Will Blog for Food

Solar Energy: Centralized, Corporatized, Commodified or Power To, Of and For the People?

The next US administration, hopefully under Democratic leadership, will make a big push toward solar energy. But as always the devil will be in the details. Whether or not there will be energy independence from foreign nations will be a function of how they go about it. There are basically two models. The government will subsidize the development and application of solar energy either way.  Which model is chosen will determine which direction the US will go in for many years. There will be those who will complain about government subsidization of the solar energy field saying it should be left to private enterprise. But what do you call the $16 billion government subsidies given to the oil companies at a time they are experiencing record profits? It's OK to subsidize large corporations but not OK to subsidize individual citizens? It's OK to subsidize rich farmers and pay them not to grow crops as was enacted again in the recent farm bill?

But there are also big subsidies and tax breaks for farmers. Despite the fact that commodity prices are through the roof, up 126% for wheat, 57% for soy and 47% for corn, which is in just about everything from plastics, sweeteners and ethanol to, well, corn. And yes farmers are still being paid not to farm their land to the tune of about 30 billion a year. ... ... with less than a couple percent of Americans still working the land, it's not struggling farm families but huge agribusiness firms that till the land and rake in the profits. And guess what the new farm bill offers them? I mean aside from endless earmarks favoring race horse owners (courtesy of Kentucky's Senator Mitch McConnell) and Western Salmon fisheries? What it offers them is continuing tax breaks on farm income up to -- unhuh -- $750,000 per farmer. President Bush asked to lower the limit to $200,000 but was ignored. Farmers who make more than $750,000 in farm income who don't want to be taxed have an option - get yourself a wife and your non-taxable income goes to $1.5 million.

Basically the government is subsidizing everyone and everything that can mount a huge lobbying effort in Washington. That means corporate subsidization, but when the little guy complains that he or she can't afford gas, food or health care, the Republican right and their corporate lobbyist shills come forward with their propaganda campaign saying that helping the little people would amount to socialism, and, although corporate socialism is OK (they wouldn't exactly put it in those words), we can't have government subsidizing individuals and families - especially poor and middle class - because that would be socialism of the worst sort - socialism that benefits the people instead of the large corporations.

But I digress. Barack Obama or Hillary Clinton or both will have a chance (especially if they have a filibusterproof Senate) to redirect the US away from corporate socialism and towards the empowerment of noncorporate individuals and families. The real issue about solar energy is not whether we'll have it (we will) but who will control it. One model is where government sibsidizes individual homeowners to install solar panels on their homes and property as Germany is doing.

An average German household, for example, can earn over 2,000 euros ($A3,130) a year from subsidies to install solar panels - double their electricity bill - and pay off all costs within 10 years and earn a pure profit for a further 10.

This is a decentralized model in which power generation and distribution is spread over the whole population. One could even say it was democratic power generation or Power to the People! The other model is the one Exxon Mobil and British Petroleum are hankering for: centralized solar power generation and distribution brought to you by the same folks who are now selling you oil. They just want to diversify into other methods, but they want to retain centralized corporate control over US energy needs. They want an energy policy in which energy can be commodified and sold to you in units and priced in such a way that they have control over it. It doesn't matter whether it is solar power or oil generated power so long as they commodify it, meter it, price it and control the distribution of it.

And the absolute worst aspect of centralized corporate control is that solar futures (like oil futures) will be bought and sold on Wall Street and in the London financial district so that speculators can bid up the price of solar energy like they're doing now with oil futures. Hedge funds and other speculators will then control the price of energy like they do now. They don't care what the source of the energy is, only whether it can be commodified, bought and sold and speculated on so they can make their 20% annnual returns to capital at the average person's expense I might add. Where do you think your gas money is going? Now if the government subsidizes individual homeowners to install solar panels, then individual families can generate their one energy both for their homes and for their plug-in electric cars. There will be no middlemen to bid up the price of energy. It will be essentially free once the solar panels are paid for. That's where government subsidization comes in. Instead of corporate profits and speculator profits, there will be a savings to individual families who will be paying essentially nothing for their energy needs. Instead of paying at the pump, paying for heating oil, paying the power and light company, families will be able to diminish their monthly expenses by those amounts. And they may even make money by putting power that they don't need back on the grid like they do in Germany. That would represent a demo- cratic approach to energy generation and distribution as opposed to the corporate approach. If you wanted to make a fine distinction, it wouldn't be socialized energy production because the government would not own the means of production. Individual citizens would. It would be economic democracy and individual empowerment as opposed to government socialism. And it wouldn't be corporate socialism where large corporations, subsidized by the government, owned and controlled the means of energy production. So conservatives how ya going to spin that? How are you going to turn the voters away from decentralized  ownership of the means of energy production and convince them that large corporations should own and control it? 

The absolute worst aspect of corporate control and commodification of energy is that energy independence will turn out to be a farce. Dependence on foreign oil in a globalized market will turn out to be dependence on oil companies who now generate solar energy that will be owned by the same Arabs and Chinese who now provide oil and from whom we borrow money. In a globalized capitalist system, actual corporate ownership in publicly traded corporations can be anyone, anywhere. It doesn't have to be Americans. And who do you think has the money to invest? So dependence on foreign oil will be replaced with dependence on foreign ownership of solar power production in the American market. That's globalization for you. But the results would be the same whether it's American corporations that own the means of energy production or globalized corporations that own the means of energy production. And why do I think foreigners would still control the means of production if this model were to succeed? Because they own a vast amount of American debt at the present time. They're swimming in dollars. The US has gone from the world's largest creditor nation to the world's largest debtor nation in just a few short years. Financially speaking, the Arabs and the Chinese are in the cat bird's seats. They own American debt big time. They can buy up publicly traded shares in any corporation they choose to including those who provide energy (whether oil or solar) to the American market. So the US will still be in the hands of corporatists, speculators and foreigners if we end up with centralized, corporatized, commodified solar energy.

The Democrats, if they should win the White House and control the Senate, will have a chance to turn this country around by rebuiding infrastructure and putting the nation on the path of decentralized, decorporatized and decommodified energy production that will benefit more or less equally every US citizen instead of enriching corporations and speculators. Non-outsourcable jobs will be created and the cost of living will go down. Instead of pouring money into wars and the largest military-industrial complex in the world, that money could be redirected into more profitable (for the people) pursuits. Instead of trying to bring democracy to the rest of the world, why not try to bring a little democracy here at home? However, control of Congress by lobbyists in order to elicit government largess for corporations needs to be eliminated. There will still be a need for oversight of the energy grid and this is a legitimate government or regulated utility function. There will still be a need for pricing of solar units so that energy can be put out on the grid by individuals and credited to them and vice versa. When enough silicon solar collectors are in place, energy should be virtually free - something that is anathema to the commodifiers. Now free energy to power homes, transportation and businesses. Wouldn't that be something? POWER TO THE PEOPLE!

How US Government Screws Senior Citizen Social Security Recipients

By fiddling with statistics, the US Government is able to come up with any figures it wants to, and, of course, it wants to come up with the figures that make it look good. Therefore, unemployment rates and inflation are doctored to make them lower than they actually are. GDP is doctored to make it seem larger than it actually is. The pernicious part is that seniors count on their cost of living adjustments (COLAs) which are pegged to the inflation rate to help them keep their heads above water. By understating the inflation rate seniors have been cheated out of their COLAs to the tune of 70% of their entire check by some estimates.

And, of course, the Bush Administration does not have to admit that we're in a recession by understating the inflation rate at 2% whereas by assuming the inflation rate is 5% (which is more in tune with reality), we would definitely be in a recession. So a recession - like beauty - is in the eyes of the beholder and the government technocrats who lie with statistics have a different definition of beauty than you or I do. Why does understating the inflation rate get the government out of a recession? Because when you adjust for inflation, it lowers the GDP to the point that we've had negative growth for two straight quarters and - bingo - that's the "definition" of a recession. Of course, you could define it in a different way...

