Friday, September 28, 2012


David Dayen, at FireDogLake, takes note of a Felix Salmon post, using a data study published by the Cleveland Federal Reserve, on the plummeting share of income going to Labor. Felix Salmon notes the paradoxical trend:
Over the past three years or so, wages and salaries have been rising steadily, while interest rates have been stuck at zero. It’s never been harder to make income from capital, while incomes for people with jobs have actually kept on rising. And unemployment, while still high, has been coming down. Given all that, it would stand to reason that the share of national income going to labor should be rising, not falling. Labor incomes are going up, the number of employed people is going up, and income from savings is going down. And yet! It turns out that people with capital are so rich, and getting so much richer, that it’s not even close
. Dayen's comment:
Something happened around 2000 that separated capital income from the historical norm. It started rising at spectacular levels. I would argue that all the different deregulatory policies of the Clinton Administration’s second term – the Commodity Futures Modernization Act, the repeal of Glass-Steagall – and the general laissez-faire attitude to regulatory policy from both Alan Greenspan’s Federal Reserve and the incoming Bush Administration created a runaway environment for capital that has not abated. Furthermore, capital gains tax rates were slashed in 2001 to 15%, after going down from 28% to 20% in Clinton’s second term. Finally, you have the internationalization of finance . . .

Tuesday, April 24, 2012

The Time Bomb which is Zombification

The Hidden Bank Time Bomb: Interest Rate Risk « naked capitalism:

Yves Smith explains the problem of too low for too long: interest rate risk and zombification.

Basically, once the monetary system has hit the zero-bound on interest rates, there's no where to go, but up.  And, if policy is to maintain rates near the zero-bound for a long time, combined with a policy of low inflation, the effect is to push financial institutions to load up on long-term debt, which carries a lot interest-rate risk.  Any rise in nominal interest rates -- any rise in inflation in other words -- will carry with it an increasing risk of destroying the capital of financial intermediaries, destabilizing the financial system.  And, that risk is increasing, as long as the central bank is maintaining a low policy rate environment.

Sunday, April 22, 2012

No Justice, No Law

Ian Welsh:
"The US does not have justice or even the rule of law and whether the public approves or disapproves is irrelevant.  Black letter law, on the books, makes most of what the banks did leading up to the subprime crisis illegal.  It was fraud.  Black letter law makes the war on Iraq a war crime, and no one went to jail for that.  Black letter law does not allow freestanding resisting arrest charges, and those happen all the time.  Basic law states that an accused has a right to face their accuser and see the evidence against them, that no longer occurs in many cases.  Basic justice says that you can’t punish someone without a trial, and the “no-fly list” indicates that is no longer true (along with being unable to face your accusers and see the evidence against you.)  The US Congress retroactively made wiretapping without a warrant “legal” and if I have to explain why retroactive immunity is wrong I give up.  Basic justice says that secret laws and secret courts are unjust, yet the US has plenty of both."

I thought that the coming political storm would so outrage the mass of people, that much of this moral obduracy would be swept away, and I was wrong. Instead of a political storm, we got a quiet political counterrevolution, and are marching down a path toward a fascist state, maybe even toward a neo-feudal order.

The Central Question

The Central Question Posed by the Great Crash | MyFDL: "The Great Crash posed one question for this country: who would bear the losses? Would it be the banks that caused the problems? The officers, directors and shareholders of those banks? Their careless counterparties? The investors who bought the fraudulent real estate mortgage-backed securities and the complex spin-offs? The owners of capital who threw money into hedge funds and other exotic investments expecting a geyser of money in return?
No.That group doesn’t lose money. They used their control over the government and the Fed to make sure that the losses would be passed on to the rest of us, pushing millions into or near poverty. The savers were trashed by the Fed’s zero interest rate policies. The national debt run up by tax cuts and wars gave the rich an opportunity to end the safety net and focus all of the efforts of government on protecting them and their interests. The rich are safe. The rest of us are in deep trouble.

The government threw money at banks with abandon, leaving incompetent failed executives in place. When it turned out that banks lied about the quality of the notes and mortgages transferred to the RMBS Trusts, the SEC and the Department of Justice refused to investigate, let alone prosecute.

Banks didn’t complete the transfer of those worthless notes and mortgages into the Trusts, so the IRS announced it wouldn’t enforce the requirements for pass-through non-taxable status. The servicing arms of those banks cheated and lied to courts around the nation about ownership, and when they got caught, they talked the government into a sleazy settlement that gives nothing to the people damaged by the frauds and allows the banks to continue to lie and cheat, if at lower levels.

This list could be expanded indefinitely, with the same outcome: the Fed, Congress and the White House have only done those things that protected the money of the rich, whether or not the settlement was consistent with the law or not.

It didn’t have to be this way. From the outset, there were things that could have been done that would have placed the losses where they belonged: on Wall Street and its criminal denizens and its careless clients. The bailouts could have come with constraints and requirements, firings, lawsuits, and indictments. The entire rotten structure could have been pushed into a form that would not threaten the lives and incomes of the middle class, a group whose responsibility for the problems was minimal in contrast to that of crooked lenders and swindlers.

No. Not in this country. Not in a nation ruled by oligarchs and a government in thrall to economic theories years after those theories revealed themselves as nonsense, or to the rich who endow those irrational theories with sanctity of revealed truth, or both. There was never a day when the primary or even subsidiary consideration was the middle class, or the rule of law, or even the pretend values of the free market. The only consideration from the outset was the protection of the rich.

