The End of the Great Moderation, the Bailouts of Freddie & Fannie and Wall Street, and the Tattered Safety Net for Everyone Else
As we bail out Wall Street along with Freddie and Fannie and all the top financial executives who have been pocketing tens of millions a year, yet allow millions of homeowners and jobless Americans to sink, it's worth contemplating what's happening to the American economy and to our social safety nets.
What economists have called "The Great Moderation" - a period when the business cycle evened out, and neither inflation nor recession posed much of a threat- began in the mid-1980s, and now appears to be over. It was good when it lasted. But it led the nation to think we didn't need much by way of social insurance.
No one knows for sure what caused the Great Moderation. Some had credited increased sophistication of financial markets and the wisdom of the Federal Reserve Board. Hindsight suggests it was more luck than anything else.
Well, folks, it turns out the great moderation was something of a fluke, and now tens of millions of Americans are in trouble with no safety net to help them.
That's because the apparent end of the boom and bust cycles led us to assume the economy would no longer impose huge, unexpected, and arbitrary losses on large numbers of Americans. So we basically got rid of the safety nets. We abolished welfare, let unemployment insurance wither, and paid scant attention when corporations eliminated defined-benefit pensions and cut health insurance benefits. We even stopped worrying about the safety of small investors, allowing federal deposit insurance to shrink as a proportion of total savings (witness the recent bank run in California).
But now we have to rethink safety nets. Right now, nets are being spread for the wrong people. The giants of Wall Street along with Fannie and Freddie get bailed out but there's still no relief in sight for most homeowners who can't pay their mortgages. Corporations that don't deliver on their pension obligations are helped but there's nothing for retirees and small investors whose savings are drying up because of Wall
Street's decline. Small investors are losing their shirts but the Fed stands by to help the biggest.
Yet I have to believe the end of the Great Moderation will eventually result in a broader safety net. Maybe not the old forms of social insurance, but new ones like universal health insurance, earnings insurance, and savings accounts in which the dollars you put away are supplemented by government dollars.
The very rich, fattest investors, and the biggest corporations don't need safety nets. Now that the booms and busts are back, the rest of us do.
What economists have called "The Great Moderation" - a period when the business cycle evened out, and neither inflation nor recession posed much of a threat- began in the mid-1980s, and now appears to be over. It was good when it lasted. But it led the nation to think we didn't need much by way of social insurance.
No one knows for sure what caused the Great Moderation. Some had credited increased sophistication of financial markets and the wisdom of the Federal Reserve Board. Hindsight suggests it was more luck than anything else.
Well, folks, it turns out the great moderation was something of a fluke, and now tens of millions of Americans are in trouble with no safety net to help them.
That's because the apparent end of the boom and bust cycles led us to assume the economy would no longer impose huge, unexpected, and arbitrary losses on large numbers of Americans. So we basically got rid of the safety nets. We abolished welfare, let unemployment insurance wither, and paid scant attention when corporations eliminated defined-benefit pensions and cut health insurance benefits. We even stopped worrying about the safety of small investors, allowing federal deposit insurance to shrink as a proportion of total savings (witness the recent bank run in California).
But now we have to rethink safety nets. Right now, nets are being spread for the wrong people. The giants of Wall Street along with Fannie and Freddie get bailed out but there's still no relief in sight for most homeowners who can't pay their mortgages. Corporations that don't deliver on their pension obligations are helped but there's nothing for retirees and small investors whose savings are drying up because of Wall
Street's decline. Small investors are losing their shirts but the Fed stands by to help the biggest.
Yet I have to believe the end of the Great Moderation will eventually result in a broader safety net. Maybe not the old forms of social insurance, but new ones like universal health insurance, earnings insurance, and savings accounts in which the dollars you put away are supplemented by government dollars.
The very rich, fattest investors, and the biggest corporations don't need safety nets. Now that the booms and busts are back, the rest of us do.
posted by Robert Reich | 7:32 AM
71 Comments:
Mr. Reich expresses concern that:
“Small investors are losing their shirts”
And yet, Barack Obama wants to almost DOUBLE the capital gains tax rate paid by small investors (starting with the very first dollar of income).
Mr. Reich, in defense of small investors (and retirees living on meager annual budgets), can we assume that you will work tireless to ensure Barack Obama does NOT become our next President?
Or, were those just crocodile tears you shed on behalf of small investors?
The long moderation makes sense when you consider all the positive forces that underpinned the economy. We had the baby boomers reaching their peak of productivity. We had a series of technological innovations. We had cheap energy. All of these has a net positive influence on the economy and so even as it went through the natural business cycle, the overall push in the economy was upward.
Today though we have quite the opposite situation developing. Boomers are beginning to retire, pulling their capital out of the markets while adding more costs to the system. Energy is no longer cheap. Technology does continue to move forward, but the innovation is happening all over the planet, not just here anymore.
So the fundamental drivers that helped to moderate the biggest problems in the economy simply aren't there anymore. We can no longer reliably grow our way out of our problems.
OK, I got an incredibly naive question, but maybe you can explain this to me. There's a lot of complaining to be found online about all these bail outs. And then, if you've followed your history classes (quite an assumption, I know) you might remember something along the lines of the Big Depression being caused by exactly those kinds of bailouts not being available, so that the financial markets (back then also run by the same types as today) being allowed to collapse.
How does that compute? Does it make sense to complain about the bailouts if the alternatives would be even ghastlier? I mean apart from the top 1% nobody likes to see the CEOs being bailed out, but it seems to me that focusing on that is kind of missing the idea a little....
This post makes me feel like we've been climbing a mountain, under cover of trees, now to come out from beneath them and see the vista below.
It's so good to get a larger view of these things, and then be able to recognize what we need to do to carry on the hope for a positive future.
Thank you Robert Reich-- your wisdom is what keeps me coming back here over and over. Thank you!
There has been a "silent depression" occurring in America over the past 50 years. I believe it has occurred more from a lack of leadership then from partisan bickering and stalemate.
1960's
Women having to move into the work force and out of their key family role = breakdown in core family structure, communications, values, guidance, etc.
America drops mental health programs & institutions = mentally ill on streets and in neighborhoods
1970's
Drug war is misguided towards users and not dealers - prisons fill excessively.
Families forced into credit spending to maintain lifestyles = consumer debt, saving rates fall
Corporate America moving offshore with jobs = loss in corporate taxes, lack of good jobs,
Illegal immigrants start taking minimum wage jobs, many are paid under the table (gray economy) = loss of taxes, loss of decent wage increases
1980's
Americans unable to save – national savings rate erodes as many struggle to maintain life styles, many begin revolving charge cards at loan-shark rates of +18%.
America's infrastructure falls further behind resulting in more traffic congestion, which equates to longer commute times, which equates to more loss in family time, and more expenses.
America’s education begins declining more each year. America falls behind to 3rd world nations in 1-12th grade testing.
1990's
Longer working hours, jobs more competitive globally, went from 8 hr days to 10 hr days to maintain
Corporate America moves from defined benefit plans to defined contribution plans, which means that employees must become investment professionals to ensure their own retirement, corporate pension funding continues to erode.
Corporate America reduces health benefits, increase in temp jobs to eliminate benefits for many workers.
Soc Sec (Ponzi scheme) is failing => retirement age increases = Baby boomers must work until 70 and beyond
2000’s
Costly war budgets distract from domestic programs and domestics problems.
Borrowing (spending) home equity to maintain lifestyle = current mortgage defaults (predatory practices by financial institutions)
They say that "prisons are a reflection of society". Now in America, 1 out of 250 persons are in jail. The social-economic problems from the silent depression in America has contributed to extensive crime, a sense of hopelessness, and lack of opportunity for many. There is overwhelming apathy towards politics and distrust in government.