Kevin Phillips has done an excellent job in running down the inflation boondoggle:

Billionaire California bond manager Bill Gross calls it "a haute con job." Bloomberg News columnist John Wasik describes it as "a testament to the art of economic spin." More and more shoppers and consumers simply disbelieve it. The subject of this scorn is the federal government's vaunted Consumer Price Index or CPI. Americans are now beginning to understand that this indicator has its own share of gimmicks not unlike a sub-prime mortgage or the six pages of fine print that accompanies your credit card agreement. Some of these CPI ingredients -- product substitution weightings, "hedonics" (price reductions for added product quality or satisfaction), and use of owner's equivalent rent (instead of home ownership costs) -- have a comic aspect suitable to mockery by Bill Maher, Stephen Colbert or Jon Stewart. But in a larger sense, they're not remotely funny. That's because the federal minimalization and misrepresentation of inflation, pursued statistically over the last 25 years, has been the main buttress of Washington's over-favorable and self-serving portraiture of the U.S. economy.

Understating the inflation rate has meant that the government has limited payouts to seniors whose social security COLAs are linked to the CPI. It also means that wage contracts tied to the CPI have saved corporations tons of money while underpaying workers. According to Phillips some $250 billion a year could be involved. Understating inflation also means that savers get a lower rate of return on their savings accounts while banks get to borrow money more cheaply.

Now anyone who has purchased gas or food recently - isn't that all of us ... hello! - knows that the price of these commodities has skyrocketed. Although the price of housing has deflated recently, anyone who bought a house say in the years from 2000 to 2006 knows that the cost of buying a house increased tremendously during those years. Yet neither housing costs nor food nor gas has been included in the CPI by the government.

Oil is up over 80 percent in the last twelve months. The New York Times' consumer reporter, W.P. Dunleavy, wrote on May 3 that his own groceries now cost $587 a month, up from $400 a year earlier. That's a 40 percent increase. Reports in the financial press make frequent reference to foreign investors who distrust the U.S. dollar because they calculate true U.S. inflation at 6% to 9% including food and energy. California economist John Williams, who runs an organization called Shadow Statistics, contends that if Washington still used the CPI measurements applied back in the 1970s, inflation would be in the 10 percent range. My own analysis, set out in much more detail in an article in the May issue of Harper's, comports with that of the cynical foreign investors. Therein lies the danger. If the current inflation rate is really 6-9 percent instead of the 2-3 percent claimed by government and most U.S. money managers, then Washington's official estimates that the economy still grew at a rate of some 0.6 percent in the first quarter of 2008 become nonsense. Subtracting a 6-9 percent inflation rate from nominal GDP growth would identify an economy that was deteriorating and shrinking, not growing. Concerned foreign dollar-holders would become even more concerned.

The deception started in the Kennedy Administration where the jobless statistics started taking a toll on the "Camelot" image. What to do to get the jobless rate down? Well, how about this? Stop counting "discouaged workers" or those who had "dropped out of the labor force" or "those who were not actively looking for work." I suppose all those had also decided to drop out of the eating and drinking force as well. Lyndon Johnson continued the deception by combining the social security budget with the general budget in the "unified budget". This masked the budget deficit. 

Now Richard Nixon topped them all by defining inflation downward and excluding food and energy costs from the CPI because they were too "volatile". In this way he arrived at "core inflation." What? Excluding the most essential aspects of economic life in order not to be embarrassed by the inflation rate? Yes, this is what Nixon actually did. Consequently, why should any American believe what the government tells them about inflation, recession, unemployment etc.? And why shouldn't social security recipients demand back payments on all the money they've been cheated out of by the government's redefining of statistics? Oh, and don't forget all that economic activity the government talks about is largely confined to the top 1% of income earners while the vast majority see their economic situation deteriorate.

In 1983, under the Reagan Administration, inflation was further finagled when the Bureau of Labor Statistics decided that housing, too, was overstating the Consumer Price Index; the BLS substituted an entirely different "Owner Equivalent Rent" measurement, based on what a homeowner might get for renting his or her house. This methodology, controversial at the time but still in place today, simply sidestepped what was happening in the real world of homeowner costs. Because low inflation encourages low interest rates, which in turn make it much easier to borrow money, the BLS's decision no doubt encouraged, during the late 1980s, the large and often speculative expansion in private debt—much of which involved real estate, and some of which went spectacularly bad between 1989 and 1992 in the savings-and-loan, real estate, and junk-bond scandals. Also, on the unemployment front, as Austan Goolsbee pointed out in his New York Times op-ed, the Reagan Administration further trimmed the number by reclassifying members of the military as "employed" instead of outside the labor force. The distortional inclinations of the next president, George H.W. Bush, came into focus in 1990, when Michael Boskin, the chairman of his Council of Economic Advisers, proposed to reorient U.S. economic statistics principally to reduce the measured rate of inflation. His stated grand ambition was to move the calculus away from old industrial-era methodologies toward the emerging services economy and the expanding retail and financial sectors. Skeptics, however, countered that the underlying goal, driven by worry over federal budget deficits, was to reduce the inflation rate in order to reduce federal payments—from interest on the national debt to cost-of-living outlays for government employees, retirees, and Social Security recipients. ... Nothing, however, can match the tortured evolution of the third key number, the somewhat misnamed Consumer Price Index. Government economists themselves admit that the revisions during the Clinton years worked to reduce the current inflation figures by more than a percentage point, but the overall distortion has been considerably more severe. Just the 1983 manipulation, which substituted "owner equivalent rent" for home-ownership costs, served to understate or reduce inflation during the recent housing boom by 3 to 4 percentage points. Moreover, since the 1990s, the CPI has been subjected to three other adjustments, all downward and all dubious: product substitution (if flank steak gets too expensive, people are assumed to shift to hamburger, but nobody is assumed to move up to filet mignon), geometric weighting (goods and services in which costs are rising most rapidly get a lower weighting for a presumed reduction in consumption), and, most bizarrely, hedonic adjustment, an unusual computation by which additional quality is attributed to a product or service. The hedonic adjustment, in particular, is as hard to estimate as it is to take seriously. (That it was launched during the tenure of the Oval Office's preeminent hedonist, William Jefferson Clinton, only adds to the absurdity.) No small part of the condemnation must lie in the timing. If quality improvements are to be counted, that count should have begun in the 1950s and 1960s, when such products and services as air-conditioning, air travel, and automatic transmissions—and these are just the A's!—improved consumer satisfaction to a comparable or greater degree than have more recent innovations. That the change was made only in the late Nineties shrieks of politics and opportunism, not integrity of measurement. Most of the time, hedonic adjustment is used to reduce the effective cost of goods, which in turn reduces the stated rate of inflation. Reversing the theory, however, the declining quality of goods or services should adjust effective prices and thereby add to inflation, but that side of the equation generally goes missing. "All in all," Williams points out, "if you were to peel back changes that were made in the CPI going back to the Carter years, you'd see that the CPI would now be 3.5 percent to 4 percent higher"—meaning that, because of lost CPI increases, Social Security checks would be 70 percent greater than they currently are. Furthermore, when discussing price pressure, government officials invariably bring up "core" inflation, which excludes precisely the two categories—food and energy—now verging on another 1970s-style price surge. This year we have already seen major U.S. food and grocery companies, among them Kellogg and Kraft, report sharp declines in earnings caused by rising grain and dairy prices. Central banks from Europe to Japan worry that the biggest inflation jumps in ten to fifteen years could get in the way of reducing interest rates to cope with weakening economies. Even the U.S. Labor Department acknowledged that in January, the price of imported goods had increased 13.7 percent compared with a year earlier, the biggest surge since record-keeping began in 1982. From Maine to Australia, from Alaska to the Middle East, a hydra-headed inflation is on the loose, unleashed by the many years of rapid growth in the supply of money from the world's central banks (not least the U.S. Federal Reserve), as well as by massive public and private debt creation.

