The Scorpion of Baldora Field

I’m not going to do a lot of the typing this post, this time I have a story. It’s a monolog from Night on the Galactic Railroad about the scorpion of Baldora Field:

Our father told us once about the scorpion of Baldora Field. The scorpion killed other bugs and ate them.

Then one day, a weasel found him. The scorpion fled, and fell into a deep well. He was trapped, and knew he'd die.Then, he thought to himself,"How often have l eaten other creatures? And now, the one time that l was the prey, l fled in utter terror. And look what came of that. I'll die in this well, alone."

"Life is filled with uncertainty. Why didn't l accept my fate? If l had freely given my life to the weasel, I would have given himanother day of life.But now my death will help no one. I am useless. Dear Lord, I beg of you, look into my heart and hear my prayer. In my next life, don't let me waste myself.Let me use my body for the truehappiness of everyone in the world."

And then the scorpion burst into flame: a brilliant crimson glow. And by the light of his burning body, he lit up the night forever.

How beautiful!

I always liked the story. “Put the others before yourself” is a very nice motto. Even if it has a subtle communist overtone. The world would probably be a better place if everyone thought that way. But like the story says, when death has you in its clutches, even the courageous falter.

There was a story a few months ago on 60 Minutes about the cost of end of life care to tax payers. It reminded me of this story. It’s easy for most to expect the old and sick to accept their fate and save the tax payers a few dollars, but it’s much harder to accept it when your time comes.

Banking: Money for Nothing

Happy new year everyone. I've been quite busy recently. So, excuses the large gap between posts. I meant to have this in my last post, but it was already such a meaty post I’ll just create a new post for it. It's not as timely as my last post. It certainly seems like the Occupy protests have wound down, which is a shame. There's rumors of something happening in March, but we'll have to wait and see.

I’ve always had a bane for banks, specifically insurance banks. You pay every month in case something unfortunate happens, making the insurance company nice and rich without providing a single product or service. And when something actually does happen, you have to fight them tooth and nail get them to give you what they agreed.

To understand banks, you must first understand money. A long time ago, paper money was simply a substitute for a real product: gold. You could take your $1 to the bank and receive $1 in gold. This was called the gold standard. But, our economy grew beyond the amount of available rare metal, so we switched to a fiat money. Money now has value because or government says it does, and we have faith in our government and the value of our currency.

The financial crisis of that started in 2007 seems like a complex issues, but it’s actually quite simple. Read a few articles, here and here, and you begin to get the idea. Large investment banks invested sold loans to people who probably wouldn’t pay them back (sub-prime loans). And then sold “insurance” on these “investments”. When people stopped paying their loans, the investment banks were in trouble. Had these had been smaller banks it would have been no big problem. But these were huge international banks, they had insured and invested in many other companies. They were “to big to fail”.

Bear Sterns was lucky, they found a buyer. But Lehman Brothers was allowed to fail. Some blame it on the government wanting the free market to take over, others blame Lehman Brothers for being uncooperative. And it sent ripples across the market. When later financial institutions when to the government and essentially held the market hostage for government money, they got what they wanted.

Years ago, this would not be possible. There were laws to prevent banks from becoming too large and taking stupid risks. They were implemented around the great depression to prevent what happened then from happening again. But, our representatives repealed those laws. I don’t know if it was greed or stupidity that led to that decision.

Let me explain, to the best of my abilities, how banks create money out of thin air. Most people believed that money is created at a mint and makes it’s way into everyday life by some form of government magic. But this is not how it happens for most money. Most people know, when you deposit currency at a bank, that bank can loan out the majority of the money to generate income from interest in loans. As anyone can who’s watched It’s a Wonderful Life can tell you, this can get banks in a heap of trouble if everyone wants to withdraw their deposits. What most people don’t know is that banks can loan out more than you deposit (called a monetary base). Lets say you deposit $1 in a bank and the government has set a reserve rate of 1:9, the bank can now conjure $8 into existence and loan out $9!

Now remember how I said our money is fiat currency? How I said our money has value only because people believe in it? That is why preventing counterfeiters is so important, if we did not protect our money, it would become worthless. What would happen if the average person found out that the “money” on their credit card was conjured into exist out of thin air?

Corporations

Where to start? There is so much I could say on the topic of corporations. People are always so scared of what the government does; believe it or not, the government is probably the least of your worries. The law tell you exactly what they are allowed to do, meanwhile corporations are a lot more free to do what they want. I could talk about class warfare and wealth disparity. That’s the popular thing to talk about, but I don’t feel the need to repeat what you’ve already read. I’m here to tell you things you might not have heard.

I would first like to start by talking about something that, on the surface, is wholly unrelated to corporations. Immigration reform in America. This is a hot button issue. Some people believe that support of stronger immigration reform is tantamount to racism. Not in my opinion. There are laws already in place making illegal immigration just that, illegal. Illegal immigration is disrespectful legal immigrants (they made the effort to immigrate legally), to the illegal immigrant (they are exploited for cheap labor) and America (lost tax revenue).

