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Thread: James Howard Kuntsler - 'It's Too Late For Solutions'

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    Default James Howard Kuntsler - 'It's Too Late For Solutions'

    for what it's worth ... from


    (snip)"Author and social critic James Howard Kunstler has been one of the earliest, most direct, and most articulate voices to warn of the consequences -- economic and otherwise -- of modern society's profligate wasting of the resources that underlie its growth.

    In his new book Too Much Magic, Jim attacks the wishful thinking dominant today that with a little more growth, a little more energy, a little more technology -- a little more magic -- we'll somehow sail past our current tribulations without having to change our behavior.

    Such self-delusion is particularly dangerous because it is preventing us from taking intelligent, constructive action at the national level when the clock is fast ticking out of our favor. In fact, Jim claims we are past the state where solutions are possible - instead, we need a response plan to help us best brace for the impact of the coming consequences. And we need it fast.



    [We now live in] this weird, peculiar period in American history when the delusional thinking has risen to astronomical levels -- predictably, really -- in response to the stress levels that our society feels. And it is expressing itself as sort of "waiting for Santa Claus and the Tooth Fairy" to deliver a set of rescue remedies to us so that we can continue running Wal-Mart, Walt Disney World, Suburbia, the U.S. Army, and the Interstate Highway System by other means. That is the great wish out there. It is kind of understandable because that is the stuff that we have, and people tend to defend the stuff that they have in any given society and the systems and platforms that they run on. But it is probably a form of collective behavior that is not really going to benefit us very much and really amounts to simply wasting our time, and wasting our dwindling resources, and even our spiritual resources when we could be doing things that are a lot more intelligent.

    Here is something I have detected as I travel around the country: there is a clamor for “solutions”. Everywhere I go people say "Don't be a doomer, give us solutions." And I discovered that the subtext to all that is they really want solutions for allowing them to keep on living exactly the way they are living now. To keep on running Wal-mart, and keep on running suburbia, and keep on running the highway system, and the whole kit of parts. And what that really means is, that they are looking for ways to add on additional complexity to a society that is already suffering from too much complexity.

    So I am trying to propose something a little different. Rather than so-called solutions, I am proposing that we use the term "intelligent responses", which is not so grandiose. It does not come with a whole grab bag of promises that life is actually going to work out exactly the way you wish. A lot of the intelligent responses that we could be making to our predicament would have a lot to do with decomplexifying and with simplifying. But we do not want to do that; we just want to add more complexity, and that is what some of the wishful thinking and vanities about technology are all about.

    We are discovering more and more is that the world is comprehensively broke in every sphere, and in every dimension and in every way. The governments in every level are all broke, the households are going broke, the banks are insolvent, the money really is not there. And the pretense that the money is there has been kept going simply with accounting fraud. And accounting fraud really accounts for most of the so-called "innovation" that we chatter incessantly about – this is at the heart of Too Much Magic and the wishful thinking about technology. We are so intoxicated with this idea that we can create new and wonderful things. And we have absolutely no sense that the new and wonderful things that we created in the money system are destroying the money system.

    One of the lessons that used to be at the center of a liberal education, and no longer is, is that life is tragic. And by that I do not mean that happy endings are impossible or that bad outcomes are guaranteed. What I mean is that there are consequences to the things that you do and that everything has a beginning and a middle and an end. And we have to get real with those.

    It seems to me that the whole capital issue is going to accelerate hugely over the summer. I really do not see how the Europeans can get out of the box they are in – it really does not look like they are going to be able to form a European fiscal union. And it really does not look like the Germans are going to be willing to print money into a hyperinflation. And so I think that the disappearance of money is going to accelerate, and it is going to be all getting sucked into a black hole over the next six months. And that is going to be the beginning of a broad-based social awareness of the nature of this problem.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    with some similar commentary by Michael Hudson ... from


    (snip)"Any discussion of the U.S. economy necessarily involves the global context. So it is necessary to discuss not only domestic U.S. developments, but also relations with Europe and the BRICS countries.

    The most important dynamic is financial. A continued decline in real estate prices, coupled with local government debts, has led to debt deflation. As personal and corporate income are diverted to pay debt service, spending on new consumption and investment goods is cut back. Sales and employment opportunities are falling off, especially for new entrants into the labor force. Major categories of debt cannot be repaid in Europe and the United States, except by foreclosures transferring property to creditors. Short-term financial aims overshadow the long-term adjustments that ultimately will be needed: debt writedowns in the public and private sectors. The alternative to this “business as usual” scenario is for the U.S. and European economies to look increasingly like the Baltics – austerity aggravating economic shrinkage.

    The U.S. Government as well as European governments have taken bad bank debts onto the public balance sheet. This is not a problem for the United States, whose Federal Reserve can simply create the credit to roll over its debt. But for Europe, public debts simply cannot be paid under current central bank constraints. Instead of changing the central bank rules, the European Union is willing to plunge the continent into depression and economic shrinkage.

    U.S. Austerity and deeper Negative Equity
    The U.S. economy is free of the monetary constraint that Europeans impose on themselves. The Federal Reserve does what central banks are supposed to do: monetize government deficit spending by buying public debt. However, the increase in new government debt creation has not been mainly to finance deficit spending to increase economic activity and employment, to invest in rebuilding the nation’s infrastructure or providing states and cities with the revenue sharing that in the past enabled them to balance their local budgets. Instead, the government has created debt in an attempt to re-inflate real estate markets back toward Bubble Economy levels. The idea was for the economy to “borrow its way out of debt.”

    In practice, there was not much hope of success. The banks sent the $800 billion of Federal Reserve’s Quantitative Easing (QE2) in 2012 abroad, mainly to the BRICS economies in the form of interest rate and currency arbitrage. The banks’ idea was to earn their way out of their own negative equity, but not by lending to a real estate market whose prices continue to decline. This is forcing more properties into negative equity – and that leaves the banks themselves in a negative equity position. So there is little new lending for real estate, to consumers, or to business. Markets are being shrunk by debt deflation.

