Posts Tagged ‘economics’

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by @anarchyroll
7/26/2014

If you don’t know who Warren Buffett is, all you need to know is that he’s the greatest living investor in the history of the American stock market(s). In the world of finance he’s the Michael Jordan, Muhammad Ali, Wayne Gretzky, and Babe Ruth. He is the man and has nothing resembling an equal.

Warren Buffett has also become the conscience of the finance sector the American economy.

This is evidenced by his refusal to put his wealth of wealth into commercial securities and derivatives. Whereas all other big banks, hedge funds, and trading houses can’t get enough of either.

In a recent issues of TIME magazine, Buffett called all commercial securities “weapons of mass destruction.”

Commercial mortgage-backed securities (CMBS) and derivatives were two primary instruments in the 2008 global economic meltdown, the worst economic collapse since The Great Depression.

Warren Buffett invests the old-fashioned way, when investing was investing. CMBS and derivatives are the tools that have turned Wall Street into a casino on steroids. CMBS and derivatives are the dice, the global economy is the table, the chips that big banks and hedge funds are playing with are the liquid assets of the global economy. Are the craps and gambling metaphors coming across clearly enough?

After all of the pain and devastation that derivatives trading has done to the global economy, there is certainly a strong case to be made that they should be done away with completely. But in the spirit of baby steps and pragmatism, how about we start with at least putting some kind, any kind of regulation on derivatives trading?

If commercial securities and derivatives aren’t good enough for the greatest living investor in America, perhaps it is best that we all steer clear of them. If someone with literally billions of dollars to burn doesn’t want to touch them, why would any person dependent on a robust 401k to be able to retire at 65 want their limited assets intertwined with the same investment instruments that collapsed the global economy barely a half decade ago?

 

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by @anarchyroll
7/14/2014

Wages have not kept up with inflation or the consumer price index for over thirty years. That is what is meant when you hear people talk about wage stagnation.

As long as wages remain stagnant compared to how much stuff costs there will never be a fully robust economic recovery.

Wage stagnation is why there is currently an all time record high of income inequality in America.

This is why you don’t need a degree in economics to understand why all debates over economic issues in America are made to seem overly complicated on purpose. Because if people were paid more for their time and effort, they could buy more things. But wouldn’t those things then be more expensive? Yes, but people would be making more money. It would be a cycle, kind of like the cycle our economy is on now but less vicious and soul crushing for the generationally poor.

You’ve heard about class warfare between the 1% of earners who possess more wealth than the other 99% of earners in the country, right? That is the heart of the Occupy Wall Street movements and protests. Why is there such a gap in income equality? Why is there class warfare? Why is there a sentiment that the “game” that is the US economy is rigged and the American Dream is dead? The underlying cause/answer is wage stagnation.

Wage stagnation is not an accident, it has been done very much on purpose for almost half a century. The haves don’t want to pay the have-nots an honest salary for their honest work and have been allowed to get away with it. The 1% could make the choice to pay their workers more. But other than it being the right thing to do, why? After all, paying the masses a living wage would mean less one-percenters could afford private yachts, jets, and islands.

Wage stagnation is tied directly to the rise in consumer debt (people use credit to pay for necessities they don’t have the money to have because they don’t get paid enough), student loan debt (parents and students need to take loans because they don’t get paid enough to pay for college tuition), and mortgage debt (not being paid enough to afford a home). Being able to afford a home is the center piece of the American Dream. To afford property, not simply to achieve financial prosperity as many would have you believe.

Until wage stagnation is addressed and done away with, very little else matters in terms of turning around America’s economy for 99% of the population. To deny this is to deny reality, or be apart of the minority of the population that is benefiting from the system as it is currently constructed. There is no gray area or in between.

A living wage is the only humane solution to this problem. But traditionally, humanity and the American economy don’t always go hand in hand. The fierce resistance to paying a living wage in America is only the most recent example.

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by @anarchyroll
7/3/2014

Nothing quite says 1% like CEO of the biggest bank in America. That is the title held by Jamie Dimon (pictured above).

Jamie Dimon is the CEO of JPMorgan Chase and one of the most brilliant economic minds in the world.

JPMorgan Chase was a beneficiary of the TARP bailout following the 2008 economic collapse. Dimon and Chase were also at the center of the London Whale economic scandal in 2012.

Dimon and Chase took billions of dollars from the government when they didn’t need it, then turned around and used it to fund the same type of reckless gambling that was responsible for the economic collapse. If that doesn’t symbolize American greed and the 1% I don’t know what does.

