Wednesday, February 29, 2012

Slimeball Jamie Dimon: Reporters are overpaid


This is not how Wall Street can win the favor of the financial press, by calling them overpaid, when newspaper reporters earn an average of $44,000 a year, compared to the average JPMorgan employee who makes $342,000!

Let this forever put to rest the commonly-held view that Jamie Dimon is "smart." Just like criticizing the media never works for politicians in trouble, it doesn't work for rich asshole bankers.


By Dakin Campbell and Andrea Ludtke
February 29, 2012 | Bloomberg

U.S. bank profits hit 5-year high -- YAY BAILOUTS!

GM's profits are at an all-time high; and so are the TBTF Wall Street banks'. Connection? They were both bailed out by the U.S. Government!

In fact, the bailout for Wall Street continues indefinitely. It's now at over $29.6 trillion.

On the other hand, the bailout of GM, Chrysler and their suppliers (and by extension, Ford) saved 1 million jobs and an entire U.S. industry from extinction. Detroit has come back leaner, meaner and arguably with better products. Whereas Wall Street has come back with... the same old shit: huge bonuses; millions spent on bribing, er, lobbying our leaders; telling us 99 percenters to get "real" jobs; lecturing us how stupid and anti-business we are for questioning their judgment, etc.


February 28, 2012 | AP

10% of Wall St. bankers are psychopaths

As it turns out, "slimeballs" is not a very exact term for Wall Street bankers; clinically, they are "psychopaths." Good to know.



By Alexander Eichler
February 28, 2012 | Huffington Post

Tuesday, February 28, 2012

Studies: Wealth makes us worse human beings

I've been accused of encouraging class warfare with my calls to increase taxes on the richest One Percent of Americans.

Today I'm encouraging science. For instance, scientific studies show that, "The mere mention of money makes people less generous, less helpful and less likely to look for teammates."

So, higher taxation is not just about plugging our federal deficit, it's about helping rich people to be more generous, more helpful, and more empathetic. That's practically God's work!




By Bonnie Kavoussi
February 27, 2012 | Huffington Post

People with a few extra bucks just aren't as nice as the rest of us, at least according to a new study.

Rich people are more likely to take candy from children, lie, cheat, endorse unethical behavior at work, and cut off pedestrians while driving, a study published Monday in the Proceedings of the National Academy of Sciences found.

The report contradicts the notion that poor people are more likely to act unethically out of financial necessity. Instead, the researchers wrote the "relative independence" and "increased privacy" of the wealthy make them more likely to act unethically. They also share "feelings of entitlement and inattention to the consequences of one's actions on others" that may play into their moral decisions.

In one experiment, wealthier people took twice as many candies as poorer people from a jar that had been designated for children. In another study, nearly half of all drivers of expensive cars cut off pedestrians at crosswalks, while no drivers of the cheapest cars and about 30 percent of drivers of cheaper cars did the same thing.

Some of the other experiments indicated that the the rich were more likely to cheat in a game and lie to a potential job applicant about the possibility that their job was being eliminated than their poorer counterparts.

The study adds to a growing body of evidence that indicates that the rich tend to be less sensitive than others. The mere mention of money makes people less generous, less helpful and less likely to look for teammates, according to research by Kathleen Vohs, a marketing professor at the University of Minnesota, cited by The Boston Globe.

In addition, a study by Adam Waytz and Nicholas Epley, professors at Northwestern University and the University of Chicago, respectively, found that people with more social connections are more likely to dehumanize others. And a report from researchers at the University of California-Berkeley released in December came to a similar conclusion: That rich people are less likely to feel empathy.

Buffett has skin in the housing game

Don't let anybody say I'm a blind cheerleader for Warren Buffett. (Maybe smarter or more pessimistic types can find a self-serving aim in Buffett's saying high U.S. corporate taxes are "myth," but I can't.)

So, let's just say Buffett is wily, hypocritical at times, and usually self-serving, but also often right. And anyway, with Buffett, we always have an easy way to find out what he really thinks: where he invests his money.


By Matt Stoller
February 27, 2012 | Naked Capitalism

Buffett: High corporate taxes in U.S. a 'myth'

Said the Sage of Omaha in an interview with CNBC: "It's a myth that American corporations are paying 35 percent or anything like it. Corporate taxes are not strangling American competitiveness."


By Bonnie Kavoussi
February 27, 2012 | Huffington Post

Republicans rightly fear the End Times

Jonathan Chait's analysis of the GOP's impending electoral doom and its wild gamble to forestall it is must-read, but long, so I'll quote selectively. The upshot is that, as Gary Brecher (aka The War Nerd) says, "birth rate wins," and so America's political future belongs to us, the good guys. Hooray for college-educated lefty liberal socialist secular progressives!:


To be sure, the apocalyptic ideological analysis—that "freedom" is incompatible with Clinton-era tax rates and Massachusetts-style health care—is pure crazy. But the panicked strategic analysis, and the sense of urgency it gives rise to, is actually quite sound. The modern GOP—the party of Nixon, Reagan, and both Bushes—is staring down its own demographic extinction. Right-wing warnings of impending tyranny express, in hyperbolic form, well-grounded dread: that conservative America will soon come to be dominated, in a semi-permanent fashion, by an ascendant Democratic coalition hostile to its outlook and interests. And this impending doom has colored the party's frantic, fearful response to the Obama presidency."

[...]

The Republican Party had increasingly found itself confined to white voters, especially those lacking a college degree and rural whites who, as Obama awkwardly put it in 2008, tend to "cling to guns or religion." Meanwhile, the Democrats had ­increased their standing among whites with graduate degrees, particularly the growing share of secular whites, and remained dominant among racial minorities. As a whole, Judis and Teixeira noted, the electorate was growing both somewhat better educated and dramatically less white, making every successive election less favorable for the GOP. And the trends were even more striking in some key swing states.

Every year, the nonwhite proportion of the electorate grows by about half a percentage point—meaning that in every presidential election, the minority share of the vote increases by 2 percent, a huge amount in a closely divided country. One measure of how thoroughly the electorate had changed by the time of Obama's election was that, if college-­educated whites, working-class whites, and minorities had cast the same proportion of the votes in 1988 as they did in 2008, Michael Dukakis would have, just barely, won. By 2020—just eight years away—nonwhite voters should rise from a quarter of the 2008 electorate to one third. In 30 years, nonwhites will outnumber whites.

[To put this another way: in 2008 John McCain won the same percentage of white people's votes that Ronald Reagan did in 1980, but McCain lost to Obama by 7 percentage points! - J]

[...]

Piles of recent studies have found that voters often conflate "social" and "economic" issues. What social scientists delicately call "ethnocentrism" and "racial resentment" and "ingroup solidarity" are defining attributes of conservative voting behavior, and help organize a familiar if not necessarily rational coalition of ideological interests. Doctrines like neoconservative foreign policy, supply-side economics, and climate skepticism may bear little connection to each other at the level of abstract thought. But boiled down to political sound bites and served up to the voters, they blend into an indistinguishable stew of racial, religious, cultural, and nationalistic identity.

[...]

Obama actually lost the over-45-year-old vote in 2008, gaining his entire victory margin from younger voters—more racially diverse, better educated, less religious, and more socially and economically liberal.

