Archive for January, 2012

The Great Recession from a different angle

Tuesday, January 24th, 2012

Joseph E. Stiglitz, Nobel Laureate and Columbia University economics professor, wrote a thought-provoking article for Vanity Fair magazine. He looks at our recent recession and ongoing recovery from a different angle:

“The fact is the economy in the years before the current crisis was fundamentally weak, with the bubble, and the unsustainable consumption to which it gave rise, acting as life support. Without these, unemployment would have been high. It was absurd to think that fixing the banking system could by itself restore the economy to health. Bringing the economy back to ‘where it was’ does nothing to address the underlying problems.”

“The good news (in a sense) is that the United States has under-invested in infrastructure, technology, and education for decades, so the return on additional investment is high, while the cost of capital is at an unprecedented low. If we borrow today to finance high-return investments, our debt-to-G.D.P. ratioテ「竄ャ窶掖he usual measure of debt sustainabilityテ「竄ャ窶掫ill be markedly improved.”

Click here to see the whole article: The Book of Jobs


An investment manager’s view of the 1%

Saturday, January 21st, 2012

This fascinating article is courtesy of the “Who Rules America” site of UC Santa Cruz’ Sociology Professor G. William Domhoff.

“Unlike those in the lower half of the top 1%, those in the top half and, particularly, top 0.1%, can often borrow for almost nothing, keep profits and production overseas, hold personal assets in tax havens, ride out down markets and economies, and influence legislation in the U.S. They have access to the very best in accounting firms, tax and other attorneys, numerous consultants, private wealth managers, a network of other wealthy and powerful friends, lucrative business opportunities, and many other benefits. Most of those in the bottom half of the top 1% lack power and global flexibility and are essentially well-compensated workhorses for the top 0.5%, just like the bottom 99%.”

Click on the title below to see the posting:

An Investment Manager’s View on the Top 1%


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Throw Granny to the wolves. Or the Vultures.

Thursday, January 19th, 2012

Today another classic old company, Kodak, has filed for bankruptcy.テつ Among its first statements, “the company cited the burden of retiree benefits”.

There’s no doubt that Kodak’s management made big mistakes, completely botching the transition to digital photography.

Why, though, should retirees who worked for the company during its good times get robbed “relieved” of their pensions?

Retirees, and current workers with long service to the company, are in a terribly vulnerable position.テつ They have no bargaining power.テつ They can’t take back the work they did, for which they were promised payment that included a pension.テつ They can’t go back in time and work for someone more trustworthy.テつ Many of the older retirees physically can’t go back to work at all.テつ Their only protection is the law, and the law isn’t helping.

There’s no other supplier to Kodak in a position to get screwed out of decades of payments.テつ The companies that sold Kodak plastic or silver or chemicals got paid long ago.テつ If they hadn’t, they’d have had the opportunity to drop Kodak, long ago.テつ Only the employees, suppliers of labor, were paid partially in a long-term promise.テつ That promise is now being violated.

During all those years of work, Kodak was NOT setting aside enough money to fund the promises they were making to their employees.テつ The pensions were called “unfunded liabilities” by the accountants, meaning that the money was owed, but there was nothing set aside to pay.テつ Implicitly, Kodak was saying that they would pay for the pensions out of future earnings.

And this is key:テつ in the meanwhile, Kodak was able to claim higher profits, raising their share price and bringing bonuses to management.テつ The accumulated debt to employees was not counted as a cost.

Kodak was not breaking the law, or accounting standards.テつ For other types of expenses, companies are required to treat money that’s owed as an expense, reducing profit, whether it is paid or not.テつ Pensions are treated differently.

Those laws and accounting standards need to be changed.テつ Companies must be forced to set aside– really aside, in a trust where they can’t touch it– the pension money that they’re promising they’ll pay.テつ They need to be forced to recognize the expense as it is incurred.テつ That’s more honest accounting, but most important:テつ that protects the workers from getting robbed.

The managers long ago got their bonuses, the shareholders of long ago saw the share price rise, champagne was popped and toasts were raised… long ago.テつ The workers from long ago paid for that illusory “success”, but did not taste the champagne.

Those workers are now faced with the remainder of their lives tasting lower living standards, possibly even bitter poverty.

That stinks.テつテつ S-T-I-N-K-S.テつ

We need to change the law to protect those workers, and all the others like them, from being robbed.


Our overdue debate about capitalism

Tuesday, January 17th, 2012

The Washington Post’s Opinion Writer E.J. Dionne Jr. crafted an insightful comment after one of last weeks’ Republican Primary debates.

“Capitalists of Romneyテ「竄ャ邃「s sort never want to acknowledge how much their ability to make money depends on what government does.テつ How does it structure the laws related to property, taxation and debt? What rules does it write on how companies can be acquired and how power within firms is apportioned among shareholders, employees, managers and other stakeholders?テつ These are not natural laws.テつ They are the work of politicians and the lobbyists who influence them.”

Click to see the article:

Mitt Romney and our overdue debate about capitalism

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