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The Slog of All Slogs: Election 2012 Begins

Apr 182012

Quickly now, grab your split-panel Obama/Romney pictures. It's general election time!

Like a band-aid you have to rip off but don’t want to, the time has come for the most modern of American traditions – the knock-out sports-for-non-sports-fan over-budgeted escapade that is an American Presidential Election. Two men enter (others pretend they do but never really count for anything) and one man wins the honor of being erected on a pillar as all that is wrong with the planet by the opposition for the next four years.

Some optional governance is possible.

Our returning champion, President Barack Obama, was last electorally seen cruising to a 365 – 173 Electoral College pasting of Senator John McCain – taking the national vote by 7.2%. It was the largest margin of victory since independent Ross Perot siphoned off enough Republican votes to help President Bill Clinton top Senator Bob Dole 379 – 159 on an 8.5% margin.

Since the 2008 election the Great Recession has ended. An anemic recovery has ensued, facing strong headwinds from a shattered real estate market that may take a generation to recover, relentless cuts to the public sector that have methodically chipped away at job growth, European trading partners held back by a widespread debt and currency crisis, and the continuing crippling debt brought on by two unfunded wars started in the dawning years of the last decade. Unfortunately for Mr. Obama it is exceedingly hard to prove a negative, so while it is within all fair assessment to assume that a President McCain administration continuing previous policies would have exasperated the bleak economic times in 2009, without a way to visit alternate realities one cannot confirm this.

In Search of a Budget Fix: Missing Revenue

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Mar 302011

How did we get here?

Among conservatives and other small-government minded individuals, a common complaint is that the full ability of our economy to recover from the late 2000′s crash is being restrained by taxes on business. Frequently cited is the 35% tax rate that businesses are supposed to pay annually. It is cited as being among the highest rates in the world – which it is. Only a handful of third world nations and Japan have official corporate income tax rates that are higher.

If corporations actually paid taxes at that rate and were hurting because of it, this would be a valid argument to go after. What occurs in the real world, however, is that through a myriad of tax loopholes and armies of tax lawyers fighting to find them, companies pay an effective tax rate that is far below the implied 35%. Some, like General Electric, can rack up billions of dollars in profit in this country and not only have to not pay a dime on any of those earnings but is actually able to get billions of dollars of refunds from the federal government.

General Electric is hardly alone in being able to exploit the system in the past year, or even over the past years. In a period of time from 1998 until 2005 some 72% of all foreign companies and 57% of domestic companies were able to not pay a dime in taxes for at least one full year. That is lost revenue for the federal government – revenue that can not possibly be made up in its entirety by going after the incomes of individuals. As a result things that those same small-government fiscal conservatives complain about – such as the ballooning national debt – are allowed to explode out of control from the abuse of these loopholes. The solution seems to be a never ending mantra of “cut! cut! cut!” and never an effort to figure out if we’re missing out on any revenue.

$600 billion into a black hole

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Nov 142010

The Federal Reserve has recently announced they are throwing $600 billion into something called “quantitative easing”, on top of $2 trillion thrown in last year. The reason? In short, to shore up our debt and to try to ignite the economy. Will it work? Maybe, but probably not that well.

Here’s a much, much better take on the why, though:

The terrible economy, still in progress

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Sep 152010

In 1964, President Johnson declared a War on Poverty. 46 years later, the poverty rate looks to return to levels not seen since his administration.

Statistics can tell the story of a boom and bust much better than more worthless day-to-day metrics like the individual movements in the stock market, especially when the companies represented in the stock market see their boom times return on the backs of not investing any profit or hiring anyone. Your books can look stellar if you don’t invest for two years down the line, much less the actual future.

Statistics can also paint an accurate picture of life in the real world – a world that is separated from the machinations of tycoons and the narratives that television pundits try to write for the rest of us. Only in the raw data can the actual situation on the economic ground be put together, and that situation has been, is, and looks to continue to be dire. This week’s example – the poverty rate:

The number of people in the U.S. who are in poverty is on track for a record increase on President Barack Obama’s watch, with the ranks of working-age poor approaching 1960s levels that led to the national war on poverty.Census figures for 2009 – the recession-ravaged first year of the Democrat’s presidency – are to be released in the coming week, and demographers expect grim findings.

