NYT's Book Review of Matt Taibbi's "Griftopia"

The New York Times Sunday Book Review looks at Matt Taibbi's newest publication "Griftopia"

The reviewer summarizes the book with the following:

In “Griftopia,” a relentlessly disturbing, penetrating exploration of the root causes of the trauma that upended economic security in millions of American homes, Taibbi argues that what unfolded was far from accidental. Rather, the nation suffered the equivalent of a hostile takeover of key areas of its commercial life by investment banking houses, while regulators and members of Congress abdicated their responsibilities either because they were influenced by campaign cash or because they believed the fairy tale that unsupervised markets always work best. The result, Taibbi asserts, was a thieves’ paradise — Griftopia.

Taibbi takes on the zombie lie, pushed by right-wing hacks, that the banks were forced to sell subprime mortgages to poor people and that Fannie Mae and Fredie Mac were the root causes of the crisis.

Taibbi persuasively dismisses the argument that the financial crisis was caused by poor people with a taste for real estate, delineating how Wall Street eagerly handed out mortgages to anyone with a pulse, and then used the home loans as the material for a far more lucrative enterprise — the exotic investments known as derivatives. The derivatives market depended upon a steady supply of mortgages. But when too many of the bets went bad, Wall Street persuaded the Treasury to construct bailouts that Taibbi describes as a “labyrinthine financial sewage system designed to stick us all with the raw waste and pump clean water back to Wall Street.”

The book attacks the mindless Tea-Party movement, calls Alan Greenspan the biggest asshole in the universe, delves into America's bubble machine typified by the original vampire-squid, Goldman Sachs, and considers how Obama's health care initiative is nothing less than a boondoggle for the toxic-sludge dealers in big-Pharma and the nickle-and-dime kleptomaniacs in the so-called insurance business.  As emotionally cathartic as it is to find someone who will call the biggest thieves and crooks on the planet, what they truly are. It is Taibbi's constant attack on the enterprises of American capitalism, those revered and sacrosanct temples, in which he viciously and relentlessly dismantles and exposes as being little more than high-end criminal rings, that is most satisfying.

An excellent read.  I hope someone was generous enough to put it under your Christmas tree.

Matt Taibbi talks about the Tea Party, Palin, & the Banks

I really hope if you have an opportunity to watch Eliot Spitzer on his CNN news-talk show, Parker-Spitzer.  The man always impresses me when he's debating friend or foe, with his enormous knowledge of governance, financial affairs, and the inherent corruption that exists between government and big business.  There really isn't any other show on the MSM cable channels, in America at least, that I think is worth watching.  Even if you're into liberal talk shows, MSNBC's lineup tends to be a little repetitious and self-serving when it comes to engaging in substantive issues. 

The above video post is another with Matt Taibbi, who grouses on the media obsession with Caribou Barbie and the Tea Party movement, the criminality of the banks, and the incompetence of Tim Geithner and Alan Greenspan.  Spitzer and Taibbi unleash a real pummelling on the ass-clowns of casino-capitalism!

Bruce Bartlett Calls Dubya's Tax Cuts Virtually Useless

Bruce Bartlett, a former Republican who served in both the Reagan and George H.W. Bush Administrations, has put forward a critique of the tax cuts implemented under Dubya (aka. George W. Bush)

To summarize, the original Bush tax cuts, although widely stated as a stimulative supply side tax-break, were in fact designed to offset the revenues the federal state was obtaining during the final years of the Clinton administration in the 1990's. A conceit articulated most prominently by Alan Greenspan, who at the time claimed that fiscal surpluses had grown too large.  Instead of creating sound fiscal policies, Mr. Bush's first term tax-cuts, rebates, and tax code "reforms" were determined by the Republican party to create, according to Bartlett, constituencies that would be grateful to the Great Leader's leadership. He outlines:

Bush proposed a doubling of the child credit to $1,000; higher limits on education savings accounts; a new deduction for two-earner couples; allowing a deduction for charitable contributions by those that don’t file itemized returns; a $400 deduction for teachers who buy unreimbursed school supplies; Individual Development Accounts to allow people to save tax-free for retraining; a refundable tax credit for health insurance; and a tax credit for financial institutions that matched savings by those with low incomes. The only supply-side element was a modest reduction in the top statutory income tax rate from 39.6 percent to 33 percent — higher than it had been during Bush’s father’s administration — that would be phased-in over a number of years.

