Recent News, Links and Quotes

Breaking News

Ex-House Speaker of the House, Dennis Hastert [R- Illinois)] was charged with evading currency rules and lying to FBI (He represented Illinois's 14th congressional district for twenty years from 1987 to 2007) He has been indicted on federal charges alleging he agreed to pay $3.5 million in apparent hush money to a longtime acquaintance blackmailing him, then lied to the FBI when asked about suspicious cash withdrawals from several banks. Some suspect he may have molested a child. This guy was third in line to the presidency. Should he lose his federal pension if he's convicted? It's also worth noting that Dennis Hastert "the lobbyist" has been showering Congress with free trips.

Also, from Roll Call: Robert Lee Foster [R-Utah], who worked on the Senate Commerce Committee for more than three decades, was just indicted on nine counts of wire fraud, allegedly connected to his Senate Federal Credit Union account. The grand jury charged that Foster defrauded at least three women of approximately $500,000, from 2008 through May 2015. He allegedly used his affiliation with the Senate to gain the trust and confidence of a 54-year-old recent widow from California, a 70-year-old stroke victim from Texas and a 75-year-old D.C. resident who was taking care of a partner suffering from dementia.The indictment alleges Foster falsely claimed he needed the money for debt repayment, legal costs, business expenses and foreign travel. He also pretended his credit card had been “hacked”. Foster allegedly promised to repay the loans, but spent the money for his own personal benefit.

This is symbolic of America's leadership today.

Pop Quiz

Which Presidential candidate said this? Was it Rand Paul? Was it Bernie Sanders?

"We had to struggle with the old enemies of peace—business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering. They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob. Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred."

It was FDR. At the Nation: Bernie Sanders to Billionaires, "You can’t have it all!"

Water

1. A Privatization of Water bill that would allow New Jersey municipalities to sell their public water utilities to private for-profit corporations without putting the measure to voters is awaiting Gov. Chris Christie’s signature.
2. As many as 43% of the homes in Detroit could have their water turned off, despite living next to one of the world’s largest sources of fresh water.
3. In California, despite there being a severe drought, Walmart is bottling and selling publicly-owned tap water.
4. An investigation by the Desert Sun newspaper has revealed that the Nestlé corporation has been illegally pumping water out of a Southern California national forest for its bottled water with a permit that expired 27 years ago. Nestlé pays the same rates for water as average residential users, and then turns around and sells this water for literally thousands of times more than it pays. (Link, link, link) America's water (as a natural resource, just like crude oil) is primarily used for massive corporate profits that greatly benefits a few.

Other Links

1) Dean Baker (May 28, 2015) Center for Economic and Policy Research: Billionaire Peter Peterson is spending lots of money to get people to worry about the debt and deficits — and National Public Radio (NPR) is doing its part to promote his cause.

2) in recent years after skyrocketing during the Great Recession, they still remain elevated compared to where they were before the recession began. Underemployment rates for the class of 2015 also remain high. This means that many young graduates either want a job but have recently given up looking for work, or have a job that does not provide the hours they need. Among young college graduates who are employed, many are working in a job that does not require a college degree at all. This is another sign of continued slack in the labor market, and a sign that young graduates’ high unemployment is not because they lack the right skills, but because of a continued lack of economy-wide demand for workers."

3) The Federal Reserve (via Mark Thoma on May 27, 2015) Why fewer workers are moving for better jobs: "Researchers at the Federal Reserve in Washington, D.C. concluded that worker mobility is falling because of a decline in the benefits of changing jobs. In particular, the attractiveness of offers to workers making a transition has fallen."

4) Wall Street on Parade (May 27, 2015) These Two Women Are Rattling Wall Street (Re: Senator Elizabeth Warren and Kara Stein) -- There are 535 members of Congress, many of whom have their campaigns financed by Wall Street firms. There are hundreds of executives at the Wall Street regulators – many waiting their chance to grab a multi-million dollar compensation package on Wall Street. The strident protestations of Warren and Stein aren’t likely to change this dynamic immediately – but it’s a critical beginning. As Margaret Mead correctly noted: “Never doubt that a small group of thoughtful, committed citizens can change the world; indeed, it’s the only thing that ever has.”

