Sunday, May 16, 2010

The Copperfield Dollar

What I have found interesting about the financial crisis of 2007-2010 as it is being referred to is that prior to the crisis there was a lot of money that was being invested in derivatives and other risky investments and yet after the crisis none of that money was accounted for. My question is where did that money go? I understand that some of the money was for loans that were defaulted on so there was no recovery there and there was the money that was built into the value of overvalued assets that will also never be recovered. However there was real money in the system that has never been accounted for. According to my crack research staff there was billions in profits made from selling these derivatives and other investment vehicles by the large trading companies. Those are the same trading companies that we had to bail-out. So again my question is where did that money go? What about all the billions the hedge funds made by betting short on the market?

It has taken me awhile but I have figured out what happened to all of that money. You see it wasn’t regular currency like we are use to using. No it was a special currency used only for these types of special transactions. You see these transactions were done using “Copperfield dollars”. For those who don’t know David Copperfield is a famous magician or illusionist who is famous for among other things making the Statue of Liberty disappear on television. So as you can imagine anyone who can make the Status of Liberty disappear would have no trouble making a few hundred billion dollars disappear. These Copperfield dollars on the surface appear to resemble ordinary currency however they have one unique characteristic that other currency do not have. These Copperfield dollars once placed in certain banks vaults disappear into thin air without a trace. You put them in the vault in 2006 and you go back in 2007 and they are gone. Poof like a puff of smoke, gone.

Now let’s be clear not every bank used these Copperfield dollars. They seemed to only have been circulated at the largest banks, investment houses, and hedge funds. So are we to believe that during this gambling frenzy that there were not profits being made. That would be like the casinos in Vegas winning all the bets but at the end of the night they have no money to show for the day’s receipts and yet there were no payouts either. So no one won any bets, but the house has no money either. How is that possible? Oh yeah I forgot they were using those pesky Copperfield dollars. Every time you think you see one you really don’t, it was an illusion.

I have to admit I have an economist friend who I think is a pretty smart guy and he has tried to explain to me what happened and the more he explains the less I understand. Finally I walk away just shaking my head with a headache. One thing he did tell me though that I thought was interesting and I believe it is something most people don’t know. Based on the terms of the bail-out loans ( yeah they were loans or stock options) it is estimated that in the final calculations it will have cost the American public around 38 billion is the figure I think he used (it may have been 48) but anyway that worked out to be about 280 dollars for each household in America to save the financial system. Now of course these were not Copperfield dollars because they came out of mine and your pockets and we are not allowed to use these special Copperfield dollars.

My question is this, why aren’t the armed tea-partiers at the offices of Goldman Sachs, Citi, and the others who used those Copperfield dollars to make 10% of our economy disappear? Who are the real terrorists here? Even the 9/11 terrorists did not shrink the economy by 10%. We started two wars behind that attack, but you’re telling me some folks can get away with stealing 10% of our economy and nothing happens? That 10% by the way is conservative because it only includes what we had to replace 700 billion not what actually disappeared in Copperfield dollars. We will never know the extent of that robbery I’m afraid. I understand people being angry, but what I don’t understand is this misplaced anger. Was it the overreach of the government that caused our economy to crash? No on the contrary it was the fact that government was not upholding its responsibilities to watch out for its citizens or is that a function of government? According to these folks it is everybody for themselves. I think these folks have been watching too many John Wayne movies because they surely don’t want that scenario.

Well, I have decided because the banks and others were so successful using those Copperfield dollars that I am going to replace my currency with them and I am going to paying all of my bills with them. Let’s see how the banks like it when they go to cash my checks and the money that was there yesterday is gone today. Poof!

“If you ever have to steal money from your kid, and later on he discovers it's gone, I think a good thing to do is to blame it on Santa Claus” - Jack Handy

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Friday, May 14, 2010

Profits Before People

Pruning relatively less-efficient employees like clerks and travel agents, whose work can be done more cheaply by computers or workers abroad, makes American businesses more efficient. Year over year, productivity growth was at its highest level in over 50 years last quarter, pushing corporate profits to record highs and helping the economy grow. - NY Times

Over the last two years I have had trouble keeping the stories straight coming from corporate America. On the one hand American workers are lazier and less productive than their counterparts in other parts of the world and then on the other hand productivity in America has never been higher. It is so high in fact that many companies are doing twice as much work with half the workforce. The good news there is that it makes the companies huge profits. As every student of business knows labor is always your highest expense. The bad news is that the American worker has become so efficient they are cutting their own throats. The proof is in the last two “so-called jobless” recoveries. Companies are using the recessions as tools to cut labor while increasing the amount of work being heaped on those employees who are left.

These remaining employees have seen the amount of work they are being asked to do more than double while their wages have remained stagnant. This has been accomplished with fear of lay-offs or fear of outsourcing jobs to overseas. So I am a little confused the employees have become more productive creating millions in profits for their employers and yet their wages have not improved markedly for the last ten years. I’m no Ivy League educated economist but even I can see that this doesn’t quite add up. How is it possible for corporate America to pull this off? It is simple really and it involves a three prong approach that has been successful for generations and continues to be so.

