Technology guerilla warfare

One of the interesting things about technology is the way that it creates a kind of arms race between those who quickly adopt new technologies and those who feel that it impinges on their own freedom and want to thwart them. We know, for example, that the radar guns used by traffic police have spawned detectors that can tell drivers who like to speed when such devices are in use, leading to more sophisticated devices being developed for police, and so on. In this case, the radar detectors were being used by people who were trying to break the law for their own benefit and increasing the risk to other users of the road.
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The propaganda machine-1: The third tier pundits

When I was interviewed recently on Blog Talk Radio about my 2005 posts about the people I call third tier pundits and the baleful influence that they have on political discourse, I didn’t really have the time to go more deeply into how it is that they got to play the particular role they currently play. It would be a mistake to think that they are merely the flotsam brought to the surface by media currents. They play a vacuous but integral part in a propaganda machine.

Third tier pundits are those people who occupy almost the bottom rung of the punditry world, the value of their contributions rising just barely above that of the people who write graffiti on bathroom walls. The most prominent examples of this species are people like Michelle Malkin, Ann Coulter, Jonah Goldberg, and Dinesh D’Souza but unfortunately there are many, many more. In fact, it seems like there is a seemingly endless supply of such people, available at a moment’s notice to appear on TV and radio and fill up newspaper op-ed space or the shelves of bookstores, spouting a predictable line of nonsense. But while they add little, they fill a significant niche in the media world and it is interesting to see what the purpose of that niche is and how they fit into the overall structure of the media. As Jonathan Schwarz says about the whole species:

A few weeks ago I wrote something comparing Michelle Malkin’s moral and intellectual standards to those of Holocaust deniers. But I also said Malkin has no significance in and of herself; every country has people as strange and confused and angry as she is. What matters is that normal societies leave them to fulminate in their parents’ basement. In contrast, troubled societies let them organize “conferences” and guest host national television programs.

In an absolute sense these third tier pundits are not important because they have nothing important to say. But understanding how they became a ubiquitous presence can give us insights into how the media is currently structured. The next series of posts will focus on this topic.

The first tier pundits are those people who actually have useful things to say. They often have deep specialized knowledge in some area. They are grounded in reality and data, do careful analyses, have a good historical and global perspective, and are not narrowly blinkered by nationalistic or jingoistic sentiments. They are not quick to rush to judgment and often have their own sources and do some original reporting and thus have new information to add to their thoughtful analyses. These people tend to write for opinion magazines (both online and traditional) that do not have huge circulations and a few of them sometimes appear on TV talk shows, though not the high profile ones. Their names tend to be not very well known to the general public, being familiar mostly to political junkies.

Some of the first tier pundits are Noam Chomsky, Norman Solomon, Howard Zinn, Edward Herman, Glenn Greenwald, Matt Taibbi, Katha Pollitt, Matthew Yglesias, Steve Benen, Juan Cole, Stephen Zunes, Robert Jensen, Jonathan Schwarz, the pseudonymous Digby, Justin Raimondo, Ken Silverstein, Jim Lobe, Ray McGovern, Bill and Kathleen Christianson, Greg Sargent, Josh Marshall, Paul Craig Roberts, and Alexander Cockburn. (In writing this partial list, it struck me that there were only three women in it and (as far as I know) no people of color. I am not sure why that is. Have I overlooked some people or is punditry more appealing to men? Or is this another instance of women and minorities having to struggle to break through traditional barriers?)

The second tier pundits are far less informative but much better known than the first tier. They consist of widely syndicated columnists who have regular access to the op-ed pages of the major news outlets. They appear often on the high-profile TV talk shows. These are people such as David Brooks, Maureen Dowd, George Will, Charles Krauthammer, David Broder, etc. Their names are usually familiar to those members of the general public who follow politics even casually. They are people who consider themselves and each other to be ‘serious’ commentators. They do not use inflammatory language. They are courted by political figures who desperately want their approval.

