Wednesday, May 26, 2010

Never Again

I don't want to see this picture ever again. Not this one, or any like it. As we in America inch ever closer to the maelstrom that has already destabilized many world capitals we have to insure that our children are safe from the excesses of "crowd control". As the truth about the damage that has been done to the economy that our children inherit becomes clearer to them, I full well expect that their scattered and relatively quiet reactions are going to bloom into full scale uprisings.

What is now confined to college campuses, where tuition increases and class closing seem to be the issues of the day, is going to migrate as more and more graduates carry debt and no job prospects into their future. Their plight will move off the cartoon pages and onto the front pages. And we, their parents and teachers, and friends, are going to ask them to do the heavy political action.

I have never understood the psychology of those who are given the guns and bayonets when they turn on their own. Simply following orders doesn't seem to do it. And I don't believe there is a great ideological divide between kids in uniforms and their brothers and sisters on the street. Yet it happens over and over. Kids are asked to pummel and shoot each other. In the name of law and order.

I think we have time to get in front of this curve. Every one of those kids in uniform has a parent, a guardian, a relative, a friend who knows them well enough to broach the subject. Every person who knows someone on the force, in the guard, or full time enlisted, ought to begin a campaign to sensitize them to the fact that they are not the handmaidens of the oligarchy. No one joined to protect the vested interests of the bankers against the citizenry. This is not an issue that will break down on party lines. People who are suffering at the hands of this regime ought to have the right to protest against it. They have the right to demand and effect change. And those sworn to protect and defend them must respect that solemn oath.

Wednesday, May 19, 2010

What to do, What to do?

anonymous asks; what to do, what to do?

An excerpt from a recent post of Les Leopold:
The ultimate insanity of our current moment is that the richest investors and the largest bankers in the world just crashed our system, got bailed out by taxpayers, grew even larger, and now are back to earning record profits and bonuses. They caused the biggest jobs crisis since the Great Depression and drove the entire global economy into a ditch–and they could do it again any minute. And now they’re telling us to tighten our belts and act more responsibly? from:

Les Leopold is the author of The Looting of America: How Wall Street’s Game of Fantasy Finance destroyed our Jobs, Pensions and Prosperity, and What We Can Do About It Chelsea Green Publishing, June 2009.

This from the NYT:
“This bailout wasn’t done to help the Greeks; it was done to help the French and German banks,” said Niall Ferguson, an economic historian at Harvard. “They’ve poured some water on the fire, but the fire has not gone out.”

"How to learn nothing from crisis"
is a must read article by Doug Henwood

Hero watch: Al Gore just added a forth estate to his collection, a 9 million dollar ocean view estate in Montecito Ca.

The above are just some of the latest in the continuing saga that is the documentation of our current crisis that spurs cries of; "what to do, what to do?".

What I am going to suggest we all do is get smarter. We have to understand how some of the fundamentals work so that we can either exploit them to our personal advantage or demand that they be reformed.

We have to learn to follow the money. When you read that the IMF is putting up a trillion euros to support the EU you have to understand that 25% of those monies are your dollars. Once again the beneficiary of your generosity is not the people, but the banks who hold the notes on the paper that blew up.

We have to know what really drives the markets and how to play them. The Fed is handing the banks profits, leveraged on our money. The "carry trade" is the trade that banks can employ that has them borrow our money at 3/4% (today's rate) and then, in a no risk trade, buy a 30 year treasury that yields 4.23 on 95% leverage.
Why would they lend to you and me and tie their money up when they can reverse this trade on a second's notice. Hedge funds don't get quite the same deal, but close.

Why does this matter to you and me? The most obvious answer is that in order to generate bank profits and make them whole again, we are expanding our debt. Second, and trickier, is those same hedge funds that brought us the last disaster, are leveraging into all manner of asset classes with cheap money. Thus the stock market, gold, oil, wheat markets, rise. Ride the pony if you dare. Here is the key proviso. When the Fed announces its first rate change, of policy, or worse an actual rate change, (the beginning of unwinding the carry trade) those of us holding any security must sell, that second. It is going to be a race to the door and it will precipitate the next crash. For a nation of people whose response to the last crash was not to open their quarterly financial reports this is asking a lot. You might want to get in front of the curve and be in cash, I-Bonds, TIPS, or a laddered portfolio of short term bonds.

For those who don't think they invest, and live within the confines of their cash flow, they must learn to recognize the impacts of a public policy that may harm them. Arizonians just voted for an increase in their sales tax. People in Maine are being asked to do the same. Here in Maine it is couched within a bill that reduces income taxes and is thus argued as neutral. Wrong! A sales tax, and God help us a VAT tax is regressive. Even the average citizen can shelter or delay some tax consequences on their income. 401's are not as sophisticated as the tax avoidance schemes of the rich but they help. But there is no escaping a sales tax. It is regressive. We are being asked to shoulder the burden of debt relief, not those who profited from the debt creation. This issue is high on the agenda of Europeans who have surfaced the fact that the rich are not paying taxes, and they are demanding justice. It is what they are demonstrating about.

All of the markets are indicating there is no risk of inflation. Why would you invest money in a 30 year treasury at 4+% if interest rates were going to rise? The principle on that investment will disappear. Trust the markets? Skip three paragraphs.

