Chomsky At 88

Today is Noam Chomsky’s 88th birthday. Age has not slowed him down. Monday night, he spoke about the threat that Donald Trump poses to our very existence at the 25th anniversary of Democracy Now!.

Hard Facts

Yup. These are actual factual statistics that illustrate the rise in inequality in the United States.

No fake news here, though it does not suit the lying establishment beneficiaries, enablers, and gatekeepers.

Economic growth in the United States: A tale of two countries
by Thomas Piketty, Emmanuel Saez, and Gabriel Zucman, Washington Center for Equitable Growth
December 6, 2016

(O)ur data show that the bottom half of the income distribution in the United States has been completely shut off from economic growth since the 1970s. From 1980 to 2014, average national income per adult grew by 61 percent in the United States, yet the average pre-tax income of the bottom 50 percent of individual income earners stagnated at about $16,000 per adult after adjusting for inflation.5 In contrast, income skyrocketed at the top of the income distribution, rising 121 percent for the top 10 percent, 205 percent for the top 1 percent, and 636 percent for the top 0.001 percent.

It’s a tale of two countries. For the 117 million U.S. adults in the bottom half of the income distribution, growth has been non-existent for a generation while at the top of the ladder it has been extraordinarily strong. And this stagnation of national income accruing at the bottom is not due to population aging. Quite the contrary: For the bottom half of the working-age population (adults below 65), income has actually fallen. In the bottom half of the distribution, only the income of the elderly is rising.6 From 1980 to 2014, for example, none of the growth in per-adult national income went to the bottom 50 percent, while 32 percent went to the middle class (defined as adults between the median and the 90th percentile), 68 percent to the top 10 percent, and 36 percent to the top 1 percent. An economy that fails to deliver growth for half of its people for an entire generation is bound to generate discontent with the status quo and a rejection of establishment politics.

Because the pre-tax incomes of the bottom 50 percent stagnated while average national income per adult grew, the share of national income earned by the bottom 50 percent collapsed from 20 percent in 1980 to 12.5 percent in 2014. Over the same period, the share of incomes going to the top 1 percent surged from 10.7 percent in 1980 to 20.2 percent in 2014. … The gains made by the 1 percent would be large enough to fully compensate for the loss of the bottom 50 percent, a group 50 times larger.

To understand how unequal the United States is today, consider the following fact. In 1980, adults in the top 1 percent earned on average 27 times more than bottom 50 percent of adults. Today they earn 81 times more. This ratio of 1 to 81 is similar to the gap between the average income in the United States and the average income in the world’s poorest countries, among them the war-torn Democratic Republic of Congo, Central African Republic, and Burundi.

The bottom 50 percent of income earners makes more in France than in the United States even though average income per adult is still 35 percent lower in France than in the United States (partly due to differences in standard working hours in the two countries). Since the welfare state is more generous in France, the gap between the bottom 50 percent of income earners in France and the United States would be even greater after taxes and transfers.

The diverging trends in the distribution of pre-tax income across France and the United States—two advanced economies subject to the same forces of technological progress and globalization—show that working-class incomes are not bound to stagnate in Western countries. In the United States, the stagnation of bottom 50 percent of incomes and the upsurge in the top 1 percent coincided with drastically reduced progressive taxation, widespread deregulation of industries and services, particularly the financial services industry, weakened unions, and an eroding minimum wage.

Cartnoon

The Breakfast Club (Getting What You Asked For)

Welcome to The Breakfast Club! We’re a disorganized group of rebel lefties who hang out and chat if and when we’re not too hungover we’ve been bailed out we’re not too exhausted from last night’s (CENSORED) the caffeine kicks in. Join us every weekday morning at 9am (ET) and weekend morning at 10:30am (ET) to talk about current news and our boring lives and to make fun of LaEscapee! If we are ever running late, it’s PhilJD’s fault.

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This Day in History

On this date in 1941, Japanese forces attack the home base of the U.S. Pacific Fleet at Pearl Harbor in Hawaii – prompting America under President Franklin D. Roosevelt to enter World War II.

Breakfast Tunes


Something to Think about over Coffee Prozac

Any dictator would admire the uniformity and obedience of the U.S. media.

