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Disaster Capitalism

If you ever noticed how magically no-bid contractors sprung up upon the decision to invade Iraq or how conveniently the residents of New Orleans were bused out after Hurricane Katrina and the 9th ward was never rebuilt...how that little something isn't quite right fly buzzes in the back of your brain while you returned to economic survival of your own, I have a must read book for you.

The Shock Doctrine - The Rise of Disaster Capitalism by Naomi Klein.

Klein has identified a new corporate strategy of using natural and man made disasters to push through corporate profit driven privatization and other agendas while the general public are disoriented, confused and thus have no ability to resist.

She calls Disaster Capitalism the rapid-fire corporate reengineering of societies that are reeling from shock.

What's Aiding the Terrorists Now? Outsourcing.

With all the breaking stories exposing KBR's policies of corruption, abuse and fraud leading up to Tuesday's Senate Appropriations Committee Hearing on the misuse of taxpayer money in Iraq, the findings of KBR's gross mishandling of funds should come as no surprise. We already knew about KBR's use of a judicial loophole to avoid prosecution in an alleged rape case, and about their scheme to avoid paying taxes on employee salaries.

The Two Economies

Waiting for the Wall Street implosion that didn't materialize, I watched the financial news. What emerged was a discussion of the two economies.

Bloomberg: Ben S. Bernanke's interest-rate cuts have touched off a vicious circle of doom for the dollar

Guess what? Now there are two economies, one for the investors, super elites and the real one for the rest of us. We should not pay attention to the paper economy according to financial advisers, it's just the place where the super elites create investment vehicles, derivatives, hedge funds, bonds...and all of that stuff which is simply the trading of paper. Nope, the real economy is just fine. The trouble is this paper economy.

Industrial Production Plunged

Industrial production plunged in February as net imports continue to hammer US production

Two economic reports today give further evidence the economy is in a recession with precarious and dangerous conditions unlike any past experience. The Federal Reserve reported today that Industrial production plunged by -0.54% in February. This sharp decline comes after an even worse decline (-0.58%) in October left a quarterly decline from Q3 to Q4 of 2007. That is, overall Industry output in February is below levels reached last July. It is worse for the Manufacturing sector with an output decline in Q4 and a -0.24% decline in February, plunging production now back to levels lower than last June.

 

Do Subsidies Work?

Frequently when prices get too high in some sector governments are called upon to provide subsidies to those who can't afford to pay.

In the US there are a large number of these. Heating fuel subsidies, food stamps, housing rental assistance and Medicaid (not Medicare) are aimed at necessities. There are also government subsidies such as Pell Grants to help pay college tuition. With the sudden downturn in the housing market there are proposals to subsidize existing mortgages. So these actions work?

I'm going to keep this brief and not overload the discussion with lots of statistics, so just take this as a working hypothesis. If you are especially interested in one program or another, or in experiences elsewhere, then please feel free to contribute data.

The Bond Market fears Deflation

This may seem like a strange title for an article in a world where gold is over $1000 an ounce and oil is at $110 a barrel, causing people like my buddy bonddad to write articles entltled, "What Inflation?", and this is somewhat a response to his latest post,
Why Isn't the Bond Market Selling Off From Inflation Fears?.

The very best analysis of the issues in our new economic world was recently set forth, imho, by Prof. Bred DeLong, who described 3 types of crises:

Laissez-faire ideologues hound CEO of GE

From the blog gristmill:
http://gristmill.grist.org/story/2008/3/13/0145/56590

"I came because I was invited," says the man on stage heatedly, squaring off his shoulders to the packed crowd. "I don't need to be lectured by anybody in this room about how to compete!"

From another speaker it might sound defensive, but in this case it is the CEO of GE, the second largest company in the world. Jeff Immelt knows whereof he speaks.

Immelt's outburst came toward the end of a Q&A session that saw him repeatedly assailed by ideological conservatives angry over his involvement in the U.S. Climate Action Partnership, a coalition of large businesses lobbying for a carbon cap-and-trade system, and his leadership role in pushing the business world to embrace clean energy and sustainability.
....

Corporations Owning Corporations

seem to recall that at one time it was illegal for corporations to own other corporations. I think this grew out of the abuses where A owned part of B and B owned part of A.

I think the two Phillips Electronics firms were involved in this type of trick.

If corporations were prohibited from owning other firms and if firms could not set up subsidiaries in other countries, perhaps the incentives to bad behavior would be reduced.

The most obvious present difficulty has to do with tax avoidance. Firms incorporate in tax havens and shift profits to these subsidiaries, many of which are nothing more than mailboxes.

Retail Sales Fall Sharply in December & February

Retail sales fall sharply in December and February; price-adjusted sales now down sharply in 4 of the last 5 months as recession deepens

Today’s Census report of nominal retail sales receipts for February also revises down sharply their earlier estimate for nominal sales in December and January. Price-adjusted retail sales have now fallen sharply in four of the past five months and even nominal receipts are back to the lowest levels since last August.

Retail Sales fall behind CPI

This surely eliminates any remaining credibility for those debt industry salesmen and politicians who still deny a recession is underway.

Price adjusted retail sales down Feb. '08

Too Many People - Too Little Work

One of the current problems in the developed world is that there is too little work to go around. As the two biggest areas of traditional enterprise (manufacturing and agriculture) have become increasingly mechanized, the number of people needed has declined.

In much of the industrialized world agriculture now requires under 5% of the workforce. Many industrial firms typically run at 70-80% of capacity. Societies have adapted in two ways, the most commonly considered is the rise of services, the other is the creation of new products of marginal utility. Even these steps have not solved the problem, the unemployment rate is kept at a modest level, but the percentage of people employed continues to decline. The two numbers don't track because official reporting agencies exclude various categories of the non-working from the labor force.

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