Friday, December 12, 2008

Flogging the Corpse

Of course, the Treasury and Paulson are going to step in and throw money at the failing Detroit car makers, so you have to wonder why they even bothered to discuss it in Congress. We seem to waste a lot of time and energy in this country in hot debates over things that are really foregone conclusions, even though I must say I'm grateful for the efforts of Shelby and Armey to block the diversion of yet another major chunk of public money to yet another failing, badly run industry that ought to be allowed to die with dignity.

Paulson is going to use some of the TARP funds to prop up these sclerotic, uncompetitive businesses with their overpaid executives and bloated Union wages, thus removing all incentive for these companies to evolve into concerns that could compete under rapidly changing conditions,and supply us with useful products in the times ahead- times in which the market for automobiles will shrink drastically. We will be paying an even larger portion of our taxes to subsidize an obsolete industry while the Koreans or Russians or Chinese build the rail cars, wind turbines, innovative nuclear and coal technologies, super-efficient solar panels, and other new and yet-to-be-conceived-of technologies and products we will be needing for most people to have any motorized transportation, electrical power, heated homes, reliable supplies of clean water or decent sanitation, or any other technological amenity that enables a civilized existence for hundreds of millions of people.

We won't be inventing or manufacturing these things here in the U.S., because we're casting all our energy, and our money for years to come, at obsolete industries and at maintaining the fiction that we can do things exactly the way we've been doing them for the past forty years.

The denizens of Detroit, likewise, will continue in their Cargo Cult-like fixation on the dying auto industry, and continue to pour all their resources and energies into reviving its twitching corpse, instead of recreating their economy on another template, and making the city a place that any other sort of business might want locate in or commit to. This is the typical pattern of dying civilizations. A major cause of the deterioration and death of a culture is the tendency most people have to remain fixated on that which made them successful in the past, in the face of vastly altered conditions. I've always said that the best thing that could happen to Detroit is for all of the Big 3 to roll over dead, so that the citizens of that poor battered city could focus on rebuilding their economy along lines more in keeping with 21st Century realities. But as long as our politicians and policy wonks are controlling the economy, we will just keep on throwing our resources at investments gone bad, while nipping emerging industries in the bud.

Given that the rescue of the financial industry is an admitted failure, I don't expect the domestic auto makers to revive under the ministrations of the Feds, but I do expect that the $14 Billion in loans under consideration won't be the last cash call. Similarly, we will keep throwing money at the failing financial firms, and have committed around $7 Trillion in loans, buybacks, mortgage assistance, and general assistance to the failing effort, while failing to generate jobs or new investment in the private sector. General Motors has $60 Billion worth of debt, and its only profitable division, GMAC, committed suicide with its DiTech 125% mortgages. The auto rescue will probably entail over $100 Billion in loans that will most likely never be repaid; these companies will still fail, for they have rolled rapidly downhill for over 30 years, thanks in no small part to government assistance and accommodations that have enabled them to cling to outdated business models and products.

Locally, we continue to create more TIF districts even though almost every TIF district designated to date has failed of its stated purpose, sometimes spectacularly (remember March First?). Others have merely produced revenues that are less than if the development had not taken place, and all are funneling money from each tax hike away from essential municipal services, resulting in revenue shortfalls and the steep deterioration of essential services and infrastructure. Worse, much of the touted retail development our taxes paid for is failing. Border's Books will close four locations along the lakefront (Uptown on Broadway; Diversey& Clark, North & Clybourn, and Hyde Park) as soon as they can get the spaces sublet, and other chain retail is downsizing rapidly. In return for hundreds of millions of dollars in direct assistance and tax incentives, we will have empty spaces, most of which are too large for most of the business that might want space in these locations, while the suburbs will be littered with dozens of dying, half-empty shopping malls and power centers that are of no use to any other type of concern, and will blight every neighborhood they're located in.

