Truth: Stranger than Fiction?

Here's a quick test: Only 1 of the following headlines is from the Onion - the other 2 are from NPR. Can you spot the spoof? 1. Prayer may re-shape your Brain 2. Israeli Prime Minister debuts new roadmap for continued strife 3. Sex offenders forced to live under Miami bridge Score two for reality.

Taxes

In the spirit of the day, I will engage in some subject-matter rhetorical musing... There has been a lot of talk recently about taxes - specifically, how our Democratic leadership will over-tax us. I decided that a short look at the tax situation would be in order. Everyone has heard the mewling that the top 20% pays 70% of the taxes, usually something like this: Picture an upside-down pyramid with its narrow tip at the bottom and its base on top. The only way the pyramid can stand is by spinning fast enough or by having a wide enough tip so it won't fall down. The federal version of this spinning top is the tax code; the government collects its money almost entirely from the people at the narrow tip and then gives it to the people at the wider side. So long as the pyramid spins, the system can work. If it slows down enough, it falls...A very small number of taxpayers -- the 10% of the country that makes more than $92,400 a year -- pay 72.4% of the nation's income taxes. They're the tip of the triangle that's supporting virtually everyone and everything. Their burden keeps getting heavier. BTW- just so we are all clear, the author of that article - Ari Fleischer - was George W. Bush's press secretary. hmmm... So, let's take a look at this - and listen to the stuff that Ari seems to forget: Income taxes do tilt upward. But they're the progressive bit of the federal tax wedge. Other federal taxes, like the payroll tax and the excise tax, are not progressive. (And we're not even going to get into state income, which are frequently regressive) That's why CBO calculates something called the "effective federal tax rate." The EFTR is simply a households’ federal tax liability divided by its income. The four taxes that are included in the measure are the income, payroll, excise, and corporate taxes. And they give us a pretty good idea of whether the rich really are overpaying. The following graph matches each income quintile's effective federal tax rate with its percentage of the national income. See if you think the rich are getting a bad deal... When you look at percentage of total tax liabilities, the rich do in fact bear a heavier burden. But it's because they have so much more money. They are not bearing a heavier burden as a percentage of their incomes. They're bearing it in relation to everyone else's incomes. Indeed, it's only because the sheer levels of income inequality in this country are frankly unintuitive that Fleischer can even write this sort of dreck. People hear that the top 20 percent pay almost 70 percent of the country's income taxes and nod their head. That's unfair! But it mainly seems unfair because people don't know the top 20 percent accounts for almost 60 percent of the national income. Wow, seems pretty obvious... Is it? Something worth noting, I think is the source of the dis-continuity that seems to exist in the upper 20%. How could they be so much higher? For a definition of these quintiles, we turn to the census bureau: Notice that the floor for the top 20% is around $88k. However, the floor for the top 5% is over $157k, which means that 80% of the top quintile makes between $88k and $157k. Taxing this group the same was as the top 5% seems a bit punitive. Therefore, as has been suggested many times before, an additional partition for the top 5% of earners seems appropriate. This is further augmented by a review of historical income growth, where the top 5% seem to have a distinct advantage again. So, the real question becomes, should taxation be income-based or wealth-based? In order to explain the question, consider the reality of marginal utility: 10% of a million dollars in income - $100K - is worth less to the person with that income than 10% of $10K - just $1K - is worth to the person with that income (in terms of living necessities, etc). This is to say that, given a certain minimum income necessary for survival (call it "minimum wage", although this is a completely separate and equally volatile topic), the wealth above that minimum is (should be?) taxed separately from the wealth below that line. I think that most people would consider this "fair", because income above the survival threshold is essentially disposable - used for bigger houses, cars, TV's and all other manner of self-indulgence. So, is it necessary for taxation to be "fair"? Most would say it is, but many others are un-concerned with "fairness". They focus on poverty and living conditions, or on economic growth and prosperity. Who is to say which is right? Personally, I feel that the perception of "fairness" is an important part of the American psyche. This is easily demonstrated with the following experiment: 2 people are randomly selected from a group. The leader hands the first $10 in $1 bills. He is told that he can give anywhere between $0 and $10 to the second person, and then he can keep the rest. The catch? If the second person rejects the offering, the $10 is taken back by the leader. Question: How much should the first person give the second? If you said $5, you have helped to prove the "fairness" requirement. Most people give this answer. In fact, if the second person is offered a smaller amount, say $1, he will often reject the offer. Although he is losing out on $1, he has punished the first person $9 for being "unfair". He has essentially paid to punish this lack of fairness. By contrast, if 2 computers play this game, the first computer always offers $1 and the second computer always accepts, because the second computer is better off with $1 than with $0, even if the first computer ends up with $9. In a similar way, the tax code is (should be?) structured to promote this sense of fairness. not surprisingly, fairness is defined differently depending on which end of the scale one sits. The top 5% consider a flat percentage to be "fair", even though the inequity in disposable income is immense. Conversely, the bottom quintile favor progressive taxation, even though it means that the top 5% will pay a dis-proportionate percentage. So, who is right?

