Whitehead sees slump worse than Depression

This ain't some blogger in his underwear. This is the ex-chairman of Goldman Sachs...


"I don't see a solution here"...
"I don't see a solution here"...
"I don't see a solution here"...
"I don't see a solution here"...

for losing the White House.

on edit:

AND BUY AMERICAN

What is your definition of "manufacturing base" and why is it preferable to what we put out now?

the scope and magnitude of fiscal recklessness and tax unfairness are unfathomable, the multi-trillion dollar offloading of the treasury to favored interests is mind-boggling, yet these economic piffles and trifles are hardly ever mentioned in the MSM, much less given thoughtful analysis. :P

on those "trillion dollar problems", IT'S YOU FUCKING RICH GUYS WHO WANT TO KEEP PAYING NO TAXES!! We working-class types know that taxes is not necessarily a bad word and we pay our fair share. Time for you guys to pony up, asshole.

Whitehead is another Republican who has all kinds of influence in the financial world, yet did we hear about him warning about the dangers of deregulation. No way, baby!

:applause:

The problem is a lot bigger and deeper than that. I agree that it would make us all feel a lot better if "they" pitched in, but their tax rates are not the problem. A few extra billions in tax revenues would not fix it. The problem is an economy that's been growing, heedless of limits, for the last several hundred (and possibly the last several thousand) years.

I understand the urge to punish the bus driver that drove us into the ditch, but we let him drive the bus, and we're still in the ditch.

of taxes. There are many other factors including tax inequity that have contributed to this situation.

But what galls me is the way these folks who were in on this AT THE TOP LEVELS and allowed these abuses to go unchecked AND EVEN ENCOURAGED THEM for personal profit, are now acting like we should listen to them dispense their wisdom about why it happened or what we should do.

I find it particularly alarming and disappointing that our President-elect seems to think that selecting his financial advisors from the ranks of the same Wall Street elite who got us into this is a good way to get us out. That is not change I can believe in. That is called crony capitalism and it results from keeping the power in the hands of the same folks year after year.

The bus in the ditch is a fitting metaphor, so let me offer a continuation of that theme: let's call the police and get the bus driver arrested, get the bus out of the ditch, then punish the bus driver if he's found guilty as charged, then find a NEW bus driver.

The ultra-wealthy, and mega-corporations who funnel all their profits into excessive executive compensation, must start to pay real taxes AND we need new advisors, e.g. Steve Eisman, who could help us devise working regulations and find a way to hold the engineers of the disaster accountable. BOTH.

I'm acknowledging that the "bus is in the ditch" as you said. I don't think most Americans
fully understand where we are.

At this point, I think we're going to be in the ditch for a long time--as this economy slowly
loses it's foundation--brick by brick. It's going to be a long, hard slog.

My strategy is to prepare for life in the ditch, for a long, long time.

I find it particularly alarming and disappointing that our President-elect seems to think that selecting his financial advisors from the ranks of the same Wall Street elite who got us into this is a good way to get us out. That is not change I can believe in. That is called crony capitalism and it results from keeping the power in the hands of the same folks year after year.


####

I totally agree and wish Obama would wake up from whatever hypnotic trance that Hillary and her boy Greenspan put him in.

Pay more than their "share"?

At least by any rational measure?

Here's a pretty straight forward analysis showing that the top 1% of incomes pay more taxes than the entire bottom 90%.

http://www.taxfoundation.org/news/show/22652.html

Help me figure this out correctly.

is fair.

Business oligarchs don't bring home paychecks like the rest of us. They pay a scant 15%, at least on the money that isn't hidden in offshore accounts.

Fair? Not hardly.

Isn't the upper marginal rate on corporations 35%?

Having billions in income would put them at that rate, wouldn't it?

Let's use Exxon-Mobil as a prominent and easy to understand example for fiscal year 2007.

They had $70 billion in profit and paid $30 billion in income tax.

That's a 42% rate overall.

You want to be fair, but it doesn't seem like you are approaching this in a very fair manner.

When I say "corporate oligarchs," I'm speaking of the CEOs, CFOs, COOs and other top management whose primary remuneration is in the form of stock options and other non-wage wages. They aren't taxed in the top bracket, which is a very reasonable 35%. They pay a paltry 15% capital gains tax, yet they avail themselves of more than their fair share of "socialized" perqs that we all pay for.

I believe Dennis Kucinich asked a very similar question of the billionaire bankers on one of his panels. "You made $2 billion last year and you only paid 15% tax on it. Do you think that's fair?"

