Alexonomic's Outlook for 2013: South America

Yes, the Brazilians are still the centerpiece of South American economic growth, yet there are competitors arising. While Venezuala faces a period of uncertainty with the potential replacement of Hugo Chavez, Argentina offers a renewed challenge to the Falklands under Cristina Fernández de Kirchner.

Alexonomic's Outlook for 2013: Europe

Europe reminds many historians of conditions during the 1930s. Economically depressed countries are embracing extremist political parties with racial divide, riots, and anger as the symptoms. Currently, most of the population is aware of the European debt crisis. Although a serious as the economic crisis is, the side effects of lower economic output can be more serious.

Americans and their Guns

To stray from the Predictions of 2013 series, I did an infographic of the gun control debate raging in the US, along with some statistics. The objectives of Obama gun control rules come plainly from the White House publication on the topic. As one can see, the proposed regulations are quite practical.

Alexonomics' Outlook for 2013: Africa

Egypt has often been the focus of news in Africa as of late. The removal of Mubarak and election of Mohammed Morsi has proven to be an interesting turn of events, but the excitement is far from over. Morsi symbolically removed ties from the Muslim Brotherhood, but that move hardly removes the influence the party has on the President.

A guide to Environmental Economics

Often, articles will be conclusions with a few supporting facts that will often sway the reader. I find this problematic for two reasons. First, the reader does not have the chance to fully understand the topic because no background is given. Secondly, the reader doesn't really have an opportunity to disagree with the writer's conclusion if the reader has little to no knowledge of the topic.

Wednesday, 19 October 2011

Occupy Wall Street is not the 99%

For once, I don’t know where to start.

The Occupy Wall Street Protests started off as a simple hashtag on twitter that was re-tweeted a few times before it reached its currently popular status as 1 in every 500 hashtags on twitter. That hashtag has materialized to show the power of social media; affecting people from all over the world and unfortunately has been a costly hashtag due to the amount of money spent on policing the protests and repairing the physical damage caused by them. Rome can attest to this, but Greece the protests would have occurred no matter what as the Unions are angry at the new austerity package to be passed. However, we have to ask one fundamental question:

What exactly is the OWS movement protesting?

Corporate Greed. Excessive Debt. Risk. Joblessness. Corporate Lobbyists.

Maybe more?

The problem with protesting this is first, protesting will do nothing. All it will do is create a populist field for the politicians to pander to, and populism is one of the most dangerous attacks democracy has faced in its history. Eventually winter will come, and less people will want to occupy Wall Street, Bay Street, or other financial centers in the Western World. The die-hards will remain, but eventually dissipate as interest dies. Like all events, news becomes old quick.

So we know this movement will die eventually like they all do, as this movement is different from the Tea Party in the sense it has no real leadership and no fundamental quantifiable demands. Fox News will show you interviews of some of the protestors to most likely ridicule them, as their demands are often very vague and ridiculously thought out. I’ll address a few:

First, bringing jobs back to America with manufacturing is not happening. We have a globalized world, and with that come multinational corporations who are self-interested. They will look for the best deal.  This cannot be reversed, the flow of information has never been quicker along with the free trade agreements and the slow abolition of tariffs. Also “99%”, your cheap clothes and cheap gadgets, your $400 laptops you tweet on along with your $30 Wal-Mart shoes, how do you think they were made? If you want your old jobs back along with the union salaries, your cost of living will skyrocket. Sorry “99%”, your old jobs are not coming back.

Next,the debt crisis. A few years back I told a few friends that to get through hell, you actually had to go through it, not simply stare at the abyss. Everyone remembers the debt crisis years ago that caused governments to bail out banks and even the legendary GM (which the government actually made money investing in). Corporate bailouts are small part of this debt crisis, but I will summarize the debt crisis quickly. Remember years ago when Clinton passed the laws to create Freddie Mac and Fannie Mae? Those were inspired by the mandate to help everyone afford a home, even those people who could not afford one. These firms were anti-competitive to the industry, forcing many banks to offer mortgages with less (or more commonly no) money down. Credit was flowing. However, homes were also overvalued as the real estate industry exploded with new buyers (more supply greater demand). Eventually this bubble burst – like it should. However, those mortgages were tied up in funds that were rated by agencies such as Standard and Poors as AAA when they were not. The reason for the rating was the creators of the funds had put junk mortgages tied with the good ones balancing it all out. The banks then insured themselves with Credit Default Swaps, which essentially created a domino effect in the industry.

