Category: economy

1. attempt to create a future that does not now exist
2. mindlessly crunch numbers that do exist

Nor is the problem the failure to abandon models and move on to new ones when they cannot adequately explain the data.

In my career, the attempt to find models that can explain past data and predict future data with more accuracy has caused Old Keynesian models and New Classical Models to be replaced by Real Business Cycle and New Keynesian models.

And it’s time for that to happen again.

Toward a More Democratic System of Corporate Governance

“It should be unsurprising then that the interests of employees, shareholders, and other stakeholders are, at best, secondary to those of executives.

“As Harvard Law Professor Mark Roe succinctly phrased it, “the US is managerialist, not capitalist.”

“Current governance arrangements have had an enormous impact on the larger economy and on the distributive features of American capitalism.

“Excessive risk-taking, stagnating wages, and the spike in executive compensation can all be linked back to a system of corporate governance that privileges management’s interests at the expense of other actors.”

[It should be unsurprising… hmmm]

How Our Economy Was Overrun by Monsters and What to Do About It

Although, let’s be fair.
Let’s target our criticism.
Some CEO’s revert to an exchange.

our united states of america

Let’s thimnk a wee bit on this.

For Americans, changing the distribution of wealth is such a loaded issue that regardless of how you frame it, they’re opposed.

“We have now sunk to a depth at which the restatement of the obvious is the first duty of intelligent men.” —Orwell

Roger Martin:

“As the power of the scientific method has encroached further than its applicability warrants into fields such as economics and business, its predictions of the future become ever more erroneous.”

[my bold]

Just 20% of brands have a positive impact on human lives.

A majority of people don’t care if 70% of brands disappear tomorrow.

“The survey notes that most consumers don’t trust companies, think their efforts to be responsible are largely spin, and that they don’t work hard to fix big problems.”

Existing approaches to building and measuring brand value are out of date.

George Mondbiot:

The 1% are the very best destroyers of wealth the world has ever seen.

Our common treasury in the last 30 years has been captured by industrial psychopaths.

That’s why we’re nearly bankrupt.

“The results resembled what you would expect from a dice-rolling contest, not a game of skill.”

Those who received the biggest bonuses had simply got lucky. Such results have been widely replicated. They show that traders and fund managers throughout Wall Street receive their massive remuneration for doing no better than would a chimpanzee flipping a coin.

Crisis has a feature I enjoy. More speak their mind.

Simon Johnson, the former chief economist at the International Monetary Fund:

‘We Are Looking Straight Into The Face Of A Great Depression‘

“We have built a dangerous financial system in the United States and Europe. We must step back and reform the system.”

David Frum, another example.

Libertarians For Oligarchy?

How long can an economic oligarchy remain a political democracy? Why would it? Wouldn’t the oligarchs be reckless to permit it?

I’m not suggesting here that anyone will overthrow the Constitution or anything like that. … We’ll still have elections, just as the British have royal weddings.

…the distribution of power tends to follow the distribution of wealth. If only a comparative few own, then only a comparative few will rule.

What will Bill Moyers be saying?

Wall Street Occupied America.

…not content with their wealth just to buy more homes, more cars, more planes, more vacations and more gizmos than anyone else. They were determined to buy more democracy than anyone else.

Money rules…. Our laws are the output of a system which clothes rascals in robes and honesty in rags.

The political parties lie to us and the political speakers mislead us.

Our politicians are little more than money launderers in the trafficking of power and policy—fewer than six degrees of separation from the spirit and tactics of Tony Soprano.

Why New York’s Zuccotti Park is filled with people is no mystery. Reporters keep scratching their heads and asking, “Why are you here?” But it’s clear they are occupying Wall Street because Wall Street has occupied the country.

Barry Ritholtz clearly, clearly spells out what caused the financial crisis.

The Big Lie goes viral.

Our economy is a complex and intricate system. What caused the crisis?

Why are people trying to rewrite the history of the crisis? Some are simply trying to save face. Interest groups who advocate for deregulation of the finance sector would prefer that deregulation not receive any blame for the crisis.

Some stand to profit from the status quo: Banks present a systemic risk to the economy, and reducing that risk by lowering their leverage and increasing capital requirements also lowers profitability. Others are hired guns, doing the bidding of bosses on Wall Street.

