tag:blogger.com,1999:blog-67629282024-03-13T12:14:09.672-07:00The CitizensAn informed discussion about politics.<br> Hosted by a mathematician, a lawyer, and a political scientist.Unknownnoreply@blogger.comBlogger2421125tag:blogger.com,1999:blog-6762928.post-76063305285035863362012-06-18T16:41:00.002-07:002012-06-18T16:41:58.319-07:00Another 2 Cents Worth on Europe and the Euro Crises<br />
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Hi Everyone,<o:p></o:p></div>
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With the latest election results in Greece and France there
is another round of media coverage on the ongoing crises in Europe.<span style="mso-spacerun: yes;"> </span>I say “crises” plural because there are, in
fact several national crises with different causes and different possible
solutions.<span style="mso-spacerun: yes;"> </span>All of them are contributing
to an overall problem for the Eurozone as a whole.<span style="mso-spacerun: yes;"> </span>That much is covered well in the press.<span style="mso-spacerun: yes;"> </span>I heard this point in particular made today
on NPR.<span style="mso-spacerun: yes;"> </span>But what is not discussed is how
the fact there are different types of crises in Greece, Italy, Spain and
Ireland leads to different options for responding to each of them.<span style="mso-spacerun: yes;"> </span>This is fitting because in a real sense, all
of these problems result from a flaw in the Euro zone which was that there was
no way to establish a single monetary policy that would be optimal for both
rapidly developing but poor countries like those currently in crisis and the
wealthier, slower growing countries of Northern Europe.<span style="mso-spacerun: yes;"> </span>Just as there was no one optimal policy for
the entire Euro zone before 2008, there is no one-size-fits-all solution to the
various problems today.<span style="mso-spacerun: yes;"> </span><o:p></o:p></div>
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<b>Greece</b><o:p></o:p></div>
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For example, in Greece the problem is that the government is
incapable of enforcing its own tax laws.<span style="mso-spacerun: yes;">
</span>Even though its population might have been able to support the level of
government spending established in the heady days after the Athens Olympics,
that would only have been possible if everyone actually paid their taxes – or at
least a sufficiently high percentage of people that any losses to evasion would
be manageable.<span style="mso-spacerun: yes;"> </span>The problem is that the
Greek government spent its resources during the boom largely on gifts to
constituents.<span style="mso-spacerun: yes;"> </span>Policies like lower
retirement ages, more generous pensions, more generous vacations, etc, did not
prepare Greece for the problems it might face in the future.<span style="mso-spacerun: yes;"> </span>There was little emphasis on investing in
things that might have enable Greece to weather an economic downtown.<span style="mso-spacerun: yes;"> </span>Greece did not, for example, invest in civil
service reform or professionalization.<span style="mso-spacerun: yes;">
</span>While the world economy was inflating the global bubble, Greece could
borrow money to finance all of this.<span style="mso-spacerun: yes;"> </span>But
as soon as borrowing became in practical, the Greek government simply did not
have funds to function.<span style="mso-spacerun: yes;"> </span>So<span style="mso-spacerun: yes;"> </span>when the 2008 recession hit, much of the revenue
available to the government disappeared just when demands for government
services spiked and the government was incapable (note: not necessarily
unwilling) to respond effectively to either development.<span style="mso-spacerun: yes;"> </span>Now Greece is in a situation where its
spending is unsustainable with locally attainable resources and its debt load
is such that it cannot borrow more to keep things going through the current recession.<span style="mso-spacerun: yes;"> </span>The debt load is so big that it cannot manage
the payments on existing debt, let alone assume more debt on its own.<span style="mso-spacerun: yes;"> </span>Greece has no choice but to cut spending and
try to raise taxes (although it is unlikely to successfully increase revenue in
proportion to its tax increases).<span style="mso-spacerun: yes;"> </span>The
only way Greece can do anything other than a massive austerity package for
years to come is if someone else pays for it.<span style="mso-spacerun: yes;">
</span>Even a devaluation would probably have to be so draconian that it would
devastate not only the Greek economy with hyperinflation but risk dragging down
the rest of the Euro zone along with it.<span style="mso-spacerun: yes;">
</span>And by “someone else” of course I mean German and other Northern
European tax payers.<span style="mso-spacerun: yes;"> </span>And even in that
event, the long term problem of the inability of the Greek civil service to
effectively manage the political economy of the country would not likely be
solved<span style="mso-spacerun: yes;"> </span>by any bailout – at least not one
envisioned by any of the key parties involved so far.<span style="mso-spacerun: yes;"> </span>Greeks opposed to bailout/austerity package
frequently complain that austerity is being forced upon them from the
outside.<span style="mso-spacerun: yes;"> </span>But their proposed solution,
that German tax payers write a blank check to the Greek government is no less
undemocratic and has the added flaw of being grossly unfair.<span style="mso-spacerun: yes;"> </span><o:p></o:p></div>
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<b>Italy, Ireland and Spain </b><o:p></o:p></div>
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But in Spain and Ireland the government was relatively
responsible.<span style="mso-spacerun: yes;"> </span>Prior to the 2008 crash
debt/deficit levels in these countries were manageable if a bit on the flabby
side.<span style="mso-spacerun: yes;"> </span>Italy and Spain in particular had recent
histories of seemingly sustainable spending levels.<span style="mso-spacerun: yes;"> </span>Italy had actually been paying down its debt
for over a decade.<span style="mso-spacerun: yes;"> </span>But the
sustainability of their long term debt schedules were dependent on continued
economic growth.<span style="mso-spacerun: yes;"> </span>The 2008 crash hammered
the real estate and construction bubbles in these three countries.<span style="mso-spacerun: yes;"> </span>Even after that pounding, the Irish government
could raise its corporate tax rates (for example) quite a bit and still have
the lowest corporate tax rates in the Euro zone.<span style="mso-spacerun: yes;"> </span>Another possible solution for these countries
would be a relatively modest devaluation of the Euro (say back to its original
value against the dollar at one-to-one).<span style="mso-spacerun: yes;">
</span>That would boost exports and possibly stimulate some growth not only in
the Mediterranean but in export dominated Germany as well.<span style="mso-spacerun: yes;"> </span>The difference between these three countries and
Greece is that IF these countries could manage to borrow <span style="mso-spacerun: yes;"> </span>(or print) enough money to stimulate their
economies back into growth, these three countries could be back on track in
relatively short order (like a year or two instead of the decade or more of
misery that Greece faces).<span style="mso-spacerun: yes;"> </span>In these
cases the people of these countries who complain about harsh austerity being
imposed by Germany may have a point.<span style="mso-spacerun: yes;">
</span>Other options are viable.<span style="mso-spacerun: yes;"> </span><o:p></o:p></div>
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<b>Keynes and the Europeans</b><o:p></o:p></div>
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The interesting thing here is that the differences between
Greece on the one hand and most of the rest of the European countries facing
deficit crises is that it underscores the necessity of professionalized and
effective government institutions for the success of a Keynesian approach to
political economy.<span style="mso-spacerun: yes;"> </span>Absent effective
institutions, any attempt to apply the kind of Keynesian stimulus approach to a
recession will only result in the kind of quagmire Greece faces today.<span style="mso-spacerun: yes;"> </span>Eventually, no more new borrowing will be
allowed and the government will have no other means of sustaining existing
government services.<span style="mso-spacerun: yes;"> But if there is a minimally effective government in place, Keynesian stimulus might be an option that deserves more consideration in Europe than it currently receives. </span><o:p></o:p></div>
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<b>Lessons for and false comparisons with the US</b><o:p></o:p></div>
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The US has a functioning and professional civil
service.<span style="mso-spacerun: yes;"> </span>The US also has historically
low tax rates across the board.<span style="mso-spacerun: yes;"> </span>When
Republicans begin to shout that the current deficit/debt situation in the US
will lead us to become “like Greece,” they are simply wrong.<span style="mso-spacerun: yes;"> </span>If there are any useful analogies to be found
for the US in Europe, they are Ireland with its low tax rates and fairly
straight forward housing bubble collapse.<span style="mso-spacerun: yes;">
</span>For both Ireland and the US simply raising taxes – even selectively and
not dramatically - is a perfectly workable, long term solution.<span style="mso-spacerun: yes;"> It is also worth noting that the US economy is already flirting with growth rates that are high enough to make even the Italian debt levels sustainable based on their pre-2008 bond yield rates. Unfortunately for Italy, Italian bond yield rates are now far higher, requiring a much higher growth rate to sustain continued borrowing. US bond yield rates however are very very low. So we can engage in a lot of Keynesian stimulus and "get away with it" contrary to Republican rhetoric. </span><o:p></o:p></div>Raised By Republicanshttp://www.blogger.com/profile/03461006522141969925noreply@blogger.com152tag:blogger.com,1999:blog-6762928.post-82506292528503718772012-05-27T13:26:00.004-07:002012-05-28T09:33:27.477-07:00Capitalism and AccountabilityThere is an old saying they use to have in Soviet Russia. "They pretend to pay us and we pretend to work." This bears some thinking. Capitalism works when there is autonomy leading to motivation and resulting in accountability. And in today's market, dominated by corporate entities, the common clerk or local manager has little autonomy and thus, even less motivation to make a decision. Accountability in today's market is a depersonalized annual appraisal. <a href="http://www.coolchaser.com/graphics/tag/Office%20Space/">Office Space</a>, the movie, shows a new kind of Marxism in action. As a moderate Democrat, I can definitely understand why some Republicans get their dander up about over-regulation in some areas. Part of our employment problem, I think, is less about money and more about the pure hassle of getting a good employee to begin with and then getting rid of bad ones. And it is all tied into this question of autonomy and accountability, which has much larger ramifications for society and economy.<br></br>
Marx was quite clear about the alienation that can come from mass production. Well, we are seeing the results in spades- in the service industry. In my case, I see it most immediately in my daily interactions which usually involve retailers. But I see it my office as well. We see this lack of accountability since 2008, in banks, insurance dealers, and the like. I am afraid capitalism and communism have become in essence the same thing by another means. I am sure this will spark some long-missing, lively blog discussion. But let us consider: What is the difference between a government centralizing production and prices and corporate entities that even if they don't totally control prices or production, are so big, they no longer respond to customers (i.e citizens) and who have monopolistic tendencies? <br> </br>
Here are some examples from my daily life- <br></br>
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1) I discovered last week that someone had paid off the $38K balance I still owe on my student loan. After a hear-racing moment, I called the USDE only to discover, like many others before me, that the USDE no longer administers my loan. It has now contracted out the Missouri Higher Education Loan Authority (MHELA)- a non-profit created specifically to get this kind of deal. This happened with no prior notice to me. Had I not chanced to log into my USDE account, I would not have known that the payment address and account number had totally changed. Good to know ahead of time, don't you think? "Doesn't my government owe me the courtesy of an explanation letter BEFORE they screw with the account", I ask the customer service rep. "Never mind," I say. It's not your fault."
