Recession and Recovery Explained!

Apparently a poll has shown that 75% of Americans believe our economy is still in recession. This gives economists fits as people are not using proper definitions. The economy stopped being in recession, a term meaning that the economy as a whole is not only not growing but shrinking, in 2009. Since then we have been in “recovery.” A recession is like digging a hole. When you reach bottom that is the end of the recession. When you start filling that hole back up, that is recovery. Unfortunately, there is still that hole until you have finished filling it, so the recovery phase feels much like the recession phase and hence the confusion. And when you have finished filling it, you are just back to where you started, having made no progress whatsoever.

The important point people are missing is that looking at the economy as a whole is kind of a blunt instrument. Various parts of the economy are recovering much faster than others. Take the Stock Market. Most people use the Dow Jones Industrial average as an indicator of stock market health, why I don’t know as it is its own blunt instrument. Before the 2008 “crash” the Dow Jones was at about 14,000. Shortly thereafter it hit about 7000, indicating that about half of the value of all stocks in that index had evaporated into thin air. As of today, the Dow Jones index is 13,228.31, so you can consider the stock market to have fully recovered. It’s recovery is over.

The big banks? Fully recovered. Basically you and I provided free money to these banks, either as interest-free loans or gifts which they then used to their advantage, but not necessarily ours. They are still receiving basically free money from us (via the Federal Reserve System) which they are using to invest, speculate, and hire lobbyists to make sure that their behavior isn’t restricted by any pesky regulations.

American corporations? The big ones are pretty much fully recovered. The auto industry got unwarranted loans from you and me (boy, we are generous) and has recovered more than nicely (probably a very good investment even though it was a bit of a risky investment). Other big corporations are making record profits, so they can be considered as being fully recovered. (In fact, total corporate profits are at an all-time high.) The businesses that are hurting are relatively new ones and quite small ones as the banks, the banks we lent so much cheap money to, aren’t lending freely, so the capital needed by these startups is scarce. (In fact, my partner and I closed our business this year, partially due to this situation.)

Nonprofit organizations? Not at all recovered, as giving has dried up considerably and if you serve the needy, demand has gone up like crazy. Running a food bank, for example, is currently very challenging.

Ordinary American citizens? Not a chance, sparky. So many are without jobs, or in a job with fewer hours of work than they need, it is painful to even dwell on the topic. Not only that but because jobs are so precarious, workers are laying low and not making pay demands or really any demands. (The United Auto Workers made major concessions to keep the auto industry alive, for example.) Productivity keeps going up, which means people are working harder and smarter, but wages are down. And the housing situation is a disaster, with millions having lost their houses and more millions sitting on mortgages much higher than their ability to pay.

Rich American citizens? Rich folks have recovered more than completely. Some made money on the recession and since this cohort of Americans has stacked the deck in their favor by buying any legislation that would favor them, they are sitting pretty. Yes, many lost a bundle in the stock market but they have since gotten much of that back. Record low taxes on the rich have helped then greatly.

The Federal Government? Dysfunction aside, the lost revenue from taxes not being paid on salaries not being earned and dubious political decisions over the last ten years or so have left the federal budget in deficit. That is, the government is borrowing money to pay its bills. Currently about 15% of the federal budget is just paying on the debt (the National Debt) already incurred. While much of this debt is owned by American citizens and can be considered to be borrowed from ourselves, it still needs to be repaid. As the overall economy improves, tax revenues will rise and if spending can be held down, the Feds will be recovering, too.

State Governments? A disaster. The states do not have the borrowing or taxing power of the federal government and many were in dire fiscal straits before the recession. States like Illinois and California are in a world of hurt. These problems will no go away any time soon.

Some, generally the rich and powerful are fully recovered from the recession, but far too many are still hurting to feel good about the “recovery” . . . that started in 2009.

Our Will, Free or Not?

We act as if we are free to do as we wish. The term used to describe this ability is “free will.” Some say the it was granted to us by god.

