Sunday, April 13, 2014

The Balanced Budget Amendment

A Balanced Budget amendment is a great idea, an idea whose time has come.  Finally, as it is long past overdue!

A Balanced Budget amendment is an essential symbol of an economy that lives within its means, within the rules of fiscal integrity, fiscal responsibility.

But that is its biggest problem – isn’t it – that it is just a symbol of fiscal integrity and fiscal responsibility?

“OK, what’s the problem?  Why is it just a symbol of fiscal integrity and fiscal responsibility?  Why doesn’t it FIX the problem?”

The problem – I think we all agree – is an out of control National Debt.  And balanced budgets do not fix that problem.

“Whoa, really, why not?”

Friday, April 11, 2014

Wikipedia

I link to Wikipedia articles a lot in my Blog.  I don’t ever use it for my writing because my posts would be much wordier than they are and I prize brevity; and because the audience I am writing for is not so compulsively interested in learning all that there is to know about a subject – who has the time?  Not me!  But I do like to give my readers a place to go for more information about a subject that I write about, if they are interested.

But why Wikipedia?

I understand that Wikipedia is controversial.  But that is a mistake.  Anyone can write a Wikipedia entry.  But every entry will be edited and re-edited by many other contributors world-wide.  It is the rare Wikipedia entry that will not go through 100 revisions.  And end up pretty reliable.  Lots has been written about Wikipedia reliability, too.

Finally, my killer argument for loving Wikipedia articles.  A Wikipedia article is itself never a “source” for any information (as “the internet” is also never a source; "I found it on the Internet" is as empty of meaning as "I saw it on TV") as it is never a primary source.  But every (most ...) Wikipedia article has a References section (with Notes and Further Reading) which points to a gazillion primary sources for virtually every assertion in the article.  So in the end it is a great way to get at primary source material.  And it is far superior to any other non-primary source that I know of to get you to primary source material for anything you want to do research on.

Viva Wikipedia!

Moral Hazard

“Moral Hazard” (for a longer discussion) was one of the most important – and necessary – factors that allowed the Great Recession of 2008 to occur.  Indeed, it may have compelled it to happen sooner or later.  So, maybe a sufficient factor, too.  For the mathematicians out there, moral hazard may have been a “necessary and sufficient” factor for the Great Recession of 2008, the Recession that was nearly the Second Great Depression.

So, what IS this thing called “moral hazard”?

Moral hazard is a condition or set of conditions that present a person or a business with the opportunity to make a bet where “heads I win, tails you lose.”  We all look for bets like this but few present themselves to us because we have laws that try to make life … more fair.  And a moral hazard bet is inherently unfair.

The kind of moral hazard that presented itself so often to the banks in the early 2000’s was being able to write a mortgage for a family, take a fee for the transaction, and then sell the mortgage to another bank or financial institution.  If the mortgage holder were to default on his monthly payments, the mortgage writer and his bank would be off the hook; the bank that bought the mortgage would take the loss.  Another example is making high-risk high-reward trades for a bank where if the trades work out the bank profits enormously and so does the trader; if the trades fail, the trader still has his salary and his bonuses and his bank will be rescued by the government (heads you win, tails the government – the taxpayer – loses) because it is “too big to fail,” too important to the health of the financial sector of the economy (finance is the new tail that wags our economy).

Thursday, April 10, 2014

Corporate … What?

It’s called “Corporate Personhood.”

Corporate personhood” means that corporations are treated as though they were persons, indeed citizens, under the law, as having the same Constitutional Rights as “natural persons,” as citizens.

On the one hand it seems innocuous enough.  On the other hand it seems absurd – and dangerous.

Corporate personhood has two arenas where it seems to make a difference whether corporations have such “rights.”  In the first instance, personhood allows corporations to participate in the electoral process – not to run for office (not yet) and not to vote (not yet), but to influence elections by spending unimaginable amounts of money, so much money that it overwhelms all other sources of campaign money.  The issue is not that their money always wins elections (as often as not both major party candidates are the recipients of big corporate cash), but that whoever wins is beholden to his or her corporate benefactors.  In the second instance, personhood allows corporations to participate in writing legislation, to dictate the terms of the legislation.  Obamacare was the handiwork of the health insurance lobby more than it was the work of Congressional Democrats or the White House itself.  We don’t elect health insurance companies to write health care legislation, but they do.

Here’s a very brief history of corporate personhood.

Sunday, April 6, 2014

The New Economy, Revisited

A Funny Thing Happened on the Way to the Forum.  I forgot the main reason I sat down to write about "The New Economy."  The main reason is that the New Economy is a “structural change” in the economy, it is not just another down-swing of another “business cycle.”

Huh?  What you talkin’ about?

Many if not most economists are so wrapped up in Economic Theory that they see the recent Recession as just another recession, just another Bust following another Boom.  This strait jacket of Economic Theory forces them to see everything as business cycles and keeps them from seeing the obvious: that this recession – the jobless recovery part of it – is not the result of a cyclical Surplus in Supply or a Deficit in Demand (I capped these 4 words because they alliterate!), it is rather the result of a new economy that needs fewer and fewer workers.  I am not talking about Globalization or the out-sourcing of jobs to China and India, etc. which will continue to savage American jobs.  I am only talking about the Technology piece of the New Economy – computers and artificial intelligence and robotics – performing work that was previously performed only by human beings.