The Stupidity of the Free Market

On CNBC this morning there was some discussion of the potential for the US automakers to provide another kick to the ribs to the US economy as they reported plummeting sales for Trucks and SUV’s. And I see where McCain/Bush has proposed an “award” of $300 million of our taxpayer monies to whoever can build a better car battery.

When California passed that mandate for zero emission vehicles, Detroit responded to the challenge. They responded by fighting against it tooth and nail, spending billions on lobbying and advertising and lawyers and the like; billions in utterly non-productive spending of shareholder equity. Likewise with raising CAFÉ standards, no, must keep the short term profitability of the SUV market over sustainable profits at all costs.

Now, it’s funny, in a pathetic sort of way, but it isn’t as if our present pricing and demand pressure's were unimaginable at the time, after all, that’s why we passed the damn law in the first place. Yet these giant corporations could only see the mandate as a threat, not an opportunity to take advantage of the inevitable future.

So when dickwads like peter and mucky and whatever other vile gopper thugs tell us how great the free market is, remember this. Those billions they wasted fighting against the laws of nature (there’s only so much oil out there-and the demand for the energy it produces far exceeds the supply) could instead have been invested in new battery technology and hybrids and fuel cells and hydrogen infrastructure to meet the mandates of the law.

So instead of avoiding massive layoffs in Detroit, instead of having the new infrastructure for new fuels and battery powered cars in place, Detroit and the Oil industry are tearing this country, and the world, apart. Disruptions caused by the meteoric increase in gas prices, the dilatory effect on the corn and soybean markets vis a vis food production, the layoffs, and especially the crisis in the Middle East rooted in Oil, is pushing us to the brink of a real serious recession, maybe a depression, maybe stagflation, but nothing good. That is the thugs and trolls mighty free market at work.

Are you as impressed as I am?

The Economics of Bush's Fear

This whole Bear Stearns JPMorgan Fed bailout/buyout has the smell of manipulation rising like the stink from the carcass of a dead whale washed up on the beach and left to rot in the summer sun for about 2 weeks. Or like driving behind a full Honey Truck, i.e. Environmental Services truck, at the end of its daily run on an August day.


“Also, under the new terms, JPMorgan will bear the risk of the first $1 billion of losses if any of Bear Stearns' assets go bad. The Federal Reserve will run the risk for the remaining $29 billion, instead of being on the hook for all of the first $30 billion in losses, as was originally announced March 16.”

Well, that’s reassuring! And a classic in understated reassurance as well. Instead of being on the hook for 100 percent of the $30 billion, we only need to worry about 97% of it! Woo freakin’ hoo!!!

I should’ve known to buy some shares when it didn’t stay at $2 but was up around $4-5 last week. Now what we need to figure out is what this new deal means within the framework of the original deal. Was that original deal just a pure PR move to manipulate the markets as a calming gesture, was JPM greenmailing the taxpayers by demanding that absurd $2 share price, or was that a patriotic move by JPM to help ease the troubled financial markets, and just incidentally almost bagged a billion dollar savings on the deal?

Or was it as good a demonstration as you will ever see of why the almighty Free Market is not infallible, not free, not the answer to our financial woes. Because what I see in this debacle is fear, pure unadulterated fear, manifested as cowardice, a fear that drives a $22 billion market cap corporation a year ago to $237 million a week ago.

The fear that somebody is selling so I better sell too, until that panic selling drives a company over the brink on nothing but that oh so wonderful sense of the Market. The Fed stampeded Bear Stearns to accept JPMs offer because the Bushies are terrified of what will happen if the stock market collapses under the weight of their laisse faire regulation, the greed and corruption of their Wall Street cronies and supporters.

If the American People really take a hit because of the failure of the scams and schemes they have allowed and encouraged, BushCo can forget about privatizing Social Security, they can forget about hegemony in the Middle East, they can forget about a Presidential Library, because all of their deeds will become exposed in the unraveling of the American Economy.

Of course we'll be screwed and all that, we can forget about healthcare for all Americans, and retirement, and ponies, and stuff, but we will all know the truth about Bush's economic plan, and the value of a Harvard MBA.

Just a Small Change

That's what Steve Leesman said this morning on CNBC, refering to the report by the NABE on the unemployment outlook for 2009. (Not in the article, but on the teevee report graphic-DGR) From 4.9 to 5.2%, just a drop really.

Doing a rough calculus, based on these statistics from the U.S. Department of Labor Bureau of Labor Statistics, that works out to around 450,000 more people unemployed.

So if you're one of those folks, you're just a drop and so sorry. To put that number in some perspective, that's a city the size of Sacramento or Cleveland or Kansas City, more than Omaha or Minneapolis or Miami FL.

Just a little statistics for your Monday morning.

More Good Economic News

FOR SOME AMERICANS THE ECONOMY IS GREAT

CNBC this morning reported on retail sales for Feb. this morning, Sacks, Nordstroms, the high end retailers in general, had a pretty good month, but not so much for the rest of the pack, in general. As I noted earlier, labor costs, i.e. wages and benefits, were up last quarter, in large part to big bonuses paid to high-income workers.

So you see, the economy is doing great! It's like the ad I heard on KLSD Air America one morning, some financial planner who wants to give back to his community for all of his business successes as a way to say thanks, and to help people out.

How nice, I thought, how progressive even. Then I heard the pitch. It was for a seminar to help the successful wealthy investors make the most out of their high end investments! Way to give back to the community, dude. [Shakes head in wonder and amazement]

In a related area, I also heard the spokesman for the American Bankers Association talking about credit cards, I guess Congress held some hearings on credit card debt yesterday, and he said that a lot of the problem is an educational one, that people need to be better educated about credit and how it works.

