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Buddy Roemer Struggles to Become Visible

March 26th, 2012 Posted in Uncategorized
Mar, 26 2012
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His crusade against corruption in politics has made him the invisible Presidential candidate.  The mainstream news media have no interest in him.  His anti-status quo message is probably the reason why.  Andrew Kreig of Washington’s Blog reported that Buddy Roemer appeared with reformed ex-convict / former lobbyist Jack Abramoff before a cozy, standing-room-only audience of 120, convened on March 22 by the non-partisan Committee for the Republic.  For those unfamiliar with Buddy Roemer, Kreig provided this summary of the candidate’s background and political perspective:

“I don’t think the answer is the Republican Party,” said the former two-term governor of Louisiana, who became a Republican in 1991 and returned to politics last year after a 16-year absence.  Earlier, he served four terms as a Democratic congressman beginning in the 1980, running unopposed in his last three races.

“And,” he continued, “I don’t think the answer is the Democratic Party.”  He says both parties are controlled by special interests and political action committees (PACs), whose checks he has refused to take since his first race three decades ago.

*   *   *

The big knock on Roemer is that he lacks high poll numbers and name recognition, doubtless because GOP debate-organizers excluded him.  Yet he was doing better in certain key criteria than some other candidates invited repeatedly for nationally broadcast debates.  Roemer concluded that his basic problem was that GOP chieftains did not want him to describe his reform message.

Therefore, Roemer’s campaign is now focused on winning the Americans Elect nomination to be on the November ballot in all 50 states.  Then he wants 15% support in poll numbers so he will be included in debates with the Democratic and Republican nominees.

On December 12, I discussed some of the criticism directed at Americans Elect.  Most notably, Richard Hansen, a professor at the University of  California at Irvine Law School, wrote an essay for Politico, which was harshly critical of Americans Elect.  Professor Hansen concluded the piece with these observations:

But the biggest problem with Americans Elect is neither its secrecy nor the security of its election.  It is the problems with internal fairness and democracy.  To begin with, according to its draft rules, only those who can provide sufficient voter identification that will satisfy the organization – and, of course, who have Internet access – will be allowed to choose the candidate.  These will hardly be a cross section of American voters.

In addition, an unelected committee appointed by the board, the Candidates Certification Committee, will be able to veto a presidential/vice presidential ticket deemed not “balanced” – subject only to a two-thirds override by delegates.

It gets worse.  Under the group’s bylaws, that committee, along with the three other standing committees, serves at the pleasure of the board – and committee members can be removed without cause by the board.  The board members were not elected by delegates; they chose themselves in the organization’s articles of incorporation.

The bottom line:  If Americans Elect is successful, millions of people will have united to provide ballot access not for a candidate they necessarily believe in – like a Ross Perot or Ralph Nader – but for a candidate whose choice could be shaped largely by a handful of self-appointed leaders.

Despite the veneer of democracy created by having “delegates” choose a presidential candidate through a series of Internet votes, the unelected, unaccountable board of Americans Elect, funded by secret money, will control the process for choosing a presidential and vice presidential candidate – who could well appear on the ballot in all 50 states.

Roemer’s ability to survive this questionable nomination process is just the first hurdle.  Even if he wins that nomination, he will be confronted by critics of Americans Elect to defend that organization’s controversial nomination procedure.  Nevertheless, if none of his opponents from that nomination campaign step up to oppose the result, Roemer might just breeze through any questions concerning that issue.

One interesting way to get a look at Buddy Romer is to read his Twitter feed – (@BuddyRoemer).  Roemer’s staff members occasionally post tweets about such subjects as the candidate’s desire to restore the “Made in America” label so that consumers would have the choice to buy products from manufacturers who employ their neighbors.  Here are some of Buddy’s own tweets:

If Santorum and Gingrich don’t get the GOP nomination, will they return to lobbying?  Or keep their records clean for 2016?

“Few men have virtue to withstand the highest bidder.” – George Washington

RT “@maximosis:  The more people wake up from their tacit acceptance of the corporatocracy, the more apparent these abuses will become.”

“The people do not control America, the big checks do.”

From 1998-2010, the Financial, Insurance, Real Estate sectors spent $6.8 BILLION in lobbying & campaign donations.

Millions $$ in earmarks go to top Congressional campaign donors.  Here are some striking examples >>http://thelobbyisteffect.com/2012/02/28/earmarks-are-a-microcosm-of-how-government-works/ #corruption

At his campaign website, supporters are encouraged to post tweets to Romer’s Twitter feed in addition to making contributions within the self-imposed, $100 limit.  At the “Blog” section, there are links to videos of the candidate’s television appearances.  A visit to the “Issues” section of his website will reveal Roemer’s position on banking reform:

As a small business banker, Buddy Roemer is proud to have chosen smart investments that kept his bank on solid footing while others were taking bailouts from the government to remain solvent.  Banking is too important to be left to the bankers, but Buddy recognizes that regulation of the industry must be a fine balance between too much and too little.

That sure sounds better than Romney’s “regulations kill jobs” theme and Obama’s track record of giving the banks everything they want, with revolving doors connecting the West Wing to Citigroup and Goldman Sachs.

The big question will be whether (as the Americans Elect nominee) Romer could accumulate the support from 15% of poll respondents so that he could participate in the Presidential debates with Obama and Romney.  It sure would be interesting to see him on the stage with those two.  The public might actually take interest in the process.



 

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Too Important To Ignore

March 22nd, 2012 Posted in Uncategorized
Mar, 22 2012
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On March 21, the Federal Reserve Bank of Dallas released a fantastic document:  its 2011 Annual Report, featuring an essay entitled, “Choosing the Road to Prosperity – Why We Must End Too Big to Fail – Now”.  The essay was written by Harvey Rosenblum, the head of the Dallas Fed’s Research Department and the former president of the National Association for Business Economics.  Rosenblum’s essay provided an historical analysis of the events leading up to the 2008 financial crisis and the regulatory efforts which resulted from that catastrophe – particularly the Dodd-Frank Act.

While reading Harvey Rosenblum’s essay, I was constantly reminded of the creepy “JOBS Act” which is on its way to President Obama’s desk.  Simon Johnson (former chief economist for the International Monetary Fund) recently explained why the JOBS Act poses the same threat as the deregulatory measures which helped cause the financial crisis:

With the so-called JOBS bill, on which the Senate is due to vote Tuesday, Congress is about to make the same kind of mistake again – this time abandoning much of the 1930s-era securities legislation that both served investors well and helped make the US one of the best places in the world to raise capital.  We find ourselves again on a bipartisan route to disaster.

*   *   *

The idea behind the JOBS bill is that our existing securities laws – requiring a great deal of disclosure – are significantly holding back the economy.

The bill, HR3606, received bipartisan support in the House (only 23  Democrats voted against).  The bill’s title is JumpStart Our Business Startup Act, a clever slogan – but also a complete misrepresentation.

The bill’s proponents point out that Initial Public Offerings (IPOs) of stock are way down.  That is true – but that is also exactly what you should expect when the economy teeters on the brink of an economic depression and then struggles to recover because households’ still have a great deal of debt.

