Sunday, June 30, 2013


With the GOP leadership concerned over Darrell Issa turning things personal, it's pretty clear that his IRS investigation is just another political witch hunt ...

* Issa directed Treasury Inspector General to ignore IRS treatment of liberal groups (Raw Story). 
* The IRS 'scandal' was a scam from the beginning (Media Matters). 
* Darrell Issa's 5 biggest lies about the IRS scandal (The National Memo).

- Mark

Thursday, June 27, 2013


So I'm looking at what's happening in Italy and start thinking to myself, What a smoldering pile of global financial crap we have on our hands. All we seem to be doing is kicking it down the road too.

No analysis here. Just one line on several of the many smoldering financial pieces that will be part of our next economic meltdown ...

Lies: With the help of Goldman Sachs Greece lied (big time) about its debt to get into the Euro zone (2001).
Smoke & Mirrors: The Federal Reserve is funneling hundreds of billions of dollars to other countries to keep Europeans invested in Wall Street.

Lies: The Italians lied with the help of Goldman Sachs (again) and are now paying the price (€8bn) for cooking the books in the 1990s so they could ditch the Lira and get into the Euro zone (1999). 
Smoke, Then Mirrors: The European Central Bank is now run by Mario Draghi, the same guy who helped cook the Italian books in the 1990s, then went to work for Goldman Sachs, and encouraged the bailout of Cyprus. 
Lies: Cyprus lied about wanting to save the economy when they were really bailing out Russian money launderers, Greece, and the stupid bankers who foolishly bought Greek bonds.

Smoke & Mirrors: U.S. financial institutions don't want to put up any real collateral to back their casino-like gambles, instead relying on borrowed assets and debt to back their bets.

What makes all of this so difficult to swallow is that the banks and financial institutions that created this mess are doing just fine. The reason is because they are allowed to draw on the public treasury, of numerous nation-states, when their financial schemes break down. History tells us that that we're all in trouble when we allow financial oligarchs to loot the public treasury to fix their mess.

I'll make this short and sweet. With the global economy smoldering, we're all living on borrowed time.

- Mark

UPDATE: Oh look, there's more ... from China (and getting worse) ... from Greece ... and don't forget Portugal.  

Wednesday, June 26, 2013


N. Gregory Mankiw is a Harvard economist.

In an early edition of his popular economic textbook he wrote that supply-side economics - which assumes that cutting taxes and putting more money in the hands of the rich will promote growth and reduce deficits - was a "crank theory." This was no great insight on his part. Mankiw was looking at the results of the Reagan, Bush I, and Clinton administrations.

Then Mankiw was invited into the inner circles of political power, and started smoking supply-side crack.

In 2003 Mankiw became Chairman of George W. Bush's Council of Economic Advisers. There he provided academic cover for President Bush's economic policies, which promised that - surprise, surprise - lower taxes on the rich would lead to higher rates of investment and growth.

 After vouching for President Bush's policies Mankiw stood by and watched as the Bush administration blew through $5.4 trillion in projected budget surpluses, effectively doubled our national debt, and blew up the economy in 2008. With that kind of record you would think Mankiw would be hiding in some cave in Afghanistan. Think again.

In fact, Mankiw's doubling down. Only this time Mankiw's not just trying to peddle a thoroughly debunked economic theory about lower taxes on the rich leading to more economic growth and smaller deficits.

In "Defending the One Percent" Mankiw argues that the generational wealth of the top 1 percent of the population is understandable if we consider that the "educational and career opportunities available to the top 1 percent" aren't much different from those available to the middle class. This leaves us to conclude that inequality is really the result of the top 1 percent being smarter and harder working then the rest of us.

No real time is given in Mankiw's article to discussing favorable legislation, access, a culture of bailouts, legal protections, inheritance, family networks, weak regulations, gender, race, ethnicity, etc. If you're not part of the 1 percent  that's on you.

Jonathan Chait took at a look at Mankiw's "one percent" paper for New York Magazine and called it an "embarrassing piece of ignorant tripe" (Mankiw's use of birth condition, organs and equality of opportunity was especially convoluted). In my view Chait was being generous.

Mankiw is smoking supply-side crack, again.

- Mark

Tuesday, June 25, 2013


The people at Zero Hedge write solid stuff on the economy and finance. Unfortunately the people at Zero Hedge can also come across as overly brainiac market guys as their writing, at times, is filled with market-speak jargon many find difficult to navigate. "Desperately Seeking $11.2 Trillion in Collateral, Or How 'Modern Money' Really Works" is one of those articles.

Fortunately, I can translate market-speak. Because what they have to say in the article is important, I'm doing that here.

In "Desperately Seeking $11.2 Trillion ..." Zero Hedge is telling us one thing: In spite of betting trillions of dollars on financial instruments (again) market players are refusing to put good assets behind their bets (again), which means that the Federal Reserve is going to have to print more money when the market collapses (again).


So you know, with graphs "Desperately Seeking $11.2 Trillion ..." will print out to about 13 pages. If you have the time you should try and read it since the nuance and the graphs are what drive home the point(s) made in the article. Since the details are what make their argument come alive, below is a jargon-free 1 page translation of Zero Hedge's article ...

OK, let's start here.

After the 2008 market collapse it became clear too many market players were gambling on toxic products that didn't have the proper assets or financial backing to pay out when the market turned sour. The end result was not pretty, as we all know.

