The Written Peace: Open Forum of May 31, 2005

The Dark Wraith Forums will have a regular post up tomorrow morning. It's one of those times when a bit of sport can be had at the expense of the economic statistics reporting industry. Two sources, four days apart, report opposite results for the direction of consumer confidence. One of the reporting services is essentially a business lobby, the other is affiliated with a university. Would anyone care to take a wild guess at which one reported consumer confidence rising and which reported it falling? Conflicting accounts such as these certainly give us cause to pause.

In other matters, The Dark Wraith Forums wishes to welcome the host of Cognitive Dissonance, a thoroughly delicious blog that's part of a stellar cluster too often ignored in this part of the Blogosphere.

Some of you have read my beefs about how the giant, soufflé, graffiti blogs ignore Blogosphere Release 2.0. Well, it suddenly struck me very recently that a mainstream is building within Release 2.0, a dominant group of blogs that has some of the best and brightest you'd ever want to find. In some ways, Big Brass Blog is the embodiment of that excellent thing that is happening here in the Second Wave.

But The Dark Wraith Forums does not want to exclude the many extensions of the strong, radical soul at the heart of any meaningful antithesis. In no small part, I must thank Gretchen at The Green Lantern for pointing me, quite unintentionally, to paths that were right there in front of me had I spent even an ounce of energy looking.

A re-post link of the Dark Wraith's Analysis: Seven Principles of Macroeconomics appears in the current issue, hosted at the Fruits of Our Labour blog, of the Carnival of the Un-Capitalists.

And before I leave this entire subject, I must also welcome the several quiet visitors who have recently stopped by from Bella Ciao, a solid alternative source of all kinds of news.


On to minding other matters, the ever interesting Phoenician in a time of Romans tells me that this blog is coming up with nothing but unintelligible code in Firefox. I am doing everything I can to find a combination of settings that causes this to happen, but I have yet to encounter a structure that does the hurtful deed. In fact, I am now under the self-imposed rule that about a quarter of all my work here on this blog in terms of publishing new articles, responding to comments, and doing minor backroom editing is to be carried out in Firefox. This very post is being prepared in Firefox.

I need to hear from people using Firefox. Are you here? Are any of you having a Firefox loading problem with this blog? Have you had any occasion when the Website load took a bad turn that caused you to get a total or partial mess of code?

I swear, this whole Internet thing has been nothing but a headache ever since it started showing up on computers. Life was so much easier during the Ice Age: see mammoth, kill mammoth, eat mammoth. None of this download mammoth, test mammoth for malicious tusk code, ensure mammoth is cross-browser compatible, promote mammoth on search engine Websites, et cetera. Lordie!


Say something here on this Open Thread. Your comments don't have to be particularly witty or even on-topic, especially since there's not really any specific topic. Just hang out and share your wisdom here at The Dark Wraith Forums hotel lounge on this Tuesday night.


The Dark Wraith sweeps off the WELCOME mat.

Analysis: If the Truth Be Told

Among the misconceptions set forth by the new Right in this country is that American labor, largely through union activity, priced itself out of competition in a globalized economy. The argument goes that, in a market economy such as that of the United States, it is only rational for employers to seek the lowest cost factors of production, be they raw materials or labor; and if labor is cheaper elsewhere, then that is where profit maximizing companies will go to secure it.

Economics for Dummies: The Neo-Con Reader's Edition
The proposition that American labor is "too expensive" is simplistic, and here's why. Throughout the 1980s, the United States federal government ran ever larger budget deficits, due in no small part to the Reagan Administration's tax cuts in the early years of the Gipper's first term. Federal budget deficits put upward pressure on interest rates. This is because the United States Treasury is entering global capital markets to compete for lendable funds; and because a sovereign nation will pay whatever rate it must to induce lenders to provide the needed money, the result is higher interest rates for all debt, both public and private.

The price of an American dollar is the interest rate it can earn. So, as domestic interest rates rise, the value of the American dollar increases relative to the values of other currencies whose interest rates are not under the same pricing circumstance. Stronger American dollars means American exports, which are obviously denominated in those dollars, become more expensive in overseas markets. And relatively speaking, because foreign currencies are becoming less valuable as the American dollar becomes more valuable, imports to the United States become cheaper.

In fact, though, everything foreign becomes cheaper, including factors of production!

No, American labor didn't price itself out of global competition; the federal government, through its budget deficits, did that. Factors of production don't willfully commit suicide, particularly when irresponsible Republican Presidents are happy to do the deed as an old-fashioned execution of the labor movement.

Something for Everyone
When U.S. interest rates are higher than those of foreign trading partners, American dollars become very attractive overseas. In fact, they become so desirable that foreign producers will lower their prices just so they can sell stuff to Americans and thereby get their hands on some of those dollars. But don't worry about those greenbacks getting homesick. They'll come back as capital investment since this is where the dollars earn the good interest rates. That's the whole point of what exchange rates and interest rates do to maintain asset flow balance: the short-term asset called dollars flows outward, creating a negative trade balance; then it flows back this way, creating a pretty much equal, positive capital account surplus.

That means foreigners get to own lots of long-term, American assets, like corporations and real estate and piles of government Treasury debt, while Americans get to own lots of short-term, foreign assets, like Toyotas and blenders and computers and Walmart junk. It works out as an equation, and prevailing exchange rates set the stage for this circulation of capital to always stay in rough balance.

A Primer on Factors of Production
When any good or service is created, the production process utilizes a mix of five broad categories of inputs. These so-called "factors of production" are land, physical capital, labor, human capital, and entrepreneurial skill, this last one being peculiar to production in capitalist economies.

Land is the physical platform upon which production takes place. In some cases, lots of land is required; in other cases, very little.

Physical capital—machines, trucks, buildings, etc.—is to some extent and in some industries a substitute for land: for example, service companies can render production in a skyscraper, whereas manufacturing companies usually have to spread out because of the need for horizontal assembly lines. That's why the downtown areas of big cities are dominated by tall buildings housing things like banks, law firms, and insurance companies, whereas the peripheries of those same cities are ringed by manufacturing plants.

Labor is nothing but raw muscle power, brute mechanical energy ready to be set upon tasks put before it. Human capital is knowledge, skill, understanding, and perhaps even wisdom set upon tasks before a person. Labor and human capital are unusual in that labor is always becoming human capital, either through formal training, as in education, or through learning that comes naturally to any beast (with the exception of neo-conservatives, who seem never to learn one tom-fool thing, despite the cornucopia of their past mistakes).

Entrepreneurial skill is the risk-taking, human organization of the other four factors in a combination that will create some output at a profit that compensates the organizer for his or her risk borne. As noted above, this one is unique to capitalist (or so-called "market") economies, although all shades of it show up even in communist economies as underground and otherwise illicit activities.

A Moveable Beast
Many industries locate with factor costs in mind. If it saves enough money, a plant will operate as close as possible to the source of its primary production factor. That means, if a manufacturing process is labor intensive, then companies in that industry will tend to locate, or re-locate as the case may be, where the labor is cheapest.

Now, most people are going to say, "Ah-hah! That's why America has lost all of those jobs to Third World countries. It's just tragic. It's terrible."

Well, yes, but blaming laborers in India and China or blaming greedy American companies misses the whole point. Remember what has been happening for more than several decades: American dollars—and therefore all things priced or denominated natively in those American dollars—have been very expensive. No, it wasn't the unions or escalating minimum wages or skyrocketing benefits in and of themselves that propelled companies to seek cheaper labor overseas: it was the regime of exchange rates that did much of the dirty deed; and those exchange rates were driven by the manner in which the United States chose to manage its fiscal house.

The chain of causality is not that difficult to track, but it certainly doesn't serve the purposes of neo-conservative politicians or the management of corporations to see it that way. Instead, the pro-business forces within this country would rather howl about getting wage and benefits concessions so America can remain, or maybe once again become, "competitive." But if the reason jobs flow overseas is relative currency valuations, wage and benefits concessions have no effect other than to produce a domestic labor force that would be entirely under-compensated were the United States government to have behaved in a financially responsible manner.

Yeah, But What About Illegal Aliens Taking "Our" Jobs
Go back to the value of the dollar. In a world where dollars are more valuable, factors of production will receive their best compensation if it is denominated in those dollars. Now, a machine can't get up and say, "Oh, I'm heading for Topeka because I can rent myself out in dollars, whereas if I stay here Mexico City, I get lousy pesos." Neither can a plot of land say, "I'm pullin' up my sod from here in Haiti and headin' to Miami where people pay for land in greenbacks."

But a person—that really unusual labor/human capital combo factor of production—can do precisely that: it can flow toward the place where its compensation is the best, even if "best" is nothing more than a technical feature of the currency's strength caused by exchange rates. And just as it does nothing to solve the problem of "expensive American workers" by demanding that they accept lower pay and fewer benefits, it does nothing to solve the problem of low wages and good jobs by turning into a bunch of kick-them-foreigners-out xenophobes. The immigrants—legal and illegal, both—are here not because America is the greatest land with the best television shows and the most wonderfully fulfilling jobs on Earth; it's because the American dollar is so valuable that they, like every other foreign importer, are willing to trade what they have at low prices just to have some of those greenbacks.

It's exactly the same dynamic, and it's caused by an America that has for years used the steroid of deficits to live so far beyond its public means that its currency is a magnet for every manner of foreign good that can flow this way.

Slapping tariffs on foreign imports, putting machine gun turrets at the borders, and pasting "Buy American" bumper stickers on Ford trucks doesn't fix the underlying problem. Fiscal discipline does that, and it's not just a matter of cutting every social welfare program that Right-wingers have been just dying to eliminate. It has as much, if not more, to do with constructing a tax system that isn't a candy store for Republicans to smash open for the electorate every time they want some votes.

