Recession Watch: one dip, two dips,... we all fall down

The trend lines are undeniable; the US economy is heading into another recession.  Debate between economic analysts entail whether what is occurring is an entirely new recession, a double-dip recession, or the continuation of even larger economic contraction that began initially with the 2008 financial crisis (which some would argue is an extension of the 2001 recession) and has properties that are unlike previous recessions.  Each of these arguments have some validity in explaining the current situation, but all conclude that this new decline, while not likely to be as severe as the 2008 crisis, will last longer in duration and given the current political weaknesses of the major industrial nations, be more difficult to mitigate.

Leaving aside the debt crisis and economic malaise that is occurring in Europe for the moment or the possible hard landing that has been predicted about China and the entailing risks these situations pose to the global economy, America's economic position is clearly weak.

First, the jobs position is dismal.  Last month, zero jobs were added and only a fraction of the jobs necessary to compensate for population growth alone have been achieved in the previous four months.  The NY Times summarizes:

Over the last 50 years, every time that job growth has been as meager as it has been over the last four months, the economy has been headed toward recession, in a recession or in the immediate aftermath of one.

The collapse of job creation is not about businesses fearing regulatory uncertainty, creeping hyper-inflation, or the need for further tax-cuts to stimulate big businesses already bloated corporate coffers, but rather it is due to insufficient aggregate demand.  People without jobs, people forced to take inferior paying jobs, people concerned that they may lose their jobs, people forced to subsidize their spouse, adult children, parents, and/or relatives, and people loaded with debt, aren't engaged in making major purchases, because they can't afford to.  Consider the following:

But the latest indicators suggest that even if the economy does not continue to worsen, it appears to be too weak to add enough jobs each month — roughly 125,000 — even to keep pace with population growth. Anything less, and the share of the population that is employed will continue to fall.

The stimulus program offered by Mr. Obama was insufficient to meet the full demands of the  financial crash of 2008.  This blog has been saying for the past three years (here, here, and here) that the weak recovery was an illusion.  Joseph Stiglitz said back in 2009 that, "We need a larger and better designed stimulus."  Paul Krugman has been waging a public policy crusade to convince the public that a second more robust stimulus is needed.  President Obama, instead of listening to these and similar minded economists, decided to split the difference and offer everyone a little of what they wanted: a little bit of tax cuts and some stimulus over a couple years.  The problem was that while averting a more severe recession, it failed to create enough power to re-inflate the economy to pre-recessionary levels.  Now that the stimulus dollars have been used, the economy is drifting back into negative territory and with a recalcitrant Republican dominated House of Representatives, there is virtually no chance that anything of substance being passed.

Other indicators such as GDP, consumer confidence, consumer consumption, factory employment diffusion index, and housing are all trending downwards.  Volatility in the market place, with abundant talk of debt crises across the western hemisphere, has investors and business worried.  Last month Asian banks cut credit lines to French banks.  Central banks across Europe, Japan, and America have made the unexpected move to offer dollars to European banks to ensure liquidity.

What had been in 2008 a financial crisis has migrated into a sovereign debt crisis.  Nouriel Roubini expands:

We are running out of policy bullets. The policymakers don't have monetary bullets; they don't have fiscal bullets; they cannot even backstop their own financial system. That's why it's more scary than a year ago, two years ago, or three years ago -- when we had all these policy bullets. Now we are running out of them.

***

Ken Rogoff, Harvard professor and former chief economist at the IMF, has said, "the real problem is that the global economy is badly overleveraged, and there is no quick escape without a scheme to transfer wealth from creditors to debtors, either through defaults, financial repression, or inflation."  As a result, Rogoff points out that many policy makers have badly misunderstood the overall problems associated with this second great contraction, as he puts it.  He offers the suggestion that, "If governments that retain strong credit ratings are to spend scarce resources effectively, the most effective approach is to catalyze debt workouts and reductions."

Solutions to both individual and national debt problems should be addressed as follows:

For example, governments could facilitate the write-down of mortgages in exchange for a share of any future home-price appreciation. An analogous approach can be done for countries.  For example, rich countries’ voters in Europe could perhaps be persuaded to engage in a much larger bailout for Greece (one that is actually big enough to work), in exchange for higher payments in ten to fifteen years if Greek growth outperforms.

Another approach offered by Rogoff to reduce the painful deleveraging process and years of unnecessary slow growth, would be for central banks to pursue a policy of moderate inflation of 4-6% for several years.

