Music industry and the value of content

Some battle piracy, some also wish to believe their valuations on their content are much higher than they are. Furthermore, content producers at the elite level controlled the entire media landscape boxing out small artists for many years. You all recognize the deflationary price implications of unlimited downloads, but you need to also understand that the same falling rate of profit tendency applies to the production side too. There are WAY more good content producers now than ever because of the falling costs to produce the content... the costs would have fallen naturally were they ever in a market place. A core part of the problem is that the old media system was a cartel. It used cartel pricing in the first place. Without the cartels in music for instance, CD prices could have been around 2-3 dollars at a decent mark up from costs. The price inflation on media is what made the music industry much more valuable than it actually was in simple commodity terms.

The solution to me needs to benefit the small players, but not by fixing the system for the cartels or elites. I think the state needs to play a role, and everything should be freely streamed by consumers for maximum efficiency, but that the federal state should probably manage the pool of aggregated values. The devil's in the details, but how else can we drive up the value of content when there is no market leverage on pricing due to extremely low production costs and infinite supply of digital commodities. Supply and demand sets the price right? Supply is unlimited and so the price is zero or near zero, or the price is almost arbitrary. If the state does it, then we can just declare the value of the entire music business to be 100 billion dollars per year, and then divvy it out to the artists, with caps on the top to create regional, national, and local acts, drive out the money laundering gangsters that are all over the industry, and create a genuinely reflective music culture.

Distribution of power in society.

The private sector is the dominant sector in our society. As a general rule, I prefer to spread power away from any concentrations. I do not think that there are technocratic issues of talent so much as massive concentrations of power within institutions that create a demand for very specialized, key individuals which occupy those institutional slots. The state, while very large in areas of imperial assaults and maintenance of proxy state power (i.e. Colombia, Egypt, Israel, Saudi Arabia, Bahrain, Iraq, Afghanistan, etc), is still quite smaller than the much larger private sector. Control over most of the social space resides in the hands of the few, and it doesn't matter if it's Hellenistic Greece or Roman oligarchy or the Roman empire or our current variation on themes as old as written records.

As for markets, closed or open, I am not a fan. I am generally opposed to concentrations of power, and markets are simply mechanistic institutions, as old as settled societies, that are crude tools that at their best, determine prices of things and people (most importantly people) on the simple and archaic mechanics of buyer inputs and seller inputs. The information that gets written off as externalities--which are enormous and far reaching, demonstrates clearly the need for a different set of economic institutions that can more accurately determine values on stuff (services, commodities, et al) and on people. Both market systems and state systems have proven their abilities through politics to subordinate the many to the power of the few. There have been massive successful challenges to that rule, civil rights, women voting, or women allowed to occupy higher slots in the economy, labor rights for the bottom 60%, etc. This has created reformist mindsets that mitigate the effects of each type of system (competitive market systems or more coordinated state capitalist hybrids) but by and large, there has been no attempt at creating a system that enhances local power, prevents concentrations and blockages, and maximizes economic outputs for the maximum number of people.

U.S. $60 billion dollar arms deal with Saudi Arabia Single Q&A with Noam Chomsky

a U.S. $60 billion dollar arms deal with Saudi Arabia has been in the news lately, and given the dominance of the U.S. over most nations in the middle east, it appeared at first, to be a significant shift away from the U.S. imperial framework that we use to maintain control over the energy resources in the gulf. The core roles of the U.S. energy system is that Israel is our #1 client--they police the region, and the Saudis were given the role established by British planners prior to the 2nd world war. With other state power systems coming in and out of fashion but managed by the U.S. at various points in time. Given the established role of the Saudis to maintain a weak central government which could be protected by "gendarmes" in the case of attack or an internal revolt, I wondered if this 60 billion dollar arms deal would be a major shift away from the dominant order

I asked Noam Chomsky on this topic, and here was the response:

ER: It's my understanding that the weapons are not as advanced as what we send to Israel, but does this undermine the imperial framework established by the Franco-British empires and... inherited and expanded by the U.S? Is the tension between Israel and Saudi Arabia significant given their respective roles in the system? Is it a major policy shift to allow the Saudis greater internal military control?

