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  1. #161
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    This is a great article about the opportunities for growth despite the dire economic situation.

    From CNN:

    Three seeds for America's future economic boom

    Crisis begets innovation.

    In the Great Depression, Americans and Britons developed important new technologies: television, movie sound, refrigeration, automatic transmissions for cars. The supermarket was born, as were the passenger aviation industry and the first franchised food company: Dairy Queen.

    Big industrial companies such as General Motors and U.S. Steel consolidated their dominance at the expense of weaker rivals. States and the federal government planned and opened the first freeways. Millions of Americans moved off the farms of the South and West to populate California and Florida.

    In a decade of economic deprivation, in other words, we can begin to see the shape of postwar America: the suburbanized, mass-production economy into which the baby boomers would be born.

    Can we see any similar promise of progress today? I think we can. I discern three glimmers of light on the horizon:

    1. A transition has begun from coal to natural gas as America's most important source of electric power. Natural gas emits about half as much carbon dioxide per unit of energy as coal. That's not as clean as solar or wind, but those technologies cannot (yet) compete on price.

    Fracking offers hope that natural gas will soon cost least of all. If that hope comes true, the transition from coal to gas will generate a huge burst of economic activity and accelerate the transition to a more sustainable future for humanity.

    2. Americans are on the move again, this time from exurb and suburb to downtown, not only where you might expect it -- San Francisco -- but also where you wouldn't: Cleveland's most central census tracts added 20% to their population from 2000 to 2010.

    Newark, New Jersey, added population for the first time since 1950. Ten thousand people moved to downtown Philadelphia; 15,000 to Los Angeles' once ghostly downtown; 2,000 to downtown Detroit. Downtown Baltimore is up 11% since 2006. The Loop in Chicago is up 76% in the past decade. Central Louisville is being rebuilt.

    The shift to a greener economy involves changes in the way we use space as much or more as changes in the way we use fuel: People reorganizing their lives in ways that allow them to walk to work rather than drive.

    The downtown revival remains a boutique industry. Real densification will come as Americans add condo towers beside their suburban office parks and atop shopping malls; as four-story and six-story multi-use buildings rise along the boulevards of Los Angeles; and as entrepreneurs invent 21st-century mass transit systems to interconnect them, such as Wi-Fi equipped jitney buses that arrive within 10 minutes of a tap on a smart phone.

    Building new cities will put construction workers back on the job. Living in them will liberate millions of person-hours from the waste of the commute.

    3. Over the past 20 years since the advent of Prozac, clinicians and researchers have developed a vastly enhanced understanding of depression. We as yet live in the infancy of mental health science, but the path forward from infancy is at last revealing itself.

    Depression is not only a source of terrible personal suffering but also a huge economic burden on society. It debilitates otherwise healthy people and may well prove the ultimate cause of drug and alcohol addiction, obesity and many industrial and auto accidents.

    Deep into the 1930s, people regularly died from ordinary infections that today would barely cost them a day off work or school. (In 1924, President Calvin Coolidge lost his 16-year-old son to an infected blister, caused by playing tennis without socks on his feet.)

    Half a century from now, will people look back as pityingly on our bafflement before nearly equally devastating but ultimately treatable mental illnesses? What will they say of our practice of leaving the most severely mentally ill to walk uncared-for through the streets of our cities, sleeping on the streets and dying of cold and exposure?

    In 1940, health care remained a boutique industry, accounting for roughly 4% of gross national product. In the decades since, health care has grown into one of America's most gigantic enterprises, 17% of GDP -- arguably too much but still a huge driver of employment and investment. Yet within this vast economic complex, mental health remains a stunted subdomain.

    Research into diseases of the mind, the production of medicines, the training and employment of treatment personnel -- might these not emerge as giant industries of tomorrow? It would be a very positive irony if this decade of economic depression should prove the era in which science at last broke the clammy grip of psychic depression.

  2. #162
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    This is an incredibly good article.

    If you are interested in the economy please read.

    From Foreign Policy:

    Fed Up

    Yes, Jamie Dimon should lose his seat on the New York Fed board. But why stop there when America's financial regulation is such a mess?

    The $2 billion and counting that JPMorgan Chase's chief investment office recently lost in London has turned the spotlight on CEO Jamie Dimon's seat on the board of the Federal Reserve Bank of New York, better known as the New York Fed. Dimon is due to testify on Capitol Hill starting on June 13, and things could get ugly.