No, it isn't, whether you think so or not.

Let's put this in perspective.

First of all, about 2/3 of all the citizens in America pay at the 15% rate or less.

Secondly, although I'm sure there are people who derive all their "billions" in income solely from revenue taxed at the 15% level, I don't know any of them. All the corporate oligarchs I know manage to get themselves well in the top bracket through regular income means, first. It's not as if they "only" pay at the 15% level. I would also note that income derived from Municipal (Tax Free) bonds isn't taxed at all - IT IS TAX FREE. Shall we now change this, too, because it just doesn't seem fair?

Which brings us to the third item. The 15% capital gains tax was instituted on non-wage revenue precisely because it is derived from the kind of economic activity we want to promote; it creates jobs, etc. I realize it is very populist to be anti- on this, but the fact remains it has a valid purpose, and contrary to what some folks think, it wasn't "snuck" into law when no one was looking. There was a reason.

I gotta ask why you are fixated on this. Very few citizens in America pay anywhere near their share in the first place. You want to get even more from the rich under the guise of "fairness"? That may be a valid alternative theory of income redistribution, but the numbers don't support it as "fair".

Capital gains taxed at 15% creates jobs!!! Sure they do pal. Look at all the jobs out there now. The top 400 people made an ADDITIONAL 600 BILLION DOLLARS under Bush. Where's the jobs?

Your grasp of economics appears to be gleaned through endless watching of CNBC and diligent reading of the Wall Street Journal editorial page.

I just told you why it was put there.

I don't watch CNBC endlessly and I don't read the Wall Street Journal Editorial Page.

Do you pay more than 15% on your capital gains income?

How about on your regular income?

Examine "Citizen Number 9"'s post history.

set off your defense mechanisms?

TRILLIONS. In off-shore accounts.

Seems like we could get a lot done with that money.

And then there is enforcement of existing regulation, not to mention necessary NEW regulations.

Whitehead is pointing the finger in the wrong direction. Or he's talking to the mirror.

Tax avoidance and cheating is a problem you find everywhere. I don't think it is a characteristic of the wealthy any more than that they pay the lion's share of the taxes in the first place.

http://www.cbsnews.com/stories/2007/03/05/ap/politics/mainD8NLNJT00.shtml

UBS - Swiss INvestment firm helps US millionaires cheat Treas out $2 bil in taxes -

Phil Gramm is is a new Vice-chairman of UBS (after getting the commodities Futures Modernization Act passed (the law that made trading in Credit Default Swaps legal and unregulated and thus lead directly to this Credit catastrophe we're now in), as a rider to the 19,000 page Omnibus Funding Bill - 2000) Gramm left Senate and got a job at UBS).

UBS - Swiss INvestment firm helps US millionaires cheat Treas out $2 bil in taxes - Phil Gramm is a Vice-chairman of UBS


most corporations don't pay any income taxes

"Sen. Carl Levin, D-Mich., chairman of the Senate Permanent Subcommittee on Investigations, said abusive tax havens and offshore accounts cost the U.S. government at least $100 billion in lost taxes each year."

http://ap.google.com/article/ALeqM5gPmpTNXx28wCGlNOPEF_wM0c2DYQD94DKOUG0

If it's the bus driver's fault, why do you guys keep hiring such bad drivers? You seem to want to hire a good ol' boy who's "just like you" when what you need is a smart, talented driver who doesn't have fixed and (party-fixated) concepts of how the trip will unfold.

Who is that? You Americans? You Democrats? Who?

The worst offenders are the Red voters, but the Blues aren't completely free from the sickness.

As I've posted a couple of times in other threads and other forums:


Basically, I think the problem is worse than anyone in the American financial/economic industry is able to admit because 1) it's truly global 2) it's multifactorial to an extent not generally appreciated, 3) the USA has lost its manufacturing base that is intrinsic to any recovery and 4) there isn't enough cheap high-EROI energy left to fuel the recovery.

Whenever I get into this discussion on the net I have a hard time determining whether the arguments being raised against this position are global or Amerocentric. There is no question that the USA has a LOT of fat in its system that will make it possible for them to do more than many other nations when it comes time to mitigate a collapse (at least for a while). However, the rules for the USA do not, obviously, apply to Belgium, South Africa, Thailand, Brazil or China. Given how interdependent the world has become, events in those nations will resonate in Schenectady. And given that we're looking at a potential deflationary collapse due to a global mark-to-market of derivatives, it's an open question how long it would take for deflation to complete America's liposuction.

