Monday, February 29, 2016

Is Trump really running for POTUS, or is he just "making a deal"?

"My party has gone bat shit crazy"
Sen. Lindsey Graham R-SC

How did he survive all this?... Hint: watch what happens next

What makes Donny run? 

He is known far and wide as a "deal-maker". 

To most American ears this term "deal-maker" is both familiar and at the same time a bit exotic. In the USA 90+% of Americans go innocently through life paying the price marked on the product they are buying or "shopping around" for a better price and if the price seems correct, this is considered a "good deal". However if you had spent some time haggling over every tomato you bought in the market places of countries like India or Morocco, or visited other cities famous for their "bazaar mentality" where you must even bargain with a pharmacist for the price of a tube of toothpaste, with "and if I buy two?" or "if I pay in dollars?",   you would have had to have learned how to make real deals or you would have been quickly skinned alive even by the street urchins, 

We might say that Donald Trump could hold his own in some of those places, but he wouldn't stand out all that much.

He even wrote a famous book about it, "The Art of the Deal".

Here is a review of that book, from the New York Times, by one of America's most prestigious literary critics:
He is proud to be at play in the fields of American free enterprise, looking for every loophole in the law and edge on his competitors he can possibly get.(...) He sounds disingenuous when he asserts that he never harassed the tenants of 100 Central Park South, but merely wanted to help the downtrodden when he threatened to move homeless people into the building's empty apartments. Christopher Lehmann-Haupt - NYT review of "The Art of the Deal"
Let Donald himself explain how it is done, which he did very thoroughly in his book:
“My style of deal-making is quite simple and straightforward. I aim very high, and then I just keep pushing and pushing and pushing to get what I’m after.” (...) “The point is that if you are a little different, or a little outrageous, or if you do things that are bold or controversial, the press is going to write about you.”(...) “good publicity is preferable to bad, but from a bottom-line perspective, bad publicity is sometimes better than no publicity at all. Controversy, in short, sells.”(...) The point is that you can't be too greedy.(...) “I discovered, for the first time but not the last, that politicians don’t care too much what things cost. It’s not their money"(emphasis mine) Donald Trump - Quotes from "The Art of the Deal"
Those are all quotes from his best selling book for the 1980s, The Republican Party are living those quotes in their own flesh at the moment.
U.S. Republicans in Washington are coming to grips with what many of them not long ago considered an unimaginable reality: Donald Trump is likely to be their presidential nominee and standard-bearer.(...) Trump has vowed to scrap U.S. trade deals, slap a tariff on imported goods and raise taxes on hedge-fund managers, as well as retain some sort of mandate to purchase health insurance - clashing with the free-market principles that have long underpinned Republican economic policy. Some Republicans in Congress, such as (...) Senator Lindsey Graham of South Carolina, said a Trump nomination would do enormous damage to the party and predicted a heavy election defeat in November to the eventual Democratic nominee. "I am like on the team that bought a ticket on the Titanic after we saw the movie,” said Graham, contending that Trump would be “slaughtered” in the general election. Money Market
Very big money is beginning to react:
A top adviser to the network of donors backed by billionaires Charles and David Koch is joining Republican Marco Rubio‘s presidential campaign, as the Florida senator seeks to rally establishment support.(...)The Kochs, who preside over a network of donors who plan to spend roughly $750 million influencing 2016 races, have said they don’t necessarily plan to endorse a candidate in the Republican primary race(...)a growing question for the Kochs is whether they will intervene to bolster the campaign of a Trump alternative. Mr. Rubio has addressed the network on several occasions. Wall Street Journal
Panic is setting in and Trump is ready and waiting for it.
The specter of Donald Trump as an elected nominee for president pushed his Republican opponents to desperate measures on Sunday, two days before a dozen states could vote to give the billionaire a huge lead in the 2016 contest.(...) Both Kasich and Rubio – who trails Trump in his Florida home – suggested their campaigns were ready for a brokered Republican convention in July, in order to keep the delegates Trump needs out of his hands. But that scenario would require a wholesale revolt against Trump by the Republican party, and the billionaire repeated hints that he is prepared to break his pledge not to run a third-party campaign.“If they have a problem, I’m going to have a big problem with that,” Trump said. “If they want to play that game, I can play it a lot better than they can.” (emphasis mineThe Guardian
Lets look at what's on the table.

The Republican Party controls both houses of Congress... for the moment, and a Supreme Court that could mark the ideological slant for a generation is up for grabs.

If Trump runs as either the Republican candidate or as an independent, all poll projections predict an Armageddon for the Republicans, with not only the loss of the presidency, but loss of majorities in both house of Congress, perhaps even in state houses too.