Credit Crisis Explained

If you still don't get it (and most don't), this guy will explain. Well.... The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Where it all Went Wrong

Over the last few months, I have been reviewing my thoughts on capitalsim and its effects. For those that have read, I have talked before about the dis-association between the growth in the economy and an individual's well-being, the desire and ability to turn different working groups against each other, whether we are really better off now than before, crazy (suspicious) real eatate price growth, and a few other topics I can't seem to recall at the moment. This all leads to a discussion of the failings of the current "capitalist" system. However, yesterday I found this interview with - who else - Noam Chomsky. He had some very interesting things to say on the subject: Keynes regarded speculation as destructive. His basic insight is well described by Indian economist Prabhat Patnaik, at the UN conference of October 30 on the global financial crisis. Patnaik explains that Keynes "had located the fundamental defect of the free market system in its incapacity to distinguish between `speculation' and `enterprise.' Hence, it had a tendency to be dominated by speculators, interested not in the long-term yield on assets but only in the short-term appreciation in asset values. Their whims and caprices, causing sharp swings in asset prices, determined the magnitude of productive investment and, therefore, the level of aggregate demand, employment and output in the economy. The real lives of millions of people were determined by the whims of 'a bunch of speculators' under the free market system." The replacement of governmental "demand management" by "bubble booms" created by speculators is a prime cause of the current financial crisis, Patnaik argues plausibly, supporting Keynes's analysis. The difference between "speculation" and "enterprise"..... hmmm.

"Originalism" Applied

Most folks know about the oft-publicized faux paus during Obama's recitation of the Oath of Office. Now, although a normal human being may find this only marginally comical, some so-called "Originalists" must be petitioning the Supreme Court at this very moment, attempting to invalidate the 44th president. As absurd as this may sound, it's not entirely made up. In order to elucidate the point, I direct your attention to this parody. It contains the "logic". I will re-post it in its entirety for 2 reasons; 1) because it made me giggle truthfully several times, and 2) since I have complete editorial control of this site, I have given myself permission... I know what you are saying: Didn't Barack Obama and John Roberts repeat the oath of office before the cameras on Wednesday?They did. But it makes absolutely no difference. Barack Obama is still not President and may not execute the powers of that office.To begin with, it is completely clear that Obama did not recite the oath prescribed in the Constitution at his inauguration on Tuesday. Article II, section 7 provides: 7. Before he enter on the execution of his office, he shall take the following oath or affirmation:"I do solemnly swear (or affirm) that I will faithfully execute the office of the President of the United States, and will to the best of my ability, preserve, protect and defend the Constitution of the United States." At Roberts' suggestion, Obama placed the word "faithfully" after the word "States." This should make no difference, you may say. But no, the text of the oath is prescribed in the Constitution and it may not be varied in any way in order to be legally effective. Anyone who says differently does not understand what it means to have a written constitution. Do you mean to suggest, for example, that Obama could add the words "hey nonny nonny and a hot cha cha" in the middle of the oath and it would be equally effective? Can he add the words "only if I feel like it" at the end of the oath? Surely you jest! And if your position is that he can make any changes he wants as long as they do not materially alter the oath, who is to decide whether the changes are material or not? That is why we have a written constitution, a Constitution that makes clear that he shall say just these words, and no others. Obama's attempt at a re-do makes no difference. The well-known doctrine of the Unitary Executive suggests that the President-elect gets one shot at taking the oath correctly. If he flubs it, that's it! He can't execute the powers of his office. After all, Unitary means "one." Clearly if the President could take the oath repeatedly, he wouldn't be very Unitary, now would he? Suppose, however, that one rejects this utterly compelling argument based on the sacred and indisputable doctrine of the Unitary Executive. Obama's do-over still fails. That is because Obama callously deleted words from the oath and added words that are not in the Constitutional text. Surely if he may not move the word "faithfully" around in the text he may also not add or delete words either. In this case, Obama added the words "Barack Hussein Obama" after the word "I" and "So help me God" at the end of the oath. Furthermore, he deleted the words "(or affirm)." The mind boggles at this display of utter lawlessness. How could Obama and Chief Justice Roberts