Last week, the WSJ ran a nice piece on “smart meters” and energy utilities (“What Utilities Have Learned from Smart-Meter Tests … and Why They Aren’t Putting Those Lessons to Use“). Some interesting stuff. First, a distinction between (information about) quantity and (information conveyed by) price is worth bearing in mind.
By making variable pricing plans possible, smart meters are expected to play a big role in getting customers to reduce their peak-hour energy consumption, a key goal of utility executives and policy makers. Electricity grids are sized to meet the maximum electricity need, so a drop in peak demand would let utilities operate with fewer expensive power plants, meaning they could provide electricity at a lower cost and with less pollution.
In some ways, this is what it’s all about, eh? Bringing down usage and production costs, not so much about smarter consumers.
Utilities have run dozens of pilot tests of digital meters and found that people cut power consumption the most when faced with higher peak-hour rates. But utility executives and regulators have been reluctant to implement rate plans that penalize people for too much energy use, fearing that if customers associate smart meters with higher bills, they will stall the technology’s advance just as it is gaining traction. Only about 5% of U.S. electric meters are “smart” today, according to the U.S. Department of Energy, but that figure is expected to grow to about one-third in the next five years.
Pretty straightforward politics, that is. But it is an odd conflation to mix smart metering with peak-load pricing.
So, many utilities are trying an approach that is less controversial, but also less effective: offering rebates to customers who conserve energy in key periods of the day. By doing things like turning off clothes dryers and adjusting air conditioners on hot summer afternoons, customers earn credits that can reduce their electricity bills.
This example is also pretty intriguing, begging a citation or two, as it’s curious to think a price rebate for nonuse isn’t equivalent to a price hike for use … unless there’s a substantial income effect or some more psychological factors. The old ‘baby Varian’ textbook has an interesting example that’s like this, if I remember correctly. “Less effective” isn’t what comes to mind. Less costly for consumers, perhaps…
Now here’s a funny story about bad planning rather than bad timing:
Pacific Gas & Electric Co., a unit of PG&E Corp., got a taste of the public-relations risk last summer when it installed smart meters in Bakersfield, Calif., as part of a broad upgrade in its Northern California service territory. When customers—who weren’t participating in any sort of experimental rate plan—received dramatically higher bills shortly afterward, they blamed the meters for what they assumed was faulty billing. The San Francisco utility investigated and concluded that the meters were functioning properly. It found that the higher bills were simply a case of unfortunate timing: An increase in conventional rates had taken effect just ahead of unseasonably hot temperatures.
The seasons are fairly predictable, although temperatures might not be. Sounds to me like heading into the summer season is just a bad plan.
PG&E now has a voluntary program in which customers agree to pay higher peak rates of 60 cents a kilowatt-hour for no more than 15 days a year, in exchange for a discount of three cents a kilowatt-hour for electricity used at other times. So far some 26,000 customers have signed up.
Sounds like the textbook approach. Why is this so tough to figure out?…
Pepco Holdings Inc. recently did a pilot test in Washington, D.C., of three rate plans designed to gauge how customers respond to different price signals. One plan pegged the price, which ranged from a penny to 37 cents a kilowatt-hour, to the wholesale cost of electricity. One charged a “critical peak price” of 75 cents a kilowatt-hour during certain hours on a handful of days, and 11 cents per kwh at other times. The final plan gave customers 75 cents for each kilowatt-hour of energy saved and charged 11 cents per kwh for power used.
Results showed that people responded most when threatened with the 75-cent-per-kwh peak pricing. Those customers cut their overall energy consumption between 22% and 34%, depending on whether they also had programmable thermostats that could automatically change temperature settings. Customers offered rebates reduced their usage 9% to 15%—again, with the deeper cuts among those who had smart thermostats.
OK. Time to calculate some elasticities. Supposing that the $0.75 was double the peak scarcity price of $0.37, and a 100% increase in price got you a 22-34% reduction in quantity consumed, we’re looking at a short-run price elasticity of demand of mere -0.22 to -0.34. Not out of line with the literature, and not terribly surprising. Except that my back-of-the-envelope math is wildly simplifying and like waaay off. Prices only doubled for the group for a few hours on a few days. Thus, their overall price didn’t really double, but only doubled for a short spell. Yet, despite that only momentary price spike, their overall consumption still fell by ~30%. This looks like demand is much, much more elastic than -0.3!
Many experts feel that not enough research has been done to protect those who aren’t able to change their electricity usage.
Sure. Personally, in this context, I’m also concerned about those who are able to change their usage. Some people may be choosing to cut back on things that we don’t want them to (e.g., A/C during heat waves, TV during the DailyShow).
Last summer, Connecticut Light & Power Co., a subsidiary of Northeast Utilities Service Co., gave new meters to 3,000 residential and business customers, testing three types of rates. Like other utilities, it found that homes facing the highest peak-hour pricing—$1.60 per kwh at certain times—responded the most, cutting peak use 16% to 23%, depending on whether they had other aids like smart thermostats. Commercial customers, in a similar test, cut their demand far less, only 7%.
Ah, good. Different users have different elasticities — and apparently commercial customers had more inelastic demands. I suspect that’s not too surprising, especially if peak times are during regular business hours and considerable residential usage can be flexibly reallocated during the day.
But the utility also concluded that it wouldn’t be fair to really crank up peak pricing until homeowners have greater access to automation tools such as smart appliances and controllers. In the future, devices will contain computer chips and software so they can go into energy-saving mode in response to a signal sent from the utility or another energy manager that higher prices are kicking in.
I hope that I can still count my resolution of watching a movie every weekend complete. I can’t watch mine this week because my sister took it to college a whole state away. I think that’s a good enough reason. I was supposed to watch The Purple Rose of Cairo, but, alas, I cannot.
I did, however, listen to my album – Jim Croce’s debut album (which I didn’t know when I bought it) – Facets. It’s good. It’s a bit more raw-sounding than his later work, but still good nonetheless. It’s a bit echo-y, but I think it benefits from that. It’s gives it a more esoteric quality. Whatever “esoteric” means. “Special, rare, or unusual interest” Thank you, Noah Webster.
I’m starting to think that perhaps this deal of listening to a different album every week (not to mention listening to all 6,000+ songs on my Zune before 2010 is over) is starting to have an adverse effect on me. I’m starting to think that I actually have musical skill. My basic prerogative is just to write a few stupid songs and have some fun with it. That’s it. Maybe though, my stupid little songs are better than what’s out there now. I don’t know. Again, I’m just entertaining stupid dreams that I have.
In other news, I have only one day left of my current classes. Monday the last day for AP English and German. Well, except for the two study sessions and AP test. I can take that though. I’ve had most of my finals. I have only physics to do on Monday. Then I get new classes:
Psychology 2
Economics
Expository Writing
French II 2
Physics 2
I had to decide on the way I’m pronouncing economics. There are two pronunciations, and I’ve used them interchangeably thus far. However, I’m choosing one over the other now. I pronounce it so that it sounds like “Eek! A nomix!” That’s the whole reasoning for the pronounciation – so that it would also sound like I’m scared of some terrible monster – a nomix. I tried to illustrate what a nomix would look like on the back of my psychology notes I think back in January, but it didn’t turn out too well. I’ll have to try again.
President Barroso has written to EU Heads of State and Government informing them of the next steps in the EU Commission’s work on climate action. in his letter, Mr. Barroso underlines that the international process needs to continue, building on what could be agreed in Copenhagen and finding new ways to instil trust back into the process. He states that an important element in the strategy is the implementation of the fast start financing for developing countries agreed in December.
The core goal must be to bring all partners closer to the EU’s ambitions and commitment to a multilateral agreement. President Barroso has therefore asked Commissioner Hedegaard to undertake a consultation of key international partners to find new ways to reinvigorate the international process. President Barroso will feed this first assessment into the Spring European Council and then in full into the Ministerial level negotiations and the June European Council.
President Barroso will discuss with President of the European Council, Herman Van Rompuy on how best to prepare the discussions in the European Council and how to ensure a powerful and unified EU voice on these critical issues for the future.
“Working together to maintain our ambitions on climate change will remain one of our most important challenges for this year. Since we did not have time to discuss this at our meeting last week I would like to share some thoughts on the work going on in the Commission as I believe we should prepare well the important decisions ahead of us.
In fact if the European Union does not take the initiative we may end up driven by the initiatives of others.
Most of us were in Copenhagen, and I think none of us were satisfied with the outcome. However, Copenhagen was a reality check. We had hoped that leading by example, and our commitment to step up our efforts to 30%, would be enough to bring others on board. This did not happen. But this is not the time for the EU to start doubting its commitments. This would be a mistake.
We need to show that we have not given up on our ambitions, even if many of our partners found it easier to limit themselves to the lowest common denominator. We should rather show our commitment to press ahead with delivery – implementing our climate and energy package showing how tackling climate change is a dynamic element in a strategy for growth by creating jobs and boosting energy security under the Europe 2020 approach that I presented and we discussed last week.
Besides the internal dimension of our work, the international front is as important as ever to tackling the threat of climate change. We need the international process to continue, building on what we could agree in the Copenhagen Accord and finding new ways to instil trust back into the process.
An important element in this strategy should be the implementation of the fast start financing we have committed to last December. We should not forget that those who were working more closely with us in Copenhagen were the developing countries, particularly the poorest and most vulnerable.
But our core goal must be to bring all partners closer to our own ambitions and to our commitment to a multilateral agreement. Copenhagen showed us just how tough it will be. Hence if we are to progress, we have to rethink our approach to these partners.
