Saturday, January 30, 2010

Howard Zinn: RIP

The historian Howard Zinn died this week at 87. His _The Peoples' History_ of 1980 altered how many viewed US history, bringing to attention the stories of those who were not the winners of the American dream, the many who suffered, from slaves through Indians, and on and on to many groups. He performed a real service and will be missed.

Friday, January 29, 2010

Banning Foreign Companies' Campaign Contributions

Many companies have tried to reduce taxes by incorporating abroad -- the so-called Bermuda Inversion. Wouldn't the banning of foreign campaign contributions apply to them?.

Thursday, January 28, 2010

Finance vs. Independence at the Fed

Richard Smith is a historian who is doing a biography about my mother's cousin.
Here is his timely piece about the corrupting influence of finance on the Fed -- in particular about A. P. Giannini got Truman to remove Marriner Eccles from his position as chairman of the Fed. So much for independence.

Smith, Richard H. 2010. "Breaking News (From 1948): Banking Mogul Ousts Fed Chairman." Huffington Post (28 January).

Climate Disclosure: More than a Carbon Inventory

The SEC has voted to require something that firms should already be doing proactively, assessing their vulnerability to climate change and legislative remedies for it. What everyone should recognize, however, is that first generation measures are not enough.

First generation analysis was first-round: a business or agency would inventory its own carbon emissions and the impact that climate change would have on their own operations. This is a good start, and much has been learned.

To go to the next generation, the guiding principle is to evaluate not only your own direct exposure, but also that of important customers, partners and suppliers. You can say it’s their problem, and it is, but it’s also yours. For example, my institutional home, Evergreen State College, has to consider what the consequences will be for student enrollment if fossil fuel prices are increased dramatically. How many commute from distant locations, and how many of these will move to our neighborhood in order to continue their education? If there are likely to be significant shifts in residential patterns that will affect student demand, can we predict them? Are there actions we can take in advance that can minimize the downside of these adjustments or possibly take advantage of the upside?

You could say that what is needed is for organizations to stop looking at themselves as if there were thick lines around their borders and see themselves ecologically.

The Ideological Use of Cost Benefit Analysis

This short section from my forthcoming Invisible Handcuffs discusses the ideological use of cost-benefit analysis.

Wednesday, January 27, 2010

Profound Journalistic Ignorance of Climate Change Legislation

It’s not like this is a new issue. By now, you’d think that journalists would have figured out what’s what in the realm of forestalling climate change, but you’d be wrong. Just take a look at today’s long writeup in the New York Times.

After a quote from Lindsay Graham, a senator from South Carolina, pronouncing the death of cap-and-trade, the coauthors write

Mr. Graham’s opinion matters because he has been the only Republican willing to work with Democratic senators on some form of climate change legislation.

But towards the end of the piece we read that

Two senators, Maria Cantwell of Washington, a Democrat, and Susan Collins of Maine, a Republican, have proposed a system known as “cap and dividend” under which power plants, steel mills, refineries and other major carbon emitters would have to pay for permits to pollute, with all of the money being rebated to consumers to cover the higher costs of energy and manufactured goods.

So: Graham is the only Republican willing to collaborate, but Collins has also sponsored a carbon-capping bill (one that would allow trading too).

Even worse—in fact, much worse—the article completely mischaracterizes Cantwell-Collins. It does not, unlike Kerry-Boxer, require industry-by-industry emission permits. Instead, it requires permits for introducing fossil fuels into the economy, whether by extraction or importation. It goes after carbon from the top of the food chain, making its cap comprehensive, unlike approaches that try to determine which uses of fuels will be regulated and by how much. This also neatly sidesteps the political morass that results from inviting each industry to lobby for its own dispensations. Auctioning fossil fuel permits and rebating the proceeds to the public, as Cantwell-Collins proposes, is not an evasion of environmental responsibility, but a rational attempt to make the inevitable energy price increases economically and politically palatable.

The real story is not the death of climate change policy, but the collapse of one particular initiative that was largely smoke and mirrors, fatally compromised by payoffs to any business alliance that stuck out its hand. The bad news is good news, unless all we know is what we read in the papers, feel discouraged and give up.

Tuesday, January 26, 2010

A Woody Allen Moment

You may remember the scene from “Take the Money and Run” (if you’re as old as I am). Over and over, as he was growing up, bullies would pull Woody’s glasses from his face, throw them on the ground and smash them. Now, as an adult, he is cornered by the police after a failed heist. In a panic, he pulls his glasses off, throws them on the ground and smashes them. “See,” he says, “I did it myself.”

Fast forward to Obama post-Massachusetts, offering to shrink the beast all on his own.

Time to switch role models.

The Other Shoe

In broad outlines, the story is very simple. In bailing out the financial system without taking possession of more than a small equity position, and then in engineering a stimulus that was deliberately inefficient—devoting a third of its cost to tax cuts at a time of massive deleveraging—the Bush and Obama administrations squandered hundreds of billions of dollars in public resources. Now, to prove his fiscal responsibility, Obama wants to cut spending on core functions of government, like public health, the environment and national infrastructure.

You can blame him for leaving the bloated Pentagon budget off the table, or for prematurely panicking over fiscal deficits. Both criticisms are entirely justified. But in a larger sense, we condemned ourselves to a generation of torturous public finance in that spasm of terrible policy. We will be paying for it, one way or another, for years to come.

Obama is not a Wimp

Barack Obama gave the appearance of meekly appealing for bipartisanship, only to get kicked in his private parts. Yet, look how courageously he is willing to take on the liberals and his party. Along with Larry Summers and Rahm Emanuel, he can really kick butt. Locale he has taken on the teachers union by ramping up Bush's No Child Left Behind. Watch him cut back entitlements for those people without enough initiative to run their own hedge funds.

He may down to the Israelis, but look how decisive he is in Afghanistan, willing to fight an unwinnable war. Not even Joe Lieberman can top him.

And what about his decisive actions against the fat cats? He didn't kick them when they were down. A would not real hero to behave that way. No, he gave them billions of dollars, but now he's decided to take them on, by creating regulations so tough that the fat cats will have to spend thousands of dollars to figure out how to circumvent them.

Barack Obama, change you can believe in.

Monday, January 25, 2010

This Ford’s in Reverse

How should the Democrats respond to their collapse in Massachusetts? Harold Ford, who wants the Democratic nomination for Senate in New York, says swing to the right: cut taxes, lower our sites on health care, fast-track more foreign workers in high-tech fields (which companies want in order to undercut wages they see as “too high”), and cut government spending.

In other words, be like Republicans, only more civilized.

If voters voted on ideology this would make sense. With the Republicans racing to the right, the median voters ought to be there for the taking. Unfortunately, few people actually vote on ideology. Political preferences are based primarily on identity (who we think are “us” as against “them”), secondarily on narrative. If Democrats reposition themselves as responsible conservatives, it just means that, when they are in power, their policies will be more conservative.

Obama’s Gesture on Student Loans

According to this morning’s New York Times, in his state of the union address Obama will call for a cap on student loan repayments. The formula will set a maximum of 10% of post-graduation income above a living allowance. Money not collected due to the cap will be replaced from the general budget.

Is this better than nothing? Yes. It removes a bit of the pressure on grads who face a harsh job market or who want to explore less pecuniary pathways in life. It also encourages students to borrow more for their education, which is a good idea if it allows them to cut back on the number of hours they try to work as they go to school, study, raise kids and cope with life’s other challenges. The cost of tuition has gone up relentlessly, and students have responded by trying to earn more, at the expense of their ability to graduate in a reasonable amount of time and remain sane in the process.

But why is this proposal so much less than it should be? For decades education policy analysts have been calling for putting student loan repayment on an ability to pay basis. Repayment should be set as a fixed percentage of income, with a proportionality between the amount of the loan taken out and the number of years of repayment. Some, who make a bundle, would end up paying more, others less. The system would be progressive and predictable. It would also pay for itself, which in principle frees up more public money for reducing tuition in the first place. (Obama would have lower-income students paying a little less, but no one paying more.)

There is a larger debate that ought to be held around using tuition to pay for the costs of public education. Outside the US this is much less common. One reason is that societies want to encourage more students to continue to a higher level, and studying is already challenging without adding financial pressure to the pot. Another is that they want to separate curricular decision-making in higher education from student preference, at least to some extent. If a college depends primarily on tuition to make ends meet, it has to give greater weight to student demand when deciding what courses to offer, which programs to expand or eliminate, what kind of teaching to reward, and so on. Obviously there are arguments on both sides of this debate, but the US has swung very far in the direction of demand-driven revenues. My college, which is nominally public, now gets the majority of its funding from students, not the state legislature.

The Obama proposal is small, small, small. I guess we are entering Phase II of his presidency, where he shifts to Clintonoid minimalism, a fine mist of minute policy droplets that bathes the public with good PR even if no one actually gets wet.

Saturday, January 23, 2010

Guard Labor

My article on Guard Labor is in the new issue of Dollars and Sense. It is extracted from my forthcoming book, The Invisible Handcuffs.

The article begins:

Guards are everywhere in a capitalist economy. A few are dressed up in uniforms, so they are easy to spot. But most do not look like guards at all. Some sit in comfortable offices; others work on assembly lines in factories. James O’Connor, a prolific sociologist from UC Santa Cruz, describes one familiar set of guards whom we do not usually think of as guards:

Consider the labor of the ticket seller at a movie house. The seller’s task is merely to transfer the right to sit in the theater to the movie-goer in exchange for the price of a ticket. But it may not be immediately obvious that it is not the lack of a ticket that keeps you out of the theater ... The ticket is actually torn up and discarded by a husky young man who stands between the box office and the seat that I want.

