Softpanorama

Home Switchboard Unix Administration Red Hat TCP/IP Networks Neoliberalism Toxic Managers
May the source be with you, but remember the KISS principle ;-)
Bigger doesn't imply better. Bigger often is a sign of obesity, of lost control, of overcomplexity, of cancerous cells

In Goldman Sachs we trust: classic example of regulatory capture by professional financial system hackers

News The “Too Big To Fail” Problem Recommended Links Corruption of Treasury Corruption of SEC Corruption of FED
Corruption of Regulators High frequency trading Insider Trading CDS -- weapons of mass financial destruction Control Fraud Principal-agent problem
Senate Hearing on Goldman The Secret to Goldman’s Success AIG collapse Abacus Deal Settlement with SEC Commodities manipulation
Goldman CDS saga Buffet Saga Commodities manipulation Aleynikov   Lobbying and the Financial Crisis
Banking Bonuses as Money Laundering Naked short selling "These F#@king Guys" (GS humor) Financial Humor Goldman Sachs related humor Etc

Professional financial hackers have a lot of common with the organized crime. And  not only in respect to common addictions to cocaine and prostitutes. But there is a subtle difference: financial hackers make it daily (and very lucrative) business to figure out ways to abide by the letter of the law while violating its spirit. Although the claim that they do not break the law has very little credibility. They do break the law, but at the same time their political influence is big enough to keep them out of jail. In 2012 Lanny Breuer, then the head of the Justice Department's criminal division  openly admitted that. In a speech at the New York City Bar Association he said that he felt that it was his duty to consider the health of the company, the industry, and the markets in deciding whether or not to file charges.  Which in case of Goldman represents insurmountable obstacle to criminal prosecution.

In any case GS converted itself into a special type of TBTF  company, the company that specialized in hacking financial system. And in a large company internal politic can turn really destructive both to the firm and society at large. In fact, in large companies there are people with very high IQ at the top with personal traits that  makes them more dangerous in comparison with bosses of Mexican gangs. It also makes internal political battles more vicious.  BTW, a lot of psychopaths have above average IQ.

In a way the USA never had a subprime crisis. What we had was systemic, neoliberalism-induced  crisis that involves FED, government, congress, banking, ratings, insurance, investment and financial industries (the banks were at the center of this crime syndicate and they were the largest beneficiaries of the crimes committed), one manifestation of which was 2008 subprime crisis.  Large banks became huge, dominant political force and based on their political weight, they hacked the financial system in the same way computer hackers hack computers systems to suit their short term needs and first of all for enrichment of the brass (appetite for "make money fast" schemes was greatly raised during dot-com crisis).

As Simon Johnson wrote in May 2009 the USA had a The Quiet Coup with banks becoming the most favored and the most protected industry of the Congress. Financial system is essentially a system of rules. If a rich and powerful organization is directed toward hacking the rules: finding weaknesses and exploiting them it is undistinguishable from mafia in a very precise meaning of the term (organize crime syndicate with strong ethnic component), only more sophisticated.  Again they are not gangsters in traditional meaning of this word, they are of a hackers, and as such they are much more difficult to prosecute.  As a comment to blog post at EconomistView by "Eric" (Paul Krugman The Unwisdom of Elites) aptly stated:

Villains....who exactly? The principle reason that there have been few prosecutions of high level bankers is that not so much that got done was illegal. Reckless, maybe. But even here is it really reckless behavior if you have a belief -- which turns out to be true -- that public finances will bear the downside risks on your behalf?

In hindsight it feels like these things should have been illegal, but the available serious punishments, such as not bailing out AIG, not allowing various investment firms to become bank holding entites, not backstopping the GSEs (read their debt issues and you'll see that nowhere is a claim made for public backing), not taking first loss positions on Bear Stearn assets, etc., etc., were foregone by voluntary actions by public officials.

Make peace with the truth that there will be no sweeping prosecutions, least of all by the federal government of the USA.

Those are serious, well educated and well motivated guys which are paid good money for finding the flaws and based on this knowledge subverting existing system of rules, rules which are the essence of financial system.  Essentially they are professional financial system hackers.  Or a strange brand of Harvard trained Mafiosi (and again, Mafia is nothing more that a diversified criminal business with strong ethnic component ;-).  But unlike Mafia they have really good connections in government and essentially captured the government in a silent coup. In a way this organization behaves like cancer cells in a human body and prognosis is not that good, despite the fact that the patient survived one time:

Finanally, the Great Recession was brought on by a runaway financial sector, empowered by reckless deregulation. And who was responsible for that deregulation? Powerful people in Washington with close ties to the financial industry, that’s who....

Due to deregulation which was the important part of neoliberal doctrine, they become legislators of their own business...  Here is what  a telling quote from the post Overruled found on macrobusiness.com.au

But in global finance there are some things happening that are genuinely different. Dangerously so. It is becoming a hall of mirrors, money referring to itself in an infinite regress. Little wonder that people are attracted to gold, because gold seems to be a tangible, solid measure of value, something we can rest on in an environment where everything seems relative. Yet this, too, is an illusion. The yellow metal only has value because it has a history of being deemed to have value. It is no more an objective measure of value than the pieces of coloured plastic, notes, that make up legal tender.

To explain what I mean, let’s start with a definition of what money is. It is rules. Rules about value and obligation. Those rules are usually based on legally enforced structures, although that need not be the case. In the case of cross border capital markets, the enforcement is informal because there is no supranational government to impose penalties. Disputes are resolved by a handful of law firms, the main penalty is to be prevented from participating for a period.

Now if money is rules, then what does it mean to “de-regulate financial markets” as was claimed in the 1990s? Can you de-regulate rules? Obviously not. So what happened? The place where rules were set shifted.

Instead of government for the most part making the rules, the traders started making the rules. The logic was, as Alan Greenspan argued, that because everyone was acting in their self interest then nothing could possibly go wrong. Pricing would be accurate, the less formal self organisation of the market would be superior to the formal oversight of governments (what would governments, which are always bad, know?) and everyone would win. Free lunches as far as the eye can see.

So the rules proliferated, especially after the advent of the Black and Scholes pricing of risk, a clever piece of maths based on what is probably circular argument, but one that is sufficiently concealed to give traders the impression that they are handing off risk accurately. This led to the explosion of derivatives and securities markets, including such instruments as collateralised debt obligations, credit default swaps and endless hedging games (my personl favourite is a derivative on “volatility”).

Now the point about rules is that they are based on agreement, and their creation can be without any limit provided traders are prepared to agree, to trust each other enough to transact. They are not finite in the way that, say, gold is. And so the rule making exploded. The global stock of derivatives is $US600 trillion, about twice the capital stock of the world (all the shares, property, equities, bonds and bank deposits). Far from deregulation making the rules of finance more more streamlined and more efficient — as if the efficiency of money could be measured anyway, given that it would mean measuring money with itself — the rule making expanded wildly. And we all know what happened when the trust that underlies those rules collapsed.

Lloyd Blankfein personality (The Independent called him the prince of Casino Capitalism)  also suggests that GS might operate in the throes of an addiction to gambling. And they know they are controlled by their addiction, and so they hate themselves, like addicts typically do, for their lack of self-control. They also see what their addiction is doing to the nation and the world, and guilt collides with craving, making the addiction even more disturbing.

From the Wall Street Journal

In December 2007, after the firm distributed multimillion-dollar bonus checks in part thanks to bets on a mortgage meltdown, about 10 Goldman mortgage traders, surrounded by dozens of cheering colleagues, wolfed down the burgers, according to attendees. Bystanders wagered cash on how many burgers the traders could eat.

The annual event resembled a scene out of “Liar’s Poker,” a book depicting bawdy antics of bond traders at Salomon Brothers in the 1980s. In fact, the 2007 contest was held just a few floors away from where the Salomon traders worked when that firm leased space in the same Manhattan building.

It was a lower-stakes version of what went on every day in the group: aggressive, take-no-prisoners trading. Mortgage-backed bonds, including complex derivatives that tracked pools of risky loans, were traded for big money in Goldman’s 400-person mortgage unit.

Addicts used to hate their actions, hate the world that lets them act, and they dehumanize the victims who suffer from it in a way that the strong hate the weak.

The real question about Goldman is what constructive role in economy those guys play. Are they just government supported and government protected extortion gang operating mainly in developing market, but due to inertia ripping off home constituents? Is Goldman really such an indispensable financial intermediary? If one looks at the firm’s revenue breakdown it's clear that this is more of a casino than anything else, and some of GS moves are savagely predatory and put the economy in danger (they were instrumental in causing the collapse of AIG (see Janet Tavakoli- Goldman Sachs Nearly Bankrupted AIG); saving AIG was largely about saving the derivatives market, which is so big and unstable that the bankruptcy of a large and intertwined counterparty could mean the bankruptcy of all gamblers including Goldman). AS Karl Denninger noted on April 12, 2009:

Goldman (and other banks') "Hedges"

There is a rumor about Goldman Sachs flying around on the street - allegedly they are about to report their second-best quarter in history, +$12 billion or so.

In addition, there is this from Bloomberg:

A 47 percent gain for the company’s stock price this year and a return to profitability in the first quarter may help Chief Executive Officer Lloyd Blankfein raise new money, analysts said. That might let Goldman Sachs, the sixth-biggest bank, return the cash received in October from the Treasury’s Troubled Asset Relief Program and shake off compensation and hiring restrictions imposed on banks that took the U.S. aid.

Gee, you don't think being paid by the taxpayer through AIG's "conduit" for losses that didn't (yet) happen at 100 cents on the dollar might have anything to do with that, do you?

And further (and potentially much worse) there is the repeated statement by Goldman executives that they were "fully hedged" against a potential counterparty default by AIG.

One wonders - was that "hedge" to be short the equity on AIG itself, perhaps?

Why is this important?

Because if that's how Goldman hedged they got paid twice and the taxpayer literally got robbed.

Someone in Congress needs to look into this now; there are already rumblings of investigation. Those rumblings need to get a lot louder and turn into subpoenas, not "polite inquiries."

If in fact Goldman (or anyone else) was "hedged" against a possible credit loss from their CDS with AIG and they were able to collect on that hedge (no matter what it was) those payments through AIG need to be clawed back immediately as nobody is entitled to be paid twice for the same risk and reap what amounts to a windfall profit by quite literally engineering a multi-billion dollar transfer of funds from the Taxpayer to the firm!

This is not small potatoes either - we're talking $100 billion+ in aggregate with these various banks on a worldwide basis.

We the people deserve answers on this right now and if persons in our government handed these banks $100 billion dollars of our tax money for what was a covered bet, allowing them to collect twice on a risk that had not yet been realized (when at most they were entitled to collect once via their private hedging activity) every single person involved in that scandal must be immediately removed from office, prosecuted if possible, and every nickel of those funds must be clawed back by whatever means are necessary.

The fact that GS is run by a compulsive  gambler completes the picture. It’s a hybrid hedge fund and bookie, with an investment bank and asset management business attached to create some respectability. As NYT wrote (Clients Worried About Goldman’s Many Hats )

Goldman’s trading operation has grown so pivotal and influential that many analysts say the firm as a whole now operates more like a hedge fund than an investment bank — another benchmark of the firm’s internal evolution that can create new friction with clients.

Is we assume that GS is a parasite on the body of the society, the question arise who is protecting such a mass scale racket in comparison with which Russian mobsters are just children. “Great vampire squid" Goldman Sachs is a strange firm and sometimes it is difficult to figure where GS ends and government starts and vise versa.

Paulson continued to appoint Goldman Sachs alumni to positions of power after the AIG decision—he named Edward C. Forst, a former head of Goldman’s investment-management division, to help draft the $700 billion Toxic Asset Relief Program (of which $10 billion went to Goldman Sachs), and then Neel Kashkari, a former Goldman V.P., as the TARP manager. And of course Edward Liddy, former Goldman board member, was already serving as the new CEO of AIG. Suddenly, everywhere you looked, men who had passed through the Goldman gauntlet of loyalty and rewards were now in key positions overseeing the rescue of the financial system. The company was earning its nickname: “Government Sachs.”

Many observers suggest that it is the insider information from government connections that fuels GS profits. See FT Alphaville The not-so-subtle management of markets

"Goldman's activity is of negative social value. Its recent profits came from trading, which basically amounts to profiting from insider information at the expense of others," says Stiglitz.

GS is more like a hedge fund then an investment bank. While slimy business practices of Goldman Sacks flourished in the atmosphere of deregulation, the idea of milking fiat money system  with stock market is the central in GS business model. That's why a recent Rolling Stone article called the firm a "great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." And a 2007 New York Times column likened its culture to the KGB, the former Soviet Union's secret police.

It's not as if Goldman escaped the financial crisis unscathed. There was a period of chaos last year when Blankfein admits he was willing to consider any option to survive, including merging with Citigroup, which by contrast is today considered one of the weakest financial institutions, 34%-owned by the government. Recently Goldman short selling of MBS during the time the other arm of the firm was packaging them caused a lot of outrage, but nothing was done so far by Obama administration to curb abuses. We will see if Blankfein will go to jail for perjury.

