Drone strike appears to have killed al-Awlaki

http://news.yahoo.com/us-officials-us-attack-yemen-kills-al-awlaki-130835684.html

I guess it's good for US national security that this man is dead, but what is to stop another similarly dangerous individual from taking his place and even doing a better job?

It is disconcerting that the US gov't can sanction the assassination of a US citizen living legally in another nation where we have no official military jurisdiction. All the "evidence" against this person is classified (actually he has not even been officially charged with any crime!), so we just have to go on the hate sermons he has released online and his alleged ties to the underpants bomber and Ft. Hood shooter. No due process, no explicit attempt to apprehend him, and it wasn't an interdiction to stop him from imminently harming others. Just shoot to kill, and the order came from a C-in-C who used to be a ConLaw professor.

Plenty of US citizens have committed treasonous behavior over the years (and yet our nation still stands), but Washington did not issue kill orders for them. In fact some of them today live comfortably and have radio/TV programs. I guess this shows Americans that under some set of conditions, our gov't can unilaterally and spontaneously murder us. But probably not being an extremist Muslim reduces our chances.

Interesting story of the Conficker worm

http://www.npr.org/2011/09/27/140704494/the-worm-that-could-bring-down-the-internet

The author of "Black Hawk Down" recently published a book about internet security and the Conficker worm, the most successful malware program known to date. I am not an IT guy, but from the interview, it seems that Conficker was written by expert hackers in Ukraine (who still remain anonymous) to tunnel into millions of Windows PCs and subtly control some of their processing resources, and then answer to a mother computer. Their aim seems to be the creation of a massive "botnet" of 10-12M slave computers worldwide that basically aggregate their processors to become the most powerful supercomputer in the world (even better than our best, expensive NSA comps). It's like those movies with the little nano-machines piling up to become a huge scary monster.

With this asset, the masters of Conficker may be able to brute-force crack computer encryption, presumably to guess passwords to steal money and/or secrets. 128-bit encryption technology can maybe produce gazillions of possible passwords (>10^38), which would take too long for even modern supercomputers to plow through. But the Conficker botnet can do this much quicker, and it's masters are now "leasing" the botnet resources to other criminals seeking to steal something. In theory, the penetration of Conficker is so great that its masters would be able to shut down the global internet if they wanted, but they seem more inclined to use it to steal, so it's left unharmed.

How the heck does Conficker infect PCs? Good ol' Microsoft did not make Windows XP very secure, and their engineers eventually discovered a vulnerability for remote access. So they issued a typical software update/patch to close the hole, and anyone who regularly updates their Windows OS should be safe. But the problem is that most PCs running Windows worldwide are using pirated versions that are not eligible for updating (another consequence of OS piracy: exposing the whole internet and trillions of wealth to crime; thanks a lot, China). So those users are totally exposed unless they download antivirus software or a free anti-Conficker program written pro bono by the "Conficker working group" near Stanford (calling themselves "the cabal," a team of volunteer cyber-security experts who recognized the danger of Conficker and are trying to stop it on their own time and own dime, because gov'ts are way behind the curve and doing nothing).

The irony is that Conficker started infecting PCs after this Windows patch. It's possible that the hackers analyzed the patch to reverse-engineer and discover what the Windows vulnerability was, so MS gave the bad guys a free how-to guide to hack Windows! By trying to fix their product, MS brought about the Conficker infection (in addition to many other similar malwares that have been since identified, and lord knows what we haven't found yet). Another consequence of monopoly: concentrated risk. And even though Conficker doesn't affect Mac or Linux, that's not to say that those OS's are any more secure. The Conficker masters just see less value in infecting the much smaller global population of Macs and Linuxes, which would create a much wimpier botnet. So take that, Apple snobs (and FYI, iOS has been hacked repeatedly so far).

Why can't we identify and shut down Conficker? Infected PCs show virtually no symptoms of infection, and are blocked from receiving any new updates, so it is a very clever parasite (and as I said, most of the infected PCs are not in the West). It just uses the processor selectively without slowing down your normal apps. But all the slave comps must answer to the mother comp for instructions, right? Why not just use that communication to locate the criminals and shut it down? Well, Conficker is elusive and doesn't just route all slave communications to one IP address. Then it would be easy to track, like a phone trace. But each day Conficker commandeers 250 IP domains, so it requires more effort to track down, and recent Conficker strains now use 2,500 domains and even 5 "high level" domains that are very secure. The hackers know that the poorly-funded cabal is the only group trying to stop them, so they just needed to make Conficker communications too costly to trace and block.

So where the hell is the gov't in all this? Isn't our security and economy at risk? Conficker seems a lot more of a concern than a couple of Taliban fighters with AKs. Obama just started a US Cyber Command within the NSA, a whole year after Conficker was discovered, but I surmise that they are grossly unprepared for the challenges ahead. Russia crashed Georgia's e-infrastructure with a worm/virus prior to its military invasion. McAfee pretty much implicated China in hacking some major US websites too, so the writing is on the wall. Hasn't anyone seen "Live Free or Die Hard?" We need McClane to rescue us.

The cabal approached the Pentagon and NSA to ask for help to fight Conficker, and maybe even sequester their computing resources. But they were summarily turned down, possibly over territorial or state secrets issues. I am sure that the NSA has a couple interns working on this (what else could be a higher priority for them, Mugabe's cell calls?), but clearly they are not winning (like Charlie Sheen). Here's another hilarious side-story. Remember how the US and Israel crashed Iran's computers controlling their uranium enrichment program? It set them back like a year. It's quite possible that our spooks hired the Conficker botnet to do that, or at least created our own similar worm inspired by Conficker.

Corporate and gov't cyber security is not up to task, but in this climate of austerity, it may be a hard sell to demand more investment in this area. No one cares to protect themselves until after the first disaster strikes (even though a few have already struck, but we just didn't care). I am sure the Ukrainian gang is a super-talented bunch of hackers, but they should be nothing compared to the resources that China or Facebook (no connection suggested) can devote to cyber-security, or cyber-warfare. Modern states already know that the best way to bring each other down (besides nukes) is to crash our e-infrastructure that we so depend on and take for granted. And even so, a cyber attack could disable our nukes and military. The internet was developed by idealistic engineers who wanted a free flow of information, so unfortunately it's structure is inherently vulnerable. We take the good with the bad, but ignoring the problem to this degree is just unacceptable. Fortunately, the likelihood of worms directly stealing our passwords and meager e-weath is still quite low. But what's the value of our little savings account if our national financial system gets wiped out?

The interesting tale of the Nets' move to Brooklyn, and what is says about the lockout

http://www.grantland.com/story/_/id/7021031/the-nets-nba-economics

Does Jay-Z have to look cool all the time, even with a tilted hardhat? What Ratner did will definitely be studied at Harvard Business School for years.

The silly owners-vs-players argument seems to be the same for NBA and NFL. The players' assets are their special sports talents. The owners' assets are the real estate and team name, under the protective umbrellas of the NBA/NFL monopolies. But say the Jerry Joneses and Mark Cubans of the world decided to retire and donate the franchises to charity. The players wouldn't be screwed. A new bunch of billionaires would build new arenas, pay the athletes probably higher salaries, and the only difference would be the New York Knights (TM) instead of the Brooklyn Nets (TM). Say Lebron and Brady decided to retire as well - their presence would be missed much more.

Profits (economic rent) should go to the scarcest, more demanded resources - in this case the players. People don't watch the games because of who owns the teams. The only reason the owners have such bargaining leverage is the anti-competitive nature of pro sports, so that other interested billionaires can't make better offers. Some thought it was ridiculous that NFL stars complained that they were treated like "slaves," but there are some undeniable similarities (and obviously some notable differences, like their still-enormous salaries, which should be bigger at market rates though). The AFL, USFL, and ABA tried to offer legit alternatives (in some cases paying players better and offering a more entertaining brand of sport), but the NFL/NBA used their legal-political-financial muscle to absorb or ruin them. Check out the ESPN "30 for 30" documentary on the USFL if you have time. They actually won an anti-trust case against the NFL, but they foolishly sought only $1 in symbolic damages, so the legal fees from that fight ruined them (and so did Donald Trump, seriously).

http://30for30.espn.com/film/small-potatoes-who-killed-the-usfl.html

So for the owners to piss and moan that they're going broke is a joke. If they don't like the business, then quit and start a hedge fund. There will be a line a block long to buy their franchise - since for a rich guy, it's such a rare feather to have in your cap, like a Picasso. It's not meant to make money (even though it does, plenty), it's a hobby to them. It's like the rich CEOs going to DC to beg for bailouts in their private jets and $10,000 suits.

"The rich have gone from being grateful for what they have to pushing for everything they can get. They have mastered the arts of whining and predation, without regard to logic or shame. In the end, this is the lesson of the NBA lockout. A man buys a basketball team as insurance on a real estate project, flips the franchise to a Russian billionaire when he wins the deal, and then — as both parties happily count their winnings — what lesson are we asked to draw? The players are greedy."

