Links 5/31/10

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  1. MindTheGAAP

    Billyblog’s comments are excellent. However:

    1. The following graphs are taken from the excellent datasets available from the US Office of Management and Budget and show the federal deficit, outlays and receipts as a percentage of GDP from 1930 to 2010. History is not even being repeated at present. The fiscal expansion was nothing like that which occurred during the prosecution of the Second World War.

    This isn’t a fair comparison, because the government this time around has kept many liabilities (Fannie, Freddy, HLBs) off balance sheet. It has also guaranteed private sector debts. Add those in, and the situation looks far more worrisome.

    2. He, along with most commentators, implicitly assumes that avoiding the “bust” portion of the boom/bust cycle is both possible and imperative. Although I’m obviously in the minority, this seems a little quixotic to me; this cycle has existed with us since the beginning of mankind. It’s the height of hubris to believe that it’s going to be repealed now, and bizarre to see people casually assume this possibility without at least justifying their faith in being able to do so beforehand.

    Just my two cents

    1. aet

      “Cycle is has existed with us since the beginnibn g of mankind”: This implies that such is caused by some “inhuman” law, which determines the human economy thus.
      Indeed: it would seem that this unknown determinant of the human economy is not simply confined to the 10,000 years of recorded history, but by an act of faith extended to the 990,000 years for which we do not have a record.
      And this economic meta-law is independent of the technical state of mankind, it would seem. Technological progress won’t help? Sure about that?

      1. aet

        The declaration of faith in the business cycle needs more rigorous evidence: and I still have trouble believing that a world in which India and China both grow at gretater than 5% per year is in any kind of serious economic trouble (although at the individual level, things can get dicey)
        India + China =2,000,000,000 people: if their economies are growing – and they are – I think that there’s much for people to do, and to keep themselves busily in business.

      2. MindtheGAAP

        economy is not simply confined to the 10,000 years of recorded history, but by an act of faith extended to the 990,000 years for which we do not have a record.

        OK, I’ll grant you that the cycle may have only lasted 10,000 years. The original point stands–how do you blithely assume that we can undo this now, especially when the ones trying to undo it didn’t recognize any bubbles during the boom times?

        And this economic meta-law is independent of the technical state of mankind, it would seem. Technological progress won’t help? Sure about that?

        No, I am not sure about that. I am not sure about anything. Given the history of the last 10,000 years (your time frame, not mine), though, I think the onus is on billyblog and everybody else to first show (or convincingly explain) that the cycle may be repealed before suggesting ways to do so. It’s almost always the overlooked implicit assumptions that screw things up, not the carefully examined ones.

        1. Anonymous Jones

          “It’s almost always the overlooked implicit assumptions that screw things up, not the carefully examined ones.”

          Based on my experience, that is sage advice. Great comment.

      3. MyLessThanPrimeBeef

        All living things go throught the cylce of birth, growth, decay and death.

        Technological ‘progress’ won’t exacerbate the boom and bust cyle? Financial ‘innvoations’ won’t make it worse? Anyone knows?

        Given the history of Homo-Not-So-Sapiens Not-So-Sapiens, it’s hard be to optimistic.

  2. attempter

    Re Krugman:

    Since the finance elites dictate all such top-down “conventional wisdom” (to paraphrase Voltaire, it’s neither “conventional” or “wise”, but manufactured propaganda which is meant to whitewash crime), when they say “the markets don’t really fear inflation now but might fear it in the future, so governments should act in obedience to this hypothetical future fear”, that must mean the finance vanguard thinks the end is in sight for what free money can do for them, and that in order to continue their extractions they’ll have to move into more direct class warfare. It’ll no longer be sufficient to simply gut the interest returns for savers on pensions; now the pensions themselves must be directly stolen. There’s clearly no end to the planned robberies. They’ll continue for as long as the system is economically sustainable, and the people’s complaine renders it physically possible.

    (And yet you still see even otherwise intelligent people who think these robbers will stop short of overt fascism once that becomes necessary to keep extracting rents.)