What Won't Happen That Should
Somewhere along the way, some politician—be it a Republican; an Independent; or God forbid, a real Democrat—needs to lay it out for the American people:

No, I'm not giving you a tax cut. You've had too many. In fact, I'm going to raise taxes, most particularly on the wealthy, not just because they can afford it, but also because it's when they screw up that the most damage gets done that the government has to clean up. And if the rich people say anything, I'm going to rip into them for the bunch of perpetual crybabies they are.

Oh, yes, and about cutting federal spending: we need to chop down a lot of pork-barrel projects. That's always on the agenda. And we'll probably get rid of some social services spending, too, but that's sure as Hell not a priority when we've got so many people doing without in this country. Before we do much cutting of domestic programs, we're going save a whole lot of money by knocking it off with starting wars against stupid little dictatorships halfway around the world. That's too expensive, especially when they get so bitchy about the part where we try to take their oil.

And finally, if any of you stand up and start whining about 'immigration reform', 'fair trade', or 'wage concessions', you're going to get kicked right in the ass, even if you can't pull your head out before my boot hits paydirt.

Saying such things would require the intelligence to grasp what is right and then the bravery to lead righteously.

That means it won't happen. Not in this era, anyway.




The Dark Wraith has spoken.

Special Blog Post: Economics Marginalia

Economics has been called many things: The Dismal Science; Common Sense Made Obtuse; The Incomprehensible Explaining the Inpenetrable; The Insubstantive Incontinence of Dolts in White Shirts...

Okay, enough of that. The point is made: economics is generally boring material handled by boring people. But sometimes, economics has interesting, if somewhat offbeat, information to offer, or it has a funny joke about its practitioners, or it has something important to say should anyone care to listen.

Jokes
Question: How many Harvard economists does it take to screw in a light bulb?
Answer: Just one; he holds it up to the light socket and waits for the world to revolve around him.

Question: ...And does it?
Answer: Yes, of course. We're talking Harvard faculty. Duh!
◊     ◊     ◊
Two economists were walking down the sidewalk when they came upon two neighbors arguing violently over their common fence. The one economist says to the other, "They'll never come to an agreement, you know."

The other economist says, "How can you be so certain?"

The first economist replies, "Well, it's obvious: they're arguing from different premises!"
◊     ◊     ◊
The master economist is training his two young apprentice economists in archery. He brings them to an audience and directs the first young economist to fire an arrow at a target. The young archer misses by 20 feet to the left, killing a wealthy bystander.

The master economist then directs his second young economist to fire an arrow at the target, and this time, the arrow misses 20 feet to the right, killing a peasant bystander.

The master economist exclaims, "Perfect!" upon which shout of praise the crowd hollers, "Whaddaya mean, 'Perfect'?"

The master economist responds, "One of the economists missed by 20 feet to the left, and the other missed by 20 feet to the right. That means, on average, their results were exactly on target!"
◊     ◊     ◊
It seems that an economist was walking along an Arabian beach when he stumbled upon an ancient lamp. He kicked it a little, then he picked it up. First looking around to make sure no one would see him doing something totally stupid, he rubbed the lamp vigorously. Much to his shock, a billowing cloud issued forth from the lamp, and out came a giant genie.

"Sahib!" bellowed the enormous being of legend and lore. "You have freed me from my prison, so I shall grant you one wish!"

The economist looked a little perturbed and mumbled, "Whatever happened to the traditional three wishes?"

The genie replied, "The central genie wishing bank recently restricted the supply of wishes because of wish inflation, so be happy with the one you're getting; and make it now, before I get upset."

The economist thought for just a brief moment, and then he said, "I wish for an end to all scarcity: an end to scarcity of food and water, an end to scarcity of adequate medical treatment, an end to scarcity of jobs, an end to scarcity of factors of production... an end to all scarcity."

The genie roared, "Are you NUTS?! You're an economist! You should know that scarcity is the entire point of economic reality. It is scarcity that creates prices, and the prices then allocate the goods and services to their most efficient end uses. Scarcity is what causes creatures and societies to try different ways of organizing themselves in their efforts to deal with the relative scarcities of material and emotional wants and needs. Without scarcity, the entire biology of life would be fundamentally altered, perhaps even catastrophically!" The genie folded his arms defiantly and concluded, "No. No, no, no. I have the right to deny the first proposed wish of any master; and since I am duty bound to deny any such wish that would so fundamentally change the order of the universe, I hereby refuse you."

The economist looked a little taken aback at the adamance of his wish granter. He said, "I am truly sorry. I think I understand now that wishes should be for small and personal matters that don't disrupt the wider cosmos." So he thought for another moment, then he said, "I know what I want. Since I'm an economist, I want to make an economic forecast just once in my life that turns out to be exactly right. Yes! That's what I want."

The genie didn't say a word; he merely turned away from his master and walked down to the edge of the beach and stared out at the sun that was setting over the ocean. There in silence he stood for what seemed like an eternity before he let out an almost mournful sigh, turned to the economist, and said, "Okay. End all scarcity it is, then."
◊     ◊     ◊
It seems that, when Albert Einstein passed away, he was taken to the line of souls awaiting entry into Heaven. Being an affable sort of fellow, he turned to the woman right behind him and said, "Hello. May I be so bold as to ask you what your IQ is?"

The lady replied, "My IQ is 190."

Einstein's eyes lit up, and he exclaimed, "Oh, that's marvelous! You and I can spend all of eternity discussing the merits of the theory of relativity and quantum mechanics. That's just wonderful."

Feeling quite happy about knowing this person, Einstein looked around her to the next person and asked, "What's your IQ, my friend?"

The man replied, "It's about 170, I think."

Einstein looked pleased and said, "Oh, good, good, good. You and I can spend all of eternity discussing issues of politics and nuclear disarmament and other such matters. Wonderful."

Finally, Einstein looked to the next man in line and inquired, "Excuse me, sir, but what is your IQ?"

The guy looked very ill at ease and muttered, "About 80, I suppose."

Einstein looked down, and after a moment's thought, said, "So... what do you think the economy's going to do?'

Did You Know
The last Republican President who balanced a federal budget was Dwight Eisenhower; the last Democrat was Bill Clinton.

University of Chicago economist Stephen Levitt has found that there was a statistically significant relationship between the lower crime rates in the early 1990s and the Roe v. Wade decision of the United States Supreme Court in the early 1970s.

The federal budget deficit for 2004 was more than $1,400 for each U.S. citizen.

As of 2004, according to the International Database of the U.S. Census Bureau, there were 6.6 deaths of infants per thousand live births in the U.S. Below are the associated infant mortality figures for a selection of other developed countries:
Australia: 4.8
Austria: 4.7
Canada: 4.8
Denmark: 4.6
Finland: 3.6
France: 4.3
Germany: 4.2
Greece: 5.6
Ireland: 5.5
Italy: 6.1
Japan: 3.3
New Zealand: 6.0
Norway: 3.7
Portugal: 5.1
Spain: 4.5
Sweden: 2.8
Switzerland: 4.4
United Kingdom: 5.2


The Dark Wraith wonders how many Americans know the difference between a bad economics joke and a bad joke of an economy.

Inflation Concerns Expressed at Fed Meeting

Minutes of the May 3 meeting of the Federal Reserve Board's Federal Open Market Committee were released Tuesday, and the tone indicated broad concern among participants about what the text referred to as "creeping" signs of inflation and, more importantly, expectations of it building into the economy. Although Fed Chairman Alan Greenspan has been quoted as saying that he favors watching inflation measures that exclude the volatile price changes in food and energy, the language in the minutes seemed to indicate that oil prices were on the minds of those in attendance.

The language in the minutes, traditionally very formal and requiring some interpretation, seemed to indicate that at least some policy controllers at the Fed favor backing down from assurances often given over the past year-and-a-half that Fed rate increases would be "measured" to allow the economy to adapt to a higher domestic interest rate environment.

Dark Wraith CyberGloss

The term "forward looking language (or statements)" means wording, either explicit or implicit, indicating or projecting future actions or events. In corporate finance, it is a formal concept that is even set forth in securities regulations.

 Although there was uniform agreement to continue for the time being to use forward-looking wording in statements issued by the Fed, the minutes went on to note that this current policy of assurances about future Fed aggressiveness in fighting inflation could be dropped if "... either a pause or a step-up in policy" was needed at a later date. Although the sentence containing that phrase included the possibility of a pause in interest rate hikes, few anticipate that the Fed has any intentions of backing down from its fight against inflation, particularly since other wording in the minutes, as noted above, pointed to concerns about inflation not only accelerating, but also embedding itself in the economy. Analysts considered this a first warning shot from the central bank that its current policy of steady, quarter-point increases in key short-term interest rates might have to be abandoned some time in the months ahead.

In other news, stocks fell modestly on Wednesday, partly on concerns about oil prices holding above the $51 level, and partly on vague concerns about the possibility that the Fed may become more hawkish on inflation as the Summer wears on. In early trading Thursday morning, stocks were generally higher, bouyed by an official government report revising the first quarter GDP growth from its initial estimate of 3.1 percent to 3.5 percent.

Dark Wraith CyberGloss

GDP can be considered the sum of consumption, private investment, government spending, and net exports (exports minus imports). Thus, as net exports rise, GDP rises; and as net exports fall, GDP falls, too.

  The upward revision was due almost entirely to final calculations of the trade deficit, which narrowed somewhat more than the earlier estimate had shown. This closing of the trade deficit was an effect of the historically very weak dollar, which made U.S. exports cheaper overseas and foreign imports more expensive on the shelves here in the U.S. However, as the Federal Reserve continues to push interest rates upward, the U.S. dollar will become stronger again, as it has since the first quarter, and this will cause foreign imports to once again become cheaper, thereby widening the U.S. trade deficit, thus depressing domestic economic growth.

As some economists had pointed out, allowing the dollar to become almost Third World weak would boost GDP by stimulating foreign purchases of cheaper American goods. Although the Bush Administration had said that it supported a strong dollar, it did nothing to turn the weak dollar situation around, and it is clear now that the Administration benefited from that cheap greenback in terms of a strong GDP showing in the first quarter of this year. The longer-term challenge to the White House, though, is to be able to sustain economic growth without relying on currency exchange rates to do the work of keeping the economy from slipping into a recession induced by the twin forces of tight monetary policy and corrosive federal budget deficits both driving interest rates upward, thereby suppressing domestic economic activity of both businesses and households.

