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"Strange rally" of S&P 500 continues despite oil going to $150.
Apr 04, 2011 | naked capitalismProfessor Outis Philalithopoulos was found dead in his home three days ago; the coroner’s report cited natural causes that were left unspecified. Unfortunately, all of the professor’s academic work has disappeared; the only trace left appears to be the following letter, which he sent to an admirer shortly before his death. The understandably concerned recipient of the letter has shared its contents with Naked Capitalism, and has insisted that her identity be protected.
Dear * * *,
Reading your generous letter was an unexpectedly encouraging experience. I rarely feel that others truly understand the purport of my theories, but when I see a high school student such as yourself navigate her way through the vilifications that surrounds my work, it makes me want to redouble my efforts to explain my ideas to a larger audience.
How did you become the most courageous economics professor of our time? Really, you are far too kind. I never thought of myself as anyone out of the ordinary while working as a young PhD on technical questions in Public Choice theory. As you probably know, Public Choice is the pathbreaking theory that demystified the decisions of politicians, showing that they act rationally in order to maximize their own economic benefits.
Soon after receiving tenure, it occurred to me that we were being profoundly inconsistent. While we had correctly criticized the previous mainstream view that politics involved benevolent efforts to serve the common good, we had failed to apply the same rigor to the community of academic economists. As a result, we were modeling both economic and political actors as self-interested utility-maximizing agents, while continuing to see economics professors as idealistic pursuers of truth. I decided to correct this oversight by developing my theory of Academic Choice, in which economists are theorized as rational agents who continually seek to maximize their future earnings potential.
The way I would describe Academic Choice theory is that it is “the sociology of economists, without romance.” Is this right? What an insightful comment. As you say, Academic Choice theory is a descriptive project, with no normative orientation. We apply a critical approach in order to counterbalance pervasive earlier notions of economists as scientific heroes struggling against popular ignorance in order to serve the common good.
What would you identify as the central insights of Academic Choice theory? The theory begins by identifying three principal ways in which economists try to maximize their utility. First, they receive salaries from universities, which can be increased if their course enrollment increases. Course enrollment is primarily driven by students with future careers in business and the financial sector, so an economist has an incentive to propound theories that CEOs and financial institutions find attractive. Even if adoption of these theories leads to substantial public costs, these costs will not be shouldered by the economist personally. Second, by developing such theories an economist can open the door to future wealth as a lobbyist or consultant. Third, the support of economists is critical to creating and maintaining special privileges for the financial services industry and for top corporate officers. By threatening to withdraw this support, economists can engage in rent-seeking. I call this last practice academic entrepreneurship.
Is it really plausible that economists threaten top banks that in the absence of some kind of payoff, they will change the theories they teach in a direction that is less favorable to the banks? There are certainly cases in history of the following sequence:
a. Economist E espouses views that are less favorable to certain special interest groups S. Doing so threatens the ability of S to extract rent from the public.
b. Later, E changes his view, thereby withdrawing the prior threat.
c. Still later, E is paid large amounts of money by representatives of S in exchange for services that do not appear particularly onerous.
For example, let E = Larry Summers and let S = the financial services industry. In 1989 E was (a) a supporter of the Tobin tax, which threatened to reduce the rent extracted by S. This threat was apparently later withdrawn (b), and in 2008 E was paid $5.2 million (c) in exchange for working at the hedge fund D. E. Shaw (an element of S) for one day a week.
However, it is naturally more difficult to witness the negotiations in which specific threats were appeased with specific future payouts. This is a problem that also bedevils Public Choice theory, in which it is likewise difficult to show exactly how a particular politician is remunerated in exchange for threatening businesses with anti-business legislation. The theory assures us that such negotiations occur, although they are difficult to observe directly. Perhaps further theoretical advances will help us to close this gap.
Isn’t it offensive to assume that economists, for motives of personal gain, shade their theoretical allegiances in the directions preferred by powerful interest groups? How could it ever be offensive to assume that a person acts rationally in pursuit of maximizing his or her own utility? I’m afraid I don’t understand this question.
Is there a “behavioral” version of Academic Choice theory, in which the basic premises are enriched by the possibility that economists sometimes act irrationally? Great question. One of my students developed just such a theory – he postulated that economists sometimes do act benevolently, but they have access to limited information and are subject to cognitive biases. Under these assumptions, he proved that economists would produce theories that are flawed in similar ways to what is independently predicted by Academic Choice.
However, while his dissertation was unquestionably a valuable contribution to the literature, I am personally convinced that the original Academic Choice theory is more empirically realistic. Studies have shown that many people do act irrationally, but not economists – to the extent possible, their decision-making conforms to the model of Homo economicus.
If the theories of economists are harmful to the general welfare, why doesn’t someone try to persuade the public that these theories are mistaken? Collective action in this sense is infeasible. If we instead consider the efforts of a single individual, the cost in terms of time and effort of discrediting an economic theory is substantial, while the benefits are dispersed over many people and so are comparatively small. In any case, the efforts of one person are unlikely to be decisive in swinging the consensus of economists away from a given erroneous theory. It follows logically that the rational decision for an intellectual consumer is to be inactive on this front, and even to be ignorant of the flaws in economic theory.
It might be thought that when economic theories are marred by particularly glaring problems, the public would notice. However, the consequence may simply be to select for economic theories that are particularly difficult for the public to evaluate, without implying any increase in the aggregate accuracy of such theories.
Do you simply assume based on the theory that people are generally ignorant about mistakes in economic theories, or are there other reasons why you would think this? Public Choice scholar Bryan Caplan was able to prove empirically that democracy subsidizes irrational beliefs. He looked at one political issue after another and found that the views of voters are very different from the mainstream views of economists and are therefore obviously irrational. I would love to be able to prove that intellectual consumers are ignorant of biases in economic theories with an equal degree of rigor, but so far have not thought of a way. See, however, the response to your next question.
The core claim of Academic Choice is that valid economic theories are an underprovided public good, due to a combination of academic entrepreneurship and rational public ignorance. Is this merely a prediction of the mathematical models, or is there real world evidence of this claim? Originally I did arrive at this result as a logical consequence of the theoretical model; however, the prediction has since been corroborated through empirical investigations.
Consider the following seven propositions. All of them have been effectively promoted and publicized by academic economists:
P1. (e.g. Greenspan) It is unnecessary to worry about deception in financial markets since market discipline will make sure that dishonest agents are permanently ostracized.
P2. (Clarke) A person whose income is 100 times as large as that of another person has contributed exactly 100 times as much to the general welfare.
P3. (First Welfare Theorem) Corporations, if left to themselves, will always provide employment to everyone and produce an economy featuring constant recession-free growth.
P4. (Arrow-Debreu) A necessary condition for this ideal economy is the availability of arbitrarily complicated securities that reference cash flows in all times, in all places, and in all ways imaginable.
P5. (Borrowing at the Risk-Free Rate) Economic institutions should be designed under the assumption that whenever a firm or bank tries to obtain a low interest loan, it succeeds.
P6. (1997/2008) If a Third World country has a banking crisis, bedrock principles of economics dictate that its largest banks should be allowed to fail and be acquired by U.S. and European banks. However, if the U.S. has a banking crisis, bedrock principles of economics dictate that its largest banks should be saved through massive subsidies from the public.
P7. (EMH, etc.) It is impossible for investment funds to beat the market. However, the current capital market system centered around funds trying to beat the market is this most perfect system conceivable by human beings.
As a bright high school student like yourself can clearly see, the list consists entirely of statements that are obviously wrong, and several of them are internally inconsistent. If economists were simply confused, we would expect to find no pattern in these statements. Instead, as predicted by Academic Choice, statements P1-P7 all directly enable rent-seeking by certain influential minorities (financial sector employees and corporate executives). Moreover, P1-P7 have also helped to generate market discontinuities with significant public costs, among which the recent global financial crisis.
Some of your critics have insinuated that the true aim of your research is to restore faith in the possibilities of democracy. How do you respond? I confess feeling rather hurt by this accusation. Let me explain to you, though, the reasons for this misunderstanding. A generation of Public Choice economists had proposed guidance by economic theories as an efficient alternative to the mistakes inherent in democratic processes, or in other words, to political market imperfections. Academic Choice suggests, however, that once one introduces “academic” market imperfections, we may need to confront the possibility that far from correcting political failures, the authority of economists may actually prove to be a source of further distortions in the economy, leading to what I call the “academic dissipation of value.”
This much is correct. However, to make the leap to assuming that I intentionally created Academic Choice theory in order to favor democracy is malicious and unfair – it is just like claiming that the main goal of the founders of Public Choice was to discredit politics.
What kinds of proposals could help to minimize value destruction by academic economists? You are quite right that from the point of view of the public this issue looms large. Even in most Western democracies, more than half of the total GDP is allocated according to principles promoted by agents subject to Academic Choice dynamics, i.e. economists. One simple remedy to the large negative externalities generated through their academic entrepreneurship could be to shrink the size of the sector of academic economists.
Another approach is indicated by the game theoretic insight that winning strategies in competitive games usually involve a random element. Following this principle, ever since antiquity trials have been decided by juries who are chosen by lot. We should therefore strongly consider periodically repopulating economics departments with people selected at random.
How are your personal relations with your economist colleagues? When I began to develop Academic Choice theory, I fully expected resistance from historians of science, since I knew they would see me as trespassing on their terrain. But I was heartbroken when I realized that colleagues in my own departments now regarded me with something akin to hatred. I tried to help them to see the elegance of my mathematical models and proofs, but their hostility continued unabated: no one would publish my articles, and even my most promising graduate students were refused jobs everywhere. I could not understand how my attempt to extend the reach of economic theory had led to this rancor, and my only solace was to remind myself that Howard Roark in The Fountainhead had also been misunderstood by colleagues who did not understand his individualistic dream of creating beauty.
But nonetheless, I persevered, and one day it dawned on me that the reactions of my colleagues were actually a startling confirmation of Academic Choice theory. After all, economists are very familiar with the free rider problem, whereby individuals take advantage of group benefits without contributing anything. In order to guard against free riders, economists had instituted the tenure process and the journal review process. And since my theories could conceivably weaken the ability of economists to extract rent in the future, they had classed me as a free rider and were attempting to impose costs on me!
Now that I have realized this, even the most malevolent stares of my colleagues are unable to disturb my sense of inner peace – for I realize that every attempt to disincentivize me from my chosen career path is yet another vindication of the explanatory potential of economic models.
If economists are generally self-interested utility maximizers, how can one explain your own passion to pursue the truth at all costs? I confess that your question has forced me to reconsider many things. Indeed, after thinking about the financial outcomes associated with my career, it seems hard for me to avoid the conclusion that I myself constitute a refutation to Academic Choice!
Trying to address this paradox has led to the humbling realization that I am a flawed example of Homo economicus. In fact, I suffer from a cognitive bias known as harmonization bias – i.e., my personal utility function is distorted by virtue of ascribing positive value to harmony between the real world and my economic theories.
My initial reaction to this disturbing discovery was fear that the validity of Academic Choice could be compromised – what if other economists also suffer from harmonization bias? Thankfully, the disorder appears to be rare in the community, and so Academic Choice theory remains applicable to the real world.
Would you recommend a research career in Academic Choice theory? There are certainly a few obstacles. You would have to resolutely conceal your interest in Academic Choice during your entire educational career, at least until you receive tenure. Once you reveal your true passion, you would have to accept both relative poverty and ceaseless acrimony on the part of your colleagues.
Academic Choice is certainly not for everyone –at the very least, it is necessary to suffer from harmonization bias. In light of these considerations, I had begun to accept that the chances of ever finding another student willing to study Academic Choice were slim. Still, your brilliant and lively letter has led me to question my pessimism.
Wouldn’t it be marvelous to see new faces in Academic Choice! The theory is full of beautiful unsolved problems that doubtless stand only in need of a fresh examination. Maybe harmonization bias is not as rare among people in general as it is among economists. Maybe I should try to offer a scholarship for younger students. What do you think?
Good luck with your senior research report and all the best,
reminded of an old article by Michael Kinsley, “A Public Choice Analysis of Public Choice Analysis.”Digoweli
Re-reading I am starting to think it is an april fools especially since there is no information anywhere about the professor and the name sort of seems a joke. It is well done with reference to Ayn Rand although the author could have said Homo reciprocans instead of harmonization bias.
Still Bryan Capan is a real person.
Actually academic choice theory is a real field of study.
http://psycnet.apa.org/?fa=main.doiLanding&uid=1994-47157-001This is a very clever letter. Thanks, but Clifford Geertz got there first and he’s real. Several years ago, at the Institute for Advanced Studies, he proposed coming up with an Anthropology of Western Science and using the institute as the study example. They refused telling him that they were not a culture but were “true objectivity.” Also the Theater Critic Walter Kerr did a brilliant book on this in the 1960s called “The Decline of Pleasure.” Scribners DigoweliSungamWell, 39 results and plenty of content farms. I’d chalk this one up as a success.Mia
It’s a great article and I would chalk it up as an April Fool as in this day and age I would expect even a blacklisted Professor to leave more of a trace online.
Btw the Psychnet article talks about something rather different. And hence cleared for general consumption. :op“Outis”=”Nobody” As in, what Odysseus called himself after he poked the poor old Cyclops’s eye out.Cro
“Philalithopoulos”=”Son of love of stone”? “-poulos” is son of, but the “Philalitho-” part is unclear or maybe just random Greek. “Lithos” is rock or stone, and since “Philosophy”=”Love of Wisdom”, “philolitho-” would be “Love of stone.”
Or it could be formed by analogy to “Philadelphia”=”Brotherly Love”, in which case it would be “Stony Love”? But the “a” in “Philadelphia” comes from the root “adelphos,” so it’s possible to read it as “Philo-” + “-alitho-” which would be “love of no stone,” but that seems unlikely.
Learning Classical Greek makes you quite the pedant.This was actually pretty fun. And no one can complain it was too difficult to see through for what it was. I’m personally glad ‘Choice Theory’ and ‘Academic Choice Theory’ are being highlighted to members of ANY forum where mounds of academic theories are used and debated. I spent a summer in Mexico once reading Randall Collins’ ‘The Sociology of Philosophies’. A brilliant piece which revolutionized how I saw academia.LAS
I’d suggest it to anyone. The first roughly 80 pages are all you need to understand the theory in depth, but the remaining bulk are actually worth the grind. I at least don’t complain much anymore about academics of any stripe being political with their work, I simply expect it as an extension of their professional academic lives and personal belief systems. They’re just like anyone else, and we can’t expect them not behave that way. We simply have to be aware of the fact and integrate that into our own decision-making when we choose who and what to believe.
Is there any other good work out there on ‘Academic Choice Theory’?We need an Outis Philalithopoulos endowed chair at every university and college.alex:
The Outis chairs shall publicly honor corporate entities, politicians and economists of the year who best illustrate predicted outcomes from the general theories of Outis. For example, politicians calling for the privatization of Medicare should be strong contenders for one of the 2011 prizes.
Now here’s the beauty of it… Because their own theories are so rewarding in and of themselves, honored recipients of an Outis prize need not be extended any actual prize money or banquet to flourish. The Outis scholars get to keep all the endowed cash.
These Outis chairs could be highly efficient positions to maintain.Phil Henshaw:
Are you from the “More Truth is Said in Jest” department? Tongue-in-cheek though your post may be (or may not be) such chairs would indeed constitute a public good.While the tale is full of truth and wonderful story telling the idea that anyone would “do away with” an academic, with that name and leaving only one scrap of paper, for becoming an outcast in his own profession, is purely hilarious. Sounds more like a case of transient multiple personality…:-)Firean:
There’s a further larger mystery exposed none the less, that indeed all academic disciplines are cellular organisms of (to be uncharitable and stay in step with the present discussion) based on self-congratulatory myth making. The further mystery is that, virtually all of nature is built around cellular organization of that same kind, developing according to whatever advances the internal designs of that cell of organization. That includes cultures, communities families, businesses, ecologies, storms etc.. That this is oddly such a visible pattern but not yet recognized by science generally is something I’ve been studying for some time, and has given me a nice set of discoveries.
I find them a bit hard to share with people, having to do with studying cultures as whole systems, but some are fairly easy to appreciate. The majority of our personal environmental impacts come from the energy the world needs to use to follow our instructions, coming from delivering what we spend money on, and outsourcing untraceable resource uses all over the world to do it, for example. Only a small part comes from our visible technology uses that are what people presently count.
There are various others described in my recent papers at http://www.synapse9.com/phpub.htm. The great confusion that the natural cellular design of knowledge communities causes is discussed both in the top paper there and in “What Wandering Minds Need to Know”, a group of very short essays on it.
“Lithopoulos” is a genuine surname, and there are persons with this name within the economics world; eg. Erik Lithopoulos, Savvas Lithopoulos.
Work it from there.harmonization bias – ascribing positive value to harmony between the real world and my economic theories.Mark P.
Other academics have tried less troublesome but equally creative ways to achieve this harmony; e.g. the professor interviewed in Inside Job, who used a simple technical method (he explained as “a typo”) to moderate the reality-dissonant tone of his research listed on his CV by changing his report title from “Financial Stability in Iceland” to “Financial Instability in Iceland”.“For example, let E = Larry Summers and let S = the financial services industry. In 1989 E was (a) a supporter of the Tobin tax, which threatened to reduce the rent extracted by S. This threat was apparently later withdrawn (b), and in 2008 E was paid $5.2 million (c) in exchange for working at the hedge fund D. E. Shaw (an element of S) for one day a week.”Eubulides:
For a serious analysis of the professional economist[s] as rent seekers see:
The U.S. economy continues to stagnate. It’s growing at the rate of 1.8 percent, which is barely growing at all. Consumer spending is down. Home prices are down. Jobs and wages are going nowhere.
It’s vital that we understand the truth about the American economy.
How did we go from the Great Depression to 30 years of Great Prosperity? And from there, to 30 years of stagnant incomes and widening inequality, culminating in the Great Recession? And from the Great Recession into such an anemic recovery?