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<br> 2) Michaels: I was sent two coupons by Michaels, a chain craft store. One was for 50% off a regular priced item May 25-27th. The second was 20% off the entire purchase, but only good on Monday. So I took the 50% off coupon and selected my full price item. At the counter, I learn that the item is actually on sale (it wasn't marked as such on the shelf) so I can't use the coupon. The coupon would be a better deal than the sale price. "Can you take the 20% off today and I'll surrender the coupon?" "Nope. Come back tomorrow." "Forget it," I reply. They lost a $35 sale and the local and state government lost the tax revenue from the purchase. I won't be going back. No point telling the clerk off. It's not her fault. The store belongs to some distant entity, she pretends to work, and they pretend to pay her. I am sure she gets little better than minimum wage.</br>
<br> 3) Staples: I am a photographer. I use a lot of ink. Staples use to give you $3 credit on recycled ink cartridges. You would take recycled cartridges in, buy new ink, and get an immediate price cut. No more I recently discovered. Now you have to go online, sign in, print a certificate (ironic considering you are now using the very ink you are trying to conserve, or you may not be able to print if you are out of ink) and bring it to the store when you want to buy your ink. I complain to the clerk, "So what used to be possible in one trip now takes 2 trips,and you are going to make me jump through hoops? That's not service. But I know, It's not your fault." She agreed it was dumb, and that it wasn't her fault. But it ensures that fewer people take advantage of the program. It is made to look like the company is giving you a deal, hoping that you won't actually take them up on it. It's like rebates that get advertised as sales</br>
<br> Get the theme? No one is a fault. We have a specal deal on boots today. Get in line. Yes, all of them are red and all them are size 12! But they are on special today! What does it remind you of? </br>
<br>Now let's look at how we shut a majority of people out of the system entirely- reverse discrimination. In an attempt to play by the numerous hiring rules, to avoid litigation, and to be sensitive to the less fortunate in society, we have succeeded in making hiring a nightmare for everyone. Since the very fact that I select means that I discriminate, then we prevent me from really selecting, but then try to hold me responsible for the outcome.</br>
<br>1)In my office, I want to hire someone to do a job. But I can't just hire someone who is qualified. This person must log on to a special website. Spend 60 minutes posting their information (we used to call it a "resume") and then wait for a confirmation number. This process has been streamlined substantially by the Obama Administration by the way. It used to take several hours. Then some computer system will filter all the candidates who applied for the job. I will get a list of people ranked based on their points. Points are given for veterans and current competitive service employees, disabilities, and god knows what else. After that, an only after that, do your qualifications count. Then we are told that we don't hire enough people with disabilities. And that while we don't have quotas, we have a goal of having 20% disabled on the staff. But we aren't allowed, I point out to ask on a form if someone is disabled. Yes, we are told, but the person can volunteer to declare themselves disabled. So, I point out, if you actually could get everyone currently on staff who is on Prozac to admit it, then we might actually exceed the "goal". I am told that this is true. So rather than selecting and being responsible for the selection, I need only ask for a list containing, excuse me for the crassness, a veteran with a gimpy leg or head injury of minority status. And then I can randomly choose 5 people an hope for the best. Because, after all, it won't be my fault. Who cares if the government gets stuck with some one of lesser qualifications, that they then can't fire even if performance is poor.</br>
<br>So I am looking around, and asking myself who is responsible? We have centralized so much, that some mystical, Kafkaesque emerald castle runs everything and we aren't sure who is behind the curtain. For any system to work, but particularly for capitalism to work, there must be a sense of responsibility and a sense of autonomy and accountability based on individual decisions. What we have now is defeatism, and a surrender of responsibility to computer systems and organizations where everyone is responsible, so no one is responsible. And don't even think of challenging the system too much. The Occupy Movement was the closest we got and it seems now invisible- the way the green revolution is in Iran, the protesters are in Russia now that Putin is elected. </br>
<br>When there is no autonomy, no one is responsible, and therefore, we pretend, and they pretend. How is it really differently from the system we claimed to defeat in 1989?</br></span>USWesthttp://www.blogger.com/profile/07572294996079264655noreply@blogger.com14tag:blogger.com,1999:blog-6762928.post-29176305829861627302012-03-25T07:38:00.003-07:002012-03-25T08:01:02.527-07:00What the Cal State Gambit Says about Public Education CostsRecently the California State University announced that unless a referendum passes that will partly restore their funding levels, they cannot afford to admit more students. So they won't. They're going to freeze admissions. <div><br /></div><div>Think about what that says. Populist rhetoric would have you believe that the reason the costs of education are rising because universities are gauging students. I often hear my students complain about the costs of their education (the university I work at has the lowest tuition in its peer group). They believe that these costs are simply a result of feckless professors and administration gauging the students because they can. But in a world where state support for public education is dropping fast, in large part because the same politicians who use and encourage this populist view are arguing that they have to punish the professors and administrators for the rising costs by cutting funding further. </div><div><br /></div><div>In response public universities have tried to keep tuition costs down. But the result is now that every new student that comes in the door of the universities represents a loss. That is, it costs more to educate that student (especially in a Science/Technology/Engineering/Math) than their tuition covers. I've talked to lots of professors in various colleges, disciplines etc and they all tell the same story. Tuition doesn't even cover half of the costs of operating the program. The populists will tell you that is because professors costs more. But here's a secret. Tuition never covered costs - ever. Public education was always subsidized by tax money and private education was subsidized by charitable donations and endowments. </div><div><br /></div><div>That the CSU system sees freezing enrollment as a viable budgetary strategy tells you that cuts to public education have gotten so bad that the universities can no longer afford to keep operating unless they get more money from the state or dramatically increase tuition to the point where most of their students couldn't afford to attend. </div>Raised By Republicanshttp://www.blogger.com/profile/03461006522141969925noreply@blogger.com13tag:blogger.com,1999:blog-6762928.post-8071090349525224692012-03-23T16:47:00.004-07:002012-03-25T20:39:08.490-07:00Terrorism in ToulouseWhile the French media ask how a man who was under surveillance managed to amase a weapons cache, I have a bigger question, one that I am sure the French will be asking themselves once the memorals are over and the bodies burried: What social forces push these people toward delinquency that would land them in jail to be radicalized? Did this young man, and his brother who seems to also be radicalized, feel marinalized? These are questions we ask every thime there is an attack.<br /><br />Toulouse is heavily populated with Pieds Noirs, North African born French who are often resented in France, or at least noted as something “Other”. Mohamed Merha was French, born of Algerian immigrants. This also made him an “other”. And being "other" in France means exclusion. The French media focuses on his troubled teen years, his delinquency, and even refers to him as the “madman”, but that is just too easy. Madmen aren't born. They are made. They are products of their homes and communities. <br /><br />Toulouse is a agriculture region that, true to form, votes conservative. Le Pen or his party reps usually do pretty well in conservative Southern France. However, in the last elections, the socialists took the Midi-Pyrenees, the department where Toulouse dominates. This is in large part because Muslim voters, who made up about 5%of voters in the 2007 election, went socialist. That doesn't sound like a large share, but made a huge difference. Sarko’s get-tough on immigrants talks scared many of them away. Toulouse is a first and foremost, a city of immigrants.<br /><br />Today on the streets of Toulouse there was a “million person march” in honor of the victims. And this weekend, there will be another silent march to the Jewish school where the students and teachers were shot. Among the banners being unfurled in Toulouse today were two in particular that were noted in the Depeche Du Midi, the regional daily newspaper. The two were written in French, Arabic, Hebrew, and Occitan (regional dialect). One said: “Live Together: equality, solidarity, dignity” and the second said: “Jews, Christians, Muslims, same God:Love”. The meta message beyond the multilingualism is clear and strikes me as a changed attitude. In my days in Toulouse, in the late 1990s, such a thing would not have been seen. Let's hope it will continue.USWesthttp://www.blogger.com/profile/07572294996079264655noreply@blogger.com7tag:blogger.com,1999:blog-6762928.post-51290629095989342732012-02-24T14:08:00.002-08:002012-02-24T14:22:35.828-08:00The No-Reality PrimaryEvery day we see more and more bizarre statements from Santorum, Gingrich, and Romney that are so far removed from reality it is hard to know how to respond. All three say that President Obama is going to turn the United States into a socialist state. There is no evidence for this idiotic statement, and none is ever adduced. At the same time, and without irony, they complain that the new health care law reduces funding for Medicare. Santorum said this morning that the United States is alienating every ally and appeasing every enemy. It is hard to know where this comes from. The only ally whose relationship is not MUCH stronger now than it was under Bush is Israel and