Portents of this future were surely rendered all the more vivid by the startling reality that the man presiding over the new majority just happened to be, himself, young, urban, hip, and black. When jubilant supporters of Obama gathered in Grant Park on Election Night in 2008, Republicans saw a glimpse of their own political mortality. And a galvanizing picture of just what their new rulers would look like.

[...]

None of this is to say that Republicans ignored the rising tide of younger and browner voters that swamped them at the polls in 2008. Instead they set about keeping as many of them from the polls as possible. The bulk of the campaign has taken the form of throwing up an endless series of tedious bureaucratic impediments to voting in many states—ending same-day voter registration, imposing onerous requirements upon voter-registration drives, and upon voters themselves. "Voting liberal, that's what kids do," overshared William O'Brien, the New Hampshire House speaker, who had supported a bill to prohibit college students from voting from their school addresses. What can these desperate, rearguard tactics accomplish? They can make the electorate a bit older, whiter, and less poor. They can, perhaps, buy the Republicans some time.

[...]

Instead the party has bet everything on 2012, preferring a Hail Mary strategy to the slow march of legislative progress. That is the basis of the House Republicans' otherwise inexplicable choice to vote last spring for a sweeping budget plan that would lock in low taxes, slash spending, and transform Medicare into ­private vouchers—none of which was popular with voters. Majority parties are known to hold unpopular votes occasionally, but holding an ­unpopular vote that Republicans knew full well stood zero chance of enactment (with Obama casting a certain veto) broke new ground in the realm of foolhardiness.

The way to make sense of that foolhardiness is that the party has decided to bet everything on its one "last chance." Not the last chance for the Republican Party to win power—there will be many of those, and over time it will surely learn to compete for nonwhite voters—but its last chance to exercise power in its current form, as a party of anti-government fundamentalism powered by sublimated white Christian identity politics. (And the last chance to stop the policy steamroller of the new Democratic majority.)

[...]

During the last midterm elections, the strategy succeeded brilliantly. Republicans moved further right and won a gigantic victory. In the 2010 electorate, the proportion of voters under 30 fell by roughly a third, while the proportion of voters over 65 years old rose by a similar amount—the white share, too. In the long run, though, the GOP has done nothing at all to rehabilitate its deep unpopularity with the public as a whole, and has only further poisoned its standing with Hispanics. But by forswearing compromise, it opened the door to a single shot. The Republicans have gained the House and stand poised to win control of the Senate. If they can claw out a presidential win and hold on to Congress, they will have a glorious two-year window to restore the America they knew and loved, to lock in transformational change, or at least to wrench the status quo so far rightward that it will take Democrats a generation to wrench it back. The cost of any foregone legislative compromises on health care or the deficit would be trivial compared to the enormous gains available to a party in control of all three federal branches.

On the other hand, if they lose their bid to unseat Obama, they will have mortgaged their future for nothing at all. And over the last several months, it has appeared increasingly likely that the party's great all-or-nothing bet may land, ultimately, on nothing. In which case, the Republicans will have turned an unfavorable outlook into a truly bleak one in a fit of panic. The deepest effect of Obama's election upon the Republicans' psyche has been to make them truly fear, for the first time since before Ronald Reagan, that the future is against them.


Republicans are worried this election could be their last chance to stop history. This is fear talking. But not paranoia.
By Jonathan Chait
February 26, 2012 | New York Magazine

Monday, February 27, 2012

Facebook's IPO, income, and users' privacy

Although Facebook founder and CEO Mark Zuckerberg said two years ago that privacy is obsolete among the younger generations, in fact, more and more Facebook users are opting to share less and less of their personal info. Reported HuffPost:

"Researchers at Polytechnic Institute of New York University tracked the privacy settings of 1.4 million Facebook profiles belonging to New Yorkers over a 15-month period between March 2010 and June 2011. They found a 'dramatic decrease in the amount of information Facebook users reveal about themselves to the general public' and the authors concluded that the users became 'dramatically more private' during the period, according to their report.

"Over the same period, users stepped up the frequency with which they hid personal details in their public profiles, which are visible to anyone on Facebook, a friend or otherwise. To measure this, the researchers tracked nine characteristics often included on public profiles -- 'friend lists, age, high-school name and graduation year, network, relationship, gender, interested in, hometown and current city' -- and monitored whether members shared fewer details over time."

Maybe younger folks are starting to catch on -- like their bosses and potential bosses already have -- that making your life an open book on the internet may not be such a swell idea.

Meanwhile, saying that "we must reject the conclusion that privacy is an outmoded value," and that privacy has been "at the heart of our democracy from its inception," President Obama released a "Consumer Privacy Bill of Rights" for the new global digital economy.

Gee, let's cross our fingers and really hope FB users' privacy issues and Obama's new regulations won't hurt Facebook's IPO, heh-heh-heh.

BTW, if you accept Facebook's figures, then in 2011 they earned about $4.40 in revenue per user. For comparison, let's look at Tristan Louis's figures for other internet/social networking companies:

*Average revenue per user:

Pandora: $ 0.54
LinkedIn: $ 1.79
GroupOn: $ 8.60
Living Social: $ 9.41
Zynga: $ 2.57
Facebook: $4.39

*Granted, since these firms have different business models, a better measure would be net profit per user -- see below. Notwithstanding, Louis's figures from 5 top social networking firms indicate that $4 average revenue per user is a good expectation, and that is supported by other analyses.

Per-user valuation at IPO:

Pandora: $ 50.98
LinkedIn: $ 86.67
GroupOn: $ 271.08
Living Social: ?
Zynga: $ 75.43
*Facebook: $11.83

*Assuming FB can raise $10 billion in an IPO; they said they hope to raise at least $5 billion.

For the above firms, I compiled these annual profit figures for 2011:

Net profit per user:

*Pandora: $ 5.10
**LinkedIn: $ 0.68
***GroupOn: -$ 1.29
****Living Social: ?
*****Zynga: -$ 1.68
Facebook: $ 1.20

*Pandora has had only 1 reported public quarter since its IPO. This is based on Q4 2011.
** LinkedIn reports only its annual EBITDA, not net profit.
***GroupOn has had only 1 reported public quarter since its IPO.
****Living Social is privately held and has delayed its IPO, but is expected to go public eventually.
*****Zynga went public in Dec. 2011; its annual net profit and latest user figures were used here.

Pretty slim pickin's in the brave new world of internet social networks. It's a definitely a volume game.

Here you can see another analysis of revenue per unique user among internet firms:



Saturday, February 25, 2012

Fun with words: DOHS

Have you ever felt "sick" to "watch" so much "pork" in Washington?

Do you feel like "Mexico" is the proper "target" of "immigration" legislation?

Do you ever worry that an "attack" may take the form of an "epidemic" promulgated by "Al Qaeda" as an "exercise" or "drill" to encourage a "wave" of panic that would cause an extreme "initiative" by the USG to seek "relief"?

What if there was an "organization" such as "Hamas," "Hezbollah," or the "Palestinian Liberation Organization" behind it?

(This preceding has been a trivial word game to distract the Department of Homeland Security from whatever it is it's supposed to do. And since I sent this to you, maybe you're now under electronic observation, too!)