I first started worrying about the possibility of a slow recovery of unemployment long ago, e.g. I criticized policymakers in 2008 "for not anticipating the slow response of employment when putting the stimulus package into place." Ever since, I've tried to keep this issue alive here and in columns, reminding everyone at every opportunity that we need to do more about the unemployment problem, calling or jobs programs, more from the Fed, etc., etc. It's been frustrating. A year ago I gave up on policymakers, but promised "I'll still complain -- there's no reason to let policymakers off the hook." I've tried to do that, to the point where I've sometimes wondered if I'm overdoing it by making the same point again and again. I'm still pessimistic about anything being done to help the millions of unemployed -- I talked earlier this week about how "there seems to be no shortage of reasons to dismiss weakness in labor markets" -- but it's worth it to continue to try. So I'm glad to see others making the case that we need to do far more than we are doing to help the unemployed:Against Learned Helplessness, by Paul Krugman, Commentary, NY Times: Unemployment is a terrible scourge across much of the Western world. Almost 14 million Americans are jobless, and millions more are stuck with part-time work or jobs that fail to use their skills. ... Nor is the situation showing rapid improvement. This is a continuing tragedy, and in a rational world bringing an end to this tragedy would be our top economic priority.Yet ... on both sides of the Atlantic a consensus has emerged among movers and shakers that nothing can or should be done about jobs. Instead..., one sees a proliferation of excuses for inaction, garbed in the language of wisdom and responsibility. ...There’s nothing wrong with our workers — remember, just four years ago the unemployment rate was below 5 percent. The core of our economic problem is, instead, the debt — mainly mortgage debt — that households ran up during the bubble years... Now that the bubble has burst, that debt is acting as a persistent drag on the economy, preventing any real recovery in employment. And once you realize that the overhang of private debt is the problem, you realize that there are a number of things that could be done about it.For example, we could have W.P.A.-type programs putting the unemployed to work doing useful things like repairing roads — which would also, by raising incomes, make it easier for households to pay down debt. We could have a serious program of mortgage modification, reducing the debts of troubled homeowners. We could try to get inflation back up to the 4 percent rate that prevailed during Ronald Reagan’s second term, which would help to reduce the real burden of debt. ...In pointing out that we could be doing much more about unemployment, I recognize, of course, the political obstacles to actually pursuing any of the policies that might work. In the United States, in particular, any effort to tackle unemployment will run into a stone wall of Republican opposition. Yet that’s not a reason to stop talking about the issue. In fact, looking back at my own writings over the past year or so, it’s clear that I too ... said far too little about what we really should be doing to deal with our most important problem.As I see it, policy makers are sinking into a condition of learned helplessness on the jobs issue: the more they fail to do anything about the problem, the more they convince themselves that there’s nothing they could do. And those of us who know better should be doing all we can to break that vicious circle.
The Washington Post
Researchers who study disasters describe a two-step economic impact, with a short-term blow that is followed by a quick, neutralizing wave of private investment, new jobs and government spending.
That’s the pattern Japan saw when a 6.9-magnitude earthquake struck Kobe in January 1995. The industrial port city lost 6,400 people. Some 100,000 buildings collapsed. The country’s economy grew 1.9 percent that year, and in less than 1 1 / 2 years, Kobe’s industrial production had nearly returned to normal.
In the two months since the March double-disaster and nuclear emergency, Japan has endured only the first economic aftereffect, crystallized last week when the government announced that, between January and March, its economy contracted at a 3.7 percent annualized rate. That second consecutive quarter of shrinkage tipped Japan into a recession.
The news doubled as a shorthand for all that had happened since the earthquake. Some 200,000 jobs were lost as a result of evacuation and building destruction, according to one research firm. Toyota suspended all domestic production until April 17 and is now operating at just 50 percent of usual levels. Concerned about Japan’s disaster-vulnerable supply chain, some companies, such as Nippon Steel, drew up plans to expand operations overseas.
The country also faces long-term energy shortages resulting from the damaged Fukushima Daiichi plant and other shuttered nuclear plants. Forced blackouts appear unlikely, but businesses are being asked to conserve energy. To avoid peak electricity times, some automakers plan this summer to close their factories on Thursdays and Fridays — and keep them open on Saturdays and Sundays.
As reconstruction money flows into the disaster region, though, economists expect Japan to experience a period of growth, beginning in the third quarter. Japan’s economy minister, Kaoru Yosano, called the recession a “temporary phenomenon” and predicted that the economy will still expand 1 percent this year.
The American media has set about poisoning the atmosphere against Strauss-Kahn. The New York Times, the liberal newspaper of record, has been at the front of the pack, treating the French politician’s guilt as an accomplished fact.
Public opinion is formed quickly in such matters, and Times executive editor Bill Keller knows perfectly well what he is doing, helping to contaminate the pool from which Strauss-Kahn’s jury will eventually be selected. One of the Times’ most recent contributions was the May 20 piece, “At I.M.F., Men on Prowl and Women on Guard,” which described the institution as “a sharp-elbowed place ruled by alpha male economists.”
From the point of view of the American media, the affair has become the latest opportunity to divert attention from the social calamity at home and neocolonial wars abroad. Characterizations of the IMF “big shot” as a bestial, serial “rapist,” with their anti-French and anti-Semitic subtext, are aimed at whipping up the basest sentiments in the population.
The campaign in the New York media is receiving support from a shameful, if predictable, source. The American liberal left (the Nation) and “far left” (the International Socialist Organization) have added their voices to this retrograde campaign.
Outside of allegations communicated by the police and the authorities, too little is known that could help anyone form a definitive opinion of the case.
What is known, however, is the context of Strauss-Kahn’s arrest, which takes on a special significance in this case and guarantees that it is not a routine celebrity scandal.
These are fraught times in the ongoing economic crisis. The position of IMF director is at the center of bitter conflicts between different countries and between different sections of the ruling elite.
There is not only the possibility of a miscarriage of justice in this instance, but the prospect, as so often happens, that changes with far-reaching implications could be effected behind the backs of the population.
Whether or not Strauss-Kahn is guilty, various forces will position themselves to exploit an opportunity created by murky events to achieve publicly unstated ends.
The so-called “left” serves a critical function. These middle-class elements become part of the process by which the whole business is concealed and the population misdirected. The “left” can be relied upon to participate in creating an atmosphere in which critical issues can be covered up.
At the end of the last week the media published Dominique Strauss-Kahn’s statement saying that he was going to leave his post of the IMF’s Managing Director. The statement says that the decision is made in order not to besmirch the financial institution and to focus on proving his innocence.
In the near future the IMF is to hold elections in order to appoint new Managing Director of the Fund. It should be reminded that the First Deputy Managing Director John Lipsky is currently the caretaker. Most investors are focused on the issue. A member of the ECB’s board of directors said that it would be wise to appoint another European to this post. Some politicians say that Jean-Claude Trichet well may succeed Dominique Strauss-Kahn. Traditionally, no American can be the Managing Director of the IMF. However, since 1992 the US representatives can run for the First Deputy Managing Director.It goes without saying, that the IMF’s new chief will determine the destiny of both the common Euro currency and the US Dollar. The traditions are unlikely to be broken: they won’t elect an American. If it is a Chinese representative that succeeds Strauss-Kahn, then he won’t probably care about the USA’s interests, which presents a potential threat for the American currency. All the Arab representatives would probably strive to focus on the interests of their countries. So, it is obvious that the procedure of electing the IMF’s new Managing Director will definitely make the financial markets go wild, showing the decline of either EUR or USD.
Another controversial question is the circumstances of Strauss-Kahn’s arrest. Yet there is only one logical answer to this question: there is a conspiracy against him. Of course, a couple of other question arises: Cui prodest? What is the aim? The logic of reasoning leads us to the forthcoming presidential elections in France (2012). Strauss-Kahn used to be the front runner…Everyone understands that the election of the new Managing Director of the IMF will cause considerable market movements. However, the direction is still not clear.
The arrest of French financier and politician Dominique Strauss-Kahn in New York City on sexual assault charges and his continued imprisonment is a disturbing event with far-reaching implications.
Strauss-Kahn is the managing director of the International Monetary Fund (IMF), perhaps the most powerful global capitalist financial institution, and a prominent figure in the French Socialist Party, one of that country’s leading big business parties. He was expected to announce soon his candidacy for the presidency in 2012, and polls in France had him leading his rivals, President Nicolas Sarkozy and extreme right-winger Marine Le Pen of the National Front.
In his class position, privilege and social outlook, Strauss-Kahn stands for everything the World Socialist Web Site opposes. But he is also a human being who is entitled to democratic rights, which include legal due process and the presumption of innocence until proven guilty. Judging from the treatment of Strauss-Kahn since his arrest and the coverage of this event in the American media, this presumption does not exist.
Neither we nor anyone else—outside the accused and the accuser (and, perhaps, other interested and unnamed parties)—know exactly what went on in Strauss-Kahn’s suite at the Sofitel Hotel in Manhattan on Sunday. Whatever information the public possesses has emerged courtesy of the New York City Police Department, the alleged victim’s lawyer, and the mass media. None of these can be considered reliable sources.
As of yet, no one has heard Mr. Strauss-Kahn’s side of the story. Rather, he has been subjected to a calculated process of humiliation and dehumanization—such as the disgusting "perp walk"—whose obvious purpose is to convict the accused in the public’s mind even before an indictment has been handed down.
Rape is an execrable crime and anyone who is found guilty of this offense must be held accountable. However, it is a fact, shameful and undeniable, that allegations of sexual misconduct have been used relentlessly, and not only in the United States, to destroy targeted individuals. The case of WikiLeaks founder Julian Assange comes most immediately to mind.
The fact that allegations of rape and other lesser forms of sexual misconduct have been used for political ends does not mean that Strauss-Kahn is a victim of a conspiracy. However, it would require a staggering level of credulousness to dismiss out of hand, prior to the most careful investigation, the possibility that Strauss-Kahn—a man whose decisions have far-reaching political and financial consequences—has fallen into a well-laid trap.
The ancient question Cui Prodest?—Who profits?—must arise in the investigation of an allegation whose immediate consequence, regardless of the final outcome of the case, will in all likelihood be the removal of the head of the International Monetary Fund and the destruction of the political career of a possible future president of France. Who would stand to gain from Mr. Strauss-Kahn’s transfer to an American prison? Certainly, this is the sort of question that the great French novelist Alexander Dumas, the author of The Count of Monte Cristo, would have asked.
But such curiosity is not to be found among the editors of the New York Times. Rather, in yet another example of its penchant for gutter journalism, the newspaper yesterday published no less than three columns—by Maureen Dowd, Stephen Clarke and Jim Dwyer—which revel in Strauss-Kahn’s humiliation, treat the allegation of rape as if there was no question of its truth, and provocatively incite their readers against the accused. Each of the columns appeals to their readers’ ignorance of due process and to the basest instincts. The filthy level of these essays is indicated by the title chosen by Mr. Clarke for his piece: "Droit du Dirty Old Men."
Sinclair's loyalty goes beyond just turning a blind eye to his reported and rumored infidelities. It has also affected her career. She had been enormously popular as the host of a political talk show for France's leading network TF1 in the mid- and late 1990s. But after his star began to ascend in earnest in the Socialist Party hierarchy, TF1's conservative ownership and management decided Sinclair's proximity to a sitting member of government (Strauss-Kahn was Minister of Finance at the time) created a conflict of interest and moved her from the political programs she'd built her career on, putting her in charge of the TF1 affiliate in charge of what was then the obscure Internet operations, a post TF1 downgraded to vice president a little later. In 2001, Sinclair and TF1 parted ways for good, a move Sinclair has recently said involved her being unceremoniously thrown out for her political and marital loyalties. Asked by the weekly L'Express whether it bothered her that her husband had "a reputation as a seducer," Sinclair replied slightly circuitously, "No, I'm actually rather proud of it! It's important to seduce for a politician. As long as he seduces me and I seduce him, that's good enough for me." (See what Dominique Strauss-Kahn can expect.)
Guillemette, like Sinclair, has acknowledged that Strauss-Kahn cheated on her, but the two women heatedly contest notions that there was anything predatory or violent in his character. On Tuesday, Guillemette disputed the account of her goddaughter Tristane Banon of being sexually assaulted by Strauss-Kahn in 2003. She told the French paper Le Parisien: "Why is a young woman deciding to file a complaint several years after the event, the day when a 25-year prison sentence is hanging over the man she accuses?" As for the New York charges, Guillemette told the daily, "The facts related by the American police are not compatible with the man I know and with whom I lived for more than 10 years." She also told the paper that she would desist from making more commentary and leave the talking to Strauss-Kahn's current wife.
Read more: http://www.time.com/time/world/article/0,8599,2072076,00.html#ixzz1MxaRS2Vk
Nicolas Sarkozy and Dominique Stauss-Kahn were never friends - one conservative, the other Socialist, their political ambitions setting them on a collision course. Yet, soon after Sarkozy's 2007 election as President of France, he surprised most people by nominating Strauss-Kahn to be Managing Director of the International Monetary Fund, a heartening reach across party lines. Others, however, saw a more devious motive: Sarkozy was moving his most potent challenger to the IMF's Washington, D.C. headquarters and depriving the freshly defeated Socialist Party of his charisma and leadership. The last four years, according to political observers in France, have been full of similar subtle and not-so-subtle maneuvers as both men prepared for what had been prophesied as a fierce battle for the French Presidency in 2012.
Sarkozy has taken the requisite "innocent until proven guilty" position about Strauss-Kahn and his catastrophic legal situation in the U.S. But few observers believe the French President is grieving. Sarkozy knew he had been lucky back in 2007 not to have faced the popular Strauss-Kahn at the polls (instead, the Socialists fielded the attractive but disorganized SÉgolÈne Royal.) During a 2006 lunch discussion, a Sarkozy adviser told TIME how relieved he and his boss were that Strauss-Kahn was not running. "Of course," said the adviser with a smile, "if he did run, he'd probably ruin his own chances by getting caught in some woman's bed." (See pictures of Sarkozy in the U.S.)
Indeed, certain analysts argue that the French President may have been betting on rather cynical odds: that by sending a notorious libertine to the puritanical Mecca of America in the first place - and to the political correct strictures of the rigid IMF in particular - Sarkozy was simply giving Strauss-Kahn enough rope to hang himself with. That may explain why it was that on Monday, the daily Le Figaro quoted Sarkozy responding to the news out of New York with a reminder that he'd alerted Strauss-Kahn of the risks of being a seducteur. "I warned him about this!"
Sarkozy wasn't the only one. Shortly after Strauss-Kahn won the IMF job, Jean Quatremer - a journalist for the left-leaning LibÉration, wrote in an otherwise glowing profile of Strauss-Kahn that "the only real problem for Strauss-Kahn is his relation to women. Too forward. He often borders on harassment. It is a problem known to the media but that nobody talks about (we are in France). And the IMF is an international organization with Anglo-Saxon sensibilities. One out-of-line move and..."
Already sensitive to the issue, Strauss-Kahn's staff were not happy with the comment. This week Quatremer recalled that "a few hours after the publication of this piece, I receive a call from Ramzi Khiroun, one of Dominique Strauss-Kahn communcation people: 'We know you like DSK [as he is known in France] and we don't understand at all why your published this piece.' The tone was friendly (he spoke to me with the informal 'tu' although we'd never met), not angry, just saddened: how could I have done such an underhanded thing to his mentor?... I knew that I was breaking a taboo. And Ramzi Khiroun even dared to ask me to erase the piece from my blog 'so as not to harm Dominique.' Such a scene is unimaginable in a modern democracy."
As it turned out, Quatremer (and Sarkozy) were prescient. In 2008, Strauss-Kahn was forced to admit he'd engaged in a sexual affair with Hungarian economist Piroska Nagy - who was his subordinate at the IMF. It was not quite the fatal misstep: Strauss-Kahn, though reprimanded, kept his job. Nagy eventually lost hers as part of a cost-cutting measure. (Have Sex Assault Charges Killed the Presidential Hopes of the IMF Chief?)
But that career crisis focused Strauss-Kahn and his staff on the fact that his sexual behavior could be used as a weapon against him when he eventually returned to French politics. A team of political advisers and communications experts was dispatched to Washington to help him spin the Nagy scandal and limit the PR damage. As part of that, according to D.S.K.: The Secrets of a Presidential Contender, a 2010 book about Strauss-Kahn, his minders told their boss to "stick to business and forget his hormone count." A seemingly contrite Strauss-Kahn appeared to do just that, not only dedicating himself to his increasingly urgent (and much-applauded) IMF response to successive economic crises around the world, but also working with French media to restore his image as a dedicated husband.
French conservative officials loyal to Sarkozy watched in horror as Strauss-Kahn's already high approval numbers resumed their ascent. A poll in late 2009 found that Strauss-Kahn was the leading figure the French public said it wanted to see play a larger role in the future. Meanwhile, Sarkozy's own s ratings continued to decline, setting record lows for the post-war French presidency. Sarkozy allies decided to escalate the sex war, voicing overt warnings in the press that they'd go public with proof of Strauss-Kahn's lamentable private behavior if he chose to run for president - referring to long-rumored incriminating photos of Strauss-Kahn caught in flagrante delicto. A book that came out around the time quoted a Sarkozy intimate and the ruling party's spokesman noting that if Strauss-Kahn ever ran for president "he wouldn't last a week. We have the photos - they exist! We'll pass them around, and the French people wouldn't like that." Strauss-Kahn responded by threatening a libel suit; the party spokesman denied having ever made the statement. (See what Strauss-Kahn's arrest means for the IMF.)
The rumored photos have been bandied about as a potential weapon for years. One political analyst said 18 months ago that he wagered Strauss-Kahn would never run for president, because "in addition to all the stories of his sexual activity, there are photographs. They're real. And no politician would ever survive what's in them if they ever went public." An advisor to a current government minister told TIME that while he'd never seen the photographs, he had it on solid grounds that they not only existed, but could even lead to criminal charges.
RALEIGH, N.C. (AP) — A murder charge against the woman who falsely accused three Duke lacrosse players of raping her is but the latest problem for a woman friends say is still haunted by the stigma of the lacrosse case.
Video: Woman who made false rape accusation faces murder charge
Crystal Mangum, 32, was indicted Monday on a charge of first-degree murder and two counts of larceny. She has been in jail since April 3, when police charged her with assault in the stabbing of her boyfriend Reginald Daye, 46. He died after nearly two weeks at a hospital.
An attorney for Mangum did not return a call seeking comment. The district attorney's office declined to discuss the case.
Friends said Mangum has never recovered from the stigma brought by the lacrosse case and has been involved in a string of questionable relationships in an attempt to provide stability for her children.
Mangum, who is black, falsely accused the white lacrosse players of raping her at a 2006 party for which she was hired to perform as a stripper. The case heightened long-standing tensions in Durham about race, class and the privileged status of college athletes.
The district attorney who championed Mangum's claims was later disbarred. North Carolina's attorney general eventually declared the players innocent of a "tragic rush to accuse."
Prosecutors declined to press charges for the false accusations, but Mangum's bizarre legal troubles continued. Last year, she was convicted on misdemeanor charges after setting a fire that nearly torched her home with her three children inside. In a videotaped police interrogation, she told officers she got into a confrontation with her boyfriend at the time — not Daye — and burned his clothes, smashed his car windshield and threatened to stab him.
