Risk Rap

Rapping About a World at Risk

Profit Us Maximus

The deal is closed.  American democracy has been sold. The US Constitution, discovered in a discount bin at a cheap dollar store at the Mall of America will now be fully privatized to serve the greater corporate interests of America.  The deal will enable the global fraternity of capitalists to finally unlock and fully realize the hidden value of an unencumbered American dream.  Profit-Us-Maximus  will replace E Pluribus Unum as the national slogan.  Undoubtedly it will appear on our national currency for the freedom of commercial interests and the uninhibited power of capital has triumphed.  Commercial interests have trumped “we the people”.  American liberty, a political currency once recognized as the worlds leading example of representative democracy has been severely devalued.

The Supreme Courts decision overturning laws that restrict corporate freedom of speech now allows corporations the unrestricted right to financially support candidates for public office.  This paves the way for an installation of  a more corporate friendly oligarchy to rule over the citizens of the worlds first and now defunct representative democracy.  The courts ruling in the Citizens United vs. the US Federal Election Commission overturned existing laws that prohibited corporations from exercising free speech.  The ruling now sanctifies the corporate purchase of air time to fund media campaigns that support or attack candidates running for public office.  The wisdom behind the overturned law was to protect the interests of citizens from a corporations ability to use its considerable capital resources to finance and influence the election of  political candidates favorable to their corporate interests.  That law is yesterdays newspaper.

The decision opens the possibility that the governance of our nation, states and townships will be administered by elected officials financed and paid for by corporate largess proffered with the proviso to do their bidding.  America risks becoming one giant company store.  Once free citizens endowed with the protection and empowerment of a Constitution and a Bill of Rights will become beholden to the whims of corporate paternalism.

If your a shareholder in one of the corporations this is a bullish market event and your equity position has surely appreciated in value.  The special dividend of political power born from purchased access to legislators will accrue favorable returns to investors in The United Corporate States of America.  No longer will senators hail from the great state of Georgia or the Live Free or Die State of New Hampshire.  It’ll be the senator from “Do No Harm” Google or “Have It Your Way” Burger King.

There will be a million unintended consequences resulting from this decision.  How government administers and delivers services and how institutions fulfill their social mission will drastically alter.  Institutions and functions that serve and support education,  military, roads and infrastructure, health care, consumer and  environmental regulations, labor protection laws and provision of social services will be transformed.  The very nature of the liberal nation state will change.

This decision will create conditions for the privatization of governmental assets and institutional service structure  to accelerate at mind numbing speed.  The New Jersey Turnpike can now be sold to a private equity firm from China.  Drilling and the exploitation of resources found on National Parks will proceed without prohibition.  Public schools will be offered on a Dutch Auction hosted on e-bay; attracting the participation of a well capitalized confederation of publicly traded Charter Schools.  The mission to acquire the listless brick and mortar carcass of a once  venerated public school system will commence.  The promise of the systems renewal with the breath  of a new life fired by entrepreneurial zeal and taxpayer support will create a new Dow Jones Index constituent,  Education Inc.   Many functions of government will be downsized and outsourced to sophisticated data processing and business process companies.  Military units will also be privatized, becoming mercenary divisions of corporate security firms.   This will enlarge their market opportunities because they will no longer be beholden to exclusively serving the needs of a single client, the USA.

As Keith Olbermann pointed out in his Special Comment concerning the Supreme Court decision, the parallels with Dred Scott Decision are ironic.  The decision ruled that Dred Scott was not a man, but merely a commodity to create wealth for a person with full rights of citizenship.   Now corporations are blessed with all the rights and privileges of a person and the rising ascendancy of their power will soon supplant the interests of individuals.  In so doing, the Supreme Court has once again proven itself to be an activist  political tool to protect the interests of political and economic elites.

We can at least be thankful that the Supreme Courts decision allows us to dispense with the charade of participatory democracy.  Rampant cynicism about the unfair influence of money on the political process has always been understood as a problem.  This has undermined the people’s trust in the electoral process.  It has  eroded a collective sense of political enfranchisement.  It has contributed to creating a pervading  malaise of ambivalence within the electorate.  The monied interests with fathomless pockets can now come out into the open and make their presence plain for all to see.   It remains to be seen how this will alter the structure of K Street.

