Selling the American Dream... Down the River

Here is a bit from a post on the BoingBoing blog about an economist who worked really, really hard to pump up the real estate balloon which popped and has spread misery, unemployment, and foreclosures across the land...

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David Lereah served as economist for the National Association of Realtors and published a series of books advising readers that there was no real estate bubble and that buying highly leveraged property would make them rich. The Amazon reviews sections for these books have become a kind of performance space for highly sarcastic commentary on the conmen who sold America on the idea of going into hock to buy real estate.

The sad fact is that knowingly pumping up a financial bubble that costs 14 million jobs and causes several million Americans to lose their homes is not a crime. To my mind David Lereah created more unjustified suffering than all the American criminals of the 20th century, but unlike the, he gets to walk the street and live off the "earnings" of the people he lied to and misled. He will never spend a day in jail. But he left more pain, suffering, and misery that all the Al Capones, mafiosi, and drug gangs combined. There is no justice here.

US Crimes at Guantanamo

In twenty or thirty years, Americans will be aghast at the crimes of the Bush and Obama administrations. They have allowed innocent people to be imprisoned for years. Here is the latest one. This info was leaked via UK newspapers via a blog that monitors the press in the UK:

The Daily Telegraph has published 759 of the leaked Guantánamo files it obtained from WikiLeaks, despite the files not having been redacted to remove sensitive information.

One of the documents published by the Telegraph today includes the full name of a boy detained at Guantánamo who, according to the file, was raped at the age of 15, just prior to being transferred to the camp.

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No charges were brought against the detainee, who was captured by US forces in Afghanistan and transferred to Guantánamo Bay "because of his possible knowledge of Taliban resistance efforts and local leaders". He was released a little more than a year after being transferred to the camp.

Go read the original post to get the full article and the embedded links.

Like the vicious internment of innocent Japanese during WWII, this Guantanamo camp with so many innocent people swept up in Afghanistan and Pakistan forced to endure years of mistreatment by brutal American torture techniques and years of imprisonment with no charges, no evidence, and no guilt.

My personal concern is the vicious treatment of Omar Khadr, a child soldier pushed into al Qaeda by his fanatical father. The kid was 15 when captured. Under international law you can't treat children as "soldiers" but the US has ignored international law. It held him for 8 years before they finally wore him down to sign a "guilty" plea. For that, the US gave him a 16 year sentence. His crime? The US claims he threw a grenade that killed a US soldier, but that is really, really hard to prove. But even if he did, you don't put 15 year olds into prison for 16 years for that. And you certainly don't torture them for years and years. Oh wait... I need to qualify that. Civilized countries don't do that, but the US does and is doing it to Omar Khadr.

Guantanamo is a very black mark on America and it will only fester. Obama promised to close it in 2008 and have trials, but it is now two years later and still nothing! Twenty or thirty years from now Americans will have to hang their heads in shame for these crimes. To my mind it is a crime on the same scale at uprooting 110,000 innocent people, forcing them to sell their homes and businesses "for a song", and shipping them off to godawful desolate places to live behind wire, watched closely by soldiers with machine guns, and having their lives run by prison administration... for no crime!

There are a few guilty terrorists at Guantanamo, but they make up less than a third of the internees. The whole "secret prisons" and "extra legal" treatment of post-9/11 suspects is a horrible black mark on America.

Cynical on Citizenship

Here are some bits from a serious post by Scott Adams, the Dilbert cartoonist:

I think the birther issue is good for the country. A modern republic needs some simple and unimportant issues to keep its citizens invested in the process. The important issues of our time are far too complicated for the average person, and I count myself in that group. We need a few simple issues so we can be part of the political conversation without hurting anything. The last thing our system of government needs is regular citizens getting involved in Middle East strategy, healthcare reform, the budget, climate change, or anything else that might matter.

I'm entirely serious. It's healthy that we average citizens have some sort of topic in the political realm that will keep us engaged while also siphoning off some of our activist energy. It reminds us that we have a role in government. It reminds us that we have a constitution. It reminds us that we're in charge, sort of. And it gives the news media something to talk about on slow news days, which is important for keeping that vital institution in business.

Most citizens would lose all interest in government if there were no issues they could grasp. In a perfect world, the largely clueless citizenry, including me, would feel as if we're part of the system while having no power to break anything important. The birther issue is sort of like letting your toddler have a toy steering wheel in his car seat. He feels as if he's doing something useful and you don't have to rely on him to keep you out of the ravine.

