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Earthquakes and EuroquakesMy year started in New Zealand with a 6.3 magnitude earthquake that devastated my city and may yet end with a Euroquake (the likely contraction or even collapse of the eurozone). Why is it not especially heartening to learn that both quakes are simply the result of systems that have built up stress over the years just releasing that stress?Physicist Mark Buchanan, writing about the Euro crisis in an article on Bloomberg.com explained:"This similarity between market movements and earthquake aftershocks seems weird if you think of a financial market as a system in equilibrium that naturally balances people’s conflicting aims and desires. But it looks less weird and even quite natural if you think of a market as just another system that, like the Earth’s crust, is perpetually driven out of balance by the action of various forces, and responds to those forces in complex, dynamic ways."
Perhaps I should take comfort in the fact that the penny is starting to drop for economists that their assumptions about markets were maybe a little off, and just maybe they’ll know better the next time the stresses start building up.
Now, about that NZ earthquake devastation, I’ll be heading home next week and will report on the rebuild.

Earthquakes and Euroquakes

My year started in New Zealand with a 6.3 magnitude earthquake that devastated my city and may yet end with a Euroquake (the likely contraction or even collapse of the eurozone). Why is it not especially heartening to learn that both quakes are simply the result of systems that have built up stress over the years just releasing that stress?

Physicist Mark Buchanan, writing about the Euro crisis in an article on Bloomberg.com explained:

"This similarity between market movements and earthquake aftershocks seems weird if you think of a financial market as a system in equilibrium that naturally balances people’s conflicting aims and desires. But it looks less weird and even quite natural if you think of a market as just another system that, like the Earth’s crust, is perpetually driven out of balance by the action of various forces, and responds to those forces in complex, dynamic ways."

Perhaps I should take comfort in the fact that the penny is starting to drop for economists that their assumptions about markets were maybe a little off, and just maybe they’ll know better the next time the stresses start building up.

Now, about that NZ earthquake devastation, I’ll be heading home next week and will report on the rebuild.

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Living in Fear, Revisited That luxury apartment building along the Rio beachfront avenue, Avenida Vieira Souto, I wrote about a while back, the one with the armed guards out front. Here’s what I learned recently. The residents were reminded in no uncertain terms in 2008 why the 1% are afraid — the armed guards make them feel a little safer.The founder and owner of Brazil’s Sendas supermarket chain the multi millionaire Arthur Sendas lived here. Sendas was widely reported to have been generous with his employees. Late one Saturday night, the son of his longtime personal chauffeur, the 28-year-old driver Roberto Costa, who had also worked for the Sendas family for 10 years came to the apartment to ask for some of this generosity. When he wasn’t shown it, he pulled out a gun and shot Arthur Sendas in the head. Now, the armed guards at the entrance to this building could not have prevented what happened that night. Arthur Sendas himself allowed Roberto Costa up and met him at the apartment door because he thought he could trust him. In a society with this level of inequality (Jorge Castañeda says that the wealthiest 10% held an average of 42% of national income in 2008-9) the wealthy can never be sure whom they can trust! Arthur Sendas’s neighbors had that lesson driven home with the sound of a gunshot, that night in 2008.

Living in Fear, Revisited

That luxury apartment building along the Rio beachfront avenue, Avenida Vieira Souto, I wrote about a while back, the one with the armed guards out front. Here’s what I learned recently. The residents were reminded in no uncertain terms in 2008 why the 1% are afraid — the armed guards make them feel a little safer.

The founder and owner of Brazil’s Sendas supermarket chain the multi millionaire Arthur Sendas lived here. Sendas was widely reported to have been generous with his employees. Late one Saturday night, the son of his longtime personal chauffeur, the 28-year-old driver Roberto Costa, who had also worked for the Sendas family for 10 years came to the apartment to ask for some of this generosity. When he wasn’t shown it, he pulled out a gun and shot Arthur Sendas in the head.

Now, the armed guards at the entrance to this building could not have prevented what happened that night. Arthur Sendas himself allowed Roberto Costa up and met him at the apartment door because he thought he could trust him.

In a society with this level of inequality (Jorge Castañeda says that the wealthiest 10% held an average of 42% of national income in 2008-9) the wealthy can never be sure whom they can trust! Arthur Sendas’s neighbors had that lesson driven home with the sound of a gunshot, that night in 2008.

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"

The Latin middle class still struggles, with living standards far behind those of the local affluent. But a middle class it is nonetheless: with cellphones and used cars; with tiny but well-built homes with every appliance; and with modest but deeply enjoyable holidays at the beach….

…much of Latin America has arrived: it is democratic, with a slight but growing majority of its people prosperous, competitive and possessing international ambitions…

And yet, as all of this is occurring, the United States — that epitome of the middle-class society, of the egalitarian dream that pulled millions of immigrants away from Latin America — has begun to go Latin American. It is in a process of structural middle-class shrinkage and inequality expansion that has perhaps never occurred anywhere else (again, possibly excepting Argentina).