Some comments from Krugman column The Joy of Sachs - Readers' Comments - NYTimes.com

"When the people fear their government, there is tyranny; when the government fears the people, there is liberty." - Thomas Jefferson

===

For more in depth analysis of Goldman Sachs' slimy business practices I recommend:

1. Matt Taibbi's "Vampire Squid" take on Goldman Sachs in the latest Rolling Stone: http://bit.ly/hwCbZ

2. CBC's 30 minute interview with Pulitzer-Prize-winning investigative reporter David Cay Johnston on Goldman Sachs & Gov't. Here's the MP3: Even Jack Bauer couldn't stop 'The Goldman Conspiracy' - MarketWatch

===

Professor Krugman, other wise people have also noticed the same mind boggling phenomenon that you very well pointed out. What has this great country become now? Goldman Sachs and what it represents have shear contempt for each and everyone of those they have the Audacity to repeatedly and legally rob, the retirees, the pension funds of teachers and firefighters, 401ks of the workers and savings of all decent people.

Eliot Spitzer and Matt Taibbi on Goldman Sachs
http://www.zerohedge.com...
http://trueslant.com...
http://www.rollingstone.com...

===

Your suggestion that Goldman worked its miracles by being clever is disingenuous. As the Times own Gretchen Morgenson demonstrated, Government Sachs worked it miracles by sitting down at the private table with goverment decision-makers -- like its old boss Hank Paulson --& hammering out recovery program that benefitted Goldman & whenever possible maimed or killed its competitors (bon voyage, Lehman brothers). If Goldman is corrupt, its Toadies in Treasury T-shirts are worse. Geithner & the top Goldman alum who run Treasury should all be fired, & Goldman should never again enjoy the special status it has acquired through well-placed veterans. There can never be honest & effective regulation when Goldman & its revolving bureaucrats decide what & who is to be regulated. The change we can believe in come from leaders who serve the people; not those who serve big banking.

The Constant Weader at 222.RealityChex.com

===

I am on a completely different ideological plane than you are. I think your Keynesian economics are a complete and absolute fraud. BUT what you say about Goldman Sachs is fact. I do not think that you go far enough. Too many government players are involved with or developed from Goldman. They guided our policies in a way that helped Goldman. More than anything, a special prosecutor needs to be appointed to investigate this travesty of justice.

One quick side note, Asset Backed Securities and other derivatives are not inherently bad, they are bad in the hands of scummy New York investment banks. But otherwise they can help small entities raise capital and allow their business models to flourish and withstand the onslaught of larger entities.

===

This isn't the American Dream anymore, but the great American Fraud! The US has now the best of both worlds: the privatisation of the profits, and the socialization of the losses!

I do hope that with their robust democracy the US will come out of this situation in a better manner.

10 reasons why Wall Street has absolute power over America's democracy
Paul B. Farrell, MarketWatch Last update: 7:13 p.m. EDT April 20,

ARROYO GRANDE, Calif. (MarketWatch) -- Two mind-numbing fast-paced dramas. Two parallel worlds. One real, one fiction, both deadly. Jack Bauer, mythic hero of "24." Dying from a deadly bio-pathogen leaked from weapons developed by Starkwood, a rogue mercenary army attacking the presidency, hell-bent on taking over America.

The other drama in play: "Hank the Hammer" Paulson, iconic Wall Street hero, a Trojan Horse placed inside Washington by Goldman Sachs as Treasury Secretary in control of America's $15 trillion economy. Goldman, a modern dynasty with vast financial powers much like those once used by the de' Medici, Rothschilds and Morgans to control nations.

One of the confounding aspects of bear market rallies is that the longer they last, the more likely investors are to expect a correction, says Barron's Bob O'Brien.

Both dramas play high-stakes games with financial WMDs that have lethal consequences. Jack compresses thrills, kills and chills into 24 hours. Hank, Goldman and their army of Wall Street mercenaries move with equally blinding speed, heart-pounding action.

Drama? You bet. Six short months ago Hank led an assault on Congress. The scene parallels one in "24:" Sangala War Lord Juma's brazen attack inside the White House. But no AK-47s necessary. The Hammer assaulted Congress with just a two-and-a-half page memo in hand. Like a crack special-ops warrior, he took down the enemy, demanding $750 billion, absolute control, total secrecy, no accountability and emergency powers to act immediately ... warning that inaction was not an option, that collapse of America's banking system was imminent, would bring down the global monetary system, pushing world's economies into a "Great Depression II." Congress surrendered.

Here's the whole plot:

Scene 1. American government is now run by the 'Goldman Conspiracy'

Oh, you really think just I'm plotting a television series? Or just paranoid, exaggerating this power grab? You better read "The Usual Suspects," Matthew Malone's brilliant article in Portfolio magazine: He "exposed" the "Goldman Sachs 'conspiracy' to take over the U.S. financial system." Read it in this context: America's financial sector has exploded from 19% of corporate profits in 1986 to 41% today, becoming a magnet for every wannabe billionaire. They know why Wall Street must control Washington.

Malone focuses on the incestuous "conspiracy" of Goldman alumni in Treasury, Bank of America, Merrill Lynch, AIG, Citigroup, Washington lobbyists and politicians.

Scene 2. Huge conflicts motivating Wall Street's 'Trojan Horse'

And just in case you think any emphasis on The Hammer's conflict of interest was invented purely to increase drama, please remember that he worked at Goldman for three decades after serving under Nixon. He got $38 million his last year as CEO in 2006 before becoming Treasury Secretary.

Then during the market meltdown six months ago the $700 million personal fortune he built at Goldman was threatened by Goldman's huge $20 billion derivatives exposure at AIG: Suddenly his responsibilities at Treasury merged with a strong self-interest in protecting his personal fortune. AIG was "saved."

Scene 3. Wall Street's 'quiet coup' also runs world's banking system

There's another equally disturbing expose in "The Quiet Coup," Simon Johnson's great article in Atlantic magazine. A former chief economist at the International Monetary Fund, Johnson also warns that America's "financial industry has effectively captured our government" and is "blocking essential reform."

Worse, he says that unless we break Wall Street's stranglehold (unlikely in the new Washington) we will be unable "to prevent a true depression," warning that "we're running out of time," echoing many of our predictions of the "Great Depression II" coming soon. See previous Paul B. Farrell.

Scene 4. Wall Street used the meltdown to take over America's government

Matt Taibbi, author of "The Great Derangement," captured this drama in a Rolling Stone piece, "The Big Takeover, how Wall Street insiders are using the bailout to stage a revolution." A must-read: "As complex as all the finances are, the politics aren't hard to follow. By creating a crisis that can only be solved by those fluent in a language too complex for ordinary people to understand, the Wall Street crowd has turned the vast majority of Americans into non-participants in their own political future. ... in the age of CDS and CBO, most of us are financial illiterates."

Wall Street "used the crisis to effect a historic, revolutionary change in our political system -- transforming a democracy into a two-tiered state, one with plugged-in financial bureaucrats above and clueless customers below."

Scene 5. How Obama is keeping alive Bush's 'disaster capitalism'

Back in 2007 at the start of the meltdown, Hank was misleading us in Fortune: "This is far and away the strongest global economy I've seen in my business lifetime." In the real world, Naomi Klein, author of "The Shock Doctrine: Rise of Disaster Capitalism," was warning us that "during boom times it's profitable to preach laissez faire, because an absentee government allows speculative bubbles."

But "when those bubbles burst, the ideology becomes a hindrance and goes dormant while big government rides to the rescue." Then, free-market "ideology will come roaring back when the bailouts are done. The massive debts the public is accumulating to bail out the speculators will then become part of a global budget crisis." TARP paybacks: Obama has a new "disaster capitalism."

Scene 6. Wall Street's CEOs rule like dictators in a banana republic

Seriously, here's how bad Taibbi sees it: "Paulson and his cronies turned the federal government into one gigantic half-opaque holding company, one whose balance sheet includes the world's most appallingly large and risky hedge fund, a controlling interest in a dying insurance giant, huge investments in a group of teetering megabanks, and shares here and there in various auto-finance companies, student loans, and other failing business."

And let's include $5.5 trillion in Fannie Mae and Freddie Mac. Wall Street's greed and stupidity resembles the self-destructive reigns of banana republic dictators.

Scene 7. Wall Street makes an un-American bet on 'disaster capitalism'

Today as you ponder buying some Goldman stock, remember, you're really betting that "disaster capitalism" is back, strong, tightening its stranglehold on Washington and on the American taxpayers, who will guarantee all Wall Street's future failures. Yes, this is un-American, but so what?

The "Goldman Conspiracy" is still probably a good short-term buy ... if you're interested in betting on America's new "democracy of capitalists, by capitalists, and for capitalists," with "The Conspiracy" leading the joint chiefs of this new mercenary army ... and it only took six short months for their "Quiet Coup!"

Scene 8. Banks recycle TARP money, pump earnings, cheat America

Here's how it worked: The Hammer conned a clueless Congress, then shelled out $350 billion of our taxpayer money (Helicopter Ben Bernanke helped by upping the ante with a couple trillion side-bet), buying toxic debt to save his ol' Wall Street buddies. They stopped lending and used the dough to doctor their balance sheets.

So no surprise that Goldman, Wells Fargo and J.P. Morgan Chase are now reporting "blockbuster" first-quarter earnings, says the New York Times, while just months ago "many of the nation's biggest banks were on life support."

Get it? They screwed taxpayers and borrowers so they can repay TARP with (you guessed it) our recycled TARP money. Now it's back to business-as-usual, with no restrictions on CEO pay and bonuses ... no thank-yous ... no admissions of guilt ... while some even arrogantly deny that they ever needed TARP money.

Scene 9. Wall Street's already set the stage for new disaster

Right after the election in November, at the peak of the banking crisis, when Hank, Goldman and the Wall Street mercenary armies were divvying up the $350 billion TARP money, we detailed 30 reasons for the "Great Depression II" likely coming around 2011. We quoted John Whitehead, former Goldman Sachs chairman, former chairman of the New York Fed, former Reagan deputy secretary of state. He warned America's problems will take years, burn trillions, result in massive deficits:

"This is a road to disaster," he said. "I've always been a positive person and optimistic, but I don't see a solution here." He did see a depression at the end of that road, one you can call the "Great Depression II."

Scene 10. Obama turned 'The Goldman Conspiracy' into a superpower

Do you see the parallels: Jack and Starkwood, Hank and Goldman? Jack's a great mythic hero. We need to believe a hero will defend the little guy, stand between us and total annihilation. But Jack Bauer's "dead." Yes, dead. Jack's not real. Never was "alive." Jack's a fiction, a figment of Main Street America's vivid imagination, the symbol of "hope" for a populist revolution. Hope that Jack, Barack or some other new hero will emerge, take power back from Wall Street and return it to the people.

Unfortunately that won't happen, folks. Yes, on TV Jack will come back from near-death, again. But in real life, Hank, Goldman and Wall Street's mercenaries are winning the war. Read and weep Portfolio's chilling finale: "Obama's victory and Geithner's appointment are the completion of Goldman's meticulously crafted plan to become a superpower. The firm now has the clout to impose its will on the financial markets, and the world."

GOP or Dems? Conservatives or liberals? It doesn't matter. We'll all controlled by "The Conspiracy." So why not surrender, let them have the power? The truth is, through their lobbyists and surrogates in Washington, they already rule America. Surrender is a mere formality.

Accept reality. Hold them accountable later. After the next crisis. After the next meltdown of disaster capitalism -- if there's anything left after the "Great Depression II" sweeps like a pandemic across the planet, consuming all economies, for a long time. But for now, Goldman and other banks may well be short-term buys. Just be ready to dump them in the near future ... a scenario that will be here sooner than you think.

See also Goldman Sachs aka "These F#@king Guys"


Top Visited
Switchboard
Latest
Past week
Past month

NEWS CONTENTS

Old News ;-)

[Dec 18, 2018] Warren Buffett suggests you read this 19th century poem when the market is tanking

Notable quotes:
"... If you can keep your head when all about you are losing theirs ... If you can wait and not be tired by waiting ... If you can think – and not make thoughts your aim ... If you can trust yourself when all men doubt you ... Yours is the Earth and everything that's in it. ..."
"... Like this story? ..."
Dec 18, 2018 | finance.yahoo.com

The stock market has had a volatile year, and it's not over yet: The Dow Jones Industrial Average lost more than 520 points on Monday and the S&P 500 fell 2.1 percent. Both are in correction and on pace for their worst December performance since the Great Depression in 1931.

But for the average person, shifts in the market , even ones as dramatic as the ones we've seen this year, shouldn't be cause for panic. During times of volatility, seasoned investor Warren Buffett says it's best to stay calm and stick to the basics, meaning, buy-and-hold for the long term.

So, during downturns, "heed these lines" from the classic 19th century Rudyard Kipling poem "If -- " which help illustrate this lesson, Buffett wrote in his 2017 Berkshire Hathaway shareholder letter :

If you can keep your head when all about you are losing theirs ...
If you can wait and not be tired by waiting ...
If you can think – and not make thoughts your aim ...
If you can trust yourself when all men doubt you ...
Yours is the Earth and everything that's in it.

Market downturns are inevitable, Buffett pointed out, using his own company as an example: "Berkshire, itself, provides some vivid examples of how price randomness in the short term can obscure long-term growth in value. For the last 53 years, the company has built value by reinvesting its earnings and letting compound interest work its magic. Year by year, we have moved forward. Yet Berkshire shares have suffered four truly major dips."

He went on to cite each of the steep share-price drops, including the most recent one from September 2008 to March 2009, when Berkshire shares plummeted 50.7 percent.

Major declines have happened before and are going to happen again, he says: "No one can tell you when these will happen. The light can at any time go from green to red without pausing at yellow."

Rather than watch the market closely and panic, keep a level head. Market downturns "offer extraordinary opportunities to those who are not handicapped by debt," he says, which brings up another important investing lesson: Never borrow money to buy stocks .