Noam Chomsky

Read the rest of this entry »

The New Oil Order

Despite a ballyhooed agreement between OPEC Members there is no reason to expect Oil prices to rise much anytime soon, though they may firm a bit and the global glut now being stored in rusting obsolete ocean going Tankers and equally rusty land based Storage Tanks reduced somewhat.

This is not necessarily a bad thing because Oil can be incredibly damaging to the environment and even lower prices than currently might encourage increased consumption just as Wind and Solar are becoming quite competitive.

Saudi Arabia Surrenders To U.S. Shale
By City A.M, Naked Capitalism
Dec 06, 2016

The details of the new OPEC pact make it clear that even this belated effort to quell the self-imposed bleeding brought on by Saudi attempts to drive U.S. shale out of the energy market – by, in Rockefeller style, over-producing to drive down prices and eradicate their competitors – is problematic at best.

OPEC as a whole agreed to cut 1.2m barrels per day (bpd) from production from the beginning of the new year, with the Saudis themselves bearing the brunt of the cuts with a personal reduction agreed to at just under 500,000 bpd. But as OPEC now accounts for less than half of all energy output in the world, it is a very weakened cartel, dependent on the kindness of strangers to survive.

Externally, this means Russia. The new global energy reality has been forthrightly addressed in the accord, as the interim deal is contingent on securing a further 600,000 bpd in cuts from non-OPEC members, with Russia expected to contribute 300,000 bpd to this total.

Unsurprisingly, the Kremlin is less than enthused, as Russian oil minister Alexander Novak blandly said that at best his country would only cut its production gradually, due to “technical problems”. OPEC isn’t much of a cartel if it is utterly dependent on major (and generally unwilling) outside players such as Russia to make its internal agreements work.

While the Saudis are hoping to persuade the Russians to go along with their fragile deal, to reach even this stage meant Riyadh wholly giving way to their hated enemy within the cartel, Iran.

Just recovering from years of sanctions due to its nuclear programme, all this past year as the Saudis have frantically tried to reach an OPEC-wide deal to cut their ruinous losses, Iran has held firm that it has no intention of hurting its just unbound economy to take one for the team. In the end, the Saudis had to meekly acquiesce, allowing Iran to continue to ramp up production, helping their sworn enemy in a way that must have put the House of Saud’s teeth on edge.

So even after surrendering to Iran, and assuming the Russians can be generally corralled to accept cuts of their own, there is a final problem with the Saudi inspired OPEC accord. The cuts are estimated to leave global oil production at 32.5m bpd, a historically high rate of supply unlikely to lead to much of a rise in the price of energy at all.

Even if prices sustainably drift upwards, all this will do is make American shale – far more price sensitive and far more capable of being quickly brought on line than the fixed rigs of the OPEC member countries – turn the spigots back on, with its production rising and the price consequently falling.

The Saudis, having utterly lost the plot, are now – as the problems inherent in this deal make all too clear – trapped in a world where they no longer control the global energy scene. It seems even the surrender terms the OPEC deal represents will not be accepted by Riyadh’s competitors. And they have no one to blame for this state of affairs but themselves.

A Real Agenda For The Working Class

This post by Bill Black touches on some of the points I tried to raise with yesterday’s Italeave piece.

Austerity is a failure and has been whenever and wherever tried, in the early 30s, in the late 30s, and for the past 6 or more years. It is impossible as a simple accounting rule for a country with a sovereign currency (one it controls the supply of and that is only redeemable in that exact same currency, like the U.S. Dollar) to go bankrupt. The only thing that can possibly happen is a little inflation which decreases demand for imported goods because they are more expensive, but also reduces Trade Deficits by making the cost of Labor and Domestic Material inputs lower.

And where is the inflation? Where is it? It’s less than the ridiculously low 2% Fed target (actually an average but because it’s still lower I won’t quibble) and has been for many, many years. People pay the U.S. for the privilege of borrowing their money (negative interest rates!). The big complaint of Banksters and Plutocrats is they can’t find those easy double digit growth plays they used to. Boo who? Mammon did not decree that you were divinely entitled to >10% returns on your investments!

