Posts Tagged ‘Washington’s Blog’
As they say in the old country, it’s an ill wind that doesn’t blow anyone any good!
So often when I stare at the screen wondering just what on earth to write about, along comes something to fire me up.
In this case, it was a small clutch of disconnected items that seemed to have a common thread for me.
The first was reading the links in this morning’s Naked Capitalism summary and seeing this:
The REAL Fukushima Danger
The Real Problem …
The fact that the Fukushima reactors have been leaking huge amounts of radioactive water ever since the 2011 earthquake is certainly newsworthy. As are the facts that:
- Scientists have no idea where the cores of the nuclear reactors are
- Radiation could hit Korea, China and the West Coast of North Americafairly hard
But the real problem is that the idiots who caused this mess are probably about to cause a much biggerproblem.
Specifically, the greatest short-term threat to humanity is from the fuel pools at Fukushima.
If one of the pools collapsed or caught fire, it could have severe adverse impacts not only on Japan … but the rest of the world, including the United States. Indeed, a Senator called it a national security concern for the U.S.:
The radiation caused by the failure of the spent fuel pools in the event of another earthquake could reach the West Coast within days. That absolutely makes the safe containment and protection of this spent fuel a security issue for the United States.
Move south of the equator if that ever happened, I think that’s probably the lesson there.
Former U.N. adviser Akio Matsumura calls removing the radioactive materials from the Fukushima fuel pools “an issue of human survival”.
So the stakes in decommissioning the fuel pools are high, indeed.
But in 2 months, Tepco – the knuckleheads who caused the accident – are going to start doing this very difficult operation on their own.
The New York Times reports:
Thousands of workers and a small fleet of cranes are preparing for one of the latest efforts to avoid a deepening environmental disaster that has China and other neighbors increasingly worried: removing spent fuel rods from the damaged No. 4 reactor building and storing them in a safer place.
The Telegraph notes:
Tom Snitch, a senior professor at the University of Maryland and with more than 30 years’ experience in nuclear issues, said “[Japan officials] need to address the real problems, the spent fuel rods in Unit 4 and the leaking pressure vessels,” he said. “There has been too much work done wiping down walls and duct work in the reactors for any other reason then to do something…. This is a critical global issue and Japan must step up.”
Apologies, that’s more than sufficient to ruin your day! If you really want to read to the end, the item is here.
However, the next item carries a much more positive thread. It was an essay that was highlighted on Linked-In back in June.
The Number One Job Skill in 2020
What’s the crucial career strength that employers everywhere are seeking — even though hardly anyone is talking about it? A great way to find out is by studying this list of fast-growing occupations, as compiled by the U.S. Bureau of Labor Statistics.
Sports coaches and fitness trainers. Massage therapists, registered nurses and physical therapists. School psychologists, music tutors, preschool teachers and speech-language pathologists. Personal financial planners, chauffeurs and private detectives. These are among the fields expected to employ at least 20% more people in the U.S. by 2020.
Did you notice the common thread? Every one of these jobs is all about empathy.
In our fast-paced digital world, there’s lots of hand-wringing about the ways that automation and computer technology are taking away the kinds of jobs that kept our parents and grandparents employed. Walk through a modern factory, and you’ll be stunned by how few humans are needed to tend the machines. Similarly, travel agents, video editors and many other white-collar employees have been pushed to the sidelines by the digital revolution’s faster and cheaper methods.
But there’s no substitute for the magic of a face-to-face interaction with someone else who cares. Even the most ingenious machine-based attempts to mimic human conversation (hello, Siri) can’t match the emotional richness of a real conversation with a real person.
Coincidentally, that thought about the ‘magic of a face-to-face interaction’ really echoed in me. Why? Because, I was ruminating on the wonderful world of human interaction this world of blogging delivers. It seems to combine all the benefits of meeting real people with a global consciousness of those same real people spread way beyond our own local domains.
Hence the reason why I offer the next seemingly unrelated item. The recent post from Sue Dreamwallker that I am republishing in full.
This is just a short post to say a Big thank you to all of my readers and to those who visit regular and comment upon my posts. You Bring with you such light and encouragement, and I often at a loss to say how much your kind support means.
I logged onto my Blog today and discover that my readership has swelled to 400 followers and so I just want to say a Big thank you for all of my oldest friends who have been with me since my beginnings of Windows Live Spaces days when I started in 2007, My first real post after transferring was called Finding Answers here on WordPress. And I remember well spending the best part of a Day getting to know and personalise my header and Blog back then as everything was alien that day was in Oct 2010. A move I am so pleased to have made, as I just love the W.P. Community of friends we have gathered here and whom I have got to know and love.
