The Word Worry

Glad the G20 leaders are feeling good. What, We Worry?

"Worry" appears in the majority of the daily musings of my capitalist pals, in this case of Wolfgang Munchau of the Financial Times. He's not worried that the bankers are getting too much. He's worried they're getting too little: "By the end of December, global banks had written off about $1,000bn (€752bn, £699bn) in bad assets, approximately half of that in the US. Since the onset of the crisis, the writedown of assets in the US has exceeded the provision of new capital."
The EU is not much better off. The Geithner plan is way too small for Munchau, and he adds, "Europe, too, will have to start to address the problem, by forcing banks to write down their assets in exchange for new capital." The same concern about inadequate size applies to the G20 pledges of new stimulus money.

But the question at this point is what has the public gotten from the money we've spent so far? Bloomberg estimates that government commitments just in the US are nearing $13 trillion. So the "worry" that appears everywhere in financial commentary is, well, worrying. Has as this just gone into the big back-yard hole for toxic waste the banks can't fill up even with $26 trillion, or $39 trillion?

How much are you going to want? And why should we pay another dollar before Geithner et al can offer a plausible answer to that question?

A much better big picture comes from the geographer and famed analyst of capitalism David Harvey, both on Grit TV (with Alexander Cockburn) and on Democracy Now. Among other good moments he:

• clearly defines neoliberalism as the reconstruction of class power
• says at one point "Last January 2008, the Wall Street bonuses collectively came in at $32 billion. OK. And at that time, two million people had already lost their houses. Figure, two million people have lost their houses; Wall Street rewards itself $32 billion. Nobody got angry about that. And I was extremely angry about that. It seemed to me this was class robbery."
• describes the Right to the City movement in terms that should lead people to look here.
• suggest the need to theorize zero-growth economics, which he points out will not be capitalist

Among other things, the interview is a relatively short refutation of the familar claim that socialist or marxist economics have no practical solutions. Harvey is good at answering Amy Goodman-style questions like "What does this current crisis mean for the future of capitalism, David Harvey?" But at the point where she asks him "were you for no bank bailouts," he replied, " Well, I was in favor of solving the foreclosure crisis. You see, if you’ve solved the housing crisis, the banks wouldn’t be holding any toxic assets. If you had gone in and bailed out all of the people, there would be no problem on Wall Street."

For the interesting overlap between Harvey's marxism and the analysis of a former IMF banker, see the Atlantic Monthly article by Simon Johnson on how the US became a banana republic of bankers.

Some Good Things to Read

Treasury Sec. Tim Geithner called for reregulation of the funds and securities fabricators and other semi-banking institutions that were expressed deregulated by a Repub-Dims grasping combo back in the Clinton day and that blew up the economy. He said,

Financial products and institutions should be regulated for the economic function they provide and the risks they present, not the legal form they take. . . . We can’t allow institutions to cherry pick among competing regulators, and shift risk to where it faces the lowest standards and constraints.

Fighting words. No details. But right on! Let's party like it's 1999.

Or like the 2 tops guys at GDF Suez in France, who had a press conference to congratulate themselves on renouncing their stock options for a year, while Gangster-Prez Nicholas Sarko said stuff like "you can't make a donkey drink that isn't thirsty" so he's going to pass a law against options and bonuses for executives at companies supported by the public. He also said France hates success and the crisis has given us our freedom back, and more of the usual nonsense.

Meanwhile back in reality, the crisis shrank the US economy at an annualized 6.3% rate in the 4th quarter of 2008. And Jeffrey Sachs joined a growing number of mainstream economists hatin on the Geithner giveaway of taxpayer money to Wall Street

California voters are not as dumb as their leaders, and are ready to reject the transparently stupid Schwarzenegger idea of filling part of the budget deficit with securities backed by future lottery revenues. Happily, Arnold's popularity is down to 33% approval - which is 3 times higher than the approval rating of the state legislature.

But THE GOOD STUFF.

