A Grand Theory of Our Present Dilemma

For the last month, I have been gripped by the gnawing sensation that all of the conventional wisdom about our current economic crisis is wrong. I think we are facing a crisis of capitalism, not just a periodic bout of market failure. What was most startling about yesterday’s GDP drop, was that consumer spending literally stopped. We have been riding in a vehicle turbo-charged with leverage and we just hit a brick wall.

“The drop in spending was so fast, so rapid, that production could not be cut fast enough,” said Nigel Gault, chief domestic economist at IHS Global Insight. “That is happening now, and the contraction in the current quarter, as a result, will probably exceed 5 percent.”

As I have said before, we are entering an Interregnum. Now the reason there was so much uproar about the Wall Street Bonuses this week is that the bankers didn’t realize this. The election of Barack Obama reintroduced the notion of a social contract. This is a very old notion as Karl Polanyi notes in his landmark book, The Great Transformation.

Take the case of a tribal society. The individual’s economic interest is rarely paramount, for the community keeps all its members from starving unless it is itself borne down by catastrophe, in which case interests are again threatened collectively, not individually. The maintenance of social ties on the other hand is crucial. First, because by disregarding the accepted code of honor, or generosity, the individual cuts himself off from the community and becomes an outcast; second, because in the long run, all social obligations are reciprocal, and their fulfillment serves also the individual’s give-and-take interests best.

Of course these notions of community and honor have long since vanished from the canyons of Wall Street, but that does not mean they have vanished from our society. But this leads me to the question of the crisis of capitalism. What I want to uncover is if there is some inherent flaw with the system that caused the Wall Street traders to push it to a breaking point?

There are very few things that Adam Smith and Karl Marx agreed upon–but one was the “tendancy of the rate of profit to fall”. This term is so well known by economists that they use TRPF as the acronym. Here’s Adam Smith from The Wealth of Nations .

It may be laid down as a maxim, that wherever a great deal can be made by the use of money, a great deal will commonly be given for the use of it; and that wherever little can be made by it, less will commonly be given for it. According, therefore, as the usual market rate of interest varies in any country, we may be assured that the ordinary profits of stock must vary with it, must sink as it sinks, and rise as it rises. The progress of interest, therefore, may lead us to form some notion of the progress of profit.

And here is a description of Marx’s TRPF theory.

Even as investment in constant capital (factories, technology,etc) increases productivity (i.e. the margin of surplus labor relative to regular labor, and thus of surplus value relative to variable capital), it reduces profits (i.e. the margin of surplus value relative to total capital). The capitalist then responds by investing more in raising productivity, which in turn reduces profits further, and so on and so forth, in a vicious cycle of diminishing returns.

This tendency, in concert with the other dialectically interrelated crisis factors developed in the course of Marx’s overall critique of capital, eventually leads to a catastrophic breakdown in the capital cycle.

So what do the theories of these two philosophers from the 18th and 19th Centuries have to do with our current crisis? When I arrived on Wall Street as a Merger and Acquisitions VP at Merrill Lynch in 1984, the age of the corporate raider and the leveraged buyout was just beginning. Up to that point debt to equity ratios in the S&P 500 companies were fairly conservative and the average investor was happy to collect dividends and hope for overall share appreciation (chart below)

s-p-dividends

But men like Henry Kravis, Boone Pickens and Ron Perlman were not satisfied with these steady returns and Mike Milken, the junk bond king showed how with a lot of leverage they could “juice” those 4% returns into the mid 20% level. So in 1985 when Kravis’ KKR bought the Beatrice Companies (Tropicana, Samsonite) for $6.1 billion, most of the money used was junk bond debt. They then sold off individual brands, retired the debt and made a 30:1 return on their investment. Now everyone wanted in on the leverage game. Pension funds, college endowments and private investors battled their way to get in on these deals. The new normal was that money should earn 10%+ per annum. Like Adam Smith said, this was unsustainable.

Next, this mentality began to affect the CFO’s of even the most successful business. Joseph Schumpter in his classic text, Capitalism, Socialism, and Democracy talks about the “vanishing of investment opportunity”. In 2003 even after the tech crash, Microsoft had cash holdings of $49 billion. But did they invest it in some new breakthrough technology? No–they used the money to buy back their own shares! So Bill Gates, our genius inventor, felt the investment opportunities had vanished and so he bought back shares to keep his stock price up. This same strategy was deployed in boardrooms all over the country, but on Wall Street, big hitters desperate for “Juiced returns” demanded even more leveraged product. And so the genius quants in the basement invented new derivatives to which 30:1 and 40:1 leverage could be applied.

So here’s my conclusion. If modern market capitalism can only be sustained through the “juice” of such leverage, then we are in a crisis. Just as the average consumer has now realized that her home equity is no longer an ATM and that carrying 10 credit cards is bad for your health, the whole economy is going to have to return to being content with a reasonable return on investment. Because for years our GDP was”juiced” in the same way that hedge fund returns were hyped, I imagine that total output will continue to drop for many quarters until we reach a sustainable level of debt to equity ratios on both corporate and personal balance sheets. And that is why groups like The Club for Growth, originally financed by Mike Milken and his ilk are so up in arms over the Obama election that they are running this contest.

comrade-large

Here are the proposals from the Club for Growth on how to solve our crisis.

Making the Bush tax cuts permanent
Death tax repeal
Cutting and limiting government spending
Social Security reform with personal retirement accounts
Expanding free trade
Legal reform to end abusive lawsuits
Replacing the current tax code
School choice
Regulatory reform and deregulation

It somehow escapes the pea-brains of these dinosaurs, that these are the very policies that have brought us to this crisis. So when a New York Times reporter has the temerity to question a Wall Street bank lawyer on Obama’s anger at his bonus, we get this.

“I think President Obama painted everyone with a broad stroke,” said Brian McCaffrey, 55, a Wall Street lawyer who was on his way to see a client. “The way we pay our taxes is bonuses. The only way that we’ll get any of our bailout money back is from taxes on bonuses. I think bonuses should be looked at on a case by case basis, or you turn into a socialist.”

This logic is so twisted it’s comical. If we don’t pay Mr. McCaffrey his bonus, then he won’t pay his taxes, so we won’t have the money to recover all the cash we put in his bank. OMG! And of course if we complain–We’re socialists.

It seems to me we are going to have a really interesting conversation about the nature of capitalism in the next few months. Regular readers of this blog know that I am not a fan of centralization and so classic notions of Socialism have no appeal for me. However the basic question of TRPF, vanishing investment opportunity and need for outsized returns depending on leverage juice remain. One of the questions we may find our selves wrestling with is the allocation of resources in a mixed economy. What if the states and cities take on the task of investing in our basic productivity infrastructure–roads, trains, broadband, electricity grid (solar, wind and geothermal) thus freeing private capital to provide the “value added” services where higher returns can be generated? Any investor in Google knows that their returns are not juiced by leverage. But on the other hand, Google could not succeed without a commodity broadband infrastucture. There is no reason that government run infrastructure should need the kinds of high returns that Wall Street demands.

All of these are questions I’m going to try to grapple with in the next few months. I don’t pretend to have the answers. What I do know is that the conventional wisdom is wrong and name calling from the The Club for Growth and Rush Limbaugh is not going to help us find a solution.

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0 Responses to A Grand Theory of Our Present Dilemma

  1. Valerie Curl says:

    Interesting blog post – and very interesting questions.

    I remember well the mad M&A rush of the 80s after the KKR deals, particularly for RJ Reynolds, and what would now be considered “creative destruction.” Unfortunately, the thousands (millions) of people who lost their jobs and pensions didn’t feel so great about it.

    I remember, too, the ideology emanating executive suites, particularly on Wall St, that “business has no social obligation to any community, group, or country. The only obligation of business is to make as much money as possible for the stockholders.”

    It was about this time, too, that Wall St. pushed for quarterly reports. Each quarter needed to show ever increasing profits for stockholders. Never mind, a company’s need to reinvest, just pay out dividends and increase the stock price. A myriad of responsible CEOs derided the quarterly reporting, but they were marginalized–and financial guys essentially took over the running of companies rather than people trained in manufacturing or production.

    Oh, and don’t forget the lawsuit brought by a large Pension Fund that sued a corporation (I don’t remember which one anymore) because profits, i.e. dividends, weren’t large enough. The suit claimed investors weren’t getting enough of the money the company was making – too much was being reinvested in the company.

    The U.S. as a whole has a long way to go to right itself.

    The good news is that the majority, apparently, in Davos right now think the “bad bank” idea is pretty good. How we’ll pay for it is anybody’s guess. The bad news is that beyond the Stimulus Plan, the Senate is considering proposing/inacting two more multi-billion dollar plans.

    I keep seeing clouds of $$$$ signs dissipating while our deficit and national debt grow as far as the eye can see. I also see the country’s holding our national debt (Treasuries) rebelling. China is already angry and is warning the U.S. to get its act together quickly.

  2. Valerie Curl says:

    Interesting blog post – and very interesting questions.

    I remember well the mad M&A rush of the 80s after the KKR deals, particularly for RJ Reynolds, and what would now be considered “creative destruction.” Unfortunately, the thousands (millions) of people who lost their jobs and pensions didn’t feel so great about it.

    I remember, too, the ideology emanating executive suites, particularly on Wall St, that “business has no social obligation to any community, group, or country. The only obligation of business is to make as much money as possible for the stockholders.”

    It was about this time, too, that Wall St. pushed for quarterly reports. Each quarter needed to show ever increasing profits for stockholders. Never mind, a company’s need to reinvest, just pay out dividends and increase the stock price. A myriad of responsible CEOs derided the quarterly reporting, but they were marginalized–and financial guys essentially took over the running of companies rather than people trained in manufacturing or production.

    Oh, and don’t forget the lawsuit brought by a large Pension Fund that sued a corporation (I don’t remember which one anymore) because profits, i.e. dividends, weren’t large enough. The suit claimed investors weren’t getting enough of the money the company was making – too much was being reinvested in the company.

    The U.S. as a whole has a long way to go to right itself.

    The good news is that the majority, apparently, in Davos right now think the “bad bank” idea is pretty good. How we’ll pay for it is anybody’s guess. The bad news is that beyond the Stimulus Plan, the Senate is considering proposing/inacting two more multi-billion dollar plans.

    I keep seeing clouds of $$$$ signs dissipating while our deficit and national debt grow as far as the eye can see. I also see the country’s holding our national debt (Treasuries) rebelling. China is already angry and is warning the U.S. to get its act together quickly.

  3. Valerie Curl says:

    Interesting blog post – and very interesting questions.

    I remember well the mad M&A rush of the 80s after the KKR deals, particularly for RJ Reynolds, and what would now be considered “creative destruction.” Unfortunately, the thousands (millions) of people who lost their jobs and pensions didn’t feel so great about it.

    I remember, too, the ideology emanating executive suites, particularly on Wall St, that “business has no social obligation to any community, group, or country. The only obligation of business is to make as much money as possible for the stockholders.”

    It was about this time, too, that Wall St. pushed for quarterly reports. Each quarter needed to show ever increasing profits for stockholders. Never mind, a company’s need to reinvest, just pay out dividends and increase the stock price. A myriad of responsible CEOs derided the quarterly reporting, but they were marginalized–and financial guys essentially took over the running of companies rather than people trained in manufacturing or production.

    Oh, and don’t forget the lawsuit brought by a large Pension Fund that sued a corporation (I don’t remember which one anymore) because profits, i.e. dividends, weren’t large enough. The suit claimed investors weren’t getting enough of the money the company was making – too much was being reinvested in the company.

    The U.S. as a whole has a long way to go to right itself.

