Thursday, October 28, 2010


Glenn Greenwald is a great American.

This rage-filled eloquent take-down of John Burns (who used to nauseate me when he was regularly trotted out as an expert-pundit about the situation on the ground in Iraq -- back when I bothered to watch TV) is a must read, and should be circulated widely.

On a broader level, I think that the NYT has lost its bearings. This is not nostalgia. What I mean is that the current historical conjuncture is one of decay of the old order on many levels. And one of them is that the center cannot hold as class divisions intensify political ones. In a pre-civil war era, the traditional role of the NYT in running the country and keeping the educated middle classes sedated is obsolete.

Oh, and did I mention that Glen Greenwald is a great American?

Thinking of Izzy Stone, it's enough to make me believe in reincarnation.

Forces of Production

I remember back in the early 80's that I expected a wave of proletarianization due to the need to squeeze profits out from somewhere. Didn't happen, primarily because consumption was defended by the 2 decade orgy of debt we've just completed.

Regardless of the business cycle, however, technology trends are inexorable -- just the stuff in the pipeline already guarantees huge transformations ahead. Yet as Portugal, Ireland and Greece reach the breaking point, I wonder when people will stop seeing market forces as laws of nature, and when the movements for progressive technology will gain a stronger voice.

In the end we come back to the core question: How much wealth is sufficient for us to realize our potential, and what relationship should human beings have to nature and each other in its achievement?

From an article on technology, robotics, and automation:

If this polarization continues, a whole cohort of people who expected to be middle class—or at least financially stable—might find themselves living a very different reality. Then they might start asking questions about why they are in that position. If it gets increasingly hard to pretend that the average liberal-arts degree prepares a student for a decent job, there may be broader support for a sober assessment of our education system, and the reforms it needs. If the skills and talents that are truly financially rewarding become harder and harder to acquire, people who would never consider themselves students of Marx might start questioning whether, given the circumstances, it still makes sense to pay people based solely on the demand for their skills in a marketplace that would be demanding very few skills.

If market forces and increased automation leave the average person without any prospects for a decent job, we may have the chance—or perhaps even the moral obligation—to recast the opportunity to do meaningful work not merely as a privilege, but as something everyone deserves.

The whole article is here.

Monday, October 25, 2010

Obama Cuts his Losses

MK Bhadrakumar's latest is a good snapshot of the Af-Pak situation. Indian strategists will be unhappy.

For Obama and the US -- kick the can down the road and get out of Dodge (at least as a tale to tell the children, err, the American voters. ----- There will be a garrison remaining for multiple purposes, but securing Kabul and building the Afghan state will not be one of them)

For the Indians --- there is no substitute for standing on your own two feet.

The US is probably telling India behind the scenes, "keep growing at 9%+ annually, and all else will follow". The key question to me is whether resource constraints emerge to throttle Indian growth before they can achieve strategic parity with China. Kinda hard to be an ambitious would-be imperial power without an educated and well-fed population.

or oil.....

or water.....

Saturday, October 23, 2010

Another great experience with Carolina Chocolate Drops last week

Strange to be at a nightclub til 11:30 ...... but sweet bluegrass

This is "Genuine Negro Jig", the title track of their latest album.

Paging Winston Smith

One of the problems with not having a live cable feed at home is that you can miss politico-cultural events of significance.

This ad caught my eye at the gymn this morning. While the theme is supposedly about fiscal matters, trade, and taxes, it was hard for someone of my age not to see echoes of the Macintosh "Big Brother" ad, as well as the Manchurian candidate. For me it was a creepy preview of a coming age of crazed "minute of hate" propaganda.

A little smile from Hoocoodanode

HooCoodanode is the comments section of Calculated Risk

Jonathan wrote on Fri, 10/22/2010 - 9:50 pm

I'm not sure why, but this reminded me of what might happen in the bond market...

Aircraft crashes after crocodile on board escapes and sparks panic - Telegraph

One of the passengers had hidden the animal, which he planned to sell, in a big sports bag, from which the reptile escaped as the plane began its descent into Bandundu.
The plane was then sent off-balance "despite the desperate efforts of the pilot", said the report.

