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Saturday, January 19, 2013

Fini!!!

Four years ago, I wrote "The Great Recession Conspiracy" to explain two things that I thought were important.
1) That the economic advice that Obama was getting was mostly crap.
2) Goldman Sachs and Citibank have taken over the U.S. Treasury.  (Note where Jack Lew was "parked" for two years when he was without a government job.  And note that he was paid $2,000,000 for his time.)

After established publishing houses turned me down because I didn't have a track record writing about economics or politics (never mind twenty successful books on business topics), I decided to experiment with electronic publishing, so I submitted the ms to every ebook publisher and they all accepted it.  And why not?

It is difficult to tell exactly because ebook publishers are lousy with record keeping, but I doubt that any more than a couple hundred ebooks were sold. So nobody was much interested in the topics I guess.

Because politics is an ever changing, on going affair, I started writing this blog four years ago, and to date almost 1,200 entries have been posted.

But last August, Google stopped supplying data about the readers of the blog (what an ugly word!!) and I had no idea whether I was Howard Beale (see the movie "Network"-it is a very good one), or whether anyone other than Darin was reading it.

After months of trying to find out what happened and what to do about it, I finally figured it out.  Google now wants to charge me for the data.

Since I don't make a cent from this adventure and my ego is secure enough with out venting into space, it doesn't make any sense to me to continue with this mis-adventure.

I have written to Eric Schmidt (he of Google management) without any reply whatsoever.

After many, many years of working in business, researching business, writing about business and teaching MBA classes around the world, I know one thing for sure, and that is this.

The minute a company begins to disrespect its customers, it is on its way out of business, no matter how big it is now!!

Interestingly enough, a couple of weeks ago, The Economist called Google "arrogant" so I guess I am not the only one.

Anyway, I am now shutting this thing down for good and going to work full time on my next project which has the working title of THE MARKETING STRATEGY AND PLANNING WORKBOOK.  To the best of my knowledge, this project will be unique.

As you know, the paper book publishing business is in the toilet and the ebook business is growing rapidly so this book will be specifically designed to be published by Amazon as a Kindle book.  And here is what is unique.

As I have travelled around the world, I have met people who have used my books and they all say the same thing.  The thing they really find useful are the planning pages that they can fill out to actually create a written plan.

But the problem with Kindle, and all ebook publishers, is that you can't print out the text.  So this new book will show how each planning page looks and then contain a link to our own website where the reader can print as many copies of each planning page as is required.

So now it is Adios!!  It has been a sometimes fun ride, but it was always frustrating.  From the looks of things so far, Obama's second term will be about as useless as his first term.

It looks like all we are left with is Winston Churchill's observation, "Democracy is the worst form of government, except for all the others".  I guess so.             

   

Sunday, January 13, 2013

Boys And Girls, This Is Getting Serious!!  The Right Wing Wack Jobs Really Are A Danger To Your Well Being.