I have therefore asked Connie Hedegaard, the Commissioner for Climate Action, to undertake a consultation of key international partners to find ways to reinvigorate the international process. I would hope to have some first thoughts by the Spring European Council, and then to feed the results in full into the Ministerial level negotiations announced by Chancellor Merkel and the June European Council. I would of course hope that this process can also benefit from your own reflections on the direction of partners’ thinking.
The work we are already doing to tackle climate change can act as a powerful lever for others to follow – but it must be seen as a genuinely collective approach. I will be discussing with Herman Van Rompuy the best way to address these elements in March as well as how we can ensure a powerful and unified EU voice on these critical issues for the future.”
LOSSES SHRINK: Higher ticket fees and the lack of large impairment charges helped fourth-quarter losses shrink at Live Nation Entertainment Inc. Live Nation’s operating losses fell to $64 million from $323 million, while merger partner Ticketmaster turned a $35 million operating profit, reversing a $1.07 billion loss.
REGULATORY HEADWINDS: Merger conditions costing $20 million this year will mean adjusted operating profits will be flat to down in 2010 personal humidifier.
FUTURE OPPORTUNITIES: The combined concert company hopes to benefit from paperless ticketing, dynamic pricing where consumers can pick the seat they want, and selling music and merchandise with tickets.
Today the Senate took action to fast-track legislation giving more than $100 million in taxpayer funded incentives to The Sembler Co., a Florida-based developer, for a planned shopping mall in Jasper County. The Senate voted to place the bill on “Special Order,” which means that the legislation is now in a top priority position to be taken up by the Senate. All bills voted on under Special Order must be recorded votes.
Costs of the incentive package for the new development continue to be unclear: ranging from a low of $22.5 million to as much as $174.5 million in tax breaks over 15 years. If Sembler is anything like the Boeing package legislators approved in October, the cost to taxpayers is probably being underestimated. (Read here for why future incentives deals should be capped so the costs are known upfront.)
Lawmakers who support the incentive package for Sembler are pushing for the quick vote in spite of vocal opposition to the taxpayer-funded giveaway:
The Policy Council and the S.C. Coastal Conservation League issued a joint statement raising economic and environmental concerns.
A series of reports in The Nerve raised questions about the development, and the developer.
The Beaufort County Council (which shares part of the land sited for the project) voted against the deal.
An analysis by College of Charleston economist Peter Calcagno projected that the Sembler tax incentives are unlikely to benefit South Carolina’s economy, or create new jobs.
Even the state of South Carolina itself—by way of a report by the state’s chief economist, William Gillespie—concluded that the megamall is unlikely to increase overall sales, but would instead shift sales from existing retailers
A decade of failed experimentation in government-driven economic development, or the fact that taxpayers are being asked to subsidize their competition, ought to be enough to dissuade lawmakers—but the real issue with Sembler is less about economics and more about corporate lobbying and political connections.
I just posted this in the comments section of Dan’s article to which Travis just referred:
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1. Caps on interest rates will cause credit rationing – meaning limiting access to credit. This means that for all of the examples of people stuck with high interest credit card debt, you need the alternate scenario to be what their situation would have been if they had no way to get a credit card at all. The alternate scenario is not a credit card at 10%. For some, this is a feature, not a bug (i.e. living beyond their means) but for others (just trying to pay their bills) this is a personal tragedy involving eviction, loss of utilities, etc. Is that better or worse than what we have now?
2. Usury can only exist in the presence of market power or collusion. If many banks across the country are charging about the same rate to the same people, I’m more inclined to call that a market rate, otherwise one of these banks could lower it from 21% to 19%, advertise and get all of the ‘profitable’ customers. Those who claim a high interest rate is usury need to explain why this isn’t happening. Are the big banks colluding? If a high risk borrower with a lot of debt and a 21% interest rate is so profitable, why doesn’t a small local bank then offer 19% to steal them away and make the profit? There are, literally, thousands of banks in the US, so I have difficulty believing that market power exists in setting interest rates, thus I have difficulty calling it usury.
3. The reason why I am opposed to the actual setting of an interest rate cap is that I think we will take the most marginalized and move them from a high market interest rate to a true situation of usury. When someone cannot go to the market to get a loan, and they need money to pay their bills, they go to more, ahem, ‘creative’ means – i.e. illegal. *Then* you have market power and usury. Tony Soprano can charge whatever interest rate he likes and he doesn’t use actuarial tables. This happens because we limit the interest rates banks can legally charge, then the highest risk people are denied credit altogether. Those who are truly in need either don’t pay their bills and are evicted, or they go to payday lenders and loan sharks. I’d rather have the status quo.
Now, I have no problem in raising awareness about interest rates and the concept of usury. Re-introducing it to our vocabulary is a good idea in my opinion. Actually setting caps on interest rates is a bad idea.
What do I propose instead?
1. Let business be business and charity be charity. We, the church, should steal their customers. People living beyond their means need financial counseling and the act of discipline and contrition in paying off the debt they got themselves into is probably a good thing. People truly in need the church needs to help pay their bills without debt – as a previous commenter noted, this isn’t sustainable for them anyway.
2. We need to advocate for education and jobs. People with a steady income are generally lower credit risk and get lower rates for short term borrowing.
3. Address the materialism and other idols we know exist in our communities. Many Americans do live beyond their means on cheap credit. Even for those with manageable interest rates, this is not good for their soul.
“WASHINGTON (Reuters) – President Barack Obama launched a vigorous defense of his economic agenda on Wednesday, rejecting critics who say it amounts to “socialism” and insisting his policies would boost U.S. competitiveness.
“Contrary to the claims of some of my critics, I am an ardent believer in the free market,” Obama said in prepared remarks to the Business Roundtable, a group of top corporate executives.” (Unquote)
The President’s concept of “Free Market” differs vastly from mine.
In a “free market” would government own Chrysler? (I think not!)
In a “free market” would government own GM? (I think not!)
In a “free market” would government own AIG? (I think not!)
In a “free market” would government own Fannie Mae? (I think not!)
In a “free market” would government own Freddie Mac? (I think not!)
(List is incomplete…but you get the idea.)
All of these, and more were seized in the last year!
Now it is possible that blow-back is causing the President to slow the progress of Chavez-like seizures, but it would not be too far from reality to refer to the President as President Hugo Obama.
Now I understand that the uber-leftists will say that the economy needed a strong hand, and it further needs stronger regulation – but this is not “regulation” – it is, literally SEIZURE!
Unless, of course you want to end torture of terrorists and commence torture of the English language – but that is exactly what lawyers do.
Tossing my resume into the job search recently has shown me just how strange the job market has become. While I’m normally a technology advocate, you can’t solve social problems with technology. I used to be disgusted at the idea of “resume padding”. As it turns out, it seems those people are the ones rewarded. Deserved or not, the resume padders are the winners these days. With the hiring manager taking less and less role in the search process, the job is often left to computerized searches and HR professionals who don’t know the difference between a qualified candidate and one who simply puts keywords on his resume.
Add to this the job qualification inflation, where managers place any possible skill they can think of as required, and you get jobs requirements that no one person can possibly match. In come the resume padders who litter the resume with any technology they have ever brushed against and the only ones who match are those who often have the least experience where you really need it. This of course, encourages more people to pad resumes and more managers to inflate requirements.
Of course resume padding isn’t the only reason managers inflate requirements. I have seen more than a few managers create an impossible mix of skills simply so they can claim there are no qualified Americans that can fill it. This allows them to use a visa to hire a foreign worker at half the rate.
All of these factors make it very bleak for those who simply want to find the right job.
The following examines briefly only a part of how the government made the health care crisis it now proposes to solve.
When I was young our neighbors worked at places like:
Ball Corporation (Muncie)
Borg-Warner (Muncie)
Chrysler Foundry (Kokomo)
Chrysler Transmission (Kokomo)
Delco Electronics (GM)
Delco-Remy (GM)
Ex-Cell-O Corporation (Elwood)
Firestone (Noblesville)
Fisher Body (Marion)
Ford Motor Co. (Indianapolis)
Guide Lamp (GM)
TRW (Noblesville)
Western Electric (AT&T Indianapolis)
These jobs paid $25/hour or more typically (in 1970’s dollars, perhaps equivalent to $35/hour or more more today)–often quite a bit more–and that’s just the list of local jobs. It doesn’t include more distant but still Hoosier domiciled outfits like Bendix (South Bend), International Harvester (Fort Wayne), Whirlpool (Evansville), Ford (Connersville), Dana Corporation (Churubusco and Richmond), numerous Gary, and numerous northwest Indiana steel mills. And these are just the outfits that readily jump to mind.
What I left out were the hundreds of manufacturing suppliers that formed up to supply components to these operations.
These corporations paid the kind of wages that allowed mom to stay at home, they paid for fabulous health coverage (often given in lieu of heavily taxed pay raises thanks to a progressive tax system that created its own dramatic cost-of-living increase and which Obama will restore in 2011), provided generous paid vacations, sick days and retirement. They made it possible to own a piece of the American Dream for those unable or for whatever reason unwilling to attend college. These manufacturers came about largely as a result of the mobilization of America’s manufacturing needs emanating from World War 2 and were one of an endless series of examples of American exceptionalism that became the envy of the world and the dream for emigrants from nations of lesser prosperity worldwide.
For over 200 years no one gave even a second thought to a need for national health care.
But today we are debating a need for government health care in large measure because though the radical implementation of free trade in which from 1983 to today the government destroyed all of this. In other words, the very problem the government proposes to solve today is a crisis which, together with greedy unions and moronic managements, it manufactured itself.
Because free trade destroyed these jobs, this legacy and this heirloom the government became both arsonist and fire department and the Obama demographic and the neocons lack both historical knowledge and experience of having lived not only through the era of US prosperity, but also its dismantling.