These guards are a central feature of capitalism. Capitalists depend upon guard labor to protect their commodities, including the goods and premises they own, but especially the labor-power in their employ. Capitalism’s reliance on guard labor deforms the entire productive process, not only wasting labor, but also snuffing out badly needed creativity.

Fed Finally Dumps Eurojunk

Mark Thoma links to a story from the WSJ entitled "Fed to End Overseas Dollar 'Swaps' It reports that as of Feb. 1 the Fed will have unloaded all of the nearly $500 billion in foreign currencies, mostly euros, that it obtained through swaps in its massive increase in its balance sheet in Fall 2008. That reportedly was used to hold all kinds of horrendous eurojunk coming out of the AIG collapse. It was the worst stuff on the balance sheet, most probably. Now it is about to be gone.

Of course they have replaced it with US mortgage backed securities that do not look so hot, although they are promising to stop accumulating those in March. If that does not work out, could trigger the dreaded second dip.

Friday, January 22, 2010

The Hypocrisy of Corporate Personhood

"Corporations have neither bodies to be punished, nor souls to be condemned; they therefore do as they like." -- often misquoted as "Did you ever expect a corporation to have a conscience, when it has no soul to be damned, and no body to be kicked?"

Edward Thurlow, 1st Baron Thurlow. 1731-1806. Lord Chancellor of England, 1778-1783, member of Parliament at end of eighteenth century

In light of the Supreme Court's outrageous decision about campaign finance, I would suggest a move to treat corporations as persons -- making them liable to imprisonment and even the death penalty, when they cause loss of life.

But no, the pro-corporate types invoke a brilliant act of legerdemain, making the death penalty for corporations unthinkable.  As I noted in Manufacturing Discontent:

"during the height of the scandal regarding Enron's multibillion dollar frauds, a "Wall Street Journal opinion piece entitled, "Corporations Aren't Criminals," noted:  "Under the common law, a corporation could not be guilty of a crime because it could not possess mens rea, a guilty mind" (Baker 2002).  Sadly, the author was correct -- at least in so far as the current courts are concerned. In the eyes of some judges, the law goes even further than ruling that corporation that violate the law lack a guilty mind.  They insist that corporate managers, who should possess a mens rea, have an ethical responsibility to violate the law when doing so will prove profitable for stockholders.  For example, Frank H. Easterbrook and Daniel R. Fischel, the former a federal judge as well as a senior lecturer at the University of Chicago School of Law, wrote:

It is not true, however, that there is a legal duty to enforce every legal right ....  Managers do not have an ethical duty to obey regulatory laws just because those laws exist.  They must determine the importance of these laws.  The penalties Congress names for disobedience are a measure of how much it wants firms to sacrifice in order to adhere to the rules:  the idea of optimal sanctions is based on the supposition that managers not only may, but also should violate the rules when it is profitable to do so. [Easterbrook and Fischel 1982, pp. 1171 and 1177 n]"

Haiti Everywhere

"Much was said this night against the parliament. I said that, as it seemed to be agreed that all Members of Parliament became corrupted, letter to chuse men already bad, and so save good."

James Boswell

In my book, The Pathology of the US Economy, I wrote about how I was witnessing the United States following when I called "The Haitian Road to Development." What I meant was an economic strategy based on pushing wages down to make the economy productive.

Over the last two days, I have been thinking about the Haitian Road to Development more broadly. We lost our power. I don't mean political power; I mean electricity that powers our house. Without electricity, the computer was dead. Reading was possible only during particular hours. We were dependent upon a corporation that has been attempting to maximize profits by cutting back on maintenance.

Yesterday I had to ride my bike about 12 miles in a heavy rainstorm with winds up to 60 miles an hour. The rains stung my face. At times, I had to dismount and walk the bicycle to avoid getting pushed into oncoming cars.

Finding myself at the mercy of the elements, for brief moments, I would think about my minor difficulties and inconveniences for brief moments, then imagining how conditions in Haiti were infinitely worse. Everybody who knows anything about Haiti realizes the way that outside forces (largely the United States) have crippled the public sphere. Poor people have no choice but to denude hillsides for charcoal and build shanties that are vulnerable to the inevitable mudslides.

To much of the outside world (well, maybe just United States), the cause of the miserable conditions in Haiti are obvious: the voodoo religion, insufficient markets, ….

In many ways, I was thinking about how the US was coming to resemble Haiti. Of course, the decline in this country is of our own making, wasting our fortunes on wars that have no possibility of a long-term positive outcome -- as if any wars do. But the mudslides in California would be familiar to Haitians. The destroyed houses are more affluent. The missing trees were not chopped down by poor people needing fuel. The inhabitants are not left without water or food. Even so, I suspect that Haitians might have more understanding of the destruction than we do.

The Haitian state is incapable of protecting the people, but it weakness is not self-inflicted. In the prologue to The Confiscation of American Prosperity, I wrote "since the election of Franklin Roosevelt in 1932, every Democratic administration with the exception of Lyndon Johnson’s has been more conservative—often far more conservative—than the previous Democratic administration. Similarly, every elected Republican administration, with the single exception of George Herbert Walker Bush’s, has been more conservative than the previous Republican administration." Obama has done nothing to reverse this destructive trend.

The US state's idea of protecting people is to launch wars elsewhere and collect dossiers on people within the country. In the face of Hurricane Katrina or other disasters, it proves itself totally incompetent. The state is even less capable in protecting the people who fall between the cracks -- a child who cannot study because of a toothache. An elderly person who requires care and home -- care which the state of California keeps restricting. Instead, the state takes on the responsibility of caring for more than 2 million prisoners.

In effect, the state is fast ceding power to the corporate world, which threatens to go much further in Haitianizing our society.

Wednesday, January 20, 2010

Pass And Sign The Senate Health Care Bill As Is

I have to say it because the Senate health care bill is terribly flawed and very far from what so many of us were hoping for. However, we must face the hard reality in light of the election results in Massachusetts. There is simply no way anybody is going to get the Senate to pass any variation on it once Scott Brown is seated, unless they can actually change the rules to do reconciliation with 50 votes without mucking about at it for too long. The only possible bill likely to be actually signed into law at this point is the one passed with such enormous effort by the Senate in December. If the House refuses we will not see another serious effort for many years. The bill does little, but it is better than nothing, increasing coverage to two thirds of the uninsured and forbidding insurance companies from refusing people over preexisting conditions or arbitrarily dumping them.

Basically there are six systems of health care out there: 1) more or less pure laissez faire, formerly seen in the US but now no high income countries, although some very poor countries; 2) the US system of mixed public private with for-profit health insurance companies and no universal coverage; 3) universal coverage through private but non-profit insurance companies, seen in Switzerland and the Netherlands; 4) mixed private public system with universal coverage, non-profit private insurance companies, and a public option, see Germany and top-rated on health-care-by-the-WHO France; 5) a single payer system by government with universal coverage, with health care workers still privately (mostly self) employed, with Canada the leading example, and 6) full socialized medicine with health care workers employees of the state, see the UK and the former Soviet Union. There has been talk in the US of single payer, and many in Congress wanted a public option (although nobody was willing to push to change our badly behaved for-profit health insurers to non-profit), but in the end the Senate bill does not move us off System 2, merely extends and improves it some. Still, it is better than nothing, and killing it with no alternative will not help Dems politically this fall in the elections.

Obama And The Generals On Iraq

The inimitable Juan Cole ( is at it again, this time documenting a very poorly reported on showdown last year between the newly installed President Obama and the top generals dealing with Iraq, Petraeus and Odierno, along with SecDef Gates. They wanted him to alter the Status of Forces Agreement that Bush had made with the Iraqi government to withdraw US troops in 16 months, with independent patrols to cease last June. The generals wanted to the patrols to continue beyond June by relabeling them, something that Cole reports would have infuriated the Iraqi government. As it was, Obama stood firm with his campaign promise to stick with the 16 month timetable, and active troop patrols ceased last June as scheduled, despite the pressure from Gates and the generals. Apparently the last combat US Marines will hand over control of long-violent al-Anbar Province this coming Saturday and depart completely from Iraq shortly thereafter, and there were no combat US deaths in December. Of course Iraq continues to have many problems, but Obama has succeeded in effectively ending an active US war role there, although few realize what was involved or are noticing it now.

The currency quarrel with China is a dangerous distraction

In an article in the Washington Post last November entitled ‘The currency quarrel’ [1] there were a number of assertions made about the economic relationship between the US and China that are questionable, to say the least.

The opening sentence begins by pointing out that “it is a cliche that the United States has no more important bilateral relationship than that with China.” Is that true? Steve Dunaway, adjunct senior fellow for international economics at the Council for Foreign Relations says:
“Only roughly 15 percent of U.S. imports come from China. Moreover, all of the basic types of manufactured consumer goods that China exports to the United States (clothing, textiles, footwear, toys, small appliances, etc.) can be imported from other countries or could be produced domestically. The prices for goods that could substitute for products from China would be higher, but the difference in costs would be relatively small.” [2]

It's Canada – NOT China - that is the U.S.'s largest trading partner. It has been for some considerable time. [3]

The Washington Post article goes on:

“The United States, in fact, consumed more than it produced, but China enabled this by accumulating $2.3 trillion in reserves and plowing much of it back into U.S. government bonds.”

In actual fact, it is clear that the US Government created the conditions under which America consumes more than it produces at home. Successive American Governments have deliberately pursued a policy entailing the embedding of its domestic corporations or their subsidiaries in foreign nations. “Investment abroad is investment in America” has been the slogan of American corporations at least since the late 1960s.

