Saturday, October 29, 2011

Dissecting the 'We Are Wall Street' Letter: the most fun you can have in reading glasses

New York Stock Exchange - iconic Wall Street ready to fight back.










 Some of you will have seen this letter. It's been circulating around Facebook for a few days now, proudly touted by those who still buy into the whacky premise of supply side economics as a beautiful rejoinder to the Occupy Wall Street movement. Let's analyze it piece by piece, and see just how beautiful it is. (Original text in blue. My comments in black.)





  • We are Wall Street. It's our job to make money. Whether it's a commodity, stock, bond, or some hypothetical piece of fake paper, it doesn't matter. We would trade baseball cards if it were profitable. This much at least is not problematic. Given the timbre of the rest of the letter, the writer is certainly arrogant enough to represent the excesses of Wall Street that we've all grown to despise.
  • I didn't hear America complaining when the market was roaring to 14,000 and everyone's 401k doubled every 3 years. Just like gambling, its [sic] not a problem until you lose. I've never heard of anyone going to Gamblers Anonymous because they won too much in Vegas. Also quite true. No one complains when they are winning. The problem here is, of course, that it was just like gambling, except it wasn't supposed to be. No one in their right mind takes their pension fund to Las Vegas. They put it in nice safe diversified mutual funds and money market funds. All the unmitigated risk came from Wall Street. Wall Street took our money to Las Vegas and lost it. Not their money, our money. We didn't give them permission to do it. They didn't ask. But even though they lost our money, they still expected to get their commissions and their fat bonuses. And it gets worse because they didn't just lose our money, they set us up to lose our money and then bet against us. They sold securitized mortgage paper that they knew was crap to our pension funds, lied about how crappy it was, and then invested themselves in short positions on the same crap so that the more money we lost, the more money they made. The biggest and most respected Wall Street firms were found guilty of this kind of fraud. They paid substantial fines and penalties for it—not so substantial that it has slowed them down any, but hundreds of millions of dollars. No one went to jail though. A lot of us Joe Mainstreets think someone should have gone to jail. God knows we would have had we sunk to this level of criminality.
  • Well now the market crapped out, and even though it has come back somewhat, the government and the average Joes are still looking for a scapegoat. God knows there has to be one for everything. Well, here we are. Scapegoat, my ass. If the shoe fits, bud.
  • Go ahead and continue to take us down, but you're only going to hurt yourselves. What's going to happen when we can't find jobs on the Street anymore? Guess what: We're going to take yours. We get up at 5am & work till 10pm or later. We're used to not getting up to pee when we have a position. We don't take an hour or more for a lunch break. We don't demand a union. We don't retire at 50 with a pension. We eat what we kill, and when the only thing left to eat is on your dinner plates, we'll eat that. Most of us in the 99% work long hours too—at least those of us who still have jobs. Good luck taking jobs away from the 14 million of us who don't have one to take, or the 11 million additional displaced workers who have been forced into early retirement, have fallen off the unemployment rolls, or are underemployed. We don't retire at 50 with a pension either. In fact many of us will be lucky to be able to retire at all after what you bozos have done to our savings. You don't eat what you kill. You kill for sport. You work until 10 at night because your whole life is about racking up points. You don't have friends except at work. Your family plays second fiddle to your job. You come after my plate and you're not going to find the filet steaks and coquilles St. Jacques that you are used to. You are going to find rice and beans. If you try to take it away from me, you are going to end up eating broth and jello at the hospital.
  • For years teachers and other unionized labor have had us fooled. We were too busy working to notice. Do you really think that we are incapable of teaching 3rd graders and doing landscaping? Well, yes I do think you are incapable of teaching 3rd graders and landscaping. I've done both and I've also been a CPA and worked as an accounting executive. I'd rather do accounting. It's easier. It's not as easy as trading hypothetical pieces of fake paper, but it's not nearly so hard as managing a classroom full of eight-year-olds or trying to get rid of a spider mite infestation on a variegated dracaena marginata without killing the plant...or yourself.

    Trading floor of the NYSE where Wall Street is busy saving America from its elementary school teachers.