A 'rescue' of the failing airlines is now be discussed, even though we already render $14 Billion a year in direct subsidies to the commercial carriers. That the airlines have been failing for years because air travel is intrinsically uneconomical and inefficient for short distances, and the whole industry is predicated on plentiful supplies of extremely cheap fuel, is not discussed. We speak of rendering larger subsidies to Amtrak, but we do not discuss removing the multiple regulatory barriers to the development of private rail carriers and otherwise leveling the playing field between them and thier extensively subsidized auto and airline competition, so that passenger service can be profitable for them. Instead, we think only of tossing more money at another mismanaged, government-owned entity. Likewise, we continue to subsidize other failing industries, as well as lifestyles and patterns of development that we would have evolved away from decades ago had not our hamfisted policy makers had the ability, granted by our taxing authorities, to implement policies whose reach extended down through decades, far beyond the limited vision of any collection of human beings, no matter how brilliant and knowledgeable. The result is continued misinvestment on a gargantuan scale, with borrowed money we will never be able to pay back, in industries and lifeways that have no future.

The economic carnage and physical blight left behind by government assistance, incentives, and other interventions is visible in every municipality in the United States, and in almost every industry. It began with many of the social programs of the New Deal era, that included low-income housing projects that were supposed to be a cure for the teeming slums, and the policy-driven and tax-funded steering of the general population toward auto suburbs and car dependence via FHA loans available only for homes in newly constructed subdivisions, and the construction of the highway system that tore apart fine-grained urban neighborhoods a;d isolated remaining residents from jobs and mobility. It is culminating in the disastrous failure and unprecedented destruction of our financial system, the complete socialization of our economy and the destruction of budding new technologies and business models, while draining the last of our diminishing economic power and depleting resources to keep failed Old Economy business afloat, that would have died a natural death many years before without such intervention.

Yet, we can blithely babble about the failure of something we call the "free market". What free market? We haven't had anything resembling that since the late 19th century, and it is difficult for most people to imagine an economy that somehow functions without "partnerships" between business and the government. We fail to see that the more an industry is subsidized, the more it fails- and almost every industry in this country is subsidized, to the extent that it has become impossible to tell what really supports itself and makes economic sense, and what doesn't. The debt bubble would never have reached the proportions it did without the easy money policies of the Fed in conjunction with massive subsidies for home builders and buyers, and the implicit guarantees of rescue for feckless financial institutions should they (again) encounter problems with the layers of bad debt our policy makers urged them to underwrite. And our domestic auto makers might have remained innovative and competitive had they not been spoiled with the easy profits of defense contracting where they never had to justify their costs, or their friends in Congress and in their local governments, who enabled them in continuing to build obsolete products by favored tax treatment and incentives.

Now that our leaders have publicly admitted that the housing "rescue" is a flop, can we reasonably expect the auto or airline bailouts to succeed? And can we also expect that government policy makers and politicians will do a better job of operating these concerns that their current managment has?

Could we start rolling back all the "rescue" programs, and instead make the emergency provisions we should have made to begin with? Government intervention is warranted only for emergencies, and the appropriate response to the failure of our financial institutions would have been to protect the innocent by protecting all "demand" money in checking, savings, and money market accounts up to any amount, as well as fixed insurance policies and annuities, and then let the tottering institutions fail. We could then spend a portion of the money we have misinvested so far, instead, on extending unemployment and on necessary infrastructure repair and replacement. The idea is to protect the innocent and their money, while providing a minimal safety net for the swelling numbers of unemployed and destitute until they can regain their footing. The idea should not be to socialize the entire economy, and it's time to look at the massive hairball of subsidies and government incentives, going clear back to 1900, that have caused so much misinvestment and pernicious development at the expense of industries and development that would be more appropriate to where and what we are now, and would be flexible enough to adjust to changing conditions as they emerge.

Thursday, December 11, 2008

Safety Alert

The Edgewater Community Council has issued a safety alert that pertains especially to elders, here in its entirety, for residents of Uptown, Edgewater, Ravenswood, Rogers Park, Lincoln Square, and West Ridge:

December, 2008

Community Alert

18th,19th,20th,24th Chicago Police Districts

One to three offenders
  • male white or white Hispanic,
  • 20's to 30's
  • 5'04 to 5'08
  • 150-160 lbs
  • white or silver automobile, possibly a white hatchback with temporary plates
try to gain entry into homes of lone elderly victims by deception. Offenders claim to be employees of a utility company needing to enter the residence to make repairs. Occasionally the offenders claim to be new neighbors or construction workers.
One of the offenders keeps the victim distracted while the others search for and remove valuables and cash from home.