Emphasis was mine.

Confidence Men: the dysfunction and rivalries among Obama and his economic team

http://www.npr.org/2011/09/20/140594464/confidence-men-ron-suskind-on-white-house-woes

This recent book describes how Obama and his hand-picked economic team poorly managed the gov'ts role in the financial crisis, and in fact couldn't handle the group dynamics of their "team of rivals." Obama was a "brilliant amateur," who was dynamic enough to rise to the presidency, but grossly unprepared to handle the current burdens of the job. Wall Street alliances of course helped to fund Obama's campaign, but once the magnitude of the crisis came to light, Obama knew and articulated that the nation needed strong, Roosevelt-ian reforms to clean up the Street. But he subverted that goal by hiring Geithner and Summers, two individuals who were about as cozy to Wall St. as possible without being total insiders.

Larry Summers headed Obama's economic team, comprised of economists and officials with top credentials. Obama himself did not have much background in economic theory and policy, and often deferred to Summers in meetings - a man who by most accounts is a total a-hole and has to run the show, which further undermined the president. Obama's stubborn desire to achieve team consensus often delayed or hampered effective decision making. Summers was alleged to compare Obama's team to "Home Alone" with no adult in charge, also claiming that "Clinton would have never made these mistakes." Typical Summers to contribute to Obama's struggles and then criticize him for it.

Obama's hiring of Rahm Emmanuel as chief of staff was a mistake; Emmanuel was a temperamental strategist, not an effective manager. He often forgot to invite key people to meetings, especially the women in Obama's cabinet (deliberately or not). Obama recruited some of the most talented women in the country, yet many of them felt unengaged, disrespected, and resigned in disgust. During some meetings, the "boys" would band together and Obama would mostly listen to them and forget to consult with the women.

Treasury Sec. Tim Geithner felt that Obama was economically naive and also believed that America didn't need a major financial overhaul, so therefore Geithner had to protect the system from the president. Obama made it clear very early that the "TBTF" big banks should be broken up. But instead, Geithner "dragged his feet" on that order to say the least (they only got bigger under his watch), and some would say committed insubordination by instead giving aid to those banks. Clearly this was a herculean task even if Geither was 100% in agreement with Obama, and this was a rare chance to clean up the Street but instead nothing was done. Obama was very displeased with this, but stuck with Geithner so as to not cause additional controversy and economic anxiety. So to avoid the drama, he kept a disloyal, anti-reform guy in a key regulatory role. Maybe that pretty much sums up the squandered potential of the Obama presidency.

----------

I've seen this story making the rounds.  I basically don't buy it, for two reasons.

First, I don't think the explanation is sufficient.  They're making the argument that Obama wanted to be more progressive in his response and harsher on the banks, but that he was prevented from doing this by the intransigence of his economic team.  However, (A) he picked that economic team, knowing full well their support for the banks.  If your goal is to crack down on the banks, you don't put a pair of guys with a decade-long history of supporting banks at the head of the table.  (B) The pattern of pro-bank behavior is too consistent, and it's positive support as well as negative support.  That is, the White House support for banks wasn't just "not breaking them up" (support by lack of action), it was also actively propping them up (taking positive action) with TARP and TALF and HAMP and Fed discount window and blah blah blah.  An intransigent Treasury Secretary might be able to block breaking up the banks, assuming a sufficient level of incompetence from Obama in overseeing that (does he not periodically ask "hey, how's progress on that break-up?").  But the rest of the positive actions that the WH has taken in support of the banks?  And this continues up to the present: just a few weeks ago the WH was leaning on the NY AG to stop doing real investigations into banking misconduct.  A couple rogue advisors don't create this consistent pattern of behavior.

Second, I think the timing is too felicitous.  In 2007 and 2008 when Obama was campaigning, he said all the right things as a progressive.  Once he got into office, he dropped all of that and took a much more conservative tack than he'd suggested in the campaign.  Now we're getting back into election mode, and Obama is back to playing progressive.  We've got a new jobs bill that says all the right things, but which we all know has zero chance of getting passed.  And now there's a book out which does a nice little whitewash on all of the pro-bank policy Obama did and continues to push, claiming that he wanted to be progressive, he was sabotaged, but *now*, now he's going to really be able to be progressive.  Right.

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I see what you mean and I share in the suspicion. But it seems a very bizarre tactic for Obama and his supporters to downplay his pro-banks behavior with an explanation of incompetence/leadership vacuum. They try to remind America that he was a true progressive after all as we approach campaign season, but Suskind's narrative also reminds us that Obama is a bad manager and not very presidential at times. Would that make anyone more likely to vote for him? People like Summers have vehemently denied ever uttering anything anti-Obama while serving under him (though that is to be expected). If this is a PR ploy, it's either genius or wacko, but definitely risky.

While the banks helped Obama get to the White House, it's not uncommon for presidents to turn their back on some supporters once they take the reins of power (or at least not fully live up to the supporters' expectations). Though looking back, I don't think Wall St. has much to complain about Obama, except for maybe a few provisions in Dodd-Frank that eliminate some bank fees (the rest of the act can easily be circumvented by big institutions, and banks are already devising new schemes to replace the lost revenue from the outlawed fees). Obama took Wall St. money in 2007-2008 for sure, but I find it reasonable that in 2009 he wanted to enact financial reform as part of his overall vision for improving the country and responding to voter sentiment. He just had no idea how to implement it, and turned to the wrong people for help.

Obama's naivete came through in his hiring of Summers and Geithner. He's not an economist, so he wanted to defer to "experienced guys". I am sure Summers and Geithner said all the right things while they were being vetted, and maybe Obama ignored their track records, or didn't know enough (and certainly didn't ask the tough questions), or felt confident that his great leadership skills would keep those guys in line with his agenda. I'm not trying to excuse his mistake, but just proposing a possible explanation. Everything about Obama's first quarter was rush, rush, rush to respond to the fin. crisis. And with the GOP being a-holes and trying to block many of his nominations, maybe Obama just wanted to make "safe" choices for his econ. team, which would also hopefully reassure Wall St. and calm Main St. If he hired true crusaders for those posts, it would have been mutiny. Obama wanted to be a different type of leader who achieves change through consensus and cooperation, but set himself and the nation up for disappointment. I don't think he was pulling a fast-one on us; it was just a combination of conditions, inexperience, and poor planning.

And once Summers and Geithner revealed their true selves in DC, it was too late for Obama. Dismissing or marginalizing them (if even possible) would send a bad message. A real leader would have found a way to do something though, rather than keep tolerating Geithner thumbing his nose at Obama's plans. Or maybe Obama was just too gullible and loyal with Geithner - who maybe kept telling him, "I'm working on it but it's really hard to get the ball rolling - it's the GOP, man!" And Obama isn't one to step on toes and micromanage (especially on stuff he doesn't understand), so maybe he just left it on the back burner while he focused on health care and Afghanistan?

Overall, I don't think the book can persuade people one way or another on Obama's progressive bona fides. Conservatives already think he's a socialist, and fed up progressives think he's a phony and a sellout. Even if he is committed to his campaign agenda, is he competent enough to make it happen? Sadly, Obama tells Suskind in the book that after his staff shake-up after the horrible midterms, he now has the team in place to be the president the nation expects, and he's starting to hit his stride with the job. Well it's a bit late for that. Suskind does seem to paint Obama as a victim, but a lot of it was of his own making (despite the best of intentions), so I don't have much sympathy. But you have to agree that so many factors were aligned against him that even if he made flawless decisions, a lot was out of his control. It's possible that not much would be different today.

Honeybees and colony collapse disorder: much of our food at risk

http://www.pbs.org/wnet/nature/episodes/silence-of-the-bees/introduction/38/
http://en.wikipedia.org/wiki/Colony_collapse_disorder
http://www.ars.usda.gov/News/docs.htm?docid=15572

Maybe you guys have been following this colony collapse disorder (CCD) crisis. But since 2006, as much as 90% of honeybee hives in US communities have suddenly died in a matter of months (this has been observed in EU nations too). Bees are some of the most evolved, beautiful, and efficient creatures in natural history, and the species is 100M years old (humans have been using them for honey for 6K years). Their mass deaths are likely attributed to human actions. Analysis of dead bees reveals symptoms similar to human AIDS - their immune systems were compromised, which hampers digestion, cognition, and makes it easier for fungi, mites, or other pathogens to attack them. Also, forager bees (that usually have excellent navigation and communication) fly out in search of food, but then don't communicate normally and don't find their way back, so the hive starves.

