They bail themselves out. Then they prepare to repeat what caused the need for a bailout in the first place. Of course. They are a late-imperial overclass that stopped listening to anything but their own cant 30+ years ago.
From the latest Business Week comes a report on how this is happening in the housing(-bubble) sector, in which the big players are now apparently buying up land thinking they’ll get back to 1995:
An additional boost came last year when Congress passed a law allowing companies to get refunds on past years’ tax payments by applying their recent losses to earnings dating back five years. Many sold land at big losses to boost their refunds. The result was a windfall of $2.3 billion for the builders as a group, including $800 million for No. 1 Pulte Homes.
The result of those balance-sheet heroics? Builders have more than $12 billion in cash they can use to replenish their land inventory. Pulte and D.R. Horton each had $1.9 billion in cash and near-term equivalents at the end of December, Toll Brothers had $1.6 billion at the end of January, Lennar had $1.3 billion, and KB Home had $1.2 billion at the end of November.
[These corporate builders’] interest in unfinished land usually comes later in the housing cycle, says Thomas E. Lucas, senior vice-president of operations for DMB in Scottsdale. “We didn’t think we’d sell raw land for three to four years,” Lucas says. That’s a striking vote of confidence considering the threats to housing from high unemployment, rising mortgage rates, and foreclosures.
Can you imagine non-capitalists ever being allowed to rewrite their income tax returns to minimize what they owe?
In any event, it’s clear that, in yet another economic sector, capital has been restored, but has no idea what to do with itself. So, despite their unwillingness or inability to lift a finger to help their own potential customers, they nonetheless presume something, somehow will return them to “normalcy.” Probably their own glorious entrepreneurial spirit, I suppose…
We know that the US Fed and Treasury pledged approximately 23.7 trillion dollars to save the FIRE sector of the US economy. How much of that was actually transferred to FIRE sector corporations in the last two years?
I’m working on posting a more substantial answer to that excellent question. A post from Paul Krugman today, however, included a graph that speaks volumes about the nature of the Bush/Obama Great Giveaway.
Now, this “bailout” has been premised on the core gospel of capitalism, which is the claim that economic crisis can only be caused by an under-supply of capital, and therefore the answer to each and every crisis is to provide more money to those who are already rich, on the theory that they are the “entrepreneurs” who would always make the investments society needs, if only they could lay hands on enough cash.
Supply-side economics is the inverse of Keynesian, demand-side economics and the Baran/Sweezy emphasis on corporate capitalism’s tendency to over-accumulate, not under-accumulate, capital. In this school of thought, the key problem is that, in the age of corporate capitalism, “entrepreneurs” tend to have too much, not too little, money on their hands. Because they over-exploit the masses, they wind up somewhat too rich and find themselves having increasing trouble locating new investment opportunities, which always require a population of prospective new buyers. So, instead of investing in new jobs and production, they start stashing increasing amounts of investable capital in Wall Street gambits, or simply sit on it.
Now, one way to test whether a real world economic crisis stemmed from supply-side or demand side problems would be to give away a mega-shitload of money to “entrepreneurs,” and watch to see what happens to the new money. If their problem were supply-side, the entrepreneurs would be just itching to lay hands on the new capital and, once they did so, they would instantly start making huge new investments, thereby creating an economic boom. Conversely, if the main problem were on the demand-side, giving a new mega-shitload of money to the already-rich would lead them to hoard the new money, since they would have nowhere to invest it, thanks to the lack of popular purchasing power out in the wider economy.
Suffice to say, this strikes me as a test that’s about as easy to read as anything could possibly be. As Business Week reported in its November 5, 2009 issue, “[a]n oversupply of money is what pushed commercial real estate over the edge.” It’s also what pushed the whole economy over the edge.
To wit, Krugman’s graph, which shows what’s happened to the banks’ share of TARP and TANF:
This trillion dollars in hoarded capital is going absolutely nowhere but in circles, since nobody can think of ways to make a profit investing it in new production. The masses are maxed out and under water, so the entrepreneurs keep their cash parked. Getting small interest payments from the Fed — as part of, you guessed it, a Great Giveaway program known as the Emergency Economic Stabilization Act of 2008 — looks far better to our “entrepreneurial” class than just about anything they can find in the real economy.
What changes has the bailout cash facilitated, you might wonder. New, cutting edge cars that out-perform Japanese makes? Radical MPG improvements? Exploration of the idea of using existing production equipment to rebuild the nation’s rail stock and infrastructure?
Not so much.
Turns out, the money is retooling marketing strategies, not transportation arrangements.