Pakistan, and that is only because Obama have a much more irascible Netanyahu to deal with and Paksistan is such a freaking mess. The charge of appeasement of enemies is hard to fathom. Killing Osama Bin Laden on Pakistani soil was appeasement? Apparently an apology for soldiers stupidly burning the Koran is appeasement, which is nonsense. A moral person apologizes for his own wrongs even if others have also committed wrongs against him. What else? <br /><br />What you have from these Republicans is blind hatred of Barack Obama for reasons more or less unrelated to the man or his policies, or anything in reality. This is not how you win an election with persuadable independent voters. This is why the primary is so volatile and strange. It is not based in reality. <br /><br /> This is, at heart, an inside debate by a core Republican electorate that is reacting from the unspoken, unacknowledged feeling that something is going very wrong if a black man is President of the United States of America.Unknownnoreply@blogger.com3tag:blogger.com,1999:blog-6762928.post-48890818553119596182012-02-06T18:44:00.000-08:002012-02-06T19:03:20.097-08:00Quit Politicizing Women's HealthThere has been a lot of news the last couple of weeks about changes to medical policies that directly affect women’s health. The most recent has been the Obama Administration’s declaration that all medical care providers who receive federal funding and who serve diverse populations will have to offer birth control. Before that, it was the Susan G. Komen For a Cure foundation. That foundation was going stop paying Planned Parenthood for mammograms.Before that, we've had political discussion about HPV vaccinations. <br /><br />Everyone just needs to stop politicizing women’s health. I can’t think of a single men's heath issue that is politicized or made such an open subject for public scrutiny. No one is talking about offering condoms or vasectomies to men, both opposed by the Catholic Church. Nothing about Viagra or testosterone supplements. What about reproductive services? Unless something has changed, the Church doesn’t like infertility treatments either. All of these health decisions that MEN and women make daily are private choices. They should not be fodder for religious and political games.<br /><br />Freedom of religion means that you have the right to choose to practice your faith or not. And you can choose to practice any faith you wish. That said, forcing religiously affiliated institutions to offer an array of health services and reproductive services does not violate religious rights. It simply allows people to have a choice. If I am a practicing Catholic, then I can choose not to use birth control. So what these institutions are really saying is that they don’t want to offer choice because most people would choose “wrongly”.<br /><br />Religiously affiliated medical facilities and universities should be medical facilities and universities FIRST and religious organs last.USWesthttp://www.blogger.com/profile/07572294996079264655noreply@blogger.com10tag:blogger.com,1999:blog-6762928.post-71650048504082302032012-01-03T13:09:00.000-08:002012-01-03T13:13:37.410-08:00Iranian Saber Rattling- Don't PanicIran has been threatening to close the Straits of Hormuz- again. They do this periodically. I doubt very much it will actually happen. I think this is “North-Koreaesq”/”Saddamesq” game playing of a desperate regime. What they really want is a spike in energy prices to further weaken Western economies. They are using the tools they have.<br /><br />The Iranian government is weak and slowly collapsing. There have been reports of tensions between the Ayatollahs and Ahmadinejad. The latest round of sanctions is aimed at the Iranian Central Bank and seeks to hasten the process. And while we haven’t heard much publicly about the Green Movement, it is alive and well underground. It still threatens the regime. Choking off money with these sanctions will fan the coals. That is what we want.<br /><br />Some have speculated that the saber rattling over Hormuz is intended to draw first fire from the US or its allies, which would then re-entrench the current government and its Ayatollahs. I doubt they are hoping to get the US to shoot first, but they may be baiting Israel. With the Syrian regime weakened, Israel is probably feeling queasier than usual. But Iranians are intelligent gamblers. They know we won’t strike militarily in an election year. We don’t have the money. They do know what a spike in Energy prices would do. The mere threat has already caused a spike. But then, it doesn't take much to cause an oil price hike. <br /><br />Another news commentator on NPR said that Saudi is increasing its oil production and that we are hoping for Libya’s oil to come back on line as well as Iraqi oil. I wouldn’t count on that. Iraqi security is obviously a problem and the Iraqi government isn’t going to do too much to anger its Shia cousins in Tehran. We may have live with higher oil prices and take the hit.<br /><br />We should not underestimate the game Iran has been playing over the last 30 years. They have been more effective that Libya ever was at creating terror cells. They have kept their population poor by turning their oil money into guerrilla movements, like Hezbollah and Hamas. But they have also funded several other groups in places like Pakistan, Iraq, Afghanistan, and India. This is well known and documented. I myself have commented on it several times in this blog. Wherever there was an opening for insecurity and mayhem, Iranian money could be found. It’s a rogue state- but a very ancient civilization that has survived by skillfully playing diplomatic and military games. So while we should be wary, we should not panic. We need to see this for what it is. The worst thing we could do is to attack or allow our allies to attack!USWesthttp://www.blogger.com/profile/07572294996079264655noreply@blogger.com5tag:blogger.com,1999:blog-6762928.post-85863327498403319202011-12-05T19:26:00.001-08:002011-12-06T05:12:47.075-08:00Why I Don't Think the Euro Will DissapearHi Everyone,<div><br /></div><div>The punditocracy is waxing panic stricken about the future of the Euro. With the ongoing crisis in Greece, Italy, Spain, Portugal and Ireland, there is increasing pressure on government borrowing throughout the Eurozone. This has many TV experts pronouncing that a break up of the Euro and a return to national currencies is inevitable. From this, many go on to predict that the EU itself is in serious danger. These types are fond of referring to the EU as an "experiment." But I think there is another outcome that is at least as likely. I think the EU will become even more centralized. Here are my reasons.</div><div><br /></div><div>First, a number of economists have reported (see this article in <a href="http://www.spiegel.de/international/europe/0,1518,800700,00.html">Der Spiegel</a>) that the costs of abandoning the Euro will be even greater than the costs of fully committing to a bail out of all the countries in crisis. The key quotation is here:</div><div><p class="MsoNormal"></p><blockquote>UBS chief economist Deo, has even gone so far as to estimate that 20 to 25 percent of GDP might be realistic in the first year after a German exit alone. That would translate to a per capita cost of between €6,000 and €8,000, with costs of between €3,500 and €4,500 in subsequent years. By comparison, if, after Greece, Portugal and Ireland each had to be given a debt haircut of 50 percent, Deo estimates it would only cost around €1,000 per German citizen -- and it would be a one-time cost.</blockquote><o:p></o:p><p></p><p class="MsoNormal">In other words, the German government has a choice between a really bad outcome and a truly horrendous one. Similar choices face the governments of the other Euro-zone countries. So long as European leaders are not so foolish as to put this choice (or more likely part of it) to a popular referendum, I'm fairly confident that each government will be wise enough to chose the really bad option and avoid the truly horrendous outcome. </p><p class="MsoNormal">Another reason I think the EU will become more centralized has to do with what the German government will demand in return for financing these bail outs. As the EU leaders begin to talk about <a href="http://www.bbc.co.uk/news/world-europe-16037425">reforming the treaties</a> that govern the EU, the proposals all seem to be in the direction of more integration and more central control over national spending. One would be forgiven for thinking that the Germans are insisting that if they get stuck with the lion's share of the bill, then they should be allowed to remake the European Central Bank more in the image of the German Bundesbank. That is a powerful and independent central banking institution that acts to restrain inflationary government spending policies. </p><p class="MsoNormal">Furthermore, if we think about the incentives to a country like Greece to ditch the Euro, the choices have been badly misunderstood in the press. The way the story is reported in most media, it is assumed that the Greek people are being made to suffer more for the sake of staying in the Euro. This is most likely not the case. If Greece left the Euro, it will still be obliged to pay off its debts. Having left the Euro, it would have to do this by printing Drachmas... A LOT of Drachmas. Predictions of hyper inflation are not unreasonable in this event. That would hit Greece at exactly the same time that it gave up the trade advantages and attractiveness to Northern European investors that came with the Euro. In other words, Greece has a choice between painful austerity and painful austerity plus <a href="http://en.wikipedia.org/wiki/Stagflation">stagflation</a>! Greek politicians have already indicated their choice... they'll take the austerity and pass on the stagflation. </p><p class="MsoNormal">Finally, even though all these changes will require heroic compromises between governments with often opposing interest, I think a deal for long term reform will happen. The consequences of failure to reach a compromise will be so dire that the governments will make the deal happen. It will be messy, lurching, awkward and push things to the final final deadline, but I think a deal will happen. And although the Germans will end up paying most of the bills for this mess, the price they will charge in return will be in the form of major reforms to the EU itself. In five or ten years we will be talking about the de facto Bundesrepublik Europa. </p><p class="MsoNormal">I should also emphasize that I'm not predicting a rapid economic recovery in Europe. I still think the EU will be hit with a nasty recession. I'm just surprised that so many people think that this recession will destroy the Euro and the EU. I get the impression that most commentators simply do not understand how firmly established the EU really is. They seem to think of it as some kind of European version of NAFTA with a currency union tacked on to it. It is far more institutionalized and deeply rooted than that. </p><p class="MsoNormal"><br /></p></div><div><br /></div><div><br /></div><div><br /></div>Raised By Republicanshttp://www.blogger.com/profile/03461006522141969925noreply@blogger.com5tag:blogger.com,1999:blog-6762928.post-41838498189626232672011-11-01T14:55:00.001-07:002011-11-01T17:24:20.541-07:00I'm Sick of the Greeks!