But notwithstanding their serious tone, as I have discussed before, their analyses are most often shallow and greatly inferior to those of the first-tier pundits. They do, however, serve an important ideological purpose, which is to limit the range of ‘acceptable’ opinion to the narrow piece of turf bounded by their views, and to advance the agenda of the pro-war/pro-business party that runs the country. While the analyses of these people tends to be ideologically driven, lack content, and sometimes don’t even make much sense, reading them is not entirely a waste of time since they give you a good sense of what the agenda of the ruling class is, what they want you to think.

The third tier pundits are near the bottom of the barrel. They are to journalism and political analyses what Paris Hilton is to acting, i.e., people who have become well known for reasons that have nothing to do with any intrinsic ability but, as a result of our celebrity-obsessed culture which assumes that if one is well known there must be a reason, have now have become fixtures on the public stage. They are a waste of time and airspace and their views range between the silly and the despicable.

Next in the series: Examples of third tier punditry

POST SCRIPT: Believing myths

Forget about who can answer the phone at 3:00am. Hillary Clinton was interviewed in June 2007 on the Christian Broadcasting Network and said the following:

Reporter: Can I ask you theologically, do you believe that the resurrection of Jesus actually happened, that it actually historically did happen?

Clinton: Yes, I do.

So here in the 21st century we have a potential president who believes in something that violates scientific laws, not to mention plain common sense. The sad thing is that not only are such questions considered reasonable to ask but that every candidate for any major elected office in the US would probably feel obliged to answer the same way, even if they felt that these were absurd things to believe in. They probably can not even evade the question by saying that religion is a private affair, because that would lead to the sneaking suspicion that they are rational and scientific thinkers, who use logic and evidence to come to their conclusions, and we can’t have that in a president, can we?

You can read the full transcript of the interview here.

The phony Social Security crisis-4: What needs to be done

(For previous posts in this series, see here.)

While Social Security is not in a crisis, it does require periodic adjustments to make it work, as the economy and demographics of the population change. It can be made solvent with minor tinkering at the edges such as removing entirely the cap on payroll tax income or increasing the rate of taxation by small amounts or by lowering the annual cost-of-living increases in benefits or, in the worst case, by slightly reducing the benefits. We are not facing the catastrophe the doomsayers predict.

The major problem with Social Security is not with the retirement benefits part but with rapidly rising Medicare costs. Currently the Social Security tax (the part that goes towards retirement benefits) is 12.4% of income up to the cap, which is $102,000 for 2008. The tax rate for Medicare is 2.9% of your gross income. Your employer pays half of this 15.3% total, unless you are self-employed in which case you are responsible for the entire amount.

It is the Medicare costs that are already outstripping Medicare revenues and rising rapidly, and thus straining the government’s finances. But this is largely a health care costs problem, caused by the hugely wasteful profit-making health system that currently exists in the US that has resulted in per capita costs that are at least twice as much as the costs in other developed countries and yet produces worse results. Introducing a single-payer system like that which exists in France or Canada would result in savings, greater ability to control costs, and better health care overall. (See the series of posts on health care where these arguments are presented in more detail.)

As far as Social Security is concerned, one thing that could and should be done immediately is to remove the cap on incomes that are taxed for Social Security. The existence of this cap means that people earning more than that pay no Social Security taxes at all on the extra income, and thus pay a smaller proportion of their total income into Social Security than those making less than the cap. Thus the richer you are, the smaller the fraction of your income that goes towards Social Security, making it a very regressive tax.

Social Security and Medicare are programs that can be made solvent for a long time. The ‘problem’, such as it is, is that the way to do so goes against the dreams of those ideologues who want to privatize Social Security funds and preserve the huge exploitative profits of the health care and health insurance industries. These people have sought to divert more and more wealth to a very few.