Jamie Dimon may be a symbol, but he is also a human being. A human being who has been diagnosed with throat cancer.

Dimon wrote in a memo that his prognosis is excellent. The cancer was caught early, the treatment plan is all set up, he won’t even have to miss work. Of course, because he has the best healthcare money can buy and then some.

I wonder if the doctors will be injecting cash directly into the tumors.

I do hope this experience will change Mr. Dimon. I hope it will affect him. I hope his paradigm will shift dramatically. Cancer is still cancer, even for a wealthy white man. I’m sure he will do serious thinking, reflecting, and planning during his treatment sessions. Hopefully he will use his massive influence on the world to do something other than use money to make money. Hopefully.

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by @anarchyroll
6/8/2014

There is something about the word, and the monetary figure trillion that catches one’s attention. Trillion, as in; the total amount of student loan debt in America is $1 trillion.

A standing rule I have is that anytime the word debt and trillion are together in the same sentence, it is worth keeping an eye and an ear on.

Elizabeth Warren has been attempting to push a student loan debt reform bill through Congress. A bill that would in essence, allow debtors to refinance their student loan debt, something that is not currently allowed to happen.

President Obama has now formally put his support behind the bill.

Student loan debt has real potential to be the next bubble that busts the entire economy akin to the housing and dot-com collapses of the previous two decades.

The other important piece of the legislation is that it lowers the interest rates on the loans themselves. The first benefit of the bill helps those already in debt. The second benefit helps those yet to take out loans. Sounds like a common sense piece of win win legislation. Naturally in Washington it is facing an uphill battle with stark opposition.

Regardless of political affiliation or economic situation, $1 trillion of debt must be formally addressed with public policy of some kind to at least take a small preventive measure against a future recession or depression caused by outstanding debt on a mass scale as currently exists with student loan liabilities.

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5/27/2014

What happens when the country that we borrow from needs to borrow from someone?

China is starting to see companies collapse and borrowing go up. Why should you care?

Because the United States of America is dependent on China whether we want to be or not, whether people know it or not. China now has to spend $4 to make a $1.

If China goes through a depression or a recession or even something resembling a recession, we are going to feel the negative effects here at home. Not just because they buy so much of our government debt, but because China is responsible for 1/3 of global economic input according to the article linked to above.

There’s no need to panic or ring a doomsday alarm. But China is in a debt crisis.When that language/terminology is used there must be cause for concern in the name of financial responsibility and fiduciary duty. Why is that the case? Why should you care about this?

China owns $1 Trillion with a T of US Government Debt.

That may not seem like a lot when you see the total amount of government debt. But a trillion dollars is a trillion dollars no matter how economists may try to justify it to themselves. Anytime a trillion dollars is involved, it’s safe to say that an eye and an ear should be paid to it at all times. Especially when a margin call from China could put us on a bullet train to a 2008 sequel. The sequel is never better than the original, but let’s keep this one in the territory of Casablanca and Old School and let the original stand alone with the test of time.

eanda logoajclogo2by @anarchyroll
5/22/2014

How many people went to jail for causing the 2008 economic collapse of not just the United States, but the entire global economy?

I thought the answer was zero, it turns out I was wrong. The answer is one, one person from Wall Street went to jail post 2008.

It’s not just an income inequality gap that exists and is expanding in America, there is also a judicial inequality gap. Since I’m white I’ve only noticed this recently. If I was a minority I would have likely not just written about the disparity, but would have been arrested and put in jail already.

Graph courtesy of Project.org

In America, white-collar criminal really is a double entendre. One for the type of crime, a second for the race of the criminal.

Though maybe it is time to update the image and the term. Something more appropriate would be green collar crime. Though the fact that almost all of the white-collar corporate CEO’s were/are white; it is the quantity of dead presidents in their offshore bank account that is the blade to their prison term skate.

What does it say about us as a society that we allow this kind of disparity to justice to become the norm? Is the damage caused by the architects of the ’08 collapse greater than, equal to, or less than the robbery of a single person? How about the rape of a single person? The murder of a single person? Selling drugs to a single person?

I’m not pretending to have an answer here. I am certainly not standing on a pedestal.

Was the damage caused by World Com and Enron akin to a serial robber? A serial killer? A serial rapist? A drug kingpin? How do we measure the collateral damage? Is the death by stabbing of a man in his early twenties different from a retiree who finds out they have lost all of their money in a Ponzi scheme and is destitute without the physical ability to earn for the rest of their life?

