California Free Press

Democrats Shooting Selves in Foot with Bush Bailout Plan

The Democrats are just going along with a Bush/Paulson bailout plan instead of putting their own stamp on it. Nancy Pelosi, in her rant yesterday (which I approve of BTW) said that the age of Reaganomics, trickle down economics, laissez-faire unregulated economics was over. That's all well and good but why, then, go along with a bailout plan based on trickle down economics? Why not make sure the plan bails out Main Street and not Wall Street. Paulson, who cashed out on $500 million of Goldman Sachs stock (without paying capital gains or any other tax) when he left Wall Street for the Treasury Department,  has probably lost a couple hundred million in his portfolio in the current crisis. Don't you think that that fact would set his priorities about whom to bail out? Would it be the wealthy investor or the person trying to get a car loan?

They've tried to sell this crisis as a liquidity crisis. They've tried to suggest that small business will not be able to make its payrolls. The Republicans always trot out small business when somebody is going to get hurt, but that's a lot of baloney. They don't care about small business. They care about big business, you know, those big enough to hire lobbyists. Paulson would bail out hedge fund investors, large corporations and the wealthy. That's who he deals with. He could care less about small business making payrolls, somebody trying to get a car loan or a mortgage. And there is plenty of liquidity in the system, just not enough to bail out hedge funds with all their toxic derivatives. Do we want a taxpayer bailout to bail out credit default swaps investors and people who have invested in other exotic financial instruments? Those are the ones that are toxic. Those assets should be frozen until such time as they can work their way throught the banking system. The government should target their provision of liquidity toward Main Street, toward mortgages, car loans and small business loans and not toward bailing out hedge funds and holders of toxic assets like credit default swaps. These after all are mainly the wealthy investors. If your pension fund is holding these instruments, you should fire your pension fund director.

And as far as 401ks, these are mainly invested in mutual funds. The stock market is volatile. So what? You can't set policies according to the whims of the stock market. It went down 778 points when the bailout plan was voted down, but it came back up 485 the next day with no bailout plan in place. Setting policy to placate the stock market is like chasing a will o' the wisp, like the flailing around in Dante's limbo. The stock market fluctuates according to day traders who sell if the news is bad, then buy when the market bottoms or buy when the news is good and sell when the market tops. It's all dependent on the news of the day and not on any underlying value of the companies the stocks represent.

The Fed has added all kinds of liquidity to the system. $630 billion on September 29. Congress voted down $700 billion, but the Fed added almost the same amount at almost the same time. Does this mean that the taxpayers' $700 billion is not needed now? Why should there be such a rush now? On September 17 the Fed bailed out AIG to the tune of $85 billion. The Fed pumped $200 billion into the system on March 11. On March 14 the Fed bailed out Bear Stearns to the tune of $30 billion. That's $945 billion by my tally. And that's still not enough? Let the Fed bail out banks. Congress should bail out the little guy, and the Democrats should start acting like they're in charge. The government has already taken over Fannie Mae and Freddie Mac. They can't provide money for mortgages? It's not believable. I've noticed that my credit cards still work. Somebody must be providing liquidity.

The bailout plan provided for recovering monies for the taxpayer ... but after 5 years. This is ridiculous. How about providing the mechanism now. In 5 years this provision may well be forgotten or superseded by events or reality. The clause in the bailout plan limiting executive compensation was riddled with loopholes and potential work-arounds. And there's nothing about repealing Gramm-Leach-Bliley and reinstating Glass-Steagall. Nothing about making derivatives illegal. Nothing about changing the system structurally. They seem to want to add more regulation of the exotic financial instruments instead of eliminating them altogether. This is no solution.

The final version of the bill included sort of a plan for eventually recouping losses; if the Treasury program to purchase and resell troubled mortgage-backed securities has lost money after five years, the president must submit a plan to Congress to recover those losses from the financial industry. Presumably that plan would involve new fees or taxes, perhaps on securities transactions. Sure, and a Republican President would submit a plan to recover losses from the financial industry? That's like having the fox submit a plan for restocking the hen house.

Here's a bailout plan that would have a Democratic flavor.

1) Add targeted liquidity for small business short term loans, car loans and student loans.

2) The bailout plan should provide relief for those facing foreclosure. ARMs should be converted to conventional 30 year fixed rate loans.

3) Bernie Sanders' plan should be implemented. Impose a five-year, 10 percent surtax on income over $1 million a year for couples and over $500,000 for single taxpayers.  That would raise more than $300 billion in revenue.

4) Thom Hartmann's plan should be adopted:  If we instate a .25 percent Securities Turnover Excise Tax  (STET) on every stock, swap, derivitive, or other trade today, it would produce - in its first year - around $150 billion in revenue.

5) There should be airtight legal language regarding limitations on executive salary, stock options, perks, bonuses and any other form of compensation.

So if Reaganomics is dead, why aren't the Democrats proposing a bottom up bailout for the middle class instead of a trickle down solution which is more of the same failed policies we've had for the last 38 years? Why are they siding with the Bush administration when the Republicans are not even buying the Bush bailout? Why don't they act on Nancy Pelosi's words and have the courage of their convictions? We've already had massive bailouts of the banking system. Let the frozen liquidity of hedge fund derivatives stay where it is until banks can work through it. At the same time liquidity can be targeted for Main Street and relief can be given to homeowners facing foreclosure.

Paulson wants bailout now; reform later. Just the opposite should be the policy of the Democrats. Reform now; bailout for the middle class as needed.

French President Sarkozy: "Laissez-Faire Capitalism is Over!"

This is from the New York Times. Please note "French banks are still heavily retail, mortgages normally require significant down payments and French regulations do not allow subprime mortgages."

Sarkozy Stresses Global Financial Overhaul

By STEVEN ERLANGER

Published: September 25, 2008

PARIS — President Nicolas Sarkozy of France tried to reassure citizens on Thursday that their savings and the nation’s economy were safe. While the global financial crisis will have serious consequences for the French economy, he said, bank deposits will be guaranteed and individual taxes will not be raised.

Mr. Sarkozy promised that the government would move ahead with its reforms, especially in shrinking the bloated state sector, and he called for an overhaul of the world’s financial system, arguing that an era of unregulated markets was over.

“A certain idea of globalization is dying with the end of a financial capitalism that had imposed its logic on the whole economy and contributed to perverting it,” he said.

“The idea of the all-powerful market that could not be contradicted by any rules, by any political intervention” was “a crazy idea,” he said. “The idea that the market is always right is a crazy idea.”

Mr. Sarkozy spoke to a rally of 4,000 supporters in the southern city of Toulon, but his speech, described by his office as a major address on the economy, was televised nationwide.

“The crisis isn’t over, and the consequences will be serious,” he said.

“Like everywhere else in the world, the French are scared. Scared for their savings, scared for their jobs, scared for their purchasing power.”

The main threat to the economy, he said, is fear, and it can be conquered only by telling the truth. He called again for a conference of world leaders before year-end to address the underlying reasons for the crisis.

“We’ve just passed two fingers from catastrophe,” he said. “Self-regulation, to fix all problems, is over. Laissez-faire is over.”

Mr. Sarkozy emphasized that he was deeply engaged in trying to manage the crisis and would pursue his main economic reforms. Those include a shrinking of the large state sector, eliminating 30,600 jobs next year and streamlining local government, and allowing more workers, despite the 35-hour week, to get overtime pay without significantly higher taxes.

But his speech, while long on rhetoric about the abuses of capitalism, was short on specifics, especially on regulating and improving the global system.

The French are already anxious about their purchasing power falling behind inflation and are convinced that America’s economic problems will worsen their own financial status.

Already, forecasts for French economic growth for next year have been cut in half to about 1 percent, and slower growth will inevitably mean lower tax revenue and a higher budget deficit.

In the budget he is scheduled to deliver on Friday, Mr. Sarkozy is expected to announce a freeze on government spending and a retreat from promises to balance the budget by 2012 — a target that was already two years behind a European Union goal for member countries.

The public deficit is expected to reach 2.7 percent of gross domestic product this year, and economists worry that without harsher spending cuts, France will exceed the 3 percent limit of the European Union next year. But the high deficit leaves Mr. Sarkozy little maneuvering room to avert a slowdown, especially since the European Central Bank, which controls the euro currency, sees its main mission as controlling inflation.

French business confidence fell in September to its lowest level since mid-2003, according to Insee, the statistics office.

On Thursday, Laurence Parisot, head of the main French business lobby, Medef, said that “the financial crisis, which came from the Unites States, is something extremely serious — it is a Sept. 11 of finance.”

This financial crisis “could provoke a very dangerous economic crisis,” he said, risking a serious recession.

Still, France has so far been reasonably well insulated from the American crisis, in large part because French banks are still heavily retail, mortgages normally require significant down payments and French regulations do not allow subprime mortgages.

Frank Thomas on the Bail-Out

The Treasury plan is to purchase the "distressed investments" of Wall Street not knowing what they are worth!

If too much is paid, taxpayers lose and Wall Street wins. If too little is paid, the firms might reject bailout offer and/or sell only the most toxic portion of their investments. Taxpayers also lose here and nation might get the long drawn out "Japanese stagnation sickness." Latter means Wall Street will ultimately lose here too.

So why are we stuck on one golden option of a $700 billion Bailout of toxic debt?

Why not still consider your option of pumping money DIRECTLY into good and troubled (but not hopelessly troubled) financial institutions in exchange for a reasonable ownership Stake? Goldman didn't balk when Buffet asked for a 7% Stake in exchange for a $5 billion loan. Why would AIG balk with a balance sheet that is ten times worse?

This is how Sweden successfully solved, for all parties, their equally serious 1992 financial crisis in 4 years and how Japan finally solved their 12 year crisis.

Some combination of Ownership and Debt financing that sharply minimizes the government being offered (or forced to accept) the obviously worst toxic debt waste is minimized. Companies then have greater resources, control and responsibility for recapitalizing their balance sheet soundly. Strict rules controlling obscenely excessive top management salaries, bonuses and stock options would still be enforced under this option also.

Again. Why can't we achieve some more equitable variation for taxpayers and financially distressed institutions along lines Buffet and Sweden achieved?

A Bailout formula based on "the hold to maturity price" (whatever that value is) without any ownership Stake is compounding potential taxpayer risks without a commensurate reward. This option may drag the whole recovery process out with resultant prolonged economic stagnation.

Maybe the financial institutions should be given little voice on these Debt + Ownership terms?

This is all going too FAST! ...
especially considering the still lurking UNKNOWN Credit Default Swap risks ... a market some say amounts to $45 Trillion or more!
... and especially considering another +-$700 billion mountain of bank Debt maturing in 2009, according to JP Morgan!

By investing huge sums DIRECTLY in our financial institutions, wouldn't this lead to better Oversight and public confidence in the system's liquidity and self-improvement ... without leaving the taxpayers as the ultimate dupes by freeing up more capital to DIRECTLY help those facing foreclosure?

Frank Thomas, The Netherlands.
Friday, 26 September, 2008

Email from Alan Collinge - StudentLoanJustice.org

Hey Everyone,

 

 

Welcome to all the new members.  We are picking up new members at roughly double the rate as previously, and so I want to make sure that all the new people feel welcome here.  We are definitely not alone.  Together, distressed student loan borrowers comprise between 5-10 million citizens. 

 

The SEC recently put Sallie Mae on the list of companies that cannot legally be "shorted" by investors.  This means, clearly, that Sallie Mae, and probably other student loan companies will be attempting to take part in the bailout.  In other words, they will be expecting to be paid for bad private student loans that they made.  It is important for you all to understand what brought us to this point.  I particularly hope that members of the media receiving this email will pay particular attention to this.  It is critically important that they get the story right:

 

The student loan industry lobbied heavily to have bankruptcy
protections removed for private loans in 2005, and then proceeded to make
huge loans at credit card-like interest rates.  It comes as no surprise to
anyone intimately familiar with the private loan industry that many of these
loans are now defaulting.

If the federal government does decide to purchase these loans, it should be
at a deep, deep discount (ie. principal only), and the borrowers should not
be reponsible for repaying more than the government paid for these loans,
ultimately.

Finally, standard consumer protections must be returned, finally, to ALL student loans.

 

I hope that you all will contribute to our Political Action Committee.  I hope that you all will take it upon yourselves to act locally to bring attention to this issue.  I hope that you all will help spread the word about this site.  We need more members, and you all are instrumental in making this happen.

 

Also, please check out the video that one of our members (Jean) has made: 

 

 

Let's go, guys.

 

 

-Alan

 

Alan M. Collinge

 

StudentLoanJustice.org

 

Please Donate to the PAC, go to www.studentloanjustice.org/pac.htm

Paulson's Bail-Out Plan Will Benefit Rich Hedge Fund Investors with Taxpayers Footing the Bill

Treasury Secretary Hank Paulson was CEO of Goldman Sachs before he became Treasury Secretary. When he left Goldman he had $500 million worth of Goldman stock with a $200 million basis. Due to a technicality he didn't have to pay capital gains on his $300 million profit when he disgorged himself of the stock. Goldman was the only company on Wall St that wasn't brought down by the sub-prime mortgage mess. Why? Because they bet that the sub-prime market would fail and that bet saved their ass because the sub-prime market did fail. The bet was made after they sold their own investors billions of dollars worth of worthless sub-prime "tranches." So they bet against their own investors. They shorted an index. Paulson oversaw this mess. Does that tell us anything about his veracity? Which brings us to the heart of the problem. Paulson wants $700 billion of taxpayer money with no strings attached to spend as he pleases "bailing out" banks. By the way it was tried by Herbert Hoover in 1931 and the depression happened anyway. So bailing out banks didn't work for Hoover nor did it work for the Japanese in the 90s. But getting back to Paulson, he doesn't want any oversight or liability. He wants to spend taxpayer money as he sees fit buying and selling financial "assets."

New York Times, October 8, 1931

Real Estate Men On Hoover Plan

Skepticism as to President Hoover's plan to liquidate frozen bank assets was expressed yesterday by Charles G. Edwards, president of the Real Estate Securities Exchange. The exchange deals almost exclusively in real estate bonds, of which it is estimated that $1,500,000,000 at par value are in default throughout the country.
[...]
"President Hoover's financial plan," Joseph P. Day said in part, "is a step in the right direction towards making real estate investment more liquid. The system will make it possible for the Federal Reserve Bank to issue acceptance notes against sound real estate securities, thus stabilizing their values. Real estate mortgages are commonly regarded in banking as frozen assets. The Hoover plan seeks to take these substantial investments from the frozen asset class and give them a recognized value."

