Does America Have a Free Market?

The rallying cry for so many politicians is to “let our free market economy” determine solutions and fix the economy. There’s just one catch: there hasn’t been a free market in the United States for well over a century. Special interests have managed to get preferential treatment from the government for so long that I wonder why this myth persists. The place where you can see this anomaly most clearly is in our federal tax code. Not only does the principal of a private equity investment fund make vastly more money than his executive assistant, he or she is also taxed on their income, for the most part, at a vastly lower tax rate. The tax code is filled with special treatments for those “big campaign contributors,” and as the battle for deficit reduction piles on, there is still resistance against removing these free market distorters from our federal laws.

For example, the May 17^th CBSNews.com reports the most recent failure to repeal such favoritism in an era of outrageous gasoline prices (“fueled” by speculators) and even more outrageous profits from the oil companies: “The Senate has blocked a bill to repeal about $2 billion a year in tax breaks for the five biggest oil companies, a Democratic measure meant to respond to huge industry profits and $4-a-gallon gas prices… The Democratic measure, the ‘Close Big Oil Tax Loopholes Act,’ is sponsored by Senators Robert Menendez, D-NJ, Claire McCaskill, D-MO, and Sherrod Brown, D-OH. It is not expected to get the 60 votes necessary to advance the bill in the Senate… Republicans oppose the bill because they say it does nothing to lower gas prices and is not a serious effort to address the problem.” Fact remains, the oil companies still get the tax break.

Homeowners have an edge tax-wise over renters; subject to caps, they get to deduct mortgage interest. Investors who buy and sell equities have an edge over those whose revenues are generated from labor: the former get vastly reduced capital gains taxes while workers pay taxes at often a multiple of those rates for earned income. U.S. corporations may be subject to the highest corporate taxes in the industrialized world, but it they just keep their earnings off-shore, they can avoid that tax… resulting in the reality that American corporations pay some of the lowest tax bills in the industrialized world. Oh, individuals are taxed on income no matter where it sits.

While agricultural subsidies are the subject of debate in this deficit-reduction-oriented time, as a January 20^th report from the Cato institute notes, we are still distorting this market as well: “The U.S. Department of Agriculture distributes between $10 billion and $30 billion in cash subsidies to farmers and owners of farmland each year. The particular amount depends on market prices for crops, the level of disaster payments, and other factors. More than 90 percent of agriculture subsidies go to farmers of five crops—wheat, corn, soybeans, rice, and cotton. More than 800,000 farmers and landowners receive subsidies, but the payments are heavily tilted toward the largest producers.” Congress men and women from farm states don’t look to kindly on cuts to these subsidies… or believe that the huge duty we apply to cheap Brazilian ethanol made from sugarcane should be removed so that our expensive American ethanol producers (who use expensive corn that drives up the cost of livestock feed) will be faced with real competition.

Had the government not bailed out on the “too big to fail” Wall Street players many special interests argue, the collapse of these mega financial institutions would have brought the entire country to its knees in a massive and more intense depression. Subsidies to encourage alternative energy installation, car purchases, new home buyers, etc. have been used in the past to stimulate expenditures in certain market sectors. NAFTA is a treaty that was supposed to level the playing field among signatory nations to reduce and then eliminate import duties, but if you listen to the indigenous American companies who cannot compete with much of that cheap Latin American labor, you know they oppose free markets.

Plain fact is we don’t have a free market and are never going to have a free market. The financial requirements to get elected almost mandate that the massive campaign contributors get their money’s worth or candidates won’t get funded. Further, as extrinsic forces, themselves often the product of non-free market government intervention operating overseas, distort and pressure our economy, the government responds with its retaliatory non-free market responses. Even without such obvious and biased pressures, the level of complexity in society necessitates governmental market regulation at some level. Think the free market would be a good replacement for the purity requirements of the FDA? Think cars would have catalytic converters without the EPA? Think the workplace would be safer if market forces and not OSHA set safety rules? Kids would go to school without public education and mandatory attendance rules? You get my point.