In real simple terms what happened in 2008 was the functional equivalent of your insurance broker taking in your monthly premiums, but then not having the money to pay out when an uninsured driver crashed into your car. Multiply this scenario by hundreds of billions of dollars and tens of thousands of crashes where the participants didn't have real insurance (or assets) to back their activities and you have a (partial) idea why our 2008 market meltdown happened.

Global financial authorities didn't like what they saw after 2008 and convened a meeting (Basel III) where they pretty much said that financial players need to come up with more collateral to back their market bets. Put another way, Basel III said market players hould have greater reserve and asset requirements if we want our financial markets to be stable.

Sounds fair so far, right? If you're going to gamble and invest in markets you should at least have the ability to back your market activities in case of an emergency.

Unfortunately, as Zero Hedge points out, recent attempts to make sure that the bets that have been made are backed with good assets fell flat on its face. Simply put, there weren't enough fools or institutions with good collateral willing to back the trillions of dollars in bets that the financial wizards on Wall Street have waged.

The problem that Basel III is trying to fix is a simple one. A good portion of the market bets made on Wall Street these days are made using the borrowed assets of other market players. It's kind of like hocking your grandparents China at the pawn shop so you can go gamble in Vegas. You have every intention of paying the money back, but you still need to win in Vegas. In market lingo these activities are referred to as rehypothecated market plays (click here for a description of how it works).

What's been created over the past 30 years is a multi-trillion dollar shadow banking system built around unregulated loans, borrowed assets, and a casino mentality.

Basel III is simply asking that market players start backing their market plays with "good collateral" instead of borrowed money and borrowed assets. To reemphasize (because it needs reemphasizing), Basel III is simply asking that if you're going to gamble you should at least have the money to back your bets.

Pretty simple, right? Unfortunately two problems have developed.

First, the $1-2.5 trillion in good collateral that Basel III asked for could not be found. No one wants to put up their stuff to back the market bets that they are involved with. This should tell us something (especially since it's happened before).

Second - and this is where it gets good - serious market players have made it clear that what's really needed to back the market plays out there is NOT simply $1-2.5 trillion in collateral but rather between $5.7 trillion and $11.2 trillion in good assets. There will be no way to pay off the counter parties if (when) the market collapses again without this amount of hard collateral.

So this is what we have. Speculators, institutional investors, and rock solid brick and mortar firms want to play in the casino. But they don't want to put anything of substance up to back their bets. And why should they? The people at the Federal Reserve - and their economic illiterate sycophants in the U.S. Congress - have made it clear that they are more than willing to fill in the financial holes with bailout cash.

This is precisely the point that the good people at Zero Hedge make. The Federal Reserve is going to have to bail out the system (again) when the next market collapse happens because there's no good collateral to back the bets made. Borrowed and leveraged assets aren't enough.

And you can bet that the good folks at the Fed will be yapping about "saving the system" in spite of the fact that the system they're saving doesn't deserve saving.

What a mess.

- Mark

UPDATE: Have regulators started to move on the reserve (capital rule) requirements? This seems to be a start; i.e. until the next legislative favor/gift from Congress guts the requirement.

Monday, June 24, 2013


The political and economic costs associated with mindless militarism in America have been significant. Many Americans today have no understanding of why we really fight, other than to stammer something about liberty and freedom.

This is what Chalmers Johnson - author of Blowback: The Cost and Consequences of American Empire (2004) - had to say about "blowback" in the documentary "Why We Fight" ...
"Blowback, it's a CIA term. Blowback does not mean simply the unintended consequences of foreign operations, but the unintended consequences of foreign operations that were deliberately kept secret from the American public ... so that when the retaliation comes the American public is not able to put it in context, to put cause and effect together ... so they come up with questions like, 'Why do they hate us?' " 
- Chalmers Johnson

In a few words here's how Blowback works ...

Unfortunately, there are many people who can't understand the conceptual map that Matt Damon lays out here (too many discussion points to link together). These people tend to be the same group who wrap themselves in the flag and advocate for mindless militarism every time our reckless politicians tells them to be scared, and that we need to go to war.

They would rather cheerlead rather than understand the larger story behind war.

All of this will be part of the last three weeks of my American Foreign Policy class this coming fall quarter (2013).

And, yes, we will be reading one of Chalmers Johnson's books in class. For a real good case study of blowback check out Stephen Kinzer's book, All the Shah's Men: An American Coup and the Roots of Middle East Terror.

- Mark

For those of you interested in this topic, you can read Chalmers Johnson's trilogy: The Sorrows of Empire: Militarism, Secrecy, and the End of the Republic (2002) ... Blowback: The Costs and Consequences of American Empire (2004) ... and Nemesis: The Last Days of the American Republic (2006).

Friday, June 21, 2013


Who had the worst week in Washington? The Majority Whip from my hometown (Bakersfield), Rep. Kevin McCarthy (Washington Post). It wasn't the first time ... not by a long shot.

Yet More Economic Nonsense ...
The anti-tax zealotry of Fox leads to the ridiculous conclusion that you should earn less in order to avoid paying more in taxes ... so, yeah, ask your boss to cut your salary so you can pay fewer taxes (Media Matters).

Bank of America home refinance employees were paid bonuses for pushing families into foreclosure. Relatedly, while processing loan applications designed to keep qualified homeowners in their homes BofA employees were "told to lie" ... so, yeah, the bonuses helped (NBC News).

The top 1 percent of income earners in America have not earned their 275 percent wage increase over the past 30 years. Their soaring salaries, stagnant middle-class wages, and rising income inequality were made possible by U.S. tax policy (Economic Policy Institute via Huffintonpost).