A federal judge recently ruled the three players accused of rape — Reade Seligmann, Collin Finnerty and Dave Evans — can pursue a lawsuit against former District Attorney Mike Nifong and the police investigators who handled their case. The players have not sued Mangum.
The False Rape Society
There are sound reasons why IMF chief Dominique Strauss-Kahn probably had no choice but to resign, given his predicament. Whether that predicament was self-created is something no one, except in all likelihood two people, knows for certain. Many responsible people called on him to resign simply because the IMF needs a chief who is neither behind bars nor distracted by a pending sexual assault trial that could send him to prison for much of the rest of his life.&nbesign for different reasons. NOW has prejudged him to be guilty of offenses against women even though he has never been adjudged guilty of any crime, and even before a scrap of evidence has been admitted in a trial on the present charges. That didn't stop NOW's president, Terry O'Neill, from proclaiming: “We’re calling for his resignation based on his pattern and practice of behaviors harming women.” http://blogs.wsj.com/washwire/2011/05/18/now-calls-for-imfs-strauss-kahn-to-resign/
Dominique Strauss-Kahn, IMF Managing Director and French presidential candidate, has been accused of rape. As the feminist dominated press is scared to even think that the rape accusations are false, Human-Stupidity has to speak up. The story is very strange, and dominated by clear mistakes and screwups committed by the accuser. A five-star hotel maid trespasses into a naked client’s room? Unforgivable. Five-star hotel security let a rapist check out without complaint? The maid wasn’t trained to instantly report crimes to security staff?
Maid Violates Professional Ethics and Walks Into a Prominent, Naked Guest’s Room
The New York Police Department claims that at about 1 p.m. on Saturday, a hotel maid entered a $3,000-a-night suite at the Sofitel near Times Square, believing that it was empty.
Talk about a bad start! She mistakenly entered a room thinking it was empty? This is not supposed to happen in a high-class hotel. Were the sex roles inverted, were a male employee to walk in on a prominent female guest, like Mrs. Hillary Clinton, the male employee would be fired and arrested for sexual harassment. Usually, hotels have a policy to ensure their staff avoid such embarrassments: cleaners are supposed to knock on the door, ring the bell, or yell “room service” when entering rooms.
Strauss-Kahn then emerged naked from the bathroom, and grabbed her, pulled her into the bedroom and threw her on to the bed, before trying to lock the suite’s main door, according to New York Police Dept. Deputy Commissioner Paul Browne, who outlined the charges to reporters. “She fights him off, and then he drags her down the hallway to the bathroom, where he sexually assaults her a second time,” he told Reuters.
Wait, what? A hitherto well behaved, civilized man, suddenly goes crazy? Just because he was naked, he wanted to take advantage of her and rape her?
A man pictured on the covers of magazines, admired by millions of women, who could get any woman he wanted with a snap of his fingers. A man from a country with legalized prostitution who could afford two luxury prostitutes per day, if he happened to be a sex addict. And this guy, exactly the moment the woman walks in, illegally, incorrectly, grabs her and rapes her?
The maid, 32, finally managed to push Strauss-Kahn away and escape, according to Browne, and her colleagues called 911. Strauss-Kahn had checked out by the time police arrived at the hotel, leaving behind his cell phone.
Very strange. No rapist should be able to just leave a five-star hotel, packed full of security agents who are trained to catch thieves, impostors, and other ne’er do wells – ESPECIALLY people who cause trouble and then want to slip away without getting caught. High-class hotels have a very professional security staff. I am sure maids are trained to instantly report crimes to security. So any delay in reporting would be her second professional failure of the day.
The NYPD usually does not take longer then five minutes to arrive on the scene of a crime, and Strauss-Kahn made it all the way onto the plane before they got to the hotel? Check out, check into the airport, pass through security?
Strauss-Kahn was arrested on charges of attempted rape, conducting a criminal sexual act, and unlawful imprisonment of the woman.
“Arrest of IMF Chief on Attempted Rape Charges Throws French Presidential Race Into Chaos” | Time Magazine
A VIP, at that:
In fact DSK, as the French call one of the country’s leading political figures, happens to be on the cover of virtually every French magazine this week as the country’s possible next President…
Across Europe, too, Strauss-Kahn’s arrest will have a major impact. It could impact critical negotiations over the E.U.’s deep debt crisis, in which Strauss-Kahn has been a key — if not the key — player. He was due to be at emergency debt meetings in Brussels this week, and perhaps mindful that he could soon be one of the E.U.’s most powerful leaders
False Rape Charges to Cover Up Her Screwup, or for Political Reasons?
What are the alternative explanations? Don’t forget that she committed a serious professional lapse, almost a crime. So it is quite likely that she did that for a reason, with intent.
- Many political and economic enemies would pay millions to get Strauss-Kahn out of the way. Is is inconceivable that they would bribe a lowly hotel maid to lodge a phony rape charge against him?
But there is a much more plausible and more parsimonious explanation:
The room maid, in a SERIOUS violation of her professional duties, walked into a client’s room while he was buck naked. Even if that was a honest mistake, it could have serious consequences for her.
- Maybe he became angry and threatened to get her fired (for good reasons). That scared her.
- Maybe she walked in with the intent to steal and was caught.
- Maybe she walked in with the intent to seduce a famous man.
- Maybe she planned to seduce him and was rejected. “Hell hath no fury like a woman scorned!”
- Maybe she walked in with the intent to seduce a famous man and then blackmail him by threatening to cry rape.
As we’ve learned, time and time again, from The False Rape Society, many women have a knee-jerk reaction to cry “rape” in order to save them from their own problems. Have you noticed that nobody in the media is saying that the maid should be fired for her transgression?
Let us see if there is any hard, corroborating evidence for this case, and if it isn’t merely another “cry wolf” story by a guilty woman seeking to salvage her job after committing a serious, unforgivable professional mistake.
Jacques Attalli, the economist, a prominent Socialist and friend of Strauss-Kahn said: “The most likely outcome is that this case will stick and even if he pleads not guilty, which he may be, he won’t be able to be candidate for the Socialist primary for the presidency and he won’t be able to stay at the IMF.”
Michel Taubmann, author of a new official and approved biography of Strauss-Kahn, said: “He is a well-known seducer but does not have the profile of a rapist.”
“Dominique Strauss-Kahn Charged with Sex Attack on New York Hotel Maid“ | The Guardian
Originally published at Human Stupidity on May 15, 2011.
Finally, the aforementioned commenter also linked to a Politico article about how Irin Carmon, Jezebel’s head harpy, went whining to Slate because their French division published Diallo’s name:
The French edition of Slate has come under fire for publishing the name of the IMF chief Dominique Strauss-Kahn’s alleged victim.
Irin Carmon, a blogger at Jezebel, addressed Jacob Weisberg, editorin-chief of the Slate Group, on Twitter: “Why did you/Slate France choose to publicize the alleged rape victim’s name?”
Most American news organizations have a policy of not naming rape victims in order to protect them.
Weisberg added that Slate’s US editor, David Plotz, had decided that Slate is not going to publish the story in English.
And this is why the American media is increasingly irrelevant – because they’re a bunch of gutless shitstains. You SOBs are supposed to be our sources of truth and information. I would THINK that the identity of a woman accusing one of the most influential men in the global economy of rape would be kind of IMPORTANT. But no, whenever the slightest bit of controversy heads your way, you journalists and reporters fold like a five-dollar bill. You have no problem with ruining the lives of men falsely accused of rape, screaming their names until they’ve become household ones, but when it comes time to put the shoe on the other foot, you bow to the hysterical demands of fascist feminists squawking about “rape culture” and “victim blaming”.
But unfortunately for the gatekeepers, we don’t need them any more! If you’re reading this article, spread the truth about Nafissatou Diallo’s identity by linking to this post wherever you can – Twitter, Reddit, your favorite forums and blogs, or whatever else. Tumblr it, Facebook it, email it to your friends. Make sure they learn the truth that the mainstream media literally does not want them to know.
Additionally, I’ll be willing to publish a translation of the Slate France article that the American website has refused to reprint. You can find it here. I’d do it myself, but my French is rusty (read: it’s beyond pathetic). If you’re fluent in French and up to the challenge, hit me up via the contact form or private message me on Facebook.
And if you haven’t already, read Human Stupidity’s dissection of the holes and irregularities in Diallo’s account of her rape.
It doesn’t matter that Strauss-Kahn is a socialist. It doesn’t matter that Strauss-Kahn is the head of the IMF. A man disagreeing with your politics does not mean he is guilty of rape nor does it change the fact that it is despicable to use a false rape accusation as a convenient weapon against a man. One reason why false rape accusations are as common as they are now is because too many people are willing to take advantage of the situation when a false rape accusation happens against a political enemy.
This is not limited to Strauss-Kahn. The same thing happened with Julian Assange. Many people were ready to hang him for the false rape accusation against him because they disagreed with his politics and his work at Wikileaks. The same thing happened to the three Duke Lacrosse players accused of rape. The Group of 88, the 88 members of the Duke faculty who branded the lacrosse players as rapists, were ready to hang them for being white and male.
You may not like Dominique Strauss-Kahn, Julian Assange, or the Duke Lacrosse players. You may not like what any of them do for a living. However, your personal dislike of a man is no excuse for not standing up to a false rape accusation.
Yeah, I follow lots of conservatives and libertarians on Twitter and all you hear from most of them is “Guilty!!!” And it’s coming from the same people who are hooting and hollering about an encroaching police state. Shameful hypocrisy. Guess Big Sister Government is A-OK if it takes down someone you disagree with politically.
I would be calling them out on it left and right if my twitter account was anonymous.
Right! I don’t like to see a false accusation (if that is what it is) levied on anyone, even a mangina. False rape accusations destroy a man’s reputation and career even after he’s proven innocent.
I for one always insist the door of my Hotel room remain OPEN when a Housekeeping Staffer comes int o do the daily cleaning. Most good Hotels have their Housecleaners work in pairs and with a door open and the other cleaner as well as other hotel guests out in the hallway nearby it is unlikely you can be placed in a compromising accusation as opposed to the door being closed. With government/political guys like this clown, he should have been a little watchful for “set ups” like government types tend to do to one another!
If he is guilty: bad news for IMF. Lots of turmoil ahead: possibly the breakup of the EU.
If he is not guilty: bad news again because of the backlash of antiamericanism in Europe. Possible breakup of relationships between EU and USA.
Looks like we have two (bad) choices.
Other than that, I’m fine, thank you..
My latest post for The Spearhead is up. As with all Spearhead posts comments are disabled so comment on the post at The Spearhead.
A few days ago IMF (International Monetary Fund) Chief, Dominique Strauss-Kahn, was arrested for allegedly raping a maid at a hotel that he was staying at in New York. It has already been documented elsewhere that there are several good reasons to believe that this is a false rape accusation. Currently the facts aren’t all in yet, but that has not stopped people from declaring their desire to hang Strauss-Kahn for this alleged crime (without a trial) because they disagree with his politics, disagree with IMF policies, or believe him to be guilty of some other crime that has not been proven.
We’re always fascinated with the contradiction that cosmopolitan, high-powered, multilingual people can behave in such primitive ways. But civilization and morality have nothing to do with sophistication and social status.
The lesson of these two fallen grandees, as Bill Maher told Chris Matthews, is: “If you’re going to go after the household help, get a ‘Yes,’ first.”ed connor
So much for the presumption of innocence. He may be guilty, but no one knows yet.
Remember the Duke lacrosse team "rapists?"
This whole column and all of the rest of the chatter are based on the phrase: "if the allegation is true." Let's presume innocence. Trial by media is good for no one, least of all the alleged victim and the alleged perpetrator, both of whose lives have been altered forever.
As someone who has done much business in France, I will say that there are many brilliant people in Paris and throughout the country of France. But men like Dominique Strauss-Kahn and Bernard-Henri Lévy have never been among them. The French have academic "royalty" made up of mediocre minds aligned with family and cultural connections. Don't blame all French for these maligners. Most French people are kind, hard-working, and wonderful. But, I will say that the day is past for what the French revernetly consider their cultural, academic elites. The world is too big, France is too small, and communication is too effective. The days of Bernard-Henri Lévy and Dominique Strauss-Kahn, and the rest of their circle -- those days are gone.
Money is power, and power can do as it pleases. This brutal attack is less about sex than it is about exercising control, reveling in the humiliation of a weaker individual, and taking something precious from her simply because he can.
It is not unlike the crimes that were committed closer to home, by financial tycoons who scammed millions of people out of their homes, their money, and their self respect. Rather than being punished for their crimes, they were given bailouts, and now are receiving obscene bonuses once again. The victims were left to fend for themselves, and no hero has emerged to demand justice on their behalf.
There is a parallel between sexual power and the power of money. The people who commit these crimes are not called the filthy rich for nothing.
Would that our our law enforcement officials moved as expeditiously against the bankers for their rape of our economy.
And many, many thanks to the victim for having the nerve to stand up to the barrage of unjustified innuendo and criticism to make her charge public. Going public with a charge of rape takes a good deal of courage. To do so when the rapist is one of the most powerful people in the world takes an immense amount of courage. She is one outstanding individual; our world is a better place today because of her.
mancurocMaureen, what's with this anti-European slant in your article, when there's no shortage of red-blooded American pols who misbehave, often preaching family values while they do so? Next thing we know you'll be campaigning for french fries to be renamed chivalry chips.
scarlethesterWhoa, whoa, whoa. Stop with all the generalizations about French people in the comments, please! Most of the normal, ordinary french citizens I have seen commenting on Times articles about this scandal have been SHOCKED at DSK's behavior, and embarrassed for France. They do not think rape is ok or excusable. It is only the supposed elite that are getting their boorish comments posted in the headlines, stirring up anti-French sentiment, and causing a culture clash of great size. It's a pity. I feel for France. Strauss-Kahn doesn't represent the average Frenchman OR his views on sexual assault. Shame on the news media for making it seem that way.
DavidI have worked for three french multinationals in New York. Though they are not all the same and I caution against stereotypes, at least one of the outfits was run by a DSK clone. A married man who had seduced three women on staff in under a year causing several other talented women to jump ship leaving the company at the mercy of the competition, nevertheless was given a raise and kept on at a greatly diminished affiliate office because the people in Paris had no clue that such an atmosphere was not acceptable to the NYC female professional.
Finally I realized he must have been on the verge of losing his job and desperate to turn over a new leaf when one day he inquired what I did for the company. I was paid about twice what most employees their got and had been there for five years, most of the work i did landed on his desk and he had to approve it, but you see, I'm a man, and not french, and so he never really noticed.
There is something very wrong with this picture, by Dani Rodrik: This graph is from a new paper by Frank Levy and Tom Kochan, showing trends in labor productivity and compensation since 1980:
Labor productivity increased by 78 percent between 1980 and 2009, but the median compensation (including fringe benefits) of 35-44 year-old males with high school (and no college) education declined by 10 percent in real terms. Women have done in general better, but two-thirds of women still have seen their pay lag behind productivity. Levy and Kochan call for a Social Compact to reverse these trends, and outline some of the steps necessary to get there. The paper is very well worth reading. Policymakers need to focus on job creation much more than they are, but as this graph shows creating more jobs is only part of the solution to the problems that middle and lower class households have been experiencing. We also need to ensure that income is equitably shared, and the paper outlines the steps needed to move in this direction:
The broken link between productivity and wage growth reflects changes in markets, policies, and their enforcement, institutions, and organizational norms and practices that have been evolving for a long time (circa 1980). Given this history, it is clear that the solutions will also need to be multiple and systemic and sustained for a long time. They also will need to match the features of the contemporary economy. The prior Social Compact was well-suited to a production-based economy in which wage increases in manufacturing set the norm for other parts of the economy.
Today, manufacturing can no longer play this catalytic role. Instead, norms and institutions need to support an innovation-knowledge based economy. We outline below a potential combination of actions suited to this task. If the list seems formidable, recall that we are now facing a situation where the economy has stopped working for something between one-half and two-thirds of all American workers.
Many of us have been calling for a New New Deal. I've done so many times over the last several years and I'm far from alone. Unfortunately, there's very little evidence that this is anywhere near the top of the political agenda. So long as those with wealth and power get theirs (and keep filling campaign coffers), it's hard to see that changing.
Posted by Mark Thoma on Friday, May 20, 2011
The CBPP looks at the source of the public debt (previous charts have examined the source of deficits, i.e. the deficit or surplus in a given year, this looks at the debt which is the accumulation of all past deficits and surpluses). As this notes, "simply letting the Bush tax cuts expire on schedule ... would stabilize the debt-to-GDP ratio for the next decade." We are on the verge of trading tax cuts for the wealthy and spending on wars for large cuts to social programs (the budget hole the recession caused is helping to fuel the calls for austerity). Maybe that's what we want, maybe not (and likely not if the polls are correct), but we ought to at least be more aware than we seem to be that this is the trade we are making:
What’s Driving Projected Debt?, CBPP: As we’ve noted, my colleagues Kathy Ruffing and Jim Horney have updated CBPP’s analysis showing that the economic downturn, President Bush’s tax cuts, and the wars in Afghanistan and Iraq explain virtually the entire federal budget deficit over the next ten years. So, what about the public debt, which is basically the sum of annual budget deficits, minus annual surpluses, over the nation’s entire history? The complementary chart, below, shows that the Bush-era tax cuts and the Iraq and Afghanistan wars — including their associated interest costs — account for almost half of the projected public debt in 2019 (measured as a share of the economy) if we continue current policies.