Many young kids today are raised with a connection to family (values) and their futures (education and job opportunity).
I fear for America's future.
Thanks for being a voice of reason and awakening. America needs to hear from the intellectuals in this country, rather than politicians. I wish you and others of your peer could have a better way to reach more average Americans in this country.
Good points Sterno.
Most people I think understand that infinite growth on a finite planet isn't possible. But people generally believe there is no limit to further growth. Which by extension, is a belief in infinite growth.
I can understand why it is hard to accept that we may finally be reaching the limits of our civilization. It's unfair that we should be reaching our limits now. Why not let it happen to our grand children or great grand children instead?
But the handwriting is on the wall in every single resource. No resource appear to be a vast untapped infinite frontier as all of our current resources once appeared to be.
Sure we're not out of many resources. We're not out of oil, gas or coal. But extraction is getting harder as we struggle against the law of diminishing returns.
We had a great run, but unless we discover a new mystery science fiction type energy resource and power it up really, really soon, we're in for a decline in every sector. And as our population continues to grow, the decline per capita will continue to accelerate.
Everywhere I turn now, I hear people scapegoating. Blaming whacko environmentalists for beating Bush I with a rubber hose until he signed executive order to make ANWAR and coastal drilling off limits. Or selfish NIMBY Home owners that don't want gas wells to replace their swing sets.
But this scapegoating is one of the signs of a declining civilization. When Rome was in it's final decline, scapegoating was so bad, that the Church was bringing witches to try to bring back the good times.
The good times are over. The long decline is here. The scapegoating will continue until moral improves.
SBvor would you recommend some lower limit for capital gains tax increases? The Capital Gains tax was reduced to help poor retired CEOs get more money out of golden parachute funds. Dividend payments on limited preferred stocks have become a tax cheat method of paying giant retirement salaries to wealthy CEOs.
Do you think that this loophole should be allowed to continue?
Joerg, the depression and this upcoming one, are both due to lack of proper regulation.
During the great depression, there were bailouts.
The problem is that the boom, bust, bailout cycle grows larger and larger until it destroys the currency.
This current bailout will drive the prices of food and fuel higher. Further bailouts will continue to destroy the value of the dollar.
We spent the last few decades dismantling all of the regulations put in after the Great Depression, that kept our financial system oscillating at a more acceptable rate. The last eight years, the pace of removing regulations has quickened, and so the frequency of the oscillations has increased, as has the intensity of the swings.
My grandfather's generation would've called us idiots for dismantling the protections that keep the economy strong. They already lived through that experiment. But their children consistently believe that this time is different, each and every time.
There are people making a lot of money on this. They'll keep lobbying to perpetuate the boom and bust cycles. If you can outspend them, you might be able to buy enough votes to counter their influence.
WeaselDog,
Whatever you tax, you get less of (in direct proportion to the extent to which you tax it).
Investment capital is the fuel which drives innovation, advances in productivity, better medicines and other quality of life issues.
Thus, if you want less innovation and fewer advances in productivity and other quality of life issues, then higher capital gains tax rates are for you.
Alternatively, if you are willing to sacrifice all that in order to feed your class hatred and envy, then higher capital gains tax rates are for you.
Just remember, higher capital gains tax rates will also decrease the likelihood that we will EVER move beyond petroleum as a transportation fuel.
Do some math for me. Tally the salaries of every Fortune 500 CEO. If the IRS were to confiscate 100% of their combined incomes, what portion of the Federal Budget would that pay (let’s just ignore the economic damage that would entail).
Meantime, let’s refresh your memory as to who pays what in taxes.
All this utterly INSANE talk about the next Great Depression is just further proof that so-called Liberalism is a MENTAL DISORDER!
In response to Joerg's comment. The simple reality is that these bail outs have to happen for precisely the reason you point out. The damage has been done.
The argument here is more about what we do going forward. There will always be companies that are too big to fail. So how do you deal with that? Do you give them a free hand to do as they wish, then bail them out when they get in trouble (privatizing reward and socializing risk)? Or do you regulate them in such a way that it reduces the chances of them overreaching and reaching a point of failure?
SBvor, I see your point. The Capital Gains tax was reduced a few years back and everything is much better now.
Actually, beyond a corporation selling stock to raise cash, I don't see how stock market gambling drives research and development.
We're talking about tax paid on profits made by speculators, right? We call them investors, but really, putting money in the market is not investing, but gambling. You're betting that you can sell at a higher price than you bought at. And eventually, all stocks end up at zero someday. The only thing that keeps stock values trading above fundamentals is constant churning by the big financial institutions, the PPT and the FED, as the rollover funds through it.
How long can they keep that up before we all go broke in this inflationary spiral?
And when more boomers are taking money out faster than small investors are putting in, how will the PPT keep the stock values high, without driving inflation up?
I fail to see the connection between the Capital Gains Taxes and the Laws of Thermodynamics.
There is no replacement for oil. No other energy source has the energy density, quality and ease of use that oil has. Nothing comes remotely close. On oil, we're living on Donal Trumps wages. Without oil, we're living on his janitor's wages. You can't bribe Jesus into refilling the oil fields. you've can't through your profits from Capital Gains into the air and generate a Star Trek Black Hole Powered Nuclear Reactor.
I completely fail to see how your personal profits will save civilization. I think you're making a giant leap in assumptions here.
sbvor, it's not that simple. Ultimately the economy comes down to supply and demand. If you have demand that's not being met by supply, then you need to put money into capital investment. Cutting capital gains rates makes sense in that scenario because it provides more money to build the infrastructure needed to provide those goods.
On the other hand, if demand is where the problem is, then investing all the capital you want does you no good because nobody's buying. The current economic problem is largely a factor of a demand problem. People do not have the money in their pockets to buy the goods that the economy produces.
Therefore it makes the most sense to tax capital investment at a higher rate so we can afford to reduce taxes or provide tax credits to lower income earners. They'll be better positioned to spend money and that will begin to get the gears of the economy spinning again.
Sbvor, I don't believe everything the government officials tell me, so I guess I have a mental disorder.
That chart shows the quantity of money slushing around in the upper levels of the system.
There once was a time when finance made up only a fraction of those numbers. Now finance makes up the lion's share.
Those numbers should scare the hell out you. They represent the new monies created to service multiply leveraged debts between inbred financial institutions.
It would be like you and I passing million dollar IOUs back and forth and the government adding that into the economic stats.
That doesn't mean what you think it means.
Sterno, you might be right that a bailout is what we need.
I don't know that we do.
But I do know that this bail out will not come with a return to rational regulation. So this bailout will lead to more bailouts.
This cycle has to crash before it can be fixed. Our leadership will keep profiting from the boom and busts until they can't.
They won't fix it, so long as they know they are guaranteed to get a bailout.
In the meantime, as the foreclosures continue, the banks are gaining a lot of real estate. And the taxpayer is paying their expenses to obtain it.
If this cycle repeats couple more times, the banks will end up owning a lot of America outright. And it the taxpayer will have financed this land grab.
Right Sterno.
In the current climate, with interest rates low and taxes highest at the lowest levels of income, investing in people and infrastructure is just stupid.
There is much more money to be made in investing in debt, leveraged in debt. So long as our monetary policy is based on the fast and easy creation of large sums of electronic money, the real profits come from siphoning from this supply.
If you invest in people and infrastructure, inflation is going to eat up all of your profits.
It's much better to invest in financial vehicles that are bouyed by inflationary pressures.
WeaselDog sez:
“Actually, beyond a corporation selling stock to raise cash, I don't see how stock market gambling drives research and development.”
