Saturday, July 18, 2015

Points to ponder on Greece‏

Currency value is related to the balance-of-trade.
Balance-of-trade is a country's economic output versus it's imports.
High exports and low imports indicate a healthy economy, strengthening currency value.
High exports may lead to occasional borrowing, as countries with surplus cash make this cash available.
Sometimes good to borrow, if it leads to investment in capital expenditures.

Example:  The US has ran a balance-of-trade (current account) deficit for most of it's history, with the exception only of 1991 (where it was merely balanced)  SOURCE: .

Countries were willing to lend to it at low interest rates because it was seen as having the potential to turn that cash into exportable product.

Greece joins the Eurozone, falsely propping-up it's currency by associating it with stronger exporting countries like Germany, but giving them a better interest-rate.  This allowed them to borrow more, increasing the import of cash, but not necessarily ensuring that  this money was put towards production of hard (and preferably exportable) goods. 

The single largest consumer in any economy is the Government, spending on the military, healthcare, infrastructure, plants and factories, and etc.  In Reagan's words, it was supposed to "trickle-down." (Reagan favored deregulation of banks, so than Bankers could get really rich and that would make laborer's rich as they picked-up the falling crumbs, but that's another story.)

The Greek government wasn't spending that way, and lots of their spending went unreported...  They were giving it to other, unreported businesses, for example.

But the current media blames a higher labor cost - which means unions are lobbying for better wages for their citizens.  Or, it's a problem with tax-evasion, but as already discussed a lot of that had to be due to unreported businesses (which is the way Greeks have been doing business for centuries).

There also is the unmissable facts (if you look for them) about Greece:  It's economy has always been heavily centered around shipping.  The economic crisis of 2008 (A mainly US phenomenon) hit Greece HARD, as worldwide shipping dropped-off and has not recovered to previous levels yet. 

So borrowing isn't a bad thing, if it leads to investments that lead to production that leads to the repayment of the debt.  This is a virtuous cycle.  Again, this is the US cycle for the economy and has been for the last 50 years. 

Greece has been running a current-account deficit for years now, made essentially worse by the relative  low-interest afforded by the Euro.  Once their deficit was exposed and other country's investors got nervous about their ability to repay the loans, their interest-rate went up.  This is a vicious cycle.  This was evident in 2010 to economists. This was the first Greek bailout.

Interest rates were creeping-up in other countries, leading to fears of contagion.  This contagion was to be feared because now it was international investors that stood to lose.  International investors do not like to lose, so they demanded more security for a new round of loans, intended mainly to bail their own sorry asses out.  They initially tried to raise the interest rates but that just made matters worse by making the cycle more vicious.  So in came the IMF.  This wasn't a gift.  The troika wasn't givingg anything for free, but something had to be done about Portugal, Ireland and Spain's rising interest-rates, because the whole of the Eurozone economies are connected.

Greece agreed to austerity loans, in a shift of debt repayment that is rarely seen in Capitalism.  Greek people were forced to accept conditions as security to the loans, which were contracted by the banks, the government and the businesses.   Taxes were raised and pensions were slashed because the Government had to correct a fiscal imbalance - one that happens when the Government is spending more than its economy earns, fueled by their lack of control over a currency which they lost due to the adoption of the Euro...  There can't be any correction by the normal process of a money-supply system.  The largest lenders to Greece (France and Germany) are asking the Greeks to further sweeten the pot of security for their loans by asking for Greek public property to be given to them, so that they can sell those assets in private transactions.  The Greeks will own nothing at the end of this and they can see that coming.

Which brings me to the unavoidable issue of the Greek economy's contraction.  Raising the VAT, threatening pension-control, and tightening tax controls will all have their consequence on an informed consumer.  Raise the VAT, and luxury spending will shrink (as will all non-essential spending).  It will increase the black market.  Pension-controls will  make pensioners nervous, and they are a considerable force among spenders (they actually have money whereas parents don't.)  Tightening tax controls will drive business further underground, especially large business transactions which tend to have access to unreported transaction mechanisms.  All of this leads to further tax shrinkage, and lost jobs.

New bailout money.  Another loan of 130B Euro.

30% of Greeks now live under the poverty line.  1 in 5 can't meet their daily nutritional needs.

Since 2010, Private European banks have been able to ship-off a lot of Greek debt than they did previously.   The economies of Ireland, Spain and Portugal are much healthier.  There is much less chance of an all-out economic collapse of the Euro.  Leftism takes hold in Greece.  Then came the Mexican stand-off:  Who will blink first?  "No more austerity, no more bailout money:  It never worked in the first place (for reasons stated above)" say's the Syriza government.  Of course, the referendum was symbolic anyway since it was held on July 5th while the Troika had pulled their offer on June 30th...  Corrupt much, Mr. Tsipras?