  • We're going to take your cushy jobs with tenure and 4 months off a year and whine just like you that we are so-o-o-o underpaid for building the youth of America. Say goodbye to your overtime and double time and a half. I'll be hitting grounders to the high school baseball team for $5k extra a summer, thank you very much. Wait...what? Cushy? 4 months off? Double time and a half? $5,000 for running a baseball practice? What planet do you live on?
  • So now that we're going to be making $85k a year without upside, Joe Mainstreet is going to have his revenge, right? Wrong! Guess what: we're going to stop buying the new 80k car, we aren't going to leave the 35 percent tip at our business dinners anymore. No more free rides on our backs. We're going to landscape our own back yards, wash our cars with a garden hose in our driveways. Our money was your money. You spent it. When our money dries up, so does yours. Wait...what...again? $85k? Same question with respect to your planet of residence. I drive a 2003 PT Cruiser, which I wash in the driveway with a garden hose. I tip 20-25% when I eat out because that's as much as I can afford. I didn't stop tipping or cut my tipping down when I lost my job because, unlike you, I am not a prick. And here's another thing. Since you make your money off of mine, when my money dries up, so does yours. It doesn't actually work the other way, much as you might wish us to believe that it does.
  • The difference is, you lived off of it, we rejoiced in it. The Obama administration and the Democratic National Committee might get their way and knock us off the top of the pyramid, but it's really going to hurt like hell for them when our fat a**es land directly on the middle class of America and knock them to the bottom. We lived off the money we worked for. You rejoiced in the money you scammed us out of. What's more the Obama administration and the Democratic National Committee are not going to knock you off the top of the pyramid. You guys paid to put them in office. They are probably going to leave things as they are unless the Occupy Wall Street movement gains so much momentum that they have to sit up and take notice. Where do you think the $2 trillion in bailout and economic stimulus money went? It went to Wall Street. It paid your fat bonus. Conservative pundits are clamoring about Obama's spending spree, but most of the money went right to the top of the pyramid where it stayed. It didn't go to hiring teachers back or putting America back to work. It went into the coffers of asshats and pirates who used some of it to lobby against financial reform and the kind of common sense regulations that would prevent another bubble, bust, and bailout cycle. Obama is your friend. He may not be as good a friend as, say, Rick Perry, but he's done everything you required to maintain the status quo.
  • We aren't dinosaurs. We are smarter and more vicious than that, and we are going to survive. The question is, now that Obama & his administration are making Joe Mainstreet our food supply...will he? And will they? Honestly, I don't even know what this means. I think possibly your last hit of cocaine kicked in somewhere in the middle of the paragraph above this one. In fact this whole missive is so disjointed and misinformed that I have decided, arrogant or not, you are not Wall Street at all. You don't know enough about how finance and economics actually work to have ever done time selling securities, vetting market analysis, or timing trends. You are an ignoramus, and you are not taking anything away from me. Besides, someone way smarter than you has already got most of it. 