By the Numbers ... 
We're not #1? America doesn't have the #1 richest middle-class in the world ... we're ranked #27 (Alternet).

You just know the U.S. isn't here either ... The top 10 happiest countries (Travel Channel).

23 reasons why parents should not be allowed to text (Keep Smiling).

Pay attention ... 7 medicines that can wreck your sex life (AARP).

Car depreciation: 5 cars that lose value, fast (Bankrate).

Apart from registering republican (couldn't resist), the top 5 regrets of the dying (AARP).

NSA / Spy Stuff ...
Senator John Tester (D-MT): Snowden's release of top secret National Security Agency surveillance programs didn't compromise national security (TPM).

This is a good one ... Five myths about the National Security Agency (NSA) that you don't know about (Washington Post).

The NSA state of secrecy must end (Katrina vanden Heuvel / Washington Post).

The definition of Blowback (Upworthy).

Miscellaneous ...
What Congress and the media (willfully) ignore in the food stamp debate (The Nation).

Designers Dolce and Gabbana sentenced to jail for tax evasion, in Italy of all places (Zero Hedge).

The Wall Street Journal blows a lot of hot wind when it comes to explaining wind energy potential (Media Matters).

- Mark 


Several months ago I wrote how the Bankers Ball continues to roll on in America. Drawing from the Rolling Stones' Matt Tiabbi I pointed out that because our "gangster banks" are so big that our political and legal officials have decided that going after their misdeeds runs the risk of undermining our economy. So in spite of similarities to the pre-market conditions that led to the meltdown of 2008, we pretty much turn a blind eye to the shady practices of the financial sector. This allows them to escape scrutiny and prosecution for their actions today.

Today we take a glimpse at a handful of the scams and shady practices concocted at Americas seemingly endless Bankers Ball.

From we get the "6 Unbelievable Ways the Big Banks are Scamming You." None of this is really new. But it's nice to have the information (and links) in one place. Here's a synopsized list of the 6 ways the biggest banks are scamming America:

1. Foreclosure: Lying & falsifying information to force foreclosure, then paying foreclosure bonuses to employees.

2. Overdraft Protection Fee Bonanza: Overdraft protection does more for the banks ($32 billion in fees) than it does for the client.

3. Posting Large Checks First: In an effort to insure that smaller checks end up bouncing banks will post checks with largest amounts, even if the smaller checks were written or appear first. Called transaction ordering, it hits America's struggling middle class and the poor hardest.

4. Taking Away Your Day in Court: If you have a bank account, a credit card agreement, a mortgage contract, and virtually any other financial service agreement, more than likely you signed off on (it's in the fine print) the financial institutions demand (you don't get the money without signing off) that if you have a dispute with them that you will go to arbitration. This forces consumers into a system that rules with the banks up to 94 percent of the time.

5. Refinancing Rip Off: Big banks and other mortgage lenders are pushing refinanced loan packages that add years and thousands of dollars to your mortgage bill.

6. Trying to Kill the Consumer Financial Protection Bureau (CFPB): The agency that's designed to monitor and roll back these abuses - the CFPB - is under attack by bank financed politicians and lobbyists.

So, yes, in spite of the attempts to reign in the worst practices of the financial services industry after 2008, the Bankers Ball continues ...

If you want the details and the links to any one of these topics click here.

- Mark 

Thursday, June 20, 2013


On this day in history ...

Muhammad Ali wasn't the greatest simply because of his boxing skills. He was also concerned about world events and civil rights. He opposed the Vietnam War, was arrested for refusing to be drafted, and on June 20, 1967 was convicted in Houston of draft evasion. Ali was stripped of his boxing title and had his license suspended. He did not fight again for nearly four years, losing millions in the process.

He said at the time:

Why should they ask me to put on a uniform and go 10,000 miles from home and drop bombs and bullets on brown people in Vietnam while so-called Negro people in Louisville are treated like dogs and denied simple human rights? No, I'm not going 10,000 miles from home to help murder and burn another poor nation simply to continue the domination of white slave masters of the darker people the world over. This is the day when such evils must come to an end. I have been warned that to take such a stand would cost me millions of dollars. But I have said it once and I will say it again. The real enemy of my people is here..... If I thought the war was going to bring freedom and equality to 22 million of my people, they wouldn't have to draft me, I'd join tomorrow. I have nothing to lose by standing up for my beliefs. So I'll go to jail, so what? We've been in jail for 400 years.

For his refusal to be drafted Muhammad Ali was both condemned and exalted in America. At the same time, by sacrificing his title in the name of a larger cause, he was breathing life into one of his most famous quotes:

- Mark

Hat tip to Robin for the link. You can "like" Muhammad Ali's Facebook page here

Wednesday, June 19, 2013


So FBI director Robert Mueller has admitted that the FBI is using drones for domestic surveillance purposes. I say, big deal. We've known about these "national security" developments for some time now, and we've done nothing.

Remember this map? It tells us about all the regions that drones have been authorized to fly in the United States by the Federal Aviation Administration (FAA).

I posted this map back in February of this year to help us understand that "Drones" are coming to a theater near you. At the time I also wrote that we shouldn't be surprised when the use of drones and increased domestic surveillance from federal government agencies become the norm.

Why should we be surprised? We've said nothing as Congress has stood by while our national security agencies have granted national security status and clearances to so many agencies and people around the country. In fact, I've been writing and speaking about our evolving cloak and dagger culture for a while now.

