1% Panic

Hey, guys. Hope all is well. I read an Op-Ed article in the Wall Street Journal yesterday and I want to comment on it. Since Black September 2008 has really rewritten a lot of economics textbooks, I’m keeping my ear close to what those guys over in Downtown NYC have to say, so most of my upcoming blogs are going to be concerning the political economy.

The 1% Panic, by Gordon Crovitz is an article, like all other WSJ Op-Eds, that gives insight to the minds of the cultured nattering American free market nabobs. In the midst of the current global financial recession, the West is compelled to observe, reflect and aver their stomach's tumult to the current economic crisis, in hopes of obviating the Marx-told-you-so pretext and providing a “better” understanding of what is, was, and may be in the Western free market. This is one of many op-ed columns in the period since Lehman Brothers' failure which adheres to such concerns and displays of lofty inquisition.

In the article, Crovitz touches on the financial market's problems which include the distrust in interbank lending, great investor apprehension, and moral hazards imposed by Washington. He determines that the quintessential mathematical structures of finance are more than apposite in finance, but that the introduction of incongruous "policy goals" from Washington encourage dysfunctional schematics in the market. One such component he underscores is the Value of Risk formula (VaR), which "assesses the historical variances and covariances among different securities, informing financial institutions of the risk they're taking." In order to make sure losses are covered, the formula helps companies look at the past in comparison to their present capital and decide if anything needs adjustment. Yet the only thing VaR falls short in is with that 1% event of unpredictability, inadmissible if plugged into the formula: for example the 1995 Barings rogue trader or today's entrenched, sinuous mortgage-backed securities (MBS). Crovitz warns that you must stay within bounds of financial sensibility and function, of which VaR and its like models appropriate. The complexity of global markets and financial instruments are the nature of finance, producing fragility which big government’s interference tends to tear. His conclusion, in light of this fragility is the following:

The good news for VaR and similar models is that the free market alone would not have allowed the bubble of subsidized mortgages, but the bad news is that it's far from clear that Congress has learned from the current crisis to pursue policy goals in ways that don't distort the fundamentals.

(emphasis added)

My question is the following: How did the smartest people at the best banks running the most sophisticated financial models fail to forecast the collapse of mortage-related securities? And apparently, this sentiment is shared by Crovitz because I am quoting him verbatim. That question, however, was not answered in his article. But the question is important for me because there is a parallel running right along the paradox of Washington: the best and brightest, but the Iraq war was a major boondoggle? No, no. It was hardly a failure--do we not have control instead of access to Mid East energy and policy? Whether or not the American public went along was an ancillary benefit. The fact that the public did not support the war is unsurprisingly mistaken as a major failure for Washington's figureheads, conflating the integrity of the Iraq war.

Now, as of recently, there is a spate of fingers on Wall Street pointing towards Washington for the bad economy. They make the point that Washington, under Clinton and with strong but minor antecedents in Carter, gave injunctions to integrate the American Dream (a house, car, dog, a family of four--I think, right?) into VaR, creating a new avenue of wealth for the financial wizards to exploit and which at the same time provides more opportunities for the subprime folks and everyone nearby (80% of America) to attain the American Dream--hence Bill Clinton's great economy. Well, Crovitz gave a big part of the reason why mathematical formulas do not compute socialist aspirations--(bad choice of words) . . . do not compute attempts to assuage old aged adages (life is tough and unfair, that's the way things are, blah, blah, blah.) This is what Crovitz is worried about: "it's far from clear that Congress has learned from the current crisis to pursue policy goals in ways that don't distort the fundamentals." In other words, stop f*@king with the way things are and let people stay in their place. So what if they complain about working three jobs and they barely make their debts. So what if they give the old, "This is America, the richest nation in the history of the world. And why the financial dread in healthcare and mortgages and education?"

Do you guys see the paradox in the American Economy and in Washington? McCain calls us the greatest force for good, but would call tree huggers utopian. Obama says Reagan was admirable in reining the excesses of the 60's, as if there is a surfeit to dignity. Hillary says national security over human rights--so hence the Saudi monarchy's tyranny on women. Gordon Crovitz and the enormous legion of liberals who fancy themselves independents (because politics is inherently evil and corrupt you know, not like the American Economy) say the free market is it. It's the "end of history". But know nothing of history.

So from his article we learned there's a 1% chance that people will come to their senses . . . And that’s a panic?

Palin admires Westbrook Pegler

How did Sarah Palin quote Westbrook Pegler and get away with it?