And I just want to say a big thank you to all of my newest arrivals who have clicked the follow button.. I hope to get around to discovering your blogs as soon as time allows.And to say thank you to my email subscribers also.. And Welcome, I hope you enjoy my thoughts and if not please don’t be shy to air your opinions for that’s how we grow and learn by sharing knowledge and understanding.
Today I just want to post what I have been up to in recent days besides the ‘Day-job’ in picture format.. So if you click the photos, you should be able to read more in the caption headings.. [Photos available on Sue’s blogsite.]
Take care all of you and I have a busy week a head in my Day Job, so I will catch you when I can…
Love and Blessings
Still the resonances continued. For Rebecca Solnit published yesterday an incredibly powerful essay over on TomDispatch. It was called Victories Come in All Sizes. As always, Tom writes a wonderful introduction. Let me skip to Rebecca’s opening paragraphs.
Joy Arises, Rules Fall Apart
Thoughts for the Second Anniversary of Occupy Wall Street
By Rebecca Solnit
I would have liked to know what the drummer hoped and what she expected. We’ll never know why she decided to take a drum to the central markets of Paris on October 5, 1789, and why, that day, the tinder was so ready to catch fire and a drumbeat was one of the sparks.
To the beat of that drum, the working women of the marketplace marched all the way to the Palace of Versailles, a dozen miles away, occupied the seat of French royal power, forced the king back to Paris, and got the French Revolution rolling. Far more than with the storming of the Bastille almost three months earlier, it was then that the revolution was really launched — though both were mysterious moments when citizens felt impelled to act and acted together, becoming in the process that mystical body, civil society, the colossus who writes history with her feet and crumples governments with her bare hands.
She strode out of the 1985 earthquake in Mexico City during which parts of the central city collapsed, and so did the credibility and power of the Institutional Revolutionary Party, the PRI that had ruled Mexico for 70 years. She woke up almost three years ago in North Africa, in what was called the Arab Spring, and became a succession of revolutions and revolts still unfolding across the region.
Such transformative moments have happened in many times and many places — sometimes as celebratory revolution, sometimes as terrible calamity, sometimes as both, and they are sometimes reenacted as festivals and carnivals. In these moments, the old order is shattered, governments and elites tremble, and in that rupture civil society is born — or reborn.
It really is an essay that you need to read in full.
However, this further extract covering the closing paragraphs explains why it resonated so strongly with me in terms of the rising consciousness of all the millions of ordinary people just trying to leave the world in a better place:
Part of what gave Occupy its particular beauty was the way the movement defined “we” as the 99%. That (and that contagious meme the 1%) entered our language, offering a way of imagining the world so much more inclusive than just about anything that had preceded it. And what an inclusive movement it was: the usual young white suspects, from really privileged to really desperate, but also a range of participants from World War II to Iraq War veterans to former Black Panthers, from libertarians to liberals to anarchist insurrectionists, from the tenured to the homeless to hip-hop moguls and rock stars.
And there was so much brutality, too, from the young women pepper-sprayed at an early Occupy demonstration and the students infamously pepper-sprayed while sitting peacefully on the campus of the University of California, Davis, to the poet laureate Robert Hass clubbed in the ribs at the Berkeley encampment, 84-year-old Dorli Rainey assaulted by police at Occupy Seattle, and the Iraq War veteran Scott Olsen whose skull was fractured by a projectile fired by the Oakland police. And then, of course, there was the massive police presence and violent way that in a number of cities the movement’s occupiers were finally ejected from their places of “occupation.”
Such overwhelming institutional violence couldn’t have made clearer the degree to which the 1% considered Occupy a genuine threat. At the G-20 economic summit in 2011, the Russian Prime Minister, Dmitry Medvedev, said, “The reward system of shareholders and managers of financial institution[s] should be changed step by step. Otherwise the ‘Occupy Wall Street’ slogan will become fashionable in all developed countries.” That was the voice of fear, because the realized dreams of the 99% are guaranteed to be the 1%’s nightmares.
We’ll never know what that drummer girl in Paris was thinking, but thanks to Schneider’s meticulous and elegant book, we know what one witness-participant was thinking all through the first year of Occupy, and what it was like to be warmed for a few months by that beautiful conflagration that spread across the world, to be part of that huge body that wasn’t exactly civil society, but something akin to it, perhaps in conception even larger than it, as Occupy encampments and general assemblies spread from Auckland to Hong Kong, from Oakland to London in the fall of 2011. Some of them lasted well into 2012, and others spawned things that are still with us: coalitions and alliances and senses of possibility and frameworks for understanding what’s wrong and what could be right. It was a sea-change moment, a watershed movement, a dream realized imperfectly (because only unrealized dreams are perfect), a groundswell that remains ground on which to build.
