Tuesday, July 30, 2013

THE STOCK MARKET vs. SOCIAL SECURITY, PART III: Privatization ... Wall Street's Bailout in Perpetuity Plan

Last month in Part I of my stock market vs. social security comparison I took a look at how much one could reasonably expect to get out of the stock market and social security over their lifetime. I wrote that, assuming you live a normal retirement, you could expect a privately managed investment account to eat up as much as one-third of your $500,000 retirement nest egg - leaving you with about $350,000. Social security, on the other hand, would return about $556,000 of the $598,000 that you contributed to the system.

Later, in Part II of my stock market vs. social security comparison I looked at what would happen to private investment accounts and social security accounts under worst case scenarios. We learned that private investment losses during another 2008-like market meltdown would be greater than losses to social security accounts, by far.

In spite of these realities Wall Street's political representatives in Washington (i.e. congressional republicans) are aching to "privatize" social security. They believe the return on investment would be much greater if the trillions of dollars now running through the social security system were invested in the market.

There are three points to consider before we compare the "return on investment" argument between the stock market and social security.

First, the privatization crowd in Washington wants America to forget that social security was never designed as an investment or retirement account. It's an insurance policy, period. Comparing rates of return, as if social security were a retirement account, is a political red herring.

On another level, while "privatization" sounds sexy and mysterious to many it's not. It simply means the trillions of dollars now running through the social security system would be shifted to the fine people on Wall Street. Seen in the proper light, privatization is code for letting Wall Street pick the pockets of the American taxpayer, again.

Finally, social security has not contributed one dime to our budget deficits. In fact it's running trillion dollar surpluses, and continues to lend money to Uncle Sam.

So the logical question is Why does the privatization crowd in Washington want to send social security funds to Wall Street, especially since Wall Street crashed so spectacularly in 2008? There are two reasons.

First, conservatives in Washington don't like that social security is a successful social program. It does what it's supposed to do. People get paid on time, and it's one of the most efficient and cost effective programs we have. It is a model insurance program for the rest of the world, which the free marketeers of America loathe.

Second, when the trillion dollar bailout crutch from the Federal Reserve and the federal government ends (and it will) Wall Street and the biggest banks know that they will be in trouble.

For example, back in December of 2011 the Federal Reserve had to step in and dump (swap) hundreds of billions in U.S. dollars into Europe or else European market players would have had to sell their dollar denominated assets (stocks and such). This sudden sell-off would have depressed the U.S. stock market and, it was feared (yeah, again), lead to panic sell offs in America and around the world.

But this is nothing new. The Federal Reserve has been dumping trillions of dollars into the market, and artificially propping Wall Street up, since before it crashed in 2008. In fact, from the time the market collapsed in 2008 through March 2013 the Federal Reserve and the federal government have intervened with money dumps and other market supporting activities on at least 1,230 days (over 80%).

And the results have been positively spectacular. Check out the chart below. The grey lines represent when the federal government or the Federal Reserve was not intervening in the market.

What we have is a market system that is addicted to government market interventions, which come in the form of favorable legislation and regular market bailouts. The people who support "privatizing" social security understand this (then again, maybe not). When the market interventions and the Federal Reserve money dumps end the money market gravy train that began in the 1980s will be over.

Simply put, Wall Street needs something to replace their current dependence on favorable legislation, bailouts and the Federal Reserves trillion dollar money shower. Shoving the trillions now sitting in social security accounts into the waiting hands of Wall Street would do the trick.

Call it Wall Street's bailout in perpetuity plan. And it will be paid for, once again, by the American taxpayer if Wall Street gets its way.

- Mark 

Saturday, July 27, 2013


For those of you who want to know more about America's "walking dead" with a zombie twist, click here.

- Mark


Ohio Bank targets wrong house in foreclosure case, seizes property, now won't replace what they took (10tv).

Detroit is not alone, several other U.S. cities have also gone bankrupt (Washington Post).

Things that make you go "Hmmm" ... The unions didn't bankrupt Detroit, the once great American cars did (Forbes).

Do you have friends who like to complain that "half the American population doesn't pay federal income taxes"? Here are some fun facts on who doesn't pay taxes (and why) for the knuckle headed friends who don't really understand the tax issue ... (Washington Post).


The next Enron? JP Morgan manipulating energy prices (Occupy Democrats).

The insanity of not having a financial transaction tax for Wall Street (The Contributor).

Five absurd reasons why America doesn't tax Wall Street's transactions (AlterNet).

In a survey Wall Street insiders say that breaking the law, screwing your clients, and covering up crimes is a way of life on Wall Street (AlterNet).


