blue states and red states

When, in 2004, Bush won the election, LI analyzed the results for the paradox in them – the Red states, we said, were electing a man who’s main task had been to pile money on the investor class, who are concentrated in the Blue states And we also said, fuck the Red states, stick the broom up their ass.

Well, the endgame, as far as the Great Fly is concerned, follows this logic off the cliff. We said then that the coming recession would target the red states. In the South and West, the easy money has always been in selling land. In the 80s, this led to the S and L bust. That turned out to be a net plus for the Red States, who were floated by tax money that came from the Northeast. It feels good to be a rent seeker, and George Bush personified the breed, so they flocked to the polls to elect him.

But the investor class had long learned its lessons from the S and L bust. The suckers, this time, were selling the land to each other, as always, while the real money was being made taking bets on the flea circus. And now America is preparing to strip itself of its economic power to please the investor class. This can’t be analyzed by party, although that is the dumb category clung to in the political blogosphere. This is about investors and debtors. The investor class just happens to be concentrated in heavily democratic states. Their reps are going to make damn sure that they get taken care of. Meanwhile, red state reps are torn between their usual kleptocratic impulses and the angry calls from the folks at home, who want the old days back, when they could coast on government insured programs, using credit limits that were the result of government fiscal policy, in order to buy and sell land at tell each other, gubmint ain’t the solution, its the problem. Its the battle of two rentseeking classes going down. Fun for the whole family.

I’m of two minds about the ongoing robbery. On the one hand, people I love are going to be hurt. On the other hand, this nation used its years of bogus prosperity to push two propositions: that we had a right to invade and massacre at will any place in the world; and that we had a right to fuck up the earth’s atmosphere until we were good and tired of it. Shouldn’t these days, these forerunners of grief, be considered condign punishment for this thoughtless nation?

The latter is probably the most deadly of the deadly American sins. Unfortunately, a nation that starts descending into the pits, economically, doesn’t shut off its emissions, although at the moment, there is less car driving and shit. Rather, it can’t afford the technology to clean up its power plants, businesses and households. Poverty, or relative poverty, will not equal a cleaner America.

There is a remark I hear over and over, and it makes me sick: I can’t understand economics. Economics is a model ruled social science. If you strip out the equations from a model, you get relations. Narrative relations. Models are stories. If you can understand a story, you can understand economics.

Now, I’d recommend, I do recommend, my essay on this topic in the preface to Silja Graupe’s The Basho of Economics. Alas, I know only two people who read that preface. And one said she couldn’t understand it. I realize that it is not written in the free and easy style I would use to write an email to a friend, but fuck, occasions call for different styles. Go read it. In it, you will find a description of the favorite story, down the years, of orthodox economics.

In American culture, there is only one group that holds to a more rigid narrative pattern than neo-classical economists. That is the Harlequin romance company. You can write off to Harlequin and get a sheet in which to fill in the variables to make a story. The inputs can differ a bit, but the output, the happy ending, is almost invariable. The difference is that in economics, the stories are invariable. They always come out with market clearing. That is the happy end around which the whole world of economics, as a science, revolves. But the story is refuted over and over by the world – and economists hate that. Thus, the attraction of thinking of the current crisis as a market clearing one – liquidity in the banks – instead of what it is, a symptom of the deep, corrupting inequality in wealth that have been allowed to overrun our economy. The economist has an instinctive reaction to market clearing problems, but is averse to the messiness of inequality, and would prefer to read that out of the model. Just as Harlequin can’t afford ambiguity in the heroine – she might be attracted or raped by the evil character, but she can’t traipse around and have several lovers, for instance – economists can’t afford to let in too much of the world into their story. If, for instance, economists had looked at the rise in oil prices earlier this year and had let in the part of the world that was about the threat of war against Iran, they would have had to “politicize” their analysis. That they could look back and find, regularly, stockpiling of commodities before a war escaped them entirely. They were content to make it a doable story of speculators versus supply and demand, and soon came home to the equilibrium that explains everything. They can’t help themselves.

Fun facts. Fun to know and tell!

LI has been trying to find various easy ways to explain that the topdown solution of the bailout actually aggravates the bottom up problem. Here’s one: the bailout, as proposed, would take around 2,000 dollars from each American, which comes to about 8,000 dollars per household. So, we are proposing, in essence, that the people who owe the money on the credit cards and the mortgages transfer 8,000 dollars to the people who own the credit card companies and the banks, and that they do this without even the least diminution of the debt they already owe.