Altogether, the economic downturn, the measures enacted to combat it (including the 2009 Recovery Act), and the financial rescue legislation play a smaller role in the projected debt increase over the next decade. Public debt due to all other factors fell from over 30 percent of GDP in 2001 to 20 percent of GDP in 2019. We focus here on debt held by the public, which reflects funds that the federal government borrows in credit markets to finance deficits and other cash needs. That’s the proper measure on which to focus because it’s what really affects the economy. We compare it to GDP because stabilizing the debt-to-GDP ratio is a key test of fiscal sustainability. As Kathy and Jim note, simply letting the Bush tax cuts expire on schedule (or paying for any portions that policymakers decide to extend) would stabilize the debt-to-GDP ratio for the next decade. While we’d have to do much more to keep the debt stable over the longer run, that would be a huge accomplishment. Posted by Mark Thoma on Friday, May 20, 2011
May 20, 2011 by Mark Thoma
Making Things in America, by Paul Krugman, Commentary, NY Times: Some years ago, one of my neighbors, an émigré Russian engineer, offered an observation about his adopted country. “America seems very rich,” he said, “but I never see anyone actually making anything.” That was a bit unfair, but not completely — and as time went by it became increasingly accurate. ... Manufacturing, once America’s greatest strength, seemed to be in terminal decline. But that may be changing. Manufacturing is one of the bright spots of a generally disappointing recovery, and ... a sustained comeback may be under way. And there’s something else you should know: If right-wing critics of efforts to rescue the economy had gotten their way, this comeback wouldn’t be happening. ... I don’t want to suggest that everything is wonderful about U.S. manufacturing. ... Still, better to have those jobs than none at all. Which brings me to those right-wing critics. First, what’s driving the turnaround in our manufacturing trade? The main answer is that the U.S. dollar has fallen against other currencies, helping give U.S.-based manufacturing a cost advantage. A weaker dollar, it turns out, was just what U.S. industry needed. Yet the Federal Reserve finds itself under intense pressure from the right to make the dollar stronger, not weaker. ... And then there’s the matter of the auto industry, which probably would have imploded if President Obama hadn’t stepped in to rescue General Motors and Chrysler. ... And this ... would have undermined the rest of America’s auto industry, as essential suppliers went under, too. Hundreds of thousands of jobs were at stake. Yet Mr. Obama was fiercely denounced for taking action. One Republican congressman declared the auto rescue part of the administration’s “war on capitalism.” Another insisted that when government gets involved in a company, “the disaster that follows is predictable.” Not so much, it turns out. So while we still have a deeply troubled economy, one piece of good news is that Americans are, once again, starting to actually make things. And we’re doing that thanks, in large part, to the fact that the Fed and the Obama administration ignored very bad advice from right-wingers — ideologues who still, in the face of all the evidence, claim to know something about creating prosperity.
May-17-11 | Democratic Underground
karynnj (1000+ posts) :Wait until more facts come out before assuming that the rather powerless woman was part of a trap -
Wait until more facts come out before assuming that the rather powerless woman was part of a trap Your "case" rests entirely on the good you see him doing in his job. People are complex and it is possible that his values, as regards international finance are completely commendable, but his actions towards this woman were dishonorable. On the other hand, he has not yet been proven guilty and there was talk of an alibi. It is far too early to think that we know the full story.
It is a huge error in logic to assume that people whose political views we like are exemplary people in all regards. I do not need to repeat the list of BOTH Democratic and Republican candidates who have done some pretty unsavory things in their private lives. We all know that list by heart. On both sides, people who trusted them were likely at first defensive, then hurt by their disappointment because they did not live up partisan's expectations for them (or to the image they worked hard to craft.
Here, what we should want is that this be dealt with as expeditiously as possible. If he has an alibi and is innocent, this needs to ended ASAP - and even then it might already have destroyed his Presidential chances. If he did what he alleged to have done, our sympathies should be with the maid - as she, not he, would then be the victim.
Information Clearing House ICH
But if Strauss-Kahn was set up, then it was probably by members of the western bank coalition, that shadowy group of self-serving swine whose policies have kept the greater body of humanity in varying state of poverty and desperation for the last two centuries. Strauss-Kahn had recently broke-free from the "party line" and was changing the direction of the IMF. His road to Damascus conversion was championed by progressive economist Joesph Stiglitz in a recent article titled "The IMF's Switch in Time". Here's an excerpt:
"The annual spring meeting of the International Monetary Fund was notable in marking the Fund’s effort to distance itself from its own long-standing tenets on capital controls and labor-market flexibility. It appears that a new IMF has gradually, and cautiously, emerged under the leadership of Dominique Strauss-Kahn.
Slightly more than 13 years earlier, at the IMF’s Hong Kong meeting in 1997, the Fund had attempted to amend its charter in order to gain more leeway to push countries towards capital-market liberalization. The timing could not have been worse: the East Asia crisis was just brewing – a crisis that was largely the result of capital-market liberalization in a region that, given its high savings rate, had no need for it.
That push had been advocated by Western financial markets – and the Western finance ministries that serve them so loyally. Financial deregulation in the United States was a prime cause of the global crisis that erupted in 2008, and financial and capital-market liberalization elsewhere helped spread that “made in the USA” trauma around the world....The crisis showed that free and unfettered markets are neither efficient nor stable." ("The IMF's Switch in Time", Joseph Stiglitz, Project Syndicate)
So, Strauss-Kahn was trying to move the bank in a more positive direction, a direction that didn't require that countries leave their economies open to the ravages of foreign capital that moves in swiftly--pushing up prices and creating bubbles--and departs just as fast, leaving behind the scourge of high unemployment, plunging demand, hobbled industries, and deep recession.
Strauss-Kahn had set out on a "kinder and gentler" path, one that would not force foreign leaders to privatize their state-owned industries or crush their labor unions. Naturally, his actions were not warmly received by the bankers and corporatists who look to the IMF to provide legitimacy to their ongoing plunder of the rest of the world. These are the people who think that the current policies are "just fine" because they produce the results they're looking for, which is bigger profits for themselves and deeper poverty for everyone else.
Here's Stiglitz again, this time imparting the "kiss of death" to his friend Strauss-Kahn:
"Strauss-Kahn is proving himself a sagacious leader of the IMF.... As Strauss-Kahn concluded in his speech to the Brookings Institution shortly before the Fund’s recent meeting: “Ultimately, employment and equity are building blocks of economic stability and prosperity, of political stability and peace. This goes to the heart of the IMF’s mandate. It must be placed at the heart of the policy agenda.”
May 19, 2011 | Foreign Policy Journal
It is possible that Strauss-Kahn eliminated himself and saved Washington the trouble. However, as a well-travelled person who has often stayed in New York hotels and in hotels in cities around the world, I have never experienced a maid entering unannounced into my room, much less when I was in the shower.
In the spun story, Strauss-Kahn is portrayed as so deprived of sex that he attempted to rape a hotel maid. Anyone who ever served on the staff of a powerful public figure knows that this is unlikely. On a senator’s staff on which I served, there were two aides whose job was to make certain that no woman, with the exception of his wife, was ever alone with the senator. This was done to protect the senator both from female power groupies, who lust after celebrities and powerful men, and from women sent by a rival on missions to compromise an opponent. A powerful man such as Strauss-Kahn would not have been starved for women, and as a multi-millionaire he could certainly afford to make his own discreet arrangements.
As Henry Kissinger said, “power is the ultimate aphrodisiac.” In politics, sex is handed out as favors and payoffs, and it is used as a honey trap. Some Americans will remember that Senator Packwood’s long career (1969-1995) was destroyed by a female lobbyist, suspected, according to rumors, of sexual conquests of Senators, who charged that Packwood propositioned her in his office. Perhaps what inspired the charge was that Packwood was in the way of her employer’s legislative agenda.
But a former U.S. assistant secretary of the Treasury and iconoclastic writer, Paul Craig Roberts, has a different view.
In an article called "The Amerikan Police State Strides Forward" in the online Foreign Policy Journal, Roberts suggests that Strauss-Kahn might have been framed—because the U.S. government did not want him replacing Nicolas Sarkozy as president of France.
"President Bill Clinton survived his sexual escapades because he was a servant to the system, not a threat," Roberts writes. "But Strauss-Kahn, like former New York Governor Eliot Spitzer, was a threat to the system, and, like Eliot Spitzer, Strass-Kahn has been deleted from the power ranks."
Roberts also notes that "Strauss-Kahn was the first IMF director in my lifetime, if memory serves, who disavowed the traditional IMF policy of imposing on the poor and ordinary people the cost of bailing out Wall Street and the Western banks."
Roberts, a former Wall Street Journal columnist, doesn't discount the possibility that the complainant was bribed. He also compares what's happening to Strauss-Kahn to the allegations against WikiLeaks editor Julian Assange, who is also a threat to U.S. hegemony.
In a postcript to the column, Roberts adds: "In the several hours since I wrote this article, authorities have announced that Strauss-Kahn, who was refused bail on specious grounds, has been put on suicide watch. Why announce it unless it serves an agenda? From the beginning, every statement and action of the authorities is designed to convey the impression of guilt. Is putting Strauss-Kahn on suicide watch a way to paint a picture of a person who can’t face the public humiliation of his crime? Is it a way to use the humiliation of constant interruption to break down his character and resolve? Or might it be to plant the idea that should he expire in prison, suicide is the explanation?"
May 19, 2011 | zero hedge
Back in November, we posted a piece by Knight Research titled "The Game Is Over" in which the firm's strategist Mark Lapolla presented his thesis why he believes that "the structural and cyclical terms of global trade have finally reached their tipping point. This will catalyze a wholesale change in sentiment and a historic repositioning of risk assets. The emerging market global growth story is over." And while the article came out just as the barrage of $750 billion in daily POMOs courtesy of QE2 was starting and hence masked the true state of reality, now that QE2 is finishing, it is only appropriate to bring Mark back up front, as the imminent and very violent convergence of the rosy myth that is the stock market, and of the underlying miserable reality, is about to wake up all those who have been dozing under the Printer Piper of Eccleslin's soothing tune, and Lapolla's thesis is about to see its first validation.
In essence, while we have heard much from those who claim that the end game will come as a result of hyperinflation, Lapolla is convinced in the opposite: namely that the end will be not a bang but a hyperdeflationary whimper. In order to refresh readers with his thoughts, recently Lapolla conducted an interview with the master questioner Kate Welling in which the Knight strategist laid out his uber-bearish case in more gruesome detail than most can stomach. Below we present the key points from his interview, as well as the full thing subsequently.
05/19/2011 | zerohedge.com
We have long claimed that 2011 is playing out in a manner virtually identical to 2010, almost to the tic. And as we approach the end of QE2 in 6 weeks, a quick glance at what happened with stocks following the end of QE1 in March of 2010, will be illustrative of what to expect this time around, because contrary to what Comcast's business channel would want its ever declining viewers to believe, it never really is "different this time." To help with that comparison, here is a David Rosenberg summarizing what happened between the end of QE1 and Bernanke's August 27 announcement of QE2. If this is all it takes, then as we (and Scott Minerd earlier) have predicted, get ready for not only QE3, but 4, 5 and so forth. And not only that, but Rosie joins the likes of Zero Hedge, Minerd, Koo, Janjuah and all other pragmatics who realize that the Fed will never, never, allow deflation to run its course even if that means collateralizing the dollar with sewer bonds and physical housing, which incidentally is what Rosenberg predicts: "the day the QE programs run their full course, the Fed will have likely added physical housing units to its balance sheet as opposed to just mortgage paper. Ben Bernanke will be the biggest landlord in the country at that time."
Rosie reminds what happened laste year between the end of QE1 and the surprise start of QE2
- S&P 500 sagged from 1,217 to 1,064
- S&P 600 small caps dell 394 to 330
- The best performing equity sectors were telecom services, utilities, consumer staples and healthcar, in other words - the defensives The worst performers were financial, tech, energy, and consumer discretionary [sound familiar?]
- Baa corporate spreads widened +59 bps from 237 bps to 296 bps
- CRB futures index dropped from 279 to 267
- Oil went from $84.30 a barrel to $75.20
- The trade-weighted US dollar index (against major currencies) firmed to 76.5 from 75.5
- The yield on the 10-year US Treasury note plunged to 2.66% from 3.84%
- Gold was the commodity that bucked the trend as it acted as a refuge at a time of intensifying and financial uncertainty - to $1,235 an ounce from $1,140 and even with a more stable-to-strong U.S. dollar too.
In other words, for those who have forgotte, gold was the only commodity that outperformed and in fact rose, as at least someone had an inkling that QE 2 was coming...
And Rosie's prediction:
The Fed is seriously contemplating an end to QE2 but make no mistake, QE3 will come down the pike, but at completely different levels on everything. It is certainly not going to happen at 1,330 on the S&P 500 but we do know that the strike price last fall was 1,040 and lots of chatter of a 'double dip' recession.
Bernanke, Yellen and Dudley, in contrast to the Fed Bank Presidents, would love nothing more than to quickly embark on QE3 and keep economic growth above 2% but they do not have enough support on the FOMC or on Capitol Hill. But that day will come when we see QE3 and it will be the day when all the folks who are complaining and lamenting QE are lining up begging for it. (And, the day the QE programs run their full course, the Fed will have likely added physical housing units to its balance sheet as opposed to just mortgage paper. Ben Bernanke will be the biggest landlord in the country at that time.)
Which means that by then, the dollar will be collateralized by multi-family apartments, warehouses and, appropriately, sewer bonds. Which also means that the dollar will be approaching an inverse asymptotic valuation. Which, lastly, means that the Fed will be monetizing every last piece of paper to come out of the Treasury, as America changes its name to the United States of Weimar.
And for those who missed Minerd's thought on the issue earlier, here it is again from the horse's mouth.Guggenheim Partners - Market Perspectives - The Case for More Monetary Elixir
Sinick:"OK, it's a profession product. What are the earnings? What are the expected earnings? Will the expected earnings pan out?"
- What do they Make/manufacture?
- What do they Mine?
- What do they grow?
- And finally, what do they export?
Sure will be nice when reality returns. Highly unpleasant, but nice all the same.
I use LI and it is not particularly helpful - I've used it a few times, have a bunch of contacts on there, but they've never earned a penny from me (other than minimal ad revenue via a few page views here and there).
I agree with Mich's assessment - not a good tool, selling electrons, hard to use, not being developed, and it is not going to pan out...
It is no secret that Geoffrey Raymond, the author of the infamous "Annotated ____" series, is one of Zero Hedge's favorite artists, in no small part due to the crowdsourced method of artistic creation. Indeed, it was only last summer that a copy of the Annotated Cramer (who can forget that prominent third nipple) was sold to a mysterious collector for a stately sum after it was annotated (in addition to the comments from the usual disgruntled suspect scribbling directly on the canvas) with comments compiled from our own post revealing this masterpiece. And once again, just as it should be, Zero Hedge and it's readers get the last word.
Prior to shipping his portrait of Ayn Rand to its new buyer, Geoffrey Raymond has invited ZH readers to submit a final round of comments, which he will then transcribe, more or less verbatim, onto the painting. He painted The Annotated Rand to coincide with last month's release of the Atlas Shrugged movie (a truly terrible flick, we are told) and the annotations inscribed in black were taken outside the premiere, then later at theaters around NYC. The blue comments were taken at his usual stomping grounds outside the NYSE.
The Raymond market, as we've predicted here before, remains hot, with prices for this best work now flirting with six figures. Might make sense to go to www.annotatedpaintings.blogspot.com and pick up a choice one while they still cost just a little more than a handful of gold coins in CME-adjusted terms. Regarding the Rand painting, our favorite annotation is "Rand + Greenspan = Bonnie + Clyde". All you closet Objectivists can now step up to the plate and have at it...
Take it away.
may have something to do with the fact that she is a racist zionist, but that's just a guess.
Don't forget she's also a HUAC Snitch.
What, that free unregulated markets always end in disasters or monopolies? Or that the current economic disaster, which was brought to us under the banner of free unregulated markets (kicked off by Ronald Reagan) has its roots in Ayn Rand and delivered by her Libertarian poster boy Alan Greenspan?
That may be your Godmother. It isn't mine. Alan Greenspan must be your Godfather too.
She was a shitty writer who could sell books by giving a repressed Calvinism-inspired society permission to be dicks. Now that the little selfishness-orgy is coming to a close, we find ourselves feeling nauseated and sticky, while this woman's legacy is trying to convince us to keep pumping, instead of grabbing a shower and skulking away to do something productive in order to distract us from the shame.
eff that shit.
Folks who have been suckling at Aynd Rand's whithered teat never realize that it's not rich milk but diseased pus they are ingesting.
If you constantly visit Zerohedge, and believe this website stands for Aynd Rand/Rosenbaum/O'Connor, then you misunderstand everything including objectivism. The woman was a halfwit with half good ideas that appealed to egomaniacal twits with delusions of grandeur about themselves. In other words, a good paperback fiction writer.
Guy Fawkes Mulder:
Because that book was full of business executives and bankers who were trying to build a world empire of megacorporate oligopolies and rigged crony captial controls. Just like current events.
Read Ayn Rand's description of Midas Mulligan. You will see that even in her magnum opus, she did not understand capitalism as run by capitalists.
Everything that occurred after the magnum opus was a miscarriage and mismanagement of the spirit of the novel. The current state of Atlas Shrugged leadership is now just an ivory tower think tank that gets paid in FRNs and produces such wonderful shilling as this:
Guy Fawkes Mulder:
You need to relax. It's clouding your judgement and your rationality and your ability to understand me.
My point was that Midas Mulligan is a totally imaginary character. In no way does he resemble any real banker. The book was very unrealistic in its portrayal of executives, particularly Mulligan. The real Fortune 500 executives and chieftains of finance in this world are not doing the morally right thing -- getting away from the immoral society and making a just one with their own abilities and alliances with moral people. In fact they all seem to be complicit in the construction of a neo-feudal world order involving resource wars of conquest and police state domestic control grids.
Standard Oil was anti-freedom. It was a monopoly octopus. It bullied out competitors. It cannot be vindicated by any one who truly believes in economic freedom.
It's just very obtuse to believe that Rockefeller-style capitalism is a good thing. It's very obtuse to say "look prices went down, thanks to Rockefeller". That's ignoring the fact that he squeezed out the competition with ruthless grafting, bribery, intimidation, and corruption.
It may be disingenuous too, but I'm going to give the "objectivism" think tanks a break and assume that they merely have their heads up their asses, and are not intentionally writing this stuff up to mislead people.
Anyway... please relax...
Ms. Rand considered herself not just a fiction writer/entertainer, but a philosopher...
well, so much for that; her blind spots could fill the black holes in Wall Street's cooked books.
I'm sure she's discussing it with Jesus right now - correlating her super-human ideals to Greenspan's flip-flop on the gold-standard.
You pretty much captured what I was going to offer:
"World's best author. When you're 16."
"The Maestro's Mistress?"
How about "The Maestro's Betrayal":
The bad news is ray-shielded mountain valleys are a fantasy, and looters are real. Login or register to post comments by The Alarmist on Wed, 05/18/2011 - 17:20 #1288899
Are you sure? Look up what is in and around Denver.
Login or register to post comments by hedgeless_horseman on Wed, 05/18/2011 - 17:39 #1288923
Kind of OT, but too funny...
Good liberal towns in Colorado?
"We're considering selling our house in LA [too many minorities] and moving someplace a little cheaper [lower taxes] for awhile. Looking at Portland, Seattle and Kalispell area. My husband also wants to consider Colorado.
Is Boulder a liberal city? [Have the tax payers and businees all left yet?] Does anyone have any recommendations? [Where are the mostly white schools?]
