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I'm Feeling Grumpy!

by rdf Tue Jul 15th, 2008 at 04:50:51 PM EST

Perhaps it's the hot weather, but I think the meltdown in the financial markets has something to do with it. I've been involved long enough that I've lived through several of these ups and downs before, but this time seems different.

In no particular order, my complaints:


  1. The standard of living of too many people is declining at once. Those at the bottom are getting squeezed by rising food and fuel costs, while those in much of the developed world are seeing the social contract ripped up.

  2. Financial institutions are failing and national governments have no idea what to do about this. The world has seen this before, and the results are never pretty: Germany in 1923, and the succession of IMF induced crises in Latin America and Asia in the 1980's and 1990's.

  3. Falling stock markets, not just as with the dot-com bubble, but with blue chip companies like GM and Citigroup. The last time this happened (1929) even JP Morgan couldn't stem the tide (although his firm is doing quite well this time mopping up the spills).

  4. From the previous point it follows that many people who have been forced, or persuaded, to invest for retirement are now seeing much of their wealth go up in smoke. Nevertheless McCain and his cronies are mounting a new attack on Social Security. This week Pete Peterson has launched a billion dollar misinformation campaign including a movie claiming that Social Security is going broke.

  5. Not satisfied with rehashing the "evils" of communal, national, insurance and social service policies, the right is now pushing the theme that it was the incompetent implementation by the GOP that got us into this state, and not their utopian (or is it greedy) beliefs in free markets, unconstrained capitalism and wars of opportunism.

  6. Even with the present meltdown, the "left" is showing no signs of understanding what sorts of steps need to be taken to avert an even bigger disaster. In the US Obama and his fellow Dems are timid, centrist, and unable to envision bold steps. In the EU the situation seems even worse in that the better social services make people more complacent and less willing to address issues. The EU itself has become like spilled molasses, walking through it takes place one slow step at a time. Meanwhile Brown, Sarkozy, and their fellow mediocrities blunder on with trivia. The other parties aren't showing any leadership either.

  7. The oil "crisis" has removed whatever traces of sanity remain. Stupid and ineffectual ideas like drilling off the coast of the US are being proposed and time is being wasted on debating them, when the development of a real energy policy goes nowhere.

Now maybe I spend to much time following the chattering classes and the real people are dealing with the important issues of the day: the US baseball season, and the upcoming Olympics. Maybe everything is really fine as long as McDonald's still offers the "dollar meal" and Bud is still brewed (even if it's owned by Belgians).

I don't want to end on a negative note, so here are my suggestions:

  1. An immediate creation of national work programs similar to the WPA and CCC in the US during the depression. Those joining get a decent wage and are put to work on those projects which private industry can't make a killing in. This means infrastructure repair, home health and child care services, educational assistance and tutoring for those in need, etc.

  2. In the US create a national health care system which covers everyone not presently covered elsewhere or those who lose their coverage when they become unemployed. Extend unemployment insurance.

  3. Freeze all mortgage foreclosures and force lenders to treat the loans as "non performing". Homeowners would be required to maintain the property and pay local taxes while negotiating a new repayment plan. Holders of the mortgage backed securities would see their income "deferred". This is preferable to seeing their holdings written down to zero.

  4. Impose immediate fuel rationing in developed countries. Some system of tradable ration coupons (or their electronic equivalent) with a cap on the amount issued which declines each year. Couple this with a gas guzzler car purchase tax based upon how low the fuel economy is compared to some standard. Offer interest free loans to any car company that agrees to switch to high efficiency vehicles under an accelerated timetable. The loans would cover the cost of conversion. The new smaller vehicles would not, in general, be cheaper than the monsters they replace, this excessive price (if any) is what would pay back the loans. Offer incentives to people willing to have their guzzlers destroyed.

  5. Institute massive public transit and freight systems wherever they are inadequate. This effort would extend to ocean vessels as well which would have to be refitted or replaced to be cleaner and more efficient. Sail could be considered with appropriate incentives. Set tariffs based upon environmental impact. There should be no reason why Australian lamb in the US costs less than local chicken.

  6. Cut military spending, cancel existing contracts for useless hardware, withdraw from overseas bases and redirect the personnel involved into the projects listed in point one. Firms in the military sector should either be nationalized or be directed to use their technical expertise for productive purposes. Someone has to build and design all the needed mass transit.

  7. Eliminate all tax havens, secret bank accounts, holding of profits outside of the parent country and fake incorporation schemes. If Bermuda and Switzerland go broke they will just have to increase their tourism appeal to compensate. Corporate tax loopholes should be closed, or alternatively, eliminated and replaced by a universal VAT. Similarly taxes should be rationalized on individuals. There is no reason for a distinction between earned and unearned income - they both buy the same goodies. Intergenerational wealth accumulation should be prevented by the tax increases and a robust estate tax scheme.

