feconomics

Yeah, we had a bad bad ice storm up here in New England but for me, the real news in this mundane and terse report on the storm's lingering effects is that our power companies are owned by foreigners. While Lehman Brothers' Mr Fuld and other captains of the US investment industry were greedily swapping defaults, believing the sales pitches of Ponzi schemers and generally whooping it up waist deep in frothy fecal financial instruments with visions of skyward tilting trends, investors in Spain and London bought up our power companies. You are going to keep needing electricity even if the economy NEVER gets well again. Now who are the smartest guys in the room? Real assets for real investors and paper fortunes for those who will only deserve to be able to wipe their bums.

I admit I am still puzzled as to how a period of near-zero interest rates is going to cure problems partly precipitated by the housing bubble that grew on the fertilizer of a few years of unprecedented 2% and 1% fed funds rates between October 2001 and May 2004.

So is there any good news in the economy? Housing starts and sales are cadaverous, manufacturing activity has fallen off a cliff and price index measures sure seem to signal an incipient deflationary period.

Ah ha! There is one US business sector where the bloom is still on the boom. [It happens to be the industry, I confess, that often pays my salary]. Does that $40 billion in arms sales to dictators and dubious allies make up for the $40 billion that Madoff embezzled? I compare the "good" profits of our one healthy industry with the bad of our worst crook because I see the same ill deep in their hearts. It is all too human a trait to be able to blind oneself morally with the glittering light that shines from a pile of gold. Both the arms merchants and the crooked investment adviser ruin people's lives. They just do it in different ways.

But as Jarecki made so clear in his documentary Why we fight, the arms merchants are so in bed with the government that they are the one industry the government will guard from foreign ownership, even if they have to prevent "wasteful" domestic spending to persevere. We partner and cooperate with other countries in making war but we like to keep the profits for ourselves as much as possible.

There are some who can question the morality of this business:

The New America Foundation, a nonprofit research group, has called on Obama, who will be sworn in January 20, and the new U.S. Congress to consider multilateral efforts to curb "destructive and destabilizing" weapons exports.

More than half of the top 25 U.S. arms purchasers in the developing world were "undemocratic governments or regimes that engaged in major human rights abuses," in 2006 and 2007, the foundation said in a report last week.

But even the French masters of war just come out and say it: the terror they combat is the prospect that the world would become unsafe for war profiteering. Lord, we don't need another jet fighter.

What if the foreign investors go after our last growth industry: the death merchants? Don't you worry now, quick and sloppy death and the constant rattling of sabers in the third world will always have MADE IN USA on it somewhere.

Will the masters of war rescue our jobs as Bernanke has not? I think the case is the exact opposite and Bernanke just isn't aware or won't admit that he is trying to breath life into a domestic economy bled to death by a gargantuan tumor of defense appropriations.

I vote for change IN THE PRESS CORPS

This "good bye kiss" from the Iraqi press to the source of so much suffering in Iraq is going to get a disproportional amount of air time.  As the son of a Bush prepares to slink off off the stage of history leaving blood, shit and ruins on all sides, one Iraqi journalist had the nerve to let him know what many in Iraq think of his nation building.  If only our own press corps were so untamed by the adminstration's control of access.  Though Mr. Zaidi will likely have his press pass withdrawn by someone in Maliki's tattered little government, there will surely be plenty of others to fill, er, um, ...his shoes.  I entertain the thought that the gaggle of pet journalists we call the white house press corp could be a little less cowed by the fear of being excluded from press briefings and photo ops if they understood the esteem the rest of the nation would accord them for chancing a disinvitation in exchange for harder and more pointed questions.  We have plenty of journalist who would like to be in the room when the president or the sec of state speak.  And when we have run out of the present crop, there are pools of excellent talent in  this country who could carry on the new tradition of true press freedom.  How could it be worse than the softball our best most privileged journalists played with the white house as Plame was shafted?

Too bad we didn't have a good shoe chucker in 2003.

Screw the bankers

There are plenty of ways to share the blame for the present poor state of the economy. In particular, I would say the MSM coverage, excluding the outlets owned by and patently inclined to paint the world as seen by uncle Rupert, has been able to sell more papers by making it sound as if the boards of directors and the vice presidents in charge of creatively disguising trashy debts as sound investments are exclusively the devils in this saga. And on my side of the blogosphere, we see plenty of counter arguments against the stupidity of conservatives who try to lay all harms at the feet of "socialist meddling" in bank regulation that required banks which took deposits in poorer neighborhoods to make loans in those same neighborhoods. I don't happen to think the conservatives are actually stupid on this particular topic but observe that their selfishness and willing alienation from have-not classes makes them function as if stupid.

