New Study Confirms That American Workers Are Getting Ripped Off   Recently updated !

New York Magazine has the article New Study Confirms That American Workers Are Getting Ripped Off.

Economists have put forward a variety of explanations for the aberrant absence of wage growth in the middle of a recovery: Automation is slowly (but irrevocably) reducing the market-value of most workers’ skills; a lack of innovation has slowed productivity growth to a crawl; well-paid baby-boomers are retiring, and being replaced with millennials who have enough experience to do the boomers’ jobs — but not enough to demand their salaries.

There’s likely some truth to these narratives. But a new report from the Organization for Economic Cooperation and Development (OECD) offers a more straightforward — and political — explanation: American policymakers have chosen to design an economic system that leaves workers desperate and disempowered, for the sake of directing a higher share of economic growth to bosses and shareholders.

It must have been 20 or 30 years ago that I came to the conclusion that being a worker is no way to get rich. You have to be an owner to make it. That’s when I got really interested in buying corporate stocks. I am not rich, but I am a heck of a lot better off now than I would have been had I not reached my conclusion.

Has Mueller Caught the Hackers?   Recently updated !

The Real News Network has the interview Has Mueller Caught the Hackers?.

Special Counsel Robert Mueller has indicted 12 officials with the GRU, Russia’s main foreign intelligence agency, for allegedly meddling in the 2016 election, including hacking Democratic Party emails. Case closed? Author and investigative journalist Michael Isikoff of Yahoo News joins TRNN’s Aaron Mate to discuss.

This is quite a back and forth between Aaron Mate and Michael Isikoff. I have a lot of respect for Michael Isikoff, but I don’t believe he is God.

He admits his lack of computer expertise in judging some of these claims. I have read computer experts that I have a lot of faith in (besides my own expertise) that makes it trivial to knock down the claims of the “intelligence” report that supports much of what Isikoff believes.

Isikoff uses the old debate trick by asking Mate if he has a better explanation. As I have said many times about people who say “I can’t imagine another explanation”, that this says more about their lack of imagination than it says about the story they believe to be true. Like a mathematical proof, you can convincingly knock holes in a proof that destroy that proof without having a better proof of your own. There are many mathematical proofs that have been postulated to “prove” one thing or another that were shown to be wrong long before anybody came up with a proof that did not get knocked down. Mathematicians may say that they strongly believe something is true, but are willing to admit there is no proof yet. There are mathematicians who will spend a career trying to prove a mathematical conjecture that they do not succeed in proving, and do not succeed in disproving.

Remember that there were politicians, journalists, and other “experts” who were so sure about the story of Iraqi WMD that turned out to be completely fictitious. Isikoff mentions that there have been two different administrations, Obama and Trump, who have made the same claims about Russia. What he fails to mention is that there has only been one intelligence apparatus (some call the deep state) that has existed throughout most of the past administrations perhaps dating as far back as WW II or before.

I always think of the lawyer’s ploy when confronted by a witness who has a record of lying, but swears to be telling the truth. The lawyer asks, “Do you expect us to believe that you were lying before, but are telling us the truth now?” Dor me, that is a very effective question. Once you lie, you destroy your credibility. It is almost impossible to get your credibility back. That is one reason I hate lies even if they are coming from “my side”.

There’s So Much You Don’t Know About Brett Kavanaugh   Recently updated !

The New York Times has the opinion piece There’s So Much You Don’t Know About Brett Kavanaugh, And you probably won’t until it’s too late.

First, the questions everyone wants answered: What is his judicial philosophy? How does he approach interpreting the Constitution and statutes? Does he agree with the decision in landmark Supreme Court cases like, say, Brown v. Board of Education, which outlawed racial segregation in public schools, or Griswold v. Connecticut, which established a constitutional right to privacy? There’s no reason, despite their protestations, that nominees for the highest court in the land can’t give the public straight answers to these questions and many more like them — several, including Chief Justice Roberts himself, did so in the past.

Naked Capitalism has an article with an excerpt from Anthony Kennedy’s opinion in the Citizen’s United Supreme Court case. Their article is Anthony Kennedy and Our Delayed Constitutional Crisis.

[W]e now conclude that independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption. …

The fact that speakers [i.e., donors] may have influence over or access to elected officials does not mean that these officials are corrupt. …

The appearance of influence or access, furthermore, will not cause the electorate to lose faith in our democracy.