The fact of the matter is we are slowly becoming a national security state. We are allowing it to happen because of how we have embraced the fear that has gripped this nation since 9/11. Worse, we will continue to hear more about the use of drones domestically until we learn to confront the political cowards who tell us we have to be afraid all the time.

So, while news of our growing national security state continues to drone on, I'll leave you with these familiar words on fear and security ...

- Mark 

Tuesday, June 18, 2013

THE STOCK MARKET vs. SOCIAL SECURITY, PART II: Your Retirement, Worst Case Scenarios

Last week I posted a comparison of what you could expect to get in retirement after adjusting for fees ...

Specifically, I asked how much can you expect to get after depositing $598,000 with social security over your working life versus what you can expect to receive from the private sector after contributing enough to build a $500,000 nest egg. Long story short? Privately managed investment accounts eat up as much as one-third of your retirement account while social security will return almost all of your money (assuming you live a normal retirement).

As promised last week, here's what happens to your private portfolio under the worst case scenario. If we use the last market collapse in 2008 as our indicator, we find that private investment losses with another 2008-like market meltdown will cause your private retirement account to dive in value like this ...

So, yeah, if you had a portfolio worth about $450,000 in 2008, after the market meltdown you would have been left with a portfolio valued at less than $200,000 by 2009/10. For the math challenged out there this means you would have been left with a portfolio valued at about 45 percent of what it was before the market meltdown.

(The thing to keep in mind here is that the rate of return in the private sector is really just smoke and mirrors because Wall Street's been propped up by American taxpayer backed bailouts, favorable legislation, and regular money dumps from the Federal Reserve - i.e. the Greenspan Put - over the past 25 years.)

OK, now let's take a look at your social security contributions under the worst case scenario.*

Yeah, that's right. If we do absolutely nothing for social security, and the worst case scenario* develops, the average American will still end up with 75 cents on the dollar. But this assumes that the U.S. Congress stands by and does nothing to fix the problems associated with reckless tax cuts, artificially low interest rates, and on the jobs front (among others).

So, let's recap.

Lesson #1: As I pointed out last week, if you contribute enough to have $500,000 in your private investment account when you retire, administrative and management fees will leave you with about $350,000. However, if you and your spouse contribute $598,000 to social security you can expect to collect $556,000 over a normal lifetime.  
Lesson #2: Under the worst case scenarios for private investors and social security recipients you can expect your private account to leave you with 45 percent of what you invested, but social security will leave you with about 75 cents on the dollar.  

But don't trust me on this. Click on the links and do the math for yourself.

Next, in Part III of "The Stock Market vs. Social Security": Why does Wall Street want to privatize social security? Hint, it has everything to do with greed and a bailout in perpetuity.

- Mark

* Worst Case Scenario: The worst case scenario assumes (1) the economy stays in the toilet, (2) unemployment remains steady, (3) previous tax holidays (like the recent 2 percent payroll deduction) aren't made up, (4) artificially low interest rates remain (which lowers the income stream from social security bonds), (5) we don't raise COLAs, (6) we don't rescind the Bush tax cuts, and (7) we don't raise the social security income tax cap ($113,700) that's currently  in place.

Friday, June 14, 2013


Here's something to think about when it comes to your retirement ...

Have you ever wondered how much management and administrative fees eat away at your private retirement accounts? Have you ever wondered what you will actually get when you decide to retire? Well, wonder no more.

According to Money Morning's Gary Gately, if a married couple contributes enough to build a $500,000 retirement nest egg they are more than likely to end up with $350,000 after deducting administrative and management fees.

Conversely the average married couple who contributed $598,000 into social security over 40 years (and retired at 65 in 2011) can expect to collect $556,000 if the man lives to 82 and if the women lives to 85. They get more if you add in Medicare, and if the married couple lives longer (in all cases the couple will receive more from social security than if they had invested the same money in an annuity).

There's one simple reality at work here.

Social security is not a private retirement account. It's an insurance program. While administrative costs eat up about 30 percent of what you put into your private retirement account (more information on private costs herehere, here, and here) the total administrative costs of social security is less than 1 percent, or about 0.8 percent of combined expenses.

Those of you who want to talk about the "the markets" historic rate of return should consider the following. Over the past 30 years the "private" stock market has been propped up with a steady stream of favorable legislation, a protected banking industry, artificially low interest rates (the Greenspan Put), Federal Reserve money dumps in Europe, Federal Reserve market purchases designed to maintain confidence, and a continuous stream of bailouts since the early 1980s, with the Mother of All Bailouts coming after 2008.

Put another way, there is nothing magical about what's happening on Wall Street.

Indeed, since 2008 we've dumped at least $4 trillion into the bailout of Wall Street. We're on the hook for trillions more. The social security trust fund, on the other hand, is currently running about a $2.7 trillion surplus. I'll leave it to you to figure out what's been happening ...

Part II on this topic: What happens under the worst case scenarios with your money in the market and with your money in social security?

Part III: Why do Wall Street's political representatives in Washington want to privatize social security? Hint, it has everything to do with a bailout in perpetuity.

- Mark

UPDATE: Basic social security facts here.


Almost two years ago I wrote an article for the Bakersfield Californian, where I discussed the Dream Act, and the need for a path to citizenship. You can read the article here. Today I ran across this article from on immigration reform and an earned path to citizenship (hat tip to Susan). It was written by Richard Trumka, president of the AFL-CIO, and Simone Campbell, executive director of NETWORK and a leader of "Nuns on the Bus" movement. To avoid copyright issues I'm re-posting only the opening of their article below ... 


