30.6.10

letters from from the brink of depression

joe
NY


A good headline could have be "Market makers are now worried that they may have stolen too much money."
There are no parallels between the response to this financial crisis and Roosevelt's in the 30's. The responses are diametrically opposed. In 2008, governments did not flood the world with cheap money. They did not protect your grandmother's savings account. They flooded wealthy, cynical CDS counterparties with money, people who had bet against the system, against the ability of American homeowners to pay off their loans. They flooded private investment banks that functioned like massive, predatory hedge funds, making markets for highly leveraged, reckless risk management and tax evasion instruments with cheap money! 2008 was capture at it's most egregious and the greatest heist in the history of the world.
In 2008, wealthy market participants were bailed out and the average worker, savings account holder and homeowner was abandoned. And that grossly unjust approach still drives governmental economic policy. There is a choice right now between austerity measures and haircuts for bondholders. Look what's happening.
When the housing bubble burst, the government could have rescued every single underwater homeowner in the U.S. and it would have cost far less than what has been spent and the effects of that spending would have directly benefited the real economy instead of only offering an insultingly false hope of trickle down. But doing so, really preventing foreclosures, would have spread losses to wealthy bankers, hedge funds and other speculative owners of fraudulently rated mortgage backed securities, CDO's and their spawn. Governments chose to protect hedge funds instead of homeowners. It's as simple and as outrageous as that. They protected AIG and Goldman instead of spending money to implement a jobs program like Roosevelt did. Bernanke, by keeping interest rates low for the banks, recently admitted he was throwing the unemployed under the bus.
The hypocrisy and irony of a Goldman Sachs economist saying that not extending unemployment benefits was "an increasingly important risk to growth" is stunning.


Rance Spergl
Chicago


I don't care what the Austrian School of Economic Thought says. I may be hearing the death-rattle of capitalism but I just can't say for sure.

What I do know is that MY RENT IS DUE TOMORROW AND THE GOVERNMENT NEEDS TO EXTEND MY UNEMPLOYMENT BENEFITS. Obama knew we'd need it so he put it his plan. Out-of-work Americans are at record highs. WHAT DOES THE CONGRESS FIND SO DIFFICULT TO UNDERSTAND? WE NEED TO EAT.

Even if the gods of capitalism created jobs tomorrow, the payroll wouldn't be met for weeks. And I still don't have health care.

BUY A CLUE PEOPLE!

ed g
Warwick, NY


Class warfare wasn't created by Marx. All he did was analyze class structure and its conflicts and contradictions.

He said many complicated things but a few were simple enough:

1) The rich have no bounds in their greed.
2) Surplus labor means people will fight for terribly paying jobs, without security or rights to maintain a livable wage.
3) The rich will work the workers to the bone and then discard them for fatter sheep.
4) When people are not organized to identify and fight for their economic, social and political rights, they will eventually lose them and lose them to a point where they have nothing to lose but those chains.
5) As its conclusion, the people will need to rise in revolt to get their human right back and to have peace, food and land; all stolen from them by capitalists under the guise of economic freedom associated with capitalism.

The first step required by the capitalists was to discredit Marx and the analysis and then proceed to Step 1) above while avoiding as long as possible Step 5).

Any thoughts about which Step we are at now?

Incredulous
West of the Mississippi


What no one wants to mention is that most of our national wealth is going into wars. We've spent about $150 billion a year for about ten years, and what has it gotten us? Nothing but death, debt, and more enemies. If we put that money in to schools, education, infrastructure and other valuable expenditures (ones that pay back--you know, "investments") where would we be now? We have the slowest and least extensive broadband network in the world--Korea is the fastest at-- (we're behind such world powers as Latvia, Lithuania, Andorra, Aland Islands, Romania, Bulgaria ...), our bridges are falling down, our schools are falling apart. If we invested in our own country--education, healthcare (and real healthcare, not what we have now), infrastructure, all the important things, we'd be so prosperous that we could help everyone else, and they would want our help, rather than seeing it as an intrusion (we do intrude on most everyone whether they want it or not).

