Mystery Economic Theater 2015

[ewmayer]

Originally Posted by ewmayer

NC reader 'Ulysses' posted a Wiki-leak of a key piece of the super-secret Trans Pacific Partnership trade-agreement-under-negotiation:

http://www.scoop.co.nz/stories/WO150...r-released.htm

NC has an in-depth followup on this story today. The author appears to estimate the odds of the U.S. actually respecting anti-USGov judgments of the ISDS panels rather more highly than do I, who see them mainly as a vehicle for the U.S. to bully other nations, as is its wont in all matters geopolitical - but his wider list of concerns/objections aligns (and expands) on mine. By way of followup to my earlier "stacked in the corporations' favor" comments I've bolded a section addressing my "corporate-friendly quasi-judiciary" concerns in re. the ISDS dispute resolution tribunals:

During a recent Amy Goodman interview of Lori Wallach, director of Public Citizen’s Global Trade Watch, on her Democracy Now show, Wallach neatly summarized the problems of progressives with the TPP:

Well, fast-tracking the TPP would make it easier to offshore our jobs and would put downward pressure, enormous downward pressure, on Americans’ wages, because it would throw American workers into competition with workers in Vietnam who are paid less than 60 cents an hour and have no labor rights to organize, to better their situation. Plus, the TPP would empower another 25,000 foreign corporations to use the investor state tribunals, the corporate tribunals, to attack our laws. And then there would be another 25,000 U.S. corporations in the other TPP countries who could use investor state to attack their environmental and health and labor and safety laws. And if all that weren’t enough, Big Pharma would get new monopoly patent rights that would jack up medicine prices, cutting off affordable access. And there’s rollback of financial regulations put in place after the global financial crisis. And there’s a ban on “Buy Local,” “buy domestic” policies. And it would undermine the policy space that we have to deal with the climate crisis—energy policies are covered. Basically, almost any progressive policy or goal would be undermined, rolled back. Plus, we would see more offshoring of jobs and more downward pressure on wages. So the big battle is over fast track, the process. And right now, thanks to a lot of pushback by activists across the country, actually, they don’t have a majority to pass it. But there’s an enormous push to change that, and that’s basically where we all come in.

I, too, am bothered by all the things Wallach mentioned and I, too, am strongly opposed to the TPP, and the upcoming Transatlantic Trade and Investment Partnership (TTIP), and the Trade in Services Agreement (TISA), which would impose similar agreements and rules to the TPP. So, I thought it would be worthwhile to add a few other concerns to the ones she mentions.

First, under the TPP, would the Government of the United States be sued and held liable in an investor state dispute action for a decision to stop issuing Treasury debt and fund deficit spending in an alternative way? Why not, since some private companies would lose profits as a result of that sort of action?

Second, under the TPP, would the Government of the United States be held liable if the Fed were to implement a policy maintaining negative interest rates for awhile? Why not, since this would cause investors in Government bonds to lose potential profits?

Third, under the Kingdom of the Netherlands – Czech Republic Trade Agreement, the Czech Republic was sued in an investor state proceeding for failing to bail out an insolvent bank which an investor company had an interest in. The investor company was awarded $236 million in the dispute settlement. So, under the TPP, or the TTIP, what would prevent a similar action against the Federal Reserve Bank of the United States, if it failed to bail out banks that were too big to fail in the future? And what could be the damages if the Fed decided to let the Bank of America fail, the FDIC took it into resolution and then a Saudi-based investment company decided to try to collect from the Federal Reserve?

Fourth, the TPP and the other agreements being put forward, provide for three-judge “courts” to conduct the dispute settlement proceeding. One of the judges is actually selected by the corporate plaintiffs. All of the judges are private attorneys who in other disputes may have represented corporate plaintiffs, and it is common for attorneys to be shifting roles from “corporate advocates” in one case to “judges” in another. Of course, the advocates get paid far more than the judges. Can anyone imagine a more criminogenic environment than this, where all the incentives are aligned in such a way as to extract funds from state treasuries for the benefit of corporations and corporate attorneys alike?

Fifth, in agreeing to such trade deals, Congress would, in essence, be turning over legislative power to the investor state dispute settlement courts and the corporations buying their loyalty. This is true because if Congress passes any laws that can be attacked in investor state disputes, the Government could find itself with billions in unanticipated costs suddenly levied upon it, and a law that cannot be enforced.