"There is simply no telling how far stocks can fall in a short period," writes Buffett. "Even if your borrowings are small and your positions aren't immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions."

Don't miss: Warren Buffett and Ray Dalio agree on what to do when the stock market tanks

Like this story? Subscribe to CNBC Make It on YouTube!

[Dec 18, 2018] Stock Sell-Off Defies Everything the Bulls Hoped Would Stop It

Dec 18, 2018 | finance.yahoo.com

View photos
Stock Sell-Off Defies Everything the Bulls Hoped Would Stop It

(Bloomberg) -- Valuations aren't stopping it. Jerome Powell's softer tone failed to soothe anyone. The moratorium on tariffs is a fading memory and now the sturdiest chart level of the year is in danger of giving way.

A stock rout that bulls thought was finished three different times since October is in a new and ominous phase, with the Dow Jones Industrial Average losing 1,004 points in two days. No Santa Claus rally. Instead, the S&P 500 Index is hurtling toward the second-worst December on record.

"The stock market doesn't care what looks good now. It's wondering if fundamentals will deteriorate in the future," said Peter Mallouk, co-chief investment officer of Creative Planning, which has around $36 billion under management. "You have a lot of people that are scared, and they're sitting on the sidelines to wait it out."

Waiting it out is starting to look like the only viable strategy. On Monday, the S&P 500 briefly pierced a level that had been a psychological foundation for 10 months, its intraday low from Feb. 9. Valuations shrink and shrink -- computer and software stocks trade at 15 times next year's earnings estimates, cheaper than utilities and soapmakers -- and the selling just gets worse.

With Monday's 54-point loss, the S&P has now fallen 2 percent or more six times this quarter. The Nasdaq Composite has done it 10 times. Both are the most since the third quarter of 2011.

Pinning a single cause on the carnage has become an exercise in absurdity, with analysts cycling through a rotating list of reasons that include trade, Donald Trump's legal travails, China data, sinking oil and cooling home prices. Anyone daring to suggest economic growth may slow in 2019 is pointed to charts showing factories, employment and profits are booming -- but those assurances are starting to fall on deaf ears.

While S&P 500 Index futures indicated a potential respite in Asian trading Tuesday, rising as much as 0.5 percent, traders remained cautious.

Investors "are too worried, but that's the big driver behind the declines we've seen recently, overall worries about U.S. growth and worries about global growth," said Kate Warne, investment strategist at Edward Jones. "Investors have gotten very nervous about the changes they're seeing ahead and they're uncertain about what they mean."

A troubling sign for Americans: equity pain, which all year has been worse overseas, is landing with more force in the U.S. The Russell 2000 Index of small caps, a proxy for domestically oriented companies, slid into a bear market Monday, falling 21 percent since Aug. 31.

On the other hand, since hitting a 19-month low in late October, the MSCI Emerging Markets Index has trended higher, even as the S&P 500 Index keeps making new lows. Stocks in the EM gauge have outperformed the S&P 500 for three consecutive weeks, the most since late January, data compiled by Bloomberg show.

To comfort themselves in the face of such depressing facts, beaten-up investors have looked at past corrections and noticed that this one is still playing out according a relatively benign plan. Under the pattern, major swoons that have interrupted the bull market that began in 2009 have taken around 100 days to tire out before dip-buyers swooped in to put things right.

At the same time, anyone betting the New Year will bring an end to the volatility should be aware that bull markets can die slow deaths. The 88-day sell-off has been going on roughly one-third as long as it has taken for the S&P 500 to fall into the 11 bear markets it's suffered going back to World War II.

How many more sellers than buyers were there on Monday? The volume of stocks trading lower on the New York Stock Exchange reached 1 billion shares, compared with 158 million that were bought. The difference in trading volume, at 883 million shares, is on track to become the biggest weekly gap since 2016, data compiled by Bloomberg show.

That the worst two-day sell-off since October landed on the same week Powell's Federal Reserve is expected to announce its ninth interest rate hike was grist for those who see central bank policy behind everything. As willingly as the Fed chairman has walked back his most hawkish pronouncements, nobody thinks monetary policy is likely to loosen even as growth in the economy and earnings slows from this year's pace.

"That's what the market is struggling with right now -- do they believe in a growth slowdown to trend or something more sinister than that?" said Phil Camporeale, managing director of multi-asset solutions for JPMorgan Asset Management. "I don't think people really want to take risk, but especially trying to catch a falling knife on equity prices."

(Adds details on S&P 500 futures trading in seventh paragraph.)

--With assistance from Elena Popina and Lu Wang.

To contact the reporters on this story: Vildana Hajric in New York at vhajric1@bloomberg.net;Sarah Ponczek in New York at sponczek2@bloomberg.net

To contact the editors responsible for this story: Jeremy Herron at jherron8@bloomberg.net, Chris Nagi, Eric J. Weiner

For more articles like this, please visit us at bloomberg.com

©2018 Bloomberg L.P.

https://s.yimg.com/uc/sf/0.1.44/r.html

Reblog Share Tweet Share Sign in to post a message. 8 viewing

[Dec 18, 2018] DoubleLine's Gundlach says U.S. equities are in long-term bear market

Notable quotes:
"... Jeffrey Gundlach, chief executive of DoubleLine Capital, on Monday said the S&P 500 stock index is headed to new lows and that U.S. equities are in a long-term bear market. ..."
"... "I think it is a bear market. I think we've had the first leg down and the second leg down is usually more painful than the first leg down," said Gundlach, who oversees more than $123 billion. ..."
"... "I think this lasts a long time. It has a lot to do with the fact that, I believe, that we're in a situation that is ... highly unusual - that we're increasing the budget deficit so spectacularly so late in the cycle while the Fed is hiking interest rates." ..."
"... The intraday low for the year in the S&P was on Feb. 9, when it bottomed at 2532.69. The low close for the year was on April 2 at 2581.88. On Monday, the S&P closed 2545.94. ..."
Dec 17, 2018 | finance.yahoo.com
<img alt="FILE PHOTO: Jeffrey Gundlach, CEO of DoubleLine Capital, speaks during the Sohn Investment Conference in New York" src="https://s.yimg.com/it/api/res/1.2/BXVsdhZsK0OiZdcOd8_ffw--~A/YXBwaWQ9eW5ld3M7c209MTt3PTQ1MDtoPTMwMDtpbD1wbGFuZQ--/http://media.zenfs.com/en_us/News/Reuters/2018-12-17T182416Z_1_LYNXMPEEBG1NJ_RTROPTP_2_FUNDS-DOUBLELINE-GUNDLACH.JPG.cf.jpg" itemprop="url"/>

NEW YORK (Reuters) - Jeffrey Gundlach, chief executive of DoubleLine Capital, on Monday said the S&P 500 stock index is headed to new lows and that U.S. equities are in a long-term bear market.

Gundlach, speaking on CNBC TV, said passive investing has reached "mania status" and will exacerbate market problems.

"I think it is a bear market. I think we've had the first leg down and the second leg down is usually more painful than the first leg down," said Gundlach, who oversees more than $123 billion.

"I think this lasts a long time. It has a lot to do with the fact that, I believe, that we're in a situation that is ... highly unusual - that we're increasing the budget deficit so spectacularly so late in the cycle while the Fed is hiking interest rates."

The S&P 500 briefly erased its losses in late-morning trade on Monday but resumed its steep decline and pierced through Gundlach's target after he made his "bear market" comments.

The intraday low for the year in the S&P was on Feb. 9, when it bottomed at 2532.69. The low close for the year was on April 2 at 2581.88. On Monday, the S&P closed 2545.94.

Investors are also bracing for the Federal Reserve's last rate decision of the year on Wednesday, when they are expected to raise U.S. interest rates for a fourth time for 2018.

Gundlach said the Fed should not raise rates this week but will. "The bond market is basically saying, 'You know, Fed, there's no way you should be raising interest rates'," he said.

The U.S. central bank's quantitative tightening campaign has made markets nervous because of the ultra-low levels that have remained in place for several years, Gundlach said.

"The problem is that the Fed shouldn't have kept them (rates) so low for so long. The problem is, we shouldn't have had negative interest rates like we still have in Europe. We shouldn't have had done quantitative easing, which is a circular financing scheme," he said.

Gundlach also said the China-U.S. trade war gets worse from here. "China doesn't like to be told what to do by President Trump," he said. For its part, "I think they (the United States) will probably ratchet up the tariffs."

The remarks by Gundlach, who in April recommended investors short Facebook Inc, extended losses in Facebook shares on Monday after he characterized the social media giant as a "diabolical data-collection monster that would ultimately fall victim to regulation." The stock closed 2.69 percent lower.

Gundlach took a shot at passive investment strategies such as index funds, declaring the investing strategy a "mania" that is causing widespread problems in global stock markets.

"I'm not at all a fan of passive investing. In fact, I think passive investing ... has reached mania status as we went into the peak of the global stock market," Gundlach said. "I think, in fact, that passive investing and robo advisers ... are going to exacerbate problems in the market because it's hurting behavior," he said.

[Dec 18, 2018] 14,889,930,106,680 Reasons to Fear Recession

The last recession was in 2008, so yes it is time for the new one.
Dec 18, 2018 | finance.yahoo.com

(Bloomberg Opinion) -- Traders and investors will be glad to see the back of 2018. It's been the worst rout since 1901, by Deutsche Bank AG's reckoning, with almost every asset class delivering losses. These charts illustrate the backdrop to what went wrong this year – and hint at what could go better in 2019.

$14,889,930,106,680

That's how much the total value of companies listed on the world's stock markets has declined since peaking at $87,289,962,917,450 on Jan 28. In other words, almost $15 trillion has been wiped off the global equity market this year.

The list of potential motivations for the sell-off is long and includes rising geopolitical risks, the prospect of trade wars erupting, the risk that a slowdown in global growth that could degenerate into a worldwide recession, and the evergreen what-goes-up-must-come-down. But might it just be possible that investors start to take the view stocks have fallen far and fast enough to offer value next year?

Talkin' About a Recession

It's clear that one of the fundamental worries spooking investors is that the period of coordinated global growth that propelled stock markets higher in recent years is coming to an end.

The R word is increasingly cropping up in news articles. But economists put the chances of a recession in the coming year at 15 percent in the U.S. and 18 percent in the euro zone, according to Bloomberg surveys. Even the Brexit-battered U.K. economy is only at a 20 percent risk, while for Japan the likelihood rises to 30 percent. Perhaps those concerns about a recession are overdone.

Curving to Inversion

Or perhaps not. One trend was omnipresent in 2018 – the relentless flattening of the yield curve in the U.S.

Yields at the short end of the Treasury market pushed higher with every quarterly increase in the Fed's benchmark interest rate. Longer-dated bonds danced to a different beat, particularly as the October equity shakeout drove a flight to quality.

An inverted yield curve – when yields on shorter-dated bonds are higher than their longer-dated counterparts – is often seen as an indicator of impending recession. It's finally happened: yields on five-years are below those for two-years. A key question for 2019 will be how the feedback loop develops between the Federal Reserve's policy intentions and the shape of the curve.

Quantitative Tightening

The Fed has been reducing its economic stimulus by not replacing the bonds it bought under its Quantitative Easing program as they mature.

But this "normalization" is already taking its toll as the sharp equity market sell off in October showed. The Fed has a tricky choice to make in 2019 about whether it can persist both with hiking rates and reducing quantitative easing. Is the world ready yet to stand on its own feet without ongoing central bank support?

No Alarms and No Surprises

Economic surprise indexes – which measure actual economic data compared to forecasts – are designed to be portents of the future. And for 2018 they largely did their job. U.S. strength is waning and Brexit is taking a toll on the U.K. In particular the third-quarter weakness in euro-zone growth, when both Germany and Italy turned negative, was well-flagged from as early as the first quarter.

For 2019 there is a more neutral outlook, but it is interesting that the U.S. economic data is much more evenly balanced in terms of expectations. Europe continues to be the worst performer – quite something considering the predicament the U.K. is in.

Europe Stumbles

Europe has seen growth falter this year, with Italy's political crisis and Germany's diesel vehicle emissions scandal taking their toll.

Italy's third-quarter growth was revised to -0.1 percent, beating only Germany. The prospects for 2019 are none-too-rosy, bar the notable exception of Spain, as momentum has evaporated. Europe remains in the sick bay of the developed world – just as the European Central Bank prepares to remove its monetary stimulus to the economy.

Relying on China

China came to the global economy's rescue in the wake of the financial crisis, but it is starting to pay the price for increasing its debt to create additional GDP growth. Total social financing as a percentage of gross domestic product – a broad measure of credit creation – is flat-lining. Adding extra debt to boost the economy is becoming a less effective measure. It is not just the threat of a trade war with America that has pushed Chinese equities down by 20 percent in 2018.

China faces the classic emerging-market middle-income trap where growth fueled by credit runs out of road. This debt bubble will not be easily fixed.

Finding Reverse Again

Japanese Prime Minister's famous three economic arrows are failing to hit their mark. Debt that stands in excess of 250 percent of GDP is hampering all efforts to resuscitate inflation and sustainable growth in the world's third-largest economy. Third-quarter GDP contracted 2.5 percent on an annualized basis, the worst performance for four years.

Tokyo might be hosting the Olympics in 2020, but there is little benefit flowing through so far. Japan, like the rest of the once dominant Asian export powerhouses, is just as beholden to the outcome of the trade war with Trump as China is.

