Obama drops a sham budget the same day China officially overtakes Japan as the World’s second largest economy. The latter is pre-baked old news. That China will surpass the U.S. in a mere 10 years? Some might wonder why the delay?
Obama tactically is wise to play budget kabuki with Republicans now. They’re disorganized, fumbling votes. Tactical politics dictate only open with the first card. Make the Republicans get their act together before trying to make a deal. Shows he’s learned a little bit from the stimulus fiasco. Still, a small a game with small players. Neither offers a way out for America’s long term economic problems. The first step must be to wean the American addict off its bubble addiction.
Consider: Deng Xiaoping accelerated China’s economic reforms in and around 1980. The same time as America abandoned traditional capitalism for plutocratic crony casino gambling. The game started with the then new fax machine and spreadsheet technology. Together, Wall Street didn’t need to be Wall Street anymore. And a 28 year old could gin up arguments for ‘unlocking’ wealth by tearing down. Hence, the 1980s M&A/LBO bubble. We were friends with one of the real life players fictionally portrayed in Stone’s ‘Wall Street’. Stone was not that far off. When we got there some people really did spread out lines at 2:30 AM to make it through another 24 hours churning out mounds of mind numbing, mostly unread paper for a closing. This first bubble popped the same time as its sisters, the S&L boondoggle and the first real estate run up.
By the early to mid 1990s, the American economy started its long migration to the Pearl River Complex. Consulting companies like the current Accenture held huge conferences teaching how to out source to China. The structural damage all carefully camouflaged. Post Netscape IPO and tout le monde reached for the NASDAQ ring. Boom, fraud, the usual routine. ENRON, Ebbers at WorldCom, etc. We had a friend working with then-AT&T CEO Armstrong who was going crazy facing pressure to match WorldCom’s (faked) numbers.
They say Clinton’s America created 20 million new jobs. True. Many of them, however, based on illusions and sock puppets peddling dog food. We all know the dot com bubble popped. And the CLEC (competitive local exchange carrier) flame out. By 2001 America economically flat lined, albeit with a budget surplus.
Two bubbles quickly helped obscure the reality that the American economy no longer creates long term wealth and jobs. First came the fear/threat national security boom followed by the real estate/financial swindle. Net result? No net new jobs created. Underscore that — we are exactly back where we started. With one exception – unprecedented wealth concentration.
Obama may claim he’s creating new jobs. Or ‘making investments’. But the American economic structural atrophy is not and can not be tackled by a federal budget. Or Potemkin ‘retraining’ programs. We must first begin with hard truths. The American economy doesn’t create much real value. For us or for export. We need a comprehensive macro economic development vision to cure our bubble addiction. Executed across industry by industry, down each silo from component and subcomponents to final assembly, etc. With tax, tariff and budgets aligned accordingly. Not the reverse.
Obama’s budget is thus D.O.A. regardless of the Republican counter. Neither have a plan to stop the bubble addiction. Neither can afford to. It’d mean telling the American people they are indeed rodents in the spinning wheel, going nowhere.
Some Rightists share this concern. They argue America needs a return to ‘Hamiltonian’ policies. Helpful but insufficient. Quaint even. Hamilton’s ad hoc market interventions helped nurture burgeoning American comparative advantage. Japan, China, the Four Tigers – all gouged the heart out of the American ‘free trade’ tragedy of the commons. Corporate America was not only complicit but eager partners. Does anyone really think ‘Hamiltonian’ policies could have handled “>Japan’s original post-war wealth creation model copied by others? Or the current Chinese juggernaut? What’s precisely the American comparative advantage now?
A problem with junkies is they never admit they’ve a problem. So now comes another fake boom, the ‘social media’ economy. Overstated? Zynga is the company that makes games for Facebook. It’s now being valued at between $7-$9 billion. It was a mere $4 billion 10 months ago. Facebook is now valued higher than Amazon and tails only Google on the Web. Don’t forget Twitter. It’s a company that doesn’t have a real business model or a path to sustainable revenue. It’s average revenue per user (ARPU) is 28 cents. Now said to be ‘worth’ $8-$10 billion. Most likely as a part of Google, etc.