Richard Trumka and Simone Campbell: Don't fall for the false choices on immigration
As Washington pundits size up the political pitfalls and payoffs of immigration reform, let’s not forget that fixing a broken immigration system is fundamentally about protecting family values and defending the dignity of workers.
We are inspired to support common-sense reform that includes an earned path to citizenship because of our Catholic faith and the moral example set by our own immigrant families. Scripture reminds us to care for the weak and love the migrants among us. Joseph, a carpenter who knew about a hard day’s work, was a migrant who journeyed across a border with Mary. In the parable of the Good Samaritan, Jesus taught timeless lessons about seeking justice for our neighbors on the margins.

Those who are left abandoned on the side of the road today include the estimated 11 million undocumented immigrants toiling in the shadows without opportunities to earn legal status. Comprehensive reform is not “amnesty,” as some opponents of sensible reform claim. It is a practical, humane response to a dysfunctional immigration system that should shame us as a nation.
For at least the past decade, a broad coalition of religious, labor and business leaders has made the case that a great country can’t claim to be a beacon of freedom and opportunity while separating immigrant parents from their children and exploiting workers. Despite the best efforts of demagogues who trade in ugly myths, division and distortion, our movement remains strong, diverse and united. It combines the visions of young immigrant dreamers, fiscally minded CEOs, workers’ rights advocates and faith leaders. This is a formidable force that will not be turned back.
It’s time to reject false choices. We can protect our borders at the same time that we provide an earned path to citizenship for millions of undocumented immigrants. We can protect both American-born workers and aspiring Americans by reforming our current immigration policy, which is a blueprint for manipulation and abuse by corrupt employers ...


You can read the rest of the article here.

In the FYI category, at least 62% of Americans (and up to 83%) support a pathway to citizenship for undocumented immigrants.

- Mark 

Wednesday, June 12, 2013


From Bloomberg we learn that Costco's CEO gets it ...

- Mark 


The best explanation of organized religion I've come across. Pointing out that "salvation lies in enhancing your humanity rather than rescuing you from it" is as thought-provoking as arguing that "God is not a Christian" ...

- Mark

Friday, June 7, 2013


To help my American Politics (PS 101) students avoid having a Wylie E. Coyote moment during our final exam ...

... below I am providing a set of links to some of the topics that I have discussed in lecture. These links should not be interpreted as providing all the information needed for each of the questions asked in the final exam. They are simply links to topics that are not in the book and/or are tied to topics students have asked about during class and office hours. 

Questions for the first two mid-terms are listed below the links section. 



Liberal Republic / Liberal Revolution. Look here under "Three Intertwined Developments" for the historical forces and intellectual roots behind our political and economic system. Then use them to help explain the Liberal Revolution, and how they provide the base for the ideas behind our Constitution.

Federal Imperative / California: Creating access points and dispersing power lies at the heart of the federal principle in America. This post on fiscal federalism outlines how the U.S. works to achieve these goals by shifting and redistributing wealth. As part of our larger discussion on California in the federal system we discussed budget issues and the recall of former Gov. Gray Davis, which is discussed here.

Civil Liberties / Civil Rights: The long march to equality under the law involved challenging stereotypes that were supported by junk science and confronting issues tied to blacks, women, and labor, among other issues. Some of the issues that we discussed in class can be found here, in last 2/3 of this post.


From Civil Liberties to Civil Rights: The long march to equality involved issues tied to blacks, women, labor laws, the influence of junk science (which justified social stereotypes), etc. It's all discussed here in the last 2/3 of the post.

* Our Court System: Here's the link to help with the FISA courts. Click here for a discussion on the Original Intent / Judicial Activist debate. Click here for a discussion on how our court system is used to protect financial interests.

The Presidency: For a review of one of the stronger presidents in the 19th century check out this this post on Andrew Jackson. Do we have an emerging American Caesar? This op-ed review several issues tied to the American presidency that we discussed in class. These two  posts discuss signing statements.

Congress: Why is it that many members of Congress appear overwhelmed and uninformed? Why do they appear to talk at each other instead of with each other? Apart from issues tied to redistricting, this post on the Bell Experiment ties into our lecture on post-industrialandia and semi-democracy in America. Click here for the link to "We're not the greatest country in the world."

Political Parties: Here's a link I have used in previous class lectures to help explain the evolution of political parties in America.


Economic Policy Making: This link helps us understand how markets actually work in America, and why economic policy making is so important. The following links discuss the role of  fiscal policy, subsidies, corporate welfareregulatory policy, and the forces behind our wage structure in America. This post discusses how much the big banks depend on subsidies to survive. This post discusses how America's redistributes wealth (i.e. fiscal federalism), while this post discusses how America has consistently worked to bailout and subsidize the market.

* Social Security: For the question on social security, apart from your notes you might want to look at thisthis, this, and this. For a discussion on COLAs (cost of living allowances), "hedonics," and our efforts to "save" social security see this (under "Boskin Commission").

Finally, keep in mind that a successful response to each question depends on you demonstrating that you have thought about and understand the topic(s) that you are addressing. Don't just list facts. Elaborate and be creative in what you write.

- Mark

Spring 2013 Questions, Exam #1 ...

