Well Worth Noting…

Two interesting articles, one an interview with Richard Koo, a former economist with the Federal Reserve Bank of New York and now chief economist of Nomura Research Institute, which appeared in this week’s Barron’s Magazine, A Japanese Rx for the West: Keep Spending and the weekly commentary of the economist and mutual fund manager John Hussman, Timothy Geithner Meets Vladimir Lenin

Koo’s views might seem to be counterintuitive – government needs to increase deficit spending on a three to five year plan while the private sector is repairing its balance sheet. Japan failed to recognize the dangers of “a balance sheet recession” and the USA could make the same mistake. I would agree, provided spending is focused on our infrastructure or alternative energy, or on myriad other public projects that resonate in our economy, creating jobs while fixing our roads and public transportation, encouraging energy independence, reducing greenhouse gases, and improving our educational system. Such investments are aimed at Main Street, not Wall Street. I would imagine Koo would be the first to note that bailouts of irresponsible investment bankers do not constitute the kind of government borrowing he means.

Koo contends that while the private sector repairs its balance sheet, writing down debt on devalued assets, it is imperative for the Federal government to borrow because even if interest rates are zero, the public sector cannot be induced to borrow: “The only way the government can turn this economy around is to do the opposite of the private sector -- borrow the money the private sector saved and spend it, which means fiscal stimulus. That's what saved Japan from entering a Great Depression.”

In effect we can’t make businesses borrow by giving capital to the banking system which only encourages more reckless economic behavior – it has to be spent elsewhere, and what better place than our infrastructure and energy independence?

John Hussman, meanwhile, writes about the very kind of borrowing we must eschew, especially as it is being done without our elected constituency’s input: the Treasury’s recent announcement that it would provide Fannie Mae and Freddie Mac UNLIMITED financial support for the next three years, reminding us that it was Vladimir Lenin who said: “The best way to destroy the capitalist system is to debauch the currency.”

As Hussman notes, “in a single, coordinated stroke, the Treasury and the Federal Reserve have encroached on spending powers that are enumerated for the Congress alone.” And perhaps worse, “…homeowners who have been diligently making their payments will keep their homes, and homeowners who took out mortgages they couldn't afford will keep their homes as well with no adverse consequence to the lenders – since the underlying loans are now owned largely by the Fed, and the Treasury has pledged its unlimited support. Why pay one's debts if it becomes optional, and the Treasury stands to absorb unlimited losses at public expense?”

.

Ghost of New Year’s Future?

If you read only forecast for 2010, let it be this one by James Howard Kunstler who writes a blog, Clusterfuck Nation. While I hope things will not evolve as badly as he speculates, he may have the direction right, the ephemerality of the “recovery” from our duct-tapped economy, government’s complicity, and our lack of moral fiber as a nation to do the right thing. “We're a nation of thugs and louts with flames tattooed on our necks, who call each other ‘motherfucker’ and are skilled only in playing video games based on mass murder.”

Amen to that.
.

And to All a Good-Night!

How many times does one have to see a version of Dickens’ A Christmas Carol to say “enough?” Never, I say, as every generation can find it’s own version, just as Hollywood always seems to find another way to rework the story. Today, the tale could be a morality play about our financial times, Scrooge being played by a Wall Street Banker du jour, Tiny Tim by a child lacking health insurance, Bob Cratchit by someone in foreclosure, while the unemployed gather beneath the robes of the Ghost of Christmas Present. Past or present Chairmen of the Federal Reserve could play the ghosts. I pick Paul Volcker for the Ghost of Christmas Present, as he seems to see things the clearest. Naturally, Bernie Madoff must play the part of Jacob Marley wearing his chains forged of Ponzi links.

For me, the classic tale still elicits an emotional response, especially the versions that come closest to Dickens’ original text. So in that spirit, I offer a couple of photos of our Xmas past, in our home in Connecticut where the holiday really felt like Christmas:

.

.