Global Warming Is Changing Life In the US

WASHINGTON (AP) — Global warming is already changing America from sea to rising sea and is affecting how Americans live, a massive new federally commissioned report says.
 A special panel of scientists convened by the government issued Friday a 1,146-page draft report that details in dozens of ways how climate change is already disrupting the health, homes and other facets of daily American life. It warns that those disruptions will increase in the future.
"Climate change affects everything that you do," said report co-author Susan Cutter, director of the Hazards and Vulnerability Research Institute at the University of South Carolina. "It affects where you live, where you work and where you play and the infrastructure that you need to do all these things. It's more than just the polar bears."
The blunt report takes a global environmental issue and explains what it means for different U.S. regions, for various sectors of the economy and for future generations.
The National Climate Assessment doesn't say what should be done about global warming. White House science adviser John Holdren writes that it will help leaders, regulators, city planners and even farmers figure out what to do to cope with coming changes.
And climate change is more than hotter temperatures, the report said.
"Human-induced climate change means much more than just hotter weather," the report says, listing rising-seas, downpours, melting glaciers and permafrost, and worsening storms. "These changes and other climatic changes have affected and will continue to affect human health, water supply, agriculture, transportation, energy, and many other aspects of society."
The report uses the word "threat" or variations of it 198 times and versions of the word "disrupt" another 120 times.
If someone were to list every aspect of life changed or likely to be altered from global warming, it would easily be more than 100, said two of the report's authors.
The report, written by team of 240 scientists, is required every four years by law. The first report was written in 2000. No report was issued while George W. Bush was president. The next one came out in 2009. This report, paid for by the federal government, is still a draft and not officially a government report yet. Officials are seeking public comments for the next three months.
"There is so much that is already happening today," said study co-author Katharine Hayhoe, director of the Climate Science Center at Texas Tech University. "This is no longer a future issue. It's an issue that is staring us in the face today"
This version of the report is far more blunt and confident in its assessments than previous ones, Hayhoe said: "The bluntness reflects the increasing confidence we have" in the science and day-to-day realities of climate change.
The report emphasizes that man-made global warming is doing more than just altering the environment we live in, it's a threat to our bodies, homes, offices, roads, airports, power plants, water systems and farms.
"Climate change threatens human health and well-being in many ways, including impacts from increased extreme weather events, wildfire, decreased air quality, diseases transmitted by insects, food and water, and threats to mental health," the report said.

"Climate change and its impacts threaten the well-being of urban residents in all 13 regions of the U.S.," the report said. "Essential local and regional infrastructure systems such as water, energy supply, and transportation will increasingly be compromised by interrelated climate change impacts."

For example, the report details 13 airports that have runways that could be inundated by rising sea level. It mentions that thawing Alaskan ground means 50 percent less time to drill for oil. And overall it says up to $6.1 billion in repairs need to be made to Alaskan roads, pipelines, sewer systems, buildings and airports to keep up with global warming.

Sewer systems across America may overflow more, causing damages and fouling lakes and waterways because of climate change, the report said. The sewer overflows into Lake Michigan alone will more than double by the year 2100, the report said.

While warmer weather may help some crops, others will be hurt because of "weeds, diseases, insect pests and other climate change-induced stresses," the report said. It said weeds like kudzu do better with warmer weather and are far more likely to spread north.

"Several populations - including children, the elderly, the sick, the poor, tribes and other indigenous people - are especially vulnerable to one or more aspects of climate change," the report said.
__
Online:
The National Climate Assessment: http://ncadac.globalchange.gov.
___

Thursday, January 10, 2013

We Have Explained The Problem Of Closed Politics And Closed Economies Here Before.  The Editorial In Today's Los Angeles Times Looks Like We Are Just About There To A Closed Economy Run By A Closed Politic.  If The Ultimate Outsider Cannot Change, In Even The Slightest Way, How The Cabal That Runs The Country Works, The Rest Of Us Are Just Plain Screwed!!!!!!

 

Time and again, President Obama has promised to curb the power of special interests, a stance more consistently breached than honored. The latest — which comes after Obama reneged on his pledge to accept only public financing for the 2008 general election if his GOP opponent did the same, and after his reelection campaign in early 2012 began urging donors to send money to a super-PAC, a financing mechanism he had spent years decrying — is his decision to accept corporate money to pay for events at the presidential inauguration this month.

It's a notable shift from four years ago, when the newly elected president limited individual contributions to $50,000 and barred corporate entities entirely; this year, the Presidential Inaugural Committee cares less about where the money comes from than whether it's green, accepting unlimited donations from corporations or individuals. This has good-government organizations up in arms, not to mention conservative groups that accuse the president of hypocrisy. They aren't wrong, even if their cause is a little overblown.

On the subject of hypocrisy, Obama does have a disturbing tendency to harshly criticize his opponents for behavior that he later imitates; that may not be terribly unusual in presidential politics, but it at least seems worthy of note, or an explanation, or even an apology. On the subject of good governance, the inauguration decision sets yet another terrible precedent, signaling to insiders that the president's rhetoric about curbing special interests is nothing more than campaign blather to be swiftly ignored after the oath of office is administered — or in this case, even before.