Has the moment finally come for doing a "deal"?

It seems to me that Donald Trump is now holding the family jewels of some of the most powerful people in the world in his tiny warm hands and is squeezing them rather hard. We are talking about a political party that now controls both houses of Congress and represents the interests of the top 0.01% of the American economy. What laws could they write for him (which I'm sure Obama, as a patriot, would be quick to sign)? Or how much would, say the Koch brothers, or all the conservative super-PACs, be willing to cough up to kiss him goodbye

The shape of a deal?

What are the Republicans still in a position to offer Donald Trump between now and the convention, something which would be more attractive for him than losing the presidential race by a historic margin and destroying the Republican Party in the process... in which case they could give him nothing?

To answer that question we would have to know things that, for the moment, only Trump himself and possibly his lawyers, accountants and tax "planners" know, but which might become public (IRS-FBI) knowledge in a foreseeable future?

Stay tuned. DS

Sunday, February 14, 2016

Oil, Banks and Bonds and the Majestic Flight of the Oozlum Bird

If you don't know him already, let me introduce you to the Oozlum Bird, probably the most useful metaphor possible for describing the world's economic/political situation today.
The oozlum bird, also spelt ouzelum, is a legendary creature found in Australian and British folk tales and legends. Some versions have it that, when startled, the bird will take off and fly around in ever-decreasing circles until it manages to fly up itself, disappearing completely, which adds to its rarity.(...) A variant of the oozlum, possibly a mutation, is the weejy weejy bird, which has only one wing which causes it to fly in tighter, faster, smaller circles, until it disappears up its own fundament. Wikipedia
Where are we now in in the Oozlum's flight plan?
Received wisdom has been upended. The fall from $100 a barrel in 2014 should have seen consuming nations throwing their hats in the air. Not a bit of it. Europe, beset by stagnation and overwhelmed by refugees, has other things on its mind. The US, now producer as much as consumer, is stuck with anaemic growth. China, the world’s thirstiest economy, has its own challenges. Global equity markets have tumbled in tandem with the oil price. Philip Stephens - Financial Times
Lets bring that up a bit closer, make it "real".
As the economy struggled to take off in the years after the financial crisis, Americans had at least one shining source of optimism: a booming stock market that not only helped rebuild shattered 401k plans, but suggested better times to come.(...) that silver lining is being threatened. The stock market is lurching downward after a flat 2015, and large banks are casting increasingly gloomy predictions about returns in the years to come. Some older workers say they’re now planning to push back retirement dates, bracing for a protracted bear market that shrinks their nest egg.  (...) wages are flat and housing prices are only beginning to recover. (...)Bond yields are at basement-lows and savings accounts offer only fractional interest rates.     Washington Post
Closer yet:
Older Americans are burdened with unprecedented debt loads as more and more baby boomers enter what are meant to be their retirement years owing far more on their houses, cars and even college loans than previous generations. The average 65-year-old borrower has 47% more mortgage debt and 29% more auto debt than 65-year-olds had in 2003, after adjusting for inflation, according to data from the Federal Reserve Bank of New York released Friday. Wall Street Journal
Of course in a globalized economy, what goes around, comes around.

Today's financial crisis, as in any oozlum-ish situation, has innumerable factors all of which play off each other in endless and unpredictable ways. One of the most ominous factors is the deteriorating geopolitical situation's effect on the price of oil and vice-versa; and the effect crashing oil prices have on the health of banks and investment and retirement funds. 

Two years ago activists were pressuring investment funds etc, to divest from oil company shares. Most fund managers, even those most sympathetic to their pleas, found this nearly or totally impossible.
If you have your 401(k) or IRA invested in a diversified U.S. stock fund, there’s a good chance Exxon Mobil and Chevron  are among your biggest individual stocks holdings. Those two oil giants alone represent 4% of the S&P 500 index, a standard market benchmark. Most professional fund managers think they simply have to hold energy stocks. Time Magazine (Sept 2014)
This reminds me somehow of the idea most people had before the crash of 2008, that real estate value was stable, that you could "bank on it", that prices would always go up, or at least never go down... and they woke up to discover that the house they lived in, their home, was worth much, much less than the mortgage debt they had contracted on it. And of course those investors holding mortgage backed securities (MBS) discovered that they were worthless. 