…

The anticipated poverty rate increase – from 13.2 percent to about 15 percent – would be another blow to Democrats struggling to persuade voters to keep them in power.

What happens when you don’t go big

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Jun 172010

Obama has gotten bills to sign, and those bills have helped, but not going for more from the start is coming back to bite far too soon.

Obama has received bills to sign, and those bills have helped, but not going for more from the start is coming back to bite far too soon.

There’s a danger in not pushing through a dramatic agenda when the situation calls for it – the danger being you succumb to falling back into the same rut, perhaps learning from your mistakes in a philosophical way but doing nothing to prevent a repeat them in the future.

There is an increasing risk that America is sliding into a double-dip recession or, at best, a period of stag-flation (little to no growth over an extended period of time) that will serve to continue to harm those who have already been harmed by the recession and keep those who are hanging on to their jobs looking over their shoulder, waiting for that next economic shoe to fall and hit them.

The panacea that was the stimulus bill – the American Recovery and Reinvestment Act of 2009 – turns out to not be the cure-all that was originally hoped for, and that a mere $787 billion couldn’t stop the continuing of the slowdown, as ludicrous as that sounds on its face. With the money running out in a midterm election year, Congress is set to dither, with disastrous repercussions for the American people who are already suffering greatly from the downturn – now entering its 3rd year (or, if you live in manufacturing states, 9th year).

If the Bank is Offering Something, it’s Probably Bad For You

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Jan 062010

These thin bits of plastic got us into a lot of trouble

In 2009, the Obama Administration got new regulations passed on the banking and credit card sectors that bring to an end business practices that were mainly set up to fleece as much money as possible out of consumers. As a consumer, you’ve come to know these practices with late payments on credit cards sending that advertised 7 – 9% interest rate to one of 30+% overnight. The Wall Street Journal had a good summary on what is to come:

For plastic, the new rules go into effect in February as part of the Credit Card Act of 2009. The rules will limit some interest-rate increases, require more disclosure to customers and prohibit banks from raising interest rates on current balances unless a customer is at least 60 days behind in a payment.

The amount of money that banks and credit card issuers made on these sorts of schemes of fine print lay somewhere between impressive and sickening:

Credit-card issuers collected $22.9 billion in penalty fees—such as those assessed for late payments—in 2009, up from $19 billion in 2008, said Robert Hammer, who runs a credit-card consulting firm in Thousand Oaks, Calif.

That is a year-over-year increase of 20.5%. Not much of anything business and/or profit related has risen by 20.5% in the last year. Impressive how one of the few things that actually does has a direct impact on the struggling consumer, thereby prolonging the recession and delaying the recovery even more.

Let the crooks keep on crooking

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Sep 292009

The Great Asset Bubble

Managing to not learn a single thing from the ancient history of last year’s economic meltdown (and just in time for the first anniversary, how quaint), reports are still surfacing that the banking industry as a whole continues to engage in, and profit from, the ultra-risky bet taking in the world of derivatives – the shadow market that nearly brought western capitalism to its knees last year. On lessons not being learned:

U.S. commercial banks earned $5.2 billion trading derivatives in the second quarter of 2009, a 225 percent increase from the same period last year, according to the Treasury Department.

More than 1,100 banks now trade in derivatives, a 14 percent increase from last year. Four banks control the market: JPMorgan Chase, Goldman Sachs, Bank of America and Citibank account for 94 percent of the total derivatives reported to be held by U.S. commercial banks, according to national bank regulator the Office of the Comptroller of the Currency.

The graph on the right is a nice example of the pool of money that is out there today.

- The red 1.9TRN represents the amount of USD that has been pledged in bailout money.
- The 0.845TRN represents all of the gold reserves in all of the central banks around the world
- The 3.9TRN represents the amount of paper money in existence
- The 39TRN represents all traditional financial reserves in the world
- The 62TRN represents “shadow banking assets” – this is where we find the chunk of money that may or may not exist in the real world that banks leverage on, which gets us into messes like the one currently being dealt with in this worldwide recession.
- The remaining 290TRN represents “other assets” in existence – this combined with the 62TRN of “shadow banking assets” represent a middle ground estimate in an enormously large, unregulated marketplace.

