The Roots of Gun Violence in Houston

Tears in the Bayou

Directed by Rico King (2017)

Film Review

This documentary is about gun violence in Houston’s African American Third Ward. Houston, the fourth largest US city, is home to more than a dozen multibillion dollar companies. It also experienced 4,194 murders between 2003-2017.

The film begins by tracing the history of Houston’s once thriving African American community with its strong African American businesses. Beginning in the1980s, the Third Ward collapsed economically, with the loss of good paying manufacturing jobs and many small businesses. As in many other cities, as men lost their jobs, more and more households were headed by single mothers supporting their families on low-wage caretaking jobs. And growing numbers of teenagers and young adults turned to drug dealing to help their families put food on the table.

The film profiles numerous local gang members, families of young people killed by gun violence, religious leaders and community activists and organizers.

For me, hearing gang members describing their own individual experiences was the most valuable part of the film. They talk at length about their parents being continuously away from home (at work) and having nothing to show for it; their own inability to find work; the pressure and stress of providing for their families through drug dealing, hustling, stealing and even armed robbery; their regard of fellow gang members as “family”; their genuine fear of being out on the street unarmed; and their horrific experience of recovering from multiple gunshot wounds.

Although the filmmakers cite research regarding the direct correlation between poverty, lack of economic opportunity and death by gun violence, none of the solutions the film proposes to to address the main underlying problem. This, in my view, is the documentary’s major weakness. I was also disappointed that they failed to address the Third Ward’s high rate of youth suicide – which apparently is even higher than the rate of death by gun violence.

 

How Economic Growth is Destroying the Environment

Growing Pains: The Ecological Costs of an Insatiable Economy

Al Jazeera (2019)

Film Review

This film begins by linking the new concept of GDP (Gross Domestic Product) introduced after World War II) with the popular myth that ever increasing GDP is a magic formula for preventing recessions and depressions and the mass unemployment and misery that accompany them.

Following the second world war, western countries experienced three decades of 8% GDP growth, resulting in near full employment and massive expansion of their middle class.

Unfortunately by the 1970s, most of western society had acquired all the cars, TVS, fridges and washing machines they could ever use; growth stalled and unemployment started to rise again. It was around this time the elite round table group Club of Rome* first questioned whether unlimited growth was possible on a finite planet.

In the 1980s, Wall Street’s answer to stalled growth was monetarism, a belief they could stimulate growth and prevent recessions by deregulating the the financial industry and simply controlling the money supply.

Instead of relying on the production of goods and services to increase growth, western economies began relying on the creation and trading of financial products (credit cards, mortgages, currency exchange, commodities futures, debt-based bonds, options and other derivatives) to keep the economy ticking over.

This seems to to work pretty well until 2008. Global growth collapsed that year and never really recovered.

The film directly challenges, from several perspectives, the pro-growth hype put out by various financial gurus. First they look at the heart breaking ecological damage wreaked by skyrocketing growth in Brazil’s Amazon rain forest. Next they examine evidence that the creation and trading of financial instruments is actually glorified gambling and speculation (in which winners have become fabulously wealthy at the expense of most of the middle class). And finally they talk to psychologists who challenge Wall Street’s claim that human beings have an endless desire to accumulate more useless stuff.

In my view the film’s major weakness is its failure to link the pressure for perpetual growth to our debt-based monetary system. At present, contrary to popular belief**, private banks create 97% of our money out of thin air when they issue loans (see An IMF Proposal to Ban Banks from Creating Money). This results in an ever increasing debt spiral, which can only be repaid via continuously increasing economic growth.


*See The Steady State Economy Movement

**When polled, most people in western countries express the belief that all money is issued by government.

The film can’t be embedded for copyright reasons but can be viewed free at the Al Jazeera website Growing Pains

The Science of Predicting the Next Financial Crisis

 

By

Can We Avoid Another Financial Crisis?

Steve Keen

Polity Press (2017)

Book Review

This book is a well-researched and documented critique of macroeconomics, the so-called “science” of capitalist economies. Maverick Australian economist Steven Keen’s main criticism of conventional economics is its inability to predict the extreme bubbles and recessions that plague capitalism. He blames this failure on macroeconomic models that pretend money and debt don’t exist. Instead conventional economics employs models that are based on primitive barter and treat money as a replacement for barter.