    States and cities also face a shrinking tax base, and many are subject to constitutional requirements for balanced budgets. The path of least resistance has been to underfund their pension plans – which have fallen far behind, especially inasmuch as most plans assume an 8% annual rate of return. This rate – assuming a savings doubling time of just nine years – has become even more fictitious today than it was a decade ago. So some localities have taken risks and lost – with their loss being the counterpart to earnings by the largest banks on derivatives.

    The bottom line here is that the U.S. economy is not in a position to “borrow its way out of debt.” The outlook thus is for a similar austerity to that of Europe.

    Financial fraud has been effectively decriminalized in the United States. In a nutshell, people have lost trust in the banks – and the financial sector itself mistrusts its fellow institutions. So the non-bank money market funding has dried up for business, and individuals are afraid to invest in the stock market.

    President Obama retains his progressive rhetoric, but actually is neoliberal. (His Senate mentor was Joe Lieberman who helped him go for the money and choose Rubinomics advisors.) Mitt Romney pretends to be a right-wing extremist, but seems reasonable on economic policy. However, he may feel under pressure to support right-wing Republican lobbyists in the Congressional leadership. Even if he does, there will not be much difference from the Obama administration. The U.S. situation thus is much like that of Britain under Labour party leadership in recent years: centrist or even left-wing rhetoric on social policies, but neoliberal financial policy favoring the banks.

    BOTTOM LINE: Neither the U.S. nor European economies can “grow their way out of debt.” Their debt deflation will worsen, and their budget deficits will widen"(snip)
    Last edited by Melonie; 07-15-2012 at 03:51 PM.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    Ahhhhhh..... The lefty Doom & Gloomers..... As for solutions..... I don't agree with too much of what Dr. Hudson suggests..... But I wouldn't mind putting him in charge for a bit.
    The country has been looted.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    ^^^ well, if nothing else, it's pretty clear that unserviceable debt problems are becoming REALLY PROBLEMATIC when the 'doom and gloom' is now coming from both the 'left' and the 'right' !!!

    Arguably, both 'poles' are now paying attention to the 'non-partisan' basic math of the situation ... that real income levels in the US and Europe have been insufficient to actually pay for the standard of living which Americans and Europeans have been accustomed to over the last 30 years ... that the 'shortfall' was temporarily made up for by individuals and governments taking on ever growing piles of debt ... but that the actual costs of debt service have now made assumption of additional debt a pragmatic impossibility.

    As such, and by whatever means, Anerican and European individuals and governments are going to be left with less money to spend on 'consumption' as more if their real 'income' must be spent on debt service. And, by whatever means, this will translate into declining standards of living ... something which Europeans and Americans alike will be loathe to accept. As James Kunstler aptly points out, Europeans and Americans are still 'deluding themselves' by clinging to the belief that some alternate outcome which will preserve their current standard of living is somehow still possible. Greeks will shortly prove that the wished for alternate outcome that will preserve their current standard of living is NOT going to be the case ... once the next tranche of EU bailout money is NOT made available to the Greek gov't ( due to their failure to implement spending reductions / austerity measures as promised ). This will mean that Greek oil, pharmaceutical and other imported goods suppliers, Greek gov't workers, Greek social welfare beneficiaries and retirees etc. will have to be 'paid' via IOU's ( or 'worthless' New Drachmas - essentially no better than an IOU ) in lieu of Euros !!! Putting this in SW context, how many Greek exotic dancers are going to be willing to continue to 'work' in exchange for IOU's which may never have any 'real value' ???

    Arguably, several other European countries are not far behind Greece along the same trajectory, with the USA not being all that far behind them on a similar trajectory !!! And some US states and cities are arguably already 'there' !
    Last edited by Melonie; 07-15-2012 at 04:31 PM.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    As for U.S. cities, we can add Scranton, Pa. to the lengthening list of U.S. cities that are effectively broke.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    ^^^ But unlike the 'sovereign' Greeks, the city of Scranton and many other cities do not need to 'beg terms' for a bailout from others who actually have money. First Harrisburg can effect a localized Scranton city bailout by saddling rural PA state residents, state businesses etc. with higher state taxes. Next the state of PA can 'borrow' money from the US federal gov't which will never be repaid, thus saddling taxpayers in less spendthrift states with higher taxes to cover the 'loss'.

    The US already has the 'fiscal union' which the bankrupt EuroZone countries are trying to force fellow EuroZone countries with money i.e. Germany, Finland etc. to join so that the debts of the bankrupt countries become the problem of every EuroZone country. And unlike the Germans or Finns, residents of fiscally responsible US states have no real 'say' about being forced to spend more of their hard earned money on additional federal taxes to bail out their spendthrift fellow states.

    However, in the meantime, it will be curious to see how many Scranton cops, firefighters etc. continue showing up for work in exchange for a $7.25 per hour minimum wage paycheck ( plus an implied city / state IOU that they will eventually be repaid - somehow - for the shortfall re their regular paycheck amount ). How many of those Scranton cops, firefighters etc. are going to keep showing up for work for a $7.25 an hour paycheck once their mortgages go into default, their cars are re-po'd, and their utilities start being shut off because their shrunken paycheck can't come close to covering their current costs of living ?

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    Quote Originally Posted by Melonie View Post
    ^^^ But unlike the 'sovereign' Greeks, the city of Scranton and many other cities do not need to 'beg terms' for a bailout from others who actually have money. First Harrisburg can effect a localized Scranton city bailout by saddling rural PA state residents, state businesses etc. with higher state taxes. Next the state of PA can 'borrow' money from the US federal gov't which will never be repaid, thus saddling taxpayers in less spendthrift states with higher taxes to cover the 'loss'.