70%?!! That means that seniors should be getting almost twice what they're getting now in their monthly checks. And since what seniors need most - food and energy - isn't even counted in the CPI - thanks to Nixon - the statistical deceit is appalling! Core inflation? Schmore inflation! The American public is being deceived - about unemployment, economic growth, inflation - you name it. The government's incentive is to misrepresent all these indices because it puts them in a more favorable light and it masks the economic distortions going on in this economy, the massive transfer of wealth from the poor and middle class to the rich and the increasing economic inequality. Economic activity looks good because most of it takes place among the very wealthy. Exclude the top 1% of income earners and the picture for the rest of the population looks dismal.

The real numbers, to most economically minded Americans, would be a face full of cold water. Based on the criteria in place a quarter century ago, today's U.S. unemployment rate is somewhere between 9 percent and 12 percent; the inflation rate is as high as 7 or even 10 percent; economic growth since the recession of 2001 has been mediocre, despite a huge surge in the wealth and incomes of the superrich, and we are falling back into recession. If what we have been sold in recent years has been delusional "Pollyanna Creep," what we really need today is a picture of our economy ex-distortion. For what it would reveal is a nation in deep difficulty not just domestically but globally. Undermeasurement of inflation, in particular, hangs over our heads like a guillotine. To acknowledge it would send interest rates climbing, and thereby would endanger the viability of the massive buildup of public and private debt (from less than $11 trillion in 1987 to $49 trillion last year) that props up the American economy. Moreover, the rising cost of pensions, benefits, borrowing, and interest payments—all indexed or related to inflation—could join with the cost of financial bailouts to overwhelm the federal budget. As inflation and interest rates have been kept artificially suppressed, the United States has been indentured to its volatile financial sector, with its predilection for leverage and risky buccaneering. Arguably, the unraveling has already begun. As Robert Hardaway, a professor at the University of Denver, pointed out last September, the subprime lending crisis "can be directly traced back to the [1983] BLS decision to exclude the price of housing from the CPI. . .With the illusion of low inflation inducing lenders to offer 6 percent loans, not only has speculation run rampant on the expectations of ever-rising home prices, but home buyers by the millions have been tricked into buying homes even though they only qualified for the teaser rates." Were mainstream interest rates to jump into the 7 to 9 percent range—which could happen if inflation were to spur new concern—both Washington and Wall Street would be walking in quicksand. The make-believe economy of the past two decades, with its asset bubbles, massive borrowing, and rampant data distortion, would be in serious jeopardy. The U.S. dollar, off more than 40 percent against the euro since 2002, could slip down an even rockier slope.

And then, as long as we're talking about social security, there is the little issue of funding it. I have blogged previously about the unfairness of capping social security contributions at around $100,000, annual income, when CEOs and hedge fund managers are making $100 million and more per year. These annual incomes are far in excess of anything remotely resembling what a person needs to live on. And then they charge self-employed people 15% of their earned income for their social  security contribution even if the person is receiving social security and still working because they can't live on what they're getting in social security. Of course, the rich have to make absolutely no social security contributions on their unearned income - income from rents, interest and dividends. And then there's the little issue of rich people who have sky high retirement incomes still receiving social security.  It's insane. They don't need it. It should be means tested. All in all the whole program from start to finish which ever end you want to look at is a total botch job, thanks to the Republicans whose goal is to eliminate it altogether.

Oil Speculators Drive Up Gas Prices at the Pump

It's not enough that speculators and hedge funds have wreaked havoc in the economic system first with the internet bubble of 2000, then with housing bubble (still bursting), but now they've turned their attention to oil and food and are currently in the process of running up prices and creating bubbles in those arenas. It represents the Enronification of food and oil in much the same way that Enron caused huge increases in electricity prices for Californians and others a few years ago by manipulating the market. By the way this isn't what caused the collapse of Enron - charging Grandmas in California outrageous prices for their utility bills. That was all perfectly legal. It was their accounting practices that brought them down. Now oil speculators are manipulating an unregulated futures market causing huge increases in the cost of vital products like food and oil. But this time they've found the perfect vehicle for making a killing in more ways than one. The demands for food and oil are only going to increase so they can bid up the prices for those commodities endlessly. The only way they can lose is if demand were actually to decrease. Then prices might come down, and they would be sitting with overpriced futures contracts. But this is unlikely to happen any time soon. The likliest scenario is that, thanks to them, oil and food prices are likely to continue to rise in a virtually unending upward spiral causing widespread food riots worldwide and pain at the pump here at home which will pauperize the middle class.

Thanks to the deregulation of the commodities markets in 2000, no one knows the mechanics of how these financial instruments are traded or in what quantities or by whom. Some have said that perhaps 60% of today's oil prices are due to pure speculation. It's not a function of supply and demand because the world's oil producers are pumping their hearts out although they can control supply if they want to. The fact that there is abundant supply points to speculation as the factor that's driving up gas prices.

The price of crude oil today is not made according to any traditional relation of supply to demand. It’s controlled by an elaborate financial market system as well as by the four major Anglo-American oil companies. As much as 60 percent of today’s crude oil price is pure speculation driven by large trader banks and hedge funds. It has nothing to do with the convenient myths of Peak Oil. It has to do with control of oil and its price. How? First, the crucial role of the international oil exchanges in London and New York is crucial to the game. NYMEX in New York and the ICE Futures in London today control global benchmark oil prices which, in turn, set most of the freely traded oil cargo. They do so via oil futures contracts on two grades of crude oil: West Texas Intermediate and North Sea Brent. ... All this is well and official. But how today’s oil prices are really determined is done by a process so opaque only a handful of major oil trading banks such as Goldman Sachs or Morgan Stanley have any idea who is buying and who selling oil futures or derivative contracts that set physical oil prices in this strange new world of “paper oil.” With the development of unregulated international derivatives trading in oil futures over the past decade or more, the way has opened for the present speculative bubble in oil prices. Since the advent of oil futures trading and the two major London and New York oil futures contracts, control of oil prices has left OPEC and gone to Wall Street. It is a classic case of the “tail that wags the dog.” A June 2006 US Senate Permanent Subcommittee on Investigations report on “The Role of Market Speculation in rising oil and gas prices,” noted, “ . . . there is substantial evidence supporting the conclusion that the large amount of speculation in the current market has significantly increased prices.” What the Senate committee staff documented in the report was a gaping loophole in US government regulation of oil derivatives trading so huge a herd of elephants could walk through it. That seems precisely what they have been doing in ramping oil prices through the roof in recent months. The Senate report was ignored in the media and in the Congress. The report pointed out that the Commodity Futures Trading Trading Commission, a financial futures regulator, had been mandated by Congress to ensure that prices on the futures market reflect the laws of supply and demand rather than manipulative practices or excessive speculation. The US Commodity Exchange Act (CEA) states, “Excessive speculation in any commodity under contracts of sale of such commodity for future delivery . . . causing sudden or unreasonable fluctuations or unwarranted changes in the price of such commodity, is an undue and unnecessary burden on interstate commerce in such commodity.” Further, the CEA directs the CFTC to establish such trading limits “as the Commission finds are necessary to diminish, eliminate, or prevent such burden.” Where is the CFTC now that we need such limits? They seem to have deliberately walked away from their mandated oversight responsibilities in the world’s most important traded commodity, oil. Enron has the last laugh . . . As that US Senate report noted, “Until recently, US energy futures were traded exclusively on regulated exchanges within the United States, like the NYMEX, which are subject to extensive oversight by the CFTC, including ongoing monitoring to detect and prevent price manipulation or fraud. In recent years, however, there has been a tremendous growth in the trading of contracts that look and are structured just like futures contracts, but which are traded on unregulated OTC electronic markets. Because of their similarity to futures contracts they are often called 'futures look-alikes.' "The only practical difference between futures look-alike contracts and futures contracts is that the look-alikes are traded in unregulated markets whereas futures are traded on regulated exchanges. The trading of energy commodities by large firms on OTC electronic exchanges was exempted from CFTC oversight by a provision inserted at the behest of Enron and other large energy traders into the Commodity Futures Modernization Act of 2000 in the waning hours of the 106th Congress.