Free will is under extensive examination of late, largely due to medical imaging technology. By wiring people up and using various types of brain scanners scientists have accrued quite a pile of evidence indicating that well before we “think” we have made a decision, our bodies have already started to act on those decisions. Anywhere from a half of a second to an astonishing seven seconds(!) before subjects state they made a decision, indications of the decision already made occur. Some claim that this is evidence that we do not have free will and that we are not in control of our own decisions, that some sort of automated response to stimuli in the environment is guiding our actions.

The implications, if this is a correct interpretation of the evidence, leads to the conclusion that we are not in control of our own decisions and therefore should not be accountable for them. This throws quite a kink into our criminal justice system and makes moral theories, in which people supposedly mull the consequences of their actions to base their decisions on, quite bankrupt since such decisions have been decided seconds before we have come to our conscious conclusion.

Are we automatons just reacting subconsciously to stimuli about which we know nothing, at least consciously?

This has been a topic of interest to me for many decades and I think most of the experts I have read make two mistakes. For one they identify with their conscious selves, e.g. “I think therefore I am.” (Descartes) Now, I certainly can’t put myself into Descartes’ class as a thinker, but I think this is a mistake. Our consciousness is apparently a late evolving tool and because it is so powerful we overvalue it. Our consciousness is a powerful tool, yes, but it is only part of us. It is also a fact that our greatest strengths are also our greatest weaknesses. Conscious thinking is quite powerful, yes, but limited nonetheless. Consider tying one’s shoes. What do you consciously focus on when tying your shoes? Nothing? Apparently this is true. No conscious thinking is required to tie one’s shoes. But have you ever watched a three-year old learning to tie his shoes? Ah, the concentration, the triumphs, the frustrations, the failures—high drama indeed. We learn many things consciously (driving a car, figure skating, swinging a golf club) and the learning is laborious, but then we execute those functions subconsciously with grace and efficiency.

We just are beginning to understand how we function subconsciously and I believe that a great deal of who we are functions that way. (I am creating these words consciously, but typing them subconsciously, for example.) I think most of what we do is done subconsciously and then we make up reasons for what we do after the fact. Consider any four-year old caught with his hand in the cookie jar—“Just what are you doing young man?”—and you will see the creative wheels turning in his eyes. Since we can’t come up with rational reasons for “why we do what we do” until we have either done those things or at least decided to do those things, it makes good sense to me that consciousness must lag decision making.

I think we are better off to think of ourselves as being more the subconscious “Me” instead of the conscious “I.” We shouldn’t elevate a smaller part of us to “all.”

The other mistake I think the experts make involves meaning. The role of free will in our judicial system supports our holding people accountable for our actions. “You commit a crime, you go to prison,” that kind of thing. To convict a criminal the prosecution must show the defendant had the means, the opportunity, and the motive to commit his crime (consider the Treyvon Martin case). Motives are reasonable reasons why something got done. We have psychologists testify as to the motives of the perpetrator, but the whole subject of psychology is a just look at “why” we do the things we do, which is an offshoot of our search for meaning. The problem is that because we are constantly looking for the “meanings” of things we get distorted vision.

I, on the other hand, argue that the search for meaning is, well, meaningless. What does life mean? People want to know what their dreams mean, for Pete’s sake. People want to know why Adolf Hitler did what he did. (He stated in Mein Kampf that God had wanted him to fight the Jews but noone apparently wants to take him at his word.) What did his actions mean? Why? Why? Why? Instead of simply accepting that he did what he did, we come up with cockamamie ideas about his life as a child or that he had a disease or a brain tumor, or, or. . . . You can always answer the question “What does it mean?” with “Nothing.” If you stop trying to extract meaning from everything you will find that things do mean something, but those meanings are personal. There is no such thing as meaning outside of our minds. (If you don’t believe me, try to find a single meaning out in the natural world.) Meanings are little fictions we create to make our lives more endurable, as in the phrase “at least it was for a good cause.”

If you want to know the meaning of life, just live.

If you want to know why we are held accountable for our actions, it is because there would be chaos otherwise. It doesn’t really mean anything.

