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Sunday Cartoon Blogging – October 4, 2015

Quite the week. Another mass shooting, Kim Davis said she met the Pope, Russia drops bombs in Syria, and we dodge another government shut-down.

The shooting in Oregon was a huge tragedy, but the Right says the shooter was a member of a “well-regulated militia”, so there is nothing we can do:

When He heard about the Kim Davis meeting, God tweeted:

Despite the hype by Ms. Davis’ camp, the Vatican said:

The pope did not enter into the details of the situation of Mrs. Davis, and his meeting with her should not be considered a form of support of her position in all of its particular and complex aspects…

We avoided the shut-down, but expect to see it again in December:

Can cooler heads prevail in the GOP? That’s a no-Boehner:

The foreign policy conversation in the US remains fixed on the idea that we can dictate terms to whomever we want, where ever we want, on whatever timetable we want. And we love, love the idea of regime change:

With the Planned Parenthood hearings, the GOP made its real position clear:

Why the Hysteria about Russia and Syria?

Tom Friedman gets it right:

Today’s reigning cliché is that the wily fox, President Vladimir Putin of Russia, has once again outmaneuvered the flat-footed Americans, by deploying some troops, planes and tanks to Syria to buttress the regime of President Bashar al-Assad and to fight the Islamic State forces threatening him. If only we had a president who was so daring, so tough, so smart.

The hysterical neocon viewpoint was amply represented by who else but John McCain, who told CNN’s Chris Cuomo that he could confirm that Russia’s initial strikes were:

Against our Free Syrian Army (FSA) or groups that have been armed and trained by the CIA, because we have communications with people there.

There was no similar howl of angst when NATO member Turkey started bombing the West’s friends the Kurds, instead of ISIS. So, no hypocrisy here.

And McCain calls them our FSA? We have no FSA, although the CIA trains a few groups. The prevailing neocon fantasy, that we could have prevented the Syrian mess by training and arming a bigger, badder “Free Syrian Army”, continues to pollute the Syrian issue, preventing honest debate. We trained and armed a million soldiers in Vietnam, 300,000+ in Iraq, and tens of thousands in Afghanistan. How did those efforts work out?

And our training of Syrian “moderate rebels” has been a total bust.

But, the Russians’ first foray didn’t hit ISIS, they hit other groups. Word is they hit targets north and west of Homs (al-Rastan, Talbisah and al-Zafaraaneh). This is an area controlled not by ISIS, but other rebel groups. And right on cue, we heard that they hit the Syrian “moderates”.

Imagine, the US couldn’t find “moderate” rebels for 3 years, but the Russians found them in 24 hours!

McCain characterized the Russian air strikes as:

An incredible flouting of any kind of cooperation or effort to conceal what their first — Putin’s priority is. And that is of course to prop up Bashar al-Assad.

It’s time for the US to move on. We need to accept the reality that Assad won’t be dealt with until the Islamist threat in Syria and Iraq is contained. It’s also time to let the Russians have a shot at containing the Islamist threat. Whatever Russia’s entry into Syria does for the confrontation with ISIS, it has clarified our thinking. Our strategy says we can’t work with Assad and Iran to attack ISIS. Putin’s strategy says work with Assad and Iran to attack Assad’s enemies and ISIS simultaneously:

• Putin’s first priority will be to secure the Russian base at Tartus and its air base at Latakia. That is what he has done with his initial strikes, as some insurgents have already tried to hit the Russian air base with rockets.
• After securing western and central Syria, Russia will work to take out ISIS, starting with eliminating a few ISIS groups that threaten Russian territory.

So, what should we be doing? Col. Pat Lang has a few ideas:

1. Obama should act as if Russia and Iran are more than just rivals and adversaries. This will take courage and leadership on his part to explain to the American people.
2. Obama must fully coordinate operations, intelligence analysis sharing and logistics with Russian and Iran.
3. We should forget about positive contributions to the ISIS fight from Turkey. Turkey is a major part of the problem.
4. We should ignore Saudi Arabia’s wishes with regard to Syria, since they support the jihadis.