    That’s the only explanation for a course of action which, as Krugman says, is directly contrary to all theory and all practical experience.

    Once again we see the de facto dictatorship of the terrorist “markets” in action. We’ll never be free until we free ourselves of the yoke of these markets.

    People think we’re stuck with the markets because all our pensions are bound up in them? Read the news: They’re going to steal all that anyway. Our only choice is whether we run the risk of starving to death in the cold, or guarantee it. Sitting still and letting these criminals work their will guarantees it.

    Of course, Krugman being Krugman, he whitewashes Obama and the Dems throughout. It’s the sinister “OECD” setting the pace here, not Obama. Riiiiiiiiiight.

    And that implicitly Republican “conservative members of the House” are responsible for Congressional dereliction on jobless assistance, when the truth is that the Dem establishment has 100% control of the situation and therefore got exactly the outcome it wanted, is a flat-out lie. K just omits the word “Republican”, even though he means for people to read it in, in order to make the lie implicit rather than explicit.

    Nobody should have any illusions: Obama and the Democratic party, in obedience to their Wall Street masters, are the ones orchestrating this next step of the class war from above.

    All of this truly is, as the Schecter piece says, Obama and the Dems talking, not “left” but centrist, while moving as far and as hard and as fast to the right as they can.

    This should put all the lies, from Krugman and others, about the health racketeer bailout in perspective. It was always absurd on its face that even as the calls to gut existing social spending were growing, anyone should believe that the fraudulent “subsidies” promised by this bill would ever materialize. This was always a criminal lie on the part of liberal hacks, and already the indications are piling up that this mandate will never be affordable nor will it ever provide real coverage.

    The goal is flatly to steal as much as possible, and if they really go ahead with trying to enforce it, using the IRS as a medieval-style goon, the only escape short of massive resistance will be the underground economy.

    Recently this blog has some threads about revolutionary situations. One ingredient which is always part of the mix is that the system tries to collect a new tax the targets find odious. Now, the American people should definitely view this looming gangster mandate as something odious far beyond the Stamp Act. It’ll be far more onerous and have absolutely zero justification (even the Stamp Act did have a “pro” argument, albeit a weak one).

    So I toss around the idea of trying to propagate the idea that it should be viewed this way, as pure robbery and tyranny, and that people should organize for resistance to it.

    The best part is how such direct resistance to kleptocracy would coincide so well with the broader relocalization imperative, imperative both as indirect resistance and as transforming toward the post-debt, post-fossil fuel economy we must in the end reach anyway. In both cases we must rely far more on the informal economy.

    1. Tao Jonesing

      Great comment. I would have put a lot of what you said differently, but I can’t disagree with the underlying truth of your analysis.

    2. Piero

      Well said. That Krugman cannot go beyond his stereotyping of categories is sad but not surprising. He acts as though the leaders of Wall Street are the left’s enemies. The fact is, Goldman gave much more money to Obama than to McCain. And a recent issue of New York Magazine said of Jamie Dimon and Lloyd Blankfein that they, like most of their peers are democrats. And, why not? The old stereotype of these guys not liking government interaction in the marketplace is a quaint leftover from a simpler time. They’re perfectly happy to have government involved. Who’s going to influence the gov’t and get special treatment, the average guy with his little 401K or Government Sachs?

      1. lambert strether

        Surely this is parody:

        He acts as though the leaders of Wall Street are the left’s enemies. The fact is, Goldman gave much more money to Obama than to McCain.

        Pull the other one, it’s got bells on. Why would anybody think that Obama is on the left?

        1. Piero

          Mmm. I don’t know. Maybe his being desperate to add a new government entitlement program despite debt and unfunded liabilities already being unmanageable?

          1. attempter

            Where the government entitlement program entitles private corporations to steal from the people, that’s a right-wing assault.

            A command economy which maintains private profit-extraction is the essence of the economic aspect of fascism, not any kind of leftism.

            The brainwashing of people like you is really astounding, that you can never get straight something so elementary.