A new business model for how money is dispensed to politicians will need to be considered .   Perhaps a new derivative  called  a PIMP, (Politician In My Pocket) should be considered.  A PIMP Exchange could be set up in Washington DC.  This future exchange would surely prosper and would propel Washington DC as the fast rising global financial center on  the come.    PIMP trading would be recognized as a fast growing emerging market.  The trading in PIMPs would attract capital from all over the world and may even rise to supplant the future pits in Chicago as the place “where the world goes to manage risk.”

The PIMP Exchange will add that much needed transparency on how the political influence market is performing and what the going price is to buy and sell politicians.  We should be grateful to the Supreme Court  Decision  that laid the judicial foundation that will finally shine light on this aspect of our political process.  Now that its out in the open its all above board.  No more under the table deals will be necessary.  This ruling and the PIMP Exchange makes it very easy to follow the money.  Perhaps legislation should be considered that require senators and congressmen to wear the corporate logos of their three largest sponsors.  If a corporation wishes to remain anonymous feeling that the  interests of their shareholders are better served they can continue to operate under the radar.  A Generic Omnibus  Politician In My Pocket or a (GO PIMP) will be  designed specifically for this purpose.

The laissez faire approach to freedom of speech unfortunately confers all the power to those with the deepest pockets.  “Politicians will be bought and sold by the gross”, according to Alan Grayson a congressman from Florida.  Mr. Grayson is proposing legislation to protect citizens rights from being trampled by an avalanche of corporate money.  The first amendment guarantees citizens that no one shall abridge or prohibit the free and open expression of ideas.  Unfortunately money speaks the loudest and facilitates access to media channels and distribution. The free and open internet provides an individual little protection.  The tussle in China between Google and the government is an instructive warning of what we can expect to occur as corporate control of the internet grows.  It is an indication of a growing rift born from competitive postures of power capitalist institutions.

Our birthright of liberty was orphaned by a pervading cynicism and the seeming ambivalence of citizens who cared little for the rights democratic republics confer and understood less about the responsibilities required to guard them.  The decision by the Supreme Court is a watershed event.  Our political culture has changed.  The United States model for governance is moving closer to the Chinese model of governance.  The state capitalism of the United States is is a mirror image replication of the Chinese model.  A ruling oligarchy of economic interests acting in concert with its hand picked governmental representatives is common to them both.

Did we awaken this morning to the sober realization that American’s best hope is a trust in a benevolent corporate paternalism?  Can we believe that the rule of unencumbered enlightened capitalists is the way to realize the promises of a post scarce society? Can we still believe in the promise that innovation and social progress  and our democratic impulses will continue to inform America’s historical evolution?  Has America and the rest of the world arrived at a tipping point, a harbinger of a dystopian future where property right trumps human rights and the hard edges of economic deprivation, class marginalization and political disenfranchisement are ills that continue to infect society.  We need a doctor.  We need a strong antibiotic to cure this disease metastasizing in the body politic.

You Tube Music Video: Tennessee Ernie Ford: 16 Tons

January 22, 2010 Posted by | China, Civil Rights, corruption, culture, democracy, economics, elections, environment, Federalism, government, infrastructure, institutional, LGBT, military, politics, private equity, psychology, regulatory, taxation, war | , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , | 1 Comment

Blame it on the Muskrat Ramble

CNN was showing dramatic footage of another levee failure along the Mississippi River. The town of Winfield Missouri lost its battle to keep its town flood free due to the subversive activity of muskrats.

According to the Army Corps of Engineers, the pesky muskrats used a burrow and bore strategy to undermine the structural integrity of the levees protecting the town. The muskrats dug deep holes into the levees in search of food and safety that ultimately defeated the heroic actions and laborious efforts of townsfolk desperately fighting to defend their community from the ravages of the flood.

It appears that the muskrats used a maneuver that was similar to the unsuccessful strategy employed by the Union Army in the Siege of Petersburg’s Battle of the Crater. Unfortunately the muskrat’s natural burrowing instincts got the upper hand on the best efforts of human engineers.