What about the people who kill themselves due to an economic depression? What if they have spouses and children? Is their loss, pain, and suffering different from a woman who gets robbed and raped at gun point walking home from the train station?

When entire neighborhoods and towns are put into foreclosure. Hundreds, thousands, millions without work, shelter, food, water, or hope for the future…are the people responsible for causing so much human tragedy somehow less evil, deserving less scorn, and less judicial prosecution than a teenager who runs over a kid while texting and driving? What about drinking and driving?

When blood is spilled, lives taken, innocence stolen in violent crimes we as a society hunt down the criminals, lock them up, throw away the key, and turn the other cheek while they are habitually raped in prison. Victims of violent crimes and their families are forever changed, unable to ever fill the hole created by an evil person that took something that can never be given back.

But is that psychological damage not shared by victims of massive financial crimes against society like in 2008? When we aren’t talking about a single person losing a job or life’s savings but a large percentage of the global population. Are the strains placed on society not akin to that placed on the immediate friends and families of violent crimes?

If not, can we at least as a society agree that we should lock up hedge fund managers, investment bankers, and Ponzi schemers that cause global recessions and depressions as strictly and regularly as we lock up drug dealers and users?

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by @anarchyroll
5/4/2014

Do you know who Thomas Piketty is? If not, get to know him because anyone who has any real influence on the world at large is reading his book, meeting with him, or seeing him speak live. He is being praised by the 99% as a harbinger for what the future of economics should look like and demonized by the 1% as another crazy socialist in a suit.

Thomas Picketty is a French economist and author. His recent book Capital in the Twenty-First Century is breaking tradition from past economic books and actually selling really well. He is a believer an evolved, progressive taxation to battle income inequality that has become a global pandemic over the past thirty years. The Guardian recently followed Picketty on a speaking tour of London. The video below contains the meat and potatoes of what you need to know about Picketty’s viewpoints, theories, and demeanor in his own words, in less than five minutes. Click on the picture to be directed to the video. Enjoy!

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by @anarchyroll
4/27/2014

The stock market in the United States is rigged like crooks who have the fix in on a casino table game.

Many skeptics and people who have lost money have been saying this under their breaths at bars and loudly at family gatherings for decades now. But since the economic collapse of 2008, many people who have watched even the most sanitized network news show that Wall Street is an insider social club with insider language, insider trading, meant for only those in the club to benefit at the expense of those on the outside.

Do you know what flash trading is?

Whether or not you have any money in the stock market you need to know about it. Because if you’re smart, then one day, you will have some money in the stock market. Like it or not, most wealth generation is created by people who are able to make money in the stock market. The US stock market, though rigged, is the gold standard of using money to make more money in the world we live in. High Frequency Trading or Flash Trades leverages technology to rig the game for those in the know.

A con using fiber optic cables is still a con. The great author Michael Lewis recently exposed flash trades to the world for the con that it is. If flash trading wasn’t/isn’t a con, then why are both the SEC and Congress already looking to enact laws to make it illegal?

If flash trading isn’t as shady as it gets, why has a separate stock exchange called the IEX opened for business on a foundation of being able to prevent flash trading? If flash trading isn’t a con, why has the IEX gotten both so much positive press, high level start-up capital, and high-profile clients/traders?

I first heard of flash trading when the Flash Crash of 2010 become public knowledge. I also remember reading an article in TIME about buildings in Manhattan being bought and turned into server farms. Considering the price of Manhattan real estate, the fact that buildings would be bought and not turned into residential or commercial property to collect rent of any kind should raise an eyebrow.

Flash trading is the epitome of why my economics blog is called Excess and Algorithms. Excess and Algorithms is what flash trading is all about. Flash trading symbolizes what Wall Street has become over the past 25 years. Shady, dishonest, illegal but allowed to exist because of high level bribery, blackmail, and under the table handshakes between those in power and those in the know. The pervasiveness of flash trading in turning the stock market into a rigged game shows why the movement was called Occupy Wall Street. #OWS tried to teach and preach many things. Their critics would argue, too many. Two of the aspects related to business and Wall Street were/are:

  • Bailouts for citizens > Bailouts for banks
  • Jail for economic collapse architects > Bonuses paid to economic collapse architects
  • Cash > Credit
  • Credit Unions > Banks

Now, thanks to Michael Lewis we know one more thing about Wall Street to adapt to going forward:

  • IEX > NYSE & NASDAQ

Act accordingly…

by @anarchyroll
4/15/2014

Did you hear the one where America turned into an oligarchy? It goes something like; between the start of the industrial revolution and the start of the Vietnam War land and resource ownership was grabbed and consolidated by a select few and they have been using the influence of said land and resources to try to grab more, more, more…how do you like it? how do YOU like it? how do you like it?