Login or register to post comments by velobabe on Wed, 05/18/2011 - 17:50 #1289027
boulder is the biggest hypocritical city in amerika. you are moving because of too many minorities. damn lady, you want minorities in and around you. you will just get so bored at looking at these white liberals in boulder. it probably has the highest per capital homeless population in amerika. i am so tired of just looking at these sorry assed white prius driving liberals. god i can't even go out for a walk on a perfect day any more and looked at these clueless people. men woman and the young people are void of any emotion, thought or action. the beauty of the environment is hard to not yearn, so see what kind of balance you can obtain, in a liberal town such as boulder colorado. colorado is the epicenter of the globalists.
"Who's this Anne Rand, anyway?"
Greenspan did nothing contrary to her personal views (which are very different from her writings). She was actually proud that her boy got selected by Pres. Ford.
See how they're all smiling?
Anybody that can spout the incoherent ideology that a strong centralized state is required to safeguard individual liberty is no true friend to liberty, or to coherent ideology.
The "Bonnie and Clyde" label fits these two to a tee. They are nothing but agent provacateurs in service of power. If she believed what she wrote originally, she quickly abandoned it in exchange for the cult of personality she gained once she hit the big time.
Objectivism was created as a dead-end street for those who thought it was putting her words into action. Luckily for many of us, Rothbard quickly figured her game out and told anyone who would listen.
Login or register to post comments by NotApplicable on Wed, 05/18/2011 - 17:55 #1289032
LOL, I just noticed that Greenspan's mother was named Goldsmith.
Oh, the irony.
Shock and Aweful:
That woman represents nothing more than an unrealistic philosophy for unrealistic people I'd say.
Somewhere between the cold, un-empathetic ideology that she espoused and the 1984-esq nightmare we live in today is what we should strive for.
Ayn Rand and other Libertarian thinkers have some good ideas about personal responsibility and what makes a strong nation and people...but taken literally and to their logical conclusions just don't seem to really be practical
Same goes for the progressivism / socialist idology. There is something admirable about wanting to create a society where equality abounds....but implementing it on a large scale and in a way that works (and without creating an entire class of people who abuse and exploit the government assistance) has been very elusive.
How about, instead of running our political / social systems based on an ideology or a philosophy....we have a political/economic and social order that is based on common sense and common purpose.
Oh fuck it....nevermind....there ain't any money in that!
That will never do.
Agreed. Rand's objectivism is an economic footnote to social Darwinism (the biological facet would be eugenics). The equilibrium/equality she sees is gained by everyone pulling for himself as hard as he can in a 300,000,000-way tug of war. Not my idea of utopia. In fact, it is neither efficient, harmonious, nor the most productive way. A liaisez-faire fantasy by a wannabe great philosophical economist. Rather, she acheived the status of long-winded novelist writing about two-dimensional characters with a transparent agenda.
May she (Ayn R. and the new movie) inspire new generations of clueless college/univ. educated idiots....longing for the trappings of fictional future-worlds...and a serious lack of "T-shirt syle".
Whatever nausea may result from her silk screened homage...would still be a healthy break from the mass commercialism of Che Guevara
John Galt works for the gubbermint now.
Actually, the gubbermint works for Galt.
Always did. Always will.
Rand doesn't get that. And that's what makes her work fiction.
Use of Weapons :
"Everyone I fucked betrayed me; making it into a philosophy made me rich".
"I might have been the original sociopathic cougar and loved the drugs, but Objectively, history remembers me for turgid prose and simplistic idealism".
"My philosophy champions rationalism; I fucking destroyed anyone with heavenly fire who didn't agree with me. And then purged the fuckers out of my cult. And I spit on their graves".
"When you see the murals of Ben Gold, you see my innermost fantasies".
"I was too stupid to read Nietzsche or Kant"
"Objectivism: Or what I did for the KGB against the useful idiots"
You want positive comments?
"Ayn Rand: A six-foot floral arrangement in the shape of a dollar sign was placed near her casket when she died, showing her true love. Then again, McDonalds made millions selling shit to the masses as well - and fiat dollars aren't a good score card".
[No, really. Hateful old hack, and not very bright. For a champion of rationalism, her brain wasn't up to the iconic role. Junk away, but she was one ugly soul, and her legacy is currently destroying the USA. Ironic, no? Or KGB deep mole planning *shrug*]
#1 Misunderstood Darwin, as have others - social adaptation / altruism have very specific cost/benefit returns, and are fundamental to a functioning society. Predators should stop being so bloody self-absorbed [thanks Ayn, tool, for making them so] and realise that symbiosis works, and predator<->prey relations in ecology are hugely complex. The current crowd make me shudder, because they mould to fit their limitations, they don't grow to meet complexity. For this crime, they need purging; mostly maladaptive mutants with obvious flaws.
#2 Misunderstood business, as have others - greed is good, if you have a something to spend it on. This does not mean purely material goods; why else would the 0.01% masturbate over 'charity' and 'bequeathing a legacy'. Top tip - complexity is a function of the market; if you leave the market more complex [rich in information] then you are a benefit. If you do not, you are not a capitalist, you are a parasite. Now stop with the bollocks and start building infrastructure again, because without it, you all die. Fucking tools.
#3 Judgement of emotions. Behaviourism is a stupid, and "nice for the masses" thought processes. Yes, I'm looking at you, proponents of 'behavioural economics' and 'nudges'. Top fucking tip: You do NOT WANT a society where people do not notice the "context hidden" nudges or psychological guides, UNLESS you want slaves. If you want slaves, then do the decent thing & split homo sapiens into two breeds, a la H G Wells. Stop being so hypocritical about your self-indulgent morality. When I have custody over other species, I relate to them QUA species. Canine qua canine. Equine qua equine. Homo Sapiens qua Homo sapiens. Anthropomorphism is stupid, dull and egotistical to the point of insanity.
In ending - killing the oceans was also dumb. For 'rationalists' you'd have been better off preventing over-fishing than anything else. I find little to recommend the short sighted and foolish nature of my species.
If you want a sensible answer: she was a smaller copy of Karl Popper, for an American overly Religious market. Try reading the original first.
Who is Ayn Rand?
Just a shitty fiction writer.
She did testify before HUAC as a snitch.
If Rand Paul married Ayn Rand, he would be Rand Rand.
A few for the background:
"I hope that comb-over man cunt straps one on and ass fucks greenspan for eternity in hell" [you nailed the hair btw, although a hitler mustache might be a nice addition]
"My estate thanks the FED and the Federal Government for loose money policies that allowed Hollywood enough wherewithal to trash my writings with visual and audio vomit"
"If I were still alive, I would have fucked DSK and maybe that midget Roubini who reminds me of a drug crazed Billy Crystal hit with a wiffle ball bat doing an impression of a sex crazed foreigner"
feel free to paraphrase
"For the main Design of the Fable, (as it is briefly explain’d in the Moral) is to shew the Impossibility of enjoying all the most elegant Comforts of Life that are to be met with in an industrious, wealthy and powerful Nation, and at the same time be bless’d with all the Virtue and Innocence that can be wish’d for in a Golden Age; from thence to expose the Unreasonableness and Folly of those, that desirous of being an opulent and flourishing People, and wonderfully greedy after all the Benefits they can receive as such, are yet always murmuring at and exclaiming against those Vices and Inconveniences, that from the Beginning of the World to this present Day, have been inseparable from all Kingdoms and States that ever were fam’d for Strength, Riches, and Politeness, at the same time."
May 17, 2011 | www.zerohedge.com
The most profitable strategy of Q1 is shaping up to be, not surprisingly to Zero Hedge readers, identifying and shorting Chinese fraud stocks. As one of the premier hunters of reverse merger fraud, Kerrisdale Capital, notes, it generated an unbelievable 89.1% return gross of fees and 73.2% net, beating the performance of the S&P by about 68%. Since inception, the fund is up 299.5% net of fees and 405.6% gross of fees. Kerrisdale notes: "As one of the first funds to expose scams within the U.S.-listed Chinese reverse merger universe, we benefited from our intimate knowledge of the sector. Most of the frauds exposed this quarter contributed to our returns in some shape or form, as did equity declines in many Chinese fraudcaps that were not exposed." Indeed, as we predicted back in November 2010, Chinese fraud hunting would soon be a pervasive and very profitable strategy. And since neither NYSE, nor Nasdaq, and certainly not the SEC cares one bit about investment integrity, we anticipate many more profitable days for those who focus purely on isolating market fraud. "The Chinese “fraudcap” space imploded this quarter. Chinese reverse merger stock scams were down anywhere from 10% to 80%, with many stocks down 50%+. On average, 1-2 frauds were exposed per week, with long, detailed reports put out by a wide variety of research firms, including Muddy Waters LLC, Glaucus Research, Citron Research, etc." Don't worry: there is plenty of it to go around.
May 10, 2011 | zerohedge.com
Only a fool assumes that they can beat a casino with luck, the casino doesn't run on a scam or tomfoolery, a casino understands the math in it's favor. When someone figures out the math and the holes in the math (and gains by it) the casino uses is when the person become persona non-grata.
The best place to be is never enter the casino and rob the participants and the owners on the way in and the way out. Or just sit back and watch.
May 11, 2011 | zerohedge.com
The Snakes are now eating each other..When theres nobody left in the casino they have to gamble with each other..
We are unwinding a bit like 2008. Energy bubble pops, then equities go down, and a bank blows up. So who will be the bank that blows up?
May 10, 2011 |dailyreckoning.com
What a wild week it was! Last week, the US bumped off Osama bin Laden. Silver collapsed. Unemployment looked terrible on Thursday…and better on Friday.
Stocks looked like they were in trouble…but then seemed to stabilize by week’s end.
And President Obama suddenly became The Decider.
What do you make of it? Or, a more practical question, if you’ve got money to invest, what do you do with it?
On Friday, gold closed at $1,491 – about 5% below its all-time high. Buy it now? Or commodities, when they too seem to be coming off record highs? Oil was down 10% last week. Buy stocks – when all the evidence shows that they are vulnerable to a big downswing…and will probably produce sub-par returns for many years?
What’s the alternative? Hold cash!
But wait. Who wants to hold dollars (or other paper currencies, for that matter) when inflation rates are rising…and the dollar is currently losing ground at the rate of more than 7% a year (according to MIT’s Billion Prices Project)?
A tough situation for investors. Damned if you do. Damned if you don’t.
05/10/2011 | zerohedge.com
And just like that, the short trap is set: following some sideways movement over the past several months, in which the market grotesquely, mockingly did not proceed in a straight line up, unlike the 8 month "Birinyi Ruler" period from August to March which extrapolated to about S&P 2,800 in 2 years, some (naive) investors speculated that the Fed may be losing control of the market and proceeded to short ridiculously overvalued stocks, that no longer reflect not only the economy on Earth but probably on any other life-supporting planet in the known and unknown universe, in dimensions from 3 through 10 or anything else reasonably allowed by Kaluza-Klein.
As a result, just announced short interest on the NYSE for the period ending April 29 has hit a fresh 2011 high, climbing to 13.094 billion shares from 13.05 billion .
Alas, this comes just as the Treasury will do everything, and we mean everything, in its power to ram the market from the s to the p orbital, trap all the shorts, force the custodians to pull every share on borrow there is, and generally to make selling stocks illegal, probably coupled with a few thousand margin hikes in everything from precious metals to tetrahydrocannabinol over the next month just to keep traders' eyes focused on the ball, simply so it can divest some of its tens of billions in shares of AIG stock and claim victory over the tin foil clad skeptics. As usual, those hoping that the neo-feudal stock market is fair and/or efficient are about to be KYed.
May 8, 2011 | The Big Picture
@BR, Sounds good, but for the average Joe, what readily accesssible tools do you have to keep track of these five points? Especially, how do you measure the dominant market trend and style drift when you live in Wasilla AK? “or loosing their edge”? Most investors have no idea who the fund manager is. Why not create a professional score card for these trends?
Great topic. Here’s one that I wrested with Barry. PIMCO TOTAL RETURN recently changed it’s guidelines to allow some equity securities. To me this is a big divergence in style and possibly due to the massive size of the fund or the increasing difficulty of its managers to outperform. Another one was the Vanguard Bond funds that for the last several years decided to engage in swaps which bring up the issue of counter-party risk and the question of whether short synthetic positions in bonds are the same as owning the underlying credit.
May 9th, 2011 at 12:16 am And if you are a 401K slave, then try even going to “cash”. For Fidelity, this gets dumped into a money-market account (not my definition of “cash”) which looses about 2% a year.
Las Vegas Tax Accountant:
May 9th, 2011 at 2:39 am Most people, sadly, don’t think long and hard about why they buy. They usually focus on the fund’s track records. A good track record is usually an indicator that the fund manager has already taken advantage of a certain niche. Once that niche has had a long period of high returns, those assets are usually overpriced.
The old saying is that “a mutual fund does well until you put your own money into it.”
I agree that investors need to have a process. Numerous studies show that the average mutual fund investor has returns far worse than the average return of mutual funds themselves. I believe that their buying strategies are almost as poorly thought out as their selling strategies. By chasing the hottest funds, they are doomed from the get-go.
I also agree that they do put in more effort when they buy, but that effort is rarely rational and effective.
Fire Your Mutual Fund Manager sounds melodramatic. Moving from one fund to another or to cash is just a choice no different from selling a stock. Do you fire the board and management when you sell stock? Of course not.
I have a relative who can’t take profits so he sees his equities rise and fall as the market rises and falls. He believes if it’s up today it will be up even more tomorrow and if it’s down it will come back. He’s over 60 and still working his ass off despite having/once having a large asset base. Not being able to sell is not limited to fund investors.
I have no problem with mutual funds. Like all investments they have advantages and disadvantages. The worse part is the minimum holding period. Once you buy, you’re usually locked in for a minimum of 30 days. It forces you to think, “where is the market likely to be in a month or more?” Most cash type funds do not have this 30 day minimum. Once you’ve met the minimum holding period you can sell without worrying about sales timing. There is no fee. You get end of day prices. Think of it like steering an ocean liner.
Funds are actively managed. ETFs are not. If a fund is a dog, sell it and buy into one that is moving. Is not drama queen stuff.
May 9th, 2011 at 12:20 pm “When Should You Fire Your Mutual Fund Manager – (ie. Exit a trade). The fact that most 401(k) and IRA owners don’t know about this basic element of investing, much less how to apply it, speaks volumes about the industry and how it really works.
BR: I would add to your list:
* When the fund’s rate of trading (buying/selling) exceeds the rate of change of profit/loss (churning & chasing returns driving up transaction fees). Some funds turn over their portfolios at 200%/year.
* When the fund has no stated “purge” strategy (methodology & timing) for removing non-performing holdings.
So much for all the conspiracy theories that Bill Gross was capitulating in his short position against US debt even as he continued to bash US fiscal and monetary policy. According to just released April data for the flagship Pimco $240 billion Total Return Fund (which saw a $4.2 billion increase in AUM in the month), Bill Gross actually added to his short position against US government debt, bringing total market value exposure to 4% of AUM or ($10) billion. More amazing is that on a Duration Weighted Exposure basis, the firm's Treasury short is 23%, read that again, 23%!
So much for that change in outlook. Additionally, Gross also sold another $8.3 billion in mortgage securities, bringing the April total to a nominal $57.8 billion. Spring cleaning at casa de Bill continued across all fixed corporate income as well, dropping the firm's exposure to IG by $1.6 billion and to HY by $2.1 billion.
The only two securities which saw a token increase was in Non-US developed markets and Emerging Markets, to $14.4 billion and $26.5 billion, respectively.
Yet the biggest shocker of all, is that Gross has now brought his cash position to an all time unprecedented high of $89.1 billion! That's right, PIMCO is charging a substantial asset management fee when 37% of all assets are in cash. One would think the mattress would cost far less. Either Gross is expecting a huge collapse in the bond market (so contrary to prevailing though), or this could well be the bet that buries the Allianz subsidiary.Goldman Hufs :
Can gross hypothetically buy American Silver Eagles while sticking to mandate of the fund or would the premium over what it could be used to purchase items in a store negate this option?
Quaderratic Probing:Atlas Shrieked :
He sees rates climbing and will buy US debt with the 89 billion. He will not buy silver or gold or copper or oil as he sees a USD back at 120 from 73 and in that case commodities will be trash. You me him ..... who has the trillion? He did not get there by being wrong............come to think of it the bond market is always right
Do you even know what happens to bond prices when rates climb? I hope you're saying he's waiting for rates to soar, and THEN step in and buy bonds. The only reason he can't buy tangible assets because it is not mandated. He's answered this question before.
"Hyperinflations offer monetary economists a natural experiment they can use to study the effects of money on the economy" -- we all know that bernanke is a scientist at heart and uses the experimental method
The "rich" are already eating each other. The debt is a fraud, their "wealth" is a fraud. Crash the fucking system already. The sooner we do, the sooner compensation will return to people who are actually worth a shit.unununium:
US revalued on the gold standard in 1933 to help stop spiraling deflation (about a 40% haircut and we saw no real inflation for years until we took part in WWII). At the end of the day all money is by writ, it's only worth what someone says it is or what someone will trade for it at a point in time (if you have your own army, you can play this game too). This includes all fiat, all fiat backed by anything (until they decide it isn't or change the rules), and all tradable physical goods including gold/silver (can never be certain of price or value based on sentiment). Life is easier once one accepts the uncerainty of it.Salah:
Bingo. Late 70's USA and Argentina 00's are much better proxies to the current situation than the Great Depression I.
It's amazing: Gross & PIMCO's actions exactly correlate to Charles Hugh Smith's prediction (see "the con of the decade"). Now I know for certain these guys ain't best-buds, but they do seem to connect on a deeper metaphysical level. Go figure.
PS: USA out of the Outer Space Treaty of 1967, let's go back to the Moon with full sovereignty over our ability to create wealth there.
From G.D.P. to private-sector payrolls, from business surveys to new claims for unemployment insurance, key economic indicators suggest that the recovery may be sputtering.
And it wasn’t much of a recovery to start with. Employment ... has grown no faster than the adult population. And the plight of the unemployed continues to worsen...
May 7, 2011 | naked capitalism
As John Maynard Kenyes, a member of the British Treasury department who quit the negotiations in disgust to write The Economic Consequences of the Peace, the treaty seized, along with coal-rich Alsace Lorriane, but any assets held by German nationals in these territories were expropriated. In addition:
The Allies ‘reserve the right to retain and liquidate all property, rights and interests belonging at the date of the coming into force of the present treaty to German nationals, or companies controlled by them, within their territories, colonies,possessions and protectorates, including territories ceded to them by the present treaty.
The provisions regarding German coal production were even more destructive. Keynes noted:
The provisions relating to coal and iron are more important in respect of their ultimate consequences on Germany’s internal industrial economy than for the money value immediately involved.