He dodged responsibility for the very predictable liquidity crisis that followed.  That's the price ou pay for voting democratically and letting the world know just what the "people" think:  Economic sanctions that are immediate.  Capital flights are alright, that's just the way capital works so tough luck if it leaves the country seeking new opportunities.  But if you vote in a way that Capitalists disagree with, they'll ensure that no one has access to capital in order to protect their interests.  The Greek bank machines dispense only 20's, but the daily limit is $50...  So I guess they only get $40....  No one knew THAT was going to happen in all of the banking system, right?

Normally, what would happen if a country had a 25% unemployment rate, a shrinking economy, etc. Greece would just print more money, which would create inflation by devaluing the currency out there by dilution, but essentially lending the money to the Greek people based on their ability to tax it back out of them - but it CAN'T!  They are part of the Eurozone and are being told how much Greek money can be printed at any time by the European Central Bank.

The European Union was created to change the course of history as it had until then been known:  Constant strife and wars between nations as distinct as can be and have ever been seen.  At least that is how it was sold to those few people who had even a slight understanding of European history.  Mix pure capitalism with an opportunity to blend this into an overall historical narrative and you have?  I know, Hitler comes to mind, but maybe not as grotesque as that:  Capitalists overarching plan to eventually rule the world?  Maybe. 

You have an occasion where the temptation to pull the sheets over your eyes and be lulled by the promise of something better to come is very strong.  People were able to see then, and should now, that the promise of a united Europe is basically good for the strong economies of Europe, bad for the soft ones and that the strong can exit at any time, leaving the weak ones even more vulnerable because they were made softer, not stronger during their encounter with unity.

Monday, August 18, 2014

What Did I Just Agree To?

Are the terms of jurisdiction and dispute resolution enforceable?

Exhilirating.  Fascinating. Informative.  Binding.  Ubiquitously, terms which transfer most or all of the liability to the user are appearing at the bottom of such pages.  Responsibilities are being surreptitiously imposed upon the “user” of the internet.  To use a term incorrectly, the “browser.”  
Large, bulky, heavy and saturated with almost incomprehensible language, the consumer is caught in a cross-sell whereby access to material is denied unless there is agreement to these “terms”.  A Quebec court has looked into the matter.

Users can feel relieved that such tactics are not new.   Principles of non-enforceability have been examined before, and the principles of unconscionable practice as well as contracts of adhesion are not new to the courts either.  What might be new is the volume of such situations to be examined.  Micheal Geists’s article, “Quebec court says no to eBay’s online contract”, ( explores this issue in the matter of jurisdiction.

Selecting a jurisdiction may well be the easiest way to ensure favorable treatment for the author, but it is also the most obvious deceit for the courts to rule upon.  If a transaction goes sour, the easiest way to avoid the possibility of dispute is to make the forum for dispute resolution inaccessible to the average website user.  Ebay’s principle offices are in California, and their terms had it that the laws of the user’s location may prevail, however any proceedings must take place in California.  This makes things easy for a giant like Ebay, which has offices all over the world but not so for the Quebec Students involved in a dispute with the giant, as described in the article.  A contract may be valid in form, but this does not meant it can’t be rejected on other grounds.

The case involved an online auction, which was terminated by Ebay prior to its conclusion.  The sellers sued Ebay in a Quebec court and argued jurisdiction since they were located in Quebec.  Ebay countered by noting terms of use stated that all disputes are to take place in California.  The court also noted that the clause was buried deep within pages of dense material with conditions stacking one on top of the other, so much so that the stipulations would require” very good eye sight and lots of patience and determination,”  to find the provision stipulating California as the forum for disputes.

Jurisdiction itself is not new to contracts, many having a clause that stipulates both parties have agreed on the laws to be utilized for interpreting the contract and agreeing to the jurisdiction of dispute, but mainly in the area of commercial contracts where it is presumed that all clauses have been negotiated.  In the arena of the consumer contract, this is relatively new ground.  This ruling runs counter to earlier cases, where deference to freedom of contract was upheld.

The desire of parties, the electronic merchants and the electronic consumer, to enter into commercial relations and the effectiveness and efficiency of e-commerce weighed heavily on these earlier decisions.  As the author notes, these were the concerns of an Ontario court in 1999.  The Quebec decision ”suggests that e-commerce is also dependant on fair contracts that grant a genuine ability to pursue legal action in the event of a dispute.”

Sunday, July 28, 2013

I'm not anti-Obama, I just love "President-speak"

I wanted to come out here, first of all, to tell you that Jay (Carney – White House Press Secretary) is prepared for all your questions and is very much looking forward to the session. The second thing is I want to let you know that over the next couple of weeks, there’s going to obviously be a whole range of issues -- immigration, economics, et cetera -- we'll try to arrange a fuller press conference to address your questions.

