A Poem on "The City"

While rooting around for media for my last post, I ran across this poem by Constantin Cavafy. It was written in 1894, and very much reflects the sense of anomie that Emile Durkheim wrote about at about the same time. [original link for the poem]

The City
By Constantine P. Cavafy

You said, “I will go to another land, I will go to another sea.
Another city will be found, a better one than this.
Every effort of mine is a condemnation of fate;
and my heart is — like a corpse — buried.
How long will my mind remain in this wasteland.
Wherever I turn my eyes, wherever I may look
I see black ruins of my life here,
where I spent so many years destroying and wasting.”

You will find no new lands, you will find no other seas.
The city will follow you. You will roam the same
streets. And you will age in the same neighborhoods;
and you will grow gray in these same houses.
Always you will arrive in this city. Do not hope for any other —
There is no ship for you, there is no road.
As you have destroyed your life here
in this little corner, you have ruined it in the entire world.

Poetry/Clash Mashup!

Another Interesting Piece by Michael Hudson

Michael Hudson has published a nice round up of Obama's financial reform package on Counter Punch on Monday (June 22).
Here are the opening lines:

In reaching across the aisle for Republican support – and no doubt future campaign contributions from the financial sector Pres. Obama is morphing into Joe Lieberman. There also is a touch of Boris Yeltsin in his sponsorship of a financial “reform” ominously similar to what advisor Larry Summers backed in Russia – relinquishing government power to a banking elite. The Financial Regulatory Reform proposal promotes Wall Street’s “product,” debt creation, at the expense of the economy at large, and lets financial chieftains continue to self-regulate the debt industry – and to keep scot-free all their gains from the past decade’s worth of fraudulent lending.

[Read More ...]
Toward the end of the piece is this interesting nugget that one should keep in mind when trying to get their head around the nature of the US economy, and its impact on our political culture right now ...

More bank lending – that is, more debt – is the heart of today’s economic problem, not the solution. Finance capitalism is undercutting industrial capitalism, replacing the production of goods and services with predatory extraction of rent and interest via economic “tollbooths,” from parking meters in Chicago to roads in New Jersey. States and localities are facing fiscal shortfalls obliging them to sell off their roads, parking meters and public enterprises to buyers who erect expensive tollbooths and extract yet more income from the shrinking “real” economy. The economy is heading toward debt peonage as it polarizes between wealthy patrons and a work force reduced to patron-client dependency relationships.

When friends and commentators wonder why there are not more -- well, any actually -- public protests over the rapidly deteriorating situations from the kitchen tables to the local schools out there on main street, it is largely because these friends and commentators have an urban-industrial model of political culture given them in the college-level story books they study [mostly written 150 years ago or derivative from those written 150 years ago]. We live in a very different post-urban, post-industrial world here in the US now, one that is deeply de-centralized, patron-client, rather than highly centralized worker-management ...

Something to ponder ...

Searching for Green Shoots No. 2

"Housing Starts Soared in May," Or so the Bloomberg headline says. Could this be another "green shoot"?! Could this be more evidence that we are not mired in a severe economic crisis, but just a little downturn that will self-correct by November of this year or so? [Just in time for Obama's Health Care "Reform" debate in congress?]

I mean after all, the post-war (that's WW II) economy was driven fundamentally by the project of building American suburbia to its present high state of development. If house building is "soaring," then we are all safe to pick up with the American Dream right where we left it about a year ago.

Well, at least the US Census Dept. release their data for us to examine for ourselves, so we don't have to rely on the cheerleaders in the press.

Here's what US Census actually reported in this morning's press release:

Privately-owned housing starts in May were at a seasonally adjusted annual rate of 532,000. This is 17.2 percent (±14.4%) above the revised April estimate of 454,000, but is 45.2 percent (±5.8%) below the May 2008 rate of 971,000.

Wow, May 2009 came in 17.2% above April 2009! Housing Starts a soaring to be sure! Just don't look beyond that first number Mr. and Mrs. American Citizen, please do not look beyond that first number! PLEASE! The S&P 500 NEEDS to go up, particularly the financial stocks!

But ... if you do look ... you will see that housing starts are 45.2% lower than just one year ago (not really a soaring figure; more of a sobering figure).

Well, sure the month to month gain is positive right? -- Hey, wait a second, what are those pesky numbers in parentheses (±14.4%) -- CRAP, since the 17.2% number is an ESTIMATE based on a sample not on all the actual houses being started ... it means that there is error and the true value is equally likely to lie somewhere between a meager 2.8% increase and a much more impressive 31.6% increase. ANY value in that range has the same chance of being the true value as the 17.2% number.



