Tuesday, April 30, 2013

Death by Schooling

It never ceases to amaze me how so many Americans support legislators who slash and burn public school budgets but scream for more prisons, harsher sentences, and the right to bear arms to protect themselves from a growing (they believe) criminal element and a gnawing underclass that saps entitlement programs. As if there were no correlation between a failed public school system, from K through college, the worst time in over 80 years to try and get a job without skills or education, and the heavy cost of social welfare and our over-large criminal justice system.
The 47% - including retirees who paid into the Social Security accounts – are drains on the system, say some of the most senior politicians in America. Why should the rich subsidize those families who act irresponsibly and do not avail themselves of the “clear” opportunities that society offers them? The adults and older kids who have opted for welfare and a criminal path should be punished, not coddled, they say. The notion of “victimization” wears thin on the minds of hardworking Americans who have to pay the taxes to support those who do not or cannot. These taxpayers feel that it is they who are indeed the victims of an underclass destined to prey on their wealth and their labors. School budgets they can cut, but prisons – at over $40K/prisoner per year in expected costs – are good investments?
The problem with this approach is the relying on any concept of victimization – giver or taker –  to understand the process. Do we punish a seven-year-old, whose single mother has no capacity to parent, by putting that child into an urban public school system where he or she has no real shot of learning how to read, write, calculate and reason, where the dropout rate is over 50% by time high school rolls around? It takes a lot of individual focus to turn that child around, but there is little appetite among legislators to address the problem with a solution that really could work. Between union seniority systems and budget-cutting legislators, children are increasing nothing more than an inconvenient truth.
Are the horrifically overcrowded inner city classrooms, dilapidated facilities, the older kids shaking down younger kids with “pocket checks,” the proclivity to join a gang if only for protection within an underfunded and corrupt system that truly doesn’t care, teachers who cannot cope with the restrictions, the new “teaching to the test” mentality, and peer pressures to give up and move into the streets all to be blamed on these miscreants-in-the-making elementary school children? And if we failed these children from the day they entered the public school system, exactly why are we enraged when they later enter the adult world as burdens to society? What exactly did we expect them to become?
A couple of articles point out exactly how stupid our educational policies are, even among kids who want to go beyond high school. The Los Angeles Unified School District, with a pretty typical urban dropout rate for major cities (over 50%), illustrates our folly. A study of the LAUSD from Harvard University, released on March 8th, shows how ill-prepared most graduates are to pursue higher education. “[The] Harvard study … found that just 16 percent of LAUSD's Class of 2011 passed the classes needed to attend California's public universities, an indicator of the challenges facing the district as it makes rigorous college-prep courses a requirement for graduation…
“Using information provided by LAUSD, researchers found that 66 percent of students who entered ninth grade in 2008-09 were on track to graduate, but only 59 got their diploma four years later. And just 16 percent of those students completed the A-G [basic college prep] coursework by the time they graduated, although 36 percent had started down the college-prep track as ninth-graders.” Huffington Post, April 9th. And most kids who do move from LAUSD’s public school system into the state’s junior colleges, colleges and universities need some level of remedial education!
Across the country, we seem to have decided to deny the vast majority of our children either a viable future or even a standard of living that approaches half of what the older generations enjoyed before the Wall Street-driven economic collapse. Even before the resulting massive budget cuts to education, we were performing badly: “In 2009, the Program for International Student Assessment, which compares student performance across advanced industrialized countries, ranked American 15-year-olds 14th in reading, 17th in science and 25th in math — trailing their counterparts in Belgium, Estonia and Poland. One-third of entering college students need remedial education. Huge gaps by race and class persist: the average black high school senior’s reading scores on the National Assessment of Educational Progress continue to be at the level of the average white eighth grader’s. Seventeen-year-olds score the same in reading as they did in 1971…  As the education scholar Charles M. Payne of the University of Chicago has put it: ‘So much reform, so little change.’”  New York Times, April 12th.
And now with the terrifying distraction of school shootings, some American school districts are lovingly following the NRA’s recommendation of having well-armed guards in school, even police officers stationed there. Of course, the law of unintended consequences has once again created new and unforeseen costs, squarely placed into our overtaxed criminal justice system, from our “let’s solve our problems with guns” mentality. “As school districts across the country consider placing more police officers in schools, youth advocates and judges are raising alarm about what they have seen in the schools where officers are already stationed: a surge in criminal charges against children for misbehavior that many believe is better handled in the principal’s office.
“Since the early 1990s, thousands of districts, often with federal subsidies, have paid local police agencies to provide armed ‘school resource officers’ for high schools, middle schools and sometimes even elementary schools. Hundreds of additional districts, including those in Houston, Los Angeles and Philadelphia, have created police forces of their own, employing thousands of sworn officers…
“Nationwide, hundreds of thousands of students are arrested or given criminal citations at schools each year. A large share are sent to court for relatively minor offenses, with black and Hispanic students and those with disabilities disproportionately affected, according to recent reports from civil rights groups, including the Advancement Project, in Washington, and the NAACP Legal Defense and Educational Fund, in New York.
“Such criminal charges may be most prevalent in Texas, where police officers based in schools write more than 100,000 misdemeanor tickets each year, said Deborah Fowler, the deputy director of Texas Appleseed, a legal advocacy center in Austin. The students seldom get legal aid, she noted, and they may face hundreds of dollars in fines, community service and, in some cases, a lasting record that could affect applications for jobs or the military.” New York Times, April 11th.  Let’s hear it for the permanent underclass that we seem destined to continue to expand!
Yup, we’d much rather spend money on our criminal justice system, even inserting it into our school systems, diverting educational budgets in order to satisfy the NRA. These are our choices, and the heavy pressure on our entitlement and criminal justice programs are the linear and direct consequences of these decisions. Want someone to blame? Look at those who have decimated our public educational system. It is their fault… and those who voted for them.
I’m Peter Dekom, and we really have only ourselves to blame.