Friday, October 22, 2010

Remarkable numbers for the Greens in Germany

From Der Spiegel:

It's not just Künast, however, who might have the opportunity to soon take over the leadership of one of Germany's states. In Baden-Württemberg, the Green Party has seen its support climb steadily in recent months and now finds itself, with 32 percent support, well ahead of the SPD (19 percent) and within just a couple of points of Chancellor Angela Merkel's Christian Democrats (34 percent). With the SPD already having indicated it would join a coalition with the Greens as the junior partner -- and with no strong partner in sight for the CDU -- there is a very real possibility that the leader of the Greens in the state, Winfried Kretschmann, will become the state's next governor when voters go to the polls there in March.

Kretschmann has benefited mightily from his party's opposition to "Stuttgart 21," a massive development project in Baden-Württemberg's capital. While construction has already begun on the project -- which envisions moving Stuttgart's train station underground and creating a new city quarter above -- many in the city have mobilized against it, saying it is a vast waste of money that was planned with little input from city residents. Merkel and the CDU have come out in favor of the project.
The 62-year-old Kretschmann, who began his political life as a communist in the mid-1970s, has so far seemed unimpressed by his party's sudden rise. "We are staying on the carpet," he is fond of saying, "even if it happens to be flying at the moment."

But there is no denying that the Green Party's carpet is indeed flying. In nationwide polls, the party has been hitting record after record. A poll published in the Frankfurter Allgemeine Zeitung on Wednesday found that 20.5 percent of Germans would vote for the Greens.

Given the impending realignments in global geopolitics, this is a trend to watch.

Wednesday, October 20, 2010

Empire of Debt

I have a mental model in which Britain's present is America's future. The declining, bankrupt empire and all that.....Of course, the Brits were pretty nimble and financialized so much in the last decades, that they managed to seem in lock step with the US in a real Anglo-American "special relationship". And in the recent bubble years, suburban London was really looking pretty comfortable.

So now what to make of the Tory move to austerity? Well, for one it confirms Carville's line about wanting to be reincarnated as the bond market-- "everyone is scared to death of the bond market"...

Because sterling is no longer a reserve currency, the Brits had no choice, methinks. They really are Reykyavik on the Thames and a funding stop would be a disaster. The US on the other hand can still print the scrip which the rest of the world remains willing to exchange for real goods, and so they are about to do so with gusto.

But it is also a great drama of an experiment in relationship to Keynesian notions of aggregate demand. Because Britain is not going to be a source of growth for the rest of the world. This is a relatively big domino to fall as we flirt with the double dip.

From the Guardian:

On the government's own figures, there will be 490,000 jobs lost in the public sector over the next four years as a result of the CSR; at least an equivalent number will be lost from private sector firms – in the construction sector, for example – that rely heavily on state contracts. Osborne is banking on the rest of the private sector growing quickly enough to absorb all the jobs lost from the public sector and creating at least a million more on top of that.

While not unprecedented, this will be challenging. The last time the UK went through an austerity programme — the mid-1990s — large numbers of private sector jobs were created. But this was a period when the global economy was booming, making life easier for exporters. It was a time when the economy was benefiting from the sharp drop in interest rates and the 25% devaluation of sterling that resulted from Britain's departure from the exchange rate mechanism on Black Wednesday. And it was a time when the banking system was functioning normally. None of those conditions apply today, which is why reducing demand by 0.5% of GDP in each of the next four years will hit growth and make it harder to bring borrowing down.

Colour me skeptical. But given that there will be a sovereign default somewhere on the periphery of the eurozone some time in the next few years, Greece, Ireland, Spain, take your pick, Britain will be well served by this pre-emptive austerity because trying to act after the fire starts would be much more expensive.

But the hit to the standard of living, especially of the poor, will be significant. All to keep debt contracts sacrosant, and the bondholders made whole.

I guess it would be silly to imagine repudiation of the debt and the issuance of a new currency, with confiscation of the fake superprofits of the big banks....

Tuesday, October 19, 2010

The gathering forces of Mordor.

Chomsky has noticed the weird anti-Muslim currents rippling through the body politic like the anti-semitic fantasies which coursed thru the Reich.

This post from Orcinus, a site I haven't visited for a few years, rightly points out and names the violent ferment on the right.

I'd move to Canada, but that's the first country they'll annex in some kind of nordic Anschluss.