Mike Mayo told the Senate Banking Committee in 2002 that financial analysts “are on the front lines of holding corporations accountable.” However…

Wall Street Can’t Handle the Truth

Analysts are supposed to be a check on the financial system—people who can wade through a company’s financials and tell investors what’s really going on. There are about 5,000 so-called sell-side analysts, about 5% of whom track the financial sector, serving as watchdogs over U.S. companies with combined market value of more than $15 trillion.

Unfortunately, some are little more than cheerleaders—afraid of rocking the boat at their firms, afraid of alienating the companies they cover and drawing the wrath of their superiors.

The approval rate for Congress is just 9%, with 84% disapproving. [link]

“There still are plenty of corrupt lobbying practices that are perfectly legal”, warns Jack Abramoff. out of jail, earning restitution with a book: “Capitol Punishment: The Hard Truth About Washington Corruption from America’s Most Notorious Lobbyist”

The Big Food business model:

“After all, these executives and their companies have a huge interest in maintaining the status quo.“

Q. On your blog you say, “confusion is one of the tried and true tools of the processed foods industry.” 

A. I think one of the main ways the processed food industry is trying to grow and defend their business is by funding self-serving research.

Catherine Rampell catches a report from the Resolution Foundation [pdf], a British research organization that focuses on workers with low income. The report covers 10 rich countries, and looks at the growth rate of median pay versus economic growth per capita from 2000 to the start of the Great Recession [GWBush, remember him?].

Of the 10 countries analyzed, Finland showed the closest relationship between the living standards of the typical worker and improvements in the overall economy. The United States is on the lower end.

“We’ve allowed finance to dominate the American economy and the world economy as a consequence.

When finance dominates an economy, it begins, I think it’s become quite clear, to play games among themselves to make money…It becomes paper shuffling.”

Republicans in a picture:

• top 1%: 8% in 1979 to 17% in 2007, more than doubling
• next 19%: 35% in 1979, 36% in 2007, barely changed
• middle 60%: 50% in 1979, 43% in 2007, down 7 points
• poorest 20%: down 2 points, from 7% to 5%

Former economics editor at the New York Times, Jeff Madrick is easy to listen to, easy to read:

The top 1 percent pay federal income taxes at a rate of 23 percent.

If we raised it to their rate only ten years ago, we’d collect about $100 billion a year. If we reversed the Bush tax cuts on those who make $250,000 a year, we’d raise about $830 billion over ten years. If we reversed all the tax cuts, including on the middle class, which I’d favor, we’d raise about $3.5 trillion over ten years.

We have plenty of taxing capacity to take care of our needs.

We simply refuse to act as a modern nation, driven by myths that we can somehow return to the simplicity of colonial America.

We are still being told that greed is good.

“…contrary to the claims of some analysts, the federally regulated mortgage agencies, Fannie Mae and Freddie Mac, were not central causes of the crisis. Rather, private financial firms on Wall Street and around the country unambiguously and overwhelmingly created the conditions that led to catastrophe.

“Yet thus far, federal agencies have launched few serious lawsuits against the major financial firms that participated in the collapse, and not a single criminal charge has been filed against anyone at a major bank. The federal government has been far more active in rescuing bankers than prosecuting them.”

Age of Greed …the single-minded pursuit of huge personal wealth has been on the rise in the United States since the 1970s, led by a few individuals who have argued that self-interest guides society more effectively than community concerns.

These stewards of American capitalism have insisted on the central and essential place of accumulated wealth through the booms, busts, and recessions of the last half century, giving rise to our current woes.

…these politicians, economists, and financiers who declared a moral battle for freedom but instead gave rise to an age of greed, Madrick traces the lineage of some of our nation’s most pressing economic problems.

The men whose ideas were responsible for our current economic problems.
C-Span Video Library.

More than day-to-day media will tell you.

Which do you trust more: democracy or financial markets?

Americans weren’t really consulted. It was an inside job.

As a result, Wall Street has prospered but the rest of the nation hasn’t. One out of four homeowners is underwater, owing more on their homes than the homes are worth.

