President George Bush explained the banking problems rippling through the economy as a drunken binge that has resulted in a hangover:
http://news.bbc.co.uk/1/hi/world/americas/7522335.stm
Apparently, this is news to some people and/or has offended some people. President Bush actually explained this one perfectly. I don't understand the controversy. If you're going to attack him for something, try his earlier linking of 9/11 to Iraq. Don't attack him for something when he makes sense.
Update on July 24, 2008: David Ellison in today's WSJ, C1, uses the same terminology as Bush: "Half of an alcoholic's problem, Mr. Ellison said, 'is admitting he's an alcoholic.'"
"And if an epitaph be my story, I'd have a short one ready for my own: I had a lover's quarrel with the world." -- Robert Frost
Wednesday, July 23, 2008
Susan Decker = Best Corporate Officer Ever?
CNBC had an interview today with Susan Decker, who is now Yahoo's president. She is currently my favorite corporate officer. She has an aura that exudes competence and intelligence, as well as femininity. Women who want to rise up in the corporate ranks ought to study Ms. Decker.
http://www.cnbc.com/id/25815607
She is married with three children.
http://www.cnbc.com/id/25815607
She is married with three children.
Most Overpaid Jobs
Chris Plummer has a great article on overpaid jobs:
http://www.marketwatch.com/news/story/10-most-overpaid-jobs-us/story.aspx?guid={954AA053-F953-43F3-BBC8-63D351A3BF2A}&dist=TNMostRead
CEOs and mutual fund managers go towards the top of the list.
http://www.marketwatch.com/news/story/10-most-overpaid-jobs-us/story.aspx?guid={954AA053-F953-43F3-BBC8-63D351A3BF2A}&dist=TNMostRead
CEOs and mutual fund managers go towards the top of the list.
Tuesday, July 22, 2008
Apple v. Bank of America: Whisper Numbers Come Home to Roost
Some of you who have been following earnings releases will be forgiven for not understanding why the market punished Apple (AAPL) after it released better-than-expected earnings (19%+ EPS surprise), while Bank of America (BAC) increased from $20/share to $32/share after showing its net income decreased by 41%. AAPL's stock was down at one point by 10%. Its growth prospects are still quite good, especially because market penetration in China is incomplete (Steve Jobs indicated that iPhones were being used in China without providing revenue back to Apple due to hacking and IP issues). BAC, on the other hand, will have major problems with its acquisition of Countrywide as more and more notices of defaults (NODs) occur. In fact, in recession-resistant Santa Clara County, NODs recently spiked.
The market makes no sense sometimes, except when it does. Earnings guidance is a game played between companies and analysts. When Apple (AAPL) tells Wall Street it expects 10% increase in sales, it does so with a wink. Apple gives the Street lower numbers so it can beat those numbers come earnings time. The Street, of course, is a formidable player. It accepts Apple's lowered expectations with a wan smile and then dumps it if the numbers aren't dramatically higher. The real numbers required to maintain or increase share price are sometimes referred to as "whisper numbers." Wall Street accepts the lower numbers on paper but demands that the company meet its whisper number later on. It's a strange song and dance that serves no one well.
AAPL went down while BAC went up because shares prices are based on how much money a company expects to earn in the future, not what it made last quarter. So the Street doesn't care about the actual numbers released--it knows it's all a game. The Street pays more attention to how well the company says it will do in the future, especially whether the company will maintain or increase full year guidance (i.e., whether the quarterly numbers released every three months will add up to the full year's "earnings per share" expectations).
What is an average investor to make of all this? Only that share prices are based more on future expectations of value than on past statistics. As they say in business, past performance is no guarantee of future results.
The market makes no sense sometimes, except when it does. Earnings guidance is a game played between companies and analysts. When Apple (AAPL) tells Wall Street it expects 10% increase in sales, it does so with a wink. Apple gives the Street lower numbers so it can beat those numbers come earnings time. The Street, of course, is a formidable player. It accepts Apple's lowered expectations with a wan smile and then dumps it if the numbers aren't dramatically higher. The real numbers required to maintain or increase share price are sometimes referred to as "whisper numbers." Wall Street accepts the lower numbers on paper but demands that the company meet its whisper number later on. It's a strange song and dance that serves no one well.
