January 26, 2015 § 1 Comment
This essay is my reaction to Thomas Piketty’s book, Capital in the Twenty-First Century. Based on a massive database composed of comparative values of labor income, return on capital income and value of capital, Piketty argues that capitalist economic systems trend toward income and wealth inequality.
He warns that, unless this trend is countered by fiscal redistribution of capital values, the trend will, over time, result in intolerable degrees of inequality. His thesis is generally based on data that shows that the rate of return on capital, which he designates “r” exceeds the growth rate of total income or output generated by the economy, which he designates “g”. His equation is thus r>g.
Mortality and Economics
We have a unique ability. We perceive our own mortality. As medical science progresses, it becomes increasingly capable of predicting our life expectancy, based on our life styles, habits and infirmities. This information, however, is individually specific and typically concerns relatively short time periods.
Mortality tables, instead, are broadly based on aggregate groups based on age, sex and national location. They analyze longer time periods.
Until recently, we have not had a mortality table to measure the life span of our capitalist economic system. Thanks to Thomas Piketty, we now have one.
He has compiled, charted and analyzed an unprecedented database of income and wealth measurements in history, gleaned from records kept by industrial capitalist countries including the United States, European nations and Japan. His data covers the period of time from 1800 to 2012. Based on that data, he does not furnish us a date certain when capitalism will implode, but he does offer a road map of why it will implode, if several very significant and unprecedented measures are not utilized.
This is an issue that has been the subject of pivotal scholarship since 1776, when Adam Smith’s Wealth of Nations was published. Smith concluded that capitalism was a perpetual motion machine, guided by “an unseen hand”. He thought it was immortal.
In 1936, John Maynard Keynes published The General Theory of Employment, Interest and Money. His book was like Dr. Spock’s 1946 Baby and Child Care. Keynes diagnosed chronic problems of capitalism and prescribed specific remedies that would avoid their harmful results. If his directions were followed, the health of capitalism could be maintained, just as Dr. Spock explained how to guide parents’ management of their children’s way through childhood.
Piketty differs from Smith and Keynes in two ways: He differs from Smith because Smith was not analyzing reality. He was reasoning a priori, based on unrealistic assumptions about human motivation and the aggregate effects of that motivation in an unrealistically assumed marketplace. Piketty, with meticulous discipline, bases his analysis on actual data, acknowledging, step by step, its limits and approximations.
Piketty’s analysis differs from Keynes because his horizons are measured in decades and centuries, while Keynes’ are designed for solutions to problems that emerge and require solutions in months, sometimes days.
Again, Keynes’ remedies are like Dr. Spock’s short term advice for childhood’s time period. Piketty has constructed mortality tables for use during indeterminate time periods. [I have not mentioned Marx, but Marx, like Adam Smith, based his prediction of worldwide revolution on assumptions about human motivation that have, so far, proved to be inaccurate.]
A Personal Note
Beginning in February, 2014, I posted four or five essays on this blog about Piketty’s book. [See Dr. Piketty’s Remedy for Capitalism’s Potentially Terminal Illness and several subsequent posts] When I wrote those essays I thought the daunting length (over 700 pages) of his book would prevent me from ever reading it. I also feared my meager knowledge of math would put his analysis beyond my intellectual reach.
Since then two things have happened. I developed a need for a diversion from worrying about my wife’s health [She has been in hospice care for the past several months.] So, I bought a Kindle, downloaded the book and began reading.
And, as I delved into the professor’s writing, I discovered that he shared my aversion to complex mathematics, not for lack of ability but because he believes mathematical models have limited utility as tools to explain and analyze macroeconomic phenomena. He argues that, more often than not, such models are either misleading or irrelevant because they are not firmly rooted in actual data.
He writes, “For far too long economists have sought to define themselves in terms of their supposedly scientific methods. In fact, those methods rely on an immoderate use of mathematical models, which are frequently no more than an excuse for occupying the terrain and masking the vacuity of the content.”
And again: “Economists are all too often preoccupied with petty mathematical problems of interest only to themselves. This obsession with mathematics is an easy way of acquiring the appearance of scientificity without having to answer the far more complex questions posed by the world we live in.”