Should we trust Paulson? Hell, no! Anyone who made a tidy profit of $500 million on Wall St with Goldman Sachs should not be in charge of bailing out Wall St. because he's just going to hand it out to his rich friends on the Bush administration's way out the door. It's just one last money grab for the wealthy. Now the fact that Goldman stayed solvent by betting the sub-prime market would fail offers a little clue as to what the real problem is. It's derivatives. And they're a bottomless pit. When Goldman bet the sub-prime market would fail, they used a derivative. They shorted an index. There are $1000 trillion of derivatives out there. The GDP of the whole world is only $60 trillion! Derivatives are a financial black hole that will suck in Paulson's $700 billion of tax payer money and keep on sucking! This bail-out is not about mortgages or loan liquidity. It's about derivatives, and who has used derivatives to the greatest possible extent? Hedge funds. It's what they're all about. Now to get into a hedge fund you have to have a net worth of millions of dollars so you know there are no poor or middle class in there. When Paulson talks about buying and selling assets, he's really talking about buying and selling derivatives in order to bail out his rich friends who are invested in hedge funds who have lost their shirts. Putting this guy in charge of the bail-out is like putting a fox in charge of the henhouse.

The Bush bail-out is a corporate give-away, with no quid-pro-quos requiring companies to act responsibly in the future, limit outrageous executive compensation, or help ordinary homeowners to keep their homes. For example, Goldman Sachs recently paid out $16.5 billion in year-end bonuses to its employees. That worked out to over $620,000 per employee. The Bush plan will give the administration a $700 billion check with no strings attached, which they'll hand over to the Wall Street firms that got us into this mess.

But actually, who better to pay for the bail-out than the rich investors in hedge funds who largely caused it in in the first place. During the last 8 years the 400 richest families in the US have added $670 billion to their net worth while the poor and middle class have  lost ground.  Rather than middle class taxpayers bailing them out, let the rich hedge fund investors bail out the banking system by losing the hundreds of millions they bet using derivatives. Maybe the bets were good. Maybe they were bad. Makes no difference. If the banks can't make good on them, why should the taxpayers? If they were bad, why should the taxpayers buy these "assets"? It's not about liquidity. The Fed has opened its discount window to everyone. What more liquidity do you want than that? Where the system is illiquid is in bad debt from derivatives, and of course they are illiquid because only a fool would want to buy a bad debt. But that is exactly what Paulson is proposing that he will do with taxpayer money. He says the taxpayers might even make money because of his prowess in buying and selling assets. Snake oil!

The illiquid "assets" Paulson is talking about in reality are just bad debts. He will only lose tax payer money in the process of bailing out his rich hedge fund investor friends who can't bear the thought of having lost their millions. The banks can't pay off on the derivative bets the hedge funds made. Now Paulson wants the taxpayers to pay off on them. But who better to lose millions than the greedy rich people that invested in hedge funds in the first place. People like Paulson himself who made hundreds of millions on Wall St and paid no taxes on it. What a sweetener for becoming Treasury Secrtetary! Instead, Paulson wants the taxpayers to bear that brunt while the rich folk walk away with the money they invested. He wants to "make them whole."I say you can't trust a former CEO of Goldman Sachs who walked away with $700 million in Goldman stock when he became Treasury Secretary to be looking out for the interests of the average American taxpayer.

Here's a better solution. Don't pay off on derivative bets. If the hedge funds fail, the rich folks end up paying for the bail-out and that's simple justice. They and their hedge fund managers got the banking system into this bind. Solution #2: To the extent that Wall St is bailed out at all, and I can see that there might be a case for bailing out non-derivative assets, the taxpayers will be paid back by the banks themselves when they become profitable again. This can happen by the government taking an equity stake in the banks or it can be set up in such a way that the taxpayers take 10% of the profits year after year until the entire amount of the bail-out is paid off. During this period no bonuses should be paid to any CEO or employee of these companies and this includes stock options, and CEO salary should be capped at $1 million a year. Also no lobbying activity will be permitted by any of these financial instituions that get taxpayer bail-outs. And put a 0.25% tax on every stock tansaction with 0.50% on every derivative transaction like short selling. Make Wall St pay for its own bail-out! Tax the Speculators!

Now I understand that banks will not loan money to other banks so they have to borrow directly from the Fed. So what? The point is that they are getting liquidity whether from other banks or from the Fed. It makes no difference. There's still liquidity in the system for legitimate loans contrary to what Paulson would have the American people believe. The Fed has become a de facto central bank which makes my case that the government should formalize a de facto situation and create a real central bank since it has nationalized Wall St already and the Fed is acting like a real central bank already. Combine the two and formalize a de facto reality.

Frank Thomas Checks In From the Netherlands

Have read your write ups and Bruce Baine's which are very instructive. Keep it up and get your remarks in the right hands. A melding of the best ideas from the public as well as the hired financial wizards is a necessity. In this respect, I´m glad to see Mr. Buffet has entered the ring. Have always admired him over the years as an extraordinary businessman who never budged from the most sound Stakeholder priorities for all his companies, namely: 
 
EMPLOYEES 1st;  CUSTOMERS 2nd;  and SHAREHOLDERS 3rd.
 
Glad to see Democrats daring to push for a stake in the bailed out firms and to have proper Oversight of Paulson and Treasury Dept. actions. Otherwise, the game is loaded with conflicts of interest and a definite bias towards the finance sharks as opposed to those suffering from losing or threat of losing their homes. After all, only two or three weeks ago Paulson was assuring eveyone that the `problem was contained.´ And he and others still don't have a clue as to the real value of the assets underlying the bad debt. What a situation! 
 
I think this rush business is dangerous. Options are not quickly being thrashed out such as seriously considering  the Swedish model of nationalization  before recapitalization and later successfully going pubic again. Government ownership of firms, even if temporary, goes deeply against the American grain. But I don´t think the Swedes feel any differently in this respect...they simply recognized that the utter calamity of their collapse in 1992 required new measures.
 
So I hope this Bailout of all Bailouts gets a cool second hearing and refinement, but am not too optimistic as people seem overcome by a great fear of the unknown. The "better to do something than nothing fever" is overruling an incisive,  prompt consideration of options. When Wall Street can't take care of its own crisis, then the situation is indeed very tenuous. So Wall Street has got everyone so frightened (including yours truly), we are ready to roll the dice.
 
I hear that JP Morgan is saying (exactly what I just said in a recent post to Dr. Reich's blog) that the total added Debt flotation in 2009 could approach $1.5 trillion, or 10% of US GDP. Sweden nationalized bank assets with an injection that cost a little over 4% of GDP. They later recovered one-half to two-thrids of their  bailout funding.
 
We'll be forced to a combination of four  ways to finance this enormous increase in Debt:
(a) raise taxes, (b) print and float money, (c) pay higher interest rates to attract lenders who are losing substantially on their current bond holdings (d) slow down urgently needed reinvestment in our economy. 
 
All of these actions could well cause a new slide in the Dollar intensified by hugely rising Interest costs. The current account deficit is already at high 5% of GDP and could also worsen if financial flows into the US slow down. I fear the Japanese 12 year stagnation sickness, despite more prompt action, because of the interwoven scale and effects of the credit crunch.
 
What a Mess!  On positive note, it gives our leadership a chance to rid ourselves of the corrupt "I win you lose"  broken down financial system and economic model we expound to the world. Not surprisingly, who comes immediately to the rescue with $30 billion in loans - 4 European counties including Norway and Denmark, countries with a combined tiny population of less than 12 million.
 
Was happy to see you take up my plea for so long now that our Defense budget spending is not sustainable. As I mentioned to you in an earlier post, when you look at Defense expenditures including related Interest cost (from past Deficits caused by high Defense spending) and excluding Social Security and Medicare (mixing oranges and apples as latter have own inflows and Outflows), Defense Spending in 2008 is close to 46% of the remaining Federal budget of $1.2 trillion. It´s bankrupting us.
 
We´ve got to focus next decade on our internal house, so simple is it!

Regards,
Frank Thomas

Now the Car Makers Are Getting Into the Act

On top of the $700 billion bail-out for the banks, the government is giving the car makers a $25 billion loan. When will the bail-outs ever stop? This is truly an economy in shambles! Everybody wants a bail-out but nobody wants to pay taxes! Are these corporations and banks that want bail-outs now going to agree to pay their fair share of corporate taxes? Are they going to call off their lobbyists? Or is the little guy expected to shoulder the tax burden while corporations get away scot free?

What is needed is a complete restructuring of the entire government including a Department of Industrial Development and Trade and a new Central Bank to replace the Fed.

This from the Financial Times:

House clears $25bn for carmakers

By Bernard Simon in Toronto

Published: September 25 2008 00:36 | Last updated: September 25 2008 00:36

The House of Representatives on Wednesday approved a $25bn package of low-cost loans to help hard-pressed carmakers and their suppliers finance plant modernisation at a time of restricted access to public capital ­markets.

The automotive loans are separate from the proposed $700bn bail-outfor the banking sector, which is still being debated in Congress. The House approved the measure 370-58, setting the stage for Senate approval within days.

The industry’s case has been helped by the fact that Michigan and Ohio, the two states most dependent on the car industry, are key swing states in the November 4 presidential election.

Executives of General Motors, Ford Motor and Chrysler and their suppliers have lobbied heavily for the loans. Both presidential ­candidates, John McCain and Barack Obama, have expressed support.

Shelly Lombard, analyst at Gimme Credit, a corporate bond research company, told clients this week that “blue collar workers are more sympathetic victims than ‘rich’ investment bankers. So it’s easier to defend loans designed to save close to 100,000 jobs in the shrinking US manufacturing industry.”

The go-ahead for the car industry loans has been written into a stop-gap spending bill, known as a continuing resolution, which must be passed to keep the federal government running beyond the end of the fiscal year on September 30. Congress and the White House have yet to agree on details of the fiscal 2009 budget.

The loans were originally authorised in an energy bill passed last December to finance the retooling of plants for more fuel-efficient vehicles, especially hybrid and electric cars. But they have become a crucial prop for Detroit carmakers.

The continuing resolution provides funding for $7.5bn, which is the estimated subsidy on the loans – in other words, the cost to the government of providing them at well below market rates.

The loans will not take effect until the energy department has written detailed regulations dealing with, among other issues, which investments will qualify and conditions for repayment. Congress has directed the department to begin writing the regulations quickly and will provide any extra staff required to do so. One lobbyist said he hoped the regulations would be completed by early 2009.

All carmakers and suppliers with operations in the US are theoretically eligible. However, the energy bill restricts benefits to plants that have been in operation for at least 20 years, thereby excluding most foreign carmakers.

A Toyota spokesman said his company was agnostic on whether it derived any benefits. It has kept a low profile in the debate on the loans.

The Detroit-based car­makers have insisted that the loans, known as the Advanced Technology Vehicles Manufacturing Incentive Programme, are not a bail-out because they must be repaid.

But critics have questioned the wisdom of supporting the motor industry with taxpayers’ money, especially in the wake of the huge amounts being provided to Fannie Mae, Freddie Mac, AIG and Wall Street investment banks.

CopyrightThe Financial Times Limited 2008

A US Central Bank Could Create Public Wealth Instead of Public Debt

According to Naomi Kline's excellent book, The Shock Doctrine: the Rise of Disaster Capitalism, the economist Milton Friedman, in the last years of his life, saw the Katrina disaster as not something that required government to help the victims but as an opportunity to privatize the New Orleans public school system, and build luxury condos where public housing once stood. His theory was that every crisis was an opportunity to advance his privatization agenda.

Why not take a page out of Milton Friedman's and Alan Greenspan's book and use this financial crisis and the shock doctrine in reverse i.e. to socialize the banking system? The banker-in-chief, Hank Paulson, has created a de facto program of nationalizing Wall St and the entire banking system. Why not simply formalize this de facto arrangement by creating a REAL US central bank which would be capitalized by the trillion dollars Paulson simply wants to add to the national debt? Accountable to Congress and the people (unlike the Fed which it would replace), the US central bank could then deal with the credit crisis, housing crisis, liquidity crisis and the crisis du jour in the interest of American citizen-taxpayers and not just in the interests of wealthy Americans, the banking system, hedge funds and foreign sovereign wealth funds (SWFs). The Fed, privately owned, has no responsibility to do so and in fact is only accountable to the banking system - not American citizens.

An Obama administration could pull this off if it had the cajones. Freddie Mac and Fannie Mae were originally government and not private entities. They have now been renationalized. Keep them that way! The penchant for laissez-faire which Greenspan (an avid Ayn Rand disciple), Friedman and others have brought about has brought capitalism to the precipice of the abyss. While the rest of the world builds up capital in sovereign wealth funds, the Friedman-Greenspan privatizers loot the Federal Treasury to reward private interests. Paulson's bail-outs are no exceptions. The charter of a US central bank should say that its purpose is to build wealth, not debt, for the American people.

The military-industrial complex together with interest on the national debt now consume most of the Federal budget. Obama should slam the brakes on this train wreck and put it into reverse. It's high time to end the disaster of 38 years of Reagonomics and use the Shock Doctrine to give the neocons a taste of their own medicine.

The government has taken an 80% equity stake in AIG. Doesn't that mean that AIG has been nationalized or, pardon me, socialized? Rather than reprivatize Wall St institutions once they regain profitability, a central bank could put them to work on behalf of the taxpayer and all American citizens. An American sovereign wealth fund could reverse the process of funneling public money to create private wealth, and instead use private money to create public wealth.

A US central bank could oversee investment in much needed infrastructure, create new jobs by providing seed money for the wind and solar energy industries, disentangle the US from dependence on foreign central banks and SWFs, correct the massive trade imbalance and do much more for the economy than the Fed's limited role of providing a discount window.

The bail-outs Paulson wants have more to do with bailing out foreign central banks than they do with bailing out American investors. He doesn't want to offend the bankrollers of US government deficits and debts.