Weakly-supported culprits include wireless radiation, pesticides, global warming/pollution, and GM crops with anti-pest properties. Concentrated pesticides and pollution can definitely kill bees, but CCD also occurs in areas without high incidences of these phenomena. It's most likely a confluence of several of these factors, and maybe others that we haven't identified yet. The presence of a virus in CCD-affected bees seems to be the most prevalent stressor, but the virus alone can't account for all the deaths. Some research is now directed towards cross-breeding virus-resistant African bees with domestic honeybees, but that is no guarantee of eliminating CCD (and new GM species carry their own concerns). 

Bees pollinate over 100 key flowering crops (including some plants that our livestock eats), contribute to 30% of our food supply (pretty much all ag. products besides staple grains that self-fertilize), and their low-cost services are worth at least $15B in economic output to the US. 3/4 of all current plant species depend on animal pollinators to reproduce. There is no insect substitute but the less effective and more fragile butterfly, and as far as I know only one province in China is trying out another species. They use human workers to spread pollen in their lucrative pear orchards, after industrial pollution wiped out local bees. Already in the US, habitat loss from urbanization and air pollution have wiped out most indigenous bees prior to this CCD crisis. Now there is a need for commercial beekeepers to truck mobile domesticated hives around the nation to pollinate various crops when in season (if local bears don't get to the honey-rich hives first). But among that population, about 1/3 of them (or 800K hives) have collapsed. Now we depend on costly Australian bee imports to make up the shortfall.

CCD should be a reminder of how fragile our civilization actually is without the help of very simple organisms that we take for granted. But their destruction will almost certainly lead to ours (or at least a more monotonous, unhealthy diet), so it behooves us to be much more aware and careful. Is it worth it to risk this much just to squeeze out some bucks of profit from another megawatt, strip mall, or bushel of corn? It's easy for industrialists to keep up their damaging practices while they hide behind the excuse of "where's the proof?", and nothing will change without new laws or massive public uproar.

Scientists think we're almost "lucky" to observe CCD, because it serves as a reminder and indicator of environmental stress likely due to human actions. Who knows about all the other harmful, toxic processes and problems that go unnoticed? Companies should be required to strongly demonstrate safety before being permitted to sell new products, like we do with drugs and foods. The absence of evidence of harm doesn't necessarily prove safety. And environmental impact assessments are clearly lacking if we approve so many projects that still end up causing damage down the road. But I forgot, regulations kill jobs. Well irresponsible companies kill living things, including people. What do we prefer?

The US transconti​nental railroads: not exactly a poster child for capitalism​, or are they?

http://www.kqed.org/a/forum/R201109061000




Richard White, a Stanford professor, recently published a book on the history of US railroads and the tycoons who ran them. Contrary to the popular mythology about the "heroic" and "self-made" champions of industry like Huntington and Stanford, it turns out that those men and the companies they ran only made it into the history books due to massive corruption, abuse of gov't resources, and human/environmental damage. And we have the general notion from econ 101 that firms make money by providing demanded goods/services to consumers in a cost-effective way. But for the railroads, every sort of business and market perversion you could think of (prior to the derivatives era) was attributed to them. Though we still have this strange adoration of the railroads as a romance and celebration of America, Old West freedom, and industrial capitalism.



Yes it was impressive that we could lay track from the Mississippi River to the Pacific in just a few years, and made amazing technological advances during the process, but it turned out to be a net loss for the country. Despite our misconceptions, many railroads went bankrupt or needed gov't "bailouts" to survive. And it was hardly free-market: transcontinentals were just not needed in the late 1800's (the demand for long-haul freight and personal transport just wasn't there to justify the huge costs), and even after the railroads were built, it was still cheaper and quicker to use SHIPS to get from SF to NYC, around South America and all. So what was the point of building them? Railroads were not reliable (especially during the winter months), so merchants still favored ships. Like any great capitalists, the railroads didn't respond to this deficiency with improved performance, but engaged in anti-competitive practice instead. They bought up most of the excess capacity on freight ships, creating scaricty and bringing ship rates closer to railroad rates. They negotiated with ship lines to get them to slow down their vessels too. Why try to outdo your competitors when you can just pay them to come down to your level instead?



The most respected railroad men avoided transcont. projects like the plague, and what was left were speculators, washed-up entrepreneurs looking for another chance, and crooks (sound like other modern industries we know?). What was significant about this period was the advent of corporate lobbying. The US railroads were pretty much the first manifestation of the modern American corporation. They pushed for Washington to create the conditions necessary for their flawed businesses to survive, similar to a Maoist or Soviet failed central-planning project. They were justified as a necessary "public good", even though the public had virtually no need for their services at the time. But when something is a public good, we may irrationally spend to keep them going even if they aren't doing any good for us. And of course stakeholders needed to justify their decisions and get public buy-in with propaganda and marketing, hence the Manifest Destiny, pride, and nationalism angles. There's nothing that US industry can't do, we're settling the savage lands with good old US hard work, go west for adventure and riches young man, yadda yadda. Sadly, there was more public outcry against the greedy, inept railroad corporations back then vs. the current greedy, inept firms today. The author speculates that this is due to enhanced marketing and penetration of US corporations today (corps play a much bigger role in US life today), so we are less likely to condemn something that we are associated with.



DC gave the railroads (RRs) huge guaranteed loans and literally millions of acres of free land (that they still own today and don't pay taxes on), even on terribly risky projects with no evidence of future profitability. RRs sold junk bonds to eastern investors by hiding much unflattering financials from traders (in fact, the big 3 US ratings agencies were started to rate RR bonds). And still the incompetent RRs needed several public bailouts to break even (even though the tycoons and big investors made out quite well off the US dime). And worse, the RR bankruptcy terms were so lax that the same doofus execs were allowed to retain control of the firms (not like Obama forcing GM to change their leadership team in exchange for bailouts, just when their execs were getting effective). Their debts were written off, so now these failed firms had a huge financial advantage over the viable, honest RRs (also sound familiar?), and drove some of them out of business. Talk about dysfunctional markets: the weak kill off the strong? Like the fruit companies in Latin America, the RRs asked the gov't to step in to violently break up labor strikes, clear out local Indians, and such. As many people died working on the RRs each year as the Civil War battle of Shiloh, often without investigation, punishment to firms, and compensation to victims (especially if they were Chinese).



So now that these joke of RRs were built, what to do with them? The firms had to get people to use them to gain revenue, so there was a big push to encourage settlement (although net population transfer was eastbound in the early RR years), buffalo hunting, cattle ranching, and mining in the West. There was no real demand for increased cattle ranching, silver, and buffalo, but the demand was manufactured with major gov't incentives, often with terrible environmental consequences (overgrazing, buffalo near extinction, mining pollution). And all the booms associated with those economies of course ended in bust and disaster for many Americans too.



If we learned our lessons from the RRs, the current dot-bomb and housing crashes might have been avoided. It's ironic that the most ardent libertarian proponents of the free market are the ones who most strongly advocate for our most uncompetitive industries. It's not the free market principles that they love, it's just taking advantage of whatever system is in place (loopholes and all) to come out ahead, no matter the cost to others. Obama and others talk about the need to invest in the future so we don't fall behind. But the problem is investments are based on predictions and many of those made by gov'ts turn out to be wrong. Look at the CA high-speed rail project - another total boondoggle where the true demand just doesn't justify the huge costs. Considering all the areas where CA needs more cash, it is a huge opportunity cost to sink billions into another rail gamble. But this is the price you pay when ideology trumps economics.



We wanted to settle the west and make tons of money, so we thought building RRs would get us there. But it was ahead of its time and caused a whole bunch of other problems. If you believe in the free market, let the market demand tell you when it's time to build RRs. If they are so desirable and well-planned, then they will easily get their own funding and won't need gov't loans and bailouts. The author contrasts the Dakotas. South Dakota's RR network was built bailout-free, and turned out to be much more high-performing than the nearby gov't-supported RR in North Dakota. In Europe and Japan, RR firms had to raise their own private capital before breaking ground, so their networks were a lot leaner, better, and weren't subject to the moral hazard associated with US firms wasting other people's money without accountability. Or if the RRs are truly a public good, nationalize them with a set of transparent laws and public input governing their operation. Of course there is the opposite extreme with China, where the gov't invested billions into another un-needed high-speed network, just to create jobs and grease the palms of various bureaucrats. But projects were rushed, safety standards and training ignored, and many of their trains run with mostly empty seats.

Looking back on 9/11 and the "terror industrial complex" it spawned

Maybe you all are like me, already sick of the emotionally-manipulative 9/11 remembrance content all over the mainstream media. Instead of more footage of twisted rubble, crying women, and the stars-and-stripes, how about something that's actually thought-provoking:

http://www.npr.org/2011/09/06/140056904/the-top-secret-america-created-after-9-11

Some of this we already know, but the Pulitzer-winning author Diana Priest has documented many ways that the secrecy-antiterrorism industry has exploded since 9/11... to a point that it is literally "out of control" as evaluated by security experts. No one knows how much we are spending, what we are doing, and who we are employing. The gov't was so unprepared for this growth that they needed to hire contractors to be able to run background checks on all the new contractors they were hiring. It's incredible: now 800,000 Americans, or 1 in 375 of us, hold top-secret clearances (many of them have not taken loyalty oaths to defend the US, and instead serve the profit motive). For all the GOP complaints about the size of gov't and its inability to sustainably create jobs - I guess they meant all other industries but this one.