Friedman describes the big advantage to letting Putin take the lead in Syria:

Let’s say the US did nothing right now, and just let Putin start bombing ISIS and bolstering Assad. How long before every Sunni Muslim in the Middle East, not to mention every jihadist, has Putin’s picture in a bull’s eye on his cellphone?

No one is arguing that Bashar al-Assad is a benevolent leader, but when US media and analysts at some think tanks start describing al-Qaeda as “moderate”, we need to rethink our strategy. Again.

You can’t go into Syria under the pretext of fighting ISIS and simultaneously try to depose Assad, only to gripe when Russia also goes into Syria under the pretext of fighting ISIS and props up Assad.

That sword cuts both ways.

The bottom line is that the US, and its ME and European allies are going to have to admit that getting rid of Assad is a secondary priority to our absolute requirement to contain and ultimately eliminate the threat from ISIS. They also must admit that none of the groups that the CIA and our ME allies have trained and supported represent a viable alternative to the Assad regime.

The sooner we do, the sooner Syria will cease to be the jihadi chessboard du jour, on which ISIS and a civil war in Syria have left hundreds of thousands of innocent people dead.

We need to turn a corner. Our current thinking has failed.

More GOP Dickitude

Dickitude was on display at the House Oversight Committee hearing into Planned Parenthood (PP). Committee Chair, Rep. Jason Chaffetz (R-UT) repeatedly interrupted PP President Cecile Richards as she tried to answer his questions Tuesday. Richards’ testimony was part of an investigation into PP’s business practices after sting videos were released that allegedly showed company executives discussing the sale of fetal tissue. Chaffetz took the time to note Richards’ salary.

Your compensation in 2009 was $353,000. Is that correct? he asked. ‘I don’t have the figures with me, but —‘Richards said. ‘It was,’ Chaffetz replied, ‘Congratulations.’

That had to be the first time in the recorded history that a Republican has criticized a CEO for making money. But, Richards provided the best moment of the day when Chaffetz was caught in a Fiorina-like lie after he pontificated on a projected slide:

CHAFFETZ: You’re going to deny that…
RICHARDS: I’m going to deny this slide that you just showed me that no one has ever provided us before! We’ve provided you all the information about everything — all the services that Planned Parenthood provides. And it doesn’t feel like we’re trying to get to the truth here. You just showed me this.
CHAFFETZ: I pulled those numbers directly out of your corporate reports!
RICHARDS: [legal team tells her something] Excuse me. My lawyers have informed me that the source of this is Americans United for Life, which is an anti-abortion group. So I would check your source.
CHAFFETZ: [looking caught off-guard, stammering] then we will get to the bottom of the truth of that.

Shouldn’t they call the anti-abortion groups that created the fake chart (and the fake videos) to testify?

But, Dickitude doesn’t require a dick. We know that Carly Fiorina did not start the PP fire, but fanned the flames by her vivid comments during the 2nd Republican debate on Sept. 16th. Then, no one could find the section of the video that Carly said she saw.

Things seemed to go from bad to worse when a new video entitled “Carly Fiorina was right”, issued by The Center for Bio-Ethical Reform, and purporting to show a PP abortion showed up this week. It quickly got traction in the media, but then things went from bad to worse: Dr. Jennifer Gunter, a board-certified OB/GYN took to her blog after viewing it. Dr. Gunter’s conclusion is that it was a premature delivery. She disputed Greg Cunningham, curator of the video, and the founder of the Center for Bio-Ethical Reform’s finding, who told Time Magazine that it had to be an abortion:

Owing to the lack of medical treatment offered to the fetus.

Dr. Gunter says that Cunningham was wrong, since the fetus is 17-18 weeks and thus, previable, and that no doctor would render care in that circumstance. She goes on to say:

A neonatologist who attempts to resuscitate a 17 week delivery would be considered unethical.

