Hughesair (Inflection Point)

Well, not exactly, today we are the exploited. Political idealism, political correctness continues blindly in support of globalization despite overwhelming evidence of its deleterious effect on our economy: flat GDP, half a trillion a year trade deficit, unimployment, loss of manufacturing, polarization of wealth, overburdening immigration as well as a national security risk due to economic weakness. Meanwhile so called conservatives, the wealthy, minimize the damage to the rest of us claiming the unemployed are just lazy, a few lost their jobs, but over all free trade is a benefit. Big business profits from cheap foreign labor, outsourcing goods and services, avoids taxes by manufacturing offshore, and multinationals go a step further. Newfound foreign wealth in part comes back seeking secure shelter, enriching our bankers with their hedge funds, dark pools and shadow banking, indeed, furthering economic and political polarization. Government favors globalization with a belief that it...

This is a non-political blog. There is no place anymore on the political spectrum for an Eisenhower Republican. However, a comment about the budget debate seems timely. There is a big smokescreen out there telling us that the moon is green. Having watched politics for a long time, Both parties lie through their teeth when they are out of power. It is a total Machiavellian world for the minority party. Anything to get that power back; country, family and ethics be dammed. Worse yet, this time there is no right answer, just opposing sides. If we extend the national debt, we face a solvency risk. If we cut the federal budget, we wallow indefinitely in stagnation and run the risk of an even greater depression. Unfortunately, the maldistribution of wealth complicates the already insolvable problem – and may indeed have caused it.   According to the New York Times based on 2010 data, the taxable income of the top 1% averages over $380,000 while the wealth of that 1% adds up to an averag...

Entitlement caused the thing. --- Back in 2012, before the Cliff, entitlement was only a campaign whipping boy of the Reds. The trouble was that entitlement was also the state of mind among the wealthy; it was almost a uniform belief among the rich that they must hoard their hard-earned wealth at all cost – even at the cost of the Republic. When we went over the Cliff, austerity measures came into effect dumping the middle class into a depression worse than the first one. Unemployment shot up to 85%. Banks foreclosed on homes. People were living on the street. Starvation was the norm everywhere except in farm areas. China sold off its investments in America, flooding the market with near worthless government bonds driving interest rates sky high. Businesses folded right and left. Rioting led quickly to disaster. At first, the military supported the failing government attempting to enforce the foreclosures and maintain order. The government was soon useless and remained in g...

Privatization of basic drug research takes the cost of academic grants out of the government’s budget and passes it through to the consumer along with industry profits, executive bonuses and marketing expenses. The greatest cost burden then falls to the middle class considering that the poor simply do without and land in the emergency room. Adding prescription insurance merely adds another industry’s profits, bonuses and marketing expense onto the already over burdened consumer.

Former SEC Chairman Arthur Levitt, who serves as a senior policy advisor for Goldman Sachs, spoke to Bloomberg TV’s Erik Schatzker this morning on “Inside Track.” Levitt said that Goldman should stop saying, “The firm puts customers first.” He goes on to say, “There is a logical, reasonable, fair, understandable tension between a seller of a product and a buyer of a product. That’s not to stay that buyers should beware. It is to say there should be transparency. But on the other hand, let’s not create a fellowship of buyers and sellers that will march into the sunset.” Whoa! Hello again, this does not sound like a bank, and this is the reason investment brokerages must be separated once more and for all from banking. An investment house sells products, that’s not to say the public should not have some protection in buying these products, but they are investment products and the buyer can choose to buy or not and the tension makes sense. However, a bank has a fiduciary responsibility t...

Why do I keep writing economics? Nobody's listening. What do I know anyway? In one way knowing is living through it. That's the economics of the street. An observation anyway: the higher than the rest of the world corporate tax structure in the US (35%) introduces two unintended consequences. One, a corporation including its officers can retain more of their collective income by paying sky-high bonuses thus reducing corporate income, that is, providing the officer's tax rate is substantially lower than the corporation's tax rate. Given a corporate tax rate of 35% that would be a probability. The solution would be to lower corporate tax levels below those of the executive officers, vise versa or a combination of both. Sequestering foreign revenue from overseas factories in overseas accounts retains more of the corporate earnings whilst enjoying overseas tax rates far below our own. The corporation finds no way to bring those earnings back home, so if invested at all,...