<span class="Apple-style-span">I have often blogged or commented about my opposition to direct democracy. Usually, my ire is directed at Prop 13 and other examples of how direct democracy undermines good government in California. But today I'm going to direct my disapproval at the proposal of the Greek Prime Minister, George <span class="blsp-spelling-error" id="SPELLING_ERROR_0"><span class="blsp-spelling-error" id="SPELLING_ERROR_0">Papandreou's</span></span>, that the EU debt deal be subjected to a popular referendum in Greece. In particular, Mr. <span class="blsp-spelling-error" id="SPELLING_ERROR_1"><span class="blsp-spelling-error" id="SPELLING_ERROR_1">Papandreou</span>, a social democrat from the <span class="blsp-spelling-error" id="SPELLING_ERROR_2">PASOK</span> party,</span> is arguing that since the deal requires further austerity measures in Greece, he cannot implement them without the mandate of a popular referendum. I shall make three arguments against this step. The first is institutional: that Mr. <span class="blsp-spelling-error" id="SPELLING_ERROR_2"><span class="blsp-spelling-error" id="SPELLING_ERROR_3">Papandreou</span></span> could in fact implement these measures immediately. The second is practical: that the average Greek citizen is not qualified to understand the implications of rejecting this plan and is even unlikely to understand which alternatives are genuinely viable. The third argument is moral: that since a significant contributing cause of the crisis is the widespread tax evasion of ordinary Greeks, they do not have the moral authority to plunge the entire European Union and the world with it, into another Great Recession. </span><div><span class="Apple-style-span"><br /></span></div><div><span class="Apple-style-span">Greek institutions are exceptionally centralized. Policy implementation in Greece, when it happens, is a relatively straightforward process. Most policies are implemented under the supervision of local prefects appointed by the interior minister. The interior minister is appointed by the Prime Minister and since Greece is nearly always governed by a single party government, Prime Ministers are the top of a highly centralized chain of command within the <span class="blsp-spelling-corrected" id="SPELLING_ERROR_3">bureaucracy</span>. There might be a legislative problem. Mr. <span class="blsp-spelling-error" id="SPELLING_ERROR_4">Papandreou's</span> party have a very slim majority and there have been resignations. One might suggest that this could prevent Mr. <span class="blsp-spelling-error" id="SPELLING_ERROR_5">Papandreou</span> from enacting the <span class="blsp-spelling-corrected" id="SPELLING_ERROR_6">necessary</span> legislation. However, the main principles of the austerity measures are in line with the typical agenda of the center right. As it happens the only serious opposition party in Greece is a center right party, New Democracy. Surely some deal could be struck that would allow cooperation between both parties. Indeed, several <span class="blsp-spelling-error" id="SPELLING_ERROR_7">PASOK</span> members of parliament have called for a grand coalition of national unity between the two major parties to do exactly that. The only reason a referendum is "<span class="blsp-spelling-corrected" id="SPELLING_ERROR_8">necessary</span>" is because <span class="blsp-spelling-error" id="SPELLING_ERROR_9">Papandreou</span> is trying to avoid getting the political blame for painful austerity measures. </span></div><div><span class="Apple-style-span"><br /></span></div><div><span class="Apple-style-span">So why is it more practical for this be done by a representative legislature instead of a referendum? There a three reasons for this. First, a referendum by its nature can only be a straight up or down vote on a given proposal. Negotiations and amendments, even minor ones, are not possible. A legislature allows for nuance and flexibility that may be critical in a time of monumental economic crisis. Second, voters cannot be expected to understand the complexity of all policies. One should not expect the average voter to understand the enormous complexity of a debt restructuring program that involves numerous national governments in Europe, North America and beyond along with global intergovernmental organizations like the International Monetary Fund. Third, if a majority of Greek voters reject the restructuring package out of a reluctance to accept the pain of the austerity elements, it would almost certainly provoke a <span class="blsp-spelling-corrected" id="SPELLING_ERROR_10">disastrous</span> financial tsunami on the order of the 2008 financial collapse. The Greek voters simply cannot be relied upon to understand the consequences not only for their own country but for the world if they indulge in some emotional populism in the form of this referendum. </span></div><div><span class="Apple-style-span"><br /></span></div><div><span class="Apple-style-span">But why, you may well ask, should a democratic society be expected to accept massive economic pain (and it will be painful) without being given the chance to vote for their own interests? Normally, I'd be quite open to this line of reasoning. However, the Greek situation is one of their own making. International banks did not force the Greek government to neglect the training and staffing of their tax collection authority. International banks did not force individual Greeks to take advantage of that lack of tax collecting enforcement by engaging in widespread tax evasion. As I have said in other blog entries that raising taxes is not a viable option because the Greek tax collection capacity combined with the ubiquitous tax evasion means that raising the nominal tax rates will simply change the text of the tax laws that everyone is ignoring. It won't actually generate more revenue. The Greek people, politicians and bureaucrats brought this catastrophe on themselves and the rest of us. They should NOT be given a veto over how the world decides to fix the mess. </span></div><div><span class="Apple-style-span"><br /></span></div><div><span class="Apple-style-span">There is plenty of pain being shared around the world in this restructuring. German tax payers will be paying off Greek pensions for a generation or more as it is. German taxpayers are also putting up additional emergency funds to cover future problems should the debt crisis spread to Italy or Spain. French banks are going to write off enormous portions of the debts Greek borrowers owe them. The Italian parliament just approved austerity measures of their own to stave off a similar crisis emerging in that country. Ireland has been living with these austerity policies since 2009. For the Greeks to now sabotage this plan is adding insult to the injuries already being endured around Europe! Enough! Mr. <span class="blsp-spelling-error" id="SPELLING_ERROR_11">Papandreou</span> should enact this law NOW. And if it means his political career ends after that, so be it! </span></div>Raised By Republicanshttp://www.blogger.com/profile/03461006522141969925noreply@blogger.com11tag:blogger.com,1999:blog-6762928.post-1483024138036995242011-10-28T14:36:00.000-07:002011-10-29T10:08:53.054-07:00Obama's Proposals Don't Change Student LoansIt has been reported that the President wants to change the student loan program. One change that is being touted is that students are allowed to consolidate private and public student loans.<br /><br />Well, this isn't a change. This is a long standing policy. I had both private (i.e. Sallie Mae) and USDE loans (Public). I consolidated them with the USDE in 2000. What they do is average out the interest rates on all your loans to get a new interest rate for your current loan. The benefit is that you make one payment to one lender at one interest rate. Usually this means a single lower monthly payment. Credit counselors have used this trick for years to help "restructure" the debt of their clients. This type of consolidation is not new nor does it represent a change to the current student loan systems. <br /><br />Assuring that student loan payments don't exceed more than 10% of someone's disposable income doesn't represent much of a change either.The student loan program introduced an "income contingent" repayment plan back in the early 2000s. They take your pay stub and based your monthly student loan payment on your gross salary. The bad news here is that if your income is low, then your monthly payment under the income contingent program may not be enough to cover the interest that accumulates over the moth. Interest that is not paid is capitalized, meaning added to the principle of the loan. So there is a whole cycle there. Interest needs to amortized like they do with home mortgages to really be fair and help students pay down the loans. Building bigger principle is simply a desperate measure to alleviate today's pain. Income contingent re-payment only keeps people under the boot of debt longer. <br /><br />I am not sure if the Obama Administration is being misunderstood by the media, or if it really is selling a load of crap to the "Occupy" crowd and the voters. I would hate to believe that the Obama Administration is that cynical.