Two weeks ago I wrote about the current debate over the 2010 paper by Ken Rogoff and Carmen Reinhart (hereinafter referred to as RR) on the correlation between debt and GDP growth. I said that the most important part of their work, which is the construction of an enormous database on debt and financial crises over the last few hundred years, was to be found in their book This Time Is Different and elsewhere. And their fundamental conclusion: debt is not a problem until it becomes one. And then it reaches a critical mass and you have what they called the Bang! moment.

John,

I am sorry to disagree with you on this question. It’s easy for the likes of you to advocate austerity  because it has no consequences for you. It only hurts those whose livelihoods disappear when there are no funds left for their salaries or social insurance benefits. But you’re not in that boat, are you?

As an active Republican; however, you had a hand in creating the world’s biggest Ponzi scheme, otherwise known as deficit finance. You and your friends thought you should be immune from taxes and ought to fund the government by acquiring its bonds, and getting a little vigorish in place of big payout. But the tax cuts you put in place and the spending programs your party launched were so massive that you and your pals couldn’t cover it, so the politicians turned to the one pool of money that could, the forced savings of those contemptible people who do your dirty work for you.

Ever since the government began to borrow massively against the Social Security Trust Fund to cover those tax cuts for people like you, there has been talk in Washington about the need to cut back benefits for Social Security recipients. Gee, I wonder why. In addition to all the other damage he did, Clinton rejiggered the inflation algorithm to slow down the growth of “entitlements” and Obama will be used for political cover in making the really big cuts. With no Monica in the offing, though, I just wonder what kind of bruhaha will be used to distract the populace.

Those whose taxes were cut the most owe that money to those who paid into the system all their lives. But you and your friends don’t want your taxes raised to cover the multi-trillion dollar shortfall that is expected to occur in the future, so you find academic whores, like Reinhart and Rogoff, to put the patina of respectability over welshing on your debts. Heaven forbid that the little people, though, should abscond with the pittances you loan them.

The money in the S. S. Trust Fund has already been spent on all kinds of things you favor, like our bloated military establishment, wars of choice, a massive surveillance apparatus and, apparently, half a billion bullets that were recently ordered by the Homeland Security Agency. Are they to be used to kill off the surplus population when the insurrection finally takes hold? With 90,000,000  unemployed, and profits at record highs, one does begin to wonder if the war on terror weren’t providing cover for the upcoming (shooting) war on the poor.

As you know, even the Federal Government can’t spend the same pool of money twice. To meet its obligations it has to raise it from somewhere. And it certainly isn’t going to get it from the 90 million unemployed through off-shoring and mechanization. Unless it plans to do what it did after the financial crisis and simply create it on computer keyboards to throw it after bad. The government will do this to bail out drug addled bankers, but not underwater homeowners or social security recipients.

As a British friend put it to me today, our country is run by a self-entitled Ivy League Mafia, with Congress as its law firm, and the media as its propagandists. They have the gall to use terms like “entitlements” to discredit the social insurance programs they’ve been looting all this time. It’s all just a cheap little numbers racket dressed up in a bespoke suit.

Sincerely,

Tim Chambers
A subscriber.

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Peter Wood is president of a conservative organization that exists for the sole purpose of challenging anything in Academia it regards as anti-big business. It was founded pursuant to Lewis Powell’s letter to the Chamber of Commerce, and its mission is to make trouble for colleges that harbor faculty members who are a bit to the left of the far right. In this case he’s attacking Bowdoin College in Maine as a hotbed of liberalism. Anyone who visits its website or peruses its catalogue will understand how traditional Bowdoin’s program actually is, with majors in the sciences and traditional disciplines, even a classics major.

The freshman seminars are something else again. They seemed to be designed to get students engaged in subject areas that are not so well established as the major fields, in which they might have a chance do some original research and thinking and discover the pleasures of intellectual inquiry. That the topics seem somewhat “out there somewhere” would seem to be the whole point, for how else would undergraduates be able to original inquiry.

No doubt, Peter Wood would prefer that the students be handed a text book full of old, established ideas vetted by the NAS. I am sorry, Mr. Wood, but established ideas are, by their very nature, not suited to original research and thinking. They exist to be accepted or rejected as is, but other than offering scholars something to debunk for the sake of debunking, they don’t offer much opportunity for original research and thinking or the pleasures of intellectual ferment.

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Equateur. – Ancienne station de l’Etat (1889) – p. 289 (Photo credit: Wikipedia)

I just finished rereading Heart of Darkness, as I’ve been thinking about writing something along the same plot line, that does more to develop one of the themes in Banana Republican Blues. What impressed me about Conrad’s book was how much one would need to know about conditions in colonial Africa — particularly in Congo, where presumably the book is set — and how much the reader would have to infer about the character of Kurtz. The conscience of the book must be found in reading between the lines, as Conrad seems very timid about anything that might be construed as criticism.