Instead, we should limit the military to actually defending the American homeland instead of using it to try and dominate the entire world. Sending the National Guard to Iraq leaves America unguarded both with respect to our borders and with respect to natural disasters for which they could be really helpful. Oh, and BTW, it's costing half a billion dollars a day. Just thought I'd throw that in. The military-industrial complex could be cut in half and still provide more protection for real US interests than it's providing now.

Fiscal responsibility and prudent stewardship should be the role of a new US central bank whose goal is not just to manage debt but to create public wealth. The goal of  Norway's SWF (and Alaska's for that matter) is to transfer wealth to the next generations. They are creating wealth for their kids and grandkids. The US government by contrast is creating debt and, by virtue of the Republicans' borrow and spend policies, transferring the payment of that debt to our kids and grandkids.

The US Should Create a Real Central Bank to Replace the Fed

In response to Chuck Shumer's question today, Paulson couldn't give a good reason why he needed the $700 billion in one fell swoop rather than in $150 billion increments. The point is that anything he does now is simply a bandaid until the election in little over a month. Paulson wants bailouts for all his Wall St friends on the way out. After all didn't he get $17 million as he went out the door from Goldman Sachs en route to the Treasury Department?

The Dems should not fall whole hog for this last minute (before Obama takes over) bail out of fat cats while adding a trillion to the Federal debt so that Obama and the Dems will have nothing to do after the election except to raise taxes.

Instead, the Dems should temporize and wait for Obama to take over so they have the maximum maneuvering room as of Jan 20, 2009, and not let themselves be put in the position of "cleaning up after the elephant parade" the Republicans left behind. The Repubs would like nothing better than to straitjacket the Dems with massive debts so that they have no money for social programs.

I say that, since there are no more investment banks (Merrill and Goldman have become, well, just commercial banks now), there's no more AIG or Fannie and Freddie as private institutions, why not recognize that Wall St has essentially become socialized? Since they want to socialize the debts, this is a good opportunity to socialize the upside as well ... permanently.

Paulson wants to socialize all the mortgage backed securities and other debt. Wait a minute. Wall St has already been socialized. It's no longer composed of private institutions. The government effectively owns it especially if Paulson gets his $700 billion. My suggestion is to recognize the reality that the banking industry has already become a part of government and to sieze the opportunity, after Obama is elected, to create a real central bank to replace the Fed, a real US central bank which would be accountable to the people and not like the Fed which operates in total secrecy and is not a part of government; it's privately owned. Use the $1 trillion bailout money to capitalize this central bank so that instead of it being a total liability added to Federal debt, it's also a positive on the new central bank's balance sheet.

Fannie and Freddie would be divisions. The central bank would then deal with whatever bailouts were needed and help reset mortgages to keep people in their houses if possible. Another division would be a sovereign wealth fund (SWF) similar to those of numerous other countries which would collect considerably more royalties than are collected now from any oil drilling on US territory. Norway collects 50% in oil royalties for the benefit of future generations. The US has created $10 trillion in debt which it will pass on to future generations. If a SWF funded by royalties from oil drilling is good enough for Alaska, it should be good enough for the rest of us. The government would then be in a position of building wealth for the US, not just going further into debt as it does now.

BTW, Obama can cut military expenditures by 50% thereby finding money for social programs.

Also posted as a comment here.

Why Paulson's Bail-Out Will Not Be Good for Taxpayers And What Should Be Done Instead

Treasury Secretary Paulson has proposed a $1 trillion bail-out for Wall Street in a hastily developed, barely thought out stop-gap plan to bail out investors. But  as opposed to the S&L bail-out where they created the Resolution Trust Corporation to hold mortgages for US real estate, Paulson's plan will not hold real estate; it will hold the securities based on real estate. In other words it will hold paper and not real property. His plan will bail out speculators and those who hold derivatives and other casino-like bets. He will pay for worthless pieces of paper that represent the securitization of mortgages not the mortgages themselves.

The  problem is with the securitization in the first place which is a direct result of the repeal of the Glass-Steagall Act which was replaced by the Gramm-Leach-Bliley Financial Modernization Act of 2000 which opened the flood gates for the creation of collateralized debt obligations (CDOs) which were a combination of a number of mortgages which were then cut up into pieces called tranches and then in turn securitized and sold to investors. They were securitized in such a way that an investor could buy a AAA rated tranche or various degrees of quality down to junk with accordingly different rates of return. Then derivatives, derivatives of derivatives and insurance based on these securities were also created and traded.

The first thing that needs to be done is to flat line derivatives. For example, say an investor shorted a tranche of a CDO which represents a combination of many mortgages. This is a derivative not based on a single mortgage, but on a slice of a combination of mortgages. Say the investor paid X for the short and, if he won the bet, he would have collected 100X. Well, the bank that should have paid him can't so Paulson is proposing that the taxpayers pay him instead. This has nothing to do with the underlying mortgage! Instead, the guy should be given back the amount of his bet at most and nothing more. Sure, in a fair and square world he won his bet, but if the banks can't pay him why should the taxpayers? You say that this will cause investors to lose confidence in the system? Bull twickey. Better the investor than the tax payer. And why should American taxpayers bail out foreign banks and Sovereign Wealth Funds?

Secondly, Congress should repeal Gram-Leach-Bliley which made the derivatives and the CDOs possible. Then in the future what happened won't be able to happen again, and let the investors regain their confidence in the financial instruments that then will be available under those circumstances like plain vanilla mortgages, stocks and bonds. Investors should be able to rebuild even more confidence in a simplified system without exotic instruments. However, their greed will have to be contained. If they don't like that, tough.

Third, the Treasury Department, having taken control of all the securities, should then proceed to unravel them - combine the tranches to get the original CDOs and then decollateralize each CDO to arrive at the original mortgages. Then investors can be paid off with the government holding the original mortgages and not the securities. Investors should be given back their original investments minus any bets they placed. The betting money on derivatives should not be paid back. Insurance bets such as credit default insurance should not be paid. Credit default swaps should not be paid. With investors given back their original investments in mortgage backed securities and the government holding the original mortgages, the government can then proceed to sell off or auction off or hold those mortgages until property values rise. They could also just take control of the property the mortgages are based on and sell that property off or hold it until property values rise thus incurring for the taxpayers as little loss as possible.

As far as helping out the people who are about to be foreclosed on, that should be easy to do once the government has unraveled the CDOs and is holding the original mortgages even if they have to be recreated. The government can then renegotiate mortgages with home owners in danger of foreclosure.

With the above method, if certain firms go under because they're not getting paid back what they think they should be getting, so be it. So pay back the original investors in tranches of CDOs, don't pay back derivatives or bets including short selling, re-enact Glass-Steagall making securitization of mortgages illlegal, let the banks that write the mortgages hold them from now on and let the government sell off the mortgages and/or real estate on which the mortgage backed securities were based.

An Nguyen Reports on Vietnam Today

Today Vietnam is a troubled nation. After signing the Bilateral Trade Agreement with the US in 2000 followed by large economic growth rates in the early 2000s and becoming a member of the World Trade Organization in 2006, growth has faltered in the last year, inflation has soared and workers have shown their dissatisfaction by numerous strikes, almost unheard of in a communist country. The following is An's report:

Vietnam is more open now compared to 30 years ago. Like any communist country, the government is more talk than action. Corruption is the way of life in Vietnam. As a foreigner, you will get a taste of it as soon as you get off the plane. Traffic police are making money by extorting motorists for any minor offenses. Local governments are using all kind of tricks to get the land from farmers for ridiculously low prices and reselling it for incredible profit. The people there said that the government is making more profit from selling land than drug pushers are making selling drugs. Many farmers felt that they had been cheated and held protests against the government. Instead of helping the farmers resolve their problems, the government arrested them for social misconduct! The gap between the rich and the poor is widening. People who have good connections with the government or government officers are usually rich. They live in luxury, while the working class and farmers are struggling everyday to make a living.
 
All the leaders in Vietnam make the same commitment when they take office. Fighting corruption is at the top of their agenda. However, the reporters who reported on corruption are in jail without trial.
 
There are 3 basic infrastructures that desperately need improvement, but for 30 years, still remain backward.
 
1) Transportation - There are no highways in Vietnam. Most of the roads are in bad shape. Road construction contracts are usually granted to those with government connections with the result being poor quality. They quickly deteriorate just as soon as they're in service. The bridges that were built during the French occupation are still being used. A journey from Ho Chi Minh City to Ca Mau City is only 360 Km [224 miles], but would take at least 8 hours drive by car. Traffic jams in HCM City are a nightmare as anyone who witnesses one can attest. The toxic fumes and noise from the motors make the traffic look worse than any war scene that I have ever seen. During the monsoon season (rainy season), it adds more misery to travelers.
 
2) Energy - The first power station was built in 2000. It was supposed to be completed by 2006 and cost 4.5 billion USD. This station is intended to supply energy to the Southwestern parts of Vietnam. During the construction, many officers were jailed for bribery, mishandling cash, etc ... It did not get completed until early 2008. The station is facing quality problems and is constantly breaking down. Vietnam is an oil producing country but is continually facing energy shortages. With frequent power blackouts, it has affected many businesses and manufacturing companies.
 
3) Communication - The telephone and cable wires hanging from the streets in Vietnam resemble a spider web. It's really amazing how the technicians can manage to find what they're looking for. Telephone fees in Vietnam are the highest in the world. Calling in and out of Vietnam costs from USD 0.50 - 1.10 per minute. The clarity of the voice is heavily dependent on the weather at the time.
 
Vietnam receives more than 6 billion USD per year from Vietnamese overseas who are sending money to their relatives. The government constantly reports good earnings from trade. They receive billions of dollars from investors every year and in loans from IMF for rebuilding Vietnam. However, the country still remains one of the most backward countries in South East Asia. We just wonder where all the money went.
 
The government is great at making one excuse after another for the problems in Vietnam. Nevertheless, they make it quite clear that the communist party in Vietnam is intelligent, righteous and always has good plans for the country. But there is much lying by party members who do not practice what they preach. Vietnam used to have a lot of resources. Our land and forests are envied by many countries around the world. After 30 years of bad management, our forests are being destroyed, all rivers are polluted by industrial waste, our resources are being depleted. A few people are getting very rich but the majority are still poor.
 
Our people can only hope and pray that someday the government will care enough to mend their ways and improve the future of Vietnam.
 
Hope this will give you some idea of what's happening in Vietnam at the present.

Vietnam is trying to follow the model of other Asian countries by achieving a rapid growth rate, attracting foreign investment and becoming a manufacturing based, export oriented economy. The communist government promises investors stability above all else, but it hasn't quite worked out that way according to the Asia Sentinel:

A year ago, in August 2007, Vietnam's Prime Minister Nguyen Tan Dung confidently addressed a gathering of regional businessmen at an Asean 100 Leadership Forum at the Melia Hotel in downtown Hanoi.

He gave a typically punchy speech about how Vietnam valued its membership in Asean, how it was increasingly integrating with the global economy after its recent induction into the World Trade Organisation,and most importantly, how its economy was humming along nicely with continued high rates of growth and investment.

At the end, after answering a few soft questions, Dung paused, eye-balled his admiring audience, and said: "One thing I can guarantee you – political stability."

The executives en masse applauded loudly and vociferously, almost as if they were cheering a stock market bull run, not the unelected prime minister of an undemocratic communist regime.

Nothing particularly unusual about that, of course – businessmen the world over love the stability and certitude of authoritarian states like Vietnam, China and Singapore.

What a difference a year can make. The suits are not cheering Vietnam's performance so much these days and the country's chastened prime minister is not sounding half so confident. Since Dung spoke last August [2007], not only has Vietnam's economy stopped purring, but its political stability is no longer guaranteed. Nor, for that matter, is the PM’s own position as secure as it appeared back then.

In a nutshell, Vietnam's economy has crashed and Dung's government has failed to ameliorate the effect on the general population, which has, in turn, grown more disillusioned with the performance of the ruling Vietnam Communist Party.

From the economic point of view, the most ominous and continuing manifestation of that disillusionment is the ever-increasing number of strikes all over the country. At the latest count, there have been around 400 since the start of the year, most of them at manufacturing plants owned by foreign investors.

Last week, in a typical stoppage, 14,000 workers at a South Korean shoe factory near Ho Chi Minh Citydowned tools in response to the management's failure to adequately increase their wages. The workers want $18 a month more, but the company has only offered $12. It may not sound like much of a difference, but when workers on wages of around $50 to $60 a month, are faced with inflation of around 30 percent, it is critically important. Representatives from top investing nations from South Korea,Taiwan, Singapore and Japan have told Dung's team to do something about Vietnam's surging labor unrest before their companies cut back on their investments or even start to pull out.

Last month, Theodore Huang, who heads Taiwan's Chinese National Association of Industry and Commerce, complained at a business seminar that the spread of wildcat strikes was the most critical aspect of Vietnam's current economic downturn. Already, the volatile labor scene is starting to negatively affect investment. Officially, despite the recent economic slide, Hanoi still claims that foreign direct investment   reportedly worth more than US$30 billion so far this year – continues to pour in.

The reality is somewhat different because the official figure only indicates registered or planned investments, which may or may not materialize. When it comes to actual disbursed investments, the amount is just US$5 billion – and that was committed before the crash. There are now signs that many companies are pausing before making further investments. 

But for the government, the immediate problem is how to appease restless workers, disgruntled rural peasants, and the small but increasingly influential urban middle-class while maintaining social and political stability. It will not be easy. Internal surveys conducted by the communist partyitself have indicated that an astonishing 80 percent of the population now think the party is no longer serving the needs of the people.

Perhaps it is not so astonishing. After all, since the prime minister's speech a year ago, inflation has risen every month, hitting 27 percent in July, the highest recorded figure since 1991. Food prices rose by 73 percent, petrol and gas by 46 percent, rents and housing by 25 percent.

 

Even Prime Minister Dung is having his problems staying in power, and the Vietnamese currency, the dong, is losing its value with respect to the dollar. The following is from Time World:

A year ago, Vietnam was being hailed as the next Asian miracle, a success story to match the rise of the Asian tigers of the 1990s and more recently the stunning growth of China and India. Thanks to economic reforms, the communist country was attracting record amounts of foreign investment. The economy expanded by 8.5% last year—among the fastest rates in the region—and housing prices doubled and tripled, driven up in part by frantic buyers who stood in line to snap up condos before they had even been built. The country's nascent stock market was minting millionaires. In Hanoi and Ho Chi Minh City, their flashy new cars clogged roads better suited for bicycles.