However, in reviewing the actual impact of those tax cuts, Bartlett concludes that it is clear that:

there is virtually no evidence in support of the Bush tax cuts as an economic elixir. To the extent that they had any positive effect on growth, it was very, very modest. Their main effect was simply to reduce the government’s revenue, thereby increasing the budget deficit, which all Republicans claim to abhor.

As my previous post explains, everything the Bush-bots claimed that they were doing and predicted about the country's fiscal situation turned out to be incorrect.  Despite the hysterical reporting by the toadies of the Republican party and Wall Street in the MSM, the tax cuts provided limited or no economic value.  It is therefore complete nonsense that if America's wealthiest and most affluent aren't given even more perks through the extension of the tax breaks, that the entire country will disintegrate.  The plutocrats are the one's who have destroyed the American middle class through their low tax, militaristic, pro-China globalization trade policies.  In the wake of their recklessness, they have increased poverty, diminished social mobility, and promoted a culture of debt that will retard US economic growth for another decade.  Since they are the one's who have felt the least pain in an economic collapse caused by their antics, they should at least bear some of the burden in returning the nation to solvency.

"Helicopter" Ben Bernanke now with Kung Fu Grip

You too can imagine the day when you will be richer than you thought possible, when Helicopter Ben shows up on the horizon with his duffel bags of loot!

Yeah... a lost decade with Japanese-like deflation will be slayed by Helicopter Ben and merry printing presses of the Federal Reserve.  Let's see Greenspan look so cool!

Jobs? What Stinkin' Jobs?

A week ago the US government published statistics, which state that the US economy added 162,000 jobs in March.  The conventional propagandists make the absurd claim that the recession is over and that the Gilded age can continue again without interruption.   A huge hurrah could be heard in the financial district of New York as the DJI passed the 12 thousand mark; a level it hasn't reached since June 2008.  Once again, the divide between reality and Dr. Greenspan's imaginarium of useless financial gimmickry grows even larger.  An emerging view that has now become nearly axiomatic amongst those of us in the reality-based sciences, is that the study of economics has become little more than an ideological handmaiden to political forces and is polluted to the point of uselessness.

Those economists, on the other hand, who have been constantly critical of both the Bush and Obama administrations economic dissembling and the "green-sprouts" argument, have noted their objections to the over-simplified and intellectually dishonest statements of their peers who claim that the US economy is on the mend and jobs will soon abound.

Robert Reich, Dean Baker, and Mark Thoma, to name a few, outline the situation:

• The positive news is that manufacturing has shown a brief but constant uptick in jobs over the past few months in the USA.  A total of 45,000 jobs since December 2009.  However, future growth is likely to be anemic.
• The US census bureau added at least 48,000 new jobs for the 2010 census in March.  As many as a million jobs will be added alone for this endeavor in the following months. These jobs are temporary and only provide a short-term solution to those who are chronically unemployed; however.
• Since the inception of the Great Recession, the US economy has lost 8.4 million jobs and failed to create an additional 2.7 million necessary as per population growth.  Thus, a total of at least 11 million jobs have either disappeared or failed to materialize.
• Many of the jobs that have been lost were in construction, mortgage banking, appraisal, financial and legal services associated with the bubble market, and manufacturing.  Most of these service oriented jobs will not return and in the case of manufacturing, are permanently lost as long as the Chinese retain their slave-labor policies and currency manipulation practices.
• State and local governments have shed 72,000 jobs since December, or 24,000 a month.  A trend that will accelerate as the federal stimulus program weans and state revenues continue to slump.
• The federal government's spending on last year’s domestic stimulus is still near its peak, and the Fed continues to hold down interest rates.  Without these two factors, there would be no job growth to report.
• Nominal wages fell in March for the sixth time since 1964. Dean Baker states that, "This is not a good sign for future income growth."
• Consumer debt remains high, with those who are employed saving and paying off existing debts rather than engaging in further purchases.  If there is a permanent change in consumer demand, no recovery to pre-recession levels of economic activity will occur in the near future.