At this stage, none of the policies suggested by Stiglitz, Krugman, Roubini, or Rogoff appear on the table in either Washington DC or the capitals of Europe.  Instead of sustained and ambitious solutions, we are left with blathering idiots telling us of austerity programs that will magically generate confidence, while keeping away the terrible bond vigilantes.  The incompetence and stupidity of our leaders is nearly blinding.

Where's my Government Subsidy!

I too wish the benevolent hand of government largess would visit me.  Subsidies, bailouts, and friendly handshakes as the taxes of the minions are redirected into my coffers.

Why shouldn't I with my friendly neighborhood politician be able to run a business model solely predicated on how much I can extort out of the public?

Why care about customer relations, effective management, cost-controls, and all those petty matters, when I can have a member of the legislative branch simply re-write the laws so I don't have to pay taxes, don't have to concern myself about environmental or labor laws, and don't have to worry about those things that all those small people have to.

Banks, energy companies, utilities, telecommunications, military industrial, surveillance state, big pharma, private education, corporate agriculture,... etc, all feeding handsomely at the trough.

Why are Americans such assholes?

The above billboard was in Tucson, Arizona!

Gawkler reports:

A reporter in Arizona tells us, "KNST tells me they took that billboard down at 9:30 a.m. Monday morning." Not quite quick enough to beat the internet.

If images and statements associated with violence didn't have anything to do with what recently happened in Tuscon, why did they take the sign down?  Shouldn't these same people re-double, in fact "re-load" their campaign against the evil liberal empire and stand their ground in their honest attempt to sell hatred and violence to the indolent and ignorant?

When are Americans going to stand up to the extremists in the right and label those who pursue a violent and nihilistic vision of politics as the real "anti-Americans!"

The Other Fame Monster

I'm not a twelve year old girl, so I'm not really sure what Justin Bieber is about.  Although, I understand he's an androgynous teenage singer from Ontario, Canada.  Regardless, an interview in today's Guardian newspaper illustrates that perhaps the concept of young people manufactured to be a global media stars without the benefit of having a strong family framework, probably isn't very good for the developing child. To illustrate consider the following excerpt:

A few days after the Sunrise incident, Justin was in New Zealand, being interviewed by a presenter with a strong Kiwi accent. He asked Justin if Bieber was the German word for basketball.

"German?" Justin asked.

"German," said the interviewer. Justin looked blank-faced. "German," said the presenter. "You know? German."

"I don't know what that means," said Justin.

"Here," said the interviewer, showing him the word German written on his card.

"I don't know what that means," said Justin. "We don't say that in America."

It's one thing not to be able to understand multi-varable calculus at the age of 14 or not to have a grasp of global political forces driving the Basel III accord even if you're much older, but not to know what Germany is? 

I'm sorry, but the child is clearly a moron, just like his backwater and hick parents.  Where do these assholes come from?  Britney Spears, Lindsey Lohan...etc, they're all white-trash morons whose money-grubbing parents catapulted them into a world in which these children barely understand and clearly in the case of the latter two stars, unable to cope with.  Teenage actors, singers, and entertainers rarely do well in life.  Education is one of the ways that allows these young people to make better decisions and hopefully salvage themselves in the upcoming years, when their lives start to disintegrate around them.  However, if you read the Guardian's article, it's pretty clear there's not much in this kid's head and what education he's getting is useless.

Gretchen Morgenson: Untangling The Complex Foreclosure Mess

Gretchen Morgenson, who writes a must-read weekly column in the NY Times business section goes on NPR to discuss the complete mess the banks and mortgage lending agencies have gotten the entire American economy into, through their initial mortgage securitization programs and now with their shady and illegal foreclosure practices.  To underline the severity of this situation, all 50 states have launched criminal investigations into the unsavory foreclosure activities committed by the banks.  Ms. Morgenson, unlike the hacks at the Wall St. Journal's op-ed pages, is an intelligent and informative journalist, who has been at the forefront in explaining the Great recession and the corpulence underlying America's corporate misdeeds.
 
NPR begins with the following introduction:

Since the housing bust two years ago, when millions of homeowners fell behind on their loans, the foreclosure industry has grown into a multibillion-dollar business. To deal with the thousands of defaulted loans needing to be processed, banks relied on thousands of temporary employees who often had little experience and training to handle the foreclosure paperwork.

This resulted in many mistakes being made throughout the foreclosure process. Reports of sloppy documentation — including the questionable notarization of documents, the loss of key paperwork needed to begin foreclosure proceedings and missing paperwork on original mortgages — temporarily halted foreclosure proceedings across much of the country in early October. It also triggered at least five separate federal investigations into the ways mortgage lenders have handled foreclosures.

The entire broadcast can be heard or downloaded here.