Hunting for Neutral

Until very recently, many economists were anticipating at least four more rate increases from the Fed next year at a pace of one per quarter. While the futures market still suggests a Dec. 19 hike is a done deal, the outlook for monetary policy in 2019 has shifted significantly in recent weeks.

Goldman Sachs Group Inc. has trimmed its forecast for number of potential Fed rate increases in 2019; billionaire fund manager Paul Tudor Jones said earlier this month that he's not expecting any additional tightening from the U.S. central bank next year. A halt to the hikes might prove as pleasing to financial markets as to President Donald Trump.

Credit Squeeze

Companies with dollar bonds have seen their borrowing costs soar relative to those of the U.S. government as the Fed has driven its benchmark interest rate higher this year. Investors have seen a corresponding slump in the value of the corporate debt they own.

Any slowdown in the ascent of U.S. borrowing costs as the Fed pauses for breath should give succor to corporate bonds – provided it isn't accompanied by a rise in defaults.

Other People's Money

It's been a terrible year for the stocks of firms that manage other people's money for a living.

Fund managers tend to invest in each other's shares. And you'd expect them to have better-than-average insight into the business prospects of their peers. So watch for an inflection point in asset management stocks – it might be a sign of a turning point for the wider market.

Happy Birthday to the Euro

The common European currency celebrates its 20th birthday at the start of January. During the two decades of its existence, rumors of the euro's demise have been proven to be greatly exaggerated.

The European debt crisis at the beginning of this decade posed an existential threat to the euro's well-being. The currency survived. At several points in the past few years, Greece seemed on the verge of either quitting or being ousted from the project. Its membership survived. And Italy's election of a populist government earlier this year raised the prospect of a founding member threatening to leave if it wasn't allowed to break the bloc's budget rules. Still, the euro survives.

In fact, as the chart above shows, investors are close to the most relaxed they've been about the euro fracturing in more than five years based on the Sentix Euro Break-Up Index, a monthly gauge of investor concern about the threat. So let's end by wishing the euro many happy returns.

To contact the authors of this story: Mark Gilbert at magilbert@bloomberg.netMarcus Ashworth at mashworth4@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Mark Gilbert is a Bloomberg Opinion columnist covering asset management. He previously was the London bureau chief for Bloomberg News. He is also the author of "Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable."

Marcus Ashworth is a Bloomberg Opinion columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.

For more articles like this, please visit us at bloomberg.com/opinion

[Dec 18, 2018] Looks like AP joined Integrity Intiative

Dec 18, 2018 | news.yahoo.com

Yahoo News - Latest News & Headlines

Matt o'Brien and Barbara Ortutay, AP Technology Writers , Associated Press December 17, 2018

<img alt="Key takeaways from new reports on Russian disinformation" src="https://s.yimg.com/ny/api/res/1.2/9VGA29inJ83dPeqC.cvqTg--~A/YXBwaWQ9aGlnaGxhbmRlcjtzbT0xO3c9ODAwO2lsPXBsYW5l/http://globalfinance.zenfs.com/images/US_AHTTP_AP_HEADLINES_BUSINESS/e66de17c8e1a4cecaf1da81f2bf87093_original.jpg" itemprop="url"/>
Some suspected Russian-backed fake social media accounts on Facebook.

Russians seeking to influence U.S. elections through social media had their eyes on Instagram and the black community.

These were among the findings in two reports released Monday by the Senate intelligence committee. Separate studies from University of Oxford researchers and the cybersecurity firm New Knowledge reveal insights into how Russian agents sought to influence Americans by saturating their favorite online services and apps with hidden propaganda.

Here are the highlights:

INSTAGRAM'S "MEME WARFARE"

Both reports show that misinformation on Facebook's Instagram may have had broader reach than the interference on Facebook itself.

The New Knowledge study says that since 2015, the Instagram posts generated 187 million engagements, such as comments or likes, compared with 77 million on Facebook.

And the barrage of image-centric Instagram "memes" has only grown since the 2016 election. Russian agents shifted their focus to Instagram after the public last year became aware of the widespread manipulation on Facebook and Twitter.

NOT JUST ADS

Revelations last year that Russian agents used rubles to pay for some of their propaganda ads drew attention to how gullible tech companies were in allowing their services to be manipulated.

But neither ads nor automated "bots" were as effective as unpaid posts hand-crafted by human agents pretending to be Americans. Such posts were more likely to be shared and commented on, and they rose in volume during key dates in U.S. politics such as during the presidential debates in 2016 or after the Obama administration's post-election announcement that it would investigate Russian hacking.

"These personalized messages exposed U.S. users to a wide range of disinformation and junk news linked to on external websites, including content designed to elicit outrage and cynicism," says the report by Oxford researchers, who worked with social media analysis firm Graphika.

DEMOGRAPHIC TARGETING

Both reports found that Russian agents tried to polarize Americans in part by targeting African-American communities extensively. They did so by campaigning for black voters to boycott elections or follow the wrong voting procedures in 2016, according to the Oxford report.

The New Knowledge report added that agents were "developing Black audiences and recruiting Black Americans as assets" beyond how they were targeting either left- or right-leaning voters.

The reports also support previous findings that the influence operations sought to polarize Americans by sowing political divisions on issues such as immigration and cultural and religious identities. The goal, according to the New Knowledge report, was to "create and reinforce tribalism within each targeted community."

Such efforts extended to Google-owned YouTube, despite Google's earlier assertion to Congress that Russian-made videos didn't target specific segments of the population.

PINTEREST TO POKEMON

The New Knowledge report says the Russian troll operation worked in many ways like a conventional corporate branding campaign, using a variety of different technology services to deliver the same messages to different groups of people.

Among the sites infiltrated with propaganda were popular image-heavy services like Pinterest and Tumblr, chatty forums like Reddit, and a wonky geopolitics blog promoted from Russian-run accounts on Facebook and YouTube.

Even the silly smartphone game "Pokemon Go" wasn't immune. A Tumblr post encouraged players to name their Pokemon character after a victim of police brutality.

WHAT NOW?

Both reports warn that some of these influence campaigns are ongoing.

The Oxford researchers note that 2016 and 2017 saw "significant efforts" to disrupt elections around the world not just by Russia, but by domestic political parties spreading disinformation.

They warn that online propaganda represents a threat to democracies and public life. They urge social media companies to share data with the public far more broadly than they have so far.

"Protecting our democracies now means setting the rules of fair play before voting day, not after," the Oxford report says.

[Dec 18, 2018] FBI's Flynn Notes Show He Was Aware of Nature of First Interview

Notable quotes:
"... christophere steele admitted before a british court today that he was hired by the clintons/obama/DNC to make up the dossier as a weapon to use against trump as a backup plan in case he won the election.. this proves the DNC lied, paid for a fake dossier, and comey admitted he knew the fake dossier was false before using it to get a FISC warrant and to spy on trump, which was used as an excuse for the mueller investigation.. yahoo news and leftwing media arent covering the story.. educate yourselves ..."
Dec 18, 2018 | news.yahoo.com

[Dec 16, 2018] Trump Models His War on Bank Regulators on Bill Clinton and W's Disastrous Wars by Bill Black

Notable quotes:
"... By Bill Black, the author of The Best Way to Rob a Bank is to Own One, an associate professor of economics and law at the University of Missouri-Kansas City, and co-founder of Bank Whistleblowers United. Jointly published with New Economic Perspectives ..."
"... Wall Street Journal ..."
"... Wall Street Journal ..."
"... The idea that examiners should not criticize any bank misconduct, predation, or 'unsafe and unsound practice' that does not constitute a felony is obviously insane. ..."
"... The trade association complaint that examiners dare to criticize non-felonious bank conduct – and the WSJ ..."
"... I have more than a passing acquaintance with banking, banking regulation, and banking's rectitude (such an old fashioned word) in the importance for Main Street's survival, and for the country's as a whole survival as a trusted pivot point in world finance , or for the survival of the whole American project. I know this sounds like an over-the-top assertion on my part, however I believe it true. ..."
"... Obama et al confusing "banking" with sound banking is too ironic, imo. ..."
"... It was actually worse than this. The very deliberate strategy was to indoctrinate employees of federal regulatory agencies to see the companies they regulated not as "partners" but as "customers" to be served. This theme is repeated again and again in Bush era agency reports. Elizabeth Warren was viciously attacked early in the Obama Administration for calling for a new "watchdog" agency to protect consumers. The idea that a federal agency would dedicate itself to protecting citizens first was portrayed as dangerously radical by industry. ..."
"... Models on Clinton and Bush. What's not to like? Why isn't msm and dem elites showing him the love when he's following their long term policies? And we might assume these would be hills policies if she had been pushed over the line. A little thought realizes that in spite of the pearl clutching they far prefer him to Bernie. ..."
Dec 14, 2018 | www.nakedcapitalism.com
By Bill Black, the author of The Best Way to Rob a Bank is to Own One, an associate professor of economics and law at the University of Missouri-Kansas City, and co-founder of Bank Whistleblowers United. Jointly published with New Economic Perspectives

The Wall Street Journal published an article on December 12, 2018 that should warn us of coming disaster: "Banks Get Kinder, Gentler Treatment Under Trump." The last time a regulatory head lamented that regulators were not "kinder and gentler" promptly ushered in the Enron-era fraud epidemic. President Bush made Harvey Pitt his Securities and Exchange Commission (SEC) Chair in August 2001 and, in one of his early major addresses, he spoke on October 22, 2001 to a group of accounting leaders.

Pitt, as a private counsel, represented all the top tier audit firms, and they had successfully pushed Bush to appoint him to run the SEC. The second sentence of Pitt's speech bemoaned the fact that the SEC had not been "a kinder and gentler place for accountants." He concluded his first paragraph with the statement that the SEC and the auditors needed to work "in partnership." He soon reiterated that point: "We view the accounting profession as our partner" and amped it up by calling accountants the SEC's "critical partner."

Pitt expanded on that point: "I am committed to the principle that government is and must be a service industry." That, of course, would not be controversial if he meant a service agency (not "industry") for the public. Pitt, however, meant that the SEC should be a "service industry" for the auditors and corporations.

Pitt then turned to pronouncing the SEC to be the guilty party in the "partnership." He claimed that the SEC had terrorized accountants. He then stated that he had ordered the SEC to end this fictional terror campaign.

[A]ccountants became afraid to talk to the SEC, and the SEC appeared to be unwilling to listen to the profession. Those days are ended.

This prompted Pitt to ratchet even higher his "partnership" language.

I speak for the entire Commission when I say that we want to have a continuing dialogue, and partnership, with the accounting profession,

Recall that Pitt spoke on October 22, 2001. Here are the relevant excerpts from the NY Times' Enron timeline :

Oct. 16 – Enron announces $638 million in third-quarter losses and a $1.2 billion reduction in shareholder equity stemming from writeoffs related to failed broadband and water trading ventures as well as unwinding of so-called Raptors, or fragile entities backed by falling Enron stock created to hedge inflated asset values and keep hundreds of millions of dollars in debt off the energy company's books.

Oct. 19 – Securities and Exchange Commission launches inquiry into Enron finances.

Oct. 22 – Enron acknowledges SEC inquiry into a possible conflict of interest related to the company's dealings with Fastow's partnerships.

Oct. 23 – Lay professes confidence in Fastow to analysts.

Oct. 24 – Fastow ousted.

The key fact is that even as Enron was obviously spiraling toward imminent collapse (it filed for bankruptcy on December 2) – and the SEC knew it – Pitt offered no warning in his speech. The auditors and the corporate CEOs and CFOs were not the SEC's 'partners.' Thousands of CEOs and CFOs were filing false financial statements – with 'clean' opinions from the then 'Big 5' auditors. Pitt was blind to the 'accounting control fraud' epidemic that was raging at the time he spoke to the accountants. Thousands of his putative auditor 'partners' were getting rich by blessing fraudulent financial statements and harming the investors that the SEC is actually supposed to serve.

Tom Frank aptly characterized the Bush appointees that completed the destruction of effective financial regulation as "The Wrecking Crew." It is important, however, to understand that Bush largely adopted and intensified Clinton's war against effective regulation. Clinton and Bush led the unremitting bipartisan assault on regulation for 16 years. That produced the criminogenic environment that produced the three largest financial fraud epidemics in history that hyper-inflated the real estate bubble and drove the Great Financial Crisis (GFC). President Trump has renewed the Clinton/Bush war on regulation and he has appointed banking regulatory leaders that have consciously modeled their assault on regulation on Bush and Clinton's 'Wrecking Crews.'

Bill Clinton's euphemism for his war on effective regulation was "Reinventing Government." Clinton appointed VP Al Gore to lead the assault. (Clinton and Gore are "New Democrat" leaders – the Wall Street wing of the Democratic Party.) Gore decided he needed to choose an anti-regulator to conduct the day-to-day leadership. We know from Bob Stone's memoir the sole substantive advice he gave Gore in their first meeting that caused Gore to appoint him as that leader. "Do not 'waste one second going after waste, fraud, and abuse.'" Elite insider fraud is, historically, the leading cause of bank losses and failures, so Stone's advice was sure to lead to devastating financial crises. It is telling that it was the fact that Stone gave obviously idiotic advice to Gore that led him to select Stone as the field commander of Clinton and Gore's war on effective regulation.

Stone convinced the Clinton-Gore administration to embrace the defining element of crony capitalism as its signature mantra for its war on effective regulation. Stone and his troops ordered us to refer to the banks, not the American people, as our "customers." Peters' foreword to Stone's book admits the action, but is clueless about the impact.

