Thursday, February 25, 2016

Westward Expansion as Safety Net

Everybody makes big deal of diversity in US.  It is an accident of history.  Unlike Europe, which has been settled for millennia, America was virtually empty when it was discovered by Columbus in 1492.  The Indians were hunter-gatherers who had created only a few cities or towns in North America, mostly in the Southwest, although they had created grander ones in Central and South America.  In North America there was relatively little resistance to the westward expansion of Europeans across the continent.  There was never much threat from Indians against European-built cities after the first hundred years or so.  As the Indians were driven westward, the war against them moved westward to protect the settlers as they moved in. 

The westward expansion essentially created free land for those who were will to claim it and fight for it.  This became the social and economic safety net for Europeans who could not make it on the more civilized east coast.  If you couldn’t make it in Boston or Charleston, you could set out for Indiana or Alabama, and eventually Kansas, Texas, or California.  Life was hard, but it was possible to get out of the oppressive slums in the east coast cities where immigrants first arrived.  Today, if you are stuck in a slum, there is no wild West to go to.  Three is no more free land, although people like Cliven Bundy claim that there should be.  As a result, it is harder for people trapped in slums to get out. 

Another mass migration that took place later was the movement of blacks from the deep South, where they had lived since slavery, to the industrial north, where low skilled jobs with good pay were available, particularly in the car industry in Detroit.  These jobs became the security safety net for struggling poor people in the South. 

When the Great Depression hit, however, the geographic safety net had largely disappeared.  There was no golden region of the country to which people could flee for a better life.  It was only then, under FDR, that the government moved in to provide its own safety net in the form of the CCC, WPA, TVA, Social Security and other government programs.  These programs became necessary because by 1930, the formerly empty United States had filled up with people. 

Prior to this there had been few restraints on immigration, because people saw it as positive to make use of empty land by farming, ranching, mining or manufacturing.  During this open immigration period, most of the immigrants came from Europe, mainly from western and northern Europe.  Thus it was not surprising when prejudice grew up against immigrants from Ireland and Italy by settlers of English and northern European extraction, for example.  The descendants brought some of their old-country hostilities with them.  Irish-English animosities were alive and well in Boston and Belfast well into the 1990s. 


The idea that the United States has always been a land welcoming any immigrants from anywhere is largely fiction.  Blacks arrived as slaves.  The Chinese were discriminated against for years, as were southern Europeans.  Even immigrants like the Germans and Poles, largely went west to more open places like Michigan and Minnesota, finding the already crowded east coast somewhat hostile to them.  

Friday, February 19, 2016

Apple Opposes FBI for Commercial Reasons

The Guardian reported that the FBI responded to Apple’s refusal to help it break into the San Bernardino terrorist’s phone by accusing Apple of using the case for financial and commercial benefit.  The article said:
The FBI accused Apple of prioritizing its public relations strategy over a terrorism investigation on Friday in a significant escalation of this week’s war between the tech company and the law enforcement agency.



The accusation, made in a court filing demanding Apple comply with an order to unlock an iPhone belonging to the San Bernardino terrorists, represents a nadir in the relationship between two opponents that previously extended each other public respect.
“Apple’s current refusal to comply with the Court’s Order, despite the technical feasibility of doing so, instead appears to be based on its concern for its business model and public brand marketing strategy,” Justice Department attorneys wrote in the Friday filing.
http://www.nytimes.com/2016/02/20/business/justice-department-calls-apples-refusal-to-unlock-iphone-a-marketing-strategy.html?emc=edit_na_20160219&nlid=56573240&ref=cta

Wednesday, February 17, 2016

Kashkari on Bank Break Up

I am pleased with Kashkari's remarks reported in the WSJ, reinforcing my earlier remarks that the big banks need to be broken up.

Friday, February 12, 2016

Bank Problems

I am concerned about declining confidence in the US banking sector.  Recently CNBC and Bloomberg have been discussing problems at the German bank Deutsche Bank.  More disturbing for Americans, declining stock prices for big American banks indicate a lack of confidence in the whole industry. Dodd-Frank was supposed to protect us from bank failures, but today Sen. Elizabeth Warren grilled Fed Chair Janet Yellen at length about problems with “living wills” for banks that fail. 

I am concerned that American banks are still too big to fail, and that Dodd-Frank has failed to keep them from engaging in risky activities that could create a global financial catastrophe.  Dodd-Frank and the Volker rule have failed to fill the gap created by President Clinton’s elimination of Glass-Steagall. 

I would like to see Glass-Steagall re-enacted.  At a minimum we need to make big banks smaller and rein in their riskier trading activities.  I am alarmed to see the stock market illustrate Wall Street’s lack of confidence in its own big banks like JP Morgan-Chase and Goldman Sachs. 

Related to this is, I believe, is the issue of income inequality.  There has been talk of lack of liquidity surrounding the current unsettled bank environment.  One problem with consolidating all the nation’s wealth in a few hands is that the few hundred families who control that wealth may all decide at once to do the same thing, e.g., sell bonds.  If they all act at once, there will be no one to buy bonds, for example.  Prices would plunge, and we would be back in another financial crisis.  To some extent this is what happened in the 1929 market crash, when like today, much wealth was held by a few extremely wealthy people.  The aggregation of wealth means that markets become smaller, controlled by a few people. and more susceptible to volatility.  As markets become dominated by a few players, the country becomes less capitalistic and more oligopolistic.  This is what happened to Russia under Yeltsin.  I hate to see America following the Russian model.