The degree of duplicity, fraud, and ineptitude exhibited by the major players in this decade long fiasco, should make everyone who has a stake in the viability of the American economy, to demand that everyone -politicians, corporations, bankers, loan agents, bond rating agencies, economists, and homeowners- all pay a severe penalty for engaging in what is likely the world's largest instance of criminal fraud.  Nothing else is acceptable, because these same devious pick-pockets will only re-emerge emboldened and unleash another wave of catastrophe upon the financial world if left unpunished.

Elizabeth Warren Lays Down Some Principles

Felix Salmon reports that Elizabeth Warren is off and running with the new Consumer Financial Protection Bureau (CFPB), by laying down regulatory principles, rather than conventional "thou shall not" rules of operation.  In his post, he expands on the difference in her approach to regulating versus the conventional approach used by the banks and their slimy lobbyists within the DC Beltway:

The fact is that it makes perfect sense for a consumer-protection bureau to regulate from the point of view of the consumer, rather than from the point of view of bank managers. Warren’s simple questions are good ones, and they’re hard to capture with rules. If banks provide valuable products to consumers, then consumers will value them. If, on the other hand, banks create products which are designed to prey on human foibles, then consumers will come to believe, in Warren’s words, that “dealing with banks is like handling snakes – do it long enough and you’ll get bit.”

If Warren can continue making in roads by challenging the financial industry in cleaning up their act and creating a long-lasting framework to the benefit of consumers, the Democrats may have a real contender for delivering the "Change" that Obama himself has failed to deliver.

Another Poisoned Prescription: Novartis Fined $422 Million for Fraud

Another year and another multi-million dollar fine and settlement from another Big Pharma corporation.  Novartis, which is headquartered in Switzerland, has agreed to pay $422.5 million, in order to settle criminal and civil investigations arising from the marketing of the antiseizure medicine Trileptal and five other drugs. 

The NY Times summarizes the billion dollar payouts that Big Pharma has agreed to in regards to criminal investigations conducted over the past decade:

Novartis joins a growing list of pharmaceutical companies that have settled government investigations into health care fraud in the last few years, including Pfizer, which paid $2.3 billion; Eli Lilly, $1.4 billion; Allergan, $600 million; AstraZeneca, $520 million; Bristol-Myers Squibb, $515 million; and Forest Laboratories, $313 million. Pfizer, Lilly, Allergan and Forest pleaded guilty to crimes in the cases.

Earlier this year I outlined in a previous blog entry the business practices and criminal endeavours pursued by Big Pharma and the medical community on an annual basis against consumers.  The above settlement list validates the fact that when the world's largest corporations are found engaging in criminal activities, little more than nuisance fines are levied against these multi-national predators.  The profits elicited from pushing either unproven or detrimental pharmaceuticals, via morally compromised physicians, far outweighs any financial fine that the US government is prepared to impose.

Andy Wyss, president of Novartis Pharmaceuticals, said that Novaritis would “continue its commitment to high standards of ethical business conduct and regulatory compliance in the sale and marketing of our products.”  For industry watchers, the current press release is a familiar issuance from the fraud-mongers in the pharmaceutical industry.

Erik Gordon, an assistant professor at the University of Michigan school of business who follows the drug industry, said it was “easy to stifle a chuckle” when the company announced a guilty plea and, in the same news release, promised to continue ethical conduct.

Prosecutors said top management at Novartis had approved illegal marketing from July 2000 to June 2004. No individual, however, was named or charged.

Given the unscrupulous and illegal behavior of these companies, it is only further telling that both Republicans and Democrats fall over themselves to placate and support these corporate criminals.  Instead of allowing Americans to purchase drugs from Canadian manufacturers, the spineless Obama administration blocked Americans from cross-border shopping and individual state governments from engaging in bulk purchases to reduce costs.  If the US Department of Justice was sincerely interested in preventing these recalcitrant criminals, whether in Big Pharma or Wall St., from repeating their actions, hundreds of corporate managers and board members would be forced to defend their actions in court.  Once the cost-benefit equation is shifted, only then will these miserable crony-capitalists be effectively dealt with.

Elizabeth Warren Takes the Reigns of CFPB

There has been an enormous amount of talk regarding the appointment, by President Obama, of Prof. Elizabeth Warren towards the establishment of the Consumer Financial and Protection Bureau (CFPB).  The new agency will have a budget in excess of $400 million annually and its policies will not be subject to presidential oversight.  The appointment bypasses the contentious issue of having her stand at the sidelines waiting for Republican opponents to permit her audience and confirmation within their royal chambers.
 