But why am I talking about it in this post? Arizona, known for it’s controversial immigration policy, was recently considering 5 bills to try to curb illegal immigration. But it did not pass. That’s not why it’s interesting though. It’s interesting because of the reason why it did not pass:60 businesses sign a letter asking them not to do so. Why would they refuse to tighter laws on immigration? Well they cite bad press for being Arizona located corporations, but how does that apply to Wells Fargo, Intel, or Cox Com.? The implication is that these corporations profit, directly or indirectly from illegal immigration, it wouldn’t be the first time a major corporation has been caught doing such.

But even more disturbing is that even though 6,500 citizens could not prevent the turning of the first reforms in the state, just 60 businesses could do so today. The reason for that is lobbying. Not many American know what it is. Basically, it’s legalized bribing. I know, I know, you were as swoon as I was when my grade school teacher recounted the tales of how the muckrakers exposed all of societies ills in the early 20^th century and did away with corruption. But today bribing is as alive as ever was, there’s just a few technicalities now. In a 12 year period our public officials accepted $30,529,002,364 in bribes! And if bribes aren’t enough, they offer to hire them! All of this is exacerbated by career politicians, being a statesmen is now a job and not volunteer work. We’ve created a buffer between representatives and the people they represent. It’s not a bad idea, considering you don’t want every yokel in America to exert direct control over the entire nation, but politicians have forgotten who they're representing.

“Too big to fail” has become a buzz word these days to describe some financial corporations. But I think is an apt phase for some of other corporations: super large, super connected companies who pose a systemic risk. Comcast, AT&T, too a lesser extent Disney, and Sony. These corporations dominate a market to the extent that every action they take has an effect on the market. They are able to dictate market conditions beyond what would occur in a competitive environment. And when these corporations are in trouble, the effects are felt even outside their market. When corporations are able hold our economy hostage for a government bailout, it is no longer a question of free market capitalism and instead a question of national security.

CNBC sometimes runs biographies on companies. They’re not really journalistic, more of an hour long commercial for whatever company their doing. But for every one that I can remember seeing, there is always something awful that the company has done to get where they are. And they are not ashamed of it. One of the executives of Coke boasted how they made a killing in South Africa when other companies were boycotting the region at the behest of Archbishop Desmond Tutu because of apartheid.

What do you expect though? Corporations aren’t people, but we treat them as equals under the law. The case of corporate personhood is rather complex and hits on some constitutional issues. First, some background. There’s no definitive corporate law. That is to say, there’s no international law on how these multinational organizations are treated. Most contain some form of idea of Ownership and Separate Legal Personality from that owner. Worst still is the fact that this is one of the few areas where the 10^th Amendment is at play and the federal government has left states to create their own laws governing corporations. So, you get odd cases of a Delaware company suing a New Jersey man in a California court. Add to this that federal law is being applied to these corporations and you end up with 50 different pegs being fitted to one hole.

Now, you also have to understand how different companies are structures. One of the core differences between an incorporated business and an unincorporated business is the concept of limited liability. Limited liability prevents owners of a company for being sued for the improprieties of their company.

Let’s take an example: Mom and Pop form a partnership (a form of company that does not provided limited liability), Mom and Pop Company, and start a shop. A customer walks in and slips and falls due to a slippery floor. This customer sues Mom and Pop Company and wins, but Mom and Pop Company has not had a good year, it doesn’t have enough assets to pay the customer. However, because it is a partnership and it’s owners don’t have limited liability Mom and Pop personal accounts must pay the remainder. Now, let’s run this scenario again and assume Mom and Pop incorporated their company to form Mom and Pop Corp.. This time our customer can only sue Mom and Pop Corp. and not Mom and Pop individually. Assuming Mom and Pop Corp. hasn’t done well this year and can’t pay the judgment, there’s nothing our customer can do. Now that’s an extreme simplification, but this is a very important concept, Mom and Pop Corp. is a different legal entity from Mom and Pop. It has its own responsibilities and rights under the law.

So, let’s put this all together. States create laws allowing the creation of corporations, distinct legal entities under that state’s laws. The federal government enacts national laws intended to protect a person’s legal rights. These federal laws are then applied to corporations because they are distinct legal entities. The end result is corporations with far more rights than anyone intended. I'm honestly surprised they haven't been given the right to vote.

But corporations aren’t like us. Corporations aren’t moral. They aren’t people. Regardless of the theory of stakeholder, corporations don’t have a vested interest in their community beyond profits. Look at the job situation. You’re a business and you’re in it to make a profit, so you want the best person for the job. So, you through up insane requirements like 2-3 years of experience for the exact same entry level job because you know it’s an employer’s market and a bunch of 401k’s just dried up so you can maybe get someone. And then you use come up with strange requirements like GPA, irrelevant courses, even SAT results because it might lead to better candidates. And because it’s an employer’s market you can ask for unreasonable things: unpaid training, substandard pay, and employer benefiting agreements. Or maybe you just have one of your employees do the job instead of hiring someone new, you save on hiring and training someone new in a tough economy. All the while you have a buildup of perfectly good, fresh graduates filling up unemployment.

