Merry Christmas, California!

California always leads the way. We all know that. Trend-setters, daredevils, iconoclasts - it's what we're about. If you want to see what's going to happen next in the country as a whole, pay attention to California. Of course, with 36 million people officially (and another 5 million currently driving on Highway 57 between Pasadena and Fontana), over 10% of the American population is already here. So there is something of a tautological feel to declaring that California leads the way.

For example, California has an official 12.8% unemployment rate. We all know this is nonsense, of course; if the BLS U-3 for the whole country is 9.6%, whereas the more "comprehensive" (that is, a number that actually counts people out of work) U-6 is 17%, then we must assume (with good reason, let me tell you) that the same differential applies here in the Golden State, and that the real UE rate for California is 12.8 + 7.4 = 20.2%. That seems reasonable. A good, round Depression Era feel to that number, doncha think?

Where it gets interesting, right here on the threshold of the Restoration of the Brown Monarchy in California, is that this month, due to the utter paralysis of the U.S. Congress, extended unemployment benefits are going to run out. Congress is understandably otherwise engaged; for example, they're trying to figure out how to spare the defense budget by raising the Social Security retirement age to the outer reaches of the human life span. The only actual "money" available is that printed by the Federal Reserve (by the cargo container lot) to distribute to the Primary Dealers to reimburse them for the Treasury bonds the PD's just bought the previous week (no joke there: literal truth). This is all in furtherance of the Fed's "dual mandate:" (1) to enrich Wall Street and (2) bankrupt the country.

All effects are bigger in California; thus, when UE shuts down, 410,000 (the official number) Californians will suddenly have no income of any kind. As the winter begins. This number is equal to the combined totals of 27 other states plus the District of Columbia. This number also exceeds the 2010 population of Oakland, California (where, no doubt, a significant fraction of the unemployed-with-no-income will be found). Not to put too fine a racist point on things, but one shudders to imagine what might happen in places like East Oakland and South Central Los Angeles when the money suddenly dries up completely.

Situations like this expose the essential vacuousness of the "trickle down" philosophy, the smug idea that the ultra-rich, the One Percenters, can enjoy their Fed Reserve largesse, their privileged, Congress-maintained assurance of bonuses, low tax rates and offshore fortresses, while the hoi polloi are left to their own devices, while the rich bastards bellow on about "creeping Socialism" (such as the kind that has perpetuated the existence of the zombie banks in the first place). Sad to say, fellas, but it isn't going to work, and if you actually think that an orderly, governable society can be maintained while half a million people are suddenly turned out into the streets, in one state alone (the national figure is two million), with no income of any kind, then I say: good luck with all that.

If Congress goes through with its Marie Antoinette routine, a very poorly controlled experiment, a form of dangerous Street Theater, will commence. People without any money do not simply roll over and die. They will seek shelter, food and money by any means necessary. As with so many of these social currents, the effects may be subtle and confused with background noise at first. A rise in violent crime, particularly mugging, armed robbery and burglary. Gangs will get bigger. Violent stand-offs between the police and criminals will become more frequent. But it will get increasingly obvious that a sea change has occurred, and only the thoroughly intellectually dishonest (i.e., the Mainstream Media) will deny what is really going on.

Who knows? Maybe this is the sort of "social development" necessary to demonstrate to the Elites that solely taking care of their own and affording benign neglect to the rest is not going to work. Congress may even realize, after consultation with their lobbyist-benefactors, that some of the federal swag may have to be diverted to paying tribute to the rebels. If so, California might again lead the way. Mitch McConnell might want to watch some old footage of Watts, 1965, to see how this can play out.

California's Pension Nightmare

I use inflammatory titles such as the above because it's a great way to stir up readership for the blog. In general my hit count increases by a factor of about 50 for any post which concerns pensions in California. This is a highly nerve-wracking subject for those directly involved, that is, state pensioners, because this guy Joe Nation and the Stanford Institute for Economic Policy Research just won't shut up about it, much as the pension managers and local politicos wish they would. Last spring, for example, Nation & SIEPR came out with a report on CALPers, the teachers' fund and the UC system which demonstrated that they were unfunded, using reasonable rates of return over the foreseeable future, to the tune of about 1/2 trillion smackers. Now Stanford is back with a study of local (county, city and district) pension systems in California which demonstrates that these smaller funds are also on the short side by about $200 billion. Adding it all up, we're missing about $700 billion in order to guarantee payment of all those pension promises, those Constitutionally-mandated contractual rights, those good-as-gold annuities signed with the sacred blood of John C. Fremont and Ishi, the California Yahi who walked out of the wilderness in 1911 and into the waiting arms of the University of California Anthropology Department.

Serious stuff, in other words. A fiscal nightmare. I couldn't quite follow what was going on with the report as described in headline versions in the Marin Independent-Journal (Marin is one of the worst-funded local governments in the state), which were so unbelievable they seemed like something out of Mad Magazine, so I read the actual report from SIEPR, and I still don't quite get it. But the idea seems to be that the pension funds are in such bad shape that the only hope is to devote large amounts of existing budgets equal to huge fractions of existing employee payroll to cover the pension obligations. Using an 18-year "amortization" approach (that is, an attempt to pull even over an 18 year period), on average local pensions at the city, county and district level will have to devote about 50% of "covered payroll" in order to meet pension obligations.

I can't find a clear definition of "covered payroll," surprisingly enough, since that is the denominator for computing the fraction. I guess it means the payroll for current employees in the pension system, which must be a very large percentage of the government work force.

"The average for all systems

in the 18-year scenario is 50

percent, suggesting that one-half

of future covered payroll will

be required to meet unfunded

pension and OPEB obligations.

It is important to emphasize

that this estimated share of

covered payroll reflects only that

required to eliminate unfunded

obligations; contributions to

fund ongoing pension and OPEB

costs are additional."

Local governments generally have to throw in another 15 or 20% to meet the ongoing pension obligations. Anyway, it's a helluva mess. It explains a few things for me. As a lawyer, I use a lot of county facilities, and things have gotten a little sketchy lately, I've noted. Things just don't happen the way they used to. The clerk's office in Marin County, for example, used to allow access to case files on a more-or-less instantaneous basis; now you phone ahead and maybe a week later they'll call you back, but probably not. The file staff is only there four hours a day.

It's pretty clear what's going on. The county is firing current employees because they need the money to pay people who used to work there. San Rafael is, along with San Diego, one of the worst political entities in the state in terms of unfunded pension and health care liabilities. The SIEPR estimates that in the 18-year scenario, San Rafael will have to pay an amount equal to 82% of its "covered payroll" to meet unfunded liabilities. With slightly worse returns on investment, and higher inflation in health care (both factors more likely than not), San Rafael may achieve that exalted status where it owes more to former employees than it does to current employees, if there are any left.

Ah, the Bubble Years, first the Dot Com bonanza and then the housing boom. It raised such lofty expectations about what was fiscally possible in the coming era. The pension formulas were all based on that Golden Age. Now you're lucky if you can earn 2.5% on a 10-year Treasury bond, the benchmark for pension returns. Yet to work, the funds need to earn 6 or 8% per year, which is why the Illinois teacher's pension, for example, has gotten into writing credit default swaps in an effort to make up massive shortfalls. It worked so well for AIG. This is only one step away from playing the lottery as an investment strategy.

Naturally, the local government entities are not going to go in for anything as logical and orderly as "18 year amortization" plans. That's the stuff of policy institutes, not real life. These are politicians we're talking about, and the first line of defense will be denial (San Rafael is already denying like crazy). When the mathematics become overwhelming, they'll resort to blaming someone else, most likely a predecessor. And finally, of course, like pension systems all across the country, the locals will wait for a federal government bailout. I think this is one of the reasons, in fact, that the Federal Reserve has been manipulating the stock market with "POMO" operations, the shell game by which the Fed slips printed money to Primary Dealers with which to play the market. If the damn stock market will just keep going up (despite the overall weak economy), the pensions can make up some of their losses and delay the inevitable bailout.

In the end, however, none of this can work, any more than Social Security can work or the Fed's other Ponzi schemes. Having "globalized" our economy, we can't just print without limit or we risk a ruinous debasement of the currency. Odd, isn't it, how a former city hall janitor's future solvency depends on what the People's Bank of China thinks about our monetary policy? Byzantine complexity - such a good idea in human affairs!

Krugman & the Wal-Martians

I don't know if you've seen the email-forward shtick called "Wal-Martians," but they're making the rounds in various formats and iterations, the one here being a rather tame depiction of one of your fellow Americans shopping at America's biggest chain (and biggest employer!). Wal-Mart is not only a huge purveyor of imported Chinese junk, but also sells more groceries than Safeway, Ralph's or the A&P.