Yet now that we've almost managed to work up a head of steam about the inauguration switch … comes the crashing realization that it doesn't really make much difference. The events hosted by the Presidential Inauguration Committee — the swearing-in ceremony, a parade and assorted balls — represent only a tiny portion of the Inauguration Day activities. They will go off without a hitch just as they did in 2009. And despite the committee's precautions that year, it's unlikely that the ban on corporate contributions led to much of a reduction in lobbying; most of the money raised by the inauguration committee came from bundlers working for Wall Street firms such as Goldman Sachs that were then in need of government assistance.
Symbolism is everything. In 2009, corporate America was being blamed for causing the economic downturn and Obama was elected with a mandate to crack down. Today, he may be seeking to mend fences and bring CEOs back to the negotiating table after a bruising campaign pitting "job creators" against the working man and woman. Or maybe he's just being two-faced.

As you know, I have bemoaned the fact that none of the crooked bastards on Wall Street have even been indicted, and so have a lot of other people, but it is now clear, "It ain't gonna happen!!"

I have no idea how you are going to explain to your children, and grandchildren, that their lives are not going to be as good as yours has been.  Unless, of course, you are a member of the 1% who are stealing everything from the rest of us.

But if you were, why would you be reading this rant???????  

Tuesday, January 8, 2013

I Have Been Thinking About These Things, But This Guy Is A Lot Smarter.  I Hope You Enjoy His Thinking!

 ** The Crisis of the Middle Class and American Power (http://stratfor.us4.list-manage.com/track/click?u=74786417f9554984d314d06bd&id=40c9fd0a13&e=301a34c410)
------------------------------------------------------------
January 8, 2013 | 1000 GMT

Stratfor

By George Friedman
Founder and Chief Executive Officer (http://stratfor.us4.list-manage.com/track/click?u=74786417f9554984d314d06bd&id=1b04df3576&e=301a34c410)

Last week I wrote about the crisis of unemployment in Europe (http://stratfor.us4.list-manage1.com/track/click?u=74786417f9554984d314d06bd&id=2874146ac1&e=301a34c410) . I received a great deal of feedback, with Europeans agreeing that this is the core problem and Americans arguing that the United States has the same problem, asserting that U.S. unemployment is twice as high as the government's official unemployment rate. My counterargument is that unemployment in the United States is not a problem in the same sense that it is in Europe because it does not pose a geopolitical threat. The United States does not face political disintegration from unemployment, whatever the number is. Europe might.

At the same time, I would agree that the United States (http://stratfor.us4.list-manage.com/track/click?u=74786417f9554984d314d06bd&id=7006c588aa&e=301a34c410) faces a potentially significant but longer-term geopolitical problem deriving from economic trends. The threat to the United States is the persistent decline in the middle class' standard of living, a problem that is reshaping the social order that has been in place since World War II and that, if it continues, poses a threat to American power.


** The Crisis of the American Middle Class
------------------------------------------------------------

The median household income of Americans in 2011 was $49,103. Adjusted for inflation, the median income is just below what it was in 1989 and is $4,000 less than it was in 2000. Take-home income is a bit less than $40,000 when Social Security and state and federal taxes are included. That means a monthly income, per household, of about $3,300. It is urgent to bear in mind that half of all American households earn less than this. It is also vital to consider not the difference between 1990 and 2011, but the difference between the 1950s and 1960s and the 21st century. This is where the difference in the meaning of middle class becomes most apparent.

In the 1950s and 1960s, the median income allowed you to live with a single earner -- normally the husband, with the wife typically working as homemaker -- and roughly three children. It permitted the purchase of modest tract housing, one late model car and an older one. It allowed a driving vacation somewhere and, with care, some savings as well. I know this because my family was lower-middle class, and this is how we lived, and I know many others in my generation who had the same background. It was not an easy life and many luxuries were denied us, but it wasn't a bad life at all.

