Relevant and even prescient commentary on news, politics and the economy.

Moms New Boyfriend, Again . . .

Guest Post by Noni Mausa

When you read a newspaper piece with a single mother’s new boyfriend in it, you know nothing good is coming.

Oh, he could be a sweet, caring man who loves her kids and has a good job, but as Damon Runyon famously said, “that’s not the way to bet.” In the usual story, he turns out to be abusive, wasteful, unreliable, criminal, vain, or at the very best, good enough with the kids to kind of watch them while she works two jobs to support them all.

The Boyfriend is definitely NOT a nanny. [Yes! A political/econ theme at last!] He isn’t hired or fired, trained or licensed. He is not capable, firm, caring, and chiefly concerned with the welfare of the house and family. The Boyfriend attains his position not by giving good husbandly performance, but by flattery, deceit, promises, insinuation, and good acting. He badmouths the previous boyfriend, painting himself as the best man for the role. He keeps it, if he does, through all these tricks plus fear, either through direct threats or through inciting fear of a world without him around to protect the family.

Once installed, does The Boyfriend keep the family safe, at least? Generally not. After the initial hopeful honeymoon period, things start to happen. Maybe she comes home and finds some essential bills haven’t been paid. Or he has bought a whale of a Chrysler Newport on which she will have to make payments. While she’s at work, he’s gotten into fights with the neighbors, or taught her kids to gamble, or sold off the appliances to pay those bills. The kids need schooling, but he only teaches them to shoot. They need good food, but he teaches them to like junk. And if any of the kids or their mother comment on his neglect and offenses, he slaps them around.

The Boyfriend thinks short term, always. He knows that after a few months or years, she will kick him out or he will leave. Much of the damage he did won’t get noticed till he’s gone. They say two can live cheaper than one, but he added to the family’s woes, he didn’t ease them. Her relief when he is gone is more blissful than her pleasure when he first moved in.

Yet, she still knows that a real husband would enrich the family and make her contented. So she goes looking again for the real thing, though if she could afford them, she would be better off hiring a traditional nanny, a housekeeper and a part time ~ahem~ gardener.

Now, a nation isn’t the same as a family, but in many ways elected officials are eerily like serial boyfriends. Those who protest the idea of a “nanny state” are oddly motivated, it seems to me. A nanny, like a traditional mom and dad, are devoted to the long-term well-being of the home and family and all the kids, not just the ones who are prodigies. The Boyfriend, by contrast, has his own agenda.

The voters are in the position of being courted every few years by candidates who will, when elected, receive the cheque book, the house keys, and a heavy leather strap for the naughtiest of the kids. We’d do well to look at candidates as though we were picking a husband for our favorite daughter. Is he vain, stupid, a liar or a cheat? is he violent or kindly, patient or impulsive? Will he maintain the household, repair the roof, water the garden, and make sure the kids get to school?

Or will you come home after four years to find that both he and the family silver (and that Chrysler Newport) are gone?

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A Nation of the Non-productive?

By Noni Mausa

A Nation of the Non-productive?

Over on Brad deLong’s blog, I tossed off a comment. Thought it was a throw-away, but is it really?

=======

Now and then for fun, I dip into the Wealth of Nations. Here’s a snippet from the beginning of Chapter III:

““A man grows rich by employing a multitude of manufacturers; he grows poor by maintaining a multitude or menial servants. The labour of the latter, however, has its value, and deserves its reward as well as that of the former. But the labour of the manufacturer fixes and realizes itself in some particular subject or vendible commodity, which lasts for some time at least after that labour is past. It is, as it were, a certain quantity of labour stocked and stored up, to be employed, if necessary, upon some other occasion. That subject, or, what is the same thing, the price of that subject, can afterwards, if necessary, put into motion a quantity of labour equal to that which had originally produced it. The labour of the menial servant, on the contrary, does not fix or realize itself in any particular subject or vendible commodity. His services generally perish in the very instant of their performance, and seldom leave any trace of value behind them, for which an equal quantity of service could afterwards be procured.”

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Good news for the big banks

Posted from an e-mail today comes this comment from Noni Mausa.  For me the key is how to filter the noise from the music so to speak.  And this involves being willing and then doing the quick checks on something that catches your eye.  You don’t have to agree with Noni’s conclusions to make yourself ask the questions needed to put articles in context.