    The US already has the 'fiscal union' which the bankrupt EuroZone countries are trying to force fellow EuroZone countries with money i.e. Germany, Finland etc. to join so that the debts of the bankrupt countries become the problem of every EuroZone country. And unlike the Germans or Finns, residents of fiscally responsible US states have no real 'say' about being forced to spend more of their hard earned money on additional federal taxes to bail out their spendthrift fellow states.

    However, in the meantime, it will be curious to see how many Scranton cops, firefighters etc. continue showing up for work in exchange for a $7.25 per hour minimum wage paycheck ( plus an implied city / state IOU that they will eventually be repaid - somehow - for the shortfall re their regular paycheck amount ). How many of those Scranton cops, firefighters etc. are going to keep showing up for work for a $7.25 an hour paycheck once their mortgages go into default, their cars are re-po'd, and their utilities start being shut off because their shrunken paycheck can't come close to covering their current costs of living ?
    True that.

    I think most, if not all , will continue to show up because they have no alternative. Who else is hiring ? Scranton is going through what Harrisburg is still undergoing. In a nutshell, the promises made exceed the ability to fulfill those promises. It seems strange to me sometimes that nobody seems able to remember the past. New York City and New York State went through this in 1975. California will have to go through some sort of jury rigged bankruptcy ( in everything but name ) sooner or later. L.A. is on the doorstep of municipal bankruptcy. Detroit and a dozen other cities in Michigan are effectively bankrupt. Illinois is still effectively bankrupt.

    This all was preceded by municipal bankruptcies during the Great Depression , preceded by a bunch during various "panics" going all the way back to the 1830's.

    In times gone by, the politicians in charge would just raise taxes. They've learned the hard way that at best, raising taxes just provides a short term solution as taxpayers pack up and move out and/or shelter income. And effectively, they just make the problem worse.
    Last edited by Eric Stoner; 07-17-2012 at 12:24 PM.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    In times gone by, the politicians in charge would just raise taxes. They've learned the hard way that at best, raising taxes just provides a short term solution as taxpayers pack up and move up and/or shelter income. And effectively, they just make the problem worse.
    You seem to be missing the point that 'this time things are different'. And literally speaking they are. In regard to bankrupt states attempting to raise state taxes, which in turn results in an exodus of 'productive' tax paying residents for other states with significantly lower state tax rates, that's only a negative if there ARE other states with lower tax rates. As is being sought in EuroLand, if 'bailouts' can be effected at the federal level, then bailing out California or Pennsylvania or Illinois becomes the financial responsibility of federal taxpayers in EVERY US STATE, and not just the responsibility of taxpayers residing in those states. If federal taxes are raised in order to finance 'selective' transfers of federal funds to states with 'distressed' state budgets, then the former incentive / differential between total tax liability for a high earning CA or PA or IL resident, versus total tax liability that person would owe if earning the same amount of money in TX or FL or WY, would be greatly reduced.

    The above is the one 'solution' that has yet to be openly attempted ... although there are many examples of similar 'stealth' federal funds transfers.


    I think most, if not all , will continue to show up because they have no alternative. Who else is hiring ? Scranton is going through what Harrisburg is still undergoing. In a nutshell, the promises made exceed the ability to fulfill those promises.
    followed by what ? A vote by the state legislature that 'minimum wage' state workers can no longer be evicted from their homes if they don't make mortgage / rent payments ? A vote by the state legislature that 'minimum wage' state workers can no longer have their vehicles re-po'd if they don't make their auto loan payments ? A vote by the state legislature that 'minimum wage' state workers can no longer have their utilities shut off if they don't pay their utility bills ?

    As Kunstler said ... 'it's too late for solutions'
    Last edited by Melonie; 07-17-2012 at 10:12 AM.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    I'm not missing anything afaik. One of the few things I give Obama credit for was telling California to go fuck itself when it came looking for a Federal hand-out. Even he recognized and understood that doing so would open a Pandora's Box of incredible proportions. One of the worst things Carter did was to assist NYC during its fiscal woes; the worst part of the 1980 Chrysler bail-out was that it worked !

    As for your "doomsday scenario" on the state level, I am sure some dummy has thought of that and proposed it. Someone had to step in and explain how the state legislature lacked authority to mess around with private contracts not to mention all the Due Process and Equal Protection implications.

    The states and cities undergoing these hard times are learning in a very painful way that EVERYTHING is finite. Especially the ability to spend and to raise taxes. At some point spending cannot be sustained. There is a limit to how much in taxes will be paid before people pack up and move to another state.

    Could Congress step in and rescue the spendthrifts ? Arguably, Yes. Will they ? Highly doubtful so long as North Dakota has the same number of Senators as California ; Texas the same as Illinois etc. Plus there are enough "adults" in the Senate to restrain such impulses. For instance Schumer's Wall St. handlers will never let him do it.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    Someone had to step in and explain how the state legislature lacked authority to mess around with private contracts not to mention all the Due Process and Equal Protection implications.
    Oh, you mean like the private contract, due process and equal protection rights that 'Old GM' bondholders were able to exercise in order to receive the 'prioritized' repayments they were legally entitled to during the GM bailout ? I assume that you remember ...

