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Where has the Federal Reserve been?

2:19 pm in Economy, Government, Jobs, Unemployment by dakine01

As many folks know, I spend a bit of time each day perusing various news sites. My postings have been light the past few weeks and months as I’ve been working through issues after my sister’s death. More recently in the last week I’ve gotten a small piece of good news in my personal life (and not saying anything further as I try to nurture this news and make it grow – but it’s not a job) as well as further bad news for my extended family, so the roller coaster ride does continue.

But then I go and see a headline like this at NBCNews.com:

Fed ready to help economy ‘fairly soon,’ minutes show

Turns out, the article was from Reuters though their headline wasn’t much better:

Fed looks set to ease fairly soon barring swift rebound

Earth to Fed! Earth to Fed! Where in the holy hell have you been for these past few years?

(Reuters) – The Federal Reserve is likely to deliver another round of monetary stimulus “fairly soon” unless the economy improves considerably, minutes released on Wednesday from the U.S. central bank’s August meeting suggested.

While the meeting was held before a recent improvement in economic data, including a stronger-than-expected July reading for U.S. employment, policymakers were pretty categorical about their dissatisfaction with the current outlook.

…snip…

The Fed held policy steady at that gathering, but signaled a renewed readiness to act amid lingering softness in the economy. The minutes showed the central bank is actively considering a “flexible” bond-buying program, which could suggest that no upfront amount will be announced.

Let’s see. The “official” time frame for the Great Recession had a start in December 2007 and ended officially in June 2009. Last June I wrote a blog post where I predicted a double-dip recession. Officially, I was mistaken as the economy has managed to maintain just enough headway to avoid the term “recession.” But also last summer, I wrote a blog post asking Mr Bernanke just where the hell he has been these past few years. I and all the other people in long term un and underemployed situations have the same concerns. We want jobs. The Fed still has a “Mission Statement” that begins with direction for “…pursuit of maximum employment…” So we sit here with the official unemployment rate at 8.3% and the rate of un and underemployeds at 15%. These number still translate to nearly 13 million unemployed and another 10 to 15 million underemployed. And again, these numbers do NOT include new college grads trying to find their first full time jobs in their chosen fields. The numbers do NOT include all the millions who have been forced to become “self-employed, independent contractors. Add these groups into the official numbers and we are probably looking at (as a guesstimate) another 10 to 15 million people. Labor force participation was at 63.7%.

But have no fear! All is not lost. Why just today, one of Willard Mitt Romney’s top economic advisers proclaimed that The Benbernank is doing a smash up job as Fed chair and deserves to remain in the position while the Republican Party has added a plank calling for an annual audit of the Fed. My guess is this is the sop to Ron Paul. And to be honest, I can see this is a good plank. Of course, we still have the Todd Akin Memorial Anti-Abortion Plank Human Life Amendment so some things never change. After all, one of the reasons the Republicans re-took the US House in 2010 was because of the lack of jobs. Yet from the very start, the House concentrated on anti-abortion legislation that included “re-defining rape.”

Todd Akin isn’t an aberration in today’s Republican Party. He is the epitome of today’s Republican Party and Paul Ryan is right there with him. Meanwhile, the denizens of the Beltway wonder what all the fuss is about with jobs and millions of un and underemployed people wonder how they will survive.

And because I can:

Cross posted from Just A Small Town Country Boy by Richard Taylor

Capitalists: Venture vs. Vulture

11:48 am in Economy, Government, Jobs by dakine01

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So there I was, surfing around the intertoobz this morning when I came across this headline at CNN:

Stop vilifying venture capitalists

I have to admit, I was a bit taken aback at the headline as it surely did not reflect anything I had read.

In reading the piece, it starts off in a fairly standard fashion:

From 1984 to 1999, Mitt Romney was in charge at Bain Capital, an investment firm that sought out small and sometimes troubled companies that, with careful management and Bain-provided cash, offered the chance for big profits. Bain, like many venture capital firms, invested in startups with the hope that the profits they made on the successes would outweigh the losses they incurred on the failures.

Venture capital markets are simple things. Two groups of people who want to create new businesses come together. Venture capitalists have money but lack ideas. Entrepreneurs have ideas but lack money. When they get together, they trade and new businesses are born.

