Stop Me Before I Vote Again

... outsourcing white-collar jobs to low-wage countries such as India has become a global fact of life - and America must learn to live with it.... Baucus said a majority of fellow Senate Democrats agreed with him, despite the party's longtime opposition to American companies moving jobs overseas.... "But the world is flat and we must work harder to better retrain our people."

"Bill Clinton pressed on [in pursuit of the NAFTA], growing more rather than less committed as the days passed. Abandoned by two of the three top Democratic leaders in the House, opposed by usually reliable Democrats in the trade unions and by some important leaders of minority groups and environmental organizations, he kept shoving more and more chips into the pot on an issue that few Americans really understood... It was the most important achievement of his Presidency... Mr. Clinton retreated early on Bosnia, on Haiti, on homosexuals in the military, on important elements of his economic plan; he seemed ready to compromise on all but the most basic provisions of his health-care reforms. Critics started asking whether he had a bottom line on anything. On the trade accord, he did, and that question won't be asked much for a while [after] the President's smashing success...free trade would not be quite so free as it might have been, but more walls came down this week than went up...at least Mr. Clinton has gained credibility, through his tenacity on the trade pact, that will help him in the months ahead. 'This is a great victory,' said Robert S. Strauss, the longtime Democratic power broker."

It amazes me how throwing an additional Opus Dei mama's boy onto the supreme bench gets accorded the attentions and hubbub of -- well, not the American Idol finalists, but at least a Wimbledon final, or the execution of a serial killer; but the Senate confirming the next fed chair -- a man who will arguably have the means within reach of his sole will to trigger world wide financial Armaggedon -- what's he get?

The pinky-up tea-cup treatment, that's what.

I guess it's just another grim testament to just how far the donkeys' 40-year shit-slide has taken them.

To my knowledge not a single brave or foolish spirit among the 45-odd Senate Democrats saw fit to even threaten to pull a Kerryesque fribbleous "Mr Smith" type chatter-stall, to protest the steamroller confirmation of Princeton's own Ben Bernanke.

"Diss Ben? Say what? Come on, man -- whats there to get hupped about?"

Well I'll simply start by saying 'twas not always so. There were days of yore when a dedicated bankers-boy rate-lifter and wage-cruncher like gentle Ben would have been bounced from pillar to post -- rhetorically of course -- by the senior Senator from the sovereign State of Stentoria.

Soon i'll post more on this freak of politics: the perpetual "all quiet on the Fed front," this preternatural outrage, this shameless sitzkrieg.

Dear Lord, where oh where, among all these long-eared butt-kissing, wall-street cell bitches are the righteous bellows of a people's tribune?

He notices that gentle Ben, our new Fed chair warmer, loves the word "transparency." To date that has translated in reality to just: "stating explicitly the numerical inflation rate... consistent with the goal of long-term price stability"

As Ralph points out that's common practice... in Europe. But Ralph takes the transparency ball himself and runs as far as he can with it. (Remember, he's a lawyer, not, like me, an attack trained political economist.) So how far does he get?

Well here: Let's "democratize Federal Reserve transparency." He gives some self-described "baby steps" towards that end -- a seven point program:

1. Regular open press conferences by the Chairman.
2. Adhere to the Budget Act which requires the submission of a formal annual budget subject to review by OMB and the Congress.
3. Require congressional appropriations for all Federal Reserve activities.
4. Allow the early release of Minutes of Federal Open Market Committee meetings .
5. Hold open meetings on all issues not involving monetary policy.
6. Require full audits by the Government Accountability Office (GAO)
7. Support legislation to prohibit commercial bank officials from serving on the boards of the 12 Federal Reserve District Banks.

Point 7 is splendid for obvious fox-in-henhouse reasons. Points one four and five are at best quixotic. Two and six would be great if the Fed was just spending money, not controlling the credit system and triggering recessions when wanted, neither of which costs anymore than falling asleep would. That leaves number three which I'll repeat:

3. Require congressional appropriations for all Federal Reserve activities.

Start with a generous tax cut upfront, of course. Then apply the tax. Do a rolling adjustment. This is one program with a long enough flight path to allow erring on the side of an overcut to begin with.

I'm referring of course to the Democratic members of the senate banking committee. Not a soul among 'em opposed either of the latest pair of hapless banker gumshoes Bush hopes to see join gentle Ben's Fed board.

Not much of a surprise -- they tossed nothing but cream puffs at Bernanke himself. If I'd been there I'd ask gentle Ben one question -- before storming out:

"Mister chairman, we know you love the idea of transparency. Well then, why this phoney to-do about posting an explicit inflation target -- core or otherwise? Why not put your intentions right out there so we all can see 'em? Go for the golden bell directly -- proclaim a flat-out wage-rate target. That's what it's really all about -- isn't it?"

Here's the donkey deadwood nine:

• Paul S. Sarbanes (D-MD)
• Christopher J. Dodd (D-CT)
• Tim Johnson (D-SD)
• Jack Reed (D-RI)
• Charles E. Schumer (D-NY)
• Evan Bayh (D-IN)
• Thomas R Carper (D-DE)
• Debbie Stabenow (D-MI)
• Robert Menendez (D-NJ)

His oldest, Joe Jr. -- well we can X him out quick. He was a spoiled, headstrong bully, and a petrified father-cowed sleaze inside, who blew himself up trying to keep ahead of younger brother Jack.

Jack himself probably got almost everything he ever wanted out of life, and then made an even more timely exit than either Lenin or Elvis.

Not so, alas, brother Bobby -- America's first ever New Democrat. Nope, that's a guy we all needed to see more of. Maybe watching him mangle his way through the rest of the high 60's and early 70's, we might have learned faster and deeper what a swindle this whole tight-assed, open-minded, challenge-cup, neo-liberal meritocracy really is.

Maybe we would have killed it off long before we got ourselves into the likes of the Clinton menage.

But back to Ted. As the baby of the brood, Ted got to be more himself then any of the others -- and putting interrupted false promises aside, I think he's actually achieved at least as much, and certainly lost far far more.

So one shakes the knowing head some, upon reading the following in this morning's Globe:

US Senator Edward M. Kennedy plans to a unveil a sweeping economic proposal to improve US competitiveness and make globalization a force of prosperity for American workers.

'To help America embrace the competitive challenges we face we must invest in promising new technologies and high-growth industries that will lead to the jobs of the future.'

Did you ever see a picture of the right hand Rocky M put into Jersey Joe's jaw to gain the heavyweight title? "He'll never get back up from that one...."

Ted's taken more then his share of knockdowns, but this is really too punchy for words. He calls it the "Right Track Act," and it's a list of

measures that includes investing in high-technology industries, lifelong education for US workers, and....

...gives corporate tax breaks for investing in nanotechnology.

Kennedy: "America is in another period of challenge." Sadly note this upside-down gesture tacked on to keep up with the Schumers: "to ensure US workers compete on a level playing field," Ted wants presidential powers "to impose tariffs on the goods of countries that unfairly underprice their products through currency manipulations."

Oh, and there's also something about Fed money to head better high tech teachers toward bad schools.

Ted, Ted, Ted -- you need a crystal resting place... soon.

"I won't vote for anyone who won't endorse re-regulating energy prices."

Nothing more bespeaks the heinous degrdation of donkery than a quick contrast of donk reaction to energy price gouging in '74 vs. '05.

Here is Paul Craig Roberts, former Wall Street Journal voodoo hack, now anti-bushwhack libertarian enragé

"The brutal truth is that America's responsibility is extreme. We have destroyed a country and created political chaos for no reason whatsoever"

For the AFL-CIO the challenge is to break with the Democratic Party elite without splitting the party, as that could hand victory to Republicans, whose version of the box is even more extreme.

Now this is very odd talk indeed -- after the bit about "the challenge is to break with the Democratic Party elite" we get the old wheeze about the "even more extreme" Republicans.

What horrendous bull twitter. Speaking as an attack-trained economist, the coin's worth of difference here between Clintonia and Bushington, as far as labor is concerned, ain't even near worth George Wallace's 1968 Bretton Woods gold-standard dime.

Pretty wonderful, huh? Since that sad day in Weehawken that name has stood for everything brightly hideous, well-heeled, and smoothly crooked in our country. Now donk bond wizard "Princeton Bob" Rubin has it over the door of his meme shop.

Marvel of marvels -- truth in labeling, for once. If my stomach can stand it I will soon have more tales to tell about this house of horrors.

Watch a few donk phoneys split a lance over this one.

We can thank petro-dereg mania -- started by ole Jimmy Carter -- for the naked lunch hog oilers feast on today.

Here's my favorite case: Clinton I believe might have altered the course of the donk parade, if in early '93 he'd stumped for a bottom-up payroll tax cut. I believe not only would he have gotten it, but he might have re-labeled the donkery for a generation as the working stiffs party, and without triangulating a damn thing.

But as he's mentioned many times since, the very notion of a working family tax break was ruled out by Wall Street Bob Rubin -- from day one.

So we got instead... that's swell but don't tell, and Hillary's health folly. And so the '94 housecleaning was a lock.

When [Clinton] was running for office in 1992, he wasn't talking about "workers" ... he talked constantly about the "middle class" (whatever it is that is supposed to mean).

According to the made-over DLC crowd of which the Clintons are charter members, the working class is a shrinking constituency -- no longer, by far, the powerhouse mass that Truman tooted his blandishments at in '48, to such miraculous effect.

Nope, according to the brain trust that does the thinking for the likes of Rahm "Lex Luthor" Emanuel and cherry-cherry Kerry, appeal to the toiler class and its economic interests ... and you lose.

Par exemple -- read "The Trouble with Class Interest Populism" on the website of the Fromsphere planetoid the Progressive Policy Institute.

The upshot -- the Demo poor and working-class base of New Deal fame is now 25% of the population, and falling.

More to come on this subject.

Q: When is progress not progressive, and reform not part of a reformation?
A: When you're only streamlining the death machine.

Recall that device in Kafka's penal colony -- if you produce a microprocessor-controlled Mark II, is that progress? Or is it progress if you reform the post-torture procedures by applying quick-healing unguents to the scrimshaw?

To me, this is what publicly-funded citizen "skill" upgrading amounts to. Since they can't control the compensation, any increased skill supply only lowers the compensation for the skill. How this settles out will vary some from sector to sector, but a fair chunk will end up as increased corporate earnings -- and to complete the loop, we jobsters pay for this passthrough to the profiteers with our payroll taxes.

Here's a typical post.

It "updates" one stalled piece of the "new jobs rights movement." Seeing how 1/3 of the job force contends "sure... ya... a union 'round here would be... nice."

But there isn't one ... of course... nor likely to be one anytime soon, unless something big blows the present corporate skull-riggary sky high.

This bill becoming law -- at least by itself -- could hardly be something big, though at any rate it could add some due process facilitation.

And yet as minor a reform as it would be, the bill can't even get itself out of committee. There are plenty of reps in both parties unwilling to vote against "jobholder liberation," so bottled up it must remain till next November -- or Kingdom Come?

George is still alive, at least as much as he ever was, and recently penned an op-ed in the LA Times. George may be very big on acid, abortion and amnesty, but he's no friend of labor. Maybe labor always knew that.

George thinks "more" is not the answer for wage earners here in America -- times have changed. Globality and all that leads this ex-bomber pilot, ex come-home-America candidate to proclaim

I believe we should allow businesses to pay employees based on their skill level. I also believe we should supplement the wages of those who earn the least.

Another way to benefit workers financially is the earned income tax credit.

According to the ex-senator from Mount Rushmore, this approach

has the virtue of being supported by a progressive tax system.

Liberals must never abandon their core principles of justice and equality. But union leaders who still see American businesses as the enemy must update that vision.

And who are these these biz donk hacks that tried their damnedest to remove this blot on America's tax-free wealth zone?

• Max "Bronco" Baucus... of course
• The Nelson brothers, Ben and Bill
• The Belle Starr of the senate, blushless Blanche Lincoln

Our economic system is called neoliberalism or the Washington Consensus... which is really the latest iteration of predator capitalism but on a global scale. It is a bipartisan effort. Both parties are dedicated to this notion, developed after the end of the cold war, of the American elite’s domination the world.

Whether it is democrats through economic imperialism or republicans through military imperialism, both are expressions of American elites out of control to the complete detriment of the working class not just in the world but within our own borders.

NAFTA was the beginning and has been a template for much of what has followed. Bush I started it and Clinton finished it. It fundamentally changed the capital/labor equilibrium and 100 years of social and “labor” progress has been destroyed or is being destroyed.

It is free movement and protection for goods and money but no protection for workers or environment. No concern or benefit for ordinary people whatsoever, the people at the top benefit and everyone else pays.

Clinton sold out the democratic constituency. The people who lost were the unionized industrial sector and environmentalists. The party went down in the next ('94) election and has never recovered. The objectives of the Democratic Party are not working class but rather the class system that has developed with globalization. The democrats and republicans are working for the same people. Nothing proves that better than GWOT.

What I am trying to say is that a real “prog” who doesn’t think the dems are the root of the problem is a dem who has either secured a paycheck in the realm or has been put to sleep by the MSM. I suggest you ask for your pay in Euros and sleep lightly.

This is a great blog, welcome existential relief from metastasizing liberal delusions.

Regarding the topic before us:

Too many misleading simplifications on this vital subject to go unchecked here.

Neo-liberal globalization predates the fall of the Berlin Wall (although the demise of really existing socialism injected it with some serious juice, ideologically and otherwise) but it postdates 1944’s Bretton Woods conference (which, in fact, was the mere ratification of international institutional designs already cooked up behind the scenes by the US Treasury Department and Lord Keynes, with the latter playing a decidedly subordinate role, given British war debts to Wall Street). It basically arrives on the scene in the 1970’s, when Keynesian welfare statism in the OECD world and national developmentalist models in the Global South could no longer deliver the goods, and in this context of stagnant growth – paired with the demise of fixed exchange rates and the boom in unregulated offshore banking – financial accumulation gained ascendance over productive investment (even this is a hopeless vulgarization).

It is not exclusively a project to prolong US primacy (ruling classes everywhere, including places that don’t take orders from Washington DC, have latched on to it to greater or lesser degrees in order to buttress their own privileges), but it is also naive to claim that it doesn’t to some extent bear the US imperial imprint (e.g. IMF-World Bank demands for "transparent corporate governance" always seem to advantage business service firms and investment banks headquartered in lower Manhattan, for some inexplicable reason).

To be sure, the dominant wings and policy elites in both parties embrace it – perhaps the so-called “liberal internationalists” of the Democratic Party most vigorously, Robert Rubin being the purest exemplar – but there are dissident blocs in both parties as well, namely the nativist paleocons on the "right" and the AFL-CIO protectionists on the "left" – neither of whom are exactly savory bedfellows, unfortunately.

Two highly recommended sources of recent vintage on this question, both quite sophisticated yet eminently readable, are David Harvey's A Brief History of Neo-Liberalism and Neil Smith's The Endgame of Globalization.

Anyway, I’ll stop here before my pedantry becomes even more grating.

... Somewhere else on the blog, JS or MJS (one of the initial guys)caught my eye by saying we should insist that any democrat we might support sign a pledge of non-intervention. I quickly replied and called this a day-dream, since intervention is built into the imperial system, which is universal and bi-partisan.

Following on JR's placement of the discussion in the context of labor, why not, instead of asking our representatives to please sponsor a less violent foreign policy, demand that they launch programs to protect American jobs and develop new ones. For starters, reverse all the tax credits that encourage businesses to locate overseas, and provide credits for those that create jobs at home.

Has any democrat recently said anything like this? Not that I know of. Maybe we could trick John Edwards into moving in that direction!

Kevin Phillips observes that American politics oscillates between periods of go-for-broke individualism and free markets, and reactions against the excesses of untrammeled capitalism. Unfortunately, the former far outnumber the latter in our history, there being only two periods where free-wheeling business was reigned in, and social needs were met -- the New Deal, and the earlier so-called Progressive Era.

But maybe we are again at a point where the evils of free market capitalism are laid bare, and a movement can be built around jobs (and health) for the people, not profits for the rich. it would be fun to be part of such a movement, wouldnt it?

The kind of rhetorical chicanery that the Democrats are stooping to now in order to seem progressive on the issue of health in America has reached new heights in disingenuity. Here is an excerpt from the platform of U.S. Senate hopeful, Ben Cardin:

Ben Cardin believes that it is unacceptable and unconscionable that while America is home to the most advanced health care and medical research facilities in the world, more than 47 million Americans have no health insurance. And each year, the cost of health care continues to skyrocket, making it more difficult for employers to offer, and for families to afford, quality health care.

Astute observation, right? So far so good eh? His proposal for resolving this travesty:

[Ben Cardin] Believes we must fight to expand coverage by building on the current employer-based system of health care. By offering small businesses assistance in securing affordable coverage for their workers, we will make it easier for states to enroll eligible children and parents in the Medicaid and the Children’s Health Insurance Program. This will also allow early retirees between ages 55 and 64 to enroll in Medicare at an affordable premium.

Health industry donations to the Cardin campaign? A whopping $225,800. His top contributor.

Anyway, if all that wasn't amusing enough, get a load of this:

Minority groups are disproportionately affected by cancer, stroke, heart disease, diabetes, and other debilitating diseases:

- [Therefore], we must intensify our research efforts to determine both the cause of racial and ethic disparities and how to narrow gaps in health status.

Geeez laweeez...what could be the cause of this disparity?

*sigh*

'My other piece of advice, Copperfield,' said Mr. Micawber, 'you know. Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery. The blossom is blighted, the leaf is withered, the god of day goes down upon the dreary scene, and - and in short you are for ever floored.'

Pelosi Promises Fiscal Restraint If Democrats Win

Minority Leader Says Democratic-Run House Would Target Deficit

By DAVID ROGERS and SARAH LUECK
July 13, 2006; Page A4

WASHINGTON -- House Minority Leader Nancy Pelosi pledged that if Democrats succeed next year in rolling back President Bush's tax cuts for the wealthiest Americans, the money would be used to reduce the federal deficit -- not for new spending....

The California Democrat anticipates some resistance from within her party, but returned to the theme of fiscal prudence in an interview with The Wall Street Journal. When asked to outline the Democrats' agenda, she listed initiatives that she said wouldn't strain the government's coffers: cutting interest rates on student loans, raising the minimum wage and demanding higher royalties from oil companies.

"Not every single dollar" would go to the Treasury, she said, "but I hope that...we would use the rollback of the tax cuts" to address the deficit since "it is the biggest drain...on the next generation."

The party left needs to throw up a few wildly divisive draft planks, not cultural but of the tax variety. Like a net-worth tax on the one percenters, and a payroll tax cut on SSI.

Nothing new here, of course, but the notion is, let's smoke out the money-changers' party familiars, then let's attack the foreign aid budget -- no more arms tech for anybody. That oughta smoke out some stooges too.

Plank battles like these -- not gay marriage and abortion and gun control -- will get at the real wire-pulling fiends

On another popular topic: forget campaign reform. That's changing the frame, while it's the picture inside that's ugly.

As I mentioned with other words in a comment here -- want to stop big money or Zionic influence? Well -- if you promise to screw 'em they won't donate.

Of course this is an impossible dream, but the point is to force the fiends to answer the musical question, "why the fuck not?"

I suspect most of you have already seen Joe's corporate wiring diagram at Counterpunch. It's sure a smooth set of grooves he's in.

It reminds us how much the nutmeg nutter is not just the mad muppet of Zionia, but also about as near the top of the US chamber-of-horrors honor roll as a donk can get.

One year after labor groups vowed to punish 15 Democrats who joined Republicans in the U.S. Congress to approve a Central American free trade pact, most have easily won their party's nomination to run again....

... 11 of the CAFTA 15 have already won their party's nomination to face a Republican party candidate in the November congressional elections. In most of those party primary races, the CAFTA 15 candidates ran unopposed.

Two of the remaining primary races are in New York, where Rep. Gregory Meeks... is running unopposed and 24-year House veteran Rep. Edolphus Towns... faces two opponents on September 12.

The New York AFL-CIO voted this week not to endorse Meeks and Towns because of their CAFTA vote.

"It basically means we're sitting out the race," said Mario Cilento, communications director for the New York AFL-CIO. "Delegates to the convention felt strongly that a message had to be sent and not take labor support for granted."

... as Democrats hope to take over control of the House from Republicans and as an aspiring presidential class of 2008 becomes more assertive, the Hamilton Project, named after the founding father and onetime Treasury secretary Alexander Hamilton, is arguably [ former Clinton Treasury Secretary and financial Svengali Robert] Rubin's most overt political act since he stepped down from the Treasury in 1999....

Housed in the Brookings Institution, the initiative embraces a number of mainstream economic prescriptions - like the necessity of equitable international trade agreements, the virtues of a balanced budget, and making economic growth more broad-based....

But by addressing issues like the costs to the economy of excessive litigation and regulation, Mr. Rubin intends to make the project a laboratory for the type of pragmatic, ideology-free policies that appeal to the project's Wall Street advisers while also hoping to lure Democratic presidential candidates away from populist economic positions. And with Mr. Rubin and his successor and friend Lawrence H. Summers on board, it will also be a training ground for the next crop of financiers with ambitions to shape policy in a Democratic administration.

They include those who have done so, like Roger C. Altman, the chairman of Evercore and a former deputy Treasury secretary; those who aspire to do so, like Steven Rattner of Quadrangle, the private equity firm; and, perhaps most important, younger Wall Street executives just now flirting with the idea.

It is with this last group of executives, drawn largely from the booming world of hedge funds and private equity, that Mr. Rubin has loomed large as an Obi-Wan Kenobi figure.

In the 1980's he cultivated their early careers as arbitrage traders at Goldman Sachs, and he is now guiding them in the ways of securing influence in Washington.

Eric Mindich, who runs Eton Park, a $5 billion hedge fund, led Goldman's arbitrage desk at the age of 25, and in 1994, at 27, became Goldman's youngest partner ever.... He is also a contributor to Mr. Rubin's favorite senator, Kent Conrad, the Democrat from North Dakota.

Then there is Richard C. Perry, who left Goldman's arbitrage desk in 1988 to form Perry Partners, now an $11 billion hedge fund. And Thomas F. Steyer, the founder of Farallon Capital, a $16 billion hedge fund, who also worked under Mr. Rubin in the 1980's and was an adviser to Senator John Kerry's presidential campaign in 2004.

Sept. 6 (Bloomberg) -- U.S. Senator Charles Schumer is "very serious'' about forcing a vote this month on legislation to place punitive duties on all Chinese imports, his spokesman said.

"We need to see real results on the currency. We need real signs of progress,'' the New York Democrat said today, according to spokesman Eric Schultz."

http://www.bloomberg.com/apps/news?pid=20601080&sid=aZVqDxEMrb2c&refer=asia

Bull goose Democrats continue to think nativist pandering and know-nothing economics will help them, even when the Republicans have locked in that pitch and can offer the full crackpot monty.

Of what do I speak? This:

[puts on wonk cap]

The quick donk New Deal way out would be to treat our jobster homes like the first New Deal treated family farms:

"Friends, these homes are America's backbone -- they produce the nation's most sacred crops" -- i.e. all our corporate job hours, in their rich variety of tasks and rates of compensation. To help, (but still reward the dutiful and thrifty), we could nationalize all residential mortgages up to the the market value of each and every Amerikan house lot, and simultaneously issue a stream of lot equity credits usable against a national George tax on ground rent (i.e. on lot value).

Voila, no more private rack-rating, and of course no more borrowing against lot value, and no more lot price elvis-plate or tulip manias either,

Our clever, constantly revalued George tax will effectively render all lots of zero private value.

Hee hee hee, and I'll control it all through a bank of high-speed computers.

Head start: the Gub already owns a big chunk thru Fanny and Fred

So what's your problem, troops? Don't tell me you saw this somewhere else, cause you ain't. This is pure originality, fellow critters. I want my just accolades, or at least a few quibbles!

My personal rep, blazing progressive Barney Frank (shown above with caped coffin-sleeper Tom Lantos) seems to have turned into a bit of a wet hen in a recent piece in that dashing people's tribune, the American Prostate

Barney tries mad, mad, double-mad dancing on gentle Bobby Reich's head, because in an earlier issue of the same earnest mag, Bobby R bluntly claims the donks, if they regain control of the House this fall, will do exactly what Karl Rove and I say they'll do -- that is, follow their cheap showboat instincts, and grandstand -- as in raise a hullabaloo about Bushco illegality, profiteering, etc., etc. -- you know, just generally play gotcha with the elephant's behind.

This Bobby claims they'll do, instead of helping the beleaguered middle-income jobholdery, which, to sir Bobby, is the one and only true party mission.

Well needless to say, this touches off a string of Frank firecrackers. Some of these just spring from vanity -- how dare anyone presume to instruct the likes of a barnyard B Frank -- but other pops are clearly explosions of authentic kitchen fury. After all, Bobby stepped on a corn here, right? And Barn has to play it up, with all the righteous outrage he can push through that tiny, lipless, side-sloped Buddy Hackett mouth of his. To the contrary, Mister Robert Reich -- Barnz and his liberal donk friends have no intention whatsoever of going after Bushco:

I know of virtually no support for trying to impeach President Bush among House Democrats, because we understand that this would be entirely counterproductive to what we are trying to accomplish both politically and governmentally.

I confess to some personal irritation ... when I am told that ... I should in fact think about beginning to do things that I have been doing."

But here's the blink passage to me. Let me set it up first. Bobby in his piece has said, among his other don't-dos, don't waste time trying to expose "nefarious links" Bushco has to [cue sinister drum roll] Wall Street. Here's the barn hen's cluck on that one:

As for myself, I have consistently said that I want to show that liberal Democrats can be fully supportive of the legitimate functioning of financial intermediaries in a responsible capitalist system, while at the same time protecting the rights of consumers and helping address the problem of growing inequality.... I have never argued that this administration has "nefarious links to Wall Street," and in fact it would be very odd if an administration had no links to Wall Street in these areas."

One is tempted to clown it up, and suggest to Barney that his hand-crafted line may reach a level of ambiguity that is itself manifestly nefarious and paradoxically revealing.

If the tower brute can torture you, then the tower brute will torture you. It's no longer debatable; you may climb the comp pole, but you can't hide. It's here, it's real, it's immediate -- even more than climate change. We live in an era of accelerating job pay blight, and now it's spreading up the compensation pole like Dutch elm disease.

If the 80's was about the jovial de-nutting of the classic New Deal blue collar male, then the 00's are about putting it to Joe and Jane Mortarboard.

But let us rejoice in this prospect of shared immiseration -- today there is no longer any broad willing market for the new-Democratic DLC neoliberal snake oil. Recall its golden era claims: prosperity for the little guy is just a skill enhancement away, and if not one enhancement, then two or at most five. Prosperity for you and more to the point for your young-'uns is within the power of your own strivings to attain. "We all can not only have capital but be capitalists too! Yes, folks, with enough education and training, we all can be our own capitals, a corporation of one selling our services (with a very tidy return on investment) to the highest bidder. Come on! Join the rush to exploit yourselves!"

Well, the returns are in now, and it seems with all this offshoring of professional services, the "human" in "human capital" is starting to sound a lot like the "human" in "human sacrfice."

Here's a real case of don't that just beat all: great Oreo hope Deval Patrick running to be donk governor of the Commonwealth of Mass. (The candidate is shown above, with that great emblem of the Democratic Party, Mike Dukakis, getting ready to cook and eat an entire blue-collar family.)

Talk about a board room whore. Needless to say, however, the AFL-CIO is behind him all the way. But the Killer Coke folks have got the goods on Patrick. I quote:

An Open Letter to Massachusetts Labor Leaders
September 5, 2006

Dear Brothers and Sisters:

Massachusetts AFL-CIO President Robert Haynes has accused me of parachut(ing) in from another state while likely violating campaign finance laws and mislead(ing) people into thinking (I) speak for organized labor.

All of these accusations stem from the fact that Mr. Haynes not only chooses to ignore gubernatorial candidate Deval Patricks blatantly anti-labor record, but resents anyone who tries to remind the voters about it.

Mr. Haynes should realize that a Big Business power broker like Mr. Patrick doesnt deserve any support from unions when running for office. Mr. Patrick has already collected nearly $800,000 in out-of-state contributions parachuted to him from many sources, including contributors who list notorious union-busting law firms like Jackson Lewis and Seyfarth Shaw as their affiliation. About $24,000 came from employees of the Boston law firm Ropes & Gray, which publicly acknowledges that it helps clients with employee discipline, implementation of reductions in force (and)union avoidance. (Incidentally, Mr. Patricks wife, Diane, is a partner in the Labor and Employment Department at Ropes & Gray.)

A closer look at Mr. Patricks past raises many more questions that both voters and labor representatives should be asking. As Texacos Vice President and General Counsel from 1999 to 2001, he was a principal architect of the Texaco-Chevron merger, which enriched a few oil executives but also resulted in the loss of thousands of jobs. When he wasnt helping impede competition and hastening the consolidation of the oil industry, he was Texacos point man on opposing the right of 30,000 poverty-stricken Ecuadorians to sue the company for causing massive damage to peoples health and their environment.

P.S. In line with Comrade Smith's anti-flag campaign, here's the logo from Patrick's Web site:

No ordinary leader indeed. Even for a Democrat, this guy is pretty damn ripe.

My report begins inside deepest academia, staring into a wizard's brew of statistical flapdoodle, full of confidence intervals and r-squares and all that, the work of a prolific Princeton poli sci cone-cap with the oddly folksy name of Larry Bartels. In its own very postivistical way, this paper makes a few very loud claims -- among which, one in particular caught my fancy: Bartels has struck a correlation that might imply a very very sinister Republican plot that fellow Princetonian prof Paul Krugman calls "very mysterious".

Seems there's a relationship between the performance of our national economy and the party in power come prez election time, and this relationship runs back to at least the Truman surprise of 48. And it's a very nasty bit of business too, as its consequences dramatically favor the electoral prospects of the repugs over the jack-assery. Bartels claims some intentional force or forces precisely gooses up any and all prez election year economies if the incumbent party in the White House is repuglickin', and snuffs out any growth if the incumbent party is the donkery. And this up or down swoop in the growth rate is worth a few possible key points up or down for the incumbent party in the vote totals. Bartels states a strong causal relationship "may well exist" between economic performance and voter party preference he even suggests an estimated "at the margin" value for this causal relationship, in the form so many extra vote points per point of higher economic growth rate.

Now I suspect what caught Father Smiff's attention in all this was another observation: in this very same paper Bartels shows that the donks are better at growth induction over all, and better by quite a bit for the little guy -- except in those accursed fourth years of Democratic White House terms, when the donkey suddenly, inexplicably, and inevitably founders. The go-go growth donks, after trotting so nicely for three years, always come up with glanders in the home stretch.

Brother Bartels skates past an important distinction here -- under the two New Dem regimes, Carter's one term and Clinton's first, the results were far less convincing. (Not until Clinton's second term, when he jammed through a huge tax cut for capital gains types (his donor class), I've always suspected he got, as a quid pro quo, Greenspan's braking the unemployment rate floor with three more years of loose credit. This loose credit kept the economy growing, unemployment rate dropping, wages rising, and the middle 60 compressing while also prospering, as they do in most rising economies.) What held for the old donkery of Harry through LBJ does not carry forward with any real demonstable signifigance to the New Dem, New South party era.

But this isn't really Bartels' main point. He's interested in the election-year trick.

Of course the really interesting question is the "how" of it, and this he doesn't address. It would be quite surprising, wouldn't it, if the dems were just not aware of the trick, or at least how to make it work for them too? After all they got Harvards and Stanfords and MIT types on their bench too. So probably it isn't ignorance -- maybe they just can't implement like the repugs can.

I will hazard this: if the pattern is there and is causal, there's one outfit that could surely pull this off: my own favorite White Whale, the Federal Reserve Bank, that independent bastion of the great American scroogery. They could do it, and do it every time.

(CNSNews.com) - Americans will hear a lot about "donut holes" in the days ahead, but it has nothing to do with the nation's obesity "epidemic."

Democrats and some liberal interest groups are furious that the government's new prescription-drug entitlement program forces some senior and disabled citizens to pay the full tab for their own prescription drugs -- beyond a certain dollar amount. They argue that the cost of prescription drugs is still too high."

Story link: http://tinyurl.com/rgxnl

Here's the House vote, with just enough Democrats to make sure it passed, when it could have been defeated.

http://clerk.house.gov/cgi-bin/vote.asp?year=2003&rollnumber=669

And the Senate vote, with -- yes! -- once again enough Democratic votes to tip the scales.

http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=108&session=1&vote=00459

This pattern repeats itself over and over. Greedy corporate welfare queens roll out the big perception management guns, get a few shills on board -- AARP, in this case -- and the Democrats provide just enough votes to make sure the very worst things happen. Afterwards, the Democrats who cost everyone so much time, energy and money are welcomed back into the fold, just like nothing happened. Then a bunch of hopefuls run against something that was preventable in the first place.

What makes this particular issue so awful is the predatory use of our elderly brothers and sisters and the clear prior knowledge that this was a terrible thing to do. Several states were forced to delcare emergencies to cover the havoc created by this legislation.

"About 20 states, including California, Illinois, Ohio, Pennsylvania and all of New England, have announced that they will help low-income people by paying drug claims that should have been paid by the federal Medicare program.

"The new federal program is too complicated for many people to understand, and the implementation of the new program by the federal government has been awful," said Gov. Tim Pawlenty of Minnesota, a Republican. On Saturday, he signed an emergency executive order making the state a "payer of last resort" for the out-of-pocket drug costs."

Story link: http://tinyurl.com/mtlpm

With a good degree of success, Larry attempts to unlock the paradox we progs found so prevalent, looking back over the voting behaviour of America's most jobbled palefaces -- i.e. their persistent tendency to prefer candidates of the party of rich man tax cuts, and their patently false promises of abundance for all, over the long-eared supposed party of the common man.

Now of course we hear the line that the fools were voting their values, not their pocketbooks -- as if they bought the costless placedo snake-oil at top dollar, just so long as the Bible said to "follow such men."

But Larry sez "Just wait a second here." Larry's discovered another possibility, dearer to the hearts of Benthamites and liberators and free-traders everywhere, namely: "self interest." Only it's unenlightened self-interest -- the great abiding fear of J S Mill and Gladstone.

Seems if you review the mind-set surveys around the time of the two big tax cuts in '01 and '03, as Larry sez, you'll find in there Homer buying the notion of cutting Mr Burns' taxes, cause Homer figured "there's a little something in it for myself" -- even if, as he seems to know,, it's a very little.

And here's the farce of it: a full 180, taking in all the major knock-ons and other secondary effects like spending cuts, deficit increases, even higher taxes someday -- it all turns the paltry up-front bird-in-the-hand jobblers' share of the tax cut into a long-run net loss, for maybe the whole bottom 80% of American households.

Now as we all recall, this was not the first jobblers' blanket-toss by the Repubs. They'd been at it for 30-plus years at this point. Just how nasty had it gotten, even before, yes before, the '01-'03 bush plutotax cuts?

I like this comparison. Larry points out: In the late Clinton 90's, the top 13 thousand households had pretty close to the same total income as the bottom 20 million households. Don't think Homer didn't kinda know this, dislike it and wish it were otherwise. And yet, instead of a massive rectification of this re configurement, after Bush got appointed and went to reward his base, damned if the Homericans didn't cry "more more more!"

Why? Not because they didn't understand the '01 cut would grossly favor the rich. Hell, 85% even knew it wouldn't do them much good at all. But according to Larry's sifting of the surveys, it was because they didn't "connect all the dots," either because they weren't paying attention, or not thinking beyond step one -- i.e. they were not informed, not "enlightened," and they didn't tie the cut to all its nasty blowbacks for them.

The assumption is that by behaving -- that is,voting -- differently, they might have achieved a different result. But while the Repubs were cutting income taxes, there was a bipartisan raising of payroll taxes. And then, Clinton promised a jobblers tax cut, renegged in '93.

To me it makes sense: when somebody gives you money, take it. Take whatever the bastards give you -- and the donks give you nothing. Especially if you play by the rules, you get nothing but lectures to play by the rules some more.

To my way of thinking, Larry quite nicely gets all the way to Monte Hall's final prize doors, and then chooses the wrong one.

Homer don't trust the donks' long-range promises. He'd rather have the repugs' short-term up-front workin slobs' rebate tip. It may not be much, but it's better then a sermon on the need for the groundlings to get some Higher Ed.

I want the Democrats to return their roots, so to speak-reclaiming their voice as the defender of middle-class Americans on pocketbook issues. And the way I argue Democrats can do this is by speaking forthrightly about the rapidly increasing insecurity of American workers and their families....

Stat: In 1970, US households had ~7% probability of a 50% future drop in income. Fifty per cent! Today, after a pretty relentless climb upwards over the last 35 years, it's now over 16% -- a 16% chance of a total household train wreck. Here's his graph:

Presumably the Democratic "roots" Hacker mentions are to be found somewhere off to the left of this chart.

http://www.ft.com/cms/s/89aac4dc-6777-11db-8ea5-0000779e2340.html:

Yet in many corners of the globe there is growing disillusionment... we see a degree of anxiety about the market system that is unmatched since the fall of the Berlin Wall and probably well before.

Why is there such disillusionment?.... As the great corporate engines of efficiency succeed by using cutting-edge technology with low-cost labour, ordinary, middle-class workers and their employers – whether they live in the American midwest, the Ruhr valley, Latin America or eastern Europe – are left out. This is the essential reason why median family incomes lag far behind productivity growth in the US, why average family incomes in Mexico have barely grown in the 13 years since the North American Free Trade Agreement passed, and why middle-income countries without natural resources struggle to define an area of comparative advantage.

It is this vast group that lacks the capital to benefit from globalisation and is desperately seeking either reassurance or a change in course. Yet without its support it is very doubtful that the existing global economic order can be maintained.

What Larry fails to point out is how the despair of Globalism's "losers" can actually be an advantage. Their opportunities are shrinking, thanks to restricted access to capital, and therefore they can take greater risks. Rational maximization of that potential will save them. His past thinking along those lines remains as valid as ever.

http://www.whirledbank.org/ourwords/summers.html:

DATE: December 12, 1991
TO: Distribution
FR: Lawrence H. Summers
Subject: GEP

'Dirty' Industries: Just between you and me, shouldn't the World Bank be encouraging MORE migration of the dirty industries to the LDCs [Less Developed Countries]...?

1) The measurements of the costs of health impairing pollution depends on the foregone earnings from increased morbidity and mortality. From this point of view a given amount of health impairing pollution should be done in the country with the lowest cost, which will be the country with the lowest wages. I think the economic logic behind dumping a load of toxic waste in the lowest wage country is impeccable and we should face up to that.

2) The costs of pollution are likely to be non-linear as the initial increments of pollution probably have very low cost. I've always though that under-populated countries in Africa are vastly UNDER-polluted, their air quality is probably vastly inefficiently low compared to Los Angeles or Mexico City.

Query 2: Suppose Larry's party does succeed in regaining power, next week or in 2008 -- are we likely to see Larry in government again?

• Put new rules in place to break the link between lobbyists and legislation

• Enact all the recommendations made by the 9/11 commission.

• Raise the federal minimum wage to $7.25 an hour.

• Cut the interest rate on federally supported student loans in half

• Allow the government to negotiate directly with pharmaceutical companies for lower drug prices for Medicare patients.

• Broaden the types of stem cell research allowed with federal funds.

• Impose pay-as-you-go budget rules, requiring that new entitlement spending or tax cuts be offset with entitlement spending cuts or tax hikes.

If the elephants hadn't shit the district six feet deep all the way out to the last lane of the beltway, this feeble stuff wouldn't elect Jesus of Nazareth.

The High Dollar: President Clinton's Unaffordable Tax Cut
By Dean Baker

Everyone knows about George W. Bush's unaffordable tax cuts, the big tax breaks that gave millions to millionaires and billions to billionaires, but few people are aware of the even more unaffordable tax cut from the Clinton administration. That is because President Clinton's tax cut took a somewhat different form: an over-valued dollar....

Clinton did not start his administration with a high dollar policy. Lloyd Bentsen, his first Treasury Secretary, deliberately allowed the dollar to weaken in the first years of the Clinton administration, with the hope of keeping the trade deficit at a manageable level. ...The high dollar policy came into being under Bentsen's replacement, Robert Rubin.

Unfortunately, Baker doesn't really do much serious damage. In fact, his attack reminds me of the Moran gang's drive-by spraying of the Capone luncheon eatery. But read it anyway; stuff on this is so rare in the media, and hey, it's short. Then come back and I'll try to hit what Dean missed.

What, back already? That was quick. Okay. Number one: the high dollar means the strangulation of industrial America. The high finance boys have nothing against factories in the heartland paying living wages, except that this conflicts with the logic of profit maximization.

Number two: forget the 3 trill foreign debt gag. That's overrated. And forget the nonsense about inflation control (translation: wage control). And yes, imports will cost more if the dollar goes to where trade is in balance. But Dean misses the correct focus: this is a systemic problem -- all "north" currencies, all currencies of advanced industrial, soon to be post-industrial nations, are wildly overvalued against the currencies of the "emerging industrial nations." In fact, looked at dynamically, it's the euro zone that right now seems headed for the greatest squeezeout of decent jobs.

At any rate take this to the bank from both Dean and me: the war on good jobs is producing zillions more totally unnecessary "job casualties" 'round the globe than any one "respectable" seems willing to acknowledge. It makes the on going Iraqistani great caliphate suppression look like the Circus Maximus it is.

"With a working family majority in Congress this January, we have a chance to start addressing bread and butter issues."

Just thought you all would like to know the Clintonian-Rubinonian Wall-street-to-my-street hokey-pokey donkery is doing business as the friend of "the working family" once again -- well, maybe not everywhere, and certainly not for everyone, but at least around the union flacks.

After all it is the party that fed, housed, and promoted Hubert Humphrey, the biggest blob of protean bullshit God ever created.

Hey, they're the majority now -- so it follows that the whole flock of congo donk birds will turn as one to cadge dimes for the jobbery, even the blue dogs -- right?

When it comes to the all things to all people department, there's nothing like a jackass.

Here Come the Economic Populists
By LOUIS UCHITELLE

FOR years, the Clinton wing of the Democratic Party, exercising a lock on the party's economic policies, argued that the economy could achieve sustained growth only if markets were allowed to operate unfettered and globally.... the Clinton administration vigorously supported free trade agreements like Nafta .... Over time, this combination - called Rubinomics after the Clinton administration's Treasury secretary, Robert E. Rubin - became the Democratic establishment's accepted model for the future.

Not anymore. With the Democrats having won a majority in Congress, and disquiet over globalization growing, a party faction that has been powerless - the economic populists - is emerging and strongly promoting an alternative to Rubinomics.

We feel we have a stronger voice now in the deliberations of the Democratic Party.

Attention, job nation: don't wait around for the huge gravy wave. Even if the "populists", or at least these old manatees of unionhood, think they're back in the great game. They can't hit their weight. Let the evil bastards up there throw 'em a few big league curve balls and they'll be as hapless as a blind Dutchman. In fact the Times piece gets around to saying pretty much the same thing, by the end:

...[D]espite their relentless criticisms of President Bush's tax cuts, neither the populists nor the Rubinite regulars would try to roll them back now, risking a veto that the Democrats lack the votes to override.

... The threat of a Bush veto affects another piece of the Democratic agenda - an increase in the minimum wage. Both Democratic factions support a bill, to be introduced in January, that would raise the minimum wage to $7.25 an hour from the current $5.15. The increase would come in three steps, spread over more than two years, with the final $7.25 not reached until spring 2009 at the earliest.

That is the same $7.25 that would be effective today if Congress had given its approval when Senator Edward M. Kennedy of Massachusetts first proposed the increase in 2004. Yet Mr. Kennedy is the chief sponsor of the new attempt to raise the minimum, his strategy being that the $7.25, stretched out to 2009, is mild enough to be acceptable to Mr. Bush and many Republicans.

... Representative Maurice D. Hinchey, a Democrat whose New York district includes Kingston and other economically struggling cities, asserts that the federal minimum should be $10 an hour now. Going that high right away is unrealistic, he acknowledged, but in the Congressional debate over the Kennedy proposal, Mr. Hinchey will push to have the $7.25 effective no later than the spring 2008, not 2009.

"If I went out on the street in Kingston," Mr. Hinchey said, "and said to people that the minimum wage is not going up to $7.25 until 2009, they would say to me, 'That is all the Democrats are going to do? Why did I vote for you?' "

Even so, one must say, my my, how big media preceptions can revolve. Wasn't long ago Bobby Rubin was the dreadnought nonpareil of donk economic policy, and now, suddenly, scaley helot serpents spring from the depths!

