Wednesday, August 31, 2011


This shouldn't be a surprise to anyone. But I'm sure it is. Thanks to a Bloomberg investigation, many are now learning the details behind the Federal Reserve's $1.2 trillion back door bailout for Wall Street's biggest financial institutions. I've been writing about it for some time already (see links below), so I wasn't going to post on this when it came out last week. But it's important, so I'll make a few short comments. 

Simply put, the nation's biggest banks like "Citigroup, Bank of America​, Morgan Stanley, and Goldman Sachs, along with dozens of others, received about $1.2 trillion in loans from an alphabet soup of Fed supplementary lending programs."

In the FYI category, you and I don't have access to any of the Fed's loan programs. Just the banks. Sweet.

How did this happen, you ask? Simple, as I wrote about then, the Federal Reserve opened up the equivalent of new "teller windows" to deal with our collapsing institutions in 2007. Since then the Fed has lent Wall Street's biggest banks at least $1 trillion to deal with their financial mess. While I suggest you check out Bloomberg's cool interactive, here's what it looks like in chart form ...

While Bloomberg's interactive refers to the money lifelines as "secret" that really isn't the case. The information has been out there. I've been blogging about the "Fed's cash machine," the money dumps, and the Fed's numerous handouts immediately after the market collapsed in 2008. In fact, I started writing about financial favors for Wall Street long before the market collapsed in 2008 (see this, this, this, and this).

Throughout the money dump Wall Street's largest "let the market work" institutions have been encouraging it all.

The incredible thing is that none of this has been a secret. It's just that no one was paying attention ... or they didn't care ... or they didn't think middle America could figure it out ... take your pick.

Whatever you want to believe, it's one of the reasons I've been saying for years that we don't have a free market. It's also why I've saying that our banks are insolvent, even if they appear liquid. They may have access to money, but they're still sitting on toxic assets that could wipe them out if they were forced to log them in at market value ... and if we had a government that would force them to live by market values.

Instead, through the Fed's miracle cash machine they've been granted bailout after bailout, and one regulatory favor after another.

Sigh ...

- Mark

Tuesday, August 30, 2011


It's incredible how our world changed in just one generation. It was 1980. I was in junior college when I started studying politics and international relations. The United States was engaged in a cold war, paying for the defense of the west, and staring down the Soviet Union as it was crumbling into history. The American Peace, or Pax Americana, was in full bloom.

South of the border, most of Latin America was dominated by corrupt regimes and crony capitalists. The region's growing debts insured that the United States would wag it's finger at our neighbors to the south, as if they were broken step-children. And why not? The U.S. had a debt to GDP ratio that was just above 30% (we owed about $979 billion then) while most of Latin America had debt to GDP ratios that hovered between 35-60%, which would be even higher when set against declining export earnings in the 1980s. Though debt ratios didn't approach 100% for most of the region in the 1980s, declining export earning contributed significantly to Latin America's Lost Decade.

And we continued to wag our finger through it all.

How things have changed in just one generation.

There's no longer a cold war, but the United States continues to spend lavishly on military budgets like drunken sailors. We are spending far more money on defense than the next 17 militaries, combined. Worse, we spend 6 times more than our presumptive enemies China, Korea and Iran put together (we might be spending more than $1 trillion a year on defense).

And for what? To defend ourselves from terrorists who killed fewer Americans in 2010 (15, most in Afghanistan) than dog bites (34) or lightening (29)?  Combined with the incredibly irresponsible trickle down borrow-and-spend policies initiated by President Reagan (then carried on by both Bushes), and it should come as no surprise that America now finds itself in a financial mess. We've been spending and cutting taxes recklessly, while subsidizing crony capitalists, and pursuing foreign demons that don't warrant the expenditures.

How big is the mess? The U.S. now finds itself with a debt to GDP ratio that hovers over 95%. This is far worse than any of the major economies in Latin America today. Bolivia, run by socialist president Evo Morales, recently posted a 3.7% budget surplus (in 2010) and felt comfortable enough to lecture the United States on it's finances.