At the Republican national convention Sarah Palin quoted Westbrook Pegler, who was a columnist in the mid-20th century. My probelm with Westbrook is that he was famous for his anti-Semitism, racism and violent rehetorial excess. After someone tried to kill Franklin Roosevelt in 1933 Pegler wrote that is was regrettable that the assassin shot the wrong man. Then in the 60's Pegler wrote that he had a wish for Bobby Kennedy: "Some white patriot of the Southern tier will spatter his spoonful of brains in public premises before the snow falls."

Fast forward to 2008 and you have a Vice Presidential candidate quoting this man in her acceptance speech on national TV and the country is not in outrage. Last time I checked when a person quotes a person in a speech in the way that Palin did, it's because her or she respects that person. And if Palin respects Westbrook Pegler she does not represent what America is suppose to stand for. Therefore, as of today I have not respect at all for Sarah Palin or John McCain because they are trying to take American backwards to a time when racism and hate were much more violent.

If the American people put these two in office all that I will be able to do is pray for this country.

S.Mayers

My Message to Disenchanted Voters

Ok, so here's my honest feelings about this upcoming election. Honestly, like I've stated in the past, I'm a HUGE Clinton supporter. I totally understand the disenchated voters out there. There was major sexism in the primaries against Hillary and now Obama is the Democratic Nominee. For anyone who saw the DNC Rules Committee, the blatant sexism was horrifying-I mean we're living in the 21st Century and it's crazy to believe that the efforts of Phyllis Shaffly has succeeded past the 1990's . I mean the knocking down of the ERA in every Congress since first proposed in the 1970s has been a conservative viewpoint. I really didn't think that the sexism would prevail within the Democratic Party, however, considering that it's the Democratic Party who usually supports women's rights. What I saw at the Rules Committee Hearing was just insane. I was not a supporter of Obama for a few reasons: character & experience being the major points that I criticized him for.

On McCain: he's a pretty liberal Republican. I could have seen myself supporting him in this election; however, he has shifted to the right-too far for me to support him. He's also a candidate who's health is a major concern.

For me, the election came down to the vice Presidential Candidates. This meant that it was up to Sarah Palin and Joe Biden to get my support. Now, I have obviously expressed my reasons against Sarah Palin. She supports everything I am against and is against everything that I support. Now, on Biden, I'm not a huge fan of Joe Biden. He has a compelling story and the guy had a tough life-as a person I think he's great. As a politician, I'm not so sure.

I'm so confused with this election. I am a PROUD DEMOCRAT and I LOVE being called a LIBERAL because that means I support the rights of the people-I support women, I support the middle class and lower classes, I support the labor unions and the education associations, I support gun control laws...I LOVE BEING A LIBERAL; however, I think we picked the wrong guys to lead our party. I want Obama and Biden in office but I'm not sure I want them there for 8 years.

A part of me honestly wants McCain/Palin to win so in 2012 Hillary Clinton can come back and take over and bring this country back to where we need to be. Yes, I am actually saying that McCain/Palin has torn me because of my absolute support of Hillary Clinton. However, I'm with Obama/Biden on most of the issues. This election means me campaigning for the Congress rather than the President. I'll go to a few events for the President but I honestly don't know who I support in totallity. In 2000 I was Gore, in 2004 I was Kerry, in 2008 I don't know and I'm really upset over this. I know I sound crazy to anyone who's not interested in politics, but it really sucks when you're huge into politics and the person you know is best for the job isn't even on the ballot.

MY MESSAGE TO DISENCHANTED VOTERS OUT THERE:
1. Do not stay home on Election Day.
2. Get out there and make a decision.
3. If you honestly cannot bring yourself to vote for either the Obama/Biden ticket or the McCain/Palin ticket, write in your choice.
--->DO NOT STAY HOME, voice your opinion!!!!!!!!!!!!!!!!!!!! This election is too important for you to stay home! Please get out there. I understand your disenchanted position, but it's so important that we voice our opinion!!!!

-Aruna Mathura

plz post comments on this!!!!!!!!!!!!!!!!!

