McCAIN: PRO-BUSING PROGRAMS ARE GOOD (FOR HIS CAMPAIGN)

At a rally that counted in with 6,000 in attendance, it turns out that more than 4,000 of them were students bused in from local schools. Things were so bad in Defiance, Ohio that even Joe the Plumber felt it more convenient to find a leaky faucet to fix. Here's John McCain calling out to J.T. Plumber



This is embarrassing. Even J.T. Plumber has left the building. Perhaps McCain should start carrying around a bottle of Drano ...

- Mark

BURNING DOWN THE HOUSE ...

MATCH STICK #1: Remember when Treasury Secretary Hank Paulson said we needed to pump taxpayer money into the financial system so the banks could start lending to consumers and businesses? Well, guess what? It looks like some of the banks are hoarding cash. Worse, instead of lending to consumers, they plan on using what they get from the American taxpayer to scarf up troubled financial institutions ... further consolidating their position in the market.

MATCH STICK #2: At the same time, market players are looking for money to buy up incredibly complex (and often toxic) investment products that they were supposed to pay insurance on. Owners of the toxic instruments, for many reasons, feel obliged to sell. In simple terms this is akin to your insurance agent arriving with the fire department, and offering to buy your burning house at a discount price. If you refuse, he leaves and takes the fire department with him.


The real problem here is that the market players don't have any money to make these purchases. They have to borrow money. This drains funds from a system that has few funds to begin with (which helps to raise LIBOR rates). If we continue with our "fire sale" metaphor, this is akin to your insurance agent gaining control of the fire hydrants when they arrive on the scene. They might not actually own the water supply, but access is cut off.

Moral of the Story: If we don't get this right (as appears to be the case now), debt, tight credit, and simple stupidity could turn a small brush fire into something the Santa Anas whip up every summer in California ...

- Mark

OBAMA ADMITS BEING NICE IN KINDERGARTEN

Obama admits sharing his peanut butter & jelly sandwich too ...



Rumor has it John McCain will launch his next round of attacks on Obama hanging out with serial redistributor Santa Claus.

- Mark

THIS IS AMERICA

If there's a heaven, I expect to find this guy there ...


- Mark

I REPORT, YOU DECIDE ... MORE FOX IDIOCY

Here's yet another FOX News Bubble Head trying to defend the fort. In this clip Megyn Kelly is trying to push the narrative that Obama will bring socialism to America because of his tax policies ...



Megyn ignores, forgets, or never learned several things regarding tax policy and democracy in America. Specifically, we've always "redistributed" wealth in America ...

1. COMRADE REAGAN? Ronald Reagan supercharged one of the most successful "wealth redistribution" policies in this country, when he took a modestly funded Earned Income Tax Credit program and provided more funding. In an effort to move families from welfare to work the EITC takes money and shifts it to the working poor. Its success has been touted and embraced by Conservatives and Liberals alike (since it was started in 1975). If we take FOX News at their word, or embrace their logic, we should all say "Thank You Comrade Reagan" for putting teeth into the program ...

2. COMRADE McCAIN? John McCain vigorously opposed George W. Bush's tax cuts for the rich in 2001 and 2002. He thought it was unfair. Obama's policy proposals simply take America back to tax rate levels John McCain defended 6 years ago. As I asked in another post several days ago, does this make John McCain a socialist too?

3. COMRADE ADAM SMITH? The spiritual godfather of capitalism, Adam Smith, was big supporter of a progressive tax system, calling on the most successful to pay a little more (as did Teddy Roosevelt). Specifically, Smith recommended higher road tolls on luxury carriages so “the indolence and vanity of the rich” could contribute to larger societal goals.

4. COMRADE BUSH? George W. Bush redistributed America's wealth when he took Bill Clinton's surpluses and handed them over to America's wealthiest class. This has to rank as one of the greatest transfers of wealth in human history. What Obama is proposing simply says, let's get some of that money back because Bush's "tax cuts for the rich" policies have been a disaster.

There's more, but you get the point. FOX News is a joke.

- Mark

SO, WHERE'S THE TRANSPARENCY?

By way of David Sirota, we find out that the Bush administration is already hiding how it is spending taxpayer dollars on the bailout. Monthly fees are being blacked out ...

... as are hourly wages ...


This certainly doesn't fit with Paulson's earlier promise to open things up by creating "a single, powerful financial regulator that demands transparency."

- Mark

SARAH PALIN ... QUEEN OF THE WELFARE STATE

Here's Sarah Palin complaining about Barack Obama's economic policies because of how they "redistribute" the wealth ...



If anyone knows about communist tendencies and the redistribution of wealth it's Sarah Palin. Let's review ...

Alaska ranks #3 when it comes to what it's citizens pays out in federal taxes, and what it receives from the federal government. For every dollar Alaskans pay into the system, they take $1.84 out. Put another way, Alaska's hardened sense of "rugged individualism" is really built on a foundation of communal welfarism.

This probably explains why Alaskans have come to see oil within their borders as a form of community property. By making this claim, and turning it into policy, Sarah Palin and the federal government watch over a system that has written a $3,269 check to every eligible man, woman, and child in Alaska.

Interestingly, instead of calling it the "Redistributing the Wealth Because We're Communists Fund" - as Sarah Palin might suggest it is today - the state of Alaska calls it the "Permanent Fund Dividend."

And in case you're wondering that comes out to well over $23,000 for Sarah Palin's family of rugged individualists.

Finally, if we want to take the Conservative's assertion that welfare Mom's have children simply to pad their welfare checks, I have to think it won't be long before republicans start questioning the real motive for Sarah and Todd to have their last child, right? I mean, their oldest children appear ready to leave the nest, taking their welfare check nesteggs with them. I hope the Conservatives don't go this route, though, because the Palin's are already under the gun for using clothes that don't belong to them.

I wonder if the Palin's can see a trailer park from their backyard ... Just asking.

- Mark

UPDATE: I knew it was out there ... Here's Sarah Palin acknowledging her socialist state tendencies a few weeks before being nominated for the VP slot: "[W]e’re set up, unlike other states in the union, where it’s collectively Alaskans own the resources. So we share in the wealth when the development of these resources occurs."