    It's about time Dimon felt the heat over his board seat. As one of 12 regional reserve banks that make up the Federal Reserve, the New York Fed's responsibilities include regulating big Wall Street banks like JPMorgan and Goldman Sachs. If Dimon sitting on the organization's board sounds like a conflict of interest to you, you're right: Nearly four years after the implosion of Lehman Brothers triggered a global economic meltdown, the fox is still guarding the henhouse.

    JPMorgan's trading loss has already prompted many calls for Dimon's ouster from the Fed board. Treasury Secretary Timothy Geithner, who previously headed the New York Fed, conceded in mid-May that Dimon had a "perception problem," and Senate Democrats have explicitly called on the JPMorgan chief to step down from the board. In late May, Esther George, the president of the Kansas City Fed, made the same point more obliquely, noting that "when an individual no longer meets these [high] standards, the director resigns voluntarily to allow someone who does meet the criteria to serve."

    I couldn't agree with George more. At the same time, her suggestion brings up a larger point: Why stop at Dimon? The entire system by which Wall Street banks are regulated needs to change, and urgently.

    On June 13 and 19, Dimon will testify in front of the Senate Banking Committee and the House Financial Services Committee and be asked to explain his losses. It won't be easy. Many details of the loss-generating credit trades that JPMorgan -- the largest bank in the United States by assets -- engaged in remain unknown. And for good reason: The more information becomes public, the harder it will be for JPMorgan to unwind the deal. (Why? Because if you know which contracts the bank must dump, it's easy to wait for the price of the contracts to drop, thus adding to JPMorgan's losses.)

    From the few snippets of information that have become available since the trading loss was first reported in May, it is clear that the bank's chief investment office bought so many contracts in certain credit indices that it was distorting the market. (Credit index here is shorthand for credit-default-swap index, the opaque and under-regulated "insurance policies" blamed by many for the 2008 financial crisis.) Credit-default swaps (CDSs) do not require that the owner of the derivative contract actually stand to lose from a credit default. When CDSs lack such an insurable interest they are considered "naked" -- the financial market's equivalent to buying insurance on your neighbor's house.

    Although JPMorgan's risk positions remain obscure, one particular credit index seems to have been at the heart of the $2 billion loss: the Markit CDX.NA.IG.9. In less than a few months, the bank's position in the index almost doubled from under $80 billion to a whopping $145 billion, which makes one wonder where regulators were in all of this. The Depository Trust Company, a data warehouse, keeps information on 99 percent of all CDS trades all of which is accessible by the bank's regulators. Each and every regulator could easily have looked up who was moving the market and made further inquiries.

    Dimon's problem, in other words, stems from a lack of oversight by both his bank and his regulators. But it's also problematic that Dimon sits on the board of the organization that's supposed to supervise his bank. It is entirely possible that officials at the New York Fed, which collects and reports data on individual banks' credit exposure, raised alarm bells about JPMorgan but somehow got rebuffed by Dimon, in much the same way that he brushed off initial press reports about a JPMorgan trader taking outsized positions as a "tempest in a teapot."

    Turns out it was a pretty big teapot.

    Even if JPMorgan's loss completely blindsided regulators, as supposedly happened to Dimon himself, there is still a conflict of interest. The Fed is tasked with implementing financial regulation to guarantee financial stability and prevent a new financial crisis from happening. But JPMorgan's chief has done everything in his power to preserve the old system, where the too-big-to-fail banks were able to make outsized profits by taking gargantuan risks thanks to taxpayers' backing.

    Dimon has ranted against the Volcker rule, which prohibits banks from making bets for their own gain, and the Basel III bank capital rules, which prescribe the minimum ratio of equity to debt on a bank's balance sheet (last September, Dimon told the Financial Times that the latter were "anti-American"). And while Dimon has asserted that JPMorgan's money-losing trade did not violate the Volcker rule, it is close to impossible to lose more than $2 billion in a little over a month with a simple credit index, as the Financial Times's Lisa Pollack has pointed out. The bet that turned sour was most likely aimed at beating the market and earning big bucks for the bank, which is considered proprietary trading and banned under the Volcker rule. (Luckily for Dimon, the Federal Reserve announced in April that enforcement of the Volcker rule will be delayed until at least 2014, rendering the question of whether JPMorgan's trades violated the regulation moot.)

    As the economist Willem Buiter noted in his keynote address at the Federal Reserve's Jackson Hole conference in 2008, the Fed listens to Wall Street and believes what it hears. Call it "cognitive regulatory capture" -- instead of special interests buying, blackmailing, or bribing the government, the big banks have somehow persuaded their ostensible regulators not to do their jobs properly. The Fed, under both Alan Greenspan and his successor, Ben Bernanke, has treated the stability, well-being, and profitability of the financial sector as an objective in its own right, regardless of whether this goal contributes to the Fed's dual mandate of maximum employment and stable prices.