But a funny thing happened on the way to prosperity. Halfway through 2008, Vietnam's authoritarian government finds itself grappling with soaring prices, collapsing markets and an increasingly restive workforce. Inflation, now running at an annual rate of 25%, is eating up much of the gains made by citizens over the last several years. Vietnam's stock market, which has fallen 58.5% since January, currently holds the unhappy title of being the worst-performing in the world in the last 30 days. Citing the government's difficulty in reining in inflation, Moody's, which grades creditworthiness, lowered Vietnam's ratings outlook last week to negative from positive. Poor ratings signal that banks may have trouble meeting their financial obligations, undermining investors' confidence in the country. In a nutshell, the economy overheated and the government was too slow to respond, says Jonathan Pincus, chief economist for the United Nations Development Program in Vietnam. "It's how we got into this problem," he says.

Inflation is causing trouble worldwide, of course, but it's particularly acute in Vietnam, where prices for virtually everything, from food to fuel to housing, have been spiking. Much of Vietnam's recent growth has been driven by its expanding manufacturing sector, but now assembly line workers' salaries are being outpaced by basic living costs. The result has been a rash of strikes—unusual in communist Vietnam—that are hurting the country's image as a haven for multinational companies looking for alternatives to China for manufacturing sites. Over the last six months, there have been more than 300 strikes throughout the country. Most last only a few days, with management usually agreeing to small pay increases. In April, a company that manufactures sneakers for Nike agreed to give workers a 10% increase, or about an additional $6.30 a month. But that amount is not enough to make much of a difference when workers go to the grocery store.

Prime Minister Nguyen Tan Dung told the country's National Assembly on May 31 that the number of households going hungry has doubled in one year. "The government understands and shares with the people," Dung said. "And sees it is their responsibility to try to best curb inflation." So far, Hanoi has moved to cool the economy by requiring banks to increase their reserves; the central bank has also raised interest rates to 12%. But inflation is being made worse by Vietnam's weakening national currency. The Vietnamese dong has fallen roughly 1.5% against the dollar in the past six months. But the recent dismal economic news is threatening to weaken it further. This past week the dong jumped from 16,120 to the dollar to 18,500 on the black market as traders rushed to put their dong into dollars and gold. The currency swoon makes imports, from food to commodities, more expensive. Jocelyn Tran, whose Ho Chi Minh City company contracts with local factories to supply apparel to U.S. stores, says the price of Chinese-made yarn has jumped 15% this year. "Our factories are absorbing it by cutting out the profit margin," says Tran. Even though some factories have raised wages, she complains that workers are still going on strike.

The government in Hanoi has been slow to tackle some of the problems in part because battle lines are no longer neatly drawn between Communist Party hardliners and the party's more liberal economic reformers. Decision-making has been fragmented to the point of paralysis, says Pincus. For example, no single entity is in control of monetary policy. In a system that works on consensus— not just among the party but committees, ministries and provinces—it has been difficult to get leaders to make tough decisions. "It's always harder to distribute the pain," says Pincus. "It's much easier to distribute the goodies."

To tackle inflation, the government knows it needs to raise interest rates and rein in spending, particularly by state-owned enterprises that have used state financial institutions as their own piggy banks. But any sudden moves can also threaten to strangle businesses and scare away new investors, which Vietnam must avoid if it is to meet its revised 7% growth rate. Still, while the numbers look bad now, Vietnam's long-term economic outlook is good, says Tom Nguyen, head of global markets at Deutsche Bank in Ho Chi Minh City. Some think the government's ability to deal with public dissent swiftly and harshly lessens the threat that strikes will turn into violent protest or will encourage calls for political change. Vietnam remains a stable country of 85 million people with a young and educated workforce. "It is unreasonable for any of us investors to expect this development process not to have challenges," says Nguyen. "But some of the heartache has to fall in the lap of the people who had unrealistic expectations." Unfortunately, most of the heartache will be felt by Vietnam's poor as they struggle to put food on the table.

 

An Nguyen Checks In from Singapore On China Baby Milk Scandal

  

An reports from Singapore:

You probably are  aware of the baby milk scandal that hit China and this region. This is only one of the few incidents that have surfaced. There are many unsafe consumer products that go unreported for fear that it will tarnish China's image. I have stopped using China's food products since the SARS.

 

Below is an article published in Singapore about the scandals that hit China in the past few years:

 

 

China-Made and Deadly

Thu, Sep 18, 2008

Milk powder: Dozens of infants were treated this week for kidney stones linked to milk formula contaminated with toxic melamine. In 2004, at least 13 babies died of malnutrition after being fed fake milk powder which contained no nutrients. Blood thinner: In March, China identified a contaminant in batches of the blood thinner heparin, supplied to Baxter International by a China-United States joint venture plant in China's Changzhou. The US Food and Drug Administration is investigating whether the 'over-sulfated chondroitin sulfate' in the heparin was the cause of over 80 deaths and more than 700 cases of serious breathing problems reported in the US. Pet food: At least 16 cats and dogs died and more than 100 pet food brands were recalled in North America in March last year, after Chinese suppliers were found to have used melamine in wheat gluten and rice protein in pet food. Toothpaste, cough syrup: Two brands of Chinese toothpaste were banned in the Dominican Republic in May last year, due to fears that they contained the lethal chemical diethylene glycol - a key ingredient in antifreeze which can cause kidney and liver damage. Diethylene glycol was also blamed for at least 100 deaths in Panama. The victims are thought to have died after consuming toxic, mis-labelled drugs in cough syrups from China. Toys: The world's largest toymaker, Mattel, recalled more than 18million made-in-China toys a year ago because of hazards from small, powerful magnets that could cause injury if swallowed, just two weeks after it recalled 1.5million toys due to fears over lead paint. Even small amounts of lead in paint can result in serious health problems, affecting a child's behaviour and learning abilities. In larger amounts, it can cause fits and death. Tyres: The US National Highway Traffic Safety Administration insisted on the recall of as many as 450,000 tyres made by China's second-largest tyre maker, Hangzhou Zhongce Rubber, in June last year. It reported that the tyres, used on sport utility vehicles, vans and trucks, could fail at highway speeds because of an insufficient or missing gum strip which prevented belt separation. The company rebuffed the accusations. REUTERS

Singapore has banned Chinese dairy imports!

The Mother of All Bail-Outs

The US government is now in the process of doing the bail-out to end all bail-outs. The bail-out du jour will be even larger than all previous bail-outs, and it will be done even more hastily. When you're throwing trillions of dollars around you would think that it would be done in a more thoughtful, well considered and deliberate manner. Instead the US government has a penchant for last minute, stop-gap, panicky problem solving. And make no mistake: this is another stop-gap deal. They haven't gotten down to the root causes of what's going on with the banking system. Here in a nutshell is the root cause: the Gramm-Leach-Bliley Financial Modernization Act of 2000. Phil Gramm, John McCain's economic policy advisor and erstwhile future Secretary of the Treasury (God spare us!), slipped this into a bill, unbeknownst to most senators, the night before it was voted on. This was the bill responsible for the machinations of Enron and now the financial meltdown of the whole banking system. Let's assign blame where blame is due! Gramm-Leach-Bliley repealed Glass-Steagall which was the depression era act that put a firewall between commercial and investment banking. Without it we would not have had the sub-prime mortgage mess because you wouldn't have been able to have collateralized debt obligations (CDOs), mortgage backed securities and credit default swaps. You wouldn't have had a toxic mixture of main street commercial banking, Wall Street investment banking and insurance companies (think A.I.G., the beneficiary of another recent bail-out). In addition we have derivatives of all the facny schmancy financial instruments aforementioned. Then we have derivatives of the derivatives etc. etc. They've just figured out that short selling might cause some problems, but in general no bets are off the table including the mother of all bets - the complete devastation of the US banking system. Want to bet on that?

The financial- ization of the US and turning it into a casino which manu- factures nothing but bets on every- thing is what the Republican party has been about for the last 30 years, ever since Ronald Reagan, thet revered and beloved figure, entered the scene. Reagan didn't know much about banking but his cronies sure did. They knew where they wanted to take the country - right back to Hooverville! Before long it would be as if FDR never even existed. Everyone knew it wasn't the New Deal that ended the depression; it was World War II so why not get involved in another war and end the New Deal by repealing for starters the New Deal banking legislation. After all it was 70+ years old. Time to modernize with the Financial Modernization Act which most senators, at the time of its passage, had never even read, much less considered or debated upon. Is this a way to do business or what?

According to Max Fraad Wollf:

We just went from Free Fall to Free Lunch. It turns out free markets are the greatest system on earth, but only when they go up. Market discipline is for low income people and homeowners. Short selling must stop only when it laps up on Goldman's shores. Today, the government deploys hundreds of billions, maybe more than a thousand billion dollars to bail out banks and owners, insurers and traders of mortgage backed securities. Wave after wave of cash infusions didn't work, Thursday morning's $183 billion did not work. So here come new rules and whole lots more money. The government will insure money markets, the government will buy between $800 billion to $1.2 trillion in distressed securities to shore up balance sheets. If this had been done last week, then Lehman, AIG and Merrill would still be out there with ALL their employees. If it had been done in March, Bear Stearns would be with us. This financial run just got more expensive than Iraq. Where will the money come from? Who gains and who loses? Is this the largest economic intervention in at least several decades?

Let's consider the bail-outs of 2008, the year of the bail-out. Bank of America acquires Countrywide - January 11. Bear Stearns swallowed by JP Morgan Chase - March 16. Then came IndyMac - July 11; then Fannie Mae, Freddie Mac - September 7. Bank of America acquires Merrill Lynch - September 15 . The Fed puts $85 billion into A.I.G. - takes 80% stake - September 16. Yesterday, September 19, Secretary of the Treasury Henry Paulson announces a trillion dollar mother of all bail-outs to end all bail-outs so help him God bail-out. It seems like the pace of the bail-outs is accelerating! They're barely finished with one bail-out before announcing the next one. And if you add up the price tags for all these bail-outs, you have approximately two trillion dollars. Just the latest one announced by Paulson yesterday was one trillion in and of itself!

Some think this signals the end of the US being the financial capital of the world. Taxpayers will have to pay more to pay for these bailouts, but John McCain promises to lower taxes. Does this compute? Paulson's latest stop-gap measure will work until the next crisis comes along. Maybe next week? US government debt and yearly deficits have become a structural part of the system, but they can't continue forever. Sooner or later the mother of all crises will arise: the US government is bankrupt. But that could never happen, you say? The US is already beholden to foreigners for about a quarter of its total debt. At the rate the US is going it will soon be a protectorate of China! Fiscal prudence is out the window. The borrowing and spending will continue. We need more money to fund the world's biggest military machine. We need money to pay interest on the national debt. We need money to bail out the banking sector. We need money to pay even higher interest rates on the national debt because otherwise countries won't loan to us. It's the Banana Republicanization of the US.

Y'all taxpayers, listen up, y'heah. You're going to have to pay higher taxes. But if you elect John McCain, he will lower your taxes and get the US into an even worse mess. Who will bail out the mother of all bailer-outers? No one. US equity will go flying out the window. You were upset when foreigners bought the Helmsley and Chrysler buildings in NYC? You ain't seen nothing yet. You don't like Dubai running our ports? You ain't seen nothing. You think the US is the financial capital of the world? Laughable. The US is the world's largest debtor nation filled with debtor instituions who are beholden to financially more prudent foreigners. Financially speaking, even Kazahkstan which has a Sovereign Wealth Fund, is better off. The US has neglected its people, its infrastructure, its health care system, its veterans and every other responsible function of government all in the name of free market, laissez-faire, devil-take-the-hindermost capitalism. Money talks and shit walks! That's the way we do it in the US.

Frank Thomas on The National Debt

The US is presently in a downward debt spiral. Transferring private debt to public debt which is what all the recent bail-outs represent (Fannie Mae, Freddie Mac, A.I.G to name a few) does nothing to alleviate the problem. It just adds to the already humungus national debt on which the government is paying $400+ billion a year in interest alone. Consumers are in credit card debt to their ears and their assets are being stripped away by decreasing real estate values. The savings rate for American citizens is less than zero. The US is increasingly relying on foreign central banks to bail them out and loan them money to fight wars. We're still spending a billion dollars every two days in Iraq. Bush just announced he's giving Georgia a billion dollars. Where's he getting the money? From the Chinese? At the same time an increasing number of people are becoming homeless including a large number of veterans. Where is the money to bail them out? Billions for Wall Street. Zilch for the homeless.

The Republican philosophy of supply side economics, trickle down economics, laissez-faire economics has been proven, unfortunately for US citizens who are left holding the bag, to be an abysmal failure. They thought that lowering taxes would provide more money for investment which would grow the economy and bring more money into Federal coffers even at lower tax rates. WRONG! Instead, lowering taxes brought less money in so that more money had to be borrowed adding to the Federal debt. A case could be made that lowering taxes contributed to the financialization of the marketplace with more people not investing in productive activities but engaged in the process of trying to make money off of money. Corporations moving jobs offshore did nothing about providing jobs for the middle class. Financialization and diminished regulation led to the situation where US taxpayers are having to bail out Wall Street banks thus adding to the national debt and exacerbating the problem. It has become a vicious downward spiral with no end in sight.