Then I realized that the author was not really saying much I could disagree with – other than his implication that Bain Co. was this benign entity only helping entrepreneurs to find the needed funding to bring their ideas to market as wiki defines it.

Today’s Boston Globe addresses this in this article.

Mitt Romney has long called himself a venture capitalist, experience he says helps him understand the economy better than other candidates for president. But he spent much more of his career in leveraged buyouts than in the investments in start-up companies known as venture capital.

Romney’s one true venture deal was Staples Inc., the office supply superstore, two years after he started Bain Capital. He wasn’t the first to discover Staples; another Boston venture firm introduced him to Staples founder Tom Stemberg. But Romney did lead the deal in 1986 in classic fashion – at first investing $650,000 in the start-up, then becoming its chief cheerleader and assisting with strategy to expand the seller of paperclips and pens.

…snip…

With leveraged buyouts, the investment firm purchases a mature company, partially with its money and with debt it transfers to the company. The new owners then usually streamline the business and seek to resell it.

For example, in the same year that Romney invested in Staples, he led the firm in its $200 million acquisition of Accuride, a wheel rim maker that was part of Firestone. Bain put down only $5 million and borrowed the rest, using junk bonds from Drexel Burnham Lambert. Eighteen months later, Bain resold the company and reaped $121 million in its first taste of the big time in the go-go 1980s.

Soon after, Romney steered Bain Capital more toward debt-driven buyouts. There was more money at stake and less risk for Bain than betting on untested technology.

My bold. And there you have it. While maybe starting life as a “venture capital” firm, Bain Co under Romney quickly turned to being Vulture Capitalists using the leveraged buyout.

At this point, I guess I should queue cue the chorus of voices shouting “FREE MARKET! FREE MARKET!”

Point of fact – there is no such thing. The LBO gets to use the debt interest to write down their taxes. By “streamlining” the business, the methods have often included cutting wages and benefits, selling off assets, and dumping pensions onto the taxpayers through the Pension Benefit Guarantee Corp. Dean Baker explains it quite nicely here and here. From the first link:

If private equity firms were successful in making companies more efficient and lowering prices to consumers, then it could lead to more jobs in the economy, even if there were fewer workers directly employed in the firms under its control. (This does not really apply in the current economy, where inefficiency means more workers are employed. This is good in the context of a poorly managed macroeconomy with high unemployment.)

However private equity firms do not profit just by making firms more efficient. Private equity also profits by financial engineering. For example, it is standard practice for private equity firms to load their firms with debt. This means that interest payments, which are tax deductible, are substituted for dividend payments, which are not tax deductible.

Private equity companies also often force firms into bankruptcy to offload debt. This can often include pension obligations, which are then taken over by the Pension Benefit Guarantee Corporation. Insofar as private equity companies are drawing their profit from this sort of financial engineering, it is not providing a benefit to the economy. In fact, it is a direct drain on the productive economy.

So much for the nonexistent “free market.” If a firm has to offload their debts and pensions on the taxpayers, there ain’t a diddly damn thing free about it.

While I am still trying to figure out how it is possible for the LBO group to incur debt for an entity that they are acquiring (don’t you have to actually own something before you can mortgage it?), I’ll close this little rant with this article from today’s Cincinnati Enquirer headlined “Tax breaks for jobs: Half fall short.” A story for another day.

And because I can:

Cross posted from Just A Small Town Country Boy by Richard Taylor

“Corporations are people,” through the ages.

7:27 am in Uncategorized by dakine01

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So I imagine by now, most folks have heard that Willard proclaimed at the Iowa State Fair that corporations are people. In light of this (and SCOTUS rulings on corporate personhood), I and some other folks on an email thread started identifying various political movements, documents, songs, and other bits of popular culture that need to be revised to reflect this equivalency. I have gleefully and willfully stolen most all of the following from these friends.

Let my corporations go! — Moses (or maybe it was Charlton Heston)

Government of the corporations, by the corporations, for the corporations — Abe Lincoln

Little corporations say the darndest things! — Art Linkletter Read the rest of this entry →