In class we discussed the historical and intellectual forces behind our political and economic system. How did these forces lead to the creation of our Liberal Republic? Indeed, if someone were to ask you whether America is a Liberal Republic how would you respond? How does our Liberal Republic contrast with feudal and colonial patterns of governance and economic production? How do the Articles of Confederation and the Federalist Papers (#10 and #51) help us understand our Constitution and our democratic form of government? Here you should be able to explain the type of democracy the Founders feared, the one they created, and the one that evolved over time.

Two parts ... Part I: In class I argued that history and a keen understanding of the human condition helped shape the Founders decision to create a federal system of government. Discuss these developments and how they help us understand the roots of the American Constitution and our federal system? Where do the Federalist Papers fit here? How do Marbury v. Madison (1803) and McCulloch v. Maryland help (1819) us understand the pecking order behind our Federal-State relations? How does our discussion on wealth redistribution help us understand the federal principle in America? Part II: From the readings, and our class discussion, explain how California’s political system differs from the federal government. Specifically, what can the state of California do that the federal government can not? Why did the Founders create these differences? As well, we reviewed some of the factors behind California’s current debt problems. Explain the dynamics behind California’s debt and how it should be fixed.

Two parts … Part I: What are the fundamental differences between Civil Liberties (CL) and Civil Rights (CR)? What does the Bill of Rights tell us about our history and the concerns of the Founders of this nation? In your view, was the Bill of Rights necessary? Using just one of the amendments, explain why or why not. Part II: Drawing from the text and lecture, outline the long march toward Civil Rights in the United States. Why were women so instrumental to the Civil Rights movement? Drawing from lecture, and from our discussion on “Junk Scholars/Junk Science” explain why the Civil Rights movement in the 19th century experienced an entirely different outcome than the Civil Rights movement in the 20th century. Did the Civil Rights movement in the 20th century accomplish its goals, or is it an on-going work in progress in America? Explain.

Spring 2013 Questions, Exam #2 ...

A two part question. Part I: With reference to the Constitution and the Judiciary Act, explain the history and structure of America’s national judicial system. Indeed, why do we have a court system? Drawing from the text, how does habeus corpus and judicial review help shape America’s political and system of justice? What’s the difference between criminal and civil law, and how does this distinction help us understand our legal system? How does the FISA court system fit into our legal system? Part II: How does the “strict constructionist/original intent” vs. “judicial activism” debate help us (or not help us) understand the Supreme Court and our system of justice? Does the documentary Super Chief: The Life and Legacy of Earl Warren help us understand this debate? How so? Drawing from the documentary, what personal experiences contributed to the decisions Earl Warren made while he was Chief Justice? Between the strict constructionist and judicial activist positions, which perspective best represents how judges should act while on the bench? Explain.

A two part question. Part I: In the course text, there is a discussion of “how a bill becomes law.” Briefly (one paragraph to one page) discuss the textbook version of how a bill becomes law. In class we discussed why Congress does not do the work of the people. Does the amount of people represented in one district today, versus 200 years ago, make a difference? How do “gerrymandered” districts help us understand our challenges? Indeed, explain gerrymandering and, drawing from your in class redistricting exercise, how the process of redistricting impacts democracy in America. Is democracy in America strengthened or cheapened by the redistricting process? Explain. Part II: In another lecture I asked whether Congress can represent the will of the people. This is especially the case when both the members of Congress and “the people” are so distracted and overwhelmed with the challenges of every day life that policy discussions and debate are distorted and confused. The end result is that semi-democracy and hyper-democracy have become hallmarks of American politics. Explain what this means. How has the promise of democracy in America been altered by this? Finally, does the United States have the best democracy in the world? You can draw from, or synopsize, your essay to explain.

After briefly discussing what Federalist #10 said about “factions” discuss how the logic behind factions applies to political parties today. In class we discussed the evolution of political parties through the 19th century. After discussing what parties do (or are supposed to do) in America, explain the early ideological roots of the republican and democratic parties? How did party politics evolve from the late 18th century through the Civil War and New Deal Coalition? As we entered the 20th century what happened to political parties in America? What led to the rise and fall of the New Deal Coalition. What forces led to the Reagan Revolution? How does the Modern Era compare to the Golden Age of party politics? Which social groups in America today tend to identify with each major party and why? Finally, what role do third parties play in American politics?

In class we discussed the formal and informal powers of the president. What are these powers? How do they help us understand the office of the president? Drawing from lecture and the readings, who were some of the early “powerful” presidents and what factors contributed to them being able to stand out as powerful presidents? Discuss the historical factors that helped transform the power of the executive branch over time. Specifically, how did the Civil War, industrialization, the Depression, and WWII affect the office of the president? Finally, from Watergate through 9/11 we have seen the power of the presidency increase in many ways. How have the powers of the executive branch evolved from the last quarter of the 20th century into the beginning of the 21st century? Are we seeing the creation of an “American Caesar”? Explain.

A two part question. Part I: In 1922 Walter Lippmann argued that research in public opinion was far too limited, especially given its importance to politics in America. Drawing from early attempts at gauging public opinion, why did Walter Lippmann make this assertion? How does the Literary Digest experience help us understand why early attempts at monitoring public opinion didn’t always measure up? How does the Literary Digest experience, and George Gallup, help understand the importance of conducting scientific polls? What type of polls do we have, and how can we be sure of their integrity? Part II: What constitutes the media today, and how does it differ from 60 years ago? Does the media shape public opinion? How so? Are we better off with so many sources of news today? Explain. Did the Stephen Colbert clip we played in class help you understand the role the role of  polls in modern American politics? How so? In your view, is the media biased, or do we have only a few biased sources? Explain. 