NC: You’re right that the arms are not as advanced as what is sent to Israel, which doesn’t object to them. And it’s doubtful that they have any purpose beyond internal repression and tying Saudi Arabia more closely to the US, with more control by the US (training, logistic support, repair, etc.). It strengthens the imperial framework, in this sense. Israel and Saudi Arabia have been tacit allies since 1967, with rare shifts.

A simplified political spectrum.

There has always been some confusion and arbitrary discussion about what the American political spectrum is. What defines the left and what defines the right. In many cases, there is an overlapping spectrum for libertarianism, socialism, liberal on social issues type stuff, but I don't use that stuff. It doesn't work for me from a framework standpoint. Anyone can arbitrarily define what they want "right" or "left" or "liberal" or "conservative" to mean. They are just labels. But if there is a continuum, I prefer the one I laid out below. But I do understand the concepts of the libertarian socialists and that the historical difference between was the difference in tactics between the anti-statist wing of the left (called libertarian) and the statist wing--which went in the socialist direction. But I do not find this to be relevant today.

In essence, the further left you go, the less power you have in few hands and the more power you have as broadly distributed as possible. The further right you go, the more it is concentrated in fewer and fewer hands. That's my metric.

Using the left as democratic, right as authoritarian and hierarchical is simply easier and clears up the muddy confusion over libertarians and socialism, liberals and the older political language. The language and discourse of modern politics is important because we power levelers are at a disadvantage for getting our message out, and the right wing has all of the advantage. We need to be quick with our message so it can be passed along quickly, without always needing such an extensive explanation.

Then there is the matter of labeling the opposition. I am growing fond of the term "right wing socialists" For starters, there is just a tiny splash of "national socialists" in the word, but most importantly, they have spent so much time and effort defining socialism as what they want it to mean through decades upon decades of business financed corporate propaganda--that the base of the right already has such an imprint of it to make it an extremely uphill, costly, and unnecessary battle to attempt to reclaim the word. The same applies to the word "Liberal".

The reason the term applies and fits so well is the bottom line economic reality that the right wing socialists very willingly, especially since Ronald Reagan's election in 1980, have taken the public money, and pooled it collectively and redistribute the wealth upwards. This has always been done, but it has been done at a more accelerated rate since Reagan's presidency. From a historical standpoint, it is the exception, not the rule to have power distributed towards the majority and away from the top. This a predictable consequence of living in a society that is dominated by privately financed corporate propaganda relaying precisely the opposite message: That the broader population is somehow in control and has somehow restricted the super special people who are not powerful because of their positions and experience in those positions but because of their inherent specialness.

To really change minds, you cannot operate on the terms of your opponents. They are setting the framework, and to play in to their frame and defend is not a winning strategy. They have already defined socialism and liberals. By using the updated, realistic term "right wing socialists" we mitigate their positioning by muddying the water--while building up the movement that defines the left: economic democracy and a broader distribution of power and decision making to the majority.

Attack and build, attack and build.

Expand the house of represenatives.

One huge problem with the house is that you really are just about as removed from your house rep as you are the executive branch (and certainly the aristocratic Senate, with its archaic 6 year terms). The country has expanded a great deal, and yet the house is capped at 435 (an arbitrarily established number I should add).

An excellent solution to me is to acknowledge the telecommunications revolution, and allow remote voting on national legislation, this will also allow the expansion of the house to a much larger number.

The clear and obvious advantages to a house of 4350 rather than 435 is that gerrymandering would be greatly reduced (though not impossible over time, I will concede) and local control over reps would be increased because there would be much smaller district sizes (right now the average district is well over 600k per rep. The second advantage here is that the problem of the 20th century was that political candidates were privately financed by the interests that privately control the country. So to pay off 435 is manageable, to a pay off 4350 is much costlier, and to pay off 43,500 even more so. Voting today is done on financial and party line basis...there is not enough of an advantage to be found in the networking and compromise side to outweigh the expansion of the house of representatives into something that can actually represent the varied people's interests in the country.

