Fact-esque

Insurance Co's Aren't the Only Ones On a Death Spiral

Paul Krugman's mention of the "death spiral" health insurance co's are caught in leads to the thought that they aren't the only ones. Remember the definition?

[P]rivate health insurance only works if insurers can sell policies to both sick and healthy customers. If too many healthy people decide that they'd rather take their chances and remain uninsured, the risk pool deteriorates, forcing insurers to raise premiums. This, in turn, leads more healthy people to drop coverage, worsening the risk pool even further, and so on.

Now, what WellPoint claims is that it has been forced to raise premiums because of "challenging economic times": cash-strapped Californians have been dropping their policies or shifting into less-comprehensive plans. Those retaining coverage tend to be people with high current medical expenses. And the result, says the company, is a drastically worsening risk pool: in effect, a death spiral.

Whether this is just another insurance scam rationalization or an actual truth is beside the point. The question is, doesn't that process - creating a situation out of sheer greed that then gets out of control - sound awfully familiar? It should. It's precisely what Wall Street and the Bushies have done to the country: set in motion an economic death spiral.

Foreign Co's Do What US Co's Can't...And in the US

OK. Here's the deal: US corpo's consistently claim they can't make money in the US unless they can underpay workers, strip their benefits, and kill their unions, and that that's why they have to outsource, globalize, and hire illegals. Americans, they say archly, don't want to work any more, don't have a work ethic, and spend more time worrying about their vacations than their jobs.

They say this despite the 1000 applications for every 25 jobs that show up, the 60+ hrs/wk Americans put in, the vacations they don't get and the holidays the corpo's ignore. They say this despite loading up many employees with the responsibilities that used to be handled by 5 people at the same time they cut salaries and benefits, which they call "a rise in productivity" and then brag about as if their management skills were the reason for it.

So if we're such schmucks and so useless, why do foreign companies want to hire us? And how come they can make money where their American counterparts can't?

Don't Mess with Rome's Trade Routes

I saw this piece about piracy at the HuffPo several days ago and wanted to link to it but didn't.   Thankfully, Corrente Wire pointed me to it again and so here it is: You Are Being Lied to About Pirates. 

Did we expect starving Somalians to stand passively on their beaches, paddling in our toxic waste, and watch us snatch their fish to eat in restaurants in London and Paris and Rome? We won't act on those crimes – the only sane solution to this problem – but when some of the fishermen responded by disrupting the transit-corridor for 20 per cent of the world's oil supply, we swiftly send in the gunboats.

OMG!! China Attacks!

The NYT is worried that China doesn't want to finance our debt, which, we are taught, is one of the Seven Signs of the Apocolypse.  Brad Stetser, who is insanely smart and insanely young, says that they do, just not at the unsustainable levels that have been going on.  

This story, like most stories of high finance, reminds me that I never again want anybody tell me that people are poor because they're stupid with their money.  The geniuses that run the global economy have been riding an unsustainable wave of crazy for the last few years and have done nothing with it except buy the global financial genius equivalent of flare guns, pornography and Southern Comfort.  People are stupid with money. Period.  The rich are just too big too fail.

Biggest 1-Month Job Loss in History

With all the hooplah accompanying the Marcel Marceau Bail-Out Mime Extravaganza up to the rush vote and even rushier signing of a bill hardly anybody has read all the way through, you may have missed the latest BushEconomy news.

We lost 160,000 jobs in Sept.

That's 160,000 in one month.

No, I'm not kidding. This isn't an SNL sketch or an Onion skewer.

The American economy lost 159,000 jobs in September, the worst month of retrenchment in five years, the government reported on Friday, amplifying fears that an already painful downturn had entered a more severe stage that could persist well into next year.

Multimedia

Graphic

Monthly Change in Number of Jobs

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Employment has diminished for nine consecutive months, eliminating 760,000 jobs, according to the Labor Department’s report. And that does not count the traumatic events of recent weeks, as a string of Wall Street institutions collapsed, prompting the $700 billion emergency rescue package approved by Congress on Friday.

“It’s a dismal report, and the worst thing about it is that it does not reflect the recent seizure that we’ve seen in the credit markets,” said Michael T. Darda, chief economist at MKM Partners, a research and trading firm in Greenwich, Conn. “There’s really nothing good about this report at all. We’ve lost jobs in nearly every area of the economy, and this is going to get worse before it gets better because the credit markets have deteriorated basically on a daily basis for the last few weeks.”

We could have done something to stop this right up until yesterday but with another $TRILLION being thrown down a hole to patch up the threatened stock portfolios of the very rich it's too late. In 6 months, we're going to be looking back at a 160K job loss as The Good Old Days when the economy was still functioning.

You Can't Have a Future

Mick recently posted about some good coverage of the mortgage bubble in the pro-war WaPo.  So far my favorite analysis of the whole scam was done by This American Life in a piece called The Giant Pool of Money.

This American Life producer Alex Blumberg teams up with NPR's Adam Davidson for the entire hour to tell the story—the surprisingly entertaining story—of how the U.S. got itself into a housing crisis. They talk to people who were actually working in the housing, banking, finance and mortgage industries, about what they thought during the boom times, and why the bust happened. And they explain that a lot of it has to do with the giant global pool of money.

This is my favorite part of the hour because it puts the blame where it belongs, which is right on Alan Greenspan's hunched shoulders:

Adam Davidson: They all wanted the same thing: a nice, low-risk investment that paid some return.  But then something happened that makes matters worse.  At this precise moment one guy took one of that army's favorite investments and made it a lot less attractive. 

Alex Blumberg: This is where we have to talk about Alan Greenspan, right?

Adam Davidson: Yeah. We have to.

Alex Blumberg:  All right, but I'm just going to promise people that this is the only time you're going to hear Alan Greenspan in this story so bear with us.

Adam Davidson: Here's one of his speeches that drove that army of investment managers crazy:

Greenspan: The FOMC stands prepared to maintain a highly accommodative stance of policy for as long as is needed to promote satisfactory economic performance.

Adam Davidson: All right. You might not believe me but that little statement, that is Central Banker speak for "Hey Global Pool of Money, screw you!" 

Alex Blumberg: C'mon, that's not what he's said.

Adam Davidson: It is.  I speak Central Banker. Believe me, that's what he said.  What he's technically saying is that he was going to keep the Fed Funds rate at the absurdly low level of 1% and that sends a message to every investor in the world: You are not going to make any money at all on U.S. treasury bonds for a very long time.  Go somewhere else.  We can't help you.

And so it began.  And Greenspan inflated the bubble at every opportunity.   It's too bad that more people don't know and revile Alan Greenspan's name, but that's how they same bad actors keep getting away with this sort of piracy over and over again.  Listen to the whole hour.  It's entertaining and a good lesson in the basics.  AND if you donate $20 to help keep the This American Life podcast free, you'll get a copy of the show on CD to share with friends.  Everyone should hear this story.

Speculators Under the Gun - Finally

Diana Henriques, a business reporter for the NYT, makes it her business in this piece to run the Fear Factor in favor of commodities speculators with a fairly broad brush. After all, we need them.

Uh-huh.

First there is the "Pity the Poor Victim" trilogy.

In Washington, financial speculators have fat targets on their backs.

They are being blamed for high gas prices, soaring grocery bills and volatile commodity markets, and lawmakers are lashing out at market regulators for not cracking down on them more vigorously.

“You study it, but you don’t act against this incredible increase in speculation,” Senator Carl Levin complained to a senior official of the Commodity Futures Trading Commission at a recent Senate hearing. “Unless the C.F.T.C. is going to act against speculation, we don’t have a cop on the beat.”

Just this week, Senator Joseph I. Lieberman, the Connecticut independent, said he was working on a proposal to ban large institutional investors from the commodity markets entirely. The same day, the Bush administration endorsed another Senate proposal to create a new federal interagency task force to investigate commodity speculation. At least four public hearings have explored the topic in just the last two months, and Senator Lieberman will hold another session on June 24.

Golly. Maybe they're "being blamed" because, well, they're responsible. Huh? Even stolid Holy Joe is getting into the act. Why, it's...it's...persecution, that's what it is. I mean, they work hard and provide a valuable service. Huh?

Although it is common in tough financial times to blame the speculators, this escalating hostility toward them is starting to worry people with years of knowledge about how commodity markets work. Because without speculators, they say, these markets do not work at all.