The crony-capitalists, financial sector lobbyists, and the banks have for the past year been leveling aspersions about Prof. Warren and her scathing criticisms of their business practices. The US Chamber of Commerce engaged in a multi-million dollar campaign last year to scuttle the idea of a CFPB from being even discussed in Congress. Indentured corporate servant Sen. Gregg Judd (R-NH) recently stated that it was his, "concern... that she would use the agency for the purpose of promoting social justice." The crony-capitalists and belligerents who were midwives to the great recession, refuse to cede any ground, even on the scorched earth they created.

Progressives and liberals on the other hand, have been touting her sensible, people-first approach to finance and banking regulations and as an ideal candidate to run the newly minted CFPB. The NY Times ran a piece in their business section underlying the grassroots feelings about Ms. Warren:

“The best way to explain it is that she speaks truth to power,” Ms. Abaunza continued. “She speaks about how people have been ripped off in a way that everybody understands. Although she is a Harvard professor, she doesn’t speak in an elitist way. She is a grandmother. She is from Oklahoma. I like the fact that she says ‘golly.’ She engenders this trust immediately. Because she is very honest.”

Paul Krugman outlined the underlying political landscape regarding the Warren appointment in his NY Times opinion piece :

The debate over financial reform, in which the G.O.P. has taken the side of the bad guys, should be a political winner for Democrats. Much of the reform, however, is deeply technical...

But protecting consumers, ensuring that they aren’t the victims of predatory financial practices, is something voters can relate to. And choosing a high-profile consumer advocate to lead the agency providing that protection ... is the natural move, both substantively and politically.

Simon Johnson, former IMF Chief Economist, also believes that there is enormous long-term value to Prof. Warren's appointment for the Obama administration:

the president finally has an adviser who understands the financial sector and who has healthy skepticism about its intentions and actions.  As we documented at length in 13 Bankers, too many top policy people – both in this administration and all its recent predecessors – have been overly inclined to accommodate the interests of finance, particularly the big banks.  In this regard, putting Ms. Warren directly into the White House with the highest possible level of access is exactly the right thing to do – much better, for example, than making her purely a Treasury appointment.

This is truly one of the more intelligent decisions the Obama Administration has made in a long time.  Consumers, average citizens, and a vast number of people -on both sides of the political divide- who are fed-up with the crony-capitalists manipulating the legislative process to their explicit benefit, all consider this to be a sound decision.   Hopefully, this is more than a token attempt to placate the Democratic Party's liberal base.   Given the departure of the Larry Summers, the Obama administration will have the opportunity to jettison its Clintonesqe neo-liberal policies and engage in sensible and progressive practices that will be in the interest of all Americans and not just the folks on Wall St.

***

Additional blog entries and links on Elizabeth Warren can be found below:

• Warren discussing with Rachel Maddow, the benefits of a CFPB: here
• Warren analyzing problems with the US economy and the banking sector: here, here, and here.
• Warren sparring with CNBC hosts and Jack Welch on the virtues of the CFPB: here

A Wall Street Government?

There is another name for a government by and for the corporations....

Yeah... it's that other F-word: Fascism.

Elizabeth Warren: The next Foreclosure Crisis

PBS has an interview with Elizabeth Warren, Chairwoman of the TARP Congressional Oversight Committee, in which she discusses:

1. The value of the newly formed Consumer Financial Protection Bureau (CFPB) in providing Americans with understandable credit card, mortgage, and loan contracts;
2. The upcoming wave of commercial real estate foreclosures. 

http://video.pbs.org/video/1547461509

Tim Geithner (Obama's Treasury tool), has obviously made a number of duplicitous comments about Warren by publically praising her credentals, while putting up internal barrcades to her possible role in the upcoming CFPB agency. As critics of have pointed out, Geithner perceives in Warren a "threat to the very scheme he has utilized to date to hide bank losses, thus keeping the banks solvent and out of bankruptcy court and their existing management teams employed and well-paid." 

On the second issue, Secretary Geithner has publically stated, when questioned by Warren, that he believes there is sufficient management of the overall risks surrounding the commercial real-estate market. As can be seen in the video, Warren civilly implies that Geithner and perhaps the entire Obama financial team are either deluded or incompetent when it comes to effectively discussing the urgency of the problem, the societal ramifications, and realistic solutions, so that the American economy can be made both secure and functioning.  As she says, "The longer you pretend, the longer it takes to get the market where supply and demand match each other."

Fishing fleet working 17 times harder than in 1880s to make same catch

UK researchers who have analyzed fishing data going back 118 years, have found that current trawl fishing fleets have to work 17 times harder to catch the same amount of fish today as it did when most of its boats were powered by sail. 