<br /><br />Really the best deal for students and lenders is what I already proposed in my earlier post.USWesthttp://www.blogger.com/profile/07572294996079264655noreply@blogger.com49tag:blogger.com,1999:blog-6762928.post-30239598660442052232011-10-20T13:27:00.001-07:002011-10-20T14:17:36.281-07:00The End of GadhafiIt's official, <span class="blsp-spelling-error" id="SPELLING_ERROR_0">Lybia</span> is now well rid of <a href="http://news.blogs.cnn.com/2011/10/20/libyan-fighters-say-they-have-captured-gadhafi/?iref=BN1&hpt=hp_t1"><span class="blsp-spelling-error" id="SPELLING_ERROR_1">Moammar</span> <span class="blsp-spelling-error" id="SPELLING_ERROR_2">Gadhafi</span></a>. This may seem like a minor event to most Americans who - justifiably - may be <span class="blsp-spelling-error" id="SPELLING_ERROR_3">focussed</span> on more pressing economic troubles at home. But this could have enormous, mostly positive implications not just for the Middle East for Africa and the rest of the developing world. <div><br /></div><div><span class="blsp-spelling-error" id="SPELLING_ERROR_4">Gadhafi</span> saw himself as world revolutionary leader with particular interest in tilting at internationalist windmills. In the 1970s <span class="blsp-spelling-error" id="SPELLING_ERROR_5">Gadhafi</span> was a prime moving force behind abortive plans to unite various Arab countries into the <a href="http://en.wikipedia.org/wiki/Arab_Islamic_Republic">Arab Islamic Republic </a>or the<a href="http://en.wikipedia.org/wiki/Federation_of_Arab_Republics"> Federation of Arab Republics</a>. The FAR plan's collapse led eventually to a<a href="http://en.wikipedia.org/wiki/Libyan–Egyptian_War"> war between Egypt and Libya</a> (Egypt won reasonably easily). In the 1990s, <span class="blsp-spelling-error" id="SPELLING_ERROR_6">Gadhafi</span> turned his vision southward and pushed for the creation of a <a href="http://en.wikipedia.org/wiki/United_States_of_Africa">United States of Africa</a>. <br /><div><br /></div><div><span class="blsp-spelling-error" id="SPELLING_ERROR_7">Gadhafi</span> was not only a consistent backer of <a href="http://en.wikipedia.org/wiki/Muammar_Gaddafi#State-sponsored_terrorism">terrorist attacks</a> but he was also the primary source of training and weapons for some of Africa's<a href="http://www.foreignpolicy.com/articles/2011/03/04/harvard_for_tyrants">worst dictators and irregular militia groups</a>. <span class="blsp-spelling-error" id="SPELLING_ERROR_8">Gadhafi</span> had close military ties with (<a href="http://en.wikipedia.org/wiki/Muammar_Gaddafi#Alliances_with_other_authoritarian_national_leaders">among others</a>): <a href="http://en.wikipedia.org/wiki/Idi_Amin"><span class="blsp-spelling-error" id="SPELLING_ERROR_9">Idi</span> <span class="blsp-spelling-error" id="SPELLING_ERROR_10">Amin</span></a>, <a href="http://en.wikipedia.org/wiki/Charles_Taylor_(Liberia)">Charles Taylor</a>, Robert Mugabe, the <a href="http://en.wikipedia.org/wiki/Janjaweed"><span class="blsp-spelling-error" id="SPELLING_ERROR_11">Janjaweed</span></a>, <span class="blsp-spelling-error" id="SPELLING_ERROR_12">Slobodan</span> Milosevic, <span class="blsp-spelling-error" id="SPELLING_ERROR_13">FARC</span>, Hugo Chavez, Daniel Ortega and other, less infamous, <span class="blsp-spelling-corrected" id="SPELLING_ERROR_14">tyrants</span>, <span class="blsp-spelling-error" id="SPELLING_ERROR_15">cleptocrats</span>, thugs and killers. It's worth noting however that <span class="blsp-spelling-error" id="SPELLING_ERROR_16">Gadhafi</span> was consistently incompetent <span class="blsp-spelling-corrected" id="SPELLING_ERROR_17">militarily</span>. Other than successfully winning his coup <span class="blsp-spelling-error" id="SPELLING_ERROR_18">d'etat</span> 42 years ago, I don't think he was victorious in any military operations of note (I may be wrong but a string of famous defeats is foremost in my head now). </div><div><br /></div><div>This man was not merely a quirky and somewhat clownish dictator who oppressed his own people. He was a force for chaos and bloodshed around much of the world. He had a knack for picking <span class="blsp-spelling-corrected" id="SPELLING_ERROR_19">loathsome</span> allies. His only saving grace was his military incompetence. If he had succeeded in more of his plans, the world would have been even worse off than it was given his bloody failures. </div></div>Raised By Republicanshttp://www.blogger.com/profile/03461006522141969925noreply@blogger.com1tag:blogger.com,1999:blog-6762928.post-13579913575227941822011-10-18T12:15:00.000-07:002011-10-18T12:36:35.735-07:00Occupy Wall Street: Student Loan ForgivenessSome Occupy Wall Streeters are calling for student loan forgiviness. This sounds like a great idea, especially for people like me with high debt. However, I disagree with this proposal. Rep. Hansen Clarke (D-MI) has sponsored a bill to forgive student loans and MoveOn.or is sponsoring a petition in support of this.<br /><br />I do not agree with complete loan forgiveness. Nor do I think it should be discharged in bankrupcy court. They tried that once and young people ended up filing for bankrupcy at alarming rates. 1) moral hazard arguments still stand 2) So long as the price of education is inflating faster than that of medical care, student loans are going to be a necessary and permanent evil. We cannot create disincentives for lenders or further barriers to qualified students. 3)Currently, there is a new bubble forming around student loans as they are packaged and sold as derivatives. The chain reaction has been sent into motion just like the housing market. This will encourage larger loans to lesser qualified students, and further fuel rising tuition costs.<br /><br />But the program rules should be changed to make the loans more fair on borrowers. I have some more moderate suggestions that I would like lawmakers to consider.<br /><br />Some background: I graduated with my MA in 1999 with over $60K in debt- of which about half was used for tuition and the other half for housing and expenses. I took on this debt freely, but out of necessity. The job market requires a graduate degree, I needed the money to help pay for it. I consolidated my debt with the USDE at 7.26% interest, low compared to many of my predecessors.<br /><br />When interest rates began to fall in the mid-2000s, I called the USDE to see about re-financing and was told that this was not legally possible. Once consolidated, borrowers are not allowed to refinance unless they are willing to take out a private loan, usually a second mortgage. I didn't own a home and couldn't afford one with my debt levels froms school, and even in 2004 most lenders were not going to provide a loan without collateral. Therefore, I continue to pay an interest rate more than twice the current market rate. <br /><br />I do receive a tax deduction on the interest I pay. However, this is little help throughout the year as monthly bills come due. Nor does it adequately address the inherent unfairness (almost usury) in how interest is handled in the student loan programs. And let's face it, it isn't an asset-backed necessity like housing. So I'd be willing to sacrifice it for some real reforms.<br /><br />Interest on student loans accrues daily. And no matter how much you pay beyond your fixed amount, the interest is always paid first and it usually eats up most of the payment. And what’s worse, it's a moving target. The amount I pay in interest changes constantly and is nearly impossible to budget for, calculate, or get around. To date, the amount I have paid back in interest is nearly equal to the principle balance I started with and I still have $42K to go. Currently, if I were to make payments so that I could pay the remaining balance in 10 years, I would have to pay over $750 a month, down from the over $800 I would have paid 10 years ago. Either <br />way, that's not possible. But the debt is still my responsibility, students still need loans, and the USDE needs the revenue stream these loans create. <br /><br />Rather than forgive debt entirely, I would suggest the following: <br /><br />1) that the law be amended to allow for refinancing of all student loans down to current rates <br />2) once the amount paid back in interest exceeds more than say 20% of the original principle, the interest should be curtialed entirely while the remaining principle is paid down. <br />3) if #2 is not feasible, then the interest should be regulated in the same way has home loans. <br />4) outlaw the selling of derivatives on student loans. <br /><br />These changes would lessen the burden on borrowers without the moral hazard associated with total loan forgiveness or the loss to the lenders, which includes the USDE. They may be enough to prevent fueling education inflation. Making the terms a bit more fair would be welcome and would help the longer term economy and a generation of young people trying to get started in a jobless economy who will default in droves if we don't do something.USWesthttp://www.blogger.com/profile/07572294996079264655noreply@blogger.com6tag:blogger.com,1999:blog-6762928.post-87869723383614569342011-10-14T10:13:00.001-07:002011-10-14T10:30:47.035-07:00Rading Social Security FundsThis is a short post, but this article,<a href="http://www.fedsmith.com/article/3131/looting-social-security-socalled-trust-fund.html"> Looting of Social Security</a> posted on Fed-Smith.com today is the clearest explanation of what has happened to Social Security funds that I have yet seen. It is a quick and easy read.<br /><br />Basically, the 2.7 trillion surplus that was to be invested in Social Security has been poured into the general fund and spent. It's gone. There is nothing but a literal cabinet filled with IOU statements.<br /><br />Now, will the government <a href="http://www.fedsmith.com/article/2324/will-government-repay-its-debt-social.html"> repay this money?</a>? Well that is a good question. From where will it get the money? Since it wasn't invested as promised.<br /><br />Again, I remind everyone that this isn't news. Remember Al Gore and his "lock box". So we are all investors who have been swindled. So, in light of this, I agree with the President that the 2% cut in payroll taxes should be continued. And it's all legal. Because in a democracy, you can pass all kinds of laws to make what you want or need to do legal. In another context, this would be termed "corruption".<br /><br />Because money paid for social security is going into the general fund, it amounts to a 2% income tax hike on the salaried class. Another reason we are the 99%.USWesthttp://www.blogger.com/profile/07572294996079264655noreply@blogger.com2tag:blogger.com,1999:blog-6762928.post-61796055345966653112011-10-13T15:18:00.000-07:002011-10-13T15:38:06.508-07:00National Sales Tax... Worst idea everHerman Caine is surging in the polls as the latest "Not Romney" As he is, the media is falling all over themselves to do halfassed analyses of his 9-9-9 tax plan. As you may have heard this refers to a 9% flat income tax, 9% flat corporate tax and a 9% national sales tax. Most of them focus on whether it will raise or lower the over all tax burden on the average family or whether it will generate enough revenue to cover existing spending. It is probably not surprising that a plan put forward by a Republican reduces revenue and further shifts tax burden away from the wealthy and corporations and onto middle class families. But the problems with the 9-9-9 are, if anything, even more catastrophic than simply yet another screwing the middle class the Grand Old Plutocrats. That 9% sales tax is a like a bomb let off in the heart of the US economy. <div><br /></div><div>Right now, retail sales/household spending make up about <a href="http://www.businessweek.com/news/2011-10-09/retail-sales-probably-rose-in-september-u-s-economy-preview.html">70% of the US economy overall</a>. If we suddenly imposed a 9% sales tax to everything bought in the US, it would certainly cause that vital sector of the economy to shrink. Consumer demand in the United States is not only a vital part of our economy it is an important driving force for the entire world economy. For example, China exports about 20% of all their exports to the US alone. If the US demand for Chinese stuff suddenly drops, it would be a serious blow to the Chinese economy as well. The same goes for Mexico, Canada, the EU, etc etc etc.