Wednesday, October 26, 2011

A Steaming Pile by Any Other Name: Horse and Sparrow Economics




For several weeks now, I have been Tweeting and Facebooking the hell out of something called 'horse and sparrow economic theory' because it is at once so evocative and so descriptive of the bill of goods that has been supply side policy since the Reagan administration. 'Supply side economics' was a term adopted to replace what was, at the time, the more pejorative term, 'trickle down economics'. In either case, the theory was that if you cut taxes for the wealthy they would have more money to save, and part of that savings would be invested in new technology and new productive capacity, which would create new jobs and lift the economy as a whole. In other words a little governmental largess for the wealthiest Americans would eventually trickle down to benefit everyone.
For a while it seemed to work that way. Reagan had inherited an economy that wasn't just stagnant, it was also inflationary. They called it 'stagflation', and while there were lots of theories as to what caused it at the time, it was doggedly resistant to any measures adopted to get out of it. Reagan's solution was across-the-board income tax cuts coupled with a massive increase in defense spending. The math didn't work of course, and Reagan's budget director, David Stockton, got into trouble for saying as much in an interview with Vanity Fair at the time.
Reaganomics, as it came to be called in the press, relied on something called the Laffer Curve to sell the plan. What the Laffer Curve purported to show was that if you lowered tax rates, total tax revenue would actually go up because the taxes saved by individuals and businesses would lead to higher income through investments and thus higher absolute taxes although at a lower rate. This turned out not to be true, and Reagan suddenly had a revenue problem. His spending was going through the roof even though he touted spending cuts, and his tax receipts were taking a nose dive. Turns out you can't arm a nation to the teeth without spending money, and arms to protect us from Soviet missiles that didn't fly straight cost a lot more than food for the poor.
Alan Greenspan, tapped by Reagan to chair a bipartisan commission to fix Social Security, instead fixed Reagan's revenue problem with subterfuge. Purporting to put Social Security back on sound financial footing, he raised Social Security taxes. The additional tax revenues filled federal coffers by effectively reversing Reagan's income tax cuts for middle and lower income wage earners. This was a huge regressive shift in the total tax burden—lightening the load for the rich and increasing the burden for the poor.
Reagan was happy to borrow the Social Security receipts to fund the arms race. He got the Soviets to spend themselves into the poor house, but the apparently serendipitous collapse of the Soviet Union may have created as many problems as it solved. Reagan once famously called the accounting sleight of hand 'revenue enhancement'. For the middle class taxpayers upon whom the burden fell, Reagan's use of the term 'enhanced' is the moral equivalent of using 'enhanced interrogation techniques' to describe torture.
Eventually stagflation went away. Supply side advocates like to point to Reagan's apparent success to sell 'enhanced' trickle down policies today. I would argue that since Reagan actually raised taxes, increased spending, and more than doubled the deficit, supply side philosophy had little to do with the improved economy. A much better case could be made for increased spending as the best way to kick-start a stalled economy.
This is just too Keynesian to be embraced by conservatives though. They are all still firm believers in the supply side formula, even though it has never really worked...not even for Ronald Reagan who is its patron saint. After thirty years, the legacy of supply side policy-making is clearly bubbles, busts, and bailouts. It is time to go back to calling supply side theory by the name it started with—' Horse and Sparrow'. It goes like this: if you feed the horse enough oats, some will pass through to the road for the sparrows.
When the sparrows get tired of the steady diet of the horse's leavings, we will finally see what 'Angry Birds' really look like.

Monday, October 24, 2011

Flatline the Flat Tax

Rick Perry is coming to town with a tired old idea - the flat tax - only it's voluntary. That's right, in an effort to simplify 3 million lines of tax code, Perry has proposed adding another layer of tax rate that you can elect to pay if your taxes computed under the old system add up to more than 20%. How is this simplification? This is an unvarnished tax reduction for the highest bracket taxpayers. 


It's just another way to lessen taxes for those who can most afford to pay, and stick it, yet again, to the middle class.


Just say 'no' to more of the same old trickle down doodoo with a bumper sticker from Aimless Arts.

Saturday, October 22, 2011

Trickle Down Theory: DooDoo Economics

The latest Aimless Arts Tee - How often do you get to wear doodoo on your shirt and still look smart?




Share this. Tweet this. Take me viral. It's my personal economic recovery plan!


Also, for the more scatologically inclined.




and finally a bumper sticker
if you feel compelled to just say 'nein!' to Herman Cain's tax plan.




Go ahead. Make my day.