Now it is indeed ironic if not demonic that Wall Street can interject itself in the commodities markets, make millions for hedge funds and speculators while causing widespread pain and starvation in the rest of the world. And it's all perfectly legal! It's Enron's dream become reality. Wall Street produces nothing, sells nothing but paper, but yet can enrich itself at the expense of poor people the world over. By driving up prices on vital necessities, it provides a disservice to humanity while enriching itself. Capitalism has indeed run amok.

Why We Need a Fighter, Not a Uniter

It looks like the long, drawn-out Democratic Presidential primary season will be over tomorrow after the superdelegates weigh in. Obama's quest to be a "uniter not a divider" is nieve at best since he could have all the people united behind him and still not sway the Republicans in the Senate who will filibuster every piece of Democratic legislation unless the Democrats have at least 60 seats in the Senate which seems unlikely. He will never unite the Republican Senators with the Democrats, and, despite having united "the people," it will all be for nought. That's why we need a fighter not a uniter, and Hillary is much more suited to that job. Task number one on day one of a new Presidency should be taking the Republicans head-on over the filibuster rules that allow them to filibuster just by threatening to do so. They don't have to give long-winded speeches to all hours of the night; they just have to say "we're going to filibuster" and whatever legislation is before that august body will be taken off the table and thrown in the circular file. That legislation is dead just on the Senate Republicans' say-so.

Obama's quest to be a uniter is a pipe-dream; it's pie in the sky. He doesn't know what determined fellows these Republicans are. They are fueled by the money heaped on them by wealthy interests represented by tons of lobbyists all pushing the agenda of the wealthy. A Democratic House and Senate combined with a Democratic President might actually get something done. But it would be necessary to have a filibuster-proof Senate. Otherwise, the Republicans will sit there and filibuster every piece of legislation not favored by the lobbyists to death. This is the fight the next (Democratic) President needs to take on right out of the starting gate. Otherwise, his or her Presidency will be for nought. I think Hillary (hopefully) understands this. Obama doesn't seem to have a clue. Sure he hasn't taken any PAC money himself. So what? How does this change the legislative proclivities of the Senate?

Bill Clinton was put in this same position because he faced a Republican Congress. It's now apparent that the Republicans can accomplish their ends even with a Democratic Congress by means of the filibuster rules. They told Bill Clinton "Either you cooperate with us (triangulate) or you'll accomplish nothing. You'll be a do-nothing President." They'll tell Obama the same thing, and he'll be pressured into triangulating. However, history has shown that it didn't work all that well for the first Clinton. He signed tons of Republican inspired legislation including the repeal of the Glass-Steagall act which led directly to the sub-prime mortgage crisis. Hopefully, President Hillary wouldn't let the same thing happen to her as happened to her husband. Anyway I'd bet she'd be more successful, having been around the block once, at taking on the Republicans than Obama would be.

The first step is using the nuclear option on the filibuster rules - obliteration of the filibuster - which the Republicans have perverted from its original purpose in order to serve their interests. And there are enough self-serving Democrats in the pockets of lobbyists that a Democratic President cannot even count on all of them. The Democratic Congress elected in 2006 has largely failed in its efforts because of its refusal to take on the Republicans over this issue. That makes it even more critical to take on the filibuster in 2009 and destroy it. The revolving door facilitates politicians who pander to lobbyists obtaining lucrative jobs with the corporations whose interests they represent once they leave "public service" if you want to call it that. For them though it's "special interest service." Their whole intention is to make a killing once they leave the government.

So, in conclusion, the stronger candidate in my opinion is Hillary Rodham Clinton. Both she and Obama want to do the right things for the US. The question is who has the better prospects for actually being successful at it. And who is willing on Day 1 to be a fighter, trim the Republicans' wings and put them in their place. There is a lot of money in Washington almost all of which is betting that neither Obama or Hillary will be able to do so.

Commodities Speculators

Gas prices are going up with no end in sight. Food prices are rising. We're obviously in an inflationary period and a recession. Wages aren't going up so we have stagflation plus a recession or to coin a term - recesstagflation. It's the worst of all economic worlds. The speculators and hedge fund managers, having profited from the stock market bubble of 2000 which later burst and the sub-prime mortgage bubble which is still bursting, have now turned their attention to the commodities market, driving up prices much as they did in the stock market and real estate. Originally the commodities market had a simple raison d'etre: payday advance for farmers. Farmers could sell their crop whether it be corn, wheat or pork bellies on the futures market before the crop was even in the ground or the animals had even been led to slaughter at a set price. The crop or animal part was to be delivered at a future date, thus the name - futures. Now in most cases the buyer of the futures contract had no intention of taking delivery. He or she was just a middle man or woman. They made their money by selling the contract to someone else for an even higher price than what they paid. Finally, the end user would buy the shipment of the actual product having paid more or less than what the farmer received in the first place. The same principles apply to the oil market.

Now just as in the mortgage market, the commodities market was deregulated making all kinds of financial chicanery possible without any government snooping or looking over their shoulders. This led to disastrous results in the mortgage market as we are seeing unfold in real time. The difference between the mortgage market and the commodities market is that homeowners who were not able to make their payments could default on their loans and walk away with their home going into foreclosure. Commodities speculators have a market for which the end product can not be walked away from. People have to eat no matter what.

So that brings us to the second key difference between the housing crisis and the food crisis: the scale of consequences. When a housing bubble inflates till it pops, people lose their homes. But when a food bubble grows till it bursts, people starve. The problem with booms is they're almost inevitably followed by busts. Worse news is that what we're seeing right now-skyrocketing food prices and growing hunger-are still the effects of the boom. If the weather turns bad, commodity prices could still double over the next few months. But with the stability of the food and agriculture system left up to the whims of mother nature's next crop yield, or how Cargill, ADM and the venture capitalists spin the roulette wheel, the bust is in the making. If the rural farm economy tanks, we're set to see farm foreclosures, another banking crisis, and global hunger that will make the sub-prime mortgage effects look like a drop in the bucket.

So as they pour money in, they know that the futures price will only go up, never down because there are always more mouths to feed, never fewer. Much as in the case of Enron jerking around the energy market, the speculators have latched onto something consumers will pay any price for: gas and food. So just as Enron caused the price of electricity to go sky high by manipulating the market, commodities speculators can trade futures contracts back and forth driving up the prices of gas and oil without pesky government intervention.

From the Washington Post:

Farmers and food executives appealed fruitlessly to federal officials yesterday for regulatory steps to limit speculative buying that is helping to drive food prices higher. Meanwhile, some Americans are stocking up on staples such as rice, flour and oil in anticipation of high prices and shortages spreading from overseas. Their pleas did not find a sympathetic audience at the Commodity Futures Trading Commission (CFTC), where regulators said high prices are mostly the result of soaring world demand for grains combined with high fuel prices and drought-induced shortages in many countries. The regulatory clash came amid evidence that a rash of headlines in recent weeks about food riots around the world has prompted some in the United States to stock up on staples. Costco and other grocery stores in California reported a run on rice, which has forced them to set limits on how many sacks of rice each customer can buy. Filipinos in Canada are scooping up all the rice they can find and shipping it to relatives in the Philippines, which is suffering a severe shortage that is leaving many people hungry. While farmers here and abroad generally are benefiting from the high prices, even they have been burned by a tidal wave of investors and speculators pouring into the futures markets for corn, wheat, rice and other commodities and who are driving up prices in a way that makes it difficult for farmers to run their businesses. "Something is wrong," said National Farmers Union President Tom Buis, adding that the CFTC's refusal to rein in speculators will force farmers and consumers to take their case to Congress. "It may warrant congressional intervention," he said. "The public is all too aware of the recent credit crisis on Wall Street. We don't want a lack of oversight and regulation to lead to a similar crisis in rural America." ... The upswing in prices has been exaggerated by the massive influx of investors and speculators seeking to profit from rising prices for corn, wheat, oil, gold and other commodities. Big Wall Street firms and hedge funds have taken huge positions in futures markets that once were dominated by relatively small operators such as farmers and grain-elevator owners. Small investors, who see fast-rising commodities as good hedges against inflation and a falling dollar, also are getting a piece of the action by investing in index funds that are tied to commodity prices.