Do you know what municipal bankruptcy is? That has such a striking ring to it, no? Municipal bankruptcy. It sounds much more damning than Chapter 9 Title 11 Bankruptcy.

I grew up thinking that governments were in charge. Federal, state, and/or local. Detroit is like a highlighter pen on a never-ending text-book page of small words, showing who is really calling the shots and who has all along…banks.

Banks nearly destroyed modern civilization as we know it in 2008 and who went to jail? Who got brought up on charges? Did any one Wall Street CEO go through half of what a single mom applying for food stamps goes through? Didn’t think so.

Money talks and cash is king. We all learn that at some point or another. It is one of the many aspects of modern society in which we quietly lie to ourselves so we can believe we are have evolved since the caveman era.  Municipal bankruptcy will soon make it impossible to ignore. Detroit is not an exception to the rule, Detroit is a harbinger. Resistance to pension reform has made that all but a certainty.

What does municipal bankruptcy tell us? That we are still serfs and they are still living in the castles. Castles became known as Manhattan penthouses in the mid 1980s. Municipal bankruptcy shows who is really in charge. We can hold all the elections we want but there is a reason it’s called virtual reality. It’s not the real thing. It just looks and feels like it…

 

 

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by @anarchyroll
3/25/2014

Very few issues in the last thirty years have been debated as much as the federal minimum wage. The debate is of course, a farce. The debate is bullshit. The debate is the economic equivalent of the debate over climate change/global warming. It is not a debate, it is an argument over power and control over resources and the monetary consequences thereof.
Somehow the minimum wage debate has been lumped in with the social safety net/ entitlements debate, as if recipients want something for nothing. Literally the opposite is true. We are talking about adult men and women who are not only willing to work, but show up for work 40, 50, 60, 70 hours a week or more. All they want in return for the more often than not, physical labor that they are give is for in return, the ability to pay all of their bills and have enough left over to have some fun AND save for the future.
Employees with more income are more productive. Employees who have higher wages are able to spend more money. Those are the reasons Henry Ford doubled the pay of his assembly line workers in 1914. The results were more productive grunts, but more importantly to Ford and to the country as a whole, more cars purchase, more money pumped into the economy. Ford’s workers were now able to buy the cars they put together on the assembly line in Detroit. This resulted not only in a boom in auto sales, but a boom to the economy in general, serving as a precursor to the Roaring Twenties.
Cost equals wage divided by productivity. Never forget that equation. Economists don’t, people with MBA’s don’t. Just like the dirty secret of fitness is you never need to do anything other than push-ups, sit ups, squats, pull ups, and jog the dirty secret of economic policy debate in regard to wages versus costs is that the effect of increased wages offsets the rise in costs due to an increase in productivity.
The minimum wage has remained essentially stagnant for almost twenty years while the consumer price index (the cost of the stuff we need to buy to survive) has gone up steadily over that time. Wages have not risen at all when adjusted for inflation, in fact, they have decreased.
Why are slave wages acceptable in our society? It’s 2014, not 1914. If people are willing to work, why should they not be paid enough to live off of their paycheck? Cause of the market? The people struggling the most are often working the hardest. How and why is the free market leaving them behind? These are people willing to work more than eight hours each day, more than forty hours each week. Do they not deserve to be able to have money for all their essential costs and still have some money for a little bit of fun here and there?
They perform the essential tasks. Hedge fund management is not essential, garbage pickup is. Bank vice presidents are not essential, food preparation is. Day traders are not essential, janitors are. Just because a group of workers doesn’t have an army of lobbyists doesn’t mean they don’t deserve their piece of the pie. Their piece of the pie they work for with their hands, feet, blood, sweat…and tears when they match their paychecks with their bills at the end of the month.
Remember these are human beings, not numbers on a spreadsheet. Lives, with families, not expenses on a report. Slavery has been abolished for quite some time. One of the consequences of that is if people are willing to do work, or hard labor, we pay them fairly for their time and effort. Fairly means a living wage. Living wage is $15 an hour. If we can’t afford to pay that, then we as a society must adjust before these hard-working people get a fourth job and learn to live on less than three hours of sleep per night with no vacation or retirement forever eva, forever eva, forever eva, until they are put six feet under in a pine wood box.