It is like demanding blood from a hemophiliac.

However, I have confidence in the inertia of things. Perhaps nobody will notice the radically diminished spending power of the average household over the long run – you know, that run of thirty years, which is the time period of the average loan. Maybe the banks will not see the obvious. Who knows?

I, personally, believe in Santa Claus.

Double Indemnity

Yesterday, LI went to Whole Foods to get some coffee and write our review of the new Library of America edition of Katherine Anne Porter’s short stories and essays. Unfortunately, two older white guys decided to sit next to me at the table and swap Fox news stories about the current financial crisis. First, however, they started out by talking about some speculative house buying the one of them was in the midst of, while he could “still get money.” They then proceeded to exclaim against Freddie Mac and Fannie Mae, which they both said they had never heard of until two weeks ago. At which point my inner concentration on the artistry of Porter was entirely broken, since I thought, you are speculating in houses and have never heard of Freddie Mac and Fannie Mae?

Apparently, in the Fox/Limbaugh circuit, the old standard about guvmint being incompetent is still fluttering above the tattered reactionary hordes, who have decided that those two agencies are wholly part of the guvmint, and wholly responsible, in some way, for the whole collapse.

I admit to being utterly baffled by people like this. They make me feel like the frantic liberal sons in Flannery O’Connor short stories, confronted with the divine mystery of their hick or genteel hick parents and grandparents. O’Connor, of course, was on God’s side – there was a numinous core in that ignorance, and her stories were of the fine comeuppance of the liberal. But this was only so when the ignorance proceeded from an intense, lifelong sense of crucifixion – and even then, O’Connor was too enmeshed in Southern verities to quite understand the scale of the injustice of Southern apartheid. The new Southern ignorance is Yankeefied enough to admit that crucifixion is for losers. Once that is out of the way, and Church has become another means of uplift as well as a wonderful way to connect sellers and buyers, we can proceed to the making of parasitic money off of a system that is underwritten and overfed by the guv’mint it disdains. The Southern Republican is a perfect semblance of the third world revolutionary so disdainfully limned by V.S. Naipaul in the 70s.

...
As to the crisis, well, my new name for it is the Double Indemnity crisis. It strikes me that all you really need to know about what the Financial system did to enrich itself over the last 30 years can be gathered from the James Cain novel, or, at the very least, the Barbara Stanwyck movie. This scene is really at the heart of what is going on now. The only difference is that the investment bank factotums rarely wore such fetching ankle bracelets.

the universal laws of bootlicking

The third chapter of the section on Propriety in The Theory of the Moral Sentiments is entitled:

“Of the corruption of our moral sentiments, which is occasioned by this disposition to admire the rich and the great, and to despise or neglect persons of poor and mean condition”

I believe that this chapter is about the most insightful thing Adam Smith ever wrote. It is certainly pertinent to the present crisis, one which is to be solved by a rushed, inverse bank robbery on the grand scale which is consistent through all of the Great Fly’s disasters. It is an astonishingly audacious step, proposed by a Treasury secretary who has failed, systematically, for a year to understand the crisis, and is thus being hailed by the establishment as a hero and our only hope – Tom Friedman, who has never failed us yet as an omen of the conventional ignorance swapped around country clubs and CEO chitchat fests, comes out in his column today with the gorgeous suggestion that Obama re-appoint Paulson if he gets elected. Apparently Friedman is tired of supporting the Iraq war, the last cretin’s cause he took up, and has been casting about for some other way to be massively wrong. Well, at least there is less bloodshed in this one, even if it does involve the further degradation of democracy as anything more than a con man’s fiddle. Friedman is a special case: the neo-liberal pablum he regularly dispenses comes straight from the various horses’ mouths: the CEO set loves him. And he in turn reflects their biases. This is why you can search his books over and you will never encounter the slightest hint that there is such a thing as a business cycle. Now that we have run into the trough of one, he is reaching for the universal solvent he saves for all difficult occasions: trust the rich.