The Piketty Experience
Reading his book is like taking two or three college courses from the same professor, whose syllabus might be entitled “Everything You Ever Wanted to Know About Everything.” He cites Honore de Balzac and Jane Austin more often than economists. He refers to the TV series Madmen. He presents his subject in short essays, using conversational language, punctuated with occasional deadpan humor that surprises you.
He is often at the blackboard, illustrating his lecture with yet another graph. He weaves his story back and forth from the French Revolution of 1789, to the two world wars and the Great Depression between 1910 and 1950; from the “Gilded Age” to the Great Recession of 2008. He transitions easily from French politics, to the policies of Margaret Thatcher in Britain, to those of Ronald Reagan in the U.S..
Piketty’s book reminds me of Maurice Ravel’s Bolero. [If you want to hear what I am referring to, here is a link: Bolero ][A comment appended to this performance declares that the worst job in a symphony orchestra is drummer during Bolero.] The professor discusses and analyzes each of the three parts of his argument from every angle, citing several, diverse sources of information about them, but he ties each digression tightly to the relevant elements in his argument.
His message is this: The return on capital exceeds the growth of the “flow of income” generated by a capitalist economy. The result is progressively increasing inequality of wealth favoring a dwindling number of very rich people and an expanding number consisting of everyone else.
This happens regardless of periodic cyclical gains and losses. It happens despite government efforts to counter the dislocations caused by market collapses or periodic “bubbles” resulting from “irrational exuberance”. The pace of progression may vary and may at times pause but, over time, the direction trends toward inequality.
The reason is twofold: Those with large stocks of capital cannot consume all the income generated by their holdings, so they save portions of their income and invest those savings in buying more capital. And, when they die, they leave their winnings to their heirs, who, thus, begin their lives with an unearned stake which they can invest in still more capital. So, each generation accelerates the pace and extent of inequality.
Piketty identifies the Great Depression, bracketed by two world wars, as a unique exception to this process. Those events destroyed so much capital that the trend toward inequality was temporarily interrupted. His data confirm, however, that the capitalists have recovered and the extent of inequality in western industrial capitalist nations is now equal to or greater than the days of the Gilden Age.
The bottom line is: Capitalism is like casino gambling: If you play long enough you will lose because the house skims off a little of every dollar risked so the odds and the math will get you. You may escape with some luck and careful decisions, but the crucial decision is to quit while you’re ahead. In this regard, capitalism is a crueler game than the casino’s: You can only escape from capitalism by dying. You could join Edward Snowden in Russia, but that doesn’t look like an improvement.
If you want to review the so-called “laws of capitalism” that Piketty uses to explain his argument, you can refer to the discussion of them in my “Dr. Piketty” post cited above. I discussed them and cited an excellent discussion of them in a review of Piketty’s book by Branko Milanovik.
Piketty’s Paradigm Shift
Until I encountered Piketty, I identified the basic difference between liberals and conservatives, in political terms, as follows: Liberals believe that government should redistribute income obtained through progressive income taxes to finance expenditures beneficial to the working class. Conservatives believe that progressive taxation discourages business owners from striving to expand their businesses, invest in innovative improvements in technology, and create the need for employees: Liberals deride this “trickle-down theory because it assumes that job creation is investment-driven. Liberals believe job creation is consumer-demand driven and is stimulated by distributing money to lower income workers, who will spend it and, thus create consumer demand.
Piketty has not dissuaded me from these beliefs, but he has convinced me that progressive taxation is insufficient to solve the problem of wealth inequality. Instead of proposing higher taxes on the wealthy, Piketty proposes to tax capital, not income. At first, I didn’t appreciate how fundamentally different this idea is. If it were implemented, he has convinced me that it would forever change the nature of capitalism.
The free access to investment and encouragement of technological innovation would remain. But the deception and anti-competition feature of capitalism would be severely thwarted.
Why? Because, in order to implement the taxation of capital, it would be necessary for the location and existence of capital to become accessible to the taxing authority. Stringent sanctions would become necessary to prevent the owners of capital from hiding both their property and their ownership. International agencies, modeled after the International Monetary Fund and other multinational agencies would be employed to deny access to the means of cross-border financing and transfers of funds to any money-storage facility that refused access and disclosure to the capital-taxing authority.
