The Best American Poetry

Julie Sheehan, Constituent Bartender: Romney's Secret Jobs Potion

A bar survives as a small business because people come in and buy drinks. How does that happen? Well, it might be because people sense a hip vibe, it might be because the beer is cheap, it might be because all the Yankees fans in the neighborhood have decided to watch the tragic series against the Tigers together on one particular flat-screen TV, it might be because the bar gives out that terrific goat cheese thing at happy hour, it might be because everybody knows your name. Any of these and more might make a bar successful.

None of these have anything to do with tax policy. Or regulation. Instead, they have to do with the existence of customers—i.e., people.

So if you’re talking about “creating jobs” or “helping the middle class,” you ought to be thinking about people. Why did the rabbi and the priest walk into a bar? They both had enough money in their pockets to splurge on a cocktail or pitcher of beer or glass of Bordeaux or whatever it is clergy order when they’re in a joke. And that money came from a job, in their case, a job with an organization that pays no taxes.

The tattered idea that lowering tax rates for business will increase hiring is absurd. The Archdiocese of Philadelphia pays $0 in tax, and yet closed St. Mary of the Assumption, along with some smaller parishes and many schools, this past summer. That means not only an out-of-work pastor, but teachers, secretaries, janitors, clerks and administrators all losing their jobs. The Roman Catholic Church’s taxes couldn’t get any lower; what the enterprise lacked was parishioners—i.e., customers—i.e., people.

And regulation? Well, The Catholic Church, along with other religious institutions, is exempt from many regulations, particularly the ones that promote equality and fairness by forbidding discrimination. For example, in Iowa, a business is not allowed to hire or fire someone “on the basis of age, race, creed, color, sex, national origin, religion, or disability,” unless it is "[a]ny bona fide religious institution or its educational facility, association, corporation or society.”

But most regulation exists to keep people from harm, not from injustice. Rules against serving toxic food or dumping slag in the drinking water or selling cars that don’t have functional braking systems are good for people—i.e., customers—and, indirectly, for businesses, because they keep customers—i.e., people—alive. The reason bars have to get liquor licenses is to protect those customers—i.e., people—from a substance that can be very dangerous if not properly handled. A dead customer will not boost revenues. A dead customer won’t enhance that hip vibe. A dead customer won’t bring his friends in next April, when the Yankees’ chances look pretty good again.

O burdensome regulations! O burdensome taxes! In Mitt Romney’s Bar & Grill, he’s pouring a secret jobs potion that’s going to jump-start our economy without even a sideways glance at the actual human beings behind economic transactions like ordering a Fuzzy Navel. The only people in his post-Citizens United wo rldview are corporations, who will pay less tax and follow fewer rules. To make up for that generous gift, he’ll slash “wasteful” government spending on such whatchacallems as: 

• teachers
• inspectors
• auditors
• analysts
• secretaries
• scientists
• researchers

Prepare to get fired, bureaucratic slackers, at which point, you’ll cease to be a customer—i.e., person. But don’t worry, that small business called St. Mary’s, just down the block from your out-of-work ass is sure to use its windfall tax break and freedom from regulation to hire more priests and nuns, folks who don’t need the contraception not covered in their health insurance. Ask your parents to send you to Divinity School. You’ll clean up in that libertarian dreamscape, that model of trickle-down economics, that no-tax, low-regulation utopia where the secret jobs potion flows freely through every empty pew.

 

 

 

A Modest Proposal: A Congressional Day of Atonement

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Yom Kippur, the Jewish day of atonement, generally falls around the end of the federal government's Oct. 1-Sept. 30 fiscal year, as Cato Institute fellow Chris Edwards reminds us. So Edwards, who is also the editor of www.DownsizingGovernment.org, mischievously proposes that to do penance for the sin of sipping—or in some cases, supping—at the government trough, we all try a fiscal fast.

"Let's see if we can go a day," he suggests, "in which we live without the federal government's welfare and services." More seriously, Edwards proposes that "Congress institute a day of atonement during which members go to the floor of the House and Senate and apologize to the American people for making no effort to the avert the fiscal train wreck that threatens the well-being of fuutre generations.

