Published CommPro.biz 2014.02.27

The Solution
 

“What do you think is the most important problem facing this country today?” The folks at Gallup ask 1,000+/- scientifically chosen Americans that question the first week of every month. Last week (2014.02.17) they released the answers for this month. Jumping back into the lead it shared with “The Economy” every month from 2008 until last fall, was “Unemployment and Jobs”. So despite the chorus that has been droning “debt/deficit, debt/deficit, debt/deficit” during that same timeframe, the public has been worrying about unemployment, jobs and the economy. The deficit and debt has been at the bottom of their list after other concerns like healthcare and the politicians who are supposed to be doing something about these problems.

Actually the politicians beating the deficit drum are the ones who were in power when it was created. So if the people are concerned with unemployment, jobs and the economy, why do they keep sending the debt creators back to Washington to complain about their creation? The answer is twofold. Firstly, those who benefit most from the policies of debt creation –the ultra-wealthy– pour money into the election campaign coffers of the debt creators. Secondly, gerrymandered districts –immune to democracy– have been created for these servants of the wealthy.

How do we create jobs, reduce unemployment and fix the economy? We don’t claim credentials when it comes to economics, nor are we relying on the host of economists who see the solution we see. We are just reviewing the past. If you start at the beginning of the modern economic model –the industrial revolution and the birth of capitalism– you find the beginning of the pattern of periodic downturns in the economy, mostly caused by one greedy sector or another.

If you examine that series of ups and downs you will find that without exception, when the economy went down, recovery was triggered by the same solution. The government stepped in creating jobs, jumpstarting recovery. There is not a single instance in the United States or any other modern economy where a downturn has been reversed by any other means, not one. The idea that austerity is the path out of an economic downturn is a proven failure. Anyone who reviews history can see that. We see it today in Europe, nations teetering on the brink of bankruptcy. Germany, the strongest nation in the EU, is stagnating. We are the strongest nation in the world. Yet we are creeping; dragged down by the debt creators.

Now is the time to repair our crumbling infrastructure, to invest in education, to fund research, to create the jobs that will pull our economy out of the mud. To do what has been done every time we’ve faced this problem for more than 200 years, jumpstart growth. The people have been worrying about unemployment and jobs for five years. We know how to fix that; it could have been addressed in 2008. Makes you wonder why some of those charged with fixing it have instead focused on the debt/deficit; maybe a distraction?

"Am I wrong?"--"Am I Nuts?"-

-"What do you think?"--"Do you agree?"

Published In CommPRO,biz 2013.11.26

 

Ignoring the Obvious

We are five years into a worldwide recession. And while the United States is very sluggishly gaining ground, much of the rest of the world is sliding further into the abyss. Germany has parlayed a heavily subsidized manufacturing sector into the best of a bad lot. The rest of the Euro block is gasping for air. Yet many in Europe and in the United States seem determined to defy history in dealing with this downturn.

The only folks in America who are doing well are at the top; up and running on the no-strings-attached-taxpayer-funded bailouts. The stock market is soaring, the too-big-to-fail banks that triggered the recession, the super rich, big business, they’re all singing happy days are here again. Meanwhile, the middle class, small business, and the poor are left struggling. The solution, we are told, is austerity, a focus on our nation’s deficit. This plan from the folks who created the deficit with the first wars in our history that we made no effort to pay for as they were fought, and a tax cut.

The economic cancer we gave Europe has ravaged the continent. Especially those who have entered the job market in the five years since its onset. Youth in some European nations face 50% unemployment, and even those who are working are grotesquely underemployed. They are in a way a lost generation. Many who have advanced degrees, masters, even doctorates, are lucky to find menial work. Many are in their late twenties, some in their thirties; robbed of their future, their hopes for career and family lost.

History teaches a very different lesson. Every single economic downturn since the modern economic age dawned with the industrial revolution has been overcome by government intervention. Let’s look at recent history. America went into WW2 deep in debt. The debt had increased by the war’s end in spite of astronomical wartime taxes. Then we spent on the GI bill, educating returning veterans and subsidizing their home ownership. We rebuilt our former enemies’ homelands and hardly took a breath before the war in Korea. After he got us out of that war President Eisenhower went on a spending spree building our interstate highway system. At the time he made it out to be needed in case we had to move a lot of troops around in a hurry, but it was really a way to boost the economy. High end tax rates for the very rich soared to 90%. And America boomed.

In contrast we are allowing our roads and infrastructure to decay. Education is the last thing on our minds; we are forgoing the future, following a path of proven failure. Those few who are benefitting from this folly will find that it can’t go on forever, it is unsustainable. As our roads and bridges break down, as the economy decays, they too will find their positions in decline. They’ll discover – perhaps too late – that the ethically and morally wanting path they have chosen, is economically wanting for them as well.

Published in CommPRO.biz 2013.08.28

The Customer Is Not Always Right

Let’s review – America has been struggling to rise out of what has been called the Great Recession. A recession brought on by a systematic dismantling of safeguards that protected us for decades after the Great Depression. Engineered by lobbyists working for Wall Street banks and the super rich –the 1% of the 1%– this tearing down of the walls was not intended to cause a recession, just to allow those at the top to make more money.

The recession was an unintended consequence. The big banks had been buying up mortgages to create bundles that investors, pension funds and the like could stash away and collect interest on month after month. What could be safer, we all know real estate never loses value; it always goes up, right? Besides, the banks had these packages checked out; the credit rating services marked them AAA.

This new idea caught on like wildfire. Pretty soon the supply of mortgages wasn’t keeping pace with the need. So the banks pushed the mortgage brokers down the line for more and more mortgages. The brokers urged people to buy, coaching them and fudging the numbers when they didn’t qualify. The banks learned to pile the mortgages with the not-so-nice on the bottom. The rating services were overwhelmed. Under intense pressure from the banks to anoint the investment packages with top ratings, it appears that the services buckled. Soon packages the bankers were calling “Crap” were gaining AAA ratings and being sold by those same bankers to trusting customers.

To understand why the rating services would hang a AAA on what the bankers called “Crap,” we have to look at their business model. The banks asking for AAA ratings paid for them. The banks are the rating service’s customers. They feared that saying no to the banks would just send them to another rating service. They anointed the “Crap” AAA to keep the bucks coming through the door.

That’s pretty much what the Justice Department is saying that Standard & Poor’s did when they sued the rating agency for $5 billion. The DOJ and 14 states are suing S&P, the largest of the rating services. The other two, Moody’s and Fitch, are likely to be next. The $5 billion suit is moving through the California court of District Judge David Carter. S&P rated $4 trillion in various bank investment vehicles over the four years leading up to the collapse.

While S&P is facing the $5 billion lawsuit, keep in mind that the real bad guys are the handful of monster banks that put together the piles of crap and coerced an AAA out of the rating services. What’s more the same banks are back at it– gambling wildly secure in the knowledge that we will have to bail them out again when they stumble. We like to think that doing the right thing is easy. It’s not, what’s easy is taking that first step in the wrong direction