And lest we forget, the U.S. president pushing for fast-tracking all of this utterly toxic policy is the very same one who, when running against Hillary Clinton in the 2008 Dem primaries, browbeat her for her support of the bad-but-far-less-so-than-TPP-would-be 'free trade' accord known as NAFTA, the same NAFTA her neoliberal hubby Bill had supported and signed into law:

In February 2008, with only two candidates left in the race for the Democratic presidential nomination, Barack Obama distributed a flier to Ohio voters denouncing Hillary Clinton’s support of NAFTA. The pamphlet was deceptive, not because the accusations he leveled against Clinton were untrue, but because it sent a message to workers that the young senator was a strong supporter of union labor and that he was a vigilant crusader against unfair trade practices.

[kladner]

+1

[ewmayer]

o Amazon Requires Badly-Paid Warehouse Temps to Sign 18-Month Non-Competes | naked capitalism

The Verge has broken an important story on how far Amazon has gone in its relentless efforts to crush workers. Despite its glitzy Internet image, Amazon’s operations depend heavily on manual labor to assemble, pack, and ship orders. Its warehouses are sweatshops, with workers monitored constantly and pressed to meet physically daunting productivity goals. Indeed, many of its warehouses were literally sweatshops, reaching as much as 100 degrees in the summer until bad press embarrassed the giant retailer into installing air conditioners. In Germany, a documentary exposed that Amazon hired neo-Nazi security guards to intimidate foreign, often illegal, hires it had recruited and was housing in crowded company-organized housing. Amazon also fought and won a Supreme Court case to escape compensating its poorly-paid warehouse workers for time they spend in line at the end of shift, waiting for security checks.

Amazon’s latest “keep workers down” practice is to make temps sign non-competes. Yes, if you are so desperate and foolish as to take a short-term gig with Amazon, you will be barred from working for virtually anyone else for the next eighteen months. Look at how incredibly broad the language is in the non-compete agreement obtained by The Verge (hat tip MF):

During employment and for 18 months after the Separation Date, Employee will not, directly or indirectly, whether on Employee’s own behalf or on behalf of any other entity (for example, as an employee, agent, partner, or consultant), engage in or support the development, manufacture, marketing, or sale of any product or service that competes or is intended to compete with any product or service sold, offered, or otherwise provided by Amazon (or intended to be sold, offered, or otherwise provided by Amazon in the future) that Employee worked on or supported, or about which Employee obtained or received Confidential Information.

Pray tell, what possible employers are not included, given how sweeping these terms are? A cleaning service? Nah, Amazon sells Roombas and vacuum cleaners, so you’d be competing indirectly with them. A receptionist in a dentist’s office? Nope, Amazon sells tooth whitening products. A massage therapist? No, Amazon sells electronic massage devices. Working as a gym? No, Amazon sells home exercise equipment. And note that this includes “intended to be old, offered, or otherwise provided by Amazon in the future.” Amazon temps are precluded from competing with Amazon vaporware too.

Yves pulls no punches in her summation:

It's time to boycott Amazon. Tell your friends to shun them. It’s time to recognize that the supposed neoliberal paradise of cheap and easy shopping comes at the expense of workers, and hence society as a whole. You pay for what you get, and stumping up for better conditions for employees means spending more. Take your business from Amazon and give it to more ethical retailers.

I have shifted much of the money I used to pay directly to AMZN to instead preferring to buy goods - especially when used is an option (e.g. books, DVDs) to one of their resellers, which include lots of local charities. Costco, which has a much better reputation in re. pay & benefits is also getting much more of my business these days, but I fear that even my current approach may constitute more lining-of-the-Bezos'-pockets than I can stomach, given how shabbily AMZN mistreats the vast majority of its employees, that is, its warehouse workers.


o OSHA Whistleblower Investigator Blows Whistle on Own Agency: Employee says the federal whistleblower program isn’t protecting whistleblowers or the public

For decades, whistleblowers have played a pivotal role in exposing wrongdoing in industries that affect public safety and welfare. NSA leaker Edward Snowden, “Deep Throat” Mark Felt and Enron Corporation’s Sherron Watkins famously blew the whistle on their employers.