Ya, ya, I know, we're just being taken on a cruise around the big circle back to nowhere -- but don't it pick up the story some, though?

Read all the way to the end, where he gestures vaguely at the Rangel-Pelosi "waver". Face it, Mark, for us mites of the jobbled weeblery, this new donk majority is nothin but a downhill mood race, a long run to bummerville.

When will these voices raised in decency start screaming "FOUL" at the Dembos for this filthy stowaway act inside the vast hope-tricked hold of the good ship SS Prog-America?

Hey, the party of rubber turkeys like Steny Hoyer and Baucus Maximus has no intention of betraying its corporate trans-nat backers, just 'cause a vast hunk of the electorate would rejoice and maybe even prosper.

The champion of the party's Right is one Peter Orzag, member in good standing of Wall Street empire's fast response team (donk division). He's coming back hard and soft at the same time, at the "neo-pops'" oafish stabs at a people's economic agenda. Before he closes for the beating, of course, up top there's the mandatory Clintonian candy-flavored poison gas blown out at us just to demonstrate "I know and feel your pain" -- you weeble-feeble jerknecked rubes, he adds in an undertone.

That out of the way, soon enough he's down to biz, using this marvelous pivot into attack mode:

[P]olicy makers who genuinely care about American families' well-being may be tempted to pursue measures... that interfere with the workings of the market, [such as] anti-trade protectionism, constraints on hiring and firing, regulatory protections for specific industries, outsourcing restrictions, or requirements that businesses spend a certain percentage of their payroll on health care.

[T]he evidence suggests it will ultimately harm the economy.

[L]eaving or compromising free trade policies [will lead to] monopoly, crony capitalism, and sloth.

Our man here from Rubinonia, having drawn up that horror show, counters with some helpful remedies of the non-market tampering, but of the gubmint tapping, tinkering, and tidying kind -- i.e. compensation schemes -- thicker, softer, gentler, job wreck collision mats -- paid for by Uncle's tax system, which, he adds, by the way, needs a little proggy tuneup.

Sorry, guys and gals... I can write no more about this -- this slop for blind goo goo chuckleheads. Not today, anyway. So i'll just leave you with Orzag's final zing:

Trying to shut down the process of creative destruction creates macroeconomic stagnation.

Some folks sense a bad tilt here: where's the AFL-CIA spokespersonage to give...balance?

Seems this dipsy doodle by madame Pelosi has elements of the Kos-tal artillary engaging in some "cross battery" firing. One side, battery Z:

http://www.dailykos.com/storyonly/2006/12/4/01326/8078

On Wednesday, December 5, freshman representatives will be subjected to indoctrination in the economics of fucking the people who sent you to Washington ... by Robert Rubin.

http://www.dailykos.com/story/2006/12/4/95838/6772

Some folk with an actual knowledge of Nancy Pelosi ... and of how Congressional events are set up and scheduled, have tried to stem the Lord of the Flies-like hate frenzy with fact injections, but the problem is that the left in this country has been so tainted with an unthinkingly reflexive, corrosive cynicism...

One hardly needs to wonder which battery has the heavier guns -- and which will prevail.

http://maxspeak.org/mt/archives/002715.html#more

Now to be clear, I like Nancy Pelosi just fine, I am thrilled that she is Speaker of the House, and I look forward to working with all segments of the party willing to work with me, including the Hamilton Project and the DLC.

As I put up at his site, If Moses can call a golden ass a golden ass -- is that enough? Do Aaron and his acolytes get to continue as usual? Or does Moses... thunder? Does Moses rain down ruination?

http://www.cato.org/pub_display.php?pub_id=6800

Allow me to hazard a few more specific suggestions about what a liberal-libertarian entente on economics might look like.... (zero) farm subsidies and other corporate welfare....

The president of Cato and the executive director of the Sierra Club have come out together in favor of a zero-subsidy energy policy.... A nascent fusionism on these issues already exists; it merely needs encouragement and emphasis....

Tax reform also offers the possibility of win-win bargains....The basic idea is simple: Shift taxes away from things we want more of and onto things we want less of.... Specifically, cut taxes on savings and investment, cut payroll taxes on labor and make up the shortfall with increased taxation of consumption.... And tax everybody's energy consumption.

...Gore has proposed a straight-up swap of payroll taxes for carbon taxes, while Harvard economist Greg Mankiw has been pushing for an increase in the gasoline tax.

Entitlement reform is probably the most difficult problem facing would-be fusionists.... Here, libertarians' core commitments to personal responsibility and economy in government run headlong into progressives' core commitments to social insurance and an adequate safety net. Yet a fusionist synthesis is possible nevertheless, for the simple reason that some kind of compromise is ultimately unavoidable.

First we have the de rigeur Yellow Peril schtick:

The greenback is sinking mainly because the United States runs an immense trade deficit with the rest of the world, especially East Asia. Countries like China, Korea, and Japan have an unhealthy co dependency with the United States. Their governments help their industries capture leadership in technologies, products, and jobs. They then sell America far more then they buy. However their central banks happily lend those dollars back to us, so that we can finance the trade deficit and keep buying their exports.

Huh? He was just talking about a deficit vis-a-vis Asia, so how did we segue into the dollar-Euro gyrations?

In fact, it's good for the trans-nats -- now an even stronger Euro will allow old Europe to share in the good-paying job demolition derby. The falling dolar readjusts the deindustrialization rate between the two advanced economies, since the dollar-pegged (and therefore also falling) east Asian currencies are "facilitated" in their "Asian invasion" of Europe.

According to Bob K, American trans-nats are hapless, myopic dupes of the heathen Chinese, since their low costs are

enticing US manufacturers to locate production in China to take advantage of the cheap labor, government subsidies, and depressed currency...

Of course, you write long enough, sooner or later you say something that's true. Here's Bob again:

Treasury Secretary Henry Paulson goes through the motions of pressuring the Chinese to let their currency trade like normal currencies, but Paulson doesn't really want that outcome...

Pure purple-spotted horse feathers. A run by who and toward what? it's pure piffle. A controlled rise of the yuan/rmb against all North currecies over, say, five years, to twice its present value presents no problem, if the North central banks do another accord like they did in the mid-80's for the final yen rise. This is easy as slicing a banana.

After much more of this gas-baggery, Kuttner finally gets to the heart of the matter, straight from Hamiltonian central:

Paulson's predecessor as treasury secretary in the Clinton administration, Robert Rubin, now a senior executive at Citigroup, confirmed to me in an interview that Wall Street wants only the most modest dollar adjustment...

Here's the peroration:

Due to our dependency on foreign financing of our trade imbalance, which in turn requires confidence in the dollar, we can't behave like normal countries... let our currency fall, and thereby make our products cheaper in world markets... improve the trade imbalance.

It gets worse: Bob wants us to Rubinize the federal budget, because "The precarious dollar is also weakened by the big federal budget deficits." That is, we buy overseas stuff with the tax cut money and higher take-home. Conclusion: cut, cut, cut. Mister president, tear down that entitlement.

Read Sirota's redaction for yourself, but sounds to me like a year's supply of bologna. As reported, and as I read 'em, each one sounded less and less like Brutus at the fall of Caesar, and more and more like Falstaff's account of his woodland "mugging " by Prince Hal.

It's really "vastly amusing," isn't it, as an ex-girlfriend of mine use to say, 35 years ago, after watching a string of farcical little pipsqueaks approach and try to impress her, on a Friday night in one of those early 70's era dating bar settings.

as Public Citizen's director of Global Trade Watch, Lori Wallach, demonstrates, holding up a giant compendium of NAFTA and WTO rules: "If there was 'free trade,' a couple of pages would do. This is about who write the rules. This is about corporate managed trade."

But may Johnny hit his one note again here? Despite Ralph hitting on the union and green beats, once again there's no mention of the overvalued dollar.

Okay, so it's one note -- but Keerist almighty, mates, its high C!

1. Trade is most prominent, but it may be the least important of my top five. Measures to protect better-paying jobs in the U.S. are feasible but only promise results to a limited extent.
2. Deficit dementia. The dirty secret in economic policy is that most economists, radical, liberal, moderate, and conservative, understand that the Federal budget need never be balanced, that moderate deficits can be sustained indefinitely. The implications of tolerating deficits of two percent of GDP -- over $200 billion in today's terms -- rather than a deficit of zero are huge.
3. Social Security. Forget "there is no crisis," the clarion call of anti-Bush campaigners. The new slogan should be, there is no problem. No benefit cuts are necessary for the foreseeable future. If anything, there is a projected shortfall of income tax revenue required to repay debts to the Trust Fund, as per current law, as well as for maintaining other Federal programs.
4. Health care. There is no crisis. There is, rather, huge projected growth in demand for an ever-expanding menu of treatments, and the burden of managing efficient, ample, and fair public sector finance of this care.
5. The Imperial Fed. Our true economic overlords, the Federal Reserve Bank's Board of Governors, have arrogated to themselves the right to ignore their mandate for full employment, elevating slow-growth anti-inflation policy over the unparalleled benefits of tight labor markets. Trade is important, but in the grand scheme of economic security, it is also a pigeon-hole.

He sent along these links:

http://counterpunch.com/quigley12292006.html

http://www.nytimes.com/2006/12/26/us/nationalspecial/26housing.html?pagewanted=1&_r=1&th&emc=th

... on the landlord economics behind the ongoing ploy to "cleanse" the Big Easy -- in this instance, by demolishing around 20k units in "the old projects" for wish sandwich replacements.

His comments and clipouts:

Third law of avarice: there's always more money in removal. Thus the Counterpunch piece:

"Lafitte could be repaired for $20 million, even completely overhauled for $85 million, while the estimate for demolition and rebuilding many fewer units will cost over $100 million."

"The way they were constructed, it's not law-enforcement friendly," said Lt. Bruce Adams... "All those entrances and exits. The fact that it's so condensed is causing the problem... with all the vacancies... you didn't know what was up the stairwell."

P.S. -- I must say, even for the Baron, this e-mail ended on a curiously tangential note: after a not surprising hyperbolic turn toward self-glorification -- "If it comes to a showdown, Jaybo, rest assured I'll be down there. I'll go back and fight, right along side my brothers and sisters" -- one wonders why he adds this: "Mark my words, if the cops attack in force I'll be the last Georgist standing! Death to all ground rent! Baratarian liberty for one and for all!"

Channeling the ole buccaneer himself?

Here's the Concord Coalition, whipping its lathered steed though every village and town of once-thrifty America, crying "The red ink is coming! The red ink is coming!"

http://www.concordcoalition.org/

The Concord Coalition is a nonpartisan grassroots organization dedicated to informing the public about the need for generationally responsible fiscal policy.

Former U.S. Senators Warren B. Rudman (R-NH) and Bob Kerrey (D-NE) serve as Co-Chairs of The Concord Coalition. Former Secretary of Commerce Peter G. Peterson serves as President.

Mission possible: in a mad fiscal panic and ignorant brute fury, cripple the FDR-LBJ social transfer system, like King Kong does that Manhattan IRT train in the 1932 flick.

Specimen -- I use the word advisedly:

It is often said that our political system only responds to a crisis. If that turns out to be true, our children and grandchildren are in big trouble.

• 2024 -- Social Security, Medicare, Medicaid and net interest consume all revenues; the deficit hits 10 percent of GDP.
• 2025 -- Net interest exceeds Medicare; debt held by the public exceeds 100 percent of GDP.
• 2035 -- Net interest exceeds Medicare and Medicaid; debt held by the public equals 200 percent of GDP.
• 2037 -- The deficit reaches 20.5 percent of GDP, exceeding the size of today's entire federal budget.
• 2039 -- Social Security, Medicare and Medicaid consume all revenues.
• 2041 -- Debt held by the public equals 300 percent of GDP.
• 2045 -- Debt held by the public equals 400 percent of GDP.
• 2046 -- Interest costs, at 21.6 percent of GDP, exceed the size of today's entire federal budget.
• 2047 -- Debt held by the public equals 500 percent of GDP.
• 2049 -- GAO model blows up because the economy is in ruins.

Why is it, when I read soft-shoe ballyhoo hokum like this, I see top-hatted Peter Boyle in Young Frankenstein, stumbling cane in hand and yowling in agony, "Puttin' on the Riiiiitz!"

http://www.prospect.org/print-friendly/print/V15/2/delong-b.html

...you will understand the wiring diagram of the Dem fiscal hawkery. Here's a teaser:

Clinton rejected the social-democracy strategy in favor of... the "Eisenhower Republican" strategy. Make economic growth the first priority. Attempt to get the Federal Reserve to be dovish on interest rates in exchange for seriously reducing the deficit. Take other steps such as trade liberalization to try to boost growth. Reform rather than expand social insurance so that you can argue that taxpayers are getting good value for what they are buying. Hope that these policies will boost investment. And make the Clinton legacy a high-investment, high-productivity growth expansion. If all goes well, a decade of rapid growth and a resolution of the deficit will open up new possibilities for progressive policy.

This was the strategy that Bob Rubin executed, first as head of the National Economic Council and then as treasury secretary under Clinton. Rubin's new memoir shows why he was able to do such a superb job, close to the very best job that could be done.

And oh yeah -- since it's the full Bob Rubin monty, written by one of his top suckling pigs, Brad deLong-eurs: while reading his narrative of the Clintonian fiscal high road, for the sake of a Millsian objectivity, banish this image from your memescreen:

Yep, that's Brad -- the Pugsley of the dismal science, if ever there was one.

http://www.citizen.org/publications/release.cfm?ID=7501

There certainly is a strong need for the United States to become a fair player in the global economy. But the new Democratic Congress is far more likely to help achieve that goal -- as well as the goal of its own re-election -- if it calls on the administration to not escalate WTO talks that are likely to lead to worsening income distribution at home and economic and social instability abroad.

In a recent CAP publication... a Clinton administration official who had previously advised the Mexican government on NAFTA has tried to make "The Case for Reviving the Doha Trade Round" of the WTO....

... the group seems out of step with the majority of the Democrats' base and progressive thinking worldwide on the WTO with a 2005 report even calling WTO escalation "critical to our future prosperity and security."

Well, how's this for openers: a firm fierce jabbing finger of scorn and derision at our Unitary Prez and top-kick decider. Nyaah, nyahh, you, like, suck at trade, duude.

http://www.ndol.org/ndol_ci.cfm?kaid=131&subid=192&contentid=254186

He's presided over a long series of blunders and lost opportunities for trade expansion.

...agreements ... marked by politically motivated attempts to polarize trade along partisan lines ... concentrate trade sacrifices in Democratic constituencies while avoiding reform of special privileges for Republican-leaning industrial and agribusiness lobbies.

In a country where loss of a job often means the loss of health insurance and pensions, and a calamitous decline in living standards, it's no accident that many Americans perceive national trade policy as indifferent and adrift, and don't trust their leaders to negotiate or enforce sound trade deals.

Okay. So now George and company have demolished huge hunks of our industrial base, like it's a college frat prank. What can we vital center types do to help? Wait for it:

Fortunately, key Democrats in Congress.... understand the false choices so often posed in the trade debate and are looking ahead toward new and fresh approaches... First, a short-term renewal of Trade Promotion Authority for the sole purpose of concluding the Doha Round.

In conjunction with a progressive farm bill, completing Doha is the best opportunity to capture new markets and jobs.

That's all well and good if you got a portfolio, or a top trans-nat executive position -- but for us just-gettin'-by on the job types, here's the real beefsteak: "a significant down-payment on a new social contract." A "down payment," get it? Not actual bigger, better, broader, faster-acting collision mats for the inevitable stream of losers -- and certainly not a full

comprehensive socal compact that includes universal health coverage, universal pensions, a reformed unemployment insurance system, and other economic security measures for middle-class families.

"Congress ... make(s) the support for health insurance and job placement now available to trade-displaced workers through Trade Adjustment Assistance open to all dislocated workers"

Pretty small beer, right? So far (and frankly, to my surprise) beyond egg-facing the boy emperor, these Dembo trogs don't seem to feel a strong and compelling need to stretch leftwards or down, toward us little angry folks, and paint themselves as the kind, patronly alternative to the Bushco steamroller. Mark my words though, they will, and sooner rather than later, I see a stampede a-comin' our way -- wise men bearing us... gifts.

It's only to be expected -- obviously a counterattack is needed since the prog-pop steamroller is crushing everything in sight, mind-share-wise. Alarm bells are ringing loudly. The orcs of magical liberalism, once so confidently streaming forth from the Clinton NewDem/DLC Orthanc are now in ignominious retreat, those marvelous gravy train years of the high 90's long forgotten by the jobbled masses.

But Third Way has the antidote. If you'd rather not wade thru any more Third Way swamp than you have to, here's a quick takedown by Tom Palley:

http://www.thomaspalley.com/

Now I know Tom's usually a far too ponderous grappler for real folks to dine out on, what with his smokestack English grunting and gripping and his all-too-conspicuous cast-iron union suit, but here his blend is oddly perfect.

And if that's still too much, here's some quick notes for my fellow ADHD types.

Thirdies message these lies till they feel like facts:

1. America's middle class is far wealthier than neopopulists believe or say.

   In fact, of course, the bottom 60%'s wages are sleeping on a 25-year rollaway cot.

2. The huge trade gap, despite clownish appearances to the contrary, is really the dark side of very good news for us jobbled second stringers, pikers, duffers and bottom feeders.
3. All that house debt is good for us, too!

Don't mind that big white thing out there up ahead -- it's prolly an ice cream barge.

http://counterpunch.com/roberts02192007.html

Paul's what you'd call an off-the-reservation 80's supply-sider. Like better-known guys who play economist/prophet of doom on TV, Paul likes to rage against the transnational project to de-industrialize America, job-strip the nation's skilled and educated, and generally run this graceful land down to Haitian status. That is to say, Paul is running with the right-flank libertarians as part of the present rising tide of national populism.

Unfortunately, his economics leaves much to be desired. Of course, as my dad, Wild Bill Paine, always said, "cheerleaders don't have to do the blocking and tackling, son" -- so I guess it don't matter much when Paul, trying to explain why the real global system just don't work like in the textbooks, writes of "the two conditions on which comparative advantage depends":

• Capital must be immobile internationally and seek its comparative advantage in the domestic economy, not move across international borders in search of lowest factor cost
• Countries have different relative cost ratios of producing tradable goods"

And as for number one -- having met the pillar, here's the post: for condition number one to hold, we would need to wipe out the entire international credit system. So the Roberts sine qua non conditions for international trade are a combination of the impossible, with the wildly, futilely excessive.

Having said that, though, I have to admit the piece is a nice attack on the shameless trans-nat shilling of one Michael Porter, of Harvard Yard and something called the Council on Competitiveness. Even if Porter's economics is barely press-room quality, at least he knows who's behind all this job massacreeing:

This argument [by the aforementioned Coun on Comp] shows that the report is written from the standpoint of what is good for global firms, not what is good for America.

It made some sense when General Motors claimed that what is good for General Motors is good for America, because when the claim was made General Motors produced in America with American labor. It makes no sense to make this claim today when what is good for a company is achieved at the expense of the American work force.

Seems like a long time ago now that blow-me Bill was able to sell his line -- "play by the rules and our party will do you for the rest."

That DLC joyride hit a big deep dark pothole, rounding the bend into the new century. Lotta geeps suddenly had a "this is all total bullshit" moment, and the Clinton line needs a makeover.

But the tower trolls' smiling hopeful apologists at Third Way offer -- what? The promise of a fresh deck? A new dealer?

Nope. Third Way has some new rules of the game for us.

TW proves to their own satisfaction that this old deck of ours ain't really stacked... well at least not so bad... at least, errr... nothing like so bad as these right out of Nowheresville, barefoot, ringwormed, new populists are trying to make out. But still, the junior woodchucks generously allow, we as "progressive realists" know there's always room for improvement. Excelsior, cries the pious monk.

If we can't change God's and freedom's deck, we can try changing, or rather mending err mending our own habits, can't we? So without any further delay, let's give a warm rube welcome to Third Way's tablets from the mountaintop, a new covenant with the Yahweh of international capital. Working title: from lunchpail, to laptop, to scrap heap in one continuous kaizen motion.

Step one: face it, it's not enough to work hard anymore. Now you gotta work smart too. In particular, forget a raise if you ain't got no 4-year college degree. You are headed straight downmarket, pal to Tiajuana wages. And oh, keep this in mind -- even after you aquire that 4-year sheepskin, better convert that student loan into a 401K as fast as possible. You're gonna need it, 'cause retirements are getting longer and the dance of death way way costlier.

And don't, whatever you do, look back, and don't look ahead. Because the old and infirm are growing faster and faster than the young and firm.

So, Third Way tells us, I got your job site strategy right here. Think portablity, disposability, scrapability. That's you, your job, and your benefits. Under the new "you're on your own, asshole" rules, from day one to night zero. And oh, you'll need to prefigure a dry-gulch retirement and health plan.

Well, what can we say? Brace for whitewater, gang. And don't blame the corporations, please. They're endangered species, the sperm whales of profit, and they have come under a new set of brutal market-inflicted rules, too, just like you -- poor babies.

In a nutshell: because the pirate gun is at their head, and the wolf is at their executive bathroom door, there can be no more Mister Nice Guy.

If you thought Mister Burns was a bummer, try 21st century market reality, as seen from behind the corner office desk. Can you spell merciless? This is not Madison Avenue hype here. Competition these days is really, really merciless. No more fat dumb and happy lifetime leapfrogging, no more generous pay envelopes at Santa time. There are too many lean and hungry Asian corporations, TW warns us, out there on the global prowl, ready to eat my lunch, your lunch, and your coffee break too, also your spouse's job and happy hour and.... In fact, you, all of you, can expect to get downsized and innovated out the back door, and sent off on a jaunt of ever less opportune job opportunities. Jack be nimble, Jack be quick -- and I mean 24/7, or Jack be sleepin' on a heating grate, cause Mister Moto bit off his balls.

To generalize the Third Way vision: we are now in a sea to shining sea, totally integrated earthwide economy, where its not enough to make something. Not at all. Production is for starvers. Today, only corporations that make themselves perpetual creators of neat new stuff can expect to meet the same payroll tomorrow they met just yesterday. So the Third Way rule of effective survival play: plan on hoppin' in and out of Strip Mall Tech, uppin' your skill bank, just to keep even.

You'll need new skeeeelz more often than a new car,to land on your feet at your new outfit. Oh, and by the way -- the outfit-to-outfit hop looks to be getting only faster and faster, and the skill set strips will be leaving you nakeder and nakeder.

Fuck Third Way and the horses' rules they rode in on. Come that inevitable next job whack, just shoot your boss on the way out and let the Clintonian effective-death-penalty state take care of you. At least you'll get three squares and central heat until you've exhausted. your appeals. And when the end comes, it'll be the most competent and effective medical treatment you'll ever get.

http://www.washingtonpost.com/wp-dyn/content/article/2007/03/05/AR2007030501440.html?referrer=email

Familiar with the buzz phrase, "creative destruction"? Here's how it applies to factory jobs: destroy a $25 an hour job, create a $12 an hour job.

Enter wage insurance, to head off resistance to this benign and laudable process. Plans are rife, but here's the great Schumer's version:

... cover almost any displaced worker of any age who loses a job for almost any reason and takes a new one for lower pay. Workers who make less than $97,500 [are] eligible... benefit... a maximum of $20,000.

the cost of the program... roughly $3.5 billion annually... could be covered by adding $25 to every worker's annual unemployment tax.

All nice and social-market like, eh? Sadism with a Swedish accent, one might call it -- except that the Swedes wouldn't have added the double injury of paying for it with a regressive flat tax. That's good old Amurrican know-how at work there.

Mother Clinton recently sent a letter to Fed chairman gentle Ben Bernanke, and (irony of ironies) also to that old China handjob, secretary of the Treasury Hank Paulson, registering her grave "concern" over Wall Street's echoing of last week's Shanghai stock market convulsions:

If China or Japan made a decision to decrease their massive holdings of U.S. dollars, there could be a currency crisis and the U.S. would have to raise interest rates and invite conditions for a recession.

If Russia made a decision to launch its nuclear missles fleet at the US...

Then there's the other howler --

the US would have to raise interest rates...

But this is all quite airy-fairy. Suffice it to say, if this letter is any indication, St Hill, if she ever returns to the White House, plans to use hysterics as a policy club.

What's the embedded objective here? consider the intro line:

As we have been running trade and budget deficits....

Try something like this on for size: "We must raise your taxes and cut your benefits. Given the terrible twin deficits, it's the only... prudent thing to do."

After all, they are... the nanny party.

The great lot bomb has not really exploded, so immediate swarms of houseless folks is not in the cards. It just can't happen that fast, given the specific mechanics of that market. But a great social crime was nonetheless committed here -- all foreseeable and, I suspect, in some important places, foreseen. In fact, any toadstool saw it coming, what with all that credit pumped into the house lots of America like so much helium; and sure enough, it's started to show its hideous second face, as these over-yeasted values collapse, but ever so slowly, like the world slowly drained after the 40 days and 40 nights of rain.

And like a bee's-eye multiple of that Biblical tale, many a family ark will be left teetering high and dry on a mountaintop -- in this case, a mountain of debt. Oh the wailing and gnashing of teeth this will bring. And since along the same lines as Jehovah's flood, this was a purely arbitrary willed cataclysm, perhaps the House of the people's representatives oughta start looking into its author, one Alan Greenspan, late of the Fed chair, by way of the Rand cult and a vote of confidence from Wall Street. Barney, start your Kafka penal colony machine, baby.

Hey, a guy can dream, right?

http://blog.aflcio.org/2007/03/16/12-miner-deaths-resulted-from-series-of-decisions-by-sago-owners/

Coal miners die often just because corporations must exploit them to make it all worth the digging and the dying in the first place.

Brad Setser's is the best site I know of to follow this protracted nightmare. Here's a recent snippet:

http://www.rgemonitor.com/blog/setser/183938#readcomments

The US current account deficit with Asia... is still rising, while the deficit with Europe and the NAFTA countries is heading down. Why? .... European currencies -- and the loonie -- have appreciated, while Asia has resisted currency appreciation....This pattern -- adjustment with Canada and Europe, but not with Asia -- was quite apparent in the monthly trade data....

US imports from China are still growing at a 20% y/y clip. Overall US imports from the Asia-Pacific are up by around 12% -- ....the US trade deficit with Asia is still rising.

What of old Europe? US imports from Europe.... up a bit less than 3% y/y in January.... The US trade deficit with Europe is falling.

And then there is Canada.... US imports from Canada in January 2007 were about 6% below what they were in January 2006. December 2006 imports were 10% lower than December 2005 imports."

Answer: they mostly leave it to their Wall Street owned Dem colleagues to take care of stuff in that area -- which leaves them enough time and "juice" to focus on tea and sympathy for its victims here.

http://www.tpmcafe.com/blog/coffeehouse/2007/mar/19/state_tried_to_stop_subprime_bubble_but_the_feds_shut_them_down

... where he ends optimistically with this:

The new Congress seems more willing to grapple with the predatory lending problem, with Congressman Barney Frank from Massachusetts saying he would introduce legislation to restrict subprime lending.

And the master Shylock here is not some latter day strip-mall tormentor of little Nell, but that inky-haired taxi dancer from Randmania, yes, I mean Alan of green stables.

http://www.cepr.net/index.php?option=com_content&task=view&id=1080&Itemid=8

To me, jobbling through profit-first private-sector America can't be done for under $20 an hour, without a sense of oppression on top of the for-sure for-sure exploitation, no matter the wage. But I'm prissy that way. According to the aforementioned mobility agenda at CEPR, a bum wage is anything paying less than about $11 per hour*, and their total on these deeply sunk wage smurf type jobs is 40 million, or about 1 in 3. Hey, 1 in 4 pay downright poverty wages**!

So what's this mobility mob's notion of a well-compensated job? One paying over $16 per hour (about four bits shy of the median) and in addition, has a serious company contribution to a health insurance plan, and at least some sort of defined contribution pension plan.

About 1 in 4 of us jobblers are holding down one of those beauties.

Ahh ain't this our America somethin'? Gotta love the place -- errr, if you can't afford to leave it.

**$9.83 per hour.

Throughout it all he conducted himself with a gusto and a sweatless elan worthy of that other hard-nosed runt named Bobby -- you know the supercilious half-pint with a heart of cold cream, the one that was about to save America from Amerika, till he got himself assassinated by a very early one-man anti-Zionist commando unit named Sirhan Sirhan for offering Tel Aviv all the jets they could eat....

But I stray, don't I? Back to the as yet unassassinated Bobby. Unassassinated, but nevertheless over. His ticket is punched. Not only is the guy in trouble, he's the mother Clinton of party political economics.

Don't believe me? Then read between the lines of this "think it all the way through" piece by my mentor, Robert Pendragon Kuttner:

http://www.prospect.org/web/page.ww?section=root&name=ViewPrint&articleId=12573

A blind spot in the usual story of the Democratic party's capture by "interest groups" is the failure to notice Wall Street as an interest group. In the usual media account, the obstacles to the party's modernization are such groups as abortion-rights advocates, blacks, gays, and unions. Candidates can score points with pundits for showing independence by taking on, say, the unions on school vouchers, or African Americans over inflammatory rhetoric (Sister Souljah), or civil libertarians over the death penalty (then-Governor Clinton's refusal to spare Ricky Ray Rector).

Such actions are said to show political courage by resisting "politically correct" politics and entrenched interest groups. But taking on the most powerful Democratic Party interest group of them all -- Wall Street -- is viewed as a sign of recklessness, unsoundness, demagoguery, and political suicide. A mark of Wall Street's ubiquitous power in defining the limits of the politically thinkable is that its power is hardly noticed. The personification of this power is Robert Rubin.

I write this after reading of the long-anticipated tariff slap the Bushco circus put on paper imports from the People's Republic recently -- and while announcing it, not dispelling notions of more such moves to come.

Important development? Not especially, but here's an inner story that might be, as told to us by the Gray Lady:

http://www.nytimes.com/2007/03/31/business/31trade.html?_r=1&th&emc=th&oref=slogin

Some lawmakers... complain bitterly that China unfairly ties its currency to the dollar which aggravates the trade imbalance....

American officials say there is no thought being given to citing currency policies as a form of subsidy....

For one thing, because the numb-nutz over at the DOC (donkey occupied Congress) for various and quite sundry reasons aren't pushing this "key" to the crisis. Start with Sander Levin of Michigan, chairman of the trade subcommittee of the House Ways and Means Committee: Hey Sandy, you stilted little fuckwit, where's the forex fiddle fit into your plans for saving the domestic auto industry?

Now let me tell you, forcing a revaluation on China would indeed be "world historical" and in the full Hegelian sense. Who knows -- might even begin a process that could turn around our 33-year industrial nosedive.

But don't hold your breath.

A friend once told me oh, four years ago, that we would be able to tell when the Democrats are on the upswing: it will be when Robert Kuttner decides that trashing other Democrats--not arguing about the future of a party, not arguing about a good society, not debating honorable adversaries, not thinking about policies, not discussing issues, but simply trashing other Democrats--is his Job #1.

Well, it must be that time.

Robert Kuttner trashes Robert Rubin."

The blog attack is on my close personal liberal friend Bobby the K Kuttner, who only just -- well, it seems like yesterday -- I bashed right here at SMBIVA with my trusty pigs bladder.

And for doing what? For mugging Bobby Rubin, the chef in perpetuity to the Clinton ear of the donkery, yes, boy scout Bobby Bondage, that baker of the flattest of policy souffles.

And behold, the final and consummate beauty of all this blog attack is by none other than Brad Delong himself, my man in the engine room, the Pugsley of the dismal science.

I wish I were George Burns, so I could ring out the last "exquisite' feature in this week's episode. For a guy like me it just don't get any richer than this. Donk egghead frenzy at its finest.

Relish as I do this final Brad Jr bloviation:

Kuttner, you see, is not in the information business. He is in the character assassination business.

He's just what the label and brand implies -- a dry 8-inch DLC cork for Uncle's budget bottle. I bet he's a parson's son like Dean Acheson. He even looks like a loan officer.

But I'm here to tell ya, he's up to date. This cuss loves the new mortgage market. Maybe he looks like he'd say "Sorry, Mr Chubb, we can't loan you that today. Why don't you go home and save your pennies and maybe come back when you can put down a real down payment?" (Imagine staring at that Adam's apple bobbing away as he says this.)

But he really don't say stuff like that, not about householders. Nope, he believes "Mr Chubb, you're going somewhere! So here's the loan you requested, and here's 20% more! Buy yourself some business suits, and the wife a new car!"

You see, the new "supply-side" trick play in town is not to cut top tax rates, and load the diff on payroll. Nope, among the banker progs that inform guys like Oby and the Kerry tree, the watchword is to raise middle America's debt nut.

I call it the peonage effect. Get the nut up to the max based on potential future earnings. That's right, chain these raw recruits to the corporate monkey bars for life. When you owe, baby, and all you got to sell is yourself and the domestic partner.... Debt will make 'em climb faster, even as the ladder slides out from under 'em.

But Uncle's borrowing? Well, pard, that is an entirely different story. Deficits incurred to increase social spending only makes life too easy for the jobless. Now if you tax-extract it from payroll.... that's different.

Get a sense of this porcupine? Here for your day's punishment is an article (or something like an article) he scrawled for the DLC last year:

http://www.ndol.org/ndol_ci.cfm?kaid=125&subid=163&contentid=253989

Message: the growing household wealth gap is the reward of virtuous savings and investing habits.

The main reason the capital gap has been widening -- aside from the effects of the recent tax cuts -- is that higher-income people have higher savings rates and a much higher likelihood of owning high-return investments, such as stocks and other forms of equity capital. For example, while just over half of the middle class has a retirement account, almost 90 percent of the top group does.

http://www.latimes.com/news/nationworld/world/la-fg-freeport21apr21,0,5229406.story?track=ntottext

Read in the LA Times how these globetrotting boyz expect to face down a sit-in strike at the world's biggest gold mine in West Papua.

The striking tribals are pissed that they get about $200 a month to extract metals in a boom market. Best part: it's all on their own land! Yup, the company has rogered these folks for nearly 40 years, and paid a fortune to local militia types to make their mission bigger and tougher all around, badder then the law.

Operations like this have that fine Mr Kurtz patina, updated to today's faster traffic.

The "free to choose" empire marches on!

http://www.nytimes.com/2007/04/24/world/europe/24yeltsin.html?th&emc=th

Boris N. Yeltsin, the burly provincial politician who became a Soviet-era reformer and later a towering figure of his time as the first freely elected leader of Russia....

As far as I can tell he was the protege of an ad hoc CIA/KGB security cartel that picked him out of the parade of political drag queens that the Gorby travesty -- picked him to be the king of topsey-turvey. The man leaped right out of a very large vodka bottle into the command chair of the world's greatest-ever national demolition job.

He imploded Russia's economy. His Harvard-engineered big bang not only ended Soviet stagnation, it blew the fucking place to rubble in a matter of 2 or 3 years. No slow step-by-step removal, just babooom! Down comes all the decaying crumbling edifice with one huge final "indignity", and after that he let the hounds loose. The conutry went straight into a bout of untrammeled, freebooting, swashbuckling, buccanneering horrors unseen among white folks since the British fleet shut down mainframe Caribbean piracy in the 18th century.

This dancing bear of a people's leader ran a whole nation the way mayors ran Chicago in the roaring 20's, and by the time the music stopped, the future of about half of Russia's households had been completely destroyed. He'd sent em back to the level of existence they'd left in 1861. Sur,e he made a few oligarchs "tycoon for a day", but by promoting one Langley-Wall Street stooge after another into the policy limelight, he managed to send Russia spiralling down so low the CIA unilaterally broke up the ad hoc cartel with the KGB, and flew home -- "mission accomplished, super power II is now a total fuckin' wreck."

And after all that -- after presiding over a wholesale poachers' slaughter and butchering of his beloved motherland -- after he'd let the bastards haul off the nation's ivory tusks to accounts in Switzerland -- the dear late departed Boris here had the gall to go out, slurring and boo-hooing and blithering his apologies for letting this pack of westernized wolverines shred the carcass of his nation's productive capacity and then piss all over its bones.

And yet, to his credit he was freely elected, not once but twice -- the second time in full Madison Ave carnival style.

Bye bye, you fuckin' drunken boob of a Wall Street stooge. They played you and rolled you like some lottery-winning rube that's wandered into a big-city cat house.

http://www.tompaine.com/articles/2007/05/04/missing_words_for_the_new_trade_debate.php

The gist: Uncle Sam is "bilaterally" levering emerging nations' legal systems, as much as their markets, into better vehicles for TNC penetration. Example: in these draft agreements, transnat "investors" gain the right to sue host countries, right there in the host's own civil justice system, for "damages" that result from said host gubmint's changes of laws and regulations. You might call it the criminalization of sovereignty.

Needless to say, it's all in the fine print and hardly new -- check out NAFTA. Which brings me to my quote of the day, from Mighty Joe Stiglitz, economist extra-ordinaire -- who sheepishly admits he bit into the NAFTA quick shuffle himself, while still a Clinton econ-con staff egghead:

It was only after it passed (NAFTA)that the potential consequences of this agreement became clear. Chapter 11 included a regulatory takings provision that allowed investors to sue states, with damages paid by the national governments.... If the United States signed on to an agreement without knowing what it was agreeing to, what did this say about other countries?

And after all, who can fault them for treating with these fritter-sized emergers this way? It's at least as even-steven as Uncle's agents in bygone days treated with his own little native red brothers.

Here's the house Dems' "new trade policy" manifesto, in bullet points:

http://waysandmeans.house.gov/media/pdf/NewTradePolicy.pdf

Remember the three little pigs and their anti-wolf houses? This is the one built of straw.

Just when you'd like to feed him to the woodchipper, leave it to ex-underwear model Dave Sirota to turn in a good tale:

... a handful of senior congressional Democrats and the White House - cheered on by K Street lobbyists - joined forces [Friday] to announce a “deal” on a package of trade agreements that could impact millions of American workers and potentially calls into question the entire election mandate of 2006 (I say potentially because the full details are still being concealed by both Democrats and the White House). You’ll notice the irony of the deal with just a glance at the front of the New York Times business section .... the deal was agreed to (though its details have still not been made public) on the very same day the U.S. government reported another widening of America’s job-destroying trade deficit.

If you want some background, here you go:

http://www.ase.tufts.edu/gdae/Pubs/rp/PB07-02WTOPovertyApr07.pdf

Congressional Democrats have been quietly negotiating with the Bush Administration to achieve a bipartisan consensus on trade, one that can move forward not only the Doha negotiations but the range of bilateral trade deals

....[S]ome congressional Democrats skeptical of the bilateral agreements seem willing to consider extending fast track authority beyond its current June 30, 2007, deadline if it will No. 07‐02 get a Doha deal done....

Congress should think twice before extending fast track authority to achieve a new WTO agreement. Most evidence suggests that the emerging set of tariff and subsidy reductions will have little impact on global poverty; according to the World Bank, the number of people living on less than a dollar‐a‐day will decline by less than one‐half of one percent with a Doha deal. More worrisome, some the world’s poorest nations may end up worse off, while some of the poorest people – small farmers – lose ground even in countries the World Bank predicts will gain from an agreement. Finally, the costs of liberalization to poor countries, particularly in lost tariff revenue on which they depend for key government services, make the new WTO agreement anything but friendly to development and poverty reduction.

Face it, America -- the jackass party is not only a war mule, it's also a cross border mule, carrying your job on its retreating back.

That trade growth pause the jobbled American majority voted for last November, is easily within the Dems' power to grant, simply by not renewing the Administration's "fast track" powers, which end this June.

The Dembo congress -- like with the Iraq gig -- can't claim "'tweren't us that done it," when your neighbor's jobless, and your raise went south. As of July, it'll be undeniably their baby too. So watch and laugh a bitter laugh as the Donkey Congos grant Cheney his fast-track renewal.

Unfortunately they ain't on a knife edge, poised above some lovely political abyss. Nope, as usual our federal power system is stuck on the same old, same old Orthrian teeter-totter. Up and down she goes, just 8 inches from the packed shit pile below.

Let's turn from this unedifying spectacle, for a moment, to another domestic "issue" -- our vast job- and wage-eating trade gap. Here's a second alert about the latest possible chance to build a people's speed bump on the road to zero industry. If nothing is done to renew it, the White House's "fast track" powers will soon expire:

http://en.wikipedia.org/wiki/Fast_track_(trade)

As mentioned here in an earlier post, this extraordinary congo-busting executive power to ram thru the people's representaive bodies any old Wall Street-crafted "international trade agreement" expire before the Fourth of July, unless they're rescued by an act of Orthrian magic.

So it's in the hands of the party in power over on the Hill -- the one with the long, all-hearing, twitchy ears. The party that in part has control over there precisely because its candidates claimed, most loudly, of course, in certain strategic open trade-blasted industrial districts -- to be the party of good job protection through "fairer" trade policies.

It just might come down to one guy, and who knows what runs the mind of fry-haired Charlie Rangel? On that, we 'll simply have to see what we see.

To be fair-and-balanced here, I feel I need to show the other hand. Maybe this sleaze treason won't be pulled off under the cover of nearly complete public darkness, as it seems the media has slightly noticed the issue recently

If you want to bone up on the stakes, I suggest this piece by union economist Tom Palley:

http://www.thomaspalley.com/?p=79

Getting fast track renewed or extended has a lovely parallel to the shootin' side of the GWOT saga, and is also of the very essence of our two headed governing beast.

In a related story, we find this very same Tom Palley, among others, trying to stir the frog pond of academic economists. It all seems to have started, improbable as it may seem, with an article in The Nation. Here's the best pull-together of links:

http://economistsview.typepad.com/economistsview/2007/05/a_role_for_hete.html

Upshot: the insider commanding heights of "the profession" are controlled by -- what else -- the society of sons of market liberty. But here's The Nation's scoop: seems these bold marketeers are willing to use "mafia tactics" to keep down skeptics and push outright heretics to the prestigeless margins.

Perhaps you're asking, "Just how, Owen, is this related to our killer trade gap and fast track?"

Summit orthodox econ-cons sing in all voices, "the best national markets are open national markets. Ergo, open wide, America, and take your medicine." The logic loons ask us to see that the best of all possible worlds requires we open up our national markets and let the TNCs bounce us jobblers back and forth till we ding so many profit bells for them that we all, at long last, feel like the "liberated" pinballs we are.

http://www.nybooks.com/articles/20275

Most Americans are troubled by the culture of dealmaking and financial engineering and insider self-enrichment.... by the callous treatment of workers and work life.... by the erosion of communities and community institutions.... Not very far below the political surface, most of us feel some version of the same vexed ambivalence toward corporate America -- dazzled by the conveniences and comforts it delivers, yet resentful of the tradeoffs that it continually demands....

I think his last shot catches this moment in America well, as the brewing winds of job site rebellion start reaching higher up the class tower, toward the penthouse corporate goblins, and out into the still nominally independent offices, labs, studios, and campuses of all our wonderfully creative symbol makers and shakers.

...it is hard to imagine... a fundamental transformation of these giant institutions. It is even harder to imagine a better world in which they remain essentially what they are.

But there's no end of fallback diversions. Handy exhibit, from the WSJ:

http://online.wsj.com/article/SB118177155165934441.html?mod=hps_us_insid

Bush adviser and prof at the famed Amos Tuck school of bizzzennnesss -- obviously both a scholar and a gentleman -- suggests that to reduce inequality, Uncle just up the payroll taxes on the above median wage workers and eliminate them on the bottom half.

Nice, eh? It's right out of the Greg Mankiw school of Mephistophelian grand rube bargains. One hopes even that Solomon of top decider-presumptives, St Hill, won't jump on this poison class wedge remedy. Doesn't seem likely. She might possibly just restore the status quo ante -- slap back on the Clinton 200k-plus tax rate structure, and administer a little whack to the top -- what, 5%? Not exactly the merit-class breadbasket, but surely its hubris elite.

What none of 'em will do is whack the donor class, with reversals of all the "incentivizing" tax cuts her hubbie and George Jr gave the capital-gains club.

Ahhh them one-percenters -- they sure can rock!

Bono, HUD Secretary to share stage

U2 front man Bono is everywhere these days.... the rock star plans to attend the Mortgage Bankers Association's convention in Boston this fall....