Frank Thomas has a good command of the facts and figures in these matters. He regularly posts on Robert Reich's blog. His main point in the following is that by increasing defense (war) spending and decreasing taxes, Republican administrations from Reagan to Bush Jr. have run up the national debt to the point that it's costing $400 billion plus each year just to service it. We then borrow this amount from the Chinese (and others) and add it to the debt so that the following year it costs even more in interest to service the debt. Foreign bankers are now demanding an increasing amount of interest to account for the fall in the dollar creating a downward spiral that won't end until either the US finds the wherewithal for financial self-discipline or foreign central banks refuse to lend to us any more. If the bail-outs this year add up to $500 billion as Frank calculates they might, the US will be faced with a $1 trillion deficit in 2009. (The expected deficit is $500 billion before the bail-outs are added in.) His recent posts from the Netherlands follow:

Annual Deficits as a % of GDP averaged 3.5% during Reagan/Bushes' years vs. 1.3%  during Carter/Clinton years. GDP growth rates averaged 6.1% during Reagan/Bushes' years vs. 7.7% during Carter/Clinton years (Inflation adjustments would not change these differences). So, lower rate of Debt growth translates into stronger GDP growth rates and vice-versa. Rising Deficits and National Debt accumulation at rapid rates drain financial resources from the productive private sector to the unproductive public sector. The huge debt service costs, e.g. including  the escalating interest cost and interest rates, reduce savings and hence capital generation. The result is a slower growth rate counterproductively compounded by the necessity to raise huge amounts of tax revenue to meet the debt service costs.             This is the Trap we are in now.... right at a time when we must Invest substantial sums to regenerate and modernize our social infrastructures, provide health care for all, offer student college loan support, provide tax incentives for alternate fuels and fuel efficiency, bail out failing financial institutions, etc.  Getting the Outflows and Inflows balance right, without exacerbating annual Deficits and a mounting Debt and without undermining the Dollar, will require the Best and Brightest in our society. Obama has the inherent capability to bring together the best minds for this daunting task ... of that I have no doubt. This is no time to be experimenting further with so-called  "Mavericks."        In reaction to the imploding of our financial institutions, I'd like to reemphasize the key virus behind all of this and that is... RAMPANT, Run-Away-DEBT in many directions. This Debt Iceberg is illustrated, for example, by fact the recent tax refund was paid by the Chinese, and by the fact that Americans have an average of 5 credit cards per person compared to 2 per person in mature European countries! Let's look at our National Debt explosion again over the past 45 years (TABLE 14 in an earlier post). I must issue a warning for those weary of down news. This post is lengthy in that regard.

TABLE 14: BEGINNING AND ENDING NATIONAL DEBT UNDER PRESIDENTS SINCE JOHNSON; % AVE. ANNUAL INCREASE; % OF GDP--1962-2008 (Data in Current $Billlions) ___________________________________ JOHNSON 1963-68 Beginning DEBT Balance.....$302.9 Ending DEBT Balance........$358.7 Ave. Year % Increase.......2.9% % of GDP: Beginning.......43.7% % of GDP: Ending..........33.4% NIXON 1969-73 Beginning DEBT Balance.....$358.7 Ending DEBT Balance........$466.3 Ave. Year % Increase.......5.5% % of GDP: Beginning.......33.4% % of GDP: Ending..........26.1% FORD 1974-76 Beginning DEBT Balance.....$466.3 Ending DEBT Balance........$629.0 Ave. Year % Increase......10.5% % of GDP: Beginning.......26.1% % of GDP: Ending..........27.5% CARTER 1977-80 Beginning DEBT Balance.....$629.0 Ending DEBT Balance........$909.0 Ave. Year % Increase.......9.6% % of GDP: Beginning.......27.5% % of GDP: Ending..........26.1% REAGAN 1981-84 Beginning DEBT Balance.....$909.0 Ending DEBT Balance......$1,564.6 Ave. Year % Increase......14.5% % of GDP: Beginning.......26.1% % of GDP: Ending..........34.0% REAGAN 1985-88 Beginning DEBT Balance...$1,564.6 Ending DEBT Balance......$2,601.1 Ave. Year % Increase......13.6% % of GDP: Beginning.......34.0% % of GDP: Ending..........41.0% BUSH Sr. 1989-92 Beginning DEBT Balance...$2,601.1 Ending DEBT Balance......$4,001.8 Ave. Year % Increase.....11.4% % of GDP: Beginning......41.0% % of GDP: Ending..........8.1% CLINTON 1993-96 Beginning DEBT Balance...$4,001.8 Ending DEBT Balance......$5,181.5 Ave. Year % Increase......6.7% % of GDP: Beginning......48.1% % of GDP: Ending.........48.5% CLINTON 1997-2000 Beginning DEBT Balance...$5,181.5 Ending DEBT Balance......$5,628.7 Ave. Year % Increase......2.1% % of GDP: Beginning......48.5% % of GDP: Ending.........35.1% BUSH Jr. 2001-04 Beginning DEBT Balance...$5,628.7 Ending DEBT Balance......$7,354.7 Ave. Year % Increase......6.9% % of GDP: Beginning......35.1% % of GDP: Ending.........37.3% BUSH Jr. 2005-08 Beginning DEBT Balance...$7,354.7 Ending DEBT Balance......$9,676.5 Ave. Year % Increase......7.1% % of GDP: Beginning......35.1% % of GDP: Ending.........36.8% Data Source: White House Office of Management and Budget -----------------------------------

An underlying message herein as mentioned many times is: Our Economic Model is OBSOLETE and OUT-of-BALANCE with its ±70% of GDP dependence [70% of GDP is consumer spending], ZERO Savings as a % of GDP and Investment as a driver of GDP at a low ±4% of GDP. That said, here are some more explanations regarding huge escalation of our National Debt. Pres. Johnson's administration started with a National Debt at a high 41% of GDP and ended at 33.4% of GDP, not bad considering the terrific cost of the Vietnam war. Nixon, Ford, and Carter brought the National Debt further down to 27%± of GDP. Then Reagan skyrocketed it back to 41% of GDP, after which Clinton and the two Bushes stabilized the National Debt at around 37% of GDP. Are these percentages good or bad? The answer lies in the speed and scale with which this National Debt and related Interest cost have grown since the beginning of Carter's term and how that rate of growth has virtually exploded under Republican administrations. To be specific: the National Debt at the beginning of Carter's term was $629 Billion. At end of his term it was $909 Billion, an increase of $280 Billion over 4 years. At the end of Reagan's 8 year term, the National Debt became $2,601 Trillion, a dramatic increase of $1,692 Trillion. It then increased further by $1,401 Trillion in Bush Sr.'s 4 year term (the growth rate seriously picked up speed). It increased $1,627 Trillion under Clinton's 8 year term (the growth rate slowed down substantially); and then increased dramatically again by $4,048 Trillion in Bush Jr.'s 8 year term (the growth rate speeded up almost exponentially!). As we all know, this has brought our nation to a National Debt level expected at end of 2008 of $9,676± Trillion ... or 10 times HIGHER than the National Debt at the end of Carter's term ... and an increase of $7.1 Trillion during Reagan/Bush Sr./Bush Jr.'s Presidencies. Too much Debt, too fast when combined with related sharp escalation of Interest cost on the Debt. To repeat, during 20 years of Republican administrations, the National Debt increased $7.1 Trillion compared to a $1.9 Trillion increase during 12 years of Carter and Clinton´s terms in office. By any definition, this result can hardly be called Prudent Conservatism. Nor is it representative of the Republican party´s (patently false) claim of being the party of Small Government while accusing the Democratic party of being the party of Big Government. PURE MYTHOLOGY, to put it politely... a divisive language and demonizing political culture that in effect says, `Hell is other people.´ This clearly casts to the rubbish bin the Republican party decades long propaganda that the Democrats belong to the party of Big Spenders, the party of High Tax Increases, and Big Government. In fact, the average annual growth rate in Federal Outlays, starting with Carter´s administration, has been 6.9% under Republican administrations vs. 6.1% under Democratic administrations. Even if Social Security, Medicare and Defense expenditures are excluded, the growth rate in annual Federal Outlays is only slightly smaller under Republican administrations at 6.1% vs. 6.6% under Democratic administrations. One thing is clear. Republican administrations are the Big Deficit producers caused by excessive escalation of Defense expenditures while simultaneously reducing Taxes going largely to the top 10% of households. Result? The tax revenue losses aren´t even offset by increased spending or investment. This is because small tax cuts going to bottom 80% of households do little for stimulating consumption. Often the marginal middle class tax cuts are used to pay down enormous credit card debt, as happened with Reagan's first term tax cut. Reagan saw the Double Hit to tax revenues occur. He then wisely cancelled his second planned tax cut going mainly to the top 10%. Still, Deficits exploded during his Presidency as a result of the Double Hit of sharply increased Defense expenditures with major tax cuts for top 10% of households who often invest their substantial cash gains from lower taxes outside the US. In contrast, Bush Jr. has learned nothing about this twin Deficit problem and wants to make it worst by sticking to his tax cuts. Result? absolute annual Deficits that have made Reagan and Bush Sr.'s annual Deficit levels look like peanuts ... all helped of course by Greenspan's cheap money policies starting in 2002 through 2007. In a blink of an eye of time's passing, we have become the world's largest Debtor [and spend more on the military than the rest of the world combined!]. So taking comfort in huge absolute increases in National Debt levels expressed as a % of GDP (now 37%) when there are ZERO Savings and also huge Trade Deficits at ±$65 Billion a month is absurdly dangerous. WE now have three way Debt escalation: Government, Consumers and Financial Institutions! This pervasive rapid Debt development has placed us entirely at the mercy of Asian money forces. It has also exponentially increased the absolute level of annual Interest cost on the Debt explosion ... to the point that the annual Interest cost is starting to match recent annual Deficit levels of ±$400 Billion. In addition to this pain, foreign financiers are asking for higher Interest payments to compensate for the Dollar's fall. This combination, mathmatically in financial terms, puts incredible pressure on raising taxes. It's why Bush Sr. had to raise taxes after Reagan's 8 years of massive absolute Deficit increases. It's why Clinton had to increase taxes after Bush Sr.'s 4 years of massive absolute Deficit increases (almost equaling Reagan's 8 years of increases). It's why the next Administration will also be under pressure to increase taxes (at a terrible time) to reverse Bush Jr.s' record breaking absolute annual Deficits and increase in our National Debt. All the Baloney about cutting EARMARKS as a the cost-efficiency panacea is just that... Baloney. Maximum cost savings here are ±$60 Billion of which a third represent very good job-generating projects. Don´t get me wrong. Any Earmark cost savings or other savings are extremely important. But the McCain/Palin duo are deceiving the public with their suggestions that cutting Earmarks is God's answer to our complex financial problems. Our government is technically, financially illiquid. This makes it almost impossible to respond correctly to crises in our own country, let alone pay for almost 50%, yes, 50% of the world's Military costs. So we are forced to borrow and print money. Both actions cause inflation and weaken the Dollar leading to fuel and commodity price increases. So, as said before, there are many tricky Catch 22s as we are caught (maybe trapped is a better word) against the background of a massive Debt buildup in a relatively short period of time and the urgent need for huge Investments to regenerate and modernize our social-infrastructure, tax breaks for the middle class, etc., etc. After the Maverick Bush Jr., this country certainly doesn't need two more Mavericks who also play with the truth and know nothing about complex economics ... other than the same old `Trickle Down´ of prosperity dogma which has left Mainstream Americans poorer.

Frank Thomas, the Netherlands, Monday, 15 September, 2008

The Deficit forecast by Bush for 2009 is already +-$500 BEFORE any funding for writeoffs for Fannie and Freddie which Dr. Reich optimistically estimates to be $25 Billion. Actual writoffs on $6.0 Trillion of mortgages and other financial instruments could well be 2% to 5%, or $200 Billion to $500 Billion added to 2009 expected Deficit of +- %500 Billion. So your 15% Debt growth assumption, which is already high, could be much higher. This possibility and your excellent thoughts about the added Interest cost escalation and its resultant increased pressure on need to raise taxes are very uncomforting financial scenarios. Bush Sr. had to raise taxes due to Reagan's 8 years of massive Deficits; Clinton had to raise taxes because of Bush Sr. massive Deficits; and I'm afraid, as you're suggesting, the next President will have to raise taxes because of Bush Jr.'s massive Deficits. This is all why we need the best brains AND experience to tackle the complex financial Mess we are in... right at a time heavy Investments are needed in our economy for all the priority Stimulus programs we all know quite about by now. Knowing the Federal Budget Deficits for 2008 and 2009 will exceed $400 Billion to $500 Billion before any consideration of the ultimate cost of the Fannie/Freddie bailout ... where the Writeoff risk exposure could be as high as 2% to 5%. This would amount to $200 to $500 Billion which must be added to 2009's already expected Deficit of ±$500 Billion. Another risk is the inflationary effect of floating substantial debt issues to finance the cost of the Fannie-Fredddie Writeoffs. As the world's number one Debtor nation, the US is testing the breakpoint as to how long the rest of the world will be willing to continue diverting their Savings to finance our runaway Debt situation. Investors in our bonds are already demanding much higher returns (as much as a 1% higher interest rate return) despite government guarantees of mortgages. Putting Fannie and Freddie in conservatorship, which eliminates the middleman shareholder profit element and obscene CEO salaries, should result in cheaper home loans given government's plan to purchase mortgage securities directly. As for pointing the finger as to who's to blame for this fiasco, this is a waste of time -- except insofar we learn from past mistakes, which we seldom do But pleasantly for a change, I was impressed to hear that President Bush, as early as 2002, saw the Fannie/Freddie structure with the "Implicit Government Guarantee" as a ticking financial time bomb. He favored and sought much stricter regulations over these companies but his own Republican Congressional party members stopped this effort when they had the majority in Congress. The Democrats finally agreed to more legalregulation authority with their improved power position in Congress as result of 2006 elections. That legal authority is now the basis of Treasury Secretary Paulson´s no option decision to take total control over these mortgage giants -- given huge exposure in outstanding mortgages and other financial instruments amounting to ±$6 Trillion, or over 60% of our accumulated Nationl Debt now approaching ±$10 Trillion in fiscal year 2008. Hope the shareholders really lose here to minimize the privatization of profits and socialization of losses disease systemically afflicting and undermining our financial system. As mentioned earlier, should the Fannie/Freddie writeoffs soar into the $200 to $500 Billion range, this is going to make it very difficult to raise funds needed for critical Stimulus Investments in Social-Infrastructure, Health Care, Alternate Fuels, Education, etc., etc. Therefore, Investment priorities and scale of same will have to be limited, no matter how many "Pork Barrel Earmark" cuts are made. Having looked at this Pork Barrel Earmark pot carefully, the most that can be saved here is ±$60 Billion annnually -- very, very Important but hardly a panacea for funding the huge Investments needed in our economy. Another complication is that at least a third of the Earmarks are for Legitimate projects that generate lots of local jobs. The problems are complex and dangerous if the policy mix and systemic changes are not balanced wisely and cleverly. For we stand in danger forgetting the 12 year Japanese collapse. As a side note, David Brooks NY Times article, `Surprise Me Most´ has a few pretty interesting ideas highlighting the need for both Parties to come together to get the Stimulus Changes right for ALL Americans. Realistic, probably not, but some wise words nevertheless. That's why way back I suggested, for example, covering our vital Human Capital Investment needs (in Education and Worker Retraining) by floating attractively structured `Invest in American Education Bonds´ -- rather than funding this particular Investment requirement by borrowing from China and paying the higher interest rates to them rather than to American investors. This would also increase our economic systems´ Savings level and hence general financial Liquidity to fund necessary Investments over nex 6-8 years -- a Savings level at ZERO in recent years! Frank Thomas, the Netherlands, Wednesday, 10 September, 2008