The obvious question that remains is what has the US government or the Fed done to prevent the big banks, which are now bigger than they ever were and were at the center of this recession, from engaging in the same activities that led to this current economic collapse?  Nothing.

Stiglitz Calls the US FED Corrupt

Last week Joseph Stiglitz, professor of economics at Columbia University and recipient of the Nobel Memorial award in Economics (2001), made a set of explosive criticisms about the Federal Reserve at a public forum on financial reform that has largely been ignored by the mainstream media to date.    Tim Iacono at SeekingAlpha says, with respect to the comments, that they are, "patently obvious to anyone with a working knowledge of how the Federal Reserve system really works, yet, even to me they somehow seemed shocking."

What was it that Stiglitz said?

If we had seen a governance structure that corresponds to our Federal Reserve system, we would have been yelling and screaming and saying that country does not deserve any assistance, this is a corrupt governing structure.

The pseudo-public (and therefore pseudo-private) Federal Reserve has long pretended to the serve the public interest, while hansomely filling the vaults of the banks to whom they are supposed to supervise and regulate.  Since the the inception of the Great-Recession libertarians, progressive-liberals, and an assortment of economists have been asking tough questions about the conduct and competency of Alan Greenspan and Ben Bernanke and the entire Federal Reserve system, which to date has blocked, scuttled, or diluted any attempts to allow transparent examination of its activities.  I too have been questioning the basis for the US Federal Reserve system (here, here, and here) for some time, and Stiglitz's comments, which I do not consider hyperbole, are a refreshing anodyne to the usual mealy-mouthed platitudes offered by the MSM on why meaningful examination of the Fed and financial system reform cannot occur.

Global Arsonist named TIME's man of the year!

For the majority of the year the managers of America's economic news have been issuing headline-after-headline declaring that 'green shoots' were upon us, jobs growth was around the corner, consumer confidence was returning, the banks were once again sound, and corporate profits are once again booming. To date, none of these exaggerations have been remotely correct; including the statement by Ben Bernanke, "that the recession is very likely over."

In terms of understanding propaganda, 2009 has been another boom year. Much like the Bush years, where government lackeys bemoaned the fact that little good-news was being reported about the Iraq war, the Obama administration has likewise, with the collusion of mainstream media (MSM), produced voluminous statements to create the public perception that the global economy was on the mend. This week Ben Bernanke, chairman of the Federal Reserve, was named TIME magazine's man of the year. To the glee of media bobble-heads everywhere, Mr. Bernanke has single-handily prevented America from sliding into a depression. Endless articles have now been written about how in the darkest moments after the collapse of Lehman Brothers, Bernanke marshaled all the power of his office to save capitalism and right the debt-laden banks from implosion. It's a compelling narrative, but one that is completely false.

Bernanke, Greenspan, and the rest of the laissez-faire economists of the Federal Reserve not only ignored regulating the housing bubble and the "shadow economy" that included the toxic assets that brought down Bear Sterns and Lehman Brothers, but encouraged the expansion of these bubbles. Bernanke served as one of the Fed's governors from 2002 to 2005, and then did a brief stint as head of the Council of Economic Advisers before taking over as Fed chair in early 2006. There were few people in government who were better situated to correct the "irrational exuberance" in the markets than this man.

In the fourth quarter of 2007, Bernanke repeated to congress and the media that there was no need to cut interest rates and that there was no recession on the horizon. Weeks later, he cut interest rates. He remained steadfast afterwards that the economy in 2008 would be "strengthening as the effects of tighter credit and the housing credit began to wane." However, his actions and private statements belied the opposite was occurring. Two months after he gave his prepared statements to Congress, the greatest economic downturn since the Great Depression began December 2007.