Bono -- perhaps best known these days for browbeating world leaders into doing something about poverty and AIDS in Africa -- won't be performing at the MBA convention. He'll be delivering a sermon... I mean the keynote address.

Hmmm... suppose he'll touch on the problems in subprime lending? Or just deliver a standard "call to action" pitch to enlist support for his "One Campaign to Make Poverty History"? It's easy to make fun of Bono's sunglasses, but the guy IS practically a saint.

The other thing that's a little strong is that line about "browbeating world leaders into doing something about poverty and AIDS in Africa." What exactly has yer man browbeaten these unspecified "world leaders" into doing?

Let all bearers of that most peculiar of commodities -- themselves -- come to Amerika like Kafka's figment does.

If "they" come here, then jobs stay at home . And even if we native-born don't fill 'em -- what's the net loss down-side-wise? And we can org 'em into unions if they share our freedoms, whereas back home they might get disappeared for doing such a naughty thing as trying to act collectively.

I say better the exploited wagery of the world unite here to fight the great class fight . Aren't we are all class brothers and sisters? Let's see to it the creators of all value get to capture a bigger share of the benefits of trade . Let's beat the trans-nats to the punch . Let's open the borders to our compadres. Through mobility at least equal to capital's, we have a higher wage to gain .

Look, the worst thing that could happen to Democrats is for voters to conclude that there?s no real difference between the parties, that when you replace Republicans with Democrats, all you do is replace sweet deals for Halliburton with sweet deals for hedge funds.

Now there is no need to get freaky about the DLC, except when they peddle bogus accusations of anti-semitism. (For that, Ford deserves to get slapped upside the head with a wet mackerel.) They are an indispensable part of the party. They are big generators of ideas (I started to write generators of big ideas). They bring resources to the table. I am happy to work and commune with them, where possible. I happen to think that in terms of basic principles of policy, they are pointing in the wrong direction.

In a nutshell, we need social-democracy at home and non-interventionism in foreign policy. The public isn't ready for that yet, but it can be led in that direction. The idea should be to unify the country around something worth following.

Link

Says her deputy campaign manager Bob Nash, "She'll be as tough as any Republican on our enemies." And on our friends, he might have added, if they don't shape up. At the Take Back America conference in June the candidate drew boos when she declared that "the American military has done its job. … They gave the Iraqi government the chance to begin to demonstrate that it understood its responsibilities. … It is the Iraqi government which has failed."

Well, maybe not right away on foreign policy, and given her voting record, maybe not ever at all. So okay, she might have the juice on social democracy.

As she runs for re-election to the Senate from New York this year and lays the groundwork for a possible presidential bid in 2008, Mrs. Clinton is receiving hundreds of thousands of dollars in campaign contributions from doctors, hospitals, drug manufacturers and insurers. Nationwide, she is the No. 2 recipient of donations from the industry, trailing only Senator Rick Santorum of Pennsylvania, a member of the Republican leadership.

That's one dubious disctinction, taking second to (former senator) Rick Santorum. The main problem with her from any "progressive" policy perspective is that she doesn't support single payer health care.

Public opinion is well ahead of Senator Clinton on health care and Iraq. I really don't think it's a question of leading them. For all the love heaped on Edwards and Obama, it's higly likely Senator Clinton is going to be the Democratic Party candidate -- and the DLC shows no signs of attempting to moderate her positions. So maybe getting a little 'freaky' about their influence is a good idea. And far from being indispensable, there's no way to get rid of them (short of turfing many Democrats out of office). There's no one in Democratic establishment who can seriously put a check on her or sway her if she decides to pursue a militarized intervention policy and cater to the health care profiteers. The Democrats and their voters are stuck with that. Pelosi and Reid aren't going to get all radical. Sweet reason and hard facts mean very little to them to begin with and once they lock in the votes, they mean nothing at all. I do understand that many Democrats do "believe in science", i.e. evolution is not evilution, global warming is not a hoax, vaccines work and so forth. But when push comes to shove. . .

"Raising retirement age or reducing benefits can't be ruled out if the Social Security system is to be saved from going bust, Rep. Charles Rangel said yesterday. 'All of these things are on the table to find some way to make certain that Social Security is solvent,' said Rangel, who is poised to take control of the powerful House Ways and Means Committee."

Link

Too much pragmatism will keep the country stuck where it is now -- prone to precipitous military adventures, diddling with the health insurance industry, upholding homilies about personal responsibility in a labor market where work doesn't pay and individual financial risk worsens.

This is certainly true. But neither idealism nor constructive contributions to a policy debate, nor any effort to help with a platform has worked. Some of very best have tried that. It has repeatedly proved useless. The Democrats who might wish to consider something besides a capitulationist "go along to get along" strategy are at the mercy of aisle crossers, dive artists and right wing thugs within their own ranks. The Republicans have had plenty of help. Building a credible threat is a better option, which for politicians means threatening their ability to get themselves elected.

It's not surprising that Ole Possum Brad Delong jumped aboard the Greenspan retro express – so has everyone else, from NPR's Philly thistle lady to Jon-boy Stewart.

But then again, Mr Delong is an expert on macro high policy. Hence his well-placed recent review in the LA Times of Herr Poison Pill's ghosted memoirs. To his everlasting discredit, Brad's taken this opportunity to produce a work of wondrous blend -- a toast to the great man, hoisting a cocktail glass filled to the brim with a pusillanimous mix of pomposity and cop-out humility.

Here's an example: according to Brad, he, the great Delong, was outthought, outjudged, out-wisdom'd by the fearless Fosdick of fiat credit 5 out of 6 times on key turning points in credit policy. Yup, Greenglue got it "right" 5 out of the 6 times these two mighty heads disagreed on "direction".

Now of course they mostly agreed. In fact, 30 out of 36 times they agreed, during Alan's 18 years at the Fed's tiller, but the one time Brad was right and Alan wrong finally came in the summer of '00 after the dot.com.pop. When Greeny "waited for more information to see how much the fall in stock-market values would affect high-tech investment spending before he acted," Brad would have dropped his rate pants right then and there, not waiting for the inevitable thud of falling corporate plant and equipment expenditures.

(NB: Alan waited much as gentle Ben "waited" after the mortgage pop, when we all knew it would affect housing construction.)

Here's Brad on the two times he figures Greenspan fucked up big-time -- the twin bubbles, tech stocks in the late 90's and house lots in the early 00's: “[These]two counts could be considered economic felonies.” Greeny claims he faced a cruel policy dilemma. According to Brad, Greeny figured

... he could have aborted the stock market and housing bubbles of the late 1990s and the early 2000s but only by paying an unacceptable price in idled factories and unemployed workers.

Here's Brad's take: "He may be right and he may be wrong in this judgment -- I don't know .... Imagine! Here's Mister Blabbermouth ready with a bold opinion on everything under the midday sun, now faced with a real deep test of his science and he -- what -- he plops out totally!

The whys of this sudden drymouth Sergeant Schultz-like "I know nossing, nossing" are prolly best left to the cui-bono boys to weave into a nice squalid pattern. I'll merely suggest even a casual look at any halfway detailed flow chart of how credit streams into both these "investment sectors" indicates several very clear, very simple, but profoundly efficacious cinch points, where pre-emption of market bubbles is possible way before they even emerge. Policies and regultion that are bubble prevention methods can be done – Hell, I could do it, it's that easy.

Smart market-specific timely regulatory interventions in the tech stock market and the house lot market in both cases would have removed the threat before either had a chance to blast the real economy. But then again, these mad Paine-type interventions would also pre-empt any sly moves by all those sharp fellahs out there, ever ready to exploit new wrinkles and loops to make additional tons of speculative fraudulent and sterile money.

After all, in the last analysis, it's not about the economy, stupid – not at all -- is it? It's about headline profit players, both winners and losers. It's ultimately all about the top carny's boodle, and not a bit about the bottom rubes' pocket holes.

http://robertreich.blogspot.com/2007/09/way-to-prevent-looming-recession.html

With the economy heading for recession... the question everyone is asking is how much [will] the Fed... cut short-term interest rates to stimulate the economy.... But a Fed rate cut won't stimulate the economy....[I]f a Fed rate cut can't prevent a recession, what can? Putting more money into Americans' pockets by cutting their taxes.... middle and lower-income Americans spend more when their taxes are cut... the biggest tax they face is the payroll tax.... the payroll tax needs to be cut ... exempt the first $15,000 of earnings from payroll taxes .... starting as soon as possible.

With a recession looming, Democrats need to stop being the party of Herbert Hoover economics.

More from the undauntable, 12-handicap R. Reich, former Clinton policy caddy, now chasing after the dembo-chiefs' golf cart, yelling with no effect -- "see that five-iron of mine on 13, guys?"

Bobby's club of choice for the present prog sandtrap lie? Forget lagging it up -- go for the pin: a net worth tax!

His words:

An annual wealth tax of one half of one percent on net worth of people holding more than $5 million in total assets.

Fore! Bob's playing through.

What's the equivalent, for our secular Sodom, of "Allah is merciful, Allah is great” in the land of Saud and Sand? I think it's something like this: "What's good for the TNCs* is good for us all."

Ask yourself next time you reach a fork in your head -- "How will this choice, properly made, help the TNCs?" -- and take your path accordingly

--------------

* Trans-national corporations, of course.

Imagine the TNC-donks had a designated double-domed mouthpiece -- who would it be but Larry Summers? His occasional columns in the Financial Times show us the momentary wind direction at the corner of Wall Street and Pennsylvania Avenue.

I think it's shifting. Take a look at this compaction I've redacted from a redaction at the site of mild and moderate Mark Thoma: http://economistsview.typepad.com/economistsview/2007/10/summers-how-ame.html

The vast majority of the US current account deficit is now being funded by central banks accumulating reserves as they seek to avoid appreciation of their home currencies ... Some means of engagement must be found with those who have yolked their currencies and so their financial policies to that of the US...

Maintaining global financial stability and the role of the dollar requires a more strategic approach -- a task that, given the political calendar, is likely to fall to the next US administration.... [The international system of exchange rates] needs to be radically reinvented .... any new approach must be premised on the desirability of a strong, integrated global economy that benefits the citizens of all countries, not on the idea that economists or politicians can calculate “fair” exchange rates....

The right and potentially effective case for adjustments in the current alignment of exchange rates relies on their unsustainability and the distortions they induce in macroeconomic policies, not on ideas of fairness to workers....

Multilateralism is better politics and economics than unilateralism but it must not become an excuse for inertia. Any new group should be as large as necessary and no larger, should meet with some frequency and should include central bankers. It should be analytically informed but everyone should know that key decisions will ultimately be taken by senior officials in the national interest, not by international organisations.

Will Larry get the job? If he does, we "workers" -- to use his word for us -- are in for a whole lot of nothin' good.

Larry Summers has banged the drum and shaken the rattles -- the Starving season cometh swift upon us: "The odds now favour a US recession!" He speaks in charcoal gray of course, but the content is unmistakable: it will "slow growth significantly on a global basis."

Now you all prolly agree with me that this Crisco-faced prick with eyes as sharp as diamonds carries behind that face a brain as close as one gets these days to a thinker in chief, a maker of medicine memes within "the plain folks' party". He's "our doc macro" for such as follow the lead of the Clintons and Obamas and Edwardses and so on. So when he sees a real good shot at a bluesy future for "the rest of this decade and beyond" -- well, it ain't, er, hopeful. Example, Homer family-wise: "Nationwide, house prices could fall from their previous peaks by as much as 25 per cent over the next several years." Ugga-bugga!

Now Larry has his remedy ready of course. I'ts got plenty of angelic detail, no doubt, but here's the short version: "Feed the credit hogs, feed 'em good, feed 'em fast and furious, give the fat fuckers all the Uncle sucker support they want" -- but make sure you wear a sober censorious sceptical expression while you do so:

"We do not have comparable experiences on which to base predictions about what this will mean for the overall economy, but it is hard to believe declines of anything like this magnitude will not lead to a dramatic slowing in the consumer spending that has driven the economy in recent years....it is now clear that only a small part of the financial distress that must be worked through has yet been faced.... These figures take no account of the likelihood that losses will spread to the credit card, auto and commercial property sectors. Nor do they recognise the large volume of financial instruments that depend for their high ratings on guarantees provided by credit insurers whose own health is now very much in doubt.... [T]he capacity of the financial system to provide credit in support of new investment on the scale necessary to maintain economic expansion is in increasing doubt. ..The extent of the flight to quality and its expected persistence was powerfully demonstrated last week...."

Sum up of the action ahead:

"Banks and other financial intermediaries will inevitably curtail new lending as they are hit by a perfect storm of declining capital due to mark-to-market losses, involuntary balance sheet expansion as various backstop facilities are called, and greatly reduced confidence in the creditworthiness of traditional borrowers as the economy turns downwards and asset prices fall."

"Then there are the potentially adverse effects on confidence of a sharply falling dollar, rising energy costs.... lower global growth as economic slowdown and a falling dollar cause the US no longer to fulfil its traditional role of importer of last resort."

"In such an environment, economic policy needs to be governed by the clear and public recognition that restoring the normal functioning of the financial system and containing any damage its breakdown may do the real economy is the central macro-economic and financial challenge facing the US."

"means the Fed has to get ahead of the curve and recognise – as the market already has – that levels of the Fed Funds rate that were neutral when the financial system was working normally are quite contractionary today."

... and not to Republican favorites that won't spend it, but to "low- and middle-income families" who will .

Larry quickly gets to the crux: let's not punish the evildoers!

"The time for worrying about imprudent lending is past.... The priority now has to be maintaining the flow of credit."

"There needs to be a comprehensive approach taken to maintaining demand in the housing market to the maximum extent possible. The government operating through the Federal Housing Administration, through Fannie Mae and Freddie Mac, or through some kind of direct lending, needs to assure that there is a continuing flow of reasonably priced loans to credit worthy home purchasers. At the same time there need to be templates established for the restructuring of mortgages to homeowners who cannot afford their resets, so every case does not have to be managed individually."

"The current main policy [Republican] thrust – the so-called 'super conduit', in which banks co-operate to take on the assets of troubled investment vehicles – has never been publicly explained in any detail by the US Treasury."

"On the information available, the “super conduit” has worrying similarities with Japanese banking practices of the 1990s...."

"for lack of transparency, suppression of genuine market pricing of bad credits, and inhibiting effect on new lending."

"Perhaps there is a strong case for [the super conduit] but that case has yet to be made.

Credit card debt is on the move -- up. Recall that usury destroyed the Roman republic. Oh, and recall this: the limited liability corporations have a de facto social contract with us ... their hired class: "we'll lend you what we won't pay you."

He belongs with Jerry Lewis, Matt Lauer and George Steinbrenner as a pomposity quartet riding in ticker tape parade down Wall Street -- ass forward, hands cuffed -- on clopping big-hooved sway-backed mining mules. And for garnish each can wear a ceremonial -- just pretendin' -- noose around their necks.

Here's Newz' latest sand-dance nullity, a typical banker's waiterlike suavity, as he clatters open the platters of skunk roast:

http://agonist.org/stirling_newberry/20080118/relief_restructuring_stimulus

Now don't get me wrong -- this isn't Babbitoid, Reagan-rides-again shit. This is the Ganymede of the prog wing of haute bankery speakin' easy here -- he's got the art-deco "Yes, buddy, I can spare a dime" gig down pat:

"In the present circumstances, the best relief program would end the tax breaks for the wealthy and shift that money in the short term to buffering groups hard hit by the economic downturn.... Tax credits and so on are, almost by definition, not the best way to do this, because they give money to people who already have jobs."

"[Tax rebates] violate one of the most important liberal principles: demand spreading. Demand spreading means, all other things being equal, it is better that more people have some money, than some people having more money. Social Security is based on this principle as is the liberal theory of government starting with FDR."

"As soon as a candidate, caucus or program makes "tax relief" its center, it is already marching to the right"

More than anything else right now -- first and foremost -- the fed gub needs to provide just that, "tax relief", at least to the tens of millions of "wage-challenged" households; and how else but through huge rebates out of the social security rip tide? That's a move to the right? Why? Because it starves the public beast? Lowers the cap on uncle's spending?

Folks, if the last 70 years of macroeconomics teaches us anything, it's this: there is no sane cap on uncle's spending till we hit purely frictional unemployment -- i.e. under 2%. And we got miles to go before we sleep.

Sum-up time? Oh no, not yet, there's more, way more. For one thing Newbie is playing John the Baptist for "a massive bank bailout," and he calls for "a stronger dollar" -- yes a stronger dollar, the present horror in the rust bowl isn't enough, I guess they all need to be jobless before we "liberals" can spread a little effective demand their way -- or should I say our way, the liberal way, the way of a hearty handout, not a job.

Sterling Blueberry is about as sinister an overaged Manhattan deb-party smarm sissy as ever laved locks. You figure maybe he's not Wall Street's poison apple pedlar? Well try this on -- it's his ultimate nightmare: selling "Wall Street to Dubai one bank at a time." The horror!

PS -- for those in need of a 5th Avenue homily, improving in some ways on Polonius:

"While we should never shy away from borrowing when we need to, and spending what we must, we should always be seeking to borrow and spend the least necessary, not the most possible. It's better go keep credit good, it is better to keep the money in the hands of the general economy, and it is better for Government to pursue plans that generate enough economic activity to support those plans by the increased tax revenues that come with increased activity. While nominal deficits aren't to be feared, actually downward spirals in the national debt - where the debt is growing faster than our real ability to pay it back - are to be avoided except in cases where swastikas and rising suns are actually blooming around the world, and not just in the imaginations of the 101st fighting keyboarders. Relief can be expanded by ending Iraq and ending tax breaks for the very wealthy. Restructuring can be best pursued by ending the weak dollar policy."

Note carefully the list of Shylock's long-eared people's elves below.

Where's the mandatory prison terms for the "corporate" looters that rigged this slurry up in the first place and last?

http://www.senate.gov/legislative/LIS/roll_call_lists/roll_call_vote_cfm.cfm?congress=109&session=1&vote=00044

http://clerk.house.gov/evs/2005/roll108.xml

The yuppie jacquerie is stoking resentment against people who took out home equity loans. Some of the borrowers were undoubtedly villainous, but most of them were borrowing to stave off financial crises. Given the lack of pay raises and the increases in cost of living, going under was only a matter of time for them, once the bubble burst. Now their failure to keep payments coming is starting to affect the equity of "real people" and the yuppies are wondering how anyone could be so irresponsible as to do something to depreciate the assets of the chosen merit scholars.

The eventual meltdown was anticipated and fucking predicted. Hence, the Bankruptcy Bill. These are the Senate paragons of actually existing liberalism who joined hands with their wingnut colleagues to get it passed. Senator Clinton thoughtfully failed to vote.

 Baucus (D-MT)
 Bayh (D-IN)
 Biden (D-DE)
 Bingaman (D-NM)
 Byrd (D-WV)

 Carper (D-DE)
 Conrad (D-ND)
 Inouye (D-HI)
 Johnson (D-SD)
 Kohl (D-WI)

 Landrieu (D-LA)
 Lincoln (D-AR)
 Nelson (D-FL)
 Nelson (D-NE)
 Pryor (D-AR)

 Reid (D-NV)
 Salazar (D-CO)
 Stabenow (D-MI)

http://www.ft.com/cms/s/0/ae9ef538-ccf2-11dc-8df7-000077b07658.html

"It is critical that sufficient capital is infused into the bond insurance industry as soon as possible. Their failure or loss of a AAA rating is a potential source of systemic risk."

"Probably it will be necessary to turn in part to those companies that have a stake in guarantees remaining credible because they have large holdings of guaranteed paper."

"It appears unlikely that repair will take place without some encouragement and involvement by financial authorities."

Along the trail, lord Larry mentions my ex-boss, that moonpie-faced, baggy-pants "ahh shucks" happy billionaire and longtime ladies' man (tried to snake my girlfriend into his jet once with hints of lobster newburg) -- of course I mean Warren Gamaliel Buffett. Here's Larry:

"While attention to date has focused on capital infusions into existing institutions, it would be desirable for capital to be injected into new institutions that do not have the legacy problems of existing ones and can meet the demand for new lending.... Warren Buffett’s recent entry into bond insurance is an example."

I'm hardly the first to note this, but New York Fed chair Timothy Geithner -- a geeter with a hand directly on the heater, so to speak -- just shit his pants in public.

Telltale smelly excerpt:

"The U.S. economic and financial system is undergoing a very challenging period of adjustment and we are likely to be living with a high degree of uncertainty for some period of time about the ultimate magnitude and duration of the slowdown underway"

This is the face of the credit crisis in action: David M. Rubenstein co-founder of The Carlyle Group, private equity personified and prolly still making it at both ends.

http://www.bigthink.com/user/david-rubenstein

Well, read here how he's dumping his stale leverage play on mortgaged-backed securities. The downward cascade proceeds apace. Basics of all these fandangos:

"The fund was set up in August 2006 with roughly $670 million in cash from Carlyle's owners and other investors, and about $300 million in additional capital raised from a public stock sale. The capital allowed the fund to go to banks and borrow far more, leveraging its cash investment some 20 times into the portfolio."

"As the market value of the Fannie Mae and Freddie Mac securities has dropped, Carlyle Capital's lenders asked it to increase its cash equity from what was 1 percent to as much as 5 percent"

"In a statement, Carlyle Capital said that it had been unable to meet margin calls in excess of $400 million over the past week and that it expected its lenders to take control of its remaining assets."

"The lenders, headed by Deutsche Bank and J.P. Morgan Chase, began selling the securities last night..."

"But Owen!" you cry, "Check out this right here in the New York Record (American)":

Split Is Forming Over Regulation of Wall Street

WASHINGTON — As Congress and the Bush administration struggle to contain the housing and credit crises — and prevent more Wall Street firms from collapsing as Bear Stearns did — a split is forming over how to strengthen oversight of financial institutions after decades of deregulation.

Orthrus' two heads -- it would appear -- "strongly disagree about whether, after decades of a freewheeling encouragement of exotic new services and new players like hedge funds, the pendulum should swing back to tighter control."

A real combat?

No no no -- a thousand times no.

The lords of Wall Street fully realize they need to produce another ritual mouthwashing and hot-tub scrub show, to quench ignorant but red-hot helot wrath.

This domestic partners' spat between the two heads is merely to make it look like the new universal reg harnessing about to be fashioned and applied will be forced upon the mightily resisting stubborn know-nothing bad ole boys of lower Manhattan, because it's so full of sharp bits and tight cinches that once on and under firm weeble rep guidance -- why, the cuffs'll never ever again traduce aunt rentier.

To get a notion of what's in store for us, I suggest we all reread some prog hip version of the life and fast times of Nelson Aldrich Carter Glass and the origin of the Fed.

We all know, by now, that we live in a nation that has a fast-disappearing industrial platform. Once the home of a mighty factory system, the envy of all the world, we now must now live off Asian-sourced industrial imports, and buy them with what amounts to trade credits no less, while more and more good domestic jobs and high wages simply roll off a cliff into the Pacific ocean, to wash up on the other shore.

My fellow Americans, welcome to the world that James Earl Carter, the Wotan of the peanut belt, brought us.

Yes, 'twas during the watch of a Democrat the fatal blow was struck -- a member of the party that rescued America's production system from its own financial toxins 'way back when Johnny "air pirate" McCain was still shitting his short pants.

Recall the one piece we collectively retain from back then, at least in our mainstream media's living memory -- the age of wild, raging, highball express, wage-push inflation. By the midterm fraggulation election of '78 it was very very clear to all us prudent Dembots that something had to be done.

Conventional answer: apply the credit brakes, and the credit brakes wrre duly applied.

But did we really need to? Could we instead have engineered a systemic morph -- a breakthrough? Instead of the heavy dose of good old cod liver oil we got, could we have actually instead morphed the system, sublated the bidness world as we knew it, and headed off toward a far far better place and time?

In any case, we didn't. We got the Volckerdaemmerung and the rest is but a gathering plebian misery.

At left, our boy, tall Paul, the master of the pythonic credit hold, right there in a group shot of hi-fi regulators taken not too long ago. He's the big one in the middle, next to Alan of Green Bubbles.

Take a moment to savor his oafish countenance. This bastard put our credit system into the most vicious figure 4 submission hold in post-New Deal American history.

Deepsighted as usual, Father Smiff dubbed him Fafner, the giant co-builder of Valhalla, and eventual dragonic keeper of the golden Ring. Indeed Volcker's tale has a Wagnerian similitude to it -- not like that long-measure, open-measure, Rhine-flows-on theme at the beginning of Das Rheingold. More like the the ring of ten thousand sledges or whatever it is in this case(*), blamming away at industrial America, hammering it into a million shivers -- but I digress. My real point is quite anti-Wagnerian.

We at the time had a shrewd dwarf, Abba Lerner, shown left, with a very big and complete answer to our inflation rampage. If Jimmy had only listened to him, instead of allowing that jumbo Princetonian dolt to crush the dynamo out the then spiraling wage/profit race up the price pole, and slam it the age-old way -- with a hard-money credit constriction so tight it knocked the pips out of tumbling dice in Las Vegas and brought on, with the inevitablity of a Teutonic curse, by the intricate concatenation of its own internal workings, the doom of American manufacturing.

But the very different and renewing alternative was there for the taking. Instead of destroying industrial America in order to save its ultimately parasitic corporate extraction system form, we could have listened to the shrewd dwarf and rigged up a new-model industrial economy, and in short,fairly cheap order, too -- one able to chug along as before but without what we've had up until now, ever since the Volckerdaemmerung -- a dispensation full of technical moth-holes and periodic policy-driven brownouts and, most of all, just what the shrewd dwarf most wanted to end, our chronic underutilization of our productive capacity -- a state of affairs so costly in lost output, it puts off our planet's return to Eden for a millennium perhaps.

The hero of this opera is one lord NIARU -- the "non-inflation-accelerating rate of unemployment," which sometimes calls itself the "natural" rate of unemployment, though there's nothing natural about it.

We can notice it. It's spectral, apart from the Fed's fearful fingerpointing into the void ahead and doomstruck cry of "Watch out! Unemployment is getting too low! Wages are about to take off unless we --" Crunch!

Year in and year out this unemployed reserve -- this pit of shit under the job tree -- produces a drag on output -- on broadly based prosperity. Dare I say it -- for the majority of us, it's a drag on the pursuit of happiness itself.

The system supposedly demands this of us all, in order to curb its own inherent tendency toward a wage/profit spiral, a sudden cobra out of the basket act, waiting just beyond X% of unemployment. For the avoidance of this, we accept serious "secular production slack" -- millions of idle hands and thousands of idle machines -- as if it were a technical limitation of any flexible innovative production system.

But if Jimmy'd listened to dwarf Abba back then -- a dwarf much nicer and more benign than any in Wagner -- we coulda ended all that, and even more wonderfully, ended all the episodic doses of RJD (rapid job destruction) required to curb the wage and profit slingers' appetite for a raise ever since.

"Natural rate of unemployment!" This phrase gets me very steamed. One time in the late 90's, skipper Greenglue actually took us down below the taboo limit. Why didn't we see it as the moment a weird corporate-imposed self-serving superstition burst apart right before our eyes? No, it was treated as a flukey miracle, later explained by the vagaries of this spectre's shifting taboo zone. It wasn't a parting of the Red Sea, but almost as kewl for those of us looking in at it.

It's quite amazing to me how most of the time we don't even notice the waste of all this non-production, this missed output sacrificed to the integrity of "the corporate system". And it's even more astounding to me how on the few occasions when we do stop to notice, we act like a 60-year-old man suddenly noticing the effects of his chronic fatigue syndrome and calling it "just my age".

---------

*That would be the Nibelungs' leitmotif on the descent to Nibelheim, Owen. See below. -- Ed.

Check this out from O-bomb-ya:

"Mrs. Clinton's opponent in the race for the Democratic presidential nomination, Senator Barack Obama, said in an interview that the welfare overhaul had been greatly beneficial in eliminating a divisive force in American politics."

http://www.truthout.org/docs_2006/041108N.shtml

What a tool! Yeah, welfare was the "divisive force" and not the corporate assholes using racist smears about "welfare queens" (never mind that corporations and CEO's are now and have always been the biggest welfare queens around).

"Before welfare reform, you had, in the minds of most Americans, a stark separation between the deserving working poor and the undeserving welfare poor," Mr. Obama said in an interview. "What welfare reform did was desegregate those two groups. Now, everybody was poor, and everybody had to work."

So say my friends the Ralph raiders:

"The corporate liberal media continues to give the cold shoulder to Nader/Gonzalez.

Case in point-New York Times columnist Paul Krugman.

Last month, Krugman was looking for a presidential candidacy to take on Wall Street.

He ran down the list and found Senators McCain, Obama and Clinton lacking.

But he ignored Nader/Gonzalez."

Paul K is a dembot, for sure, and, one guesses, an anti-spoilercrat as much as the next politics-of-the-possible type. But does that make him a corporate liberal stooge?

It does blinker him. Note this blog post from the great man:

"One thing that doesnt seem to have gotten much scrutiny in the bitter controversy is the suggestion that the past 25 years have been an era of continuous economic hardship for the American heartland. If were talking about the decline of industrial cities, there's some truth to that picture. But if were talking about incomes and employment, the Clinton years were pretty good for middle-income Americans and especially good for middle-income Midwesterners....

Did people feel that the Midwest was booming during the 1990s? Yes. Here's a link to a 1997 paper from Economic Perspectives titled Reversal Of Fortune: Understanding the Midwest Recovery.

In fact, it was the malign neglect of the dollar's forex value, even as it subsequently rerose to toxic heights in the late 90's, that did the dirtiest deed -- and of course that was by the Dembot Rubinomicals.

Just as both the rupee and rmb -- after the '97 Asian currency crackup -- started a serious commitment to a long-run lowball dollar-peg policy -- and at a then insanely out of whack exchange rate -- the dollar itself began to rise too far and too fast against the Euro and Yen and other northern currencies. It was a double whammy.

Hell herself could contrive no worse fate for our industrial heartland than the global strong exportable dollar ambitions of Wall Street's premier jackasses Bob Rubin and Larry Summers.

But this is not the lesson dutiful Paul draws:

"I'm not trying to boost Hillary here. Even from his own point of view, it's just crazy for the likely Democratic nominee [i.e. Obama --ed.] to denigrate the economic record of... the only Democratic president most Americans remember."

"You can't spend the better part of two decades campaigning for NAFTA and PNTR for China, and then come here to Pennsylvania, and tell the steelworkers you've been with them all along." Fair enough. But he goes on:

"Not every job that has left is coming back. And not every job lost is due to trade automation has made plants more efficient so they can make the same amount of steel with few workers. These are the realities.... The truth is, trade is here to stay. We live in a global economy. For America's future to be as bright as our past, we have to compete. We have to win."

Win? Yes, but who wins, Obs, who? The transnat big boys and their rentier ragtags, or the broad flow of domestic wagery? Obbsie is ready for that one:

"If CEO pay keeps rising, while the standard of living for their workers continues to decline, that's not a win for America.... For America to win, American workers have to win, too."

More, Obs, more more more. Some clarification. Some detail. Some goddamn 'hows'. But this is the best we get:

"Any trade agreement I would support [must] contain real, enforceable standards for workers.... I believe the Permanent Normalized Trade agreement with China didn't do enough to ensure fairness and compliance. It's not just that China is following the path taken by so many other countries before it, and dumping goods into our market while not opening their own markets. It's not just that they're violating intellectual property rights. They're also grossly undervaluing their currency.... That's unacceptable. That's why I co-sponsored the Currency Exchange Rate Oversight Reform Act. And that's why as President, I'll use all the diplomatic avenues open to me to insist that China stop manipulating its currency."

Me, I prefer "instead".

UPDATE: YouTube has apparently been supine and compliant enough to remove the video from their site, but you can still watch it at 23/6.

His latest gem:

"growth in the global economy encourages the development of stateless elites whose allegiance is to global economic success and their own prosperity rather than the interests of the nation where they are headquartered."

The swine has an unblinking insight into boardroom evil, and a shrewdness and delight in viciousness that blinks at no corporate horror. He's like Doc Benway, hurling a scalpel into his patient's chest just to make the operation more interesting.

Hell, he's the Arnold Ziffle of Wall Street--

-- the closest thing they got to an on-retainer genius.

By the looks of him alone, I ask you, ladies and gentlemen of the jury, how could the likes of this this, this... think-tank porcupine ever hope to bust apart the trans nat-OITP(*) ring's all-in, full-tilt, take-no-prisoners attack, which is even now preparing to apply ten thousand wrecking balls to whatever still remains standing amidst the rubble of our national industrial platform?

I know, I know. Once again, I've prefered the rude senseless personal insult to the principled, documented, text-based dismantling of the argument. So okay, read this, and particularly this flapping burlap of a finale that Maestro Scott substitutes for the much-needed roundhouse left:

"The countries whose currencies are in the OITP index account for roughly 59% of the current U.S. trade deficit.... OITP's relative stubbornness is problematic for United States and global adjustment and makes strengthening currencies in the OITP index and the Japanese yen even more important for correcting the U.S. trade deficit."

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(*)The Other Important Trading Partner index. Its member currencies: China, Mexico, Saudi Arabia, Malaysia, Thailand, Korea, Russia, Taiwan, Indonesia, Israel, India, Philippines, Brazil, Colombia, Chile, Argentina, Singapore, Hong Kong.

Here's a report from the watch out for Larry Ziffle team:

Recently our guy took a malign thumping from three Hindu gents. Waxing to the beat-down, they mocked his status as a globalist and neolib paragon: "Larry are you turning protectionist hack, now we South Asians are getting into the great game too, and we might add, taking a few tricks from you Yanks?"

In fact they get it so all-fired wrong that Larry, in a rejoinder just below their post, makes minced cow of them. In essence: I come to save globalization, not raze it. Here's Larry's money line:

"True friends of global integration and of the developing world will work to design more ways to insure that a more integrated and prosperous global economy is one from which all will benefit."

To reassure The Street, Obama has taken on this willing but dronish-looking orbital of the great Rubinius Maximus:

He is to be "economic policy director". According to brumigin.com,

"Furman, 37, most recently worked as an economist and budget expert at the Brookings Institution in Washington, where he headed the Hamilton Project, an economic policy research group aligned with the Democratic Party that was founded by Rubin, now chairman of Citigroup Inc.'s executive committee."

The Hamilton Project! Mein Gott! Prepare for the absolute worst, folks. Three winters in a row will not be enough. We'll be crying for Andrew Mellon.

For those new to my personal bestiary, this droopy chap's mentor, Bondage Bobby Rubin, did more to destroy industrial America during his 8 years running the world economy, than any man alive, and I'm very much including that unctuous taxi dancer and refugee from the Rand institute, Meister Alan of Greenstain himself.

To the likes of Bobby the Terrible, Alan was but a chittery, thieving temple monkey.

Obama: NAFTA not so bad after all
The Democratic nominee, in an interview with Fortune, says he wants free trade "to work for all people."

WASHINGTON (Fortune) -- The general campaign is on, independent voters are up for grabs, and Barack Obama is toning down his populist rhetoric - at least when it comes to free trade.

In an interview with Fortune to be featured in the magazine's upcoming issue, the presumptive Democratic nominee backed off his harshest attacks on the free trade agreement and indicated he didn't want to unilaterally reopen negotiations on NAFTA.

"Sometimes during campaigns the rhetoric gets overheated and amplified," he conceded, after I reminded him that he had called NAFTA "devastating" and "a big mistake," ....

Obama's tone stands in marked contrast to his primary campaign's anti-NAFTA fusillades....

In February, as the campaign moved into the Rust Belt, both candidates vowed to invoke a six-month opt-out clause ("as a hammer," in Obama's words) to pressure Canada and Mexico to make concessions....

Now, however, Obama says he doesn't believe in unilaterally reopening NAFTA.....

Obama also reiterated his determination to be a tougher trade bargainer. "The Chinese love free trade," he said, "but.... It's no secret they have consistently encroached on our intellectual property and our copyright laws.

One chap in public torment over this is our old friend and Bush-basher the ever-beaverish merit badger Paul of Princeton. The Krug-man cometh and goeth on this one -- in fact over and over again he cometh and goeth.

Here's a recent such effort:

http://krugman.blogs.nytimes.com/2008/06/23/speculative-nonsense-once-again/

In this one, he sez twice he ain't got "no dog in the hunt". And nope, he doesn't. But he sure gets himself into a fix as he tries to rationalize what appears to be monstrous, and in the process looks like a man chasing a greased pig -- across an iced-over pond.

Krug believes by all thats logical and Marshallian and taught at MIT that this huge price soar ain't from tampering, ain't from the dark arts of the corporates and fundsters at work. Can't be! He's Dr Pangloss without even knowing it. All's well that ends well in the best of all corporate markets

Oh hell, why do I bother to lampoon the Paulmeister? The truth is, nobody with a PhD in economics has a decent model of pricing -- for oil or electricity or corn or interest rates or doctors' fees or anything, really, other than abstract widgets. Nobody understands prices in the world we all actually live in.

But one doesn't have to be an Ivy-trained Marxian attack economist to have one's suspicions. Don't we all, if we're not drunk on conventional wisdom? Any fool can see something ain't quite right, eh?

So how do guys like Paul get to where it's all "spontaneous and to be expected maybe grim but natural and transitory and on the yellow brick road and blah blah blah"? Unless it's demonstrated to be the exclusive doings of the Other Team, aka the GOP, Paul's standing up for the orthodox tower troll calmative -- which is? In the long run we'll all eat cake.

That brings me to the other classy set of smug hand-sitters, you green-aholics -- you shits just love these higher prices -- am I right?

For obvious reasons, I suppose -- you don't so much care who's pocketing the windfalls, like I do, just so long as the sky high pump charges reduce hoi polloi's consumption -- right? I mean down the road when Mr and Mrs Below Average IQ buy the next four wheeled planet stinker.

Yaah, great! Thousand dollar oil with 980 dollar profits! Lets give our blessed mother planet and her exiguous dime-thin atmosphere a chance to recoup its life-sustaining freshness.

Ahh!

Well, not really.

May I suggest this line of reasoning to you green goblins to munch along with the morning latte? You want reduced consumption of oil -- fair enough; but you're great believers in some variant of wealth as equal as possible too, aren't you?

Now you guilt-drenched strivers, then ask yourself this: Is there today a long run real price of crude that maximizes the rate of adjustment? And if there is -- if there's a price beyond which we're just shooting extra superfluous cash at the corporate swine -- then are we at it, above it, or below it?

I say we're above it, cellmate -- well above it. And I say remember the little folks. Don't we need to factor out any global economy-wide slowdown effects on total consumption these hypothetical uber-plus price hikes might lead to? Shouldn't starve-the-beast strategists avoid setting up a a regular-guy deparment? Even Malthus had his limits. In other words: the income effects on total household consumption of everything including oil need to be compensated, don't they?

As the late Sir Johnny Hicks might say: to substitute is divine but to consume is human.

Here's a brief overview of Johnny's nice distinction.

To cut to the chase: just what might the crude price be that would maximize the adjustment rate? My guess: 60 to 80 dollars oughta be more than enough to sustain the development and production of alternative sources of energy. Anything higher is pure windfall -- a serious production of pleb-prole misery gone to waste.

The donkeys bray with glee "this one's for you, Mr and Mrs Little Schmuck." Obviously there'll be a virile override of any staged POTUS veto -- the tower trolls know their Bismarc. Fortunately for the job system's unofficial management class, odds are this correction will remain at a pace below freak-out velocity -- and yet....

Ahh, so what if we're back to a job force the size of the one we had last year at this time. Things move so slowly these days. But then again the next six months might see this pace swiften. The ability to plow under jobs, even in good times, is quite impressive -- at least it always impresses me.

Gross job loss from all sources -- quits, fires, layoffs, liquidations, retires, etc. easily can run up into the two million range each and every month. 25 million jobs reaped away, every year

Imagine if the system simply stopped replacing us dispensables. Why, off the solid 5% base we got now, in just a year's time we could reach 21% joblessness. Soup lines! Hoovervilles! Dance marathons!

See how kind these corporations are, taking us in like they do. It's always possible they might not.

Back to the here and now: it takes a net 100k new jobs per month to absord all the entrants and re-entrants into the marketplace. A quick calculation tells us if we're down absolutely by 450k since last December, and if we add in 6 months' worth of these missing 100k shiny new opportunities, then we discover -- as the great Krug did today -- we're, yikes, a million jobs short.

Will the job market's current doldrums spell electoral doom for Hanoi Johnny? Is he suitable for framing as America's latest job drought Judas goat? Is that alone enough to once again shoot down the air pirate? _

"Unfortunately, no one, certainly not in Asia or the US, seems willing to bite the bullet and help engineer the necessary co-ordinated retreat to sustained sub-trend growth, which is necessary so that new commodity supplies and alternatives can catch up."

That's Harvard's own Kenny Rogoff, who wants to slow global growth by any means necessary -- because prices are rising too fast. Right now, sez the kenmeister, "governments are clawing to stretch out unsustainable booms... Getting the diagnosis right is the place to start. The world as a whole needs tighter monetary and fiscal policy."

Let's pass by this odd conflation of diagnosis and prescription. As far as cures go, this is the purest kind of allopathic fools' poison. Advice like this breeds cures more sociopathological by far than the social pathology it's alleged to cure. The remedy for a boom -- trigger a bust. Sound familiar?

It's the top-shelf kill cure made at least nationally famous by Paul "submission hold" Volcker back in the Carter/Reagan years. But hey, Kenny wants to go global with it.

See, Kenny means by "sustained sub-trend growth" an earth-wide figure-four financial hog tie. After that euphemism, try on this for pop speak:

"The historic influx of new entrants into the global workforce, each aspiring to western consumption standards, is simply pushing global growth past..."

"the safety marker on the speed dial."

The real heavy here is that vastly overrated Mr Nasty, accelerating inflation. Heaven forbid the oppressed bond holders of planet Terra take some real value losses through unanticipatedly swift price level change.

Bust through this mental barrier about paper wealth being king, and we might just morph into a new age of sustained super above-trend growth. Now wouldn't that be awful?

What's not to like, you say? Well, "Ninja Zombie," one of Mark's commenters, offered this confident piece of under-a-toadstool Ubermensch nonsense:

I'm not sure this is necessarily a good idea... The inequality in productivity between people is huge, often much larger than the inequality in wages.

One example:

I spent a month recently building an OCR system, which replaced some data entry people. My productivity is about 216x that of the data entry guys: a system I built in one month does the work that 18 people do in a year, and 18*12=216. My wages are only about 7x the wage of a data entry guy.

It all fits together so well, given the vast and persistent attempt in the media to misdirect any discussion of our fast and furously polarizing household incomes gap. The official story is that the basis for the gap is changing -- away from property income versus work income, to growing differences in the rewards of different levels of skill, talent, effort, training, etc.

Add to this an alleged iron law of technical progress -- a "long-term innovational tilt" away from creating more skill-less jobs and toward ever greater demand for more-skill jobs. That is, innovation itself supposedly requires ever more skill-intensive employments, and our global path forward implies magnified differences between various jobblers in the "market value" of their hours of hired-out toil.

Hmm. You got a problem with that, Paine?

I do. No such iron law exists. In fact, the net is probably the other way. And even if there were such a tilt, it won't govern job compensation.

Let's use Herr Zombie's anecdote. His reasoning displays not only a lack of empathetics, but an even smaller dose of actual economics. Rule One in a market system exposed to even the most imperfect of competitive winds: The reward to the inventor of any productivity enhancement is almost never in line with a full compensation for her innovation's incremental welfare impact on its ultimate beneficiaries, its users. All master Zombie's innovation could do is lower the relative product price commensurate with the total reduced labor costs -- and even that's only if the inventor actually owns the rights to his innovation. In this present corporation-dominated regime, where even brains like Zombie's here are hired out to the tower trolls, what the marketplace -- smart or dumb as it may be -- ultimately rewards is the owning corporation, through said corporation's various rent traps and other market bending methods. That is, whatever rents the corpration is able to retain in the form of higher margins and isn't forced to piss away in lower prices, goes to the corporation's owners and top managers, not -- not -- not! to the jobbled geeks, not to hired pus-heads like undead office toon Ninja here.

What's Ninja worth -- ultimately? He's worth what his replacement fresh out of programming school over at Torpedo Tech in Bangalore might cost his corporation to hire.

From the New York Times:

Obama Aides Defend Bank’s Pay to Biden Son

During the years that Senator Joseph R. Biden Jr. was helping the credit card industry win passage of a law making it harder for consumers to file for bankruptcy protection, his son [shown above -- Ed.] had a consulting agreement... with one of the largest companies pushing for the changes....