And while capacity to pay is as important as ever (the U.S. still retains the capacity to pay), the recent stupidity we saw over the debt ceiling is not encouraging. The Tea Party's fake populism and manufactured rage are encouraging the Barbarians at the Gate to question the credibility of the United States.

Today, even though annual budget deficits in the United States have only averaged about 10% of GDP after the 2008 market collapse (not bad considering what happened) ...

... total debt to GDP ratios in the United States have risen so fast it's now approaching 100% of GDP. This is quite a swing from when it was just above 30% when President Reagan entered the White House. No wonder Ecuador's socialist president lectured the United States on it's finances. Simply put, he can.

Why is all of this important? Because apart from the faux populist outrage we're getting from the Tea Party cranks (where were these guys when Reagan tripled and Bush II doubled our national debt?), we now have to deal with a world that has less confidence in America.

The world sees a country that seems more concerned with empty tax cuts, crony capitalism for Wall Street, and endless foreign wars than it is with fiscal responsibility and global leadership. They see a nation run by Wall Street kleptocrats, who are guided by ideologues pushing a failed ideology. Worse, many have a sense that they are seeing an empire in decline.

This helps explain why leftist-socialist presidential candidates have had found success in Argentina, Brazil, Chile, Bolivia and Venezuela. While there's much to admire in this country, it's no longer easy for  Latin Americans to point to the United States' economic model as the path to follow. How can it be when fraud and incompetence on Wall Street are rewarded with bailouts and bonuses?

Yet, the United States continues to prod and push Latin America on issues ranging from drugs to immigration when, as any Latin American will tell you, it's U.S. policies and habits that encourage both. The Bush administration even tried a cold war tactic when they participated in (led?) an attempt to remove Venezuela's Hugo Chavez from power in 2002, even though he had been popularly and legitimately elected president. While it wasn't picked up by America's media, political insiders understood that the U.S. had a hand in the attempt to oust Chavez from power by bankrolling Venezuelan groups opposed to Hugo Chavez.

Then there's the hypocrisy of our response to the 2008 market crash.

History tells us that if any of our neighbors to the south had experienced the same market meltdown that we did in 2008 that our response would have been much different. Apart from demanding strict austerity measures we would have pressured Latin American officials to make big changes in the way government bureaucrats and their crony capitalists did business. Our response to our own meltdown, however, was to spend lavishly and to cover up for Wall Street with taxpayer backed bailout funds.

How we reacted to our market meltdown in 2008 is one of the reasons why I wrote, tongue-in-cheek, that it's a good thing we don't have a U.S. Embassy in the United States.

In the past - using the U.S. Embassy as a base to direct events - the U.S. initiated coups and forced unwanted leaders from power for lesser offenses throughout the world. With this in mind, in 2009, after being asked about the evolving economic mess in the United States, Chile's then President (2006-2010) Michelle Bachelet joked:

The reason why in the United States there has never been a coup d'etat is because, in the United States, there is no United States embassy.

President Bachelet may have been joking (she issued an apology later), but the point was made. After 30 years of pursuing budget busting tax cuts and unrestrained neoliberal policies in the United States, we are now experiencing what Latin America did when it embraced free market policies under corrupt regimes in the 1980s: economic instability and financial collapse.

What's worse, in many ways we've done nothing to rectify the issues that have altered our economic landscape in just one generation. This is unfortunate because, while our media ignores how it's all tied in to the American Peace, Latin America is picking up on the new realities of Pax Americana in the 21st century.

I'll be touching on this, and other issues, in my Politics of Latin America class this winter. Stay tuned for updates.

- Mark


Too funny. Via Digg ...

- Mark

Monday, August 29, 2011


Did President Obama's economic stimulus program work? In my view it did. In fact, I know it did. The primary reason I know it did is because of what would have happened if we had not dumped hundreds of billions into the economy via the stimulus program. We could have ended up in another depression, or somewhere near those lines.

This is where problems begin for most people. I always get asked, "So, how do you know? Show me the evidence ... ", usually with some fine expletive worked in there. Follow me as I explain how I know (I'll get to the actual stimulus studies below).