By Andrea Stone
February 24, 2012 | Huffington Post

Taibbi: GOP makes 'circular firing squad' for lack of targets

Here's Taibbi's take-away from the GOP presidential primaries so far, culminating in the Arizona debate:

"This is where the Republican Party is now. They've run out of foreign enemies to point fingers at. They've already maxed out the rhetoric against us orgiastic, anarchy-loving pansexual liberal terrorists. The only possible remaining explanation for their troubles is that their own leaders have failed them. There is a stranger in the house!

"This current race for the presidential nomination has therefore devolved into a kind of Freudian Agatha Christie story, in which the disturbed and highly paranoid voter base by turns tests the orthodoxy of each candidate, trying to figure out which one is the spy, which one is really Barack Obama bin Laden-Marx under the candidate mask!

[...]

"These people have run out of others to blame, run out of bystanders to suspect, run out of decent family people to dismiss as Godless, sex-crazed perverts. They're turning the gun on themselves now. It might be justice, or it might just be sad. Whatever it is, it's remarkable to watch."


Or, as somebody else noted, even Ronald Reagan wouldn't be considered Reaganeque enough by today's hardcore rightwing electorate.

Not that my opinion or Taibbi's matters to Republicans, nevertheless, I've been trying to keep silent about just how crazy the available GOP choices are, so as not to jinx anything. Too bad it looks like Gingrich is out of the running. My next best choice is Rick "Every Sperm is Sacred" Santorum. (Fifty percent of American voters are women, you dumbass.) Of course Romney, the nominee apparent, will be fun to watch squirming as he denies perhaps his best achievement as governor of Massachusetts, "Romneycare."

Nope, nobody can pass the GOP's Primary Purity Test; but it's fascinating to watch them all try. Then it will be even more fun to watch the eventual nominee try and take it all back as he runs to the middle: "No, no, America. That's not what I meant! I'm not that crazy!"


By Matt Taibbi
February 23, 2012 | Rolling Stone

GOP plans would blow up national debt

Here's how much the tax & spend plans of "fiscally responsible" GOP candidates would grow the U.S. national debt over 10 years, according to non-partisan U.S. Budget Watch:

Gingrich: $7 trillion
Romney: $2.6 trillion
Santorum: $4.5 trillion


By Lori Montgomery
February 23, 2012 | Washington Post

Treasonous U.S. politicians outsourcing war decision to Israel

Remember when Republicans professed that all military decisions should be left to "commanders on the ground" (which is contrary to our citizen-led military designed by the Constitution, but never mind...)?

Well, when it comes to attacking Iran to make Israel feel more secure, U.S. commanders should be ignored, according to neocons like John McCain and Joe Lieberman. In fact, they think America's commander-in-chief should be ignored, because Israel's interests trump ours.

American leaders putting Israel's interests before our own are despicable; they are flirting with treason. Yeah, I said it.


By MJ Rosenberg
February 22, 2012 | Huffington Post

Glenn Beck's Goldline forced to refund $4.5 M... What about Beck?


The company Goldline scammed its customers into buying overvalued collectible gold coins instead of real gold bullion. Essentially, they were convincing their clients to pay a risk premium for coins, where the supposed risk was government confiscation of personal gold.

ABC broke this story, and they mention that Goldline used Glenn Beck ("The people I trust are the people at Goldline".... "You see, back in 1933, FDR said, 'OK, we're gonna take all your gold...'"), and other conservative pundits and politicians (Mike Huckabee, Fred Thompson) to sell its overvalued gold coin business.

Goldline has agreed to refund $4.5 million to its customers and set up a fund of $800 K for further claims; in exchange a Santa Monica court dropped 19 criminal charges.

This is actually the second time a gold company advertised by Beck has run afoul of California law. I wonder if Glenn Beck, et al, will donate the revenues they received from Goldline?....

But this is about more than money. Goldline's pitch was based on a paranoid view that even buying gold wasn't safe, because the federal government could come and take it away. (Which is bogus, incidentally.) Without conservative talk radio and FOX, such paranoid beliefs would not be so widespread.

The real crime here is irresponsible talking heads leading millions of Americans to believe their government is fundamentally corrupt and out to get them. Too bad Goldline's celebrity accomplices like Glenn Beck don't have to pay any share of this settlement.


By Matthew Mosk
February 22, 2012 | ABC News

Wednesday, February 22, 2012

Obama wants to cut corp. tax rate to 28%

There goes that darn BHO again, killing U.S. jobs. What in the world is that America-hating Marxist thinking?!?

I hope to goodness Republicans don't let him get away with this, especially before the November elections.


By Jim Kuhnhenn
February 22, 2012 | Huffington Post

Tuesday, February 21, 2012

Drug testing for welfare recipients and clash of conservative values

This is a pretty good example of where conservatives' values collide, and one proves stronger: on the one hand, conservatives despise drug use as immoral, and they think it leads to crime and poverty; on the other hand, they want to cut government expenditures wherever possible.
In the case of drug testing for welfare recipients, it's a case of spending way more money on testing than can be saved by excluding drug abusers from welfare.
For example, since Florida mandated testing of welfare recipients last year, only 2 percent have failed the tests. Florida has had to eat the costs of tests for the 96 percent who passed.
But don't hold your breath waiting for Florida to cancel expensive drug testing. This is a case where conservatives want government to spend a lot of money to promote their values.
UPDATE (02.25.2012): GOP primary candidate Mitt Romney said that drug testing for welfare recipients was an "excellent idea," damn the costs. So there you go.

Commentary: Drug testing welfare recipients is a waste of taxpayers' money
By Mary Sanchez
February 20, 2012 | Kansas City Star
URL: http://www.mcclatchydc.com/2012/02/20/139081/commentary-drug-testing-welfare.html#storylink=cpy

Ring of 450 U.S. military bases threatened by Iran

His title looks like a typo.

Indeed, Iran is a threat to the U.S., because it can hardly spit in any direction without hitting a U.S. military base.

Ring of Iranian Bases Threatens US

By Juan Cole

February 18, 2012 | juancole.com

I had grabbed an earlier version of this graphic off a Democratic Underground bulletin board from 2005. It made the point that the United States, which professes itself menaced by Iran, rather has Iran encircled by military bases. I have tried to update the map a bit, though this area is a moving target and the map no doubt isn't perfect. It is expressive enough, however, of the reality. Iraq and Uzbekistan no longer have American bases, but the US military now has a refueling station in Turkmenistan.


Some critics complained that forward operating bases are not much of a base. But actually, this map vastly understates the case. It shows only a few of the estimated 450 US military bases and outposts in Afghanistan, e.g. And it does not show drone bases, of which the US has 60 around the world.

Iran has 150 billion barrels in petroleum reserves, among the largest reserves in the world, but they cannot be exploited by US corporations because of Israel lobby-inspired US congressional sanctions on Iran. US elites, especially Big Oil, dream of doing regime change in Iran so as to get access to those vast reserves. Likely the most important US objection to the Iranian civilian nuclear enrichment program is that it could give Iran "nuclear latency," the ability to construct a bomb quickly if it seemed to Tehran that the US planned to attack. That is, the real objection in Washington to Iranian nuclear know-how is that it makes Iraq-style regime change impossible and so puts Iranian petroleum out of reach of Houston for the foreseeable future. This consideration is likely the real reason that Washington does not, so to speak, go ballistic about North Korea and Pakistan having actual nuclear warheads, but like to has a fainting spell at the very idea of Iran enriching uranium to 3.5 percent (a bomb takes 95%). North Korea and Pakistan don't have oil.