In the middle of an excellent article he as just written for Vanity Fair, Niall Ferguson seems to reach a similar view: plenty of blame to share if blame is what makes you feel good:

This hunt for scapegoats is futile. To understand the downfall of Planet Finance, you need to take several steps back and locate this crisis in the long run of financial history. Only then will you see that we have all played a part in this latest sorry example of what the Victorian journalist Charles Mackay described in his 1841 book, Extraordinary Popular Delusions and the Madness of Crowds.

You see we have had social conservatives whose numbers were spread over several economic classes for a long time in this country. And for 30 years, the old voting patterns of poor vs rich were successfully breached by the Rovesque strategies of wedge issue politics around social issues. But I think that the fact that until some point in the late 70s or early 80s the middle class had been expanding and average wealth rising was the ironic enabler of the shift in voting patterns. The success of liberal views in raising the standard of living was to some extent then the cause of its own eventual failure at the polls: we never ceased to "vote our pocket books" but our pocket books seemed to be headed toward higher tax brackets. By an equally ironic turn, the last 30 years of "success" of this perverse conservative shift have so ruined our economy that the voting block of people whose dominant issue is a feeling of financial precariousness has expanded back toward the majority that it was in the first half of the 20th century. I say success because the Republicans DID control congress and the White house long enough to significantly expand the advantages of corporations and high income families. Perverse because in 30 years of legislation, [de]regulation and rhetoric ad nauseum about wasteful government spending, they managed to completely expunge that quaint notion that debt is a bad thing and bills should be paid on time from our our nations political dialog.

I mentioned blame. Except for the downward spirals of divisive politics, blame is not a useful tool. Note how seldom Obama named names and how often he spoke rather of hope, change and what to do to make things better. With the pathetic exception of the 2000 election, Americans damn well got what they voted for whether they understood that or not at the time they cast their ballots. Blaming a banker, or a debt rating agency, or a financially insecure first time home buyer who takes an oversized loan is beside the point. Assessing where we have systemic failures should be a first priority. Systemic failure would include shoddy neutered regulatory powers as we now, even Alan Greedspan, all seem to recognize. We should be concerned who knew what and when they knew it regarding the margins of debt and levels of risk and unsustainable or fragile leveraging of debt. Greed being the heart of all actors in this tragedy, our best defense against the kind of fiscal calamity in which we are all now stewing is transparency.

So, getting back to blame, who fights transparency? All of us like to hold our cards close to the vest but who mounts an organized and well funded war on transparency?  We who go for a loan to buy a $22000 car get x-rayed for our credit history and lenders can go on line and learn details of our financial past we ourselves hardly remember. Can the nation's tax payers ask the same questions of those lenders who now want trillions of OUR tax dollars? Hell NO! No one less than Bloomberg has been trying to get a little transparency and they find:

Banks oppose any release of information because that might signal weakness and spur short-selling or a run by depositors, Scott Talbott, senior vice president of government affairs for the Financial Services Roundtable, a Washington trade group, said in an interview last month.

Kristol Knocked

Everybody gets it wrong. I don't have high hopes for my country's future. We will probably wind up with a stimulus package that puts a boob job and face lift on an economic model that is more ready for taxidermy. The word "green" will no doubt get used liberally, its all the rage. Infrastructure expenditures at least might, for better or worse, still be facilitating the growth of commerce in our children's time. My misgivings, not to belabor the matter more in this outing, arise from my distrust of growth as an unquestioned economic holy cow. But there is a "stimulus" that will make the money just go away, doing at most nothing better than getting people killed as it goes to oblivion....growth will not be a side effect. I speak of the dumbest response to the stimulus idea and it comes from right where you would expect.

Near the end of his confused confession that, in effect, Republican administrations have expanded government spending [ though he neglects to mention that they did so by borrowing in our names, rather than honestly paying via taxes], the incredibly stupid alien named Mr William Kristol is inexplicably allowed to write the following diaper load in the New York Times:

Similarly, if you're against big government, you'll oppose a huge public works stimulus package. If you think some government action is inevitable, you might instead point out that the most unambiguous public good is national defense. You might then suggest spending a good chunk of the stimulus on national security directing dollars to much-needed and underfunded defense procurement rather than to fanciful green technologies, making sure funds are available for the needed expansion of the Army and Marines before rushing to create make-work civilian jobs. Obama wants to spend much of the stimulus on transportation infrastructure and schools. Fine, but lots of schools and airports seem to me to have been refurbished more recently and more generously than military bases I've visited.

