Slouching towards neofeudalism

The financial crisis that grips our nation's states and cities has a malicious source, and Governor Tim Pawlenty recently named that source: public school teachers.

"It used to be that public employees were underpaid and over-benefited. Now they are over-benefited and overpaid compared to their private-sector counterparts."

The school teacher, the policeman, the firefighter - these are now the faces of what is wrong with America today. It doesn't matter that studies by the Bureau of Labor Statistics say otherwise, America can no longer afford their overpaid, middle-class salaries.

At least that is what the right-wing media is telling us. Tea party members also want to see a drastic pay cut for the same people who teach their children. A familiar comment on the internet is, "I took a pay cut last year. Why shouldn't they?"
This attitude goes beyond schadenfreude and goes straight to the crabs in a bucket mentality. Strangely enough this attitude of "if I can't have it, neither should you" only extends to working class people who live next door. For some reason none of the jealousy and malice is reserved for the people who actually broke the budgets of the states and cities, i.e. the people who deserve it.

If you really want to know why the cities and states are so broke, then you must first ask yourself where all the money went. Was the firefighter down the street from you buying vacation yachts for his tropical island? Probably not.
However, the guys on Wall Street who sold your school district, county, and state governments complicated financial derivative products are buying yachts for their tropical islands. Maybe we should start there instead.

Detroit Mayor Dave Bing is struggling to save his city from fiscal calamity. Unemployment is at a record 28% and rising, while home prices have plunged 39% since 2007. The 66-year-old Bing, a former NBA all-star with the Detroit Pistons who took office 10 months ago, faces a $300 million budget deficit—and few ways to make up the difference.
Against that bleak backdrop, Wall Street is squeezing one of America's weakest cities for every penny it can. A few years ago, Detroit struck a derivatives deal with UBS (UBS) and other banks that allowed it to save more than $2 million a year in interest on $800 million worth of bonds. But the fine print carried a potentially devastating condition. If the city's credit rating dropped, the banks could opt out of the deal and demand a sizable breakup fee. That's precisely what happened in January: After years of fiscal trouble, Detroit saw its credit rating slashed to junk. Suddenly the sputtering Motor City was on the hook for a $400 million tab.

What most often happened is that Wall Street rating agencies, the same agencies implicated in corrupt business practices, downgraded the municipal bonds, thus turning the the financial deals into an albatross for broke cities, but a profitable one for Wall Street.

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Detroit is hardly alone. No state in the union has been spared the backlash of a one-sided financial deal that transferred public wealth to the already wealthy. Wall Street is raking in huge amounts of money from our broke cities and states at the worst possible time. The SEIU did a study which shows the country's municipal governments losing $1.25 Billion just from these interest rate swap deals alone.

"Elected officials are simply no match for the investment banker that's selling the deal."

Yet in conservative political circles there is little blame directed at Wall Street. They would rather blame the guy picking up their garbage for his $45,000 a year wage, than they would denounce the investment banker who tricked their city government out of hundreds of millions of dollars. Can these people even do math?
The logic of this attitude reminds me of someone who drives all the way across town to "save" a couple nickles on gas, while blindly shoving thousands of dollars into their 401k that someone they've never met on Wall Street manages. Matt Taibbi wrote about this phenomenon last year.

The setup always goes the other way: when the excesses of business interests and their political proteges in Washington leave the regular guy broke and screwed, the response is always for the lower and middle classes to split down the middle and find reasons to get pissed off not at their greedy bosses but at each other. That’s why even people like Beck’s audience, who I’d wager are mostly lower-income people, can’t imagine themselves protesting against the Wall Street barons who in actuality are the ones who fucked them over.

Taibbi describes it as a "peasant mentality". I agree. However, Taibbi doesn't take the logical next step and tells us what it all means - neofeudalism.