Of course, month to month changes are notoriously not meaningful. It is much better to see where we are in terms of the long-term historical trends....

Check out the following graph:

Oh for crying-out-loud! Are you kidding me?!

Housing starts are still mired at the lowest levels of activity in 50 years! 50 YEARS! Housing is in a full blown depression, the current levels have not been recorded since census started keeping track. I mean come on people.

"Housing Starts Soared in May,"

Selling your book again, are you Bloomie?

Where is all the money going?

As one reads the various financial bits Out There in medialand (blogger too!), one gets the distinct impression that this community still has no flippin' theory of money creation as it currently exists. And THAT is a serious problem for our everyday lives and for a more humane society.

Take this little bit from yesterday posted by Rolfe Winkler at Option ARMageddon. Rolfe's concern is that

The Fed published its latest Flow of Funds report today. One key takeaway: While total debt is growing more slowly, it is still growing. Since Q3 ‘08 households have cut their debt (slightly), but the federal government is borrowing so rapidly, overall debt continues to expand.

And,

The only way to climb out of a debt-induced depression is to pay down debt or to write it off. Levering up only delays the inevitable.

Unfortunately Americans, and lately the Obama administration, have shown absolutely no political will to do this. Republicans decry growing deficits, but do you ever hear them enumerate cuts they would make? Clearly our plan is to keep borrowing until our lenders cut us off.

Check out this nice graphic that Rolfe has nicely posted to give us an idea of what he is on about.


Now, to be sure, Rolfe is right about total debt still rising, and is doing so largely because the Federal Government is trying to fill in where businesses and consumers once led. But, the idea that paying off this debt or just allowing unmanageable debts to be written off would not be a nice tonic for our current malaise, it would be (it in fact is) a disaster for you and me.

Why, well, Rolfe has no idea where most of the money you and I earn and spend each day comes from. In short, that money (about 95% of it anyway) has come from all of that debt listed in this picture. What's worse is that that money/debt is both created and destroyed each and every day that you and I breathe. So, if new money/debt is not created to replace the money that is destroyed, the net amount of money available for you and I to earn and spend goes down and down. Meaning: you and I have less and less money to earn and spend (in the aggregate). -- This is a bit of an oversimplification, and I am not even mentioning the problem of compound interest that we all pay in addition to the actual money that we borrow when we pay off our debts!

Well, to those of your brave enough to take a look, I urge you to watch Paul Grignon's excellent animation that explains the whole process.



Some of you might also check out Chris Martenson's "Crash Course" which covers some of the ground for exponential growth as a practical impossibility in a world of physical limits; though I don't think Chris has a very clear understanding of the theory of money as debt, either.

Once you have enjoyed these must see presentations -- I particularly like Paul's animation because gives us all a sense of what we might be able to do about this situation in the long run -- let's reconsider Rolfe's graph above. Clearly debt is no longer growing exponentially. THAT is a problem for you and me. What's worse ... much of the new debt being invented by the Fed and the Treasury as we speak is NOT coming back to you and me in the form of new debt/money that you and I can earn and spend. It is going right into banks around the world, where it is being horded to allow them to gamble and pay their bookies in the World Casino called the global financial marketplace.

Net result to you and me, there's not enough money to service our debts AND buy the stuff you and I need each week, month, and year to get by and raise our families (hence all the foreclosures and bankruptcies and plummeting tax receipts). So far this money crunch is slamming some business sectors (e.g., autos & real estate) ... if the curve on that graph above turns down (as it inevitably will as the vicious cycle of debt destruction continues to accelerate in the coming months and -- yup, I'm going to say it -- years) expect the money crunch to hit more and more of those parts of the economy you and I depend upon for our more basic needs.

Not that I want to scare the hell out of anybody, but driving with our eyes shut hasn't worked out so well so far, now has it?

Well, what can we do about it? Now that is the conversation EVERYONE should be having. People will find alternative economies to get their basic needs; but ultimately we need to think more broadly, both in terms of ethics and in terms of politics.

Having a shared understanding of Money as Debt is a great place to start -- not to mention understanding how the current banking/global financial system is both amoral and inefficient -- promoting as it does stupid inequality and wasteful accumulation at all levels of society (yeah, that's right I am implying there can be smart inequality -- given the division of labor) .

Now, let's have some F'in Pink Floyd!