Piketty recognized that taxation of capital would have to be administered multi-nationally. He proposed a kind of “pilot program” to consist of the Eurozone. Eventually, he proposed that the taxation be administered on a world-wide basis. He recognized that this is not feasible now and that much political and educational work must precede such a radical change in the way business is taxed and conducted.
Piketty is like the Surgeon General, warning about cigarettes. When the first timid warning was issued, nothing much changed. Smoking was a worldwide habit and business. It took decades of litigation, research and thousands of warnings and legislative battles before smoking started to decline.
Piketty has notified us that, unless we take steps to redistribute capitalistic wealth, most of us, or our grand-children or their grand-children will be working for, and at the sufferance of a very small group of very greedy people. And, by that time, the media sources will have convinced everyone that such a system is preferable to all others.
This will not happen if the transparency contemplated by Piketty becomes a source of growing political demand. The curious thing is that we already have a working model of how it works. People typically don’t hide their ownership of real property because, if they are not the recorded owners, they cannot use it for collateral to borrow money and, if they don’t pay taxes on it and, thus identify themselves as the owners, the state or someone else may dispossess them.
This system developed here in the U.S. beginning with the Homestead Act of 1862. It tolled the end of the “open range” that has been featured in countless western novels and movies. The history of the development of this system is related in a book, The Mystery of Capital, by Hernando de Soto Polar. I described my reaction to the book in an essay posted a few years ago. [See Keeping Up With the Jones’s]
The point is that a system requiring ownership disclosure can be created. There is no reason why forms of capital other than land could not be subjected to disclosure. Tax avoiders would not be so eager to transfer their capital to the Cayman Islands if Cayman banks were required to disclose the ownership of it to a multinational taxing authority. The Piketty tax would be levied on the capital, not on its owner. But the motivation to hide ownership would be attenuated if stealth could not prevent tax liability.
Perhaps corporate lawyers would transition from being wealth-hiders to property valuation experts.
I don’t want to be too naive about this. Thomas Kuhn’s The Structure of Scientific Revolutions describes how reluctantly investors wedded to status quo techniques and “conventional wisdom” yield to new information. But, they do finally yield, if confronted with undeniable evidence.
Some “ah-ha” Piketty Moments
I know this essay reads like it was written by a college sophomore who just read Walden or The Theory of the Leisure Class. As I read Piketty’s book, I did have an echo of that kind of excitement, long since forgotten. Brain re-wiring is no longer part of my usual intake of information.
1. Piketty has not made me change my moral judgments, but he has given me new ways to see some features of my world. For example, he explains why he prefers taxation to deficit spending by government: Deficit spending is paying wealthy investors for money to finance public needs, while taxation gets their money without paying for it. Public borrowing is justifiable only when there is not enough time for the taxation process to occur.
2. Inheritance of wealth is a major contributor of wealth inequality. It is affected by the life expectancy of the population So, when medical research extends life expectancy, it slows the trend toward wealth inequality.
3. 19th Century fiction featured inherited wealth as a major determinant of a wealthy life style. 20th and 21st Century fiction does not. The reason is that land is no longer the main component of wealth. Corporate wealth now dominates.
4. Piketty writes that we are becoming a culture dominated by managers, not wealthy owners of land who no longer need to work. He also observes that we now have an elite group of managers who can fix their own salaries, so the size of the salaries is not dependent on the value of the managers’ performance. At the very top of the economic scale, meritocracy no longer prevails.
5. One reason the return rate of capital exceeds the growth rate of the economy: As the size of capital owned by an individual increases, the ability to hire expert financial management dramatically increases. So, if a person, or a foundation or private fund group owns a billion dollars worth of capital, he or it can easily afford to hire a large team of economic advisers. A person owning a few million dollars worth of capital cannot afford to hire that kind of super-managers with that kind of diverse talent. And so on, until, as Piketty puts it, the guy with a few hundred thousand dollars to manage has to depend on a CPA and “his brother-in-law”, who furnishes market tips.
The top tier of owners have managers who can find investment opportunities not publicly traded or known to less knowledgeable and less “connected” sources of information. Piketty cites data to show that the differences between the returns of different sizes of capital ownership are very significant.