The German empire has been built more truly on coal and iron than on blood and iron. The skilled exploitation of the great coalfields of the Ruhr, Upper Silesia, and the Saar, alone made possible the development of the steel, chemical, and electrical industries which established her as the first industrial nation of continental Europe. One-third of Germany’s population lives in towns of more than 20,000 inhabitants, an industrial concentration which is only possible on a foundation of coal and iron. …It is only the extreme immoderation, and indeed technical impossibility, of the treaty’s demands which may save the situation in the long run….
Our hypothetical calculations… leave us with post-war German domestic requirements, on the basis of a prewar efficiency of railways and industry, of 110 million tons against an output not exceeding 100 million tons, of which 40 million tons are mortgaged to the Allies….Every million tons she is forced to export must be at the expense of closing down an industry….the surrender of the coal will destroy German industry.
Now what, pray tell, does this have to do with Ireland, and Geithner? Geithner is as doctrinaire and short-sighted a defender of bankers’ privileges as the Allied Powers were of their rights to make Germany pay for the costly and bloody Great War.
We’ve written about this before. It takes particular conditions to produce hyperinflation, not just money printing but also destruction of a lot of productive capacity. That’s what grabbing a lot of Germany’s coal output did, it killed the industries that depended on it.
So who are these foreign bondholders of Irish debt. Probably banks and investment firms mainly in Germany, Britain, and the US who are managing assets of high net worth individuals. It’s not like our pension or endowment funds would be investing overseas, at least hope not. Maybe some insurance companies. So Geithner is standing up for rich Americans, at the expense of Irish workers. Quelle surprise.
One of the largest holders of Irish debt now is reportedly the ECB, and by implication, the taxpayers of the eurozone, thanks to the ECB’s disingenously presented “Securities Markets Programme” (ie that is even without counting their potential exposure via repo collateral). In my opinion, it was always a mistake for the EU or eurozone to lend to troubled countries and thereby put relatively healthy countries increasingly at risk. It would be better to just subsidise their interest payments until they either get out of difficulty or give up the fight, as I explain in more detail here: http://reservedplace.blogspot.com/2011/04/principals-of-subsidisation.html
List of Irish Bond holders is supplied by Guido Fawkes ( reply to Three Wickets Q. So who are these foreign bondholders of Irish debt ?
Image from the blog dated oct.15. 2010,
After reading only a few sentences of this post I started getting queasy. There is some kind of personal problem, that I’m addicted to reading about the U.S. actions here and abroad to help the most destructive organized crime wave in our history. You are too kind Yves, yes the banks do make agreements that are clearly in their favor and break those agreements when circumstances change. But more disturbing is how they have purchased legal and regulatory authority to create laws, regulations and policy in their favor, that legitimize their actions. So even when individual agreements are incorrect, faulty or fraudulent, the courts and other legal authorities have little or no means to protect the citizen. For example, there is only three days to cancel a mortgage. That is not enough time for citizens who have been in many cases denied the facts about the true value of the properties they have purchased, and the legitimacy of the contract they are signing. Banks claim these mortgages should be iron clad, and to obtain any relief for these crappiest of deals the standards seem high,once well settled issues such as chain of title are now rewritten by banks, and citizens have few, weak options for relief. These are just a few example of how the system increasingly favors the banks, creditors and how the citizen must be prepared to fight these infinitely well funded entities with our measly incomes and representation to obtain any economic justice. When we are fighting our own leaders for equity its a problem (women and minorities are experienced in this area). When all the rules are in the banks favor its a problem. We are the next Russia.
“We are the next Russia.”
In soviet Russia, people had dascha, people owned apartment. In modern America, after collapse, people won’t eat, people won’t have place to live.
This is accurate – a comparison during the time of ‘Gorbey’ was that everyone in Russia basically was housed, a state priority. Not shit housing either, but a home everyone actually owned. In the US, we had examples of independant nation states in notorious Cabrini Green or Robert Taylor complexes, whole groups of people essentially isolated in access compared from the rest of society.
Soviet Russia also had a lot more inventory stockpiled than America. Given the lack of consumer culture and goods I imagine Soviets were also more resourceful as individuals, specifically in producing necessities out of scarce resources. Most people in America don’t know how to make what they need with their own hands and there really isn’t much on the shelves once the supply line stops.
Oh, and Soviets had vodka. That always helps in a situation like this.
Philip Pilkington :
The fact that the stockholders sided with the Euroboys is less surprising than you might think. It’s a class thing.
You see, there’s a certain class of people in Irish society who worship power. They consider themselves above and beyond the great unwashed that make up the rest of the population. They often identify with whoever they see as an outside power. Crude as it might be, these people used to be referred to as ‘West-Brits’ or ‘Castle Catholics’.
That’s where I think the mentality comes from: the colonial experience. But it runs deep (trust me, I’m related to some of these people…).
It is — and has always been — a very self-destructive class dynamic. And it continues to be through to this day. The psychologists used to call it ‘identification with the aggressor’ and I think that sums it up nicely. http://anse.rs/mwsrJh
A few years ago eXiledonline ran a very funny satirical piece that, among other things, dealt with this cultural phenomenon. Here it is: http://bit.ly/aEScoy
Incidentally — and just for some shameless self-promotion — the Versailles meme has been bumping around Ireland for a few months now. I think I might have started it off with a polemical piece I wrote to get the lefties in Ireland stirred up: http://bit.ly/b1YsEI
May 6, 2011 | WSJ
In its monthly report Friday on borrowing, the Federal Reserve also said overall consumer credit outstanding rose, up $6.02 billion to $2.426 trillion. The increase, the sixth in a row, was bigger than expected. Economists surveyed by Dow Jones Newswires had forecast a $4.8-billion rise in consumer debt during March.
The gains came amid mixed signals about the U.S. economy’s strength. For instance, government data Friday said private sector payrolls grew by the most in five years. And yet the same report showed the jobless rate rose to 9.0%.
On Wednesday, the Institute for Supply Management said U.S. service sector activity in April slowed to its weakest since last summer.
Lots of suckers out there! They keep piling on that debt just like the politicians keep feeding on all that free FED and treasury trough debt money. Economic slavery is a good thing .
William R. Barker:
U.S. consumers in March increased their credit-card debt for the second time since the financial crisis flared, giving a sign of hope… –
So let me get this straight; going into debt is… GOOD…???
Going into debt to pay… er… ordinary living expenses is… GOOD…???
Having to buy gas and groceries on… er… credit – at interest – is… GOOD…???
Spending going up because of inflation – getting less bang for the buck… this is GOOD…???
Folks… if this is “expert financial analysis” then give me reruns of Dallas so at least I can enjoy JR!
“$6.02 billion to $2.426 trillion. The increase, the sixth in a row, was bigger than expected.”
So are recent retail sales bumps simply a combination of inflation and new cc debt? Doesn’t sound like a “recovery summer” to me.
May 04, 2011 | Telegraph
One curious aspect of recent events in the Middle East and North Africa is how unwilling most commentators have been to join the dots between the Federal Reserve’s second phase of quantitative easing and these revolutions. I’m less queasy. Of course, all revolutions have many causes, and I don’t mean to belittle the achievements of brave non-violent protesters, desperate self-immolators, or saloon-car rifle-wielders. But, as a trigger and driver of these events, the Fed seems very clearly to have achieved more in the Arab world in six months than the Pentagon achieved in decades.
The case is clear and simple, but nonetheless powerful for that. QE2 drove up food prices, as we ought to have expected. Rapid food prices rises led to revolutions, as we ought to have expected. Cut away the other factors and complexities that are always there in revolutions, and the implication is clear.
When I did my degree in Statistics in the late 60s we had a "joke" exercise which was to prove that the number of births to unmarried girls was caused by the films on in cinemas.
It just so happened that the graph of illegitimate births rose at the same rate as attendances at cinemas - ergo - PROOF!
In fact, they were not at all related (as far as we could see) other than in an increasingly wealthy nation more people went to the cinema, and more people (not necessarily the same people) could afford to keep illegitimate children.
The principle of "joke" links does not seem to have changed!
Statistics are 97.2% more dangerous than Hitler in the wrong hands.
I honestly believe we need regulatory legislation for the ONS to give guidance and crack down on the misleading missuse of statistical information, not just in advertising, but in news programs and political debate as well. Joe Sixpack can easily be fooled by unqualified statistics.
The above analysis is missing vital elements. We already saw riots a few years ago globally because of rising food prices. Remember the rice hoarding in Thailand??? So the scene was already set.
Looking at the world economy as a whole one can see global boom/high demand for food, a new effect from biocrop demand , and finally an impact of global monetary easing which has been fueled by US, Eurozone mainly. The implication is clear..
ALL THREE factors at work. Disentangling them is not obvious.
Social networks and satellite TV, following years of abuse by police states, were the main cause of the revolutions.
I’m not sure of the statistical veracity of this linkage, though I’ve no doubt, as the article suggests, many a PhD thesis will be devoted thereto in the years to come. However, two points are worthy of further comment.
- Firstly, the destabilising influence of rising commodity prices on political systems (but particularly on harsh dictatorships)-the unfortunate metaphor (certainly with regard to the desert states) of ‘the straw that broke the camel’s back’ comes to mind-and its link back to QE. This seems to me to be an eminently verifiable postulate, though only through further careful research. Tunisia would be the obvious starting point for such research since the revolution there provided the catalyst for Egypt, and so on.
- The second point, however, is that we should urgently question whether the Fed can be trusted as the effective custodian of the world’s reserve currency. In my view, it cannot. As we all know, the USA has enormous debt and fiscal difficulties that continue to escalate, and the whimsical interventions of the Fed with its recurrent bouts of QE now place the world’s economy in almost permanent jeopardy. In other words, it seems to me that dollar dependence is now at the heart of global economic dislocation and this needs to be addressed as a matter of urgency.
Perhaps the way out of this painful dilemma is for commodities to be traded using a basket of currencies, a sort of global ecu equivalent. This is not a novel suggestion, but the sooner we get on with it, the better.Quote - 'One curious aspect of recent events in the Middle East and North Africa is how unwilling most commentators have been to join the dots between the Federal Reserve’s second phase of quantitative easing and these revolutions. I’m less queasy.'
Tyler Durden from zerohedge is less queasy as well. In fact he wasn't queasy at all when he wrote about this on 19/02/11 in an article entitled - 'Is Bernanke To Blame For The Rising Global Revolutionary Wave?'
Paul B. Farrell on 15/02/11 gives ten reasons why the Fed needs to be toppled, which is related to this issue, although it doesn't explicitly link the two things - rather it suggests that ultimately the Egyptian revolution will replicate itself in America, with the Fed playing the toppled 'dictator'.
Also on 15/02/11, the Guardian, in an article entitled 'World Bank Warns Of Soaring Food Price Dangers' concludes with a quote from Robert Zoellick (World Bank President) -
'...rising global food prices were an "aggravating factor" but not the main reason for violent protests that toppled leaders in Egypt and Tunisia.'
Finally, Max Keiser and Stacey Herbert put all of this together on 22/02/11 in their inimitable style on The Keiser Report -
I was reminded of this Keiser report when reading the Telegraph article above. I recommend this twice weekly program to anyone who (like myself) is not a financial genius, but wants to know the truth about what is really going on in the world. Yes, Max can be a bit of a clown, which puts some people off (personally I like it!), but he gets to the crux of the matter and puts deliberately confusing financial jargon into laymen's terms.
You can see his two thirty minute videos each week via the above link, or you can see them on freeview channel 85, which is Russia Today news channel.
Milestone 1: End of QE2
The Fed’s $600 billion QE2 program is scheduled to end in June. Will risk assets like stocks and commodities be able to stay up without the Fed’s steady medication that the market has come to rely on? Or is the system healthy enough to survive without life support?
There are bullish and bearish arguments.
- The bullish arguments: Everybody knows that QE2 is about to end, so it is “in the market” and therefore no big deal. The economic expansion is now entrenched enough that QE is no longer needed. The jobless rate is finally coming down, manufacturing surveys continue to show strength, and company earnings are robust. Finally, even though the Fed is about to stop easing, it seems unlikely that the Fed will actually tighten any time soon, either by letting its balance sheet shrink or by raising rates. We could get a period of “QE2 Lite,” where the Fed continues to reinvest maturing bonds, to give it some more time to assess things. I think only after a sustained period of strong payroll growth is the Fed likely to shrink its balance sheet (either through attrition or asset sales), let alone actually raise rates (which I believe might not happen until 2012).
- The bearish arguments:
- For one, a year ago we all knew that QE1 was ending in March 2010, yet that didn’t prevent the S&P 500 from correcting 17% that summer (although the end of QE1 was by no means the sole cause).
- Also, it’s an undeniable fact that since the March 2009 low, the rally in stocks and other risk assets has been almost perfectly correlated with an expansion in the Fed’s balance sheet. Therefore, the thesis that the market can stand on its own two feet could be something of a leap of faith (but I guess there is only one way to find out).
- Finally, the U.S. economy seems to be weakening somewhat, just as it did a year ago, judging by the decline in the Citigroup Economic Surprise Index (shown below), which looks at economic releases and compares them with expectations.
- When the data come in better than expected, the index rises; when data are weaker than expected, the index falls. The current decline shows a loss of economic momentum, and could affect bond yields as well.
- There’s also the ongoing weakness in home prices. At the same time, Europe is still spreading deflation via not only its fiscal austerity (old news) but now also a tightening in central bank policy (new news). Put all this together and one can conclude that the deflationary winds could blow once again, right at the same time that the Fed is about to stop easing.
Yes, the stock market has posted impressive gains since the idea of QE2 surfaced, with the Standard & Poor's 500 Index ($INX) up nearly 31% from its low last August. And that has pushed up household net worth by $2 trillion. The hope has been that this will translate into new spending and drive the economy forward.
But stock ownership is concentrated among the wealthy: On average, just 12% of households worth $100,000 or less own stocks and mutual fund shares outside their retirement plans -- a group that comprises 74% of the total population. While many more own shares through 401ks and IRAs, they're not in a position to easily tap that wealth for current spending.
At the same time, QE2 has pushed up borrowing costs, pressing down the prices of homes -- a much more widely held asset. The Case-Shiller Home Price Index started falling last summer as the idea of QE2 was floated, and it hasn't stopped since. The broad 20-city index now sits below 2009 levels.
This is a continuation of trends that have been in place since the recession ended in 2009. According to Credit Suisse equity strategist Douglas Cliggott, it suggests the improvement in net worth during the past two and half years "has been heavily skewed towards that relatively small part of the U.S. population that has significant equity holdings."
... ... ...Disappointing GDP
Just look at the first-quarter GDP growth numbers released last week. Most people just aren't spending.
The government reported that GDP growth slowed to 1.8% annualized from 3.1% in the fourth quarter -- a dramatic slowdown at a time when both QE2 and the government's payroll tax cut were in full effect. Indeed, Paul Ashworth at Capital Economics was disappointed enough to tell his clients that given all the tailwinds, he had "originally hoped for a lot more."
The drop was due mainly to bad weather, higher energy prices and a decline in consumer spending. The last two of these factors, at least, are set to continue with the budget fight under way and commodity prices still high. Consumption growth slowed to 2.7% from 4% previously -- mainly due to a drop of nearly 50% in spending on goods such as motor vehicles and groceries. Government consumption dropped 5.2%, which whacked 1.1% from overall GDP growth.
Unfortunately, while Fed Chairman Ben Bernanke insisted last week that any negative factors are "transitory," the data suggest otherwise. The Kansas City Fed Manufacturing Composite Index was just the latest regional factory survey to suggest production is slowing. And as I mentioned in my last column, the Citigroup U.S. Economic Surprise Index continues to decline to reflect this slowdown in manufacturing.
A flawed idea from the start
I can't say I'm surprised. Last November, I wrote that QE2 threatened a repeat of the "Great Inflation era" that started in 1964, lasted 20 years and didn't end until inflation was at 15% and interest rates at 22%. In "Hiking inflation won't help, Ben," I wrote:
"It seems strange to have this discussion more than a year after the recession officially ended, after corporate profits have returned to pre-recession peaks, after the economy has created 1.6 million new jobs and after personal income has moved to new highs."
There was no credit panic. Interest rates were not high. There was not a lack of liquidity. But the concern was that inflation was too low and job growth too slow. So the Fed decided to push another $600 billion worth of cheap cash into the financial system by buying back bonds, despite the fact that the banks were holding nearly a trillion dollars in "extra" cash in their vaults.
Bernanke himself, when he introduced the idea of QE2 at a central bank gathering in August, said the maximum benefit would be seen during a period of "economic and financial stress" via a lowering of borrowing costs for businesses and households. Only later -- after interest rates started rising instead of falling -- did he focus on the idea of raising stock prices as a major goal of QE2.
The decision-making was flawed.
As I wrote back then, inflation was pushing off its lows and moving higher. Bond market activity was suggesting a very low chance of sustained deflation, a deeply feared cycle of falling prices. And early indicators of economic growth were improving. Job growth -- while slow because of structural issues the Fed cannot solve -- was reaccelerating.
...the recent feverish rise of gold and silver has demonstrated that the Fed has dumped enough cheap cash into the system to allow speculators and momentum traders to run amok. And their escapades are damaging the real economy and the financial security of working Americans.
Last November, I spoke with an expert on the Fed, Allan Meltzer, who penned "A History of the Federal Reserve" and served in both the Kennedy and Reagan administrations.
I checked in with him again recently to see if he still thought the move was "foolish." His criticisms have only sharpened. He believes that the Fed's QE2 initiative was "unnecessary and mistaken" and agrees that it has resulted in more inflation, higher commodity prices and a devalued dollar.
... ... ...
Last week, I laid out the case for a period of underperformance in the stock market as the negative effects of QE2 filter into the economy. (Read Investors, it's time to run and hide") This looks likely to continue, since the program has another two months to run -- keeping pressure on food and fuel prices and consumer spending.
A surge of inflation is likely despite the fact that the unemployment rate is still close to 9% and factory output is well off of its pre-recession highs. Such is the nature of our economic malaise. Remember that high unemployment doesn't preclude higher inflation: Spain's unemployment stands at 21.3% while its inflation rate has increased to 3.8%.
Gary Shilling’s Insights Newsletter is always full of interesting market commentary. While he’s been excessively bearish on the equity market in recent years, Shilling has nailed the overall macro outlook including the weak economic outlook, bear market in housing and the debt deflation environment. His latest monthly newsletter contains some good macro investment themes for the investor who is not overly enthusiastic about the economic backdrop:Octavio Richetta
“The turmoil in the Middle East has introduced considerable volatility into security markets and threatens global oil suppliers and the worldwide economic recovery. So have the earthquake and tsunami in Japan, the prospective hard landing in China, the continuing sovereign debt crisis in the eurozone and the renewed drop in U.S. house prices. In this environment, we’re investing cautiously.