*   *   *

Professor John Coates hit the nail on the head:

“While the various proposals being considered have been characterized as promoting jobs and economic growth by reducing regulatory burdens and costs, it is better to understand them as changing, in similar ways, the balance that existing securities laws and regulations have struck between the transaction costs of raising capital, on the one hand, and the combined costs of fraud risk and asymmetric and unverifiable information, on the other hand.” (See p.3 of this December 2011 testimony.)

In other words, you will be ripped off more.  Knowing this, any smart investor will want to be better compensated for investing in a particular firm – this raises, not lowers, the cost of capital.  The effect on job creation is likely to be negative, not positive.

Simon Johnson’s last paragraph reminded me of a passage from Harvey Rosenblum’s Dallas Fed essay, wherein he was discussing why the economic recovery from the financial crisis has been so sluggish:

Similarly, the contributions to recovery from securities markets and asset prices and wealth have been weaker than expected.  A prime reason is that burned investors demand higher-than-normal compensation for investing in private-sector projects. They remain uncertain about whether the financial system has been fixed and whether an economic recovery is sustainable.

To repeat what Simon Johnson said, combined with the above-quoted paragraph:  the demand by “burned investors” for “higher-than-normal compensation for investing in private-sector projects” raises, not lowers, the cost of capital.  How quickly we forget the lessons of the financial crisis!

The Dallas Fed’s Annual Report began with an introductory letter from its president, Richard W. Fisher.  Fisher noted that while “memory fades with the passage of time” it is important to recall the position in which the “too-big-to fail” banks placed our economy, thus leading Congress to pass into law the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank).  Although Harvey Rosenblum’s essay was primarily focused on the Dodd-Frank Act’s efforts to address the systemic risk posed by the existence of those “too-big-to-fail” (TBTF) banks, other measures from Dodd-Frank were mentioned.  More important is the fact that the TBTFs have actually grown since the enactment of Dodd-Frank.  Beyond that, Rosenblum emphasized why this has happened:

The TBTF survivors of the financial crisis look a lot like they did in 2008.  They maintain corporate cultures based on the short-term incentives of fees and bonuses derived from increased oligopoly power.  They remain difficult to control because they have the lawyers and the money to resist the pressures of federal regulation.  Just as important, their significant presence in dozens of states confers enormous political clout in their quest to refocus banking statutes and regulatory enforcement to their advantage.

The ability of the financial sector “to resist the pressures of federal regulation” also happens to be the primary reason for the perverse effort toward de-regulation, known as the JOBS Act.  At the Seeking Alpha website, Felix Salmon reflected on the venality which is driving this bill through the legislative process:

There’s no good reason at all for this:  it’s basically a way for unpopular incumbent lawmakers who voted for Dodd-Frank to try to weasel their way back into the big banks’ good graces and thereby open a campaign-finance spigot they desperately need.

I don’t fully understand the political dynamics here.  A bill which was essentially drafted by a small group of bankers and financiers has managed to get itself widespread bipartisan support, even as it rolls back decades of investor protections.  That wouldn’t have been possible a couple of years ago, and I’m unclear (about) what has changed.  But one thing is coming through loud and clear:  anybody looking to Congress to be helpful in the fight to have effective regulation of financial institutions, is going to be very disappointed.  Much more likely is that Congress will be actively unhelpful, and will do whatever the financial industry wants in terms of hobbling regulators and deregulating as much activity as it possibly can.  Dodd-Frank, it seems, was a brief aberration.  Now, we’re back to business as usual, and a captured Congress.

The next financial crisis can’t be too far down the road   .   .   .


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No Consensus About the Future

March 19th, 2012 Posted in Uncategorized
Mar, 19 2012
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As the election year progresses, we are exposed to wildly diverging predictions about the future of the American economy.  The Democrats are telling us that in President Obama’s capable hands, the American economy keeps improving every day – despite the constant efforts by Congressional Republicans to derail the Recovery Express.  On the other hand, the Republicans keep warning us that a second Obama term could crush the American economy with unrestrained spending on entitlement programs.  Meanwhile, in (what should be) the more sober arena of serious economics, there is a wide spectrum of expectations, motivated by concerns other than partisan politics.  Underlying all of these debates is a simple question:  How can one predict the future of the economy without an accurate understanding of what is happening in the present?  Before asking about where we are headed, it might be a good idea to get a grip on where we are now.  Nevertheless, exclusive fixation on past and present conditions can allow future developments to sneak up on us, if we are not watching.

Those who anticipate a less resilient economy consistently emphasize that the “rose-colored glasses crowd” has been basing its expectations on a review of lagging and concurrent economic indicators rather than an analysis of leading economic indicators.  One of the most prominent economists to emphasize this distinction is John Hussman of the Hussman Funds.  Hussman’s most recent Weekly Market Comment contains what has become a weekly reminder of the flawed analysis used by the optimists:

On the economy, our broad view is based on dozens of indicators and multiple methods, and the overall picture is much better described as a modest rebound within still-fragile conditions, rather than a recovery or a clear expansion.  The optimism of the economic consensus seems to largely reflect an over-extrapolation of weather-induced boosts to coincident and lagging economic indicators — particularly jobs data.  Recall that seasonal adjustments in the winter months presume significant layoffs in the retail sector and slow hiring elsewhere, and therefore add back “phantom” jobs to compensate.

Hussman’s kindred spirit, Lakshman Achuthan of the Economic Cycle Research Institute (ECRI), has been criticized for the predictiction he made last September that the United States would fall back into recession.  Nevertheless, the ECRI reaffirmed that position on March 15 with a website posting entitled, “Why Our Recession Call Stands”.  Again, note the emphasis on leading economic indicators – rather than concurrent and lagging economic indicators:

How about forward-looking indicators?  We find that year-over-year growth in ECRI’s Weekly Leading Index (WLI) remains in a cyclical downturn . . .  and, as of early March, is near its worst reading since July 2009.  Close observers of this index might be understandably surprised by this persistent weakness, since the WLI’s smoothed annualized growth rate, which is much better known, has turned decidedly less negative in recent months.

Unlike the partisan political rhetoric about the economy, prognostication expressed by economists can be a bit more subtle.  In fact, many of the recent, upbeat commentaries have quite restrained and cautious.  Consider this piece from The Economist:

A year ago total bank loans were shrinking.  Now they are growing.  Loans to consumers have risen by 5% in the past year, which has accompanied healthy gains in car sales (see chart).  Mortgage lending was still contracting as of late 2011 but although house prices are still edging lower both sales and construction are rising.

*   *   *

At present just four states are reporting mid-year budget gaps, according to the National Conference of State Legislatures; this time last year, 15 did; the year before that, 36. State and local employment, which declined by 655,000 between August 2008 and last December – a fall of 3.3% – has actually edged up since.

