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Fear Itself

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Waiting in the airport for my plane back to LA, I heard one of the CNN bloviators describe the last four days as a “Reign of Terror”. The mind boggles. I don’t mean to discount Boston’s tragedy and obviously these two crazy kids managed to kill four people and wound quite a few others, but by what measure was the 60 hours after the original bomb blast a “Reign of Terror”? Only by the measure of a fear obsessed 24/7 media culture that has taken the old, “if it bleeds, it leads” adage of the tabloids to its natural conclusion.

Lets step back and think about the quality of “terrorist” that has menaced America post 9/11. As incompetent a collection of losers and Osama wannabes as one could imagine. The shoe bomber, the underwear bomber, the Times Square bomber, and now these two confused Chechens. Here is my assumption about the Boston Bombers. The older brother, having been denied US citizenship because he beat up his girlfriend, becomes alienated and starts hanging out on Islamist web sites. Meanwhile the younger brother, already an American citizen is almost preternaturally assimilated into US youth culture. He’s handsome, smokes pot, has lots of girl friends and dresses like a typical hip hopster. The older brother comes back from a trip to Chechnya talking Jihad and the younger brother is too stoned to resist the manic appeal of his beloved brother to participate in the planting of the bombs, which the older brother has manufactured off of Islamist website recipes.

But they are the gang that couldn’t shoot straight. They are clueless to the fact that any big city in America has almost complete surveillance coverage of its streets. They don’t even think of trying to escape! The little brother goes out and gets stoned with his friends the night after the Marathon. It’s only the next morning when he realizes that he might need his car, which is in the shop getting repaired. By the time both their pictures are on TV, they are in a state of complete panic. You can almost hear the younger brother pleading with his sibling, “what the fuck did you get me into?”

When the inevitable happens and they are cornered by the cops, they comically try to throw one of their IED’s at the cops, only to have it bounce 20 feet in front of them, explode and fill their own legs full of shrapnel.

But if you were to tune into Cable news on Thursday or Friday, you would have not heard about this Opera Bouffe, but rather be confronted with all the post 9/11 Terror in our Cities graphic packages, complete with scary music. A whole city shut down for 24 hours over what should have been treated as a high level SWAT operation. Was there anyone who even dared to ask if this was really the appropriate reaction?

As I have been saying for a while, the default setting for American media and finance culture for at least the last 12 years has been FEAR. It has forced us to overreact in almost every sector. It forced us into two unnecessary wars. It forced us to bail out the big banks at the public expense. It has kept Americas great companies from investing in our future, preferring to hold $trillions in cash on their balance sheets for what they are assured is the coming shitstorm where they will no longer be able to borrow. And few realize that most of the Great Wall Street fortunes made in this period have been by taking advantage of the fear culture. The whole hedge fund economy is based on taking a short position (betting on failure) and then “talking your book” so it becomes a self fulfilling prophecy. How did John Paulson accumulate one of the great fortunes of our time? By designing a securitized bundle of mortgages that HE KNEW WOULD FAIL, taking the short side of the trade and then getting some suckers (fooled by the AAA rating) to take the long side.

Nothing productive has come out of this fear culture. Despite the constant barrage of bad news, the world has actually gotten better in the last 12 years. Millions have been lifted out of poverty. Life expectancies have improved. More women and minorities  are being educated and are taking positions of power. Cars are getting more efficient and less polluting. But for a tabloidized media culture, these are not interesting stories. And for speculative capitalism, good news does not bring instant windfalls like a great short play.

As a society we have to realize that Franklin Roosevelt was right when he said, “We have nothing to fear, but fear itself.” America’s innovation culture was not built by being risk averse, just the opposite. Just how the media and the stock speculators could heed Roosevelt’s advice is of course the much larger question.

