Political Economy category archive

A local business association is running a seminar about how to be a better CEO.

Got any suggestions as to who should attend?

But rich.

Our monied classes. Read the whole thing. It will give you a break from the want ads:

That was the sixth-largest haul on record, according to a report released Wednesday by the New York State comptroller.

While the payouts paled next to the riches of recent years, Wall Street workers still took home about as much as they did in 2004, when the Dow Jones industrial average was flying above 10,000, on its way to a record high.

Some bankers took home millions last year even as their employers lost billions.

The comptroller’s estimate, a closely watched guidepost of the annual December-January bonus season, is based largely on personal income tax collections. It excludes stock option awards that could push the figures even higher.

The fruits of Republicanism:

“Anybody who is looking for a job now is feeling an economic tsunami,” said 48-year-old Wilson, who says he has exhausted his family’s savings and now spends most days searching for jobs at an area employment-assistance center. “It feels like all of a sudden, it has just fallen apart.”

’nuff said:

Officials at the Food and Drug Administration and the Centers for Disease Control and Prevention, which have been investigating the outbreak of salmonella illness, said yesterday that Peanut Corporation of America found salmonella in internal tests a dozen times in 2007 and 2008 but sold the products anyway, sometimes after getting a negative finding from a different laboratory.

Republican economic theory at work:

But the number of other people who have been caught running Ponzi schemes in recent weeks is adding up quickly, so much so that they have earned themselves a nickname: mini-Madoffs.

The Republican theory that there is something intrinsically moral about combining greed, riches, and lack of accountability, . . . oh, well.

Republicanism is bankrupt.

Thanks to it, so are the rest of us.

Aside: Delaware Liberal has a quotation from Adam Smith that Republicans don’t want you to see.

The Guardian lists the suspects.

No bonuses here:

The number of people coming into the nonprofit (Sunday Breakfast Mission) shelter for a hot meal each night has more than doubled in the past year. Volunteers at the dining hall on North Poplar Street in Wilmington served 890 meals to needy men, women and children last month, compared with 398 meals in December 2007.

The reason is no mystery to the Rev. Thomas Laymon, who runs the mission.

“The doubling is very evident every night now,” he said. “And the answer is it has an economic reason behind it, because these are not just the homeless who are coming in.”

Another one bites the dust.

1st Centennial Bank of Redlands, Calif. was seized by the Federal Deposit Insurance Corp. and state regulators on Friday. It was the third bank failure this year, and brings to 28 the number of banks that have closed since the beginning of the current credit crisis.

In other news, Andy Stern, President of SEIU, prepares to attend the Davos World Economic Forum for the first time. He’s done his homework:

“These experts have failed the citizens of the globe. They have wrought economic havoc with financial manipulation, greed and deregulation,” he said, in a telephone interview. “I don’t know if it will do any good, but there is a need for straight talk and ending the backslapping, self-congratulatory noblesse-oblige attitude that I think has been more prevalent in the past.”

Robert Reich:

It’s called Lemon Socialism. Taxpayers support the lemons. Capitalism is reserved for the winners.

And the folks who planted the lemon trees are still going home with their pay for performance bonuses and their fancy cans.

Oh.

I forget.

Performance has nothing to do with it.

They get the bonuses because, well, they wear three-piece suits, write good memos emails, and look good in meetings.

They take us for fools.

And we prove them right.

Addendum, the Next Morning:

Polly Toynbee in the Guardian:

Debenhams is a useful paradigm for much that went wrong. Private equity gobbled it up in 2003. Its new owners sold off its property, took £1bn out of the business and put it back on the market with a £1bn debt round its neck. At the height of financial madness, institutional funds were suckered into buying back the now debt-laden company at a higher price than the marauders paid in the first place. It has not done too well.