I will be returning to the information in this book. It has already provoked a whole new array of comments, books about it, online interviews and press articles. I have not yet heard it discussed by politicians or featured on Sunday talk shows. I may have missed it, because I have limited my weekend commentary to Fareed Zakaria and Steve Kornacki.
My conclusion is: Piketty has convinced me that the problem he poses is real. I don’t know how bad it will have to become before it becomes intolerable and his solution becomes feasible.
I am sure of one thing: Marx’s vision of capitalism’s demise because of the collective outrage of the world’s workers was illusory because it was based on the motives and emotions of its victims. Piketty’s prediction is based on the internal mechanics of the system. The implosion will occur, not because of its victims, but because of flaws in the system unless Piketty’s tuneup saves it.
December 24, 2014 § Leave a comment
Several Weeks ago I posted an essay entitled “How To Incite Violence”. It was a response to the decision of Benjamin Netanyahu to demolish the homes of the Palestinians who murdered people at a mosque. Some of the reaction to the murders of two New York police officers reminds me of that essay.
Solidarity Is Not Served By a Declaration of War
Pat lynch, president of a NY police union, erupted after the murders with a disgusting accusation that NY Mayor de Blasio was complicit with the murderer because the Mayor has defended the right of New Yorkers to protest the police killing of unarmed black men and, as the husband in a mixed marriage, has described how he felt obligated to warn his son to regard policemen with extreme caution and some fear.
Lynch, speaking soon after the murders, used a televised interview to spew the following accusation: “[There is] blood on many hands tonight” [including] “those that incited violence on the street under the guise of protest” [and starting with] “the office of the mayor.”
It is hard to imagine a more irresponsible and ignorant way for a union leader to behave. While leaders in the black community, surviving family members of the young men who were killed, the Attorney General and the President of the United States, have denounced violence, but vowed to protect the rights of the protesters, Lynch chose to demagogue the issue by blaming the Mayor and the protesters for the violence of a mentally deranged assassin.
Any fool can see that the most dangerous outcome of the events of the past few weeks is a complete rupture of trust and cooperation between the black communities of America and the police forces upon whom they depend for protection. That result leads to a perception of the police as an enemy occupying paramilitary force. The most likely reaction to that perception is the development of guerrilla tactics by the occupied against the occupiers.
That result is not necessary. No one believes that all, or even most policemen are murderous bigots. But, when the elected leader of the police declares war on those who are seeking relief from what they see as police abuse by some policemen, as well as on the public figures who acknowledge the reasonableness of their quest, it promotes the idea that, in fact, all the police are the enemy.
Guerrilla wars are brutal, bloody and hard to end or win. Ask the French about Algiers. Ask the veterans of the Vietnam war. Ask the British about the IRA. We don’t want a guerrilla war against the police in the ghettos of America. That’s why Pat Lynch is an idiot.
The Real Problem
There is similarity between the reaction of Pat Lynch to the protesters and the reaction of Netanyahu to Palestinian murderers. Both willfully ignore the real sources of incitement of hostility toward those they represent. In both cases, the hostility is born of months and years of daily debasement and harassment, occasionally punctuated with episodes of lethal violence. In Gaza and the West Bank, it consists of annoying check points, travel restrictions, unjustified armed confrontations, and debilitating interference with normal commerce. In the minority communities of America, it consists of “stop and frisk” policies, unjustified automobile stops by armed police, so called “driving while black” arrests and detention, needless casual violence during these episodes involving having one’s head slammed into the hood of a car and being ordered, at gun point, to prostrate oneself on the ground and being strangled to death if that order is resisted.
Reactions to these practices become, over time, generalized cultural smouldering anger, transmitted from one generation to the next. They incite hostility, anger and distrust toward those responsible for them. When this morphs into organized protests, it is stupid to conclude that the protests incited the hostility, anger and distrust.
This is the kind of absurdity that characterized the claims that “outside agitators” were responsible for the civil rights protests in the South in the 60’s. Pat Lynch has joined the pantheon of crackers who whined to news interviewers that “These outsiders are just stirring up our nigras and causing trouble.”
One reason for this rant is an excellent op/ed piece in today’s Haaretz newspaper. This professional writer expresses these ideas better than I can.
Here is a link: Haaretz
December 20, 2014 § Leave a comment
I recently finished reading “Debtor’s Prison”, the latest of several books written by Robert Kuttner, editor of American Prospect magazine and visiting professor at Brandeis University. This was a recommendation from professor Milton Lower, my economics mentor.