    The good news is that the majority, apparently, in Davos right now think the “bad bank” idea is pretty good. How we’ll pay for it is anybody’s guess. The bad news is that beyond the Stimulus Plan, the Senate is considering proposing/inacting two more multi-billion dollar plans.

    I keep seeing clouds of $$$$ signs dissipating while our deficit and national debt grow as far as the eye can see. I also see the country’s holding our national debt (Treasuries) rebelling. China is already angry and is warning the U.S. to get its act together quickly.

  4. Valerie Curl says:

    Oops. Sorry about the double posting.

  5. Valerie Curl says:

    Oops. Sorry about the double posting.

  6. Valerie Curl says:

    Oops. Sorry about the double posting.

  7. lakelady says:

    the inherent flaw? Greed.

  8. lakelady says:

    the inherent flaw? Greed.

  9. jt.odochartaigh says:

    I am looking forward to your next posts on this subject. It seems to me we are balanced on the point of a knife with forces like Limbaugh and the Comrade Club urging and pushing us with all their might toward a kind of feudalism. They are proponents of, as lakelady says, greed. No human system is immune to its effect and no human system will survive its grip.

  10. jt.odochartaigh says:

    I am looking forward to your next posts on this subject. It seems to me we are balanced on the point of a knife with forces like Limbaugh and the Comrade Club urging and pushing us with all their might toward a kind of feudalism. They are proponents of, as lakelady says, greed. No human system is immune to its effect and no human system will survive its grip.

  11. Fentex says:

    I don’t think it was capitalism per se that has failed. The idea of freedom to invest and expand your capital remains valid.

    The bad risks taken with other poeples money and demand that society structure itself to enable such behaviour isn’t capitalism – it’s an oligarchy trying to suck everyones wealth into it’s own pocket by controlling the writing and regulation of law.

    The solution isn’t to abandon capitalism but to disempower the oligarchs.

  12. Fentex says:

    I don’t think it was capitalism per se that has failed. The idea of freedom to invest and expand your capital remains valid.

    The bad risks taken with other poeples money and demand that society structure itself to enable such behaviour isn’t capitalism – it’s an oligarchy trying to suck everyones wealth into it’s own pocket by controlling the writing and regulation of law.

    The solution isn’t to abandon capitalism but to disempower the oligarchs.

  13. doug says:

    Interesting but wrong–total sales in December were down 1.4% excluding gas according to the Commerce dept–sure the mix changed to value and luxury goods were way off–but consumers still had to reach into their wallets to the tune of 98.6% of 2007 spending—yes unemployment is way up–but it is off the 10-11% peak Reagan faced in 82/83—we may get there–but recessions and business cycles are a part of capitalisim–maybe Jon you are drinking to much of the academic socalist kool aid– prehaps you would prefer living in Russia?–how about China?–maybe Cuba?—

  14. doug says:

    Interesting but wrong–total sales in December were down 1.4% excluding gas according to the Commerce dept–sure the mix changed to value and luxury goods were way off–but consumers still had to reach into their wallets to the tune of 98.6% of 2007 spending—yes unemployment is way up–but it is off the 10-11% peak Reagan faced in 82/83—we may get there–but recessions and business cycles are a part of capitalisim–maybe Jon you are drinking to much of the academic socalist kool aid– prehaps you would prefer living in Russia?–how about China?–maybe Cuba?—

  15. doug says:

    Interesting but wrong–total sales in December were down 1.4% excluding gas according to the Commerce dept–sure the mix changed to value and luxury goods were way off–but consumers still had to reach into their wallets to the tune of 98.6% of 2007 spending—yes unemployment is way up–but it is off the 10-11% peak Reagan faced in 82/83—we may get there–but recessions and business cycles are a part of capitalisim–maybe Jon you are drinking to much of the academic socalist kool aid– prehaps you would prefer living in Russia?–how about China?–maybe Cuba?—

  16. Dan says:

    doug, I think it’s clear that Jon didn’t mean that all consumer spending didn’t literally stop. Our economy is founded on unceasing growth, and when contraction begins, the system collapses. A drop of 1.4% in consumer spending is a disaster, at least in our current economic system.

    “perhaps you would prefer living in Russia?–how aobut China?–maybe Cuba?–”

    For that silly and, I hope, facetious remark, you get my nod as the Rush Limbaugh Impersonation of the Week Award.

  17. Dan says:

    doug, I think it’s clear that Jon didn’t mean that all consumer spending didn’t literally stop. Our economy is founded on unceasing growth, and when contraction begins, the system collapses. A drop of 1.4% in consumer spending is a disaster, at least in our current economic system.

    “perhaps you would prefer living in Russia?–how aobut China?–maybe Cuba?–”

    For that silly and, I hope, facetious remark, you get my nod as the Rush Limbaugh Impersonation of the Week Award.

  18. Dan says:

    doug, I think it’s clear that Jon didn’t mean that all consumer spending didn’t literally stop. Our economy is founded on unceasing growth, and when contraction begins, the system collapses. A drop of 1.4% in consumer spending is a disaster, at least in our current economic system.

    “perhaps you would prefer living in Russia?–how aobut China?–maybe Cuba?–”

    For that silly and, I hope, facetious remark, you get my nod as the Rush Limbaugh Impersonation of the Week Award.

  19. Dan says:

    ok and I get the nod for Mangled Grammar of the Week.

  20. Dan says:

    ok and I get the nod for Mangled Grammar of the Week.

  21. Dan says:

    ok and I get the nod for Mangled Grammar of the Week.

  22. Dan says:

    “What if the states and cities take on the task of investing in our basic productivity infrastructure–roads, trains, broadband, electricity grid (solar, wind and geothermal) thus freeing private capital to provide the “value added” services where higher returns can be generated?”

    Jon, you said that you weren’t interested in a centralized economy, and so I had to wonder what you have in mind; this is apparently it.

    And where do cities and states get their funding for such projects? What city, in your entire lifetime, has not, even in the best of economic times, been operating continuously on the edge of financial insolvency?

    What state capital in a populous state does not have endless power struggles with its large cities? (California most of all, but Illinois is right up there.)

    So I’m not sure how that’s going to work, unless Uncle Sucker will forever hand over large amounts of federal money with no strings to the states.

  23. Dan says:

    “What if the states and cities take on the task of investing in our basic productivity infrastructure–roads, trains, broadband, electricity grid (solar, wind and geothermal) thus freeing private capital to provide the “value added” services where higher returns can be generated?”

    Jon, you said that you weren’t interested in a centralized economy, and so I had to wonder what you have in mind; this is apparently it.

    And where do cities and states get their funding for such projects? What city, in your entire lifetime, has not, even in the best of economic times, been operating continuously on the edge of financial insolvency?

    What state capital in a populous state does not have endless power struggles with its large cities? (California most of all, but Illinois is right up there.)

    So I’m not sure how that’s going to work, unless Uncle Sucker will forever hand over large amounts of federal money with no strings to the states.

  24. Dan says:

    “What if the states and cities take on the task of investing in our basic productivity infrastructure–roads, trains, broadband, electricity grid (solar, wind and geothermal) thus freeing private capital to provide the “value added” services where higher returns can be generated?”

    Jon, you said that you weren’t interested in a centralized economy, and so I had to wonder what you have in mind; this is apparently it.

    And where do cities and states get their funding for such projects? What city, in your entire lifetime, has not, even in the best of economic times, been operating continuously on the edge of financial insolvency?

    What state capital in a populous state does not have endless power struggles with its large cities? (California most of all, but Illinois is right up there.)

    So I’m not sure how that’s going to work, unless Uncle Sucker will forever hand over large amounts of federal money with no strings to the states.

  25. Jon Taplin says:

    Doug- Consumer spending fell almost 6% in the quarter. What I’d like you to answer is the question posed about our desperate need to juice returns with leverage–our other addiction.

  26. Jon Taplin says:

    Doug- Consumer spending fell almost 6% in the quarter. What I’d like you to answer is the question posed about our desperate need to juice returns with leverage–our other addiction.

  27. Jon Taplin says:

    Lakelady-The conventional wisdom is that the flaw was “greed” by a few bad apples. But the problem is so widespread (the amount of undeclared bad debt) that one would have to conclude some sort of mass greed hysteria had taken over a basically innocent populace of bankers.

    I don’t buy it.

  28. Jon Taplin says:

    Lakelady-The conventional wisdom is that the flaw was “greed” by a few bad apples. But the problem is so widespread (the amount of undeclared bad debt) that one would have to conclude some sort of mass greed hysteria had taken over a basically innocent populace of bankers.

    I don’t buy it.

  29. Jon Taplin says:

    Lakelady-The conventional wisdom is that the flaw was “greed” by a few bad apples. But the problem is so widespread (the amount of undeclared bad debt) that one would have to conclude some sort of mass greed hysteria had taken over a basically innocent populace of bankers.

    I don’t buy it.

  30. Interesting analysis. At some point companies’ interest shifted from producing products that in turn generated a profit to “simply” making money. Corporations have been putting the needs of their shareholders before the needs of their customers since at least the 1980s (the roots of the current mess IMO). Thing is, they never stopped to consider that if the customers disappear they have no way of pleasing the stockholders. Well, they’re being forced to consider it now. Capitalism probably would work reasonably well if we were just dealing with markets for products and services, supply and demand, etc. It’s all the add-on academic constructs (hedging, leveraging, etc.) designed not to make and sell a product, but to make money out of an idea that seem to be causing the problems. Talk about vaporware!

  31. Interesting analysis. At some point companies’ interest shifted from producing products that in turn generated a profit to “simply” making money. Corporations have been putting the needs of their shareholders before the needs of their customers since at least the 1980s (the roots of the current mess IMO). Thing is, they never stopped to consider that if the customers disappear they have no way of pleasing the stockholders. Well, they’re being forced to consider it now. Capitalism probably would work reasonably well if we were just dealing with markets for products and services, supply and demand, etc. It’s all the add-on academic constructs (hedging, leveraging, etc.) designed not to make and sell a product, but to make money out of an idea that seem to be causing the problems. Talk about vaporware!

  32. Interesting analysis. At some point companies’ interest shifted from producing products that in turn generated a profit to “simply” making money. Corporations have been putting the needs of their shareholders before the needs of their customers since at least the 1980s (the roots of the current mess IMO). Thing is, they never stopped to consider that if the customers disappear they have no way of pleasing the stockholders. Well, they’re being forced to consider it now. Capitalism probably would work reasonably well if we were just dealing with markets for products and services, supply and demand, etc. It’s all the add-on academic constructs (hedging, leveraging, etc.) designed not to make and sell a product, but to make money out of an idea that seem to be causing the problems. Talk about vaporware!

  33. Chris Weekly says:

    @Fentex – Right on.
    @ Amber – yep.
    @Doug – LOL
    @JT – Thank you. Please keep it coming.

  34. Chris Weekly says:

    @Fentex – Right on.
    @ Amber – yep.
    @Doug – LOL
    @JT – Thank you. Please keep it coming.

  35. Chris Weekly says:

    @Fentex – Right on.
    @ Amber – yep.
    @Doug – LOL
    @JT – Thank you. Please keep it coming.

  36. Rick Turner says:

    I think that the real problem is that it shifted not to “shareholders first” but to “board of directors friends, the executives first”. And they needed such huge fake profit margins to pull the wool over the eyes of the shareholders. If you can fake a 20% return, skim of half of it in bonuses, compensation, stock options, etc., and still fool the stockholders into thinking that they’re making 10%, you’ve got it made…for a few years. Then the piper must be paid…and the piper stopped playing his tune in the latter half of 2008. The piper noticed that suddenly there were DRM and copyright problems with fake money making, and the whole culture of corrupt and counterfeit capitalism is grinding to a halt…hurting a lot of more or less innocent people in the stoppage.