Blame it on heightened passions just before a presidential election. But my annual Yom Kippur poll of analysts on economic sins that should be atoned for has provoked an unusual degree of Old Testament-style anger at both the state of the economy and statements about the economy by the two main presidewntial candidates.
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-- Gene Epstein, "Congress, Forecasters Have Much to Atone for" (Barron's, Septmber 24, 2012)

Julie Sheehan, Constituent Bartender: You Had Your Chance, Job Creators

The feast of the wealthy upon the little guy should long be over and we should have moved on to after-dinner drinks: tax hikes in gleaming snifters for the country club set; for the rest of us, a minimum-wage hike and jobless benefits, lifted to our lips and kissed like the whipped cream on an Irish coffee. Yet the little guy, despite his morsel size, is still being battered, fried up and served with a side of frozen fear to an already obese elite. That glob of fear on the plate is that the superrich, poor fragile creatures, won’t create our jobs if we ask them to contribute to the upkeep of our country.

The Bush tax cuts, a boondoggle for those that already gots, were first enacted in 2001, over a decade ago. These senseless giveaways have not only remained in place, but been fattened up for the fattest among us, wallet-wise, all in the hope that those grotesquely wealthy people will use their tax refunds to create jobs. Ten years later, our country had roughly 3 million fewer jobs. But the superrich keep getting richer.

The “job creators” theory has been tasted, re-tasted, tasted yet again—still no jobs.

It’s easy to see why. Imagine earning $22 Million in 365 days. (Almost half of all Americans make less than $25,000 per year.) That comes to $60,274.00 per day. How would you spend over $60,000 in one day, then wake up and do it again the next day, day after day, including holidays and weekends, for a whole year? Sure, you could buy some big ticket items, a Maserati here, a home in La Jolla there, but you’re probably not going to buy hundreds of Maseratis or resort get-aways. Nor will you necessarily create a lot of jobs if you do. For consumption to drive an economy—and ours is consumer-driven—you need masses of people buying masses of Fords and Chryslers, not the 1% buying a handful of fancy imports. At $16,000, the 2012 Dodge Dart, a modest compact, is out of reach for that 48.1% of Americans earning less than $25,000 per year.

“No,” say the defenders of the rich getting richer. Wealthy people create jobs by investing in new companies or in the expansion of old ones, not by consuming stuff themselves. Unfortunately, neither the behavior of so-called investors nor that of the businesses they allegedly invest in fits with this argument. Wealthy people spend less than 2% of their money investing in new companies. Moreover, companies themselves don’t want to expand, even though they already have the cash to do so, without any investors. The reason they are not hiring, if we are to believe them, is that there’s no one to buy the extra stuff they’d produce. Remember, almost half of us are making less than $25,000 per year. We can’t afford more stuff. We can’t afford the stuff we already have, which is why our standard of living has been going down.

So Job Creators, you had your chance. Yes, you. And who is this “you”?  This “you” who makes $22 Million? Gee, looks like Mitt Romney made that much in 2010, most of it from Bain Capital, which he “retired” from 10 years earlier. What if, instead of paying him, Bain Capital had hired two people every day of the year at a salary of $30,000? They’d have created 730 jobs. But they didn’t do that. Like our tax system, Bain gave the money to a rich guy, who promptly stashed it overseas in “blind” trusts that invested in his own kid’s start-up business, or in the hedge fund of one of his campaign supporters. True, 2 jobs were created, but they were hardly the kind of jobs that would fuel a national recovery.

Job Creators, you had your chance. Now give us the money, in the form of higher wages and a federally mandated jobs program, and we’ll give recovery a try. We’ll check back with you in 10 years, to make sure you, your son and your billionaire campaign contributor are still okay.