And with the worst economy since the Great Depression, we’re now embarking on fiscal austerity. Either Congress’s super-committee comes up with $1.2 trillion of federal budget cuts that Congress agrees to – going into effect a little over thirteen months from now – or $1.5 trillion of cuts are made across the board. Meanwhile, states and cities have been slashing public services for the past three years.

So which is it? Rule by democracy or by financial markets?

I’m going to give my whole bag of candy to the richest looking kid I see & trust that he’ll trickle it down to the other kids.

Hey kiddos,

Let’s talk turkey – specifically about those turkeys who want to cut Social Security benefits. What’s up with that?

http://www.justscrapthecap.com/

Well, it sure as heck isn’t because of the deficit. Social Security’s trust fund has a $2.6 trillion surplus right now, which is enough to pay everyone’s benefits in full for another 25 years.

If anyone tells you Social Security is going broke, they’re blowing more smoke than a chimney.

Here’s the reality: Social Security would pay full benefits forever – not just to us, but to you, and even your kids (hint, hint) — if millionaires simply paid the same Social Security tax rate as most people.

Heck, we could even afford to improve Social Security benefits a bit.

Right now, everyone pays Social Security taxes on the first $106,800 they earn, which means most people pay Social Security taxes on their whole paycheck. But since $106,800 is the cap, a whole lot of wealthy people don’t pay a dime in Social Security taxes on most of what they make.

Not to get all parental – it’s your life – but this is important stuff. Because unless you tell Congress to “Just Scrap the Cap,” they could cut Social Security benefits — and we might be movin’ in.

Tell Congress no cuts to benefits – Just Scrap The Cap.

Love,

Mom and Dad

Umair Haque’s snippets & tweets:

It wasn’t just what America did that made it great. It wasn’t just what it believed. It was why we believed it.

This isn’t just money, jobs or income that we’re talking about. It’s human life.

So basically, the American national discussion alternates between mocking and blaming the powerless….

It’s funny how we’re at the mercy of dolts, buffoons, and sociopaths. Actually, it’s not.

History will remember what happened to the American middle class as an illustration of the fatality of nihilism.

The sense of despair–no jobs, no opportunities, no security, total fear–pulses out from the American ruins like a tsunami.

Shattered cities, boarded up neighborhoods, crumbling ruins, squandered lives. So inexpressibly sad.

A society that wishes to remain civilized cannot allow such extreme misery and squalor to grow at it’s very heart.

Inside the glass and steel, another world. Suits and ties, in furious pursuit of extracting the last morsels of prosperity.

I don’t know how to express it. But it’s so, so disturbing to see the juxtaposition of great wealth right next to implacable misery.

It’s not just the level of injustice in America that’s seriously disturbing–but the garishly exaggerated glorification of it.

It’s not just that a tiny few are getting rich. It’s that they’re getting super-rich by doing super-destructive stuff to prosperity.

Why Money Won’t End the Great Stagnation

Harvard’s Umair Haque offers an interesting ‘thought experiment’ to help us understand how our economy is structured; that it sucks prosperity from most of the population.

Try this. Imagine aliens are listening to our politics and protests. Imagine a miracle. They give each & every American $500,000. Will this help?

What happens next? Have we fixed the problem? Well, it depends.

If Americans then proceed to hit the mall, fill their coffers with lowest-common-denominator faux-designer junk, buy several SUVs, a membership to the VIP room at an ultra-trendy nightclub or five, and a McMansion–well, then, in a few short years, they’re likely to be right back to square one: broke and jobless. For the simple reason that the above don’t create much more than McJobs and capital flowing upwards, from the collapsing middle to the super-rich.

Worse, because they haven’t invested in public goods, they’re likely still to be absent the basic safety nets of health, life, and unemployment insurance, not to mention working infrastructure. If, in short, people choose the post-modern American dream of opulence, this crisis will recreate itself —forever.

Dear Wall Street:

“We bailed out Wall Street to avoid Depression, but three years later, millions of Americans are in a living hell.”

“In no uncertain terms, our leaders told us anything short of saving these insolvent banks would result in a depression to the American public. We had to do it!