Of the forecast Year-End 2008 $9.7 Trillion National DEBT accumulated since 1950, $7.1 Trillion was generated, or 74%, over 20 years of Reagan, Bush Sr. and Bush Jr. administrations. This was mostly the cause of exploding Defense Spending combined with Tax Cuts that went primarily to top 10% of households (not offset by stimulation of increased Tax Revenues), thereby leading to a Double Hit on annual Deficits. Clinton was first President to restore fiscal discipline under Treasury Secretary Rubin, resulting in Budget Surpluses during Clinton´s last term of Office. The trick now is how to regenerate the economy with appropriate Investments in Social-Infrastructure, Alternate Energy Tax Incentives, Health Care for All, strengthing Pre-college Educational System and Worker Retraining programs, reducing taxes on middle class offset partially by modestly higher taxes on upper class and businesses WITHOUT exacerbating the annual DEFICITS to above $600 Billion over next 4 years. Bush´s Budget for 2009 already projects a Deficit exceeding $500 Billion! As I've said for so long now, our Economic Model is Out-of-Balance with its traditional extreme dependence on Consumption (72% of GDP) to drive the economy and NO reliance on Savings (Zero %) and weak Investment(4%) as supporting drivers of the economy. This formula in combination with long periods of stagnant working middle class wages drives people to Debt and guarantees a repetitive national financial crisis syndrome, each crisis more serious than the last one. A more stable economic-model balance, in my amateur view, would be to make the temporary painful transition to Consumption at 65%, Savings at 6% and Investment at 6-8% of GDP. This means, in addition to lower taxes for middle class, tax incentives will be needed to stimulate more Americans to SAVE (consume less) whereby resultant added Liquidity Inflows into financial system will help finance much of the considerable Investments ... so urgently required now to regenerate (reindustrialize, hopefully) our economy and to achieve energy independence. This increasing Savings strategy component would also help slow down our dependence on lavish borrowings from China, Europe. So there are a lot of Catch 22s here that require the best brains to get the financial Inflow-Outflow policy mix right and to retain the innovative commercial vibrance of our unique CAN DO society ... that benefits ALL Americans. Making phoney dogamatic labels of `You Liberals´ or `You Radical Conservatives´ are getting us nowwhere. This poisoning labeling culture is responsible for paralyzing our creativity and compromise to get things done and repaired in a Balanced, Pragmatic fashion. No one ideology has a monopoly of the right ideas or perfect panacea of thinking about what´s ailing us and what the exact solutions should be. That´s the first Reality we Americans need to grow up to FAST! Frank Thomas, the Netherlands, Friday, 05 September, 2008

 

MELTDOWN! The US Economy Goes Down the Tubes

"The fundamentals of the economy are strong," trumpets John McCain. The fundamentals of the American economy are not only weak; they are structurally unsound. With a national debt of $10 trillion, a war in Iraq costing $1 billion every two days, interest on the national debt alone totaling $500 billion a year, another trillion added to the debt for corporate bail-outs, zero savings rate, consumer credit card debt, consumer negative home equity - I could go on and on, but you get the picture. Lehman Brothers, around since the Civil War, was allowed to go bankrupt. Merrill Lynch sold itself to Bank of America. The Fed bails out AIG to the tune of $85 billion and then takes an 80% stake for which the taxpayers will never see a penny of profit because we're not socialists, remember? We're only socialists when it comes to bailing out the rich, not when it comes to making profit to offset taxes.

James Moore writes in "A Nation of Village Idiots":

Conservative Republicans always want the government to stay out of business and avoid regulation as long as they are making lots of money. When their greed, however, gets them into a fix, they are the first to cry out for rules and laws and taxpayer money to bail out their businesses. Obviously, Republicans are socialists. The Bush administration has decided to socialize the debt of the big Wall Street Firms. Taxpayers didn't get to enjoy any of the big money profits on the phony financial instruments like derivatives or bundled sub-prime paper, but we get the privilege of paying for their debt and failures. Let's just consider the money. The public bailout of insurance giant (becoming a dwarf) AIG is estimated at $85 billion. According to one report, that's more than the Bush administration spent on Aid to Families with Dependent Children during his entire time in office. That amount of money would also pay for health care for every man, woman, and child in America for at least six months.

You can bet your bippy that, after the taxpayers have bailed out A.I.G. and now own 80% of it, they will never see a cent of profit from it. If A.I.G., Freddie Mac and Fannie Mae have been socialized in order that the taxpayers can have the privilege of paying off their debts then, when they get back on their feet, the taxpayers should also reap their profits. These could be considered an offset against taxes which will have to be raised to pay the interest on the national debt caused by adding the cost of the bailouts to it. However, as soon as these institutions become profitable again, they will be privatized. So the losses are socialized, the profits are privatized.

How did we get here? That's pretty easy to answer, too. His name is Phil Gramm. A few days after the Supreme Court made George W. Bush president in 2000, Gramm stuck something called the Commodity Futures Modernization Act into the budget bill. Nobody knew that the Texas senator was slipping America a 262 page poison pill. The Gramm Guts America Act was designed to keep regulators from controlling new financial tools described as credit "swaps." These are instruments like sub-prime mortgages bundled up and sold as securities. Under the Gramm law, neither the SEC nor the Commodities Futures Trading Commission (CFTC) were able to examine financial institutions like hedge funds or investment banks to guarantee they had the assets necessary to cover losses they were guaranteeing. This isn't small beer we are talking about here. The market for these fancy financial instruments they don't expect us little people to understand is estimated at $60 trillion annually, which amounts to almost four times the entire US stock market. And Senator Phil Gramm wanted it completely unregulated. So did Alan Greenspan, who supported the legislation and is now running around to the talk shows jabbering about the horror of it all. Before the highly paid lobbyists were done slinging their gold card guts about the halls of congress, every one from hedge funds to banks were playing with fire for fun and profit.

John McCain has been a deregulator from way back. Remember the Savings and Loan scandal and bail-out? Why there was John McCain in the middle of it - one of the Keating 5 who told the Federal Home Loan Bank Board (FHLBB) to stay away from Charles Keating and his Lincoln S&L. With Phil Gramm as his economic advisor and future possible Secretary of Treasury, do you think his agenda will include repeal of the Gramm-Leach-Bliley Financial Modernization Act which repealed the depression era Glass-Steagall Act which put a firewall between commercial and investment banking? Don't bet on it. These guys are philosophically against regulation. But it just isn't lack of regulation that's the problem. Fancy financial derivatives are a big part of the problem and they need not just to be regulated but to be made illegal. What do you think the chances are of that? In order to save capitalism from itself, capitalism has to be rolled back to a time when none  of these financial instruments existed. Asking a commission to regulate them at this point is probably beyond human capabilities because no one understands them, least of all the guys who invented them and then lost billions of dollars using them.

McCain and four other US senators (known to history as the Keating Five) met with Edwin Gray, then chairman of the FHLBB. McCain had been hesitant to attend but had reportedly been called a "wimp" behind his back by Keating. The message to the FHLBB and Gray from the Keating Five was to lay off Lincoln and cool the investigation. Gray and the FHLBB did not relent but Lincoln stayed in business until 1989 when it collapsed with the rest of the S&L industry. The life savings of more than 20,000 elderly investors disappeared with the failure of Lincoln. Keating went to prison for five years. Charles Keating was John McCain's pal. They met in 1981 and Keating dumped $112,000 in the McCain campaign bank accounts between '82 and '87. A year before McCain met with the FHLBB regulators, his wife Cindy and her father, according to newspaper reports at the time, invested about $360,000 in one of Keating's shopping centers. The Arizona Republic reported McCain and his wife and their babysitter took nine trips on Keating's private jet to the Bahamas to stay at the S&L liar's decadent Cat Cay resort. The senator didn't pay Keating back for the plane rides until years later when he was under investigation.

But the main problem isn't the problems in the banking industry. It's the absolutely cavalier attitude on the part of every Republican administration since Ronald Reagan about the Federal debt which is added to with every bail-out. Don't forget folks that we have to pay interest on this debt which is now around $500 billion a year. That's money that can't be spent on infrastructure, education, health care, social security, investment in new job producing industries and many other programs that could be helping those in need not to mention victims of the increasingly frequent natural disasters thanks to global warming.

The situation has gotten dire, my friends. The US is in hock to foreign central bankers and sovereign wealth funds. China has been loaning us the money so we can go into debt for years. The US is facing the situation that it will become merely a protectorate of China or of an international coalition. Thanks Reagan, Bush, Bush-Cheney.

Wind Powered Cars?

Y'all have probably seen the ubiquitous TV ads by T. Boone Pickens. ("Ah've been an awl man all mah lahf.") He wants to use wind energy to replace natural gas and use natural gas to replace gasoline. So he wants to run cars, buses and trucks on natural gas and thereby decrease our dependence on foreign oil for which we are running a trade deficit of $700 billion a year. We're getting poorer as a nation because of our consumption and oil rich nations such as Saudi Arabia, Venezuela and Russia are getting richer.  Something has to be done ...

Why not use wind generated electricity directly to power automobiles instead of using natural gas? This has been suggested by Lester Brown. The advantages are that the infrastructure involving installing natural gas pumps at service stations need not be built. Plug in electric hybrids or all electric vehicles require no new infrastructure. And the transmission lines necessary to transmit the wind generated electricity from the "wind belt" to the major population centers need not be built.

Plug-in cars are here, nearly ready to market. We just need to put wind in the driver's seat. Several major auto manufacturers, including GM, Ford, Toyota and Nissan, are producing plug-in hybrids. Both Toyota and GM are committed to marketing plug-in hybrids in 2010. Toyota might even try to deliver a plug-in version of its Prius gas-electric hybrid, the bestseller whose U.S. sales match those of all other hybrids combined, next year. GM is in the game, too, with its Chevrolet Volt. This plug-in car is essentially an electric car with an auxiliary gasoline engine that generates electricity to recharge the batteries when needed. It boasts an all-electric range of 40 miles, more than adequate for most daily driving. GM reports that under typical driving conditions, the Volt averages 151 miles per gallon. This new car technology is matched by new wind-turbine technology, setting the stage for an automotive-fuel economy powered largely by cheap wind energy. The Energy Department notes that North Dakota, Kansas and Texas alone have enough wind energy to easily satisfy national electricity needs. To actually put wind power on the road, of course, we would have to tap the wind resources in nearly all the states, plus those that are off-shore, which the department says can meet 70 percent of national electricity needs. Texas, this country's leading oil producer for the last century, is now our leading generator of electricity from wind, having eclipsed California two years ago. With more than 5,500 megawatts of wind-generating capacity now in operation and two vast wind-farm complexes under development, the state will have more than 20,000 megawatts of wind-generating capacity (think 20 coal-fired power plants). Pickens, with his own 4,000-megawatt wind farm under development in the Texas Panhandle, is one of the largest investors.

One of the problems with electricity generation especially by wind is that the demands for electricity are highest during the day and lowest at night when everyone is asleep. However, those windmills keep on cranking out electricity anyway which is mostly wasted. But if people plugged in their electric vehicles so that they can be charged up overnight, you get the wonderful result of a nation of distributed storage batteries. Now experts in Denmark, which derives a great deal of its energy from windmills, have suggested this as a great way to make use of off peak electricity generation which can then be used in the following ways: 1) to power cars for going to work and 2) once at work cars are plugged into the grid and off load the energy stored the night before (except for that amount necessary to drive home, of course). Some have even suggested locating wind turbines on the cars themselves.

While many residents in some places, such as Cape Cod, take a NIMBY (Not In My Backyard) view of wind farms, the opposite is true in much of the rest of the country -- including the ranch country that extends from Texas north through the Dakotas. There, it's a PIMBY (Put It in My Backyard) issue. In ranching regions, competition among communities for these wind farms, and the jobs and tax revenues that come with them, is intense. Each wind turbine on a rancher's land typically brings a royalty of $3,000 to $10,000 per year, with no investment on the landowner's part. And the ranchers can continue to graze cattle on the land. Some 30 states now have commercial-scale wind farms. The potential -- and the desire for wind energy -- is high. That's because wind wins on almost every count. It is carbon-free, cheap, abundant and inexhaustible -- and it is ours. No one can embargo the supply, the price never changes, and wind farms can be built in 12 months. This is why shifting to natural gas to fuel cars, as Pickens recommends, isn't the best move. In contrast to wind-generated electricity, where costs are falling, the price of natural gas is on its way up. ... Indeed, a study by Pacific Northwest National Laboratory points out that the existing grid, using its off-peak capacity to recharge cars, could provide electricity for more than 70 percent of the U.S. fleet if all cars were plug-in hybrids. While gasoline prices are probably headed to $5 to $10 a gallon, the wind-generated-electricity equivalent of a gallon of gasoline costs less than $1. We are now in a position to launch a crash program to convert to plug-in hybrids on a massive scale and at wartime speed. This would resuscitate Detroit, reinvigorate thousands of the country's wind-rich rural communities, dramatically cut carbon emissions and quickly reduce the vast outflow of dollars for imported oil. The car companies themselves seem on board -- witness GM's massive advertising push for the Chevy Volt. The ad ends with the Volt, standing at the base of snow-capped mountains, clouds traveling swiftly overhead. Its launch is targeted for 2010. Perhaps by then, the wind moving the clouds will also power the sleek-looking sedan below.

  The combination of wind and solar can provide most of the US' energy needs and the drive to convert to these energy sources could provide many new, highly productive and well paid jobs. No new infrastructure need be built at pumping stations. In fact there would be no more trips to the gas station. Not good news for gas station owners but good news for consumers. Electrical outlets are readily available, but metering the electricity could require new infrastructure. But why build an infrastructure just for metering? Why not have a meter located on the car itself which could communicate wirelessly with the electric company so that the proper account can be charged regardless of where the car hooks up to power?

