You all know I have a remarkable tolerance for libertarians, but here is where I really break from their “fire all the regulators” schema. Jack DeCoster, owner of Wright County Egg, which recalled millions of eggs poisoned with Salmonella in the last few weeks is a serial violator of even the egg Councils own rules. As the Wall Street Journal reports when the FDA finally got into this case and inspected DeCoster’s egg factories, this is what they found.

The FDA inspectors who visited Wright County Egg, one of the producers at the heart of the salmonella-related egg recall, reported finding  wild birds, rodents, dead and live flies, maggots and chicken manure piled up to eight feet high in or near the producer’s facilities.

There are just too many bad actors out there like DeCoster. The government’s regulatory powers are the only thing between DeCoster’s greed and the public health.

The elder DeCoster, a Maine native who set up business in Wright County in the 1980s, pleaded guilty to federal immigration charges in 2003 and paid a record $2.1 million in penalties. In 2001, the state Supreme Court ruled that DeCoster, a repeat violator of state environmental laws, could finance, but not build, hog confinement operations for his son. Earlier this year, the elder DeCoster paid a fine to settle animal state cruelty charges against his egg operations in Maine.

The market can’t police this guy because he sells his eggs to hundreds of supermarket chains that sell the eggs under their house label. So you can’t avoid factory eggs from guys like DeCoster trying to cut corners to make a bigger profit.

To me the Federal Government has three important Cabinet departments: State, Defense and Treasury. And then it has a bunch of regulatory agencies like the FDA, SEC, EPA, etc.The party in control of the Presidency really has control over the regulatory agencies. No one is messing with Obama’s handling of Defense or State and Treasury must be doing OK because people are still buying our bonds like crazy. So even if the Republican’s take control of the house and pass some crazy “return to the Bush Tax cuts” bill, it will never pass the Senate. Even worse case, the Dems lost the Senate, they could use the Republican filibuster tactic and tie up the big giveaway to the top 1% income earners.

What I’m saying is the progressive control over the regulatory agencies will be the greatest gift Obama can give his countrymen. He can be our protection against the greedheads like Jack DeCoster.

“The old is dying and the new cannot be born.  In this interregnum there arises a great diversity of morbid symptoms.”-Gramsci

The etymology of the word “morbid” is the Latin word morbidus meaning disease. Let us consider the particular disease that grips America right now. Students of Germany in the early part of the Great Depression (1929-1934) might recognize the conditions for a Fascist democratic coup that took place in that period. Here are some of the symptoms:

Paranoia-The Wall Street Journal reports that if you had been savvy enough to invest in an Armageddon portfolio this year you would be sitting pretty.

It is the ultimate bunker portfolio.

Amid the market tumult, a handful of stocks have seen their share prices ratchet up to record highs in recent weeks. And many of them are connected by a curious, if disconcerting, thread: Between them, they provide an investor with essentials for any respectable fallout shelter—makers of bottled water, canned goods, dehydrated broth, gas masks and auxiliary generators.

As with the Goldline Scams, Beck and the end of the world brigade that are pushing the notion, that Spam is the protein source of the future, is part of a completely dystopian fantasy that I think bears little touch with reality but feeds the all important “fear quotient” that is so necessary to fascist politics. A strong man is needed in a time of chaos.

Ignorance-As Timothy Egan so eloquently wrote last week, we are entering cloud cuckoo land.

A growing segment of the party poised to take control of Congress has bought into denial of the basic truths of Barack Obama’s life. What’s more, this astonishing level of willful ignorance has come about largely by design, and has been aided by a press afraid to call out the primary architects of the lies.

The Democrats may deserve to lose in November. They have been terrible at trying to explain who they stand for and the larger goal of their governance. But if they lose, it should be because their policies are unpopular or ill-conceived — not because millions of people believe a lie.

The second element of fascist strategy is The Big Lie. First perfected in 1933 by Hitler’s propaganda chief Joseph Goebbels— “In that position, he perfected the “Big Lie” technique of propaganda, which is based on the principle that a lie, if audacious enough and repeated enough times, will be believed by the masses.” (Wikipedia ).