It makes me more certain that we need  a section for those who are mildly interested in economics as it affects their lives, or feel either not qualified or reticent to even ask a simple list of questions in an effort to understand what is going on.   With examples.

by Noni Mausa


Good News! Little Billy Recovering Well!

The Associated Press had an article this morning about how well the banking sector is recovering from the financial crisis.  I had to giggle — it’s like reporting that little Billy is  feeling better now after getting a tummyache from eating Little Susie’s entire birthday cake.

I commented online to that article, but here’s my comment for your delectation.
———————–
Full article at
U.S. banks see their fortunes rise
Article by: MARCY GORDON , Associated Press, Updated: July 5, 2012 – 10:42 PM

Profits are up, bank failures are down, more loans are being repaid
on time and losses are ebbing.” 

I wrote:

And this is being presented as GOOD news?  Let’s see:

— Interest rates are down, so they’re not making money off interest, or not much.
— Loans are being offered “cautiously,” which I guess means they’re only loaning to people and businesses who don’t really need it.
— Instead, they are profiting from “higher account fees and more mergers,” that is, charging more the same or lesser services. (Could you remind me how this cannot be a drag on the economy?)
— Bank failures are slowing — but hundreds of banks have closed down (http://www.fdic.gov/bank/individual/failed/banklist.html) or been swallowed up by others since 2000.  Thirty-one have closed in 2012 alone, all smaller, local banks from the look of the lists.
http://www.zacks.com/stock/news/77303/bank-failures-31-so-far-in-2012

— But the big banks are much bigger.  There are currently about 7,500 banks in the US, of which the largest (JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, and Goldman Sachs) held more than
$8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to the Federal Reserve. http://www.businessweek.com/articles/2012-04-19/big-banks-now-even-too-bigger-to-fail

The Big Five today are about twice as large as they were a decade ago relative to the economy.
How much of their profits comes from systemic fraud and extortion? I
guess we’ll find out once the FBI have finished their work.
http://www.rollingstone.com/politics/news/bank-of-america-too-crooked-to-fail-20120314

and  http://4closurefraud.org/2011/06/15/bank-of-america-significantly-hindered-federal-investigation-u-s-official-says/

The stability and profits of the banking sector is a good news story indeed — if you happen to be a bankster.

Noni Mausa
PS  I found all this data online in the 17 minutes it took me to write
this comment.

PPS  What is it with the Associated Press?  They seem to often have
these rah-rah articles.

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Let’s Play “You Be The Sucker!”

By Noni Mausa

Let’s Play “You Be The Sucker!”

Let’s see. Business and banks have heaps of money – and aren’t hiring, spending their money, or loaning it out. Meanwhile, a few million working-age Americans have no money and no work, and many are young, strong, highly trained and capable. Business is complaining that they can’t get suitable employees for some sectors. But they aren’t training them, and in sectors where wages are low, they aren’t raising wages. Houses stand empty, while thousands are homeless or living in cramped conditions with family or friends. They are all playing “Don’t Make Me The Sucker.” It’s like a game of musical chairs where no-one gets off their chairs except the terminally benign or naïve. You can crank up the music all you want, but nobody’s moving.

And in this game, they’re all correct. If any of them moves without all the others moving, they get to be The Sucker. For instance, what if the unemployed went first? Suppose they went to the zero lower bound of wages and offer to work for free till the economy improves, “to show willing,” as the Brits say. But the losses they would court – loss of unemployment support, loss of time for real job search – are hardly balanced by the slim possibility that the humble homage they pay to the source of all human worth, the employer, will in the future be rewarded by a decent wage and steady work. Giving something for free hardly ever raises its price. In a rising economy this could work, for some. In a stagnant one, the unpaid employee is the sucker.

 
But the employer is in a fix too. There’s no fence that keeps his success from nourishing the business-slackers around him. If he goes first, and pays his people a living wage, his employees will spend their dollars at the cheapest stores – the ones who didn’t waste their time and money on wages and benefits. The generous employer creates customers for others, not for himself. If he goes first, he’s the sucker.