Special Blog Post: Changes in the Works

The Dark Wraith Forums will return to regular articles tomorrow night. For the past couple of days, your host has been periodically immersed in grading term projects and final exams, then calculating final grades. That task will be completed tomorrow morning.

Beginning tomorrow afternoon, and most likely lasting well into the evening, the blog will be subjected to some re-coding. Comments made recently on other blogs have mentioned the long load time for this Website. One comment included a warning that Firefox crashed during load. All of this has been taken to heart, so some changes will be made, most of them barely noticeable. The signature layout will be untouched, understated in the artful, if perhaps somewhat grim, beauty that it has. Most of the changes will have to do with javascripts that tend to take quite a bit of time and processor muscle for the average computer to pull.

Again, though, none of the alterations will in any way affect the joy experienced in coming to this respite from the mundane, tangible world.

Now, suffer your host a recommendation. Some of you may already know about this, and others of you may already have tried it and decided you didn't like it, but it's worth mentioning, anyway. If you're using Windows, particularly Windows XP, you might want to try something called ClearType. It's more or less a pre-installed plug-in (at least in XP) that you turn on by going to Microsoft's ClearType Tuner site, which will take you through three screens: first you'll turn on ClearType on your computer, then you'll select the appropriate monitor color set-up (which is almost always RGB and not the other), then you'll select from six possible font rendering strengths. Generally speaking, you'll probably want to select either the strongest or the second strongest because ClearType can have a slight blurring effect, especially on monitors that aren't very high-end jobs. The stronger the rendering of ClearType, the less noticeable this blurring (or "ghosting") will be; however, you might want to try the second-highest, rather than the highest, setting just because of the stress on the eyes created by the cleartyping at full power.

The payoff for using ClearType is pretty evident: text characters will no longer have jagged and indistinct boundaries. The effect is most striking for typefaces at small and very large sizes. At first, the change is somewhat disconcerting, and that blurring effect might be bothersome. Although ClearType was promoted primarily for laptops with LCD screens, its use and popularity has expanded to traditional monitors. Give it a try; if you don't like it, you can always go back to the site and re-select the rendering strength or just turn it off.

On to another note, some of you might have noticed that trying to access The Dark Wraith Forums yesterday took you to a screen that said the Website's bandwidth had been exceeded. My immediate suspicion was that the blog was under a flood attack to blow the bandwidth, but the Web hosting service techs assured me that it was no attack: it seems The Dark Wraith Forums has honestly earned its way to needing more bandwidth than is provided to run-of-the-mill Websites. So, with some glee and a small measure of additional funds, this blog now has enough bandwidth through which to move a herd of cattle.

Have your say, here. I shall be in and out tomorrow afternoon and evening as I check to make sure my re-coding hasn't caused a catastrophe. And please, for Heaven's sake, if anything noticeably good or bad is happening to your browser's rendering or loading of the blog, let me know. I have no desire to make the kind of coding error that would actually prompt a bovine stampede.


The Dark Wraith opens the range.

Update
Changes to The Dark Wraith Forums are now complete; and at least at first blush, the blog is no worse for the wear.

As noted above, the main goal of this exercise was to decrease the load time for the Website. To this end, the javascripts were simplified, and certain features were moved from on-load to on-demand status. Specifically, you'll notice that now, over in the sidebar, you can click on a button and the ShortNews tickers, which used to be clear at the very bottom of the blog, appear as a nice pop-up window. The same is true of the stock and market tickers. This puts these features in a convenient place, and it makes both the blog, itself, and those features load more quickly since javascripts aren't fighting with each other to dig foundation and initialize all at the time you come to the site.

A few other changes won't be noticeable at all. One of them is that a javascript distributed by blogrolling.com has been eliminated. Although the record of links will still be maintained at blogrolling.com, and although bloggers can still blogroll The Dark Wraith Forums via the hyperlink in the sidebar, the blogrolling javascript that created a list of blogrolled sites was problematic: at best, it increased load time for the whole blog; and at worst, when blogrolling.com was having server problems, that javascript's failure to initialize could crash a whole blog that was trying to run it.

On another matter, I must thank Mr. Goat for noting that the ClearType Webpage provided above is causing grief for some users. Old White Lady confirmed this, but both indicated that they were successful in turning on ClearType by using Microsoft's ClearType Tuner PowerToy, which is a downloadable utility. Fortunately for my hide, it sounds like they both like what ClearType has done for them. (It's always a little scary when something I recommend turns out to be a fiasco for those who try it.)

So there you have it: The Dark Wraith Forums has been tweaked ever so slightly to make the entire experience of coming here to hang out even more enjoyable than it was before. Now, someone please tell me whether or not the alterations have, indeed, had the intended effect of making the blog load more quickly than it did before.


The Dark Wraith awaits.

Analysis: Fire and Seeds

This is a college town: a private college, a state university, something marginally better than a diploma mill, and a community college are all located within about a five-mile radius.

The town is divided into the visible, reputable, upper-middle class and the less visible, but far larger, class that isn't. The better people for the most part work in middle or upper management at one of the several huge, multi-national services companies in town. Everyone else gets by. The layoffs at the big factories on the outskirts of town have left a quiet wasteland of older people trying to find work and younger people trying to find a future.

The bright kids from the right side of the tracks go to the state university, or they leave town entirely. The rest of the kids find work where they can, and many of them stop by the community college on their way to adulthood. They join the ranks of older people taking classes because they, like the youthful students, believe that the key to a job—a real job with permanence and benefits and meaning—lies in education. Many of them, young and old alike, vow to go on to the state university to complete four-year degrees. Most won't.

The people who attend the community college are, for the most part, trying to lay patches on a shambles of the education they have already received. Young and old together find the task terribly difficult. Studying productively hours at a time is just not in their nature and not in their backgrounds. Attending classes every day isn't either. Showing up for exams is not an absolute. Cheating is not a matter of ethical proscription; it's just a matter of not getting caught. The community college sells them all a bill of goods, and some rise to the challenge, but others simply cannot. At best, though, from this place will come some graduates who will go on to the state university or to a technical school and eventually get a job that pays a marginally living wage.

Between the old and new wings of the main building where classes are conducted is a big smoking area. There, the people gather; and there, the conversations among the students paint a broad canvas of the lives these people have and the lives to which they aspire.

So much of what the young men talk about is war. Many are already in the Guard, or they are about to enlist, or they're back from a tour of duty. They talk about other things; but a great swath of what animates their conversations has to do with war. With their culturally acceptable crew cuts and they're almost uniform-like clothing, they go on and on about war.

Three young men are talking out there, and the one young man, who's just enlisted, says, "Fuck, yeah. I'd fucking shoot 'em. They shit on themselves! Did you hear about that?—they shit on themselves when you lock 'em up!" The other two are snickering and nodding their heads in agreement.

Another young man—every bit the square-jaw, flat-top, muscles-on-top-of-muscles Marine—sucks hard on the butt of his cigarette while he grumbles about the female soldiers in his company having sex with their superiors, then refusing to do any work, and no one will punish them. He gets off that subject and starts talking about how the Marines don't do bad things and screw up all the time like the Army people do: Marines are disciplined, trained warriors; and Army people are nothing but a bunch of worthless junk that never thought they'd actually have to do anything for their weekend-warrior paychecks and college grant money. His eyes brighten when he's asked about weaponry. "You guys didn't have the 'Saw' back then, did you?" he grins. A little prompting gets him to describe it: sort of a cross between an M-16 and an M-60. "It's sweet."

He doesn't even make it to the final exam before his unit's called back. An early, hastily written final gets him the "A" he probably didn't quite deserve.

A slightly older student is always out there before and after class. He's a full-fledged veteran. As the semester goes on, his struggle to find a job takes a more and more noticeable toll on his demeanor. He stops talking about what he wants to major in when he goes to the state university. He talks more and more about how good it felt to be out in the field, to be among his buddies, to be among weapons with their awe-inspiring power. By the end of the semester, he's gone to the recruiting station to cut a deal to re-enlist.

Another veteran isn't too talkative. Outside in the smoking area, he stays mostly to himself, but sometimes he'll talk about his truck and his new son. He chain smokes while he sits, leaning forward with his hands on his knees, staring out across the corn fields beside the campus. At one point, after all the other kids have gone inside for their next classes, he takes one last draw on his cigarette, and he mutters something about what a couple of young, loud pups were saying.


The culture of these males just oozes a deepening affinity to what the neo-conservatives have done to re-tool America into a war nation. The economy is failing them, the world of high and broad knowledge is pretty much unavailable to them, and the prospect of a country at peace is uninteresting to them. But despite all that should be telling them to fight for change, to insist upon and demand a civil society that provides abundantly for its people, these men line up to embrace the very mentality that sets upon them the boot of want and despair.

This time of war is what gives those young men their meaning, their hope, their focus. It's all an abstraction to people of better means: it's flag-waving nationalism for America on the march, or it's wholesale revulsion at the lies breeding the monstrosity of it all. But for the kids there at that community college, it's the way out of the slow stew of economic and social Hell that awaits them in lives that promise to otherwise go nowhere and mean nothing.

There's some of this at the state university, too; but there's something else going on, and it's even evident in small ways at the community college. It's very much like the mid-1960s: most of the kids wear their hair butch-cut short and talk a fairly hard conservative line while doing a whole lot of unconservative things. At first blush, everyone looks just about the same as everyone else.

But then, there's that fringe group.

Looking closely at the young people scurrying between the buildings, shock of all shocks, long hair on a few young men is making a comeback. So is that avoidance of the tough-talk boy groups in the smoking areas and the hallways. So is that almost cautious, imperceptible excitement of engagement when they realize that the professor is unapologetically and unrelentingly chewing into the dominant media's perspectives on what's happening in the world.

