Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Month: June 2010 Page 1 of 2

How bailing out the rich created the Depression

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On June 29, 2010

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The other day, Krugman wrote that we’re in the beginning of a new Long Depression.

Forgive me, but he’s wrong: this isn’t the beginning, it’s been going on for about two years now.

During a Depression there are periods where GDP grows.  There are periods where jobs grow.  It’s just that the periods of job growth don’t last.

There were opportunities to end the Depression before it really dug in its heels.  The last one was at the beginning of Obama’s term.  Kicking out of the Depression required two things.

The first was an adequate stimulus. This didn’t just mean a large enough stimulus, though the one offered was not large enough, it meant one properly constructed.  Tax cuts for ordinary Americans are not stimulative, because folks like banks who have pricing power (you must have a credit card, loans, etc…) will simply take that money away by raising rates and fees.  And it doesn’t mean short term shovel-projects, it means making commitments which will last for years so that businesses, when making plans know that hiring is worth it because those employees will be needed for more than a year or so.

Likewise the US has some serious problems with the structure of the American economy.  The cornerstone of the stimulus had to be reducing US dependence on oil because as long as the US economy is so dependent on oil, full fledged growth is simply not possible.  The days of $20/barrel oil aren’t coming back, and every time the price of oil gets too high, it puts great pressure on the US economy (and every other modern nation.)

The second thing which had to be done is to force the banks to actually eat their losses.  Wipe out the shareholders and let the bondholders take their losses.  All the money plunged into the banks (and it was much more than the TARP money, which was the smallest part of it) was wasted.  Banks are not lending, and restoring lending is what the bailouts were sold as doing.  Moreover they have raised borrowing rates and fees on those who need credit most, soaking up money which otherwise would be helping the economy rather than simply being sopped up to plug holes in bank balance sheets.

The trillions of dollars spent attempting to bail out the banks weren’t just wasted, by keeping zombie banks alive they made the situation worse.  Further by not wiping out the wealth of banks and those rich folks who made foolish investments which wrecked the world economy, they created a political problem: to whit, as Durbin said—the banks still own Congress.  (Along with the military industrial complex, pharma and various other monied interests).  Because monied interests still own Congress, they have made it impossible to fix America’s structural problems.

Six percent of GDP could have been saved by doing health care reform properly, but that didn’t happen.  The current “financial reform” bill under consideration is so week that I don’t know of one credible outside analyst who thinks it is sufficient to make sure there isn’t another financial crash, and on and on.

Historically speaking periods of high concentration of wealth only end when the rich lose it in a huge crash.  They are never ended by, say, high marginal taxation—high marginal taxation only occurs after the losses have occurred as those who saw the run-up do their best to make sure it can’t happen again.

That lasts until the generations who saw the mania and crash start dying off and losing power.  So you start seeing really serious decreases in marginal tax rates and slashing of financial regulations when the generations who lived through not just the Great Depression but the Roaring twenties were no longer around.

The cliche that a crisis is an opportunity is, sadly, true.  But it is only an opportunity if you take it.  What politicians, and this includes Obama and Geithner, as well as Bush, Paulson and Bernanke, did, was they protected the rich from their own folly, and made  ordinary people pay for it.  The wealth of the rich has mostly recovered, corporate profits have recovered, but for ordinary people the economy still sucks and there is no reason to believe it isn’t about to start sucking even more.

The financial elites think that what they can do is create an economy with a permanently high unemployment rate and that Americans (and Europeans, for that matter) will put up with it, because what choice do they have?

We are going to have another kick at this can, because the legislation being put in place is not sufficient to prevent another financial crisis.  This is a Depression, and it is not going to go away.

Next time I hope we will consider doing the right thing.  Make those who crash the system take their losses and break the power of the rich over government.

Be very clear, it’s you, or it’s them.  You break their power, or they will continue to push your wages towards parity with China.

And they are very determined it’s not going to be them.

Are you determined it’s not going to be you?

What Actually Happened at the G20 Protests

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On June 28, 2010

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There’s been a lot of crying about “thugs and anarchists” in Toronto.  I live about 4 blocks from where some of the vandalism occurred, though I wasn’t there at the time.

