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Wednesday, February 13, 2019

Decreasing Bank Size by Increasing Capital-Reserve Requirements: Plutocracy in Action?

Although the Dodd-Frank Financial Reform Act was passed in 2010 with some reforms, such as liquidity standards, stress tests, a consumer-protection bureau, and resolution plans, the emphasis on additional capital requirements (i.e., the SIFI surcharges) could be considered as weak because they may not be sufficient should another financial crisis trigger a shutdown in the commercial paperr market (i.e., banks lending to each other). A study by the Federal Reserve Bank of Boston found that even the additional capital requirements in Dodd-Frank would not have been enough for eight of the 26 banks with the largest capital loss during the financial crisis of 2008. As overvalued assets, such as subprime mortgage-backed derivatives, plummet in value, banks can burn through their capital reserves very quickly. A frenzy of short-sellers can quicken the downward cycle even more. This raises the question of whether additional capital resources would quickly be "burnt through" rather than being able to stand for long as a bulwark. The financial crisis showed the cascading effect that can quickly run through a banking sector as fear even between banks widens as one damaged bank impacts another, and another. 

The full essay is at "Manipulating Bank Size by Reserves."

Johnson’s “Reinvention” of JC Penney: Too Much and Too Little

In April 2013, JC Penney’s board wished the CEO, Ron Johnson, “the best in his future endeavors.” His effort to “reinvent” the company had been “very close to a disaster,” according to the largest shareholder, William Ackman. During Johnson’s time at the company as its CEO, shares fell more than fifty percent. In February 2013, Johnson admitted to having made “big mistakes” in the turnaround. For one thing, he did not test-market the changes in product-line and pricing-points. The latter in particular drove away enough customers for the company’s sales to decline by 25 percent. Why did Johnson fail so miserably?

The full essay is at "JC Penny Reinvented?"
Ron Johnson's short tenure as CEO of JC Penney was disastrous, according to Altman.   Source: Reuters

Monday, February 11, 2019

Is Modest Growth vs. Full Employment a False Dichotomy?

As Summer slid into Autumn in 2012, the Chinese government was giving no hint of any ensuing economic stimulus program. This was more than slightly unnerving for some, as a recent manufacturing survey had slumped more than expected, to 49.2 in August. A score of 50 separated expansion from contraction. A similar survey, by HSBC, came in at 47.6, down from 49.3 the previous month. Bloomberg suggested that China might face a recession in the third quarter. So why no stimulus announcement?  Was the Chinese government really just one giant tease? I submit that the false dichotomy of moderate economic growth and full employment was in play. In short, the Chinese government did not want to over-heat even a stagnant economy even though the assumption was that full employment would thus not be realizable.

Greek Austerity: Pressure on the Environment

“While patrolling on a recent cold night, environmentalist Grigoris Gourdomichalis caught a young man illegally chopping down a tree on public land in the mountains above Athens. When confronted, the man broke down in tears, saying he was unemployed and needed the wood to warm the home he shares with his wife and four small children, because he could no longer afford heating oil. ‘It was a tough choice, but I decided just to let him go’ with the wood, said Mr. Gourdomichalis, head of the locally financed Environmental Association of Municipalities of Athens, which works to protect forests around Egaleo, a western suburb of the capital.”[1] Tens of thousands of trees had disappeared from parks and forests in Greece during the first half of the winter of 2013 alone as unemployed Greeks had to contend with the loss of the home heating-oil subsidy as part of the austerity program demanded by the state’s creditors. As impoverished residents too broke to pay for electricity or fuel turned to fireplaces and wood stoves for heat, smog was just one of the manifestations—the potential loss of forests being another. On Christmas Day, for example, pollution over Maroussi was more than two times the E.U.’s standard. Furthermore, many schools, especially in the north part of Greece, had to face hard choices for lack of money to heat classrooms.
Greek forests were succumbing  in 2012 to the Greeks' need to heat their homes as austerity hit.   source: Getty Images
Essentially, austerity was bringing many people back to pre-modern living, perhaps including a resurgence in vegetable gardens during the preceding summer. At least in respect to the wood, the problem was that the population was too big—and too concentrated in Athens—for the primitive ways to return, given the environment's capacity. 

The full essay is at "Greek Austerity and the Environment."

1. Nektaria Stamouli and Stelios Bouras, “Greeks Raid Forests in Search of Wood to Heat Homes,” The New York Times, January 11, 2013.
2. Skip Worden, God's Gold, available at Amazon. 

Saturday, February 9, 2019

Behind Cameron's Referendum on Britain's Secession from the E.U.

