Month: October 2008

Syria claims that US forces attacked a civilian construction site on its territory. “The Associated Press news agency quoted an unnamed US military official in Washington as saying that American special forces had attacked foreign fighters linked to al-Qaeda.” The official said, “We are taking matters into our own hands.”

This, in combination with attacks within Pakistani territory, appears to represent a serious expansion of the wars which are supposedly against terror. Having been rebuffed in its designs on Iran, the Bush administration may nonetheless be leaving its successor with a broader war that won’t be any more winnable for its expansion.

A German economist has created a stir, by arguing that bankers are scapegoats in the current financial crisis, and by comparing them to Jews in Nazi Germany. Stephan Kramer, general-secretary of the Central Council of Jews in Germany demanded an immediate apology, saying, “It would be news to me if managers were being beaten, murdered or locked up in concentration camps.”

Kramer understated the matter when he also said, “This comparison is outrageous, absurd and completely misplaced, an insult to the victims.” For one thing, the Jews were likely as innocent as it is possible for capitalists to be; they certainly engaged in nothing like the massive fraud that created the current financial crisis. For another, the perpetrators of this fraud, rather than being shipped off to concentration camps, are retiring to comfortable upper class lifestyles. They are not being forced to sell their assets on the cheap. They are not losing their homes.

It isn’t just Jews to whom Kramer owes an apology.

Mixed in with the sounds of the Halloween party here at Lupin, I hear also the sound of Lori Kay Stout’s musical instrument, a kind of xylophone, but larger and with a far superior timber to any I saw and heard as a child. The last time I heard her play it was when the Stouts commenced the expulsion of Ed and Kassandra Dennis, a battle that consumed four long months and involved many visits from a biased Sheriff’s deputy. (And indeed, Deputy Kubik saw no need whatsoever to display any sense of impartiality, refusing to restrain the Dennis’ conduct in any way while threatening the rest of us with arrest.)

That battle was eventually won, thanks to expert legal assistance; the Stouts found lawyers, including one among the membership, who put on stellar performances in court. But as the Dennises left in defeat, hopes for Lupin’s revival quickly sank; membership, which had begun to decline with the dot-com bust in 2001, even before the Dennises seemingly did everything they could to destroy what is, at core, a social club, picked up only to a limited extent. Lupin has always been on the financial edge, but the Stouts’ mismanagement quickly turned the trend back downward as Lori abused staff (to whom she pays minimum wage not in real money but in Lupin credit, reminiscent of a company store) and saw only money where humans walked.

Lori told me at the beginning of the battle to expel the Dennises that she played this instrument to relieve stress. I have guessed that the Earth Dance was a financial disaster; it might have been mitigated only if a member who organized it took a share of the losses. Tonight was probably the last opportunity for Lupin to make any money this year, but a big group of burners canceled, leaving only a long table of members waiting too long for dinner in the restaurant when I strolled through at about 7 pm tonight. Though this is a Saturday night, the parking lot has only a few more cars than one might expect to find on a good Sunday night.

Now the economy is turning downwards again, even for the relatively well-to-do who comprise the bulk of Lupin’s membership, with a recession forecast to be longer and harder than any in decades. A faithful member who served as Lori’s second-in-command resigned effective the beginning of this month, increasing the load on Lori, and I think making the management situation here completely untenable even in an abusive model that assumed infinite replaceability of staff and unimportance of membership.

Lori, I think, hopes no one will hear her playing her xylophone over the music from the clubhouse. But I hear her. I am no accountant, and I have no access to the books. Rather, I am a communication scholar; it is the decline in attendance I see, and it is on this that I base my conclusions. The Stouts are through.

The ACLU has published a map of what it calls a “constitution-free zone” on what can no longer be called borders–as imaginary lines demarcating national territory–but frontiers in which “American citizens traveling from one place in America to another are being stopped and harassed in ways that our Constitution does not permit” just as if they were at a border checkpoint, where fourth amendment protections do not apply. These frontiers are 100 miles across and include not just the Mexican and Canadian borders but coastlines. The ACLU estimates that two thirds of the US population lives within these frontiers.