Her final point was that there is no proof this video is in a PP clinic much less in the US. And hours after the publication of the video, several medical experts contacted by Time Magazine raised questions about whether the video showed an abortion.

These attempts to defund PP are a form of pandering to the anti-abortion wing of the Republican base. The base doesn’t care about literal truth when all them little angel babies are being massacred by the socialists.

Fiorina’s description of video evidence of PP performing a horrible procedure looks to be untrue, particularly since the footage:

• Didn’t come from the videos Fiorina was discussing
• There’s no evidence that the footage comes from PP
• There’s very good evidence that it doesn’t involve an abortion

Even if we grant that Fiorina was confused on the night of Sept. 16th when she made her statement about the video, the only way to explain her continued insistence that what she saw is real is to say she’s too stupid, too stubborn to admit she’s wrong, and/or that she’s a liar.

None of these are good qualities to have in a president.

Yet, the Right sees it exactly the other way: They think these are great qualities to have in a president. It’s a perfect projection of themselves onto an extremely powerful person, one who doesn’t give two fucks about reality, facts and evidence, and will lead from the gut.

That’s how we ended up in Iraq.

The “System” of Prisons

Politicians throw the term “reform” around all the time, and it usually means nothing. One problem that most agree requires reform is the US prison system. VICE did a fantastic job with their report, “Fixing the System,” which aired on HBO, about America’s broken criminal justice system. You can see it on YouTube:

https://www.youtube.com/watch?v=oTL_3WL5gfw

Those who read the Wrongologist in email can see the video here.

In July, VICE followed Mr. Obama to the El Reno Correctional Institution in El Reno, Oklahoma, and recorded the first time a presently serving president sat down with a bunch of inmates at a prison. He talked about their families, how they got into crime, why they copped a plea, what kind of businesses they’d like to start, how they might get financing to start those businesses, what kind of responsibilities they have as parents and to their communities, the reasons for and against the War on Drugs, and the impact of the cycle of mass incarceration on communities of color.

Perhaps a little background. The US has 2.2 million prison inmates. China is second with 1.5 million, and Russia third with 874,000. According to PrisonPolicy.org, The US incarcerates 716 people for every 100,000 residents, more than any other country. And Vox reports that 16 US states have more people in prisons than in college housing!

The HBO show says that this era of mass incarceration came about due to the war on drugs which focused on crack cocaine, meaning that many nonviolent people of color wound up in prison. Next, mandatory-minimum sentencing laws led to a throw-away-the-key culture, with long, destructive prison terms.

Well, leave it to David Brooks to take exception yesterday to the common view that prison reform would be a net positive for American society:

The drug war is not even close to being the primary driver behind the sharp rise in incarceration. About 90% of America’s prisoners are held in state institutions. Only 17% of these inmates are in for a drug-related offense, or less than one in five.

See what he did there? Brooks reframed the discussion to state prisons. Sadly, on the federal level, 48% were in prison for drug crimes, according to Department of Justice statistics. Brooks also misunderstands that the Federal sentencing minimums do not necessarily apply in state courts. He is incorrect that states hold 90% of prisoners. They hold 64%, or 1.4 million of the 2.2 million prisoners. They do hold the vast majority of violent offenders, with 725,000 (53%) jailed for violent offenses. Brooks wanders around and at the end, lands in his typically happy place:

Lifting the spirits of inmates, as described in the outstanding Atlantic online video “Angola for Life,” can also help. But the fundamental situation won’t be altered without a comprehensive surge, unless we flood the zone with economic, familial, psychological and social repair.

Well, Mr. Brooks, if you wanted to make sure that nothing changed, you would recommend waiting for an entire cluster of problems to be addressed, not one of which is remotely likely to happen. He doesn’t support any solutions. And he studiously avoids the stacked deck that makes the prison population so black.