Governors of other E.U. states reacted quickly to David Cameron’s announcement that if his party would be re-elected to lead the House of Commons, he would give his state’s residents a chance to vote yes or no on seceding from the European Union. The result would be decisive, rather than readily replaced by a later referendum. Cameron said the referendum would also be contingent on him not being able to renegotiate his state’s place in the Union. This renegotiation in particular prompted some particularly acute reactions from the governments of other “big states.” Behind these reactions was a sense that the British government was being too selfish. This was not fair, I submit, because the ground of the dispute was on the nature of the E.U. itself as a federal system. 
David Cameron, A former PM of Britain
The full essay is at "Britain in a Confederation?"

Friday, February 8, 2019

Second-Term Inaugural Addresses of American Presidents: Of Transformational or Static Leadership?

According to a piece in the National Review, “George Washington might have had the right idea. Second inaugural addresses should be short and to the point. Of course, speaking only 135 words as Washington did in 1793 might be a little severe.”[1] Consider how short, and (yet?) so momentous Lincoln's Gettysburg Address was. The challenge for second-term-presidents, whether Barack Obama or the sixteen two-term presidents before him, is “how to make a second inaugural address sound fresh, meaningful and forward-looking." Almost all of Obama’s predecessors failed at this. Only Abraham Lincoln and Franklin D. Roosevelt made history with their addresses. One stirred a nation riven by civil war; the other inspired a country roiled by a deep depression. All but forgotten are the 14 other addresses, their words having been unable to survive the test of time. Even those presidents famed for their past oratory fell short.”[2] This is a particularly interesting observation: surviving the test of time being the decisive criterion. Even a president whose silver tongue mesmerizes a people of his or her time may not deliver ideas that survive beyond being a cultural artifact of the president’s own time. What of an address that is quite meaningful in its immediate time yet does not pass the test of time so as to be recognized as a classic? 

The full essay is at "Inaugural Addresses: Of Leaders?"

1. George E. Condon, Jr., “The Second-Term Inaugural Jinx,” National Journal, January 20, 2013.
2. Ibid.

Increasing Income Inequality in the U.S.: Deregulation to Blame?

Most Americans have no idea how unequal wealth as well as income is in the United States. This is the thesis of Les Leopold, who wrote How to Make a Million Dollars an Hour. In an essay, he points out that the inequality had increased through the twentieth century. His explanation hinges on financial deregulation. I submit that reducing the answer to deregulation does not go far enough.

The full essay is at "Increasing Income Inequality."

Les Leopold, “Inequality Is Much Worse Than You Think,The Huffington Post, February 7, 2013.

Thursday, February 7, 2019

A U.S. Senator Aiding a Contributor While Averting a "Fiscal Cliff": Turning a Crisis into an Opportunity

The law passed by Congress on January 3, 2013 to avert the across-the-board tax increases and “sequester” (i.e., across-the-board budget cuts) was “stuffed with special provisions helping specific companies and industries.” While many of the provisions would increase the U.S. Government’s debt, at least one would decrease it. Is the latter any more ethical because it is in line with the more general interest in reducing the federal debt? Put another way, does the end justify the means?  Do good consequences justify bad motives?  These are extremely difficult questions. The best I can do here is suggest how they can be approached by analysis of a particular case study.

The full essay is at "Aiding a Contributor."

On the Impact of Political Rhetoric: From “Global Warming” to “Climate Change”

Words matter in politics. The side that can frame a question by definitively naming it in the public mind enjoys a subtle though often decisive advantage in the debate and thus in any resulting public policy as well. For example, “pro-choice”privileges the pregnant woman, while “pro-life” defines the abortion debate around the fetus. Similarly, “global warming” implies a human impact, whereas“climate change” defines the issue around nature. Even though the shift from“global warming” to “climate change” is more in keeping with the evolving science and won’t be bumped off by a cold winter, political players have been the driving force—language hardly being immune to ideological pressure.

Tuesday, February 5, 2019

An Empire's Economic Scale Demands a Market System: The Case of China

A trend of increased-scale economies can be observed through history as city-states have given way to the increased military power of centralized Medieval kingdoms. Many of those expanded into Early Modern kingdoms as advances in military technology make it possible for kings to extend the territory under their control. Even empires have gotten bigger. Modern-day Germany was once considered an empire, as were Switzerland and the Netherlands. Today these polities are states in a modern form of empire, the EU. Similarly, the emergent United Colonies of America was considered to be an empire within the British Empire, with the individual colonies being viewed on both sides of the Atlantic as Early Modern kingdom-level polities on par with the states of the E.U. in the twentieth century. Similarly in China, as kingdoms were added, an old form of empire took shape. Because these enlargements came about gradually over centuries, it has been difficult for the human mind to recalibrate how the modern large empire-scale economies should be designed to take into effect the distinct challenges of the scale. We can see such an adjustment in the case of China as economic centralization came to be replaced by regulated markets, albeit with a sizeable involvement still of the government in the economy. 

The Emperor Kangxi of the Qing Dynasty. He ruled for 60 years, greatly expanding the size of the empire. (Source: Chinahighlights.com)

The full essay is at "The Case of China."