When the ridiculous becomes the absurd ... In response to a FOIA request the NSA says they don't have the technology to monitor their own e-mails, (ProPublica).

If you want to travel by air your individual rights are now for sale (RT).

No warrant? No problem. How the government can get your digital data (ProPublica).

Artist Robert Shetterly portrays NSA whistle blower Edward Snowden in historic light (Common Dreams).


Climate of fear ... reporter blows the whistle on Reuters news agency hostility to covering climate change (Common Dreams).

Teen pregnancy rates drops by 60% in California, and in other parts of the nation, but remain stubbornly high in - you guessed it - the moral crusading, anti-science south (Think Progress).

Former President Jimmy Carter trashes Citizens United decision as "legal bribery of candidates" (Occupy Democrats).

How the economy is doing in 11 charts (Washington Post).

- Mark

Friday, July 26, 2013


Who will replace out-going Federal Reserve Chair Ben Bernanke?

There are currently two front runners, Larry Summers and Janet Yellen. Former Labor Secretary Robert Reich knows both and provides the following review on his Facebook page:
Word in Washington is President Obama will nominate either Janet Yellen or Larry Summers to be the next Fed chief. It's not quite as important a decision as a Supreme Court nomination but it's a very big one: The Chairman of the Federal Reserve Board is the single most important economic player in the United States. So who would be best -- Yellen or Summers? I know both fairly well. Janet Yellen has impeccable credentials. She's now vice-chairman of the Fed, after having been head of the San Francisco branch of the Fed, and before that, an economics professor at Berkeley. In 2007 she was one of the very few voices sounding the alarm about the sub-prime mortgage crisis. Not incidentally, she's also a delightful person. Those who have worked with her tell me she listens carefully to all views, and is respectful of her employees. If selected, she'd be the first woman to head the Fed.
I worked with Larry Summers in the Clinton administration, where he eventually became Treasury Secretary. Under Obama, he ran the National Economic Council. Personally, I like Larry. He's very bright, and able to see the nub of most policy problems very quickly. But he has the tact and personality of a bull in a China shop, and he's been notoriously wrong about a few big things. In the late 1990s, he urged Clinton to sign off on legislation killing off Glass-Steagall, and was also part of the Rubin-Greenspan cabal that rejected the arguments of Brooksley Born, then chair of the Commodity Futures Trading Commission, for why the CFTC should regulate financial derivatives. Summers' subsequent tenure as president of Harvard came to an end after he suggested one reason women were not well-represented in the sciences is they don't have the mind for it. As chair of the National Economic Council under Obama, he and Tim Geithner, then Treasury Secretary, bailed out Wall Street while refusing to impose tough conditions on the banks.

So, if you were the President, who would you nominate?

So, who would you pick? I know who I would pick. The decision is not a difficult one.

- Mark 


It would be sweet to see Senator Mitch McConnell (R-KY) lose to Alison Lundergan Grimes. Contribute to her campaign if you can.

- Mark 

Thursday, July 25, 2013


- Mark 


This Bill Maher clip is too funny. Fair Warning: Don't watch this if you find off-color language offensive (it is Bill Maher) ...

- Mark 


Code 10b-5 of the Securities and Exchange Commission (SEC) is pretty clear. You can not lie or omit information about the investment (security) products you are trying to sell. Pretty simple. 

For example, you can't create a fancy investment product that you know is crap and then dump it on clients - like pension plans or the U.S. government - without telling them about the downside. The warning "buyer beware" is not good enough when you know you're peddling crap.

As is the case with any car salesmen, you can't lie or omit information when you know about potential product defects and hazards. Call SEC 10b-5 the lemon law for Wall Street. Still, with all the market smoke & mirrors that we see on Wall Street, deception happens all the time

This explains why so many financial institutions have settled cases for billions of dollars rather than try to defend themselves in court. They know how they have defrauded customers, and also know that it's cheaper to settle than to go to court. Barry Ritholtz, CEO of Fusion IQ (and author of "Bailout Nation"), does a pretty good job of explaining the issue here

So there is no doubt, this is what SEC 10b-5 says:
§ 240.10b-5 Employment of manipulative and deceptive devices.It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
(a) To employ any device, scheme, or artifice to defraud,
(b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
(c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,
in connection with the purchase or sale of any security.
(Sec. 10; 48 Stat. 891; 15 U.S.C. 78j)
[13 FR 8183, Dec. 22, 1948, as amended at 16 FR 7928, Aug. 11, 1951]

This all looks good except for one thing. All the exemptions and loopholes the U.S. Congress has granted Wall Street. 