Krugman: Fiscal austerity is all pain, no gain

By Paul Krugman
February 19, 2012 | New York Times

Last week the European Commission confirmed what everyone suspected: the economies it surveys are shrinking, not growing. It's not an official recession yet, but the only real question is how deep the downturn will be.

And this downturn is hitting nations that have never recovered from the last recession. For all America's troubles, its gross domestic product has finally surpassed its pre-crisis peak; Europe's has not. And some nations are suffering Great Depression-level pain: Greece and Ireland have had double-digit declines in output, Spain has 23 percent unemployment, Britain's slump has now gone on longer than its slump in the 1930s.

Worse yet, European leaders — and quite a few influential players here — are still wedded to the economic doctrine responsible for this disaster.

For things didn't have to be this bad. Greece would have been in deep trouble no matter what policy decisions were taken, and the same is true, to a lesser extent, of other nations around Europe's periphery. But matters were made far worse than necessary by the way Europe's leaders, and more broadly its policy elite, substituted moralizing for analysis, fantasies for the lessons of history.

Specifically, in early 2010 austerity economics — the insistence that governments should slash spending even in the face of high unemployment — became all the rage in European capitals. The doctrine asserted that the direct negative effects of spending cuts on employment would be offset by changes in "confidence," that savage spending cuts would lead to a surge in consumer and business spending, while nations failing to make such cuts would see capital flight and soaring interest rates. If this sounds to you like something Herbert Hoover might have said, you're right: It does and he did.

Now the results are in — and they're exactly what three generations' worth of economic analysis and all the lessons of history should have told you would happen. The confidence fairy has failed to show up: none of the countries slashing spending have seen the predicted private-sector surge. Instead, the depressing effects of fiscal austerity have been reinforced by falling private spending.

Furthermore, bond markets keep refusing to cooperate. Even austerity's star pupils, countries that, like Portugal and Ireland, have done everything that was demanded of them, still face sky-high borrowing costs. Why? Because spending cuts have deeply depressed their economies, undermining their tax bases to such an extent that the ratio of debt to G.D.P., the standard indicator of fiscal progress, is getting worse rather than better.

Meanwhile, countries that didn't jump on the austerity train — most notably, Japan and the United States — continue to have very low borrowing costs, defying the dire predictions of fiscal hawks.

Now, not everything has gone wrong. Late last year Spanish and Italian borrowing costs shot up, threatening a general financial meltdown. Those costs have now subsided, amid general sighs of relief. But this good news was actually a triumph of anti-austerity: Mario Draghi, the new president of the European Central Bank, brushed aside the inflation-worriers and engineered a large expansion of credit, which was just what the doctor ordered.

So what will it take to convince the Pain Caucus, the people on both sides of the Atlantic who insist that we can cut our way to prosperity, that they are wrong?

After all, the usual suspects were quick to pronounce the idea of fiscal stimulus dead for all time after President Obama's efforts failed to produce a quick fall in unemployment — even though many economists warned in advance that the stimulus was too small. Yet as far as I can tell, austerity is still considered responsible and necessary despite its catastrophic failure in practice.

The point is that we could actually do a lot to help our economies simply by reversing the destructive austerity of the last two years. That's true even in America, which has avoided full-fledged austerity at the federal level but has seen big spending and employment cuts at the state and local level. Remember all the fuss about whether there were enough "shovel ready" projects to make large-scale stimulus feasible? Well, never mind: all the federal government needs to do to give the economy a big boost is provide aid to lower-level governments, allowing these governments to rehire the hundreds of thousands of schoolteachers they have laid off and restart the building and maintenance projects they have canceled.

Look, I understand why influential people are reluctant to admit that policy ideas they thought reflected deep wisdom actually amounted to utter, destructive folly. But it's time to put delusional beliefs about the virtues of austerity in a depressed economy behind us.

Monday, February 20, 2012

EU's fanatical 'saviors' destroying Greece, EU

Cohen draws a stunning historical parallel:

"The EU's terms do not begin to match the altruism the United States showed to the defeated Germans after 1945.... Greece has invaded no one and committed no crimes against humanity. Yet the EU, which boasts that solidarity is its founding principle, is forcing it into destitution and chaos."

Is Cohen right, that mere hubris by EU officials who don't want to admit their beloved idea of a currency union was ill-conceived, is driving their insane behavior to "save" the EU by destroying its member states?


By Nick Cohen
February 19, 2012 | Observer

Greek democracy is being destroyed. Not by soldiers marching with insane slogans on their lips about the inevitable triumph of the German master race, international proletariat or global jihad, but by moderate men and women who think themselves immune to ideological frenzy. Greece's enemies are novel, but no less frightening for that: extremists from the centre ground; the respectable running riot.

Which ever way you cut it, Greece can't win. The EU "bailout" cannot perform the first function of a rescue and save the sufferer from suffering. The Germans, with Dutch and Finnish assistance, are pushing Greece into a death spiral. The EU demands that Greece cuts 150,000 public jobs over three years – the equivalent in terms of population of our government taking 800,000 jobs from the UK public sector. Greek politicians must also accept without a quibble a 22% cut in the minimum wage and further reductions in the welfare state.

Greece is in permanent recession. The economy shrank by 7% in the three months to December 2011. Tens of thousands of family businesses have gone bust. Europe is now offering to revive Greece by impoverishing it; to heal it by harming it. As Tacitus said of the Roman legions' earlier attempt to impose a European union: "They make a desert and call it peace."

Whether Greek society can stand the pressure remains an open question. The parties of the far left and right are flourishing in the polls as the public comes to see its centrist politicians as traitors for trying to appease a hostile EU. Once the Grecian fringe was reserved for the unhinged. The last time I asked Liana Kanelli, spokeswoman for the Greek Communist party, about her country's crisis, she flew off into a rage about how the 1999 Nato intervention to stop Serb nationalists slaughtering Kosovo Muslims was an imperialist plot to extend capitalism into the Balkans. Nothing I could say could wake her from her land of make-believe and return her to the subject at hand.

Her fellow citizens no longer see Kanelli and her kind as dangerous fools, however. Because they oppose the EU, cranks from the left and racists from the right now make more sense to Greeks than their mainstream politicians. The parallels with the 1930s are too obvious to labour.

Whatever the political consequences, every sensible financial commentator understands that the Greek economy can take no more. The "bailout" will merely push it deeper into the mire. The EU's terms do not begin to match the altruism the United States showed to the defeated Germans after 1945. America did not pauperise West Germans as many in France and indeed Washington wanted. America guaranteed their security, then gave them loans from the Marshall Plan that allowed the West German economic miracle to begin. Greece has invaded no one and committed no crimes against humanity. Yet the EU, which boasts that solidarity is its founding principle, is forcing it into destitution and chaos.

The alternative to bowing to the demands of their German overlords is not noticeably better. If Greece were to leave the euro, there would be hundreds of thousands, maybe millions, of law suits, as parties argued whether contracts should be honoured in the old or new currency. Hyper-inflation might set in. The European banking system might collapse. As William Hague says, the euro is a burning building with no exits.