- Mark 


Apparently, if you're a politician, it's OK to lie if your constituents want to believe the lie that you are telling them (Crooks & Liars).

Pope Francis spotlights social teaching with blunt calls for an ethical economic system (National Catholic Reporter).

Is China the 1990s version of Japan? (Economonitor)

The earth's weirdest landscapes ... really incredible pictures (Sierra).

Since 2010 unemployment among college graduates over the age of 25 has been 4.6 - 4.7 percent, while it hovers between 9 and 10 percent for non-college graduates (graphs here). If you have a graduate degree it's 3.3 percent. Earning differences are big too (Georgetown Public Policy Institute).

If the Postal Service is failing blame Congress (Mother Jones).

The real story behind Finland's low infant mortality rates (Updated News)

If companies had realistic slogans what would they be? (Reddit)

MSNBC's Mika Brzezinski blasts Fox Business as 'caveman central' over its sexist 'female breadwinner' meltdown (The Raw Story).

Congresswoman - and aspiring cave woman - Marsha Blackburn (R-TN) opposes equal pay laws for women because womenfolk "don't want the decision made in Washington" (Nation of Change). In a related (non) story, black Americans are now opposed to civil rights legislation because it came from Washington ...


What's behind the surge in home purchases? Wall Street money (New Deal / NY Times). But wait, it's even worse (Barry Ritholtz).

The corporate world's response to public demands ... Ignore evidence. Deny Science. Minimize problems. Then cry 'Freedom!' (and invoke the Nanny State) (Nation of Change). 

Why government regulation, and NOT corporate governance, is necessary to fix the financial sector ... it turns out board members are too whiny and greedy to stop the madness (Dealbook / NY Times).

Radical kleptocrats anxious to stop disclosure of corporate money in campaigns (Nation of Change).

Interesting book review on why the banksters are making so much money. While not specifically mentioned in the book review it's clear that the focus is on wealth extraction (Nomi Prins / Nation of Change).

How CEOs play beat the Wall Street estimate (Zero Hedge).

Straight from the Department of Homeland Security ... Words to avoid if you don't want the government spying on you (Mail Online).

While I don't agree with the rational-actor model of "The Paradox of Imperialism" it's still an interesting read (Ludwig von Mises Institute). Be sure to check out the global map ...

- Mark 

Wednesday, June 5, 2013


The post below is for my International Political Economy class (PS 404). The focus is on understanding the long-term causes behind the 2008 market meltdown. 

There are many reasons that our market collapsed in 2008. If we understand these we're better equipped to understand why it's going to happen again (and it will). Below I draw from my book to present ten developments that helped create the conditions for the market collapse of 2008. What you'll see is that 2008 wasn't some kind of 'once in a century credit tsunami' that couldn't have been foreseen. It was the result of very deliberate steps that included putting market blinders on our politicians and society (which we seem to be doing once again).

You can quibble with one or two of the 10 points, and can definitely make a case for emphasizing one point over another, but the reasons for our 2008 market collapse - and the logic behind our next collapse - can be found below.

With that, our 2008 market collapse in ten easy steps ...


1. A Naive Belief in "Free Market" Ideology (blinds policymakers)
... U.S. leaders effectively ignore the economic costs associated with (1) paying for the defense of the west, (2) America's failure to adapt to globalization and new competition (produced, in part, by the success of Bretton Woods), (3) the structural changes in the economy caused by the rise of financial services sector (i.e. the "symbolic" economy), (4) Nixon's price controls, and (4) the impact of OPEC's inflation inducing price hikes.
... Instead of confronting the costs associated with paying for the cold war, competition from abroad, the financialization of the economy, Nixon's price controls and OPEC price hikes, America's leadership blames the sluggish U.S. economy on "the state" (regulations, domestic programs, and taxes), while calling for "a good 'ol shot of capitalism" in 1980.
... Ronald Reagan enters the White House after Maggie Thatcher becomes Britain's Prime Minister. Trickle Down Economics is born. Deregulation and tax cuts for the rich are embraced. Militarism, new global competition, financialization and OPEC price hikes are effectively ignored.
... The free market is embraced after Reagan leaves office in spite of the fact that Reagan dumped trillions in borrowed money into the economy, almost tripled the national debt, raised taxes on the middle class (FICA), and lifted the debt-limit ceiling 17 times. Reagan's accomplishments are attributed to him being a fiscal conservative and free marketeer.

BUILD UP: 1970s-1980s

2. Deregulation / Financialization  of Economy (regulators take a vacation)
... 1971 the dollar is de-linked from gold and becomes a commodity. A formal futures market develops for money, interest rates, and other novel investment tools of the financial community.
... OPEC price hikes wreak havoc on markets and prices. Pundits and foreign policy experts alike (see especially Henry Kissinger) are caught flat footed.
... new policies and deregulation are pushed by financial services sector, which make the Savings & Loan and other financial meltdowns possible (1970s/1980s). This helps set the stage for deregulation which eventually leads to the dismantling of the Glass-Steagall Act and the passage of the Financial Services Modernization Act (1999)
... the financial services sectors consolidates and grows as America's symbolic economy grows in importance. The SEC begins its disappearing act.