So, do we have free will? I say “yes” even though neither you nor I are consciously aware of the process by which we make decisions . . . but we are learning more every day and, maybe, some day we will. I think that those subconscious processes will be just as logical as the ones we point to now that are conscious. And those decision making process are made by the “Me’s” in all of us.

And then will we find out what it all means? I doubt it.

Onward Christian Soldiers

The problem with Christians (don’t you just love people who start declarations with “The problem with. . . !–I’m just doing it as a tribute to Andy Rooney) is too few of them actually take the trouble to read their Bibles. Instead they accept the Disney version provided by their church.

I had a conversation with a Christian who claimed that the Holy Bible was the “inerrant word of God.” I asked him if he meant there were no mistakes or contradictions in the Bible and he said yes. I had to respond that the second Chapter of Genesis (you know, the first book in the Bible) contradicts the first chapter (one said that man was created before plants, the other plants before man). And in the New Testament, the Book of Matthew tells us that Judas hanged himself right after Jesus was taken by the authorities, while the Book of Acts tells us he used the 30 pieces of silver (a system of coinage not in use at the time, by the way) to buy a field and he died from a fall (breaking open his abdomen). In between there are hundreds if not thousands of direct contradictions, things that can’t both be true. My “true believer” didn’t believe me, nor do I expect he will look it up.

Many other Christians go around believing they have relatives in Heaven, not knowing that the Bible clearly states that none of us lowly humans gets into Heaven until the “final days.” Until then your bones just lie in the cold, cold ground along with the heathens’. They also don’t know that when those final days come, slightly less than 150 thousand believers will be let in, not a very reassuring statistic for any of the 2 million Christians walking around today.

I guess it comes from my years as a college professor, but if you are going to cite an authority, at least take the time to read the appropriate sections and make sure you got them right.

The one authority I guess I can cite is one guy who listened carefully in church. He said “Life in Lubbock, Texas taught me two things: one is that God loves you and you’re going to burn in Hell. The other is that sex is the most awful, filthy thing on Earth and you should save it for someone you love.” (C.J. Werleman quoting Butch Hancock)

Speculate on This!

The Obama administration is proposing new rules (regulations!) that will prohibit wealthy institutions from speculating on the price of oil. The reason being global demand for oil is down, global supply is up . . . and prices are climbing. Huh, you mean the market doesn’t work the way economist say it would? Shouldn’t prices fall when demand is low and supply high? Well, no, because of a couple of things. One, there is a futures market in oil and gasoline designed to help even out supply and demand waves (a good thing, probably) but also wealthy individuals and corporations have no place to put their mountains of money, so why not drive up the price of gasoline with it?

A St. Louis Federal Reserve study found between 2004 and mid-2006 speculation contributed more to the price of oil than both global supply and demand combined, roughly 15% of the cost per barrel. Hey, I’m for speculators going away. A 15% decrease in the price of gas would be quite helpful now. In fact, I am for speculators everywhere just going away. They contribute nothing to society, they are just economic leeches.

I propose a “New Rule” (Thank you, Bill Maher.),
namely that: “Whenever a businessman or politician predicts dire results
from a piece of legislation or a new regulation,
they must have a sign behind them stating what their other predictions have been
and whether they have been right or wrong.”

Of course, congressional Republicans began gnashing their teeth almost immediately. New regulations (sputter, sputter) . . . impossible, it will hurt business! Not as much as overly expensive gas so that speculators can add even more money to their piles, while again, contributing nothing to the system.

Every time new regulations come along, business experts explode because those regulations, well, they will put them out of business. Auto manufacturers predicted that the Clean Air Act would put them out of business. (They also thought a 5mph impact surviving bumper would cost billions until an inventor displayed one he could sell for $75. By the way they got Congress to lower the requirement from 5 mph to 3.5 mph because it was just too hard on them.) The CFC Ban was predicted to doom certain industries, but their replacements improved efficiencies and cut costs. Environment regulations have at least broken even (or better) on their balance sheets.