There’ll be economic spin offs from this newest bubble. There always is. Cheerful cable talking heads touting some index going up. The question few will ask is what’s any different from the other bubbles? Valuations suggest it’s the same old song. How long will the associated economic activity last? Where does the final ‘wealth’ end up? Or just the chimera of hope and change? You know where the Stiftung stands.
All of which is to say the looming budget fracas is relatively uninteresting. Cutting the deficit or ‘investing’ in education or even on random projects like high speed rail are beside the point. Without a comprehensive macro economic vision and actual politics to implement it, the budget ‘battle’ is like the old WWF. Which reduces 2012 down to Republican Light vs. Republican Right.
Oh joy.
DrLeoStrauss says
Amazing that it takes 2013 for people to see the obvious. The LA Times asked what we discussed here long ago, here being just the latest.
http://www.latimes.com/business/la-fi-0303-bull-market-20130303,0,7845800.story
With Groupon’s meltdown and Facebook’s face plant, where will the Blodget and Meeker hucksters turn next?
Dr Leo Strauss says
American venture capital reaches $8.1 billion, highest since Dot Com bust.
http://www.cnet.com/8301-1001_3-57472869-92/vc-funding-hits-$8.1b-highest-point-since-dot-com-days/
DrLeoStrauss says
Funny how people blame Facebook for the bubble’s demise. They don’t read this blog or your comments, obviously.
http://news.cnet.com/8301-1023_3-57441887-93/how-facebooks-zucked-up-ipo-just-killed-the-tech-bubble
Sam Lowry says
Wasn’t sure where else to put this recent article from Forbes (yes, Forbes!) about how America=Plutocracy. With a sound thrashing of modern economists as an added bonus. Those crazy cats who wrote the Citigroup plutonomy report in 2005 are looking quite prescient. One wonders for how much longer this view (America=plutocracy) can remain hidden from the mainstream consciousness.
DrLeoStrauss says
Will Americans do anything once it’s unavoidably obvious? 2006-2012 says no. The Democratic Party is institutionally incapable of executing is original political function.
A meaningful political response, if it is to come, apparently requires even more acute social discontinuity to galvanize. Those circumstances, as we’ve discussed here, are likely to occur when oligarchy inevitably disintegrates according to its inherent internal structural weaknesses.
Without meaningful political institutions to channel constructive action history teaches us demos will turn to a Man on a White Horse. It’s this trajectory that makes Obama’s weakness and vacillation so utterly galling. Not because of his alleged failure to deliver this or that immediate preferred outcome. But his accommodation to anti-liberal democratic impulses and oligarchical agendas ultimately delegitimizes organized, constructive politics.
Sam Lowry says
Well said. It really does seem like people won’t see or acknowledge what’s going on until we hit rock bottom (to use the parlance of pop psychology). The displacement of empathy and mercy from our set of core values doesn’t bode well for what the path to that moment will look like IMO. A recurring thought is to go overseas to a country TBD, ride things out (realizing things aren’t going to be easy there either), and repatriate knowledge/capital/etc if and or when Americans decide to be part of civilization again. Kind of a dick move, but there is little sense in sticking around here being the “I told you so” person.
DrLeoStrauss says
More tech-drinking-from-their-own-bathwater seeking a moment of meme attention denying the obvious, the so-called tech-bubble has already faltered.
http://rogerandmike.com/post/15563392521/technology-waves-and-valuations-are-we-in-a-social
Dr Leo Strauss says
USA Today discovers only now ‘IPOs struggle to recover’.
http://usat.ly/tOztVD
DrLeoStrauss says
Groupon and the latest bubble:
http://gigaom.com/2011/11/04/all-the-groupon-ipo-really-proves-is-that-the-bubble-is-back/
Dr Leo Strauss says
DoD turns to VC firms for emerging technology insights.
http://www.reuters.com/article/2011/10/14/us-venture-pentagon-idUSTRE79D60J20111014?