Mr. Biden’s son, Hunter, received consulting fees from the MBNA Corporation.... [A] company official had once described him as having a $100,000 a year retainer....

The financial services industry began seeking relief from Congress in the mid-1990s from an increase in bankruptcies that was cutting into its profits.... [E]xecutives at MBNA... began donating heavily to both major political parties and many national politicians, including Mr. Biden.

In late 1996, the company hired the younger of Mr. Biden’s two sons, Robert Hunter Biden... who had just graduated from Yale Law School.... The company promoted Mr. Biden to senior vice president by early 1998....

Travis Plunkett, legislative director of the Consumer Federation of America, a consumer group that opposed the bill, said that Senator Biden had provided a “veneer of bipartisanship” that eventually helped the credit card companies win over other Democrats. “He provided cover to other Democrats to do what the credit industry was urging them to do,” Mr. Plunkett said.

Aides to the Obama campaign said Sunday that Senator Biden’s goal was always to strike a workable compromise between the competing interests on the bankruptcy bill....

MBNA employees have given Mr. Biden more than $214,000 in campaign donations over the years, the largest amount in his coffers tied to any single company. But the company’s employees have given even more lavishly to President George W. Bush and top Republican lawmakers.

I ask myself, how long, oh Lord, how long can the little folks stifle their outcry over all this majestic wet rot? What part of 30 years of going nowhere don't we geefs and geefettes understand? Just take a look at this latest "lame duck" job-class report card, drawn up by the perenially indignant double-dome strivers down there at the beltway's "for the greater googoo" policy institute.

No, on second thought, don't read it. You'll just be told what you already know. But for a few twists, any one of us could have written it umpteen times in the last few decades.

The gist: the vast middle reaches of the American wage class are taking the slow boat to shitsville. There's some interest in a few details -- for example, for months now our corporate tower trolls have seen fit to compact more small-potato opportunities then they've creating. And no, we haven't been in a jobs recession or for that matter gone through a full economic cycle and ended up worse off than before it started. Gotta go back pre-dustbowl to top that stat.

So us poor buggers aren't marching on Washington or up late nights burning silk hatters in their pajamas.

Look at it this way: thirty years of class war takes its toll -- at least on the losers, and their confidence in themselves.

I've been goin' down so long now, junior -- it's startin' to feel like I ain't exactly destiny's child....

I really wouldn't have thought that anything could make me proud of the US House of Representatives, but yesterday's stunning rejection of the bailout bill certainly did -- no thanks to the Democrats, who voted for it 140-95.

All the experts and wise men were for it -- the Waxmans, the Franks, the Rangels. In fact anybody with a safe seat was apparently for it. The people who bolted were the people who don't take their re-election this fall for granted -- in other words, the people who had to listen, however unwillingly, to what the public was saying.

For the experts, deeply invested in their knowledge of the arcane institutions of finance, a threat to those institutions is a threat to civilization itself. Apparently the public, however, doesn't grasp just how indispensable these institutions are. I'm with the public on this one.

Comrade Owen understands these matters better than I do, so I asked him about it. His take:

The returning mariner immediately chivy-ed me with "meltdown" questions:

"Just what would be so terrible if we let all these bankrupt institutions evaporate? -- Nobody to lend to solvent businesses any more? But surely that's nonsense -- the Fed could do it directly if need be, no?"

Yes indeed, if Uncle stands ready to put the whole corporate economy (globally) on a new "artificial" gubmint hi-fi vascular system. The chaos would be temporary and the damage to organizational momentum among our production outfits minimal. Boldness to the max of course would be de rigueur. Damn the glitches and full speed ahead -- anything less would yield unnecessary losses of real output.

Warning, Will Robinson! Warning!

Yes the commanding heights are right there within Uncle's grasp. he has all he needs to get on with it. But need I notice a jilted Wall Street gathering herself on her Manhattan Laputa, ever ready across the Rhine -- like any deposed ancien regime, preparing her vicious pounce at even the slightest wobble or uncertainty on Sam's part.

Obama got the fire in his belly for the likes of that? I mean do he look like this guy to you?

The black man who straight-armed Wall Street. Hmmmmm.

"Once a bank in a given town shut its doors, all the knowledge accumulated by the bank officers there effectively disappeared. Other banks weren’t nearly as willing to lend money to local businesses and residents because the loan officers at those banks didn’t know which borrowers were less reliable than they looked. Credit dried up."

And just who's this particular idiot? Some virtual cat burglar from the business pages of the New York Times. Behold his electrified hair act as he, like his other "fellow worriers.... connect[s] the dots... to teach a little lesson on the economics of a credit crisis — how A can lead to B, B to C and C to Depression".

Ahh comrades, he's but one idiot in a chorus of idiots -- a chorus of idiots headed up by a string of distinguished lead soloists, including double-domed faux-Nobel laureates and eminent tycoons and tower sharks -- all peddling the purest brand of hooey.

These days we're getting fed nothing but a steady diet of bull goose feathers -- policy as the illusion of the impossible. What we need is a Huey Long manic boast -- a kingfisher, a dealer in miracle loaves. But we get what? We get who? Why none other than Gentle Ben Bernanke -- our livid-faced soul-sapped fed chair from old Nassau itself.

Seems Ben is in fact a former scholar of the great depression:

"As a young academic economist in the 1980s, Mr. Bernanke largely developed the theory that the loan officers’ lost knowledge was a crucial cause of the Depression. He referred to this lost knowledge as “informational capital.” In plain English, it means that trust vanished from the banking sector."

If you want to think it through, try starting with this notion: activating idle resources has zero opportunity cost. If the Gub runs a big enough deficit, spends enough money, extends enough easy business credit -- well, why not? Credit costs nothing to produce, and credit is the elixir, when it flows, even indiscriminately, into our mazelike thicket of real tangible product businesses, our outfits that hire folks and put 'em to work producing actual consumable shit.

Yes they do it for for a profit and through exploitation -- but ain't it a cold existential fact that a job, any job, is better then no job at all?

Is it all a big waste? Wasting what? A bridge to anywhere built out of otherwise idle resources, no matter where it's going, no matter how marginal its additional social value -- it's better then ten thousand pairs of thumbs twiddling away on La-Z-Boys.

Fuck the fine structure, fuck "all the knowledge accumulated" by the Mr Potters everywhere. So what if "banks are hoarding capital"? We the weebles don't need their stinking capital. We got plenty of capital, social capital, capital of Uncle, from Uncle and by Uncle, and it can get spread out free of charge.

So gang, tell Uncle to start doling out the credit lines all up and down Main Street. Fuck the Rubins and the Reeds.

Fuck the Potters. Pass 'em by. Pass all of 'em.

Go to the source and fill all those greedy little hands out there ready to rumble the marketplace -- fill 'em with cash. Let America's eager grasping legion of petty for-profit outfits seek their petty fortunes out in the forum battling for orders against each others grain. Let 'em sell more I-phones. Let 'em build more sundecks and cut more blue hair. Let 'em rip and swindle and and serve more restaurant meals. Let 'em -- even if they're only in it for the money -- half-assedly care for more elders and raw kids. Let the markets roar. Let a zillion firms contend. Let's try some of this guy's snake oil for once:

Once again the Democrats -- those dedicated fans of hedge-fun genius -- led the charge. Monday's rejection of the bill saw a Dem vote of 140-95 in favor. Calls from Barack (among other things) boosted this margin, today, to 172-63. The Republicans, who opposed the bill on Monday by a quite lopsided margin, experienced some erosion due to relentless pressure, but still honorably gave a majority "nay" -- 108-91.

The professional thumbsuckers have pondered this development, of course. Here's the Washington Post:

[T]he change from Monday's vote to today's tally is clear: The number of Republicans voting for the bill went from 65 to 91, and the number of Democrats in favor from 140 to 172. Those increases are attributable to four main factors: 1) Monday's 778-point plunge in the Dow, which spooked many lawmakers; 2) The apparent swing in public opinion after the initial defeat; 3) The addition by the Senate of several expensive goodies, including business tax breaks, an increase in FDIC insurance on bank deposits, and mental health parity legislation; and 4) The hard work of leaders on both sides of the aisle to coax more members into the "aye" column.

The "apparent swing in public opinion" has no link in the WaPo item -- because of course there was no such swing. Earlier today Steny Hoyer optimistically observed that phone calls to his office were now only 3-1 against the bailout -- as contrasted with 6-1 a few days earlier. Always look on the sunny side, Steny. And ignore your constituents -- 3-1, 6-1, schmix-to-one, this is Wall Street we're talkin' about here.

The WaPo piece interestingly continues:

Vulnerable lawmakers, with very few exceptions, did not switch their positions, still voting overwhelmingly against the bill....

[T]here are 44 incumbent House members who face notable challenges in the November, ranging from contests that are potentially competitive to those that are very tight. Of those 44, nine voted in favor of the rescue bill on Monday. Today, 12 vulnerable lawmakers voted aye, meaning that just three switched their votes -- GOP Reps. Randy Kuhl (N.Y.), Joe Knollenberg (Mich.) and Jean Schmidt (Ohio).

All the other vulnerable members stayed in the "no" column.... [W]hile 60 percent of the House backed the rescue today, just 27 percent of the members worried about the November election did.

Sometimes you know whats comin' and you just gotta brace yourself:

Tentative cheer: Paulson may have been dragged kicking and screaming into doing the right thing to rescue the financial system.

So now Uncle's goin' partners with the mugs -- and the people's elite friends are delighted. In greater deeper pwog-space it's all about properly managing the bail. Like in this case using the "Swedish model" -- where Uncle makes an equity play and gets a little upside potential on his dime.

Okay, so that's better than just transferring the toxic shit onto Uncle's books, and full-face dollars to the Street creeps. But look, gang, whatever the form here, the headline still reads: WALL STREET HEGEMONY SAVED! Orthrian two-headed rule means any real bypass operation shall not pass.

Oh, and that "Swedish model"?

The original equity bail in Sweden circa 92-93 was a pure lemonade maker. Only sick-ass banks got bought into, and run from the gubmint corner office.

Jacob Wallenberg, the curly-topped super-saurian in the silk suit above, a man of means and global connections, got to keep his private bank all to himself.

Here's another nice turn, from another pwog who has ideas about "managing" the crisis. The Mephisto-like Greg Mankiw sez, in effect, that yup, equity from Uncle is the only way:

"Other economists have suggested that the government inject capital itself. That raises several questions. First, which firms? The government does not want to put taxpayer money into “zombie” firms that are in fact deeply insolvent but have not yet recognized it. Second, at what price should the government buy in? Third, isn’t this, kind of, like socialism? That is, do we really want the government to start playing a large, continuing role running Wall Street and allocating capital resources? I certainly don't.

Here is an idea that might deal with these problems: The government can stand ready to be a silent partner to future Warren Buffetts.... Whenever any financial institution attracts new private capital in an arms-length transaction, it can access an equal amount of public capital. The taxpayer would get the same terms as the private investor. The only difference is that government’s shares would be nonvoting until the government sold the shares at a later date.

This plan would solve the three problems. The private sector rather than the government would weed out the zombie firms. The private sector rather than the government would set the price. And the private sector rather than the government would exercise corporate control."

Remember the story a week or so ago about Richard Fuld, the helmsman who ran Lehman Brothers on the rocks, getting punched out in the company gym by a disgruntled employee? J Alva Scruggs sent in the following reflection:

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/3150319/Richard-Fuld-punched-in-face-in-Lehman-Brothers-gym.html

If that URL breaks, I've got a custom one that works well for this.

http://tinyurl.com/nozick

This offers a classic proof of Nozick's theory on entitlement. The punch was freely transfered and justly acquired. The punchor delivered the punchee's compensation without any coercion from the state. He mixed his labor with it -- and it was a resource that previously had no owners. Indeed, before the punchor clenched his fist and swung, the punch did not exist. Immaculate, pure and wholly free of liens. Therefore it was his to give. The punchee demonstrated his acceptance by assuming a recumbent position, again without coercion from the state.

http://www.guardian.co.uk/commentisfree/2008/oct/16/useconomy-usa

Seems according to cousin Joe Stiglitz, Paulson and posse are short-sheeting the "taxpayers":

"For all the show of toughness, the details suggest the US taxpayer got a raw deal. There is no comparison with the terms that Warren Buffett secured when he provided capital to Goldman Sachs. Buffett got a warrant-the right to buy in the future at a price that was even below the depressed price at the time. Paulson got for the US a warrant to buy in the future-at whatever the prevailing price at the time. The whole point of the warrant is so we participate in some of the upside, as the economy recovers from the crisis, and as the financial system starts to work."

Aaah we need a new broom in Washington eh? A broom to sweep away these Street creepers:

But here, I'm afraid, is what we're likely to get instead --

Enter Obama on an ass indeed, and to loud hosannas -- from the money-changers.

Time to build ten thousand digital shrines to this new world sage, Bill Vickrey. In spite of the disreputable distinction of winning the economics pseudo-Nobel, on the three big battle fronts of the global klass krieg -- jobs, inflation, and deficits -- Doctor Bill was peerlessly fierce and fearless.

In particular, he was a good deal bolder than, for example, that impish Mephisto, Harvard Yard's own Mitt Romney advisor, Greg Mankiw. Greg tut-tuttingly quotes Vickrey:

Deficits are considered to represent sinful profligate spending at the expense of future generations who will be left with a smaller endowment of invested capital. This fallacy seems to stem from a false analogy to borrowing by individuals. Current reality is almost the exact opposite. Deficits add to the net disposable income of individuals, to the extent that government disbursements that constitute income to recipients exceed that abstracted from disposable income in taxes, fees, and other charges. This added purchasing power, when spent, provides markets for private production, inducing producers to invest in additional plant capacity, which will form part of the real heritage left to the future. This is in addition to whatever public investment takes place in infrastructure, education, research, and the like. Larger deficits, sufficient to recycle savings out of a growing gross domestic product (GDP) in excess of what can be recycled by profit-seeking private investment, are not an economic sin but an economic necessity....

[W]hat I would like to see is a budget deficit of about $500 billion averaging for the next five years, until we get from 5 percent unemployment down to 1 percent unemployment.

Was Vickrey a kook? Advocating $500 billion deficits in 1996 certainly sounds kooky. Correcting for inflation and real growth, that would be about $800 billion today.But no, he was not a kook: He was one of the last hard-core Keynesians, far more Keynesian than so-called new Keynesians like me....

Now Wild Bill's schemes might not pass a thorough audit, at least as laid out in pop lingo here; but as cautiously glossed here, the full force of his vision brought down to us from the mountaintop is vastly understated.

Citizen suckers, hear this: we could run up cumulative federal deficits in excess of 10 trillion dollars over the next four years, and be fiscally poised for the future, just like we were at the dawn of the cold war.

$10 trillion... that's what Obama could borrow in his first term, and end up making us all better off than we were when he arrived at the White House.

So... what to spend it on?

As some Chinese red mandarin was quoted in the press recently -- we gotta spend it "fast" and with "a heavy hand".

But here's the real point: the best and fastest first shot would be not to spend it at all, but to rebate it: send a check for last years SSI taxes to every payrolled geef and geeffette in this country, and then declare a holiday from the SSI tax till further notice.

It's ours, we earned it, so let us spend it -- or pay down debt, or whatever. Just plain dispose of it any way we want.

Then next we might think of nationalizing the HMO's, like Uncle is already doing with all our big-boy high-finance outfits. Replicate the Paulson/Bernanke/Ribbentrop bailout pact -- but not to the benefit of the silk pajama crowd. Nope. For us -- by socializing the private health insurance industry. Call it single payer by other means.

Once it's partly ours -- get every American signed up to a private plan, and have Uncle pay the first $2000k per head, as social coverage of... well... personal coverage. That oughta get the ball rolling.

Note: This rebate plan is unlike the balance-sheet plugs approach, AKA "bail the big bums out" -- or as Obama all too benignly calls it, "fixing the financial plumbing." Don't matter if it's for the banks, or the insurance companies -- balance sheet injections only benefit us jobblers directly if the pipes leak. Otherwise we gotta pray for lots of so-called wealth effects to lift aggregate domestic expenditures.

Note: anticipating that 5% of upper-crust wealth increase will get spent -- not lent-- is prolly high ...that's as far as wealth effects go.

So if the rich guys behind these faltering hi-fi firms feel restored to former wealth levels, by a trillion or two in bail bonds, then they'll spend maybe ...maybe... maybe... 100 billion more than otherwise.

Not a very high yield, eh? And so far as the "plumbing" goes -- as far as lending goes -- hey, the state of defaults makes lending increases very problematic. The bastards are unlikely to turn the taps enough, any time soon.

Whatever voodoo hoodoo might occur as a result of the series of pain-relieving Paulson corporate injections, a direct rebate to wageling households, of taxes extracted to begin with right out of their own work earnings, will hit the real economy -- the one that makes real products -- much harder. And more importantly, resurrect the job force levels much much faster. It's a virtual WPA, folks -- bootstrap macro at its finest. In fact, if the household expenditure wave is big enough, in about two or three years, when we finally have the plans for our green lean and clean sustainable production machine, we oughta see such hyper-employment conditions, and such a real wage spiral under way, and such a production capacity squeeze that... it'll knock the pips off the dice in Las Vegas.

---------

Next post:

General product inflation is ripe for a harness. Enter the markup cap-and-trade system -- to end price pollution in our time.

"The main thing to realize is that for the time being we really are in an alternative universe, in which nothing would be more dangerous than an attempt by policy makers to play it safe"

In the blog post from which this morbidly panicked line was culled, there is also this:

[Goldman Sachs] then turn to an estimate of likely changes in the “private sector balance” — the difference between private sector saving and private sector investment. And it’s stunning:

The GS house price forecast combined with current equity prices and credit spreads implies a rise in the private sector balance from +1% of GDP in the second quarter of 2008 to +10% in the fourth quarter of 2009 -- a rise of 9 percentage points, or 6 points at an annual rate.

Yes, Virginia, we're headed down a continent-wide rabbit hole -- unless, that is, our dear ole Uncle Sawbuck, the stricken cyclops of planet Earth, takes some super-bad, mighty bold and bodacious countermeasures, and takes 'em pronto.

Again St Krug:

"What’s the answer? Huge fiscal stimulus, to fill the hole. More aggressive GSE lending. Maybe a “pre-commitment” by the Fed to keep rates low for an extended period -- that’s a more genteel version of my “credibly promise to be irresponsible.” And maybe large-scale purchases of risky assets."

Note on the relative meaning of "huge fiscal stimulus": to Paul it's prolly on the order of 800 bills in increased fedral deficit. Which is piffle, a mere pigeon drop. It might-oughta take us, on highest estimate, and with a tail wind from Asia, if we're extra lucky, and all hits just right -- about halfway across the canyon.

It's summertime, summertime
Sum, sum, summertime... 

Well, no more studying history
And no more reading geography
And no more dull geometry
Because it's summertime

It's time to head straight for them hills.... 
 

Larry Summers may have missed out on Treasury -- thanks, it seems, to his foot-in-mouth dis of the math skills of upper-middle-class women -- but will nevertheless dwell deep in the bosom of Obaham, as director of the National Economic Council: Obama's "closest economic adviser," as the Wall Street Journal notes with ill-disguised and well-justified delight.

The Journal goes on to add:

Mr. Obama has instructed his economic advisers to draft a stimulus that could ... push back planned tax increases on families earning over $250,000 from a planned 2010 start date to 2011....

Essay question, in two parts: (i) In the image above, which party is finding the encounter more painful? Discuss, in particular, the closed and/or narrowed eyes of the figures depicted. (ii) Will they nevertheless manage to suck it up and work together successfully for the benefit of very wealthy people? Justify your answer. (Especially if it's "no".)

Okay, so we're on a doomsday dive toward massive roasted homestead territory. Millions are about to get spit out of the corporate back door. Millions, as in ... 15 millions. So what's with this 2.5 million jobs bit, Mistah Barracket?

Christ on a bagel, everywhere he goes, every time he speaks, its "2.5 million jobs... 2.5 million jobs..."

Fellow yankers, our nicely browned prez-elect drones on these days like.... a hypnotist, eh? "America, you're growing sleeepy... sleeeepy... sleeeepy."

I got two questions: first, where'd that number come from?. Second, and more importantly -- where in the fuck decent green and blue-skyed can that pissant of a job number hope to lead us to anyway?

Here's my guesses:

Barrack's magic job creation number came right out of Larry Summers' asshole. Without a shitload more, it will drive us and our economy to a tender spot where we're still only a short putt from the hellhole we're headed for right now.

By my calculations, between fiscal deficits and trade gap reductions, the nation's macro net demand-increasing effects will need to induce, as noted above, 15 million jobs -- which is well more than ten percent of what we have right now.

And that's figuring on a bare minimum spontaneous job slough-off process. The silk-hatters have visions, I suspect, of more like 20 million net sloughs, but that's another post.

Obviously we can't get anywhere near that on Obie's plans, at least as so far announced. Even given a few hidden ball tricks, we'll need in addition a freakishly huge shift in our trade balance, considering the present globe-wide simultaneous import contraction. Unless we act to counter it, a massive wave of feeblization is about to hit our export sector.

Recall that we had galloping exports last year and that kept our whole production system hovering over the abyss, instead of plunging into it. But now any job-inducing, net-trade-gap-closing, abyss-fall-rate-decelerating on the international front must come from (drum roll, please) import reduction.

Ya, I know, there's a big plus there. Look at oil. That oughta knock a couple hundred bills off the trade deficit all by itself. Fine. You just bought us maybe two million more jobs. Combined with Obie's green-thumb army, that still leaves, what, 10 million jobs to go.

They'll not come from any other sources of potential trade improvements -- except consider this: given no forex effects, we have only tumbling commodity prices. But this cuts both ways. Save oil, and we're confined by present policy to import reduction. That won't induce the needed weaker dollar. Recall the post-crisis "flight to safety" effect. The rush out of risky currencies and into the imperial dollar has raised dollar forex rates when they needed to go lower. The international credit/default paper catastrophe has reversed that lovely tailwind the falling dollar gave us into a strapping headwind.

Prove it, you say? Let's go to the textbooks.

Munch through any of 'em, and you'll find only two possible kinds of trade demand shifters, and thus gap changers: 1) Substitution effects, where changes in relative value between domestic and foreign prices change amounts of each bought.

Sorry, that's out. We ain't gonna shift from higher-price imports to lower-price domestics, not with a dollar heading back up toward capital-export heaven. Strong dollars obviously only make the domestics relatively more expensive. So that leaves only:

2) Income effects -- shifts that are the result of relative trade budgets. That here translates very nicely as "expenditure reductions". If those reductions, made on our side, outweigh the reductions on the foreign side -- if, in particular, we the many big fat ugly job- and credit-line deprived and wage-depleted American boobiators, cut our purchases of imports more than the fast income-sinking foreign hordes reduce their purchases of our exports -- then we'll create domestic jobs.

In brief: laying a ton of us off, freezing the comp of the rest of us, will indeed work. Putting us on short rations will cut our import demand, right along with everything else, and by routes circuitous put some of us back to work.

To put way too fine a point on it: we'll need to destroy 6 million jobs to gain back 2 million.

Yes, further hope of lift from trade balance improvements exists, shipmates, but it only exists as an easing of our entrained doom spiral.

(One of Father Smiff's sardonic Latin maxims oughta get tagged on here, don't you think?)

On the trade front, if we want gains of, say, another 8 million sustainable jobs, we'll need direct bold big-gubmint action. Just like on the fiscal front, we'll need an intentional return -- with a vengeance -- to a falling dollar. And as things are crumbling away now, world market-wise this won't happen unless Uncle makes it happen through a globe-wide exchange-rate realignment, which includes a serious and permanent dollar drop.

Part II to follow.

So where's the rest of the 15 million good sustainable jobs coming from, if not trade and uncle Obama's largesse? How does this sound: 3 trillion dollars worth of unplanned, uncalled-for, highly risky neat new net expenditures by America's free-range firms.

Maybe our economic colossi, the ten thousand limited-liability transnat Freikorps will go totally manic, and spend tons on highly venturesome projects: spend it on real stuff, real products, just now produced products, and just now performed services, that facilitate production and circulation -- a freshet of bareassed investments and gambles, and in lunatic proportions. Does that seem likely?

Will the "private system" spend its own way back to prosperity? Can we wait upon the big Incs? Can we rely on the ten thousand? Can they, like bees, all rise into full buzz at once? Can we have ten thousand simultaneous Scrooge moments? A sudden pandemic boardroom morph into 24/7/365 Christmas-morn mode?

Matter of fact, I think we can we can -- yes we can -- but it'll be a long wait, a decade long even.

As I recall, the old misery himself, the original Scrooge, after two feckless ghostings more for the readership than the protagonist, the prick was finally actually scared shitless by his own meaningless end and gold teeth-picking Death. Maybe that's the way to induce corporate types into caritas in perpetuum, eh?

They'll not be sentimentalized there, reasoned there, jawboned there, legislated there, or hoped there -- only scared at gunpoint there.

Here endeth today's lesson. Now -- let us pray.

"Oh Lord, give us your chosen ones, your semi-toiling, semi-huddled ones, give us out of your infinite bounty 10 million dream factory jobs. Amen."

Now go back to work, you loafers, and tonight, pray again -- pray for an amazing grace. Pray for St Barack to become St Rocky. Pray this present avatar of uncle Sam, with God's hard hand at his bum, leads us back into our amazin' sizzlin' early 40's form. Pray for a battlin' come-back America, an America ready to and able to build our new green and gold cube Jerusalem -- build it fast and all by ourselves.

"What is most disturbing ....is the unmitigated praise for the selection of Timothy Geithner. Geithner may do a fine job at Treasury, and we should all hope that he does, but let's not forget that he was in the middle of the policy team that gave us this economic mess. He was a top official in the design of the East Asian bailout that set us up on the over-valued dollar, bubble-driven growth course. He also thought that one-sided financial deregulation was just fine."

Also sprach Dean the undauntable Baker, the Ixion of pro-jobbler econ-con prog-blog tribunes.

Not exactly big-box, as econbloggers go, but he thumps the drum steadily, if not artfully, and I agree: what is it that is a Geithner?

Second generation establishment functionary; Dartmouth grad; Kissinger Ganymede; Rubin detail golem; protracted stymate to that mental pederast Arnold Ziffle, er, that is, Larry Summers, through innumerable Clinton-era crises in the imperial cockpit; Bushtime risk morass-maker, IMF hatchet-hurler -- on and on it goes.

Does this augur ill? I'd say so, if I thought this Romulan-eared hyper-cypher had the freedom of will worthy of an earthworm. But I suspect he don't. I see in him a guy in love with climbing marble stairs other folks built.

Look, gang, setting to one side Alexander the Great, Hank the crank Morganthau, and Albert Gallatin, the treasury post is not for guys on a personal mission. Looking over the former inmates, the job looks mostly like it's fit for Wall Street and Washington's B-listers: a bunch of classy pin-pushers, glorified Wall Street valets, and bygone deballed corporate bulls, easily replaced and even more easily bypassed.

Applicable POTUS pocket maxim: "Let 'em catch my flak. Make a gaffe, soak 'em in shame and neglect. Use 'em to misdirect the press. Et cetera."

That goes for peacock walkers, like secretaries of state, too, of course.

Here's an article that goes to Homeric lengths to itemize the near $8 trillion -- yes, that's not a typo, trillion not billion -- of balance-sheet dice-tosses so far rolled across the hi-finace game board by various wings, arms, and feet of Uncle Sawbuck, in the form of "pledges" and "guarantees".

They're like so many anti-Salvation Army Santas, these minion agencies of der Alte hizseff, and they're are doling up -- ever so generously -- paper gold.

Not to us jobbled masses, mind you, not to allow mortgage write downs. But to allow our challenged elite financial institutions to protect their worldwide legions of innocent counter-parties.

These massive backup obligations made on Uncle's behalf, if not themselves actual means of payment, are at least a rock-solid foolproof riskless private creditors' recourse to our dear rich uncle's famously limitless dollar credit line.

When the final tally tolls, how much of the $8 trillion -- trillion, mind you! -- in pledges now outstanding will go down the gopher hole?

Among friends and comrades: I'm thinkking a measly one trillion. Heh. Chump change.

But even so, this ain't exactly S&L II, no more than Minya's dad is just another Minya:

I hear y'all out there, yelpin' at the indecency of this: "By God and Ralph Nader, compare and contrast here, citzens! On the one hand -- 25 billion for the friends of the UAW, and a paltry 15 billion for Obie's green stables project. Trickles, trickles, and no more, for our fracurted manufacturing base -- while Wall Street gets trillions upon trillions!"

So what's really up here?

It's not quite as grotesque as it looks, nor as aggressive as it pretends to be, for that matter. Keep in mind two very different sets of numbers are circling around each other here; and they always follow old Bill Petty's rule: "never compareth the wrong stocks to the right flows".

We'll pass on the bottom-line point that these two types of action have very different impacts on what matters to us iron jawed prole-o-philes: i.e. job dynamics ... wage rates ... paid hours, etc. The bail actions are just the first step in a series of balance-sheet shifts that leads mostly to no where but around and around the speculative categories of fictitious assetry; while the other -- the money spent on opening factory doors, or keeping them open -- though way smaller, immediately induces actual purchases.

Let's take the numbers for any Gub purchase of real stuff. What do we compare 'em to? Well, of course, the output value of our nation's gross annual domestic product: 15 trillion dollars.

To keep these numbers in persepctive, let's find a real standard unit: something tangible and obvious. I suggest Uncle Spreadeagle's excellent GWOT adventures, which now run us, what, $150 billion a year? That's conveniently around 1% of our 15 trillion dollar GDP.

Using this unit -- let's call it the GWOTbuck -- to measure, consider Paul Krugman's proposed trillion dollar budget deficit. That's 7 GWOTbucks. As long as we stick to real expenditures for actual real useful stuff, like armed predators and bulletproof vests, on this basis Obama's green Michigan initiative is 1/10 of a GWOTbuck -- spread over 3 years!

When we move up above the mundane product system to the Scheinwert realm, where the $8 trillion will someday roam -- how big is it, comparatively? I mean, is it really too big? Is Uncle Sucker's latest "on the hook fer" number really a horror among horrors?

To be absolutely fair-minded, clear-conscienced, and even-handed about it:

Yes and no.

Yes, it is a horror among horrors, because it's a handout to thieves frauds and assembled dungheads. But is it too horribly huge a giant choker of an 8-ball?

Well, no. Not when properly compared to the economy's totalischer scheinwert zyztem -- ie the plausible total value of our vast superstructure of digital IOU/UOMe obligations-- and that, in turn, to the value of our true string of pearls of great price that collateralize these solemn contractual promises: namely, our real production system and our national structures from infra- to ultra- to residential to strictly-for-business.

Clear so far? I hope not, as Hegel would say.

What's it all worth, this pile of money bonds, mortgages and other obligations and entitlements, titles, deeds, certificates, licenses, share equities, insurance policies, annuities, pension funds, and so on-- What's it really worth?

It's worth what it's latched onto that's real -- land lots, for instance (and what are they really worth?) -- and then structures and then equipment and then...? Number, please?

Lets guess $40-50 trillion.

Against that number, what's the $8 trillion Uncle's vouched for -- so far? It's only three big annual criminal-class clawbacks away from paid in full: three 5% wealth levies, and it's gone, pinned back onto the private ledgers.

Beware, high hats. If Uncle turns old-Hickory on ya, and sets his mind to gettin' the republic's purse unstuck, then you might have something to worry about.

To make a clean breast of it: Uncle prolly oughta vouch for all of it, anyway. Yup, the whole stinkin' Scheinwert mountain range. And at book value. Just to create ongoing optimal capital market conditions. Like Ike always said, "knock out any uncetainty you can, as soon and as completely as you can."

I hasten to add: of course Uncle would need to charge the issuers of all these obligations -- sacred or profane as they may be -- an annual risk of default premium of, oh, maybe... $500 billion. Cheap, considering Uncle's one-of-a-kind, nickel-plated, wall-to-wall face-value assured blanket coverage.

Among the results would be risk free investment for us toiling plebian minnows.

Caveat: given this final full socialization of all financial losses, we gotta bind the CEOs in adamantine chains, ironclad and foolproof against wild and fraudulent pyramids. Ninja IRS units, a zillion escrows, 3 million clawbacks... and... and ... gibbets. Lots of gibbets.

"So here’s what I’m wondering: will it, in fact, even be possible to pull the economy out of its nosedive before unemployment goes into double digits?" That's the terrier of Times Square, columnist and antigolemist at the Grey Lady, Princeton professor of economics and this year's miss faux-Nobel, Paul Armitage Krugman.

Past 10% unemployed already baked-in, Paul? Then the coaster is about to pick up speed, and it's too late to pull out of this nosedive now.

Today, the aggregate job shuck by corporate Amerika is running at about half a million a month.

Now we got a very active job market. The system usually turns over 20 million positions a year. That means each month, at the present rate, maybe 1.8 million jobblers jump ship, or get pushed out over the rail. Add in about 150k new arrivals and re-entrants, and even ignoring the 6 million seriously unemployed already out there, thats nearly 2 million new folks each month lookin' to get into a new job.

But the system right now don't want 2 million new hires. The system only wants 1.3 million. So after sloughing off the dropouts -- the ones that have officially stopped lookin' -- we end up with about 650k newbies without a job to call their own.

Now my figurin' tells me that an unchecked free-fall US economy will produce a peak point total for nationwide once-and-for-all net lost jobs of around 15 million (creatively destroyed positions, I hasten to add, victims of that cannibal king Progress).

Fifteen million jobs lost, before corporate Amerika "feels safe enough" to sustain "present staffing levels" indefinitely. In other words: left to itself, the system will take us toward Depression levels of joblessness.

At today's rate, we'll take 30 months to reach bottom. That's long enough for Emperor Obama to meaningfully intervene.

But, fellow critters, it won't happen that slowly. The system ain't linear. Expect further acceleration in job drops this winter -- maybe up to a million-man month, and as soon as February.

That means too soon, as St Pauly girl seems to be sniffin' in the wind. It's proably too late now, no matter what Abe Redivivus does -- just like the war of southern secession.

Too late, baby, too late to avoid the deeper than necessary jobless pit. No dembo recovery package will kick in fast enough. By the flowers of May... ugh.

These dynamics are taking us into unknown territory. It's quite possible, by hitting the million-a-month level on the early side -- say, by Groundhog Day -- our job market might hit a system phase change where qualitative morphs hit the dynamics. One thinks of the credit sector this past September.

Research project: find the Great One's peak drop and scale 'er up to now. Inevitably, piling up all these lost-job souls stokes hotter flames elsewhere -- or rather, everywhere, or at least everywhere wage households' dollars once reached. Positive feedback frenzy, anyone?

Everywhere, numbers -- dark-smelling economic numbers -- pour out on us from our newspapers.

But for a moment, let's wave 'em aside.

These numbers, however they run, however they mean, however they show our betters making a hell of things here on rock three -- they'll not change for the worse just 'cause we few ignore them awhile. What will be, will be, Obama... eh?

As Paul Samuelson, the great and terrible neoclassical theorist, once said: "After all, economic history is just one big numerical example after another."

Let us, as scientists, rise above this midden-heap of numbers to the algebra of all possible societies.

Sam's science -- alas, my science, the dismal science -- looking down from its Platonic platform on high, despite much media-induced popular belief to the contrary, actually gets what's up these days -- at least when the dismal science is fully awake and using its latest formalisms and data streams, and as long as it places itself in the hands of able souls with the best of Ivy training like Stiglitz and Summers. Scientifically speaking, lots of folks -- maybe even 'enough folks enough of the time' -- more or less understand how our economic world runs itself, and where it's got itself into, and where it's likely headed further into. But then, as Dr Marx famously observed, the point -- the really big point, where the wheels hit the road, is -- to change the fucking numbers.

In that light, and to change theistic systems, all our Joshuas must betray their Moses. Even if the great Moses, Keynes himself, seemed to show us all a foolproof way to take the dismal permanently out of the dismal science, it's only too apparent these days that Keynes' present crop of Joshuas ain't up to the task of conquering Palestine for us promised people of earth, the wretchedly jobbled masses.

For instance: we had a one-year warning about the horrors that beset us now. We saw this coming way back in August 2007, and nonetheless that warning led to what? A 12 month Sitzkrieg, till bam! we're faced with the hot-footed, maybe too late, maybe just-in-time scrambles of this past September and October -- a whole year later and only after the full force of the gathering shock waves were already whacking the shit out of our hi-fi sector.

Why this Pearl Harbor-like lapse?

Because, despite a thousand highly placed plaints of "who knew" from the likes of the bonded one, Bobby Rubin, the dirty fact is they all knew. They all saw it coming, the tower trolls. In fact some have known for so long they forgot it a couple of times along the way. They knew and they did nothing, because they preffered this massive global catastrophe to the alternative.

And the alternative is...?

Here is what the science sez:

We have it in our latent power to construct a global macro system -- run on Keynes-Lerner-Vickrey principles -- a global macro system where such absurd self-induced economic contractions as the present imbroglio wouldn't even get underway. Comrades, come the day of final action, we can build a worldwide no-bubble zone, a worldwide no-stagnation zone, no runaway-inflation zone, and last but far from least, a worldwide no-unemployment zone. Yes there could be right here even with all the natural restrictions of our joint human condition, earthwide hyper-employment, through fairly elementary macro mangement of effective demand, so long as we maintined a fairly smartly co-ordinated pricing system.

And here's the bazooka shot to Wall street and Babbitville alike: we could have this, coupled with steady but rapid productivity growth.

But here's the rub: if we did these easy-to-cook-up moves, we'd destroy -- even without intent -- the corporate system that runs all things marketed round here.

The core insight: forget prosperity for ever and for all. The present system couldn't even survive constant full employment. If the job market were forever overflowing with job opportunity, in remakably short order our leading corporations would soon enough begin to founder. Their raison d'etre, their vast and deeply artificial irrigation system of private profits would begin to dry up. Any value produced not caught as wages would rush out of the system straight into innocent consumer surplus. Without the ability to make the sack scary, the bastards at long last would be left, God forbid, to drink only of the exiguous trickle of rewards due them for actual innovation.

"The horror! The horror!" as Harold Geneen might say. A system without a plethora of carefully crafted rent sumps is a system that turns limited liability corporations into dinosaurs.

This sometimes clever, sometimes brutal job rationing system is the one motive force absolutely necessary to fill and sustain the above mentioned profit sumps, AKA market driven oligopoly profits. And so it shall remain so as long as personal earnings from the labor of others are around to warm the bedrooms of widows and orphans. And other shareholders as well.

We live inside, under, and through this system, but without personal culpability. We aren't to blame. The trolls themselves aren't to blame, not at least at the one-at-a-time corporate level. No. The evil is in fact today lovingly enforced by job scarcity's younger brother, centralized credit rationing, the system's Holy Ghost power, that keeps alive the mechanism of surplus margins inside corporate revenue boundaries. Which is to say: the credit ration system, by pulling in its markers, usually can keep wages the hell out of profit's hair.

To travel to even a higher platform, feature this, my friends and fellow befucked-niks: even if you get to the mountaintop -- even if you take on all the power of mankind, strip away nation-states and go to a one world system where equality of race gender and creed radiates like sunshine itself -- if in a moment of Burkean lily-liveredness or Dickensian nostalgia or fondness for the once great and powerful, you keep intact our large limited liability corporate critters, then not only will they regain control earthwide, they will resurrect the job scarcity system by whatever means availible. And with time and fair sailing you'd once again begin to experience its opposite, sudden heavy seas -- rapidly developing, excessive, non-efficiency-enhancing job shucks; and they'd emerge as quickly and as senselessly and as massively as any of today's recurrent draftings into the armies of idleness.

Lots of folks seem to pick one over the rest, or confuse 'em one with another.

• Recovery: an immediate return to full employment globally by massive deficit spending now.
• Relief: a tax rebate plan over four years to shift trillions in national debt burden from households to Uncle Sawbuck.
• Reform: harness the free-range corporations to the national plow and tax wealth like a borrowed mule.
• Reconstruction: This is a two-parter: 1) A 4-year plan to build a green American production platform, and 2) a balanced-trade dollar.

In America today, with an overhang of household debt and high uncertainty, tax cuts are likely to be ineffective (as they were in Japan in the 1990s). Much, if not most, of last February's US tax cut went into savings...

Stig would have us pull off a revenue-neutral tax shift from the small skilled workers to the portfoliate and the high-fee professionalate. Fine, but two-phase it, Stig: Now relieve the wagery with a massive payroll tax holiday, plus -- why not? -- a rebate of the entire content of the Social Security trust funds.

"You earned it, you damn well need it, so I'm givin' it back, cowpokes."

By my lights, Dani Rodrik is a fine political economist. He recently posted at his site this interesting calculation:

"How much of a boost to economic activity will a fiscal stimulus provide? For those who believe that we have entered a Keynesian world of shortage of aggregate demand -- me included -- the answer depends on the Keynesian multiplier.

The size of this multiplier depends in turn on three things in particular, the marginal propensity to consume (c), the marginal tax rate (t), and the marginal propensity to import (m). If c=0.8, t=0.2, and m=0.2, the Keynesian multiplier is 1.8 (=1/(1-c(1-t)+m)). A $1 trillion fiscal stimulus would increase GDP by $1.8 trillion....

Now suppose that we had a way to raise the multiplier by more than half, from 1.8 to 2.8. The same fiscal stimulus would now produce an increase in GDP of $2.8 trillion -- quite a difference. Nice deal if you can get it. In fact you can. It is pretty easy to increase the multiplier; just raise import tariffs by enough so that the marginal propensity to import out of income is reduced substantially (to zero if you want the multiplier to go all the way to 2.8). Yes, yes, import protection is inefficient and not a very neighborly thing to do -- but should we really care if the alternative is significantly lower growth and higher unemployment?"

Cosmopolites, beware! The dark shroud of protectionism looms near.

Here's the flip side: raise the system to the global level, where there are no imports or exports only internal planetary trade. The propensity to import naturally goes to zero (unless some Venusians turn up who want to sell us cars), and you get the same powerful results as by sliding lower down to national protectionism.

If the earth's 200 nations formed a more perfect union, say, like the Terran federation of nation-states, then we have again the robust fiscal multiplier 2.8....

O brave new world!

"Let me try my hand at a definition of non-depression economics.

Non-depression economics believes that:

Short-run economic policy should be left to the central bank-- the legislature and the executive should focus on the long run and keep their noses out of year-to-year fluctuations in employment and prices.... The highest priority for central banks should be to maintain their credibility as guardians of price stability. Once that highest goal has been achieved, central banks can turn their attention to trying to keep the economy near full employment."

There you have it: the mind of a Clinton neoliberal in the time of hi-fi cholera, a born designated driver: "Where to, Mistah Madoff, suh?"

How halcyon and wistful, eh?

"Today, many experts believe that unemployment could reach 10 percent by the end of next year and our economy could fall $1 trillion short of its full capacity."

"The Obama plan represents not new public works but, rather, investments that will work for the American public. Investments to build the classrooms, laboratories and libraries our children need to meet 21st-century educational challenges. Investments to help reduce U.S. dependence on foreign oil by spurring renewable energy initiatives (many of which are on hold because of the credit crunch). Investments to put millions of Americans back to work rebuilding our roads, bridges and public transit systems. Investments to modernize our health-care system..."

... grappling with the age-old question "Can any honour exist independent of religion?"

Whilst we numberless orphans of the storm are blown from pillar to post, we're to be comforted by thoughts of Obama's econ-con dream team fashioning a squared-circle rescue (albeit behind the great veil of discretion) -- a plan that preserves all our tiny souls' civic virtue and yet extends to us a generous secular grace.

"Some argue that instead of attempting to both create jobs and invest in our long-run growth, we should focus exclusively on short-term policies that generate consumer spending. But that approach led to some of the challenges we face today -- and it is that approach that we must reject if we are going to strengthen our middle class and our economy over the long run..."

Okay, so I'm convinced uncle Obama could pull us out of the dive, acting solo and using just the budgetary levers of taxes and expenditures -- so long as he's bold enough. And in consequence, if we wallow long in this coming jobless pit, I can rightfully lay the blame on the good emperor hisseff.

But what of, say, the leader of Cambodia operating with no limitless dollar mine to tap? Can he or she be blamed if the gathering depression lingers on past next year in that small and much-tasked country?

