Friday, January 30, 2015

DEBUNKING THE MYTH OF ST. REAGAN ... REAGANOMICS WAS REALLY A STATE-LED RECOVERY FUELED BY A DEFICIT SPENDING ORGY

Below is an excerpt from Chapter 10 of my book, The Myth of the Free Market. In this section I explain why President Reagan's "economic successes" had very little to do with free market policies. I'm posting it (again) because when colleagues and friends have asked me about Reaganomics, they claim they can't be bothered to buy or read my book after I explain where they can learn more. So, yeah, I'm going to start e-mailing this (as you should too) to those who continue to believe in the myth of St. Reagan ...


*****************

... Upon entering the White House in 2001, the center-piece of President George W. Bush’s economic program was rooted in Ronald Reagan’s supply-side economic policies. He reasoned that by putting more money in the hands the nation’s wealthy that investments would increase, which would create more jobs and generate more tax revenue. 

Insisting that the Reagan administration’s policies got the economy moving the Bush administration promised that just as Reagan saved the American economy from stagflation and misery that his tax-cutting, favor-the-rich, plan would reinvigorate the American economy. While the rhetoric was strong, a careful read of the facts illustrates that the Bush administration misread both Reagan’s accomplishments and history.

To understand what President Bush was trying to emulate in 2001 it’s necessary to recall the conditions that Ronald Reagan inherited, and supposedly tamed while in office. With inflation (12-13 percent) and interest rates (20 percent) reaching new heights in the late 1970s, and with unemployment on the rise (around 6 percent), both confidence and investment were lagging in America. The result was a new term in the field of economics and a fresh challenge in American politics: Stagflation (recession, low productivity, and inflation). By the time Ronald Reagan left office inflation and interest rates were back down to single digits, while unemployment hovered around a more acceptable 5 percent. 

Because of these developments, conservatives and ill-informed talk show hosts like to claim that a combination of tax cuts, deregulation, bureaucratic reform, and assorted incentives created the environment for investment that energized the economy. Indeed, according to revisionist historians the Reagan administration was able to get America moving by reducing the size of government, cutting government spending, and getting “government off of our backs.” 


This would be an interesting by-line except for one thing. It’s not true. 

First, it’s interesting to note that job creation under Ronald Reagan never matched the levels achieved under Jimmy Carter, while the size of the federal government’s workforce grew from 2.8 million employees to 3.1 million.


Job growth, by president, 1981-2015.

Public sector job growth, federal government.
Note the growth under President Reagan (1981-89) and the decline under President Obama(2009- ). 

In fact, the number of federally subsidized programs under Ronald Reagan was scaled back only to 1970-1975 levels, which helps explain why the Reagan administration hardly put a dent in the size of government. 

Acknowl
edging this, in 1985 Fortune magazine wrote that the “budget is way out of balance because of a little-known fact: real federal spending, adjusted for inflation, has climbed even faster under President Reagan than it did in the Carter years.” In the end, in spite of what the supply-side supporters promised, the national debt almost tripled from approximately $930 Billion to $2.7 Trillion under Reagan. 

So what created the conditions for the American economy to stabilize in the late 1980s, and take off during the 1990s? Primarily three factors: all of which undermine the Bush administration’s second-coming-of-Reagan claim (they also pretty much debunk the “first-coming-of-Reagan” claim too).

On the inflation front, we find that OPEC – an oligopoly that depends on cooperation to sustain itself – found its solidarity undermined by late 1981. With the beginning of the Iran-Iraq War, which Saddam Hussein initiated in part because the ayatollahs were fomenting fanatic revolution in Iraq, black markets in the oil industry grew as cheating on the part of the two combatants began (to fund their war efforts). 




In addition, conservation efforts, alternative energy sources, new oil discoveries, among other developments, helped to stabilize oil prices. But these efforts were initiated by President Ford and, to a larger degree, by President Carter. Still, the reality was OPEC unity – one of the primary catalysts behind price hikes – had unraveled, while government-inspired conservation efforts paid off. As the price for oil dropped, so did inflationary pressures. 

We also need to recognize a second force on the inflation front. Recall the strategy employed to control inflation was taken up by Federal Reserve Chairman Paul Volcker. In spite of pressure from the Reagan administration, who initially wanted to expand the money supply, most economists agree that by sticking to his guns, and maintaining a stringent monetary policy, Mr. Volcker helped to slay the inflation dragon. Critical here is that Mr. Volcker was appointed by Jimmy Carter, and not Ronald Reagan. 

Finally, the Reagan administration’s deficit spending broke all previous records. In fact, his administration spent twice as much as the previous 39 presidential administrations combined, in the process using taxpayer funded debt to deposit hundreds of billions of dollars into the national and global economy each year. This government induced “pump priming” was an artificial stimulus – what economists call a “Keynesian stimulus” (Chapter 9) – and was hardly a vote of confidence for laissez-faire economics. 

In sum, cracks in OPEC unity, conservation efforts, a tight monetary policy, and a state-led stimulus to our larger economy suggest that the Reagan administration’s policies were, at best, a supporting rather than leading factor in reversing the dismal economic environment of the 1970s. 

Perhaps more importantly was how Ronald Reagan used the state to make favorable legislation for industry a standard state function, while turning hostility toward labor into a conservative virtue. Combined with record budget deficits, the Reagan years helped create an economy supercharged by deregulation and debt. But worst of all is how his policies worked to undermine the laws of justice Adam Smith argued was necessary for markets to function efficiently and equitably ...


- Mark

* You might want to send your friend this too ... "These 4 Charts Make It Clear ... President Reagan Outperformed by President Obama on Jobs, Growth, and Investment Return."  

WHAT IT TAKES TO BE IN THE TOP 1%

Want to live like you're part of the American elite that makes up the top 1 percent?


Unless you're fortunate enough to work on Wall Street, or in the financial sector - where your biggest mistakes are covered up and bailed out by Washington - you probably have some work to do. From Blue Nation Review ...



- Mark

Thursday, January 29, 2015

THE IMPACT OF FALLING OIL PRICES ON BAKERSFIELD

California is America's third largest oil producer, behind Texas and North Dakota. The majority of California's oil production comes from Kern county, which is starting to feel the pinch of falling oil prices around the world. Read about it in the Los Angeles Times' "Oil Bust Chokes Off Bakersfield's Boom" ...