As Jane Mayer pointed out, The Big Lie  and the  Tea Parties are  financed by Billionaires like David Koch and Koch Industries, that have thrived on Republican government corporate welfare and radically lowered taxes, during the Reagan Bush Era.

The combination of fear and the gullibility to believe The Big Lie, as the Germans, Italians and Spaniards all learned in the depths of a depression, is a lesson we need to avoid here. I still don’t know what Glenn Beck really did last weekend. It was a real curveball. And Beck has studied Orson Welles his whole life. (His production company is named after Welles’s company, Mercury). And Welles knew from the night War of the World’s terrified America, that the the national combination of paranoia and a Big Lie (the Martians were invading New Jersey) can panic Americans into really morbid symptoms. Last Weekend might be just the first act of Beck’s three act play.

Stay tuned.

I was at lunch with Norman Lear a few months ago when someone at the table was bemoaning the sorry state of a TV business dominated by reality fare like The Real Housewives of New Jersey. Norman turned and said, “that may be true but as far as I’m concerned we are in the golden age of TV drama.”

Whoever wins the Emmy tonight for the Best Dramatic Series, I have come to realize that Lear is right. My own personal favorite, Mad Men, is a perfect example of why the quality of writing and character development in contemporary TV drama surpasses that of the cinema. The most popular dramatic movies this year are Avatar, Inception, Iron Man 2, The Twilight Saga; Eclipse, Clash of the Titans. Not one of them can compare in the quality of dialogue, character or plot twist with an single episode of Mad Men. Of course you say that is an unfair comparison as all the top action movies are not about character or dialogue–they are about action and special effects. So let’s go further down the list to Shutter Island or Eat, Pray, Love. I still say no contest.

The problem with Hollywood is that they are deathly afraid of characters deemed “unsympathetic” and so they will never try the crazy high wire act that Mad Men’s Matthew Weiner is constantly working with Don Draper. Draper cheats on his wife, drinks in the middle of the day and is often rude to his subordinates. And yet you stick with him, deeply interested in his journey. In the current season, Draper is headed for a real fall, at which point we assume he will pull himself together and regain our trust. But you can’t be sure and that is why we are in the golden age of TV drama.

I watched the whole Glenn Beck speech waiting for the red-meat politics to flow, but it never came. Instead what he delivered felt like the world’s largest AA meeting. Beck confessed his sins and asked us all to surrender to God and “Divine Providence.” He promised to listen with an open heart to his political opponents.

Either he had some Paul on the road to Damascus conversion in the last few weeks or this was a Glenn Beck impersonator at the Lincoln Memorial.

Weird.

My previous argument in the Economist debate was that the 3% of GDP that was made up of financial services in 1965 was clearly sufficient to the task, the proof being that the decade was a strong candidate for the greatest economic decade of the 20th century. We should be suspicious, therefore, of the benefits derived from the extra 4.5% of the pie that went to pay for financial services by 2007, as the financial services share of GDP expanded to a remarkable 7.5%. This extra 4.5% would seem to be without material value except to the recipients. Yet it is a form of tax on the remaining real economy and should reduce by 4.5% a year its ability to save and invest, both of which did slow down.

With a U.S. GDP of $14.3 Trillion, Grantham is saying we spent in excess of $643 Billion a year on the financial sector that could have gone to more productive uses. Much of that went to pay bankers and hedge fund commissions and bonuses. Here’s Grantham again.

This bloated financial system was also increasingly deregulated and run with increasing regard for profit and bonus payments at all cost. Thirty years ago, Hyman Minsky could have told you that this would guarantee a major financial bubble sooner or later and at periodic intervals into the indefinite future. This unnecessary explosion in the size of the financial world has been a clear example of the potential for dysfunctionality in the capitalist free market system. I have not been a great fan of the theory of rational expectations – the belief in cold, rational, calculating homo sapiens; indeed, I believe it to be the greatest-ever failure of economic theory, which goes a long way toward explaining how completely useless economists were at warning us of the approaching crisis (with a half handful of honorable exceptions). But it would be a better world if their false assumptions were actually accurate ones: if only information flowed freely, were processed efficiently, and were available equally on both sides of every transaction, we would indeed live in a more efficient and probably better world. The problem that information is asymmetrical in the financial business is a serious one. One side of the transaction, say an institutional pension fund, is often at the mercy of the other, say the prop desk of a talented and mercilessly profit-oriented investment bank. The problem of asymmetrical information is compounded by the confusion between the roles of agent and counterparty. I grew up in a world where stocks and other financial instruments were traded by the client with a high degree of trust in the agent. Millions of dollars traded on a word, without a tape recording. Somewhere along the way, without any formal announcement of the change, the “client” in a trade mutated into a “counterparty” who could be exploited. Steadily along the way, the agents’ behavior became more concerned with the return on their own trading capital than with the well-being of their clients…