Once in a while, they'll even let a professor in on their political activism: underground newspapers, blogs, the coffee shop where they get together. They don't talk too openly, but they know what they're doing. They're dabbling in all things counterculture: anarchism; Marxism; strangely defiant music; variant art and comics; and even deconstructive intellectualism, that thing to which they were denied exposure throughout their entire educational experiences. They're exploring themes and people and places and ideas that no one in their entire lives told them existed; and the more they learn, the more their alienation is channeling. Yes, some of this has been going on all along; but now, the faint smell of critical mass is in the air. It's still a long journey from here to where the open clashes start to come.

But come they will. And they will be every bit as nation-wrenching as the last time the kids got sick of the lies and did something about it. All the older people can do is sit back and choose a side. Or maybe be a professor who shows up at the coffee house to listen to them as they become the hope of a better future.

And about what that quiet veteran muttered, the one who didn't talk much except about his truck and his new son: he'd been listening to a couple of young men nearby blabbing excitedly about their recent enlistments and going over to Iraq. What the veteran muttered was, "Dumb-asses."


So it begins. And we all know where it ends.






The Dark Wraith has spoken.

The Written Peace: Open Forum of May 20, 2005

The Dark Wraith Forums herewith offers a thread for discussions of any matters that strikes the fancy of new visitors and regulars. Your host must travel to another state to stay until Sunday evening, at which point he will return, anticipating that the hotel will be in the same condition in which he left it. It is expected that everyone will conduct matters here with the dignity, the focus, the sobriety, and the decorum that have come to be the hallmarks—nay, the legacy—of this reputable resource of responsible writing.

Besides, I'll have access to a computer every now and then through the weekend, which means I can check in to make sure the shenanigans around here don't head down the all-too-common path to hooliganism. That's right: hooliganism; it's the number one cause of blog blowout.

At the end of the evening, turn out the lights, shut off the coffee pot, and put the cat out (provided, that is, that the cat is on fire).


The Dark Wraith hits the highway.

Special Analysis: Of Crystal Balls and Yield Curves

The recent upsurge in stock prices has given many in the mainstream media cause for celebration, appearing as it does to be a sign of a strengthening and healthy economy. Implicitly, the message is that the neo-conservative economics of massive federal budget deficits caused by round after round of tax cuts coupled with a war of opportunity have created a growth environment. Aside from the minor annoyance, largely if not entirely downplayed by the mainstream news media, of an official unemployment rate that has remained persistently above a historically high five percent, the good times seem to be just about unstoppable.

The only cloud on the horizon seems to be the Federal Reserve Board, which last year declared an end to its "accommodative policy" of printing money to finance the Republicans' excesses of spending beyond tax revenues. The Federal Reserve did this because, if the money supply grows faster than the real growth rate of the economy, the result will be inflation. Since early in the Bush Administration, the Federal Reserve had been more than a little helpful to the radical Republican agenda; and it is in part a tribute to the two decades of low inflation before the 21^st Century that markets did not react before now to the growing overhang of dollars that were filling the economy for Mr. Bush and the neo-cons. But recent, modest increases in the consumer price index and the producer price index pointed last year to growing inflationary pressures, and so the Fed began to tighten the money supply using its available tools.

How to Be a Central Bank
The price of money is interest rates. If the supply of money becomes relatively more restricted, its price will rise. That means the Fed's contractionary monetary policy will cause interest rates in the economy to go up. However, the Fed has direct control only over short-term interest rates: it sets two key rates, and it directly manipulates the very important yield on short-term government debt obligations. The way it does this second exercise is by using Treasury bills (short-term government debt obligations) as trading instruments with banks. When the Fed wants more money in the economy, it buys Treasury bills held by banks: the Fed pays the banks with cash money, so the money supply in the banking system expands. On the other hand, if the Fed wants to drain liquidity out of the banking system, it sells Treasury bills to banks: the banks pay cash money to the Fed for those T-bills, and that means less money in the banking system. These buying and selling exercises are called "open market operations," and they're done every day. These OMOs are the primary means by which monetary policy is operationalized.

So the central bank of the United States of America is right now carefully draining liquidity out of the economy to the end of giving the economy, through its growth, an opportunity to absorb the overhang of greenbacks. The danger is that, if interest rates rise too much and too fast, the economy will suffer: businesses will stop borrowing to expand operations, consumers will stop borrowing to buy big ticket items, households will start putting too much money in savings accounts instead of buying stuff, and the American dollar will become so strong overseas that no people in other countries will be able to afford our exports. It, therefore, is a balancing act for the Fed: contract the money supply too slowly, and the inflationary pressures continue to build; contract the money supply too quickly, and interest rates rise too much and too swiftly for the economy's participants to adapt without creating a recession. Everyone of good will hopes that the central bank can do what it must, but at the same time do so with judicious caution. To stop the inflation before it becomes embedded in wage and price expectations, the Fed is now going about what should have been its sole mission all along: "ensuring the stability of the aggregate price level," which is technical terminology for keeping inflations and deflations from ever happening.

Recall above that the Fed controls only the short-term interest rates in an economy. It sets the largely symbolic "discount rate" at which it would lend money to a bank; and it sets the "Federal Funds rate," the rate at which banks may lend money to one another. Far more importantly, though, through its open market operations, the Fed sets the rate on short-term Treasury bills, those highly liquid, short-term instruments used by the federal government to borrow billions of dollars in quick cash. When the Fed buys these securities from banks, that means the demand for them is increasing, which drives their price up. On the other hand, when the Fed sells these Treasury securities to banks, that means the supply of them in the banking system is surging, which causes their price to drop.

Now, here's the part that can confuse people who aren't familiar with finance: when the price of a bond goes up, its yield falls; and when the price of a bond goes down, its yield rises. This isn't some theory; it's just a mathematical fact, and following are two examples to show it. Keep in mind that a one-year Treasury bill is bought at some price less than a thousand dollars, and in one year, the T-bill matures and the investor is paid exactly a thousand dollars.

Let's say the price of the T-bill is $970. That means an investor pays $970 now, and gets $1000 in a year. Hence, an investment of $970 earns $30 in interest, so the yield on the investment is $30÷&970, or about 3.09%.

Now let's say the price of the T-bill falls to $960. That means an investor pays $960 now, and gets $1000 in a year. Hence, an investment of $960 earns $40 in interest, so the yield on the investment is $40÷$960, or about 4.17%.

There it is: a bond price of $970 means a yield of 3.09%, but a bond price of $960 means a yield of 4.17%! As prices of bonds fall, their yields rise, and as prices of bonds rise, their yields fall.

When Yield Curves Misbehave
Now comes the part about what's going on in the American economy today. The Fed is selling lots of T-bills to banks. This drains liquidity from the banking system, which drives interest rates up. At the same time, because the Fed is increasing the supply of short-term Treasury instruments in the banking system, the price of T-bills is dropping, so this is pushing the yields on those T-bills upward.

In an ideal world, as short-term rates—the ones the Federal Reserve can control through its operations—go up, long-term yields and rates should march up pretty much in lock-step, since long-term rates should have the short-term rates embedded in them, along with some extra points for longer and longer commitments of the money. In other words, in an ideal world, the so-called "yield curve"—the graph of yields on various maturities of Treasury securities against their terms to maturity—should be a gently rising arc, starting at the yields on short-term T-bills, and rising fairly smoothly upward to mark the yields of the intermediate-term Treasury "notes" and on outward to the truly long-term Treasury "bonds." At right are recent snapshots of the yield curve. Each one of them, taken by itself, is not unusual on its face: each one has the classic, upward arc of a normal yield curve. The troubling part is what the yield curves look like taken all together because the long-term yields having been quite noticeably dropping, which could happen only if the prices of those long-term instruments were rising. The problem is that the United States government is borrowing billions and billions of dollars, which means the Treasury Department is selling stadiums full of long-term T-bonds. With the supply of T-bonds hammering upward, the price of T-bonds should be falling, which means the yields on T-bonds should be rising. But right there are those yield curves, and there is no mistaking it: the yields are not rising; they're falling. Something is causing the prices of Treasury bonds to keep rising, thereby pushing down the long end of the yield curve. So who's doing this? Investors.

Domestic and foreign investors are buying out on the long end of the government's debt securities; and they're getting the money to do this from several likely sources. Foreign investors are using the greenbacks they've earned from selling cheap stuff to Americans; and domestic investors are getting the money from bailing out of the short end of the yield curve. The recent surge in stock prices has been some of those same proceeds being thrown into equities, which are in some respects nothing but infinitely long-maturity debt obligations, anyway.

Now, there's nothing wrong with this. It's a little weird to see the yield curve flattening, but it's not a disaster. Unless...

Unless What?!
If the long end of the yield curve goes below the short end of it, the result is called an "inverted yield curve"; and it's a fairly rare animal. More importantly though, sometimes—not always, but sometimes—inverted yield curves precede recessions.

In fact, five recent recessions have been preceded by inverted yield curves. Count 'em: five.

Looking once again at that yield curve as of yesterday, it is obvious that the thing isn't inverted. And it might very well be the case that it never will get to a full inversion. And even if it does get to a full inversion, that certainly doesn't prove that a recession will occur: the yield curve has briefly inverted in the past, and the economy has subsequently dodged a serious downturn.

In other words, it's not something to get worried about. Certainly not yet, anyway.




The Dark Wraith encourages all of you to have a bright and hopeful day.

The Written Peace: Open Forum of May 17, 2005

Upon this good night, an open thread is offered in consideration of the rather heavy load the last couple of threads took on topics about the economy and about how the government uses old and rather bad statistical methods to "adjust" data. It would appear that many people do not know that raw price increases are no longer used to calculate the month-to-month rate of inflation. The good news is that this means people, in their minds and in their hearts, really do still believe their government. The bad news is that this government can still rely on that faith at the end of the day.

