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As many of you know, David Brooks is one of the few conservative columnists that I regard highly. But occasionally he writes something that is so boneheaded, it makes you wonder. Such a column was his defense of Mitt Romney and the Private Equity Business this week. Here is Brooks.

Forty years ago, corporate America was bloated, sluggish and losing ground to competitors in Japan and beyond. But then something astonishing happened. Financiers, private equity firms and bare-knuckled corporate executives initiated a series of reforms and transformations.

The process was brutal and involved streamlining and layoffs. But, at the end of it, American businesses emerged leaner, quicker and more efficient.

This version of the 1980′s could have been written by one the hundreds of Lobbyists deployed by the Private Equity Industry in Washington. That was probably where Brooks “researched” his story.  The real history of the era is quite different.The 1980′s was the start of the financialization of American business, with it’s wave of complex financial instruments that only a quantum math scholar could decipher. Writing after the Great Depression of the 1930’s, the economist Joseph Schumpeter spoke of “vanishing investment opportunities” by which he meant that the enormous growth of productivity, combined with the oligopolistic pricing structures of American capitalism generated a growing surplus which went beyond the capacity of system to absorb it. As I researched this post I began to wonder if Schumpeter’s concern still applied to the American economy and certainly Ben Bernanke in a 2005 speech called “The Global Saving Glut”, seemed to believe so. American capitalism had always been a boom and bust cycle as an historian of the Panics of 1837, 1857, 1869, 1873, 1893, 1903, 1907, and 1929 would know. However, by the late 1960’s economists had come to believe that fiscal and monetary policy had eliminated the extremes of the business cycle. But by the mid 1970’s, after the Arab oil embargo, the American economy began to fall into a condition known as Stagflation—a brutal combination of business stagnation and unemployment mixed with the inflation brought on by rapidly rising energy prices. Read more…

Cory Booker revealed the real stakes for the November Election. Faced with having to raise most of the money for his next campaign (maybe Governor?), Cory chose to suck up to Wall Street on Meet The Press and trash Obama. Booker’s remarks defending Bain Capital forced Obama to reiterate why Savage Capital is an issue in this election.

In the spotlight of the world stage, President Barack Obama on Monday unapologetically defended his campaign’s attacks on Mitt Romney’s record at the private equity firm Bain Capital and vowed to keep up the onslaught all the way to November.

“This issue is not a distraction,” Obama defiantly declared at a press conference wrapping up a NATO summit in his hometown of Chicago. “This is what this campaign is going to be about.”

“If your main argument for how to grow the economy is ‘I knew how to make a lot of money for investors,’ then you’re missing what this job is about,” the president said, evidently relishing the opportunity to knock Romney.

“It doesn’t mean you weren’t good at private equity, but that’s not what my job is as president. My job is to take into account everybody, not just some. My job is to make sure that the country is growing not just now, but ten years from now and 20 years from now,” he said.

To my mind this is a bit of a gift, even though Booker clearly was looking out for his own reelection not Obama’s. Bain is just exhibit one in the argument against the Leveraged Buy Out Business. Financed by ex-con Mike Milken in the 1980′s, Mitt was just a piker compared to Henry Kravis or Steve Schwartzman. He was B League. The whole industry of leverage is a plague upon our society.Before Mitt Romney and Miker Milken, debt to equity ratios were rational. After them, the use of junk bond debt exploded and we never looked back until the whole House of Cards collapsed in 2008.  Now we are considering electing this man, Romney, the Leverage Buy out guy, President?

No. Bring on the populist battle we have been waiting for. The 1% vs the 99%.

The biggest political problem Obama has with both the Progressives and the Libertarians is that he pussied out on the Wall Street Bailout. No one went to jail, unlike the Savings and Loan Crisis of the 1980′s. We paid out the banks 100 cents on the dollar for billions of essentially worthless Credit Default Swaps and other forms of insurance written with no collateral behind it.

This week, Jamie Dimon gave Obama a do over. Obama needs to spend the next six months in a populist crusade to enact the Volker Rule is it’s strictest form. A form that would have banned the obviously phony “hedge” that JP Morgan is now going to loose $3 Billion on.

“The timing, prices and particular choice of index that people are saying that J. P. Morgan used seems to support the view that there was more to the trade than just a hedge,” said James Parascandola, a veteran credit-default-swaps trader formerly with MF Global Holdings Ltd. and Barclays PLC.

Already, Republicans like accused inside trader, Representative Spencer Bachus, the most powerful Republican on finance, are coming to Jamie Dimon’s defense.

“Even with this loss, I believe they’re one of the most profitable financial institutions in the country,” Mr. Bachus said at a House hearing on Wednesday morning. “There is no risk from this loss to depositors or to taxpayers.…They remain a very profitable, viable institution.”

Never mind.

For Obama, this is a Teddy Roosevelt moment. Roosevelt gave a speech in Provincetown, Massachusetts right after the Panic of 1907, which eerily mimicks the crash of 2008. He called out “the malefactors of great wealth” and went on to say,

“. . . [these men] combine to bring about as much financial stress as possible, in order to discredit the policy of the government and thereby secure a reversal of that policy, so that they may enjoy unmolested the fruits of their own evil-doing. . . I regard this contest as one to determine who shall rule this free country—the people through their governmental agents, or a few ruthless and domineering men whose wealth makes them peculiarly formidable because they hide behind the breastworks of corporate organization.”

