Human Misery = Great Profit Opportunities!

A conservative columnist for the Chicago Tribune says Hurricane Katrina was a blessing in disguise. I’ll let that sink in. What does she mean?

Conservatives are pleased when bad things happen to other people. Hurricanes create investment bargains! Human misery = profit opportunity!

Which explains why Rick Santorum drew applause from the conservative base when he said rape could be a blessing in disguise. Bad things happening to other people can be translated into good things happening for you if you are paying attention, if you're right-thinking and sufficiently heartless.

It’s happening in Greece too. Crisis and misery tends to draw vulture capitalists eager for quick profits and easy bargains. If you discover someone is down for the count. Why help them? Why not use them as a stepladder to a better life?

This is the core idea behind Disaster Capitalism. Disaster = Profits

Republicans, conservatives, the 1%, venture capitalists. They all view terrible events happening to other people as great business opportunities for themselves. The Guardian wrote about this bizarre investment class cheerfulness while New Orleans was still underwater.

Because the ups and downs of fortune are just the natural course of events. The downturns may seem awful to those nobodies experiencing it firsthand, but they are too shortsighted to see the bounty being reaped by the blessed few God has put in a safer position. The investment class is wiser and more able to view these ups and downs philosophically. “Let things unfold as nature intended. Let the weak fail. It makes America stronger to weed out the less deserving and the unlucky." That’s a common view among the 1%. Disaster for others represents a windfall for them.

But their opinion changes when the disaster happens to them. (Through no fault of their own, of course.) When they face difficulties help must be sent immediately. Because they hold hostages. We are all hostage to the fortunes of the rich. If they fall they fall on us. Here's a list of the huge corporate bailouts working Americans have paid for, and corporate CEOs have put in their own pockets. Still, it had to be done. The alternative would have been worse.

Timely help in New Orleans might have been a good thing too, but it would only have helped regular people. Most of whom had negligible net worth.

The important thing is to rescue property. And in New Orleans what the money people discovered was letting the poor drown made it possible to scoop up bargains. Property on the cheap. Blocks of soggy historic downmarket houses ready to be cleared out and replaced with warehouses for Walmart and other corporations, or with more attractive apartment blocks suitable for new, more prosperous citizens more likely to be Republicans.

The Systematic Looting of the American Dream

Who owns the shining new residential towers going up in New York and other major cities? Don't answer; you wouldn't know them. The dream home used to be a widely shared American Dream, but this is no longer the case. (Because of Citizens United our political system is now owned the same way by secretive billionaires, many of them foreign, using piles of hoarded cash to buy residency and public policy.)

Increasingly the American Dream of homeownership is reserved for billionaires. They have extremely expensive pieds a terre in places all over the world, where they may only live a few days a year thereby evading the usual obligations to pay for local infrastructure and public services. What do you want to bet their real estate fees and taxes, if any, are paid by their companies and deducted from their income taxes, again, if any. The top 1% have learned to levitate above ordinary concerns and obligations of citizenship. What they want, they buy. What they don't want to do, they buy out of.

And what has happened to middle class homeownership? The opposite. Going, going, gone. Homeownership has become a privilege of the few who own for a living and those who work for a living are increasingly excluded.

The daily sermon fed to us for years by the banking industry and by the Republican Party was that homeownership was next to godliness. It was a measure of how responsible and hardworking you were. Now they seem to be saying that working class homeowners are to blame for the recent financial collapse. Not true, in fact. Middle class homeowners are the playthings of the 1%. The investment schemes that benefit people who own for a living are devised to skim fees and penalties and ownership from people who work for a living.

With incomes down we see more working people looking for ways to make ends meet. Reverse mortgages are advertised as a simple way to balance the family budget. By looting the family’s wealth. What choice do some families have? Looting of this kind happens when there is an exploitable advantage. Incomes have lowered for most Americans since 1980, a gift of Reaganomics. That has made most Americans exploitable.

Where have we seen this systematic looting of value before? We used to read about mobsters who took over small companies and looted their value at the point of a gun. It was a crime back then.