The privateering pattern is clear: in high times, the transnational free-range corporations fly in to places like Cambodia with their international credit and their cutting-edge technology and their first-rate organization, but when the great sucking sound begins, and the rip tide is in the offing -- they fly right on out, collapsing the local asset markets and taking much "domestic paper capital" back with them to the Manhattan metropole and its imperial dollar.

Moral: the tangled web in the end snares the threadwalking fly.

Here is the great and glorious Keynes, circa deep dark depression days:

"I sympathize, therefore, with those who would minimize, rather than with those who would maximize, economic entanglement among nations.... I have become doubtful whether the economic loss of national self-sufficiency is great enough to outweigh the other advantages of gradually bringing the product and the consumer within the ambit of the same national, economic, and financial organization. Experience accumulates to prove that most modern processes of mass production can be performed in most countries and climates with almost equal efficiency.... let goods be homespun whenever it is reasonably and conveniently possible, and, above all, let finance be primarily national..."

Back to Cambodia. Now I have a history with this place and its brief essay into radical autarky back in the 70's, so I think of it often when the wild and wooly down side of "limited liability internationalism" raises its head, like it has recently. One has to wonder if Keynes meant this passage above to apply to the likes of today's descendent of Pol Pot's Democratc Kampuchea. More broadly, can we say the periphery of the earthwide Yankee empire is safe for practioners of Keynesianism?

Can little brown states run like big white ones do?

Let's begin by doubting it.

To be continued...

"The fact is that recent economic numbers have been terrifying, not just in the United States but around the world. Manufacturing, in particular, is plunging everywhere. Banks aren’t lending; businesses and consumers aren’t spending. Let’s not mince words: This looks an awful lot like the beginning of a second Great Depression."

Again and again our man Kruggles of Rouge Gap -- butler to the thinking elite -- yelps into the gathering whirlwind his deepest-felt fear:

"I’m sure that Congress will pass a stimulus plan, but I worry that the plan may be delayed and/or downsized...."

Why those terrible, awful, no good, very bad Republicans, of course:

"Look, Republicans are not going to come on board. Make 40% of the package tax cuts, they’ll demand 100%. Then they’ll start the thing about how you can’t cut taxes on people who don’t pay taxes (with only income taxes counting, of course) and demand that the plan focus on the affluent. Then they’ll demand cuts in corporate taxes. And Mitch McConnell is already saying that state and local governments should get loans, not aid — which would undermine that part of the plan, too."

Argggh. It's a tactic worthy of ... Hamas!

The highly-educated econ-cons are dancing in the dark these days, and if they got a heart -- it scares 'em plenty.

Here's my recent favorite hair-standing-on-end conjecture by that everlasting friend of the little people, Paul K of Times Square and Nassau Hall:

"There’s been some talk about risks of deflation, but there’s one alarming comparison I haven’t seen made.... the CBO is currently projecting an output shortfall from the current slump comparable to the slump of the early 1980s. Actually, it’s very close....

Now here’s the thing: the slump of the early 1980s produced the Great Disinflation, which brought the core inflation rate down from about 10% to about 4%. This time, however, we entered the slump with a core inflation rate of about 2.5%. If we experienced a disinflation comparable to that of the 1980s, that would mean ending up with deflation at a rate of -3.5%."

Why? Well, first there's the obvious: one starts postponing purchases and that tends to build its own added downward price mojo, if an economy is already short on sufficient effective demand.

But more centrally, in a deflationary regime, where the real value of dollar denominated obligations increases right along with the real value of the dollar itself, the debt jacket harnessing us all gets to weigh heavier and heavier

Paul here is taking quite sharply, literally, and without offsets, a model of aggregate price level movement that the late (and not a minute too soon) evil dwarf Milton Friedman inspired with some vague verbal gestures back in the late 60's (yes, right in the heart of the topsey-turvey; the model was evolved by a bevy of other, more math-hungry dwarfs after that).

It postulates a so-called "natural rate of unemployment" (now, by the way, placed in our "real world" at 5% or so), and here's whats relevant about this "reasonable assumption": if an economy such as ours were to run a rate of unemployment higher than our "natural rate", then the core inflation rate (the rate of increase of our aggregate price level due to wage costs) begins to slow itself down; and if (like today) we start this higher than natural jobless period from very near the low end of the inflation range, and we proceed to run above our natural rate long enough -- well, we might travel down past the zero inflation point and right on into Bizzaro-land, right into deflation; nay, accelerating deflation, much as we experienced off and on for three years under Quaker apostate and bulwark of ordered liberty Herbert Zebulon Hoover.

Now that's taking the model very literally, of course, as one is wont to do when one's in the scary-story business, but even within the model, Paul K's conjecture from analogy to the 80's Reagan-Volcker Goetterdaemmerung hardly accounts for structural variations that might well exist in any market system's dynamic behaviour: far above zero inflation (mid 80's) vs. very near zero (nowsville).

My hero Abba Lerner felt there was no such sweet spot "natural " rate of unemployment, with inflation accelerating immediately to one side and disinflation just as immediately to the other side, no matter the initial rate of inflation.

Dear Abba suggested we might actually exist in this age of modern macro management on a kind of plateau between say 10-12% unemployment and 3-4% unemployment, where uncle's macro policy could stabilize the jobless rate more or less while simultaneously maintaining a given rate of price change (again more or less). He thought we could drift forward without much action either way, anywhere along that spectrum. That is, with anywhere between 15 million and 4 million jobless supplicants -- an 11 million margin of misery.

I think he was right. And I bet the system's corporate demigods will discover within the next three quarters or so that they're quite comfortable with an 8-10% jobless rate -- for a few years here anyway -- you know just till things settle down. The horrors of proximate job loss without the actual losing of one's job is a tonic to citizenship. In particular it gives the right kind of environment for America's jobbler zillions to get used to their freshly-poured, still-drying cement debt suits.

Maybe it's true, comrades -- maybe most of us wage freaks really do need a decent interval of hell's-doorstep pecuniary night sweats. Maybe we need to learn to be grateful to our Scrooges and our Mr Burns-es, grateful for our grossly liened-on home and shitpile job.

Next time: scarcity works; or, the cases of jobs and credit scores. Why "walking away" from a debt suit might require a far stronger job market and consumer credit market than Obigma's posse prolly has in store for us.

According to the court intellectuals from the Brookings & Heritage workgroup (pdf), the best way to approach gutting entitlements is through hostile, 'triggering-event' additions to the budget process and the elimination of the entitlements' automatic adjustments to keep up with real world costs. In this way they can avoid the appearance of explicit attacks. The people who perform the gutting can wring their hands and cry, "the Budget made us do it!". As the gutting unfolds, there would be no single activist decision anyone could point to. An explanation of what had happened would take time. Anyone trying to explain would have to be careful not to step on the brand-loyalty corns of the listeners.

Needless to say once the changes have been made, undoing the harm would require more effort than went into it. The defensive collegiality of the dirty legislators would work against it.

The wonks feel the decision to pursue passive aggression has been forced on them by the lack of a "level playing field". There is nothing quite like the endless search for victimology of court intellectuals. And typically, for court intellectuals, they're proud enough of their nasty, contemptible little planning sessions to make the results of them available for public consumption.

The first step toward creating a more level playing field and achieving long-run fiscal sustainability in the federal budget is to take the three major entitlement programs off autopilot. We recommend the following changes:

• Congress and the president should enact explicit long-term budgets for Social Security, Medicare, and Medicaid that are sustainable, set limits on automatic spending growth, and have a required review every five years. Since people depend heavily on these programs and plan their lives around them, they must be budgeted on a long-term basis and should not be adjusted frequently. Reviewing them every year like discretionary spending programs would cause too much uncertainty for retirees and place too great a burden on Congress. The three major entitlement programs should be budgeted for longer periods (for example, 30 years) but be subjected to review every five years. These five-year reviews would allow reconsideration of the trade-offs between entitlement spending and other purposes and might cause adjustments in benefits, premiums, taxes, or all three.

• The rules for the five-year review must include a trigger or action-forcing device that requires explicit decisions when projected spending exceeds budgeted amounts. The trigger might involve automatic benefit cuts or revenue increases (including premium increases) that could only be over-ridden by an explicit vote or enactment of alternative policies that would achieve budget outcomes similar to the automatic adjustments. Alternatively, the trigger process could require that a commission make recommendations for closing the gap to the president and Congress on which an up or down vote must be held. The trigger process that forces an explicit vote when the long-run budget for any of these programs is exceeded will dramatize the importance of modernizing these entitlement programs to reflect increased longevity, higher incomes, and the rising cost of medical care. If the public wants the increasingly expensive health benefits provided by Medicare and Medicaid because they judge them to be well worth the costs, then those benefits will have to be paid for with some combination of revenue increases and cuts in other spending.

• The long-run costs of these three programs should be visible in the budget at all times and considered when decisions are made. Benefits should not be increased—either at the five-year review or in between—without ensuring that they are fully financed.

"Recent news reports suggest that many influential people, including Federal Reserve officials, bank regulators, and, possibly, members of the incoming Obama administration, have become devotees of a new kind of voodoo: the belief that by performing elaborate financial rituals we can keep dead banks walking."

The Babbits of Bumble Creek never tire of telling Uncle that he better not get into the "pickin' winners from losers" business -- and yet he keeps doing it, though he wants to believe, or wants us to believe, that he's not doin' it Hizz-seff.

Hence the zombies: Uncle will rebuild the credit conduits by working through allegedly animatronic Wall Street middlemen.

But... what if the animatronics are actually the pokes operating from inside the beltway and not the boardrooms of Wall Street?

Note this take by one James Surowiecki:

"I think that as the “nationalize now” meme has taken hold in the blogosphere, people are talking about nationalization “awfully casually" -- I think people are skeptical of it for two big reasons:

1) -- the general principle that private enterprise is typically better at efficiently allocating resources than government;

2) the idea of the state literally determining which companies and individuals do or don’t get credit is, even to a non-libertarian, at least a little troubling."

Obviously, "efficiency allocating resources" -- right now -- must mean "stop allocating resources" -- eh? Yeah, go ahead, send us the 2 trillion in cash and 12 trillion in guarantees, but stop the music -- stop the system -- stop production -- time out -- you 15 million more jobblers, go sit in 15 million little corners somewhere, anywhere -- and wait till we get our balls back.

And damned if, despite the efficiency of idleness now, Uncle still wants his good hi-fi zombies to lend lend lend -- and he'll be damned if they won't.

Obigma's raiders won't N-word the big banks, even if the economy keeps sliding away into the drink like our calving icecaps. There'll be no red thread runnin' through here -- there will be no commanding-heights strategy 'round this White House.

The new powers that be will not choose winners from new beginnings. They won't rebuild the financial world out of shiny new creatures. These veteran magistrates, like some gaggle of tender old sluts, will keep on sticking with the losers -- as long as they're big enough.

An earlier post by your obedient savant here, calling for a huge rebate of the social security trust funds, caught the following comment -- right on its glass jaw, or at least so thought the commenter:

"Trouble is, there is no $2 trillion surplus to distribute -- it's already been spent. All there is are government bonds, and you have to stand in line with the Chinese and Arab oil states to get anything back from them."

If you make the dollars, and they cost you nothing to make, where's the limit on 'em?

I know, I know -- shades of Robert Mugabe and Zimbabwe's zillion percent rate of runaway inflation rise to spook you if any one mentions uncle's unchecked power of moneyfacturing: "It will lead to a collapse of the dollar system! What of the widows and orphans?"

Not at all. Like an occasional plebian armed uprising, what's so wrong about an occasional hyperinflation? It may water the tree of liberty -- long as the right people stay ahead of the curve, that is. The right people, to my way of thinking, are the low prolers and the other honest live-by-toil citizens of the Jacobin republic. It's just as easy to keep the ordered masses ahead of the wave as the high rollers.

"So," you say, "it's the kulaks and shopkeepers, the petty rentiers and such -- it's them that suffer from galloping inflations, eh, Citizen Paine?"

Not even. It's only creditors in all their shapes and sizes that suffer.

Inflation can operate like a debt cram-down. It can cut real debt burdens. In fact in the right hands, it could be the cheapest, fastest, fairest way to do it, if it's planned and taken step by step.

I throw this out as a challenge, like the guy in the dunking chair.

Thesis: Uncle can spend all he wants, so long as it's dollars, Worst case, he creates the conditions for total transformation, total liberation from the social debt harness.

Here's how: Uncle says, this inflation will be a deliberate policy, and by proper indexation all real wage rates and real savings and real pensions of all sweat-of-the brow breadwinner American jobblers can be maintained intact despite inflation's mighty surf.

The prudence of Scrooge McDuck only insures and protects the incarceration of society's producing classes.

vs J.M. Keynes --

-- a duel in the sun between the patron saint of direct and borrowed gubmint expenditures, and the wizard of Flatlandian monetary magic.

We all know about Keynes and his liquidity trap, right?

Well, be prepared now to meet and greet doctor Irving Fisher, eugenicist, preacher's boy, and diet nut, father of a self-reported "both new and important" deflation debt dive bomb theory of depressions.

Two sides of the same coin? Are they both about the flaw at the core of a private credit based economy?

Not exactly -- there's enough difference between 'em to muster loudly opposing factions for today's great policy moment: Uncle as direct buyer of first resort for lots of real neat green stuff, vs. Uncle as buyer of last resort for all things figmentary and toxic.

Put that way, it sounds obvious who's the heel and who's the babyface. But not so fast, comrades.

Both men's models were designed in, by, and for the great depression. But by the time the war to end depression had subsided into a cold peace, Keynes and his "theory" were king of the planet, whereas Fisher, though home-grown and, in the roaring 20's, every bit as much of a superstar as Keynes (and a pro-business, anti-labor superstar to boot) found his rival paradigm largely unattended-to, not only in academia, but in leading American policy circles as well.

Up and down the line, it was Keynes' century, and so it remained, all through the Harry, Ike and Jack years. In fact, the triumph of Keynes and his postwar Hicksite followers was so complete by the time of LBJ and RMN -- in other words by amok time -- that even the Chamber of Commerce had its version -- though de-balled -- of Keynes.

"We're all Keynesians now," dear old Dick once glowered to the press.

By the high 60's, fiscal deficits had become the universal Rx for the system's mild macro slumps. Credit policy was left to the pinch-nosed, green-eyeshade guys, while the likes of Paul Samuelson and Jim Tobin carefully calibrated the nation's optimal federal deficits.

But Fisherian deflation theory, with its starring role played by the monetary authority, arrived or re-arrived back on the scene -- albeit as a late entrant after the kook-krieg of flame fanners and zoo-doers -- and Irv was a major beneficiary of the highly successful anti-Keynesian, anti-fiscalist campaign touched off by the deadly bottom-line events of the late 70's. Stagflation! The Waterloo for Keynes and his borrow-to-spend formula. And particularly during the Reagan salad days, a new macro mindset triumphed -- despite the evidence at hand, i.e. the economy roaring out of the 82-83 contraction, prolly more from a Keynesian huge deficit run and military buildup than through Kodiak Volcker's final removal of the figure-four credit lock he'd applied back in '79. But that's another story.

In retrospect, it would seem that the immiserating events of the failed Carter crusade had told an eternal truth: larger fiscal deficits as attempts to tune up job markets ultimately lead to uncontrollable wage-price cyclones. Cyclones like the ones that blew apart the late 70's also blew apart the city of light that Johnny K's acolytes were attempting to build in postwar America. The day of the money-base loons had arrived, and with them came the retreat of the Keynesians into post-Keynesians. Like monks in Ireland, they kept the candles of truth burning -- ahh, maybe with a bit of twist to 'em, I must admit.

The new respectable macro science found Fisher.

So what was Fisher's angle? His starchy Yankee values were repelled by handouts and confiscatory transfers, and building public pyramids in the wilderness, so he looks on first view like a nice antidote to the flippant gay British free-lunch advocate.

In the dark days of the depression, doctor Fisher, looking out his Yale office window at a misery visible, like any good scientist, tried to find a way to reconcile his deepest disciplinary prejudices with what he observed around him. The unorthodox virulence of the great contraction had shattered his boundless high spirits. After some false starts and fad fancies, our man, in a moment of clarity, built a simple model of explanation that -- worked.

He kept his model of the "real economy", the market-based production system, intact, but he constructed a new addition to his overlying credit system.

Short course:

Left to the whims and vaguaries of the unfettered market systems, both credit and production, any rapid accumulation of excess unsustainable private debt will lead inevitably to a period of "realization" and subsequent panic and crisis. And that leads on to massive asset liquidation, and from there we go into a protracted grinding deflation, a downward spiral where our already burdensome debt loads become ever heavier as prices and incomes and outputs fall, and consquently defaults grow ever bigger and spread ever wider.

Okay. So that's kinda kool. On rediscovery, who do you think became the number-one fans of this Fisher deflation model?

Ten years ago, that would be hard to pick. You got folks all the way from Krugman on the white-hat side, to Taylor on the black to pick from. But now, after all the swanning-about of the hi-fi credit system these last dozen years or so, paleo-Keynesians have sallied from the Ivy towers to do battle with the monetary macro-uber-alles crowd -- often, as in Krug's case, the paleos are reborn post-Keynesians. And all this, of course, gets muddled by the multitude of shallow syncretists attempting to blend the two sharply opposed equestrian schools into a common camel jaunt.

At one pole you got yer Fisherian policy camp calling for maximum balance sheet actions, versus those dauntless paleo-Keynesians calling for maximum infrastructure-building, benefit-extending, state-budget-boosting by means of federal budget busting, etc.

The credit economy vs. the production economy? Bankers vs hard hats?

Ah, if it were such a simple choice: Scrooge or the union kulaks -- who would not know which side to be on? But my friends, both sides dance inside the circle of doom.

Stay tuned.

What hath the house donkery passed?

$607 billion in direct spending and appropriations and $212 billion in tax cuts. Those numbers are not even close to getting us halfway to heaven, and if heaven needs to be reached in one leap -- sorry, we ain't gettin' there.

Imagine, 11 blue dogs voted against it, while the repubs held solid -- zero repubs voting for it. On to the senate, where the same pattern would block it, and they just might -- yes even this stinker.

The rocky road, white house version:

"I hope that we can continue to strengthen this plan before it gets to my desk," Obama said in a statement after the vote. "We must move swiftly and boldly to put Americans back to work, and that is exactly what this plan begins to do."

Details:

My beloved payroll tax cuts? 500 dollars -- five Franklins -- for each of us jobblers. What's that, $65-70 billion? Only about a third of the tax cut's total value. Obviously we can expect this cut side to rise as the senate weighs in -- and their friends the corporate crazy cats oughta bag even more useless hog boodle, AKA "investment incentives".

Beware this creep, Jeffrey Sachs, the Quetelet Professor of Sustainable Development at Columbia University.

He is a vicious climbing grasping sanctimonious hollow pine of a grifter, the Geraldo Rivera of development economics, a lamp unto himself alone, a scorpion fire, a sickening soul, a blemish on shame itself.

Once Doctor Shock to both Poland and Bolivia, the smiley face of raw neolib market stampedes that brought misery worthy of the four horsemen in its wake, he's now Doctor African Makeover, the white rain man that wretched sub-Saharan black folks never asked for, but got right up their ass.

In the last decade, this trans-nat limited-liability emerging-economy death-wish incarnate, despite heading for deep cover as a champion of the poorest of the global poor, remains nothing but a babyfaced corporate pimp, ready to facilitate the free range profiteers and various other serial rapists of one backward nation after another.

I'll not trouble you with the details. Just never read a word he writes or believe anything he claims. If he said horse jockeys oughta all be over 7 feet tall, he couldn't get himself one inch further from the truth than he is right now, 24/7.

This undauntable guy's ever-boring, ever-ready ambition will never give up the hustle. His foul spirit wants in on everything, and he'll get in on everything too, if he ain't sent rocketing down to the circle of Hell reserved for oily human corkscrews like him.

On the other hand, this shrewd witty chap --

... Dani Rodrik, despite -- or more likey because of -- an odd Sancho as Quixote side, must have a place waiting for him somewhere up there in God's own sugar bowl.

I quote from a recent light and popular advice piece of his, intended for the same array of emerging states the above Sachs man has tried poisoning, states now obviously confronting a fast submerging "order" here on market Earth:

"First on the agenda must be new rules that make financial crises less likely and their consequences less severe.Left to their own devices, global financial markets provide too much credit at too cheap a price in good times, while they deliver too little credit at bad times. The only effective response is counter-cyclical capital-account management. -- discouraging foreign borrowing in good times, and preventing capital flight in bad. "

But soft! Here entereth the villain --

"Instead of frowning on capital controls and pushing for financial openness, the IMF should be in the business of actively helping countries implement such policies. It should also enlarge its emergency credit lines to act more as a lender of last resort to developing nations hit by financial whiplash. "

"Second, the crisis is an opportunity for achieving greater transparency on all fronts, including banking practices in the advanced countries that facilitate tax evasion in the developing nations. Wealthy citizens in the developing world evade more than a hundred billion of US dollars worth of taxes in their home countries each year thanks to bank accounts they maintain in Zurich, Miami, London, and elsewhere. Governments of these nations should ask for and be given information on their nationals’ accounts."

"Third, developing nations should also push for a Tobin tax (**) – a tax on global foreign currency transactions. Set at a small enough level – say 0.25% – such a tax would have little adverse effect on the global economy while raising considerable amount of revenue. At worst the efficiency costs would be minor; at best the tax would discourage excessive short-term speculation. The revenues collected – which would easily amount to hundreds of billions of US dollars annually – could be spent on global public goods such as development assistance, vaccines for tropical diseases, and the greening of technologies in use in the developing world."

------------------

(**) While we dream -- a Tobin tax rate might work better if structured to move up and down dynamically, like a congestion tax.

There I was, reading a column by the New Yorker's James Sourkraut, about who precisely oughta be afraid of the big bad wolf called moral hazard -- and it's just rolling along in the usual commonplace fashion when this pops up:

"The moral-hazard argument -- assumes that the most important factor shaping corporate decisions is the interest of the company as a whole. But, more often, what’s shaping those decisions is the interest of individuals.... The fact that people can reap enormous [personal] rewards... is likely to lead to [more] reckless behavior, regardless of whether companies are bailed out or not.... Even if we allow Citigroup to fail... Chuck Prince, the former C.E.O., will still have walked away with a package reportedly worth more than seventy million dollars."

Well, for starters, these Chucky Prince critters, prolly already planning their next scamarama, can be rounded up, branded on the forehead, and slung into a detention center. That's what.

Possible site? I suggest inside the 9/11 crater, right there in lower Manhattan. I'm thinking of maybe a system of all-glass cages, suspended from a pair of gleeming steel trade-tower sized armatures, Calderesque fashion. You know, let the fuckers twist up there in the trade winds, so to speak. Glitter and rattle away like obscene chimes day and night. Inside each cage a financial Houdini, all of 'em gyre-ing about like a flock of secular Simeon Styliteses.

If we were to consult a good constitutional scholar on this, I'll bet my trust fund we'll be told the power to do such noble deeds rests comfortably within the scope of our federal House of Representatives.

I can see it now: la Nan sets up a special task force "to investigate the Wall Street debacle," Pujo Committee style. You know, one of those "never again" type scrambles.

A viciously seductive she-cat is appointed to head up the staff of crack investigators -- think Vishinsky in a tank top:

Provisional lists are drawn -- long and grossly unfair lists -- regrettably, in the frenzy to mete out a higher justice, very few innocent assholes with even a remote connection to "the Street" are spared.

Much too much is leaked to the press before a wave of belated decency arrives, and the list is winnowed from tens of thousands to it's final "minimalist" tally of three hundred putrid souls.

Of course, these despicable, finally-named fiends -- many of them at any rate -- will take flight, but just as often they'll be apprehended, Ninja style -- plucked like wood lice from their places of betrayed hiding.

Some, alas, will die along the way -- manhunts are like that -- a few will be fired apon while fleeing -- others will doubtless die by their own hand -- hopefully, in a few totally unsavory cases, prior to giving their testimony before the sub committee.

Let's pray there will be secret waterboarding, and that full truths will be extracted, and these egregious toads will each tell their heinous tale in full

The reduce the stories to boilerplate -- carefully and scrupulously scripted boilerplate, needless to say. Every phrase inspired by real actual interogation notes. I imagine this oughta be the work of a team of the finest writers known to the DNC.

And then there's the recitations themselves. Feature this: the bastards themselves -- battered, unshaven, beltless, stumbling and mumbling and staring vacantly about them -- each moaning out his own individual story, all in a weird lock step.

Why comrades, the effect will be a miracle -- a billion viewers gasping, fuming, gnashing, weeping; a hardcore 50 million drunk with an unquenchable rage will storm the nearest ATM machine and -- there's enough potential zip zap here -- to begin the world anew!

Owen will grouse, no doubt, but my fellow New Yorker Doug Henwood has some cogent stuff to say:

Tomorrow will bring the unveiling of the Obama administration’s overhaul of the Henry “Hank” Paulson bank bailout, the Troubled Asset Relief Program (TARP)..... [I]t looks like a significant portion of the scheme will amount to this: the government will lend money to hedge funds and the like at subsidized rates to buy toxic assets from banks - and the gov will guarantee the investors against losses. Evidently, the administration thinks the toxic assets are being underpriced by the markets. If they’re right, the buyers will make money. If they’re wrong, then we all pay.

From the hedgies' point of view, it’s all reward, no risk... What the public gets out of this is impossible to specify, aside from the risk of massive losses.

I hope this isn’t really what will emerge. But if it is, the Obama administration will have broken new ground in awfulness. The same formula that brought us this mess... will be applied towards solving it....

Hedge funders like Chicago’s Kenneth Griffin wrote Obama big checks during the campaign season.... Obama’s top economic advisor, Larry Summers, worked for a hedge fund (D.E. Shaw) after he got fired from Harvard. And no doubt Treasury Secretary Tim Geithner would like a multimillion dollar job on Wall Street after he leaves public service, just like Robert Rubin got at Citigroup after engineering the repeal of Glass-Steagall.

Can things really be this bad?

My man Doug Henwood is in fine form again today:

They’ve botched the stimulus, and they’re botching the financial rescue. They’re worse than I expected, and I wasn’t expecting much in the first place.

Parturiunt montes, nascetur ridiculus mus!

It makes you wonder: Who's minding the store? And I think the answer is: No one, actually.

Times like this reveal a weakness in the picture that we Lefties tend of have of our society and its ruling elites. We imagine the commanding heights populated by shrewd, crafty, far-sighted strategists, the devoted servants of capital and empire, whose mission in life is to keep capital and empire afloat and thriving, and who will do whatever it takes to discharge that mission.

This picture is wrong. The brain of the body politic is not animated by such spirits. Rather it is infested with spirochetes, bloodworms, flukes, annelids, larvae, fungi, amoebae -- parasites, in short. Critters whose goal in life is not to keep their host organism alive, but to devour its tissues and secrete their toxins into its bloodstream.

Normally, the organism is healthy enough to carry a rather heavy parasite load. But a point arrives when the toxins build up. The mighty beast goes blind and deaf. It staggers. It drools. It startles at imaginary noises and finally blunders off a cliff.

Do the parasites care? They don't. They just want to keep their parasite party going, and enjoy their parasite lifestyle. If that means they have to chew into an important ganglion -- well, hell, dude, I'm a parasite. This is what I do.

Parasites are highly evolved but not very intelligent, in the ordinary sense of that term. They're excellently adapted for lodging themselves in the soft rich flesh of their host, and what they do, they do well. But their repertoire is sharply limited; and in particular, they have no capacity at all for understanding what is happening to their host, or how to keep their host alive even for their own benefit.

This fact explains the remarkable stupidity of what passed for "debate" over the stimulus program, and the staggering, unbelievable, world-historical stupidity of the final product. The spirochetes of Wall Street, and the hookworms of the Republican Party, and the liver flukes of the Democratic Party -- very much including Ali 'Bama and his band of Clintonite theives -- didn't do anything, couldn't do anything, but what they always do: gnaw away at their host's vital organs -- and secrete poison.

Behold the mouse:

"The final bill includes -- a scaled-back version of Mr. Obama’s middle-class tax cut proposal,which would give credits of up to $400 for individuals and $800 for families within certain income limits. It will also provide a one-time payment of $250 to recipients of Social Security and government disability support."

"Scaled back"? I'll say -- from nugatory to microscopic. Those oughta be 12K returns, doled out over 12 months, constituting the disbursement of the trust fund frauds ending Uncle Sour's 30-year reverse-Madoff scandal.

Plus: a retirement tax holiday -- till further notice -- employee side only, comrades! -- Of course.

Talk about your Gyro Gearloose -- this young Icelander, working inside the New York Fed, has taken a "state of the art" macro model used widely by Ivy policy wonks, set it up to deal with our zero short rate T-note market and made it talk to us in looking glass logic: "Forget yer massive payroll tax cut plan, Owen!"

Because according to this analyst, "it would be ideal to raise payroll taxes to stimulate the US economy today."

Yup, don't cut 'em -- that will cause further real output contraction. Nope, raise 'em. Just goes to show ya -- build it right, turn the crank, and you can get the voice of Satan.

To be fair to our sorcerer's apprentice here, he adds, "I am bit hesitant to draw the lesson from this paper -- although this clearly is a direct implication of the analysis"

Okay, I'll spoil the fun: it's all just Mankiwish hijinx. Note this in the author's conclusion:

"It is worth stressing that the way taxes are modelled here, although standard, is special in several respects."

"In particular, tax cuts do not have any "direct" effect on spending. The variation in taxes only has an effect through the incentive it creates for employment and thus "shifts aggregate supply", thus lowering real wages and stimulating firms to hire more workers."

"One can envision various environment in which tax cuts stimulate spending, such as old fashioned Keynesian models, or models where people have limited access to financial markets. In those models there will a be positive spending effect of tax cuts, even payroll tax cuts like the ones in the standard New Keynesian model."

"Models where people have limited access to financial markets."

Father Smiff's pal, Dougwood Hen, has it right here -- "They’ve botched the stimulus" -- but then he goes and lays this lead egg: "They’re botching the financial rescue."

Botching? Looks like a fine heist to me, so far, and only likely to get more clever as it unfolds. This is their home course, after all.

Let's begin at the beginning. Here's Henwood:

"The only thing that makes any sense is to nationalize the weakest banks, kick out management, wipe out the shareholders, clear the decks, and start over with a tightly regulated system."

Well, Sweden's hi-fi sector was back looking like it did before the crisis in under 5 years, so it "makes sense" for who? The Wall Street rexheads?

To be fair, you note "This isn’t even all that radical a position anymore."

Indeed not. In fact, who gives a flying frog's leg about clever solutions that preserve the system? Hey, clever solutions might help Uncle "win" in Iraq too!

That being said, I think so far you are the reporter from the inside; but then you go righteous on us: "If these sick and devious “public-private partnership” schemes don’t work out, which seems likely...."

Devious, perhaps, but sick as in morbid? I think maybe that's a case of counting out Kong while he's still on his feet:

(Recall Carl Denham: "Don't worry, boys -- we've taken a lot of the fight out of him since he left his island.")

You point out correctly that "they’re doing absolutely everything they can to avoid even an orthodox nationalization." Maybe that's not because they're sick and foolish and blind, but because a string of nationalizations would not advance their interests.

I also agree that "This is looking more and more like Japan’s disastrous indulgence of their “zombie banks” in the 1990s than Sweden’s successful bailout." Indeed. The Swedes didn't indulge their zombies -- talk to Wallenbergerbitzstein.

And you're probably right, too, that "Instead of a few rough years, we’re likely to get a miserable decade" That's because the time out to regroup serves the corporate agenda quite nicely -- if we let 'em pull it off, that is.

You leave me thinking your take is something like this: these fucking bowtie-heads are taking us through purgatory just because they're driven like zombies to follow their ideological compulsions as much as their love of gain, and that they're gonna go Japan's way, not Sweden's way, and make our lives far far worse than they have to be.

But why give advice -- even if it's good advice -- to the enemies of humankind? Why should we the weebles, the job smurfs of America, care whether the rescue is well done or botched? We the weebles don't need no stinking private credit system. Say that -- not to the bankers, but to your fellow weebles -- and be done with it. Say we don't need no savings, no stockholders, no bondholders. They all suck the fruit of our toil.

Why should we small tubers give a rusty fart about the great bail? It's all just double-entry bookkeeping -- as in double talk, double back, double shuffle, double duty, double cross, double steal. Hell, if you like authoritarian farce, watch an episode of Hogan's Heroes.

When it comes to the real world of poli econ-con, we the road kill need to keep our focus on Uncle's recovery plans, now caught in a process that has indeed been, utterly, as Doug sez, "botched" from January of '07, at least -- and botched on purpose.

But if we must talk balance-sheet magic tricks, let's look at 'em from street level. Whatever is done for the big banks, Swedish massage or Japanese teac ceremony, life out here in mortgaged Middle America continues the slow seepage of rising delinquency and default.

Father Smiff is a great admirer of Alex Cockburn -- hell, the Reverend probably likes Cockburn even better than Doug Henwood -- but I don't entirely share his admiration. Alex has a very silly piece up on Counterpunch online at the moment. He warns:

"Obama’s bailout plan, added to the FY 2009 budget deficit he has inherited from Bush, opens a expenditure hole of about $3 trillion."

“Who is going to purchase $3 trillion of US Treasury bonds? Not the US consumer. The consumer is out of work and out of money. Private sector credit market debt is 174 per cent of GDP.” The sum is too big for the increasingly wary Chinese and Saudis to underwrite by buying Treasury bills where interest yields are... so low...."

Now this is all a mare's nest of hooey, as imbricated with holes as a quick wit's quick study can produce. Holes upon holes -- a nestle ring of parlor goblins and dancing tables.

In fact, most of the buying of Uncle's trillions in refuge safe debt, will be by red-blooded American institutions that are simultaneously selling Uncle their present holdings of toxic shit.

And as to the Hans and the burnoose boys -- fuck 'em if they can't take a joke, as Jack Nicholson says somewhere.

Unless the Han want the dollar to sink and further wipe out their exports -- better eat this Yankee paper, fellas. And the towel-topped Midases of the petrodesert? Where else or where better do they have to park their loot? In overvalued currencies like the Swiss franc?

Up now, down later -- that's the North currency game, no matter which angle or sequence of angles you play it all through.

So -- buy they both will.

That room of the haunted castle being passed, Alex gives us this Aunt Nellie turn:

"Failing everything else, there’s the government printing press, which can roll out the dollars and add inflation to unemployment."

How? In the present state of the global economy a combination -- a one-two punch -- of low nominal rates and high inflation is plain and simply impossible -- as impossible as a flying shark.

"Nationalize 'em! Nationalize 'em! Fuck the stockholders! Scalp 'em bare! " -- comes now the cry of Alan Greenspan joining the anvil chorus, apparently ready to find at long last a fellowship with radical rectifiers like Father Smiff's hero Dougwood Hen.

What music they'll make, this broad bloc of prudent children of the night.

Caveat pre-emptor.

Do I really need to emphasize: credit system saving of any sort is not even for opportunists -- it's for idiots, useful, useless, and otherwise.

Note the Greenstain's proviso: Save "the senior debt" -- the credit system's "anchor".

Okay, so there's lots to be said for Sweden as a producer of models. But as a model for our economic crisis -- Miss Sweden is, well, a miss.

Nationalizing a couple of banks never solved Sweden's real problems back then, and nationalizing 12 or 17 of our fattest banks now won't solve our problems either.

Fact: Sweden ultimately dug her way out of her economic hole in the early 90's by devaluing her currency and conducting a nice export-led recovery.

Fact: Sweden is a lovely but tiny piece of the global economy. If big Uncle Hegemon tried -- right now -- to pull off such a rapid dollar devalue, the whole global trade system and financial system would react and react badly.

So enough of this Sweden model nonsense.

We need to focus for now on an internal recovery. This spells one thing and one thing only: a huge huge huge string of fiscal deficits.and credit swaps. So huge in fact must this be that all the ridiculous either-or'ing chitter over tax cuts vs spending, buying poison or purging poison, has one and only one obvious answer: We damn well better do all of the above, plus more, and fast.

This is in fact the lesson out of Japan -- go full-throttle on all fronts, or you're in for ten years of damnable dorkdom.

Even infamous bloviator Martin Wolf has a few sound words on this score....

"Those who argue that the Japanese government’s fiscal expansion failed are... mistaken. Despite a loss in wealth of three times GDP and a shift of 20 per cent of GDP in the financial balance of the corporate sector, from deficits into surpluses, Japan did not suffer a depression.... The explanation was the big fiscal deficits."

"When, in 1997, the Hashimoto government tried to reduce the fiscal deficits, the economy collapsed...."

"The Japanese lived with zombie banks for nearly a decade. The explanation was a political stand-off: public hostility to bankers rendered it impossible to inject government money on a large scale, and the power of bankers made it impossible to nationalise insolvent institutions."

Returning for a moment to the land of the ice and snow -- are they nicely chastened and prudent non-plungers?

Well, nope -- seems they got into the post-Soviet lot-and-loot bubble big time for such a small player:

"Fears of a full-blown economic crash in Eastern Europe shook the region's currencies and the share prices of Western banks doing big business there, helping to spur a new shock to financial confidence around the globe.

Some market analysts warned of a regional economic collapse on the scale of the Asian crisis in the late 1990s, as a report by the Moody's ratings agency warned it may downgrade banks active in Eastern Europe.

The cost of insuring government debt from Poland to Russia rose further, while currencies fell. The Hungarian forint slid to an all-time low Tuesday against the euro. Poland's zloty fell to a near-low against the euro."

"A "special comment" published Tuesday by Moody's Investors Service Inc. warned that euro-zone banks... with significant exposure to East European economies may be downgraded."

On that hot list of blasted banks -- why, Swedish banks, and they're in for $140 billion. For a scale-up, thats like chancing $4.2 trillion here in good ole Sweden x 30, DBA the SS America.

Can you say TALF? It rhymes with Ralph, and it's what Father Smiff's mentor Dougwood Hen was clucking and fluttering about back a ways. I think he called it "sick", which rhymes with slick.

Seems suddenly it might be "not so fast there pard" time, what with the fourth estate on the case. Even the grey lady has her long ugly nose past the green door now, and yikes, read all about it: Obie plans to lend a trillion bucks to pathological profit hogs -- at 2% -- allow 20 to one leverage -- cover most losses -- privatize "returns of 20 percent or more" -- assume almost all the downside risk.

Wow. I want in on that caper. Wouldn't you?

"But Owen--" you start to say. And I interrupt: Yeah, yeah, I know, if we all got in at the ground floor -- that would spoil the whole fuckin' scam.

What's pleasant is that it seems all sorts of inside-the-loophole, behind-the-curtain games are going "public" on our lonesome privateers these days, and I mean public in a bad way, baby!

A few choice passages from the genuine NYT article mentioned earlier:

Most banks no longer hold the loans they make, content to collect interest until the debt comes due. Instead, the loans are bundled into securities that are sold to investors, a process known as securitization.

But the securitization markets broke down last summer after investors suffered steep losses on these investments. So banks and other finance companies can no longer shift loans off their books easily....

The Obama administration hopes to jump-start this crucial machinery by effectively subsidizing the profits of big private investment firms in the bond markets. The Treasury Department and the Federal Reserve plan to spend as much as $1 trillion to provide low-cost loans and guarantees to hedge funds and private equity firms that buy securities backed by consumer and business loans.... Some worry it may benefit only select investors at taxpayer expense.

The program also does not try to change securitization practices that, many investors say, spread risks throughout the world and destroyed financial institutions. Policy makers acknowledge that for now, fixing credit ratings, reducing conflicts of interest and improving disclosure can wait.

Under the program, the Fed will lend to investors who acquire new securities backed by auto loans, credit card balances, student loans and small-business loans....

Depending on the type of security they are borrowing against, investors will be able to borrow 84 percent to 95 percent of the face value of the bonds. Investors would not be liable for any losses beyond the 5 percent to 16 percent equity that they retain in the investment.

Simon Johnson, an economics professor at the Massachusetts Institute of Technology and a former chief economist at the International Monetary Fund, said many people might take a dim view of the TALF program because it provided government subsidies to investors like hedge funds. Investors who borrow from the Fed could enjoy annual returns of 20 percent or more.

“The TALF,” he said, “raises a lot of questions.”

It's a great irony, this notion of nationalization of the banks -- at least the version that guys like Greenstain call for.

They not only want as quick as possible a return to private hands, but they'd only euthanize the asshole Lilliputian common stockholders.

Like a chorus of Russian baritones they all bellow, "Save the bondholder class!"

As far as they're concerned Uncle Sugar can go ahead and nationalize the big banks -- so long as he don't touch a hair on the hairy ass of any "senior debt".

"Preserve it, cherish it, reward it -- at all costs, make senior debt feel loved," they cry -- and hey, don't you get why? Aren't they the spine of the global economy?

Horse feathers!

Here's the real skinny, mates, here's Owen's plan:

Recall the two-bank option? -- Take banks in trouble and turn 'em into a pair of good and bad daughter banks. Very Madame Moa-ish that -- very Red Guard -- recall the slogan, "one becomes two"?

I buy it. Let's do that. Lets split the bastards in two. But here's how:

If you peer into 'em you'll find.all these toxic banks have basically two types of liability on their balance sheet: two sets of obligations.

One is to the aforementioned bond holders of various ilks and seasons, and the other is to us -- the ignorant innocent depositors of America.

This centaur of finance comes from the merger of the commercial and investment banks, way way back in the Clinton restoration, when "two became one" -- a very reactionary idea, that.

Now, since the patent folly of it all is paramount in the people's mind, let's reverse that squalid incestuous buttfuck of a marriage. Let's take each toxic critter and hack out a good bank using the critter's deposits as sole liability and sole obligation. And let's couple those deposits with an equal portion of assets, to wit the soundest part of the bank's loan portfolio.

And then let's have Uncle Sap insure the deposits -- oops, that's already more or less done, eh?

Once that new good bank is up and running, Uncle Slambo, the hammer of rentiers -- well he oughta just flat out 100% nationalize it and all its kin.

Stack 'em in groups and let 'em compete with each other, like the GSEs Fanny and Freddie do, or almost do.

What about the bad banks? Ah. This part you're gonna really like.

Throw all the bondholders and stockholders and every one else left over with claims to wealth through theft, and stick 'em with the rest of the portfolio -- the nub ends of the sound loans and all the stinking pile of Wall Street piffle, and then shoot the whole misbegotten freak show back out onto the deep rolling seas and wide open ways of our planet's markets for privately held paper figments.

If that moth-tongued gossiping auntie, the Washpost, is to be trusted, then the class struggle inside the present White House is over.

Larry "The Sow" Summers and the "progressive" side of Wall Street won, and Jared Burpstein and the union piecard side of the DC loop lost.

"Meeting in January on the eighth floor of the transition team's office in downtown Washington, Geithner pressed the incoming president to commit to cutting the deficit to 3 percent of the economy over the next five years, which would keep the nation's debt roughly in line with normal economic growth. Summers quickly backed him.

"Some, including economist Jared Bernstein, resisted, saying that such a strict limit would make it more difficult to confront the many challenges ahead and that the size of the government's emergency response to the economy and financial markets would make the cap tough to maintain.

In February, the entire economic team convened in the windowless Roosevelt Room in the White House. Obama abruptly ended the debate. Geithner and Summers would have their way."

Show us you're a man, not a mouse, Uncle! Walk away, Sam -- walk away from Wall Street's secret sewers.

Want to defend your country? Well, for once, defend it by defending her people from something in lower Manhattan besides collapsing towers. Walk away from the masked privateers' danse-macabre. Get back to the real deal -- more jobs now!

Okay, I've howled my futility away. But really, folks -- we here at SMBIVA like to talk about lots and lots of us small nuggets walking away from the mortgage snares, etc. But it's Uncle that needs to really take a hike here,. and let the privateers use this colossal mound of shitpaper to wipe their own asses.

I guess my real point -- since the shouting is so futile -- why is this so hard to fathom? Why are the pwog elites so under the evil charm? Why the hypnotic stare? Why "we must rebuilt it restore it reanimate it reform it redeem it" blah blah blah?

Take my usual whipping boy, the full o' heart Kellogg's kid, the tireless terrier von Nassau auf Trenton, Paul Francis Xavier Kooooggleman.

After some great gabble about the puny Federal recovery plan: "3.5 million jobs almost two years from now isn’t enough in the face of an economy that has already lost 4.4 million jobs, and is losing 600,000 more each month." ... don't he throw this horror in just for the sake of -- well -- no damn good sake, that's fer sure:

"A real fix for the troubles of the banking system might help make up for the inadequate size of the stimulus plan"

Again, Mr Kelloggman knows this well enough:

"an overwhelming majority [of the public] believes that the government is spending too much to help large financial institutions. This suggests that the administration’s money-for-nothing financial policy will eventually deplete its political capital."