Paulson’s success with the establishment, which is even greater than the reception accorded Rumsfeld in 2003, stems partly from the fact that he has the interests of that establishment firmly fixed in his mind. But even if he is the investor’s champion, he has produced an investor’s nightmare, and he seems determined to keep plugging at throwing good money after bad until we’ve exhausted all the money there is. The dirty secret is that the credit swap market is busted; the whole of the shadow financial system is meeting the question that it was designed to avoid: what are the derivatives it trades really worth? We have been assured for thirty years, ever since the neo-classicals regained dominance from the Keynesians and attempted to devise a private structure that would do what the state did before, that they insure, and thus extend, the capacity of lenders to lend. Thus, our economy will depend on the equilibrium provided by the private market rather than the heavy handed intervention of the state. We’d all live in the gingerbread house and get to eat it, too.

This was always a rather pinheaded dream, but the scheme was culturally assured by what Smith describes well – the unwarranted admiration that surrounds the wealthy. This is a truly American disease: it is amazing to hear Americans squeal about the wealthy, as though they were demi-gods – so smart! so successful!

A brief conspectus of the Great Fly’s terrible reign can be derived from this handy passage in Smith:

“Many a poor man places his glory in being thought rich, without considering that the duties (if one may call such follies by so very venerable a name) which that reputation imposes upon him, must soon reduce him to beggary, and render his situation still more unlike that of those whom he admires and imitates, than it had been originally.

To attain to this envied situation, the candidates for fortune too frequently abandon the paths of virtue; for unhappily, the road which leads to the one, and that which leads to the other, lie sometimes in very opposite directions. But the ambitious man flatters himself that, in the splendid situation to which he advances, he will have so many means of commanding the respect and admiration of mankind, and will be enabled to act with such superior propriety and grace, that the lustre of his future conduct will entirely cover, or efface, the foulness of the steps by which he arrived at that elevation. In many governments the candidates for the highest stations are above the law; and, if they can attain the object of their ambition, they have no fear of being called to account for the means by which they acquired it. They often endeavour, therefore, not only by fraud and falsehood, the ordinary and vulgar arts of intrigue and cabal; but sometimes by the perpetration of the most enormous crimes, by murder and assassination, by rebellion and civil war, to supplant and destroy those who oppose or stand in the way of their greatness. They more frequently miscarry than succeed; and commonly gain nothing but the disgraceful punishment which is due to their crimes. But, though they should be so lucky as to attain that wished-for greatness, they are always most miserably disappointed in the happiness which they expect to enjoy in it. It is not ease or pleasure, but always honour, of one kind or another, though frequently an honour very ill understood, that the ambitious man really pursues. But the honour of his exalted station appears, both in his own eyes and in those of other people, polluted and defiled by the baseness of the means through which he rose to it. Though by the profusion of every liberal expence; though by excessive indulgence in every profligate pleasure, the wretched, but usual, resource of ruined characters; though by the hurry of public business, or by the prouder and more dazzling tumult of war, he may endeavour to efface, both from his own memory and from that of other people, the remembrance of what he has done; that remembrance never fails to pursue him. He invokes in vain the dark and dismal powers of forgetfulness and oblivion.”

Long ago, LI invoked the powers of the chthonic goddess to punish a country that mindlessly ravished and killed Iraqis by the hundreds of thousands. But we never expected it to happen. Well, it is happening. And the dark and dismal powers that are rising up are not, it turns out, fabricated from oblivion: they are all about the debts that can’t be cashed out, the flesh debts. The return of the repressed on the horses of the riders of the Apocalypse are among us, children. Run and hide if you can.

LI GOES TO THE VOMITORIUM

It is nice to see that some of the bigfoots – Greider and Krugman, and even the Bushite pinhead, Sebastian Mallaby in the WAPO – are coming out of the shrubbery to denounce the Treasury department’s theft in the offing. The NYT, in contrast, has set Peter Baker to the task of licking up a monument of bubble gum and marble for those two superheroes of this Bushian time, Paulson and Bernanke. Baker is the man for the task: on the Washington Post, he strove mightily to apologize for mass murder and torture, covering President Backbone with the same objectivity that might be expected from one of Nero’s catamites, reviewing Nero’s acting abilities in the Coliseum. His description of the brain (Bernanke) and the man of action (Paulson) is like a Damien Hirst piece, if Hirst took to carving Pierrots out of his own shit: it is kitsch cast in excrement:


“The two men have been working early and working late, tracking Asian markets and fielding calls from their European counterparts, then reconnecting with each other by phone eight or nine times a day, talking so often that they speak in shorthand. Mr. Paulson has powered through the long days with a steady infusion of Diet Coke. Asked twice to testify by the Senate last week, he begged off.