*   *   *

Manufacturing employment, which declined almost continuously from 1998 through 2009, has since risen by nearly 4%, and the average length of time factories work is as high as at any time since 1945.  Since the end of the recession exports have risen by 39%, much faster than overall GDP.  Neither is as impressive as it sounds:  manufacturing employment remains a smaller share of the private workforce than in 2007, and imports have recently grown even faster than exports as global growth has faltered and the dollar has climbed.  Trade, which was a contributor to economic growth in the first years of recovery, has lately been a drag.

But economic recovery doesn’t have to wait for all of America’s imbalances to be corrected.  It only needs the process to advance far enough for the normal cyclical forces of employment, income and spending to take hold.  And though their grip may be tenuous, and a shock might yet dislodge it, it now seems that, at last, they have.

A great deal of enthusiastic commentary was published in reaction to the results from the recent round of bank stress tests, released by the Federal Reserve.  The stress test results revealed that 15 of the 19 banks tested could survive a stress scenario which included a peak unemployment rate of 13 percent, a 50 percent drop in equity prices, and a 21 percent decline in housing prices.  Time magazine published an important article on the Fed’s stress test results.  It was written by a gentleman named Christopher Matthews, who used to write for Forbes and the Financial Times.  (He is a bit younger than the host of Hardball.)  In a surprising departure from traditional, “mainstream media propaganda”, Mr. Matthews demonstrated a unique ability to look “behind the curtain” to give his readers a better idea of where we are now:

Christopher Whalen, a bank analyst and frequent critic of the big banks, penned an article in ZeroHedge questioning the assumptions, both by the Fed and the banks themselves, that went into the tests.  It’s well known that housing remains a thorn in the side of the big banks, and depressed real estate prices are the biggest risk to bank balance sheets.  The banks are making their own assumptions, however, with regards to the value of their real estate holdings, and Whalen is dubious of what the banks are reporting on their balance sheets. The Fed, he says, is happy to go along with this massaging of the data. He writes,

“The Fed does not want to believe that there is a problem with real estate. As my friend Tom Day wrote for PRMIA’s DC chapter yesterday:  ‘It remains hard to believe, on the face of it, that many of the more damaged balance sheets could, in fact, withstand another financial tsunami of the magnitude we have recenlty experienced and, to a large extent, continue to grapple with.’ ”

Even those that are more credulous are taking exception to the Fed’s decision to allow the banks to increase dividends and stock buybacks.  The Bloomberg editorial board wrote an opinion yesterday criticizing this decision:

 “Good as the stress tests were, they don’t mean the U.S. banking system is out of the woods.  Three major banks – Ally Financial Inc., Citigroup Inc. and SunTrust Banks Inc. – didn’t pass, and investors still don’t have much faith in the reported capital levels of many of the rest.  If the Fed wants the positive results of the stress tests to last, it should err on the side of caution in approving banks’ plans to pay dividends and buy back shares – moves that benefit shareholders but also deplete capital.”

So there’s still plenty for skeptics to read into Tuesday’s report.  For those who want to doubt the veracity of the banks’ bookkeeping, you can look to Whalen’s report.  For those who like to question the Fed’s decision making, Bloomberg’s argument is as good as any.  But at the same time, we all know from experience that things could be much worse, and Tuesday’s announcement appears to be another in a string of recent good news that, unfortunately, comes packaged with a few caveats.  When all is said and done, this most recent test may turn out to be another small, “I think I can” from the little recovery that could.

When mainstream publications such as Time and Bloomberg News present reasoned analysis about the economy, it should serve as reminder to political bloviators that the only audience for the partisan rhetoric consists of “low-information voters”.  The old paradigm – based on campaign funding payola from lobbyists combined with support from low-information voters – is being challenged by what Marshall McLuhan called “the electronic information environment”.  Let’s hope that sane economic policy prevails.


 

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More Great Thoughts from Jeremy Grantham

February 27th, 2012 Posted in Uncategorized
Feb, 27 2012
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I always look forward to Jeremy Grantham’s Quarterly Letter.  Grantham is the Co-founder and Chief Investment Strategist of Grantham Mayo Van Otterloo (GMO), an investment management firm, entrusted to oversee approximately $97 billion in client assets.

Unlike many asset managers, Jeremy Grantham has a social conscience.  As a result, during the past few years we have seen him direct some sharp criticism at President Obama, Tim Geithner, Ben Bernanke and – of course – Goldman Sachs.  Grantham fell behind schedule when his Third Quarter 2011 Letter was delayed by over a month.  As a result, Grantham’s Fourth Quarter 2011 Letter was just released a few days ago.  At 15 pages, it earned the title “The Longest Quarterly Letter Ever”.  As usual, Grantham has provided us with some great investment insights – along with some pointed criticism of our ignorant legislators and mercenary corporate managers.  What follows are some selected passages.  Be sure to read the entire letter here (when you have time).

To leave it to capitalism to get us out of this fix by maximizing its short-term profits is dangerously naïve and misses the point: capitalism and corporations have absolutely no mechanism for dealing with these problems, and seen through a corporate discount rate lens, our grandchildren really do have no value.

To move from the problem of long time horizons to the short-term common good, it is quickly apparent that capitalism in general has no sense of ethics or conscience.  Whatever the Supreme Court may think, it is not a person.  Why would a company give up a penny for the common good if it is not required to by enforced regulation or unless it looked like that penny might be returned with profit in the future because having a good image might be good for business?  Ethical CEOs can drag a company along for a while, but this is an undependable and temporary fix.  Ethical humans can also impose their will on corporations singly or en masse by withholding purchases or bestowing them, and companies can anticipate this and even influence it through clever brand advertising, “clean coal” being my favorite.  But that is quite different from corporate altruism. Thus, we can roast our planet and firms may offer marvelous and profitable energy-saving equipment, but it will be for profit today, not planet saving tomorrow.

It gets worse, for what capitalism has always had is money with which to try to buy influence.  Today’s version of U.S. capitalism has died and gone to heaven on this issue. A company is now free to spend money to influence political outcomes and need tell no one, least of all its own shareholders, the technical owners.  So, rich industries can exert so much political influence that they now have a dangerous degree of influence over Congress.  And the issues they most influence are precisely the ones that matter most, the ones that are most important to society’s long-term well-being, indeed its very existence.  Thus, taking huge benefits from Nature and damaging it in return is completely free and all attempts at government control are fought with costly lobbying and advertising.  And one of the first victims in this campaign has been the truth.  If scientific evidence suggests costs and limits be imposed on industry to protect the long-term environment, then science will be opposed by clever disinformation.

*   *   *

Capitalism certainly acts as if it believes that rapid growth in physical wealth can go on forever.  It appears to be hooked on high growth and avoids any suggestion that it might be slowed down by limits.  Thus, it exhibits horror at the thought (and occasional reality) of declining population when in fact such a decline is an absolute necessity in order for us to end up gracefully, rather than painfully, at a fully sustainable world economy.  Similarly with natural resources, capitalism wants to eat into these precious, limited resources at an accelerating rate with the subtext that everyone on the planet has the right to live like the wasteful polluting developed countries do today.  You don’t have to be a PhD mathematician to work out that if the average Chinese and Indian were to catch up with (the theoretically moving target of) the average American, then our planet’s goose is cooked, along with most other things.  Indeed, scientists calculate that if they caught up, we would need at least three planets to be fully sustainable.  But few listen to scientists these days.  So, do you know how many economic theories treat resources as if they are finite?  Well, the researchers at the O.E.C.D say “none” – that no such theory exists.  Economic theory either ignores this little problem or assumes you reach out and take the needed resources given the normal workings of supply and demand and you can do it indefinitely.  This is a lack of common sense on a par with “rational expectations,” that elegant theory that encouraged the ludicrous faith in deregulation and the wisdom of free markets, which brought us our recent financial fiascos.  But this failure in economic theory – ignoring natural limits – risks far more dangerous outcomes than temporary financial crashes.