In 1958 John Kenneth Galbraith wrote The Affluent Society. It was a book far ahead of its time, and one of the first to use the term "neo-feudalism". It dared to question traditional attitudes towards economics, and for that it was hated and shunned by wealthy conservatives.

Inequality has been justified on many grounds, “principally noted for the absence of the most important reason, which is the simple unwillingness to give up what [the rich] have.” Equality has been argued to lead to uniformity and monotony (the rich sponsor the arts and education), redistribution has a musty association with godless communism, and the original Ricardian defense was that the present system was ultimately inevitable, and any attempt to change it would only lead to short-run inefficiency which would make everybody worse off.

This attitude, that some amount of suffering is necessary in the current system, and that any major changes in it would be self-defeating, is what I call Sacrificing to the Volcano God. We have turned economics into a religion, where the mistakes are common, yet the fundamental assumptions it is based on is beyond question. Gaping flaws in logic are ignored, or even held up as unanswerable mysteries that laymen could never understand. When the Volcano God rains ash and lava upon us, it is because we angered the Volcano God with our sins of minimum wage laws, child labor laws, environmental regulations, and worker safety laws. More sacrifices are needed or the Volcano God will destroy us all.

The High Priests of Economics never explain exactly how these sacrifices will fix the economy, nor do they mention that the sins in question might be their own. Yet we still rush to offer up our children's futures through unpayable debts while never considering that there might be better alternatives.

"Jesus Christ is Free Trade, and Free Trade is Jesus Christ."
- Dr. Robert Browning

Like the Volcano God, nothing can stop globalization. There is no alternative.
Besides, globalization is good. They tell us that it creates jobs, and you are expected to believe them even while you watch all the factories in your town close down and get sent overseas.

"Outsourcing is just a new way of doing international trade."
- N. Gregory Mankiw, chairman of Bush's Council of Economic Advisors

This shouldn't surprise anyone. David Ricardo, legendary economist and free-trade proponent, explained how this dynamic worked nearly two centuries ago.

"If instead of growing our own corn... we discover a new market from which we can supply ourselves... at a cheaper price, wages will fall and profits rise. The fall in the price of agricultural produce reduces the wages, not only of the laborer employed in cultivating the soil, but also of all those employed in commerce or manufacture."
- David Ricardo, Des principes de l'economie politique et de l'impot, 1835

So you see, your wages are supposed to fall with free trade globalization. Those who worship the Volcano God knew this all along. They also knew that our manufacturing base was going to move south of the border when NAFTA was passed. They fail to differentiate between free trade and global labor arbitrage.

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I never understood how the wealthy elite could think that the impoverishment of the working class could be a good thing until I ran across the story of Plutus the other day.
Plutus, the God of Wealth, was blinded by Zeus so that he would be able to dispense his gifts without prejudice for things like need. When a couple citizens of Athens decide to give Plutus back his sight, the Goddess of Poverty intervenes. She tells them that she is the source of all progress in the world, and that if poverty was eliminated it would destroy civilization.
That's when I realized that the High Priests of Economics aren't actually worshiping a Volcano God. They are worshiping the Goddess of Poverty.

“Thus you dare to maintain that Poverty is not the fount of all blessings!”
- Goddess of Poverty, 388 B.C.

"In a little time [there will be] no middling sort. We shall have a few, and but a very few Lords, and all the rest beggars."
–R.L. Bushman

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Neofeudalism is a concept in which government policies are designed to systematically increase the wealth gap between rich and poor while increasing the power of the rich over the poor. It's a party-neutral idea. There is no cabal pushing the plan, merely the sum effect of pressure from the wealthy elite.
Those policies can be seen today. Just look at the fact that earned income are taxed at a higher rate than unearned income, and the repeal of the inheritance tax. Other ways are harder to measure but no less real, such as white collar criminals receiving slaps on the wrist, while the poor feel the full weight of the law. It's a system with two sets of rules, one for the rich another one for the poor, and that is the definition of neofeudalism.
Another manifestation of neofeudalism is the growing power of corporations, that leave the poor dependent on private interests more powerful than the government, a situation resembling traditional feudal society.