So how have their plans worked out? Very well, it turns out. The share of the income of the rich has been increasing at a rapid pace at the same time that their share of taxes has been decreasing. The March 5, 2008 issue of the Wall Street Journal reports:

The nation’s top 400 taxpayers reported a total of $85.6 billion of income on their federal income-tax returns for 2005 — an average of $213.9 million apiece, according to Internal Revenue Service data obtained by The Wall Street Journal.

Just to make the cutoff to join this exclusive club, you had to report income of at least $100.3 million, up sharply from $74.5 million the previous year. The average income among the top 400 in 2004 was $172.8 million.
. . .
Indeed, the top 400 taxpayers have greatly increased their share of individuals’ income since the mid-1990s. The group accounted for 1.15% of total income in 2005, up from 1.02% the prior year — and more than twice as large as its 0.49% share a decade earlier. It’s the highest percentage since the early 1990s, which is as far back as the IRS data go.
. . .
The average federal income-tax rate for the group was 18.23% . . . well below the average income-tax rate of nearly 30% back in 1995,

As the article points out, the way the data was collected actually underestimates the wealth since it takes into only the adjusted gross income (AGI).

The assault on Social Security is part of the generalized rhetorical attacks on all public services, including public education, Medicare, Medicaid, and welfare by those who would seek to destroy them. A key strategy in this war is to portray all government as bureaucratic, wasteful, and incompetent. Bush’s contribution to this war was to appoint to high positions people who were either actually incompetent (so that they would mess things up, feeding into perceptions of a useless government) or those who were ideologically committed to having the government avoid its obligations.

My worry is that the pro-war/pro-business interests and the Wall Street investment classes may think that they have got all the goodies that they are likely to get from Republican administrations and think that they need a Democratic administration and Congress to be able to overcome the grassroots opposition to attempts to subvert Social Security, Medicare, Medicaid, and all the other government services that try to provide a much needed social safety net.

This is why even greater vigilance will be needed if and when Democrats take control of government. Bill Clinton got away with a lot of things because he was able to talk populism while acting in the interests of Wall Street. That should not be allowed to happen again.

POST SCRIPT: Telephone opera

As readers of this blog know, I am not a big fan of television. But one of my favorite TV programs is Sesame Street. It can’t be beaten for its unique combination of great music with clever lyrics, genuine humor, education, and positive messages, all without being preachy. I used to watch it almost every day when my children were younger and now, thanks to YouTube, I can watch again some of my favorite segments.

In this sketch, Placido Flamingo and other Muppets affectionately parody opera.

The phony Social Security crisis-3: More realistic views of the alleged ‘crisis’

(For previous posts in this series, see here.)

In deciding whether Social Security is in trouble or not, it is important to bear in mind different measures. Let us start by assuming that no changes at all are made in the system and that current projections for future demographics hold for the next fifty years. This is a very big ‘if’ indeed, but a starting point for analysis. The alarmists look at the year in which projected Social Security benefits paid out in that year exceed the revenues from the payroll tax that same year. That is expected to occur around 2018. But that alone does not constitute a crisis. Social Security has been running a surplus all these years so by that time the trust fund will have about 3.7 trillion dollars in reserve. This fund earns interest and the interest can be used to supplement the payouts following the year when the expenditures start to exceed the revenues. At a 4.5% interest rate on the US treasury bonds, the accumulated trust fund can generate an annual growth of about $170 billion due to interest alone. Using this interest to pay benefits can be done for some time during which the size of the trust fund will remain the same or will still be increasing, though more slowly.

There will then come a year when the addition of the interest to the payroll tax revenues is not sufficient to cover the cost of the expenditures. The trust fund principal will then have to be used to pay benefits and will thus start to decrease. The worst-case scenario is having all the trust fund be used up, which is quite far into the future, somewhere around 2050. Actually, this scenario is actually the original Social Security model. It was designed as a pay-as-you-go system, with each year’s payroll tax revenues going to meet that same year’s benefits expenditures, without running up big surpluses or deficits.