As best I can tell, what happened is that for about an hour, the Black Bloc protesters clearly and visibly prepared for action, with both the police and other, non-violent protesters able to see they were doing so. The number of Black Bloc vandals seems to have been between 50 to 100, certainly not more than 200.  (The police had 20,000 men.)

The police actually withdrew, leaving behind police cars for the Black Block to torch.  Which they then did.   The Black Bloc then proceeded up Yonge street (the main north/south street in downtown Toronto), vandalizing as they went, and eventually many headed over to Queen’s Park, the Provincial capital.  Two hours after the first violence, the police finally take action, ensuring that there are plenty of videos of police cars burning and vandalism that would not have occurred if they had taken action earlier.

According to the police, rather than confront a maximum of 200 protesters, they withdrew behind the barrier around the G20 meetings and let them vandalize downtown Toronto for 2 hours.

At the end of the day the people who matter never even saw any protests and the 1 billion dollar police presence and suspension of civil liberties was “justified” by vandalism and burning police cars.

Simply put, the police decided that they couldn’t spare say 2,000 out of their 20,000 men to stop 200 vandals.  This was a deliberate decision to allow downtown to be vandalized.

I leave it as an exercise for readers to decide if this was a matter of incompetence, or if it was a deliberate strategy.  And if it was deliberate strategy, just what they were trying to accomplish with their strategy.

Of course, along the way Canadian Civil Liberties observers were arrested as well, and protesters were not allowed to see lawyers.

I am ashamed to be Canadian today, and I am ashamed of my governments, at all levels.

(A video of a clearly peaceful protest nonetheless attacked, after the jump)

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G20 Confers on how to make you pay for the rich’s blunders

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On June 27, 2010

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It’s really, really simple.  The rich crashed the world economy.  They were bailed out, with their wealth having almost entirely recovered and corporate profits likewise have pretty much recovered.  Now, at the G10, the world’s leaders are discussing how to make regular people pay for the rich’s follies.

The world’s developed countries have built extensive public health systems, promised citizens a paycheck for life and erected a welter of protections around some industries and types of jobs. Now their leaders are conferring over a singular dilemma: how to take some of it back without undermining the economies they are trying to sustain.

You notice that somehow, no one is talking about going back to 1950’s levels of progressive taxation, with a top rate around 90%. No, what they’re talking about is making the middle class and the poor pay for the sins of the rich.

The key thing here to understand is this: there is no crisis for the rich or corporations any more, therefore as far as they are concerned, there is no crisis.

Dick Durbin once said, “”And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place.”

It’s not just the banks, of course, they are just one of the apex predators of the current court system, along with the Pentagon, pharma and various other predators.  The systems is simple enough—they take care of Congress, staffers and everyone else who matters, and those people take care of them.  Even if a congress member is not reelected, if they went down doing the bidding of monied interests they are taken care of.  If they don’t do the bidding of their masters, on the other hand, their post-Congress career will be much less pleasant.

At the G20, today, what is being discussed is how to take away what’s left of your economic future.  Ordinary Americans didn’t see a pay raise in the last decade. Not only won’t they see one this decade, they’ll take a loss, and now even the European experiment in taking care of the population is on the chopping board.

This is your future being decided, and no, they don’t think you have a say in it.

The Housing Bubble Was Based On Fraud

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On June 26, 2010

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Once again:

Recent filings by two Federal Home Loan Banks — in San Francisco and Seattle — offer an intriguing way to clear this high hurdle. Lawyers representing the banks, which bought mortgage securities, combed through the loan pools looking for discrepancies between actual loan characteristics and how they were pitched to investors.

You may not be shocked to learn that the analysis found significant differences between what the Home Loan Banks were told about these securities and what they were sold.

The rate of discrepancies in these pools is surprising. The lawsuits contend that half the loans were inaccurately described in disclosure materials filed with the Securities and Exchange Commission.

Half of them were fraudulent.

Half

There would have been no housing bubble without widespread fraud.  None.

Virtually every major bank executive in the US should be indicted for fraud.  The fact that there aren’t even serious investigations, let alone indictments, tells you everything you need to know.  Everyone in the system knows it was all fraud, they knew it at the time, and that is exactly why there are no real investigations.