If we do enter an era of inflation, then you are going to have to learn an entire new skill set. An early trial balloon was sent up in California with the printing of scrip as a cash substitute and it didn't work. It did work in Argentina. Of course they were smarter about how they designed the system and paid a premium to holders of their funny money. Argentina is but one example of how a citizenry acted to protect itself. Those with money moved it off shore and into other nations currency. The same is happening in Europe today. The flow of euros to dollars is one of the factors keeping our interest rates low. (Fear that the Chinese will devalue the Renminbi keeps it from becoming an international reserve currency).

Another survival skill is the ability to index. Persons holding or dealing in any commodity are creating indexes to hedge the value of their commodity against devaluations. Iron ore futures are just the latest. When Argentines demanded to get paid daily for their labor and then exchanged their wages into another currency or bought a commodity they needed with that money, they were effectively hedging the costs of those commodities. No one wants to hold anything being devalued.

The lesson to learn is not to enter into long term contracts that fix your remuneration without effective, unconditional COLA adjustments built in. And you must demand independent third party regulators to determine the actual rate of inflation, be you a Social Security beneficiary, teacher, cop, WalMart employee, or seemingly secure IT worker.

It may be time to consider tax boycotts. Counties are considering boycotting state revenues, while real estate tax boycotts are spreading. The key to any such activity is to appreciate the need for solidarity. When it finally becomes clear that the persons getting shafted by this kleptocracy are us, then we may find we have more in common with the disenfranchised than we could imagine. When gets their act together to identify the bankers, and protest their actions, it is not enough for us to sit in front of the TV and murmur or write a check. If we are really concerned about what to do we have to begin to join those coalitions we can tolerate and actually get in line.

Learn a new language set. Come to terms with "walkaway, bankrupt, boycott, self interest, tax avoidance, yuan".

"Yes Magazine" has been promoting a set of alternative behaviors. Peruse their splash page and determine where and how you might find ways to act to resolve this morass.

Wednesday, May 12, 2010

Bill Moyers Redux

Bill Moyer's final broadcast has aired. The complete transcript of that show and the blog for future reference is here. I excerpted his farewell editorial from that broadcast:

BILL MOYERS: "You've no doubt figured out my bias by now. I've hardly kept it a secret. In this regard, I take my cue from the late Edward R. Murrow, the Moses of broadcast news.

Ed Murrow told his generation of journalists bias is okay as long as you don't try to hide it. So here, one more time, is mine: plutocracy and democracy don't mix. Plutocracy, the rule of the rich, political power controlled by the wealthy.

Plutocracy is not an American word but it's become an American phenomenon. Back in the fall of 2005, the Wall Street giant Citigroup even coined a variation on it, plutonomy, an economic system where the privileged few make sure the rich get richer with government on their side. By the next spring, Citigroup decided the time had come to publicly "bang the drum on plutonomy."

And bang they did, with an "equity strategy" for their investors, entitled, "Revisiting Plutonomy: The Rich Getting Richer." Here are some excerpts:

"Asset booms, a rising profit share and favorable treatment by market-friendly governments have allowed the rich to prosper...[and] take an increasing share of income and wealth over the last 20 years..."

"...the top 10%, particularly the top 1% of the US-- the plutonomists in our parlance-- have benefited disproportionately from the recent productivity surge in the US...[and] from globalization and the productivity boom, at the relative expense of labor."

"...[and they] are likely to get even wealthier in the coming years. [Because] the dynamics of plutonomy are still intact."

And so they were, before the great collapse of 2008. And so they are, today, after the fall. While millions of people have lost their jobs, their homes, and their savings, the plutonomists are doing just fine. In some cases, even better, thanks to our bailout of the big banks which meant record profits and record bonuses for Wall Street.

Now why is this? Because over the past 30 years the plutocrats, or plutonomists — choose your poison — have used their vastly increased wealth to capture the flag and assure the government does their bidding. Remember that Citigroup reference to "market-friendly governments" on their side? It hasn't mattered which party has been in power — government has done Wall Street's bidding.

Don't blame the lobbyists, by the way; they are simply the mules of politics, delivering the drug of choice to a political class addicted to cash — what polite circles call "campaign contributions" and Tony Soprano would call "protection."

This marriage of money and politics has produced an America of gross inequality at the top and low social mobility at the bottom, with little but anxiety and dread in between, as middle class Americans feel the ground falling out from under their feet. According to a study from the Pew Research Center last month, nine out of ten Americans give our national economy a negative rating. Eight out of ten report difficulty finding jobs in their communities, and seven out of ten say they experienced job-related or financial problems over the past year.

So it is that like those populists of that earlier era, millions of Americans have awakened to a sobering reality: they live in a plutocracy, where they are disposable. Then, the remedy was a popular insurgency that ignited the spark of democracy.

Now we have come to another parting of the ways, and once again the fate and character of our country are up for grabs.

So along with Jim Hightower and Iowa's concerned citizens, and many of you, I am biased: democracy only works when we claim it as our own. "

I would add that as we watch Greece implode and their citizens' reaction to being asked to suffer the burden, and as this process spreads to the rest of Europe, you take the time to place Moyer's words in context and realize it is but a matter of time until such policies are implemented here.