But there is no reason to think that even this ‘worst-case’ scenario is inevitable. Dean Baker and Mark Weisbrot, co-directors for the Center for Economic and Policy Research, in their book Social Security: The Phony Crisis demolish the scaremonger arguments about Social Security by those who would love to turn over all that money to investors to speculate with. In an op-ed article, they write a detailed point-by-point rebuttal of all the myths propagated and conclude:

The latest Social Security trustees’ report, whose numbers even the White House uses, predicts that the Social Security program can pay all promised benefits for the next 38 years—with no changes at all. The June 2004 estimate from the nonpartisan Congressional Budget Office projects that Social Security can pay all promised benefits without changes for even longer, until 2052. That’s nearly half a century.

And we are supposed to be worried about this?
. . .
The bottom line is that Social Security is more financially sound today than it has been throughout most of its 69-year history, according to Social Security trustees’ numbers.
. . .
The impending crisis of Social Security is a myth. Without it, however, Bush’s initiative to slash benefits and partially privatize the program wouldn’t have a prayer.

Economist Paul Krugman has also challenged the myth of a Social Security crisis, and his article is worth quoting extensively:

Inside the Beltway, doomsaying about Social Security — declaring that the program as we know it can’t survive the onslaught of retiring baby boomers — is regarded as a sort of badge of seriousness, a way of showing how statesmanlike and tough-minded you are.
. . .
But the “everyone” who knows that Social Security is doomed doesn’t include anyone who actually understands the numbers. In fact, the whole Beltway obsession with the fiscal burden of an aging population is misguided.

As Peter Orszag, the director of the Congressional Budget Office, put it in a recent article co-authored with senior analyst Philip Ellis: “The long-term fiscal condition of the United States has been largely misdiagnosed. Despite all the attention paid to demographic challenges, such as the coming retirement of the baby-boom generation, our country’s financial health will in fact be determined primarily by the growth rate of per capita health care costs.”

How has conventional wisdom gotten this so wrong? Well, in large part it’s the result of decades of scare-mongering about Social Security’s future from conservative ideologues, whose ultimate goal is to undermine the program.

Thus, in 2005, the Bush administration tried to push through a combination of privatization and benefit cuts that would, over time, have reduced Social Security to nothing but a giant 401(k). The administration claimed that this was necessary to save the program, which officials insisted was “heading toward an iceberg.”

But the administration’s real motives were, in fact, ideological. The anti-tax activist Stephen Moore gave the game away when he described Social Security as “the soft underbelly of the welfare state,” and hailed the Bush plan as a way to put a “spear” through that soft underbelly.

Fortunately, the scare tactics failed. Democrats in Congress stood their ground; progressive analysts debunked, one after another, the phony arguments of the privatizers; and the public made it clear that it wants to preserve a basic safety net for retired Americans.
. . .
Social Security isn’t a big problem that demands a solution; it’s a small problem, way down the list of major issues facing America, that has nonetheless become an obsession of Beltway insiders. And on Social Security, as on many other issues, what Washington means by bipartisanship is mainly that everyone should come together to give conservatives what they want.

Orszag, Krugman, Baker, and Weisbrot point their fingers at the real problem, which is the out-of-control rise in health care costs. Of the 15.3% of the income below the cap that goes as payroll taxes (half of which is paid by employers), 2.9% goes towards Medicare. It is these rapidly rising health care costs that will cause huge budgetary problems in the future, not paying Social Security retirement benefits.

Scaring us about Social Security serves the purpose of diverting out attention from the very real problem of high health care costs. After all, the administration and Congress are completely in the pockets of the health care industry (the insurance and pharmaceutical companies and the hospital and doctors lobbies) and they want to avoid for as long as possible the fact that a government-run single-payer system of financing health care is the only long-term solution to this problem.

Next: What needs to be done

POST SCRIPT: This woman is very upset

Before he started playing the doctor in the current TV series House, Hugh Laurie played goofy characters in comedies on British TV. Here he plays a hapless TV news reporter in a sketch from the BBC TV show A Bit of Fry and Laurie.