    If you can steal just a little bit of money from a whole lot of people, you can do it for a long time before people notice or get up their dander to do something about it. If you could scam every citizen of the US for a buck, nobody would give a shit and you’d be a multi-millionaire. Multiply that by a few hundred or a few thousand times, and that’s what has happened, only we just noticed it…and we’re not happy campers.

  37. Rick Turner says:

    I think that the real problem is that it shifted not to “shareholders first” but to “board of directors friends, the executives first”. And they needed such huge fake profit margins to pull the wool over the eyes of the shareholders. If you can fake a 20% return, skim of half of it in bonuses, compensation, stock options, etc., and still fool the stockholders into thinking that they’re making 10%, you’ve got it made…for a few years. Then the piper must be paid…and the piper stopped playing his tune in the latter half of 2008. The piper noticed that suddenly there were DRM and copyright problems with fake money making, and the whole culture of corrupt and counterfeit capitalism is grinding to a halt…hurting a lot of more or less innocent people in the stoppage.

    If you can steal just a little bit of money from a whole lot of people, you can do it for a long time before people notice or get up their dander to do something about it. If you could scam every citizen of the US for a buck, nobody would give a shit and you’d be a multi-millionaire. Multiply that by a few hundred or a few thousand times, and that’s what has happened, only we just noticed it…and we’re not happy campers.

  38. Rick Turner says:

    I think that the real problem is that it shifted not to “shareholders first” but to “board of directors friends, the executives first”. And they needed such huge fake profit margins to pull the wool over the eyes of the shareholders. If you can fake a 20% return, skim of half of it in bonuses, compensation, stock options, etc., and still fool the stockholders into thinking that they’re making 10%, you’ve got it made…for a few years. Then the piper must be paid…and the piper stopped playing his tune in the latter half of 2008. The piper noticed that suddenly there were DRM and copyright problems with fake money making, and the whole culture of corrupt and counterfeit capitalism is grinding to a halt…hurting a lot of more or less innocent people in the stoppage.

    If you can steal just a little bit of money from a whole lot of people, you can do it for a long time before people notice or get up their dander to do something about it. If you could scam every citizen of the US for a buck, nobody would give a shit and you’d be a multi-millionaire. Multiply that by a few hundred or a few thousand times, and that’s what has happened, only we just noticed it…and we’re not happy campers.

  39. JTMcPhee says:

    Finally, we start to get closer to the heart of things. On the beam, as it were.
    Wasn’t it some guy named Sartre who penned or maybe typed something called “No Exit”?
    http://www.sparknotes.com/lit/noexit/summary.html
    What’s missing is, as mentioned, a DECENT social contract. We have the one that people like Gingrich and Milken and Madoff wrote, what the lawyers call a “contract of adhesion.” A Contract ON America, or at least an offer the rest of us were not able to refuse. Those of who us who are dumb and slow and not astute and greedy enough to play big People’s “Monopoly,” who just worked hard on keeping the Real Economy going, who lived in the same house and went to the same church and sent our kids to the public school down the street and resisted the seductions of consumption, drove older efficient cars, trusted “financial advisers” who I guess were suckered into the same dead-end behavior as the Bubble Economy People – Those plain old people who abided by the OLD social contract are the ones who will be grinding away at the jobs in the businesses that produce Real Wealth, and will with their ever-increasing tax burden, generate the bricks and mortar on which that the next Bubble will start its outrageous and tenuous growth.
    The thing we need to keep in mind is that all the folks who have swooped and soared on their Speculation Bubbles know a simple truth: that for them, there are no consequences. Until science figures out how to keep the telomeres in order and the Rich Guys can afford to extend their “investing” lives for a couple of hundred years, making the Kleptocracy the permanent world structure, these people know they only live a bit more than three score and ten years. And have faith that what happens after that is either the Big Nothingness, or some form of Universal Grace where the Almighty kisses them on both cheeks and says “There, there, it’s all right now,” and swings wide the Pearly Gates. And because there are no consequences for people who can write the laws regulations and policies and then say their conduct and activities were “not illegal” and “not indictable” and “consistent with the Rules of Professional Ethics,” they get to accumulate money and power and like Mike Milken, KEEP a few billion or few hundred million to ensure their comfort.
    Mr. Taplin, I think you have it pretty much exactly right. Humans have become a plague species, with the advent of “civilization” and agriculture that allows accumulation of food stocks beyond subsistence needs, making inevitable the ascendancy of kings and priests and ignorant armies clashing by night, and how our hereditary kleptocratic elite. We are at a point where it’s not only up or down for our puny 401ks, which were nicely designed to feed the system you described with yet more Real Economy wealth, but maybe for our species and a whole bunch of others.
    The Wealthy, they only have to fight a holding or rear-guard action, even as the planet gets ready to vomit us humans off into oblivion for sickening her so, to get away with what they have conspired, actively or tacitly, to do to the rest of us. And continue enjoying their pleasures, up there on the top deck of the World Ship or on the shores of their private islands, living as top predators up in the upper stories of the jungle, while the rest of us beetles and annelids aerate the soil, digest the shit and leavings they drop, and turn it back into nutrients (along with our rotting carcases) to keep feeding the strangler figs that have replaced the old-growth hardwoods. Acid oceans, a planetary fever, shortness of breath, toxemia, tumors sprouting everywhere (isn’t Dubai just LOVELY in the spring, dahling, all those cute little theme islands mounded up out of now-dead marine habitat.) They will eventually die as individuals, but if and/or when they go down as a class, it will be in a grand
    Ragnarok

    with all of us sucked and suckered down into the same pit with them.

    McCaffrey and the Club for Growth are snipers keeping us distracted from the rest of the holding action, some of it camouflaged as stuff like the Emergency Economic Stabilization Act of 2008, HR 1424, that pulled-pork sandwich of a “law” that gives the cover of “legality” to an enormous theft of Real Wealth from us and many future generations.

    As to what is to be done, my bets are on small communities, “communes” of “commune-ists,” if you will, who would at least live together in a way that institutionalizes the Golden Rule crap, all that Hippie stuff from the time before Haight-Ashbury became a place where the hairy guys wore big knives on their belts and the gals did that thing that Shel Silverman noticed, that old Playboy cartoon where the Flower Princess says, “oh no, Mr. Silverstein, I give you my body because I LOVE you, and you give me the $50 because you love ME.” Where the group has what used to be called “the wisdom of the village,” and enough skills to grow their food and keep their livestock and learn how to beat rusting fenders into plowshares.

    The only stuff that grows at the kind of rates the Wealthy demand is aggressive cancer cells and pathogenic bacteria colonies. Both of which usually end up killing the organism they live off of.

    And to think that all of this “order” we see around us is built of atoms of the heavier elements that were born from the belly of an exploding star.

  40. JTMcPhee says:

    Finally, we start to get closer to the heart of things. On the beam, as it were.
    Wasn’t it some guy named Sartre who penned or maybe typed something called “No Exit”?
    http://www.sparknotes.com/lit/noexit/summary.html
    What’s missing is, as mentioned, a DECENT social contract. We have the one that people like Gingrich and Milken and Madoff wrote, what the lawyers call a “contract of adhesion.” A Contract ON America, or at least an offer the rest of us were not able to refuse. Those of who us who are dumb and slow and not astute and greedy enough to play big People’s “Monopoly,” who just worked hard on keeping the Real Economy going, who lived in the same house and went to the same church and sent our kids to the public school down the street and resisted the seductions of consumption, drove older efficient cars, trusted “financial advisers” who I guess were suckered into the same dead-end behavior as the Bubble Economy People – Those plain old people who abided by the OLD social contract are the ones who will be grinding away at the jobs in the businesses that produce Real Wealth, and will with their ever-increasing tax burden, generate the bricks and mortar on which that the next Bubble will start its outrageous and tenuous growth.
    The thing we need to keep in mind is that all the folks who have swooped and soared on their Speculation Bubbles know a simple truth: that for them, there are no consequences. Until science figures out how to keep the telomeres in order and the Rich Guys can afford to extend their “investing” lives for a couple of hundred years, making the Kleptocracy the permanent world structure, these people know they only live a bit more than three score and ten years. And have faith that what happens after that is either the Big Nothingness, or some form of Universal Grace where the Almighty kisses them on both cheeks and says “There, there, it’s all right now,” and swings wide the Pearly Gates. And because there are no consequences for people who can write the laws regulations and policies and then say their conduct and activities were “not illegal” and “not indictable” and “consistent with the Rules of Professional Ethics,” they get to accumulate money and power and like Mike Milken, KEEP a few billion or few hundred million to ensure their comfort.
    Mr. Taplin, I think you have it pretty much exactly right. Humans have become a plague species, with the advent of “civilization” and agriculture that allows accumulation of food stocks beyond subsistence needs, making inevitable the ascendancy of kings and priests and ignorant armies clashing by night, and how our hereditary kleptocratic elite. We are at a point where it’s not only up or down for our puny 401ks, which were nicely designed to feed the system you described with yet more Real Economy wealth, but maybe for our species and a whole bunch of others.
    The Wealthy, they only have to fight a holding or rear-guard action, even as the planet gets ready to vomit us humans off into oblivion for sickening her so, to get away with what they have conspired, actively or tacitly, to do to the rest of us. And continue enjoying their pleasures, up there on the top deck of the World Ship or on the shores of their private islands, living as top predators up in the upper stories of the jungle, while the rest of us beetles and annelids aerate the soil, digest the shit and leavings they drop, and turn it back into nutrients (along with our rotting carcases) to keep feeding the strangler figs that have replaced the old-growth hardwoods. Acid oceans, a planetary fever, shortness of breath, toxemia, tumors sprouting everywhere (isn’t Dubai just LOVELY in the spring, dahling, all those cute little theme islands mounded up out of now-dead marine habitat.) They will eventually die as individuals, but if and/or when they go down as a class, it will be in a grand
    Ragnarok

    with all of us sucked and suckered down into the same pit with them.

    McCaffrey and the Club for Growth are snipers keeping us distracted from the rest of the holding action, some of it camouflaged as stuff like the Emergency Economic Stabilization Act of 2008, HR 1424, that pulled-pork sandwich of a “law” that gives the cover of “legality” to an enormous theft of Real Wealth from us and many future generations.

    As to what is to be done, my bets are on small communities, “communes” of “commune-ists,” if you will, who would at least live together in a way that institutionalizes the Golden Rule crap, all that Hippie stuff from the time before Haight-Ashbury became a place where the hairy guys wore big knives on their belts and the gals did that thing that Shel Silverman noticed, that old Playboy cartoon where the Flower Princess says, “oh no, Mr. Silverstein, I give you my body because I LOVE you, and you give me the $50 because you love ME.” Where the group has what used to be called “the wisdom of the village,” and enough skills to grow their food and keep their livestock and learn how to beat rusting fenders into plowshares.

    The only stuff that grows at the kind of rates the Wealthy demand is aggressive cancer cells and pathogenic bacteria colonies. Both of which usually end up killing the organism they live off of.

    And to think that all of this “order” we see around us is built of atoms of the heavier elements that were born from the belly of an exploding star.

  41. Fentex says:

    For a humorous take on the slide of coroprate fortunes this video feeds stocks price slides into a music composing machine to see hwat the sound like…

    A bit like the heroes famous software in “Dirk Gently’s Holistic Detective Agency”.

  42. Fentex says:

    For a humorous take on the slide of coroprate fortunes this video feeds stocks price slides into a music composing machine to see hwat the sound like…

    A bit like the heroes famous software in “Dirk Gently’s Holistic Detective Agency”.