*   *   *

As described above, the current U.S. capitalist system appears to contain some potentially fatal flaws.  Therefore, we should ask what it would take for our system to evolve in time to save our bacon.  Clearly, a better balance with regulations would be a help. This requires reasonably enlightened regulations, which are unlikely to be produced until big money’s influence in Congress, and particularly in elections, decreases.  This would necessitate legal changes all the way up to the Supreme Court.  It’s a long haul, but a handful of other democratic countries in northern Europe have been successful, and with the stakes so high we have little alternative but to change our ways.

*   *   *

Capitalism, by ignoring the finite nature of resources and by neglecting the long-term well-being of the planet and its potentially crucial biodiversity, threatens our existence.  Fifty and one-hundred-year horizons are important despite the “tyranny of the discount rate,” and grandchildren do have value. My conclusion is that capitalism does admittedly do a thousand things better than other systems:  it only currently fails in two or three.  Unfortunately for us all, even a single one of these failings may bring capitalism down and us with it.

Keep in mind that the foregoing passages were just from Part II of the Quarterly Letter.  Part III is focused on “Investment Observations for the New Year”.  Be sure to check it out – it’s not as bearish as you might expect.  Enjoy!



 

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Struggles of a Passive Centrist

February 13th, 2012 Posted in Uncategorized
Feb, 13 2012
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In September of 2010, I wrote a piece entitled, “Where Obama Went Wrong”.  It began with this statement:  “One could write an 800-page book on this subject.”  Noam Scheiber has just written that book in only 368 pages.  It’s called The Escape Artists and it is scheduled for release at the end of this month.  The book tells the tale of a President in a struggle to create a centrist persona, with no roadmap of his own.  In fact, it was Obama’s decision to follow the advice of Peter Orszag, to the exclusion of the opinions offered by Christina Romer and Larry Summers – which prolonged the unemployment crisis.

The following graph from The Economic Populist website depicts the persistence of unemployment in America:

Noam Scheiber’s new book piqued my interest because, back in July of 2009, I wrote a piece entitled “The Second Stimulus”, which began with this thought:

It’s a subject that many people are talking about, but not many politicians want to discuss.  It appears as though a second economic stimulus package will be necessary to save our sinking economy and get people back to work.  Because of the huge deficits already incurred in responding to the financial meltdown, along with the $787 billion price tag for the first stimulus package and because of the President’s promise to get healthcare reform enacted, there aren’t many in Congress who are willing to touch this subject right now, although some are.

The Escape Artists takes us back to the pivotal year of 2009 – Obama’s first year in the White House.  Noam Scheiber provided us with a taste of his new book by way of an article published in The New Republic entitled, “Obama’s Worst Year”.  Scheiber gave the reader an insider’s look at Obama’s clueless indecision at the fork in the road between deficit hawkishness vs. economic stimulus.  Ultimately Obama decided to maintain the illusion of centrism by following the austerity program suggested by Peter Orszag:

BACK IN THE SUMMER of 2009, David Axelrod, the president’s top political aide, was peppering White House economist Christina Romer with questions in preparation for a talk-show appearance.  With unemployment nearing 10 percent, many commentators on the left were second-guessing the size of the original stimulus, and so Axelrod asked if it had been big enough.  “Abso-fucking-lutely not,” Romer responded.  She said it half-jokingly, but the joke was that she would use the line on television.  She was dead serious about the sentiment.  Axelrod did not seem amused.

For Romer, the crusade was a lonely one.  While she believed the economy needed another boost in order to recover, many in the administration were insisting on cuts.  The chief proponent of this view was budget director Peter Orszag.  Worried that the deficit was undermining the confidence of businessmen, Orszag lobbied to pare down the budget in August, six months ahead of the usual budget schedule.      .   .   .

The debate was not only a question of policy.  It was also about governing style – and, in a sense, about the very nature of the Obama presidency.  Pitching a deficit-reduction plan would be a concession to critics on the right, who argued that the original stimulus and the health care bill amounted to liberal overreach.  It would be premised on the notion that bipartisan compromise on a major issue was still possible.  A play for more stimulus, on the other hand, would be a defiant action, and Obama clearly recognized this.  When Romer later urged him to double-down, he groused, “The American people don’t think it worked, so I can’t do it.”

That’s a fine example of great leadership – isn’t it?  “The American people don’t think it worked, so I can’t do it.”  In 2009, the fierce urgency of the unemployment and economic crises demanded a leader who would not feel intimidated by the sheeple’s erroneous belief that the Economic Recovery Act had not “worked”.  Obama could have educated the American people by directing their attention to a June 3, 2009 essay by Keith Hennessey (former director of the National Economic Council under President George W. Bush) which described the Recovery Act as “effective”.

Noam Scheiber’s New Republic article detailed Obama’s evolution from inexperienced negotiator to President with “newfound boldness”:

FOR TWO AND A HALF YEARS, Obama had been hatching proposals with an eye toward winning over the opposition.  In most cases, all it had gotten him was more extreme demands from Republicans and not even a pretense of bipartisan support.  Now, after the searing experience of the deficit deal, he still wanted reasonable, centrist policies.  But he was done trying to fit them to the ever-shifting conservative zeitgeist.  When he finally turned back to jobs in August, he told his aides not to “self-edit” proposals to improve their chances of passing the Republican House.  “He pushed us to make sure this was not simply a predesigned legislative compromise,” one recalls.

Many readers will be surprised to learn that Larry Summers had aligned himself with Christina Romer by advocating for additional fiscal stimulus during the summer of 2009.  In fact, Ms. Romer herself has already confirmed this.  The Romer-Summers alliance for stimulus was also discussed in Ron Suskind’s book, Confidence Men.

As for the stimulus program itself, a new book by Mike Grabell of ProPublica entitled, Money Well Spent? provided the most even-handed analysis of what the stimulus did – and did not – accomplish.  Mike Grabell gave us a glimpse of his new book with an article which appeared in The New York Times.  The piece was cross-posted to the ProPublica website.  Keith Hennesssey’s prescient observations about the shortcomings of that program, which he discussed  in June of 2009, were somewhat consistent with those discussed by Mike Grabell, particularly on the subject of “shovel-ready” programs.  Here is what Keith Hennessey said, while supporting his argument with the observations of Congressional Budget Office Director Doug Elmendorf:

In fact, the infrastructure spending in the stimulus law will peak in fiscal year 2011, which goes from October 1, 2010 to September 30, 2011.  That’s too late from a macro perspective.