The reason I actually wanted to come out today is not to take questions, but to speak to an issue that obviously has gotten a lot of attention over the course of the last week -- the issue of the Trayvon Martin ruling. I gave a preliminary statement right after the ruling on Sunday. But watching the debate (demonstrations) over the course of the last week, I thought it might be useful for me to expand on my thoughts a little bit.

First of all, I want to make sure that, once again, I send my thoughts and prayers, as well as Michelle’s, to the family of Trayvon Martin, and to remark on the incredible grace and dignity with which they’ve dealt with the entire situation. I can only imagine what they’re going through, and it’s remarkable how they’ve handled it.

The second thing I want to say is to reiterate what I said on Sunday, which is there’s going to be a lot of arguments about the legal issues in the case -- I'll let all the legal analysts and talking heads address those issues. The judge conducted the trial in a professional manner. The prosecution and the defense made their arguments. The juries were properly instructed that in a case such as this reasonable doubt was relevant, and they rendered a verdict. And once the jury has spoken, that's how our system works. But I did want to just talk a little bit about context? and how people have responded to it and how people are feeling.

You know, when Trayvon Martin was first shot I said that this could have been my son. Another way of saying that is Trayvon Martin could have been me 35 years ago. (35 years ago, in 1978, Obama was on a scholarship attending the private preparatory school Punahou in Hawaii.  His mother was in graduate school earning her Phd in Anthropology.)  And when you think about why, in the African American community at least, there’s a lot of pain around what happened here, I think it’s important to recognize that the African American community is looking at this issue through a set of experiences and a history that doesn’t go away.

There are very few African American men in this country who haven't had the experience of being followed when they were shopping in a department store. That includes me. (Read that sentence again:  Obama is one of the men who haven’t had that experience.) There are very few African American men who haven't had the experience of walking across the street and hearing the locks click on the doors of cars. That happens? to me -- at least before I was a senator. There are very few African Americans who haven't had the experience of getting on an elevator and a woman clutching her purse nervously and holding her breath until she had a chance to get off. That happens often. (Not all the time, but often.  As it does to a lot of other people besides blacks.)

And I don't want to exaggerate this, but those sets of experiences inform (making it right, because that is the information available to them?) how the African American community interprets what happened one night in Florida. And it’s inescapable for people to bring those experiences to bear. (What does that mean?  It suggests that African Americans cannot reason this otherwise because their history clouds their judgment.)  The African American community is also knowledgeable that there is a history of racial disparities in the application of our criminal laws -- everything from the death penalty to enforcement of our drug laws. And that ends up having an impact in terms of how people interpret the case. (Another way of saying blacks are overrepresented at all levels of the justice system except those who make and enforce the laws.)

Now, this isn't to say that the African American community is naïve about the fact that African American young men are disproportionately involved in (soft language for victims of) the criminal justice system; that they’re disproportionately both victims and perpetrators of violence. It’s not to make excuses for that fact -- although black folks do interpret the reasons for that in a historical context. (More fuzzy language to express the idea that blacks have a bias or prejudice because of their history.) They understand that some of the violence that takes place in poor black neighborhoods around the country is born out of a very violent past in this country, and that the poverty and dysfunction that we see in those communities can be traced to a very difficult history. (Ghettoization, or the fact that when people are put in ghettoes, they tend not to care for their belongings, family values shrink, they become violent, etc.)

And so the fact that sometimes that’s unacknowledged adds to the frustration. And the fact that a lot of African American boys are painted with a broad brush and the excuse is given, well, there are these statistics out there that show that African American boys are more violent -- using that as an excuse to then see sons treated differently causes pain. (Bias is unacknowledged, this adds to Black’s frustration.  Statistics prove African American boys are more violent… but he doesn’t discredit the statistics? Black boys being treated unfairly and this causes more pain.)

I think the African American community is also not naïve in understanding that, statistically, somebody like Trayvon Martin was statistically more likely to be shot by a peer (another black boy) than he was by somebody else. So folks understand the challenges that exist for African American boys. But they get frustrated, I think, if they feel that there’s no context for it and that context is being denied.(?  Permit crime by constantly reminding yourself of the context, that context being that blacks are less fortunate because of the history of bigotry in the United States.)  And that all contributes I think to a sense that if a white male teen was involved in the same kind of scenario, that, from top to bottom, both the outcome and the aftermath might have been different.

Now, the question for me at least, and I think for a lot of folks, is where do we take this? How do we learn some lessons from this and move in a positive direction? I think it’s understandable that there have been demonstrations and vigils and protests, and some of that stuff is just going to have to work its way through, as long as it remains nonviolent. If I see any violence, then I will remind folks (I hate that word!) that that dishonors what happened to Trayvon Martin and his family. But beyond protests or vigils, the question is, are there some concrete things that we might be able to do.

