Ted Auch

“Size is not the appropriate restriction,” said Senator Mark Warner, Democrat of Virginia and a member of the banking committee, who helped draft the regulatory bill. “The real question should be the level of inter-connectedness and the risk-taking we saw in the crisis of 2008.” Mr. Warner added, “The Dodd bill does provide ability for these banks to be broken up.”

So let me see if I have this straight Senator Warner your not concerned about the size of bangs with respect to Senator Kaufman and Senator Browns Safe Banking Act of 2010 - which would have limited the size of individual bank’s assets to 3% of GDP (6 Largest banks currently account for 63% of GDP) and the all important leverage factor to 16 to 1 (It had risen to 30 & 40 to 1 at places like Bear Sterns and Lehman) -  but you want to minimize inter-connectedness?

Well let me ask you a simple question: If you go to a family reunion and their are only 6 Warner’s - or whatever your mother’s maiden name was - at the shindig are you more or less likely to be “inter-connected” with those individuals than if that reunion instead included 100 of your nearest and dearest relatives?

See this is classic talking out of both sides of your mouth. As Stephen Roach likes to say you can’t have both decoupling and globalization at the same time. Pick your Poisson Senator Warner: Inter-connectedness or TBTF?

From an interesting article by Joschka Fischer on Project Syndicate:

“In Iraq, the question of power-sharing between Sunnis and Shia has neither been resolved or secured institutionally in such a way that would definitively prevent a slide back into civil war after the majority of US troops withdraw in 2011.“

Quite simply the reply to this is that while Sunni v. Shia may be the short-term cyclical conflict of most importance it is clear from this reader’s perspective that the long-term structural problem is the Kurdish Northeast (Large concentrated oilfields) v. the predominantly Arab rest of Iraq (Small dispersed oilfields). The Trigger Line as this separation is known will prove a chronic issue and one that no amount of troops, drones, or Maliki/Obama DoubleSpeak will resolve.

Nuance is the name of the game in Iraq and the quicker we in the US brush up on it the quicker we will be equipped to hold our politicians feet to the fire on the off chance they show their faces around town. I would imagine the heat will turn up even more when water becomes more restricting…Again a short-term cyclical (Oil) v. long-term structural (Water) paradox, only this one will be a matter of life or internal combustion. In the words of Hindu priest Avimukteshwaranand Saraswati “Without electricity, you can survive. One can’t survive without water…”

“You can’t be a real country unless you have a beer and an airline—it helps if you have some kind of a football team, or some nuclear weapons, but at the very least you need a beer.”

“There will never be a nuclear war; there’s too much real estate involved.“

Frank Zappa

Miles Davis wrote in his scabrous autobiography about being invited to a White House dinner in 1987. An older woman asked the not-so-modest trumpeter what he’d done to merit being there. Davis shot back, “Well, I’ve changed music five or six times.”

Goldman Sachs paid back the TARP money no doubt and that is exciting, but here are the other 2/3 of the bailout pie they don’t like to talk about.

First the Federal Reserve discount window where they borrowed >$30 Billion at 0.75% interest and turned around and lent it to businesses and governments at 3-4% interest….THAT MY FRIENDS IS CALLED MINTING MONEY!

Also the AIG bailout basically funneled a large amount of liquidity to Goldman and a variety of other large multi-national financial “institutions” (See below). So those smug smiles are indicative of Foxes In The Hen House. The graph below is another reason why Tim Geithner, Hank Paulson, et al are complicit in this fiasco. TOO CONNECTED TO FAIL!

Data rarely lies especially Pie Charts.

Three large newsaper conglomerates are experiencing a renaissance of sorts, which I hope portends brighter days ahead for the most important component of the Fourth Estate. The New York Times, Gannett Inc., and Lee Enterprises are moving up and as a huge fan of The Times and the physical satisfaction one gets from having a newspaper in one’s hands I am siked. Gannett for those who don’t care is the owner of USA Today, The Detroit Free Press (On life support), The Cincinnati Inquirer, and The Arizona Republic, while Lee Enterprises primary publication is The St. Louis Post Dispatch along with a variety of medium- and small-market newspapers that form the foundation of local journalism and are necessary to sustain a vigilant pulse on City Councils and townhalls throughout the land. We need the Too Big To Fail AND The Too Small To Care newspapers alike, because unlike the latter when applied to banking TBTF newspapers are our 1st through 6th Senses in DC, while the TSTC serve myriad custom-made and stewarded purposes.