As described in EurkeAlert!

They found that trawl fish landings peaked in 1937, 14 times higher than today, and the availability of bottom-living fish to the fleet fell by 94 per cent.

The findings are the result of a study using previously overlooked records and suggest the decline in stocks of popular fish such as cod, haddock and plaice is far more profound than previously thought.

The research is published in Nature Communications, the new online science journal from the publishers of Nature.

Ruth Thurstan, lead author of the study from the University of York's Environment Department, said: "We were astonished to discover that we landed over four times more fish into England and Wales in 1889 than we do today.

"For all its technological sophistication and raw power, today's trawl fishing fleet has far less success than its sail-powered equivalent of the late 19th century because of the sharp declines in fish abundance."

The findings suggest that the damage to fisheries is greater and has taken place over a much longer period than previously acknowledged, pre-dating developments such as the Common Fisheries Policy which are usually blamed for declining stocks.

Simon Brockington, Head of Conservation at the Marine Conservation Society and an author of the study, said: "Over a century of intensive trawl fishing has severely depleted UK seas of bottom living fish like halibut, turbot, haddock and plaice.

"It is vital that governments recognise the changes that have taken place. The reform of the Common Fisheries Policy gives an opportunity to set stock protection and recovery targets that are reflective of the historical productivity of the sea."

The study calculated 'landings of fish per unit of fishing power' (LPUP) from 1889 to 2007 to give an indication of changes in the amount of fish available for capture by the fishing fleet. In that time, LPUP declined 500 times for halibut, more than 100 times for haddock and more than 20 times for plaice, wolffish, hake and ling. Cod has declined by 87 per cent.

Professor Callum Roberts, from the University of York's Environment Department, said: "This research makes clear that the state of UK bottom fisheries – and by implication European fisheries, since the fishing grounds are shared – is far worse than even the most pessimistic of assessments currently in circulation.

"European fish stock assessments, and the management targets based on them, go back only 20 to 40 years. These results should supply an important corrective to the short-termism inherent in fisheries management today."

The Definition of Human Selfishness

Representatives of the human race have voted and decided to liquidate another species in the name of Mammon and short-term economic gain.

Delegates from 175 countries, representing the Convention on International Trade of Endangered Species of Wild Fauna and Flora, voted on a series of measures to eliminate international trade on the Bluefin Tuna and a variety of other animals that are posed for extinction.  According to the Washington Post,

The adult population of eastern Atlantic and Mediterranean bluefin tuna has declined 74 percent over the past half-century, much of it in the past decade, and the population has dropped 82 percent in 40 years in the western Atlantic.

The proposal originally initiated by Monaco and agreed upon by the USA and several EU states, failed to achieve a majority position at the Doha, Qatar conference; with 20 nations in favor, 68 against and 30 cowards abstaining. 

Japan the greatest consumer of worldwide Tuna, imports nearly 80 percent of commercially traded Atlantic bluefin.  Similar to its extensive campaign to dissuade any international body from preventing it from harvesting whales, Japan has used its considerable economic clout to prevent limitations on any trade embargo or harvesting constraints in international waters.  Few deny that the motivations behind their stance are purely commercial.  As Susan Lieberman, director of international policy at the Pew Environment Group said, "This was a case of just plain ignoring the science for short-term economic gain."

Japan is not alone in its posturing; however.  Canada, a country that has made itself into an environmental pariah by its fealty to dirty oil-sands production and the persistent refusal by its conservative government to acknowledge and address climate change, has actively sided with the Japanese on the tuna issue.  Canada's Minster of Fisheries, Gail Shea, applauding the defeat of the trade ban and touting Canada's own policies, which have permitted over the decades the devastation of Atlantic fisheries and the current collapse of Pacific Sockeye Salmon.  So when Canadians say they have a plan to manage fishery stocks, you can be certain that that species will be decimated.

To highlight the absurdity of the entire trade system, consider how Bluefin Tuna is cultured in Spanish waters; as relayed by the BBC.  The fish are initially kept alive in off-shore pens, where they are fed vast amounts of expensively caught fish (around 10-kg of feed fish serve to make the tuna put on 1-kg of body weight).  They are then harvested by hand using divers, packaged at a purpose-built factory, and flown -on the same day- to Asian markets.  All this so some silly twit can eat sushi with his/her choice of dipping sauce.

***

Additional background stories and commentary on this subject can be found here, here, and here.