When the muskrat’s holes appeared, citizens covered them with sandbags but it only seemed to postpone the inevitable and unfortunate breach of the town’s defenses. The levee failure flooded approximately 1,000 acres of land in this community of 720.

The rascally rodent may have won the battle of Winfield Levee; but this skirmish will serve as a reminder that our country needs to marshal its forces and make substantial investments in national infrastructure. This is a war we cannot afford to lose. We must redirect our national priorities to defend and protect our beloved country.

The Captain and Tennille know something about muskrats.

So too does the great Louis Armstrong.

Risk: infrastructure, flood, opportunity cost, national priorities, agriculture

June 28, 2008 Posted by | environment, infrastructure, jazz, pop, risk management | , , , , , | Leave a comment

Eco and Econ Hardship of the Iowa Floods

Just when the price of corn was hitting $7 a bushel, Iowa’s farmers were counting on making a killing this year. The rise in the price of agricultural products due to increased global demand was one of this years few favorable economic developments that farmers were looking to capitalize on. Unfortunately Mother Nature threw them an awful curve ball and wiped out many farms that abutted the angry rivers of the Midwest. The loss of 10% of the states corn yields, has also hurt soybeans and other crops. Though it will certainly drive prices even higher, for the farmers whose fields are underwater , this year will bring financial hardship not abundance as some have thought only a week or two ago.

Longer term the floods destruction may also significantly damage soil and water quality due to the spread of toxins, hazardous waste, dead farm animals and other industrial pollutants rippling through the farmlands as the flood spreads. If 10% of the areas farmland is affected this will command a premium on agricultural futures for years to come.

Eventually, the flood waters will drain off from the once rich arable soil, carrying with it all the fertilizers, petroleum by products and other effluents into the Mississippi River. As it passes New Orleans it won’t be far from its final destination where it can cause considerable damage to the waters of The Gulf of Mexico and its struggling aquaculture and fishing industries.

The Army Corps of Engineers has issued 13 million sandbags. Those sandbags will have to be hand filled. The amount of labor, energy and resources expended to fill those bags in a valiant struggle to buttress failing levee systems is a testament to the American spirit to endure.

As we tally the awful cost of this catastrophic event lets be mindful that investment in our infrastructure is a critical issue that is central to our national defense. I can’t help but think what a wise decision a $2 billion investment in levees would have returned to this country in saved expense and opportunity cost. The old adage that an ounce of prevention is worth a pound of cure is sure sage advice that unfortunately we always seem to dismiss as a meaningless cliche.

We’ll close this post with a favorite from the old Granges of the Midwest.

Let’s listen to Woody Guthrie sing “This land is Your Land.”

Risk: infrastructure, agriculture, aquaculture, water, Mississippi River, Gulf of Mexico, inflation, arable land, crop yields

June 18, 2008 Posted by | environment, folk, homelessness, infrastructure, risk management | , , , , , , , , , | Leave a comment

Tallying the Cost of the Iowa Flood

Thomas Hart Benton

As the flood waters in Iowa drain southward to its destination in the Mississippi River, new sites and new cities are threatened by levee systems that cannot cope with the extraordinary scope and power of nature’s wrath.

Insurance companies will give estimates about the extent of the dollar damage the flood has claimed. The number I have seen for Cedar Rapids is $700 million. I don’t know how they derive that number. I believe it to be replacement value of insured property and assets of insurance in force. That’s a big number but it does not account for uninsured property, loss of potential income from jobs and small business revenue, loss of municipal tax revenue and the intangible but very real cost of lost opportunities due to the allocation of time and treasure to rebuild and repair damaged and lost assets.

CNN this morning was reporting that The University of Iowa assembled a rescue party to recover $400 million worth of art from its famous museum located in one of its flood ravaged buildings. For all intents and purposes the Hawkeyes campus is shut down and some believe that a number of buildings cannot be salvaged. How do you put a price on learning? How will this effect the decision of prospective students to choose the University of Iowa for their college education? What impacts will this have on the precarious economics of state funded college institutions?

Though we can easily see how Iowa is burdened with the extraordinary financial cost of this terrible event, all Americans will be impacted as a result of this flood. For example, railroads have scaled back schedules due to flooded lines. This will impact commerce of businesses waiting for deliveries and sellers looking to complete the book to bill cycle.

