How the 1% are cleaning out the rest of us: Part I

Occupy Wall Street posterThe Occupy Wall Street movement seems to be gaining momentum and there are people with a good track record of predictions—Dr Ravi Batra for instance—who believe that the time has come for such a movement to change the world. The non-productive money manipulators have broken the free market capitalist model and I’m hoping that pay-back time is nigh.

Where I part company with the Occupy Wall Street folk is that I don’t believe capitalism is the problem. Capitalism works well when adequately contained. It’s the failure of governments to regulate it that’s the problem.

Here is one of the ways the fat cats are creaming the system and destroying the world’s economy for the rest of us.

“Window Dressing”

The money managers borrow short term and use the loans to finance big risks without their shareholders’ knowledge. Then, prior to balance sheet publication, they sell the most toxic of those investments and pay back those borrowings. With luck, they make a killing on the dodgy assets without getting caught. The managers’ bonuses are earned on short-term gains, so their interests are not in line with the interests of their clients who want medium to long term gains on their investments.

The deceptive practice of some mutual funds, in which recently weak stocks are sold and recently strong stocks are bought just before the fund’s holdings are made public, in order to give the appearance that they’ve been holding good stocks all along.

The deceptive practice of using accounting tricks to make a company’s balance sheet and income statement appear better than they really are.
Investorwords.com

From The Wall Street JournalIt doesn’t always pay off as MF Global Holdings may discover very soon. The Wall Street Journal found such activity among “primary dealers,” major banks and securities firms that trade directly with the Federal Reserve are borrowing big during the financial quarter to invest in short-term high-risk investments to maximise their bonuses.When the end of the quarter looms they temporarily reduce borrowings by substantial amounts to hide their dodgy dealings.
Furthermore, the Journal reported in 2010: WSJ uncovered this dodgy practice at MF Global Holdings Ltd, who are filing for bankruptcy protection.

A Journal analysis of financial data from 18 large banks known as primary dealers showed that as a group, they have consistently lowered debt at the end of each of the past six quarters, reducing it on average by 42% from quarterly peaks.

Wall Street Journal 2011

Unfortunately the gambling hasn’t paid off this time:

From Reuters:

Call it the mother of all margin calls: Up to 50,000 former customers of bankrupt broker MF Global must find some $1 billion in additional collateral almost overnight, or be forced out of their trades.

Next: How the 1% are cleaning out the rest of us: Part 2

 

Recovery? Don’t hold your breath

John Key, in yet another triumph of hope over experience, maintains that we’re on an economic roll. There are some minor problems with Mr Key’s super-optimism. Not unlike the now abandoned “catching up with Australia” pledge, or the “Working for Families is communism by stealth” backtrack.

Over 50 years of voting I’ve been a swinging centre-right voter and a supporter of capitalism. I’m a slow learner. I didn’t notice that the system that once worked very well is now absolutely broken.

When Henry Ford invented the production line and started churning out Model T cars in vast numbers, he concluded that if he wanted to create an economic and transport revolution he needed to ensure that his car was affordable. More specifically, he had sufficient insight to realise that success depended upon the people who built the car being able to afford to buy it.

For several decades this was understood by economists, money managers, reserve bankers, and capitalists. For the market to work successfully ordinary workers had to be sufficiently well paid that they were empowered to be consumers. It’s no use producing vast quantities of junk if nobody can afford to buy it. Trouble is, sometime in the last 20 or 30 years they’ve forgotten the basic message. The ratio between the incomes of the top earners and the average worker has increased enormously, but for 10 or 20 years the inflation adjusted wage of the average worker hasn’t increased. The top earners are nevertheless creaming the system more and more with every passing day and they’re apparently oblivious to the fact that they’re strangling the golden goose.

From SmartBlog

In 2010, the average annual wage for U.S. workers in production operations was $33,770 while the average CEO pay in S&P 500 companies was $11,358,445. CEO pay was 336 times more than the average employee.

The Wall Street crowd and their cronies around the Western World are sucking more blood out of the system than they were before it all turned pear-shaped in 2007-8. Before your money bailed them out. It’s unsustainable.