But more recently we’ve seen this same model used by the great heroic Venture Capitalist. The gun isn’t necessary because the middle and working class household is already being made insecure and exploitable by the decline of working incomes.

The Venture Capitalist looks for decent companies who pay their employees decently and maybe have a fully funded retirement plan for them––companies that have been untouched by Reaganomics. What does this Venture Capitalist do? He charms the company’s owner, offers him a nice check, and then he buys the company. Before the check clears he sucks all the money out of the pension fund and uses it to pay the former owner. Then he lays off employees and pockets those savings. Then he has a balance sheet that shows all of this “profit” which he uses to sell the company at an inflated price.

I realize the Nazi analogy is completely forbidden today. But the Nazi miracle was financed in a similar way, by confiscation from Jews and liberals. Someday we may be able to see the criminality of what is going on, or at least its unfairness and dishonesty. But right now it is legal. And it is also sanctified by the sacred memory of Ronald Reagan who set this middle class decline in motion.

Killer Business Model

Excellent article in the Washington Post about how furniture rental companies gouge three times the value of the furniture from people who can't afford to buy. This is called the Genius of Capitalism.

Faced with a need or a shortage, do you set about filling that need, that shortage, or is your first question how to exploit the shortage to the fullest advantage?

Is human vulnerability something to take advantage of?

Is poverty a profit opportunity for your company, the deeper the poverty the greater the profit?

Is someone else's helplessness part of your business model? When you see helplessness do you feel sympathy or greed?

Is helpfulness a naïve and foolish custom? Is it unbusinesslike to include generosity or humane consideration in your business plan?

Let’s imagine you manufacture flotation devices, lifesavers they’re called. It costs money to make them, so you sell them for a price. Naturally.

But here’s a business model: you provide flotation devices to lifeguards. Call these lifeguards sales agents and pay them a small commission. Then when someone is drowning don’t have your agent throw them a buoy free of charge, let the market set a price. Dicker with the floundering. Or rent the device to the person fighting for his life, loan the use of the buoy at so much per second. They’re really eager to rent, so set that rate as high as you can. Plus interest, compounding every second.

This is what’s known as a killer business model.

The Foolishness of Austerity Economics

Paul Krugman has been writing about the stupidity of austerity economics. Here's his column from this morning.

Also, there's a new book by David Graeber that fills out the long history of debt, explaining the usefulness of debt on a societal level, shared public debt. The national debt so hated by Republicans and FoxNews fulminators was created by a founding father named Alexander Hamilton. You can see his picture on the ten dollar bill in your pocket. How did we get to where we are now? The recent past is more dramatic and foolish and catastrophic than the longer more rational, more prosperous period between FDR and Reagan. We may be emerging from the catastrophe, but there are powerful people who hold our economy hostage: call them the Austerity Economists. The debt haters who also (no coincidence) created the most damaging debts we're dealing with now.

In the mid nineties, after Clinton had raised some taxes on high earners, fostering a period of sustained growth, there was also an effort made to balance the federal budget, to pay our debts down. Good timing, really. It's good to do this when the economy is up and revenue streams are steady. Keynes said this. But there was a worry among large investors: what would happen when the safest investment of all, the US Treasury note, became less plentiful, became rarer because the government was borrowing less? There was serious concern. Nothing bad happened.

Then Bush Jr. was appointed president, and the prudent Democratic money policies were thrown out. Taxes were cut and spending exploded. Unnecessary wars were declared and pursued profligately. War was paid for outside the budget. More taxes were cut. New security bureaucracies were created. A huge unpaid benefit was given to seniors. Regulations were relaxed on speculators. Huge pools of cash were sloshing around in the pockets of corporations and hedge funds, which was wagered recklessly. We experienced an investment class bubble. It wasn't a housing bubble really, it was driven by rich people with too much money chasing too few plausible investments during a period when average households were feeling stretched and losing buying power.

Then the economy collapsed. The last catastrophic gift from the Bush years. Obama was elected. Responsible people came back to the helm. Why has the economic recovery been so sluggish? Financial sector collapses take longer to recover from. The financial sector itself recovers––look at the profits of the large banks and hedge funds––but the damage to the wider economy, collateral damage done by their crimes to innocent people and households takes a long time to repair. Millions of people will never recover. Their incomes will never recover. Their future will be significantly diminished because of the foolish greedy things done by cowboys in the financial sector, and the millions of households harmed will never be able to earn and spend like they could before, like they might have if President Gore had been able to continue the more responsible policies of the Clinton administration. (The man was elected, after all.)