The problem with pursuing "woulda-coulda-shoulda" scenarios or asking "what if" is that many people don't think these exercises bare fruit. They think there's no way to contemplate what never was, especially if the "what if" undermines what they desperately want to believe is true. Part of the reason for this mind set is that Joe Six Pack just doesn't understand how we study the "what ifs" of our lives, especially when it comes to the economy (or any similarly complex topic). What they don't understand is that our kids engage in these kind of activities every day.

How do kids do this, you ask?  Here's an example.

When my son was five he would consistently ask questions like, "Who do you think would win in a fight, Superman or Spiderman?" or some similar question. It really didn't matter who my son was asking about. What he was engaged in was a creative mind exercise that allowed him to contemplate the "what ifs" of his world.

As my son replaced Spiderman with Batman, or some other super hero team, he was considering different outcomes under different conditions. Sometimes he would consider what would happen if Spiderman had kryponite, or some other outcome changing variable. It didn't matter. He was engaged in a mind exercise that social scientists also engage in. And while it may not be as simple or as fun as when kids do it, social scientists have gotten pretty good at studying the "what ifs" of our lives.

In the social sciences the "what ifs" we study are are referred to as counter factual activities. Wait, don't leave. I won't use that word more than once. What's a counter factual? (OK, twice). It's a mind exercise that allows us to think about alternative or other possible scenarios. Today we might watch programs like Spike's Deadliest Warrior, among others, which help us understand the science behind counter factual thinking. While the process behind using counter factuals for the social scientist is a bit more complex than what our kids do (it involves the scientific method), you get the point.

Unfortunately, apart from professional social scientists, most adults don't engage in stimulative mind exercises that force us to ask questions about things that make us uncomfortable. This is one of the reasons many are inclined to reject studies that respected social scientists put out. There are a number of reasons for this.

Many people get set in their ways, for example. Others fear the "What if I'm wrong?" moment. They don't want to entertain anything that might disturb their world view. This explains, in part, why Galileo's contemporaries didn't want to look into his telescope ...

Others fear disappointment and regret, especially if their lives or partners don't meet their expectations. It can lead to depression. Whatever it is, the end result is that many adults don't engage in (or accept) the free flowing creative mind activities that most kids do almost every day (which probably explains why adults don't skip, and children do; but I digress ...).

I bring all of this up because the Washington Post's Ezra Klein has done an excellent job of explaining why we know that President Obama's stimulus program worked. Or, to put it in terms that my then five-year old son would recognize, we now know for sure that Superman would beat Spiderman ;-) ...

For those of you who don't have the time to read the piece (or who find it a bit too technical), just know that Ezra Klein has broken down nine of the best studies on the effects of the economic stimulus program. What Klein presents is a lesson in how we study and understand counter factuals, like whether the economic stimulus program worked or not.

In this case, Klein explains why we know that the economic stimulus program worked.

- Mark

Saturday, August 27, 2011


The retirement of Apple CEO Steve Jobs is a pretty big deal. His presentation to the Cupertino City Council on Apple's proposed new campus not only gives us insight into how he thinks about the environment that he lives and works in, but also into how his life experiences as a kid tie into his sense of community. The fact that he showed up personally to make the presentation on the new spaceship campus (it's impressive) says much.

Some of his comments over his lifetime also help us understand markets in the 21st century in ways that Washington doesn't seem to grasp.

Jobs on innovation and creativity: "Innovation has nothing to do with how many R&D dollars you have. When Apple came up with the Mac, IBM was spending at least 100 times more on R&D. It's not about money. It's about the people you have, how you're led, and how much you get it." 
Implication: Real entrepreneurs don't sit around waiting for money dumps or a cut in the capital gains tax to become successful.

Jobs on competition after Microsoft invested $150 million in Apple to help bail it out in 1997: "... time has come to disabuse the notion that for Microsoft to succeed, Apple must fail."

Implication: While being the biggest on the block may be good, competition is a good thing. Monopolies should not be encouraged or pursued.

Jobs on getting fired: "I didn't see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life."
Implication: If Jobs became a better business person after being fired from the company he built we could have gained much by forcing concessions and layoffs on Wall Street after 2008. The industry and the economy would have been better off if we had put a few more companies in receivership, or just let them burn.