“He told me he had like four hours of sleep,” said Senator Christopher J. Dodd, Democrat of Connecticut and chairman of the Banking Committee. But there were limits to Mr. Dodd’s sympathy. “The public wants to know what’s going on,” he said he replied.

Mr. Bernanke (his drink: Diet Dr Pepper) has made a point of leaving the office by midnight to get at least some rest, but friends say the toll on him is clear as well. Alan S. Blinder, a longtime friend and former vice chairman of the Federal Reserve, recalled seeing Mr. Bernanke at a conference last month in Jackson Hole, Wyo. “He looked like he had the weight of the world on his shoulders,” Mr. Blinder said.
And that was before last week.”

Baker, whose effusions about the heroic, surge-right Bush in the NYT Magazine a couple of weeks ago did had a dramatic effect on LI (we wanted to vomit after the first couple of paragraphs) is in the fortunate position of the right sycophant at the right moment, and one can feel him wiggling with excitement. And he has that eye, doesn’t he: diet Dr. Pepper. Don’t you feel his maternal, servile ache as he longs to perhaps bring one of his action heros, a true Batmen out to free Gotham from its bad debts, another can. He understands, as does the NYT, that this huge crisis in the Bandit class can only be assuaged by an obsessive, massive theft that will make our successful and oh so smart masters feel, well, masculine again; one that will exist like a burning yearning brand on the hides of Americanus bovus, all of us lower downs: bought and sold at undermarket prices. But of course, we out here in the fields, we cant understands theft! So hard! Maybe the smarter peoples will figure it all out for us! Then we votes for them!

Of course, in the UK, the New Labourites have already figured this out and have translated it into the ineffable language of toadeating. This is one of the Blairites, explaining, oh so delicately, that we can’t, just can’t, return to cutting into the hides of the wealthy, who are generating our prosperity at a fearful rate. Such genius brains!

“But is an economy which promotes minority wealth and privilege and requires the state to tax the beneficiaries to support those it excludes really the only alternative to the current order? An agenda based on the redistribution of wealth rather than the redistribution of opportunity can only ever deliver justice as compensation; mitigating the worst effects once the damage is done. It is morally unambitious and likely to fail in the long run because by taxing the beneficiaries more heavily, the wealth-generating capacity of an already underemployed economy is further compromised.”

Oh my! Such butter and shit on the tongue, lodged firmly in the City asshole! We have to (sob) redistribute opportunity! We need Blair, with all his evangelical fervor, that wondrous Uriah Heep persona, to intone things like this. Far better to be read by Texas redneck conservatives than the taffee Tartufferie of the “Left” in the Anglosphere state that seems destined to sink the most in the next year.

Juggling kleptocrats: the Bush years continue

I had lunch with a friend, yesterday, and I came up with a pretty good metaphor to describe the current financial crisis while talking about it with her. It is the dish stacking metaphor. At the root of this crisis is a shortfall in the amount of money that the average household can afford to pay on a house. That’s real simple. Stacked on top of that is the larger shortfalls of nested securities that depended on those bottom mortgages. The shape of the financial system is, from the plate stacking perspective, all wrong. Instead of smaller amounts of money depending on the larger amount at the bottom, the plates above the bottom plate get larger and larger, until you reach the great world of the derivatives plate.

The government has so far been trying to fix the problem from the top. But when a stack of plates starts to wobble, you can’t fix the problem from the top. The more you add to the top, the more the instability increases.

Which takes us to the latest and greatest news from our criminal oligarchy. In a coup d’etat move not unlike the patriot act, the Bush administration, prime architects of the disaster, are now proposing a bail out plan for the wealthy that, in its scope and audaciousness, dwarfs the tax cuts of 2001-2002.

I commented on this over at the Economist’s View. I’ll quote myself. Sorry.
When people say it is a solvency problem, what they really mean is that the effect of amplifying income inequality over the past thirty years and using all the resources of the government to stamp out "wage inflation", ie the just distribution of productivity gains to the producers, is that households are not increasing their incomes as they did in the pre-70s days. But policy makers are pretending like they are. The bailout plan still pretends that the bottom 80 percent of the population will buy and sell houses at prices that are greater than they can afford. Are the politicians still that stupid? The government can buy a 300 thousand dollar house in Phoenix and hold it all it wants to, the number of buyers who can really afford a 300 thousand dollar house simply aren't enough to make up a healthy market. It is that simple. If the government spent its 700 billion dollars giving every household in America a 20,000 a year raise, well, then they could afford those houses. Otherwise, no.