You cannot easily quantify this destructive revolution but you can go through the list and see that almost everyone of the manufacturing operations listed above no longer exist on US shores, let alone Indiana.
These manufacturers didn’t employ a few dozen as at McDonalds, or a few hundred as with a Wal-Mart, but each plant employed 2,000 or more people. And how important was it to Indiana? Even with the wanton destruction of this legacy with nothing to replace it, Indiana still has the highest percentage of workers employed in manufacturing of any US state.
Need further evidence of what was lost? Consider the last time you went job hunting. How many apps did you put in at the local foundry versus the number of apps you put in at the local Burger Doodle?
Last Tuesday DC was lucky enough to host an all-star panel of global justice activists in a panel discussion called “Evaluating Copenhagen: What it Means for Ecology, Economy, and Equity“, convened by leading movement organizations and moderated by Ray Suarez of PBS.
Among the panelists were leaders and experts of the global justice movement like Martin Khor from the South Centre, Maude Barlow from the Council of Canadians, Victor Menotti of the International Forum on Globalization, Chair of the UN Permanent Forum on Indigenous Issues Victoria Tauli-Corpuz, and Gopal Dayaneni from Movement Generation. You can view the full event online here, or by clicking the image below. I’ll discuss some highlights and possible movement-building lessons.
Movement-Melding in Copenhagen
The experts left very little doubt that the fight to avert climate catastrophe is the fight for the direction of the global economy.
Climate justice + development justice + trade justice = true global justice.
If, as panelists noted, the climate negotiations will eventually lead to the rewriting of the global economy then global institutions like the WTO and other unfair institutions of trade and development will have to change dramatically. For decades, social movements have resisted the globalization agenda of the international corporate elite. With the threat of climate change, the world has been forced to pursue fundamental economic transformation. That transformation presents tremendous opportunity, and so comprises the silver lining on the dark, looming clouds of possible climate catastrophe.
Problem is that too few of us in the global north are connecting the dots between the struggles of the global justice movement with the current fight for a fair climate deal.
Before I say more, here are some highlights from a few leaders and thinkers who are:
- Early on Maude Barlow makes the explicit connection between the unfair and anti-democratic process that played out in Copenhagen as parallel to what we see at the World Trade Organization (WTO) in Geneva. Rich countries ganging up and bullying poorer countries, divide and conquer tactics, and ‘green room’ -esque VIP meetings where the ‘real’ decision are made, without voices of poorer countries or marginalized peoples (min 7:00).
- Martin Khor makes clear that by proposing to cap emissions, that leaders are “negotiating not only the future of humanity and the earth, we are also negotiating the distribution of the future GNP of the world” [emphasis mine]. Because the five major issues areas in the working groups “are no longer about climate science” only, shifting the global economic and development paradigm is explicitly required to avert catastrophic climate change. He then criticizes the exclusive and anti-democratic process, reminiscent of the WTO process, that produced the controversial Copenhagen Accord (beginning around min 11:30).
- Victoria Tauli-Corpuz points out the importance of the historic first inclusion of language regarding human rights and land rights of indigenous and local peoples in the climate negotiation document. Also, like the movement for global economic justice at the WTO, she emphasized the wisdom of using an inside-outside strategy to influence the negotiations inside AND support the social movement mobilizations outside the convention center (min 31:00).
- Victor Menotti notes how the each of the food, finance and climate crises has been caused by neoliberal economic orthodoxy that privileges corporate power over democratic governments, and by capture of global institutions like the WTO by corporate interests (min 38:00).
A spirited discussion followed, delving into a wide array of issues:
- Gopal Dayaneni insisting that a real solution will require indigenous and local peoples winning back rights over their land, ecologies and development paths (min 44:00).
- Maude Barlow pointing out the hypocrisy of countries negotiating new trade deals that further enshrine corporate economic development paradigm that relies on over-consumption and over-extraction, while purporting to green themselves in the climate negotiations (min 51:00).
- Victoria Tauli-Corpuz takes on the question of climate debt, and how indigenous peoples have led the fight to solve the problem by opposing fighting corporate extraction projects and with them the “dominant economic development paradigm” that facilitate it (min 1:06).
- Victor Menotti relates how lessons from fighting the WTO teach that we need to call out corporate power and spotlight who wins and who loses under proposed climate solutions and their corollary economic underpinnings. If we recognize that its not a poor country vs. rich country dynamic, but a fight of corporate elites vs. the rest of us (min 1:13).
The overall upshot of the panel was that the proper venue for solving the climate crisis is the U.N. Indubitably. Just solutions will not emerge from a more exclusive and corporate-captured venues like the G-20 or WTO.
Global Justice Movement at the Millenium
The lesson here for movement builders and campaigners is another. These experts, all steeped in peoples’ movements for a more just and sustainable world, call us to act now for justice beyond Copenhagen, and beyond the next climate summit in Mexico. To answer their call we must fundamentally challenge what Victoria Tauli-Corpuz calls the “dominant economic development paradigm” – one that not only causes global warming emissions but one that sews the very injustices and inequities that Gopal Dayaneni points out are what enable over-consumption and over-extraction.
Thus a good climate agreement is not, as Martin Khor mentions, just a matter of climate science or emissions targets. It never really was. There are those within the alter-globalization movement that highlight the need to turnaround failed trade policy in order to actually stave off climate change, and the youth climate movement does as good a job as anyone linking the struggles of people in the global south with those in the global north.
But to create sufficient pressure behind real solutions we’ve still got a long way to go. We need to find common strategies for building a revitalized movement for global justice – a progressively more holistic and vibrant one that bridges all the gaps that have divided us. That means organizing to confront every single global institution that promotes the “dominant economic development paradigm” like the WTO, the World Bank, the International Monetary Fund (and other development banks), and fight back against corporate control of our governments, especially the G-20 governments key to governance of each of these institutions.
The global justice and climate movements, then, are inextricably linked. In fact they are one in the same. and we must seize the moment and unite. Tuesday night’s visionary voices from the global south, and others representing marginalized people in the global north, proclaimed the need for just this sort of solidarity. We must continue to push the climate fight beyond the science and into the realm of global social, economic, and ecological justice for regular working people across the globe.
We in the global north need to step it up while the planet still hangs in the balance. You can almost feel the forces aligning, and hear the ranks forming. If we continue to grow together, an unprecedentedly vibrant movement awaits us.
I have been arguing for a while that there is a strange bedfellows coalition forming between progressives and libertarians around ending America’s Imperial adventures and beginning Life After Empire. Yesterday Ron Paul gave an extraordinary speech calling for the end of empire in front of the Conservative Political Action Committee’s annual convention. When the speech was over the 10,000 delegates voted in a straw poll for their 2012 Presidential candidate. Ron Paul won easily beating Mitt Romney by 9 points. Paul’s platform is built on two points: end our military adventures and close down the Federal Reserve. The first is built on a different idea of conservatism, citing Eisenhower as a model and the notions about the Fed are based around the idea that Private interests (the New York Banks) should not be in charge of how much money we print. Neither of these seem like very controversial stances to me, but the announcement of Paul’s straw poll victory brought a chorus of boos from the Republican establishment at CPAC. I don’t agree with a lot of what Paul says, but if you watch this section of Paul’s speech you can see an opening for a progressive candidate who was anti-Imperialist and anti-Wall Street and willing to revert to the Democratic principles of Jeffersonian Democratic Federalism.
Calvin Coolidge cut federal income tax rates in 1924, 1926, and 1928. At the same time he cut spending by Congress and was able to pay off one-fourth of the national debt. By the time of the second tax cut, which not only cut rates but eliminated taxes for lower-income people, only the richest 2% of people were paying any income tax at all. While I think it is intrinsically unfair for only 2% of the citizens of the country to pay income tax, I think it is great that it provided enough to run the government. Some of the credit for the success of this apporach goest to Andrew Mellon, Secretary of the Treasury at that time.
He is a president that I really admire. He said:
“Collecting more taxes than is absolutely necessary is legalized robbery.”
“Don’t expect to pull up the weak by pulling down the strong.”
“Duty is not collective; it is personal.”
“Ultimately property rights and personal rights are the same thing.”
On January 21st, Lloyd Blankfein left a peculiar voicemail message on the work phones of his employees at Goldman Sachs. Fast becoming America’s pre-eminent Marvel Comics supervillain, the CEO used the call to deploy his secret weapon: a pair of giant, nuclear-powered testicles. In his message, Blankfein addressed his plan to pay out gigantic year-end bonuses amid widespread controversy over Goldman’s role in precipitating the global financial crisis.
The bank had already set aside a tidy $16.2 billion for salaries and bonuses — meaning that Goldman employees were each set to take home an average of $498,246, a number roughly commensurate with what they received during the bubble years. Still, the troops were worried: There were rumors that Dr. Ballsachs, bowing to political pressure, might be forced to scale the number back. After all, the country was broke, 14.8 million Americans were stranded on the unemployment line, and Barack Obama and the Democrats were trying to recover the populist high ground after their bitch-whipping in Massachusetts by calling for a “bailout tax” on banks. Maybe this wasn’t the right time for Goldman to be throwing its annual Roman bonus orgy.
Not to worry, Blankfein reassured employees. “In a year that proved to have no shortage of story lines,” he said, “I believe very strongly that performance is the ultimate narrative.”
Translation: We made a shitload of money last year because we’re so amazing at our jobs, so fuck all those people who want us to reduce our bonuses.