And this one from Florida Christmas Present, where it will be 80 degrees and one of the high points is the annual Christmas Boat Parade. It’s a Humbug, I say!

.

Book Publishing Roulette

Unfortunately this is not the first time that I’ve said something negative about my industry. I am particularly bewildered as to how some giant trade publishers seem content to play Russian Roulette, thinking they can stem the tide of the migration from print to digital by simply going into a hissy-fit and refusing to issue e-book editions until the hard cover edition has had several months in the market without “competition.” Their failure to recognize that their industry’s economics is of no concern to the marketplace is another nail in their coffin. Strong independent publishers have an opportunity to pick the bones of behemoths such as Simon and Schuster and HarperCollins who, along with Hachette Book Group, have announced their intention to delay the publication of e-book editions until their higher-priced hardcover editions have had several months in the marketplace. “Each publisher voiced concern that the popularity of cheap, $9.99 e-book best sellers available simultaneously with new hardcovers endangers the publishing industry's future.”

Instead they should be embracing the policy of “any-time-any-place” publishing – delivering the goods to the consumer whenever he/she wants it and in any form. There may have to be price disparities for different formats. Certainly the more a title is aimed at the consumer (trade), rather than at someone who needs information to do a job (professional), the digital edition price might undercut the hardcover. But do they really think that they can control the digital tsunami? The only thing endangering “the publishing industry’s future” is the misguided policies of trade publishers themselves.

.

God, the Ninth, and Nine-Eleven

How does one reconcile the destructive events of 9/11 with the creative force of Beethoven’s 9th Symphony both coming into being in the name of God? As Friedrich Shiller’s Ode to Joy concludes -- the basis for Beethoven’s massive choral addition to the symphonic form -- “Do you sense the Creator, world?/Seek Him beyond the starry canopy!/Beyond the stars must He dwell.” And no doubt the hijackers on that fated day believed they were performing a sacred duty for their “Creator.”

I’ve been reading John Updike’s last short story collection, My Father’s Tears, interspersing those stories with other things I read, treating them like the little gems they are. Since 9/11 though I’ve made it a point to avoid anything about that horrible day, just because it is so raw in memory. We could see the columns of smoke 50 miles away in Connecticut on that crystal clear day.

So it was some trepidation when I realized that Updike’s story “Varieties of Religious Experience” is about that very day; beginning with “THERE IS NO GOD: the revelation came to Dan Kellogg in the instant that he saw the World Trade Center South Tower fall.” (He was from out of town, visiting his daughter and grandchild at their apartment in Brooklyn Heights.) To get through this story, written from various perspectives (including a woman on the ill fated flight that crashed in PA), I had to continually take deep, slow breaths, just to control my anxiety. Not that Updike capitalized on gruesome details, but there is the constant unreal undercurrent of the lunacy of that day. One knows where it is all going, and if this is what God is all about, anyone’s God, organized religion seems so hypocritical, a crutch or a means of justifying anything. One brief paragraph from the story encapsulates its essence:

Dan could not quite believe the tower had vanished. How could something so vast and intricate, an elaborately engineered upright hive teeming with people, mostly young, be dissolved by its own weight so quickly, so casually? The laws of matter had functioned, was the answer. The event was small beneath the calm dome of sky. No hand of God had intervened because there was none. God had no hands, no eyes, no heart, no anything. Thus was Dan, a sixty-four-year-old Episcopalian and probate lawyer, brought late to the realization that comes to children with the death of a pet, to women with the loss of a child, to millions caught in the implacable course of war and plague. His revelation of cosmic indifference thrilled him, though his own extinction was held within this new truth like one of the white rectangles weightlessly rising and spinning within the boiling column of smoke. He joined at last the run of mankind in its stoic atheism. He had fought this wisdom all his life, with prayer and evasion, with recourse to the piety of his Ohio ancestors and to ingenious and jaunty old books – Kierkegarrd, Chesterton – read for comfort in adolescence and early manhood. But had he been one of the hundreds in that building – its smoothly telescoping collapse in itself a sight of some beauty, like the color-enhanced stellar blooms of photographed supernovae, only unfolding not in aeons but in seconds – would all that metal and concrete have weighed an ounce less or hesitated a microsecond in its crushing, mincing, vaporizing descent?