Where I live we have CostCo, Home Depot and other Big Box, but no Wal-Mart. It's an attitude thing, I think. It's as if the locals consider it the Line in the Sand: if Wal-Mart arrives, the game is up. Civilization as we've known it ends. Personally, I think that's a little delusional. All the other signs of the End Times are here in force; what difference does it make if we add Wal-Mart to the mix? Still, we must take our comforts in American culture where we can find them. There are no Wal-Marts within ten miles of my house - hooray for us! I realize, of course, that the prejudice works both ways. Wal-Mart knows that we're not really their target demographic. Why waste a big, ugly warehouse on us?

The lady in the picture is Wal-Mart's target demographic. Camo shorts, huge caboose, and all on patently obvious display. As I say, these pictures can be multiplied ad infinitum. Largely speaking (ahem), what these specimen slides reveal is rather pathetic and touching, in their way. For what they are actually portraying is a subcategory of Americans (increasing in number by the minute) who are victims of America's agribusiness-sponsored reliance on high fructose corn syrup as a major food stuff, combined with our atrocious system of public education (indeed, our public schools are main purveyors of junk food). 43 million Americans are on food stamps, and a lot of that subsidy goes to buying crap at Wal-Mart. Perhaps you have read about the legions of food stamp zombies who roam the aisles at Wal-Mart at midnight on the last day of the month, waiting for their credit for the next month to kick in.

So in an overall sense, what we have here are people who are unable to defend their alimentary canals from the propaganda and market dominance of ConAgra and Archer Daniels Midland. Diabetes, obesity and premature death are the direct results.

While considering these pictures of Earth-bound extraterrestrials, I was also thinking about that redoubtable economist at the New York Times, Paul Krugman, who has become, in his pugnacious way, the favorite intellectual piñata in the blogosphere and beyond. Krugman takes his field, economics, pretty seriously, which is hilarious in its own way. He regards it as "science," and he wrinkles his rather low brow and pontificates to anyone who will listen to him on a very regular basis, including twice a week in his column, which is actually the same column published twice a week. These essays, which are atrociously written, have a "Groundhog Day" feel to them. Every Monday and Friday, Krugman writes that the stimulus should have been bigger. That's it. I don't know how his editors let him get away with it, but he won the Nobel Prize, so I guess they have to. At any rate, Krugman believes that if the Chinese would just stop manipulating their currency, and the Republicans would cooperate, the United States could borrow more money, pump it into the American economy, and we would recover promptly. Unemployment would be cut in half faster than you could say John Maynard Keynes.

Personally, I'm not so sure. That's where the Wal-Martians come in. Granted, one should not impute too much importance to anecdotal evidence and impressionistic conclusions. These are just pictures of fat people at Wal-Mart, after all. But you see, I can't help thinking that the "science" of economics posits or presupposes some sort of Ideal Actor for its neat formulations to work, some sturdy, moderately-well educated, healthy Person to carry out the actions implied in the formulae. You know? And such animals are in short supply in American society. Wal-Martians are not really Bell Curve outliers anymore. In Krugman's Princeton Ivory Tower, he is somewhat shielded from this reality, which the rest of us live with daily. To him, a statistical cohort is a statistical cohort: Standard Man.

Nope, that ain't right. I can see where Krugman and his ilk would rather not think about this reality. In the first place, how do you statistically "model" Wal-Martians? More important, however, is that Krugman is one of those "globalists" who infest the editorial pages of the New York Times. A free trade advocate, an "internationalist," a bigger-is-better apostle of worldwide integration. He doesn't allow himself to think too much about what those movements have done to the United States, the offshoring of all our productive jobs, the hollowing out of the American economy, the reduction of our business activity to "financialization" and multinational corporate headquarterism. Krugman goes in for a lot of jingoistic attacks on China (and now Germany), but these are red herrings resulting from his willful blindness about his own complicity in the destruction of America.

What did these clowns think would happen if we encouraged a system where Detroit line workers competed head to head with Chinese laborers willing to work for a couple of bucks a day? Globalization has been a disaster for the United States, along with refusal to enforce our anti-trust laws, so that we have now, as Roy Zimmerman sings, "One World, One Bank." 24% of the country's wealth is concentrated in 1% of the population, the average CEO makes over 500 times as much as whatever line workers are left. The elites make their huge salaries and bonuses playing globalist games; the rest of the country is moving to the Red Planet.

Sorry, Paul, but transfusing blood into the American cadaver isn't going to get the job done. That high unemployment is here to stay, along with printing money to pay bills. Keep up the Harry Potter good guy/bad guy tropes and memes, but if you want to see what's really happening, go buy a 50 pound package of frozen Nachos at your local Wal-Mart.

Drifiting along with the tumb-a-ling tumbleweed

I still get the occasional email blast or even text message from the Obama PR Department, but their hearts no longer really seem in it. Or maybe that's just a projection. I guess we weren't the ones we've been waiting for after all. Could be another bus will be along in an hour, or twenty years from now or so.

Meanwhile, we just drift along either like the Sons of the Pioneers suggested, or like the Titanic in the earlier hours of April 14, 1912. So far, so good! as the man who fell off the observation deck of the Empire State Building said as he passed the 50th floor. I can't imagine that Barack Obama could actually be reelected in 2012, but that's still a couple of years away, and who would have guessed in 2008 that the Republicans would pick up 60 seats in November, 2010? So maybe a surprising turnaround? I suppose so...

Still, it seems to me that we have a ways to go in the wrong direction because very strong inertial forces are resisting any positive change at this point. The investment and commercial banks which own the U.S. Government are fighting for their very survival, and don't want to be 'resolved" under the Dodd-Frank bill passed as part of financial reform. This is the actual reason (IMHO) for the bailouts and "quantitative easing" that are passed seriatim by Congress and the Feral Reserve, with the full complicity (oddly enough) of Barack Obama. Thing about Barry is, if he had come into office and by some miracle the zeitgeist was completely anti-bank among the outgoing administration and in the halls of Congress, then that's the way Obama would have rolled. He would have been a righteous crusader for us against the banks. Alas, the bought-and-paid-for government, and the revolving door between Wall Street and the Treasury Department and White House, assured us of an overriding presumption that "stability" in the economy depended totally on preserving certain specific, powerful banks. We forget that this is just sort of a "theory," although that itself is too grand a word. It's the way they wanted it. And since they wanted it that way, Barack Obama went along with that program because he doesn't actually like "change." He likes calm, nonadversarial stability, even if it's the stability of a sinking ship (subject to change, in other words).

Thus, Deutsche Bank, Goldman Sachs, JPMorgan, the Bank of America, Wells Fargo and the rest of the gang continue to stagger along, with their "mark-to-fantasy" portfolios of worthless mortgages, HELOCs and junior encumbrances, and their massive exposure to class action lawsuits from angry hordes of suckers sold all that mortgage-backed crap. Until so much in the way of resources (all of our resources, and then some, including hallucinated "money") is directed elsewhere, we can't get anywhere. We're devoting all of our time and money trying to reanimate a dead way of life, where house prices always went up and everyone shopped till they dropped, and we called that lunacy an "economy." We want the past back again because it's all we can remember at this point. If we get it back, it still won't work, because it contained the seeds of its own destruction (i.e., insufficient productive jobs which actually created wealth).

Then we've got the ongoing wars, which we'll apparently never get out of, and the $1 trillion we devote to defense will just keep flowing out the door.

There is no hint of any change in either of these conditions (bankrupt banks and war), because they cannot change through volitional acts. There are no actors on the scene with enough power to change them. The changes the conditions will cause anyway will just happen to us, willy-nilly. Thus, sing along with the Sons.

http://www.youtube.com/watch?v=iGk7Io4chO8&feature=related

So Long, Texas!

As Inspector Clouseau told us in "A Shot in the Dark," science is hopeless without facts (or "fects," as Peter Sellers would have it). So is every field of organized thinking, including the pointless drivel of the amateur blogger. One must aspire.

Thus, in the wake of a continuing series of American disasters, including Tuesday's elections, one must consider the fects as we move forward if we are to be guided in our thinking in a serious and productive way. Among these fects, I take great solace in the recent announcement, apparently serious, that Texas may withdraw from Medicaid. Their reasoning, if such it can be called, is that Obamacare will require them to add many new people to the state-run medical rolls beginning in 2014, when health care reform really kicks in. For those of you unaware of how it works, aside from a few gimmicky palliatives about who can be dropped from coverage under private plans, this is what Obamacare is: A large expansion of eligibility for Medicaid at the state level, achieved by defining eligibility more broadly. That's all that Congress could come up with, but you're not surprised, are you? Did you expect something useful?

Texas doesn't want that. Texas prides itself on having no income tax, on its independence, and on its plain cussedness. I say: more power. If the eyes of Texas are upon us, ours should also be on Texas. Texas believes it can close its large budget deficit, and avoid a lot of trouble, if it tells Washington to stick Obamacare where the sun don't shine. I like this development, but not because I favor forcing poor people to go without medical care. That inhumane policy I leave entirely to the Lone Star State.