Corporations poison our land, our air, our water, our food, our medications, our military when it makes them a dollar. They are the greed manifest: “every man for himself”. And we look the other way.

Because we get our high fructose corn syrup and our reality TV. We’re not poor, we get our stomachs filled and our promotions and we’re happy. That’s something that all those dictators in the Middle East forgot. So, you’re not likely to see a wholesale revolution or something like the end of Fight Club anytime soon. And I wouldn’t want to see one; life is pretty good compared to other times and places. So, what can we do?

In the past we had regulation. And not just regulation that intended to foster R&D but instead created loopholes. We had trust busting laws. We broke up Standard Oil once! But no more. Now we make sure Microsoft includes a ballot screen in Windows. Blame it on globalization, I blame it on corporations learning who to bribe.

Outsourcing is another devious thing corporations tend to do. Can’t get cheap labor to come to you, go to it. So counties that have laws that protect laborers lose jobs to countries that don’t. Right now, our tax code actually rewards corporations for doing so.  What about heavier import tax or, dare I say, embargos? It would certainly create a niche where that company used to be. Kind of artificial trust busting: when a corporation gets big enough, it outsources and can’t sell their goods in their original country anymore, opening up the market again.

And on the topic of taxes, a flat tax is not unobtainable. Some simple calculations will tell you that based on the total income taxes in 2008, $1,091,473,000,000, and the 2008 budget, 2,900,000,000,000, that a flat tax of %8.76568 would yeild the same amount of income tax and that a flat tax of %23.29017 would cover the entire budget. Especially when you factor in removing all the loopholes from the current tax code, a flat tax becomes less absurd. Capital gains are treated differently than earned income in our current tax code, millions of tax dollars slipping passed. If the adjusted flat tax puts too much burden on lower income brackets, increase the minimum to compensate. It’s been kept artificially low through our tax system, and that’s not what a tax system is for. The role of a tax system is not to supplement low income or reduce wealth disparity; its role is simply to generate income for the government to operate.

Back to the topic of corporations, perhaps the solution to corporate greed is simpler than regulation.

In the 1960s and 1970s a company called IBM had commanding control of the computer industry, which was at the time relegated to mainframes. There were other companies that manufactured mainframe, but IBM was so much larger than them that they were referred to as “Snow White” and the others as “the Seven Dwarves”. Everything was going swimmingly for IBM up until the 1980s. By this time IBM was bloated and slow, allowing technologies that they owned to be replaced by newer technologies and allowing their competitors to undercut their prices. When the PC revolution came, they lost their core business, mainframes. To this day, they have never regained the market control they once had.

So, perhaps there is a chance that, if left to their own devices, corporations that grow too big will be consumed in a similar way, without posing the systematic risk of “too big to fail” corporations.

Osama bin Laden: a Postmortem

I’ve stayed away from news posts, although I am still considering some news-round-up posts if I can find the time, and stuck mainly to content rich posts. This post will be no different, although the death of Osama bin Laden is news, there’s a lot going on in the Middle East, and I want to explore that.

I want to start out by saying I was not one of the ones out in the street cheering when Osama was killed. I just have something against celebrating the death of another person. I suppose it has to do with my belief that the world isn’t so black and white as to lump people into extremes. But, if you ask anyone who lost someone during the attacks or in the subsequent war that followed, they weren’t celebrating either. This was a time for reflection.

A lot of people like to cite the Muslim religion as the driving force behind Al Qaeda. That it was a clash of culture that led Osama on his path: “They hate us for our freedom”. While there was religious influence in the group, it was not the driving force. The Middle East is a region in which religion is all pervasive, with many operating theocrats. So, the real goal of Al Qaeda is political.

There is a huge disparity of wealth in many Arab countries; a small ruling elite controlling most of the wealth and resources, leaving the rest in poverty. It was easy for Al Qaeda to recruit terrorists when there were so many that are disenfranchised, poverty stricken. Many believed they had no future. It was easy for Al Qaeda to point their finger at ruling elite and the west, who had given their blessing to many of these rulers, and rally support against them.

But, Al Qaeda’s motives were never the problem, it was their modus operandi. Drawing support against a dictator is a noble pursuit, and many in the international community would support it. But when you attack civilian and peace time military, that is inexcusable and will label you as a murderer. And you will have to face the consequences, as Osama bin Laden did.

But, Osama bin Laden’s death was largely ceremonial. Al Qaeda’s support in the Middle East had waned. And it was not just the military operation in the Middle East that had minimized their influence.

In late 2010, a series of nonviolent protest swept across the Middle East. Known as Arab Spring, disenfranchised and impoverished citizens challenged the established dictators. In a few months, several countries had ousted their dictator and undergone revolution. People had found a way for change that didn’t require terrorism. Al Qaeda was left to watch as they became irrelevant.

Many claim that Osama bin Laden’s death was a turning point in the “War on Terror”, but that point came month ago when people chose peace over violence.