The reader commentary gleefully flings Mr Kristol's poo back in his face

"Unambiguous good". Kristol, you are a disgusting paper peckered twit! Oh what a helpful expenditure the 750 billion already blown on military adventures in Iraq has been for us! Look how we prosper! By all means Mr. Kristol, lets pour more of this money we no longer have down this star spangled rat hole of yours. Even the generals who still have lunch with you for want of any other fan club must feel ashamed afterwards.

Oil: get over it.

Sen. Dodd asking for the head of the chairman of GM misses the point and sounds personal in the process. Obama himself is the only quoted official who has said anything remotely sane about bailing out the auto industry but it remains to be seen if he is setting the tone for this Bailout.

President-elect Barack Obama, whose transition team has been involved in the talks, made starkly clear in an interview and at a brief news conference on Sunday that any aid to the Big Three auto companies should not come without significant concessions.

"They're going to have to restructure," Mr. Obama said in an interview on "Meet the Press" on NBC. "And all their stakeholders are going to have restructure. Labor, management, shareholders, creditors — everybody is going to recognize that they have — they do not have a sustainable business model right now, and if they expect taxpayers to help in that adjustment process, then they can't keep on putting off the kinds of changes that they, frankly, should have made 20 or 30 years ago."

So we are going to bail out the dinosaurs who lobbied successfully for a "truck" loophole in fleet mileage standards after OPEC gave notice in 73 that oil prices were theirs to set. This industry, for salvation of which labor and shareholders and management alike beg my tax dollars, is the same one that foisted off the SUV on the fatuous American car market and had us all driving "trucks" through their loophole. Mr. Frank, an intelligent representative whom I trust to be well informed about the likely financial consequences of inaction, is nonetheless being stampeded by the dire prospect of double digit joblessness. Pray, do not join us in our financial neurosis, Barney! I would advise Congressman Frank to stand back and let this 8-cylinder, 5 MPG industry be hung, albatross-fashion, around the neck of the departing turd who will soon trudge back to Texas.

We once made great bicycles and were only the more healthy for doing so. But we did not bail out the bicycle companies that faced bankruptcy. [do read that link. It is a short review of a great cautionary tale of how to ruin an industry leader...we better learn its lessons quickly] The companies we are now being asked to give billions to rescue have been merely larger scale examples of the mismanagement and missed markets that sank Schwinn.

Surely we could pick a better industry to save than the one that has lobbied to keep us up to our chins in debt and Saudi oil with only smoke to breath. We should be a bit more grown up. We should face the fact that change is painful and our fortunes have shrunken...NOW is the time to bite such bullets and tighten such belts as are needed to turn us toward a greener and more sustainable economy. If money we will be long repaying must be spent, NOW is the time for us to invest it in things that wean us from our 20th century fuelishness and fondness for fattened asses.

David Brooks misrepresents Obama's stance on salvaging our junkie domestic car industry but his questioning of why we won't let a failure go about its failing so as to make room for whatever creature will prove fitter than the paleocarbonmobile industry are questions we should answer. I would not be much moved by the dissolution of Detroit though my view of its demise as a benign effect comes from a quite different rationale than Mr. Brooks. We who live, live with the "what happened" of our history and the professors and authors live with the "why it happened". Let it happen. How often have you seen Krugman and Brooks in anything like a state of agreement? Do you realize the money sought by Automakers would suffice to retrain most of their workers for greener jobs?

e-petition your ______

In the last week or two, my in-box increasingly bulges with the flurry of pleas to sign this petition or that. And I have gone along with many of these requests. I used to clean the personally identifying data out of the requests and post them at Daily Cause but its a lot of work. I can however point you to a very useful website I learned of via one of these pleas:

Midnight Regulation

The Bush administration is feverishly f__king the environment, old-growth forests, workers rights and a number of other causes for the benefit of its corporate sponsors. All this goes on while congress is distracted with the fallout of 8 years of financial mismanagement. Whatever rule changes the executive branch can, or at least thinks it can, make without congressional oversight, it is changing full speed ahead.

Go to that linked page to see regulation changes you may care to protest or which are still subject to public comment prior to their adoption. Bush is not dead yet.