He also missed the other elephant in the room. You can’t escape the parallel between mass incarceration and the growth of for-profit prisons. These corporations have contracts that require that cities and states provide them sufficient prisoners to meet an agreed number, or pay the prison in cash.

This incentivizes putting people behind bars, and should have nothing to do with free market capitalism. This is a policy error that must be corrected.

Two final points:

• Crime flourishes in areas where economic abandonment has produced poor schools and poor prospects. Yet Brooks has argued in the past that the minimum wage should not be raised, that welfare is wasted on moochers, and that the social safety net is too expensive to maintain.
• The plea-bargain system is another culprit. Somewhere in the 1970s, prosecutors figured out an easier way. Threaten an accused with massive charges and punishments, and then propose a plea bargain to a lesser charge. Because people are risk-averse, and/or do not have the money to hire the lawyers to fight the worst charges, they accept the plea bargain and end up in jail, without a trial. This is why it’s always important (if you can do so) to get in contact with a firm such as Mark Rees Law and similar alternatives to ensure you get a fair trial when it comes to your court date.

Conservatives like to cite the number of one-parent households and how the lack of both parents around makes it more likely that a child from a poor area will become a criminal. Mr. Brooks seems to think that releasing non-violent drug offenders from prison will not have much effect on society. But many prisoners are parents.

How many children could have a parent back with them, and maybe avoid incarceration themselves?

See the documentary. Reform the system!

Monday Wake Up Call – September 28, 2015

Wrongo and Ms. Oh So Right were in South Hero VT for the weekend. Here is a pic just after sunset, looking west towards Plattsburg NY. There is little fall color in Northern Vermont yet:

A few thoughts about Boehner’s resignation. Boehner faced a choice between a coup and a shutdown. That led him to make a deal with the Teahadists: If he stepped down as Speaker, they would vote for a “clean” Continuing Resolution (CR) and avoid a government shutdown. Several members of the Freedom Caucus, the conservative group that led the revolt against Boehner’s leadership, said they will now support the spending bill without demands that it include language to cut off funding for Planned Parenthood. Alex Pareene summed up the Boehner era:

It was not a distinguished tenure. His meager accomplishments came in spite of himself and to the great consternation of his Republican colleagues. He pinballed from one pathetic humiliation, usually at the hands of his own caucus, to the next. The only reason Boehner remained speaker for as long as he did—to his eternal regret, it is clear—is because his bitterest opponents were too stupid to figure out how to oust him, and his likeliest replacements never wanted the job.

So, at least as of the time this is written, the corporate wing of the GOP will get their clean funding bill (and retain a shot at the Presidency next year), at the same time, the Teahadists are allowed a “victory” by getting rid of Boehner. The corporate wing will insert another one of their guys in the Speaker position and a year down the road, Boehner is out from under the lobbyist rules, and goes on to a job paying 10 times of his current salary.

But we’ve got unfinished business, like the transportation bill, the Debt Ceiling and the Omnibus Spending Bill to keep government functioning into next year. These will be left for the next Speaker.

The GOP establishment looks to be fragmenting into two parts. They have the majority, but they have lost Eric Cantor, their rain-maker. Boehner, another rainmaker and cat-herder, is now gone. McConnell has now lost the air support he used to enjoy from the House. Rep. Matt Salmon (R-AZ), a co-founder of the House Freedom Caucus, suggested that Senate Majority Leader Mitch McConnell (R-KY) may need to be the next head on the chopping block, particularly for his unwillingness to get rid of the Senate filibuster. From Salmon:

We made a lot of promises to the American people, that if we took the Senate, that we would do certain things and those things have not been accomplished…A lot of the problems we are engaged in is because the Senate doesn’t take any action on anything and there’s nothing that any presidential candidate on our side says that will ever be realized as long as the modern-day filibuster is enacted in the way it is today.