I know that Eric Holder (Attorney General) is reviewing what happened down there, but I think it’s important for people to have some clear expectations here. Traditionally, these are issues of state and local government, the criminal code. And law enforcement is traditionally done at the state and local levels, not at the federal levels. (Obama was criticized in March by saying Trayvon would have looked like his son, and this, before the jury had rendered a verdict.  He narrowed it here to read that it could have been him, thus avoiding the implication that all brown-skinned boys are alike.)

That doesn’t mean, though, that as a nation we can’t do some things that I think would be productive. So let me just give a couple of specifics that I’m still bouncing around with my staff, so we’re not rolling out some five-point plan, but some areas where I think all of us could potentially focus.

Number one, precisely because law enforcement is often determined at the state and local level, I think it would be productive for the Justice Department, governors, mayors to work with law enforcement about training at the state and local levels in order to reduce the kind of mistrust in the system that sometimes currently exists. (Nothing new here.)

When I was in Illinois, I passed racial profiling legislation, and it actually did just two simple things. One, it collected data on traffic stops and the race of the person who was stopped. But the other thing was it resourced us training police departments across the state on how to think about potential racial bias and ways to further professionalize what they were doing.

And initially, the police departments across the state were resistant, but actually they came to recognize that if it was done in a fair, straightforward way that it would allow them to do their jobs better and communities would have more confidence in them and, in turn, be more helpful in applying the law. And obviously, law enforcement has got a very tough job. (He avoids telling us the rate of success, the results of the data compiled, etc.  He just compliments the “folks” in law enforcement who have a very tough job.)

So that’s one area where I think there are a lot of resources and best practices that could be brought to bear if state and local governments are receptive. And I think a lot of them would be. And let's figure out are there ways for us to push out that kind of training.

Along the same lines, I think it would be useful for us to examine some state and local laws to see if it -- if they are designed in such a way that they may encourage the kinds of altercations and confrontations and tragedies that we saw in the Florida case, rather than diffuse potential altercations. (Stand your ground.)

I know that there's been commentary about the fact that the "stand your ground" laws in Florida were not used as a defense in the case. On the other hand, if we're sending a message as a society in our communities that someone who is armed potentially has the right to use those firearms even if there's a way for them to exit from a situation, is that really going to be contributing to the kind of peace and security and order that we'd like to see? (Stand your ground laws are otherwise known as “Shoot to kill” laws.)

And for those who resist that idea that we should think about something like these "stand your ground" laws, I'd just ask people to consider, if Trayvon Martin was of age and armed, could he have stood his ground on that sidewalk? And do we actually think that he would have been justified in shooting Mr. Zimmerman who had followed him in a car because he felt threatened? And if the answer to that question is at least ambiguous, then it seems to me that we might want to examine those kinds of laws.

Number three -- and this is a long-term project -- we need to spend some time in thinking about how do we bolster and reinforce our African American boys. And this is something that Michelle and I talk a lot about. (Slips in a reference to his wife.  Unnecessary because it adds nothing to the argument.)  There are a lot of kids out there who need help who are getting a lot of negative reinforcement. And is there more that we can do to give them the sense that their country cares about them and values them and is willing to invest in them?

I'm not naïve about the prospects of some grand, new federal program. I'm not sure that that’s what we're talking about here. But I do recognize that as President, I've got some convening power, and there are a lot of good programs that are being done across the country on this front. And for us to be able to gather together business leaders and local elected officials and clergy and celebrities and athletes, and figure out how are we doing a better job helping young African American men feel that they're a full part of this society and that they've got pathways and avenues to succeed -- I think that would be a pretty good outcome from what was obviously a tragic situation. And we're going to spend some time working on that and thinking about that. (No answer given at all, just a very emotional presentation of the problem.)

And then, finally, I think it's going to be important for all of us to do some soul-searching. There has been talk about should we convene a conversation on race. I haven't seen that be particularly productive when politicians try to organize conversations. (Didn’t he just do that, a paragraph above?)  They end up being stilted and politicized, and folks are locked into the positions they already have. (O.k., he did that but here’s his alternative.) On the other hand, in families and churches and workplaces, there's the possibility that people are a little bit more honest, and at least you ask yourself your own questions about, am I wringing as much bias out of myself as I can? Am I judging people as much as I can, based on not the color of their skin, but the content of their character? (Very obvious quote from Martin Luther King, a necessity in a speech like this one.) That would, I think, be an appropriate exercise in the wake of this tragedy.

And let me just leave you with a final thought that, as difficult and challenging as this whole episode has been for a lot of people, I don’t want us to lose sight that things are getting better. (Hope) Each successive generation seems to be making progress in changing attitudes when it comes to race. It doesn’t mean we’re in a post-racial society. It doesn’t mean that racism is eliminated. But when I talk to Malia and Sasha, and I listen to their friends and I seem them interact, they’re better than we are -- they’re better than we were -- on these issues. And that’s true in every community that I’ve visited all across the country.