- Mark 

10 BASIC ESTATE TAX FACTS YOU SHOULD KNOW ...

Since 2008 wealth gaps in America have increased, as this Mr. Burns clip suggests. Should the 
Estate Tax should be increased, as President Obama has proposed? The following should help you decide.

Did you know that, according to the IRS, unless you inherit an estate worth more than $5.43 million you won't pay a dime in taxes because of the estate tax

From the Center on Budget and Policy Priorities we get the "Ten Facts You Should Know About the Federal Estate Tax" ...

1. Fewer than 2 of every 1,000 estates (0.15%) face the estate tax (see chart below). 
2. Taxable estates typically pay less than 1/6 of their value in taxes. 
3. Large loopholes allow many estates to avoid taxes. 
4. Only a handful of small, family-owned farms and businesses owe any estate tax (only 20 small businesses and farm estates nationwide owed any estate tax in 2013). 
5. The largest estates consist mostly of "unrealized" capital gains that have never been taxed. 
6. The estate tax is a significant revenue source. 
7. Repealing the estate tax (again) would likely leave less capital for investment. 
8. Compliance costs are moderate. 
9. The U.S. taxes estates more lightly than most comparable countries. 
10. The estate tax is the most progressive part of the tax code.

You can read the details behind the 10 estate tax facts listed above here.

Chart for #1 above. The number of estates that actually pay the Estate Tax is ridiculously low.

- Mark 

Tuesday, January 27, 2015

BE AFRAID AMERICA ... IT'S YOUR DUTY TO BE AFRAID

The war on terror is not an actual war. We discuss this in my International Relations course every year ...


Unfortunately, most Americans don't have a clue what the difference is between a real enemy (Nazi Germany, the Soviet Union, etc.) and an abstract concept. Peddling the idea that you're somehow on the front lines of the a war on terror, and should be in constant fear, is Madison Avenue gold for the military-industrial complex. If you're already afraid of non-English speaking dark people, who don't worship as you do, the "war on terror" almost sells itself in America. 

But should Americans buy into the idea that they will one day be caught up in a terrorist attack?  Absolutely not.

According to the Center for Disease Control you are 110 times more likely to die from contaminated food than you are from a terrorist attack. You're also more likely to be hit by lightening or win the lottery than die at the hands of a terrorist. You're  4,706 times more likely to drink yourself to death before you die in a terror attack. 

Heck, you just might be killed by a toddler before you are killed by a terrorist (click here for more). 

In spite of these realities we continue to build a national security state because, well ... it's our national duty to be afraid. We're told to be afraid of everything from Sharia law (Kansas is particularly paranoid) to the ever dangerous terror babies.



If you're interested in some real facts, especially how all of this has impacted our lives, check out what the Washington Post revealed in "Top Secret America" ...
* Some 1,271 government organizations and 1,931 private companies work on programs related to counter terrorism, homeland security and intelligence in about 10,000 locations across the U.S.
* Nearly 1 and 1/2 times the number of people who live in Washington, D.C., hold top-secret security clearances.
* In the D.C. metropolitan area, 33 building complexes for top-secret intelligence work are under construction or have been built since 9/11. They occupy the equivalent of three Pentagons.
* Many security and intelligence agencies do the exact same work, creating redundancy and waste.
* 50,000 intelligence reports are issued each year (about 1,000 a week), which even senior officials admit cannot possibly be digested.
This national security apparatus, with all of the secrecy and paranoia it perpetuates, grows every day. It's what is now dragging us into endless wars that we can't win. As James Fallows pointed out in The Atlantic this past December, this is one of the great tragedies of the American military today.



But, by all means, be afraid America. 

It's your duty to be afraid.

- Mark 

OBAMACARE FACTS

More Obamacare facts you're likely to never hear about ...


- Mark 

TRUE


- Mark

Monday, January 26, 2015

HIGH-SPEED RAIL MATTERS


Still, there's hope. For information on recent developments with high speed rail in California click here.

- Mark 

Friday, January 23, 2015

THE TERRORISTS WON? THINK ABOUT IT ...


- Mark 

WEEKEND READING 1-23-15


Come to Jesus, or I'll beat him into you ... Pastor admits to knocking out kid who didn't believe in God (Uniladmag).

Five-year-old misses friend's birthday party and gets invoice for £15.95 (The Guardian).

Drone carrying meth crashes in Mexican supermarket parking lot (Christian Science Monitor).

30-year-old son, and a Princeton graduate, kills his hedge fund manager dad after being told that his allowance was going to be cut (NY Post).


SOMETHING SERIOUSLY WRONG HERE
Banking on death: Banks profiting off of current and former employee deaths helps explain why a slain MassMutual executive's murder should raise eyebrows (Wall Street on Parade).

The U.S. Corporate State has become the monarch our Founding Fathers despised (Nation of Change).

The perfect financial storm: Why we're headed for a future global economic crisis (Salon).

Derivatives: The unregulated global casino for banks (Demonocracy).

Oxfam study finds that richest 1% likely to control half of global wealth by 2016 (NY Times).


WHY WE HAVE INEQUALITY
Why wages won't rise (Robert Reich / Nation of Change).

Idea for tackling inequality Number 27,653: Stop subsidizing it (Truth Out / Dean Baker).

How America's wealthy stole the American Dream and cashed it at an offshore bank (Alternet).

Ivy League's meritocracy lie: How Harvard and Yale cook the books for the 1 percent (Salon).


OIL SLICKS
Each year billions of dollars don't make it to the U.S. Treasury because it stays in the pockets of the oil and gas industry in the form of subsidies and tax breaks. Cool interactive shows what it really costs (Big Oil Giveaways).

Keystone XL could face lawsuit from Nebraska ranchers (Nation of Change).


POST-STATE OF THE UNION CHATTER
State of the GOP is broken: I thought Joni Ernest was bad. Then I watched Ted Cruz (Salon).

Senator Joni Ernst's family received almost half a million dollars in federal subsidies (Salon).