The federal government established the Whistleblower Protection Program in the 1970s to shield employees from retaliation when they report wrongdoing or safety hazards in their industry. But insiders say the program is failing the very people it is supposed to protect, and jeopardizing public health and safety in the process.

The program is run and managed by the Occupational Health and Safety Administration (OSHA). Current and former OSHA employees, complainants and government reports reveal a system that has botched the investigation and management of whistleblower cases.

“OSHA is hostile to whistleblowers,” said Darrell Whitman, an agency investigator.

[Nick]

We don't use Amazon, favouring our local bookstores and shops instead.

[kladner]

Originally Posted by Nick

We don't use Amazon, favouring our local bookstores and shops instead.

Same here. We have a very good independent book store within walking distance. If they don't have an item they will order it. They also have large (proportionally) sections for LGBTQ material. Among other things, we have a nice collection of gay comic books which came from Unabridged Books.

I also try to steer any purchases I make at work to other vendors. The only problem is that Amazon is just one of the evil outfits of which I am aware. For example, NewEgg may be just as bad, but I don't have that information.

[ewmayer]

o China expert Michael Pettis weighs in on the "slap in the face to Washington" (in terms of key allies signing up for it despite dire threats from DC) Asian Infrastructure Investment Bank:

Michael Pettis: Will China’s Asian Infrastructure Investment Bank Eventually Matter? | Naked Capitalism

As I see it, the creation of the AIIB is not nearly as important as everyone seems to think, and if Beijing’s decision to create the AIIB, and Washington’s decision to oppose it, was part of the struggle for future geo-political dominance in Asia, let alone the world, they were both going to be wrong. There were only two useful parts to this story, it seemed to me. First, it showed that neither Washington nor Beijing understood very well either the functioning of the global balance of payments or the reasons why the West, and especially the US, dominates the regime that governs global trade and capital flows (but I guess we already knew that). Second, Washington had handled this whole process so ineptly that it had managed to transform a minor initiative by Beijing into a huge symbolic disaster for Washington and a great victory for Xi Jinping.

o Risky Moves in the Game of Life Insurance | NYT

You hear a lot about “redundant reserves” in the industry these days. Many companies would prefer to hold fewer of the stable, low-yielding assets required by law and use the extra money to pay shareholder dividends. Some also want to build more risk into their investment portfolios, in hopes of receiving the higher returns that Wall Street expects.

Policyholders may not perceive any of this. But regulators, perhaps paradoxically, are not only aware, but sometimes even eager to allow insurers to add leverage and satisfy their growing appetites for risk. The National Association of Insurance Commissioners, a 144-year-old support group for state regulators, still issues special reporting standards, called “statutory accounting,” to help states enforce the law. But the states are also free to administer the rules as they see fit, and in recent years, this has often meant waiving certain rules. The waivers, called “permitted practices,” can be worth a lot of money.

WCPGW? (What could possibly go wrong?) And of course Fed-manadated perma-ZIRP helps drive this, by eliminating risk-free 'stodgy' investments with decent yields. First we throw seniors under the bus by depriving them of safe income on their life savings, then we double-whammy them by allowing/forcing their life insurers into risky investments. That way even those un-American savers who resist the urge to put the life savings into risky Wall-Street-benefitting bets have their life insurance quietly invested in such gambling schemes. And as with virtually every other area Wall Street touches, reform efforts are stymied by captured regulators such as the one from Iowa featured in the next snip:

As more and more money has flowed away from policyholder reserves and into the hands of investors, some state regulators have challenged captive reinsurance. New York State’s superintendent of financial services, Benjamin M. Lawsky, has called the transactions “financial alchemy,” because they can make money seem to pop out of thin air for insurance companies to grab.

Other states disagree. In an emailed response to questions, Mr. Gerhart of Iowa called captive reinsurance “a pragmatic approach to address the nationally recognized problem of redundant reserves.”

But wait - reform efforts are being undertaken. And what kinds of folks are in charge of said 'reforms'? (Bolds mine):

The insurance commissioners association has been trying to put the genie back in the bottle, toiling over new rules that would limit captive reinsurance in the future. At a meeting in Phoenix last weekend, it formed a new working group, overseen by Mr. Gerhart, to study why captive reinsurance has now spilled over from life insurance into annuities, a popular retirement-planning tool.

This scammery will of course be exposed in a hig way by the next crash, but as with the last one, you can be certain that none of the major players behind it will be held to account.