 

The Greek Tragedy: It's Different This Time [by DL and friend]

A friend who plans to spend Christmas and New Year's in Greece files this report on that beleaguered and financially challenged nation, the ancient homeland of Periclean democracy, Sophoclean tragedy, Ariostophelian comedy, the Parthenon (left) and Doric architecture (the model of the neo-classical facades that the great capitalist financiers favored), Plato, Aristotle, Achilles, Odysseus, Penelope, Orestes, Electra, Oedipus, Antigone, Teiresias, and the goddess Athena. -- DL

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       There are at least two ways of looking at the presidential election in Greece on June 17. The most obvious is that the election of New Democracy's Antonis Samaras (30% of the vote) was a complete disaster in that it basically extends the policies that led to the current crisis, and this despite the fact that Samaras's platform was indistinguishable from the Pasok platform (13% of the vote) until it became obvious that the Syriza antibailout platform (27% of the vote) was too popular to simply dismiss. This in turn led to references from New Democracy about "amendments" to the current bailout program, which has done so little for Greece, the rest of Europe, and the world. However, to my knowledge, no specific amendments have been proposed. . . .
       Syriza and its candidate, Alexis Tsipras, have a more sanguine view, one exemplified by the parties in Athens on Sunday night when Syriza learned it had come in a fairly close second -- and articulated by Tsipras a few days later in an interview with Reuters (during which, incidentally, he made no reference whatever to the chortling heard from the G7 summit when those august heads of state learned that Samaras had won the election. That chortling was echoed, no doubt, by the EU finance ministers in Luxembourg last Friday). Tsipras and his party believe that the bailout program is doomed and that the new government doesn't have a chance of staying in power. Syriza is ready to take over and reject the bailout, and Tsipras expects this to happen soon rather than later. Anyone who thinks he's being overly optimistic would do well to study the map of Greece in the Wikipedia entry for the June 17th election in Greece, remembering always that capital Athens is more like New York than Washington and that no Greek feels any further from what is happening to his or her country than any other Greek. It's a result of living on 6,000 islands.
     Yes, it will take Greece a long time to recover, but — longer than it took to recover from the Venetian and Turkish occupations? From the savage civil war after World War II? I doubt it. These are tough people who know in their hearts that it's better to be a truly sovereign state than to be bullied and slandered by Angela Merkel, not to mention the European Central Bank and the IMF. That map of Greece in mind, it can only be a matter of time before Greece defaults on its debt, drops the euro, and starts printing and coining drachmas. Samaras might conceivably keep his job is if he were moving in that direction. But his backers (I almost wrote "his bankers") wouldn't like that, he wouldn't like that, and besides, Tsipras is already there.
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Kierkegaard weighs in on the Eurozone crisis [by DL]

The question on everyone's mind is, What is German Chancellor Angela Merkel going to do? She's reportedly still undecided. so I recommend that she listen to Ella singing this song with the Chick Webb band in the late 1930s.

On late night TV, I had the chance to interview Soren Kierkegaard on the Eurozone crisis on the day the yield on the ten-year Spanish bond surged to a euro-era high above 7%. "The German Chancellor seems to be lowering expectations and addressing a domestic audience, just as she has in advance of prior summits," noted Kierkegaard, a research fellow with the Oscar Peterson Institute for Internatinal Economics. "Refusing to dampen the growing panic may be strategic, a way to give European leaders more room to maneuver." I asked Kierkegaard to forecast a likely outcome. "Past summits failed to appease markets," he shrugged. "I think we can expect significant progress on a European bamking union and a long-term plan for eurobonds. But there's no quick fix in sight, especially if Merkel demands power transfers requiring new treaties as part of the quid pro quo. That would be a year-long process, and markets don't like to be kept waiting." 