If Senate Democrats could get the nominee, Brett Kavanaugh, to read this passage aloud, and ask him to explain the logic of Kennedy’s opinion, then we would know all we need to know about the nominee.

July 13, 2018

If the appearance of ellipsis in the above quote makes you wonder what was left out, I looked this up in the opinion on CITIZENS UNITED v. FEDERAL ELECTION COMMISSION as published by the Supreme Court.

While a single Bellotti footnote purported to leave the question open, 435 U. S., at 788, n. 26, this Court now concludes that independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption. That speakers may have influence over or access to elected officials does not mean that those officials are corrupt. And the appearance of influence or access will not cause the electorate to lose faith in this democracy. Caperton v. A. T. Massey Coal Co., 556 U. S. ___, distinguished. Pp. 40–45.

In my mind the ellipsis was not meant to deceive and it did not deceive.

Michael Olenick: Update Confirms That Share Buybacks Are Still Corporate Suicide

Naked Capitalism has published the article Michael Olenick: Update Confirms That Share Buybacks Are Still Corporate Suicide. Here is an excerpt of an excerpt from the article.

Corporate executives and directors are apparently bereft of ideas and the confidence to make long-term investments. Rather than using record profits, and record amounts of borrowed money, to invest in new plants and equipment, develop new products, improve service, lower prices or raise the wages and skills of their employees, they are “returning” that money to shareholders. Corporate America, in effect, has transformed itself into one giant leveraged buyout….

If you want to get an idea of the long-term consequences of Trump’s recent corporate tax cuts, this article ought to scare the pants off you.

I have written many posts about the harm that vulture capitalists do with their leveraged buyouts and taking publicly traded companies private. Turns out, CEOs of publicly traded companies have figured out how to do this without having to take the company private.

In simple terms, they strip the assets of the company, put the company into huge debt, pay themselves more than handsomely, then walk away to let someone else try to pick up the pieces.

Executive Coaching Achieves Miracle Success, and Self-Parody, at Nortel

New Economic Perspectives has the article Executive Coaching Achieves Miracle Success, and Self-Parody, at Nortel, by William K. Black.

As I have explained in prior posts, the creation of ‘modern executive compensation’ has proven catastrophic, principally because of its perverse effects on CEO behavior. Modern executive compensation created both a criminogenic environment encouraging CEOs to use their seemingly legitimate firms as ‘weapons’ to defraud and predate on customers and the government, but also created powerful, perverse incentives to run the firm in a manner harmful to its long term viability.

For anybody who still harbors dreams of the benefits of the capitalist system as now practiced in the USA, here is an article for you. I am not accusing capitalism of having an inherent flaw. My main complaint is how it has been perverted by extremist capitalist ideologues.

Ocasio-Cortez understands a key feature of the economy in a way most politicians miss — and it could be a huge asset for Democrats

Business Insider has the article Ocasio-Cortez understands a key feature of the economy in a way most politicians miss — and it could be a huge asset for Democrats.

“The idea that we’re going to austerity ourselves into prosperity is so mistaken,” Ocasio told In These Times. “Honestly I feel like one of the big problems we have is that, because Democrats don’t have a deep understanding of or degrees in economics.”

Who knew they teach real economics at Boston University?

Ocasio-Cortez, who has an economics degree from Boston University, says the US economy needs another New Deal like the one implemented by President Franklin Delano Roosevelt in response to the Great Depression.

She seems to be able to explain this far better than Bernie Sanders ever has.

This is her key insight: Despite quack economists’ insistence to the contrary, the US government is nothing like a household. It is not “burdened” by debt. It can borrow indefinitely, as long as that borrowing does not spur inflation. What matters, really, is the quality of the spending, not the size of the deficit.

Well, in reality, the USA government doesn’t even have to borrow by any law of economics. The USA government creates USA money at will. It is only the Federal Reserve act of 1913 that insists on a circuitous route where the Federal Reserve Bank can only buy US Treasury debt from the open market after the US Treasury has sold the debt to the public. Without this requirement, the Federal Reserve Bank could just buy worthless paper from the Treasury the way they did with the Quantitative Easing that they did for the private banks.

Rigged: Post #2

I have previously posted about the book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer by Dean Baler. In that post, I had just begun to read the book, and it looked very promising. It is generally an excellent book about the rents extracted from the economy by the rich,

I am reading Chapter 6 Out of Control at the Top: CEO Pay in the Private and Public Sectors which is also generally good, until I came to this startling excerpt.