  43. Fentex says:

    For a humorous take on the slide of coroprate fortunes this video feeds stocks price slides into a music composing machine to see hwat the sound like…

    A bit like the heroes famous software in “Dirk Gently’s Holistic Detective Agency”.

  44. Davaudian says:

    The Milken, Boesky, Keating crowd of the past, has just turned into the Madoffs of today. It’s pretty normal for these creeps to keep score in their toxic manner. That in and of itself shouldn’t shake the foundation of capitalism but should show us an age old flaw in human nature.
    There’s been a perfect storm here of real estate bubbles, a really bad president starting wars and running deficits, and a nice money making business cycle that has turned. Now it’s time to flat line for a while. Anybody that has done well is looking at a great time to buy almost anything if you have the cash. That doesn’t mean you must buy, but things are surely cheaper than they were a year ago. Therefore, investors that are on the sidelines will return as soon as the light turns green.

    Doug is right…try living in Cuba with no streetlights and stand in line for your coffee and meat.
    Jon hopefully you won’t blame W anymore for the tsunami or tend to side with academia just to get an ‘atta boy or a whataguy while on campus when you really do have a real handle on our situation. Forget the stooges in D.C. as being enlightened enough to part the waters. Plus we have Rick Turner…just ask Rick!

  45. Davaudian says:

    The Milken, Boesky, Keating crowd of the past, has just turned into the Madoffs of today. It’s pretty normal for these creeps to keep score in their toxic manner. That in and of itself shouldn’t shake the foundation of capitalism but should show us an age old flaw in human nature.
    There’s been a perfect storm here of real estate bubbles, a really bad president starting wars and running deficits, and a nice money making business cycle that has turned. Now it’s time to flat line for a while. Anybody that has done well is looking at a great time to buy almost anything if you have the cash. That doesn’t mean you must buy, but things are surely cheaper than they were a year ago. Therefore, investors that are on the sidelines will return as soon as the light turns green.

    Doug is right…try living in Cuba with no streetlights and stand in line for your coffee and meat.
    Jon hopefully you won’t blame W anymore for the tsunami or tend to side with academia just to get an ‘atta boy or a whataguy while on campus when you really do have a real handle on our situation. Forget the stooges in D.C. as being enlightened enough to part the waters. Plus we have Rick Turner…just ask Rick!

  46. Davaudian says:

    The Milken, Boesky, Keating crowd of the past, has just turned into the Madoffs of today. It’s pretty normal for these creeps to keep score in their toxic manner. That in and of itself shouldn’t shake the foundation of capitalism but should show us an age old flaw in human nature.
    There’s been a perfect storm here of real estate bubbles, a really bad president starting wars and running deficits, and a nice money making business cycle that has turned. Now it’s time to flat line for a while. Anybody that has done well is looking at a great time to buy almost anything if you have the cash. That doesn’t mean you must buy, but things are surely cheaper than they were a year ago. Therefore, investors that are on the sidelines will return as soon as the light turns green.

    Doug is right…try living in Cuba with no streetlights and stand in line for your coffee and meat.
    Jon hopefully you won’t blame W anymore for the tsunami or tend to side with academia just to get an ‘atta boy or a whataguy while on campus when you really do have a real handle on our situation. Forget the stooges in D.C. as being enlightened enough to part the waters. Plus we have Rick Turner…just ask Rick!

  47. rhbee says:

    So JTM,

    In your metaphor, the rich or the need to be rich, is the cancerous growth we now have no cure for. Can’t laugh away the pain. Can’t smoke our way through the after-treament. We have finally found the big C and it is us, Pogo. See Jon, it isn’t just the wall-streeters or the bankers or the earmarking politicos, it is all of those millions of middle class live off the equitiers, clip those coupon, wannbe millionaires and more. It is the damn school system that wastes its energy trying to come up with a scheme that will teach everyone everything. It is the damn religionists that think, still think, this is somehow their “God’s” plan. It is a culture created by movies and tv and advertising, actually those are really all the same thing, that creates a constant stomach rumble to have way more than is enough. It is a world full of people at the top of their own personal pyramid that can’t think of what to do or where to go next. A world of people who apparently never really thought about how to live life once you’ve got it made. Well, we have got it made America, now what?

    Jobs – that’s what. Screw all this rhetoric about which side voted for what stimulus package. There plenty that is broke about our country and the world for us all to work on. So give us jobs that are meaningful and screw the bankers who won’t invest in anything but their own stock holders.

    Whew, that was fun.

  48. rhbee says:

    So JTM,

    In your metaphor, the rich or the need to be rich, is the cancerous growth we now have no cure for. Can’t laugh away the pain. Can’t smoke our way through the after-treament. We have finally found the big C and it is us, Pogo. See Jon, it isn’t just the wall-streeters or the bankers or the earmarking politicos, it is all of those millions of middle class live off the equitiers, clip those coupon, wannbe millionaires and more. It is the damn school system that wastes its energy trying to come up with a scheme that will teach everyone everything. It is the damn religionists that think, still think, this is somehow their “God’s” plan. It is a culture created by movies and tv and advertising, actually those are really all the same thing, that creates a constant stomach rumble to have way more than is enough. It is a world full of people at the top of their own personal pyramid that can’t think of what to do or where to go next. A world of people who apparently never really thought about how to live life once you’ve got it made. Well, we have got it made America, now what?

    Jobs – that’s what. Screw all this rhetoric about which side voted for what stimulus package. There plenty that is broke about our country and the world for us all to work on. So give us jobs that are meaningful and screw the bankers who won’t invest in anything but their own stock holders.

    Whew, that was fun.

  49. rhbee says:

    So JTM,

    In your metaphor, the rich or the need to be rich, is the cancerous growth we now have no cure for. Can’t laugh away the pain. Can’t smoke our way through the after-treament. We have finally found the big C and it is us, Pogo. See Jon, it isn’t just the wall-streeters or the bankers or the earmarking politicos, it is all of those millions of middle class live off the equitiers, clip those coupon, wannbe millionaires and more. It is the damn school system that wastes its energy trying to come up with a scheme that will teach everyone everything. It is the damn religionists that think, still think, this is somehow their “God’s” plan. It is a culture created by movies and tv and advertising, actually those are really all the same thing, that creates a constant stomach rumble to have way more than is enough. It is a world full of people at the top of their own personal pyramid that can’t think of what to do or where to go next. A world of people who apparently never really thought about how to live life once you’ve got it made. Well, we have got it made America, now what?

    Jobs – that’s what. Screw all this rhetoric about which side voted for what stimulus package. There plenty that is broke about our country and the world for us all to work on. So give us jobs that are meaningful and screw the bankers who won’t invest in anything but their own stock holders.

    Whew, that was fun.

  50. Davaudian says:

    P.S. and we have JTMcPhee…telomeres..wow.

  51. Davaudian says:

    P.S. and we have JTMcPhee…telomeres..wow.

  52. Davaudian says:

    P.S. and we have JTMcPhee…telomeres..wow.

  53. Seth says:

    There’s an old joke that every generation thinks it invented sex. Well, it’s much the same with debt. Every generation discovers that gearing up with debt feels amazing … while the market is going up. Then they discover that what was so awesome on the way up, turns out to be rather more like ‘shock and awe’-some on the way back down to … and then right on into the ground.

    Jon, you’re right that we’re in an interregnum. Major financial implosions frequently do precipitate political avalanches, occasionally quite severe ones. The French Revolution, the English Civil War, the rise of the Nazis, the New Deal. They come in all shapes and sizes. Tough to tell what form our present crisis will take.

    As to the ‘need’ for leverage in recent years, a couple of observations. The “savings glut” thesis adopted by establishment economists — the idea that China and other developing nations were just too darn careful with their money — was the flip side of an “investment drought” here in the US. There has been very little “capital deepening” right here at home, because so much of the corporate earnings available for investment was being generated abroad through offshored divisions and virtual supply chains. There were tax advantages to keeping the money abroad and reinvesting it there (not to mention the labor arbitrage). What came back to our shores was the prudent savings of developing nations who had been through a frightening series of financial crises in ’97 and swore they’d be prepared next time.

    Because nobody was investing in the US, and China et al. were binging on Treasuries and (to a lesser extent Agencies) the cost of borrowing long stayed down even after Greenspan started raising short rates (the “conundrum”). With cheap money for housing “investment” but much less investment in innovative uses for American labor, we’ve been stagnating.

    Absent innovation, pretty much any economy will tend toward a sort of ancient Egyptian steady-state in which a strict caste system rationalized by authoritarian religion regulates every aspect of human lives. Talk about TRPF! It’s technological change, the new fortunes it creates and the new power centers resulting from those fortunes which disrupt the establishment and prevent the heat death of culture.

    Fortunately, innovation is still an option for us. Just one that too many Americans seem to have temporarily lost touch with. While they’ve been watching “reality” TV and hating/envying Wall Street’s “innovative” shell games, young people all over the rest of the world (particularly in Asia) have been hard at work learning math & science and developing the skills that will help them to compete.

    The US after WWII was a bit like a kid who’s rich uncle died and left him a fortune. We’ve been rich well beyond our real deserts. We’ve been pretty thoroughly spoiled by it. But that’s coming to an end. The world is going to show us a bit of tough love in the years ahead, but we’ll be the better for it.

  54. Seth says:

    There’s an old joke that every generation thinks it invented sex. Well, it’s much the same with debt. Every generation discovers that gearing up with debt feels amazing … while the market is going up. Then they discover that what was so awesome on the way up, turns out to be rather more like ‘shock and awe’-some on the way back down to … and then right on into the ground.

    Jon, you’re right that we’re in an interregnum. Major financial implosions frequently do precipitate political avalanches, occasionally quite severe ones. The French Revolution, the English Civil War, the rise of the Nazis, the New Deal. They come in all shapes and sizes. Tough to tell what form our present crisis will take.

    As to the ‘need’ for leverage in recent years, a couple of observations. The “savings glut” thesis adopted by establishment economists — the idea that China and other developing nations were just too darn careful with their money — was the flip side of an “investment drought” here in the US. There has been very little “capital deepening” right here at home, because so much of the corporate earnings available for investment was being generated abroad through offshored divisions and virtual supply chains. There were tax advantages to keeping the money abroad and reinvesting it there (not to mention the labor arbitrage). What came back to our shores was the prudent savings of developing nations who had been through a frightening series of financial crises in ’97 and swore they’d be prepared next time.

    Because nobody was investing in the US, and China et al. were binging on Treasuries and (to a lesser extent Agencies) the cost of borrowing long stayed down even after Greenspan started raising short rates (the “conundrum”). With cheap money for housing “investment” but much less investment in innovative uses for American labor, we’ve been stagnating.

    Absent innovation, pretty much any economy will tend toward a sort of ancient Egyptian steady-state in which a strict caste system rationalized by authoritarian religion regulates every aspect of human lives. Talk about TRPF! It’s technological change, the new fortunes it creates and the new power centers resulting from those fortunes which disrupt the establishment and prevent the heat death of culture.

    Fortunately, innovation is still an option for us. Just one that too many Americans seem to have temporarily lost touch with. While they’ve been watching “reality” TV and hating/envying Wall Street’s “innovative” shell games, young people all over the rest of the world (particularly in Asia) have been hard at work learning math & science and developing the skills that will help them to compete.

    The US after WWII was a bit like a kid who’s rich uncle died and left him a fortune. We’ve been rich well beyond our real deserts. We’ve been pretty thoroughly spoiled by it. But that’s coming to an end. The world is going to show us a bit of tough love in the years ahead, but we’ll be the better for it.