The demonstrators should know what they are protesting and have solutions. The politicians do not. First differentiate investment banking, commercial banking, brokerage houses, insurance and the stock market. They may all be on Wall Street, but they have very different functions. Capitalism and our stock market along with venture capital historically served America very well and it is in our DNA. Don't mess with what works. That aspect of Wall Street is vital to our economy, so are commercial banks. The problem grew when all of these separate entities were allowed to merge forming giant interrelated cartels and banking monopolies. Can you see a conflict of interest when the bank, the brokerage house and insurance company merge together -- and issue credit cards as well? The government subsidy, too big to fail, in the early banking crisis created further bank and bank-brokerhouse mergers. Banking is now an unsustainable monopoly. Overlapping enterprises and mer...

We link to this blog written by an Iraqi Dentist, educated in England, who continued to worked during the war. His blog reveals a rich history and background to events in Iraq. The continued dysfunction in Iraq reported still today -- in contrast to the spontaneous revolutions of the Arab Spring -- seems to confirm the conviction that democracy cannot be exported or imposed on a despot society unless the people in mass rise up and are willing to die for their freedom. When the majority of reasonable people instead flee the country, there is no way. Attempting to do so, seems well beyond the point of diminishing returns, especially when the motives are a bit disingenuous, favoring the interests of commerce if only a little.

They Killed the Goose that Laid the Golden Eggs. What’s more, they are beating her dead body with the political certainty that she will wake up and produce more. The depression is real. They have repealed all of the regulations written after the last depression, rules to prevent the depression from ever happening again. You heard the political sound bites of deregulation and privatization. The golden goose needed a game warden. You can’t play a money sport without referees and rules. The same goes for banking, insurance and investment houses. This is not political, just reality. It has to do with trade, wars and mostly money. War profits the Daddy Warbucks’. Outsourcing jobs and manufacturing, works for large corporations. The trade deficit lines the pockets of the whole investment and banking world. Foreign dollars come back to us for a safer haven than banks in our `uneven trading partners` own country. All of the feed for our goose went to its greedy owners. You can’t drive an eco...

I've written about this before, but for new readers, market liquidity and short term market response very closely correlate with the daily Treasury receipts compared to a year earlier. 6/14, yesterday's tax receipts yielded 7.07 billion less than a year over, and 5.9 billion less month-to-date than that collected a year ago. --- Not good, the market today showed it. Without wildly productive economic growth and more US jobs, tax revenue lags and so does market liquidity. Dangerous too are the politicians playing childish games with the debt ceiling. Freezing government spending for job growth and refusal to tax more heavily the wealthier banking class seems contra productive to the market and the economy as well.  "Daddy Warbucks" profited greatly from the trade deficit and remains immune to the down-turn if not the cause. Some might call it only fair that he pay more to balance the budget and pay down the National debt. Meanwhile the market goes up and down, on...

Investor’s Business Daily , IBD , May 23 headlines, “1,000 Small Banks May Be Shut Down Due To Dodd-Frank.” So-called conservatives unwittingly and with the confidence of political creed, place themselves far right of Adam Smith in their half a century quest for deregulation. You cannot play baseball without rules and you cannot run an economy without regulation. The banking rules were there for a reason. They emerged from the depression of the 30s to prevent such a devastating crash from ever happening again. Banks lobbied ceaselessly for deregulation. They got it and look what happened. This valorized political mantra of deregulation amounts to economic anarchy, pumping money into big banks and out of the hands of small banks, small business and the credit card population at large. The front-page journalism objecting to reinstating rules and restraints on the destructive behavior of giant banking monopolies strikes me as a political editorial based on a political belief system al...

If you doubted that the derivative market in sub prime loans and apparently a lot that are not, amount to a PONZI scheme not unlike Bernie Madoff's transgressions, just read this piece in the New York Times. http://www.nytimes.com/2011/03/06/business/06mers.html?pagewanted=1&hp This kind of thing was called stacked sales in Colorado in and near Breckenridge in the early 50s. Sell high prairie ranches to far away buyers, selling the same property over and over until a buyer shows up. Reselling packaged mortgages as investment innovations, amounts to the same thing. How many times does one mortgage show up in multiple investments? When one investment instrument owns interest in another it amounts to just that. Privatize it. Take it away from the slow meticulous county clerk and there you have it. The real estate business has always been a dirty business. Derivatives are not regulated; that was their appeal. Big banks call it leveraging. I call it stacked sales. When it fall...

This you don't want to hear. The daily tax returns closely parallel market movement as a proxy for the liquidity index, L2. The daily receipts for 2/24 trails that of a year ago by a round billion. The month to date trails year over by 16.5 billion. Year to date year over shows a gain of 34.4 billion. --- Late February liquidity slumped and so did the market. Last year, the fed ends Sept. 30, listed 2.038 trillion revenue. We spent 3.685 trillion. Thus far this year we took in 822.8 billion and spent 1.379 trillion. The National Debt at the beginning of 2010 was 11.864 trillion. By year end it was 13.511 trillion. As of 2/24 the National Debt is 14.067. The statutory limit is 14.294 trillion. What does it all mean? Mostly a short term negative effect on the stock market. If institutional and corporate money does not continue to buy into the equities market, and there are not a lot of buy backs, then market liquidity is not sufficient to sustain the growth that we have seen ye...

