One more thing...

I forgot to mention during my last post, but I will continue to update both my shared items and Delicious bookmarks. They are accessible from the right-hand column of this blog, or by bookmarking the hyperlinks in the last sentence.

Also, it appears that I'm not the only one feeling this way. Sharon Astyk writes a great blog, and today she wrote the following:

You see, I’m starting to feel I can’t compete with reality - any actual attention to events as they unfold points up the fact that my own doomiest imaginings are being wildly exceeded.

Let’s see - California is broke, functionally insolvent, and has stopped paying for just about everything, including its state police. Remember how often they trumpted that they were the 6th largest economy in the world - well, that’s kinda like saying the UK is insolvent…oh, and that actually might be not so far from the truth too, since they just had to nationalize their banking system. We’ve lost at least 300,000 jobs in two weeks. The New York Times may be out of business by spring. While neither rain nor sleet nor hail will keep the postal service from its appointed rounds, money probably will, and they are talking about cutting out Saturday deliveries. Homelessness and hunger are rapidly on the rise, as are suicide and murder suicide.

There’s rioting in Russia, China, Greece, and massive worker demonstrations in France and Britain. Australia is seeing record high temperatures, while many of the rest of us struggle with record lows. California’s drought may be the worst in a century. And the already hungry are among the deepest sufferers of the food crisis. The New York Times, Fortune Magazine, Bloomberg - they are all starting to use words like “Biblical proportions” “Deep Depression” “Apocalypse.” It is getting hard to compete with the mainstream doomers.

We’ve been “fixing” the problem - which is a big part of the problem - think of the word “fix” here as in “the fix is in.” We’ve just spent 8 trillion dollars bailing out the banks - more than all the wars in US history, the Louisiana purchase and the space program combined. And what did we get for it? Bank of America and Citi are still teetering, the jobs are still being flushed daily. The estimate is half a million a month - every month.

And people aren’t really very angry yet. They should be - think about what 8 trilliion dollars could actually have bought us, had anyone cared as much about the people as they do about the banks, and about the wealth of the fortunate. At some point people will realize that it isn’t going to work - and their anger will be frightening - and just. The New Hampshire state legislature is currently debating legislation that would assert that if the US implements martial law or abrogates the Constitution, it will effectively dissolve the Union. While one wonders where they were the last eight years, this is being taken quite seriously, and it would have been unthinkable a decade ago.

Eight trillion could have paid for free health care for every American, cradle to grave for a century. Eight trillion was sufficient to cover the cost of almost all the mortgage debt - every American could have been given their house and the “foreclosure crisis” ended instantly. Eight trillion was enough to build renewable energy infrastructure that could have softened the crisis, to reinsulate our houses, to provide basic food and health care to the world’s poor. The same eight trillion we were told we didn’t have when it was needed by those who wanted educations, basic medical care, decent shelter, a home, hope, a decent life, we had a plenty for the banks and the wealthiest people in the world.

A number of energy and environmental advocates don’t seem to grasp that the 8 trillion figure - and the monies spent by other nations - aren’t proof that we can build a renewable infrastructure or address peak oil if we really want to - instead, they are what we are doing *instead.* Yes, nations can print money, but in order to inflate our currency, we’d have to disentangle ourselves quite violently from the other nations with which we are economically intertwined, and that would have its price too. That is, our ability to keep bailing is limited - and the 8 trillion now buried in bank vaults and flushed down the toilet is money we don’t have for future adaptations. Think about it - we’re debating 3/4 of a trillion dollars for all the American people combined (and some of that will also make its ways into the coffers of the bank) - while we’ve already spent almost 9 times that much on the banks. 300 million Americans get 1/8 or less what the banks get. What does that say about us? And what does it say about the ability and willingness to mobilize funds for things that actually protect human lives?

I encourage you to read the whole post, but that's the part that really struck me. I guess that's why I can't keep talking about all of this, it's got such an air of inevitability. Anyway, if you want to see the full-text of the New Hampshire (state motto: "Live free or die") legislation that would define the conditions under which they will secede (and encourage other states to do the same), it's here. Quite a read. Stunning really, watching this type of history unfold. I mean, the fact that the majority of the population in the US does not realize that there is a new debate about secession going on is really quite amazing. It ought to really hammer home the seriousness of the problems. And to think, I wondered if I was being too dramatic when I wrote about the potential for new wars of secession in November last year.

What GOP Leaders deem wasteful in Senate stimulus bill

What GOP Leaders deem wasteful in Senate stimulus bill - CNN.com: "(CNN) -- On Monday, House Republican leaders put out a list of what they call wasteful provisions in the Senate version of the nearly $900 billion stimulus bill that is being debated:

• $2 billion earmark to re-start FutureGen, a near-zero emissions coal power plant in Illinois that the Department of Energy defunded last year because it said the project was inefficient.

• A $246 million tax break for Hollywood movie producers to buy motion picture film.

• $650 million for the digital television converter box coupon program.

• $88 million for the Coast Guard to design a new polar icebreaker (arctic ship).

• $448 million for constructing the Department of Homeland Security headquarters.

• $248 million for furniture at the new Homeland Security headquarters.

• $600 million to buy hybrid vehicles for federal employees.

• $400 million for the Centers for Disease Control to screen and prevent STD's.

• $1.4 billion for rural waste disposal programs.

• $125 million for the Washington sewer system.

• $150 million for Smithsonian museum facilities.

• $1 billion for the 2010 Census, which has a projected cost overrun of $3 billion.

• $75 million for "smoking cessation activities."

• $200 million for public computer centers at community colleges.

• $75 million for salaries of employees at the FBI.

• $25 million for tribal alcohol and substance abuse reduction.

• $500 million for flood reduction projects on the Mississippi River.