What I like is that this sort of thing is obviously the beginning of the break-up of the USA. Texas is a big and populous state: second in land mass (and wait till the ice melts! yee-haw!) and with 24 million people. Lots of influential politicians come from Texas, or act like they do (George W. Bush, e.g.). Governor Rick Perry is essentially a secessionist, and he's very popular in Texas, not only, obviously, for his high-school-senior-1973 hair. No one outside Texas is going to argue long and hard if Texas decides to leave. Hey, it's their call. They've been a country before, they can be one again. I, for one, would not bother applying for a visa to visit there. Been there, done that. I can't imagine that Washington, D.C. would mount an invasion to force them back into the Union. We did that between 1861-1865, and where did it really get us? They're still unhappy, still resentful. They still want out. You can't make somebody love you.

The beauty of Texas secession is that it sets a precedent, and a painless one. The departure of California, on the other hand, would cause a great deal of consternation elsewhere in the United States. We grow half the country's food. The Midwest "breadbasket" is essentially a corn field. California grows everything else. We'll still sell it to you, though. Just don't try to pay for it with "dollars." Pay for it with trade, with manufactured goods that we need, such as...such as...okay, we'll get back to you on things you make that we need. See, we have these ports, and they look toward the Far East...

Texas has that same disparity in money shipped to Washington versus money received from the Feds as does the Golden State. It's a losing proposition. California has about 33 million people, about half the size of France, yet we have a larger economy than the Frogs. (We're more productive because we don't have nearly as much fun.) Our population is in the same general range of Spain (which has 40 million). Texas is about the size of Romania, and Romania is a weird place, just like Texas.

In fact, in general the populations of the European nations suggest that the USA, at 330 million, is w-a-a-a-y too large to be efficient and governable. Germany is the largest country, at 82 million. We could have four countries the size of Germany, or eight the size of Spain. Or 65 the size of Denmark, where the quality of life is supposedly the highest on Earth. See what I mean?

This could really be the happiest outcome of what happened on Tuesday. We just put ourselves out of our neverending misery. We are NOT going to work things out or avert collapse. We all know that. So let's be smart, for once. 65 countries working at different solutions almost guarantee that someone will come up with a workable program. And so much more diverse and interesting. Who cares, really, if John Boehner is orange, or if Lindsey Graham is trying to convince the rednecks of South Carolina that he's not gay by bombing Iran? Or if David Vitter likes hookers and wearing diapers? Haven't we already done all that?

Creative disintegration: an idea whose time has come. If Texas leaves, California will soon follow, and who could argue with our rejoinder: you let those guys leave. What makes them so special? I mean to say.

Thoughts on the New Reichstag Coming to a Capital Near You

American self-loathing gets as tiresome as American self-love, it's just that the first followed pretty naturally on the heels of the second. The idea of American Exceptionalism was a misperception based upon a faulty appreciation of the simple fact that the country was founded on third base and had an easy walk home. Latitude, diverse geography, climate, resources, two oceans - America was unique. The fact that all we could come up with was suburbia and a car culture says more about human beings than it does about anything uniquely American. Given the same advantages, other groups of homo sapiens would have screwed it up just as badly. They just didn't have the chance.

Now that we're way down the list in everything constituting the "quality of life" among civilized nations, it's slowly becoming apparent that our day has come and gone. I suppose that's why the analogies to Germany under the Third Reich are sort of fascinating to me. That was their story, too. Under the guidance of the Iron Chancellor, Otto von Bismarck, Germany was united and held sway over all of Europe in the late 19th century. Then after a disastrous World War I, an even more disastrous peace settlement at Versailles, the hyperinflation of the Weimar Republic beginning in 1922, and Germany arrived at that point where it could see it all slipping away. The Nazis saw a chance to seize the initiative by promising the Germans they could be great again. It wasn't the fault of the true German, they were told, it was the presence of "parasites" and "undesirables" in their midst.

There were a lot of dumb and unimpressive people leading the National Socialists during their rise to power. The purges of Jewish Germans from academic, professional and artistic positions in Germany after passage of the Nuremberg Laws guaranteed the mediocrity of the movement. It took a fearful toll on the country's competence, but they replaced excellence with violence and intimidation, and (it has to be admitted) with ruthless discipline and organization.

Under the analogy, Barack Obama becomes a kind of von Hindenburg character in the piece. Well-intentioned, not very forceful, a little clueless about what he's really up against. Obama keeps thinking, against all evidence, that he can cooperate with the increasingly Rightist Republican Party and "get things done." This is a total illusion. The Republicans will enforce their iron determination to give him nothing.

What the Republicans are missing, at present, is a Hitler character. They're an organization of second bananas. They have no one who really lights up the national stage. Well, analogies are never perfect. What is similar is the sense of national humiliation, and the reaction against it. For some reason, humans seem to think the answer is always in uber-nationalism and reactionary movements. By Tuesday night, the lower Haus of the Reichstag will be solidly Republican, on the order of 230 to 205. The Senate will still be in Democratic "control," but only by counting the fellow travelers of the Right Wing, the sell-outs and the closet Republicans. Obama will have no trouble getting money for war, but everything else will be a hopeless struggle.

Another area where the analogy breaks down is that Hitler saw himself as a new Napoleon, and under the guise of seeking Lebensraum, he set about conquering the Old World. It's best to remember that he had an awful lot of support right here in the United States. Contrariwise, the Tea Party and ultra-Rightist Republicans do not appear interested in conquering Mexico and Canada. Their motivations seem equal parts theocratic and anti-government, although in truth there is no coherent philosophy that leaps out at you from their various slogans and war cries. They're against Obama, they're clear on that. They don't like health care, science, big government, deficits, the EPA or the Department of Education. I think if they could be assured they would always have the right to carry guns into bars and churches, they would feel that 90% of their program had been enacted.

Things have been weird and they're going to get weirder. People who were unthinkable as candidates even four or six years ago, racists, idiots, are being taken seriously as political leaders with an excellent chance of election to the highest positions in the country.

I take some comfort in remembering that the Third Reich lasted only twelve years. But then, it had a very different America to put it out of its misery.

Our very own Sturmabteilung

English words never sound quite as sinister as their German equivalents, which is one of the reasons that American Fascism just seems like a lot less fun than the Italian and German versions. I mean, really: Tea Party? I enjoyed reading Johnny Tremaine as much as the next young patriot when I was a kid, and the Boston Tea Party seemed like a thrilling caper that really showed those stuffy Brits that we had arrived on the world stage. Thus, what a come-down that the movement which borrowed the name has nothing to do with the American Revolution but is mostly just a religiously-inspired, regressive, Christian-revanchist goose step down memory lane. (Patent pending on that sentence, btw.)

As proof that we can't do anything right, including mob violence, here's a picture making the rounds of a Rand Paul supporter stepping on the head of a MoveOn.Org troublemaker who showed up at one of Rand's Klan meetings. Point one: the SA would never have worn white sneakers. Das ist so lahm. Although Rand Paul's supporters do utilize the main technique of the Brown Shirts, the Sturmabteilung, which is violence to make a point. Let's face it, there simply comes a time when you know you're so damn right that anyone who disagrees with you needs to get their head stomped. Rand's supporters have become sick and tired of all these intellectual digressions, these "discussions" and whatnot. So get out of here or we'll throw you to the ground and stomp on your head.

Such an approach does discourage the expression of opposing points of view. We should be under no illusions about that. Hitler's National Socialists never actually achieved an electoral majority in Germany, either (as the Tea Party will fail here to do as well), so to compensate for that shortfall, that "delta" between where Adolf wanted to be and where he got through the electoral process, Hitler used what you might call his political Irregulars, enforcers who kept the whole open debate thing from getting out of hand. The young woman who showed up at the Rand Paul rally with an offending placard no doubt got off lightly compared to the Brown Shirt treatment circa 1936, say, but we've got to give the Tea Party a chance. They're learning, after all. Hitler did not perfect the art of violent intimidation overnight either. These things take time.

Turning the country into an open-air asylum takes time, too, but we're getting there. I note with singular satisfaction that the First Amendment is now under open assault from the Tea Party gang. Ken Buck, who is leading in the Colorado race for the U.S. Senate as the Republican/Tea Party candidate, does not like the idea of separating church from state, although he likes the idea of forbidding the government from "establishing" a religion (because, for example, what if a Jewish president were elected? Or a Muslim? Okay, another Muslim, the TP's would say.) Then America, obviously a Christian nation from the get-go, could find itself in a messy situation, with the Koran calling the shots instead of the Ten Commandments as God intended.

Buck has a half percent lead, and Nate Silver thinks he's got a 54% shot at getting elected. One of Ken's concerns is that he finds it "scary" how "secular" the country is becoming. Well, we can't have that. It's the secularists (Sekelar Hoomanists, as the church of my childhood used to call them) who advocate ideas such as science, with the dire threat it presents of a detailed and accurate understanding of reality. Science has produced such ridiculous red herrings as global warming and evolution, for example, ideas so pernicious and subversive that one poll showed that 14% of Tea Party people themselves believed in man-made climate change! Only 86% of the Party is cleaving to the Party line! Fortunately, as any student of history can tell you (that is, most people not in the Tea Party), Hitler knew how to deal with dissidents within his own party as well.