Even two years later, the government showed no interest in raising taxes on the richest Americans. Both parties explained that they couldn’t raise taxes even on the rich in a recession, and that the only solution was cutting out unemployment benefits, lowering the minimum wage, slashing Social Security and Medicare, and removing people from Medicare and the shredded remnants of help for the worst off.

The current lousy economy is a result of deliberately chosen policies. The government could have chosen policies that would have protected the middle class at the expense of rich criminals and their clients and their hedge funds and their off-shore trusts and their tax-avoidance schemes, the people and entities that wrecked the economy. It didn’t.

It’s not that we don’t know what to do to make the economy work for the middle class. We do. The government and the elites and the rich won’t allow it. They go house to house, from Bangor to Bakersfield, saying to the inhabitants, What part of this sentence don’t you understand? You think we’re going to eat our losses? You think we don’t care about our money? Well. Suck. On. This."

I didn't originally intend to quote this whole, wonderful rant, but I couldn't stop. Sort of like eating cashews.

The Death of Facts

To the shock of most sentient beings, Facts died Wednesday, April 18, after a long battle for relevancy with the 24-hour news cycle, blogs and the Internet. Though few expected Facts to pull out of its years-long downward spiral, the official cause of death was from injuries suffered last week when Florida Republican Rep. Allen West steadfastly declared that as many as 81 of his fellow members of theU.S. House of Representatives are communists.
Facts held on for several days after that assault — brought on without a scrap of evidence or reason — before expiring peacefully at its home in a high school physics book. 

Thursday, April 12, 2012

Wanker Time

Atrios recalls that the last decade has been
a time when this country stopped even bothering to pretend to live up to many of its supposed ideals. We go to war and kill lots of people for no good reason, elites have eliminated any accountability for themselves for criminal wrongdoing, we've tortured and assassinated people, and the response to massive economic suffering and related criminal fraud has been to give lots of free money to the people who caused it all.

Monday, March 19, 2012


John Robb at Global Guerillas has some speculation about the rise and fall of civilizations. The truth is that we know so little about the ancient Roman world, its politics and its economics, that we are more likely to simply project our own obsessions and preoccupations on their history, as we are to gain genuine insight from their example. But, it is still fun to speculate and draw parallels. Like anything organic, I suppose that civilizations can be said to have something like a natural lifecycle: birth, growth and death. The ancient Hellenic world lasted about 1200-1300 years or so, from its emergence at the end of the Dark Age that followed the collapse of Bronze Age civilization, around 750 BC, down to the Fall of Rome in 476 AD, or, if you prefer, the Plague of Justinian in 541-542 AD. As others have noted the Eastern Empire went on, though, there were severe strains there as well -- severe enough to mark out a Dark Age of at least a couple of centuries, even in the East, even where the institutional Empire and the City of Constantinople appeared to survive. I find the handwaving over an opaque "complexity", as well as the analytically empty complaints about high taxes and a debased currency to be unsatisfying. The early city-state culture of trading cities, and of Rome's Empire, was a hungry and expanding beast, bringing new lands under cultivation and extending the scope of peaceful trade throughout the Mediterranean basin and beyond. There must have been gains to economic productivity from the Magna Gracia project and the Carthaginian expansion into Spain, as well as Rome's methodical conquest of Italy and its founding of new cities. Solon's reforms in Athens, planting olive groves, etc., must have unleashed energies comparable to those released by the French Revolution, energies, which would have been capped and finally extinguished by the short-sighted plutocracy of Rome and its latifundia. Reducing Sicily from the breadbasket of Rome to a wasteland must have required centuries of poor farming practice, soil erosion, pestilence, famine and plague. The ancient Romans, in the latter days, were not technically inventive. They never seemed to grasp the potential of windmills. They failed to invent the stirrup or a workable horse collar or really good heavy plow. The Empire was big enough to afford the kind specialization of labor, which might yield technical advance, to meliorate the shortage of new slaves and declining yield of soils under cultivation. Instead domination by the rich of the poor masses seems to have deepened to the point that the poor were liable to extinction in plagues and famines, while the competition for power among the elites became ever more lethal. Our modern civilization emerged from the Dark Ages around 800 or 900 AD, with a fusion of the Franks and Vikings, and the invention of the motte and bailey castle. A predatory military caste began an expansion that ended in something close to world conquest by the end of the 19th century. Accelerating technological advance has marked its character, but it is worth remembering that the predatory character of the elite, at this culture's core, was there from the beginning. William the Conqueror, the Angevin Henry II, the Crusaders who sacked Constantinople -- these were ruthless, violent bandits, whose first order of business was to exploit the mass of farmers everywhere, from their walled castles. The normal state of Western states over the centuries has been a low-performance equilibrium, in which oppression and domination by parasitic elites was often just short of collapsing the society. France in the 17th century was the richest and most powerful country in the world, seemingly on the verge of ruling North America, India and much of Europe, but by the end of the reign of the Sun King, the country lay prostrate. It would struggle on fitfully for another 75 years, before its feudal parasites were overthrown. The outburst of egalitarian energy would catapult France back into contention for the domination of Europe, if not the world, before the forces of reaction again gained the upper hand. Feudal Empire would dominate much Europe right up to the conflagration of World War I, in the 20th century. That we are again seeing a parasitic elite emerge, in a neo-feudal order, should not be seen as anything but a renewed expression of Western Civilization's DNA.