• $10 million to inspect canals in urban areas.

• $6 billion to turn federal buildings into "green" buildings.

• $500 million for state and local fire stations.

• $650 million for wildland fire management on forest service lands.

• $1.2 billion for "youth activities," including youth summer job programs.

• $88 million for renovating the headquarters of the Public Health Service.

• $412 million for CDC buildings and property.

• $500 million for building and repairing National Institutes of Health facilities in Bethesda, Maryland.

• $160 million for "paid volunteers" at the Corporation for National and Community Service.

• $5.5 million for "energy efficiency initiatives" at the Department of Veterans Affairs National Cemetery Administration.

• $850 million for Amtrak.

• $100 million for reducing the hazard of lead-based paint.

• $75 million to construct a "security training" facility for State Department Security officers when they can be trained at existing facilities of other agencies.

• $110 million to the Farm Service Agency to upgrade computer systems.

• $200 million in funding for the lease of alternative energy vehicles for use on military installations.

Looks like a big list of waste, right? Add it all up though, and they're talking about a little more than $19 billion, or roughly 2% of the total size of the stimulus package. Put another way, the total "waste" amounts to $62 dollars of the $2,962 that the stimulus package is expected to cost every man, woman, and child in the United States. Of course, that amount doesn't include the roughly $8 trillion spent so far on bailouts and guarantees. If you want to break that down, we're looking at $26,330 for each and every person in the US. Congratulations, if you're single, you're soon to be $30,000 deeper in debt than you thought you were!

More news on the dollar

After yesterday's brief discussion on the future of the dollar, there are three major articles today on the subject.

First, the Wall Street Journal takes issue with the presumptive replacement for Tim Geithner at the New York Fed- a Mr. William Dudley.

One of the Fed's most important tasks in coming months will be deciding when to remove the oceans of liquidity that it has been pushing into the economy to fight off a deeper recession. Remove it too late once the recovery begins, and the Fed will risk creating new asset bubbles or a run on the dollar. Yet as chief economist for many years at Goldman Sachs, Mr. Dudley consistently supported a weak dollar in the name of reducing the U.S. trade deficit.

This is a dangerous message to send at any time, but in particular as the new Administration embarks on an epic spending spree that will require from $2 trillion to $3 trillion in new U.S. borrowing over the next two years. The world's creditors aren't likely to lend as much, or as cheaply, if they think their dollar assets will be debased as a matter of U.S. policy.

Reuter's provides a contrasting view- that Geithner and Obama face a daunting, but vital, task of persuading the world that they intend to maintain a strong-dollar policy.

"This time around the administration probably means it when it says it backs a strong dollar. They have to be dead serious about it," said Samarjit Shankar, a director for global strategy at the Bank of New York Mellon, in Boston.

"Trillions worth of U.S. debt is coming soon to the markets. Which foreign central bank or institution will buy this debt if they are not fully convinced the dollar will remain strong?" he added.

The challenge for Obama's team, analysts said, will be to support the dollar's value without direct manipulation in the markets, with the economy in recession, interest rates near zero, and a ballooning current account deficit.

Moreover, Washington will have to achieve all that without antagonizing China, the biggest holder of U.S. Treasury debt, the analysts said.

"It will be a real test. One thing is to finance a $450 billion deficit and another is to finance $2 trillion," said Chris Rupkey, a senior financial economist at Bank of Tokyo-Mitsubishi in New York.

And finally, a wonderful op-ed piece from Peter Schiff.

Barack Obama has spoken often of sacrifice. And as recently as a week ago, he said that to stave off the deepening recession Americans should be prepared to face "trillion dollar deficits for years to come."

But apart from a stirring call for volunteerism in his inaugural address, the only specific sacrifices the president has outlined thus far include lower taxes, millions of federally funded jobs, expanded corporate bailouts, and direct stimulus checks to consumers. Could this be described as sacrificial?

What he might have said was that the nations funding the majority of America's public debt -- most notably the Chinese, Japanese and the Saudis -- need to be prepared to sacrifice. They have to fund America's annual trillion-dollar deficits for the foreseeable future. These creditor nations, who already own trillions of dollars of U.S. government debt, are the only entities capable of underwriting the spending that Mr. Obama envisions and that U.S. citizens demand.

These nations, in other words, must never use the money to buy other assets or fund domestic spending initiatives for their own people. When the old Treasury bills mature, they can do nothing with the money except buy new ones. To do otherwise would implode the market for U.S. Treasurys (sending U.S. interest rates much higher) and start a run on the dollar. (If foreign central banks become net sellers of Treasurys, the demand for dollars needed to buy them would plummet.)

In sum, our creditors must give up all hope of accessing the principal, and may be compensated only by the paltry 2%-3% yield our bonds currently deliver.

As absurd as this may appear on the surface, it seems inconceivable to President Obama, or any respected economist for that matter, that our creditors may decline to sign on. Their confidence is derived from the fact that the arrangement has gone on for some time, and that our creditors would be unwilling to face the economic turbulence that would result from an interruption of the status quo.

But just because the game has lasted thus far does not mean that they will continue playing it indefinitely. Thanks to projected huge deficits, the U.S. government is severely raising the stakes. At the same time, the global economic contraction will make larger Treasury purchases by foreign central banks both economically and politically more difficult.

Theiving Merrill executives accelerated bonuses before BofA deal

Every time I think I've seen the lowest, most despicable, most brazen, unconscionable, outright theft, something like this comes along and proves me all wrong. When do we start seeing these fucking executives in handcuffs?

Merrill delivered bonuses before BofA deal
Merrill Lynch took the unusual step of accelerating bonus payments by a month last year, doling out billions of dollars to employees just three days before the closing of its sale to Bank of America.