Something that will become more apparent as the summer progresses is the toll the flood will have on rising corn prices. Due to crop destruction it is estimated that the price of corn will rise by 9%. This is a cost that all American’s will unfortunately share equally and will only exacerbate the problem of rising inflation.

When the levee breaks you got no place to stay and escape the harm of this costly flood.

Risk: agricultural futures, municipal finance, transportation, infrastructure, University of Iowa, inflation, opportunity cost, fine art

June 16, 2008 Posted by | commodities, community, economics, environment, folk, infrastructure | , , , , , , , , , , , | Leave a comment

Cedar River, Five Feet High and Rising

The flood of Cedar Rapids seems like an ugly rerun of the Katrina disaster.  Hospitals are being evacuated, homes abandoned, businesses closed, commerce halted and a community is in acute distress.

The City of Five Seasons, population of 120,000 boasts a strong economy, rich culture and engaged citizens whose civic pride and community involvement is the city’s greatest asset.  It is a great city of The Great Plains and its people will rise to the challenge to rebuild itself. The Cedar Rapids Chamber of Commerce lists 1700 members.  Some will do well as a result of this flood.  Construction companies, waste management firms, building suppliers and others will find opportunity as the flip side of this risk event.

This extreme risk event however, may prove to be a coup de grace for small businesses already stressed due to the slow economy and inflationary pressures. As this incident unfolds the disaster response agencies FEMA and the Department of Homeland Security will be closely watched to see how they perform in their recovery and restoration efforts.  We wish them well.Floods and their destructive aftermath are becoming a cruel joke on the American people because these types of events can be mitigated.  I am of the mind that the severity of geo-risk events can be mitigated by investing in the country’s infrastructure like levees, dams and other engineered solutions.

It is a question of priorities and all citizens should ask why the Federal Government continues to ignore the crumbling infrastructure of this country?  Why must needless lives be lost, businesses bankrupted and communities destroyed because the priority seems to be an open checkbook to fund the prosecution of a war that is exhausting the political, emotional and economic capital of this nation.

The administration spends over $10 billion dollars a month to bolster the failed state of Iraq in their nation building project.  What they seem to have forgotten is that the infrastructure of the USA is worthy of this type of investment and certainly demands its undivided and immediate attention.

Consider what New Orleans cost this country and the many billions of dollars we continue to spend to partially recover from the Katrina disaster.  Consider what the return on investment a $1 billion improvement project to upgrade New Orleans’s antiquated levee system prior to Katrina disaster would have yielded the American taxpayer?  Not to mention the avoidance of the utter devastation of a great American city and it’s people.

That’s the hallmark of true leadership.  Leaders need to offer solutions to problems before they occur.  Unfortunately, current leaders are too preoccupied with other priorities and immediate returns on political capital to propose solutions that look beyond the next election cycle or special interests checkbooks.

Today in Cedar Rapids the front line in the war on terror is being fought against an unrestrained river that is carrying away lives, fortunes, dreams and the personal security of citizens that only a strong, vibrant and stable community can provide.Yes, infrastructure is an area where government matters.  Being anti government, anti tax, anti federal bureaucracy are nice radical platitudes that play on voters political suspicions and partisan sentiments; but eventually the bill comes due at all to often too high a price.  This country can ill afford to lose another city.

All politicians should note, as the Cedar River rises’ so too does the personal anguish and political discontent of our citizens.  We pray for their safety and full restoration.

Here is another version of Five Feet High and Rising by the great Johnny Cash.

Risk:  geo-risk, small business, political, infrastructure, opportunity, community, culture, ROI, opportunity cost

June 13, 2008 Posted by | Bush, cities, community, infrastructure, war | , , , , , , , , , | Leave a comment

Tommy Bartlett Thrill Show

The Midwestern region of the United States has been devastated by rain, floods and tornadoes. This year is on a pace to set the record for most tornadoes in a season. The incessant rains that continue to fall have led to devastating floods of communities in Minnesota and Iowa. The unusual spike in increased precipitation could also threaten corn crops and other agriculture due to too much rain. The rain is posing significant risk to the regions economy.