Nowadays the world economy is quite literally dominated by giant transnational global corporations, most of which are owned and controlled by American citizens. In 2002 it was written:
“9 of the top ten companies in the world, 72% of the top 25 global corporations, 70% of the top 50 global corporations. 5 of the top global banks, six of the top 10 pharmaceutical/biotech companies, 4 of the top ten telecommunications, 7 of the top IT corporations, 4 of the top gas and oil corps, 9 of the top ten software companies, 4 of the top ten insurance companies, 9 of the top ten general retail companies.” All call the USA their home. [4]

and these firms tended to enjoy extraordinary levels of dominance in world markets:
“By the early 1990s, five firms controlled more than 50 percent of global market share in consumer durables, steel, aerospace, electronic components, airline, and auto industries. In oil, personal computers, and media, five firms controlled more than 40 percent of the market. In American markets ranging from commercial airlines and aerospace to computer hardware and software to household appliances, three or four firms control up to 90 percent of the market, and market share concentration continues to increase through mergers and targeted growth strategies.” [5]

China’s domestic firms, on the other hand, simply can’t compete with these global giants.

“At the start of the 21st century, not one of China’s leading enterprises had become a globally competitive giant corporation, with a global market, global brand, and a global procurement system…The brutal reality is that after two decade of reform, China’s large firms mostly are still far from being able to compete with the global giants. ” [6]

It seems odd under these conditions that the Washington Post article complains about China’s attempts to protect its export industries by linking its currency to the plunging US dollar. Why is the dollar plunging in value in the first instance?

The American government has pursued economic and military policies whose net effect tended to consistently devalue its domestic currency. Actions such as engaging in decades of avoidable military aggression against a long list of nations, refusing to enforce viable fuel standards for vehicles, failing to use the decades of opportunity since the ‘70s oil crisis to foster and protect an sustainable alternative energy industry, deregulation of financial and commodity markets that have consequently bred inflationary speculative activities on a disastrous scale. And so forth. The list of US government failure is a long one.“U.S. exports are not growing as much as they would otherwise, and neither are those of other countries in Asia.” Says the Washington Post.

Well, the United states is still, by every measure, the world’s largest economy but even the citizens of this wealthy nation are struggling to find the financial resources to sustain the huge markets that the global TNCs would like to see continued indefinitely. Neoliberalism has bred massive inequality:
“Between the mid-1970s and 2006 the Gross Domestic Product of the United States trebled; the level of labour productivity almost doubled; the Dow Jones Index rose from 1000 to 13,000. Yet astonishingly enough, during that entire period, according to several studies, the income of the average American worker and family essentially remained stagnant [whilst] …. from 1980 to 2006, … the wealthiest 10 per cent of Americans increased their share of national income from 35 per cent to 49 per cent.” “By 2006 the wealthiest 1 per cent earned 20 per cent of national income.” [7]

The rich have gained access to virtually unlimited funds in the context of the world economy being on a precipice. People all over the planet have been struggling to pay their bills. When China opened itself up to capitalism the global labour force increased immensely. Consequently, wages could be kept low almost everywhere. Consumption predictably declined and at a time when inflation was being experienced with the rising costs of business inputs. This has occurred in a general situation of global oversupply.
“Corporations had little motivation to increase investment and employment, so no interest in borrowing no matter how low the Fed made the cost of credit. On the contrary, they had every incentive to slow down capital accumulation and reduce costs by way of cutbacks on jobs and plant and machinery, while availing themselves of falling interest rates to pay down their debt. And that is what they did.” [8]

The Washington Post will probably continue to blame China for US’ woes. The US and other nations, however, cannot grow their way out of this slowdown. Governments around the world may try to continue pump-priming aggregate demand but if they do ecological catastrophe and other severe problems will continue to play out. They must stop blocking the urgently needed consolidation and restructuring of our economies.

There is now a dire shortage of energy and minerals and this problem will not be able to be addressed for years to come. The bailing out of big financial institutions is also causing the entrenchment of inflationary expectations.

We need a public media that ceases to point the finger at economic rivals and, instead, looks for real solutions to the whole range of pressing problems we all now face. Or we’ll be inundated by much bigger problems very, very soon. Avoidance is not a strategy.

[1] The currency quarrel
China won't change on command. America must retake control of its own financial destiny.
Tuesday, November 24, 2009

[2] The U.S.-China Economic Relationship: Separating Facts from Myths
Author: Steven Dunaway, Adjunct Senior Fellow for International Economics
November 16, 2009

[3] Canada, Not China, Is U.S.'s Largest Trade Partner
Sunday, January 03, 2010

[4] Facts on the US Economic Empire
by etra Jaimers. Eat the State. Volume 7, #3 October 9, 2002

[5] 'Corporation Nation' by Charles Derber. 1998. ISBN 0-312-19288-6. Pages 59- 62 Chapter three:'The Mouse, Mickey Mouse, and Baby Bells'

[6] (Nolan, P. 12) as quoted in:
The China Factor:Mystery, Myth or Magic?
CTMA Roundtable. Kim Korth and John Cleveland. February 26, 2004
IRN, Inc. 550 Three Mile Rd. Grand Rapids, MI 49544

[7] The Great Recession and neo-liberalism
Extract from Robert Manne's 2009 QE Lecture in Quarterly Essay 36,
19.01.10 12:24 am

[8] Brenner, Robert. (2009). What is Good for Goldman Sachs is Good for America The Origins of
the Present Crisis. UC Los Angeles: Center for Social Theory and Comparative History. Retrieved

Sunday, January 17, 2010

Off the Table or Under the Table: Economics vs. Health Care

Apparently, the Obama folks are following the Bush precedent, paying Johathan Gruber, a health care economist, under the table -- at least he seems to have done nothing to let it be known -- to influence the health care debate

I posted two brief mentions about Jonathan Gruber and health care, without realizing that he had a $392,600 contract with Health and Human Services that had not yet been made public.

First, last November, I posted the following comment in response to a New York Times article about Health Care, alluding to single payer being "off the table.":

Jonathan Gruber is a health economist from MIT -- an expert, no doubt. David Leonhardt quotes his favorable comment on the Senate health care bill: “I can’t think of a thing to try that they didn’t try.”

Leonhardt, apparently, never bothered to ask him about single payer, which was off the table.

A year before, prior to the contract, I posted:

I’m just looking over the August NBER digest. It covers five NBER articles, of which three may be mildly interesting. The first has the scary title, Public Insurance Expansions Crowd Out Private Health Insurance by Jonathan Gruber and Kosali Simon. We learn that: For every 100 children who are enrolled in public insurance, 60 children lose private insurance.” Thank God that George Bush had the courage to stand up to the radicals and threatened to veto an expansion of child health coverage. Otherwise, they might lose their private insurance.

Jane Hamsher has a piece showing how effectively the White House and the Democrats use Gruber's expertise to support their own mangling of health care reform.

Glenn Greenwald has a piece, the second part of which compares this arrangement to what Bush did with Armstrong Williams and Maggie Gallagher and the CNN generals.

Saturday, January 16, 2010

What Ails Us

I began reading Chris Hayes’ latest rumi-Nation like a fan, cheering him on. Talking about the last national election, Hayes wrote:

If the working hypothesis that bound this unwieldy coalition together--independents, most liberals and the Washington establishment--was that the nation's troubles were chiefly caused by the occupants of the White House, then this past year has served as a kind of natural experiment. We changed the independent variable (the party and people in power) and can observe the results. It is hard, I think, to come to any conclusion but that the former hypothesis was insufficient.

Yes, I thought. He is hot on the trail.

But then he seemed to get distracted. I agree with his diagnosis, that America suffers from a gross imbalance of power, but between whom? He would put “the people” on one side, I suppose, but this vague label always conceals as much as it explains—which people? On the other side we have total darkness: he doesn’t say who the other side is, other than it’s the force that makes us bargain over crumbs in policy arenas like health care.

Power is indeed a big part of the story. I would emphasize two specifics: (1) America has virtually lost the voice of organized labor. Show me any industrialized country that gives progressive politics even a remote shot and doesn’t have substantial union representation of the workforce. (2) We face the political consequence of almost two generations of exploding income inequality. The ones who have prospered in this ruthless world are relatively numerous (perhaps 20% of the population, even more of the electorate), conscious of their class interest, and willing and able to pony up for the cause. Yes, I know the lion’s share of growth has gone to the sliver at the very top, but the broad upper-middle is more interested in protecting what it’s got than pining after the super-rich.

But there are other elements that belong in the picture.

A big one is the devolution of the Republic Party. It is difficult to find words to express this. I have never, not even when I was a young kid, had any affection for this outfit, but in retrospect I have to admit that, once upon a time, they were conscientious in support of the values of their constituency. In office, they would hire experts (more conservative ones, but not always) to provide reasonably informative reports and forecasts. They often found themselves on the yea-side of important, progressive legislation, such as the wave of environmental and consumer initiatives of the late 1960s and early ‘70s. They were worth arguing with.

I can’t remember how many years it’s been since I paid any attention to the intellectual content (if that’s the right term) of Republican discourse. At least since Gingrich, it's been fools-or-knaves all the way. But our political system is set up to lock in place a two-party governance structure, and if one party goes bonkers, the machinery simply breaks down.

An overarching problem has been the rise of the finance view of the world as the ruling perspective in the US and those regions under its influence. This is partly about the power of individual people and institutions, essentially the massive private funds that dominate the resources of government in speculative markets—at least during profitable times. In that sense, it helps nail down the specific identity of “them” in Hayes’ us-against-them power imbalance story.

More broadly, however, there are ideological and social dimensions to financialism that have to be taken into account. In the realm of ideas, this perspective sees the financial “moment”, the decision to invest or trade, as the crucial link in the chain of wealth creation, denigrating such mundane activities as doing physical work or managing the day-to-day complexity of production systems. It justifies a system of corporate governance and personal rewards that would otherwise be indefensible. The ideology has a mass base because (and here we see again the consequences of inflated inequality) that same 20% or so has acquired a consequential financial stake and has come to see itself in those terms. That’s what the ticker at the bottom of your TV or computer screen is telling you when you tune into the news.