“At our darkest hour we gave these banks every single thing they asked for. We allowed investment banks to borrow money at zero percent interest rate, directly from the Fed. We gave them taxpayer cash right onto their balance sheets. We allowed them to suspend account rules and pretend that the toxic sludge they were carrying was worth 100 cents on the dollar. Anything to stave off insolvency. We left thousands of executives in place at these firms. Nobody went to jail, not a single perp walk. I can’t even think of a single example of someone being fired. People resigned with full benefits and pensions, as though it were a job well done.

“The American taxpayer kicked in over a trillion dollars to help make all of this happen.

“But the banks didn’t hold up their end of the bargain.”

Revealed – the capitalist network that runs the world.

There’s 1318 transnational corporations that form the core of the economy.

As anti-capitalist protesters take to the streets, mathematics has teased apart the global economic network to show who’s really pulling the strings.

An analysis of the relationships between 43,000 transnational corporations has identified a relatively small group of companies, mainly banks, with disproportionate power over the global economy.Science may have confirmed protesters’ worst fears.

 

Hundreds of defense contractors that defrauded the U.S. military received more than $1.1 trillion in Pentagon contracts during the past decade…

When awards to ‘parent’ companies are counted, the Pentagon paid more than $1.1 trillion during the past 10 years just to the 37 top companies engaged in fraud.

Angry Bear: So to elaborate a little, let’s take two people who make exactly the same amount:  $100,000 in taxable income.

‘Worker Taxpayer’ earns her money by working (getting compensation by way of a W2) and ‘Investor Taxpayer’ earns her money from dividends in a $4 million stock portfolio she holds (its about 2.5% in yield – about right).

Let’s say they are both unmarried.  Investor taxpayer does not work and has no compensation income.  They are otherwise ‘equal’. Right? (Except that investor taxpayer fits the description of those who vituperate about lazy welfare recipients who sit on the couch all day and watch TV, right? I’ll keep the rhetoric down, because the facts are outrageous enough to speak for themselves.)

Worker taxpayer will pay $7650 in payroll tax, plus $21,617 in income tax for a total tax burden of $29,267.

Let’s look at investor taxpayer.

You would think they would be taxed at the same rate as worker, right?  Wrong.

Because investor taxpayer receives all of her income from qualified dividends, they get a “special” tax treatment.  Bear with me, we’re almost done.  Generally, the maximum tax rate for qualified dividends is 15%, BUT HERE it is actually 0% because investor’s other income (remember she doesn’t work) is taxed at the 10% or 15% rate.

To refresh: Worker making $100K pays about $30K in tax.
Investor making $100K in qualified dividends pays $0 – no – tax.  Huh?  Yup. 

What this means is that rich people – who are incented by tax policy to remain on their couches (too much earned income would otherwise trip them into the 15% dividend tax bracket) – are now getting off their couches and going to tea-party rallies to maintain this unfair redistribution of wealth in their favor.

Just wait. After the protesting in Wall St, London, Milan and elsewhere, any major crash on the horizon will just end up being blamed on ‘all those peasants’!

Everything was fine around here until you plebs began complaining about it!

London occupied as well:

The whole system is wrong but which bits make it strikingly obvious to the ordinary person?

I think tax avoidance, evasion and downright criminality is a powerful place to start. If top banks and top companies are involved in this then ergo something is really wrong and so the questioning continues.

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The Guardian reported that,

The 100 largest groups registered on the London Stock Exchange have more than 34,000 subsidiaries and joint ventures between them. A quarter of these, over 8,000, are located in jurisdictions that offer low tax rates or require limited disclosure to other tax authorities.

And that,

The banking sector has the largest number of tax haven companies, with the big four UK banks – HSBC, Royal Bank of Scotland, Barclays and Lloyds – having a total of 1,649 offshore subsidiaries. They have the largest number of companies registered in the Cayman Islands, with Barclays alone registering 174 subsidiaries and ventures there.

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by Sally Kohn —It’s Not What They’re for, But What They’re Against

Critics of the growing Occupy Wall Street movement complain that the protesters don’t have a policy agenda and, therefore, don’t stand for anything. They’re wrong.

The key isn’t what protesters are for but rather what they’re against — the gaping inequality that has poisoned our economy, our politics and our nation.

