Policy of the One Percent, by the One Percent, for the One Percent

From “The 1 Percent’s Solution,” Paul Krugman, NYT:

“Thus, the average American is somewhat worried about budget  deficits, which is no surprise given the constant barrage of deficit scare stories in the news media, but the wealthy, by a large majority, regard deficits as the most important problem we face.  And how should the budget deficit be brought down?  The wealthy favor cutting federal spending on health care and Social Security — that is “entitlements” — while the public at large actually wants to see spending on those programs rise.

“You get the idea:  The austerity agenda looks a lot like a simple expression of upper-class preferences, wrapped in a facade of academic rigor.  What the top 1 percent wants becomes what economic science says we must do.

“[T]he years since we turned to austerity have been dismal for workers but not at all bad for the wealthy, who have benefited from surging profits and stock prices even as long-term unemployment festers.

“And this makes one wonder how much difference the intellectual collapse of the austerian position will actually make.  To the extent that we have policy of the 1 percent, by the 1 percent, for the 1 percent, won’t we just see new justifications for the same old policies?”


Not Budging from the Bottom of the Cliff

If we needed any further proof that markets are irrational, we see it today in the stock market’s rise of 308 points.  Yes, the deal reached on the fiscal cliff was better than nothing, but only slightly.  It postponed much more than it solved.

The markets can climb if they want to, but as for me, I’m going to sit here at the bottom of the cliff.  I see no point in trekking back up only to tumble again in a couple of months.

Once Tim Geithner can no longer find spare change in Treasury’s couch cushions, we’ll hit the debt ceiling in a couple of months.  I laughed last night when the President said he won’t negotiate on that.   He’s going to hold his breath till the world’s economy turns blue?

The sequester that got “delayed” in this deal for 60 days will come up again at the same time as the debt ceiling.

Finally, the latest “continuing resolution” we limp along with in lieu of a real budget expires at the end of March.  So another fight.

I expect the Tea Party will make the coming battles over the debt ceiling, sequester, and budget make the one we just concluded look like, well, like a tea party.

A Perfect Match — Mitt and a Snake Oil Salesman

Josh Marshall at Talking Points Memo reminds us that the economic “expert” Mitt is using to push his “Romney Economic Boom” plan, Kevin Hassett, wrote a best-selling book in the late 1990’s.

That book was Dow 36,000: The New Strategy for Profiting from the Coming Rise in the Stock Market.

You remember when the Dow hit 36,000, don’t you?  Me either.


Libor Elicits a Shrug and a Yawn

We’re so used to financial shenanigans that we’ve reached the “So what else is new?” stage.  From “The Spreading Scourge of Corporate Corruption,” Eduardo Porter, NYT:

“Perhaps the most surprising aspect of the Libor scandal is how familiar it seems.  Sure, for some of the world’s leading banks to try to manipulate one of the most important interest rates in contemporary finance is clearly egregious.  but is that worse than packaging billions of dollars worth of dubious mortgages into a bond and having it stamped with a Triple-A rating to sell to some dupe down the road while betting against it?  Or how about forging documents on an industrial scale to foreclose fraudulently on countless homeowners?

“The misconduct of the financial industry no longer surprises most Americans.  Only about one in five has much trust in banks, according to Gallup polls, about half the level in 2007. … Sixty-two percent of Americans believe corruption is widespread across corporate America.

“The inexorable rise of income inequality is also likely to encourage fraud, fostering resentment and undermining trust in capitalism’s institutions and rules.  Economic research shows that participants in contests in which the winner takes all are much more likely to cheat.  And the Unites States is becoming a winner-takes-all economy.”

Deck Stacked Against the Little Guy

From Rich Karlgaard on Forbes.com about Facebook’s IPO:

“Facebook left nothing for the common investor.  The insider pig pile of PE firms and celebrity Silicon Valley angels took it all.  This is a rather new, post-Sarbanes-Oxley fact and it should make Americans very, very angry.  When Microsoft went public in 1986, its market value was $780 million.  Microsoft’s market value would rise more than 700 times in the next 13 years.  Bill Gates made millionaires of thousands of ordinary public investors.  When Google went public in 2004 at a $23 billion valuation, it left less on the table for you and me.  Still, if you had invested in Google then and held your stock, you would be sitting atop a 9x return.  Zuckerberg and his Facebook friends took it all…”