In case you are wondering why you're now at the top of the front page.
I changed the timestamp because I thought your post deserves way more reads than just the weekly collection of economic funnies that I post every Sunday, so I wanted yours first.
I want to change this in the upgrade, to have the reordering of the front page not just on time of publication but also a mix of time as well as votes but for now, front page is just based on time (and the vote is static, it's either you're on the front page or off).
Why don't they turn them into homeless shelters frankly? And let credit card companies foot the bill for them.
I have a funny feeling they will become glorified homeless shelters anyway.
Do you ever feel like you are watching a building collapse? For years corporations, business has been like termites. Eating away at the foundation of the building, that being the U.S. worker, the U.S. middle class, good old fashioned income, high paying jobs, stable career and retirement funds. The U.S. middle class has been under attack for years and finally the entire building is tumbling down.
Yet the focus is still on consumer spending! This isn't a criticism at all of your post, more the main stream media and even main stream economists...they focus on consumer spending when we should see, every day, a story on wages, income, underemployment, offshore outsourcing, insourcing and the destruction of the U.S. middle class...
I think we literally need all of America to hit the streets in a major protest and we all chant one thing in unison, jobs, jobs, jobs, jobs.
it's like a phantom disconnect that somehow consumer spending can raise when people have no money.
It's the same thing with tax incentives....who cares about tax incentives when people have no money, they don't have work, a job.
Beginning with the GAO, and along with Wharton, there have been an almost infinite amount of studies on the negative, destructive impact of private equity firms on the economy in general, and American corporations, in particular. And all those collateralized fund obligations (CFOs) and collateralized (commercial) loan obligations (CLOs) coming due - and about to default - will most probably usher in the next meltdown.
The classic case is the Blackstone Group and TravelPort, but NJR Nabisco, and so many others, represent the continuing down side of the peddling of "junk paper."
In the short-term Bill Gross is almost surely a contrary indicator. He's done that before - saying one thing and doing another.
But Gross isn't talking about short-term effects, and the fundamentals of the dollar are real.
That last chart, showing Private Investment in Capital Equipment as a Percent of GDP, shows the great contradiction of the past half century: a capitalist economy with less capital intensity.
But what is cause and effect? Is there less capital intensity because of de-industrialization? Or is financialization driving de-industrialization? The market ideologues argue that de-industrialization is mostly the natural result of market forces at work: American labor is too expensive, blah, blah.
I think the truth is much closer to financialization being the cause: the great conservative political fight for over half a century has been to roll back the financial regulations that were imposed in the New Deal. The unstated goal was to allow concentrations of wealth (i.e., the Mellon family, or the Koch family, or the Rockefeller Foundation, etc.) to once again control the economy. This fight was cloaked in the argument of "unleashing the creative potential" of the financial markets, but what it really did was allow usury, speculation, and rent to become the most "profitable" types of economic activity.
Regarding the first point, are private equity firms properly considered part of "Wall Street"? My hunch at this point is that much of the private equity financing comes from Silicon Valley and other new wealth concentrations created by the computer and internet revolutions.
As for closing down Wall Street - well, that's exactly the point of this blog: to show that actually, of the over three trillion dollars traded in U.S. financial markets each day, very little of it is directed to the primary function of allocating capital to people and companies that will use it productively to create real wealth. What we as a society must do is devise and implement new policies that make it once again profitable to engage in real economic activity, while discouraging and penalizing usury, speculation, and rent. Those people and institutions on Wall Street that can accept and adjust to such a new policy regime will survive. Those that can't, won't - and should actually be hurried to their graves. Because the basic moral question of all economic activity comes down to the survival of the human species. The environmental problems we face should make that moral question starkly clear. What the conservatives, rentiers, speculators and usurers are demanding is nothing less than the "right" to act immorally, and to "profit" from that immorality.
This moral question is especially clear when considering "there will be less and less need to issue new debentures for purchasing things like new factories and such." Half the world's population lacks access to what we consider basic infrastructure: drinking water, sewage, electricity, mass transit, medical care:
According to WHO, over 1 billion people suffer from the effects of a "Neglected Tropical Disease." . . . .
Most NTD's share a common trait, they are based on parasitic, rather than bacterial or viral infection. To some extent this is the nature of beast: viral and bacteria infections can spread well beyond the tropics. For example, take a look at the list on this page. Most of the bacterial and viral names are familiar, only a few parasites are, and two of those such as Malaria, involve a vector that can carry the disease. To put it bluntly: rich countries worry about problems that can strike them.