And so we have to be vigilant and we have to work on these issues. And those of us in authority should be doing everything we can to encourage the better angels of our nature, as opposed to using these episodes to heighten divisions. But we should also have confidence that kids these days, I think, have more sense than we did back then, and certainly more than our parents did or our grandparents did; and that along this long, difficult journey, we’re becoming a more perfect union -- not a perfect union, but a more perfect union.

Thank you, guys.

Friday, January 07, 2011

Christmas Thoughts - Written in 2008

On this special day of celebration, let us take a moment to remember all of the special characters and traditions that brought this day into being.

First of which is the almighty God, the creator of all things and the essence of goodness.

Then there is Christ, the anointed one, who was presented to a great people, the Jews, to enrich their traditions and bring forward great peace!

Then, let us not forget Thomas Nast, the German American cartoonist who in 1863 began drawing an image of a jolly old fat man in a red suit with a black belt and white accoutrements at the ends of his clothes. And let us also not forget the very many advertisers who, by the 1920’s, had solidified this image of Nast’s into a popular cultural icon.

Let us also not forget the Dutch inhabitants of New York City. In an effort to return to their Dutch traditions after having their colony “swapped” by Holland for other territories; and wishing to express their non-English-based traditions, the Dutch reinvented their holy man, Sinterklaas, during the American War of Independence in an effort to distinguish him from the English patron saint of children, Saint Nicholas.

Let us not forget Sinterklaas himself, or the character that predates him by some 300years, Father Christmas. Pére Noël, as the French refer to him, was a symbol of holiday merrymaking and drunkenness in the 15th century. During that time there was great competition from that other festive time, the Epiphany. Of course, the Epiphany falls on January 6th, a tradition still held by the Eastern cultures.

So now let us not forget the Puritans, whose antipathy during the reformation, based on accusations of “popery” (the law that ensured that when a Roman Catholic died, his estate be divided equally amongst his sons, unless one of those sons converted to the Protestant faith, whereby he could inherit the whole of the estate; a law that was meant to reduce the size and influence of the Roman Catholic landed estates) led to the banning of Christmas in 1647, by England’s then puritanical rulers.

In 1660, Charles the Second ended the ban. The Roman Catholic Church had by then redefined the tradition, orienting it more towards a religious theme.

In Colonial America, reaction to this ban had various effects. The Puritans of New England had embraced the ban, however the celebration was outlawed in Boston from 1659 to 1681. Christian residents of New York and Pennsylvania observed the festival freely. The Moravians of Bethlehem, Pennsylvania, brought-forth the tradition of the Christmas tree, a Christian adaptation of the pagan tradition of tree-worship.

George Washington is not to be forgotten as well as the tradition of Christmas in America had fallen out-of-favor, seen as an English tradition during the Revolution. Attacking the Hessian mercenaries at Trenton in 1777, the response from the mostly German victims of the attack, who viewed Christmas much more favorably than the Americans at that time, came by the 1820’s.

Worried that the tradition might die-out, writers like Charles Dickens imagined a family-oriented, heartfelt celebration, and thus was the impetus for the writing of “A Christmas Carol”. Other writers, such as Clement Clark Moore, wrote a poem in 1822 called “A visit from Saint Nicholas,” now recognized by its opening line, “Twas the night before Christmas.”

Some claim that Moore exaggerated the claims that he was making that the depictions in this poem were a reflection of what he had observed in England. Nevertheless these traditions were widely imitated in the US, and thus the tradition of seasonal gift-giving began at around that time.

By 1850, we have the original scrooge, in the form of writer Harriet Beecher Stowe. Her book, “The First Christmas in New England” was a complaint that the spiritual tradition had been replaced by commercialism, that the true meaning of Christmas had been reduced to a shopping-spree.

In 1870, Ulysses S. Grant declared Christmas a federal holiday.

Let us lastly not forget that the true meaning of Christmas, as it is so brilliantly illustrated in one of our now most cherished traditions, Christmas lights and candles.

Just as Jesus brought forward, modified and advanced the ancient traditions of his people, this tradition is a reworking and therefore extension of the Jewish tradition of lighting the Menorah, which symbolizes bringing light into the darkness.

Let us remember and celebrate not what distinguishes and separates us on this holiest of days, let us remember the fluidity of the traditions that bring us all together. Let us, at least on this one day, see each other as a community sharing in the various traditions and figures that bind us. Let us this day love each other as brothers and sisters.

Happy Holidays and I say this not to reduce the meaning of Christmas, but to recognize the meaning of all of the world’s cultural expressions of the same thing, without needing to mention each one by name. All of the best to you and yours, and may peace and goodwill be known to all mankind.

Monday, January 03, 2011

Merry Fricken' Christmas!