The Court Eunuch Standard of Blogging Exposed by Dave Weigel’s Resignation

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On June 26, 2010

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As many may be aware, Dave Weigel, a reporter for the Washington Post resigned after emails to a private listserv called Journolist were publicly released.  These are the things he wrote which cost him his job:

•”This would be a vastly better world to live in if Matt Drudge decided to handle his emotional problems more responsibly, and set himself on fire.”

•”Follow-up to one hell of a day: Apparently, the Washington Examiner thought it would be fun to write up an item about my dancing at the wedding of Megan McArdle and Peter Suderman. Said item included the name and job of my girlfriend, who was not even there — nor in DC at all.”

•”I’d politely encourage everyone to think twice about rewarding the Examiner with any traffic or links for a while. I know the temptation is high to follow up hot hot Byron York scoops, but please resist it.”

•”It’s all very amusing to me. Two hundred screaming Ron Paul fanatics couldn’t get their man into the Fox News New Hampshire GOP debate, but Fox News is pumping around the clock to get Paultard Tea Party people on TV.”

I’ve spent some time reading around the web, and the main criticism of Weigel seems to be that he wasn’t impartial: not only didn’t he like the right wing folks he was covering, he despised them.

This is exactly what is wrong with US journalism.  The responsibility of reporters is not to be “impartial”, their responsibility is to tell the truth.  Should reporters have been unmoved by the fact that that America was torturing people?  Should that not bother them as people?  S Should they be unmoved by the fact that Bush sold a war based on lies, and millions of people were displaced, killed and injured as a result?

Is that we want?  Sociopaths who have no personal opinions?

Weigel isn’t being attacked because he wrote anything in his public work which wasn’t true, because he didn’t write any such thing.  As Friedersdorf writes, his public work was of the highest quality and that should be the only thing which matters.

I’ll defend to death, however, the proposition that the work of a journalist should be the only standard by which he is measured. Mr. Weigel’s work is superb: he breaks news, his foremost loyalty is to the facts, and he reliably treats fairly even folks with whom he very much disagrees…

…Firing Dave Weigel incentivizes more digging into the personal opinions of journalists, and validates the idea that they should be judged on the basis of those opinions, rather than the content of their work. What’s next? E-mails sent to a few people and leaked? Opinions offered at a bar over beers and surreptitiously recorded? Can I reiterate how glad I am to have moved away from Washington DC? (You should hear what I say about De Beers in private!)

If you taped everyone’s conversations, and intercepted all their emails, the very few people who could not be hung by their own words, who have never said anything that doesn’t sound bad, are exactly the people you don’t want as reporters or bloggers.

People who are either so self-controlled they never say anything intemperate, or so passionless they have no beliefs that get them riled up are the sort of folks who have nothing useful to say: the sort of folks who don’t challenge a President who wants to attack a country which never attacked the US, has nothing to do with 9/11 and has no weapons of mass destruction.

This standard, the “court eunuch” standard, is exactly why you have a press corp that is worthless for holding those in power responsible.  People with no strong beliefs, or whose ambition or fear is so great they never express those standards strongly, are the sort of people who know that bucking a President isn’t good for your career, and so who cares of hundreds of thousands of people die because you’re a gutless careerist?

The bloody obviousness of most good predictions

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On June 23, 2010

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Back when I was in university, one day I found myself in a first year sociology class with a 150 odd other students.  The Prof, a wonderful teacher who went by Dr. Anderson, and to whose door I once tacked a list of 15 intellectual disagreements, asked the class a simple question.

“How many of you treat men and women exactly the same?  Put up your hands if you do.”

Everyone’s hands went up.  Everyone except mine, that is.

She then asked how many people didn’t treat men and women the same.

I put up my hand.

I spent the next 15 minutes being villified by my classmates, called sexist and even a homophobe (I’ve never figured out how we got to homophobia.)  I was livid, and by the end of it incredulous.

After the class I talked to her.  First I asked if she believed that all my classmates treated men and women the same.  She scoffed at the idea.  Then I asked “are they stupid, or are they all liars?”