On the second anniversary of that day in lower Manhattan when people first sat down in outrage and then stayed in dedication and solidarity and hope, remember them, remember how unpredictably the world changes, remember those doing heroic work that you might hear little or nothing about but who are all around you, remember to hope, remember to build. Remember that you are 99% likely to be one of them and take up the burden that is also an invitation to change the world and occupy your dreams.
Rebecca Solnit, author most recently of The Faraway Nearby spent time at Occupy San Francisco, Occupy Oakland, and Occupy Wall Street in 2011 and wrote about Occupy often for TomDispatch in 2011-2012. This essay is adapted from her introduction to Nathan Schneider’s new book, Thank You, Anarchy (University of California Press).
Copyright 2013 Rebecca Solnit
The final element was from an email yesterday in from Chris Snuggs. Chris has previously written guest posts on Learning from Dogs, the last one being In Defence of Politics back on July 8th. In that email was the following photograph.
Let me draw out the thread that I saw in all these items.
That is that the 1% that Rebecca Solnit wrote about are incredibly powerful people, with access to more power, money and control than one can even imagine. But what that 1% cannot control is the growing consciousness, the growing mindfulness and awareness of millions of people across this planet that something as simple and pure and beautiful as unconditional love will conquer all.
The most fundamental lesson that we can learn from dogs!
A frank and honest assessment of the reality of the present economic situation, Part Two.
Yesterday, I wrote about publishing, in two parts, a recent article from the Blogsite, Washington’s Blog. If you missed the first part that was here. As I wrote yesterday, it is detailed and comprehensive, which is why I think it will be more easily digested as two parts presented on Learning from Dogs over this week-end.
So on to Part Two.
The particular post that appeared on Washington’s Blog on the 28th April was entitled Gallup Poll Shows that More Americans Believe the U.S. is in a Depression than is Growing … Are They Right? You can link to it here.
Blytic calculates that the current average duration of unemployment is some 32 weeks, the median duration is around 20 weeks, and there are approximately 6 million people unemployed for 27 weeks or longer.
Moreover, employers are discriminating against job applicants who are currently unemployed, which will almost certainly prolong the duration of joblessness.
As I noted in January 2009:
In 1930, there were 123 million Americans.
At the height of the Depression in 1933, 24.9% of the total work force or 11,385,000 people, were unemployed.
Will unemployment reach 25% during this current crisis?
I don’t know. But the number of people unemployed will be higher than during the Depression.
Unemployment is expected to exceed 10% by many economists, and Obama “has warned that the unemployment rate will explode to at least 10% in 2009″.
10 percent of 154 million is 15 million people out of work – more than during the Great Depression.
But it is important to look at some details.
For example, official Bureau of Labor Statistics numbers put U-6 above 20% in several states:
- California: 21.9
- Nevada: 21.5
- Michigan 21.6
- Oregon 20.1
In the past year, unemployment has grown the fastest in the mountain West.
And certain races and age groups have gotten hit hard.
According to Congress’ Joint Economic Committee:
By February 2010, the U-6 rate for African Americans rose to 24.9 percent.
Unemployment rates for less-educated and younger workers:
- As of the third quarter of 2009, the overall unemployment rate for native-born Americans is 9.5 percent; the U-6 measure shows it as 15.9 percent.
- The unemployment rate for natives with a high school degree or less is 13.1 percent. Their U-6 measure is 21.9 percent.
- The unemployment rate for natives with less than a high school education is 20.5 percent. Their U-6 measure is 32.4 percent.
- The unemployment rate for young native-born Americans (18-29) who have only a high school education is 19 percent. Their U-6 measure is 31.2 percent.
- The unemployment rate for native-born blacks with less than a high school education is 28.8 percent. Their U-6 measure is 42.2 percent.
- The unemployment rate for young native-born blacks (18-29) with only a high school education is 27.1 percent. Their U-6 measure is 39.8 percent.
- The unemployment rate for native-born Hispanics with less than a high school education is 23.2 percent. Their U-6 measure is 35.6 percent.
- The unemployment rate for young native-born Hispanics (18-29) with only a high school degree is 20.9 percent. Their U-6 measure is 33.9 percent.
No wonder Chris Tilly – director of the Institute for Research on Labor and Employment at UCLA – says that African-Americans and high school dropouts are experiencing depression-level unemployment.
And as I have previously noted, unemployment for those who earn $150,000 or more is only 3%, while unemployment for the poor is 31%.
The bottom line is that it is difficult to compare current unemployment with what occurred during the Great Depression. In some ways things seem better now. In other ways, they don’t.
Factors like where you live, race, income and age greatly effect one’s experience of the severity of unemployment in America.
In addition, wages have plummeted for those who are employed. As Pulitzer Prize-winning tax reporter David Cay Johnston notes:
Every 34th wage earner in America in 2008 went all of 2009 without earning a single dollar, new data from the Social Security Administration show. Total wages, median wages, and average wages all declined ….