  55. doug says:

    Jon —what stats are you citing?—go to the commerce dept that tracks the real numbers and ;ets discuss this when you have the facts

  56. doug says:

    Jon —what stats are you citing?—go to the commerce dept that tracks the real numbers and ;ets discuss this when you have the facts

  57. Rick Turner says:

    Doug, do you trust the Commerce Department’s numbers? That may be like trusting Bernie Madoff’s numbers… It may also be like trusting the numbers on “unemployment” which so conveniently leave out millions of those who either do not choose to work or have given up looking.

    More and more I am reminded of what my high school history teacher, Mr. Raines, drilled into our teen aged brains: “Figures lie, and liars figure.”

  58. Rick Turner says:

    Doug, do you trust the Commerce Department’s numbers? That may be like trusting Bernie Madoff’s numbers… It may also be like trusting the numbers on “unemployment” which so conveniently leave out millions of those who either do not choose to work or have given up looking.

    More and more I am reminded of what my high school history teacher, Mr. Raines, drilled into our teen aged brains: “Figures lie, and liars figure.”

  59. Rick Turner says:

    Doug, do you trust the Commerce Department’s numbers? That may be like trusting Bernie Madoff’s numbers… It may also be like trusting the numbers on “unemployment” which so conveniently leave out millions of those who either do not choose to work or have given up looking.

    More and more I am reminded of what my high school history teacher, Mr. Raines, drilled into our teen aged brains: “Figures lie, and liars figure.”

  60. rhbee says:

    We are in phase one of this, whatever you call it, recession, depression, interregnum, where shock is keeping us from over-reacting. Phase two is just around the corner when we all try to send the government IOUs for our next tax payments.

  61. rhbee says:

    We are in phase one of this, whatever you call it, recession, depression, interregnum, where shock is keeping us from over-reacting. Phase two is just around the corner when we all try to send the government IOUs for our next tax payments.

  62. rhbee says:

    We are in phase one of this, whatever you call it, recession, depression, interregnum, where shock is keeping us from over-reacting. Phase two is just around the corner when we all try to send the government IOUs for our next tax payments.

  63. Jon Taplin says:

    JTM- Your long post was a thing of wonder. I too think there is wisdom to be found in the Whole Earth Catalog era.
    http://jontaplin.com/2008/05/21/summer-reading/
    I was surprised to find there is a whole new commune movement .
    http://www.wannastartacommune.com/

  64. Jon Taplin says:

    JTM- Your long post was a thing of wonder. I too think there is wisdom to be found in the Whole Earth Catalog era.
    http://jontaplin.com/2008/05/21/summer-reading/
    I was surprised to find there is a whole new commune movement .
    http://www.wannastartacommune.com/

  65. Jon Taplin says:

    JTM- Your long post was a thing of wonder. I too think there is wisdom to be found in the Whole Earth Catalog era.
    http://jontaplin.com/2008/05/21/summer-reading/
    I was surprised to find there is a whole new commune movement .
    http://www.wannastartacommune.com/

  66. Jon Taplin says:

    JTM- Your long post was a thing of wonder. I too think there is wisdom to be found in the Whole Earth Catalog era.
    http://jontaplin.com/2008/05/21/summer-reading/
    I was surprised to find there is a whole new commune movement .
    http://www.wannastartacommune.com/

  67. Jon Taplin says:

    Dan- As to your question of how the cities and states finance this, it requires a major revision of how we tax people. First we raise sales taxes and split them between cities and states. We also standardize a state gas tax of $1 per gallon. This discourages consumption and encourages savings. Second those saving get invested in Municipal bonds that pap 5.5% tax free (the steadiest investment I own). Third, we fight to reduce federal income taxes and raise state income taxes. This makes it harder for the Pentagon to take all of our money.

  68. Jon Taplin says:

    Dan- As to your question of how the cities and states finance this, it requires a major revision of how we tax people. First we raise sales taxes and split them between cities and states. We also standardize a state gas tax of $1 per gallon. This discourages consumption and encourages savings. Second those saving get invested in Municipal bonds that pap 5.5% tax free (the steadiest investment I own). Third, we fight to reduce federal income taxes and raise state income taxes. This makes it harder for the Pentagon to take all of our money.

  69. Jon Taplin says:

    Dan- As to your question of how the cities and states finance this, it requires a major revision of how we tax people. First we raise sales taxes and split them between cities and states. We also standardize a state gas tax of $1 per gallon. This discourages consumption and encourages savings. Second those saving get invested in Municipal bonds that pap 5.5% tax free (the steadiest investment I own). Third, we fight to reduce federal income taxes and raise state income taxes. This makes it harder for the Pentagon to take all of our money.

  70. Jon Taplin says:

    Doug here are the stats from the International Herald Tribune.

    In the fourth quarter, rising inventories accounted for the difference between the overall 3.8 percent contraction of the economy and a steeper 5.1 decline in final domestic sales.

    “The difference between 3.8 and 5.1 percent is the inventory buildup,” Nigel Gault, chief United States economist at IHS Global Insight, said. “My only explanation is that companies could not cut production fast enough.”

    5.1% decline in final sales

  71. Jon Taplin says:

    Doug here are the stats from the International Herald Tribune.

    In the fourth quarter, rising inventories accounted for the difference between the overall 3.8 percent contraction of the economy and a steeper 5.1 decline in final domestic sales.

    “The difference between 3.8 and 5.1 percent is the inventory buildup,” Nigel Gault, chief United States economist at IHS Global Insight, said. “My only explanation is that companies could not cut production fast enough.”

    5.1% decline in final sales

  72. bernard says:

    What is a decent social contract without justice ?
    To put an end to an era of corruption some harsh justice must take place. Nice phrases wont do the trick. Where is the check and balance sistem ?
    The new American dream must be valid for all the Americas as a whole. Somebody has to set an example that the rest of the world can follow.
    The money is made with new ideas , new way of solving old problems. If an inventor becomes a multimillionaire everybody will applaud. Not so
    a corrupt banker or politician. There is nothing wrong with Capitalism as such. What is wrong is the lack of Justice.

  73. bernard says:

    What is a decent social contract without justice ?
    To put an end to an era of corruption some harsh justice must take place. Nice phrases wont do the trick. Where is the check and balance sistem ?
    The new American dream must be valid for all the Americas as a whole. Somebody has to set an example that the rest of the world can follow.
    The money is made with new ideas , new way of solving old problems. If an inventor becomes a multimillionaire everybody will applaud. Not so
    a corrupt banker or politician. There is nothing wrong with Capitalism as such. What is wrong is the lack of Justice.

  74. bernard says:

    What is a decent social contract without justice ?
    To put an end to an era of corruption some harsh justice must take place. Nice phrases wont do the trick. Where is the check and balance sistem ?
    The new American dream must be valid for all the Americas as a whole. Somebody has to set an example that the rest of the world can follow.
    The money is made with new ideas , new way of solving old problems. If an inventor becomes a multimillionaire everybody will applaud. Not so
    a corrupt banker or politician. There is nothing wrong with Capitalism as such. What is wrong is the lack of Justice.

  75. Davaudian says:

    What we all know is the fed is killing our country with out of control spending and by being unable to live on a budget. The fed hates you and hates having to play by the rules.
    “Figures lie and Liars figure”..truer words were never spoken.
    It’s like some chick with a credit card in the shoe department.

    Here, have some future…

  76. Davaudian says:

    What we all know is the fed is killing our country with out of control spending and by being unable to live on a budget. The fed hates you and hates having to play by the rules.
    “Figures lie and Liars figure”..truer words were never spoken.
    It’s like some chick with a credit card in the shoe department.

    Here, have some future…

  77. Davaudian says:

    What we all know is the fed is killing our country with out of control spending and by being unable to live on a budget. The fed hates you and hates having to play by the rules.
    “Figures lie and Liars figure”..truer words were never spoken.
    It’s like some chick with a credit card in the shoe department.

    Here, have some future…

  78. Davaudian says:

    What we all know is the fed is killing our country with out of control spending and by being unable to live on a budget. The fed hates you and hates having to play by the rules.
    “Figures lie and Liars figure”..truer words were never spoken.
    It’s like some chick with a credit card in the shoe department.

    Here, have some future…

  79. doug says:

    Jon–you are confusing GDP with consumer spending– GDP is total output not what John Q Public takes out of his wallet to spend—that amount was off only 1.4% in December–not nothing but hardley a melt down as you and others state–this media blitz which you are a part of is over playing the facts to sell a story and in the process making it worse–as to GDP–everyone was forcasting a decline of 5-6% and it came in on down 3.6%—yes inventories were built—but did no one think of that when forecasting GDP to begin with?—you are having trouble dealing with a bad story that isn’t as bad as you would like it to be–why is that?—are you still trying to sell how bad Bush was?–or make a case for a big spending bill to be quickly, and unexaminedly, put in place?

  80. doug says:

    Jon–you are confusing GDP with consumer spending– GDP is total output not what John Q Public takes out of his wallet to spend—that amount was off only 1.4% in December–not nothing but hardley a melt down as you and others state–this media blitz which you are a part of is over playing the facts to sell a story and in the process making it worse–as to GDP–everyone was forcasting a decline of 5-6% and it came in on down 3.6%—yes inventories were built—but did no one think of that when forecasting GDP to begin with?—you are having trouble dealing with a bad story that isn’t as bad as you would like it to be–why is that?—are you still trying to sell how bad Bush was?–or make a case for a big spending bill to be quickly, and unexaminedly, put in place?

  81. doug says:

    Jon–you are confusing GDP with consumer spending– GDP is total output not what John Q Public takes out of his wallet to spend—that amount was off only 1.4% in December–not nothing but hardley a melt down as you and others state–this media blitz which you are a part of is over playing the facts to sell a story and in the process making it worse–as to GDP–everyone was forcasting a decline of 5-6% and it came in on down 3.6%—yes inventories were built—but did no one think of that when forecasting GDP to begin with?—you are having trouble dealing with a bad story that isn’t as bad as you would like it to be–why is that?—are you still trying to sell how bad Bush was?–or make a case for a big spending bill to be quickly, and unexaminedly, put in place?

  82. doug says:

    Jon–you are confusing GDP with consumer spending– GDP is total output not what John Q Public takes out of his wallet to spend—that amount was off only 1.4% in December–not nothing but hardley a melt down as you and others state–this media blitz which you are a part of is over playing the facts to sell a story and in the process making it worse–as to GDP–everyone was forcasting a decline of 5-6% and it came in on down 3.6%—yes inventories were built—but did no one think of that when forecasting GDP to begin with?—you are having trouble dealing with a bad story that isn’t as bad as you would like it to be–why is that?—are you still trying to sell how bad Bush was?–or make a case for a big spending bill to be quickly, and unexaminedly, put in place?

  83. Dan says:

    Jon, Chicago sales tax is already 10.25%. How high will this sales tax have to go? 20%? 30%? Isn’t sales tax regressive?

    I still have yet to hear an argument from either side about how we’ll create a sane system of taxation and services. (I’m talking long term, not in terms of the present crisis.) Both sides state their ideas, and generally claim that their idea is the only sane idea, but they all sound crazy to me.

    But I suppose that’s probably not a good can of worms to open up right now.

  84. Dan says:

    Jon, Chicago sales tax is already 10.25%. How high will this sales tax have to go? 20%? 30%? Isn’t sales tax regressive?

    I still have yet to hear an argument from either side about how we’ll create a sane system of taxation and services. (I’m talking long term, not in terms of the present crisis.) Both sides state their ideas, and generally claim that their idea is the only sane idea, but they all sound crazy to me.

    But I suppose that’s probably not a good can of worms to open up right now.

  85. Dan says:

    Jon, Chicago sales tax is already 10.25%. How high will this sales tax have to go? 20%? 30%? Isn’t sales tax regressive?

