Libs and Cons Special Blog Series: When Smart People Fuel Stupid Economic Misconceptions

Misconception: The Stock Market and The Market are one in the same. Republicans seem to hold this idea of "the market" as if godlike in its command of business and economy. If the economy seems to be good, Republican credit themselves for their faith in the market, and they credit the market for its freedom and power. If the economy turns lousy, they point to cycles and tell us not to worry because the market will make everything right.

Reality: The Stock Market is one mechanism of exchange that makes up The Market.

The Stock Market is gambling with a bigger purpose. Over time, the stock market measures the markets functional success in spreading societal well-being. It operates essentially as a casino, albeit one that incorporates highly advanced mathematical slot machines and a dual business purpose. The first purpose is to raise cash to grow the business. People invest (or "bet" or "gamble") their money based on their perceived value of the business. It's kind of like a second mortgage for the business where the business pays its lenders back with good decisions that increase the value; the stock is liquid and lenders can cash it in for prevailing stock price at any given moment, The catch is the interest may be positive or it may be negative.

The number of lenders relates to the second function of the stock market as an executive check and the balance. In theory, a large, diverse pool of investors react to information (earnings reports, outlook, expansion, day-to-day operations) that determines the value of the stock. Since supply of the stock is essentially fixed, a stock's value is driven by demand for the stock which is driven by the ongoing success of the business. The stock market, however, is only as good as the speed and accuracy with which the business relays important information to investors. In the internet era, this should happen instantaneously; that it doesn't and that the market has essentially vomitted and shit simultaneously and uncontrollably speaks volumes on the speed and accuracy of the information provided to investors.

Compounding the problems we're witnessing today are bonuses structured to give executives large amounts of stock eventually gave them a controlling interest within shareholder pools that became shallow as the economy evaporated. This explains why shareholders were happy to reward the executives... The executives had in effect become the shareholders. In so doing, they manipulated the model to make it as inefficient as it could possibly get.

The market, on the other hand, is a system of exchange that can best be described as EVERYTHING. It's everything, it's everything that effects everything, it's everything that effects everything that effects everything. The market is the mechanism for economics; economics is the system for and measure of the expansion of societal well-being. Like the stock market, the efficiency of the market is only as good as the infrastructure for deliverying well-being to people; it can be measured by velocity, reach, and quality.

If the market is some omnipotent economic force that we should respect and fear as some Republican governers and talking heads seem to infer, then a bunch of executives just bought a one way ticket to hell. Enjoy your free business class upgrades while they last.

Retention Bonuses or Hush Money...

AIG: Retention bonsuses? Ken Lewis: Banker of the Year?

For real. Once upon a time Wall Street may have been credible. Those times have passed.

AIG is not handing out retention bonuses; that is hush money so the fat can continue to cut the meat and try and convince us that its too fatty.

Ken Lewis could have made a 4 billion dollar TARP payment to the Government if he hadn't given it to his buddies when he bought that other pile of lard that once went by the name Merryl Lynch.

Let AIG Fail--But Cut the Executive Fat First

AIG needs to fail, because they are the health care problem not the solution. From the ashes of AIG, let a new health care model rise up. This new model shall be predicated on incentives to prevent and cure. And let this new model of sound economics by way of expanding well-being be funded by bonuses fraudulently stolen from America designed to transfer wealth back up where it belongs.

Forgive me if I have trouble identifying with Republican senators who publicly decry Universal Health Care; in private I can't help but think this isn't more about their unlimited supply of viagra and botox.

Libs and Cons Special Blog Series: When Smart People Fuel Stupid Economics

MISCONCEPTION: OBAMA'S STIMULUS PERVERTS THE FREE MARKET

The bailouts, the stimulus, the suggestion of nationalizing a national bank has caused some Republicans to charge him with perverting the free market. So I know many highly opinionated yet fundamentally misguided Republican party leaders want us to believe that Obama has guided an economic downcycle into the Great Depression. And I know deep down they hope that their use of the word pervert wasn't an attempt to take back the meaning of the word, but was to linke Obama to the the suggestions that has been imbued in the word "pervert." But what's scary is the thought that they either truly believe that Bush was a perfectionist bent purifying the market. But his his economically inefficient rewarding of the Iraq oil contracts to Halliburton suggests otherwise. But why does this glaring detail go undiscussed among those high minded enough to aspire to such a pure economic ideology?

REALITY: FREE MARKETS DO NOT EXIST

A completely free market might be achievable when the global village achieves some sort of Utopian enlightenment en masse; in other words, not I’ll never see a wholly free market. Further actually a part of any free market, especially when it is the only entity capable of correcting a run of failures (aka Wall Street executives) as severe as those witnessed during this ridiculous meltdown. Republicans have accused Obama of perverting the market. Sorry, the market already in dire need of castration. Obama’s merely countering the perversion in the market with sound economic decisions. And to think that they do is not acceptable from parties for Government.