“This week Mr. [Sayed Perwiz] Kambakhsh narrowly escaped the death penalty over alleged actions that – even had he committed them, which he denies – would be nothing more than a typical classroom debate for a journalism student in the West.”

Gary L. Francione complains that California’s proposition 2, a modest effort to improve factory farm animals’ conditions modestly, will 1) “not even come into effect, if at all, until 2015” and contains numerous loopholes; 2) “will only make the public feel better about animal exploitation and will result in increased exploitation;” and 3) “Humane Society of the United States, Farm Sanctuary, and other groups . . . should perhaps spend a chunk of its $223 million in assets and $124 million in revenues on vegan education.” This comes to my attention through some shrieking on Facebook to the effect that that Francione must be some kind of a prophet and that what he posts must be received wisdom.

This has, unsurprisingly, drawn a fierce counterattack who believe proposition 2 is better than nothing and argue to the effect that those who oppose it on the above grounds must be jihadis.

Extreme? Check out the depths of hell to which this particular flame war has descended. “Miranda Pandaqueen” writes:

I was attacked…

Amy said:
“If you are really that simplistic in your thinking, you have a lot ow work to do.”
“you’re obnoxious” that was said TWICE!
“Freaking worry about things in England and skadootch!”
“You’re a cloded-minded idiot”
“BTW this IS going to pass, so suck it !”

And yet I’M the one being told to be quiet!!!

I wrote in response to all of this:

But there seem to be two logical leaps from reducing the suffering of animals in proposition 2 to less guilt among meat eaters to more meat eating.

The first logical leap assumes that meat eaters currently suffer guilt and that by reducing this guilt, we enable them to continue to consume meat. But this is, on the whole, absurd. Most meat eaters refuse to feel guilty about their food choices. As one of my carnivorous friends put it, rather callously, these animals exist for human consumption. How she is able to reconcile that view with the compassion she extends to the cats that live with her and come to visit her is beyond me.

The second logical leap assumes that less guilt among meat eaters will lead to more meat eating. This again assumes that meat eaters feel guilt. It also assumes that a significant reduction in meat eating exists to be diminished through this reduced guilt. I see no evidence of this. Vegans continue on the fringes of the mainstream; our numbers may grow in aggregate, but I would be surprised if we are increasing substantially as a fraction of the entire population. This means that more animals will suffer and be consumed, with or without the passage of proposition 2.

The question then is whether proposition 2 will in any way mitigate the suffering of animals. While its aims are far more modest than I would prefer, the advocacy for this proposition accomplishes a public relations goal of raising awareness of the fact that there is even a problem.

Proposition 2 is a baby step. I am appalled by what it does not do. But given the level of public awareness on this issue, larger steps risk becoming leaps; they increase our vulnerability to charges of extremism, insensitivity to the cost of food in a population which has suffered the most extreme widening of the gap between rich and poor in the western world, and to defeat.

Proposition 2 is better than nothing. Not much better, I agree. But it is the least that can be done.

So there you have it. You can choose my received wisdom or Francione’s.

Rolling Stone points out that “Oil is now worth half what it was worth three months ago.” and criticizes Paul Krugman for claiming that there was no bubble in oil prices.

Krugman’s fatal assumption seems to have been that “Faced with higher prices, drivers would cut back on their driving; homeowners would turn down their thermostats; owners of marginal oil wells would put them back into production.” This assumes that demand for oil is, in economic terms I remember from an Economics 1A class a very long time ago, elastic. It means that when a particular good or service is priced too high, consumers can and will cut back.

While consumption has indeed dropped, the Wall Street Journal seems to indicate that economic conditions have driven down demand rather than high prices. But before the crash, both oil and food prices were skyrocketing. Krugman, among others, blamed biofuels at least in part.