Currently the top 1% of society own 40% of the nation's wealth. The lower 50% of the nation have the mean assets worth less than $28,000. The richest 10% are worth, on average, 143 times that, or $3.976 million.

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Note the inverted relationship between marginal tax rates and wealth inequality in the charts above

Despite this disparity, 80% of tea party members think that raising taxes on households making more than $250,000 to pay for universal health insurance is a bad idea. At the same time, 88% of tea party members think Obama, a president they despise, "favors the poor", and 73% think that "providing benefits to the poor encourages them to remain poor".
Noam Chomsky in Hegemony or Survival had this to say:

If working people depend on the stock market for their pensions, health care, and other means of survival, they have a stake in undermining their own interests: opposing wage increases, health and safety regulations, and other measures that might cut into profits that flow to the benefactors on whom they must rely, in a manner reminiscent of feudalism.

Neofeudalism isn't just about the powerful taking over everything. It's about conditioning the poor to accept their designated role in society, even fighting to defend the ability of the wealthy to exploit them. It requires working people to do things that are against their own interests, and nowhere is this more true than in our current economic system.

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How is it that we have a politico-economic system in which the government’s explicitly stated goal is to entice people to take out loans for houses and cars they don’t even need? 150 million cars on the road and we must keep buying new ones? Millions of vacant housing units and we need to build new ones? Homes so full of Chinese junk that half of it goes into off-site storage, and we need to shop more? For whose benefit?
Ever heard of debt-slavery? How about feudalism?

Here's an even better word: peonage.

It always amazed and confused me how everyone in America is obsessed with their credit rating. It's almost as if people don't realize that credit equals debt. Debt is something that people have feared for thousands of years, because unlike Americans today, historically debt was always associated with another scary term - slavery.
Debt bondage, indentured servitude, slavery, they all mean the same thing. Yet somehow the establishment has convinced us that the ability to "manage" our slavery is something to be proud of. They even have a rating system for it.

I'm not being facetious. Being heavily in debt means you don't have the freedom to quit your job. People who have lost their job are unable to move because the enormous debt tied to homes they can no longer afford.
Being tied to a piece of land is the definition of serfdom.

Every once in a while our love for the wealthy elite who are exploiting us wanes. When that happens the American people need to be distracted. Perhaps it is incompetent terrorists in caves in faraway lands. Or maybe its poor immigrants who want low-paying jobs. One way or another there will always be a scapegoat, and we will need to declare war on them. As Taibbi put it:

It’s a classic peasant mentality: going into fits of groveling and bowing whenever the master’s carriage rides by, then fuming against the Turks in Crimea or the Jews in the Pale or whoever after spending fifteen hard hours in the fields. You know you’re a peasant when you worship the very people who are right now, this minute, conning you and taking your shit. Whatever the master does, you’re on board. When you get frisky, he sticks a big cross in the middle of your village, and you spend the rest of your life praying to it with big googly eyes. Or he puts out newspapers full of innuendo about this or that faraway group and you immediately salute and rush off to join the hate squad. A good peasant is loyal, simpleminded, and full of misdirected anger.

Welcome to 21st Century America.

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Comments

executive class

Great post and I have no idea why the focus on public service unions instead of the outrageous executive class/pay and corporate governance.

It's like instead they are cult, super stars. Warren Buffet is treated like a God, same with Soros, same with Bill Gates and on and on (I'm picking "liberal" to show, executive class knows no political persuasion and also these folks, when it comes to their agenda or money, will screw the middle class just like the right! Notice Buffet's lobbying on derivatives!)

Also, the site title is to take the real Populist outrage and redirect it where it belongs. Your call out on the "twist" by corporate and special interests to redirect populist outrage to the wrong groups and their amazing success at doing that....is a worthy goal to do on this site!