(snip)

But it’s business as usual for the masters of this failed universe. Who is to stop them? Shareholder democracy was always an empty myth. The government relies on the men who profited in the balloon years to get us out of this, making them ministers in the Lords to oversee their own. No doubt they will regulate the worst, but don’t expect a scintilla of culture change. There is a sense right now that the financial and political worlds still don’t get it. They are like cartoon characters who have run off a precipice, suspended in mid-air before realising how hard they are going to crash.

Bonddad on the TARP. After a detailed analysis, he concludes that:

My guess is that much of the anger over TARP has as much to do with how we got here rather than what is actually happening with the program. Put another way, there is understandable anger about the stupidity that has cost the US economy dearly over the last year. That anger is understandable. A perfect storm of lack of regulatory enforcement, greed and outright stupidity combined to place the US in the worst financial situation since the early parts of the Great Depression.

However, I would caution that the anger be stored away from the current discussion and instead brought out when we discuss reform which will be forthcoming. Right now the goal is to keep the economy moving — or, perhaps more precisely, to keep it from falling off a cliff. It’s a bit like lecturing a drunk driver while he’s in the emergency room; yes, he needs to be dealt with, but it’s more important at that time to keep him alive. That’s what we have to do right now — keep the economy alive.

“The evil that men do lives after them”:

First-time applications for state unemployment benefits rose 62,000 to a seasonally adjusted 589,000 in the week ending Jan. 17, the Labor Department said Thursday. The level of initial claims is up 82% from the same period in the prior year, and the last time the level was higher was in November 1982. The four-week average of new claims was unchanged at 519,250. The number of people collecting benefits in the week ending Jan. 10 rose 97,000 to 4.61 million, a level that is 72% higher than in the prior year. The four-week average of continuing claims rose 58,750 to 4.56 million — the highest level since November 1982. The insured unemployment rate remained at 3.4%.

And the ripple effect:

New York State’s unemployment insurance system, besieged by claims from laid-off workers, ran out of money on the first business day of the year and is borrowing daily from the federal government to bridge a fast-growing and potentially huge deficit, state labor officials say.

Despite paying lower benefits to its jobless residents than other Northeastern states, the state’s unemployment fund has been borrowing about $90 million a week from the federal unemployment trust fund, state officials said. The deficit has already reached $212 million and is expected to exceed $2.5 billion by the end of 2010, they said.

Paul Krugman:

Old-fashioned voodoo economics — the belief in tax-cut magic — has been banished from civilized discourse (One can only hope–ed.). The supply-side cult has shrunk to the point that it contains only cranks, charlatans, and Republicans.

But recent news reports suggest that many influential people, including Federal Reserve officials, bank regulators, and, possibly, members of the incoming Obama administration, have become devotees of a new kind of voodoo: the belief that by performing elaborate financial rituals we can keep dead banks walking.

But, then again, Wall Street bankers wear three-piece suits (even the female ones), drive (or are driven in) expensive cars, and vote Republican, so it must not be their fault. Right?

Looming poverty raises enlistments:

The Army exceeded its targets each month for October, November and December — the first quarter of the new fiscal year — bringing in 21,443 new soldiers on active duty and in the reserves. December figures were released last week.

Recruiters also report that more people are inquiring about joining the military, a trend that could further bolster the ranks. Of the four armed services, the Army has faced the toughest recruiting challenge in recent years because of high casualty rates in Iraq and long deployments overseas. Recruitment is also strong for the Army National Guard, according to Pentagon figures. The Guard tends to draw older people.

“When the economy slackens and unemployment rises and jobs become more scarce in civilian society, recruiting is less challenging,” said Curtis Gilroy, the director of accession policy for the Department of Defense.

And how does a flair for the obvious seem so revolutionary?

Oh, I forgot. The obvious is too obscure for most economists because, well, it’s not obscure enough. And it doesn’t require long mathematical formulae and fanciful notions about how people behave that are in no way related to how people behave.

According to Dr. Ravi Batra, economics professor and author of The New Golden Age: A Revolution Against Political Corruption and Economic Chaos, (see: ravibatra.com ), bailing out banks is like bailing out criminals while victims are left to suffer.