Meanwhile, I said, unemployment in Greece remains over 25%, and the Greek people are pulling their cash out of the bank at the rate of a billion euros a day. Kierkegaard reflected before replying in his deadpan manner that "an awkward moment of silence" might best suit the occasion. The remark drew an appreciative laugh from the studio audience. We shook hands, and the segment ended with my guest standing up to leave. "Ladies and gentlemen," I said, "Soren Kierkegaard." -- DL

The Volatility Index ("volatility being the square root of variance") [by DL and friend]

We asked our friend on Wall Street to make a summer forecast and to explain a term we're hearing a lot on the news these days: the "volatility index," or the "VIX." Here's the report. -- DL

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You asked about the stock market going into summer as shaky as it has been for, what, four years now? But the entire premise of the stock market is that there is no end in sight, and if there is, it's only because you're facing the wrong way. No matter how many times it's right, and so far it's always been right in the U.S., it only has to be wrong once and it's gone forever, or at least until the next stock market shows up. What happened to the ancient Greek and Roman stock markets? The Aztec and Inca stock markets? The U.S.S.R, East Germany, and hardcore Communist China? They all became mature markets of one kind or another, and top heavy, and toppled. We may be headed in the same direction, at least financially, which is why diehard investors, if they haven't given up on equities altogether, even the risk takers mired in biotech and IT, are so infatuated with emerging markets right now. No unions? No EPA? Heck, I might actually make money in those countries, and what I don't know about the poverty and the torture, well, let's drop that thought right there. And they're right, they might make money there, some foreigners do, but they shouldn't expect any investment protection that they don't provide themselves. The SEC stops at the same border so many people fleeing from emerging markets cross on their way into the States. Why do they think rich Brazilians and Mexicans have armed bodyguards?

No one knows what's going to happen next, anywhere, and at this point it seems like it's going to be this way for a while, with market volatility registering every swing up, down, and sideways in the national and international psyche. Fortunately, you can invest in this volatility, and when a friend's cousin told me how he was doing it, I realized at once that he was investing in the closest thing to a sure thing we've seen in a long time. The VIX, as you may know, is the CBOE's volatility index for the S&P 500—and you can take positions not only in the options of the index itself but also in other derivative products, including ETFs, depending on where you expect the index will be, or not be, in the next 30 days. When I asked Richard where he put his money during lulls, he said, "In my pocket"—that is, he was either making a specific time bound trade or he was out of the market altogether. No, he isn't contributing to the GDP, but he's not loafing in blue chips, either.

A couple of things worth thinking about before you call your broker. Wikipedia: "The VIX is the square root of the par variance swap rate for a 30 day term initiated today. Note that the VIX is the volatility of a variance swap and not that of a volatility swap (volatility being the square root of variance). A variance swap can be perfectly statically replicated through vanilla puts and calls whereas a volatility swap requires dynamic hedging. The VIX is the square root of the risk neutral expectation of the S&P 500 variance over the next 30 calendar days. The VIX is quoted as an annualized standard deviation." The second is from Rubashov's diary in Arthur Koestler's Darkness at Noon: "The capitalist system will collapse before the masses have understood it.
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Whither Greece? [by DL]

I asked the man in the street, I mean my friend on the Street, about the fate of Greece and the Eurozone, and this is what I heard:
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I don't know about Greece. None of the other countries really cares about Greece, many because their own problems are overwhelming, and in the long run I think Greece would be better off out of the Eurozone and, in fact, the whole EU (haven't The Iliad and The Odyssey been proof a long time that Greece is both the single force most responsible for Europe and not itself European?). But you also have to consider the run on banks that Greece's exit would probably — some would say surely — trigger and which the other Euro countries obviously don't want and are incapable of dealing with, financially or otherwise. So it looks like Greece either gets out on its own, defaulting on its debt, and begins the long road to recovery, or, through no fault of its own, really, but because no one wants the fantasy to evaporate, it takes out the whole Eurozone and possibly, eventually, the EU as well. Good riddance to bad rubbish: The United States of Europe has always seemed ridiculous to me. But, meanwhile, chaos either way.
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What can I say / but oy vay? Meanwhile, if anyone knows anything about a Spanish language Monopoly-like board game about the IMF called" Eternal Debt," please let me know. -- DL

James Diamond, Private Eye [by DL]

I asked a friend who works on the Street to comment on the news of the colossal mishaps at JP Morgan Chase under golden boy Jamie Dimon's watch.