    The point that I am making, from the perspective of the 'third world' country that I'm currently living in, is that based on recent US executive, supreme court etc. actions I wouldn't 'bet the farm' on such inconvenient anachronisms as private contract rights, due process rights and/or equal protection rights these days. And this may be especially the case when 51% of registered voters stand to financially benefit if the private contract, due process and equal protection rights of the 'greedy rich' are ( supposedly ) the only ones being violated.
    Last edited by Melonie; 07-17-2012 at 02:00 PM.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    Quote Originally Posted by Melonie View Post
    You seem to be missing the point that 'this time things are different'. And literally speaking they are. In regard to bankrupt states attempting to raise state taxes, which in turn results in an exodus of 'productive' tax paying residents for other states with significantly lower state tax rates, that's only a negative if there ARE other states with lower tax rates. As is being sought in EuroLand, if 'bailouts' can be effected at the federal level, then bailing out California or Pennsylvania or Illinois becomes the financial responsibility of federal taxpayers in EVERY US STATE, and not just the responsibility of taxpayers residing in those states. If federal taxes are raised in order to finance 'selective' transfers of federal funds to states with 'distressed' state budgets, then the former incentive / differential between total tax liability for a high earning CA or PA or IL resident, versus total tax liability that person would owe if earning the same amount of money in TX or FL or WY, would be greatly reduced.
    You're making stuff up again. You're trying to portray liberal high-tax states, like California and Illinois, as being a burden on conservative low-tax states. The reality is that California and Illinois pay a lot more in federal taxes than they receive. Wyoming receives more money from the federal government than they pay in taxes.

    http://visualizingeconomics.com/2010.../#.UAZDc5HAETA


    Quote Originally Posted by Melonie View Post

    As Kunstler said ... 'it's too late for solutions'
    Just because some obscure, gloom and doom author said that, doesn't mean it's true.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    And you're 'cherry picking' particular data that bears little or no relationship to the point at hand ... which are 'transfers' of federal tax revenues derived from taxpayers in all US states to particular states having major budget deficit problems.

    To be more specific, the data at your link has, as a major component, federal spending for the operation of military bases located in specific states. While some portion of this federal spending does inject money into local economies, there is NO direct transfer from federal coffers to state coffers via military spending. On the other hand, tens of billions of dollars worth of federal 'emergency' unemployment benefit funding, billions worth of 'loans' from the federal treasury to specific bankrupt state unemployment funds, hundreds of billions worth of federal dollars for expanded state medicaid funding under Obamacare etc. are not included in the figures given at your link, but represent direct transfers of federal tax dollars to state treasuries.

    And, obviously, the higher a particular state's unemployment rate and social welfare benefit eligibility rate is, the higher the per-capita transfer of federal dollars is to that particular state !!! And de-facto effective federal tax rates are NOT uniform from state to state either, because residents of high tax rate states can deduct their high state income tax payments and high property tax payments from their federal tax liability ... meaning that a Texas taxpayer earning X dollars per year must pay a higher federal income tax bill than a California taxpayer earning the same X dollars. So yes, it's entirely accurate to say that certain states pose an additional 'burden' on federal taxpayers of other states.

    However, this line of discussion is really somewhat moot ... since the basic math of the situation says that imposing draconian tax rates on the 'rich' cannot come close to allowing state and federal spending to continue at current levels without creating massive additional deficits, with those deficits translating into a larger and larger share of tax revenues having to be used strictly for interest payments and principal repayments on previously acquired gov't debts. This is the basis of the author's observation that 'It's too late for solutions'.
    Last edited by Melonie; 07-18-2012 at 03:39 AM.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    Quote Originally Posted by Melonie View Post
    Oh, you mean like the private contract, due process and equal protection rights that 'Old GM' bondholders were able to exercise in order to receive the 'prioritized' repayments they were legally entitled to during the GM bailout ? I assume that you remember ... http://www.noquarterusa.net/blog/245...-get-the-pole/

    The point that I am making, from the perspective of the 'third world' country that I'm currently living in, is that based on recent US executive, supreme court etc. actions I wouldn't 'bet the farm' on such inconvenient anachronisms as private contract rights, due process rights and/or equal protection rights these days. And this may be especially the case when 51% of registered voters stand to financially benefit if the private contract, due process and equal protection rights of the 'greedy rich' are ( supposedly ) the only ones being violated.
    Um .... hmmmmm. Legitimate points and one of many reasons why I opposed the methodology of the recent GM bailout. Nothing of the sort was done with Chrysler back in 1980. Nor with NYC in 1975 for that matter. Their bonds got paid off in full. Fortunes were literally made by buying NYC and Chrysler debt for as little as 10 cents on the dollar.

    If you are right , and a state could just default on its debt and never pay it back, then it is all over afaic. Last one out the door please smash all the lamps because there won't be any point in turning them off.

    Fortunately, those evil, dirty , greedy "rich" people include many pension funds and other investment entities that lots of middle class folk are invested in. On the other hand one problem is that there is no bankruptcy mechanism for a state; there is no equivalent to Chapter 9. So nobody knows for sure what kind of mischief could be perpetrated in the name of fiscal salvation while bowing at the altar of "fairness".

    Technically, both you and Eagle are correct. He is right that states like California and New York ( and THEIR residents ) pay more in Federal taxes than they get back in Federal funds. You are right that net transfer payments to those same states paint a somewhat different picture.
    As you point out, this misses the essential points i.e. the fiscal condition of certain states having little to do with Federal policy and proposed "solutions" that try to avoid the painful choices that are necessary to manage the mess. Because that is what we are down to in many cases. Instead of real solutions, the best we can do is manage the mess.

    There was no federal mandate for California to provide the fat juicy pensions it does starting as early as age 45 ! Illinois made almost all of its own mess and ought to clean it up itself etc. etc.