Have you noticed it’s getting darker earlier? Yes, but after the holidays it’ll start getting lighter earlier.

- Christmas

o Pagan ritual of the end of the harvest.

- Easter

o Pagan ritual of the beginning of a new harvesting season.

Early man became terrified at this time of the year. It is unusual to find anything particularly vivacious due to longer periods of darkness or cold. What was needed was a little encouragement that the seasons would once again change back, that after the period of longer darkness would emerge a period of longer light. That encouragement came in the message of hope and hopefulness.

Those who brought this message of hopefulness were like shepherds guiding people through the darkness. All that was needed was proper preparation in order to get through the winter, and at this time of year those who had plenty would be encouraged to give-off surplus in the form of gifts. This would ensure the survival of the group, and surely those who had more to give would be remembered for it in times of plenty and perhaps be able to prosper because of it. So there may have been a bit of a selfish motive even then – Give a bit now to the needy (a good thing) and when everyone is in bountiful times, they will remember and still support you (a good thing too).

So the custom of last-minute shopping, this furious exchange of goods, is not new! Merchants are offering discounts; people are madly dashing-about even though we all know we will get through the winter!

The themes of this season aren’t new either: Hope, joy, celebration are all being heralded as the emotions to be experiencing, as a way to ward off the despair and fear that would have naturally occurred to early man. Caveman instinct has us caroling about singing songs about what a “wonderful time of the year” it must be, since the plainly obvious cold and darkness must mean their opposite.

Merry Christmas? “Have you noticed it’s getting darker earlier?”

Happy New Year? “Yes, but it will soon get lighter longer.”

These are the expressions I’m going to replace with their counterparts this year. No freaking “Merry Christmas” for me. And no “Happy Chanukah” either because it means essentially the same thing. “Ramadan” is just another ritual around the harvest, but it is not celebrated at this time of year so they don’t go around saying “Happy Ramadan” in competition with “Merry Christmas” so I’ll leave that alone. I do have a problem with Kwanzaa though. Any modern ritual, created in the 20th century is NOT authentic. Jolly old fat guys, yuletide logs, and menorah candles – all these are steeped in the ancient mysteries. A tradition only as old as I am is not a tradition at all, and besides it stole every symbol it has (besides it’s Swahili name) from the dominant cultures it was supposed to be breaking free from.

So sorry if I’m the Grinch who stole Christmas from you, but I will leave-off with this: The message is still a good one: Gathering before the night is sensible. Passing-out the little extra is good for tending to the herd. Yes, we probably will have another springtime after this, but then again, who knows? Telling each other stories of hope is a good countermeasure for the natural anxiety and depression that still seems to accompany this time of year.

And since we’re all going around bullshitting ourselves about the true origins of these rituals, it’s a good idea to also bullshit our offspring. Lie to the children! Lie to ‘em all! It get’s them off to a good start for their own round of bullshitting. Plus it makes plastic trinkets all the more marketable.

So happy hibernation period to all! I bring a message that the earth is round, and it will soon move around the elliptical orbit it is on and become closer to the sun again!

Now put that on a card and sell it!


Tuesday, April 07, 2009

In order to understand the “bubble” in the present economy, one must understand how such “bubbles” are created.

In simple terms, the value of something is always relative to the availability of a similar substitution product.

This did not occur in real terms within the American economy for the last 30 years. America, the land of the free, was the recipient of massive infusion of foreign labor.

The availability of dirt-cheap capital infusion due to the availability of low-priced foreign bonds made it preferable to the Manufacturing Community to reinvest in these bonds rather than making the return on their manufactured product. This meant that the international credit system was buoying the purchase-power of the American public to unreasonable levels.

The Investment Banking community reveled in this: The deregulation begun in the 70’s and galvanized under Milton Friedman and Ronald Reagan were but the result of the previous deregulations (see Carter and deregulation of airlines, railroads, telephone companies, natural gas, and banking.)

Without regulation, these industries were free to act under their own impulse, and I can tell you that the single most predictable human impulse is greed. Their impulse was to create ever-growing gyrations of debt-instruments that rely on someone shouldering the risk of non-payment, and they could do so due the omnipresent figment that the US tax-base was insurmountable. Same with their production base, although that withered away years ago. According to the American’s, even that would come back, they just had to suppress their workers the wages they had negotiated over time.

Some facts: Germany has a higher-paid labor force than the US. As does France. As does Sweden, Australia, etc. But we are told we have to suppress our “greedy” workers even as their companies farm offshore labor to create an alternative source of the same product (see Gillette and German Production.)