The most frustrating thing is the foolish Bush policies still have a lot of influence. His advisors took well-paid and highly influential positions in the large financial institutions that Bush failed to regulate, where they continue to influence financial thinking and coerce policy. Bush people still have hands on the financial tiller because our economy is largely controlled by large private entities. Even the public institutions are influenced by large financial players.

The most damaging and weirdly contradictory policy Bush's Boys have pushed, and they've pushed it hard, is Austerity.

Imagine a person is admitted to the ER with massive bleeding. The Austerity policy would dictate the doctors not waste blood donors' blood on this person. BushThink says it's better to give this blood supply to people who already have enough blood, who aren't in danger. If those healthy people don't need it now, it's best to store it in case they'd like to have it in the future. Austerity policy preaches restricting help. Hungry children are helped best by withholding food. It is a do-nothing policy.

The rationale is that households restrain spending when revenue stops. A responsible thing for a household to do. But an economy is not a household. Alexander Hamilton created the national debt to help the economy grow. The debt was an engine for infrastructure investment. It turned the U.S. from a backward nation into the largest economy in the world. Deficit spending bought the western half of the country. It laid the railroads (Republican president) and built the interstates (Republican president.) Why have Republicans turned from prudent and productive growth policies to unproductive and stingy ones? Possibly because their large donors no longer feel invested in this country––they're not as invested because they bank in Switzerland and the Caymans and Bahamas and they don't pay the same percentage of taxes the rest of us do. Massive deficit spending for WWII hoisted us out of the last Great Depression, something FDR's more cautious deficit spending failed to do during the 30s.

Another medical analogy: imagine a patient comes into the ER. His heart has stopped. Austerity policies would say Do Nothing. Wait. Pray. The more Keynesian doctors would use a defibrillator to jolt the heart back to life. Austerity doctors would say that's a waste of electricity. We had an economy in 2008 and 2009 that needed a jolt. TARP gave that jolt but subsequent stimulus was blocked and watered down by Austerity believers, do-nothing purists. These foolish ideologues, BushThinkers, also steered most of the stimulus into the pockets of the perpetrators of the collapse rather than into the households that would have spent the money. The bankers who got it banked it. They sat on it. They didn't see enough opportunities for profitable investment so the money didn't enter the consumer economy where it would have created opportunities for productive investment.

We have a political reality that gives veto power to the big banks through their proxies in the Republican Party. So we do nothing. There is a tacit veto preventing help from getting to the households that most need it, who would quickly spend it and stimulate the economy, who would spend that money at stores down the street. What's happened instead is the Big Money people, the BushThinkers, have taken the American economy and buried it in their backyard, waiting for their private opportunity to exploit it profitably, but an economy dies when it's buried. The BushThinkers think there are only two ways to invest money: in their offshore accounts or on split second wagers on the movement of the markets. This oscillation between ancient economics and casino economics isn't good for us.

The other rationalization for the Republican Do Nothing Austerity Policy (and you've heard it recited over and over again by the hedge funders' Republican proxies in Congress) is that to deficit spend now would swell the national debt and place a burden on our children. Which sounds rational to households without any money... but it isn't. It's not what we do as a community. Republican policies begin and end with the individual and damn the community.

Scrooge has become the dominant philosopher of the moment. "Let them die then, and decrease the surplus population."

Don't deliver money where it's needed; deliver more where there is too much already.

Don't deliver help where it's needed; help the people whose houses are full of underpaid help already.

Don't feed the hungry; feed the well fed, feed the overfed.

Don't supply medical care to the unhealthy; insure the healthy, treat the healthy.

America needs to get its head around the basic and necessary logic of the public sector. The thinking that sends policemen and firemen and paramedics and soldiers and rescue personnel toward danger instead of away from it.

Our national wealth should help in an emergency rather than hiding under the bed.