This is an angry book but the writer does not waste space expressing his anger. Instead he paints a vivid picture of a four-century history of stupidity, avarice and oppression that is well calculated to evoke anger in any reader equipped with even a vestigial conscience.
The History of Bankruptcy Law
The book guides you through a history of bankruptcy law, various economic booms and busts and governmental reactions to them. It is laced with nuggets of interesting details.
For example, did you know that Daniel Defoe (yes, the one who wrote Robinson Crusoe), played a significant role in redesigning English bankruptcy law by injecting the idea that it might be wise to let defaulting debtors remain free to work and earn money with which to pay their debts, instead of leaving them to rot in jail? Neither did I until I read this book.
I will not try to summarize the history that Kuttner narrates. His thesis is that bankruptcy law was historically designed to rescue investors and business proprietors whose choices and judgments proved to be disastrous. Individuals, by contrast, who, for whatever reason, found themselves unable to pay debts incurred to finance their consumer purchases, their rent or other private obligations, were regarded as immoral wastrels entitled to no remedy except confinement in prison.
About two-thirds of Kuttner’s book concern the treatment of government debt. He contrasts two different political reactions to government debt.
The Austerity Solution
One reaction is based on fear that government debt will lead to inflation by increasing the money supply and hence, reduce the value of wealth, including bonds and other forms of contractual debt (e.g. mortgages). This causes the wealthier segment of society to pressure government to reduce debt.
There are two ways to do that: raise taxes and cut expenses. Because we have a progressive tax system, raising taxes is despised even more than government debt by those with wealth. So, austerity is the constant battle cry of the wealthy, especially the rentier class, whose wealth and income consists of holding and manipulating financial obligations, not producing real goods and services.
The Consumer Demand Solution
The solution favored by Kuttner is to use government expenditures to transfer wealth, obtained either through taxation or by incurring more debt, to the working class segment of society, thus facilitating their demand for goods and services, thus creating more income for those whose businesses satisfy that demand, thus increasing taxable revenue and thus enabling government to reduce its debt.
In other words, to Kuttner, austerity remedies for excessive government debt is like using gasoline to put out a fire.
The Moral Argument
One idea that recurs throughout Kuttner’s book is his rejection of the argument that affording relief from debt is immoral. He identifies this morality argument as the basis for many of the harmful policies adopted by governments to deal with debt problems. He recounts and discusses the Rick Santelli rant that triggered the launch of the Tea Party in U.S. politics. As the collapse of the housing bubble began, Santelli erupted in a televised angry spiel, complaining that improvident home purchasers should not be helped because that would be unfair to others who had not defaulted on their mortgages.
As Kuttner notes, Santelli stupidly failed to mention that fire sales of foreclosed homes would drive down neighborhood home values, regardless of whether the owners were current on the their mortgage payments.
Another example: After WWI, Britain, France and other allies spent decades trying to punish Germany for its “war guilt” by requiring it to pay a huge “war debt”. This was obviously impossible, because the war left Germany economically prostrate, but the victorious nations, like stupid Santelli, failed to perceive the generalized damage to the entire European economy caused by keeping Germany from regaining economic stability and resuming trade with its neighbors.
Kuttner contrasts the treatment of Germany following WWI with the treatment of Germany, Italy and Japan following WWII, when the Marshal plan and other measures designed to restore their economies to economic health proved beneficial, both to them and to the economies of the allied nations who had defeated them in the war.
Kuttner also identifies the policies of Angela Merkel and her influence on the European Union’s policies toward Greece, Italy and Spain. He recounts how her insistence on stringent austerity requirements as a price for the EU’s assistance to those struggling economies needlessly condemned their populations to impoverishment and hampered their ability to recover from their financial problems. Chancellor Merkel, according to Kuttner, suffers from the Santelli stupidity virus. By extending their impoverishment, their EU trading partners suffer from diminished export markets.
Kuttner also recounts the history of the IMF, beginning with its Bretton Woods birth, when it promised to be a useful central bank with resources available to restore nations from economic crises. He describes how it was overtaken by bankers who subscribe to the Merkel-Santelli doctrine. Now it requires that, in exchange for its help, a country must condemn its population to decades of poverty and deprivation.