Certainly, the push for biofuels was certainly ill-considered; people can eat corn, but there are many other plant substances that could be made into fuel. But this kind of inflation, conveniently excluded from “core” inflation, is reminiscent of California’s electricity crisis that seemed to signal the dot-com crash in 2001. It is the kind of event that suggests we have pushed beyond the limits of sustainability.

It wasn’t an oil bubble we were seeing but a systemic bubble. While world leaders will soon convene to devise a “Bretton Woods II” to regulate the financial industry on an international scale, the BBC reports that President Bush reiterated “that any plan to re-think the mechanisms of the global financial system could not be allowed to undermine the free market.”

But the “free market” is only “free” if you are a wealthy investor, able to send your money anyplace in the world to get the best deal. Ordinary people continue to face geographic limitations. I can’t buy gas for 12 cents a gallon in Venezuela because I’m in California. But an industrialist can locate a factory in China or India or any place else in the world where (s)he can find the least restrictive regulations and the lowest labor costs. And I am supposed to accept lower wages in order to compete with the world.

That this so-called “free market” can be considered sustainable is fantasy thinking. It makes no sense. But this is the scam that has been perpetrated on people in the developed world while the rich have gotten dramatically richer.

This is the bubble that has popped. The credit freeze means consumers no longer have phony money to spend. It also means that businesses can’t buy inventory, make payrolls, or sell as many goods on credit. And the reality of declining incomes takes hold.

Will Hutton writes of the current financial crisis, “This is history’s joke: the crisis of capitalism long predicted by communists and socialists who are no longer able to take advantage of it.” He believes that “what needs to happen on top is an assault on the dark heart of the global financial system – the $55 trillion market in credit derivatives and, in particular, credit default swaps, the mechanisms routinely used to insure banks against losses on risky investments. This is a market more than twice the size of the combined GDP of the US, Japan and the EU. Until it is cleaned up and the toxic threat it poses is removed, the pandemic will continue. Even nationalised banks, and the countries standing behind them, could be overwhelmed by the scale of the losses now emerging.” And no one, he argues, believes in the financial system.

As well they shouldn’t, but to say that is simply to repeat the obvious.

[President George W.] Bush’s speech Saturday was interrupted on WNBC-TV by a commercial for the Broadway musical “A Tale of Two Cities,” the New York Daily News reported.

“It was the best of times, it was the worst of times,” the commercial said, showing the blade of a guillotine slamming down.

The phrase is the well known opening line of Charles Dickens’ “A Tale of Two Cities” — an epic story set against the French Revolution depicting the wide gap between the super rich and the growing number of poor people.

While Bush’s head certainly ought to be on the chopping block for crimes far more vast and far more severe than a laissez-faire attitude towards greed, I am hearing from more and more quarters that the ideology of deregulation is dead.

Capitalist Libertarians will disagree. They will argue that we still haven’t tried deregulation. But history has now illustrated on multiple occasions that the closer we come to their economic model, the closer we come to disaster.

It is not enough to protest political hierarchy. Economic hierarchy must also be addressed, but for capitalists to do this would require that they address a far deeper contradiction.

Capitalism relies on the idea that owners of resources (land and materials) will invest them, employing people who invest their labor and who will purchase finished products. Notice that I conflate consumers with workers, for they are the same people. Yet the highest value in capitalism is return not on the investment of labor but on the investment of resources. That means that workers are an expense to be minimized.

Capitalists reply that workers do not accept the risks that “entrepreneurs” do. Workers who have been cast aside for cheaper ones overseas and who are now compelled to accept employment at far lower pay would hardly say they have absorbed no risk. Their plight belies the capitalist Libertarian presumption that workers and bosses negotiate as equals.