We might call the crash of 2008 "Oozlum - I"

Knowing what an ironclad, "good as gold" storehouse of value oil has been for many years and extrapolating from the old Time article, the image of another punctured bubble arises and it would be essential to quickly know the exposure to oil shares of any bank or fund where your savings are.
RBS (Royal Bank of Scotland) has advised clients to brace for a “cataclysmic year” and a global deflationary crisis, warning that major stock markets could fall by a fifth and oil may plummet to $16 a barrel. The bank’s credit team said markets are flashing stress alerts akin to the turbulent months before the Lehman crisis in 2008. “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small,” it said in a client note.(...) "All these people who are ‘long’ oil and mining companies thinking that the dividends are safe are going to discover that they’re not at all safe,” he said. (emphasis mine Telegraph
How to proceed in the age of "Oozlum - II"?

One of the advantages of growing older is to still possess the living oral history of ones parents and grandparent's generations, which can often take you back well over a hundred years. 

If like me, you are an American in your seventies, one, who as a child liked to listen to older people spin yarns, you may have heard many vivid stories about the bubble that led up to the crash of 1929 from people whose entire lives were marked by it and its aftermath. 

Just on example from my family lore would be a relative who went from running a steel mill in '29 to selling shirts from door to door two years later and going to markets at closing time to buy cheap, unsold, vegetables. I heard endless stories like that as a boy. The idea that Wall Street was either corrupt or strictly for insiders was common to nearly everyone who lived through the depression,

The bottom line would be that my parent's and grandparent's generation would never dream of investing in stocks; and the only bonds they would buy would be US Savings Bonds... and that was good enough in the post war boom years of the 50s and 60s. 

It is when middle class prosperity began to stutter and splutter in the 1970, and hard work and earnest saving became not enough to fully participate in the globalized cornucopia of consumerism: it was then that "simple folk" were lured back into speculation.

And now as we await the Oozlum's last plunge.
Just like we have seen so far – periodic inexplicable and what the heck moments as markets everywhere hunt for causes to explain away something very inconvenient. That the game has changed for financial markets – that there is no going back to the boom times – and that the world going forward is a much more boring, and much less finance friendly place, than the markets want to admit. Most of all to themselves. Mark Blyth - The Guardian
What to do? Where to go from here? Personally, I can't think of anything better than the video below. DS

Sunday, February 07, 2016

The Best Reason for Supporting Bernie Sanders

MIT Technology Review
“In a sense, you could say we are engaged in the class struggle.”
"There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning."
 Warren Buffet
“Call it democracy, or call it democratic socialism, but there must be a better distribution of wealth within this country for all God’s children.”
What is the best reason for supporting Bernie Sanders?

How about: "the future of humanity is at stake"?

Exaggeration? Not really.

To get right to the point: in at most a generation, or perhaps much sooner, science, in the form of robotics and Artificial Intelligence, will have led humanity to a fork in the road. A clear choice between a dream utopia and utter dystopia lies before us... it reads like science fiction, but it isn't.

One path we could take holds the possibility of leading us to an amazing and paradisaical utopia of infinite possibilities for a full and enriched quality of life, an end to poverty and even alienation... for everyone... everywhere.

And the other path - the one we are traveling today - would eventually lead the immense majority of humanity, including most of today's middle class Americans, to live in conditions that would make the legendary slums of present day Calcutta look like Disneyland by comparison.

Calcutta today.- Your town tomorrow?
How can we take the right path?

The question is: what ideas and what political mobilization will best make sure that humanity takes the path of the greatest good for the greatest number, instead of the path that will lead to unimaginable wealth and power for a tiny minority and utter misery and a "life of man, solitary, poor, nasty, brutish and short"  for 99% of humanity.

Here is how the situation stands now, with the present technology... in the opinion of none other than Martin Wolf, someone who nobody could consider "radical". Here the prestigious, chief economist of The Financial Times says.
(T)here is anxiety over rising inequality and economic insecurity. Perhaps the most fundamental cause is a growing sense that elites are corrupt, complacent and incompetent.  Martin Wolf - Financial Times
And remember, that is with present technology.