The daunting task for economists working on ways to torture data is not in coming up with theoretical reasons for making adjustments; and it is not difficult to do the alterations of raw data in such a way that something like inflation at the consumer and producer levels looks much tamer than it really is. The difficulty comes when the actual economy—the place where people work, consume, and plan for the future—turns sour. Although the mainstream media has been more than helpful during the Bush Administration in securing the people from many problematic results of neo-conservative policies, a recession is somewhat difficult to hide. It is not, however, impossible to do so.

The Analysis posted just below explained what causes some recessions and how people can tell that one has a good chance of coming in spite of what the Administration and the media say. The idea has gained some popularity that the world is now somehow so different that old rules don't apply: a government can run massive federal budget deficits without consequence, macroeconomic business cycles don't happen anymore, and deep recessions cannot occur. Readers of that Analysis might have learned a little economics, and with that knowledge, they have some tools by which they can judge for themselves if the world is now really so different that the old-fashioned body of knowledge about how economies work can be set aside.

But readers must keep in mind that neo-conservative economists bear one unmistakeable belief of their predecessors, the Classical economists: so long as the economy is on a long-term growth path, the short-term—with its recessions, depressions, unemployment and attendant human suffering—does not matter. It just doesn't.

The neo-conservative radicals should hope that their new world has truly come, a world where only the very long term has sway in public policy. If they are wrong—if what happens tomorrow, next month, or in the coming few years really does finally matter to people—then those neo-conservatives will learn something important when their gallows are built.

The hangman does not wait for the long run.



Write what you have to say upon anything worthy or unworthy of comment: at The Dark Wraith Forums Hotel and All-Night Diner, just about everything is interesting to someone.


The Dark Wraith flips on the OPEN sign.

Analysis: Seven Principles of Macroeconomics

The Bush Administration has avoided recession to date largely because, from shortly after the inauguration, the Federal Reserve created money at a faster rate than the real growth rate of the economy. When the Federal Open Market Committee—the monetary policy arm of the Fed—put an end to this last year, it said that it had ended what it called an "accommodative policy." In plain English, the Federal Reserve had been printing money to finance the neo-conservative excesses of war and tax cuts. In the absence of any self-discipline by the Republican-controlled Congress, expenditures have been exceeding tax revenues year after year, creating record budget deficits that stand in stark contrast to the last years of the Clinton Administration, when the federal government ran budget surpluses that were allowing the United States of America to begin a long, slow process of paying down the national debt, which had skyrocketed during the Reagan Administration.

To clarify where the American economy stands right now, several myths need to be put to their everlasting place of rest; and the best way to do this is to affirm principles of economics. These principles, by the way, are not subject to debate; they are not cause for argument from alternative perspectives; and they are certainly not going to go away because of some "new economy" invented in the fertile minds of neo-conservative radicals clutching their positions of power, their lifer status at think tanks or in academia, or their awards and accolades from their fawning peers.

Principle 1: The Cause of Inflation
Creating money at a rate faster than the economy can absorb it creates inflation. More importantly, it is the only process, under normal conditions, that can cause inflation, which is a rise in the aggregate price level of an economy. Inflation is not caused by the price of one good or service rising; inflation is not caused even by the prices of a bunch of goods or services rising.

And inflation is not caused by an increase in wages. Most notably, raising the minimum wage is not "inflationary," and anyone who says otherwise is just plain wrong.

If prices of goods or factors go up in one sector of the economy, consumers and business will substitute away from the products and factors whose prices are rising to the extent possible; and to the extent that they cannot get away from those more expensive things, they'll just have less income to buy everything else. It is only when the Fed accommodates a price rise in one sector that the substitution and income effects don't deal with the situation. When the Fed pulls a helpful little stunt, it's called "monetizing a price shock," and it makes everyone feel okay for a while; but ultimately, all prices go up, and everybody is back to square one. The Fed's history of providing abnormal liquidity is long and illustrious. In the lifetimes of the most of the readers of this article, the Fed has graciously "provided liquidity" for the Arab oil embargo of the early 1970s, the stock market crash of the late 1980s, and the tragedy of September 11, 2001.

Principle 2: Budget Deficits Do Matter
If the government cannot pay for its expenditures with tax revenues, then it must borrow money. It does this by selling Treasury securities of various terms to maturity. Neo-conservatives claim that federal budget deficits don't matter: since the Treasury securities are backed by the full faith and credit of the United States of America, the government will not default, so there is no need to worry about mounting national debt accumulated through years of fiscal irresponsibility. Some even point out that, as a percent of the Gross Domestic Product, the federal budget deficits are actually fairly modest compared to the debt as a percentage of income of many households.

These arguments are silly. When a household borrows money, regardless of how much, the effect on capital markets isn't just minimal, it's nil. A household simply cannot borrow enough to have any impact whatsoever on the global supply of lendable funds.

But a nation the size of the United States can; and more importantly, it does. Hitting the global capital markets for hundreds of billions of dollars year after year has profound impact not just here in the United States, but everywhere on Earth. The United States will pay whatever interest rate it must to command the money it needs. That means everyone else—from the family borrowing for a new home to the small nation needing money for economic development—must not just meet those interest rates being paid by Uncle Sam, but exceed them, since no other borrower's IOU on Earth is as safe as those Treasury instruments.

Principle 3: Lunch is Served, Sir
But interest rates were so low for a long period of time during the Bush Administration. These low rates propelled a decent economic expansion. How could it be that federal deficits should have been pushing interest rates up, and printing money should have been causing inflation, but neither of these things happened?

Recall from above that the Federal Reserve was providing an "accommodative" monetary policy for pretty much the entire first term of Bush Administration, effectively printing money to pay bills that should have been paid with hard tax revenues that the Republicans pandered away with one round of tax cuts after another.

Here's the key: interest rates are the price of money. Think about it: to give up using money, a person gets interest on a savings account; to obtain money in excess of income, a person must pay an interest as a fee for having that extra dough. So, when the Federal Reserve pours shiploads of money into the economy, it's doing nothing more than increasing the supply of those greenbacks; and as the supply of anything turns into a flood, its price will go through the floor.

Ah, there's the ticket, then: all that excess money the Fed was cranking out was driving the price of money—interest rates—through the floor, and this was feeding a nice little economic expansion. So even as the Republicans were putting pressure on global capital markets, which should have been pushing interest rates upward, the Fed was pounding out the greenbacks to keep domestic interest rates low.

But why didn't all that money create inflation before now?

Principle 4: Foreign Toasters
"If Americans would only save more money..." or so the whine commences about the low domestic savings rate. That's disingenuous on its face: with domestic interest rates riding rock bottom in recent years, no American in his right mind is going to commit a whole lot of cash to a hole in the ground from which no consumption pleasure can be derived. More to the point, anyway, the cheap imports give Americans a perfect vehicle for saving money while consuming it.

When a dollar goes to a foreign country in exchange for an import, that dollar must eventually return to the United States. This is the necessary balance of capital flows: a short-term, liquid financial asset like a greenback going out must roughly be matched by a long-term investment coming back. The short-term side of the equation is called the "trade account," and the long-term side is called the "capital account" (well, sort of). A negative trade balance must be matched by an equal, positive capital inflow. Thus, by American consumers buying foreign goods, they are effectively saving money in foreigners' central banks; and then those foreigners use the dollars to invest here. And there's one great big, giant target for investment that will offer whatever it must to get the money it needs, and this behemoth needs to borrow lots and lots of money because it can't keep within its budget.

That's right: consumers buy imports and send dollars overseas in the transactions; then those dollars come back as foreign financing of the United States government's budget deficits! And the Americans who are buying imports really are the source of those funds that ultimately go to finance the excesses of the Republicans. The Americans are saving in overseas central banks; and instead of drawing interest, they're getting goods at a discount to what they'd otherwise pay if this capital flows balancing mechanism weren't needed.

Principle 5: That Lunch Wasn't Free, Sir
The Federal Reserve Board has many duties. It is the regulator of banks, it is the lender of last resort to banks, it is the agent of the Treasury for the printing of money. But in its role as the creator and enforcer of monetary policy, it has one and only one job: the maintenance of the stability of the aggregate price level. Period. The Fed is not to trade off the stability of the aggregate price level for anything—not to help the economy out during a rough patch, not to ensure that Republican presidential candidates get elected, not to kill off "irrationally exuberant" stock markets, not to "accommodate" irresponsible tax cuts and wars.

The Federal Reserve is to prevent inflations and deflations from occurring. And when it strays from this path, as it has to prop up the Bush Administration and its shopaholic allies in Congress, it must eventually mend its ways and in so doing proclaim its virtuous duty as the inflation fighter.

Well, here come all of those greenbacks, fresh from their overseas tour at famous central banks around the world. Billions and more billions of them seeping back into the U.S. economy, in their excess making each one worth less and less, therefore causing dollar prices to rise to reflect the eroding value of each one.

The Fed must clamp down on the money supply by lowering its growth rate to something less than the real growth rate of the domestic economy so that the real economy can slowly sop up and get some use out of all those extra bucks.

But remember from above that interest rates are the price of money. Just as surely as interest rates should fall as the supply of money becomes excessive, interest rates should rise as the supply of money gets squeezed.

But that creates a bit of a problem. Rising interest rates are the great killer of economic activity: households won't borrow as much for big ticket items, so businesses will start seeing their inventories accumulating, which will make them cut back on production, which will mean layoffs, which will mean households will have less income, which will mean less buying of more modest goods and services, which will mean layoffs spreading out of manufacturing and into service sectors, which will mean...

Principle 6: The Heartbreak of Recession
As if this scenario isn't grim enough, the labor market in the United States hasn't been all that great for quite some time. President Bush and his minions tout the economic expansion,but seem to be pretty quiet when it comes to that rascally unemployment rate that stays above five percent officially and is some ways higher if discouraged workers are tossed in for good measure.