The key to understanding the whole mess, IMO, is to first understand how interconnected the world and its various problems have become. That in itself makes overall analysis of the situation difficult or impossible to any degree of precision. However, if there's one thing we've learned from systems engineering it's that systems that are complex, dynamically unstable, highly efficient and highly interconnected work very well when things are going well, but fail rapidly and completely in unexpected ways when things go wrong. As a result I mistrust analyses that look at one component of the system that is modern civilization (e.g. replacing oil-driven transportation with electric transportation) and say "We can fix this part even if that part over there breaks." Maybe, maybe not. I am sure, though, that the longer things go on as they are with our civilization the more problems will occur, and over time the probability of encountering a significant insoluble problem approaches 100%. And the time frame for this appears to be much shorter than we've been assuming.

Then there is the perennial (and perennially optimistic) reference to the WPA during the Great Depression. Millions of people were put to work on infrastructure projects, and were happy to find the work, no matter what it paid. Of course labour costs will drop through the floor in any deflationary depression, but there's more to a recovery than juat the cost of labour. The problem I find with comparisons to Depression-era WPA efforts lies in these facts:

• The American manufacturing base has been significantly eroded compared to 1930;
  
• Energy and raw material prices are much higher than they were then (oil is over 5 times more expensive in constant dollars);
  
• The population of the USA is almost 3 times higher;
  
• The per capita national debt is 6 times higher in constant dollars;
  
• The national debt has ballooned from 20% of GDP in 1030 to 100% today;
  
• The USA now imports 2/3 of its oil, compared to 0 then. This is especially significant in light of the Export Land Model proposed by Jeffrey Brown of The Oil Drum, which leads to the conclusion that the international oil market could go completely dry within 25 years.
  
• The derivatives market -- whose value depends strictly on agreements between buyers and sellers that can vanish in an instant -- is nominally valued at ten times the world's total GDP. The disappearance of this value in a global mark-to-market event could be the trigger for a world-wide deflationary crash.

All these factors create a physical and economic environment with "significantly" more challenges than the USA faced in 1930.

My best guess right now is that the world will, overall, reset within ten years to a level of economic activity that is less than half of today's value, and that this will become the new normal. Recovery to our current level of activity will not be possible due to the convergence of permanent ecological and energy shortfalls. Some regions may do better than that, some worse. The USA is primed to be fall into the "worse" column because of its dependence on imported oil and its eroded manufacturing base, neither of which can be rectified in the time remaining with the money remaining.

As I said above, given the current circumstances a recovery from this crisis is not guaranteed.

Most energy substitutes that have the scalability to meet the challenge (e.g. a switch to electric cars and electric rail)

These are not energy substitutes.

Can I stop reading now?

Sorry for the terminological inexactitude.

And no, you have to keep reading till you're finished. This will be on the exam.

Take a look at a graph of national debt in the United States over time. Our debt is a function of compounding interest -- it rises quite slowly over a long period of time, but if you look closely you will notice that we started to "turn the corner" on this function in the 1980s, and the line becomes increasingly vertical on the graph. This is the classic "hockey stick" form of exponential functions.



Compare this with the stock market over the long view (say, since the 1920s). Except for the bubble and crash of the 1920s, it plugs along within a relatively consistent range. That is, until you get to the... 1980s. Then, it starts a significant upward climb. This phenomenon takes on an added dimension in the graph shown, with periods in which wealth is based more on "tangibles" showing less financial growth than times where it is based on "intangibles". Guess which period we have been in for the past 25 years....



Personally, I believe there is a direct correlation between these two phenomena. A good part of the relationship lies in the financialization of the U.S. economy during this time frame -- a measure meant to maintain U.S. economic hegemony in the face of a declining manufacturing base in relation to total global manufacturing output. Debt became the engine of growth, not production. Of course, increasing debt meant that people and institutions on all levels had to start going after higher and higher returns in order to pay back current debt AND make a profit.

This scenario worked so long as everybody expected that growth would continue, and that those debts would all be subsequently repaid (or, at a minimum, serviced). However, once people STOP believing that these debts will be repaid, the whole system faces collapse. Ultimately, this system is based on confidence -- that's why I tend to liken it to a grand confidence game (or, in abbreviated terms, a con game). Financial sectors aren't really interested in producing anything of lasting value -- they're designed to create wealth out of thin air. When the illusion of wealth supported by their elaborate debt and capitalization instruments collapses, the wealth itself vanishes like a fart in the wind.