DrLeoStrauss says
Facebook punts IPO possibility to end of 2012.
http://www.ft.com/cms/s/2/2b842146-dec3-11e0-a228-00144feabdc0.html#axzz1XyP6LCIY
DrLeoStrauss says
Bringing the Stupid:
“shervin: Securitizing social impact as an investable asset class is a neat idea. It’s based on Sir Ronald Cohen’s ideas. Met him at @summiseries.”
DrLeoStrauss says
FB IPO 1st quarter estimated at $100 . . .Bn.
http://www.thestreet.com/story/11151426/1/facebook-ipo-could-top-100b-report.html
Dr Leo Strauss says
The Nation just put up their essays “Re-Imagining Capitalism” —
http://www.thenation.com/article/161267/reimagining-capitalism-bold-ideas-new-economy
Dr Leo Strauss says
@Comment Nocera knows for him personally when push comes to shove ‘readers’ (the rabble, defending the elderly) won’t keep him in accustomed lifestyle. Patrons will. Even liberals have to get their foie gras from somewhere, you know?
Comment says
NYT liberal Joe Nocera is willing to throw American seniors under the Medicare bus even though he said he does not think the Ryan plan adds up. Then he turns his compassion toward Russian oligarch billionaires being treated unfairly.
So typical.
Comment says
@Dr Leo Strauss Underwriters know if they can make the corporate insiders wealthy, then all else will be forgiven in a rising tide or expanding bubble.
Dr Leo Strauss says
All too true, keep the players’ money happy.
Dr Leo Strauss says
Mark Andreessen (who just sold his part of Skype) says there’s no bubble. Given his past record, you know you can literally take that to the bank via your Netscape overlay on Windows 95.
http://allthingsd.com/20110601/marc-andreessen-says-theres-no-bubble-but-hes-happy-if-you-think-there-is/
Dr Leo Strauss says
@Dr Leo Strauss
LinkedIn screwed by its underwriters and doesn’t even know it.
http://www.businessinsider.com/linked-in-ipo-2011-5-b
Dr Leo Strauss says
Welcome to the party, pal ! The Economist catches on:
http://www.economist.com/node/18681576?Story_ID=18681576&CFID=170654919&CFTOKEN=88857859
Dr Leo Strauss says
“[The Daily Show] wanted to make me the Face of the Era, and they succeeded. Rick Santelli’s a conservative. Ideological. O.K., I get that. But me? I was very anti-Bush. I’m a Democrat, I’ve got the canceled checks to prove it, and suddenly I’m the enemy? Me? Me?
The old me would have hit Stewart with a chair. I’m proud I didn’t do that. I controlled myself. But maybe I shouldn’t have. Maybe I should have taken the gloves off. When Stewart talked about how his 75-year-old mother lost money in the market, I could have said: ‘Hey, your brother Larry Leibowitz is one of the heads of the New York Stock Exchange. Why didn’t he give your mom advice? Maybe I should have said that . . .
After the interview, [] total strangers would come up to me and say, ‘Jim, I’m sorry.’ That made me feel horrible, people feeling sorry for me. For six months it was on my mind all the time. I hurt so bad. But I don’t really think about it now . . . Actually I don’t.
I feel like I was in a Kesselschlact. You know? Kesselschlact means ‘caldron battle’ in German. That’s what the Nazis called battles of total annihilation, and that’s how I felt. Like a survivor of Kesselschlact.
Jim Cramer on being victimized by The Daily Show (May 2011)
Dr Leo Strauss says
http://techcrunch.com/2011/04/26/groupon-getting-it-in-the-ass-in-china/
The Administration’s ‘Let A Hundred Start Ups Blossom’ people should take note.
