Friday, June 13, 2008
Diplomatic Triumph of the Day: The Democratic nominee
It would not be an exaggeration to say that the Democrats’ nomination of Obama as their candidate for president has done more to improve America’s image abroad — an image dented by the Iraq war, President Bush’s invocation of a post-9/11 “crusade,” Abu Ghraib, Guantánamo Bay and the xenophobic opposition to Dubai Ports World managing U.S. harbors — than the entire Bush public diplomacy effort for seven years.
The Great Brown Hope of the Day: Barack Obama (6/05/08)
Getting to see your children in California is like pulling teeth
In April Edwin Garcia broke the news that California's women prisoners who were awaiting drug-rehab, vocational or a parenting program where the inmates can live with their children in a special unit were being given the choice of having bad teeth pulled or not entering the programs. Naturally most of them opted to go snaggle-toothed.
Now the California Senate is holding confirmation hearings for Jeffrey Thompson, Gov. Schwarzenegger's appointee to oversee health care policy for the Department of Corrections and Rehabilitation. Like most Republican appointees, Thompson's main credential is that he knows absolutely nothing about his job—neither health care nor prisons—but he is a Rotarian—
"One thing that I've never shied away from in life is challenge," Thompson said, adding that he was asked to serve by the governor. "As a Rotarian, I believe in service above self. That's why I'm here."
The Senators want to know what he's going to do about offering women a choice of their children or their teeth. The President of the Senate brandished a copy of the story from April and excoriated—
"That's outrageous," he continued. "I don't care what the reason is. It's outrageous. I just finished reading a book on, another book on Nazi Germany. That's the kind of stuff that goes on in other countries, in other regimes, not here."
Apparently the Senators haven't been following the news. And even sadder is that in the end I'm sure Mr. Johnson will be confirmed.
Most health care services in California's prison system are already under a court-appointed receiver following a lawsuit against the state, but dental and mental health care were allowed to slip through the gap. If this is the state's approach to dental care, dare we imagine what is being done to the mentally ill?
Thursday, June 12, 2008
Gas Price Effect of the Day: The four-day school week
Some Kentucky school districts are considering four-day instructional weeks to combat the rising cost of bus fuel. —unattributed story from the AP
Other districts in Kentucky have already gone to a four-day-week schedule.
Concerning Kentucky educational attainment Wikipedia reports—
Education in Kentucky suffers from the same negative stigma as many other Southern states. Some statistics, such as ranking 47th in the nation in percentage of residents with a bachelor's degree and an adult illiteracy rate of about 40%, seem to justify the stereotype, while others, such as ranking 14th in educational affordability, 25th in K-12 attrition, and being named the 31st smartest state using a formula by author Morgan Quitno (ahead of western states like California, Nevada, Arizona and New Mexico) suggest that the stereotype may be overblown.
The author speaks of a "stereotype" but fails to mention what that stereotype is. I too will remain discreetly mum. But for whatever the stereotype is, having an adult illiteracy rate of 40% does not suggest that it is "overblown." This is Republican territory.
Now I wonder how many Kentuckians believe that Obama is a Muslim.
Wednesday, June 11, 2008
Derivative of the Day: The Global Warming Index
UBS launched the first global warming index, the UBS Global Warming Index, which is composed of weather futures contracts in 15 cities, effectively betting on the weather. —Lianna Brinded reporting in "Banks respond to demand for climate change derivatives"
Hedge funds and private equity groups have been in a dither ever since the collapse of mortgage derivatives. Where to park all that money? There's oil and food, of course, and speculation in them has so far brought us significant increases in the cost of both.1 But multibillionaire George Soros has been warning that our beloved investors may have created an "oil bubble" and a "food bubble" ready to pop as soon as "the most serious recession of our lifetime" gets into full swing.
But investors wanted other opportunities to create froth (known in the trade as "diversification"2), and climate change looked like it just might be the new best thing—
After the US sub-prime mortgage fallout wreaked havoc on the credit market this summer, an investment sector that is uncorrelated to any other asset class has provided an alternative choice in long-term funding. According to data provider Lipper Feri, about €3bn ($4.2bn) was raised in the top 10 funds in environmental equity and ecological funds in Europe in the first half of this year, exceeding last year's total by €200m.