    I still have yet to hear an argument from either side about how we’ll create a sane system of taxation and services. (I’m talking long term, not in terms of the present crisis.) Both sides state their ideas, and generally claim that their idea is the only sane idea, but they all sound crazy to me.

    But I suppose that’s probably not a good can of worms to open up right now.

  86. Dan says:

    Jon, Chicago sales tax is already 10.25%. How high will this sales tax have to go? 20%? 30%? Isn’t sales tax regressive?

    I still have yet to hear an argument from either side about how we’ll create a sane system of taxation and services. (I’m talking long term, not in terms of the present crisis.) Both sides state their ideas, and generally claim that their idea is the only sane idea, but they all sound crazy to me.

    But I suppose that’s probably not a good can of worms to open up right now.

  87. Bonifer says:

    I enjoyed this post, Mr. Taplin. It’s thought-provoking and it puts a long and mythic lens to a problem that is so in-our-faces it’s almost impossible to see the forest for the trees.

    I see three areas where capitalism–as defined by the past 10-12 years of all-out looting of the system–has failed us.

    – As computers sped up, transaction speed went along for the ride and network technology supported the complexity of the new ‘product’. This unleashed what you might call a kind of ‘Telemarketer Effect’ on the financial markets. It got to be too many people people swapping too much debt at a faster and faster clip, with ‘speed of transaction’ as its only value-add. The faster traders traded, the more money they made, because that is how the product was designed. It was the quantity and not the quality of the transactions that mattered most.

    – As Amber from Albuquerque points out, no real wealth was being created during these transactions, no commodity moved to market or new technology brought to life. In fact, because the ultimate victims were people who had their life savings and pensions destroyed by the systemic collapse, you might say it sucked wealth out of the economy by harming to the people who generated that wealth in the first place. These transactions became so un-moored from any kind of real goods or services, that instead of ‘making markets more efficient’ which is what a laissez-faire capitalist would tell you the system does, the hog-wild trading was ‘efficiently making markets’. Markets for nothing, as it turns out except more debt, more leverage. Keep piling enough debt on one end of the teeter totter, with nothing of any substance added to the other side, and real assets sitting on the other side are going to get catapulted into the ether. And that’s where we find ourselves today. Tumbling through the air without any idea where or how we’ll land.

    – The current system puts no value on ‘social capital’ a term I first saw used by Umair Haque. Machine-triggered transactions give no weight to their impact on community, environment, culture. This is the biggest flaw in unchecked capitalist greed, and is the big reason government must have a role in overseeing markets. My guess is that this is the area where we’ll see the most immediate impact from the policies and rules of the Obama administration. Markets do not exist to be gamed by a few inside players. They exist to give many the opportunity to get in the game.

  88. Bonifer says:

    I enjoyed this post, Mr. Taplin. It’s thought-provoking and it puts a long and mythic lens to a problem that is so in-our-faces it’s almost impossible to see the forest for the trees.

    I see three areas where capitalism–as defined by the past 10-12 years of all-out looting of the system–has failed us.

    – As computers sped up, transaction speed went along for the ride and network technology supported the complexity of the new ‘product’. This unleashed what you might call a kind of ‘Telemarketer Effect’ on the financial markets. It got to be too many people people swapping too much debt at a faster and faster clip, with ‘speed of transaction’ as its only value-add. The faster traders traded, the more money they made, because that is how the product was designed. It was the quantity and not the quality of the transactions that mattered most.

    – As Amber from Albuquerque points out, no real wealth was being created during these transactions, no commodity moved to market or new technology brought to life. In fact, because the ultimate victims were people who had their life savings and pensions destroyed by the systemic collapse, you might say it sucked wealth out of the economy by harming to the people who generated that wealth in the first place. These transactions became so un-moored from any kind of real goods or services, that instead of ‘making markets more efficient’ which is what a laissez-faire capitalist would tell you the system does, the hog-wild trading was ‘efficiently making markets’. Markets for nothing, as it turns out except more debt, more leverage. Keep piling enough debt on one end of the teeter totter, with nothing of any substance added to the other side, and real assets sitting on the other side are going to get catapulted into the ether. And that’s where we find ourselves today. Tumbling through the air without any idea where or how we’ll land.

    – The current system puts no value on ‘social capital’ a term I first saw used by Umair Haque. Machine-triggered transactions give no weight to their impact on community, environment, culture. This is the biggest flaw in unchecked capitalist greed, and is the big reason government must have a role in overseeing markets. My guess is that this is the area where we’ll see the most immediate impact from the policies and rules of the Obama administration. Markets do not exist to be gamed by a few inside players. They exist to give many the opportunity to get in the game.

  89. Bonifer says:

    I enjoyed this post, Mr. Taplin. It’s thought-provoking and it puts a long and mythic lens to a problem that is so in-our-faces it’s almost impossible to see the forest for the trees.

    I see three areas where capitalism–as defined by the past 10-12 years of all-out looting of the system–has failed us.

    – As computers sped up, transaction speed went along for the ride and network technology supported the complexity of the new ‘product’. This unleashed what you might call a kind of ‘Telemarketer Effect’ on the financial markets. It got to be too many people people swapping too much debt at a faster and faster clip, with ‘speed of transaction’ as its only value-add. The faster traders traded, the more money they made, because that is how the product was designed. It was the quantity and not the quality of the transactions that mattered most.

    – As Amber from Albuquerque points out, no real wealth was being created during these transactions, no commodity moved to market or new technology brought to life. In fact, because the ultimate victims were people who had their life savings and pensions destroyed by the systemic collapse, you might say it sucked wealth out of the economy by harming to the people who generated that wealth in the first place. These transactions became so un-moored from any kind of real goods or services, that instead of ‘making markets more efficient’ which is what a laissez-faire capitalist would tell you the system does, the hog-wild trading was ‘efficiently making markets’. Markets for nothing, as it turns out except more debt, more leverage. Keep piling enough debt on one end of the teeter totter, with nothing of any substance added to the other side, and real assets sitting on the other side are going to get catapulted into the ether. And that’s where we find ourselves today. Tumbling through the air without any idea where or how we’ll land.

    – The current system puts no value on ‘social capital’ a term I first saw used by Umair Haque. Machine-triggered transactions give no weight to their impact on community, environment, culture. This is the biggest flaw in unchecked capitalist greed, and is the big reason government must have a role in overseeing markets. My guess is that this is the area where we’ll see the most immediate impact from the policies and rules of the Obama administration. Markets do not exist to be gamed by a few inside players. They exist to give many the opportunity to get in the game.

  90. Bonifer says:

    I enjoyed this post, Mr. Taplin. It’s thought-provoking and it puts a long and mythic lens to a problem that is so in-our-faces it’s almost impossible to see the forest for the trees.

    I see three areas where capitalism–as defined by the past 10-12 years of all-out looting of the system–has failed us.

    – As computers sped up, transaction speed went along for the ride and network technology supported the complexity of the new ‘product’. This unleashed what you might call a kind of ‘Telemarketer Effect’ on the financial markets. It got to be too many people people swapping too much debt at a faster and faster clip, with ‘speed of transaction’ as its only value-add. The faster traders traded, the more money they made, because that is how the product was designed. It was the quantity and not the quality of the transactions that mattered most.

    – As Amber from Albuquerque points out, no real wealth was being created during these transactions, no commodity moved to market or new technology brought to life. In fact, because the ultimate victims were people who had their life savings and pensions destroyed by the systemic collapse, you might say it sucked wealth out of the economy by harming to the people who generated that wealth in the first place. These transactions became so un-moored from any kind of real goods or services, that instead of ‘making markets more efficient’ which is what a laissez-faire capitalist would tell you the system does, the hog-wild trading was ‘efficiently making markets’. Markets for nothing, as it turns out except more debt, more leverage. Keep piling enough debt on one end of the teeter totter, with nothing of any substance added to the other side, and real assets sitting on the other side are going to get catapulted into the ether. And that’s where we find ourselves today. Tumbling through the air without any idea where or how we’ll land.

    – The current system puts no value on ‘social capital’ a term I first saw used by Umair Haque. Machine-triggered transactions give no weight to their impact on community, environment, culture. This is the biggest flaw in unchecked capitalist greed, and is the big reason government must have a role in overseeing markets. My guess is that this is the area where we’ll see the most immediate impact from the policies and rules of the Obama administration. Markets do not exist to be gamed by a few inside players. They exist to give many the opportunity to get in the game.

  91. Jon Taplin says:

    Bonifer-Three good points and food for thought as I continue this exploration of how to fix capitalism.

  92. Jon Taplin says:

    Bonifer-Three good points and food for thought as I continue this exploration of how to fix capitalism.

  93. len says:

    “The thing we need to keep in mind is that all the folks who have swooped and soared on their Speculation Bubbles know a simple truth: that for them, there are no consequences.”

    Carlos Marcello operated for years with that assumption and until the RICO act was passed, only Bobby Kennedy interupted his reverie and even then, it took until 1980 to pull him out of it by entrapment.

    We had a good contract. We’ve had a season of locusts aided by twenty odd years of corruption in the Federal enforcement. There are times to do what it takes but that is a challenge to individuals who as Kennedy did, will chase the bad guys into hell. Even with good laws, unless enforcement has character backed all the way to the highest law enforcement in the land, the President, the laws are ineffective. Even with these, in a global economy how does the President watch all the money in motion?

    As long as the locusts come in swarms and there is no way to stop them, we’ll see another season of locusts. As long as the politicians are subject to the business rules of Marcello, they’ll go unpunished.

    Individuals have to learn the rules of smart economics and business. In the one I know best, computer science, a CEO that makes bold statements about customer satisfaction being the goal and that the computer science itself is just unimportant product guarantees their investor two things: customers will become increasingly unsatisfied and low quality product. It rewards dissatisfaction (it grants the right to deal long after the deal should have closed) and squeezes out the necessary redundancy while pushing the talent toward the door.

    The squeeze for Wall Street profitability is different from product market profitability. The highest money goes into intangibles and that means tangibles create wealth linearly. The high numbers of the Wall Street model act like attractors pulling all the other engines toward them and away from the means and values that create wealth by production of tangibles.

  94. len says:

    “The thing we need to keep in mind is that all the folks who have swooped and soared on their Speculation Bubbles know a simple truth: that for them, there are no consequences.”

    Carlos Marcello operated for years with that assumption and until the RICO act was passed, only Bobby Kennedy interupted his reverie and even then, it took until 1980 to pull him out of it by entrapment.

    We had a good contract. We’ve had a season of locusts aided by twenty odd years of corruption in the Federal enforcement. There are times to do what it takes but that is a challenge to individuals who as Kennedy did, will chase the bad guys into hell. Even with good laws, unless enforcement has character backed all the way to the highest law enforcement in the land, the President, the laws are ineffective. Even with these, in a global economy how does the President watch all the money in motion?

    As long as the locusts come in swarms and there is no way to stop them, we’ll see another season of locusts. As long as the politicians are subject to the business rules of Marcello, they’ll go unpunished.

    Individuals have to learn the rules of smart economics and business. In the one I know best, computer science, a CEO that makes bold statements about customer satisfaction being the goal and that the computer science itself is just unimportant product guarantees their investor two things: customers will become increasingly unsatisfied and low quality product. It rewards dissatisfaction (it grants the right to deal long after the deal should have closed) and squeezes out the necessary redundancy while pushing the talent toward the door.

    The squeeze for Wall Street profitability is different from product market profitability. The highest money goes into intangibles and that means tangibles create wealth linearly. The high numbers of the Wall Street model act like attractors pulling all the other engines toward them and away from the means and values that create wealth by production of tangibles.