JUST SILLY STUFF
Can a man resist a beautiful woman? Yes, they can (Elephant Journal).

23 solutions to the most mind numbing and self-absorbed First World life challenges (Stumbleupon).

Laziness on another level (Stumbleupon).


OUR IGNORANCE CUP RUNNETH OVER
You will be shocked at how ignorant Americans are: What Americans don't understand is an obstacle to progress (Salon).

Fox News host claims President Obama will alter First Amendment to align with Sharia law (Crooks & Liars @ 4:10).

Paul Krugman on the real reason reality doesn't make the slightest dent in the right-wing brain (Alternet).


MISCELLANEOUS
20 Years Later: NAFTA has delivered on practically none of its promises (Foreign Affairs / Jorge Castaneda).

The U.S. House, not so representative (Washington Post).

Guess who poses the biggest threat to legalizing pot in California? Hint: It ain't the man (Mother Jones).

President Obama breaks with historic Cuban policy; implements dramatic changes (COHA).

- Mark 

Thursday, January 22, 2015

30 YEARS AGO TODAY ...1984

Thirty years ago today (January 22, 1984) this ad made its national debut during the Super Bowl ...


- Mark



AMERICA'S NATIONAL SOVEREIGNTY SACRIFICED TO THE KOCH BROTHERS' BUSINESS EMPIRE?

If you read "Inside the Koch Brothers' Toxic Empire" from Rolling Stone magazine you're going to love Koch Brothers Exposed: 2014 Edition from Brave New Films. It offers an excellent overview of what the Koch brothers stand for, and what they are doing to our nation.  ... 


- Mark 

Tuesday, January 20, 2015

BRITISH PRIME MINISTER: FOX NEWS TERROR EXPERT "CLEARLY A COMPLETE IDIOT"


After hearing about Fox News "terror expert" Steve Emerson's claim that the British city of Birmingham was no-go zone in Britain David Cameron, Britain's prime minister, said, "I choked on my porridge and I thought it must be April Fool's day." Cameron later dropped all protocols and said Emerson is "clearly a complete idiot."

After he was called and questioned about his claims, Emerson later retracted his comments while Fox News followed up with an apology. Still, this hasn't stopped both from being ridiculed in the press and on social media, as this piece helps us see.

- Mark

HALLA TOMASDOTTIR: A FEMININE RESPONSE TO ICELAND'S FINANCIAL CRISIS + "THE ICELAND PATH"

Another informative talk via TED: Halla Tomasdottir talks about bringing feminine values into finance in, "A Feminine Response to Iceland's Financial Crisis" ...


In brief, AUDUR CAPITAL (which recently merged with another company) works around these guiding principles:

1. RISK AWARENESS: Don't invest in things you don't understand (i.e. complex derivatives). 
2. STRAIGHT TALK: Make sure everyone knows the risks, no matter how inconvenient. 
3. EMOTIONAL CAPITAL: Take a look at the people in the businesses where you're going to invest. Understand it's people, and not spreadsheets, that make and lose money. 
4. PROFIT WITH PRINCIPLES: Profits that have a positive social/environmental impact.

Incredibly enough, these are not the principles guiding Wall Street or America's financial giants today.

At the end Halla Tomasdottir talks about doing away with the mind-set that focuses on companies focusing on business on the one hand and while doing philanthropy with another. She calls for combining the two as a way of doing "good business" with a sustainable future.

***********

Finally, in the FYI Department, the path that Iceland's taken since the global market meltdown of 2008 differs from the path taken by the United States and Europe, on so many levels ...




- Mark 

Sunday, January 18, 2015

10 THINGS TO IMPROVE YOUR LIFE (kind of)

Some silly if not useful tips ...


- Mark

BAR ECONOMICS: ONE OF THE BEST EXAMPLES OF WHAT HAPPENED IN THE LEAD UP TO 2008, BY FAR

Via Comic Hill we get one of the best examples of what happened in 2008, by far ...

1.11
Mary is the proprietor of a bar in Dublin. She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronise her bar.
To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later. She keeps track of the drinks consumed on a ledger (thereby granting the customers loans).
Word gets around about Mary’s “drink now, pay later” marketing strategy and, as a result, increasing numbers of customers flood into Mary’s bar. Soon she has the largest sales volume for any bar in Dublin.
By providing her customers freedom from immediate payment demands, Mary gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages. Consequently, Mary’s gross sales volume increases massively. A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Mary’s borrowing limit. He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral.
At the bank’s corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINKBONDS, ALKIBONDS and PUKEBONDS. These securities are then bundled and traded on international security markets. Naive investors don’t really understand that the securities being sold to them as AAA secured bonds are really the debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb, and the securities soon become the hottest-selling items for some of the nation’s leading brokerage houses.
One day, even though the bond prices are still climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Mary’s bar. He so informs Mary.
Mary then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts. Since Mary cannot fulfill her loan obligations she is forced into bankruptcy. The bar closes and the eleven employees lose their jobs.
Overnight, DRINKBONDS, ALKIBONDS and PUKEBONDS drop in price by 90%. The collapsed bond asset value destroys the banks’ liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.
The suppliers of Mary’s bar had granted her generous payment extensions and had invested their firms’ pension funds in the various BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds. Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers.
Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multi-billion euro no-strings attached cash infusion from their cronies in Government. The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Mary’s bar.

- Mark

Kudos to Kathleen for the link.

UNDER PRESIDENT OBAMA ...


- Mark

Saturday, January 17, 2015

IS THE NSA BREACHING OUR ENCRYPTION TOOLS? SIMPLY PUT, YES THEY ARE

Apple 1984 Super Bowl ad:"Why 1984 won't be like 1984"
During the 1984 Super Bowl Apple ran an ad telling the world that conformity in the future would not be the case. Its Macintosh personal computer would save us all from having to live a thoughtless mind controlled future, where we were ruled by an omnipotent Big Brother-like government (the ad was really aimed at cutting into IBM's market share).

The images in the ad were a direct reference to George Orwell's book Nineteen Eight-Four, where Orwell described a dystopian security state. In this Orwellian state compliance was maintained by the "thought police" and disseminated by a televised Big Brother that controlled information.