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One of the more bizarre signs of Jamie Dimon's fall from grace is the way he is now often referred to in the media as "James Dimon." (You feel like saying, "Private eye?") The real money loser, though, unless the initial $2 billion, which has already widened to $5 billion, turns out to be only the beginning of a chasm, is his loss of the ability to argue down regulation in Washington. That regulation, whatever its virtues, and there's no doubt in my mind that the regulation is needed, just as there's no doubt it won't prevent future stealing, mismanagement, recessions, and depressions, is going to cost JPM and the other banks a fortune. And do you remember the way they howled when Spitzer forced them to cough up $1.4 billion for the privilege of not admitting guilt to collusion between research and investment banking? In the real world it's called a plea bargain; on Wall Street it's known as the "settlement" (sometimes inital capped) or, occasionally and longwindedly, the "settlement agreement." Of course enforcing the separation between IB and research cost, and costs, the companies a lot more than the one-time fine. Volcker will be expensive, too.
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In other financial goings on. . .  in the last twenty-four hours I have heard from pros that the best place to put your money at the present time is

a) A thirty-year mortgage at the lowest rate you can get from a reputable bank. "Cash is going to be a lot more expensive when prices and costs start to rise, and inflation comes back big."

b) Cash in US dollars as the last stable currency in a worldwide flight to safety. "The chances of a global recession beginning in the fourth-quarter approach 100%, not so much because of the mess in the Eurzone but because China and India are slowing."

c) Dividend paying blue chip stocks with healthy balance sheets and free cash flow -- Exxon Mobil, Chevron, Microsoft, Intel, Coke, Pepsi, Johnson & Johnson, Bristol Myers Squibb, Caterpillar, Disney, IBM, Procter and Gamble, GE, American Express. "The size of the dividend is less important than the company's record of growing the dividend."

d) Gold (always the default position for 5 to 10% of the investment public).

e) Kenneth Koch's poem in which the crazed poet gives away "the money you had been saving to live on for the next ten years. / The man who asked for it was shabby / and the firm March wind on the porch was so juicy and cold."

The only thing they all agree on is to avoid bonds, especially long-term bonds, and Treasury notes. -- DL

Your Financial IQ [or, Finance for Poets, Part VI]

We asked our broker friend Eric Rice to devise a shortcut list of sample questions that would determine your financial intelligence quotient. It is Eric's belief -- and one we share -- that any smart, educated person, even one who is mathematically challenged, should be able to direct and control his or her investments. Think about it. No one has a greater interest in preserving and enlarging your capital than you do. Poetry is, to invert Wallace Stevens's aphorism, a kind of money, and yet American poets with academic appointments are said to spend an average of twelve minutes a year, maximum, on their retirement plans.

See how you score on the quickie exam Eric drew up to evaluate your potential as a self-actuated Wall Street amateur in the best sense of that old-fashioned word.

(1) Investors drawn to the precious metals market, and to the yellow metal in particular, are known on the Street as "gold bugs." Explain the derivation of this term.

(2) Is "dollar-cost averaging" a really better method than "lump sum" investing?

(3) Should the basis of the Dow Jones Industrial Average be re-calculated to make stock prices a less significant factor than market capitalization?

(4) What is the hidden risk in "index funds"?

(5) True or false: when interest rates go up, the value of bonds goes down.

(6) Is AMEX a buy at 60? Is DIS a buy at 45?

(7) If you hold 150 shares of Coca Cola and the firm announces a two-for-one stock split effective in August, should you sell or hold the new shares (presuming that they are long-term holdings and therefore taxed more favorably than stocks held for less than one year)?

(8) When, as now, money market funds yield zero, and saving accounts return less than one percent, what should you do with money you can't afford to lose? 

(9) What is a DRIP?

(10) If you have $50,000 invested equally in ExxonMobil, IBM, Johnson and Johnson, Intel, and Pepsi, are you properly diversified in today's market?