That is because you have absolutely, positively, ZERO comprehension of how the capitalist system works.
And, THAT is because you were “educated” in a system built upon a Socialist paradigm which does not teach students but rather indoctrinates victims with Socialist propaganda.
Selling stock to raise cash is PRECISELY what fuels virtually all human progress. Maintaining a secondary market in those stocks is what:
1) Provides incentive to purchase stock from the initial offering.
2) Provides incentive to continue to grow and continue to innovate.
weaseldog:
1) Your 1st post is correct; Finite planet + declining resources + increasing population + global warming = end of civilization as we know it. Doesn't need to be, but I don't see anyone beginning to accept or address the problem.
2) You don't know sbvor do you?
Great Moderation: Huh? Early 80's Reagen gave us the biggest recession since 30's depression. Late 80's S&L collapse, mid 90's .com bubble, 98 Russian currency crises, 2000 .com bust, 2001-06 housing bubble, NOW; everything in the toilet. When was the moderation?
Just a minor nit to pick:
2) Provides incentive to continue to grow and continue to innovate.
The incentive is to grow profits. Innovation can be a secondary benefit, but that's not the goal of business necessarily. Exxon, for example, has recently dumped billions into buying back it's own stock and paying out dividends. That's not innovating.
Businesses will almost always do what is in the interest of maximizing profitability. In a publicly traded company, they are actual in legal peril if they don't. Innovation and other positive benefits of these businesses are always necessarily secondary to profit.
Given this, what works best is a system where regulation adjusts the playing field such that innovation, social welfare, environmentalism, etc, are also in line with increased profitability. What we have now is far from that.
Nobody here is advocating socialism, instead we're advocating a well regulated capitalist system that factors in the social costs of our nation into the cost of business. Doing this up front, rather than simply having all the negative consequences after the fact and then being made to clean up the mess.
Sad, but true, this country is circling the drain. It is just a matter of time.
Sterno,
Without innovation, there will be no profits.
Ditch your hatred of Capitalism!
WeaselDog,
The world is not even remotely close to running out of hydrocarbon energy sources.
I’ve posted about “Peak Oil” here.
But, as I noted in that post, that “Peak Oil” analysis does not factor in our tremendous Oil Shale resources OR our tremendous Coal resources. As this editorial notes, the technology to liquefy coal into crude oil is already in use.
France knows very well that your casual dismissal of Nuclear Power is unfounded. And, I have every confidence that other alternative energy sources will become more and more effective and efficient (over the next few DECADES).
I can't keep a straight face when I read comments that imply our monetary system needs MORE regulation.
Let's not get this wrong, fellas.
Fannie Mae and Freddie Mac are government sponsored enterprises. They are the epitome of government interventionism in the market.
The reason they have become so inflated is that they knew Fannie and Freddie were capable of buying any debt instrument created by the banking industry.
The banks aren't to blame, either. They are concerned with the bottom line, as they should be.
But in a system built upon the ridiculous notion of perpetual growth through never-ending spending and supported by fractional reserve banking, this is all that can happen.
How do you pay back $46 in debt when only $13 is in existence?
multiply these numbers by a trillion and you get actual USD debt compared with actual USD in circulation.
Regulation is an open banking system, backed by sound money, where the market requires banks to be held accountable for their issuance of deposit receipts.
Only this system can truly regulate.
Good GRIEF!
The INSANITY in this thread is REALLY over the top (even for so-called “Liberals”)!
It is ironic that I would offer my previous comment without first observing a dose of sanity having been introduced (by marketeer).
Sbvor I see your point.
Under the old paradigm, capitalism was driven by profits.
A corporation made and sold a product, or they provided a service.
They earned profits in this endeavor, and they often turned this some portion of their profits back into investments in people and infrastructure. Often they would receive tax breaks for doing so.
But that's the old socialist Marxist way of doing things. Now corporations endlessly issue and sell stock to earn profits.
Sbvor, I said that we're not running out of oil, so you argued that I'm wrong, that we're not running out of oil.
Do you read before you post?
What we are seeing is production limits. We are reaching a point where we can no longer continue our march to infinite extraction rates.
Each energy source has a maximum rate of production. To continue growth, we must continually consume more energy every year. This means that the rate that we extract energy out of the Earth must continue to increase. This must increase to infinity or we reach the end of growth.
Oil shales require more oil to produce than they return. There is no way that mining this resource is going to reach production rates of many millions of barrels a day.
Let's try a thought experiment. Say you and a friend are each granted a trust, of one billion dollars.
You are allowed to withdraw from this trust at $100/month and your friend can withdraw at $20,000 month.
You each have a billion dollars, so there is no difference between your abilities to spend this money right or wrong?
This is the situation with energy extraction. It's not the estimated reserves that matter as much as the rate that these reserves can be mined.
I don't mind being called insane by people who believe that our energy consumption and industrial production can grow to infinity on a finite planet.
If we discovered infinite energy, then at some point the waste heat alone would cook the planet and kill us all. If we could shed the waste heat, we'd still eventually collapse under the gravity of our ever expanding mass.
If you believe in infinite growth on a finite planet, that's fine by me, but don't expect me to take you seriously.
It's obvious that Science and Math have a strong liberal bias.
"Sad, but true, this country is circling the drain. It is just a matter of time. "
Not to be too much of a Pollyanna, but it seems to me that when things are looking most impossible, when there's no way through a problem, that when transformation can happen.
I have hope that this country's best resource, our people (the mutts and mongrels among us especially) will find a way to do the real work that needs doing to make us a productive nation again.
I'm not an economist, so don't whack me if you are. Still, I can't see why we couldn't put our collective efforts to the task of finding and implementing alternative energy sources.
The service economy of the last 30 years has been a vampire economy -- and the vampires have benefitted. But the body collective may rise hail and sound if we can gather the will to transform the horrors of now into something new and great. I'm so ready for that. Aren't you?
WeaselDog,
1) When you show me how this comment amounts to an argument that “we're not running out of oil”, I will consider withdrawing my assertion that you’re a silly, childish troll.
2) When you substantiate your utterly false assertion that “Oil shales require more oil to produce than they return”, I will consider withdrawing my assertion that you’re a bald faced liar.
You’re just not worth my time.
Dixon, alternative energy sources aren't an economic problem.
We know about every energy resource that we can commercially extract.
If you add up all of the alternatives that have growth potential, then they don't come anywhere near fossil fuels in BTUs.
If we want more growth, we need something that we don't know about.
I don't believe that this solution will happen this year or the next. It may take many decades for a wealthy society that is dedicated to science to accomplish the transition to the next unknown source of energy. After the Super Conducting Super Collider was killed, I lost faith that the US can look past quarterly profits long enough to accomplish such lofty goals.
Dr. Reich,
Compliments! ... one of your essay critiques I concur with totally.
Trust in the future you will be specific on the policy options for more equitable Safety Nets for Mainstreet America as opposed to Wall Street America. Our nation is being torn apart by a Capitalism that favors the Few while the Many pay for the former's losses.
This calls for a return to "CAPITALISM WITH A
CONSCIENCE" ... in the respectful conservative tradition of Edmund Burke where concern for a fair playing field, individual and community progress were treasured values in our democratic system
Frank Thomas, The Netherlands
Sbvor, if you believe that we are not depleting the oil in the Earth, then you must believe that the supply of oil is infinite.
If the supply of oil is infinite, then it would have infinite mass and the Earth would collapse into a black hole.
The alternative I suppose is that the oil in the Earth is infinitely supplied by an alternate space time continuum.
Do you actually believe that the quantity of oil in the Earth is infinite?