Thirty years after Apple's ad made its debut we can ask, How are we doing? Are we headed for 1984-like future? If the first step lies in having the state watch what we say and do, because they can, the TED talk below suggests we're moving in that direction.

Specifically, as I've written about many times before, our growing national security state has been busy monitoring what we say and documenting who we associate with in cyber space. As this TED talk makes clear, this is being done on a massive scale, whether we're viewed as a threat or not ...


- Mark

Hat tip to Alan for posting the link.

A LESSON IN HUMAN DECENCY, AND THE WRATH OF THE INTERNET ...

Having worked for tips in my previous life, this story strikes a nerve ...

A Boston pizza delivery man was told to return to an auto dealership to return $7, which he thought was a tip because the staffers didn't ask for change on a $42 (plus change) tab. Upon returning the money the delivery man, who has a newborn and works two jobs, was harassed by the staff. The exchange was caught on video, went viral, and caused quite a stir.

Here's a clip of the pizza man returning the money, and the exchange he had with the staff. FYI, at the end one of the video one worker threatens to "put my foot in your ass" as another threatens to get the delivery man fired ...


The dealership felt the immediate wrath of the internet, with scathing Yelp comments and lowly 1 star reviews.


On a lighter side, capitalizing on the moment the competition's new commercial makes it clear they have an entirely different approach to people, and the pizza delivery man.


And always remember, tip the wait and service staff.

- Mark 

Friday, January 16, 2015

CHINA'S GDP PASSES THE UNITED STATES (sort of ...)


China has officially passed the United States when it comes to the amount of goods and services that passes through its economy in a year, sort of ...

When it comes to measuring what the Chinese can purchase with their own currency - what economists call Purchasing Power Parity - the Chinese are now #1 in the world. What this means is that as a nation the Chinese can purchase more stuff in the aggregate than the United States.



So, what's Purchasing Power Parity (PPP), you ask? Good question.

In a few words, using PPP differs from the traditional way we measure economic activity because PPP focuses on how much a nation can purchase domestically in their own currency. The traditional way of measuring economic activity is to use U.S. dollars to gauge how much an economy produces each year.

So why use PPP, you ask? Another good question.

Measuring how much can be produced in U.S. dollars can be misleading. This is especially the case since the dollar has enjoyed a privileged position among the world's currencies since World War II. While there are issues tied to the growing amount of dollars in circulation around the world - which reduces its value over the long run - the U.S. dollar is still the world's reserve currency. Simply put, other nations accept and still want dollars, even if the dollar has become devalued over time because of the $1.3 trillion (and counting) that's in circulation around the world.


Apart from the privileged position of the dollar we also have challenges associated with speculation on currencies, interest rate shifts, etc. These fluctuations help to make some currencies stronger or weaker.1

All of this helps explain why vacationing U.S. citizens can use the dollar to purchase more goods in some countries when they travel. There are many factors that help raise, or reduce, the value of the dollar (or any currency, for that matter). If done correctly, using PPP can help reduce currency fluctuations by muzzling the privileged position of the dollar - while filtering out other inflating or deflating factors2 - from the currency exchange equation.3

So, in the case of China above, if we remove the privileged position of the dollar (among others), and focus on how much their national currency can purchase domestically, we end up with China being able to purchase more goods and services than the United States.


However, this doesn't necessarily mean the Chinese are richer. Not by a long shot.

What the Chinese currency can purchase internally ($17.5 trillion) must be spread out between 1.36 billion people (about $12,800 per person). The fact that China's wealth is concentrated in the hands of the few makes it clear that China's place atop the PPP perch may not mean as much as some might want to suggest.

Conversely, the purchasing power of the U.S. ($14.6 trillion) is divided by 316.1 million people (about $46,000 for every person). While wealth gaps in the U.S. are bad and getting worse, there's no doubt that individual Americans enjoy better purchasing prospects that the average Chinese citizen.

Of course, if we measure how many goods and services an economy can produce using the traditional dollar denominated method (simple GDP) the U.S. remains the world's top producer, having produced $17.5 trillion worth of "stuff" in 2014.

For their part the Chinese produced a little over $10 trillion in goods and services.

Click here for a list of countries whose currencies are under or over valued according to the PPP method.

- Mark


     1. For many PPP may be confusing, and helps explain why no one really likes talking to economists about the world. I understand. If you find yourself confused, you might want to take a look at this example (which, I suspect, many will find even more confusing).

     2. We want to keep in mind that, apart from muzzling the privileged position of the dollar, the PPP formula also filters out several other currency manipulating factors. Specifically, it helps reduce the manipulative impact of inflation expectations, short term fluctuations, interest rate changes, and growth expectations from currency exchange rates.

     3. The end result is that PPP is supposed to help us determine where the exchange rate "should" be. The thinking (or the theory) behind the PPP method is that exchange rates should be at a level where a basket of goods can be purchased for the same price in either country.

STOP SAYING "THE AMERICAN PEOPLE WANT ..."

Poll after poll makes it clear that the vast majority of Americans want to regulate Wall Street and want to end tax breaks and subsidies for oil companies. So Speaker Boehner and the GOP need to ...


At the end of the day, watering down Dodd-Frank for Wall Street and pushing the Keystone XL deal is not what the people want.

So, again, quit saying "The American people want ...". 

- Mark 

Thursday, January 15, 2015

THE WORLD OF JOURNALISM HAS LOST AN ICON

One of the world's great journalists passed away last week ...



Julio Scherer Garcia was one of the most respected and widely read journalists in Mexico and Latin America. He inspired many investigative journalists to follow in his footsteps, and to pursue stories that unveiled criminality, injustice, and cronyism in Mexico (like the story in the book discussed here).

After being forced out of the newspaper that he worked for (Excelsior) in 1976 - by Mexican President Luis Echeverria - Scherer founded the investigative news magazine Proceso. It immediately became the standard in Mexico (and Latin America) for investigative journalism and helped, in the words of the NY Times, "lay the groundwork for Mexico's democratic transition."

During his journalistic career Scherer would interview John F. Kennedy, Fidel Castro, and Pablo Picasso, among others. His prestige was such that he was invited by the Zapatista rebels in 1994 to mediate their discussions with the government. Scherer declined, citing his ethics as a journalist.