  95. len says:

    “The thing we need to keep in mind is that all the folks who have swooped and soared on their Speculation Bubbles know a simple truth: that for them, there are no consequences.”

    Carlos Marcello operated for years with that assumption and until the RICO act was passed, only Bobby Kennedy interupted his reverie and even then, it took until 1980 to pull him out of it by entrapment.

    We had a good contract. We’ve had a season of locusts aided by twenty odd years of corruption in the Federal enforcement. There are times to do what it takes but that is a challenge to individuals who as Kennedy did, will chase the bad guys into hell. Even with good laws, unless enforcement has character backed all the way to the highest law enforcement in the land, the President, the laws are ineffective. Even with these, in a global economy how does the President watch all the money in motion?

    As long as the locusts come in swarms and there is no way to stop them, we’ll see another season of locusts. As long as the politicians are subject to the business rules of Marcello, they’ll go unpunished.

    Individuals have to learn the rules of smart economics and business. In the one I know best, computer science, a CEO that makes bold statements about customer satisfaction being the goal and that the computer science itself is just unimportant product guarantees their investor two things: customers will become increasingly unsatisfied and low quality product. It rewards dissatisfaction (it grants the right to deal long after the deal should have closed) and squeezes out the necessary redundancy while pushing the talent toward the door.

    The squeeze for Wall Street profitability is different from product market profitability. The highest money goes into intangibles and that means tangibles create wealth linearly. The high numbers of the Wall Street model act like attractors pulling all the other engines toward them and away from the means and values that create wealth by production of tangibles.

  96. doug says:

    Jon–your theory is that consumer spending stopped–but your facts are wrong– you really need to check out the data–

  97. doug says:

    Jon–your theory is that consumer spending stopped–but your facts are wrong– you really need to check out the data–

  98. Jon Taplin says:

    Doug- The 5.1% decline was in final sales to consumers, not GDP. You still are not answering my question about our addiction to leverage.

  99. Jon Taplin says:

    Doug- The 5.1% decline was in final sales to consumers, not GDP. You still are not answering my question about our addiction to leverage.

  100. Jon Taplin says:

    Doug- The 5.1% decline was in final sales to consumers, not GDP. You still are not answering my question about our addiction to leverage.

  101. Jon Taplin says:

    Doug- The 5.1% decline was in final sales to consumers, not GDP. You still are not answering my question about our addiction to leverage.

  102. Al Marcy says:

    Potable water is so precious, only us idle rich bastards can afford to piss and shit in it. We let others die from the lack of it. Many others, every second. And still – we flush.

    There is no greater arrogance than thinking our waste is more important than other human lives. You folks see what appears to you as greater arrogance.

    The finer points of wealth amuse the wealthy, the poor just die as soon as possible.

    Not soon enough.

    And I will flush whenever I please.

    In the long ago 1960’s, I was a Humanities major in a fine University.

    Not a proper one, I was sent to Viet Nam. We were giving a war – at their place. It stank. Many died, a bit early. Many of us got medals and citations. Many more got new kinds of VD. We brought our medals and diseases home with us, if we came home at all. Some did not.

    Humanity is not human, it is a silly idea. Like wealth and fine moral convictions.

    You cannot flush a toilet with ideas.

    And becoming dead again is everyone’s only common fate.

    See, it is quite simple.

    Even us wealthy bastards are just gonna die.

    Our piss and shit never left us, we just chose not to notice where it went.

    Here.

    Surprised?

    Why??

    I just play with old technology. Music brings me comfort. I know it is an illusion I cannot sustain, but, I do the best I can with these lousy cards I was dealt … you know?

    May our illusions hide the shark as long as possible.

    Do not worry, we may die lost in our illusions, but, the shark is swimming and swimming and getting hungry, again, and again.

    Many sailors drown and sink to the bottom to rot. Sharks are the big ride at this theme park, but, even they can’t eat all of us … sigh.

    Rot is not very good story board material, so we pretend the sharks await us all.

    We pretend a lot.

    I quite enjoy it, sometimes.

  103. Al Marcy says:

    Potable water is so precious, only us idle rich bastards can afford to piss and shit in it. We let others die from the lack of it. Many others, every second. And still – we flush.

    There is no greater arrogance than thinking our waste is more important than other human lives. You folks see what appears to you as greater arrogance.

    The finer points of wealth amuse the wealthy, the poor just die as soon as possible.

    Not soon enough.

    And I will flush whenever I please.

    In the long ago 1960’s, I was a Humanities major in a fine University.

    Not a proper one, I was sent to Viet Nam. We were giving a war – at their place. It stank. Many died, a bit early. Many of us got medals and citations. Many more got new kinds of VD. We brought our medals and diseases home with us, if we came home at all. Some did not.

    Humanity is not human, it is a silly idea. Like wealth and fine moral convictions.

    You cannot flush a toilet with ideas.

    And becoming dead again is everyone’s only common fate.

    See, it is quite simple.

    Even us wealthy bastards are just gonna die.

    Our piss and shit never left us, we just chose not to notice where it went.

    Here.

    Surprised?

    Why??

    I just play with old technology. Music brings me comfort. I know it is an illusion I cannot sustain, but, I do the best I can with these lousy cards I was dealt … you know?

    May our illusions hide the shark as long as possible.

    Do not worry, we may die lost in our illusions, but, the shark is swimming and swimming and getting hungry, again, and again.

    Many sailors drown and sink to the bottom to rot. Sharks are the big ride at this theme park, but, even they can’t eat all of us … sigh.

    Rot is not very good story board material, so we pretend the sharks await us all.

    We pretend a lot.

    I quite enjoy it, sometimes.

  104. Morgan Warstler says:

    Jon,

    This is just convoluted. It isn’t logically valid.

    The fact the government is willing and able to do the bailout, MEANS that it should have set terms on financing – like say NO bonuses.

    That’s all fine and logical, I have suggested to you a way to try and claw them back – that’s even supportable.

    BUT, seriously it doesn’t follow, that a company shouldn’t buy back it’s stock when it believes its shares are undervalued. That’s good business.

    It also doesn’t follow, the the government SHOULD have done the bailout at all.

    And most to the point, it doesn’t get you out of the box of your own making – the juice is still totally doable. It just isn’t gong to be doable, until prices and inventories settle down, and inflation starts to kick back in. Until we see inflation, all of these theories on both sides are bullshit – because both sides will spend and cut taxes with abandon to stave off deflation.

    But inflation will rear it’s ugly head, and then and only then, will we know who comes down where, what everyone really believes. Policy is being made in a vacuum right now, printing money has no consequence because we over valued everything for the past couple years (with bullshit), so as long as prices are falling, and jobs are being cut… we don’t see it. Less actual milk is being made, less actual gas is being processed, less actual clothes are being sewn.

    If you think we can “live without the juice,” that there is going to be a job for everyone, and food for everyone with productivity down and staying down, then I want some of what you are smoking.

    Big cuts in government spending are right around the corner. Half of these new programs will not be able to be funded after 18mos, because raising taxes will bring less receipts, and government deficit spending will be causing inflation. You should be thinking a head.

    You can’t get blood from a stone.

  105. Morgan Warstler says:

    Jon,

    This is just convoluted. It isn’t logically valid.

    The fact the government is willing and able to do the bailout, MEANS that it should have set terms on financing – like say NO bonuses.

    That’s all fine and logical, I have suggested to you a way to try and claw them back – that’s even supportable.

    BUT, seriously it doesn’t follow, that a company shouldn’t buy back it’s stock when it believes its shares are undervalued. That’s good business.

    It also doesn’t follow, the the government SHOULD have done the bailout at all.

    And most to the point, it doesn’t get you out of the box of your own making – the juice is still totally doable. It just isn’t gong to be doable, until prices and inventories settle down, and inflation starts to kick back in. Until we see inflation, all of these theories on both sides are bullshit – because both sides will spend and cut taxes with abandon to stave off deflation.

    But inflation will rear it’s ugly head, and then and only then, will we know who comes down where, what everyone really believes. Policy is being made in a vacuum right now, printing money has no consequence because we over valued everything for the past couple years (with bullshit), so as long as prices are falling, and jobs are being cut… we don’t see it. Less actual milk is being made, less actual gas is being processed, less actual clothes are being sewn.

    If you think we can “live without the juice,” that there is going to be a job for everyone, and food for everyone with productivity down and staying down, then I want some of what you are smoking.

    Big cuts in government spending are right around the corner. Half of these new programs will not be able to be funded after 18mos, because raising taxes will bring less receipts, and government deficit spending will be causing inflation. You should be thinking a head.

    You can’t get blood from a stone.

  106. JTMcPhee says:

    “Big cuts in government spending.” Well. Other than the the power to take a percentage of all the Real (and Imaginary) Wealth via taxation, and the ability to mint and print “money” which is only a token that marks the exchange of, sometimes, real value, and blow it into the neck of the balloon that used to be labeled “M1,” “the government” does not have “money” to spend. “The government” through all its branches just ALLOCATES the incomprehensible sums that are collected, to those who have the most effective way of pressing their claims.

    rhbee says it’s all about jobs. Which jobs? ones that grow food and build mass transit and make steel and bridges? Or the ones the Aerospace Industry Association tells us “we” ‘can’t live without?’ Or the ones that result in the death-spitting Multiple Kill Vehicle featured in an earlier blog entry here? Or the ones that produced THIS?

    Seems to me that one main missing or at least under-considered ingredient in a healthy, homeostatic social mix is the location of the intersection of self-reliance, self-interest, and altruism. I think a lot of Whole-Earthers in their teepees and yurts and geodesic domes and earth-sheltered homes had no qualms about using food stamps and unemployment and other social-welfare support, when the going got tough. And having achieved the physical environment they spent so much doctrinal energy defining and building, what did they do from there? Was it ever enough to just work to grow one’s sustenance and gather and prep the flax stems, shear the sheep and card and spin and knit and loom, enjoy the change of seasons and a bird’s song at sunrise on the way to the fields and the night sky? Jerry Rubin was maybe not the archetypical Whole-Earther, but he was counter-culture, and look where he ended up.

    I wonder if Freud, who in my mind was wrong about so many other things, was at least heading in the right direction with his line about Liebe und Arbeit being all you need (John Lennon, of course, would have made it even simpler.)

    Is there any agreement on who gets to keep on living, as things get tighter and rougher? Or will it be every man for himself? Humans can make a pretty broad range of social structures, with more or less respect for the wisdom of their elders and more or less tendency to leave the weak to freeze and starve in the snow. I hope to be around for maybe one more turn of the wheel, to see what Pogo’s observation elicits from the parched and depleted soil our locust-like indulgences have left for the next round. I am still betting on the almost inevitable success of a franchise chain of suicide parlors…

    But hey, what do I know?

  107. JTMcPhee says:

    “Big cuts in government spending.” Well. Other than the the power to take a percentage of all the Real (and Imaginary) Wealth via taxation, and the ability to mint and print “money” which is only a token that marks the exchange of, sometimes, real value, and blow it into the neck of the balloon that used to be labeled “M1,” “the government” does not have “money” to spend. “The government” through all its branches just ALLOCATES the incomprehensible sums that are collected, to those who have the most effective way of pressing their claims.

    rhbee says it’s all about jobs. Which jobs? ones that grow food and build mass transit and make steel and bridges? Or the ones the Aerospace Industry Association tells us “we” ‘can’t live without?’ Or the ones that result in the death-spitting Multiple Kill Vehicle featured in an earlier blog entry here? Or the ones that produced THIS?