engage in such blatant editing of the sacred constitutional text? Can't they just read the words of the Constitution without editorializing? It is precisely this hubris on the part of judges and politicians that leads to the dreaded disease of "living constitutionalism," in which government officials add words to the constitutional text that aren't there and delete words that they find inconvenient. It is simply outrageous that both Roberts and Obama feel that they must flaunt their living constitutionalism before our very eyes in their faux Presidential oath of office! But you may object, no president since George Washington himself has read the constitutional text verbatim since the founding of the Republic. They have all inserted their names into the text in a raw display of egotism, and then added the words "So help me God." In addition, all the Presidents have deleted the words "or affirm" with two exceptions, when a President-elect deleted the words "swear" and "or." If the addition and deletion of words in the oath makes the oath ineffective, you may argue, no President has ever legitimately executed his office. To which I say, so what? Are we a government of laws or a government of men? Do we have a written constitution that is the supreme law of the land or do we simply have a set of suggestions that can be cavalierly discarded whenever they would offend the sensibilities of a President-elect? The Constitution's text is clear. It is up to us to follow it with blind and mindless obedience. If a President-elect cannot read a simple text faithfully without editorializing, he doesn't deserve to be the President. And if no President has been able to resist thinking he knows better, then none of them have lawfully acted as our nation's Chief Executive. But, you may object, didn't Barack Obama became President anyway on noon of Inauguration day, because of the 20th amendment? Of course not. The text of the 20th amendment is perfectly clear on this point: 1. The terms of the President and the Vice-President shall end at noon on the 20th day of January, and the terms of Senators and Representatives at noon on the 3rd day of January, of the years in which such terms would have ended if this article had not been ratified; and the terms of their successors shall then begin. It is obvious to any schoolchild that the phrase "the terms of their successors" refers to the terms of Senators and Representatives, and not to the terms of the President and Vice-President. That is because an all important comma separates the two clauses. Moreover, the Twentieth Amendment did not explicitly repeal the Oath Clause of Article III, and it is clear from this clause that the President cannot begin to execute the powers of his office until he takes the oath. I am sure that many people wish that the President could edit the oath of office however he likes, for example, adding his own name and the words "so help me God." But these people do not understand what it means to have a government founded on a written constitution. Perhaps the failure of Barack Obama to become President, and the crisis that ensues, will serve as a lesson to them to hew more closely to the genius of our founding fathers. Lol... Can't people understand the clear meaning of the Constitution?? Must it always be explained?? This parody includes many topics that I have mentioned before, such as the legal significance of comma placement and the status of originalism with respect to US law. The interesting thing is to read the response from a self-described "originalist" - and usually a moderately decent guy - Michael Stokes Paulsen. His response is here: Touche! I greatly enjoyed Jack Balkin's skewering of strict textualism and formalism ("Why Barack Obama Still Isn't President"), even though I am an apostle of these methods. Alas, I was hoping Jack was serious. But sadly (for the house conservative), I must concede that Barack Obama lawfully holds, and properly could "enter on the execution of" the Office of President of the United States. Reeling, knocked to the ground by Jack's devestating demolition of originalist textualism, struggling to pick myself up, and depressed generally, I am driven by desperation to suggest some saving constructions for originalist methodology. Is it possible, for example, for a departure from the Constitution to be a real, actual departure from the Constitution (understood according to its original public linguistic meaning) but yet be of no constitutional consequence? Is there a (legitimate) doctrine of "harmless constitutional error"?... Perhaps, for additions, rather than deletions, a better term would be extra-constitutional, so long as what is added does not subtract or detract from what remains. George Washington's traditional addition "so help me God" does not so much "violate" the Oath Clause (we will save for another day whether it violates the Establishment Clause) as add something of his own -- a little presidential speech, as it were, no different in principle from the giving of an Inaugural Address (which also goes beyond the Constitution's requirements). So too, "hey nonny nonny and a hot cha cha" adds something -- akin to Inaugural balls and parties. If it subtracts anything, it subtracts dignity and gravitas. It does not subtract from