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I some what agree with the article

because of the under funded pension problem of government pensions.

I agree more with what you say, "It's like instead they are cult, super stars. Warren Buffet is treated like a God, same with Soros, same with Bill Gates" Oddly Huff Po people do treat Soros as some god like figure but he is a financial shark. In a heartbeat he would eat their financial dinner.

Also the Hollywood types are big on my list. My brother-in-law works for some of them. As a financial guy he is a hired hand in their eyes. But he has a lot of disdain for them.

They talk about how much they care, they have a liberal bend but they are some of the most greedy, self centered narcissistic people on earth. They use every loophole available to dodge taxes but will go to an open mic and tell how we need taxes.

A show that makes me ill is Hollywood Tonight (or what ever it is titled). I could care less what those pampered pooches are doing to them self or to others.

Shall we even talk about the $millions payed to chase or catch a ball?

We are living in a very, very strange time. It is like a casino. You either hit it big or you wallow in the sallow of what was once a robust middle class.

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Two Separate Issues

Detroit has and had the option of Chapter 9 bankruptcy where they could have just not paid those bills you talk about but it would also void the union contracts. Lord forbid they do either and give some relief to the taxpayers there. The system though does not represent the majority of voters. It represents the wealthy AND it represents powerful unions. The only powerful unions left are federal, state and municipal unions. Where does that leave the rest?

They just borrowed $250 million rated at junk status with no financials given out and the threat of Chapter 9 looming. Lowering debt by borrowing at a higher rate what a unique idea. Well they have to meet their current obligations because well they have to.

Municipalities have been forced to look for higher and higher yields through more risky financial vehicles because of their debt levels and contractual promises. Everyone was on board with that till the market collapsed because those vehicles gave everyone what they wanted. The vehicle ran out of gas now its the car salesmans fault 100%?

No one wants to talk about the fact that two thirds of the stimulus funding last year which everyone will pay back went straight to state and local budgets mandated to be spent on education and medical costs. It completely insulated the education and medical sectors from the downturned economy last year. Now that its been spent things haven't changed so where is the money coming from?

Tax the rich? I'm all for it so why didn't it happen?

We had 60 democrats in the Senate with a fillibuster proof majority and they didn't have the cohones to raise taxes on the wealthy and raise tariffs to help labor here so we are reaping our just deserts here if anything. If it didn't happen then, guess what, its not happening. Those people do not represent the average taxpayer.

So if they are not going to raise taxes or increase tariffs then what is going to happen to the average worker? I'm not talking about teabaggers making over $250k either. The average worker here makes about $44k a year per capita. The squeeze is on - lower wages, higher cost of benefits and higher taxes for mandated costs. The average taxpayer sees the only thing they have any control over is local taxes. Hence municipal costs get broken out and looked at. Thats natural. The costs are rolling downhill and falling on property owners - thats whats happening nationwide.

Obama is in league with the big banks and the Fed just the opposite of what I voted for so I just don't expect anything postive on financial reform or jobs except as presented by the media. Change we can believe in? The biggest lie ever perpetrated on me anyway by a politician.

The entire system is FUBAR and designed to pit us against each other - I agree but its not as cut and dry evil on one side and the good guys on the other as presented. Thats a fairy tale.

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Very good points...

...I was going to add something but you said it all.

Regards,

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My Points Vindicated

In my post above I made this point.

Municipalities have been forced to look for higher and higher yields through more risky financial vehicles because of their debt levels and contractual promises. Everyone was on board with that till the market collapsed because those vehicles gave everyone what they wanted. The vehicle ran out of gas now its the car salesmans fault 100%?

Today on ZeroHedge a blistering expose on the Illinois Teachers Pension fund and how THEY have decided to invest whats left of their funds. THEY make their own decisions on where to put their money bad and good and THEY are responsible for the fallout although as the post states taxpayers will end up on the hook once again.