As a result, in the wake of the current world-wide recession, some nations, notably India, have refused to deal with the IMF, preferring instead to cope with their economic problems with policies of their own. As a result, their recovery has been less traumatic and quicker than their neighbors’, who received “help” from the IMF.
Pete Peterson – Man of Many Wrecking Crews
Kuttner’s book includes a remarkable description of how a single wealthy man, Pete Peterson, has been able, over several decades, to be a significant force behind a wide array of America’s fiscal and economic policies. Kuttner catalogs a remarkable number of ways this billionaire has managed to pick cabinet members, influence Fed policies, buy college and university curricula designed to indoctrinate generations of business school graduates and economists with Peterson’s right-wing ideology.
In this brief summary I can’t do justice to Kuttner’s carefully researched list of Peterson’s accomplishments. I can only assure you that, as described by Kuttner, Peterson makes the Koch Brothers look like amateurs. The Kochs merely buy politicians. Peterson buys the minds of thousands of people who occupy jobs where they can do more damage in a month than a U.S.Senator can do in years.
Referring to Peterson, Kuttner writes:
“A former commerce secretary under Richard Nixon, he is personally close to Democratic economic eminence Robert Rubin. The two have long promoted the idea of a grand fiscal bargain in which Democrats agree to cut social insurance and Republicans agree to higher taxes. Peterson served as chairman of the Council on Foreign Relations, and in 2002 he led the search committee that successfully recommended Rubin protege Timothy Geithner as president of the Federal Reserve Bank of New York. One can assume that Geithner, later Obama’s Treasury secretary, returns Peterson’s calls.
Peterson has spread his money around, giving over $50 million dollars to the influential Institute of International Economics, long headed by Democrat C.Fred Bergsten. The outfit was duly renamed the Peterson Institute For International Economics, a separate entity from the Peterson Foundation.”
This is by no means all of Peterson’s accomplishments. It is troubling for me to realize how much this man has been able to buy adherence to his ideas and to insinuate them into the operational policies of America. It is troubling because, as described by Kuttner, they make not the slightest sense except to enrich the wealthy and beggar the rest of us.
This is a useful and important book. Its revelations enable you to see today’s political debates with a new pair of glasses. My comments have covered only a small taste of the information in it. I recommend it if you crave the ability to understand some of the context surrounding the current debates about the deficit, tax reform and the global economic market place.
December 13, 2014 § Leave a comment
As I write this, the United States Senate is debating a measure that would weaken Dodd-Frank’s regulation of Wall Street banks, increase the amount of money a single donor can contribute to political parties and enable employers to reduce pension payments of retirees after they retire and have earned their pensions.
These outrages are attached to a budget bill whose passage is required to keep the government operating. None of these dishonest and unwise amendments have anything to do with the budget. They were attached to the budget bill by anonymous members of the House of Representatives at the behest of Citigroup. There was no committee hearing. There was no opportunity to vote on them separately.
In other words, they were so obviously the result of corruption that their sponsors would not own them. They could only be adopted as part of a legislative blackmail scheme.
This is not, however, the real scandal. The real scandal is that this dishonest scheme could only proceed with votes by Democratic Party members. The bill passed the House by a narrow margin, including aye votes by 57 Democrats.
[I note with some satisfaction that no Texas Democrat voted “aye”.]
No, that is really not the real scandal. The real scandal is that the only two elected officials who are personally identified with pressuring members of Congress to agree to these outrages are named Barack Obama and Joe Biden . Yep. Some things are too dishonest to make it, even given the present sorry state of our politics. So you have to bring out the Big Guns, the Prez and Vice (pun intended).
How did this happen? Well, we get the usual explanation. It was a compromise; the best deal we could get. If we don’t go along, the President won’t be able to work with Republicans on other matters.
Whoa! Say what? When has the President been able to work with Republicans on anything significant? What makes anyone think this will improve in a few weeks when the GOP majority will become filibuster proof? Just how stupid and naive are we suppose to be? Will this be an adequate explanation for the retirees whose pensions will be decimated? When the power of the Koch Brothers and others like them is used to gain even more control of our political parties, will we view the results and say, “Well, it’s bad, but it was worth it to avoid an ugly argument about the 2014 Budget Bill.”