Even if new employees were his for free, enlarging his business when there are no customers is a recipe for failure. He briefly nourishes other businesses by building a bigger plant, investing in machinery and training, and what comes of it? He gets to be the sucker. Banks trying to make loans in a time of stagnation are obvious suckers. Where’s the profit in loaning at 3.8% when the risks of default are not only high, but controlled by other, unpredictable, even fraudulent actors in the financial arena? If hegoes first, he’s the sucker.


Businesses who need specialized employees are suckers if they try to train them or take them through apprenticeship. Where’s the guarantee that the employee won’t take his skills elsewhere – to a business that can offer higher wages because they didn’t waste money in training? If a business trains first, he’s the sucker. Each one alone is a sucker for trying to do what, in a functioning economy, makes sense. In stagnation, only fools try to go first, and not one in a hundred succeed if they try.
 
So obviously what we need, right here, right now, is a nation of fools. Can anything get all the players off their chairs in back into Mr. Fezziwig’s dance? Nobody trusts anybody, and rightly. The smaller players can’t do it, and the giant ones hardly need to. But something needs to be done. As our wise Mr. Pratchett said regarding the game foote-the-ball, “…a tactic was for players to cluster thickly around their own goal so there was no possibility of anything getting past them. I regret however that if both teams do this you do not have a game so much as a tableau.”
 
And a tableau, however individually sensible, is not an economy.

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Wealthy Non-Taxpayers — From 60 to Thousands in 30 Years

by Noni Mausa

Wealthy Non-Taxpayers — From 60 to Thousands in 30 Years

Bruce Bartlett provides the numbers, but it’s so much easier to see in a chart.

Wealthy Non-Taxpayers 1977 to 2009, showing incomes over $200,000 per year.  Blue is percentage of total households over $200,000 paying no taxes, purple is numbers of high-income households paying no taxes. Numbers from chart here: http://economix.blogs.nytimes.com/2012/06/05/rich-nontaxpayers/, drawn
from IRS data.

On this chart, the percentage appears relatively stable with a low of 0.066 to a high of 0.529 (66 per 100,000 to 529 per 100,000) but actually that’s an eightfold increase, mostly accruing after 2004.
The numbers of households, however, leap like a gazelle after 2004, reaching a high of 22,000 high income households paying no taxes, from a low of only 60 in 1977.

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Inequality on the Island

by Noni Mausa

Inequality on the Island

Your island has 1000 people. 500 are working age, 500 are children or elderly and can’t do much.  That’s normal, and not a problem.

The 500, working together, easily produce enough food and stuff for 5000 people, while also supporting the 500 young, old and disabled.  In fact, the working 500 are so productive that in good times they have plenty of time to create music and art, write books, do research, and explore the sea, the land and the heavens.  And when members of the 500 grow old, there are youngsters ready and willing to take their place.

With 5000 livings floating around, no-one expects each person to have 5 livings.  Some will always have a bit more, others a bit less. But this variability can go too far.

By 2007 on the island, 200 people control 4250 of the 5000 livings,and of that group ten people control 1730 livings.  One of the 200 has 615 livings all to himself.

The other 800 people on the island have 750 livings to share, 0.94 each.  Half of these people are not workers, and need to be supported by the remaining 400.

These 400, subsisting on less than a living each, produce 80%of the island’s economy of 5000 livings, or 10 livings each.  In return they receive 1.88 livings with which to support themselves and one dependent.

There’s your inequality.  How does it look to you?

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The Mordant Litmus of Texas?

by Noni Mausa
The Mordant Litmus of Texas?

The other day I was listening to a fascinating interview on US executions.
"So far this year, 5 convicted criminals felt the executioner's
needle. Michael Graczyk watched as they took their last breath. The
reporter from the Associated Press has witnessed more than 300
executions. It's believed he's seen more men and women put to death
than anyone else in the United States."
(Link is here. Audio  is here)

But what caught my ear was the moment in the interview when Graczyk
remarked that in 1982, Texas resumed executions. I thought, there's
another entry for my file "It all started in 1980."

From 1964 to 1982, eighteen years, Texas executed nobody.

In 1964 the US Supreme Court negated all death penalties nationwide in
"Furman v. Georgia" due to unacceptable trial-and-sentencing
procedures. (details here, in case you care.)