There's another graph here that bears mentioning: oil production.



I find it interesting that the first real downward tick in this graph coincides with the explosion of debt AND the upward drive of the stock market -- the 1980s. I also wonder what would have occurred during the past 25 years if there had NOT been North Sea or Alaskan North Slope oil fields coming on line to increase production and drive down price. In any event, if the future predictions of this oil production graph are to be believed, what hope do we have for continuing the economic patterns to which we've all become accustomed?

I'm not overly optimistic. And I do agree with the OP -- "I don't see a solution here..." What we're facing here is a predicament that forces us to adjust our behaviors, not a problem that we can solve.

The Peak Oil boogeyman (and his Chainsaw Charlie cousin, the net oil export problem) is the one factor that makes most people unwilling to look this predicament in the eye.

is a change of behavior, and that will not be a choice, but will be forced on us by reality. It will not be pleasant but if we act rationally, maybe we can turn it into a positive thing.

I wrote about this from the perspective of Norbert Elias's The Civilizing Influence.

Norbert Elias and System Collapse
by Chris Harrison

As part of my studies toward my Masters' degree in history, I had to read excerpts from The Civilizing Process by Norbert Elias. This reading is part of a seminar on historiographical methods and analysis, focusing on different social theories and the way they affect the work of historians in trying to explain the past.

I found Elias's work to be quite fascinating. Basically, it theorizes that the process of "civilization" is largely the result of people subordinating their impulsive drives -- the repression of the id by the ego and superego, in Freud's terminology -- as their social organization changes over time. Elias says that this process is mutually reinforcing and not entirely rational. People demonstrate greater self-restraint as their social organization becomes more complex and interdependent. Likewise, increased levels of self-restraint propel a greater level of complexity and interdependence. Central to Elias's notion of "progress" along the scale of impulsiveness to self-restraint is the level of security under which people live. In societies that do not provide a high level of physical or material security, the impulsiveness of the id reigns. For those that achieve a high level of security, the restraint of the ego and superego keep the id in check.

To support this idea, Elias cites the changes in human behavior as Western Europe changed from a feudal society of warrior-nobles and knights into the court society of absolutist kings and aristocratic nobles. In the former, the use of violence was highly decentralized. Most people did not have adequate levels of security -- especially physical security. To venture on the roads outside of town was to invite the certain predations of highwaymen or rival soldiers. Disputes between individuals (particularly nobles) were settled by violent confrontation. By contrast, in the society of absolutist kings, the use of violence was monopolized by the monarch. Nobles could no longer settle their disputes through violence, so the court society (with its emphasis on manners, fashion, elaborate titles and intrigue) evolved instead as a forum for noble competition and a means of differentiating the aristocracy from the commoners. The latter was also a much more complex and interdependent society than the former. Finally, the former had a general world view largely characterized by fear and emotion (superstition and religion), while the move toward "civilization" appealed increasingly to empirical rationalism (observation and science).

As far as historical reference goes, Elias provides a decidedly Marxist superstructure for his theories. Basically, his history begins in medieval Europe and proposes a rather linear view of civilization's development, as well as describing Western Europe as the vanguard of civilization's progress. I was left wondering about how Elias would describe the notion of a society moving away from "civilization" -- from a highly complex, centralized, interdependent society to one that is decidedly less so.

Central to any analysis of collapse through Elias's lens is the loss of material or physical security. Also, the relationship between changing social organization and the loss of security must be viewed as a mutually reinforcing process. I believe that if Elias had gone back a little further, he could have found an excellent model for this process: the Roman Empire.

The collapse of the Roman Empire was certainly predicated by internal problems -- declining harvests, political intrigue, etc. However, these internal problems greatly contributed to the rolling back of the frontier by Germanic barbarians. When the highly complex society of Rome lost steam, it lost its cohesive force among its populace. Where the citizens of Rome once were willing to sacrifice for her, now they concerned themselves with the circuses of the Colosseum even as the empire crumbled around them. A substantial internal proletariat -- people who lived within Roman borders but felt no affinity or allegiance to Roman ideals -- swelled in number. A fine example of this proletariat is offered by the rapid spread of Christianity through Rome, in spite of its initial criminalization by the Roman authorities. (Arnold Toynbee, A Study of History)

So, the short version is that eventually complexity imploded, the "barbarian" conquered the "civilized," and Europe plunged into the Dark Ages. However, traces of the "civilized" still remained after 476 A.D. -- namely the Catholic Church. It is strange that what initially was a proletarian movement within Rome (Christianity) became its vehicle for the preservation of classical culture as society became less complex, less secure, less rational and more violent. What this demonstrates, however, is that the move either forward or backward on the scale of "civilization" is often a process of negotiation between the old and the new, the more and less "civilized." Even as Rome fell, it planted the seeds of what would eventually bloom after the Dark Ages had passed. Many ideas of the Renaissance, scientific revolution and Enlightenment found their genesis in the work of classical Greek and Roman scholars.

