Soft-Peddling Bias

So on Thursday (02/05/09) I'm rolling down the highway in the Garbage State, immersing myself in the extraterrestrial information stream-of-consciousness when I run into Brother Ron's show on POTUS. I admit to being slightly curious about his choice of topics to discuss that day, given that the focus of everyone else in the country over the drinking age was the economy and the disposition of the bill currently in the Senate. So I listened on for a bit, Ron specifically talking about the need to properly identify a problem before you can hope to resolve it. I absolutely agree with that point.
What prompted me to pick up my phone and hit speed dial was the illustrative content of his cogitation; referring to the so-called "war on Terror" (I don't recall if he used that phrase) and saying that we specifically need to identify "the enemy" as "Islamic Medieval Totalitarians." Now, the point is taken but I couldn't resist wondering why it was necessary to specifically identify these people by a religious label and I could only come to a single conclusion. I think Brother Ron isn't satisfied with simply identifying these people as criminals only, citing (correctly) that a large part of their self-identity stems from their religious background. He shies at the fence though, not willing to admit that a large part of that background is universal to the other two Western religious traditions and all such superstitions in general. He'll acknowledge them as "Islamic" but not "Religious".
So, I say lets carry the argument to its actual, logical conclusion; these are Religious Medieval Totalitarians. All religions, all superstitions, not merely Islam, have tenets that are used to justify horrific and anti-human behavior.
If a person is made uncomfortable with this notion, then they are well advised to leave religion out of the equation and focus on dealing with these persons and groups as civil criminals. Comparisons may be odious but that makes them no less accurate.

A Stimulating Idea

At the moment there is a food fight going on up on Capitol Hill, with left and right both acting, appropriately, like children. Our economy has flagged so far that I'm tempted to start calling it a pennant and the only thing that our representatives seem able to agree on is that something needs done, PDQ. Neither Democrats or Republicans are apparently interested in reaching for an acceptable compromise, since the former are feeling their stones and the later won't stop holding their breath. What do I mean? Simply that Democrats want it all their own way on spending and they want it now while Republicans refuse to even discuss the concept that spending might be more useful than yet round another of tax cuts. The irresistible farce and the immovable objection.
My own view is that this whole bill needs to be reworked from the ground up, starting by separating it into two bills; lets have one for stimulus in the short term and another for recovery in the long.
"Beginnings are important."
I will not venture to toss about numbers because I am not presently qualified to do so; I will suggest a few specific items that might be suitable foundation pieces for a national stimulus package. Since I am of the opinion that stimulus and recovery are two separate and distinct aims with separate and distinct processes for achievement I am going to skip some exceptionally good ideas that won't do anything immediately helpful. I'll come back to them later.
Let's start by getting something established at the outset: there are lots of good economically stimulative expenditures that also produce beneficial effects in the long term in other, seemingly unrelated areas. My personal torch is for a national mass transit system. In the very short term building a nation wide people moving system would employing a veritable army in a multitude of capacities. From sophisticated engineering professionals to base laborers, the direct employment would be excellent; I can't assert specific numbers but I can easily imagine tens of thousands in each of the lower 48, especially if we include non-skilled labor. A shovel and a wheel barrow might not be as fast as a back-hoe but they certainly do work, particularly in tight spaces. As for the knock-on effect from materials, equipment, maintenance, logistics, communications et al., I have to boggle at the amount of work created and the level of employment thereby necessitated.
There are a number other benefits created by such a program, so painfully obvious that I need anesthetic eye-drops to point them out. Start with the drop in automobile traffic; less congestion, less pollution, less wear on the highways, fewer accidents and less demand for fossil fuel energy. This also increases mobility; more options for living, working, shopping, health care and education. This is just a drop in the bucket. A national, high-speed mass-transit system would correct and/or improve so many problems that the only thing anyone should have difficulty grasping is why this isn't happening yet.
I'll stop and let your eyes recover.
The next item on my agenda of neat ideas for putting people back to work is, if not original, at least reached independently. Resource extraction.
I know what you're thinking; you're wrong, so shush and listen instead.
We have created, in These United States, the single most wasteful and short-sighted society in history. There are, all across this land, titanic deposits of our own refuse. Holes and hills full to bursting with wasted products that could be salvaged and reprocessed. How difficult is it to suggest that the Department of The Interior might be funded and directed to tap these reservoirs of material and render it for sale to manufacturers? Bales of cleaned wood and fiber pulp, simple ingots of copper or aluminum and containers full of plastic beads for extrusion machines?
I know the basic idea of recycling isn't original but if we re-imagine the scale, then maybe everything old can be new again.
The last thing I want to suggest here is what the current President has already pointed out. There are a number of skilled workers and facilities all over the country that can be used to produce wind turbines and solar cells. Here's an idea; what say local municipalities in the multitude of regions across the nation that aren't dense, urban centers invest some of their tax money into getting windmills set up? Any excess power generated for the grid could easily be reimbursed to the public in the form of a tax credit and thereby allow the public to profit by their investment. In addition to immediate domestic benefits, this primes the U.S. to become the primary exporter of renewable energy technology to the rest of the world. That would include interesting places like India; or China, that huge, ever-more energy hungry nation we currently have a huge, ever-more frightening trade deficit with.
These are not pipedreams people. We're already talking about spending close to 1 Trillion dollars on this effort so I think we can all agree that we recognize the need to invest in ourselves. Think about it and pass it along. If we move this enough it might just make it to the right people.