Walk the walk, uncle. Keep talkin whatever talk you want, but just walk.

AIG's roll of top payouts reads like a places-to-hit list for a peoples' vigilante outfit fixin' to make some serious mass arrests.

"Financial companies that received multibillion-dollar payments owed by A.I.G. include Goldman Sachs ($12.9 billion), Merrill Lynch ($6.8 billion), Bank of America ($5.2 billion), Citigroup ($2.3 billion) and Wachovia ($1.5 billion).

Big foreign banks also received large sums from the rescue, including Société Générale of France and Deutsche Bank of Germany, which each received nearly $12 billion; Barclays of Britain ($8.5 billion); and UBS of Switzerland ($5 billion)."

I wonder -- will that, and the near-simultaneous revelation of maybe a billion in bonuses sliding out to various crack AIG team leaders, cause an actual congressional convulsion, not just the usual damp-squib sputter, dutifully amped-up by our fair and balanced media?

Of course, there's a bit of a problem lurking beyond the amusement-park aspect:

The Obama recovery plan will need another huge injection soon -- prolly another trillion or so. Yet polls indicate the asshole innocent wage-earning votin' weeblery have grown exceedingly restless.

So maybe any more is way way too much. I can easily imagine a sudden conservative congo majority rising up, moving from both sides to the center aisle and shouting down Pennsylvania Avenue --

"No mas, Obie, no mas! We must end this insanity! After trillions down the Wall Street rathole... No mas!"

Maybe March will prove the cruelest month -- this year at least.

It started simply enough -- the stock market perked up on rumours of higher earnings at the zombie banks. Then Gentle Ben sees light at the end of his 12 month-long tunnel vision; and don't my ex-boss, the skirtchaser from Omaha shown below, agree --

... Yup, the banks are back!

We must be cheered, eh? Notice, pinko onlookers one and all, the sly implied syllogism here: the private banking system is "reviving"; private banks are the heart of our credit system; therefore, the credit system has turned the corner.

Comes now the sorites: the credit system is the heart of our real economy -- the one our phoney-ass jobs hang from -- so therefore, we're about to get back on track -- give or take a few quarters of growing joblessness, while the markets work through their inevitable "transmission lags".

All bullshit of course; but here's a nice fact:

Nearly half of the credit flow before the great crumble was securities based, and those markets, the ones for securitized debt, whether over the counter or under, are not even visited these days by our reanimated giant zombies.

So they're like a vast dance hall full of bloated corpses. Play all the polkas you want; these bastards ain't gonna get up and into it.

Gentle Ben suggests we need to revive these securities markets too, before we can declare it's hammer time again in America. But that's not all, folks.

Even if the credit system could be restored to its condition as it was, say, one day after 9/11 -- you still won't see a revival this time round 'cause you can't lend what no one will borrow.

Even if this is a false spring, a real springtime for banking is coming, and maybe fairly soon, but here's the point:

That was the story from say mid-1933 on. The banks were spiffed up, re-opened, ready to lend. But the credit didn't really start to flow till Hitler absorbed the Danzig corridor. For six long years the corporate sector remained on Polonian(*) strike. That's right, six years; and FDR had to employ millions on lightweight gummint projects, just to keep the place from exploding.

For six years the corporate Scrooges horded their cash, borrowed near nothing, and sat out the twilight of the New Deal in a grump.

Okay, Paine, you say -- don't think I don't hear you muttering out there -- what about us credit-constrained waifs and waifettes? What about you and your pard and the pizza parlor down the street?

Well, we ain't got collateral, now do we? Mr Potter is not interested in taking a chance on love.

----------------

(*) OP is presumably thinking of Hamlet I:3, not of the much-invaded Eastern European kingdom.
--Ed.

Back in vaudeville days there used to be a con vs. gull gag that involved making change -- an elaborate shuffle that started as a simple swap of a tenner for a pair of fives, and led over a hill-and-dale series of swaps and half reversals to the con trading up his starter ten for 18 bucks of the mark's dough.

Uncle Honeybucket is about to play one of these fast change bits -- on himself. Here's how the harlot-bard of Times Square tells it:

"The government plans to offer subsidies, in the form of low-interest loans, to coax private funds to form partnerships with the government to buy troubled assets from banks."

"The government hopes that the subsidies it provides to investors are so rich that they will be willing to risk overpaying somewhat for the assets."

"What we’re talking about now are private firms that are kind of doing us a favor, right, coming into this market to help us buy these toxic assets off banks’ balance sheets."

"The Bank is trying to kill me -- but I will kill it." And Old Hickory did just that, unlike someone kooling it up in the White House now.

President Jackson took on the financial octopus of his era, and despite the bank's aura of invincibility, he did kill it, after getting re-elected over the bank's peacock, Henry Clay, by a rampant 18-point margin and running off two money-stooge Treasury secretaries.

He stood against it and its invisible fortune, its circle of bought men, and the London banks behind it; dared it "take your best shot," then after the bank did its damnedest, took steady aim -- bang!

Made of adamantine stuff, that towering bastard.

Hey, he gave 'em fair warning. During his first year in office, king Andy set the bank's president -- the soft-handed fork-tongued slickster Nicholas Biddle, shown left -- straight: "I never trusted banks -- not after I read about the South Sea bubble."

Words to live by.

Yesterday I passed along an item that depicted Obie talking tough to bank honchos about their high-on-the-hog salaries.

The reality is a little different:

Administration Seeks an Out On Bailout Rules for Firms

The Obama administration is engineering its new bailout initiatives in a way that it believes will allow firms benefiting from the programs to avoid... limits on lavish executive pay....

The administration believes it can sidestep the rules because, in many cases, it has decided not to provide federal aid directly to financial companies, the sources said. Instead, the government has set up special entities that act as middlemen, channeling the bailout funds to the firms and, via this two-step process, stripping away the requirement that the restrictions be imposed, according to officials.

Master of the site, Fr. M Smiff, passed along for comment this statement by Congressman Barney (DBA Henny Frankencluck):

Barney Frank Applauds FASB's Murder Of Mark-to-Market

“I applaud the very important actions taken by FASB (the Financial Accounting Standards Board) today.... which has made significant progress toward addressing inaccurate asset valuations in the markets.

The FASB believes the rule can be applied more fairly and take into account the currently dysfunctional state of some markets. The integrity of the standard-setting process is preserved, while avoiding the pro-cyclical effects of improper valuation practices."

'Progress ' -- 'inaccurate' -- 'fairly' -- 'integrity' -- 'avoiding' -- and -- 'improper'

The rest is perfectly transparent to anyone willing to curl their brain some.

But for those in want of a small unbending hand here, interpreting chairman Frank's pronouncement, I hope this short spirited gloss will suffice:

We the people of America have a problem, and so do our leading private banks.

Despite the surprising efficiency of all markets, current trading prices of securities may not fully reflect underlying long-term values....

(No no, don't gasp, this is really really true, folks.)

This of course is a particularly nasty problem for our huge depository private banks.

Besides owing the usual limited liability corporate duty to produce pellucidly plain and accurate updates of their financial status, on a timely basis, to their stock- and bond-holders, these outfits -- because they hold the payment system of the economy -- have in addition the obligation to demonstrate "technical solvency" to an even higher authority than senior debt holders.

If they wish to remain a going concern, depository banks must accept the scrutiny of madame FDIC, the flying audit vulture that swoops in ever lower circles over funny-acting operations, ready in an instant to seize and rend 'em to pieces, if inflows or outflows go out of sync, and upon inspection their accounting books don't add up to black ink totals.

But what if the assets are complex securities? You can't use historical costs. What if they experience trouble -- unexpected rates of delinquencies and defaults?

In years past those able to get to the real books have looked to current markets to find the prices -- arms-length traded prices for like securities. But should they have?

Obviously, recent events on our leading asset exchanges have painfully shown us that asset markets are protean creatures, giddy fickle things, manic one moment and panicky the next.

Nothing going on yesterday or today can reasonably bring a sound expectation of what's next -- let alone what will emerge in the end. Finding any guiding light in this ceaseless price chatter can be daunting, to say the least

So what's to do? The answer, after much hugger-mugger, seems to be: why not make it worse? Why not allow standard accounting methods to replace the value from the id called market prices, with -- well, models, and offsets, and fudge factors, and....

Let Associate Bumfiddle pass along bookkeeping numbers to Account Manager Fred Faddle's techno team for the moral equivalent of waterboarding, which in this case means processing these hapless raw numbers through hierophantic hermeneutical quantitative models worthy of Kafka's penal colony, and keep processing them till the numbers themselves confess "this bank is sound, this bank is viable, this bank is going to be profitable," and of course "this bank nonetheless owes no taxes."

The historical record here is clear: green eyeshades, in their core Mickey Mouse role as the chief peculators' assistants, can readily shape, pre-shape, re-shape, post-shape, ultimately utterly mis-shape any and all reportings to fit whatever top management specifies as the appropriate illusion du jour for release to those fucking stinkers the investing public, and more importantly the ghouls from gubmint.

Now with this standardization, this certification, this Frankification of creative fabrication, untold profit Golcondas can be summoned from the least promising heap of toilet paper. Innocent petty investors beware! Your illusions are in the hands of imagineering gnomes, not the brainless tics of the marketplace monster.

Careful plotted designs await you at the broker's counter, designs able to carry you even further past the edge of the cliff than you were before.

Postscript:

Is that Mingo the Merciless I hear? "Why in these troubled times must you play the hideous vacuous traducing cynic, Owen?"

Okay, message received. In a moment of broadminded fairness, I'll let the other side speak for itself. This from "One member of the five-member accounting standards board", addressing the "criticisms that the body had bowed to political pressure":

'We are an independent standard setter and it's important that we maintain our independence [but the board can't] ignore what's going on around us...'

According the the WSJ, "The rules change spurred [a] stock-market rally."

There's something to be said for the grim weather, drab cuisine, and glum earnest Protestantism of the gray Northern climes. Another shoe drops on a matter discussed here earlier:

Canada to split with U.S. on mark-to-market rule
Bitter disappointment expected for banks on mark-to-market decision
Financial Post April 7 2009

Canada is set to split with the United States over its response to the financial crisis and reject a move to let banks duck losses by inflating the value of troubled assets....

The country's top accounting watchdog reached the decision during a closed-door board meeting on Monday, giving a thumbs-down for now to a U.S. move to loosen accounting standards.

The decision, due to be announced this week, is a big blow to Bay Street and means Canadian companies will have to record hits on distressed assets that are hard to sell.

Shares in Canadian banks rallied last week along with Wall Street after Washington's politically charged decision to ease so-called mark-to-market rules that experts said could goose bank profits by 20%.

Bay Street executives had lobbied for Canadian authorities to follow the American lead, and will be bitterly disappointed by the decision to break with Washington and align with Europe.

"The basis of the U.S. financial system and economy is private capital. Policies must encourage rather than discourage private capital participation for the short run as well as the long run -- The U.S. financial system is worth preserving, and the only safe policy while investors are in panic mode is to preserve it with as few changes as possible with the government providing the resources needed...."

Reason for post?

I never tire of good advice. Do you?

One of our original sin's great Satans:

Ole Bill Garrison long ago told us -- our federal government was conceived constituted and consecrated by a motley pack of jailhouse lawyers solely for the happiness of a cabal of high-flyin' card-sharks -- err, or was that maybe H L Mencken who said that?

As we watch this pinched pocket-sized Romulan scurry about the business of paying Wall Street our good money for its bad paper, I'm reminded daily of the tidy man at the top of this post, the first and easily the greatest of all our treasury secretaries, a man who needs no labeling, the bastard genius of our credit-based banking system, Alexander Hamilton.

As big as it is, as soiled and scurvy as it seems, today's great bail can't begin to compare with Alex the original's opening act. No one, and I mean no one, not even the late Paul Harvey, can look that boldly squalid tale in the eye and not secretly gurgle with nausea.

Here's Lady Liberty's languishing public obligations to her very own revolutionary soldiery, almost all of whom long since traded their "holdings" away -- for one night's round of watery grog no doubt -- then suddenly its gonna be redeemed by the newly constituted federal gubmint, and at nothing less than full face value, mind you, for the enduring benefit of a handful of hightoned silk-vested grifters, placemen, punters and shylocks.

What a way to let the federal festivities begin, eh!

So who's that other fellow, Paine?

Why that's Alex's mentor, sponsor, and crooked underworld god beneath every trapdoor, the great patriot financier, thumb-in-your-pie master wirepuller, wild -- no, crazed -- land speculator, and at long last utterly ruined and imprisoned Robert Morris of Philadelphia, a man who might well have been the completest, most brilliant, most horrific incarnation of our nation's chiefest most enduring sin of sins -- the Yankee-Doodle Uncle-Diddle three-cornered hat trick.

Are you all as fed up with the "they gotta have skin in the game next time" gambit -- as fed up as Super Al Shooman and me iz?

I admit, the idea has some appeal. Next time -- if there is a next time -- if the red revolution doesn't turn all private banks into floating flood refuse -- let's make pretty damn sure any real live actual human agents have serious skin in the game. In fact, their whole hides oughta be up for skinning:

Behold Al's famous bankers' curing shed.

Let's at it -- let's design these damn agent incentive mechanisms. But in a word, that may prove -- daunting.

Some of you don't believe me? You think its do-able? Let's let the jury of our peers here decide.

Time passes; the all-star game comes and goes; the sun cools considerably --

"And in summation, comrades of the jury, the record we have presented to you clearly shows time and means enough exist for your self-appointed corporate agents to offload, one way or another, their personal jeopardy entirely onto your innocent asshole generic heads."

Aren't we maybe fools to think we can force them to put any of their skin in, when they view our skins -- quite rightly -- as little more than a giant mound of dandruff? Does our giant aggregation of little bits of skin even in the least guide our limited-liability agents to wider goals than they might head towards if guided solely by their very own guile alone?

Mates, no matter what we hope, no matter what we legislate, they are now, were ever, and always will be only guided by their very own personal guile and gain anyway.

No my fellow citizen-jurors, no no no no -- no more widows and orphans milled to financial powder by these privateering brutes. They've suffered enough. Emancipate them from their Marley-esque chains. Let's end the credit system as we know it, the system of irresponsible pillage and pilfer that now strangles middle America.

This by way of warmup. Now let's turn to the latest beacon swing of the Roubini lighthouse of gloom. Mr and Mrs America, and all ships at sea, feature this:

"Actual Macro Data Are Already Worse than the More Adverse Scenario for 2009 in the Stress Tests. So the Stress Tests Fail the Basic Criterion of Reality Check Even Before They Are Concluded"

More to the point, who oughta care even if the bankster buggers are animated X-rays these days?

Private bankers and the banks they ride in and out of town on never never never lead economies out of real live honest-to-God slumps like the one the earth's in now. Not any more than equity markets or bond markets or any other paper asset shuffling and scuffling.

These dollar-denominated bag-heads await the robust recovery of product markets before they'll venture to join any expansionary process by re-introducing an ample flow of private lending. Fill every bank vault in America with gold coins, and they'll just sit on 'em, like Judge McDuck here:

Even before product markets can start to rock-and-roll again, gubmint's gotta spend and borrow to get the dough-ray-mee out there in hungry knarled toilin' hands to start the spending on these damn products anyhow.

So fuck the balance-sheet saga. It's like one big comic strip, longer than War and Peace, and its story line is a non-starter, even for grocery-store reading.

A robbery of the Treasury is in progress, folks -- not by John Dillingers or mongol hordes, but by bald ghouls in imported suits.

So what else is new?

Personally, I don't give a shit if it never stops -- if the finagle just runs it up and up. Hey, the faster it flows, the sooner it blows. Keep yer swap-ola goin', you silk-souled motherfuckers -- just as long as Uncle runs blue-whale budget deficits, deficits that dwarf anything peacetime America ever conceived of before, and just so long as job markets rip skyward as if fired from a million Stalin organs: Go ahead, bankster, knock yourself out.

Because, buster, in the end, you might as well be hording Reichsmarks for all the security it'll give your great-grandchildren. One day a people's congress will come along that mandates a series of fed actions so draconian, so prole-cattish, that it will erase this travesty of yours faster than Yeltsin wiped out the cumulative savings of 3 generations of Soviet workers!

[dub in roaring applause line here]

Where does this all leave the private banks that the Roubini lighthouse of gloom wants declared insolvent?

They're figments to begin with -- pure expressions of the zero origination cost of credit -- give me access to the circular Fed and Treasury paper flow, let me take my drinks right from the main pipe like the Mellons and the Buffets do, and I can become anything you want me to be, ranger!

Mike Flugennock passed along this wonderful item. Apparently Clintobama éminence-grasse Larry Summers, after some straining at stool, has experienced a flow:

Obama's top economic adviser: 'free-fall' ending

Lawrence Summers, director of President Barack Obama's National Economic Council, said there have been some encouraging signs the dive in economic activity that began late last year was drawing to a close.

"There has been a substantial anecdotal flow over the last six to eight weeks of things that felt a little bit better," Summers [said]....

But Summers refused to predict how strong the rebound will be or when it will take hold.

Summers got a laugh from the audience when he said the presence of seven television cameras was "seven too many" for him to forecast the unemployment rate's peak.

And for those willing to delve a bit further, here's that piece's back up report.

And oh, by the way, here's a picture of a gal that oughta join the Leon Henderson Virtuous Regulators' Hall of Fame, the blessed Brooksley Born, juxtaposed with some of her noteworthy antagonists:

"In 1996, President Clinton appointed Brooksley Born chair of the Commodity Futures Trading Commission (CFTC). The CFTC is an independent federal agency with the mandate to regulate commodity futures and option markets in the United States.

Born was outspoken and adamant about the need to regulate the quickly growing but largely opaque area of financial derivatives. She found fierce opposition in SEC Chair Arthur Levitt, Treasury Secretary Robert Rubin and Federal Reserve Chair Alan Greenspan, all of whom felt that the financial industry was capable of regulating itself."

... Phil Gramm, of course; and this chap --

... Chris Cox; and this chap, already seen above, but burn his image into your retina again:

... whom I will not name; naming calls. Chaps like these ultimately won the day for Orthrus and his tip-o'-Manhattan master.

But it reminded me of our solemn duty, as vanguard tribunes of the whole filthy lot of exploited humanity, to put aside our narrow national perspective, and take a bigger look at the whole earth as one closed market system -- the real macro take.

As my ex-teacher, the legendary bon vivant Bob Mundell, used to say, "this, ladies and gents, is the proper point of observation".

So what do we see up here? The corporate flight patterns look quite different thand they were just last year. Much like the real flows -- the cross border trade flows -- the cross border finance flows are contracting substantially.

No matter where one looks -- the north-south global flow, the west-east Euro flow -- it's the same story: contraction contraction contraction.

The planet's production system is going to sleep for a spell, and where's Uncle Hedge at in all this -- Uncle buyer-of-last-resort, Uncle border-opener, Uncle hi-fi Laputa, Uncle crusader?

Contracting -- err, except in the worst hellhole for empire on the planet, of course:

(You may have to right-click and "view image" to see this work of Cold War psychosis in its full glory.)

If Uncle wants to play Atlas, his deficit ain't nearly enough.

It's a global problem, in need of a global solution; but since Uncle fails to share the proceeds of empire fairly, he's unlikely to get his junior partners to adequately share its burdens either -- military or financial.

That's John Bogle, famous fundmeister, and he's a piece of work. Read this Cato-like disembowelment of our nation's trans-nat corporate chieftains:

Self-interest got out of hand... We've moved from a society in which "there are some things that one simply does not do" to one in which "if everyone else is doing it, I can too".... The old notion of trusting and being trusted -- which once was not only the accepted standard of business conduct but the key to success -- came to be seen as a quaint relic of an era long gone....

The larger cause was our failure to recognize the sea change in the nature of capitalism that was occurring right before our eyes. That change was the growth of giant business corporations and giant financial institutions controlled not by their owners in the "ownership society" of yore, but by agents of the owners, which created an "agency society".... The managers of our public corporations came to place their interests ahead of the interests of their company's owners.

"Our money manager agents -- who in the U.S. now hold 75% of all shares of public companies -- blithely accepted the change. They fostered the crisis with superficial security analysis and research and by ignoring corporate governance issues. They also traded stocks at an unprecedented rate, engaging in a dangerous spree of speculation."

"Smith presciently described the characteristics of today's corporate and institutional managers (many of whom are themselves controlled by giant financial conglomerates) with these words: "[M]anagers of other people's money [rarely] watch over it with the same anxious vigilance with which... [they] watch over their own... they... very easily give themselves a dispensation. Negligence and profusion must always prevail."

"...We must work to establish a "fiduciary society," where manager/agents entrusted with managing other people's money are required -- by federal statute -- to place front and center the interests of the owners they are duty-bound to serve"

Stop the presses! Senate dembos play naughty "spoiler" role once again!

Here's a droopy pwog account:

"Yesterday in the U.S. Senate, the banks won the key vote on S. 896, the Helping Families Save Their Homes Act, which has already passed the House as H.R. 1106. The vote was on Senator Durbin’s amendment that would allow judges to modify residential mortgages in bankruptcy....

Even though the Durbin amendment was supported by President Obama, it failed 45 to 51 with 11 “centrist” Democrats voting against....

Without this bankruptcy provision, President Obama’s plan to address the housing foreclosure crisis will essentially be limited to federal subsidies — which can’t do a lot of good....

There is a moral to this story. No matter what progressive measure President Obama proposes, and no matter what slightly-compromised but still strong legislation is passed by the U.S. House of Representatives, it won’t become law without the support of the so-called “moderate” Democrats in the Senate."

Lesson? Ummmh... elect more Democrats?

Yeah! That's the ticket! Once we have, you know, 70 or 75 dembots in the Senate, we might squeeze out a few simple majority votes expressing the popular will!

Here they are -- all -- errr, 12?

• Max Baucus (MT)
• Michael Bennet (CO)
• Robert Byrd (WV)
• Tom Carper (DE)
• Byron Dorgan (ND)
• Tim Johnson (SD)
• Mary Landrieu (LA)
• Blanche Lincoln (AR)
• Ben Nelson (NE)
• Mark Pryor (AR)
• Arlen Specter (PA)
• Jon Tester (MT)

I'm a great fan of Dani Rodrik, shown above. He's for government 'industrial intervention' in the global south states; for regulating cross border private credit flows; for balanced trade; and for an open throttle for job seekers across the north/south borders.

You can hardly ask for more out of an elitist merit class social scientist. But there are some nuts it's pretty hard to crack. Here's Dani on the plight of the developing world in the coming days:

Growth in the developing world tends to come in three distinct variants. First comes growth driven by foreign borrowing. Second is growth as a by-product of commodity booms. Third is growth led by economic restructuring and diversification into new products.

Today the first two models are at greater risk than the third. But we should not lose sleep over them, because they are flawed and ultimately unsustainable. What should be of greater concern is the potential plight of countries in the last group. These countries will need to undertake major changes in their policies to adjust to the new realities.

"By capturing a growing share of world markets for manufactures and other non-primary products, these countries increased their domestic employment opportunities in high-productivity activities. Their governments pursued not just good "fundamentals" (e.g., macroeconomic stability and an outward orientation), but also what might be called "productivist" policies: undervalued currencies, industrial policies, and financial controls.

"China exemplified this approach. Its growth was fueled by an extraordinarily rapid structural transformation toward an increasingly sophisticated set of industrial goods... China also got hooked on a large trade surplus vis-a-vis the U.S. ― the counterpart of its undervalued currency."

"Global macroeconomic stability requires that we avoid such large current-account imbalances in the future. But a return to high growth in developing countries requires that they resume their push into tradable goods and services.... In the past, this push [into world markets] was accommodated by the willingness of the U.S. and a few other developed nations to run large trade deficits. This is no longer a feasible strategy for large or middle-income developing countries."

"Are the requirements of global macroeconomic stability and of growth for developing countries at odds with each other? Will developing countries' need to generate large increases in the supply of industrial products inevitably clash with the world's intolerance of trade imbalances?"

"There is in fact no inherent conflict, once we understand that what matters for growth in developing countries is not the size of their trade surpluses, nor even the volume of their exports. What matters is their output of modern industrial goods (and services), which can expand without limit as long as domestic demand expands simultaneously. "

"encouraging industrial production directly... it is possible to have the upside without the downside."

"There are many ways that this can be done, including reducing the cost of domestic inputs and services through targeted investments in infrastructure."

"Explicit industrial policies can be an even more potent instrument."

"The key point is that developing countries that are concerned about the competitiveness of their modern sectors can afford to allow their currencies to appreciate (in real terms) as long as they have access to alternative policies that promote industrial activities more directly."

"... developing countries will have to substitute real industrial policies for those that operate through the exchange rate.... External policy actors (for example, the World Trade Organization) will have to be more tolerant of these policies as long as the effects on trade balances are neutralized through appropriate adjustments in the real exchange rate. Greater use of industrial policies is the price to be paid for a reduction of macroeconomic imbalances."

Dani, I love you, my man -- but are you shittin' me?

Here's the Frisco Fed:

"U.S. household leverage, as measured by the ratio of debt to personal disposable income, increased modestly from 55% in 1960 to 65% by the mid-1980s. Then, over the next two decades, leverage proceeded to more than double, reaching an all-time high of 133% in 2007."

"In the long-run [household expenditures] cannot grow faster than income because there is an upper limit to how much debt households can service, based on their incomes."

The payment has two terms: principal and interest. You can keep raisin' the principal if you keep lowering the interest. Voila! Much much more carrying capacity emerges, till, well, you know.

So now given all those households' likely income prospects, what lies ahead for 'em looks like one huge shitload of "deleveraging", as the business community terms it.

How do they -- we -- get back to a workable ratio of household income to debt service? There's a fork here -- a choice. Either the poor bastards spend less or they default more.

Big benchmark of deleveraging:

"From 1929 to 1933, in the midst of the Great Depression, nominal debt held by U.S. households declined by one-third."

But we're lookin' at a few years of continued tight-belting ahead of us -- well, some of us -- that is, unless more of us just pull the hillbilly barefoot settlin'-up method and walk away from our underwater burnt-grass house lots, and learn -- like me -- to live beneath the plastic money floor created by our chthonic credit gods.

Frisco Fed's sum-up:

"Going forward, it seems probable that many U.S. households will reduce their debt. If accomplished through increased saving, the deleveraging process could result in a substantial and prolonged slowdown in consumer spending relative to pre-recession growth rates."

"Alternatively, if accomplished through some form of default on existing debt, such as real estate short sales, foreclosures, or bankruptcy... deleveraging could involve significant costs for consumers, including tax liabilities on forgiven debt, legal fees, and lower credit scores."

Horse feathers! I say -- and they admit as much, once they catch their breath:

"Moreover, this form of deleveraging would simply shift the problem onto banks that hold these loans as assets on their balance sheets."

Ahh, that felt good. But we must all come together in the end, so here's the Frisco kids' parting words:

"Either way, the process of household deleveraging will not be painless."

I'd like Dean Baker more if he had as much paranoia in him as thi picture below seems to promise:

... But alas, he's all too grounded. He does have his moments, though. Take this recent offering reproduced at Counterpunch: "Waterboard the Fed!" he cries, and I say 'damn straight'!

What in hell have them white-cuffed clowns gone and done with our precious 2 trillion dollars they lent out to the banksters anyway? As Dean notes:

"there is no public paper trail for the Fed’s [bailout] loans, even though it has more than three times as much money outstanding as does the Treasury through TARP -- it is not possible to find out how much money Goldman Sachs borrowed, at what interest rate, and which assets it posted as collateral. The Fed has explicitly refused to make information about specific borrowers public. In fact, the inspector general who has the responsibility for overseeing the Fed told Congress that she does not have this information. Apparently the Fed doesn’t even trust its inspector general with information on its lending practices....

It is difficult to understand the rationale for this secrecy.... After all, this money... belongs to us."

"The Fed has more direct control over the direction of the economy than the President and Congress, yet it carries through its actions... outside of the public’s view....

In a democracy, it is difficult to justify a situation in which the most important economic policymaking body is, by design, more answerable to the banking industry than [to] democratically elected officials."

Enter, stage left, the pwoposed pwogwessive wesponse: The Fedewal Weserve Twanspawency Act, which requires the Government Accountability Office (GAO) to audit the Fed’s books and report to Congress.

Yes, the GAO -- that posse of Elmer Fudds with green eyeshades. Just try to imagine what heroic scenes must ensue as these shock troops of accountability fan out among the hushed offices of the Fed, kicking in paneled doors and demanding, "The secwet books! Pwoduce 'em, you sowwy ass pwicks!"

Nice suggestive piece from the immortal Ralph:

Once upon a time early in the 19th century, corporations came into existence by state legislatures approving charters, which were granted for a limited period of time and for limited purposes. These corporations - producing textiles and other products in New England - raised capital in part because their investors had limited liability. That meant they could not lose any more than their investment if things went wrong.

Since corporations were artificial legal entities and not human, these lawmakers feared that without some strong leashes, they could be creating Frankensteins.

Over the following two hundred years, these ever larger corporations and their attorneys have been driving relentlessly, dynamically to erect systems of privileges and immunities....

Their first big move was to take the chartering authority from the state legislature and place it inside an executive agency where chartering became automatic, shorn of the conditions the lawmakers once imposed.

Once chartering became automatic, perpetual and open-ended, corporate lawyers moved to have the courts - not the legislatures - turn corporations into "persons" for purposes of constitutional rights.

Their big breakthrough came with the Santa Clara case in 1886 when the U.S. Supreme Court allowed its summary headnotes to declare that the railroad in the case was a "person" for purposes of the 14th amendment.

It's always good to be reminded how contingent and contrived are the institutions we take for granted as necessary and ineluctable.

You'd think somebody would long since have written a good book on Ralph's particular topic here -- the creation of the corporation-as-subject. I'm too lazy to research it right now. But does some kind reader have the needful -- and therefore, surely extant -- citation?

Little Bobby Reich is the measure of the pwagmatic pwog elite's good intentions. In a multi-part post at his blog site recently, he recapped America's job mission as he sees it. Interestingly enough it starts with abject surrender:

"First and most broadly, it doesn't make sense for America to try to maintain or enlarge manufacturing as a portion of the economy.... Even if the U.S. were to seal its borders and bar any manufactured goods from coming in from abroad ... we'd still be losing manufacturing jobs. That's mainly because of technology."

What a colossal fallacy. Yes, jobs are evaporating inside modern plants, but that hardly means modern plants ought not be built here.

"A century ago, almost 30% of adult Americans worked on a farm. Nowadays, fewer than 5% do."

No. Here's the real gimmick, embedded in mush:

"Stop blaming poor nations whose workers get very low wages. Of course their wages are low; these nations are poor. They can become more prosperous only by exporting to rich nations."

As Church Lady used to say, "how conveeeeenient."

But let us continue following the bouncing dwarf:

"When the U.S. economy gets back on track, many routine jobs won't be returning -- but new jobs will take their place. [They] are easy to overlook -- much of the new value added is invisible."

Invisible value-added? Yes here it comes, Father, as you knew it would -- the IP express:

"A growing percent of every consumer dollar goes to people who analyze, manipulate, innovate and create.

These people are responsible for research and development, design and engineering. Or for high-level sales, marketing and advertising. They're composers, writers and producers. They're lawyers, journalists, doctors and management consultants. I call this "symbolic analytic" work because most of it has to do with analyzing, manipulating and communicating through numbers, shapes, words, ideas."

"Symbolic-analytic work can't be directly touched or held in your hands, as goods that come out of factories can be...."

"Whatever consumers buy these days, they're paying more for these sorts of tasks than for the physical material or its assemblage. On the back of every iPod is the notice "Designed by Apple in California, Assembled in China...."

"You can bet iPod's design garners a bigger share of the iPod's purchase price than its assembly...."

"America’s biggest challenge is to educate more of our people sufficiently to excel at such tasks.... In decades to come, nations with the highest percentages of their working populations able to do symbolic-analytic tasks will have the highest standard of living and be the most competitive internationally."

'[The] biggest challenge we face over the long term... how to improve the earnings of America's expanding army of low-wage workers who are doing personal service jobs in hotels, hospitals, big-box retail stores, restaurant chains, and all the other businesses that need bodies but not high skills."

Two nations, two "biggest challenges", all in one.

The Up nation's biggest challenge:

"no other nation surpasses us in providing intellectual and creative experience within entire regions specializing in one or another kind of symbolic analytic work (LA for music and film, Silicon Valley for software and the Internet, greater Boston for bio-med engineering, and so on)."

"[W]e’re in danger of losing ground because too many of our kids, especially those from lower-middle class and poor families, can’t get the foundational education they need."

Comes now an very perfunctory Rx for biggest challenge #2, lifting the downer America:

"Unions could help raise their wages by giving them more bargaining leverage. A higher minimum wage and larger Earned Income Tax Credit could help as well.

"Not all of our young people can or should receive a four-year college degree, but we can do far better for them than we're doing now. At the least, every young person should have access to a year or two beyond high school, in order to gain a certificate attesting to their expertise in a particular area of technical competence. Technicians who install, upgrade, and service automated and computerized machinery -- office technicians, auto technicians, computer technicians, environmental technicians -- will be in ever-greater demand."

Then again, maybe Bobby has it all wrong. Maybe after we've destroyed the present production system and the Mittelstand earnings it threw off. as Bobby himself adds,

" -- eventually the dollar (might) drop so low that global firms will find it profitable to locate traditional manufacturing assembly (back here)in the United States. -- "

Yeah, Bobby, the Thirdies can build symbolians too, and for next to nothin' brother. But is Bobby daunted by this? Nope:

"... demand for symbolic analysts in the U.S. will continue to grow faster than the supply. Innovation creates that demand, and demand for it, in turn, generates more innovation.... It's simply wrong to assume a zero-sum game among nations. There is no finite amount of symbolic-analytic work to be parceled out around the globe. There is no limit to the capacity of the human brain to discover new problems needing to be solved, or to create better solutions to old problems. And no limit to the number of problems needing solutions."

Full context here. Comment seems superfluous.

Could this man, Gentle Ben of Temple Fed, be the future Jimmy Stewart of homespun people's biz finance? It's on the order of the day, and the grey lady has a question in her mouth about it all: should the fed emerge from the current credit crisis as a hands-on outfit operating exclusively for the collective benefit of that noblest of all noble abstractions -- "the people"?

[T]he Fed... stepped in to fill the lending vacuum left by banks and Wall Street firms [and now] officials have been dragged into murky battles over the creditworthiness of narrow-bore industries like motor homes, rental cars, snowmobiles, recreational boats and farm equipment."

"A growing number of economists worry that the Fed’s new role poses risks to taxpayers and to the Fed itself -- If the Fed cannot extract itself quickly, they warn, the crucial task of allocating credit will become more political and less subject to..."

"... rigorous economic analysis."

Get it? Credentialed meritoids, awake!

As if that alone were not enough to set the entire professional class of the upper West Side into motion, the grey lady goes on to mouthpiece mode: "Fed officials acknowledge" that doing stuff like lending to real economy credit sectors directly could

"undermine the Fed’s political independence and credibility as an institution..."

"... that operates above the fray."

The Fed under its normal modus operandi lets our private banks gather in the windfalls of credit expansion, by costlessly creating a larger monetary base and leaving the lending out of the new money -- and at multiples, yet, limited only by a generous reserve ratio -- to the banksta caste. With nice assured margins, too.

The bankstas can lend it out to whomever they wish, and more importantly, not lend it out when they don't wish. And that's what the present so-called liquidity trap really is all about: not lending -- except back to Uncle of course.

Thus arises the "lending vacuum" mentioned above by the Times, that got the Fed pro-tem in the loan biz. And damned if now -- as the horror appears to recede -- these bankers don't get their front men out cautioning Uncle to keep his issuing of new fiscally driven debt -- at least for real purchases of real products -- to a biblical minimum.

Quite the paradox, at least on the surface. After all, the more new securities issued by Uncle, the higher the rate of interest he pays and borrowers earn -- all else equal, as they say.

Here's the great "concern" in a nutshell:

"Executives and lobbyists [will] flock to the Fed, providing elaborate presentations on why their niche industry should be eligible for Fed financing or easier lending terms."

Obviously this will lead to a better, higher overall social welfare result. Obviously.

Such are the rhumba-like miracles of "rigorous economic analysis" when clutched tightly in the profit nuts by the grand old goosing hand of the market place.

Time to give Mike Hudson, numbers man from La Mancha, his due. From a recent Counterpunch item:

"In reaching across the aisle for Republican support – and no doubt future campaign contributions from the financial sector -- Pres. Obama is morphing into Joe Lieberman.... Confronting the wreckage of a debt crisis worse than any since the Great Depression, Mr. Obama has achieved what no Republican could have: rescuing the Bush Administration’s pro-creditor policies that fostered the Bubble Economy in the first place."

"The deregulation-by-centralization ploy -- The politically astute way to deregulate a public utility – especially in the wake of a financial crisis that has much of the population up in arms – is to shed crocodile tears over Wall Street’s “culture of irresponsibility,” as Mr. Obama did on Wednesday, and then claim that you are “centralizing” regulation to make it stronger rather than weaker. If you are going to block future bank regulation, of course you promise that your act will provide greater public oversight. Mr. Obama has tapped the Federal Reserve for this role. But this is precisely what exacerbated the Greenspan Bubble."

"One way to make credit-card rates more economic would be for the government to provide its own rival service. After all, credit cards have become a major form of payment today. Isn’t electronic payment really a public utility? The difference is that unlike electric and gas utilities or railroads, there is no regulation to keep fees in line with economically necessary basic costs to the card issuer.... To really protect consumers, why not counter extortionate credit-card practices by re-introducing anti-usury laws? They were evaded initially by companies incorporating themselves in states with “race to the bottom” laws. If Washington can override state prosecutors to prevent punishment of financial fraud, why can’t it override such ploys by the usury industry? Here’s where centralized federal law really should count for something."

"The plan is silent when it comes to the reported 25 per cent of U.S. real estate sunk into a state of negative equity and 1/8 already in arrears heading for foreclosure as the mortgage debt attached to it exceeds its (falling) market price."

1. Regulatory capture. Preparing the ground for future Alan Greenspan “free market” ideologues
2. Failure to give meaningful teeth to fraud reduction
3. Failure to reverse the shift to pro-creditor bankruptcy laws
4. Failure to re-introduce Glass Steagall or otherwise limit lenders “too big to fail”
5. Failure to deter credit default swaps and other “casino capitalist” gambles
6. Failure to reform the tax system that has distorted the financial system to promote predatory extractive debt, not productive industrial credit

Here's Mike's summary verdict on Ob's draconian crackdown:

"Mr. Obama explained: “we are proposing a set of reforms to require regulators to look not only at the safety and soundness of individual institutions, but also – for the first time – at the stability of the system as a whole.” But this is just what is not being done."

“Born and bred in the briar patch,” crowed B’rer Rabbit triumphantly after being thrown there.

Vanity Fair features Cousin It Stiglitz -- the thinking econ-con 's choice for prince of lightness. His brilliant punchthrough:

"There used to be a sense of shared values between America and the American-educated elites around the world. The economic crisis has now undermined the credibility of those elites. We have given critics who opposed America’s licentious form of capitalism ample ammunition to preach a broader anti-market philosophy. --. Many countries may conclude not simply that unfettered capitalism, American-style, has failed but that the very concept of a market economy has failed, and is indeed unworkable under any circumstances. Old-style Communism won’t be back, but a variety of forms of excessive market intervention will return."

" -- And these will fail. The poor suffered under market fundamentalism—we had trickle-up economics, not trickle-down economics. But the poor will suffer again under these new regimes, which will not deliver growth. Without growth there cannot be sustainable poverty reduction. There has been no successful economy that has not relied heavily on markets. Poverty feeds disaffection. The inevitable downturns, hard to manage in any case, but especially so by governments brought to power on the basis of rage against American-style capitalism, will lead to more poverty. The consequences for global stability and American security are obvious."

Despite the moans and wails that abound today in pwog circles, talk about plans vs. markets doesn't always have to be melodramatic, though Stigelasaurus Rex might not agree. Here's a postively positive note, and it's on the planning side -- hot stuff, and right out of the academy.

By now you all know the great fox of emerging world progressive productivism, Doctor Dani Rodrik. Here he spends about 30 pages showing us well-intended one-world lugs how an aggressive but shrewd global-south country might substitute a neighborly, balanced-trade, parity-forex regime for the east Asian nasty fiddle gimmick -- and still grow with Han-like speed toward the white man's living standard.

And to think -- it's positively Hamiltonian! (Couldn't resist the bust -- never could resist a bust -- but keep reading after the photo):

According to Dani boy, what the Southern states need now is a set of comprehensive national subsidy plans for rapid local industrial transformation.

The idea is simple enough, really: just contrive a relative price shift between domestic and foreign trade goods, and also between domestic trade and non-trade goods; then let the local markets and entrepreneurs do the rest.

This can be pushed to any desired level; you only need to "show me the money" -- "me" being that local entrepreneur, of course -- and watch "me" -- Mister Mister of Bongoville -- work the work and jerk the jerk errr umhh -- for the benefit of the whole nation.

Just where will these lovely catalytic public subsidy funds come from? In Dani's model they come from -- where else -- the policy economist's universal non-distorting can opener, "lump sum taxes".

However, since this is the People's Republic of Southeast Utopia we're talkin' here, why not go for broke? I recommend a universal ground rent tax as the nicest base for the subsidy. As the local currency rises, it touches off a lot boom, and the cycle turns virtuous, eh?

But trust Dani here -- he has a toy general equilibrium model, nicely illustrated toward the end of the piece, to soundly prove it's a lead-pipe cinch.

The acid test in these matters of high economic policy is of course how one answers this one straightforward question: can you fit this gubmint-type "plan" comfortably within the Limited liability Incs' world wide optimal design?

Whaddya think, rangers?

Welcome to the house of scary stats!

Hey, shipmates, it's about time we all realized just how deeply the Trans-nat Inc's 60-year trade globalization project has turned into a shambles -- and it wasn't the anti's that done it, it was the planetary credit bubble bugger.

Epitome: national trade patterns built up over decades suddenly fluxed all at once into deep negative territory. Global trade turned negative in October 2008 and by the following February was reaching a record low of -33%. That's minus 33 percent.

Feature that. First time in a generation the magnitude of the total trade drop is bigger than 20%.

Yes, individual national drops of plus-20% are not uncommon. But, errr, not all nations together, not all at once, never -- at least not since the big one, way back there when Betty Boop blew Hoover. And guess what, folks, this looks to be falling faster than even that one!

Stagnation, misery, bloated jobless rolls -- all have a very bright future -- earth wide!

It looks like I was too hard on John Mackey, the transgressing Whole Foods dude, and not nearly hard enough on the shopping liberals. In the regrettable context, which this most certainly is, the liberal venom towards him could, hypothetically, make things much worse for a lot of people. They have once again rejected a lesser evil for a much greater one. Fortunately, the shopping liberals are so miserably feckless that their boycott threats won't amount to shit. They'll still make things worse in other areas, for example, Kabul, Baghdad and Colombia, but it looks like this one is beyond their ability to ruin. Because it requires something more than passivity and spite.

More

The pettiness and idiot grandiosity of the shopping liberals is way over the top. The stock market is not the real economy. Corporate management can be punished for doing something half-decent and rewarded for doing something that destroys the company.

Only the yuppie lynch mobs of shopping liberals could find a way to get a corporation defended by the left.

And

A few words to clarify. If single payer were on the table, things would be different. But it's not. If a broad public option were on the table, things would be different. But it's not. Solicitude for the worst of the worst is on the table. And it's staying there, no matter what. Mackey does stand to be hurt, as it happens, if he intends to keep providing employee health care. In these circumstances, the boycott threatened by the shopping liberals is egregious vanity and spite.

this weeks not in the msm news poli-con to despise
at the daily hate sessions ...

andrei shleifer,
j.b. clark award winner

"During the early 1990s, Andrei Shleifer was an advisor to Anatoly Chubais, the then vice-premier of Russia, and was one of the engineers of the Russian privatization......

During that time, Harvard University was under a contract with the United States Agency for International Development, which paid Harvard and its employees (shleifer)to advise the Russian government. ....