Srikant Dash, head of index research and design at rating agency Standard & Poor's, said: "Primarily, we saw retail and high net worth investors seeking portfolio exposure to climate change-related derivatives. However, after four to five months, the field of investors is broadening and we are experiencing high levels of inquiries and executed deals with institutional investors and long-term fund allocators."
The rule in finance is that if it moves, someone will bet on it.
This report was written over six months ago, and I haven't followed the progress of the "climate change-related derivatives." But as ridiculous as it all is, I wouldn't be surprised to learn that the free market has managed to create a "climate-change bubble," which may explain a portion of the early heatwave now hitting the Northeast.
1A number of right-wing cable news anchors are jumping through hoops to say this isn't so.
In response to the triple shocks this past Friday of a $11 bump in oil price, sharp rise in unemployment and big selloff in the stock market, Gwen Ifill of PBS interviewed John Authers, investment editor at the Financial Times, and Roben Farzad, a senior writer at BusinessWeek magazine on Monday. Their comments offer some interesting insights into the price of oil—
GWEN IFILL : .... Roben, we've talked Friday on this program about the perfect storm that's been brewing out there of bad economic news. In a nutshell, what's the cause?
ROBEN FARZAD: It's really twofold. A lot of people are going to study Friday going forward. I mean, that was such a shock to the system to see oil go up $11 a barrel.
You did have some global ... histrionics on the margin—i.e., what's going on in Nigeria with the ongoing uprising in the Niger Delta and Iran saber-rattling.
But it was really an unbelievably obtuse story in that we got terrible economic news in the morning, something which would typically cause crude oil prices to go tumbling down. People suddenly fearing further weakening in the dollar went to crude oil as a redoubt of safety. That's increasingly being looked at as a hedge against inflation, thus exacerbating the recessionary news in the first place.
And it remains to be seen if that kind of perverse relationship is going to unwind.
On the contribution of oil speculation—
GWEN IFILL: Roben Farzad, how much of this is all driven by investor and consumer behavior?
ROBEN FARZAD: You know, that's almost like that question everybody is asking, how much of this is speculative froth? ....
... it's so hard to take the actual $135 price and say, "Well, this much is actual supply and demand. This much is a war premium, you know, a saber-rattling premium for what's going on in Nigeria and Iran and points elsewhere. This much is a speculative premium. This much is an inflation premium."
But quite shockingly today, you had the president of OPEC come out and say that $70 is something closer to the supply-demand nexus. And everything above that is fluff.
So to consider that almost that price has been marked up 100 percent, and you have the advent of certain products, exchange-traded funds, where you can, as a retail investor, log into your brokerage account, buy the security equivalent of a barrel of oil.
Suddenly, that has become the speculative area, the kind of safety hedging area of choice, now that the bloom is well off the real estate rose. And stocks haven't been great shakes. People are really going headlong into oil.
On foreign government subsidies of oil for their consumers using all those American dollars "they don't know what to do with"—
JOHN AUTHERS : ....
The other intriguing development over in the emerging world -- and this could be a key to how this bubble has managed to develop to this extent -- is that a lot of emerging countries have big subsidies for oil, which means that the high global prices haven't cut down on demand thus far. People haven't felt the need to cut back on their oil consumption.
You're beginning to see some of those countries -- because, obviously, it's costing them more and more to subsidize oil as the price goes up -- you're beginning to see those subsidies come under threat. And that could be the catalyst to finally see these prices come down to something more sustainable, when you lose the protection in the developing world.
With the kind of growth we've seen in the developing world, if you are getting to the point where these oil prices actually affect that as well, that begins to change an awful lot of our cozy assumptions about the stabilizers for the global economy.
ROBEN FARZAD: Gwen, that's a critical point. I'm sorry, just to seize on that point, because I think that this gets hidden amid all the headlines here and shaking your fist at speculators and OPEC.
The developing world writ large is a voracious consumer of any spare oil right now. China just alone spends $45 billion on subsidizing gasoline consumption, but this is all a function of a lot of monetary profligacy here. We've been a mind...
JOHN AUTHERS: Exactly.
ROBEN FARZAD: ... over the past five or six years the Chinese funding our deficits, a lot of manufacturing money going to China. They have more dollars than they know what to do with.
And the real scary thing is they can keep spending this money on profligate things like gasoline subsidies until well after the Olympics, because they have a huge machine to feed.
Automobile purchases are quadrupling there over several years. There's a burgeoning middle class. And we just keep funneling them our dollars.