After playing with loaded dice and having it blow up in their collective faces a year ago, the same institutions – mostly headed by the same people – continue to gamble in the same ways, now gambling even more than before.

Why is this bad? Look to the distant 2008:

Simon Johnson, a professor at the Sloan School of Management at the Massachusetts Institute of Technology and former chief economist of the International Monetary Fund, said that the seeds of another collapse had already sprouted. If major banks are allowed to keep making bets that are ultimately backed by taxpayer guarantees, they will return to the practices that led them to underwrite trillions of dollars in bad loans, Professor Johnson said.

“They will run up big risks, they will fail again, they will hit us for a big check,” he predicted.

This is what keeps the banking system going at present

So far, one year into the crisis hitting the fan, major new regulations have not been leveraged against the financial industry – though the currents seem to be pointing in that direction. There is only one thing that can really put a stop to this, and that is a reinstating of the Depression-era Glass-Steagall Act. The 1933 law created the FDIC as we know it, and more importantly prevented a bank holding company from owning other financial companies. The separation of financial institutions allowed for companies to grow, but never become “too big to fail” – where the failure of a single company could potentially threaten to ruin the entire financial landscape. The Glass-Steagall Act was undone by the Gramm-Leach-Bailey Act of 1999 – which, for all intents and purposes, laid the ultimate groundwork for the asset bubble – and crash – of the last decade.

A re-institution of Glass-Steagall is nowhere on the horizon.

To prevent a replay of last year’s crisis, investors in financial institutions, especially bondholders, must believe that they will lose money if banks fail, said Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation. “You need to send that very strong, clear signal to restore market discipline,” Ms. Bair said.

But legislation that would allow regulators to close giant institutions in an orderly fashion has been stalled for months. So too have efforts to create a systemic regulator that would focus on the broader risk that might occur from the ripple effects caused by the failure of one major bank.

Another proposed change would require banks to list and trade derivatives through a central clearinghouse, just as stocks and options are traded through exchanges, but it has yet to go anywhere.

Until this changes, the risk for a repeat performance at some point in the future, or the risk for a deepening of the crisis to true depressionary status remain most assuredly on the table.

Oh, the little country is poking the big country with a stick again!

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Aug 082009

In tonight’s edition: Georgia is posturing for some odd reason, Pakistan: still a mess, and unemployment looks not quite so bad for the moment…

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As has been mentioned a couple of times in recent postings, we’re at the one year anniversary between Russia and Georgia’s war, the same war that saw Georgia thoroughly spanked as Russia barely expended any muscle in dispatching Georgians out of two sections of the country that preferred to have a friend in Moscow than a friend in the EU. Doing its best job in not remembering the past, Georgia is trying to flex its muscle, for the hell of it.

Russian President Dmitry Medvedev said Georgia’s actions, including a troop buildup on the borders of two separatist Georgian regions, are cause for “serious concern” a year after a war between the two countries.

“Georgia’s actions continue to cause serious concern, from the unceasing threats to restore its ‘territorial integrity’ by force and daily warlike rhetoric to its concentration of armed forces on the borders with South Ossetia and Abkhazia and serious provocations in border areas,” Medvedev said in a letter to French President Nicolas Sarkozy. Excerpts from the letter were posted today on the Kremlin Web site.

If need be, Moscow can once again flick the Georgian fly off its shoulder. Whatever the cause the Georgians think they have, right or wrong as they may be, one has to realize that unless you’re going in with the backing of Brussels or Washington, you’re not going to wind up doing much of anything except getting routed. This lesson hasn’t been learned yet, but hopefully it’s all just a phase and diplomacy can guide both sides in the future.

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Pakistan is a country that has been an absolute mess for years, with the formally government-backed Taliban turning on its source country after being booted from Afghanistan in 2001. Allowed to fester and gain its control in Pakistan’s largely lawless western areas, the Taliban has been able to spread back into Afghanistan and encroach on Pakistan’s capital – moves that have brought see-sawing violence through cities across the country, resulting in displacement of thousands, and many deaths. With the apparent killing of a top Taliban leader, it appears that the following has been added to Pakistan’s plate of instability: inner-Taliban conflict.