Someone earning the median income today might just pull this off, but it wouldn't be easy. Assuming that he did not have college loans to pay off but did have two car loans to pay totaling $700 a month, and that he could buy food, clothing and cover his utilities for $1,200 a month, he would have $1,400 a month for mortgage, real estate taxes and insurance, plus some funds for fixing the air conditioner and dishwasher. At a 5 percent mortgage rate, that would allow him to buy a house in the $200,000 range. He would get a refund back on his taxes from deductions but that would go to pay credit card bills he had from Christmas presents and emergencies. It could be done, but not easily and with great difficulty in major metropolitan areas. And if his employer didn't cover health insurance, that $4,000-5,000 for three or four people would severely limit his expenses. And of course, he would have to have $20,000-40,000 for a down payment and closing costs on his home. There would be little else left over for a week at the seashore with the kids.

And this is for the median. Those below him -- half of all households -- would be shut out of what is considered middle-class life, with the house, the car and the other associated amenities. Those amenities shift upward on the scale for people with at least $70,000 in income. The basics might be available at the median level, given favorable individual circumstance, but below that life becomes surprisingly meager, even in the range of the middle class and certainly what used to be called the lower-middle class.


** The Expectation of Upward Mobility
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I should pause and mention that this was one of the fundamental causes of the 2007-2008 subprime lending crisis (http://stratfor.us4.list-manage1.com/track/click?u=74786417f9554984d314d06bd&id=11f7634abd&e=301a34c410) . People below the median took out loans with deferred interest with the expectation that their incomes would continue the rise that was traditional since World War II. The caricature of the borrower as irresponsible misses the point. The expectation of rising real incomes was built into the American culture, and many assumed based on that that the rise would resume in five years. When it didn't they were trapped, but given history, they were not making an irresponsible assumption.

American history (http://stratfor.us4.list-manage.com/track/click?u=74786417f9554984d314d06bd&id=1dbe996cd5&e=301a34c410) was always filled with the assumption that upward mobility was possible. The Midwest and West opened land that could be exploited, and the massive industrialization in the late 19th and early 20th centuries opened opportunities. There was a systemic expectation of upward mobility built into American culture and reality.

The Great Depression was a shock to the system, and it wasn't solved by the New Deal, nor even by World War II alone. The next drive for upward mobility came from post-war programs for veterans, of whom there were more than 10 million. These programs were instrumental in creating post-industrial America, by creating a class of suburban professionals. There were three programs that were critical:
1. The GI Bill, which allowed veterans to go to college after the war, becoming professionals frequently several notches above their parents.
2. The part of the GI Bill that provided federally guaranteed mortgages to veterans, allowing low and no down payment mortgages and low interest rates to graduates of publicly funded universities.
3. The federally funded Interstate Highway System, which made access to land close to but outside of cities easier, enabling both the dispersal of populations on inexpensive land (which made single-family houses possible) and, later, the dispersal of business to the suburbs.

There were undoubtedly many other things that contributed to this, but these three not only reshaped America but also created a new dimension to the upward mobility that was built into American life from the beginning. Moreover, these programs were all directed toward veterans, to whom it was acknowledged a debt was due, or were created for military reasons (the Interstate Highway System was funded to enable the rapid movement of troops from coast to coast, which during World War II was found to be impossible). As a result, there was consensus around the moral propriety of the programs.

The subprime fiasco was rooted in the failure to understand that the foundations of middle class life were not under temporary pressure but something more fundamental. Where a single earner could support a middle class family in the generation after World War II, it now took at least two earners. That meant that the rise of the double-income family corresponded with the decline of the middle class. The lower you go on the income scale, the more likely you are to be a single mother. That shift away from social pressure for two parent homes was certainly part of the problem.


** Re-engineering the Corporation
------------------------------------------------------------

But there was, I think, the crisis of the modern corporation. Corporations provided long-term employment to the middle class. It was not unusual to spend your entire life working for one. Working for a corporation, you received yearly pay increases, either as a union or non-union worker. The middle class had both job security and rising income, along with retirement and other benefits. Over the course of time, the culture of the corporation diverged from the realities, as corporate productivity lagged behind costs and the corporations became more and more dysfunctional and ultimately unsupportable. In addition, the corporations ceased focusing on doing one thing well and instead became conglomerates, with a management frequently unable to keep up with the complexity of multiple lines of business.