The bottom line, experts say, is that there is no language in the Illinois pension code that prohibits pension funds and retirement systems from buying or selling OTC derivatives as an investment method. In the event of catastrophic losses, lawsuits would be filed against the fiduciaries, but ultimately taxpayers would be left holding the bag.

61% Underfunded Illinois Teachers Pension Fund Goes For Broke, Becomes Next AIG-In-Waiting By Selling Billions In CDS

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that one deserves an Instapopulist

as a write up. Just unbelievable! How to F&*K up the #1 economy in a matter of 30 years. I think that's a record for history isn't it?

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Here here

This is what I've been saying for a while - reacting to a loss in economic security by trying to get rid of economic security for other workers is ludicrous.

Anti-solidarity is not a winning strategy. Firing teachers by the tens of thousands just means higher unemployment.

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Excellent, and I'm happy to see

that your posting on DailyKos received much attention.

(I'm on the road right now, and have been at Jon Larson's home in the Minneapolis suburbs. Jon has written a nice description of the NAMES model engineering show in the Detroit suburb of Southgate, and included a very nice video of some of the incredibly well crafted exhibits. And yesterday Jon and his friend took me out on the expanded stretch of the Mississippi River known as Lake Pepin. It was my first time sailing, and almost everything that could go wrong, did. About the only things we didn't do were spill some fuel and blow up the boat. Jon provides details.)

Anyway, I posted this as a comment on DailyKos, and will add it here as well. I've been reading Thorstein Veblen's 1904 book, The Theory of the Leisure Class. (The full text of the book has been made available online by Project Gutenberg at www.gutenberg.org.)

In Chapter Eight – "Industrial Exemption and Conservatism," Veblen explains how the leisure class (the rich, ruling class), by its nature and by it very existence, makes a society conservative. This, of course, contradicts all those who just a year and a half ago were trumpeting the message that the 2008 Presidential election proves the U.S. is not a conservative country.

First, Veblen explains that there is a deeper, more fundamental reason that the leisure class resists change beyond the preservation of their vested interests.

The leisure class is in great measure sheltered from the stress of those economic exigencies which prevail in any modern, highly organized industrial community. The exigencies of the struggle for the means of life are less exacting for this class than for any other; and as a consequence of this privileged position we should expect to find it one of the least responsive of the classes of society to the demands which the situation makes for a further growth of institutions and a readjustment to an altered industrial situation. The leisure class is the conservative class. The exigencies of the general economic situation of the community do not freely or directly impinge upon the members of this class. They are not required under penalty of forfeiture to change their habits of life and their theoretical views of the external world to suit the demands of an altered industrial technique, since they are not in the full sense an organic part of the industrial community. Therefore these exigencies do not readily produce, in the members of this class, that degree of uneasiness with the existing order which alone can lead any body of men to give up views and methods of life that have become habitual to them. The office of the leisure class in social evolution is to retard the movement and to conserve what is obsolescent. This proposition is by no means novel; it has long been one of the commonplaces of popular opinion.

The prevalent conviction that the wealthy class is by nature conservative has been popularly accepted without much aid from any theoretical view as to the place and relation of that class in the cultural development. When an explanation of this class conservatism is offered, it is commonly the invidious one that the wealthy class opposes innovation because it has a vested interest, of an unworthy sort, in maintaining the present conditions. The explanation here put forward imputes no unworthy motive. The opposition of the class to changes in the cultural scheme is instinctive, and does not rest primarily on an interested calculation of material advantages; it is an instinctive revulsion at any departure from the accepted way of doing and of looking at things--a revulsion common to all men and only to be overcome by stress of circumstances. All change in habits of life and of thought is irksome. The difference in this respect between the wealthy and the common run of mankind lies not so much in the motive which prompts to conservatism as in the degree of exposure to the economic forces that urge a change. The members of the wealthy class do not yield to the demand for innovation as readily as other men because they are not constrained to do so.