Throughout the story of Marlowe’s journey, there is the expectation of meeting Kurtz, and the extolment of his character as a virtual demigod, all the while reading about those massive shipments of ivory. Then comes the ambush of the riverboat, which is more bark than bite. None of the arrows finds its mark and only the helmsman dies at the hands of a spear chucker. Finally, the attackers are dispersed by the sound of a steam whistle. 

Kurtz, when we finally meet him is a tottering near corpse, surrounded by local tribesmen of seemingly loyal disposition. Kurtz, in the end has little to say, so the reader is left with nothing more than his famous last words, “The Horror, The Horror!” and no indication what the horror might be. One can only assume that, in his isolation, he has become depraved with the slaughtering of elephants for the rich reward of the ivory. Like the buffalo hunters of the 19th century, depicted in Parkman’s Oregon Trail, he has presumably littered the savannah with rotting carcasses, but in accordance with the ethics of that time, he would have done so with a clear conscience. So the horror of which he speaks remains an enigma.

It would seem to me that in Congo, particularly, there were far greater horrors (by the standards of the time) than the slaughter of the elephants for ivory, yet these are not mentioned. So there is all this long slow build-up and then, what? There is some intimation early on –  in the shore bombardment, conducted for no clear reason by the naval cruiser, and the eagerness of “the pilgrims” to kill some of the natives for sport — that there is a great disregard for the lives of the natives, but that does not seem to be the horror to which Kurtz’s dying words refer. As an exploration of the darkness of the human heart and mind it offers neither psychological insight nor intellectual enlightenment.

Technically, the entire book is written in the first person, with two narrators of barely distinguishable voice, so one is occasionally uncertain which narrator is speaking. I find this off-putting when reading when reading amateur fiction, and there is no excuse for it in what is billed as a masterwork. Moreover, the character development throughout is barely adequate to give the reader a sense of who anyone is, and the thinnest of them all are Marlow and Kurtz.  Conrad demonstrates little virtuosity beyond pure narration. There isn’t even much description of the of the African terrain, so one knows no more about Africa at the end than at the start. It is an fine example of why storytelling, on its own, is not enough to produce great fiction.

Addendum: As was pointed out to me on Goodreads, there is a fine essay by Chiua Achebe, which reveals the Heart of Darkness as Conrad’s own bigotry, and the need of Western civilization to look upon Africa as a foil for it its own vices. I cannot help but agree.

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• 

  (Photo credit: Wikipedia

  As pointed out to me in a comment by Greg on Goodreads, the view of the great Nigerian writer, Chinua Achebe.

Cover of Foe: A Novel (King Penguin)

J. M. Coetzee‘s novella, Foe, was suggested to me by an editor at Harper Collins, for reasons I still do not understand, as a model for my own novel, Banana Republican Blues. I just finished reading it for that reason. What I found interesting about it is that it offers a useful reflection on the problem of autobiography in fiction. What was Defoe supposed to make of heroine, Susan Barton’s story of a man who spent fifteen years on an island moving a 100,000 stones to form terraces on a hillside? It doesn’t make for much of a plot. So, it deals with the problem of turning mundane truth into the stuff of the sublime.

I had a similar problem in writing Banana Republican Blues, but this wasn’t why the editor suggested I read Foe. The event that my novel is based on is a cross-country automobile trip. I was alone in the car the entire way and brought a CB radio with me, in case of emergency, and also for possible companionship. But I hardly heard a peep out of it, and didn’t speak to anyone. Moreover, as much of the terrain was so monotonous — Interstate 10 from Florida to West Texas, before heading north towards Santa Fe and my ultimate destination of Seattle — there was virtually nothing about the landscape that merited description for the part of the trip that is featured in the novel. Then again, aside from a broken timing belt, the repair of which used most of my travel budget, so that I had to find work in Santa Fe, the trip was completely uneventful. So to make the novel interesting, I had to invent everything. Which is what Defoe did, of course, and what he would have had to do with the story Barton provided him. Instead he invents a life for her.

Coetzee’s tale is that of Susan Barton’s life since being set adrift by a mutinous crew and washing ashore of Cruso’s island. It is also a tale of the assumptions we make about otherness. Cruso’s friend, Friday, who returns to England with Barton, is referred to throughout as a cannibal, and is assumed to be a slave. As he has no tongue — it having be cut out when he was a boy — he hasn’t the means to speak for himself, which leaves him in a state of dependency, first on Cruso, then on Susan, which Susan finds onerous. In the climax, Foe begins to teach him to write, so that he might have the means to tell the full history of his a Cruso’s castaway lives, at which point the viewpoint shifts several years into the future, when a new narrator appears, disconcertingly, in the same first person POV, to relate a final dream sequence in which the whole basis for the tale is presumed to unravel, which is what, of course would happen to the victor’s tale were it related to us, instead, by the voiceless loser.