Treasury bonds (favorable) Treasurys have rallied as a safe haven in a sea of trouble. Slowing growth and looming deflation will also favor Treasurys. These are available through security brokers, banks and www.treasurydirect.gov as well as via ETFs and futures contracts. Standard & Poor’s warned of a possible downgrade of Treasurys if the deficit isn’t seriously addressed until after the 2012 election, but the market dismissed the threat promptly. After failing to call the collapses in Enron, Worldcom and subprime mortgages, rating agencies have little credibility. Inflation fears are nearly universal, but commodity inflation is unlikely to spawn a wage-price spiral given high unemployment and ample global capacity. Also, both agricultural and industrial commodity prices may have broken (see Commodities below).
Income-producing stocks (favorable) Included are utilities, drugs and telecoms with high, safe and rising dividends. Also, master limited partnerships. They can be purchased individually or through ETFs.
... ... ...
Commodities (unfavorable) The commodity bubble may be beginning to break as others join us in thinking about a hard landing in China, falling U.S. house prices and troubles in Japan and the eurozone. Oil may be the exception with Middle East uncertainty. Implement with stocks, ETFs and futures. We’re short copper and sugar.”
Shilling’s advice rarely pays out in the short term as he is always way too early in his forecasts but his big bearish calls have been right. His investment advice is dreadful if you have a short term, follow the trend oportunistic, trading orientation in your investments.
If you are patient and have nerves of steel, holding onto his recommendations may provide good to mixed results. e.g., he’s been calling por the euro’s demise virtually since the euro came out forecasting parity or even worse against the dollar. Even though this may turn out to be the case in the long term when, as u know, we’l all be dead. This is yet to occur.
At present, his BIG contrarian calls is being USD bullish and 30 year stripped treasuries bulish despite Qn (i.e., despite all the liquidity the fed has and may continue to create.
I greatly respect his macro forecasting skills so, I unlike JImmy Rogers, continue to mantain a signifcant usd position via stocks, cash, and long T bonds, in addition to the dollar bear/inflation hedge stuff (e.g, gold, gold miners, foreign equities). I am roughly following the permanent portfolio strategy. Not because I want to but because I don’t know any better in this environment and having retired at 46, capital preservation i a key consideration.
If I were to follow my animal spirits, I would put HALF my money into 30 year strips and have a ball if Shilling turns out to be right. The long T is so universally hated that the contrarian devil in me keeps pushing me to make the move. However, I also continuosly hear this loud little angel’s voice: ‘U greedy SBO! if U turn out yo be wrong, U’l be wiped out!
Apr 27, 2011 | MarketWatch
All across America, investors are talking about one thing and it's not the royal wedding. It has to do with the Federal Reserve, and the topic is this: What sort of opportunities might arise or disappear after Quantitative Easing II, or QE2, ends in June?
It's a good question and one that's been discussed "internally here for some time," said Larry Whistler, a CFA charterholder and president and chief investment officer of Nottingham Advisors.
"The short answer," he said, "is I'm not sure investors should be doing anything differently because of the imminent end of QE2."
Plenty of professional investors -- including Bill Gross, co-chief investment officer of PIMCO; Jeff Gundlach, manager of DoubleLine Total Return Fund (DBLTX, Trade); and Rick Rieder, chief investment officer of fixed income, fundamental portfolios for BlackRock -- are reportedly lined up on opposite sides of the trade. Strategas Research Partners recently noted that the Fed has purchased 70% of Treasury debt since November.
But that does prompt the question: Who will fill the void when the Fed stops buying bonds? "The answer, I believe, is the domestic investor, only at much higher rates," Whistler said. For his part, Whistler predicts that the 10-year U.S. Treasury will yield 4%-plus by midsummer. It's now trading at 3.3%-ish.
Of course, there's another view. "The opposite argument is that the end of Fed buying will cause the economic recovery to lose steam, the stock market to fall -- and interest rates to remain low because of that," Whistler said. "I understand that argument but don't subscribe to the theory."
Given the possibility that interest rates rise over the course of the summer, what should you do? "As with most things, it probably pays to hedge your bets while avoiding any radical moves that could prove costly if you're wrong," Whistler said.
With respect to Treasurys, Whistler suggests shortening your durations to avoid the risk of principal loss if rates rise. "For fixed-income investors, the trade-off right now is income versus principal protection," he said. "A duration inside three years will help you protect principal but will produce very little income."
Given the rock-and-hard place that many fixed-income investors are in, he said that one "hedge" strategy to consider is this: Construct a barbell, buying one-to-three-year maturities and seven-to-10-year maturities. "The yield curve is very steep so you are getting paid to move out a bit," he said. "That said, by leaving some money short-term, investors can take advantage of higher rates when they materialize."
As for investment ideas, Whistler is fond of investment-grade corporate bonds over Treasurys right now. For investors with less than $100,000 to invest, he suggested constructing a barbell with ETFs, buying iShares Barclays 1-3 Year Credit Bond Fund ETF (CSJ, Trade ) and/or the iShares Lehman 1-3 Year Treasury Bond (SHY, Trade ) on the short-end, and iShares IBoxx $ Investment Grade Corporate Bond fund (LQD, Trade ) or the PowerShares Build America Bond Portfolio (BAB, Trade ) on the long end.
As for municipal bonds, Whistler said, "they've already been hammered due to uncertainties and fears surrounding the creditworthiness of state and local governments."
But his best guess is that a sell-off in Treasurys might be slightly more muted for municipal bonds and that the "ratios may simply adjust closer to historical norms." Historically, 10-year municipal bonds yield about 85% of Treasurys and 30-year municipal bonds yield 92%. Right now, both 10-year and 30-year municipal bonds can be had at 100%-plus of Treasury yields, he said.
When it comes to investment ideas for municipal bonds, Whistler recommends sticking with "very high-quality essential-service bonds or strong state general-obligation bonds. And he prefers "defensive structures" that mature in 10 to 15 years but are callable in four to six years. "You get a little higher yield in exchange for selling the call option to the issuer and if rates rise, you benefit with a higher yield to maturity than a straight non-callable bond," Whistler said. He suggested avoiding states such as Illinois, Nevada and California "as fiscal uncertainty outweighs incremental yield at this point."
Plus, he advised against buying "insurance" on bonds and he advised against buying municipal ETFs "because the tracking error is too high."
Ultimately, when it comes to municipal bonds, Whistler suggested that you "focus on the underlying credit."
Whistler is also in the camp that says any massive sell-off in bonds would be met -- given that we have such an "activist Fed" -- by QE3 as "concerns over the housing market and the need to keep mortgage rates low are likely to trump common sense or what others might call market forces."
As for equities, Whistler is of the opinion that valuations are reasonable. It appears that the S&P 500's operating earnings will hit $90 to $95 per share. Given that, Whistler said, interest rates could rise quite a bit -- by 100 to 150 basis points or 1 to 1.5 percentage points "before they start jeopardizing corporate earnings or price-to-earnings multiples."
So what stocks look appealing? From his vantage point, Whistler said he's fond of U.S. high quality stocks, the sort that can be found in Vanguard Dividend Appreciation fund (VIG, Trade ) , the iShares S&P 100 index fund (OEF, Trade ), the SPDR S&P Dividend ETF (SDY, Trade ), the Jensen Portfolio (JENSX, Trade).
He also likes Wal-Mart Stores Inc. (WMT, Trade ) , Abbott Laboratories (ABT, Trade ), International Business Machines Corp. (IBM, Trade ), Johnson & Johnson (JNJ, Trade ), and Coca-Cola Co. (KO, Trade ). These are companies with great balance sheets, attractive valuations and global franchises, Whistler said.
Whistler noted that small- and mid-cap stocks have outperformed large-cap stocks recently but when the "free lunch" is over -- when low interest rates are gone -- those sectors should underperform, he said.
Whistler also likes emerging-market equities, noting the greater long-term growth rates in countries such as Brazil, China, and India. Investment ideas: Vanguard Emerging Markets ETF (VWO, Trade ), iShares MSCI Emerging Markets Index (EEM, Trade ) and WisdomTree Emerging Markets Equity Income Index (DEM, Trade ).
As for what to do now given what the Fed may or may not do with QE2, Whistler advised against making any rash moves or market timing.
"This latest rally really began on the back of QE2 and the hope is that the economy has gained enough momentum over the past six to nine months that when it gets unwound, GDP can still expand at that 3% to 4% rate," he said.
"The bottom line is, this is year three of the presidential cycle and the Fed has become a very political body. Risk assets have historically done very well in 'year threes' and I don't believe this year will be any different," he said.
"Despite all the hand-wringing, fear-mongering and sensational headlines, we believe most investors would be best served by sticking to their original long-term investment plan," Whistler said.
"While it never hurts to discuss and develop contingency plans or establish hedges, radical moves such as market-timing rarely work in the long-run."
Robert Powell is editor of Retirement Weekly, published by MarketWatch. Learn more about Retirement Weekly here. Follow his tweets here.
April 30, 2011 | naked capitalism
Maybe it is not a matter of manipulation as you assert, it is money tring to find a home, a “store of value.”
Is there any reason oil should be here at these price levels, no. However, in this market, whether it be a young retailer, retirees, hedge fund managers or even the Bill Gross’s of the world, where do you put your money now? Where do you find yield or something that isnt overpriced? where I ask?
With no velocity, weakening dollar, ZIRP, in a toppy market, with margin compression on the horizon ( said input costs rising, no real revenue and can’t pump up earnings with layoffs, that’s already been done)…there is nowhere to with your dollars.
Cheap money has to find a home somewhere; Bernanke is trying to get money moving again, but, instead, it is finding a home in OIL.
“Cheap money has to find a home somewhere; [the bernack] is trying to get money moving again, but, instead, it is finding a home in [FILL IN THE BLANK].”
right, no manipulation. nothing to see here. move along.
First, don’t mistake my comments as an endorsement of Bernanke, or Greenspan, for that matter.
Though, now I have a question….based on your response to my post. What do you propose should be done? What can be done from a monetary standpoint has been done.
Seriously, if you don’t like fed policy…then call your sen and congressman. Tell them to get off their a** and get down to the business of fiscal policy. Because, right now our cowardly politicians are playing power grab, and having verbal jousts in the media on trivial, and not so trivial matters for another day. The focus is on everything BUT the economy.
Brilliant how the fed chairmanship provides cover for 535 elected in this country is it not?
I am beginning to think Chris Whalen is right, when he suggests raising rates and not raising the debt ceiling.
Although, why not take that a step further. Not only should the Fed raise rates…they should do a full 100-150 basis points and announce they are selling 2-10yrs all at the same time.
You want to light a fire under the a**es of our politicians….that would do it, and right quick! Dow 5000, SP-to-500 anyone?
As we read yesterday in Naked Capitalism the Commodity Futures Trading Commission can limit the value of speculative oil contracts but won’t do so because it is dominated by Bush Republican appointees. Yet another everyday story of corruption by the “corporate little monarchs” of America.
Just to clarify: Obama and the Democrats have chosen to leave in place the domination of Bush Republican appointees because they agree with their crimes 100%.
The cartoon with the sheep is not a very good idea. Goats would be better – they’ll eat weeds, sheep are very picky eaters.
The question becomes, how long can you sustain Brent/WTI at these levels, before you send the economy over the precipice?
Another 1-2 months of crude at these levels, coupled with everything else hanging by a thread, and you can mark the peak of this current business cycle and print the expansion @ 24 months. Academics at NBER will tell us this 12 months from now right?
Gas prices track the euro.
Merely stating the obvious: as in, all Baptist preachers are charlatans.
I contend that you sir don’t even know what a charlatan is. A doctor, a banker, an economist, a politician, and folks like you can be a charlatans, but it’s hard for a purveyor of faith to be a charlatan being as faith is based on belief instead of knowledge.
World English Dictionary charlatan:
—n someone who professes knowledge or expertise, esp in medicine, that he or she does not have; quack
i’ll have to remember your “executive defense” next time i find myself in front of a judge/jury: “i believe i didn’t commit any crime, therefore i’m innocent.”
Oil prices are volatile! Voll-eh-TILE! Can’t think straight with all this g+ddamn volatility going on!
There was a time, when it wasn’t always such, known, as the Great Moderation (1986-2002). In those dreamy, halcyon days — when oil prices wafted, melodically along (flitting and floating always in the 20 to 40 dollar per barrel range) — an economist could wile away his unencumbered hours, tinkering, perhaps, with the margins of his models.
Not any more.
Times have changed, and my advice to economists: A viciously nasty and complex “new” economic paradigm has arisen, but don’t let the stress of thinking about it, eat you up. Ignore it. Simply pretend The New Nasty doesn’t exist, then go about your business — whatever your business happens to be.*
*If your business entails making money peddling the same advice to others that I just peddled to you, then bravo, sir, you’ve figured it out, and I dare say, you will become, if you haven’t already, a well-to-do peddler indeed.
Gas in the U.S. is still cheap. Most ‘developed’ nations pay significantly more – often WAY more – for gas of all types, and they continue to function just fine. High gas prices may eventually force some semblance of efficiency that capitalism never bothered to get around to.
It’s just a shame that we didn’t get around to that efficiency back when oil was still plentiful. Imagine how much oil would be left in Texas today if…
dude! it’s frickin relative! most ‘developed’ nations pay significantly LESS – often WAY less – for medical care of all types. are you that narrow minded that you take ONE commodity as a guage for a whole standard of living?
Cool, there’s lots of flexibility then. So what’s the problem? Oh yeah, that feline below with has delusions of primate-hood.
Another important difference is the nature of urban planning: sprawling suburbs and big box stores or tight urban and rural communities where residences are near employment and commerce. Does a nation eat what it grows, or does it export it and import other food instead? I think there are plenty of factors more directly relavent to gas price dependency than health costs, but I get your point.
Then there’s this sort of thing that fatcat will get a self-indulgent chuckle out of.
Fat Cat here, so listen up little chumps:
You wanted to drive your fat asses in your gigantic 8 cylinder SUVs while blasting your air conditioner on maximum, you had better get ready to pay up what I demand for MY gasoline. $4 today, $5 next week, and $20 next year. You are a nation of entitled fat slobs addicted to luxury, and I will decide the price you may ME for providing that lifestyle. Is that clear?!
February 23, 2011 | naked capitalism
Mickey Marzick in Akron, Ohio:
The fundamental assumption underlying “privatization” is that the private sector is inherently more efficient than the public sector. This belief is so ingrained in Americans that it is rarely challenged or subjected to intense scrutiny.
What is meant by “efficiency” is also rarely examined. Least amount of input for maximum amount of output is deficient when “externalities” are factored into the equation. Is the ability of a company to raise prices because it has a virtual monopoly on a given good/commodity – parking [limited space at an airport], for example – EFFICIENT if there is no other competitor against which to measure/evaluate this service? There may be “competitive bidding” at the outset but as time wears on the winning bidder tends to lock out all other competitors and erect barriers to entry that deter new entrants/competitors. Is this the result/fault of government or simply the result of more efficient business practices?
The size of an organization – small versus large – also has to be considered. To assume that the large global bureaucracies required to run a transnational corporation are inherently more efficient than that of a comparable government bureaucracy requires examination. BP’s approach to safety, subcontracting, etc, as opposed to the practices of STATOIL and/or PETROBRAS might suggest a completely different story.
Merely because an “order” comes down from the top doesn’t mean that its ultimate implementation is what was intended at the outset. This dilution of authority is inherent to any organization and increases with size. One might be able to “manage” an organization with a spreadsheet, but running it on a day-to-day basis with that spreadsheet and for how long remains to be seen. The tendency for a department to be created and then exist long after its original purpose/goal has been achieved or superseded is not confined to government bureaucracies. Sunset laws and zero-based budgeting could be introduced into many a large corporation becasue of goal displacement and the “resistance” would be fierce!
Likewise, the tasks of government and those of business are different in spite of what adherents of privatization – running government as a business – would suggest. Are crucial safety services like police and fire to be allocated on the basis of ability to pay? “911 is a joke” implies that this is the case in poorer neighborhoods more than it is elsewhere. Much like funding schools with property taxes. Is it any wonder why students in wealthier districts tend to go on to university more than their peers in poorer districts.… Quelle surprise! It’s a self-fulfilling prophecy and has become institutionalized in this country and not necessarily because these students in the former are inherently more intelligent. But it’s automatically assumed that a “private education” is better than one received at a public institution. For what is the question?
“Privatization” has been sold to the American public as a panacea without any serious consideration of the fundamental premises underlying it. Of course, less government and deregulation were sold as well and the results have been “mixed” depending on where one sits in the audience. But we clamor for more of the same… WHY?
DownSouth9:58 am Mickey,Mickey Marzick in Akron, Ohio
I’m not sure the efficiency argument is the one that resonates most with the public. Perhaps the more salient argument is the one articulated by Milton Friedman in his book Capitalism and Freedom. As Greg Grandin explains in The Road from Serfdom:
More than his monetarist theorems, this equation of “capitalism and freedom” was his greatest contribution to the rehabilitation of conservatism in the 1970s. Where pre-New Deal conservatives positioned themselves in defense of social hierarchy, privilege, and order, post-WWII conservatives instead celebrated the free market as a venue of creativity and liberty. Such a formulation today stands at the heart of the conservative movement, having been accepted as commonsense by mainline politicians and opinion makers. It is likewise enshrined in Bush’s National Security Strategy, which mentions “economic freedom” more than twice as many times as it does “political freedom.”
Friedman was a master purveyor of impartial truths and gross simplifications. In The Moral Dimension Amitai Etzioni describes the analysis that is necessary to get past Friedman’s half-truths and distortions:
To develop a workable conception of competition, one must move beyond the conceptual opposition between “free competition” and “government intervention,” which implies that all interventions are by a government, that all interventions are injurious, and that unshackled competition can be sustainable. Dichotomies are the curse of intellectual and scholarly discourse. Typical is the notion that competition is “voluntary” and hence “good” (disregarding that most exchanges occur among non-equals in economic and social, and political power, hence are partially coerced), and that government is “coercive” and hence “bad” (disregarding that the government is often persuasive or uses economic incentives rather than force and that the capsule is only partially governmental). Competition, like rationality, ought to be treated as a differentiating concept; the question is what levels of competition (especially as measured by the scope of activities it encompasses) are efficient, and in line with one’s values.
Friedman’s defactualized world is part and parcel of neoclassical economic dogma. Here’s Etzioni again:
[T]he neoclassical literature on the subject focuses almost exclusively on intra-economic, and not on political, means for gaining monopolistic profits. In short, to understand the transactions within the economy one must understand its inner political structure—-the power that various economic actors have over one another because they are able, more effectively than other actors, to mobilize the government to help them in their intramarket relations with others.