</div><div><br /></div><div>With the world economy in a fragile state now, Herman Caine's plan could plunge the world into a demand slump depression along the lines of what we saw in 1929. Imagine, just as we are showing the faintest hints of recovering from a capital crisis recession and just as the Europeans are getting their collective act together about Greece, Cain would have us voluntarily jump off the cliff again. You can't run a global economy like a pizza delivery joint. </div>Raised By Republicanshttp://www.blogger.com/profile/03461006522141969925noreply@blogger.com4tag:blogger.com,1999:blog-6762928.post-34447750770844706712011-10-10T21:36:00.000-07:002011-10-10T21:38:48.088-07:00Oct 5th Statement from Occupy Wall StreetThey didn't leave anything out. That is for sure!<br /><object id="flashObj" width="480" height="270" classid="clsid:D27CDB6E-AE6D-11cf-96B8-444553540000" codebase="http://download.macromedia.com/pub/shockwave/cabs/flash/swflash.cab#version=9,0,47,0"><param name="movie" value="http://c.brightcove.com/services/viewer/federated_f9?isVid=1&isUI=1" /><param name="bgcolor" value="#FFFFFF" /><param name="flashVars" value="videoId=1202794306001&linkBaseURL=http%3A%2F%2Fcurrent.com%2Fshows%2Fcountdown%2Fvideos%2Fspecial-comment-keith-reads-first-collective-statement-of-occupy-wall-street&playerID=1040141195001&playerKey=AQ~~,AAAA3B3xrZk~,HJshEnrCBsRvDMbCheku3Pjss6-I6ruG&domain=embed&dynamicStreaming=true" /><param name="base" value="http://admin.brightcove.com" /><param name="seamlesstabbing" value="false" /><param name="allowFullScreen" value="true" /><param name="swLiveConnect" value="true" /><param name="allowScriptAccess" value="always" /><embed src="http://c.brightcove.com/services/viewer/federated_f9?isVid=1&isUI=1" bgcolor="#FFFFFF" flashVars="videoId=1202794306001&linkBaseURL=http%3A%2F%2Fcurrent.com%2Fshows%2Fcountdown%2Fvideos%2Fspecial-comment-keith-reads-first-collective-statement-of-occupy-wall-street&playerID=1040141195001&playerKey=AQ~~,AAAA3B3xrZk~,HJshEnrCBsRvDMbCheku3Pjss6-I6ruG&domain=embed&dynamicStreaming=true" base="http://admin.brightcove.com" name="flashObj" width="480" height="270" seamlesstabbing="false" type="application/x-shockwave-flash" allowFullScreen="true" allowScriptAccess="always" swLiveConnect="true" pluginspage="http://www.macromedia.com/shockwave/download/index.cgi?P1_Prod_Version=ShockwaveFlash"></embed></object>USWesthttp://www.blogger.com/profile/07572294996079264655noreply@blogger.com2tag:blogger.com,1999:blog-6762928.post-35181573458354169772011-10-07T13:45:00.000-07:002011-10-07T13:53:21.218-07:00Neutron BombLast night, Harry Reid exercised what is known as the "nuclear option" in some circles over Senate rules. He led a majority of Democrats to overrule a parliamentarian and cut off the right of the minority to call for multiple votes on amendments after cloture. It happened rather unexpectedly in an attempt to an amendment to the Chinese-currency-kvetching bill. McConnell wanted to force a vote on an amendment containing Obama's original jobs bill (not the current version with the millionaire's tax) to embarrass the president and cause more delay. This restricts post-cloture maneuvering by the minority. Of course, this is not really a nuclear option in the sense that that term was created to talk about outlawing the filibuster altogether in 2005. (Note, according to The Hill, a similarly arcane such use of the majority-overrule took place in 2000 under Bill Frist's leadership to eliminate votes on "sense of the senate" resolutions under such circumstances.) <br /><br />This is actually a very big deal. It is the first time Harry Reid has ever done anything to stand up to the minority in the Senate worth a damn. It is the first time he has reacted seriously to the way McConnell has flouted tradition to all but shut down the Senate. Republicans are threatening direly about possibly messing with the filibuster when they're in the majority as retaliation. I have no doubt they will do so no matter what Reid does. I hope we see more of it. Part of what made it work was the Reid sprang this on McConnell unexpectedly and got the 51 votes without much fuss and bother. No showdown, just a win.Unknownnoreply@blogger.com3tag:blogger.com,1999:blog-6762928.post-8713110380163869322011-10-05T08:44:00.000-07:002011-10-05T08:57:19.715-07:00Two Visions of FrustrationIn light of the last post about the Occupy Wall Street protests and how they might be an emerging contrast to the Tea Party I thought I would post two links to the Democratic version of the "us vs elites" meme and the Republican version of the "us vs elites" meme. <div><br /></div><div><a href="http://www.youtube.com/watch?v=hOyDR2b71ag">Here</a> is Elizabeth Warren's now famous statement about fair taxation and "class warfare."</div><div><br /></div><div><a href="http://www.youtube.com/watch?v=dbWz1RYGE3Q">Here</a> is Governor Rick Perry's address to a Republican/Tea Party rally in Austin Texas.</div><div><br /></div><div>One thing that strikes me is that Warren's rhetoric is must more focussed economic distribution. Who wins and who loses from the current economic regime. Perry's rhetoric does mention taxes but mainly focusses on abstracts like "states' rights" and "the constitution" and "the founding fathers" etc. </div><div><br /></div><div>Another difference is that Perry's rhetoric - to the extent it talks about economic distribution - focusses on the idea that government should stop taking things from individuals. Warren's rhetoric focusses on the idea that corporate elites have been taking things from the community without paying anything back. </div><div><br /></div><div>It's not obvious to me which message will have more traction in the midst of ongoing sluggish economy or renewed recession. But certainly the mere fact that there is now a clearly enunciated and easily understood alternative to the "taxes bad" mantra of the Tea Party makes the 2012 election campaign more competitive. It's also refreshing that this may turn out to be the first election in a long time in which the two parties are clearly debating rival visions of the future in a substantively meaningful way. It will be nasty and hard fought. And many people will be upset that their side didn't win but this is exactly the kind of policy debate so many people who are frustrated with politics as usual want to see.</div>Raised By Republicanshttp://www.blogger.com/profile/03461006522141969925noreply@blogger.com1tag:blogger.com,1999:blog-6762928.post-61383098649823995662011-10-01T17:09:00.000-07:002011-10-04T15:41:25.631-07:00Occupy Wall Street A Potential Game Changer?Something interesting is happening in response to a year of Republican austerity measures imposed by the 2010 elections at the state level and by House Republican blackmail over government shut downs and government debt defaults. A new wave of protests have emerged modeled on the "Occupy Wall Street" protests in NYC. The protests are spreading to cities across the country. What's more, while unions were not the initial driving force, they are quick to see the potential of allying themselves with these protesters. Several big unions are planning to join the protesters. <div><br /></div><div>Here is why I think this is potentially a big deal. First, this seems to be a continuation of the anti-union busting protests in Wisconsin that lead to the recall of several Republican state legislators in that state and threatens to lead to the recall of Republican governor Walker. These kinds of protests are provoked by Republican policy overreach and have a record of have electoral consequences. </div><div><br /></div><div>Second, and this may be more important, both the Wisconsin protests and the Occupy Wall Street protests are changing the nature of the anti-elite populism that the Tea Party has tried to tap. Where the Tea Party directs their ire at government and intellectuals, these protests are defining the elite in terms of wealth. Instead of calling high school teachers "communists" or railing about homosexuals, immigrants and "librul elites" these protests are zeroing in on the mega wealthy at the top of corporate America. In other words, the Tea Party now has serious competition for the leadership of the angry masses. If the new wealth-based definition of bad-guy elites takes hold, it will directly undermine the Republican 2012 political campaign and find an obvious ally in the Democratic party which is already pushing for more transfer of wealth from the mega rich to the middle class and poor. </div><div><br /></div><div>Finally, the single greatest fear of the Republican party is a high turnout election in which large numbers of middle and low income people vote based on their rationally identified economic self interest. So long as this segment of the population can be distracted by "Guns, Gays, and God" or by the Tea Party's cartoonishly ideological rants, the GOP can survive the fact that their policies are actually likely to have a negative impact on the clear majority of voters' lives. These protest threaten to put the focus of the 2012 elections on income disparity and tax fairness. If those become the dominant themes of 2012, it gives the Democrats and inherent advantage. It also gives Democrats something to rally their otherwise demoralized base around. </div>Raised By Republicanshttp://www.blogger.com/profile/03461006522141969925noreply@blogger.com5tag:blogger.com,1999:blog-6762928.post-47387771257514091282011-09-22T15:57:00.001-07:002011-09-22T16:10:39.760-07:00Obama's New ApproachPresident Obama has adopted a new approach to going after the Republicans. Rather than bending over backwards to compromise with uncompromising jerks, he is focussing the spot light on meaningful policy differences that most people can readily understand. This is a good idea. The deficit/debt problem is fundamentally a distributive one. Specifically there is no solution that makes all interested parties better off without making someone worse off. That means that any debate will ultimately boil down to WHO is going to be made to be worse off that the others may benefit. Republicans are insisting that it should be the middle class and poor who are made worse off so that the wealthy and corporations benefit. That's a hard position to defend when it is revealed for what it is. <div><br /></div><div>The Democrats' position is that taxes should be raised on the top brackets and corporations. At this point the mood of the country is increasingly angry with exactly the targets of these increases. <br /><div><br /></div><div>So long as Obama continued to try to find common ground the stark differences would not be revealed and Republicans could more easily hide the real effects of their policies. But with Obama's new confrontational approach, the Republicans will be forced to state exactly why the super rich should continue to pay low tax rates while the rest of the country struggles. Obama dug quite a whole for himself through the (I think necessary) compromises to avoid defaulting on the debt, but the more the 2012 election becomes about these two competing visions, the harder it will be for Republicans to win. If the Republicans are foolish enough to nominate Perry, the contrast will only become starker. </div></div>Raised By Republicanshttp://www.blogger.com/profile/03461006522141969925noreply@blogger.com6tag:blogger.com,1999:blog-6762928.post-59920142163857302512011-09-16T16:58:00.000-07:002011-09-18T16:20:51.128-07:00In Defense of Crossing T’s and Dotting I’s<p class="MsoNormal">There is an emerging talking point among Republicans that the way to create jobs is not to spend government money on infrastructure projects or even to cut payroll taxes or give tax breaks to companies that hire new people.