Leonard Cohen Playlist

The Rooster Crows Again

Long the object of scorn, ridicule, and exasperation on the part of "Anglo-Saxon" business and political elites, the French system of generous social welfare and big government appears to be getting new respect and perhaps generating a touch of envy. At least, that's a prominent viewpoint in France.

Status Quo Ante

Following a week in which a dynamic new President assumed office and an anxious nation wondered whether he will somehow find a way to restore our lost national luster, the talking heads on This Week with George Stephanopoulos dedicated the first ten minutes of their babble-fest to analyzing the reasons why Caroline Kennedy withdrew her candidacy for the U.S. Senate. Cokie Roberts took particular umbrage at the "sexism" involved in l'affaire Caroline, as if it were patently obvious that Ms. Kennedy's storied name, enormous wealth, A-list connections, and telegenic celebrity were assets unequal to the massive liability of her gender. That Governor Paterson appointed another woman to the post in lieu of Kennedy did not dissuade Cokie from the righteousness of her ridiculous argument.

Denial

Our economy is in shambles with the nation's treasure being squandered in a desperate attempt to rescue our corrupt and profligate financial system from insolvency. Millions of citizens are confronting unemployment, or foreclosure, or the impossibility of retirement, or lack of access to health care, or some combination of these. The luckier among us are merely confronting nauseating insecurity. Capitalism is in severe crisis and its catastrophic collapse, if not certain, is uncomfortably possible. Yet it is now clear that if the crisis cannot be remedied with solutions emerging from within the bounds of conventional economic thinking and entrenched political ideology, then the crisis simply will not be remedied.

Liberal Patriotism

Refreshing, isn't it, that we learned on election night and again at this week's inauguration that patriotism can be expressed with hope and joy and without elegies to empire and the hooahs of soldiers.

The French Are Responsible for Obama's Presidency

Ségolène Royal, who lost against Nicholas Sarkozy in the latest French presidential election, reveals to the world that "yes, I inspired Obama, and his teams copied us."

Relax, all you French-bashers. The public reaction to her comments in France is rollicking laughter.

The Big Bummer for Tom Friedman

Tom Friedman, he of Lexuses, olive trees, the flat earth, "suck on this," the Friedman unit, and lately, a proselytizer for a Green-driven economic utopia, seems to have fallen on hard times - at least to the extent that times can be hard for someone with a plum writing job for The New York Times and who collects a reported $50,000 per speaking engagement.

Tom's wife is apparently heiress to General Growth Properties, a Real Estate Investment Trust and the nation's second largest owner of shopping malls. General Growth has seen its market value plunge more than 97%, reducing the Friedman family fortune from $3.5 billion in December 2007 to its present $25 million. [Source: Harper's Magazine Index, February 2009]

Alas.

From this Month's Harper's Index

• Number of times in 2008 that the S&P closed up or down 5 percent in a single day: 17
• Number of times between 1956 and 2007 it did this: 17
  

Just in Time for Inauguration

Israel's ready for a cease-fire.

Protest Watch #4 - Latvia

NY Times:

Violent protests over political grievances and mounting economic woes shook the Latvian capital, Riga, late Tuesday, leaving around 25 people injured and leading to 106 arrests by the police.

Remember When Nortel Was Flying High?

Despite 16 rounds of layoffs, the company hasn't been able to turn itself around and has now filed for bankruptcy protection.

Investors had little apparent faith in the company whose shares once reached 123.10 Canadian dollars on the Toronto Stock Exchange. Adjusted for a 10 to 1 consolidation, they closed at just under 4 Canadian cents on Tuesday.

A Good Way to Calm the Stomach

No better antidote to a nauseating Tom Friedman column than medicine administered by Glenn Greenwald.

Time for a National Bank?

I'm trying to understand this. The banks get in trouble because of bad lending practices exacerbated by securitization. They stop lending. The government swoops in and gives away piles of money to induce the banks to lend. The banks don't lend because they can't find credit-worthy borrowers. So instead, they take the money and use it to shore up their own balance sheets. But if the banks aren't lending, they're not making money, and therefore their health is still very much in question.