Stimulus spending is not the same as credit card debt. That's what people have been doing. Borrowing money to buy garbage, like televisions and cars and junk that has no long-term value. Stimulus spending, properly targeted, is investment money. Our country is like a business that has never reinvested its profits. Instead of taking monies that we make and improving the physical plant, we just try to squeeze more and more life out of crumbling infrastructure, to the point that it's now so far gone that it's not in need of repair or maintenance (the time for that has long passed), but we're talking about major rebuilding, which is much more expensive than maintenance. If you don't take care of your car on a regular basis, it will eventually require very expensive repairs. If you don't upgrade your business, stay current on equipment and technology, retrain your workforce, you fall behind and eventually someone else who's smarter will run you out of business. You have to take care of the thing you've built. In this country, we try to do everything on the cheap, so that someone can fatten his wallet at everyone else's expense. Take BP for example ... they drilled that rig on the cheap, and now look who is paying for it. Their example is a reflection of how we run this country. Do everything as cheaply as you can get away with ... you can bet that BP isn't hurting that much ... even the loss of a few dozen billions to government to take care of the damage to the gulf and its residence is a drop in the bucket of their profits over the long-term.

Face it ... we live in a socialist society ... that's what SOCIETY is ... it has to be, otherwise, we're all living in caves and hauling our own water from the local river, and polluting it with our waste. In a complex society, it takes big government to take care of big needs ... it's not so simple as the Republicans would have it ... they have only one idea for running anything ... cut taxes. But what happens when all the services that are fueled by those tax dollars go away? Read Jose Saramago's novel "Blindness" ... you'll find out.


Garrett Clay
San Francisco Bay


No mention of the two biggest elephants in our room- defense spending and the trade policies that have driven wealth creation (jobs) out of the country.

"Hello McFly!" Until we solve those problems, and even our "best and brightest" don't see them yet, we'll remain in a depression.

And one other hot tip- never expect any entity to provide an honest measure of their performance- anyone who believes government statistics on unemployment please get in touch with me, I've got a bridge you might want to buy.

Sideline
Hong Kong


Many people complain about jobs being stolen by China, but that is a misconception. China did not force corporations to shift their productions to its land, although they do give initial tax incentives to foreign corporations to set up factories as well as low cost land. But this is common also in SE Asia as well as S. America. The government only uses the media to create a China syndrome making them look as if they are the victim.

China did not provide cheap labor, the wages were set by foreign investors, not China. As a matter of fact, China have implemented laws to protect local workers from being abused by foreign corporations.

China also has very straightforward business taxes. Any money changing hands between two companies, a business tax is levied regardless of whether profit is made. The argument behind it is that there are many accounting methods to show low or no profits, so there is a business tax which is built into every transaction, and every corporation has to pay. So if one company receives a million yuan, its bank will automatically debit 5.5% from the receiving entity's account. Taxes on profits are charges as much as 30%+. The Chinese government is quite pragmatic: if you don't make money, don't do the business. Many foreign corporations cannot escape from this tax.

Why can the U.S. learn from others, instead of discrediting them?

Perhaps the immediate solution for the U.S. is to do the same: build in a business tax as a cost, better yet, global transactions are subject to such taxes, just like an expats living and working abroad having tax liability with the IRS.

The fact is: it is not only jobs are leaving the U.S., but also corporate taxes as well as profits that is held overseas. There are billions of dollars being re-invested overseas because the multi-nationals do not repatriate the profits back to the U.S., creating a monetary liquidity crunch at home. These profits can be re-invested in the U.S. whereby jobs will be naturally created. Corporate foreign holdings should be encouraged, if not enforced, to be repatriated to ease the illiquid monetary system.

The U.S. is entering a turning point, as most working Americans have been led to commit their forward income against current assets like mortgages and credit card debts. But Accounting 101 tells us that every asset entry is offset by a liability. The middle class work force is shrinking from aging and so will be the federal tax income that backs its treasury products.

Who is going to say Moody or Standard & Poor is not going to downgrade the 30-year notes? They did with Greece and a couple other European countries already.

Gloomy, yes indeed!

2 comments:

sarah caplan, los angeles said...

It's a terrific idea! Last time it caused about 70 million people to be murdered in world war II. It was an economic war, don't believe that any nation went to war to save the Jews. Germany and Japan wanted economic power and in the end the Marshall plan gave it to them. Engalnd still has an entire section of its population that naver worked from leaving school after Maggie Thatcher put her fiscal conservatism to work. She created an underclass that operates if at all in a black economy. I don't know about where you live but in my neighborhood crime is on the rise-and soon I expect to be held up at gunpoint as the redistribution of wealth continues. But I rest easy knowing that hedge fund managers are doing better than ever and if they pay taxes they only have to pay at 15% rate.

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