Goldman wasn’t alone. The nation’s six largest banks — all committed to this balls-out, I drink your milkshake! strategy of flagrantly gorging themselves as America goes hungry — set aside a whopping $140 billion for executive compensation last year, a sum only slightly less than the $164 billion they paid themselves in the pre-crash year of 2007. In a gesture of self-sacrifice, Blankfein himself took a humiliatingly low bonus of $9 million, less than the 2009 pay of elephantine New York Knicks washout Eddy Curry. But in reality, not much had changed. “What is the state of our moral being when Lloyd Blankfein taking a $9 million bonus is viewed as this great act of contrition, when every penny of it was a direct transfer from the taxpayer?” asks Eliot Spitzer, who tried to hold Wall Street accountable during his own ill-fated stint as governor of New York.
Beyond a few such bleats of outrage, however, the huge payout was met, by and large, with a collective sigh of resignation. Because beneath America’s populist veneer, on a more subtle strata of the national psyche, there remains a strong temptation to not really give a shit. The rich, after all, have always made way too much money; what’s the difference if some fat cat in New York pockets $20 million instead of $10 million?
The only reason such apathy exists, however, is because there’s still a widespread misunderstanding of how exactly Wall Street “earns” its money, with emphasis on the quotation marks around “earns.” The question everyone should be asking, as one bailout recipient after another posts massive profits — Goldman reported $13.4 billion in profits last year, after paying out that $16.2 billion in bonuses and compensation — is this: In an economy as horrible as ours, with every factory town between New York and Los Angeles looking like those hollowed-out ghost ships we see on History Channel documentaries like Shipwrecks of the Great Lakes, where in the hell did Wall Street’s eye-popping profits come from, exactly? Did Goldman go from bailout city to $13.4 billion in the black because, as Blankfein suggests, its “performance” was just that awesome? A year and a half after they were minutes away from bankruptcy, how are these assholes not only back on their feet again, but hauling in bonuses at the same rate they were during the bubble?
The answer to that question is basically twofold: They raped the taxpayer, and they raped their clients.
The bottom line is that banks like Goldman have learned absolutely nothing from the global economic meltdown. In fact, they’re back conniving and playing speculative long shots in force — only this time with the full financial support of the U.S. government. In the process, they’re rapidly re-creating the conditions for another crash, with the same actors once again playing the same crazy games of financial chicken with the same toxic assets as before.
That’s why this bonus business isn’t merely a matter of getting upset about whether or not Lloyd Blankfein buys himself one tropical island or two on his next birthday. The reality is that the post-bailout era in which Goldman thrived has turned out to be a chaotic frenzy of high-stakes con-artistry, with taxpayers and clients bilked out of billions using a dizzying array of old-school hustles that, but for their ponderous complexity, would have fit well in slick grifter movies like The Sting and Matchstick Men. There’s even a term in con-man lingo for what some of the banks are doing right now, with all their cosmetic gestures of scaling back bonuses and giving to charities. In the grifter world, calming down a mark so he doesn’t call the cops is known as the “Cool Off.”
To appreciate how all of these (sometimes brilliant) schemes work is to understand the difference between earning money and taking scores, and to realize that the profits these banks are posting don’t so much represent national growth and recovery, but something closer to the losses one would report after a theft or a car crash. Many Americans instinctively understand this to be true — but, much like when your wife does it with your 300-pound plumber in the kids’ playroom, knowing it and actually watching the whole scene from start to finish are two very different things. In that spirit, a brief history of the best 18 months of grifting this country has ever seen:
CON #1 THE SWOOP AND SQUAT
By now, most people who have followed the financial crisis know that the bailout of AIG was actually a bailout of AIG’s “counterparties” — the big banks like Goldman to whom the insurance giant owed billions when it went belly up.
This may sound far-fetched, but the financial crisis of 2008 was very much caused by a perverse series of legal incentives that often made failed investments worth more than thriving ones. Our economy was like a town where everyone has juicy insurance policies on their neighbors’ cars and houses. In such a town, the driving will be suspiciously bad, and there will be a lot of fires.
AIG was the ultimate example of this dynamic. At the height of the housing boom, Goldman was selling billions in bundled mortgage-backed securities — often toxic crap of the no-money-down, no-identification-needed variety of home loan — to various institutional suckers like pensions and insurance companies, who frequently thought they were buying investment-grade instruments. At the same time, in a glaring example of the perverse incentives that existed and still exist, Goldman was also betting against those same sorts of securities — a practice that one government investigator compared to “selling a car with faulty brakes and then buying an insurance policy on the buyer of those cars.”
Goldman often “insured” some of this garbage with AIG, using a virtually unregulated form of pseudo-insurance called credit-default swaps. Thanks in large part to deregulation pushed by Bob Rubin, former chairman of Goldman, and Treasury secretary under Bill Clinton, AIG wasn’t required to actually have the capital to pay off the deals. As a result, banks like Goldman bought more than $440 billion worth of this bogus insurance from AIG, a huge blind bet that the taxpayer ended up having to eat.
Thus, when the housing bubble went crazy, Goldman made money coming and going. They made money selling the crap mortgages, and they made money by collecting on the bogus insurance from AIG when the crap mortgages flopped.
It was a brilliant move. When a company like AIG is about to die, it isn’t supposed to hand over big hunks of assets to a single creditor like Goldman; it’s supposed to equitably distribute whatever assets it has left among all its creditors. Had AIG gone bankrupt, Goldman would have likely lost much of the $5.9 billion that it pocketed as collateral. “Any bankruptcy court that saw those collateral payments would have declined that transaction as a fraudulent conveyance,” says Barry Ritholtz, the author of Bailout Nation. Instead, Goldman and the other counterparties got their money out in advance — putting a torch to what was left of AIG. Fans of the movie Goodfellas will recall Henry Hill and Tommy DeVito taking the same approach to the Bamboo Lounge nightclub they’d been gouging. Roll the Ray Liotta narration: “Finally, when there’s nothing left, when you can’t borrow another buck . . . you bust the joint out. You light a match.”
And why not? After all, according to the terms of the bailout deal struck when AIG was taken over by the state in September 2008, Goldman was paid 100 cents on the dollar on an additional $12.9 billion it was owed by AIG — again, money it almost certainly would not have seen a fraction of had AIG proceeded to a normal bankruptcy. Along with the collateral it pocketed, that’s $19 billion in pure cash that Goldman would not have “earned” without massive state intervention. How’s that $13.4 billion in 2009 profits looking now? And that doesn’t even include the direct bailouts of Goldman Sachs and other big banks, which began in earnest after the collapse of AIG.
CON #2 THE DOLLAR STORE
In the usual “DollarStore” or “Big Store” scam — popularized in movies like The Sting — a huge cast of con artists is hired to create a whole fake environment into which the unsuspecting mark walks and gets robbed over and over again. A warehouse is converted into a makeshift casino or off-track betting parlor, the fool walks in with money, leaves without it.
The two key elements to the Dollar Store scam are the whiz-bang theatrical redecorating job and the fact that everyone is in on it except the mark. In this case, a pair of investment banks were dressed up to look like commercial banks overnight, and it was the taxpayer who walked in and lost his shirt, confused by the appearance of what looked like real Federal Reserve officials minding the store.
Less than a week after the AIG bailout, Goldman and another investment bank, Morgan Stanley, applied for, and received, federal permission to become bank holding companies — a move that would make them eligible for much greater federal support. The stock prices of both firms were cratering, and there was talk that either or both might go the way of Lehman Brothers, another once-mighty investment bank that just a week earlier had disappeared from the face of the earth under the weight of its toxic assets. By law, a five-day waiting period was required for such a conversion — but the two banks got them overnight, with final approval actually coming only five days after the AIG bailout.
Why did they need those federal bank charters? This question is the key to understanding the entire bailout era — because this Dollar Store scam was the big one. Institutions that were, in reality, high-risk gambling houses were allowed to masquerade as conservative commercial banks. As a result of this new designation, they were given access to a virtually endless tap of “free money” by unsuspecting taxpayers. The $10 billion that Goldman received under the better-known TARP bailout was chump change in comparison to the smorgasbord of direct and indirect aid it qualified for as a commercial bank.
When Goldman Sachs and Morgan Stanley got their federal bank charters, they joined Bank of America, Citigroup, J.P. Morgan Chase and the other banking titans who could go to the Fed and borrow massive amounts of money at interest rates that, thanks to the aggressive rate-cutting policies of Fed chief Ben Bernanke during the crisis, soon sank to zero percent. The ability to go to the Fed and borrow big at next to no interest was what saved Goldman, Morgan Stanley and other banks from death in the fall of 2008. “They had no other way to raise capital at that moment, meaning they were on the brink of insolvency,” says Nomi Prins, a former managing director at Goldman Sachs. “The Fed was the only shot.”
In fact, the Fed became not just a source of emergency borrowing that enabled Goldman and Morgan Stanley to stave off disaster — it became a source of long-term guaranteed income. Borrowing at zero percent interest, banks like Goldman now had virtually infinite ways to make money. In one of the most common maneuvers, they simply took the money they borrowed from the government at zero percent and lent it back to the government by buying Treasury bills that paid interest of three or four percent. It was basically a license to print money — no different than attaching an ATM to the side of the Federal Reserve.
“You’re borrowing at zero, putting it out there at two or three percent, with hundreds of billions of dollars — man, you can make a lot of money that way,” says the manager of one prominent hedge fund. “It’s free money.” Which goes a long way to explaining Goldman’s enormous profits last year. But all that free money was amplified by another scam:
CON #3 THE PIG IN THE POKE
At one point or another, pretty much everyone who takes drugs has been burned by this one, also known as the “Rocks in the Box” scam or, in its more elaborate variations, the “Jamaican Switch.” Someone sells you what looks like an eightball of coke in a baggie, you get home and, you dumbass, it’s baby powder.