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Imagine a media that has no topics that can be understood at a sixth-grade level of reading comprehension. That's the sweet spot for clear writing regardless of the reader's education. As soon as you go above the sixth-grade level, you lose about two-thirds of the country, maybe more. The high end of the news industry couldn't stay in business if it only reported on issues that require a high school level of reading comprehension to follow along. We need a well-financed news media to act as watchdogs for the government. Bloggers aren't going to do it.

Now the media is beginning to focus on the issue of President Obama's academic record. This is the very best situation that a healthy republic could hope for. I can't imagine anything more useful than focusing on the educational achievements of the President. And when this issue gets old I propose we focus on the question of whether President Obama is still sneaking a cigarette now and then.

I feel sorry for the serious journalists that feel obliged to cover stories about the birther situation. Perhaps a healthy compromise is to label such issues as "citizen engagement" issues and acknowledge that they have an important role in educating voters and keeping people interested in the system.

I don't have the same low opinion of people or democracy that Scott Adams has. I believe people are very effective voters just using their common sense and assessment of character of candidates. they don't have to understand all the nuances of policy. They do need to know whether this candidate supports people in need or people in greed, whether their votes are bought and they try to "sell" policies that make no sense, or whether they talk about jobs, education, healthcare, infrastructure, children, and the future. I think people are smart enough to figure out that "tax cuts for the rich" isn't in their own best interest.

The Latest Entrant into the Renewable Energy Armory

Would you believe that petroleum and natural gas are now thought to be "renewable energy sources"? Here's a bit from a post on Geoffrey Styles' Energy Outlook blog:

However, there's another, more controversial theory of the origins of at least some oil and gas, suggesting that they were formed by chemical or biological activity much deeper in the earth, and then migrated long distances before being trapped. If correct, that would mean that not only aren't these fuels truly fossils--and thus essentially static and finite--but that they might actually be continuously regenerated by natural processes in much shorter time spans. A number of academics appear to hold this view, and it was a common theory of petroleum origin among Soviet scientists. Much of this is explored in a lengthy white paper on the Deep Carbon Observatory site, including the shortcomings of current analytical techniques in determining definitively whether a given sample of methane originated from organic material in sedimentary rock or from some other source.

Finding gas or oil in deposits much deeper than those we already know about, or in places that aren't consistent with our present understanding of petroleum geology, would represent an even bigger potential energy revolution than the one begun by the recent development of the means of unlocking shale gas resources. It would also shift our perspective on the nature and required speed of the energy transition on which we've embarked. If oil and gas weren't finite--at least in human terms--it might alter the urgency of deploying some of the alternative energy technologies now in our repertoire. At the same time, it would have enormous implications for climate change, by greatly increasing the ultimate quantity of carbon we could eventually emit to the atmosphere.

I enjoy stories like this because they show that all the "sure thing" thinking that most people have never acknowledges how little we really know and how much science can revolutionize our thinking.

Robert Reich Connects the Dots

This is an excellent 2 minute summary explaining the ails of the US economy...

Getting It Wrong in a Really Big Way

Here is a bit from an excellent post by Robert Reich that points out that the big shots at the top of the economy are reading the wrong tea leaves. They are getting it wrong. They are reading the opposite of what is really there:

Much of Wall Street thinks inflation is now the biggest threat to the US economy. As has been the case in the past, the Street is dead wrong. The biggest threat is falling into another recession.

The most significant economic news from the first quarter of 2011 is the decline in real wages. That’s unusual in a recovery, to say the least. But it’s easily explained this time around. In order to keep the jobs they have, millions of Americans are accepting shrinking paychecks. If they’ve been fired, the only way they can land a new job is to accept even smaller ones.

The wage squeeze is putting most households in a double bind. Before the recession, they’d been able to pay the bills because they had two paychecks. Now, they’re likely to have one-and-a half, or just one, and it’s shrinking.

Add to this the continuing decline in the value of the biggest asset most people own – their homes – and what do you get? Consumers who won’t and can’t buy enough to keep the economy going. That spells recession.

Why doesn’t Wall Street get it? For one thing, because lenders always worry more about inflation than borrowers – and, in general, the wealthier members of a society tend to lend their money to people who are poorer than they are.

But Wall Street’s inflation fears are also being stoked by several specifics.

First are price upswings in food and energy. The Street doesn’t seem to understand that when most peoples’ wages are dropping, additional dollars they spend on groceries and at the gas pump means fewer dollars they have left to spend in the rest of the economy. Rather than cause inflation, this is likely to lead to more job losses.