For these and many other reasons, the corporation became increasingly inefficient, and in the terms of the 1980s, they had to be re-engineered -- which meant taken apart, pared down, refined and refocused. And the re-engineering of the corporation, designed to make them agile, meant that there was a permanent revolution in business. Everything was being reinvented. Huge amounts of money, managed by people whose specialty was re-engineering companies, were deployed. The choice was between total failure and radical change. From the point of view of the individual worker, this frequently meant the same thing: unemployment. From the view of the economy, it meant the creation of value whether through breaking up companies, closing some of them or sending jobs overseas. It was designed to increase the total efficiency, and it worked for the most part.

This is where the disjuncture occurred. From the point of view of the investor, they had saved the corporation from total meltdown by redesigning it. From the point of view of the workers, some retained the jobs that they would have lost, while others lost the jobs they would have lost anyway. But the important thing is not the subjective bitterness of those who lost their jobs, but something more complex.

As the permanent corporate jobs declined, more people were starting over. Some of them were starting over every few years as the agile corporation grew more efficient and needed fewer employees. That meant that if they got new jobs it would not be at the munificent corporate pay rate but at near entry-level rates in the small companies that were now the growth engine. As these companies failed, were bought or shifted direction, they would lose their jobs and start over again. Wages didn't rise for them and for long periods they might be unemployed, never to get a job again in their now obsolete fields, and certainly not working at a company for the next 20 years.

The restructuring of inefficient companies did create substantial value, but that value did not flow to the now laid-off workers. Some might flow to the remaining workers, but much of it went to the engineers who restructured the companies and the investors they represented. Statistics reveal that, since 1947 (when the data was first compiled), corporate profits as a percentage of gross domestic product are now at their highest level, while wages as a percentage of GDP are now at their lowest level. It was not a question of making the economy more efficient -- it did do that -- it was a question of where the value accumulated. The upper segment of the wage curve and the investors continued to make money. The middle class divided into a segment that entered the upper-middle class, while another faction sank into the lower-middle class.

American society on the whole was never egalitarian. It always accepted that there would be substantial differences in wages and wealth. Indeed, progress was in some ways driven by a desire to emulate the wealthy. There was also the expectation that while others received far more, the entire wealth structure would rise in tandem. It was also understood that, because of skill or luck, others would lose.

What we are facing now is a structural shift, in which the middle class' center, not because of laziness or stupidity, is shifting downward in terms of standard of living. It is a structural shift that is rooted in social change (the breakdown of the conventional family) and economic change (the decline of traditional corporations and the creation of corporate agility that places individual workers at a massive disadvantage).

The inherent crisis rests in an increasingly efficient economy and a population that can't consume what is produced because it can't afford the products. This has happened numerous times in history, but the United States, excepting the Great Depression, was the counterexample.

Obviously, this is a massive political debate, save that political debates identify problems without clarifying them. In political debates, someone must be blamed. In reality, these processes are beyond even the government's ability to control. On one hand, the traditional corporation was beneficial to the workers until it collapsed under the burden of its costs. On the other hand, the efficiencies created threaten to undermine consumption by weakening the effective demand among half of society.


** The Long-Term Threat
------------------------------------------------------------

The greatest danger is one that will not be faced for decades but that is lurking out there. The United States was built on the assumption that a rising tide lifts all ships. That has not been the case for the past generation, and there is no indication that this socio-economic reality will change any time soon. That means that a core assumption is at risk. The problem is that social stability has been built around this assumption -- not on the assumption that everyone is owed a living, but the assumption that on the whole, all benefit from growing productivity and efficiency.

If we move to a system where half of the country is either stagnant or losing ground while the other half is surging, the social fabric of the United States is at risk, and with it the massive global power the United States has accumulated. Other superpowers such as Britain or Rome did not have the idea of a perpetually improving condition of the middle class as a core value. The United States does. If it loses that, it loses one of the pillars of its geopolitical power.