As I’ve written elsewhere, this elevation of financial interests—the claim that all of us are best off if investors are able to reap the highest return possible—is the deep force behind both global imbalances and the financial crisis. That must be worth something.

And then there is simply the never-ending sequence of historical moments, the context that makes our situation unique and not just a deduction from some generic model. Throw in the fallout from the debt crisis of 1982, the collapse of Communism in 1989, the continuing standoff between Israelis and Palestinians and its impact on the Islamic world, the about-face in Chinese (and to a lesser extent Indian) economic policy, the information and communications revolution, and we can begin to fill in the details.

If this list is even remotely correct, the vague, we-are-the-world democratic euphoria provoked by the Obama campaign and recalled, nostalgically by Hayes, was impotent from the outset. (The ideology of bipartisanship also missed the point.)

But Hayes is right in the end: Bush, for all his horrors, was not the root problem, and the election of Obama is hardly the solution. If we want to try to turn this thing around by design and not just depend on dumb luck, we need to identify the deeper issues and focus our energies on them.

2009 In Dot Point

** The US ..needs to create 250,000 jobs a month to just absorb people coming into the workforce and they're not doing that.[1]

** The US economy is 70% consumption.[2]

** Only roughly 15 percent of U.S. imports come from China. [3]

** The broad U6 category of unemployment rose to 17.3pc in the US [4]

** 10% of households in the US are behind on their mortgages. 30%+ of homes are in negative equity. Roughly one in seven houses is in serious problems.[5]

** Right now [Dec 09] housing prices, adjusted for inflation, are roughly back to where they were at the beginning of the decade.[6]

** One million American families lost their homes in the fourth quarter of 2009. Another 2.4 million homes are expected to go in 2010. [7]

** It was a decade of zero gains for stocks, even without taking inflation into account. The Dow first topped 10,000 in 1999. "Last week [week to 27th December 2009] the market closed at 10,520."[8]

** The headline employment number for December 2009 [was expected to be] "slightly higher than that for December 1999, but only slightly."[9]

** Private-sector employment has actually declined [in the US]— the first decade on record in which that happened.[10]

** "if it isn't government, it isn't getting done" Very high levels of government debt are being financed by (i) investors concerned about the safety of other assets (ii) central banks buying bonds issued by the Treasury….like an internal transfer of printing money game that’s going on. [11]

** There is $4.2 trillion of corporate debt which has to be refinanced over the next five years. This poses a refinancing risk. [12]

** The risk of a 50-year old woman acquiring breast cancer rose to 12% in 2009 compared to 1% in 1975.[13]


[1] Das is not good: post-crash stagnation. 9th December 2009 09/DEC/2009

[2] Das is not good: post-crash stagnation. 9th December 2009 09/DEC/2009

[3] The U.S.-China Economic Relationship: Separating Facts from Myths
Author: Steven Dunaway, Adjunct Senior Fellow for International Economics
November 16, 2009

[4] America slides deeper into depression as Wall Street revels
December was the worst month for US unemployment since the Great Recession began.
By Ambrose Evans-Pritchard
Published: 6:35PM GMT 10 Jan 2010

[5] Das is not good: post-crash stagnation. 9th December 2009 09/DEC/2009

[6] The Big Zero
Published: December 27, 2009

[7] America slides deeper into depression as Wall Street revels
December was the worst month for US unemployment since the Great Recession began.
By Ambrose Evans-Pritchard
Published: 6:35PM GMT 10 Jan 2010

[8] The Big Zero
Published: December 27, 2009

[9] The Big Zero
Published: December 27, 2009

[10] The Big Zero
Published: December 27, 2009

[11] Das is not good: post-crash stagnation. 9th December 2009 09/DEC/2009

[12] Das is not good: post-crash stagnation. 9th December 2009 09/DEC/2009

[13] Cancer From the Kitchen?
Published: December 5, 2009

A Footnote to the Gruber Affair

Jonathan Gruber, a health economist at MIT and the main “independent” analyst the Obama administration has relied on to put numbers on its health reform proposals, was paid almost $400,000 last year by the government to do this—but the payments were kept hidden until Marcy Wheeler of Firedoglake broke the story. A small firestorm has raged over this episode: see this and this and this.

Aside from what it says about the commitment of team Obama to open, honest government, it also casts a light on a lesser-known fact about the economics profession: economists never have to disclose their funding sources to the public. They don’t have to say who’s paying them when they publish a journal article. They don’t have to say who’s paying when they write op-eds or make presentations at academic gatherings. Unlike medical researchers, who have gone through a process of soul-searching over their financial relationship to pharmaceutical companies and other interested parties, economists never discuss, and apparently never think about, the potential for money to corrupt.

Obviously, incentives are important for everyone but them.

Friday, January 15, 2010

Real Confusion

AP is reporting that real wages declined during 2009 but their lead sentence is quite confusing.

American families were squeezed last year as their inflation-adjusted weekly wages fell 1.6 percent — the sharpest drop since 1990 — well below the 2.7 percent consumer inflation rate.

Real wages decline if inflation exceeds the increase in nominal wages, which is what I think AP meant to say. This sentence, however, almost appears to compare some alleged increase in real wages to the increase in consumer prices.

BLS reports that average weekly earnings of production and nonsupervisory workers on private nonfarm payrolls in current dollars rose by 1.87% from December 2008 ($612.72) to December 2009 ($624.16) but when adjusted for inflation, their constant (1982) dollar weekly earnings fell from $288.12 to $283.58 or the reported decline in inflation-adjusted weekly wages. My math says this means the deflator had to rise by 3.5% over the same period not the reported 2.7%.

Thursday, January 14, 2010

Rowley Versus DeLong On The State Of Macro

This is one of those naughty little contretemps I just cannot resist reporting on. So, Charles Rowley of George Mason has been posting "on the State of Macroeconomics" in the past few days. One post was not too unreasonable, slamming the longstanding assumption in favor of rational expectations, evidence. The third of these, which can be linked through, (new name for The Austrian Economists) is a much less admirable and defensible affair, although he made a better case for himself in some of his comments. It is basically a weak anti-Keynesian screed that includes the following quotation: "The Keynesian model never worked; and never will work. It has been resuscitated by opportunistic economists, not because they believe in its merits as an agent of macroeconomic rehabilitation, but because they recognize its political value as a weapon for moving economics from laissez-faire capitalism, or (hopefull) beyond to fully-fledged socialism."

Now there is much to criticize in those remarks alone, along with the rest of the post. However, Brad DeLong proceeded to make a complete fool of himself by jumping in on this with the following comment: "Why do you lie about what I think?" Rowley then very reasonably pointed out that he named no names in his mostly egregious post, but this triggered DeLong to call him a "coward." When Peter Boettke reposted and linked this on Coordination Problem, Brad jumped in there also to accuse Boettke of lying. This is a pathetic decline for Brad, who has long had a record of excessively deleting comments (and I think most of what he posts is very intelligent). Really too bad.

Rowley's further explanation, which made some sense, although it was not in his original post, was that he was annoyed with economists who had been labeling themselves "New Keynesians," which models do generally assume some ratex, but who were now advocating old-fashioned "hydraulic Keynesianism" in the current situation. He said that there were many such who had this inconsistency problem, not just Brad, although he said he had no problem with genuine "old Keynesians" who had never lost their faith, mentioning Robert Solow in particular by name. Whoosh!

Hansen Tries to Explain Why He Appeared to Be Confused, But Just Adds to it

When Jim Hansen, a genuine hero in the world of climate science, published an op-ed in the New York Times last December, he was excoriated by many writers, including yours truly. The piece was deeply confused, almost incoherent, in its attack on carbon caps and defense of carbon taxes.

Now Hansen has published a new account of “what I really meant”. It is just as muddled as the original. Hansen tells us, for instance, that he knew all along that caps and taxes are reflections of one another:

I do not dispute the economic theory that a cap and a fee are, in principle, equivalent. But cap and trade's complexity allows special interests to take over, killing its effectiveness.

(Actually, caps and taxes are not equivalent in a world of uncertainty, but we will let that pass.) So now the claim is that taxes are simple and pure, while caps are murky and lead only to corruption. This is no doubt true if you compare a perfect, hypothetical tax to an actual, highly compromised cap. If Hansen thinks that a tax system passed by Congress will be the pristine, comprehensive, loophole-free policy of his dreams, he hasn’t had much contact with the IRS recently.

What he can’t seem to get clear on is that he has two entirely legitimate complaints, but they have nothing to do with caps vs taxes. Hansen is against giving away carbon permits and against offsets. I (and many others) agree with him completely. This should be a reason to weigh into the public debate against giveaways and offsets. But no, he says the solution is to switch to a tax—as if there can’t be giveaways (rebates) and offsets (credits) in a system of carbon taxes.

Finally, he dumps on the Cantwell Bill, which proposes a carbon cap without giveaways and offsets—a bill that is as short, sweet and uncomplicated as anything you could hope for. Why? Well, it’s a cap, and, you know, complicated and sure to be stuffed with giveaways and offsets and....

Cochrane Too

Cassidy has him saying:

What efficient markets says is that prices today contain the available information about the future. Why? Because there’s competition. If you think it’s going to go up tomorrow, you can put your money where your mouth is, and your doing it sends (the price) up today. Efficient markets are not clairvoyant markets. People say, “nobody foresaw saw the market crash.” Well, that’s exactly what an efficient market is—it’s one in which nobody can tell you where it’s going to go. Efficient markets doesn’t say markets will never crash. It certainly doesn’t say markets are clairvoyant. It just says that, at that moment, there are just as many people saying its undervalued as overvalued.

