There He Goes Again

This is something of a re-start to this blog.  Its been a few months since I posted due to various complications, but I am back and will be posting on a regular basis.  I have certain basic principles I follow in my posting, or perhaps philosophies would be a better choice of word.  These will inform and influence this blog, and the political blog I have started elsewhere.  I also plan to review my Critical Mass blog which is my rant on contemporary society.
What are these philosophies you ask?  (At least I hope you do, as I am writing for my own pleasure and satisfaction but I do want there to be an audience.  And I do wish for comments and even contrary opinions.  A dialogue or debate is part of the learning and growing process. 
So here they are:

Big is Bad-this idea has had a fairly prominent place in the dialogue over the “Great Recession”, at least until recently.  I maintain in my Economics 101 influenced outlook that big is bad in every part of the economy.

Greed is Not Good-it is a disease that the world’s economy suffers from and almost died from a couple of years ago.  The unending pursuit of more and more coupled with the Big Companies and Rich Powerful individuals acting out this way are the primary source of the economic problems we have faced since Reagan.

A Bounded Market Economy-this is my, still being worked out, vision of how we deal with the screwed up version of capitalism we now have.  I am not a socialist or a communist.  I think the way market economies are supposed to work actually empowers  people and allows them to prosper, but only when it is bounded or protected against the actions of the ruthless and greedy.

A Synthesis, or Systemic outlook on how the Economy and/or the world works.  Everything is linked, everything affects everything and trying to study Economics in a reductionist way is way too limited.  It has its uses, but many economic actions take place for non-economic reasons and you need to deal with that to understand.  At least in my less than humble opinion.

So, I am back for good or ill.  I hope you get something out of this and let me know if you do. 

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Greed Is Not Good

This will be a short post, but one on a subject that I will return to.  That is my almost biblical aversion to getting rich.  After all the Bible did say that the love of money is the root of all evil. 
Yet somehow in contemporary America those who become obscenely wealthy are celebrated as great men. (Occasionally women also)
I maintain its actually evidence of deep psychological problems.  The need to have more and more.  The desperate need to prove that mine is bigger than yours. 
So one of the things that would be part of my system of Bounded Capitalism is a graduated income tax. One that if plotted would have an almost hyperbolic curve to it.  So that lower and middle incomes would pay low levels of tax, but at some level- a million dollars for example- the curve would get very steep.
The conservatives would say that this creates a negative incentive to wealth creation.  That people would stop working if most of their incremental income was going to taxes.  Great I say. 
Then there might be more work for other people to do.  Spread the work and the income around. 
Its also very true that the real wealth creators out there don’t really work for money.  They work for the joy that creating something new gives them. 
How many stories have you seen about the original founder of a new business being pushed aside, or leaving voluntarily when the business gets big and bureaucratic.  They often then go on to start another business, they work ridiculous hours and yes they make money, but they seem not to care about it.
The people that are focused in on the amount of money they have, and how much more they want,  are the source of all our economic and political problems.  We have to get them back under control or we are never going to get out from under.
After all, once you have a million dollars do you really need more?  For what?  More Ferrari’s? A bigger plasma TV?  Do things like this actually make you happy? 
If so then you are a victim of the disease I am ranting about. 
Is there a cure for it?  Probably not.  We need to palliate the symptoms so the rest of us don’t get infected, or suffer from the results of their sickness. 
Will this sort of program ever get enacted?  I am an eternal optimist, but not in the short term.  Because the rich are powerful will not sit idly by.  And because my view is clearly a minority one.  And if all the troubles that The Great Recession has caused did not stir a mass movement to rein the wealthy in, what will it take?  Something I do not want to live through I think. 

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A Virtuous World Of Finance?

One of the themes of this blog is going to be on the virtues of simplicity.  In the financial world, as in many others, this is key. 
Why do I say this?
Look at the recent financial reform bill passed by the congress and signed into law by President Obama.  It’s thousands of pages long. I doubt that most of the congressmen read it, or understand it very well.
And now it will go to the regulatory agencies to actually draft the rules of the (supposedly) changed playing field of finance.
Will the public, through the media, pay any attention to this process?  Are you kidding? 
But the banks and financial institutions are already hiring ex-regulators as lobbyists and spending major bucks on this area.  So what do you think the rules are going to look like when they get done, if they get done in our lifetime.
That’s why I tout the virtues of simplicity.  I think writing detailed financial rules and regulations is just playing into the hands of the operators out there.  The more complicated the rules are, the more ways there are to game the system.
Considering the salaries paid to people in the financial sector vs. those the  regulators receive where do you think the truly smart financial people look for jobs?
So what I propose is a version of Opt-In for financial instruments.  The basic investments that are out there and that have been aroud for a while are known and pretty much understood.  Home Mortgages, loans to business, car loans, stocks, bonds, etc.  These all have markets and are not overly complicated. 
So Banks can invest and deal in them and count the appropriate ones, at varying levels, against their capital requirements, and expect federal risk insurance. 
Everything else, collaterized debt instruments, futures, bundled below prime mortgages, any ‘securitized’ financial instrument will have to apply for certification.  And it should be an extremely strict process with absolutely no bankers on the board of the agency doing the inspection. 
Perhaps it should be publicly debated also. 
The banks can engage is this sort of trading, or speculating, or whatever you wish to call it.  But not on the taxpayers dime.  On their stockholders dime only until rigorous regulation certifies them. 
I rather suspect risking their own money for a change will have a dampening effect on these ‘investment opportunities'. 
This, along with a version of The Volcker Rule would go far to deal with this situation. 
But, of course, I live in some weird dream world so don’t expect to see anything like this soon. 