True enough I said, but, when you watch the way the credit card companies sell their product, and isn't that what advertising is all about, educating the consumers about your product? But, alas, when you watch the ads, they're selling vacations and golf outings and impressing the boss and buy buy buying more crap for your house. I'm pretty sure that educating the consumer about responsible credit, the impact of just making the minimum payment on your credit card accounts, and a whole plethora of things related to credit and credit cards, is AWOL from their campaigns.

But their spokesmodel said the problem is the consumer being un-educated. No mention of their culpability in it, no sirree bob, it's you, you dear readers, at fault.

More Good News-Labor Costs Rise!

And productivity increased as well! Hooray! Bravo, good job, workers! You worked hard for all that money!

What? What's that you say?

Not so fast, lowly laborers, is that what you're telling me?

Bugger!

It was the biggest quarterly increase in labor costs since a 9.1 percent surge in the first three months of 2006. Both gains [labor costs-DGR] were attributed in large part to big bonuses paid to high-income workers.

Oh.

Well, never mind, I need to go work now.

Private Equity-Too Much Liquidity?

CNBC was gossiping this morning, talking about "the market" and they were talking to some guy (sorry, forgot his name!) about the big TXU (Texas Utility) private equity acquisition, and Mark Haynes (not a fan at all but he does ask the right questions from time to time, in between relentless cheerleading) asked if the deal wasn't so much about market conditions but really a matter of private equity liquidity, in other words, there's too much money available in private equity.

The trader somewhat agreed, and that's the point, really. Wonder where all of our money has gone? The "Market." There have been a large number of these privitization deals of late, due in large part, IMHO, because these firms have all of our money, courtesy of BushCo. Consider this snippet from one article discussing the deal.

Kohlberg Kravis Roberts and Texas Pacific Group led a group that included Goldman Sachs and three other Wall Street firms that will pay $69.25 per share, or about $32 billion, for TXU, and assume TXU's debt. [...]

Goldman Sachs, Lehman Brothers, Citigroup and Morgan Stanley also intend to be part of the purchasing group at closing [...]

TXU also said former Secretary of State James A. Baker III will serve as advisory chairman to the new owners, former EPA Administrator William Reilly and former Commerce Secretary Donald L. Evans will join the TXU board.

Now, I'm not criticizing the deal, it sounds like there are plans for some seriously good environmental concessions as part of the deal, time will tell of course, The firms won support for the buyout from some environmentalists who have criticized TXU by agreeing to sharply scale back TXU's controversial $10 billion plan to build 11 new coal-fired power plants that would produce tons of new greenhouse gas emissions, there's that 'ol ubiquitous "some" for one, but it just seems to me that too few people have too much money, that for all of their incompetence, stupidity, and delusion, that's one area where the Bush Administration has been quite successful. And given George W's inabiltiy to find oil both in Texas and the Persian Gulf, you have to think that somebody else has been in charge of that part of the government.

If only that bunch had allegiance to anything besides money.

Let's Call It What It Is

One of the underlying themes this election season was little discussed, but often in the middle of debates. Its why the GOP hyperventilation about tax cuts made it into debates, why the economy seemed to be ignored over the growing disaster of Iraq, the corruption of the GOP, and it was the foundation of the plaintive Democratic theme, "we can do better."

I refer to the growing income gap in this country, nicely laid out in this article by Don Bauder. It's something I've talked about a bit over at the old homestead, it's something I've argued in comments about, that sure, the economy may be doing great, that wealth may be on the rise, but it's not any where near equitable or uniform. What are those stats cited in the article,

• Chief execs of the largest corps make 500 times what the avg worker makes.
• Forty years ago it was 80 times.
• The top 1 percent of Americans has 34.4 percent of the wealth.
• The top 5 percent has 58.9 percent.
• The bottom 80 percent has 15.3 percent.

Oh yes, the economy is doing fantabulously. But not just for everyone. In fact not for most everyone. Sure, we have more material stuff, hell it was our patriotic duty to consume more, right, but having more stuff doesn't pay for a serious medical illness, put the kids through college, or move your good retirement date any closer.

You're going to see this theme more now that those nasty Democrats have control of Congress, and State legislatures, and Governors (don't even say it, muck. Grrrrrrr!)

But will they call it the way it is?

Tax the Rich!! Feed the Poor!! Medical Insurance for All!! Make the Rich Pay!!

That strange rumbling sound you just heard was the shudder of the GOP wealthy. People are starting to get a sense of what has really been happening while they've been looking at the death and destruction in Iraq and Afghanistan, peering under their beds for Terrorists, duct taping their windows, all the scaremongering and terrorizing done by their own government.

As Democrats start their oversight, as Henry Waxman gets some answers, as the Democratic Staffers, as the Whistleblowers, as the wronged in this country get heard, that shudder is going to turn into squeeling and whining like nothing we've heard, as the gopper corporatists try desperately to hold onto that wealth, and as everyday Americans realize that wealth was unfairly earned at their expense, there's going to be some serious dues paying, and it will get ugly.

But it must be done, if we're to have any say in the future, any pull with China and the tremendous threat their billions of consumers pose to this planet if they don't manage their growth with intelligence and foresight, if we don't want to plunge the world into another world wide depression and world war, a real one, fought for control of the planets resources, oil, fresh water, food.

And I'm an optimist!!