The ultimate solution to many of these diseases is a simple technology: the toilet. Sewage systems are not sexy, but they are among the most effective technologies for relieving human misery known. At present, providing safe storage, point of use disinfection, and improved hygiene, would save what health officials call a "Disease Adjusted Life Year" at about the cost of 1,000 U.S. dollars per year. Is it worth it? Would you pay a thousand dollars for a year of healthy life? What about those people whose total economic output is less than a thousand dollars. The square of starvation rears its head again. There are people who are not worth keeping alive, from the point of view of the global economy. Piped water does not improve outcomes as much, but it does save time. Piped water pays for itself with the proceeds of about 4 weeks of paid labor. (Figures from WHO World Health Reports 2002, 2003, 2004, 2006, 2008) Or to be blunt again, these are people who are dying of poverty. It is not hyperbole to say that 50 cents can save a life.
There is no one I know of in the world looking at the physical bill of materials to actually meet the world's needs, but I suspect, based on what I was researching and writing about 20 years ago, that it is still the case that there is not enough steel production capacity, valve production capacity, skilled manpower, etc., to get the jobs done that really need to be done. Most recently, I calculated that just to build a real rail mass transit system in the U.S. would require the entirety of two and oen half years of domestic steel production.
much like our Congress, has created this debacle. What's the profits for the next quarter? preparing for the next election? Does anybody think long term anymore?
Somehow this idea of paying CEO's with company stock has to end. Yes, its cheaper for the company but when the guy, looking at his bonus in company stock, is making decisions for direction .... you don't think there is a conflict of interest???
Running a corporation based on its stock price has created one problem after the next. (search for cheaper labor, labor reductions, over priced stock, piss poor decisions and short term thinking, reduction in money to grow the business, huge payouts to CEO's that have fucked the company but increased share price). Then there was that back dating share payouts.
Of course, my opinion is more that those rays of sunshine indicate short-to-medium-term breaks between hurricane squall lines, but around most econ sites, that passes for stark raving optimism!
That the NYT and LAT are picking up the theme, together with Bill Gross trying to move the dollar lower, makes me think a short term bottom is very near.
Longer-term of course, the dollar has major problems. But OTOH, look at 10 and 30 year treasuries. From the viewpoint of 2009, it looks like yields are blowing up and prices collapsing. From a 3 or 5 year viewpoint, it looks like the liquidity/solvency crisis of late 2008 that caused yields to drop and prices to surge, has resolved, and bonds are now resuming their former prices/yields.
C'mon, this site has been sounding the alarm for a while now. I even put up a stupid graphic of a list of long-dated futures contracts on the Eurodollar contracts showing a steadily decline in prices. And countless others have been saying the same thing on other aspects leading into this.
Does the studies really take into effect the impact of private equity firms? I have friends who own companies, who instead of selling debt or even float to the public simply go to private equity firms or other institutionals. Organic growth will many times meet the need of capital expenditures. As for shutting down Wall Street, well I'm not sure about that.
Something else that just occured to me. Looking at those charts (particularly that last one), this info serves as a derivative to the de-industrialization of the nation. As we lose companies that make things, or at least they move offshore, there will be less and less need to issue new debentures for purchasing things like new factories and such.
This is an exceptional post Tony. You are showing a fundamental assumption flaw as well as how the real economy, the one that keeps people employed, makes things, gives real services has been in a downward slope for years.
In many respects, this is tracking the Great Depression.
An initial crash, a rebound, then the real downturn.
We've had the first two, now comes the third... and it will be the killer because of the dire condition of the dollar.
In case any out there haven't considered the ramifications of a problematic dollar, once we can't pay for oil in dollars, once the world stops using the dollar as a common denominator .... the U.S. sinks to being (no, not 3rd world) rather, just another country. China takes its former place. China will also buy up US assets/property in a major way. Your boss/landlord will likely be Chinese in the future.
As stated in an earlier post, the powers that be are trying desperately to make things like they were before. They're doing that by blowing a new bubble (they're even manipulating the stock market now). They'll never learn. It will fail, in fact we're just now seeing it happen. This is where things get ugly.
How can citizens combat this? Well for one, put some real heat on Obama. Sorry Obama supporters, by appointing Geithner and Summers as his economic team & giving them free reign, Obama has showed his true colors and loyalties.