AAPL went down while BAC went up because shares prices are based on how much money a company expects to earn in the future, not what it made last quarter. So the Street doesn't care about the actual numbers released--it knows it's all a game. The Street pays more attention to how well the company says it will do in the future, especially whether the company will maintain or increase full year guidance (i.e., whether the quarterly numbers released every three months will add up to the full year's "earnings per share" expectations).
What is an average investor to make of all this? Only that share prices are based more on future expectations of value than on past statistics. As they say in business, past performance is no guarantee of future results.
Monday, July 21, 2008
Pfizer (PFE)
Like many before me, Pfizer (PFE) has caused me heartbreak. I sold all but 100 shares of it today, and will consider it a closed position at a percentage loss of 5.5%. I also picked up more IF and EWM and opened a new position, VNQ.
It appears I correctly called a bottom in the banking sector. Today, Bank of America reported better than expected earnings (which means they weren't completely abysmal), and CNB keeps chugging up. As one of the few people in the entire country who called at least a short-term banking bottom correctly, I am waiting for my first CNBC appearance...but won't hold my breath.
I've been keeping track of all my retirement accounts, which is where I do most of my trading. From June 3, 2007 to July 21, 2008, my portfolio increased 3.0%. It's not great performance, but the S&P 500 decreased 18% during that same time period, so I'll take it [from June 1, 2007 (1536.34) to July 21, 2008 (1260)].
The information on this site is provided for discussion purposes only and does not constitute investing recommendations. Under no circumstances does this information represent a recommendation to buy or sell securities or make any kind of an investment. You are responsible for your own due diligence.
It appears I correctly called a bottom in the banking sector. Today, Bank of America reported better than expected earnings (which means they weren't completely abysmal), and CNB keeps chugging up. As one of the few people in the entire country who called at least a short-term banking bottom correctly, I am waiting for my first CNBC appearance...but won't hold my breath.
I've been keeping track of all my retirement accounts, which is where I do most of my trading. From June 3, 2007 to July 21, 2008, my portfolio increased 3.0%. It's not great performance, but the S&P 500 decreased 18% during that same time period, so I'll take it [from June 1, 2007 (1536.34) to July 21, 2008 (1260)].
The information on this site is provided for discussion purposes only and does not constitute investing recommendations. Under no circumstances does this information represent a recommendation to buy or sell securities or make any kind of an investment. You are responsible for your own due diligence.
Sunday, July 20, 2008
New York Times v. Sullivan: Should the NYT Go Private?
The New York Times reports earnings on July 23, 2008. Its stock price has declined as younger readers eschew newspapers for the internet. The NYT's reporting itself is still stellar--its recent reports on the economy have been fantastic, and its charts and easy-to-read graphs showing various economic statistics are unparalleled. Many outlets use the NYT's links or re-publish their articles and statistics, so demand isn't the NYT's problem. The real issue is monetization: "How does the NYT maintain its dual roles as a pillar of news reporting, which requires wide distribution, and as a public corporation, which requires more cash flow to please shareholders?" Both aims are not necessarily synonymous, because free content is more widely distributed, while paid content reaches a smaller audience. These conflicting aims render the NYT heavily dependent on advertising dollars, which are being shifted more to Google and other internet outlets. If Google's recent earnings results are any indication, the NYT may have a difficult future. Still, cash flow is not everything, and the NYT's reputation is still gold in terms of goodwill.
It is vitally important to remember that the NYT is directly responsible for one of the defining legal principles of our country--free speech. Every American should read Justice Brennan's opinion in New York Times Co. v. Sullivan, 376 U.S. 254 (1964):
The First Amendment, said Judge Learned Hand, "presupposes that right conclusions are more likely to be gathered out of a multitude of tongues, than through any kind of authoritative selection. To many this is, and always will be, folly; but we have staked upon it our all." United States v. Associated Press, 52 F. Supp. 362, 372 (D.C. S. D. N. Y. 1943). Mr. Justice Brandeis, in his concurring opinion in Whitney v. California, 274 U.S. 357, 375 -376, gave the principle its classic formulation:
To summarize the decision, American libel law after the NYT case made it very difficult for a public figure to sue someone for criticism. Europeans and Singaporeans, in contrast, sacrifice free speech for more civility. This remarkable difference would not exist had the New York Times not chosen to fight a libel judgment all the way to the Supreme Court. Today, one wonders if the NYT would have authorized such legal fees for the sake of principle. Would shareholders today agree to receive fewer dividends if it meant spending money to establish a long-term legal principle? The more I think about it, the more I believe the New York Times and newspapers should go back to being privately held so they can focus on long-term trends rather than short-term shareholder whims. Perhaps the earnings release on July 23, 2008 will force that result if it is bad enough. If earnings are good, we win because NYT's stock goes up; and if earnings are poor, we win, because we might get a newspaper more focused on reporting, not pleasing shareholders.