The great shift in the paradigm for the new breed of conservatives is that recessions can't happen because the over-accumulation of inventories lead-in doesn't happen anymore. Companies are just too darn good at keeping inventories from getting out of hand, what with all of the computerized management systems and just-in-time ordering and the like. But the key has been the sharply lower use of permanent stocks of labor: keeping workers at the farm is inconsistent with flexibility in production, so when they're really not needed, it's better if they can be let go on a moment's notice if at all possible.

The problem is that, once production has been re-aligned for such flexibility, there's not a lot more that can be done once the consumer demand dries up. The paradigm shifts right smack back to where it started, except that there's no wiggle room to adapt to recessionary demand pull-back. The tree that was flexible enough to bend to the ground in a breeze finds the hurricane a good reason to go, "SNAP!"

Principle 7: What Happens When There's No Parachute
Now normally, the federal government could step in when the economy turns sour. Jobs program, extra spending on social stuff, maybe more unemployment benefits, more money for higher education and training programs, a tax cut, perhaps even a decent little war.

Oh, that's right: the federal government has spent itself into a hole, so borrowing more money might push interest rates up even more, which would push the economy into an even deeper recession. Besides, the Republicans are ideologically opposed to make-work jobs programs; and stimulating the economy with another round of tax cuts would just drive the federal budget deficit into even worse territory.

Fortunately, there's always a good war that could stimulate the economy.

Oh, that's right: the United States can't afford another war; and anyway, the armed forces are up to their necks already with Afghanistan and Iraq. So even though we really should plow North Korea and Iran back a couple of decades before they get enough nukes to start mopping their respective regions of the world with threats of nuclear annihilation, we can't.

Well, then, it looks like a no-holds-barred recession is on the agenda.




The Dark Wraith has spoken, and having spoken, hopes his readers are all of good cheer, now.

Both First-Time and Continuing Claims for Unemployment Benefits Rise

The Bureau of Labor Statistics this morning said that first-time claims for unemployment benefits rose during the latest reporting week, moving against analysts' expectations that they would fall. The rise to 340,000 first-time claims was the third up-tick in a row and indicated a softening jobs market.

Adding to concerns about weak demand for labor, continuing claims for unemployment benefits rose by 15,000, the second consecutive increase. However, the four-week moving average of continuing claims for unemployment benefits actually fell, an odd mathematical result that cannot continue to occur for more than a few weeks. The sustained rise in first-time claims coupled with the push upward in continuing claims is of concern to some economists, but the continuing claims rising for two weeks in a row while the moving average of those continuing claims is falling could be an even more important sign of trouble ahead: this moving average has now dropped into the same range where it stood right before the last recession.

Dark Wraith CyberGloss

A four-week moving average uses the average value of the current week's number and the three preceding weeks. Each week, the oldest data value is dropped and replaced with the current value to keep the average moving forward as time moves on.

  At first, it might seem to be a contradiction that continuing claims for unemployment benefits could fall right before a serious downturn in an economy, but the explanation for this is that, as more workers experience sustained difficulty finding employment, a progressively larger number of them don't get counted as unemployed—or even in the workforce, for that matter—because they've been out of a job too long. Thus, for a while, anyway, initial claims for unemployment benefits can rise, and even the total number of long-term claimants can rise, but the overall moving average of long-term claimants can fall because so many of those long-term claimants are dropping into the category of "discouraged workers."

On Wall Street Wednesday, stocks closed modestly higher after a punishing morning that saw all of the major indices bleed down hard before an afternoon recovery fueled by bargain buying and favorable news about oil prices. The Bush Administration declared yesterday that it wanted to see $25 per barrel oil, and investors became all kinds of excited about the boost such cheap oil would give to the domestic economy. For a while, oil prices actually moved lower, flirting in the range below $50 per barrel, largely because of swelling inventories.

Dark Wraith CyberGloss

From basic economics, if the supply of oil rises, its price should fall; if the demand for oil weakens, its price should fall. Thus, if petroleum inventories are rising, and demand at the gas pump is dropping, the price of oil should almost certainly go down.

  But later action Wednesday and early Thursday showed that the forces that initially pushed oil into sky-high territory are still flexing their muscles, and oil prices are now pushing back up above the $50 per barrel mark. The see-saw prices point to a battle of opposing forces, but the Administration's declared desires are generally considered to be meaningless in what will ultimately be the oil price trend over the coming months. As the Federal Reserve continues to push short-term domestic interest rates upward, the U.S. dollar should strengthen against other currencies, and this will cause the price of dollar-denominated oil to fall. Also, as the U.S. economy weakens, demand for oil will ease as well, and this should help oil prices go down.

On the other hand, the short- and intermediate-term outlooks for oil prices are still very uncertain because of the continuing possibility of major supply disruptions in the Middle East and because of prospects for international conflicts there and in other parts of the world. Should a crisis erupt because of Iran's nuclear weapons program or because of North Korea's nuclear stockpile, oil prices would turn sharply higher and thereby do considerable damage to the many economies around the world that are already teetering on the brink of recession.

Stocks Close Lower Tuesday, Trade Gap Finally Narrows on Weak Dollar

After pulling up over the past week, stocks turned south again on Tuesday as investors began a profit-taking frenzy. The Dow Jones Industrial Average of 30 blue-chip equities lost almost exactly one percent of its value, and the broader Standard & Poor's Index of 500 large companies' stocks lost slightly more than a percent of its value. The NASDAQ composite index of smaller-cap companies' stocks lost eighty-five hundredths of a percent. Stocks were rallying early in the day, but a wave of selling in the afternoon turned the market decidedly sour. A rally later in the trading day stopped the free-fall, but it wasn't enough to make much of a dent in the overall negative numbers. Early Wednesday trading indicated that stocks were again under seige.

The bond market continued a troubling trend, with the benchmark 10-year long bond rising in price as investors pulling their money out of stocks loaded up on long-term debt issues. The price pressure upward caused the yield on the 10-year Treasury to drop to 4.20 percent. Early Wednesday trading indicated that the yield was continuing to ease, meaning that long-term debt instruments are coming that much closer to going below short-term yields, a phenomenon that almost always indicates a recession will occur within several quarters.

Dark Wraith CyberGloss

The Federal Reserve affects short-term interest rates primarily by buying or selling short maturity government Treasury debt, which alters the prices, and therefore the yields, of that debt.

  While the Federal Reserve has been driving short-term interest rates upward in its fight against inflationary expectations building into the American economy, the market-driven long rates are not responding as the Fed would like. Although Fed Chairman Alan Greenspan has expressed his dismay with the situation regarding an impending inverted yield curve, he and his fellow Governors of the Federal Reserve have virtually no tools of monetary policy at their disposal to change the situation.

In other news Wednesday morning, the government reported that the trade deficit for April narrowed to $55 million dollars, a notable drop from the record $60.6 billion dollar red ink in March. The narrowing of the trade gap occurred mainly because consumers and businesses imported considerably less, even as the cost of petroleum was skyrocketing. The explanation for this is that the weakening U.S. dollar has had precisely the effect of pushing up the prices of all imports, energy and otherwise, and this has killed a significant amount of domestic interest in purchasing those imports. This scenario is partially confirmed by reports over the past few days that inventories of crude oil are rising, which would mean that, even though producers are still pulling the crude out of the ground at a relatively steady pace, the demand at the end of the line isn't drawing it to the refineries and then to the gas stations as quickly as it's coming into the inventories.

As far as the weakening dollar altering the relative balance of imports versus exports, not only were imports down in April, but exports were up, as well. This would indicate that the Bush Administration's strategy of publicly stating that it wants a strong dollar, while doing nothing to actually strengthen it, might be working to boost the American exports sector. Unfortunately, there are two downsides to this.

Dark Wraith CyberGloss

Interest rates are the price of money. When domestic interest rates rise, the value of the U.S. currency does so, as well, thus making foreign imports cheaper and American exports more costly.

  The first is that the drop in purchases of imports is could be tied to slackening consumer demand for all goods and services because of an overall weakening of the U.S. economy. The other problem with this strategy is that, as the Federal Reserve continues its record string of short-term interest rate increases, the value of the dollar will strengthen, meaning that imports to the United States will become cheaper, once again, and American exports to other countries will become more expensive: these combined forces will cause the trade deficit to resume its upward climb, and the Bush Administration's hope that domestic exports will keep the U.S. economy from dropping into recession will be thwarted.

Analysis: The Ancient Future

A long time ago—centuries, it has been—the poor, the wretched, the hopeless one day came to the end of their fear. As a lazy, opportunistic philosopher many hundreds of years later would describe it, they came to that place where they chose not to live any longer on their knees, the cattle of wealth, the chained labor of users. Many were the children of enclosures, whereby the landed aristocracy put an end to the centuries-old practice of allowing the workers to live on the land of the lords. With such acts of selfish, greedy cruelty, the free and unfree alike, who had come even to have claim of their own to land, were sent on their way, welcome only for the plantings and the harvests.

Between the devastation of the Plague and the evictions from the manors, perhaps a quarter of England's people would be on the road, without a place of permanence, without a place of belonging. The civil courts of England had long before, in the early part of the century, decided that those who were not noblemen had no standing to plead their cases. In so doing, the crown had left the peasants with the full understanding that they were beneath the protection of law.

Perhaps the angry mob that day knew ownership was for the wealthy, while rage is forever the last comfort of the masses.

These angry men were led by one named Wat Tyler. With his righteous act of murdering a tax collector who had stripped his daughter naked, he was undoubtedly the one who started that awful day of bloodshed in the streets of Kent; but his act was really only a touchstone: his was merely the spark set to the dried kindling of resentment that had been festering for years like rotting flesh in the grave. His act was one of those "tipping points," where a physical system, long past the point where it should have done something, finally does so with just the slightest nudge. For so long, so many wrongs had been committed that the humiliation of Tyler's child was perhaps terrible, but certainly not unusual.

In the hours and days after Wat had made himself forever a wanted man, his sympathizers set upon the merchants, the judges, the lawyers; and all of these men reviled for their ways would pay, some with their very heads in an orgy of spontaneous and unreserved violence.