On a more personal level, starve the beast. Don't have anything to do with the major 5 banks. They are truly evil and need to go (especially Goldman Sacks). Put your money in Credit Unions. Get out of the stock market. Buy physical gold/silver (not the paper funds).
Don't vote for incumbents, demand term limits on Congress & public financing of elections.
Support the move to Audit the Fed, then abolish it (I think the audit will cause such outrage there'll be no doubt it would be subsequently eliminated).
If the above fails, then more drastic action.
I'll address that if needed.
Obama, Pelosi, Reid - Why are they turning a blind eye to the fact that GM will outsource production? Most people buy GM cars for the fact they are Made in America and not because they are good cars.
If GM cannot sell a car made in Detroit, the more they will not sell a car made in China. Toyotas, Hondas, BMWs, Subaru's are made in America and hire Americans - why buy a clunker?
The Congressional hearings were topics on many other econ/financial sites this week. One of the readers at one of those sites left these comments:
All the 'testimony' given before Congress is not only a breathtaking web of pathological lies, but more and more resembles a stream of consciousness (poorly done) and the charlatan rituals of 'talking in tongues'.
No one has dropped to the floor and started writhing but it's coming, just be patient and stay in your seats.
At this point of absurdity, Geithner could easily say something like, "excuse me, I have to scratch my balls before I give y'all the next shameless lie", belch loudly and start reciting nursery rhymes and the 'distinguished' members of Congress won't bat an eye.
They would compliment his polish and manners for saying 'excuse me'.
Which is another reason for EP to exist because we have posts (multiple authors) harping on the need for income and how it is the base element for any economic recovery over and over, from the theory and the statistics.
We need almost a manifesto post. Seriously. On the idiot box, I see "report" after "report" talking about "free money" and "credit score" and what they really mean are "tax incentives" and more debt.
It's like they are just absurd. One cannot get a tax credit when they do not have any damn money in the first place. So, this entire thing, from tax credits for green homes to tax credits for health care is just ridiculous. If you can't make the rent and buy food then no one gives a rats ass about tax credits because there is nothing to credit!
Good news is another hearing a few Congress Reps. are raising hell about the Obama administration giving out so much money to these various corporations (including GM) who are simply busy offshore outsourcing more jobs!
or the proper way, to increase the savings rate in this country would be to increase interest rates.
Thus far they are doing the exact opposite as they want cheap money.
yeah, I don't really see higher incomes any time soon.... heh ... anytime in my lifetime. Not when we are competing for jobs against guest workers, outsourcing, and globalization
that the only way to increase the saving rate without additional pain is to increase household incomes. Household income growth has been do in large part to "stimulus" checks and tax cuts and through good jobs.
But policymakers either don't care or don't understand this point.
I agree, they should grab the reins and rein in. So far, we have some pretty nice rhetoric and it sure seems from constituents to individual Congress members there is a lot of upset so why are they not plain standing up as an independent branch of government and doing something about it?
In case you are wondering why you're now at the top of the front page.
I changed the timestamp because I thought your post deserves way more reads than just the weekly collection of economic funnies that I post every Sunday, so I wanted yours first.
I want to change this in the upgrade, to have the reordering of the front page not just on time of publication but also a mix of time as well as votes but for now, front page is just based on time (and the vote is static, it's either you're on the front page or off).
Why don't they turn them into homeless shelters frankly? And let credit card companies foot the bill for them.
I have a funny feeling they will become glorified homeless shelters anyway.
Do you ever feel like you are watching a building collapse? For years corporations, business has been like termites. Eating away at the foundation of the building, that being the U.S. worker, the U.S. middle class, good old fashioned income, high paying jobs, stable career and retirement funds. The U.S. middle class has been under attack for years and finally the entire building is tumbling down.
Yet the focus is still on consumer spending! This isn't a criticism at all of your post, more the main stream media and even main stream economists...they focus on consumer spending when we should see, every day, a story on wages, income, underemployment, offshore outsourcing, insourcing and the destruction of the U.S. middle class...
I think we literally need all of America to hit the streets in a major protest and we all chant one thing in unison, jobs, jobs, jobs, jobs.
it's like a phantom disconnect that somehow consumer spending can raise when people have no money.
It's the same thing with tax incentives....who cares about tax incentives when people have no money, they don't have work, a job.