    This is one consequence of the serious wounds inflicted on the whole concept of Federalism resulting from a liberal interpretation of the Constitution. Originally 13 different states got together and agreed to surrender a SMALL portion of their sovereignty in order to form " a more perfect union". The ultimate goals were deliberately few: " justice ; domestic tranquility ; common defense " and the excuse for so much mischief: " promote the general welfare". Wilson, FDR et. al came along and turned the whole thing on its head. But I am digressing. The point is one I have often tried to make ; what sense does it make to take tax dollars from N.Y. and Cali , send them to D.C. for a night on the town and then send a portion back to those states while distributing the rest to other states and Federal bondholders ? Btw , the "night on the town " includes the cost of the Feds collecting and managing said monies and to pay the salaries and benefits of all the Federal bureaucrats who know better than the folks in Florida or New York how their money ought to be spent . Wouldn't it be better to let the folks in Albany and Sacramento decide how and where to spend that money ? And if they get themselves into fiscal trouble or otherwise do not spend it wisely, leave it to the voters of those states to make the necessary changes. Why not let 50 state legislatures decide how much STATE money to spend on Medicaid ? I pick out Medicaid because that is the one Federally mandated program punching the biggest hole in too many state budgets. And states like N.Y. and California have gotten screwed for decades on the funding formula for same while relatively wealthy southern states like Virginia, North Carolina and Texas have NOT been paying their fair share. One reason is that the funding formula hasn't changed since 1965 !
    To digress just a bit further to make a larger point, one potential consequence of Obamacare is to make this situation even WORSE ! The states need MORE discretion in this and other health care spending, not less. Rather than try to referee all the interstate squabbling over who is paying what and whether or not it is "fair"; why not just leave it all to the states and let them work out their own problems ? Let the folks in Austin, Nashville and Richmond take care of their residents with their own money and let the folks in Springfield, Albany, Trenton and Boston
    do the same.
    Last edited by Eric Stoner; 07-23-2012 at 06:24 AM.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    Okay now, this thread is a little too gloomy even for my tastes. The American economy has shown itself to have almost an infinite capacity for reinventing itself. This is the beauty of a capitalist system relatively free of corruption, which allows innovators and risk takers to allocate capital to meet both domestic and foreign demands for goods and services. Existing industries evolve and new industries form. We have faced great challenges before and come through to prosperity and I believe that we will do so again.

    What does concern me, however, is the timing and relative strength of any future period of prosperity. Our current political class has heaped an unprecedented amount of burdens and uncertainties upon employers. With future healthcare expenses and tax bills likely to rise - unquanitifiably so for many businesses and their owners - it is small wonder that many small and midsize employers are hesitant to add more overhead. Given that small and midsize employers have accounted for the bulk of all new jobs in the U.S. in the last decade, this is a real problem and will be for some time to come.

    And, of course, the largest employers in the country face not only these added expenses, but the most anti-business regulatory regime seen in the modern era. There are a number of large corporations currently sitting on a lot of cash, but who can blame them for holding off on expansions, special projects, and other potential employment generating activities in this environment? The financial services industry (banks, insurers, asset management firms, stock market participants, financing companies) firms are currently facing a dizzying array of new regulations stemming from Dodd-Frank, large manufacturers are facing additional environmental and labor fights, the energy industry is practically begging to create new jobs and has largely been unable to do so - the list goes on.

    And, of course, my previous mention of banks did not even take into account the challenges currently inherent in running any type of home mortgage operation. Housing lenders are getting hit from both sides, with their primary banking regulators pressuring them to increase capital and raise lending standards while other state and federal agencies attempt to force them to continue to hold bad mortgages and/or to lend in equal proportion to certain demogrpahic groups, even if they are bad credit risks. Is it any wonder that banks are barely lending at all right now? Not only are they being prevented from locking in their current losses and cleaning up their balance sheets, but when they DO try to broaden their lending in a responsible manner, they get hammered for it. Until some sanity comes back into the process, home lending will continue to be limited, thereby continuing to depress the housing market.

    But this is not the first time that our economy has faced extraordinary challenges, including those created by political interference. Now I don't normally give politicans much credit for a good economy or even blame them for a bad one as they often have little real influence over these things, but I cannot help but believe that the current political class has done a lot to hinder this recovery. However, these things rarely last as the American people have historically shown little long-term tolerance for this type of behavior. It just may take an election cycle or two to remove the impediments to a more speedy recovery.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    Quote Originally Posted by rickdugan View Post
    Okay now, this thread is a little too gloomy even for my tastes. The American economy has shown itself to have almost an infinite capacity for reinventing itself. This is the beauty of a capitalist system relatively free of corruption, which allows innovators and risk takers to allocate capital to meet both domestic and foreign demands for goods and services. Existing industries evolve and new industries form. We have faced great challenges before and come through to prosperity and I believe that we will do so again.

    What does concern me, however, is the timing and relative strength of any future period of prosperity. Our current political class has heaped an unprecedented amount of burdens and uncertainties upon employers.
    No they haven't. Employers have heaped an unprecedented amount of burdens and uncertainties on the American people. Americans are worried about losing their jobs as a result of cost-cutting, or having their job moved overseas to China or some other third-world country. As a result, Americans aren't spending money, and overall demand in the economy is down.

    There have always been uncertainties in the economy, and there always will be. Nobody can predict the future with great certainty. "Uncertainty" hasn't stopped employers from hiring before.

    What is keeping employers from hiring is basic economics. Demand is down. When demand for goods and services is down, employers are not going to increase hiring. In industries where demand has increased, so has hiring. Demand for autos has increased, and so has hiring by American auto-manufacturers. Demand for oil (world-wide) and natural gas has increased, and so has hiring in these industries. "Uncertainty" has not prevented employers in these industries from hiring more workers. Demand for housing has fallen, so employment in housing construction has fallen as well. It has nothing to do with "uncertainty".