States revised their trial procedures and by 1976 the Supremes allowed
that under these new procedures states could resume executions. Yet
Texas didn't use this until 1982 (a single execution), and then things
took off.

However, this post has nothing to do with capital punishment, but with
the economy. And I noticed something interesting.

See, all this led me to look at the number of Texas executions over
time. In this very rough (don't laugh) graph,

there were three peaks in Texas executions -- in the late 1800s, in the 30s,
and today's. Each peak has outdone the previous, and the 2000-2010
numbers were the highest ever.

For those who don't notice it, these eras equate to the Long Depression, the Great Depression, and our current depression.

Now, I realize that an element of the growth in executions is tied to
population growth, and if I had time I could chart that out. However,
Texas population growth can be seen in this chart (http://www.lsjunction.com/texians/charta.gif), and is shown to be a
long smooth exponential rise since 1800. Taking that into account,
there would still be three big bumps in the distribution of
executions. In my second laughable graph, you can see executions
really take off in the late 90s, leading into the biggest decade ever
-- 2000-2010, 248 executions.

It certainly looks to me like America's deepest recession /
depressions, are linked to Texas executions in some way. But
laughable graph #2

shows that the link is probablypredictive rather than resultant -- something is happening in the society which causes a buildup of personal disasters and/or punitive overreaction, before the bubble bursts.

If this is the case, then laughable graph #2 seems to show a dismally
hopeful trend, as execution rates have dropped since the housing and
finance bubbles burst in 2007-2008.

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The Rulers Cannot Take Responsibility

op-ed by Noni Mausa

   
The Rulers Cannot Take Responsibility

At least, not in the sense of crime and punishment.  Only in  immediate, short term and small decisions can political rulers be  unambiguously judged right or wrong, and adequately punished.  There is no punishment, however severe, that can adequately balance the potential harm done by one man or a small group to an entire nation.  Even in ordinary people, the threat of reprisals is unevenly effective in preventing crimes. And nobody thinks such threats can prevent  stupidity, misjudgment and decisions made on incomplete data.  The scope for such poor decisions is magnified thousandfold in the public arena.

In government the scale of possible harm is so disproportionate to what a bad ruler can suffer or repay, that for all practical purposes they wield power without responsibility.

Even the most earnest and caring leader, the cleverest, the strongest,  cannot “take responsibility.” They can do much good and much harm, but  they personally can’t be held accountable in any way that mends the broken crockery of the nation.

The whole purpose of government is to make decisions for the common  good across time.  Longer than a term of office or even a lifetime,  the work of government requires planning and caution.  It is
inherently conservative in the original sense of the word.  The only way rulers can “take responsibility” is to realize this and  to make decisions and support social structures that are cautious and  conscious.


They need to build and maintain excess capacity.  They must conserve  resources that might be useful or more valuable in the future.  They  need to nurture relationships with other nations and peoples.  They need to sponsor or at least tolerate a myriad of niches of knowledge,  skills and unique obsessions.  We can’t know when we will need them.  A high-functioning nation is the opposite of a high-functioning  business.  Efficiency for its own sake is dangerous.  Demanding
immediate profits, or any profits at all, can reduce the effectiveness  of a government.  Messyculture, not monoculture, is more valuable over time. (Taxol, anyone?) And a large, durable bureaucracy acts as a keel and ballast together, steadying and orienting the nation.  Even in non-democratic countries, a series of captains (kings, tyrants, revolutionaries) take the wheel and steer for a little time, only to
be replaced.

When you’re sleeping on a mountain ledge in the fog and can’t see the dropoff, it makes sense to sleep right up against the stone wall.  In effective government, red tape and a habit of caution are kept in place to prevent us rolling over the edge.

Are there any conservatives in the US today?  Maybe the Greens, and  some of the Democrats.  Perhaps some of the quieter, older Republicans.  But it’s almost certain that there is no-one high in the  big US parties today who is conservative enough to keep us off the rocks.  This leaves informed voters with nothing but distasteful choices.  The best we can do is look for candidates who are least
likely to cut the safety tape, and most likely to send out scouts to monitor the crumbling cliff’s edge.

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