If you have any information please call 911.

Tips on calling 911

Keep your Holiday Season Safe by Following These Safety Tips

The Holiday Season is a very special time of the year. It's a time for family, friends, and festivities! But also a time when busy people forget to be careful about their personal safety and property. As a result, people can become victims of burglary, theft, fraud, and con-games.

Everyone could use extra money around the Holidays, including the criminals. The Chicago Police Department is publishing a few suggestions to make sure that your holidays are safe and secure.

  • Give your home the "occupied appearance" by leaving various lights on.
  • Let a trusted neighbor know if you are going to be gone for longer period of time. Return the favor and create a "Neighborhood Watch".
  • Don't use shortcuts through alleys or walkways. Always use well-lit and well-traveled areas.
  • Always keep a hand free for emergencies.
  • Shop with friends and relatives. There is safety in numbers.
  • If you must take a purse with you, carry it close to your body with the clasp turned towards your body.
  • Cash should be carried in a front pants pocket.
  • Do not display large sums of cash.
  • Never leave your purse in a shopping cart or on a counter unattended while you shop.
  • Transfer valuables to the trunk of your vehicle before you reach your destination.
  • Never leave valuables in plain view inside of your vehicle.
  • Keys should never be carried in your purse. Keep your keys in your pocket.
  • Remain alert at all times.
  • When returning to your vehicle or home, have your keys in your hand before you reach the door.
  • Use the "panic or alarm button" on your chain if you feel fearful or suspicious.
  • Be alert for suspicious persons loitering in parking lots.
  • Always lock your vehicle even if you are only going to be gone for a few minutes.
  • Lock your doors immediately upon entering your vehicle and always drive with your doors locked.
Have a Safe and Happy Holiday Season!
Aida Kulasic
Edgewater CommunityCouncil
Housing and Safety Director

Monday, December 8, 2008

Now Don't Tell Anybody

There's nothing that plays so badly with the American public as bad news, especially if it means that we might be compelled to alter our daily habits or give up things that we've grown to view as entitlements, like ever bigger and more amenity-stuffed houses on 3-acre lots 50 miles out of the city that appreciate 20% a year and have ATM machines attached to them so that we can pull money out of them every time we get an itch for some recreational shopping, or the ability to wrack up a three-quarter million dollars' worth of debt on those houses while making payments against them barely equal to the rent on an average city apartment and while using them as piggy banks from which to pull money for vacations and boats and Hummers and shopping sprees at the mall.

Willful blindness on the part of the people we pay to lead us in policy matters, and coddling the public in its delusional state, have been the chosen political operating methods of both our political parties, which did a wonderful job of deluding themselves and the public as to the price that would exacted for the 10-year credit binge that has produced the current economic debacle. Anyone who pointed out the rather obvious facts- that the debt being incurred would sometime soon have to be repaid by somebody, and that debt both public and private had reached levels beyond what we jointly or severally could hope to pay back in our lifetimes- was labeled a killjoy and party-pooper, and booed off the stage.

However, there are a few public figures that have been stalwart in their determination to level with the public and deliver the information we badly need in order make the personal decisions and plans that either enable us to successfully resist the destructive hysteria of the moment and make the life and financial decisions that will enable us to negotiate some of the most wrenching shifts in our economy and life arrangements in over a century, and continue to lead reasonably comfortable lives- or end up being refugees in Tent Cities, bartering toilet paper for washing water and canned beans. Senator Roscoe Bartlett, a Maryland Republican, is one of these, along with former Fed Chairman Paul Volcker, oil geologists Colin Campbell and Kenneth Deffeyes, and SAIC Senior Energy Program Advisor Robert L. Hirsch, whose landmark report on the eminent peaking of world oil production, Peaking of World Oil Production: Impacts, Mitigation, and Risk Management, is an unsparing assessment of the bleak and choppy future on the downslope from the peak of production; and the difficult and wrenching shifts in our entire fix on life that we must make in order to ensure a shift to lower energy use, and still enjoy anything like the technological amenity that we have enjoyed since 1900.