As to shale oil, it's the same as snake oil. If if it had a positive return in energy, after the mining, crushing , washing , processing, drying, baking, etc..., then it would be profitable to produce. And the oil industry would have been producing oil from it for decades.
Tar sands are profitable because stranded natural gas powers the process, even though it is close to being an energy loser. When the stranded natural gas runs out, the tar sands operations will shut down.
I don't believe in infinite energy, infinite resources, perpetual motion of endless free lunches.
Call me stupid, but that's just the way I am.
You're welcome to believe in these things. That's fine by me. I'm not here to give you a college education in chemistry and geology. And I won't bother to try.
If you have an interest in learning more about these topics, your local community college can help you out. I recommend that you start with a basic chemistry curriculum for science majors. That will give you the knowledge necessary to do energy calculations and understand the fundamentals of thermodynamics.
Without innovation, there will be no profits.
Ditch your hatred of Capitalism!
I just sited an example of profits without innovation. I can site many more examples. Most of the examples are companies that exploit holes in regulation and manipulate markets to their advantage.
Furthermore, innovation isn't necessarily a positive. Many innovations, if not most, are double edged swords bringing both benefits and consequences. Many of our innovations in manufacturing have come with a consequence of pollution.
As for hating capitalism: seriously? Capitalism has it's flaws but it's clearly the best system we've got going. I believe that capitalism tempered with regulation and an understanding of the national interest in promoting social welfare is about as good as we're likely to get.
The banks aren't to blame, either. They are concerned with the bottom line, as they should be.
Actually the current problem was not driven by Mac/Mae. They have regulations that limit what they can do. They can't make crazy loans like all the other banks did. But the problem is that all those crazy loans created a bubble in the real estate market that ultimately undercut the value of the assets that Mac/Mae hold.
The implicit government backing of Mac/Mae is problematic, but then again, Bear Stearns ended up getting government backing even though they aren't a GSE.
This whole problem would have been avoided by simply putting regulations in place that would have required better collateralization requirements for these loans. Sure this would have hurt the revenue generated by these investments, but then it would have also prevented a bubble from forming before it had a chance. Given that, the failures would be far more limited and certainly wouldn't have touched Mac/Mae.
Sbvor, how many million barrels of oil a day do we get from shale?
We've known about oil shales for thousands of years.
Show me how it will bring up production and bring prices down today.
Show me the money.
You're calling me a stupid childish troll because I don't believe with all my heart, in a technology and resource that is unproven.
Show me a commercial operation producing millions of barrels of oil a day for shale, without subsidies, and I'll be convinced.
Until then, I think you're calling me a troll because I don't believe in the power of magic pixie dust.
You're making an extraordinary claim and then telling me that to disprove you, I must prove a negative. It's logically impossible to prove a negative. That's why the onus is on proving a positive.
As an example of proving a negative... Imagine if you were to assert that oil comes from invisible undetectable pixies, peeing into cracks in the Earth. You argue that if I cannot disprove that the pixies exist, then they must exist. But by definition we can't prove they are real. Just because I can't prove that invisible undetectable pixies don't exist, doesn't constitute proof that they do exist.
Likewise I can't prove that shale oil will never have a positive EROEI, but likewise you can't prove it does. All of the research I am aware of, shows it to be nearly zero in the best cases.
Until you have a result that can be disproven, there is nothing to disprove.
Robert said…
“We abolished welfare, let unemployment insurance wither, and paid scant attention when corporations eliminated defined-benefit pensions and cut health insurance benefits.”
Amen.
Robert Rubin is advising Obama; I wonder if Larry Summers is far behind. If these two have even a trace of the influence they had in the Clinton administration things will only worsen. Servility to corporate interests has already done far too much damage as your essay suggests.
Right Sterno.
With regulations removed, and assurances given that defaults would be rewarded, it was logical and reasonable for the banks to create the conditions for a crash.
Each institution is simply chasing after profits, using whatever means are available.
The net effect of allowing them to do anything they want, accumulates into a crisis.
It's the very nature of capitalism to exploit opportunities, which is why the marketplace requires rules, to keep the playing field level.
Rational regulations keep the economy healthy. They promote capitalism and healthy competition.
Without a fair and level playing field, the system becomes unbalanced and crashes.
WeaselDog said:
“Oil shales require more oil to produce than they return”
This article, quoted below, proves WeaselDog to be a bald faced liar:
“This [Oil Shale extraction] technique takes a lot of energy (though no more than conventional oil drilling, Shell says; roughly 3.5 times as much energy comes out as goes in).”
Sbcor, jut keep in mind that, today, we get a 10 to 1 EROI on oil. so if Oil Shale is at 3.5 to 1, we're going to need to have to more than double the energy input to get the same amount out. Increased energy demand equates to increased prices.
This is drifting way off topic now, but just wanted to make that quick point.
Sbvor thanks for the link.
I hadn't seen that one before. So clearly I'm a liar.
And we know that people in the oil industry never lie, proving once again, I'm a liar.
Did you notice that they say that drilling plus the electricity to cook the shale requires the same energy as just drilling.
Drilling + Energy = Drilling
It seems to me that this equation may be missing something.
So how many barrels a day is this technology producing?
How money commercial operations are making money on this technology?
How much money is being made on this?
How much of an impact is this making on current oil production?
What gas stations sell fuel made from this source?
Do you have a link that shows the expected maximum production rates?
Sbvor, Don't you think you could raise the tone, just a little? You've got an argument to make. But your abusive tone and unnecessary name-calling greatly dilutes the substance of what you have to say.
Sterno,
According to this source, Shale Oil is economically recoverable at “$70-95/barrel” (well below the $145 per barrel we’ve seen recently).
Most so-called “Liberals” love corn ethanol (and other pie in the sky biofuels). But, a brief review of this search indicates the EROEI for corn ethanol is anywhere from 1.3 to 2.0.
With an EROEI of 3.5, in situ recovery of Oil Shale is anywhere from 75% to 169% more efficient to produce than corn ethanol (which has been an unmitigated government subsidized disaster on EVERY FRONT).
And yet, you so-called “Liberals” continue to advocate for more and MORE government intervention in private markets. You never learn! You never will!
Sterno, it's still on topic IMO, as this is driving the crisis.
We can argue about future fixes all we want, but our problem today is that energy production is not growing. After a lackluster recovery from the 2001 downturn, it's gone flat again.
Without energy growth, we can't have industrial growth.
When there is money growth but no corresponding industrial growth, then our economic system oscillates as it tries to correct for the imbalance.
When you couple in unsound monetary policies you get economic disasters.
As we have an increasing money supply chasing after a fixed production in goods and services, it is expected that prices will rise.
Sbvor showed us that chart that shows the US GDP rising dramatically the last eight years. That represents the flow of new monies circulating in the system, chasing after a static flow of goods and services.
The banking bailouts will add a fresh flood of dollars to the economy. and to make Sbvor happy, it'll show as a rise in the GDP. Unfortunately, it will be followed by a wave of price inflation, that will further damage our economy.
Sbvor believes that the future will solve our energy problems. But this doesn't help the fact that gasoline prices are rising now, and will be boosted by these waves of bailouts, which lead to the need to produce money faster,m for more bail outs.
Let me tell another lie:
Tomorrow's possible solutions do not solve our problems today.
Sbvor says - "And yet, you so-called “Liberals” continue to advocate for more and MORE government intervention in private markets. You never learn! You never will!"
What liberals are you referring to? Henry Paulson or Bernanke perhaps?
If corn ethanol does have a great EROEI, then it doesn't need subsidies. And wasn't it a Republican majority that passed these subsidy bills? Shouldn't you be praising this landmark Republican legislation rather than dissing it? Do you really want to cut into Monsanto's profits?