Sunday, October 17, 2010

Droit du Seigneur

Naked capitalism seems way ahead on foreclosuregate issues.

This post captures the anger fused with analysis that is badly needed.

An excerpt:

Perhaps the most insidious propaganda line, and certainly the most scabrous, is the bashing of alleged “deadbeats”. While the subprime borrower – powerless, often a minority – has long been an easy target, and the contempt has been spreading up the income scale as more people are engulfed in the catastrophe, the fact remains that few people intentionally bought more house than they could afford. Most were induced by the massive propaganda barrage from the banks, government, MSM, and even consumer groups, to see a house as a guaranteed investment which could only appreciate in price. More importantly, the main cause of inability to keep up the mortgage is losing one’s job or suffering a medical disaster. It’s the banks themselves who have presided over the destruction of America’s jobs, especially over the last two years. And it’s the government which refuses to counteract the banks’ campaign of socioeconomic scorched earth. (That’s the same government which also pointedly refused to reform the health care system, choosing instead to further entrench the existing larcenous dysfunction under a facade of lies and misdirection.)

So it’s the banks and government themselves who are overwhelmingly responsible for the wave of defaults. The defaults are the knock-on effects of the bank crimes, and now the banks want to seize the homes by further criminal means. Even after all this, few people fight foreclosures if they can’t afford to pay. The great majority of them say they can pay if they get a promised modification, or claim to be the victims of servicer error. So by any measure – moral, rational, or legal – the “deadbeat borrower” talking point is a sham.

And more:

This preference for lawlessness, this knee-jerk recourse to lies and crimes, is however no joke. At the lower levels, outside the regular media eye, the banks have repeatedly demonstrated their comfort with pure brutality. The examples proliferate of thugs threatening people, breaking and entering, bashing in doors, terrorizing occupants. So long as government at every level is the waterboy of the banks while people on the ground remain unorganized, atomized, and vulnerable, this will only get worse.


All of this, from the original predatory lending, to flippancy about conveying the titles and legally securing the trusts, to the Bailout dedicated to propping up those toxic MBS, which we now know are probably nothing but unsecured loans, to the government-led propaganda campaign and legislative hankering to cover up and eventually “legalize” this latest revelation, down to the brutish violence and dirty tricks of the gutter, is one coherent whole, one simple train of logic. It’s simply the logic of might makes right, feudal greed, and total nihilism vis the law and democracy. The mortgage debacle reveals so many abdications of the system, and this abdication of the rule of law is one of the most thorough.

If only there were a political party willing to link up resistance on the ground with a comprehensive strategy of mass messaging and organizing......

Saturday, October 16, 2010

The Serengeti

Stolen in full from The Big Picture:

Bank of America announced that it has discovered a few trivial, easily-remedied technical problems with some of its mortgages. “We will stop foreclosure sales in some states until our assessment has been satisfactorily completed, or until the politicians whom we have compensated so generously do their damn jobs and get rid of those pesky laws and rights that are slowing us down. Our ongoing assessment shows the basis for foreclosure decisions is accurate, except in those few regrettable cases where we repossessed a house that actually had no mortgage on it whatsoever—hey, nobody’s perfect, ha ha,” a Bank of America spokescreature said. “It’s really quite a lot of trouble to verify the address before we take someone’s house,” the spokescreature continued. “Comparing addresses on two documents slows us up by a good fifteen seconds. After all, we have a lot of houses to foreclose on. Anyway, many of those people actually do owe money to us, or to somebody, anyway. I know it is a bit confusing to citizens when our competitor HSBC and another bank simultaneously try to foreclose on the same property, especially when they are in a federal foreclosure prevention program. It’s sort of like one of those programs on Animal Planet where each hyena grabs a leg of the still twitching gazelle and tries to pull it away from the other hyenas. But that’s the way nature works—nobody asks those hyenas petty-minded questions about whether title to the gazelle was properly transferred, and to which hyena, and whether the title was properly notarized by an authorized local cheetah. Sometimes a company just has to sink its fangs into a customer, lock its jaws, which can exert a pressure of 1,000 pounds per square inch, brace its legs, yank, and see what tears loose. If we get the wrong gazelle, we will make every effort to compensate it for our erroneous gnawing, bone-crushing, and marrow-sucking.”