So for people who believe that the “free market” is the answer, to me and anyone who really looks behind the rhetoric knows, no such animal exists or will exist; we are just getting another “vote for me” buzzword without any real meaning in contemporary America. But it amazing to me how gullible so many Americans can be when it comes to relatively simple economic principles. We need to understand that an American “free market” has been a myth for a very long time. And even as we remove some distortions in this cynical “deficit reduction” trendy time, trust me, there will new ones passed to perpetuate the system.

I’m Peter Dekom, and I like keepin’ it real!

The Changing Face of Work in America

With the recent numbers from Bureau of Labor Statistics telling us that our unemployment rate has improved slightly, it seems that we are solidly in “recovery phase,” and that improvements in the job market are always a “trailing economic indicator.”AOLNews.com (April 1^st) summarizes: “The unemployment rate fell to a two-year low of 8.8 percent in March, capping the strongest two months of hiring since before the recession began… The economy added 216,000 jobs last month, the Labor Department said Friday. Factories, retailers, the education and health care sectors and professional and financial services all expanded payrolls. Those job gains offset layoffs by local governments.” Woo hoo!

Except that unemployment number doesn’t contain those who have slipped out of the statistics because they’ve been unemployed so long they don’t count, folks who want to work full time and can only find part-time or occasional work, and those folks in chronically high regions of unemployment, including parts of Nevada, California, Michigan and large segments of the “rust best.” And it comes before the plethora of expected levels of austerity layoffs triggered at the state and local government levels, the potential offshoot of a federal shutdown if Congress can’t agree on a budget or the fact that so many workers are “contract” workers with no tenure and no benefits.

The unemployment statistic also doesn’t address the notion of unhappy workers and underemployed specialists forced to take lower-paying jobs outside of their field of expertise (which may have become obsolete!). It’s great to create jobs, but the actual pay and benefit levels become relevant to a consumer-driven recovery and home values. Folks with less money to spend or who are uncertain about their futures simply spend less and are very unlikely to buy a new home. Measuring underemployment is exceptionally difficult, however, but the starting point has to be various “job satisfaction surveys,” yet one also has to be sensitive to employed workers whose job description has expanded (but their pay has not) to cover all those fellow employees who got the sack in a corporate efficiency move; employers, sensing a scarcity of jobs out there, don’t seem to be concerned with treating their employees well or even paying them commensurate with their effort these days. And as the dollar inflates, but pay levels do not (unless you are on Wall Street in a senior capacity), folks are able to spend even less, another form of underemployment.

So let’s see if we can look around for hints of what might give us a handle on whether there is also a rising river of underemployment in these discontentment statistics. You can start with the most exaggerated version of this analysis: “According to a recent survey by job-placement firm Manpower, 84% of employees plan to look for a new position in 2011. That's up from just 60% last year.” CNNMoney.com (December 23, 2010). Too dire; I just don’t buy it.

Maybe it depends on the kind of job. According to the October 11, 2010 Buzzle.com, “Job Satisfaction Statistics or employee surveys say that over 65% of workers are not satisfied with their job. Many surveys regarding job satisfaction have been conducted by several companies and individuals, after consulting thousands of Americans by giving them a questionnaire on employee job satisfaction. Though the reasons given for dissatisfaction in job were many, the situation is really serious and hence, HR managers should take timely steps to solve these problems in the workplace. According to statistics, more than 70 % of teachers, fire fighters, authors and physical therapists were found to be highly satisfied with their jobs. Even psychologists, in general, have a very high percentage of job satisfaction. Then, which are the professions where job satisfaction is low? This might be an obvious question in your mind. Jobs such as those of laborers, waiters, servers, cashiers and bartenders have the least satisfaction percentage. Job satisfaction statistics reveals that only 21 to 27 % of people engaged in these professions are satisfied with their work. The job satisfaction percentage has reduced significantly in the US as compared to the earlier days.” Still stretching my credibility, but better.