Food Stamps Replace Soup Kitchens
1 out of every 7 Americans now rely on food stamps.
While we don’t see soup kitchens, it may only be because so many Americans are receiving food stamps.
Indeed, despite the dramatic photographs we’ve all seen of the 1930s, the 43 million Americans relying on food stamps to get by may actually be much greater than the number who relied on soup kitchens during the Great Depression.
In addition, according to Chaz Valenza (a small business owner in New Jersey who earned his MBA from New York University’s Stern School of Business)millions of Americans are heading to foodbanks for the first time in their lives.
The War Isn’t Working
Given the above facts, it would seem that the government hasn’t been doingmuch. But the scary thing is that the government has done more than during the Great Depression, but the economy is still stuck a pit.
The amount spent in emergency bailouts, loans and subsidies during this financial crisis arguably dwarfs the amount which the government spent during the New Deal.
For example, Casey Research wrote in 2008:
Paulson and Bernanke have embarked on the largest bailout program ever conceived …. a program which so far will cost taxpayers $8.5 trillion.
[The updated, exact number can be disputed. But as shown below, the exact number of trillions of dollars is not that important.]
So how does $8.5 trillion dollars compare with the cost of some of the major conflicts and programs initiated by the US government since its inception? To try and grasp the enormity of this figure, let’s look at some other financial commitments undertaken by our government in the past:
As illustrated above, one can see that in today’s dollar, we have already committed to spending levels that surpass the cumulative cost of all of the major wars and government initiatives since the American Revolution.
Recently, the Congressional Research Service estimated the cost of all of the major wars our country has fought in 2008 dollars. The chart above shows that the entire cost of WWII over four to five years was less than half the current pledges made by Paulson and Bernanke in the last three months!
In spite of years of conflict, the Vietnam and the Iraq wars have each cost less than the bailout package that was approved by Congress in two weeks. The Civil War that devastated our country had a total price tag (for both the Union and Confederacy) of $60.4 billion, while the Revolutionary War was fought for a mere $1.8 billion.
In its fifty or so years of existence, NASA has only managed to spend $885 billion – a figure which got us to the moon and beyond.
The New Deal had a price tag of only $500 billion. The Marshall Plan that enabled the reconstruction of Europe following WWII for $13 billion, comes out to approximately $125 billion in 2008 dollars. The cost of fixing the S&L crisis was $235 billion.
So even though the government’s spending on the “war” on the economic crisis dwarfs the amount spent on the New Deal, our economy is still stuck in the mud.
Why Haven’t Things Gotten Better for the Little Guy?
Government leaders make happy talk about how things are improving, but happy talk cannot fix the economy.
Two fundamental causes of the Great Depression, and of our current economic problems, are fraud and inequality:
- Fraud was one of the main causes of the Depression, but nothing has been done to rein in fraud today
- Inequality was another major cause of downturns – including the Depression – but inequality is currently worse than during the Depression
There are, of course, other reasons the economy is still stuck in a ditch for most Americans, such as encouraging too much leverage, bailing out the big speculators, failing to break up the mammoth banks, and failing to spend wisely, where it will do some good. See this and this. But fraud and inequality were core causes of the Depression, and our failure to address them will only prolong our misery.
A frank and honest assessment of the reality of the present economic situation.
The next two days see me publishing, in two parts, a recent article from the Blogsite, Washington’s Blog. Perhaps one can’t blame the efforts of so many of the western governments’ leaders to talk up the economy but at street level the vast majority of people feel pain about their circumstances.
The particular post that appeared on Washington’s Blog on the 28th April was entitled Gallup Poll Shows that More Americans Believe the U.S. is in a Depression than is Growing … Are They Right? You can link to it here. It is detailed and comprehensive, which is why I think it will be more easily digested as two parts presented on Learning from Dogs over this week-end.
Here’s the first part.
Consumer confidence is, well … in somewhat of a depression.
Reuters reports today:
The April 20-23 Gallup survey of 1,013 U.S. adults found that only 27 percent said the economy is growing. Twenty-nine percent said the economy is in a depression and 26 percent said it is in a recession, with another 16 percent saying it is “slowing down,” Gallup said.
Tyler Durden notes:
That means that more Americans think the country is in a Depression, let alone recession, than growing.
How can so many Americans believe that we’re in a depression, when the stock market and commodity prices have been booming?
As I noted last week:
Instead of directly helping the American people, the government threwtrillions at the giant banks (including foreign banks; and see this) . The big banks have – in turn – used a lot of that money to speculate in commodities, including food and other items which are now driving up the price of consumer necessities [as well as stocks]. Instead of using the money to hire Americans, they’re hiring abroad (and getting tax refunds from the government).