Veblen then explains how the leisure class "enforces" conservatism in the rest of society.

The aversion to change is in large part an aversion to the bother of making the readjustment which any given change will necessitate; and this solidarity of the system of institutions of any given culture or of any given people strengthens the instinctive resistance offered to any change in men's habits of thought, even in matters which, taken by themselves, are of minor importance. A consequence of this increased reluctance, due to the solidarity of human institutions, is that any innovation calls for a greater expenditure of nervous energy in making the necessary readjustment than would otherwise be the case. It is not only that a change in established habits of thought is distasteful. The process of readjustment of the accepted theory of life involves a degree of mental effort--a more or less protracted and laborious effort to find and to keep one's bearings under the altered circumstances. This process requires a certain expenditure of energy, and so presumes, for its successful accomplishment, some surplus of energy beyond that absorbed in the daily struggle for subsistence. Consequently it follows that progress is hindered by underfeeding and excessive physical hardship, no less effectually than by such a luxurious life as will shut out discontent by cutting off the occasion for it. The abjectly poor, and all those persons whose energies are entirely absorbed by the struggle for daily sustenance, are conservative because they cannot afford the effort of taking thought for the day after tomorrow; just as the highly prosperous are conservative because they have small occasion to be discontented with the situation as it stands today.

From this proposition it follows that the institution of a leisure class acts to make the lower classes conservative by withdrawing from them as much as it may of the means of sustenance, and so reducing their consumption, and consequently their available energy, to such a point as to make them incapable of the effort required for the learning and adoption of new habits of thought. The accumulation of wealth at the upper end of the pecuniary scale implies privation at the lower end of the scale. It is a commonplace that, wherever it occurs, a considerable degree of privation among the body of the people is a serious obstacle to any innovation.

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eek!

EP isn't an extension of DK.

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Yikes your clip is way too long for Friday

I do question what the definition of conservative. The premise is that wealthy by definition means conservative. What then were the wealthy in Communist Russia or those in Russia's upper government that all those benefits (can't remember the Russian word). I guess they were conservative communists.

So if a Progressive society was in force, those not wanting change, they would be conservative.

Is that how I am to interpret what you say?

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I would say you have it correct

and the example you chose to use is an excellent example of why Veblen's socio-political analysis is superior to Marx's. Marxism, after all, has been a miserable failure in both organizing a society, and in projecting the end of capitalism (i.e., inherent contradictions).

But why is Marx more popular than Veblen? Unlike Marx, Veblen made no attempt to carry his immensely powerful socio-political analysis into practical political effect. In fact, Veblen offers no prescriptive remedies. Marx, on the other hand, hold out the promise - illusory and misguided it turns out - of achieving a better society if specific steps A, B, C and so on are carried out.

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Conservative Classes of Society

Before Veblen, Marx and Engels both identified the 'sub-proletariat' as 'counter-revolutionary' along with the idle rich. The marxists had a hard time explaining aristocrat revolutionaries, because many of aristocrat revolutionaries Lafayette, Jefferson, von Steuben, worked at least making revolution.

The line between idle and non-idle rich is difficult to draw. In some ways you can make the case that an equity investor class, really works, or loses money. A debt investor class is definitely non-working and reactionary.

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Burton Leed

False Needs

The question in the prior post asked how we possibly accumulate stuff
"
How is it that we have a politico-economic system in which the government’s explicitly stated goal is to entice people to take out loans for houses and cars they don’t even need? 150 million cars on the road and we must keep buying new ones? Millions of vacant housing units and we need to build new ones? Homes so full of Chinese junk that half of it goes into off-site storage, and we need to shop more? For whose benefit?
Ever heard of debt-slavery? How about feudalism?

"
Sure it leads to a feudal society. But the 'needs' are false. Nobody can use the horsepower, the extra clothes, all those rooms in big houses. Not to mention the proliferation of every conceivable bit of trash and gadgets we all 'got to have'.