Click for super huge graphic.

- Mark

Friday, August 26, 2011


OK, I couldn't just leave this alone as an "update" to my post from yesterday. I have to elaborate ...

It's déjà vu all over again. It was February 2007. Markets were in a tizzy over stocks that went crazy days before. Ben Bernanke came out after the market took a tumble and said that "markets were working well" and that he expected the U.S. economy to pick up. In June of 2008 he would add, “The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.” Oops.

Then we have Bernanke's other pre-market collapse gaffes, which include predicting 5% unemployment through 2011.

Look, Bernanke's mistakes aren't him simply saying inflation is going to be 2.5% when it turns out to be 3.1% They are numerous, and they are huge. This link helps us understand how he and the Federal Reserve have become the chief apologists and enablers of Wall Street.

But wait, there's more.

Back in September 2008, right in the middle of our market collapse, Fed Chair Bernanke supported granting Treasury Secretary Hank Paulson Czar-like authority to do what he wanted with $700 billion dollars. No looking at what actually caused the mess, just hand over the money. No strings attached. Seriously. No strings attached.

Rosy pictures before. No questions asked afterwards. Move along, nothing to see here. Nice, if you're a market player on Wall Street.

Fast forward 4 1/2 years to August 26, 2011 (i.e. today). Markets were worked up over recent roller coaster rides on Wall Street, and what appears to be an imminent recession. Federal Reserve Chairman Ben Bernanke gave a much anticipated talk in Wyoming and said that the U.S. is on track for long-term economic growth. While he also announced that no new economic stimulus measures were on the table, he did leave open the possibility of more action by the Fed if another recession looks likely.

Now, where have I heard this kind of open-ended murky talk before?

Oh yeah, I started writing about the Fed's "everything is fine" pep talks almost as soon as I started my blog, back in 2007. I kept talking about our collapsing economy throughout 2008, right up until the market collapsed. And through it all, Mr. Bernanke was painting a rosy picture ...

At the end of the day, it really doesn't matter. It's business as usual in Washington and on Wall Street. You and I are going to pick up the tab, like we did the last time. And it could well be done in a way that nobody notices (as I discuss here and here).

If we look at Bernanke's track record, and translate his Fed-speak talk at Jackson Hole this afternoon, we should know that the die has been cast. And we should all be seeing the same thing. We're in trouble. Expect another money dump (i.e. a quantitative easing stimulus).

It really is déjà vu all over again.

- Mark

Thursday, August 25, 2011


Do you want proof that our markets are out of whack? Check out the following chart, which comes to us via Barry Ritholtz' The Big Picture.  Make of this what you will, then follow me below ... 

My thoughts? We just experienced a market collapse, and are poised to enter a second recession. Yet, the stock market is still above the point at which Alan Greenspan thought we might be entering a period of "irrational exuberance" in 1996.

As I've written about before, I think what you see in the chart above can be attributed to several factors.

1. The Fed's seemingly never ending money dumps (started after Reagan fired Paul Volcker), which are designed to boost markets when they stumble (a.k.a. the Greenspan Put).

2. Financialization run amok (due, in part, to the rise of the symbolic economy and deregulation).

3. The market's herd mentality (made possible, in part, by centralized modeling and market zombies).

4. Accounting gimmicks & fraud (a market staple that acts like Ritalin).

5. All of the above ...

Take your pick. You can make a case for any one of the choices here.

For my money - as those of you who read regularly have probably guessed by now - it's #5 ... "all of the above." This why I think Fed Chair, Ben Bernanke, will let the world know tomorrow, in Greenspan-like fashion, that the money's still going to be cheap, and/or that another money dump is on the way (though it will probably be clouded in murky Fed-Speak).

Whatever it is, our markets ain't right. And Bernanke's speech tomorrow won't do much to fix it either.