From MarketWatch

The left-wing Institute for Policy Studies found that the CEOs of the job-cut companies on average took home nearly $12 million in 2009, above the $8.5 million brought in by the average CEO of an S&P 500 company. The study found that 72% of the announced layoffs came at a time when the company was reporting positive earnings.

“This reflects a broader trend in Great Recession Corporate America: squeezing workers to boost profits and maintain high CEO pay,” said the study.

The growth occurring in the US and elsewhere is a jobless recovery. How does China remain an engine for growth when the people who buy their products have empty wallets? Sure, they can generate some internal consumption from their massive surplus, but that won’t last long when their own individuals and local authorities have been indulging in a borrowing spree which has created a massive real estate bubble. Negative equity is knocking on China’s door too.

For 2 or 3 decades the underpaid workers in the Western World have been borrowing to buy stuff that they previously could afford to buy for cash, or that didn’t exist, or that they chose not to buy. Now those people are pulling up the drawbridge. Countries like China and Germany who have relied on manufactured exports for growth are heading for a train wreck.

Millions of people around the world have lost their jobs and their homes. The rich are getting richer after the system that feeds their greed was bailed out using the taxes of those who’ve been destroyed. A revolution is overdue and I suspect that it’s coming.

From the horses’ mouths

The Wall Street Journal and Forbes Magazine are hardly bastions of Liberalism, nevertheless they can spot a trend when it hits them in the eye.

As you can see from this graph from the WSJ, the rich are doing OK. In 1965 they earned, on average, a mere 24.2 times the average employee’s income. In 2009, long after the recession hit, it was 185.3 times, and if you check this link at Forbes magazine, you’ll see that the thin red line is now on the rise again.

These people just don’t get it.

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CEO salary disproportionate growth

Saving Valentina

In the self-absorbed, self-indulgent, greedy and dangerous world we’re bombarded with by the various media, sometimes we need a reminder that there are good people in our midst and that good things still happen.

On Valentine’s Day 2011 Michael Fishbach, with a few family and friends, saved the life of a humpback whale. I’m getting maudlin in my old age, this brought a tear to my eye.

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PlainText: simple, elegant, useful

“For editing text on iPad & iPhone. PlainText is a simple text editor with a paper-like user interface. Unlike the default Notes app, PlainText allows you to create and organize your documents in folders and sync everything with Dropbox.com.”

PlainText logoIf you use Dropbox and you have an iPhone or iPad, you’ll love PlainText. If you don’t have Dropbox you should, it’s the best data handling service provided in decades and it’s free. PlainText is a deceptively simple text editor/iPhone app and it’s a gem. It’s really easy to use, it looks classy, and it makes life a little easier.

PlainText supports folders and it links to your Dropbox account, so files are automatically synchronized between your iPhone and all computers linked to your Dropbox. Because it’s minimalist, it lets you focus on writing instead of spending half your life managing the process.

I’m over fancy todo lists. I just use an “action” text file for todo’s and a “fridge door” text file for a scratch pad. I save them into the PlainText folder in my Dropbox and that’s the job done.

PlainText is free. It displays a small advertisement at the bottom of your iPhone screen which isn’t too obtrusive but can be removed by purchasing “Remove Ads” for a miserly $2.49. Don’t be mean, pay up. 🙂 My only gripe is that it’s not available for other smartphone brands. Yet another barrier to abandoning Apple.

Dropbox

If you’re one of those deprived folk who haven’t yet discovered Dropbox, check it out in my Just Wondering post right here. If you use my referral link you’ll be rewarded with an extra 250MB of free synchronized Dropbox storage space.

PlainText Tips

Another very useful trick for me. I’m not the greatest phone typist, so if I wish to send a longish text message, I type it into my “textMessage” file in PlainText on the computer. It’s instantly updated by Dropbox in the iPhone app. From there I just copy all and paste it into a text message.

Cool bananas.

Use it with TextExpander

TextExpander for Mac, not surprisingly, is a text expander. The iPhone app costs $6 and if you do a lot of text work on your iPhone it’s a boon. If you don’t know what I’m on about check my post on text expanders here.