Which leads to a question for the United States: why would you allow that to happen, when we in Latin America can show you how difficult it is to achieve the kind of exemplary middle class that you invented in the first place, and that gave you such economic power and social cohesion — at least since the 1920s? Especially when we all know its existence is crucial to preserving some of the best traits of your own national character.

"

What Latin America Can Teach Us, by Jorge Castañeda, professor of politics and Latin American and Caribbean studies at New York University, who served as foreign minister of Mexico from 2000 to 2003.

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Open Letter to President Obama, 2

Dear Mr. President,

Open Letter re Your Speech in Osawatomie, Kansas, December 6, 2011. 

In your recent speech, you said:

"Too often, we’ve seen Wall Street firms violating major anti-fraud laws because the penalties are too weak and there’s no price for being a repeat offender. No more. I’ll be calling for legislation that makes these penalties count – so that firms don’t see punishment for breaking the law as just the price of doing business."

Sir, this call for new legislation is not fooling anyone! Where’s the enforcement?

Anyone who has taken a minimum of time and effort to read news about the mortgage securitization and foreclosure train-wreck knows that at least a few courageous state attorneys general are finally prosecuting some of the firms responsible for the devastation.

The issue is not that there aren’t adequate penalties in the current laws to punish financial crimes. Attorneys General Masto (NV), Schneiderman (NY), Harris (CA), and Coakley (MA) are certain that they can scare banks and mortgage servicers in their states into straightening up and flying right just by prosecuting them under current law.

The questions Joe and Jane Public want answered are these:

Where is the political will from your administration to push for much more widespread enforcement of current laws?

Why has the Department of Justice not been all over the news with indictments and perp walks?

Why is your administration providing cover for a deeply flawed settlement being negotiated between AGs of other states and the big banks and mortgage servicers?

Why has your administration not beefed up the size and quality of the enforcement operations (at the SEC, FBI and DOJ, to name the most obvious agencies) needed to investigate these kinds of crimes?

New legislation means nothing if the enforcement is weak-willed and weak-kneed! We are not fooled by calls for new legislation. Words, and especially vague promises, are worthless at this point. We are looking for action!

Sincerely

Dona Jane

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Artist William Powhida Draws up a Damning List of Indictments of the 1%-ers … and then sells it to them for (I hope) some serious money. Here’s what his art attests:"Some Conclusions: Let’s just say it…trickle-UP economics is really WTF happened when Clinton listened to the committee to ruin the world (Greenspan, Rubin, Summers) and deregulated the financial universe…"See the complete artwork here.Photograph (from Postmastersart.com) shows a detail from the artwork “Some Conclusions” by William Powhida 2011 (graphite, colored pencil and watercolor on paper, 17 x 14 inches), part of a series titled "derivatives," in which the artist critiques the US’s financial leadership and the art world’s ambivalent relationship with the 1%.

Artist William Powhida Draws up a Damning List of Indictments of the 1%-ers

… and then sells it to them for (I hope) some serious money. Here’s what his art attests:

"Some Conclusions: Let’s just say it…trickle-UP economics is really WTF happened when Clinton listened to the committee to ruin the world (Greenspan, Rubin, Summers) and deregulated the financial universe…"

See the complete artwork here.

Photograph (from Postmastersart.com) shows a detail from the artwork “Some Conclusions” by William Powhida 2011 (graphite, colored pencil and watercolor on paper, 17 x 14 inches), part of a series titled "derivatives," in which the artist critiques the US’s financial leadership and the art world’s ambivalent relationship with the 1%.

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Economics As If People Who Owe Money Matter

Two pieces of media came across my laptop screen this week and made a strong impression.

Debt Jubilee the Answer?

In his interview on the BBC, Australian economist Steve Keen at the University of Western Sydney says, “… the creditors of the world, were dominant politically and have certainly set the political agenda for the last 20 or 30 years. The debtors have been down at the bottom of the pile. Now we need to reverse that and turn the power back towards the debtors rather than the creditors.” Steve Keen interview video and my transcript.

Update: My transcript is also up on the website of the Polish National Bank. Does that mean I’m famous?

Or Do We Let Debts Die With the Regime that Contracted Them?

And in an article originally posted in German at Frankfurter Algemeine Zeitung and reposted in English on nakedcapitalism.com, Michael Hudson, an economist at University of Missouri, Kansas City, says, “Debts imposed by fiat, by governments or foreign financial agencies in the face of strong popular opposition may be as tenuous as those of the Habsburgs and other despots in past epochs. Lacking popular validation, they may die with the regime that contracted them. New governments may act democratically to subordinate the banking and financial sector to serve the economy, not the other way around.”

Hudson’s conclusion seems clear. Civilizations have always slid from democracy to oligarchy to hereditary aristocracy, before a revolution swings the pendulum back to democracy, and debt has been a major driver of this process. Once the creditor class goes too far, creating widespread “debt slavery” in a society, the debtor class starts to fight back to restore balance. Is this what’s starting to happen now with OWS?