To be filed under “not understanding the difference between necessary and sufficient conditions”.

Fama’s Fallacy

Listen to this excerpt from his interview with John Cassidy:

Back to the efficient markets hypothesis. You said earlier that it comes out of this episode pretty well. Others say the market may be good at pricing in a relative sense—one stock versus another—but it is very bad at setting absolute prices, the level of the market as a whole. What do you say to that?

People say that. I don’t know what the basis of it is. If they know, they should be rich men. What better way to make money than to know exactly about the absolute level of prices.

He makes this point several other times within a few minutes: we know markets are efficient because they are unpredictable.

But those famous monkeys, who sat at their keyboards for centuries hoping to randomly tap out Hamlet, could just as well be inputting unpredictable asset prices.

How can someone be a world famous financial economist and not know the difference between necessary and sufficient conditions?

Tuesday, January 12, 2010

A Hatchet Job on the Landesbanken

Today’s New York Times putdown of public banking in Germany was probably not intended to be ideological, but, with the luck of the Rolodex, that’s how it turned out. It is certainly true that several Landesbanken have engaged in stupid and even corrupt practices and have needed to be bailed out. What’s missing, however, is the context.

Contrary to the claim by the EU official quoted in the article, Brussels has been on the warpath against the Landesbanken for years. They have been under intense pressure to demonstrate market rates of return, to show that they are not subsidizing domestic credit in Germany. But they have no competence in speculative finance; their stock in trade is financing the extraordinarily productive Mittelstand—the small, family-owned enterprises that outperform any other SME sector in the world and provide the basis for the country’s export machine. Forced to show instant hyper-profits, these naive public bankers went out and loaded up on mortgage-backed securities, Icelandic delicacies, and other such fare. In other words, they tried to turn themselves overnight into poster children for EU financial neoliberalism and got seriously burned.

No doubt Brussels will use this disaster as an excuse to put still more pressure on Germany to move to a private, profit-driven financial system. The consensus in Germany, however, is to find a way to restore the Landesbanken and return them to their core task of maximizing the profits and productivity of their borrowers. American readers would be better informed by an article that described the EU’s campaign for financial liberalization and the role it played in making Europe even more susceptible to a financial implosion whose epicenter was the US.

Class Coalitions and Keynesian Fiscal Policy

I’ve been rethinking some of my earlier writings (this is almost always true), and have changed my views on the political economy of Keynesian fiscal policy.

Old view: Keynes offered the twentieth century’s most influential example of an economic policy that depended on, and also galvanized, a coalition between workers and employers. By recognizing that workers are also consumers and that profits depend on consumption, expansionary fiscal policy à la Keynes identified a common interest in high levels of employment, and therefore wages. While it would not be in the individual interest of any employer to raise the wages of his or her own workers alone, it is at least potentially in the collective interest of the class of employers to enlist worker-voters to support an economy-wide program to bolster worker incomes. This coalition has atrophied for a number of reasons during the past generation or so, and seriously expansionary policy is invoked only in times of economic distress.

New view: Keynesian fiscal policy was central to class coalitions in the liberal, English-speaking world, as above. In the main non-liberal capitalisms coalitions formed over policies to achieve high employment through high levels of investment. This was pursued through public ownership, public-private partnerships, worker and public stakeholder influence in corporate investment policy, and other “microeconomic” mechanisms. As long as these policies worked, additional stimulus via fiscal deficits, at least during non-recessionary times, could legitimately be criticized as inflationary. This helps explain why fiscal expansion has a bad reputation in Germany and Scandivia and a dubious reputation in France. These investment-centered coalitions have proved more durable than consumption-centered ones, although the current crisis, which may yet result in a prolonged period of dampened investment, could put them to the test.

How does Japan fit into this story?

Monday, January 11, 2010

Massively Misrepresenting the Econoblogosphere: "Blogometrics"

The lead article for 2010 in the Eastern Economic Journal (vol. 36, no. 1, pp. 1-10) is "Blogometrics" Franklin G. Mixon, Jr. and Kamal P. Upadhaya. It claims to rank economics bloggers, blogs, and universities, by the scholarly impact of the bloggers in question. This may be a worthy effort, but there is a complete mystery as to the set of blogs that they use in this study, with it apparently being tilted heavily towards Austrian or libertarian blogs, with none "further left" than either Brad DeLong's blog (a former official in the center-left Clinton presidency) and Mark Thoma's Economists View. While highly read Mankiw, Marginal Revolution, and Freakonomics are included, Krugman's blog is not, with him probably being more "progressive" than any of the 83 bloggers listed, of whom it is probably a race between DeLong, Thoma, and the late Paul Samuelson as to who is the "lefiest." As it is, of the 40 blogs considered, at least 5 are Austrian and at least another 5 are overwhelmingly libertarian. In terms of university rankings, while Harvard does come in at #1, George Mason is #16, while Princeton is not even on the list of 44 universities ranked. In the body of the paper it is stated once that they are studying the "main contributors to some of the most well-known blogs," although no method of selecting those is provided. On one table they give average page views per day from the EconDirectory of Gongol for 16 of their 40 blogs. Only three of these blogs are in the top ten of Gongol, with only only 7 of them coming in above the 426 for Econospeak (rank for Dec. 09, 59th), with one of them, macroblog, coming in at zero, and another that was listed as 963, at zero for the latest listing. I list below their list and top 40 from Gongol's most current posting, with commas separating the names of the blogs from the respective lists. I also note that they overstate the dominance of Americans in the econoblogosphere.

Mixon-Upadhaya Gongol
(rank by scholarly impact of
"main contributors) (rank by AVPD)

Becker-Posner, Calculated Risk
Greg Mankiw's blog, Michael Shedlock
RGE Monitor, Big Picture
Inside the Economist's Mind, Marginal Revolution
Neuroeconomics, Naked Capitalism
Organizaion & Markets, Gregory Mankiw
Freakonomics, Baseline Scenario
Game Theorist, Economist's View
Vox Baby, Tax Prof
John Lott's Blog, Credit Writedowns
Grasping Reality with Both Hands, VoxEU
Daniel W. Drezner, Coyote Blog
Marginal Revolution, European Tribune, Gongol
macroblog, Financial Armageddon
Core Economics, Carpe Diem
Environmental Economics, Overcoming Bias
EconLog, Half Sigma
Cafe Hayek, Angry Economist
Division of Labour, Carl Futia
The Sports Economists, Angry Bear
The Austrian Economists, Triple Pundit
Hypothetical Bias, Economic Edge, QandQ
Economics Roundtable, Mess that Greenspan Made
Economist's View, Trader Mike
Mises Economics Blog, EconBrowser
Adam Smith's Lost Legacy, Tim Worstall, Economic Populist
Economic Principals, Wages of Wins
the Attention Economy, John Lott
Reasonable Bystanders, Fistful of Euros
Newmark's Door, Ekonomi Turk
Market Power, Willisms
ElectEcon, Visualizing Economics
Equinometrics, Random Roger's Big Picture
Knowledge Problem, Art Diamond
The Perfect Substitute, Environmental Economics
The Blog of Diminishing Returns, Bonddad Blog
The Capital Spectator, Roth and Co.

Sunday, January 10, 2010

Sins Of The Sons Of Samuelson: More From Atlanta

Also in the HES/AEA session I organized in Atlanta was a paper by David Colander and Casey Rothschild entitled, "Sins of the Sons of Samuelson: Vision, Economic Pedagogy, and the Zigzag Wadnerings of Complex Dynamics," available at this link. They argue that Samuelson was aware of complex dynamics and how math models could simplify insights in Marshall and others that had been expressed only in the "zigzag wanderings" of literary expression. They blame the "sons of Samuelson" for turning the push to math models, certainly led by Samuelson, into a mindless dogma that oversimplified economics and misled many in many different ways. They proposed how to change intro textbooks to open students' minds to complexity (and Rothschild will be joining Colander as a coauthor in future editions of his popular intro textbook).

Rajiv Sethi has just posted on Samuelson's own interest in nonlinear dynamics, citing my mentioning a paper by Samuelson on Mark Thoma's blog, with Thoma linking to the Sethi piece. Sethi discusses the nonlinear version of Samuelson's multiplier-accelerator model, which appeared in the same year (1939) as his much more famous linear version. Sethi notes that I had brought this up on Thoma's blog only two weeks prior to Samuelson's death.

As a matter of fact I cite that paper by Samuelson in the paper I presented in the session at Atlanta, "Chaos Theory Before Lorenz," available on my website and also having appeared recently in print in a special issue of Nonlinear Dynamics, Psychology, and Life Sciences, honoring the late Edward Lorenz, the MIT climatologist who was reputed to have "discovered chaos on a coffee break" back in 1961. He was the person who coined the term "buttefly effect."

Friday, January 8, 2010

A Festschrift For Me (Brag, Brag)

If you cannot brag where you co-blog, where can you? Anyway, a book has just been published, _Nonlinear Dynamics in Economics, Finance and the Social Sciences: Essays in Honour of John Barkley Rosser, Jr._, edited by Gian-Italo Bischi, Carl Chiarella, and Laura Gardini, Berlin/Heidelberg: Springer, 2010. Unfortunately it is very expensive. It contains papers presented at a conference held at the University of Urbino in Italy in late September, 2008, honoring my 60th birthday, which was in April of that year. I gave a plenary talk there (not in the volume), and they were very nice to me (the Italians know how to do these things right, :-)).