The timing is notable because the money was paid as Merrill’s losses were mounting and Ken Lewis, BofA’s chief executive, was seeking additional funds from the government’s troubled asset recovery programme to help close the deal.

Merrill and BofA shareholders voted to approve the takeover on December 5. Three days later, Merrill’s compensation committee approved the bonuses, which were paid on December 29. In past years, Merrill had paid bonuses later – usually late January or early February, according to company officials.

Within days of the compensation committee meeting, BofA officials said they became aware that Merrill’s fourth-quarter losses would be greater than expected and began talks with the US Treasury on securing additional Tarp money.

Last week, BofA said it would be receiving $20bn in Tarp money, in addition to the $25bn that had been earmarked for it and Merrill last year. It was then revealed that Merrill had suffered a $21.5bn operating loss in the fourth quarter.

Despite the magnitude of the losses, Merrill had set aside $15bn for 2008 compensation, a sum that was only 6 per cent lower than the total in 2007, when the investment bank’s losses were smaller.

The bulk of $15bn in compensation was paid out as salary and benefits throughout the course of the year. A person familiar with the matter estimated that about $3bn to $4bn was paid out in bonuses in December.

Nancy Bush, an analyst with NAB Research, described the size of the 2008 Merrill bonus payments as “ridiculous”.

BofA said: “Merrill Lynch was an independent company until January 1 2009. John Thain (Merrill’s chief executive) decided to pay year-end incentives in December as opposed to their normal date in January. BofA was informed of his decision.”

BofA declined to specify when Mr Thain informed the bank of his decision.

A source familiar with the matter says Mr Thain, in the weeks leading up to the December 8 compensation committee meeting, had been weighing the possibility of requesting a bonus of at least $10m for himself before ultimately deciding against such a move.

So, if you're not clear what this means, let me break it down for you. Merrill decides they are too broke to function as an independent company, so they decide to sell themselves to Bank of America. Bank of America gets $25,000,000,000 (it seems like a bigger number if you use all the zeros instead of just saying "$25 billion") from the Paulson to make the deal work. Merrill decides a couple of days later that they've done a hell of a wonderful job and still deserve their bonuses, but they've got to hurry up and pay them out before BofA takes them over. In the meantime, BofA realizes that Merrill's eyeball deep in bad shit, and wants out of the deal. Paulson says, "no way", and kicks in another $20,000,000,000 and agrees to guarantee up to $118,000,000,000 in bad loans. Today, BofA says to John Thain (former CEO of Merrill Lynch) "your services are no longer needed."

In short: Merrill executives are fucking theives, and have perpetrated a massive heist on Bank of America, who passed the buck on to you, the taxpayer. How does that make you feel?

Dollar set to fall?

As I briefly mentioned yesterday, a dollar devaluation is not unforeseeable in the near-term. Many analysts suggest that it is highly unlikely due to its status as reserve currency, a viewpoint echoed in today's Wall Street Journal.

Unlike the pound, the dollar is being buttressed by its unique status as the world's reserve currency and the vehicle for transactions in U.S. financial markets, including Treasury bonds. That means investors often seek out the dollar as fears rise, sometimes in spite of their concerns about the U.S. economy.

Fair enough, for now. But consider the factors driving the devaluation of the pound:

The U.S. and the U.K. face very similar predicaments, from a deepening recession to a damaged financial system. Both are orchestrating massive bank bailouts and attempting to assist struggling homeowners. Both are ramping up government spending even as they rely on financing from overseas investors. And both countries have central banks that have slashed interest rates and opened the door to unconventional ways of stimulating the economy.

Essentially, a very real fear that the massive bailouts and spending in the UK will bankrupt the government itself. The UK government is dependent on financing from overseas investors to keep the government functioning, as is the US government. As the situation deteriorates in China, perhaps dumping the massive investment they have made in the US become an increasingly attractive option, especially as treasuries become riskier as the cost of the assorted bailouts and buyouts and loans and guarantees spirals. Again, from the Wall Street Journal:

While the dollar continues to benefit from its unique position in financial markets for now, it is far from clear that the resilience will last. "Right now the market is beating up on the pound, but at some point it will look for something else to pick on," says Paul Mackel, a currency strategist at HSBC in London.

The fact that the Federal Reserve stands ready to use a host of unconventional measures to flood the economy with liquidity in an effort to stimulate growth "could hurt the dollar quite badly" later this year, he says.

Fed Balance Sheet Decaying

Fed Balance Sheet Decaying

Does anyone talking about this "bad bank" realize that we already have one? It's the Federal Reserve, and it has already taken on trillions of dollars of worthless paper from banks. If you really think the bad bank is the way to solve the crisis, then just let the Fed keep doing what they're doing.

The Audacity of Hypocrisy

Barack Obama's inaugural address is expected to rely heavily on themes of sacrifice, of paring down the excesses, of hearkening back to a time when people were responsible for themselves, as well as for others in their communities.

Aides said the President-Elect's first words as president would hark back to John F Kennedy's plea to "ask not what your country can do for you – ask what you can do for your country".

Rahm Emanuel, who will be chief of staff in the new White House, said: "We need that culture of responsibility, not just to be asked of the American people, but its leaders must also lead by example."

The address was mostly written a week ago, according to new press secretary Robert Gibbs, and will be "heavily infused with this notion of responsibility and getting our country back on track".