ANCHORAGE DAILY NEWS ENDORSES OBAMA

With the state of Arizona now sliding into the "leans McCain" category, the Anchorage Daily News' endorsement of Barack Obama has to hurt. It certainly helps to explain why Super Sarah Sunday in Anchorage, Alaska was a sad and pathetic display of support for the McCain-Palin ticket, especially when compared to Obama's rally in Anchorage.

- Mark

THIS IS WHY YOU SUSPEND A CAMPAIGN ...

From the NY Times ...

HONOLULU – Senator Barack Obama slowly walked up the steps of his campaign plane here on Friday evening, his suit coat slung over his shoulder, as he concluded his one-day visit home to Hawaii.

From touch-down on Thursday to take off on Friday, Mr. Obama spent nearly 22 hours on the ground in Honolulu visiting his ailing grandmother, Madelyn Dunham. He did not say how Mrs. Dunham was feeling and campaign aides did not disclose her condition, but he believes this could be his last time seeing her. He had expressed worry in interviews that she may not live until Election Day, and explained that he suspended his campaign schedule to see her, and recalled how he had not been able to get to his mother’s bedside before she died ...

The Honoluluadvertiser.com offers a small window into the life of Obama's Grandmother, Madelyn Dunham, with pictures of Obama as he walks in his old neighborhood during his visit.


- Mark

OBAMA & THE NEXT AMERICAN CENTURY ...

The NY Times' Nicholas Kristof has an excellent article that explains how the U.S. could start regaining its international position and moral standing around the world with an Obama victory. What he's really saying is that with Barack Obama in the White House we could collectively recapture the Soft Power that allowed America to lead in the 20th Century. Read the article to find out why.


- Mark

ALAN GREENSPAN: PRINCIPLES OF FREE MARKET FLAWED

In testimony before Congress Alan Greenspan conceded that the fundamental principle behind republican theories of free markets is flawed. The NY Times reports:

Mr. Greenspan told the House Oversight Committee on Thursday that his belief that banks would be more prudent in their lending practices because of the need to protect their stockholders had proved to be wrong.

Mr. Greenspan said he had made a “mistake” in believing that banks operating in their self-interest would be enough to protect their shareholders and the equity in their institutions.

Mr. Greenspan said that he had found “a flaw in the model that I perceived is the critical functioning structure that defines how the world works.”

What? If you deregulate and put a pile of free money in front of people they might act stupidly and want more? You mean "overeager investors" might not take into account the threats posed by market fluctuations (that could lead to a housing collapse)? But ... but ... what about rationality? Aren't people who work in markets rational? You mean human beings might try and cheat one another, and might try to game the system, if they think they can get away with it? Who could have seen this?

The real incredible thing is that market people who pride themselves on being prudent and hard core realists believed their own naïve rhetoric. In the real world people will cheat one another if given the opportunity ... In the real world love stinks and really doesn't conquer much ... In the real world Bambie's Mother dies ... To believe that it could be any other way - especially in an arena driven by profit and money - suggests an embarrassing level of naïve utopianism, especially for people who like to claim a ruthless sense of individualism in markets.

Let's make this simple. My friends, the current market collapse is a product of undisciplined deregulation. It also illustrates what happens to common sense when it is mugged by greed, stupidity, and ideology.

- Mark

UPDATE: From Newsmax.com .... Former Federal Reserve Chairman Alan Greenspan told Congress in prepared testimony Thursday that the current global financial crisis is a "once in a century credit tsunami" that policymakers did not anticipate.

Let's be clear here. The current market mess is not a "once in a century" event. Serendipity has nothing to do with what has happened to our economy, and country. Greenspan is ignoring how real decisions driven by ideologues have an impact. He's also ignoring his role in making money so easy to get that all you needed was a pulse and a signature. It's time for Mr. Greenspan to stop making excuses and start accepting blame, especially for cheerleading the events that got us into this mess.

AL QAEDA [HEARTS] McCAIN?

According to the Washington Post, it appears that Al Qaeda wants John McCain to win. He's good for recruitment and helps their larger cause. Here's what the terrorists are saying ...

"Al-Qaeda will have to support McCain in the coming election," said a commentary posted Monday on the extremist Web site al-Hesbah, which is closely linked to the terrorist group. It said the Arizona Republican would continue the "failing march of his predecessor," President Bush.

And why do they want the McCain-Bush policy approach to continue? Because President Bush and the Republicans have taken our country into an Al Qaeda trap they believe has "exhausted" our resources and "bankrupted" our nation's economy" (although, to be fair, Wall Street is helping out here too). They want this to continue.

Apparently, Al Qaeda thinks a terrorist strike "might swing the election to McCain and guarantee an expansion of U.S. military commitments in the Islamic world" - further bloating our national debt.


So, Al Qaeda thinks that getting the U.S. into a prolonged war is good because it will bankrupt the nation? All they need is a wannabe tough guy war monger in the White House, and a few well placed terror attacks. George W. Bush, it turns out, was the perfect stooge. Who would have thought?

Oh yeah, me. In this Bakersfield Californian article, over five years ago.

- Mark

McCAIN'S A SOCIALIST?

Here's McCain when he was concerned about policy, and not ideology ...



Here's Jon Stewart pointing out the McCain campaign's absurdities today ...



- Mark

ALASKA VILLAGE ... MISSING AN IDIOT

Sarah Palin has absolutely no clue what "powers" the vice president of the United States has. She's stumped by 3rd Grader Brandon Garcia's question.



Look, the vice president is not "in charge of the United States Senate" (majority leaders are) and they can't do things "if they want to ..." Put more bluntly, Sarah Palin would not be able to "get in there" to support the President's agenda, especially if the Democrats keep control of the Senate.

What an idiot.

- Mark

P.S. For the record, the vice president (1) is the president of the senate, "but shall have no Vote, unless they be equally divided" (Art. I, Sec. 3) and (2) waits for something bad to happen to the President like "Removal of the President from Office, or of his Death, Resignation, or Inability to discharge the Powers and Duties ..." (Art. II, Sec. 1).

THE BUSH-McCAIN-REPUBLICAN NATIONAL COMMITTEE VOTER FRAUD TRIANGLE

As if on cue, after our discussion on voter fraud this past Saturday, an on-going voter fraud case has netted its first arrest. Unfortunately for republicans it was one of their guys. The allegations pretty much follow the tactics and points outlined by Candi on Saturday. You can read about Mark Jacoby’s arrest, and allegations that his firm “slammed” voters (duped them into changing their registered party), here.

