Monday, March 23, 2009

Federal Hedge Fund?

It looks like Obama and Geithner want to create a hedge fund for the hedge funds. They are offering to guarantee the bad bets, which is what the derivatives market did. That's the market that just crashed and wrecked our economy.
If I understand what they are offering, investors can buy up questionable assets at a huge discount. If the values increase over time, the investors get the gains. If the values decrease, there is no loss for the investor- only for me and you- the taxpayers.
I am bummed. This is more slimey stuff going on in the dark. What happened to the transparency promise?

Wednesday, March 11, 2009

Predator State

Comments on The Predator State by James Galbraith

Freedom to Shop-
Includes freedom to but and sell the livelihoods of other people. Stock market decides which companies live or die, who runs them, what direction they develop; go vt has no role in protecting investors/strategic direction of companies (industrial policy).

Free Market replaces all other freedoms- speech, association, faith, assembly, press, fear, want, science, art.

Reagan/Volker 1981- monetarism- high interest destroyed export markets for 20 years, recession destroyed home markets, dollar driven up 60%. Made industrial equipment much cheaper overseas.

Corporate democracy replaced legislative and investigative powers of congress and imperitive power of the courts. Mismanagement, deception, manipulation, fraud concealed. Private sectors set up to feast on public systems- schools, military logistis, security, social security, FEMA,

Public universal health insurance (Medicare) do not evaluate risk- save on a major cost of health insurers. Do not have to pay stockholders or meet market rate of return. Not a commodity- no competing suppliers; supply-demand doesn't fit.

Cap and trade (market)
assumes the sum of all these decentralized decisions will achieve the best results. Will actually cause economic slowdown. Global, inerdependent, asymmetrical problem can't be solved by random adjustments- driving patterns/ plant emissions- in ne part of the world.

Polite solutions have filed- inequality, pollution, education, health care, unemployment, et al. Need to get intentional and serious and plan our way out.
Development of feasible alternatives to transportation, heating, basic needs must precede or accompany end of old way. Alternative is further despoilation and nasty wars.

High wage/ low unemployment comes from raising wages. Cutting wages to remain competitive removes the motivation for high productivity and techn ological innovation, which means loss of competitiveness in the long run. This is what we are experiencing.

Tuesday, March 3, 2009

Credit Default Swaps continue to wreck the market

As I understand it, the ongoing short-selling of credit default swaps is the major cause of the continuing market fall. How is it that this hasn't been stopped? If Ben Stein gets it and tells it to Larry King, how the Hell can the Obama money team miss it?

The game was fixed from the beginning. The quality ratings used to guide investors were bullshit- no one was looking at anything- they just put up the ratings they got from the banks. For honest investors it was like driving a Nascar race with a blindfold on.

Pretty soon, swaps were used not just to insure against debt, but to make money by speculating whether companies would fail or not. Bush's regulators didn't even bother to look into the mouth of the campaign contribution gift horses. They didn't need to because it was all unregulated. Besides, they weren't accountants- they were lawyers and wouldn't know a horses tooth from a horses ass (except their boss was such an excellent example of the latter).

So now we have something like $45 to 60 trillion worth(less) of these things floating around, attracting short sellers who continue to speculate and wreck good companies, employee livelihoods, and the market.

Anybody out there know why this shit continues?

Monday, March 2, 2009

Better is Better

If we hope for an economic recovery, we have to be guided by an insistence on quality. Given the range of crises facing us, we are going to need a simple, clear conceptual focus to guide our recovery. To reverse our downward trend, we need to identify another trend that will take us up. One of the things that has always been part of the American success story is quality. From Valley Forge to blue jeans to Google, when we have focused on quality, in people and products, we have succeeded.

Medical studies found that when physicians were rewarded for quality of performance instead of quantity of procedures (the current Medicaid model), costs actually declined 20%.

It is possible none of the approaches to rescuing the banks will work if quality is not the primary factor in choosing which banks deserve a bailout. If a bank has been managed badly, it will not turn around under the same management. If a bank is basically well run and trusted, it should receive taxpayer support. Quality must guide these decisions.

Employers who invest in technological innovation to keep productivity high, and keep wages high as well, guarantee quality products and performance. They remain competitive while companies that seek gain through lower labor costs fail.

Info Tech and Innovation Foundation has shown the competitiveness of our economy has fallen over the past ten years. This is largely due to a focus on cutting pay rather than improving productivity and innovation. Stock prices go up when layoffs and pay cuts are announced, despite the long-term effect on competitiveness and quality. This inflates the price of the stock but does not improve quality or add value to the company. When reality returns, the balloon pops and people lose their jobs and savings.

As the indicators continue to point to a deepening crisis, we need to look deeper for answers. Rather than focus on the crisis- and solution-of-the-moment presented by various media, we need to find a guiding theme to guide our efforts. Insistence on quality is the theme.