I especially like the exemption for SIPA, which might as well be called "let Wall Street do what they want as long as the fine print is good" law. In the FYI category SIPA was designed to protect customers from Wall Street firms who like to dip into customer accounts without their knowledge (which you can read about here). The SIPA exemption combined with this exemption for broker-dealers - and the fact that Glass-Steagall was effectively repealed in 1999 - essentially allows broker-dealers and Wall Street's biggest players to do what want (as long as the fine print is worked out).

Long story short? Favorable legislation and deregulation is undermining both the spirit and integrity of the SEC's Lemon Law, and nobody seems to care.

- Mark 

UPDATE: Here's a list of JP Morgan's most recent fines, which add up to more than $7 billion. http://www.zerohedge.com/news/2013-07-30/jpmorgan-7-billion-fines-just-past-two-years

Tuesday, July 23, 2013


Goldman Sachs is being accused of market manipulation (again). Specifically, the New York Times is alleging in "A Shuffle of Aluminum, but to Banks, Pure Gold" that Goldman Sachs is using its warehouses to keep aluminum from reaching the market, which alters the price of aluminum to their benefit.

Goldman Sachs issued a fact sheet in response. Two things stick out.

First, it's really convoluted. This, no doubt, is deliberate.

Second, Goldman Sachs doesn't refute the article's larger claim about tying up aluminum supplies for longer and longer periods to jack up the price. Here's what the NY Times' article claims:

Before Goldman bought Metro International three years ago, warehouse customers used to wait an average of six weeks for their purchases to be located, retrieved by forklift and delivered to factories. But now that Goldman owns the company, the wait has grown more than 20-fold — to more than 16 months, according to industry records.

At the end of the day, if the Goldman Sachs fact sheet was designed to refute the claim that Goldman Sachs is manipulating the aluminum markets, it was a big fail. Specifically, Goldman agrees that they physically hold large amounts of aluminum ("We hold an inventory position ..."). They also make it clear that they own the warehouses where aluminum is moving in and out of, as claimed in the article ("We also hold other physical commodity operations as investments ...").

Then it gets fun.

Goldman Sachs refutes the claim that the people at the warehouse mentioned (Metro) are manipulating shipments. But they also make it clear that "it's the owner of the metal" who makes the decision to move aluminum out of one warehouse "to meet their own needs or objectives."

Again, Goldman doesn't really argue with the market manipulation claim, other than to say that the warehouse company (Metro) is not doing it to extract more more money (higher rents). But they're not disputing the claim that they've had a hand in the market manipulation.

But don't trust me on this. Read the article and Goldman's response for yourself. This article from the Washington Post also sheds light on the manipulation.

- Mark

UPDATE (8-04-13): In the About Time category ... Goldman Sachs is going to get sued (Zero Hedge).

UPDATE (8-01-13): John Oliver offers his opinion on Goldman Sachs' aluminum price manipulation here ...


Does a global financial oligarchy exist? Do a handful of people run our global economy? Read the Global Power Project's on-going series on global wealth and power and decide for yourself. The articles should keep you busy for a while ...

Part I: Exposing the Transnational Capitalist Class.

Part II: Identifying the Institutions of Control.

Part III: The Influence of Individual and Family Dynasties.

Part IV: Banking on Influence With JP MorganChase.

Part V: Banking on Influence With Goldman Sachs.

Part VI: Banking on Influence With Bank of America.

- Mark


Texas Governor Rick Perry is running around the country trying to drum up business for his state. Here's what Lewis Black had to say about Gov. Perry's trip to New York. Too funny ...

- Mark 

Monday, July 22, 2013

READING FOR THE WEEK (July 22, 2013)

Here's what Manhattan would look like inside the Grand Canyon (New York Magazine).

World's scariest bridges (Travel + Leisure).


Darrell Issa ... wannabe, fool, and all around clown (NY Times).

The Return of Lawrence Summers, Mr. Spectacular Failure (Creators).

So Dick Cheney's daughter, Liz Cheney, is running for U.S. Senate in Wyoming. Here's 10 fun facts about the person who makes nepotism look worse than it already is (Mother Jones).

The 10 mind numbingly dumbest things ever said about abortion and women's rights (Rolling Stone).

Charles Koch Foundation: If you earn $34,000 per year you're in the top 1%. What they ignore is that if you work full-time in a minimum wage job in America you won't earn more than $16,000 per year, and that you need to live in a place like Bangladesh to enjoy the benefits of being in the top 1% (Huffingpost).


Is your money safe in an insured bank account? With the new reality of banks shifting bank losses on to depositors means you should think again (Truthout).