I propose a “New Rule” (Thank you, Bill Maher.), namely that: “Whenever a businessman or politician predicts dire results from a piece of legislation or a new regulation, they must have a sign behind them stating what their other predictions have been and whether they have been right or wrong.” Even baseball players have batting averages. Just because you are wearing a $4000 suit doesn’t mean you have more brains than a rabbit. Show us a track record of being able to predict these things correctly and if you can’t, why should anyone listen?

“Legalization is not the answer, Obama said.” Oh, Yeah?

Even as the global “war on drugs” trudges into its fifth decade with every sign we are losing, the U.S. is in a state of political denial about recreational drug use. Oh, I realize that President Obama could have said nothing else. If he had said anything else, he would have had zero chance of getting re-elected.

You see, recreational drug use is a moral issue for many. No distinction is made as with the use of alcohol: moderate use is okay, abuse borders on the illegal, any use of recreational drugs is verboten, generally because of the attitude of people whose morality doesn’t stand up to inspection. There, I did it. Gauntlet thrown. The anti-drug crowd’s stand that recreational drugs cannot be legalized is immoral in itself.

Think about the damage done by illegal drug use. The damage done to children whose parents were on drugs when they were in utero is immense. The crime (see Mexico), the killings (see Mexico), and the lost revenue through taxation are immense (see us).

What I would do (were I King) is different. I would have a government lotto. The contest would be to design recreational drugs that have no direct negative health affects (getting dizzy and falling down doesn’t count) and cannot be abused. The prizes would be 150 year patents on the production of the five best drugs. The winner of the prizes would be their only legal producers and these drugs would be sold through drug stores at quite low prices so as to drive down the cost of illegal drugs and put the criminals out of business. These drugs would have government controlled prices and a modest (<10%) tax associated with their purchase.

Drug companies would fall all over themselves coming up with an acceptable drug, find two and they’ll have hit an immeasurable jackpot (think Viagra squared). There are plenty of quite mild euphorics that are available now, the only trick is to make them non-abusable. By that I mean if you take the recommended dose you get mildly high. If you take a little more you get higher. You take even more and . . . buzz kill, either no effect (meaning you wasted your money) or the effect is lessened (you wasted your money and killed your high). All of these behaviors are available in the current pharmacopeia, just not all together in one package.

Think about it. Currently alcohol is legal for those over a certain age (and this I would like to maintain, even for safe recreational drugs, as young people are not entirely in charge of their faculties until they are somewhat grown; for evidence see age and alcohol related accident statistics) but it has negative health effects for those who “overdose” and creates so much distortion of reality that thousands die from car accidents alone because of its effects. Long term abuse of alcohol leads to organ degeneration and early death, preceded by divorce, loss of job, etc., etc.

And this is legal? You betcha! The government represents us and we want a drink now and again. We tried making alcohol illegal and look at what happened. During Prohibition (the experiment was so traumatic, you don’t even have to say prohibition of what) people still imbibed and rampant illegal rum running sprang up. I live in Chicago, the former home of Al Capone, if you need an example of what happened.

Our current recreational drug situation is reminiscent of the Prohibition years. Rampant crime. Prisons full of drug offenders. People doing recreational drugs anyway, etc., etc.

Why not try legalization, but responsible legalization. Create a short list of safe, non-abusable recreational drugs. The drug companies make good money. The government makes good revenue through taxation. The people get mild euphoria safely and without fear of being arrested. Thousands of people (possibly approaching 50%) of those currently in jail for “drug offenses” will not be replaced by new offenders, as safe, inexpensive, legal recreational drugs will drive down the prices of illegal drugs effectively putting the enterprises currently producing and distributing them out of business.

For those who take a moral stand against legalizing drugs, I say “let he who is without sin throw the first stone.”

A Personal Note People reading this will probably think “author is a pot head” or some such thought. Other than enjoying a drink from time to time, I do not use any other recreational drugs. (So, there!)