Scherer's reputation would also land him an interview in 2010 with Sinaloa's Ismael "El Mayo" Zambada, one of the top drug lords in Mexico. The respect Zambada had for Scherer was such that he let it be known that he always wanted to meet him; a sentiment the picture below seems to capture.


After he was criticized for the Zambada interview Scherer replied, "If the Devil offers me an interview, I go to hell."

Towards the end of his life Julio Scherer refused interviews and requests by his colleagues who wanted to write his autobiography, saying that his body of work should speak for itself.

For my part, while living in Mexico, I read Proceso religiously. I was surprised (and honored) when I got a call from one Proceso's reporters, who was doing a story on some of the developments I had written about in my Ph.D dissertation.

Scherer was born April 7, 1926, in Mexico City and passed away on January 7, 2015. He was 88.

- Mark

FOOTBALL TALK: COWBOY FANS ... IT WAS NOT A CATCH

Via SBNation we get the clips of the week (well, from last week's Packer-Cowboys game). Catch or no catch?

dez



I say no catch. The ball touched the ground before Dez Bryant finished making the play. Look, if Bryant had made the same play as he was sliding out of bounds the catch would have been ruled incomplete. You can't use the ground to help you control the ball, which is what happened when the ball bounced up (a bounce that was caused by the ground) and was then finally caught in the end zone.

See in particular Note 2 and Item 1 below from Section 8.1.3 of the NFL rule book.

Article 3 Completed or Intercepted Pass. A player who makes a catch may advance the ball. A forward pass is complete (by the offense) or intercepted (by the defense) if a player, who is inbounds: 
(a) secures control of the ball in his hands or arms prior to the ball touching the ground; and 
(b) touches the ground inbounds with both feet or with any part of his body other than his hands; and 
(c) maintains control of the ball long enough, after (a) and (b) have been fulfilled, to enable him to perform any act common to the game (i.e., maintaining control long enough to pitch it, pass it, advance with it, or avoid or ward off an opponent, etc.). 
Note 1: It is not necessary that he commit such an act, provided that he maintains control of the ball long enough to do so.
Note 2: If a player has control of the ball, a slight movement of the ball will not be considered a loss of possession. He must lose control of the ball in order to rule that there has been a loss of possession. If the player loses the ball while simultaneously touching both feet or any part of his body to the ground, it is not a catch.  
Item 1: Player Going to the Ground. If a player goes to the ground in the act of catching a pass (with or without contact by an opponent), he must maintain control of the ball throughout the process of contacting the ground, whether in the field of play or the end zone. If he loses control of the ball, and the ball touches the ground before he regains control, the pass is incomplete. If he regains control prior to the ball touching the ground, the pass is complete. 

So, yeah, you have to hold on to the ball through the entire process of catching the ball and hitting the ground. Dez Bryant didn't have control of it as he went through the end zone. End of story.

Here's the reaction to the no catch call inside the Cowboy's owners box. New Jersey governor, Chris Christie, is not too happy.


Still, maybe now Cowboy fans understand how Raider fans felt after the "tuck rule" was called.

OK, back to work.

- Mark

Hat tip to Tom for the original link.

Wednesday, January 14, 2015

SMALL GOVERNMENT HYPOCRISY


- Mark 

MID-WEEK READING (1-14-15)


20 quotes that make it clear that the U.S. was not founded as a Christian nation (Examiner).

Warren takes swipe at Reagan, trickle-down economics (Politico).

Krugman ridicules GOP for believing "facts have a liberal bias" (Salon).

The right-wing domestic terror plot you didn't hear about this week (Raw Story).


STRANGE / INTERESTING STORIES
You can be king: The incredible story of Sealand, the nation-state (Ozy).

Atomic deserts: A survey of the world's radioactive no-go zones (Der Speigel)

Rising oceans swallowing up small islands? Let 'em sink (Ozy).

Inside the luxury Doomsday condos where the rich plan to ride out the apocalypse (Raw Story).


FOR THE GUN NUTS
Man practicing "open carry" law robbed of brand new gun, at gunpoint (KOIN6).

Woman mistakenly shoots husband who brought home surprise breakfast (TPM).

A gun is now more likely to kill you than a car is (The Economist).


MEASLES DON'T KILL PEOPLE ... 
Disneyland measles outbreak, another lesson in how stupidity can kill (Blue Nation Review).

The rich and their anti-vaccine quacks (National Memo).


BASIC FACTS ABOUT WELFARE EVERYONE SHOULD KNOW
Everything you need to know about the war on poverty (Washington Post).

Fact checking Paul Ryan's claim that $15 trillion has been spent on the war on poverty (Washington Post).

Jesse Ventura: Walmart and the Walton family are the real 'welfare queens' (Examiner).


FACES OF LAWSUIT ABUSE, 2014
Rescuers sued by man they pulled from flood waters because they didn't get there fast enough (Faces of Lawsuit Abuse).

Baseball fan caught sleeping on camera, sues ESPN for $10 million (Faces of Lawsuit Abuse).

Little League coach sues player over celebratory helmet toss (Faces of Lawsuit Abuse).

Man who filed a personal injury lawsuit for "serious, permanent and debilitating injuries" caught on video pushing huge, historic boulder off its perch (Faces of Lawsuit Abuse).


COLLEGE TALK
Obama proposes plan to make community college free for everyone (National Memo).

Is College the new high school (The New Yorker)?

A university president gave $90,000 a year to give his minimum wage workers a raise (Vox).


WHAT'S WRONG WITH THESE PEOPLE?
Bill Cosby told a rape joke during a show (Blue Nation Review).

GOP Senators: Paris shooting justifies NSA powers (Ozy).

South Carolina Republican calls for mandatory NRA-themed high school gun classes (ATTP).

Conservatives on Facebook go full Nazi, call for genocide against Islam (ATTP).


MISCELLANEOUS
8 shocking things Republicans have said about the poor (Blue Nation Review).

The U.S. has more jails than colleges. Here's an interactive map of where those prisoners live (Washington Post).

JPMorgan is the latest target on Goldman Sachs' hit list (Money Morning).