[ewmayer]

Suggested weekend reading for econo-autodidacts:

Nice historical piece over at NC on various financial "innovations" often featured in these pages - liquidity, leverage, hedging, fictitious collateral, securitization (and multiple pledging or 'rehypothecation' of securitized assets, as was rampant during the late great housing bubble), financial-sector deregulation, margin-call cascades and political shenanigans involving the then-central-bank, the Second Bank of the United States. The resulting credit booms and busts all occurred within the early 19th-century financial system in the southwest (with respect to its then-extents, a few decades after the Louisiana Purchase of 1803) US and its global export markets (e.g. the textile mills of industrial-revolution-era Britain), all of it underpinned by cotton-pickin'slavery capitalism. One even had the then-analog of the latter HELOC (home equity line of credit) in the form of the SELOC (my initialism), the slave equity line of credit:

Quick Note on Slavery, Finance, Minsky, and the Panic of 1837

The enslaved people that Bieller brought to Concordia Parish became the root of his fortune—as they and a million others like them would become the root of the prosperity of not just the antebellum southwestern states, but of the United States as a whole. And perhaps one could go further than the U.S. By the 1830s, the cotton that enslaved people grew in the new states and territories taken from Native Americans in the early nineteenth century was the most widely traded commodity in the world. Its sale underwrote investments in new forms of enterprise north of slavery. It was also the raw material of the industrial revolution.

When Jacob Bieller put his two dozen slaves to work growing and picking cotton, his whip was also driving the creation of a new, more complex, more dynamic world economy. In the lifetime between the ratification of the Constitution and the secession of the Confederacy, enslavers moved more than a million enslaved African Americans to cotton-growing areas taken by the new nation from their original inhabitants. Forced migrations and stolen labor yielded an astonishing increase in cotton production: from 1.2 million pounds in 1790 to 2.1 billion in 1859, and an incredible dominance over the international market—by the 1830s, 80% of the cotton used by the British textile industry came from the southern U.S.

Nice piece, and a fabulous article by Dr. Baptist. I will make my commentary about just that last little snip, which especially lit up my irony detectors:

...by the 1830s, 80% of the cotton used by the British textile industry came from the southern U.S.

This point is deeply ironic in light of the Brits' often expressing pride in the notion that they "abolished slavery before the US did." Note one particularly ludicrous claim repeated by the foregoing wikiarticle:

Richardson (1998) finds [West Indian historian Eric] Williams's claims regarding the Industrial Revolution are exaggerated, for profits from the slave trade amounted to less than 1% of domestic investment in Britain. Richardson further challenges claims (by African scholars) that the slave trade caused widespread depopulation and economic distress in Africa—indeed that it caused the "underdevelopment" of Africa. Admitting the horrible suffering of slaves, he notes that many Africans benefited directly, because the first stage of the trade was always firmly in the hands of Africans. European slave ships waited at ports to purchase cargoes of people who were captured in the hinterland by African dealers and tribal leaders. Richardson finds that the "terms of trade" (how much the ship owners paid for the slave cargo) moved heavily in favor of the Africans after about 1750. That is, indigenous elites inside West and Central Africa made large and growing profits from slavery, thus increasing their wealth and power.[26]

Economic historian Stanley Engerman finds that even without subtracting the associated costs of the slave trade (e.g., shipping costs, slave mortality, mortality of British people in Africa, defense costs) or reinvestment of profits back into the slave trade, the total profits from the slave trade and of West Indian plantations amounted to less than 5% of the British economy during any year of the Industrial Revolution.[27] Engerman’s 5% figure gives as much as possible in terms of benefit of the doubt to the Williams argument, not solely because it does not take into account the associated costs of the slave trade to Britain, but also because it carries the full-employment assumption from economics and holds the gross value of slave trade profits as a direct contribution to Britain’s national income.[27]

The massive flaw in the "insignificant component of the British economy" arguments is that it ignores economic contributions due to the exploitation of slaves elsewhere than the British Empire proper. For example in the growing of the cotton subsequently processed in British textile mills. As the Wikiarticle on the Industrial Revolution notes, "Textiles were the dominant industry of the Industrial Revolution in terms of employment, value of output and capital invested", so 80% of the feedstock for the British textile industry coming from slave plantations in the U.S. surely underpinned a hell of a lot more than 5% (or the even more ludicrous 1% figure of Richardson) of the British economy of the day.