Speculators, people willing to risk their capital in search of high profits, are central to healthy commodity markets, they say, and broad-brush restrictions on them could damage markets that are already under pressure from rising global demand for food and fuel.

Scapegoats! That's what they are. Why, without them OUR ECONOMY WOULD CRASH AND BURN!! We're blaming them and they may not even be the sole cause.

Even in Washington, there is widespread agreement that no single factor is responsible for rising food and energy prices. The hungry, high-growth economies of India and China are fundamentally affecting worldwide demand, while uncooperative weather and government policies on trade and ethanol are among the many factors affecting supply.

That's it! It's China's fault. THE YELLOW PERIL!! Our speculators are innocent!

Or it's (I love it) the weather. Really, folks, there's nothing going on here but common FREE MARKET FORCES. There's no <whisper> greed </whisper> here. Just good, wholesome, American business. And those prices? And those mag-ni-ficent oil profits? And those guys betting they'll make oodles of $$$ on starvation? They're just classic American businessmen taking advantage of an opportunity no matter what the cost.

To other people.

[B]eneath all these external factors is the simple seesaw of the marketplace: For every person who buys oil at $130 a barrel, there must be another person willing to sell at that price — and, odds are, at least one of them will be a speculator.

See? Normal. Nothing to be worried about. Everything's fine. Back to your homes. [beat] What was that?

In a statement this week, Walter Lukken, the C.F.T.C. chairman, said the commission was determined to see that commodity prices were set “by the fundamental forces of supply and demand, rather than by abusive or manipulative practices.”

Abuse? Manipulation? Well, in the old days, maybe....

The commodity market has seen its share of manipulation scandals — allegations that executives at J. R. Simplot had tried to fix the Maine potato market in 1976, allegations that the Hunt family of Texas had manipulated the silver market in 1979 and, just last year, BP’s settlement of federal charges that it had manipulated propane prices.

Certainly, there have been unusual price spikes in commodity markets, like the short, sharp roller-coaster ride that hit the cotton market in early March and the more recent gyrations in the oil markets that have alarmed some market participants.

But there's an even greater danger: if you take the speculators out of the commodities market, they might start fooling around with something else. EEK!

The stage of the speculation that is alarming Washington is the commodity futures market, which trades a financial derivative called a futures contract, an agreement for the future delivery of a fixed amount of a commodity at a certain price. The prices at which these futures contracts change hands are the benchmark for pricing commodities around the world.

In essence, speculators are the only voluntary players in the commodity futures markets. They could use their billions to dabble in currency markets or buy distressed real estate or pile up Treasury bonds.

(emphasis added)

So calm down. Speculators are like bats - they may be scary but they eat all the mosquitoes.

So speculators become the ballast in the market, making the contrary trades, taking on the risks the hedgers want to shed, reacting quickly when news jolts the markets and, most important, creating liquidity by pouring in enough money to allow everyone to make very large trades quickly without causing wild price swings.

See? Speculators GOOD! Speculators GOOD!

Oy.

This isn't propaganda, it's just a one-sided, bi-polar, good/evil view that doesn't allow for middle ground. Like, maybe, you can have speculators but keep them from running amok? Why is that such a hard concept for business reporters - and conservatives - to understand?

Wall Street Starts Paying for Its 7-Yr Party

It was, of course, inevitable. It was, of course, the end result of machinations and manipulations that were unethical at best and illegal at worst. It was, of course, what they were afraid of all along, why they fed themselves $$$300BIL$$$ worth of taxpayer bail-out money.

It finally happened.

All 30 of the stocks that make up the Dow Jones industrial average took a hit as the index dropped nearly 400 points on fears that high energy prices will extend and deepen an economic slowdown.

“The market is meeting its worst fears right now,” said Quincy Krosby, chief investment strategist at the Hartford, a financial services firm.

The Dow fell 3.13 percent, or 394.64 points, to close at 12,209.81. The broader Standard & Poor’s 500-stock index lost 43.37 points, or 3.09 percent, to 1,360.68, its lowest point in four months. The technology-laden Nasdaq composite index declined 75.38 points, or 2.96 percent, to 2,474.56.

(emphasis added)

When oil went to the previously unthinkable price of nearly $140/bbl, Wall Street finally seemed to realize that something had to give. The cowards (all investors are) abruptly ran for the hills, desperately trying to salvage something from the mess they had made in the name of short-term gains. Some undoubtedly did but it was at everyone else's expense, not that investors care about such things (like who pays the piper if they won't).