the oath. The accidental rearrangement of "faithfully" strikes me as a deviation from the Constitution that does not subtract or detract from the oath. But for the sake of argument let's call the deviation "unconstitutional." What is the legal effect of this constitutional violation? Can a violation of the Constitution ever be "harmless," in the sense that it does not matter to anything? I, too, along with a fearful nation, was greatly relieved that the oath was, later, faithfully executed. But even a pig-headed formalist (like me) thinks that some "violations" of the Constitution simply are not material. They do not affect constitutional powers or privileges in any way. Apparently, the purported death of Republican humor has been (only) slightly exaggerated. Paulson absorbs the hit almost with comedic grace. Then, however, he sets off explaining how the parody is almost accurate... the "originalist" then starts discussing something truly spooky - how violating the Constitution may be "not material"?? Holy crap, we argue more or less forever about the legal significance of particular words and punctuation, and then we decide that the resulting interpretation is immaterial? Sounds awfully progressive to me...

The Biggest Story That's Not on TV

In the midst of typical foolishness in American politics - the selling and/or nepotizing of senate seats and fears of economic meltdown - there is a monumental story that has barely seen the light of day. Consider this post my flashlight. On December 11, a bi-partisan congressional committee released this report regarding the use of torture and the complicity of the President and other seinor staffers. In order for this to sink in, we must return to 2004, and the graphic and disturbing images from Abu Ghraib: If you don't remember, this is Lynndie England, an American soldier who has borne the brunt - not to mention a huge prison sentence - of being one of a "few bad apples". However, the new report - written by 13 Democrats and 12 Republicans without a single dessent - says: The abuse of detainees at Abu Ghraib in late 2003 was not simply the result of a few soldiers acting on their own. Interrogation techniques such as stripping detainees of their clothes, placing them in stress positions, and using military working dogs to intimidate them appeared in Iraq only after they had been approved for use in Afghanistan and at [Guantanamo]. Secretary of Defense Donald Rumsfeld's December 2, 2002 authorization of aggressive interrogation techniques and subsequent interrogation policies and plans approved by senior military and civilian officials conveyed the message that physical pressures and degradation were appropriate treatment for detainees in U.S. military custody. What followed was an erosion in standards dictating that detainees be treated humanely. Also, Remember comments made by the President? Bush, on May 24, 2004, described what happened at Abu Ghraib as "disgraceful conduct by a few American troops who dishonored our country and disregarded our values." On June 1, 2004, he told a reporter: "Obviously, it was a shameful moment when we saw on our TV screens that soldiers took it upon themselves to humiliate Iraqi prisoners -- because it doesn't reflect the nature of the American people, or the nature of the men and women in our uniform. And what the world will see is that we will handle this matter in a very transparent way, that there will be rule of law -- which is an important part of any democracy. And there will be transparency, which is a second important part of a democracy. And people who have done wrong will be held to account for the world to see. "That will stand -- this process will stand in stark contrast to what would happen under a tyrant. You would never know about the abuses in the first place. And if you did know about the abuses, you certainly wouldn't see any process to correct them." LIAR! Just look at the self-righteous indignation of the Republican shills. First, Glenn Reynolds: Of course, it's not the same as Saddam's torture -- which was a matter of top-down policy, not the result of a**holes who deserve jail or execution, and will probably get one or both. As with other reported misbehavior, it should be dealt with very, very harshly. But those who would -- as Senator Kerry did after Vietnam -- make such behavior emblematic of our effort, instead of recognizing it as an abandonment of our principles -- are mere opportunists. "Jail or execution"? I have yet to hear Reynolds call for either of this for Bush, Cheney and Rumsfeld. A whole bunch of his buddies recite a similar sermon. Specifically, NRO's Jonah Goldberg, Republican hack extrordinaire, is in piety mode as well: Even if all of these pictures were staged this would be an outrage. The fact that they are real makes this staggeringly awful. The awfulness is twofold. First, there's the illegal, morally corrupt -- and corrupting -- evil of torturing people for the pleasure of it (and taking pictures of it!). Second, there's the counter-productive stupidity of it. Even if these guys were the worst henchmen of Saddam's torture chambers, the damage this does to the image of America is huge. How do we look when we denounce Saddam's torture chambers now? How many more American soldiers will be shot because of the