The Director further points out that the 2009 stimulus law created many new programs.  This slows spend-out, as it takes time to create and ramp up the new programs.

The Administration has made much of working with federal and state bureaucracies to find “shovel-ready” projects to accelerate infrastructure spending.  All of my conversations with budget analysts suggest this claim is tremendously overblown, and Director Elmendorf asks, “Is this practical on a large scale?”

On February 11, 2012, Mike Grabell said this:

But the stimulus ultimately failed to bring about a strong, sustainable recovery.  Money was spread far and wide rather than dedicated to programs with the most bang for the buck.  “Shovel-ready” projects, those that would put people to work right away, took too long to break ground.  Investments in worthwhile long-term projects, on the other hand, were often rushed to meet arbitrary deadlines, and the resulting shoddy outcomes tarnished the projects’ image.

The Economic Recovery Act of 2009 will surely become a central subject of debate during the current Presidential election campaign.  Regardless of what you hear from partisan bloviators, Messrs. Hennessey and Garbell have provided you with reliable guides to the unvarnished truth on this subject.



 

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Government Should Listen To These Wealth Managers

February 9th, 2012 Posted in Uncategorized
Feb, 09 2012
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A good deal of Mitt Romney’s appeal as a Presidential candidate is based on his experience as a private equity fund manager – despite the “vulture capitalist” moniker, favored by some of his critics.  Many voters believe that America needs someone with more “business sense” in the White House.  Listening to Mitt Romney would lead one to believe that America’s economic and unemployment problems will not be solved until “government gets out of the way”, allowing those sanctified “job creators” to bring salvation to the unemployed masses.  Those who complained about how the system has been rigged against the American middle class during the past few decades have found themselves accused of waging “class warfare”.  We are supposed to believe that Romney speaks on behalf of “business” when he lashes out against “troublesome” government regulations which hurt the corporate bottom line and therefore – all of America.

Nevertheless, the real world happens to be the home of many wealth managers – entrusted with enormous amounts of money by a good number of rich people and institutional investors – who envision quite a different role of government than the mere nuisance described by Romney and like-minded individuals.  If only our elected officials – and more of the voting public – would pay close attention to the sage advice offered by these wealth managers, we might be able to solve our nation’s economic and unemployment problems.

Last summer, bond guru Bill Gross of PIMCO  lamented the Obama administration’s obliviousness to the need for government involvement in short-term job creation:

Additionally and immediately, however, government must take a leading role in job creation.  Conservative or even liberal agendas that cede responsibility for job creation to the private sector over the next few years are simply dazed or perhaps crazed.  The private sector is the source of long-term job creation but in the short term, no rational observer can believe that global or even small businesses will invest here when the labor over there is so much cheaper.  That is why trillions of dollars of corporate cash rest impotently on balance sheets awaiting global – non-U.S. – investment opportunities.  Our labor force is too expensive and poorly educated for today’s marketplace.

*   *   *

In the near term, then, we should not rely solely on job or corporate-directed payroll tax credits because corporations may not take enough of that bait, and they’re sitting pretty as it is.  Government must step up to the plate, as it should have in early 2009.

In my last posting, I discussed a February 2 Washington Post commentary by Mohamed El-Erian (co-CEO of PIMCO).  El-Erian emphasized that – despite the slight progress achieved in reducing unemployment – the situation remains at a crisis level, demanding immediate efforts toward resolution:

Have no doubt, this is a complex, multiyear effort that involves several government agencies acting in a delicate, coordinated effort.  It will not happen unless our political leaders come together to address what constitutes America’s biggest national challenge. And sustained implementation will not be possible nor effective without much clearer personal accountability.

One would think that, given all this, it has become more than paramount for Washington to elevate – not just in rhetoric but, critically, through sustained actions – the urgency of today’s unemployment crisis to the same level that it placed the financial crisis three years ago.  But watching the actions in the nation’s capital, I and many others are worried that our politicians will wait at least until the November elections before dealing more seriously with the unemployment crisis.

On October 31, I focused on the propaganda war waged against the Occupy Wall Street movement, concluding the piece with my expectation that Jeremy Grantham’s upcoming third quarter newsletter would provide some sorely-needed, astute commentary on the situation.  Jeremy Grantham, rated by Bloomberg BusinessWeek as one of the Fifty Most Influential Money Managers, released an abbreviated edition of that newsletter one month later than usual, due to a busy schedule.  In addition to expressing some supportive comments about the OWS movement, Grantham noted that he would provide a special supplement, based specifically on that subject.  Finally, on February 5, Mr. Grantham made good on his promise with an opinion piece in the Financial Times entitled, “People now see it as a system for the rich only”:

For the time being, in the US our corporate and governmental system backed surprisingly by the Supreme Court has become a plutocracy, designed to prolong, protect and intensify the wealth and influence of those who already have the wealth and influence.  What the Occupy movement indicates is that a growing number of people have begun to recognise this in spite of the efficiency of capital’s propaganda machines.  Forty years of no pay increase in the US after inflation for the average hour worked should, after all, have that effect.  The propaganda is good but not that good.

*   *   *

In 50 years economic mobility in the US has gone from the best to one of the worst.  The benefits of the past 40 years of quite normal productivity have been abnormally divided between the very rich (and corporations) and the workers.

Indeed “divide” is not the right word, for, remarkably, the workers received no benefit at all, while the top 0.1 per cent has increased its share nearly fourfold in 35 years to a record equal to 1929 and the gilded age.

But the best propaganda of all is that the richest 400 people now have assets equal to the poorest 140m.  If that doesn’t disturb you, you have a wallet for a heart.  The Occupiers’ theme should be simple:  “More sensible assistance for the working poor, more taxes for the rich.”

I’ve complained many times about President Obama’s decision to scoff at using the so-called “Swedish solution” of putting the zombie banks through temporary receivership.  Back in November of 2010, economist John Hussman of the Hussman Funds discussed the consequences of the administration’s failure to do what was necessary:

If our policy makers had made proper decisions over the past two years to clean up banks, restructure debt, and allow irresponsible lenders to take losses on bad loans, there is no doubt in my mind that we would be quickly on the course to a sustained recovery, regardless of the extent of the downturn we have experienced.  Unfortunately, we have built our house on a ledge of ice.

*   *   *

As I’ve frequently noted, even if a bank “fails,” it doesn’t mean that depositors lose money.  It means that the stockholders and bondholders do.  So if it turns out, after all is said and done, that the bank is insolvent, the government should get its money back and the remaining entity should be taken into receivership, cut away from the stockholder liabilities, restructured as to bondholder liabilities, recapitalized, and reissued.  We did this with GM, and we can do it with banks.  I suspect that these issues will again become relevant within the next few years.

The plutocratic tools in control of our government would never allow the stockholders and bondholders of those “too-big-to-fail” banks to suffer losses as do normal people after making bad investments.  It’s hard to imagine that Mitt Romney would take a tougher stance against those zombie banks than what we have seen from the Obama administration.