“It appears that some of our process servers may not have actually served the owners with notice of our intent to foreclose. But, honestly, wouldn’t warning them make it a whole lot harder to catch them? It is a myth that hyenas giggle and cackle before they attack. Actually, they are usually quite silent until they get close enough to bite. On the Serengeti, due process means that the gazelle runs as fast as it can and the pack keeps ripping small chunks off until the gazelle collapses due to shock and blood loss and inability to pay for a lawyer. There may have been some trivial, unimportant problems with the relevant documents, but we are confident that many of those gazelles really did owe us money, and we believe that our ripping them into pieces, digesting them, and regurgitating their horns and hooves is ecologically sound and generally in accord with the law of nature. Now, if you’ll excuse me, I will have to go mark the boundaries of my pack’s territory with the musk from my anal scent gland. We don’t want other hyena packs like J.P. Morgan invading our turf. That could be a real mess—those guys know how to sink their fangs in, and they know how to break down the door of a house and change the locks even when they haven’t foreclosed on the property.”

Asked for comment, a J.P. Morgan spokesperson said, “We have no interest in invading the grasslands turf of Bank of America or HSBC because we are not hyenas. We are amphibious apex predators, and our preferred mode of foreclosure is to lurk underwater by the bank of a river. When a gazelle or a wildebeest sticks its muzzle in the water, we surge upward and, um, serve papers on it, or something. Or grab a leg and go into our famous death roll, spinning and thrashing until the leg comes off. Then we like to take the borrower’s corpse up-river for a few days of what we in the mortgage business call ‘seasoning’. We would also like to remind you puny, pathetic citizens that we can grow to twenty-three feet long, we can gallop at up to seventeen miles per hour for short distances, we have maintained our distinctive business culture successfully since before dinosaurs evolved, we have thick dorsal osteoderms which are hard to penetrate even with an axe, and we are much more biologically complex than other reptiles: unlike them, we have features like a cerebral cortex and a four-chambered heart, and many of us have Ivy League degrees. We recommend that AMBAC and Pimco think carefully about all of these features before trying to push their mortgage-backed securities back onto our balance sheet. As for any legislators or prosecutors who might be thinking about going after us, we have very slow metabolisms. We can submerge for an hour and go for months without eating. We will outwait you and probably eventually hire you as a lobbyist. We would also like to note, though, that we are not without compassion. We honor our prey and weep for it: do you see the large tears rolling out of our eyes and down our scaly cheeks? You probably thought crocodile tears were a mere myth or proverb, but we do in fact have lachrymal glands that secrete a proteinaceous fluid. Crying has an important place in our corporate culture: it lubricates our eyes and cleans our nictitating membranes.”

The Senate and the House, with remarkable foresight, have already passed HR 3808, a bill to facilitate the sharing of taxpayer carcasses across state lines. The bill’s sponsor, Representative Robert Aderholt, an Alabama Republican, said, “It is important to ensure that multiple species of predators can efficiently divide a taxpayer carcass and transport pieces of it from one waterhole to another.” David Axelrod, an advisor to President Obama, said, “We originally planned to sign it, but we are less than a month away from elections, and many gazelles and springboks seem to be agitated about this issue, so we decided to table it for now. We have complete confidence, though, in our ability to find some swift, quiet resolution of this problem after the election.” Secretary of Predation Timothy Geithner added, “I think we can all agree that our nation’s highest priority is to ensure a steady and increasing flow of protein to our apex predators. Crocodiles and hyenas are actually very delicate creatures, and any regulatory interference with their feeding habits could have a catastrophic effect on the entire ecosystem.” Despite their superficial differences, both parties fervently agree on the crucial importance of making life easier for apex predators.

Friday, October 15, 2010

An inflection point is upon us

The phony war may be ending. I think everyone should have a little physical gold and silver handy, unless you live in a country with plenty of water, food, petroleum, medicines, and rare earth metals.... If you do, please let me know where it is, 'cause I wanna move there, or at least buy its currency.