And security contractors are paid much more than similar "public servants", so the CIA saw a brain drain where junior analysts would accrue the necessary year or so to acquire the basic skills sought by the security firms. They would then leave the CIA, get hired by Blackwater types, and do the exact same job for 3X pay, with the gov't and ultimately taxpayers on the hook to cover the higher expense.

If we thought CIA was covert, they are getting one-upped by JSOC (Joint Spec Ops Cmd, that used to do hostage rescue but now is the gov'ts elite hit squad that nailed Bin Laden and others). JSOC has all the power and resources of the CIA (if not more), yet isn't bound by law to report its activities to Congress or others. Obama has given them the green light to step up their activities, and to their credit they have killed/captured many more "terrorists" than the CIA. But it is scary that some secret org can decide to put a name on a kill list, and then just go out and do it without asking anyone for permission (yet are funded by us). They represent us but don't answer to us, so we get the blowback if they mess up (like errant drone strikes in Pakistan whipping up anti-Americanism).

Let's also remember all this stuff on the anniversary of 9/11, including the tens of thousands of non-Americans who have died as the result of our wars.

Worker disengagment and poor management are very costly

Here's another doozy about workplace dysfunction from the NYT:




http://www.nytimes.com/2011/09/04/opinion/sunday/do-happier-people-work-harder.html?_r=1



"Since January 2008, ...Americans now feel worse about their jobs — and work environments — than ever before. People of all ages, and across income levels, are unhappy with their supervisors, apathetic about their organizations and detached from what they do. And there’s no reason to think things will soon improve... Gallup estimates the cost of America’s disengagement crisis at a staggering $300 billion in lost productivity annually."



Wow, that is bigger than the GDPs of most nations.



I don't get why firms seem to just accept this. This is big money. Even if the "touchy-feely" worker motivation stuff is probably beneath most execs, the middle and lower managers just don't ask the necessary questions (or are too busy to pay attention), and no one is holding them accountable if they don't. No one likes the "adult babysitting" part of management, but if you want productivity, loyalty, and high-functioning groups, this is probably the most direct and effective route. Corny rah-rah speeches at all-hands meetings (that usually do not resemble reality) and sending out cliched worker satisfaction surveys (yet not acting on the findings) only hurts morale further. Are leaders smoking something, imagining that their departments are perfect utopias where workers always come pumped up to give their best (because of their brilliant leadership, of course)? And obviously it's about more than compensation.



Some managers are awesome, but others seem generally clueless when it comes to knowing their workers. They make threats, falsely promise or delay rewards, and set unrealistic goals, and as they watch their people scramble to meet them, they think it's validation of their good leadership. Wow, look at them go for me, and I didn't even need to bribe them! Some managers think (or make it appear) that their groups are high performing despite heavier burdens on them, but they never ponder if that is the best way. And I don't mean, "Can I squeeze even more out of them?" It's a tough climate for job-seekers now, but that shouldn't be a green light for managers to abuse captive employees and impose unreasonable expectations. "It's dog-eat-dog out there and we have to get tough to survive." Well a lot of sick, immoral stuff has been justified that way over the centuries.



I think especially in the tech fields, emotional IQ is so lacking and there isn't a serious effort at manager training/improvement monitoring. Sure it's a two-way street and workers share some blame for not speaking up and proposing solutions, but due to asymmetric communication and reputation implications, this can be nearly impossible to pull off. Basically, bad managers and management systems aren't getting fixed because (a) workplace culture from the top down doesn't take employee satisfaction seriously, (b) the higher bosses don't collect the right data to evaluate management skills and incentivize improvement, and (c) it is too risky or difficult for workers to inform the proper parties on their managers' shortcomings. Blind leading the blind kind of stuff.



Management seems to prefer to reorganize, rotate VPs, and alter budgets (to make it look like they've got a plan), instead of getting to the roots of employee dissatisfaction - which seem to be plainly obvious and intuitive, so it's not like a Herculean feat. They just aren't willing to give what the workers need. Or maybe some managers are more concerned with their own career advancement, politics, and other BS, so they want to hoard credit/attention and don't allow their workers a chance to take on more responsibilities, feel more engaged, and get noticed, all of which strongly correlates with job satisfaction and productivity (workplace creativity, a critical part of business success, is highly correlated with positive mood as well). Maybe it's some subconscious, antisocial behavior where managers can't help but keep their people down to satisfy their insecurities, like frat hazing or abusive parenting.



Maybe firms like Google (with plenty of super-smart but bad managers I'm sure) are trying to get on the right track. Use data-driven methods to improve management and worker engagement. Try to close the gap between a manager's false assumptions and what workers truly feel (and what is actually happening on the ground).



http://www.nytimes.com/2011/03/13/business/13hire.html

Solyndra bankruptcy

http://www.forbes.com/sites/toddwoody/2011/08/31/what-solyndras-bankruptcy-means-for-silicon-valley-solar-startups/


http://www.kqed.org/a/forum/R201109020900



This is a terrible sign for US cleantech and manufacturing just as US jobs reports are quite bleak. Solyndra was the poster-child of green start-ups. They got over $1B in private VC funding, $535M of guaranteed loans from the DOE as part of the Stimulus Plan (the first private firm to get a DOE loan), and even a visit from President Obama as part of his campaign to push for a cleantech-fueled economic recovery. Obviously the GOP are jumping all over this, citing this example as proof that Obama is clueless about economics and jobs: http://www.sfgate.com/cgi-bin/blogs/nov05election/detail?entry_id=96638.



Solyndra was so confident about its business prospects that it rapidly grew to 1,100 workers and set up a huge $700M plant in Fremont (yes, expensive-as-hell Fremont) to manufacture thin-film cylindrical PV panels. The writing was on the wall, but it was still a big shock that the firm declared Ch. 11 recently and laid off its entire workforce. So why did it happen? Is solar just a flop? Well, Solyndra's competitive advantage was using cheaper but less efficient thin-film technology at a time when silicon PV panels (the industry standard) were fairly expensive and China's solar sector was tiny and unproven. But since the 2008 downturn, China launched huge in capital investment projects, including building up a solar manufacturing industry from stractch that quickly became the largest in the world. The global price of silicon plummetted (demand declined due to the recession and supply increased due to development in China), wiping out Solyndra's advantage. The 70% price drop is great for global clean energy, but not for US manufacturers.



http://www.greentechmedia.com/articles/read/contract-silicon-prices-fall-50-close-to-spot-price/



So China was already subsidizing its solar manufacturing sector (basically free land, credit, and labor) to undercut the market, and now it's priciest input just got cheaper. So Solyndra was pretty much screwed, even if it had the best technology (2 other Bay Area solar firms also recently folded). But maybe we should learn from this example that cleantech firms shouldn't try to win through cost leadership. China will own us there every time. Our businesses have to utilize sophisticated technologies, innovative product development, and strategies so that China can't easily copy and undercut us (think Apple). Sure let's outsource the cheap, easy stuff like manufacturing and logistics, but we can't beat China on their terms - especially when their gov't isn't paralyzed with debt and partisanship, and they are 100% behind rapid high-tech and economic growth.



So what do we do now? The libertarians say this validates their views that gov't shouldn't be in the VC business. Maybe Obama's people were so awestruck by "the green panacea," that they didn't perform due diligence on Solyndra's prospects in a recession and vs. Chinese competition. But plenty of savvy private sector investors (such as Richard Branson and the Waltons) also threw money at Solyndra and got hosed (and that was during a time when VC money was pretty tight, before the exuberance over Facebook and such). Some big-gov't folks would say to not change course because Washington funded the interstate highway program, Internet, and GPS, and all those radically changed history and exponentially increased economic growth. True, but how about all the projects Uncle Sam funded that were utter failures, that we don't know about? Like usual, I guess the prudent course is some sort of middle ground. Gov't involvement but vetted as well as possible to avoid pork and boondoggles. The problem is, China is bankrolling ventures big time, and they can afford to have a 5% success rate and still gain market share on us. We can't afford to be wrong as much, especially with so much political resistance to cleantech and gov't spending now.