Bob Stone's insistence on using the word "customer" was mocked by some -- but made an enormous difference over the course of time. In general, he changed the vocabulary of public service from 'procedure first' to 'service first.'"

That is a lie. We did not 'mock' the demand that we treat the banks rather than the American people as our "customer" – we openly protested the outrageous order that we embrace and encourage crony capitalism. Crony capitalism's core principle – which is unprincipled – is that the government should treat elite CEOs as their 'customers' or 'partners.' A number of us publicly expressed our rage at the corrupt order to treat CEOs as our customers. The corrupt order caused me to leave the government.

Our purpose as regulators is to serve the people of the United States – not bank CEOs. It was disgusting and dishonest for Peters to claim that our objection to crony capitalism represented our (fictional) disdain for serving the public. Many S&L regulators risked their careers by taking on elite S&L frauds and their powerful political fixers. Many of us paid a heavy personal price because we acted to protect the public from these elite frauds. Our efforts prevented the S&L debacle from causing a GFC – precisely because we recognized the critical need to spend most of our time preventing and prosecuting the elite frauds that Stone wanted us to ignore..

Trump's wrecking crew is devoted to recreating Clinton and Bush's disastrous crony capitalism war on regulation that produced the GFC. In a June 8, 2018 article , the Wall Street Journal mocked Trump's appointment of Joseph Otting as Comptroller of the Currency (OCC). The illustration that introduces the article bears the motto: "IN BANKS WE TRUST."

Otting, channeling his inner Pitt, declared his employees guilty of systematic misconduct and embraced crony capitalism through Pitt's favorite phrase – "partnership."

I think it is more of a partnership with the banks as opposed to a dictatorial perspective under the prior administration.

Otting, while he was in the industry, compared the OCC under President Obama to a fictional interstellar terrorist. Obama appointed federal banking regulators that were pale imitation of Ed Gray, Joe Selby, and Mike Patriarca – the leaders of the S&L reregulation. The idea that Obama's banking regulators were akin to 'terrorists' is farcical.

The WSJ's December 12, 2018 article reported that Otting had also used Bob Stone's favorite term to embrace crony capitalism.

Comptroller of the Currency Joseph Otting has also changed the tone from the top at his agency, calling banks his "customers."

There are many terrible role models Trump could copy as his model of how to destroy banking regulation and produce the next GFC, but Otting descended into unintentional self-parody when he channeled word-for-word the most incompetent and dishonest members of Clinton and Bush's wrecking crews.

The same article reported a trade association's statement that demonstrates the type of outrageous reaction that crony capitalism inevitably breeds within industry.

Banks are suffering from "examiner criticisms that do not deal with any violation of law," said Greg Baer, CEO of the Bank Policy Institute ."

The article presented no response to this statement so I will explain why it is absurd. First, "banks" do not "suffer" from "examiner criticism." Banks gain from examiner criticism. Effective regulators (and whistleblowers) are the only people who routinely 'speak truth to power.' Auditors, credit rating agencies, and attorneys routinely 'bless' the worst CEO abuses that harm banks while enriching the CEO. The bank CEO cannot fire the examiner, so the examiners' expert advice is the only truly "independent" advice the bank's board of directors receives. That makes the examiners' criticisms invaluable to the bank. CEOs hate our advice because we are the only 'control' (other than the episodic whistleblower) that is willing and competent to criticize the CEO.

The idea that examiners should not criticize any bank misconduct, predation, or 'unsafe and unsound practice' that does not constitute a felony is obviously insane. While "violations of law" (felonies) are obviously of importance to us in almost all cases, our greatest expertise is in identifying – and stopping – "unsafe and unsound practices" because such practices, like fraud, are leading causes of bank losses and failures.

Third, repeated "unsafe and unsound practices" are a leading indicator of likely elite insider bank fraud and other "violations of law."

The trade association complaint that examiners dare to criticize non-felonious bank conduct – and the WSJ reporters' failure to point out the absurdity of that complaint – demonstrate that the banking industry's goal remains the destruction of effective banking regulation. Trump's wrecking crew is using the Clinton and Bush playbook to restore fully crony capitalism. He has greatly accelerated the onset of the next GFC.


Chauncey Gardiner , December 14, 2018 at 2:01 pm

Thank you for this, Bill Black. IMO the long-term de-regulatory policies under successive administrations cited here, together with their neutering the rule of law by overturning the Glass-Steagall Act; de-funding and failing to enforce antitrust, fraud and securities laws; financial repression of the majority; hidden financial markets subsidies; and other policies are just part of an organized, long-term systemic effort to enable, organize and subsidize massive control and securities fraud; theft of and disinvestment in publicly owned resources and services; environmental damage; and transfers of social costs that enable the organizers to in turn gain a hugely disproportionate share of the nation's wealth and nearly absolute political control under their "Citizens United" political framework.

Not to diminish, but among other things the current president provides nearly daily entertainment, diversion and spectacle in our Brave New World that serves to obfuscate what has occurred and is happening.

RBHoughton , December 14, 2018 at 9:41 pm

I'm with you Chauncey. I believe the rot really got started with creative accounting in early 1970s. That's when accountants of every flavor lost themselves and were soon followed by the lawyers. Sauce for the goose.

Banks and Insurers and many industrial concerns have become too big. We could avoid all the regulatory problems by placing a maximum size on commercial endeavour.

chuck roast , December 14, 2018 at 4:28 pm

Sameo-sameo

A number of years ago I did both the primary capital program and environmental (NEPA) review for major capital projects in a Federal Region. Hundreds of millions of dollars were at stake. A local agency wanted us (the Feds) to approve pushing up many of their projects using a so-called Public Private Partnership (PPP). This required the local agency to borrow many millions from Wall Street while at the same time privatizing many of their here-to-fore public operations. And of course there was an added benefit of instituting a non-union shop.

To this end I was required to sit down with the local agency head (he actually wore white shoes), his staff and several representatives of Goldman-Sachs. After the meeting ended, I opined to the agency staff that Goldman-Sachs was "bullshit" and so were their projects.

Shortly thereafter I was removed to a less high-profile Region with projects that were not all that griftable, and there was no danger of me having to review a PPP.

Oh, and I denied, denied, denied saying "bullshit."

flora , December 14, 2018 at 10:08 pm

Thank you, NC, for featuring these posts by Bill Black.

I have more than a passing acquaintance with banking, banking regulation, and banking's rectitude (such an old fashioned word) in the importance for Main Street's survival, and for the country's as a whole survival as a trusted pivot point in world finance , or for the survival of the whole American project. I know this sounds like an over-the-top assertion on my part, however I believe it true.

Main Street also knows the importance of sound banking. Sound banking is not a 'poker chip' to be used for games. Sound banking is key to the American experiment in self-determination, as it has been called.

Politicians who 'don't get this" have lost touch with the entire American enterprise, imo. And, no, the neoliberal promise that nation-states no longer matter doesn't make this point moot.

flora , December 14, 2018 at 10:47 pm

adding: US founding father Alexander Hambleton did understand the importance of sound banking, and so Obama et al confusing "banking" with sound banking is too ironic, imo.

Tim , December 15, 2018 at 8:29 am

It was actually worse than this. The very deliberate strategy was to indoctrinate employees of federal regulatory agencies to see the companies they regulated not as "partners" but as "customers" to be served. This theme is repeated again and again in Bush era agency reports. Elizabeth Warren was viciously attacked early in the Obama Administration for calling for a new "watchdog" agency to protect consumers. The idea that a federal agency would dedicate itself to protecting citizens first was portrayed as dangerously radical by industry.

John k , December 15, 2018 at 12:14 pm

Models on Clinton and Bush. What's not to like? Why isn't msm and dem elites showing him the love when he's following their long term policies?
And we might assume these would be hills policies if she had been pushed over the line. A little thought realizes that in spite of the pearl clutching they far prefer him to Bernie.

[Dec 16, 2018] Top Democrat Schiff Adds Call for Probe of Trump, Deutsche Bank Links

CIA democrats are still determined to sink Tramp, and continues to beat the dead cat of "Russian collision". What is interesting is that Jacob Schiff financed Bolsheviks revolution in Russia.
Yahoo comments reflect the deep split in the opinions in the society, which is positioned mainly by party lines. Few commenters understadn that the problem is with neoliberalism, not Trump, or Hillary who represent just different factions of the same neoliberal elite.
Notable quotes:
"... Schiff said Deutsche Bank has paid hundreds of millions of dollars in fines to the state of New York for laundering Russian money, and that it was the one bank willing to do business with the Trump Organization. ..."
"... In an interview with the New Yorker that was posted on line on Dec. 14, Schiff said the Intelligence Committee is "going to be looking at the issue of possible money laundering by the Trump Organization, and Deutsche Bank is one obvious place to start." ..."
"... A Senate investigation, which Warren and Van Hollen want to see followed by a report and a hearing, could put further pressure on the lender. The written request from the senators, sent Dec. 13, cites Deutsche Bank's "numerous enforcement actions" and a recent raid by police officers and tax investigators in Germany. ..."
"... Schiff, a target of Trump's on Twitter, also referred to reported comments by the president's sons some years ago that they didn't need "to deal with U.S. banks because they got all of the cash they needed from Russia or disproportionate share of their assets coming from Russia." He said Sunday he expects to learn more about that claim through financial records. ..."
Dec 16, 2018 | finance.yahoo.com

(Bloomberg)

The incoming chairman of the House Intelligence Committee joined Democratic colleagues in questioning ties between Deutsche Bank AG and President Donald Trump's real estate business.

Representative Adam Schiff of California said on NBC's "Meet the Press" Sunday that any type of compromise needs to be investigated. That could add his panel's scrutiny to that of Representative Maxine Waters, who's in line to be chair of the House Financial Services Committee and has also focused on the bank's connections to Trump.

Schiff's comments came three days after Wall Street critic Elizabeth Warren of Massachusetts and fellow Senate Democrat Chris Van Hollen called for a Banking Committee investigation of Deutsche Bank's compliance with U.S. money-laundering regulations.

Schiff said Deutsche Bank has paid hundreds of millions of dollars in fines to the state of New York for laundering Russian money, and that it was the one bank willing to do business with the Trump Organization.

"Now, is that a coincidence?" Schiff said. "If this is a form of compromise, it needs to be exposed."

In an interview with the New Yorker that was posted on line on Dec. 14, Schiff said the Intelligence Committee is "going to be looking at the issue of possible money laundering by the Trump Organization, and Deutsche Bank is one obvious place to start."

More Pressure

A Senate investigation, which Warren and Van Hollen want to see followed by a report and a hearing, could put further pressure on the lender. The written request from the senators, sent Dec. 13, cites Deutsche Bank's "numerous enforcement actions" and a recent raid by police officers and tax investigators in Germany.

It also notes the lender's U.S. operations being implicated in cross-border money-laundering accusations such as in a recent case involving Danish lender Danske Bank A/S and the movement of $230 billion in illicit funds.

"The compliance history of this institution raises serious questions about the national security and criminal risks posed by its U.S. operations," the senators said in their letter. "Its correspondent banking operations in the U.S. serve as a gateway to the U.S. financial system for Deutsche Bank entities around the world."

Troy Gravitt, a Deutsche Bank spokesman, responded that the company "takes its legal obligations seriously and remains committed to cooperating with authorized investigations."

Van Hollen, a Maryland Democrat, had questioned the Federal Reserve earlier this year about how it would keep the White House from interfering with oversight of the lender, which had been a major lender to Trump's real estate business.

Schiff, a target of Trump's on Twitter, also referred to reported comments by the president's sons some years ago that they didn't need "to deal with U.S. banks because they got all of the cash they needed from Russia or disproportionate share of their assets coming from Russia." He said Sunday he expects to learn more about that claim through financial records.

To contact the reporter on this story: Jesse Hamilton in Washington at jhamilton33@bloomberg.net

To contact the editors responsible for this story: Jesse Westbrook at jwestbrook1@bloomberg.net, Mark Niquette, Ros Krasny

[Dec 14, 2018] You apply for a job. You hear nothing. Here's what to do next

Dec 14, 2018 | finance.yahoo.com

But the more common situation is that applicants are ghosted by companies. They apply for a job and never hear anything in response, not even a rejection. In the U.S., companies are generally not legally obligated to deliver bad news to job candidates, so many don't.

They also don't provide feedback, because it could open the company up to a legal risk if it shows that they decided against a candidate for discriminatory reasons protected by law such as race, gender or disability.

Hiring can be a lengthy process, and rejecting 99 candidates is much more work than accepting one. But a consistently poor hiring process that leaves applicants hanging can cause companies to lose out on the best talent and even damage perception of their brand.

Here's what companies can do differently to keep applicants in the loop, and how job seekers can know that it's time to cut their losses.


What companies can do differently

There are many ways that technology can make the hiring process easier for both HR professionals and applicants.

Only about half of all companies get back to the candidates they're not planning to interview, Natalia Baryshnikova, director of product management on the enterprise product team at SmartRecruiters, tells CNBC Make It .

"Technology has defaults, one change is in the default option," Baryshnikova says. She said that SmartRecruiters changed the default on its technology from "reject without a note" to "reject with a note," so that candidates will know they're no longer involved in the process.

Companies can also use technology as a reminder to prioritize rejections. For the company, rejections are less urgent than hiring. But for a candidate, they are a top priority. "There are companies out there that get back to 100 percent of candidates, but they are not yet common," Baryshnikova says.