    So let's not stop with ousting Dimon from the New York Fed board. Groupthink, cognitive capture, and even direct capture (in the form of corruption) are ever-present threats for central banks, not only in terms of financial oversight but also with respect to monetary policy. And today they're out of control.

    If we want to further reduce the hold that the big Wall Street banks have on central bankers and supervisors, we should make an eight-year, non-renewable term the maximum anyone can serve in any capacity as a regulator, supervisor, or member of the interest rate-setting committee. Greenspan served as chairman of the Federal Reserve from 1987 to 2006, more than twice what would be allowed under the term limits I propose. Bernanke is now serving a second four-year term as Fed chairman, and would be barred from reappointment if term limits were in place.

    Since proximity tends to blur vision, it might be wise to place the financial supervision of the big Wall Street banks at a geographic distance as well -- say, with a regional reserve bank such as the Kansas City Fed. The New York Fed is literally too close to Wall Street for comfort. When he was the New York Fed president, Treasury Secretary Timothy Geithner was extremely close to Wall Street CEOs, enjoying private dinners at Jamie Dimon's home. Not coincidentally, Geithner shrugged at President Barack Obama's suggestion that banks that are too big to fail need to be broken up.

    On the regulatory front, it is time to outlaw naked credit default swaps, for which there is no better economic rationale than horse betting. China took this step right after the 2008 financial crisis and the European Union has restricted naked CDSs on sovereign debt (though this appears to be more of a futile attempt to contain the debt crisis in the eurozone). Had naked CDSs been outlawed, JPMorgan would not have incurred its massive trading loss.

    Smaller steps like demanding more coordination among regulators would also help. The Commodity Futures Trade Commission is now examining how JPMorgan's trading affected the market for credit derivatives and the Security and Exchange Commission is looking into the bank's public disclosures regarding the troubled trades. Neither agency, however, supervises banks like JPMorgan. That is left to the New York Fed and the Office of the Controller of the Currency, a little-known branch of the U.S. Treasury. When I asked both agencies which entity was primarily responsible for spotting exposures like the one incurred by JPMorgan, each organization discreetly pointed at the other.

    Many a commentator has said that the 2008 financial crisis exposed the flaws of free-market capitalism. But the crisis could just as easily be attributed to a political system where people and corporations with deep pockets have an outsized influence on public policy and tilt the playing field in their favor. Under the right rules, capitalism works just fine. Maybe it's American democracy that's the real problem.

  3. #163
    Senior Member Lateralus's Avatar
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    The finance industry will not change until it's the target of a French-style revolution.
    "We grow up thinking that beliefs are something to be proud of, but they're really nothing but opinions one refuses to reconsider. Beliefs are easy. The stronger your beliefs are, the less open you are to growth and wisdom, because "strength of belief" is only the intensity with which you resist questioning yourself. As soon as you are proud of a belief, as soon as you think it adds something to who you are, then you've made it a part of your ego."

  4. #164
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    For all those who like to hate on shale gas and Fracking... have a look at this.

    From the Daily Beast:

    Where are all the Fracking accidents



    A Yale University Energy Study Group has done a cost-benefit analysis of shale gas extraction and has determined that at current levels, the extraction of shale gas has generated a consumer surplus of slightly more then $100 billion for the American economy:

    Gas production in 2008 was 25.6 tcf so that the surplus to consumers by the price reduction from shale gas equaled $102.9 billion.... [It] is startling to acknowledge that consumer benefits from the technology of shale gas drilling and new gas production can be expected to exceed $100 billion per year, year in and year out as long as present production rates are maintained.

    Yet the whole point of the analysis is to weigh the benefits of the new and cheaper fuel source against the costs of extraction, especially the potential environmental accidents that can occur.

    To determine how significant the environmental costs were, the authors used an EPA report to determine the scale of accidents associated with shale extraction, with a focus on incidents of groundwater contamination. The number of times this happened was surprisingly few:

    To undertake such an assessment of costs, we have reviewed current studies and reports on accidents, misuse of technology and poor well design and installation. A 2011 report for the Secretary of Energy (“Deutch Report”) counted 19 instances of problems with frackwater over the previous few years, amid thousands of wells drilled.

    (The report also noted that the Oklahoma Corporations Commission has found no documented instances of groundwater contamination in that state. It did acknowledge that the EPA also identified groundwater contamination occurring at a couple of salt water aquifers in Wyoming.)