ill will and outrage this generates? How do we claim to be champions of the rule of law? Well, there is one way. This needs to be investigated and prosecuted. If there's more to the story -- whatever that could conceivably be -- let's find out. But if the story is as it appears, there has to be accountability, punishment and disclosure. Indeed, even if this turned out to be a prank, too much damage has already been done and someone needs to be punished. Under Saddam torturers were rewarded and promoted. In America they must be held to account. I see. Now that is beyond doubt that the President and his pals were involved, let's look for a demand for "accountability, punishment and disclosure". Wait for it..... Wait for it..... Still waiting... Well, you get the idea. What we get instead is a veritable cacaphony of excuses for the White House Gang: What would Mr. Obama do? After all, if we’d gotten our hands on a senior member of Al Qaeda before 9/11, and knew that an attack likely to kill thousands of Americans was imminent, wouldn’t waterboarding, or taking advantage of the skills of our Jordanian friends, have been the sensible, moral thing to do with a holy warrior who didn’t fear death but might have feared pain? Hmmm... Maybe Glenn Reynolds can explain his thoughts? The people in government who made mistakes or who acted in ways that seemed reasonable at the time but now seem inappropriate have been held publicly accountable by severe criticism, suffering enormous reputational and, in some instances, financial losses. Little will be achieved by further retribution. Well then - does ANYONE care about this stuff? The zealotous moral compasses of the Republican party haven't done much: WARREN - Well, and you know what - some of the stuff I saw looking at Guantanamo looks like clearly it was torture. To me, if you torture someone, you put yourself no better than the enemy. We must maintain the moral highground. You have no right to condemn the immoral actions of others if we're doing the same thing. And we should expect that others will torture our people if we're torturing them. BELIEFNET- Did you ever talk to President Bush to try to convince him to change his policy? WARREN - No. No. BELIEFNET- Why not? WARREN -- Never got the chance. I just didn't. In fact, in the first place, I'm a pastor, and people might misunderstand - I don't deal with policy issues with Barack Obama or President Clinton or John McCain. I just don't. that's not my role. My role is to pastor these guys. As a leader I understand stress. He says torture is deeply immoral and that the Bush administration did appear to torture - but declines to describe the Bush policy as a moral failing. He says he didn't mention his views on torture because (implausibly) he didn't have the opportunity. Then he said it was inappropriate for him to raise it with Bush because he only offers spiritual support. ...But if he weighs in on behalf of some caues -- opposing gay marriage and abortion, for instance -- then he can't well say it would have been inappropriate to campaign harder against torture. The Democrats dont seem to care either: UPDATE: Here -- from July of this year -- is one of the more remarkable quotes of the Bush era; it's from Nancy Pelosi, who was explicitly briefed on the CIA's torture program in 2002: Q: You’ve ruled against impeaching George Bush and Dick Cheney, and now Kucinich is trying to pass that. Why do you insist on not impeaching these people, so that the world and America can really see the crimes that they’ve committed? PELOSI: I thought that impeachment would be divisive for the country. . . . If somebody had a crime that the President had committed, that would be a different story. It's not like there's any evidence that Bush committed any crimes or anything, said Pelosi. Sigh... Greenwald goes on: Just ponder the uproar if, in any other country, the political parties joined together and issued a report documenting that the country's President and highest aides were directly responsible for war crimes and widespread detainee abuse and death. Compare the inevitable reaction to such an event if it happened in another country to what happens in the U.S. when such an event occurs -- a virtual media blackout, ongoing fixations by political journalists with petty scandals, and an undisturbed consensus that, no matter what else is true, high-level American political figures (as opposed to powerless low-level functionaries) must never be held accountable for their crimes. Never. Cheney still isn't even worried about it: KARL: Did you authorize the tactics that were used against Khalid Sheikh Mohammed? CHENEY: I was aware of the program, certainly, and involved in helping get the process cleared, as the agency, in effect, came in and wanted to know what they could and couldn't do. And they talked to me, as well as others, to explain what they wanted to do. And I supported it. KARL: In hindsight, do you think any of those tactics that were used against Khalid Sheikh Mohammed and others went too far? CHENEY: I don't. KARL: And on KSM, one of those tactics, of course, widely reported was waterboarding. And that seems to be a tactic we no longer use. Even that you think was appropriate? CHENEY: I do. And why should he worry? It's not as though anyone cares.