Fast-forward now to the present. Currently, we face a wide range of predicaments -- climate change, peak "everything," overpopulation, unsustainable debt, etc. The unprecedented complexity and interdependence of our social organization is largely the result (and cause) of increased material and physical security. What happens if these predicaments cause this security to deteriorate? Will we become stuck in a downward spiral like Western Europe after the fall of Rome, unable to regroup until after they hit rock bottom? Or will we be able to adjust our organization to meet new realities? Will the negotiation between complex and decentralized take place in a more rational manner this time around, or is a lack of rational forethought a fait accompli of this process?

http://fringemusings.blogspot.com/

NOTE -- as the author of this piece I give permission for publication in full.

out of people you've beggared.

2/3rds of corporations are not paying any taxes. We need to have an alternative minimum tax on corporations, requiring those with over 5 million in revenues (including subsidiaries in these calculations) to pay a minimum of 20% of profits.

Also there are myriads of loopholes in the tax code, tax havens offshore, lopsided trade deals, etc... all of which needs to be fixed.

Then you have this ten trillion dollar debt which hangs on all of us. How do we pay it off? Answer - you have to go after the wealthiest one-half of one percent and cut that debt in half in 5 years, eliminate it in 10. Otherwise, we'll keep bankrupting ourselves with the interest on the debt which is the black hole of the American economy.

Can you provide a citation for your claim and explain why it should be remedied?

How about you explain why it is misleading first?

Or are you trying to deliberately mislead readers?

Corporations purposely craft their structures to avoid ending a year with a profit to avoid the problem of "double taxation" where the corporate profit is taxed at the corporate rate and the after-tax portion is then distributed to shareholders who are taxed again at whatever their personal rate is.

2/3 of corporations may not pay any taxes on "profits", but the shareholders will pay the taxes on the wealth they derive from the corporation.

On corporations, we would have the unthinkable situation wherein Oil Companies would finally be
taxed on their obscene profits (some of which has been derived by destroying forever our National parks and Open Spaces) and then the shareholders would have to pay their taxes.

Okay, so let's not change the Ciorporate Tax Code. Let's just revamp the Federal Code whereby certain industries get such big freebie handouts.
Let's have the Oil Industries pay through the nose for deriving oil and other products from our land.
They would lessen their profit base - but would still be terribly solvent companies.

And stop giving what amounts to federal donations to Big Pharma so they can turn around and charge the American consumer two to eight times what they would pay for meds if living in any other country.
(Either that or hand the Big Pharama companies some legislation that will hold down the price of their commodities to a price in line with what other countries' drugs cost.)

Companies invest huge amounts in forward-looking activities that bring us what we need.

Billions of dollars sounds shocking, but Exxon is a very large company and the recent huge profits are generated by our addiction to oil.

We'd be better off solving the addiction than throwing stones at the folks who get the oil.

Exxon and other oil and gas companies already pay royalties on the oil and gas they draw from Federal Leases. They have previously negotiated these contracts with the Fed. I think it's about 16% of the value they take right now. It doesn't sound fair to see what they make each year and then take more from them just because they made a bundle. Blame your government for the "poor negotiating", if you want to think of it that way. Here's hoping the new administration will be a better manager of this through the Interior Dept than the last one was.

Accountability. It's good for everyone.

As for big Pharm, I'm glad they make money so they can continue to operate and find new compounds that benefit us all. It is good that they can get those compounds to folks beyond our borders who don't have as much income as we do here in the states.

5% of the population owns 90% of EVERYTHING. This in effect, means that the rich own 90% of stock. So tax the corporations and tax dividends. So fucking what.

Your arguments on this and other topics are either specious or woefully ignorant.

simply because someone has "more" or "lots"?

I don't get the rationale behind that.

I'd like to play "Secret Agent" with you, but could we do it some other time?

he should know

fucking capitalists

I hope they all have to eat the shit they've spewed on all of us.