But don’t rising stock prices help create wealth?
Not really. As I pointed out in January:
A rising stock market doesn’t help the average American as much as you might assume.
For example, Robert Shiller noted in 2001:
We have examined the wealth effect with a cross-sectional time-series data sets that are more comprehensive than any applied to the wealth effect before and with a number of different econometric specifications. The statistical results are variable depending on econometric specification, and so any conclusion must be tentative. Nevertheless, the evidence of a stock market wealth effect is weak; the common presumption that there is strong evidence for the wealth effect is not supported in our results. However, we do find strong evidence that variations in housing market wealth have important effects upon consumption. This evidence arises consistently using panels of U.S. states and individual countries and is robust to differences in model specification. The housing market appears to be more important than the stock market in influencing consumption in developed countries.
I pointed out in March:
Even Alan Greenspan recently called the recovery “extremely unbalanced,” driven largely by high earners benefiting from recovering stock markets and large corporations.
As economics professor and former Secretary of Labor Robert Reichwrites today in an outstanding piece:
Some cheerleaders say rising stock prices make consumers feel wealthier and therefore readier to spend. But to the extent most Americans have any assets at all their net worth is mostly in their homes, and those homes are still worth less than they were in 2007. The “wealth effect” is relevant mainly to the richest 10 percent of Americans, most of whose net worth is in stocks and bonds.
I noted in May:
As of 2007, the bottom 50% of the U.S. population owned only one-half of one percent of all stocks, bonds and mutual funds in the U.S. On the other hand, the top 1% owned owned 50.9%.
(Of course, the divergence between the wealthiest and the rest has only increased since 2007.)
And last month Professor G. William Domhoff updated his “Who Rules America” study, showing that the richest 10% own 98.5% of all financial securities, and that:
The top 10% have 80% to 90% of stocks, bonds, trust funds, and business equity, and over 75% of non-home real estate. Since financial wealth is what counts as far as the control of income-producing assets, we can say that just 10% of the people own the United States of America.
Indeed, most stocks are held for only a couple of moments – and aren’t held by mom and pop investors.
How bad are things for the little guy?
Well, as I noted in January, the housing slump is worse than during the Great Depression.
As CNN Money points out today:
Wal-Mart’s core shoppers are running out of money much faster than a year ago due to rising gasoline prices, and the retail giant is worried, CEO Mike Duke said Wednesday.
“We’re seeing core consumers under a lot of pressure,” Duke said at an event in New York. “There’s no doubt that rising fuel prices are having an impact.”
Wal-Mart shoppers, many of whom live paycheck to paycheck, typically shop in bulk at the beginning of the month when their paychecks come in.
Lately, they’re “running out of money” at a faster clip, he said.
“Purchases are really dropping off by the end of the month even more than last year,” Duke said. “This end-of-month [purchases] cycle is growing to be a concern.
And – in case you still think that the 29% of Americans who think we’re in a depression are unduly pessimistic – take a look at what I wrote last December:
The following experts have – at some point during the last 2 years – said that the economic crisis could be worse than the Great Depression:
- Fed Chairman Ben Bernanke
- Former Fed Chairman Paul Volcker
- Economics scholar and former Federal Reserve GovernorFrederic Mishkin
- The head of the Bank of England Mervyn King
- Nobel prize winning economist Joseph Stiglitz
- Nobel prize winning economist Paul Krugman
- Former Goldman Sachs chairman John Whitehead
- Investment advisor, risk expert and “Black Swan” author Nassim Nicholas Taleb
- Well-known PhD economist Marc Faber
- Morgan Stanley’s UK equity strategist Graham Secker
- Former chief credit officer at Fannie Mae Edward J. Pinto
- Billionaire investor George Soros
- Senior British minister Ed Balls
States and Cities In Worst Shape Since the Great Depression
States and cities are in dire financial straits, and many may default in 2011.
California is issuing IOUs for only the second time since the Great Depression.
Things haven’t been this bad for state and local governments since the 30s.
Loan Loss Rate Higher than During the Great Depression
In October 2009, I reported:
In May, analyst Mike Mayo predicted that the bank loan loss rate would be higher than during the Great Depression.
In a new report, Moody’s has just confirmed (as summarized by Zero Hedge):
The most recent rate of bank charge offs, which hit $45 billion in the past quarter, and have now reached a total of $116 billion, is at 3.4%, which is substantially higher than the 2.25% hit in 1932, before peaking at at 3.4% rate by 1934.
And see this.
Here’s a chart summarizing the findings:
(click here for full chart).
Indeed, top economists such as Anna Schwartz, James Galbraith, Nouriel Roubini and others have pointed out that while banks faced a liquidity crisis during the Great Depression, today they are wholly insolvent. See this, this,this and this. Insolvency is much more severe than a shortage of liquidity.