Our system will proliferate false needs, repressive tolerance in direct proportion to the accumulation of surplus capital and wealth of the ruling classes. All the
income and wealth distribution studies over 100 years prove
this point empirically.

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Burton Leed

big box house

That reminds me. During the height of the housing bubble, I saw perfectly cool and swell houses torn down in order to build a bigger house all the way to the sides of the lot. Gone were the trees and gorgeous green lawns. In their place was this glorified McMansion, all about making more money. If you can imagine this very livable, beautiful home, with lots of glass windows to watch the yard birds and lots of warmth, very functional home replaced with this sterile, McMansion and no real yard, grass, trees with this carbon copy drywall and carbon copy floor plan, you'll get what I mean. It turns what was a real home into a commodity, I mean physically you could tell the difference.

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The peoples needs outweighed responsibility

I have asked this question to people, normally people with those $20,000 car loans.

With your loan to buy a car, you have exhibited the ability to do so and willingly went into debt. You purchase makes you happy. What if you needed a $20,000 operation to save your life, would you so willingly take out a loan to pay for it. Would you be so happy of the medical purchase.

People don't like that question because it is based on a different responsibility. It is not based on consumption but is based on individual responsibility. All around we are bombarded with the rights of consumption, to consume and never stop. But to pay for something that isn't part of the consumption equation is very foreign to modern man.

It was different when my 87 year old mother was in her young years. They were a generation that responsibility was not based on never ending consumption.

There are true real needs such as taking care of your health but more false needs are foisted upon us. Since I started driving in the 1960's I have only owned one new vehicle. That was purchased because I had to have a van with special hauling needs, the engine was going to be abused, etc. and a used vehicle would not fit the bill. Believe me I tried and they all quickly died. Why do so many people feel the need to go into debt for new cars?

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you're missing some things here

Buying a car is discretionary spending. Getting an operation is necessary spending. Also, being able to drive a car implies one is healthy and thus can earn income. Needing an operation implies one is sick and cannot earn income. They are not the same thing by a long shot. Health care is like food and water, in many instances without them you will die before your time.

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San Diego Sues Public Pension to stop taxpayers on the hook

See why we need EP? The other side. Mish is pointing to San Diego Sues its Pension System to Shift Responsibility for Deficit from Taxpayers to the Employees (Shedlock is IMHO a conservative but one that tries to stick to facts more than most).

San Diego's pension plan has a $2 billion deficit. To help fill the deficit the city plans to shift responsibility for some of the gap to the employees.

There are protests by the public workers unions today over this.

But whose fault is it really that the pension has a deficit? Uh, isn't it Wall Street, the big banks who lost the money gambling with it on derivatives?

If I posted this comment on DK, I'll bet I would have gotten a troll rating. That's the problem with that site, beyond it's not an economics site, but a political one and if the economics fit, oh that's great too. ;)

If someone says something that isn't in the political mantra du jour, they are attacked.

This is why EP is so insistent on sticking with facts and let facts, statistics, the economic theory speak for itself.

(Yes I have an account on DK and am in good standing and so on, have posted many times on the site).

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It is why I no longer go to DK

Their site is very addicted to a given political side. Even if you are showing facts, theories, etc. if it doesn't fit the political view of DK......you are labeled. Yep, normally labeled troll.

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I don't think many even read the posts

They use it as an online discussion, chat, the comments are possible to do that (and hopefully will be greatly improved on the major upgrade on this site!).

It's true, the troll hunters will pop up on a diary within 10 seconds of it's publication, no way they can read it and if you're talking about something they don't like, damn the facts.

But midtowng is well known there (I was for a time but I am investing all of my time on The Economic Populist now), and he does get recognition of his good posts. So did I, but the comments still to me were a cess pool a lot of the time.

