Tag Archives: economics

We are all High Risk now

I’ve heard it all about Trump. I agree with much of it. He is all the bad things you think he is. He is a whirlwind of incompetence. All true. Not in dispute on my end. And yes, we should be very vigilant and very involved, because what he seems to be doing, primarily, is making people very uneasy about the future. But enough of the hot-takes and put-downs and emperor-has-no-clothes memes. It is time to put away the childish things. All the rants, all the ridicule, all the facepalm… all of it. Even if it is just for a minute.

 

Try this: Think about Trumpworld like you were having it explained to you by a financial advisor. Maybe your financial advisor, if you have one. He/She is likely very serious, very focused, and not a political blowhard. He can chat about either party with equal ease. He knows that filtering out the political background noise is essential to making good financial decisions. What would the Trump administration look like if you filtered out the stadium-volume politics? That is what good financial advisors do. The good ones are good because they can look at a proposition without getting too wrapped up in the writ-large politics of it. Trump is not a politician. He has no political background, skills, or even firm political beliefs. What he has done with his life is amass a personal fortune, and a key part of amassing a fortune is learning to lay off risk. If you play with big numbers and you can get someone to reliably take more risk than you take, you will reliably amass wealth at their expense. That’s how a guy who couldn’t make a casino work; who rolled craps on bottled water, vodka, and steaks (I guess American’s couldn’t get on board with those things); a guy who has cratered and declared bankruptcy at least four times (plus other sell-offs and bail-outs); managed to become the President of The United States of America: Laying off risk on potential voters.

 

That’s not all of it, of course. The other part of the Trump mystique is getting people to ignore or minimize the risk he are asking them to take. To make this sleight-of-hand work you have to either misdirect them about the degree of the risk, or you have to get them very focused on some other risk. The mark has to be so focused on that other risk that they overlook the obvious risks they are being asked to take by Trump. That is how you get investors to buy in, and it extends executives, staff, regulators, and whole governments. Reading the room and having a feel for what token of misdirection will be most effective is probably the one thing Trump is really good at. He proved it during the 2016 campaign. He routinely clobbered people with better, or better-formed, political platforms because he could play an arena full of potential voters in a way they couldn’t dream of. Prairie Home Companion, meet Tony Montana fronting Led Zeppelin.

 

The last tie-in to Trump’s success in 2016 is evangelism. Not just Christian Evangelical evangelism, but also the idea of a true believer who is all-in. Apple was showing their understanding of the concept’s power when they added “Mac Evangelist” to their org chart. Trump is a Trump Evangelist. The Best. The Smartest. The King of Deals. And so on… And that nauseating passage aside, Trump is pulling from both flavors of the word, almost equally. In a religious setting the risk is always outside, facing in, threatening the audience. The unbeliever. The heavy metal music. The gangsta rap lyrics. The [insert your favorite secular pleasure here]. The reward the religious evangelist offers is the safety of being inside, away and apart from the external menacing force. Trump knows this play like he knows the buttons on his TV remote. All he had to do is sprinkle in the barest soupçon of old time religion and the audience understood. Inside Good. Outside, Bad. Prosperity Gospel Politics brought to the Presidency.

 

And yet again, there is a huge risk component in Religious Evangelism. [“Again with the risk?” you ask? Yes. Stick with me for a sec] Think about it like your somewhat boring and outwardly apolitical finance guy would. Guys like Joel Osteen are just laying off huge amounts of risk on their flocks, and the house always wins. Trump is doing the same thing, but in his case the flock absorbing the risk is 350 million US citizens who are now finding out that the risks are high, they are real, and there is no way to mitigate them.

You want an example of what kinds of risk I am thinking of? Here ya go: You have rank amateurs running the departments of Housing, Energy, and Education. How do you feel about those three things? Pretty strongly, I’d imagine. If there is a bedrock to western civilization it is housing, energy and education. So who were “the best people” to guide these bedrock agencies? You have a guy who initially refused the job because he admitted not having any pertinent experience (aside from having lived in a house, I shit you not), running Housing. You have a guy with an Ag degree [full stop] in charge of our nation’s nuclear weapons and fissionable materials over at DOE. And lastly you have a woman with no professional education or education policy background in charge of Education… but who’s brother (Eric Prince of Blackwater fame) made a cool billion(z) leveraging the US population’s concept of risk in Iraq and Afghanistan. And, oh yeah, this: did anyone notice that her husband is the founder of Amway. Amway is basically a peak-risk-distribution effort. The company always takes on less risk than their franchisees. Always. The house always wins. Always.