Monday, April 29, 2013

Living under the Boot

Dissenters. Some regimes arrest and torture you, a few arrest you with a couple of whacks to the gut or head, others arrest you and your entire family and send them for generations to come into a slave labor camp (yes, the latter is the warm and fuzzy world of North Korea)… might be a short confinement, years in hell or years in hell until an occasional amnesty or even a regime change. We’ve had our way with protests, setting some nasty precedents during protests during the Vietnam War for those old enough to remember.
The last time there were mass protests in Iran, accompanied by mass arrests, was 2009, just before the last presidential election that reinstalled Mahmoud Ahmadinejad in that “top spot.” I use quotes, because the president is hardly “the man in charge,” and the elected legislature is hardly the last word on just about anything. The Ayatollahs, claiming direct communication with God, can reverse any decision they do not like or impose new rules regardless of legislative direction. Iran, after all, is a theocracy where the Word of God is an extra-legal mandate. It’s what happens when you push religious rules into government.
Ahmadinejad, seeming champion of Iran’s nuclear program that has generated massive economy-killing sanctions, is termed out. His followers are now locked in a power struggle with both traditional and reformist factions to establish who his successor will be, assuming the Ayatollahs even allow that office to continue at all. The strangest part of all of this is how pro-American Iran’s middle class has become, but they are powerless against the repressive Revolutionary Guards longing to arrest, beat and humiliate any with obvious pro-U.S. sentiments. With the Ayatollahs controlling the selection of qualified candidates for the election, you can bet that these pro-American sentiments will not rest with any acceptable coffice-seeker.
As Israel presses the United States to move military options to the fore, perhaps even willing to mount a preemptory strike on its own, to stop or at least delay Iran’s acquisition of a nuclear weapon, tensions within Iran are at an all-time high. Will such a strike even matter? Will hordes of the pro-U.S. middle class die in the attack? Noting that Iranian officials seem to be present at every North Korean nuclear test, whether or not Iran’s nuclear facilities are attacked, many are concerned that Iran might simply buy finished nukes from Kim Jong-un’s regime, a nation that is rattling its nuclear saber directly at the United States.
And exactly what does the upcoming presidential election mean in this awkward mix? “With only three months to go in his second and last presidential term, [Ahmadinejad] has raised a series of controversies intended, experts say, to reshape his public image and secure the support of dissatisfied urban Iranians for his handpicked successor, Esfandiar Rahim Mashaei. It is all part of a power struggle ahead of the June election between Mr. Ahmadinejad’s faction and a coalition of traditionalists, including many Revolutionary Guards commanders and hard-line clerics.
“With the demise of the protest movement that sprang up after the last presidential election, in 2009, Mr. Ahmadinejad and his supporters have emerged in the unlikely role of the opposition. They are now fighting the traditionalists who, among other things, take a tougher line in negotiations with the West on Iran’s nuclear program and would like to abolish the presidency - a locus of opposition to their power.” New York Times, April 3rd. Uh oh, not exactly the news we want to hear, and for many, the thought of Holocaust-denying Ahmadinejad as a moderate reformist might be hard to swallow. However, relative to the clerics, he most certainly is.
When he leaves office and if his followers are not in power, Ahmadinejad faces the prospect of facing his own arrest and prosecution for cronyism and his opposition to the wishes of the more conservative elements in government. For example, as Iran officially backs the repressive Assad regime in Syria, Ahmadinejad has taken a very controversial stance in his political speeches: “The president has also taken to using the slogan ‘long live spring’ in his speeches, which some have interpreted as an allusion to the Arab Spring uprisings. ‘This way of thinking and talking about ‘Human Awakening’ is political mischief and dangerous,’ one newspaper wrote in an editorial.” NY Times.
In the longer term, the theocracy in Iran may not be sustainable, but in the meantime this extremist nation can wreak havoc internally and with the rest of the world. With its rather close ties to North Korea, the political winds seem to be blowing against what might be best for world peace and political stability.
I’m Peter Dekom, and these repressive regimes are profoundly dangerous to us all.