Bring back The Sedition Act

So I'm reading a very interesting and funny book by Bill Bryson, Made in America, a history of American English, and I come across this oddity:

"The Sedition Act of 1918 made it illegal, among much else, to make critical remarks about government expenditure or even the YMCA."

All you windy fiscal stimulus denialists in the Windy City - you know who you are! - DO NOT PASS GO , DO NOT COLLECT $200!

Euroland Hardball? Atlanta Rumors

One hears things in the hallways of American Economic Association meetings, and I heard some rumors from sources who will remain anonymous but are well connected at the recently finished meetings in Atlanta. So, when the new Greek prime minister came into office in mid-December, George Papandreou, what had been reported as a budget deficit of around 6-7% of GDP, already unpleasantly above the Euroland official limit of 3%, turned out to be more like 12-13%, if not worse. Spreads on Greek bonds have gone way up, and there is a sense of crisis on the nation's foreign indebtedness. It needs help from the ECB and the Eurozone countries more generally or else faces tough cuts. These are probably coming anyway, but Papandreou is resisting somewhat. The rumor is that hardball negotiations are getting going between him and the effective leaders of the Eurozone, Merkel and Sarkozy. The latter will be putting a lot of pressure on Papandreou, but he may use the threat of removing Greece from the euro as a counterpressure. Now many might suggest that this is not much of a counterpressure, given that various eastern European countries are begging to join the euro in the current situation, as is even formerly aloof Iceland (not even in the EU yet). However, it is probably the case that Merkel and Sarkozy do not wish to open the door to having countries leaving the euro (as others might be tempted to follow if a devaluation by Greece works out well in terms of employment growth). France and Germany have worked very hard over a several decade period to make the euro as solid as the Deutsche Mark, and having anybody leave might trigger a more general unraveling of the euro, something long forecast by some US observers such as Martin Feldstein.

It occurs to me that the rise of the US dollar over the last month from around 1.51 to the euro to more like 1.43 might in part be due to the worries about such possible defections (even though presumably the countries still on the euro would be "stronger" ones). At a minimum this will probably scotch any moves to make the euro replace the dollar as the major world reserve currency in the near term (and other alternatives such as the yuan/renmimbi are nowhere near being ready to step in). I must also note that this recent rise of the dollar rather makes ridiculous recent reports, such as one in the Washington Post today, that the rising price of oil in the last few weeks is due to the falling dollar. What falling dollar? I continue to be astounded by the decreasing competence of newspaper reporters on economic matters.

Volcker says its all broken

"The American political process is about as broken as the financial system....The Treasury is an outstanding example of a broken system, but it's not the only one....I think people have lost confidence in government, they've lost trust in government, and it shows. This isn't a question just of this Administration. It's been kind of a steady, downhill path." [*]

[*] Business Week: At the Table December 30, 2009, 5:00PM EST
Paul Volcker: The Lion Lets Loose
Charlie Rose talks financial reform with former Federal Reserve Chairman Paul Volcker
Business Week: At the Table December 30, 2009, 5:00PM EST

Thursday, January 7, 2010

The Oil and Money Straitjacket

David Holden and Richard Johns, in their 1981 book ‘The House of Saud: 'The Rise and Rule of the Most Powerful Dynasty in the Arab World’ describe how Saudi oil money was used to hire American firms to industrialise Saudi Arabia with the overall management and fiscal responsibility delegated to the US Department of Treasury. The commission so set up was “independent to the extreme”. “Ultimately, it would spend billions of dollars over a period of more than twenty-five years, with virtually no congressional oversight. Because no US funding was involved, Congress had no authority in the matter, despite Treasury’s role. ”[1]

I wonder how effective monetary policy could be in the US under such a large and secret money regime?

David Holden was murdered in Egypt in December, 1977, while his and Johns’ book was still a work in progress. “Some say that Holden pried too deeply, and that is why he was murdered, others ascribe his death to a case of mistaken identity; almost certainly the truth will never be known.” [2]

A reviewer of Holden and Johns’ work noted that there are “some wonderful nuggets of insight [that are] not discussed in other books. For example a quote from Kissinger's own doctoral dissertation:
"... not shy away from duplicity, cynicism or unscrupulousness, all of which are acceptable tools of statecraft." (p 348)

and, after the death of King Faisal, a quote from the Washington Post:
"[King] Faisal probably did more damage to the West than any other single man since Adolf Hitler." (p382)

Why was the Washington Post so against Faisal?

As it turned out this Saudi Arabian leader was assassinated in March 1975. The timing is interesting. It was only two days before Faisal’s death that the former left-wing Australian Deputy Prime Minister (Jim Cairns) and Australian Senator Wreidt met him in order to negotiate a very large loan for Australia to fully develop its domestic energy infrastructure. This included moves toward the use of solar energy. King Faisal assured Cairns and Wreidt at the time of “the fullest possible cooperation of Saudi Arabia about oil, food and monetary or investment matters.” Cairns believed “it was possible for large sums of money to have been borrowed at far lower rates of interest than would have had to be paid in Australia, and perhaps elsewhere.” [3]

Cairns noted that “the death of King Faisal and later the disarray of the Australian government prevented any progress in 1975. That was the year many Australians point to a coup against Australia’s last social democratic Labor government having occurred with American CIA involvement. [4] Jim Cairns was removed from the office of Treasurer by the then Prime Minister Gough Whitlam after the mainstream newspapers in Australia (virtually then under the control of only three families – Murdoch, Fairfax and Packer) engaged in a campaign attacking the credentials of Cairns. The Melbourne Age, for instance featured banner headlines claiming a member of Cairns family was to get $600,000. Cairns wrote: “It was never possible for anyone to get one cent as a result of anything I, or the government, or any member of it did or did not do.” [5]

Cairns was aware that the aim of the USA at the time was take control of the distribution of oil funds in international financial markets “rather than be lent directly, especially in government to government loans”. “In Washington in October, 1974, OPEC was anathema. If there were to be any ‘cartels they had to be American controlled.”. Cairns added:
“I got the impression, both in Washington and New York, of confidence that oil pressures could be successfully resisted without any military action [6], and that American financial houses could soon regain control of the investment of oil funds.”[7]

And so they did. Wall Street banks monopolized the recycling of petrodollars and the US government acquiesced in vastly inflationary oil price rises in order (at least partially) to bail out its defence contractors. In Australia it was the end of an era. After a relentless oligopoly media campaign, on 11th November 1975 the ‘bunyip aristocracy’ of the Liberal-Country Party coalition came to power in Australia under Malcolm Fraser. It was constantly referred to in Australian corporate media as a ‘landslide’ defeat for Labor, but the party acquired 43.8 percent of the votes – even with the incessant anti-labor campaign – and received only 28 percent of the seats. Cairns thoughtfully wrote in 1976 that such an outcome “may have brought the end of the apparent two-party system.”[8] He was right.

“The strait-jacket was there, and it proved to be one made of money.” [9]...and oil.

[1] [1] David Holden and Richard Johns, ‘The House of Saud: The Rise and Rule of the Most Powerful Dynasty in the Arab World (New York: Holt Rinehart and Winton, 1981), p359. As quoted in ‘Confessions of an Economic Hitman’ by John Perkins. Page 84. Published by Ebury Press Random House, 20 Vauxhall Bridge Road, London SWIV 2SA. 2005. ISBN 978091909109

[2] John P Jones III (reviewer of Holden and Johns book at Amazon).

[3] Jim Cairns ‘Oil in Troubled Waters’1976. Widescope International Publishers, Victoria, Australia. Page 92

[4] A Coup in Australia and the CIA
Brenda Rosser. Saturday, July 5, 2008

[5] Jim Cairns ‘Oil in Troubled Waters’ 1976. Widescope International Publishers, Victoria, Australia. Page 92

[6] Jim Cairns ‘Oil in Troubled Waters’ 1976. Widescope International Publishers, Victoria, Australia. Page 82

[7] Jim Cairns wrote: “On January 3, 1975, Dr Kissinger, American Secretary of State, indicated that in some circumstances a ‘takeover of Arab oilfields was a possibility’, not because the cost of fuel had quadrupled, but that it would be ‘another matter where there was some actual strangulation of the industrialized world.’ At about the same time Professor Robert Tucker of John Hopkins University had issued a paper settling out the pros and cons of an American seizure of parts of Kuwait and Qatar. He believed that even if the Arabs set fire to the oil wells it would take only a few months to have the oil flowing freely again. He was satisfied that Russia would not intervene.” Jim Cairns ‘Oil in Troubled Waters’ 1976. Widescope International Publishers, Victoria, Australia. Page 79

[8] Jim Cairns ‘Oil in Troubled Waters’ 1976. Widescope International Publishers, Victoria, Australia. Page 129

[9] Jim Cairns ‘Oil in Troubled Waters’ 1976. Widescope International Publishers, Victoria, Australia. Page 130.

Mirowski On The Market Crash

At the recently completed AEA/ASSA meetings in Atlanta I organized a joint HES/AEA session on "Complexity in the History of Thought." Speakers included me, David Colander, John Davis, and Phil Mirowski of the Notre Dame department that is about to be abolished. He spoke provocatively to an overflow audience on "Inherent Vice: Complexity vs. Behavioral Explanations of the Crisis." In this he dismissed views that emphasized "bad behavior by individuals" including irrationality and corruption as causes of the crash and larger breakdown. He argued that it was a systemic problem, doing so by extending his recent idea of markomata, that markets are fundamentally algorithms that evolve as competing systems with increasing levels of hierarchy in the form of futures and derivatives markets. While conventional theory says such developments should improve efficiency and spread risk, they can lead to increased fragility as the rising complexity can lead to a breakdown of computation as in the halting problem in computer science, implying an inability of the system to set prices, which was exactly what happened in the crash. I was the discussant, and while I had some technical complaints, I find this a very intriguing argument, and it generated considerable and very lively discussion in the session.