Searching for Green Shoots No. 1

I am basically a 'green shoots' skeptic, meaning that I believe all the blather we hear in the -- *ahem* -- media and from our -- cough, cough -- public representatives about economic recovery being just around the corner is a bunch of hokum. Why? Because we pulled forward trillions of dollars of future earnings to pay for our apparently prosperous lifestyles as a society, betting on the expectation that those future earnings would grow exponentially ad-infinitum (a mathematical practical impossibility (Check out Chris Martenson's crash course for a primer). What's worse, the whole flipping planet got in on the act, borrowing trillions in the present and betting that unending future prosperity or future growth toward prosperity would pay for the luxuries and wasteful spending of the present. Now, the real future is here and we ain't nearly as prosperous as we hoped we'd be, as a result huge sections of the global political-economy are under enormous stress, past debts will need to be paid off or written off, and that process is well underway right now.

But, so what? Who care what I think. Let's have some data. After all, those green shoots just might be out there, we are just not paying attention to them.

Today, the United States commerce department released preliminary estimates of imports and exports for April, 2009. Let's take a look at all of the monthly estimates for US imports and exports going back to 1992.




See the [dot] bomb bubble? Nice little bit of trade growth there, eh? But --oh Mommy! -- how about that housing bubble? Now that drove a nice little trade boom for the Good Ol' US of A, now didn't it? And that little bit of chimeric macro-economic activity has been crashing spectacularly since last summer! No upturn seen in these data!

Of course, Lawrence Summers, President Obama's Rasputin-like economic adviser, has been promising "green shoots" since February. Let's take a closer look at the same data to see if we can detect those green shoots! [zooming in on the recent boom-bust cycle]



Yup, sure enough, in February this year the crash reversed a bit and there was a little uptick in trade activity, particularly with exports of goods and services. A little 'green shoot' in support of Larry's little propaganda campaign. Since then? Down the slide we go! Wheee!

I want my 'green shoots!'

Can I get a witness!

Life in a world of unlimited horizons and limited means

I ran across this bit while rereading Durkheim's Suicide [first published in 1897]. I thought it very timely.

“For a whole century, economic progress has mainly consisted in freeing industrial relations from all regulation.
…[N]ations are declared to have the single or chief purpose of achieving industrial prosperity; such is the implication of the dogma of economic materialism …. And as these theories merely express the state of opinion, industry instead of being as a mean to an end transcending itself, has become the supreme end of individuals and societies alike. Thereupon the appetites thus excited have become freed of any living authority [either church or state]. By sanctifying them, so to speak, this apotheosis of well-being has placed them above all human law. Their restraint seems like a sort of sacrilege. For this reason, even the purely utilitarian regulation of them exercised by the industrial world itself through the medium of occupational groups has been unable to persist. Ultimately, this liberation of desires has been made worse by the very development of industry and the almost infinite extension of the market. So long as the producer could gain his or her profits only in his or her immediate neighborhood, the restricted amount of the possible gain could not overexcite ambition. Now that he or she may have almost the entire world as his or her customer, how could passions accept their former confinement in the face of such limitless prospects.
Such is the source of the excitement predominating this part of the society, and which has thence extended to the other parts. There, the state of crisis and anomy is constant and, so to speak, greed is aroused without knowing where to find ultimate foothold. Nothing can calm it, since its goal is far beyond all it can attain. Reality seems valueless by comparison with the dreams of fevered imaginations; reality is therefore abandoned, but so too possibility is abandoned when it in turn become reality. A thirst arises for novelties, unfamiliar pleasures, nameless sensations, all of which lose their savor once known. Henceforth one has so strength to endure the least reverse. The whole fever subsides and the sterility of all tumult is apparent, and it is seen that all these new sensations in their infinite quantity cannot form a solid foundation of happiness to support one during days of trial. The wise person, knowing how to enjoy achieved results without having constantly to replace them with others, finds in them an attachment to life in the hour of difficulty. But that humanity who has always pinned all its hopes on the future and lived with his eyes fixed upon it, has nothing in the past as a pleasure against the present’s afflictions, for the past was nothing to it but a series of hastily experienced stages. What blinded that person to him- or herself was his expectation always to find further on the happiness he or she had so far missed. Now he or she is stopped in his or her tracks; from now on nothing remains behind or ahead to fix his or her gaze upon. Weariness alone, moreover, is enough to bring disillusionment, for he or she cannot in the end escape the futility of an endless pursuit.
We may even wonder if this moral state is not principally what makes economic catastrophes of our day so fertile in suicides. In societies where a person is subjected to a healthy discipline, he or she submits more readily to the blows of chance. The necessary effort for sustaining a little more discomfort costs him or her relatively little, since he or she is accustomed to discomfort and constraint. But when every constraint is hateful in itself, how can closer constraint not seem intolerable? There is no tendency to resignation in the feverish impatience people’s lives. When there is no other aim but to outstrip constantly the point arrived at, how painful to be thrown back! Now this very lack of organization characterizing our economic condition throws the door wide to every sort of adventure. Since imagination is hungry for novelty, and ungoverned, it gropes at random. Setbacks necessarily increase with risks and thus crises multiply, just when they are becoming more destructive.
Yet these dispositions are so inbred that society has grown to accept them and is accustomed to think them normal. It is everlastingly repeated that it is human’s nature to be eternally dissatisfied, constantly to advance, without relief or rest, toward an indefinite goal. The longing for infinity is daily represented as a mark of moral distinction, whereas it can only appear within unregulated consciences which [sic] elevate to a rule the lack of rule from which they suffer. The doctrine of the most ruthless and swift progress has become an article of faith. But other theories appear parallel with those praising the advantages of instability, which, generalizing the situation that gives them birth, declare life evil, claim that it is richer in grief than in pleasure and that it attracts people only by false claims. Since this disorder is greatest in the economic world, it has most victims there.”