So nobody really drew the line in the sand and said, "We need to protect the dollar. We need to mind our fiscal and monetary imbalances." And now we're paying an overdue tab for it.
2The language of investment and finance can be quite entertaining. If a hedge fund manager or CEO takes the fund or company beyond its normal sphere of activity, it's called "diversification"—unless the investors or shareholders don't approve. In that case it's called "strategy drift." [back]
Quote of the Day
The American corporation is an institution in which the disparity in power between the top and the bottom is worse than it is in a political dictatorship. There's no political dictator who even entertained the idea of having a say over when people could go to the bathroom.
Tuesday, June 10, 2008
Hooey of the Day: You don't have to read the financial section
You don't have to read the stock tickers or scan the headlines in the financial section to understand the seriousness of the situation we're in right now.
Translation: Don't trouble your pretty little heads about Wall Street.
Nothing could be further from the truth.
A week from today, I'll be talking about this long-term agenda in more detail. It's an agenda that will require us first and foremost to train and educate our workforce with the skills necessary to compete in a knowledge-based economy.
A knowledge-based economy might get off to a good start by asking everyone to read the headlines in the financial section—and then offer a mandatory crash-course at every high school and college so they can understand them.
And here comes the part you've been waiting for—
... we know that we can't or shouldn't put up walls around our economy
The Chinese seem to have done precisely that with remarkable success.
... a long-term agenda will also find a way to make trade work for American workers. We do the cause of free-trade - a cause I believe in - no good when we pass trade agreements that hand out favors to special interests and do little to help workers who have to watch their factories close down. There is nothing protectionist about demanding that trade spreads the benefits of globalization as broadly as possible.
There is also nothing protectionist about refusing to buy from another country that for which you have nothing to trade except your assets.1
The Chinese, the Saudis and the Emirates will not continue to accept our brightly colored beads forever. Sooner rather than later they'll want to exchange them for something more valuable than a promise from the U.S. Treasury—something a little more real, a little more tangible.
Oh well. We have to get out of this mess somehow. Let's go ahead and sell Louisiana. Maybe the buyer will restore New Orleans. But we should at least try to hold on to Alaska.
Revolutionary Slogan of the Day (6/09/08)
Monday, June 09, 2008
Revolutionary Slogan of the Day
Where once Americans understood the cry "No taxation without representation," another American revolution might start with "No bailouts without social ownership." —William Tabb, Professor Emeritus at Queens College, writing in "Financial Crisis and Financialization's Appropriations"
It's not very catchy. I think "No salvation without socialism" would be snappier.
But seriously, taking the viewpoint of business, the American public should ask itself "What would a capitalist do in similar circumstances?" Would said capitalist merely bail out a business from the goodness of his heart or demand a slice of the action? And that is exactly what the sovereign wealth funds (SWFs), the investment arms of other governments, are doing as they assist with the Great Bank Bailout of 2008.
Odd that these governments, to which we are indebted for everything from oil to flag pins, can own significant chunks of the American banking system, but the American people can't—no matter how much money they put in.
Free-Market Objective of the Day (11/10/07)
"First" of the Day (1/21/08)
Understatement of the Day: A failing economy and an ignorant public (5/26/08)
Gas Price Effects of the Day
People are giving up meat so they can buy fuel. Gasoline theft is rising. And drivers are running out of gas more often, leaving their cars by the side of the road until they can scrape together gas money.
All very Third World. And the story has some interesting anecdotal accounts and statistics on the effects of the gasoline price rise—
Nationwide, Americans are now spending about 4 percent of their take-home income on gasoline. By contrast, in some counties in the Mississippi Delta, that figure has surpassed 13 percent.
I recently had to replace a gas cap. The clerk asked if I wanted it "keyed"? At first I didn't know what he was talking about. It took me a moment to realize he was talking about a locking gas cap.
I declined the offer. First, it would have cost about $3 more than the non-locking cap. Second, if anyone tries to siphon my gasoline they're as likely to suck up residual water as gasoline, since that's about how much I keep in the tank. And third, locked gas caps are inspiring some siphoners to take the shortcut of simply cutting the fuel line or drilling a hole in the tank.
Recently there have been warnings to anyone thinking about drilling into a metal tank of the danger of explosion. But the level of American education is not high. I wouldn't want to see anyone hurt for nothing.
Headline of the Day (4/02/08)