OK, here’s study from insurance giant MetLife (blimp, anyone?), that actually carries a whole lot of credibility: http://www.metlife.com/assets/institutional/services/insights-and-tools/ebts/Employee-Benefits-Trends-Study.pdf Want the short strokes? The March 28, 2011 TransparencyRevolution.com summarizes the most important “dissatisfaction” results of the relevant polling in this piece: “The report describes a ‘workforce ready for flight’ and states that some 34% of employees surveyed hope to be working elsewhere in the next 12 months… Studies show that, on average, people change jobs every four years. Although job changes occur for a lot of different reasons, it would make sense to estimate that in more robust economic times, the number of people looking to change jobs would be around 25% [considered normal], rather than 34%. When hiring really does pick back up in earnest, companies that are interested in minimizing turnover and retaining talent are going to be surprised to see so many people leave….Workers who say that ‘I am satisfied with the job I have now’ has declined from 59 percent three years ago to 51 percent last year.” OK, I’m finally buying the numbers. We have a really, really long way to go – if we even ever get there – to reception the halcyon days of 2006/7!

I’m Peter Dekom, still lookin’ behind the numbers to see what it all means.

No Afghans at the Dog Show

What now? Osama’s gone. Pakistan is never going to be a reliable ally… ever! And the Taliban are attacking us in Afghanistan as if they were smelling victory around the corner. We aren’t going to “win” in Afghanistan, and our own picked leader, Hamid “I’m so damned corrupt” Karzai, is busy entreating with the Taliban, because he knows the Americans have to leave. Those conversations are being encouraged by the Americans for precisely the same reasons.

First, let’s look at the United States from the Muslim perspective. Look at the local view from an e-zine, Jidaliyya (jidaliyya.com) which collates the work of Muslim scholars who write under sponsorship of the Arab Studies Institute (which is in turn affiliated with Georgetown University’s Arab Studies Journal).

In the May 4^th, Jidaliyya.com, Sanaa Alimia writes: “While people in Washington, New York and across the US were celebrating, dancing, and chanting ‘USA! USA!’ for the long-awaited vengeance for the 3,000 deaths of the 9/11 terrorist attacks, people across Pakistan are mindful that over the last seven years the number of Pakistanis killed is 34,017. In 2010, over 900 Pakistanis were killed in US drone attacks, which were also supported by their own government and military. Less than two weeks ago, over twenty-five people were killed in North Waziristan, in one drone attack and the month before forty civilians were killed in another drone attack. Beyond the casualties, there are hundreds of thousands of displaced Afghans and Pakistanis who cannot return home. There are countless maimed amputees, whose disfigurement is a commonplace feature of the landscape in Peshawar…

“The war in and against Pakistan has transformed the country. Checkpoints, bomb blasts, identity cards, paranoia, detentions, and drone attacks are all daily realities, features of the landscape. As Mohsin Hamid summed up, ‘America’s 9/11 has given way to Pakistan’s 24-7-365.’” In short, there is nothing that America wants or believes is reasonable given the Taliban-supported attacks against the Twin Towers or the Pentagon that has, in the eyes of the vast majority of Pakistanis, justified the American actions in Afghanistan or the cross-border attacks against the Taliban and their supporters across the border in Pakistan.

For the most part, America and its policies are despised by the locals, who would rather consort with the very Taliban who are attacking Pakistani cities and towns than support America’s war on terror (or whatever name we choose to apply). Anyone who believes that a Pakistani politician could get re-elected by clearly backing American goals in the region is both naïve and misguided. The only reason the United States has to entreat with the Pakistani leadership and provide aid is to keep almost 100 nuclear warheads out of direct control of Islamist militants. Pakistan will never make a real choice to side with the United States, no matter what our Congressional leader believe. Pakistani politicos are literally forced to play both sides of the game.