Another reason to ditch the banks and bank with credit unions ... If you put $250 in a Chase bank account and get 12.5 cents a year (at 0.05% APR) you will likely be charged a $4.00 per month fee if there is no activity in your account (Buzzflash/Truthout).

Too Big To Fail banks pushing to crush credit unions - and remove the competition - by going after credit union tax exemption (LA Times).

MORE MARKET STUFF (you should know about)

Monsanto's patent appeal rejected by the Indian government, saving farmers, food, and lives (Nation of Change).

Think the private sector gets it right? Think again ... The obscenities of capitalism and America's free marketeer lunatic fringe is getting it wrong, big time (Nation of Change).

Wealth and inequality in America ... Perception vs. Reality (Youtube). Hat tip to Jose for reminding me about this.


Yes, President Obama knows what he's talking about when it comes to Trayvon Martin (Daily News).

In a "chilling" ruling, Chevron is granted access to activists' private internet data (Common Dreams).

"Go Public" ... the antidote to the billionaires war on public schools (Truthout).

Russia to arrest openly gay tourists (Travel and Escape).

In the WTF category ... The leaked NSA slide show the Department of Homeland Security doesn't want their employees to read. So, yeah, it's so secret that even when it's public knowledge you're not supposed to see it (Washington Post).

- Mark 


While conservative politicians and right wing pundits follow the lead of the billionaire Koch brothers and push to eliminate the minimum wage in the United States the minimum wage in Australia is $16.00 per hour. It's based on a sliding scale and hasn't caused all the panic that the right wing claims it will do to the economy.

Meanwhile, in the United States the taxpayer subsidizes Wall Street with seemingly endless bailouts and favorable legislation, and then helps to underwrite the million dollar salaries of corporate CEOs with generous tax deductions.

So, yeah, America's working class is told they don't need a base salary floor, or worker protections, but America's richest class has their million dollar salaries subsidized by the American taxpayer and regular bailouts of the financial sector.

No wonder America's financial elite don't want to discuss class warfare. They're winning the war and don't want others to notice that it's been happening for quite some time now.

- Mark 

Friday, July 19, 2013


A week back I posted on Zero Hedge's contention that the giant banks have taken over the real economy, as well as the financial system, which allows them to manipulate markets on a massive scale. Here's yet another example.

Again, there is no free market.

- Mark 

UPDATE: Here's more on the topic ... http://occupydemocrats.com/jp-morgan-the-next-enron/

Thursday, July 18, 2013


Senators Elizabeth Warren (D-MA) and John McCain (R-AZ) have introduced legislation to bring back the Glass-Steagall Act, which would be a big first step in reigning in the excesses of the financial sector. Below is the story behind the legislation that they're trying to revive ...

It was 1929. The stock market collapsed, in part because many commercial banks were trying to do what investment banks did. The problem was that - unlike investment banks who find people with lots of money to burn (i.e. the rich) to make their investments - the commercial banks were bundling up the deposits of their regular customers to make big market bets before 1929.

But wait, it gets better (or is that worse?).

In addition to commercial banks sending customer deposits to investment banks (via "broker loans") insurance companies that found themselves under the same financial roof as an investment bank saw their funds drained and shifted to investment banks. With a steady flow of easy money, as it were, from commercial banks and insurance companies investment banks had a field day. They took big risks and made larger and larger bets. Indeed, the number of trades doubled between early 1928 and the latter part of 1929 (4 million to 8.2 million), as did the Dow-Jones industrial average (191 to 381).

As long as the market kept going up the investment bankers saw handsome returns - which they famously did not share with the customers whose accounts backstopped their market bets.

Then, in 1929, everything went south. The stock market crashed on the nonsense that had floated it for years. Panic hit and many bank depositors lost everything. Almost 5,000 banks would shut their doors.

To prevent this from happening again the U.S. Congress came up with a plan. The Glass-Steagall Act (also known as the Banking Act) was passed in 1933. Apart from creating government backed depositor insurance (FDIC) it also outlawed commercial banks from doing what investment banks do and prohibited commercial banks, insurance companies, and investment banks from operating under the same roof. 

There would be no more serendipitous movements of money from one institution to another.

To be sure, Glass-Steagall didn't prevent Wall Street from gambling with its clients' money (see here and here). But it did protect the little guy on Main Street from Wall Street, and Wall Street wannabes, who used their accounts to backstop their market bets.

The best part of these developments was that "market collapse" and "government bailout" were effectively erased from America's economic language for the better part of 50 years.  

In spite of the fact that Glass-Steagall and other regulations had stabilized our economy and protected the little guy on Main Street the financial sector got restless.