Libs and Cons Special Blog Series: When Smart People Fuel Stupid Economic Misconceptions

MISCONCEPTION: SOCIALISM VS. CAPITALISM IS OUR BATTLE

This battle is a non issue; you're not with one or against the other. If this paramount battle between right and wrong touted routinely by the Republican indeed has no basis in reality, then it was necessarily created exclusively to divideto divide people and therein becomes an illustration of the polemics that run so deep in the Republican party.

REALITY: THERE IS NO BATTLE. LEADERS USE TOOLS BASED ON IDEOLOGY TO MANAGE THE ECONOMY.

Economic theories are neutral. Economic policy is only as good as the people executing it. An economy is a phenomenon of the people, services, and resources that make it up; tools based on free market or social economic theories contribute to the ongoing success. Sometimes you need a hammer, sometimes you need a screwdriver. If you refuse to use a hammer because it’s a hammer, you’re screwed when you discover that you accidentally got nails. I guess it’s a good enough excuse when you have people begging to let them do your work anyway.

Class Wars at Bank of America: The Overdraft Fee

Me and Mr. Overdraft are very well acquainted after two rounds fraudulent activity within six months that left my bank account off by $800. And try to make a customer phone specialist or automated telling mechanism understand how hard it is to manage your bank account (let alone look for a job) when you're out of work and your bank account is saddled with late fees that aren't your fault.

For what its worth, two months and five hundred dollars in the red later, the charges were reversed and idea that I was right after all did not leave me feeling good about my outburst at the local Branch Manager who robotically repeated to me policies and tools bank of America implements to help me make sure these situations do not arise in the future. Fortunately the idignity this schmuck felt when I threw the forty billion dollar bailout package in his face gave put my bank account in the red that day and didn't quite render my direct deposit obselete.

These are policies implemented by distinguished men like Chair-CEO-Pres Ken Lewis for whom $800 is a lunch. To his failed executive buddies at Merril Lynch, however, Ken is the reluctant philanthropist who helps his friends in their hour of "need," because some people need food and some people need filet, some people need shelter, and others need penthouses, and still some need shoes But don't tell them that the 4 billion dollars that that 4 billion dollar parachute was Ken's to give.

After my old boss passed in November, I struggled with some depression and failed to get the afidivit back to Bank of America by the deadline. So when I snapped out of it and found the source of my fraudulent activity, I acted quickly to make it right, but it was hard.

All I wanted was a provisional $171 credit added back to my account while the investigator conducted his investigation into my claim of fraudulent activity. While some told me parts of the process, nobody knew the process and nobody bothered to ask aroudn.And for all their posturing that they understand my situation... for all the action they told me to take that I took... it took months for them to pay attnention. My account would never have gone below $224 if not for the fraudulant activity.

I may share some blame with the supershoppers whose sprees caused my account to go over the limit. And Bank of America may have my best interest when they prioritize debits from my account biggest to smallest so that those mortgage payments that I won't be thinking about anytime soon have a better chance of clearing.

What I don't get is why the fee doesn't account for the size of the overdraft. So many of my overdrafts were like $2 or $3, and each was hit with a $35. In some cases it was merely a combination of timing and overdrafts that caused my account to go into the red instead of linger dangerously close to it.

And why does the bank charge not account for the size of the overdraft? Shouldn't the bank charge percentage ovedraft fees to make the punishment fit the crime?

There are some people who naturally don't have to worry about such things. But some do; in fact, more do every day. For some, like Ken Lewis, these battles concern amounts that wouldn't cover lunch. For some, these battles concern amounts that save their home.

But the embarrasment of being poor has lead to people everywhere being held unfairly accountable for small mistakes. Simultaneously, those at the top of the financial ladder fell no need to apologize for the failures that effect those toward the bottom. You might think that that with so many invaluable men who make millions of dollars individually each year to make lending decisions would be accountable for lending bad lending decisions.

And as for those who overdraw: I agree that consequences should follow actions; I just think that the consequences should mirror those actions.

Madoff Shouldn’t Go To Jail!

Much has been made of Bernie Madoff’s decision to plead guilty to his ponzii scheme.  But will he go to rich person jail or back home to his posh penthouse in Manhattan to learn his lesson.

America needs to get smarter with its corporate punishments.  Madoff isn’t a danger to society anymore;  he did his damage.  But there is something fundamentally not satisfying about sending this Wall Street Wacko to jail.

If I were the judge, I would make sure that Madoff became an example and that he learned his lesson in the limelight that he loves.   ‘Bernie’s Redemption Journey’ would follow Bernie Madoff as he lives a life of forced philanthropy that will take him to all the poorest places in America where he would do 8 hours of volunteer work a day in exchange for three hot meals, a shower, and a place to sleep.