The phony Social Security crisis-2: Double talk on Social Security

(For previous posts in this series, see here.)

We currently see this curious double-talk taking place about the US bonds that form the assets of the Social Security trust fund. When trying to scare people about Social Security, people in this administration talk about the bonds in the trust fund being ‘worthless’ pieces of paper. But when trying to actually sell the bonds in international markets to finance its deficits, the government talks about how robust the US economy is. Like all double-talking politicians, the two different faces are presented to two different audiences, with the hope that the audiences will not overlap.
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Some campaign thoughts

Today is voting day in the Ohio, Texas, Vermont and Rhode Island primaries, and is as good a day as any to discuss the nature of the race.

This day is being breathlessly marketed as a crucial, decisive, make-or-break day, just like the Potomac primaries day before that, or Super Tuesday before that, or the New Hampshire primary before that. On the basis of the results, reporters will declare that one candidate has the momentum and start urging the other candidates to drop out of the race just because they think those candidates are unlikely to win. Why do the reporters care? The candidates have every right to continue for as long as they can or want to without being accused of somehow ruining the process by staying in. Why not just let the voters decide when they have had enough of a candidate? As a result of the elections, if Obama or Clinton or Huckabee or Paul refuse to concede and decide to go on to Pennsylvania on April 22 and even after that until the final elections on June 3, let them do so without being hounded to get out. Even if Huckabee (say) has no mathematical chance of winning his party’s nomination, surely the voters in the remaining states have a right to express their preference for him if they want to?

On another point, with the final primary being on June 3, there will be almost two whole months before the party conventions. So as a result of all the leapfrogging that took place with so many states trying to get in early, we will now have the summer doldrums where nothing happens for two months. Couldn’t they all have started about six weeks later?

I have not been writing about the significance of the Democratic presidential nominee being, for the first time, either a woman or an African-American. Not that this isn’t an important development but before we sprain our elbows patting ourselves on the back, it might be good to realize that this is long, long overdue. After all, many other countries have elected both women and minorities as heads of state much earlier. My own country of origin (Sri Lanka) elected the world’s first female executive head of state way back in 1960, when Sirimavo Bandaranaike became prime minister.

Our reaction here shouldn’t be “Isn’t this great?” but “Why did it take so long?”

But progress is progress, however belated, and should be welcomed. At the very least, this development should put to rest tiresome discussions about whether the US is ‘ready’ for a woman or minority president.

But just at the moment when the possibility of a female US President is being savored, along comes this extraordinarily silly article in the Washington Post by Charlotte Allen in which she argues in support of all the absurd negative female stereotypes that we have long striven to eliminate from our discourse, such as that women are dumb, bad at math, looks-obsessed, shoe-fetishizing airheads, governed exclusively by their emotions, who can’t even drive properly.

The editor of the section of the newspaper in which the article ran now says it was meant to be tongue-in-cheek, but the first rule in humor and satire is to be funny. If you are not, people have a right to take what you are saying as intended to be serious. There are suspicions that this explanation was a story designed to protect themselves from the furious denunciations the article received. What is the Post going to do as a follow up? Run another ‘tongue-in-cheek’ article by an African-American arguing that black people really are stupid and lazy and shiftless?

Charlotte Allen should get some tips from Dave Barry, who is a great example of a writer who exploits all kinds of stereotypes for humor and you are never in any doubt as to his intent. His classic essay The Difference Between Men and Women is a brilliant example of how to use gender stereotypes to humorous effect.

Finally, just the day before the primary elections, we in Ohio were deluged with poll results about the Democratic race, with conflicting predictions. What is the point of such last-minute poll results? It does not help the campaigns since it is too late for the campaigns to do anything with this information. Are the polls meant to influence voters? What kind of voter would choose a candidate on the basis of a last minute poll? Frankly, I cannot think of any good reason to release such last-minute polls except that the polling outfits think that real point of elections is to see which of them is better at predicting election results, so that elections become a test of the polls.