The problem with comparing alternatives with crude at a given price, is that crude determines the costs. As the price of crude rises, the estimates have to be refactored.
It would be more instructive to say that a given energy source is worth is at 120% of the price of crude, or some such relationship.
well, I'd say that there was no "period of moderation", that it was due to manipulation of GDP, unemployment, and CPI/inflation data by the government over the last 40+ years.....
http://www.harpers.org/archive/2008/05/0082023
WeaselDog,
There is one small problem associated with making any further progress in extracting our tremendous domestic Oil Shale resources.
You see, your beloved Democratic Congress has made it FREAKING ILLEGAL to do so!
But, for those (other than yourself) who might actually be interested in educating themselves, this is an excellent and very comprehensive source.
Sbvor, take a step back. Breathe.
First of all, did I say anything positive about corn ethanol? No. The only reason corn ethanol is popular is because Iowa votes first in primaries. Ethanol has potential, but the EROI on corn is barely break even at best. I can point you to any number of "Liberal" sites that will tell you as much.
Also, yes it is economically recoverable at those prices and, in fact, they are beginning to extract oil shale and tar sands because it is now economically viable. But then you might wonder why if that's the case, the price of a barrel of oil is so high. The answer is simple: supply and demand.
Oil sands and shale may be economically recoverable at current prices, but the important question is: can we produce usable oil at a rate that's sufficient to offset the drop off in more conventional sources? So if Mexico's oil production drops, as it has, can we churn out enough oil shale, to offset that decline? My impression is no.
WeaselDog, et al:
Republicans (I’m not one) have caved in to Environmental Extremists across the board (owing to the simple fact that they are incapable of fighting the propaganda arm of the Democratic Party known to some as “The Media”).
Case in point…
When it comes to Climate Change, Bush and McCain are both ALMOST as ignorant (or, perhaps, cynical) as Obama.
Sterno,
1) I never accused you, personally, of loving corn ethanol.
2) Supply and demand? You’re preaching to the choir:
Drill Here, Drill Now, Pay Less
World Oil Balance vs. Price
3) Left to its own dynamics, world markets for oil will find a balance between supply and demand (with price serving as the balancing beam). However, anything we can do to increase the world supply will help to mitigate the price.
Choosing to do NOTHING (the LONG STANDING preferred “solution” of so-called “Liberals”) will GUARANTEE that prices continue to climb for years and decades to come!
Sbvor, Yea, I'm aware of the environmental extremists excuse.
Republicans have to give their friends giant subsidies while taking big handouts, because they are pressured by environmental wackos.
I'm beginning to believe that left wing media idea, now that I've come to understand that Pat Buchanan is now considered a left extremist by the conservatives. Likewise a pool of molten lava is cool swimming hole compared the hot plasma in a burning star.
So in that context, the media represents the more liberal views of the Republican Party. I wouldn't characterize it as left wing, but if you're Rush Limbaugh, Sean Hannity or a member of their congregations, then almost everything is a left wing environmental conspiracy designed to destroy America.
I have to laugh though at the idea that Bush's brain is controlled by environmentalists that they demand that he push for subsidies for corporations that employ his family members as board members.
In the environmental liberal whacko world, Monsanto is one of the most hated entities around. Their hard work to destroy family farms and to push GMOs makes them reviled in the eyes of the left.
Yet you tell me that these same people that hate Monsanto, want the government to give them giant subsidies to push GMO corn for ethanol production?
It's easier to believe that the Bush family members on the board bribed Republicans to give them the subsidies. It is a simpler explanation.
Sbvor, those liberal bobey men that you're scapegoating don't have any power.
We are going to drill ANWR and drill off the coasts. And it won't help with prices.
And why are you bothered by high oil prices. They simply prove that the market works. And since most of the Republican leadership has stakes in the oil industry, they are making tons of money on high oil prices.
Aren't you happy that conservatives are enjoying record windfalls with prices so high? you don't want the liberals to win, and see oil profits reduced do you?
Don't you want to see Bush, Cheney and Condi earn even more money with gasoline prices rising to $10/gallon? Isn't that a Republican dream?
And besides, Bush explained today that his tax rebate is going to solve our problems. So why the whining about liberals? Bush fixed our problems.
Actually the long term plan favored by "liberals" is to shift us away from using oil all together. Biofuels, improved battery technology, and an increased focus on renewable sources of energy. The problem with attempting to solve the problem by growing oil production is it's not clear that it's even possible to increase global total oil production. Even if it's possible in the short term, eventually we hit a wall.
We have oil resources, sure, and so does everybody else, but we can only pump it out of the ground so fast and, meanwhile, currently tapped reserves are falling off. Saying we have 86 billion barrels in the ground is a lot different from saying we can produce 1 billion barrels/year. Most estimates I've seen suggest that this oil, if produced would have minimal impact on the cost of oil and that minimal impact wouldn't be for 20 years.
This is from today's press conference.
THE PRESIDENT: The Strategic Oil Petroleum Reserve is for, you know, emergencies. But that doesn't address the fundamental issue. And we need to address the fundamental issue, which I, frankly, have been talking about since I first became President -- which is a combination of using technology to have alternative sources of energy, but at the same time finding oil and gas here at home. And now is the time to get it done. I heard somebody say, well, it's going to take seven years. Well, if we'd have done it seven years ago we'd be having a different conversation today. I'm not suggesting it would have completely created -- you know, changed the dynamics in the world, but it certainly would have been -- we'd have been using more of our own oil and sending less money overseas.
So who was president seven years ago when the Energy Task Force Meetings were being held?
Sterno,
Using only conventional drilling technology, we have MORE OIL AVAILABLE TO US THAN IRAQ DOES!
As usual, you have offered ABSOLUTELY NO PROOF that it would be impossible for us “to increase global total oil production”. That is simply a purely fictional narrative which you find to be emotionally satisfying and politically convenient.
But, let’s indulge your fantasy and presume you are correct. In that scenario, IF we CONTINUE to indulge the “DO NOTHING Dims”, where the HELL do you think world supply will be ten years from now?
There is NO single solution to this issue. We MUST make use of EVERY opportunity available to us or we will run the risk of continuing to drag down the global economy to the point that we will not have sufficient venture capital to allow the private sector to create the innovations that will move us beyond petroleum as a transportation fuel (knowing that we will, for the foreseeable future, need and want more oil for countless other products).
Here's a chart of US oil production:
http://en.wikipedia.org/wiki/Image:US_Oil_Production_and_Imports_1920_to_2005.png
If we have so much oil and it's simply a matter of producing it, then why aren't we? Why isn't Exxon dumping billions into oil shale instead of billions into stock buy backs? 800 billion barrels of oil in that shale? Fine, why isn't it being produced right now?
P.S.) All biofuels are a dead end boondoggle overflowing with corruption.
All biofuels are likely to suffer the same three fundamental flaws that corn ethanol does:
1) The EROEI is likely to be about as low corn ethanol.
2) The land required to produce the biofuels will, inevitably, drive up the price of whatever commodity would have otherwise been produced on that land.
3) There is simply not enough land to make it viable.
See my post (which has not yet covered the other pitiful angle of the enormous government subsidies).
As far as “subsidies” for “Big Oil”…
With “subsidies” like these, who needs them!
All this “subsidy” bunk is just more ignorant hatred aimed a “Big Oil”.
The loss of economic moderators was predicted years ago and no one planned for the loss. Speculation in housing and mortgage securities was allowed to run wild with no oversight. Oil is now being used as the next great speculative tool. Speculation in commodities such as corn, wheat and rice is a close second to oil. We are now held hostage in our homes with decimated values. We are paying obscene prices for petroleum based products when we sit on massive fields of natural gas and oil that are untapped. Food costs are rising at a rapid clip too. "Inflation is under control" crows the Fed.