Therefore, it's unsettling and not a little ironic, that at just the hour when we are being shown the gruesome cost of willful blindness regarding our finances public and private, that Hirsch himself would counsel us to soft-pedal the truth regarding world energy supplies, and enable the public in self-delusion regarding the harrowing energy sitution and our lack of viable alternatives to our current energy-guzzling life arrangements. Hirsch was quoted in the November 14 issue of The New York Times, and many other places, as follows:


The world is in the midst of the most severe financial crisis in most of our lifetimes. The economic damage that has already been wrought is considerable, and we have yet to see the bottom or the turnaround. Against this background, I suggest that the peak oil community minimize its efforts to awaken the world to the near-term dangers of world oil supply. The motivation is simple: By minimizing our efforts in the near term, we may not add fuel to the economic fires that are already burning so fiercely.

We are all aware of how disoriented governments and business are right now. Our leaders, leaders-to-be, and best minds are disoriented and seeking pathways out of the current morass. The public is in a quiet panic mode — those who were reasonably well off are less well of, and their options for action are limited. Those that have lost their jobs and/or homes are desperate. Businesses and the markets are in what might be called a free fall. If the realization of peak oil along with its disastrous financial implications was added to the existing mix of troubles, the added trauma could be unthinkable.

Like many of you, I’ve devoted my recent efforts to trying to wake the public and governments to the impending horrors of peak oil. As much as that awaking is urgently needed, continuing to press forward now is almost certainly not in the broader interest.

Many may be tempted to directly challenge the recent IEA World Energy Outlook. I am among those who were very disappointed. Pressing those concerns at this time might further the peak oil “cause,” but it could well do much more damage than any of us really intend.

Please keep up your studies and thinking, because helping the world realize the dangers of peak oil is an absolute must. In the near term, keeping relatively quiet is likely the better part of valor.

Certain phrases in Hirsch's plea speak to the problem with Willful Blindness. Would "our leaders, leaders-to-be, and best minds" be so "disoriented", had they sqaurely confronted the many signs out there, that were there as early as 2003, that the credit rampage was ratcheting out of control and that the overhang of public and private debt, the largest ever in the history of the world, was a massive threat to our financial system and economy? They did not confront the situation because doing so would have wrecked the "ownership society" party of "wealth creation, which was wholly dependent upon debt creation and asset inflation; and the underlying weakness of our unproductive and parasitical economy would have been laid bare, with unacceptable political repercussions.

Well, the confusion and disorientation of our leaders and "best minds" regarding the global financial unravelling is nothing compared to the panic, hysteria, and total inability to deal with non-negotiable realities, that will ensue once we are headed irrevocably down the slope of fossil fuel depletion,and which is starting right now- if we continue to delude ourselves regarding the gravity of the global fossil fuel drawdown and the weakening position of this import-dependent country in competing for dwindling global supplies. Once again, our leaders will be blindsided by circumstances that these wonderful minds will tell us they could not possibly have been expected to forsee, and we will have to deal with a constellation of suddenly dire circumstances, from a position of extreme ignorance, a bloated sense of entitlement, and the almost total lack of alternatives, coping skills, or willingness to adapt our behavior and world view to new and unwelcome circumstances.

As any floundering home debtor grappling with the reset of his $500,000 mortgage to payments that exceed his monthly income can ruefully attest, willful blindness regarding the core material facts of your life is not a sound operating policy for individuals. You wouldn't have taken that mortgage had you troubled yourself to actually read it and understand it, would you?And if the failure to see and understand is disastrous for individuals making major life decisions, how dangerous is it for a troubled country of 300 million people who are mostly totally dependent upon systems and arrangements that simply will not function once the fuel supplies that make them possible begin to dwindle sharply? The failure of our "best minds" to confront this bald truth is criminal.

We're not talking here about just having to give up our cars and being stranded in unheatable houses 5 miles from the nearest public transit. We are talking about the breakdown of all the systems and structures we depend upon for food production and delivery, for health care, for electrical power and home heating, for sanitation and potable water. We have not discussed how we will allocate fuel supplies in order to make sure that lifeline services such as the fire and police departments are adequately supplied, nor have we talked about the public health challenges that spot shortages and suddenly upward-ratcheting prices due to that, might entail, such as the sudden unavailability of essential vaccines, or the inabililty of many municipalities to deliver the clean water we take for granted, or provide for basic sanitation.