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Ramesh Ponnuru (Photo credit: Wikipedia)

Updating Reaganomics – NYTimes.com.

Just as a broken clock can be right once a day, so a broken policy can be right once in a century. Reagan may or may not have been correct in his approach to the economy, but updating Reaganism in the way that Ramesh Ponnuru proposes is definitely not the way to go. It is not a reformation of Reaganism, but an extension of it far beyond anything Reagan would have dared to propose.

Reagan’s term began at the tail end of a long bear market, which had witnessed considerable economic growth without a corresponding rise in stock prices. His term coincided with the beginning of the micro-computer boom and the long bull market that generated. It coincided as well with the entry into the work force of large numbers of women and a consequent rise in household incomes. It also coincided with improvements in productivity accompanied by stagnant wages, and a sharp rise in immigration that brought large numbers of desperate people willing to work for the minimum wage. What Reagan’s supply side solutions achieved amounted only to greater returns to capital, and the income distribution of the typical banana republic, so we suffer from excess capacity and a lack of consumer demand.

Let’s take a close look, then, at Ponnoru’s proposal. First, he says, let’s lighten the burden of the payroll tax. Excuse me? We anticipate a social security deficit of how much, and he says we should lighten the payroll tax, how about extending the tax to all forms of income, including the economic rents, Conservatives like Ponnoru are so intent on on shielding from any form of tax. Anyone who thinks that Social Security isn’t under attack at the moment because those who have always opposed it used its trust fund as an ATM to pay for their sacred tax cuts over the past twenty years, and don’t want their taxes raised to pay that money back, is suffering from the sorts of delusions that put people in psychiatric wards.

He also proposes “changing the existing tax break for health insurance,” so that people could pocket the difference between more expensive plans and less expensive plans. As if the cost of health care were only the cost of the premium paid. By choosing less expensive plans, those who need to use them would end up even worse off than they would with an expensive plan. In health insurance, as in everything else, you get what you pay for.

After that, he begins to make sense, though I’m not so sure about making software patents less secure. We do have competition in software, that the patenting process does not impede. Just look to open source.

His argument would have been far more effective had he begun with his conclusion, reminding us of what Regan said. “IN OUR PRESENT CRISIS, government is not the solution to our problems….” What may have been true at that time is far less true today, especially with our financial and energy sectors sector having run amuck, and still no corrective action taken to bring things back into balance.

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English: Barack Obama Deutsch: Barack Obama (Photo credit: Wikipedia)

Obama Wins for whom? | Michael Hudson.

Does Dr. Hudson honestly wish to suggest the the Koch brothers et al, and Citizen’s United were a set up to get the President re-elected? And that people were persuaded to pour billions of dollars into Republican coffers to scare the plebes into voting for the lesser evil, as if that were the desired result all along. So that they could get the Democrats to do what they have wanted done since Social Security existed? That’s a little too far-fetched and cynical for me.

Frankly, Dr. Hudson, I don’t know what to think of Obama. What he seems like to me is a product of his upbringing and his times. He was raised by a banker, after all, and attended elite schools. He is, therefore, disposed to understand of such people and give them the benefit of the doubt. He is also the product of a time in which virtually everyone was brainwashed by Reaganism, and would have been too young and inexperienced to see it for what it really was, a Coup d’Etat by the rentiers. 

He also came of age politically at a time of bitter partisanship, in which the ownership of trillions of dollars of the nation’s surplus was at stake, and the loudest, the boldest, and the most mendacious messengers prevailed. Along comes Obama, with his “can’t we all get along” vibe and voters who were sick of the ugliness went for it, only to discover that the “hope and change” they voted for was, for all intents and purposes, the “hope and change” they voted for; a not so loud, not so bold, not so mendacious gentleman who was born to give away the store in the naive hope of achieving some “gentlemen’s agreements.”  In 2008, I preferred him as a candidate to HRC, but had no illusions about his Blue Dog politics. 

He’s had his trial by fire. He’s learned where the power lies. With luck, he has learned how NOT to tangle with it. Now he has four more years to learn HOW to tangle with it. I’m willing to wait and see if his mother’s rebellious spirit and his community organizer genes don’t inform his second term. What choice, after all do I have? He’s my President for the next four years.