Another challenge is the industry itself. Highways and the early Internet are fairly straightforward concepts to develop, just plan and do it. But no one knows which horse to pick in cleantech. I suppose it would be wisest to diversify and place many small bets, but then no single industry will get to economies of scale quickly. Imagine if the gov't had to pick a search engine to back in the dot-com days. So now we have geothermal, wind, solar, biofuels, and fuel cells, with several variants of each. The gov't doesn't have the expertise and resources to properly evaluate all these options. The private sector doesn't have all the answers either. For example, one of the big Mojave Desert solar farms just decided to retool its entire setup from mirrors (focusing solar energy to heat water and spin a turbine) to conventional Si PV panels, since the global price dropped. Conditions are changing so fast that firms need the flexibility and investor patience to be able to adapt, if possible. But with Washington dithering and private credit still tight, we are only falling further and further behind. Good times.

GOP hypocrisy over Bush vs. payroll tax cuts

http://news.yahoo.com/gop-may-ok-tax-increase-obama-hopes-block-124016578.html




Un-freaking-believable GOP hypocrisy over taxes and debt. Bush tax cuts (over 90% of them benefit the wealthy) set to expire - hold the nation hostage until they're extended, even if it drastically increases the national debt. Payroll tax holiday set to expire (that mostly helps the working poor and middle class, and has a smaller impact on the debt since its tied to future Social Security benefits), no way Jose. But of course this in no way means that the GOP is complicit in a tax increase (they signed the Grover Norquist pledge and all), yet that is precisely what they called the potential expiration of the Bush tax cuts. I think the problem is I'm not a multi-millionaire, otherwise this all would make perfect, consistent sense.



All we hear about from DC is "jobs, jobs, jobs," but nothing's happening. To be honest, neither the Bush nor payroll tax breaks can spur much job growth, but at least lower payroll tax on workers will give them more purchasing power at a time when consumer demand and our overall economy are wobbly. And their consumption will help preserve other jobs. Many companies are sitting on piles of cash but refusing to hire, and the long-term unemployed in America don't generally fit the profile that employers are seeking. It's always supply-side thinking with the GOP: cut business taxes and you magically get more jobs and prosperity. But firms have no obligation to use the tax rebates on hiring (unless Washington crafts the law as such, which they can do but won't), and frankly it may not be the wisest use of the money at this time for many firms. Remember that Paulson convinced Congress to give the big banks a huge cash infusion (the now famous 1-page bill with no strings attached) to spur consumer lending, but after that credit actually got tighter and the banks tended to use the money to snatch up other distressed banks at fire-sale prices. So if jobs are the ultimate goal of all this tax cut talk (and not simply profit-taking), they're going at it all wrong.



Observing the trends in 2011, I can't come up with a plausible explanation other than the Republicans are committed to blocking gov't progress and economic growth (for the bottom 95% of us), and any attempts by the president to encourage them, in order to make him look inept as the election approaches. And of course they'll blame him for the economic woes that they mostly created. Surely Obama is not helping his cause much, but from my perspective only one political party has shown that it is willing to sabotage this country (and the entire global economy by extension) simply to win some offices. I think we have a place for dangerous threats like that: Gitmo. The Tea Party freshmen are hurting this country more than Osama's driver ever did or could.



--------



And if you have time, try to check out "Inside Job" and "The Conspirator" recently out on DVD/on-demand. The former is an Oscar-winning documentary about the financial crisis. Most of the material is known to us by now, but the director also explores a different angle: how some top academic economists (funded by big banks and industry groups) promoted over-confidence in de-regulation and risky investment vehicles with their biased publications and lectures. This helped gov't to turn a blind eye, ratings agencies to inflate their scores, and investors to over-spend on risky securities. And the film also captures the Columbia Business School dean and other ex-Bushies looking really silly.



The latter is a Redford film about the outrageously inappropriate trial of Mary Surratt, an indirect acquaintance of J W Booth who was accused and eventually hung for conspiring to kill Lincoln. While not well received by the critics, it's an interesting examination of a dark chapter of US history that we don't learn about in school. Her trial demonstrated how war hysteria and political pressures will make even the highest offices in the land more than willing to trample on the Constitution and our most sacred values. A horrible crime was committed, and in order to "heal, move on, and maintain order and security", the guilty must be swiftly "brought to justice" (as in, whacked). And if no one fits the legal definition of guilty, then we'll manufacture someone and change the definition. Those who protest will have their reputations destroyed and patriotism questioned. This is especially pertinent as we're approaching the 10th anniversary of 9/11.

Jerks make more money, nice guys finish last?

http://www.huffingtonpost.com/2011/08/16/nice-women-finish-last-work_n_928207.html


http://www.kqed.org/a/forum/R201108190900



Most of us implicitly feel or observe this, but a team of business professors recent published a paper showing data that being more disagreeable at work is correlated with higher pay (especially for males, supposedly in order to fit the dominant, aggressive gender role), when controlling for industry, worker age, timing, and job level. "Agreeable" people are characterized by 6 facets: trust, compliance, altruism, straightforwardness, modesty, tender-mindedness, so I guess disagreeble would be opposite. A person 1 SD more disagreeable than the mean of their data set made on average $10K/18% more than a person 1 SD more agreeable than the mean. I believe the data was collected by self and peer reported surveys, so they're not fully objective and quantitative.



But this type of disagreeable personality is also correlated with less success in relationships, more stress, and generally less life satisfaction. And as you would expect, the "jerks" are less likely to manage others and receive promotions they are qualified for; they only seem good at negotiating raises. They are also fired more often, but find new jobs quicker. We know that women and minorities unfairly trail white men in terms of compensation, and the "advantage" for being disagreeable is diminished for them (probably due to backlash over the stereotypes of being a bitch or an uppity minority).



But this is a paradox. Jerks only succeed if they can differentiate themselves from and take advantage of nicer, more submissive coworkers. A company entirely staffed by jerks would likely fail. And if a nice guy reads this study and wants to get meaner in order to make more money, the rapid temperament change would probably be met with negative reactions. That person would lose the capital he has accumulated from being nice, and his "forced jerkiness" would probably be interpreted as phony or weak by his true jerk peers. And of course there are many other ways to try to get recognized and make more money at work besides being meaner. Though there's no guarantee that any of these measures will bear fruit; it depends on your org, bosses, economy, etc.



One hybrid solution is to be a jerk at work and nice in your personal life, but most of us know that it's hard to wear multiple hats and keep separate personalities totally separate. Plus salary is not the only measure of a person's worth and life satisfaction. We would probably agree that the most talented actors and artists are not the highest paid, and being a jerk and "winning" all the time isn't the last word for life (and clearly it costs you in other areas). Or if that is all you need to be happy, you probably have bigger problems.



Of course this stuff is just the tip of the iceberg and it's an age-old labor issue, or human social issue in general. We know that the workplace is generally a harsh, soul-crushing hell, and getting more so with time and economic pressures. We have to get mean at times to avoid being a doormat. Maybe it's all about picking our spots, and fighting when it will pay off most.

Shooting down the GOP argument against taxes

Very good discussion about the recent stock market volatility and tax reform (even the listeners calling in are pretty sharp, except the last one):




http://www.kqed.org/a/forum/R201108050900



The economists on the program (not liberal wackos) pretty much obliterate the GOP argument against any new revenue generation as part of a bigger plan to reduce national debt and put us on a better economic trajectory. The "educated people's" general strategy for economic recovery is like the opposite of the Tea Party's: increase short-term gov't spending (for infrastructure and other helpful investments), increase exports, and reform taxes (which will pay for that spending and also cut into our debt). And of course Warren Buffet, the poster child of all the positives of our free market, thinks taxes on high earners are too low as well. Taxing the incomes of the rich may discourage hard work and innovation to some extent (but not like the USSR), though there's little evidence that it's a net loss for society, especially considering all the good we could do with the extra revenue (even in the hands of inefficient Uncle Sam). It's true that the rich currently pay a disproportionate % of total income taxes, but that's how it's supposed to be. They also hold a disproportionate % of total national wealth, and that % is growing a lot faster than their tax outlays.



I don't know what is the deal with the GOP and taxes. They pay their country club fees, their PTA dues, and AMEX black memberships, don't they? We have to pay for the services and benefits we enjoy, right? Even if their vision of small gov't materializes, some private (profit seeking) firms will have to step in to meet the social demand for safety, conveniences, etc. If the rich aren't paying gov't for that stuff, then they'll have to pay Acme Corp. that may not have the customer's best interests at heart. Based on the track record, I would mostly prefer public service providers. The USDA and NPS have screwed over far fewer Americans over the years than Enron and Countrywide. We can't expect to live in a first world nation funded at third world levels.



Apart from raising some income taxes, ending some tax deductions is crucial. The mortgage interest deduction is the biggest culprit. I regret that I use it, but I wouldn't mind to see it disappear in a package of smart reforms. The interest deduction (and most itemized deductions in fact) just benefits select industries, political interests, and the rich at the expense of other national needs. The wealthy can hire accountants to best exploit the tax laws, and the more they spend, the more they get back (which encourages frivolous over-consumption and bubble creation). Many lower earning, less educated Americans are ignorant on some ways they could reduce their tax burden, and have trouble navigating our ridiculously complex tax code.