Since the banks aren't lending, businesses can't get loans. This puts them in trouble and makes the weak economy weaker. So the piles of government money aren't doing anything for the general economy. For the banks themselves, the money is doing nothing more than insuring that they will eventually need more money to postpone their collapse again.

Wouldn't it be better for the government to cut out the middle man, forget about giving money to the banks, and instead loan it directly to businesses and consumers? In other words, why don't we set up a national bank?

The Questionable Practice of Subsidizing Homeownership

The Richmond Fed, of all institutions, recently published an article critical of the subsidization of homeownership. Some takeaways:

• Government attempts to boost homeownership, dating from Clinton's "National Homeownership Strategy," resulted in the loosening of lending standards that led to the financial meltdown.
• The tax deduction for mortgage interest encourages people to buy bigger and more expensive homes.
• An assortment of government subsidies steer more investment capital to the housing market than would otherwise occur. This has resulted in an overinvestment in housing relative to other capital goods.
• It is not clear that using one's home as one's primary investment is a sound financial decision. The opportunity costs of other investment choices are generally not taken into account.
• Homeownership reduces labor mobility.
• Because of the interest homeowners have in keeping the property values high, they have a bias toward land-use regulations. These restrict the number of houses that can be built in a given area, keeping inventory low and values artificially high.
• Notable quote from Nobel-prize-winning economist Edmund Phelps: "It used to be that the business of America was business. Now the business of America is homeownership."

These observations support the argument that suburbanization has been a terrible misallocation of resources.

Graph of the Change in Unemployment

Telling graph from Paul Krugman.

Loathsome People

Amusing profiles of 50 prominent personalities. A couple of my favorites:

20. Joe the Plumber

Charges: The Che Guevara of bald, pissed off white men. In a lot of ways, Samuel Wurzelbacher really does represent the average American—basing economic opinions on unrealistic expectations of personal future success, blaming his failure to meet those expectations on minorities and old people, complaining about deadbeats getting his taxes when he isn’t actually paying his taxes, and advertising his own rudimentary historical and mathematical ignorance by warning of creeping socialism in a country whose highest income tax rate has dropped by half in thirty years. “Joe” indeed symbolizes the true American dream—to become undeservedly rich and famous through a dizzyingly improbable stroke of luck. As American folk heroes go, Wurzelbacher ranks somewhere between Hulk Hogan and Bernie Goetz.

Exhibit A: "Social Security is a joke...social security I've never believed in, don't like it. I hate that it's forced on me."

Sentence: After blowing his fifteen minutes and all his money on coke and Thai hookers, an infirm, elderly Joe finds that social security actually is a joke, and is finally forced to snake toilets for a living.

[snip]

5. Alan Greenspan

Charges: The mortgage meltdown may seem complicated, but it started simple, with Al Greenspan pegging the Fed fund rate at 1%. This made Treasury Bonds a fairly lame investment, and led to investors looking for other seemingly safe securities to buy, which led to a flourishing demand for mortgage-backed securities, which led to banks increasingly lowering their standards for mortgage applications, eventually giving liar loans away to anyone willing to take them, which used to be called usury. This led to a decline in the real value of these MBA securities due to high probabilities of foreclosure, but somehow they were still AAA-rated by credit agencies displaying either hopeless incompetence or criminal collusion. Even a monkey wouldn’t need a slide rule to see what would come next. But Alan Greenspan, super-genius guru of the glorious realm of the self-regulating free market, is totally flummoxed. Refusing to accept any blame for years as the housing bubble, long-predicted by out-of-favor economic realists, bloated and burst, only recently has Greenspan accepted even marginal responsibility, admitting only that he was “partially” wrong, professing a state of “shocked disbelief” that lenders couldn’t regulate themselves, and thinking to himself, “This isn’t how it worked in Atlas Shrugged!”

Exhibit A: “Parasites who persistently avoid either purpose or reason perish as they should.”

Sentence: Recurring role as a senile great uncle on new C-grade sitcom “Krugman’s Krew.”