POST SCRIPT: Save the economy! Buy more junk!

Berkeley Breathed’s excellent comic strip Opus comments on the absurd ‘economic stimulus package’ that our wise leaders in government have come up with.

The phony Social Security crisis-1: Understanding the system

There are many who would have you believe that Social Security is in dire straits and that it will go broke soon, so that younger people who are paying into it now will not get any benefits when they retire. While Social Security regularly requires tinkering to remain solvent, this kind of rhetoric is misleading but has been systematically promoted to make young people think that they are being swindled by the old, and thus generate intergenerational warfare. It is the tried-and-true divide-and-rule strategy. The goal is to scare people into agreeing to give private investors access to the money in the Social Security trust fund. (For a fascinating history of how the various forms of social safety nets, including eventually the Social Security system, came about, see here.)

Social Security is designed as a ‘pay as you go’ system, with the money being taken in now in so-called payroll or employment taxes (officially called FICA taxes) going to pay the benefits of those currently retired. It is presently running a surplus (i.e., each year it takes in more money than it spends) so that there is an increasing accumulation of reserve funds in the account, which is called the ‘trust fund’.

The confusing thing about understanding the government budget is that since Social Security is not an independent financial entity, the money that comes in as Social Security revenue is not kept separately from other government revenues, i.e., the ‘trust fund’ is not a separate vault of cash. What the government collects as revenue in any form (Social Security taxes, Medicare taxes, income taxes, import duties, etc.) can be used to fund general government expenditures.

But that does not mean that the trust fund is a fiction. How the government gains access to the money in the trust fund is by using that money to buy US government treasury bonds and what the Social Security trust fund holds is not cash but these government bonds. The trust fund reserves are thus in the form of government guarantees to honor its financial obligations, no different from the government’s obligations to honor its treasury bills, currency, and other forms of IOUs.

What is required by law is that the trust fund be accounted for separately and it is thus said to be “off-budget”. So the government is required by law to keep separate accounts for Social Security and the rest. But when government budgets are presented to the public, the government likes to mix the two budgets (Social Security and the rest) together (i.e., make Social Security “on budget”) so that the annual Social Security budget surpluses that go into the trust fund can be used to hide the huge annual deficits that are being run up elsewhere, the latter caused by massive tax giveaways to the rich, spending huge amounts on needless wars (thus subsidizing the military-industrial complex), and the runaway health care costs that are endangering Medicare.

So the trust fund is being used (in terms of book-keeping sleight-of-hand) to hide the scale of the huge budget deficits being run up in the rest of the government. The real problem is not with Social Security but the way that the government has been fiscally irresponsible overall.

The future solvency of Social Security depends on projections of future revenues (which depends on the size of the workforce and its levels of income) and future payouts (which depends on the projected number of future retirees and their longevity).

One of the planks on which the scaremongering about Social Security is based is the indubitable fact that the percentage of retirees will increase shortly due to baby-boomer retirements, thus projecting increased payouts without comparable increases in revenue.

The other plank that people have used is the well-known fact that the trust fund consists, as I discussed above, not of actual cash but of US treasury bonds. They argue that the Social Security trust fund, although rich on paper, contains nothing more than ‘worthless’ government IOUs.

But this is absurd. The belief that the US can honor those and similar bonds that the government sells to other countries is what keeps the dollar as the world’s reserve currency and is what makes foreign governments purchase those bonds, without which the US could not finance its deficits. The net foreign debt owed by the US to foreign entities and held by them in the form of such bonds has risen from $311 billion in 1994 (4.4% of GDP) to $2.4 trillion in 2004 (23% of GDP).