As long as Institutional Democrats embrace a Neoliberal Austerity policy and ignore inequality and under and unemployment they are doomed to electoral failure! Want to blame the Gen-Xers and Millenials for not turning out big enough margins for Hillary (she won huge majorities from those groups btw, just not big enough)? Think about how incredibly fulfilling it is to find your Ivy League Degree qualifies you to be an under paid Night Manager at a Burger King which you supplement so you don’t starve to death by letting drunk people barf in your car as an Uber driver. What we’ve just seen demonstrated is that Identity Politics is not enough to win an election. The economy, stupid, treats women and minorities (women are a majority, you could look it up) worst of all.

Jobs, Jobs, Jobs – Not Austerity
by William Black, New Economic Perspectives
December 5, 2016

Any plan by Democrats to “Help Working People” should begin with the word “jobs.” But the creation of “jobs” funded by the federal government in its critical role of employer of last resort is not even an option when policy is in the grips of austerity fever. New Democrats take the bizarre policy position that it is too expensive to pay people who want to work to do useful work, but fine to pay them extended unemployment insurance because there are not enough private sector jobs to employ them full-time.

The NYT editorial is so mixed up that it never mentions either the primary problem – the devotion to self-destructive austerity of New Democrats and Old Republicans – and never mentions the essential policy that would transform our economy and win the devotion of the working class to whatever party puts the policy in place. That policy is a dedication to permanent full employment by making the federal government the employer of last resort for any American who wants to and is able to work. Instead, the editorial focuses on a number of desirable policies to help workers who are already fully employed. Yes, most Americans who wish to work are employed and we should implement policies that help fully employed working class Americans. But tens of millions of Americans are classified as “underutilized” by the Bureau of Labor Statistics. Many were so discouraged by the job markets that they dropped out of the work force. Worse, Americans in general and the working class in particular no longer believe that they have any meaningful job security – that our jobs could disappear without warning within months. The federal employer of last resort would transform the workplace by restoring job security.

The editorial’s sole emphasis is on increasing the income of fully employed workers. That is a worthy goal that should be pursued in parallel with the paramount goal – jobs and providing the security to all Americans of always being able to find a job if they are willing and able to work. More income for the already fully-employed working class is great, but Americans want to work.

Millions of Democrats are salivating at the prospects of being able (again) to chortle at the hypocrisy of Republicans when it comes to austerity. Yes, Republicans always say they love austerity, but when they are in power in modern times they always rise above their pro-austerity dogma and adopt at least some stimulus. Democrats are eager to attack the hypocrisy and Congressional Democrats are gleefully planning to trap Trump in a welter of demands for “revenue neutral” taxes (code for austerity) and “pay fors” (another code for austerity). The New Democrats are so eager to attack Trump’s “mountains of debt” that they are about to launch a new offensive against the working class in the New Democrats’ long war against the working class via economically and politically illiterate austerity.

And how will the Republicans respond? Enough will bend to Trump that they will likely do a major infrastructure program. Then the Republicans will confront the New Democrats with their own odes to austerity and “pay fors” and demand that the New Democrats make an analog to Sophie’s choice. Austerity demands budget cuts in other fields, so the Republicans will tell the New Democrats to choose which social program they are most desperate to preserve – and consign the other programs to death via austerity. In sum, the New Democrats are about to replay the same disastrous economic and political mistakes that have caused so much harm to Americans, particularly the working class, and gifted the presidency to Trump.

A government with a sovereign currency such as the United States is not “just like” a household or a corporation or the State of Vermont. A budget surplus or deficit for the U.S. federal government is not a moral issue. A budget “surplus” or “deficit” is not an intrinsically good or a bad thing – it depends on the economic conditions of the real economy. For the U.S., with its unique role as the international currency and large trade deficits, federal budget deficits are typically desirable – and typically occur under both Democrats and Republicans. We do not “burden” our “grandchildren” when we run federal budget deficit in typical circumstances or in response to a Great Recession. We greatly aid our children and grandchildren by rejecting austerity in such circumstances. We would help them far more if we provided a federal job guarantee of last resort.