We cannot afford to be willfully blind regarding the global fuel drawdown, which is continuing apace even with the recent destruction of oil prices and the return to $40 a barrel oil due to the global financial unwinding. This is a temporary circumstance that in itself could lead to critical shortages, as many drilling and recovery projects have been cancelled due to the impossibility of realizing a profit at these price levels, meaning that we will have less oil in the near future. Failure to negotiate the downslope successfully will mean that we will not only never recover economically in our likely lifetimes, but will also experience systems failure, social disorder, and material hardship comparable to that experienced by Russia after the Soviet collapse, except that the Russians had a degree of social cohesion and experience in dealing with material adversity that we totally lack here in this land of total dedication to personal convenience at any cost in fuel and debt.

Our politicians will not tell us the truth because their careers depend upon making us feel good. And now even people who usually know better are afraid of panicking us sheoples out here and possibly causing a stampede. Therefore, may I suggest that we each of us begin, as individuals and local communities, to prepare ourselves? For individuals, that means getting out of debt to the extent possible in these jobless times, curtailing spending on non-essentials, and redesigning our lives for comfort and amenity, not to mention bare material survival, on a much smaller energy platform. What adjustments a person makes will depend on personal necessities and means. It might mean getting to know your community and neighbors better, and forming informal cooperative associations and mutual-aid pacts. It will probably mean relinquishing treasured material goals and adjusting to meaner circumstances than what we've been accustomed to. For communities, it means tabling planned public expenditures, especially on large infrastructure projects that will be increasingly obsolete under the new regime of energy scarcity, while committing to putting the systems and platforms in place that we will badly need down the road. It should certainly mean curtailing spending on monument-building and "vanity" projects that bring no long-term benefit to the community but occasion large net costs, like Chicago's planned 2016 Olympics. It should also mean rolling back the pay raises of public officials, in keeping with the reduced circumstances of the citizens underwriting their paychecks. It should absolutely mean a critical look at all our lifeline services and our critical water, utility, and sanitation infrastructure in order to make critical repairs and improvements while fuel is still relatively cheap, for the costs of improvements will ratchet beyond affordability as fuel prices start to hike again.

Most of all, we need to get the word out. Willful blindness is not "the better part of valor"; it is cowardice, and if ever there were a time that we cannot afford to walk through a minefield blindfolded, this is it.

Saturday, December 6, 2008

Nix the 2016 Olympics

Is the City of Chicago broke enough without committing $2 billion or more to another idiotic and disruptive exercise in empty symbolism and monument- building?

If New York City doesn't want the Olympics, should we consider whether we really want it?

And just exactly what will the city gain from hosting this 8-week extravaganza with the attendant security risk, and the disruption and displacement of thousands of residents from the area around Washington Park?

The cost alone ought to make boosters pause. Chicago is in poor case to front the projected $2 billion the event will cost, which would mean a pretty steep net loss to the city, for revenues from ticket sales are projected to be about $750 Million.

However, the estimated cost is most likely a very conservative estimate of the actual costs involved. The experience of other cities hosting the event is very instructive. Tessa Jowell, the minister in charge of the London 2012 Olympic Games, has admitted that it was "a mistake, in light of the current recession", to have bid for the games, and that costs are far exceeding original estimates. The cost has, according to Jowell, risen almost four-fold, to 9.35 Billion pounds, or approximately $20 Billion. Bejing fared much worse with its 2008 games, which not only cost more than $40 Billion, but occasioned a massive diversion of water from the provinces, causing widespread crop failures in water-short,poverty-stricken rural provinces.