The firebrands in the House say that Sen. Ted Cruz is the defacto leader of the party. The Presidential primaries might determine a different leader, but the establishment wing of the GOP doesn’t have the control it used to have.

But, all is good in the cesspool. So, let’s try to wake up both John Boehner and the Freedom Caucus. Here are The Rolling Stones with “You Can’t Always Get What You Want”, recorded live at the Max in October 1990 and released in 1991:

For those who read the Wrongologist in email, you can view the video here.

Friday Cartoon Blogging??

It sounds like an old story, but the Wrongologist and Ms. Oh So Right are again headed to a wedding in Vermont, so there will be no new posts until Monday. Therefore, cartoons!

We can’t ignore the visit of Pope Francis. Yesterday, he spoke to the Congress, and the usual spin ensued. Like the Liberty U folks when Bernie spoke there, the defining political issue for 90+% of Republicans is abortion. As long as the Pope remains with them on that issue, there’s no contradiction between their faith and political affiliation.

They will no more listen to this Pope on other issues than they did to John Paul II’s anti-war messages.

Liberals, including liberal Catholics, appreciate Francis because he says some things that they’ve believed for a long time. It’s always nice when an authority figure affirms one’s beliefs. But the three Catholic POTUS candidates, Christie, Jeb, and Santorum, have already rejected anything Francis has to say on climate change and income inequality. As have all the GOP members of Congress regardless of their religious affiliation.

The Pope’s big job:

Brian Williams returned from banishment to anchor coverage of the Pope:

We may see a government shutdown this fall. One thing to keep in mind about the Republican debate over whether or not to risk a government shutdown for the “defund Planned Parenthood” movement is that this isn’t a fight over goals or principles. There isn’t a single Republican presidential candidate who does not favor “defunding Planned Parenthood:

The GOP is moving on to Carly:

Volkswagen’s CEO Martin Winterkorn resigned on Wednesday over the emissions cheating scandal, saying “I’m not aware of any wrongdoing on my part.” Strange choice of words, probably written by his PR team. This is a rogue company that undertook anti-social activities for profit. Anyone can see that this is the outcome we should expect if Mr. Market is allowed to run free:

The Beetle morphs:

Corporations Want Europe to Add Refugees

According to The Guardian, the European Union ministers forced through a plan to relocate Middle Eastern asylum-seekers throughout the EU. The plan would distribute 120,000 souls across all EU countries.

The headline yesterday was that Romania, Hungary, Slovakia and the Czech Republic voted against the proposal, but could be forced to take immigrants anyway. These Eastern European governments have been among the most vocal opponents of plans to relocate refugees across the EU. But, according to The Economist, this position ignores economic logic:

A survey by Manpower Group, a consultancy, found that two out of five firms in Poland struggle to fill vacancies. In Hungary, almost half could not get the staff they need. In the Czech Republic and Slovakia fewer employers report difficulties (18% and 28%) but the share has been climbing steadily over the past few years.

Here is their chart showing the difficulty in filling jobs in the EU:

The argument in the countries that need to fill jobs but do not want migrants is that they can fill skill gaps by drawing in labor from neighboring countries with more similar cultures. This may fill some positions, but wages are much lower in the countries needing labor. The Economist reports that wages in Germany are 150% higher than in Hungary. And Germany’s social safety net is superior.

These statistics point to serious problems in the EU’s local economies. But the real issue isn’t under population in the EU. We have been told for years that the unemployment rate among young Europeans is very high. Trading Economics reports that the overall jobless rate in the Eurozone fell to 10.9% in July, from 11.1% in the previous three months. That means 17.4 million EU citizens are unemployed. But, youth unemployment averages 21.9%. Here are some depressing Youth Unemployment statistics from summer, 2015: (Source: Statista.com)

Greece: 53.7%
Spain: 49.2%
Italy: 44.2%
France: 23.6%
Germany: 7.1%

So, even if people in certain EU countries understand that there might be an economic upside to allowing immigrants into their country, their opening position is: “why aren’t we hiring our own kids?”