Some times of anarchy last for years, some for only moments. Wat Tyler brought focus to the Peasant Rebellion so that it could last and be used to set the unfree free, to demand of their king that he see them, that he understand their fury, that he change the ways of the world that he surely mastered.

King Richard II bravely went to the mob as it gathered and began to be a coherent beast, a force with its own leader, perhaps even a body with its own threads of vision about what should be, what could be, if only the king would first listen, then agree or die.

Richard met Wat and swiftly had his throat slit. As Wat lay gasping in the horror of his own death, Richard spoke to the mob, exhorting those desperate and now leaderless men to believe him when he said that he was of their mind, that he was of their nature and beliefs about the rights they had so long been denied by the merchants, the judges, and the noblemen. Richard told the stunned and wanting army of the lost that they should go home and await his commands.

They did so.

And in the days that followed, the king sent his soldiers to their places of life and squalor; and these rebels were taken to the streets—some fifteen hundred of them—and they were hanged for their women, for their children, for their neighbors, and for every manner of voyeuristic scum to see.

That was the settlement after the morning that had breathed the fire of the Peasant Rebellion of 1381.

After all, Richard could not change the future: he could ensure only that it would come.



In this 21^st Century, the United States will become a militarized, industrial-political state, setting loose upon the world an imperative to respond in kind or be subjugated by the engine of resource control. Giant nations that insist upon another way will starve for want of the raw resources of production. Small nations that resist will be called "failed states," and they will, indeed, fail under the crushing burden of sanctions and, finally, intervention.

Within America, the tax burden will swiftly, if perhaps somewhat fitfully, shift entirely away from income generated by capital, and the burden will move almost entirely to income generated from labor. The arguments will seem reasonable: certainly, profit is only to the end of providing people with jobs and income, so the taxation of corporate earnings is nothing less than a deterrent to the creation of the jobs that ultimately produce the income that is the real heart and soul of the wealth of a nation.

Surely, if people are to invest money for their retirement, how could it be reasonable to impose upon them a tax for earning capital gains? Surely, it is so much more the average person who receives dividends and rents and estates. To tax income earned by capital is to cut right to the marrow of what it means to be a society of owners.

Workers—those with skills that cannot be replaced by the thinking and the brute machines of the new world—will be welcomed to the ranks of the employed only when they are needed. They will be sent to the roads when they are not; and they will be infused of an understanding that their lot is their own, that they have bootstraps that they can use to lift themselves up, if only they would try harder, be better, have more education, act more responsibly.

As in every age since His time, Christ will give expression to the suffering of life; yet, as in every age since His time, He will offer no more. But it will be enough; and enough will be abundance to the faithful, whose ranks will grow ever larger as the harshness of this world becomes unbearable without the promise of the next.

And then someday, the flashpoint will come.

That lazy, opportunistic philosopher mentioned earlier, whose name was Karl Marx, pointed to what comes: from his professor Georg Hegel, he came to understand what we call "historical inevitabilities": just like the well-order universe of all things inanimate, societies will come to the same ends when presented with the same predicates.

Those who say they are for the working people must do what is necessary: even as they cannot change the future, they can certainly ensure it. Those who rebel in that moment of future fury will come to their end as their loved ones, their children, their neighbors, and the voyeuristic scum watch, all of them in some curious way relieved that the world will stay ordered, even as that order commands them to their chains.

And so the future will come; and it will come, once again.



The Dark Wraith has spoken. May you rage against destiny.

The Written Peace: Open Forum of May 7, 2005

The Bureau of Labor Statistics on Friday said that the U.S. economy created a whopping 275,00 new jobs in April, far exceeding the consensus forecast of 175,000 new jobs. Interestingly—and tellingly—the unemployment rate remained stuck at 5.2%. The stock markets were so excited by the news that they closed at just about exactly the same levels at which they had opened for the day.

The Dark Wraith Forums herewith offers an open thread for comments on matters of interest, importance, trivia, or a combination of the three. Speak your mind, good people.

As a point of departure, on a recent thread, an idea was set forth by your host. It was a rather flippant, passing thought put to writing, but it brought forth several favorable comments both on the thread and in private e-mails. It would do well to either kill it now or allow the Dark Wraith to turn his obsessive nature to the task of making it a reality. Those who have been regulars here know that there is a point at which a possibility becomes a driving obsession for the Dark Wraith, and the obsession doesn't find peace until the task at hand has been finished: witness toggling comment threads, The Dark Wraith Forums Polling Center, stock market tickers, news tickers, blogScream, the Bloggrrrlz Gallery, and the entire visual layout of this blog.

Gentlemen, who's on deck for a Men of The Dark Wraith Forums premium calendar? Mr. Goat, Mr. Shakes, OddJob, Joseph, Lowly Red Stater, NeoCon Crusher, Gary, Lymond, Treban, Guy Andrew Hall, Culture Ghost, T. Rex, Left Behind Child, and all you others? Kill it now, or yet another Dark Wraith idea will come to fruition, whether or not the world really needs it.



The Dark Wraith opens the thread.

Unemployment Data to Be Released Friday; Treasury Eyes Return of 30-Year Bond

Tomorrow, the Bureau of Labor Statistics will release unemployment data for April. Analysts are projecting 175,000 new jobs formed in April, which would be relatively strong. Analysts are also projecting that the unemployment rate will remain at the official rate of 5.2% registered in March. Conventional wisdom has it that, since a net of 150,000 new workers enter the labor market each month, that is how many jobs must be formed to keep unemployment from rising.

As noted previously here on The Dark Wraith Forums, the economy actually needs to form considerably more than 150,000 new jobs for 150,000 new workers. First, regional imbalances may place new jobs where unemployment is not a problem, leaving areas where many workers are entering the labor market without jobs or the means to relocate to where the jobs are. Also, even if the number of new jobs in a given geographic area matches the number of net new workers, those new workers might not have the skills required for the jobs that are forming in that area. A third reason that the number of new jobs formed must be higher than the number of net new workers entering the labor force is that many workers no longer are counted in the roles of the unemployed because they no longer meet the criteria set down by the Bureau of Labor Statistics for being in the labor force. These so-called "discouraged workers" may still be seeking employment, and if jobs were available that matched their skills and experience, they would re-enter the labor force and add to the supply of labor available to absorb the new jobs being offered.

As a result of these factors not currently considered by media and academic analysts, a target of 150,000 new jobs likely understates the actual number of new jobs that would be required to turn around what has been a less-than-desirable labor market during the entirety of the Bush Administration.

In other news, Treasury Secretary John Snow made the somewhat surprising announcement that the government is contemplating a return to government borrowing on 30-year Treasury bonds, which were abandoned in late 2001 because, at that time, the government was running budget surpluses and therefore didn't need to borrow money at any terms of maturity, and certainly not for 30 years, which would burden future generations.

Dark Wraith CyberGloss

The "yield curve" is a graph of maturity of Treasury bonds against their yields. The yield curve is published daily by financial newspapers like The Wall Street Journal and online financial news sites like Yahoo Finance.

  Now, however, with the Bush Administration running year after year budget deficits, the government has once again been borrowing money, and at a record pace. The re-appearance of the old long bond will allow the government to offer its lenders a new instrument that might be favored by investors who prefer to put money into a security where the funds can earn a fixed interest rate for a long time period without the risks inherent in rollovers that might have to be carried out under undesirable conditions.

It is possible that the return of the long bond has to do with the fact that interest rates on long maturity debts have not been rising nearly as rapidly as interest rates on shorter term borrowings. Typically, this should not happen, since lenders would normally want a somewhat higher rate for having to give up money for a longer period of time. However, with the economy's shorter term outlook appearing less and less rosy, capital markets are showing an increasing willingness to shave some yield off their longer term lending rates just to ride out the economic perils that may occur in the months and several years ahead as further erosion of the domestic economy and the nation's financial standing becomes almost inevitable. With at least several more years of experiments in radical, neo-conservative economics on the agenda for the United States, the risks posed to financial markets have undoubtedly begun to show themselves in a yield curve that is perilously close to becoming "inverted," a phenomenon that has virtually always preceded a serious economic downturn.

Fed Pushes Short-Term Rates Up While Manufacturing Sector Weakest in Two Years

As expected, the Federal Reserve pushed interest rates under its control up by another quarter of a percent on Tuesday, continuing what has been the longest sustained run of rate hikes in the history of the central bank. Concerned about inflationary pressures building in the economy, the Fed has been battling inflation since the middle of last year, stating that it had ceased to overproduce money—which is the sole cause of inflation—to accommodate the Bush Administration's inability to match federal expenditures to revenues. Yesterday's rate hike is the record eighth increase in a row.

There had been some concern that the Fed would begin to deal with the threat of inflation more aggressively by pushing short-term rates up by a half of a percent rather than a quarter of a percent;

Dark Wraith CyberGloss

The "discount rate" is the rate at which the Federal Reserve would lend money to a bank. The Fed changes this rate to signal capital markets about its standing monetary policy.

  but with growing evidence of sharp weakening in key sectors of the economy, the Federal Reserve elected not to hit the economy with an unusually hard blow. The latest increase in the federal funds rate—one of two key rates the Fed sets—now puts it at 3.00%. The Federal Open Market Committee, the rate-setting arm of the Fed, meets periodically to decide what monetary policy to pursue and how aggressively to pursue it.

Dark Wraith CyberGloss

The "federal funds rate" is the interest rate at which banks may lend money to one another.

  Because long-term rates embed short-term rates, in addition to other factors, the latest increases by the Fed will ultimately translate into higher rates on all borrowing by businesses, consumers, and even local, state, and federal government. Although the private capital markets ultimately set yields on debt instruments, the rates set by the Fed are strongly correlated with what ultimately becomes of those yields in the open markets.

