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Archive for November, 2010

I don’t usually press my financial articles on people. I’d much rather you go watch the hilarious comedy “The Retributioners,” or listen to my often eclectic but increasingly accessible rock music on the right hand side of this page. But if you want some insight into the China and its economy, you might like this article I wrote for Financial Advisor magazine.

First of all, China has taught us that free markets are superior to ones that are totally government controlled. In 1979, Deng Xiaoping introduced market reforms to China, conferring a special economic zone status on a sleepy fishing village. That village, Shenzhen, has become one of the fastest-growing cities on the planet, a place where China still tries out new free market experiments while also learning how to balance it with its responsibility to its people’s well-being. To the shame of the Chinese, they have not yet developed Western style free speech, and the country’s human rights record is abysmal–government critics are imprisoned, vital AIDS statistics are suppressed, and the country is in denial about the environmental impact of its boom. These are all things to fear about a country not totally awake from its legacy of totalitarianism. But don’t let these things cloud your vision of what the country has done economically or get confused that free markets alone are saving it. What’s making the country better is a sober-sided and smart mix of capitalism and socialism both.

Now that it has been unleashed, China is now about to explode with a rampant consumer economy. More than half of its population is still rural, and as the country inevitably urbanizes, it will gobble up the world’s iron, copper, oil and coal. It’s become the biggest market for cars and, according to some sources, for energy. Its economy has fuel to burn. This growth was threatened by the economic crisis of 2008, so China’s government did what any responsible leaders would do: they spent money on stimulus. About a trillion dollars. This has kept their GDP humming while the United States’ has faltered. Some say that China’s growth can’t be compared to ours, because it’s a actually a brand new economy with lots of room to run. A country where many of the cell phones and cars have yet to be bought, where there are few hackneyed businesses and lots of room for innovation and enterprise. Nevertheless, government stimulus indubitably can help an economy out of trouble when markets overheat, an idea that short-sighted Americans have either forgotten, out of impatience in 2010, or deny themselves, out of ideological fanaticism because fanaticism is part of their identity, much like their old company t-shirts and pet rocks.

It’s a bit harder to see how a mature economy such as ours can explode again when we first have to cut out all the cancer–the overleveraging, the overspending, the abundant undeserved credit. Some say we just wait for the next tech bubble and get rid of our government in the meantime. That’s a cruel, nihilistic philosophy, and if that doesn’t chill your heart, let’s just call it completely wrong. For anybody with a memory (hard to find in the United States), I’ll remind you that America got through the years of the New Deal (let’s say 1932 to 1980) with high progressive taxes and Social Security and Medicare, and at the same time we created computers, lasers, televisions, FM stereos, new ways of distributing and preserving food, new ways of communicating and we went to the moon–all under the aegis of what is now called socialism by the right wing. This large government presence didn’t hold America back one damn bit. In fact, if it didn’t create the middle class, it certainly helped preserve it.

Unfortunately, these people wearing tricorne hats and waving “Don’t Tread On Me” flags have learned the wrong lessons from Ronald Reagan. Our economy will indeed come back in the next couple of years, but it will likely be because we take up where we left off (pursuing all the bad habits Dutch left us)–by selling IOUs to each other, insuring them, and trading monopoly money and putting that in place of productivity. We can also hold our breath and wait for a new asset bubble. But what they don’t realize is that China (and oil-rich nations with lots of petrodollars) are going to continue to fund it, because we refuse to pay for the things we demand. Some of us want roads. Some of us want firemen. Some of us want to build bombs. But whoever it is in charge, Americans love to spend other people’s money. If I thought the Tea Party would address that issue, I might take sides with them. Unfortunately, they won’t. The “Leave Me Alone” party wants it all for free and won’t tell you the truth about any of these issues. They wave the flag and scream that they are victimized–somehow while they are also stomping on people’s heads.

And elsewhere, the highly productive Chinese will be earning their strong economy and handing our asses to us.

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Here are several first drafts of President Obama’s speech following his party’s upset in the midterm elections on Tuesday.

My fellow Americans,

I stand here before you today humbled, but also a bit confused about what you might have been thinking Tuesday when, like a lot of spoiled brats, you voted…

Tuesday was a historic day in America’s history. After we Democrats spent the last two years communicating the need for changes in our health care and financial sectors, you Americans took the initiative by boldly shooting the messenger…

My fellow Americans,

I’m still scratching my head at how shit-all stupid you could be…

My fellow Americans,

We saw at the polls Tuesday that Americans are very impatient and angry about the pace of change. Therefore it should not be surprising that they elected people to Congress who don’t actually agree with them on anything …

Russ Feingold has been a maverick legislator. That’s why you brave mavericks out there kicked him to death like a scrawny yearling…

Is it just me or does Nancy Pelosi look like a scary helicopter mom?