Ever heard of the Gini Coefficient? Yeah I thought not who has and frankly who cares? Well in reading Stephen Roach’s “Stephen Roach on the Next Asia: Opportunities and Challenges for a New Globalization” I came across this measure of income dispersion within and across economies of all shapes and sizes. When I went to the US Bureau of Labor Statistics looking for a historical record of US Gini coefficients I was disappointed (but not surprised) to see a very disturbing trend developing.

First let me note that the Gini Coefficient is a decimal between Zero and One (The Grey Between Binary!), with One being absolute inequality (i.e. The Rich Have Everything) and Zero being completely equitable distribution of income across any given economy.

What I saw when I plotted the Bureau of Labor’s data was a sharply upward trending slope from left (1967) to the present (2007). At the current trend we will have a Gini Coefficient of 0.537 in 2025, 0.652 in 2075, 0.767 in 2125, and 0.939 in 2200. That is unless the world ends. OR H1N1 kills us all. This should disturb those on the left and the right equally, because believe you me the folks benefiting from this trajectory have no religion or aspirations for any type of greener planet, rather they are driven by Financial Weapons of Mass Destruction and really big yachts. This points towards a New America, which when we think about income equality or meritocracy we see that it is becoming more and more a Zero Sum Game or what what 18th/19th Century British economist David Ricardo called Comparative Advantage (See Below). Although in this instance we are talking about intra-country or -region income disparities.

Comparative Advantage (According to the US Bureau of Labor Statistics): When one nation’s opportunity cost of producing an item is less than another nation’s opportunity cost of producing that item. A good or service with which a nation has the largest absolute advantage (or smallest absolute disadvantage) is the item for which they have a comparative advantage.

I think that this trend and the data it describes to are two more examples of why across-the-board capitalism does not work. Do aspects of capitalism work? OF COURSE no one (not least of which me!!) is saying differently, but to assume that any “-ISM” in its entirety is suitable for an entire country or across the board is foolish, arrogant, dangerous, and short-sighted. BEWARE OF THE -ISM PEOPLE!!!

Lets briefly put this trend and Gini in some perspective. First it is worth noting where the US sits globally with respect to Gini. As you can see below we (US in Red) are somewhere in the middle of the 153 global average of 0.409±0.103. Some of the esteemed nations with a more equitable distribution of wealth include Russia, Myanmar (That’s Right Myanmar!), Cuba, and Saudi Arabia. Our neighbors on the Gini scale include Irag, Petro States like Iran and Nigeria, not exactly paragons of freedom. Given the projections I calculated above we will join nations like Zimbabwe (Hint: You know the nation with inflation >1 quadrillion %) by 2025, systemically corrupt nations like Sierra Leone, Equatorial Guinea, and Namibia in 2075, AND…..Drumroll Please…………..We will be off the current distribution by 2125 at a Gini of 0.767. Not bad huh? So with all the huffing and puffing from the right about our dept and deficit climbing as a % of GDP I think it is worth paying credence to this much maligned index, given its current value and projected trend. Sure we need to consume less and save more, but the fact is that many in this country are under the impression that “Compared with people in other rich countries, Americans tend to accept relatively high levels of income inequality because they believe they may move up over time. The evidence is that America does offer opportunity; but not nearly as much as its citizens believe.”

So the final point that many on the way- and intermediate-right, along with countless centrists and Efficient-Market Hypothesis ideologues make is that this type of asymmetrical wealth distribution is a product of and promoter of competition. The idea that a rising tide lifts all boats with respect to consumption, investment, government spending, and export-import (ie GDP = C+I+G+(Exp-Imp)). However, if we look at GDP as a function of the Gini Index across the aforementioned 153 nations we see ZERO RELATIONSHIP! Let me say that again there is no relationship between an increasing Gini (ie, Rich Getting Richer!) and GDP growth. So, what are we to make of this? Well the answer is that The Great Decoupling with respect to income inequality has spread geographically and will prove insidious and along with an increasing redistribution of water rights another reason why bottom-up “concern” should and will grow. We’re not talking about astroturf revolution, but rather empirical and well-thought out multi-angle reform.

Clean Energy, Clean Coal, Foreign Oil, Middle East Instability, blah blah blah blah blah.

