Tag: Economy

This is the Sort of Thing that Takes Down Authoritarian Regimes

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Vladimir Putin is experiencing significant political blow-back for cuts to pensions and an increase in the retirement age.

It’s part of the standard neoliberal playbook, and it is the sort of thing, rather than foreign adventurism or crack-downs on political rivals, that frequently result in major political shakeups:

Pension reform is genocide!” “You deprive us of our pension – we deprive you of your authority!” “We don’t want to die working!”

These were only some of the slogans shouted by Russian protesters during mass rallies last weekend, held in response to a new reform that will rise the retirement age in Russia. From Moscow to St Petersburg to Siberia to the country’s Far East, the rallies were a nationwide phenomenon across the world’s biggest country.

For Vladimir Putin, the situation represents a rare mis-step. The tough-guy president has, for years, presented himself as a national defender, fully in synch with the concerns of the Russian street.

The media were not beating about the bush. Moscow newspaper Moskovsky Komsomolets defined the protests as the “most dangerous and risky reform of President Putin’s 20-year rule.”

More than three million Russian citizens have already signed an online petition against the pension reform which, starting from 2019, is due to gradually increase the retirement age from 60 to 65 for men and from 55 to 63 for women.

………

However, Prime Minister Dmitry Medvedev has stated clearly that reform is necessary to save Russia’s pension system, which relies on state budget subsidies to stay afloat. Despite brave talk of sanctions resistance, a rising Russian economy, apparently successful overseas military adventures and the warm afterglow of the World Cup, low oil prices and Western sanctions continue to erode Moscow’s finances.

………

Regardless of whether it is essential or not, the reform is colossally unpopular – about 90% of Russians oppose it. Naturally, it is having a deep impact on the approval rating of the United Russia party.

………

As a result, Putin’s popularity rate has been already affected by the reform, falling sharply from 80% in May to 64% in late July, according to the VTsIOM state pollster. This is problematic for Putin, considering that a great deal of Russian trust in him depends on his reputation as “protector of the Russian people” against foreign threats and as guarantor of national stability, particularly after the chaos of the Yeltsin years.

I expect to see some sort of partial walk back from Putin, as well as long term political consequences.

The number of authoritarian governments that have been brought down by implementing these sorts of neoliberal remedies, frequently at the hands of the IMF, is legion.

We ……… Are ……… F%$#ed

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It took over 50 years after the crash of 1929 for the the next banking crisis, the Savings and Loan crisis, to occur.

It took 25 years after that for he next crash, in 2008.

Now, my money is on us not even making it to 15 years:

Big banks are getting a big reprieve from a postcrisis rule aimed at curbing risky behavior on Wall Street.

Federal bank regulators on Wednesday unveiled a sweeping proposal to soften the Volcker Rule, a cornerstone of the 2010 law that was enacted after the financial crisis to rein in risky trading. The change would give Wall Street banks more freedom to make their own complex bets — activities that can be highly profitable but also leave them more vulnerable to losses.

The rule, part of the broader Dodd-Frank law, was put in place to prevent banks from making unsafe bets with depositors’ money. It took five agencies three years to write it and has been criticized by Wall Street as too onerous and harmful to the proper functioning of financial markets. On Wednesday, the Federal Reserve proposed easing several parts of the rule, and four other regulators are expected to soon follow suit, kicking off a public comment period that is expected to last 60 days.

The loosening of the Volcker Rule is part of a coordinated effort underway in Washington to relax rules put into place in the wake of the 2008 financial crisis. Big banks, emboldened by President Trump’s deregulatory agenda and a more favorable political climate in Washington, have begun pressing for changes to several postcrisis rules, including the Volcker Rule.

………

“This proposal is no minor set of technical tweaks to the Volcker Rule, but an attempt to unravel fundamental elements of the response to the 2008 financial crisis, when banks financed their gambling with taxpayer-insured deposits,” Marcus Stanley, policy director at Americans for Financial Reform, said in a statement.

Senator Elizabeth Warren, the Massachusetts Democrat who has been among the most vocal critics of changes to Dodd-Frank, called the proposal the latest example of corruption in Mr. Trump’s Washington.

“Even as banks make record profits, their former banker buddies turned regulators are doing them favors by rolling back a rule that protects taxpayers from another bailout,” Ms. Warren said.

Honestly, I blame all those people who decided that it would be too “disruptive” to jail banksters.

There were lots of bankers jailed, including the head of the New York Stock Exchange in the 1930s.

In the 1980s, it was a smaller number of S&L executives.

Under Barack Obama and Eric “Place” Holder, no prosecutions at all.

The banksters are going to make more money, and the rest of us will eventually have to pay for their excesses.

It’s Called Monopoly Rents and Oligopolies

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The good folks at the New York Times have noted that healthcare costs in the US started rising sharply relative to other developed nations around 1980.

Ignoring the obvious error (Dean Baker notes that the increase in US medical inflation started in the 1970s, not the 1980s) the history is clear: this began with a major push toward deregulation that began under the Carter administration, along with largely successful efforts to privatize what had been publicly owned research and development.

The walk-back from meaningful antitrust enforcement, and to deregulate many aspects of the market economy, along with efforts to privatize federally funded research progressed rapidly during the late 1970s, culminating with the disastrous Bayh-Dole act, which had the effect of handing government research to private entities.

Later, under the Reagan administration, the break-neck pace of these changes further accelerated.

It became the wild west, and a very opaque one at that, and to paraphrase former banking regulator Bill Black, if looting is possible, it has already happened.

What’s more the proceeds of the looting are almost immediately reinvested in rent seeking activities like campaign donations, to embrace and extend the regime.

Rinse, lather, repeat.

Even by the Standards of Trump, This is Unbelievably Stupid

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Donald Trump has a plan to lower drug prices in the United State.

Basically, he wants to force other countries to pay more, and then big pharma, out of the goodness of its heart, will lower prices in the USA, because the drug companies will only take as much money as they need, and won’t waste it on excessive executive compensation or stock buybacks.

I’m not sure if they are being stupid, or if they think that we are this stupid, but in either case, the level of idiocy buggers the mind:

President Trump, poised on Friday to unveil his strategy to lower prescription drug prices, has an idea that may not be so popular abroad: Bring down costs at home by forcing higher prices in foreign countries that use their national health systems to make drugs more affordable.

On Tuesday, Mr. Trump rebuffed his European allies by withdrawing from the Iran nuclear deal. Threatened tariffs on steel and aluminum have strained relations with other developed nations. And now the administration is suggesting policies that could hit the pocketbooks of some of America’s strongest allies.

“We’re going to be ending global freeloading,” Mr. Trump declared at a meeting with drug company executives in his first month in office. Foreign price controls, he said, reduce the resources that American drug companies have to finance research and develop new cures.

The White House Council of Economic Advisers fleshed out the idea three months ago in a report that deplored the “underpricing of drugs in foreign countries.”

The council said that profit margins on brand-name drugs in the United States were four times as high as those in the more regulated markets of major European countries and Japan. The United States, it said, needs to “address the root of the problem: foreign, developed nations, that can afford to pay for novel drugs, free-ride by setting drug prices at unfairly low levels, leaving American patients to pay for the innovation that foreign patients enjoy.”

Most of pharma research funding already comes from the governmet and big pharma spends more on advertising and marketing than they do on research, but, according to Trump and his Evil Minions™, the problem is that they can’t rape consumers hard enough.

Great googly moogly.

If You Believe that the Market is Everything, then Everything is for Sale

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Case in point, the the academic integrity of the economics program at George Mason University, more specifically its Mercatus “Think Tank”, which, rather unsurprisingly, turns out to be a wholly owned subsidiary of the Koch brothers.

Not a surprise. Bribery and undeserved adulation of the rich is pretty much what the Mercatus Center is all about:

In defending its financial ties to the Charles Koch Foundation — some $50 million worth, as of 2016 — George Mason University has cited its academic independence from donors.

Yet George Mason is less independent than it has let on, according to documents released last week via an open-records request, and amid an ongoing suit about donor transparency brought by student activists.

Angel Cabrera, university president since 2012, shared the news with faculty members in an email, saying, “I was made aware of a number of gift agreements that were accepted by the university between 2003 and 2011 and raise questions concerning donor influence in academic matters.”

The gifts, in support of faculty positions in economics, “granted donors some participation in faculty selection and evaluation,” Cabrera said, noting that one such agreement is still active (the rest have expired).

All 10 of the now-public agreements relate to the university’s Mercatus Center for free market research, a locus of Koch-funded activity. Three of the agreements involve Koch. The two most recent, from 2007 and 2009, stipulate the creation of a five-member selection committee to select a professor, with two of those committee members chosen by donors. The other Koch agreement, from 1990, also afforded Koch a role in naming a professor to fund.

George Mason also allowed Koch a role in evaluating professors’ performance via advisory boards. And while the agreements assert that final say in faculty appointments will be based on normal university procedures, the 2009 agreement says that funds will be returned to the donor if the provost and the selection committee can’t agree on a candidate.

It is of course common for donors who support professorships to specify the academic field or subfield. So while the Koch family’s extensive giving to antiregulatory causes in politics is controversial, it is not necessarily controversial that they fund professorships in economics and even free-market economics. But academic values have long held that donors don’t get to pick who holds chairs, or evaluate them.

Such details are similar to those in a now-defunct agreement with Florida State University, from 2008, that defenders of Koch have said was a one-off. It was previously revealed that Utah State University’s grant agreement with Koch from around the same time had similar language, however.

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Student activists are currently in court in Virginia, arguing for their right to view agreements made between donors and the university’s foundation, saying they, too, should be subject to state open-records laws for public institutions. In particular, the students — and many faculty observers — have questions about the identity of an anonymous donor who agreed to give $20 million dollars to rename George Mason’s law school after the late U.S. Supreme Court Justice Antonin Scalia, in 2016.

The university has consistently said that the foundation is a private entity and that compromising the confidential nature of donations through that avenue by releasing such documents could chill giving. Koch was a joint, $10 million donor on the law school deal.

The new documents were released as part of an open-records request by Samantha Parsons, a former student at George Mason who is now involved in the lawsuit through her organization, UnKoch My Campus. In addition to the approval-based agreements, emails released name Leonard Leo, executive director of the Federalist Society, as a representative of the anonymous donor to the law school.

John Hardin, Koch’s director of university relations, said in a statement that “while our grant agreements have evolved over time, we have always been committed to the highest standards of academic integrity and freedom.”

Bullsh%$.

They have done this before, repeatedly, and each time they have given the same tired line.

The Brothers Koch, and their supporters, are a truly pernicious and toxic influence in our society.

They poison everything they touch, sometimes morally, as with their attempts to secretly buy academic programs, and sometimes literally, as with their petcoke play.

In any case, people of good conscience and good reputation should wash their hands of the Kochs.

Tweet of the Day

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And as regards Britain, the facts are EU rules impede Corbyn’s program: you can’t properly nationalise if you can’t abolish internal markets, you can’t build public industry with its state aid rules, you can’t renationalise the NHS with its public procurement rules, etc, etc

— Ronan Burtenshaw (@ronanburtenshaw) April 30, 2018

The EU is an antidemocratic and neoliberal project, and until this is fixed, and until the Krauts hegemony of the union is ended, the problems of the EU are going to continue to get worse.

Medical Data Point of the Day

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It turns out that the average American birth costs more than the recent delivery of Prince William and Princess Catherine’s 3rd child at a luxury private hospital in London.

That hospital serves champagne and has an extensive wine list, and it still costs about the same as an average delivery in the USA:

………

Yet the price of delivering the new prince, who is fifth in line to the British throne, was probably slightly less than that of an average American baby. In 2015, the Lindo Wing charged £5,670 ($8,900) for 24 hours in a deluxe room and a non-Caesarean delivery. A survey in the same year by the International Federation of Health Plans found that the average fee for such a delivery in the United States was $10,808. ………

God bless our market driven health care system.

Michael Moore Could Explain This to You

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The military’s fighter pilot shortfall is reaching alarming proportions — and a new report from the Government Accountability Office shows just how bad the problem has become.

The Air Force, Navy and Marine Corps are each short about a 25 percent of the fighter pilots they need in crucial areas, according to the GAO report released Wednesday, titled “DOD Needs to Reevaluate Fighter Pilot Workforce Requirements.”

The problem has grown worse in recent years. And because it takes the Air Force, for example, about five years of training — and costing anywhere from $3 million to $11 million — before a fighter pilot can lead flights, holding on to these pilots is vital to recouping the military’s investments and making sure the services can carry out their required missions.

Over the last two years, the Air Force has particularly sounded alarm bells over its pilot shortfalls. The service has stood up a team led by a one-star general to find ways to stem the bleeding of its pilot ranks. Efforts include dramatically increasing retention bonuses, cutting out paperwork and other non-flying duties that keep pilots out of the cockpit, and taking many other steps intended to keep pilots in the service.

Last November, Air Force Secretary Heather Wilson said the service was short 2,000 of all its pilots, or about 10 percent, and sounded a dire prediction of what it would lead to.

………

But these stop-gap measures come with a cost, GAO said. Squadron leaders and fighter pilots told GAO that the high pace of operations for senior fighter pilots — some have been used to fill vacant junior positions, for example — limits their ability to train junior pilots. And that makes it harder for the military to grow the ranks of pilots with specific qualifications.

Deploying fighter pilots more frequently causes family instability and leads to career dissatisfaction, GAO said.

………

Retention of fighter pilots is also declining. Although the Air Force has dramatically increased the maximum retention bonus for pilots — first from $125,000 up to $225,000 in 2013, and finally up to $455,000 last year ― fewer and fewer pilots are taking them. Between 2013 and 2017, the take rates for fighter pilots declined from 63 percent to 35 percent, a 28 percentage-point drop.

One of the sources of recruitment for pilots of all kinds are people who want to become commercial airline pilots.

With changes in the industry making the positions far less pleasant, (Michael Moore discussed how the treatment of airline pilot by airlines have become increasingly abusive in his movie Capitalism: A Love Story) fewer people are considering putting in 5-10 years of military service as a entree into commercial aviation.

You see the same thing with truckers, where pay and benefits have been decimated over the past few decades.

If you have a job that requires specialized skills and training, and you devalue that job so as to overpay the banksters, fewer people will get the skills and training necessary for that job.

It’s Econ 101.

Quote of the Day

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Clinton’s boast that she won where the economy is vibrant partially explains why she lost: There are too few of these vibrant areas left to win national elections.

—David “D-Day” Dayen

He gives a pretty good explanation on why Clinton’s open contempt for the Americans who have been left behind by the “new economy” touted by her husband and his ilk was so politically damaging.

A Good Point

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The folks at (where else) Jacobin make a point that is shocking, illuminating, and true.

Specifically they note that private property could only has begun as theft backed up by the threat of violence, which in a very real way, makes all property stolen:

Perhaps the most interesting thing about libertarian thought is that it has no way of coherently justifying the initial acquisition of property. How does something that was once unowned become owned without nonconsensually destroying others’ liberty? It is impossible. This means that libertarian systems of thought literally cannot get off the ground. They are stuck at time zero of hypothetical history with no way forward.

Obviously, our current society could not function without property, but it does put the whole concept of eternal property that is so beloved of libertarians and the neoliberal order in some much needed perspective.

It Is Now Officially the Trump Economy

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Down 666 points on Friday, and 1175 points on Monday.*

The benefits of the tax cuts are positively amazing:

The Dow Jones industrial average plunged 1,175 points Monday in an exceptionally volatile day for financial markets around the world, stirring concerns about the durability of the long-running stock gains.

In the biggest global sell-off since 2016, financial markets from Asia to Europe to the United States were rocked primarily by concerns about inflation.

The Dow was off a heart-stopping 1,600 points during afternoon trading, the largest intraday point decline in the blue-chip index’s history. But the 4.6 percent loss for the day was not even close to the biggest.

The downdraft raised fresh anxieties among Americans who have seen their retirement savings and household worth march steadily higher without any of the gyrations that are part of a normal market cycle.

It also threatened to deprive President Trump and the GOP of a favorite talking point at the nascent stages of the 2018 midterm campaign.

Although the declines were eye-catching, market observers have been anticipating a correction after a year of big gains in the Dow, the broader Standard & Poor’s 500-stock index and the tech-heavy Nasdaq.

You know, Trump was right. I’m sick of winning.

*Yes, I know that the stock market, and particularly the Dow, are separate from the real economy.

Why Wages Never Rise

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Because any hint of wages increasing along with productivity result in the Federal Reserve trying to shut it down.

The Fed has been promulgating low wage economics for decades:

There have been all kinds of carefully phrased semi-hawkish statements emanating from carefully contained semi-hawkish Fed governors recently. Today, Dallas Fed President Robert Kaplan repeated what he has been saying for a while – that the “base case” should be three rate hikes this year, and that there could be four, warning, “if we wait to see actual inflation, we’ll be too late.”

But it’s the most fervent “doves” – when they start getting cold feet as doves – that matter the most when it comes to tightening monetary policy.

One of the most persistent, most vocal doves on the policy setting FOMC has been Minneapolis Fed President Neel Kashkari. He voted against all three rate hikes in 2017, and was vocal about why he did: inflation was too “low.”

 ………

There was a number in the jobs report this morning that got his attention: Average hourly earnings in January gained 2.9% year-over-year, the largest gain since June 2009, hallelujah, finally. Pressures are building up in parts of the economy, and companies are griping they cannot hire enough workers in some professions – or that they would have to pay more, God forbid, to hire them.

………

“The most important thing that I saw in a quick review of the jobs data is wage growth,” Kashkari told CNBC on Friday.

“We’ve been waiting for wage growth. Everyone has been declaring that we’re at maximum employment. More Americans have been coming in, which is a really good thing. But there hasn’t been much wage growth. This is one of the first signs that we’re seeing wage growth finally starting to pick up. That’s good for the public as a whole. I think it’s good for the economy overall. But I do think if wage growth continues, that could have an effect on the path of interest rates.”

The path of these interest rates is already winding uphill. For now, everyone at the Fed when they advocate for higher rates keeps repeating the qualifier, “gradual.” But so far, Kashkari has used every opportunity to vote and speak out against any and all rate hikes.

Yet the moment wages tick up, suddenly it gets his attention. It gets every Fed governor’s attention. Wage increases give them the willies.

Creating asset price inflation, including the most glorious housing bubble imaginable, became the Fed’s publicly stated policy goal under Chairman Bernanke – his infamous “wealth effect” doctrine. And consumer price inflation must always be high enough to eat up wage gains and help companies show growing revenues, but not so high that it blows down the whole house.

But wage inflation is toxic for the Fed. Wage inflation means that people get paid more for the same amount of work. A higher income due to promotions, for example, is not part of wage inflation.

Expect rates to go up much more rapidly now.

This is Impressive

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The costs of renewable energy installations, including storage, has fallen precipitously:

Proposals for renewable electricity generation in Colorado are coming in cheap, like, $21/MWh-cheap for wind and battery storage. Though there are a few caveats to those numbers, federal incentives and quickly falling costs are combining to make once-quirky renewable projects into major contenders in an industry where fossil fuels have comfortably dominated since the 19th century. 

 Early last year, Colorado energy provider Xcel Energy requested proposals for new electricity generation. Specifically, the company needed 450 megawatts of additional generation to meet future demand. In a separate request called the Colorado Energy Plan, Xcel said (PDF) it would consider replacing two coal plants providing 660MW of capacity with “hundreds of megawatts of new wind and solar as well as some natural gas-fired resources” if new resources could be found cheaper than what those coal plants cost to operate (including costs to shut down the plants early).

By late November, energy companies had submitted their best offers. Although exact details of the offers aren’t available yet, Xcel Colorado was required to make public a summary of the proposals (PDF) in the month after the bids were submitted.

………

Still, the prices quoted were encouragingly competitive. Although Xcel’s report doesn’t have a lot of details, this is what we know:

  • Out of 152 standalone solar bids, the median bid price was $29.50/MWh.

  • Standalone wind received the second-most bids from potential developers (that is, 96), and the median bid price was an astonishingly low $18.10/MWh. That’s on the same level as a record-low $17.70/MWh bid put forward in Mexico in November.
  • 87 bids were placed to develop solar-plus-storage installations, with a median bid of $36/MWh. Still, we don’t know what kind of storage was proposed or how much of it was proposed. If you have a giant solar field sending electricity to the grid as it gets made, and a small battery installation to manage frequency regulation or serve a local community for an hour of downtime, that’s not terribly exciting. This median price is down from a previous competitive price of below $45/MWh signed by Tucson Electric.
  • 11 bids were placed to build wind-with-storage at a median bid of $21/MWh. The same problem with evaluating Xcel’s solar-and-storage bids is present in the reported wind-and-storage bids: without more detail, it’s hard to evaluate how much storage comes with that.
  • Seven bids suggested a combination wind, solar, and battery storage installation, with a median price of $30.60/MWh.
  • Five bids suggested combining solar and wind for around $19.90/MWh.


A few more traditional, dispatchable technologies were proposed as well, but Xcel asked bidders to price these out in terms of dollars per kilowatt-month ($/kW-mo). That unit of measurement is considered capacity pricing, or pricing for electricity that’s generated when demand exceeds a certain point, so it’s not quite comparable to the $/MWh seen above.

Among those resources, combustion turbines came in at $4.80/kW-mo, and combustion turbines with battery storage came in at $6.20/kW-mo. For context, in a 2010 paper (PDF), New England’s grid saw a $4.50/kW-mo bid for more traditional fossil fuel generators.

Renewables are still more expensive to install, but the differential is falling quickly.