Twilight of the Oligarghs

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This image of Sheldon Adelson wheeling his way out of a busted Romney Victory Celebration seems so telling to me. This sad old man, with his badly dyed hair, who thought he could buy the election, unable to even walk away with dignity. In the end, he did not really understand our country. His own personal piqué at having to pay more taxes is a kind of Madame LaFarge gesture, but the Sans Culottes are right outside the walls of his Venetian Palace and some of them are even inside, cleaning the drunk gamblers barf off the bathroom floor. If there is any justice, he will be in jail at this time next year for bribery under the Foreign Corrupt Practices Act.

Can you imagine what Karl Rove’s life has been like for the last 36 hours? All those billionaires ringing him up asking, “what the fuck happened?”, knowing full well that they had bet the house on a loser, not because of any great principle, but simply to keep their tax cuts and get rid of the EPA and Dodd Frank. In the last minutes of his expiring bet on Tuesday Night, when Rove tried to get Fox News to reverse their call that Obama had won, it revealed the smallness of the man and the deep failure of the whole exercise the Rove and Murdoch tried to foist on the American public.

And then there are the true bastards of this game, the Koch Brothers. Almost singlehandedly responsible for the climate change denial industry, they threatened their employees who didn’t vote for Romney. They spent their millions trying to keep from having to clean up all the dirty plants they run that poison our air and water.Good luck with that, boys.

The question must be asked. Do we have to go through this again in two years? Have these assholes learned their lesson? I doubt it. Hopefully some investigative reporter will really uncover the dark corruption of the Super Pac system. How much did Karl Rove make off Crossroads? Who were the secret donors who tried to stop California’s Prop 30 at the last moment? How is the Koch’s Super PAC a Social Welfare organization under the IRS code?

Donald Trump tweeted we need a revolution after his losing bet on Romney failed. If he and his billionaire buddies try to steal an election one more time, there will be a revolution, but it won’t be one the Donald is happy about, because the pitchfork brigades will be outside Trump Tower looking for his comb over scalp.

American Crack-Up

When did it start?

When did America’s mass consensual hallucination begin? When did the boundaries between truth and fiction dissolve?

Consider the evidence.

I awoke this morning to read that a candidate for the Presidency (Newt Gingrich) believes we should launch a preemptive nuclear strike on North Korea and Iran because he fears they are about to launch a nuclear missle to be “detonated in outer space high above the American heartland, (which) would set off a huge and crippling shockwave of electricity. Mr. Gingrich warns that it would fry electrical circuits from coast to coast, knocking out computers, electrical power and cellphones. Everything from cars to hospitals would be knocked out. “Millions would die in the first week alone,” he wrote in the foreword to a science-fiction thriller published in 2009 that describes an imaginary EMP attack on the United States. Most scientists regard this as the ravings of a paranoid lunatic even if these two pygmy powers had such a rocket, and yet this man could seriously be the Republican nominee for the President of the United States. This is like Ron Hubbard running for President on the Scientology ticket. Continue reading

Bring on the Culture War

The pundits are saying this week that progressives are experiencing “Perry Panic”.

Bullshit.

I say bring it on.

Bring on this culture war to end all culture wars. We need a real clear decision. Do we (all the people, not some of the people) want to move towards Rick Perry’s vision on the future or Barack Obama’s vision of the future. Down Perry’s road lies a world where gays stay in the closet, women are submissive, where Social Security is abandoned to the care of Wall Street (for a big fee), and where we keep trying to play the role of policeman of the world.

Pretty much the opposite would be what Obama believes. So let’s choose as a country

As Dana Milbank has pointed out, in another time, Rick Perry would be thought of as a nut case.

But we are not in a normal time, we are in an interregnum, “where the old is dying and the new cannot yet be born”. The only way to get out of the political quicksand we find ourselves in as a country is to have a knock down drag out election about the direction of America. It’s not like this hasn’t happened before. In 1800 with Jefferson’s Democratic victory over the Federalists, the lines for the American story were set, as the great historian Joseph Ellis noted.

“The main story line of American History, cast Thomas Jefferson and Alexander Hamilton in the lead roles of a dramatic contest between the forces of Democracy and the forces of Aristocracy.”