Unemployment at or Near Depression Levels
USA Today reports today:
So many Americans have been jobless for so long that the government is changing how it records long-term unemployment.
Citing what it calls “an unprecedented rise” in long-term unemployment, the federal Bureau of Labor Statistics (BLS), beginning Saturday, will raise from two years to five years the upper limit on how long someone can be listed as having been jobless.
The change is a sign that bureau officials “are afraid that a cap of two years may be ‘understating the true average duration’ — but they won’t know by how much until they raise the upper limit,” says Linda Barrington, an economist who directs the Institute for Compensation Studies at Cornell University’s School of Industrial and Labor Relations.
“The BLS doesn’t make such changes lightly,” Barrington says. Stacey Standish, a bureau assistant press officer, says the two-year limit has been used for 33 years.
Although “this feels like something we’ve not experienced” since the Great Depression, she says, economists need more information to be sure.
The following chart from Calculated Risk shows that this is not a normal spike in unemployment:
As does this chart from Clusterstock:
As I noted in October:
It is difficult to compare current unemployment with that during the Great Depression. In the Depression, unemployment numbers weren’t tracked very consistently, and the U-3 and U-6 statistics we use today weren’t used back then. And statistical “adjustments” such as the “birth-death model” are being used today that weren’t used in the 1930s.
But let’s discuss the facts we do know.
The Wall Street Journal noted in July 2009:
The average length of unemployment is higher than it’s been since government began tracking the data in 1948.
The job losses are also now equal to the net job gains over the previous nine years, making this the only recession since the Great Depression to wipe out all job growth from the previous expansion.
The Christian Science Monitor wrote an article in June entitled, “Length of unemployment reaches Great Depression levels“.
60 Minutes – in a must-watch segment – notes that our current situation tops the Great Depression in one respect: never have we had a recession this deep with a recovery this flat. 60 Minutes points out that unemployment has been at 9.5% or above for 14 months:
Pulitzer Prize-winning historian David M. Kennedy notes in Freedom From Fear: The American People in Depression and War, 1929-1945(Oxford, 1999) that – during Herbert Hoover’s presidency, more than 13 million Americans lost their jobs. Of those, 62% found themselves out of work for longer than a year; 44% longer than two years; 24%longer than three years; and 11% longer than four years.
Part Two tomorrow.
Very difficult times ahead but a fairer social order could be one outcome.
As is so often the case, a number of different lines of thought come together once again to highlight the pressures on society and my belief that we are in the ‘zone of change’ between the last 40 or 50 years and what is ahead for western societies. There is no question that these are very difficult times as, I presume, all phases of change have been over many centuries.
On the 28th October there was a Post on Learning from Dogs about the recent book from Will Hutton, Them and Us. That book masterfully articulates the core issues in British society arising out of some fundamental economic policy errors and the very difficult times that are being experienced right now.
The British are a lost tribe – disoriented, brooding and suspicious. They have lived through the biggest bank bail-out in history and the deepest recession since the 1930s, and they are now being warned that they face a decade of unparalleled public and private austerity.
As if to underline the fact that the economic situation is far from recovery, despite what is being promoted, here’s a recent article from Washington’s Blog. Almost impossible to take an extract that conveys the essence of this powerful (and scary) article – so just go here and read it. Or if you haven’t the time here’s a taste:
SATURDAY, NOVEMBER 27, 2010It’s Not Just the “Peripheral” European Countries … Financial Contagion Could Spread to “Core” Eurozone Countries and the U.S.
Americans will not be spared if there’s a recession in Europe, even if U.S. bank exposure to European government debt is relatively limited.
The European Union is the second largest market for U.S. exports, behind only Canada. The EU bought about $175 billion in U.S. goods in the first three quarters of this year. That’s up about 8% from a year ago.
So worsening problems in Europe will clearly be a drag on the U.S. as well.
Niall Ferguson, Marc Faber, and SocGen’s Edwards and Grice predicted 9 months ago that the European debt crisis would eventually spread to America.
But the question of what country the “contagion” might spread to next is really the wrong question altogether.
The real question is whether the wealth of the people around the world will continue to be shoveled into the bottomless pit of debts held by the big banks, or whether the people will prevail and the giant banks and bondholders will be forced to take a haircut. See this, this and this.
So back to the issue of fairness. There is no escaping the consequences, still playing out, of the ‘spend now, pay tomorrow’ culture of the last 30 or 40 years so then the main issue is how do we mitigate the consequences for those who are most exposed to some of less prettier aspects of modern life. Ponder on that question while you read this recent piece from Open Democracy.