The EU cannot take responsibility for what it has done and be magnanimous for reasons British readers may not grasp. Raised in a Eurosceptic country, we do not understand how an absolute commitment to the European project was a mark of respectability on the continent. Like going to church and saying your prayers for previous generations, a public demonstration of commitment to the EU ensured that the world saw you as a worthy citizen. If you wanted to advance in Europe's governing parties, judiciaries, bureaucracies and culture industries, you had to subscribe to the belief that ever-greater union was self-evidently worthwhile.

Currency union is – self-evidently – a disaster. Admitting that would bring a loss of face too great for the European elites to bear. To take the most discreditable example, Germany and Holland have benefited enormously from the single currency holding down the exchange rate for their goods, while imposing effective tariff barriers on southern Europe.

Instead of saying: "We are rich because they are poor", Angela Merkel and her boorish colleagues imitate the smug, parochial, selfish Bild reader, who thinks that foreigners' problems would be solved if only they could turn themselves into him. Germany insists that the Greek crisis is the result of the corruption of Greek public life. Greek politics is undoubtedly corrupt, although I should add that the first victims of corruption are poor Greeks who cannot afford to bribe officials or hide their savings from the taxman.

But Greek corruption cannot explain why Portugal is in crisis, any more than Italian corruption can explain why Ireland and Spain are in crisis. All five countries are suffering – and France may soon be suffering – because the euro is a monumental mistake. Rather than rectify it, European leaders attack the welfare states, employment protections and public services that the best of the European centre-left fought for after 1945. In the name of saving the euro, everything must go.

As the poverty deepens and the protests swell, the EU's image will change – and not for the better. It was once seen as a haven, which offered Europeans an escape from the terrors of the past. The EU, wrote the perceptive British diplomat Robert Cooper in 2002, is at the forefront of the "postmodern world". Instead of invading each other, Europeans allowed negotiators at Brussels to settle conflicts and regulate everything "right down to beer and sausages".

The EU may have been petty and irritating. It may not have been very democratic. But its avoidance of conflict produced a pleasant, prosperous and peaceful continent.

Europe does not seem pleasant, prosperous or peaceful today. When historians write about the end of its postmodern utopia, they will note that it was not destroyed by invading armies anxious to plunder Europe's wealth or totalitarian ideologues determined to install a dictatorship, but by politicians and bureaucrats, who appeared to be pillars of respectability, but turned out to be fanatics after all.

KY bill to end phone service to rural areas

This is what happens when we let "free markets" and corporate interests solve every public problem: some Americans have to go back to living in the 1870s.


By John Cheves
February 17, 2012 | Lexington Herald-Leader

Facebook too shall pass

This gives me hope. We may just outlive Facebook and Twitter. But even if we don't...

... Just think, a thousand years from now digital archaeologists might dig up the remains of your LOL cats and vacation photoblog and ask in awe and amazement, "Who were these people?" and "What were they thinking?" Because you'll be long dead but personal data never dies.

(There won't be LinkedIn then either because everybody knows that in the future there is no more money, hence no need for job networking; it'll be a socialistic paradise enabled by rational scientific advancement and one-world government where everybody wears identical unitards and gets along.)

But for those of you crave constant contact with your Facebook, there is also a bright side to a future without it: Perhaps, just perhaps, the posted minutiae of your trek to Starbucks or to pick up your dry cleaning may actually seem interesting to human beings a few millenia from now, as opposed to people today.



Sunday, February 19, 2012

Father of classical physics was alchemist, end-times freak


Isaac Newton is not the only great scientist who also fooled around with Biblical prophecy and alchemy (he wrote nearly a million words on the subject yet never published anything). It just goes to show that even geniuses in one way can be pretty dumb in other ways.

Or, to give another example, just because somebody is successful in business doesn't mean he knows anything about governing.

Just think how many more great discoveries in physics, optics, and mathematics that history could have squeezed out of Newton if he hadn't been wasting his time on this other junk! It's our loss.


By Caroline Morley
February 16, 2012 | New Scientist

Friday, February 17, 2012

Renting beats owning '100 percent of the time'

This Arzaga guy makes a pretty bold claim. Yet I bet if a lot of people crunched the numbers like he did, even "financially secure" people, they'd find out he was right: buying a home wasn't worth it financially. It really is an emotional / lifestyle choice for most people.

UPDATE (02.25.2012): Owning a home makes even less sense in today's economy, when you might have to pick up and move to find a good job. A new study found that there are millions more "super-commuters," those traveling 100 or more miles a day to/from work, because they can't or won't leave their old house.


By Lou Carlozo
February 15, 2012 | Reuters

Rich Arzaga owns a luxury home in San Ramon, California, but he's not betting on it as an investment.

The founder and CEO of Cornerstone Wealth Management, who bought the 5,000 sq. ft. property in 2005 for $1.8 million and has spent $500,000 improving it, considers the abode a wonderful place for his family. But ask him to rate his home -- or any home, for that matter -- as a financial investment, and Arzaga balks.

"It's the American Dream to own a home, but whoever said that didn't do the analysis on it," says Arzaga, knowing he's taking a contrarian stance to conventional wisdom.

Examining 250 properties around the U.S., and going through close to 40 client files to project the financial impact of owning real estate versus liquidating it, Arzaga, an adjunct professor in personal finance at the University of California at Berkeley, found that, "100 percent of the time it was better to rent, rather than own."

That's right: 100 percent.

The reason is simple. While a home is the main repository of wealth for many Americans, it comes with numerous hefty expenses. The carrying costs - what's needed to hold and maintain the asset - range from property taxes and home insurance to emergency repairs and renovations. In a rental situation, the landlord covers those costs, leaving the occupant free to invest revenue in other areas.

"I don't have the emotions a lot of people do surrounding real estate," Arzaga says. "I have steely eyes for how investing in real estate works, and I'd better be a prudent investor for my clients."

Owning a dream home, he says, creates a drain on other financial priorities, causing homeowners "not to meet their financial goals. They were going to fail."

Some real estate experts thought there was some truth to Arzaga's argument, albeit with several conditions.

"To state that owning a home is or isn't a good investment is too simplistic," says Jeffrey Rogers, president and COO of Integra Realty Resources. "It depends. In times of relatively higher rents, low home values, and low interest rates, it makes sense to own a home. But in a reverse market, it wouldn't be economically feasible. Over time, those who purchase in down or flat markets with low interest rates come out ahead."

"Our lifetimes are a long time, and when we look over the long term, real estate and other investments tend to have a positive return," says Jed Kolko, chief economist at Trulia.com, a real estate search and research website. "But when it comes to real estate, changing your mind is expensive. There are a lot of costs involved in buying, selling and moving. If you move every two years, it's probably a bad investment for you. It also depends on your job market. If you're in a one-company town and the company goes down, there goes your job and there goes your home value."

Greg McBride, a senior analyst at Bankrate.com, agrees with one point of Arzaga's. "Home ownership is not so much a creator of wealth as a store of wealth," he says. "The promise of home ownership is that over the long haul, it can rebate many or perhaps all of your costs, unlike rent, which doesn't rebate a dime."

The trouble, he says, is that many Americans want a home so badly, they neglect other ways to grow wealth and financial security.