When institutions, for example, pay 20% of their profits to a hedge fund, they are presumably paying a market-derived competitive rate. But what the institutional industry in total misses is that it is a zero-sum game. All of the profits the hedge fund makes are extracted from the market at someone’s expense, let us say, to oversimplify, another institution’s expense. One part of the collective institutional fund universe is paying a large group of hedge fund managers to squeeze gains out of another part of the total pot and then is sharing these gains in a rather cannibalistic way. The incentive payment is designed in a way that encourages and maximizes this extraction of gains at their own collective expense. One institution pays a fee to encourage another institution’s loss, and then participates in the loot. The logic is acceptable only because it is obscured by a fallacy of composition: we always forget that we are the market, and that all costs are a reduction in our returns.

But Grantham’s concerns are more fundamental, because in the next 20 years the U.S. (along with much of the developed world) will have far fewer workers to support the retirement of the Boomers. In other words, instead of spending our collective wealth on remuneration for the top 5% of the society, we might have prepared for the inevitable winter that is ahead of us.

So what can you do to prepare even modestly for a shift in population mix? I believe that there are two useful steps that can be taken, or could have been. Step 1. You can make sure that the infrastructure is as up-to-date as it can possibly be to minimize any unnecessary load on future workers and taxpayers so that no unnecessary maintenance costs have to be paid. In such a sensible world, the roads and bridges are sparklingly well maintained, with many of them new. The schools, water, and energy transmitting systems are as modern and effi cient as can be. Obviously, we have totally failed on Step 1. We have not even discussed that our aging population makes this policy extremely desirable. We enter the new difficult world of an aging population profile perhaps as badly prepared as possible, with huge unpaid maintenance bills, the worst in modern times. Our infrastructure is sadly neglected even by our own earlier standards, with poor public transportation, decrepit bridges, etc., etc., etc. It’s as if we expected a great and immediate increase in the worker bee percentages, which is the complete opposite of reality.

Step 2. We can pay down all future debts to further ease the problem of the squeezed 30-year period that we know we face. Here again, we enter our trickiest period, with record Federal Debt heaping additional claims onto the future. Not content with having the reduced percentage of workers carrying proportionately more retirees, we have needlessly loaded them with our routine current expenditures so that they – the working taxpayers – will have to add unnecessarily high interest and debt repayments to their future load.

Both steps are completely the reverse of what is needed. What a testimonial to the shortsightedness of both today’s and yesterday’s politicians. And to be fair, let it be said that long before Obama was a gleam in the eye, no conversations at all were heard on the prudent preparation that this aging population problem desperately required. Congress has played the part of the carefree, unprepared grasshopper perfectly.

I do think we are headed for a crisis. It is a crisis that will take a wholesale reordering of our screwed up priorities to resolve. We will have to drastically cut back the money spent on the Military sector and the financial sector. We will all have to save more and spend less on unneeded crap at the mall. And as a society, we will have to stop acting like those Congressional grasshoppers who have been singing all summer and may be rebuked by the industrious ants of Asia, when we come begging for sustenance during the long winter of the Boomer’s retirement. The problem is, that there is one alternative solution to the crisis ahead—American Exceptionalism.

Romney, Palin, Gingrich all argue that we can stay happy grasshoppers, because the rules don’t apply to us. We’re Americans and we are exceptional. We don’t have to have world class schools, roads, broadband and alternative energy systems because we have a world class war machine. In our most paranoid visions the right wing man on a horse rides in and bombs Iran to get our economy going again. I know the neocons have been predicting World War IV for a while, but it doesn’t have to end this way.

There is still time before winter comes.