Fairness and the cost of life for the poor in BritainBrian Landers, 26 November 2010
Most Britons had “never had it so good” despite the “so-called recession” declared Lord Young of Graffham. His words were immediately disowned by David Cameron, who fired him. But in reality Young was only articulating what he and his circle are experiencing and privately believe.
For example, on the BBC’s Sunday morning Broadcasting House on 21 November, Lord Charles Powell who was Margaret Thatcher’s advisor, complained, “unfortunately he said the wrong thing. In terms of fact what he said was probably right, with interests rates low people are not particularly badly off at the moment. But some people are very badly off and it is insensitive, I suppose, to suggest that everyone is not doing too badly at this time. It does show that you can’t speak the truth in politics anymore you have to defer to what is politically correct”.
Well, there is another truth: that for thousands of pensioners and not just “some” of them, negative real interest rates on their savings are becoming a disaster. Even though for the heavily mortgaged wealthy, low interest rates do indeed make them much better off.
What Young’s comments illustrate, therefore, is that when we consider equality and inequality we need to look at expenditure patterns, which can be just as important as differences in income.
Historically debates on social equality focus overwhelmingly and inevitably on inequalities of income. We read, for example, that according to a study by Incomes Data Services chief executives of the UK’s 100 largest companies are now paid on average 88 times the pay of typical full-time workers and that this ratio is getting worse. Last year the multiple was 81 times and ten years ago top bosses took home 47 times the average wage.
But in addition to their income being a lot lower the poor also suffer more because life costs them more. There are two issues, one obvious, one less so.
The primary issue is one of fairness. Three for the price of two supermarket offers are great value only for those who can afford to buy two; those who can only afford one end up paying 50% more per unit. Is that fair?
Another supermarket example which received widespread but soon-forgotten newspaper coverage earlier this year is more subtle. Tesco owns three convenience store brands in this country: Tesco Express, Tesco Metro and One Stop. An enquiry in 2006 found that the corporation was charging more than 20% more for the same products in its One Stop stores than in its Tesco branded stores. Tesco responded that it was bringing prices down in One Stop but in 2010 further research showed that One Stop prices were still 14% higher than prices for the same product in the rest of Tesco. One Stop typically operated in less attractive (that is poorer) areas where there was no competition from other mega-corporations and where therefore significantly higher prices could be charged. Again that raises issues of fairness.
If such unfairness is somehow familiar there is a further layer that goes beyond fairness: we live in a society where in many tiny ways the poor actually subsidise the better off through the way patterns of expenditure are organised by the market place, (i.e., not just by providing cheap labour).
Consider for example the cost of owning a car. Bernard Jullien of the University of Bordeaux analysed published data on household expenditure and trade data from car distributors (See Competition and Change 6, 2002). He showed that richer consumers were being cross-subsidised by poorer consumers. Distributors in France (and almost certainly elsewhere) were following a conscious policy of keeping new car prices lower to increase their market share. Then then marked up the prices of spare parts and maintenance to maintain their overall profit levels. Jullien found that the unintended consequence was that well off customers, who were more likely to buy new cars, ended up being subsidised by less well off customers who typically bought second hand cars that needed more frequent repair.
There are more examples if the term “well off” is extended to include corporations. The cost of producing and distributing the electricity needed to power a light bulb is the same whether the bulb is in a private house or in the office of a mega-corporation – and yet the corporation will undoubtedly pay far less. Quantity discounts typically reflect the purchasing power of the buyer rather than any scale economies for the seller.
What are apparently rational pricing strategies have the unintended consequence of ensuring that poor people pay more than the well off in ensuring the overall profits corporations need.
Then there is time. Time budget surveys have shown, for example, that the poor take much longer per mile to get to work than the rich because the forms of transport they use are typically much slower. Similarly the poor have to devote more time to food shopping and a host of other activities.
There is nothing conspiratorial about the way that the poor fare worse than the rich. Often it is just the accidental by-product of perfectly sensible business decisions. Indeed in some cases there may even be wider social benefits. Improved stock control with Just-In-Time inventory techniques and Call-Off procurement contracts has ensured that waste in many industries has been sharply reduced; it is unfortunate that in food retailing one consequence is that end-of-day price reductions on perishable products are now less common, again hurting the poor more than the rich.
What can be done to mitigate these expenditure inequalities? First, they deserve to be highlighted, if only because, like so much else, they are beyond the experience of the multimillionaires in and around the cabinet. Second, and especially if we are going to talk about Big Society and us being ‘all in it together’, we need to think about economic models that build into their measures of success their consequences for all of us.
There are so many excellent Blogs out there that it is difficult at times to keep track of key articles. But here’s one reproduced from Washington’s Blog. It was published on the 30th April and sets out some powerful reasons why the so-called Too Big To Fail banks should, and must, be broken up. It is reproduced with permission. Ed.