Now the speculators know there are world wide food shortages so by the law of supply and demand and because of inflationary pressures on the American dollar, they are only going to make money by buying a fixed quantity of a commodity now and selling the contract before the delivery date to an end user. This drives up the price of the commodity whether it be food or oil because, unlike the housing market, people need to eat and drive. Now some people think this is creating another bubble. Exchange-traded funds and index funds allow speculators to place bets that commodities will go up or down in the future. Money has flooded into these funds mostly on the long side. In other words most people are betting that the prices of commodities will continue to go up, hence the bubble. The "smart money" is betting that at some time there will be a correction and prices will tumble. However, increased demand for meat (it takes 8 pounds of grain to produce one pound of meat) and ethanol means that less food is available to those in poorer countries who are dependent on the grains to avoid starvation. This has produced food riots in some parts of the world.

So just as speculation in the housing market drove up the cost of houses to unsustainable heights providing homeowners with gains in equity that caused them to think that they could refinance unendingly, pull equity out and spend it, money pouring into the commodities market is driving up the cost of gas and food, two essentials that are consumed immediately and thus have no inherent equity value. The homeowner profited by riding the mortgage bubble at least till it ended, but there is no profit for the consumer who must pay higher prices for staples driven by speculators and investors. And poor people are the most vulnerable to rising prices. But this may be the greatest boon to investors who may profit endlessly from rising demand on the backs of increasingly desperate poor people.

None of this speculation is really necessary. If the farmer needs a payday advance, why can't he get it from a commercial bank rather than Wall Street? I'm sure his equity in his farm would justify a loan. There's no need for a futures market in which the farmers themselves participate in order to get the highest price. All the financial middlemen are just driving up the cost of food and gas and ultimately will cause starvation among the world's poor. Let the farmer sell directly to the end user and finance his crops with a loan from a commercial bank if need be. This is just another example of capitalism run amok. The answer is not more regulation; it's making speculation illegal!

The Decline and Fall of the American Empire

It's never a good sign when a nation's currency is on the skids and inflation accelerates. The architect of Reagonomics, Alan Greenspan, has come in for a lot of criticism lately. As well he should. It looks like replacing all those manufacturing jobs with stock and mortgage broker jobs wasn't such a good idea after all. What has been called the financialization of the US has led directly to the pauperization of the US. It's one thing for government officials to lie to us about war; it's quite another to lie to us about our breadbasket. As they use statistics to cover their asses, it just gets silly to argue about whether or not we're actually in a recession. "Oh, you couldn't prove it by me. We might be in one or we might just be in a slowdown or we might be in a downturn, but who knows." The thing is they've defined "recession" in such a way that we can never know we're in one till it's over! How convenient!

The good news is that underwater homeowners can still "walk away" from their homes without their mortgage debt following them for the rest of their lives. Student loan debters aren't anywhere near as lucky! Investors are going, "Aw, shucks. Didn't they change the law so that they wouldn't be able to do that? How can we reliably rate bonds triple A without that kind of investor protection?" Banks have been lobbying Congress to prevent consumers from walking away from credit card debt by declaring bankruptcy. Instructively, holders of student loan debt have already had the laws changed to prevent students from walking away from student loan debt by declaring bankruptcy. Those debts will follow them for the rest of their lives. Bondholders, whose securities are mortgage backed, are out of luck as the recent sub-prime crisis illustrates. Homeowners simply walked away. Banks lost billions. They won't make that mistake next time unless the Democrats simply roll back the sanctions against bankruptcy. The Republicans will seek to roll them forward as part of their plan to create a debtor class out of the middle class.

As the US dollar falls, the Finns legislate days off for shagging:

Gspan's new paradigm would have continued if cheap (read: slave) wages in China stayed in the sub-50 cent per hour range allowing Wal-Mart to continue offering; 'Every Day Low Prices That Save You $1 at the Cash Register But Cost You $2 In Pay.' But starting last summer, when interest rates began moving higher - after wages in China and India bottomed - the unbearable lightness of America's Zeppelin economy found a lead lining and started to sink - taking with it the U.S. dollar, the illusion of cheap imports, and high productivity gains (in reality, just Chinese slaves sewing American flags for pennies a day). Digression and Rhetorical Foreshadowing Alert: One of the lies U.S. government statisticians tell Americans is that Europeans are less productive. In fact, Europeans are equally, and in many cases more productive than the average American worker. The difference is that Europeans invest their productivity gains into time off while Americans invest their gains in consumption. Getting back to Gspan's nightmare, his Philosopher's bong-pipe smoking FOMC (Fed Open Market Committee) circle jerks thought that copper, lead, zinc, oil, gold, corn, wheat, rice, coffee and milk were never going to rise in price ever again. Now we've all got the munchies, but nobody can afford beer or pretzels. The zombies and shills on CNBC and Fox Business News keep jabbering away trying to inflate Gspan's busted new paradigm lead balloon with the force of their own hyperbole even while it gets pricked with rumors and negative bets from titanic currency speculators and spiteful Sovereign Wealth Funds. James Cramer can blow only so much hot air. Greenspan wrongly thought that 'financial services' could permanently replace manufacturing in America. Imagine a nation of 100 million stock brokers trying to sell stocks and bonds to each other; i.e., Atlanta Georgia times 10,000 (before the recent collapse). Now that the value of financial services are collapsing along with the dollar, Americans are being asked to step up to the plate and forget all about financial services. The Fed's got a new idea; manufactured synthetic financial memories. Bernanke says inflation is not really a problem. He says the problem is people's expectation of inflation. To fix the economy people have to remember a time when inflation wasn't such a big problem and then inflation will go away - even though Goldilocks has been replaced with Charles Bukowski - and is lying in the gutter too drunk to remember his own name - much less $20 a barrel oil. Americans think their financial collapse is going to take the whole world down with them. No way. Aside from the world benefiting from a bankrupt America that can no longer bomb people for sport and oil, the other major benefit of an evaporated U.S. is the removal of the globe's no. 1 waste producer. The U.S. has only 4.5% of the world's population yet generates 25% of its garbage. And Americans themselves might benefit too. As the price of food skyrockets America's obesity problems should dissipate. Greenspan will write a new book; "From Turbulence to Starvation: Lose Weight and Money at the Same Time." The rest of world (the parts of it the U.S. isn't bombing-for-dollars) doesn't see any risk in a collapsed U.S. America as the brand that is America just isn't cool any more. As an ideology, American style democracy faded as a world leading beacon along with Katrina and the Abu Ghraib photos. Add to the mix preemptive wars, expanded death penalties, NSA, FBI, CIA, wire tapping, and rigged elections. No, the Europeans are not worried. Take the Finns for example. Typical of their high productivity European counterparts they live in a huge economic zone with a strong currency, less unemployment than the U.S. (as pointed out in a recent HuffPost Blog, America's Government Lies -- Adjusted unemployment number is 12% not 5.1%), and enjoy a higher quality of life, and higher human and civil rights too. But there is never enough of a good thing, so the Finns are looking to pass a new law that gives couples a paid week off per year to shag.