If by now you’ve finished rolling on the floor laughing your ass off over GM’s new “May the Best Car Win” campaign and perhaps vomiting as you realize that pickup trucks and SUVs remain a central part of the Not-So-Big Three’s plans, consider the latest news out of Chrysler.
According to Automotive News, here is what that pool of investors is planning to do with their free handout:
Chrysler hikes spending to rebuild brands
After five months of near silence on the marketing front, Chrysler Group is roaring back with a new attitude. The automaker is ratcheting up advertising this quarter and plans to do so in each of the next two years, CFO Richard Palmer said last week. He spoke at the unveiling of Chrysler’s five-year plan under Fiat S.p.A., which took control of Chrysler as it emerged from bankruptcy in June.
Chrysler Group vehicle sales fell 30 percent last month from a year earlier and are down 39 percent this year through October. CEO Sergio Marchionne said, “I can give you one reason: The fact that we’ve been incredibly quiet for the last five months, so the marketing positions of all our brands have been incredibly weak.”
Chrysler’s plan is big — literally. Three experts who attended the meeting were given a loose-leaf binder 2 inches thick outlining it.
Hold shares in a crashed bank, hedge fund, or major corporation? Here’s your bailout check, sir!
Live down the social ladder and hold a credit card you struggle to pay? Will you get some bail-out money? Nope. Maybe a mandated reduction of your interest rate? Nope. A cap at least on your present rate? Nope again. You get this instead:
Oh, huzzah! Now — oh, glorious day! — it will be slightly easier to know exactly how the bailed-out class is using its publicly-provided do-over to continue raping you. And they will, of course, have to rape you according to some new, very slightly slower timetables. With the Democrats in power now, that much goes without saying, you see.
Why? Well, this is capitalism. Our overclass needs a chance to over-accumulate some more capital, so they can fuel their next “investment” bubble. Will it be in tulips? Stocks? Collateralized debt claims? Survival shelters? That’s for them to say, and for us to bend over and take.
To make a long, sickening story short: You know any new law is a disaster when it passes the Senate, as this great fart-in-your-face did, 90-to-5.
In a collectively wealthy nation that’s home to 100 million people with tenuous or no access to medical care, the order of bailout priorities is revealing: first money, then cars.
That, of course, is no accident. Contrary to Obama’s assertion (and the long-running dogma behind it), it is our ruthlessly calculating corporate overclass, not the free-spirited American masses, that insists on cars. If big investors were ever to permanently lose their ability to peddle sufficient millions of new cars each year, corporate capitalism itself would be in even deeper trouble than it already is. That’s because, thanks to its inherent size, complexity, fragility, and amenability to marketing-managed stylistic fetishism, there’s simply very few other profit-generating products like the private automobile. It is the profit motive, not the national spirit, that is the prime mover of reality.
As the consequent push to resuscitate this cornerstone capitalist product unfolds, I thought it might be helpful to those of us who prefer life to money to review the some of the most basic undiscussed human costs of our cars-first transportation dictatorship:
► According to the National Highway Traffic Safety Administration, in the year 2007, automotive collisions killed 41,059 people in the United States. That’s 112 a day; 790 a week; 3,422 a month. And 2007 was no anomaly. Quite the opposite: 41,059 is almost exactly the average annual death toll for the prior half-century, during which well over 2 million individuals perished in U.S. car crashes.
►In typical years, the number of people “severely or critically” injured, but not killed, in U.S. car crashes surpasses the number killed. In commonly used medical scales, “severe or critical” injuries as those that transcend “serious” ones. Injuries classified as “serious” but not “severe” or “critical” involve things like open leg fractures, amputated arms, and major nerve lacerations. To be ranked “severe” or “critical,” a non-fatal collision must involve a severed spinal cords or a head injury with an extended period of unconsciousness and lasting brain damage. In the words of the U.S. Centers for Disease Control, “For MAIS 4-5 (severe and critical) injuries, the predominant [monetary] costs [of the crash] are related to lifetime medical care.” Of course, as the authors of one study explain, “Persons injured in these crashes often suffer physical pain and emotional anguish that is beyond any economic recompense. The permanent disability of spinal cord damage, loss of mobility, loss of eyesight, and serious brain injury can profoundly limit a person’s life, and can result in dependence on others for routine physical care.”
►If the United States of America has a national smell, it is car exhaust, which is ubiquitous. And the smell is but the tip of the iceberg, of course. “Automobile emissions are the main cause of urban air pollution and contain thousands of chemicals, several of which are recognized as mutagenic or carcinogenic.” As a glance at the roadside after an urban snowstorm will confirm, as a by-product of both fuel combustion and the normal wear of tires and roadbeds, automobiles – especially those with diesel engines — also create large amounts of dangerous “particulate matter.” Breathing particulate matter, a.k.a. “PM” in the professional danger-counting trade, is most dangerous for children, the sick, and the elderly, and exposure to it is heaviest among the poor, who are disproportionately non-white, and who disproportionately live near major urban highways, where PM is heaviest.