In contrast, Keenn’s economic modeling is based on the inconvenient reality that most mainstream economists choose to ignore – that private banks create 97-98% (see  An IMF Proposal to Strip Banks of Their Power to Create Money) of our money out of thin air when they issue loans. Keen also criticizes conventional economists for failing to track private debt (corporate, small business and household debt – which includes mortgage, credit card and student loan debt).

Based on careful research, Keen reveals how all recent recessions were triggered by a rise in private debt above 150% GDP* – preceded by five years of private debt exceeding 10% of GDP. The recession occurs when various economic stresses cause banks to reduce the amount of credit they issue (ie the amount of money they create).

He disputes that public (government) debt plays any role in triggering recessions. He points out that government debt had been declining world wide as a percent of GDP prior to 2008 – when governments increased public debt to try to compensate for the collapse of private debt.**

Keen predicts the next debt zombies headed for recession (based on extremely high levels of private debt) are Ireland, Hong Kong and China.**


**The US private debt to GDP ration reached 210% at the end of 2017 (US private debt to GDP ratio) and continues to increase.

**Because nearly all money is created by banks as loans (debt), when private debt declines, government must increase public debt to keep money circulating in the economy.

 

 

The Seamy Side of Wall Street: An Insider’s View

Liar’s Poker: Rising Through the Wreckage on Wall Street

by Michael Lewis

WW Norton (1989)

Book Review

Like many of Lewis’s post-collapse books, this early memoir is simultaneously funny and educational. As with The Big Short and The Flash Boys (see Wall Street: More Deeply Corrupt than We Thought), my favorite aspect was the colorful personalities of the investment bankers Lewis worked with at Saloman Brothers between 1985-1988.

Like Lewis’s more recent books, Liar’s Poker teaches us a lot about the seamy side of Wall Street and investment banking.

Theoretically Saloman Brothers specialized in selling bonds, ie corporate bonds to finance corporate debt, Treasury bonds to finance federal debt and in their latter years mortgage bonds (bonds that enabled savings and loan associations to raise money to finance mortgages). In reality Saloman Brothers made most of their money “trading” mortgage bonds, ie encouraging investors to speculate in purchasing bonds in the hope their value would increase.

As Lewis describes it, he worked in a totally immoral environment in which traders routinely screwed over their clients to increase Saloman profits and their personal bonuses.

The chapter I found most enlightening concerns the role of the Federal Reserve in the collapse of the savings and loan industry in the late eighties.

I also enjoyed the chapter about junk bond* king Michael Milken. Despite Lewis’s obvious admiration for Milken, the latter would be indicted in 1990 for insider trading and racketeering. In return for testifying against former colleagues, the junk bond king was allowed to plead guilty to securities and reporting violations. Sentenced to ten years in federal prison, he only served two.


*Junk bonds are bonds issued by corporations determined to be high credit risks (unlike to repay their debts) by credit rating agencies, such as Moody’s and Standard and Poor.

 

The Coming Financial Crash: Learning from History

Panic: The Story of Modern Financial Insanity

Edited by Michael Lewis

WW Norton (2009)

Book Review

This book is a collection of essays about the four major Wall Street crashes of the last 30 years. The first was Black Monday, on October 19, 1987; the second the 1997 Asian financial crisis; the third the Dotcom crash of 2000-2002; and the fourth the global economic crash of 2007-2008.

Black Monday

At the time, Black Monday was the worst Wall Street crash in history – with a percentage decline in stock prices twice that of the 1929 crash. The various essays blame Black Monday on two main causes: an overvalued stock market (with too many shares bought with borrowed money) and new computerized trading programs that automatically sold larges volumes of institutional stocks (from pension plans, mutual funds, etc) once their price dropped below a designated price.

Asian Financial Crisis

The collapse of South East Asian currencies (South Korea, Philippines, Indonesia, Thailand, Hong Kong, Malaysia) in 1997 is blamed on a variety of factors. Malaysian Prime Minister Mahathir Mohamad blamed Soros, but Lewis claims the latter had temporarily stopped currency trading in 1997. The Asian crisis was contagious, causing investors to also pull their funds out of Russia and Brazil, as well as the six Asian countries. Both the ruble and the Brazilian real collapsed in 1998.