Capitalism also accepts as given the ownership of resources, with no consideration for how those resources came to be owned overwhelmingly by a particular class of people. Let me put the question this way: Do you believe 1) that the god of Abraham exists, 2) that he is the original landlord of the earth, 3) that he authorized kings and popes to sell or give away his property, and 4) that he authorized them to do so in a way that would benefit a few people at the expense of the vast majority? Our present system of property ultimately relies upon this chain of authority and though we might find any or all of the links in this chain dubious, we acquiesce to the system of property it has established and we do not take back from the rich all that they have stolen over a period of several millennia. Not only are workers an expense to be minimized, but they are the victims of a grand theft.

Yet for all the talk of change and for all the criticism of discrepancies between rich and poor, I still see no acknowledgment that workers are due a living wage. Rather French President Nicolas Sarkozy claims that a European Union plan to guarantee inter-bank loans will, according to the BBC, “address all aspects of the crisis.”

Leaders of the G7 met today and promised to take action. They offered no specifics; I’m guessing this omission will do little to reassure the panic-stricken investors we’re all supposed to sympathize with.

“Fluff. Good fluff but fluff,” said Robert Brusca, analyst at FAO Economics.

“A pledge of everything (makes it) sound like they are clueless,” he added.

“The markets wanted maybe more assurance that there would be a unified global backstopping of the banks, and it doesn’t sound like that’s in there,” said Kim Rupert, managing director of global fixed income analysis at Action Economics.

If, as many economists are saying, the key to resolving the crisis is in stabilizing the housing market, it follows that we must abandon the practice of paying people less than it costs to live. Not only does this policy send a message that people’s lives are without value, but it means that fewer people can afford houses. If, as a few have observed, a problem looms with consumer credit in its totality, then it follows that we must abandon the notion that people are only important for the usurious interest payments they make.

And if it is not possible to run a money-based economy that values people, then we should stop running a money-based economy.

The Wall Street Journal reports that nearly 1 in 6 homeowners are “under water,” meaning they owe more than their homes are worth, on their mortgages. Worse, “among people who bought within the past five years, . . . 29% are under water on their mortgages.” Given a 30% drop in home values, it is unsurprising that this is up sharply from last year, but

having more homeowners under water is likely to mean more eventual foreclosures, because it is hard for borrowers in financial trouble to refinance or sell their homes and pay off their mortgage if their debt exceeds the home’s value. A foreclosed home, in turn, tends to lower the value of other homes in its neighborhood.

And unemployment is rising, even on the publicized figures which have been manipulated to understate the problem, which probably means there will be more “borrowers in financial trouble.” The Journal notes that “No longer having equity in their homes makes people feel less rich and thus less inclined to shop at the mall.” It doesn’t note that many people have been using home equity which will no longer be available to refinance their credit card debt.

According to preliminary figures from the Federal Reserve, outstanding revolving credit dropped in August to $969.0 billion from its July high of $969.6 billion. That’s still up nearly $200 billion from 2003 levels with a rate of increase that about doubled in 2006 and which was higher than that through the first quarter of this year. It appears that delinquency rates are rising.

This adds to what Gary Dorsch, writing for Market Oracle, calls a “reckless decision to allow Lehman Brothers (LEH) to fail,” that left bondholders high and dry. Writing for the Asia Times, Doug Noland explains,

At this point, there is clearly insufficient credit expansion to support inflated asset markets; incomes and household spending; corporate cash flows and investment; and government receipts and expenditures. Lending markets are frozen, securitization markets broken, corporate and municipal debt markets in disarray, derivatives markets in shambles, and the leveraged speculating community is engaged in panic de-leveraging.

As a consequence, the over-indebted household, corporate and state and local sectors now face a devastating liquidity crisis.

This is not going to help employment. And unless someone can explain how a lot more consumer debt is not going to go bad, this looks to me like the beginning rather than the end of a vicious cycle. A year ago, I started wondering what would happen in a couple years once Barack Obama was president and we were still in Iraq and the economy was a disaster. There’s still a year to run on that question. It looks like we’ll be finding out.