The Market is Dead; Long Live the Market!

Nothing endures but Change.
How many times in modern history have people proclaimed the end of a major institution, only to be proven wrong? Hard saying.
How many times have people, upon surviving the end of an institution, later proclaimed the vindication of said institution when its vanquisher is later brought into disrepute or is itself deposed in favor of a third thing? Equally hard to say.

One thing that is beyond debate however is that there is currently a fad of claiming that the failure of present capitalist market systems somehow vindicates Communism. I am not making this up. In my regular daily immersion in the information streams supplied by extraterrestrial sources (not as crazy as it sounds) I have in the previous few weeks heard a small but growing number of voices from all over the world and many walks of life proclaiming that the current global economic crisis is proof positive that capitalism is a failed, non-viable, inequitable and basically evil horror, finally revealed for the monster it is. These people are not universally insane, ignorant or anarchists or tyrants. Although even Marx would admit that a disproportionate number of collectivists are generally poor and for various reasons disaffected.

What is disturbing (particularly here in the U.S.) is that so many people seem to be caught in a bi-polar cognitive extremism; the argument essentially being that, "An economy must be either Capitalist or Communist. There are no other options nor any middle ground."

This is obviously a false dilemma to anyone with a fractional understanding of economic systems and/or the reasoning ability of a small child. When people's finances are threatened however, both understanding and reason often go out the window, hurled by a massive explosion of emotional reaction. This is neither surprising nor difficult to understand. Wealth is the medium of survival in the modern world and the most primal instinct burned into every cell of every living creature is survive. I'm getting ahead of myself however. Let's start (as always) with first principles.

What is money? Money is not, in and of itself, anything real. Money is a symbol, a marker like a poker chip. So what, then, is it symbolic of? Without delving into a lot of history that is not, for the moment, relevant in a practical sense we'll simply say that money is representative of the amount of energy available in the social system. Any commodity or service can be explained in terms of the amount of energy it requires to produce/provide. This is where all economic theories begin and from whence they begin to diverge.

One argument says that the social system is closed in this regard, that no energy is gained or lost, only distributed. Detractors call it the "zero sum game" and it is the underlying basis of Communism, "There's only so much wealth to go around, so we have to make sure everyone gets a fair share." The counter argument says that new energy is added by the labor of participants in the social system. "Work creates wealth," as they say in Capitalist circles. What the proponents of this argument tend to fail to address is whether not the door swings both ways; can energy also leave the system? Some adamantly deny this, most ignore it and a few spend uncomfortable minutes examining their shoes. What most Communists get hung up on isn't actually where it all might go, but rather where it comes from. The question/argument boils down to, "Energy cannot be either created or destroyed, so where are you bastards getting it from?"
As it happens, they're both right.

Here's the short version: Energy (money) cannot be created, but it can be converted from one form to another. Work transforms energy and moves it into the economic system. A good analog might be to think of the economy as a plant and work as sunlight. Light (work) does not strictly speaking create more plant(economic growth) but it does supply energy to the system...and without it, obviously the whole thing fails, withering and dying.
Now lets get complicated.

The market force itself is a mechanism, matching supply with demand. This machine, seemingly as simple as a lever and fulcrum, is instantly complicated by human motivations that frequently ignore the simple logic of a mechanism. Often there are demands created not by a genuine need (in the survival sense of the word) but by a perceived need. Also there are wants, which create further demands that the market must, by its very nature as an exchange mechanism for energy within the system, try and fulfill.