- Mark

UPDATE: It's déjà vu all over again. It was February 2007. Market were in a tizzy over stocks went crazy on February 27. Ben Bernanke came out and said that "markets were working well" and that he expected the U.S. economy to pick up. Then we have his other gaffes (including 5% unemployment through 2011). Fast forward 4 1/2 years to August 2011. Markets are worked up over recent roller coaster rides on Wall Street and what appears to be an imminent recession. Today Federal Reserve Chairman Ben Bernanke said the U.S. is on track for long-term economic growth and announced no new economic stimulus measures during his speech at a conference in Jackson Hole, Wyo. But he did leave open the possibility of more action by the Fed if another recession looks likely. If we look at Bernanke's track record, and translate from the Fed-speak, this is what we get: We're in trouble. Expect another money dump.

Wednesday, August 24, 2011


One of the reasons the market collapsed in 2008 is because market players either ignored or didn't have enough information about derivative market exposure. Then they ignored the casino economy this ill-informed derivative market helped create. This is important because when market players learn new things about co-signers, collateral, job status, price, or market valuations they might be more (or less) willing to consummate the deal.

Think about an esteemed uncle who promises to co-sign a house note for you, and then learning that he is going to declare bankruptcy. But his books still look good, so he's willing to hold off until you get the house. Is withholding this information a good idea, for anyone? Now imagine this market wide.

Not securing and sharing critical information proved devastating in 2008. Even though Wall Street and other market players were backed up by rosy market models (that few understood), the money people on Wall Street started to panic when they learned that big financial houses (like Lehman Bros.) didn't actually have the money to back up their over sized market bets.

Well, hold on to your hats. Because of Wall Street's muscle in Washington, it looks like much hasn't changed after all. Wall Street's lobbyists have fixed things so that we're poised to party like it's 2008. Cue to Prince ...

Seriously, International Finance Review is reporting that the trading centers ("trade repositories") that are supposed to document and house information crucial for derivative markets may not be collecting the information that they should. According to a recent report on Over The Counter (OTC) derivative data, the regulatory scope of derivative trade centers appears to exclude,

"... information contained in derivatives master agreements and credit support annexes, as well as data relating to collateral or payment transfers, or valuation data coming from external sources."

Translated this means that critical due diligence - like collateral and market valuation, among others - that could help assess risk, isn't always documented or presented. You know, kind of like before the market collapsed in 2008.

So, in spite of Dodd-Frank (as I pointed out here), Wall Street can enter into a derivative agreement and they don't necessarily have to reveal previous prices (how much the last customer paid) or demonstrate proper collateral. It's kind of like going car shopping and asking for the Car Fax and being told, "Our market doesn't really require this."

Why is this important? Because as of January 2010 the notional value of the OTC derivative market has apparently grown to about $300 trillion dollars in the U.S., and over $600 trillion between the G-10 countries. This is about 20-40 times the size of the American economy.

So, yeah, we're doing it all over again.

- Mark


Too funny. This picture pretty much captures the media's pathetic over hype of yesterday's 5.8 earthquake on the east coast (hat tip to Seven for the link).

In the FYI category, California gets a 5.8 quake about once every 3 years. Across the mountains (from Bakersfield), Mammoth Lakes had a 4.2 earlier this morning. You can check California's recent quake history here. Attached below is the map of recent quakes in California up until this morning.

- Mark

Tuesday, August 23, 2011


It appears that Rick Perry is now backing away from what he wrote in his book. And his book was published just nine months ago!

In Fed Up: Our Fight to Save America from Washington, Texas governor argued that Social Security was a Ponzi scheme. What an idiot. It's an insurance program, not an entitlement program.

Like other clueless Republicans who either don't have an idea what Social Security is about - or who don't care about telling the truth - Perry is more showman than statesman. Franklin D. Roosevelt designed Social Security, as I explained in the Bakersfield Californian over six years ago (and elsewhere), so that it would be a self-funding insurance program that would pay for itself. And it does.

In fact, Social Security has taken in so much money (in part because President Reagan effectively doubled Social Security taxes, at the urging of Alan Greenspan) that the program has been lending money to the U.S. government for decades. The federal government now owes the program money (trillions).

What this means is that, unless you conveniently ignore how successive administrations have been drawing on the programs surpluses, Social Security has nothing to do with the budget deficit. Nothing. Zilch. Nada.