Nowhere has the impact of geo-risk been as starkly demonstrated as in the disappearance of Lake Delton. Built in the 1930’s Lake Delton is a key anchor attraction for the regions important leisure and tourist industry. Long a favorite getaway destination and vacation spot for heat challenged residents of Chicagoland, many will now be forced to find another site to escape those hot city nights. Lake Delton escaped into the Wisconsin River after its dam broke due to heavy rains. Talk about unforeseen risk events. This has to rank with having your place of business destroyed by the falling Skylab. In statistical probability nomenclature the disappearance of Lake Delton is a “fat tail event.”

Lake Delton is an anchor attraction of the Wisconsin Dells. Occupancy rates will surely suffer at the 20+ resorts located in the area. The disappearance of the lake will strike a severe blow to the critical tourism revenue so important to the local economy. The Tommy Bartlett Thrill Show (The Greatest Show on H2O) is one of the first casualties of this extreme risk event. He’ll have to ground his aquatic hi-jinks and bring in landlubbing jugglers and unicyclists due to the absence of water in the lake. It’s a courageous recovery strategy and we hope that the area will attract enough crowds to make it profitable for Tommy Bartlett’s 55th year of providing family entertainment for Lake Delton visitors.

I would bet that few business depending on Lake Delton for sustenance may not have included the possibility of the lake’s disappearance in its annual risk assessment revue. This is ironic and dangerous because the lake is the primary business driver for the areas small businesses. All local businesses must consider the availability of clean and accessible water when conducting it’s annual risk assessment and opportunity discovery revue.

It seems that whenever you take something for granted your begging to be clobbered by some extreme event that comes at you from left field.

Another consideration is “what could these businesses have done to protect themselves from this risk event?The obvious answer is risk transfer by purchasing insurance. It would be interesting to see what companies had business continuity and interruption policies that covered this type of event.

This is a good lesson in product market risk concentration. The products and services of area businesses are almost entirely tied to its proximity to the lake. If that single factor fails or as in the case of Lake Delton disappears your business fails. That is too much risk concentration in a single factor and it can be tempered by developing products and services that are not tied to the lake.

The larger lesson from this type of event is that small businesses need to take an activist role to lobby local and federal representatives to make sure that the lakes, dams and water quality is protected and properly maintained. This is an infrastructure issue that goes to the heart of the debate about national policy and program priorities that need attention and funding. Infrastructure is an issue that has a dramatic effect on small brick and mortar businesses. If a bridge, road, street, electricity or telephone service is interrupted it can put a small business out of business. Small businesses need to assess these risk factors in its business plan and outline contingencies to manage these risk events should they occur.

Infrastructure programs is a growing problem and will continue to grow as state and local governments scale back on maintenance and improvement projects due to budgetary constraints and the inability to raise taxes. Unfortunately the nation’s infrastructure needs immediate massive help. The Tommy Bartlett Thrill Show won’t be surfing its way through the velvet waters of Lake Delton this summer. Let’s hope they’ll be back thrilling overheated Bear fans next summer.

You Tube Video: Beach Boys, Surfin USA

Risk: geo-risk, environment, infrastructure, tourism, agriculture, futures, small business

June 12, 2008 Posted by | commerce, environment, infrastructure, pop | , , , , , , , | Leave a comment

Disaster Response Triad

The earthquake that devastated the Sichuan Province in China, the cyclone that flooded the Irrawaddy River delta in Myanmar and the hurricane that leveled the beloved American city of New Orleans is an interesting study in comparative approaches to disaster response.

All of these natural disasters were terrible human tragedies. The significant loss of life, the destruction of property and environmental damage has forever altered the way of life for millions of people. These disasters have also revealed telling insights into the values of the national governments responsible for rescue, relief and recovery efforts.

The Myanmar effort or more appropriately, non-effort to address the mass misery of its people is a stunning example of authoritarian ambivalence towards the suffering of its subjects. This abomination is more criminal then tragic and is a striking example of the lengths a despotic ruling clique will go to preserve its power through control of the means of subsistence.