Worries by many about the U.S. economy were further fueled on Monday as the Institute of Supply Management released it index for April activity in the manufacturing sector. This "manufacturing index" is a relatively broad measure of the level of business activity in the manufacturing sector. The index's level in a given month and changes in it from month to month indicate the health of this huge, critical component of the industrial economy.

Dark Wraith CyberGloss

A manufacturing index value greater than 50 indicates that the sector is growing; a value below 50 means the sector is contracting.

  While analysts had expected the index to hold at a reading of 55, instead it fell to 53.3, pointing to a weakening of the production side of the U.S. economy. Behind the raw number was evidence that manufacturers were attempting last month to pull back inventories, which other indicators have shown are rising as final demand weakens. Among other concerns about the slide in this number, as it approaches the critical value of 50, new jobs in the manufacturing sector may become fewer and farther between as manufacturers need less labor to fill orders.

After a string of strong up days for the stock markets, Tuesday was almost eerily quiet on Wall Street as investors had little reaction to what they had already expected from the Fed. There was little else to motivate large-scale buying and selling activity, either. That may change in the later part of the week as markets have an opportunity to chew on a few shards of economic data being released and investors have a chance to review a bid for a five percent stake in General Motors by the Kerkorian Group.

All eyes, however, will remain focused on numbers later this month for the producer and consumer price indices. With the Federal Reserve still pushing rates up by only a quarter of a percent at a time, it is signaling that it does not perceive inflation as becoming more of a threat than previously thought. In this regard, two hours after the Fed yesterday had released its traditional statement about what it had done to rates and why it had taken those actions, it rereleased the statement with one additional sentence stating that it believed long-term inflation expectations remain "well-contained." Although not without precedent, the unusual step of amending a public statement seems to indicate that the Governors of the Fed want to assure markets for the time being that there will be no surprising rate hikes for the foreseeable future. This should allay some concerns of investors, whose recent worries have translated into rather sharp swings in stock prices. But even with the run of good days recently on Wall Street, the general trend in stock prices has still been downward, with the Dow Industrial Average flirting perilously close to the 10,000 point mark, and the NASDAQ already well below the 2000 point level.

Analysis: First Impugn Honor; All Else Will Then Perish

Over the past several months, President Bush has made a concerted effort to promote his plan to alter the Social Security system that has successfully provided for retired Americans for seven decades. In his zeal to diminish the credibility of the existing system, he has gone so far as to describe the assets held by the Social Security Trust as "a bunch of IOUs in a drawer." He said he saw them there.

Those "IOUs" to which he was referring are a collection of about two dozen, multi-billion dollar bonds issued by the United States Department of the Treasury, which issues debt instruments of various types and denominations to finance the operations of the federal government. Treasury instruments issued for short-term borrowing are called "bills"; those issued for intermediate term borrowing are called "notes"; and those issued for long-term borrowing are called "bonds." All Treasury instruments are backed by the "full faith and credit" of the United States of America. This means that no greater degree of obligation to honor the debt could exist—not by a person, not by a corporation, not by any public or private agency. But even against this backdrop of guarantee, the Treasury bonds issued to the Social Security Trust are extraordinary: among other features, they must be cashed on demand, and they must be cashed before any other obligations of the government that would be called at the same time and under similar conditions. That means these Special Issue Treasury Bonds are like what are called in the banking system "drafts on demand deposit accounts."

In plain English, a "draft" is a check, and a demand deposit account is a checking account at a bank.

If you walk into a bank with a check that someone has written you from an account at that bank, the bank must satisfy your demand for the amount set forth on the face of that check, provided that the funds are available and you can show that you are the named party on the check or that you represent the same. Checks are highly "liquid": they are essentially the same as cash money because of their on-demand feature. Other types of drafts that look like checks are not as liquid as bank checks. In particular, drafts on so-called "NOW" (Negotiable Order of Withdrawal) accounts might be treated for most intents and purposes just like checks, but they aren't checks; and if ever push came to shove in a time of difficulty for financial institutions, the differences between the real checks and the other instruments that only appear to be checks might become evident, much to the dismay of people holding drafts written from NOW accounts.

The Special Issue Treasury Bonds issued to the Social Security Trust are strikingly like checks, then, except that they are backed by the full weight of the nation's integrity as a sovereign state. Bank checks are backed by a federal insurance program that, although strong and solvent, cannot rise in surety to the level of a nation-state's fundamental honor.

President Bush seemed appalled that there wasn't cash money in the drawers of the Social Security Trust. After all, those funds in the Trust are supposed to be in some kind of "lock box" untouchable by outside interests. But to expect the Social Security Trust—or any trust, for that matter—to put actual dollars into a vault and keep them there until they are needed is stunning: by declining to take measures by which money can appreciate in value, the Trustees of the Social Security system would be gravely mismanaging the funds in their care. On the other hand, to place those funds at risk would also be imprudent. The only action, therefore, the Trustees have available to them consistent with their grave fiduciary duty is to invest the proceeds from Social Security taxes in the risk-free investments offered by the United States government through its Treasury bonds.

Vice President Dick Cheney, in an interview with Michael Medved of the Salem Christian Radio Network, attempted to explain that Mr. Bush was not impugning the ability of the United States of America to satisfy its debt obligations. Mr. Cheney explained that, when the Social Security system needs to draw upon those Special Issue Treasury Bonds, the government will be forced to satisfy those on-demand instruments without necessarily having the funds available to do so. That means the government will be forced to raise taxes steeply to meet the obligations, or it will be forced to enter the capital markets to borrow money.

Being from the political party with a history of currying favor by cutting taxes, the prospect of raising taxes to meet honor obligations would be anathema to the new breed of Republicans. With respect to the second possibility, Mr. Cheney represented that the idea of borrowing money to retire federal debt would be, in some way, extraordinary. In fact, though, it is not: a huge amount of the money generated at Treasury Department auctions of new Treasury instruments goes specifically to retire maturing Treasury instruments. Republicans should know this: in his time, Ronald Reagan ran large federal budget deficits year after year, so the government could not pay off debt that was maturing during his Administration. That meant the Treasury auctions of that era (and of Administrations previous) were to the expressed end of not just paying for then-current deficits, but also for paying off old federal debt.

To pose that the Social Security system must somehow be fundamentally redesigned because of the normal course by which deficit-riddled, tax-averse Administrations generate funds is to demand that the lender be punished for the irresponsibility of the borrower. It does not occur to Mr. Cheney and Mr. Bush that their constant refrain of low taxes has put the government in the position of being forced to constantly refinance debt with further debt. It occurs to them only to evicerate a social insurance program that is ideologically at odds with their vision of the way the federal government should interact with its citizens.

And so Mr. Bush would have the Social Security system at least partially privatized to bring about what he calls an "ownership society." Unfortunately, in order to wreck the current system—to "break it so that it can be fixed"—he would have the United States of America borrow, in Vice President Cheney's own words, "trillions and trillions" of dollars on behalf of the Social Security Trust, and the proceeds from those borrowings would then be lent to workers so that they could invest that money in stocks and bonds with the hope of earning enough money that they could both repay what they had borrowed from the Trust and have enough remaining to finance, at least in large part, their own retirements.

In other words, instead of the Social Security Trust having that "drawer full of IOUs" backed by the full faith and credit of the wealthiest and most powerful nation the Earth has ever seen, the Trust will have two drawers: one will have trillions of dollars in IOUs from millions and millions of average, working Americans; and it will have another drawer full of books of coupons that it will be filling out year after year for generations to come as it pays on the money it has borrowed from global capital markets.

To those who claim that this plan by the neo-conservatives could destroy the Social Security system, the response is almost too obvious to state: The point is not that this could wreck the system; the point is that, by its very nature, Mr. Bush's plan will.

And that means, from the perspective of the neo-conservative radicals who now control the United States, the plan will be highly successful.



The Dark Wraith has spoken.

The Written Peace: Open Forum of April 30, 2005

Given the substantive and extensive discussion on the thread for the last Open Forum, it seems appropriate on this dark and quiet Saturday night to provide another opportunity for the commentators here to have their say on any topic of interest to them.

As food for thought, the President of the United States this past week held one of his rare, prime time news conferences. Some might say that none of the questions put to him addressed the core criticisms of his Administration, so perhaps it would do well to humbly offer the White House Press Corps some zingers for the next press conference he holds in a year or so.

Mr. President! Are you working on any initiatives to protect us from attacks by terrorists, other than ones like the Patriot Act and Patriot Act II that fundamentally compromise our civil rights and liberties? If so, can you outline some of those initiatives, focusing on the ones that have to do with firing your employees who failed so miserably in the days and months leading up to September 11, 2001?

Mr. President! Will you be testifying under oath to a grand jury regarding the nature and details of your relationship with a person who posed as a journalist here in this room?

Mr. President! Will you be submitting a bill to Congress to forbid the United States from rendering prisoners to third nations for the purpose of having them tortured?

Mr. President! Speaking of federal prosecutors, Patrick Fitzgerald claims to have hit a dead end in his investigation of who in your Administration outed CIA operative Valerie Plame. Do you plan to have him re-assigned to make an example for other prosecutors that you want results, not excuses?

Mr. President! Do you have some estimates of how much your family's friends in the House of Saud have realized in additional profits from the recent run-up in oil prices?

Mr. President! Virtually every major stock index is lower now than it was when you first took office more than four years ago. Do you have an explanation for this? As a follow-up, will you endorse a rule that stockbrokers involved in privatized Social Security accounts management disclose this fact to their clients?

Mr. President! During your Presidency, two of the world's most dangerous countries to American interests—Iran and North Korea—have come to the verge of being nuclear states. What are you going to do about these two menaces, given that most countries have no intention of letting the United States lead them into war, and given that the United States can't afford a real war now, anyway, since we've driven our armed forces into the ground with a war in Iraq started on false pretext?

Mr. President! Why are you just standing there smirking at us as we ask you one question after another that should have been asked from the get-go of your Presidency?

Thank you, Mr. President.



The Dark Wraith encourages your comments on these and other important—or perhaps not-so-important—questions of the day.