Now meet Hod Lipson:
Hod Lipson (born 1967 in Haifa, Israel) is an American robotics engineer. He is the director of Cornell University's Creative Machines Lab (CCML), formerly known as Computational Synthesis Lab (CCSL), at the Sibley School of Mechanical and Aerospace Engineering. Lipson's work focuses on evolutionary robotics, design automation, rapid prototyping, artificial life, and creating machines that can demonstrate some aspects of human creativity. His publications have been cited close to 10,000 times, and he has an h-index of 50, as of November 8, 2015. Wikipedia
Professor Lipson is very worried.
Hod Lipson’s vision of the future is one in which machines and software possess abilities that were unthinkable until recently. But he has begun worrying about something else that would have been unimaginable to him a few years ago. Could the rapid advances in automation and digital technology provoke social upheaval by eliminating the livelihoods of many people, even as they produce great wealth for others? (...)  Are we at the beginning of an economic transformation that is unique in history, wonderful for what it could do in bringing us better medicine, services, and products, but devastating for those not in a position to reap the financial benefits? Will robots and software replace most human workers?(...) A prevailing view among economists is that many people simply don’t have the training and education required for the increasing number of well-paying jobs requiring sophisticated technology skills. At the same time, software and digital technologies have displaced many types of jobs involving routine tasks such as those in accounting, payroll, and clerical work, forcing many of those workers to take more poorly paid positions or simply abandon the workforce. Add to that the increasing automation of manufacturing, which has eliminated many middle-class jobs over the past decades, and you begin to see why much of the workforce is feeling squeezed.(...) Whoever owns the capital will benefit as robots and AI inevitably replace many jobs. If the rewards of new technologies go largely to the very richest, as has been the trend in recent decades, then dystopian visions could become reality. (emphasis mine) - Who will own the Robots - MIT Technology Review
Newslinks Thought for the Day: If the word "democracy" has its origins in the Greek words demos, meaning "people," and kratia, meaning "power"; then what happens to democracy, when the demos don't "add value"?... "Not adding value" being a bland technicism that means people are not needed for much of anything anymore. Therefore power-less?
Some people and organizations who are paid to think are busy thinking about all this. One of them is  the Brookings Institute.

This is how Wikipedia describes them:
The Brookings Institution is an American think tank based on Embassy Row in Washington, D.C., USA. One of Washington's oldest think tanks, Brookings conducts research and education in the social sciences, primarily in economics, metropolitan policy, governance, foreign policy, and global economy and development. In the University of Pennsylvania's 2014 Global Go To Think Tanks Report, Brookings is ranked the most influential think tank in the world
    This is how they see the problem and possible practical solutions to it.
    While emerging technologies can improve the speed, quality, and cost of available goods and services, they may also displace large numbers of workers. This possibility challenges the traditional benefits model of tying health care and retirement savings to jobs. In an economy that employs dramatically fewer workers, we need to think about how to deliver benefits to displaced workers.
    Darrell M. West proposes striking economic changes in order to restructure how our society delivers on the social contract, such as:
    • Separating the dispersion of health care, disability, and pension benefits outside of employment, offering workers with limited skills social benefits on a universal basis.
    • Mandating a basic income guarantee for a reasonable standard of living to combat persistent unemployment or underemployment posed by the automation economy.
    • Revamping the Earned Income Tax Credit (EITC) to allow the benefit to support households in the grips of high unemployment.
    • Providing activity accounts for lifetime learning and job retraining to motivate the workforce to keep pace with innovation.
    • Offering incentives for volunteerism—beneficial for many people who in the future may not be able to provide for their families through regular employment but may still wish enrich their communities.
    • Encouraging corporate profit sharing to spread the benefits of improved productivity to the broader workforce.
    • Reforming the education curriculum to reflect the high premium STEM skills will offer employees in the future.
    • Expanding arts and culture for leisure time, ensuring that reduction in work will not eliminate chances for cultural pursuits.
    "There needs to be ways for people to live fulfilling lives even if society needs relatively few workers," West writes. Taking steps now in anticipation of the exciting new future that awaits will help people adapt to new economic realities.(emphasis mine"What happens if robots take the jobs?" - Darrell M. West
    If West's agenda could be realized, what might it look like?

     Going back to the piece from MIT:
    Software and digital technologies have displaced many types of jobs involving routine tasks such as those in accounting, payroll, and clerical work, forcing many of those workers to take more poorly paid positions or simply abandon the workforce.
    The disappearance of paper pushing jobs doesn't have to be a tragedy. Read this from the philosopher, Erich Fromm:
    Marx did not foresee the extent to which alienation was to become the fate of the vast majority of people, especially of the ever increasing segment of the population which manipulate symbols and men, rather than machines. If anything, the clerk, the salesman, the executive, are even more alienated today than the skilled manual worker. The latter's functioning still depends on the expression of certain personal qualities like skill, reliability, etc., and he is not forced to sell his "personality," his smile, his opinions in the bargain; the symbol manipulators are hired not only for their skill, but for all those personality qualities which make them "attractive personality packages," easy to handle and to manipulate.  Erich Fromm
    So if, thanks to AI and robots, it is no longer possible to "earn" a living, but the rights to "life itself, + liberty + the pursuit of happiness", are still maintained, then offering West's menu of "Incentives for volunteerism—beneficial for many people who in the future may not be able to provide for their families through regular employment but may still wish enrich their communities." or "Expanding arts and culture for leisure time, ensuring that reduction in work will not eliminate chances for cultural pursuits.", while making sure everyone, everywhere, has decent health care, education etc, would,  in short, mean a recipe for heaven on earth.

