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HUMANITY DOOMSDAY CLOCK - Moves forward to 2125 due to election of US President trump.

Estimate of the time that Humanity will go extinct or civilization will collapse. The HUMANITY DOOMSDAY CLOCK moves forward to 2125 due to US President trump's abandonment of climate change goals. Apologies to Bulletin of the Atomic Scientists for using the name.

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Saturday, June 30, 2012

CFTC Proposed Rules - Offshore Trading In Derivatives

Barry, My Liege :

The CFTC has proposed some rules to regulate derivatives in offshore trading.

The rules [seen here : http://in.reuters.com/article/2012/06/30/cftc-cross-border-idINL2E8HTFR620120630] make some sense.

My Liege, here is the question : Do we have the ability to place and enforce sensible rules, or will the bank lobbyists succeed in watering them down ?

It is a big question.

Your faithful servant,

Wednesday, June 27, 2012

Primer : Profit Motive and Public Institutions

Barry, My Liege :

There appears to be a trend of appointing successful business people to the governing boards of public bodies. The University of Virginia created headlines recently with its attempt to introduce business methodology into a publicly supported University.

It is no secret that public funding at State and local government levels for the support of public education is in danger due largely to lower tax collections. Additionally, there does exist a political philosophy which encourages the demise of public education for some reason.

In response, some institutions are downsizing in order to meet the lower level of tax support available today, while others are applying business models in an attempt to increase revenues.

However, My Liege, there is a fundamental contradiction between a business model and a public model.

As we go forward, it will be well to remember this contradiction.

In a business model, the objective is to reduce costs in order to increase profits. In some cases, costs can be reduced for the business by having other entities pay the costs. The economic term for this is 'externalized costs'.

For example, automobile manufacturers are not required to pay all the costs which their products incur ; costs such as air pollution, road construction and maintenance and costs associated with accidents are all borne by the society at large.

If automobile manufacturers were required to pay all the costs they create, the price of an automobile would be so high that the companies would sell very few cars.

But, public institutions have different objectives. In most cases, public institutions attempt to provide services which have 'externalized benefits' ; in other words, the benefits which public institutions create accrue to society at large and not to the institution.

For example, consider a public water delivery agency which charges very low prices and attempts to provide all people with clean water. Society at large will benefit from its operations even though the fees the agency charges its customers will barely cover its out of pocket costs.

Were we to privatize that water agency, the profit seeking managers would logically raise rates, cut off customers who are slow to pay, defer maintenance on its system and skimp on water quality testing and treatment.

Clearly, society as a whole is better off with a public agency than with a private company delivering water.

We will be wise to remember this contradiction as we seek to work our way out of the current recession.

For more on the growing trend to finance public works with private funds, see this article :

http://www.sfgate.com/news/article/More-mega-projects-turning-to-private-investors-3690367.php

Your faithful servant,

Monday, June 25, 2012

Recovery : Cost, Benefit Analysis

Barry, My Liege :

It is time to summarize the costs and benefits to the Economic National Security of the United States of all of the 13 specific proposals made in this space to remedy economic maladies facing the United States today.

1. Strengthen Unions

Costs - Some companies will face higher wage and benefit costs.

Benefits - Middle class wages and benefits will rise thereby increasing aggregate demand and GDP.

2. Stop Union Busting

Costs - Some companies will face higher wage and benefit costs.

Benefits - Middle class wages and benefits will rise thereby increasing aggregate demand and GDP.

3. Destroy Monopolies

Costs - Some monopolies and oligopolistic firms will lose monopoly profits.

Benefits - Consumer surplus and economic welfare will increase thereby increasing aggregate demand and job creation.

4. End Free Trade

Costs - Tariffs and protections will raise retail prices of some goods, slightly reducing consumer surplus.

Benefits - GDP will increase by about $ 1 trillion per year by eliminating Balance of Payments deficit, domestic employment will increase.

5. Tax Away Great Fortunes, Great Incomes

Costs - Taxing away great fortunes and incomes will harm the rich.

Benefits - Wealth redistribution will increase aggregate demand and job creation.

6. Create National Industrial Policy

Costs - Some companies which are not chosen as worthy of protection will face increased competition and may fail.

Benefits - By targeting growth industries, our economic future will be more secure.

7. Extend Utility Regulation

Costs - Some companies will no longer enjoy monopoly profits.

Benefits - Consumer costs will decrease, thereby raising aggregate demand and GDP.

8. Install Punitive Bank Regulation

Costs - Some banks will be harmed although depositors will not.

Benefits - Consumers and the economy will benefit from a stable financial system.

9. Keep Social Security and Medicare as they are

Costs - Some additional borrowing may result and some formulae may be adjusted.

Benefits - Keep aggregate demand at current levels; provide secure future for elderly and infirm.

10. Single Payer Health Care

Costs - Some insurance companies will fail.

Benefits - We will provide health care to all and save about 9% of $ 2 trillion per year, or $200 billion, compared to what we spend now on total health care.