  8. The evil rulers around the world (this includes the developed countries - they know who they are) should be given an offer they can't "refuse". Leave now with a modest settlement or go to jail. The international criminal court shouldn't be restricted to those with hard to pronounce names. The concept that the world stands by while a single madman causes untold grief was discredited when Stalin, Hitler and Mao were doing it. That it is still going on after the world has lived through that is beyond belief. I'm not talking about the latest conservative wet dreams of a "concert of democracies" meant as a cover for neo-colonialism. Perhaps we need a new form of international democracy. If enough people in enough countries have had enough of a Bush or Mugabe then they have to go, not matter how much they have intimidated or fooled their local citizens. After all the rest of the world is feeling the consequences of their actions, so why don't they get a vote?

Is any of this going to happen? Not likely. Could any of this happen? Change has happened before, inspired by idealism. The most powerful phrase of the past 300 years has been "all men are created equal". They just need to turn off the TV and get to work remaking the world.

Display:
A rant with a detailed agenda.

A great rant. Very encouraging to see it listed so simply. Thanks.

You can't be me, I'm taken

by Sven Triloqvist on Tue Jul 15th, 2008 at 05:15:48 PM EST
I read the headline and wondered if the other six dwarves were jealous. ;-)

excelent rant.

Any idiot can face a crisis - it's day to day living that wears you out.

by ceebs (ceebs (at) eurotrib (dot) com) on Tue Jul 15th, 2008 at 05:44:14 PM EST
Go ahead and feel Grumpy.  He enjoys that kind of shit.  But keep your paws off of Dopey and Sneezy, and I dibs Snow White.

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Tue Jul 15th, 2008 at 06:58:18 PM EST
grumpy was good!

now please write an EU constitution. your prescription looks totally sensible to me, can i vote somewhere?

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Tue Jul 15th, 2008 at 11:03:43 PM EST
How does this make you feel? <running-for-cover>

by das monde on Tue Jul 15th, 2008 at 11:50:18 PM EST

Boom time for the global bourgeoisie

By Jim O'Neill, chief economist at Goldman Sachs

In the midst of the current widespread gloom and doom in the west, it is important not to lose sight of the true structural themes shaping our era.

Linked to the current mood, commentators often depict an embattled and shrinking middle class, with sharply rising financial inequality. However, globally, this is simply not true. One of the most startlingly positive phenomena for many generations continues to unfold around the world. We are in the middle of an explosion of the world's middle class.

As two of my colleagues, Dominic Wilson and Raluca Dragusanu, showed in a paper Goldman Sachs published last week (The Expanding Middle: The Exploding World Middle Class and Falling Global Inequality), about 70m people a year globally are entering this wealth group, as defined by those on incomes of between $6,000 and $30,000 (€3,800-€19,000, £3,900-£15,000), in purchasing power parity terms.

The phenomenon may continue for the next 20 years, with this global middle accelerating to 90m a year by 2030. If this happens, an astonishing 2bn people will have joined the ranks of the middle class. This demonstrates that, contrary to widespread opinion, global inequality is declining significantly, not increasing.

Behind this powerful development is, of course, the unfolding story of the Bric, as we dubbed Brazil, Russia, India and China back in 2001. In addition to the gloom surrounding cyclical challenges in the US and other developed economies, it is currently becoming fashionable to believe that the Bric story is about to be tipped over the edge by rising inflation, scarcity of resources and their own backlash against globalisation. Some slowing of rapid growth in these economies is bound to happen. Indeed, the sustainability of it might be helped by some softening.

But I believe this negative mood is overstated.



In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Wed Jul 16th, 2008 at 11:45:21 AM EST
He's right, of course. Goldman Sachs will have a bright future advising these newly wealthy people how to invest. I'd suggest GM. If you invested 50 years ago your holding would now be worth about half of what you started with (ignoring dividends).

Explain to me again exactly how capitalism benefits everyone?

By the way did anyone ever mention "oil" to him?

Policies not Politics
---- Daily Landscape

by rdf (robert.feinman@gmail.com) on Wed Jul 16th, 2008 at 12:01:07 PM EST
[ Parent ]

By the way did anyone ever mention "oil" to him?

This is all the more ironic that it is one of his colleagues who has made the most spectacular predictions about oil prices going up (with talk about an "oil spike" to $105 a year or two ago, and more recently talk about $200 oil), and that Goldmans is generally seen with suspicion as one of those speculators pushing oil prices up.

But oil scarcity not beng part of the "narrative", they don't feel the need to fit the two together.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Wed Jul 16th, 2008 at 12:32:57 PM EST
[ Parent ]
A guy representing finance execs who at the top have hundreds of millions squared away, and at the bottom are finally squaring away their first $10M, dares to comment on people who finally are earning $6K to $30K?

What exactly am i missing here?

"Life shrinks or expands in proportion to one's courage." - Ana´s Nin

by Crazy Horse on Wed Jul 16th, 2008 at 04:21:03 PM EST
[ Parent ]
Jerome a Paris:
and that Goldmans is generally seen with suspicion as one of those speculators pushing oil prices up

Not Goldman, I think, but the captive funds they operate and which their traders have as a backstop eg "Date Rape" and all that.

But their fighting talk re oil prices, and the current bubble/ spike, keeps the money flowing in to the funds all right.