The first is the comparative budgets of the Pentagon since the Carter Presidency.

What is so immediately striking is that the military budget has grown 289% in real dollars since 1980 and yet the actual fighting force has shrunk radically: Army divisions down by 47%, commissioned ships down by 45%, Air Force fighter attack jets down by 54%. So the “Tooth to Tail ratio” has dropped radically. Lots of bureaucrats not so many soldiers as this next chart shows.

As my correspondent so eloquently put it, “70%+ of our DoD personnel have not deployed or have only deployed once in their careers. Meanwhile, the other 30% are being run into the ground by the burdens of two wars. I have close friends on their 4th or 5th trip to Iraq.” So where are all these “undeployable soldiers working? Well one place is in the vast layers of the Pentagon bureaucracy that make General Motors in 2005 look like a start-up.

But beyond this ridiculous situation comes the fact that 339,000 active duty personnel are being deployed in “commercial activities” at one of the 5000 military bases we maintain around the world. These soldiers, mostly performing jobs like clerking in the PX cost $160,000 per soldier/ per year at a total cost of $58 billion per year. This is how the DBB depicted this absurdity.

Defense Secretary Gates’s advisors from the corporate sector have obviously made him aware of many of the problems he will face in trying to attack this monstrous, obscene bloat. Unfortunately, Congress may be the enemy in cleaning up this mess. No congressman who has one of these little military cities in his own district wants to see them cut back–Military Keynesianism.

Where we once could expect sensible Republicans like Lugar and McCain to be outraged by this waste, the new force of the Nativist, Nationalist Right Wing of the Republicans will probably cow them into silence. And so it will be left to the odd Liberaltarian coalition to carry the flag of fiscal responsibility on this one. As the DBB states in its introduction to Secretary Gates, “The country’s current fiscal posture is a national security threat.” Our ability to continue as the world’s un-paid cop, using borrowed money is an unsustainable enterprise. We need to consider Life After Empire.

Alienation is the precise and correctly applied word for describing the major social problem in Britain today. People feel alienated by society. In some intellectual circles it is treated almost as a new phenomenon. It has, however, been with us for years. What I believe is true is that today it is more widespread, more pervasive than ever before. Let me right at the outset define what I mean by alienation. It is the cry of men who feel themselves the victims of blind economic forces beyond their control. It’s the frustration of ordinary people excluded from the processes of decision-making. The feeling of despair and hopelessness that pervades people who feel with justification that they have no real say in shaping or determining their own destinies.

Many may not have rationalised it. May not even understand, may not be able to articulate it. But they feel it. It therefore conditions and colours their social attitudes. Alienation expresses itself in different ways in different people. It is to be found in what our courts often describe as the criminal antisocial behaviour of a section of the community. It is expressed by those young people who want to opt out of society, by drop-outs, the so-called maladjusted, those who seek to escape permanently from the reality of society through intoxicants and narcotics. Of course, it would be wrong to say it was the sole reason for these things. But it is a much greater factor in all of them than is generally recognised…

The other illustration is the widespread, implicit acceptance of the concept and term “the rat race”. The picture it conjures up is one where we are scurrying around scrambling for position, trampling on others, back-stabbing, all in pursuit of personal success. Even genuinely intended, friendly advice can sometimes take the form of someone saying to you, “Listen, you look after number one.” Or as they say in London, “Bang the bell, Jack, I’m on the bus.”

To the students [of Glasgow University] I address this appeal. Reject these attitudes. Reject the values and false morality that underlie these attitudes. A rat race is for rats. We’re not rats. We’re human beings. Reject the insidious pressures in society that would blunt your critical faculties to all that is happening around you, that would caution silence in the face of injustice lest you jeopardise your chances of promotion and self-advancement. This is how it starts, and before you know where you are, you’re a fully paid-up member of the rat-pack. The price is too high. It entails the loss of your dignity and human spirit. Or as Christ put it, “What doth it profit a man if he gain the whole world and suffer the loss of his soul?”

I have been accused of aggregating data when it comes to my economic analysis of America’s crisis.

I plead guilty.