Agruments for a US Consumer Protection Agency

Professor Elizabeth Warren, who chairs the Congressional Oversight Panel created to oversee the TARP funds, was on the Rachel Maddow Show last night and described the rational for having a single Consumer Protection Agency that would regulate credit card rates, mortgages, and general financial transactions in America. 

The Republican party, drunk on the deregulatory vino and still thinking it's 1999, have proclaimed that any such agency would be a terrible idea and would cause severe problems for business across America.  Those problems of course would not  be anything like the depression causing legislation, such as the Gramm-Leah-Bliley Act of 1999, which eliminated the Glass-Steagall Act of 1933 and permitted the financial monstrosity of Citibank to come into existence.  These same politicians, who continue to carry water for their Wall Street paymasters, want the public to believe that after the greatest economic collapse  in the history of mankind (in absolute terms), that their deregulatory laissez-faire ideology is the solution and not the problem.  What have these invertebrate shills for corporate-fascism done since the inception of the crisis?  First, they denied that there was a problem, then they start screaming like hysterical little girls at a boy-band concert, proclaiming that if we didn't hand over everything, including Grandma's silver dinner utensils, to the banks, who caused the problem, that we would be all doomed and consigned to the soup-kitchens. 

To date: the banks got their trillions of publicly backed dollars; executives of these financial firms received record bonuses for nuking the global economy; no meaningful legislation to prevent another crisis has been passed; and most economists, who first called the onset of the current depression, state that we are in worst shape than before the crisis.

In the discussion segment, Professor Warren outlines why it is not only important to have meaningful regulations for all consumer products, but why regulations facilitate transparency, accountability, and prevent commercial fraud.  She outlines her case by explaining, why if there had been a single consumer regulatory body in place, that much of the crisis stemming from the sub-prime loan fiasco and the shadow derivatives market, would not have occurred.  Her "money" quote was:

What we have aren't regulators who are there to regulate on behalf of the public.  What we have are regulators who are there to offer good deals to the banks.

Visit msnbc.com for breaking news, world news, and news about the economy

Niall Ferguson: I've seen the future and it stinks!

Niall Ferguson gives an interview with business journalist Consuelo Mack of the PBS program 'WealthTrack'.  In it Ferguson does his standard song and dance about the origins of the strife between the USA and China or what he ofter refers to as Chi-merica.   He sternly admonishes those who feel that the current recession/depression is over and the classic 'V' shape recovery is occurring.   Paul Krugman, who has been having a public feud with Ferguson, addresses both topics in his NY Times column (respectively here and here).  In both cases, Ferguson and Krugman are basically on the same page in offering both concerns and veiled predictions of weak American economic performance in 2010.

The take home message in my opinion, which comes near the end of the interview, is Ferguson's comparison of the current 'depression' with of the depression of 1873.  This particular event, which is almost never referenced in the press, involved depressions emerging in both America and Europe.  In America, construction work lagged, wages were cut, real estate values fell and corporate profits vanished.  A total of 89 railroad companies went bankrupt, 18,000 businesses failed between 1873 and 1875, and unemployment reached 14% by 1876.  Whereas in Europe, the Vienna stock exchange crashed, Viennese banks failed, speculative bubbles collapsed, and industries crashed.  Deflation ensued for the next twenty years and an economic shift from Europe to America occurred.

In Ferguson's analysis, China plays the part which America played in the 1873 crash, in terms of the shift of industrial strength.  He also believes that like the populist backlash that emerged in the first Gilded age, current day populist rage across the Western world arising from severe unemployment, decreasing social amenities, and the realization of the corrupt financial/governmental systems, could pose substantial risk for standing governments.

The second message, despite his early preening in the interview about the rise of the emerging markets and especially China, is in his own words,  "I've been to Chongqing. I've seen the future and it stinks!"  He concludes that China's communist party is incapable of fundamental reform or eliminating the rampant corruption that underlies the fabric of its merchantalist society.  I have written a fair degree on China's corrupt business practices (here, here, and here for example) and believe likewise, that this facet of their culture will be one of the principle agents why the so-called Chinese miracle will not overtake the West.

Another Japanese First: A Comic Book Library

According to France24,

"In a move to promote serious study of Japanese manga, a university in Tokyo plans to open a library with two million comic books, animation drawings, video games and other cartoon industry artifacts. Tentatively named the Tokyo International Manga Library, it would open by early 2015 on the campus of the private Meiji University, and be available to researchers and fans from Japan and abroad."