In fact, the only reason Social Security is even mentioned as part of the budget is because President Lyndon B. Johnson decided to include it in the domestic budget. He did this only because he wanted to show his critics that we spent more on domestic programs than we did on our foreign engagements (i.e. the cold war and Vietnam) during the Vietnam War.

Yet, Perry (and his GOP presidential wannabes) like to suggest to Americans across our great nation that Social Security is in trouble. Incredibly, many Americans believe him. Why? I'm not sure, but one suspects that when it comes to Social Security Governor Perry is either Super Stupid, or that he believes that a majority of Americans are ...

Think about the following.

Today, if we did absolutely nothing with the Social Security program the interest earned by fund's bonds could pay out benefits until at least 2024. In fact, according to the Congressional Research Service, Social Security would have absolutely no problems paying out benefits for the next 75 years if all national income were subject to the payroll tax (currently about 15% of all national income is excluded from the Social Security tax).

Others Social Security facts that Governor Perry and his Clueless Wonders in the GOP don't seem to understand is that ...

* Before Social Security was enacted over 47% of America's elderly (but more elderly women) lived in poverty.

* Before Social Security was expanded in 1959 the poverty rate among America's elderly was still 35%.

* Today, only about 9% of America's elderly live in poverty (so, yes, more can be done).

But wait, there's more.

As I pointed out in my book, one of the greatest beneficiaries of programs like Social Security (and Medicare) has been America's bread winning middle class. Without Social Security as many as 44% of America's elderly would be living in poverty, and/or looking to their children and relatives for assistance. Anyone who has taken in a relative or friend during hard times knows exactly what this means for your bottom line (and your life of leisure).

Put another way, America's middle class has prospered in part because of insurance programs like Social Security.

Remind your friends of this the next time they try and tell you that Social Security is a problem.

- Mark 


Northern Trust has a list of FAQ that compare the Great Depression (1929) to the Great Recession (2007-2008), which we're currently experiencing. The charts are particularly helpful. Check it out here.

- Mark

Monday, August 22, 2011


Via Digg we get, "Hemp Against Hitler: How Cannabis Helped America Win WWII." It's an informative article, especially for WWII historians.

This YouTube clip is a nice history lesson on the relationship between hemp and the U.S. Navy.

- Mark

Saturday, August 20, 2011


So I'm on the Jaz McKay radio show the other day (Thursday). I'm talking to a caller who wants to explain to me and the guest host - former Kern County DA Ed Jagels - why she thinks Mexican immigrants have trouble assimilating in the United States. The conversation turned really fun when she explained that her expertise on assimilation and Mexicans came from her one Christian missionary experience driving through Tijuana.

I wanted to hear what she had to say so I didn't interrupt and say anything about Tijuana not being the best source for understanding Mexico, it's culture, or assimilation. So I listened. I'm paraphrasing, but here's how the conversation went ...

Caller: As we drove through Tijuana to drop off building materials I noticed how no one paid attention to the laws, no one followed the rules, and that no one cared about keeping things clean ... blah, blah, blah

ME: So what you're saying is that Mexicans are barbarians ...

Caller: I'm just saying that one of the reasons Mexicans don't assimilate is that they don't understand how to respect laws because they don't respect anything in Mexico ...

Me: So, I'm just Conan the Barbarian? All Mexicans are just barbarians ...

Caller: I'm just saying that from what I saw in Tijuana there was no respect for the rule of law ...

At this time guest host Ed Jagels recognized the hole the caller was putting herself into, and he tried to interject. But I was a little miffed, and wanted to have some fun. So, calling on my inner barbarian, I pushed on and pressed the obvious point ...

ME: What you're trying to say is that Mexicans don't assimilate because they're barbarians by nature. And you gathered all of this cultural information from your one trip to Tijuana ...

CALLER: I'm just saying that part of the reason they don't assimilate here ...

ME: The next thing you're going to tell me is that they don't use forks down there ...

CALLER: Well, ummm ....

ME: And you call yourself a Christian?