A Honduras Solution.

There are 2 standoffs in Honduras. The first standoff is between one section of Honduran elites and their now deposed elected president Manuel Zelaya. The second is the political line being walked between the rest of Latin American leaders and the United States. The U.S. is heavily tied down in the middle east and central Asia, after a massive bet was placed by the neoconservative faction of the American political right on using military control to lock down the energy reserves in the Persian Gulf as one of the last great sources of American power (that is to say, control of energy for the rest of the world). As of now, the U.S is suffering from what used to be called imperial overstretch. From a historical standpoint, our power over others is in a state of decline as other powers rise (by definition, "super-power" or power is a relationship between peoples, and by extension, any region that extricates itself in varying degrees from U.S. control is reducing our overall power over them).



The Persian Gulf: Unstable as the region is, the U.S. heavily protects "our resources" under various middle eastern desert states through a proxy system. Clients manage our resources for us, leaders, kings, 99% of the vote dictators, have come and gone while serving U.S. national and corporate power. Oil is the prime resource, which the U.S. uses as leverage against its strategic competitors by using force in "deterring potential competitors from even aspiring to a larger regional or global role." Part of this past weeks news that world powers seek to unpeg oil from the U.S. dollar is sign of the trajectory of our declining ability to control the energy supplies needed for other nations. While I don't see the peg shifting in the short term, the writing is on the wall.



Central Asia: Part of the Condoleezzaliza rice containment strategy to curb Chinese inroads into energy producing regions in Central Asia is to finance clients in places like Uzbekistan...as the 2 links here describe from an east Asian perspective, the moves taking place in this region.



Japan and South Korea: Outside of the North Korean diplomacy game, Japan and SK have remained loyal clients, staking their economic fate on exporting to the United States. Clearly though, they took a much more independent path of development, maintaining much more state control over their economies, developing much more quickly than their disorganized counterparts in the global south.



European Union: Preventing a rival superpower has been an objective of U.S. power since the early 1990s. As the cold war deterance faded, the U.S. accelerated violent attacks on defenseless targets, as the Soviets could be ignored, and the U.S. could flex its muscles. (Grenada, Panama, Iraq, Kosovo, etc..), the central lesson was that attacks can occur on targets that were unable to adequately defend themselves. The EU quickly accelerated internal integration with the creation of the common currency. This trajectory of EU integration remains firmly in place in my view, though clearly, there will be ups and downs in the future.

Latin America: The U.S. regards Latin America as our backyard. In NSC-68, George Kennan, in a highly influential policy document notes that the U.S. would use "harsh measures of repression" to maintain control of those resources. The cold war pretexts would be used to justify the countless dictators which kept each country from voting in ANY popular government (no matter what ideology) which won on a platform of diverting resources away from the U.S. for the benefit of the domestic population. The 20th century in Latin America was a sad one filled with torture, and mass murder traced to Washington's doorstep, and rationalized away with fear mongering corporate propaganda used to justify our anti-democratic interventions such as this:



By the turn of the 21st century, A series of elected governments has been swept into power in Latin America encouraging integration within the region on a scale never before seen. With integration occurring, the old guard of Latin American elites in Honduras (this applies to Latin American elites in general) wants to ensure its own power with the backing of the United States. But the U.S. is tied down elsewhere, and cannot afford a concerted protest of this type of behavior by the rest of the governments Latin America (especially Brazil and Argentina). To resolve the Honduran Crisis, Brazil should attempt to threaten to put a coalition together for a "humanitarian intervention" in Honduras. Picking up an alliance of Brazil, Argentina, Nicaragua, Bolivia, and at the last minute Venezuela would be the wisest course of action. By threatening multi-lateral invasion, the U.S. hand will be forced by virtue of the fact that if it wishes to slow the decline of its influence, it will have to force the Honduran elite's hand. Otherwise, the situation will at best become like Haiti following the 91 coup--when Clinton condemned the coup, but walked the line long enough to allow the back channel support of the right wing to arm the Haitian thugs and allow them to massacre, rape, and torture the Lavalas supporters for years. By the time Aristide was returned to power, the base of his support was destroyed. In Honduras, the base for Zelaya is not even close to the base of support Aristide had from Lavalas (the popular coalition/party that backed the early aristide period) in the early 90s. However the play, if Brazil and Argentina choose to act on it, will certainly have the intended effect. The U.S. will either act to maintain its status as the alpha dog, or it will allow a broad Latin American coalition to invade and place peacekeepers on the ground. It is likely that tepid EU support may be offered if Bolivia and Venezuela are not on board at least at first.

Ultimately, a considered goal should be to get on the road to an EU Style of integration which will once again, force the U.S. to take a much more responsible lead or else be left in the unilateral cold.

The Commodities Bubble, Stocks, Gold, and Money.

The debate now is when to raise rates to prevent inflation. The debate later will be why monetary policy is failing society.

To support this blog, click all the random ads that pop up on this page. They don't know who I am, and I don't know who they are, but I get like 80 cents (until the bottom falls out of that market too.. hah) * update: adsense took their ads away. So much for my little plan.

In my view at this time, gold is a bubble financed by low interest rates. The narrative in the financial press is that gold is a hedge against future inflation. But I am pretty sure that gold is being pumped up by the same forces pumping up equity markets. Super high leverage from low rates has pumped more money into the system--but it does not "print money" as the common metaphor (again, see the Schiff/Ron Paul post) has said. The Federal Reserve and all other monetary incentive to invest policies only create the option to create money out of thin air. It is NOT a guaranteed event. Let's run through a scenario.

Let's just say we have 1 billion dollars in a a hedge fund. The hedge fund borrows 9 billion more at a 1% rate. It now takes 10 billion and attempts to invest its money at a profit. To clear things up, why does it want to borrow money if it has 1 billion already? The short answer is so that it can magnify profits. A 1 billion dollar investment with an 8% annual return nets 80 million, a 10 billion investment at the same rate of return is 800 million. The gains are magnified--but so too are potential losses. But the interest rate in question plays a huge role in monetary policy, because if the initial borrowing rate is 7% then the return on our hedge fund investment is the difference between 8% and 7%. A 1% rate of return.

So given the nature of our current monetarist regime, the one that has ruled the economy since the late 1970s, the missing link in the money printing and inflation discussion is that money only gets printed when it gets borrowed and invested. And right now, money is being borrowed and invested. The S&P is up 50% or so since March 2009. However, this money is being made on money in the same way that houses were mysteriously worth twice as much in 3 years during the housing bubble. Given the extra push and incentives on profitability (low rates, combined with the government buying up assets that the private sector couldn't sell except for at a major loss), it's understandable that a herd of investment is being plowed into anything that can be bought and sold for a profit. And that's where you get the money printing business coming into the discussion. The money gets printed when it gets borrowed and magnified into circulation. Monetarists use the following metrics to break down the money supply: M0, M1, M2, and M3. If the hedge fund $1 billion puts that billion into the stock market then the aggregate value will go up by whatever buying impact that $1 billion has on the market. If the fund pumps $10 billion in, then the demand impact goes up by ten times as much, and the value of the market will reflect that as well.

The take home lesson here is that ALL inflationary scenarios are built on the investor class taking the low interest rate bait and plowing it into the markets. They are most likely highly leveraged bets which makes me instinctively feel that once the losses start, it will be a very rapid decline because of the magnification of losses on the way down--and the subsequent lack of incentives and "risk aversion" (fear) will pull private investment out of the market.

For more on this, and some extra history, see my prior post.