Prodded by political developments in the 1980s deregulation became the norm. After sufficiently diluting Glass-Steagall with pin prick legislation throughout the 1980s and 1990s the financial industry decided that they needed to neuter Glass-Steagall once and for all. They got the U.S. Congress to effectively repeal Glass-Steagall with the Financial Services Modernization Act (also known as the Gramm-Leach-Bliley Act). President Clinton signed it into law in 1999.

MSNBC's Dylan Ratigan explains what happened ...

Visit NBCNews.com for breaking news, world news, and news about the economy

And just like that, after 50-plus years of relative economic stability, the small bailouts that emerged with reckless deregulation in the 1980s and 1990s turned into the monster 2008 market collapse. Incredibly, there was one U.S. Senator, Byron Dorgan (D-ND), who saw it coming in 1999 ...

There's little doubt that Senators Warren and McCain's legislation will not be enough to reign in the stupidity that we see in the marketplace today (it has little chance of passing). But it would help banks focus on boring loans for small businesses, homes, and infrastructure projects rather than pursuing risky investments in derivatives, collateralized debt obligations, and credit default swaps. 

There's much more to do, which includes walking back some of the reckless borrowing and deregulation that was passed in the 1980s and 1990s.

But the Warren-McCain legislation is a start.

- Mark

IN THE FYI CATEGORY: Fair's fair. Here's the American Enterprise Institute's "Five Myths About Glass-Steagall." It focuses on trying to shift blame for the 2008 market collapse to the government (who else?), but is not particularly convincing, or well argued. Here's why ...

#1 is misleading (at best) because it emphasizes underwriting rather than pooled resources and shared obligations ... # 2 says nothing about the bogus collateral behind the traded assets ... # 3 really says that trading toxic crap is not the problem, it's getting stuck with the toxic asset that is ... #4 is more opinion (and a wrong one at that) than fact ... #5 misses the point (ignores?) the role of our shadow banking system and how deregulation allowed anyone who could fog a mirror to get a loan.

For a better understanding of the market collapse click here, here, and here.

P.S. Kudos to those who wrote and asked me to write about Glass-Steagall. When I get more than a couple of requests I make an extra effort to respond ;-)

Wednesday, July 17, 2013


I've posted on the insanity before. Incredibly, the insanity continues. The picture below captures the Republicans Obamacare vote obssession that's led to the 38th vote to repeal the Affordable Care Act ...

If you want to take a look at the GOPs penchant for repeating the same failed storyline when it comes to tax cuts, budgets, repeated math failures, and failed analysis click here, here, and here.

In the FYI category, while all of this has been going on our Republican-led House of Representatives hasn't passed a single comprehensive jobs bill program. If you want to take a look at the 30 bogus jobs bills the GOP claims to have passed (they really focus on taxes and deregulation) click here.

- Mark

Tuesday, July 16, 2013

READING FOR THE WEEK (July 16, 2013)

House Republicans pass a pork-laden farm bill that gives billions to the agriculture industry ... with no money for food stamps (WP Wonkblog).

Is President Nixon's former Vice-President, Spiro Agnew, the starting point for the talk radio mentality we see today (History Commons)?

If the Director of National Intelligence - David Clapper - can lie to Congress with no repercussion he can lie about anything else, including Syria and Iran (Truthout).

The Roberts Court is out of control ... It appears that developers can now claim an unconstitutional "taking" of their property rights if cities and counties don't allow them do what they want, or require them to follow their land use guidelines (SCOTUS blog).

The making of the U.S. surveillance state, 1898-2020 (Truthout).

Latest Snowden poll; 55% say whistle blower, 34% say traitor (Zero Hedge).

Greenwald: Snowden docs show NSA "blueprint" (Chron).

Did the U.S. get the Europeans to ground the plane flown by Bolivia's President Evo Morales? (Buzz Flash).

What do you know ... there's an oil glut, and North America is leading the way (Calgary Herald).

Explaining Basel III and where the Fed's embrace falls short (NY Times/DealB%k).

Giant banks have taken over the real economy, as well as the financial system, which allows them to manipulate markets on a massive scale (Zero Hedge).

What's the "chained CPI"? (AARP)

Could 9/11 related insurance claim(s) be insurance fraud (PressTV)?

Fed up teachers refuse to teach summer school in Texas (Takepart).

Giants vs. A's, in the Silicon Valley sweepstakes (WSJ).

Vanity Fair does an interesting review of John F. Kennedy's last days with Jackie after the death of their son Patrick (Vanity Fair).

Michelle Obama issues a smack down to a heckler who was just being rude (Cafemom). 

The colossal stupidity of calling Hilary Clinton too old (and why the GOP doesn't get it, still) (Bloomberg).