Indeed, America's Founders--as much as they hated their newspapers (just ask Alexander Hamilton, whose affair was exposed by the media, making him the original Bill Clinton)--intended media outlets to be the "fourth pillar" of government, keeping it in check. But as media have consolidated operations and focused on profit, it is hard to see any real criticism of government policies. Having hundreds of channels and outlets competing for our attention has fractured the public and its ability to engage in deliberative democracy. Keith Olbermann and Jon Stewart aside, where are our modern-day Edward R. Murrows? It is a sad and telling commentary on today's media that the most critical pundits of government policies are a former sports newscaster (Olbermann) and a comedian (Stewart). As good as they are, we deserve better.
Here are some excerpts from the Supreme Court's decision:
Justice Black:
[S]tate libel laws threaten the very existence of an American press virile enough to publish unpopular views on public affairs and bold enough to criticize the conduct of public officials...We would, I think, more faithfully interpret the First Amendment by holding that at the very least it leaves the people and the press free to criticize officials and discuss public affairs with impunity...I doubt that a country can live in freedom where its people can be made to suffer physically or financially for criticizing their government, its actions, or its officials...An unconditional right to say what one pleases about public affairs is what I consider to be the minimum guarantee of the First Amendment.
Justice Goldberg is even better:
In my view, the First and Fourteenth Amendments to the Constitution afford to the citizen and to the press an absolute, unconditional privilege to criticize official conduct despite the harm which may flow from excesses and abuses...The theory of our Constitution is that every citizen may speak his mind and every newspaper express its view on matters of public concern and may not be barred from speaking or publishing because those in control of government think that what is said or written is unwise, unfair, false, or malicious. In a democratic society, one who assumes to act for the citizens in an executive, legislative, or judicial capacity must expect that his official acts will be commented upon and criticized...Our national experience teaches that repressions breed hate and "that hate menaces stable government."
Justice Brandeis from WHITNEY v. PEOPLE OF STATE OF CALIFORNIA, 274 U.S. 357 (1927) (a Bay Area/Alameda County trial case):
Those who won our independence believed that the final end of the state was to make men free to develop their faculties, and that in its government the deliberative forces should prevail over the arbitrary. They valued liberty both as an end and as a means. They believed liberty to the secret of happiness and courage to be the secret of liberty. They believed that freedom to think as you will and to speak as you think are means indispensable to the discovery and spread of political truth; that without free speech and assembly discussion would be futile; that with them, discussion affords ordinarily adequate protection against the dissemination of noxious doctrine; that the greatest menace to freedom is an inert people; that public discussion is a political duty; and that this should be a fundamental principle of the American government.
It is vitally important to remember that the NYT is directly responsible for one of the defining legal principles of our country--free speech. Every American should read Justice Brennan's opinion in New York Times Co. v. Sullivan, 376 U.S. 254 (1964):
The First Amendment, said Judge Learned Hand, "presupposes that right conclusions are more likely to be gathered out of a multitude of tongues, than through any kind of authoritative selection. To many this is, and always will be, folly; but we have staked upon it our all." United States v. Associated Press, 52 F. Supp. 362, 372 (D.C. S. D. N. Y. 1943). Mr. Justice Brandeis, in his concurring opinion in Whitney v. California, 274 U.S. 357, 375 -376, gave the principle its classic formulation:
- "Those who won our independence believed . . . that public discussion is a political duty; and that this should be a fundamental principle of the American government. They recognized the risks to which all human institutions are subject. But they knew that order cannot be secured merely through fear of punishment for its infraction; that it is hazardous to discourage thought, hope and imagination; that fear breeds repression; that repression breeds hate; that hate menaces stable government; that the path of safety lies in the opportunity to discuss freely supposed grievances and proposed remedies; and that the fitting remedy for evil counsels is good ones. Believing in the power of reason as applied through public discussion, they eschewed silence coerced by law - the argument of force in its worst form. Recognizing the occasional tyrannies of governing majorities, they amended the Constitution so that free speech and assembly should be guaranteed."