How one company is trying to help

WayUp was founded to make the process of applying for a job simpler.

"The No. 1 complaint from candidates we've heard, from college students and recent grads especially, is that their application goes into a black hole," Liz Wessel, co-founder and CEO of WayUp, a platform that connects college students and recent graduates with employers, tells CNBC Make It .

WayUp attempts to increase transparency in hiring by helping companies source and screen applicants, and by giving applicants feedback based on soft skills. They also let applicants know if they have advanced to the next round of interviewing within 24 hours.

Wessel says that in addition to creating a better experience for applicants, WayUp's system helps companies address bias during the resume-screening processes. Resumes are assessed for hard skills up front, then each applicant participates in a phone screening before their application is passed to an employer. This ensures that no qualified candidate is passed over because their resume is different from the typical hire at an organization – something that can happen in a company that uses computers instead of people to scan resumes .

"The companies we work with see twice as many minorities getting to offer letter," Wessel said.

When you can safely assume that no news is bad news

First, if you do feel that you're being ghosted by a company after sending in a job application, don't despair. No news could be good news, so don't assume right off the bat that silence means you didn't get the job.

Hiring takes time, especially if you're applying for roles where multiple people could be hired, which is common in entry-level positions. It's possible that an HR team is working through hundreds or even thousands of resumes, and they might not have gotten to yours yet. It is not unheard of to hear back about next steps months after submitting an initial application.

If you don't like waiting, you have a few options. Some companies have application tracking in their HR systems, so you can always check to see if the job you've applied for has that and if there's been an update to the status of your application.

Otherwise, if you haven't heard anything, Wessel said that the only way to be sure that you aren't still in the running for the job is to determine if the position has started. Some companies will publish their calendar timelines for certain jobs and programs, so check that information to see if your resume could still be in review.

"If that's the case and the deadline has passed," Wessel says, it's safe to say you didn't get the job.

And finally, if you're still unclear on the status of your application, she says there's no problem with emailing a recruiter and asking outright.

[Dec 14, 2018] The whole austerity crisis thing appears to have been engineered so that a few blinkered and unpatriotic, vulture mafia privateers can make a killing, selling off vital state assets, such as infrastructure and ports, to the Chinese. This is a very suspicious and widespread trend.

Notable quotes:
"... Bob Marley got it right.... the human race is becoming a rat race, and it's a disgrace. ..."
"... The biggest problem is the financialisation of the economy... what is the actual value of things? The market is so manipulated that real price discovery is not possible. ..."
"... We have an over-cooked service-sector economy unsustainably reliant on cheap debt, cheap energy, and cheap manufactured goods to fuel our 'high-end levels of consumption, and mobility or living standards, and an over-heated housing market that is unsustainably run according to the needs of investors and landlords rather than residents or tenants. ..."
"... What we need is a coordinated approach between our nations. Undercutting each other on corporate taxes, writing tax avoidance into law, and continuing to allow multinationals to influence our politicians and play our governments against each other is exactly the game we must end. ..."
"... Instead, it places the financially powerful beyond any state, in an international elite that makes its own rules, and holds governments to ransom. That's what the financial crisis was all about. The ransom was paid, and as a result, governments have been obliged to limit their activities yet further.... ..."
"... "Ransom". There is no better word to describe it. This (the ransom mentality) is exactly the reactionary, vindictive, doctrinaire psychology that must be extracted like a cancer from our institutional lives and the human species. A monolithic task. But identifying the cause is the first step to cure. ..."
"... these are the new medieval transnational barons ..."
Jun 09, 2013 | theguardian.com
MysticFish -> Crackerpot , 8 Jun 2013 14:43
@Crackerpot - The whole austerity crisis thing appears to have been engineered so that a few blinkered and unpatriotic, vulture mafia privateers can make a killing, selling off vital state assets, such as infrastructure and ports, to the Chinese. This is a very suspicious and widespread trend.
artheart , 8 Jun 2013 14:38

Bob Marley got it right.... the human race is becoming a rat race, and it's a disgrace.

I see it every day from the window of my flat, on a main road, in Bethnal Green. There's a 'mentally unstable' Rastafarian who stands by the overground station, and shouts things out to people like "You're living in babylon".

I do sometimes think he's not the mental one.

artheart -> HolyInsurgent , 8 Jun 2013 14:32
@HolyInsurgent

The biggest problem is the financialisation of the economy... what is the actual value of things? The market is so manipulated that real price discovery is not possible.

We have an over-cooked service-sector economy unsustainably reliant on cheap debt, cheap energy, and cheap manufactured goods to fuel our 'high-end levels of consumption, and mobility or living standards, and an over-heated housing market that is unsustainably run according to the needs of investors and landlords rather than residents or tenants.

The whole thing is going to blow apart. Our 'aspirations' are slowly killing us - they're destroying the social fabric.

MikeInCanada , 8 Jun 2013 14:28
What we need is a coordinated approach between our nations. Undercutting each other on corporate taxes, writing tax avoidance into law, and continuing to allow multinationals to influence our politicians and play our governments against each other is exactly the game we must end.
HolyInsurgent , 8 Jun 2013 14:08

Deborah Orr: Instead, it places the financially powerful beyond any state, in an international elite that makes its own rules, and holds governments to ransom. That's what the financial crisis was all about. The ransom was paid, and as a result, governments have been obliged to limit their activities yet further....

I never thought I would live long enough to see this level of honesty ATL. It should have been published long ago, but at least the discussion now begins.

"Ransom". There is no better word to describe it. This (the ransom mentality) is exactly the reactionary, vindictive, doctrinaire psychology that must be extracted like a cancer from our institutional lives and the human species. A monolithic task. But identifying the cause is the first step to cure.

peterpuffin -> PointOfYou , 8 Jun 2013 14:03
@PointOfYou - these are the new medieval transnational barons

[Dec 14, 2018] Here's the funny thing about those who cheer the broken neoliberal model. They promise we will get to those "sunny uplands" with exactly the same fervor as old Marxists.

Notable quotes:
"... Neoliberalism? This is not just a financial agenda. This a highly organized multi armed counterculture operation to force us, including Ms Orr [unless she has...connections] into what Terence McKenna [who was in on it] termed the `Archaic Revival'. That is - you and me [and Ms Orr] - our - return to the medieval dark ages, if we indeed survive that far. ..."
"... The conscious and intelligent manipulation of the organised habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. We are governed, our minds are moulded, our tastes formed, our ideas suggested, largely by men we have never heard of. ..."
"... the UK government did intervene in the economy when it bailed out the banks to the tune of many billions of pounds underwritten by the taxpayer. The markets should always be regulated sufficiently (light touch is absolutely useless) to prevent the problems currently being experienced from ever happening again. ..."
"... Traditional liberalism had died decades before WWII and was replaced by finance capitalism. What happened after WW II was that capitalism had to make various concessions to avoid a socialist revolution: social and political freedoms indeed darted ahead. ..."
"... No chance mate, at least not all the time greasy spiv and shyster outfits like hedge funds are funding Puffin face and the Vermin Party. They are never going to bite the hand that feeds them ..."
"... And in case we get uppity and endeavour to challenge the economic paradigm and the rule of these neoliberal elites, there's the surveillance state panopticon to track our movements and keep us in check. ..."
"... There is not a shred of logical sense in neoliberalism. You're doing what the fundamentalists do... they talk about what neoliberalism is in theory whilst completely ignoring what it is in practice. In theory the banks should have been allowed to go bust, but the consequences where deemed too high (as they inevitable are). The result is socialism for the rich using the poor as the excuse, which is the reality of neoliberalism. ..."
"... She, knowingly, let neo-liberal economic philosophy come trumpeting through the door of No10 and it's been there ever since; it has guided our politicians for the past 30 odd years. Hence, it is Thatcher's fault. She did this and another bad thing: the woman who glorified household economics pissed away billions of pounds of North Sea Oil. ..."
"... Bailouts have been a constant feature of neoliberalism. In fact the role of the state is simply reduced to a merely commissioning agent to private parasitical corporations. History has shown the state playing this role since neoliberalism became embedded in policy since the 1970s - Long Term Capital Management, Savings and Loans, The Brady Plan, numerous PFI bailouts and those of the Western banking system during the 1982 South American, 1997 Asian and 2010 European debt crises. ..."
Jun 08, 2013 | discussion.theguardian.com

Jenny340 -> EllisWyatt, 8 Jun 2013 13:37

@EllisWyatt - Here's the funny thing about those who cheer the broken neoliberal model. They promise we will get to those "sunny uplands" with exactly the same fervor as old Marxists.
PointOfYou , 8 Jun 2013 13:37

Neoliberalism has spawned a financial elite who hold governments to ransom

Neoliberalism? This is not just a financial agenda. This a highly organized multi armed counterculture operation to force us, including Ms Orr [unless she has...connections] into what Terence McKenna [who was in on it] termed the `Archaic Revival'. That is - you and me [and Ms Orr] - our - return to the medieval dark ages, if we indeed survive that far.

The same names come up time and time again. One of them being, father of propaganda, Edward Bernays.

Bernays wrote what can be seen as a virtual Mission Statement for anyone wishing to bring about a "counterculture." In the opening paragraph of his book Propaganda he wrote:

"..The conscious and intelligent manipulation of the organised habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. We are governed, our minds are moulded, our tastes formed, our ideas suggested, largely by men we have never heard of.

This is a logical result of the way in which our democratic society is organised. Vast numbers of human beings must cooperate in this manner if they are to live together as a smoothly functioning society. In almost every act of our daily lives, whether in the sphere of politics or business, in our social conduct or our ethical thinking, we are dominated by the relatively small number of persons who understand the mental processes and social patterns of the masses.

It is they who pull the wires which control the public mind..."[28]

Bernays' family background made him well suited to "control the public mind." He was the double nephew of psychoanalysis pioneer Sigmund Freud. His mother was Freud's sister Anna, and his father was Ely Bernays, brother of Freud's wife Martha Bernays.

Snookerboy -> OneCommentator , 8 Jun 2013 13:17
@OneCommentator - the UK government did intervene in the economy when it bailed out the banks to the tune of many billions of pounds underwritten by the taxpayer. The markets should always be regulated sufficiently (light touch is absolutely useless) to prevent the problems currently being experienced from ever happening again.

Those at the bottom of society and those in the public sector are the ones paying the price for this intervention in the UK. If you truly believe in the 'free' market then all of these failing organisations (banks, etc) should have been allowed to fail. The problem is that the wealth created under the current system is virtually all going to those at the top of the income scale and this needs to change and is one of the main reasons that neo liberalism should be binned!

ATrueFinn -> OneCommentator , 8 Jun 2013 13:09
@ OneCommentator 08 June 2013 5:21pm

No, it was as recently as ww2 more or less

Traditional liberalism had died decades before WWII and was replaced by finance capitalism. What happened after WW II was that capitalism had to make various concessions to avoid a socialist revolution: social and political freedoms indeed darted ahead.

Do read a book about history!

clairesdad -> brighton2 , 8 Jun 2013 13:06
@brighton2 - No chance mate, at least not all the time greasy spiv and shyster outfits like hedge funds are funding Puffin face and the Vermin Party. They are never going to bite the hand that feeds them.
NotWithoutMyMonkey , 8 Jun 2013 13:01
And in case we get uppity and endeavour to challenge the economic paradigm and the rule of these neoliberal elites, there's the surveillance state panopticon to track our movements and keep us in check.
TedStewart , 8 Jun 2013 12:51
Neoliberalism has spawned a financial elite who hold governments to ransom

Are you saying neoliberalism is a great big useless pile of shit? Then you are absolutely right!

kingcreosote -> MickGJ , 8 Jun 2013 12:47
@ MickGJ 08 June 2013 1:08pm . Get cifFix for Firefox .

I know what you are saying it's just sooner or later as those at the bottom continue to be squeezed the wealthy will sow their own seeds of destruction. I think we are witnessing the end game which is reflected in the desperation of the coalition to flog everything regardless of the efficacy of such behavior, they feel time is running out and they would be right.

taxhaven , 8 Jun 2013 12:44
Call it what you will - "neoliberalism", "neoconservatism", "socialism" or whatever it is...

This debate is not even really solely about money: this is about liberty , about free choice, about being permitted to engage in voluntary exchange of goods and services with others, unmolested. About the users of services becoming the ones paying for those services.

Ultimately the real effect will be to remove power from governments and hand it back to where it belongs - the free market.

dmckm -> OneCommentator , 8 Jun 2013 12:43
@ OneCommentator 08 June 2013 5:04pm . Get cifFix for Firefox .

voluntary transactions among free agents. That's called a free market and it is by far the most efficient way to produce wealth humanity has ever known.

Could you explain how someone bound by a contract of employment, with the alternative, destitution, is a 'free agent'?

jazzdrum -> SpinningHugo , 8 Jun 2013 12:25
@SpinningHugo - Nothing comes out of nothing and i well remember black Monday in the City. That was the start of the spivs running the economy as if it were a casino. If you think its only on CiF that Thatcher gets the blame, think on this, Scotland, a whole nation blames her too.
TedSmithAndSon -> theguardianisrubbish , 8 Jun 2013 12:24
@theguardianisrubbish -

Unless you are completely confused by what neoliberalism is there is not a shred of logical sense in this.

There is not a shred of logical sense in neoliberalism. You're doing what the fundamentalists do... they talk about what neoliberalism is in theory whilst completely ignoring what it is in practice. In theory the banks should have been allowed to go bust, but the consequences where deemed too high (as they inevitable are). The result is socialism for the rich using the poor as the excuse, which is the reality of neoliberalism.