To those of the wider public who have never read or watched Japanese animation, although your children definitely have, it is an ornate and bizarre world (somewhat like Japan culture itself) that includes a broad range of subjects: action-adventure, romance, sports and games, historical drama, comedy, science fiction and fantasy, mystery, horror, sexuality, and business and commerce, among others. Unlike the uber-geek "Comic Book-Guy," who peddles his wares to children in the television cartoon The Simpson's, the manga genre is embraced by people of all ages in Japan.

Manga itself is a hybrid art that combines historical Japanese motifs and modern Western styles of animation. These highly stylized comic-book novels and their televised adaptions, have over the decades depicted the continuous cultural development of the Japanese people and its larger society since the Second World War. The gekiga style of drawing (emotionally dark, realistic, and sometimes violent) focuses on the day-in, day-out grim realities of life, and is often drawn in a fashion that has been described as 'gritty'.

Unlike a number of Japanese re-inventions that have failed to find a foot-hold outside of Japan, Anime or Japanese Animation has produced a significant following around the world. As an example, Quentin Tarantino's Kill Bill movies were based on a 1972-3 manga released in Japan called Lady Snowblood. In North America over the past few decades, a variety of children's television programing have highlighted Anime. These westernized adaptions include shows like Sailor Moon, which has been exported to more than 23 countries, and Pokemon, which has spawned a dozen movies and a worldwide audience.

As odd as it may seem, a serious academic exploration of the cultural roots and influence of Japanese animation on modernist artwork and global pop-culture is warranted.

Arigatou gozaimasu.

Quote of the Day: Finding new ways of screwing up!

Floyd Norris of the NY Times has an interesting blog entry about the company behind Iridium Satellite phones and the risk that befalls investors who confuse a company's underlying physical assets with the actual economic value of those assets. What I found interesting and perhaps most salient is the author's continued exasperation with the myopic level of thinking that financial investors continues to exhibit (which ties into my earlier quote of the day entry):

the comment heard from time to time: “This cycle will go better because investors have learned from their past mistakes.” In my three decades in the industry I have found almost no evidence of learning in the financial markets. People simply find new ways to make the same mistakes all over again.

Update: Tuna & Ocean Conservation

The Christian Science Monitor has a good article updating the continuing crisis that surrounds the demise of large ocean faring fish like Blue Fin Tuna and what is being done about it by individual nation states and multilateral organizations.

I've already written fairly extensively on the decline of the Blue Fin tuna, the state of global fisheries, and even regional situations such as the Pacific Salmon along the coast of British Columbia, Canada.

To review, the bad news is that despite attempts to limit harvesting to preserve tuna and other species through regional fishery management systems, global fisheries on a whole are in severe crisis. The obvious culprits are global fishing fleets that scavenge the world's oceans using modern vessels, satellite tracking, and sophisticated fishing gear to maximize their haul and profits. The United Nations' Food and Agriculture Organization (FAO) has estimated that, "Some 80 percent of commercial fish species are either fully exploited, overexploited, or collapsed." No less than nine of the world's 23 tuna species worldwide are “fully fished” and without immediate action all will face collective extinction in the years to come.

Furthermore, rampant exploitation motivated by commercial interests are again threatening the global commons and the viability of life in the open oceans.

Globally, $9 billion is lost to so-called pirate fishing, according to a study last year by the University of British Columbia and Marine Resource Assessment Group. In the Pacific alone, [illegal, unreported, and unregulated] (IUU) fishing takes 36 percent of the total catch, compared with a 19 percent global average.

These pirate fleets who plunder the global commons are a "huge problem in tuna fisheries across the western Pacific, particularly in “doughnut holes,” international waters between [exclusive economic zones] boundaries. In these waters, reflagged ships often use fish aggregating devices (FADs) that attract juvenile yellowfin tuna."

On the other side, there are international and regional compacts that may come to fruition next year that will give some reprieve to the tuna and other threatened species. For example,

The Obama administration... last month unveiled the outline of a comprehensive “ecosystem-based” plan to restore health to US ocean waters, including coastal fisheries. Among several measures, US fisheries would be pushed toward science-based instead of politically based catch limits. If the plan works, the United States could become a global model: It controls more ocean in its 200-mile exclusive economic zones (EEZ) than any other nation.

To improve the situation the following steps will have to be minimally implemented. They include:

• Restricting gear that is too good at catching fish. Nets with larger holes let younger fish escape, for example.
• Closing hard-hit and breeding areas to fishing to let them recover.
• Drastically reducing the number of fishing vessels chasing the fish.
• Reducing the total allowable catch.

Ralph Nader: "Obama is Conflict Adverse!"