Then there is the anti-immigrant issue that transcends economic concerns, the ethnic makeup of one’s own country, and what migrants may do to impact these old European cultures. No argument about the economic merits of increased immigration will likely sway voters if they believe their way of life will be compromised. The fear of a “mob at the gates” drives anti-immigrant feeling throughout the world.

So, who says Europe needs all of this migrant labor? Much like in the US, it is the corporations who say they can’t fill jobs with the requisite talent. What they really mean is, talent at a price.

Why can’t German firms import Italian or Spanish kids to do the work?

This sounds remarkably similar to tech firms in the US saying that they cannot find STEM workers, and so ask the government to add more H-1B visas so that migrants from India can fill jobs in Silicon Valley.

The global picture is clear: Many jobs now done by humans are being taken over by machines. Computers will ease our transition to declining populations. Even many low-skilled jobs in manufacturing and agriculture can be handled by robots, requiring a large jump in the skills humans need to learn in order to get the fewer, better paying jobs that remain.

A partial solution may be to import some migrants to fill a few low skilled jobs, but adoption of new technologies rather than population growth, is a better way to go about raising the living standards in Europe.

And we must shut off global population growth sometime soon. The Wrongologist has reported before on “The Coming Jobs War” by Jim Clifton, in which Clifton says that globally, some 3 billion people are looking for work right now, and nearly all of them are willing to work for less than the average American or European.

Every society will be more secure economically if they can promote a high resource-to-population ratio. Those countries who can become close to self-sufficient in food, water, energy, and renewable resources will be the only ones with middle-class living conditions.

Middle Eastern migrants understand this. Some may be fleeing for their lives, but the vast majority are simply economic migrants. The EU is being led by the nose to focus on asylum-seekers, when even they are economic migrants.

Although the poorer parts of the world experience very high population growth, and the developed world does not, it is a safe guess that not a single country today has a population that is low enough to guarantee success in the future world economic order.

Think about what Agent Smith said in The Matrix:

Every mammal on this planet instinctively develops a natural equilibrium with the surrounding environment but you humans do not. You move to an area and you multiply and multiply until every natural resource is consumed and the only way you can survive is to spread to another area. There is another organism on this planet that follows the same pattern. Do you know what it is? A virus. Human beings are a disease, a cancer of this planet. You’re a plague and we are the cure.

Pope Francis on Capitalism

With the Pope starting his visit to the US, most focus will be on Conservatives’ support for the Catholic Church’s views against abortion and gay marriage. Conservatives are far less enthusiastic about Francis’ views about climate change and capitalism, both of which are covered in Pope Francis’ encyclical, Laudato Si’.

While the Wrongologist has not read Laudato Si´, he did read an extensive and thoughtful review by William Nordhaus in the NY Review of Books, who says the Pope thinks that the degradation of our environment is a symptom of deeper problems: rapid change, unsustainable over-consumption, indifference to the poor, and the decay of social values.

Nordhaus notes that the encyclical contains an extensive discussion of the features of markets and modern capitalism. It emphasizes dysfunctional tendencies and distortions, witness his criticism of excessive consumption:

Since the market tends to promote extreme consumerism in an effort to sell its products, people can easily get caught up in a whirlwind of needless buying and spending. Compulsive consumerism is one example of how the techno-economic paradigm affects individuals. [Paragraph 203]

And Francis’ criticism of the distorting effect of the drive for profit:

Once more, we need to reject a magical conception of the market, which would suggest that problems can be solved simply by an increase in the profits of companies or individuals. Is it realistic to hope that those who are obsessed with maximizing profits will stop to reflect on the environmental damage which they will leave behind for future generations? [Paragraph 190]

Nordhaus quotes Francis, who argues that profit-seeking is the source of environmental degradation:

The principle of the maximization of profits, frequently isolated from other considerations, reflects a misunderstanding of the very concept of the economy. As long as production is increased, little concern is given to whether it is at the cost of future resources or the health of the environment; as long as the clearing of a forest increases production, no one calculates the losses entailed in the desertification of the land, the harm done to biodiversity or the increased pollution. In a word, businesses profit by calculating and paying only a fraction of the costs involved. [Paragraph 195]

Francis singles out financiers for special disapproval:

In the meantime, economic powers continue to justify the current global system where priority tends to be given to speculation and the pursuit of financial gain, which fail to take the context into account, let alone the effects on human dignity and the natural environment…. [Paragraph 56]

The Pope criticizes capitalism’s push to make ultra-consumers of everyone:

This paradigm [consumerism] leads people to believe that they are free as long as they have the supposed freedom to consume. But those really free are the minority who wield economic and financial power. [Paragraph 203]

Pure capitalism ignores two major shortcomings of those economies run by Mr. Market: The first is the emergence of monopolies, or things like unregulated pollution, which distort market outcomes. The second is inequality of opportunities and income. And much has been written about rising income inequality, particularly by Seitz and Piketty, and Joseph Stiglitz.

However, it would be inaccurate to point solely to the depletion of resources or pollution as major causes of rising poverty. Instead, it is forces such as the labor-saving nature of new technologies like robots, rising imports from low- and middle-income countries, and the capture of our income taxing system by corporations and the wealthy that have distorted our markets.

Specifically, as economist Arthur Okun has written, markets do not have automatic mechanisms to guarantee an equitable distribution of income and wealth:

Given the chance, [the market] would sweep away all other values, and establish a vending-machine society. The rights and powers that money should not buy must be protected with detailed regulations and sanctions, and with countervailing aids to those with low incomes. Once those rights are protected and economic deprivation is ended, I believe that our society would be more willing to let the competitive market have its place.

So, as this week rolls out, expect to hear many voices on the right argue that Francis is an unrealistic economic fool. In particular, expect to hear George Will’s arguments this week in the National Review echoed by the media. Here is a representative quote from Mr. Will: (emphasis by the Wrongologist)

Francis’s fact-free flamboyance reduces him to a shepherd whose selectively reverent flock, genuflecting only at green altars, is tiny relative to the publicity it receives from media…He stands against modernity, rationality, science and, ultimately, the spontaneous creativity of open societies in which people and their desires are not problems but precious resources. Americans cannot simultaneously honor him and celebrate their nation’s premises.

See what George Will did there? He says that climate denialism is pro-science, while belief in climate change is anti-science.

Know the enemy by their arguments.

Monday Wake Up Call – September 21, 2015

Are you familiar with the “Bad Bank” strategy? It is a new bank set up to buy the bad loans of a bank that has a significant amount of nonperforming assets. Those assets are purchased at market prices. If the assets remained on the original bank’s books, they would be forced to take big write-downs. So, the “good bank” sells the assets to the bad bank, and clears their balance sheet.

And the “bad bank” goes off to fail, be recapitalized, or liquidated. The shareholders and bondholders of the “bad bank” stand to lose money from this solution but its depositors will be bailed out by the government.

Occidental Petroleum (OXY) made a similar deal last November by spinning off California Resources, (CRC) and since then, most investors that bought into the deal got burned.

CRC held OXY’s oil-and-gas exploration assets in California. CRC is CA’s largest natural gas producer and its largest oil-and-gas acreage holder with operations in Los Angeles, San Joaquin, Ventura, and Sacramento. OXY was the big player in the Monterey Shale formation, which had been hyped as the largest reserves of oil in the US. But, in 2014, the US Energy Information Administration (EIA) downgraded the amount of OXY’s known reserves in CA. From Wolf Richter: (emphasis and brackets by the Wrongologist)

The LA Times spilled the beans last week [May 2014] that the EIA is set to severely downgrade the Monterey Shale in California in an upcoming report. Once thought to hold 13.7 billion barrels of technically recoverable oil, the EIA now believes only about 600 million barrels are accessible. Slashing technically recoverable estimates by 96% could be enough to kill off the shale revolution in California.