Just don't expect our overlords in Washington to set an examply of the sacrifice required. To ensure that the American people gets the message loud and clear, a estimated total of $150 million will be spent. Yes, these truly are perilous times: tens of millions unemployed, businesses closing their doors all around the country, millions facing foreclosure. Obama is showing how important it is to squarely face these challenges by having a big party that costs a shitload of money. Of course, the banking industry is suffering more than most, but they somehow still found it within their means to donate more than any other industry to the celebration. I guess all those billions of dollars we gave them weren't wasted after all. The phrase "fiddling while Rome burns" springs to mind.

jkerkez1 has written a brilliant diary on the subject over at DailyKos, please read the whole thing. If you can't, check out the final two paragraphs:

In my opinion, Barack Obama should have cancelled the inauguration celebration, re-directed all of the money set aside for the events to food banks around the nation, and modeled for the nation the sobering realities that we face. Instead he has chosen a grand and glorious wedding rather than a quiet marriage in front of a Justice of the Peace. He has opted for the ten thousand dollar wedding ring rather than weaving blades of grass together into a wedding band. He has baked a cake for a million wedding invitees, a lovely frosting-encased edifice that has no nutritional value for the country. And once the grand wedding is over, all of the drunk celebrants will return home and wake up on Wednesday morning with hangovers and less money in the bank and will scratch their heads and wonder what happens next.

Truth be known, I believe that in time the festivities of the inauguration will serve to undermine Obama's authority during this the most trying moment in American History. People will recall the smiles and good feelings and they will wonder aloud, "what the hell were we thinking?". Had Barack Obama opted for a more understated and somber inauguration, people may have been jolted out of their somnabulent complacency. Unfortunately, while the rest of the nation battens down the hatches, it's party time in Washington!

Cynicism part II- "How's that 'change' working out?"

I praised David Sirota's reporting on the bailout earlier, here's a perfect example of what I mean:

The veto is the legislative equivalent of a nuclear warhead — a rarely used instrument of devastating force that singularly vaporizes the votes of 535 elected representatives. So when a president-elect issues a veto threat before being sworn into office, it sets off a particularly big explosion because it is a deliberate agenda-setting edict about priorities for the next four years. That's why every American who isn't a financial industry executive should be nervous.

After President Bush this week asked Congress to release the bank bailout fund's remaining $350 billion, Obama pledged to veto any bill rejecting the request, meaning he is beginning his presidency not by "turn[ing] the page on policies that have put the greed and irresponsibility of Wall Street before the hard work and sacrifice of folks on Main Street," as he once pledged. Instead, he is promising a mushroom cloud unless lawmakers let taxpayer cash continue flowing to the biggest of Big Money interests.

Amid paeans to "new politics," we're watching old-school paybacks from a politician who raised more Wall Street dough than any other, a president-to-be whose inauguration festivities are being underwritten by the very bankers who are benefiting from the bailout largesse. Safely distanced from electoral pressure, Obama has appointed conservative economists to top White House positions; floated a tax cut for banks; and is now trying to preserve corporate welfare that almost exclusively benefits the political donor class.

This isn't much-ballyhooed "change"; it's money politics by a different name. How do we know? Because neither Obama nor anyone else is genuinely trying to justify the bailout on its merits — and understandably so. Even the most basic queries prove such merits don't exist.

Has the bailout increased bank lending, as was its stated objective? "Hundreds of billions of dollars have been injected into the marketplace with no demonstrable effects on lending," says a new report by the congressional panel charged with overseeing the money.

Do federal officials have a solid plan to improve the bailout? The report raises alarms about "the shifting explanations of its purposes," noting that the government has "not yet explained its strategy."

Is the cash being spent responsibly? The report says a lack of transparency means the public "still does not know what the banks are doing with taxpayer money."

But the most damning question isn't even being voiced: Is a bank bailout the best way to boost the economy?

Somehow, immediately releasing more bailout funds is being portrayed as a self-evident necessity, even though The New York Times reported this week that "the Treasury says there is no urgent need" for additional money. Somehow, the burden of proof is on bailout opponents who make these points, not on those who want to cut another blank check.

This bizarre dynamic is anything but the "pragmatism" Obama rhetorically fetishizes — and the anti-bailout majority knows it.

Cynicism and the electorate

David Sirota has done some really excellent reporting on the massive theft....errr... "bailout". Today he highlights one senator that criticized the bailout to get elected, then turned around and voted for it yesterday. Sirota opines:

When politicians campaign on populist themes, and then weeks later quite literally vote for the bills they attacked, it makes a mockery out of our democracy. It tells the American people that those representing us think representative democracy - with its campaigns, and promises to voters - is a laughingstock. And what we end up getting are policies that turn our economy into a laughingstock whereby those at the top guffaw their way to the bank, while the rest of us are the butt of the joke.

And so the reason to be disgusted with this kind of vote - whether it comes from Merkley, the Udall brothers or anyone else - has as much to do with the bailout being awful policy as it does with leaders defiling the very political process they are a part of. When that happens thousands of times over the course of many years (as it has in this last decade), it sows the kind of deep cynicism that erodes the public's foundational confidence in its own government.

The only question left is why do people keep voting? What recourse do you have now? As a voter, you thought you were getting someone who was going to vote the way he said he would- silly rabbit! Now you have to wait another 4 years before you can vote him out, and get someone else who is going to tell you appealing lies during the campaign, then ignore you once they are safely in office. Consider the following:

A central question that any voter who claims to wish to be informed must ask is: why is this man’s name on the ballot?

The standard answer is that he has a vision to fix the neighborhood, the city, or the country, and so he has nobly dedicated his life to public service, and needs your vote so that he can begin fixing the problem. He is a pragmatic idealist who knows that compromises must be made, but who can still make tangible improvements in your life.

Of course, this is all pure nonsense, as we can well see from the fact that things in a
democracy always get worse, not better. Standards of living decline, national debt explodes, household debt increases, educational achivements plummet, poverty rates increase, incarceration rates increase, unfunded liabilities skyrocket – and yet, election after election, the sheep run to the polls and feverishly scribble their hopes on to the ballots, certain that this time, everything will turn around! (For those reading this in the future, we are currently right in the middle of “Obama-mania.”)