Does it make sense that the federal limit on full interest deduction for a married-filing-jointly couple is a mortgage of $1M? That's nuts, especially when the US median home price in 2010 was $185K. And you can even deduct on a second home that isn't heavily rented out. Those folks don't need a tax break. In general, affordable home ownership is good for our society, but of course it's not for everyone's budget. I could accept a meager interest deduction scaled vs. one's adjusted gross income and local median home price, but no way for entire jumbo loans, withdrawing equity to play the market, and any high earner. The rich are the last people who need rewards for purchasing stuff. Otherwise it incentivizes over-leveraging and buying too much real estate for one's budget. If the rich want a sweet crib, then why not pay more cash down rather than getting a reward for borrowing a huge sum? And now interest rates are very low (if your FICO score grants you access to credit), so it's not like interest is killing the average fixed-rate homeowner (assuming old mortgages can re-fi). The mortgage interest deduction is costing the US (that means you and I) about $90B/year. That's pretty much the size of spending cuts over 10 years that Obama-Boehner agreed to last week. Sure the real estate and banking industries would take a hit from this change, and maybe home prices would dip, but all that extra revenue could keep more people working/spending, and investments in infrastructure will yield future returns for everyone. It's better than a hand-out to upper-middle-class and rich homeowners.



http://www.irs.gov/publications/p936/ar02.html

http://www.washingtonpost.com/wp-dyn/content/article/2011/01/21/AR2011012102256.html



Unfortunately a lot of schedule A deductions follow this pattern: a net loss for America. This is also somewhat true for educational incentives. America just doesn't get the most bang for buck by helping people attend college, sorry Dems. It's something people are going to do anyway, so why encourage it? And for those who aren't ready for college but get suckered in by shady Univ. Phoenix recruiters, they are going to drop out saddled with tuition debt, which hurts everyone but Phoenix. I know education is an investment and cultural priority, but probably our K-12 system needs the help more. Yes colleges are getting pricier and more competitive, but why credit families making more than $100K/year? If they care about their kids' futures, they will save money for school instead of taking another trip to Maui. As you can see, the poor aren't the only ones depending on "gov't handouts". I fully believe that the qualified poor should get education assistance to help climb the ladder, but deductions for the middle class are not the best use of funds (though mortgage interest is still way worse than this).



And maybe we as a country are just consuming too much, and should save better to take pressure off some gov't services. China's economy is growing like gangbusters, yet the gov't:consumer spending ratio is much higher than ours. This won't last forever, and of course China is an exports economy, but it just shows that it's possible. Taxes always lower total economic efficiency ("deadweight loss"), but some revenues are necessary so we can have a civilization. And some taxes hurt more than others. We should be taxing consumption, not production. Many economists feel that the value-added tax is the best way to go. It's not that different, and theoretically generates the same revenue as sales tax, but creates less distortion in incentives. Firms only pay tax on the gross margin or "added value" of their output (sales minus costs of production) and get tax breaks on exports, while the end-user pays VAT on the purchase price of the goods/services. So the system doesn't unfairly punish producers, and encourages consumers to buy more responsibly. It is not perfect, and there are some regressive elements to it, but maybe the poor (who still need to buy some stuff) could be compensated by lower income taxes and subsidies on essentials.



http://en.wikipedia.org/wiki/Value_added_tax



But the problem is, all these tax arguments can make perfect logical and economic sense (and be fully constitutional), but if they conflict with the conservative ideology of the role of taxes in our culture, then they are political non-starters. Obama has mentioned tax reform in his speech today and during his 2011 SOU address, but we probably won't do anything about it. It's like racism, seriously. You can date the nicest, cutest, smartest, most honorable black man in the world, but your parents still won't approve when you bring him home. Heck a racist could be trapped in a burning building, and refuse to be saved by a black firefighter. That's what the GOP is like, totally irrational. It just doesn't make sense to unconditionally reject something that can be good (or at least necessary) for our survival.

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Sorry, just had to add this:




Check out these idiotic news headlines (attachment). The press is suggesting (maybe inadvertently) that Monday's terrible stock losses are totally due to the S&P downgrade. This is ridiculous for several reasons, but I'm sure the deficit-hawks in the GOP will jump all over this crap and twist its meaning. First, if US debt is somehow less safe now, then why has the yield dropped again as investors are dumping stocks in favor of US bonds (and gold)? That shows the people with the money don't care about what S&P did. Second, Moody's and Fitch didn't agree with S&P's rating (and neither did Warren Buffet), so it's possible that S&P are flat wrong. Third, no credible entity should care how the ratings agencies score them anyway (who the hell cares if we are AAA or AA+, especially when those ratings aren't quantitative and both are still very good?). Ratings are less and less important as pension funds and other big investors rely on their own research. Lastly, this S&P downgrade was not a surprise. They were pretty much "threatening" to do this weeks ago unless the gov't could agree on $4T in cuts (which is a tall order). So why didn't the markets react then?



http://finance.yahoo.com/news/Dow-plunges-more-than-634-apf-1960115615.html?x=0

"The market is under a lot of stress that really has little to do with the downgrade." - $20B bond fund manager

If this is so, then Yahoo! picked horribly misleading headlines, and unfortunately headlines may be all that some readers see.



Correlation doesn't prove causation. The markets were headed down today even if S&P did nothing. The downgrade surely didn't help make anyone feel better, but it's our stalled economic recovery and worries about Europe that are fueling most of the losses. Probably investors are more concerned about Washington's inability to enact changes and react constructively and swiftly to crises more than our actual debt numbers.



So the Tea Party should think about that too if they truly love this country. Or do you think the GOP obstructionism and ultimatums are deliberately designed to tank the US economy leading up to the 2012 election? Then they will try to pin our troubles on the Dems and retake the WH. Because our economy will eventually improve of course, and they don't want to allow Obama to take credit (it's bad enough that the guy took down Osama). So if Obama isn't an idiot, he has to stop playing nice and call out the GOP on this, and I think many sensible voters will side with him. If GOPers are scared to raise taxes and face voter anger, they should also fear losing their jobs if they fail to accomplish anything, or worse block efforts to help the American people.



I know this theory sounds horrible, but it wouldn't be the first time. There was an investigation into whether the Reagan campaign worked with the Pentagon to delay the Iran hostage crisis resolution until after he beat Carter in the 1980 election, so Jimmy couldn't get credit for it. A gov't investigation later refuted the claim, but many high-level people still believe it, and the facts of the case are quite intriguing.



http://en.wikipedia.org/wiki/October_surprise_conspiracy_theory
 
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http://fivethirtyeight.blogs.nytimes.com/2011/08/08/why-s-p-s-ratings-are-substandard-and-porous/?hp






Clearly the S&P rating has SOMETHING to do with the market. There are plenty of non savvy investors in the marketplace to make that effect happen.





Also I take issue with this housing tax break allowance. Of course i own an expensive home so this is near and dear to me but as a rich person who works for my income i essentially have 1 tax break which is my home. Without the interest writeoff I would be claiming zero and paying extra every month to avoid a fine for not putting enough away for taxes. Champagne problems maybe but in an area whose average housing cost is somewhere between 300k - 500k is getting the total jumbo loan as a write off a crime?





On a somewhat separate note, how can you eliminate that writeoff without screwing the people who already own homes? The price of a home has priced in the fact that people get a discount on mortgages and if a lack of writeoffs makes homes less affordable prices will reflect that by dropping. So folks with mortgages would be less able to pay for them and go underwater as a result. So implementation would certainly be an issue.





I do understand this is a writeoff that mostly benefits the rich but this is one of those things where certain areas of the country (read LA/NYC/MIA/ETC) have plenty of "rich" people who couldn't be homeowners near their place of employment otherwise.
 
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Regarding the S&P downgrade and the market drop, sure there were some knee-jerk, ignorant investors who got spooked by the news, but I'm not sure how much they contributed to the overall decline. Maybe US debt is less attractive now, but it's still the best game in town, so people were more worried about stocks/overall economy and fled to bonds/gold. So maybe S&P warned us that the well water has some bacteria in it, but we're thirsty as hell and it's better than drinking piss.