To summarize the decision, American libel law after the NYT case made it very difficult for a public figure to sue someone for criticism. Europeans and Singaporeans, in contrast, sacrifice free speech for more civility. This remarkable difference would not exist had the New York Times not chosen to fight a libel judgment all the way to the Supreme Court. Today, one wonders if the NYT would have authorized such legal fees for the sake of principle. Would shareholders today agree to receive fewer dividends if it meant spending money to establish a long-term legal principle? The more I think about it, the more I believe the New York Times and newspapers should go back to being privately held so they can focus on long-term trends rather than short-term shareholder whims. Perhaps the earnings release on July 23, 2008 will force that result if it is bad enough. If earnings are good, we win because NYT's stock goes up; and if earnings are poor, we win, because we might get a newspaper more focused on reporting, not pleasing shareholders.
Indeed, America's Founders--as much as they hated their newspapers (just ask Alexander Hamilton, whose affair was exposed by the media, making him the original Bill Clinton)--intended media outlets to be the "fourth pillar" of government, keeping it in check. But as media have consolidated operations and focused on profit, it is hard to see any real criticism of government policies. Having hundreds of channels and outlets competing for our attention has fractured the public and its ability to engage in deliberative democracy. Keith Olbermann and Jon Stewart aside, where are our modern-day Edward R. Murrows? It is a sad and telling commentary on today's media that the most critical pundits of government policies are a former sports newscaster (Olbermann) and a comedian (Stewart). As good as they are, we deserve better.
Here are some excerpts from the Supreme Court's decision:
Justice Black:
[S]tate libel laws threaten the very existence of an American press virile enough to publish unpopular views on public affairs and bold enough to criticize the conduct of public officials...We would, I think, more faithfully interpret the First Amendment by holding that at the very least it leaves the people and the press free to criticize officials and discuss public affairs with impunity...I doubt that a country can live in freedom where its people can be made to suffer physically or financially for criticizing their government, its actions, or its officials...An unconditional right to say what one pleases about public affairs is what I consider to be the minimum guarantee of the First Amendment.
Justice Goldberg is even better:
In my view, the First and Fourteenth Amendments to the Constitution afford to the citizen and to the press an absolute, unconditional privilege to criticize official conduct despite the harm which may flow from excesses and abuses...The theory of our Constitution is that every citizen may speak his mind and every newspaper express its view on matters of public concern and may not be barred from speaking or publishing because those in control of government think that what is said or written is unwise, unfair, false, or malicious. In a democratic society, one who assumes to act for the citizens in an executive, legislative, or judicial capacity must expect that his official acts will be commented upon and criticized...Our national experience teaches that repressions breed hate and "that hate menaces stable government."
Justice Brandeis from WHITNEY v. PEOPLE OF STATE OF CALIFORNIA, 274 U.S. 357 (1927) (a Bay Area/Alameda County trial case):
Those who won our independence believed that the final end of the state was to make men free to develop their faculties, and that in its government the deliberative forces should prevail over the arbitrary. They valued liberty both as an end and as a means. They believed liberty to the secret of happiness and courage to be the secret of liberty. They believed that freedom to think as you will and to speak as you think are means indispensable to the discovery and spread of political truth; that without free speech and assembly discussion would be futile; that with them, discussion affords ordinarily adequate protection against the dissemination of noxious doctrine; that the greatest menace to freedom is an inert people; that public discussion is a political duty; and that this should be a fundamental principle of the American government.
WSJ Article: Rage against the Machine
The Wall Street Journal published a James Grant (of Interest Rate Observer fame: http://www.grantspub.com/) article today titled, "Why No Outrage?"
http://online.wsj.com/article/SB121642367125066615.html?mod=todays_us_nonsub_weekendjournal
In the old days, you'd expect a William Jennings Bryan preaching to the masses, and Howard Beale being mad as hell at Wall Street's alleged fleecing of the poor. But the William Bryan analogy isn't quite on point, and the populist movement was declared dead as early as June 1990. Take a look at this Kirk Scharfenberg Atlantic Monthly article, "Populism in the Age of Celebrity"--if it was published today, we wouldn't know the difference, even though almost two decades have passed:
http://www.theatlantic.com/issues/96feb/buchanan/scharf.htm
Mr. Scharfenberg's point is we have elevated celebrity and materialism over quieter, more intellectual pursuits, and in doing so, have extinguished "deliberative democracy." To wit: "As a nation, we have lost the capacity to ponder events, reflect on their meaning, and act." Another point Mr. Scharfenberg makes is materialistic pursuits (e.g., studying the stock market) render us more separate from each other, while community-based pursuits (e.g., Little League) bring us together, allowing for active democracy and an exchange of ideas. Put another way, we reap what we sow; however, if we've sown and accepted materialism for the last eighteen years, then who's to blame for our current financial mess?