Investors’ recent hopes that the United States might yet skirt a recession sank swiftly in the face of gloomy indications that the economy is gripped by a slowdown and pressured by record fuel prices.

And food prices.

So now they're starting to woprry about what the rest of us have known was coming for months. *Yawn*

Took long enough.

Sturm und Drang: Reid Lets BD's Off Hook - Again

Well, the corporate-run Democrats have done it again (how many times is that this week?). After a heavy session of political kabuki in which they stormed about the stage, chewing scenery about the dangers of global warming and the need to address corporate insensitivity to and disinterest in any such effort as well as their general disbelief that global warming even exists, the usual suspects - members of the DLC/BD Alliance - once again joined the GOP long enough to get their corporate sponsors what they wanted.

[W]ith a chorus of Senate voices having proclaimed the urgency and importance of the issue...the Great Climate Change Debate of 2008 ended on Friday morning, after three and a half days, with a procedural vote that effectively shelved the bill until next year. A motion by Democrats to end debate and move to a final vote, requiring 60 votes to succeed, fell far short, with 48 senators in favor and 36 against.

The bill would cap the production of heat-trapping gases and force polluters to buy permits to emit carbon dioxide. Critics, including many Republican senators, said it would raise energy prices, including the cost of oil, at a time when Americans are struggling with record gasoline prices.

***

[E]ven after the vote, it was hard to discern where many lawmakers stood, with 10 Democrats among the 48 senators who voted to close debate saying they would have opposed the bill had it come to a final vote.

(emphasis added)

Reid, who's still playing the game as outlines in the DLC playbook, refused to make opponents uncomfortable (maybe because several of them are in his own party) and closed down the vote so the party could claim the Pubs blocked them at every turn and the Senate needs more Democrats. All those who think it would really make any difference, raise your hands.

The final Congress before Bush's replacement by Barack Obama has been reduced to kidney-flipping and flipping the finger. They will do NOTHING because they're afraid Bush/McCain will get credit for any success the Dems generate. While out here in the real world, what's happening is that everyone is now convinced the Democratic party is full of spineless wimps and fools. They'll vote for Obama but why vote for the rest of these weak, cowardly jackasses? They're just like the Pubs only they're worser weenies.

Thus do the Dems squander yet another opportunity to convince voters they aren't worthless. But what did you expect? Anything else would piss off corporate contributors who don't want clean air if it costs them a single penny, this despite the fact that they're the ones who are poisoning it.

Wall Street Speculating on Oil Futures

Well, somebody's finally admitted it in print: Big Banks and hedge funds are speculating in oil futures because the Bush Administration changed the rules.

Hedge funds and big Wall Street banks are taking advantage of loopholes in federal trading limits to buy massive amounts of oil contracts, according to a growing number of lawmakers and prominent investors, who blame the practice for helping to push oil prices to record highs.

The federal agency that oversees oil trading, the Commodity Futures Trading Commission, has exempted these firms from rules that limit speculative buying, a prerogative traditionally reserved for airlines and trucking companies that need to lock in future fuel costs.

The CFTC has also waived regulations over the past decade on U.S. investors who trade commodities on some overseas markets, freeing those investors to accumulate large quantities of the future oil supply by making purchases on lightly regulated foreign exchanges.

Over the past five years, investors have become such a force on commodity markets that their appetite for oil contracts has been equal to China's increase in demand over the same period, said Michael Masters, a hedge fund manager who testified before Congress on the subject last month. The commodity markets, he added, were never intended for such large financial players.

(emphasis added)

Look at the bolded part again if you missed it the first time: Wall Street has been buying oil contracts worth as much as China's increase and over the same period of time. You mean, like, they expected exactly that increase at exactly that time?

And the Bushies helpfully exempted these huge financial players from rules that would have prevented them from glomming onto all that lovely $$$.

What's that smell? You smell that? It's the crude, pungent odor of Mendacity and Greed. We are paying enormously high prices for gas and oil because US speculators who couldn't even have been in the market before Bush changed the rules for them have been driving up those prices for their own benefit.

Oh, alright. So you knew that already. Still, nice to see it confirmed isn't it?