... Under Anatoly Chubais, privatization led to valuable Russian business assets being acquired at extremely cheap prices amid accusations of rigged auctions.
Shleifer was also tasked with establishing a stock market for Russia . That effort was also unsuccessful, and became mired in charges of corruption and self-dealing.

Under the False Claims Act, the US government sued Harvard, Shleifer...(he) bought Russian stocks and GKOs while they were working on the country's privatization, which potentially contravened Harvard's contract with USAID.

.... On August 3 92005) Harvard University, Shleifer and the Justice department reached an agreement under which the university paid $26.5 million to settle the five-year-old lawsuit. Shleifer was also responsible for paying $2 million dollars worth of damages.... A firm owned by his wife previously had paid $1.5 million in an out of court settlement.

Because Harvard University paid most of the damages and allowed Shleifer to retain his faculty position, the settlement provoked allegations of favoritism on the part of Harvard's outgoing president Lawrence Summers, who is Shleifer's close friend and mentor. Shleifer's conduct was reviewed by Harvard's internal ethics committee. In October 2006, at the close of that review, Shleifer released a statement making it clear that he remains on Harvard's faculty. However, according to the Boston Globe, he has been stripped of his honorary title of Whipple V. N. Jones Professor of Economics.

ahhh the salad days of yore



by now i suspect the following thought has occured to all of us too many times even to to count:


the credit crisis last year was mighty damn convenient ....eh?? ....global outlook wise


and so now that uncle Saps "peoples' credit line" has forstalled
an amazing game of golden pick up sticks as frenzied brigades of suits
wrestled each other over the wreckage of wall street ...

so okay...ummh so ...hey ...where's the... like ....recovery man??

indeed if alls well on wall street
why the jobmart horror projections stretching to the far horizon??


well --as ronnie used to say--

the underlying production platform of our global economy
was so utterly out of kilter from all the prosperity building these last 20 years
it needs a nice long slow down .... some yellow flag time
soz it can get about the business of..
well... a massive planetary all markets structural readjustment

unlike costless infusions of cash ...rebuilding the production platform
takes time and a good deal of creative destruction
and often of the sort that turns rivers into creeks creeks into

oh hell that don't work as an analogy
its more like we gotta start
turning boundary crossing turnpikes back into back roads and back roads into foot paths and...
you get the gimmick
pretty much flipping the flops and flopping the flips ...everywhere from somewhere to no where

even if trade flows between points A and Z remain fairly heavy
they might need a serious rebalance
like err
what has five lanes one way now say Z => A
and two lanes the other way A=> Z
shift
down to 3 from 5 and up to 4 from 2 ...errrr some time in the greater tomorrow
after the sum total effective demand (7) returns that is

----------------

then what about looking at this from the job class amerika POV
ie what's our prospects ???

well folks the present hideous grinding of the flesh of a zillion human gears
must go on...and on ....and on and on

bad message
whats the best scape goat??

what else NEW DEAL 2.0

blamed it all on those silk hat fuckers
the finacial royalists
the class distant wally world machinators

that small nasty group of evil white men

imagine this xmas
scenes of zombies wacking those cosseted bland syrenes of prosperity past
on a wide screen above the twilight gloom of an mall atrium
as shoppers without credit
shuffle about below consoling their little muzzlers

hey this will go on it must go on
long after the technocrats have restored the system to working order

we can only watch and wait for sunrise at the production plants

patience grit and personal pride
those are the citizen virtues
we the weebles will be called upon to publically and privately express

down here in the job short streets of gooberville misery will have a whole job nation as company


------------

my fellow patriots :

" God bless our dear ole american safety nets
and please dear congress
pass the universal health "

what a blood curdling roar that will make in an elite merit ear

Shades of The Pecora --

-- or just another damn belt-loop pecora?

Phil Angelides, the begoggled chap shown up top, is after the foul-ballers of Wall Street, and he's pumped, baby, pumped:

"Our job is not to engage in public posturing. It is to pursue the evidence wherever it leads, to leave no financial stone unturned."

" In the course of doing so, we may well find criminal activity as well as egregious practices that were not only permitted but exalted."

"Our job isn’t to presume the worst actions and intention -- -but to follow ...."

Yup, he's gonna clean up Dollar City, folks. Bleat, bleat!

So why this rough, tough, wool-puff turn?

"In the wake of the market crash of 1929, there was a whole generation of Americans who would not put their money at risk in what they considered to be the casino of the stock market. The Dow Jones Industrial Average did not regain its 1929 peak for 25 years. We can ill afford a similar prolonged lack of faith and trust."

Dear Members of the Financial Crisis Inquiry Commission,

In this moment of great economic turmoil, there is a simple but critical question that we must ask and answer together as a nation:

What caused the crisis?

We, the undersigned, call on you to fulfill the responsibilities of your position by joining together in non-partisan cooperation to investigate the origins of the financial crisis in ways that lead to a full understanding of the institutions, people and practices that are responsible for our economic collapse.

In particular, we encourage the adoption of three guidelines that history has taught us are essential to an effective inquiry:

• Appoint a single investigator. This individual must have a proven record of exposing fraudulent elites and institutions, and must provide a professional, non-political spirit to the investigation.
• Afford no special treatment. No one is off-limits or gets special protection in the investigation.
• Provide the tools to do the job. The investigator must be given ample budget and time, full subpoena authority, and the ability to hire and fire staff.

These principles were applied in the 1930s when Congress launched a formal inquiry into the causes of the Great Depression. That commission -- led by Ferdinand Pecora -- was willing to reach into the highest levels of Wall Street and finance to determine the causes of the economic collapse of 1929. The courage with which the commission greeted its task-and the revelations that courage ensured-inspired the sweeping banking and financial reforms that were the bedrock of our financial system for decades.

Building a new financial foundation requires us to begin on solid ground-the truth. It is only by illuminating the mistakes of the past that we will be able to meet the great challenges of the future.

Thank you for your consideration, and for your willingness to take on this historic challenge.

Signed,

Dr. Andrew RichRoosevelt Institute
Dr. Joseph Stiglitz, Economist, Roosevelt Institute
Dr. Thomas Ferguson, University of Massachusetts, Boston
Christopher Hayes, New America Foundation
Dr. Robert Johnson, Economist, Roosevelt Institute
Dr. David Woolner Historian, Roosevelt Institute
Dr. William Black, University of Missouri, Kansas City School of Law
Dr. Robert Reich, University of California at Berkeley
Dr. James K. Galbraith, University of Texas
Dr. Randall B. Woods, University of Arkansas
Rev. Marcia Dyson, Georgetown University
Rudy Arredondo, National Latino Farmers & Ranchers Trade Association
Meizhu Lui, Closing the Racial Wealth Gap Initiative
Dr. Barbara M. Parramore, Professor Emeritus, North Carolina State University
James P. Hoffa, International Brotherhood of Teamsters
Hamilton Fish, The Nation Institute

It's a little different now. Guess who may have to pay for corporate globalization's malfunction?

Right the first time: you.

Click for full-size graph.

"In my view, if policymakers insist on waiting until the level of real activity has plainly and substantially returned to normal -- and the economy has returned to self-sustaining trend growth -- they will almost certainly have waited too long.

A complication is the large volume of banking system reserves created by the nontraditional policy responses. There is a risk, of much debated magnitude, that the unusually high level of reserves, along with substantial liquid assets of the banking system, could fuel an unanticipated, excessive surge in lending.

Predicting the conversion of excess reserves into credit is more difficult to judge due to the changes in the credit channel."

Them's the words of black Irish Kevin Warsh, shown at left, Bush-appointed Fed governor, formerly among the boy emperor's council of economic witch doctors.

Admittedly, he's one of the more ghoulish brains among the credit flow federales -- here he is, for example, quoting the unspeakable Daniel Patrick Moynihan. But he's not the only ghoul. In fact the joint is full of 'em.

"A rapid exit from accommodative policy" -- oh, the pain, the pain, as Prof Smith was wont to say. This perma-hawk button-pushing bunch at the Fed -- credit doom hangs like a mushroom cloud over my daydreams. Is it to be our near tomorrow?

By the way -- before joining the Bush hose-and-close squadron, our mean Mr. Warsh was a decade-long member and leader of the Mergers & Acquisitions Department of -- Morgan Stanley & Co.

And here I've been trashing poor tubs-of-fun Chrissy Romer -- oh the shame of it all!

In fact the titmouse-voiced gentle mountain Chrissy had calculated it way closer to Vickrey standards, in the run-up to that final internal stimulus debate:

[Romer] had run simulations of the effects of stimulus packages of varying sizes: six hundred billion dollars, eight hundred billion dollars, and $1.2 trillion. The best estimate for the output gap was some two trillion dollars over 2009 and 2010. Because of the multiplier effect, filling that gap didn’t require two trillion dollars of government spending, but Romer’s analysis... suggested that the package should probably be more than $1.2 trillion.

The memo to Obama -- detailed only two packages: a five-hundred-and-fifty-billion-dollar stimulus and an eight-hundred-and-ninety-billion-dollar stimulus. Summers did not include Romer’s $1.2-trillion projection. The memo argued that the stimulus should not be used to fill the entire output gap; rather, it was “an insurance package against catastrophic failure.

Foremost among those providing sweet reasons for intentional misery was, of course, our Wall Street wizard, Lardass Larry:

"... a package that was too large could potentially shift fears from the current crisis to the long-term budget deficit.... which would have an unwelcome effect on the bond market."

Care for a smoking gun, anyone?

Of course we could blame Larry, and that's good innocent fun, and quite right as far as it goes. But it's not the end of the story.

This is a guy with a track record -- a very consistent and well-known track record -- and he's the guy Obie chose to trust.

"The Bureau of Labor Statistics does not track pay cuts, but it suggests they are reflected in the steep decline of another statistic: total weekly pay for production workers, pilots among them, representing 80 percent of the work force. That index has fallen for nine consecutive months, an unprecedented string over the 44 years the bureau has calculated weekly pay, capturing the large number of people out of work, those working fewer hours and those whose wages have been cut. The old record was a two-month decline, during the 1981-1982 recession."

Here's the tale of one of private equity's little harlot shops, the 133-year-old Simmons mattress company, makers of the famous Beautyrest pocketed coil system.

They've been bounced from PE outfit to PE outfit for near on 25 years now, only in the end to pitch over into bankruptcy. Here's the NYT version of the sordid final sprint into default, but for those like Father Smiff allergic to straight biz-news, here's the final act in short:

2003: The last private equity outfit, THL, bought Simmons from the prior private equity outfit for, in round dollars, $1.1 billion -- 330 million of its own hard cash plus the lovely leverage of another $750 million in bonds serviceable by the mattress company's prospective revenues.

2004: New owners issue another $140 million in bonds on behalf of their recently aquired prize company.

2005-2006: Business booms at ye old bedding shop.

2007: My, my, yet another issue of bonds, this one for 300 million. Simmons now has $1.2 billion in bond debt. That's a lot of mattresses.

Now of course the $440 million in interim bond proceeds mostly wasn't used to build company capacity, but to pay a cash-out in two dividend hunks to the privateers upstairs at THL.

By the end of '07, the buckos are fully "cashed out" plus $45 million to the good.

2008: The market for mattresses begins to slide. The debt load proves too much. Bond payments are "suspended".

2009: Bankruptcy is declared.

Post mortem: okay not a killer bottom-line entry.for THL -- not like THL's star turn, buying Snapple for $130 million and selling it for $1.2 billion a couple years later -- but hey, not all strikes can be mother lodes, and even the Snapple caper was a mere sideshow by AIG standards -- right?

Lots of this paper shuffle stuff is done, well, just for the sport of it. After all, most of these buckos are already holden so considerable already -- why bother about any particular deal's bottom lines? Small potato stuff like Simmns isn't noticeably moving the dial one way or the other anyway.

It's about local conditions, novelty, and playing through no matter what -- like a good round of golf at an unfamiliar course.

Oh and by the way --

"From 2003 to 2007, 188 companies controlled by private equity firms issued more than $75 billion in debt... to pay dividends to the buyout firms."

I've always had a great admiration for Dani Rodrik, but hell, did it recently get tested. Here comes Dani pulling behind him a massive stinker -- eggs on me, eh?

MYTH OF RISING PROTECTIONISM

"... the international trade regime has passed its greatest test since the Great Depression with flying colors."

But those flying colors seem to make cosmopolite and emerging south world fan Dr Rodrik very happy indeed. I can't share his enthusiasm.

Okay, nothing wrong per se with this:

"When everyone raises trade barriers, the volume of trade collapses. No one wins"

"As Keynes recognized, trade restrictions can protect or generate employment during economic recessions.

But what may be desirable under extreme conditions for a single country can be highly detrimental to the world economy."

Dan fails to note the present triumphant first world policy elite has only half heartedly (at best) implemented the slumptime universal national RX prescribed by the great fairy prince of hard-times improvident budgeteering.

We all know Keynes offered another way to restore production to a contracted "developed" economy, right? Besides beggar-thy-neighbor with higher and more comprehensive border walls, Keynes offered a brighter sunnier recovery by massive add-on spending in situ by the various creditworthy national gubmints -- funded entirely from the limitless borrowings that fiat moeny affords every legitimate and healthy state sovereign. By implication, Dani salutes the blind rump of Keynes, as embodied in the automatics of "the welfare state"

"Modern industrial societies now have a wide array of social protections ― unemployment compensation, adjustment assistance, and other labor-market tools, as well as health insurance and family support ― that mitigate demand for cruder forms of protection"

Maybe in Dani's next op-ed, rather than another hoorah for "the planetary social market system", he oughta debunk the myth of necessary misery.

Why must the developed world creep along at, what, 2/3 of capacity? You already know the answer: so the trans-nat outfits get their preferred pathway -- one that maintains a "strong imperial dollar"

See, "we" can rebalance global trade simply by slowing import demand here at home. And "we" do that by simply slowing household income recovery.

One cut cures all -- a few years of quiet time where we Norte midget amigos just can't buy imports, 'cause we're payless jobwise and 'nyet, buster' creditwise -- in short, on our calvinist backsides.

This great stagmnation rut is corporate kool precisely because it's NOT recovery and rebalancing by forex driven import substitution. That might be a societywide "better" pathway for reasons numerous enough for several more posts, but not to put too fine a point on all this (and Dani, I submit, is fully aware of this) -- "wage widgets of America, hear this: the job lamp is not lit."

Though it's crystal clear a planned and programed dollar drop might be combined with a rapid return to high production through, what else, the skillful use of -- Keynesian macro(*)! -- it's just not gonna happen. Not a preferred option in policy circles. Till further notice, all you bo-peeps get this straight: there'll be no recovery -- for you!

----------------

(*) Which by routes both circuitous and profoundly un-miraculous might also cut the special interest protectionists and anti-immigrants right off at the knees.

Doctor of Econology Gentle Ben Bernanke has again sounded the dismal goat's horn, not for the first time, reconfirming our fate: we norte-americano job groundlings are to suffer a dose of protracted class immiseration.

Because it's our planetary duty. Translation: it's Wall Street's preferred pathway to rebalance global commerce. A necessary midcourse correction, so to speak, and we're elected to take the correction right in the paybasket.

"As the global economy recovers and trade volumes rebound, however, global imbalances may reassert themselves. As national leaders have emphasized in recent meetings of the G-20, policymakers around the world must guard against such an outcome. We understand, at least in principle, how to do this. The United States must increase its national saving rate. Although we should deploy, as best we can, tools to increase private saving, the most effective way to accomplish this goal is by establishing a sustainable fiscal trajectory, anchored by a clear commitment to substantially reduce federal deficits over time"

It's always a good first approximation to assume that worse for us is better for our plutonic superiors.

Oh and by the way: no, Ms Woodstock, this is not to aid the toiling masses of Asia. This is, as I too often point out here, them sacrificing us job goobers on the double cross of their phoney forex-fiddle-built, capital-export and product-import hegemonic dollar. Our homegrown multinational intermediaries need that steroidal dollar.

Hey, comrades -- you wouldn't want these earthwide bearers of brown technical progress, these missionaries for deep-dish commercial civilization, all crumpled up by a colossal dollar crash -- would you? I mean, really -- would you wanna see 'em rendered in one big compaction into an inky pile of useless trash bails?

Far better we geefers beat on, boats against the current, borne back ceaselessly into the blues.

The Euro zone also must produce mass misery for its jobblers. In fact its forex winch is even worse than Uncle's. Read this piece by econ-con Willy Buiter, shown above. Guess it takes one of the tribe to glare ferociously at a tightass bank policy when he sees it:

"The euro has become a currency on steroids. Its relentless nominal and real appreciation since the end of 2000 was briefly interrupted in the second half of 2008, but resumed with a vengeance during 2009. The strength of the currency is hurting the exporting and import-competing sectors of the Euro Area. Unemployment and excess capacity continue to rise."

Oh by the way -- tightass Buiter's bold solution:

"Cut the official policy rate from 1.00 percent to 0.00 percent, and the interest rate on the deposit facility (reserves held by commercial banks with the Eurosystem) from 0.25 percent to minus 0.75 percent"

------------

(*)Powers That Be.

Read this, fellow doom lovers. it's a fairly clear and untwisted account of the global trade scene, and it suggests -- well, not doom, but maybe double trouble:

"Taking as read that the great trade collapse was primarily driven by a sudden, synchronised and severe drop in demand, it is clear that trade will recover as demand recovers. Indeed, trade is already bouncing back at a fairly spectacular rate. While the bounce is impressive, it is not unexpected. Indeed all the post-war trade collapses have been followed by very rapid recoveries in trade flows, as Figure 5 [below] shows.

The chart plots the three major trade collapses highlighted above. In the 1982 and 2001 episodes, trade returned to its pre-crisis level in two or three quarters after the nadir; the 1975 crisis took four quarters -- "

"Do global imbalances matter? Is their continued existence driving the world economy towards another global crisis? These are questions on which macroeconomists have not yet formed a consensus. The IMF and World Bank have calmed the waters by projecting reductions in the imbalances of the world’s largest trading nations – especially China and the US.

This column points out that these projections of improving imbalances are almost surely wrong. The rapid collapse of trade between the third quarter of 2008 and the first quarter of 2009 improved most balances of trade. It could not have done otherwise; if both imports and exports drop rapidly, the gap between them drops equally rapidly. In the same mechanistic manner, the recovery of trade flows – a recovery that seems to have started this summer – will almost surely return the US, Germany, China and others to their old paths."

Left to its own devices, the spectacular trade contraction will lead spontaneously to a trade re-expansion and get us back into the wicked imbalances of the Bush II years.

The great contraction is not a great correction. For a great durable correction we need -- as all attentive SMBIVAers know -- some very serious adjustments to various players' incentives, notably through drastic foreign exchange re-alignments.

Likely? -- in a New York syllable -- Naaah!

What's likely is plan B -- also well understood by denizens of pappy Smiff's place -- a protracted job-short credit-cramped expenditure stagnation, primarily inside the leading first world's consumer economies. In other words, slow the trade rebound down, asap, amap.

Now goodness knows that won't solve anything, but it sure will allow the key planetary plutonauts more time to ponder their options. Understandable, given the first rule of exploitation: "do no more harm to the host than does good for you -- except for sport."

Roaring back into massive absolute trade gap territory looks to be... not even all that surely good for the plutonauts, who have no widely shared conception of what the Alabama hell might happen the next time the doom dong sounds.

So, Nascar fans, it's yellow-flag time on the world track.

Closing off the fast fiscal policy track to recovery, needless to say, is a key part of the whole yellow-flagging of the domestic American economy.

Enter Time Square merlin-without-portfolio Paul "nattering nabob" Krugman, mad as hell and not taking it any more -- errr -- without, ummm -- serious protest.

His contra blast comes in a blog post under quite a daring headline: "Stupidity Economy", where Paul announces sagely that "bad ideas are acting as serious constraints on policy."

Bad ideas, Paul? Come on. Cui bono, pal, cui bono? Where's our countryless cosmopolite corporate claw holders in all this? What if THEY want a yellow flag here -- not because they're "stupid", or condemned to operate under the laws of faux markets, or even because they're any more or less greedy than the rest of us. What if it's err -- umm -- prolly in their best long-run interests? What if they're kinda like our old slaveholding class? Maybe the good of the nation -- the progress of the nation -- right now is, well, not so good for them?

Now of course top liberal economist Krug knows perfectly well what ought to be done -- for the good of America's job-class majority, at any rate:

"[A] really big fiscal expansion, sufficient to mostly close the output gap. The economic case for doing that is really clear. But Washington is caught up in deficit phobia, and there doesn’t seem to be any chance of getting a big enough push."

Well, since we can't increase total job hours without triggering an import surge, then we start job-time sharing, like the Euros do. Spread the misery and to try to squeeze from both sides. He throws in incentivizing bribes for the corporate hiring office, sorta like the new machine tax credit.

Savour that a while, fellow dismailians -- then let's move on to finger-pointing time: not exactly cui bono, more like cui scapegoat-o.

See its not the trans-nats Pauli boy accuses. He's decided to tag China with the blame for our stagtime horizons:

[T]he problem of international trade imbalances is about to get substantially worse. And there’s a potentially ugly confrontation looming unless China mends its ways.... Most of the world’s major currencies “float” against one another. That is, their relative values move up or down depending on market forces.... these days most nations try to keep the value of their currency in line with long-term economic fundamentals. China is the great exception. Despite huge trade surpluses and the desire of many investors to buy into this fast-growing economy — forces that should have strengthened the renminbi, China’s currency — Chinese authorities have kept that currency persistently weak. They’ve done this mainly by trading renminbi for dollars, which they have accumulated in vast quantities. And in recent months China has carried out what amounts to a beggar-thy-neighbor devaluation, keeping the yuan-dollar exchange rate fixed even as the dollar has fallen sharply against other major currencies. This has given Chinese exporters a growing competitive advantage over their rivals, especially producers in other developing countries. What makes China’s currency policy especially problematic is the depressed state of the world economy. Cheap money and fiscal stimulus seem to have averted a second Great Depression. But policy makers haven’t been able to generate enough spending, public or private, to make progress against mass unemployment. And China’s weak-currency policy exacerbates the problem, in effect siphoning much-needed demand away from the rest of the world into the pockets of artificially competitive Chinese exporters."

"[T]his problem is about to get much worse.... Looking forward, we can expect to see both China’s trade surplus and America’s trade deficit surge.... With the financial crisis abating... U.S. trade... showed a sharp increase in the trade deficit between August and September. And there will be many more reports along those lines....

So picture this: month after month of headlines juxtaposing soaring U.S. trade deficits and Chinese trade surpluses with the suffering of unemployed American workers. If I were the Chinese government, I’d be really worried about that prospect."

Maybe if we slow the pipe flow here a bit, by reducing effective demand for imports, the strong-boy dollar profit lifts can continue.

Kill 'em with 3000 cuts not 1000. Slow the depth of each cut, but keep the rate at one cut per month. 25 years of misery, not 9. At least for now, we can always speed up again.

The Han accession to the north currency club could be 2025, 2035, but prolly 2020 sounds best. Here's PK again:

"[T]he Chinese don’t seem to get it: rather than face up to the need to change their currency policy, they’ve [decided] to make our unemployment problem even worse."

Hey, it's already happening. What's left to do in Beijing? Wall Street is taking the point position here. On that topic, note this laff riot of a line from Mr K:

"I’m not sure the Obama administration gets it, either."

For those with a detail-oriented disposition, here's Krug's job "time share" plan and raison d'etre:

"Consider, for a moment, a tale of two countries. Both have suffered a severe recession and lost jobs as a result — but not on the same scale. In Country A, employment has fallen more than 5 percent, and the unemployment rate has more than doubled. In Country B, employment has fallen only half a percent, and unemployment is only slightly higher than it was before the crisis Don’t you think Country A might have something to learn from Country B?".

Dean Baker, ever the eager Gedanken mischief maker, suggests a Vergeltungswaffe Uncle might train on the PRC's yuan:

"Just as China can set a value of its currency against the dollar, the US government can set a value of the dollar against the yuan. The Chinese government currently supports an exchange rate at which the dollar can buy 6.8 yuan....

The US could adopt a policy through which it will sell dollars at... say 4.5 yuan."

"The difference in exchange rates would provide an enormous incentive for Chinese businesses and individuals to exchange their yuan at the Treasury rate rather than the official Chinese rate. While this may violate Chinese law, the enormous potential profits would make the law difficult to enforce. In a relatively short period of time, the US exchange rate is likely to become the effective market exchange rate.Of course... warring exchange rates would lead to a period of instability and unnecessary hostility between the two countries. "

Ahh does my mouth water -- the blood shows at my temples -- the antique ill-used Celtic knees yearn to spring into action -- a billy goat awaiting the alarm.

Actually, Dean hasn't done the full model simulation on this, I suspect. I doubt a sufficient torrrent of illicit yuan would emerge even at 2 to 1. However if Dean is just trying to make one truth perfectly clear, then he surely has: by one means or several others, regardless of the efficacy of his forex V-4,

"Washington has the ability any time it chooses to push the dollar down to a more reasonable level against the yuan."

"Senate Banking Committee Chairman Chris Dodd... wants to take supervisory power from the Federal Reserve, which is controlled by the banks it pretends to monitor, and put it in the hands of a new independent agency.... As Dodd’s spokeswoman Kirstin Brost put it: “The Federal Reserve flat out failed at supervising the largest, most complex firms.” But White House economic adviser Austan Goolsbee frets that taking power from the Fed would cause financial industry “nervousness.”"

Obviously senator Dodd is willing to play softball here -- but not the 'Bama-shave team; they're playin' it by the golden rule, eh? Here's Goolsbee caught by the camera recently:

Come to think of it he does look a bit nervous. Judging by that posed priss look, the Ghoulman was obviously cornered by a lady press photog, not a cellphone-wielding foreclosed harridan of a homeowner.

Scheer goes on to spotlight this Bronxville honey bear, Neal Wolin...

... known as Woodie Tobias to Summers' Doctor Tongue and Bob Rubin's Count Pukula -- back in the Clinton wonder years:

Scheer:

"In the Clinton years, Wolin was general counsel to then-Treasury Secretary Lawrence Summers, the key architect of the radical deregulation that caused the recent banking collapse. Summers went off to work for hedge funds and banks that paid him $15 million in 2008 while he was advising Obama. Meanwhile, Wolin became general counsel for Hartford Insurance Corp., which had to be bailed out by the taxpayers because it took advantage of the radical deregulation that he helped write into law."

As my pop used to say about his competitors from time to time -- "a real cesspool denizen he."

Fox News shoehorns out the goober phrase of the week -- "double-dip recession" -- with Obama, playing macro-economist manqué, suggesting precisely the fiscal policy path that if boldly followed just might indeed insure a second dip.

Here's how Wrong-Way Barry Corrigan, our Lincolnesque POTUS, sees it: If he's to manage the coming great stagnation prudently, a la Goldilocks, that'll require maintaining a careful mid-channel course between the Scylla of too much "red ink" and the Charybdis of too little employment.

"Red ink", Mr President? I thought Uncle Sam can't ever get enough red ink these days. Here's Der Kroogglehorn:

"Overall borrowing by the nonfinancial sector hasn’t risen: the surge in government borrowing has in fact, less than offset a plunge in private borrowing."

"The combined percentage of those in foreclosure as well as delinquent homeowners is 14.41 percent, or about one in seven mortgage holders"

"Climbing national debt could cause... people [to] lose confidence in the U.S. economy in a way that could actually lead to a double-dip recession."

Something tells me Dr. Hope had some other kind of people in mind.

So if big bad papa-bear deficits are out, maybe bribes will work, as in

"... tax provisions that can encourage businesses to hire sooner rather than sitting on the sidelines."

And maybe there isn't. I hear the vox populi now: "one term wonder -- one term wonder."

Sarah, my church-supper hot-dish darling, your ascension can't come a moment too soon.

Morty Zuckerman is a Midas pig of no mean accomplishment, and in info-mart circles -- unlike, say Pinch Sulzberger -- his acquired media majesty rode on funds earned -- or "earned" -- by his own self. Obviously the guy knows his way up and around pretty damn good.

So let's pay attention here when he wades in on the issue of "reforming our domestic financial institutions". Take instinctive populist topic A: bank size.

"The too-big-to-fail firms -- lie at the heart of the current crisis"

No? Then let us strive with integrity and honor to gradually reduce them prudently and lawfully by measured steps taken one at a time with all deliberate speed till the major American credit dispensing firms are down to a safe publically manageable set of dimensions -- right?

No again, sez Dr Z:

"Bear in mind that size, for all the crisis it helped to bring, has also greatly benefited the U.S. economy, enabling our big financial firms to compete against others in Europe and Asia."

Let Dr Z's kooler head prevail: "systemically important banks" just oughta pay Uncle for their privileges:

"If they benefit from explicit or implicit protection from the government, they should not be able to ride free on the backs of taxpayers"

Don't spring for this persiflage, I beg you. These are the words of a big-time legitimized thief. Don't imagine he's prepared to endorse some class-neutral, whole-people-preferable answer to the mudsill helots' cry of "call me Huey".

Take a careful squint at this modest proposal of his:

"Risk of failure should be reduced in one of two ways: by increasing capital requirements or by providing the option for the banks to be smaller or less systemically important. This can be effected either by narrowing what businesses they can be in or by making them less interconnected. In the worst-case scenario, the final backstop has to be bankruptcy or dissolution. A new resolution mechanism will have to unwind these too-big-to-fail institutions through a series of well-ordered procedures that do not imperil the whole economy."

A very complex set of statutes, interlarded with discretionary regulator controls, settings, and options: looks like reform correction and prohibition, but it's really more like rehabilitaion and rejuvenation.

Zuckie is after all a member in good standing of the Friends of Uncle Hegemonic's Invisible Empire, so he dearly wants to keep The Big Fuck, LLC, goin' strong.

"The Federal Reserve should remain at the center of these new regulatory efforts. The Fed may be less popular today on Capitol Hill, but there is no other institution — certainly not Congress itself — that has the sophisticated understanding and detailed knowledge to monitor the financial health of the banking firms and that possesses the relative degree of independence from political pressures that the Fed has exhibited over many years.

The Federal Reserve may have fumbled a bit in the evolution of a bubble economy. But once the crisis hit, it was the Federal Reserve, under Ben Bernanke, whose innovative, imaginative response to the crisis literally saved the financial world. Bernanke's Fed found new ways to pump liquidity into the credit markets that were on the verge of a total freeze-up.

This could only have happened because of the Fed's political independence, experience in and understanding of the financial world, and wideranging authority. No one could respond better than the Fed if the next crisis is anywhere near as severe as the last one.

Should Congress undermine the Fed's monetary policy function, we would face a worldwide collapse of confidence in the dollar that would inevitably lead to higher interest rates.

Congress is always playing the blame game, but it would be incredibly irresponsible at this point to undermine the Fed and its capacity to handle the new financial world that we will all be living in."

This is an old, old story, but jeez, has it ever got legs.

Look, there’s a faint echo of all this on the left — people who are outraged at the idea that we’re going to make saving the planet basically a business decision, aligning private incentives with environmental goals so that doing the right thing becomes a profit opportunity rather than a moral duty. That, I think, is what’s behind the furor over cap and trade.

Krugman

This reminds me of the "debates" over the placement of the Star Wars missiles. They're completely worthless as a defensive weapon. Even in tests rigged to let them perform well, they're useless. They are good, however, for shooting down passenger jets and satellites and this makes their installation a constant, mindlessly bellicose provocation. But the mind reading conservatives who support Star Wars know the causes of the objections to them far better than their critics. They have broken the codes and read the minds of the critics. They understand that it's irrational hatred for security driving the criticism.

And so with the efforts to introduce a market solution to GHG emissions. The experience with it to date is consistent bad faith, relentless efforts at gaming the system, lack of political will to police it and an actual increase in emissions. It doesn't work. There are conceivable circumstances in which it could work, but there's next to no support at all for the political changes that would be necessary.

Mind-reading, code-breaking liberals know better than their critics, alas, and this knowledge persists in spite of the broad support for carbon taxes and rebates, public funding for transitions to cleaner energy and advocacy for systems of production that don't lurch from one exploitive catastrophe to another. Maybe we can hope for some buyer's remorse from them down the line. After their fatuous, servile and useless response to global warming has managed to elect another Republican president.

Der Volcker is back in action, and he's spraying everyone he can with a very trog-like magic bean repellent!

The useful ogre of the Carter-Reagan counter-revolution -- the man who put the figure-four submission hold on the credit system -- the author of the Volckerdaemmerung, with real interest rates even the devil himself might not accept -- is now attacking con brio the Wall Street high-fliers. l

Here's a concise sum-up by former IMF Merlin and present-day MIT mandarin Simon Johnson -- seems His Eminence is at a hi-fi banquet a while back and finds himself

"... sitting next to one of the inventors of financial engineering. I didn't know him, but I knew who he was and that he had won a Nobel Prize, and I nudged him and asked what all the financial engineering does for the economy and what it does for productivity.

Much to my surprise, he leaned over and whispered in my ear that it does nothing—and this was from a leader in the world of financial engineering. I asked him what it did do, and he said that it moves around the rents in the financial system—and besides, it's a lot of intellectual fun."

More?

Okay, take it, Paul:

"I have no doubts that it moves around the rents in the financial system, but not only this, as it seems to have vastly increased them.

How do I respond to a congressman who asks if the financial sector in the United States is so important that it generates 40% of all the profits in the country, 40%, after all of the bonuses and pay? Is it really a true reflection of the financial sector that it rose from 2½% of value added according to GNP numbers to 6½% in the last decade all of a sudden? Is that a reflection of all your financial innovation, or is it just a reflection of how much you pay? What about the effect of incentives on all our best young talent, particularly of a numerical kind, in the United States?"

"I am probably going to win in the end."

Take another glance at the photo above. See the look he's casting on the Hopester? What does that suggest to you?

I can't recall a nicer public spectacle than the Senate just gave us, with health care "reform". A couple more of these -- let's say, one on little guy protections from financial toxic emissions, and another on Energy, Inc's carbon emissions -- oughta open wide the mass pwog cry for ending the 60-vote cloture requirement. Paul Krugman has already plunked for it. What a sad day for the center-aisle party that would be.

Of course I hear Father Smiff muttering darkly that "they'd just have to find ten Joe Liebermans instead of one. They wouldn't have any problem doing that."

I dunno. Call me a giddy optimist, but I'm prepared to expect some real reforms here, like the first term of Wilson or FDR or LBJ. The system does need to function a bit more smoothly here at home. Once the trans-nat titans fully grasp that it's either a better safety net or protectionism, they'll opt for a better safety net.

Ah, you ask, what reason do they have to believe that the choice is ineluctable?

Good point. It wasn't, for years -- hence the splendid de-industrialization process for the last three deacdes, even as the safety net languished.

However, the consequences of the long industrial demolishing from the mid-90's till now has reached the point where signifigant further wage structure disintegration is not possible -- nothing more remains to be destroyed that can be destroyed... safely. Even with the invention of modern usury there is a limit to squeezing, and the social fabric mustn't rip apart at it's class seams either, eh?

Now protectionism is the jobs policy that avoids fiscal deficits. But protectionism ruins the trans-oceanic profit slurry.

What is to be done?

The current stagnation is only a stopgap -- the wide-open trade story always had a side story. Winners must compensate losers; hence the safety net.

But safety net enhancements cost money, big money.

Example: for years the corporations as a whole have wanted out from the defined benefit biz, including of course sponsoring health plans.

Obviously only uncle can set up this transition, and it will require mobilizing resources. Who from?

Well, the corporates aren't about to pay more themselves. So who else has benefited from the trans-nat racket?

We've had a dynamic in our national tax systems for decades that has very effectively shifted most of the cost of uncle/state gub programs to job-class strata through payroll and consumption taxes, plus of course federal borrowing with its attendent carrying costs.

That is, of course the essence of an ideal safety net, from the trans-nat corporate POV: the job class pays for all the trade-induced losses themselves, while the corporates pocket the gains.

This trick isn't working so well any more, since the job class is pretty well tapped out.

So the trans-nats need to go after somebody who's actually made out a bit in the globalization process.

Hmmm. How about a big chunk of the top 10%, that directly and indirectly gained from the de-industrial scam -- the fuckin' self-righteous corporate parasites, both professionals and rentiers?

Yup, now the petty rentiers must be tapped, too, if the safety net is to grow; and just as obviously, if you need to tax merit-class rent-heavy "earned" incomes and portfolio liberals, you need to promote the dems to top dog party status.

Nice, eh? Put 'em in power so they can tax themselves.

The cost of keeping the commanding heights private property, episode 79: guest star, James Kwak of Baseline Scenario:

" Visa has been increasing its market share by increasing the prices it charges to merchants; it takes those higher transaction fees and passes some of them on to banks ... giving them an incentive to promote Visa debit cards over other forms of debit cards. Not only that, there are different fees on debit cards depending on whether you use them like a credit card (signing for them) or like an ATM card (entering a PIN). Signing costs the merchant more, so the banks and Visa give you incentives to sign instead of using a PIN. The end result is higher costs for merchants, who pass them on to you.

Ordinarily this should create the opportunity for a new entrant (say, NewCard) to offer lower fees. But there are three problems.... First, individual customers would have no incentive to use NewCard rather than Visa, since any savings get distributed across all customers of a given merchant (through lower prices). Second, there are massive technological and marketing barriers to entry. Third, even if merchants and customers want NewCard, the banks–the distributors of debit cards–don’t."

"Tell me again, how does this benefit society? Theoretically having a couple of big transaction processing networks could lower costs... because of economies of scale. But we’re probably talking a couple of pennies per transaction there, while the fees that Visa charges are an order of magnitude bigger... It struck me that I have in the past cited the debit card as an example of a beneficial financial innovation.... But I’m not sure those benefits are worth the amount that the networks and the banks are sucking out of the system (resulting in higher prices for everyone)."

---------

(*) And foidermoah: I t'ink Wall Street must be destroyed.

The Larry and Ben show -- America's beloved stagonomic twins -- have a neat new trick in store for us and it's coming to wageling job sites near you. By means mysterious and confabulating these master magi will telepathically induce the total once and for all disappearance of... one trilllllion simoleons, and all of it straight out of the 'umble wages of us rubes.

Here's Dean "the dream" Baker:

"We use Bureau of Labor Statistics (BLS) data on the economy since 2007 and Congressional Budget Office (CBO) projections of economic performance through 2012 to estimate the total loss of wages and salaries resulting from the decrease in employment in the current downturn.... We find that the fall in employment from its 2007 levels will cost U.S. workers just over $1 trillion in lost wages and salaries during the five-year period 2008-2012.

The estimated lost wages and salaries exceed – by about $150 billion – the CBO’s estimate of the full ten-year cost of the health-care reform bill that recently passed in the House of Representatives.

From the standpoint of jobs – the economic variable that most concerns Americans – the recession is not even one-third over. Cumulative wage and salary losses so far (2008 and 2009) constitute less than one-third of the total expected missed earnings through 2012.

We have not yet seen the bottom of the labor market. Lost wages and salaries in 2010 will be more than 25 percent higher (after adjusting for inflation) than the losses experienced in 2009. Lost earnings in 2011 will be higher than they were in 2009; and 2012 will be almost three times as bad as 2008, the first full year of the recession...

We do not include the cost of lost health insurance or pension contributions, lost earnings resulting from declines in the usual hours of work for those workers who manage to keep their jobs, or any cuts in wages and salaries stemming from cost-cutting pressures brought on by the recession."

I don't think I need to say very much about the decision to have Clinton and Baby Doc Bush take an interest in the relief efforts. Instead, I want to talk about growing up. Adulthood doesn't come easily for some people. Peer pressure and an eagerness to placate authority can make judgments on right and wrong very difficult. If they say the wrong thing, for example "why is he sending those psychopaths?!" in response to authority's decisions, their peer group might come to believe they have cooties. Yet, it's important to ask, to question and to doubt, developmentally speaking, otherwise adolescence and the shame of the apple-polishing reflex will go on forever. The sunk costs of servility become insurmountable, and they'll grow up to become moral cretins, just like those wacky wingnut kids.

I'm not entirely unsympathetic to the plight of access-bloggers, scab liberals, recidivist nudgees and the victims of libertarian paternalism. I do want to help. The sight of them flailing around breaks my heart. I wuv you, wibwubwools and pwogs, weahwee I do.

The bag of rotten organ meats called Baucus-care is often sold to us by large-souled but deeply insightful humanitards like Nobelista Paul Krugman, he of Times Square and Nassau Hall by way of Nassau County, as in this toss-off back in late fall '07.

"From the beginning, advocates of universal health care were troubled by the incompleteness of Barack Obama’s plan, which unlike those of his Democratic rivals wouldn’t cover everyone. But they were willing to cut Mr. Obama slack on the issue, assuming that in the end he would do the right thing.

Now, however, Mr. Obama is claiming that his plan’s weakness is actually a strength... The central question is whether there should be a health insurance “mandate” — a requirement that everyone sign up for health insurance, even if they don’t think they need it. The Edwards and Clinton plans have mandates; the Obama plan has one for children, but not for adults."

As seen in our dear PK 's Xmastide sum-up of the Baucus Concoctus,

"This plan combines three main elements: community rating, so that premiums can’t be based on medical history...

subsidies, to help lower-income families afford the premiums...

[AND]

... an individual mandate, so that healthy people are in the pool, keeping premiums down..."

Why?

Well according to our other loving meritoids, a mandate will forever bar... (a still largely undemonstrated)... "adverse selection process", which can only emerge in the single person policy market anyway. Seems even the faint possibility of some insignifigant body of antisocial shoeless souls "gaming the system" sends our great philanthropists like Lord Paul into fits of anxiety.

Whereas...

When it comes to the recent White House push on hi-fi reform -- the saddling of mustangs on Wall Street -- where the system itself is by sacred mission always about, and only about, gaming the system -- behold, there's no such fear.

The bastards expect us to buy their never-again bullshit without putting any teeth in it -- without hacking a few of these giant redwoods into mulch.

Nope, all the federals gotta do, according to Team Barry is, well, freeze things just as they are.

Surprised? Or like that pretentious hillbilly, Father Smiff, are you slapping your knee and imagining the mythic kulak morons out there keyed in on their commute radio:

"Listen up, fellow critters: never fear, the DC rangers are on the case. The gold-collar crime-bustin' team, gentle Ben and twitchy Tim the Wall Street Romulan, got a bead drawn on this beast. So stop this silly thinking man's hysterics here -- why, that's just sissy bullshit. Uncle's got this all well in hand. Just go back to yer den chair, maybe turn on the super bowl prelims and pass around the Old Milwaukee. We'll... freeze things in place."

I see Pa turning to Ma -- "why shucks, honey bun... that sounds like a pretty damn small-fry-friendly default position to me."

Here's convincingly indignant self-appointed people's watchdog Simon Johnson:

"To freeze the banks at or close to their current size, this makes no sense at all. Why would anyone regard twenty years of reckless expansion, a massive global crisis, and the most generous bailout in recorded history as the recipe for creating “right” sized banks?"

"Banking is based on trust. The banks get our paychecks and hold our savings; they know where we spend our money and they keep it private. If we don't trust them, the whole system breaks down. Yet for years, Wall Street CEOs have thrown away customer trust like so much worthless trash."

Liz Warren, here testifying to the erect size of Jamie Dimon's accounting tool, may be a Nader for household usury, if she keeps up the evolving pace of her rhetoric and the quality of her public revelations. Example, from a necessarily indirect link to a recently published tollgated Wall Street Journal op-ed:

"Wall Street executives explain privately that they cannot get rid of fine print, deceptive pricing, and buried tricks unilaterally without losing market share.

Citigroup... in 2007... decided to clean up its credit card just a little bit by eliminating universal default—the trick that allowed it to raise rates retroactively, even for consumers that did nothing wrong. Citi's reform resulted in lower revenues and no new customers, triggering an embarrassing public reversal.

Citi explained sheepishly that credit cards were now so complicated that customers couldn't tell when a company offered something a little better. So Citi went back to something a little worse."

"For all of our beloved rugged individualism (and our individual right to handguns), it doesn’t do much good when you’re up against your credit card issuer. "

Simon Johnson, who despite his fresh educated-rube's face, prefers playing Old Testament prophet, put aside his usual thundering against the Shylocks of Wall and Lombard Street to compile this economic tour d'horizon for our congressional caretakers. It ain't Jeremiah but it is B-plus work.

Upshot? Pretty simple: the emerging giants, India and China, remain the darlings on the MNC dance cards, whereas old Europe is quagmired worse than Norte-Amigo and we all may hit another global contraction this fall.

