February 8, 2015
Crisis: Ukraine, Obama's Budget, Wall Street, Fracking, Global Capitalism
  "They who can give up essential 
   liberty to obtain a little temporary
   safety, deserve neither liberty
   nor safety."
   -- Benjamin Franklin
   "All governments lie and nothing
   they say should be believed.
   -- I.F. Stone
   "Power tends to corrupt, and   
   absolute power corrupts
   absolutely. Great men are        
   almost always bad men."
   -- Lord Acton

Prev- crisis -Next


1. Angela Merkel: Bombs and Bullets Won’t Solve Ukraine
     Conflict (Video)

2. President Obama's 2016 Budget Is Not A Middle-Class

The Incredible Lies We Are Told About Wall Street
'Game-Changing March for Climate' as Californians Rise
     Up Against Fracking

Global Capitalism's Terrifying New Math

This is a Nederlog of Sunday, February 8, 2015.

This is a crisis log. There are 5 items with 5 dotted links: Item 1 is on Merkel on the Ukraine; item 2 is on the fact that Obama's real budget (pro rich) is not what he says it is (pro middle class); item 3 is on the lies people are told about Wall Street; item 4 is about fracking in California (and seems a bit ... naive, to me, but OK); and item 5 is a fine article on global capitalism.

1. Angela Merkel: Bombs and Bullets Won’t Solve Ukraine Conflict (Video)

The first item today is an article by Alexander Reed Kelly on Truthdig:
This starts as follows:

German Chancellor Angela Merkel has said the crisis in the former Soviet republic will not be resolved by military means and that the peace agreement drafted in September needs to be put into effect.

Merkel, speaking at the Munich security conference Saturday, said she wanted peace in Europe with Russia.

The Guardian reports:

Germany has opposed aiding Ukrainian troops for fear of worsening the conflict, which has already cost more than 5,000 lives, but the idea has many supporters in Washington.

“I cannot imagine any situation in which improved equipment for the Ukrainian army leads to President Putin being so impressed that he believes he will lose militarily,” Merkel said. “I have to put it that bluntly.”

Disagreement has emerged between Europe and the US about how best to confront Putin as Moscow-backed rebels make gains in eastern Ukraine. Barack Obama is under pressure from some in Congress to send weapons to Kiev.

I say. I reproduce it here because I agree with Merkel that (and I quote):
(..) the crisis in the former Soviet republic will not be resolved by military means (..)
That is, I hope so. Otherwise, I still do not understand much about that conflict, mostly because I don't read the languages, and what I have read about it, especially from the U.S., seemed to me almost only propaganda, and propaganda for war.

There also is a video there, in the New Much Worse But Claimed Much Better format of The Guardian and there also is a link to a Guardian article.

The video, that ends with the claim "theguardian the whole picture" in fact is the opposite, at least how it gets presented to me, namely as a very faint picture of a video (?!why that, Herr Blau?! what nonsense motivated you to that idiocy?!) that has NO information of any kind, not even of its duration. (This is The New Guardian Style: The less you know, the happier your will be - or so it seems to me.)

As it happens, it is worth seeing, but it also is another example of the major destructions wrecked on the website of The Guardian. [1]

2. President Obama's 2016 Budget Is Not A Middle-Class Manifesto

The next item is an article by Eric Laursen on Alternet:
This starts as follows:

“Meet the new prez, same as the old prez.”

That bastardization of an old lyric by The Who promptly popped into my head upon learning this week that the White House is again floating the “chained CPI” as a means to whittle down its benefits obligations, through Social Security as well as other programs. Little more than two weeks earlier, Sen. Bernie Sanders (I-VT), who had been working closely with the White House on its fiscal-2016 budget, said President Obama had assured him that the budget would not contain the controversial change, which would apply a stringier formula to the cost-of-living adjustments Washington makes every year.
But the fact that Obama told Sanders one thing about this very sensitive matter, which could greatly reduced benefits for everyone from Social Security recipients to military and civil service retirees to food stamp recipients—some 80 million people, all told—and then apparently put it back on the table, illustrates an important point about presidential budgets: they are bargaining chips, not blueprints.

Yes, but that is precisely the trouble with the whole Obama-presidency: He talks progressively, but he acts as a Republican-lite president.

There is this on that aspect:

“It's a mixed bag,”  Josh Bivens, research and policy director at the Economic Policy Institute, says of the president's budget. “The irony is that the elements that are the most bold and progressive are the ones with the dimmest chance of passing, while the weakest stuff is where there could be some negotiation with the GOP.”

Yes - or rather: the irony is that Obama seeks to flatter the Democrats by saying things he knows he cannot possibly enact with the present Congress, while proposing and enacting Republican wishes that he might have blocked.

More precisely, what Obama proposes amounts to this (and I have worked in an
explicitly given link):

Yet about 80% of benefits from 529 plans go to households with incomes above $150,000 and 70% to households making more than $200,000. And it's not as though Obama was proposing to wipe out the plans. Assets could continue to accrue tax-free; savers would only pay taxes when they withdraw funds, just as with 401(k)s. As Robert Greenstein of the Center on Budget and Policy Priorities told New York Timesblogger Thomas Edsall, “The implications of this debacle are troubling. If we can’t reform a tax break that is highly inefficient and gives the overwhelming share of its benefits to high-income people who don’t need the benefits to engage in the desired activity (in this case, going to college) … then it’s going to be awfully difficult to address a number of the challenges the nation faces in the years ahead.”