Our government officials – from across the political spectrum – would be wise to follow the advice offered by these fund managers.  A political hack whose livelihood is based entirely on passive income has little to offer in the way of “business sense” when compared to a handful of fund managers, entrusted to use their business and financial acumen to preserve so many billions of dollars.  Who speaks for business?  It should be those business leaders who demonstrate concern for the welfare of all human beings in America.


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Thinking Clearly During An Election Year

February 6th, 2012 Posted in Uncategorized
Feb, 06 2012
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The non-stop bombardment of inane, partisan yammering which assaults us during an election year, makes it even more refreshing when a level-headed, clear thinker catches our attention.  One popular subject of debate during the current election cycle has been the American Recovery and Reinvestment Act (the 2009 stimulus bill).  In stark contrast with the propaganda you have been hearing about the 2009 stimulus (from both political parties), a new book by Mike Grabell of ProPublica entitled, Money Well Spent? brought us a rare, objective analysis of what the stimulus did – and did not – accomplish.

Matt Steinglass of The Economist recently wrote a great essay on the “stimulus vs. austerity” debate, which included a discussion of Mike Grabell’s new book:

The debate we had about the stimulus probably should have been a lot like the book Mr Grabell has written:  a detailed investigation of what does and doesn’t work in stimulus spending and whether the government really can jump-start a promising industry through investments, tax breaks and industrial policy.  But that wasn’t the debate we had.  Instead we had a debate about the very concept of whether the government ought to spend money counter-cyclically during a recession in order to keep the economy from collapsing, or whether it should tighten its belt along with consumers and businesses in order to generate confidence in the financial markets and allow markets to clear.  We had a debate about whether governments should respond to recessions with deficit spending or austerity.

The ProPublica website gave us a peek at Mike Grabell’s book by publishing a passage concerning how the stimulus helped America maintain its status as a competitor in the electric car industry.  Nevertheless, America’s failure to support the new technology with the same zeal as its Asian competitors could push domestic manufacturers completely out of the market:

A report by congressional researchers last year concluded that the cost of batteries, anxiety over mileage range and more efficient internal combustion engines could make it difficult to achieve Obama’s goal of a million electric vehicles by 2015.  Even many in the industry say the target is unreachable.

While the $2.4 billion in stimulus money has increased battery manufacturing, the congressional report noted that United States might not be able to keep up in the long run.  South Korea and China have announced plans to invest more than five times that amount over the next decade.

As Matt Steinglass concluded in his essay for The Economist, current economic circumstances (as well as the changed opinions of economists John Cochrane and Niall Ferguson) indicate that the proponents of economic stimulus have won the “stimulus vs. austerity” debate:

The 2010 elections took place at a moment when people seemed to have lost faith in Keynesianism.  The 2012 elections are taking place at a moment when people have lost faith in expansionary austerity.

Although the oil industry has done a successful job of convincing the public that jobs will be lost if the Keystone Pipeline is not approved, big oil has done a better job of distracting the public from understanding how many jobs will be lost if America fails to earn a niche in the electric vehicle market.

The politicization of the debate over how to address the ongoing unemployment crisis was the subject of a February 2 Washington Post commentary by Mohamed El-Erian (co-CEO of PIMCO).  El-Erian lamented that – despite the slight progress achieved in reducing unemployment – the situation remains at a crisis level, demanding immediate efforts toward resolution:

The longer that corrective measures are delayed, the harder the task at hand will be and the greater the eventual costs to society.

*   *   *

In fact, our current unemployment crisis is a force for broad and disruptive economic, political and social dislocations.

Mr. El-Erian noted that there is a faction – among the opposing forces in the debate over how to address unemployment – seeking a “killer app” which would effectuate dramatic and immediate progress.  He explained why those people aren’t being realistic:

There is no killer app.  Instead, Congress and the administration need to move simultaneously on three fronts that incorporate multiple measures:  those that address the immediate impediments to job creation, including a better mix of demand stimulus and medium-term fiscal reform involving both federal spending and revenue, as well as stronger remedies for housing and housing finance; those that deal with the longer-term enablers of productive employment, such as education, retraining and retooling; and those that strengthen the social safety nets to appropriately protect citizens in the interim.

Have no doubt, this is a complex, multiyear effort that involves several government agencies acting in a delicate, coordinated effort.  It will not happen unless our political leaders come together to address what constitutes America’s biggest national challenge. And sustained implementation will not be possible nor effective without much clearer personal accountability.

One would think that, given all this, it has become more than paramount for Washington to elevate – not just in rhetoric but, critically, through sustained actions – the urgency of today’s unemployment crisis to the same level that it placed the financial crisis three years ago.  But watching the actions in the nation’s capital, I and many others are worried that our politicians will wait at least until the November elections before dealing more seriously with the unemployment crisis.

In other words, while the election year lunacy continues, the unemployment crisis continues to act as “a force for broad and disruptive economic, political and social dislocations”.  Worse yet, the expectation that our political leaders could “come together to address what constitutes America’s biggest national challenge” seems nearly as unrealistic as waiting for that “killer app”.  This is yet another reason why Peter Schweizer’s cause – as expressed in his book, Throw Them All Out, should be on everyone’s front burner during the 2012 election year.


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Niall Ferguson Softens His Austerity Stance

February 2nd, 2012 Posted in Uncategorized
Feb, 02 2012
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I have previously criticized Niall Ferguson as one of the gurus for those creatures described by Barry Ritholtz as “deficit chicken hawks”.  The deficit chicken hawks have been preaching the gospel of economic austerity as an excuse for roadblocking any form of stimulus (fiscal or monetary) to rehabilitate the American economy.  Ferguson has now backed away from the position he held two years ago – that the United States has been carrying too much debt

Henry Blodget of The Business Insider justified his trip to Davos, Switzerland last week by conducting an important interview with Niall Ferguson at the annual meeting of the World Economic Forum.  For the first time, Ferguson conceded that he had been wrong with his previous criticism about the level of America’s sovereign debt load, although he denied ever having been a proponent of “instant austerity” (which is currently advocated by many American politicians).  While discussing the extent of the sovereign debt crisis in Europe, Ferguson re-directed his focus on the United States:

I think we are going to get some defaults one way or the other.  The U.S. is a different story.  First of all I think the debt to GDP ratio can go quite a lot higher before there’s any upward pressure on interest rates.  I think the more I’ve thought about it the more I’ve realized that there are good analogies for super powers having super debts.  You’re in a special position as a super power.  You get, especially, you know, as the issuer of the international reserve currency, you get a lot of leeway.  The U.S. could conceivably grow its way out of the debt.  It could do a mixture of growth and inflation.  It’s not going to default.  It may default on liabilities in Social Security and Medicare, in fact it almost certainly will.  But I think holders of Treasuries can feel a lot more comfortable than anyone who’s holding European bonds right now.

BLODGET: That is a shockingly optimistic view of the United States from you.  Are you conceding to Paul Krugman that over the near-term we shouldn’t worry so much?