She declined to speculate.

It’s a question which has consumed me since.  Are people who are unable to see the blindingly obvious stupid or are they liars?  Of course, there are more possible answers, and the simplest is just that people can make themselves believe whatever they want, and that belief is often real.  Sometimes it isn’t, sometimes they’re liars, which we normally call being a hypocrite.

And the smarter someone is the easier it is to convince themselves of whatever they want to believe.  Being really smart means always being able to come up with a reason why you’re right.

Most of my analytical and predictive successes have been of the “this is bloody obvious” variety.  A commenter said the other day that predicting that Dems would take losses in 2010 was an obvious prediction, but in early 2009 most of the rest of the progressive blogosphere was busy telling themselves and everyone else that the Republicans were such a disaster that at worst losses would be mild and Dems might even make gains.

Likewise, the housing bubble was obvious way out.  All you had to do was look at a chart.  It didn’t take being a genius economist (which I’m not).  It didn’t take fancy math.  All it took was the ability to say “hey, that looks exactly like a bubble, and all bubbles burst”.  All you had to do was listen for the fools saying “it’s different this time”.

It’s almost never different this time.  Human nature does not change.  Things which didn’t work in the past are unlikely to work now.  Incompetent people, which is to say people with a track record of screwing up, are not likely to suddenly become competent.  And if you can’t imagine what it’s like to be someone you despise, you can’t predict what they’ll do.

Most of my predictions are pretty close to “virtually everyone comes to regret trying to occupy Afghanistan” or “if Obama fucks up the economy and pisses off the base, and he’s going to do both because he just fucked up the stimulus on both ideological and practical axes, Democrats won’t do well in 2010”.  And most of my analysis is of the order of “people treat men and women differently.”

The sad thing is, apparently the vast majority of pundits can’t figure out either of these things.  Or if they can, they’re too compromised, and too chicken-hearted, to dare say them.

Analysis isn’t complicated.  It’s not even hard.

Well, it’s not hard as long as you don’t give a fuck if, like every mainstream pundit who opposed the Iraq war due to either realizing there were no WMD or because they knew it would turn into a clusterfuck, you’re ok with losing your job or being demoted, while those who get it wrong are promoted and rewarded.

As long as you don’t mind, like my younger self, being told you’re a bad person for saying the truth that others don’t want to hear.

Perhaps the strange thing is that anyone is fool enough to even try.  Perhaps my classmates were the wise ones and I the fool.

Helping “Terrorists” Engage In Anything Non-Terroristic Can Get You Locked up for 15 Years

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On June 21, 2010

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You can’t make up bad decisions like this.  Note that this is a 6-3 decision, not a close one:

The law barring material support was first adopted in 1996 and strengthened by the USA Patriot Act adopted by Congress right after the September 11 attacks. It was amended again in 2004.

The law bars knowingly providing any service, training, expert advice or assistance to any foreign organization designated by the U.S. State Department as terrorist.

The law, which carries a penalty of up to 15 years in prison, does not require any proof the defendant intended to further any act of terrorism or violence by the foreign group.

Nor does it require any proof that the organization is a terrorist organization, since a State Department declaration is an administrative act.

The Humanitarian Law Project in Los Angeles had previously provided human rights advocacy training to the Kurdistan Workers Party, known as the PKK, and the main Kurdish political party in Turkey.

The Humanitarian Law group and others sued in an effort to renew support for what they described as lawful, nonviolent activities overseas.

“The Supreme Court has ruled that human rights advocates, providing training and assistance in the nonviolent resolution of disputes, can be prosecuted as terrorists,” said Georgetown University law professor David Cole, who argued the case.

“In the name of fighting terrorism, the court has said that the First Amendment permits Congress to make it a crime to work for peace and human rights. That is wrong,” Cole said.

Got that?  Trying to help an organization do non violent things will get you locked up.

More to the point, as noted earlier, this is clearly a violation of the right of association and the right for free speech.  You get locked up based on who you associate with, not what you’ve actually done, and the decision who you can associate with is a purely administrative act at the sole discretion of the President of the United States.  Any organization the State Department declares a terrorist organization you cannot associate with, period.