The first prong is that they convince enough people that someday they could be wealthy too and so it is not a good idea to create problems or taxes for wealthy people because someday they could affect you. Let’s take a closer look at this concept that anyone can get rich in America. The truth is that while this country more than any other offers the opportunity for almost anyone to become wealthy, the truth is that few of us ever will. The idea that you could go from humble beginnings to great wealth is a well worn myth that continues to be propagated in our society. The truth is that less than 40 folks a year get rich by means other than inheritance, marriage, or criminal enterprises. So good luck with that!

The second prong is to convince people that having wealthy people pay their fair share is somehow evil or socialism. You would not know it but the current tax burden of Americans is the lowest since Harry Truman was president. If this is true then why are the tea-partiers and their wealthy benefactors complaining about the government’s assault on working people by over burdening them. Much of our debt could be reduced if we just went back to the tax structure we used under Bill Clinton. The problem in America is that no one wants to pay for anything. Everybody wants free stuff. I can understand middle-class folks complaining about being squeezed but we have the biggest discrepancy between wealthy and everyone else since the “Gilded Age”. Is it unfair to ask those who have received more to pay more? If it is then our democracy and our economic system is a sham.

The third and final prong is the tactic of diversion. The wealthy get the people to focus on issues that divide versus issues that unite. This is the job of their high paid mouthpieces Rush Limbaugh, Glen Beck, and Sarah Palin. Their goal is to focus people’s attention on the black and brown hordes who are stealing “our America” and our “way of life”. The one thing I have noticed at all of those Congressional hearings about the economic meltdown, the ecological disaster in the Gulf, and any other current complaint that the tea-partiers are complaining about all of the CEO’s and representatives were not black or brown. They were to a person white and male. So who is really stealing us blind?

If our system is to survive we will have to figure out a way to have reinvestment of some of those billions in profits that have been created not by the overpaid CEO’s but by the productivity of the American worker. I don’t believe that it is only the government’s responsibility to retool the American worker. Is it not also the responsibility of those who have profited from these workers to provide for their future or are they just responsible for their demise?

Everyone is entitled to their own opinion, but not their own facts. - Daniel Patrick Moynihan
The Disputed Truth

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Tuesday, May 11, 2010

Moses & The Constitution

Today's Constitution is a realistic document of freedom only because of several corrective amendments. Those amendments speak to a sense of decency and fairness that I and other Blacks cherish. – Thurgood Marshall

The one thing that troubles me about many on the right and the left is both sides belief that the Constitution is untouchable and engraved in stone. The American Constitution despite the proclamations of tea-baggers was not written by the hand of God Almighty, instead it was written by a group of 18th century men with the limited knowledge of the world and history that they had. I will grant strict constructionists the fact that many of the concepts they enshrined in the constitution were ahead of their time, but let’s not forget all of the concepts that they neglected in the document or perverted due to their prejudices. All “men” were created equal so long as they were men, white, and property owners.

I believe that instead of looking at the constitution as absolute and complete we need to view it as a living, breathing document. A document whose basic tenets we hold untouchable but one where we also recognize that it can be amended to include those situations that men of the 18th century would never have imagined would exist. How could we expect them too, unless we believe that it was written by the hand of God a position which I personally do not subscribe to? Students of history can attest to the fact that the complexion of our country has changed dramatically and continues to change. There are those who want to cling to the America of the 18th century in the false hope that the sands of time can be stopped by the sheer will of stubbornness and ignorance.

What does it mean to be a strict constructionist? Does it mean that you believe that the constitution was complete as originally written or does it mean it was complete after certain amendments? I have never been sure what exactly these people believe. As a member of one of the groups who were originally left out of the constitution I find it difficult to accept the completeness of the original document. We are not the society we were in the 1700’s and we will never be again. Our society and our country are evolving and if we believe that our constitution will not have to evolve then we are laying the foundation for our demise into irrelevancy. I find it interesting that those who label themselves strict constructionists are usually those who were included in the original document and therefore believe that there is no reason to make it more inclusive.

"With regard to that we may add that when we are dealing with words that also are a constituent act, like the Constitution of the United States, we must realize that they have called into life a being the development of which could not have been foreseen completely by the most gifted of its begetters. It was enough for them to realize or to hope that they had created an organism; it has taken a century and has cost their successors much sweat and blood to prove that they created a nation. The case before us must be considered in the light of out whole experience and not merely in that of what was said a hundred years ago. The treaty in question does not contravene any prohibitory words to be found in the Constitution. The only question is whether [252 U.S. 416, 434] it is forbidden by some invisible radiation from the general terms of the Tenth Amendment. We must consider what this country has become in deciding what that amendment has reserved." – Oliver Wendell Holmes

I believe that the constitution has been incorrectly interpreted in decisions like Dred Scott, the Santa Clara County decision, and even today with the recent decision to allow corporations unlimited campaign funding. These decisions have one thing in common and that is they were decided using strict constructionist views. The courts rather than applying the standards of the period they were in chose to retain the standards of the original framers complete with their prejudices and ignorance. As the President continues to fill vacancies on the court, as groups like the tea party continue to call for strict constructionist reading of the constitution, as states continue to enact draconian legislation, and as the threat of terrorism continues to loom over us it is important that as nation we define what we stand for. Do we stand for a society that is inclusive and believes in the value of all people or will we continue to claim this right only for those who look like we do?

The tyranny of a prince in an oligarchy is not so dangerous to the public welfare as the apathy of a citizen in a democracy - Charles de Montesquieu

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