Myanmar’s paranoid government uses obfuscation to conceal the impact of its governance practices on its people is damning. Clearly the world has a clear understanding that the Emperor has no cloths and hopefully it will not be long before the people of Myanmar will be able to fully execute its will and rid itself of a repressive government that’s sole purpose is the perpetuation of its oppressive rule.

The Peoples Republic of China’s response is the antitheses of Myanmar’s government’s non-response. China has quickly and efficiently mobilized its state apparatus with military precision. China’s militarization is pervasive and its army is a powerful extension of the state that touches many aspects of daily life and serves as an organizational focal point for the culture and the country’s rural political economy. Here the military is an instrument of relief not of repression as in the case of Myanmar. To be fair the economic strength of China puts it in a better position to respond and provide the relief that a disaster of this magnitude demands. The earthquake has silenced the public relations debacle of the worldwide tour of the Olympic Torch. The Olympic Torch tour has served as a focal point of protest and has eroded the stature of China’s reputation. The earthquake has helped to create some sympathy for the people of China and has shown that the rulers of the Forbidden City are very capable managers of a very formidable state apparatus.

The US Government’s rescue and response efforts following Hurricane Katrina have been scrutinized, dissected and politicized since the time of the event almost three years ago. Lots has been written and we should examine in more detail the risk management lessons from the numerous historical, political, economic and cultural dimensions of the Katrina event. The most salient feature of the US response was how FEMA and Homeland Security could organize and manage a market solution to Katrina. Wal-Mart had the trucks and the logistics, Home Depot had the generators, AT&T the phone cards, General Honore brought the honor and President Bush dispensed funds from the Federal treasury.

I suspect that the Federal Government’s initial reticence to respond to the Katrina crisis was the ideological conviction that the market will provide a solution. Bush’s circle knows that capitalism like nature abhors a vacuum. The spirit of entrepreneurialism will fill the breech that Katrina blew into the intricate levee structure of America’s most idiosyncratic city.

You Tube Video: Dr. John, Sweet Home New Orleans

Risk: Force Majeure, Government, Market, Political, Civil Stability

May 14, 2008 Posted by | China, government, infrastructure, military | , , , , , , , , , , , , , , | Leave a comment

Three Legged Stool

During our last recession back in 2002, I attended a prime brokerage conference at Credit Suisse First Boston (CSFB). A senior economist for the firm gave a presentation on the economic outlook for the coming year. The economist explained that the US economy is like a three legged stool. In his analogy, each leg of the stool representing different demand drivers for the economy.

The first leg represented government spending. The economist suggested that due to the balanced budget amendment and a federal commitment to tax cuts government spending would be curtailed so we cannot expect this segment to lead the recovery.

The second leg of the stool was corporate spending and since earnings growth had dramatically slowed CSFB indicated that we cannot count on corporate spending to lead us out of the recession.

The last leg of the stool was consumer spending. The economist indicated that the American consumer was still a vibrant demand driver due to the rise in the value of their real estate holdings and the potential to unlock the equity within their homes. Consumer spending played an important role in leading the US economy out of the last recession. But the depletion of home equity has exhausted the resource of consumer spending as a leading driver of demand and we cannot expect a consumer led recovery to get us out of the current recession.

Evidence of the slowing consumer spending is reflected in stagnant growth of retail sales as reported by Haver Analytics in its report for March. So it is with great trepidation that we greet Goldman Sachs’ announcement that corporate earnings will be “awful” .

During the last recession the CSFB economist did not foresee an accommodationist Fed policy that unleashed a Tsunami of cheap credit and a mammoth off balance sheet spending spree to fund the war in Iraq.

So the question of what will drive economic growth to lead us out of the current recession? Cheap credit is creating global inflation pressures and stoking friction between the worlds central bankers and is a contributing factor in the Rice Crisis.

What role will government spending play in leading us out of the current recession?

Will we witness further off balance sheet expenditures to fund a retooling of our depleted military and some much needed investment in our corroding national infrastructure?

Risk: Inflation, Credit, Market, Military Spending, Social, Corporate Earnings, Recession

You Tube Video: Guffman Stool

April 17, 2008 Posted by | credit crisis, economics, infrastructure | , , | Leave a comment