This comes on the heals of the McCain campaign’s attempts to link Barack Obama to voter fraud and ACORN when the "fraud" referred to appears to have been done by temporary employees who submitted registration cards in an attempt to increase their pay. Why is this important? Put simply, it fits the Bush administration’s M.O. for pursuing baseless voter fraud cases against democratic party officials on the eve of elections. The goal is to muddy the waters and to link democratic candidates and officials to fraud. It’s a diversionary tactic.

These tactics, it should be noted, were not always prevalent.

As I pointed out on Saturday’s program, the Department of Justice once had a set of guidelines that frowned upon pursuing individual voter fraud allegations right before an election. Common sense tells us all why these guidelines are necessary and good for democracy. Then President Bush came to office.

The Bush administration changed the guidelines and used the Department of Justice to go after democratic office holders. This helps explain why, out of 375 corruption cases carried out by Bush’s Justice Department through August 2007, 79.87% were investigations of Democratic officials. Only 17.87% of the investigations involved republican officials (democrats represent 50% of all elected officials across the country).

When 8 regional U.S. Attorneys didn’t pursue cases vigorously enough – or if they pursued corruption cases against republican candidates too vigorously – they were fired. A Special Prosecutor has been appointed to investigate the firings. Of these cases, perhaps the most widely publicized was the firing of U.S. Attorney from New Mexico David Iglesias, who would not bring voter fraud cases in his district, even after being called by Senator Pete Domenici.

Fortunately, the Obama campaign is on to these tactics. Here’s a letter from Obama’s legal team asking Attorney General Michael Mukasey to expand the authority of the Special Prosecutor appointed to investigate the U.S. Attorney dismissals. Obama’s attorneys want to expand the scope of inquirty to include “a review of any involvement by Justice Department and White House officials in supporting the McCain-Palin campaign” through the dissemination of unsupported voter fraud allegations.

Obama’s legal team is calling it like it is, an “unwarranted and politically motivated intervention in the upcoming election.”

- Mark

HOUSING STARTS CRASH

From the NY Times ...

Since 2003, housing starts have fallen 63 percent. Housing starts are now officially at their lowest level since the government began keeping monthly statistics, way back in 1959.


- Mark

JOE THE PLUMBER ... GOING DOWN THE DRAIN

It looks like John McCain's Joe the Plumber story, like his campaign, is going down the drain.

Bloomberg.com is reporting that pretty much everything about Joe the Plumber is either not true, or seriously overstretched to fit a political narrative. The problem is Joe the Plumber tried to make it look like he would be hurting under the Obama tax plan because of the $250,000 tax kick-in when, in fact, he would do better ... much better.

It turns out that Joe the Plumber doesn't make anywhere near $250,000. He never has. JP actually makes about $40,000 (which probably explains his tax problems). But if JP did make the $280,000 that's been thrown out there, not only would JP be much better off financially but he would only start paying the higher rate on the first $30,000 he made after $250,000. This adds up to a heartbreaking $733 in new taxes ... on an added income of $240,000! Oops.

Click here to read the entire slow-bleed Joe the Plumber campaign lie from Bloomberg.com.

- Mark

JOE THE PLUMBER: A FRAUD?

It looks like Joe the Plumber wasn't an independent voter ... and he might not even be a licensed plumber. Oh, and he can't do math either. Check it out here.

Still, he fits the McCain M.O. ... shoot (yourself in the foot) first, ask questions later.

- Mark

THE DEBATE'S SMACK DOWN MOMENT

I'm definitely discussing this on Saturday's program ...

There were a lot of serious and contentious exchanges in tonight's presidential debate. Much of the press focused on John McCain's "I'm not 'W' " comment (yes, I know, I'm paraphrasing), the Bill Ayers references, and McCain's air quotation reference to women's "health" and late term abortions.

However, for my money the biggest smackdown moment of the debate was when John McCain tried to criticize Barack Obama for opposing "free trade" by citing his "nay" vote on a trade agreement with Colombia. McCain then threw in a condenscending jab about Barack Obama's need to visit Latin America.

This was Barack Obama's cue to take John McCain to school.

Obama explained that simply because a treaty says "free trade" doesn't mean it's about free trade. He told McCain, and the country, he opposed the treaty with Colombia because of the numerous, on-going, and still unsolved murders of union leaders in Colombia. You can't, after all, have free trade when you're killing and intimidating labor.

John McCain was visibly stumped and boxed in by the reference. He thought he was going to score points on foreign policy and trade, and ended up looking clueless. It was supposed to be a big moment for him (you could tell by the look on his face) but Obama casually dismissed McCain with a wave-of-the-hand-like reference to the facts.

If there was ever any doubt about Barack Obama's ability to connect issues tied to globalization, trade, and labor this settled it. Fortunately for McCain and his campaign, our nation's media is so out of touch with these issues that the Colombia-labor reference flew under their radar.

While our national media appears to have missed the moment, I can assure you labor leaders around the world did not.

- Mark

THE LORD GIVETH ... AND TAKETH

Whether you're spiritual or religious, or simply go with the flow, we all understand "Naked came I out of my mother’s womb, and naked shall I return thither: the LORD gave, and the LORD hath taken away." Well, get ready for more nakedness ... what we've seen over the past couple of weeks is just the beginning.


Washington bungled the first round of responses to economic meltdown. The second round, at this point, doesn't look much better (the responses don't address the real challenges facing us as a nation).

As for President Bush ... He's not only an empty suit in the face of market collapse, but he's doing his level best to prove Paul O'Neill's claim that he's "like a blind man in a room full of deaf people" correct. Move over President Hoover (although, to be fair, at least Hoover didn't leave us with a disaterous war).

- Mark

NOT EVEN CLOSE ... $300,671 vs. $11,733

I've posted on this several times over the past year, but this makes it very clear what happens when Democrats are in control. From the NY Times ...

*******************************************************
Since 1929, Republicans and Democrats have each controlled the presidency for nearly 40 years. So which party has been better for American pocketbooks and capitalism as a whole? Well, here’s an experiment: imagine that during these years you had to invest exclusively under either Democratic or Republican administrations. How would you have fared?



As of Friday, a $10,000 investment in the S.& P. stock market index would have grown to $11,733 if invested under Republican presidents only, although that would be $51,211 if we exclude Herbert Hoover’s presidency during the Great Depression. Invested under Democratic presidents only, $10,000 WOULD HAVE GROWN TO $300,671 OVER NEARLY 40 YEARS.

This makes it clear why the electorate trusts the Democratic Party with the economy ...

- Mark

OBAMA

Duane Moore alerted me to this one. I like it.



- Mark

A CONTRAST IN APPROACHES ...

Now this is what I'm talking about ...

Barack Obama is proposing that we immediately give citizens penalty-free access to retirement savings to help them through the downturn, is calling for a 90-day moratorium on home foreclosures, and encouraging the federal government to lend money to cash-strapped local and state governments. This is just the beginning (especially since these proposals are really suggestions for President "Deer-in-the-Headlight" Bush).

Conversely, three weeks after declaring the fundamentals of the economy "strong," John McCain is doing his level best to prove that he was wrong then, and erratic now. He's on the campaign trail playing Chicken Little:

These are hard times, my friend. Our economy is in crisis. Financial markets are collapsing. Credit is drying up. Your savings are in danger and your retirement is at risk. Jobs are disappearing. The cost of health care, your children’s college, gasoline and groceries are rising all the time, with no end in sight, while your most important asset — your home — is losing value every day.

Great. The Dow busts back on news of a coordinated European bailout and McCain rains on the parade. These guys are tone deaf. He should be discussing how strong action can create good results.

To his credit, McCain tried to distance his campaign from President Bush by painting him in a Hooveresque fashion: "We cannot spend the next four years as we have spent much of the last eight: waiting for our luck to change." Unfortunately, it took McCain 8 years to realize what we've known all along. That's not leadership. That's political opportunism.

The truly incredible thing was when McCain had the temerity to say "The next president won’t have time to get used to the office ..." with Sarah Palin at his side.

And the Maverick goes down the drain ...

- Mark

THE FACTS ON THE MELTDOWN

Conservative pundits want you to believe that Fannie Mae, Bill Clinton, and Democrats are to blame for the current financial crisis. This fits in with the McCain-Palin narrative that we should fear people who aren't one of us ... they'll eventually cause trouble. The problem, according to McClatchy news, is the data (from the Federal Reserve) doesn't support the rhetoric:

More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.

Simply put, the institutions making the risky loans were from the private sector. Worse, the institutions buying up all the bad mortgages in the secondary markets also turned out to be from the private sector.

According to data from Inside Mortgage Finance, between 2004 and 2006 (when subprime lending was exploding) "Fannie and Freddie went from holding a high of 48 percent of the subprime loans that were sold into the secondary market to holding about 24 percent."

One of the reasons the private sector institutions were able to make so many bad loans - and then buy them from each other - is because of deregulation that occurred in the securities and banking sector since the early 1980s. The President's Working Group on Financial Markets chimed in when they issued a statement saying the turmoil in financial markets "clearly" was triggered by a dramatic weakening of underwriting standards for U.S. subprime mortgages, beginning in late 2004.

No wonder the McCain-Palin rallies have taken such a hateful turn. With John McCain showing no understanding of economic issues, there are no "teachable" moments for him. Ignorance has been allowed to trump the facts. It's all they have now. Well, that, and the hate-filled rallies.

- Mark

KRUGMAN WINS NOBEL PRIZE

Princeton economist and NY Times op-ed writer Paul Krugman has been awarded the Nobel prize in economics. While the award is based on his insights on international trade, the Nobel prize also recognizes Krugman's capacity to clarify general economic principles. Here's a partial list of the books that Krugman's written ...

Written in 1999, The Return of Depression of Depression Economics is one of the "must read" books for anyone interested in understanding the economic mess that confronts the international community.

In a few words Krugman questions whether the type of trading and market rescues that went on before 1999 is prudent and sustainable given that there is no real framework for dealing with systemic crisis. He asks the right questions - especially given what we're seeing now. Krugman makes it very clear that the conditions that existed at the domestic level in 1929 (weak regulations, market myopia, little understanding of the financial instruments, etc.) now exist at the international level. Hence the title of the book.

In The Return of Depression Economics Krugman goes through several case studies to demonstrate how the economic fault lines that existed pre-1999 pose a danger to global trade. I've used this book many times in my International Political Economy class. While the book is a bit technical in some places, it is highly accessible. I'm surprised this book hasn't been cited by pundits today. Perhaps it will now.

Another Krugman book that I like is The Great Unraveling: Losing Our Way in the New Century (2003). The book is really a collection of his essays, mostly from the NY Times. I especially like this book because it allows the reader to see how prescient Krugman has been on the economic challenges of our day.

Few recall that it was Paul Krugman, at the height of the California Blackouts, who first raised the issue of whether Enron and other energy players were deliberately gaming the system and ripping off California consumers. It turns out Krugman was right. The narrative on this rip-off was real time; the analysis alone makes the book a bargain.


Krugman's most recent book, The Conscience of a Liberal (2007), pulls his ideas together in a very readable fashion. Quite simply, Krugman proves that he is one of the best writers on the planet when it comes to explaining complex financial issues, and the challenges of our day.

In all, the Nobel Prize helps validate what Paul Krugman has been saying for years. While the right wing crazies will no doubt lament the Nobel committee's "declining standards" or refer to other "shiny spoon" nonsense, the fact is the Nobel Prize is well deserved.

Our presidential candidates, and the world, would do well to listen to what Krugman has to say about the economic issues confronting us today.

- Mark

SAME TUNE, DIFFERENT BAND

Here's what we have from around the world so far ...

1. More than $25 trillion has vanished from global equities in 2008.

2. Benchmark European stocks fell 22 percent last week.

3. The Dow had its worst week since 1914.

4. The World Index of stocks in 23 developed countries slid 20 percent, the most since records began in 1970.

5. European banks wrote down $226.8 billion out of a global total of $635 billion

To deal with these issues, according to Bloomberg.com, the Europeans are making a concerted effort to confront the global economic crisis. Among the measures taken include:

1. A pledge to guarantee bank debt with maturities up to five years (through 2009).

2. Allowing governments to buy bank stakes.

3. A commitment to bailout "systemically" critical banks in distress.

Hmmmm ... I don't see any regulatory discipline, or penalties for the knuckleheads who got us into this mess. The European response pretty much allows states to use taxpayer money to bailout global financial institutions who made stupid decisions when they should have known better.

Hang on. Something tells me we'll we discussing this stuff for a long time.

- Mark

McCAIN'S RALLIES ... NOT JUST ABOUT PAINTING OBAMA AS AN OUTSIDER

I've been loathe to discuss the business of race in this presidential contest because of the stereotypes and emotions that are released. It's a real Pandora's Box, and has no place in American politics today given the challenges that confront the country after almost 8 years of corrupt and incompetent rule under President Bush. The War in Iraq, the assault on civil liberties, national debt, the economy, and other topics deserve a wider discussion.

Then I saw John McCain's campaign take it up a notch when speaking about Barack Obama this past week. The suggestions that Barack Obama is not one of us brought up the issue of race, and supercharged it. Barack, according to the McCain-Palin narrative is not only an "outsider" worthy of suspicion, but he may be part of some type of conspiracy that seeks to do harm to America.

What made this narrative real, and nauseating, for many were the the venomous reactions of doubt and hate that have spewed from McCain-Palin campaign rallies. This is a sample of the many we have seen ...





Apart from unhinged ignorance, what's clear here is that John McCain and Sarah Palin have unleashed the dogs of hate and intolerance. Ed Kilgore sees this too and points out that Sean Hannity, Lou Dobbs, Ann Coulter, and others are more than happy to take the story and run with it. Their new meme seeks to link Barack Obama and the current economic crisis to a Socialists-Minorities-Terrorists-Fannie Mae-Freddie Mac-Community Reinvestment Act narrative.

And just like that, all of our problems are wrapped into one tight little conspiracy made between outsiders, terrorists, and people who are "not like us." President Bush and a bankrupt neocon ideology are suddenly, and conveniently, off the hook.

This is a dangerous path. Apart from the open venom and hate that's been released, the past makes it clear that an environment of economic doubt and fear (which the Bush administration has done their level best to stoke since 9/11) can lead to virulent demands for radical change. It takes very little to ignite ignorant scapegoating and simpleton solutions. But there comes a time when events can escape human control ...

In the 1930s we saw people with no money and no hope flirt with socialism and other radical ideas in America. Fortunately, we had a steady hand at the wheel in FDR. In the 1930s we also saw the German people toss everything aside, as they placed the burden of military defeat and economic depression on Jews, democrats, and outsiders. We all know who they had as their leader.

Scapegoating and diversion from the issues are old and ugly tactics. With the American and world economies on the brink of collapse, America needs to rise to a level the world once expected from this great country. American political campaigns should not be a warm-up act to beer hall politics.

- Mark

THE RETURN OF DEPRESSION ECONOMICS?

This is from RGE Monitor contributor Nicholas Bloom, who's also been doing work for the National Bureau of Economic Research. In a few words he's telling us that market volatility has now returned to Great Depression levels.

In the first graph, we see that from the 1880s through the early 1960s market volatility reached 60% in 1929 and in the late 1930s ...

Well, guess what? Here we go again ...



The incredible thing is that the political and economic leaders of this country didn't see this coming. Today's market developments didn't help things much either ...




- Mark

MY KIDS EXPLAIN THE MELTDOWN ... "IT'S LIKE SOMEBODY'S STEALING MONEY"

As I was getting the kids ready for school this morning I had the TV on, watching market developments. The screen was full of numbers, with somber analysis. Curious, the kids asked what the numbers meant. I explained that the numbers represented what was being bought and sold in the country.

I didn't get into the details, and didn't have to because I used the Monopoly board game to make my point. They understood immediately (I thought, "Either I'm really good at explaining this, or they're smarter than I give them credit for ... I think it's the latter).

While I made their breakfast I was surprised because they stayed in front of the TV, commenting to each other as they watched the numbers go down. I asked them what they thought. Monica, referring back to the Monopoly example said, "It's like somebody's stealing money from the bank." She's 10.

My son Sebastian chimed in, "It's like a big drain ..." I was caught by what he said next, "I would just take my piece and leave." He's 9.

This, in a nutshell, explains what's happening in the markets. People think they're getting ripped off. And they're right.

If world government leaders meeting in Washington this weekend don't get their act together - and it might be too late already - this could turn into a real panic. Then we'll be confronted with another suggestion my kids threw out - playing another game.

- Mark

A DISCUSSION ON TAXES

I'm not a big fan of the NY Time's Thomas L. Friedman. Especially after he served as Bush's cheerleader in the run-up to war in Iraq, and then gave him a never ending window to get things right with his "the-next-six-months-are-crucial" routine on the war (which has now been satirized as a "Friedman Unit").

However, he gets this one right ...

... Palin defended the government’s $700 billion rescue plan. She defended the surge in Iraq, where her own son is now serving. She defended sending more troops to Afghanistan. And yet, at the same time, she declared that Americans who pay their fair share of taxes to support all those government-led endeavors should not be considered patriotic.

I only wish she had been asked: “Governor Palin, if paying taxes is not considered patriotic in your neighborhood, who is going to pay for the body armor that will protect your son in Iraq? Who is going to pay for the bailout you endorsed? ... Do you think borrowing money from China is more patriotic than raising it in taxes from Americans?”

This country needs to have a serious discussion on taxes. And, no, I don't like paying them either ... but someone has to become an adult and start paying the bills. If we don't, we will become even more exposed and vulnerable to other nations ... and there's nothing patriotic about that.

President Bush turned surpluses into deficits by giving tax cuts to the people who needed it least. He also killed any hope of paying down the national debt. In the process he initiated one of the greatest transfers of wealth in world history. Almost 30 years of giving tax breaks to the rich and hoping it jump-starts another economic revolution is a joke.

America needs this discussion.

- Mark

OBAMA

Good, and inspiring ...



- Mark

McCAIN'S MOMENT

Since we talked about this on Saturday's program, I thought I'd post it too.



- Mark

AIG's $85 BILLION EXECUTIVE RETREAT

Insurance giant A.I.G., who foolishly jumped into mortgage mess and then went to the government for an $85 billion bailout, has just given the American taxpayer the middle finger. Barack Obama made reference to this last night, and the LA Times:

Just days after the federal government committed $85 billion of taxpayers' money to a bailout of insurance giant AIG last month, senior execs from the troubled company headed to Southern California's ultra-swanky St. Regis Resort in Monarch Beach for a week of wining and dining top salespeople.

The total cost for the retreat was $440,000. Keep in mind that we now know that in the days before it filed for bankruptcy protection last month, "AIG tried to hide negative information about its condition from auditors."

Obama's right. The government needs to sue to get our money back, and someone needs to be fired.

- Mark

19 DAYS ... $540 BILLION

So I'm finishing up some graphs for my book and decided to take a look at our national debt. I didn't think I needed to since I last checked 19 days ago. I'm glad I did. In a span of 19 days our nation added $540 billion in debt to our balance sheets.

No U.S. president has added that much to our national debt in one year, let alone in 19 days.

We also want to keep in mind that when President Bush entered office on January 20, 2001 our nation owed just $5.72 trillion ... and that number was going down. Today we owe about $10.18 trillion.

At this rate, and with an additional $800 billion added to our national tab, we could owe well over $11 trillion by the time George Bush leaves office.

You can check the numbers here.

- Mark

JOHN McCAIN & THE "KEATING 5"

John McCain's "Keating 5" ghost has returned.



You can learn more about John McCain and Keating Economics here.

- Mark

CHAOTIC DAY ON WALL STREET

The stock market didn't do well today. It dropped another 369 points. It's now below 10,000.



If "misery loves company" we can take a look at what's happening in Europe.

- Mark

ARE WE NOW NIGERIAN PRINCES?

From Brad De Long's blog ...


SUBJECT: REQUEST FOR URGENT BUSINESS RELATIONSHIP

DEAR AMERICAN:

I NEED TO ASK YOU TO SUPPORT AN URGENT SECRET BUSINESS RELATIONSHIP WITH A TRANSFER OF FUNDS OF GREAT MAGNITUDE.

I AM MINISTRY OF THE TREASURY OF THE REPUBLIC OF AMERICA. MY COUNTRY HAS HAD CRISIS THAT HAS CAUSED THE NEED FOR LARGE TRANSFER OF FUNDS OF 800 BILLION DOLLARS US. IF YOU WOULD ASSIST ME IN THIS TRANSFER, IT WOULD BE MOST PROFITABLE TO YOU ...

- Mark

A.I.G. HAS SPENT $61 BILLION OF ITS BAILOUT

According to Newsmax.com, "American International Group has already taken $61 billion of the $85 billion loan offered to it by the U.S. Treasury ..." Incredible.

Can you imagine paying full tuition and putting $15,000 in your college kid's account for books & food for the year, then getting a call in the middle of the fall quarter informing you they've already spent almost $11,000? But don't worry, says A.I.G.'s new CEO, Edward Liddy. He claims a "strong, viable and nimble AIG will emerge from this crisis." This is about as comforting as your college kid telling you "I can eat Top Ramen the rest of the year."

Rating firms Moody’s and Standard & Poor’s seem to agree. After A.I.G.'s announcement they immediately downgraded A.I.G.

- Mark

THE "DON'T BLAME ME" CULTURE CONTINUES

From Bloomberg.com ...

In his testimony to Congress Richard Fuld, the chief executive officer of bankrupt Lehman Brothers, said his investment bank was felled by rumors, out-of-date rules, and slow reactions by regulators. All of this worked to fuel a "storm of fear" on Wall Street that led to the collapse of his firm. In other words, Fuld is saying "Don't Blame Me."

If we accept Fuld's terms ...

... his decision to dive head-first into risky mortgages when the market was collapsing had nothing to do with Lehman's collapse.
... his statements earlier this year that the "worst of the impact to the financial markets was behind us" was sound analysis.
... the out of date rules his industry fought to maintain or abolish in the name of deregulation was a sound industry strategy.

Fuld's nonsensical comments should help us all understand how we got into this mess. These guys were either clueless, or criminally stupid.

And in the FYI Department, Fuld made $40 million last year ... essentially for helping to drive Lehman Bros. into the ground.

- Mark

PREDATORY LENDING SETTLEMENT

Good News: In what will rank as the largest predatory-lending settlement in history, an estimated 125,000 Californians may get their Countrywide loans modified and payments reduced under a program to be announced today. The program is expected to save billions for homeowners.

Bad News: The program, however, rests on the assumption that investors in mortgage securities cooperate with the loan workouts. There is no indication, yet, that this will happen.

This is one of the problems of the $700 billion bailout. While the securities market gets the American tax-payer to subsidize the value of their products, there is no provision to compel the mortgage security industry to cooperate with programs like these.

I'll discuss this in more detail on Saturday.

- Mark

PRICE FIXING & THE GREAT AMERICAN RIP-OFF

Be prepared because once the Treasury Secretary is done inflating the value of worthless assets $700 billion may only be the first installment ...

One of the topics we discussed in yesterday's program was Sections 132 & 133 of the Bailout bill. In essence, these sections give the Treasury Secretary the authority to revalue or fix the prices of assets that have no real market. Why do they have no real market? Because the system was driven by people playing monopoly with Legos. When credit dried up no one wanted to step forward and keep the monopoly game going. When there are no buyers there is no market. Pretty simple, right?

The logic of the market says the people who created the mess should lose their shirts. This will set prices right. Here's former presidential candidate and current Congressman Ron Paul discussing the matter with Fed Chair Ben Bernanke.



You got that? Under the guise of "price stability" the Federal Reserve - and the U.S. taxpayer - are going to bailout stupid people who made stupid decisions while they played monopoly.

The incredible thing is that we've already provided hundreds of billion in credits to the financial sector through the Federal Reserve since last year (a process I began posting on last December). This means that $700 billion is really the second installment of an on-going bailout process.

So this is what we have. An installment bailout plan ... and the authority to inflate the value of products that have no real market today. And we pay for it all. How neat is that for Wall Street?

My friends, the authority to unilaterally inflate the value of assets means $700 billion is not a ceiling, it is a floor.

Oh, and our national debt just passed $10 trillion last week.

- Mark

THE WORST IS YET TO COME

The LA Times has an article in today's paper that explains why - as we discussed in yesterday's program - there are more economic problems around the corner. The article suggests that things won't turn around until late 2009 or 2010, at the earliest.

I have some graphs that I've put together for my book which will help illustrate why this article is right. I'll try and post those later this week.

- Mark

THE VP DEBATE ...

Tina Fey is on a roll ...



- Mark

TRAIN OF THOUGHT ...

I saw this on Dailykos.


I'll post the other ones later ...

- Mark

LETTERMAN'S TOP 10 ... SARAH PALIN

PRO-OBAMA MINERS GIVE NRA THE SHAFT

This speaks for itself. You can read the full story here ...