The only difference here is that the victims, homeowners and consumers, are the foundation of the economy, and they are hurting because their wages have not kept pace with rising prices.

The celebrated economist Milton Friedman once said that the true test of a theory is its forecasting ability. Batra’s theories easily pass this sterling test.

This is because in the first edition of his book printed in 2006 Batra vividly foresaw the current economic chaos in all its dimensions. He forewarned us about stock market losses, the credit crunch, homeowner defaults and above all soaring unemployment, starting in 2007 and lasting at least till 2010.

The obvious was too obscure for any but liberal economists, who have been all over this thing like a bad suit for years.

But they were (hoick! ptui!) liberals (which we all know is a dirty thing–Rush Limbaugh told us so), so no one listened to them, for they just weren’t serious enough and, besides, their concern for the average Joe and Jane meant they had no Republican crud cred.

Besides, they did not qualify as members of the Masters of the Universe, given their belief that there is more to civilized society than survival of the fattest.

Batra quotation via Alan J. Heavens.

The Washington Post dissects the real estate crash, with a focus on La La Land. The whole thing is worth the 10 minutes it takes to read it. Here’s a nugget:

For a brief time in 2005, the housing market showed signs of cooling nationwide and interest rates edged up. Lenders reacted by reaching out to even riskier borrowers with more subprime and other exotic loans to keep the home-buying frenzy going, said Howard Shapiro, an analyst at investment bank Fox-Pitt Kelton.

Some lenders wooed borrowers with generous terms once reserved for the most creditworthy. Mortgage financiers Fannie Mae and Freddie Mac, eager to profit, started buying more of these loans — in effect, subsidizing the market.

Blinder used the Wile E. Coyote character in the old Road Runner cartoons to explain what happened to prices next: “The coyote is running, running until he runs off the mesa, suddenly he’s out there in thin air and stays there for a while — then crash,” he said.

The markets that crashed the hardest were the ones where prices had climbed the fastest.

I’ve been in the local Circuit City only twice. Neither time could I find anything whatsoever to interest me. It made Best Buy, which I loathe, look good.

This may be to some extent fallout from Republican Economic Theory, but it is just as much fallout from incompetent management, marketing, and product selection.

Wonder if the local store will go back to its roots as a bowling alley?

Bankrupt electronics retailer Circuit City Stores said on Friday it will liquidate its assets and shutter hundreds of U.S. stores after failing to reach a deal to sell the company.

U.S. Bankruptcy Judge Kevin Huennekens approved the plan to sell Circuit City to a liquidator group, capping a tumultuous year for the specialty chain.

except watch soaps and eat Chee-tos.

First-time applications for state unemployment benefits rose 54,000 to a seasonally adjusted 524,000 in the week ending Jan. 10, the Labor Department said Thursday.

The gain in the most recent claims data restarts an upwards trend that analysts had expected. Initial claims had declined in the prior two weeks, likely due to difficulties in accounting for seasonal adjustments.

In other news, no beer to cry in.

Conservatives lie.

Live with it.

Via Duncan.

Life is also tough in contractor-land:

More than half a million jobs were lost in the US last month, taking the unemployment rate to its highest in 16 years.

Job losses over the whole of last year totalled 2.6 million, the biggest annual loss since 1945 when 2.75m jobs were shed, the US labour department said.

The bulk of the year’s job losses came in the last four months when 1.9m people were laid off. In December alone, US employers cut 524,000 jobs. The original numbers for October and November were also revised higher.

We hear from the right that it’s always the fault of the working person who has the temerity to want fair pay, health care, and a retirement.

Toyota is suspending production at all 12 of its Japan plants for 11 days over February and March, a stoppage of unprecedented scale for the nation’s top automaker as it grapples with shrinking global demand.

Oh. Wait. There’s no UAW in Japan, is there?