Want a solution to the mortgage and credit crises? Reinstitute the Glass-Steagle Act! Nobody's talking about that. The repeal of Glass-Steagle led directly to the sub-prime mortgage crisis, but now all they're talking about is more regulation and oversight - by the Fed. Note that the Fed has no oversight by any democratic body such as the US House or Senate, and we're going to look to them to prevent any future banking crisis? The fox guarding the henhouse? Why doesn't Congress get involved and put Glass-Steagle back into effect. That would put the firewall back between commercial and investment banking and tend to definancializise the US. I think that is just what we need. It would take away all the hedge fund managers' toys though. Oh nooooo. On second thought we can't have that.

America's Trillion Dollar War Machine and the Wall Street Bail-Out

It's not mere speculation that the US is a huge war machine that neglects the welfare of its own people. When it comes to war, no expense is spared. When it comes to funding programs to help the American people, any expense is too much. The US government is very poor when it comes to welfare in the broad sense of the word, very rich when it comes to war and occupying the world and bailing out Wall Street. With over 700 military bases abroad, there are more than 3 bases for every country in the world. Meanwhile, veterans are made to beg for their benefits and go homeless in the streets. No government official or Presidential candidate is even talking about homelessness in America which is a major and growing problem especially among the elderly and veterans. In The Three Trillion Dollar War, Joseph Stiglitz and Linda Bilmes write

The Bush Administration was wrong about the benefits of the war and it was wrong about the costs of the war. The president and his advisers expected a quick, inexpensive conflict. Instead, we have a war that is costing more than anyone could have imagined. The cost of direct US military operations - not even including long-term costs such as taking care of wounded veterans - already exceeds the cost of the 12-year war in Vietnam and is more than double the cost of the Korean War. And, even in the best case scenario, these costs are projected to be almost ten times the cost of the first Gulf War, almost a third more than the cost of the Vietnam War, and twice that of the First World War. The only war in our history which cost more was the Second World War, when 16.3 million U.S. troops fought in a campaign lasting four years, at a total cost (in 2007 dollars, after adjusting for inflation) of about $5 trillion (that's $5 million million, or £2.5 million million). With virtually the entire armed forces committed to fighting the Germans and Japanese, the cost per troop (in today's dollars) was less than $100,000 in 2007 dollars. By contrast, the Iraq war is costing upward of $400,000 per troop. Most Americans have yet to feel these costs. The price in blood has been paid by our voluntary military and by hired contractors. The price in treasure has, in a sense, been financed entirely by borrowing. Taxes have not been raised to pay for it - in fact, taxes on the rich have actually fallen. Deficit spending gives the illusion that the laws of economics can be repealed, that we can have both guns and butter. But of course the laws are not repealed. The costs of the war are real even if they have been deferred, possibly to another generation.

As Fed chairman Bernanke continues to bail out Wall Street and in the process adds hundreds of billions of dollars in liabilities to the Federal government and the American taxpayer, the US continues to increase its debts and liabilities. First, Bernanke arranged a deal for JPMorganChase to buy out Bear Stearns for $2 a share. But Bear Stearns shareholders were not happy with that so Bernanke in effect says "OK, then, how about $10 a share?" We can't have unhappy shareholders in a bankrupt company, can we?  We must do  something!

J.P. Morgan and Bear still needed the Fed's acquiescence to reopen negotiations. New York Fed President Timothy F. Geithner, with support from colleagues on the Fed Board of Governors in Washington and top officials at the Treasury Department, used that as leverage to negotiate the new deal.

The key word here is acquiescence. The Fed is acquiescing to everything in order to appease Wall Street investors, taking on even more liability in the new deal. The first deal had the fed assuming $30 billion in Bear Stearns liabilities. The second deal has it assuming everything over $1 billion. How is that a better deal for the American taxpayer? This is all a continuing and massive transfer of wealth from the taxpayer to the wealthy along with Bernanke's promise of $400 billion of liquidity to Wall Street banks. Now don't you think that the collective minds on Wall Street are going to figure out a way to cash in on all that liability? They will figure out how to work the system so as to manifest that transfer of wealth and cash in on every last dollar of the Fed's guarantees. When you add on the $160 billion stimulus package, you come up with the astonishing figure, depending on how you value the Bear Stearns liability, of around another trillion dollars for  the recent bailouts and stimuli. A few trillion here, a few trillion there ... pretty soon you're talking about real money!

From Robert Reich's blog:

So JP Morgan is raising its offer for Bear Stearns, hmm? Well, it still may be a good deal for old JP, because the worst that can happen is JP loses $1 billion. If losses turn out to be more than $1 billion, the Fed – that is, you and I and every other American taxpayer – will make it up to JP. Who knows what the assets are really worth? They may be worth 80 cents on the dollar, in which case Bear’s stocks are a huge value even at $10 a share (remember, their market price before the panic was around $70 a share). They may be worth 90 cents on the dollar – even better for JP. Or they may eventually (in the long run, when the crisis is over and housing values start trending upward again) be worth far more --- maybe, just maybe, even approaching $70 a share. JP doesn’t know. Bear doesn’t know. The Fed doesn’t know. Everyone is guessing. Bear shareholders are playing a giant game of “chicken.” They’re threatening to go into bankruptcy – that is, liquidate the firm and essentially sell off their assets in an auction – if they don’t get a better deal from JP than the $2 per share JP originally offered.

As part of the new Bear Stearns deal, the Fed's role was also renegotiated. The central bank originally had agreed to put public dollars on the line to guarantee $30 billion of risky mortgages owned by Bear Stearns. In the reworked deal, J.P. Morgan agreed to cover the first $1 billion in losses if the value of those securities falls, with the Fed responsible for any losses beyond that. The main point here is that what Bernanke and the Fed are doing is all guess work. They are in uncharted waters and they are playing by ear. But their main concern is the investors not the homeowners who are in or about to go into foreclosure. If they wanted to protect them, they'd mandate restructuring of their loans. But this would piss off the investors who were counting on the homeowners' mortgages resetting to higher interest rates. In other words the investors were counting on the homeowners getting screwed when they made their investments, and, by golly, it's not fair to change the rules of the game now and make their investments worth less. However, it's OK to bail out huge investment banks.

Wall street has become a huge casino and doesn't serve any positive economic purpose or function. It used to be that they provided venture capital for start-ups and assisted with initial public offerings (IPOs). Now Silicon Valley has their own venture capital firms, and Wall Street just provides ever more fancy investment vehicles for rich investors who are not satisfied with just buying stocks and bonds as in the old days. No, they want to bet that the values of these stocks and bonds will go up or down at some future date. They want to buy insurance against their bets. They want derivatives of derivatives. They want synthetic exposure to the bond market as opposed to real exposure. They want credit default swaps. Who needs all this stuff? Surely, it contributes nothing to GDP. 70% of GDP is consumer spending; the remainder is almost evenly divided between real investment and government spending.

[Investment] is defined as investments by business or households in capital. Examples of investment by a business include construction of a new mine, purchase of software, or purchase of machinery and equipment for a factory. Spending by households on new houses is also included in Investment. In contrast to its colloquial meaning, 'Investment' in GDP does not mean purchases of financial products.

In the $14 trillion American economy, if Wall Street and all its supposedly sophisticated investment vehicles disappeared off the face of the earth, the GDP would not be affected one bit! They are talking about regulating Wall Street banks; why not just outlaw all these fancy schmancy investment vehicles? They didn't rear their ugly heads until a couple years ago anyway, and right off the bat they've cost the American taxpayers almost a trillion dollars. Why not get back to a real  economy?

And, tying this all together, the US government is spending $3 trillion on war (and spends more on its military than the rest of the world combined), another trillion on bailouts and stimulus packages, and all the while running up the US national debt to almost $10 trillion. If the US government were to disappear altogether, the US GDP would still be roughly $12 trillion based on consumer spending and real investment. So my solution to this mess: get rid of Wall Street and get rid of the war based component of government spending. They say that in 10 years the government budget will be totally consumed with paying interest on the national debt, social security and medicare. But that doesn't account for the fact that war trumps social security and medicare. It's far more likely that the government budget will consist of paying interest on the national debt and war.