DrLeoStrauss says
Do ya think?
http://www.businessweek.com/magazine/content/11_17/b4225060960537.htm
Comment says
Isn’t Maureen Dowd a bit of a bubble herself – still coasting on her personality journalism from a long time ago?
Note she is now going after Nir Rosen – Modo only attacks people when they are down – Judy Miller, Rumsfeld, etc – She waits until they are down, then pounces with safe ridicule.
http://www.nytimes.com/2011/02/20/opinion/20dowd.html?smid=tw-NYTimesDowd&seid=auto
Dr Leo Strauss says
SecondMarket values Facebook at $67.5 billion.
http://techcrunch.com/2011/02/18/facebook-secondmarket/
Dr Leo Strauss says
Obama-Endorsed VC Program Promises 6,000 New Startups, 25,000 Jobs
Uh huh.
http://hothardware.com/News/Obamaendorsed-VC-program-promises-6000-new-startups-25000-jobs/
Comment says
@Dr Leo Strauss
Jamie Dimon could not hide his boredom/disdain when he was trying to explain people on the Hill why banks were being unfairly victimized by the business hating press. We recall he was telling him that Congress was in their rights to hold hearings, but he did not want them to get above their station. Many Congressmen treated him like the way Barton treated BP’s CEO.
Dr Leo Strauss says
@Comment
It’s true. The contempt felt for those living on their salaries on the Hill (staff as well as principals) and their need for campaign cash is dog whistled in meetings or con calls at the Roundtable, Chamber, AFSA, etc. At least when we would be there for meetings – it’s been a while, now. Even when dealing with Phil Gramm et al, who was with them intellectually/substantively, there was never a sense of peer or even higher level, all instrumental.
The folks on the Hill know it, too. It burns but then they hope that maybe the connections will help them out of comparative poverty when they leave.
Dr Leo Strauss says
Obama’s latest emphasis on tech start ups as the key to lowering unemployment another warning sign. His directing money to the sector all but putting WH imprimatur on a new bubble for his electoral prospects. The usual suspects (who stand to benefit directly or indirectly) already primed to jump on the main stage, pick up their pom poms and cheer.
Comment says
Boeing execs got better bonuses than Airbus.
http://www.latimes.com/business/la-fi-hiltzik-20110215,0,442445.column
Comment says
A lot of conservatives in Congress have no idea that Wall Street is taking advantage of their prejudices and ignorance of finance. They are useful, for now.
http://baselinescenario.com/?s=Daron+Acemoglu
Comment says
Boehner is dumbf*** . He has no idea how his inaccurate “America is broke” refrain sounds around the world. Just a schmuck. Talk about blaming America. These dummies in the GOP think blaming America is pointing out the Contras or Savimbi are not saints, but they go around telling world investors America cannot pay her bills.
Comment says
“Truly, and I hold ambition of so airy and light a quality that it is but a shadow’s shadow.”
~Rosencrantz (Hamlet 2.2)
Apposite quote for today’s unions – they settle for whatever Clinton or Obama give ’em. They have no choice. For now, at least.
Comment says
Unions are a shadow’s shadow. No one is scared of AFSCME. People are far more afraid of being pulled over in a traffic stop than they are of nearly any union activity.
This is unfortunate in many ways – but the toothpaste (made in Brazil) is out of the tube (made in China).
Taking apart an early 90s PC recently (almost 1 gig hd) – I wistfully noted the high percentage of American made parts from companies that are now ash. The rest of the parts were Japan and Taiwan.
Dr Leo Strauss says
@anxiousmodernman
Great observations. Indeed unions today are shadows of an exhausted idea. Echoes of a bygone era in the collective political consciousness. Even union reps probably feel it inside themselves.
It is likely to be cyclical. The importance of collective action to re-balance monopoly/plutocratic capital re-discovered. Whether ‘unions’ are the future manifestation or some other socio-political construct. As you note, to function effectively for the future, unions or union 2.0 must be structured, organized and activated independent of the past and relevant for new circumstances.