The Perpetuation of “Too Big To Fail/Jail”
Dodd Frank addressed a problem that confronted us when the Wall Street Banks faced insolvency because of their fraudulent marketing of mortgage based derivatives. They used depositor money to finance those derivatives. If they became insolvent, the taxpayers would have to make the depositors whole because of the FDIC insurance program. That is, the taxpayers would belatedly finance the reckless greed of the Wall Street pirates.
Dodd Frank cured this by requiring that future trading strategies that depend on derivatives and Byzantine schemes involving sketchy tools like credit-default-swaps, that look like insurance but have no reserves, would have to be conducted by entities separate from FDIC insured deposits, with money other than depositor money.
In other words, the ones who profit from high-risk gambles would have to risk their own money, not FDIC-insured depositor money.
Predictably, this was regarded as a terrible idea by the high-risk gamblers. They have become addicted to the system of “If I win, I pocket the money. If I lose, you pay for the loss.” So, Citigroup, acting for the other pirates, just wrote a solution to their problem, forwarded it to some elected officials they owned, who transcribed it into an amendment to the budget bill. Their solution is part of the bill Obama and Biden have been frantically calling House and Senate members about, begging them to vote “aye”.
Thank God For the Women
Nancy Pelosi was left out of the negotiations that led to this piece of garbage. She did not join the cheer leaders who whooped it through the House. But the one who has filled a gaping chasm where the political soul and conscience of the Democratic Party once rested, is Elizabeth Warren. What a thrill to see a Senator who has not forgotten how to express moral outrage. And knows how to do it while exhibiting a razor sharp wit and a mind to match.
When she spoke on the floor of the Senate, looked squarely into the camera and addressed Citigroup, the sponsor and author of the Dodd-Frank gut job, and said, “I agree with you. Dodd-Frank is not perfect. It failed to break you up into small pieces.”, I just about fell in love again, despite 65 years of marriage. She is a wonder!
Which Side Are You On?
This episode reminded me of an old union song I taught my daughters to sing when they, and I, were young. It was written in 1931 by Florence Reese, the wife of a coal miner in Harlan County, Kentucky, during a bitter strike. The Harlan County Sheriff was J.H. Blair, an enforcer and strike breaker for the mine owners.
One night some of Blair’s thugs stormed into the Reese home, looking for Sam Reese. He had been tipped off and was not there. They terrorized his wife Florence and his children but didn’t get Sam.
After they left, Florence, angry and scared, wrote a song on the back of a calendar, expressing her devotion to the union and her contempt for those who failed to support the strike. Here is a link to Pete Seeger and his banjo, singing Florence’s song:
While watching CNN and MSNBC about this budget episode, I kept getting madder and madder and I remembered that old song. So I wrote my own version:
In our US Congress
There are no neutrals there
You either vote your consciences
Or whore for billionaires
Which side are you on?
Which side are you on?
Which side are you on?
Which side are you on?
Obama we’re in danger
The wolves are at our door
We don’t need reasoned argument
We need a two-by-four
Barack Hussein Obama
How dumb can you get?
A shepherd cannot safely try
To make a wolf a pet!
It’s time to rein in Wall Street
Our country’s not for sale
At ballot box and in the streets
We must fight and prevail.
Thank God for Betsy Warren
She speaks for us out loud
She does not hedge or compromise
To blend in with the crowd
No go along to get along,
She hews to moral rules
She tells it straight and tells the truth
She has no time for fools
I don’t yet know how this drama will end, but I’m not optimistic.
December 8, 2014 § 1 Comment
Jim Hightower is a friend of mine. He edits and publishes a newsletter called Hightower Lowdown. I recently discovered it. Jim combines a seasoned political mind and a Molly Ivins sense of humor. A few decades ago, in 1982, before Texas became a Republican stronghold, Jim was elected Texas Commissioner of Agriculture. In 1990 he was defeated by Rick Oops Perry.
He was on Senator Ralph Yarborough’s staff for awhile; edited the Texas Observer for awhile; and has never stopped working to promote political common sense and economic justice.