    Since the paper claimed there were only 19 reported instances of problems with frackwater contamination I had to read the original EPA report to determine where this number came from. The EPA report itself does not give a number, instead stating that opponents of fracking tend to lack a lot of solid cases to point to:

    Advocates state that fracturing has been performed safety without significant incident for over 60 years, although modern shale gas fracturing of two mile long laterals has only been done for something less than a decade. Opponents point to failures and accidents and other environmental impacts, but these incidents are typically unrelated to hydraulic fracturing per se and sometimes lack supporting data about the relationship of shale gas development to incidence and consequences.

    Which in turn, lead to a footnote that cited an MIT study on shale gas extraction which had an appendix entitled "Publicly Reported Incidents Related to Gas Well Drilling". It found 43 publicly reported incidents. Of those 43 incidents, half were incidents of water contamination:

    Of the 43 incidents reviewed, almost 50% were related to the contamination of groundwater with natural gas, as the result of drilling operations. Most frequently, this appears to be related to inadequate cementing of casing into wellbores, allowing natural gas to migrate from lower formations into groundwater zones. Properly implemented cementing procedures should prevent this from occurring. The second major category is on-site surface spills, which can arise from a variety of causes — from hose leaks to overflowing pits to breaching of pit linings.

    The authors of the MIT report note that this is not a "definitive analysis of all known incidents" but this is still fewer then I expected to find given the size of the shale gas industry.

    There are hundreds of thousands of shale gas wells across America, and while there are many horror stories in the media, it seems there are surprisingly few documented and confirmed cases of accidents occurring, especially with contaminated water.

  5. #165
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    For anyone interested in the outcome of the Supreme Court case regarding the ACA (Obamacare):

    An Obamacare Hint



    Today the Supreme Court ruled in Knox v. SEIU that public sector unions could not charge non-union public employees for political activities. While the decision is being examined mainly for the free speech implications, a colleague notes that the ruling might hint that the justices are also skeptical of the legal arguments being made by advocates of Obamacare:

    Today's holding in Knox v SEIU has unrecognized implications for the coming decision on the Affordable Care Act.

    Ed Whelan at Bench Memos notes:

    “[W]e do not revisit today whether the Court’s former cases have given adequate recognition to the critical First Amendment rights at stake.” The free-rider arguments that those cases have relied on (i.e., preventing nonmembers from free-riding on the union’s collective-bargaining activities) “are generally insufficient to overcome First Amendment objections” and are “something of an anomaly.” “Similarly, requiring objecting nonmembers to opt out of paying the nonchargeable portion of union dues—as opposed to exempting them from making such payments unless they opt in—represents a remarkable boon for unions.” It’s difficult to see the justification for an opt-out rule. Indeed, the Court seems to have accepted the opt-out approach “more as a historical accident than through the careful application of First Amendment principles.” (Slip op. at 10-13.)

    The mandate in Obamacare is all about the free rider problem. Further, opting out of the market for insurance sure sounds like this. We will know soon but the language in this union dues case does not bode well for Obamacare.

  6. #166
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    Is There A Pragmatic Center?

    Forget Reagan Democrats, soccer moms, and NASCAR dads. The No Labels blog presents a new poll to argue that voters fed up with paralyzed politics could form a new pragmatic majority during the 2012 election:

    A majority of voters (54%) are Problem Solving Voters (PSVs), which is defined as someone who:
    — When voting for national office, chooses candidates who are focused on solving problems rather than the candidates who align most closely with their party affiliation
    — If a member of a political party, somewhat often or frequently votes for candidates outside of their party for national office

    94% of Independents are Problem Solving Voters, compared to 30% of Democrats and 33% of Republicans
    — Problem Solving Voters are discouraged with the current state of our country—only 29% think the country is heading in the right direction, compared to 42% of non-PSVs
    — Only 16% of PSVs believe that the current leaders in Washington are able to get things done; 84% believe we ultimately need a new group of leaders who are focused on solving problems

    If the 2012 Presidential election were held today, Mitt Romney would win the PSV vote 51-49, while Barack Obama would win the non-PSV vote 52-48
    —This is in contrast to the 2008 election, when Obama carried the PSV vote 48-37
    —On specific issues, PSVs see Romney as more of a problem solving candidate for Tax Policy (55%), Deficit Reduction (58%), and Immigration (51%), and see Obama as more of a problem solving candidate for Healthcare (59%)

  8. #168
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    From David Frum's column at the daily beast:

    How Much Does The Presidency Cost?