When the September Crisis of 2008 unfolded, the FED loaned at least $2 Trillion dollars to both US and foreign banks. Economist Dean Baker, co-director of the Center for Economic and Policy Research, elaborates on Bernanke's perfidy at this critical juncture:

[Bernanke] has refused to provide the public, or even the relevant congressional committees, with information on the trillions of dollars in loans that were made through the Fed's special lending facilities. While anyone can go to the Treasury's website and see how much each bank received through Tarp and under what terms, Bernanke refuses to share any information on the loans that banks and other institutions received from the Fed.

Where we do have information, it is not encouraging. At the peak of the financial crisis in October, Goldman Sachs converted itself from an investment bank into a bank holding company, in part so that it could tap an FDIC loan guarantee programme. Remarkably, Bernanke allowed Goldman to continue to act as an investment bank, taking highly speculative positions even after it had borrowed $28bn with the FDIC's guarantee.

The rational in naming Ben Bernanke as the most important person of the year, is simply to provide him with official credibility in the face of the ruinous laissez-faire ideology that has held sway over Washington for the past thirty years. Wall Street has given the MSM its orders to present the fiction that Mr. Bernanke is the man who saved the world and who must naturally be given another term as FED chairman. The financial world that existed pre-Lehman Brothers no longer exists and the elites who destroyed the world economy, do not wish anyone to understand the scope of their mismanagement in hyping casino-capitalism, while destroying the American dream.

***

Additional blog postings and links of interest:

Eliot Spitzer has "Nine Questions for Ben Bernanke," which to date, none have been adequately addressed by either Mr. Bernanke, the FED, or the feckless MSM.

Critics who said Bernanke should not be re-appointed: Nassim Taleb, Anna Jacobson-Schwartz, Senator Bernie Sanders (I-VT), and Ron Paul (R-TX) to name a few.

People who have advocated Bernanke's reappointment in the media with reservations are Nouriel Roubini and Paul Krugman.

Nine Questions for Ben Bernanke

I'm not a fan of the monetary or regulatory policies advocated by the Federal Reserve. I think Alan Greenspan was a crook; although unlike the politicians and corporate yes-men he served, he never claimed he wasn't. Nassim Taleb has called for Bernake's head, as have persons on both the right and left; although for quite different reasons. It is clear that Mr. Bernanke will be confirmed without undue problem, just as Greenspan was. If the Democrats were serious (which it doesn't appear to be) or at least a few outliers, like Representatives Ron Paul (R-TX) or Gary Ackerman (D-NY), who do sit on the House Financial Services Committee were able to ask the right questions, then we might actually understand where this listing ship will finally sink.

Elliot Spitzer, former Governor of NY, has listed some decisively intelligent questions that should be asked of Mr. Bernanke when he's subjected to appointment. They are:

1. How does the Fed define economic success? If the Fed is to be the macro giant that it seeks to be, we must understand whether its metrics for success focus on GDP growth, job growth, household median income growth, inflation moderation, or some other data.

2. What industrial policy does the Fed see best fitting our macro goals?

3. How do we define and measure systemic risk? If the Fed wishes to be granted the authority to be the regulator of risk, it better be able to explain how it measures it.

4. Has the Fed found the analytical error that permitted it to believe throughout 2008 that the crisis was contained and would not jump from the sub-prime sector to the entire financial system? If we cannot locate that analytical error, how can we possibly begin to spot systemic risk in the future?

5. Has the Fed examined why it permitted the avalanche of debt to course though the financial system without one of its own analysts observing that the risk of default was not reflected in the market's pricing of risk?

6. What bank structure will best accomplish the macro goals the Fed defines? Do we desire a market dominated by several institutions that are openly "TBTF"—too big to fail—or are we going to reverse the implicit and explicit federal guarantees of the past year and cut loose the major institutions? And if we are to cut them loose, how will the market be persuaded that they really are on their own, and the Fed will not rescue them next time, too?