But bottom line is we are an economics site for lay people. As one can see, by our lovely bills in Congress, no financial reform, the scorecard is Wall Street - batting 1000, American people, batting 0. For the most part, that's the situation, when it comes to enacting something that could really help and change the U.S. economy in favor of the U.S. middle class, we are losing and losing big time and that's with the theory, facts, statistics on our side.

So, the goal is to increase focus on the facts and let's face it, the middle class at large has no power, no real representation in Congress, is more of just something to consider public opinion manipulation on, a few Populist speeches here and there, but change the system from skewed towards Wall Street, MNCs, executives to the U.S. labor force? Obviously no way in hell these players intend on doing that. We're the proletariat to them.

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Gambling to Maintain High Return

Is it as simple as saying the banks lost the money gambling on derivatives?

Do you think the client in this case the Pension Fund board has any say in the investments? Do you think they were aware that the higher returns they wanted were higher risk or were they just plain stupid?

Any fund can invest in safer financial vehicles. Where the money goes is part and parcel with what the expected returns are and that is extracted from the needs of the investor.

How would the conversation between a fund manager and a fund start off? Something like what type of return do you need to meet your commitments?

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I think they were hoodwinked

yes. I think it was a Frontline who interviewed even sovereign nations and their investments and they were duped. That's the whole reason for the posts on the credit rating agencies. They were slapping AAA ratings on these worthless CDOs.

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Well

You are specifically talking about CDO's also as if thats the only available investment out there.

When anyone looks at these things they know the higher the return the higher the risk. You don't have to be on Wall Street to understand that do you?

Whats the return on Corporate bonds these days or Treasuries or Munis? Not enough of a return for their ever growing needs. Greed and need set the tone of the investment.

Pension Fund Consultant Resigns Over Investment Choices of
the Pension Board

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Praise for "Slouching toward Neofeudalism"

Fantastic description. This over-consumption, this obsession and mania for consumption for its own sake, this lack of any mature self-discipline in spending, this confusion of wants and needs, this willing assumption of enormous debt, all this has been one factor in the economic meltdown. I do not wish to minimize or excuse the guilt of big finance, etc., but we consumers, as a group, have played right into their hands. Each gainfully employed individual can make the choice to live well within his means. Yes, I am aware that the unemployed have very few choices, but I am just saying that the causes of our current malaise are multiple and mutually reinforcing.

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Ray Joiner

In further praise of Midtowng's erudition

In case one or two people may have missed this, the blog title with "Slouching" is a reference to a poem of William Butler Yeats, "The Second Coming", the last two lines of which are:

"And what rough beast, its hour come round at last,
Slouches towards Bethlehem to be born?"

As long as we're with this poem, two other lines seem relevant today:

"The best lack all conviction, while the worst
Are full of passionate intensity."

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Ray Joiner

Read this entire article...

http://www.macombdaily.com/articles/2010/03/07/news/srv0000007764565.txt...

...and then tell me there is not an issue with public sector pensions. I am in no way against good benefits for public employees, but they have got so out of hand that something needs to be done. Paying a retired 45 year old deputy sheriff $115,000 a year for the rest of his life is just not sustainable.

Regards,

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Great Post

This post is simply brilliant. I've read it several times over the last few days and keep thinking about it. The serf/neofeudalism concept finally puts our country into an understandable, if sad, framework. I've always been baffled when somebody that's barely getting by complains about those union teachers or government employeees instead of the elites. Thanks for introducing me, and I'm sure others, to the concept.

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Excellent Post

A well written, clear thinking article of where we really are today. I hope you all forward it on to your friends. It deserves more distribution.

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Excellent article midtowng

Thank you for your time and effort to help all of us understand.

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detroit automakers and credit ratings

i always thought that the ratings agencies intentionally have driven down the credit ratings of the auto companies over the last years so the banks could do to the auto workers exactly what they are trying to do to the Greeks; no more health care, no more good wages and benefits and pensions. AUSTERITY. All the while they were slapping AAA ratings on CDO trash.

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