The scam’s name comes from the Middle Ages, when some fool would be sold a bound and gagged pig that he would see being put into a bag; he’d miss the switch, then get home and find a tied-up cat in there instead. Hence the expression “Don’t let the cat out of the bag.”
The “Pig in the Poke” scam is another key to the entire bailout era. After the crash of the housing bubble — the largest asset bubble in history — the economy was suddenly flooded with securities backed by failing or near-failing home loans. In the cleanup phase after that bubble burst, the whole game was to get taxpayers, clients and shareholders to buy these worthless cats, but at pig prices.
One of the first times we saw the scam appear was in September 2008, right around the time that AIG was imploding. That was when the Fed changed some of its collateral rules, meaning banks that could once borrow only against sound collateral, like Treasury bills or AAA-rated corporate bonds, could now borrow against pretty much anything — including some of the mortgage-backed sewage that got us into this mess in the first place. In other words, banks that once had to show a real pig to borrow from the Fed could now show up with a cat and get pig money. “All of a sudden, banks were allowed to post absolute shit to the Fed’s balance sheet,” says the manager of the prominent hedge fund.
The Fed spelled it out on September 14th, 2008, when it changed the collateral rules for one of its first bailout facilities — the Primary Dealer Credit Facility, or PDCF. The Fed’s own write-up described the changes: “With the Fed’s action, all the kinds of collateral then in use . . . including non-investment-grade securities and equities . . . became eligible for pledge in the PDCF.”
Translation: We now accept cats.
The Pig in the Poke also came into play in April of last year, when Congress pushed a little-known agency called the Financial Accounting Standards Board, or FASB, to change the so-called “mark-to-market” accounting rules. Until this rule change, banks had to assign a real-market price to all of their assets. If they had a balance sheet full of securities they had bought at $3 that were now only worth $1, they had to figure their year-end accounting using that $1 value. In other words, if you were the dope who bought a cat instead of a pig, you couldn’t invite your shareholders to a slate of pork dinners come year-end accounting time.
But last April, FASB changed all that. From now on, it announced, banks could avoid reporting losses on some of their crappy cat investments simply by declaring that they would “more likely than not” hold on to them until they recovered their pig value. In short, the banks didn’t even have to actually hold on to the toxic shit they owned — they just had tosort of promise to hold on to it.
That’s why the “profit” numbers of a lot of these banks are really a joke. In many cases, we have absolutely no idea how many cats are in their proverbial bag. What they call “profits” might really be profits, only minus undeclared millions or billions in losses.
“They’re hiding all this stuff from their shareholders,” says Ritholtz, who was disgusted that the banks lobbied for the rule changes. “Now, suddenly banks that were happy to mark to market on the way up don’t have to mark to market on the way down.”
CON #4 THE RUMANIAN BOX
One of the great innovations of Victor Lustig, the legendary Depression-era con man who wrote the famous “Ten Commandments for Con Men,” was a thing called the “Rumanian Box.” This was a little machine that a mark would put a blank piece of paper into, only to see real currency come out the other side. The brilliant Lustig sold this Rumanian Box over and over again for vast sums — but he’s been outdone by the modern barons of Wall Street, who managed to get themselves a real Rumanian Box.
How they accomplished this is a story that by itself highlights the challenge of placing this era in any kind of historical context of known financial crime. What the banks did was something that was never — and never could have been — thought of before. They took so much money from the government, and then did so little with it, that the state was forced to start printing new cash to throw at them. Even the great Lustig in his wildest, horniest dreams could never have dreamed up this one.
The setup: By early 2009, the banks had already replenished themselves with billions if not trillions in bailout money. It wasn’t just the $700 billion in TARP cash, the free money provided by the Fed, and the untold losses obscured by accounting tricks. Another new rule allowed banks to collect interest on the cash they were required by law to keep in reserve accounts at the Fed — meaning the state was now compensating the banks simply for guaranteeing their own solvency. And a new federal operation called the Temporary Liquidity Guarantee Program let insolvent and near-insolvent banks dispense with their deservedly ruined credit profiles and borrow on a clean slate, with FDIC backing. Goldman borrowed $29 billion on the government’s good name, J.P. Morgan Chase $38 billion, and Bank of America $44 billion. “TLGP,” says Prins, the former Goldman manager, “was a big one.”
Collectively, all this largesse was worth trillions. The idea behind the flood of money, from the government’s standpoint, was to spark a national recovery: We refill the banks’ balance sheets, and they, in turn, start to lend money again, recharging the economy and producing jobs. “The banks were fast approaching insolvency,” says Rep. Paul Kanjorski, a vocal critic of Wall Street who nevertheless defends the initial decision to bail out the banks. “It was vitally important that we recapitalize these institutions.”
But here’s the thing. Despite all these trillions in government rescues, despite the Fed slashing interest rates down to nothing and showering the banks with mountains of guarantees, Goldman and its friends had still not jump-started lending again by the first quarter of 2009. That’s where those nuclear-powered balls of Lloyd Blankfein came into play, as Goldman and other banks basically threatened to pick up their bailout billions and go home if the government didn’t fork over more cash — a lot more. “Even if the Fed could make interest rates negative, that wouldn’t necessarily help,” warned Goldman’s chief domestic economist, Jan Hatzius. “We’re in a deep recession mainly because the private sector, for a variety of reasons, has decided to save a lot more.”
Translation: You can lower interest rates all you want, but we’re still not fucking lending the bailout money to anyone in this economy. Until the government agreed to hand over even more goodies, the banks opted to join the rest of the “private sector” and “save” the taxpayer aid they had received — in the form of bonuses and compensation.
The ploy worked. In March of last year, the Fed sharply expanded a radical new program called quantitative easing, which effectively operated as a real-live Rumanian Box. The government put stacks of paper in one side, and out came $1.2 trillion “real” dollars.
The government used some of that freshly printed money to prop itself up by purchasing Treasury bonds — a desperation move, since Washington’s demand for cash was so great post-Clusterfuck ‘08 that even the Chinese couldn’t buy U.S. debt fast enough to keep America afloat. But the Fed used most of the new cash to buy mortgage-backed securities in an effort to spur home lending — instantly creating a massive market for major banks.
And what did the banks do with the proceeds? Among other things, they bought Treasury bonds, essentially lending the money back to the government, at interest. The money that came out of the magic Rumanian Box went from the government back to the government, with Wall Street stepping into the circle just long enough to get paid. And once quantitative easing ends, as it is scheduled to do in March, the flow of money for home loans will once again grind to a halt. The Mortgage Bankers Association expects the number of new residential mortgages to plunge by 40 percent this year.
CON #5 THE BIG MITT
All of that Rumanian box paper was made even more valuable by running it through the next stage of the grift. Michael Masters, one of the country’s leading experts on commodities trading, compares this part of the scam to the poker game in the Bill Murray comedy Stripes. “It’s like that scene where John Candy leans over to the guy who’s new at poker and says, ‘Let me see your cards,’ then starts giving him advice,” Masters says. “He looks at the hand, and the guy has bad cards, and he’s like, ‘Bluff me, come on! If it were me, I’d bet everything!’ That’s what it’s like. It’s like they’re looking at your cards as they give you advice.”
In more ways than one can count, the economy in the bailout era turned into a “Big Mitt,” the con man’s name for a rigged poker game. Everybody was indeed looking at everyone else’s cards, in many cases with state sanction. Only taxpayers and clients were left out of the loop.
At the same time the Fed and the Treasury were making massive, earthshaking moves like quantitative easing and TARP, they were also consulting regularly with private advisory boards that include every major player on Wall Street. The Treasury Borrowing Advisory Committee has a J.P. Morgan executive as its chairman and a Goldman executive as its vice chairman, while the board advising the Fed includes bankers from Capital One and Bank of New York Mellon. That means that, in addition to getting great gobs of free money, the banks were also getting clear signals about when they were getting that money, making it possible to position themselves to make the appropriate investments.
One of the best examples of the banks blatantly gambling, and winning, on government moves was the Public-Private Investment Program, or PPIP. In this bizarre scheme cooked up by goofball-geek Treasury Secretary Tim Geithner, the government loaned money to hedge funds and other private investors to buy up the absolutely most toxic horseshit on the market — the same kind of high-risk, high-yield mortgages that were most responsible for triggering the financial chain reaction in the fall of 2008. These satanic deals were the basic currency of the bubble: Jobless dope fiends bought houses with no money down, and the big banks wrapped those mortgages into securities and then sold them off to pensions and other suckers as investment-grade deals. The whole point of the PPIP was to get private investors to relieve the banks of these dangerous assets before they hurt any more innocent bystanders.
But what did the banks do instead, once they got wind of the PPIP? They started buying that worthless crap again, presumably to sell back to the government at inflated prices! In the third quarter of last year, Goldman, Morgan Stanley, Citigroup and Bank of America combined to add $3.36 billion of exactly this horseshit to their balance sheets.
This brazen decision to gouge the taxpayer startled even hardened market observers. According to Michael Schlachter of the investment firm Wilshire Associates, it was “absolutely ridiculous” that the banks that were supposed to be reducing their exposure to these volatile instruments were instead loading up on them in order to make a quick buck. “Some of them created this mess,” he said, “and they are making a killing undoing it.”