Looks like Prof. Reich's "SUPERCAPITALISM" is in rare form.
Your corporate masters now control your future America.
We voted for it and we will continue the madness in November.
Actually ethanol is being produced in Brazil today with an EROI of about 5 to 1 (and I've heard as high as 7 to 1). Corn is just not naturally good for this process, but there are other sources that are. There's also a lot of research into algae based biofuel production that look to have substantially better yields.
Yes, biofuel production does take up a lot of space. There's also potential issues of water usage, etc. It's also true that, in some cases, especially when using corn for ethanol, that it is competing for usable food. It is not a panacea.
This is why, eventually, we need to move away from combustion engines and liquid fuels to drive them. An infrastructure that makes use of solar thermal power, nuclear, and eventually fusion, provide a means for producing the electricity we need which can then drive much of the transit infrastructure.
No need to get into the government subsidies for this, as they are foolish. It drives up food prices and gives the impression that ethanol from corn is much cheaper than it is. But there are other ways to make fuel that do not involve corn that are far more efficient. Eventually we need to move to an entirely different way of powering transit, but it's at least a stop gap as oil production declines.
The current Republican safety net is the belief that America is full of "stuff" from China via Walmart; and people can move in with family, or live in the woods, in their cars, or on the street. That's the Republican safety net. George W Bush and Elaine "Taiwan sweat shops" Chao have rarely met their monthly jobs creation target. You never hear Rush Limbaugh calling them liars. The American middle class doesn't seem to mind-at least not for now. That is the American safety net.
The American middle class will have to become immune to Roger Ailes's BS before they vote for any safety net.
The Republicans will rely on Roger Ailes until it's clear they can't, then they'll have to come up with another ploy-maybe voter disenfranchisement-as they've done with requiring government issued voter IDs for the elderly. The counter argument is to get rid of a US President 2-4 months after his polled approval rating falls to x%.
In your book, Supercapitalism, you state that Washington, DC, is awash with special interest group money to the point that the middle class interests never get heard. Nothing has changed, yet.
The people standing in line at IndyMac today may be standing in line to vote in November. We'll see how Roger Ailes versus the Safety Net equation solves itself.
Oil declined this afternoon because "options contracts expired," per MSNBC. Good reason for options contracts to stay expired. Maybe the head of the oil cartel and George W Bush decided to help oil prices drop, for once.
Sterno (3:12 PM),
1) Are you really so stupid as to believe a Wikipedia entry which:
A) Cites no source for the data
B) Has been openly challenged as to accuracy
2) This spreadsheet downloaded from this page does confirm that US oil production has been declining for decades.
3) Why would that decline surprise you? Just examine this chart and look at what proportion of our conventionally recoverable domestic resources (in ANWR and the OCS ALONE) your stinking Dims have rendered ILLEGAL TO DEVELOP!
4) Better yet, examine THIS CHART and get a BETTER perspective on what proportion of our overall resources your stinking Dims have rendered ILLEGAL TO DEVELOP!
5) The Peak Oil hysteria is NOT driven by any lack of oil OR any inability to deliver more oil. It is driven by nothing more than a lack of a political will on the part of Congressional Dims to allow ACCESS to domestic oil!
From the blog EconimicRot:
http://economicrot.blogspot.com/2008/07/washington-mutual-and-national-city.html
Closing Note: We currently have > $14 Trillion circulating the globe and, in the U.S., less than 3% of that is available in cold, hard, cash -- the rest are ones and zeros on computer hard drives... Really makes one stop and think...
I have seen the figure 14 trillion before, in a small useful book about lies the US government is telling and other disinformation, I'll post the title and author soon, so 14 trillion is believable to me. Get your hands on your cold, hard cash.
Here we have kayxyz seemingly encouraging an utterly irrational and completely hysterical run on the banks (which are in better shape than they were in 1991).
Who says so-called “Liberals” don’t want the worst for America?
The "14 trillion" is also found in Disinformation: The Little Earth Book by James Bruges. Supplemental reading for the ethics course for health sciences. "14 trillion for housing" is probably also a Google search.
Sbvor don't forget also, that when the debate was going on about drilling the North Slope of Alaska, it had more oil than Saudi Arabia and would last the US hundreds of years. So why aren't we pumping all the oil there?
I'm glad that you have faith that future undeveloped solutions will solve problems today.
Thanks to you, I'm sure we'll all be paying $2.00 / gallon for gas today, because the future bring the price down.
Well it's almost time for us to go to work in our flying cars. Another future solution for today.
And that raging Democrat George Bush I is the guy that signed the executive order, taking out ANWAR and coastal drilling.
The raging Democrat Bush II also signed it.
But we know that Republicans are nothing but environmental wacko sex slaves, right? That's why the push an environmental anti-business agenda so heavily.
The Bush's certainly didn't ban domestic drilling to keep their personal profits high. That would be capitalistic.
Sbvor, I don't think you have to worry.
In our quest for infinite growth, there is no resource we won't consume. We'll eat the planet down to dust.
There's nothing anyone can do to stop it. Human beings are just like locusts. And you know that, your mantra is "Eat more! Eat faster!"
That's why we're called consumers. We eat and produce waste. That is our purpose. I know we won't change.
Over the decades I've noticed that every time we have a problem, the solutions get hyped into the stratosphere and people like you that don't quite understand the problem become big cheerleaders for eating the planet faster.
In the end, the solutions don't meet expectation is size or rate of usage.
I checked your charts on your web page and when contrasted with our current 23 million barrel per day consumption and the slower production rates these fields will have, I don't see how they are going to make a meaningful difference. They are hardly worth getting excited about.
We'll drill ANWAR, but we'll be so screwed by the time it's at full production that it'll probably do more good for Asia than it will the US.
By all means, cheer lead for finishing off our last resources faster. Drain that trust fund. Empty the savings. That's what we do.
But please, quit calling Bush, Cheney and Condi Raging Democrats. That just sounds stupid.
Dr. Reich,
The "bailouts" to which you refer certainly are not bailouts of the owners of the companies; the values of those stock holdings have decreased dramatically. Several CEO's have lost their jobs already, and the salaries they made in the past are unaffected by the bailouts. The point is that everyone is suffering, and the only thing being "bailed out" possibly, hopefully, is a chain reaction that will lead to many failures and a serious depression' a domino effect that will effect everyone.
Yeah, the owners have lost billions of which they will not recoup. The bailouts are pretection to the counter parties.