Pakistan says it is investigating unconfirmed reports of a deadly shooting between two rival Taliban commanders seeking to replace the group’s leader Baitullah Mehsud, who was allegedly killed in a U.S. missile strike.

Pakistani Interior Minister Rehman Malik said Saturday the reports suggest a fight broke out during a meeting (shura) between Wali-ur-Rehman and Hakimullah Mehsud, and that one of them is dead.

But another Taliban commander, Noor Sayed, denied there had been any such confrontation.

The succession meeting was reportedly held in the semi-autonomous tribal region of South Waziristan bordering Afghanistan, where Pakistan’s Foreign Minister Shah Mehmood Qureshi says Baitullah Mehsud was killed Wednesday.

In theory this is a touch of good news, since a fractured Taliban is less likely to make a move on Islamabad and overthrow the government there, but the chance for more violence elsewhere – especially in the western proviences – continues to run high, if not getting higher.

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Hark! There’s one sort-of kind-of good-but-not-really bit of news out there! The unemployment rate fell… slightly!

Major stock indexes jumped more than 1 percent Friday after the government said the nation’s unemployment rate unexpectedly fell in July for the first time in 15 months and that employers cut fewer jobs. Bond prices fell, driving yields higher as investors left the safety of Treasurys.

The Labor Department report handed investors the best evidence yet that the economy could be climbing out of the recession. Analysts widely consider unemployment the biggest obstacle to a recovery in the economy, which is driven by consumer spending.

The surprise figures injected new life in a monthlong rally and provided validation for traders who have been betting since March that the economy is healing. The Dow Jones industrial average rose 114 points to cap its fourth straight weekly gain. The Dow is at its highest level since early November.

I do love that terminology though… “highest since November” – still need another 50% jump to get back to tasting “the way things were” when this all began in 2007. A 0.1% decline in the unemployment rate doesn’t mean that the sun has risen and everything is all better, but at least the bleeding isn’t at as severe of a rate. Could this be the peak of the worst in unemployment? Possible, but not likely – people are still losing their homes and the entire slow turning wheel that has ground us down over the past many months has too much inertia to just stop in its tracks. Could this be a pause in unemployment and there’s still a second spike higher? Possible, but not for sure – we may just linger here for years as the economy stagnates before finding its new direction.

A coup, complete

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Aug 052009

In today’s edition: Iran’s coup becomes official, the U.S. ponders the good bank/bad bank solution, and the Rooskies are coming

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As the President, I swear to Almighty God before the Holy Quran and the Iranian nation that I will protect the official religion and the Islamic Republic regime and the country’s constitution, and use all my talents and qualifications towards responsibilities I have undertaken, and dedicate myself to serving the people and promoting the country, promoting religion and morality, supporting truth and spreading justice, and will avoid any kind of obstinacy and defend the freedom and dignity of individuals and rights of the nation that the Constitution has recognized. I will refrain from any action to safeguard the borders and political, economic and cultural independence of the country, and with the help of God and by following the Islamic Prophet and the Imams like a devout and self-sacrificing trustee will protect the power that has been given to me by the nation as a sacred trust placed in me and pass it to the nation’s elected [leader] after me…

With those words spoken today, Mahmoud Ahmadinejad began his 2nd term as President of Iran. It appears all but certain that the old guard of that country has solidified its grip, has pulled off an obvious mass electoral fraud, killed its own citizens to further the cause, and has gotten away with it. Perhaps not scott free, but any sort of winning is winning, right? One last time now, the “actual” and “real” results…

Official Iranian Election Results
Mahmoud Ahmadinejad	24,527,516	62.63%
Mir-Hossein Mousavi	13,216,411	33.75%
Mohsen Rezaee	678,240	1.73%
Mehdi Karroubi	333,635	0.85%

…and…

Unofficial Iranian Election Results
Mir-Hossein Mousavi	19,075,623	45.39%
Mehdi Karroubi	13,387,104	31.85%
Mahmoud Ahmadinejad	5,698,417	13.56%
Mohsen Rezaee	3,754,218	8.93%

The next Iranian election for President is in 2013. Mr. Ahmadinejad is term limited and will not be allowed to run (probably). Still, I highly, highly doubt that any sort of openness of debate will be allowed anywhere near the level that was seen in Iran this year – and it will probably be limited in such a way for a long time.