Six months later, OXY exited CA shale by spinning off 80.5% of CRC to OXY’s shareholders. CRC’s shares began trading on the NYSE on December 1, 2014. As part of the spinoff, CRC paid OXY a special dividend of $6 billion. To fund the dividend, CRC issued bonds totaling $5 billion and leveraged loans for the remainder. This debt now costs CRC about $330 million a year in interest.

Back in 2014, hedge funds were clamoring for energy spinoffs. They’d buy a big stake in the parent company and push the board to do a spinoff that entailed loading the spinoff up with debt to fund a fat special dividend back to the parent.

“Unlocking value,” is the Wall Street term for this kind of financial engineering. Wall Street then made sure that there were enough unwitting or yield-desperate buyers for the bonds. The hedge funds made their money, and moved on.

Then CRC reported its second quarter earnings, which showed a net loss of $68 million on revenues that had plunged 45% to $609 million. And on September 15, Moody’s slashed CRC’s corporate rating from Ba2 to B1, and the bonds from Ba2 to B2. All of it with “negative outlook”. Moody’s described CRC’s relatively high costs of production and interest costs totaling $31.71 per barrel of oil equivalent. It pointed to low oil prices that it didn’t expect “to improve materially in 2016.”

So in 2014, no investor realized that CRC’s reserves had been cut by 96%? Or, that their break-even cost per barrel was $31+?

This Cali deal is Straight Outta Enron.

Now the question is can CRC survive without having to resort to a debt restructuring, bankruptcy, and a total shareholder wipe-out?

These kinds of deals are best pulled off in a credit bubble. Low interest rates force some investors to chase yield, and the unwitting buyers that have these fruits of Wall Street’s labor in their portfolios are the ones who feel the pain. Wall Street will tell you that the dividend and spinoff were disclosed in advance, so it’s not “fraud” by the company. It’s just “stupidity” by yield-hungry investors.

Why do you care? These securities could easily be in your 401k, or in an ETF that you own directly, assuming that you are among the 48% of Americans that have investment accounts.

So it is time for We the People to wake up to Wall Street’s financial engineering and what masquerades as legalized robbery. To help with the wake up, here is John Lennon’s “Power to the People”:

You will note the nearly completed Twin Towers at the end of the video. For those who read the Wrongologist in email, you can view the video here.

Sunday Cartoon Blogging – September 20, 2015

Pope Francis, Russia’s President Putin and China’s President Xi walk into a bar…Well, it won’t be that type of week exactly, but all will be in the US over the next few days. There will be summits and mini-summits, and a few hallway meetings between them and individually, with Mr. Obama. But the game-changer is likely to be Pope Francis, who is bringing his message about Mr. Market, and how Mr. Market isn’t working for the average Joe. In fact, many Republicans are suspicious of the Pope:

Rep. Paul Gosar, (R-AZ) says he’s boycotting Pope Francis’ appearance before Congress. He said:

If the Pope wants to devote his life to fighting climate change then he can do so on his personal time.

Rep. Gosar, who has received campaign contributions of $12,500 from oil and gas companies and $28,850 from electric utilities, doesn’t believe in climate change. Apparently, he would rather the Pope devotes his speech to abortion, Planned Parenthood, and to the threatened religious liberties of County Clerks.

This Pope’s message causes discomfort for people on both sides of the aisle. Conservative Catholics used to welcome Francis’ predecessors ecstatically, and with open arms, but that was in the old days, when Popes were Popes:

Even when in the Reagan Library, today’s GOP candidates can’t duplicate St. Ronnie’s message:

The GOP debate brought the smell of roasted pig:

Views now differ on Paradise:

The Wrongologist

Geopolitics, Power and Political Economy

Author: wrongologist