"No redeeming social value..."

Without offering any particularly useful remedies or further insights, Former Reagan and Bush-1 Treasury Secretary Nicholas Brady responds to the "Occupy Wall Street" sentiments and confirms what, increasingly, we already know - the powerful financial sector has become bloated, unproductive and increasingly irresponsible:

I understand the roots of this vocal resentment. When I came to Wall Street in 1954, investment banking was a profession, one that financed the building of this country’s industrial capacity and infrastructure.

"Crony Capitalism Comes Home"

Nicholas Kristof:

When I lived in Asia and covered the financial crisis there in the late 1990s, American government officials spoke scathingly about “crony capitalism” in the region. As Lawrence Summers, then a deputy Treasury secretary, put it in a speech in August 1998: “In Asia, the problems related to ‘crony capitalism’ are at the heart of this crisis, and that is why structural reforms must be a major part” of the International Monetary Fund’s solution.

The American critique of the Asian crisis was correct. The countries involved were nominally capitalist but needed major reforms to create accountability and competitive markets.

All Coffered Up With No Place To Go!

Even the banks are falling on "hard times"...uh...if that means "more money than you know what to do with."  These jerks royally screwed us, crashing the economy...and their narrow-gauge profiteering even has them tripping up themselves, having broken their own business model. If you want to use a bank to deposit savings - which one assumes from the origins and alleged social utility of banks would be as welcome as buying a hamburger at MacDonalds - increasingly their message is "don't bother."

The New York Times - "Banks Flooded With Cash":

Bankers have an odd-sounding problem these days: they are awash in cash.

"Iraq by the numbers...$3-5 trillion in total economic cost to the US..."

Think Progress' Eli Clifton, "Iraq By The numbers - The World's Costliest Cakewalk":

"Heckuva Job!"

(W)hile the return of all U.S. service men and women by Christmas is a cause for celebration, the costs of the war are only beginning to be fully understood. The “cakewalk” to Baghdad, as George W. Bush adviser Kenneth Adelman infamously wrote in February, 2002, has been anything but. The Iraq War, and the faulty premise that Saddam Hussein was developing weapons of mass destruction, has had a staggering humanitarian and economic cost.

Here are some relevant numbers:

The "Official" GDP Lag

The US economy is producing close to a trillion dollars less in goods and services annually than it should be producing under "normal" conditions. That is disastrous for employment, the revenue base and economic competitiveness as skills erode and innovation slows.

 From the Wall Street Journal:

6.7%: The gap between U.S. GDP and its potential.

It looks as if, despite everything, gross domestic product picked up in the third quarter, easing fears that the U.S. was on the cusp of another recession. But that doesn’t mean the economy is anywhere near where it needs to be...

Experts quibble about exactly where potential GDP is these days, and that’s especially true in light of all the damage the economy has suffered. Companies have invested less on new plants and equipment, unemployed workers’ skills have eroded, and some people have exited the work force for good — all things that have likely lowered the economy’s potential. But even so, everyone agrees it is still much, much higher than what we’re getting now.

US median wage is just $4000 above the "family of 4" poverty line

Reported at NASDAQ:

The 3-decade shift of income to the economic elite

The Social Security Administration released data on U.S. wages and payroll in 2010 this week, and the news isn't good for most of the working class or middle class.

Though the average wage of a single earner stood at $39,959.30 per year, that number was skewed by those at the very top of the survey - the 93,725 earners who took home more than $1 million annually. That top sliver - a fraction of a fraction of the top 1 percent - collectively took home $224.6 billion, or about $2.4 million per top earner. (Ed. note - over a quarter of total W2-type wage income, that figure does not include income from sources such as capital gains.)

The Global 1%

Via Think Progress:

Millionaires Control Almost 40 Percent Of The World’s Wealth, Make Up Less Than 1 Percent Of Its Population | According to a new Global Wealth Report from Credit Suisse, millionaires and billionaires control nearly 40 percent of the world’s wealth, while making up less than 1 percent of its population. “The 29.7 million people in the world with household net worths of $1 million (representing less than 1% of the world’s population) control about $89 trillion of the world’s wealth. That’s up from a share of 35.6% in 2010,” the report said. As the Wall Street Journal’s Robert Frank put it, “here’s another stat that the Occupy Wall Streeters can hoist on their placards.”

Thoughts for the day...on the "Cut Social Security and Medicare that drive deficits" hype

From Dean Baker:

(I)t would take just 5 percent of the projected wage growth over the next 30 years to make the Social Security trust fund fully solvent for the rest of the century.

Health care costs are projected to take more of people's income, but this is far more the result of our broken health care system. If we paid the same per person for our health care as other wealthy countries we would be facing enormous budget surpluses in the decades ahead. If our per person costs were the same as the average of other wealthy countries it would free up more than $1.2 trillion a year ($4,000 per person) for other uses.

