Happy Ponzi Day!

Charles Ponzi was born 129 years ago today, so I guess that makes it Ponzi Day today. The man for whom the pyramid scheme was named though, was a chump. Today's schemers have been many times more successful. By the time Ponzi's scheme peaked in 1920, Wikipedia notes that "he had made $420,000 ($4.59 million in 2008 terms)." See what I mean? $4 and half million isn't even enough for today's ponzi artists to get out of bed. For example, let's look at the currently best-known ponzi artist, Bernie Madoff. The amount missing from Madoff clients' accounts was nearly $65 billion, although that includes fabricated money-- actual losses total about $18 billion. Even at $18 billion though, that's still almost 4,000 times the ponzi scheme than Ponzi himself. Madoff made headlines again this week, saying that “It’s unbelievable, Goldman … no one has any criminal convictions. The whole new regulatory reform is a joke. The whole government is a Ponzi scheme.” And who better to know Ponzi schemes than the man who bested Ponzi?

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Read more about the article Secretary of the Treasury doesn’t understand economics
Timmy "Turbotax" Geithner. Image via Wikipedia (commons)

Secretary of the Treasury doesn’t understand economics

Tim Geithner, appointed to Secretary of the Treasury despite being unable to calculate his own taxes, has just proven he does not understand the role of oil prices in modern economies. Speaking at a breakfast today in Washington, Geithner claimed that:

“The economy is in a much stronger position to handle” rising oil prices, Geithner said.... “Central banks have a lot of experience in managing these things.”
This is the opposite of truth. Central banks do not, in fact, have a lot of experience in dealing with rapidly rising oil prices in a worldwide recessionary environment where there is no clear deflation nor inflation. Hell, central banks do not even have a lot of experience in managing an out of control real-estate bubble, or dot-com bubble, or any of the economic crises that hit over the past decade or so. Nor is the American economy in a "much stronger" position than it was in 2008, which was the last time a major oil price spike played a role in devastating the world economy. In fact, there is no shortage of people arguing the opposite of Geithner. Let's start with Fatih Birol, the chief economist of the International Energy Agency (IEA). Just yesterday, he warned of the danger of high oil price's impact on the economy:

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We Are Not Parts

I’ll admit up front that I’m shooting from the hip here. There are many aspects to what is happening in Wisconsin right now with parallels to several past instances in the country in the fight over workers’ rights, unions, and moneyed interests, but I frankly don’t have the time to research them all right now and get something up before it all comes to a head. Isn’t it interesting, though, that we are collectively cheering what is happening in the Middle East right now and something similar is happening right here and people don’t seem to be paying attention to what’s at stake? I grant you, it’s a stretch. But on principles, not so much. We’re talking about who has the right to speak to power and over what. The protesters in Madison aren’t having their internet access and phone service pulled and it’s doubtful the military will be called in, but on the other hand the Wisconsin state police are being asked to go get the now-labeled Wisconsin 14 and bring them back to the state capitol to vote on something that is clearly a stripping of the right of petition and assembly. So this can become very quickly a constitutional issue and that’s scary, because right now the Supreme Court has been decidedly against workers’ rights. Governor Scott is at least being clear. I’ll give him credit, he’s not ducking questions about what he’s trying to do. Wisconsin, like many states, has a budget crisis. He’s already gotten concessions from the unions, a lot of money. The unions have not balked at doing their civic duty in terms of agreeing to pay cuts, freezes on raises, and some concessions on benefits to help the state meet its budgetary responsibilities. But he’s going further and asking that all these unions be stripped of their collective bargaining abilities in order to make sure they never again demand something from the state that the legislature or the governor believes they don’t deserve. In other words, Governor Scott doesn’t ever want to have to sit down and ask them for concessions ever again—he wants to be able to just take what he wants. [More . . . ]

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Read more about the article De-heroification … dispelling some Reagan myths

De-heroification … dispelling some Reagan myths

Now that the hoopla of February's first weekend has faded, let’s hope the deification process fades as well. It must have been such a downer for the Reaganites and their 100th birthday celebrations to have to compete with the NFL and the most watched Super Bowl ever…the gall to schedule such an event on the holiest of days! Amidst all the reminiscing and nostalgia, I did happen to see a few articles not as admiring, such as Michael Kinsley's on Slate. I like this part:

In the economic sphere (discussed in last week's column), the Reagan hagiographers give him credit for things he intended that never happened, such as smaller government. On the world stage, they credit him for things he never intended that did happen.
I'm not going to get into the myriad of philosophical elements of Reagan's legacy on what he did and didn't do and what gets attributed correctly or not. I don't have the time, or the inclination, and there are a host of Gipper love books and a couple like Will Bunch's Tear Down This Myth: How the Reagan Legacy Has Distorted Our Politics and Haunts Our Future for your reading pleasure. It's human nature to see things from one's too often myopic viewpoint and human nature to remember things they way we want, to the point of manufacturing memories that just aren't true. Such is the case with Reagan and that nostalgia. Longing for the days that never were. And the political right and its Murdoch media arm are very good at enhancing the myth that is the goal of the Reagan Legacy Project, "recalling" those good old days of Reagan. Truth or not, there are several topics that are now commonly tied to Reagan's legacy; myths of smaller government, lower taxes, less spending. And most people have no idea how much the debt and deficit grew under Reagan. The military has a nice term known as BLUF - which stands for Bottom Line Up Front. This is going to get tedious, so I'll cut to the chase:
In raw numbers not adjusted for inflation, Reagan increased federal spending by $466B (69%) over what he inherited, averaged a %177B deficit (+180%), added $1.40 trillion to the debt (+178%), enjoyed a pretty substantial increase in the GDP (+77%), but increased the debt to GDP ratio by 15%. Even adjusted to a FY2005 baseline to account for inflation, Reagan still increased federal spending by 22%, averaged a deficit that was 99% more than Carter's average, increased the public debt by 100%, and as the adjusted GDP increase was only 28%, that 15% increase in debt to GDP was a lot more substantial. Reagan added 13,000 non-defense federal employees - the IRS grew despite his wishes. (Clinton decreased the non-defense federal workforce by 99,000.)
I'll deal with each piece individually, but that's it in a nutshell. If you want to know more and how I determined this, read on...

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Our healthcare mess

Remember how we solved our healthcare problems with the reform measures promoted by Barack Obama? Not true. Our politicians aren't being honest about the extent of the problem we face, and it threatens our entire economy, according to this detailed and thoughtful article from Wilson Quarterly. Here's an excerpt:

Last year, Medicare and Medicaid made up almost 22 percent of the federal budget, about $500 billion and $250 billion, respectively. By 2050, together with the additional costs of the new health care law, they will expand to 48 percent of the budget (excluding interest payments on the national debt). At about $4.8 trillion (in today’s dollars), that sum will dwarf that year’s projected spending on Social Security by a factor of more than two, even though the retirement program, at $680 billion, is currently much larger.

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