7. Does the Fed stand by the notion that asset bubbles are better dealt with after the fact than during their creation? Does this view, which the chairman has articulated with some frequency, doom us to the incessant cycles we have lived through over the past decade?

8. Does the Fed still have faith in "self-regulation," the concept that was used to justify the decay that set in throughout the regulatory apparatus in Washington?

9. What governance structure is appropriate for the Fed, given its new authority?

Eliot Spitzer: the FED is a fraud machine!

Economics and The Great Recession

Economists across the world have been grinning from ear-to-ear saying the recession is nearly over, “we’ve past the worst,” and there are clear indicators of improvement. Arguments have been bandied about that tell the greedy and the absent minded that “green-shoots” are rising, the rate of job losses has declined, there are fewer surplus’ to be seen in manufacturing circles, and consumer sentiment has improved. While these arguments all have an element of truth, taken in context with actual events that have unfolded not merely in the past eighteen months but in the past two decades of globalization, a substantially different set of conclusions can be reached.

I’ve never trusted economists and their dismal science as a whole. One of the fundamental aspects of ‘real’ science, and not the statistical bloviations of financiers, is the concrete capacity to first, adequately explain a physical phenomenon and second, to accurately predict physical events before they occur based on the prior’s explanation. Let’s first review how they did leading up to this current recession:

1. Alan Greenspan former chairman of the US Federal Reserve (1987-2006) and an adherent of Ayn Rand, in March 2007 said he saw only a one third chance that a recession could occur that same year. The US recession officially began December 2007.

2. Greenspan’s successor, Ben Bernanke, stated in July 2007, only months before the beginning of the largest economic downturn since the Great Depression of 1929, he believed that despite a host of potential economic perils the US economy would pull through 2007 and into 2008 in relatively good shape. It did not.

3. Mark Perry, professor of economics at University of Michigan-Flint, stated in his popular economics weblog Carpe Diem in October 2007, “Economic variables identified by the NBER as the most important recessionary indicators… provide no support for the notion that the U.S. economy is headed for recession.” In fact he believed, “Most current economic indicators suggest a healthy economy, expanding at the average rate of an expansionary economy.” A year later stock markets across the planet crashed.

4. Martin Feldstein, a professor of economics at Harvard and the president of the National Bureau of Economic Research (NBER), stated in November 2007 in the NY Times that, “My judgment is that when we look back at December with the data released in 2008 we will conclude that the economy is not in recession now.”

5. April 2008, Alan Greenspan was given the opportunity to re-evaluate his previous stances and provided the eager public with another kernel of his vast sagacity in the belief that a decline in “U.S. home prices will probably end well before early [2009] as the number of houses on the market diminishes, aiding an economic rebound.” As of today, “US home prices fell 6.8 percent in April from a year earlier as rising unemployment and record foreclosures kept buyers out of the market.”

6. Greg Mankiw, a Harvard University economist and another Bush-bot adviser, recently stated in the NY Times, “It is fair to say that this crisis caught most economists flat-footed. In the eyes of some people, this forecasting failure is an indictment of the profession. But that is the wrong interpretation.” I’m sorry but this isn’t the Gong Show; you’re wrong again.

The above aren’t drama queen’s like Jim Cramer or for that matter anyone affiliated with CNBC. Rather, they supposedly are the best America has to offer in understanding economics and as such, were given pedestals in government and chairs in academia to pursue policies in the public interest. As the above summation reveals, none of them came close to accurately analyzing the existing trends or predicting the evolution of the current recession. If any person in ‘real’ science were to give such glaringly inaccurate and poor predictive analysis they would be fired and dismissed as dunces and crackpots.

In the past few months, the schemers, speculators, and accumulated greedheads, have been positing the argument that we are at the end of this so-called recession. Again, I think we need to re-evaluate the terms we are using. Richard Posner, a conservative jurist and author of a recently published book “A failure of capitalism,” has called this current situation a ‘depression’ due to,

The intensity of the anxiety that it has aroused, the enormous costs that the government has incurred to try to stop the downward spiral of the economy, the possibility that those costs will bite us as the economy begins to recover and by doing so will knock the recovery off its path, and the further possibility that the recovery will be extremely protracted because of long-term changes in consumer preference.