 

So stop thinking about what a braying jackass Trump is. He was one before all of this started. Nothing will change. He will always be a braying jackass. Get over it.

 

I am making the case that we start thinking about Trump as the guy who sees the entire US population as a risk-soak. His presidency is just like every other Trump deal: The less equity you have at buy-in, the more risk you gotta take. And over 95% of the US population does not have the required equity to hedge against Trump. We are faced with the prospects of backsliding on worker protections, civil rights, air and water quality, Social Security, healthcare, foreign relations, foreign economics, domestic economics, and the feeling that a world war is imminent. At the same time we are seeing Wall Street deregulated, energy corporations take over the EPA, and a massive increase in military posture and spending. The payoff is supposed to be a period of sustained economic resurgence. Last I checked the DOW was over 20,000. That was pre-Trump. At the end of eight years of G W Bush it was around 6,500. Talk about selling ice cubes to eskimos! There has been plenty of economic growth in the past 10 years, but it all stayed out in shareholder-land. The money was not used to create jobs, build factories, build coal-fired power plants, and club baby seals for fun and profit. It was used to pay the guys who had been exposed to the least risk in the first place. They are the people who bear the least risk of being without good housing, good healthcare, good education, clean water, affordable energy and good nutrition.

 

While the US Senate deliberates in secret over what version of Trumpcare can get 51 votes, think about the risk you are being asked to take on. Guys like Trump use risk as the basic measuring stick for every major decision. Maybe it’s time we all started doing the same.

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America gets a real-time IQ test

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I’m going to assume that some moderate percentage of the US population could either describe an oligarchy or identify one if they saw one. I don’t think it is anywhere near 50%, but let’s say it is greater than 25%. (But read the Wiki. It’s a good primer on what tipping-point we just crossed)

Now what percentage of them could identify an emerging oligarchy? It would be like saying you can ID an oak tree, but not an oak sapling. Lots of people fall into that category.

What just happened in the US is that an oligarchy sapling just broke through the forest floor, is getting lots of nutrients and sunlight, and before you know it, son, you got yourself a mature oligarchy growing right there in the front lawn. And the bigger it gets the harder it will be to get rid of. How do we know if we have a real oligarchy, and not just a playboy-type with delusions of grandeur? The dichotomous key to political systems will get you close:

You have a billionaire as president-elect. He became a billionaire by extracting moderate sums of money from thousands of people at a time, and then doing it again, and again. What billionaires care about it not whether the Dallas Cowboys are looking good (That’s Jerry Jones’ issue, and he is “special”), or whether their bills are getting paid. They mainly care about other billionaires, their money, and how they stack up against them. So we can check that box. They play “Fantasy Billionaire” the way Joe Six Pack plays Fantasy Football. But with piles of other people’s money. No other billionaires have been elected to the presidency of the US. That is a big bragging point right there. That goes over real big when he gets on the phone with other billionaires AND with other heads-of-state. It’s a win-win. And don’t he know it? It’s Trump, Putin, and a few guys in the UAE. That, as they say, is the list of billionaire heads-of-state. Don’t go looking for their free press or their sterling record on human rights.

And in the case of our current president-elect, Donald Trump, he is demonstrating his incuriosity, thin skin, and sub-par intellect at every damn turn. We don’t have a super-genius billionaire, or even a really smart billionaire. We have a whiny douche from Queens who inherited more money from his daddy than the average American makes in a lifetime. He is accustomed to outsourcing virtually everything. He hires “the best”. (More on that, and how he only hires the best for himself and hires the worst when it comes to protecting the American citizenry, later.) How does a guy like this plan to run a country?

Glad I asked! First, you put military lifers in positions where you want chain-of-command respected, not a bunch of smart-ass sass-back. You only want to hear “how high?” when you yell “Jump”. So you stock Defense, Homeland Security, and Intel with guys who will throw their mother in front of the L-train in the name of chain-of-command. It helps if you have conspiracy theorists with itchy trigger-fingers and an axe to grind. Less motivational work and coercion to waste Trump’s time.

Next, you recruit fellow billionaires who you know will put other billionaires (like the president-elect. just sayin’) first, and pretty much fuck the little guy all day long. That is how they got there. When you find anyone who ever called Rex Tillerson “human rights champion” please let me know. Trump himself has *never* gone on the record regarding human rights (I looked, and if you find something I am all ears). It is safe to say he has never though about the concept other than as a way to tar a “loser” who put humanity over making a dollar. Go find the country that Rex Tillerson has staked out where you have a thriving middle class, lots of manufacturing jobs, cheap top-flight health care… Good luck. If that model was successful they would be like Johnny Appleseed, as opposed to Joey Goebbels.