The Street is also worried that the Fed’s easy money policies are pushing the dollar down and thereby fueling inflation – as everything we buy abroad becomes more expensive. But if wages are stuck in the mud and everything we buy abroad costs more, Americans have even fewer dollars to spend. This also spells recession, not inflation.

Finally, the Street worries that if Democrats and Republicans fail to agree to a plan to cut the budget deficit, the credit-worthiness of the United States as a whole will be in jeopardy – causing interest rates to rocket and inflation to explode. Standard & Poors, the erstwhile credit-rating agency, has already sounded the alarm.

The Street has it backwards. Over the long term, the deficit does have to be tackled. But not now. When job growth remains tepid, when wages are dropping, and when the value of most households’ major asset is declining, government has to step in to maintain overall demand.

This is the worst possible time to cut public spending or reduce the money supply.

The biggest irony is that the Street is doing wonderfully well right now, in contrast to most Americans. Corporate profits for the first quarter of the year are way up. That’s largely because corporate payrolls are down.

Payrolls are down because big companies have been shifting much of their work abroad where business is booming. The Commerce Department recently reported that over the last decade American multinationals (essentially all large American corporations) eliminated 2.9 million American jobs while adding 2.4 million abroad.

What the Commerce Department didn’t say is the pace is picking up.

This pig-headed refusal to look at reality and see it for what it is makes life miserable for the bottom 90% of society. Reich sums it up nicely:

America’s jobless recovery is becoming a wageless recovery. That puts the odds of another recession greater than the risk of inflation. Wall Street and its representatives in Washington don’t understand – or don’t want to.

Sadly Obama doesn't "get it". He has never acknowledged that his economic policies are always a dollar short and a day late.

Smart People Advocating Dumb Policies

I was at an investment conference yesterday and was thoroughly frustrated by hearing the speakers demand more austerity, cut deficits, get debt under control. I finally piped up and pointed out that this bad advice is exactly the road that the UK has embarked upon and it is leading to very bad results there. The speakers at the conference retrenched a bit. While advocating deficit/debt reduction they were willing to admit that it should be done with care and it "could" take place on a timeframe of years and not immediately.

I'm frustrated because all these voices calling for spending cuts immediately are threatening a 1937-style recession within a depression. FDR succumbed to these howls about cutting deficits and worries about inflation and he produced a slump inside the Great Depression.

Since these were investors worried about the effects of inflation, I put my point as a "concern": if you go after deficits & debts before the recovery is soundly established, you can crash the stock market. The Dow Jones index dropped from a high of 185 in 1937 to a low of 113 in 1938. That's a fall of 40%. As investors, we have to be careful what we wish for. If you think the bogeyman is "deficits and debts" and push hard to cut them "now!" like the Republicans are doing, you can end up watching your investments evaporate as the market retreats by 40% in the face of a big downturn in the economy.

The speakers at the conference toned down their cry for cutting deficits and debts "now!" and rephrased this as "over time as the economy strengthens". More people need to call out the fanatics and to get them to tone down their cries for austerity "now!". If we don't push back, we may get the 1937 equivalent.

Here's a bit from a Paul Krugman post on his NY Times blog on the same subject:

The bad GDP number for the UK isn’t a surprise — in fact, judging from market response, investors seem to have expected something even worse. Still, if you step back and look at what has been happening, it’s doubleplusungood: zero growth over the past 6 months, with every reason to be worried on the downside looking forward, as Cameron’s austerity bites deeper.

Jonathan Portes gets to the nub of it:

On fiscal policy, the message is that we should listen to economists, not credit rating agencies. Most mainstream economists argued that the impact of the government’s fiscal consolidation on confidence and consumer demand would be negative; so it has proved.

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Meanwhile, the argument that fiscal overkill was necessary to appease the credit rating agencies has again been disproved by market reaction – or the lack of it – to the Standard & Poor’s outlook warning last week in America, where US Treasury yields hardly budged.

In short, there is no confidence fairy; and S&P can call invisible bond vigilantes from the vasty deep, but they won’t actually come when called.

Portes hits, in particular, on a point I’ve tried to make a number of times, here and more recently here: right now, we’re living in a world in which basic economics points to conclusions utterly at odds with what Very Serious People are supposed to believe, in which radical outsiders base their views on standard economics while orthodox types turn to heterodox, highly dubious speculations.

Go read the whole post to get the embedded links.