Beginning with the GAO, and along with Wharton, there have been an almost infinite amount of studies on the negative, destructive impact of private equity firms on the economy in general, and American corporations, in particular. And all those collateralized fund obligations (CFOs) and collateralized (commercial) loan obligations (CLOs) coming due - and about to default - will most probably usher in the next meltdown.
The classic case is the Blackstone Group and TravelPort, but NJR Nabisco, and so many others, represent the continuing down side of the peddling of "junk paper."
In the short-term Bill Gross is almost surely a contrary indicator. He's done that before - saying one thing and doing another.
But Gross isn't talking about short-term effects, and the fundamentals of the dollar are real.
That last chart, showing Private Investment in Capital Equipment as a Percent of GDP, shows the great contradiction of the past half century: a capitalist economy with less capital intensity.
But what is cause and effect? Is there less capital intensity because of de-industrialization? Or is financialization driving de-industrialization? The market ideologues argue that de-industrialization is mostly the natural result of market forces at work: American labor is too expensive, blah, blah.
I think the truth is much closer to financialization being the cause: the great conservative political fight for over half a century has been to roll back the financial regulations that were imposed in the New Deal. The unstated goal was to allow concentrations of wealth (i.e., the Mellon family, or the Koch family, or the Rockefeller Foundation, etc.) to once again control the economy. This fight was cloaked in the argument of "unleashing the creative potential" of the financial markets, but what it really did was allow usury, speculation, and rent to become the most "profitable" types of economic activity.
Regarding the first point, are private equity firms properly considered part of "Wall Street"? My hunch at this point is that much of the private equity financing comes from Silicon Valley and other new wealth concentrations created by the computer and internet revolutions.
As for closing down Wall Street - well, that's exactly the point of this blog: to show that actually, of the over three trillion dollars traded in U.S. financial markets each day, very little of it is directed to the primary function of allocating capital to people and companies that will use it productively to create real wealth. What we as a society must do is devise and implement new policies that make it once again profitable to engage in real economic activity, while discouraging and penalizing usury, speculation, and rent. Those people and institutions on Wall Street that can accept and adjust to such a new policy regime will survive. Those that can't, won't - and should actually be hurried to their graves. Because the basic moral question of all economic activity comes down to the survival of the human species. The environmental problems we face should make that moral question starkly clear. What the conservatives, rentiers, speculators and usurers are demanding is nothing less than the "right" to act immorally, and to "profit" from that immorality.
This moral question is especially clear when considering "there will be less and less need to issue new debentures for purchasing things like new factories and such." Half the world's population lacks access to what we consider basic infrastructure: drinking water, sewage, electricity, mass transit, medical care:
There is no one I know of in the world looking at the physical bill of materials to actually meet the world's needs, but I suspect, based on what I was researching and writing about 20 years ago, that it is still the case that there is not enough steel production capacity, valve production capacity, skilled manpower, etc., to get the jobs done that really need to be done. Most recently, I calculated that just to build a real rail mass transit system in the U.S. would require the entirety of two and oen half years of domestic steel production.
much like our Congress, has created this debacle. What's the profits for the next quarter? preparing for the next election? Does anybody think long term anymore?
Somehow this idea of paying CEO's with company stock has to end. Yes, its cheaper for the company but when the guy, looking at his bonus in company stock, is making decisions for direction .... you don't think there is a conflict of interest???
Running a corporation based on its stock price has created one problem after the next. (search for cheaper labor, labor reductions, over priced stock, piss poor decisions and short term thinking, reduction in money to grow the business, huge payouts to CEO's that have fucked the company but increased share price). Then there was that back dating share payouts.
Of course, my opinion is more that those rays of sunshine indicate short-to-medium-term breaks between hurricane squall lines, but around most econ sites, that passes for stark raving optimism!
That the NYT and LAT are picking up the theme, together with Bill Gross trying to move the dollar lower, makes me think a short term bottom is very near.
Longer-term of course, the dollar has major problems. But OTOH, look at 10 and 30 year treasuries. From the viewpoint of 2009, it looks like yields are blowing up and prices collapsing. From a 3 or 5 year viewpoint, it looks like the liquidity/solvency crisis of late 2008 that caused yields to drop and prices to surge, has resolved, and bonds are now resuming their former prices/yields.