And Trump has Bannon, who jerks off to photos of Goebbels, so another base covered. This guy is a “strategist” in only the broadest way. He seems to be the worst kind of political apparatchik. The kind who will never be seen in public, or grant interviews, or take any real responsibility. He has his hand up Trump’s ass and it looks like Trump is talking, but you are really hearing Bannon throwing his voice. THAT is this dude’s “strategy”. And as usual, when “strategy” is next separated from “propaganda” it will be the first time.

Next, Lackeys. You cannot have a functioning oligarchy without lackeys. You need dopes who are so far over their skis that they will take whatever direction they get because what the fuck does Rick “Dancing with the Stars” Perry know about nuclear warheads? Nothing. And he ain’t gonna learn anytime soon. The steady stream of agency heads who are incompetent or outright hostile to the charters of the agencies they are being tapped to head is not a coincidence. You want a nice mix of incompetence and hostility. Both is nice.

Like an exterminator examining the mud casings in the footings of your democracy, I hate to tell you this, friend: you got a colony of oligarchs, military stooges and lackeys setting up shop in your house. The fix is to get at it early and maybe in short order you’ll have a problem you can fix with a can of RAID. But for now you gotta be ready to do the hard work to knock this oligarch colony down to size.

 

The Only Thing Changing is the Climate

Bold move by President Obama this week, getting all kind of stabby on greenhouse gas emissions and “carbon”. I will bow to BikeSnobNYC and tell you that “crabon emissions” are what I have on enchilada night…

In a major way, I am not imprressed. Not because the ideas aren’t good, or because they are rehashed, or because they have zero chance of being implemented… but it is that the reason they have zero chance of happening is because the United States is still a wholly owned subsidiary of the petrochemical industry. And don’t you forget it. Setting prices of gasoline, uh, that is their turf. If you want to play that game they will double down on your pathetic carbon tax with $150/bbl crude faster than you can say “gouge me”. The public won’t care who did it, they will pillory the guy who they believe caused gas to top $5/gal. If they wanted that shit they would move to Europe and pay $6/gal, and get healthcare for the troubles.

I’ve probably related this before but here goes: on my first full day in a job dealing with climate and energy policy I joked “fix gasoline at $5 and we can declare victory tomorrow”. And then it happened. Gas hit $5 in almost all major markets in 2007 and the top blew off. SUV sales cratered, economy cars were flying out of showrooms, people were carpooling, public transit saw a ridership spike (even the bad systems)… and you can go check the math with the EIA, gasoline sales and deliveries took a major hit. BUT, that was due to wehat I believe to be massive futures manipulation in energy markets, facilitated by a lenient SEC under the Bush II administration. If there had been a carbon tax driving that pricing you would have the social changes, the consumer changes, and the tax revenue to start building real next-gen infrastructure. Throw in the income tax swap and you would have more money in consumer’s pockets and a nice economic boost in all the other sectors. But instead all we got were record-breaking profits over at Big Oil.

The problem is that every climate scientist, economist, back bencher, tree hugger, knows or should know that carbon tax policy is sound policy. You can swap it against income tax, and it is a win-win. Even nutjob supply-siders on the right nod in agreement. The trick is to make sure you are spending the revenue on leveling the playing field for competing technologies. And doncha know that Daddy Petrobucks hates that shit all day long. It isn’t enough for him to get Billions of USD in free money at the taxpayer expense, and have a captive market, and legalized pice fixing… no, he certainly will not allow sales of his product to fund his competition.

So enjoy the show, but feel free to leave early because… SPOILER AlERT!  The Bad Guy Wins in the End.

SEBAC Wrap

I have avoided any blogging since the SEBAC 2011 agreement firmed up.  I certainly didn’t want to be in the group that was stirring shit up before the vote.  In what some are calling a “shocking” turn of events, the tentative agreement (TA), also known as a concessions package, was rejected under the bylaws of SEBAC.  The reason it was rejected is complicated because the media reporting is consistent in erroneously describing the voting process and requirements.  Simply: Each Union is comprised of Bargaining Units, Each Bargaining Unit represents a separate contract, and is comprised of Chapters.  Each chapter votes on the agreement, and the aggregate votes of the chapter determine how the Bargaining Unit votes.  All the votes from all Bargaining Units determine how that particular Union votes.  Each Union represents a portion of the employees within SEBAC.  For this vote there are two simultaneous standards: 14 of the 15 SEBAC Unions have to vote for it, and those unions have to represent 80% of the SEBAC mambership.  AFSCME represents over 30% of SEBAC, so if they vote “no”, the deal fails. They did, and it did… but three smaller unions also voted “no”.