As most of you know, the contradictions of capitalism are showing up in the FX market (foreign exchange, for all you literature majors). What's clear is that TPTB are rapidly losing control at the international level and it looks like the Washington Consensus is approaching crack-up. There is a debate about who is going to "win" -- Martin Wolf in the FT a few days ago thinks it's the USA, but retaliatation from elsewhere is also likely being prepared. The Chinese authorities are by turns trying to scare us with the risk of a major domestic upheaval in their country if the yuan revalues up too rapidly, while also trying to move tout de suite to arrange trade with direct settlements invoiced in local currencies.....

Meanwhile, clearly some in the capital markets are awake to "tail" events:

From the FT Alphaville site:

The rift between Japan and Korea which has spilt into the open in the past 24 hours, with a Japan minister protesting Korea’s currency policy, only to be rebuffed by the BoK governor, is significant for the rifts that are opening up WITHIN Asia.

c) Start taking more note of what is going outside of the ostensibly major players: i) Russia widens rouble intervention band – sells it as a step towards inflation targeting – but in truth they are fed up with constant non-RUB flow related interventions, and the instability of their $480 Bln FX reserves ii) Singapore tightens policy, but widens SGD intervention band for the first time since 9/11, eminently expecting more volatility and again probably fed up with intervening. iii) Taiwan regulator suggests foreign investors put up foreign currency as margin for Taiwan stock trades – are they fed up with intervening? I think so..

More observations as and when they come to light, but there seems little doubt that we are now heading down the cliff face of a full blown crisis, but smelling the coffee of that crisis is not yet en vogue!

The upcoming G20 meeting promises to be a hugely significant event, though we hoi polloi won't get the details until very late after marching orders have already been issued. This was supposed to be the meeting at which the composition of the SDR was to be re-negotiated, I believe, but I've heard nothing about that lately. Given the latest events, I expect volatility in global financial markets will accelerate immediately afterwards unless there is a grand, sustainable compromise announced in the final press conference. What are the odds of that?

Michael Hudson has a good comprehensive piece here, which is widely being linked to, and is the closest we are getting to a progressive view of these developments in realtime.

What was it that Frank Fukuyama said about the end of history? Maybe it really was all that dope he smoked as a high school kid.....

Sunday, October 10, 2010

Undersea Currents

I believe I recently read that China has been a net seller of Japanese Govt Bonds, reversing the intervention of late summer. Nevertheless, this post is a good articulation of some of the underlying geopolitical aspects of current economic policy. I do believe that the Chinese intervention was at the least a demonstration project to make a point.

There is a curiously perverse but symbiotic relationship that exists between China’s mercantilists and America’s finance capitalism. The whole “Bretton Woods II” process contributes to the financialization of our economy, as it continues to hollow out our manufacturing base. It represents an unholy alliance between Wall Street and China’s military, which is driving much of the investment in China because they are reaping so many material benefits. The problem, however, is that at some point Chinese credit expansion has no place to put its money. All of the targets have been saturated, which means that there will be overinvestment in all industries and to an incredible degree. This may well kill industry after industry. It appears to be happening already in Japan.

Sunday, October 3, 2010

We'll know its the 1930's if they take the White House

Matt Taibbi strikes again with an entertaining, clear article on the Tea Party's psychological underpinnings. I consider Rolling Stone pretty mainstream, though I don't know its circulation these days. Gotta be reaching people who don't read Frank Rich, though.

Many quotable lines, this is just one example:

So how does a group of billionaire businessmen and corporations get a bunch of broke Middle American white people to lobby for lower taxes for the rich and deregulation of Wall Street? That turns out to be easy. Beneath the surface, the Tea Party is little more than a weird and disorderly mob, a federation of distinct and often competing strains of conservatism that have been unable to coalesce around a leader of their own choosing. Its rallies include not only hardcore libertarians left over from the original Ron Paul "Tea Parties," but gun-rights advocates, fundamentalist Christians, pseudomilitia types like the Oath Keepers (a group of law- enforcement and military professionals who have vowed to disobey "unconstitutional" orders) and mainstream Republicans who have simply lost faith in their party. It's a mistake to cast the Tea Party as anything like a unified, cohesive movement — which makes them easy prey for the very people they should be aiming their pitchforks at. A loose definition of the Tea Party might be millions of pissed-off white people sent chasing after Mexicans on Medicaid by the handful of banks and investment firms who advertise on Fox and CNBC.

Read the rest here.

This was today's must read from Yves Smith's Naked Capitalism.