C'mon, this site has been sounding the alarm for a while now. I even put up a stupid graphic of a list of long-dated futures contracts on the Eurodollar contracts showing a steadily decline in prices. And countless others have been saying the same thing on other aspects leading into this.
Does the studies really take into effect the impact of private equity firms? I have friends who own companies, who instead of selling debt or even float to the public simply go to private equity firms or other institutionals. Organic growth will many times meet the need of capital expenditures. As for shutting down Wall Street, well I'm not sure about that.
Something else that just occured to me. Looking at those charts (particularly that last one), this info serves as a derivative to the de-industrialization of the nation. As we lose companies that make things, or at least they move offshore, there will be less and less need to issue new debentures for purchasing things like new factories and such.
This is an exceptional post Tony. You are showing a fundamental assumption flaw as well as how the real economy, the one that keeps people employed, makes things, gives real services has been in a downward slope for years.
Great job!
In many respects, this is tracking the Great Depression.
An initial crash, a rebound, then the real downturn.
We've had the first two, now comes the third... and it will be the killer because of the dire condition of the dollar.
In case any out there haven't considered the ramifications of a problematic dollar, once we can't pay for oil in dollars, once the world stops using the dollar as a common denominator .... the U.S. sinks to being (no, not 3rd world) rather, just another country. China takes its former place. China will also buy up US assets/property in a major way. Your boss/landlord will likely be Chinese in the future.
As stated in an earlier post, the powers that be are trying desperately to make things like they were before. They're doing that by blowing a new bubble (they're even manipulating the stock market now). They'll never learn. It will fail, in fact we're just now seeing it happen. This is where things get ugly.
How can citizens combat this? Well for one, put some real heat on Obama. Sorry Obama supporters, by appointing Geithner and Summers as his economic team & giving them free reign, Obama has showed his true colors and loyalties.
On a more personal level, starve the beast. Don't have anything to do with the major 5 banks. They are truly evil and need to go (especially Goldman Sacks). Put your money in Credit Unions. Get out of the stock market. Buy physical gold/silver (not the paper funds).
Don't vote for incumbents, demand term limits on Congress & public financing of elections.
Support the move to Audit the Fed, then abolish it (I think the audit will cause such outrage there'll be no doubt it would be subsequently eliminated).
If the above fails, then more drastic action.
I'll address that if needed.
Obama, Pelosi, Reid - Why are they turning a blind eye to the fact that GM will outsource production? Most people buy GM cars for the fact they are Made in America and not because they are good cars.
If GM cannot sell a car made in Detroit, the more they will not sell a car made in China. Toyotas, Hondas, BMWs, Subaru's are made in America and hire Americans - why buy a clunker?
I want to see this done up, acted Professionally, in a video clip.
The Congressional hearings were topics on many other econ/financial sites this week. One of the readers at one of those sites left these comments:
LOL, well I thought it was funny.
Which is another reason for EP to exist because we have posts (multiple authors) harping on the need for income and how it is the base element for any economic recovery over and over, from the theory and the statistics.
We need almost a manifesto post. Seriously. On the idiot box, I see "report" after "report" talking about "free money" and "credit score" and what they really mean are "tax incentives" and more debt.
It's like they are just absurd. One cannot get a tax credit when they do not have any damn money in the first place. So, this entire thing, from tax credits for green homes to tax credits for health care is just ridiculous. If you can't make the rent and buy food then no one gives a rats ass about tax credits because there is nothing to credit!
Good news is another hearing a few Congress Reps. are raising hell about the Obama administration giving out so much money to these various corporations (including GM) who are simply busy offshore outsourcing more jobs!
or the proper way, to increase the savings rate in this country would be to increase interest rates.
Thus far they are doing the exact opposite as they want cheap money.
yeah, I don't really see higher incomes any time soon.... heh ... anytime in my lifetime. Not when we are competing for jobs against guest workers, outsourcing, and globalization
that the only way to increase the saving rate without additional pain is to increase household incomes. Household income growth has been do in large part to "stimulus" checks and tax cuts and through good jobs.
But policymakers either don't care or don't understand this point.
I agree, they should grab the reins and rein in. So far, we have some pretty nice rhetoric and it sure seems from constituents to individual Congress members there is a lot of upset so why are they not plain standing up as an independent branch of government and doing something about it?
Take the authority away or put an deadline on the $750 billion open line of credit that Mr. Geithner thinks he has.
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