    Quote Originally Posted by rickdugan View Post
    With future healthcare expenses and tax bills likely to rise - unquanitifiably so for many businesses and their owners - it is small wonder that many small and midsize employers are hesitant to add more overhead. Given that small and midsize employers have accounted for the bulk of all new jobs in the U.S. in the last decade, this is a real problem and will be for some time to come.
    Again, many small and midsize employers are hesitant to add more overhead because overall demand is down. For businesses where demand for their product has been increasing, I'm sure they don't have a problem adding more overhead. As I said earlier, the auto industry and the oil and gas industries have been increasing hiring. Tax bills for employers increased significantly in the 1990's, but that did not stop them from greatly increasing hiring. Tax bills for employers have decreased significantly over the past 12 years. Where is all the job creation that was supposed to come from tax cuts?


    Quote Originally Posted by rickdugan View Post
    And, of course, the largest employers in the country face not only these added expenses, but the most anti-business regulatory regime seen in the modern era. There are a number of large corporations currently sitting on a lot of cash, but who can blame them for holding off on expansions, special projects, and other potential employment generating activities in this environment? The financial services industry (banks, insurers, asset management firms, stock market participants, financing companies) firms are currently facing a dizzying array of new regulations stemming from Dodd-Frank, large manufacturers are facing additional environmental and labor fights, the energy industry is practically begging to create new jobs and has largely been unable to do so - the list goes on.
    That's nonsense that this is the "most anti-business regulatory regime seen in the modern era". Corporations are having record profits. How are they able to do this if the current "regime" is placing all of these costly anti-business regulations on them? How have our oil and natural gas producers been able to greatly increase their output if they're burdened by all of these "anti-business" regulations? We didn't have Dodd-Frank in 2008. How well did things work out for the financial industry back then, without it?

    Quote Originally Posted by rickdugan View Post
    Now I don't normally give politicans much credit for a good economy or even blame them for a bad one as they often have little real influence over these things, but I cannot help but believe that the current political class has done a lot to hinder this recovery.
    Look how well the tax cuts and deregulation that you advocate worked during the previous administration.
    Last edited by eagle2; 07-22-2012 at 10:36 PM.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    Tax bills for employers have decreased significantly over the past 12 years.
    One must qualify that statement ... tax bills for CERTAIN gov't favored employers, like GE and GM and Apple and Google and First Solar and Pacific Ethanol and JP Morgan have gone down. However, US companies not receiving such gov't favored tax status pay the second highest corporate tax rates in the world.


    Corporations are having record profits. How are they able to do this if the current "regime" is placing all of these costly anti-business regulations on them?
    for the most part, via overseas sales and overseas production, which is NOT subject to US environmental / worker safety / clean energy etc. compliance costs !!!


    Demand is down. When demand for goods and services is down, employers are not going to increase hiring
    Technically speaking, US demand for most goods and services hasn't declined at all. What HAS declined is the willingness by lenders to continue to provide loans to satisfy many Americans demand for goods and services they still want ... but were never actually able to afford to buy. As the author points out, there is no 'solution' for this situation ...
    Last edited by Melonie; 07-23-2012 at 10:52 AM.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    Quote Originally Posted by eagle2 View Post
    No they haven't. Employers have heaped an unprecedented amount of burdens and uncertainties on the American people. Americans are worried about losing their jobs as a result of cost-cutting, or having their job moved overseas to China or some other third-world country. As a result, Americans aren't spending money, and overall demand in the economy is down.

    There have always been uncertainties in the economy, and there always will be. Nobody can predict the future with great certainty. "Uncertainty" hasn't stopped employers from hiring before.

    What is keeping employers from hiring is basic economics. Demand is down. When demand for goods and services is down, employers are not going to increase hiring. In industries where demand has increased, so has hiring. Demand for autos has increased, and so has hiring by American auto-manufacturers. Demand for oil (world-wide) and natural gas has increased, and so has hiring in these industries. "Uncertainty" has not prevented employers in these industries from hiring more workers. Demand for housing has fallen, so employment in housing construction has fallen as well. It has nothing to do with "uncertainty".



    Again, many small and midsize employers are hesitant to add more overhead because overall demand is down. For businesses where demand for their product has been increasing, I'm sure they don't have a problem adding more overhead. As I said earlier, the auto industry and the oil and gas industries have been increasing hiring. Tax bills for employers increased significantly in the 1990's, but that did not stop them from greatly increasing hiring. Tax bills for employers have decreased significantly over the past 12 years. Where is all the job creation that was supposed to come from tax cuts?



    That's nonsense that this is the "most anti-business regulatory regime seen in the modern era". Corporations are having record profits. How are they able to do this if the current "regime" is placing all of these costly anti-business regulations on them? How have our oil and natural gas producers been able to greatly increase their output if they're burdened by all of these "anti-business" regulations? We didn't have Dodd-Frank in 2008. How well did things work out for the financial industry back then, without it?



    Look how well the tax cuts and deregulation that you advocate worked during the previous administration.
    "Employers" are not responsible for enforcing trade agreements with China. Nor do they control Chinese monetary policy. Although many have benefitted from Chinese undervaluation of the yuan as much as Chinese companies. That is ONE reason why we are so reluctant to punish China. Our companies benefit too from the weak Chinese currency.

    You are confusing two kinds of "uncertainty". Nobody knows what will happen to the overall economy over the next five years or so. But employers can calculate the costs of hiring new workers and decide whether they can afford to do so now. What they aren't able to tell is what those new workers will cost two to five years down the line.

    Your "demand side" prescriptions haven't worked either.
    Last edited by Eric Stoner; 07-24-2012 at 07:33 AM.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    Quote Originally Posted by Melonie View Post
    One must qualify that statement ... tax bills for CERTAIN gov't favored employers, like GE and GM and Apple and Google and First Solar and Pacific Ethanol and JP Morgan have gone down. However, US companies not receiving such gov't favored tax status pay the second highest corporate tax rates in the world.
    No they don't. The rate that U.S. corporations actually pay, is one of the lowest in the world. In addition, personal income taxes, payroll taxes, and taxes on capital gains and dividends have all been lowered over the past 12 years.