Financial Crisis and Inveitability

I feel that is high time that I commented on the biggest debacle of my life - the financial crisis. To date, we have seen the massive failure of Fannie Mae, Freddy Mac, Lehman Brothers, and AIG - with possibly more to come. We are in the midst of determining whether or not to bailout AIG and their financial brethren. Through all of this most people seem genuinely surprised at this outcome. I, for one, am not. The tailspin of the US - and therefore the worldwide - financial markets began in a frighteningly familiar way. Corporations, under intense pressure to continually grow their businesses at a level far above inflation, are continually searching for new markets and opportunities. In the lending sector, the typical business model more or less follows a simple description: Financial institutions lend money to home buyers, and then sell securities on the market that are backed by the expected future income stream generated by the mortgage payments from the home buyers. Implicit in this system is as assumed rate of default, usually (and hopefully) a fairly small percentage of the loans given. This business model has been very successful, but certain lenders wanted more. They realized that there were many potential home buyers that had not taken out mortgages due to various "risk factors", or due to the fact that their current financial situation did not warrant a large loan. These lenders knew that approving loans to these higher risk borrowers would result in a much higher projected income stream, which would mean more securities to sell. Everyone with a mailbox or an e-mail account knows what happened next: hundreds of thousands of people were "pre-approved" to borrow huge sums of money for homes that they could not possibly afford. I personally remember being "pre-approved" for a loan that was almost 6 times my annual salary. Fortunately, I knew enough math to reasonably understand that I could never afford such a loan, and did not take the bait. For many others, however, the offer was not to be ignored. They saddled themselves with massive mortgage debt, secure in the fact that it was OK because they were "pre-approved". Mortgage and re-financing sales sky-rocketed, and the revenues of the lenders grew by leaps and bounds. Meanwhile, in the securities market, fund managers began to take notice of the massive increase in the potential income of the mortgage lenders. They started filling their mutual funds with mortgage-back securities, and sat back to watch their funds grow at 4-5 times inflation. The housing market was booming, and executives at places like AIG and Lehman Brothers were making millions in executive compensation. The mutual fund and hedge fund executives were making millions as well in executive compensation. The massive market potential and the need to show massive growth lead to perverse accounting practices at places like Fannie Mae, but since there was enough money to go around, nobody seemed to mind. Like all things that are too good to be true, however, this financial paradise could not last. The massive and ever-widening gap between the projected income stream of mortgage-backed securities and the actual income stream became impossible to hide. Excessive default from the high-risk mortgages made the income projections on which the securities sales were based highly suspect. As consumer confidence eroded, the value of mortgage-backed securities began to plummet. Due to the high value of the mortgage industry, and the penetration of mortgage-backed securities in the mutual fund market, the entire financial sector began to feel the pain. Many lenders followed their loanees into bankruptcy. The entire system teeters on the brink of collapse. A fairly amusing, yet dangerously accurate portrayal of the whole event is here. How could this have been allowed? The fact is that this happens all the time in the US "free market economy", but usually to a lesser degree of severity. In the 1980's, the S&L disaster followed suspiciously similar lines. The S&L companies had been offering small loans to private consumers, and doing a fairly good business. However, as their growth began to slow, they started looking elsewhere for new markets. The "answer" presented itself in the form of commercial real estate. the S&L's began dealing in commercial real estate in the same way they had previously dealt with residential properties, resulting in a huge increase in expected income. Fund managers latched onto this growth in the same way as described above, and similar securities backed by equally dubious income streams found their way into most American portfolios. Then, as now, the difference between expected cash and actual cash eventually broke the S&L industry, and many average investors lost lots of money. The S&L executives and fund managers, however, got rich quickly. As if this weren't enough, the same basic story can be found in the .com