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The financial crisis and its after effects continue to haunt us. Fannie Mae & Freddie Mac, two companies that were quazi-private lenders of last resort to potential house buyers, were slammed by last fall’s meltdown. There appears to be an endgame on the table for both of those companies, and that would basically involve wiping their collective slates clean:

The Obama administration is considering an overhaul of Fannie Mae and Freddie Mac that would strip the mortgage finance giants of hundreds of billions of dollars in troubled loans and create a new structure to support the home-loan market, government officials said.

The bad debts the firms own would be placed in new government financial institutions — so-called bad banks — that would take responsibility for collecting as much of the outstanding balance as possible. What would be left would be two healthy financial companies with a clean slate.

The moves would represent one of the most dramatic reorderings of the badly shattered housing finance system since District-based Fannie Mae was created by Congress to support mortgage lending during the Great Depression. Both Fannie Mae and Freddie Mac, based in McLean, have government charters to buy home loans from banks, which they then repackage and sell to investors. The banks can then use the proceeds to offer more loans to home buyers.

While this does the job of making unhealthy companies healthy again, and attempts to collect whatever is left over of what can be paid on these properties, it does allow two companies to walk away from their own lending practices and their own mess, into the future to potentially do it all again. The bad guys get away and we get stuck with the bill. The downside to letting them fail, however, was seen in last fall’s stock market crash. The evaporation of Lehman Brothers helped to evaporate 20 – 30% off of the U.S. stock market – and that was just one financial company. It’s one of those situations where there are no pleasurable options, just bitter pills to swallow. Good job, capitalism.

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Russia is flexing its muscle:

A senior Russian military official said Wednesday that Russian nuclear-powered attack submarines spotted off the U.S. East Coast were on a legitimate training mission.U.S. defense officials said Tuesday that two Russian submarines had been patrolling in international waters for several days. While the activity was reminiscent of the Cold War, the U.S. officials said the submarines had done nothing to provoke concern.

Gen. Anatoly Nogovitsyn, a deputy chief of the General Staff of the Russian military, said the patrols were part of efforts to give more training to the military forces.

For anyone who has forgotten the back story, last year the tiny nation of Georgia instigated a war against Russia with weapons sold to them by the United States. The Georgians were routed and sent packing by the overwhelming Russian forces and in a few days the conflict was over. The fact that Russians were being shot at with American weapons though, did not sit well with Moscow – causing a freezing in relations like nothing seen since the end of the Cold War. Such a thing isn’t going to be forgotten by the Russians as quickly as the West might forget that the conflict ever happened. If anything the exercises off the east coast of the U.S. are a “stay out of our backyard!” warning that, thanks to the current administration we have, will more than likely not turn into a dick waving war for the 2010s and beyond. Just let time heal these wounds.

Iran moves toward outlawing opposition

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Aug 022009

In today’s edition: What might be the beginning of the end of the Iranian opposition, success is apparently a warning of disaster, and a college graduate displays they slept through any and all legal classes they may have taken.

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The show trials in Iran have begun. Over the next few days, perhaps weeks, hundreds of people will be publicized on state media – accused of inciting riots that were actually massive protests in the days that followed that country’s historic election. The leaders of the reform movement – so far not including main opposition candidate Mousavi – will be tried, found guilty, paraded in front of the public, and either locked up for the rest of their lives or put to death. That seems to be exactly where all this is heading, indicating that the hard line regime looks to remain just that and to not give into the public’s demand for modest reform.

The mass trial of Iran’s top reformist leaders over the weekend on charges that include conspiring to overthrow the regime signals that a process is under way to eventually outlaw the reformist party and ban its members and supporters from political activity, Iran analysts say.