Two Points

I turned the tube on an hour or so ago, and tuned to CNN—it’s been a while so I decided to see what there talking about and how they talk about it. I forgot that Life With Louie (Lou Dobbs) was running around this time, otherwise I would’ve been deterred from turning the television on, but I sat on the couch before I heard his pompous little invectives of the Wall St. bailout, so I just decided to wait for the picture to turn on and watch it. I sat there listening to this guy, staring at his capped teeth and his well powdered cheeks, becoming a bit queasy from the contrast between his hair’s orange sheen and the waving American flags on the background display screens, and sat there listening to him berate the “greedy Wall St. guys” and the proposed $700 billion dollar bailout. It’s quite interesting how TV journalists ostensibly go so far in criticizing the establishment. Well, at some point soon there later, I heard him point two interesting things about the current financial affairs, the latter actually being a proposition. The first point was essentially, you know, “just let them (Wall St.) fall, let them fail, they deserve it.” Sensible. Okay the second point was what he calls trickle up economics (a cognate of the Trickle Down economics, where if I make billions of dollars, you can work for me and job employment grows), where he asks, “Why not inject money into the subprime consumers and therefore save Wall St. and the taxpayers, Henry Paulson speaks so fondly about? Why not bailout those who defaulted on their subprime loans and avoid completely the mess we’re in?”

The first few seconds, I thought about it earnestly, because in market economics it’s f!*cking inconceivable. Nonetheless, I entertained the thought. And it occurred to me: you can criticize the establishment . . . because the American people are still utterly stupid, like Pavlovian dogs grouped in a bewildered herd (I’m saying this from the educated elite’s perspective). I doubt Mr. Harvard Lou himself believes what he reads off the teleprompter, but it goes to show you what sort of republic we’re in.

In regards to the “consumer bailout”: If the government bails out the consumers or borrowers, however you prefer to call it, the government has just given an extraordinary amount of money to a very large population of consumers; their money supply has increased drastically. Now, there’s a difference between consumers and industries. Here’s one part of the difference: if you give free money away (it’s similar to the, “why not give everyone a million dollars?”) a violent inflation will ensue like Krakatau. The money amount proportionate (and most likely even more skewed) to the government’s injection amount will essentially become worthless; and it’s a great amount of money injected because the subprime mess measures in the billions. This in turns flips upside down our sense of economic reality, our economic perception of what is and what isn’t. Just try to think of the mammoth implications that would require in such a codified economic system we have to do. Every relationship within that system will have its cherry popped again, and again, and again. The Fed will lose their monetary policy—the exact thing they are to prevent is this chaos. Marginal propensity to Consume (MPC, the % of each additional $ income that we spend on consumption) would go haywire distorting all sorts of models and formulas. Foreign investors and economies would look into their wallets in confusion and say WTF?! and look around at each other and say I have a brain freezzzzeeeeeee! Remember: money (paper notes) relies on it’s relative scarcity, it’s legal tender, and it’s acceptability. These three things give money value, status, means of permutational exchange. If the government bailed out the consumer, the government and consumer (citizen) are now conflated. The transaction would see two parties: business and government. You can’t do that. That’s chaos. The government is money—all the treasury has to do is call Fort Knox and say print the money. This relationship defies economics. Now, if we’re more cautious and just presume a brief governmental intervention, then what is concluded from thereon is that the government’s word is worth nothing, it’s responsibilities are left to Judah. You can’t have legal framework, wherein private property and business operate, underpinned by such blasphemy as the government’s violation of economic “laws”. (I feel like emailing an economics professor to make sure I’m right, because Louie’s proposition is just ludicrous.)

Why not let Wall St. fail? Simply put: because it would be the beginning of the end for capitalism. And notice, unlike the preceding presentiment of a “consumer bailout”, a Wall St. bailout is possible and functional because government’s role is to ensure the function of society. The Social Compact, right? The government provides a legal framework for business to operate. You can bailout business because business is a social enterprise within that framework (you can't bailout the citizen from its own social framework). And it can do so because the government is vested authority by the people. Hobbes, Locke, Montesquieu, Rousseau, right? They worked out their theories and a republic is formed. Well, from the 18th Century onwards, two forces have kneecapped the notion of government as the authority; that’s why we now distrust the government, right? Those two forces are technology and modern business. The concept of power has attained greater freedom with the rise of those two forces, but with it the excesses from those two forces has given the people—the powerless—the opportunity to learn what is freedom (which is different from that of power’s.) Wall St. must be bailed out because that would mean power (what the government holds traditionally and what business holds privately) is shifted back to the old concept of government and closer to the people, where then people have to operate with their own resolve, not leaving things up to the powerful.



Anyway, you can catch Louie every weeknight at 7 pm eastern. You can learn alot!