Three Cheers for the Failure of the Neocon Carlyle Group Hedge Fund!

The Carlyle Group, a bunch of neocons including former President George H W Bush, James Baker, former Secretary of State, Frank Carlucci, former Secretary of Defense among others, who sought to profit off the war in Iraq by investing in defense contractors, have come a cropper! Hip hip hooray! Hip hip hooray! Hip hip hooray! They had the inside information about war and the massive budget expenditures for war, and they sought to profit from this insider information and to profit off of war. For all essential purposes, they are war profiteers. But their greed did not stop there. Not content just to profit from war, they formed a couple of hedge funds in order to multiply their profits by investing in mortgage backed securities. Now those hedge funds have defaulted and I couldn't be happier. I hope these billionaires lose their asses. Just desserts I say.

A fund managed by the US private equity giant Carlyle Group has become the latest to be hit by demands from lending banks making calls on loans secured on mortgage bonds. Carlyle Capital Corp, a publicly traded fund that holds $21.7bn (£10.8bn) of securities, said it had received a default notice from one of its lending banks and expected at least one more after it failed to meet demands for extra security from jittery counterparties. The Guernsey-based fund has struggled to meet more than $60m of margin calls and demands for extra collateral since the start of the month. It met the calls until Wednesday, when it was landed with more than $37m of demands and missed four out of seven calls. John Stomber, the chief executive of Carlyle Capital, said counterparties were demanding margin prices that did not represent the underlying recoverable value of the fund's assets. Carlyle Capital's investments are all AAA-rated securities issued by Fannie Mae and Freddie Mac, the US-Government-sponsored mortgage finance agencies. "This disconnect has created instability and variability in our repo financing arrangements," he added. "Management is actively working with the company's repo counterparties to develop more stable financing terms." The return demanded for agency mortgage bonds over 10-year US Treasuries has widened to the highest for 22 years, according to Bloomberg. Tumult in the credit markets as asset values of all but the safest of debt plummet is prompting lenders to investment funds to demand ever-greater security for their loans, forcing funds into crisis even if they claim the underlying assets are sound. Carlyle Capital's woes come after Peloton, a London-based hedge fund, was forced to liquidate its two funds and shut down because 14 lending banks had pulled credit lines. William O'Donnell, a UBS government bond strategist, said markets were "utterly unhinged". ... Carlyle Group has more than $75bn under management. In the 1990s, its advisers included John Major, the former prime minister, and George Bush, the former US president.

From a previous blog:

And then there's the Carlyle Group from which George Bush, the father, is making billions from the War on Terrorism. Even as the planes smashed into the WTC George Herbert Walker Bush was meeting with Osama Bin Laden's brother at the Carlyle Group. Quote from the website- the Bush- Saudi Connection: "It’s passing strange that even as the hijacked planes smashed into the World Trade Center, the Carlyle Group was holding its annual investor conference. Shafig Bin Laden, brother of Osama Bin Laden, attended."

Now while the Fed is bailing out investment bankers by pumping liquidity into the system, they are not pumping liquidity into the individual motgagees who are defaulting on their mortgage payments and going into foreclosure. A slight difference in moral hazard whether you are Joe Six Pack or a high flying financial institution. They lecture the poor mortgage holders that they knew what they were getting into; therefore, they are acting irresponsibly if they walk away from their obligation to pay their mortgage. However, when a financial institution gets a government bailout instead of facing the full consequences of the decisions it made, it's clear that there is a different standard for Joe Six Pack than there is for the mega-rich CEOs and billionaire investors.

The government is simply protecting its own: rich investors. They made a bet that the  middle class would responsibly pay their predatory mortgages once they reset thus netting them juicy profits. That bet didn't work out so they went to Uncle Sam to bail them out. No such bail-out was extended to Joe Six Pack. Paulson and Bernanke tell you that the economy would grind to a halt if Wall Street investment banks fail. Nonsense! The only consequence is that all the rich investors would lose their shirts. They deserve to do so because of their greedy risk taking behaviour. In other words they rolled the dice and lost. Then they come crying to the government. When they are winning they chide that the government has no place interfering in the free market. The government should keep its nose out of their affairs. Wall Street to government: butt out. We rich bastards know what we're doing and we don't need government to regulate us. Privatize! Privatize! Hands off the economy.

I say let the hedge funds fail. They have nothing to do with the everyday needs of average middle class people. They only have to do with rich investors. Some hedge fund managers have made as much as $100 million a year. These people don't deserve to be bailed out by the government. It's just another example of the transfer of wealth from the poor and middle class to the rich facilitated by the Bush Administration and lauded by Rush Limbaugh and all the true conservatives. After all the $400 billion promised by the Fed to cover shaky investment banks will ultimately come out of taxpayers' pockets. Or the Fed will print money causing hyperinflation and the dollar's demise. Either way it's more government debt and taxpayer liability.

Well the chickens are coming home to roost. A good portion of Wall Street could go out of business without affecting the real economy. It only serves the needs of investors, not average citizens. This portion of the economy should be allowed to "seize up." Then the economy could get back to its real function: providing goods and services for real people instead of providing investment opportunities for rich investors. Bernanke and Paulson are only watching out for the investment class not the middle class home owners going into foreclosure, otherwise known as the debtor class.

Demise of the Hedge Funds?

Wall Street investment bank Bear Stearns is in trouble. Another bailout by the Federal government, which is willing to bail out any high flying investment firm but not the little guy, has occurred. They were prompted to do this by a good old fashioned run on the bank. Just as in Mary Poppins, investors were calling Bear Stearns and demanding their money. Poor Bear Stearns. They had already suffered the collapse of two of their hedge funds tied to the sub-prime mortgage mess. Leveraged 30 to 1, it could simply not give everyone who wanted it their money back. So good old Uncle Sam, stingy when it comes to health care or social programs to help the poor, just couldn't say no to Bear Stearns and its investors. We can't have high flying capitalist investors losing money now, can we? Good old Uncle to the rescue. At these stratospheric levels they call it a liquidity crisis. At the level of the average consumer, they call it being too poor to pay your bills. It amounts to the same thing. The greedy capitalists lost their bets. Tough tittie. Let them go out of business. Let them lose their asses. Let Bear Stearns and its hedge fund investors fail. They were "all in." Now they've crapped out. Who cares? Another day in the life. But the government bails them out, thereby taking on trillions of dollars in increased liabilities (to the taxpayers, that is), in addition to the trillions of dollars it throws down the rat hole in Iraq, but is too poor to take care of its veterans not to mention its homeless veterans or poor people seeking health care.

Bear Stearns, squeezed by the sub-prime crisis, needs an emergency loan. Its stock plunges, and wariness grows. By Walter Hamilton and Tom Petruno, Los Angeles Times Staff Writers March 15, 2008 NEW YORK -- The battered global financial system looked a lot more fragile Friday as one of Wall Street's biggest investment houses was forced to get an emergency loan from the Federal Reserve, raising the specter of more giant securities firms laid low by the global credit crisis. Bear Stearns Cos. said its ability to finance its operations had "significantly deteriorated" in the preceding 24 hours, compelling it to borrow an undisclosed amount of money from the Fed. The disclosure sent the stock market down sharply and underscored how vulnerable the global financial system has become since a wave of defaults on home loans given to people with bad credit led to the collapse of the sub-prime mortgage market. Bear Stearns is heavily exposed to faltering securities tied to sub-prime mortgages, and as credit markets seized up in recent weeks, confidence waned that the company would be able to make good on its own obligations. That triggered a classic run on the bank, with clients pulling out money and other financial firms refusing to do business with the company. "A lot of people wanted to get cash out," Alan Schwartz, Bear Stearns' chief executive, said in a conference call with analysts. A lack of confidence is undermining much of Wall Street and is threatening to become a self-fulfilling prophecy that could intensify the country's credit squeeze, doing more damage to an economy that many experts say is already in a recession. "This transcends Bear Stearns," said Bruce Foerster, a Wall Street veteran and president of South Beach Capital Markets. "It shows the fragility of all these institutions, particularly investment banks and commercial banks." Bear Stearns' stock plunged $27, or 47%, to $30. It has plummeted 79% in the last year.