Then the dominos fell. People lost jobs. Bear Stearns and Lehman Brothers were gone and Washington Mutual is still in bankruptcy litigation. Sorry OWS, but the government hardly helped all the corporate big wigs out.

Also, what inspired these events? The people wanted everyone to have a home, social movements pushed for it. Thus, Clinton made it so. Then when the domino’s fell (because everyone cannot own a home – the principle behind this thought is absurd), people demanded the government protect their jobs. The government did so by issuing bailouts, without some of these bailouts we would have been in a lot more trouble.

In the end, the protestors have to remember that the “99%” did not live in their own means, spent credit they did not have, and that’s what escalated the situation. Don’t believe me? Look up credit card and personal debt statistics. This financial crisis was a function of the people.

Why are we here today? Again, the “99%” wanted pensions. They wanted Medicare and social programs. They wanted social insurance and the rest. They wanted Obamacare. In Europe, French air controllers receive 60 days of paid vacation annually (something like that, I’d like to be proven wrong). More social reform has happened in the last two decades than ever before in history. Why? Because the “99%” wanted it, and voted in the politicians who made it happen.

However, social programs cost money. A lot of money. Throw in large government bureaucracies and it costs more money due to the inefficiencies that exist in these structures. Due to this, governments had to borrow, and borrow they did to keep their citizens happy. Yes, the “99%” mortgaged our future.

So now, banks who loan the deposits they receive from the average Joe so they can make money and inflate the money supply (basic multiplier effect – Econ 101) to the countries, are now facing risk of no payment. The Western governments simply cannot continue to pay what is projected to be in a decade 30% of budgets as interest fees. If Western governments default, it’s a chain reaction. Banks go bankrupt, and deposits are in flux along with the “99%”’s credit cards used to buy those wonderful cardboard signs. Yes, “99%”, read how the banking system works before attacking it. Money is not created out of thin air.

So, we have to come to a conclusion. That is, we have created our own mess. Governments are a function of the people in democracy. Corporations are a function of profit, and that ambition and drive is what creates jobs.

However, two key parts of the protests are corporate greed and lobbyists. First, you will never stop corporate greed just like OWS will never stop the hooligans in masks breaking glass. Why? It’s as simple to say that there are bad people in all organizations. The Muslims have al-Qaeda. The Catholics have Pedophile priests. The government has members who take bribes. It’s going to happen.

Lobbyists? Well, this I tend to agree with. Lobbyists do not allow government to look at issues from an unbiased standpoint, which is something that is missing in Western culture’s decision making today. On the flip side, who do you think funds the million dollar campaigns? Obama’s campaign was projected to cost a billion bucks; that money comes from somewhere. I certainly see why the politicians do it, and I see why the corporations do it. However, the relationship is wrong in principle. How to stop it? Protesting won’t work. Demanding an end to political gongshows (have you seen the Rick Perry ads? Looks like a movie trailer) that have been staged over the last decade would be nice, as these gongshows cost quite a bit. How will we end this? Education of the “99%”. Don’t just vote for the elephant or the donkey, red or blue. Do your research into the candidates, and stay informed. Stay away from populism, and maybe if we all look in the mirror and decide to inform ourselves instead of riding waves of ill thought slogans and loud mouthed speakers.

Readers may be wondering why I placed “99%” in quotation marks. That’s because OWS is not the 99% of the world. OWS is not representative of the global citizens who make informed choices on a daily basis. OWS is a group of people who have nothing better to do than complain about a situation they don’t understand, and place blame on the easiest target. Western countries have gotten themselves into a mess, and the only way to get through it is to take personal responsibility, tighten our belts, and cut a few of the nice perks we’ve had over the last few years.

To get through hell, you actually have to go through it.