ED JAGELS (recognizing the evolving train wreck): I think we need to go to break about now ....

ME: Hey, Ed ... I have a question ...

ED JAGELS: Yeah ...

ME: Do you think you can teach me how to use a fork during the break? Ha, ha, ha, ha ....

ED JAGELS (doing his level best to ignore me): We'll be back after these messages ...

Seriously. One trip to Tijuana and the caller was a cultural and ethnic expert on Mexicans. In her view she now understood what motivates Mexicans both in Mexico, and in the United States.

Hey, I have an idea. With her insights into the human condition, why don't we put her in charge of an anthropological team in the Middle East? She's obviously got a gift for understanding people from around the world. And best of all, as a Christian she can spread the Word of God, in a non-threatening, completely bias-free, manner. Bring your Bibles, here we come ... Hallelujah!

And people wonder why more and more people around the world hate us ... Sigh!

- Mark

Friday, August 19, 2011


"The great enemy of the truth is very often
not the lie, deliberate, contrived, and dishonest,
but the myth, persistent, persuasive, and unrealistic."
- John F. Kennedy

Have you ever wondered how Fox News, Rush Limbaugh, and other conservatives have been able to convince so many Americans to turn against President Obama, or to work against their own interests? It's tied to disinformation and a culture of lies, and can be traced to something we call false equivalency. Here's how it works.

False equivalency occurs when someone falsely compares what one person did (or does) against a "similar" action without taking into account context, wide differences, and facts that make the comparison ridiculous. It's a technique designed to distract and dilute the facts, which is crucial if you want to muddy the political waters, or provide cover for failure.

It can be as simple as someone staying up all night with a sick baby and then saying, "I'm tired, I didn't sleep at all last night because I stayed up caring for the baby," only to be met with, "Yeah, I'm tired too, I stayed up past my bedtime watching Jay Leno." Another example of a false equivalency (FE) might go something like this claim, which I dealt with yesterday on the Jaz Mckay radio show.

I came to this country as a Canadian, but I assimilated and eventually became a U.S. citizen legally. All Mexicans should be able to assimilate, and become a legal citizen like me, as well.

The reality here - which I incorporated into my reply (after I asked a few questions) - is that assimilation is much easier if you have a law degree (the caller did), if you already speak English, if you're fair skinned, and if you arrive in the U.S. from an Anglo-Saxon country, like Canada. These factors are far different than if you are a poor, uneducated, Spanish-speaking Mexican.

The Canadian-Mexican comparison is not the same. It is a false equivalency comparison designed to ignore or hide very real contrasts.

So, why am I bringing this up? Because of an evolving story that's starting to gain traction in conservative circles. The story began with President Bush in 2008 (and perhaps as early as 2000, as we'll see).

As he was preparing to leave the White House President Bush, with the economy collapsing, President Bush falsely claimed that things weren't so bad because he entered the White House with a recession, and was leaving with a recession. Specifically, he said during his final press conference as president:

"In terms of the economy, look, I inherited a recession, I am ending on a recession."

Nothing to see here. I'm leaving things exactly as I got them. Right ...

Look, at the end of the day the economic situation that President Bush inherited was in no way comparable to the economic disaster that he left President Obama. To make the claim that President Clinton left a recession is delusional. But wait, it gets better. It's also a lie.

According to the National Bureau of Economic Research a recession is officially declared when you have two consecutive quarters (six months) of GDP decline. This never happened under President Clinton. Growth slowed during one quarter, but not two. But the deception doesn't end there.

President Bush conveniently ignored that President Clinton left him hundreds of billions in budget surpluses. The CBO projected that these surpluses would grow and generate about $5.8 trillion by 2011. President Bush blew through all of this, then left President Obama with annual trillion dollar deficits.

But this didn't prevent President Bush and his team from lying about the "Clinton's recession" (that never was) so that they could falsely draw parallels to the "Bush recession." And it worked. By 2004 the false equivalency "Bush Recession = Clinton recession" claim had at least 62% of Americans believing the falsehood that an economic recession "began during Bill Clinton's administration, before George W. Bush took office."