Summers’ subtitle warns that Trump’s tax proposals “would threaten to increase federal debt and interest rates.” In other words, Summers is banging the war drums to renew the New Democrats’ long austerity war against the working class. There are two parts to Summers argument. First, Trump’s proposed tax cuts are crafted to help the wealthiest Americans. Second, the tax cuts would increase the budget deficit. Summers’ first argument is mostly fine, indeed, it is understated. (He makes the false claim that President Reagan’s tax cuts did not favor the wealthy and represented a “bipartisan” “reform.”) Trump’s plan is to betray the 99% and rig the system to lock in the power and wealth of the one percent (indeed, the top .0001). Trump remains, as he has been for decades, a crony capitalist.

Summers’ second argument is “Austerity Forever.” He leads with another code phrase for austerity, implying that the proper standard for any tax changes is that they be “revenue-neutral reforms.” That means no net tax cuts. Why? What we know, as even Summers agreed, was that President Obama (who told New Democrats that he was a New Democrat) proposed a stimulus program that he knew (because Summers told him) was far too small and then turned his back on stimulus and then in early 2010 in the State of the Union abandoned stimulus and proposed austerity (the code, provided by the Rubinite Jack Lew, was that the federal government should “pull in its belt” in response to the Great Recession because households were doing so).

The 2009 stimulus, though deeply inadequate, materially increased U.S. growth. The self-destructive switch by January 2010 to supporting austerity greatly extended the recovery time from the Great Recession and weakened job market recovery. The U.S. economy could benefit greatly from stimulus even now, so why should Democrats be insisting that they will fight any net tax cut? Summers’ answer, as always, is the need for austerity.

So, we now have the New Democrats’ lead economist, Summers, telling us we should be in panic mode because Reagan had such a dogmatic belief in austerity that he raised taxes (though, net, Reagan actually cut taxes). Summers is seriously proposing that the Democrats should take their policy advice on austerity from Reagan! He claims that Democrats, in response to the revolt of the white working class, should embrace austerity and renew the New Democrats’ long war against the white working class even though he knows that is terrible economics and politics. Reagan knew next to nothing about macroeconomics. Let me be explicit – both the Old Republicans like Reagan and the New Democrats shared this embrace of austerity’s long war against the working class. Reagan’s embrace of austerity was a key contributor to the stagnation of working class wages and the rise of the plutocrats. This is how out of touch the New Democrats are with the American people – Summers’ sees Reagan as the role model that Democrats should emulate.

But Summers’ primary cause is austerity, so he claims that we should accept weak growth and higher unemployment. If Summers were correct about secular stagnation, however, the imperative policy response would be to end the New Democrats and the Old Republicans’ long war of austerity against the working class and ensure that the federal government provided a guarantee that it would serve as the employer of last resort. Summers, of course, claims that our current condition closely approaches “full employment” and we need not worry about the millions of Americans who have dropped out of the labor force or are unemployed or underemployed. At the insipid growth rates he believes will become the norm under austerity, the unemployment rates would grow substantially.

Cartnoon

The Breakfast Club (Power)

Welcome to The Breakfast Club! We’re a disorganized group of rebel lefties who hang out and chat if and when we’re not too hungover we’ve been bailed out we’re not too exhausted from last night’s (CENSORED) the caffeine kicks in. Join us every weekday morning at 9am (ET) and weekend morning at 10:30am (ET) to talk about current news and our boring lives and to make fun of LaEscapee! If we are ever running late, it’s PhilJD’s fault.

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This Day in History

Jefferson Davis dies in New Orleans; Four people die at a free Rolling Stones concert at the Altamont Speedway in Livermore, California; America’s first attempt to put a satellite into orbit fails; Jazz pianist Dave Brubeck is born.

Breakfast Tunes


Something to Think about over Coffee Prozac

We don’t know the power that’s within our own bodies.

Dave Brubeck

Read the rest of this entry »

Italeave

Italians Vote “No,” Renzi to Resign, Banking Crisis Now Looking for Taxpayers
By Wolf Richter, Naked Capitalism
December 5, 2016

While the UK voted to exit the European Union, Italy might try to exit the Eurozone. This will be tough to do, and it will have daunting implications. Alone a serious discussion of this topic at the national level will spread uncertainty and fears of financial mayhem.

But until that election, a caretaker government would have to deal with the white-hot banking crisis, and some banks might collapse entirely.

