In my last post, I wrote about the squirrels in my neighborhood. I was bumming over the lack of respect offered lesser creatures. And I was writing about how wonderful it is to see wildlife juxtaposed to concrete and asphalt. It was a coincidence that just as I was writing about squirrels, my sister was sending me pictures of wildlife in her backyard. As you can see, she’s got serious wildlife in her neighborhood – nobody running this guy down.
Somehow, Saturday afternoon – glassy-on-the glide at Ellgrass Reef and few guys on the rotation, summer south swell, and the sun felt good. Looking up the Point, a thousand black dots like some kind of digital pic gone awry. But at the reef – it was a different world. After a clean session, I went to the beach to take in the big picture. I set my LB down, elevated off the sand – the nose on part of the reef and the tail on a piece of driftwood – deck facing down. I sat up against the cliff and enjoyed the view – it was beautiful. I was in a daze watching sets, people going back and forth, and then shock! As I scanned the scene, my eyes stopped in horror. There was some kid using by board as a bridge between the beach and the rock that the nose of my board was resting on. My gosh – words couldn’t get out of my mouth fast enough – my voice sounded more like a bark. The child, and the rest of his family looked at me like I was a complete idiot – like, ‘what’s the big deal.” Foolishly, I tried to explain that the child was essentially grinding my life into the dust. They just stared at me – I think they were a little scared. For my part, I rinsed my board, checked for damage, and bailed before someone else decided to use my board for some alternate purpose.
Monday and the surf was small – but the glide was fun. Similarly, the market did the glide, and pearled up to its jaw. Where did the money go? Treasuries. Downgraded- but still a safe haven. I want to look back to the Corpgov, the more Republi-than-Crat plan to privatize Social Security. The idea was to shift all that Social Security cash to Wall Street. But check it out – just like today, when the market crashes and your privatized Social Security account gets ready to crash along with it, your fund manager will look to protect your money – and buy Treasuries. The same Treasuries your Social Security funds are invested in right now. The difference – the private sector management of your Social Security funds will cost you the fees and transaction costs necessary for the management firm to show a profit.
Our news of the S&P downgrade states, “The credit rating agency said it was cutting the country’s top AAA rating by one notch to AA-plus because the deficit reduction plan passed by Congress did not go far enough to stabilize the country’s debt situation.” However, the report from the S&P that heralded the downgrade said, “The political brinkmanship of recent months highlights what we see as America’s governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed.” It’s true that the debt situation isn’t the target. We’ve had debt ever since we’ve had war – and we’ve always been good for it – because we agreed that it mattered – that we were responsible (which of course conflicts with our irresponsible lust of war). If the people who are our government create instability, are ineffective, and unpredictable – then how can our debt be anything but risky. It’s not the debt plan; it’s our own shitty government. If our government can’t make the right decisions, with all our resources at its disposal – who would want to invest? – Hence, the downgrade. If you need more proof regarding our lack of decision-making – S&P goes on; “It appears that for now, new revenues have dropped down on the menu of policy options… Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues.” And if our own media outlets can’t tell the story, how is the decision making going to change? Maybe the downgrade won’t amount to much – the message?
“It can be very profitable indeed for the big Wall Street banks, but the purpose of the near-zero interest rates was supposed to be to get banks to lend again. Instead, they are, indeed, paying “outrageous bonuses to their top executives;” using the money to engage in the same sort of unregulated speculation that nearly brought down the economy in 2008; buying up smaller banks; or investing this virtually interest-free money in risk-free government bonds, on which taxpayers are paying 2.5 percent interest (more for longer-term securities).” Imagine, you barrow money at near zero interest, and then invest the money at 2.5 percent – a net of over 2 percent.
Here’s a positive outlook: “What’s happening across the world is an attempt by the financial sector to really make its move and say this is their opportunity for a power grab. And they’re creating this artificial crisis as an opportunity to carve up the public domain and to give themselves enough money. They’re taking the money and running, because they know that unemployment is going up. The game is over. They know that. And the only question is, how much can they take, how fast?”
Sustainable – Workers have never claimed such a paltry share of real national income growth. Economists at Northeastern University in Boston recently found corporate profits captured 88 percent of income growth between the second quarter of 2009 and the fourth quarter of 2010. Workers’ take? Slightly more than 1 percent. Trickle down? I think not. More like trickle out.
I’ve spoke about how government subsidies to poor and low-wage workers are actually subsidies for corporations – the corporations take the difference of their low-wage employment and lack of health care, and their tax loopholes (i.e., lack of tax revenue – corporate subsidies) and call it profit. Meanwhile the government picks up the slack so that low-wage workers can eat, have water to drink, have a home, and energy. Here’s some insight – “many Wal-Mart employees depend on some kind of government program to supplement their low wages and pathetically inadequate health insurance, which most people can’t afford anyway.” “…the Wal-Mart people, asked to see whether anybody here might be eligible for TANF, for example, Temporary Assistance to Needy Families, because they’re kind of depending on that government – those government supplements to keep people going.” The quotes are from author Barbara Ehrenreich, who wrote Nickel and Dimed: On (Not) Getting By in America.
In theory a big tax increase would suffice to close the gap, but in a competitive economy where a hedge fund and its managers can move to Singapore or Switzerland and a factory can move to Mexico or China, there probably is no way to raise rates without strangling whatever growth has been forecast.