    Quote Originally Posted by Melonie View Post
    for the most part, via overseas sales and overseas production, which is NOT subject to US environmental / worker safety / clean energy etc. compliance costs !!!
    You're making stuff up again. U.S. corporations had record profits in 2010
    http://www.nytimes.com/2010/11/24/bu...econ.html?_r=1

    While at the same time, foreign sales by U.S. companies declined
    http://www.prnewswire.com/news-relea...125804878.html

    and U.S. manufacturing has been expanding
    http://seekingalpha.com/article/6026...s-for-15-years

    How are U.S. manufacturers able to increase output with all of these "burdensome regulations"?

    How has the U.S. been able to increase oil and natural gas production with all of these "burdensome regulations"?


    Quote Originally Posted by Melonie View Post
    Technically speaking, US demand for most goods and services hasn't declined at all. What HAS declined is the willingness by lenders to continue to provide loans to satisfy many Americans demand for goods and services they still want ... but were never actually able to afford to buy. As the author points out, there is no 'solution' for this situation ...
    Now you're making up your own definition of "demand".

    http://en.wikipedia.org/wiki/Demand_%28economics%29
    -snip-
    In economics, demand is the desire to own anything, the ability to pay for it, and the willingness to pay during a specific period
    -snip-

    The reason demand has fallen is because consumers are saving more and spending less.
    http://www.bloomberg.com/news/2012-0...-correct-.html

    Again, just because some obscure author says there is no 'solution' for this situation, doesn't mean it's true.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    Quote Originally Posted by Eric Stoner View Post
    "Employers" are not responsible for enforcing trade agreements with China. Nor do they control Chinese monetary policy. Although many have benefitted from Chinese undervaluation of the yuan as much as Chinese companies. That is ONE reason why we are so reluctant to punish China. Our companies benefit too from the weak chinese currency.
    Employers are still responsible for deciding where they are going to locate their facilities. As an article in my previous post stated, in 3rd qtr. 2010, U.S. corporations' earnings were at the annual rate of $1.6 trillion. With annual earnings of $1.6 trillion, there are many corporations that could easily afford to be able to manufacture products in the U.S., rather than overseas.

    Quote Originally Posted by Eric Stoner View Post
    You are confusing two kinds of "uncertainty". Nobody knows what will happen to the overall economy over the next five years or so. But employers can calculate the costs of hiring new workers and decide whether they can afford to do so now. What they aren't able to tell is what those new workers will cost two to five years down the line.
    If employers hire more employees now, and their cost becomes too expensive in two to five years from now, employers can lay them off just as easily as they can hire them. The main reason hiring is down is because demand is down.

    Quote Originally Posted by Eric Stoner View Post
    Your "demand side" prescriptions haven't worked either.
    It has. When the stimulus was first started, the U.S. economy was losing 700,000 jobs a month. By the time it ended, the economy was adding 100-200,000 jobs a month. What hasn't worked is austerity. For the past year and a half, overall government spending, at the local, state, and federal level has been going down, and government workers are being laid off. When Reagan was President, government spending increased every year, and the hiring of government workers increased every year, and the economy grew and unemployment went down.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    ^^^ For a fact, US employer taxes and employee costs haven't been reduced at all - well, outside the sphere of gov't favored companies anyhow. Federal employer SSI taxes have not been reduced. State and local taxes on businesses have risen. Gov't unemployment insurance premiums and disability insurance premiums have risen. Additionally, US employers will soon face new Obamacare related taxes ... some aspects of which may significantly increase the cost of 'firing' an employee. And while they may not be technically considered as taxes, US corporation environmental compliance costs, worker safety compliance costs, etc. have been rising as well.

    Yes US corporations do decide where to locate their production facilities. However, it is the duty of corporate officers to optimize shareholder 'value', not to 'pay their fair share' of US corporate taxes. Ask yourself how 'breaking even' by manufacturing in a US state, versus generating major profits by manufacturing in a 'third world' country, aligns with the above.

    Also, in regard to the definition of 'demand', it is Fannie Mae, Freddy Mac, HUD, Ally Bank, GM Financial, and the US congress via the IRS who have effectively redefined 'demand' ... via US TARP money and US taxpayer guarantees facilitating new loans involving near zero down payments and ludicrous debt to income ratios which are unlikely to ever be paid back ( by the borrower / consumer ) !!!

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    Quote Originally Posted by Melonie View Post
    ^^^ For a fact, US employer taxes and employee costs haven't been reduced at all - well, outside the sphere of gov't favored companies anyhow. Federal employer SSI taxes have not been reduced. State and local taxes on businesses have risen. Gov't unemployment insurance premiums and disability insurance premiums have risen. Additionally, US employers will soon face new Obamacare related taxes ... some aspects of which may significantly increase the cost of 'firing' an employee. And while they may not be technically considered as taxes, US corporation environmental compliance costs, worker safety compliance costs, etc. have been rising as well.

    Yes US corporations do decide where to locate their production facilities. However, it is the duty of corporate officers to optimize shareholder 'value', not to 'pay their fair share' of US corporate taxes. Ask yourself how 'breaking even' by manufacturing in a US state, versus generating major profits by manufacturing in a 'third world' country, aligns with the above.

    Also, in regard to the definition of 'demand', it is Fannie Mae, Freddy Mac, HUD, Ally Bank, GM Financial, and the US congress via the IRS who have effectively redefined 'demand' ... via US TARP money and US taxpayer guarantees facilitating new loans involving near zero down payments and ludicrous debt to income ratios which are unlikely to ever be paid back ( by the borrower / consumer ) !!!
    Correct. As I indicated in another thread, Obama is sowing the seeds for another housing boom and bust :

    1. The notorious Interagency Taxk Force on Fair Lending is alive and well and their 1994 prescriptions are being implemented AGAIN by Obama's Consumer Financial Protection Bureau, HUD and the Justice Department. Banks are again being warned that "the agencies will not tolerate lending discrimination in any form."