Deep water windmill platforms similar to deep water oil drilling platforms off both our coasts can provide energy to major population centers and distributed solar panels obviate the need for huge transmission lines which are inefficient over long distances anyway. The distribution of energy production also has the benefit that the economic rewards will be more evenly distributed among the population rather than concentrated in large centralized mega corporations which then can manipulate the energy market via Wall Street. Solar and wind need to be subsidized by the government in such a way that small scale operations and individual property owners can own production facilities as they have been in Germany.

The train is leaving. Let's get on board.

Alaska's Sovereign Wealth Fund

We have written previously about Sovereign Wealth Funds (SWFs). They are usually owned by countries such as China, Singapore, Norway and the United Arab Emirates. Recently the US has been going to these countries to bail out its failed banks. The recent bail-out of Fannie Mae and Freddie Mac was undertaken so as not to displease its investors many of whom were foreign central banks, China being the largest investor. How ironic that we have to go to China, a communist country, to bail out American capitalism! Little known is the fact that, although the US as a whole has what amounts to a Sovereign Debt Fund, a national debt in the neighborhood of $10 trillion, four US states have sovereign wealth funds - Alaska, Alabama, New Mexico and Wyoming, that is if you want to consider the states as sovereign entities. The most prominent of these is Alaska which is getting ready to give each Alaskan citizen the sum of $3269.00 just for being an Alaskan citizen! These payouts occur on a yearly basis.

Now this begs the question "why does not the US as a whole have a SWF?" The short answer is that far from being a wealthy nation, the US is the world's largest debtor. The long answer has to do with the fact that not only does the US virtually give its assets such as oil away to the oil companies, it gives them tax breaks and subsidies too! Other countries such as Norway derive a 50% profit on every barrel of oil produced which goes right into the SWF.

The Alaska Permanent Fund has an asset value of $35 billion. The mission of the APF is to maximize the value of Alaska's Permanent Fund through prudent long-term investment and protection of principal to produce income to benefit all generations of Alaskans. The US as a whole only has tax payer liabilities but no SWF to "benefit all generations of US citizens." Instead we argue about how to pass on taxpayer liabilities to future generations. The recent taxpayer bailout of Freddie Mac and Fannie Mae has only added trillions more to the US national debt which is to say taxpayer liabilities most likely deferred (in an act of total cowardice) to future generations. The Bush administration wants its wars and they want them now without paying for them. However, Alaska and a few other states (unlike California which can't balance its budget) have prudently set aside funds for the benefit of future generations thus driving a rift between the state which has a "save and invest" philosophy and the federal government which has a "borrow and spend" philosophy. The following is from the APF website.

Why did Alaskans create the Fund? During construction of the Trans-Alaska Pipeline in the 1970's, oil companies flooded state coffers with money paid for leases to explore and secure drilling rights.  The Legislature spent all $900 million of that initial lease money within a few years. Alaskans realized that they were about to receive a great deal more money from oil when the pipeline was complete. They wished to better safeguard the robust income forthcoming from the pipeline, but the state constitution did not allow for dedicated funds.  So Alaskans voted in 1976 to amend the constitution to put at least 25% of the oil money into a dedicated fund: the Permanent Fund.  This would save money for future generations, which would no longer have oil as a source of income. In 1976 Governor Hammond proposed a constitutional amendment to create the Fund. The 9th Alaska Legislature modified the governor's legislation and placed it as a ballot proposition in the 1976 General Election.  It passed by a margin of two to one. What is the purpose of the Permanent Fund? The 1976 state law establishing the Permanent Fund (AS 37.13), states that the Fund was created: to provide a means of conserving a portion of the state's revenue from mineral resources to benefit all generations of Alaskans to maintain safety of principal while maximizing total return to be a savings device managed to allow maximum use of disposable income for purposes designated by law

And this is from the law establishing the APF:

Section 15. Alaska Permanent Fund. At least twenty-five percent of all mineral lease rentals, royalties, royalty sale proceeds, federal mineral revenue sharing payments and bonuses received by the State shall be placed in a permanent fund, the principal of which shall be used only for those income-producing investments specifically designated by law as eligible for permanent fund investments. All income from the permanent fund shall be deposited in the general fund unless otherwise provided by law [Effective February 21, 1977].

So Alaskans haven't just given away their natural resources to the oil companies. Similar to Norway they've taken a percentage of all oil profits extracted from their state. What about all the drilling that goes on in Texas and Louisiana? Evidently, all those profits go into oil company coffers with nothing going to the citizens of those states. Such a deal for the oil companies, and then US taxpayers give them even more. But Alaska, since it entered the union much later than other states, was in a unique position:

The United States is one of the few nations in the world in which petroleum and other subsurface resources may be privately owned. The history of oil and gas development in most of the nation is a history of struggles among private owners over the development and disposition of petroleum (Lovejoy and Homan, 1975; McDonald,1971). Two factors made Alaska an exception to this rule when it entered the union in 1959. First, the federal government awarded the new state a 102-million-acre land entitlement, including subsurface rights, to be selected from unreserved public domain. Second, the 1953 Submerged Lands Act settling intergovernmental disputes over offshore resources had recently awarded coastal states offshore mineral rights within three miles of land. Alaska's long coastline entitled the state to a vast nearshore estate. The geology was fortuitous, rewarding the state handsomely with oil and gas resources on both onshore and offshore entitlements.

Unlike the US which just gives its oil leases away to the oil companies, Alaskans drove a bargain in return for which they obtain royalties on Alaskan oil production. Alaska relies on oil for about 80 percent of its revenue and has no sales or income tax. Alaska state government is mandated to invest 25% of its oil revenue into the APF while the other 75% of oil royalty revenue is dispersed to other government funds to finance education, infrastructure and social services. Alaska imposes a tax of approximately 5% on oil companies. This produces a lot of money but is nowhere near the 50% that Norway gets from the extraction of its oil. Although Alaska benefits from oil production the oil companies are still getting away with murder. And they and their lobbyists are in the business of reducing the royalties they have to pay to Alaska even more. Their goal, of course, is to pay Alaska absolutely nothing which would bring it into par with the other oil producing states.

The latest deal nets the citizens of the US just 14 cents a barrel when a barrel of oll is selling for well over $100. As suspected, the Bush administration's Department of the Interior is in cahoots with the oil companies and is shortchanging American citizens - in fact selling out the interests of US citizens to private interests.

Earlier this month, Royal Dutch Shell, coming off the most rapacious quarter in its history with a 60% increase in earnings to $8.47 billion, spurred on in large measure by OPEC-inflated crude oil prices, announced that it had successfully obtained the drilling rights to 275 lease blocks in the Chukchi Sea offshore northwest Alaska. These new lease holdings, together with Shell's lease holdings in the Beaufort Sea moved David Lawrence, Shell's Executive Vice President Exploration to triumphantly exclaim they have the "potential of becoming a new heartland for Shell." And there, in a nutshell you have it. What was once the national patrimony of all Americans is now becoming the new 'heartland' for Royal Dutch Shell. To give you a sense of the giveaway, the Minerals Management Service, the federal agency responsible for the auction covering 29.7 million acres has estimated that the area contains 15 billion barrels of "conventionally recoverable" oil and 77 trillion cubic feet of conventionally recoverable gas. Shell, as the high bidder, is proudly proclaiming it is paying $2.1 billion for the leases. Leases that appear certain to be in the most prolific areas of the Chuckchi Sea. That amounts to a grand cost of 14 cents a barrel permitting access to the potential of some 15 billion barrels of a commodity now selling near $100/bbl.

The Minerals Management Service has been recently in the news because of corruption. It seems they were getting too close with the oil companies, having sex with oil company employees, accepting gifts etc. It's the same old story. Party hearty while selling out the American taxpayers to corporate interests. What can you expect when the Bush administration has replaced professional employees with partisan hacks dedicated to serving the interests of the corporations it's supposed to regulate or negotiate with?

American citizens should be outraged about the Bush administration's sellout to Big Oil not only of US oil leases but of foreign involvements like the war in Iraq whose chief purpose is to protect oil company interests. It seems Saddam Hussein's main crime was not using chemical weapons (which the US sold him) on his own citizens but national-izing Iraq's oil production and kicking Exxon Mobil, BP and Shell Oil out of Iraq a few decades ago. Thanks to Bush-Cheney they've regained a foothold in the Iraqi oilfields. It remains to be seen whether they will be successful in profiting from oil production there, but what we do know is that about $1 trillion has been added to US taxpayer liabilities thanks to Bush-Cheney efforts, and over 4000 Americans and hundreds of thousands of Iraqis have died there to protect oil corporate interests. This is not to mention the tens of thousands of Iraqis and Americans who have been wounded and the millions of Iraqis displaced. Now they want to fight Russia over oil in the Caucasus. It might be better to just cool it in that part of the world and tend to our knitting here at home, take a page out of Alaska's book and initiate a US Sovereign Wealth Fund whose purpose would be to lease US assets such as natural gas on favorable terms with the goal being to "provide for the welfare of future generations of US citizens."

US Needs Cabinet Level Department of Trade and Industry

There is no question that US trade policy is abysmal and manufacturing jobs are leaving the US in droves. There are massive trade deficits month after month with no end in sight. Yet the US government does nothing to reverse this situation. Other countries have cabinet level departments of trade and industry to promote domestic manufacturing and to encourage trade that is favorable to that particular nation. At a minimum this would comprise a balance of trade so that there would be no deficit or surplus. Striving for this goal would be responsible both to the nation (in this case the US) and to other nations who are trading partners. Rather than free trade on the one hand or protectionism which didn't take other nations' interests into account on the other, balanced trade should be the policy of the US. That might require seeding, nurturing and leveraging some industries and sunsetting others. While other nations pursue rational (and mainly selfish) policies, the US, in the name of free trade, leaves the door wide open for other nations to sell anything they want into our markets, flooding our markets with cheap goods, while US corporations are "free" to export jobs to other countries. Such a deal! Meanwhile, stuff that could be produced locally is transported halfway around the world by container ship.

Japan has MITI (Ministry of International Trade and Industry) whose goal is to create Japanese jobs and wealth by exporting manufactured goods around the world but mainly into the US market. An American MITI would also be in the business of creating US jobs that weren't exportable and strengthening the US industrial base. By the way MITI has now morphed into METI. Part of this cabinet level department would act like a national employment agency insuring that human capital found its way to wherever it was needed the most. This would also have the salubrious effect of diminishing unemployment. It's worth quoting at length from the Swedish national employment agency to show just how advanced other countries can be while the US stays in a state of mental retardation accompanied by extreme hubris and jingoism. Please note that this is a national or public employment program and not a private employment agency. As such it is absolutely comprehensive and thorough, not the usual hodge podge, catch as catch can, fall through the cracks system found in the US. Important functions have been socialized while the jobs themselves remain privatized. An intelligent trade-off between privatization and socialization has been realized.