Wednesday, October 19, 2011

Dumping on the Occupation


 The legion of detractors of the Occupy Wall Street protests are beginning to sound as tedious as some of the activists. Their favorite rejoinder seems to be 'get a job' followed close on by 'take a bath'. Of course neither one is particularly useful when you're speaking of a group of people who are essentially camping in an era of 9.5% unemployment. Those protesting the protests are as clueless as to what the Occupy movement is about as the individual tin-foil hat candidates they love to single out as somehow representative, which of course they are not.
Some of this is the fault of the movement itself, which has deliberately sought to be so leaderless and egalitarian that it has given a voice, however briefly, to all manner of crackpots and scatterbrains, and even listened politely while they rant about whatever is on their minds. The rest is due to the self-appointed and largely self-serving guardians of the status quo who pick out easy targets for the kind of sound bite criticism that sells blog space and air time. These pundits miss the issues at the heart of Occupy Wall Street, and so miss the opportunity to engage in the kind of dialogue that would actually address our myriad of problems.
Raise your hand if you think Occupy Wall Street is a bunch of effete college students who think they should get something for nothing simply because they are too lazy to work for it. Shout out if you believe they are all left-leaning progressives who want to crush business with an endless stream of burdensome taxes and regulations. Stamp your feet if you are convinced that Occupy Wall Street was started by a bunch of elitist college professors to sweep away capitalism and the American way of life and replace it with a New World Order. What a bunch of folderol—honestly!
The irony here is that the protestors camped out in Zuccotti park are angry for the same reasons that the Tea Party is angry. Their future looks hopelessly grim. The self-worth and economic value that were supposed to accrue to them for getting an education and going to work have evaporated. The rewards of innovation and creativity and perseverance and frugality and hard work are no longer assured. The natural order of things has been overturned and replaced by something insidious and grossly unfair. The system now rewards the pirates and charlatans.
The difference between Occupy Wall Street and the Tea Party lies, not in why they are mad, but rather in who they are mad at. Occupy Wall Street is mad at the bank executives and speculators who stole our future—the guys who, as Nobel laureate in economics, Joseph Stiglitz, has pointed out, created a system to 'socialize losses and privatize gains'. They took huge risks, pocketed the money they made, and got the taxpayers to backstop their play when things went south. You can follow the money and see what they got away with. Their perfidy is well documented and infamous.
The Tea Party, on the other hand, is mad at Barak Obama and the runaway spending of the Democrats. They are mad at everyone who got sucked into an adjustable rate mortgage. They are mad at people with serious illnesses who can't buy medical insurance. Why don't they just die already and quit burdening an already overtaxed system? They are mad at welfare cheats, medicare cheats, layabouts who draw unemployment instead of getting jobs, and anything with the word entitlement in it.
They are mad at these things because Glen Beck told them to be, or Rush Limbaugh, or any one of a number of pandering nabobs who make their money telling people what they want to hear. It hardly matters that the math doesn't work. You can take all the villains of the fundamentalist right and add up the money lost to their villainy and you won't come up to the amount of the problem. That's because the problem is on the other side of the equation—the revenue side—the side where the real cheats live.