The already beleaguered euro reacted immediately, dropping 1.17% to $1.0505, the lowest since the low of March 2015, which had been $1.0457. If it slips below that March 2015 low, it will mark the lowest level since 2003. It currently trades down about 1% at $1.056.

The largest 14 Italian banks – not counting the myriad of smaller banks – are sitting on €286 billion of “non-performing exposure,” as the ECB calls it. These loans, debt securities, and off-balance sheet items won’t be repaid. Banks still carry this toxic waste as assets on their books, and writing off this toxic waste and cleaning up their books would crush the banks’ capital officially – though in reality, it got crushed long ago – and take down the banks.

So banks have to find new capital to clean up the horrendous mess, but new capital has become scarce, given the horrendous mess.

The most urgent case is Italy’s third largest bank, Monte dei Paschi. It has already raised new capital twice in recent years, only to re-collapse. The third time is not going to be the charm, investors have decided. They’ve lost their appetite for losing even more money on this morass.

But the already complex – and ultimately very costly – task of dealing with Italy’s zombie banks, after years of brushing toxic waste under the rug, has become vastly more complex in the absence of a government with a mandate. Instability and uncertainty are likely to ricochet from Italy’s banking crisis to the Eurozone and its teetering banks, and beyond.

So, just to make this clear, the Euro is now trading at $1.05 and there is over 50% likelihood according to Bloomberg that it will reach parity with the dollar within months with some analysts, including Deutsche Bank, predicting it will fall as low as .80 to .95. What does that mean? Well, in the short run it means European goods will become cheaper relative to the U.S. (good time to take a vacation) and that the U.S. Trade Deficit will rise.

Is that a negative economic outcome for the U.S.? Maybe, some economists claim there are limits to how large a deficit you can run though none of their dire predictions of hyper-inflation have proven true so far, the more immediate effect is it makes U.S. Labor inputs less price competitive and there will be job loss (that, unfortunately, has plenty of evidence to back it up).

The Fix Is Already In, as Italy’s Moment of Truth Beckons
by Don Quijones, Wolf Street
December 3, 2016

Europe is sick and tired of national referendums, in the opinion of Jean Claude Juncker, the president of the European Commission. Over the past week, Juncker has urged EU leaders not to hold more referendums as he fears that other European electorates may take a leaf out of the UK’s book and vote to leave.

It’s not hard to understand Juncker’s distaste for referenda: the EU has been on the losing end of just about every popular vote of this fledgling century. Whenever people in Europe have been given the rare opportunity to vote on Brussels-related business, they invariably vote against Brussels. In fact, the only vote the EU has won this century was in Ireland in 2009, and that was only after the people had first voted against the Treaty of Lisbon. It was the wrong answer and voters were politely invited to reconsider. Or else.

It is the banking crisis that has Brussels most worried. As Italy’s finance minister Pier Carlo Padoan admitted on Thursday, if the vote goes against Renzi, the resultant political uncertainty would make it even more difficult to raise capital, putting at risk as many as eight mid-sized financial institutions, all of which are already at or beyond the brink of solvency.

They include Monte dei Paschi di Siena, home to an estimated 35% of Italy’s €360 billion of non-performing loans. The bank, whose shares are now worth less than €0.20, has failed spectacularly to come up with a convincing plan to steady its finances, despite all the creative assistance it’s received from Wall Street’s biggest bank, JP Morgan Chase, and Italy’s most influential investment bank Mediobanca.

MPS has managed to persuade bondholders to swap their holdings for shares, at roughly 20 cents on the euro. But the second part of the rescue plan involves issuing new shares worth almost 10 times its current market cap. An ‘anchor investor’ (such as Qatar’s sovereign wealth fund) taking a large bloc would be the ideal solution, since most smaller investors have already been burnt in two previous capital expansions.

But even big-time investors with more money than sense, or hoping to call in big favors at a later stage, will be hard to find if the referendum leaves the country without a government. In such an event, a caretaker government would have little choice but to carry out a highly sensitive ‘bail-in’ of junior bondholders, including many small-scale retail investors who were criminally “missold” complex financial instruments during the liquidity-starved days of Italy’s sovereign debt crisis. In the worst case scenario, a bail-in of MPS could become the catalyst of a system-wide bank run.