So anyway, just picking up the pace of posting in advance of next Tuesday. Heh heh. After which, I think a dissenting view like mine, contrary as it is to the general drift of the country, might place my head more or less where that young lady's is in the picture. And thinking about the steadily deteriorating educational system in this country, I would not think that the tendency of the populace is going to be away from superstition, religious intolerance, anti-intellectualism, obscurantism and that whole constellation of crazy stuff. Quite the contrary. Might not be a bad idea to develop at least a contingency plan for moving somewhere else, some country where the rule of law, high intellectual and educational standards, open debate, freedom of artistic and political expression - where all such things are common and revered.

You know, someplace like Germany.

The sign post up ahead reads Twilight Zone

It's never true until Nate Silver says it's true, so I guess it's now the case: the Republicans are going to take the House of Representatives. Nate's done his "Monte Carlo" simulations (at least 100,000 of them), and the tumblers keep falling in the same place: about 230 Republicans, 205 Democrats. A gain of 50 seats in two years.

I liked it better when Nate ran a stand-alone blog (his "538" site) instead of as a prognosticator for the New York Times, but his work looks much the same. He tends to be scary accurate. In the Senate, it appears likely the Democrats will wind up with about 51 or 52 seats, and the current odds favor the election of Sharron Angle over Harry Reid, although it's a very close race. A world without Mr. Mumbles - I just can't imagine it.

Thus endeth the days of Democratic hegemony, of the powerful dominance in the House and the near "veto-proof" advantage in the Senate. We will have a completely divided government. A Republican House, a Democratic Senate, a Republican Supreme Court and an undeclared White House. I imagine that President Obama will move from irrelevant to invisible, but at least he will have the consolation of a ready-made excuse: what can he possibly do with a divided Congress, one house of which is implacably hostile to any of his ideas and the other saddled with the "60-vote" rule?

We will thus transition from the era in which almost nothing was accomplished to an era where nothing whatsoever gets accomplished. In some ways, if your mind is partial to controlled experiments and the scientific method in general, this will present an opportunity for learning. The USA, instead of being primarily a place where the conflicts are internal, will now face two new foes: the rest of the world's population and Mother Nature. This should be interesting. I'm as bored as the next person listening to all the usual formulations, the "Progressives" against the "Conservatives," et cetera. Keith Olbermann versus Bill O'Reilly (although now that I've discontinued cable television, I don't see much of that). The American electorate seems so absolutely devoid of new ideas that it is simply, and reflexively, going to return the Republicans to power because they're the other choice. That's what the Republicans have going for them: they're not the Democrats. What a creative society!

While Obama was President with a Democratic Congress, he was unable to do anything. He couldn't get any global warming legislation passed. The costs of healthcare are as sky high and unaffordable as ever. Wall Street is still running amok, with the pace of wealth-concentration in the upper one percentile undiminished. Unemployment, realistically speaking, is about 20%. The dark shadow of Peak Oil hangs over everything, and we didn't do a thing about it. The value of everything continues to deflate, other than the stock markets pumped on Federal Reserve money-printing operations. In about one year, about 30 to 40% of all houses in America will have loans against them greater than the value of the house itself. Homelessness and poverty will continue to proliferate. And meanwhile, the world at large, which has gotten extremely tired of American currency manipulation and systematic fraud as its main economic outputs, is steadily reorganizing itself for the post-American future.

On issues such as climate change, the USA will increasingly play the role of world pariah. Using about 25% of the world's fossil fuels (with 4% of the population) and producing 20% of the world's greenhouse gases, America is being left behind by countries which are facing the truth about the need to change to sustainable energy, including, oddly enough, the People's Republic of China. The wars we keep fighting and fomenting (and which we ask other countries to finance) irritate the hell out of the rest of the world.

So against this backdrop, we will switch gears from 2nd down to 1st, forgoing even the appearance of adaptation in favor of theocratic distractions, witchcraft, Rand Paul-like Luddite racist reaction, gay-bashing and other stuff which was last this popular during the Dark Ages. America, I think, will be more like a howling mob controlled by corporate bastions behind security gates, bastions which employ people in other, poorer (but not for long!) countries to make stuff and produce their wealth, with the occasional invasion of another country to remind us that we're all patriotic Americans being "kept safe" by the Pentagon.

An Armed Madhouse, as Greg Palast described it. This should be interesting, in a macabre way.

Glum & Glummer

At the urging of Karl Denninger, who has become the de facto doyen of the fraudclosure issue, I watched a panel discussion hosted by the American Enterprise Institute, featuring such prominent gloomsters as Nuriel Roubini and Chris Whalen. Five economists in all, and they competed to see who could be the most pessimistic about the economy. That's one thing I've noticed in recent months: it has become mainstream to be dire, whereas only a short time ago the happy talk seemed to compete on an equal footing, led by the Cheerleader in Chief himself, President Obama.

I think it's healthy, myself, to the extent one can extract any hope from such circumstances. The Federal Reserve is doing what it does, which is contemplating printing another trillion or two and flooding the bank basements with more "liquidity," which the banks won't lend, of course, because there are no qualified or interested borrowers. It's such an odd misunderstanding of what's wrong with the American economy: if you could actually fix it by making entries on a Federal Reserve computer, declaring the existence of more "money" by the typing of long strings of 1's and 0's, then the problem would not be real in the first place. Yet the problem is real, and the principal dilemma is that the economy has been built on a foundation of illusion and fraud for the last thirty years or so. It was only the forward momentum of American advantages which kept things going at a seeming level of prosperity for as long as they did. Various charts used by the Glum & Glummer panel verified this sad fact: it has been the steady build-up of private and government debt which has created the "wealth effect" which allowed our consumerist jubilee to keep going, as the great mass of the populace relied on the steadily rising value of their houses to amass a fortune, extracting this equity as they went to buy stuff from each other (and most of that imported).

Roubini forecasts another 10% drop in housing prices over the next 12 months. The effect, he said, will be to place about 50% of all mortgaged houses underwater, that is, the loans against such houses will exceed the value of the house. Chris Whalen added that we are only about 25% of the way through the foreclosure process for houses that are currently in trouble, let alone the "strategic defaults" to come implied by Roubini's forecast (and Dr. Doom & Gloom is rarely wrong about these things). Ergo, ipse dixit: Roubini is saying the whole damn thing is going to come crashing down around our ears. An economy depending on the wealth effect is going to get hammered if half the mortgaged housing stock represents bad loans and uncollectible debt. The general estimate is that about 60% of all houses have a mortgage to one extent or another; if half of these are negative equity situations, then 30% of the entire American housing stock will be underwater.

Securitizing mortgages made it all possible, because that process "spread the risk." It sure as hell did - it spread the risk to every nook and cranny of the nation. It's becoming apparent what really happened in the fraudclosure scandal. The banks and loan packagers were equally caught up the bubble mania of the boom housing years and simply never thought that any foreclosure problem could become epidemic. It's amazing in retrospect to contemplate something this huge and pervasive and imagine that it was not part of the advanced contingency planning. Housing prices would always go up; thus, the fact that mortgage-backed securities were loaded up with loans that did not meet the specifications of the prospectus (and Eliot Spitzer has recently discussed proof adduced by the Financial Crisis Inquiry Commission that at least 28-29% of the loans in "Triple A" rated CDO's did not meet the underwriter's warranties) would never come to light. A rising tide would continue to lift all boats, and no worries about a few borrowers here and there defaulting; the foreclosure auction would return 100% of the value of the loan back to the pool.

That's also why the big banks and securitizers didn't care that they were riding roughshod over county recording statutes and the Statute of Frauds, why they in effect created their own "real property common law" through the formation of MERS (Mortgage Electronic Registration Systems). Mortages were trading hands so fast, in such huge numbers, that they didn't want to be bothered with paperwork and all the burdensome county recording fees. And again, so what? Foreclosures in signficant numbers were never going to happen, and none of this shoddy, illegal paperwork would come to light. Just the fees at the front end, and the cash flow on sale of the CDOs, baby; that's all they cared about.

It is interesting what an enormous Black Swan the foreclosure crisis now presents to our collective consciousnesses, is it not? No one really saw it happening in just this way. It is a cautionary tale about the dire consequences of excessive complexity coupled with mass integration. When it goes, man, it takes everything with it. We were so much safer when there were thousands of small lenders holding their own mortgages, and the economy itself was diverse, with agriculture, manufacturing, building and all the other varied components of a real economy. Now we've got this mess. A financialized nightmare built entirely on fraud and swindle, and next up, the class action lawyers tearing into the bones of the banking system as they go after all those fraudulent CDOs issued by BofA, Goldman, Bear Stearns, Merrill Lynch, JPMorgan, et alia ad nauseum.

America, as we've known it, is toast. The moral of the story being that one had better seek his or her own diversity where she can find it.