Wednesday, October 12, 2011

Occupy Wall Street Occupies National Stage


Watch live streaming video from globalrevolution at livestream.com




 I've been watching the Occupy Wall Street protest in a kind of bemused and detached way since it started. They have yet to look serious or come up with a thoughtful, viable agenda. Their one saving grace up till now has been, in the words of Paul Krugman of the New York Times, that 'they are angry at the right people'.
So I like them—this great unwashed rabble of campers and activists—even though they seem to ricochet from issue to issue like amped up pinballs without understanding anything fully, or even adequately. Why do I like them? Because the enemy of my enemy is my friend. They may not understand what they are doing, but they are down there in the financial district making trouble and impeding traffic and generally pissing off the Wall Street establishment. That's almost enough for me.
Things are beginning to change though. Occupy Wall Street is gathering momentum as a movement, and in no small measure due to the over-reaction of the police sent to maintain order and the screeching condemnations coming from conservative pundits and financial commentators on the usual cable outlets.
The protestors are still largely an unfocused mob with no clear agenda, but their persistence, their omnipresence on social media, and the ridiculous posturing of their detractors have given them an air of legitimacy. Lately, even Ben Bernanke, Timothy Geithner, and President Obama have separately expressed philosophical empathy with the protest, if not in principle, at least with their level of frustration. '...Who can blame them?' Bernanke quipped. Well, seemingly a lot of people can blame them, but most of that blame is apparently going to come from the political right.
Indeed. Bernanke's rhetorical question is doubly curious in that one of the more consistent calls of the protest is for the complete and immediate dismantling of the Federal Reserve Bank. Bernanke will be out of a job if the protestors have their way and, given the timbre of some of the attendant tweets and rally signs coming out of the protests, he just might be tarred, feathered, and carried out of town on a rail in the bargain. Obama's remarks are more obviously self-serving, and that, to my thinking, is as problematic as the condemnations from the right because the protest is and ought to stay apolitical.
The initial Occupy Wall Street narrative went something like this: Wall Street greed and corruption have robbed us of our future. They have tanked the economy, cost millions of jobs, stripped us of the value that used to give us comfort in our homes and our retirement accounts. They have undermined our worth as individuals and as a nation. They have made us less secure, less safe, more vulnerable. When they had brought the whole financial system to the edge of collapse, they reached into our pockets yet again and got us to rescue them from their own folly. Now, while the rest of us are still trying to crawl out of the smoking ruins they left us, they are back to their old tricks, unchastened, unrepentant, and unrelenting in the pursuit of the rest of our happiness. This is a huge injustice that needs to be fixed, and we are going to camp here and raise a ruckus until somebody does something about it.
This is not a political narrative, although many seem tempted to make it one. The Wall Street pirates donate almost equally to both major political parties. There is a reason for this, and the first Occupiers of Wall Street seemed to understand as much.
Politicians on both sides of the aisle share the blame for the paucity of regulation and fiscal licentiousness that got us into this mess. While Democrats are held by Republicans to be the party of profligate spending, the deficit rose most dramatically under Republican administrations. And while Republicans are widely thought to be the party that champions the worst excesses of corporate America, some of the most egregiously enabling deregulation took place under Democrats. Our problems are not rooted in political ideology. They are rooted in a system whose controls were deliberately broken in exchange for political contributions and support made to both parties by what Matt Tabbai of Rolling Stone calls a new Grifter Class.
These thieves are the real enemy, and they have co-opted our democratic processes and our institutions for their own gain. What they do is not just greedy, not just larcenous. It is, in my opinion, treasonous. They have done more damage to this nation than any terrorist organization. They have undermined our strength, weakened our influence, stripped us of our freedom, and all without recourse to any ideological framework. They are not political. They are criminal. They use politics, to be sure, but only as a means to an end. The larger political issues of left versus right, progressive versus conservative, the tensioned balance between individual rights and majority rule mean nothing to them. Their only concern is have or have not.
The Occupy Wall Street protestors think this is wrong. They may be a raucous mob at this point. They may even, as conservative commentator Michelle Malkin has suggested, smell bad. There's no doubt they have expressed some crazy notions, some of them self-contradictory, but this is always a danger when you have deliberately tried to remain leaderless and organically democratic. One could level many of the same criticisms against that other infamous grass-roots protest movement—the Tea Party. Personally I think there is something to like about both groups. They each have legitimate grievances.
The danger is that all this unfocused frustration is easily co-opted by politics. Certainly the Tea Party has come to be identified with a kind of fundamental rebublican libertarianism. Now MoveOn.org is busy trying to marshal the energy of the Occupy Wall Street groups. This is a shame, really. There is much to like about the fact that the initial anger of the movement has been directed at real pirates and charlatans. The environment that made the piracy legal was created in Washington by Democrats and Republicans alike. The solutions to the problems are actually quite simple and even fairly well known, but they will have to be addressed with the same kind of bi-partisan co-operation that created them in the first place. Playing us versus them with these movements will just muddy the waters and delay any chance of real reform.

Monday, October 10, 2011

Class Action


When you've got the blues, you need to blow the horn.