    3. lambert strether


      Even now, I still find it almost impossible to believe that career “progressives” would knowingly shill for a policy that forces people to buy junk insurance with the IRS acting as a collection agent. But they did, they did!

      Enabling rent-seeking behavior at its very best; that’s what both legacy parties are about.

  3. rjs

    Toxic Oil Spill Rains Warned Could Destroy North America

    A dire report prepared for President Medvedev by Russia’s Ministry of Natural Resources is warning today that the British Petroleum (BP) oil and gas leak in the Gulf of Mexico is about to become the worst environmental catastrophe in all of human history threatening the entire eastern half of the North American continent with “total destruction”.

    Russian scientists are basing their apocalyptic destruction assessment due to BP’s use of millions of gallons of the chemical dispersal agent known as Corexit 9500 which is being pumped directly into the leak of this wellhead over a mile under the Gulf of Mexico waters and designed, this report says, to keep hidden from the American public the full, and tragic, extent of this leak that is now estimated to be over 2.9 million gallons a day.

    The dispersal agent Corexit 9500 is a solvent originally developed by Exxon and now manufactured by the Nalco Holding Company of Naperville, Illinois that is four times more toxic than oil (oil is toxic at 11 ppm (parts per million), Corexit 9500 at only 2.61ppm). In a report written by Anita George-Ares and James R. Clark for Exxon Biomedical Sciences, Inc. titled “Acute Aquatic Toxicity of Three Corexit Products: An Overview” Corexit 9500 was found to be one of the most toxic dispersal agents ever developed. Even worse, according to this report, with higher water temperatures, like those now occurring in the Gulf of Mexico, its toxicity grows.

    The United States Environmental Protection Agency (EPA) in discovering BP’s use of this dangerous dispersal agent ordered BP to stop using it, but BP refused stating that their only alternative to Corexit 9500 was an even more dangerous dispersal agent known as Sea Brat 4.

    The main differences between Corexit 9500 and Sea Brat 4 lie in how long these dangerous chemicals take to degrade into their constituent organic compounds, which for Corexit 9500 is 28 days. Sea Brat 4, on the other hand, degrades into an organic chemical called Nonylphenol that is toxic to aquatic life and can persist in the environment for years.

    A greater danger involving Corexit 9500, and as outlined by Russian scientists in this report, is that with its 2.61ppm toxicity level, and when combined with the heating Gulf of Mexico waters, its molecules will be able to “phase transition” from their present liquid to a gaseous state allowing them to be absorbed into clouds and allowing their release as “toxic rain” upon all of Eastern North America.

    Even worse, should a Katrina like tropical hurricane form in the Gulf of Mexico while tens of millions of gallons of Corexit 9500 are sitting on, or near, its surface the resulting “toxic rain” falling upon the North American continent could “theoretically” destroy all microbial life to any depth it reaches resulting in an “unimaginable environmental catastrophe” destroying all life forms from the “bottom of the evolutionary chart to the top”.

    internal links support thesis:

    1. Francois

      Talk about a morale booster! :-(

      Note how BP is framing the debate: Either this dispersant, or another one, that is worse.

      Hmmm! Is it necessary to use a dispersant in the first place? Inquiring minds would very much like to know.

      The thing I find most incredible is to witness the EPA impotence or, worse, nonfeasance. I have a very hard time believing that EPA cannot force BP to stop now, or hand out criminal prosecutions to anyone refusing to obey this order.

      Can anyone with environmental law expertise shed light on this matter?

      1. MyLessThanPrimeBeef

        Why the need for a dispersant in the first place?

        In this age of superficiality, it’s all about looking ‘pretty,’ – thus the pretty get prettier and the ugly get uglier. Unfortunately, it’s not surprising that the solution is worse than the problem, as I said on 5/20/10.

      1. Roger Bigod

        They’re good at propaganda, too. Perhaps BP should hire the creators of the Gazprom Song. I believe Susan Sontag would agree that this is corporate camp.

      2. gordon

        I think the US is giving them a good run for their money; maybe not much to choose, really.

  4. Glenn Condell

    Not a good news day today, obviously.