China, India and Vietnam were virtually unaffected, as they defied the US and IMF by imposing capitol and currency controls (preventing foreign investors from withdrawing funds or exchanging large amounts of currency without government authorization).

All three countries continued to experience 9-11% growth during the next decade.

Dot Com Crash

The Dot Com boom was largely fueled by the advent of computerized day trading, allowing investors to purchase large volumes of stock directly without going through established brokers. It was also the first time in history that investors scurried to buy shares in companies that operated at a loss. The immediate cause of the Dot Com crash was a decision by the Federal Reserve to raise interest rates, bankrupting hundreds of Internet startups that could no longer afford to borrow money. Amazon, which also operated at a lost, was spared by the continued support of Silicon Valley venture capitalist John Doerr.

The 2008 Global Economic Collapse

The most interesting essays in this section are by analysts who predicted the collapse. Hedge fund manager John Paulson made $3-4 billion in 2007-2008 by correctly predicting the timing of the crash and purchasing cheap credit default swaps.* As mortgage bonds started failing, demand for CDS’s skyrocketed as investors rushed to limit their losses.


*A credit default swap is a financial swap agreement that the bank that issues the CDS will compensate the buyer in the event of a debt default or other credit event.

 

 

 

Kidney Valley: Nepal’s Thriving Organ Black Market

Kidney Valley

RT (2017)

Film Review

This documentary concerns Karnali Province in Nepal, where approximately 10,000 kidneys are illegally harvested every year by traffickers. Most are smuggled into India, where patients buy them for $15,000-20,000 each. Filmmakers visit one village where roughly one person per household has sold a kidney.

The traffickers take advantage of extreme poverty and low education levels to coerce villagers to agree to surgery. Although they are promised $5,000-6,000 for undergoing the procedure, “donors” typically receive $500-1,000 at most.

Nepal’s illegal kidney trade has been in operation for roughly 20 years report Karnali residents are much more willing to up up their kidneys since a 2015 earthquake made tens of thousands of them homeless.

The Crumbling of America

Crumbling America

Directed by Henry Schipper (2009)

Film Review

This is a compelling, though somewhat melodramatic, documentary about crumbling US infrastructure – especially its bridges, roads, levees, dams, water delivery systems, sewage systems, and power grid. The US presently spends less on infrastructure (2% of GDP) than the developing countries China (9%) and India (8%). The percentage of GDP Americans spend on infrastructure has declined from 12% in 1960.

Most bridges, superhighways and water and sewage pipes are designed to last 50 years, and many are approaching or have exceeded their expected lifespan. There are no programs to repair vital levees along the Mississippi River and in California. A 6.9 earthquake would totally destroy San Francisco’s earthwork levees, contaminating all southern California’s drinking water, as well as destroying acres of prime agricultural land.

Shoddy maintenance of urban water and sewage systems leads to hundreds of thousands of leaks per year, especially in eastern rust belt cities. While parts of the national electrical grid are subject to ever more frequent and lengthy power failures due to poor maintenance and obsolete switches, sensors, data systems and transformers and rotting utility poles.

Reaching the Wrong Conclusion

Despite the wealth of data they present, I strongly disagree with the filmmakers’ conclusion: that taxpayers need to front up with trillions of dollars to repair America’s crumbling infrastructure. I strongly believe this massive decay presents a unique opportunity to replace 100-year-old technologies with cheaper, more efficient, people-friendly 21st century technology.

For example, I totally disagree with their assertion that the electrical grid was “the greatest infrastructure achievement of the 20th century.”  Besides being one of the most inefficient infrastructure projects ever invented (according to the EPA the US power system loses approximately 67% of the power it creates), the grid was never intended to serve the public – it was intended to increase the sale of electricity and electrical products, as well as consolidating the control of production and distribution in the hands of Wall Street corporations (see Reclain the Commons: Take Back the Grid). The renewable energy revolution, which enables households and neighborhood to produce their own solar energy, also allows ordinary people to control its destruction.

Likewise our totally gridlocked super highways don’t need to be rebuilt – they need to be replaced with cheaper and more efficient and climate-friendly high speed and computer trains and buses.

While inefficient and unhealthy (adding chlorine to our water creates a variety of dangerous chlorinated organic compounds) water delivery and sewage systems need to be replaced with more modern technologies that allow us to recycle our water instead of pouring it down the drain.