To makes matters worse, the war in Afghanistan has escalated, and American casualties are mounting, all amidst a continuing sinking feeling that all of this American bloodshed is for naught, that we will withdraw only to watch the Taliban solidify their hold on the entire country. The morale of our fighting men and women in Afghanistan is thus at an all-time low. “As fighting and casualties in Afghanistan's war reached an all-time high, U.S. soldiers and Marines there reported plunging morale and the highest rates of mental health problems in five years… The grim statistics in a new Army report released [May 19^th] dramatize the psychological cost of a military campaign that U.S. commanders and officials say has reversed the momentum of the Taliban insurgency…

“Some 70 percent to 80 percent of troops surveyed for the report said they had seen a buddy killed, roughly half of soldiers and 56 percent of Marines said they'd killed an enemy fighter, and about two-thirds of troops said that a roadside bomb – the No. 1 weapon of insurgents – had gone off within 55 yards of them.” HuffingtonPost.com, May 19^th. We’ve long-since lost any semblance of victory; the war hasn’t been going our way for a long time. With billions of dollars wasted on a futile effort in horrible economic times, most Americans can’t seem to understand why we’re still there either.

Clearly, our forces in Afghanistan share that perspective, as Huffington’s summary of the above report highlights:

· Only 46.5 percent of soldiers said their morale was medium, high or very high last year, compared with 65.7 percent in 2005. For Marines, it was only 58.6 percent last year compared with 70.4 percent when they were surveyed in 2006 in Iraq. (The report compares numbers of the Marine to their time in Iraq because they were not in Afghanistan in significant numbers before the surge.)

· Nearly 80 percent of Marines and soldiers said they'd seen a member of their unit killed or wounded, compared with roughly half who said that in the earlier years.

· Nearly 1 in 5 soldiers and Marines reported psychological problems such as acute stress, depression or anxiety last year, compared with 1 in 10 among soldiers in 2005 and about 1 in 8 among Marines in 2006.

· The use of drugs for mental health or combat stress was lower among soldiers and Marines than among civilians in the same age group.

We have a moment. We killed Osama. We can use this as an excuse to accelerate our departure and claim we’ve got what we need, we’ve clearly shown the world how we respond to outrageous attacks on American soil and there is little left for us to accomplish going forward. If the President’s Middle East message, delivered in his May 19^th speech at the Department of State, is to resonate with Muslims around the world, now is a very good time to quit Afghanistan. We are most certainly not making America any safer by continuing to stab at the bees nest.

I’m Peter Dekom, and while I believe we should respond strongly and harshly against our attackers, we also must operate in a manner that is best for America.

Mail Call

You are required to deliver the nation’s mail, but absent extraordinary circumstances, you cannot raise rates beyond the rate of inflation, you have to pre-fund your retiree benefits and you have a pile of collective bargaining agreements that require all kinds of benefits for postal employees. Welcome to that governmental corporation, the United States Postal Service. Emails have preempted much of the profitable first class mail traffic (which has fallen 2% just in the last quarter!), and the USPS seems to be mired in the delivery of snail-mail spam – third class crap that most of us use to enhance the local landfill. Companies like UPS and FedEx have also hurt the Postal Service’s profits by taking away a huge amount of that lucrative overnight mail and bulk-item shipping.

Over the last few years, the USPS has cut about a quarter of its staff, but it is still lumbering under a set of outdated rules and burdensome Congressional mandates… with insufficient access to cash or the ability to raise rates high enough to cover actual costs. The Postal Service’s efforts have been insufficient to stem the hemorrhaging of red ink. They expect to post an $8.3 billion loss for the fiscal year ending this September 30^th. Under current rules, the USPS would also have to pre-fund $5.4 billion in retirement benefits and cover a further $1.2 billion to reimburse the Dept. of Labor for worker’s compensation insurance at that time. The Postmaster General, Patrick Donohoe, is telling Congress that unless they come up with additional funding sources, the USPS simply lacks the ability to pay that $5.4 billion, and it will default.

