E.L. Beck

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Minnesota Law Review: Corporatists on Supreme Court

By: E.L. Beck Tuesday May 7, 2013 5:00 am
US Supreme Court

A new study shows the degree to which the Roberts-led Supreme Court responds to corporate interests.

A recent study, published in the Minnesota Law Review, has found the Roberts Court extremely friendly to corporations. The study is significant, as it includes members of the status quo, including a professor of law and political science from USC, a professor of law and economics from the University of Chicago, and a judge from a U.S. Court of Appeals. The review is exhaustive, tallying 42 pages in length.

“In the eight years since Chief Justice Roberts joined the court, it has allowed corporations to spend freely in elections in the Citizens United case, has shielded them from class actions and human rights suits, and has made arbitration the favored way to resolve many disputes.

“Whether the Roberts court is unusually friendly to business has been the subject of repeated discussion, much of it based on anecdotes and studies based on small slices of empirical evidence. The new study, by contrast, takes a careful and comprehensive look at some 2,000 decisions from 1946 to 2011.”

This, from a synopsis in a New York Times article.

 

We’ve Been Providing Wall Street’s Next Bailout Fund

By: E.L. Beck Tuesday March 12, 2013 8:00 am
Wall Street

Wall Street

In this post, “The Vanishing Middle Class,” I left off with this sentiment:

“There are no saviors remaining, and the next storm will be too big to control.”

Substantive changes, alas, usually emerge only through substantive shocks. Yet, if we can channel the proper momentum towards these upcoming changes, not all will be lost.

In this post, we will see that lower- and middle-income households have unknowingly bailed out the Wall Street banks again, in advance of the next storm.

To find support for this contention of a coming storm, I turn to an news analysis posted a couple of years ago by Ellen Brown on truth-out.org.

The Vanishing Middle Class

By: E.L. Beck Tuesday March 5, 2013 8:00 am

The Waters Begin to Churn

During my return to graduate school a few years ago, I had enrolled in a class on international political economy and a requirement, naturally, was to complete a paper. I elected to write on Japan’s “Lost Decade.” Before I dove into the topic’s research, I only held a sketchy picture of Japan’s long recession, one that started in the early ‘90s due to a collapse in that country’s commercial real estate market, and assumed that by 2004 – the year I wrote the paper (rewritten for a general audience as A Roadmap to Follow, now posted on Scribd) – the recession would be over. Nevertheless, I was intrigued by such a lengthy economic downturn.

As my research unfolded a clearer picture, I started to see that, far from moving on, Japan was entering its second consecutive “Lost Decade,” and that the country was truly suffering from some intransigent economic problems. Despite enormous amounts of fiscal stimulus from Japan’s national government, its economic woes had taken root and were not going away. As I drilled through the various arguments as to why this reality took hold – the commercial real estate bubble, Japan’s government propping up failed banks, and a stubborn deflationary cycle, to name a few – I started to understand that the true root causes could be traced back to the 1980s.

It was then that, in response to the United States levying steep tariffs to protect the domestic automotive industry during the Reagan administration, Japanese automakers responded by building manufacturing plants here in the U.S. There were no grand strategies at play here: Japan’s automakers were simply responding to a threat to their ongoing viability as companies. What no one – to the best of my knowledge – perceived at the time was that this offshoring of manufacturing would eventually open the flood gates for Japanese companies from across the industrial spectrum to send more and more jobs overseas.

This bleeding of middle-income jobs took an immediate toll on Japan; the commercial real estate collapse was merely the triggering device. That it happened so soon in Japan can be explained, I argued in the paper, by the fact that Japanese are net savers, a then-culturally ingrained tendency. As a result, Japanese consumers did not lift their country’s moribund economy by spending on credit; they simply did the rational thing and stopped spending. As time went on, this created a deflationary spiral downwards. It took five years after the real-estate collapse before deflation appeared on Japan’s radar and nine years before deflation took a particularly nasty – and entrenched – turn. There was simply no demand to be found anywhere in the country.

In the United States, manufacturers also started to offshore jobs during the ‘80s, but no long, severe recession turned up. The difference? When Japan’s middle incomes stagnated, Japanese tightened their belts and stopped spending. Americans, on the other hand, responded by going on a spending binge, increasing credit card debt to new highs, taking out equity loans on their abodes, and buying new homes. When home prices reached record heights due to demand, Americans signed on to ever more sophisticated mortgages that allowed little or no down payments, with low monthly payments for the first few years (balloon mortgages). Americans didn’t care: They assumed that before the reset took effect, the house would be sold and another one bought. In short, Americans made up for a lack in increased in wages with an increase in credit lines.

I wanted to make this parallel at the end of the paper, and show that the U.S. was following the same track. Data from the Federal Reserve and the Census Bureau were showing the rising indebtedness versus stagnant incomes but at the time, the American economy was doing fine, brushing itself off after a quick downturn in the wake of the technology bubble bursting in 2001. “Stick to Japan,” my professor suggested. “Anything else is just conjecture on your part.”