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Alms For The Rich

A recent op-ed piece by Paul Krugman in the New York Times on-line got me thinking.  And his further comments about how he has been attacked in his blog Conscience of a Liberal even more. 
The first bit was about how Colorado Springs is turning off one-third of its street lights to save money.  And towns and cities across America are firing teachers, furloughing policemen and cutting back on services everywhere they can. 
Meanwhile, the debate in Congress is about extending the Bush tax cuts for the rich.  This would increase the already huge projected budget deficit by $ 700 million dollars over 10 years. 
The fight, of course, is being led by the republicans and centrist democrats who are known as deficit hawks.
So, Paul’s point is that apparently we are willing to give huge tax breaks to the wealthy among us, while turning out the street lights all across America.
This is the sort of thing that I want to post about.  Because it shows why Economics used to be taught as Political-Economics.  And maybe it still should be.
Because economic decisions are made for a lot of reasons having nothing to do with the (dubious in the extreme) economic facts.
Two other articles I think connect to this subject.  They are Medicare Stronger…by Bill Scheer on ourfuture.org and What the Social Security Report Says… by Dave Johnson at alt-media.net.  Both of these posted blogs talked about how the latest data shows how the government bailout has helped the auto industry return to profitability, the health care bill has strengthened Medicare, and the Social Security Trust fund is in excellent shape.
Now have any of you seen this sort of story in your newspapers or on TV.  Probably not.  I did see a small article on part of this in my local NJ paper.
But the overwhelming fact of media coverage on these issues is that the government never does anything right, the SS system is bankrupt or will be tomorrow, and Health Care Legislation will create death panels and end Medicare.
This from the “Liberal” media.
This sort of story is what I wish to deal with in this and my other blogs.  How the reality of what the world is about is, at best, presented in a distorted way. 
And maybe, propose some ideas on dealing with this.
Meanwhile, go out there and vote for republicans in November.  We need more multi-billionaires. 

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Economics 101

Cover via Amazon

Bill Gates via last.fm

Before I start ranting about specific events I want to explain my philosophy if you will.  The sort of economic system that I would like to see come into existence.  I know that there are powerful vested interests that are not going to be in favor of this.  I also know that not everyone, and maybe nobody, will agree with the tenets of this system. 

But I think it is a better way of running things.  It’s a third way if you will between the Washington Consensus, or Rational Economic Man, or whatever you want to call the system we have had for a while, and the various forms of socialism, or planned economics. 

I call it Bounded Capitalism, or the Bounded Market System. 

It rejects the micromanaging and control of the market that the left tends to endorse, but puts limits on the excesses of the market.  Yes, I am talking about a role for government.  That may be heresy to some people, but I am also talking about letting the market decide almost all of the time. 

By the way, I am talking about a market as defined in most Eco 101 courses.  One with many buyers and sellers.  That’s a market we haven’t seen in a while.

Obviously there are a lot of details to this idea and it will take more than one post to explain it.  Hopefully there are those of you out there that will stick around and follow my argument as I develop it. 

But the general idea is to keep income within certain boundaries, by mechanisms that interfere with the market as little as possible.  Nobody is poor, nobody is Bill Gates. 

Could I mean a (gasp!) graduated income tax?

Possibly, it’s one possible feature of this system. 

Another key part is size.  We have all read the various articles and speeches about too big to fail in re the financial crisis.  Well, I think the too big to fail, or too big to exist phenomenon exists all through our economy and it is, to not coin a phrase “The Axis Of Evil”

If Small Is Beautiful then Big Is Ugly. 
Details to follow.

No One Knows

This blog is going to be about money.  But from a somewhat different perspective.  Its about the politics of money and economics and finance.  And the history and sociology of same.  Because, despite what some economists will tell you, economics and finance are not a science.  Very little is certain about money.  That’s where the title comes from.  The way the economy will behave is not known with any certainty.  (Heisenberg’s Uncertainty Principle)  There are a range of probabilities and the observer effect is very strong.  Stock markets swing wildly on rumors and real information both.  And anyone who tells you what the state of the economy is going to be in 5 years, let alone 5 months is talking through his hat, as they used to say when men wore hats
.
Anyway, I have an academic background in economics, and worked in finance for many years.  I have a cynical, but I think realistic view of the fuzzy world of money and will be imparting my views of it here. 
Backed by sources both pro and con to my opinions.  For that is what they are- opinions.  And so is every one else’s who talks about economics.  No one really knows. 
I will leave you for now with what my first economics teacher (In Brooklyn Technical High School) once said.  The only way to make money on the stock market is to write a book about how to make money on the stock market.