If these US government treasury bonds ever do become truly ‘worthless’, as alleged by the scaremongers, that would mean that the US government has become unable to honor its debt obligations. That would signal that the entire US economy has totally collapsed and that the US dollar has ceased to have any value. If such an unlikely scenario as the failure to honor to its government bonds were to ever come about, this would lead to global economic upheavals on an unprecedented scale, since all these foreign governments and other entities would also be holding worthless pieces of paper and we would then have far more serious matters to worry about than Social Security.

This does not mean that there should be complacency. A watchful eye needs to be kept on the solvency of Social Security and the rest of the government’s budget. There are indeed reasons for concern. The continuing massive deficits and the decline in value of the dollar (last week saw it reach record low levels against the euro) are a source for global concern about the health of the US economy and have led to grumblings and some talk of switching to the euro as the world’s reserve country. But those alarms have not reached major proportions as yet. The idea that the US government might default on its debt obligations (and thus leave the Social Security trust fund truly worthless) is not even being considered.

Next: Double talk on Social Security

POST SCRIPT: Why Obama’s message seems more effective than Clinton’s

Bob Harris has a perceptive take on a significant difference between the rhetoric coming from the Clinton and Obama camps.

The brave new world of finance-14: The next bubble?

(For previous posts in this series, see here.)

In this final post in this series, I want to look at what might be the next bubble looming on the horizon.

In his article The next bubble: Priming the markets for tomorrow’s big crash (Harper’s Magazine, February 2008) Eric Janszen says that the total value of real estate, if priced according to historical growth rates, should be about twelve trillion dollars. But the real estate boom drove the prices up to about double that, to twenty four trillion. If this is truly a bubble phenomenon and real estate values drop to what they should be historically or even below, suddenly twelve trillion dollars worth of assets would have essentially vanished into thin air.

It may not be that catastrophic. As has been pointed out elsewhere, real estate prices have not dropped that precipitously as yet (and in some areas of the country have not dropped at all) and some are speculating that it won’t. Such people argue that while prices have declined from the peak, that it has now reached a new equilibrium and will not sink further. I think we won’t know for sure which is the case for a couple of years, until all the dust settles from the subprime crisis and all the losses have been tallied. At present, there is considerable guesswork as to the full extent of the losses, both real and potential.

But there is a serious danger that the subprime losses can trigger a recession or even a depression and both the government and the business sectors are trying to find ways to stave it off.

Janszen argues that to make up for the losses generated by the subprime crisis, the financial sector is already gearing up to generate, and thus benefit from, the next bubble sector. What area of business would make a good candidate for the next bubble? Based on recent history, Janszen says that it has to meet certain criteria:

We have learned that the industry in any given bubble must support hundreds or thousands of separate firms financed not by billions but trillions of dollars in new securities that Wall Street will create and sell. Like housing in the late 1990s, this sector of the economy must already be formed and growing even as the previous bubble deflates. For those investing in that sector, legislation guaranteeing favorable tax treatment, along with other protections and advantages for investors, should already be in place or under review. Finally, the industry must be popular, its name on the lips of government policymakers and journalists. It should be familiar to those who watch television news or read newspapers.

He looks at various possible candidates for the next bubble, such as the health care, pharmaceutical, and biotechnology industries, and finds each one problematic for various reasons. He thinks that the only sector that meets all the criteria is alternative energy, because it is one of the few sectors big enough to serve the purpose. He thinks that this is already in the process of being “branded” as the next big thing.

Riding the wave of the environmental movement and people’s concern about the future of the globe, he says we are going to see immense investment by the government in alternative energy sources (nuclear, hydrogen, geothermal, solar, hydrogen, ethanol), not because of any deep environmental concerns, but because it will enable the government to subsidize the energy industry by the tens of trillions of dollars necessary to make up for the disappearance of the assets incurred by the collapse of the real estate bubble.