Sunday, April 28, 2013

Teaching Cats to Bark, Dogs to Meow

The shift of emphasis in American financial institutions from a role as a corporate strategic advisor – so-called investment banking, where financial structuring, mergers & acquisition are the drivers – to trading (buying and selling stocks, bonds and other financial instruments) has totally changed what minimal ethical philosophy defined Wall Street. Teams of mega-expensive lawyers, hordes actually, have focused on loopholes to statutes and regulations, to allow financial institutions the greatest possible freedom. No one looks beyond those laws to the ethics. It’s about getting away with it, not doing what’s right. Sell those instruments! Sell! Sell! Sell!
The government has been the Street’s greatest enabler. It slashed away the ban on combining commercial lenders with financing traders in 1999 by repealing the relevant protections of the depression-era Glass Steagall Act, allowing rogue traders (now with bank status) access to cheap Fed Funds, which many have deployed for their own benefits.   Congress deregulated those nasty and often ill-defined (at least to buyers) derivatives in theCommodity Futures Modernization Act of 2000. On April 28, 2004, the Securities and Exchange Commission took the lid off how much debt the “too big to fail” institutions could carry; Lehman and Bear Stearns went out with debt multiples of their underlying equity of over 30 to 1! The post-crash Dodd-Frank legislation was horrifically watered down and has faced a House of Representatives with a strong unwillingness to fund the empowered regulatory agencies in order to implement those soggy and minimal protections.
So we bailed out the big bad boyz, because their collapse would further threaten our economy. It was blackmail, but some form of that support was necessary. Still these financial institutions screamed for deregulation. The bad boyz quickly returned to their profligate ways. Phony mortgage foreclosures, LIBOR rate fixing, money laundering and dealing with cartels and terrorists, rogue trades slammed even the biggest players and new and improved (right!) derivatives that looked a whole lot like the ones that tanked our economy in 2007 seemed to be creeping back.
Because the biggest financial institutions (all with major U.S. subsidiaries) operate globally, they can move money around to the friendliest venues, and American regulators are under-staffed with inadequate regulatory empowerment to stop growing bad habits. “Banks have been shedding risky assets to show regulators that they are not as vulnerable as they were during the financial crisis. In some cases, however, the assets don’t actually move — the bank just shifts the risk to another institution… This trading sleight of hand has been around Wall Street for a while. But as regulators press for banks to be safer, demand for these maneuvers — known as capital relief trades or regulatory capital trades — has been growing, especially in Europe.
Citigroup, Credit Suisse and UBS have recently completed such trades. Rather than selling the assets, potentially at a loss, the banks transfer [via a derivative] a slice of the risk associated with the assets, usually loans. The buyers are typically hedge funds, whose investors are often pensions that manage the life savings of schoolteachers and city workers. The buyers agree to cover a percentage of losses on these assets for a fee, sometimes 15 percent a year or more… The loans then look less worrisome — at least to the bank and its regulator. As a result, the bank does not need to hold as much capital, potentially improving profitability…
“The rule-writing going on as part of the Dodd-Frank financial regulatory overhaul may prevent some of these trades, but bankers say this will simply force them to structure the trades differently… Some regulators say they are concerned that in some instances these transactions are not actually taking risk off bank balance sheets. For instance, a financial institution may end up lending money to clients so they can invest in one of these trades, a move that could leave a bank with even more risk on its books.” New York Times, April 10th. The funds include masses and piles of private pension money that could vaporize in another meltdown.
Cheap interest has definitely helped the big boyz back to the top. Stocks are soaring even as average Americans continue to watch their real buying continue the slide that began in 2002. As hundreds of thousands of workers give up looking for work, the unemployment statistics look better (because they don’t count these masses of withdrawing workers) but we still face under- and unemployment of record proportions. The top 1% seems likely to increase its 42% stake in America’s wealth in this era of continued financial deregulation.
Outrageous pressures to make more profits in this rising market have returned. A new “everybody else is doing it so I have to do it too in order to be competitive” sheep mentality has returned to the street. Nobody is calling the emperor as naked, but everyone knows there is a bubble waiting for us out there. Next week? Next year? Farther out? Anybody’s guess, but it will take a needle to pop that bubble to stop these rogue practices again… and it 100% the fault of a Congress that so needs campaign contributions – particularly the House with members who face re-election every two years – that its members steadfastly lie to the American public and tell them that regulation is stifling job growth. What regulation actually stifles are campaign contributions.
I’m Peter Dekom, and the cats are still meowing and the dogs still barking.