"You have the other financial bases covered: emergency savings, retirement savings, paying off debt, saving for the education of your children," McBride says. "There's no sense in buying a home if it's going to deplete your emergency or retirement savings."

McBride crunched the numbers in a pre-bubble era (2004) for a home purchased at $200,000 by a buyer in the 27 percent marginal tax bracket. Factoring in a 30-year mortgage, $1,200 in annual home insurance, closing costs of $5,500 and maintenance costs of $100 a month, along with property taxes, he calculated that it would take a selling price, 10 years later, of $395,404 just to break even. His conclusion gave Arzaga's view credence: "Homeownership may not be the moneymaker you think it is." (See the full chart at link.reuters.com/hej66s)

Then there's the emergency fund, a must for when a home requires unexpected repair work.

"As far as emergency savings is concerned, six months of a cushion is adequate," McBride says. "But only 24 percent of people have that kind of cushion, and about 65 percent own homes."

So while home ownership may sound glamorous, you need a lot of money to make it work, without much guarantee of positive returns in a post-bubble era. Indeed, Arzaga cites himself as an example of how home ownership doesn't pay off. His residence is today worth $1.5 million, about 17 percent less than what he paid.

So why not sell? For Arzaga, it's a lifestyle choice, and one that he doesn't regret, since his big money-making investments are elsewhere.

Obama campaign promises 'not to make Wall St. look bad'

Obama flip-flopped on accepting money from big-money super PACs and he promised to go easy on Wall Street, his biggest donors, during the campaign.

Conservatives, if you think Obama is going to institute state socialism, this should calm your fears. Liberals, if you think Obama has learned anything or will change, think again. He's still a big-corporation guy, standing steadily in the center-right.


By Jillian Berman
February 15, 2012 | Huffington Post

Megadeth for Santorum!

Well this seals it. If the man who sang "99 Ways to Die" supports Rick Santorum, that's all I need to know.

I know, I know, some of you are still waiting to see who Ted Nugent will endorse. Too many good choices out there!



February 16, 2012
By Steve Inskeep | NPR


Thursday, February 16, 2012

German linguists can't do without 's**tstorm'

You're welcome, Germany.

But German speakers are not alone; even we English speakers sometimes find that "shitstorm" is the only word that will do.

I humbly submit this slight variant to the lexicon: "shitastrophe."

UPDATE (07.09.2013): Here's the latest on shitty German lexicography: "The German Dictionary Has A New Fun Word, Thanks To The Internet And The Eurozone Crisis."  Apparently shitstorm (ScheiƟesturm?) is one of Merkel's favorite words.


By David Moye
February 14, 2012 | Huffington Post

Romney a hypocrite, poor businessman in opposing auto rescue

I realize there is an election this year and Republicans have to say everything Obama has done or attempted to do has been a complete failure, blah, blah, blah... but come on, the Detroit bailout has been a huge success. And it was started by Dubya, not Obama, which gives Romney perfect cover to ignore it. But no. He can't help himself.

Mitt Romney, the GOP's nominee apparent, has foolishly picked a fight with Obama and the revitalized Detroit auto industry in his erstwhile home state of Michigan simply to stand apart from the Administration and look good in front of the far Right. He wrote in an op-ed in the Detroit News saying, "The president tells us that without his intervention things in Detroit would be worse."

He called the auto industry bailout, "crony capitalism on a grand scale," writing, "I believe that without his intervention things there would be better." This is Romney kicking Detroit after it has lifted itself off the mat; but he also kicked Detroit when it was down in 2008 when he wrote a piece for the New York Times titled "Let Detroit Go Bankrupt."

(For the record, GOP runner-up Rick Santorum also opposes the auto bailout -- but also criticized Romney for hypocritically supporting the Wall Street bailouts.)

To be fair, Romney called for a "managed bankruptcy" of GM and Chrysler, but this was a fantasy. With an auto industry collapse amidst a financial industry collapse, "No one — I repeat, no one — had the slightest interest in funding these companies on any terms," meaning the companies would have been sold off piece by piece, and all their suppliers would have gone belly up. It's shocking that Mr. Bain Capital did not recognize the facts then, and really calls into question Romney's judgment and financial acumen.

Thankfully, Obama did not listen to Romney, the U.S. did provide $85 billion in emergency loans to the auto industry, and as a result, in 4Q 2011, GM posted its largest profit in its 103-year history. Chrysler just posted its first profit since 1997. And most important, 1 million U.S. jobs have been saved. Let's not forget that even Ford, which did not accept bailout funds, lobbied Congress for the bailout of GM, Chrysler, and their suppliers, not to mention lobbied for "cash-for-clunkers," because if Ford's competitors had failed, the entire industry including Ford would have failed.

Military-corporate welfare grants NH town a tank

Where are the Tea Parties when we really need them? (Chasing after welfare moms, voters without photo IDs, and Mexican fruit pickers, as usual.....)


By Radley Balko
February 16, 2012 | Huffington Post

"We're going to have our own tank."

That's what Keene, N.H., Mayor Kendall Lane whispered to Councilman Mitch Greenwood during a December city council meeting.

It's not quite a tank. But the quaint town of 23,000 -- scene of just two murders since 1999 -- had just accepted a $285,933 grant from the U.S. Department of Homeland Security to purchase a Bearcat, an eight-ton armored personnel vehicle made by Lenco Industries Inc.

[...]

Since the Sept. 11 attacks, the war on terror has accelerated the trend toward militarization. Homeland Security hands out anti-terrorism grants to cities and towns, many specifically to buy military-grade equipment from companies like Lenco. In December, the Center for Investigative Reporting reported that Homeland Security grants totalled $34 billion, and went to such unlikely terrorism targets as Fargo, N.D.; Fon du Lac, Wisc.; and Canyon County, Idaho. The report noted that because of the grants, defense contractors that long served the Pentagon exclusively have increasingly turned looked to police departments, hoping to tap a "homeland security market" expected to reach $19 billion by 2014.

Obama: Healthcare fraud buster-in-chief

Health Care Fraud Judgments: Federal Authorities Recovered $4.1 Billion In 2011

By Kelli Kennedy

February 13, 2012 | Huffington Post

URL:  http://www.huffingtonpost.com/2012/02/14/health-care-fraud-judgment_n_1275320.html

GOP's demented 'oldthink' on U.S. nuke stockpile

Congressional Republicans just blow my mind. How can they Obama's call to reduce our nuclear stockpile to "only" a few hundred nuclear warheads "unilateral disarmament" when Russia is poised to follow suit, and when the the country they say we should be arming ourselves against, Iran, doesn't have even one nuclear weapon yet??

This is old, Cold-War thinking ingrained so deep it can't be excised. It is like a tumor causing dementia in their rotting brains. These old dinosaurs just need to crawl away from Washington and die in a bog somewhere.

Obama Administration's Proposed Nuclear Weapons Cuts Attacked By House GOP

By Donna Cassatta and Robert Burns

February 15, 2012 | Huffington Post

URL: http://www.huffingtonpost.com/2012/02/15/obama-nuclear-weapons-cuts-house-gop_n_1279946.html

Tuesday, February 14, 2012

Why does America lock so many people up?