5 Reasons We Must Break Up the Giant Banks
As everyone from Paul Krugman to Simon Johnson has noted, the banks are so big and politically powerful that they have bought the politicians and captured the regulators.
But the giant banks are not only dangerous because they skew the political system. There are five economic arguments against the mega-banks as well.
Fortune pointed out last February that the only reason that smaller banks haven’t been able to expand and thrive is that the too-big-to-fails have decreased competition:
Growth for the nation’s smaller banks represents a reversal of trends from the last twenty years, when the biggest banks got much bigger and many of the smallest players were gobbled up or driven under…
As big banks struggle to find a way forward and rising loan losses threaten to punish poorly run banks of all sizes, smaller but well capitalized institutions have a long-awaited chance to expand.
So the very size of the giants squashes competition.
Less Loans, More Bonuses
Small banks have been lending much more than the big boys.
The giant banks which received taxpayer bailouts actually slashed lending more, gave higher bonuses, and reduced costs less than banks which didn’t get bailed out.
Lack of Transparency in Derivatives
JP Morgan Chase, Bank of America, Goldman Sachs, Citigroup, and Morgan Stanley together hold 80% of the country’s derivatives risk, and 96% of the exposure to credit derivatives.
Experts say that derivatives will never be reined in until the mega-banks are broken up.
Increased Debt Problems
As I pointed out in December 2008:
The Bank for International Settlements (BIS) is often called the “central banks’ central bank”, as it coordinates transactions between central banks.
BIS points out in a new report that the bank rescue packages have transferred significant risks onto government balance sheets, which is reflected in the corresponding widening of sovereign credit default swaps:
The scope and magnitude of the bank rescue packages also meant that significant risks had been transferred onto government balance sheets. This was particularly apparent in the market for CDS referencing sovereigns involved either in large individual bank rescues or in broad-based support packages for the financial sector, including the United States. While such CDS were thinly traded prior to the announced rescue packages, spreads widened suddenly on increased demand for credit protection, while corresponding financial sector spreads tightened.
In other words, by assuming huge portions of the risk from banks trading in toxic derivatives, and by spending trillions that they don’t have, central banks have put their countries at risk from default.
Now, Greece, Portugal, Spain and many other European countries – as well as the U.S. and Japan – are facing serious debt crises. See this, this and this.
By failing to break up the giant banks, the government is guaranteeing that they will take crazily risky bets again and again and again.
(Anyone who claims that Chris Dodd’s proposed “reform” legislation will prevent banks from getting bailed out again is wrong. If the giant banks aren’t broken up now – when they are threatening to take down the world economy – they won’t be broken up next time they become insolvent, either. And see this.)
Unfair Competition and Manipulation of Markets
Moreover, Richard Alford – former New York Fed economist, trading floor economist and strategist – recently showed that banks that get too big benefit from “information asymmetry” which disrupts the free market.
Nobel prize winning economist Joseph Stiglitz noted in September that giants like Goldman are using their size to manipulate the market:
“The main problem that Goldman raises is a question of size: ‘too big to fail.’ In some markets, they have a significant fraction of trades. Why is that important? They trade both on their proprietary desk and on behalf of customers. When you do that and you have a significant fraction of all trades, you have a lot of information.”
Further, he says, “That raises the potential of conflicts of interest, problems of front-running, using that inside information for your proprietary desk. And that’s why the Volcker report came out and said that we need to restrict the kinds of activity that these large institutions have. If you’re going to trade on behalf of others, if you’re going to be a commercial bank, you can’t engage in certain kinds of risk-taking behavior.”
The giants (especially Goldman Sachs) have also used high-frequency program trading which not only distorted the markets – making up more than 70% of stock trades – but which also let the program trading giants take a sneak peak at what the real (aka “human”) traders are buying and selling, and then trade on the insider information. See this, this, this, this and this. (This is frontrunning, which is illegal; but it is a lot bigger than garden variety frontrunning, because the program traders are not only trading based on inside knowledge of what their own clients are doing, they are also trading based on knowledge of what all other traders are doing).
Goldman also admitted that its proprietary trading program can “manipulate the markets in unfair ways”. The giant banks have also allegedly used their Counterparty Risk Management Policy Group (CRMPG) to exchange secret information and formulate coordinated mutually beneficial actions, all with the government’s blessings.
Again, size matters. If a bunch of small banks did this, manipulation by numerous small players would tend to cancel each other out. But with a handful of giants doing it, it can manipulate the entire economy in ways which are not good for the American citizen.
No wonder virtually every independent economist and financial expert is calling for the big banks to be broken up.
Some argue that it is logistically impossible to break up the behemoths. But if we broke up Standard Oil, we can break up the giant banks as well.