<span style="mso-spacerun:yes"> </span>All of these things have been supported by Republicans in the past.<span style="mso-spacerun:yes"> </span>But now they swear that the only policy worth pursuing is eliminating a wide range of existing regulations.<span style="mso-spacerun:yes"> </span>I was watching CNN this morning as I ate breakfast and it is clear that American journalists are simply not equipped to report on this subject.<span style="mso-spacerun:yes"> </span>Instead of engaging in a discussion of what regulations are and how they are enacted, CNN ran a human interest style story where they interviewed the owner of a small car painting business in California.<span style="mso-spacerun:yes"> </span>He swore that he was personally committed to protecting the environment etc but that some regulations were simply unreasonable intrusions into his business. He described these as regulations that did nothing but force him to “cross t’s and dot I’s.”<span style="mso-spacerun:yes"> </span>The point of the story was clear:<span style="mso-spacerun:yes"> </span>Regulations are silly because they make well intentioned business owners waste their time filling out paper work instead of creating new jobs.<span style="mso-spacerun:yes"> </span>This interview reminded me of a conversation I once had with a group of small business owners at a yacht club in Santa Barbara.<span style="mso-spacerun:yes"> </span>They are standing around grousing about exactly this sort of regulation.<span style="mso-spacerun:yes"> </span>They hated it and blamed “socialists” in Sacramento and Washington for the whole thing.<span style="mso-spacerun:yes"> </span>Here is the gist of what I told them. <o:p></o:p></p> <p class="MsoNormal"><o:p> </o:p></p> <p class="MsoNormal">The complexity of the paperwork is not a result of “socialist” dominance.<span style="mso-spacerun:yes"> </span>On the contrary, the excess of paperwork is a direct result of a regulatory system that depends overwhelmingly on self-reporting.<span style="mso-spacerun:yes"> </span>The self-reporting approach was insisted upon by conservatives who were able to force it through the necessary compromises so common in American politics.<span style="mso-spacerun:yes"> </span>In more centralized democracies, such as the UK, there is a good deal less paperwork to fill out.<span style="mso-spacerun:yes"> </span>However, such countries have a good deal more inspectors barging into businesses and snooping around.<span style="mso-spacerun:yes"> </span>I asked the cluster of businessmen at the yacht club if they would rather have paperwork or government inspectors and they all said, “Paperwork!” without hesitation.<span style="mso-spacerun:yes"> </span><o:p></o:p></p> <p class="MsoNormal">Clearly the Republicans are trying to use the persistent economic troubles as an excuse to undo a century of regulations entirely.<span style="mso-spacerun:yes"> </span>They want to return us to a Dickensian dystopia of the 1890s.<span style="mso-spacerun:yes"> </span>If we eliminate the paperwork without hiring thousands of new inspectors at the state and federal agencies that enforce environmental, workplace safety and other regulations, we would effectively eliminate the original regulations.<span style="mso-spacerun:yes"> </span>These regulations were not imposed to make life difficult for business.<span style="mso-spacerun:yes"> </span>Rather they were put in place because businesses were making life unlivable (literally) for the workers who were getting sick and injured in dangerous workplaces, the neighbors who were being poisoned by industrial run off and the many species that were being driven to extinction by the same (such as the bald eagle that Republicans love to fetishize).<o:p></o:p></p>Raised By Republicanshttp://www.blogger.com/profile/03461006522141969925noreply@blogger.com5tag:blogger.com,1999:blog-6762928.post-30488201147333075682011-09-14T10:37:00.000-07:002011-09-14T12:11:15.948-07:00Marketing the Presidency-There Danger LiesPrepare for a rant. Today I was reading NBC's news blog. The headline was <a href="http://firstread.msnbc.msn.com/_news/2011/09/14/7757898-first-thoughts-obamas-rough-news-day">"Obama's Rough News Day"</a>. After describing why the day was tough, the article says, "All of these stories can be explained away via individual context. But taken together, they signal how <span style="font-style:italic;">Obama’s brand </span>has taken a big hit." (Italics are mine")<br /><br />It is no secret that we market celebrities, politicians, and ideas like candy and children's toys. The lines between simple advocacy and unadulterated celebrity have long been blurred. But I beat an old horse, already whipped by Noam Chomsky. The difference today is the ability to target specific people and to gather data using new technologies. The ability to hit smaller and smaller targets only increases with each passing day. And it segments and balkinizes the body politic. Marketing to a vast audience is now narrowed to brainwashing a specific piece of the electorate. And it plays with our minds. Politics is no longer a national discussion to be held above the din of marketing. We can now target the 10 people in Indiana who we need to convince to vote for us rather than the entire state.<br /><br />We use to joke about the celebrity of Bill Clinton, or JFK for that matter. But the entire presidency? This NBC thing is the first time that I have seen such a blunt admission that the presidency is now a "brand". It'd be funny if it wasn't so disturbing. Palin is a brand. I haven't heard yet of the "Bachmann or Romney brand". That's just because they haven't yet been fully market tested. But they are working on it. They already know that the one line testing well for Bachmann is "“Make no mistake about it, Barack Obama will be a one . . . term . . . President!” <a href="http://www.newyorker.com/reporting/2011/08/15/110815fa_fact_lizza?currentPage=3">(New Yorker: Leap of Faith)</a>. They can do this with audience response systems. And they ensure that her "Barbie Doll"(Mattel, slogan: "Creating the future of play") image is well honed and protected. To be fair, all candidates are doing the same thing.<br /><br />We now live in a landscape where the nonsensical is standard for marketing. Can you tell me what "Natural French Fries" are? If they are now natural, what the hell have they been up until now? That ranks up there with Jumbo Shrimp and all natural flavor, which means what again? Chemistry meant to taste natural, or that they actually added a dab of real fruit juice to that high fructose corn syrup? Our politics are as nonsensical. "It's time for America to be America again" (Rick Santorum). What has it been up until now? Pseudo-America? The line is actually from a <a href="http://scienceblogs.com/dispatches/2011/04/santorum_borrows_liberal_sloga.php">Langston Hughes poem</a>- a liberal civil rights poem.<br /><br />Gee, maybe we should just give up and go all the way. Let's cut the deficit by funding our government institutions like we do sports stadiums. After all, California was ready to sell off real-estate to close its budget gap. Maybe the Super Committee (reminds me of jumbo shrimp again- just a flavorless crustacean, higher in useless cholesterol and empty calories than the regular shrimp) should try this out. We can sell the White House to Proctor & Gamble and rent it back, calling it "The Gillette White House". We can do the same with Congress. I can see "The Coca Cola Capital Dome". And on the Old Executive Office Building, we can add a digital billboard with all sorts of great advert slots for sale. Before the opening speech at the next party caucus they can announce, "This caucus, hosted in Tazo Stadium, is brought to you by Pepsi co., a family of beverage firms bringing <span style="font-style:italic;">naturally</span> refreshing ideas to you!" And we can digitally swap out the banner ads along the balconies of the convention center like they do at Pro tennis matches. (Maybe they are already doing this?) And we can employ Google technology to insure that if you check a candidate website every banner ad on your free e-mail engine will belong to that candidate or his friends. They can link it to the local party congressional candidate (thanks to that address you provided on your Facebook page) to ensure that you get the full party slate.<br /> <br />Then when we can overlay consumer buying patterns at Home Depot against voting tendencies and demographic data to identify the 10 those Independent voters in central Indiana to the exclusion of everyone else. And while we are at it, we can make sure to find clever ways to disenfranchise those 50 voters in county X who always vote for the wrong state assembly representative. We need wall-to-wall one party rule, you know. And we don't even need gerrymandering to do it anymore. Gerrymandering has gone they way of the filibusterer. All of this subverts the democratic process. Everyone of us becomes nothing more than a cog in the marketing wheel- divorced from the means of production. (Gee, can you say Carl Marx? Moment for thought. Hummmm.)<br /><br />My favorite brand is "The American People". What a brand that is! I can see it now, "American People" bubble gum- light, airy, and full of hot air! The label can be emblazoned with eagles and flags. I just watched a movie the other day where Susan Hayward's character says, "Millions of dollars spent to sell the American culture to the world, and still no one knows what Root Beer is." We are bought, sold, and spent.<br /><br />So, to end my rant, my dad use to shake his head and say, "you can't stop progress". And he is right. But you should be able to control it. The day we turn entire branches of government into nothing more than brands and commodities, we have lost as a citizenry. The technology has taken over and we don't matter to the process. Only the 10 people in some distant corner of the nation matter. And candidates will further lock themselves in DC while radicalizing their ideas and rhetoric to capture those 10 people. And in the process, the whole purpose of getting elected by a majority to genuinely to govern and serve, is lost.USWesthttp://www.blogger.com/profile/07572294996079264655noreply@blogger.com2tag:blogger.com,1999:blog-6762928.post-61067283638614589542011-08-22T04:34:00.001-07:002011-08-22T04:58:34.628-07:00LibyaThe <a href="http://www.cnn.com/2011/WORLD/africa/08/22/libya.war/index.html?hpt=hp_t1">news is out</a>. Libyan rebels have taken most of the capital and captured three of Gadhafi's sons including his heir apparent, Saif Al Islam, who promised that the streets would run with rivers of blood before his family gave up power. <div><div>