On Sunday, reaction by Iranian newspapers and Web sites to the trials of some 100 detained opposition members, including a former vice president, was polarized as some raised questions about whether their confessions were coerced.

Those who disagree may eventually be forced to fall in line, and opinions like this might become more common and more… official from the government toward the west:

The Kayhan newspaper, which acts as a mouthpiece for Iran’s government, hailed the testimonies as proof that Western powers were plotting a “velvet revolution” in Iran and called for the execution of top reform leaders. It also encouraged the government to jail Mr. Khatami and opposition leader and presidential candidate Mir Hossein Mousavi.

If this all goes according to plan, Iran will become a one-party dictatorship:

The outlawing of the Islamic Participation Front, the reform party that vehemently opposes Mr. Ahmadinejad, would immediately purge the parliament of reformist lawmakers. It would also ensure that no reformist candidate could run for office.

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The so-called “Cash for Clunkers” program, a program that is offering up to $4,500 for an individual to trade in their old, gas guzzling car for a new, more energy efficient one has been a smashing success – going through its allotted billion dollars in funding in just one week, which potentially translates into a quarter million new car sales. Upon hearing that the funds were running out the House hurriedly passed a measure that would allocate another $2 billion for the successful program. If it is approved by the Senate this week, then it’s full steam ahead for the program at least through the rest of this month. This new source of economic activity and overall successful part of the $700+ billion bailout effort of this government is exactly why the Democrats and Obama can’t be trusted with anything! What? Oh, it must be the newest Republican talking point:

Republicans say the problems with the program are another strike against the Obama administration as it pushes for a speedy overhaul of the health care system that would involve a government-run insurance program. They argue that government involvement in any industry is a recipe for disaster.

Senator Jim DeMint, Republican of South Carolina, said the “cash for clunkers” program was an example of the “stupidity coming out of Washington right now.”

“The federal government went bankrupt in one week in the used-car business, and now they want to run our health care system,” Mr. DeMint said in an interview on “Fox News Sunday.” “This is crazy to try to rush this thing through again while they’re trying to rush through health care, and they want to get on to cap-and-trade electricity tax. We’ve got to slow this thing down.”

Let’s play that game where we parse language. The “problems” described by Senator DeMint, and others like him, say that because the program was such an overwhelming and popular success, it was an utter failure. It would have apparently been better if nobody bought anything and the program… failed. The “government went bankrupt in one week” line is a cute touch but is, in fact, just another distortion of the truth. The government allocated x-dollars for the program, which were subsequently spent. The government is now looking to re-allocate an additional x-dollars for the program, so it may continue. This happens on an annual basis in Washington, it’s called the budget. Under Senator DeMint’s argument, every program and the federal government itself goes bankrupt every year because money that is allocated is eventually spent. That’s over 233 years of continuous bankruptcies. How will we ever survive?

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Here’s an entry for “legal case that doesn’t have a snowball’s chance in hell“:

A 27-year-old Monroe College graduate is suing the New York school, contending it has done little to help her find a job.Trina Thompson, who graduated in April with a bachelor’s degree, alleges in a Bronx Supreme Court lawsuit that she did not receive adequate employment leads and advice from the school’s office of career advancement, the New York Post reported Sunday.

“They have not tried hard enough to help me,” the information technology degree graduate alleges in the July 24 suit.

Ms. Thompson has apparently yet to learn that college is not a service that is guaranteed to do things for you. Just because you get a degree in anything doesn’t mean you’re going to the Forbes 500 list, and just because your school has job seeking help doesn’t mean that you are guaranteed to get a job. Ms. Thompson is a bit miffed that she spent $70,000 on schooling and was not greeted with a job upon leaving the campus for the final time, but she’s in a very large boat with a vast number of graduated students all across the country. The jobs just aren’t there right now, at least not in the fields that were studied during school. Most people set out to make do with what they can, hoping that when the economy finally does turn, there will be some sort of employment award for that piece of paper that is worth so many thousands of dollars. In the meantime the answer is not to sue everyone else for your problems. Anyone who honestly thinks college = automatic employment is perhaps not smart enough for the real world just yet, and may consider additional schooling.

All of this coming from a college student who has been there, done that.

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