The left would argue that the solution is for laws to transfer wealth from the rich to the middle class. That would increase consumption but, depending on the scope, would threaten the amount of capital available to investment by the transfer itself and by eliminating incentives to invest. You can't invest what you don't have, and you won't accept the risk of investment if the payoff is transferred away from you.

The agility of the American corporation is critical. The right will argue that allowing the free market (http://stratfor.us4.list-manage2.com/track/click?u=74786417f9554984d314d06bd&id=c025bdd3bf&e=301a34c410)  to function will fix the problem. The free market doesn't guarantee social outcomes, merely economic ones. In other words, it may give more efficiency on the whole and grow the economy as a whole, but by itself it doesn't guarantee how wealth is distributed. The left cannot be indifferent to the historical consequences of extreme redistribution of wealth. The right cannot be indifferent to the political consequences of a middle-class life undermined, nor can it be indifferent to half the population's inability to buy the products and services that businesses sell.

The most significant actions made by governments tend to be unintentional. The GI Bill was designed to limit unemployment among returning serviceman; it inadvertently created a professional class of college graduates. The VA loan was designed to stimulate the construction industry; it created the basis for suburban home ownership. The Interstate Highway System was meant to move troops rapidly in the event of war; it created a new pattern of land use that was suburbia.

It is unclear how the private sector can deal with the problem of pressure on the middle class. Government programs frequently fail to fulfill even minimal intentions while squandering scarce resources. The United States has been a fortunate country, with solutions frequently emerging in unexpected ways.

It would seem to me that unless the United States gets lucky again, its global dominance is in jeopardy. Considering its history, the United States can expect to get lucky again, but it usually gets lucky when it is frightened. And at this point it isn't frightened but angry, believing that if only its own solutions were employed, this problem and all others would go away. I am arguing that the conventional solutions offered by all sides do not yet grasp the magnitude of the problem -- that the foundation of American society is at risk -- and therefore all sides are content to repeat what has been said before.

People who are smarter and luckier than I am will have to craft the solution. I am simply pointing out the potential consequences of the problem and the inadequacy of all the ideas I have seen so far.

============================================================

Sunday, January 6, 2013

If You Are Still Not Convinced That The Federal Reserve Bank Is Run By Idiots, Follow This Simple Math!!

1)  Our overwhelming problem is a lack of jobs.  Even Mitt agreed that 23 million Americans were unemployed or seriously under-employed.

2) Small businesses create about 70% of ALL new jobs.

3) The Fed has decided that the problem with small businesses is that they can't borrow money so they have printed something over three TRILLION brand new $100 bills on the theory that will keep interest rates low so small businesses  will borrow money.

4) But the Fed's own reports show that 1/3% of all small businesses do not even try to apply for a loan because they don't want to be embarrassed when they are turned down.  Further, the Fed's own data show that 2/3% of small businesses who do apply get turned down when they apply (and embarrassed to boot)!  
  
5) So the Fed's own data show that only 21% of all small businesses benefit from their huge printing orgy.

6)  When will somebody explain to all those dumb bastards at the Federal Reserve that the problem is that small businesses don't have enough customers!!  (And small businesses are disappearing at a record rate!!

7) And they don't have enough customers because 23 million Americans are unemployed or under-employed. 

Why is that simple math so difficult for everybody in Washington to comprehend?????? 


Wednesday, January 2, 2013

If You Are Having Trouble Understanding What Is Going On In Washington, This May Help.

Here are the numbers.


* U.S. Tax revenue: $ 2,470,000,000,000
* Fed budget: $ 3,620,000,000,000
* New debt: $ 1,150,000,000,000
* National debt: $ 16,271,000,000,000
* Recent budget cuts: $ 38,500,000,000

Let’s now remove 8 zeros and pretend it’s a household budget:

* Annual family income: $ 24,700.00
* Money the family spent: $ 36,200.00
* New debt on the credit card: $ 11,500.00
* Outstanding balance on the credit card: $ 161,710.00
* Total budget cuts so far: $ 385.00

Does that make things clearer??


Tuesday, January 1, 2013

This May Be The MOST Important Idea You Have To Consider In 2013!!