Don’t believe one optimistic word from any public figure about the economy or humanity in general. They are all part of the problem. Its like a game of Monopoly. In America, the richest 1% now hold 1/2 OF ALL UNITED STATES WEALTH. Unlike ‘lesser’ estimates, this includes all stocks, bonds, cash, and material assets held by America’s richest 1%. Even that filthy pig Oprah acknowledged that it was at about 50% in 2006. Naturally, she put her own ‘humanitarian’ spin on it. Calling attention to her own ‘good will’. WHAT A DISGUSTING HYPOCRITE SLOB. THE RICHEST 1% HAVE LITERALLY MADE WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. Don’t fall for any of their ‘humanitarian’ CRAP. ITS A SHAM. THESE PEOPLE ARE CAUSING THE SAME PROBLEMS THEY PRETEND TO CARE ABOUT. Ask any professor of economics. Money does not grow on trees. The government can’t just print up more on a whim. At any given time, there is a relative limit to the wealth within ANY economy of ANY size. So when too much wealth accumulates at the top, the middle class slip further into debt and the lower class further into poverty. A similar rule applies worldwide. The world’s richest 1% now own over 40% of ALL WORLD WEALTH. This is EVEN AFTER you account for all of this ‘good will’ ‘humanitarian’ BS from celebrities and executives. ITS A SHAM. As they get richer and richer, less wealth is left circulating beneath them. This is the single greatest underlying cause for the current US recession. The middle class can no longer afford to sustain their share of the economy. Their wealth has been gradually transfered to the richest 1%. One way or another, we suffer because of their incredible greed. We are talking about TRILLIONS of dollars which have been transfered FROM US TO THEM. All over a period of about 27 years. Thats Reaganomics for you. The wealth does not ‘trickle down’ as we were told it would. It just accumulates at the top. Shrinking the middle class and expanding the lower class. Causing a domino effect of socio-economic problems. But the rich will never stop. They just keep getting richer. Leaving even less of the pie for the other 99% of us to share. At the same time, they throw back a few tax deductible crumbs and call themselves ‘humanitarians’. Cashing in on the PR and getting even richer the following year. IT CAN’T WORK THIS WAY. Their bogus efforts to make the world a better place can not possibly succeed. Any 'humanitarian' progress made in one area will be lost in another. EVERY SINGLE TIME. IT ABSOLUTELY CAN NOT WORK THIS WAY. This is going to end just like a game of Monopoly. The current US recession will drag on for years and lead into the worst US depression of all time. The richest 1% will live like royalty while the rest of us fight over jobs, food, and gasoline. So don’t fall for any of this PR CRAP from Hollywood, Pro Sports, and Wall Street PIGS. ITS A SHAM. Remember: They are filthy rich EVEN AFTER their tax deductible contributions. Greedy pigs. Now, we are headed for the worst economic and cultural crisis of all time. Crime, poverty, and suicide will skyrocket. SEND A “THANK YOU” NOTE TO YOUR FAVORITE MILLIONAIRE. ITS THEIR FAULT. I’m not discounting other factors like China, sub-prime, or gas prices. But all of those factors combined still pale in comparison to that HUGE transfer of wealth to the rich. Anyway, those other factors are all related and further aggrivated because of GREED. If it weren’t for the OBSCENE distribution of wealth within our country, there never would have been such a market for sub-prime to begin with. Which by the way, was another trick whipped up by greedy bankers and executives. IT MAKES THEM RICHER. The credit industry has been ENDORSED by people like Oprah Winfrey, Ellen DeGenerous, Dr Phil, and many other celebrities. IT MAKES THEM RICHER. Now, there are commercial ties between nearly every industry and every public figure. IT MAKES THEM RICHER. So don’t fall for their ‘good will’ BS. ITS A LIE. If you fall for it, then you’re a fool. If you see any real difference between the moral character of a celebrity, politician, attorney, or executive, then you’re a fool. No offense fellow citizens. But we have been mislead by nearly every public figure. We still are. Even now, they claim to be 'hurting' right along with the rest of us. As if gas prices actually effect the lifestyle of a millionaire. ITS A LIE. IN 2007, THE RICHEST 1% INCREASED THEIR AVERAGE BOTTOM LINE WEALTH AGAIN. On average, they are now worth over $4,000,000 each. Thats an all time high. As a group, they are now worth well over $17,000,000,000,000. THATS WELL OVER SEVENTEEN TRILLION DOLLARS. Another all time high. Which by the way, is much more than the entire middle and lower classes combined. Also more than enough to pay off our national debt, fund the Iraq war for twenty years, repair our infrastructure, and bail out the US housing market. Still think that our biggest problem is China? Think again. Its the 1% club. That means every big name celebrity, athlete, executive, entrepreneur, developer, banker, and lottery winner. Along with many attorneys, doctors, politicians, and bankers. If they are rich, then they are part of the problem. Their incredible wealth was not 'created', 'generated', grown in their back yard, or printed up on their command. It was transfered FROM US TO THEM. Directly and indirectly. Its become near impossible to spend a dollar without making some greedy pig even richer. Don't be fooled by the occasional loss of a millionaire's fortune. Overall, they just keep getting richer. They absolutely will not stop. Still, they have the nerve to pretend as if they care about ordinary people. ITS A LIE. NOTHING BUT CALCULATED PR CRAP. WAKE UP PEOPLE. THEIR GOAL IS TO WIN THE GAME. The 1% club will always say or do whatever it takes to get as rich as possible. Without the slightest regard for anything or anyone but themselves. Reaganomics. Their idea. Loans from China. Their idea. NAFTA. Their idea. Outsourcing. Their idea. Sub-prime. Their idea. High energy prices. Their idea. Oil 'futures'. Their idea. Obscene health care charges. Their idea. The commercial lobbyist. Their idea. The multi-million dollar lawsuit. Their idea. The multi-million dollar endorsement deal. Their idea. $200 cell phone bills. Their idea. $200 basketball shoes. Their idea. $30 late fees. Their idea. $30 NSF fees. Their idea. $20 DVDs. Their idea. Subliminal advertising. Their idea. Brainwash plots on TV. Their idea. Vioxx, and Celebrex. Their idea. Excessive medical testing. Their idea. The MASSIVE campaign to turn every American into a brainwashed, credit card, pharmaceutical, medical testing, love-sick, celebrity junkie. Their idea. All of the above shrink the middle class, concentrate the world’s wealth and resources, create a dominoe effect of socio-economic problems, and wreak havok on society. All of which have been CREATED AND ENDORSED by celebrities, athletes, executives, entrepreneurs, attorneys, and politicians. IT MAKES THEM RICHER. So don’t fall for any of their ‘good will’ ‘humanitarian’ BS. ITS A SHAM. NOTHING BUT TAX DEDUCTIBLE PR CRAP. In many cases, the 'charitable' contribution is almost entirely offset. Not to mention the opportunity to plug their name, image, product, and 'good will' all at once. IT MAKES THEM RICHER. These filthy pigs even have the nerve to throw a fit and spin up a misleading defense with regard to 'federal tax revenue'. ITS A SHAM. THEY SCREWED UP THE EQUATION TO BEGIN WITH. If the middle and lower classes had a greater share of the pie, they could easily cover a greater share of the federal tax revenue. They are held down in many ways because of greed. Wages remain stagnant for millions because the executives, celebrities, athletes, attorneys, and entrepreneurs, are paid millions. They over-sell, over-charge, under-pay, outsource, cut jobs, and benefits to increase their bottom line. As their profits rise, so do the stock values. Which are owned primarily by the richest 5%. As more United States wealth rises to the top, the middle and lower classes inevitably suffer. This reduces the potential tax reveue drawn from those brackets. At the same time, it wreaks havok on middle and lower class communities and increases the need for financial aid. Not to mention the spike in crime because of it. There is a dominoe effect to consider. IT CAN'T WORK THIS WAY. But our leaders refuse to acknowledge this. Instead they come up with one trick after another to milk the system and screw the majority. These decisions are heavily influensed by the 1% club. Every year, billions of federal tax dollars are diverted behind the scenes back to the rich and their respective industries. Loans from China have been necessary to compensate in part, for the red ink and multi-trillion dollar transfer of wealth to the rich. At the same time, the feds have been pushing more financial burden onto the states who push them lower onto the cities. Again, the hardship is felt more by the majority and less by the 1% club. The rich prefer to live in exclusive areas or upper class communities. They get the best of everything. Reliable city services, new schools, freshly paved roads, upscale parks, ect. The middle and