Savers in a neoliberal society are lambs to the slaughter. Thatcher "revitalised" banking, while everything else withered and died.

Neoliberalism is based on the thought of personal freedom, communism is definitely not. Neoliberalist policies have lifted millions of people out of poverty in Asia and South America.

Neoliberalism is based on the thought that you get as much freedom as you can pay for, otherwise you can just pay... like everyone else. In Asia and South America it has been the economic preference of dictators that pushes profit upwards and responsibility down, just like it does here.

I find it ironic that it now has 5 year plans that absolutely must not be deviated from, massive state intervention in markets (QE, housing policy, tax credits... insert where applicable), and advocates large scale central planning even as it denies reality, and makes the announcement from a tractor factory.

Neoliberalism is a blight... a cancer on humanity... a massive lie told by rich people and believed only by peasants happy to be thrown a turnip. In theory it's one thing, the reality is entirely different. Until we're rid of it, we're all it's slaves. It's an abhorrent cult that comes up with purest bilge like expansionary fiscal contraction to keep all the money in the hands of the rich.

outragedofacton -> MickGJ , 8 Jun 2013 12:02
@MickGJ - You are wrong about the first 2 of course. Banksters get others to do their shit.

But unfortunately the poor sods who went down on D Day were in their way fighting for Wall Street as much as anything else. It's just that they weren't told about it by the Allies massive propaganda machine. So partly right

5/10

LetsGetCynical , 8 Jun 2013 11:57

The response should be a wholesale reevaluation of the way in which wealth is created and distributed around the globe

Which would be what? State planning? Communism? Totally free market capitalism? Oh wait, we already have the best of a bad bunch, a mixed capitalist economy with democracy. That really is the crux of it, our system isn't perfect, never will be, but nobody has come up with a better solution.

outragedofacton -> artheart , 8 Jun 2013 11:55
@artheart - Thank goodness for RT.

Learn also about the West's nefarious activities in the Middle East.

ATrueFinn -> fr0mn0where , 8 Jun 2013 11:51
@ fr0mn0where 08 June 2013 4:29pm

Barclays bank "only" paid out £660m in dividends to the bearers of risk capital, while its bonus pot for a very select number of its staff was £1.5bn.

Fascinating! Now, one could infer that Barclays represent "beneficial capitalism", rewarding its hard-working employees, but maybe we won't.

This is not the traditional capitalist style

The Traditional capitalist is not an extinct species but under threat. For the time being the population is stagnant in some countries and even increasing in some others. However, due to the foraging capacity of Neoliberal creature , competing in the same economical niche, the size and life expectation of it are diminishing.

dmckm -> SpinningHugo , 8 Jun 2013 11:50
@ SpinningHugo 08 June 2013 10:59am . Get cifFix for Firefox .

She, knowingly, let neo-liberal economic philosophy come trumpeting through the door of No10 and it's been there ever since; it has guided our politicians for the past 30 odd years. Hence, it is Thatcher's fault. She did this and another bad thing: the woman who glorified household economics pissed away billions of pounds of North Sea Oil.

szwalby -> MickGJ , 8 Jun 2013 11:30
@MickGJ - No, you're right. Why let yesterdays experience feed into what you expect of the future? Lets go forwards goldfish like, every minute a brand new one, with no baggage!
And by the way, who saved the hide of the very much private sector banks and financial institutions? The hated STATE, us tax payers!
fr0mn0where -> ATrueFinn , 8 Jun 2013 11:29
@ATrueFinn -

I think I agree with everything that you say here? The people at the top these days aren't really of much use for anything, including capitalism. The only thing that they do excel at is lining their own pockets and securing their privileged position in society.

They have become quite up front about it. There was a bit of a fuss last year when Barclays bank "only" paid out £660m in dividends to the bearers of risk capital, while its bonus pot for a very select number of its staff was £1.5bn. Barclays released a statement before their AGM explaining:

"Barclays is fully committed to ensuring that a greater proportion of income and profits flow to shareholders notwithstanding that it operates within the constraints of a competitive market."

This is not the traditional capitalist style competition that they are talking about where companies competed as to who can return the biggest profit for their shareholders this now comes secondary to the real competition which is for which company can return the biggest bonuses for a small group of employees.

theonionmurders -> theguardianisrubbish , 8 Jun 2013 11:05
@theguardianisrubbish

Bailouts have been a constant feature of neoliberalism. In fact the role of the state is simply reduced to a merely commissioning agent to private parasitical corporations. History has shown the state playing this role since neoliberalism became embedded in policy since the 1970s - Long Term Capital Management, Savings and Loans, The Brady Plan, numerous PFI bailouts and those of the Western banking system during the 1982 South American, 1997 Asian and 2010 European debt crises.

No wonder you're so ignorant of the basics of economic policy if you won't flick through a book - fear of accepting that you're simply wrong is a sure sign of either pig ignorance or denial, and is as I said embarrassing so its not really much point in wasting anymore time engaging with you.

petercs , 8 Jun 2013 10:44

The neoliberal idea is that the cultivation itself should be conducted privately as well. They see "austerity" as a way of forcing that agenda.

..."neoliberal", concept behind the word, has nothing to do with liberal or liberty or freedom...it is a PR spin concept that names slavery with a a word that sounds like the opposite...if "they" called it neoslavery it just wouldn't sell in the market for political concepts.

..."austerity" is the financial sectors' solution to its survival after it sucked most the value out of the economy and broke it. To mend it was a case of preservation of the elite and the devil take the hindmost, that's most of us.

...and even Labour, the party of trade unionism, has adopted austerity to drive its policy.

...we need a Peoples' Party to stand for the revaluation of labour so we get paid for our effort rather than the distortion, the rich xxx poor divide, of neoslavery austerity.

Crackerpot , 8 Jun 2013 10:43
When the IMF 'admitted' that the first bail out of Greece was 'bungled' are they trying to imply that the subsequent bail outs have been a success....
artheart , 8 Jun 2013 10:34
People need to start watching The Keiser Report to hear the truth, if they can handle the truth. Link here: http://rt.com/shows/keiser-report/

I simply cannot recommend it enough.

MickGJ -> bluebirds , 8 Jun 2013 10:30

@bluebirds - deregulated capitalism has failed

Of course it has. And it will continue to "fail", while provide us with all sorts of goodies, for the foreseeable future. Capitalism's endless "failure" is of no more concern than human mortality. Ever tried, ever failed, try again, fail better.
epinoa -> CaptainGrey , 8 Jun 2013 10:25
@CaptainGrey -

Except it's not. It is still very much alive and growing.

In as much as a zombie is.

The "alternatives" have crashed and burned save Cuba and North Korea.

I'd say the current oligarchical form of capitalism has crashed quite spectacularly. I say this as a free market capitalist too.

[Dec 14, 2018] Noam Chomsky pointed this out aeons ago though-that the American model is to use tax money to benefit private interests through technological infrastructure

Notable quotes:
"... Now we see moneyed entities with vested interests, carpet bagging and flogging off the NHS and an unelected fossil fuel mandarin, at the heart of government decision making, appointing corporate yea-sayers, to the key government departments, with environmental responsibilities. Corporations capturing the state apparatus for their own ends, is 'corporatism.' ..."
"... "Neoliberalism in practice is every bit as bad as Communism in practice, with none of the benefits." ..."
"... The bailout is simply actual neoliberalism as opposed to the theory inside tiny right wing minds. The system depends on the wealthy not being allowed to suffer the consequences of their own greed, or it would represent revolution and still not work. ..."
"... Neoliberalism in practice is every bit as bad as Communism in practice, with none of the benefits. It always amusing to see neoliberal morons shout about the red menace when they're two sides of the same coin. ..."
"... Neoliberalism is nothing if not the opposite extreme of the communist planned economy. Like the communist planned economy, neoliberalism is doomed to failure. I think we've all been sold a lie. ..."
Jun 08, 2013 | discussion.theguardian.com

epinoa -> Fachan , 8 Jun 2013 10:19

@Fachan -

Just as democracy is the worst system of government except for all other, so capitalism is the worst economic model except for all other.

Shame we only have bastardized forms of them.
bridkid5 -> NotAgainAgain , 8 Jun 2013 10:18
@NotAgainAgain - this is very true, it reminds me of an engineering company I worked for in Nottingham (since gone under). The production manger was a corrupt thief. He gradually sub-contracted the production work out to other companies in the area, taking backhanders for his troubles.

Once all the production was farmed out, he somehow got himself promoted to director level, where he and a sycophant subbed all the design work out. So all the production and design was done out of house, standards dropped and the company closed, leaving him with a nice payoff, just prior to retirement.

Some would say he played a blinder, my interpretation is he ruined a perfectly viable company, making a very good product, and over the course of about 5 years put over 30 people out of work.

In a just world he would be spending his retirement in prison.

ATrueFinn -> MickGJ , 8 Jun 2013 10:13
@ MickGJ 08 June 2013 2:16pm

ext year's harvest (possibly of GM food which makes better use of scarce resources)

Indeed. Wheat will grow as flour and fly to our cupboards.

ATrueFinn -> fr0mn0where , 8 Jun 2013 10:10
@ fr0mn0where 08 June 2013 1:53pm

Income distribution and a happy workforce is actually very good for business as well as society!

Of course it is, but the capitalists do not know it. In many countries, including Finland, the "condition of the working classes", ie. working conditions, have been in rapid decline for the last 20 years.

Permanent salaried jobs have been replaced with temps from agencies, unpaid overtime is becoming the norm, burnouts are commonplace and so on.

If in your country things are different, no mass lay-outs and outsourcing to China, count yourself lucky!

crinklyoldgit , 8 Jun 2013 10:04
On form, Debs. Here is something I like.

But even though an illiterate market wouldn't be so great for them, they avoid their taxes, because they can, because they are more powerful than governments

Noam Chomsky pointed this out aeons ago though-that the American model is to use tax money to benefit private interests through technological infrastructure.

It was ever thus, if in slightly different forms. Still it is surprising that they have gone so quickly from their stated position at the start of the republic of a rejection of kings and emperors to their position now of corruption so ingrained it is impossible to make distinctions. Proxy emperors are emperors all the same, no matter the rhetoric that promotes them.

One senses that there is very little 'going back' possible. Besides, the great Neoliberal scam is predicated upon the qualities of the 'governments' we have and the capacity of those 'rhetoricians' with the capacity to say anything or play any role, to lick any arse, to get elected. Such apparent strength is weakness. In this world that now exists here, we have now entered the same world as the USSR in the eighties, where the announcement of bumper harvests of wheat, made everyone with a brain cell groan and think 'Oh fuck! no bread this winter-quick, run to the shops now, and buy up all the flour there'.

But there is now no way to declare that without being seen as beyond the pale-a bug eyed conspiracist.

Still, I am a believer in the connectedness of this world. The economic system and its mythologies are just weird and distorted canaries in the coalmine of the wider environment. It is indicating that there is a misalignment between the way we think and what is possible in this world. Austerity promoters and 'Keynsian' Ballsites are one and the same thing-both pretenders that the key to the problems is within their narrow gifts

Hubris is followed by nemesis. In a wider sense what we seen now is a complete failure of the capacity to educate and to learn,and moderate behaviour, and find some way of caring for our 'others', beyond the core of 'self'. nationalism is essentially an extension of 'self'. We now shall see the failure of a retraction of thought into nationalism and scapegoating.

I predict that the population of the world will decline over the next century-quite markedly.
The only solace is that at the end of the process, the pain will be forgotten. It always is.

MysticFish -> MickGJ , 8 Jun 2013 09:57
@MickGJ - Cameron said 'We will cut the deficit, not the NHS,' and promised to be the 'greenest government ever,' saying that you could 'go green,' if you voted 'blue.'

Now we see moneyed entities with vested interests, carpet bagging and flogging off the NHS and an unelected fossil fuel mandarin, at the heart of government decision making, appointing corporate yea-sayers, to the key government departments, with environmental responsibilities. Corporations capturing the state apparatus for their own ends, is 'corporatism.'

Spoutwell , 8 Jun 2013 09:53

Much of the healthy economic growth – as opposed to the smoke and mirrors of many aspects of financial services – that Britain enjoyed during the second half of the 20th century was due to women swelling the educated workforce.

There was very little 'healthy economic growth' in Britain in the second half of the 20th century. Britain was bankrupt after WW2 with its people dependent on Marshall Aid and food contributions from its former 'colonies'.

Whatever 'growth' occured after Marshall Aid arrived was scuppered by a class system where company managers were more concerned with walking on the workers than with keeping their businesses afloat while such discrimination provoked hard left trade union policies which left british industry uncompetitive and ultimately non-existent.

If that wasn't enough, Thatcherism arrived to re-inforce class discrimination, sell off national services and assets and replace social policy with neo-liberal consumerism. Whether the workforce was swollen by women or anyone else is immaterial.

The anti-democratic incestuous class conflict latent in British society continues to ensure that the UK will remain a mere vassal state of foot-soldiers and consumers for international neo-liberal capitalism.

MurchuantEacnamai -> DasInternaut , 8 Jun 2013 09:49
@DasInternaut - Completely agree. The performance has been poor to absymal. But this is a failure of democratic governance because the collective interests of citizens as consumers and service users are not being represented and enforced by the elected politicians since they have been suborned by the capitalists elites and their fellow-travellers.