I have been reading a fascinating book by two economists, Daron Acemoglu and James A. Robinson, entitled WHY NATIONS FAIL-The Origins of Power, Prosperity and Poverty.
They have examined and traced just about every society since records have been keptTheir conclusion is that there are four conditions of crucial interest in every society.  They have cute, academic names for each of them, but since I am not up for tenure, I will substitute simpler names.  Two conditions are economic and two are political.

Closed Economies:  In this condition, existing industries and sources of wealth are protected and new industries and sources of wealth are prohibited or discouraged.

Open Economies:  This is Joseph Schumpeter's "Creative Destruction" in which new ideas, new industries, new sources of wealth are welcomed and encouraged even though they may well displace existing ones.

Closed Politics:  In this condition, a very small group of elites control the entire government and use that power to enrich themselves out of all proportion.

Open Politics:  Here, governance is widely shared by all members of the society and decisions are made that are in the best interests of everyone in the society.

Their conclusion is that when Open Economies are combined with Open Politics everyone benefits and the economy grows profitably.  But Closed Politics always leads to Closed Economics and the society always becomes very poor, or there is a revolt, which may lead to Open/Open conditions, or it may simply change the members of the ruling elite.

Now here is the Issue Of Incredible Importance:  As we speak, there is a still small, but influential group of people saying the America's days of prosperity and growth are behind us, and that your children, and grandchildren will not live as well as you do.  Bill Gross, Paul Krugman and Robert Schiller are among that small group.

Following the analysis in Why Nations Fail would suggest that we are moving from an Open Economy/Open Politics to a Closed Economy/Closed Politics.

So what is the evidence here?  Well, first of all there is Congress where 96% of the members who seek re-election win.  Virtually all current Congresspersons are millionaires.  Only a few were millionaires when they were first elected.  Even most of those who chose not to seek re-election become lobbyists at million dollar salaries and they never leave Washington.

 The CEO's of major U.S. Corporations are now paid staggering incomes in wages and options and bonuses.  Not long ago, the CEO made 20/30 times more than the lowest paid employee.  Now it is 300/400 times as much.

The top 1% of all U.S. households hold 40% of all the wealth in the entire U.S.

Does that sound like a small group of people have gained control of the U.S.?

Here is what a complete outsider has to say about this.  This article appeared in the Sydney (Australia) Morning Herald.

     

The four business gangs that run the US

Date

Ross Gittins

Ross Gittins

The Sydney Morning Herald's Economics Editor

Illustration: Michael Mucci. Illustration: Michael Mucci.
IF YOU'VE ever suspected politics is increasingly being run in the interests of big business, I have news: Jeffrey Sachs, a highly respected economist from Columbia University, agrees with you - at least in respect of the United States.

In his book, The Price of Civilisation, he says the US economy is caught in a feedback loop. ''Corporate wealth translates into political power through campaign financing, corporate lobbying and the revolving door of jobs between government and industry; and political power translates into further wealth through tax cuts, deregulation and sweetheart contracts between government and industry. Wealth begets power, and power begets wealth,'' he says.

Sachs says four key sectors of US business exemplify this feedback loop and the takeover of political power in America by the ''corporatocracy''.

First is the well-known military-industrial complex. ''As [President] Eisenhower famously warned in his farewell address in January 1961, the linkage of the military and private industry created a political power so pervasive that America has been condemned to militarisation, useless wars and fiscal waste on a scale of many tens of trillions of dollars since then,'' he says.
Second is the Wall Street-Washington complex, which has steered the financial system towards control by a few politically powerful Wall Street firms, notably Goldman Sachs, JPMorgan Chase, Citigroup, Morgan Stanley and a handful of other financial firms.

These days, almost every US Treasury secretary - Republican or Democrat - comes from Wall Street and goes back there when his term ends. The close ties between Wall Street and Washington ''paved the way for the 2008 financial crisis and the mega-bailouts that followed, through reckless deregulation followed by an almost complete lack of oversight by government''.