Better to Be Wrong in a Herd than Independently Right

A number of exasperated commentators (Digby and Glenn Greenwald are two prominent ones who come immediately to mind) regularly blast the Washington establishment and the major media for continuing to publish the opinions and analysis of pundits who have proven rarely, if ever, to be correct. Yves Smith explores the economic side of this phenomenon in a post that discusses the spectacular failure of most economists to foresee this, the second worst economic downtown in the past eighty years, and the absence of accountability for this failure. Shockingly, many of the very economists who were so utterly wrong continue to guide and shape economic policy. Yves' analogy:

But if a doctor repeatedly deemed patients to be healthy that were soon found to have Stage Four cancer that was at least six years in the making, the doctor would be a likely candidate for a malpractice suit. Yet we have heard nary a peep about the almost willful blindiness of economists to the crisis-in-its-making, with the result that their central role in policy development remains beyond question.

Unshakable American Faith

Americans, famously, are a people of faith. We believe in many things, but we're in our present straits because we believed in debt - unlimited debt. The mass of us trusted that we could have what we wanted when we wanted it by borrowing to get it. Since we always wanted more, we always borrowed more. The wise among us - at least those in our leadership - made no attempt to dispel the people's faith in debt because they shared it. To be sure, like any priestly class, they testified to their faith with sophistication and nuance, in the liturgical language of financial engineering. But whether our faith was expressed through a deck of credit cards and an interest-only mortgage or through collateralized debt obligations and credit default swaps, the fundamental belief that prosperity depended on debt was the same.

Wealth through debt is just one of our colorful faith-based initiatives. There are others and they continue apace. We believe in unlimited resources. We believe in unlimited power. We believe in unlimited growth. And we have more than a mustard seed of faith that whatever bumps we may encounter on the road to more will be smoothed by our unlimited ingenuity.

Our childlike faith in limitlessness is encouraged as a matter of official policy. We equate prosperity with growth, measuring our society's health by its increase in gross economic output, without bothering to ask about the quality of the output or the sustainability of the growth. The quality leaves much to be desired and the sustainability is not only doubtful, it is impossible. But we treat these facts as heresies and so in the unshakable spirit of true believers, we rebuke any who recite them and collectively cling ever more tightly to The American Way of Life.

We continue to believe in suburban expansion. We yearn for a new boom in housing starts, in new office parks, in new retail complexes, and in the highways and byways that connect them. We believe in suburban expansion because we consider home ownership the essence of the American Dream, the sine qua non of responsible adulthood.

Consistent with our belief in suburban expansion, we believe in unlimited resources. First, we believe in unlimited land. We have faith there will always be land for new houses and that if the land we need for lawns and swimming pools displaces land for crops and animals, we do not fret, because our faith in unlimited land spills into our faith in unlimited food.

We believe in unlimited energy. We have faith that fossil fuels will serve our energy needs until they are gone, at which point we will seamlessly shift to a new energy source that will heat our homes, run our gadgets, and fuel our cars.

Declining asset values, including that fortress of wealth, the suburban home; rising unemployment; and economic anxiety have, perhaps, shaken our belief in unlimited debt. But they show no signs of weakening our conviction that American life is fundamentally limitless.

Gaza

I don't claim to have more than a rudimentary understanding of the complexities of the Israeli-Palestinian conflict. I do believe, however, that U.S. policy is too strongly pro-Israel and that we often confuse Israel's interests with our own. I am troubled that there are almost no prominent politicians in either party who deviate from reflexive support of Israel and I was sickened when Jimmy Carter, of all people, was attacked when he published "Palestine: Peace Not Apartheid," with some of the more rabid and paranoid Israel-backers accusing him of anti-Semitism.

In the context of this latest round of bloodshed in Gaza, I've been listening to hear what voices might be raised in opposition to Israel's policies. Glenn Greenwald is one who has stepped forward with sharp criticism. He posted the following clip from Bill Moyers' Journal, in which Moyers also takes issue with Israel's actions and blind support for them by the American government.





Elsewhere among the commentators and analysts in my orbit, David Seaton has posted a BBC video in which a former captain in the Israeli air force publicly condemns his countries latest actions in Gaza. Seaton also links to this article by Naomi Klein, who calls for an international boycotts and divestment initiatives aimed at Israel, similar to those directed at South Africa during its apartheid regime.

Interesting Fact

Before he became president of Russia, Dmitry Medvedev was chairman of Gazprom.