CON #6 THE WIRE
Here’s the thing about our current economy. When Goldman and Morgan Stanley transformed overnight from investment banks into commercial banks, we were told this would mean a new era of “significantly tighter regulations and much closer supervision by bank examiners,” as The New York Times put it the very next day. In reality, however, the conversion of Goldman and Morgan Stanley simply completed the dangerous concentration of power and wealth that began in 1999, when Congress repealed the Glass-Steagall Act — the Depression-era law that had prevented the merger of insurance firms, commercial banks and investment houses. Wall Street and the government became one giant dope house, where a few major players share valuable information between conflicted departments the way junkies share needles.
One of the most common practices is a thing called front-running, which is really no different from the old “Wire” con, another scam popularized in The Sting. But instead of intercepting a telegraph wire in order to bet on racetrack results ahead of the crowd, what Wall Street does is make bets ahead of valuable information they obtain in the course of everyday business.
Say you’re working for the commodities desk of a big investment bank, and a major client — a pension fund, perhaps — calls you up and asks you to buy a billion dollars of oil futures for them. Once you place that huge order, the price of those futures is almost guaranteed to go up. If the guy in charge of asset management a few desks down from you somehow finds out about that, he can make a fortune for the bank by betting ahead of that client of yours. The deal would be instantaneous and undetectable, and it would offer huge profits. Your own client would lose money, of course — he’d end up paying a higher price for the oil futures he ordered, because you would have driven up the price. But that doesn’t keep banks from screwing their own customers in this very way.
The scam is so blatant that Goldman Sachs actually warns its clients that something along these lines might happen to them. In the disclosure section at the back of a research paper the bank issued on January 15th, Goldman advises clients to buy some dubious high-yield bonds while admitting that the bank itself may bet against those same shitty bonds. “Our salespeople, traders and other professionals may provide oral or written market commentary or trading strategies to our clients and our proprietary trading desks that reflect opinions that are contrary to the opinions expressed in this research,” the disclosure reads. “Our asset-management area, our proprietary-trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research.”
Banks like Goldman admit this stuff openly, despite the fact that there are securities laws that require banks to engage in “fair dealing with customers” and prohibit analysts from issuing opinions that are at odds with what they really think. And yet here they are, saying flat-out that they may be issuing an opinion at odds with what they really think.
To help them screw their own clients, the major investment banks employ high-speed computer programs that can glimpse orders from investors before the deals are processed and then make trades on behalf of the banks at speeds of fractions of a second. None of them will admit it, but everybody knows what this computerized trading — known as “flash trading” — really is. “Flash trading is nothing more than computerized front-running,” says the prominent hedge-fund manager. The SEC voted to ban flash trading in September, but five months later it has yet to issue a regulation to put a stop to the practice.
Over the summer, Goldman suffered an embarrassment on that score when one of its employees, a Russian named Sergey Aleynikov, allegedly stole the bank’s computerized trading code. In a court proceeding after Aleynikov’s arrest, Assistant U.S. Attorney Joseph Facciponti reported that “the bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.”
Six months after a federal prosecutor admitted in open court that the Goldman trading program could be used to unfairly manipulate markets, the bank released its annual numbers. Among the notable details was the fact that a staggering 76 percent of its revenue came from trading, both for its clients and for its own account. “That is much, much higher than any other bank,” says Prins, the former Goldman managing director. “If I were a client and I saw that they were making this much money from trading, I would question how badly I was getting screwed.”
Why big institutional investors like pension funds continually come to Wall Street to get raped is the million-dollar question that many experienced observers puzzle over. Goldman’s own explanation for this phenomenon is comedy of the highest order. In testimony before a government panel in January, Blankfein was confronted about his firm’s practice of betting against the same sorts of investments it sells to clients. His response: “These are the professional investors who want this exposure.”
In other words, our clients are big boys, so screw ‘em if they’re dumb enough to take the sucker bets I’m offering.
CON #7 THE RELOAD
Not many con men are good enough or brazen enough to con the same victim twice in a row, but the few who try have a name for this excellent sport: reloading. The usual way to reload on a repeat victim (called an “addict” in grifter parlance) is to rope him into trying to get back the money he just lost. This is exactly what started to happen late last year.
It’s important to remember that the housing bubble itself was a classic confidence game — the Ponzi scheme. The Ponzi scheme is any scam in which old investors must be continually paid off with money from new investors to keep up what appear to be high rates of investment return. Residential housing was never as valuable as it seemed during the bubble; the soaring home values were instead a reflection of a continual upward rush of new investors in mortgage-backed securities, a rush that finally collapsed in 2008.
But by the end of 2009, the unimaginable was happening: The bubble was re-inflating. A bailout policy that was designed to help us get out from under the bursting of the largest asset bubble in history inadvertently produced exactly the opposite result, as all that government-fueled capital suddenly began flowing into the most dangerous and destructive investments all over again. Wall Street was going for the reload.
A lot of this was the government’s own fault, of course. By slashing interest rates to zero and flooding the market with money, the Fed was replicating the historic mistake that Alan Greenspan had made not once, but twice, before the tech bubble in the early 1990s and before the housing bubble in the early 2000s. By making sure that traditionally safe investments like CDs and savings accounts earned basically nothing, thanks to rock-bottom interest rates, investors were forced to go elsewhere to search for moneymaking opportunities.
Now we’re in the same situation all over again, only far worse. Wall Street is flooded with government money, and interest rates that are not just low but flat are pushing investors to seek out more “creative” opportunities. (It’s “Greenspan times 10,” jokes one hedge-fund trader.) Some of that money could be put to use on Main Street, of course, backing the efforts of investment-worthy entrepreneurs. But that’s not what our modern Wall Street is built to do. “They don’t seem to want to lend to small and medium-sized business,” says Rep. Brad Sherman, who serves on the House Financial Services Committee. “What they want to invest in is marketable securities. And the definition of small and medium-sized businesses, for the most part, is that they don’t have marketable securities. They have bank loans.”
In other words, unless you’re dealing with the stock of a major, publicly traded company, or a giant pile of home mortgages, or the bonds of a large corporation, or a foreign currency, or oil futures, or some country’s debt, or anything else that can be rapidly traded back and forth in huge numbers, factory-style, by big banks, you’re not really on Wall Street’s radar.
So with small business out of the picture, and the safe stuff not worth looking at thanks to the Fed’s low interest rates, where did Wall Street go? Right back into the shit that got us here.
One trader, who asked not to be identified, recounts a story of what happened with his hedge fund this past fall. His firm wanted to short — that is, bet against — all the crap toxic bonds that were suddenly in vogue again. The fund’s analysts had examined the fundamentals of these instruments and concluded that they were absolutely not good investments.
So they took a short position. One month passed, and they lost money. Another month passed — same thing. Finally, the trader just shrugged and decided to change course and buy.
“I said, ‘Fuck it, let’s make some money,’” he recalls. “I absolutely did not believe in the fundamentals of any of this stuff. However, I can get on the bandwagon, just so long as I know when to jump out of the car before it goes off the damn cliff!”
This is the very definition of bubble economics — betting on crowd behavior instead of on fundamentals. It’s old investors betting on the arrival of new ones, with the value of the underlying thing itself being irrelevant. And this behavior is being driven, no surprise, by the biggest firms on Wall Street.
The research report published by Goldman Sachs on January 15th underlines this sort of thinking. Goldman issued a strong recommendation to buy exactly the sort of high-yield toxic crap our hedge-fund guy was, by then, driving rapidly toward the cliff. “Summarizing our views,” the bank wrote, “we expect robust flows . . . to dominate fundamentals.” In other words: This stuff is crap, but everyone’s buying it in an awfully robust way, so you should too. Just like tech stocks in 1999, and mortgage-backed securities in 2006.
To sum up, this is what Lloyd Blankfein meant by “performance”: Take massive sums of money from the government, sit on it until the government starts printing trillions of dollars in a desperate attempt to restart the economy, buy even more toxic assets to sell back to the government at inflated prices — and then, when all else fails, start driving us all toward the cliff again with a frank and open endorsement of bubble economics. I mean, shit — who wouldn’t deserve billions in bonuses for doing all that?
Con artists have a word for the inability of their victims to accept that they’ve been scammed. They call it the “True Believer Syndrome.” That’s sort of where we are, in a state of nagging disbelief about the real problem on Wall Street. It isn’t so much that we have inadequate rules or incompetent regulators, although both of these things are certainly true. The real problem is that it doesn’t matter what regulations are in place if the people running the economy are rip-off artists. The system assumes a certain minimum level of ethical behavior and civic instinct over and above what is spelled out by the regulations. If those ethics are absent — well, this thing isn’t going to work, no matter what we do. Sure, mugging old ladies is against the law, but it’s also easy. To prevent it, we depend, for the most part, not on cops but on people making the conscious decision not to do it.
That’s why the biggest gift the bankers got in the bailout was not fiscal but psychological. “The most valuable part of the bailout,” says Rep. Sherman, “was the implicit guarantee that they’re Too Big to Fail.” Instead of liquidating and prosecuting the insolvent institutions that took us all down with them in a giant Ponzi scheme, we have showered them with money and guarantees and all sorts of other enabling gestures. And what should really freak everyone out is the fact that Wall Street immediately started skimming off its own rescue money. If the bailouts validated anew the crooked psychology of the bubble, the recent profit and bonus numbers show that the same psychology is back, thriving, and looking for new disasters to create. “It’s evidence,” says Rep. Kanjorski, “that they still don’t get it.”
More to the point, the fact that we haven’t done much of anything to change the rules and behavior of Wall Street shows that we still don’t get it. Instituting a bailout policy that stressed recapitalizing bad banks was like the addict coming back to the con man to get his lost money back. Ask yourself how well that ever works out. And then get ready for the reload.
I was on the Ubuntu forums yesterday checking out a couple of threads and it struck me that we still haven’t managed to get out of a weird feeling that the amorphous developer community surrounding Ubuntu somehow owes the users who post wishlist threads a free ride.