The housing bubble, the easy credit bubble, and stagnant wages form the Bermuda triangle of this economy, into which a trillion dollars is going to disappear. The United States of Denial strikes again.

ps - read Joe Nocera's column in the NYT. So funny, it will make the blood come out of your mouth. Now, onto a scintillating critique of the reactionary elements in Batman 4. Onward the Revolution!

Is a private ritual like a private language?

“And when you pray, you shall not be as the hypocrites are: for they love to pray standing in the synagogues and in the corners of the streets, that they may be seen of men. Truly I say to you, They have their reward.

But thou, when thou prayest, enter into thy closet, and when thou hast shut thy door, pray to thy Father which is in secret; and thy Father which seeth in secret shall reward thee openly.

But when you pray, use not vain repetitions, as the heathen do: for they think that they shall be heard for their much speaking.

Be not ye therefore like unto them: for your Father knoweth what things ye have need of, before ye ask him.” – Matthew 6:5-7

I went into a bicycle shop the other day. I’d been delaying having my bike fixed, but I knew, from the hairraising sound that the brakes emitted every time I pressed them, that the pads were shot. I also knew that, ever penny wise and pound foolish, I’d waited too long to fix them. The clerk told me, at first, that they could change the pads without changing the cable, and then, when the guy in the back started fixing it, that it would require a cable change too. On top of that, it turned out I had a hole in the back tire, caused by the back brake pad.

The man who fixed the bike came out with it and put it up on a little rack. He talked to me while he fixed it. I watched him not watch his hands, which went here and there, testing the sprungness of the brake, adjusting the screws and the position. He looked at me or straight ahead. His hands were like marvelous, separate creatures, below the sea level of his apparent attention, although in fact his mind was really concentrated on the feelings in his fingertips, his sense of the pressure exerted by the screwdriver, the pull and resistance of the brake assembly. It was obvious that he not only did not need to see what he was doing, but that seeing would get in the way. I had ineffectually tried, myself, to adjust the brakes, peering through my reading glasses to see the whole assemblage, and of course I was awkward and put everything on wrong. I’ve seen my Dad and my brothers repair things in this hands first way too. It is an enviably elegant thing to do.

It is, supremely, a routine.

I mention this because Mauss, in his book on the ethnography of prayer, makes a valiant effort to distinguish rituals from routines. His ultimate purpose is to use prayer as a kind of discursive object in which the ritual and the belief converge. He is what he says about rituals (rites)

“It isn’t after the nature of acts and their real effects that it is possible to distinguish the two orders of fact. From this point of view, all that it is possible to say about rituals is that they cannot produce the results one attributes to them. According to this way of judging, one can’t distinguish rituals from erroneous practices. One knows, however, that an erroneous practice is not a ritual. Thus, it is not in considering the efficacity in itself, but the manner in which the efficacity is conceived that we can discover the specific difference. Thus, in the case of technique, the effect produced is supposed to arise entirely from the effective mechanical labor. And this besides has right on its side (a bon droit), for the effort of civilization has precisely consisted in reserving to industrial techniques and the science on which they repose that useful value that one attributed in the past to rituals and religious notions. On the contrary, in the case of a ritual practice, other causes completely are supposed to intervene, to which is wholly imputed the expected result. Between the movements that constitute the sacrifece of the construction dn the solidity of the house that it is supposed to insure, there is not even from the point of view of the sacrificer any mechanical link. The efficacity lent to the ritual has nothing in common with the efficacity proper to the acts which are materially accomplished. It is represented mentally as completely sui generis, for one consideres that it comes entirely from special forces that the ritual has the property of putting in play. Thus even if the effect actually produced would result in fact in executed movements, there would be a ritual if the believer attributed it to other causes. Thus the absorption of toxic substances produces physiologically a state of ecstacy, and yet it is a ritual for those who imput this state not to its true causes, but to special influences.”

If Mauss is right about this, and if he is right that prayer is a ritual, then there is something extremely puzzling about the famous saying in Matthew. Which I will get to in a further post.