I could not get the thought of 9/11 out of my mind Sunday when, for the first time in my life, although I had listened to various recordings in the past, I saw, heard, became immersed in Beethoven’s 9th Symphony, a magnificent, ambitious undertaking of the Palm Beach Opera, performed at the Kravis Center in West Palm Beach.

Long ago in a college music history/theory course we reviewed Beethoven’s 9th and I had a copy of the score. It was the most complex piece I had ever seen, the orchestration for different sections being a mystery as to how everything can be brought together in one coherent entity. Four well-known opera soloists and four different choruses joined the Palm Beach Opera Orchestra. There were hundreds of people on stage. If there is a God, he/she/it is embodied in that Symphony, the purest ethereal expression of reverence and joy I have ever witnessed. Could it be that the same species that concocted a 9/11 could create such a masterpiece, and written by just one man who was deaf as well? So, for me, those are the bookends of this first decade of the 21st century, the infamous, wanton destruction of life and normalcy at the beginning, and beholding Beethoven’s intensely spiritual 9th Symphony at the end, contradictory undertakings in the name of “God” and mankind.
.

Paul Volcker: ATMs beat Masters of the Universe

Here is a little news item that made its way to the top of my Web pile this morning, Paul Volcker telling like it is ( Ben, are you listening?) at a business conference of financiers in Sussex, England yesterday that their industry's "single most important" contribution in the last 25 years has been automatic telling machines, which he said had at least proved "useful". By implication, all those wonderful products those financiers dreamt up over the same period were “less than useful.” He than concluded that riskier financial activities should be limited to hedge funds to whom society could say: "If you fail, fail. I'm not going to help you. Your stock is gone, creditors are at risk, but no one else is affected." (Ben, are you listening?)

Pull Up! Pull Up!

Like many people, I feel disillusioned by the first year of Obama’s Presidency. This is probably more my problem as he is a mere mortal and inherited so many crises, long time in the making, deeply ingrained, that he would have to be Superman, flying around the world to turn back the clock of time, to undo faulty foreign policies, reconnect the dollar to some form of the gold standard, change the unrealistic long term promises of Medicare and Social Security, roll back the deregulation of our financial institutions, and I could go on and on, but you get the picture of, perhaps, a society in a spiraling decline. Despite our cries of “Pull up! Pull up!” the ground closes in.

I still think the President could have devoted more of his first year to policies addressing what I called a “new economic morality.” Instead, he had focused more on healthcare, not that that is not also important. But Main Street seems to have been sacrificed at the altar of Wall Street and we are angry. Who truly believes the economic crisis is solved rather than being merely postponed? Let another generation deal with it, the same response of previous administrations. How long can we kick the proverbial can down the road? What kind of healthcare can this nation have if it is bankrupt?

So, I confess, I got caught up in “the dream,” the fantasy that one man, Mr. Obama, could make such a huge difference and in such a short time. I’ve been chastened by disillusion. The extent of my buying into the dream at the time is borne out by an email I had sent to a friend, a mother of a young family, suggesting she read my then recent blog entry. I quote this is below, and I conclude with that entire entry:

“Did you enjoy the inauguration? To me, it was one of those great moments in American history, and I am glad to have been around to witness it and not just read about it. What Obama does with this opportunity, is anyone’s guess but I pray it turns out well for your children’s sake and for those of my grandchildren, if I should be so lucky.