Tuesday, January 5, 2010

What is the Fed up to Now?

Recently I read that the Financial Services Regulatory Relief Act of 2006 will give the Federal Reserve, for the first time, explicit authority to pay interest on reserve balances, beginning on October 1, 2011. [1] I wondered why this change was being introduced.

A clue came yesterday when I read that, at present, THE FED IS UNINTENDEDLY INCREASING BANK RESERVES by its lowering of long-term interest rates and directly supplying credit to borrowers who can’t get money elsewhere. The excess bank reserves created by this process are claimed not to be a spur on credit growth and inflation because “bank lending is constrained by customer demand and by capital [and] right now loan demand is moribund (in spite of a zero federal funds rate) and capital is in short supply.” The Fed wants to drain the ‘tsunami’ of excess reserves caused by its above intervention so that it can regain its capacity to set the Fed Funds rate.[2] It will want to raise the Fed Funds rate eventually and the author of this article hopes they won’t do this anytime in the near future.

However, according to Mark A Sadowski the Federal Reserve -for the first time in history– is already paying the banks interest on excess reserves [ER]. They can earn 0.25% “absolutely risk free on nearly $1 trillion.” This is more than the banks can earn on 1, 3 or 6 month T-Bills right now. “It is a highly deflationary policy that has sharply reduced the money multiplier and has probably rendered the current quantitative easing largely impotent…The IOER appears to be a tool to help prop up the financial sector while keeping long-run inflation expectations low…It is a tragic deflationary mistake.” [3]

It looks like banking has become an unviable business these days. With claims that there are insufficient borrowers at a time when real interest rates are negative [4]. The banks, in any case, don't generally want to lend because most of their customers are insolvent. The solution, therefore is to pay the banks money for doing absolutely nothing.

There is no broadly accepted modern definition of feudalism nor is there one for this more recent emergence of absolute financial nobility [5]. Therein lies our challenge. To find a more apt description for our new lords.

In the absence of any public control over events, self knowledge will at least give us a little power.

[1] Divorcing Money from Monetary Policy
Todd Keister, Antoine Martin, and James McAndrews

[2] The truth about all those excess reserves
Dec 30th 2009, 19:27 by The Economist | WASHINGTON

[3] Mark A. Sadowski commenting on Dec 31st 2009 3:50 GMT at:
The truth about all those excess reserves
Dec 30th 2009, 19:27 by The Economist | WASHINGTON

[4] Gold and Real Interest Rates. Mark Berger. 20th November 2009

[5] It could be easily argued that the financiers have always been part of the 'nobility' all along. This may be the first time in history, though, where all the pretense to banking has been abandoned by this class.

Sunday, January 3, 2010

New Measures for Bankruptcy Needed

I was reading a Paul Krugman article last night where this economist was addressing, what appears to be, the single-minded pursuit by Government of 'an inadequacy of demand' in the economy.

"It is possible for economies to suffer from an overall inadequacy of demand--recessions do happen" said Krugman. Then he added: "they can usually be cured by issuing more money--full stop, end of story.”[1]

And this is where the issue of bankruptcy plays in. You can't keep fueling consumption when people can't pay their bills without drawing down or abandoning all of the 'houses' they need to survive in.

So here's some reminders to Paul Krugman and company of what an ultimate bankruptcy really means:

“The risk that a 50-year-old white woman will develop breast cancer has soared to 12 percent today from one percent in 1975. Likewise, asthma rates have tripled over the last 25 years and childhood leukemia is increasing by one percent per year.”[2]

"Three out of every four Tasmanians suffer from a chronic health condition. This renders them unable to hold down a job and sees them struggle with simple daily tasks." [3]

"[consumptive water use across the Murray-Darling Basin in Australia] has reduced average annual streamflow at the Murray Mouth by 61 percent. The river now ceases to flow through the mouth 40 percent of the time compared to one percent of the time."[4]

"..In recent years [1992]... we have been witnessing another dramatic drop in biological diversity as a result of human activity, with both species extinctions and gene pool declines occurring at rates unprecedented in the earth’s history."[5]

"The Environmental Protection Agency is ready [April 2009] to start testing 67 pesticide ingredients for their possible endocrine disruption effects. But the testing program the agency plans to use is only a pitiful skeleton of what
it needs to be. This battery of tests, first recommended in 1998, is outdated, insensitive, crude, and narrowly limited. Each test and assay was designed under the surveillance of corporate lawyers who had bottom lines to protect and assorted toxicologists who were not trained in endocrinology and developmental biology."[6]

[1] The Accidental Theorist, All work and no play makes William Greider a dull boy.
By Paul KrugmanPosted Friday, Jan. 24, 1997, at 3:30 AM ET

[2] As quoted in the Tasmanian Times and sourced from:
Cancer From the Kitchen?
Published: December 5, 2009

[3] Plan to fight chronic disease. DAMIEN BROWN
December 07, 2009 09:13am
The Mercury link:

[4] CSIRO, Water Availability in the Murray-Darling Basin- A report from CSIRO to the Australian Government, October 2008, p 5. See for further information. As quoted in:
Native Title Report 2008, Case Study 2
The Murray-Darling Basin – an ecological and human tragedy

[5] Spellerberg and Hardes 1992 as quoted in:
Biodiversity and Ecosystem Function: Do Species Matter?
Paul S. Giller and Grace O’Donovan. Paul S. Giller, Department of Zoology and Animal Ecology, University College Cork, Republic of Ireland (corresponding author; e-mail:; Grace O’Donovan, Department of Environmental Resource Management, University College Dublin, Belfield, Dublin 4, Republic of Ireland.

[6] EPA's new pesticide testing is outdated, crude
In its search for endocrine-disrupting chemicals, the EPA should turn to scientists who think outside the box and inside the womb. The agency's testing program is "a pitiful skeleton" that will fail to detect many serious effects on human development.
By Theo Colborn, The Endocrine Disruption Exchange. April 27, 2009

Saturday, January 2, 2010

The Doppelgänger Effect

by the Sandwichman (his farewell address)
Ere Babylon was dust,
The Magus Zoroaster, my dear child,
Met his own image walking in the garden.
That apparition, sole of men, he saw.
For know there are two worlds of life and death:
One that which thou beholdest; but the other
Is underneath the grave, where do inhabit
The shadows of all forms that think and live
Till death unite them and they part no more....
Economics has a double. Whenever an economist encounters that shade he lets out a terrified shriek. For Marx, the spectre haunting Europe was called communism. For Dilke, it was disposable time. It was Nassau Senior's "Last Hour". But for militantly anti-union employers at the turn of the 20th century -- and economics textbooks thereafter -- it was a humble lump-of-labor fallacy.

Make no mistake. When economists do it, it is arcane and learned ceteris paribus hokus pokus. But it is a fallacy and an aberration when the uncouth and uninitiated try their hand and apply it to the Great Shibboleth.

Classical political economy did not survive Marx's critique. To get around that embarrassment, economists erected the hydra-headed neo-classical scaffolding of a marginalist analysis whose elusive variations and elaborations make it harder to pin down.

In their heart of hearts, though, contemporary economists cling to a cherished inheritance from their classical forebears: the "wage-fund" of a fixed amount. But in this case, the error of this assumption is projected onto a hazily unspecified Other -- politicians, unionists, Luddites, Utopians or cranks. Whoever. This Other is the tremulous economists' doppelgänger

Economizing is labor saving. Economy means doing more with less. People specialize and trade so that they can have more with less effort. The purpose of technology is to reduce the amount of effort required to make something -- that is, to reduce the amount of wasted effort.

The purpose even of many consumer goods is to bring greater ease into our lives. A washing machine spares the housewife hours of scrubbing and wringing. A car relieves the shopper from the tedium of walking to the grocery store and the burden of carrying groceries back home.

The end of work, that is to say, is leisure. Even when the labor-saving capabilities of specialization, trading and technology are turned toward the production and consumption of more goods, those goods themselves are overwhelmingly aimed at expanding ease and leisure. Adam Smith observed this peculiar fact in his Theory of Moral Sentiments. And he wasn't the only one.

If the end of work is leisure, the end of growth is more work. Houston, we have a paradox. To economize is to save labor but to "grow the economy" is to waste it. Every economic action leads to a fork in the road. To save or to spend? To have more or to work less?

This bifurcation, this paradox, makes any conceivable economic calculation indeterminate. All the great economic thinkers -- Smith, Marx, Mill, Marshall, Veblen, Keynes -- acknowledged this paradox. Economics, then, is in essence the elaboration of a riddle -- an "unsolved riddle" in Leacock's phrase -- not the mechanical grinding out of predictions.

But statesmen, generals and captains of industry don't want to be bothered with silly riddles. They want predictions -- but, of course, only certain kinds of predictions, "mirror, mirror on the wall." And it is the statesmen, generals and captains of industry who write the checks -- even though the toiling masses are the ones who will be compelled to honor those checks with their blood, sweat and tears.

Economists who cash those checks with their mystically pedantic predictions are impostors and charlatans. One of the time-honored ruses of charlatans and crooks is to loudly denounce others as quacks and cranks. It's a good distraction and it establishes the bona fides of the confidence man as someone who can be trusted to proclaim the difference between truth and falsehood. And if the accused replies with a counter-claim? Well, who spoke first? It is to entrap the mark in a hall of mirrors.

Is there a way out? Listen. Touch. Smell. Explore. Remember.

Ten years ago, Tom Walker comprehensively refuted the lump-of-labor fallacy claim in a chapter, "The 'lump of labor' case against work-sharing: Populist fallacy or marginalist throwback," included in the anthology Working Time: International trends, theory and policy perspectives.