Along the way Team Bush and the GOP were aided by Fox News, Rush Limbaugh, and other conservative mouthpieces. This is important to understand today because two of the biggest mouthpieces of the right - Rush Limbaugh and Sean Hannity - are now planting the utterly false idea that when President Bush left office the unemployment rate was around 5.6% . Huh?

Check out this chart on unemployment rates from the Bureau of Labor Statistics ...

No matter how you slice it, when President Bush left office at the beginning of 2009 the unemployment rate was right around 7.5%, and climbing. Proving that stupidity and mendacity are contagious among like minds, on Monday Sean Hannity claimed that President Obama "inherited unemployment at 5.6 percent."

Both Limbaugh and Hannity lied by deducting two percentage points from Bush's unemployment figures simply because they want to attack President Obama, and then get America to abandon him. If the economy and the nation go down in flames in the process, too bad. 

What's happening here is that the far right is in the process of trying to rewrite history, not so much because what they say is true, but because they understand that false equivalencies that involve lies actually work. Suggesting that what President Bush left President Obama is equivalent to what Bush inherited from President Clinton is patently false, and part of an evolving narrative of lies.

If the GOP can wrap these lies up into another false equivalency story about unemployment and the economy, even better. The question is whether the American public will fall for it, again.

- Mark

Thursday, August 18, 2011


For those of you in the Bakersfield-Kern County region, I'm going to be on the Jaz McKay show around 12:30.

The former DA for Kern County, Ed Jagels, is guest hosting. It should be fun. KNZR 1560 on your radio dial.

- Mark

Wednesday, August 17, 2011


The Christian Science Monitor picked up on this Jon Stewart clip, and asks "Did Ron Paul's presidential bid just get a big boost from Jon Stewart?" In his opening comments Stewart made it clear that Fox & Friends (among others) virtually ignored how Ron Paul not only came in second, but barely lost out to Michele Bachmann in the Iowa Straw poll last week.

Ron Paul's reward for his popularity in Iowa? He gets ignored and became the Republicans "13th floor" in the post-straw poll analysis. Too funny. Check out the Stewart piece here." width="512" height="288" type="application/x-shockwave-flash" allowFullScreen="true" allowScriptAccess="always" base="." flashVars="">

- Mark


In my book and on my blog I've written about the impact collapsing economies could have on global security, and how we can see historical parallels to what we are experiencing today with what happened in the 1930s. It's not pretty. But it doesn't seem to matter.

The Europeans, who should know better - and who have taken steps to rein in some of the stupidity - nonetheless have embraced their own blind alley of debt. Meanwhile, in the United States income inequality, wealth gaps, and personal debt loads continue to grow. America's financial mandarins, however, are doing just fine, which is part of the problem.

All of these developments, as unfortunate as they are, were pre-conditions to the frivolity and stupidity that preceded the global calamities of the 1930s and 1940s.

Those of you who've read my book, or taken my classes, understand what's happening. Even the global institutions that were designed to help avoid these situations are in trouble. But no one seems to be able to piece any of this together. There is no sense of urgency, or instruction. Which is strange, because we've done this before.

As I pointed out in my book, and on this blog, history is now whispering in our ear.

This is why this piece from Market Watch is so interesting. I'm not so much concerned that it's advocating higher taxes on those who got us into - and are now profiting from - our market mess. Nor does it discuss the international implications with any depth. Still, the article is important because it points out how our domestic situation is on a path to blow up in our collective faces. The date the author is point to (2012) isn't as important as the parallels he discusses.

Apart from growing impatience domestically, the author points out that there “are two remarkable similarities in the eras that preceded" 1929 and the market collapse of 2008. Both eras "saw a sharp increase in income inequality and household-debt-to-income ratios” and in each case “as the poor and middle-class were squeezed, they tried to cope by borrowing to maintain their standard of living.” The end results was a market crash. The serpents of Nazism were unleashed, and economic warfare followed.

It's a short but good read. But don't get too caught up in the tax the super rich stuff (as much as I agree with the argument).  Your focus should be on tying what's happening today to what happened 80 years ago.

Seriously. History is whispering in our ear.

- Mark