In America today, 400 people have more wealth than the bottom 150 million combined.

That’s not because 150 million Americans are pathetically lazy or even unlucky. In fact, Americans have been working harder than ever — productivity has risen in the last several decades. Big business profits and CEO bonuses have also gone up. Worker salaries, however, have declined.

Most of the Occupy Wall Street protesters aren’t opposed to free market capitalism. In fact, what they want is an end to the crony capitalist system now in place, that makes it easier for the rich and powerful to get even more rich and powerful while making it increasingly hard for the rest of us to get by.

The protesters are not anti-American radicals.

They are the defenders of the American Dream, the decision from the birth of our nation that success should be determined by hard work not royal bloodlines.

A Century of Our Streets and Wall Street

Why didn’t we build a better society?
Our problems seem so-o-o, er, old.

Healthcare industry prices rise rapidly. Medical bankruptcies increase.

Illness and medical bills contribute to a large and increasing share of US bankruptcies.

Using a conservative definition, 62.1% of all bankruptcies in 2007 were medical; 92% of these medical debtors had medical debts over $5000, or 10% of pretax family income. The rest met criteria for medical bankruptcy because they had lost significant income due to illness or mortgaged a home to pay medical bills.

Most medical debtors were well educated, owned homes, and had middle-class occupations. Three quarters had health insurance.

Using identical definitions in 2001 and 2007, the share of bankruptcies attributable to medical problems rose by 49.6%. In logistic regression analysis controlling for demographic factors, the odds that a bankruptcy had a medical cause was 2.38-fold higher in 2007 than in 2001.

“Teaching someone to program is like giving them a superpower.”

—Hilary Mason, 32, chief scientist, Bitly

“What do you mean by inequity?”

“There is no progression in the tax rate.”

Folks, dry as the subject is, here’s a sensible discussion of our tax fiasco.

Tidbits galore.

How Rich is Too Rich For Democracy?
by Thom Hartmann, 2005, CommonDreams.org

Let’s see now:

At what point does great wealth held in a few hands actually harm democracy, threatening to turn a democratic republic into an oligarchy?

It’s a debate we haven’t had freely and openly in this nation for nearly a century, and last week, by voting to end the Estate Tax, House Republicans tried to ensure that it wouldn’t be had again in this generation.

But it’s a debate that’s vital to the survival of democracy in America.

In a letter to Joseph Milligan on April 6, 1816, Thomas Jefferson explicitly suggested that if individuals became so rich that their wealth could influence or challenge government, then their wealth should be decreased upon their death. He wrote, “If the overgrown wealth of an individual be deemed dangerous to the State, the best corrective is the law of equal inheritance to all in equal degree…”

This Time is Different: Eight Centuries of Financial Folly

Throughout history, rich and poor countries alike have been lending, borrowing, crashing–and recovering–their way through an extraordinary range of financial crises. Each time, the experts have chimed, “this time is different”–claiming that the old rules of valuation no longer apply and that the new situation bears little similarity to past disasters. With this breakthrough study, leading economists Carmen Reinhart and Kenneth Rogoff definitively prove them wrong. Covering sixty-six countries across five continents, This Time Is Different presents a comprehensive look at the varieties of financial crises, and guides us through eight astonishing centuries of government defaults, banking panics, and inflationary spikes–from medieval currency debasements to today’s subprime catastrophe.

comment snippets at Google Books:

This is the most important book that no one will ever read.

…financial markets are not self-regulating. Competition for profit leads lenders to take on dangerous and ultimately deadly levels of risk…

… the basics of economics don’t really change, no matter what fantasies people come to believe.

SO much of economics is pure theory with no attempt to verify…

*Very* data heavy, but they walk you through it pretty well.

Don’t we realize facts are sacred?

“They took the basic subprime losses and magnified them to a point at which no one — not banks, not investors, not entire governments — could bear the cost of the massacre that followed.”

Heidi Moore says,

“The problem is that even when only some of the people get fooled, all of us are paying all of the time.”

Banks should tell the truth.

To everyone.

“Wall Street is the factory for all the financial products in the United States, and you can’t allow a factory to put out some poisonous products and claim the rest are healthy.”