The foreclosure mess

About 15 years ago I was defending an action brought by two individuals against my client concerning ownership of a Napa Valley vineyard. It was, as such cases go, pretty interesting; for one thing, I finally understood what the phylloxera epidemic was all about, and why it had become so necessary to import ancient French root stock to California to offer resistance. Also, why roses are planted at the end of vineyard rows (they are the canaries in the coal mine - infestations tend to show up in the roses first).

Anway, while fitfully dozing through one of the tedious depositions taken in a pretentious San Francisco office, it struck me that the two individual plaintiffs were attempting to assert causes of action (claims) against my client that actually belonged to a defunct (as in bankrupt) corporation; to wit, a breach of contract claim to which that b/k corporation, and only that b/k corporation, was a party. Not these two schlemiels and their tricky lawyer - nope, the bust-o corp. Rousing myself to full consciousness, I began making notes on my yellow pad (in place of the usual Fred Flintstone sketches with which I ordinarily pass the time). Within a few weeks (a heartbeat in the litigation game), I had "severed" this issue for a separate trial - a trial on the issue of "standing" or "real party in interest," in which I challenged the right of these two yokels to pursue this claim at all. The judge liked the theory, ruled in my favor, and it was pretty much all over from there.

If this stuff sounds kind of dull, then imagine what it's like for the judges of America to sift through the "standing" and "real party in interest" implications of cases involving about $6 trillion in sour mortgage loans. Because that's what we're actually talking about here. I have not yet heard an actually cogent explanation of the crux of the problem, because this is a technical area of the law and the usual blowhards who are not legally trained nevertheless feel themselves completely competent to hold forth on this arcana. It's not that simple, no matter what Karl Denninger thinks. In essence, what is going on, in broad outline, is this: the "securitization" process (in which about 80% of all home loans were involved during the housing bubble years) was a conveyor belt, mass production phenomenon. That was supposed to be its "charm:" everybody knew that the entire housing market could not suffer a massive, coordinated, highly-correlated decline - right? Thus, safety in numbers. Individual mortgages were assembled with other individual mortages and sold into the secondary market (the shadow banking system), where they were racked and stacked into mortgage-backed securities (MBS) and then those derivatives were poured into molds called Collateralized Debt Obligations (CDO) which consisted of literally thousands of individual mortgages of all make and manner, creditworthiness, et cetera, et cetera, all tranched, sliced and diced and "rated" by the big ratings agencies like Moody's. The end purchasers of such monstrosities were pension funds, high net worth investors, hedge funds, you name it, anyone looking for that high fixed income return with virtually "zero risk," because the housing market can only go up.

It was that rosy assumption that led to the main problem we now face. You see, the hoary and ancient Law of Real Property, proud relic of Anglo-American common law, demands all kinds of formal ritual. A lot of ins and outs and what-have-yous, as Dude Lebowski said. This is because title to real property is so important to keep straight. So: deeds must be in writing. They must be signed and notarized before they can be recorded. Those who own a security interest (such as a company owning a mortgage) must also reduce their claim to writing, and must notarize the deed of trust or mortgage before recording it. And let's say that the mortgage company sells that security interest to someone else up the securitization food chain; well, then Company 1 needs to document that assignment or sale so that Company 2 acquires Company 1's interest, and the same solemn formalities need to be followed in order to "perfect" such an assignment.

Are you beginning to see the problem? Joe Sixpack, taking a break from being unemployed long enough to buy a 5-br, 4-ba charmer in North Las Vegas circa 2004, for the steal-it price of $450,000, nothin' down, ARM at 1% for the first year, infinity thereafter, signs a note, a deed of trust, receives a deed, and signs 320 other documents on the fold-out dining table in the double wide there in Bullhead City. The deal is done at the local level, but the fun is just getting started. Up the food chain the main documents go, to their eventual place of repose in Row 2,345, Column 6,784 of the indescribably complex CDO that becomes their eventual home. Lord Blackstone and the other eloquent crafters of the English common law never had this kind of thing in mind when they insisted on writings for all real estate transactions (the Statute of Frauds) and strict adherence to the concept of "chain of title" in order to prove, ahem, one's standing to enforce rights against real property, such as the right to foreclose on a mortgage one claims to own against the property as the Real Party In Interest. Specifically, how does the ultimate owner of such a mortgage prove that all the proper assignments were made as legally required all the way up the line as Joe's mortgage wound up poured, like one molecule among billions, into the Jell-O mold of the CDO?

That's what I think went on. There are other problems, such as those excuting affidavits attesting to default and the amount owed having no idea what the actual computations are on which such affidavits are based. But the huge, probably unfixable problem is that the process of moving mortgages into the secondary market became so byzantine, and performed on such a massive scale, that inevitable (and fatal) shortcuts were taken on all the intermediate paperwork necessary, legally, to establish a chain of title and assignment of mortgage rights. And the reason, really, that it got so sloppy is that no one ever thought that millions of foreclosures would ever be necessary - because the housing market only goes up.

Lawyers for homeowners are now exploiting all of these problems. Produce the "wet ink" promissory note, they say; prove that your mortgage right is in the chain of title; prove that this property did not find its way into more than one CDO (as many houses apparently did, inevitably in such an out-of-control process). One might say, well hell, the homeowners, Joe & the Little Woman, are in arrears, there ain't no question they're in foreclosure, so let's evict them, you know, on general principles. But the law doesn't work that way. Maybe they haven't made their payments, but it's still incumbent on MERS, or the Bank of America or GMAC, to prove that they (and only they) have the right to do the evicting. If they can't prove it, it's their own damn fault for participating in such madness, and it doesn't matter whether Joe "ought" to be evicted. You're not the Real Party in Interest to do it.

Fairy tales can come true, it can happen to you, as Ol' Blue Eyes used to croon.

Magic Water, Decoded

The Magic Water is fiat currency, in this case the U.S. Dollar. The 19 Elders are the Federal Reserve's pet banks, the 18 Primary Dealers, and Ben Bernanke. The Oasis is the Ponzi scheme the U.S. Treasury is running to finance its huge deficits. Hopama is obviously Obama, who has been seduced by Wall Street (if any seduction was necessary) into playing the Too Big to Fail (TBTF) game.

The Wall Street insiders do, in fact, own the U.S. government. We have arrived at the political arrangement which my old Berkeley prof, Sheldon Wolin (in his book Democracy, Inc.), calls "inverted totalitarianism," a variant of Fascism where, as between the central government and big business, business now calls the shots. Wolin is a dyed-in-the-wool Leftist, but these Left/Right labels do not really matter anymore. All that matters is acquiring a systematic understanding of how the scam works. It works this way:

The federal government has huge deficits, borrowing nearly half of all it spends annually. While the government had very large debts before the financial crisis began in 2007, they have exploded with TARP, the stimulus (ARRA), et cetera, so that they are now running at $1.5 trillion per year. The deficit is blowing out at both ends: tax revenues have fallen about 25% (total income, inclusive of Social Security, is about $2.1 trillion), while spending has increased by about 1/2 trillion annually. The Social Security surplus is now no longer raided to disguise deficits (as under Bush) because there is no surplus.

The Treasury and Federal Reserve have two large problems: (1) how to sell enough government paper to keep up with the new debt (deficits) and buy up the rollover debt which keeps maturing; and (2) how to keep the interest rate low enough on such debt so that debt service does not simply eat up the entire federal budget. The Federal Reserve does not want to appear to be simply "printing money." This debases the currency even further than the current spot price of gold, $1,300 per ounce, would suggest has already happened. Another clue in terms of the value of U.S. money is the cost of gasoline and food; why, in a period of sharply falling demand, are the prices of these basic commodities going up? Answer: both are based on the cost of imported oil.

Thus, Welcome to the Midway: the shell game played by Chief Carnie Ben Bernanke with his inner circle of Elders, the 18 Primary Dealers. It's fun, it's easy, and you can't play, too. The key to winning is to have already won, that is, to be a bank Too Big to Fail. If you are, then you become eligible for direct business dealings with the Federal Reserve, which essentially is the only game in town, or the Magic Oasis. You can borrow money dirt cheap through amenities available only to you, such as the Primary Dealer Credit Facility or the Fed's discount window, at the ludicrously low rate of .25%, meaning one quarter of one percent. Where, then, might you find a guaranteed return on your borrowed loot? By buying Treasuries, which pay somewhat more than your borrowing cost. Another way to raise money is to sell all the worthless shit on your books, such as bonds made out of mortgage-backed securities, to the Fed in exchange for "cash." The Fed sweetens such deals by pretending these bonds have a market value, and pay you at "par," meaning the face amount the bonds were considered equal to in some hashish-filled den in the basement of Goldman Sachs back in 2005. These "assets" then sit on the books of the Federal Reserve (its balance sheet has expanded from about $800 billion to about $2.2 trillion over the last two years) until they die.

Where does the Fed get the "money" (Magic Water) to buy MBS bonds or to lend to the Primary Dealers? It prints the money. The Fed conjured $1.5 trillion into existence in order to take out the trash sitting on the books of all the TBTFs and to buy treasuries (in essence from itself) during its period of "Quantitative Easing," which was, however, just the beginning.