In the neoclassical paradigm there is no room for the concept of power. Says Stigler (1968, p. 181): “The essence of perfect competition is…the utter dispersion of power.” He adds that power is “annihilated…just as a gallon of water is effectively annihilated if it is spread over a thousand acres.”
I think Hannah Arendt hits upon another gaping hole in classical economic theory, and that is that it does not recognize the power of necessity—-the necessity for food, shelter and clothing—-as a motivating force of human behavior. Here’s how she put it in On Revolution:
Poverty is more than deprivation, it is a state of constant want and acute misery whose ignominy consists in its dehumanizing force; poverty is abject because it puts men under the absolute dictate of their bodies, that is, under the absolute dictate of necessity as all men know it from their most intimate experience…
For the liberation of the labourers in the initial stages of the Industrial Revolution was indeed to some extent contradictory: it had liberated them from their masters only to put them under a stronger taskmaster, their daily needs and wants, the force, in other words with which necessity drives and compels men and which is more compelling than violence.
The U.S. criminal justice system and Friedman and Hayek’s trek down to Chile to throw their unbridled support behind the murdering dictatorship of Augusto Pinochet serve as showcases for just how morally and intellectually the “capitalism and freedom” formulation is. Unbridled capitalism a la Hayek and Friedman is a formula for authoritarian police states, not for freedom.11:18 am DownSouth,DownSouth
I don’t necessarily disagree with you but how one views “capitalism and freedom” may be dependent on one’s age, generation, region, and education. As a child growing up in NE Ohio during the 1950s, capitalism tempered by strong industrial unions was part and parcel of freedom – from fear and want! And government was viewed much more positively. But this was after the sit down strikes and goon violence had largely ceased. I suspect that when the government was seen as in bed allied with capital that “Capitalism and freedom” had a much different meaning to factory workers in Akron or Detroit or Pittsburgh or coal miners in West Virginia and Pennsylvania. Their everyday experience would have found Friedman’s fairy tale a bit of a hoot…
My grandfather, who started working in the coal mines of PA at age 13, never saw “capitalism and freedom” as identical twins. He would tell us of how during strikes, miners would be evicted, etc – if not worse. That life in a coal company town did not mean freedom to him… It was brute force against brute force.
My father and his peers may have subscribed to the “capitalism and freedom” picture you describe because they had begun to enjoy some of the fruits of their labor. But government intervention was not a dirty word to either my grandfather or father. The former used to rant about strip mining way before government did anything about it. Allowing the coal companies to despoil the land was capitalism but had little to do with freedom.
When seen from my grandfather’s hirotical perspective, this “capitalism and freedom” view is more postwar and has to be seen within the context of the Cold War. For Communism/Socialism were juxtaposed as the antithesis of both capitalism and freedom. It was either or – a bipolar world. And this perhaps is what gave rise to the view that government intervention is “creeping socialism” and by extension, an infringement on freedom – political and economic. And there was simply no debate that capitalism was more efficient than communism. But the rationale for capitalism was predicated on the assumption that the efficient allocation of scarce resources is maximized and the resultant material abundance/production results in freedom from want – the ultimate proof of the pudding, right? But in return for the latter, other more “esoteric” freedoms might have to be sacrificed. [Maslow’s hierarchy of needs comes to mind…]
If one asked persons who worked on the construction of Hoover Dam or the TVA, I suspect their perceptions of government would differ from Milton Friedman’s simplistic “capitalism and freedom” formulation as well. Most Americans have been brainwashed into believing that “capitalism” is good and guvmint’ is bad. And the dumbing down and antigovernment/deregulatory drift of the past 40 years has made this view sacrosanct as the 11th Commandment! The financial crisis/meltdown is the guvmint’s fault and more of the latter threatens both “capitalism and freedom” because it so inefficient…11:40 am Mickey Marzick in Akron, Ohio said: “But the rationale for capitalism was predicated on the assumption that the efficient allocation of scarce resources is maximized and the resultant material abundance/production results in freedom from want – the ultimate proof of the pudding, right?”Tao Jonesing
I think that capitalism takes a lot of credit where credit isn’t due.
The theologian Reinhold Niebuhr, in The Irony of American History makes this observation:
We have forgotten to what degree the wealth of our natural resources and the fortuitous circumstances that we conquered a continent just when the advancement of technics made it possible to organize that continent into a single political and economic unit, lay at the foundation of our prosperity.
Hannah Arendt comes to a similar conclusion in On Revoluton:
Wealth and economic well-being, we have asserted, are the fruits of freedom, while we should have been the first to know that this kind of ‘happiness’ was the blessing of America prior to the Revolution, and that its cause was natural abundance under ‘mild government’, and neither political freedom nor the unchained, unbridled ‘private initiative’ of capitalism, which in the absence of natural wealth has led everywhere to unhappiness and mass poverty.
I think the only explanation as to why the “capitalism and freedom” fiction has persisted is that it serves the constellation of neo-liberal, neo-conservative, and neo-imperialist interests.11:31 am @Mickey,charlie
We need to distinguish between the sale of public assets and the outsourcing of public services to private firms.
The sale of public assets has nothing to do with efficiency, it has to do with raising cash. The problem is that many public assets (e.g., utilities, airports and public transportation) are natural monopolies that are actually more efficient economically in the hands of the public sector, which is not motivated by profit. When you privatize natural monopolies, you get rent-seeking, and prices rise as the new owner lards on new fees because it can and the public has nowhere else to go.
The outsourcing of public services to private firms can be problematic, but not always and usually not in the same way. This goes back to your question of what is efficiency? When a state or local government outsources its public services to a nominally more efficient private firm located in another state, you have greatly diminished the economic efficiency of those state and local tax dollars spent because they no longer circulate in the state and local economy, which means they’re not subject to state and local taxes. The most economically efficient use of state and local tax dollars is in employing (directly or indirectly) state and local residents, who tend to spend most of their money locally.8:39 am I’m all for efficiency. And yes, as an American I do default to a “private” is better than “public” model.liberal
However, let’s not focus on workers for a second but management. Most public sector management types are beyond incompetent. They couldn’t make it in a private MBA program (which isn’t much of a bar) and probably couldn’t manage your local McDonalds. I’m talking transit, hospitals, airports, etc.
I’d posit that is it management that is more of a problem with provision of pubic goods than the workers. Private management? Well, GM wasn’t too hot either.
Another default position is monopoly. Far too often it is better to look at this from anti-trust than frame it as public/private.
What I which Yves would talk about more is the finance deals for these infrastructure sales. Why is it a good idea for MS to issue 100 years bonds to chicago parking, or 40 year bonds, while it isn’t a good idea for a public entity to do the same?
Transurban, another Oz company, has found a new US speciality: getting infrastructure deals with public money. Look at the 495 beltway. Guess who joined their board: Rodney Slater. And look at where Mary Peters goes.
Two final points:
1. Woud it make sense to fund a cadre of top-notch civil servants in the US that run public institutions? I’m not saying federal — I’m saying these folks could run local, state and federal institutions and even be assigned out to non-profits.
2. Much of the financing is directly related to LEVELS of government. Take Chicago, where you probably have 200+ government entities issuing debt on a regular basis.8:45 am Far too often it is better to look at this from anti-trust than frame it as public/private.attempter
Many of the things provided are more or less natural monopolies. Like airports and major roads.
Thus, they generate economic rent. It’s fine if a private sector company manages the asset, only if government retains the rent.
Re public sector employees, my experience dealing with them at work is that the best solution would be to drastically increase both their pay, and what’s expected of them. There are support staff where I work where one person paid twice as much could replace five of them. The support staff where my wife works (both Federal installations) are equally bad, also at low salaries.10:23 am as an American I do default to a “private” is better than “public” model.DownSouth
That’s a non-sequitur.
What’s your historical rationale for that default?
The American Revolution was among other things anti-corporate and anti-monopoly, while it’s clear that the Constitution itself intended for the model to be public or private, depending on what best contributed to the general welfare. The Constitution obviously also intended for corporations to remain severely constrained.
So it’s historically false to say Americanism necessarily prefers private over public models, and one shouldn’t repeat that later-conceived ideological lie.11:19 am charlie asks: “Would it make sense to fund a cadre of top-notch civil servants in the US that run public institutions?”Tao Jonesing
The short answer: No!
This is the sort of utopian, elitist solution put forth first by W.E.B. Du Bois and later by Paul Samuelson. As Cornel West wrote in Race Matters:
The Enlightenment worldview held by Du Bois is ultimately inadequate, and, in many ways, antiquated, for our time. The tragic plight and absurd predicament of Africans here and abroad requires a more profound interpretation of the human condition — one that goes beyond the false dichotomies of expert knowledge vs. mass ignorance, individual autonomy vs. dogmatic authority, and self-mastery vs. intolerant tradition.
West goes on to conclude that without what he called “the correction from below,” there is no hope for the underclasses.11:41 am “The short answer: No!”moi
My sentiments exactly.
The technocracy has proven to be a failure. Experts are just as prone to human frailty as anybody else, and vesting more discretion in non-elected experts makes it that much more likely that we’ll have no say in what they do, even if what they do is absurd on its face.2:54 pm Define “efficiency.”Kate Sweat9:31 am Funny you should mention infrastructure giveaways… buried in the Wisconsin budget bill, Section 16.896 allows No-Bid sale or operation contracts for state-owned heating, cooling and power plants http://www.ginandtacos.com/2011/02/21/stand-and-deliver/.steelhead23
Koch Industries is interested. http://host.madison.com/ct/news/local/govt-and-politics/article_f3c998a8-3ebd-11e0-9ce0-001cc4c002e0.html
Koch was a major contributor to Walker’s campaign, most notably by buying tv ads (thanks, Citizens United!). They opened a branch office in Madison 2 weeks before the election.
PS thank you bery much for the post comparing public/private sector compensation.10:51 am I cannot overemphasize my concern about this issue. This privatization craze brings to mind Naomi Klein’s Shock Doctrine in which she details a neoliberal enslavement of the world, primarily the second and third worlds, through debt peonage. Now, it has come to the major economies of the globe. Deficit projections are not to be solved with new revenues, but by cutting services and selling infrastructure. I suppose Enron is not a big enough bugaboo to clearly demonstrate that profit maximization and public good are not subsets of one another. From where I sit, there is no overlap whatsoever.Sherparick
There is a related question I have asked on other blogs. What public assets are secure from creditors? That is, we all know that a number of states and municipalities are in danger of default on their debts. Are the public assets held by those states and municipalities accessible to creditors? Does anyone out there know? I much prefer getting my water from my local special district than from some foreign firm wishing to maximize its profits. (pardon my repeat of this query from yesterday – I really wish someone would answer).11:43 am I belive that one of the most undereported stories of the last ten years is how Corporate America has seen “privatization” of Government functions as huge moneymaker.sherparick
This is Rick Scott’s whole raison d’etre for his run for office in Florida, to make himself and his friends even richer by privatizing almost all state functions.
Meanwhile, apparently Governor Walker made some very revealing statements to someone he thought was David Koch, but who was not said Koch. http://www.balloon-juice.com/2011/02/23/the-beast-punks-walker/11:59 am I think the first thing to say about Niall Ferguson’s little article is that it contains the remarkable lie that the U.S. Government is “…Now, in the midst of the biggest crisis of American public finance since the Civil War, they simply collapse.” This statement simply does not make sense when people are practically giving the money to the Treasury interest free short term, and the long term rates are still near their lows, interest rates not seen since the Great Depression. http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldDave of Maryland
Meanwhile, Ferguson’s heroes, the Cameron/Osborne Government is sending the U.K. into a double dip recession. So despite Ferguson’s snide comments, Krugman and the Keysians have been proven right. See also Dean Baker’s columan in today’s Guardian. http://www.guardian.co.uk/commentisfree/cifamerica/2011/feb/22/economics-economy12:05 pm I’m surprised there hasn’t been more historical analysis.eyesoars
Maggie Thatcher sold vast swathes of UK in the 1980’s.
One of the underlying reasons behind Fidel Castro’s revolt was that in 1959 Cuban electric prices were the highest in the world.
Over in Iceland, the final gasp of the ancient regime was to sell off their geo-thermal power plants. This not three years ago.
And we all remember how false propaganda caused many states to sell off their state-owned electric power generation plants (in hopes of cheaper electricity!) not a dozen years ago. Enron, anyone?
Here in Maryland, two or three years ago the day came when electric rates virtually doubled. They had been stable for ten years, dating back to when the state gave away its power plants. Yet still the lines blow down with every passing windstorm. There are no plans to bury cable, which has been blowing in the breeze, one way or another, for more than a century.12:54 pm ISTR water riots in Bolivia in 2000 after the country’s water supplies were privatized. Didn’t make the news much up here in the U.S.Cedric Regula
Then there was Enron’s rent-seeking in California and elsewhere after Bush I deregulated the utilities as his last act in office.
And weren’t there were some shenanigans in Ohio a while back, where the governor resisted pressure to privatize utilities and found himself put on the street by the monied interests?2:00 pm There seems to be some misunderstanding here what Enron was about. Someone basically had a good idea and handed it to a bunch of crooks to implement, and voila, the crooks figured out how to do something bad with it.Moopheus
The basic idea was to create a traded electricity market so private sector utilities (or public, if we still got any) that had excess supply, short term or otherwise, could sell it to the utilities that may need it.
This is efficient use of existing capacity, but at least as important it makes planning new capacity much easier. Since takes 6 years or so to go from planning to being on line, utilities had to forecast demand that far out. Difficult and inaccurate. Then the new power comes in big chunks, a typical plant is 550MW and usually at least two are built on a new site. And they cost billions. So if power can be sold outside the local grid, the transition of bringing new power on line is eased from a financial standpoint.
And the efficiencies may be realized by the consumer, because maybe the rate regulators won’t passed thru the cost of a brand new 1GW chunk of power being billed at half output.2:33 pm One of the main concerns I have about privatization is about access and protection of rights. A public road is available to all, but a private road might not be. I think that some people just hate the idea that there is public anything–roads, schools, records–not because of cost or efficiency but because at a deeper level it threatens their privilege. A public record means accountability (see MERS). A public school means opportunity for the proles. A public space means a place where you can say what you want, where your constitutional rights will be most strongly enforced. It’s part and parcel with the efforts to weaken labor and regulation, the stagnation of wages and reduction of social mobility, to eliminate the inheritance tax, and all of that–restore a permanent aristocracy where the oligarchs are above the law, and the res of us get squat.
April 30, 2011 | Economist's View
Look at it this way.
On the positive side: At least the next time around we probably won't have a libertarian follower of Ayn Rand as chairman of the Fed.
On the negative side: Of course, this assumes that a Republican Congress and President will allow us to keep the Office of Financial Research. It's more likely that during the next bubble a bipartisan majority will de-fund the OFR because we've achieved a new economic paradigm that ensures permanent growth (without inflation, and only 12% unemployment) and that doesn't require facts to support it. And anyway, we need (finally!) to worry about the deficit, which has reached one gazillion dollars.
While I can understand the desire of a professional economist to develop some kind of mechanism for identifying what one might call instability in the economic landscape, I wonder about the implications for action and even the extent of possible acceptance.
Is it really possible to cut off an essentially political debate by announcing some number, however carefully calculated, which implies instability? And is it likely that the economics profession would accept any such indicator as a body, or would such an indicator simply become a bone of contention among competing schools of thought?
To amplify my second point, we have seen over the last couple of years tremendous debate between "fresh-water" and "salt-water" economists over basic issues in economics. Each side has anathematised the other for supposed professional shortcomings. This struggle has been fought over fundamental beliefs about economic processes, issues much more basic and longstanding than any new "instability indicator" would be. Yet there is still no agreement. Why would we expect agreement over an instability indicator?
On the other hand the two sides agree about quite a lot. They agree over the primacy of capital over all other factors of production. They agree about the financialization of non-financial sectors and the beneficial results of merger and acquisition, outsourcing, offshoring, and globalization with only occasional deference to social downsides disregarding the negative effects of consolidation such as reduced competition, operational disruption, and other opportunity costs. Theoretical economic efficiency trumps reality.
The dot-com and real estate credit bubbles were readily observable in reality. They did not need to be modeled to be assessed because they existed in plain sight. Bubbles eventually burst. The downsides were not illusive. Bursting bubbles induce rapidly falling asset price. To economists they are fun to watch and speculate on, but pre-emptive action is politically untenable. To interfere would be to risk be blamed for triggering a collapse as well as prematurely stopping the music.
The worst crime by economists is the denial that the credit crunch was not obvious. What was not obvious was the extent of the over-leverage and that mostly out of a lack of curiousity. Anyone could see the crash coming, but few expected that Leaman and AIG (and some other investment banks) would be so deep in CDS obligations given the obvious risk. The junk bond nature of the CDO/MBS was obvious as bonds backed by any bubble, but the level of CDS bond insurance held by investors that did not hold the bonds on which the insurance was taken was only revealed by Mike Stathis (publicly in his 2006 book America's Financial Apocalypse) and a very few other investors.
The need for a better warning system is mostly a cover for the passive failings of regulators and economists.
It was clear that the Price to Rent ratio was whack in the early 2000s. Dean Baker and numerous others called bubble on this basis.
This suggests that targeting loans with regulatory policy aimed at keeping Price to Rent ratios under control would be useful. One area of research would be to determine what price to rent ration to target and regulatory steps to keep them there. Also, if there were times/locations where the ratio did not apply.
Another area of research is wealth inequality and BigG versus private investment. At what point does wealth inequality and too much investment capital start to drive bubbles rather than productive investments in domestic infrastructure?
Mark A. Sadowski:
I think this is key. When relative prices get out of whack a price bubble is under way. I claim I thought something was out of whack in housing prices as early as 2001. I have no proof of course. I was a high school math teacher with an interest in econ then. I reentered school in 2005 to study economics. I'm defending my PhD dissertation soon.
Now, this doesn't mean financial crises are inevitable under such circumstances. The Fed should have been prepared to provide extraordinary monetary stimulus. But then it isn't willing to do very much even now, so KYAG.
As did the ratio of median price to median household income. When people are buying houses that they can't afford in the long term, or that they can't rent at a profit, something bad will eventually happen.
When compensation and profits in the financial sector are out of whack with other parts of the economy at the same time, it's a pointer at where the fundamental problem lies.
My brother is a developer... He said that when he went to Dublin, Ireland and looked at the building cranes in the sky.. He noted just from the sheer number of cranes that something was wrong... There were just too many...
Instincts... instincts... instincts..
I think the whole pareto efficiency idea has gone too far... it makes no statement about the overall well-being of society.
Regulation... regulation... regulation...
Maintain good regulation and these things won't happen.
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