The impact of Herman Cain's "9-9-9" tax plan...

...in one REALLY LONG graph, via Jared Bernstein and the Tax Policy Center.

Cain:"Stupid people are ruining America!"

Presidential aspirant, book tour star and pizza Godfather Herman Cain has a tax plan that raises taxes on the bottom 80% of the population.

The working poor see their taxes raised nearly $2000 on average.  Most Americans who have jobs will see a tax increase of around $4000 - while the top 20% of earners will see a tax reduction of over $14,000 on average.  But even that average distribution is deceptive.  What's most startling is how Cain's plan benefits the top 1% - and even more amazing, how his plan cuts taxes on the top 10% of that top 1%:

Wall Street thrives while Main Street struggles

Corporate profits are at a 60 year high - but 40% of small businesses see their earnings declining. Travis Waldron at Think Progress has it:

Even as the economy struggles, corporate profits continue to rise. Wells Fargo, the largest consumer lender in America, announced today that its third-quarter earnings rose 21 percent, to $4.1 billion. Citigroup, the nation’s third-largest bank, also released its earnings statement today, announcing that its third-quarter earnings rose 73 percent over last year, with $3.8 billion in profits. Even though JP Morgan Chase saw its earnings fall from a year ago, it still raked in more than $3 billion in profits.

Corporate profits as a share of the nation’s gross domestic product, in fact, are at their highest point since 1950. Recent snapshots, however, tell a much different story on Main Street, where small businesses are limping through an economic recovery that treated corporations much more kindly. According to the National Federation of Independent Businesses’ September report, two out of every five small businesses reported that profits are falling:

A voice from the "1%"...in solidarity with "Occupy Wall Street"

I just saw this via Ezra Klein ("Financiers for Occupying Wall Street"), having missed it last week.  Mohammed el-Erian is co-CEO of PIMCO, one of the world’s largest — and wealthiest — bond trading operations, with more than $1 trillion under management. Surprsingly and to his great credit, el-Erian has written a commentary on the virtues of "Occupy Wall Street," cautioning the media,  the economic elite of which he is a part, and the politicians to take notice, to listen and to collaborate on fundamental reforms:

To those wondering whether to pay attention to the "Occupy Wall Street" (OWS) protests, the answer is yes. This is more than just a nascent movement that will grow in the weeks and months ahead. It is part of a worldwide drive for greater social justice. 

Like recent examples of peaceful grass-root protests -- from those that delivered the Egyptian and Tunisian revolutions to the massive street demonstrations in Israel -- OWS has taken many by surprise. In just a few weeks, a self-organized group of diverse individuals planted the seed for what is becoming a national movement that exponentially gains energy and visibility… 

A peaceful drive for greater social justice can unify people from diverse cultural backgrounds, political affiliations, religions, and social classes. 

If you doubt this, go ask the Arab governments overthrown by secular forces that they were slow in understanding and inept in reacting to...

"Inequality not only stinks, but also damages economies"

New York Times columnist Nicholas Kristof - calling the Occupy Wall Street movement "America's Primal Scream" - looks at income inequality as the measure of an economy as damaged and dysfunctional:

RIP Jimmy Stewart

Living under Communism in China made me a fervent enthusiast of capitalism. I believe that over the last couple of centuries banks have enormously raised living standards in the West by allocating capital to more efficient uses. But anyone who believes in markets should be outraged that banks rig the system so that they enjoy profits in good years and bailouts in bad years.

The banks have gotten away with privatizing profits and socializing risks, and that’s just another form of bank robbery.

“We have a catastrophically bad misregulation of the financial system,” said Amar Bhidé, a finance expert at the Fletcher School of Law and Diplomacy at Tufts University. “Its consequences led to a taint of the entire system of modern enterprise.”

Economists used to believe that we had to hold our noses and put up with high inequality as the price of robust growth. But more recent research suggests the opposite: inequality not only stinks, but also damages economies.

In his important new book, “The Darwin Economy,” Robert H. Frank of Cornell University cites a study showing that among 65 industrial nations, the more unequal ones experience slower growth on average. Likewise, individual countries grow more rapidly in periods when incomes are more equal, and slow down when incomes are skewed.

Graph via Mother Jone

That’s certainly true of the United States. We enjoyed considerable equality from the 1940s through the 1970s, and growth was strong. Since then inequality has surged, and growth has slowed.

One reason may be that inequality is linked to financial distress and financial crises. There is mounting evidence that inequality leads to bankruptcies and to financial panics.

Calculating the costs of the Bush tax cuts...