To summarize the game: the U.S. Treasury maintains its checking account at the Federal Reserve. It draws on this money to finance its operations. The Treasury doesn't "make" nearly enough money from its "income" (taxes), so it borrows the huge difference. Increasingly (as foreign creditors lose interest in playing), the deficit is papered over by the Federal Reserve's "Open Market" and lending operations in furnishing printed money through loans to, and purchases of trash from, the TBTFs. The Primary Dealers use a lot of this virtually free money to buy Treasuries to lock in a spread between their ludicrously low borrowing rate and the ludicrously low coupon rate paid by Treasury bonds. This "cash" from the Primary Dealers is deposited in the Treasury's checking account at the Federal Reserve. Thus, the origin of the money in the Treasury's checking account at the Federal Reserve is money which the Fed printed and ran through the Primary Dealers so that it would like an "investment" instead of a fee for money-laundering. The Fed, in other words, prints the deficit and incurs a fee of 2-3% for the use of its ATM at the Primary Dealers.

The complexity of the system disguises its true nature. The Federal Reserve of New York has all kinds of "rules" and "regulations" on the quality of "collateral" which must be posted in order to borrow, and blah blah blah. Bear in mind the simplest maxim of engineering: the power flowing through a system defines the system. 40 million Americans are on food stamps while a handful of financial criminals make millions per year idly tapping a few keyboard keys and locking in a return which would have made Croesus realize he'd been wasting his time. And all with assistance of your federal government.

Magic Water

In a sub-Saharan African country, wrecked by decades of endless drought, ravaged by disease and malnutrition, the tribal elders felt helpless to lift the populace out of their misery. There had been a great deal of poor planning for decades, truth be told, it was obvious that adherence to tribal ritual and folkways and a general failure to adapt had led to massive overpopulation and poverty, yet the members of the tribe still looked to the elders for leadership and hope.

A few miles north of the village, in the general direction of the trackless Sahara, one of the elders found a Magic Oasis. Life there was cool and easy, with lush vegetation, ample water and plenty of shade. Well, the "water" wasn't real, but it could be made to flow at will, and the tribal elder was reluctant at first to say much about it. He wasn't sure, really, how it even worked, but eventually he told the other 18 elders about it and pretty soon they were all making regular trips up to the Magic Oasis where they splashed around in the Magic Water, drinking to their hearts' content, lolling in the shade and in general living the good life. What was obvious was that they couldn't really share the water, magic though it might have been. "There's not enough for everyone," the elder who found the Oasis said.

This was a problem, they agreed. Maybe, they thought, some of the Magic Water could trickle down to the general tribesmen, they could get just enough to keep them happy, and that would ease the consciences of the 19 Elders who were up to their necks in the stuff. "Nope, won't work," said one of the elders. "It won't be Magic anymore if they all get some of this water."

The natives, however, were getting increasingly restless. "This sucker could go down," said one of the elders, a Bushman. They then hit on an idea that was beautiful in its simplicity and effectiveness. One of the elders ventured down into the moiling tribe, among the filth and disease, and found Hopama, a particularly gifted and articulate tribesman. They brought him up to the Magic Oasis. He was impressed. "We have an idea for you, Hopama," they said. "We think you ought to run for Chief on the idea that this stuff belongs to everyone. After you become chief, you can make sure that the Magic Water stays with us, but you can tell them anything you want. After you've been Chief, you can be an elder too, and splash around in this stuff all you want. What do you think?"

It sounded good to Hopama, because, although he didn't say this to the Elders, he didn't really give a shit one way or the other. He was elected Chief pretty easily, because he really could talk. Some of the Elders even went to work for him, sort of, although their hearts were always back at the Oasis. After a couple of years, the tribespeople noticed that the Magic Water (yeah, they'd heard about it by now, you can't hide Magic Water forever) was still up North at the Oasis and wasn't doing them a hell of a lot of good. "What gives with the soft touch with the Elders?" they began asking him. "How come they're not down here with the flies and the malaria like the rest of us? They got it better than ever."

Hopama had to bob and weave for a couple of years, but just as the Elders promised, he eventually became an elder too and hung out at the Magic Oasis with the rest of them. That lasted for a couple of years until the Chinese bought the land and put an airport there.

the occasional mind burp

One reason I've been blogging even less than Dmitry Orlov now does is that I find the whole process a kind of bummer. There just isn't much new to say anymore. The economy is depressed, we continue to fight the same pointless wars, the repeal of the U.S. Constitution appears irreversible, and there are only so many ways you can write about all that before it simply becomes irritating. I watched Barack Obama hold one of his rare press conferences last Friday, and that confirmed me in my Weltmude. Obama doesn't seem that interested in what's going on either. I can see why his handlers have decided to keep him away from these press dog & pony shows. He's awful at the process of speaking "off the cuff," less interesting than Bush because with W you had the thrilling prospect of a strange new English word made up on the spot. Obama never says "strategery," for example. When Obama ventures into "explaining" unconstitutional practices, of course, some tension comes into the dialogue, because he doesn't make any sense. In making his case for military commissions, for example, he stated that the Justice Department "knows" some of the prisoners are guilty because they've "got the goods on them," but they're not sure they can get a conviction in an "Article III court," fancy talk for an ordinary federal court. So they'll try them in a "better" forum, where conviction is easier. It's probably just the force of old legal habit with me, but see, I thought the whole idea of due process was that you don't "know" anything until you prove it under the laws of evidence and the trier of fact agrees with you. And the rules of evidence don't permit confessions under torture, hearsay without foundation, secret informants and various other shortcuts used in military tribunals because the evidence is considered inherently unreliable. To use an old formulation, "it's not fair." Plus, since about 3/4ths of the detainees who have managed to challenge their incarceration through habeas corpus petitions are found, essentially, held without credible evidence, how certain are you, Mr. President, that you actually "know" any such thing?

Doesn't matter, I suppose. So please stop the press conferences altogether, because they're very dispiriting affairs. The description of the economy as "not there yet" (the White House Team decided on that form of "candor," I guess) is sure true enough. If 40 million people are below the poverty line, if the same number are on food stamps, if the real unemployment rate is 20%, if tax revenues are falling through the floor while federal spending skyrockets -- yeah, I'd say we're not there yet. The plan was to get there, I suppose, by November 2nd, but that isn't going to happen. Anyone for a nice cup of Tea?

Speaking of which: man, are the Democrats blowing that one. Ganging up and making fun of Tea Party candidates because they seem so "lower middle class," such as Christine O'Donnell: Earth to Democratic National Headquarters - that's the whole point, morons. True, her college graduation was delayed because she couldn't pay her student loans, she lost a house in foreclosure, she says things associated with Fundamentalist Christianity. Do you think, therefore, she's some sort of modern American rarity? Word: she's not. She is part of a movement that will soon shake your windows and rattle your walls, so laugh while you can. As Glenn Greenwald so articulately says, the criticisms of such candidates are not based on outlandish positions which we've never heard before. Everything Rand Paul, Sharron Angle, Christine O'Donnell and Sarah Palin say is within the Republican platform. It's just the way they say it - it's raw, unadorned, not couched in Beltway pieties. Joe Biden says that the Eastern European nation of Georgia should become part of NATO, thus bringing itself under the mandatory protection of the United States in the event of Russian invasion (again). Thus threatening the world with nuclear war. Sarah Palin says that we should go to war with Russia if they invade Georgia again. One is acceptable, one is "outside the mainstream." They're both lunatic ideas, and they both arrive at the same place.

The Democrats, having completely blown their chance to get somewhere between November, 2008 and November, 2010, face a very uncertain future. As strange as things have been, they're about to get stranger yet. There may even be things to write about.

The 14th can go the way of the Other 10

I should mention it's gotten easier to write these posts since I settled into this new relaxed style. Maybe, as B.B. King would have it, the thrill is gone, but so is the feverish tension of all that Hope & Change that had me and a lot of other people so fired up for a while. As the original resident of the Pond had it, a single truth is enough for the Seeker, and the single truth apparent now, to my way of thinking, is that the political system doesn't work anymore. How it got into this deplorable state is a complicated question, even for me, and don't forget: I have a degree in political science. That's right, I'm a scientist, I hold a Bachelor of Science from what was once a publicly funded university (prior to Prop 13), although admittedly now it's a wholly owned subsidiary of British Petroleum, which owns the science department, and the Haas Family, which owns the business school.

So in this Zen-like state of Acceptance, it is easier to admit the truth of what's going on these days on the Fruited Plain, specifically, not too much good. The whole country is sort of up for grabs, the final devolutionary step, perhaps, in the collapse of citizenship that I think underlies the decadence of public governance in the USA.