This ties back to your observations about the race to the bottom for ‘content providers’ by corporate farmers. It’s happening in a lot of economic silos. Clerical work has long been outsourced — how shocking for lawyers to realize they are in many instances clerical and legal research cheaper in India. Healthcare and medicine, too.
Unions 2.0 are years away. Ed Schultz is a vocal supporter of the past and awful broadcast aside we can sympathize. All that detritus must be cleared out.
Today, as more and more Americans see their lives slide backwards into commoditization and prospects vanish as mobile capital seeks the fastest return on capital, it seems bewildering. It will take time for those caught in the race to the bottom to realize the experience is shared and then coalesce.
It will not be painless or even without violence and efforts by the puppet State apparat to crush or intimidate. That’s another part of labor history Americans forget but will re-discover anew.
anxiousmodernman says
Trumka on C-SPAN this morning pleading for more government dough. I mean, yes, I want big infrastructure investment, too, but union members should expect a little more creativity from their leadership.
Trumka related an anecdote to the effect of the following: “My friend volunteered for the census, and with his assignments he got a clipboard, a denim workshirt, and a pencil, none of them made in America!.” So we start up a state-run textile industry to get America working again? Give me a break!
He did propose a mild tax on financial transactions, which I would support, but failed to turn it into a political issue. Instead he totally accepted the other side’s frame, namely “Does the President’s Budget Cut Enough”?
Comment says
More innocent days – Mac 1984
http://www.openculture.com/2009/02/steve_jobs_demos_the_first_macintosh_in_1984.html
Comment says
@Dr Leo Strauss Apple is a ferocious company – but gets away with much because it is cool. Isn’t Gore on the Board? Surprised if he is and people don’t mention that.
Tbilisi says
@Dr Leo Strauss
Also, however note the indignation in the CNET article as if Apple Inc betrayed some unwritten moral code (because if it were written, it would be a law and Apple would be prosecuted/fined). Your feudal metaphor from the Ariana post is correct – Apple is assumed to be a transnational feudal lord, whose manufacturing practices betray the (very one sided) social contract with their workers – we make $6B in profits, you survive the workday in conditions that are not slavery. Deal!
Instead we could view Apple as an inherently amoral profit-making entity that needs to be properly regulated, and in order to be properly regulated it’s easier to keep those manufacturing jobs at home, where they will be subject to our labor laws, not Asia’s. Sounds like a win-win, except of course this would mean less social media on the go.
Dr Leo Strauss says
@rkka
And we leave this behind, too:
http://news.cnet.com/8301-27083_3-20032074-247.html#ixzz1E5L1CE9Z
rkka says
“Two bubbles quickly helped obscure the reality that the American economy no longer creates long term wealth and jobs. First came the fear/threat national security boom followed by the real estate/financial swindle. Net result? No net new jobs created. Underscore that — we are exactly back where we started.”
Yup. According to bls.gov, private sector jobs are back to 1999 levels. The government sector has been the only reliable source of job growth for over a decade, and now that’s dropping too.
This is what we must now do to appease the Gods of Austerity.
anxiousmodernman says
You do see it in the small things. A meanness.
Comment says
Your prescription is wise, but politically impossible for the forseeable future. The vultures and lobbyists are too powerful. Only by indirection can the direction of the economy change. Also – many right wing cultural tropes have embraced declinist policies – Think about how Ohio just elected a Gov who sold his own state worthless derivatives. Then he gets in office and exults in dismantling the one thing that can help a state now lacking in natural advantages – fast mass transit. Kasich. You see it the small things – the embrace of ignorance and fatness as virtues – etc etc
Comment says
As a painful aside – a friend was trying to convince us to buy Amazon when it 1st went public. We were not a close reader of Tom Friedman at the time so when he mocked Amazon’s chances to succeed – we listened and did not buy the stock. Odd – Friedman was a big bubble booster – except for Amazon. We then started to notice how he is always opposite of correct when it comes to the interests of the general reader.