FERGUSON: I think the issue here got a little confused, because Krugman wanted to portray me as a proponent of instant austerity, which I never was.  My argument was that over ten years you have to have some credible plan to get back to fiscal balance because at some point you lose your credibility because on the present path, Congressional Budget Office figures make it clear, with every year the share of Federal tax revenues going to interest payments rises, there is a point after which it’s no longer credible.  But I didn’t think that point was going to be this year or next year.  I think the trend of nominal rates in the crisis has been the trend that he forecasted.  And you know, I have to concede that. I think the reason that I was off on that was that I hadn’t actually thought hard enough about my own work.  In the “Cash Nexus,” which I published in 2001, I actually made the argument that very large debts are sustainable, if your borrowing costs are low. And super powers – Britain was in this position in the 19th century – can carry a heck of a lot of debt before investors get nervous.  So there really isn’t that risk premium issue. There isn’t that powerful inflation risk to worry about.  My considered and changed view is that the U.S. can carry a higher debt to GDP ratio than I think I had in mind 2 or 3 years ago.  And higher indeed that my colleague and good friend, Ken Rogoff implies, or indeed states, in the “This Time Is Different” book.  I think what we therefore see is that the U.S. has leeway to carry on running deficits and allowing the debt to pile up for quite a few years before we get into the kind of scenario we’ve seen in Europe, where suddenly the markets lose faith.  It’s in that sense a safe haven more than I maybe thought before.

*   *   *

There are various forces in [the United States’] favor. It’s socially not Japan.  It’s demographically not Japan. And I sense also that the Fed is very determined not to be the Bank of Japan. Ben Bernanke’s most recent comments and actions tell you that they are going to do whatever they can to avoid the deflation or zero inflation story.

Niall Ferguson deserves credit for admitting (to the extent that he did so) that he had been wrong.  Unfortunately, most commentators and politicians lack the courage to make such a concession.

Meanwhile, Paul Krugman has been dancing on the grave of the late David Broder of The Washington Post, for having been such a fawning sycophant of British Prime Minister David Cameron and Jean-Claude Trichet (former president of the European Central Bank) who advocated the oxymoronic “expansionary austerity” as a “confidence-inspiring” policy:

Such invocations of the confidence fairy were never plausible; researchers at the International Monetary Fund and elsewhere quickly debunked the supposed evidence that spending cuts create jobs.  Yet influential people on both sides of the Atlantic heaped praise on the prophets of austerity, Mr. Cameron in particular, because the doctrine of expansionary austerity dovetailed with their ideological agendas.

Thus in October 2010 David Broder, who virtually embodied conventional wisdom, praised Mr. Cameron for his boldness, and in particular for “brushing aside the warnings of economists that the sudden, severe medicine could cut short Britain’s economic recovery and throw the nation back into recession.”  He then called on President Obama to “do a Cameron” and pursue “a radical rollback of the welfare state now.”

Strange to say, however, those warnings from economists proved all too accurate.  And we’re quite fortunate that Mr. Obama did not, in fact, do a Cameron.

Nevertheless, you can be sure that many prominent American politicians will ignore the evidence, as well as Niall Ferguson’s course correction, and continue to preach the gospel of immediate economic austerity – at least until the time comes to vote on one of their own pet (pork) projects.

American voters continue to place an increasing premium on authenticity when evaluating political candidates.  It would be nice if this trend would motivate voters to reject the “deficit chicken haws” for the hypocrisy they exhibit and the ignorance which motivates their policy decisions.


 

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Instead Of Solving a Problem – Form a Committee

January 26th, 2012 Posted in Uncategorized
Jan, 26 2012
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It’s become a stale joke about the Obama administration.  Every time a demand is made for the White House to take decisive action on an important issue  .  .  .  the President’s solution is always the same:  Form a committee to study the matter.

In my last posting, I discussed the January 20 article written by Scot Paltrow for Reuters, which revealed that Attorney General Eric Hold-harmless and Lanny Breuer, head of the Justice Department’s criminal division, had been partners in the Washington law firm, Covington & Burling.  As Scot Paltrow pointed out, during the years while Holder and Breuer were partners at Covington, the firm’s clients included the four largest U.S. banks – Bank of America, Citigroup, JP Morgan Chase and Wells Fargo & Co.

Less than a week after publication of Paltrow’s report, which raised “conflict of interest” questions concerning Holder’s reluctance to prosecute banks or mortgage servicers for fraudulent foreclosure practices, President Obama delivered his State of the Union address.  With Paltrow’s revelations still fresh in my mind, I was particularly surprised to hear President Obama make the following statement:

And tonight, I am asking my Attorney General to create a special unit of federal prosecutors and leading state attorneys general to expand our investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis.  This new unit will hold accountable those who broke the law, speed assistance to homeowners, and help turn the page on an era of recklessness that hurt so many Americans.

If it weren’t bad enough that critics had already been complaining about the Attorney General’s failure to prosecute mortgage fraud cases, Obama has most recently appointed Holder to supervise “investigations into the abusive lending and packaging of risky mortgages that led to the housing crisis”.  It’s hard to avoid the assumption that those “investigations” will lead to nowhere.  By Wednesday, I found that I was not alone in my cynicism concerning what is now called the Office of Mortgage Origination and Securitization Abuses.

Wednesday morning brought an essay by Yves Smith of Naked Capitalism, in which she expressed dread about the possibility that New York Attorney General Eric Schneiderman may have been seduced by Team Obama to join the effort exerting pressure on each Attorney General from every state to consent to a settlement of any and all claims against the banksters arising from their fraudulent foreclosure practices.  Each state is being asked to release the banks from criminal and civil liability in return for a share of the $25 billion settlement package.  Ms. Smith compared that initiative with Obama’s most recent announcement about the Office of Mortgage Origination and Securitization Abuses:

So get this:  this is a committee that will “investigate.”    .   .   .  Neil Barofsky, former prosecutor and head of SIGTARP, doesn’t buy the logic of this committee either:

Neil Barofsky @neilbarofsky

If task force created either b/c DOJ hasn’t done an investigation, or b/c 3-yr investigation a failure, how does Holder keep his job?

A lot of soi-disant liberal groups have fallen in line with Obama messaging, which was the plan (I already have the predictable congratulatory Move On e-mail in my inbox). Let’s get real.  The wee problem is that this committee looks like yet another bit of theater for the Administration to pretend, yet again, that it is Doing Something, while scoring a twofer by getting Schneiderman, who has been a pretty effective opponent, hobbled.

If you wanted a real investigation, you get a real independent investigator, with a real budget and staffing, and turn him loose.  We had the FCIC which had a lot of hearings and produced a readable book that said everyone was responsible for the mortgage crisis, which was tantamount to saying no one was responsible.  We even had an eleven-regulator Foreclosure Task Force that looked at 2800 loan files (and a mere 100 foreclosures) and found nothing very much wrong.

Neil Barofsky’s question deserves repetition:  Why does Attorney General Eric Hold-harmless still have his job if – after three years – the Justice Department has taken no action against those responsible for originating and securitizing the risky mortgages which led to the housing crisis?