Thanks but no thanks. Check the link. This is a big deal. After taking our tax payer support for their solar panel manufacturing facility, Evergreen pulls up stakes, lays off 800 employees and moves to China. Whilst China subsidizes their own solar panel manufacturing including the Evergreen partnership, we twiddle our thumbs and wonder if the Chinese Solar panels will undercut our own manufacturing efforts. Will they become yet another lower priced Chinese import? Will Evergreen then do it to us once again. Will we pay them twice for their product? Come to think of it, aren't other US companies doing the same thing? Where's the Trade Commission when we need them. Ah but just one more hemorrhage of American jobs and the balance of trade. Almost sounds like extortion and our own naivete. The government must decide if electric power is our priority. If so, pursue that source of cheap, exploitable, abundant and renewable energy with all our might.

The economy will not fully recover until the housing market gets cleared of foreclosures and uncertainty. Forcing out mortgage holders is not the only way to clear the market. If we go back to the measure that required banks to value their assets at current market prices, Mark to Market, according to generally acceptable accounting practices (GAAP), we might see some motivation for banks to modify underwater and delinquent mortgages and start over. This would put money back into the economy, clear the housing market and give relief to the unemployed. This is the 4th outrageous banking real estate crisis. When are we going to put some discipline into this market? It's hard to feel sorry for banks that profited on this depression. When a bank is an insurance company and a brokerage house there will be mischief. When mortgages are repackaged and resold it still looks like a ponzi scheme.

High-Flux Solar-Driven Thermochemical Dissociation of CO2 and H2O Using Non Stoichiometric Ceria by Wm Chueh, Chris Falter et al  Cal Tech; Science 24 Dec 2010 No 6012 p1797 The authors demonstrate a concentration of sunlight on porous Ceria  with temperatures up to 1500C, stripping oxygen from CO2 and from water and yielding CO, O2 and H2. (Bypassing the plant cycle of converting CO2 and water into O2 and hydrocarbons. We thrive on the O2 and utilize the carbon for food and fuel.) Oil was a cheap, abundant, exploitable resource driving our industrial economy. High prices and peak oil ended our long industrial buildup of wealth. We have been steadily pissing away that wealth and will continue to do so until we build out a similar cheap, abundant, exploitable energy source. Electricity is that source, and solar is an unlimited free and sustainable source of electricity. However, storage of electricity for night time use and some economic means o...

http://www.investors.com/NewsAndAnalysis/Article/559547/201101111852/China-Spurns-Defense-Secretary-Gates.aspx Whether you like security, economics or aircraft, these two links reflect the didicult and interrelated choices that we have to deal with. http://www.pacaf.af.mil/news/story.asp?id=123231357

Economics 201 Sacred cows cause distortions to the market balance. For instance, minimum wage, arguably a sacred cow, causes a shift in jobs to cheap off shore labor. However, without minimum wage, there is no way most single parents can afford housing, heat & electricity, food, pediatric care, transportation and tax. Even with minimum wage, many single mothers find themselves with Medicaid, food stamps, unpaid bills and probably unfiled income tax returns. The real problem stems from the outrageously high cost of living. I do not mean inflation. Unrestrained free market pricing of critical infrastructure raises the basic cost of living to the benefit of the privatized utility. Furthermore, a regressive federal, state and local sales tax adds to the burden of the minimum wage earner. Lowering the basic cost of living to a level wherein the low wage earner can live modestly, would solve the unemployment problem, the welfare problem and probably ship fewer jobs overseas. Obv...

Legislators, facing the challenge of jobs, the economy and their own paycheck, voice the cry, “spend baby spend.” True, consumer spending drives the major segment of our consumer economy, but the well is dry. The accumulation of wealth in the upper five or ten percent of the population leaves little left over to drive a consumer economy. Compound that internal sequestration of wealth with our outsourcing: telephone services, technical services and manufacturing to low labor cost countries and you see the point. An economy based on, shifting wealth from one class to another, cannot last, and it hasn’t. We have not yet come to grips with the causes of this depression and it is not over. The banking excesses caused the depression of the 30s. Banking did so again much earlier and obviously orchestrated the depression of today. This was the fourth banking-real-estate scandal. This one challenges prosecutors in its complexity but is no less a ponzi scheme. Arguably, banking has a fiduci...