For instance in one thread there is a general complaint that developers are not doing enough new things for lucid, or not enough testing, or enough stabilisation. When in fact the developers are doing exactly the right amount of development and exactly the right amount of work, based upon what their own needs and feelings are.
Of course this part is hard to understand for users that have been told that Ubuntu is a free lunch. Developers are under no obligation to do anything unless paid to do so. It doesn’t matter how many wishlist threads there are, no developer is ever going to read it and sometimes I wonder if it’s just to make the posters feel better about their lack of ability. I’m reminded of this phraise:
“Too many Chiefs and not enough Indians”
Yes FOSS gives you the power to be your own Chief, to say what you like and don’t like, to use what you find useful and to dismiss anything you don’t. But along with that it gives you the responsibility to be your own Indian too. You have to work at what you need and it’s only useful to complain when your hoping to strike up a decent and productive discussion.
Perhaps this is why the Opportunistic Developer project is important, to try and convince more Chiefs to get down and do some of the grunt work in solving their problems. I just wish there was an Opportunistic Payment project that allows people who can’t contribute time, to at least be able to push development forward with good old fashioned money.
I think I’ve posted on this before .At the moment 30 economists have written to the Times with one outlook and 60 others have written with another outlook , supposedly in opposition to the previous economists.Cue jokes about economists who can’t agree over anything.
( BBC joke …If you lined all the economists end to end in a line , you would still not reach a conclusion .
my favourite is …three economists go hunting deer…one aims…misses to the right ..next aims …misses to the left…the third …exclaims…”we got IT!”…)
Actually …markets are unknowable because knowledge itself alters the market.Therefore widely desseminated knowledge would widely alter the market..hence there can not be a consensus.If there is…it will fail to come exactly right.
If we all knew exactly how economic indicators were going to behave , we would all go out and purchase financial instruments to take advantage of that and that itself would alter the result.
I post news here.
1. Dutch salaries increase faster than inflation
Salaries in the Netherlands increased by an average 3.3 percent last year according to figures from Statistics Netherlands.
AMSTERDAM -
This means salaries increased faster than inflation at 2.5 percent.
People working in the entertainment and service sectors benefited most with pay rises of 4 percent. The lowest pay rises were in the catering sector, with employees only gaining 2.3 percent more money. Government pay packages saw increases of 3.3 percent, partly due to end of year bonuses.
Pay rises do not necessarily lead to higher purchasing power, primarily because part of the pay package is withheld in premiums for pensions and social security, say Statistics Netherlands.
Every spring in the Netherlands, discussions are held on pay and conditions between the social partners (employers’ organisations and unions), in the hope of preventing wage conflicts and strikes.
2. Wider income gap between single mothers and mothers with partners http://www.cbs.nl/en-GB/menu/themas/inkomen-bestedingen/publicaties/artikelen/archief/2010/2010-2992-wm.htm
The disposable income of single mothers is considerably lower than that of cohabiting or married mothers. The average disposable income of single mothers was 15 thousand euro in 2008, as against nearly 25 thousand euro for mothers living with partners. The gap has widened since 2003.
Income gap wider
The average standardised disposable income of single mothers in 2003 was 68 percent of that of cohabiting or married mothers, as opposed to 62 percent in 2008. The predominant reason is that the participation rate on the labour market of single mothers, which is lower anyway, has grown more slowly than the participation rate of cohabiting or married mothers.
Differences in income from labour reduced
The share of women working on a full-time basis has dropped faster among single mothers than among their cohabiting or married counterparts. On average, mothers living with partners also work longer hours each week than single mothers.
These developments have rapidly reduced the gap in income from labour between mothers living with and without partners. In 2003, the average single mother earned 116 percent of the income of a cohabiting or married mother. In 2008, the share had dropped to 101 percent.
Single mothers earn higher incomes from labour because those who participate on the labour market on average work longer hours than working mothers with partners.
GED means General Education Development. It is made for those people who have not been complete their higher education due to some personal circumstances. General Education Development (GED) tests are administered internationally through authorized test centers. GED test developed in 1942.
SECTIONS OF GED TEST
The GED test made up for 5 sections. They are:
Language arts: writing
Language arts: reading
Social studies
Science
Mathematics
LANGUAGE ARTS: WRITING
The language arts writing test consists of two parts. Part 1 consists of 50 multiple choice questions that involve students to amend and modify. There are total of 50 questions that completed within 75 minutes. Part 1 consists of 30% of the questions on sentence structure. It involves correcting sentence fragments, run on sentences, comma splices, misplaced modifiers, and lack of parallel structure. Another 30% part of this questions deal with usage, i.e. correction of errors in subject verbs and verb tenses. And the 25% of questions related to mechanics. Students require correcting the errors in punctuation, capitalization and spellings. The next 15% of the questions are organizations, which involves, restructure of paragraphs or ideas within paragraphs.
The part 2 evaluates the capability of a student to write an essay on a well known topic. The essay must be required 200- 250 words. It is the test of student’s ideas, point of view, logic and reasoning, vocabulary and its usage. The time of essay completion must be 45 minutes. The scores earned on the both parts are summed up and reported as a single score.
SOCIAL STUDIES
This section consists of 50 multiple choice questions that needed to complete within 70 minutes. This section covers the following topics.
25% national history
20% economics
25% civics and governments
15% World history
15% Geography
The material provided could be from a paragraph, graph, cartoon or figure, map, table, chart, photograph. The method of answering the question in social studies test is through understanding the questions and then applying, analyze, the information that provided.
SCIENCE
This section consists of 50 multiple choice questions that needed to complete within 80 minutes. This section covers the following areas.
45% life science
20% earth and space
35% physics and chemistry
These questions involve the students understanding about the chart, table, graph, or figure to use their knowledge through his experience in life and work.
LANGUAGE ARTS: READING
This section consists of 40 multiple choice questions that needed to complete within 65 minutes. Candidates are required to interpret written prose and poetry passages and answer the questions based on them. This section covers the following areas.
75% literacy test
25% nonfiction prose
The literacy test 75% area comprise it those sections.
Poetry
Drama
Prose fiction before 1920
Prose fiction between 1920 and 1960
Prose fiction after 1960
Non fiction prose 25% area comprises:
Reading section are about 200 to 400 words in length and poetry parts about 8 to 25 lines each. Each of the passage or poetry has about four to eight questions.
MATHEMATICS
This section consists of 50 multiple choice questions that needed to complete within 90 minutes. This section is the test of student’s mathematical concepts and ability to use these concepts in the real life. The concepts cover under this section.
25% numbers: number sense and operations
25% measurement and geometry
25% data statistics and probability
25% algebra functions and patterns
Only 80% of mathematical questions are based on multiple choices and other 20% questions call for the student’s to make up their own questions.
SCORES
The candidates should score more than 40% of the graduating high school seniors. The candidate should score about 410 in the GED exam to clear it and get the diploma.
President Barack Obama has announced more than $8bn (£5bn) of federal loan guarantees to help build the first US nuclear power stations for 30 years.
While I’m happy to hear that we will build some nuclear power plants, I’m not happy that federal loans will be used to fund such a program. It would have been better to curb the restrictions against building such facilities and allowed the market to determine the future of energy production in the United States.
Is this the Economist that got into trouble in Siam?
Blog Note: There is a major debate going on at the Economist.com on China in Africa.
While what China does in Africa, may first appear very distance from Thailand. But in fact there are some very important implications, such as China’s contract farming to grow rice in Africa. If that still sounds far away, in fact, China’s offer to Laos, right here close to Thailand, on contract farming-just got a Thai company contract with Laos kicked-out. The big news in Thailand is that China says it will invest about US$1 billion in Thailand in the short-to-medium term. But the amount that is going to Africa is about 7-10 times, Thailand figure.
The debate going on at the Economist.com, have some policy implications-namely the Economist does a wrap up of these debates into semi-research paper that are published and most of the European press follows these Economist semi-research papers. Obviously, the government and policy makers notices.
The following is one opinion from the Economist.com
JEAN-NOEL wrote:
Dear Sir,
I disagree with the thinking of this house. As French, though I am belonging to the wrong country to write about colonialism as well as neo-colonialism, I will try to demonstrate why I believe that China, as a country and a state, is behaving worse than any other colonialist countries in the past.
To show it, I will use the history of China.
The Chinese Empire has been built as a country located in the centre of its influence zone. The character describing “Mainland China” is itself describing the centre of the World. The Chinese Empire has during all its history successfully succeeded in maintaining countries around under control through unfair relationship. These relationships were based on the fact that the state of China will help against any kind of external aggression and in return for this protection the State will receive regular payments. This system was the key for establishing a system which lasted until the XX century. The system had far more disadvantages than advantages. And some of these disadvantages are still influencing the state of development of these countries in Asia, and will do with Africa.
The largest disadvantage has been that such countries as the Mekong countries where maintained in an underdeveloped state. They had an organization of state fitting exactly to the Chinese one. Their Kings or establishment should be agreed by the Chinese State.
Now looking to what is happening in African countries where the PRC is “investing”, I can see that the ones wanting to receive these investments there is the same trend.
An aspect which is not enough considered today is that the so called investments are not made by “private” Chinese companies. They are made by the Chinese state companies. And as a measure of return on investment the political influence on how the country behaves is the most important one for these companies, rather than the profit.
The countries around China had to live with the fact that that the resources they could supply could not be controlled by them. They had to deal with plenty of Chinese civil servants, armed men and Chinese Mafiosi. Reading the articles from The Economist, I can see that there are plenty of examples of the same behavior of the Chinese state in Africa.