As for O'Neill, he seems incapable of writing anything without dropping a "BRIC" reference, because of course, who was it who invented the acronym....

"The future is already here -- it's just not very evenly distributed" William Gibson

by ChrisCook (cojockathotmaildotcom) on Wed Jul 16th, 2008 at 07:38:30 PM EST
[ Parent ]
... is people entering from the bottom in low-income nations, but its also bolstered by people entering from above in high-income nations.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Wed Jul 16th, 2008 at 12:50:31 PM EST
[ Parent ]
And he's using dollars as a reference point. While PPP$ might not be as affected by the dollar crash as exchange rate $, I'd guess that even PPP$ aren't exactly what they used to be...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jul 16th, 2008 at 02:07:41 PM EST
[ Parent ]
If a US$ doesn't buy the same bundle of goods and services as it used to, and another currency, say the &euro, better retains its ability to buy a bundle of goods and services, the € will rise in the €/US$-PPP.

The problem is rather the time lag ... market rates are available on an ongoing basis, and trade-weighted exchanged rates at reasonably high frequency, even if not daily ... but it'll be sometime in 2009 that we have the estimates for 2008 PPP exchange rates.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Jul 16th, 2008 at 04:14:14 PM EST
[ Parent ]
Yes, but that's precisely what I mean. If the dollar drops, everything else goes up in both exchange rate terms and PPP terms. Which means that all other things being equal, 1 PPP$ doesn't buy as much today as it did ten years ago, right? So measuring "middle class" by PPP$ rather than by a basket of goods makes more people richer in your statistics without making them able to buy more stuff, right?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jul 16th, 2008 at 04:57:30 PM EST
[ Parent ]
But the typical GDP_PPP numbers are real GDP, which is to say corrected for inflation.

Indeed, there's no reason not to correct for inflation, since all the problems are exactly the same problem as estimating purchasing power parity ... you don't take any substantial new problems on board moving from current dollar PPP to base year dollar PPP.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Jul 16th, 2008 at 05:33:39 PM EST
[ Parent ]
OK, that makes sense. Assuming that they use sensible numbers for inflation, of course...

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jul 16th, 2008 at 05:39:54 PM EST
[ Parent ]
... goods for the inflation index ... but then, the PPP is screwed up for exactly the same reason, since its a cost-of-a-bundle-of-goods index across space instead of across time.


I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Wed Jul 16th, 2008 at 07:13:14 PM EST
[ Parent ]
... has been doing substantial work on the details of a Job Guarantee (in addition to their macro theory work on the benefits of a Job Guarantee as an inflation anchor).

CoFFEE

Three working papers from 2005 to this year ... links are to abstract pages from which the full PDF file can be downloaded.

CoFFEE working paper on the abandonment of full employment policy

Buffer stocks and monetary policy - the role of the central bank

The Job Guarantee feasibility study: preliminary findings

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.

by BruceMcF (agila61 at netscape dot net) on Wed Jul 16th, 2008 at 12:21:32 PM EST
Hell, just do #s 6 & 7 and you will have the game well in hand.  The money to solve the problems will flow forth in great mounds.  Of course these go right at the heart of the problem and are protected with all the ferocity the owning class can muster.

Like Frank Zappa said, its the "crux of the biscuit".

"I said, 'Wait a minute, Chester, You know I'm a peaceful man...'" Robbie Robertson

by NearlyNormal on Wed Jul 16th, 2008 at 07:34:52 PM EST
But Zappa was a libertarian who felt all taxation was tantamount to robbery. He might not have liked the military but his economic formulae are about as penetrating as you'd expect from a Norquister.

keep to the Fen Causeway
by Helen (lareinagal at yahoo dot co dot uk) on Thu Jul 17th, 2008 at 11:24:43 AM EST
[ Parent ]
You're feeling grumpy, crikey...I thought I'd cornered the market on that.

However this suggests that you expect something better from some groups;-

Even with the present meltdown, the "left" is showing no signs of understanding what sorts of steps need to be taken to avert an even bigger disaster. In the US Obama and his fellow Dems are timid, centrist, and unable to envision bold steps.

 But these groups are all the elites, they all went to the same schools, they all went to the same universities, they all got rich out of the system before they became politicians. So they don't see anything broken about the system; after all, it worked for them.

In the EU the situation seems even worse in that the better social services make people more complacent and less willing to address issues. The EU itself has become like spilled molasses, walking through it takes place one slow step at a time. Meanwhile Brown, Sarkozy, and their fellow mediocrities blunder on with trivia. The other parties aren't showing any leadership either.

Brown, Sarko are all dyed-in-the-wool products of the Cold War Atlanticism that has disfigured european politics for decades. They are true believers in America and the American mythology that anything is possible so long as you have a big enough military and so cannot imagine any other way of governing than by sacrificing their countries' national interests to America's. It worked before, so what's the problem ?

keep to the Fen Causeway

by Helen (lareinagal at yahoo dot co dot uk) on Thu Jul 17th, 2008 at 11:31:31 AM EST


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