Donohoe testified at a Congressional hearing: “The Postal Service is committed to satisfying our core mission — delivering America’s mail… That is an imperative. To do this, we must pay our employees and our suppliers. But it must be understood that, absent legislative action, the Postal Service is certain to default on these substantial payments. This is clearly not the outcome we would choose, but without congressional involvement, the result is unavoidable.” Simply put, Donohoe is telling us that the USPS is incapable of meeting its statutory obligations… it needs new statutes and new funding to continue operation. The USPS is going broke. “USPS is on the verge of exhausting a $15 billion line of credit with the U.S. Treasury, with only $2.5 billion left to use, Donahoe said. The remaining funds would cover only payroll obligations and supplier payments at the end of the fiscal year, according to aides who were not authorized to speak publicly.” Washington Post, May 17^th.

In addition to the above competitive factors and the shift to electronic communications, the USPS is further burdened by legal requirements that it pre-fund retirement and health benefits, which has resulted in the anomaly that this virtually bankrupt structure has over-funded its future obligations by significant amounts: “Donahoe urged senators to quickly pass a bill reintroduced Tuesday by Sen. Thomas R. Carper (D-Del.) that would permit USPS to use billions of dollars it has overpaid to the federal worker pension funds in the last 30 years to make the $5.4 billion payments…The Postal Regulatory Commission and the Postal Service Inspector General have estimated that USPS has over-funded the Civil Service Retirement System by $50 billion to $75 billion since the 1970s.” The Post. Think you could live without third class mail? Think you might accept a bigger rate hike on packages and first class mail? Believe that the Postal Service should be sold into the private sector and simply operate under true market conditions? Can you imagine a country without a governmental postal system?

I’m Peter Dekom, and I guess we are watching the Postal Service…er…. go postal!

Violence, Prisons and Recessions

Recessions create economic desperation, drive people to bankruptcy, losing their life savings, watching their families go without. The reasonable expectation might well be that frustration would lead to anger which in turn lead to violent outbursts. The news is still filled with those exceptionally violent moments, like the Arizona attack on Congresswoman Giffords or the attack on a hapless Giants fan at a Dodgers’ baseball game, but strange as it seems, violent crime in the U.S. is significantly less in these dire economic times; 2010 had the lowest rate of reported violent crime in four decades.

“In all regions, the country appears to be safer. The odds of being murdered or robbed are now less than half of what they were in the early 1990s, when violent crime peaked in the United States. Small towns, especially, are seeing far fewer murders: In cities with populations under 10,000, the number plunged by more than 25 percent last year.” New York Times, May 23^rd. However, things aren’t as rosy in some of the larger cities. New York, for example, has seen a 14 percent increase in murder, and rape, robbery and assault were also on the rise. “New York was the only city with more than a million people besides San Antonio with an increase in the total number of violent crimes — a 4.6 percent jump, to 48,489 — and the only one besides Philadelphia to see a rise in murders.” NY Times.

“Criminology experts said they were surprised and impressed by the national numbers, issued on Monday by the Federal Bureau of Investigation and based on data from more than 13,000 law-enforcement agencies. They said the decline nationally in the number of violent crimes, by 5.5 percent, raised the question, at least in some places, of to what extent crime could continue to fall — or at least fall at the same pace as the past two years. Violent crimes fell nearly the same amount in 2009…

“There was no immediate consensus to explain the drop. But some experts said the figures collided with theories about correlations between crime, unemployment and the number of people in prison… Take robbery: The nation has endured a devastating economic crisis, but robberies fell 9.5 percent last year, after dropping 8 percent the year before.” NY Times. To make issues a tad more complex, the reduction in violent crime also tracks a reduction of inmates behind bars. Apparently, America’s proclivity to incarcerate may actually increase violent crime. Are prisons schools for violence that only make inmates angrier and more bitter?