Madoff would do be forced to do the tough jobs that real people do and rarely receive recognition or compensation for.  Every 6 months his mission would change and he’d have to adapt to the new set of conditions and hope that Americans far removed from yachts and diamonds would welcome a fraud.

After five years, Madoff would be subjected to a live parole hearing online conducted and decided by a random lottery of citizens across America.

THE RULES OF THE PUNISHMENT

--The production crew will not interact with Madoff.  They’re the not-so-secret camera.  Likewise Bernie will never be given the opportunity to address the camera.  His interaction will simply the people approved as part of his current six month mission.

--Everything he needs, he must pay for in his service to others.  He shall have no access to cash, credit, or a banking account.

--The costs of Madof'f’s sentence would be paid by advertisers instead of taxpayers.  The cable or network home of the show will also be responsible for the upstart costs America’s economic education initiative and interactive classroom after the show achieves a minimum rating to-be-decided.

--If Madoff is granted parole, he would be moved to a court approved apartment in an undisclosed location where he will be given a certain monthly allowance that will meet his living expenses and a health insurance policy from a fund established using profits from his show. 

--He will be forbidden to interact with any sort of financial sector business for the rest of his life.  If efforts to do so are revealed he will be exiled to China.

So this may be a little ridiculous.  But its economically sound.  Who wouldn’t want to watch the old man serve someone other than himself the next few years.?

I would let his current wife (if there is one) keep her clothes and shoes and give her the option of ‘til death.  Mr. Madoff would be permitted would be seized and liquidated.  Some of this would go into an emergency mutual fund to assist those experience real effects  as a result of Madoff’s scheme (retirees, for example).

I let Mr. Madoff pack one suitcase that would consist only of clothing and put him on a plane

It's the Economy, Stupid! So What's Up With All the Stupidity?

It’s the Economy, Stupid! But What’s With All the Stupidity.

In retrospect, the speeches in that file of commencement encapsulated defining moments in recent history. Reading the points of view from those who paved my way revealed distinct shifts in tone, substance, and outlook every decade or so. Most striking was the high minded sense of duty apparent in speeches written during the ‘50’s and ‘60’s. High school students actually spoke of civics, diplomacy, ethics, and economy not only like they knew what they were talking about. They spoke of these subjects as if they mattered.

I won’t be winning any Nobel prizes anytime soon for groundbreaking economic theory. But economics isn’t that hard; and I don’t get why otherwise smart talking heads can’t shut up long enough to get their heads around the idea. If people actually paid mild attention to the economy and understood the inverse relationship between supply and demand enough to apply it, the economic meltdown would have been predictable.


Instead of a pre-emptive stimulus to the economy, the silly debate regarding a solution rages on. That debate exists at all is a scary sign that our elected officials fail to get the economy. Spending is not debatable; is where and how much to spend that you might find room for scrutiny. The efficiency and reach of the stimulus relates directly to how much capital flows back into a system low on cash and high on demand. To those who question spending in these times I can only recommend some good old fashioned economic study time. If they truly understand economics, then they are simply sabotaging America which is absolutely unacceptable.

Making matters worse, talking heads MSNBC remain unsure of the solution themselves, but nonetheless they have opinions. Thankfully Rachel Maddow got it. She just needs to say it often and say it loud so that the voice of reason can rise up among widespread misinformed banter. It’s great to know that Keynes had an economic theory that ran counter to Friedman’s economic theory; in the end, just learn the study the theories and go online and find some fun economic game site and play supply demand. Most people overthink economics, I think; so keep the idea that economics is easy in mind.

But since learning economics sounds more Herculean than it is, I’ve created a cheat sheet for all those talking heads out there to jump to at least sound like they know what their talking about. The Republican strategy to overcome the meltdown may well be hopeless, but they stay on point and the sound as if the know what their talking about.

To get talking heads started down the path of talking about the economy simply and accurately, I’ve created a little cheat sheet. It’s dedicated to the fine cheaters who bankrupt America, rewarded themselves, and blamed everyone else.

Economics is a measure of societal welfare, or happiness. Measures of the strength of an economy come in various forms like job growth and the stock market. Sound economic policy inherently is its own check and balance and system and measure. Economist peal various systems down to their fundamental cores to try and create tools that those engaged in economy can use to make it strong. Some tools have their core in capitalism and others use socialism. To take either one off the table leaves the economy exposed to failure. But theories do not fail on their own; what unites fundamentally capitalist tools and fundamentally socialist tools are they they are only as effective as the people who use them. Taking tools of socialism off the table because they are "socialist," is a lot like throwing out your hammer because screwdrivers are American and hammers aren't is stupid; if you get nails instead of screws, you're screwed and its not the screwdriver's fault that it can not hammer a nail. It is the toolman's fault for being stupid. Likewise, the economy has failed because... Well, I don't think we're quite ready for accountability yet.

If this is a shock to you, please check back daily for my Take Back the Economics Series to Take Back Economcis!