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English: Mug shot of Charles Ponzi (March 3, 1882 – January 18, 1949). Charles Ponzi was born in Italy and became known as a swindler for his money scheme. His aliases include Charles Ponei, Charles P. Bianchi, Carl and Carlo. Italiano: Foto segnaletica di Charles Ponzi. Charles Ponzi (Lugo, 3 marzo 1882 – Rio de Janeiro, 18 gennaio 1949) è stato un truffatore italiano. Immigrò negli Stati Uniti, dove divenne uno dei più grandi truffatori della storia americana. (Photo credit: Wikipedia)

The real problem is the tax cuts the rich have enjoyed for many years, and the resultant Ponzi scheme known as deficit finance. To cover the deficit in current account we borrowed the Social Security Trust Fund. The money has been spent. The trust fund is full of IOUs that someone will have to repay, and as everyone knows, that will mean significantly higher taxes or a default on the debt. If there should be a debt default that would mean a significant haircut for private bondholders. But replenishing the trust fund would probably mean clawing back the significant income gains that the wealthy have accrued these past 30 years.

Not even the U.S. Government can spend its money and have it too. We have, in effect, transferred the forced savings of the working class to the creditor class through the tax system. It remains to be seen if we can create several trillion dollars out of thin air to save the Social Security Trust Fund, as we did to save the banking system. But the bankers wont benefit, so I fear it is all over but the shooting, and that is what this fight is about.

via The Real Referendum – NYTimes.com.

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You want to get to the root of it, Brooks? It comes from a famous letter sent by Lewis Powell to Eugene Sydnor of the Chamber of Commerce.

After serving as president from 1964 to 1965, Lewis Powell, Jr. became a Supreme Court Justice. (Photo credit: Wikipedia)

http://www.webcitation.org/64jAmJkKB

Entitled “Attack on the Free Enterprise System,” it details a massive left wing conspiracy to destroy the United States free enterprise system and calls for a virtual war on all elements of the left, communists, socialists, hippies, college professors, students etc. all of whom aimed to bring down our economic system.

It called for the formation of pro business think tanks, lobbies, watchdogs and witch hunters and an all out propaganda war against these dangerous elements of our society.

Within a few years it build K Street into a monolithic lobbying bloc that literally owned the people’s representatives and regulators. Within a few decades they dismantled all the regulations intended to save the financial system from its own irrational practices and erected new barriers to prosecuting financial fraud.

Those dangerous university students became bankers and businessmen. High finance took on a whole new connotation and corporate powder rooms a new meaning as pot smokers in thee piece suits upgraded to better substances.

What destroyed the economy was not a cabal of communists, socialists, and new left literary theorists. It was a bunch of coked up bankers and traders dealing in an alphabet soup of fraudulent financial products and free trade advocates who shipped American jobs abroad.

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I share Romney’s disappointment, but compared with his predecessor, Obama has done a much better job of stimulating economic output. Under the GOP’s plan, output fell in 2001 from 104.5 to 101, then rose to 103.5 by 2004, just enough to get the boy president re-elected, then rolled downhill and fell off the cliff until 2009 when when it hit 96.5. Obama stepped up with the Democratic stimulus package that brought it back to 102.5.

Then, the Republican Congress blocked his every initiative and nothing constructive happened.

The GOP adds 2 points to output in a jobless recovery, following the the tech bust, but later subtracts 7 points. Obama adds 6 points to output in another jobless recovery. And we’re supposed to believe that the GOP has the better plan? Where are the GOP’s much heralded job creators? Why are they AWOL?

They weren’t there for their own boy president, they weren’t there for Obama, and they won’t be there for Mitt Romney either.

Why? Because their taxes have been cut so much there is too little margin for them in the tax deductibility of payroll. If Romney reduces their taxes even more, there will be even less of a margin. You want to put people back to work, give the “job creator ” saints some incentive, raise taxes on them to increase their margins on payroll deductions.

http://bonalibro.us

via Romney Convention Speech: He Expressed Disappointment – NYTimes.com.

To paraphrase it, they think because they did some serious reading once upon a time that they can be regarded as intellectuals. The problem is that they mostly misread the authors upon whom they base their authority, such as Adam Smith and Von Hayek. They take convenient quotes out of context from the Reader’s Digest Condensed Books version because all they need are a few choice words to put in their fund raising letters. As those with little knowledge are wont, they cling tenaciously to their extracted texts because they haven’t the benefit of insight from which to evolve their own ideas within the changing economic context.

At any rate, it sounds like you would agree with consultant Michael Murphy, “Obama is the people’s second choice, but Romney is the third.”

A little more recognition of “we” and “us” would help. But then that might involve putting some money where their mouths are, and paying their workers a higher wage, and themselves a little less. Ouch!

http://bonalibro.us

via Party of Strivers – NYTimes.com.