Also, the great Changer wants to limit taxes for the rich; he wants to increase the costs of Medicare to those it insures (the poor); he wants to destroy governmental democratic powers by the TTP and the TTIP, which he also wants to impose on hundreds of millions in secret, and he knows how to lie and deceive very well and with lots of totally false charm.

Here is the last paragraph:

Maybe the president's budget is a middle-class manifesto. But that may only be what he wants us to think.

Well... no, it is not "a middle-class manifesto", but yes, he wants people to think it is. This article is well worth reading in full.

3.  The Incredible Lies We Are Told About Wall Street

The next item is an article by John Buell on Alternet:
This is an interesting article, and also one from a series. I picked out three quotes. Here is the first of them:
Michael Konczal, writing in the Washington Monthly, invites us to compare two eras at General Electric. This is how business professor Gerald Davis describes the perspective of Owen Young, who was CEO of GE almost straight through from 1922 to 1945: “[S]tockholders are confined to a maximum return equivalent to a risk premium. The remaining profit stays in the enterprise, is paid out in higher wages, or is passed on to the customer.” Davis contrasts that ethos with that of Jack Welch, CEO from 1981 to 2001; Welch, Davis says, believed in “the shareholder as king — the residual claimant, entitled to the [whole] pot of earnings.”
That, in turn, also was a partial lie: In fact the CEOs of corporations earn these days on average ten times more than the CEOs of 1975. But yes, the profit no longer "stays in the enterprise, is paid out in higher wages, or is passed on to the customer." Instead, it is paid to the CEOs and the large investors.

The second is this:
Konczal points out: “Beginning in 1980 and continuing today, banks generate less and less of their income from interest on loans. Instead, they rely on fees, from either consumers or borrowers. Fees associated with household credit grew from 1.1% of GDP in 1980 to 3.4% in 2007. As part of the unregulated shadow banking sector that took over the financial sector, banks are less and less in the business of holding loans and more and more concerned with packaging them and selling them off.”
Which is to say that "the costs" for householders to get a credit more than tripled in 25 years. (And these "costs" are incomes and profits for the banks and their managers.)

And this is the third lie:
In a commentary for the blog Naked Capitalism, Marshall Auerback summarizes recent work by Mariana Mazzucato, author of “The Entrepreneurial State”, “Typically the private sector only finds the courage to invest in breakthrough technologies after a so-called “entrepreneurial state” has made the initial high-risk investments. This can be seen today in the green revolution, the development of biotech and pharmaceutical industry, and the technological advancements coming out of Silicon Valley. Mazzucato argues that by not giving due credit to the state’s role in this process we are socializing the risks of investing, while privatizing the rewards.
That is: Much of the profits that e.g. Apple and Google put into the pockets of their CEOs are in fact not due to Apple and Google at all (though they profit, and the rest does not) but to the government, including the whole development of the Internet that made Google and Apple so powerful.

There is considerably more under the last dotted link, that is also part of a series.

4. 'Game-Changing March for Climate' as Californians Rise Up Against Fracking

The next item is an article by Sarah Lazare on Common Dreams:

This starts as follows:

Thousands of people from across California kicked off a march through Oakland on Saturday to demand that Governor Jerry Brown show "real climate leadership" by halting all fracking and shifting to 100 percent renewable energy in the state.

The demonstration brought together more than 100 grassroots groups, from labor to indigenous to environmental justice organizations, and is being billed as a a "game-changing moment for the climate movement in California." Ahead of the protest, organizers estimated it would exceed 10,000 people.

There is also this:

The mounting protests are inspired by New York's recent prohibition on fracking, which was won through grassroots pressure, and they come amid growing public anger that the fossil fuel industry continues to drill near schools, farms, and homes in the state, using and polluting water despite California's historic drought.

And this:

More than 25 labor unions and worker justice organizations are participating in the march, to "show that the tide is turning in the labor movement away from support for fracking and other forms of extreme energy and toward community-controlled, local clean energy," according to a press statement.

I dutifully reported it, and there is considerably more under the last dotted link, but I should also say that I have seen about 40 years of "environmental actions" that were - how shall I put it, hm, hm... -  not very successful.

And as I am merely reporting facts here, I add that this does not mean one should not act against fracking or for the environment, but only that these actions, so far at least .... well etc.

5. Global Capitalism's Terrifying New Math

The next and last item for today is an article by Kate Aronoff on Common Dreams:

This starts as follows:

McKinsey, one of the world’s preeminent business consultants, released a sobering new report this week detailing that, worldwide, total debt has risen by 40.1 percent — or $57 trillion — since the financial crisis of 2008. “Debt,” here, can mean many things: debt to other countries and international institutions, as in Greece and Italy, which were bailed out by the troika; it also means debt to financial institutions, or household and personal debt of the kind those of us paying off mortgages, medical debt or student loans here in the states know all too well. It all means bad news for the economy.