It's funny how the blogger is saying it may be profitable to bet against S&P over its sovereign debt ratings. Historically, when S&P downgraded sov. debt from AAA to AA+, the yields on those 10-yr bonds tended to go down over the next month (as we saw with the US yesterday). This may be due to other economic events coinciding with a country under debt stress, but no industrialized nation downgraded by S&P has ever defaulted afterward, and investors seemed to pay no heed to the lower ratings.



http://www.businessinsider.com/average-yield-impact-of-a-lost-aaa-rating-2011-7



The link below describes how 90% of subprime securities that Moody's/S&P rated AAA pre-bust were later shifted to junk status. Is anyone in MLB batting .100 and keeping their job? Some of the big banks are being investigated for pressuring the ratings agencies to raise the grades of some of their securities. In some cases, bank execs called into those agencies to complain, and after some wrangling/bribes/threats, the agencies made exceptions to their risk assessment standards so the securities could be rated higher. That's like Michael Bay calling into Rogert Ebert's office and wiring him some cash to sweeten his nasty review of the latest Transformers slop. Maybe instead of relying on the big 3 agencies tainted by conflict of interest, we could have a crowd-sourced service from vetted financially-savvy contributors, similar to a Wikipedia or Yelp? I know there is plenty of independent investment advice out there, but something a little more official and trustworthy could help. Maybe it already exists?



http://www.bloomberg.com/news/2011-04-13/moody-s-s-p-caved-to-mortgage-pressure-by-goldman-ubs-levin-report-says.html



Regarding the mortgage interest deduction, sorry I didn't clarify before but any changes wouldn't be retroactive to existing mortgages. They would have to be grandfathered in or have the deduction withdrawn gradually. I know how you feel though. We obey the law, work hard, and haven't withdrawn much from the system (we haven't taken any unemployment, welfare, disability, etc.). Where's our damn reward for being good soldiers? But that's the thing, in a compassionate society the able have to sacrifice more for the less able. Is it "fair"? Well that's another discussion, but people like us really don't need any tax handouts, even if we're not living large and many of our neighbors seem to be doing a lot better (in their cases, even less justification to help them). I'd rather a handicapped person still get her home care, or a veteran get his physical therapy, instead of me getting a deduction. Of course I'd rather all the normal people get more help and the rich pay more into the system, so I'd fight harder for Bush tax cuts repeal before I fight for mortgage interest deduction repeal. Also, if we reformed other aspects of the tax code and labor market, you wouldn't need the extra money from deductions anyway.



The interest deduction is supposedly meant to make home-ownership more affordable and encourage people to do it. You and I bought during a time of really low rates, and even fed/state tax credits for first-timers. If interest deduction is the last bit of help a person needs to get over the hump and afford a mortgage, then maybe that person isn't ready to own. For your family and mine, we wanted a place of our own and our lifestyles/finances permitted it, so we would probably buy with or without the tax break. It's like Cash for Clunkers - the wealthy mostly took advantage of it, and in fact the program unintentionally put upward price pressure on the used car market (by destroying some supply), which hurt poor people who can only afford bad used cars. Like I said though, I could support a partial interest deduction adjusted for income/location, but not as generous as the current program. The bigger problem is expensive real-estate in the big coastal markets as you said, but that is a whole other can of worms that I don't know how to address.
 
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Yes!  MY point for the last 30 years with regards to 401Ks, etc.  I HAVE NO IDEA what to do with my money, but ever since that asshole reagan came along with the 'you know best how to invest your money' line of bullshit, I've HAD to put my money into the market. the ones who convinced us that this was for the best, certainly knew what to do with our pensions-line their own pockets with OUR savings.  They then burned me on the 401K bullshit, too.  So, now, once again, it's my fault for not knowing what to do.  I'm with the folks in the streets in london at this point.  burn, baby burn.
 
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Yes I'm frustrated and pissed off too. Our money is going poof (not that I had much to begin with). We can't compete with the resources and power of Wall Street investors, and we're not rich enough to hire them. So unless we have a crystal ball, the best we can do is diversify and let it sit. A mix of industries, company types, funds, bonds, commodities, and some liquid cash for quick emergencies. But others on this list know much more about finance and investing than I do, so please chime in and help us.




In general, the US stock market has been a very good and safe bet since WWII, and T-bonds even better. There will be shitty days and scams of course, but in the long run our investments should appreciate better than real estate or CDs (unless the 21st Century economy is vastly different than history). But of course an individual has to tailor his or her investments for their risk tolerance, values, and life circumstances.



I don't know about all the circumstances going on in England now, but it seems like the Rodney King riots. I just think it's sad when trouble-makers destroy property and wreak havoc only in poor neighborhoods. People have every right to protest and show their anger. So if they want to break the law, torch Harrod's and 10 Downing Street, not the poor immigrant flats of people on the margins who never did wrong to anyone. And Harrod's is insured anyway, though of course it is more protected by security forces than the slums.

Obama surrendered to the GOP on the debt issue

http://www.nytimes.com/2011/08/01/opinion/the-president-surrenders-on-debt-ceiling.html?_r=1&hp


http://www.kqed.org/a/forum/R201108020900



This debt bill doesn't have much to celebrate, but it's especially repugnant for progressives. There isn't a single cent of revenue generation, not even closing the corporate jet tax loophole (that Obama mocked in his debt speech) which would have just netted a few million/year and affected a tiny fraction of our population. He couldn't even get that. I know politically Obama is weakened and the debt issue is not all his fault. We're still paying off Reagan and Bush borrowing, and the stimulus was necessary to avoid a depression, yet the conservatives only want to tighten the belt now, when the economy is quite fragile and dependent on a healthy consumer sector (and gov't spending for that matter). While economists predict that these spending cuts (which won't take effect until 2013) won't hurt the economy much, it does lower consumer-investor confidence, and the rest of the world is wondering what the hell is wrong with Washington (and let's not underestimate what this ding to our reputation will cost us in the future, see Iraq). All that will impair an already sluggish recovery, and won't help create jobs.



Like his caving on the Bush Tax Cuts, Obama was in a tough situation though - the GOP knows that the buck stops with him and he doesn't want to preside over a gov't default. The GOP and especially the TP don't care if they wreck DC (and by extension, the US people whom they claim to represent). So it's like a parent bargaining with her child holding a family heirloom watch over the toilet bowl. The watch means a lot to the parent and nothing to the child. He is giggling and thinks it's a fun game to see the parent (an authority figure) panic and plead. The parent is at a major negotiating disadvantage. And yes, Biden was right, technically it's terrorism. When you control something precious to the other side, and threaten to harm it unless you get what you want, what else do you call that? I suppose Wall Street calls it "business as usual." But that worries me - will this become business as usual? We don't negotiate with (Islamic) terrorists because we don't want to send the message that their brutal methods will actually work to accomplish their goals. But now that Obama has caved on several occasions, the ultra-right/TP are only getting bolder with their demands. They see it works, and now every damn budget/spending debate from now on will probably involve this type of ludicrous brinksmanship, posturing, and blackmail (at least until the Dems lose the White House).



Some pissed off liberals think that Obama should have let the nation default, to show the people what the GOP wants and let them take the heat for America's suffering. But like the bank bailouts, he chose the lesser of two evils (moral hazard vs. financial freeze). He is a risk-averse president, and would rather compromise with the GOP than put the nation under unnecessary stress. Maybe that is a prudent decision, but at some point we have to put our foot down. He can't lead the nation being on the defensive all the time. Obama may have avoided a catastrophe this week, but it's not helping his re-election chances and it was a betrayal to his party's philosophy.



Instead, Obama could have raised the debt limit without Congressional involvement (as Bill Clinton recommended) and let the GOP try to take the issue to court. At least the gov't would still run and we'd be paying off our obligations in the meantime. All the panic about debt Armageddon was kind of misleading; sure it would be catastrophic if the US defaults, but that wouldn't happen. We have the funds to pay off our obligations, maybe at the expense of other federal spending, but we won't be deadbeats. As sad as it is, our debt/GDP ratio is still pretty comfortable (lower than France's and the UK's). Italy is one of the biggest economies in the world and their ratio is double ours (http://en.wikipedia.org/wiki/List_of_sovereign_states_by_public_debt). US debt is still one of the safest investments in history, so who cares if S&P threatens to downgrade us? Those were the same morons that gave sub-prime mortgage securities AAA ratings. The Euro has bigger problems, Japan's economy is gloomy, China isn't trustworthy, the stock market and commercial paper can be volatile, and some commodities have issues too. Where would you put your millions for safety? During this big debt debate, what happened to the yield on the 10-year T-bond? It actually went down (to ~2% now), meaning that investors are finding it more desirable vs. other similar investments. Demand for US debt is increasing, so the world is still very confident in us. In comparison, Greek 10-year bonds are paying out around 25% if you dare to sink your money there.



This bill creates a Congressional commission to decide how to make the remaining $1.5T cuts over the next few years. But how can we expect that such a group would show more cooperation than what we've seen? What if that group doesn't come to an agreement? An across-the-board gov't spending cut (not sure the %), including entitlements. I guess that is exactly what the GOP is hoping for, so the conservatives on the commission really have no incentive to compromise on any liberal initiatives. They now have the luxury to wait out the Dems because they are not scared of the fallback plan. Either they get everything they want, or they still get a pretty good outcome if the talks fail. No harm can come to them, except from possible voter ire in 2012, but there's plenty of that for the Dems too. I can't believe Obama agreed to all this.
 