3. Interest Rate Manipulation / The Greenspan Put (what free market?)
... Interest rates are used first to stabilize markets, and then as a tool to stimulate them. Bailouts and Federal Reserve money dumps begin in earnest under Alan Greenspan's leadership at the Federal Reserve. The Greenspan Put (dumping cheap money into the system when Wall Street gets in trouble) begins in 1987.
... the Federal Reserve becomes Wall Street's support system, and then it's puppet.
... Market recklessness surges as financial services (and then gambling) grows.

4. Yield Hunts / Secondary Markets (casino economy begins)
... Inflation + low interest rates in 1980s lead bond traders to start looking for higher yield investments.
... Non-traditional but high return investment products become more attractive, but market players are (initially)reluctant because of low bond ratings.
... Globalization (largely unregulated) allows financial firms to seek higher investments abroad through loans, secondary markets, arbitrage, etc.

5. Bailout City (what accountability?)
... Beginning with Mexico in 1982 (actually it begins earlier, but this is where I'm starting here), Wall Street's short sighted recklessness is bailed out time and time again. The Greenspan Put (and bailout nation) is entrenched with the 1987 rescue of LTCM.
... Accountability and free market ideology are undermined with successive bailouts and the Greenspan Put, but no one cares. Wall Street/investment bankers continue to believe in the wonders of the market.

MANIA: 1990s / Aughts ...

6. Securitization / Derivative Markets Explode (hello Rumpelstiltskin)
... Market players become Rumpelstiltskin, and turn toxic products into gold. CDOs, SIVs, CDSs, and other novel investment products become popular, especially after ratings agencies get into bed with Wall Street's biggest investment banks. Interconnected market players game the system.
... Wealth extraction becomes more important than wealth creation. What might have been prohibited or fraudulent before 1970 becomes the modus operandi with favorable legislation.
... Security markets begin demanding more debt products (i.e. CDOs) to securitize, as rating companies begin to hand out AAA ratings on virtually anything that can be modeled and chopped up.
... Symbolic economy grows 30-40 times the real economy.

7. Toxic Market "Innovations" Applauded (herd mentality for rugged individualists)
... In 2004 Wall Street (Goldman Sachs then-CEO, Hank Paulson) goes to SEC for permission to carry 40:1 debt to equity ratios (Imagine going to a bank and asking to borrow $2 million on a $50,000 a year income). In spite of opposition from Paul Volcker (Alan Greenspan's predecessor at the Fed) 40:1 borrowing ratio is granted by the SEC.
... With demand for securities growing, hedge funds, shadow banks, and Wall Street press Washington regulators to allow "non-conventional" lender packages into the housing market.
... Non-bank, or shadow banks, become critical cogs in financial machine. Subprime mortgage underwriters might acknowledge but ignore all lending standards.
... With brokers dumping newly created loans 30-60 days after they're written, NINJA loans, No Doc loans, Liar loans, and other type of teaser programs become the norm.
... Caution thrown to the wind as competent regulators like Brooksley Born are buried politically (after she called attention to disastrous derivative markets), and Sarbanes-Oxley legislation allows Washington/Wall Street to say "See, we fixed it" after Enron. Free market praised as fraud and a lack of oversight become the norm.
... Consumers borrow and use homes as ATMs, which give the illusion of prosperity.
... Personal debt climbs; the national debt doubles during the aughts; Bubbles and record profits grow.

8. The Federal Reserve & Congress Become Cheerleaders (casino economy goes Vegas
... Cheerleaders (who should be regulators) applaud innovative instruments and massive (unregulated) lending as evidence of the power of unrestrained markets.
... Home equity loans explode, consumption increases. Debt is the name of the game as it provides source for new securities and credit default swaps (insurance).
... Alan Greenspan cheers "new paradigm of active credit management" as interconnected institutions and the shadow banking system sign off on new securities, mortgage back contracts, and other debt instruments/loans.
... The paychecks of those on Wall Street and in the financial services sector, plus their bonuses, shoot through the roof.
... Notional value of derivative contracts surge past $285 trillion (when annual GDP is only $14 trillion).

PAYING THE PIPER: The Mother of All Bailouts

9. Boom / Bust / Credit Freeze (back to reality)
... What do you know? Strawberry pickers making minimum wage really can't afford $700,000 home loans.

10. Blame Game Begins (continues today)
... Government Secured Enterprises (Fannie Mae), FHA loans, and Community Reinvestment Act (the poor) originally blamed for market collapse. Former Treasury Secretary Hank Paulson joins the game.
... George W. Bush claims he inherited a recession, and left with a recession. A false equivalency.
... Much anticipated bi-partisan FCIC report is blind-sided by GOP primer that deliberately excludes any mention of Wall Street, the shadow banks, interconnected cronyism, and deregulation (all the stuff I highlighted in red above).


Today the too big to fail banks and Wall Street are the only ones who have access to, and are profiting from, unlimited cheap money and our propped up casino economy. Think about it. Today the house of cards (yes, it's still a house of cards) is propped up by cheap money for Wall Street, deregulation for Wall Street, favorable legislation for Wall Street, and adherence to a failed free market ideology that keeps the trillion dollar bailout and QE money flowing, for Wall Street.

At the end of the day it took almost a full generation to reach our current level of market failure. Arriving at this point took the better part of 30-plus years. We're going to have to develop a better understanding of how the state creates (created) the conditions under which wealth is created if we are going to fix this mess.

- Mark

PS: Also, for my PS 404 class, I wrote about how war inspired the modern nation-state, and discuss the evolution of the modern state through the post-Westphalia, post-Napoleonic Wars, and the post Versailles periods here ...