Sounds good, eh? In fact it's "very nicely played indeed", if you happen to be a Plutonian lady or gentleman anxious to see the hi-fi Laputa sailing through blue skies again over Whole Earth, incorporated. Give or take a few scares, all's well up ahead if you're one of those, like Tim Geithner or the Calydonian boar, Larry of Harvard Yard, who have the privilege to presently manage this cautious restoration project.

As to the problematic progress of us OECD joblingers: try another planet, lugheads.

For the ADHD clique here's Doctor Johnson's quite exciting coda:

"The most worrisome part is that we are nearing the end of our fiscal and monetary ability to bail out the system.

In 2008-09 we were lucky that major countries had the fiscal space available to engage in stimulus and that monetary policy could use quantitative easing effectively. In the future, there are no guarantees that the size of the available policy response will match the magnitude of the shock to the credit system... Much discussion of the Great Depression focuses on the fact that the policy response was not sufficiently expansionary. This is true, but even if governments had wanted to do more, it is far from clear that they had the tools at their disposal – in particular, the size of government relative to GDP is limited, while the scale of financial sector disruption can become much larger...We are steadily becoming more vulnerable to economic disaster on an epic scale."

Really? Yup, sez Simon. I'm glad no one told FDR that in 1940.

NB: "We are steadily becoming more vulnerable to economic disaster on an epic scale." Closing out with that piece of meaningless high-C gibber proves one thing for sure: In the end -- if you want to stop the show -- nothing, nothing at all, beats a hi-fi agitprop-induced bout of pure catatonia.

Possible headline of tomorrow and tomorrow and tomorrow:

Globe's Economy Suddenly Totally Collapses

Manhattan: After years of teetering and tottering, yesterday at 3:37 pm he world's economy imploded to form a hypermassive black-hole singularity, which immediately sank to the center of the earth and now appears to be devouring the physical mass of the planet.

Viewing the wreckage from his tower window, one Wall Street regular observed: "Guess that system of chrome steel skyhooks we built just couldn't hold 'er up any longer."

Right?

Noticing the Hellenic crisis allows me to whack a particularly fatuous instance of the perennial debt-bombing siren-sounders -- in this case the paleolithic Brit hysteric Nellie Ferguson, shown above doing an imitation of Tony Soprano doing an imitation of Nosferatu.

Here's Nellie sounding the general all-points alarm:

"It began in Athens. It is spreading to Lisbon and Madrid. But it would be a grave mistake to assume that the sovereign debt crisis that is unfolding will remain confined to the weaker eurozone economies... it is a fiscal crisis of the western world."

"The Obama administration’s new budget blithely assumes real GDP growth of 3.6 per cent over the next five years, with inflation averaging 1.4 per cent. But with rising real rates, growth might well be lower. Under those circumstances, interest payments could soar as a share of federal revenue – from a tenth to a fifth to a quarter."

"The Chinese have sharply reduced their purchases of Treasuries from around 47 per cent of new issuance in 2006 to 20 per cent in 2008 to an estimated 5 per cent last year."

Nellie -- always the empire man -- has a nice quote on this very point from no less than Larry S, the Calydonian boar hizseff:

“How long can the world’s biggest borrower remain the world’s biggest power?”

And furthermore -- if indeed the foreigners stop buying our public debt issues, you can expect the dollar to tumble, and like the 7th cavalry riding to the rescue, a lower dollar will cause our trade deficit to evaporate automatically, and just as automatically reduce the necessary size of any full-employment federal deficits!

We citizen chumps really need to see all this as clearly as possible, 'cause the phonus balonus keeps on gettin pitched right at us. Here's another example from hissy boy Nelly:

"The long-run projections of the Congressional Budget Office suggest that the US will never again run a balanced budget. That’s right, never. "

If you want to play this game, here's the key ratio: the long-run ratio of debt to GDP == (deficit /gdp) x (gdp/gdp growth ) => debt growth /gdp growth.

First choose a long-run average rate of deficit as percent of gdp, i.e. the forever-after average fiscal deficit rate. We're at 10-12% or so now, in the depths of a recession; but what is the likely upper bound average deficit forever? That number -- whatever it is -- plus the assumed average rate of gdp growth -- both let us say in current ie nominal not constant dollars -- is anyone's guess, but I'll use a highball set of numbers just to prove my point.

Say we have an 8% average forever deficit to gdp ratio -- the euro zone, that bastion of hard money, seriously disapproves long run average fiscal deficits above 3%. But I'm being a wild man here. And say we have a a modest 5% average forever gdp growth rate -- maybe 2.5% inflation, 2.5% real growth. Then the final ratio of debt to gdp will be as 8 is to 5, right? it's that simple: the debt total will be 1.6 times the current gdp, about twice what it is today here, but very near several Euros and below Japan's.

Since Father Smiff can't understand anything numerical without a graph, here are some pictures for his benefit:

So what is the assumed long interest rate (R) paid on the public debt? Multiply whatever rate you choose by the debt to gdp ratio and you have the debt service steady-state "burden" on the economy. In our example, 8(R)/5. If R is a fairly high-side reasonable 6% we get an 9.6% of gdp burden.

If the federal tax take keeps to its present 19% of gdp, servicing the debt will take about half the tax collections; but with another 8% of gdp each year coming into the federal budget, debt servicing becomes 36% of it. Now yes, Aunt Polly, that's a big number indeed. But it's forever, right? So we have plenty of time to find a unique tax base to extract these service payments from.

Say we effectively tax only the wealthy few for this 8% of GDP. If they own half the wealth and wealth is 4 times GDP, then big deal -- an average 4% wealth tax equivalent on the holders of the top half of our national wealth. Sounds like fun to me!

All this was well understood 65 years ago, at least, and these numbers I've used are not way-off estimates of the possibles for the next 30 years.

And remember, my fellow radical imps, we haven't yet used the fiscal monetary "nuclear option": a transition to all public debt held if necessary by the Fed itself; or another non-nuke WMD, namely Uncle's monetary agents running a faster long-term inflation rate while holding the nominal rate of Fed notes at that same target rate, effectively zeroing out the real rate of riskless return.

Poof! Inflation taxing away the public burden of the debt incubus! Yes, the inflation tax, bane of the goldbugs, that invisible built-in adjuster called the changing cost of "living". Not so much fun, that, as taxing the plutonians, but easily adjusted to, once you real producers of real stuff are made aware of the gig.

Now comes Simon Johnson, respected, credentialed, tenured, and once highly-placed global hi-fi technocrat, suddenly turned rogue lion in the street, who's been roaring "cut the big boys down to size" -- and coming from his desk, that has some purchase, as they say. But on today's topic, where does he stand?

Unfortunately, he's as orthodox a poison peddler as Fred Thompson. No free-lunch deficit guy he... not like your pal Owen here.

"No country can go on issuing... debt without consequence", simple Simon says. Ugh, how banal, what typical high-perch crapola.

"The macro situation remains stable only as long as foreigners buy and hold... government debt.... This is a major economic and national security risk.... Unsustainable debt dynamics can undermine us all."

Once you can adjust your currency or your inflation rate or your tax targets freely and democrataciously, it's child's play... which brings us back to the playpen du jour, the Hellenic contretemps and the deathly grip of the euro.

One fact spells doom here: Greece has no currency of its own to adjust, so it and Spain and Portugal and my dear Ireland, since they're all similarly shackled, must adjust their price and wage levels instead. Translation: a protracted interval of joblessness, dearth, and misery, so long as the all-powerful "reformed Reichs" to the north of the zone refuse to step up their own rates of price level change.

Just goes to prove... a world without Uncle would find plenty of vicious corporate pricks left on the planet ready able and wildly willing to play sadistic global Procrustes. Andrew Mellon lives and his name is Trichet:

Paul Krugman has been on this beat for a while now:

http://krugman.blogs.nytimes.com/2010/02/11/greek-troubles-are-more-than-fiscal/

http://krugman.blogs.nytimes.com/2010/02/10/riga-mortis/

http://krugman.blogs.nytimes.com/2010/02/07/know-your-deficits/

Why him? Beacuse this legendary back room Issimo is a man of steely credit grip and utterly "insider-only" moneymaking; and unfortunately he is waiting in the wings to become the next Kaiser of the Euro zone, succeeeding the toxic troll Trichet.

Heeere's Simon:

"... As Mr. Weber aspires to European-level leadership, here is the big issue. Is it his intention to manage the currency zone to suit the preferences of the core nations (i.e., Germany), while letting those on the periphery be whipped around by policies that are not suited for them?... German officials [like Weber] are keen to criticize the southern periphery of the eurozone, but let’s face it – eurozone monetary policy was highly procyclical (exaggerating the boom and the bust, e.g., in Spain), and regulators looked the other way as northern/core banks extended credit to the Mediterranean and East European neighbors.

The upside benefited German exporters; the downside is now being laid entirely at the door of “profligate” nations... Germany and Mr. Weber have been central in building a version of the Bretton Woods fixed exchange rate system within Europe. The entire burden of adjustment is placed on deficit countries (talk to Greece); it is considered beyond the pale to even suggest that German fiscal policy may be too tight, that Germany needs to expand domestic demand, or – heaven forbid – that Germany’s intention to export its way back to growth (with a current account surplus, in their view) is not exactly a model of enlightened economic leadership.... On top of this, and unlike Bretton Woods, there is no mechanism for adjusting exchange rates within the currency union."

Oh little ones of Greater Sweden, rise up! join your Latin brothers and sisters! Stop this Kraut mug on his brutish progress to the throne of torture and bondage. You too have nasty chains to break. Look closely, comrades -- the links are right about your throats.

And no, I don't mean the football team:

Icelanders reject full repayment to British, Dutch caught in bank collapse

LONDON -- Icelanders this weekend resoundingly rejected a plan to reimburse overseas depositors after the failure of an online Icelandic bank, a rare public referendum on the repayment of a foreign liability that could fuel further concerns over debt problems in Europe.

A whopping 93 percent of Icelanders rebuffed a government push to reimburse Britain and the Netherlands $5.3 billion....

Voters reveled in a carnival atmosphere following the vote, shooting fireworks into the air and raising placards saying "Sorry Darling, No Deal" -- a reference to Britain's Alistair Darling, the finance minister....

Darling conceded on Sunday that it could now take "many, many years" before London would see any reimbursement. But he also seemed to strike a conciliatory note, saying both Britain and the Netherlands are willing to be flexible.

It's always been head-for-the-hills time in northwest Europe when the Vikings find themselves seized by a "carnival atmosphere".

I happened to be living in Ireland during one of the intermittent "cod wars" between the Icelanders and the Brits. It would have done your heart good to hear the Irish cheering on the Icelanders -- all those unfortunate misunderstandings with Thorgest et al. quite forgotten.

According to a story I heard several times there -- though I've never been able to confirm it -- there was at least one occasion when an Icelandic gunboat loaded up its guns with potatoes and broadsided an English vessel. Talk about bangers and mash! The characteristic Irish narrative genius brought vividly to the mind's eye an image of the Brit warship and its spiffy officers slathered inches-thick with potato puree, flavored with a soupcon of cordite.

March is Independent Fed month!

This month back in '51, the blatantly bright-eyed anal-looking briefcase thief pictured above freed our Fed from the Truman treasury department, after 9 harrowing years of institutional captivity, just as many of our brave boys in Korea were entering Chicom captivity.

Clio takes with one hand as she gives with the other, no?

At any rate, brainwashing seems to work in both directions. Here's one way -- the classical way, the Red Menace way. Before washing:

After washing:

And here's another way -- the Fed's freedom-to-turkeyrope way. Before washing:

After washing:

To read about this glorious silk-hat liberation struggle, maybe start here. In brief: the Fed had its policy rate ceilinged, for nearly a decade, at a level often well below inflation. The clamp was placed originally in 42-43 just as Uncle, resorting to extraordinary measures, exploded his deficits to win the war.

The same clamp -- prolonged by diabolical Treasury forces -- helped win the postwar peace too, as the economy barreled ahead in unprecedentedly broad and bottom-elevating strike-infested fashion.

With help like this pinned rate, obviously the size of our war-induced federal paper debt mountain shrank nicely, as the postwar years of stiff -- in part, wage-driven -- price level updrafts roared away.

March, '51 -- like mighty badger Milhous closing the gold window in August '71

-- one of the really big invisible ink landmarks in the great American class struggle.

Simon Johnson -- shown above, looking a bit like Bob Newhart -- has had his manic anti-Laputa moments lately. But it seems, come the ultimo pinch -- once a guy's spent some quality time trawling the watery byways of the planet for the IMF in full B and D mode... well, you know... ya just can't take the bonecrusher out of 'em.

Here's Simon pressing our brave little grasshoppering Hellenes to morph into fiscal anorexia mode and deal with their "sovereign debt bubble" by... paying it off!

"By the end of 2011 Greece’s debt will reach around 150% of GDP... About 80 percent of this debt is foreign owned, and a large part of this is thought held by residents of France and Germany."

" Every 1 percentage point rise in interest rates means Greece needs to send an additional 1.2 percent of GDP abroad to those bondholders."

"What if Greek interest rates rise to, say, 10% – a modest premium for a country which has the highest external public debt/GDP ratio in the world, which continues (under the so-called “austerity” program) to refinance even the interest on that debt without actually paying a centime out of its own pocket, and which is struggling to establish any sustained backing from the rest of Europe?"

"..Greece would need to send a total of 12% of GDP abroad per year, once they rollover the existing stock of debt to these new rates (nearly half of Greek debt will roll over within 3 years).

This is simply impossible and unheard of for any long period of history. German reparation payments were 2.4 percent of GNP during 1925-32, and in the years immediately after 1982, the net transfer of resources from Latin America was 3.5 percent of GDP (a fifth of its export earnings). Neither of these were good experiences."

"On top of all this Greece’s debt, even under the IMF’s mild assumptions, is on a non-convergent path even with the perceived “austerity” measures."

These "numbers" can get a signifigantly opposite play. Enter St Paul of Nassau: "In the past, some countries have managed levels of debt that high or higher, without default...So how is that possible?

Suppose that Greece had as much credibility as Germany, and could borrow at a real interest rate of 2 percent. Then stabilizing the real value of its debt, even with a debt ratio of 150 percent, would require a primary surplus of only 3 percent of GDP. That’s certainly possible for some countries, although maybe not for Greece... this suggests that optimism or pessimism about future default can, to at least some degree, be a self-fulfilling prophecy." As if to scotch Johnson's own bitter prophecy, the Euro barons are making nice about Athens -- err, not Byronic nice; more like "them's pets of the realm" nice.

In any case these numbers are far from horrorific in absolute terms. Imagine, say, South Carolina in fiscal trouble. Could the rest of the states bail her out through the grand offices of Uncle Sap?

"Soitenly!" as "Curly" Krugman pointed out some time ago: "Overall, the group of stressed economies account for about 20 percent of the eurozone’s GDP", Krug observes -- less of a hard slog than, say, if Uncle were to bail out Dixie (though we have to put Spain aside as TBTF).

Hell, it gets to be a damn fine boat ride. If the Euro central bank can borrow at sub German rates, then...

But alas, mates, a greater fraud is in progress here, perpetrated upon a lesser fraud, and in the end 'twill all prove just another silk-hat squeeze play, a starve-the-little-critters gambit, a nifty iron-law flimflam, a way to crumple the welfare state just a tad more, foul its safety nets and crimp its feckless hu-cap squanderings. "They're in a pickle, boys, so let's squelch 'em and squelch 'em gooood!..."

To paraphrase Andy Mellon: "Starve starve starve! Starve Greece! Starve Portugal! Starve Latvia and Estonia too, and oh yes, of course, begorrah, starve that dirty little figment on the Emerald Isle."

-------------------

(*) The rates on Greek sovereign debt -- as a mere fly speck out of the global total -- could be easily kept down by simple purchases on the open market by the European central bank. This fantasy of ballooning rates leading to a cascade of attacks on other weak sister sovereigns is as unnecessary as the fear of, of... the fear of wet hair when you're about to leave a hat shop in a rainstorm.

As to this straight-from-scratch bullshit --

"[10%] is a modest premium for a country which has the highest external public debt/GDP ratio in the world"

And as for Greece the debt king -- why, the chaps have a smaller GDP to debt ratio than Japan, among others.

Check out Japan's borrowing rates.

Smartass pleb defiance, or just the usual positioning for a buttfuck? You decide...

Yer man Carolan O'Marx (the da) observes somewhere that the Irish often get the chance to prove just how far a people can go to debase themselves. Of course, the good doctor was thinking of the then recently passed great and glorious famine.

Much since has troubled and tasked those verdant superstition-cursed but matchlessly-eloquent islanders. The latest hammering seems to include an extra-special dose of nasty: a banker bedlam turned servile sovereign bailout, and one so wild it may well be without parallel on the planet.

After the Irish lot bubble burst, at a level well beyond the American regional standard -- on the order of 50% from the top of the market to the bottom! -- the economy contracted monstrously. Unemployment soared. Pay packets were slashed. Misery saddled up its dark horse and galloped throughout the land. I'll let global visionary and indignant half-twit Simon Johnson take up the telling here, in an essay with the disquieting title, "Could the US become another Ireland?":

"Ireland's three main banks built up 2.5 times the GDP in loans and investments by 2008;... The banks got the upside and then came the global crash... Today roughly 1/3 of the loans on the balance sheets of banks are non-performing or “under surveillance”; that’s an astonishing 80 percent of GDP, in terms of potentially bad debts.

The government responded... They guaranteed all the liabilities of banks and then began injecting government funds. The government is now starting a new phase – it is planning to buy the most worthless assets from banks and pay them government bonds in return. Ministers have also promised to recapitalize banks than need more capital. The ultimate result of this exercise is obvious: one way or another, the government will have converted the liabilities of private banks into debts of the sovereign (i.e., Irish taxpayers)."

"Ireland, until 2009, seemed like a fiscally prudent nation. Successive governments had paid down the national debt to such an extent that total debt to GDP was only 25% at end 2008 – among industrialized countries, this was one of the lowest.

But the Irish state was also carrying a large off-balance sheet liability, in the form of three huge banks that were seriously out of control.

When the crash came, the scale and nature of the bank bailouts meant that all this changed....The government has cut takehome pay of public sector workers by roughly 20% since 2008 through lower wages, higher taxes, and increased pension payments...Even with their now famous public wage cuts, the government budget deficit will be an eye-popping 12.5% of GDP in 2010...they still plan further major expenditure cutting and revenue increasing measures each year until 2013, in order to bring the deficit back to 3% of GDP by that date. The latest round of bank bailouts (swapping bad debts for government bonds) dramatically exacerbates the fiscal problem. The government will in essence be issuing 1/3 of GDP in government debts for distressed bank assets which may have no intrinsic value. The government debt/GDP ratio of Ireland will be over 100% by end 2011 once we include this debt."

"Ireland had more prudent choices. They could have avoided taking on private bank debts..."

But comes now one Johnny Corrigan with this bold Celtic cuff line:

"You have to talk the talk and walk the walk,... send a clear message to the market about how you are going to correct the problem and then deliver."

Oh lord above, please, I beg you, help the long-suffering people of Ireland, that Red Sox among the nations. Stretch forth thy mighty hand and stir them up to rebellion. Turn 'em into Vikings. Strengthen them to spit back these crooked obligations their gubmint has forced 'em to swallow. Visit thy wrath and indignation upon their gubmint for underwriting all these failed plunderings of their very own pirate pack of Shylock fraudsters, whilst at one and the same time slashing everything in sight. Yea verily, they do out-Hoover Hoover!

Ahh now, calm down Owen me lad, calm down. After all don't it just go to show ya an antique Emerald truth: when a "sovereign" lobby owns an Irish gubmint, it really owns 'em, all the way down to their heels. The buy is never partial or renegotiable. An Irish gombeen gummint can be trusted to walk the walk, as the man sez -- right off the plank.

Is it lean-kine time down here in Pharaoh Obama I's happy realm?

Ichabod Goolsby's Adam's apple...

... is replacing the sweet smile of Junoesque milkmaid Christy van Romer as the public face of Pharaoh's fifthwheel council of economic advisers.

Gee, they looked like almost a couple back at the barn dance last month.

Signs of conflict within?

I'd say prolly not. I tend to think they both were front-row fodder whenever the headless horseman galloped the night roads of Sleepy Wallow...

... to the spooky reverb'ed cry of "Porco...porco..porco!"

The sudden bursting of most "value" bubbles couldn't, by themselves, bring down a national economy. Not even one like the recent house-lot bubble. So why do we think so?

Despite the chatter about the specifics of home ownership, etc., they're largely incidental to this ongoing horror. Anything could have triggered the present slow-but-steady monster mash. It was in the cards from 1971.

Recall the burst bubbles of yore: The S&L bank blowout of '89... The stock meltdown of '87... The dotcom burst of '01... The energy price collapse of the mid-80's... My own favorite, the gold bubble of '79.

I'm no chronicler of hi-fi mayhem, but that's a start.

There's lots of 'em. They go with modern credit-driven capitalistic asset markets. They're bult into the institutions and rules of the game, and so they come and go like cyclones. Most times the economy sails on through with only above deck wreckage

If you want to study the present...impasse, then forget bubble-watching. Leave that to the portfolio crowd. If you're a regular Mcjobbled type, like me, I suggest you rent your digs, spend your takehome, and die somewhere between 70 and 75.

Yup, plow into the here and now, brothers and sisters.

Recall these words: "Which of you by taking thought can add one cubit unto his stature?"

But I wander.

You're a wage slave. Live with it. But if you want to have some fun pretending to be a prophet while you play out your string, then keep the global economy under constant scrutiny.

Yeah, we get bubble-bursts there too, of course. Just recall the Chinese firecrackerish string of forex crumbles in '97-'98, or Mexico in what, '94? Argentinia in '00, or was it '01? The debt crisis that ate the Iberian continent in the mid-80's. Black Africa just about 24/7. Etc. Etc.

But no. I mean the overall international flows of trade, and what is called, with genteel nicety, "investment".

There are, I dunno, 180-20 bounded outfits stationed around the planet. Prolly 30-40 of 'em are significant, and they're all criss-crossed by multinational corsairing crews scurrying about, making bold real crossings and near-invisible virtual crossings everywhere and always.

This gets to be complex and snared. That's where we come in, we wagelingers of the developed zones. If we're not watching, we settle in for some version of what we got right here today: a yellow-flag slowdown, a "stagnation".

These are protracted "outcomes", right there in the cards from the very production of the deck, just waiting to turn up again and again: not as one or two bad cards in a row, to a few players here and there, but to most players and for many hands in a row, game after game, enough bad cards to immiserate nearly every sucker at every table on the surface of mother Earth.

Despite the fact we're mired in a global crisis of deep structural origins, a crisis that has no exit for us little types without great upheaval or much quiet misery, our mainstream liberal press still flings hammers at itself and at Wall Street over the hammy Brechtian drama of fall '08. That curtain-raiser still keeps most of the MSM ink spilling over. How to prevent a repeat of Lehman-AIG?! -- As if there was nothing but handwringing to do about today's panoramic policy of deliberate cruelty that only continues the great recession -- this giant stag party thrown for us deepfried OECD jobbler-gobblers, so we won't have the cash or credit to import 3 trillion dollars worth of Asian products over the next few years.

Imagine if the calls for austerity got explained that way. Better we analyze the details of the lot bomb/toxic paper fire-dance. Better we use that dark morality play to alibi the present criminally intentional macro regime of Darth Ohbummer, der Hungerkanzler!

So Larry is leaving the ship in January.

Why announced now?

Could it be to lift at least one sorry incubus off the Donkle's back for election day? Rally the base with, like, hope, of like, a change?

And yet, how nice, anyway: the hog of Harvard Yard is returning to his ivy-twined trough. Who knows, who cares? It's all good -- so long as the Congress can be deadlocked through '12, and the GOP one way or other can be plausibly fingered for the sorry state of affairs.

Our next econ-con czar a czarina? My pick, Laura Tyson, who recently wrote:

"OUR national debate about fiscal policy has become skewed, with far too much focus on the deficit and far too little on unemployment.... By focusing on the wrong things, we are in serious danger of failing to do the right things to help the economy recover from its worst labor market crisis since the Great Depression...The primary cause of the labor market crisis is a collapse in private demand..."

"Clearly, the pace of recovery is far slower than what is needed to restore the millions of jobs that have been lost... by next year, the stimulus will end, and the flip from fiscal support to fiscal contraction could shave one to two percentage points off the growth rate at a time when the unemployment rate is still well above 9 percent. Under these circumstances, the economic case for additional government spending and tax relief is compelling..."

" The federal government should pledge generous financing increases for [unemployment benefits and aid to state governments(*)] through 2011.."

"As long as the economy is operating far below potential, policy makers should do two seemingly contradictory things. First, they should provide additional fiscal support for job creation and growth. And, second, they should enact a credible multiyear plan now to stabilize the ratio of federal debt to gross domestic product gradually as the economy recovers."

-------------------

(*) "Aid to state governments"?!?! Yuck! -- The Editor

This from the daily Yup-it-up bump-and-grind:

"The substantial drop in credit card debt in the United States since early 2009 has been widely attributed to newly frugal consumers. But analysts say that a significant portion of the decline is actually the result of financial institutions writing off billions of dollars in credit card debt as losses."

Those are the choices if a nation wishes to escape a household debt trap; and which did the Ohbummer redcoats choose?

The route more traveled by, of course: plan one, the slow credit butchering fought much like a war against an insurgency, house by house, clearing the balance sheets ruining the little jerk's credit score one by one.

Plan two? We coulda gone that way. It would involve a massive surge in effective demand through an Avuncular fiscal power play, one that pulled us rapidly up and into ball-tight job markets and triggered that ever-to-be-desired rapidly rising nominal wages.

Gonna happen?

No. The corporate redcoats usually stick to plan one, slow nasty and long as it is, 'cause it works better for them, all things considered.

And since we're still living in corporate occupied territory -- the redcoats rule!

"For decades, as productivity goes up, wages stagnate. The profits from increased productivity are siphoned off into the financial sector... In order to maintain the high profits drained by the financial sector, and avoid paying higher wages, one industry after another has moved its production to cheap labor countries. Profitable enterprises shut down as capital goes looking for even higher profit."

Fine, and the piece it's from is fine too, but "how" is the important question: how does the financial sector suck off this value to start the cycle?

The literary left hasn't a clue, and I bet readers here, besides a sifted few, don't either.

Hint: it isn't by high interest rates.

So how's the national pay packet doing? Let's ask a tax guy:

"Measured in 2009 dollars, total wages fell to just above $5.9 trillion, down $215 billion from the previous year. Compared with 2007, when the economy peaked, total wages were down $313 billion or 5 percent in real terms... Every 34th wage earner in America in 2008 went all of 2009 without earning a single dollar... Total wages, median wages, and average wages all declined, but at the very top, salaries grew more than fivefold."

"Since then the base has fared poorly while huge economic gains piled up at the very top."

Yeah, I'd say maybe that played a role. Here's a nice stat: in '09 the top 74 pay earners made as much as the 19 million lowest-paid.

Postwar middle America, God shed his grace on ye; and then came Ronnie.

Owen will probably demur, but I like this tour d' horizon from Doug Henwood. One thing Owen might agree with is putting Carter appointee Tall Paul Volcker (from Teaneck, New Jersey) in the dock:

Paul Volcker came into office[in 1979] declaring that the American standard of living had to decline, and he made it happen by driving up interest rates towards 20% and creating the deepest recession since the 1930s. (We just beat that record, but it took 30 years!)

Needless to say Doug's remarks produced some comedy on my lefty mailing lists. Here, for example, is one dependable defender of the Dems -- let's call him Brunellus:

> Reagan and his minions established many more aspects of
> Reaganism than Volcker's interest rate hike. Even economically,
> Volcker didn't do "supply-side" and deficit hawk cuts of welfare. But
> critical in Reaganism is the whole political, cultural and ideological
> change. Volcker played a relatively small role in the whole of
> Reaganism compared to Reagan.  

------------

* Anybody born later than Chris Marlowe, anyway.

I pounce, I read it with elan and alacrity and... ahem... what's the adage about firearms bared in a melodrama? This gun has gone off, but alas it's pure clown time. You can make out the pops only if you listen really, really hard.

If these guys condescended to us sovereign rubberstamps any more brazenly, we'd have a Loony Toon here on our hands, not a Powerpoint presentation. Check out its opening salvo:

We have a patriotic duty to come together on a plan that will make America better off tomorrow than it is today.

America cannot be great if we go broke.

... to the facetious mock-stentorian stylings of Senator Claghorn.

Does it add up to anything? No; but then if you were tired and it's late and you have miles and miles to go and this looms up ahead in blazing 50's neon:

As tacky as it is -- does it sound inviting to ya?

Job stagnation doesn't mean bottom-line stagnation, it seems. Thus the NYT:

"The nation’s workers may be struggling, but American companies just had their best quarter ever... Since their cyclical low in the fourth quarter of 2008, profits have grown for seven consecutive quarters, at some of the fastest rates in history."

"Economic conditions in the United States may still be sluggish, but many emerging markets like India and China are expanding rapidly."

The coerced affect industry is possibly the most parasitic of all the competitors in the corporate bloodsucking sector. It's definitely the most pathological. The neoliberal Taylorists merely insist on frantic step-up, fatuous metrics and worker burnout by age forty. The imperial crackpots can settle for shredding children with cluster bombs. The nightstick fetishists ask for no more than few canisters of pepper spray and handcuffed victims. The banksters are content with a world economy run for their benefit. The happiness people want you to like it.

The fulsome giddiness and unapologetic emotional blackmail of their pitch would be disturbing no matter what was getting pushed. In the context of the world as it actually exists, it's much worse than disturbing. The insistence on shit-eating grins is as close to violence as one can get without actively assaulting another human being.

As I write, almost a million unemployed have lost their benefits. Could be above two million by the new year:

The elephants are producing a cliffhanger of a particularly melodramatic form this time.Will the folks tumbling off the UE log get a Xmas rescue... somehow? Will these GOP stalwarts suddenly go through a conversion? Buy the Chuck Schooomer sub-million-dollar compromise? Or will Ohbummer knuckle under to the nasty mean Scrooge party extortion and allow a re-up of the entire Baby Bush rich man's tax cuts?

Frankly, why not? Obsessive fantasy tax attacks on the rich are mere moral hygiene for merit-class Holy Joes. Proles, the ever level-headed delightful Esau class, prefer the benefits now to some sanctimonious farce of ritual forced sacrifice at the margin.

Progressive tax revanchism is for the dark side of the merit moon.

Here's Dean Baker making a sober rerun of the high 90's Rubinite-Clintonite macro con, now that we got two more of Bobby's Rangers running the dashboard at the White House:

"Both Daley and Sperling were major actors in the Clinton administration. At the center of the Clinton administration's economic policy was the idea that reducing the budget deficit was the key to boosting the economy."

"If the deficit fell, then the private sector could be counted on to provide the demand to fill the gap created by less demand from the public sector."

"While the private sector did fill the gap in the late '90s, it did so from growth that was driven by a stock bubble. The stock bubble primarily fueled consumption, which hit a record high as a share of the GDP. It also led to somewhat higher investment, although much of this was in hare-brained, Internet start-ups of little or no value.

The stock bubble burst over the years 2000-2002. The resulting recession featured what was at the time the longest period without job growth in the post-World War II era....

Clintonite-era policy made the recovery from the last recession more difficult.... Robert Rubin's high dollar policy led to a massive trade deficit. An overvalued dollar provides a huge subsidy to imports, and effectively imposes a tariff on exports."

"Banks... like a high dollar because it makes them more powerful in an international context; however, it is about the worst imaginable policy from the standpoint of manufacturing workers. The high dollar is the main factor behind the loss of six million manufacturing jobs over the last 13 years. The basic story is simple: it is very hard to compete when your currency gives your competitors a 30 percent cost advantage."

Then there's "the NAFTA-type trade deals", and of course China into the WTO,

"that further depressed the wages of manufacturing workers by... placing them in direct competition with low-paid workers in the developing world..."

BTW here's a tic-like sore point with blue-collar tribune Dean: this was pulled off "while leaving highly paid professionals like doctors and lawyers largely protected..."!

Let us note, the system is coming for the docs, too, Dean. Plausible "final solutions" are mobilizing on the international skill-head front even as i type this.

Of course there's MORE!

"The Clinton economic agenda was.. about setting Wall Street loose... This meant..taking enormous risks with creditors, knowing that the government will come to the rescue if necessary.... This growth path... laid the seeds for the economic wreckage that engulfed the country when the housing bubble finally burst in 2007."

Our man's sum-up:

".. If progressives had devised policies that caused 25 million people to be unemployed or underemployed, cost the economy $4 trillion in lost output and caused millions of people to lose their homes, they and their children and their grandchildren would be exiled from policy circles for the next century.However, for the Clinton crew, it's just a matter of putting on a "pro-growth" hat and going back to work."

In a speech some weeks ago, read before the pro-union Economic Policy Institute, Larry the porcine Merlin gave us an exit sum-up. It's all too obvious that reality is wildly different from his twice-told tale. But don't think doc Summers doesn't know the score; don't think he doesn't know what he's done and not done.

Here's Larry's introductory evaluative criteria, the yardstick and scale he uses to vindicate WH policy:

"It is by what happens to the middle class that our economic policies have to be judged."

"A better life for our citizens [and] Upholding the 250 year American tradition of children whose lives are better than their parents'"

He calls this long haul objective "Keeping our Economy the Envy of the World" and he warns "We need to renew the American economy for a century that will be very different from its predecessor."

Here's the pivot:

"the key lesson that management strategists have distilled for businesses is this: you don't succeed by producing exactly the same thing that other people are producing in the same way just at a lower cost. You succeed, by establishing your own uniqueness and excellence... The United States has led the global economy by building on its unique capacities.

By building on our distinctive strengths, we can continue to lead in the next century.

There is no going back to the past. Technology is accelerating productivity in mass production to the point where even China has seen manufacturing employment decline by more than ten million jobs over the most recent decade for which data is available.

We are moving towards a knowledge and service economy... the world is shrinking... It is a different, a smaller world. What does it mean to adapt to this?"

Now Larry sez it's possible 'cause, 'cause, well, well we done it before so now we just gotta do it some more, only now on a national scale.

Do what exactly? Something he calls "the American North " did in the last century: namely, to prosper

".. even as the southern part of the United States caught up, even as we drew strength in the generation after World War II as Europe and Japan's economies converged towards our own"

Here's the homework for America as assigned by Professor Summers:

"Find ways to prosper as the emerging markets of the world take their place on the global stage."

But the past is just prologue, as the man said. What now should "our" approach be?

Not "to compete with the world on price even if it means striving to win races to the bottom." Nope, that's not for us, not if we want our "middle class" to "prosper". Better yet, no "workers" sacrificing "wages, benefits, and bargaining rights to hold onto their jobs." No slashing of "taxes on businesses even as their profits rise in order to lure them to stay in the United States." No shredding the "social safety nets in the name of self-reliance." Larry thinks "such Social Darwinism was bad morality and bad economics in the 19th century, and it is no better in the 21st."

Nice to see that you've caught up with Charlie Dickens, Larry. Maybe now that you're out of office, and no longer run Harvard, you've had a chance to do some reading?

Okay, Larry, now take us to this better place. Larry is like, so there:

"Consider this: The flatness of the world notwithstanding, by far the largest part of the activities Americans engage in and the goods they buy remain quite local. It is health care and retail services, recreation and education, haircuts and insurance policies, hotels and houses and I could go on."

"Moreover, where we compete with other countries, our strength is collective. Few of us can hope to succeed as individuals in a global economy where any particular task or skill can be purchased at very low prices in much of Asia and beyond. Rather, our strength must come from establishing uniqueness, establishing that which is difficult to replicate, that which comes from more collective action."

"Any idea or machine or even individual capacity can be transplanted. Far harder to transplant, imitate, or emulate are our great institutions – the national laboratories and the national parks and the national highway system, great universities and great cities and great technology clusters, a diverse culture, deep capital markets, and a tremendous ethic.

Where competition is concerned, the lesson for us as a nation is the same as the lesson for business: far better to compete by innovating, leading, and competing on strength, than by standing still, and reducing prices. Let me highlight what I see in this regard as the three essential priorities for the years ahead. "

"President Clinton used to say that in a world where ideas can move, capital can move, a nation's distinctive strength lay in its people. Our biggest failing as a nation over the last 50 years has been with respect to education. We were once the envy of the world; now we struggle to get into the top half of OECD nations.

The Duke of Wellington famously observed that the Battle of Waterloo had been won on the playing fields of Eton, and I would suggest that in this less elitist age, the battle for America's future will be won or lost in its public schools. For too long we have been caught in a sterile debate between those who believe in more accountability and those who see the need for more resources. In truth, no one who has seen the conditions in our urban schools can deny the need for more resources, and no one who believes in incentives can deny the need for more accountability.

Through Race to the Top the Administration has sought to reform elementary and secondary education both by providing resources and by increasing accountability. These kinds of efforts will need to be magnified in the future.

Even as we strengthen elementary and secondary education, we must also expand higher education opportunities. The US used to lead the world in the share of young people who became college graduates. It is no longer in the top ten..."

*Thrusts fingers down throat and vomits*

Onward the chariot rumbles, last seen poring over the high side, screaming "more means tested scholarships, more means tested scholarships"!

Now, however, comes the real Larry hobby-horse stuff. "Unique institutions"! I.e.

"the link between education and... innovation, the other central pillar of economic growth... "

"We have had for a very long time in the United States a distinctive ecology which is the reason we are the leading economy in the world."

Watch as Larry makes myth run uphill:

"On the one hand, we have recognized, venerated, and acted on the observation that it is individualists – the Edisons, the Fords, the Gates and Zuckerbergs – who, with a uniquely anti-bureaucratic temperament, who would not dream of a filing a grant application, who drive an enormous amount of the economy's progress. We have maintained a culture where it is still true today that with all our financial system's failings, and they are many, we are the only country in the world where you can raise your first hundred million without owning a tie if you have a sufficiently good idea. And that is a great strength of our economy."

"At the same time as maintaining a culture that supports the entrepreneur, that salutes the rebel, that allows people to establish themselves as major figures in business without even bothering to complete a college degree – at the same time as having support for the individual, we also recognize that fundamental innovation and progress will not happen without the public sector playing its essential role.

There would be no internet without DARPA. No car industry without highways. No pharmaceutical revolution with the NIH.

Maintaining and increasing our American capacity for innovation thus requires both fundamental support for entrepreneurial innovation and for the key foundations of science and technology.

That's why we have to make it easier to patent a new idea or innovation; make it easier for entrepreneurs and small businesses to raise capital; make it easier for the most promising minds and the most promising entrepreneurs to come to this country from around the world."

Between that and Wall Street's paper towers we will...let's see... insure a broadly prosperous ever materially advanced middle class? Recall Larry's yardstick here?

By devoting our public dollars and might to the support of IP, Inc. outfits we'll raise the golden mean?

This is amazing. How can he expect anyone to fall for this shit, even if conflated with cries for more higher ed. The man knows these world-leading institutions have already internationalized their sources for top earners. From Hollywood to Harvard, it's third-world brains a-go-go. The Zuckerbergs are just the thin end of the wedge.

From fashion to fusion, it's only the globe's best for these top outfits. So how does that trickle down, Larry?

It's a rich text. There's so much more:

"Budget deficits are a tax on our future, unless used to finance productive investments... it is essential that we establish long-run parity between revenues and expenditures."

"Baumol's Disease... In certain areas, rapid productivity growth is possible... but it always has and always will take 8 teachers to teach 96 students for one hour in classes of twelve."

To infuriate MJS, Larry adds "Moynihan's Corollary to Baumol's Disease: there is a tendency in activities in which Baumol's disease is most pronounced to migrate to or be located in the public sector..."

Moral: "That's why Bowles-Simpson so important."

Lovely. Bowles-Simpson! That fucker was DOA. Wonderful to consider how a text delivered in mid-Decemeber, even a text from a world-historical mind like El Puerco's, will pass its sell-by date long before mid-January.

From the prayer tower of Wall Street:

"U.S. multinational corporations, the big brand-name companies that employ a fifth of all American workers, have been hiring abroad while cutting back at home... The companies cut their work forces in the U.S. by 2.9 million during the 2000s while increasing employment overseas by 2.4 million ... That's a big switch from the 1990s, when the MNC's added jobs everywhere: 4.4 million in the U.S. and 2.7 million abroad...

In all, U.S. multinationals employed 21.1 million people at home in 2009 and 10.3 million abroad."

We, as dirty pinko sour-appletons of course must append this fact: the number of domestic jobs -- in particular, manufacturing jobs -- blown up by MNC-fostered products and services coming back at us across our borders from various overseas locations is hardly encompassed by this 2.9 million number. Of course not; why, that number is as uncountable as the angels that sat out the war in Heaven.

SMBIVA's favorite economist, Lump of Larry, had one of his epiphanies and he's touched ground, if only for the moment, in the real world. I doubt he'll stay. There's no money, prestige or power in it. Veneration of the Lump offers much more to ambitious types.

But while he's here, he's made an intelligent observation:

Training programmes or measures to increase work incentives for those with high and low incomes may affect who gets the jobs, but in a demand-constrained economy will not affect the total number of jobs.

A somewhat circuitous repudiation of the Lump, but a repudiation nevertheless.

There's a lot to pick apart.

The dearth of policy options in the Bank of America insolvency is entirely a matter of choice. The liberal capitalist prescription (notional, but whatever) is a forced bankruptcy, wiped out shareholders, haircuts for bondholders, dismissal of the management, forced disgorgement of their ill-gotten gains, reorganization and re-privatization. Now of course that's not going to happen, and it wouldn't fix what's wrong with the system even if it did. But that is a policy option and it's one that would have plenty of popular support.

Warren Buffett as "lender of last resort" is a joke. The banksters received $1.2 trillion from the Fed, on top of the toxic asset creditor bonanza and their fully subsidized looting spree; all at public expense. Buffett is making a huge, immediate profit at no risk. He's not lending. He's cashing in. No wonder he doesn't mind paying a bit more tax. It's a great investment.

I could call this deranged wingnut boilerplate and leave it at that, but it's rare to find a NY Times blog post that draws so many reasonable comments. That's something special. So...

Mulligan, via CEPR, appears to be unfamiliar with the work of Fred Hayek, who was very much in favor of a "comprehensive system of social insurance " and saw no reason why there shouldn't be government interference to ensure such things as limits on working hours.

It is self-evident that if labour-time is reduced to a normal length and, furthermore, labour is no longer performed for someone else, but for myself, and, at the same time, the social contradictions between master and men, etc., being abolished, it acquires a quite different, a free character, it becomes real social labour, and finally the basis of disposable time—the labour of a man who has also disposable time, must be of a much higher quality than that of the beast of burden.*

Hayek also believed that workers deserve "a chance to decide whether the prospects of a particular occupation are sufficient to compensate for the disadvantages connected with it." They don't need to be immiserated until they're compliant. Hayek was opposed to that. Casey Mulligan really needs to read Road to Serfdom.

I typed that with a straight face. Honest, and it's all true too.

Okay, I've had my fun. One thing we do know for sure, as far as dependency goes, is that state protection for banksters does rob millions of Peters for the benefit of a handful of insatiable Pauls. The higher their compensation, the more handouts they demand. The more wealth they control, the less incentive they have to engage in productive activity. This is Econ 101!

*Some other guy, not Hayek.

Dr. Jeffrey Sachs, economist, wants to help Nigeria.

http://ecologicalheadstand.blogspot.com/2012/02/oh-what-tangled-web.html

If you've been frustrated by references to the Lump of Labor canard and the Lump of Labor fallacy, Sandwichman has posted a brief history.

Of further interest,

[T]he Sandwichman just finished a first draft of "The 'Lump of Labor' Hoax: Evidence, Inference and the Blur of Bamboozlement," which probes far beyond the platitudes of The Economist into the plagiarism, forgery, incomprehension and evasion that has characterized the fallacy claim since its inception.

http://ecologicalheadstand.blogspot.com/2012/02/boilerplate-b-buttonwood-keep-on.html

Another evil of the robot is the ill-will it begets between the masters and the workmen: their whole lives seem to be a constant effort, on the one hand, to see how much can be pressed out of the reluctant peasant; and, on the other, how little can be done to satisfy the terms of agreement, and escape punishment. Mutual injury becomes a mutual profit; suspicion and ill-will are the natural results

If you have any desire to see economists excoriated, and you should, have I got a blog for you. Stroll on over to Robert Vienneau's Thoughts On Economics.