Four years after that refutation was published, the bogus fallacy claims again blossomed -- presumably in response to the French 35-hour workweek experiment and to the jobless recovery after the 2001 recession. The Sandwichman began a series of postings to MaxSpeak re-iterating the debunking of the fallacy claim. Those posts evolved into a second article, "Why Economists Dislike a Lump of Labor," published in the September 2007 Review of Social Economy.

The nonsensical nature of the fallacy claim is extreme. It is akin to the innumerable sayings attributed to Mark Twain that he never said or the many beliefs attributed to Marx that, in actuality, he quoted only to criticize. And like those misquotations, the fallacy claim circulates on, oblivious to the truth of its origin, its logical coherence or its factual ground.

The real shame, though, is not so much in the thoughtless circulation of this baseless claim as in the almost unanimous deference paid to the blustering pronouncements by the economics profession. It is a shame because leisure, unemployment, waste, environmental sustainability, social justice and war are important issues and to trivialize and marginalize a potentially effective policy approach to those issues is, to say the least, "inappropriate", if not technically criminal negligence.

Some would say that those who knowingly, or through flagrant and obstinate refusal to perform their duty of due diligence, bring on a war, plague or famine are guilty of mass murder. They are little and not-so-little Eichmanns. But the Sandwichman is wary of such name-calling. The Sandwichman would rather offer incentives than invectives.

On May 1, 2008, the Sandwichman offered a $10,000 prize to anyone who could successfully refute Tom Walker's debunking of the lump-of-labor fallacy and get it published in a leading economics journal. The judge for whether the rebuttal was successful or not would thus have been not the Sandwichman himself but a pillar of the economics profession.

Academics warned the Sandwichman that such a bet was foolhardy because respected journals will publish "all kinds of crap" as long as it conforms to the prevailing ideology. Nevertheless, the deadline for entering the prize competition -- December 31, 2009 -- came and went and the Sandwichman didn't receive a single entry or even an inquiry. Zilch, zip, nada. Not only will the lump-of-labor mongers not put their money where their mouth is, they won't even put their mouths where the money is!

Last year (2009) alone, "Charlemagne" at The Economist, Peter Coy at Business Week, Harvard Economics Professor Edward Glaeser, Ed Crooks at the Financial Times and Northwestern Economics Professor Robert J. Gordon each invoked the lump-of-labor fallacy claim in complete ignorance of what they were talking about. The Sandwichman has been accused of being repetitive. The Sandwichman doesn't like to be repetitive. But when people who get paid to know what they are talking about keep repeating nonsense and lies, the Sandwichman suspects that maybe folks haven't heard yet that the jig is up on the lump-of-labor scam.

Ten thousand dollars says Robert J. Gordon is a buffoon, Edward Glaeser is a impostor, Peter Coy is a con-man, Ed Crooks is a crook and Charlemagne is a charlatan. The Sandwichman is not calling these gentlemen those names, though. He is offering them a wager. Although the original prize offer has expired, terms for an extension remain negotiable.

Listen. Touch. Smell. Explore. Remember. Above all, remember.

Friday, January 1, 2010

1983 'Ponzi Game' prediction

I'm reading William Greider's 1989 book 'The Secrets of the Temple - How the Federal Reserve Runs the Country' and came across the following acknowledgement and prediction of and for a global 'ponzi scheme' playing out to an ultimate crisis.

"A genuine solution, [US Federal Reserve governor] Philip Coldwell predicted, would not be acceptable, either to bankers or politicians, until the consequences of the LDC debt reached a sufficiently frightening level of crisis - when the "Ponzi game" broke down and everyone was forced to acknowledge it. Like all illusions, this one might continue for quite a long time, perhaps many years, but it could also collapse abruptly at any time shattered by random events.

"The way out of this thing is a shift in the way we treat the LDC debt," Coldwell argued. "The banks would have to take a big hit on their balance sheets, but then it's over. If you give them a definitive hit, then they could say it's behind us. If you get down to a crisis stage, the banks would accept that. They would have no choice."[1]

Looking at contemporary economic history it seems clear that the beginning of the current global financial crisis can be traced at least as far back to the Johnson administration in the early-mid 1960s. This is when inflation and accompanying inflationary expectations were set in concrete by huge military expenditures on the Vietnam War as well as through what is arguably, an accompanied global oil price hike that was deliberately manipulated to help pay for it.[2][3] It was also the time the evolution to bigness in capitalism made it possible for large firms to: (i)increase their prices as a response to a rise in inflation, (ii)increase their prices in response to a general drop in demand for their services and products, (iii) increase their prices in response to losses caused by speculative activities gone wrong, (iv) generate revenue from activities not linked to employment nor the creation of wealth.

Permanent recession and economic zero sum games played out as astounding levels of economic concentration became commonplace both in the industrialised nations and around the globe.
“Between 1950 and 1971 the 200 leading U.S. corporations increased their control of all U.S. manufacturing assets from 46 to 87 percent. By 1971 the assets of the top 100 equaled those of the other 194,000 corporations. [4]”

The US Federal Reserve - whose key staff are often former corporate CEOs - worked intimately with global transnational corporations (with the latter's origins based in the US).[5] From the mid 1960s to late 1979 the Fed's focus was on hitting its interest rates targets (the price of money) over and above controlling the quantity of money. [6] The resulting inflation foreshortened horizons in thinking and led to increases in debt and increases in long-term interest rates. Creditors received negative returns on loans that were contracted at times when inflation was lower. Corporations began to engage in much deeper levels of exploitation through globalisation where imprudent loans were pushed on third world nations to recycle the massive increase in excess US dollars resulting from the oil shocks of the 1970s.

By 1979 that game was up. By that time negative real interest rates couldn't be sustained. and the US dollar had come under severe speculative attack.
"The dollar-based monetary system was about to collapse. The core of the problem was that for the second time in a year corporations, banks, central banks and other investors (including moneyed Arab interests) had stopped accepting dollars as the universal currency. Instead, there was heavy dollar selling on a global scale and the proceeds were going into gold, silver, deutsche marks, Swiss francs and even art and real estate." [7].

The Carter administration instituted the Money Control Act of 1980, lifting controls of interest rates and making usury legal. The new Fed chairman Paul Volker took advantage of the ability of the US to freely decide the price of the world’s trading and reserve currency and increased global interest rates to levels that were unprecedented. Third World debt [8] had escalated already because of high oil prices and the extraordinary rise in the global interest rate (denominated in US dollars) became essentially unpayable for them.

This is the background to the Ponzi scheme described by Coldwell in 1983. It's ironic that in a time of such overproduction of money that a small minority of creditors took all the power and forced up interest rates across the world, permanently damaging their economies. Nothing much has changed since then. In the early 1980s:
"Volker and his international aides worked assiduously to protect the earnings of the banks, particularly the money-center banks which were most exposed [to third world nation default]. In the negotiations over new loans, Volcker usually supported the bankers in their persistent refusal to make any concessions on interest rates. The Fed also took care to instruct its bank examiners to treat the huge portfolios of questionable LDC loans with special solicitude. If the rules were applied to strictly, major banks might be confronted with huge loan write-offs that would wipe out their capital.

The central bank, as regulator and protector, had worked itself into a compromising position. On the one hand, the Fed was trying to gradually extricate the largest banks from their overexposure and preaching sterner discipline for the future. On the other hand, the Fed was bending the banking standards and pressuring hundreds of other wary bankers to make new loans they regarded as dubious....when the [smaller regional] bankers balked at committing more money to the new loan packages, they were pressured by the major banks. If that didn't work, they received a friendly call from the president of the local Federal Reserve Bank, urging them to reconsider."

In most cases, William Greider takes care to point out, such successful persuasion "implied an unstated guarantee by the government."

This observation leads to yet another powerful phrophecy in Greider's book:
"The problem is that by the time the crisis ends, the regulatory authorities may be so deeply compromised by the concessions that they have made to the banks that there is no return."[9]

As we now see, the gambling in the world's financial markets went on and on and increased. It didn't ever stop because of government intervention. History shows, wrote Michael Moffit, that eventually the game will end. Vast abused freedom on the part of US government administrations - Democrat and Republican alike - and of that of global TNCs have shackled both them and us.

We are all among the losers now.

[1] William Greider. 'The Secrets of the Temple - How the Federal Reserve Runs the Country' Touchstone 1989. Page 549

[2] See William Endaghl 'The Fake Oil Crisis of 1973'

[3] The ex-ambassador to Saudi Arabia, James E. Akins… argued [around 1980] that Kissinger acquiesced in the Shah-led oil price hikes beginning in 1974 to provide Iran with the finances to help out ailing Northrup, McDonnell Douglas, General Dynamics, Boeing, Grumman and Litton Industries.
The Multinational Monitor
Business In the Shah's Iran
by John Cavanagh

[4] Quoted from: American Global Enterprise and Asia
Journal article by Mark Selden; Bulletin of Concerned Asian Scholars, Vol. 7, 1975

[5] In 1975 it was reported that "“A recent survey of 1,029 executives of leading U.S. global corporations, for example, found just 19 foreign citizens.”
American Global Enterprise and Asia
Journal article by Mark Selden; Bulletin of Concerned Asian Scholars, Vol. 7, 1975

[6] "the Fed [as a monopolist] cannot control both the price of money...and the quantity of the same time."
Maxwell Newton 'The Fed - Inside the Federal Reserve, the Secret Power Center that Controls the American Economy' Times Books, 1983. Page 211

[7] Michael Moffit 'The World's Money' 1983. Page 196

[8] These were syndicated loans originating from the concentrated financial markets of Wall Street.

[9] Karen Lissakers 'Dateline Wall Street: Faustian Finance', Foreign Policy, Summer 1983.