This may actually be good news as the United States Supreme Court has affirmed a lower court’s order mandating that, because of serious overcrowding and under-staffing, approximately 30,000 inmates must be released from California prisons over the next two years. Apparently, the shortage of funding for prisons – exacerbated by the recession – could not keep up with California’s need to incarcerate, with the overwhelming number of prisoners having some nexus to the world of narcotics.

The court was not persuaded that such a release would work a serious increased risk for the general public. Instead, Justice Anthony Kennedy noted that three photographs proved the cruel and unusual circumstances of California’s prison problem: “In the first two [pictures], men are packed into what looks like a makeshift shelter, with just a few guards monitoring as many as 200 prisoners. The third photo shows man-sized cages in which prisoners needing mental health treatment are held until a bed opens up. One inmate, Justice Kennedy writes, was found standing ‘in a pool of his own urine, unresponsive and nearly catatonic.’” NY Times (Editorial).

The United States, not just California, needs to begin a serious reevaluation of the understanding of the relationship between economic hardship, incarceration and the real impact on deterrence. With 5% of the world’s population, it is truly difficult to understand why we incarcerate about 25% of the earth’s prisoners.

I’m Peter Dekom, and completely rethinking entrenched old ways is always a good thing, even if you decide to continue old practices.

Punishing Students and their Parents

When a child is consistently delinquent in or tardy for school, punishments in the past have ranged from failing the student to suspending or expelling them. Great idea, huh? Let’s take a juvenile delinquent and throw him or her, unskilled, out onto the streets! That’ll teach that school-hating minor who’s boss. Perhaps we should improve his/her shooting and drug-selling skills before he or she goes to make sure he uses his time well. Never ever understood why expelling a student, particularly in their teens, was anything other than a punishment of society for letting matters progress to such a disturbing level. Failing a student as punishment also seems like preparing him or her to drop out as soon as they can legally do so. Dropout rates in inner city high schools average around 50%!

There have been alternatives, and arresting a teen for truancy – very seldom done in a justice system that is overloaded with other criminal acts – and ordering them to a boot camp until they achieve a judge-mandated goal is a very disruptive and expensive solution to the problem. Yet serial and constant unexcused absences from school are pretty strong indicators of something wrong, often seriously wrong. Truancy could be to avoid embarrassment or physical danger or it could be because the student has “other things to do,” usually on the wrong side of the law. Nipping such issues earlier, rather than waiting for them to encumber the criminal justice system later, would actually seem to be a less expensive alternative. Bullying and humiliation scenarios are clearly a school district responsibility; detecting potential criminal behavior would seem to be a necessary inquiry as well.

Not all school districts have access to bona fide boot camps – total confined institutions run with military discipline and lots of personal monitoring – but for those that do, the technique, while expensive, tends to produce better (but not great) results than alternative punishments. For parents with funds, boot camp can be a private experience… much like sending junior to military school decades ago. On the “nice” side, there are also summer camps in academic subjects for concerned parents that hardly fall into the category of punitive educational institutions of last resort.

But there is a new wave of “punishments” for delinquency and truancy sweeping the country, this time focused on the parents. Teachers are tired of taking the blame for poor performance at difficult inner city schools. They want to shift responsibility to the caretakers of the student the rest of the time: the parents. Legislation has already passed or is on the dockets of dozens of state assemblies to impose requirements on parents – to attend parent-teacher conferences, to be responsible for their children’s showing up for school, generally to be responsible for their children’s actions while in school and even one proposal in Indiana to perform minimal “volunteer” services at their kids’ school (that didn’t get out of committee).

But the wave of legislation is here: “Alaska fines parents for a child’s truancy. In California, a misdemeanor charge can be brought against a parent if the truancy is flagrant enough. California is also the first state to allow judges to order parents to attend parenting classes if their child belongs to a gang. The goal, said the bill’s sponsor, Assemblyman Tony Mendoza, a Democrat, is to help parents navigate the minefield of adolescence. The new law took effect in January, and early reports indicate that attendance at the classes is sparse.