• Matt Taibbi's amazingly hostile but useful history of the A.I.G. scam. This is the US government as Hedge Fund, in which the taxpayers are increasingly indebted shareholders in a failing company.
• Thomas Geoghegan's "“Infinite Debt: How Unlimited Interest Rates Destroyed the Economy.” Read his interview on Democracy Now, then subscribe to Harpers to read the article (it's a good magazine). Geoghegan's crucial thesis: "the inability of people to raise their own wages and the incredible ease with which they could get credit instead helped create this flow of capital out of manufacturing and into finance."
• Daniel Brook on payday lending - at 200-400%. On DN, Amy Goodman's intro points out, "In the early ’90s, there were fewer than 200 payday lending stores in the country. Today it’s a $40 billion industry with more than 22,000 stores. There are more payday lending stores than McDonald’s and Starbucks combined. As more Americans are living paycheck to paycheck [47%], the demand for payday loans is increasing.
  

There many great people like this on the beat, and there is therefore hope.

Culture of Dive Bombing

Job losses in the graph look like the World War II movie where the Zero dives full-speed straight into the sea. This time, Zeros-R-Us.

There have been four major modern explanations for mass layoffs, and the accompanying article mixes together the last two. Mass layoffs:

1. result from acts of God or nature. There is nothing to do but wait and pray.

2. express the superior power of the capitalist class, which benefits itself by liquidating labor when it feels the need.

3. results from natural obscelencence, capitalism's creative destruction, and markets' natural genius for outing the old and lofting the new.

4. are an optional piece of business strategy. Business for Dummies.

(4) is a nice version of Marx's class struggle (2). This piece says, for example, "Layoffs are multiplying because of dysfunction in the financial system, which is prompting even healthy companies to shed workers and shut down operations out of concern they may soon lose access to credit."

In other words, even while they are still making money, companies choose to protect their credit rather than their workers.

The idea that this is just fine, that it is legal, ethical, and logical to fire employees can be fired as a precautionary measure, was carefully developed by decades of conservative activism and argument.

A preferred argument is (3), which says firing is simply an expression of natural transitioning to a higher order. A typical manifestation, again from this article:

“The decimation of employment in legacy American brands such as General Motors is a trend that’s likely to continue,” said Robert E. Hall, an economist at Stanford University’s Hoover Institution. “We have to stimulate the economy to create jobs in other areas.”

Oh, so the US isn't going to do transportation anymore?

(3) is the sum of all wisdom of the field we know as economics. This field has been a disaster, and someday there will be . . . the Corporate Inquisition.

In the meantime, journalists need to hear that (4) is not actually justitifed by (3) - there's nothing natural about mass layoffs as your one solution to economic problems, and to your own deep fears.

Statehouse Clown Show

I've been avoiding comment on the California budget situation, which has gone from bad to ridiculous. But my native state is an object lesson in our topic of the last few days - well of this whole blog, really: replace social with market economics, watch everything fall apart. It's an object lesson in this blog's other topic: the failure of the political class worldwide.

The LA Times story today is "Legislature adjourns with no budget; governor prepares to lay off 10,000." The large Dim majority needs more or less one Republican to vote with them to beat the 2/3 limit for tax increases. The Republicans, unable to face the reality that on economics they are ALWAYS WRONG, have taken a no-tax pledge. The result will be the shutdown of every single public project in the state, and mass layoffs to add to the furlong.

Schwarzenegger now gets to star as Herbert Hoover in his own movie called "I, Arnold - Depression Governor." He was cast in the role by his own party, whose rank-and-file is also ignoring their own party leadership.

Here's the circle of geniuses that are holding 40 million people hostage with their ideological narcissism and general lack of a grip on reality.

That's GOP Sens. George Runner, Sam Aanestad, John Benoit and Bob Dutton, from left, and Dave Cox, seated.

Genius, you ask. Is my sarcasm a little harsh? Well here's swing vote holdout Abel Maldonado (R-Central Coast) in his own genius words:

Last week, I sent a letter to the Big 5 demanding that the funding be removed from the budget and allocated to other programs. But instead, the Big 5 ignored my request. If they were truly making a good-faith effort to show the people of California that they were serious about fixing this budget problem, the million dollars would have been re-appropriated to a vital program.

Etc. Seems that Genius Maldonado, self-described son of farmworkers, ran for the Republican nomination for Controller, was shut out by his own party for voting for a budget compromise in 2006, and is mad that the current Controller has $1 million for "office furniture," or whatever. Ergo, no state budget. Ergo, tens of thousands are out of work.

Maldonado to current farm workers (and every other kind): let them eat office furniture! Pure genius!