Overall, the constant strain of greed is probably just one factor in our current malaise. Capitalism seems made for constant boom-and-bust cycles, so when times are good, no one complains, and when times are bad, no one also complains because they expect the next bubble to be around the corner. To borrow from Churchill, perhaps consistently steady growth for everyone isn't as desirable as the inconsistent opportunity for unequal wealth. Thus, the recurring hangover America experiences every ten years seems vaguely familiar but not bad enough to want to actually do something about it.
Personally, I am conflicted about whether outrage is justified. There is no doubt we have become a more craven society, more harried, more avaricious, less God-fearing, and less civil. But we have also become more affluent, more connected through electronic advancements, less hungry, and less stagnant. In France, the youth riot because they cannot find jobs due to the socialist structure, which always favors older persons. In America, even most of the unemployed have televisions, food in the fridge, a car, a cell phone, and internet access. America is also more diverse than ever, and most of the economically vibrant cities have less than a 50% white, native-born population (Chicago, Miami, New York, San Francisco, San Jose, etc.). Even the South is revitalizing itself, as manufacturing moves back to cities like Louisville, KY and Huntsville, AL. It's quite a turnaround from the days of Bull Connor attacking his own city's residents and Sandra Day O'Connor being unable to find a job as an attorney after graduating at the top of her law school class.
So a question has to be asked: is it possible for civilizations to reach a saturation point in terms of progress? Is it possible that while America still has eons of progress remaining in terms of spreading wealth, increasing media diversity, reducing its prison population, and re-discovering a more peace-minded foreign policy, most of the work relating to the spread of basic comforts has already been done? Perhaps we do not riot like the days of Watts because we know we are better off than our ancestors and most of the current world population. As one satirist (P.J. O'Rourke?) has remarked, "When my young daughter tells me, 'Life is unfair,' I tell her, 'Honey, you live in the greatest country in the world. You're not starving. You will not experience government-sanctioned sex discrimination. You have economic prospects. You are relatively safe. You'd better hope life keeps being unfair to you.'"
As for William Jennings Bryan, some readers will remember him as a fiery populist ("You shall not crucify mankind upon a cross of gold"). Yet, almost no one knows the context of the famous gold gobbet. Bryan was attacking the banks for not lending farmers more money. Banks, as we all know, loan more money than they actually have. They can do that because the money isn't linked to any hard asset. A bank doesn't need one bar of gold to loan 100 dollars. It can have no gold in its vault and lend as much money as it wants. In the old days, however, the gold standard meant the U.S. could only loan money based on how much gold it had in its vaults, because it had to be able to redeem the paper money for gold at any time. So if the U.S. didn't buy more gold, it couldn't loan more money to the banks, and the banks couldn't loan more money to the people. The gold standard, by linking paper currency to a fixed quantity of gold, prevented banks from taking in two dollars and loaning the same two dollars to others four or more times through multiple loans. If we had a gold standard today, the subprime mess would not have occurred, because banks would not have been able to fund all the loans without unrealistic quantities of gold.
So when Bryan railed against the gold standard, he wanted more inflation and more loans, because his farmers were already in debt, and their customers didn't have money to buy their products/produce. This double-bind meant the farmers were not getting paid, and their debt was increasing. By advocating more inflation, the value of the farmers' debt would be reduced and more people would have money to buy their products, breaking the debt cycle. Thus, Bryan wanted exactly what we had from 2002 to 2007--easy money.
Lost in all the reporting on the financial crisis is the unprecedented access to money the poor had, leading to a small window of opportunity to escape a lifetime of low hourly wages. As Bryan discovered, easy money helps the poor when compared to having no money. Easy money allows the poor to buy homes. Easy money allows the poor to open a small business. Easy money helps the poor, who get greater access to new jobs created by the influx of new money to spend. Easy money hurts the rich, who see their savings reduced by inflation. In a stunning reversal that would have made Marx proud, shareholders--thought of as rich--took the hit along with the poor. The problem, then, wasn't easy money--it was financial mismanagement and greed on all sides. Such factors make it harder to get outraged. For example, my immigrant, middle-class parents were able to refinance their house at a low interest rate, freeing up more money to spend and giving them more security. At the end of the day, we've reaped what we've sown.