Forget Notepad

For editing text files in Windows, I use the free Notepad++ which, unlike Notepad, allows several files to be open at once in tabs.

Notepad++

You can stop starvation

“Sometimes I’d like to ask God why He allows poverty, famine, and injustice in the world when He could do something about it… but I’m afraid God might ask me the same question.” — Anonymous

I’m a big fan of TED.com. I’ve been moved, amused, intrigued, and sometimes inspired by quite a few TED presentations. This one is the most important I’ve seen.

“Josette Sheeran, the head of the UN’s World Food Program, talks about why, in a world with enough food for everyone, people still go hungry, still die of starvation, still use food as a weapon of war. Her vision: “Food is one issue that cannot be solved person by person. We have to stand together.” — TED.com

We know how to fix it, we have the resources, we have the food, we should have the motivation. It would even save us money!

What can you do to promote Josette’s program?

Why wouldn’t you do it?

Mark all Gmail messages as read

It’s easy to end up with vast numbers of Gmail messages marked unread even when they’re not. For instance, if you’ve imported hundreds of messages from another account. To avoid having to do this manually page-by-page here’s the easy fix:

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  • Go to Settings (click on the gear wheel icon at top right of your screen).
  • Select “Mail Settings”.
  • Select the “Filters” tab.

Create a Gmail filter

  • Click on “Create a new filter”.
  • In the box labelled “Has the words:” enter is:unread.

Unread items filter

  • Click on the “Next step” button.
  • Click the OK button on the warning screen.
  • Check the “Mark as read” box and the “Also apply filter to x conversations below..” box.

check boxes

  • Click the “Create filter” button.

That’s it!
Delete the filter when you’ve finished.

Saving Valentina

In the self-absorbed, self -indulgent, greedy and dangerous world we’re bombarded with by the media, somethimes we need a reminder that good things happen too.

On Valentine’s Day 2011 Michael Fishbach, with a few family and friends, save the life of a humpback whale. I’m getting maudlin in my old age, it brought a tear to my eye.

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Ratigan on financial Armageddon

Dylan Ratigan lost his rag on MSNBC. His interviewees, who were supposed to enlighten us economically, didn’t get a word in edgewise while he told it like it is. America should listen to this man. Everything he says is exactly right and if nobody pays attention we’re all in deep schtook.

Here in New Zealand we have similar problems with head-in-the sand politics as usual. Fortunately for the rest of the world world our idiotic politicos and ill-informed voters won’t bring the world to its economic knees.

If you’re in any doubt a year after Dylan melted down read this: China Is Headed For Meltdown

You can stop starvation

“Sometimes I’d like to ask God why He allows poverty, famine, and injustice in the world when He could do something about it… but I’m afraid God might ask me the same question.” — Anonymous

I’m a big fan of TED.com. I’ve been moved, amused, intrigued, and sometimes inspired, by quite a few TED presentations. This one is the most important I’ve seen.

“Josette Sheeran, the head of the UN’s World Food Program, talks about why, in a world with enough food for everyone, people still go hungry, still die of starvation, still use food as a weapon of war. Her vision: “Food is one issue that cannot be solved person by person. We have to stand together.” — TED.com

We know how to fix it, we have the resources, we have the food, we should have the motivation. It would even save us money!

What can you do to promote Josette’s program?

Why wouldn’t you do it?

Mark all Gmail messages as read

It’s easy to end up with vast numbers of Gmail messages marked unread even when they’re not. For instance, if you’ve imported hundreds of messages from another account. To avoid having to do this manually page-by-page here’s the easy fix:

this is a dummy line break
  • Go to Settings (click on the gear wheel icon at top right of your screen).
  • Select “Mail Settings”.
  • Select the “Filters” tab.

Create a Gmail filter

  • Click on “Create a new filter”.
  • In the box labelled “Has the words:” enter is:unread.

Unread items filter

  • Click on the “Next step” button.
  • Click the OK button on the warning screen.
  • Check the “Mark as read” box and the “Also apply filter to x conversations below..” box.

check boxes

  • Click the “Create filter” button.

That’s it!
Delete the filter when you’ve finished.