The Chinese state knows very well that Africans can be their best Ambassadors in their own country, so as done in the past, they receive today some students or future leaders in China and educate them, sending them back with gifts of importance locally but not for China.
Do the people of this house remember the fact that African students had been thrown through windows in the University of Beijing in the 90’s? Have the student’s organization in China changed so much that they now welcome African students?
Is it possible for African students to stay in China and go up the social Chinese power system? No! African students continue to be treated as “inferior people” in China. The general idea is that if the Chinese state wants to survive as it is, it needs influence wherever it is possible, and African people educated in China will help the actual Chinese state to be maintained onto power directly like by talking at UN through their “African pupils” or indirectly by acting in their own country in favor of their “educators”.
The business made between the countries under Chinese rules and China is made only to serve the business of China. This disadvantage is often related with plenty of stories about “wrong scales” used to measure weight of rice at boarders or inside the ruled countries by Chinese merchants.
In Africa now the stories of contracts made under “unclear rules” or contracts giving not only the largest share to the Chinese state companies, but also allowing these state companies to come with their own personnel replacing the Africans are now established.
The fact that Chinese do not only deal but replace the locals is a sign that they not only like to win, they also like to establish their own system of measure inside countries which they do not consider “civilized”. The last disadvantage I see, which is so difficult, to establish because it is one which is so much uncertain, is related to tyranny versus democracy.
The Chinese Empire has never been seen as democratic.
Did democracy appear easily in China? Did it stay long? No. And today as Taiwan maintains its democratic stance, the Chinese state does whatever it can to reduce the differences between Taiwan ROC and PRC to a geographical question. With such a history of difficulties related to human rights, to power of law, how can one believe that what has not emerged yet in the Chinese state could be helped by the same Chinese state to be brought to life in Africa?
Africans have better to deal with South America or India for the sub-Saharan countries and with Europe and Turkey or other democracies of the Middle East Region than with the Chinese state for what regards process of democracy to be reinforced or implemented.
In the context of responding to an article in The Atlantic by Megan McArdle, J. Michael McWilliams does a good job of laying out some of the statistical problems that underlie attempts to measure things such as the effectiveness of insurance in health outcomes. For example:
From the quasi-experimental literature, McArdle cites evidence of a lack of immediate survival gains with near-universal Medicare coverage after age 65 in the general population (Card et al. 2004; Levy, and Meltzer 2008). From a clinical perspective, however, we should not expect immediate survival gains for most previously uninsured adults because mortality is such a distal outcome. Survival gains may not manifest for years after improved chronic disease control and cancer screening are established, suggesting much more complex improvements in mortality trends are likely to evolve after age 65 in response to universal coverage. Quasi-experiments that rely on abrupt discontinuities occurring with age are not well suited to capturing these complex but potentially large effects. Consequently, the absence of evidence suggested by these studies is not evidence of absence. In contrast to the general population, immediate mortality effects might be expected for acutely ill patients for whom coverage may improve access to life-saving procedures and therapies.
“WASHINGTON — It was a telling glimpse into the state of mind of rattled Senate Democrats.
Worried that they were going to be skewered for pushing a jobs bill that was stuffed with business tax breaks and pork, Senator Harry Reid, the majority leader, pulled the plug Thursday on a rare bipartisan proposal, gambling both with the party’s best chance of posting a needed legislative win as well as with President Obama’s new push for cross-party cooperation.
The surprise move by Mr. Reid, partly in response to fears from lawmakers that they were going to take a pummeling on cable news, has put the future of the jobs legislation in question and showed how the criticism heaped on their health care plan and the loss of the Massachusetts Senate seat have put Democrats in a protective crouch.”
SAN FRANCISCO — American Airlines and Japan Airlines filed an application with the Department of Transportation for antitrust immunity as part of their effort to forge closer business ties, the airlines said late Friday. “An immunized JBA will benefit the public, offer new competition in the fast-growing Asian aviation marketplace and strengthen the relationship between American and Japan Airlines, which will support JAL’s successful restructuring,” said American’s Chairman and Chief Executive Gerard Arpey payday loan lenders.
I was watching Glenn Beck the other day, and he mentioned something that I hadn’t heard of before: the depression of 1921. Admittedly, my studies of history have mostly focused on the ancient world or post-WWII America, so I wasn’t up on the ’20s too much, but I was kind of surprised about this. Weren’t the ’20s known as the “roaring twenties” because of the massive prosperity of the time? I thought that the economy was great until the Great Depression – so what was this about a big depression during this time?
Woodrow Wilson was the first major socialist leader of the 20th Century. His employment of progressive government policies left a mark on the US economy, leaving it in shambles. President Harding took office supporting capitalism and free market president, and this is the primary reason that we don’t hear about the depression that he fought – it ended quickly because the free market was allowed to correct itself.
The Oregon Catalyst has an essay explaining the situation:
It’s a few years after the war and things are dire indeed. US farm export sales crashed as European farms returned to production after WW1. The beginning of depression was extraordinarily sharp: the U.S. price level declined by over 40% in 6 months and 56% for the year. The highest decline ever in the whole history of the United States. The gross national product plunged 24 percent.
As the depression grew the President began to dismantle the huge federal bureaucracies built up during WW1. The Presidents slogan was “less government in business” as he opposed excessive governmental interference in the private sector of the economy and worked to control $25 billion of Federal debt. After taking office the President had said that government ought to “strike the shackles from industry .. We need vastly more freedom than we do regulation.”
The 1921 loss of half the value and price of all goods was horrendous. For comparison the loss of housing value in the last year is around 18%, lower in many areas and a bit higher in others. Even though it was worse than 1930 we don’t remember the 1920 depression because the President didn’t tinker with the economy and built the groundwork to allow quick recovery without wide spread damage.
That President? That was Warren G Harding. Harding “embraced the advice of Treasury Secretary Andrew Mellon and called for tax cuts in his first message to Congress on April 12, 1921. The highest taxes, on corporate revenues and “excess” profits, were to be cut. Personal income taxes were to be left as is, with a top rate of 8 percent of incomes above $4,000. Harding recognized the crucial importance of encouraging the investment that is essential for growth and jobs, something that FDR never did.”
Under Harding, GNP rebounded to $74.1 billion in 1922. The number of unemployed fell to 2.8 million, s reported 6.7 percent in 1922. Then fell again in 1923. So, just a year and a half after Harding became president, the Roaring Twenties were underway.
The Secretary of Commerce? That was Herbert Hoover who wanted government intervention in the economy … which as president he was to pursue a decade later when he transformed the second Great Depression into the beginning of a disaster.
Jim Powell at the Cato Institute also presents a history of this depression, and how it was corrected:
Harding’s Secretary of Commerce Herbert Hoover wanted government intervention in the economy— which as president he was to pursue when he faced the Great Depression a decade later— but Harding would have none of it. He insisted that relief measures were a local responsibility.
Federal spending was cut from $6.3 billion in 1920 to $5 billion in 1921 and $3.2 billion in 1922. Federal taxes fell from $6.6 billion in 1920 to $5.5 billion in 1921 and $4 billion in 1922. Harding’s policies started a trend. The low point for federal taxes was reached in 1924; for federal spending, in1925. The federal government paid off debt, which had been $24.2 billion in 1920, and it continued to decline until 1930.
Conspicuously absent was the business-bashing that became a hallmark of FDR’s speeches. Absent, too, were New Deal-type big government programs to make it more expensive for employers to hire people, to force prices above market levels, or to promote cartels and monopolies.
With Harding’s tax and spending cuts and relatively non-interventionist economic policy, GNP rebounded to $74.1 billion in 1922. The number of unemployed fell to 2.8 million— a reported 6.7 percent of the labor force— in 1922. So, just a year and a half after Harding became president, the Roaring Twenties were underway. The unemployment rate continued to decline, reaching an extraordinary low of 1.8 percent in 1926. Since then, the unemployment rate has been lower only once in wartime (1944), and never in peacetime.
The Roaring Twenties were a time of unprecedented prosperity. GNP expanded year after year without inflation. Productivity improved, and real wages increased. The stock market tripled. There was a dramatic expansion of the middle class. The Great Migration occurred during the 1920s, with some 7 million African-Americans moving north for better schools and job opportunities. Women had the vote. Millions of Americans began to buy cars, originally a luxury of the rich. People bought radios that enabled ordinary people to hear the finest entertainers in their own homes. Movies became popular. Frozen food made possible a more varied diet year-round. Doctors developed new medicines to fight deadly diseases like diphtheria and tuberculosis.
While Harding can hardly be considered a champion of laissez-faire economics (he supported tariffs, after all), the pro-growth policies he implemented are directly responsible for the astonishingly rapid growth in prosperity— and widely shared prosperity— America enjoyed throughout the Roaring 20s.
I was told in school that the progressive New Deal policies of FDR saved America from teh Great Depression, and the Left has touted this advice for us in the wake of our current economic downturn. Of course, history clearly shows that not only did the New Deal not end the Great Depression, it probably prolonged it.
I can’t understand how anyone can sit with a straight face and tell us that the best way to come out of a recession is to increase taxes, government spending, and debt. The Left had been crying out for government regulation of the economy to “fix” it, despite the fact that the imposition of socialist controls on the housing and lending markets are what caused the housing bubble to begin with. It seems very apparent to me that Socialism in general propigates itself by creating the very problems it calism to offer a solution to, like a vacuum salesman who dumps dirt on your carpet.
Let the American people excell, already. Leave us the hell alone, and we’ll do what we need to do to get back on track. It has worked before, and it can work again, if you let it.
And for your viewing pleasure, a vidoe discussing the Great Depression and responses to it:
