skewz's Open Salon Blog

Eye of the (Financial) Hurricane?

Thu, 23 Apr 2009 20:04:56 -0400

Is it just me or do things seem far too calm the last few weeks? I mean, we're in the midst of the worst financial and economic crisis since the Great Depression and we've got the stock market up nearly 40% since early March. Where's the panic? What happened to the grave concern?

My sense is there are a couple things behind the recently relative calm. First, there is only so much of a constant stream of dire news one can take before you start to go numb. When you've already heard about the bulk of the financial system being insolvent, entire industries going bankrupt, etc. it's easy to get jaded.

For those of us fortunate not be be directly impacted by a job loss and maybe not much effect on our circle of friends, it may be easy to dismiss the supposed severity of the crisis. However, we shouldn't get lulled to sleep by this relative calm. If you stay focused on what's really happening (unemployment still increasing, no fix for the banks, etc.) it's hard not to conclude that things will get much worse before they'll get better.

So don't come out of the basement just yet...

Over Last 100 Years, Multi-term GOP Presidents = Bank Crisis

Fri, 17 Apr 2009 17:04:00 -0400

OK, correlation does not equal causation; but this is modestly humorous. Over the last century, any time you had a multi-term GOP president (in other words, long enough to do real damage) you had a pretty substantial collapse in the banking industry (i.e., near fundamental economic collapse). For the statistics junkies the R does not equal 1...it assuredly can be described as R<>1 but R is notably greater than 0. Just putting down a list of presidents over the last century and then mapping the major bank panics over the same time period reveals some interesting stuff.

The yellow highlighted line items represent multi-term GOP presidents with banking panics associated with them. Those in blue/cyan represents multi-term GOP presidents where no such panic occurred. Eisenhower and Nixon are the two non-panic GOP presidents. A simple business cycle recession took place near the end of Eisenhower's presidency. He's also the president to kick-off the largest public works program in world history with the Interstate highway system. Richard Nixon, of course, was president during the stagflation years of the oil shocks though a lot of his economic woes likely came out of spending for Johnson's Great Society programs.

The other presidents with panics associated with them are Theodore Roosevelt with the famous bank panic of 1907 where JP Morgan had to step in as the lender of last resort. His notable power led to demands that a non-private lender of last resort be created. This was the impetus to create the FED which was established in 1913. Prior to the creation of the FED the last central bank in the US was abolished by Andrew Jackson in the early part of the 1800s which resulted in most of the 1800s being characterized by constant bank panics and runs. We then have Coolidge and the Great Depression followed by Reagan and the Savings and Loan crisis. Finally, we have George Bush and the most recent melt down.

Again, it's an interesting view; but that's about it. While the press puts up silly comparisons between Texas secession and 1861, we thought we'd put some silliness up of our own.

"Right Wing Extremism" Outrage - Justified?

Thu, 16 Apr 2009 20:04:44 -0400

We've talked a lot about how we're impressed with the clinical case of chronic amnesia the press suffers from. The symptoms of this malady were on display again during the discussion of the Obama administration's Department of Homeland security report outlining threats from right-wing extremists. The report pointed to a variety of factors including the economy, the first African-American president being elected, and many veterans suffering from post-traumatic stress disorder having trouble re-integrating into society as potential catalysts for violent activity.

Many were offended by the reference to veterans as being folks who could be turned to violence in the current political and economic environment. Fair points of debate.

However, many rejected the report completely as an example of the Obama administration trying to politicize the Department of Homeland security. However, many of these critics seem to have forgotten that the Bush administration's Pentagon felt threatened by anti-war protesters earlier this decade. Such anti-war sentiments were perceived to be destabilizing by the Bush administration. But forgetting such points is forgivable since that would be reaching back a few years...though we still struggle to understand how people in the press who spend 8 plus hours a day looking at this stuff can't draw back on their own memories much less Google.

A few years ago is forgivable, but not being able to reach back a few days is definitely less so. On April 4th Richard Poplawski killed 3 police men in the suburbs of Pittsburgh, Pennsylvania (where candidate Obama famously said they cling to their guns and religion). He was arrested soon after the shootings.

Based on reviewing Poplawski's online activity, it's clear he had white supremest tendencies, feared the current administration, and was generally an avid consumer of right leaning information. Despite Dennis Roddy's efforts in Slate to suggest Poplawski's interests were wider ranging than right-wing news, its hard to get away from the fact that his online search history revealed a disturbed individual who easily subscribed to the most extreme perspectives offered by the right (there are similar stories on the left, but for the moment we're speaking of the recently released Department of Homeland security report). In addition, there was fear of being evicted from his residence. This fact may line up with the economic pressures the report points to.

It's not clear that Poplawski's interest in things right-wing led to his killing of 3 police officers. However, he clearly was interested in stock piling weapons and food in anticipation of the end of society as we know it based on current policies per some of his online comments. A correlation between his seeming online perspectives and real world actions will likely either be affirmed or rejected through his trial.

But, when such vocal outrage is expressed at a report that was largely authored during the tenure of the Bush administration; the press should at least point to this juxtaposition of facts - a recent killing(s) seemingly motivated by extremist thought and flabbergasted outrage at a report that suggests such violence could occur. It would seem that a simple copy/paste technology could have helped the media create that context for the news consuming public. The ridiculous string of events begs for comments: A right wing extremist kills 3 police officers, a report suggesting such a thing could occur comes out, and outrage at the suggestion that this possibility which has already occurred could occur would seemingly be an obvious story. The absurdity of the logic and chain of events would demand some comment in the media.

World's Largest Democracy Continues It's Experiment

Thu, 16 Apr 2009 15:04:44 -0400

There was a lot of talk about spreading democracy throughout the world for the better part of the last decade. Efforts met with mixed success, but inspiration can be taken from India's "experiment" with democracy. The results are in and after more than 50 years of smooth transitions of power, we can say the "experiment" has been largely a success. India's massive democracy has matured with:

A significant reduction in political violence
The evolution of a vibrant multi-party system with competitive options at the local, state, and national levels
The integration of 1.2 billion people into a functioning political order
The assimilation of 8 major religions
The accomodation of 28 major languages and hundreds of dialects
The dampening of hundreds of sectarian divisions
The ability to overcome all of the above in the face of a transitioning population with barely 65% literacy rates moving away from subsistence farming scattered across over 1 million small villages

Just the logistics of the elections are shocking and impressive:

1.2 Billion people
714 million eligible voters (more than twice the entire population of the US)
Low literacy rates of 65% (many vote by selecting pictures)
Voting machines distributed to remote jungle locations on the backs of elephants
1.3 million voting machines
Nearly 850,000 voting locations
Multiple phases to accomodate the massive logistics

Despite the seemingly overwhelming process and the many miles countless voters have to trek to polling stations, Indian's turn out in high rates for elections - nearly 60% versus roughly 50% for the US. It's a truly inspiring process as one of the world's largest emerging economies goes through this ritual. It likely deserves a bit more attention that it is getting given the triumph of democracy in the face of so many obstacles.

Texas Forgets Its Big Bad Bailout Legacy - Please Secede

Wed, 15 Apr 2009 20:04:20 -0400

This was the banner on the page of the Huffington Post just moments ago. Texas' governor Rick Perry just did something that radical Reverend Wright may never have thought about...destroy the union. Yes, he's threatened to secede.

But with all the anger towards bailouts, Texas should just send a thank you note before they head out of the union (let's not get started on the oil depreciation tax credit that allowed Texas to pay less in taxes than almost any other state...sorry California). In 1989 when the Resolution Trust Corporation (RTC) was set up to deal with the Savings and Loan crisis that culminated after a period in the 1980s (read Reagan years) when deregulation, bad lending, and lax supervision led to a collapse in these banking institutions (sound familiar). At the time, the government enacted a public-private bailout mechanism to resolve the situation (sound familiar again).

Fully half of those institutions were in the "great" state of Texas. You're welcome Texas. You have a strange way of showing it. This is a bit of context