Healthcare

reform: (noun or verb) [to put or change into] an improved form or condition b: to amend or improve by change of form or removal of faults or abuses. *Merriam Webster Online

Obama’s healthcare plan creates a new entity (unnamed as of yet) to guarantee eligibility for the UNINSURED; those who are insured are allowed to keep their insurance provider. His program would allow subsidies for families, easier enrollment into the program, reined costs of services (non-medical, just administrative), affordable premiums, comprehensive benefits, quality control and efficiency throughout all levels of the program. Obama also plans to look establish a watchdog group / mediator for the private sector of the health industry (it's called the National Health Insurance Exchange). Technically, that is Obama’s plan and it's not healthcare reform, because healthcare is privatized in the United States. Healthcare today is a goods and service industry, rather than a humanitarian institution (these two terms are interchangeable by their broad implications, but I’m hoping you guys can catch my drift here). The reasons why I’m in favor of his plan is because it’s an actual effort (though it may not come true) to think bright, while McCain’s advisers are a bunch of Melvins who poke fun at the interests of the public, as his plan illustrates a trite overture of what they believe is healthcare “reform”.

As I have done with Obama’s healthcare plan—which I got from his website—I will summarize McCain’s palaver on healthcare rather briefly. All in all, McCain wants to refurbish the technicalities of the healthcare system (and as I’ve mentioned previously, is privatized, unaccountable to the concerns and preferences of human individuals, but totally attentive to consumer concerns and preferences), by promoting free market competition “in order to meet needs” (of the bunch of whiners). Now, you can check out his website and read for yourself—it’s not technical at all, just annotations. It’s like one of those local commercials for the county senior retirement community.

These are their healthcare plans in a healthcare system that is a wannabe free market industry, and where there is more profit to gain in every ounce of medical treatment than pound of preventive practice or science. It is also imperative to note the highly intertwined cheap eats industry and sedentary/stressful lifestyles so often imposed on the average Joe. Since the early 1990s, no longer is depression, weight gain, migraines, palpitations, etc, related to one’s lifestyle when looking for its treatment . . . instead it’s a condition, which Product X, or Y, can treat. No longer are links drawn between the oppressive forebearance of looking for a job, maintaining it, paying off your debts, spending most of your life indoors instead of outdoors, eating artificialities, looking forward to the weekend or the intermittent recreational activity while living the rest of your time in work—that dreary thing called making a living, no longer is this nexus carried over in the pyschosomatic treatment. It’s just pills, liquids, and the latest medical treatment, “to help you get through your day”. Boy, I sure wish Adam Smith was around to set things straight . . .

Can I have friggin feedback?

As the title suggests, I would like some feedback so I don’t have to write twenty pages on the political economy. That way I can help address your concerns or questions, point out some useful reading I’ve come across. You, know, a mutual knowledge exchange. I want to know what you guys know, too.

So how are you guys enjoying Black September (catchy cognomen conferred by the Wall Street Journal)?

The economy, the elections… both dogged through jarring controversies (by the way, Palin is making things very easy for the Dems—so there’s one thing for us to cheer up and don’t buy into the whole female turnover to the Republican party because of Palin… I checked it out, and the situation is essentially like a Beware information text box on the corner page of some Statistics textbook—highlighting the ways in which statistics info is deficient and misleading. In fact, I was going to do Part II Palin and Republicans, but not anymore) Anyway… the economy and the elections. So, I obviously can’t get into all of the economics here, but I encourage you to start your own research projects on the economy and become “enlightened”.

I actually want to begin by briefly noting the tom foolery at the BlueWave event, where Pam was so gracious enough to take us. The Democrats, except for one, at the event used the rallying call reverberated around all the blue/red county halls—the economy effecting the middle class, aka Americans. So the routine goes something like this: blame the venal Bush administration, remind us how much of an economic purulence is the Iraq war, we need energy independence like the 4th of July, and don’t forget Change from this and that. So, this is where Economics comes into play I guess. And as a former Board Chief at Goldman Sachs, the last one of two (formerly five) remaining investment banks on Wall St, there was a reason why Corzine didn’t go on the offensive against Bush (and maybe I’m giving him too much credit as a sincere elitist who knows better) at the BlueWave event. The reality is the economy is a dynamic.

McCain like all of us, including Obama (just because they don’t have time to study the matter) are not experts on economics. Experts know derivatives, models and modes, various input-output coefficients, and quantitative theorems. Any attempt by McCain to declare himself economically circumspect is utter rubbish; we really should know by now, that there’s a difference between a republic and a democracy. McCain is from a republic, Galbraith from a democracy. With this mind, it’s easy to see the objectives McCain wants to pursue; co-opting and appealing to the carefully cultivated emotions from the public, instead of enlightening them--where the latter drew Thomas Jefferson’s advocacy.