11. Follow Keynesian Fiscal Policy

Costs - We will borrow more in a recession.

Benefits - We will have less drastic recessions and lower unemployment rates.

12. Require Media Provide Free Political Ads

Costs - Some media companies will receive less income.

Benefits - Reduce amount political candidates raise, reduce corruption.

13. Encourage Occupy Movement Protests

Costs - Several deaths may result from protest over-reaction by authorities, costs for policing demonstrations will be high.

Benefits - If peaceful political actions fail to provide leadership, it will be the last chance to save the political future of the United States of America.

There you are, My Liege.

That is the list of economic maladies together with proposed remedies and the costs and benefits of each.

We pray you choose your actions wisely.

Your faithful servant,

Recovery : Occupy Movement

Barry, My Liege :

The previous several postings in this space have discussed various economic maladies which afflict currently the Economic National Security of the United States.

Those postings have included suggested economic remedies and estimates of the costs of each malady which remains un-remedied.

My concern, My Liege, is that the political process in the United States is both too corrupt and too gridlocked to install any of the remedies suggested.

This situation constitutes a vacuum of national political leadership.

It is an old truism that 'Nature abhors a vacuum.'

That is the reason for specifying the Occupy movement as a Recovery issue.

As you know, the United States has a long history of political demonstrations, strikes, riots and general unrest beginning in 1619 with a strike by Polish craftsmen in the Jamestown colony for voting rights and continuing through today with the Occupy movement.

My father served in the National Guard that was called to San Francisco from Los Angeles in the International Longshoremans and Warehouse union strike of 1934. Two longshoremen, Nick Bordoise and Howard Sperry, were shot to death by the San Francisco Police. May 1934.

Should you, Barack H. Obama, fail to remedy or ameliorate some of the maladies listed here through government action, then the last remaining hope for the Exceptional Experiment that was the United States is the Occupy movement.

We can hope that the movement will continue with its protests and that there will be real reform as a result.

The danger is that the Occupy Movement will be co-opted by a violent group and that the recently militarized police and Homeland Security will overreact, killing some protestors.

We also hope that the Movement stays on its current non-violent course and lobbies peacefully for economic change.

Just about every country in the world contains a privileged class of people who abuse and exploit the average and the poor.

If we fail to redress our current situation, we may become just another country where the privileged exploit the underprivileged.

Your faithful servant,

Sunday, June 24, 2012

Recovery : Media and Campaign Finance

Barry, My Liege :

It is time to consider requiring that the media which receive its frequency allocations from the Federal Government provide free campaign ads to political campaigns.

Since the public owns the frequencies, the public has the right and duty to ensure that they are used in the public interest. It is the responsibility of the Federal Communications Commission to ensure that the public interest is protected.

The FCC is failing its duty.

At the moment, media receives billions of dollars in revenues from political campaigns. One estimate is that the 2012 election will cost $ 8 Billion ; much of that will go directly to media outlets to buy political ads.

Using a very rough guess of 75% of campaign finance going to media buys, which means media will receive $ 6 billion this year alone.

It is bad enough that the media receives an indirect subsidy from the government through political ads, but the bigger problem is that the politicians who write our laws must raise that money from campaign donors in order to be elected.

Politicians who receive campaign contributions are naturally disposed to consider the interests of their campaign contributors when writing legislation.

The question then becomes this : What exactly do donors want that is contrary to the public interest?

There are at least three things that moneyed interests can obtain through campaign contributions that damage the public interest.

First - Monopoly.

Campaign donors seek laws and regulations which enable them to obtain or expand a monopoly or oligopoly. The deleterious effects of monopoly profits were discussed earlier in this space. Monopolies and oligopolies harm the public interest simply because they exist.

Second - Favorable treatment from legislators and regulators.

Jamie Dimon of J. P. Morgan recently testified before Senate and House committees about a large loss made by his bank. The questions were embarrassing for the country. There were no questions which reflected the public interest, only questions which allowed Mr. Dimon to gloss over any potential dangers to the public from his bank's incompetence.

My Liege, you will not be surprised to learn that Mr. Dimon and his family have given $400,000 to Congressional campaigns since 1998. Some of those contributions went to the very Congress persons who questioned Mr. Dimon. Some of the questioners had received $2,000 from the Dimon family.

Now, we can only imagine what happens to the public interest when legislators and Presidential candidates must raise $ 8 Billion in one campaign.

Third - Writing Legislation.

The American Legislative Exchange Council [ALEC] is a group composed of legislators at State and Federal levels and corporate lobbyists who convene and propose laws for State and Federal governments. Some of the laws proposed by ALEC have been adopted word for word by various States.

Fortunately, public pressure has encouraged some corporations to withdraw from ALEC and its influence is waning. But, we can expect that another similar effort will be launched in the near future.

Proposed Solution

The above argues for overall campaign finance reform, and it is well needed.

This space suggests an alternative method to achieve positive public interest results : namely, requiring the media to provide free political as part of their licensing.

It is not expected that this will be easy inasmuch as it will be very effective.

Your faithful servant,