The question remains – why is this man on the ballot?

We all know that it takes an enormous amount of money and influence to run for any kind of substantial office. The central question is, then: why do people give money to a candidate? I’m not talking about a national presidential campaign, where obviously people give a lot of money to the candidate in the hopes of giving him power to achieve some sort of shared goals and so on.

No, I mean: where does the money to get started even come from?

Why would pharmaceutical companies, aerospace companies, engineering companies,
manufacturing companies, farmers, and public-sector unions and so on give money and support to a candidate? Clearly, these groups are not handing out cash for purely idealistic reasons, since they are in the business of making money, at least for their members. Thus they must be giving money to potential candidates in return for political favors down the road – preferential treatment, tax breaks, tariff restrictions on competitors, government contracts etc.

In other words, any candidate that you get to vote for must have already been bought and paid for by others. Does this sound like an odd and cynical assertion? Perhaps – but it is very easy to figure out if a candidate has been bought and paid for.
Candidates will always talk in stirring tones about “sacrifice” and so on, but you surely must have noticed by now that no candidate ever talks specifically about the spending that he is going to cut. You never hear him say that he is going to balance the budget by cutting the spending of X, Y or Z. Everything is either couched in abstract terms, or specific promises to specific groups. (At the moment, the current fetish – in leftist circles – is to pretend that 47 million Americans can get “free” healthcare if the government lowers the tax breaks on a few billionaires.)

In other words, if you don’t see anyone else’s head on the chopping block, that is because it is your head on the chopping block. Of course, if the government really wanted to help the economy at the expense of some very rich people, it would simply annul the national debt – in effect, declare bankruptcy, and start all over again.
Why does it not do this? Why does it never even approach this topic? We have seen price controls on a variety of goods and services over the past few generations – why not simply place a moratorium on paying interest on the national debt, at least for the time being? Well, the simple answer is that the government simply cannot survive without a constant infusion of loans, largely from foreign lenders. This is a bit of a clue for you as to how important your vote really is, and how concerned your leaders are about your personal and particular issues – relative to, say, those of foreign lenders.

Ah, you might argue, but why would a pharmaceutical company, say, give money to a
potential candidate, since no deal can possibly be put down in writing, and that potential candidate might well take the money, and then just not take the calls from that pharmaceutical company when he or she gets into power?

Well, this is a distinct possibility, of course, but it has a relatively simple solution.
When a candidate is interested in taking a run at any reasonably high office, he goes around to various places and asks for money. When you ask someone for a few thousand dollars, naturally, his first question is going to be: “What are you going to do for me in return?”

Early on in any particular political race, there are quite a number of candidates. Anyone who wants to donate money to a political candidate in the hopes of gaining political favors down the road is only going to do so if he believes that the candidate will fulfill the unwritten obligation – the “anti-social contract,” if you like.
In politics, as in business, credibility is efficiency. Those who have built up reputations for keeping their promises end up being able to do business on a handshake, which keeps their costs down considerably. No new person entering a field will have the credibility or track record to be able to achieve this enviable efficiency, and so will have to earn it over the course of many years.

Thus we know for certain that when a company gives money to a political candidate, in the expectation of return favors in the future, that political candidate already has an excellent track record of doing just that. This kind of information will have been passed around certain communities – “Joe X is a man of his word!” – just as the reliability of a drug dealer and the quality of his product is passed around in certain other communities.

Thus we know that any candidate who receives significant funding from special interest groups is a man who has consistently proven his “integrity to corruptibility” in the past – for if he has no track record, or an inconsistent track record, no one will give him money to get started. (Just as a side note, this is a very interesting example of exactly why anarchism will work – we do not need the state to enforce contracts, since the state itself functions on implicit contracts that can never be legally enforced.)

In other words, whenever you see a name on the ballot, you can be completely certain that that name represents a man who has already been bought and paid for over the course of many years, and that those who have paid for him do not have, let us say, your best interests at heart.

But we can go one step further.

Since all the money that moves around in a political system must come from somewhere – the millions of dollars that are given to the sugar farmers must come from taxpayers – we can be sure that just about every benefit that special interest groups seek to gain comes at your expense. Pharmaceutical companies want an extension on their patents so they can charge you more money. Domestic steel companies want to increase barriers against imported steel so they can charge you more money. If a government union wants additional benefits, that will cost you. If the police want to expand the war on drugs, that will cost you security, safety and money. Whoever strives to benefit from the public purse has their hand groping towards your pocket.

Thus it is perfectly fair and reasonable to remind you that every name that you see on the ballot is diametrically opposed to your particular and personal interests, since they have been paid for by people who want to rob you blind.

Another aspect of “democricide” is the inevitable and constant escalation of public
spending necessary to achieve or maintain political power. Let us take the example of a mayor running for his second term. When he was running for his first term, sewage treatment workers donated $20,000 to his campaign, and in return he granted them a 10% raise. Now that he is running for his second term, and cannot give them another 10% raise, they have no reason to donate to his campaign. Thus he either has
to offer the sewage treatment workers some other benefit, or he has to create some new program or benefit which he can dangle in front of some new group, in order to secure their donations. This is why political candidates always announce new spending when they throw their hats into the ring – the new spending is the rather unsubtle promise of benefits which will be granted to those who donate to his campaign. A new stadium, a new convention center, a new bridge, a new arts program, new housing projects, highway expansions and so on – all of these inevitably and permanently raise the “high water mark” of governmental spending, and are an absolute requirement of running for office. Now, our aforementioned sewage treatment workers would of course prefer a permanent 10% raise rather than a one-time cash bonus. Thus they will always try to negotiate a permanent contract rather than continue to be at the mercy of the will and whim of their
political masters.