    Seems to me that one main missing or at least under-considered ingredient in a healthy, homeostatic social mix is the location of the intersection of self-reliance, self-interest, and altruism. I think a lot of Whole-Earthers in their teepees and yurts and geodesic domes and earth-sheltered homes had no qualms about using food stamps and unemployment and other social-welfare support, when the going got tough. And having achieved the physical environment they spent so much doctrinal energy defining and building, what did they do from there? Was it ever enough to just work to grow one’s sustenance and gather and prep the flax stems, shear the sheep and card and spin and knit and loom, enjoy the change of seasons and a bird’s song at sunrise on the way to the fields and the night sky? Jerry Rubin was maybe not the archetypical Whole-Earther, but he was counter-culture, and look where he ended up.

    I wonder if Freud, who in my mind was wrong about so many other things, was at least heading in the right direction with his line about Liebe und Arbeit being all you need (John Lennon, of course, would have made it even simpler.)

    Is there any agreement on who gets to keep on living, as things get tighter and rougher? Or will it be every man for himself? Humans can make a pretty broad range of social structures, with more or less respect for the wisdom of their elders and more or less tendency to leave the weak to freeze and starve in the snow. I hope to be around for maybe one more turn of the wheel, to see what Pogo’s observation elicits from the parched and depleted soil our locust-like indulgences have left for the next round. I am still betting on the almost inevitable success of a franchise chain of suicide parlors…

    But hey, what do I know?

  108. JTMcPhee says:

    “Big cuts in government spending.” Well. Other than the the power to take a percentage of all the Real (and Imaginary) Wealth via taxation, and the ability to mint and print “money” which is only a token that marks the exchange of, sometimes, real value, and blow it into the neck of the balloon that used to be labeled “M1,” “the government” does not have “money” to spend. “The government” through all its branches just ALLOCATES the incomprehensible sums that are collected, to those who have the most effective way of pressing their claims.

    rhbee says it’s all about jobs. Which jobs? ones that grow food and build mass transit and make steel and bridges? Or the ones the Aerospace Industry Association tells us “we” ‘can’t live without?’ Or the ones that result in the death-spitting Multiple Kill Vehicle featured in an earlier blog entry here? Or the ones that produced THIS?

    Seems to me that one main missing or at least under-considered ingredient in a healthy, homeostatic social mix is the location of the intersection of self-reliance, self-interest, and altruism. I think a lot of Whole-Earthers in their teepees and yurts and geodesic domes and earth-sheltered homes had no qualms about using food stamps and unemployment and other social-welfare support, when the going got tough. And having achieved the physical environment they spent so much doctrinal energy defining and building, what did they do from there? Was it ever enough to just work to grow one’s sustenance and gather and prep the flax stems, shear the sheep and card and spin and knit and loom, enjoy the change of seasons and a bird’s song at sunrise on the way to the fields and the night sky? Jerry Rubin was maybe not the archetypical Whole-Earther, but he was counter-culture, and look where he ended up.

    I wonder if Freud, who in my mind was wrong about so many other things, was at least heading in the right direction with his line about Liebe und Arbeit being all you need (John Lennon, of course, would have made it even simpler.)

    Is there any agreement on who gets to keep on living, as things get tighter and rougher? Or will it be every man for himself? Humans can make a pretty broad range of social structures, with more or less respect for the wisdom of their elders and more or less tendency to leave the weak to freeze and starve in the snow. I hope to be around for maybe one more turn of the wheel, to see what Pogo’s observation elicits from the parched and depleted soil our locust-like indulgences have left for the next round. I am still betting on the almost inevitable success of a franchise chain of suicide parlors…

    But hey, what do I know?

  109. JTMcPhee says:

    “Big cuts in government spending.” Well. Other than the the power to take a percentage of all the Real (and Imaginary) Wealth via taxation, and the ability to mint and print “money” which is only a token that marks the exchange of, sometimes, real value, and blow it into the neck of the balloon that used to be labeled “M1,” “the government” does not have “money” to spend. “The government” through all its branches just ALLOCATES the incomprehensible sums that are collected, to those who have the most effective way of pressing their claims.

    rhbee says it’s all about jobs. Which jobs? ones that grow food and build mass transit and make steel and bridges? Or the ones the Aerospace Industry Association tells us “we” ‘can’t live without?’ Or the ones that result in the death-spitting Multiple Kill Vehicle featured in an earlier blog entry here? Or the ones that produced THIS?

    Seems to me that one main missing or at least under-considered ingredient in a healthy, homeostatic social mix is the location of the intersection of self-reliance, self-interest, and altruism. I think a lot of Whole-Earthers in their teepees and yurts and geodesic domes and earth-sheltered homes had no qualms about using food stamps and unemployment and other social-welfare support, when the going got tough. And having achieved the physical environment they spent so much doctrinal energy defining and building, what did they do from there? Was it ever enough to just work to grow one’s sustenance and gather and prep the flax stems, shear the sheep and card and spin and knit and loom, enjoy the change of seasons and a bird’s song at sunrise on the way to the fields and the night sky? Jerry Rubin was maybe not the archetypical Whole-Earther, but he was counter-culture, and look where he ended up.

    I wonder if Freud, who in my mind was wrong about so many other things, was at least heading in the right direction with his line about Liebe und Arbeit being all you need (John Lennon, of course, would have made it even simpler.)

    Is there any agreement on who gets to keep on living, as things get tighter and rougher? Or will it be every man for himself? Humans can make a pretty broad range of social structures, with more or less respect for the wisdom of their elders and more or less tendency to leave the weak to freeze and starve in the snow. I hope to be around for maybe one more turn of the wheel, to see what Pogo’s observation elicits from the parched and depleted soil our locust-like indulgences have left for the next round. I am still betting on the almost inevitable success of a franchise chain of suicide parlors…

    But hey, what do I know?

  110. Rick Turner says:

    JT, what a card! Can I have the last dance with you?

  111. Rick Turner says:

    JT, what a card! Can I have the last dance with you?

  112. Rick Turner says:

    JT, what a card! Can I have the last dance with you?

  113. Rick Turner says:

    JT, what a card! Can I have the last dance with you?

  114. Davaudian says:

    Ha, the guys a national treasure…

  115. Davaudian says:

    Ha, the guys a national treasure…

  116. Davaudian says:

    Ha, the guys a national treasure…

  117. Davaudian says:

    Ha, the guys a national treasure…

  118. doug says:

    Jon—commerce dept shows december sales down 1.4%–check out the data—they are the official source for US consumer spending–as to leverage I think that it’s really very simple–people have not lost their desire to spend long term but need to right size their personal balance sheet–when they have and have a comfort level with thier own job they will borrow and spnd again—but clearly the leverage fest of the recent past is over and that does have real effects on the economy– right now the concern is deflation but the smartest guys I know are concerned long term with inflation but cannot call the turning point—dn

  119. doug says:

    Jon—commerce dept shows december sales down 1.4%–check out the data—they are the official source for US consumer spending–as to leverage I think that it’s really very simple–people have not lost their desire to spend long term but need to right size their personal balance sheet–when they have and have a comfort level with thier own job they will borrow and spnd again—but clearly the leverage fest of the recent past is over and that does have real effects on the economy– right now the concern is deflation but the smartest guys I know are concerned long term with inflation but cannot call the turning point—dn

  120. doug says:

    Jon—commerce dept shows december sales down 1.4%–check out the data—they are the official source for US consumer spending–as to leverage I think that it’s really very simple–people have not lost their desire to spend long term but need to right size their personal balance sheet–when they have and have a comfort level with thier own job they will borrow and spnd again—but clearly the leverage fest of the recent past is over and that does have real effects on the economy– right now the concern is deflation but the smartest guys I know are concerned long term with inflation but cannot call the turning point—dn

  121. JTMcPhee says:

    Rick, you wouldn’t want to dance with me — I’d be stepping all over your toes.

    Other than the “Mad Max” musings of this old Tieresias, any substantive comment on whether the “Aerospace Industry” ought to get pride of place at the glutton’s table we are shorthanding as “the bailout stimulus package?”

    In the nursing biz, if you want to get someone going, one of the best nostrums is a “black and white:” prune juice and milk of magnesia, 50-50, served warm. Any application to the folks in Congress who are so busily earmarking for their “special friends,” with butrillions of “dollars” that somebody, someday, is going to actually have to produce some Real Wealth to underwrite?

    Inflation? Hey, if it was good enough for Weimar Germany and Brazil, it’s good enough for us!

  122. JTMcPhee says:

    Rick, you wouldn’t want to dance with me — I’d be stepping all over your toes.

    Other than the “Mad Max” musings of this old Tieresias, any substantive comment on whether the “Aerospace Industry” ought to get pride of place at the glutton’s table we are shorthanding as “the bailout stimulus package?”

    In the nursing biz, if you want to get someone going, one of the best nostrums is a “black and white:” prune juice and milk of magnesia, 50-50, served warm. Any application to the folks in Congress who are so busily earmarking for their “special friends,” with butrillions of “dollars” that somebody, someday, is going to actually have to produce some Real Wealth to underwrite?

    Inflation? Hey, if it was good enough for Weimar Germany and Brazil, it’s good enough for us!

  123. Morgan Warstler says:

    The dirty little secret of inflation, is all those foriegn reserves… we’ll be ok destroying their value (and putting oil rich nations and china down a notch), for a tad… but the inevitable result of reducign the money supply will be a mutually exclusive choice between government spending and keeping short term interest rates low for business growth.

    Since Obama is well aware higher taxes are only acceptable if they actually lead to more revenues, that’s when we’ll see what’s what.

  124. Morgan Warstler says:

    The dirty little secret of inflation, is all those foriegn reserves… we’ll be ok destroying their value (and putting oil rich nations and china down a notch), for a tad… but the inevitable result of reducign the money supply will be a mutually exclusive choice between government spending and keeping short term interest rates low for business growth.

    Since Obama is well aware higher taxes are only acceptable if they actually lead to more revenues, that’s when we’ll see what’s what.

  125. Morgan Warstler says:

    The dirty little secret of inflation, is all those foriegn reserves… we’ll be ok destroying their value (and putting oil rich nations and china down a notch), for a tad… but the inevitable result of reducign the money supply will be a mutually exclusive choice between government spending and keeping short term interest rates low for business growth.

    Since Obama is well aware higher taxes are only acceptable if they actually lead to more revenues, that’s when we’ll see what’s what.

  126. len says:

    Swarming theory has been popular among the social network pundits, both how to start them, how to stop them and are they controllable. From Scientific American comes the following on locust swarming and the potential of serotonin stimulation to cause this:

    http://www.sciam.com/article.cfm?id=when-grasshoppers-go-bibl

    Note the potential of density to engender desperation and fear and the effects on serotonin production. As an amplifier, the web is a great way to simulate density (see Facebook connections) and stimulate fear. Toss in a little environmentally mediated desperation and voila.

  127. len says:

    Swarming theory has been popular among the social network pundits, both how to start them, how to stop them and are they controllable. From Scientific American comes the following on locust swarming and the potential of serotonin stimulation to cause this:

    http://www.sciam.com/article.cfm?id=when-grasshoppers-go-bibl

    Note the potential of density to engender desperation and fear and the effects on serotonin production. As an amplifier, the web is a great way to simulate density (see Facebook connections) and stimulate fear. Toss in a little environmentally mediated desperation and voila.

  128. len says:

    Swarming theory has been popular among the social network pundits, both how to start them, how to stop them and are they controllable. From Scientific American comes the following on locust swarming and the potential of serotonin stimulation to cause this:

    http://www.sciam.com/article.cfm?id=when-grasshoppers-go-bibl

    Note the potential of density to engender desperation and fear and the effects on serotonin production. As an amplifier, the web is a great way to simulate density (see Facebook connections) and stimulate fear. Toss in a little environmentally mediated desperation and voila.

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