Dear Americans,

Did you read the damn health care bill? It said you didn’t have to change insurers. It was right there in print. I guess asking that you read is too m…..

Dear Voters,

To my independent friends in particular: Do you just vote against everything or do you actually have any beliefs?

My fellow Americans,

You say you want to roll back big government, and that you are mad the government has failed to get you a job. I am very sorry it is too late for you to work through the logic and do the math on that statement and change your ghastly abhorrent vote that you made on T…

My fellow Americans,

You know, right wingers, if you screamed “capitalized medicine” as often as you scream “socialized medicine,” you’d probably realize that both sound pretty scary, that is if you could think for two …

Half of voters unhappy with the health care bill thought it went too far. Half thought it didn’t go far enough. John Boehner sees this as a mandate. If he won the lottery, I suppose he’d think it was because he was smart.

Dear voters,

I want to congratulate the wealthiest 2% of Americans for winning Tuesday’s election. Oh let’s admit it, you win every election…

You kicked out more people who voted against health care than voted for it, just because you seem to like kicking people out. If I’ve learned anything, it’s that I shouldn’t listen to you at all.

Dear voters,

How about that Charlie Sheen? What a putz!

Dear voters,

I’m putting “too big to fail” on the dollar, since you all seem to like meaningless sentiments.

My fellow Americans,

I have tried my hardest to remain nonpartisan and stay above the fray. But I guess it’s hard to stay above the fray when you are dealing with a chimpanzee who is trying to eat your face, therefore …

My fellow Americans,

Boy was I ever shellacked this week…

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From a pre-recorded phone message for New York State voters  left by the mother of Saul Farber:

Hello. I know that you don’t know me, but I’m the mother of Saul Farber, the 24-year-old candidate for New York’s 26th state Senate district. You might not think of me as the most objective person in the world, but you have to believe me when I say that my son Saul is the only candidate who can truly take on the special interests in Albany and sweep aside the petty partisan politicking. I should know because I’ve raised him for 24 years and I am the only person with any real insight into what he can do for you in the State Senate.*

I can tell you from direct experience that Saul is tenacious. If that sounds like he was a difficult child, then fine, I do not mind if you make that inference. Saul is a person who will never, never let anything go. He will argue every point to the ground; even after you told him, Saul, this fight is over, he will still make sure that he has reframed the debate for you, made you want to smack yourself in the head and tear out your hair crying for it to be over. Like me, the State Senators on the other side of the aisle will surely be crying Uncle when my son gets hold of them with his contrary manner and petulant determination to have things his way at all times.

When he was four and I tried to feed Saul strained peas, he wouldn’t do it. When he was five, I told him we were going to the circus, and he said that if I didn’t take him to the aquarium instead, he would hold his breath until he died.

When he was eight, Saul wanted to see a Yankee game, the Statue of Liberty and Coney Island all in one day. When I tried to explain to him that these destinations were all too far apart to get to by train in one day, he insisted that I had enough money to pay for a taxi. When I said that it was far too much money, he called me cheap and jumped out of the subway.

New York, you must believe me that this is exactly the kind of relentless drive you can expect if you elect my son, Saul Farber, to the New York State Senate to represent its 26th District. I can assure you that Saul has not changed a bit from those days. Just like he did to the peas, Saul is going to throw out any special interest money, and will likely throw it all over the wall so that other people have to get down on their hands and knees to clean it up. Just as he held his breath, I’m sure he will filibuster and do whatever it takes to keep lobbyists from attaching new taxes to the state budget. Just as he called me cheap for not taking him to every last city borough to see every last tourist attraction, I know that now he will call his enemies in Albany cheap and guilt them into doing things they really just don’t have the energy or capacity to do on their own.

Saul can make things happen! Even if he has to drum the life out of every last bit of the body politic, he will do it.

That’s why I implore you to get my 24-year-old son out of my house and into the State house in Albany. You have to do it for the future of New York and for the future of one New York mom in particular who has gone gray raising this frustrating baby into a sapling junior lawmaker.

You must get him out of my house, New York. You must, you must, you must.

*An earlier version of this article in a couple of instances incorrectly mentioned Farber as a candidate for Assembly, though in all others, including the headline, listed him as a Senate candidate.

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We’ve heard all the complaints about the current state of Washington: a new president has broken his promises and pursued a far left agenda, reneged on promises to get us out of Guantanamo, continued to employ Bush-era policies on surveillance and signing statements. Conservatives say he has quadrupled the deficit spending and forced an unpopular health care bill down the throats of American taxpayers, one that will force Americans to buy health insurance, a mandate that might possibly infringe their Constitutional rights. He has had the government take control of vast parts of our auto and banking industries. At the same time he and the progressive caucus in Washington are steering us toward tax increases at the worst possible time–when we are still suffering the withering effects of a recession and crippling unemployment that continues to hover around 10%.