A study that has attracted considerable attention, Cronqvist and Fahlenbrach (2012), is an analysis of CEO pay at companies that transition from public ownership to ownership by private equity. The rationale for focusing on these companies is that with private equity ownership there isno separation between ownership and control, and so if the problem of CEO pay is one of a corporate board that does not act in the interest of shareholders, then a takeover by private equity should remove this obstacle. The private equity company stands directly to gain by minimizing CEO pay, insofar as the pay is consistent with maintaining the performance of the CEO. From this perspective, if CEOs of publicly held companies are drawing rents, then they should see sharp cuts when private equity owners take over. But Cronqvist and Fahlenbrach found little reduction in non-performance-based pay, such as straight salary and benefits, and a large rise in incentive pay. This outcome is often taken as evidence against the claim that CEO pay involves a substantial rent component.

While Cronqvist and Fahlenbrach have performed an interesting analysis of the issue, their findings are far from conclusive on the question of rents in CEO pay. A major problem with using companies held by private equity as a comparison is that, almost by definition, the private equity firm is expecting the company it takes over to undergo major transitions. This is the point of the takeover. The private equity firm hopes that by restructuring the company, it can increase profitability. Its plan is to bring its takeover back on the market and resell it as a public company in three to 10 years.

The astounding naivete of this section was beyond belief to me. Compare the above description with an excerpt from another previous post Private equity bosses took $200m out of Toys R Us and crashed the company, lifetime employees got $0 in severance.

Private equity’s favorite shell game is to take over profitable businesses, sell off their assets, con banks into loaning them hundreds of millions of dollars, cash out in the form of bonuses and dividends, then let the businesses fail and default on their debts.

Does this real-life example sound anything like what Dean Baker is talking about in his book? So, finding that CEO pay does not go down after a company is taken private, does not at all prove that high CEO pay is worth it. The CEO’s of companies taken private are fiercer rent extractors than CEOs of publicly traded companies.

If a respected economist like Dean Baker writes a book about how the system is rigged, and yet can be this astoundingly blind to what vulture capitalists really do, then you have to go into reading this book with a large bag of salt. I wish he could rewrite this chapter because it destroys much of the authority of the rest of the book.

This is just another example of the reader having to know what parts of a book are credible and which parts fall far short.

Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer

Dean Baker has an interesting book Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer.

There has been an enormous upward redistribution of income in the United States in the last four decades. In his most recent book, Baker shows that this upward redistribution was not the result of globalization and the natural workings of the market. Rather it was the result of conscious policies that were designed to put downward pressure on the wages of ordinary workers while protecting and enhancing the incomes of those at the top. Baker explains how rules on trade, patents, copyrights, corporate governance, and macroeconomic policy were rigged to make income flow upward.

I just started to read this free book. I am up to page 7 so far. It looks like it is going to be a fascinating book if you find economics fascinating. I am one of those crazy people who do think the subject is fascinating.

Former US Envoy to Moscow Calls Intelligence Report on Alleged Russian Interference ‘Politically Motivated’

Consortium News has the article Former US Envoy to Moscow Calls Intelligence Report on Alleged Russian Interference ‘Politically Motivated’,

Prominent journalists and politicians seized upon a shabby, politically motivated, “intelligence” report as proof of “Russian interference” in the U.S. election without the pretense of due diligence, argues Jack Matlock, a former U.S. ambassador in Moscow.

I have seen too many “progressives” lately seeming to jump on the anti-Russia propaganda bandwagon that is being promoted by the corporate media and the corporate Democrats. I wanted to have the link to this article handy as something to show to these people when they don’t seem to realize how they are being duped.

Bill Black: Fed Lets Goldman Sachs and Morgan Stanley Off Hook, Investors Profit Billions

Naked Capitalism has The Real News Network has the interview Bill Black: Fed Lets Goldman Sachs and Morgan Stanley Off Hook, Investors Profit Billions.

GREG WILPERT: So, first, what are the implications of the Fed allowing Morgan Stanley and Goldman Sachs to pass their stress test? That is, to pay investors even though they technically failed those tests, and should have kept most of these billions as assets to back them up.

BILL BLACK: OK. They didn’t technically fail the test. They actually failed the test. And what the new Fed, as you say, Trump appointees, have said, well, a failure isn’t going to be treated as a failure if you’re a really massive financial institution like Morgan Stanley and Goldman Sachs.

Ok, if you want to hate on the Federal Reserve Bank, here might be a perfectly valid reason to do so. Forget the fake news that the Fed is a private bank.