Sage advice for the time, but by 2007 my instincts proved correct. In March of that year, I caught a glimpse of a news story about a mortgage company – New Century Financial – that had specialized in subprime mortgages and was now in trouble. In the paper on Japan, I noted the ravaging effects of deflation on home prices, but did not necessarily foresee that the economic collapse in the United States would emanate from the housing market. Who could have guessed banks and financial institutions would hand out mortgages to borrowers in no position to repay? Perhaps when banks have to reach out to the subprime market to issue more credit, that’s an indication the prime credit markets are saturated, not a good thing.  Nevertheless, the number of defaults, primarily buyers who had purchased homes using subprime mortgages, was increasing at New Century and causing the company financial stress.

I knew it was only a matter of time.

The Dirty Secrets of Clean Hydrogen

By: E.L. Beck Tuesday January 29, 2013 8:00 am

We placed a man on the moon in less than a decade after the call to action. Why can’t we do the same for hydrogen?

On June 14, 2011, Bloomberg News reported that Energy Secretary Steven Chu “whose mandate includes getting more fuel-efficient cars on U.S. roads, is disregarding advisers in his own department and seeking to cut almost half the federal funding for hydrogen-powered autos.”

Chu explained that “hydrogen fuel-cell technology” developed by carmakers “isn’t yet practical,” according to the story. Yet, Mary Nichols, chairwoman of California’s Air Resource Board, contends that Chu’s “explanations don’t make sense to me. They are not based on the facts as we know them.” In light of the Obama Administration’s and automaker’s July, 2011 agreement to achieve 54.5 mpg fleet averages by 2025, de-incentivizing hydrogen research hamstrings such goals. These actions undercut progress on hydrogen. So why take them?

As we look into the future, hydrogen must have a presence. While hybrid vehicles play a stop-gap role during our switch from reliance on oil, they do not hold long-term potential thanks to their incremental fuel savings and limited use for anything beyond a family sedan. Biofuels also have a dead end, seen in their need to replace food-producing farmland with energy-producing farmland. With our ever-increasing population on earth, that is unsustainable.

Electric cars are nice with which to play in the short term, but as their numbers grows, so too the demand for the electric to recharge them grows and, at some point, the carbon emissions saved by the electric vehicle is overtaken by the carbon emissions produced by the power plant that generates the electricity to recharge the electric vehicle. Besides, some as-yet unknown breakthrough technology will be required to truly boost battery capacity exponentially beyond what we enjoy today, the capacity that will be required to turn an electric vehicle into anything beyond an urban commuter vehicle.

All of these technologies hold short-term potential, perhaps even mid-term, but long-term potential? It is doubtful. Reaching substantial independence from oil will require a substantial seismic shift in our energy resourcing. Simply look at one vehicle category that electric and hybrid technology cannot answer, and that biofuels cannot answer in light of its above-mentioned shortcoming: trucks. Trucks, from pickup trucks to commercial panel vans to local delivery trucks to semi-trucks, will need to maintain their current engines to remain viable. Only the internal-combustion engine, at the moment, produces the torque required for trucks to haul or tow (or for off-road equipment such as bulldozers to do their jobs).

Freddie and Fannie Crap Gold Eggs for Wall Street

By: E.L. Beck Friday December 28, 2012 8:59 am

Despite all the blathering in early 2011, from both sides of the aisle, regarding attempts to wind down Fannie Mae and Freddie Mac (and here and here and here), securities guaranteed by these government-backed entities (yes, government backed… let’s no longer pretend U.S. taxpayers are not on the hook for these white elephants) are now at $1.72 trillion, compared to $1.2 trillion at this time last year, according to Bloomberg News this morning.

Freddie Mac Logo

The continued existence of Freddie Mac & Fannie Mae serves Wall Street.

And let’s face it, considering how the Mac and Mae geese are shitting golden eggs right into Wall Street’s lap, these financially troubled mortgage giants are not going to be closed. Consider the following headlines since the beginning of 2011 to the present (in chronological order; headline abbreviations are mine):

Citi Dumped Bad Mortgages onto Mac

Wells Fargo Refuses to Settle w Mac and Mae

Taxpayers Pay Mac and Mae’s Legal Fees

Taxpayers Still at Risk from Mac and Mae

Fannie Mae Seeks $5.18 Billion More

S&P Lowers Mac and Mae Ratings

F Mac Uses Defective Analysis to settle w Bank of America

Mac and Mae Hesitate to Help Homeowners

Mae Killed Principal Reduction Program

Mae Refuses to Punish Countrywide

Mae Enriches Private Equity

All of this, including the rise on mortgage-backed bonds, plays into the hands of Wall Street in one fashion or another.