This is really a must-read article, a real revelation for those on the "left" and "right" sides of the crime & prison debate. But it's long so I'll quote excerpts. Let's start with the shocking, shameful stats:

"More than half of all black men without a high-school diploma go to prison at some time in their lives. Mass incarceration on a scale almost unexampled in human history is a fundamental fact of our country today—perhaps the fundamental fact, as slavery was the fundamental fact of 1850. In truth, there are more black men in the grip of the criminal-justice system—in prison, on probation, or on parole—than were in slavery then. Over all, there are now more people under 'correctional supervision' in America—more than six million—than were in the Gulag Archipelago under Stalin at its height. That city of the confined and the controlled, Lockuptown, is now the second largest in the United States.

"The accelerating rate of incarceration over the past few decades is just as startling as the number of people jailed: in 1980, there were about two hundred and twenty people incarcerated for every hundred thousand Americans; by 2010, the number had more than tripled, to seven hundred and thirty-one. No other country even approaches that. In the past two decades, the money that states spend on prisons has risen at six times the rate of spending on higher education."

Think about that. I regard the Soviet Union with horror; it was a giant murder mill and prisoner factory spanning a dozen time zones. And yet, according to Gopnik, today's America is in an important way even worse. How is that possible in the country that defeated Communism? How have we let ourselves get so bad?


And then there is prison rape. We all know about it. We joke about it, or fear it, or try to ignore it, or sometimes say (cruelly) that it is just punishment. Here's what Gopnik has to say:

"Prison rape is so endemic—more than seventy thousand prisoners are raped each year—that it is routinely held out as a threat, part of the punishment to be expected. The subject is standard fodder for comedy, and an uncoƶperative suspect being threatened with rape in prison is now represented, every night on television, as an ordinary and rather lovable bit of policing. The normalization of prison rape—like eighteenth-century japery about watching men struggle as they die on the gallows—will surely strike our descendants as chillingly sadistic, incomprehensible on the part of people who thought themselves civilized."

There are two theories for how the modern U.S. prison system came into being (and let's remember it's a fairly new institution, compared to what we had before): a result of Northern efficiency and procedural justice without room for judges to make commonsense, common law rulings; or a continuation of the Southern slave plantation by other means. Regarding that latter theory, writes Gopnik:

"'American prisons trace their lineage not only back to Pennsylvania penitentiaries but to Texas slave plantations.' White supremacy is the real principle, this thesis holds, and racial domination the real end. In response to the apparent triumphs of the sixties, mass imprisonment became a way of reimposing Jim Crow. Blacks are now incarcerated seven times as often as whites. 'The system of mass incarceration works to trap African Americans in a virtual (and literal) cage,' the legal scholar Michelle Alexander writes. Young black men pass quickly from a period of police harassment into a period of 'formal control' (i.e., actual imprisonment) and then are doomed for life to a system of 'invisible control.' Prevented from voting, legally discriminated against for the rest of their lives, most will cycle back through the prison system. The system, in this view, is not really broken; it is doing what it was designed to do. Alexander's grim conclusion: 'If mass incarceration is considered as a system of social control—specifically, racial control—then the system is a fantastic success.'"

And then there is the more recent phenomenon of for-profit U.S. prisons, run as corporations, whose only source of growth, perversely, is more and more inmates:

"It's hard to imagine any greater disconnect between public good and private profit: the interest of private prisons lies not in the obvious social good of having the minimum necessary number of inmates but in having as many as possible, housed as cheaply as possible. No more chilling document exists in recent American life than the 2005 annual report of the biggest of these firms, the Corrections Corporation of America. Here the company (which spends millions lobbying legislators) is obliged to caution its investors about the risk that somehow, somewhere, someone might turn off the spigot of convicted men:

"'Our growth is generally dependent upon our ability to obtain new contracts to develop and manage new correctional and detention facilities. . . . The demand for our facilities and services could be adversely affected by the relaxation of enforcement efforts, leniency in conviction and sentencing practices or through the decriminalization of certain activities that are currently proscribed by our criminal laws. For instance, any changes with respect to drugs and controlled substances or illegal immigration could affect the number of persons arrested, convicted, and sentenced, thereby potentially reducing demand for correctional facilities to house them.'"


Gopnik goes on to describe how falling crime rates -- about a 40 percent decline in crime throughout the Western world in the 1990s -- cannot be explained by increased incarceration; the numbers so far defy easy explanation. But New York City is a different story: its crime rate decreased 80 percent. Why? Not for the reasons often cited. New York is not richer or whiter than it was, in fact, it is twice as black and Hispanic today compared to 1961. Nor did "broken-window" policing do it:

"In the nineties, the N.Y.P.D. began to control crime not by fighting minor crimes in safe places but by putting lots of cops in places where lots of crimes happened— 'hot-spot policing.' The cops also began an aggressive, controversial program of 'stop and frisk'— 'designed to catch the sharks, not the dolphins,' as Jack Maple, one of its originators, described it—that involved what's called pejoratively 'profiling.' This was not so much racial, since in any given neighborhood all the suspects were likely to be of the same race or color, as social, involving the thousand small clues that policemen recognized already. Minority communities, [researcher Franklin E.] Zimring emphasizes, paid a disproportionate price in kids stopped and frisked, and detained, but they also earned a disproportionate gain in crime reduced. 'The poor pay more and get more' is Zimring's way of putting it."

"Zimring said, in a recent interview, 'Remember, nobody ever made a living mugging. There's no minimum wage in violent crime.' In a sense, he argues, it's recreational, part of a life style: 'Crime is a routine behavior; it's a thing people do when they get used to doing it.' And therein lies its essential fragility. Crime ends as a result of 'cyclical forces operating on situational and contingent things rather than from finding deeply motivated essential linkages.' Conservatives don't like this view because it shows that being tough doesn't help; liberals don't like it because apparently being nice doesn't help, either. Curbing crime does not depend on reversing social pathologies or alleviating social grievances; it depends on erecting small, annoying barriers to entry."

And what about NYC's rate of incarceration?

"'New York City, in the midst of a dramatic reduction in crime, is locking up a much smaller number of people, and particularly of young people, than it was at the height of the crime wave,' Zimring observes. Whatever happened to make street crime fall, it had nothing to do with putting more men in prison."

And these facts lead Gopnik to the inevitable but "radical" conclusion that:

"...since prison plays at best a small role in stopping even violent crime, very few people, rich or poor, should be in prison for a nonviolent crime. Neither the streets nor the society is made safer by having marijuana users or peddlers locked up, let alone with the horrific sentences now dispensed so easily. For that matter, no social good is served by having the embezzler or the Ponzi schemer locked in a cage for the rest of his life, rather than having him bankrupt and doing community service in the South Bronx for the next decade or two."

Gopnik admits this goes against our current "common sense" and even a lot of "liberal" studies on crime prevention:

"To read the literature on crime before it dropped is to see the same kind of dystopian despair we find in the new literature of punishment: we'd have to end poverty, or eradicate the ghettos, or declare war on the broken family, or the like, in order to end the crime wave. The truth is, a series of small actions and events ended up eliminating a problem that seemed to hang over everything. There was no miracle cure, just the intercession of a thousand smaller sanities. Ending sentencing for drug misdemeanors, decriminalizing marijuana, leaving judges free to use common sense (and, where possible, getting judges who are judges rather than politicians)—many small acts are possible that will help end the epidemic of imprisonment as they helped end the plague of crime."