Friday, April 26, 2013

The Ripple Effect

The little stories, many with devastating impact, that slide below the headlines often make ripples that can turn into economic tsunamis in the aggregate. Of late, I’ve trolled the news looking for those global climate change tales that have eluded becoming lead stories, but genuinely impact our daily lives. We’ve seen the crop devastation from the recent drought in our gain-producing states, wildfire damage, superstorm damage, etc… but there are impacts and ripples everywhere.
Today, I’d like to look at our Great Lakes which, despite an expectation of a rise of 2 or 3 inches from the spring thaw, have significantly lower water levels than at any time ever recorded. The Army Corps of Engineers has released the following measurements: Lakes Michigan and Huron are about 26 inches below their long-term monthly averages, and Lake Superior is about 13 inches low. So what? There’s still plenty of water left, right? Aside from the possibility that this is just the beginning of a more disturbing trend, there is a more direct and immediate problem with this fall in the water table.
Because the lakes have areas where ship traffic must pass that are reasonably shallow, these giant ships and barges have been required to reduce their cargo loads by as much as 15%. Maybe that doesn’t sound like much, but realize that there is almost the same cost of crew, ship and fuel to ship less (hence the per unit cost has to increase), and the supply reductions can also have a negative impact on manufacturing, exports, our balance of payments, improving our economy, etc. Too abstract? Okay, let’s get down into the specifics.
First, the Corps of Engineers and local governmental operations have to step up dredging efforts, not cheap under any analysis. In Michigan alone, “State officials surveyed 63 communities on their dredging costs and have asked the Legislature for $21 million. The funds are awaiting Gov. Rick Snyder's approval.” Detroit Free Free, March 25th. Second, local harbors are facing as much as a two foot drop in water levels, reducing the number of accessible recreational boat slips that can be rented out. Michigan’s estimated loss: $850,000. Little stuff.
Back to cargo reduction. On March 29th, CBS News looked at the problem: “The persistent drought has produced some of the lowest levels ever recorded in Lake Michigan and Lake Huron. And as a consequence, the big ships that carry iron ore to mills around the lakes are now being forced to lighten their loads - or risk running aground…  [In February,] CBS News went aboard the Stewart J. Cort in the Port of Milwaukee. As long as an aircraft carrier, the ship can carry 65,000 tons of ore. ‘When this ship loaded its last cargo of the season, it had only 55,000 tons on board,’ [a trade industry spokesman said]. If a ship is 10,000 tons of ore short, ‘that means a steel mill didn't make about 6,700 tons of steel and that could have been turned into 8,400 cars. And 8,400 cars would keep a large auto plant working for 15 days,’ he explained. ‘And you have to remember that's on just one trip. These ships will make 45 to 50 trips during a season.’” Drop the water levels even more in future years and… Well, you get it. Big stuff.
I’m Peter Dekom, and as I look at governmental priorities to find more domestic oil, I wonder who is running the dollar cost tab on all the economic damage this continued reliance on fossil fuels will actually cause.