I write with two purposes: First, spread awareness of his newsletter. Subscription costs are modest and the ideas deserve wider distribution. Second, to make available Jim’s reaction to Barack Obama’s War on ISIS. His statement, as usual, is both thoughtful and delivered with scathingly targeted humor. Here is a link: Lowdown.
I’m not sure but I think Jim was the author of one of my favorite political adages: There’s nothing in the middle of the road but dead armadillos.
December 3, 2014 § Leave a comment
I just watched Lawrence O’Donnell’s program aired last night on MSNBC. He presented a segment about the way an Assistant District Attorney advised the grand jury concerning the law pertinent to Daren Wilson’s killing of Michael Brown. He quotes excerpts from the transcript to show that the grand jury was given a copy of the Missouri statute stating the legal standard according to which Officer Wilson’s conduct should be judged.
The statututory standard in that statute was declared unconstitutional by the U.S. Supreme Court in 1985. It immunized a police officer for killing a person if the person was fleeing from the officer, regardless of the nature of the crime for which the officer was seeking to arrest the person.
Weeks later, the Assistant D.A., as the grand jury was finishing its deliberations, handed the grand jury a copy of the current applicable statute. She did not tell them the reason why the statutory standard which had governed their judgment during the previous several weeks had been declared unconstitutional. She just left them to figure it out.
Here is a link to O’Donnell’s presentation of this evidence of prosecutorial misconduct: Ferguson Farce
I urge you to watch it. There was never a chance for justice for Michael Brown. The grand jury unwittingly applied a law declared unjust and unconstitutional thirty-seven years ago.
November 25, 2014 § 1 Comment
In the aftermath of the farcical grand jury episode in Ferguson, Missouri, I am frustrated at the focus of attention on blood trails and whether the kid was moving toward the cop when the cop emptied his pistol into him.
I think the crucial event occurred in the police car in the few seconds before the cop got out of his car, his pistol drawn, and pursued Michael Brown. The cop told the Grand Jury that, while he was in the police car, he and Brown struggled. He said Brown tried to grab his pistol. He said the pistol discharged twice. We know that one of those shots hit Brown in the hand. Describing those events, the cop said that he felt like a five-year-old struggling with Hulk Hogan.
In other words, the cop said that he realized, while he was still in the police car, that he was physically incapable of subduing Michael Brown. Then, Michael Brown ran away from the police car. The cop was absolutely safe. He was in the police car. He had a radio. He could call for help. He had Mace. He had a truncheon or “billy club”. He was within a few minutes drive of police headquarters. During those few seconds, he had to make a choice: Should he call for help? Should he try to catch Brown and subdue him with Mace? Did he think he might be able to arrest Brown by using his truncheon?
He rejected all those alternatives. Knowing that he was incapable of physically subduing Brown, the cop, his pistol in hand, got out of the police car and pursued Brown. When he made that choice, he formed the intent necessary to convict him of premeditated murder or, if we assume he was acting in response to overwhelming rage due to the pummeling he had endured at the hands of Brown, maybe involuntary homicide. One thing is plain: He was not acting in self-defense. He was guilty of homicide.
The particular circumstances that surrounded the actual shooting are interesting but they are not crucial. That encounter was caused by the cop, not Michael Brown.
I have now heard that the cop claimed he felt bound to pursue Brown because he thought Brown might assault innocent citizens. The circumstances do not support that lame excuse. When the cop first saw Brown and a companion walking down the street, they did not appear to be prowling around looking for people to assault. He just told them to move to the sidewalk. They were jaywalking.
At a trial, the cop could try to convince a jury that, feeling like a five-year-old challenging Hulk Hogan, he was so concerned about protecting others from Brown that he felt it was necessary to kill Brown. He already knew that the only way he could control Brown was to kill him because Brown was beyond his physical ability to handle.
Another thing that makes me believe the cop was guilty of premeditated murder is the fact that he went through the farce of yelling “get down” “get down” before killing him. He had absolutely no reason to believe, based on the encounter in the police car, that Brown was likely to become docile and obedient in response to this cop who had just shot him in the hand. The “get down” yell was just going through the standard preparation for the killing. Like most cops, this one probably believed that failing to obey the directions of a peace officer is sufficient basis for using deadly force. This is not the law, but the false belief that it is, leads to numerous deaths at the hands of lawless cops.
The cop’s Hulk Hogan admission was a confession.