Having said all that, I'm going to let Howard Beale have the last words:
I don't have to tell you things are bad. Everybody knows things are bad. It's a depression. Everybody's out of work or scared of losing their job. The dollar buys a nickel's worth; banks are going bust; shopkeepers keep a gun under the counter; punks are running wild in the street, and there's nobody anywhere who seems to know what to do, and there's no end to it.
We know the air is unfit to breathe and our food is unfit to eat. And we sit watching our TVs while some local newscaster tells us that today we had fifteen homicides and sixty-three violent crimes, as if that's the way it's supposed to be!
We all know things are bad -- worse than bad -- they're crazy.
It's like everything everywhere is going crazy, so we don't go out any more. We sit in the house, and slowly the world we're living in is getting smaller, and all we say is, "Please, at least leave us alone in our living rooms. Let me have my toaster and my TV and my steel-belted radials, and I won't say anything. Just leave us alone."
Well, I'm not going to leave you alone.
I want you to get mad!
I don't want you to protest. I don't want you to riot. I don't want you to write to your Congressman, because I wouldn't know what to tell you to write. I don't know what to do about the depression and the inflation and the Russians and the crime in the street.
All I know is that first, you've got to get mad.
You've gotta say, "I'm a human being, goddammit! My life has value!"
So, I want you to get up now. I want all of you to get up out of your chairs. I want you to get up right now and go to the window, open it, and stick your head out and yell, "I'm as mad as hell,
and I'm not going to take this anymore!"
http://online.wsj.com/article/SB121642367125066615.html?mod=todays_us_nonsub_weekendjournal
In the old days, you'd expect a William Jennings Bryan preaching to the masses, and Howard Beale being mad as hell at Wall Street's alleged fleecing of the poor. But the William Bryan analogy isn't quite on point, and the populist movement was declared dead as early as June 1990. Take a look at this Kirk Scharfenberg Atlantic Monthly article, "Populism in the Age of Celebrity"--if it was published today, we wouldn't know the difference, even though almost two decades have passed:
http://www.theatlantic.com/issues/96feb/buchanan/scharf.htm
Mr. Scharfenberg's point is we have elevated celebrity and materialism over quieter, more intellectual pursuits, and in doing so, have extinguished "deliberative democracy." To wit: "As a nation, we have lost the capacity to ponder events, reflect on their meaning, and act." Another point Mr. Scharfenberg makes is materialistic pursuits (e.g., studying the stock market) render us more separate from each other, while community-based pursuits (e.g., Little League) bring us together, allowing for active democracy and an exchange of ideas. Put another way, we reap what we sow; however, if we've sown and accepted materialism for the last eighteen years, then who's to blame for our current financial mess?
Overall, the constant strain of greed is probably just one factor in our current malaise. Capitalism seems made for constant boom-and-bust cycles, so when times are good, no one complains, and when times are bad, no one also complains because they expect the next bubble to be around the corner. To borrow from Churchill, perhaps consistently steady growth for everyone isn't as desirable as the inconsistent opportunity for unequal wealth. Thus, the recurring hangover America experiences every ten years seems vaguely familiar but not bad enough to want to actually do something about it.
Personally, I am conflicted about whether outrage is justified. There is no doubt we have become a more craven society, more harried, more avaricious, less God-fearing, and less civil. But we have also become more affluent, more connected through electronic advancements, less hungry, and less stagnant. In France, the youth riot because they cannot find jobs due to the socialist structure, which always favors older persons. In America, even most of the unemployed have televisions, food in the fridge, a car, a cell phone, and internet access. America is also more diverse than ever, and most of the economically vibrant cities have less than a 50% white, native-born population (Chicago, Miami, New York, San Francisco, San Jose, etc.). Even the South is revitalizing itself, as manufacturing moves back to cities like Louisville, KY and Huntsville, AL. It's quite a turnaround from the days of Bull Connor attacking his own city's residents and Sandra Day O'Connor being unable to find a job as an attorney after graduating at the top of her law school class.