Take, for example, the "debate" over the 14th Amendment. Should it be "repealed?" Those are the terms in which the discussion happens in this stupid country of ours. Alberto Gonzales, legal hack who once headed up the Justice Department, says don't repeal the 14th Amendment, but he's Hispanic, so what did you expect. Sarah Palin is okay with repealing the 14th Amendment. Yet who even knows what the 14th Amendment is? Most experienced lawyers would never even think about the "birthright" clause when thinking about the 14th. The 14th Amendment was the landmark amendment of the Reconstruction Era (1868) which made certain that the Due Process Clause of the 5th Amendment, as well as the new Equal Protection Clause of the 14th, was fully applicable to state and local governments. Without the 14th such epochal decisions as Brown vs Board of Education would not have worked. Jim Crow would still be in effect, perhaps. Rand Paul's wet dream of sending a black family to the next, blacks-only motel would be okay with the feds, so long as Kentucky law allowed it.

So most lawyers don't want to see the "14th Amendment" repealed. What the politicos/ talk shows are yelling about is the "birthright" clause, which grants citizenship to anyone who manages to be born within U.S. borders and become "subject to its jurisdiction."

"All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.^[3]"

To be fair, this is a reasonable question to ask: the original purpose of the Birthright Clause was to make certain that certain members of the American public who were literally here from the beginning, African-American slaves, would not be denied citizenship after the Emancipation Proclamation because of the awful (dreadful, you could say) Dred Scott decision, which denied not only citizenship but essentially humanity to freed slaves. The slaves were not "illegal immigrants." They did not sneak into the USA to drop an "anchor baby." They were originally brought here on slave ships, those who survived the voyages. So, as with many generalized provisions in the Constitution, the Birthright Clause of the 14th found a new and not-really-intended use in the case of illegal immigrants. A series of Supreme Court decisions, however, have made it clear that birthright citizenship is available to anyone born here, no matter how that birth happened to happen.

Settled law, right? An amendment (really, what Sarah is talking about, even though she doesn't know it, is an amendment to an amendment) takes forever under the Constitution, so let's move along to the next thing. And I guarantee you, practically, that that is not going to happen. There's another way in America these days. It began with Bush and has come to be settled policy with Obama: if you don't like a civil liberty or Constitutional provision, if it's inconvenient, you simply ignore it. Few things are more dangerous than such lawlessness, of course, it's the gateway to tyranny and mob rule, but...Here We Are! The 4th Amendment and FISA law got in the way of Bush's illegal spying program. No problem, no one is going to do anything about it. Military commissions violated the 5th (and 14th!) amendments regarding due process. So what? Waterboarding and other forms of torture violate the 8th Amendment. Who cares? The use of "faith-based" delivery systems within the federal government violate the First Amendment's Establishment Clause. Wake me when you've got something important to say. Habeas corpus?- the aforementioned Alberto said it's not even in the Constitution; the Constitution just says you can't repeal it. Hey, if sophistry like that works (and Obama is using it in Bagram prison in Afghanistan), tell me something that won't. How 'bout the right to assassinate American citizens anywhere in the world if they're a "security risk?" Sounds like an end run around the 5th and 14th Amendments' Due Process Clause, doesn't it? Do they care in Saudi Arabia? Then why should we?

Saudi Arabia, by the way, is one of those countries which denies birthright citizenship. In so many ways (capital punishment, use of torture), countries such as Kuwait, Iran and Saudi Arabia are our political cousins. Anyway, the future is pretty clear. As things fall apart, what's going to happen is that we will move from a system of presumption of citizenship to one where citizenship is a matter of affirmative proof. The Arizona law is a big step in this direction, and overwhelmingly Americans favor this approach. Then too the Supreme Court could get a new case and simply reverse the Wong case of 1898 (and others following) and say that the 14th Amendment was never meant to apply to illegal immigrants, which might not be a bad argument, after all.

One way or another, through Constitutional nullification, mob rule, ad hoc decisions, the days of birthright citizenship are numbered, if I know my fellow yahoos, and I think I do. It's a fine mess you've made here, Oliver.

Trying to care about November

I'm sure I should care. The midterm elections in November, I mean. This could be momentous, and I'm going to start caring pretty soon. Others obviously do; I get several emails a day from barackobama.com, for example, imploring me to support Democratic candidates. Okay, I guess that's what they're saying. I haven't opened an email from barackobama since sometime in 2009, I'm guessing. I haven't given a dime to any candidate; I'm like you, Barack - fiercely bipartisan. I did give about forty bucks to a nice young woman going door-to-door soliciting money to clean up the Great Pacific Garbage Patch. Regardless of how I feel about Democrats or Republicans, I like sea otters, sea lions, seals, dolphins, whales, fish. Even plankton. Even if I don't stop to say it often enough, I do owe a huge debt of gratitude to the lowly work of the plankton, and so do you. Floating around at the bottom of the food chain, getting swallowed in enormous quantities by the humpback whale, as he plays his game of migratory Pac-Man up and down the coast between Alaska and Baja.

Speaking of Alaska, Lisa Murkowski, hereditary Senator and Republican from Alaska, is in real trouble. Some Tea Party guy named Joe Miller, with a slightly pudgy, high fructose corn syrup ingesting-looking wife (perfect for modern America), is ahead of her by 1,700 votes. Ominous! I should care about that. One thing to bear in mind is that Hitler, before rising to total power, actually never commanded a simple majority of all German votes. Didn't need to. Got close enough and then what you might call non-democratic tactics got him the rest of the way there. It took quite a while, actually, between the Beerhall Putsch in the early Twenties to his final victory in 1933. That's the way these things roll out. See, it doesn't matter all that much whether the Right Wing (Tea Party) of the More Right Wing Party in America (the Repubs) actually gain a majority in the House (or Senate) this time around. I don't think they will. But what's on their side is time. Do you honestly think economic times in America are going to be better in 2012? Nah, we're just getting started on the Highway to Hell. And massive unemployment, foreclosure, displacement, anxiety -- these classic sequelae of a Depression are driving the political process at this point.

Gee, what if Carly becomes Senator instead of Barbara Boxer? That should be important, shouldn't it? I get a couple of emails a day from Barbara, probably because of my halcyon days when I gave money regularly to Barry, Barry of the country club on Martha's Vineyard. Man, I'd like to be on the fairways at Martha's Vineyard myself, especially with the whole course essentially closed off just so I could play through. No sour grapes, though. Where was I? Oh yeah, Barbara. She's a stalwart when it comes to global warming. Too bad she's serving in the United States Senate, where there's no chance of any effective legislation ever being enacted. That's the thing that could happen if I don't start getting interested - Obama and His Merry Band of Democrats have gotten very good at passing big bills with the Names of Big Issues. What I call the Names Project: Healthcare Reform (with no reform), Financial Reform (ditto), the Stimulus (what can you say?). Bills With Those Names won't even get out of committee if the Democrats lose. And then you know what? The war in Afghanistan will get escalated, and then a new, secret, robotic war in Yemen will start up...

I'm trying to stay focused here. This isn't funny. The Tea Party is the leading edge of a very negative development, nativist, nationalistic, belligerent, intolerant, obscurantist. Yeah, I know what you're thinking - would you really be able to tell the difference? Sure you would, I say. We need some sort of rallying cry: Vote for Democrats! They don't do anything, except it feels okay, because they're not that scary!

Finally, I think I've found an approach that will work for me.

Crabwalking the Ground Zero Mosque

Laurence Kotlikoff, an economist at Boston University, wrote a recent piece for Bloomberg News in which he argued persuasively that the USA is utterly, thoroughly, irrevocably bankrupt, with its total liabilities, honestly counted, in the $202 trillion range, or about four times the annual gross world product, and 15 times the annual American GDP. We've reached, he writes, the end of our Keynesian rope and there's simply no way out. We're trapped in zero interest rate paradigms (ZIRP) because the national debt, and the rate of new debt issuance, have become so monumental that the slightest tick upward means that debt service alone will crush the federal budget and cause the country to implode. Kotlikoff is the author of The Coming Generational Storm, a prescient look at the impending war between young and old concerning the attempts of the Baby Boom generation to retire and draw Social Security and Medicare in amounts that the American economy simply cannot support, despite what clowns like Krugman write about "trust funds" and the rest of the illusionary nonsense. Nor will the various governments, federal, state and local, be able to fund, in full, all of the pension promises they have made to former and existing employees. The money is simply not there, and future funding is based on completely unrealistic, quasi-hallucinatory 8% rates of return which haven't been around since the Clinton Administration.

While these Depressionary realities continue to roll out, it's only natural that the MSM and the Klown Kollege in D.C. would disport themselves with any distraction at hand, since if one thing has become absolutely, completely obvious, it is that the political system in this country cannot handle any real problem whatsoever. Those days are over. No part of the federal government has the resources, the competence or the good faith to deal honestly with anything, and they are going to ride the Titanic right into the iceberg, stripping the crystal chandeliers and pocketing the sterling silverware while they party on into the night.

So we learned that much, at least, with the election of Barack Obama: nothing is going to help. Good to know. You, me and the cockapoo over there at the corner of the greensward taking a dump - we're all on our own. So what's to report?

Well, we can get excited about whether Muslims will build a new mosque within a few blocks of "hallowed" Ground Zero. Barack calls it "hallowed ground," echoing Lincoln at Gettysburg, as if that makes any sense whatsoever. Gettysburg was hallowed ground, in Abe's estimation, because of the pitched battle which had occurred there not long before his speech at the height of the Civil War, and the deaths of soldiers on both sides, particularly the armies of the North fighting to preserve the Union. That's not the same thing at all as the site of a terrorist attack; it gives way too much credit to the terrorists. But Americans are not deep historians, so who cares.

Obama began his participation in the "controversy" by saying something banal, obvious, almost principled: in America, under the First Amendment, the right to practice religion shall not be abridged, for anyone, and the equation of American Muslims with al-Qaeda or the terrorist cell which attacked on 9/11 is bigotry. So far, so good. Then, as usually happens, he frightened himself with his unguarded candor and began hemming and hawing, in his usual irritating way. What he meant was, see, yeah, we have a First Amendment and everything, I'm not taking that back, but is it such a good idea for Muslims to be building a mosque near Ground Zero, because, you know, those were Muslims who attacked us and everything, and people could get the wrong idea, and...

So then we were back to Louis Gates, the Cambridge cop and the Biergarten moment. Lah dee frickin dah. Where else could we wind up? For the aid of invertebrates everywhere, here are what I think are the two principled positions possible on this issue:

1. We have freedom of religion. Thus, the right to build a place of worship is equally accessible to any religion which applies. Thus, Muslims can build a mosque in Lower Manhattan, and Catholics can build cathedrals near elementary schools.

2. There is something suspect about Islam. They don't make enough noise about anti-Americanism, they won't condemn terrorists, they tend to institute Shariah law whenever they get enough critical mass together to influence politics. We have to start rolling back Islam in this country, as some European countries are doing now, as in France with the anti-head scarf rules, et cetera. What the United States is doing in Afghanistan and Iraq, and probably soon in Iran, really is a crusade against Islam, not a coincidence connected to oil or oil pipelines, and we're taking the war to the new battlefield, right here at home.

Take your pick. Strict Constitutional approach or something different. What's it gonna be? Saying you wonder about whether it's "wise" to build a mosque in Lower Manhattan is not leadership. It's an attempt not to take a position. Not that I'm telling you anything you didn't already know.

Sunday Funnies

The question thus arises, what is to be done with the train wreck that is the American economy?

One approach that has become popular is to write about it. There is a land office business these days in gloom and doom. Its practitioners are now so numerous it's pointless to list them all. Those who become prominent have made a business out of bad news. That is, after all, the American way - maybe the economy is coming apart at the seams, but how can I, personally, make some money out of this deal? There are hundreds of books on the subject, many websites, thousands of blogs. Not all are venally motivated; some, after all, are exercises in pure Schadenfreude, others are the psychological working-through of chronic depressives.

Here at the pond, I must say that I'm clearly not in it for the money. Nor do I consider myself a chronic depressive, and it's bad form to revel too much in misfortune. It's not even in good taste, in fact. I do find it interesting, that's all. It's interesting to understand the reality of a given society and polity. That's what Thoreau was into - how does this whole situation work? Why do people behave the way they do?

One thing I think we can say without being gainsaid (successfully) is that for something around forty years, American society has been on a downward trajectory. That's old news at this point, but certain parameters bear the judgment out. As one example, the breathless analysts at outlets like CNBC and Bloomberg, whose relevance depends on the relevance of the thing they're selling, the ups and downs of the stock market, don't often point out that the S&P 500 and the Dow are at virtually the same level now that they were in 1998; however, there has been at least 25% inflation during that period, so to adjust for constant dollars, one would have to put the S&P in the 750-800 range instead of its nominal 1,100 or so, and the Dow at 7,500, instead of just north of 10,000. So why don't the stock pundits talk about this? It's obviously the reason that Wall Street got into the casino business. Churning the market and creating exotic betting vehicles were the only way to make money once the traditional retail trade dried up and "buy and hold" took its place among our durable illusions.

And then, of course, the illusion-bordering-on-delusion of the globalization movement. Americans are so gullible and so poorly educated about what is in their own best interest that they listened to functional idiots like Tom Friedman of the New York Times, whose only expertise, so far as I can discern, is in clumsy writing. Or Paul Krugman, another Times-sponsored propagandist, who doesn't talk a lot about the fact his Nobel was won for work he did on "patterns of international trade," back in the go-go 1990's, when NAFTA was signed and Perot heard that giant sucking sound of American jobs heading South O' the Border and to Asia. Look, how obvious can something be? If you're the top economic dog, paying high salaries for value added work such as manufacturing complex products like automobiles and electronics, how is it going to benefit the mass populace if you ship all those jobs overseas where the work is performed for pennies on the dollar, and relegate yourselves to retailing and importing the stuff you used to make? Won't water seek its own level? You might ask, well isn't such a process inevitable? No, of course it isn't. Someone not in the thrall of American-based multinational corporations increasing their profit margins by using cheap labor (completely free of environmental considerations) would see what was going on and bring home the reality that the economy needed to be restructured, less on consumerism, more on essential value-added manufacturing, small-scale farming and ecological balance. Essentially, a post-growth economy. The United States has the resources to accomplish this. The crisis in the United States was an act of slow-motion economic suicide.

Well, we don't have central planning, in any rational sense. The current takeover by the federal government of what's left of American industry and finance is simply a salvage operation to keep the game afloat for a little while longer. Bernanke & Co. are attempting to maneuver the American economy into a glide path leading to the softest possible crash landing. There is wisdom in this, as Dmitry Orlov has written. If you ease your way down, then when the final collapse comes it will be more like falling out of a ground floor window than from 85 stories up.

Return of the native

Admittedly, I was a little spooked when I read about Project Vigilant, a "private sector" outfit that snoops all over the internet looking for signs of un-American activities, assembles such data into "actionable" form and then peddles it to "three initial" federal agencies, which surely include the FBI, CIA and NSA. You can imagine the kind of fine, discriminating, First-Amendment-protecting approach which would be used by such a company. Apparently, Project Vigilant comes up with something like 250 million bits of useful nuggets per day, from emails, websites, comment sections, et cetera.

Still, evil flourishes when good men do nothing, and one tries to be a good man, despite everything. But as insurance, I've begun perusing right wing websites such as Red State, Powerline and even Fox News. I just log on and let them run in background. Then when PV takes a look at the Ol' Swimmer, they have to admit I also spend hours a day figuring out what Sean Hannity thinks about the issues of the day. I like balance, see.

Since I last wrote regularly, nothing much has happened. Maybe that's just the nature of a Depression. Money was the energy behind many developments, and the money's all gone, and the folks back home don't wanna talk on the phone. My guess is that President Barack Obama did not realize he was signing on to govern a country mired in an actual Depression. Like many of the propagandists around him, he participated in the groupthink idea that this was simply another in a long series of cyclical recessions, deeper than most, but nevertheless a species of the same thing. This was the wrong read of the situation. What we're in now is the historically inevitable result of the destruction of the middle class, from many causes, and the usual quick fixes such as tinkering with interest rates are not going to work. I don't think Obama, at the personal level, has any idea what to do about it, because nothing in his background, work experience or education prepared him at all to lead a country out of such a morass. I mean, all that he would have been able to do, at best, would be to begin the process, which is going to take a long time. His easygoing, golf-playing, back-patting, hoops-with-LeBron style would have worked fine if the economy, as with Clinton, was taking care of itself, or at least appeared to be doing so. But when radical (note to Project Vigilant: radical as in "radish," to the root of the matter) changes are needed, and not just Change as a campaign slogan, then it becomes something altogether different. Obama, with his escalation of the Afghanistan...whatever it is we're doing, and his general approach of pretending he was elected in 1992 instead of 2008, is not getting the job done.

We're just drifting. Since the Administration cannot create jobs, they've decided to work with the statistics instead. To keep from going "over budget," the Obama Administration has become the first in living memory to forgo the whole budgetary process. We don't have a budget. Tax revenues this year, including Social Security, will hit about $2.1 trillion. The total outlays (can't call it a budget, since there isn't one) will reach about $3.6 trillion. Nevertheless, Paul Krugman says the federal government is not "cash strapped," because it can borrow money at astonishingly cheap rates. This is true. And the reason the Treasury can issue ten-year notes paying 2% is because the economy is so moribund this is considered a good return.

I remember the phrase my father used to use: the "depths of the Depression." In other words, you don't get there overnight. The crash occurred in 1929, but things steadily worsened during the Thirties. 1935 was worse than 1930. It takes a while for the accumulated savings and forward momentum of the good years to play out, and that's what is happening now, three years after the beginning of the downturn in the summer of 2007, when W warned us "this sucker could go down." Facing the music would be a start, but the political system, addicted as it is to magical thinking and the election cycle, cannot do that. So we pretend things will get better if we wait and just keep doing the same things. House prices will go up because that's what they do. Jobs will appear because America is "innovative." Don't think so. This sucker's not going back up until we do something different.