    "I will be the first president in modern history to be outspent in his re-election campaign."

    That's President Obama speaking—or anyway, whoever writes his fundraising letters—as quoted in today's USA Today.

    That's probably not true. Most accounts credit John Kerry with outspending George W. Bush in 2004. Be that as it may, the key variable in President Obama's sentence is the word "modern." The modern era of campaign finance begins in 1976, when post-Watergate disclosure laws first applied to presidential elections.

    (That era is ending as we speak, as those same laws dissolve under the impact of recent court decisions authorizing limitless and undisclosed spending by independent campaign entities.)

    Before 1976, we are in a very different world, a world in which we know amazingly little about how much campaigns spent and who financed them.

    Perhaps you've seen the below chart, compiled by Mother Jones magazine.


    Nifty, ain't it? It's also almost 100% guesswork, at least for the period before 1976, and certainly for the period before 1925.

    A 1925 law imposed the first disclosure rules in American history. All contributions over $100 were supposed to be disclosed. But since Congress never got around to providing any enforcement mechanism for the law, it was effectively disregarded. Was a briefcase containing 1000 $50 bills a $50,000 contribution, which must be disclosed? Or was it a series of $50 contributions, each of which could be given anonymously? Congress did not say, and it never created a regulatory to clarify.

    And before 1925, we are in a world of total murk.

    The Mother Jones chart cites a 1974 book by George Thayer titled "Who Shakes the Money Tree?" I tracked down and read a used copy. Thayer's is a lively journalistic account, thinly sourced and very far from authoritative. It also fails to deal with two key facts about 19th and 20th century campaign finance:

    1) Through most of the 19th century, probably the most important source of party finance was not donations from rich businessmen, but assessments on the salaries of government patronage hires. The (very!) gradual shift away from patronage hiring after the 1880s and the scare given the business community by William Jennings Bryan in 1896 altered those realities for the 20th century.

    2) But even in the 20th century, American campaigns were surprisingly labor—rather than capital-intense—and the labor was volunteered, typically by union members on the Democratic side and by chambers of commerce and the like on the Republican. For that reason, it did not matter very much if (as probably happened) Tom Dewey outspent Harry Truman in 1948. The most important donations were not denominated in dollars, but in hours.
    Volunteers are the life blood of any campaign. You can have all the money, but if you have none of the enthusiasm, it doesn't matter.

  9. #169
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    In response to the SCOTUS ruling, from the daily beast:

    Conservative Health Reform



    As I've argued below, conservative intransigence on healthcare in 2010 will look ever more reckless with the passing years. Republicans need to move rapidly to a more constructive approach. What would such an approach look like?

    Obviously (super-obviously!) I speak only for myself, but here would be the main elements of my approach:

    1) Universal coverage has been extended. It won't be retracted, and it shouldn't be retracted. Not only will universal coverage lift a wholly unnecessary misery from the lives of millions, improving the health and welfare of the whole population, but it will also be a spur to economic productivity. Ending the fear of loss of coverage will encourage people to launch new businesses and to change jobs.

    2) We should want gradually to sever the connection between employment and coverage for the same reasons as Point 1.

    3) We should want to merge the coverage system for under-65s and over-65s. Because over-65s are the largest healthcare consumers, the design of the post-65 program inevitably shapes healthcare for everybody. That design is perverse, freezing in place a fee-for-service model that inflates costs and multiplies procedures rather than maximizing health.

    4) We should want to give states the decisive role in defining and shaping healthcare service within their boundaries. The defense of local design of services is an important role for conservatives.

    5) We should want to control costs, and indeed to drive them down to levels prevailing in other advanced economies. If the US paid e.g. same 13% that Switzerland pays, rather than the present 17%, that would be the equivalent of getting the entire defense budget for free. Healthcare costs are the hidden drivers of so many US social ills. They explain why education costs run so high (because teachers get generous health benefits) and why wages have stagnated (because productivity gains increasingly are consumed by the cost of maintaining employee benefits).

    6) It's important that healthcare be financed in ways that share costs broadly. Highly progressive financing of healthcare programs—as contained in the ACA—invites cost inflation. If the 1% are paying almost all the bill, why should the 99% care about cost control? Yet from the point of view of American growth and competitiveness, costs must not only be controlled, but actively driven down. Only when all feel the burden of cost will all agree on the importance of cost control.

    I think that's a pretty conservative program, actually.

  10. #170
    Senior Member Survive & Stay Free's Avatar
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    The liberal answer to conservative complaints.

    Scotus ruling.

    Awesome.

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