 My friend, David Kaa, who blogs at ManWife Chronicles about the trials and tribulations of long-term unemployment received a cease and desist order from an attorney representing his former employer. You can read the details here
It seems that David's employer was upset that he was making disparaging comments about them in his blog and on a video commentary that he put up on YouTube. The lawyer said he had to quit. Not only did the lawyer insist that he quit, but also that he remove the offending posts and dismantle his website. To give legal weight to this demand the lawyer cited a non-compete agreement that David had been required to sign when he was first employed. Also cited was the Digital Millenium Copyright Act.
This last seemed a bit over-reaching to me. At issue was the fact that David's video included shots of the employer's office building with its logo displayed prominently on the side. Wait...what?! Displaying a picture taken on a public thoroughfare of a sign on a building is copyright infringement?
David called bullshit on this one, but it turns out that the lawyer is right. You can't do that, at least not for commercial purposes or private financial gain. Neither can Google it would seem, but nobody is making an issue of it with them. David's former company's logo is displayed for all to see on the street view of Google maps. Google presumably has more lawyers than God.
David did take the video down though. Who wants to waste the precious hours of blissful unemployment (no longer working for assholes) fighting with a lawyer? As my hometown pharmacist and soda fountain operator used to say, 'You can wrestle with a turd all day long, but no matter how bad you whup it you're still bound to get a little on you.'
Copyright issues aside, I think the proscription against making disparaging comments is an actionable offense on the part of David's employer, and many others as well. My former employer did it too—not in a non-compete agreement but in the termination letter I was forced to sign in order to get any severance pay. I'm not only prohibited from making disparaging comments in any public forum, I'm also prohibited from acknowledging that any severance agreement even exists. Good luck enforcing that one.
Here's my point. The ability to make disparaging comments is a necessary adjunct to the continuing mental health and well-being of an unemployed individual. This fact is, I think, well established in modern society on another front. For instance people who have just gotten out of bad relationships are allowed, expected, even encouraged, to say all manner of perjorative things about their former significant others. It's part of the healing process. It's an expression of the anger that is one of the five necessary steps in the grieving process.
Nothing more closely parallels a divorce or break-up than losing one's job. The longer you've had the job, the more effort you've invested in the relationship, the harder it is to adjust to being terminated and escorted out of the building like a trespassing derelict. This is a hurtful experience. Anyone who's been through it knows that you need all the healing tools available to weather the turmoil and get your life back on track. One of those tools is the ability to work through the natural feelings of anger and betrayal.
Taking this a little bit further, the continuing mental health and well-being of the unemployed is a necessary adjunct to their ability to get another job.
This is and has been an extremely difficult job market. Three years after the CDO- and derivative-fueled real estate bubble burst and brought our economy to the brink of collapse, unemployment is still running above 9%. There are an estimated 25 million unemployed, underemployed, and displaced workers who need jobs. Conservatively there are 6 people actively looking for work for every one available job.
A job seeker in this market needs to be on top of his or her game. There's no room for self doubt or depression. The slightest sign of weakness is going to get you culled from the herd of available applicants for any job. A job seeker needs to be positive, confident, assertive, self-possessed and optimistic. None of these is very likely while you still have unresolved issues regarding your former employer. In other words you've got to work through your anger to be sane, and you've got to be sane to have a chance of getting a job, especially in an employer's market.
Seen in this context, any effort on an employer's part to circumvent the natural process of healing can be viewed as unfair and injurious. Proscriptions against disparaging remarks, public or private, are deliberate attempts by employers to protect themselves from the consequences of their decisions at the expense of the very people they harm the most. It is adding insult to injury. It is kicking a man when he is already down. It is therefore objectionable. It needs to stop.
I propose a class action lawsuit on behalf of every unemployed person who has been forced to agree to place their mental health and future financial security in this kind of jeopardy in order to make it easier for their employer to fire them. It's only fair.

Wednesday, October 5, 2011

MORE CONVERSATIONS WITH BEAN: Inbreeding the Banks


We've had our greyhound, Bean, for a year now. He's adapting well to life off the track, and he seems happy to have traded his racing days for a life of reflection. Every day he grows in wisdom and grace. He is a good dog, eager to please and quick to learn. We have begun to engage one another in conversation with some frequency. Here is one such exchange.
ME: Yes I did, Bean. Very interesting, don't you think?
BEAN: Interesting?! Frightening is what it is.
ME: How so?
BEAN: I've been watching this for a long time, ever since the news started talking about banks being too big to fail.
ME: And?
BEAN: Seems like merging is the wrong way to go about fixing the problem.
ME: You make a good point. If they're already too big, mergers just make them bigger.
BEAN: Yeah, but that's not the half of it. Think what's involved in the merger. You got a bad bank, full up with toxic assets, about to go under, and you merge it with another bank where all the same problems haven't come to light yet. You haven't solved anything. I mean, you palm Merril and Countrywide off on Bank of America, Wachovia off on Wells Fargo, Bear Sterns and Washington Mutual off on JP Morgan, you just made yourself a ticking time bomb. There are only four commercial banks left at the top. You're running out of places to bury the crap, if you know what I mean.
ME: You seem to have a pretty good handle on this for a dog.
BEAN: Well it's not exactly rocket science.
ME: A lot of people find this all very complicated.
BEAN: That's because they don't know how to think like dogs. Look at it like this. Suppose you had a really bad pit bull. He's aggressive, unmanageable, and anti-social. He's already done serious injury to a lot of innocent bystanders. What do you do with a dog like that? Do you neuter him? Rehabilitate him? Put him down? ...Or do you breed him to a bigger, stronger dog?