We know a few things now that we suspected:

  • There were a lot of reasons to vote “no” if you were intent on voting “no”, ranging from immediate pocketbook issues to political gamesmanship
  • We had a lot of people running scare tactic games to swing that “no” vote, mostly political gamesmanship arguments
  • The unions who have always played their own game did it again… they are “special”, they believe they are above layoffs.  Time will tell if they are right.

We also had a few surprises, mainly CEUI voting “no”, and how close some of the bargaining-unit “yes” votes were.

I’ll come right out with what I think made this deal so hard for many to swallow:  Most CT state employees were working under a concession package from 2009, and that had two years of furlough days, two years of zero-increases, and a 2.5% pay increase in year 3, starting July 1, 2011.  The 2011 SEBAC deal took that 2.5% increase back (yoink!), set up another “charlie brown” 3% raise in 2015, and on top of the “concession of a concession” there were long term pension and health restructuring terms.  I think the weight of the cumulative “ask” was higher than SEBAC and OLR calculated, against the 4-year job protection “give”.  Also, despite the weird calculus of the hard-right, state employees are also paying the tax increases passed by the legislature, so some felt doubly dipped-upon.

Even with that analysis, I think the stability outweighed the drawbacks and voted “yes”.  I see not only my own tenure with the State as a public investment, but also that of my coworkers.  As a taxpayer and a state employee I know that the payroll savings are often/always offset by the cost of retraining/rebooting a program.  In some cases the “brain drain” is fatal.  Unfortunately, many people, both within and without state service, don’t see these programs as an investment.  That is a major failing of organized labor, and State government in general.

The idea that the modifications to the 1997 SEBAC collective bargaining health and pension package needed to be addressed now, and were so very urgent and essential to this concession package, is baffling.  SEBAC really fucked this up, along with the helpful folks at OLR.  Filling a 2-year budget gap, with a $1-billion per year price on the head of state employees, was how this stampede got started.  Putting long-term concessions into the deal in exchange for a slightly smaller than $1-billion per year ask by the Governor, was the grease on the rails.  The deal might have passed if it had been just a hard to swallow 5-year wage concession package.  But this lash-up of arrogance and optimism was doomed.  Reworking the SEBAC 1997 agreement (master agreement) would have been a cracking idea for a Malloy second term.  But we are seeing that Malloy doesn’t have that kind of vision.  Everything now, everything his way, or else.

That said, I also consider this entire debacle a massive failure for the credentials and effectiveness of Governor Dannel Malloy.  Yes, we have a budget deficit.  Yes we have 9.1% unemployment.  But balancing the budget doesn’t create jobs: job creation balances the budget.  Dan is in serious danger of failing Econ 101 as his first major act as Governor.  “See Me After Class” stickie, free of charge.  But job creation is hard, and manipulating budget items is easier, so Dan took the easier route (not to mention one in line with the “powers” of the Governor’s office).  What that means to me is that any economic turnaround will be coincidental with his budget balancing act, not a result of it.

But the SEBAC 2011 vote was not about the finer points of economic policy, a revote on the 2010 Governor’s race, ObamaScare, Sustinet boogeymen, or “sending a message”.  It was a ratification vote on a concession package.  I think that message got lost in the month between the announcement of the deal and the actual voting.  Add in the week-long delay between early and late voting unions (AKA Operation ClusterFuck), and it was a perfect storm of “how to miss the forest for the trees”.

Now… I fully expect the “no” voters to get out there and storm the LOB with their ideas that are going to solve the mess they created…  or, will they sit on their entitled asses and bitch?  Wanna piece of that action?!?!  It is looking like the “no” votes were made with no concept of an alternative, but a strong sense of “status quo” and a desire to keep it.  Sure, some people felt that they were burdened more than others.  But another thing lost in the discussion is that both the retirement age bump in 2022, and the health care revamp, came with options.  Want to keep your current retirement age past 2022?  Pay a max of 0.78% between now and your retirement.  Want out of the health maintenance plan?  Pay $100/month and one annual deductible.  That health care deal is, FWIW, something that most of the private sector employees would jump through a burning wall to get.

But wait!

[THIS JUST IN: SEBAC has tabled their vote to accept the results of the voting on the SEBAC 2011 tentative agreement.  “After reporting on their union’s balloting, a motion was taken for coalition leaders to cast a final official vote to accept or reject the agreement. A second motion was then raised to table the vote for 30 days, which was passed by consent.” Sweet Christ On A Crutch… what next?]