Americans, angry about the state of the economy, their unemployed neighbors and perceived loss of freedoms, are very susceptible to these arguments and have taken the only course they know–they’ve lashed out and tilted right, vowing not only to vote in Republicans, but those approved by the libertarian-minded Tea Party.

Americans, in other words, are about to shoot themselves in the face.

I’m sorry, that doesn’t seem strong enough. What other aphoristic or pithy phrases could I use to get people’s attention? What if I said Americans are going to shoot their children in the faces? Or kill their own dogs? Or disembowel their family members?

It seems hard to choose the right violent imagery to describe how Americans are about to get it so entirely wrong on November 2–when they send to Congress people who loudly cried for a new Great Depression. Who rail against unemployment insurance when 10% of America is unemployed. Who scream against federal tax increases that haven’t actually happened.  America is about to elect people whose biggest argument is that unemployment is still 10%, therefore we should have elected a government that did nothing to help save the economy in the first place. President Bush shouldn’t have kept banks solvent with a bailout (you do remember it was Bush who did that, right?) and President Obama shouldn’t have injected stimulus into the economy. The Tea Party argument? We should have let the economy crash and burn and unemployment go to 26% or 30%.

Shooting. Yourself. In the face.

We are about to punish Barack Obama for saving the economy from a new Great Depression. It’s as  simple as that. We are about to thump the Democrats for keeping the car industry and several venerable financial institutions from imploding. We are about to body check a Democratic Congress for their part in making sure 95% of Americans have health insurance by the end of the decade. We are going to head butt Nancy Pelosi for making sure health insurance companies can’t turn away children for pre-existing conditions. We’re going to sucker punch Barack Obama for dragging the last combat battalions out of Iraq. We’re going to rabbit punch Congress for giving the middle class a tax cut (and even offering to extend it). We’re going to bitch  slap Barney Frank for trying to police Wall Street, to stop the promiscuous mixing of bank deposits and speculative investments and stop excessive risk taking by banks  that helped lead to the financial crisis. It was this free-market biases, deregulated, Wild West Wall Street that in 2008 led to people to lose their savings, their hedge funds and their faith in the meaningless pieces of paper that are the foundation of capitalism. We have short memories in America. We have decided Barack Obama is now responsible for all of that.

Shooting. Ourselves. In the face.

And what are we going to trade all this all in for? A group of people with no real agenda other than to hate government spending — at least if it is not spent on them. People who say the market takes care of itself. People whose only stated virtue is their anger. People who at worst make schizophrenic connections between Joseph Stalin and Nancy Pelosi and who at best are actively calling for the conditions that led us to financial ruin in the first place. Mainstream Republican leaders complain about the skyrocketing U.S. deficit on the one hand but refuse because of rigid ideology to do the one thing all economists agree would need to be done to balance the budget: control spending, yes, but also increase taxes, especially on the top 2% of the wealthiest Americans. The Tea Party is worse. They show little agenda but vanity and petulant conviction in categorically untrue things. They think cap and trade is a redistribution scheme. They think illegal Mexican immigrants are destroying the middle class. They think Medicare is a private company. They show no policy imagination but instead flaunt their ignorance as if that, like their anger, were somehow a virtue. These are not people who have not ever learned or cared about how policy affects real people like your grandparents and your poor neighbors but instead have learned only to smugly curl their lip and deride people who spent their lives in public service (whether it be Democrats or Republicans). It’s the kind of knowing smile you often see on people who know nothing at all–a popular gambit with teenagers who haven’t done their homework. We laughed at “Fast Times at Ridgemont High” when Jeff Spiccoli “cruised” history. Now Sarah Palin is the one cruising history. She’s gotten a free pass for knowing nothing. She makes dummies feel secretly wise.

These are the people you are about to entrust your economy to. Shooting. Yourself. In the face.

The problem with electing people who have no respect for government and no real policy agenda is that when they get elected, they are incredibly weak and susceptible to the new accouterments of their power. They will find themselves agreeing with more aggressive people who do have strong policy agendas. Lobbyists. Think tanks. The insurance industry. The military industrial complex. News Corp. And make no mistake–the real agenda of many alpha Republicans is a gutted government at home (one that pays, it seems, for nothing but Medicare) and an expanded empire abroad. Were Republicans to take power today in both Congress and the White House, they would not only ignore the ailing economy (since they believe it’s government’s job to do nothing), but they would try to get you to ignore it too by refocusing your attention on Iran, which would once again take center stage in our national discourse. A Congress of weak-minded Tea Party hacks would suddenly shed their “leave me alone” philosophy, which is not their real philosophy at all, and go along with the nationalistic, sloganeering patriotism that characterized the Bush era. Need proof? They already did. The Tea Party already failed the libertarian test by showing up late for the real executive power grab–and dressed for the wrong party.