    2. The problem is that this has been read by EVERYBODY involved to REQUIRE different lending standards and offering dfifferent levels of assistance to minority borrowers. This is exactly the policy that led to so much mischief in the late 1990's up to about 2006. The CFPB has endorsed the old mischief making lending standards.

    3. It gets better. The CFPB has declared ( without any supporting evidence ) that only 60 % of credit profiles from credit reporting bureaus are accurate. In fact, the Policy and Economic Research Council found that 99.5% were free from material errors. Neither did the Federal Reserve in a 2007 sampling of 300,000 credit reports. In fact , the Federal Reserve found that minority applicants were getting higher credit scores than justified by their actual credit history. Nonetheless, Richard Cordray , head of the CFPB has commissioned the Center For Responsible Lending to re-write the rules for collecting and analyzing credit data.

    4. The Justice Department has revived Janet Reno's policy of pressuring banks to make bad loans. Rather than fight it out in court and risk being branded racist, large banks like Wells Fargo and BOA are just settling. The lead Justice Department official in charge of enforcement, Thomas Perez, has compared bankers to Klansmen and said their lending practices are just as bad as cross burning.Settling banks have agreed to lend at less than market rates , disregard creditworthiness and open bank branches regardless of their economic feasibility or viability.

    5. Not content to just permit loans to those receiving public assistance, Justice is now requiring it from settling banks. Banks are also being required to lend money in areas where they are not even located. Attorney General Holder is going beyond the Clinton policy and is ramping up the pressure on banks to lend more money to minorities. Any use of sub-prime surcharges or other ways to minimize the risks of lending to sub-prime borrowers are being labeled as racist and constitute grounds for prosecution under Holder.

    6. Ironically, Holders main targets like Wells Fargo scored well on Community Reinvestment Act examinations i.e. their minority lending got "outstanding" grades.

    7. Here's where it really gets scary. Holder et. al. are NOT stopping with home loans. The same degradation of lending standards is being imposed on business loans to minorities. Banks are simply being told to lend money regardless of whether the borrower can pay it back.

    8. Already, the default rate among African Americans over age 50 is twice that of whites in the same age group. They USED to constitute the best demographic for lending among minorities.

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    ^^^ all true, but just one aspect of the author's overall point.

    Also, again by 'sheer coincidence', ABC news just came out with this analysis of the offshore 'profits' accounting / tax 'games' being utilized by US corporations ... in this case Apple



    (snip)"On Tuesday, Apple is set to report financial results for the second quarter. Analysts are expecting net income of $9.8 billion. But whatever figure Apple reports won't reflect its true profit, because the company hides some of it with an unusual tax maneuver.

    Apple Inc., already the world's most valuable company, understates its profits compared with other multinationals. It's building up an overlooked asset in the form of billions of dollars, tucked away for tax bills it may never pay.

    Tax experts say the company could easily eliminate these phantom tax obligations. That would boost Apple's profits for the past three years by as much $10.5 billion, according to calculations by The Associated Press.

    While investors might rejoice if Apple suddenly added $10.5 billion to its profits, unilaterally erasing a massive U.S. tax obligation could tarnish its reputation as a relatively responsible payer of U.S. taxes. Instead, the company is lobbying to change U.S. law so that it can erase its liabilities in a less conspicuous fashion. The issue has become part of the presidential campaign.

    Like other companies, Apple typically keeps profits on overseas sales in overseas accounts. When someone buys an iPad in Paris or Sydney, for instance, the profit stays outside the United States.

    On Tuesday, July 24, 2012, Apple is set to report financial results for the second quarter. Analysts are expecting net income of $9.8 billion. (AP Photo/Ed Ou, file) CloseApple may pay some corporate income taxes on that profit to the country where it sells the iPad, but it minimizes these by using various accounting moves to shift profits to countries with low tax rates. For example the strategy known as "Double Irish With a Dutch Sandwich," routes profits through Irish and Dutch subsidiaries and then to the Caribbean.

    When it comes to using creative tax techniques, Apple is no different from other multinational corporations, says Robert Willens, an independent accounting expert.

    And just like other corporations, Apple leaves cash overseas. If it brought it home to the U.S., it would have to pay federal income taxes on the money (though it would get a credit for foreign taxes already paid). In Apple's case, those overseas accounts have grown to a staggering $74 billion — equal to the market value of Citigroup Inc.

    The money is accumulating overseas because corporations are counting on lower U.S. tax rates in the future. At 35 percent, the U.S. corporate tax rate is among the highest for developed countries. In 2004, Congress enacted a one-year "tax holiday" for overseas earnings, and multinationals are hoping for a repeat of that. Presidential candidate Mitt Romney wants to permanently eliminate federal taxes on overseas profits. President Barack Obama attacked that idea last week, saying it won't create U.S. jobs, like the Romney campaign contends.

    Where Apple does differ from other companies is that it sets aside a portion of these overseas profits, marking them as subject to U.S. taxes sometime in the future. Essentially, it's saying "this is money that we'll likely have to pay U.S. federal income taxes on" because we intend to repatriate it, says Willens.

    But because Apple doesn't actually bring the profits into U.S. accounts, it doesn't pay the taxes. Instead, it records a tax liability. When Apple reports quarterly results, it subtracts these liabilities from its profits, even though it hasn't actually paid the taxes."(snip)

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    Default Re: James Howard Kuntsler - 'It's Too Late For Solutions'

    ^^^ All the more reason for genuine tax reform. Lower the rates, broaden the base and close the loopholes. Everyone who has seriously looked at the situation agrees that this is exactlyn what needs to be done. Except for a few assholes like Krugman and zealots like Norquist.

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