As “Renegade Economist” Ross Ashcroft explains for the Guardian, Kingston University economist Steve Keen, who predicted the financial crisis back before the bubble burst in 2008, has created a metric to understand when a global financial system needs some, for lack of a better word, updating. He’s written that when private debt reaches 150 percent of a country’s GDP, that that country should take some serious measures to get its financial house in order. Replicated on a global scale, a critical mass of countries all clocking in above the 150 number spells a highly fragile economic landscape. In the UK, private debt currently stands at 350 percent of GDP. In Japan? 400 percent. China? 217 percent. In the United States, that figure stands at a reasonable if-still-ominous 233 percent of GDP. Overall, private debt now stands at the greatest levels in human history.

Here is something on Steve Keen (<- Wikipedia) from the Wikipedia:
He considers himself a post-Keynesian, criticizing neoclassical economics as inconsistent, unscientific and empirically unsupported. The major influences on Keen's thinking about economics include John Maynard Keynes, Karl Marx, Hyman Minsky, Piero Sraffa, Joseph Alois Schumpeter, and François Quesnay.
I read at least 4 out of these 6, and also in considerable detail (though Sraffa published very little of his own thinking). There is also this in the Wikipedia article (minus a note number):

Keen's full-range critique of neoclassical economics is contained in his book Debunking Economics. Keen presents a wide variety of critiques on neoclassical economic theory, and argues that they show neoclassical assumptions are fundamentally flawed. Keen claims that several neoclassical assumptions are empirically unsupported (that is, they are unsupported by observable and repeatable phenomena) nor are they desirable for society at large (that is, they do not necessarily produce either efficiency or equity for the majority). He argues that economists' overall conclusions are very sensitive to small changes in these assumptions.

I have been trying to tell my readers several times now that I do not think much of economics - in spite of its containing a fair amount of mathematics - is really scientific, so I am quite pleased to find a real mathematical economist who did predict the crisis of 2008, unlike nearly all his colleagues, who agrees with me. [2]

O, and as to the last statement in the above quotation: That means that there is hardly any firm theoretical basis founded on real facts in present-day economics (in contrast with real sciences like physics and chemistry).

The above continues as follows, which I quote for my own pleasure:
Keen has attempted to counter Marx's theory (in his view Marx's pre-1857 view, specifically) from a post-Keynesian perspective, by arguing that machines can add more product-value over their operational lifetime than the total value of depreciation charged during those asset lives.
See my article on Marx: Apart from dialectics (that I always considered incompre-
hensible nonsense) my main theoretical reasons to cease being a Marxist in 1970 (having Marxist parents and grandparents) is that I saw - all by myself, in 1969 - that Marx's labor theory of value was inconsistent (in which I was right: see e.g. Steedman's book "Marx after Sraffa").

Back to the article under the last dotted link, there is also this:
Rather than putting money into the “real economy,” where we live, spend, love and work, politicians in 2008 chose to prop up the bankers and speculators who got us into the mess in the first place. Consequently, the only industry that’s grown significantly since 2008 is the financial sector. In other words, they bailed out the wrong people and are likely to do so again and again. Given our current political landscape, they’re also more likely to ground us further into a vicious cycle of austerity and “backdoor privatization,” as Ashcroft calls it. That is, cutting spending and public services to save money, starving out vital public services and paving the way for private industry to buy up our now husk-like social safety net, post offices, public transit systems, schools, etc.

Quite so. And the main reason that our leading politicians "bailed out the wrong people and are likely to do so again and again" is simply corruption: The "wrong people" are the richest individuals there ever have been; they have worked since 1980 to bring down the mixed system that worked well from 1946-1980; and because they have such vast sums of money, and now also may do so by the Supreme Court's awful decisions, they may buy almost any American  politician, and deceive and delude most of the ordinary people by their billions that are mainly spend on - false, deceiving, deluding - advertisements (political and non-political).

Finally, there is this:

While some economists might have you believe that their choices are based on cold hard calculations, the choices of where to allocate money — especially in the wake of a financial crisis — are ideological. It’s not an ideology of evil bloodsuckers, but of a heartfelt, pragmatic belief that more resources should be controlled by fewer people.

Yes, indeed: ALL economical decisions of any great political effect are IDEOLOGICAL decisions, and are NOT based on real science. And especially
the "economics" that informs the decisions in favor of the few rich is not
science but ideology that pretends to be science, much like it also works in
the pseudoscience of psychiatry.

And this is an article well worth reading in full.


[1] I will write a special on this, but not today.

[2] Incidentally, here is another reason why much of economy must be illusions, delusions or - especially - ideologically motivated lies: Nearly all economists disagree with many other economists, just like theologians do.

Also I'd like to add that while this does seem to me to be the case in current
economics, this does not at all mean that, eventually, economics may not be a real science. It very well may be - my point is that it is not. (And most of most sciences will either be overthrown or will be seen in a quite different light within 25 years, for that is a very safe induction from the history of the sciences.)

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