This is perhaps the biggest danger of what we’re about to do. One of the biggest reasons that America is about to shoot … itself … in the face.

Often when you hear people on the far right complain about the government, they will tell you in a nice, clear, concise and short epigrammatic prose all you need to know about the economy: you have to cut taxes, deregulate and get out of the way. This is an article of faith for people who don’t realize how complicated economies really are. Macroeconomics is not the type of thing that easily gives itself over to the platitudes of the left wing or the right. The fact is that the economy, like your father, is more complicated than that. Ask almost anybody, even Republicans, what ended the Great Depression and they’ll say the Second World War, but they won’t work through the logic–government spending saved the economy. Ask them why Ronald Reagan was a great president and they’ll say he helped save the economy by cutting taxes and deregulating. They won’t talk about his huge military buildup–in other words, how government spending helped save the economy.

Meanwhile, overseas, another government has shown that throwing a trillion bucks in stimulus into your economy can make a great difference: the Chinese government has thrown about as much money into its sagging economy in the last two years as America has. Unlike we Americans, however, the Chinese forced their banks to lend. Of course, they suffered some overheating speculation in property, but their GDP has run circles around ours. In part this is because China is going online with its own major consumer demand–a huge engine of growth as the country urbanizes. But without a doubt, government stimulus saved it from plunging into the morass. Unlike Americans, the Chinese have no strange and self-defeating bias against a government helping its people against the depredations of capitalism gone out of control.

Tea Partiers do. They are so wedded to their beliefs, in fact, that they would let the economy fall apart and our society plunge into Malthusian chaos before they gave up on these beliefs. You don’t need proof for this belief. They have said it out loud. The Republicans poised to take over in the House of Representatives, not Tea Partiers, by the way, have said that if they takes over in the next session, they won’t be able to work with the president unless the president concedes that government spending doesn’t help the economy. In other words, Barack Obama will have to believe in the Easter Bunny if he wants Republicans to work with him.

Our banks should have been allowed to fail, say Tea Partiers, and the consequences be damned, even if it’s the average American who would have suffered the most. Theirs is a millenarian philosophy, a law of the jungle. “Creative destruction” means that if capitalism eats itself and mass unemployment results, so be it. Has any member of the Tea Party talked about what it would take to bring jobs back other than cutting taxes? Do you honestly think the real problem is that taxes weren’t cut enough? They were already at historic lows, as were interest rates, and that’s when rampant, crippling, stupid risk taking took place at almost every level of the economy, from subprime home borrowers to hedge fund managers. Look at the balance sheets of American companies and look at the record amount of cash they are sitting on, in an environment where taxes continue to be low, and then ask yourself if you can still be wedded to your obnoxious faith in economic libertarianism. It’s a bit like starving your baby by not giving up your belief in veganism. The reason unemployment is still high is that American companies find spoiled Americans with their luxury goods and their iPhones too expensive to hire. It has nothing to do with anything Barack Obama has done.

And yet it’s people who are crying about high taxes that you are about to hand your economy to. People who don’t even know their taxes haven’t increased. Shooting. Yourself. In the face.

Of course, it’s important to ask when government should be involved in the economy and when it should back off. Instead, the discussion has been hijacked by free market fundamentalists who make up in vitriol they lack in real economic insight. Centrists, Blue Dog democrats and even reasonable conservatives are afraid of these people. For some reason, when nobody seems to know what to do, we are always impressed by the people who have the most conviction of spleen.

You can definitely criticize Obama’s deference to these people. Deference to enemies somehow only gets the blood of your enemies up even more. I can’t think of any president in recent years so hot to cooperate with the party across the aisle and who for that quickly got Hitler mustaches painted on his effigy.

For that we’re going to hand at least one house of  Congress back to the Republicans next week. Some are even talking about impeaching the president. For what? Starting an illegal war? Codifying water boarding? No, just for being, in their minds, a communist.

You can dislike the state of the nation. You can be unhappy, from either side of the aisle, with what Barack Obama has done or hasn’t done. But if can’t vote for him, then it’s important to know this Election Day that there is definitely somebody you should be voting against: extremists. The Tea Party is a dangerous movement of crackpots, at worst racist and at best willing to destroy the middle class and wreck the economy because of a reductionist, idea fixe. If there is a group of reasonable Republicans who want to discuss how misplaced liberal good intentions hurt the middle class, I’ll be happy to listen to them. But that is not who we are about to elect. We’re about to elect the people of Jonestown. Cultists. Crazies.

Shooting. Yourself. In the face.

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