For most of our country’s history the Hamilton forces have won; money = power. But in the elections of 1828, 1860, 1896, 1932, 1960 the country underwent a complete political realignment with the forces of democracy breaking through and Capital losing control.

So I’m looking forward to the first Obama-Perry Debate because it will distill the choice for America. Do you want to go back to Rick Perry’s imaginary 1950′s world or do you want to take a chance on real future where American entrepreneurs can win around the world because we have our priorities straight.

We educate our citizens to world class standards, we create world class intellectual property, we support freedom movements in various ways in various regions, but we don’t consider ourselves the unpaid cop of the world.

I think Obama can deliver on those priorities and the mix of these three elements can create an innovation movement of extraordinary power. I understand there is a lot of cynicism around in the liberal community, but I have thought since I started this blog in December of 2007, that Obama was an extraordinary politician. Go with me here. Case in point.

Today Obama announces he wants to do a speech before Congress at the exact time of the Republican debate on MSNBC. He accomplishes two wonderful objectives in the same move.

  1. He brings attention to a Republican Debate that no independent was planning to watch. Now they may observe at first hand the Chamber of Horrors that is the Republican Field, all battling to get to the right of eachother. But Good Ole Rick is gonna win that battle because he’s put 234 people to death by injection since he has been governor.
  2. If the Republican’s Chicken out, (NBC is willing to move the Debate back an hour) then they will look like they don’t want a direct comparison with Obama’s speech to Congress. And if Obama accedes he looks like a reasonable man.

This is gonna be a fun election. For those of us who enjoyed 2008, 2012 is gonna be a blast.

JT

Brave New World, Redux

After Thursday’s stock market crash, we find ourselves staring into the abyss of a potential double-dip recession. Republican’s, having ignored the history lesson of the business lobby 1937 Austerity Push, which managed to push America back into depression, seem to be clueless to the fate of most Americans. Of course, As the New York Times reports, their financial base is doing very well and luxury spending is reaching new highs. But America’s economy lives and dies on the confidence of the average consumer. In the go-go years of the late 1990’s the concept of “mass affluence” and “affordable luxury” dazzled marketers into believing that “aspirational marketing” was the path to the streets of gold in which the majority of citizens would have 60” inch flat screen TV’s running 500 channels of cable TV and 100 MBPS Broadband services, even if they had to hock their house to get it. But, as a new White Paper from Ad Age entitled, “The New Wave of Affluence” points out, “In 2011 however, in the wake of a massive reset, it appears that mass affluence may be a thing of the past.” Ad Age goes on to suggest that marketers concentrate their attention on the 3% of the American population earning more than $200,000 per year, “who account for almost 50% of consumer spending.” The esteemed Telecom analyst Craig Moffett, in a report titled “How the Other Half Lives” chose to look at the darker side of this picture. “After paying for food, shelter, and transportation, the average bottom-40% family is left with…. wait for it…. just $1,215 per year, or $100 a month, for everything else.  That’s $100 per month for all discretionary purchases, telecom services, cable or satellite TV, movies…  and everything else.  Indeed, after Healthcare, the number drops below zero.” A recent report on consumer discretionary spending from the Federal Reserve Bank of New York shows “this time is different.” Going back decades, such spending had never fallen more than 3 percent per capita in a recession. In this slump, it is down almost 7 percent, and still has not really begun to recover.” Continue reading

Old Masters and Young Geniuses

In researching my book I have been reading the work of an economist named David Galenson, who is trying to understand the life cycles of artisitic creativity.  In his book, called Old Masters and Young Geniuses: The Two Life Cycles of Artistic Creativity, he notes two artistic prototypes–Experimental innovators, who work by trial and error and arrive at their major contributions gradually, late in life. Cezanne represents this archetype. In contrast the Conceptual innovators make sudden breakthroughs by formulating new ideas, usually at an early age. Picasso represents this archetype.