“That is not surprising, said Diane Ravitch, an education historian and the author of ‘The Death and Life of the Great American School System.’ Yes, parenting can be ‘taught’ Ms. Ravitch said, but not this way… ‘If we could just find the right person to punish,’ she said of the philosophy behind too many education reform plans. ‘Punish the teachers. Punish the parents. It’s Dickensian. What we should be doing instead is giving a helping hand.’…

“In the end, then, all these ‘punish the parents’ paradigms will probably take their historical place as just one more shift of the pendulum in the sweep that already includes contradictory certainties like ‘children are being allowed to grow up too quickly’ and ‘children are being infantilized too long.’ Like every other new way of thinking, it will eventually be looked on as a well-intentioned but flawed reflection of a moment in time.” New York Times, May 20^th. At a time when we are eviscerating school budgets, necessitating reducing the number of classes while also increasing average class size, the whole system is moving in the wrong direction. Education is a bout motivating, personalizing and tailoring educational programs to what works with the students themselves, each of whom comes from a different background. But we cannot rain our economic failures at the cost of depriving our children of their future. They didn’t ask to come into this world.

I’m Peter Dekom, and no society can prosper and grow in a modern world without solid and effective educational programs that embrace all young people.

Could this Ever Happen Here?

The economic failures of Greece have drawn the big headlines in Europe of late, a country mired in debt whose government bonds are basically accorded “junk” status by the big rating agencies, resulting in borrowing rates north of 15%. The stench of default is in the air, and massive austerity amidst unprecedented levels of unemployment set the stage for a series of continuous showdowns between the European Union’s many governing bodies and the Greek leadership. A slight shot of measurable growth in the Greek economic, however, came as a pleasant surprise, injecting a ray of hope in an otherwise abysmal situation.

It seems, however, that the European Union’s earlier loan package and enforced austerity (a condition to earlier bailout efforts) have only made things worse: “It is clear that the bailout package and the austerity terms imposed on Greece have deepened its recession and added to its already substantial debt burden. The debate now is whether making more cuts and recharging a program to privatize many formerly government-run agencies and social services in Greece will be enough to persuade a reluctant Europe to lend the country another 60 billion euros… ‘It looks like a real unraveling — everyone is taking their own position and as a result cooperation has become an impossibility,’ said Paul De Grauwe, an economist in Brussels who advises the president of the European Commission, José Manuel Barroso.” New York Times, May 24^th. Hmmm… aren’t major budget deficit reduction plans in the U.S. the equivalent of those austerity measures? And Greece has a population of a little over 11 million; the bigger problem may on the western side of Europe in Spain, with a vastly great population of over 46 million.

Ah but Spain, almost forgotten in the recent focus on Greece, may be a vastly more challenging problem than anyone has anticipated. Let’s start with hard unemployment, a factor that has led to more than a week of protests all over the country as local elections took place on the 22^nd. With an official unemployment rate of 21.3%, Spain’s younger demographics appear to be bearing a disproportionate share of that pain. Approximately 45% of the 18-25 workforce is jobless. “Tens of thousands of Spaniards angry over joblessness protested for a sixth day on Friday in cities all over the country, and the government looked unlikely to enforce a ban on the demonstrations, fearing clashes…. Dubbed ‘los indignados’ (the indignant), tens of thousands of protesters have filled the main squares of Spain's cities for six days in a wave of outrage over economic stagnation and government austerity marking a shift after years of patience.” HuffingtonPost.com, May 21^st. The protests (pictured above) continued.