Open Customer Systems in the Swedish Public Employment Service   Background   Great changes have taken place in Sweden’s Public Employment Service (AMS) over the past few years. The break-through of the new information technology has enabled us to develop a variety of on-line placement services. The main purpose of the AMS` Internet programme is to improve and modernise the infrastructure provided by the Employment Service by creating a comprehensive web- site for placement, vocational guidance and information on education and the labour market. Through the Internet development, we can gradually transform the physical infrastructure to a virtual one, creating a higher transparency on the labour-market.   The Virtual Employment Service contains several benefits:   §         Information and electronic communication is accessible 24 hours a day directly from the customers homes and/or workplaces. The distribution of placement services and labour-market information is no longer restricted by the physical locations of  employment offices. §         Employers and job-seekers may now control their own information-spreading and contact each other directly, without any intermediary. §         Providing a service of equal quality to all citizens are greatly enhanced. At the same time, the basic services can still be adapted to individual needs, through a high degree of personalisation and interactiveness. §         Since most employers and job-seekers can rely on the new self-service tools, the personnel at the employment offices can focus more on long-term unemployed and other job-seekers who need more individual guidance, as well as on companies and market-sectors that experience shortage of skilled and educated labour. Overall, the cost-effectiveness of the Public Employment Service will thus increase. §         The development of recruitment services on the Internet will also benefit the Swedish companies directly, making their recruitment processes more effective.   AMS´ Internet-site has been a tremendous success. Currently, more than 400,000 individuals use our Internet services each month. This corresponds to over ten per cent of the Swedish work-force! After only five years, the majority of AMS´  information and brokerage services are accessed through the Internet.   Current Services   In the spring of 2000, AMS´ web-site comprises the following main services:   §         Job Vacancies AMS´ web-site provides Sweden’s leading job vacancy service. In January 2000 it attracted more than 350 000 visitors, and the number  is growing month by month. Visitors can access all job vacancies reported to the Employment Service. If the employer has an e-mail address, this can be linked to a ready-made application form which the applicant can fill in and e-mail to the employer directly. Employers also have the possibility of adding their own logotype and a link to their own home page, as well as presenting the enterprise, the workplace and/or the working unit concerned in words and pictures. Job vacancy advertising is free of charge to employers. An employer can follow on-line how many times the ad has been read. Tens of thousands of job opportunities all over Sweden are posted each day, and we also offer links to private job-sites as well as to the web-sites of the public employment services in Europe and North America. §         CV [Curriculum Vitae] Database The CV Database is an on-line service for firms wishing to recruit new employees. Everyone wishing to look for a new job can register his or her  CV at the AMS´ web-site. By creating a search-profile employers can find suitable applicants without difficulty and contact them directly.   Job-seekers present their qualifications by means of an occupational nomenclature and search words. For example, there are searchable words for education, skills and knowledge of languages. The search tool is based on AMS Job Profile Matching System.  An employer wishing to run a detailed search for people with particular skills bases the search on the same Job Profiles.   An exhaustive list of qualifications is vital in order for the employer to obtain an accurate picture of the individual, and the CVs should be regularly updated. The job-seekers also  add a personal letter to potential employers, where they are able to give a more personal presentation of themselves.   For the enhancement of information quality, the CVs are subject to minimum requirements concerning content and accessibility. However, to protect the integrity of the candidates, they are able to keep their names and their current employer anonymous - this is an option very few use, though.   At the beginning of year 2000 more than 22,000 Swedish companies were registered as users of the CV Database and it contains about 50 000 accessible CV:s.   §         Recruitment assistance In the spring of 2000, a Recruitment assistance tool will be introduced as a further service to employers. They  will be able to conduct an individualised recruitment dialogue with job applicants. This application aims at helping employers to sort large amounts of applicants automatically, thereby rationalising their administrative efforts to select candidates for interviews. Hopefully, in a longer perspective, it will also give us a more realistic picture of the actual selection-criteria used on the labour-market, which in turn will help us provide even better labour-market information and make our labour-market programmes more effective.   §         The Image and Artists Bank The Image and Artists Bank is one of the world’s largest Internet galleries. This service enables artists to present their skills on-line in the form of reference pictures and qualifications. This bank is intended to be a meeting point for artists and clients. It currently holds presentations of about 1500 Swedish artists and photographers. An English version of the Image and Artist Bank is being prepared, as well as possibilities to present video art.   §         Occupations and Education In order to provide information and guidance when choosing an occupational direction and/or a suitable educational program, the AMS web-site currently holds two extensive databases;  Occupational A to Z and Educations in Sweden. The Occupational A to Z contains descriptions of 500 occupations, showing duties,  training alternatives, employment prospects and rates of pay. Educations in Sweden holds up-dated information on more than 3500 education programmes and training courses all over Sweden, as well as information on different ways of financing studies. §         Information Service AMS provides a wide array of information on our Web-site, aimed at job-seekers, employers, journalists and the general public. We provide information on: -     The service provided by the employment offices -         Labour market programmes -         Unemployment benefits -         Reports and statistics about the Swedish labour-market -         Information on how to find jobs/applicants abroad, living conditions in other countries and EU-information related to the labour-market -         Internet-based papers and magazines concerning the labour-market, as well as a press-room   §         Call-Center To create a professional customer-support for our Internet clients, AMS has established a special call-centre. Here, customers can get support for our Internet-services, as well as gain information on any subject related to the labour-market, educations or unemployment benefits.   Future Development   §         New web-site AMS is preparing a profound rebuilding and improvement of our employment services on the Internet. The "new generation" will include greatly improved functionality and interactiveness, where each and every customer – job-seekers and employers alike - may create their own, personalised web-site. Here, they can freely choose which services they want to use, and they will be able to subscribe for the information they want and have it transferred to them by the communication channel of their choice, be it e-mail, cell-phone or any other electronic channel. In this way, e.g. job-seekers will be able to get new vacancies and messages from employers delivered to them automatically, without having to search the databases each time they use our services. Our customers will also be able to subscribe for information on activities offered by their local employment office, articles about their occupational field, housing possibilities, create links to other web-sites, and much more. The administrative support will also be enhanced, so that e.g. employers may easily gather all information concerning a specific recruitment - i.e. advertisement, applications, contacts with applicants - in one place, thereby getting a better overview of the recruitment process. The new site will be built up successively during 2000.   AMS is also developing a job-seeker program where job-seekers will be able to get on-line support in their job-seeking. This program will be interactive, and through the dialogue the user will gain access to various testing tools, vocational and educational information, labour market information and job search advice.   §         System support for internal recruitment Large companies and organisations have called for an application whereby AMS Job Profiles and CV Databases can be used for their internal job markets. As a response, AMS has developed a special application for in-house use in companies, based on our occupational templates and on our external placement systems. The aim of this venture is to facilitate internal recruitment by the organisations concerned, but also to provide simple means of combining internal and external recruitment.   §         Local web-sites All local employment offices around Sweden already have their own local web-sites, within the framework of AMS general web-site. We are now developing these local web-sites, enhancing the possibilities for information-spreading and interactive dialogue between the local employment offices and their customers. For instance, job-seekers may register themselves at the employment office, apply for participation in labour-market programmes, communicate with their employment officer through e-mail or "e-visits".  This will in particular benefit job-seekers living far away from an employment office - which is not unusual in a sparsely-populated country like Sweden. §         Multimedia Features The scope of services is broadening and the level of interaction is increasing. In the near future, when high-speed transmission becomes more common, there will be better possibilities for including multimedia features as well. AMS is following these developments very closely and is preparing to produce films about occupations and sending Web-TV in the future. When this is a reality, it will also create new possibilities for performing interviews and dialogues through the Internet.   Conclusion   During the past five years AMS has created an employment service system on the Internet with a rich content and advanced functionality.  That this development clearly fills a market need is shown by the large amount of Swedes using our Internet services on a regular basis. We were also very proud to be the first winner of the "Golden Link" in 1999 - an Internet award given to the authority providing the best net-services to the Swedish citizens.   Of course, this development would not have been possible were it not for the rapid break-through of IT in Sweden during the 1990`s, with world-leading companies in the Internet and telecom sectors and a very deep Internet penetration among the general public. In turn, this situation creates almost unlimited opportunities for further extension of our Internet services in the years to come.

Contrary to the bullshit that the US population is served regarding socialism, the Swedish public employment agency acts to minimize outlays for unemployment insurance and to maximize participation in the job force or labor market thereby diminishing government expenditures. Here's a quote from their website: "the Public Employment Service is charged with ensuring that the unemployment insurance system functions as an employment conversion insurance." So the intention is to get people employed as soon as possible and to keep them off of unemployment insurance as much as possible, to ensure smooth functioning of the labor market.  

Obama is right to pursue a policy of rewarding corporations who create non-outsourceable jobs in the US with tax breaks and heavily taxing corporations who export jobs overseas. An incentive structure for corporations needs to be set up such that corporations have more of an incentive to pay taxes than to hire lobbyists. If they want to relocate overseas to escape US taxes entirely yet sell into the US market, this needs to be addressed with selective tariffs to give them a disincentive for doing so. Again the goal should be balanced trade - no trade deficit, no trade surplus - and then the US can't be accused of protectionism, just looking out for its enlightened self-interest while encouraging trade with other countries - not US corporations who have relocated overseas. A cabinet level US METI could encourage the growth of new corporations which have the attitude (after all, they're "persons" aren't they and persons can have "attitudes") of contributing to the national well-being by sharing profits not only with shareholders but with taxpayers as well. The attitude should be: if corporations don't want to pay taxes, let them leave and let new corporations take their places. The US should encourage some corporations (those who want to share) with subsidies and tax breaks and discourage others (those who don't want to share).

The problem with lobbyists running Congress needs to be addressed, the law changed if necessary. The current system is out of whack. American corporations should be subservient to the US government, not in control of it. A healthy tax policy would tax those most able to pay and not those the least able. That would mean that the most profitable corporations would be taxed the most and poor people the least. Instead we have the exact opposite today as lobbyists and accountants are paid by corporations to create and invoke policies which tax them (the corporations) the least and poor people the most. Obama's message of tax relief for the middle class while raising taxes on the wealthy is exactly the right antidote to the Republican imprecation "the Democrats will raise your taxes." Hell yes, they will if you're rich. But they'll reduce them if you're middle class. Right on, Obama! The Republicans will find ways to increase your taxes without saying so if you're poor or middle class while lowering them for the wealthy and rich corporations who can afford to be represented in Washington not by elected representatives but by paid lobbyists. The US government has become a plutocracy - government by, of and for the rich. McCain panders to the poor and middle class while representing the rich. Most, if not all, of his advisers are lobbyists.

The educational system needs to be reformed and students guided, and trained and informed in such a way that their talents will actually be used in the job market. In other words there will be a job waiting for them when they graduate instead of graduating into an empty job market or prepared for a job which has been or will soon be outsourced. Not everyone wants to go to college and become a computer scientist. So-called blue collar jobs are a much more natural fit for many workers because they require hands on skills and are non-sedentary and, therefore, more healthful in the long run. It's ridiculous that US citizens have been brainwashed to the point that people think they are failures or second class citizens unless they graduate from college. Coming out of college with $100,000. in debt from student loans is a ridiculous situation compared to having started a successful business in lieu of college. College mainly trains people to be employees. So what's the sense of going into debt to prepare yourself to be an employee and, therefore, subservient to your employer when you could be self-employed and, therefore, "free" in a society which supposedly values freedom? People are so brainwashed. I'd rather have $100,000. in the bank, no college degree and a four to eight year start on getting a business off the ground than be $100,000. in student loan debt and have a college degree which in many cases is a worthless piece of paper.

Finally, the military-industrial complex (the only source of good middle class jobs at present in addition to the health care industry which badly needs reform and job reduction) needs to be defunded with the funds being shifted to infrastructure rebuilding and seeding and leveraging new productive industries. The government needs to seed, nurture and leverage new industries, not totally own them. Industrial employees should be private employees not government employees. The purpose of government should be guidance and oversight - not ownership. Leave that to the private marketplace. What the US needs is not tinkering with its economy but a whole restructuring of the economy. The fundamentals of the economy are not strong. It needs a total make-over.

Lower GDP Can Actually Be Good for America

Economists all agree that with regard to GDP (Gross Domestic Product) which is a measure of the cost of all goods and services sold during a given time period (usually a calendar year), growth insures a robust economy, and, therefore, is a good thing. In fact two quarters of negative growth define a recession, and that's bad. However, not all GDP growth is good, and negative GDP growth can actually be good insofar as quality of life is concerned. Here's an example. The US spends more on health care than any other country in the world and yet 47 million people are uninsured and other countries provide better health care for less cost. Therefore, if the US adopted a health care system similar to another country that's providing better health care for a lesser cost, the quality of life for all Americans would be increased, but the GDP would be decreased. So a bad health care system that costs more leads to a higher GDP and a good health care system that costs less leads to a lower GDP.

Similar examples abound. If we all grew and ate our own food, that component of GDP due to the sale of food products produced domestically would be decreased to zero thus decreasing GDP. However, GDP would actually increase due to that component of food sales which are imported. If we all walked, rode bicycles or used public transportation, that component of GDP due to automobile and gas sales as well as auto maintenance would be reduced to zero, but the environment would be better off due to less carbon emissions. However that component of GDP due to imported oil would actually go up. If we all provided our own energy with solar panels on our rooftops, we'd all be better off because it would mean more money in our pockets and the environment would be better off but it would decrease GDP. If nobody gambled, we'd all be better off, but it would eliminnate the casino industry so that component of GDP would be zero. We could go on and on about ways to decrease GDP that would actually increase the quality of life. If cigarettes and smoking were totally eliminated, it would decrease GDP but increase quality of life. Ditto for fast food emporiums - think MacDonald's,
Kentucky Fried Chicken, Wendy's, Carl's Jr. We would be better off without the gratuitous calories and sugar provided by soft drinks but if Pepsi and Coca Cola were eliminated, it would decrease GDP. In fact the whole world would be better off without the export of American cigarrettes, fast foods and soft drinks since the world's population has gone from undernourished to obese in one generation due to these products primarily but American GDP due to exports would decrease.

So why are economists so enamored with GDP? Whether it goes up or down should not be the main consideration. The main consideration should be that increases in GDP actually improve the quality of life. Those are good increases in GDP. Increases in GDP due to the sale of products which aren't good for individuals or for the environment are bad increases in GDP. Conversely, decreases in GDP due to a reduction in sales of products and services that are actually good for us should cause concern among ecconomists, but not decreases in GDP due to a decrease in the sale of products and services that are actually bad for us or bad for the environment. Other measures of human well-being have been proposed and are in fact being used today. For instance, the Human Development Index which also takes into account life expectancy, literacy and educational attainment and Gross National Happiness which takes into account subjective as well as objective factors are but two alternative measures:

Economic Wellness: Indicated via direct survey and statistical measurement of economic metrics such as consumer debt, average income to consumer price index ratio and income distribution Environmental Wellness: Indicated via direct survey and statistical measurement of environmental metrics such as pollution, noise and traffic Physical Wellness: Indicated via statistical measurement of physical health metrics such as severe illnesses Mental Wellness: Indicated via direct survey and statistical measurement of mental health metrics such as usage of antidepressants and rise or decline of psychotherapy patients Workplace Wellness: Indicated via direct survey and statistical measurement of labor metrics such as jobless claims, job change, workplace complaints and lawsuits Social Wellness: Indicated via direct survey and statistical measurement of social metrics such as discrimination, safety, divorce rates, complaints of domestic conflicts and family lawsuits, public lawsuits, crime rates Political Wellness: Indicated via direct survey and statistical measurement of political metrics such as the quality of local democracy, individual freedom, and foreign conflicts.

If I stop eating fast food and thereby lose weight and decrease my blood pressure, I've increased the quality of my life but decreased the GDP. If I put a solar panel on my roof and buy a plug-in electric car, I will decrease my expenditures on gas not to mention auto maintenance which improves my life because I will have more money in my pocket and, therefore, will not have to work as much which improves the quality of my life but decreases GDP. If I save more and consume less, I will decrease GDP but be better off because I will be in a stronger financial position and better able to weather financial emergencies. 100 years ago the GDP was less at least in part because transportation consisted of railways and horses and buggies, both of which are more efficient in terms of energy consumption than automobiles. If people grew their own hay, then energy for transportaion by horse and buggy cost next to nothing. Transportation by rail has always been cheaper because it is public and not individual transportaion. All the ways people used to be self-sufficient but are not today contributed to a lower GDP, and all the ways that people are dependent on the economic system today contribute to a higher GDP, but has the quality of life necessarily been improved? I think not. In fact a reduction of GDP due to switching from oil based energy to solar may reduce GDP due to a reduction (maybe even elimination?) of the gas based automobile industry but would actually increase GDP due to the reduction of foreign oil imports currently around $700 billion a year.

Creating American jobs by means of government subsidation of the solar and windmill industries and infrastructure rebuilding will increase GDP. Reduction of military-industrial complex spending will reduce GDP, but government subsidation and encouragement of productive industries (industries that don't produce weapons of destruction) will eventually add more to GDP because its products can be used more than once. Of course, it could be argued that war increases GDP in the countries it affects because of all the rebuilding activity that takes place after buildings and infrastructure are destroyed. Likewise, destruction from hurricanes, tornadoes, floods and earthquakes increases GDP because of all the building activity that takes place after these environmental catastrophes have taken place. To the extent that disasters can be prevented, the lowering of GDP would be appreciated by those affected not connected with the building industry.

In short self-sufficiency, environmental stewardship and elimination of industries that actually cause harm might lower GDP but in the long run the human race would be better off.