The Obama Scandal Business Is Losing Credibility

Darrell Issa has been the CEO of the Obama scandal business.  He has used his committee in the GOP House to manufacture scandals.  They have been given extensive publicity by the cable news network which is the marketing arm for the scandal business.  Unfortunately for Issa most of the scandals that he manufactured have turned out to be imaginary.  Dana Milbank has been covering the scandal business for the Washington Post.  He reviews each of the scandal's manufactured by Issa and declares them to be defective products.  Isssa, in turn has lost his credibility with many in the media who have been reporting on the scandals.  The only marketing organization available to him is Fox News which has nothing else to sell.

The New Religion Of Finance And How It Shapes Corporate Investment

This article, written by a professor from the Harvard Business School, describes the financial metrics that determine executive compensation and shape corporate investment decisions.  There are three kinds of investments that corporations make.  One kind of investment, that he calls empowering investment, creates jobs and builds assets.  The two remaining investment types discourage investments in assets and jobs.  Return on net assets (RONA) is one the ratios that has become part of the new financial religion.  That ratio can be enlarged by increasing profits and/or by reducing assets.  It is easier and faster to reduce assets than it is to increase profits.  That has encouraged many firms to shed assets from their balance sheets.  Instead of investing in revenue producing assets, many firms have contracted with other firms to produce their products.  For example McDonnell Douglas outsourced the production of the DC 10.  This increased its RONA dramatically.  Unfortunately, this also enabled the contract manufacturers to capture the replacement part business.  McDonnell Douglas lost the recurring revenue stream that could have helped it to finance the DC 11 which was never produced.

The new financial religion has discouraged empowering investments that create jobs and grow the economy.   The religion funnels investment into the two remaining investment categories that focus on short term RONA.  The short term focus that prevails in most corporations and on Wall Street has been determined by the new financial religion that is firmly held by corporate executives and financiers.  We can't understand the global economy without understanding the new religion of finance.

Truthiness

This is a video link to Colbert's description of TV news.  He manages to very funny and quite perceptive at the same time.  Truthiness is telling people what they want to hear.  People believe what they want to believe and cable news networks, in particular, satisfy that need.  They tend to reinforce the general belief systems of their target audience.  Colbert is brilliant at turning this into humor.   

The Corporate States

We have a dreary day in the Boston area.  That calls for a little humor to start off the day.

A Legal Blow To Sustainable Development

The Supreme Court has ruled on a case that will it make it difficult for local communities to approve development projects with contingencies on the developer to mitigate harmful effects on the environment.  The 5-4 decision will leave local governments the choice of dismissing the proposal or accepting it without contingencies.  This will prevent many worthwhile projects from being approved or it will be harmful to communities which must absorb the mitigation costs.  This is just another example of a conservative Supreme Court usurping the authority of elected officials.  The court has imposed the standards established in a separate court decision, that it approves of, on local communities.

A World Of Rising Healthcare Costs

Government spending of healthcare is higher in the US than it is in the rest of the world but it is also rising in most other countries.  It represents a growing percentage of government spending everywhere.  Efforts are underway to reduce the growth rate of healthcare spending, but it will continue to represent an increasing share of government budgets.

Another Way Of Looking At The Mankiw Defense of The Top 1%

Noah Smith provides a real life example to illustrate the problems in Greg Mankiw's defense of rising inequality.  It doesn't take an economics degree, or expertise in statistics, to appreciate the problems in Mankiw's defense.  His example shows why most people are upset by rising inequality.  We shouldn't be too critical of Greg Mankiw, however.  He is just doing his job.  His argument will appeal to many of the trustees at Harvard and to conservative students who share his views.