It's that nasty old sub-prime mortgage mess thats at the root of all the trouble. Wall Street cleverly securitzed all that debt and sold it off as bonds to investors, something it couldn't have done if Franklin D Roosevelt's New Deal had been left in place. But Rush Limbaugh, among others, is trying to do something about that - FDR's New Deal, that is. In others words Republican types are conscientiously seeking to destroy it, something they managed partially to do by pressuring "triangulating" Clinton into repealing the Glass-Steagall Act that put a firewall between commercial (think mortgage) and investment (think mortgage backed securities) banking. So it was off to the races for the know-it-all, Wall Street, super hip capitalist bankers and hedge fund types. Oh how high did they fly - for awhile - making millions and billions of dollars. Consider the Forbes Fortune 400 list - hedge fund managers galore. Now they're crying crocodile tears to the Fed and the Federal Government - two different entities, but totally incahoots. Oh well, if you make $100 million a year, you only need to work one year anyway.

Bush says the economy is having a "tough time", but not to worry. If the sky were falling, Bush would call it a "tough time." "Never let them see you sweat" is his motto. But wait a  minute. These Wall Street guys are smarter and wealthier than Joe Six Pack. So they deserve to be bailed out, don't they? After all Joe Six Pack is an average slob who will be satisfied with the $600. bread and circus money Bush is prepared to give them.

Robert Reich has a blog in which he says all the Fed bailouts in the world won't work. Can't put Humpty Dumpty back together again. Some are even calling for more regulation. Oh how that word grates on the nerves of true conservatives. Maybe FDR had it right the first time. Think they might call for a reinstitutionalization of the Glass-Steagall Act? Not on my watch, says Bush. Ronald Reagan (remember trickle down economics?) would roll over in his grave. The Bush-Cheney plan was to leave the Democrats the biggest economic mess of all time when they took over in '09. It just didn't quite work out that way. The shit hit the fan altogether too early. Now they're trying to fix the economy with spit, glue and bailing wire, sort of like how the Okies fixed up their jalopies when they left the dust bowl for California in the 30s.

Robert Reich says: "The Fed bailing out the big banks is like someone with a helium tank blowing more air into a leaky balloon. It only postpones the inevitable, which is that the balloon will lose its air and float back to earth. For markets to work again, speculative bubbles have to burst, one way or another." I like that metaphor! Like blowing hot air into a balloon with a hole in it. Tough, indeed, Mr. President. But you don't have a clue, and if you did, you wouldn't let it puncture your macho bravado that can't admit that you and all your neocon, feed-the-rich-soak-the-poor cronies were just plain wrong about the economy, the war in Iraq and just about everything else, both philosophical and practical, that you've laid your hands on or spouted out of your mouths for the last 28 years.

I say let Bear Stearns go out of business. Let all the Wall Street, let's-make-money-out-of-money types go out of business. Let's get back to the basics. Screw the "financialization of America." Derivatives don't put food on the table. I say strip the hedge funds from the economy. Get rid of most of Wall Street and get back to basics. Put the strictly financial types, who are parasites of capitalism, out of business. If a business doesn't serve the needs of the people, it shouldn't exist! People that provide real goods and services should be encouraged. People that make money off of money should not. They're only turning the economic system into a casino! I noticed that the high gas prices aren't due to lack of supply (remember the first law of capitalism: the law of supply and demand). They're due to investors in the commodity market for oil taking their money out of shaky Wall Street investments and bidding up the price of oil. Hey, if trading oil on the commodities market were made illegal, we wouldn't have this problem. What's wrong with oil suppliers selling directly to oil companies selling directly to consumers. Too many middle men. Get rid of the traders. Then all that would determine the price of gas would be real supply and demand, something that the OPEC cartel carefully controls. Either way we're screwed.

From an article in the San Diego Union, March 15, 2008, entitled Fed Acts to Rescue a Major US Bank:

Firms such as Bear Stearns conduct business with many individuals, corporations, financial companies, pension funds and hedge funds. They also do billions of dollars of business with one another every day, borrowing and lending securities at a dizzying pace. The sudden collapse of a major player could not only shake client confidence in the entire system, but also make it difficult for sound institutions to conduct business. Hedge funds that rely on Bear Stearns to finance their trading and hold their securities would be stranded; investors who wrote financial contracts with Bear Stearns would be at risk; and markets that depended on Bear Stearns to buy and sell securities would screech to a halt, if they were not already halted. ... The demise of the hedge funds began what has been a slow but persistent loss of market confidence in the bank. Such an erosion can be devastating for any investment bank, especially one such as Bear, which has a leverage ratio of over 30-to-1, meaning it borrows more than 30 times the value of its $11 billion equity base. “The public has never fully understood how leveraged these institutions are,” said Samuel Hayes, a professor of investment banking at Harvard Business School. “But the market-makers understand this inherent risk. This is a run on the bank, just like Long Term Capital Management, Kidder and Drexel Burnham.”

Why Obama Should Not Be the Democratic Nominee

There are a lot of reasons.  But before I start let me say that I'll vote for Barack if he's the Democratic nominee. He would be infinitely better than John McCain.

1. He wants to bring people together. Give me a break! The only people he needs to bring together are the Republican Senators who will filibuster every piece of Democratic inspired legislation to death and effectively stop anything the Democrats want to do. Think he'll get the bloc-voting, filibustering Republican Senators to come over to the Democratic side? Think again. He'll either get nothing done or triangulate as Bill Clinton did. Instead of triangulation what we need is a President who will take on the filibustering Republicans and the legitimacy of the filibuster itself. This might spark a constituional crisis but so be it!

2. As nominee, the Republicans will generate all kinds of rumors about his African connections. Half his family lives there. Then there are the rumors about his lack of patriotism. The Republican smear machine will go to work on Obama. You can see they are ambivalent about who they'd rather run against because they've already developed a well-spring of hatred and demonization for Hillary over the last 20 years or so. They'll have to start from scratch with Obama, but they're already working overtime to make up for lost time.

3. As President, there will be all kinds of pressure on him to intervene in Africa. We've already got a mess on our hands in Iraq, that road to hell having been paved with bad intentions. We don't need another one in Africa, this time the road to hell being paved with good intentions. Mia Farrow, Steven Spielberg and others have been pressuring politicians to intervene there. And who's already there siding with the bad guys? China. They want the oil and they don't give a crap about who gets pushed off their land in order for them to get it. We don't need a confrontation with China in Africa.

4. Lack of political sophis-tication. We don't need Amateur Hour in the White House.

5. More susceptible to cooption and selling out. He'll want to triangulate with the Republicans as Bill Clinton did (a big mistake in my opinion) in order to get anything done. Republican pressure will undermine his agenda and determine the course of legislation. (Witness Bill Clinton with Gatt-NAFTA and signing the repeal of the Glass-Steagall Act which led directly to the sub-prime mortgage crisis.) Hopefully, Hillary has gotten beyond "triangulation," realizes the errors of her husband's ways.

6. Obama is more likely to pander to powerful interests. Hillary has been there, done that and has nothing to prove.

7. Obama still hasn't made his fortune; Hillary has nothing to sweat financially. This would make Obama more likely to sidle up to and be impressed by powerful financial interests.

8. Hip-hop in the White House? Oh, noooooooooo.