Now lets draw these threads together; Money is the medium by which we manipulate the free energy in the social system, allowing demands (including survival demands such as food and shelter) to be met in an efficient manner. Got that? Moving on...

So if money is the key to meeting demands (of whatever kind) in the social system, nobody should be surprised by the idea that every single rational human being wants to have as much of it as they can possibly get. There are a host of natural and manufactured imperatives for this, ranging from instinctual survival to dating/mating and social dominance to entertainment. The most valuable asset most people have is their house and/or land. Since the population is almost always increasing and there is almost always a demand for more housing, the temptation to sell for a substantial profit is great. Especially if you can artificially inflate the sale price.
This is where the whole thing really starts.

I choose my words intentionally when I say "artificially inflate". There are a host of reasons why a house might be sold at more or less than its "real" price. Location matters such as proximity to hospitals or schools, retailers or employers. Crime rates or vulnerability to natural disasters might factor in as well. The immediacy of need; my own family once found itself in a situation where we absolutely needed to find a place to live in particular region during the winter. Not exactly optimal for the buyer's side of the ledger. All of these things are perfectly normal and generally do not disrupt normal market functions much, if at all, depending on how acute they may be. In a Capitalist economy though, you can try and buy or sell at whatever price you think you can get away with.
When selling real property, there is almost always a third party involved whose job it is to assess the value of the property in question. A number of factors are involved, include those mentioned above. During the latest housing boom though, a new factor entered the equation, "How much do you want this to sell for and what's my commission going to look like?"

This started small but grew rapidly until houses and properties were being valued not according to what they were actually worth but rather how much profit could be made by sellers, lenders and assessment companies. As a result, the entire market started selling houses at inflated rates to people whose needs frequently forced them to accept loan terms they wouldn't be able to meet in anything but absolutely _perfect_ circumstances.

The first, most obvious question we all have to ask is, "Why on earth did lenders make such obviously irresponsible loans in the first place? Why weren't they afraid of a wave of mass defaults?" The answer is painful and in some ways brilliant, at least on their part. They didn't hold onto the debts.

Once large numbers of these mortgages started to accumulate, the lending institutions started bundling them together as blocks of debt, sold under the label of "Mortgage Backed Securities." American real-estate was the most solid asset in the world and buyers around the world flocked to buy these products, assuming them to all be guaranteed income generators as debtors payed off their mortgages. The bad paper by this point was spread all about the world.
The defaults began and red ink ran like blood at Iwo Jima.

This is a simplified version of things. The cascade hasn't finished yet and more factors are coming into play.

The point is, none of this is the fault of the free market itself. The market is a mechanism, nothing more or less. Like any machine it functions exactly as it is designed to unless you screw with it. Artificially inflating home prices counted as screwing with it and as a result the entire system operated, for years, as though it had more money than it really did. Goods and services were produced that weren't backed up by real energy and as a result the entire system is now, violently, re-balancing itself. All of this comes about, not because the market is good or evil or because of anything outside of the stupid, short-sighted decisions made by the operators of that vast mechanism we call the market.
People did this. Not systems, people.
So, as the song goes, "Where do we go from here?"

The simple answer is, we go forward. In one sense, the current would-be Proletariat are right; the free market has failed, though not because of any systemic flaw. Rather it has failed because we haven't operated it correctly. The near future will undoubtedly see a shift towards greater oversight, more extensive regulations to try and deter this sort of abuse. That is as it should be but I must emphasize and cannot overemphasize that we must be extremely cautious that we do not over correct, dipping towards command economics. Perhaps a mixed-economy approach would be good, allowing businesses free reign until they become a threat to national interest, then either breaking them up into smaller interests or outright nationalizing them, if their product or service becomes essential, such with utilities or transportation networks.

Whatever the case, we can safely say that the market as we have known it is certainly going to go away, replaced by something that will, in all probability, be very much the same, but different in a small but important way that will make it more robust in the face of parasitic cleverness. Systemic Darwinism, if you like, "Decent with modification."

It is interesting and perhaps worthwhile to note that the Tarot symbol for change is the Death card, capturing the concept that in order for something new to begin, some old has to end. Therefore, again, the would be revolutionaries around the world are right, in a sense.
The Market is Dead; Long Live the Market!