Third is the Big Oil-transport-military complex, which has put the US on the trajectory of heavy oil-imports dependence and a deepening military trap in the Middle East, he says.

''Since the days of John D. Rockefeller and the Standard Oil Trust a century ago, Big Oil has loomed large in American politics and foreign policy. Big Oil teamed up with the automobile industry to steer America away from mass transit and towards gas-guzzling vehicles driving on a nationally financed highway system.''
Big Oil has consistently and successfully fought the intrusion of competition from non-oil energy sources, including nuclear, wind and solar power.

It has been at the side of the Pentagon in making sure that America defends the sea-lanes to the Persian Gulf, in effect ensuring a $US100 billion-plus annual subsidy for a fuel that is otherwise dangerous for national security, Sachs says.

''And Big Oil has played a notorious role in the fight to keep climate change off the US agenda. Exxon-Mobil, Koch Industries and others in the sector have underwritten a generation of anti-scientific propaganda to confuse the American people.''

Fourth is the healthcare industry, America's largest industry, absorbing no less than 17 per cent of US gross domestic product.

''The key to understanding this sector is to note that the government partners with industry to reimburse costs with little systematic oversight and control,'' Sachs says. ''Pharmaceutical firms set sky-high prices protected by patent rights; Medicare [for the aged] and Medicaid [for the poor] and private insurers reimburse doctors and hospitals on a cost-plus basis; and the American Medical Association restricts the supply of new doctors through the control of placements at medical schools.

''The result of this pseudo-market system is sky-high costs, large profits for the private healthcare sector, and no political will to reform.''

Now do you see why the industry put so much effort into persuading America's punters that Obamacare was rank socialism? They didn't succeed in blocking it, but the compromised program doesn't do enough to stop the US being the last rich country in the world without universal healthcare.

It's worth noting that, despite its front-running cost, America's healthcare system doesn't leave Americans with particularly good health - not as good as ours, for instance. This conundrum is easily explained: America has the highest-paid doctors.

Sachs says the main thing to remember about the corporatocracy is that it looks after its own. ''There is absolutely no economic crisis in corporate America.

''Consider the pulse of the corporate sector as opposed to the pulse of the employees working in it: corporate profits in 2010 were at an all-time high, chief executive salaries in 2010 rebounded strongly from the financial crisis, Wall Street compensation in 2010 was at an all-time high, several Wall Street firms paid civil penalties for financial abuses, but no senior banker faced any criminal charges, and there were no adverse regulatory measures that would lead to a loss of profits in finance, health care, military supplies and energy,'' he says.

The 30-year achievement of the corporatocracy has been the creation of America's rich and super-rich classes, he says. And we can now see their tools of trade.

''It began with globalisation, which pushed up capital income while pushing down wages. These changes were magnified by the tax cuts at the top, which left more take-home pay and the ability to accumulate greater wealth through higher net-of-tax returns to saving.''

Chief executives then helped themselves to their own slice of the corporate sector ownership through outlandish awards of stock options by friendly and often handpicked compensation committees, while the Securities and Exchange Commission looked the other way. It's not all that hard to do when both political parties are standing in line to do your bidding, Sachs concludes.

Fortunately, things aren't nearly so bad in Australia. But it will require vigilance to stop them sliding further in that direction.
Twitter: @1Ross Gittins
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We could examine each of these four corners of the new Closed Politics here, but I will settle for one, the Oil Company oligopoly. Consider who fought mass transit at every step?  Who gets HUGE government subsidies called the Depletion Allowance?  
Who fights "green technology" with great ferocity?  Who is risking the drinking water of a huge number of Americans by routing the TransCanada pipline right through the Ogala Aquifer?  And If you want to see a staggering number, just check out how much money Exxon pays Rex Tillerson?  It is an obscene number.
Now it is your job to check out the other three corners.  If you want a place to start, look at the connections between the senior Senator from New York (a Democrat), and Wall Street to see where his money comes from, and then see how he votes.
And always remember that if you can see the money in public, it is only a trivial portion of the real amount.  There is a "river" of cash that flows from businesses to the government, at all levels, that is completely hidden and out of sight!!