The Republican mindset that is blocking our national recovery says "don't help" and "think only of yourself". This thinking is what is keeping us down right now. It is defunding every effort to lift us out of the ditch using community effort and community investment.

To say, as the Republicans say, and talk radio and FoxNews repeat endlessly, that using government spending to stimulate the economy would place an unbearable debt on our children, really is saying that the best way to protect our children's inheritance is to give our national wealth to the wealthy so they can put it safely in the Cayman Islands where it can lie safely idle the way the wealthy lie safely idle. They're saying that the best thing to do with our nation's wealth is to put it back in the hands of the people who wagered it foolishly prior to 2008.

What the Republicans are saying is "Austerity is a good thing for the poor." And we're all more poor than we were in the Clinton years.

Austerity, though, is like starving your children to protect their inheritance.

Whose inheritance is it? Are these Austerity economists really telling us to give that inheritance to them? Are America's grandparents deciding to spend their grandchildren's inheritance on themselves? Is there a feeling among seniors that the younger generations screwed things up and can't be trusted with spending money? The victims are not the perpetrators here.

Whose bad choices created this lousy economy? Do we really blame the very households the bad economy destroyed? Was it really the bad decisions of the wealthy bundlers and resellers of mortgages? Was it the predatory lenders? Was it the hedge funds who diverted investment away from productive categories into bizarre financial wagers? Was it the wealthy exporters of jobs, whose export of jobs is still subsidized by Bush era policies we haven't been able to end?

Was it the older generation of Reagan worshippers who decided the economy could be left unregulated? The same generation who voted themselves ample retirement but have decided to remove that prospect for their children and grandchildren? The same generation who now have free healthcare but seem happy to withhold healthcare from their children and grandchildren? We can understand their reasoning a little if we realize that once people retire they cease to be workers and become reliant on investments; their loyalties change. You could say they become different people, at once powerless and powerful. They exist in the pocket of their investment groups. They might not even be aware of the shift in their mindset. They're conflicted because they need government but they're owned by the bankers who manage their investments for them, and lobby Washington for them.

Meanwhile, because of the Republican veto of any sustained stimulus, the economy sits and waits. The generations who are still working, whose jobs are insecure, whose incomes have been flat since Reagan flattened workers' incomes, wait, and put off plans, and curb their spending, and worry. And the generation that has graduated and found its careers stalled since 2008, waits too. This last group may never recover because the generations who benefited from the long, sustained, secure and broad prosperity created by the policies of FDR, Truman, Eisenhower, JFK and LBJ, have spent their waning years supervising the dismantling of those policies and the degrading of the American economy. They decided to follow the wealthy speculators who sold the American economy and banked their gains offshore.

Romney's Vulture Capitalist Presidency

As brilliant a piece of writing as I've read about this election cycle. Walter Kirn analyzes Romney's campaign as Romney himself does, as a business move, the presidency as an acquirable asset whose obligations can be disposed of, as the seemingly friendly takeover of a company for the purposes of taking its assets and selling them, seizing its pension fund to put to "better uses" (better than paying retired people for their life's toil), downsizing, laying off, offloading, scrapping, exporting facilities, all the while paying huge consulting fees to yourself and your chums in the closely held partnership. The gleam in Romney's eye is a microchip.

The presidential candidate as vulture capitalist, who will take over a company and leave not even bones behind, absorbing what's useful to the private firm and its partners, selling what's sellable, and using up or dumping everything else. George W. Bush was the old fashioned preppy boob MBA, the kind that used to sleep through Ivy League and grad school and accept the desk reserved for them on Wall Street, where they were too obtuse to do much harm.

(Calvin Trillin, a few years ago, wrote an excellent explanation of the old safe kind of Wall Street idiot from Andover and Yale.)

Romney is the newer, more cold-blooded kind, the kind that knows what it's doing and exactly how much it's after in billions, greedy rather than lazy, for whom every person is a number, every working person is a liability and a disposable obligation. A dog to put on the roof of the car. I don't think Romney minded much when the old setter ran away while they were in Canada. And notice the pooch didn't find his way back to the Romney home like in the old Disney movie.