The Numbers Don’t Lie (Unlike Our Politicians)

I have been reading “Winner Take All Politics” by Jacob Hacker (Yale) and Paul Pierson (Berkeley) and even though it is about a year and a half old now, it points up the problem we face very, very well. Basically, some very wealthy (and quite conservative) citizens of this country, starting in the 1970s, have waged a campaign to advantage their economic standing. As a consequence, the “rich have gotten richer” at the expense of the rest of us.

While Hacker and Pierson claim that this is a matter of the rich, the top 1% (maybe the top 0.1%) of all Americans, getting much richer, not a suppression of those of us in the 99%, even though part of their argument is a comment that “labor unions were in decline” during this period. Now I cannot stack up academic credentials like those of the authors, but I beg to differ. There was suppression of the 99% especially involving labor unions. This is what I see.

There are two sources of protection the middle class has from rapacious business interests: government and labor unions. I do not think that is by accident that labor unions are “in decline” and government, especially the federal government, is very unpopular. As a strategy, if I were trying to rig the system in my favor, I would change the rules to favor me and I would change the rules to disfavor those who could oppose me. This has been done.

Consider Canada. At the end of WWII, both Canada and the U.S. had 30+% of their jobs as union jobs. Currently, Canada is about the same, but union jobs in the U.S. have “slipped” to 12-16% (based on various estimates). Well, they didn’t slip, they were pushed. A concerted effort to change the rules of the game to disadvantage unions and advantage corporations has resulted in this decline. Consider the 2009 campaign to restore the right of unions to get workers to sign membership cards and if they get 50+% of the workers to join, they become the bargaining agent for those workers. This system was in place for decades until federal law was changed requiring elections involving all workers, oh, but allowing business owners to threaten and browbeat their own workers before the election ( “If the union wins, you will lose your job!”). There are even law firms now that specialize in keeping unions out of businesses by such tactics. With majorities in both House and Senate, the Obama administration couldn’t get this practice restored. (If you guessed filibuster, you are correct.) So, a concerted effort to undermine labor unions has worked and one of the two pillars of the middle class was severely weakened.

The second pillar of support for the 99% is government. When President Obama took office in 2009, approval of Congress was in the 40% range. Now it is in danger of falling to single digits! (Once they got the rules stacked in their favor, they want to discredit any power able to reverse or even erode those privileges.) So, there is a concerted effort to bring government, especially the federal government, into disrepute. Consider the attempts to remove the subsidies from the U.S. taxpayers to big oil companies. Oil companies are the most profitable companies in the world, let alone the U.S., and they do not need subsidies to look for more oil. Their CEOs have admitted such before Congress. But the attempts to pull those subsidies have been rebuffed repeatedly. (If you guessed filibuster. . . .) And then a staggering 73% of Americans think taxes on the wealthiest Americans should be restored to those at the beginning of the Bush administration. All such attempts have been rebuffed. All of these actions paint the Congress in a negative light in the eyes of the public (at least those paying attention). Why would representatives and senators do this, essentially lower the assessment of their own performance? Well, they are in relatively “safe” districts (guaranteeing re-election) and they are being paid extremely well to do so. Not only are the donations to their campaigns generous, but as soon as they announce they are retiring from office, they will be courted into high paying lobbying jobs (paid by, guess who!).

The cause of all of these things are very wealthy conservative individuals. They pay and we suffer. By changing the rules (Citizen’s United, anyone?) they get still richer and use that money to pay for more politicians and more lobbyists. (During the health care “debate,” there were more lobbyists working for the health care industry than their were members of Congress).

These manipulating conservatives claim that what has happened is a result of globalization and technology, a natural effect of market forces, etc. but the wealth concentration happening in the U.S. hasn’t happened in any of the countries with which we were comparable in Gini Coefficient (at least before as now we only compare with banana republics). This was done deliberately.

These same conservatives claim that the Founding Fathers favored limited government as an argument to diminish the role of government even more. But the Founding Fathers also favored majority rule. The bought and paid for politicians in the Senate are ruling from the minority (41 votes can prevent anything from happening).

So, do read “Winner Take All Politics,” as it is almost assuredly correct in its research. But as to the conclusion the super rich have gotten that way without suppressing the 99%, I am not buying that.