How California bested Texas (The New Yorker).

- Mark 

Tuesday, January 13, 2015

ARE ALL SNOWMEN ABOMINABLE? APPARENTLY, YES ...


Via Time.com ...

**********************
Saudi Cleric Declares All Snowmen Abominable
Asks followers to resist the urge to build them

... Munajjid, fielding questions on a religious website, replied that any representation of a man, including a snowman, violated the kingdom’s strict ban against figurative depictions of the human form.

“God has given people space to make whatever they want which does not have a soul, including trees, ships, fruits, buildings and so on,” he said.

**********************
So, here's my question. Does the ban on figurative depictions include statues, like this one of the Ayatollah Khomeini?

The Ayatollah Khomeini (1902-1989)
Just asking ...

- Mark 

ANOTHER REASON WHY AMERICA IS IN DECLINE

It's stuff like this that's helping to reduce the world's reliance on fossil fuels, and setting America up for failure in the renewable energy race ...

Aerial picture of Horns rev wind farm in Denmark.
In 2014 Denmark set a world record for wind power production. Specifically, Denmark produced 39.1 percent of its energy from wind farms. This puts Denmark on track to meet its 2010 goal of getting 50 percent of energy from renewable sources.

While countries like Denmark, Germany and the United Kingdom are investing heavily in the renewable energies of the future the U.S. Congress continues to play political games when it comes to its energy policy.

After spending almost the entire year doing nothing on the Production Tax Credit - which is used to promote and subsidize renewable energy products - Congress finally passed a bill this past December that provides renewable energy industries a "retroactive" package of tax credits.

Here's the fun part. The tax credits lasted all of two weeks, and ended on December 31, 2014.

You can bet that members of Congress who voted for the bill will crow throughout 2015 that they passed renewable energy legislation, in spite of the fact that really didn't do anything for the renewable energy industries of America. They'll also, no doubt, accuse the sane members of Congress who refused to go along with their two week funding charade as opposing renewable energy.

What Congress did is akin to getting money to go college after you already dropped out - and two weeks before the quarter ends - and then being told you're not getting anything for the next year. Oh, and you can't use the money allocated for the year you dropped out the following academic year.

Yeah, that's how our U.S. Congress works.


For those of you yelling at the screen about how we can't afford renewable energy subsidies, or how the magic of the market works, here's a quick overview of the more than $470 billion in tax breaks that the U.S. government has pumped into the oil and gas industry. For a breakdown of how much is given away in tax breaks, by company and tax category, click here and here.

If you're interested in learning how lobbying helps maintain America's dysfunctional oil and agriculture subsidies you might want to watch the award winning documentary PRICELE$$.

- Mark 

JON STEWART TAKES A LOOK AT THE HOMELESS IN UTAH

Another approach towards the homeless in America ...


- Mark 

Monday, January 12, 2015

BILLION DOLLAR LOBBYISTS

The Koch brothers gave the GOP their marching orders on tax breaks. They want the Republicans to go after tax incentives that underwrite renewable energy investments. Here's why ...


- Mark

UPDATE: Click here for a quick review of how tax incentives for renewable energy was effectively killed in 2014.

Saturday, January 10, 2015

TOO FUNNY ...WATCH JIMMY FALLON'S INTERVIEW FALL APART IN A HILARIOUS WAY AFTER HE REALIZES HE BLEW A CHANCE TO DATE NICOLE KIDMAN

Because it's so personal and spontaneous this is even better than Fallon's SNL stuff ...


- Mark

UNDERSTANDING CHARLIE HEBDO IN 3 MINUTES

Via Vox.com we get an overview of Charlie Hebdo in three minutes ...


Via Vox.com we also get The New Yorker's next magazine cover ...


Click here for 12 powerful political cartoons from around the world responding to the Charlie Hebdo attack. Here's one example ...
- Mark 

Friday, January 9, 2015

OBAMA DESTROYING AMERICA :-)


- Mark

RISE OF THE MACHINES (Part II): ECONOMIC FALLOUT FROM THE THIRD INDUSTRIAL REVOLUTION, ACCELERATED BY GOVERNMENT POLICIES


In "Rise of the Machines (Part I) ..." I took a cue from economist Nouriel Roubini and wrote about the birth of the Third Industrial Revolution, the rise of the Silicon Valley, and how they have impacted the world we live in. Specifically, I pointed out how productivity and wealth creation has been surging because of technological advancements, but that none of these gains are trickling down to ordinary workers in the form of higher wages, or job security.

Because smart machines appear to both facilitate and terminate the functions of ordinary workers the wage gains made by labor in the first two industrial revolutions are slowly being degraded and lost.

Specifically, ordinary workers are watching as the financial gains they help generate today are gobbled up by those who either develop our new technologies, or who control and financially underwrite the larger economy. This reality helps explain why we are now living in an era where we can have a strong economy, a record setting stock market, record wealth creation, and growing GDP, but very few financial gains for ordinary workers who help increase our nations productivity.

This hasn't always been the case. There was a time when the compensation of ordinary workers kept pace with increased productivity.


So, what's happening?

In a few words, the rules of the economic game have been changed. But technology is only partially responsible for the weakened position of labor and stagnating wages we have seen over the past 40 years. The other part is political, and can be tied directly to state-led policies that have stripped labor of its bargaining power, and is now marginalizing its place in society. As I pointed out over a year ago, the case of Detroit goes far to help us see how this happened.

We'll get to the Detroit example after we discuss why Nouriel Roubini's "rise of the machines" apocalyptic prediction for ordinary workers is already in the works.

ECONOMIC FALLOUT FROM THE THIRD INDUSTRIAL REVOLUTION
At the outset we need to acknowledge that current trends make it clear that future advances in technology will continue to primarily benefit those with money and high skill sets. What this says about the prospects of ordinary laborers, and the middle class, is not good.

Why keep the house cleaner around so long when the iRobot Roomba 880 can vacuum your floors for free? To be sure, there will always be service oriented work, but the number of laborers needed to complete a job will decline as machines do more of our menial work.