Despite their domestic legal (and later historiographic) fig-leafery in this regard, the Brits continued to benefit hugely from slavery in their former North American colony, and of course they didn't classify Dickensian exploitation of the laboring classes - including young children - as slavery, nor the odious exploitation of the "free peoples" in their far-flung colonial empire. Of course the slavery-profiteers in the northern US were no less execrably hypocritical, as several NC readers note in the comments to the above piece.

And some key insights from the double panics of 1837 and 1839, including - to complete the analogy with the present - state bailouts (as explained in the full piece):

Except for planters, who were mostly debtors, almost every market actor—cotton merchants, dry-goods merchants, Southern bankers, Northern bankers—now realized that they were both creditors and debtors. But as they scrambled to collect debts from others so that they could pay off their own, two things were happening. The first was that their individually rational pursuit of liquidity created the collectively irrational outcome of systemic failure. No one was able to pay debts, and so most buying and selling ground to a halt. An attempt to restart the system failed. A second, bigger crash in 1839 finished off many of the survivors of the 1837 panic. During those two years, meanwhile, a second consequence had emerged: the discovery that most of the debt owed by planters and those who dealt with them was “toxic,” to use a recent term. It was unpayable.

One very important result of the crisis was the emergence of Wall Street as the undisputed financial center of gravity of the then-young US. "History may not repeat, but it does rhyme."

[xilman]

Originally Posted by ewmayer

This point is deeply ironic in light of the Brits' often expressing pride in the notion that they "abolished slavery before the US did."

You can be pretty damn sure that had the rebels not left the Empire, slavery would have been abolished in the rest of British North America at the same time.

IMO, the colonists would have likely gained independence within a couple of years of the Great Reform Act, probably as a result of the immediately following abolition of slavery throughout the Empire, possibly (though somewhat less likely IMO) because the GRA wouldn't give sufficient representation to the colonists.

[ewmayer]

Originally Posted by xilman

You can be pretty damn sure that had the rebels not left the Empire, slavery would have been abolished in the rest of British North America at the same time.

Perhaps you can, but I cannot, lacking access to a "history rewind and retry" functionality.

IMO, the colonists would have likely gained independence within a couple of years of the Great Reform Act, probably as a result of the immediately following abolition of slavery throughout the Empire, possibly (though somewhat less likely IMO) because the GRA wouldn't give sufficient representation to the colonists.

Gained independence ... like, say, Australia, you mean? There it took until 1986 to achieve full independence. But hey, the Aussies always were slow on the uptake, weren't they? /sarc

And again, formal abolition is one thing - continued-profiting-from quite another. It is indisputable that the British economy benefited hugely from slavery and colonial exploitation long after the reform acts you mention. If having that pointed out gets your kneejerk-nationalist hackles up, so be it.

[xilman]

Originally Posted by ewmayer

Perhaps you can, but I cannot, lacking access to a "history rewind and retry" functionality.


Gained independence ... like, say, Australia, you mean? There it took until 1986 to achieve full independence. But hey, the Aussies always were slow on the uptake, weren't they? /sarc

And again, formal abolition is one thing - continued-profiting-from quite another. It is indisputable that the British economy benefited hugely from slavery and colonial exploitation long after the reform acts you mention. If having that pointed out gets your kneejerk-nationalist hackles up, so be it.

Or like Canada, which managed it in the 19th century. Actually, I meant that the rebellion would likely have taken place 1834-36 or so.

No dispute about the profiteering aspect from me though. It's just that I enjoy winding up the colonists, wherever they may be. For instance I flew into Sydney a while back. The visa entry form asked if I had any criminal convictions. Once in the country I told the locals that I hadn't realised it was still expected of new arrivals.

[jasonp]

An interesting article from the BLS on the various misconceptions of their measurements of inflation in the US. Somewhat old (2008) but probably still relevant, as changes to their algorithms occur very slowly.

Vaguely OT, but back when I worked at NIH there was a novel that was published about a secret conspiracy perpetrated by the group that I worked in to show different genetic search results from our databases depending on who was asking. It was so insidious that the building my group worked in had to be blown up to protect it (hundreds of people worked there). If my job could be turned into a tool of the Illuminati, then anybody's job can.