Just for the top 5% of incomes:


(Source: National Priorities Project)
 via Wonkblog

"Britain's Self-Inflicted Misery"

An excellent editorial in the New York Times on the disastrous British austerity strategy - which, as the authors point out, is an ideology more than a viable economic plan:

PM Cameron cogitates

For a year now, Britain’s economy has been stuck in a vicious cycle of low growth, high unemployment and fiscal austerity. But unlike Greece, which has been forced into induced recession by misguided European Union creditors, Britain has inflicted this harmful quack cure on itself.

Austerity was a deliberate ideological choice by Prime Minister David Cameron’s ruling coalition of Conservatives and Liberal Democrats, elected 17 months ago. It has failed and can be expected to keep failing. But neither party is yet prepared to acknowledge that reality and change course.

Britain’s economy has barely grown since the budget cuts began taking effect late last year. The most recent quarterly figures showed the economy flat-lining, with growth at 0.1 percent.

New figures released this week reported Britain’s highest jobless numbers in more than 15 years.

Remembering The New Deal

This excerpt, published at Slate courtesy of the Free Press, comes from Michael Hiltzik’s new book, The New Deal: A Modern History.

During the years of the New Deal, America’s government built as it never had before—or has since. 

The New Deal physically reshaped the country. To this day, Americans still rely on its works for transportation, electricity, flood control, housing, and community amenities. The output of one agency alone, the Works Progress Administration, represents a magnificent bequest to later generations. The WPA produced, among many other projects, 1,000 miles of new and rebuilt airport runways, 651,000 miles of highway, 124,000 bridges, 8,000 parks, and 18,000 playgrounds and athletic fields; some 84,000 miles of drainage pipes, 69,000 highway light standards, and 125,000 public buildings built, rebuilt, or expanded. Among the latter were 41,300 schools.

The transformative power of this effort is inestimable. The Tennessee Valley in 1933 was a quintessential backwoods region of “grim drudgery, and grind” in the words of its savior George Norris: beleaguered by floods, drained of its manpower by the siren call of the cities, the latent wealth of its river and lumber left fallow. The TVA of Norris and Franklin Roosevelt turned it into a land of plenty that called its workers home, put its natural endowments to productive use, and delivered to its residents the promise of a secure American middle-class lifestyle.

The Republican Rabbit Hole

Paul Krugman marvels at the GOP's "adventures in Wonderland":

Reading the transcript of Tuesday’s Republican debate on the economy is, for anyone who has actually been following economic events these past few years, like falling down a rabbit hole. Suddenly, you find yourself in a fantasy world where nothing looks or behaves the way it does in real life.

And since economic policy has to deal with the world we live in, not the fantasy world of the G.O.P.’s imagination, the prospect that one of these people may well be our next president is, frankly, terrifying.

In the real world, recent events were a devastating refutation of the free-market orthodoxy that has ruled American politics these past three decades. Above all, the long crusade against financial regulation, the successful effort to unravel the prudential rules established after the Great Depression on the grounds that they were unnecessary, ended up demonstrating — at immense cost to the nation — that those rules were necessary, after all.

But down the rabbit hole, none of that happened.

Polish Hero Lech Walesa in Solidarity with Occupy Wall Street

It will be interesting to see how Occupy Wall Street's critics respond to this:

Solidarity hero Lech Walesa is flying to New York to show his support for the Occupy Wall Street protesters.

"How could I not respond," Walesa told a Polish newspaper Wednesday. "The thousands of people gathered near Wall Street are worried about the fate of their future, the fate of their country. This is something I understand."

A former shipyard worker who led Poland's successful revolt against Soviet communism, Walesa said "capitalism is in crisis" and not just in America.

"This is a worldwide problem," he told the Lublin-based Dziennik Wschodni newspaper. "The Wall Street protesters have focused a magnifying glass on the problem."

Cainsian Economics - "The Devil is in the details"

Lawrence O'Donnell and Bruce Bartlett - with an assist
from Michele Bachmann - dissect the GOP "frontrunner du
jour" and pizza Godfather's devilish 9-9-9 Plan to raise
taxes on the working poor and cut taxes for the rich:

Visit msnbc.com for breaking news, world news, and news about the economy

"Founding Fathers" quote of the day - and what it means for us in the present tense

We are free today substantially,  but the day will come when our Republic will be an impossibility.

It will be an impossibility because wealth will be concentrated in the hands of a few. A republic cannot stand upon bayonets, and when that day comes, when the wealth of the nation will be in the hands of a few, then we must rely upon the wisdom of the best elements in the country to readjust the laws of the nation to the changed conditions.

The "Father of the Constitution", President James Madison,  cited in "The Great Quotations" by George Seldes - via Washington Monthly.

Rick Ungar adds this perspective on our current problems to Madison's quote:

Robert Reich - The 7 Biggest Economic Lies (in 2.5 minutes)

Via robertreich.org