In fact, the amount of things we now do for ourselves - called "prosuming" - is considered so normal that we don't even think about how we have adapted to technology. We now pump our own gas. We do much of our banking at the ATM or on-line. We purchase products on the internet. We order uber drivers from our phones. We do so many tasks that once required considerable assistance from a middleman or service professionals that we're eliminating the need for low- and middle-skilled workers.

Put more simply, ordinary workers are being displaced by machines, which is pitting more and more workers against one another for fewer and fewer low- and middle-skill jobs. As wages stagnate and decline (and they have) middle-class Americans have had to cope with more work, while accumulating more debt.

While more debt is good for those in the financial sector in the short-term, it's not so good for society over the long-term.

The on-going displacement of workers by technology explains why economist Nouriel Roubini suggested that our modern economy is built on a "rather shaky foundation." Roubini's concern - as Franklin D. Roosevelt and the intellectual godfather of capitalism, Adam Smith, understood - is that if workers can't earn a strong income America will be left with an economy where only distressed consumers, debtors, and the wealthy can buy the products produced.


Suggesting that the U.S. will become dependent on distressed consumers, prosuming debtors, and a small group of extremely wealthy consumers to keep the economy going isn't some wild prediction on Roubini's part. It's already happened. People have been working and racking up debt in America because of stagnating and declining wages for some time now.

Think about the following for a moment.

LOST WAGES, DEBTOR NATION
According to data from the St. Louis branch of the Federal Reserve, because wages have stagnated or declined in America over the past 40 years, America's middle class lost about $1.215 trillion in wages during this time. Put another way, if wage gains from 1970 through 2010 had maintained the same pace that it did immediately after World War II through 1970 Americans would have had an additional $1.215 trillion in their pockets.

To make up for these lost wages, and to help make ends meet, American households became two-income families, saw breadwinners working two or more jobs, or began tapping into (or gave up on) savings. Worse, credit card use shadowed all of these developments.

This helps to explain why American households racked up almost $1 trillion in credit card debt right before the market collapsed in 2008.


Taking on almost $1 trillion in credit card debt came close to matching the $1.215 trillion in lost wages that Americans lost over the past 40 years. But it has turned America into a nation of debtors, while transferring trillions to the wealthiest Americans.

The economic fallout from the Third Industrial Revolution is clear: Productivity and wealth may be increasing but ordinary workers aren't seeing the same share of the wage gains that they saw in the immediate post-war era. The amount of debt and individual bankruptcy cases in America is just one of several examples of the economic fallout.

All of this is important to economist Nouriel Roubini because it confirms that technological leaps aren't necessarily making workers or nation-states better off in the long-term. But Roubini's analysis is incomplete. Technology is only one part of a larger problem. A very deliberate set of government policies in the United States have advanced a national race to bottom, which is also working against the interests of labor.

As I pointed out over a year ago, what's happening in Detroit helps explain why the rise of the machines is not the only challenge laborers face in America.

WHAT'S WRONG WITH DETROIT ... AND AMERICA
Contrary to what you've heard, the fiscal problems of Detroit, and the challenges that confront America, are not so simple, or the result of labor unions. The 79,500 Michigan jobs/workers that were displaced or shipped to China between 2001 and 2007 didn't happen because of mysterious "magic of the market" forces. Nor did Detroit's tax base suddenly disappear because of incompetent political leadership (though the incompetence didn't help).

Michigan's jobs and manufacturing picture worsened - as did the nation's - because of policies taken by the federal government over the past 30 years. These policies rewarded companies for shifting manufacturing jobs around the world.

When jobs leave so does the tax base. Pretty simple.

Now, someone reading this might be screaming at their screen right now that unions priced the American worker out of the global labor pool by demanding too much. Think again.

Germany produces twice as many cars as the United States. Their unionized auto industry pays workers significantly more than what the U.S. auto industry pays. Indeed, when you take out what it costs for health care (Germany has universal health care) we find that German auto workers make about two times what their U.S. counterparts earn, while benefits for German workers are substantially more rewarding (8 weeks paid vacation, free day care, etc.).



So, the big question is if German auto workers make far more than their U.S. counterparts, why is it that Germany hasn't experienced collapsing industrial cities like Detroit? Why is it that Germany - with its higher salaried auto workers - is seen as the key to Europe's economic stability, while the U.S. is still languishing in a 2008-induced market zombie walk?

SO, WHAT HAPPENED TO DETROIT?
While we could discuss how favorable legislation helped facilitate the financialization of America's economy (discussed in my next post on this topic) for now we'll concentrate on three other developments that help us understand what happened to Detroit, and America's manufacturing base.

The first development is pretty simple. For the longest time no one wanted to buy U.S. automobiles. Beginning in the early 1970s America's auto makers began producing crap. Remember the Gremlin? The Corvair? The Pinto? The Chrysler Imperial LeBaron Two Door? The AMC Pacer? The Chevy Chevette? This wasn't the workers fault. This one is on management. When auto manufacturers in America were forced to shut their doors jobs disappeared too.



The second answer is a bit more complex, but still relatively simple too.

Germany's constitution and social culture embrace unions, worker councils, and the right to strike. This helps shape Germany's union-management relations so that they are collaborative, as opposed to being adversarial (the case in the United States). It's the primary reason that Germany didn't experience wholesale layoffs in the auto industry after the 2008 market collapse (offering "extended vacations" instead). Unions and management worked together to keep people employed.



Finally, apart from producing crummy automobiles and going after unions, the United States has gone out of its way to encourage its auto industry and manufacturing base to leave, while doing little to protect American workers. Think about the following.

As I noted above, between 2001 and 2007 Michigan lost 79,500 auto jobs to China. This happened because of specific government policies, both here and in China.
1. Free Trade Agreements: The U.S. has entered into numerous trade agreements that facilitate moving manufacturing jobs overseas, especially to low paying regions of the world.
2. Currency Manipulation: China has been allowed to manipulate its currency, which enables it sell more goods in the United States.
3. Labor Rights Abused: China regularly suppressed labor rights, which lowers manufacturing wages by as much as 47% to 86%, and attracts manufacturers from the U.S. 
Throw in generous U.S. tax credits for business expenses - which include credits for shipping jobs overseas - and it's easy to understand why almost 3 million jobs in the United States were outsourced or were displaced by government policies between 2001 and 2007 (the German government, on the other hand, appears to have had a role in saving VW from a hostile takeover in 2008 by orchestrating the largest hedge fund loss in history).