If you were to look at the chart above of personal consumption, you would certainly think we were still in a deep recession, if not the second great depression. And yet over the weekend in two separate dinners, the restaurants on the West side of Los Angeles were packed. The conversation seemed ebullient. The wine was flowing.

So we are living in parallel universes. One world as described by Gretchen Morgenson are in Debt’s Deadly Grip.

Halfway through this year, 11.4 percent of outstanding consumer debt was delinquent, up slightly from 11.2 percent a year earlier. An astonishing $1.3 trillion of consumer debt is delinquent, with $986 billion seriously so — 90 days late and counting. While delinquent balances are down by about 3 percent from the same period last year, serious delinquencies are up a bit more — 3.1 percent.

Here are some other troubling statistics from the Fed: a half-million people had a foreclosure added to their credit reports between March 31 and June 30, an increase of 8.7 percent over the first quarter of the year. And the numbers of consumers with new bankruptcies appearing on their credit reports rose 34 percent during the quarter, to 621,000. That increase is significantly bigger than it has been in the last few years, according to the Fed.

These sobering facts directly lead to the aggregated data in the chart at the top. No one with maxed out credit cards and an underwater home equity loan is spending time at the mall.

And then there is the other America, the top Five Percenters, who can still fill up the Apple Store on a Thursday night, lusting after their new I Pads. The divergence of these two worlds is leading to a potential crisis of capitalism. In my darkest, most conspiratorial imagination, I imagine the politicians of the two major parties engaged in a shadow play of feigned opposition with only one real goal—keep capitalism from collapsing.

In that sense, Barack Obama, like Jimmy Carter and Bill Clinton before him, may have entered office with a vision of true reform, only to discover that the nexus of the financial establishment and the state was so interwoven, that the elites had only one expectation–to save their ass. Here is Bill Greider in his definitive account of the finance-state nexus, Secrets of the Temple: How the Federal Reserve Runs the Country.

The Federal Reserve System was the crucial anomaly at the very core of representative democracy, an uncomfortable contradiction with the civic mythology of self government. Yet the American system accepted the inconsistency. The community of elected politicians acquiesced to its power. The private economy responded to its direction. Private capital depended on it for protection.

In this sense, the libertarian critics on this blog are right that Keynesian economics are no more than a band aid on an open knife wound to the American gut. Keynes saw his job to save capitalism in the 1930′s and in that sense Tim Geithner and Larry Summers are no different. There only task is to keep the system from collapse. But the Libertarians as well as us classic liberals need to answer this question– If you withdraw all the state-finance props to a fragile economy (Fannie Mae, Ag Subsidies, Oil drilling subsidies,etc), are you ready to face the consequences of a true second Great Depression?

If you say yes, then what is your plan for recovery? Are you prepared for the possibility that capitalism as is currently deployed in the West, dependent on both corporate welfare and easy access to the extraction of raw materials from the commons, could not survive?

Finally, are you ready for the possibility that in the midst of this chaotic depression, that an authoritarian, “white man on a horse” might be pushed forward to lead us out of chaos, which would mean the end of your precious liberty?

Just asking?
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First, they prove that adjusted for GDP, Sweden and Great Britain are greater pop music exporters.

Waldfogel and Ferreira analyzed every song on the hit lists of 22 countries between 1960 and 2007. They then compared each country’s share of the pop-music market with the size of its economy.

Not surprisingly, American hits dominated, accounting for 51 percent of music sold over the period. Adjusted for GDP, however, Sweden takes the top spot — followed closely by Britain. Despite fears of pernicious cultural Americanization, more people around the world are listening locally: Foreign artists now account for just 30 percent of each country’s pop hits, down from about 50 percent in the 1980s.

But more importantly, they show that people like to consume music from their own country.

Trade in music bears some similarities to the trade of physical goods: shorter distances and sharing a common language promote higher trade volumes between countries, and those relationships have been relatively stable over the last 50 years. We also find a large bias toward domestic consumption of music which has, perhaps surprisingly, increased in the past two decades: the share of consumption worldwide that originates from domestic artists increased from less than 50% during the 1980’s to almost 70% in 2007.

McLuhan was totally wrong. We have not become a global village. Maybe a global megacity, with hundreds of different neighborhoods we could visit in a single day, each with their own distinctive sound blaring from the boom box.