The London games will not take place for another four years, yet the costs continue to mount, and during the worst ecomomic downturn in 75 years. Given our mayor's penchant for monument-building projects that virtually always overrun their costs estimates and siphon much-needed funds from lifeline services such as our underfunded and steeply undermanned police department, and decrepit public transit and essential water, sewer, and road infrastructure, we can pretty well figure that the expenditures on the Olympics will cause steeper shortfalls, with potentially disastrous results, in our necessary municipal services and structures. We need urgently to consider whether an open-ended financial commitment to this immense vanity project is in order given our current economic situation, especially since it so closely parallels the debacle of 1929 and ensuing Great Depression. Falling personal incomes, failing businesses, and mass layoffs will probably continue for quite some time, and we will be severely challenged to meet minimal public needs from falling tax revenues. All public expenditures will have to be carefully weighed, and whatever is not essential to maintain our muncipal services at a level that assures the safety and basic well-being of its citizens and businesses, will have to be tabled.

Well, counter the boosters, the games will boost tourism and enrich city businesses. My first response to that, is: at whose cost? Will the taxpayers at large be soaked once more to provide profits to a few business concerns? Are the taxpayers not being soaked enough through the city's 165 or so TIF districts in order to provide lavish profits to a few crony businesses?

However, it appears, from the experience of Atlanta, that the event can result in a net loss of tourism and revenues to tourist-related businesses. A 2003 study by Coates and Humphrey concluded that "building new sports facilities and attracting new professional sports teams did not raise income per capita or total employment in any US city." In his excellent article, Estimating the Costs and Benefits of the Olympic Games:What Can Bejing Expect From Its 2008 Games?, Jeffrey Owens describes the disappointing economic results of the 1996 Atlanta, Georgia games:

In reality, data and anecdotal evidence strongly suggest the Olympics had a significant crowding out effect on the rest of the tourism industry. Table 3 shows convention attendance in Atlanta, which had been increasing steadily over the previous ten years, fell ten percent from 1995 to 1996. hotel occupancy rates fell from 72.9% in 1995 to 68% in 1996 despite the Olympics. Macroeconomic indicators in Georgia and Fulton County show no discernible break in the pattern of per capita income growth or unemployment rates (State of Utah 2000). Due to the disruption caused by the Olympics, hotels and restaurants that would be expected to benefit from increased tourist traffic were actually hurt. "In other parts of town, many hotels and restaurants reported significantly lower than normal sales volume during the Games. Even shops and resorts in areas up to 150 miles away reported slower than normal business during the summer of 1996" (French and Disher 1997, p. 390).

Mr. Owen goes on to remark:

Along with crowding out on the demand side, local businesses and workers must also deal with temporary entry on the supply side. Although the Atlanta economic impact report makes no mention of entry by either workers or firms, the Atlanta experience serves as an example of how entry can bring into question if area residents actually benefit from growth in the tourism sector. The Centennial Olympic Park in downtown Atlanta served as the focal point for entry of corporations who sponsored the Games. To some extent the Olympics in Atlanta were self-contained. Entry of corporations and workers from outside the Atlanta area made the Olympics an economy unto themselves. Much of the income would go to firms and workers who are not permanent residents of the local economy.

Lastly, consider the terrorism risk. Chicago got lucky in the 911 attack. The 911 terrorists had a much bigger day planned than what they were able to accomplish, for the Sears Tower was on their list of targets, and only the immediate closure of all airports in the country saved this city. Security will have to be a major obsession at the games, given Atlanta's experience, and the known threat that exists at this time. The Games have been so politicized and are so laden with symbolic value that they are a very appetizing target for terrorists.

Whether considered in the light of its cost to the taxpayers, the security risk involved, the disruption of the lives of thousands of residents in the affected area and their inevitable displacement, or the negative return on investment that most cities hosting the games have experienced, the Olympic Games are a costly and unjustifiable vanity.


Because of the lenght of the URL links to articles quoted here, I didn't link them in the article but am posting the links below.

The title of this post links to a series of articles examining the Chicago 2016 Olympic bid, by Daniel Honigman. Dan's website is http://danielhonigman.com. He has posted an entire series of articles discussing the costs and benefits of the 2016 Chicago Games.

Jeffrey Owens, Estimating the Cost and Benefit of Hosting Olympic Games: What Can Bejing Expect From Its 2008 Games? is at http://findarticles.com/p/articles/mi_qa4127/is_200510/ai_n15705690/pg_1?tag=artBody;col1