Thursday, April 25, 2013

Spinning Off Unwanted Assets

When Time Warner drilled down into the deterioration of their magazine assets in an increasingly online world, they did what so many companies do in parallel situations: announced the spin off the magazine group into separate publicly traded entity. Where values can be sold to third parties, even at distressed prices, many companies discard their unwanted operations that way. Great corporate strategy, but unfortunately, this seems to be an operational theory in developing nations, where families facing economically hard times spin off the extra younger mouths to feed.
World Vision is a non-profit with a focus on children and poverty. They help people with a bit of spare cash to sponsor impoverished children all over the world. They also make sure the world knows the facts surrounding child poverty and the accompanying life endangerment. In a report issued on March 8th (International Women’s Day), World Vision examined the ugly truth about a nasty habit of child marriage in many developing nations, where girls and women are looked upon as chattel or, at best, second class human beings. The resulting report, entitled Untying the Knot: Exploring Early Marriage in Fragile States addressed a statistical finding that in under-developed nations, when natural disaster, violent conflict (and the rape, destruction and displacement that follows) and/or financial collapse occur, the incidence of child brides being married off rises.
For the record, these brides are not love-starved teens and pre-teens looking to couple with their true loves. These are forced marriages, some to reduce the economic burden on the family, some to generate a dowry, while others are seen as protecting the child from lack of opportunity or the ravages of rape, war or environmental catastrophe. The parents often believe it is for the little girl’s own good. The United Nations reports that half of all girls in the world 51 least-developed countries were married by age 18… but an 18-year-old bride is most certainly an elder compared to the 12-13 year-olds finding themselves with a vastly older husband.
World Vision notes: Of the 25 countries with the highest rates of early marriage, the majority are affected by conflict, fragility, or natural disasters, the report finds… And girls trapped in early marriage tend to be poor, under-educated, and living in rural areas where birth and death rates are high and where conflict is common… Other drivers included harmful traditional practices and the lack of alternative opportunities for girls — in particular, the lack of opportunity to go to school. Girls will also marry because of threats and coercion.
The report identified the top 10 countries with the highest child marriage rates:
Percent married before 15
Percent married before 18
1. Niger*
36 percent
75 percent
2. Chad*
35 percent
72 percent
3. Bangladesh*
32 percent
66 percent
4. Guinea
20 percent
66 percent
5. Central African Republic
21 percent
61 percent
6. Mali*
15 percent
55 percent
7. Mozambique*
17 percent
52 percent
8. Nepal*
10 percent
51 percent
9. Malawi*
9 percent
50 percent
10. Ethiopia*
24 percent
49 percent
* Countries where World Vision works to help build communities that promote and provide for women and girls’ development along with men and boys.
Not only is this a cruel and degrading process, but childbirth in younger girls carries a particularly higher risk of complications and death. But what can be done? “[Erica Hall, Child Rights Policy director at World Vision points] out that requiring marriage registration and working on a grassroots community level is key to creating systemic change. She cited examples such as the Grandmother's Project in southern Senegal, a nonprofit partner of World Vision that focuses on reducing early marriage, female genital mutilation and early pregnancy by creating an intergenerational dialogue about how to shift the gender-role paradigm.” Huffington Post, March 8th.  
It’s usually not changing the laws that matters, because in most countries the practice is illegal; enforcement is haphazard and not prioritized. And so much of the economic disruption can be traced to drought generated by global climate change. “The issue of child marriage has gained momentum outside of the NGO world as well. Former Secretary of State Hillary Clinton announced last October a public-private initiative that focuses on ending child marriage by increasing education opportunities, providing training among officials and tracking every country's legal minimum age of marriage...” Huffington Post. Support through local religious groups, working through organizations like World Vision (sponsoring girls out of dire poverty) and generally letting your elected representatives know that you care are tangible steps we can all take to help solve this horrible abuse.
I’m Peter Dekom, and we if don’t care and speak out, who will?