McCain's stance against pork barrels projects are a stupid issue and unimportant; how can you siphon off money in a system where money is created out of thin air (the Fed post 1929) and engrossed by perpetual open-ended credit (personal savings as % of disposable income [that's the blue collar american income] is -.40%, FDR in 1944 was like 25%, that's freaking awesome)? So, this wraps up McCain and his economic agenda. And you really have to be kidding if you think his healthcare thingamajig and reform policies are important. In total sincerity, it’s unimportant because the health care system is working just fine, so YOU need to shape up. At least that’s what the economics say and has been saying since the Nixon years. Remember, profit revenue, net gain, that’s privatized in a free market. The firm costs and production excesses are socialized, that’s called “externalities”. The externalities are what Obama and McCain talk about in their debates (you know, we American free marketers are looking out for you). In the functioning of economics (the real world outside those debates), methods to maximize profits minimize costs in an industry (health care) so intimate to human idealism, creates problems when the only thing the Average Joe knows is work (because you need money to live) and health care (in order to live)--the great gulf between externalities and the economics of health care totally unbeknowst to him. Hence; one of the 2008 issues is health care (but as it rightly should be; my reasons do more with democractic principles than economics or my family and I)

The economy is not so good (obviously--the finance sector, which is about 25% of the American economy, forgot to "pull out" and now has a surprise [wink, wink]). But, the jobs in the health sector?: they're expanding by 36% through 2012. So, hey part of the economy is growing (the U.S. always grows, but in times like this its by 1.23%) because 36% adds to the GDP, Gross Domestic Product (the how big is your d*@k stick amongst nations). The externality in this case, and now I’m sort of distending the definition, is that the 36% increase in health care jobs means that there is an increase in American obesity and their cancer phone problems and pollution, coronary heart disease grease and "I need to exercise, but I don’t have the time". That’s a relationship in the economy, which has no say in politics because people don’t have time to learn, so people like Bush II talks to us like we're stupid. McCain is a lot of bull, an incredible marksman in pointing out what’s wrong with “the economy”, and an old bag of dust.

Guys, this is my most disorganized blog, but the issue of political economy is too overwhelming, I feel like a virgin again. So can you just ask me questions? I’ll respond. Then I’ll ask you questions and then you respond, like I hinted at the outset.


PS Runie: Bill Clinton's administration (as I told you) was more of an economic a-hole than Bush II. Look at things now. You still rock though. I hope your neck is better.

Correction on Banning Books

Hey everyone,

First off, I apologize for my typos in the last blog I wrote. The "9 Reasons I don't Support Sarah Palin" blog was charged by a lot of emotion-written right after a heated debate over Mrs. Palin, and I did not pay any attention what so ever to my grammar.

Secondly, I have recently found out that the book-banning thing is a lie. She did fire the librarian, but for what reason, I'm not 100% sure. She also asked for the resignation of many others in the Wasilla governing bodies who were placed in office by her opponent (typical of politicians).

The thing about politics is that it might be true, but things are covered up in order to prevent bad press. I'm not saying this is the case and that the librarian was actually fired because she did not ban the books, but it may be a 1/2 truth-one can never tell in politics. I believe that Bill Clinton's pardoning of certain people was under much scrutiny by the Republicans and many lies were put out by the Republicans in order to discredit the Clinton family (such as Hillary stole from the White House). These are tactics that have been used in politics numerous times before and we need to stop it-ON BOTH SIDES!!!! Putting out lies on a person running for office does not make you look any better than that person-in fact it makes you look worse in terms of ethics. I'm not saying the Obama Campaign did this, but whoever did put it out there, knowing it was not the complete truth or that it was a complete lie needs to stop.

We need to let the American People know who are the people running for office, not the lies on those people. I still obviously do not like Sarah Palin, however, lies are things I cannot tolerate. After re-reading my previous blog I realized that I misspoke when I did not write "allegedly." I honestly meant to, however, when you're upset, you're usually not thinking straight and I totally and completely apologize for that! I still think the Republicans, as a whole, skip over the First and Fourth Amendments and I stand by that statement.

If I did not write "allegedly" for the firing of the State Trooper, I apologize for that as well. She is currently under investigation for that and it has not been proven yet. Please keep these things in mind as you follow the blogs and the NEWS. Again, I apologize.
-Aruna