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"The body sitting is a mountain. The body in motion is water. The body constantly sits and constantly moves. The earth sits within the body. The sky sits within the mind: the sanity, the wisdom, the truthfulness. The totality of virtue and delight sits within this stillness and movement…"— Norman Fischer
(from the introduction to Dogen’s Mountains and Waters Sutra)
Photograph: Pedra dos Dois Irmãos at sundown, viewed from Ipanema, Rio de Janeiro

"The body sitting is a mountain. The body in motion is water. The body constantly sits and constantly moves. The earth sits within the body. The sky sits within the mind: the sanity, the wisdom, the truthfulness. The totality of virtue and delight sits within this stillness and movement…"
— Norman Fischer

(from the introduction to Dogen’s Mountains and Waters Sutra)

Photograph: Pedra dos Dois Irmãos at sundown, viewed from Ipanema, Rio de Janeiro

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Hope Versus Fatalism

On one of my favorite blogs that urges fundamental changes to our economic system, a reader posted this fatalistic comment:

"Nothing is harder to change than human behavior, especially the values that drive our behavior. How do you propose changing the values that are the foundation of the American economy? A major reason this isn’t being discussed is that there’s no solution, and nobody to blame but ourselves. …" — Justin Mares Oct 24, 2011 

Here’s what I would say to Justin Mares: I’m an optimist; I believe there is a solution. It lies in a radical kind of education, starting with educating ourselves, then our friends, family, and coworkers, and eventually the school kids who will grow up to be the next generation of working, voting adults.

We start by ourselves, seeking out and reading the people who are proposing new paradigms and new approaches to economic and social problems. We think them through and, turning the principles into local initiatives, we try them out with other like-minded people and watch the momentum grow.

We learn about a view of economics that doesn’t require infinite growth. (“Mother Jones”)

We read in “Yes” magazine about people who are taking back power on behalf of their local communities and those who are creating more sustainable livelihoods.

We immerse ourselves in the local-food movement in our own community and take back our power from the food-industrial complex.

And most important, we educate ourselves about the ways our own mind tugs us away from our own best interests, if we let it. 

We learn what real happiness looks like, and what it takes to defend it, and we put into practice what we learn.

None of this happens overnight. But that’s okay. It took years — even decades — to get to where we are. It will take time for the tide to turn. Being part of the process can be exhilarating. And it’s already starting to happen, as documented in the articles I’ve linked to here.

The old paradigm of the “pursuit of happiness” emphasized individual achievement and individual rewards. The new, more lasting happiness will require a community-led and community-focused approach. This scares some of us: What, I’ll actually have to work one-on-one with peaceniks and foodies, joining strangers in a radical venture whose outcomes are unclear?  But we can get over that fear, knowing that whatever happens can’t be worse than what’s going down, right now, without our input.

We’re all in this together. And we’ll get through it best by learning and working together. The direct democracy of the #Occupy movement can point the way.

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Living in Fear 
What would it mean to be in the top 1% in a deeply unequal society?
5. Living in fear of armed assault, kidnapping, even murder.
There’s a luxurious building along Rio’s Atlantic beachfront with a monumental statue out front in Arte Moderna style, and always two armed security guards at the entrance. I often wonder who lives there. And what it must feel like to need armed guards to keep you safe. Do these one-percenters ever feel completely safe?
I had to pretend I was taking a photo of the impressive sculpture when what I was really photographing was the guard in his bullet-proof vest — he probably wouldn’t let me photograph him if he knew that’s what I was doing. After all, I could be planning an assault on the building. Ha!
(No. 5  in a photo-essay series on inequality.)

Living in Fear

What would it mean to be in the top 1% in a deeply unequal society?

5. Living in fear of armed assault, kidnapping, even murder.

There’s a luxurious building along Rio’s Atlantic beachfront with a monumental statue out front in Arte Moderna style, and always two armed security guards at the entrance. I often wonder who lives there. And what it must feel like to need armed guards to keep you safe. Do these one-percenters ever feel completely safe?

I had to pretend I was taking a photo of the impressive sculpture when what I was really photographing was the guard in his bullet-proof vest — he probably wouldn’t let me photograph him if he knew that’s what I was doing. After all, I could be planning an assault on the building. Ha!

(No. 5 in a photo-essay series on inequality.)

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Whom Can You Trust? What would it mean to be in the top 1% in a deeply unequal society? 4. An unbridgeable divide from ordinary people.  For the sensitive souls in your family, that divide will be painful. It means not knowing who you can trust. It means knowing there are lots of people who are angry and resentful at your privilege. And never being sure if the person you’re talking to right now is one of those who is full of anger and resentment.
(No. 4 in a series on inequality. Read the introduction here.)

Whom Can You Trust?

What would it mean to be in the top 1% in a deeply unequal society?

4. An unbridgeable divide from ordinary people.

For the sensitive souls in your family, that divide will be painful. It means not knowing who you can trust. It means knowing there are lots of people who are angry and resentful at your privilege. And never being sure if the person you’re talking to right now is one of those who is full of anger and resentment.

(No. 4 in a series on inequality. Read the introduction here.)