    At the risk of overload, I would just mention that Israel has murdered between 10-19 people on the flotilla to bring supplies to Gaza, and has a few nuke subs lurking off Iran.

  5. dearieme

    “Radioactive fish near nuclear plant said ordinary”: I admit that I’m rather impressed that it speaks English at all. If that’s what a wee spot of strontium can do for a fish, let’s have more of it.

    1. MindtheGAAP

      Maybe BP should run ads with the tag line, “Nine out of 10 fish prefer BP”

    2. Fifi

      This article’s title really deserve the Award for Most Willingly Malevolent Title of the Year. It’s disgusting. That editor should shot.

      The article itself does a good job. It’s perfectly factual and just states the finding of a study that shows that fish collected near a nuclear plant was actually at the low end of background radiation and of some radiation traces left-over from the 50’s atmospheric nuclear tests then from fall-out from Chernobyl. Significantly higher concentrations are found in rivers totally unrelated to nuclear power plants.

      Does it mean that this nuclear power plant lower natural radiation in the nearby river? Of course not. It just means it has no impact.

  6. Roger Bigod

    During a tour of a BP PLC staging area for cleanup workers, CEO Tony Hayward said the company’s sampling showed “no evidence” that oil was suspended in large masses beneath the surface. He didn’t elaborate on how the testing was done.

    Hayward said that oil’s natural tendency is to rise to the surface, and any oil found underwater was in the process of working its way up.

    “The oil is on the surface,” Hayward said. “There aren’t any plumes.”

    1. Glen

      “The oil is on the surface,” Hayward said. “There aren’t any plumes.”

      Translation of CEO speak for people of the Gulf of Mexico:

      “You can all go eat shit and bark at the moon.”

  7. Ronald

    Equity Extraction has fundamentally changed the U.S. housing market by making move up buyers rare an endangered. It was difficult to acquire additional loans on a home up until the 90’s when a variety of equity home loans became common not to mention the refi first and take out equity also became fashionable.
    Move up buyers along with asset inflation provided the sales velocity necessary to fuel the price banding reflected in today’s market. Sales velocity now reflects cash and GSE low down payments buyers while those that own their property outright or still have large equity in their home tend to stay put for long periods.
    Given the trend towards price deflation and mining property equity via banking credit lines it would seem reasonable to suggest that GSE financing and cash buyers would provide the sales velocity for the RE market for years and that RE equity may become a relic of the boomer bubble asset.

  8. Karen

    Paul Krugman –

    Why does he so often throw bad arguments in with the good ones? I used to have a lot more respect for him.

    Specific beefs with this one:

    (1) “Yet inflation is low and declining”
    This is not entirely true – looks to me as though there has been asset-price inflation in the stock market.

    (2) “…the chance that markets might start expecting inflation, even though they shouldn’t and currently don’t”
    The gold craze says this is not a correct assertion. Also, expert opinion seems to be in strong agreement that inflation is in our future. Disagreement is almost entirely focused on WHEN inflation will begin to rise.

    (3) “slashing spending when you’re still suffering from high unemployment is a really bad idea — not only does it deepen the slump, but it does little to improve the budget outlook, because much of what governments save by spending less they lose as a weaker economy depresses tax receipts.”
    This reminds me of Reaganomics. Expecting total tax receipts to go up because you spend $1 and collect a fraction of it back in taxes is about as logical as expecting total tax receipts to go up because you cut tax rates.

    (4) “Right now, investors don’t seem at all worried about the solvency of the U.S. government; the interest rates on federal bonds are near historic lows.”
    How long did it take for investors to go from not worried at all about Greek government debt to running for the door? Now, I do think the difference between Greece and the USA is that investors almost certainly don’t have to worry about explicit U.S. default. But inflation (just by itself), as well as the big interest-rate increases that might eventually be necessary to bring it back down, ARE a concern for Treasury buyers as well as for buyers of all other fixed-rate dollar-denominated investments.