With the benefit of the largely inflated belief that the US was the most efficient system of production on the planet, foreign markets took the plunge. Production units like Japan came to see the growing US buying power as their main source of revenue. China expropriated land and people to feed an ever-hungry American population, to the detriment of their own native people. Investment Bankers made a fortune off what they knew was a scam: If the comparative price weren’t a consideration of their equation (after all, 1$ a month wages cannot last forever) then the capacity to produce a good of equal value will surely become a factor.

Eventually, China will be as good at producing a widget as any other nation.

Well, where does that leave the American Advantage? Nowhere. Goods of equal value have become, despite the American optimism that this will never happen, available worldwide. So how did this crisis come to be?

The factors mentioned above provided the breeding-ground for this epidemic. The only polar advantage held by the US, whose production skills and advantage have only deteriorated over the years, was its reputation as a refuge. Huge buying power of foreign investments allowed the free-flow of funds without the necessity of meddling with the central banking system. Companies and investment bankers were allowed to freely exchange (and amplify) the available cash in the system.

Basically, they created inflation through thin-air. The balance on your credit-card is not debt owned by your bank – It was resold to some foreign firm who thought you were the president of Dupont, and is only now realizing you are actually a greeter at Wal-Mart.

It was a time when the credit-rating of your company was increased by the complications on your balance-sheet. Those days are gone. This is similar, in fact identical, ton the savings-and-loan scandal that happened in the 90s: Small banks had bankrolled their debt-to-equity ratios to disastrous proportions, companies had leveraged themselves to the point where they were bankrupt (on paper) and yet still maintained the highest ratings. Now we know why: The ratings agencies themselves were being rated by the firms they were rating!

Sarbanes-Oxley and Basel 2 were attempts at reigning this in, but it was too late. The over-leveraging had already taken hold. The comparison is easy: You, as an individual, must pass a “cash-flow” rating, which will determine whether or not you get the loan.

If it’s a mortgage, you must have no more than 37% of your gross revenue to pay for your net debts, 41% if fixed expenditures such as taxes, electricity and heating are included. This will affect you in a yes/no from the bank.

In commercial finance, you must maintain a certain amount of “equity” on your balance-sheet in order to maintain a proper credit-scoring. This will include your inventory on hand, number of days this inventory has been held, cash reserves, goodwill (dependable repeat sales,) equity in other holdings, minus provisions for loss, comingled provision for loss (which is reduced from goodwill), availability of cash-surrender from insurance, etc. All this will result in your credit scoring.

Which is important because this and only this allows you to use credit as a kind of silo. Farmers use silos to cover the weak spots in a harvest. Companies use borrowing as a silo to cover cyclical changes in their cash-flow.

Right now, because of comingled risk, credit-ratings are plummeting. Banks do not want to lend even to other banks, because they no longer can anticipate the latter’s borrowing-power. A downgrade from a Moody’s AAA rating to BBB could mean billions in cost of borrowing, and this is the single biggest expense of some to these companies.

Therefore the drive to bailout is simply the wrong move. The media will hype this as unappealing on a romantic basis: The old should make way for the new, inefficient companies should make way for the more efficient but the truth is we don’t know that the replacement companies will be more efficient, we only know they will be new. If the current economic paradigm maintains its hold, even those are doomed to economic collapse.

Companies will take the bailout money and do what makes the most rational (not just) sense to their organizations: They will stick this money on their balance sheets and hope for a different outcome despite identical circumstance. It is the circumstance that makes the difference, and that is why a global economic shift is impending. Where that will leave the US is anyone’s guess, but I am sure it will not be any better than it has been in the last 30 years.

Continuing to inflate the money-supply merely re-inflates the bubble. Unless all comparative markets do the same, we simply have “re-flation”, priming the bubble to where it was to before the burst.

How does this make any sense? When I have a bad debt, the last thing I do is lend more money. Bad money after bad. No PHD required, that is stupid.

There are ways to re-structure companies/banks that do not involve bankruptcies and that are already written into law. In Canada we have the process of the Creditors Arrangement act (CCAA). No money is injected, the only onus is placed on the creditors and the companies to come to a common agreement as to the value of continuing the business as a going-concern. The company has to adjust its costs, and the lenders have to adjust the return on their injections.

This becomes complicated when you have foreign investors involved. But what is being done now is to use the US tax-base to some form of “ransom” to accomplish the same end. Play by our rules, or we’ll default on foreign bonds.

The ransom only lasts as long as it is credible.


Thomas L. Friedman

In case you don’t know this guy, he is probably the most celebrated opinion journalist in America.

The New York Times loves him because he’s made a career out of apologizing for or explaining in a soluble way that the Americans are basically better, more efficient, more politically correct, etc. etc. than anyone else.

Here is Friedman at his best, and here are some of my critiques of his arguments:

Founding premise: Green is popular now because of a perfect storm of events – 911 showed us that people who thrive on petro-dollars are out to kill us – Katrina showed that continued use of fossil fuels evokes climate disasters – Internet has created a massive new set of consumers and awareness in Green technology. 3 billion people all with the American Dream? (48 seconds) Our interference in some other countries has shown us it ain’t so: Not everyone on this planet thinks that a new toaster or microwave is the end-all of existence.