He predicts that we will soon start seeing highly increased hype for various forms of alternative energy and companies that deal in them will start going public, issuing stock and cashing in on the hyped-up interest in this area, just the way internet startups did a few years ago. Janszen also points out that Al Gore has joined the big venture capital firm of Kleiner, Perkins, Caulfied & Byers that was involved in the IPOs of Google and Amazon. Thus despite the initial skepticism Gore received from traditional business and media when he raised the alarm about global warming, he may turn out to be useful to them as the poster boy for the new alternative energy bubble. Joshua Frank also raises questions about the support that the energy industry (including nuclear and coal) are giving Obama and what they might be expecting in return.

I must say that initially I was skeptical about Janszen’s fingering of alternative energy as the next bubble but more recently I have seen disturbing reports that he may be on to something. President Bush, John McCain and Congressional Republicans are now talking enthusiastically about the virtues of alternative energy and green technologies, even while ridiculing the notion of global warming and strongly resisting efforts at conservation. President Bush, for example, now talks up hydrogen-powered cars and solar and wind power as the way of the future, even as he opposes far more direct energy conserving measures such as raising fuel efficiency standards for cars and trucks.

Like many other people, I am very worried about the long-term health of the planet and in favor of reducing our consumption of all resources, including oil. One has the sense that the tide is turning on this issue, that more and more people are beginning to think that we cannot go on consuming resources at the current rate. It is very disturbing to think that the government-industry-Wall Street complex will hijack the general public’s very real concern and cynically use it to siphon yet more vast amounts of public money into the hands of private investors and speculators, the way people’s support for home ownership was used to pump up the profits of those financial institutions involved with real estate.

The next president will play an important role in determining whether we have real conservation efforts or are merely going to create an alternative energy bubble, and we clearly need to watch developments carefully.

POST SCRIPT: Will Tim Russert denounce and reject his ties to Stalin?

Yesterday, I wrote about Tim Russert’s appalling performance as moderator of Tuesday’s debate. General J. C. Christian is worried about what might happen if Tim Russert’s tortured logic in linking Obama to Farrakhan is applied to Russert himself.

The rise of Tim Russert and the decline of journalism

I watched the Democratic primary debate held in Cleveland on Tuesday. It was the first debate I had watched live so far during the primary season. Who do I think won? I think such questions are meaningless. These kinds of debates are not meant to provide that kind of result.

But the losers of these debates are quite easy to pick: they are usually the moderators. What I hate about these debates is not the candidates’ performance (they actually come off quite well) but the moderators, who come across as preening and vain and self-important, and who seem to think that the debates are all about them.

And of that breed, there is no doubt that Tim Russert is the most obnoxious. No one epitomizes all the problems of modern journalism better than him. His shtick is really wearing thin. He often makes it a point to refer to himself as just a ‘blue-collar boy from Buffalo’, as if that makes him an outsider, just like you and me, a regular, working class guy like his daddy, so that we will overlook the fact that he is a well-connected Washington insider, a consummate Villager, someone who is completely at home with the moneyed-classes that rule the country.
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The brave new world of finance-13: The new bubble cycle

(For previous posts in this series, see here.)

Karl Marx famously argued that capitalism, while being remarkably resilient in overcoming problems and capable of releasing enormous productive capabilities, also carries within itself the seeds of its own eventual destruction because of its incapacity to accept an equilibrium state. Capitalism requires that companies have to push for continuous expansion and growth and this leads to the creation of monopolies and instabilities that inevitably result in crashes. I never quite understood that aspect of the Marxist critique of capitalism. After all, why couldn’t a company, once it had developed a good product and business model, just continue to plug away at a steady rate of manufacture and sales and profits? Why did it need to grow and expand in size in order to survive? I know that it cannot simply stay the same since developments and competitors will leave it behind. I can understand the need to improve products, even change the product line, and increase efficiency. But why must there also be an imperative to increase market share and profit margins, which often means that one must take actions that are harmful in the long run? Is it caused by simple greed? It seems to be too simplistic to ascribe human emotions as drivers of macro-economic behavior.
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