For Barack’s whole administration he has followed his Harvard instincts and stuck with The Establishment. Thats why Geithner and Summers were his economic team and Gates was his defense team. Now, like Teddy he has to risk being called a class traitor and cast off his establishment team in the hopes that he could fulfill Tom Paine’s promise of our Revolution, “We have it in our power to begin the world over again.”

What is remarkable is that Obama essentially can fulfill this promise by doing nothing.

If he is able to defend the laws he already passed—the Affordable Care Act, the Women’s Equal Pay laws and the Sequester passed in the summer of 2011—we will have “begun anew”. Why?

Let’s start with the sequester.

Since 1955, Progressives have tried to cut the Military Budget, without success.But if nothing changes, starting in January the Defense Budget will take huge cuts.

For the Pentagon, that would mean about $50 billion a year in less defense spending from fiscal year 2013 to FY2021, according to the Congressional Budget Office. The CBO baseline already assumes roughly $450 billion in reduced defense outlays, coming from provisions of the Budget Control Act.

Lindsay Graham, Mr. Defense Pork is outraged at the very thought of the cuts.

“I have heard from people after every engagement: ‘why do you need this military?’ only to have to ramp up, go to war without the equipment, send the (National) Guard off with a shell of a force. What happens if China gets bolder, Iran gets a nuclear weapon, (or) we have to go into Yemen?”

I’m sure if Mitt Romney becomes President, Lindsay won’t have to worry.

So what about Bernanke’s notion that the Sequester will drive us off a “Fiscal Cliff” ? Well due to the brilliant negotiating by Barney Frank in the conference committee, there are no cuts to Medicare or Social Security in the Sequester. So does the “fiscal cliff” arrive because we are cutting the military industrial complex? Highly doubtful. The weapons systems now being built are on very long cycles and it is doubtful this employment would slow down. So what happens when the Bush Tax Cuts expire (the other part of Bernanke’s fiscal cliff)? Quite frankly, very little. The rich are not going to stop buying $100 million paintings, just because their income tax rate went up 4%.

So this is all Barack has to do. Push through the Volker Rule and threaten to veto any change to the Budget Control Act of 2011 or the Affordable Care Act.  An America with a radically reduced military budget, a decent and fair universal health care system and a financial sector under control would be able to face the future unburdened with Neoconservative fantasies of being the world’s cop and with an economy not built around speculation but around production and services sold world wide.

Now all Barack has to do is get reelected.

I was at a conference today when Peter Ackerman, the funder of Americans Elect, gave a speech. It was an empty suit recitation of how our politics are broken and we need a third party. They have somehow managed to avoid registering as a political party even though they plan to be on the ballot in 50 states.

By not registering as a political party, Americans Elect avoids having to disclose all its financial backers. The veil of secrecy permits donor protection for those who worry about retribution from the two major parties, the group says.

This is patent nonsense. When I was an investment banker in the 1980′s, Peter Ackerman was famous as Mike Milken’s enforcer at Drexel Burnham. One of his duties was to raise hundreds of millions for Mitt Romney’s Bain Capital. It is so clear to me that Romney knows the only way he will get in the White House is by creating his own version of Ralph Nader, the man that put George Bush in the White House. So he gets Ackerman to fund this totally phony political party to try and drain off just enough moderates from Obama for Romney to sneak in. When I asked Ackerman if he funded Romney he said yes, but claimed it was 20 years ago, and so it was irrelevant.

What a crock.

The unemployment rate clicked down last month while a relatively anemic 150,000 jobs were added. What’s going on? As I have been saying for months, the leading edge of Baby Boomer retirement is kicking in and this is a good thing.

But a number of economists are arguing that the recession is distracting people from the real story — long-run demographic trends that have nothing to do with the current economy. Baby boomers are starting to retire en masse, which means that there are fewer eligible American workers.

Demographics have always played a big role in the rise and fall of the labor force. Between 1960 and 2000, the labor force in the United States surged from 59 percent to a peak of 67.3 percent. That was largely due to the fact that more women were entering the labor force while improvements in health and information technology allowed Americans to work more years.

But since 2000, the labor force rate has been steadily declining as the baby-boom generation has been retiring. Because of this, the Federal Reserve Bank of Chicago expects the labor force participation rate to be lower in 2020 than it is today, regardless of how well the economy does.

In a March report titled “Dispelling an Urban Legend,” Dean Maki, an economist at Barclays Capital, found that demographics accounted for a majority of the drop in the participation rate since 2002.

Every year, for the foreseeable future, 3.5 million boomers will retire. Thus, the 300,000 people who left the workforce last month is about on track with that figure. Mitt Romney can rattle on about how horrible this is, but he’s just wrong. If you have worked a lifetime and have a decent pension, you will retire when you get a chance.

This brings us to the real unemployment crisis. Read more…