bust of 2000. The future value of most of the new-fangled ".com" companies was ridiculously over-stated, creating a massive gap between perceived value and actual value. Financially savvy leaders exploited this perceived value to sell huge amounts of stock at enormously inflated prices. Needless to say, another small group of people in corporate leadership and investment management got rich. Regular investors, meanwhile, lost billions when the bubble finally burst. The fact that this same basic mechanism could have manifested itself in the financial markets so many times should provide some insight as to the mechanics of the "free market" economy and "capitalist" institutions. Executive leaders are expected to show massive gains year over year. If they do, they will be rewarded with huge compensation packages. Fund managers are similarly expected to create huge returns, and are rewarded richly as well. This necessitates risk-taking on the part of the executives in order to achieve the needed growth. Fortunately for these executives, the risk of failure is nearly non-existent. If the risks taken prove to be disastrous (as they have recently), the executive has already received the massive compensation package for the earlier perceived growth. He is under no obligation to give it back. By the time the mistake is fully manifested, the risk has been diluted in the securities market and spread across all those who hold the securities backed by the now-defunct income stream. If it gets really bad, we can always declare bankruptcy or appeal to the government for a bailout. So it is all reward, and no risk, for the executives - assuming they are willing to paint their "risks" in the best possible light; treading the line of legality, and certainly intentionally deceiving the investing public. All reward, and no risk, if only we tell a little white lie... how can an executive resist? We have seen the executive compensation debate before, but this Fannie Mae compensation paper bears review... Chomsky, of course, offers the best insight: The unprecedented intervention of the Fed may be justified or not in narrow terms, but it reveals, once again, the profoundly undemocratic character of state capitalist institutions, designed in large measure to socialise cost and risk and privatize profit, without a public voice. This "socialize cost and privatize profit" mentality is the common thread that connects the S&L crisis of the 1980's, the ".com" bubble of the 1990's, and the financial crisis of 2008. This is our system. This is how it works - always has. So, will this crisis change it? Not likely. As the American public, we are now going to pay for the unpunished mistakes of the financial elite - whether through a tax-funded bailout or through a catastrophic collapse in the investment market, this crisis will hit us all in the wallet. We are asking for an explanation, a recovery plan, and reform. We will get none of them. The "why?" has been asked many times. As always, the survey result is in the eyes of the question-asker. The average person has no idea what has even transpired, let alone what should be done about it. No doubt that, bailout or no bailout, we will be told that the decision has the support of the American people, and we will be shown surveys that seem to prove it. So, no explanation. As for the recovery plan: We are being asked for $700 billion dollars. If you are like me, you are no doubt wondering how it is possible that the financial folks could have arrived at that number so darn quickly. Are they really that smart? Nope: We just wanted to choose a really large number... Wow. I feel much better now. Is oversight/regulation in our future? Really, what's the point? The system will still work to "socialize cost and privatize profit" - oops, I mean Capitalism. And, a terrible thing is regulation.. or "Socialism", as the Republicans - and to only a slightly lesser extent the Democrats as well - will cry... and the average citizen will believe them, because we have been taught to fear and abhor the dreaded Socialists so much that merely invoking the dreaded name is enough to send many Americans into convulsions of irrational fear - perfect for suggestion. So, the financial markets are broken, the regulatory bodies are dysfunctional, the leaders of the recovery plan are pulling "really large numbers" out of thin air.. and we are told - "Trust Us". So, let's find the $700B, eh? Ironically, we already have it - really, it's true. On September 24, the House passed a $612B defense authorixzation bill. That's right... $612B for "defense": The whole bill passed by a vote of 392-39 and will fly through the Senate, where a similar bill has already been approved. And no one will even think to mention it in the same breath with the discussion of bailout funds for dying investment banks and the like. I'm converting what little money I have left into gold and sewing it into my mattress tonight.