As this process continues, the proportion of non-discretionary spending in any political budget grows and grows. This is another reason why new spending initiatives must always be created in order to secure new donations. Money cannot be shifted from one area to another, because it has permanently been earmarked for a particular group in return for a one-time political contribution in the past.
If the mayor who is running for his second term decides to attempt to roll back the 10% raise, in order to free up money which he can then offer to someone else in return for campaign contributions, he would be committing political suicide. He would be breaking a freely-signed contract, sticking it to the working man, and provoking a very smelly strike – but for his own particular self-interest, the effects would be even worse.

Remember, people will donate to a political campaign based on an implicit contract of
future rewards from the public treasury. If a candidate attempts to “roll back” benefits that he has distributed previously in return for donations, not only will he incur the wrath of the existing special-interest group, but he will be revealed as a man who breaks his implicit and unenforceable “contracts.” Since this candidate can no longer be relied upon to give public money back to those who donate to his campaign, he will find that his campaign donations dry up almost immediately, and his political career comes to an abrupt end.

Of course, ex-politicians are highly prized as lobbyists as well, but if this mayor breaks faith with a donator, he will no longer be valuable in that capacity either, and will forego significant income in his post-political career.

Finally, any political candidate who has channeled public money to past donators faces the problem of blackmail. If he attempts to cross any of his prior supporters, mysterious leaks to the press will start to emerge, talking about the sleazy backroom deals that got him in power – thus also effectively ending his political career. All the other candidates will piously deride his cynical corruption, while of course making their own sleazy backroom deals in turn.
(It is highly instructive to note that two well-known fictional portrayals of the political campaign process – “The West Wing” and “The Wire” – repeatedly portray the candidate begging for money, but never once show why he receives it – the motives of his donors. The reason for this is simple: they wish to portray an idealistic politician, and so they cannot possibly reveal the reasons why people are giving him money. If the fictional story were to follow the inevitable “laws” of democracy, the storyline would be abruptly truncated, or the lead character would be revealed as far less sympathetic. The candidate would ask for money, and then the potential donor would indicate the favor he wanted in return. Then, the candidate would either refuse, thus ending his campaign for lack of funds – or he would
agree, thus ending any real sympathy we have for him. This basic truth – like so many in a statist society – can never be discussed, even on a show like “The Wire,” which has little problem revealing corruption everywhere else. A policeman can be shown breaking a child’s fingers, but the true nature of the political process must be forever hidden…)

Thus we can see that – at least at the level of economics – democracy is a sort of slowmotion suicide, in which you are told that it is the highest civic virtue to approve of those who want to rob you.

Wolf evolved to prey on other wolves...

...instead of the sheep, for once. New evidence has emerged showing that fraudster financier (is that redundant?) Bernie Madoff's fund never made a single trade. Not one. Never bought or sold a single share of stock. Which means that I'm a much better investor than Madoff- in two ways actually: I have actually traded stock and have not lost $50 billion dollars (at least, I haven't yet, but I'm young). However, he's a much better fraud than I am. And he's out on bail in one of his multi-million dollar homes, so I guess he's got me there. However, his puny $50 billion ponzi scheme is much smaller than the stock market at large, and therefore was not considered to be "too big to fail".

How to understand billions... trillions....etc....

As the financial wheels keep on spinning over, I tried to give you an idea of the scale involved here. Most people have no conception of how large the difference is between millions, billions, trillions.

Time does a much better job helping people conceive of the size, using time instead of space.

The genius of our numbering system is that we can signify massive quantities in short spaces. One billion takes no longer to write than one million, points out Andrew Dilnot, an economist at Oxford University and author of The Numbers Game.

But that similarity trips us up when it comes time to imagine how those figures translate to the real world, where three more zeroes make all the difference. "My favorite way to think of it is in terms of seconds," says David Schwartz, a children's book author whose How Much Is A Million? tries to wrap young minds around the concept. "One million seconds comes out to be about 11 and a half days. A billion seconds is 32 years. And a trillion seconds is 32,000 years. I like to say that I have a pretty good idea what I'll be doing a million seconds from now, no idea what I'll be doing a billion seconds from now, and an excellent idea of what I'll be doing a trillion seconds from now."

So when we're talking about a deficit of $1.2 trillion dollars, if we counted those dollars at a rate of one per second, we'd get done counting in the year 40,409 (A.D., assuming humans still exist and are using the same calendar system).

Riots: Coming to America? Part 2

As I mentioned in my last post, rising levels of inequality in the US are feeding a growing sense of discontent. Bloomberg.com had a couple of items on the front page mirroring what I'm talking about.

The first discusses the hatred for billionaire Stephen Feinberg, founder of Cerberus Capital-- the company that's in the news lately for trying to give away their share of Chrysler for free. (So far, there are no takers).

As CEO of a $26 billion company, Feinberg has a net worth of about $1 billion, according to Forbes Magazine’s 2008 list. Brukardt made $24 an hour, or about $80,000 last year including overtime. Brukardt said he owes $160,000 on the mortgage for his five-bedroom duplex on College Avenue in Appleton, Wisconsin, and he doesn’t know how long he can keep making payments.

Sound's like a classic example of the type of inequality we're discussing.

“There’s a pent-up anger wherever I travel,” said Leo Gerard, president of the Pittsburgh-based United Steelworkers, which represents 1.2 million members, including the Kimberly mill workers. “People feel very much like they’re being screwed. I really think you’ll see tens of thousands of people if not hundreds of thousands taking to the streets and protesting across the country.”

...

As unemployment grows, displaced workers are starting to protest. In Chicago, employees of Republic Windows & Doors occupied a factory earlier this month after Bank of America Corp. of Charlotte, North Carolina, forced the company out of business by cutting its credit line. Bank of America and New York-based JPMorgan Chase & Co., a part-owner of Republic Windows, agreed Dec. 10 to a $1.75 million loan to cover the severance pay of 240 employees.