<br /></div><div>The CNN infotainment models are making a big deal this morning about whether the US involvement was "worth it." So let's do some rough cost benefit calculations.</div><div>
<br /></div><div>What did cost? CNN reports that the White House estimates that US involvement in Libya will cost $1.1 Billion. <a href="http://www.washingtontimes.com/news/2011/apr/7/democrat-white-house-low-balling-costs-libya-missi/">Other</a> estimates by critics of the operation run more like $33 Billion. What did it achieve? I believe no US military people have been killed.</div><div>
<br /></div><div>1) Gadhafi's forces were poised to perpetrate a mass slaughter of the populations of Benghazi and Misrata - cities with hundreds of thousands of people each. The operation clearly prevented Gadhafi's forces from capturing either city.</div><div>
<br /></div><div>2) Gadhafi was a particularly nasty dictator who had sponsored some of the most infamous terrorist attacks other than 9/11. He's now out of the world picture except as a fugitive. </div><div>
<br /></div><div>3) The US was able to make a high profile, tangible effort to remove an Arab dictator that the overwhelming majority of Arabs across the Middle East despised. For once the US was doing something that advanced the cause of democratic reforms in the Middle East.</div></div><div>
<br /></div><div>4) The example of Libya should not be underestimated in relation to the ongoing rebellion against the Assad dictatorship in Syria. </div><div>
<br /></div><div>5) At the time the US got involved, there were indications that some of our close European allies were keen to get involved with us or without us (especially France and the UK). Our involvement made their efforts much more likely to succeed. Preventing a European foreign policy disaster is of great value to us and should not be dismissed casually. </div><div>
<br /></div><div>The cost benefit calculation for the Libyan operation is in stark contrast to the enormous costs (in lives and money) and dubious benefits of either the war in Iraq or Afghanistan. Granted, the honeymoon in post Gadhafi Libya will be brief. Libya will almost certainly have a long, painful and ultimately disappointing transition. But the same is true for Iraq and Afghanistan both of which cost much much more. As military adventures go, Obama's foray to the Shores of Tripoli will probably be shown to be a relatively costless distraction at worst but at best could end up generating a series of important benefits for US policy in the Middle East for a bargain basement price. </div>Raised By Republicanshttp://www.blogger.com/profile/03461006522141969925noreply@blogger.com2tag:blogger.com,1999:blog-6762928.post-73860881155491385142011-08-15T20:59:00.000-07:002011-08-15T21:02:02.794-07:00If you thought you new Michele Bachmann . . .you don't. She is a Christan Taliban. Total fringe. This article from the Aug. 15th, edition of <a href="http://www.newyorker.com/reporting/2011/08/15/110815fa_fact_lizza">the New Yorker </a>is worth the read. RBR, I'd be interested in your take on the Iowa Straw Poll.USWesthttp://www.blogger.com/profile/07572294996079264655noreply@blogger.com3tag:blogger.com,1999:blog-6762928.post-5764606847478465932011-08-14T12:24:00.000-07:002011-08-14T12:59:34.630-07:00Sunday Musings-DEBTThe recent downgrade by the S&P of US debt was lousy, but it was a wake up call. US citizens have too much debt- and it isn't all their fault. College tuition is rising faster than inflation. It's keeping pace with medical care. It's a crisis in the making, a real catch 22. So students take out loans for tuition then put their text books on credit cards. Hello!
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<br />Now the next big debt bubble: Student Loans- largely fueled by for-profit institutions. Problem here, folks, is that there is no way out for the borrows. Waltz on over to <a href="http://www.mybudget360.com/student-loan-bubble-next-massive-debt-bubble-to-crush-the-economy-student-debt-higher-edudation-bubble-bust-crash-credit-markets/?source=patrick.net">MyBudget360.com</a> for a very good article on the next crash.
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<br />That was the morning coffee conversation with my fiance this morning. Then we went grocery shopping and we were having a conversation with the clerk. She and her husband are having trouble paying their mortgage. So they called the bank to see about renegotiating their 6% interest rate into something lower. The bank informed them that to do this, they would have to reassess the property and that they are not currently assessing property. End of conversation. She and her husband told them that they were considering strategic default. This had no effect on the bank. (People in my part of the world are rather open about their finances-oddly enough.)
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<br />After leaving the grocery store, my finance and I started to figure out what perverse incentive was keeping the bank from a simple re-negotiation. Of course, this has been written about all over, but not by me. So my turn. This is what we realized:
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<br />1) Banks don't pay property taxes on the homes they are holding.(thus the strapped states and counties)
<br />2) Banks can keep inflated assets on their balance sheets, thus not having to recognize their losses to investors. The idea is to keep investors interested in Bank stocks. But investors have been bearish on banks stocks because of the confusing about what these banks actually hold on their balance sheets and because banks are keeping larger cash slush to cover bad debt,
<br />3) Banks collected on the PMI. In other words, they got the insurance money on the loss.
<br />4) all told, even if the bank tears the house down, they've made more money on it than they would have if they sold the houses at a loss.
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<br />The way this works is that the bank will foreclose. Then the house is supposed to go to auction. So the bank will bid whatever price is equal to the outstanding mortgage. Of course, the outstanding mortgage is usually based on very inflated prices. So the bank usually wins the house at auction. Then the county tax collector sends the bank a bill for the outstanding taxes, the banks asks for a deferment until they sell the house. Without the proper legal remedy, the tax collector agrees to to the deferment. But then the bank holds the property off the market, not wanting to further deflate prices with overstock.
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<br />So in the end, the original owner has a great incentive to walk away- believing that in 3 years he will be able to buy a new house at a cheaper price. The banks on the other hand were hoping to see interest rates rise. But the Fed just told them not to hold their breath. So score 1 to the people.
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<br />We need to start putting banks back in line- charging them property taxes and putting bans on their ability to package student loans into securities. They also need to change the rules on student loans. At this point, I must start to agree with those conservatives who point out that student loans encourage sharking by universities and colleges- particularly the for-profits. Loan limits need to be set lower. And students should be given a 20 day grace before interest accrues on their loans, like credit cards. USWesthttp://www.blogger.com/profile/07572294996079264655noreply@blogger.com3tag:blogger.com,1999:blog-6762928.post-39202019625254917422011-08-09T19:26:00.000-07:002011-08-09T19:49:29.615-07:00London CallingLondon has finally managed, more or less, to put an end to three nights of rioting which has also spread to other cities. The cause of the rioting is not specifically known. From across the pond, I think the reason for the rioting is not hard to discern. Teenagers have seen a massive economic collapse, their futures effectively taken away from them (in the short timeframe of youth) and nobody has yet paid for it. A kid who was 14 in 2007 saw a crash when he was 15 and is now trying to get a job at 18, with none available. This is not a specific riot over a specific thing. It is the result of an alienated and disaffected generation that is angry at society at large and sees nothing in government, church, or school that would connect them to civil society. The best analogy is to California hills in recent years that are full of unburnt fuel (trees and brush) from years of bad forest management, bone dry and ready to ignite.
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<br />Eventually, there was bound to be some violence in response to what I would call the economic violence perpetrated by bankers against the middle classes of the developed world. In London, it appears to be low scale rioting by kids. In the USA, it is taking on the darker hues of the Tea Party, a group not dissimilar to emotional teenage rioting but much more dangerous. Or random violence such as the shootings in Tucson last January. As I said to people two weeks ago, the main desire of Tea Partiers was to see an actual default by the Federal Government and the chaos that would follow: "Burn, baby, burn!" There will be blood. This was to be expected. Lucky London that it is all so mild and juvenile. Greece has not been so lucky.
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<br />Unknownnoreply@blogger.com6