Let’s look at the outcome of the past six months for America:
1. The June 2009 US employment report shows that conditions in the labor market continue to be extremely weak, with job losses in June of over 460,000
2. Unemployment has risen from 7.2% to 9.5%
3. Underemployment rate has risen from 14.8% to 16.8%
4. Aggregate number of hours worked per week has dropped precipitously
5. There has been more than 6 Million jobs lost since the start of the crisis
6. The DJIA remains 42% below its 2007 peak of 14,200
7. Personal savings of those with jobs has risen to 6.9%

The UK, the Eurozone, Japan, and all emerging markets are in worst shape than the USA. The UK output is expected to decline by 4.3% in 2009. The ECB announced in June that it expected Eurozone GDP to decline by as much as 5.1 percent this year. Eastern Europe is still a brewing concern with its capacity to further undermine major Western European economies and financial sectors. Japan faces historic levels of unemployment and continuous month-to-month declines in exports. The numbers offered by the Chinese simply don’t add up and their vaunted domestic middle-class population is not in any position to become uber-consumers. Unlike previous recessions and regionalized meltdowns, the rancid fruit borne by the collusion of national governments and international finance industries now encumbers the entire globe and all industries.

Despite these obvious facts, the OECD has declared “green sprouts” are rearing, the worst is behind us all, and in 2010 the 30-country organization will see 0.7% growth. The IMF, as of yesterday, boosted its 2010 global growth forecast to 2.5 per cent. Ben Bernanke back in February assured congress that, “there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery.” Given the track record of these “experts,” does anyone really believe them?

Nouriel Roubini, one of the few economists who got it right, has stated that the U.S. recession will last at least two years and could drag on as long as the one that plagued Japan in the 1990s. Joseph Stigiltz who has done an excellent job of analyzing the roots of this current calamity states the little spoken but obvious fact:

So the real risk, I think, is that things will be even worse [than] before the crisis. The reason I say that is the way that we have gone about rescuing the banks and restructuring our financial sector has resulted in the too-big-to-fail banks becoming even bigger.

The best argument I have discerned is that there will not be a sustained recovery or minmally a return to the previous norm! One has to consider the fact that we have seen a fundamental and systemic failure of capitalism across the globe and neither the American nor any other nation’s economy will simply revert to “business-as-usual.” For the past decade, the American consumer, who represents 70% of the US economy, was sopping up an inordinate level of consumables from China, Japan, and the rest of the world. They built it and the Yanks bought it. Now that has stopped.

Americans are losing their jobs at record levels, they are seeing whole domestic industries disintegrate with no chance of those jobs returning, health care costs are increasing, and the value of their homes are collapsing. US Housing prices as of April 2009, have witnessed an 18% year-over-year drop and a reduction of 32.6% from their peak three years ago (S&P/Case-Shiller index). Currently, ten percent of homeowners have mortgages that are valued more than their homes are actually worth. Foreclosures increased 18% in May 2009 and thus remain unabated. The US banking industry, on the other hand, has an additional $1.8-trillion exposure to commercial real estate and faces potential losses of approximately $200-billion. The implication is that commercial real estate, "Is headed for a crash that could eclipse even the devastating slump of the early 1990s." The American consumer has wisely started to save again; however, this new propensity towards frugality during a severe recession reduces the likelihood that a recovery will occur anytime soon or can be maintained.

Robert Reich states, “This economy can't get back on track because the track we were on for years -- featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere -- simply cannot be sustained.” Therefore, the growth and consumption that occurred during the roaring nineties and the dismal decade of the zeroes will not be repeated. A new equilibrium will have to be established with diminished expectations, reduced (if any) growth rates, and an end to the culture of excess that has permeated government, business, and individual want.

As John Connor says in Terminator Salvation, "If we stay the course, we are dead! We are all dead!"