    Of course the money for all of this would have to come from taxing the only ones who would still have any money... the one-percent.

    Now stop for a moment and think a bit... Can you imagine the "one-percent" buying into any of Darell West's agenda? For example: the Koch brothers... or Sheldon Adelson or the right-wing think tanks, like The Heritage Foundation The American Enterprise Institute, Standford's Hoover Institution, etc, etc,etc, all the "greed is good" crowd, Ayn Rand's Objectivists, or any of their political errand boys: Cruz, Trump, Christie, Rubio, Bush... and the endless lobbyists and their hordes of parasitical congress-persons and assorted senators or governors. Can you imagine them swallowing West's program without the assistance of a nationwide, massive, political, "Great Awakening", to "help" them gag it down.

    Facing such hard, ruthless, well-funded and organized opposition, those who call themselves "realists", those possibilists said to "living in the real-world"; in other words, those settling for small "realistic", incremental gains, would be putty in the hands, of such brutal opponents .

    It will be a long hard fight and very different from the old-fashioned labor battles... because with robots doing everything and the one-percent owning the robots... who could go on strike? In the meantime, until all the robots arrive, the one-percent is moving more and more manufacturing to China: a one-party dictatorship where strikes are illegal.

    The fight

    Below I have included a classic political fight song, "Which Side Are You On?", sung by the iconic folk singer, Pete Seeger, in social-democratic Sweden, in the no less iconic year, 1968. It's about a coal miner's strike in Kentucky.... It is a wonderful song, wonderfully sung, but coal's going out these days and so are strikes... so only the title makes much sense today... and one single phrase in the song... which sums up why I believe that anyone who thinks that Darell M. West's agenda is worth fighting for, should support Bernie Sanders.

    The single phrase?

    You guessed it!

    It's,  "Us workers haven't got a chance, unless we organize."

    Recite that as a liberating mantra.

    This brings us to Bernie
    When Sanders says — as he does in every speech — that he’s seeking to build “a revolution,” that’s not just rhetoric. What Sanders understands in his bones is that every period of progressive reform in U.S. history has come as a result of massive street heat, of energized movements that push policymaking elites to the left. Abolitionists pressured the Lincoln Republicans toward a policy of emancipation. Militant workers and a socialist left, whose general strikes shut down several major cities in 1934, prompted Franklin D. Roosevelt’s Democrats to legalize collective bargaining and create Social Security in 1935. The civil rights movement enabled the Kennedy-Johnson Democrats to pass the landmark legislation of the ’60s. Progressive reform doesn’t happen absent a large and vibrant left. Harold Meyerson - Washington Post
    Now Robert Reich, the brilliant Atom Ant of left-wing, economists and agitators, describes how it was done before and how it could be done again.
    Teddy Roosevelt got a progressive income tax, limits on corporate campaign contributions, regulation of foods and drugs, and the dissolution of giant trusts – not because he was a great dealmaker but because he added fuel to growing public demands for such changes.(...) "The real world we’re living in” right now won’t allow fundamental change of the sort we need. It takes a movement. Such a movement is at the heart of the Sanders campaign. The passion that’s fueling it isn’t really about Bernie Sanders. Had Elizabeth Warren run, the same passion would be there for her. It’s about standing up to the moneyed interests and restoring our democracy. It Takes a Movement, Like the One at the Heart of Bernie Sanders’ Campaign, to Change the World -  Robert Reich 
    Reich makes a very, very important point... This is not really about Bernie himself, it is about the people themselves, the Demos and their Kratia.  

    Bernie Sanders is simply the only one who has had the guts to rise to the occasion. 

    The only "mouse" brave enough to volunteer to "bell the cat"...

    Bernie Sanders + enough voters = Mighty Mouse

    And finally Bernie speaks for himself:
    As he looked ahead to carrying on the fight in New Hampshire, he used many of his favorite lines. “It is just too late for establishment politics and establishment economics.” “We do not represent the interests of the billionaire class, Wall Street, or corporate America. We don’t want their money.” “The American people are saying no to a rigged economy.” “We are going to create an economy that works for working families, not just the billionaire class.” - Bernie Sanders Just Changed the Democratic Party - The New Yorker
    You could say it louder, but it would be hard to say it more clearly. 

    Moral of the story: It has happened before and it can happen again and God help us if it doesn't. DS

    PS: Here is the Brookings document in full to download: