Showing posts with label Economics. Show all posts
Showing posts with label Economics. Show all posts

Thursday, August 10, 2023

Stock In Academies

People talk about Nixon’s “Southern Strategy” and how the South converted from Yellow-dog Democrats to the world’s most conservative Republicans.  Nixon was taking advantage of a situation that was already developing.  In 1969, most of Mississippi blamed the Democratic party for our position on the Rubicon of integrating our public schools and the panic that ensued.  When I look at the list of names of the men who formed the Board of Directors for Jackson Preparatory School in 1970, it’s really easy for me to see the seeds of a revolution.  I can’t look at a single name on that list and say, “I did not love this man,” but the truth is the truth, and the Republican takeover of Mississippi started in Jackson, and it started with those men, and it started over the issue of integration.

A lot of people are already tired of discussing the birth and growth of private schools in Mississippi around 1970.  I think it’s important we do discuss it because it has a lot to do with the state of our schools today, and the state of our schools today has a great deal to do with the state of our state.  It’s also important to remember that we were just children.  Nearly all of the people who made these decisions passed away ten years ago.  

You’ll often hear said that St. Andrews and St. Richards were parochial schools and shouldn’t be included in this, and JA was started as an alternative school that taught phonics in early reading as an alternative to what JPS was teaching.  All of these things were true.  These three schools were started under very different conditions than what happened in 1970.  When the purpose for them was formulated, the idea of most of white Jackson abandoning the public schools wasn’t a consideration.  When these schools began, nobody believed we would be forced to integrate.

St. Andrews, St. Richards, and JA all experienced massive growth in 1970.  While these schools weren’t created as an alternative to integrated public schools, there were parents who considered that, if they were going to leave the public schools, they would rather their children attend a school like that rather than a school like Prep or Manhattan.  My parents were one of these.

The superintendent of Jackson Public Schools told my grandfather to “tell Jim he better get those boys into private schools because I don’t know what will happen next year.”  Next year in this story was the year Murrah would be forcefully integrated.   Normally, a comment like that would be of concern, considering what my father did for a living; it was a paradigm shift and a huge amount of pressure beyond just wanting to do the best he could for his children.  For the superintendent of Jackson Public Schools, my father’s biggest client, to say he should move us out of the JPS system was disturbing on many levels, disturbing enough that this is what my parents decided to do.

My oldest brother went to Prep because his football coach was also going to Prep.  The same coach noticed my early growth spurt and the size of my arms and asked me when I was going to prep every time I saw him until I was a sophomore at Millsaps.  He caught me with a pitcher of beer at Mr. Gattis Pizza in the 10th grade and asked when I was going to Prep.  The rest of us, my other brother, my sister, and I, went to St. Andrews.  In the late 70s, there were some concerns about what was going on at St. Andrews, so my sister transferred to Prep, just in time to miss David Hicks.  That’s another story.

With integration, there was a lot of pressure for both JA and St Andrews to add a high school, and neither had the money.  St. Andrews spent a great deal of money building what remains one of the most attractive lower schools in Mississippi.  There were still loans out for it, and nearly all the sources they had for large gifts were tapped to build it.  

The high school St Andrews eventually built looked like it was erected by an entirely different organization than the lower school.  One building had a second floor that could never be used because the building inspector wouldn’t approve it, so the planned staircase was never built, and those rooms were used for storage.  Every so often, you’d see Jessie on the maintenance staff haul a broken chair-desk up an extension ladder to store it in this unused portion of the building so that it could be used for parts later on.

There was a struggle for a while to decide what the future of JA would be.  Many saw it as a feeder school for Prep.  Prep already had a preferred feeder school in First Pres, though, so the relationship became strained.  JA was also working under a different educational paradigm than Prep.  Prep was very traditional, basically, the same curricula as Murrah (since that’s where most of their staff came from), whereas JA was interested in more modern curricula (at least, more modern in terms of the 1960s). More than ten years into it, JA decided they, too, must have a high school, but where would they find the money?

While most of the banks had the motivation to loan these new schools money, they still required some backup to the loans.  More often than not, these came in the form of personal guarantees from board members.  Often, a willingness to personally guarantee a banknote was how one became a board member.  The money for these banknotes paid the construction companies, companies like my dad’s that provide chairs, desks, and blackboards, and most importantly, the salaries of the teaching staff, almost all poached from the public schools.  Some people will take offense that I use the word “poach” here.  I hold nothing against anyone who left a job in our public schools for a job in our private schools.  These people, mostly women, were excellent educators, and considering the stories I’ve heard about the chaos in the administrative side of Jackson’s public schools at the time, I don’t know that I can blame them for switching.

The idea of offering stock in the school as a way of raising a little extra money was a part of nearly every school other than St. Richards and St. Andrews; both of those had already built most of their lower school and had a more stable economic situation due to their parochial nature.  Many of these personally guaranteed notes were called as the need for money soon outstripped the money coming in from tuition.  Everything was happening so fast; this was almost guaranteed to happen.  Some of these men, who had to pay out of their pocket for the loans the school could not pay, took stock in the school as payment.  That way, for quite a while, when a new student would enroll and buy stock, they were buying it from Mr. Smith or Mr. Jones, who still had five hundred shares left from when he had to pay off the school's banknote.  

The question of integrating the schools was a complicated one.  Prep, Woodland Hills and Manhattan had no interest in integrating, they couldn’t legally refuse to admit anyone based on race, and there were parents who tested the waters, but no black students were enrolled.  JA had staff members who were very open to integration, but the cost of attending prevented it for many years.  Glenn Cain and I discussed this several times.  He even showed me some of the applications from black parents to prove he was telling me the truth.  Glen, I think, at times, was in an impossible situation where everyone wanted something different from him, and his own vision for the school became difficult to manifest.  Jesse Howell found it easier to realize his vision and get others to back him up.  Part of that was just his magnetic personality, but part of it was an unwillingness to challenge the status quo.  For many people, Prep was the new Jackson Central High School, but without any of that integration nonsense.  If you look at the board and the faculty, you’ll see the names of an awful lot of Central alumni.

St. Andrews and St. Richards were both very motivated to integrate on orders from their respective religious organizations, but again cost became an obstacle.  St. Andrews ultimately became the first private school to integrate willingly.  They were, and are now, pretty proud of that.  While he was a good student and well-liked, there was still an enormous economic gap between white and black parents, and the cost of attending St. Andrews prevented him from graduating there.  His presence started something, though.  Soon, every grade would have at least one black student, and the number grew every year.  James Meridith sent his sons to St. Andrews.  During my entire tenure at St. Andrews, there were talks of merit-based and need-based scholarships, with experiments with both.  While nearly everybody was in favor of it, paying for it was an obstacle.  It was expensive enough to keep the doors open; adding that sort of expense on top proved too difficult.  

A lot of us noticed that black students would drop out around Jr High School.  Part of that, I think, was the idea that, if their parents were going to spend that much money, it’d be better invested in the early grades so their children got a good foundation.  I’m sure the idea that being around other black students as a part of social life was also more of a consideration in the upper grades.  

The baby boom had already stretched Jackson’s educational resources thin.  Although considerably larger, Murrah wasn’t nearly the architectural marvel of Bailey or Central.  The cost was the primary consideration.  Jackson barely had enough money to meet its public school needs and then voluntarily put on themselves the added burden of duplicating it as private schools.  Considering just how much of a task this was, regardless of whether it was a good idea or not, makes me have some respect for the people who did it.  It was, however, a horrible idea.  None of the terrible things predicted to happen at Murrah happened.  There were no murders in the hallway, and the drug problem at Murrah was considerably smaller than the drug problem at the private schools.  The kids who stayed at Murrah got every bit as good of an education as the kids who went to Prep.  The difference is, Prep is well-funded and going strong today, but Murrah struggles to meet the basic needs of its students.  Murrah is far more segregated now than it was in 1975.  We’ve struggled to keep a superintendent of Jackson Public Schools every year since 1970.

A lot o people don’t want to talk about this.  “It was fifty years ago.”  “We were children.”  “The world is different now.”  All of this is true, but when I look out at what’s happening educationally now in Mississippi, what I see are the scars that were left when most of Mississippi abandoned the public school system.  Scars that won’t heal unless we talk about this.  A lot of people think they’re safe from all this as long as they can send their kids to private schools.  It’s not that simple.  Our culture and our economy depend on the families who can’t afford to send their kids to these private schools.    Your kids who went to private schools will be left with the same unanswered questions we were left with by our parents, and the longer we take to address these issues, the more our society will become polarized and dysfunctional. 

Prep, St Andrews, and JA all seem pretty well-heeled now.  That’s an illusion created by fifty years of investment.  The first few years, the schools looked nothing like that.  Mississippi still struggles to meet its basic educational needs.  If you look at the money spent on our private schools, it might become clear where the money went.  The cities that are now mostly white won’t remain so.  We didn’t escape the problem of integration; we postponed it.  Sooner or later, those chickens will come home to roost.

Monday, July 31, 2023

I know Victoria's Secret Too

 In her song “I Know Victoria’s Secret,” singer Jax reveals that Victoria’s secret is that she was made up by an old man living in Ohio.  She’s right, but there’s more to it than that.  

Victoria’s Secret was invented by a man named Roy Raymond, who tried shopping for foundation garments at stores like Sears and found the experience inadequate.  Underwear for both men and women was produced by the same companies that produced them for the troops in WWII and sold them in packs of three, mostly in white, but sometimes prints or pastels for women.  Raymond was aware that the most successful clothing mail-order catalog that wasn’t Sears was Fredrick’s of Hollywood.  He had the idea to do the same thing, but less trashy and in a better location than West Hollywood.  Not knowing much about California, he picked Palo Alto for his first store and produced his first catalog with two sigs (16 pages) and a cover, which immediately sold out.

In the late 1970s, Les Wexner studied the growing patterns of young women shopping in the new phenomenon of suburban malls.  He combined that with the fashion sense he gleaned from the more popular women’s fashion magazines and found low-cost producers to make similar items priced for middle-class young women, with the result being The Limited, which by 1980 was almost entirely located in suburban malls.

Wexner was much better with money than Raymond, and in 1982, offered to buy out a bankrupt Raymond and add Victoria’s Secret to Limited Brands.  With the deal completed, Wexner was the unchallenged “King of Malls” and remained so until total sales in malls started falling off in the new century.

Jax’s song suggests Wexner might have been creepy.  He might have been, but not in an Aqualung sort of way as the song suggests, but in more of a Merchant of Venice sort of way.  He’s not eyeing little girls with bad intent, but he is making an awful lot of money.  

I’ve heard people read the long “I am a jew” speech from Shylock, suggesting that Shylock might have been a sympathetic character, and Shakespeare might have been sympathetic to Jews.  He was not.  Like a lot of Shakespeare’s work, you really need to read the whole play.

Wexner was responsible for a lot of things.  Among them are the move to women sexualizing their bodies at a much younger age, even younger than the “flapper” movement in the 20s.  He promoted an unrealistic body image that lead to an epidemic of eating disorders.  Between the fast food business and the fashion business, Americans have whiplash with regard to how they should feel about food.  

Wexler was also one of the first to move most of his production to Asian sweatshops with lax or no rules regarding child labor, so you ended up with a situation where pacific islander twelve-year-olds were manufacturing clothes sold to American sixteen-year-olds, who had to hide them from her father and change clothes in the car before going out to meet her friends.  

He did all this to make money, and he did make money—lots of it.  I think it’s important to do what Jax does and reveal how these things happen, so you don’t end up with young people who all they really know about the people marketing to them that “it’s cool” or not.  It’s an awful lot more complicated than just cool or not, and maybe songs like this are the best way to get the message to teenagers who really don’t have much time for us.

Tuesday, July 4, 2023

Women Who Don't Celebrate Holidays

 Wayne LaPierre and the NRA are big fans of the idea that a "good guy with a gun" is all you need to solve the problem of "bad guys with guns."  They believe in it so much that they plaster it all over their social media every time it works.  

That's the problem; every time it works is between one and two percent of all the gun violence in the nation.  One or two percent make their evidence in this argument almost anecdotal.  While it does work at some level, their strategy simply isn't solving the problem.

Usually, their social media post will go like this: Larry Smith takes out Rico Warez with the AK47 he kept in the back of his truck in case he wanted to go deer hunting.  Their posts are filled to the brim with racial dog whistles. Then 500 middle-aged men will comment how great it is to be an American and FU Brandon!  

Problems like gun violence amplify problems with economic disparity.  The darker and the poorer you are, the more likely you are to be the victim of gun violence.

Going to the grocery today, I was struck by what a terrible job we do of governing the people who live here.  Morgan Place is so filled with potholes you can't navigate it with a normal vehicle.  Inside the grocery, the women at the deli counter were talking.  I suppose the topic before I walked up was why they're working today (July 4).  One of them said she didn't mind working on the fourth because that's when her cousin got shot, and her family doesn't celebrate it, and the other woman said she felt the same about Christmas because that's when her daddy got shot.  

Two women, Americans both Mississippians and Jacksonians, laid out a testimony before me of what a horrible job we've done of governing the world they live in.  By "we," I mean me too!  There certainly have been thousands of times when I could have done more, said more, and tried more to make things better but didn't.  

Our city has an administration that was elected on the premise that they could and would do something about economic disparity, but they've done such a shit job at maintaining the basic functions of a city that they've actually made the effects of economic disparity much worse.  Our state has a decidedly conservative legislature and administration, by word, absolutely devoted to providing security to its citizens but failing utterly for these two women.  Both ends of the political spectrum made promises to help these women, and both failed.  Their lives are bad and getting worse.  

I think we have to admit that conservative gun policies are a failure.  I think we also have to admit that liberal policing policies are also a failure.  I think we have to go back to the drawing board and re-evaluate everything we're doing and look for solutions to the problem rather than ways to protect our empire of ideas.  

It's not fair that these women have to work on July fourth while I get to fuck around and do what I want.  It's also not fair that in one of the world's most advanced countries, we can't keep that woman's father safe on Christmas Eve or the other woman's cousin safe on the Fourth of July.

Thursday, May 19, 2022

Ayn Rand and Andrew Ryan

For many years, I studied Ayn Rand's Objectivism pretty closely. I saw her ideas, combined with libertarianism, as the solution to most of our social and economic shortcomings.  

I had help, too. Libertarian commentators like James Randy and Penn Jillette guided me through the process, and I criticized, especially conservatives, who strayed from Rand's precepts. I never really considered the other side of the argument, though. I tend to be a very stubborn person and sometimes suffer from myopia on some issues.

A video game called Bioshock opened my eyes to the full spectrum of what Objectivism really meant. Rapture is The Fountainhead, and the introduction of a science fiction element called "plasmids" makes Rand's utopia unravel in the face of true human nature.

Never let anyone say you can't learn something from a video game.

Monday, April 27, 2009

I Hate Target

I went by Target today because, although disillusioned long ago, I'm still fascinated by marketing and store design and when it comes to these things, particularly class position marketing, Target is the best of the best.

First you have to understand Target makes not the least pretense at reaching the straight male market segment, so my presence there is pretty alien, both for them and for me. I put on my NASA approved containment suit and forged ahead though, in the interest of science.

Target does an amazing thing. They make a living selling consumer goods and household products to women who consider themselves slightly better than Walmart. They have a men's clothing department, but that's only because, shopping for husbands and sons, women actually purchase more men's clothes than men.

Target walks a pretty fine line though, because their customers actually prefer the same brands offered at Walmart and Kroger, so Target has to offer them in the same price range. Since they don't have Walmart's volume, they're probably making less profit on these products than Walmart, even though they sell them for a few cents more. They also have higher per foot real estate costs because they put their stores in locations slightly more visible than Walmart.

To make up the difference, they add a few premium sections to the store. They can't have a premium clothing section because women are pretty particular about where they buy their clothes and the market segment they're going for wants their work and dress clothes to come from boutiques rather than mass marketers. They may be mass market boutiques, but let's not split hairs.

I think Target generates a lot of their profit from their confections, coffee, furniture, and linens sections. The one I went to even had a Starbucks at the front of the store, which is interesting because the Walmart down the street has a Subway in the same spot. When it comes to class marketing, Subway vs Starbucks pretty much tells the whole story.

You could never have a Target for men. Most men simply aren't as attuned to the fine striations of class as women are. Not all men are immune to this type of marketing, but usually the stores who market to men that way are much smaller and locally owned and usually restricted just to clothing. People who try class marketing in typically male stores like hardware or electronics usually fail. They're still out there though, but their customer base is pretty small.

The only stores that have much consistent luck at class marketing to men are some brands of automobiles and sometimes Apple computers. At Lowes or BestBuy though, they actually shun class marketing because they know it could drive many of their customers away, regardless of their income.

Although I recognize class and all it's machinations in human society, I tend to think it's bullshit, so I usually think of class marketing as a fine, seven-layer, serving of bullshit too. One day, I think people will come to realize that all these folks who serve them by observing class distinctions are really manipulating them and there'll be some sort of backlash against it. Until then, I'll visit stores like Target occasionally, just fascinated to see what these people are up to now.

Thursday, April 2, 2009

Karl Marx Was An Asshole

Recently I wrote about how conservatives in these troubled times are returning to their roots and re-reading Ayn Rand. In the interest of fairness, I'd like to also point out that liberals are showing a renewed interest in Karl Marx.

If you don't know, Marx was the evil genius behind communism and he was a real asshole. Despite his reputation as a humanitarian, the people who actually tried communism would tell you there wasn't much improvement between having the state own everything and the old system where the king owned everything.

Like Rand, Marx had no practical experience in any of the subjects he wrote about. He idolized Darwin but decided to forgo Darwin's extensive fieldwork and based his economic and political theories entirely on stuff he read in books.

It's not like people never gave Marxism a chance. Russia and China both tried Marxism, but the only way they could keep order was by killing tens of millions of people. Even hippies were barely able to eek out a medieval subsistence using Marxism, only made bearable by copious amounts of cannabis and lots of sex with hairy women. Marx called religion "the opiate of the people", never realizing how much actual narcotics his own system required.

Professional English asshole, Christopher Hitchens recently waxed nostalgic about Marx in his Atlantic Monthly article: The Revenge of Karl Marx. I could write a whole article on how Hitchens is an arrogant ass and pretty much wrong about everything.

To bring things full circle, I hear a lot of buzz among the republican zombies about how President Obama is trashing the constitution and ushering in an era of communism in America.

First off, Obama isn't trashing the constitution any more than any of his twenty predecessors. Compared to George W Bush, he's John Adams himself. The office of the president is far more powerful than the founding fathers ever intended, but that started some time before Lincoln and growing ever since.

Secondly, Obama isn't introducing communism. Communists take over successful, going companies to expand their power and install their social plans. Obama is taking over decidedly unsuccessful companies in what one could best describe as something of a super-power bankruptcy action for companies "too big to fail".

These companies could easily avoid any government aggression by simply getting their act together and not taking any government bailout money. It doesn't take a genius to figure out that Obama's actions with these companies is an effort to calm people's concerns about the bailout process. People want to know this money is well spent so the government is getting involved to make sure these companies do fairly logical things like reducing salaries, which, by some twisted logic, they weren't doing on their own.

Most of these companies probably won't exist in ten years, no matter what the government does. The Obama administration is trying to engineer some sort of soft landing for the rest of the economy as these really big companies implode. Obama may be liberal, but he's no communist.

To be quite honest, incendiary political speech like this really chaps my ass. I realize it's people's preferred way to play the game these days, both on the left and the right, but it's simply not helpful in any way. You have to accurately describe what's going on before you can understand it and deal with it. Otherwise, you might as well just say George Bush is Godzilla and Obama is Gamera and cheer them on from the rubble like a Japanese school kid.

Tuesday, March 10, 2009

I'm as Mad as Hell and I'm Not Going To Take This Anymore!

This is one of my favorite performances in the history of cinema. If you've never seen Network, I encourage you to see it as soon as you can. I'm not kidding. Many people consider it the greatest film of that decade, better than the Godfather films.

Peter Finch won an oscar for this performance, probably for this very scene, and he deserved it.

Howard Beale: I don't have to tell you things are bad. Everybody knows things are bad. It's a depression. Everybody's out of work or scared of losing their job.

The dollar buys a nickel's work, banks are going bust, shopkeepers keep a gun under the counter. Punks are running wild in the street and there's nobody anywhere who seems to know what to do, and there's no end to it.

We know the air is unfit to breathe and our food is unfit to eat, and we sit watching our TV's while some local newscaster tells us that today we had fifteen homicides and sixty-three violent crimes, as if that's the way it's supposed to be.

We know things are bad - worse than bad. They're crazy. It's like everything everywhere is going crazy, so we don't go out anymore. We sit in the house, and slowly the world we are living in is getting smaller, and all we say is, 'Please, at least leave us alone in our living rooms. Let me have my toaster and my TV and my steel-belted radials and I won't say anything. Just leave us alone.

Well, I'm not gonna leave you alone. I want you to get mad!

I don't want you to protest. I don't want you to riot - I don't want you to write to your congressman because I wouldn't know what to tell you to write. I don't know what to do about the depression and the inflation and the Russians and the crime in the street. All I know is that first you've got to get mad.

You've got to say, 'I'm a HUMAN BEING, Goddamnit! My life has VALUE!

So I want you to get up now. I want all of you to get up out of your chairs. I want you to get up right now and go to the window. Open it, and stick your head out, and yell: I'M AS MAD AS HELL, AND I'M NOT GOING TO TAKE THIS ANYMORE!

I want you to get up right now, sit up, go to your windows, open them and stick your head out and yell - 'I'm as mad as hell and I'm not going to take this anymore!'

Things have got to change. But first, you've gotta get mad!

You've got to say, 'I'm as mad as hell, and I'm not going to take this anymore!
Then we'll figure out what to do about the depression and the inflation and the oil crisis. But first get up out of your chairs, open the window, stick your head out, and yell, and say it:


Jon Stewart Vs CNBC

Much has been made of the battle between the staff at CNBC and Jon Stewart over a bit Stewart did criticizing CNBC for their bullish comments before the bear market kicked in.

Business news makers, commentators and journalists are used to operating in their own little sphere, hardly noticed by the rest of the world, but when the economy became the biggest story in the world, they found themselves suddenly thrust into a much larger spotlight and they're not at all comfortable there.

These guys are just going to have to butch up about it though, because the market crash and the credit freeze and the housing bubble happened on their watch. It was their job to warn us about this disaster before it hit and most of them didn't.

There's going to be a lot more uncomfortable comments thrown their way in the days ahead, so they'd better get used to it.

Jon Stewart's initial Volly

Jim Cramer at CNBC Responds

Stewart responds to Cramer's Response

Oh yeah, by the way, Cramer's advice to sell everything at the bottom of a Bear Market? Not a good idea.

Monday, February 23, 2009

A Lack of Faith

I'm beginning to worry that we're losing faith in everything, especially ourselves. From politics to the economy to culture and religion, nobody seems willing to trust anyone anymore.

The flagging economy and the falling stock market has a basis in tangible matters, but most of it is just a massive lack of faith in the system and its ability to correct itself. Recently on another blog, people were discussing a possible local criminal case and someone commented "forget about it: it's Mississippi", as if it were a forgone conclusion that justice can't be done here.

They say it started with the Kennedy assignation, then the Johnson era credibility gap and finally Watergate just blew everything out of the water. Whatever "innocent" trust we ever had in ourselves is just gone now. I think this might fuel a lot of the anger and inflexibility between the parties. Nobody is willing to trust the "other guys" to be anything but corrupt.

If I could do one thing for this country, it would be to get people to believe in each other again. "The other guy" acts an awful lot like you would in the same situation, and that's really all you need to know to understand him. Yes, there are people who abuse the system, but most of them get caught and the system always works to correct itself. Eventually, the system flushed out even "untouchables" like Scruggs and Abramoff and corrected itself.

Life's never been simple or easy, but even though the system breaks down from time to time, it always pulls itself back together because it's our nature to make things work and do the right thing. Things have been tough for a while now and they're liable to be tough for a while longer, but we will right ourselves again and we will do it because, in the end, we can trust each other: we have to.

You don't have to believe in God to understand what Jesus meant when he said "consider the lilies of the field, how they grow; they toil not, neither do they spin...yet even Solomon in all his glory was not arrayed like one of these..."

Things will fall into their right place because they are meant to; that's how the system works. Certainly we have to be vigilant and mindful of what we are doing, but we can do that, we do it every day.

Have faith in God, but have faith in each other too because we are all just lilies of the field.

Sunday, February 15, 2009

Odd Man Out

I can't really tell where the republicans are coming from anymore. They used to be very pro-business, but their fight against the economic stimulus bill makes me think there must be something else motivating them.

It can't be that they're motivated by a desire to balance the budget, because for the last seven years they let military spending throw the budget as far out of balance as it's ever been. It can't be that they desire a smaller government either because the patriot act certainly grew government in some unusual ways.

I think they're just against domestic spending. They think it's bad for us if anyone gets aid from the government. I can't tell if there's anything to that philosophy or not. Certainly there are scenarios where people take advantage of government aid or get used to relying on it to get by rather than their own initiative, but there are also times when people use it as a stepping stone toward moving themselves into the working or middle class.

Another issue might be that after suffering such a huge electoral defeat, the republicans might feel they lack identity and are doing whatever they can to distinguish themselves from Obama's new democrats. The republicans left in Washington come from very solidly republican districts and might fear how any cooperation with the democrats plays to their home constituency.

As the economy improves, the republican point of view might gain relevance, but for the time being they're just going to have to get used to being the odd man out.

Thursday, January 29, 2009

Hope and Fear

In his first inaugural address, Franklin Roosevelt said "the only thing we have to fear is fear itself", which is interesting because fear itself elected Roosevelt, fear kept him in office and fear gave him the political clout he needed to enact his political agenda.

Fear for the environment (the dust bowl), fear for the economy (the depression) and ultimately, fear of foreigners (WWII) were key elements of Roosevelt's popularity.

Historians almost unanimously credit Roosevelt's New Deal with resolving the Great Depression. Economists are less generous. The numbers by themselves support the economists' view, but, at the very least, Roosevelt did with the New Deal what any competent physician would do, which is to treat the symptoms until they can find a cure for the disease.

Although the catchphrase of the Barack Obama campaign was "hope", since his election, all of his speeches featured fear prominently, falling just short of the old action hero line "follow me if you want to live!"

I favor big chunks of Obama's recovery plan, but his rhetoric is beginning to bother me. Certainly he faces an uphill political battle on a lot of it, but one of the "changes" he promised us was more sincerity, honesty and responsibility in leadership and trying to energize his legislative agenda by frightening the public won't cut it.

So Mr. President, what we want is more hope and less fear.

Protecting Steel from Foreigners

Last week I made an argument that there were some circumstances where protectionism might be logical and needed. Apparently the president agrees, because it's part of his economic stimulus package, particularly in regards to steel.

Almost immediately, representatives from the EU began calling for the removal of any protectionist elements from the bill, particularly with regards to steel. European steel isn't the problem. European steelmakers operate on a fairly level playing field with US steelmakers because Europe requires their factories to meet standards similar to those in the US with regards to pollution, product and worker safety. The problem is Asian countries who don't have these safeguards and can produce steel much cheaper because they don't.

There's a diplomatic problem though, with singling out Asia or particular Asian countries from the stimulus bill, which is probably why they chose to word it so that it covers all foreign-produced steel. The other possible problem is that I suspect this aspect of the bill comes from the United Steelworkers Union and invoking protectionism for the sake of unions can be problematic.

It may also be that we have WTO, EU and other treaties that prevent this element of Obama's stimulus package. If that happens, then we have the choice of either passing them as is and trying to change the treaties after the fact, or we can remove the provision until such time that we can secure changes in these treaties, or we can just pass it as is and let the chips fall where they may with regards to any trade treaties.

I can't recommend the third option, but I can't rule it out either. The answer here has to be a policy of not entering into international trade agreements with countries who use a lax legal environment with regards to pollution, worker and product safety to cut costs and make their products cheaper than ours. If we can get the EU to agree with us on this, then the move would have even more clout. Moves like this might even make agreements like the Kyoto document redundant and unnecessary.

Friday, January 23, 2009

Blame The Media, Again?

Dan Gillmor writes a pretty interesting piece suggesting financial journalists should have played a larger role over the last ten years in warning the country about the looming financial crisis:
"Journalists are notoriously thin-skinned, defensive about even legitimate criticism. But this lapse has been too blatant even for reporters to miss. Two-thirds of financial journalists in a recent survey said the news media "dropped the ball" in the period before the crisis became apparent. (Still, almost none of them assigned the press any responsibility for what has occurred.)"
Gillmor goes on to suggest that the media should play a larger role in warning the country about this and other disasters:
That common practice suggests an opportunity. When we can predict an inevitable calamity if we continue along the current path, we owe it to the public to do everything we can to encourage a change in that destructive behavior.

In practice, this means activism. It means relentless campaigning to point out what's going wrong, and demanding corrective action from those who can do something about it."
Although I like Gilmor's article very much there are some things I'd like to point out:

First, he's overly critical of print media journalists, suggesting their reporting might have been skewed in favor of their advertisers, even though, from my perspective print media journalists (and blog journalists) were much more responsible in reporting about the building bubble than electronic media journalists.

Secondly, he makes no mention of the obvious fact that although financial journalists were far too optimistic five years ago, helping build the bubble, they have also swung too far the other way now and their pessimism might slow the recovery.

I'm very much in favor of activism among journalism, but you have to temper it a good bit, because, sometimes these guys have no clue what they're talking about. If you're going to follow an activist journalist on any issue, it pays to also read another one on the opposite side of the issue so you can forge your own sense of the truth out of the middle.

It should be pointed out that Gilmor himself is a print (and blog) media financial journalist, who made a name for himself writing about the bubble, but failed to accurately predict its ultimate bursting.

You can read the entirety of Gilmor's article here: The Media's Role In The Financial Crisis

I recommend it, but with the reservations noted above.

Peter Schiff is Insane

Peter Schiff gets a lot of credit these days for going on television and predicting the banking collapse of the current recession, even though some other economists missed it. Through his television appearances, Schiff earned the nickname "Dr. Doom" because of his dire predictions.

So, is Schiff the brilliant prognosticator of the future? Not necessarily. Lots of other people saw the current economic crisis coming, especially the housing bubble, they just lacked the desire or the personality to go on television. Yes, some of Schiff's predictions came true, but even a broken clock is right twice a day.

Before you sell all your belongings and follow Schiff, there are a few things you might want to consider:

He's one tin-foil hat away from being a full blown survivalist, yet he graduated from Berkley. Like Stan Lee says "nuff said".

His father is currently in prison for income tax evasion, not because he's a crook, but because he's a tax protester.

Many of Sciff's investment clients took a beating in 2008. It turns out, hiding your money in Singapore wasn't such a good idea after all.

Sciff follows the Austrian school of economics, or as I like to call it, the "Mad Max" school of economics, whose main tenets are that human beings are too evil and too stupid to ever govern effectively, so the only solution is the thunderdome of absolute laissez-faire.

"Dr. Doom" is a financial adviser for "Dr No." Schiff works for Ron Paul. Birds of a feather flock together, especially when they're both radical libertarians who want to bring down the government.

He was wrong about the dollar and wrong about gold and on his radio show Jan 14, 2009, he said Americans should stock up on guns and ammunition to fight off the wandering hordes of the coming apocalypse. That's just great radio...If you're Art Bell!

Schiff was right that Americans didn't save enough and spent too much on consumer crap made in Asia. Duh! You didn't have to go to Berkley to know that. This has been a known criticism of the American economy far and wide for forty years.

A bear market doesn't make survivalists suddenly brilliant and "right" any more than a bull market means you should invest in rose-colored glasses. A little faith in each other tempered with some common sense will carry you pretty far in this old world. In the mean time, try and avoid the people trying to grab your attention at either end of the pendulum. They're not necessarily all that bright or right.

Wednesday, January 21, 2009

Deepening The River of Our Economy

Right now, everyone is focusing on the crisis in banking as the cause of our economic problems, but I wonder if this is an effect and not a cause.

The financial sector certainly made some really stupid mistakes, but they actually were doing fairly well until something set them off.

When that happened, they realized they had, over the years, removed a lot of the safeguards we installed to protect them. That was the stupid part.

For thirty years, maybe more, maybe twice as long, our economy has been a shallow river. The water moved very fast, but it wasn't very deep.

Two years ago, we found ourselves in a situation where growth in the the world's economy was outstripping the resources we built to fuel it. The problem was fuel itself. We were too reliant on fossil fuels and when demand outpaced supply, we saw fuel prices more than double.

Energy costs are a fundamental building block of any economy, and you can't double the cost of energy without having serious repercussions throughout the rest of the system. Fuel prices doubled and the economy stalled. When the economy stalled, it created a major back flow in the banking system so the banking system broke.

As painful as this recession is, it may have come not a moment too soon. Without a slow down in the world's economy we were facing the serious problem of literally running out of energy. This recession may give us just enough time to correct the problem before it's too late.

The river of our economy overflowed its banks and threatened the villages in the valley below.

Alternative forms of energy have been a part of our economy for more than seventy years, but they were only a small part. Instead we supplied our demand for energy with fossil fuels as a commodity. It was more profitable in the short-run, but lead to two major problems: global warming and dwindling supply.

Renewable forms of energy are part of the infrastructure, not a commodity. Wind, solar, tidal, thermal, hydroelectric, even nuclear energies cost more to build on the front end, but then they are free from the fluctuations of the commodity market as they are self-supplying to a large extent.

Our energy has always come from a mix of infrastructure sources like hydroelectric and commodity sources like natural gas and oil, but in the past the ratio of that mix was something like 10% infrastructure and 90% commodity, leaving us incredibly vulnerable to the fluctuations of commodity markets.

Suppose we change that ratio, to say 60% renewable infrastructure sources and 40% non-renewable commodity sources. We need to retain that 40% from commodity sources because they're more flexible and can respond to fluctuations in demand, but it's unlikely demand will ever fall below the 60% provided by infrastructure sources.

To do this will require a genuine increase in both leadership and responsibility in the public and corporate sector. Some will say we can never expect that kind of performance in people, people are too greedy and too stupid, but I say we can. We can accomplish anything we want to.

Hell, we went to the moon strapped to the tip of an over-glorified bottle rocket. We can do anything.

By changing the mix of where we get our energy, by investing in our energy infrastructure, we deepen the river of our economy. The water won't move as fast, but more will flow past us and our future will be more secure.

Image: Hoover Dam from the air; Source Wikipedia

Wednesday, January 14, 2009

Oops CNN Does it again

Here's the headline: Retail sales drop for 6th straight month

Here's the Sub Head: Slump is the longest in at least four decades.

Pretty dire huh? Ready to cut your wrists yet?

Don't give up hope yet though, buried deep in the article is this: Of the $9.4B drop in sales between November and December, just over half was due to the plunge in gas prices, which pushed gas sales down by $4.9B, or 15.9%.

So, rather than going with a headline that says something like "Retail Sales Drop Driven by Falling Gas Prices", which would be true, instead they go with the end of the world scenario.

Never mind that six months ago gas prices were at an all time high and people were ready to go through the village with torches and pitchforks to hunt down oil executives, or that the real drop in retail sales is more like under 2.4%, let's REALLY scare the crap out of people with our headlines!

People are frightened about their economic future and that's understandable, but it would really help if the fourth estate would step up to the bar and start trying to make things better rather than worse. All they have to do is start reporting the news rather than trying to sell it with supermarket tabloid headlines.

read the article here

Friday, January 9, 2009

Economic Stimulus

For twenty years now we've been adjusting the Fed Funds Rate as a panacea for all our economic woes. Hey, it worked for Reagan so why not, right?

Adjusting the Fed can provide a short-term stimulus or regulation for the economy, but it's useless for dealing with more systemic problems. The way we've been using the Fed for the last fifteen to twenty years is sort of like treating chronic fatigue syndrome with caffeine.

I'm encouraged by Obama's plan to invest in our infrastructure as a means of economic stimulus. Working on our infrastructure, building roads and bridges, can provide real long term economic stimulus that no quick-fix can.

We need to invest in and develop the means of producing our economy rather than relying on mathematical tricks.

We must develop the means and the discipline of controlling our economy rather than just letting the free market take us wherever the hell it wants to go, because where it wants to go isn't always where we want to go.

Tuesday, December 30, 2008

How Not To Write A Headline

On, the headline reads: Worst Holiday Shopping Season Since '70

Now, to read just the headline, you would think CNN is saying that retailers sold about as much in 2008 as they did thirty-eight years ago in 1970, which would have been an unmitigated disaster.

Fortunately, if you read the article, you'd discover that they really meant holiday retail sales were down around four percent from last years holiday retail sales, which is the worse year-to-year decline since 1970.

In terms of actual dollars, retailers actually sold over three times as much in 2008 as they did in 1970.

Considering the state of the economy, that year-to-year sales were down no more than four percent would actually be pretty good news if it weren't for the massive markdowns retailers took to try and maintain their revenue.

Still a four per-cent decline isn't news that the sky is falling. In fact, retail sales beat in 2008 beat some projections and some retailers like reported their best Christmas sales ever.

A big part of any recession is the pessimism people feel about the state of the economy which curbs spending. With that in mind, one would hope that a responsible news agency would forgo incendiary headlines in favor of more factual ones so not to inflate people's fears.

This doesn't seem to be the case over at

You can read the article here:

The lesson here may be that if one really wants to understand the news they have to go a good bit beyond the headlines, and even then it's best not to trust just one source for your news. The downside is that it's actually a lot of work to keep yourself informed.

Sunday, December 21, 2008

On Dogs and Free Markets

I want to talk about free market economies, but first I want to talk about dogs.

Dogs in the City
Dog-owners who live in cities and don't have yards know that they have to walk their dog once, sometimes twice a day.

Dogs are remarkable creatures. They're highly intelligent and blessed with sharp natural instincts as well. Their senses are far superior to ours and pound-per-pound, they are much stronger and faster than us, but, the city isn't their natural environment.

Owning a dog in the city means using a leash. The leash prevents the dog from walking in front of a moving bus, going into a sewer drain, after another dog, into a garbage can or humping a cop's leg. It keeps the dog safe and healthy and keeps the owner out of trouble.

The leash needs to be long enough to allow the dog some natural freedom of movement, but short enough to keep the dog out of dangerous situations and keep the owner out of trouble.

Dog owners will tell you that, at first, dogs hate the leash, but pretty soon they grow to love just the sight of it because it means they get to go outside.

Markets are like Dogs.
Markets are like dogs. They're remarkable creatures, but stable societies aren't their natural environment. Markets are made up of human beings, but they, themselves are not human and they require human supervision and control to keep them out of trouble.

Think of government regulation as a leash for markets. They prevent the market from wandering in front of a bus, chasing after squirrels or humping a cop's leg.

Completely free markets are like dogs in a city without a leash. They're free to run around and have a great time, but there's a really high risk they'll end up as road kill, getting lost, or getting the owner in some sort of trouble, so responsible owners invest in a leash.

Regulation isn't necessarily anti-capitalism. Its a recognition that, unlike ants, human beings clearly aren't more intelligent when they act in groups than they are individually and need some sort of guidance to prevent them from doing something really stupid.

Thursday, December 11, 2008

Old School Bear Market Benefits

There were a couple of bear markets when I was a kid.

My dad had several friends who were stock brokers or bankers and he would call them a couple of times during the day and at the end of the day to see what the market did and to prevent monopolizing one guy's time, he would change up who he called from day to day.

The calls themselves were really cool. They would start with "how's the market", then go through a short discussion of national and local business news then end with news about wives, children and other relatives.

These were real two-way conversations with people he knew. You don't get that from watching the news, which is, at best, a one-way exchange of information. They built connectivity between two human beings, which, in turn made the whole community just a little bit stronger, especially when you consider how many other people were having just the same sorts of conversations.

Were my dad alive today, he would simply check the Internet to see what the market was doing, then go about his business, completely missing the opportunity to connect with someone, with anyone.

Technology has added so much to our lives, but it has taken some away as well. We have more information available to us than ever before in human history, but we're also becoming more and more isolated.

Perhaps that's why the fastest growing parts of the Internet are all companies that offer some sort of social interaction like Facebook, Myspace, Twitter and the like.

The trick now will be to evolve these sites from being not only very useful, but also very profitable so they'll stick around. That was a hurdle my dad's brand of social interaction didn't have to pass. It will happen though. There's almost always a way to make money on things that are useful.

Official Ted Lasso