- Mark 


Did the Republican Party embrace racists and bigots to win national elections in the latter half of the 20th century? Yes they did, and it was part of a larger "southern strategy" that President Nixon used to gain the White House in 1968.

While I have written about this in the past (a discussion on political parties) Allen Clifton's article "The Truth About Republican Racism and the 'Southern Strategy'" provides a nice overview of the point when the GOPs southern strategy developed. Because of copyrights issues, I'm only posting one-half of the article here.

Whenever the topic of racism gets brought up between Democrats and Republicans, there are two facts you’ll almost always hear conservatives use to counter the belief that their party is full of racism:
  • President Abraham Lincoln was a Republican
  • The KKK was largely organized, and populated by, Democrats
And both are facts.
But when someone uses these two items as their defense that the Republican party isn’t loaded with racism, they’re only showing their ignorance about the reality of racism within their party.
It’s true, Southern Democrats were extremely racist.  At the same time, Northern “liberal” Democrats and Republicans had already been working together to end discrimination and pushed for ending segregation.
See, in 1948, President Harry Truman made one of the boldest public moves by a Democrat towards Civil Rights for African Americans by creating the President’s Committee on Civil Rights, and ending discrimination in the military.  At the Democratic National Convention in 1948 a call was made for civil rights—prompting at least 35 Southern delegates to walk out.
These movements towards civil rights for African Americans spurred a short-lived political party — the States Rights Democratic Party, also known as the “Dixiecrats.”  The people who comprised this movement adamantly defended segregation of the races.  It was an attempt to keep the “tyrannical Northern liberals” from “destroying the freedom of states’ rights in the South.”
Luckily, this political party only lasted one election.  But what this movement really did was recognize the shift of Democrats embracing equality for African Americans and Southern whites strongly opposing any mention of civil rights.
The moves by President Truman sparked the spread of equality in the South and left Southern white Democrats with a feeling that their party was abandoning their racist — and oppressive — system of beliefs.
Over the next decade, more and more Democrats began to embrace equality, passing the Civil Rights Act of 1964 and the Voting Rights Act of 1965.  And while more African Americans began to vote for Democrats, in the late-1960′s a new Republican strategy was put into place—the “Southern strategy.”
This was a plan was that was first popularized by Richard Nixon.
What the “Southern strategy” essentially does is it identified the fact that African Americans were voting for Democrats, therefore Republicans decided they would make white voters more aware of this fact in hopes of driving the “white vote” towards the Republican party ...

The problem with the southern strategy today, as Senator Lindsey Graham (R-NC) pointed out in 2012, is that the Republican Party is not "generating enough angry white guys to stay in business for a long time."

You can read the rest of Clifton's article here.

- Mark 

Saturday, July 13, 2013


What's wrong with this picture?

To help Wall Street and the banks survive after they set fire to our financial system in 2008 the Federal Reserve and the federal government effectively handed over $4 trillion to help stabilize the economy. After receiving $3 trillion from the Federal Reserve, and over a trillion dollars from the U.S. taxpayer, the financial sector is now hoarding about 85% of what they were given (actually, lent or traded).

Oh, and the banks get to borrow money from the Federal Reserve at .75%.

College graduates paying student loans cumulatively owe about $1.2 trillion. After the market collapse many find themselves in serious financial trouble. Those who find themselves in financial trouble are told to stand on their own two feet, and to pay back their loans (which cannot be discharged in bankruptcy hearings, or absorbed by the government under assorted "toxic asset" programs available to Wall Street). Making matters worse, after the 2008 market collapse student loan debt is the only category of consumer debt that has increased since the market collapse.

Oh, and our GOP-led Congress just allowed interest rates on student loan debt to increase from 3.4% to 6.8%.

The rationale behind all of this is that our GOP-led Congress wants the income derived from the interest payments that students pay ($51 billion in 2013) to continue. You know, so we can pay down our multi-trillion dollar national debt that the stupidity of the banks helped make worse.

So, yeah, after the market collapse of 2008 the banks got the gold mine, while our nation's college students got the shaft.

- Mark

Friday, July 12, 2013


Too funny ...

- Mark 


I have a question. 

If a cable company in New York can ask the Supreme Court to intervene and ask the National Labor Relations Board to stop pursuing labor disputes because they dispute the constitutionality of President Obama's recess appointments to the NLRB (caused by the GOP's appointment obstructionism) ...

... can labor unions ask the Supreme Court to intervene and ask the Federal Reserve to stop bailing out and funneling cheap money to Wall Street and our Too Big To Fail banks? You know, until the constitutionality of the Federal Reserves authority to create $3 trillion (by purchasing toxic assets) is settled.