My problem: 911 cannot be definitively attributed to any one people or region. Katrina, according to climatologists, may be as much the result of natural cyclical changes that the earth has been subject to for millions of years, and some were worse. What made Katrina a disaster was slow, stupid and inefficient Government reaction to it. And the Internet creating a Green consumer? I’d love to see the statistics that have EVER shown that the Internet is yet a viable advertisement vehicle. It has long been a dream, but so far all people have figured out how to consume with the Internet has been how to consume for free.

He then sets 4 different analysis points for why the Green revolution is starting to grow (1.06 minutes). Those producers of supposed “Green” products (like the curly light-bulbs which threaten our planet worse than energy-consumption at the time of their disposal) must be really happy that the New York Times is taking about some form of “revolution” in green product use. (I think what they’re selling most of is the bags myself.)

His four are: Geo-Economic (good to start out at where we want the destination of the discussion to be!)
Geo-Strategic (economics and strategics is not such a wide divide)
Climactic (Green should after all study its effect on the climate)
Economic (how is this distinct from analysis point # 1?)

So then we get Mr. Friedman’s wonderful analysis of China, India, Brazil. They will not buy-into any restrictions on their use of dirty energy. Friedman at least admits that’s a privilege that only the West can have. (1.34) Now then he goes to the conclusion he wants to support (bad idea, starting with a conclusion and choosing facts that support it.)

We need Scaleable/Emissions Free/clean power at the ChinDia price. One would expect that to mean we need to produce Green power at a much lower price, and make that power available to China and India.

Watch the twist here: Friedman then looks to the people who pay him, the Government, to impose taxes on oil to such high standards that any alternative looks cheap. He wants the Governments of consuming countries like India and China to have to pay such large, Government controlled taxes (carbon taxes) that they would have no rational choice but to consume American-made, American controlled “Clean” energy at prices driven up by these tariffs as well. See (2.21) “It has to be priced, today, at a level competitive with the dirtiest coal.”

Now he changes the name he gave to either analysis point 1 or 2 (I’m still uncertain as to the distinction) and he calls it by a better name: Geo-Political!

He states the obvious: “Government’s role is to get the prices right” (3.09). Not the value, which is a comparative term, but the “price”.

This means again taking a dollar value and so manipulating it as to take comparative value out of the equation.

Price=Profit, and it is what American Advertising, Marketing and other fabrications that view the planet as their sandbox, not a fair distribution of available resources. This is what got us into trouble in the first place.

At (3.25) he says the comparative price will be competitive (read increased) and start to “scale” (love that word – Copied out of Management Theory, it usually means downsizing for efficiency. In this case distorted to maximize and legitimate greed.). Where does this carbon tax go? Not to the people, as he is no apologist for the people. It goes into a bigger banking and industrial system which by greed will fail again. He doesn’t say so, so I will.

At (3.25) he says the comparative price will be competitive (read increased) and start to “scale” (love that word – Copied out of Management Theory, it usually means downsizing for efficiency. In this case distorted to maximize and legitimate greed.). Where does this carbon tax go? Not to the people, as he is no apologist for the people. It goes into a bigger banking and industrial system which by greed will fail again. He doesn’t say so, so I will.

(3.46) “And if the rich countries (the ones that burned all the planet’s recuperative ability in the first place) lead the way, set an example (like all the examples they’ve set in prior history) then I believe the developing world not only will follow, but will have then, at the China price, faster.” Just gotta love the condescending tone of phrases like “the developing world” in a context like this. Despite our failures, and at a time when we are most vulnerable, please follow our lead is what he seems to be saying. And the China price thing? Just prior, he set how this would work: All energy prices would go up…

So now we are treated with a roller-coaster ride of an analogy: It’s now called “Geo=Politics.” (4.06) “We in the United States need to bring the price of oil up. So we stimulate the alternatives (carbon credits) and the innovation that will ultimately bring the global price of oil and energy down.”

He lets no period of reflection for that deflection by asking a question immediately: “Why is that important?”. Marketing will tell you to direct the question making it seem that it was a question of the consumer (the listener) while it really is not: It’s a question planted by the presenter.

I love then ending where he compares the statements “No taxation without representation” (a civil war slogan) with “No representation without taxation” (a slogan he invented to attribute to the “Petro-Authoritarians” that he decries (mainly Brazil). One is the converse of the other statement, and to boot this guy is trying to sell an argument that the price of oil must go up in order to bring peace and stability to the planet.

Sure, if the added costs go to the developed countries in the form of excise tax known as Carbon Taxes.

In my view, this is purely charlatanism and sophistry. You judge for yourself.