5) Washington Post (May 19, 2015) Hillary Clinton made remarks distancing herself from the TPP trade deal that Obama is pushing and that she supported while serving in his cabinet: "There are questions being raised about this current agreement," Clinton continued. "It hasn't been fully negotiated yet, so I don't know what the final provisions are yet... So, I have said I want to judge the final agreement. I have been for trade agreements, I have been against trade agreements. I've tried to make the evaluation dependent on what I thought they would produce, and that's what I'm waiting to see."

6) Why helicopter money is a political economy issue (Wednesday, 27 May 2015) A thoughtful (and slightly wonkish) piece with thoughtful comments by the readers. Related paper from the Philly Fed: The Redistributive Consequences of Monetary Policy -- via Fed in Print.

7) The IMF says Larry Summers is right—and Ben Bernanke is wrong—about economic stagnation --- AND --- Secular Stagnation! Larry Summers is Right

Factoryless Goods Producing Firms (FGPF)

Via Timothy Taylor: A FGPF is as a firm that has no manufacturing establishments in the United States, but performs pre-production activities such as design and engineering itself and is involved in
production activities, either directly or through purchases of contract manufacturing services. The best-known example of a factoryless goods producer is Apple Inc., which designs, engineers, develops, and sells consumer electronics, software, and computers. For the vast majority of its products, including iPhones, iPads, and MacBooks, Apple does none of the production and the actual manufacturing is performed by other firms in China and elsewhere. While Apple is known for its goods and services and closely controls all aspects of a product, almost none of Apple’s US establishments would be in the manufacturing sector.

(The comments below were on Tim Taylor's post, but were from Mark Thoma's blog)

• Micro circuit design is indigenous while fabrication is almost totally outsourced overseas. There are concerns about counterfeit parts that also might contain hardwire viruses.
• Aerospace moved to the same model about 20 years ago and is getting more and more of the parts that they design manufactured overseas. The Boeing 787 was the ultimate outsourced aircraft.
• Outsourcing has hit the defense industry big time, which can cause issues with "fit" and performance of the parts, quality, and configuration management — leading to bogus parts and security issues.
• The automobile industry is a classic example of the "make or buy" decision, especially because a car has so many parts, components, super-components. The auto industry has outsourced parts to "contract" manufacturers for decades. More and more US auto parts are coming from overseas. If you are driving a Ford, it was likely assembled in Detroit — but most of the "value-added" was generated somewhere else.
• And after the jobs are outsourced, where are the profits outsourced? To places like Bermuda, which has a zero tax rate on profits. What a deal! So what should be the proper response to that HUGE PILE OF MONEY that American companies are collecting abroad, but not bringing home? Should the US force these companies to bring their profits home; and if so, how should they be taxed? At normal tax-rates?
• If that happens, then most of the value goes to the stockholders who, in essence, are taxed effectively less than 20% of the amount they would be making in dividends. This does nothing to solve "Income-Disparity/Income and Wealth Inequality". Whereas, were those dividends more dispersed (that is, included higher pay to its workers), then some wider benefit would accrue.
• Should corporate taxation be increased on profits made? And what will be the negative impact therefore upon P/E ratios that help determine its stock-price?
• If "Income-Disparity/Income and Wealth Inequality" is to be "resolved" in the US (and elsewhere) then we must think of to whom go the rewards. And for the moment, it is those who own most of the stock. And guess who that is? They are called the one-percenters.

Editor's note: Via CNBC: What's driving the wealth of the wealthy? In the developed world (the U.S. and Europe) it's mainly stocks. And stocks have been on a tear year in the U.S., which has mainly benefited the top 5 percent, who own 60 percent of all individually held stocks.

• When Marie Antoinette heard the ruckus outside the window of her apartments in the Versailles Chateau, she asked, "Que veut le peuple?" (What do the people want?") When told that they had come because there was no food left in Paris, she responded, "Qu'ils mangent de la brioche!" ("Then let them eat sweet buns!") Which is why she lost her head later.
• If we do not attend to the problem of the dynastic amassing of wealth, we shall have a catastrophic internal revolution one day. Throughout history, "Income-Disparity/Income and Wealth Inequality" has been the spark that set aflame revolutions. In fact, it was at the heart of the American revolution in 1776 — when "enough" finally became "too much".