This is of a piece with other policies which allow the President to assassinate an American citizen without a trial, to lock people up indefinitely without a trial and so on.  When they President does deign to allow a trial evidence obtained from torture is admissable, and the if the President doesn’t want the accused to know who their accuser is or to see the evidence against them, so be it.

This is, I should emphasize, just a continuation of a trend, a punctuation mark by the Supreme Court in a long line of decisions which have gutted the first amendment, the right to face one’s accuser, the right to due process and so on.  If I were to point to a very bad law that many folks supported who shouldn’t have it would be the RICO statutes, which likewise made simple association a crime.  Since it was “bad people” doing the association (the Mafia) folks didn’t care.

Since it’s bad people, “terrorists”, this time, too many people won’t care.

But if the rights of those you despise aren’t protected, than neither are yours.

Catching Up with the Obama Dilemma

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On June 21, 2010

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I haven’t had much to say the last bit, because the rest of the blogosphere and even mainstream pundits are catching up to where I was a while ago.  Let’s see where we are, and where we’re going.

To recap:

1) the stimulus bill was neither big enough, nor well enough put together to do the job.  However many jobs it “saved and created” they weren’t enough.

2) Obama is not in the least interested in doing progressive things unless great pain is inflicted on him, personally.  This is most likely because he is not a progressive.

3) On civil liberties, Obama is probably actually worse than Bush.  Yes, that’s quite an accomplishment, but there you have it.

4) He’s an incompetent leader, who over-centralizes decision making, refuses to delegate, then makes decisions slowly and badly.

5) His courtiers are not the problem (although they’re almost all scum), he is the problem: he chose them.

6) The spring job recovery is already petered out, and around the world virtually every major economy other than China is turning to austerity, including the US.  US cities and States are in a horrible state, gross income is down, and bank lending is still not recovering.  The US economy has become more oligopolistic and more sclerotic than ever before, with the major firms who run the economy making their money by squeezing little people who have nowhere to turn.  Thanks to Bernanke, Paulson, Geither, Bush and Obama’s bailouts, and refusal to engage in meaningful restructuring of the economy or the financial industry, their profits have recovered.  That means, to them, that the crisis is over.

7) Election results in the midterms are looking really bad.  I was warning about this in beginning of 2009, because if Obama’s economic policies didn’t work, and if he continually alienated the base, it was going to cause problems.  The only thing Obama and Congressional Dems have going for them is how bloody awful the Republicans are.  But being the lesser evil isn’t always enough.  Liberals and progressives can’t vote Republican, but they can refuse to donate, not volunteer, and in many cases, not vote.

Going forward Obama is faced with a choice.  He won’t do enough to make the base happy, because he genuinely doesn’t believe in any progressive ideals.  What he can do, however, is goose the economy. He has most of the TARP slush fund to play with.  He could dump it into the economy post-haste in order to rescue the mid-terms.

Whether to do so is a dilemma for him.  On the one hand standard methodologies are still showing that the Dems (barely) hold onto the House, and keep the Senate.  But it isn’t much of a stretch for the Republicans to win the House.

If they do so, Obama’s presidency is effectively over.  The Republicans will Clintonize him, tying him down in a blizzard of subpoenas and fake scandals.  He will get nothing done for the next two years, and will probably lose re-election.

On the other hand, if he spends the money in 2010, it won’t be there in 2012, and after all, Dems might squeeze through without it.

Choices, choices…

I’d feel sorry for him, but he’s made clear that he isn’t a Democratic president, and he isn’t a liberal or a progressive, so I see no point in wasting any angst on personal problems he himself created.  All of this was totally predictable, and was, in fact predicted by multiple people.

Obama never made a sincere effort to fix the economy, to end the wars, to stop civil liberties abuses or to revamp the financial industry.

As he reaps, so he sows.  It is unfortunate Americans have to suffer even more than he does (he’ll be taken care of after he leaves the Presidency, never fear), but such is life.  Maybe it’s time to stop voting for people who say they love Reagan and that they don’t believe in Democratic solutions to problems.

Coming up…

We’re still in a Depression

and

Why it is never in Congress’s interests to look after Americans

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