By sending taxpayer funded trade representatives to negotiate trade deals, while ignoring currency and labor abuses, the U.S. government has effectively told Detroit and America's industrial base - and the middle class - we don't care about you. The end result is that millions of American jobs have been sent to countries all over the world.



Overseas profits and executive pay in the United States has climbed, but workers and America's middle class are left scrambling for what's left.

WHAT WORKERS ARE COMPETING WITH ... IT'S NOT JUST MACHINES
The interesting thing about these developments is that while negotiating trade agreements the private sector has been adamant about protecting proprietary rights and corporate patents. Forcing governments around the world to go after street vendors and protect intellectual property rights is part of our larger free trade negotiating position. Worker rights, however, are an entirely different matter.

Forced or slave labor? No problem, send the products here. 

Child labor? No problem, send the products here. 

Unsafe working conditions? No problem, send the products here. 


All of this has made it easier to go after labor in the United States.


To be sure, there's no doubt that German auto makers have shifted production over seas and now produce cars in China. But they don't do so as part of a larger policy goal to drive down wages in Germany. The idea that we're all in this together is rooted in Germany's historic approach to economics, and is not simply a shop floor poster in Germany.



Forcing the American worker to compete with laborers who have few protections and can't defend themselves in a global undermines the moral justification of capitalism - the idea that if you work hard you can get ahead. It also defeats the spirit of market economies that we fought two wars in the 20th century to promote.

At the end of the day, as I wrote almost two years ago, if we wanted to protect and demand global labor rights we could. But we don't. Instead we encourage firms in the United States to go abroad and then dismiss the needs of labor, which helps explain what happened to Detroit and what's happening in America.

Racking up almost $1 trillion in credit card debt becomes much easier to understand once we see the bigger picture.


THE REAL REASON WHY RICH ARE GETTING RICHER

The economic fallout from the Third Industrial Revolution is real. People are losing jobs, while low- and middle-skilled workers are encountering more competition for the work that they do. Technology is pushing this along by creating magnificent labor saving devices. Still, as we saw above, technology alone is not the only culprit for falling wages and job instability.

The experience of Detroit (and Germany) makes it clear that the U.S. government has embraced a series of domestic and foreign policies over the years that have undermined labor's bargaining position, and America's broader wage picture. The ability to send American jobs overseas so easily today is not simply a function of mysterious market forces led by technological advancements. An aggressive post-war trade policy, built around the American-led Bretton Woods institutions, is what made globalization possible. 

For those who study international relations or American foreign policy - and to be blunt about it - what we've experienced is Pax Americana empire building, with a mercantilist twist. There are no "free markets" here.
The wealth that has been created as a result of these dynamics - increased productivity, labor displacement, and aggressive trade policies - has been phenomenal. Just over the past 10 years global GDP has gone from $43 trillion to $77.6 trillion. The distribution, or the trickling down, of this wealth around the world and in America has not comported with the promise of free market enthusiasts. 

What's worse are some of the claims that are made to explain why "the makers" of wealth are far more deserving than "the takers" who push for higher wages. Among their arguments, as I noted in an earlier post on inequality, is that the top 1 percent of wage earners (and their congressional sychophants) believe their income gains are "earned" because - if we are to believe their argument - they are smarter, harder working, and more deserving, among others. End of story.

Conversely, if your income and financial situation have stagnated or worsened - as is the case with America's middle class - it's because you are not smart enough, hard working enough, and less deserving. At the same time, many are viewed as whiners and moochers.


Both assumptions are simply not true.

Let's make this real simple. The rich aren't getting richer simply because of productivity gains made possible by technology. The rich are getting richer because of state sponsored globalization (Bretton Woods/Treaties), state supported outsourcing (tax inducements), a string of market bailouts, artificially cheap money, legislative favors that include tax gifts, deregulation, and many other state-led developments that have nothing to do with being harder working or smarter than middle-class Americans.

Put another way, as I point out in my book, the state creates the conditions under which wealth is created. The fact that it's not trickling down to ordinary workers is also on the state.

CONCLUDING THOUGHTS
As I pointed out in "The Rise of the Machines (Part I) ..." the technological ecosystem created in California didn't happen simply because entrepreneurs and capital magically merged together. The state created the conditions for a unique set of developments to find critical mass in the Silicon Valley. Just as we couldn't marvel over the gifts of athletes until we had organized sports and built stadiums, we couldn't have benefited from the gifts of Robert Noyce and Steven Jobs if the state had not created the conditions for market entrepreneurs to prosper. 

Unfortunately, over the past 40 years the United States has moved in an ideological direction that no longer recognizes the mutually beneficial relationship between states and markets. We have chosen, instead, to focus on the market myth of the frontier rugged individualist.

This ideological shift has created a safe environment for favorable legislation and political gifts to play big hand in determining how much of market profits trickle down to the workforce. Wealth creation and wealth accumulation at the levels we see today are not simply a result of technology driven increases in productivity, as economists like Nouriel Roubini suggest. 



In fact, making technology the primary culprit in putting people out of work, or pushing wages down, is too facile. Worse, it provides "market cover" - and a convenient excuse - for larger politically motivated commercial and trade policies that have done so much damage to the prospects of ordinary workers, and the middle class, over the past 40 years. 

We need a new cooperative agreement between the state, workers, and industry - coupled with a new social structure of innovation that helped build the Silicon Valley - that reflects how markets really work. Without it, the wealth gaps and stagnating wages we see today will continue apace.

The Third Technological Revolution will not bring promised benefits, as promised by Ronald Reagan and other "supply-siders" over 30 years ago, as long as the productivity and new wealth associated with the rise of the machines doesn't "trickle down" to the middle class. 

- Mark 


P.S. I have a "Rise of the Machines (Part III) ..." piece in the works that explains how our changed world economy, built on the back of the technological revolution, has enthroned financiers. These developments will make things much more difficult for workers, and the middle-class, around the world. 


I'll post on this here, with a link, at a later date.