With a track record like this, no Federal politician or cabinet member or agency with Wall-Street dirt on their knees is going to pull the plug on Mac and Mae… until the next downturn necessitates their demise.

D.C.? Just send the bailout bill to us middle-income taxpayers. We’ll happily cover it with all our riches.

Thinking and the Federal Deficit.

By: E.L. Beck Wednesday December 19, 2012 10:57 am

Thinking and the federal deficit mat be two concepts that won’t often appear together – and from the public discourse one could say mutually exclusive – but if we get to the heart of the matter, both concepts are in critical need of being tied together. The days of believing we can simply throw more money at a social or economic issue are over.

In my Scribd paper, The American Republic, I discuss the need for more engagement with our political system, but that engagement must come from an informed opinion. Informed = Education = Thinking. Dr. Derek Cabrera, of the Cabrera Research Labs at Cornell, mentions this critical aspect of maintaining a democracy in his TED talk at Williamsport on thinking.

While I confess I have little patience watching many video links that come my way, Cabrera bursts out of the gate on this one… he has to, since TED speakers have a very strict time limit in which to give a presentation.

Intelligent Evolution

By: E.L. Beck Tuesday December 18, 2012 12:09 pm

“By the seventh day God completed His work which He had done, and He rested on the seventh day from all His work which He had done.” – Genesis 2:2

And so the story of the universe’s creation ends in Genesis.

Evolution versus creationism – or intelligent design – is a debate fraught with raw passions, much heat, but little in the way of light.

I always found it interesting when certain interpretations of the Genesis account of creation maintain it took place over the course of six 24-hour days. Yet, this flies in the face of what the Judaic and Christian scriptures reveals about God.

Money in Politics – Innovation and Employment Suffers

By: E.L. Beck Monday December 10, 2012 10:27 am
Shredded money.

Corporate personhood also hurts innovation.

After the Federal government’s debt-ceiling debacle in the summer of 2011, I posted a very brief white paper outlining some suggested reforms, aimed at reducing the massive dysfunctionality that seems to have taken root in D.C. One of those suggestions involved campaign financing:

“All organizations, profit or non-profit, should be banned from donating to campaigns; only individuals should be permitted to donate to campaigns, $1,000 maximum per individual per year.”

I was simply interested in returning good governance, and my proposal stemmed from a realistic assessment of the Supreme Court’s Citizens United decision: If we cannot take exception with corporations’ right to free speech – based on a legally thin contention of a corporation’s personhood – then we should simply ban all organizations from donating money. While this proposal will take out the good along with the bad organizations, this should allow it to withstand legal challenges, since all organizations are banned equally. This proposal will serve two purposes; 1) remove a major source of money from the U.S. political system along with its corrupting influence and 2) drastically decrease the cost of funding campaigns, thus allowing more third-party candidates to mount credible campaigns, and keep our elected officials back at their desk, doing their jobs rather than spending most of their time raising money. The latter, of course, operates under the assumption that extravagant campaigns will disappear, and so will the need for large war chests. Campaigns will be forced to work smarter with their limited funding.

Well, it seems James Allworth, over at the Harvard Business Review, has found another reason for removing money from politics: Corruption, er, campaign financing and lobbying activities, is strangling U.S. innovation:

“One of the prime drivers of economic growth inside America over the past century has been disruptive innovation; yet the phenomenon that Lessig describes is increasingly being used by large incumbent firms as a mechanism to stave off the process. Given how hard it can be to survive a disruptive challenge, and how effective lobbying has proven in stopping it, it’s no wonder that incumbent firms take this route so often.”

As I have previously maintained, small businesses, independent proprietors and self employment are the few avenues left for the U.S. to follow for a rebound in employment, but no one is paying attention or addressing this, particularly politicians and large corporations, because these parties do not want to see labor rates climb. Any initiative that has the capacity to soak up the unemployed means the surplus labor supply dwindles, which means labor rates rise.

Now Allworth brings to our attention just how unpalatable large corporations find competition in the marketplace, and how, through campaign financing, corporations erect barriers to small firms trying to enter and disrupt the marketplace.

One of the items on my to-do list is to research the numerous ways in which regulations are written and administered to stifle small firms, while allowing large corporations to maintain their monopolistic and oligarchic controls over markets. It’s high time to pursue such a line of investigation. For instance, current regulatory structures make it all but impossible for organic, free-range livestock farmers to sell their products across state lines.

What’s more bothersome is to witness small business owners rail against regulatory control, yet defend large corporations in the same breath, as if the regulatory controls that apply to small business owners stifle large corporations in the same manner.

Nothing could be further from the truth. Large corporations are interested in quashing competition, and will do so with the occasional buyout, but just as often by regulatory control, too. Small businesses will find no friends amongst the large firms.

Photo by Tax Credits released under a Creative Commons license.