So a question has to be asked: is it possible for civilizations to reach a saturation point in terms of progress? Is it possible that while America still has eons of progress remaining in terms of spreading wealth, increasing media diversity, reducing its prison population, and re-discovering a more peace-minded foreign policy, most of the work relating to the spread of basic comforts has already been done? Perhaps we do not riot like the days of Watts because we know we are better off than our ancestors and most of the current world population. As one satirist (P.J. O'Rourke?) has remarked, "When my young daughter tells me, 'Life is unfair,' I tell her, 'Honey, you live in the greatest country in the world. You're not starving. You will not experience government-sanctioned sex discrimination. You have economic prospects. You are relatively safe. You'd better hope life keeps being unfair to you.'"
As for William Jennings Bryan, some readers will remember him as a fiery populist ("You shall not crucify mankind upon a cross of gold"). Yet, almost no one knows the context of the famous gold gobbet. Bryan was attacking the banks for not lending farmers more money. Banks, as we all know, loan more money than they actually have. They can do that because the money isn't linked to any hard asset. A bank doesn't need one bar of gold to loan 100 dollars. It can have no gold in its vault and lend as much money as it wants. In the old days, however, the gold standard meant the U.S. could only loan money based on how much gold it had in its vaults, because it had to be able to redeem the paper money for gold at any time. So if the U.S. didn't buy more gold, it couldn't loan more money to the banks, and the banks couldn't loan more money to the people. The gold standard, by linking paper currency to a fixed quantity of gold, prevented banks from taking in two dollars and loaning the same two dollars to others four or more times through multiple loans. If we had a gold standard today, the subprime mess would not have occurred, because banks would not have been able to fund all the loans without unrealistic quantities of gold.
So when Bryan railed against the gold standard, he wanted more inflation and more loans, because his farmers were already in debt, and their customers didn't have money to buy their products/produce. This double-bind meant the farmers were not getting paid, and their debt was increasing. By advocating more inflation, the value of the farmers' debt would be reduced and more people would have money to buy their products, breaking the debt cycle. Thus, Bryan wanted exactly what we had from 2002 to 2007--easy money.
Lost in all the reporting on the financial crisis is the unprecedented access to money the poor had, leading to a small window of opportunity to escape a lifetime of low hourly wages. As Bryan discovered, easy money helps the poor when compared to having no money. Easy money allows the poor to buy homes. Easy money allows the poor to open a small business. Easy money helps the poor, who get greater access to new jobs created by the influx of new money to spend. Easy money hurts the rich, who see their savings reduced by inflation. In a stunning reversal that would have made Marx proud, shareholders--thought of as rich--took the hit along with the poor. The problem, then, wasn't easy money--it was financial mismanagement and greed on all sides. Such factors make it harder to get outraged. For example, my immigrant, middle-class parents were able to refinance their house at a low interest rate, freeing up more money to spend and giving them more security. At the end of the day, we've reaped what we've sown.
Having said all that, I'm going to let Howard Beale have the last words:
I don't have to tell you things are bad. Everybody knows things are bad. It's a depression. Everybody's out of work or scared of losing their job. The dollar buys a nickel's worth; banks are going bust; shopkeepers keep a gun under the counter; punks are running wild in the street, and there's nobody anywhere who seems to know what to do, and there's no end to it.
We know the air is unfit to breathe and our food is unfit to eat. And we sit watching our TVs while some local newscaster tells us that today we had fifteen homicides and sixty-three violent crimes, as if that's the way it's supposed to be!
We all know things are bad -- worse than bad -- they're crazy.
It's like everything everywhere is going crazy, so we don't go out any more. We sit in the house, and slowly the world we're living in is getting smaller, and all we say is, "Please, at least leave us alone in our living rooms. Let me have my toaster and my TV and my steel-belted radials, and I won't say anything. Just leave us alone."
Well, I'm not going to leave you alone.
I want you to get mad!
I don't want you to protest. I don't want you to riot. I don't want you to write to your Congressman, because I wouldn't know what to tell you to write. I don't know what to do about the depression and the inflation and the Russians and the crime in the street.
All I know is that first, you've got to get mad.
You've gotta say, "I'm a human being, goddammit! My life has value!"
So, I want you to get up now. I want all of you to get up out of your chairs. I want you to get up right now and go to the window, open it, and stick your head out and yell, "I'm as mad as hell,
and I'm not going to take this anymore!"
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