I want to emphasize that this happened in Appalachia (West Virginia), a supposed Obama weak spot.

Here's the interesting part. The NRA was trying to get miners on record as opposing Obama for an ad, but the miners didn't like it and closed down the mine. Their union had already endorsed Obama. So what does the NRA do? They blame the mine's closure on "mischief driven by the Obama campaign."

- Mark

P.S. I'm not saying this made the difference, but the radio ad that Blue Grass legend Ralph Stanley cut for Obama had to be helpful. You can listen to it here.

TYRANNY OF LOWERED EXPECTATIONS

OK, this is the United States of America. You can't say that someone avoiding questions, reading from cue cards, and repeating "Maverick" everytime she hit an intellectual cul de sac had a good night. This pretty much explains Palin's "success" last night ...



Republicans should be embarrassed. They've lowered standards to such a degree that Sarah Palin's debate performance makes her "presidential" material in their eyes.

How does not falling on your face make you qualified to be vice-president? How does winking like a school girl and forcing out "Say it ain't so Joe" on cue elevate discussion? That's not folksy, it's pandering and demeaning to the office she aspires too. And what's with her not doing any more public interviews?

Sarah Palin is now John McCain's campaign prop. And conservative women are fine with this?

- Mark

PIRATE ECONOMICS

The pirates off the coast of Somalia got it wrong. They should have gone to Wall Street. It's much easier to board and loot treasure when you trash an economy, threaten meltdown and depression, and then lobby Congress for your loot. No wonder Congress put in earmarks for Rum ... they needed the pirate vote.
The House caved in and approved the bailout measure on the second try. Incredible.


Look, at the end of the day, this vote was a pathetic cave-in to Wall Street and their threats of insolvency. And it did little to nothing to punish the culprits behind this bailout mess.

Tonight I'm going to go spend money and drink until I find an eye patch to put on. Then I'll put my daughter's parakeet on my shoulder for effect. Arrrghhhh ...

- Mark

OK, I WOULDN'T VOTE FOR THE SENATE'S BAILOUT BILL. HERE'S WHY ... (Part II)

Originally I had planned on going through the Senate’s bailout proposal on a step-by-step basis. After reading through it I found this to be an impossible task. I can’t do it because doing so lends credibility to the notion that the sections of the bailout proposal I discuss have some merit. They don’t. Here’s why.

GENERAL OBSERVATIONS … Pirate Economics
The Senate proposal is larded down with pork and effectively rewards economic extortion. This is pirate economics.

Let’s make this perfectly clear. There’s a problem. But the problem does not exist on Main Street. The problem exists on Wall Street. Wall Street began creating, investing in, and insuring stuff they never should have insured. They dug themselves into a hole. Then they called on Washington to deregulate markets so they could dig a bigger hole. Wall Street gambled and they lost. Now they want the American taxpayer to bail them out. The Senate bill gives them their bailout.

THE FISCAL INSANITY … Accounting Gimicks
First up, the smoke and mirrors ...

Of all the gifts and tax credits granted in the Senate’s bailout version perhaps the worst provision (for the taxpayer) is the one that allows the Treasury Secretary to revalue the toxic financial instruments that are dragging down the books of the financial institutions (Sections 132 & 133). Allowing Secretary Paulson, who has many friends on Wall Street, to unilaterally increase the value of the toxic garbage and bad deals Wall Street made will cost the American taxpayer billions more (yes, I doubt Paulson's integrity on this one).

And then there’s the regular pork. There's too much of it ...

If opponents of the original House bill didn’t like it because it was fiscally irresponsible, it makes absolutely no sense to add to the fiscal irresponsibility by adding at least $100 billion in taxpayer funded tax breaks for pet projects. Making matters worse, everyone’s invited to the party (except the American taxpayer, who picks up the tab). The Senate bailout version allows Secretary Paulson to bailout foreign banking institutions.

WHAT'S MISSING … Common Sense
The Senate version doesn’t say “Grow Up” to the financial institutions ...

We seem to have forgotten that, beginning last year, the federal government made hundreds of billions available to banking institutions. In spite of this, financial institutions still will not lend to each other. Why? Because they are afraid of each other's stupidity and, incredibly enough, they don’t trust each other. Yet, they want the U.S. taxpayer to trust them, again. Great.

And what about the American taxpayer ...

The Senate version says absolutely nothing about foreclosures caused by predatory lending practices. Nor does it say anything about bankruptcy laws that turned personal debt (and especially credit card debt) in America into a virtual debtor’s prison.

Look, if you’re going to provide assistance to Wall Street in troubled times, the American taxpayer, who got sucked into the mess (because they trusted Congress and Wall Street not to abuse their positions), deserve some kind of assistance to get out of the predatory and poorly structured loans that helped encourage this mess.

Simply allowing judges to review mortgage contracts would help. There's no money, or bailout involved here. Just common sense.

This last point is important because Wall Street went nuts with the toxic mortgage products, that are now dragging down the system, after bankruptcy laws changed in 1978. By not allowing judges to adjust mortgage contracts – no matter how egregious or disceptive – Congress effectively said to the American homeowner, “If you got swindled you have to live with the mistake … tough luck.”

Wall Street, however, laughs all the way to the bank. And they're going to giggle like school girls if they get this bailout.

FINAL THOUGHTS … For Now
Wall Street and media blowhards argue that if we don’t provide this bailout the economy will free fall into a new era of depression economics. This may be possible. But it's also extortion.

Simply put, this is not the only bailout proposal that can be made. And, yes, this is a “bailout” and not a “rescue.” You want the people you rescue to live.

We need to think this through. Specifically, we need to remember that if we are in such an emergency situation why doesn't Congress simply pass a bill that addresses the crisis – you know, without the pork? Why do we have to bribe members of Congress, who claim to care about America, to do the right thing?

I say judge the bailout proposal on its merits, not because a bunch of pirates have stormed the halls of Congress.

- Mark

P.S. I will discuss all of this, and more, on tomorrow's radio program.

OK, I WOULDN'T VOTE FOR THE SENATE'S BAILOUT BILL. HERE'S WHY ... (Part I)

Last night, after taking a quick look at the Senate bailout version I wrote that, in spite of the pork included, I might support the bill if I were in the House of Representatives. There's too much at stake (and there is). However, after getting a closer look, I have to say that I would not support this bill. Before I provide the specifics - which I will do in my next post - we need some history.