David Dayen of Firedoglake weighed-in with his own skeptical take on Obama’s purported crakdown on mortgage origination and securitization abuses:

First of all, this becomes part of a three year-old Financial Fraud Task Force which has done approximately nothing on Wall Street accountability outside of a few insider trading arrests.  So that’s the context of this investigative panel, part of the same entity that has spun its wheels.  Second, the panel would only look at origination, where there have been plenty of lawsuits and where the main offenders are all out of business, and securitization, which may aid investors (that includes pension funds, of course) but not necessarily homeowners.     .   .   .

Given the fact that this is an election year, President Obama knows that mere lip service toward a populist cause will not be enough to win back those disgruntled former supporters, who have now learned – the hard way – that talk is cheap.  Obama is now going the extra mile – he’s forming a committee!  Trouble is – those disgruntled former supporters have already learned that committee formation is simply the disingenuous “follow-through” on a false campaign promise.  Nice try, Mr. President!


 

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Too Cool To Fool

January 16th, 2012 Posted in Uncategorized
Jan, 16 2012
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It’s always reassuring to see that there are a good number of people among us who aren’t easily manipulated by “the powers that be”.  Let’s take a look at some examples:

Glen Ford is the executive editor of the Black Agenda Report.  On January 11, Mr. Ford discussed how – up until now – the Occupy Wall Street movement has managed to avoid being co-opted by the Democratic Party and MoveOn.org.  Unfortunately, the Obama regime may have succeeded in establishing a grip on OWS.  Glen Ford offered this explanation:

The Democratic Party may have entered the Occupy Wall Street movement through the “Black door,” in the form of Occupy The Dream, the Black ministers’ group led by former NAACP chief and Million Man March national director Dr. Benjamin Chavis and Baltimore mega-church pastor Rev. Jamal Bryant.  Both are fervent supporters of President Obama.

*   *   *

It appears that Occupy Wall Street’s new Black affiliate is also in “lock-step” with the corporate Democrat in the White House, whose administration has funneled trillions of dollars to Wall Street and greatly expanded U.S. theaters of war.

*   *   *

Black ministers in campaign mode routinely depict Obama’s political troubles as indistinguishable from threats to “The Dream,” whose embodiment is ensconced in the White House.  That’s simply common currency among Black preachers pushing for Obama.

*   *   *

It is highly unlikely – damn near inconceivable – that Occupy The Dream will do anything that might embarrass this president.  Its ministers can be expected to electioneer for Obama at every opportunity.  Their January 16 actions are directed at the Federal Reserve, which is technically independent from the executive branch of government – although, in practice, the Fed has been Obama’s principal mechanism for bailing out the banks.  Will the ministers pretend, next Monday, that the president is somehow removed from the Fed’s massive transfers of the people’s credit and cash to Wall Street over the past three years?

*   *   *

At this late stage, there is no antidote to the potential cooptation, except to rev up the movement’s confrontation with the oligarchic powers-that-be – including Wall Street’s guy in the White House.  Let’s see what happens if OWS demonstrators join with Occupy The Dream at Federal Reserve sites on January 16 carrying placards unequivocally implicating Obama in the Fed’s bailouts of the banksters, as Occupy demonstrators have done so often in the past.  Will the Dream’s leadership be in “lock-step” with that?  Maybe so – I’ve heard that miracles sometimes do happen.

Anyone who challenges the Obama administration’s symbiotic relationship with the Wall Street banksters invites accusations of advancing the Republican agenda for regaining control of the White House.  This problem will be solved once a populist third-party or Independent candidate rises to pose a serious challenge to the incumbent.  Beyond that, an African-American commentator who dares to expose Obama as a tool of Wall Street is likely to face harsh criticism.  Glen Ford has demonstrated more courage than most Americans by taking a stand against this venal administration.

Another exemplary individual, whose opinions were never compromised to justify or rationalize the current administration’s tactics, has been economist Joseph Stiglitz – the Nobel laureate who found himself ignored and shut out by the Obama administration ab initio.  Professor Stiglitz recently wrote a commentary entitled, “The Perils of 2012” in which he dared to predict an election year fraught with economic despair.  Such conditions make for an incumbent President’s worst nightmare.  As a result, non-Republican economists are expected to avoid such prognostication.  Nevertheless, Professor Stiglitz proceeded to paint an ugly picture of what we can expect in the near term, after first reminding us that there has been no sound policy advanced for mitigating the devastation experienced by the middle class as a result of the 2008 financial crisis:

The year 2011 will be remembered as the time when many ever-optimistic Americans began to give up hope.  President John F. Kennedy once said that a rising tide lifts all boats.  But now, in the receding tide, Americans are beginning to see not only that those with taller masts had been lifted far higher, but also that many of the smaller boats had been dashed to pieces in their wake.

In that brief moment when the rising tide was indeed rising, millions of people believed that they might have a fair chance of realizing the “American Dream.”  Now those dreams, too, are receding.  By 2011, the savings of those who had lost their jobs in 2008 or 2009 had been spent.  Unemployment checks had run out.  Headlines announcing new hiring – still not enough to keep pace with the number of those who would normally have entered the labor force – meant little to the 50 year olds with little hope of ever holding a job again.

Indeed, middle-aged people who thought that they would be unemployed for a few months have now realized that they were, in fact, forcibly retired.  Young people who graduated from college with tens of thousands of dollars of education debt cannot find any jobs at all.  People who moved in with friends and relatives have become homeless.  Houses bought during the property boom are still on the market or have been sold at a loss.  More than seven million American families have lost their homes.

*   *   *

The pragmatic commitment to growth that one sees in Asia and other emerging markets today stands in contrast to the West’s misguided policies, which, driven by a combination of ideology and vested interests, almost seem to reflect a commitment not to grow.

As a result, global economic rebalancing is likely to accelerate, almost inevitably giving rise to political tensions.  With all of the problems confronting the global economy, we will be lucky if these strains do not begin to manifest themselves within the next twelve months.

Another commentator who has been “too cool to fool” is equities market analyst, Barry Ritholtz.  One of his recent blog postings documented how Ritholtz never accepted the propagandistic pronouncements of the National Retailers Association about Christmas season retail sales.  Once the hype began on Black Friday, Ritholtz began his own campaign of debunking the questionable data, touted to boost unjustified confidence about the direction of our economy.  Ritholtz concluded the piece with this statement:

Those of you who may have downplayed the potential for a recession to start over the next 12-18 months way want to revisit your views on this.  It is far from the low possibility many economists have it pegged at.

Fortunately, not everyone has been as imperceptive as those on the Obama administration’s economic team who admitted that as late as 2009, they underestimated the extent of economic contraction resulting from the 2008 crisis.  It’s time for the voting public to dis-employ the political hacks who have allowed this condition to fester.  One effective path toward this goal involves voting against incumbents in primary elections.  Keep in mind that America’s Congressional districts have been gerrymandered to protect incumbents.  As a result, any plan to defeat those officeholders in a general election could be an exercise in futility.  Voting against current members of Congress during the primary process can open the door for more capable candidates during the general election.  Peter Schweizer’s cause – as expressed in his book, Throw Them All Out, should be on everyone’s front burner during the 2012 primary season.


 

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