As I was trying to apply this schema to music I put Bob Dylan in the Conceptual innovator camp and Louis Armstrong in the Experimental innovator group. And then in the midst of my sadness over the sudden death of a friend, I found myself listening over and over to a piece of Dylan’s late work called Workingman’s Blues #2. It showed me that an artist can burn bright and hot in his early years (for Bob almost too hot) and still have the great later work of a Cezanne. Here’s the last verse of the song.

Now I’m down on my luck and I’m black and blue
Gonna give you another chance
I’m all alone and I’m expecting you
To lead me off in a cheerful dance
Got a brand new suit and a brand new wife
I can live on rice and beans
Some people never worked a day in their life
Don’t know what work even means

Meet me at the bottom, don’t lag behind
Bring me my boots and shoes
You can hang back or fight your best on the front line
Sing a little bit of these workingman’s blues

Grand Theory, Continued

Since my post last week on A Grand Theory Of Our Present Dilemma, I have been inundated with a great deal of personal communications from friends and colleagues that point out that quite a few other economists have been advancing the same notion that the financialization of the American economy was a feint to hide the underlying stagnation of the “real economy”. My friend Ken Miller, former Vice Chairman of Credit Suisse/First Boston pointed me to the work of his father in law Paul Sweezy. Others have pointed out the work of the Deutsche Bank analyst, Jim Reid. In the chart below, Reid points out that in the last ten years, U.S. financial sector profits have deviated from the mean to the tune of $1.2 trillion and that a return to the mean would inevitably mean a give-back of that amount.

excess-profits

Reid’s report was written last July, long before we realized the incredible amount of potentially worthless CDO’s still were sitting on bank balance sheets.The U.S. Controller of the Currency’s latest report shows that the total amount of derivatives sitting on bank balance sheets has only fallen by 3% in the last quarter and still totals an astonishing $175 Trillion.

credit-derivatives

What is obvious is that the gains from the financialization of the economy only went to the top 1% and that wages for the rest of the population as a percentage of GDP have continued to fall.

Wage disbursement as percentage of GDP

Wage disbursement as percentage of GDP

At the same time as we juiced up the financial economy, the real economy continued to stagnate. The overcapacity that I have been talking about is not particularly new, but it will now get much more serious.

Percent utilization of industrial capacity

Percent utilization of industrial capacity

 As Sweezy points out, our contemporary notion of a progressive economist, Paul Krugman may have discounted Milton’s Friedman’s monetary solution to a depression,but his solution was hardly comforting to those of us not interested in the military industrial complex’s answer to our problems.

If monetary policy failed to avert the reemergence of “mass unemployment” on the level of the 1930s, which he thought unlikely, there was always “an easy solution, expansionary fiscal policy.” Krugman’s proof: “the giant public works program that restored full employment, otherwise known as the Second World War.”

On Sunday, in his interview with Matt Lauer, President Obama said that “it is likely that the banks have not fully acknowledged all the losses that they’re going to experience,” and that more banks were likely to fail. I’m afraid this is an understatement. What worries me the most is that we are nowhere near the bottom of this crisis and already the signs of civil unrest caused by the crisis are everywhere.

I am not a seer, and have no idea where this this furious gale will bear the ship of state. I do know that America has the ability to reinvent herself and am comforted by the words of de Tocqueville.

Democratic nations care but little for what has been, but they are haunted by visions of what will be; in this direction their unbounded imagination grows and dilates beyond all measure….Democracy, which shuts the past against the poet, opens the future before him.

Fire The Advance Man

If Sarah Palin was on a Jihad to get her ex-brother law Trooper Michael Wooten fired, my guess is that the Republican advance man who came up with the brilliant idea of the hockey puck drop at a Philidelphia Flyers game tonight is next on the hit list.

It’s hard to blame Sarah Palin for her booing on the ice in Philadelphia this evening. It’s almost a truism of politics that if you send a pol to a sporting event, he’s going to get booed. Politicians, as a class, aren’t all that popular, and it’s what sports fans do. According to legend, Eagles fans once booed Santa Claus. Still, not a great moment.

The Times hockey blog says the boos were “resounding.” The Wilmington paper says it was an “avalanche.”