lower class communities get little or nothing without a local tax increase. Which, they usually can't afford. So the red ink flows followed by service cuts and lay-offs. All because of the OBSCENE distribution of bottom line wealth in this country. So when people forgive the rich for their incredible greed and then praise them for paying a greater share of the FEDERAL income taxes, its like nails on a chalk board. I can not accept any theory that our economy would suffer in any way with a more reasonable distribution of wealth. Afterall, it was more reasonable 30 years ago. Before Reaganomics came along. Before GREED became such an epidemic. Before we had an army of over-paid executives, bankers, celebrities, athletes, attorneys, doctors, investors, entrepreneurs, developers, and sold-out politicians to kiss their asses. As a nation, we were in much better shape. Strong middle class, free and clear assets, lower crime rate, more widespread prosperity, stable job market, lower deficit, ect. Our economy as a whole was much more stable and prosperous for the majority. WITHOUT LOANS FROM CHINA. Now, we have a more obscene distribution of bottom line wealth than ever before. We have a sold-out government, crumbling infrastructure, energy crisis, home forclosure epidemic, credit crunch, weak US dollar, 13 figure national deficit, and 12 figure annual shortfall. The cost of living is higher than ever before. Most people can't even afford basic health care. ALL BECAUSE OF GREED. I really don't blame the 2nd -5th percentiles in general. No economy could ever function without some reasonable scale of personal wealth and income. But it can't be allowed to run wild like a mad dog. ALBERT EINSTEIN TRIED TO MAKE PEOPLE UNDERSTAND. UNBRIDLED CAPITALISM ABSOLUTELY CAN NOT WORK. TOP HEAVY ECONOMIES ALWAYS COLLAPSE. Bottom line: The richest 1% will soon tank the largest economy in the world. It will be like nothing we’ve ever seen before. The American dream will be shattered. and thats just the beginning. Greed will eventually tank every major economy in the world. Causing millions to suffer and die. Oprah, Angelina, Brad, Bono, and Bill are not part of the solution. They are part of the problem. THERE IS NO SUCH THING AS A MULTI-MILLIONAIRE HUMANITARIAN. EXTREME WEALTH MAKES WORLD PROSPERITY ABSOLUTELY IMPOSSIBLE. WITHOUT WORLD PROSPERITY, THERE WILL NEVER BE WORLD PEACE OR ANYTHING EVEN CLOSE. GREED KILLS. IT WILL BE OUR DOWNFALL. Of course, the rich will throw a fit and call me a madman.. Of course, they will jump to small minded conclusions about 'jealousy', 'envy', or 'socialism'. Of course, their ignorant fans will do the same. You have to expect that. But I speak the truth. If you don’t believe me, then copy this entry and run it by any professor of economics or socio-economics. Then tell a friend. Call the local radio station. Re-post this entry or put it in your own words. Be one of the first to predict the worst economic and cultural crisis of all time and explain its cause. WE ARE IN BIG TROUBLE.
So what can we do about it? Well, not much. Unfortunately, we are stuck on a runaway train. The problem has gone unchecked for too many years. The US/global depression is comming thanks to the 1% club. It would take a massive effort by the vast majority to prevent it. Along with a voluntary sacrifice by the rich. THATS NOT GOING TO HAPPEN. But if you believe in miracles, then spend your money as wisely as possible. Especially in middle and lower class communities. Check the Fortune 500 list and limit your support of high profit/low labor industries (Hollywood, pro sports, energy, credit, pharmaceutical, cable, satelite, internet advertising, cell phone, high fashion, jewelry, ect.). Cancel all but one credit card for emergencies only. If you need a cell phone, then do your homework and find the best deal on a local pre-pay. If you want home internet access, then use the least expensive provider, and share accounts whenever possible. If you need to search, then use the less popular search engines. They usually produce the same results anyway. Don't click on any internet ad. If you need the product or service, then look up the phone number or address and contact that business directly. Don't pay to see any blockbuster movie. Instead, wait a few months and rent the DVD from a local store or buy it USED. If you want to see a big name game or event, then watch it in a local bar, club, or at home on network TV. Don't buy any high end official merchendise and don't support the high end sponsors. If its endorsed by a big name celebrity, then don't buy it. If you can afford a new car, then make an exception for GM, Ford, and Dodge. If they don't increase their market share soon, then a lot more people are going to get screwed out of their pensions and/or benefits. Of course, you must know by now to avoid those big trucks and SUVs unless you truly need one for its intended purpose. Don't be ashamed to buy a foreign car if you prefer it. Afterall, those with the most fuel efficient vehicles consume a lot less foreign oil. Which accounts for a pretty big chunk of our trade deficit. Anyway, the global economy is worth supporting to some extent. Its the obscene profit margins, trade deficits, and BS from OPEC that get us into trouble. Otherwise, the global economy would be a good thing for everyone. Just keep in mind that the big 3 are struggling and they do produce a few smaller reliable cars. Don't frequent any high end department store or any business in a newly developed upper class community. By doing so, you make developers richer and draw support away from industrial areas and away from the middle class communities. Instead, support the local retailer and the less popular shopping centers. Especially in lower or middle class communities. If you can afford to buy a home, then do so. But go smaller and less expensive. Don't get yourself in too deep and don't buy into the newly developed condos or gated communities. Instead, find a modest home in a building or neighborhood at least 20 years old. If you live in one of the poorer states, then try to support its economy first and foremost. Big business is fine on occasion depending on the profit margins and profit sharing. Do your homework. If you want to support any legitimate charity, then do so directly. Never support any celebrity foundation. They spend most of their funding on PR campaigns, travel, and high end accomodations for themselves. Instead, go to Charitywatch.org and look up a top rated charity to support your favorite cause. In general support the little guy as much as possible and the big guy as little as possible. Do your part to reverse the transfer of wealth away from the rich and back to the middle and lower classes. Unfortunately, there is no perfect answer. Jobs will be lost either way. Innocent children will starve and die either way. But we need to support the largest group of workers with the most reasonable profit margins. We also need to support LEGITIMATE charities (Check that list at Charitywatch.org). This is our only chance to limit the severity and/or duration of the comming US/global depression. In the meantime, don't listen to Bernenke, Paulson, Bartiromo, Orman, Dobbs, Kramer, OReiley, or any other public figure with regard to the economy. They are all plenty smart but I swear to you that they will lie right through their rotten teeth. IT MAKES THEM RICHER. Like I said, you are welcome to run this by any professor of economics or socio-economics. If thats not good enough, then look up what Einstein had to say about greed, extreme wealth, and its horrible concequences. I speak the truth. GREED KILLS. IT WILL BE OUR DOWNFALL.
By the way. I just know that someone here will respond with the usual 'I know more than you. I'm smarter than you. Look how smart and knowledgable I am.' crap. Its very predictable. So let me say this in advance. I don't claim to be an expert in this field. But I'm no fool either. This is not brain surgery. For the mostpart, its simple math. Which is all I needed to predict the current recession in writing almost 3 years ago. Since then, I've gone on record against people like Greenspan, Bernenke, and Paulson. So far, my predictions have been accurate. Did any of my wise-ass 'know-it-all' critics see this comming way back in '05'? Hell no they didn't. So before you run with all of your stupid insults, you might want to consider my motives. I'm not here for attention or praise. I'm not here to compete with the rest of you. I'm here because I'm disgusted, angry, and scared silly. I really do see this as the greatest injustice of all time. I would cut my own arm off if I thought it would make a difference.
This is an example of Minsky's statement that "stability breeds instability". "Welfare" is expensive, reform it and nobody notices any problems. Replace defined benefit pensions with defined contribution plans. Everything is still ok today. Reduce employer-paid health benefits. People still come to work. Glass-Stegall impedes the flow of capital. Remove it, see the increase in investments.
Then things blow up. And we have to remember why some of these were in place.
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