But what may be substantially more dangerous may well be the budget deficits and hidden liabilities of its state and local governments (Spain is actually divided up in to 17 autonomous communities and two autonomous cities). It seems that the level of these financial impairments may have been profoundly underreported. “The story is that regional elections in Spain on [May 22^nd] could bring new parties to power, which as … rememberers of the Greek-debt nightmare know will likely result in the shocking uncovering of a ton of hidden debt… Financial markets have for months been convinced that Spain is ring-fenced from the debt problems of the other European peripherals [The other PIIGS nations]. It had sure better be, because a bailout of Spain would be quite a bit bigger deal than a bailout of Greece or Portugal. If cracks start to form in that conviction, things could get very interesting in a hurry.” WSJ.com, May 20^th.

There is a growing feeling in the European banking community that the incumbents in Spain, from the national to the local levels, have tried to contain the economic devastation by simply lying about the extent of the governmental debts and undisclosed economic ailments. There is nervous twittering within the major debt rating agencies, and if there are any disclosures that come from the newly elected officials looking to lambaste the incumbents they replace, expect another the ratings to fall, the deficit to explode and the true economic to send shudders through global markets, which have already reacted in nervous anticipation of bad news. Even our own markets reflected this nervousness over at least two trading days recently.

A further impaired Europe, with more economic crises to deal with, becomes an even less likely buyer of American goods and the impact on the global debt markets will put that much more pressure on an already decimated American credit market (as Spain sucks up more capacity), making it even more difficult for consumers and small businesses to access debt. Greece, because of its relatively smaller population, is an equally smaller issue when compared to the possibilities in Spain.

The thought that distant lands and distant economies have marginal impacts on American values is a myth that seems to die hard. The rain in Spain is a big drain on the U.S. as well. Don’t believe that there is a link? Look at the reaction of the U.S. stock market when there is a negative announcement in Europe.

I’m Peter Dekom, and we are all so overwhelmingly connected.

Towing the Line

Even as rains release floodwaters all across the United States, the longer-term prognosis for water availability, as average temperatures rise and as underground aquifers relinquish their last drops of liquid gold, is less than positive. California is particularly vulnerable, and the May 23^rd Newsweek notes that for southern Europe alone, with rising temperatures and “reducing rainfall another 30% - things will only get worse.”

For those living in coastal regions, aside from the possibility of desalinization of ocean water, there may actually be another, more dramatic, solution. Towing fresh-water-abundant icebergs from the polar ice flows, as global warming increasing breaks off these massive water storage units in record numbers (an estimated 15,000 measurable icebergs released off Greenland this year), may become a pragmatic necessity. While we haven’t done it yet, computer simulations tell us that towing icebergs to places where water is desperately going to be required is more than possible; it is actually commercially feasible.

The visionary behind the underlying theories revolving around using tugs and currents to move giant ice flows where they can be “mined” for water is 86-year-old French eco-engineer, Georges Mougin. He’s been working on this concept for four decades, but until recent computer simulations proved how feasible the process can be, it was just a high-risk theory in search of substantiating proof. As an additional benefit, water trapped in icebergs happens to be some of the purest rainwater, frozen thousands and thousands of years ago.

With the help of some of the most sophisticated 3D computer simulations from Dassault Systèmes, Mougin has worked how a tugboat, working with the ocean’s actual currents, could deliver a viable iceberg with about 38% shrinkage (from melting) along the way. The larger the iceberg, the less the percentage of shrinkage. The scientists aggregated massive amounts of oceanographic and meteorological data to substantiate viability.

Able to withstand fierce storms, the tug system starts by enclosing the half of the iceberg by encircling it with an insulating geo-textile material (a belt first surrounds the berg, and then the curtain is dropped to provide the insulation). While the tug snails at a speed of one knot per hour, making the journey consumes a very long five to six months, and generating the greatest assist from ocean currents really depends heavily on picking the right departure date.

An actual test with a smaller iceberg will cost between $3 and $5 million, but it does appear that this “theory” will be a reality in a year or two. Human ingenuity is going to be tested to the max in the near term – as the earth’s resources are increasingly reaching their limits.

I’m Peter Dekom, and a cool glass of iceberg water sounds pretty good right now