- Mark 

NOTE: In reality my question is a bogus one. There's no constitutional dispute on either issue here. The President can make recess appointments and Congress can delegate financial authority. I'm just raising questions about Justice Robert's decision to accept the cable company's petition, which is being pushed by corporations who benefit from GOP obstructionism and government paralysis.

Tuesday, July 9, 2013

WEEKLY READING ... on Corruption and Crime (7-9-13)

Around the world a majority of people feel corruption and bribery have gotten worse, and think governments can't fix it (CBS News).


Scamming our seniors ... How seniors get bilked out of $2.9 billion per year (AARP).

Scamming investors (and an update on this post) ... How private equity-investment firms may be scamming you by outsourcing the management of your account (Fortune).

Scamming the poor ... The battle over payroll cards versus payroll deposits & checks (NY Times/DealB%k).

Scamming the middle class with rising fees (NY Times).

Scamming the state ... £13 trillion (or about $21 trillion) hidden from the taxman by the global elite (The Guardian).

Scamming the state, II ... The GAO finds that U.S. companies only pay 1/3 of the corporate tax rate (Truthout).

Scamming the state, III ... Global trade reduces tax revenue (Washington PostPrinceton University).

Scamming students ... with rising tuition and fewer state subsidies, then charging students more interest than the Federal Reserve is charging banks for interest on the loans (CBS / Mark Martinez).

Scamming labor ... by using the government to go after labor rights and unions (NY Times).

Scamming the Federal Reserve, the middle-class, and the state ... rather than loaning money out the banks are sitting on 81.5% of the trillions Bernanke's Federal Reserve gave them (Ritholtz Blog).

Scamming the old fashion way ... bribery, lying, cheating (Think Progress).

The result ... Inequality and concentrated wealth. £6.3 trillion in assets are owned globally by 92,000 people, or about 0.001% of the world's population (The Guardian).

Here's how growing inequality is happening, in less than 3 minutes ...

- Mark 

Monday, July 8, 2013


As part of a larger profile on Bakersfield and authors from the region I did an interview last month with C-SPAN for their American History series. Since the interview is also part of C-SPAN's BookTV series my discussion covers the major themes from my book "The Myth of the Free Market." Enjoy ...

The C-SPAN interview appeared this 4th of July weekend, and can be found here.

- Mark 


I don't need to add anything here ...

- Mark 

Friday, July 5, 2013


Have Americans become less politically progressive and dumber than was the case fifty years ago? Think about it. We all know about increasing wage gaps, declining purchasing power, increased debt loads, our skewed reward system, economic uncertainty, and the growing wealth divide in America. It's worse today than it was fifty years ago. And it's far worse if we think about our kids' future and social mobility.

So why have Americans stood by and watched as wealth and wage gaps have increased while social mobility has declined?

With things going to hell in a handbasket for America's middle-class we have to ask ourselves, What's happened to the energy behind the social and political demands made by women, labor, and people of color throughout the 1950s and 1960s? Are Americans simply less progressive, or has apathy and the dumbing down of America's working class become the new norm?

If you've asked yourself about these and other questions then you're going to love "Class War and the College Crisis: The 'Crisis of Democracy' and the Attack on Education."

In a few words, "Class War ..." makes it clear that not only have things gotten more difficult for America's middle class but the challenges todays middle-class face today are the result of a very deliberate strategy. Here's the interesting part. It's been orchestrated by those with money and wealth since the 1970s.

The key behind the strategy lies in depriving the public sector of the cash that it needs to fund public goods, which includes making access to higher education more difficult financially. The tool for reducing the states capacity to provide public goods has been to deprive it of funds by granting tax breaks that are both unnecessary and skewed to benefit people who don't actually need the break.

That it makes the wealthy even richer, while keeping the middle-class in their place, is just gravy on their tax cut gravy train.

There's more to the story, but you get the point. You might like to think that you're working your way up to that champagne lifestyle but, unfortunately, the deck is steadily being stacked against you. And it's been going on for some time now.

- Mark 


If you want a better understanding of the history behind the radical right wing and our modern Republican Party Claire Connor's "Wrapped in the Flag" is a good place to start. It documents how the radical ideas of the John Birch Society have become part of the mainstream right. For those of you who don't know much about the Birchers keep in mind that they vehemently opposed the Civil Rights movement, called President Eisenhower and Martin Luther King, Jr. "communists" and have no problem placing property rights over individual rights (especially when race is involved).