Monday, February 4, 2019

School Security: Turning Schools into Prisons and Violating Individual Rights?

Certainly by 2019 a strong case could be made in virtually any of the U.S.'s member-states for investing more in the security particularly of high schools and two-year, or "junior," colleges, given the number of mass shootings. The majority of the steps taken were doubtlessly well-justified. However, issues of security managers and employees going too far even in unintentionally intimidating students, staff, and even visitors undoubtedly existed too. Unfortunately, such instances can be difficult to detect because they are likely, ironically, to be incidental to what is really needed to provide adequate security. It follows, I submit, that when such an issue does arise, a hidden, rather presumptuous mentality may exist even if it is difficult to detect as it is subtle. 

The full essay is at "Intimidating Security Has a Cost."

Saturday, February 2, 2019

Facebook Defies Markets: No Accountability for Unethical Managements

When Facebook announced a record $6.9 billion profit for the final quarter of 2018, up 61% from the last quarter of 2017, the company’s management could also boast of an estimated 2.7 billion users of Instagram, WhatsApp, Messenger and Facebook each month, 1.52 billion of whom used Facebook every day.[1] This was particularly surprising at the time because the company had “earned the ire of users and regulators [in the E.U. and U.S.] for a growing list of privacy issues, including the Cambridge Analytica data scandal and a massive security breach.”[2] Cambridge had improperly used information on tens of missions of Facebook users, and hackers had accessed the telephone numbers and email addresses of 30 million users. Even though Facebook’s CEO, Mark Zuckerberg “touted the steps taken by the company [in 2018] to deal with the missuse of the platform,” his company had been criticized on the eve of the announcement for being in violation of the agreement with Apple regarding an iOS app (Facebook Research) distributed to employees and customers through Apple’s “Enterprise Development Program.”[3] That program prohibited distribution to customers and accessing “information such as private messages, web searches and location data.”[4] How could users not have reacted negatively, hence bearing on Facebook’s stock-price and profit-level? How could a company’s unethical management—a point I had documented in Taking the Face Off Facebook in 2015, prior to the scandals—not be punished by the market?

[1] Seth Fiegerman, “Facebook Posts Record $6.9 Billion Profit Despite privacy Scandals,” CNN Business, January 30, 2019.
[2] Ibid.
[3] Kaya Yurieff and Ahiza Garcia, “Apple Says Facebook’s Controversial Market Research App Violated Its Policies,” CNN Business, January 30, 2019.
[4] Ibid.

The Right in European and American Politics: Disentangling Right from Right

The far-right in Europe has been quite different than the right-wing in American politics. Putting aside the usual caricature of “people in pointy hoods and the Ku Klux Klan,” Marine Le Pen said she still believed “the American right [was] much more to the right than the National Front.” She may have agreed with those who wanted to manage American frontiers more effectively and prevent massive illegal immigration, but she was also a big believer in the state’s ability and obligation to help its people. “We feel the state should have the means to intervene,” she said. “We are very attached to public services à la française as a way to limit the inequalities among regions and among the French,” including “access for all to the same level of health care.”[1] This statement implies that survival is a human right--something the American right has tended to eschew in favor of a survival-of-the-fittest mantra that conflates the state of nature with the interdependency in a developed economy. 

The full essay is at "Disentangling Right from Right."

1. Tracy McNicoll and Christoper Dickey, "What a Tea Party Looks Like in Europe,”  Newsweek, September 6, 2010.

Thursday, January 31, 2019

The Ministerial Exception: A Religious Right to Discriminate

In early 2012, the U.S. Supreme Court recognized, for the first time ever, a “ministerial exception” to employment discrimination laws, saying that churches and other religious groups must be free to choose and dismiss their leaders without government interference. In his written opinion, Chief Justice Roberts wrote, “The Establishment Clause [of the First Amendment to the U.S. Constitution] prevents the government from appointing ministers, and the Free Exercise Clause prevents it from interfering with the freedom of religious groups to select their own.” The wrench in the works here concerns the matter of delimiting the exception, given the inflation in what constitutes “ministerial” in terms of tasks.

The full essay is at "The Ministerial Exception."

Can an American Member-State Exit the Union?

A war was fought over it. In early 2013, the White House made it explicit in replying to a petition. Yet still there was a sense among at least some Texans that something was amiss. Following U.S. President Obama’s re-election in 2012, citizens of Texas, Louisiana, Alabama, and five other member-states in the U.S. signed petitions for the White House to allow their respective states to secede from the Union. At the time, few people other than the secessionists themselves took the petitions seriously. Yet the underlying contending principles deserve more serious reflection even if no "exit" is anticipated. Most importantly, the matter concerns how and whether the rights of member-states (and majorities of the people, therein) are to be circumscribed in a federal union that leaves said republics semi-sovereign and with residual sovereignty.