In a few words, what we are being asked to bailout is a market environment that is no longer focused on the production of goods & services. What we have in front of is, and what helped create this mess, is a market driven by gamblers bent on extracting wealth. The Senate bill not only fails to punish what can only be called 'pirate economics', it pretty much rewards it.

A little bit of history helps us understand my thinking here, and how we got to this point. I'll address the specifics of the Senate bill in my next post. The following is from Chapter 4 of my forthcoming book, The Roots of Markets & Wealth ...

In A Short History of Financial Euphoria, John Kenneth Galbraith discusses the famous case of “Tulipomania” in Amsterdam at the beginning of the seventeenth century. What started as simple prestige for those who possessed novel tulip bulbs turned into wild speculation over successive price increases throughout 1636. Specifically, competition over tulips turned into mania, with single bulbs trading for new carriages and homes, or fetching as much as $25-50,000 each. Demand reached such heights the Amsterdam Stock Exchange developed a futures market for the bulb. 

This market, as well as the dreams of many speculators, would collapse under the weight of its own nonsense and spectacular avarice. As sellers demanded their tulip contracts be enforced, they were disappointed when their petitions fell on the deaf ears of the courts. Because the market had little to do with the production of actual goods and services, the courts viewed Tulipomania as little more than a gambling operation. As is the case throughout these histories, panic, default, and bankruptcy followed. Galbraith wrote “no one knows for what reason” the speculation and mania ended, but there’s little doubt common sense finally prevailed in a market spun out of control by deluded buyers and sellers. 

Fast forward almost 340 years. We find the creation of another futures market, but this time in U.S. dollars. In The Vandal’s Crown: How Rebel Currency Traders Overthrew the World’s Central Banks, Gregory J. Millman tells the story of how a glut of U.S. dollars (see Chapters 10 & 11) helped turn the world’s anchor currency into another commodity, just like corn and beef. Driven by the need to pay for the defense of the West, while attempting to solve social problems at home, by the mid-1960s the U.S. government had put too many dollars into circulation. Because too much of anything drives down its value traders knew the future price of the dollar would both fluctuate and drop, especially with persistent U.S. budget deficits and growing debt.

Like all good entrepreneurs traders wanted to profit off of these dynamics but needed to go beyond what traders in the Euro-Currency markets were doing (trading currencies to cover commercial transactions). They wanted to trade dollar futures. By 1970 they were looking to trade and speculate on the dollar like Chicago Mercantile dealers who bought and sold pork bellies and cattle. To do this, they needed to convince the Nixon administration that speculating on the value of the dollar was a good thing. They would say nothing about what made trading on the dollar so profitable – the underlying irresponsibility of bloated budgets, growing debt, and price fixing.

For $5,000 (paid by traders) Milton Friedman was goaded into writing a paper which argued that a futures market in dollars was a good idea. Friedman would ignore the underlying irresponsibility of bloated budgets and growing debt. Friedman’s paper was sent to Nixon’s Treasury Secretary, George Schultz, who bought into the idea, stating “…if it’s good enough for Milton [Friedman], it’s good enough for me.”

The result was an explosion in currency trading and other “innovative” financial instruments whose value now outpaces the value of goods and services produced around the world. Today, an entire industry of traders, analysts, and lawyers make their living off of what Peter F. Drucker called a “symbolic economy” (discussed in Chapter 11). Ignored is how little the average person understands this part of the economy, and how bloated budgets and growing debt feed it. Also left unaddressed – if not conveniently ignored – is how continued deficit spending and bloated budgets virtually insure the precipitous decline of the dollar. These dynamics fly in the face of what Adam Smith had to say about the importance of knowledge, transparency, and information in capitalist markets.

Given these cases (and there are more), do we simply trust all market players to do what’s right and not succumb to speculation, greed, and the herd mentality that overtook Holland’s tulip traders? If history – and current events – has taught us anything it’s this: The further a generation gets from the great financial disasters of the past the more their confidence grows in the brilliant and innovative discoveries they’ve made in the markets of their day. Past experiences and skeptics - as JK Galbraith put it - are “dismissed as the primitive refuge of those who do not have the insight to appreciate” what the new wonderkinds have fashioned ...

- Mark

A GLOBAL "BLACK SEPTEMBER"?

Just so we're aware, there are several financial institutions around the world that aren't doing very well ...

The Financial Times has an interesing interactive-graph page showing that during the month of September national governments intervened and/or insured over $1 trillion dollars ($1,063,000,000,000) worth of troubled financial instruments.

Here's an interesting fact. In spite of spending $297 billion to bailout Fannie/A.I.G./Citi-Wachovia, the U.S. came in a distant second to Ireland, who pumped in $572 billion to guarantee market liabilities.

Here's another interesting tidbit. With the exception of the U.S. these bailouts occurred after Congress rejected the bailout proposal on Monday.

This was just September. I think it's fair to ask whether the $700 billion bailout Congress is now considering is just a first installment ...

- Mark

THERE'S NO PUTTING LIPSTICK ON THIS PIG

If the House Republicans didn't like the bailout proposal they rejected on Monday, they're going to love what the Senate just passed. There's stuff for education, credits for steel industry fuel, stuff on the alternative minimum tax, energy credits, and additional oil industry tax breaks.

I guess these guys can't help themselves ... it's not like there's an emergency going on. The Senate, however, did put stuff in that would deal with the financial mess we're in. Good for them. Then they patted themselves on the back (profusely, I might add) for doing what we were all taught in kindergarten - to work together.

If House Republicans stood on principle in rejecting the proposal on Monday we can expect them to reject this Senate bailout proposal out of hand, right? Then what? But if the House Republicans cave in, and vote for this bill, what does it say about their principles?

Incredibly, I'm not sure I would vote against this bill if I were in the House of Representatives. The longer market uncertainty persists the easier it is for events to escape human control ...

I'm still reading through this 431 page (up from 109 pages) bill. Stay tuned.

- Mark

"WHEN TRUST VANISHES, WORRY ..."

The NY Times has an excellent piece that reminds us what happened to the nation's economy after 1929. In a few words we need to remember that the market collapse of 1929 wasn't what did us in. It was the subsequent bumbling that turned market collapse, and a Depression, into The Great Depression.


You can read it by clicking here.

- Mark