    Seems to me we SHOULD worry about reducing our government’s dependence on borrowing. Interest on the national debt is a permanent drag on our economy, and as long as we get our financing in the markets we are vulnerable to panics like the one that hit Greece. But we should not place the burden on those least able to carry it. We need to raise taxes, at least enough to undo the Bush tax cuts.

  9. dearieme

    “its molecules will be able to “phase transition” from their present liquid to a gaseous state”: or as we say in English, it might evaporate.

  10. gordon

    The Guardian updates its Gaza flotilla coverage, saying (31 May):

    “At least nine pro-Palestinian activists were killed as Israeli naval commandos stormed the largest ship in the flotilla carrying passengers. Dozens more were wounded and evacuated by helicopter to Israeli coastal hospitals.

    “Israel said more than 10 of its troops were injured, two seriously, in the battle that began early yesterday morning in international waters, about 40 miles from the coast of Gaza”.

    The Guardian editorialises on the raid (1 June):

    “If an armed group of Somali pirates had yesterday boarded six vessels on the high seas, killing at least 10 passengers and injuring many more, a Nato taskforce would today be heading for the Somali coast. What happened yesterday in international waters off the coast of Gaza was the work of Israeli commandos, not pirates, and no Nato warships will in fact be heading for Israel. Perhaps they should be”.

  11. Dogbrain

    Environmental disasters multiplying like mushrooms? Check.

    Natural resources disappearing? Check.

    Energy crisis around the corner? Check.

    Financial collapse ongoing? Check.

    Loss of credibility of democratic institutions? Check.

    Authoritarianism on the rise? Check.

    No way forward? Check.

  12. auskalo

    I never thought I would hear myself say this, because I hate unnuanced bland generalised assertions. There are so many ways in which the Obama administration is a quantum improvement on Bush – think stimulus, healthcare, financial regulation, don’t ask don’t tell, and two reasonable Supreme Court nominations. But on foreign policy in general, and Israel/Palestine in particular, Obama is proving to be as stupid as Bush:

    1. He has failed to close Guantanamo detention centre or correct the gross violation of human rights it represents.
    2. He has escalated an unwinnable war in Afghanistan
    3. He has legitimised a military coup in Honduras
    4. He has caved in to Netanyahu on illegal settlement expansion several times and has allowed his Vice President to be humiliated on a visit to Israel
    5. He has capitulated to Chinese manipulation of the Dollar Yuan exchange rates despite numerous threats to confront the issue
    6. He has caved in to his Afghan counterpart, Hamid Karzai, having accused him of corruption and falsifying elections – and to to Karzai’s brother, Ahmed Wali, having accused him of being a drug lord.
    7. He has been repeatedly snubbed by the President of Brazil, Luiz Inacio Lula da Silva, who has chaired meetings of 31 Latin American and Caribbean countries which excluded the United States, and actually got something constructive done by negotiating a deal with Mahmoud Ahmadinejad for Iran to ship 1,200 kilograms of its low-enriched uranium to Turkey. Obama then ignored the deal and proposed tougher sanctions on Iran.
    8. He has done nothing on climate change and was all for expanding deep sea off shore drilling until BP pissed in his back garden.
    9. And now, to cap it all, he has blamed peace activists for getting themselves killed by an illegal act of war and opposed a UN investigation of the war crime.

    Is there no end to his grovelling incompetence? Increasingly world leaders, large and small, are learning that Obama is a paper tiger who makes bullying noises, some fine speeches, and then capitulates at the first sign of opposition.

    It must be the first time in history that the Nobel Peace prize has been awarded to coward who mistakes collaboration with racists, genocidal maniacs, drug lords, rapacious corporations, fascists and juntas for bipartisan compromise.

    Hell, even Bush had more balls – even if he was stupider still. Bush may have been ignorant and wrong, but he had the courage of his convictions. Obama apparently has no courage and no convictions. It is hard to tell which is the more dangerous combination.

  13. دار التميمي حمد

    Hell, even Bush had more balls – even if he was stupider still. Bush may have been ignorant and wrong, but he had the courage of his convictions. Obama apparently has no courage and no convictions. It is hard to tell which is the more dangerous combination.

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