“With nothing left to lose, militancy gave them their one hope,” said Harley Shaikin, a labor relations professor at the University of California, Berkeley. “We’ll see more rather than less of this.”

The second article focuses on Iceland, where the banking collapse is stirring unrest:

The fallout in Iceland may presage civil disruptions elsewhere, as job losses multiply and credit bills come due. Few nations can count themselves safe, says Ian Bremmer, president of the New York-based Eurasia Group, which analyzes political risk for businesses.

“As people have their expectations changed radically, you can have protests come out of nowhere,” even in developed countries, Bremmer said.

Riots in Greece this month, sparked by the police shooting of a teenager, became tinged with economic dissension. A group of Kuwaiti equity traders marched on the emir’s office in October to demand the closing of the stock exchange to stem losses. Even in U.S. cities, civil disorder is “conceivable” if unemployment rises above 10 percent from November’s 6.7 percent, Bremmer says.

Hauksdottir, the owner of a Reykjavik witchcraft shop, says over a cup of thyme and juniper tea that only civil disobedience can force banks to stop collecting debts that people can’t pay.

“We’ll use our voices, and then if we have to we’ll use our hands, and maybe axes,” Hauksdottir says.

...

The protests may escalate as bills come due and severance pay runs out for those who lost jobs at the three biggest lenders, including Landsbanki, the second-largest, says Stefan Palsson, a historian. He once led the Campaign Against Militarism, opposing NATO bases in the 1960s.

He said he’s surprised ordinary people are backing activists once considered “hooligans.” There was public outrage three years ago when environmentalists poured yogurt over aluminum representatives to protest a new plant.

“Now you have protesters kicking down doors at police stations, and respectable elderly people saying ‘Well, they’re young and full of enthusiasm, and anyway, they’re right!’” he said.

How far does a billion dollars go?

It's only shocking if you haven't been paying attention. Two new bailout items of interest today, but honestly I'm getting tired of talking about this. Nobody cares. Trillions of dollars are being wasted, but nobody cares.

Have we forgotten what these numbers mean? I know they sound the same.... "million, billion, trillion..." But because they rhyme, it's easy to forget how much money that actually is. Think of it in terms of miles traveled. A dollar bill is about 6" wide. A million dollars laid end-to-end would go about 94.7 miles. A billion dollars would go about 94,697 miles, almost enough to go four times around the earth at the equator. A trillion is a thousand times larger than that. A trillion dollars is 94,696,969.7 miles, which is enough to travel to the moon and back to earth about 198 times. Does that give you an idea of the scale here?

Where'd the bailout money go? Here are some of the actual answers from bankers:

• "We've lent some of it. We've not lent some of it. We've not given any accounting of, 'Here's how we're doing it.' We have not disclosed that to the public. We're declining to."
• "We're not providing dollar-in, dollar-out tracking."
• "We're choosing not to disclose that."
• "We're not sharing any other details. We're just not at this time."
• "We are going to decline to comment on your story."

And my favorite quotation is

• "I just would prefer if you wouldn't say that we're not going to discuss those details."

In other words, "I'm not telling you how we're spending it, and please don't report the fact that we're not telling you." Of course, they can't really come out and say that it's going to bonuses can they?

AP Reports $1.6 billion went to bailed-out execs. That's enough for more than 6 trips around the earth with dollar bills laid end-to-end. The median income in the US in 2007 was $50,233 in 2007, enough to travel 4.75 miles. The CEO of Goldman Sachs made $54,000,000 last year, enough to travel 5113 miles. It's just obscene.

Paulson flips (again)

Paulson Tuesday, 12/16:

Paulson also said he has no current plans to ask Congress to make the second half of the $700 billion financial rescue fund available before the Bush administration leaves office on Jan. 20.

Paulson, Friday, 12/19:

Treasury Secretary Henry Paulson said Friday that Congress will need to release the last half of the $700 billion rescue fund because the first $350 billion has been committed.

Any questions?

Goldman moves profits offshore: taxes go from 6 billion to 14 million

The hits just keep coming:

Goldman Sachs cuts taxes to one percent by moving profits offshore

Texas Democrat Rep. Lloyd Doggett, who serves on the House Ways and Means Committee, said Goldman, like other banks, shifted income to countries with lower taxes to reduce its tax burden.

"This problem is larger than Goldman Sachs," Doggett told Bloomberg. "With the right hand out begging for bailout money, the left is hiding it offshore."

Still asking: where's the credit crunch?

As I first reported here on November 18, the available data indicate that there was, in fact, no national credit crisis. Kudos to David Sirota for the reporting there, and apparently he's been keeping up on it in the meantime- read the whole report here, entitled "Did America get punked on the bailout? Yes, now here's what to do".

If you don't believe him (I must admit that even I was skeptical), check out the source data. It comes from the Federal Reserve's own numbers, as reported by the Federal Reserve Bank of Minneapolis' Research Division. Their main working paper is here, and the technical details are here. He also quotes from a Reuter's story which says

"It is startling that many of (Federal Reserve) Chairman (Ben) Bernanke and (Treasury) Secretary (Henry) Paulson's remarks are not supported or are flatly contradicted by the data provided by the very organizations they lead," said the report.

Did you get that? The stories they are telling you are contradicted by their own data! So there are two possibilites:

1. Bush, Paulson, Bernanke & Co. are stupid. Extremely stupid. So incredibly stupid that they cannot understand what a column of basic numbers are telling them. So stupid they frequently have to stop and wipe the drool from their slack jaws as they stumble incoherently about. So stupid they are in danger of drowning if they look at the sky when it's raining.
   