This should give us all hope. And it should serve as an example that systemic change does not necessarily result from "changing the whole system," but rather from small, high-leverage interventions which turn self-reinforcing vicious cycles backwards, turning them into virtuous ones.


Why do we lock up so many people?
By Adam Gopnik
January 30, 2012 | New Yorker

U.S. spending power won't come back

The lost spending power of U.S. consumers was driven largely by debt, largely financed by inflated home values. On the part of banks, this vanished wealth was based on derivatives whose value was based on homes whose value evaporated, bringing down the whole house of financial cards. In both cases it was wealth that should never have existed in the first place. We all must come to terms with the new normal. There is no going back to 2005. Anybody who says we can is ignorant or a charlatan.


By Bonnie Kavoussi
February 13, 2012 | Huffington Post

"The economy that we had before the recession is gone," said Kenneth Goldstein, economist at the Conference Board. "It's not coming back."

The U.S. economy is transitioning to a new normal in which businesses invest less and consumers spend less than before the recession, Goldstein told The Huffington Post in an interview last week. As a result, he said, economic growth and job growth will be slower than before.

He said that businesses, consumers and the government would need to spend at least $1 trillion more than they are likely to spend in order for the economy to return to its pre-recession growth rate. But he added that no one is willing to spend the money necessary to jumpstart the economy, since the government is cutting spending, consumers are saving more, and businesses expect a lower return on their investments.

"Where's the money?" Goldstein asked.

The Conference Board, which counts half of all Fortune 500 companies among its members, provides economic and business advice and research to its member companies.

The main problem is that consumers' expectations for the future have plunged, Goldstein said. They suffered from such a large economic shock in 2008 and 2009 that many older people now do not expect to return to work, and many younger people no longer expect to make that much money, he continued. As a result, Americans have cut back on spending.

Consumers are indeed saving more than they did before the recession. They saved 3.7 percent of their incomes at the end of 2011, in contrast to less than 2 percent of their incomes during all of 2005, according to government statistics. Their wages, when accounting for inflation, actually fell in 2011.

Consumer confidence has been at recessionary levels for the past four years, according to the Conference Board's Consumer Confidence Index.

Like consumers, businesses are spending less because they have lowered their expectations of future income, Goldstein said. While businesses could expect returns of 8 to 12 percent on their investments before the recession, they are now expecting returns of about half that amount. If they raise prices too much, consumers will choose cheaper alternatives, he said.

Exports are one of the only bright spots sustaining U.S. economic growth at this slower pace, he added.

Now that people's homes are often worth less and credit is expensive, people are relying on their wages to be able to spend money -- and their wages have barely been growing, said Lynn Franco, director of the Conference Board's Consumer Research Center. She said this means that economic growth will be slower than it was before the recession for the foreseeable future, since consumer spending comprises two-thirds of the U.S. economy.

"If you just take a look at the fundamentals alone," she said, "you cannot get back to the levels of consumer spending that we had prior to the crisis."

Monday, February 13, 2012

MB360: United States of Dollar Stores


Posted by mybudget360
February 12, 2012

Before 2000 dollar stores were largely seen as a bazaar of quirky trinkets and plastic oddities. Many sold excess volume of products, even selling old Super Bowl t-shirts of teams that did not win. Yet the dollar store of today is not the one of even one decade ago. The disillusionment of the middle class and the rise of a low-wage American worker base have created a booming business for dollar stores. Customers from more affluent backgrounds are now shopping at these stores because of an economic caution about their declining purchasing power. Even in the midst of the boom in the stock market we still have over 45,000,000+ Americans receiving food assistance. I talked about this large segment of our population in EBT Nation. What does the rise of the dollar store tell us about the future of the American economy?

Dollar Store growth

Dollar stores have been around for many decades but the surge in big name dollar stores really hit a full head of steam once the recession arrived:

dollar general and family dollar chart stock

You can see that the two leading dollar stores, Dollar General and Family Dollar hit full stride after 2008. This is a billion dollar business that is benefitting from the weakness in the overall economy. As more income is concentrated in fewer hands, the middle class gets squeezed down and with trillion dollar bailouts targeted at the financial sector, many Americans are seeing their purchasing power dwindle. Yet this compression is not felt as heavily at dollar stores where many can live large with a declining dollar, even if it is only for a brief shopping experience.

Part of this growth also comes from our persistently high unemployment rate:

unemployment us 2012

5 states still have underemployment rates that are above 20 percent. So even though jobs are being added many are being added in lower-wage service sector fields. 5 million good paying jobs were lost since the recession hit and only about 1 million have been recovered.

Impact of compressing middle class on dollar stores

One of the surprising trends with dollar store growth comes from more affluent Americans becoming customers:

"(NY Times) Financial anxiety — or the New Consumerism, if you like — has been a boon to dollar stores. Same-store sales, a key measure of a retailer's health, spiked at the three large, publicly traded chains in this year's first quarter — all were up by at least 5 percent — while Wal-Mart had its eighth straight quarterly decline. Dreiling says that much of Dollar General's growth is generated by what he calls "fill-in trips" ­— increasingly made by wealthier people. Why linger in the canyons of Wal-Mart or Target when you can pop into a dollar store? Dreiling says that 22 percent of his customers make more than $70,000 a year and added, "That 22 percent is our fastest-growing segment."

I found this trend intriguing but this stems from the fact that most average Americans are seeing a compression to their real wage growth:

growth-in-income-inequality

The fastest growing segment of dollar store customers are coming from those making $70,000 a year or more. In fact, 1 out of 5 dollar store shoppers come from this group. Keep in mind the median household income in the US is $50,000 and those that make $70,000 a year or more are in the top 35 percent of households.

This also plays into the reality of those lower-wage service sector jobs being added:

"This growth has led to a building campaign. At a time when few businesses seem to be investing in new equipment or ventures or jobs, Dreiling's company announced a few months ago that it would be creating 6,000 new jobs by building 625 new stores this year. Kiley Rawlins, vice president for investor relations at Family Dollar, said her company would add 300 new stores this year, giving it more than 7,000 in 44 states."

If you look at where dollar stores are most prevalent you will find them all across the country but they are most prevalent in the South:

dollar stores us

The rise of the dollar store goes hand and hand with the loss of the middle class in America. The largest customers at dollar stores are still those with lower incomes, households making $40,000 a year or less make up nearly half the customer base. But when this pool continues to grow you have business growth and that is what we are seeing here. The average per capita income in the US is $25,000 which doesn't go far given the cost of healthcare, energy, and education.

It is also fascinating to see that 40 to 45 percent of dollar store items now come from big name brand companies. This industry is now a multi-billion dollar industry. I've driven around and see Subway and KFC for example now having marketing material showing "EBT accepted here" and dollar stores with a large and growing segment of their aisles made up of by food, are seeing a boon in this economy. I mean think about it with 45,000,000+ Americans receiving food assistance this is a large customer base. You also have many retirees who heavily rely only on Social Security stretching their declining buying power at these stores. Even with low profit margins business can be good. Not sure if we should be thrilled that dollar stores are one business segment that is booming in our modern day economy.