►Because air-pollution damage to the human body accumulates over time and complicates complex multiple-cause diseases, the exact amount of suffering and death caused by automotive air pollution can presently only be guessed at. A recent special report in the Journal of the American Medical Association estimated that the overall annual airborne toxics death toll in the United States is somewhere between 22,000 and 52,000 a year. This would mean that, even if something like 20,000 deaths from air pollution is the best guess, and even if cars account for only a quarter of all U.S. air pollution exposure, then autos-über-alles is causing another 5,000 premature U.S. deaths each year. Since many medical researchers suspect that we may be radically under-estimating the damage done by air pollution, this figure may someday prove laughably low.
►Automotive air pollution also produces a range of non-lethal health costs. The San Jose Mercury-News, one of the few major U.S. newspapers to attend to the topic at all, reports these estimates air-pollution’s non-fatal impacts:
The death toll due to air pollution only begins to touch the vast magnitude of human suffering caused by breathing our dirty air — for every 75 deaths per year due to air pollution in the U.S., health scientists have estimated that there are 505 hospital admissions for asthma and other respiratory diseases, 3,500 respiratory emergency doctor visits, 180,000 asthma attacks, 930,000 restricted activity days, and 2,000,000 acute respiratory symptom days.
►The biggest health cost of autos-über-alles may be its discouragement of walking and bicycling. Studies confirm that the United States has by far the lowest percentage of miles traveled by foot or bike in the world. Meanwhile, the nation is experiencing a worsening obesity epidemic epidemic, with health consequences that now rival those of tobacco addiction. According to the Journal of the American Medical Association, “poor diet and physical inactivity” now cause 400,000 deaths a year in the United States. Hence, even if car dependency explains only 10 percent of the food-exercise imbalance, that would mean there are another 40,000 American lives being sacrificed to the automobile every year.
►As our schools crumble and tens of millions of us go without health insurance, we Americans continue to spend well over a trillion dollars every single year buying, equipping, fixing, fueling, parking, insuring, and road-building for our cars. What kind of Charlie-and-the-Chocolate-Factory transportation system would we now have, had we spent on railroads, bike paths, and pedestrians-first cities even half what we’ve instead spent on automobiles and auto-friendly spaces over the last century? How nice would our towns, schools, hospitals, and insurance programs be if we could stop squandering so many resources on autos-über-alles?
►According to the U.S. Census Bureau, regularly employed “Americans [now] spend more than 100 hours commuting to work each year…[and] this exceeds the two weeks of vacation time (80 hours) frequently taken by [year-round, full-time] workers over the course of a year. Traffic jams account for a fast-growing share of this commuting time. Between 1982 and 2003, the time commuters spent stuck on congested roads almost tripled, rising from 16 to 47 hours per driver, per year. Meanwhile, the “number of urban areas with more than 20 hours of annual delay per peak [rush-hour] traveler…has grown from only 5 in 1982 to 51 in 2003.”
And all this carnage and waste is but half the story. The question of how to project cars-first transportation much farther into the future of a heavily armed planet of competing nation-states with finite energy and atmosphere is, if anything, a problem more pressing than our automobile-imposed public health crisis.
[I]t looks like the Treasury and the Fed will pump up some $250-500 billion to help hedge funds buy bad assets – with the FDIC guaranteeing the buyers against losses. In internal administration battles, Geithner “successfully fought against” stricter rules on executive pay, and beat back the attempts to replace top maangement.
Of course, to say that Geithner won these battles is to say that Obama agreed with him. Once again, the embodiment of hope and change went with the status quo when he didn’t really have to. There would have been little political price to pay for putting the screws to the banksters.
This is looking more and more like Japan’s disastrous indulgence of their “zombie banks” in the 1990s than Sweden’s successful bailout, the model for the “nationalize them and clear the decks” approach. Instead of a few rough years, we’re likely to get a miserable decade.
For what it’s worth, my own view is this:
The problem is that making new loans is not only not the right answer, it’s not even possible. The Reagan Revolution /Great Restoration/New Democrats strategy of relying on credit expansion to fill the demand hole caused by heightened fucking of the working class is now at its final — and completely logical — end. Either we start to reverse the basic class-fuck from above, or this depression continues to deepen.
Meanwhile, it’s important to ask: What’s the dream outcome of what’s being attempted by Obama? Another six month round of credit card balance transfers and fever-brained real estate bidding wars? Based on what underlying new real production and income?