Ralph Nader, consumer advocate and contrarian, still continues with his Cassandra-like march against the imperious forces of crony-corporatism, government incompetence, and inequity. His actions over the decades, through the institution of safer vehicles, consumer protection legislation and regulatory bodies, and his tireless work to expose the gross distortions of avarice masquerading as capitalism, has saved more American lives and a many public dollars than all the past half-dozen US presidents combined. In the above posted video from Yahoo tech ticker, he lays out in his opinion of the Obama administration's first nine months.

It includes such highlights as:

• His early months in office have been "very disappointing."
  
• Obama is "a frightened man," who won't take on corporate power.
  
• Obama is "conflict averse" - and a "harmony ideology type," who's being taken advantage of by the sharks in Congress, of both parties.
  
• He's "Bush-Cheney redux" when it comes to military and foreign policy, "albeit with better speeches" to the Muslim world. Given Obama's handling of the wars in Iraq and Afghanistan, Nader wonders in amazement: "And they gave him the [Nobel] Peace Prize?"

Unlike the teabaggers and those on the right who have Obama derangement syndrome, Nader's criticisms are based on Obama's actual policies, which continue to be substantially less than and in too many cases opposite what he campaigned upon during the Democratic party primaries and full election.

Additional reading on "fact based" criticisms from the left, produced by Mr. Obama's less than awe-inspiring presidency can be found on this blog here and here.

Saturn: Why one of Detroit’s brightest hopes failed | csmonitor.com

Saturn: Why one of Detroit’s brightest hopes failed csmonitor.com

Saturn was supposed to be the American answer to Japanese competition. Better cars, no-hassle pricing, superior customer support, and innovative marketing. When Penske pulled out of the bidding for the GM division, those aspirations collapsed and Saturn joined the waste bin of another failed American enterprise.

The article by the CS Monitor provides a depressing reality for the little car company that could have, should have, but didn't succeed. A number of problems from insufficient models, inadequate attention to engineering high-quality vehicles, and internal dissidence from other GM divisions lead this company to die.

It started out with high minded goals

Created in 1985, the Saturn brand - launched with iconic commercials showing hordes of buyers in the Tennessee hills - represented a rare piece of forward thinking in traditional Detroit. But The Wall Street Journal chided the project for being too ambitious, requiring not just a new car, but a new plant, new dealers, and a new workforce.

Even as late as 2007, the company was looking at a comeback to compete with Japanese imports

Saturn had begun to make a comeback with the new models in 2007, but was hit hard by the recession. At its high point, the company sold 300,000 cars in a year, more than current US auto market players like Subaru and Mitsubishi.

The good news is that GM's management and the UAW, which never embraced the cooperative structure of the company, will have their final wish in seeing the company die. As the Wall Street Journal elaborates:

But make no mistake: The failure here isn't Mr. Penske's. Saturn was killed by its creators, GM and the UAW. The company starved Saturn for new products, and the union waged war against Saturn's labor reforms to keep them from spreading to other GM factories.

I'm sure they will enjoy feasting on the ashes as more union workers join the unemployment lines and fewer people buy domestic vehicles.

Matthew Simmons: Peak Oil is Real and Has Arrived

The rise and fall of oil prices over the past few years has lead many to consider the finite nature of petroleum reserves. Optimists talk of the current price of natural gas, normalization of crude prices, and technological advancement that shall lead us to bountiful and stable energy reserves. Pessimists view structural limitations in creating a non-carbon based energy economy and a decline in fossil fuel reserves.

Matthew Simmons, who wrote "Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy," offers the thesis that sudden and sharp oil production declines could happen at any time. Even under the most optimistic of scenarioes, Saudi Arabia (the world's largest producer) may be able to maintain current rates of production for several years, but will not be able to increase production enough to meet the expected increase in world demand. Eventually, a day of reckoning will arrive and the world economy will be confronted with a major shock that will stunt economic growth, increase inflation, and potentially destabilize the Middle East.

In Foreign Policy (FP) magazine, he offers a riposte to a number of critics who have recently dismissed his assertions.

First, alarming data from the International Energy Agency and the U.S. Department of Energy shows that the flow of global crude oil peaked in 2005 and is now sliding steadily. The world will never "run out of oil," but its flow is in decline. There may still be ample oil reserves left in the ground when oil flows fall to half of today's use. But these remaining reserves are all either very low-quality heavy oil, which is difficult to process, or tainted with toxic elements that make it hard to refine into usable petroleum products.

He goes on to argue that his opponents arguments, which he describes as being based on belief rather than hard empirical data and meaningful econometric arguments, are unsound. His years of experience and insights into the current situation need to be fully appreciated by consumers and world leaders alike. How many times in this past decade have we heard, "Don't worry, trust us!"