Here's what Robin Blinn has to say about Claire Connor and her book:

Claire's father served on the first national board of the John Birch Society along with Fred Koch, father of the oppressive billionaire brothers, Charles and David Koch. As a young teen, Claire joined the Birchers, so she knows where all of the bodies are buried. Her personal story was forged in the crucible that gave birth to the radical Tea Party which threatens the core of our democracy. Accordingly, it's important for all of us to understand their roots. 

At the end of the day, many of the ideas behind today's radicalized right wing Republican Party are essentially a rewrite of the John Birch Society. Go to Claire's site here or purchase a copy of "Wrapped in the Flag" here to learn more.

- Mark 

Thursday, July 4, 2013


Have you ever wondered why President Harry S Truman once demanded a one-armed economist? It's pretty simple. After receiving diverse reports on economic policy proposals from several economists a frustrated President Truman blurted out, "All my economists say, 'On the one hand ... but on the other hand ...'".

President Truman's frustration in understandable. He wanted certainty from a field that likes to claim scientific status but operates in an arena governed by political uncertainty and human error.

To better understand President Truman's frustration requires that you think what it would be like if, say, geologists were still arguing over whether the world is flat or round. What would you do with competing advice from one geologist who says "Go ahead and send the navy around the world" but then have to consider equally the geologist who warns about "not sending them because you'll lose the fleet when they fall off the earth"?

I know, I know. The comparison is a bit exaggerated, but you get the point. The conundrum that Truman faced was never more evident than when two economists (Gunnar Myrdal and Friedrich Hayek) won the Nobel prize in economics in the same year for saying the exact opposite thing!

Anyways, below we have an example of the work economists often put together but can lead to misleading assumptions and, unfortunately, faulty policy prescriptions. I say "misleading" because after reading the Bank of England's discussion paper "Is the 'Great Recession' really so different from the past?" one could justifiably be left to ponder whether "on the one hand the economy's not so bad" when "on the other hand" we all know better.

And, yes, the discussion paper was put together by two economists.

Here's the problem I have with the study. After discussing the 2008 market meltdown, and then comparing the meltdown with the recession of the 1970s, we find that the discussion paper virtually ignores the causes behind the recession of the two periods.

This is a problem because, at the end of the day, you can't pretend that two recessions are comparable when the underlying causes and subsequent responses are completely different (the fact that the outcomes of the second recession are not played out is a problem too). It's akin to comparing the life achievements of two kids who might look the same but live in different neighborhoods and have different parents (you know, kind of like the nonsense Harvard economist N. Gregory Mankiw tried to argue here).

Not only is the exercise a distraction, but it makes you look clueless to what's happening. In this case, the Bank of England discussion paper could lead one to believe that our 2008-inspired recession isn't as bad as we think when, at the end of the day, there's a world of difference between the recession of the 1970s and what we're experiencing today.

I'll make this brief.

Causes behind the 1970s recession ...

1. Deficit spending
2. OPEC price hikes lead to inflation and ...
3. Accelerates the financialization of our economy (where the focus is on speculation and wealth extraction over investment and wealth creation)
4. New global competition (thank you Bretton Woods) adds to corporate America's uncertainty caused by inflation and the financialization of our economy.

The causes behind the 2008 market meltdown and subsequent recession ...

1. Reckless deregulation
2. Reckless tax cuts and deficit spending
3. Deregulation means financialization on steroids, which leads to ...
4. A greater emphasis on wealth extraction over wealth creation
5. A continuing and naive belief in the integrity of markets, which helps explain the political failure of Congress and the Federal Reserve to discipline and correct market stupidity.

Causes behind the recovery of the 1980s ...

1. Paul Volcker's stringent monetary policies, plus ...
2. New sources of energy (wind, oil, nuclear, etc.), war (Iran-Iraq) and conservation efforts help slay inflation dragon.
3. President Reagan's deficit spending dumps trillions into the economy and acts a (military) Keynesian kick-start.

Causes behind the stagnating economy today ...
1. Ben Bernanke's trillion dollar money dumps hoarded by the banks, which means ...
2. The Savings-Investment function collapses.
3. The Just Say No Congress goes on a repeal Obamacare and regulate women's body binge, but does nothing with alternative energy or on the jobs front (which, combined with hoarding and a collapsed S-I function, makes it appear Keynesian policies don't work).
4. The financialization of the economy accelerates, which emphasizes - as Joseph Schumpeter might argue - playing monopoly rather than building monopolies.

Pretending that the recession of the 1970s and post-2008 period are similar, while ignoring their causes, only feeds the tendency to make faulty policy prescriptions. It also places an emphasis on the economic over the political.

So, yeah, trying to compare the 1970s recession with the recession today is a bad idea. They are two different beasts.

- Mark