To avoid that outcome, every effort will be made to keep MPS from crumbling under the weight of its own toxic debt load, even if that means bending or breaking the rules of Europe’s sacred bail-in legislation before they’ve been put into use. As Italian daily Corriere della Sera reported on Friday, Italy is in last-gasp negotiations with the European Commission over the terms of a state bailout of MPS. The taxpayer funded-rescue has already been requested and could be launched as early as next week, “if needed” (ha!).

In other words, the fix is already in. Every effort will now be made not only to steady the ship and dampen fears of financial contagion but also to use the political crisis as cover for channeling vast sums of overt and covert taxpayer-funded assistance to a financial sector that cannot be allowed — at any cost — to suffer the consequences of its own chronic mismanagement, or worse.

The solution? As it always is for the Neoliberal elites- less democracy.

Italy Just Handed the Global Economy Another Giant Variable
By PETER S. GOODMAN, The New York Times
DEC. 5, 2016

Italy’s banks are stuffed with uncollectable debts in part because the country’s economy is smaller than it was a decade ago. Bad loans on bank balance sheets reflect that millions of people have lost jobs, eliminating spending power, while companies have seen sales evaporate.

Read- Austerity doesn’t work.

Mr. Renzi pursued reforms aimed at spurring companies to invest. He made it easier for companies to terminate low-performing workers to eliminate a chief impediment to hiring them in the first place — the fear that giving someone a job was akin to adopting them as a dependent forever.

Read- lower wages and less job security.

He sought to speed civil processes in the notoriously inefficient court system to make it easier for banks to recoup bad debts by collecting collateral.

Read- foreclosures.

The constitutional changes he sought were aimed at clearing another blockage to reform. They would have trimmed the powers of the upper chamber of the legislature, a place where proposals die.

Read- less democracy.

Voters clearly did not trust Mr. Renzi to wield greater power. Now, they will be represented by someone with less power where it matters a great deal: Brussels and Berlin.

Tell me again why they should sacrifice their rights to faceless Neoliberal autocrats?

Debt-saturated nations in Europe have long argued that their burdens would be lighter if they could spend more money to spur faster economic growth.

But the European Union — anchored by Germany — has cited rules limiting the spending of member governments with big debts. Instead, Brussels and Berlin argue, such countries must deliver so-called structural reforms, stripping away labor protections and trimming pension benefits.

In a testament to the severity of this creed, German Finance Minister Wolfgang Schäuble effectively threatened to banish Greece from the euro if Athens did not deliver on reforms it promised as a condition of successive European bailouts.

Austerity doesn’t work. That was true in the 30s and it’s just as true today. As long as Austerity is the policy of the European Union, Italy and the rest of the members are better off out of the Euro and out of the Union. Voters are not stupid.

Standing Rock: Who Said Protests Don’t Work?

The US Army Corps of Engineers denied the final easement the Dakota Access Pipeline (DAPL) that would have allowed Energy Transfer Partners to drill under the Missouri River endangering the water and desecrating Native American burial grounds.

The Army Corps of Engineers will not grant the permit for the Dakota Access pipeline to drill under the Missouri river, the army announced on Sunday, handing a major victory to the Standing Rock Sioux Tribe after a months-long campaign against the pipeline.

Assistant secretary for civil works Jo-Ellen Darcy announced the decision on Sunday, with the army saying it was based on “a need to explore alternate routes” for the crossing.

“Although we have had continuing discussion and exchanges of new information with the Standing Rock Sioux and Dakota Access, it’s clear that there’s more work to do,” Darcy said in a statement. “The best way to complete that work responsibly and expeditiously is to explore alternate routes for the pipeline crossing.”

The army corps will undertake an environmental impact statement and look for alternative routes, the tribe said in its own announcement.

“The Standing Rock Sioux Tribe and all of Indian Country will be forever grateful to the Obama administration for this historic decision,” tribal chairman Dave Archambault said in a statement.

Is this over? Not quite. As of this morning, the project developers, Energy Transfer Partners LP and Sunoco Logistics Partners LP, have said that they are committed to building the pipeline without rerouting and called on the incoming Trump administration to overturn the action they consider “purely political.”

The denial of the permit was a major battle in the war to protect the water supply and the rights of indigenous people. Now, there are more battles to come.

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