Emile Durkheim, Suicide: A Study in Sociology, 1897 [1951 trans. by John Spaulding]. [Edited for archaic use of masculine gendered pronouns.]

Lies! Damn Lies! And Statistics! :D

I have long been fascinated with social statistics, and for some time, business statistics or economic statistics have been a major preoccupation -- although to be fair, I spend plenty of time with census and health statistics too!

It's not just because I like to derive some feeling of control from them, you know, are things really that bad, are things really that good. For some stupid reason, "things" are always reduced to economic activity in my mind.

Social statistics are not just a form of clairvoyance and anxiety management. I am also fascinated by them as a cultural product. The people that report them and consume them use them to gauge reality, there is a whole social apparatus that is dedicated to their production and distribution. All too often, I am surprised by the way people use them not to discern reality, but as talismans to ward off fears of social ills, often with little or no understanding of what these number mean.

Today for example, The Institute for Supply Management released its monthly "Report on Business" Index for non-manufacturing industries. The basic measure attempts to divine whether business activity is expanding or contracting relative to the previous month. A score below 50 represent overall contraction from the previous month, a score above 50 represents overall business expansion. The report for may is summarized as, "

The NMI (Non-Manufacturing Index) registered 44 percent in May, 0.3 percentage point higher than the 43.7 percent registered in April, indicating contraction in the non-manufacturing sector for the eighth consecutive month, but at a slightly slower rate.

Now, generally everyone on the various sites I read interprets this to mean what the ISM implies it means, that overall business activity is contracting but not as rapidly as it had been the previous month. The take home message, the recession is losing steam, or, to paraphrase one blogger, it turns out that the aircraft carrier that is the US economy cannot turn on a dime [note the implied optimism, that the aircraft carrier is turning!]

But can we have any confidence in the validity or the reality behind such an interpretation of this number? Actually, no. The ISM index is compromised of a number of measures taken from a questionnaire sent to a panel of 300 purchasing and supply managers from around the country. As near as I can tell from the website, the sample is not representative of all, but even if it is a representative sample, which requires a precise sampling strategy, it is a relatively small group of a much, much larger population of purchasing and supply managers around the country.

So what you ask? Well, the statistics taken from the ISM represent business activity for these 300 members of the panel, but it is only an approximation of the real value in the real world (assuming the sample is representative of the whole). The real world number lies either somewhat higher than the survey statistic or somewhat lower -- and, if the sample is representative of the whole, this range of error is knowable with a fairly high probability of certainty (say 95 or 99 percent). So, the ISM misleads, or better, the ISM ritually reproduces an economic talisman that can give a sense of where we might be going in terms of economic activity in the past month. But we cannot know from this statistic where we are going. In point of fact there is an equal chance that the contraction of business activity is actually slightly worse than last month, as much as it is to be the case that it is slightly better! We'd be given this range and more information about the sample if this statistic was, in fact, intended to be used as a indicator or reality. That we are not given this information suggests to me that its purpose is for clairvoyance and other anxiety management purposes.

Of course, if the sample of 300 executives is a non-random, convenience sample ... well all bet are off. The statistic in that case is not very helpful at all.