2. They are group of utterly brazen thieves, that have (so far) managed to extort trillions of dollars from .

And I don't think they're that stupid.

Paulson doesn't expect any more major firms to fail during crisis

Paulson doesn't expect any more major firms to fail during crisis

Treasury Secretary Henry Paulson said Tuesday that he did not expect any more major financial institutions to fail during the current credit crisis.

Paulson also said he had no plans to ask Congress to make the second half of the $700 billion financial rescue fund available before the administration of President George W. Bush leaves office on Jan. 20.

I had to double-check the dateline on this piece, seems like I'd heard it all somewhere before. Oh yeah, it was in the New York Times, November 17, 2008, where Paulson said:

As policymakers face the difficult challenges ahead, they will begin with two considerable advantages: a significantly more stable banking system, one where the failure of a major bank is no longer a pressing concern; and the resources, authority and potential programs available to deal with the future capital and liquidity needs of credit providers.

I suppose if you want to be extraordinarily technical, he was correct. Citigroup didn't "fail", they were bailed out on November 23rd, less than a week after the Paulson said that "the failure of a major bank is no longer a pressing concern." I mocked him for that statement on 11/18, where I said:

"The failure of a bank is no longer a pressing concern"??? So what will he say once Citigroup goes belly up? Oh, that won't be a "failure", because the government will either dump a bunch of money into them, or help them become acquired.

I like being right, but sometimes I just wish I were wrong.

Goldman Sachs slashes compensation: now only $363,654

Boo-fucking-hoo. But can anyone explain to me why wage concessions from workers (not executives) is part of the proposed automaker bailout, but we're not requiring any salary caps or executive compensation limits as part of the great Wall Street Bailout of '08?

Bloomberg.com: Worldwide: "Dec. 16 (Bloomberg) -- Goldman Sachs Group Inc. eliminated 2,500 jobs in the fourth quarter and slashed average pay per worker 45 percent to $363,654 as the firm posted the first quarterly loss since going public almost a decade ago."

But how will those poor bastards survive on only $363,654 apiece? Well, it's time for us as a nation to pull together, I guess we all have our burdens to bear, right?

Executive compensation-- Part II

Dean Baker has got a very credible alternative theory. Maybe Paulson's not a lone gunman here, Congress may also be to blame. Rather than actually limiting executive compensation, just tell everyone you limited it.

Let me suggest an alternative hypothesis. Perhaps Congress really did not want to cut executive compensation on Wall Street. After all, word has it that members of Congress gets lots of campaign contributions from very high paid Wall Street executives.

Of course, giving taxpayer dollars to the richest people in the country is not very popular with ordinary taxpayers. So, it might be in the interest of members of Congress to appear to be trying to rein in executive compensation on Wall Street, even if this is not their real intention. In other words, the restrictions of executive compensation put in the bailout bill were just a charade for the kids.

No limits on executive pay, after all

Paulson says, "All your dollars are belong to us!" Photo: AP

On September 24th, the New York Times reported Treasury Secretary Henry Paulson as saying "The American people are angry about executive compensation, and rightfully so. Many of you cite this as a serious problem, and I agree. We must find a way to address this in legislation without undermining the effectiveness of the program.” Paulson was ostensibly arguing that banks would rather go bankrupt than face these limits on the compensation paid to their top executives.

Soon thereafter, he capitulated and agreed to the limits, one of the few sticking points in Congress for a massively unpopular bailout bill. It seemed to me at the time that he agreed fairly quickly to this condition, but I chalked it up to his stated desire to get the bailout done with unprecedented speed. Turns out, he agreed to it because they had already figured out a way around the limits.

Today's Washington Post reports that during the tense bailout negotiations, a seemingly minor change took place:

But at the last minute, the Bush administration insisted on a one-sentence change to the provision, congressional aides said. The change stipulated that the penalty would apply only to firms that received bailout funds by selling troubled assets to the government in an auction, which was the way the Treasury Department had said it planned to use the money.

Now, however, the small change looks more like a giant loophole, according to lawmakers and legal experts. In a reversal, the Bush administration has not used auctions for any of the $335 billion committed so far from the rescue package, nor does it plan to use them in the future. Lawmakers and legal experts say the change has effectively repealed the only enforcement mechanism in the law dealing with lavish pay for top executives.

Is anyone even surprised with these revelations anymore? So now we know why Paulson decided not to use the auction mechanism after all, in favor of just giving the money directly to the banks. If there were auctions, then the big guys wouldn't get paid as much. Paulson couldn't do that to his old pals (who made $39 BILLION in bonuses alone last year), so he had to change the entire way the program worked. Luckily Congress gave him a bill that let him do whatever he wanted! As Barry Grey remarked during the original debate over executive compensation:

The universal mantra is the need for all Americans to “come together,” put aside their partisan differences and personal interests and accept the need for “sacrifice” in support of the common good—which just happens to coincide with the interests of Wall Street and the multi-millionaires and billionaires who control it.

But Paulson, in his weekend television appearances, was obliged to implicitly acknowledge that there is one segment of society that is not prepared to sacrifice a dime and will not hesitate to throw the country into a depression, if the alternative is the slightest diminution in its seven- and eight-figure compensation packages.

In spite of his intentions, Paulson’s comments demonstrate the utter fraud of the claims that the plan to place the national wealth at the disposal of Wall Street is driven by concerns for the well-being of the American people. His remarks reveal the most basic truth about American society: The interests of the overwhelming majority of the people are entirely subordinated to the money-mad strivings of a financial aristocracy.

The plutocrats call the shots. They determine public policy. They exercise an absolute veto on all decisions taken by the government, which is, in the final analysis, an instrument for the defense and advancement of their narrow and socially destructive interests.

The constant invocations of patriotism are purely for public consumption—a means of blinding the people to the class relations that dominate America.