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Obama's actions here are only surprising if you think he's a liberal. He isn't. He's a moderate conservative. He gives liberal-sounding speeches to establish his credentials, but his actions are moderately conservative. He's largely continued W's wars, and started a few of his own. He kept W's defense secretary and a bunch of the economic advisers (imagine FDR keeping Andrew Mellon). Gitmo. His health care plan rejected single payer and instead followed the template you can trace back through Romneycare to the Heritage Foundation's initial 1989 mandate + subsidies solution. He's gone after whistleblowers even harder than W. His opening offer in the manufactured debt ceiling crisis included big cuts to social security and medicare (which for a long time have been how you identify that someone is a Democrat at all).






And he's on track to raise a billion dollars, mostly from rich businessmen. Do you think they'd be paying huge amounts of money if they thought he was failing? He's doing exactly what he's supposed to do. Even early on he was telling people that the long-term goal was to cut social security - his aides explained this to David Brooks back in March 09: http://www.nytimes.com/2009/03/06/opinion/06brooks.html ("He is extremely committed to entitlement reform and is plotting politically feasible ways to reduce Social Security as well as health spending."). He's looking to be a sort of reverse "Nixon goes to China": the ostensibly indisputable liberal who because of those liberal credentials can be trusted to negotiate a fair deal to cut the left's core programs, and thus becomes the transformational politician who brings left and right together to do what's needed. In these debt negotiations he's not getting out-maneuvered, he's Br'er Rabbit saying "please don't throw me into the briar patch!"





The only real hope for the left is a solid primary challenge, to force a change in the dialogue, because the Bachmann bogey-man will guarantee no third party candidate affects the outcome. The current hope-and-prayer is Elizabeth Warren, even though no one seems to know where she stands on anything other than the economy.
 
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Obama is one of them. This is what he wanted, too. Get over it.


Try this on:



http://www.yourownhealthandfitness.org/blogs/?p=288



There is no debt crisis. We've been gutted like a flounder.
 
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Thanks, friends. Yes it may be true that Obama is not a liberal, but how the F did he convince the Dem Senate majority and at least a few dozen Dems in the House to approve this bill? What were Reid and Pelosi's roles in this? Apparently Obama's horrible at persuading conservatives, but great at keeping the Dems in line. The liberal wing of the House may have revolted but were powerless to stop it, though you'd think a few committed senators could have filibustered? Or they don't want to take the blame for missing the deadline?




Obama has clearly picked his backers (or vice versa), but what if he doesn't win? Despite lining Obama's coffers, corporate interests would prefer a GOP in the White House (even if there's not much difference with an Obama admin.), and they are ready to sign new checks for whoever emerges out of the GOP primary. By making deals with the devil, doesn't Obama worry he may get screwed? I'm not so confident about his re-election chances after all this, and there are more budget battles to come before next Nov. The US public doesn't seem to be very sympathetic to Obama over these shameful impasses, so what the hell is he getting out of all these concessions, politically?



Look, I understand the TP attitude. They think DC has overstepped its mandate and is spending out of control. They feel the need to block Dem initiatives tooth & nail, and hopefully they can roll back some gov't expansions for our own good. Forget their economic ignorance and political inflexibility, but I can understand why they would be motivated to subvert the gov't to serve their own interests and save the country. If I was a congressman during the W Bush years, I would feel the same way. It would be like de-funding the Iraq War to protest the immorality-irresponsibility of it. Dems would have been skewered for attemtping such a move in 2005, yet this debt blackmail is somehow OK? And stopping Iraq would save lives, but freezing the gov't is costing lives.



Obama was elected by a pretty big margin because America thought he could bring people together. Well he hasn't, and it's probably gotten worse. It's not all his fault, but if he is failing precisely in the area that he was supposed to excel in, what are the voters (especially Dems) to do about it in 2012? You think anyone would dare to challenge him from the left? Maybe the hopey-changey stuff was all BS, and he's not interested in forging relations and working with others. But he's not dumb; after a few months on the job he should have seen that the GOP and others weren't willing to work with him either on most of his "official agenda." Maybe he needed to play nice to get (minimal) health care reform passed, but that's a pretty crappy legacy to hang one's hat on. Why did he invest so much in that area, and totally fold on other critical issues like jobs and revenue?



Why the hell does he still try to work with the right after 2+ years? It's a divided gov't now and the Dems may take more of a beating in 2012. Why not try to get as much stuff done while you can? He's still the freaking president. Use executive orders and circumvent the checks and balances like Bush did. But as you said, I guess he's not interested in that. Though you'd think Pelosi and Reid wouldn't just sit idly by while Obama pisses away the rest of his term. Reid almost lost (to a total joke candidate) last election. They have a lot riding on this next year, what the hell? What is the Dems' strategy?

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Pelosi is the only reason things weren't worse, and she's clearly not
a big Obama fan at this point. In fact, Obama would have backed off of
that watered-down healthcare bill without her. These are trying times
for the "left," but it would be a good idea to invest in a few more
behind-the-scenes operators (even though she plays the good soldier in
public) like her.

http://www.thedailybeast.com/articles/2011/08/01/nancy-pelosi-takes-gutsy-stand-backs-disliked-obama-boehner-debt-deal.html

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Thx, S. The Prodigal Son has returned! That's interesting about Pelosi and Obama's desire to distance himself from her to not be perceived as a liberal. But these days, only FNC is accusing Obama of being one of those. I guess the best thing for Pelosi's career is to be a good soldier, help Obama get re-elected, and reclaim the House so she can become Speaker again. If she led a revolt from the left over the debt and other issues, I don't know what that would do to the country and the Dems, but it probably wouldn't help them in 2012. Though the TP is forcing the mainstream GOP to change, so why can't the progressive wing put pressure on Obama? If the GOP alternatives weren't so damn scary, I would hope for Obama to lose so he learns his lesson about picking the right backers and mistreating allies. And I do appreciate Pelosi putting her foot down on some issues so the debt package wasn't worse. She should bring that stuff to light so Americans can see that some people in DC are still trying to fight for them. A tell-all book 3 years later won't help.

J's link to the Brooks piece is pretty depressing too. I know centrists win the presidency, and a big chunk of Obama's support in 2008 was from middle-of-the-road or slightly-right folks. But if his agenda all along was to cut entitlements, benefits, and worker's rights, then what's the point of running for the goddam Democratic ticket? Some cutting may be necessary, but not right now, and especially with so many sources of untapped, fair revenue. And of course when you cut that spending in a recession, it has a magnifying effect in our consumer economy. Aid recipients have less money to inject back into the system, and we're talking about food and rent here, not Vuitton purses and shares of Apple. How do more broke, desperate people help our country recover? And they were some of the most marginalized, vulnerable Americans to begin with, which is why they were getting help. Sure there is some abuse going on, but it pales in comparison to tax cheating by the rich. Though it's easier to demonize the "welfare mom" than Ford. 

Of course a black man has no chance to win the GOP primary, but why the hell did Obama declare himself a Dem? He voted like a Dem when he was in the Senate at least, maybe just to make powerful friends like Reid and Biden? I just don't get what Obama wants out of all this. He was young and a Senate baby when he ran for president, it's not like there was urgency. Unlike the Clintons, he was already rich upon entering the WH. Sure there's always the lust for power, but why go through all the pain of the office when you're just going to be Mr. Status Quo and Don't Rock the Boat? Dozens of politicians can do that already - he was supposed to be the "game changer." His hair went gray like his predecessors, so clearly he's working hard on something. Just wish the non-rich American people had more to show for it.

L's link sends a powerful message, and it's what we were discussing here in the past. We know how big-business libertarians are bankrolling the TP, and the Dems are dumping labor in favor of corporate campaign support. We know about the great wealth divergence since the Carter admin. We know that the rich were barely scathed in the recent recession, while the poor-to-middle have given back much of their gains from the bubble '90s. The labor market is horrible. In the 1930s, we had the New Deal to jump-start the economy, but many critics say the Obama stimulus was actually too small to be effective. The Supreme Court is the most business-friendly in generations. The US worker is now pushed harder than his/her peers in all other developed nations maybe besides South Korea (and their economy is booming compared to ours). Now the US worker is so fearful for his/her economic future and with very little leverage in the market, that he/she will put up with just about anything to keep the paycheck coming. That's looking closer and closer to the Industrial Revolution, minus the black-lung and child labor.

I am so angry and ashamed of our country and our people, but unfortunately I am part of the 60% that doesn't want to feel bad about my inaction. Actually, I am kind of hoping for things to get so bad that the citizens have no choice but to rise up. It's time the rich assholes feel a little fear and pain like the rest of us. It's not class warfare, it's survival.