The 2 graphs presented here derived from the US Mine Health & Safety Administration show the true cost of coal. Since data was first recorded back in the 1930s we have lost at least (ie Average Annual Derivation) 420,960 men due to coal mine fatalities and 25,633, 151 have been injured. As to the severity of the latter I wasn’t able to get my hands on how many resulted in men that were Functionally Dead. With more and more union busting and people like Don Blankenship the owner of Massey Energy the company that oversaw the Upper Big Branch mine in West Virginia making no bones about his distaste and most likely hatred of unions fatalities will rise in my opinion. Yes mechanization and strip-mining has resulted in a decline in fatalities but there has been - in recent years - an increase in large and broadly fatal “accidents”. The Upper Big Branch was a non-union mine thanks to Mr. Blankenship’s machinations. I am not promoting across-the-board unionization but I am worried that erosion of unions where their presence is required may prove economically costly to miners and in the worst case scenario Upper Big Branch Reduxes throughout Appalachia. There may be clean ways to burn coal but it’s extraction is dirty on so many levels not least of which is the fact that it robs communities of their fathers, brothers, uncles, little league coaches, and more importantly their collective spirit. West Virginians and coal mining communities writ large consist of proud, determined, stubborn, and resourceful people. However, the Paradox of Plenty (ie, The Resource Curse) caught them off-guard with the speculative and nefarious vultures swooping in to promise riches that have yet to be delivered. We need to stop stigmatizing these communities and start infusing them with capital aimed at a more diversified economic portfolio. I have been to these communities and they are desperate to decouple themselves from Carbonaceous Robber Barons like Don Blankenship.

Enjoy the data I think the figures speak for themselves.

Average Annual Deaths and Injuries:

Average Cumulative Deaths and Injuries:

So with the advent of the neo-capitalist agenda in China circa Deng Xiaoping’s invoking of the Four Modernizations in 1978 we are seeing a new China Same as the Old China. Chairman Xiaoping’s Four Modernizations were meant to fuse the Good of Capitalism with the Supremacy of Mao’s Vision. They addressed Agriculture, Industry, National Defense, and Science & Technology (EARTH TO TEXAS SCHOOLBOARD!!!). Anyway it seems that this fusion has taken what appears to be a pro-bourgeois turn for the worse if a recent piece in The Economist is any indication. Next thing you know we’ll be hearing that the C-Class of China’s Big Four Banks are or will shortly be receiving large bonuses based on short-term, highly leveraged, overly creative, and socially useless financial instruments. NO WAIT THAT COULD NEVER HAPPEN!

“The ruling by Pudong’s district government—Circular 301, as it is officially called—allows these subsidies to be paid to “qualified financial talents working at qualified financial institutions”. Upon approval by regulators, senior managers can receive a reimbursement of 40% of their taxes, plus a housing subsidy. That pushes their tax rate down to 27%, still higher than Hong Kong’s 15% and Singapore’s 20% but well below what a banker would pay in New York (44%) or London (soon to be 50%) or for that matter Tokyo (50%) or Seoul (35%).

Bankers who are not quite so important get a not-so-grand tax break, roughly half as large. More junior staff get nothing. The same system of targeted personal-tax breaks for senior executives was apparently successfully used in Beijing to entice financial firms to move from one side of the Forbidden City to the other, to an area called Financial Street. Once the leading global firms had moved their offices, the tax rebates were allowed to lapse. The same will probably happen in Shanghai. But for now, if you’re a capitalist-roader, the people’s party is pretty hard to beat.”

iCasualities is reporting 4,390 and 1,042 in Iraq and Afghanistan, respectively.

The UK is at 179 and 281, respectively, while “Other” is at 139 and 400.

The Department of Defense has identified 4,381 American service members who have died since the start of the Iraq war and 1,026 who have died as part of the Afghan war and related operations. It confirmed the deaths of the following Americans:

Iraq

BLOUNT, William A., 21, Pfc., Army; Petal, Miss.; First Battalion, 64th Armor Regiment, Second Brigade Combat Team.

COLLINS, Robert W., 24, First Lt., Army; Tyrone, Ga.; First Battalion, 64th Armor Regiment, Second Brigade Combat Team.

Afghanistan

BORIO, Roberto E. Diaz, 47, Sgt., Army; San Juan, P.R.; First Battalion, 65th Infantry Regiment, 92nd Maneuver Enhancement Brigade.

LACKEY, James B., 45, Senior Master Sgt., Air Force; Green Clove Springs, Fla.; Eighth Special Operations Squadron.

VOAS, Randell D., 43, Maj., Air Force; Lakeville, Minn.; Eighth Special Operations Squadron.