I had an interesting experience the day before the inauguration, Martin Luther King Jr.’s birthday. First, I was plagued by dreams so I got up at about 5.00 am and began to write in my blog. It just flowed as if someone else was writing it. I usually don’t post stuff I write until I have time to ruminate about the piece and do some editing, but that morning was different. So here is what I wrote: http://lacunaemusing.blogspot.com/2009/01/early-in-morning.html

After posting this, I went out for my usual walk as the sun was rising, wearing my radio earpiece. The station was playing the famous Martin Luther King, Jr. speech, “I Have a Dream.” What a magnificent, poignant rhetorical piece, so apt on the eve of this particular Inauguration day. I had forgotten its details (although I watched it live in 1963). So as I walked, I listened, and suddenly in the western sky, with the rising sun, a broad, magnificent rainbow appeared. It deepened during my entire walk and as King’s speech ended it faded (I could get spiritual over this).”

Monday, January 19, 2009
Early in the Morning
It is early in the morning on the eve of President-elect Obama’s inauguration – in fact very early, another restless night. When it is so early and still outside, sound travels and I can hear the CSX freight train in the distance, its deep-throated rumbling and horn warning the few cars out on the road at the numerous crossings nearby.

Perhaps subconsciously my sleeplessness on this, the celebration of Martin Luther King’s birthday, relates to the incongruous dreamlike images of the bookends of my political consciousness, from the Little Rock desegregation crisis of 1957, the freedom marches that culminated with the march on Washington in 1963 and Martin Luther King’s historic "I Have a Dream" speech, to the inauguration tomorrow of our first Afro-American President. All this breathtaking demonstration of profound social change in just my lifetime.

Much has now been said comparing Obama to Lincoln. In my “open letter” to Obama that I published here last May http://lacunaemusing.blogspot.com/2008/05/open-letter-to-senator-obama.html I said “Your opponents have criticized your limited political experience, making it one of their main issues in attacking your candidacy. Lincoln too was relatively inexperienced, something he made to work to his advantage. Forge cooperation across the aisle in congress, creating your own ‘team of rivals’ as Doris Kearns Goodwin described his cabinet in her marvelous civil war history.”

The Lincoln comparison is now omnipresent in the press, not to mention his cabinet selections indeed being a team of rivals. But I am restless because of what faces this, the very administration I had hoped for: a crisis of values as much as it is an economic one. The two are inextricably intertwined.

I am reading an unusual novel by one of my favorite authors, John Updike, Terrorist. One of the main characters, Jack Levy laments: “My grandfather thought capitalism was doomed, destined to get more and more oppressive until the proletariat stormed the barricades and set up the worker’ paradise. But that didn’t happen; the capitalists were too clever or the proletariat too dumb. To be on the safe side, they changed the label ‘capitalism’ to read ‘free enterprise,’ but it was still too much dog-eat-dog. Too many losers, and the winners winning too big. But if you don’t let the dogs fight it out, they’ll sleep all day in the kennel. The basic problem the way I see it is, society tries to be decent, and decency cuts no ice in the state of nature. No ice whatsoever. We should all go back to being hunter-gathers, with a hundred-percent employment rate, and a healthy amount of starvation.”

The winners in this economy were not only the capitalists, the real creators of jobs due to hard work and innovation, but the even bigger winners: the financial masters of the universe who learned to leverage financial instruments with the blessings of a government that nurtured the thievery of the public good through deregulation, ineptitude, and political amorality. This gave rise to a whole generation of pseudo capitalists, people who “cashed in” on the system, bankers and brokers and “financial engineers” who dreamt up lethal structures based on leverage and then selling those instruments to an unsuspecting public, a public that entrusted the government to be vigilant so the likes of a Bernie Madoff could not prosper for untold years. Until we revere the real innovators of capitalism, the entrepreneurs who actually create things, ideas, jobs, our financial system will continue to seize up. That is the challenge for the Obama administration – a new economic morality.

It is still early in the morning as I finish this but the sun is rising and I’m going out for my morning walk. Another freight train is rumbling in the distance. I hear America singing.

.