Eric's answers :

(1) Poe's story.
(2) Yes, except when a "lump sum" (inheritance, lottery) lands in your lap and must be handled all at once
(3) Yes and no. The issue is under debate.
(4) Index funds promise you "average" returns. Is that what you want? Are you American?
(5) True
(6) AMEX probably, DIS definitely
(7) If you agree wth Warren Buffet's buy-and-hold strategy you keep all the shares.
(8) You put emergency money in a savings account, and your core investment cash account in a short-term bond fund. Also, you load up on dividend-growing stocks.
(9) Dividend Re-Investment Plans (where you receive your dividends not in cash but in additonal shares of stock)
(10) Eric would say yes, though a purist might question the doubling-down in tech (Intel, IBM), a sector Eric favors for superior short-term performance, If you had an additional fifty thousand and wanted to continue a blue chip strategy, you might add equal amounts of Caterpillar, Wells Fargo, Chevron, Proctor and Gamble, and Microsoft.

Julie Sheehan, Constituent Bartender: Greenspan's Own Oops Punch

Entertaining as Rick Perry’s November 9, 2011 “Oops” moment was—you know, the one when in his frenzy  to take a hatchet to government, he forgot which heads he was chopping off—the more significant and now completely repressed “oops” moment for the American right occurred three years earlier, on October 23, 2008, when Alan Greenspan confessed his “state of shocked disbelief” that markets don’t regulate themselves.

Without rules, the free market is kind of like the punch you might have served at parties in your college dorm. Who knows what toxic assets were swimming around in there? Fermented Hi-C? Grain alcohol? Nail polish? Why not, when punch itself was invented by desperate sailors who had run out of beer and turned to the locals for a stimulus package. One of the oldest recipes calls for arrack, which tastes a bit like a credit default swap and is made from palm trees. Any punch worth its floating lemon wheels is meant to creep up on guests, unleashing a voracious appetite for risk. In dormitories, that means regrettable sex. Greenspan’s deregulatory punch unleashed a voracious appetite for paper profits, what he called “euphoria” and the rest of us call greed.

Beyond chopping off regulatory heads wherever they might be, Chairman Greenspan left another insidious legacy. He handed off a historically low 4.25% interest rate to his successor, Ben Bernanke, who then had very little room to cut it. Fiddling with the Federal Funds rate is one of the few tools the Fed has. Roughly put, the idea is to crank the rate up when the economy’s “euphoric.” Paul Volcker raised it to 20% in 1981, and was duly vilified. Nobody likes a spoiler, but ever since the Depression, the Federal Reserve’s job was supposed to be to take away the punch bowl just when the party gets going. And part of why you take the punch bowl away is so that you can bring it back, by lowering rates in a crisis like the one we have now. That’s hard to do when rates are already low.

Greenspan not only failed to take away the punch bowl, he spiked it with 80-proof easy money, in the form of both low interest rates and deregulation. No wonder the speculators got drunk. His tenure fit right in with the larger recklessness of the Bush years, the blind appetite for risk, the unwillingness to weigh long-term consequences against immediate gain--in the case of the invasion of Iraq, the neglect to think even one week ahead into a post-Saddam future. The attitude was to take the easy profit in the short term and let the future fend for itself. Thus so-called fiscal conservatives and budget hawks gave away a budget surplus to the 1%, rather than saving it for a rainy day. Meanwhile, the rest of us journeymen got punch drunk, battered in the early rounds of what turned out to be an economic TKO to the middle and working class.

At his 2008 hour of reckoning, Greenspan predicted a “restrained” market “for an indefinite future”:

"The financial landscape that will greet the end of the crisis will be far different from the one that entered it little more than a year ago. Investors, chastened, will be exceptionally cautious. Structured investment vehicles, Alt-A mortgages, and a myriad of other exotic financial instruments are not now, and are unlikely to ever find willing investors."

Chastened, my ladle. Not only did investment banks and hedge funds quickly return to that “myriad of other exotic financial instruments,” Greenspan himself renounced caution a few years later, criticizing the meek regulations of the Dodd-Frank Act for their attempts to impose order on financial markets.

Have a cup of Greenspan's Oops. You’re going to need it when you get rabbit punched by those party animals again.