The people, indeed, have been sold a lie, but, unfortunately, it is only UKIP which is making the political waves by revealing selected aspects of this lie. The three established parties have been 'bought' to varying extents. But more and more citizens are beginning to realise the extent to which they have been bought.

Itsrainingtin , 8 Jun 2013 09:44
There is an upside to all of this, maybe I wont get modded so much from now on for being so angry at the ideological criminals . Hopefully the middle classes will cotton on to the fact that all this is not a mad hatters tinfoil hobby, we need more of them to be grumpy.
szwalby -> MickGJ , 8 Jun 2013 09:43
@MickGJ - We've already seen it. Not great so far. GS4, Winterbourne view, southern cross, trains...............Welfare to work companies, delivering no better results than people left to their own devices. Energy companies.

We'll see if the new wave of free schools, academy schools, and all the service outsourced by the council perform any better.

Doubtful, as to make a profit, they have to employ poorer paid people, less well qualified, and once they've got a contract, they've got very little competition, as when the second round of bidding comes around, as the firms having got the first contract are the only one with relevant experience, they are assured of renewal, the money machine will keep going!

MurchuantEacnamai -> TedSmithAndSon , 8 Jun 2013 09:39
@TedSmithAndSon - There's a huge difference between meddling and ensuring effective governance. But I expect in your omniscence you know that.
theguardianisrubbish -> theonionmurders , 8 Jun 2013 09:38
@theonionmurders - I am not going to read a book.

Neoliberalism are policies that are influenced by neo classical economics. If you are suggesting that the neoliberal school of thought would advocate any kind of a bailout then you are mistaken. Where else have I "apparently" embarrassed myself?

theguardianisrubbish -> TedSmithAndSon , 8 Jun 2013 09:28
@TedSmithAndSon - This is just an inaccurate rant not a reply.

"The system depends on the wealthy not being allowed to suffer the consequences.."

Unless you are completely confused by what neolibralism is there is not a shred of logical sense in this.

"The debt industry are the lenders who take advantage of a financial system..."

Which is what savers are. They come in the form of individuals businesses and governments. This encompasses everyone.

"whilst paying the lowest possible rate. Wonga, for instance."

If you are a lender you do not pay anything, you receive.

"Thatchers revolution was to take our citizenship and give it a value, whilst making everyone else a consumer, all for a handful of magic beans in the shape of British Gas shares."

...not forgetting that she revitalised the economy and got everyone back to work again.

"Neoliberalism in practice is every bit as bad as Communism in practice, with none of the benefits."

Neoliberalism is based on the thought of personal freedom, communism is definitely not. Neoliberalist policies have lifted millions of people out of poverty in Asia and South America. Communism has no benefits for society open your eyes!

theonionmurders -> theguardianisrubbish , 8 Jun 2013 09:24

@theguardianisrubbish - Does this author not realise that a government bailout goes against the whole neoliberal school of thought?

No it isn't. You're confusing neoliberalism with neo classical economics. The level of knowledge on economic theory here is sometimes embarrassing.

http://www2.warwick.ac.uk/fac/soc/sociology/rsw/research_centres/theory/conf/rg/harvey_a_brief_history_of_neoliberalism.pdf

MickGJ -> ATrueFinn , 8 Jun 2013 09:16

@ATrueFinn - After they are finished, what do Singaporeans eat?

Next year's harvest (possibly of GM food which makes better use of scarce resources). I imagine the sun will eventually stop bombarding us with the energy that powers photosynthesis but I'm not losing any sleep over it.
richmanchester -> MurchuantEacnamai , 8 Jun 2013 09:13
@MurchuantEacnamai - I think the point is this, Amazon make money by selling books, they avoid paying taxes, yet expect an educated, literate population to be provided for them, on the grounds that illiterate people don't buy books, and expect roads to move the books around on.

So who will pay for this?

TedSmithAndSon -> theguardianisrubbish , 8 Jun 2013 09:12
@theguardianisrubbish - No! The bailout is simply actual neoliberalism as opposed to the theory inside tiny right wing minds. The system depends on the wealthy not being allowed to suffer the consequences of their own greed, or it would represent revolution and still not work.

The debt industry are the lenders who take advantage of a financial system designed to push profits upwards (neoliberalism in practice), whilst paying the lowest possible rate. Wonga, for instance.

Thatchers revolution was to take our citizenship and give it a value, whilst making everyone else a consumer, all for a handful of magic beans in the shape of British Gas shares.

Neoliberalism in practice is every bit as bad as Communism in practice, with none of the benefits. It always amusing to see neoliberal morons shout about the red menace when they're two sides of the same coin.

szwalby -> MickGJ , 8 Jun 2013 09:04
@MickGJ -

.and provides them at a massively inflated cost accompanied by unforgivable waste and inefficiency, appalling service and life-threatening incompetence.

as opposed to the private sector, who always does what it says it will do, at reasonable cost, for the benefit of their customers, and with due regards to ethics? Like the Banks, the financial sector, who will never sell you a product that isn't the best for you, regardless of their interest? the private companies like Southern Cross, GS4?

The private insurance who refuse to take you on the minute you've got some illness or disability? Get off it! The state isn't perfect, the services it provides are not perfect, but replacing them with private provision isn't the answer!

DasInternaut -> MurchuantEacnamai , 8 Jun 2013 08:59
@MurchuantEacnamai - How would you rate how well British government has done in ensuring markets are genuinely competitive. How well has British government done in ensuring our energy market is competitive, for example. Does the competitiveness we observe in the energy market give customers better or worse value than they had before deregulation? How do you rate the British government's performance in rail and public transport, with respect to competitiveness?

Personally, and notwithstanding the notable exception of telecoms, I rate the British (and US) government's performance in deregulating state entities, creating new markets and ensuring competition, as poor.

Neoliberalism is nothing if not the opposite extreme of the communist planned economy. Like the communist planned economy, neoliberalism is doomed to failure. I think we've all been sold a lie.

[Dec 14, 2018] Neoliberal ideology acted as a smokescreen that enabled the financially powerful to rewrite the rules and place themselves beyond the law

Notable quotes:
"... Neoliberalism has spawned a financial elite who hold governments to ransom ..."
"... Neoliberal ideology acted as a smokescreen that enabled the financially powerful to rewrite the rules and place themselves beyond the law. ..."
"... So it seems that your suggestion is for a return to western capitalism post-war style - would that be right? (b.t.w. if I bring up the whole Soviet Union thing, it is partly because quite a few commentators in this debate come across as if they wish for something much more leftist than that). ..."
"... What you have missed, is that the lions share of the proceeds of that growth are not going to ordinary people but to a tiny minority of super rich. It is not working for the majority. ..."
"... The taxpayers are left to pick up the tab, nations are divided against immigrants and scroungers and then unfettered evangelists like you can spout as pompously as you like about how much big business would like to remove the state from corporate affairs. ..."
"... Without the state there wouldn't be neo-Liberalism, it took state regulated capitalism to build what unfettered purists insist on tearing apart for short term greed. ..."
"... The trouble is Neo-Liberals do not want to remove the state at all, they want to BE the state and in the process rendering democracy pretty much meaningless. And they've succeeded. ..."
"... The biggest swindle ever pulled was turning the most glaring and crushing failure of unfettered corporatism into the biggest and most crushing power grab implemented in order to suppress the will of the people ..."
"... Nobody hates a market more than a monopoly and capitalism must inevitably end in monopoly as it has. For the profiteering monopolies investment especially via taxation is insane as it can only undermine their monopoly. ..."
"... The bankers have always known that the austerity caused by having to pay off un-payable loans, that increase every year, will eventually produce countries very similar to the "Weimar Days" in pre-Hitler Germany. ..."
"... They also know that drastic conditions such as these often lead to a collapse of democracy and a resurgence of Fascism. ..."
"... Neoliberalism could not exist without massive state support. So the term is meaningless. There is nothing "liberal" about having a huge state funded military industrial complex that acts a Trojan horse for global corporations, invading other countries for resources. ..."
"... Neoliberalism is a branch of economic ideology which espouses the value of the free-market, and removing all protective legislation, so that large companies are free to do what they want, where-ever they want, with no impediments from social or environmental considerations, or a nation's democratic preferences. ..."
"... Business-friendly to who exactly: the nation or hostile overseas speculators? ..."
"... The golden age of 1945 - 1975 or so witnessed huge rises in standards of living so your point linking neo-liberalism to rising standards of living is literally meaningless. There was an explosive growth in economic activity during the three or four post war decades ..."
"... The assumption shared by many round here that the young are some untapped resource of revolutionary energy is deeply mistaken ..."
Jun 10, 2013 | www.theguardian.com

WyldeWolfe , 10 Jun 2013 19:42

Neoliberalism has spawned a financial elite who hold governments to ransom

So it's been a success then.

disorderedworld , 10 Jun 2013 17:21
A wonderful article that names the central issue. Neoliberal ideology acted as a smokescreen that enabled the financially powerful to rewrite the rules and place themselves beyond the law. The resultant rise of financial capitalism, which now eclipses the productive manufacturing-based capitalism that was the engine of world growth since the industrial revolution, has propelled a dangerous self-serving elite to the centre of world power. It's not just inequality that matters, but the character of the global elite.
MatthewBall -> murielbelcher , 10 Jun 2013 16:23
@murielbelcher -

The neo-liberal order commenced only in the late 1970s - there was a very different order prior to this which was not "soviet socialism" as you term it.

So it seems that your suggestion is for a return to western capitalism post-war style - would that be right? (b.t.w. if I bring up the whole Soviet Union thing, it is partly because quite a few commentators in this debate come across as if they wish for something much more leftist than that).

Anyway, my worry with this idea is that I am just not convinced that life in "The West 1945-80" was better on the whole than in "The West 1980-present". It's true that unemployment is higher these days, but a lot of work in the post-war years was boring and physically exhausting; in factories and mines where conditions were degrading and bad for health; and where industrial relations were simply terrible. I think as well that the higher unemployment is a localized phenomenon that many developing countries are not experiencing (this is relevant because Deborah Orr proposes change for the whole world, not merely the West).

There were also frequent recessions and booms - in fact, more frequent (albeit shorter) than now. What seems to have changed in this respect is that, whereas we used to alternate regularly between 2-3 years of boom and 1-2 years of bust, we now have 15 years of continuous boom followed by a (maybe?) 10 year bust (this pattern began around 1980). If you asked me which of these two patterns I preferred, then I think I'd go for the pre-1980 pattern, but its not clear to me that the post-1980 pattern is so much worse as to underwrite a savage indictment of the whole system.

As for Casino banking: they should reform that. Britain's Coalition Government has done something in that respect, although its not very radical - I am hoping Labour can do more. There is certainly a lot to be said for banks going back to a pre-"Big Bang" sense of tradition and prudence.

Buts let's not also forget the plus sides in the ledger for post-1980 capitalism: hundreds of millions in the former third world lifted out of poverty; unprecedented technological innovation (e.g. the internet, which makes access to knowledge more equal even as income inequality grows); and the accomodation (at least in the West) of progressive social change, such as the empowerment of ethnic minorities, LGBT people and women.

Change, yes - but lets be careful not to throw the baby out with the bathwater.

MatthewBall -> Grich , 10 Jun 2013 15:40
@Grich -

What you have missed, is that the lions share of the proceeds of that growth are not going to ordinary people but to a tiny minority of super rich. It is not working for the majority. http://www.nakedcapitalism.com/2010/07/58-of-real-income-growth-since-1976-went-to-top-1-and-why-that-matters.html

OK, but both the claim and the link cited in support talk only about a problem in the US. This can't really answer my point, which was that the rest of the world should not be expected to support a change to the economic system of the whole world just because of problems that are mostly localised to North America and Europe. People in developing countries might like the fact that they are, at last, catching "the West" up, and might well not care much about widening inequality of incomes in Western societies.

If you are going to propose changes that you want the whole world to adopt, as Deborah Orr does, then you should be careful to avoid casually assuming that Africa, India, China, et al, feel the same way about the world's recent history as we do. It seems to me that not enough care has been demonstrated in this regard.

MarkHH -> MickGJ , 10 Jun 2013 13:34

@MickGJ - Left to their own devices the most extreme neo-liberals would remove the state almost completely from corporate life.

Except when the State has to step in to prop up an unsustainable ideology. Then it's all meek murmurings and pleas for forgiveness and a timid "we'll be better from now" concessions and the Government obliges the public with the farce that they actually intend to do anything at all but make the public pay for the financial sector's state subsidized profligacy.

Once the begging bowl is re-filled of course then the pretense of "business as usual" profligacy rises to the fore.

The taxpayers are left to pick up the tab, nations are divided against immigrants and scroungers and then unfettered evangelists like you can spout as pompously as you like about how much big business would like to remove the state from corporate affairs.

When you well know that is the last thing big business would like to do. More of the state owned pie is always the most urgent of priorities. Poorer services at inflated costs equates as 'efficiency' until the taxpayer is again left to step in and pick up the bill.

Without the state there wouldn't be neo-Liberalism, it took state regulated capitalism to build what unfettered purists insist on tearing apart for short term greed.

The trouble is Neo-Liberals do not want to remove the state at all, they want to BE the state and in the process rendering democracy pretty much meaningless. And they've succeeded.

The biggest swindle ever pulled was turning the most glaring and crushing failure of unfettered corporatism into the biggest and most crushing power grab implemented in order to suppress the will of the people.

Just as IMF loans come with 'obligations' the principle of democracy itself was sold as part of 'the solution'.

The unsustainable, sustained. By slavery to debt, removal of society's safety net and an economy barely maintained by industries that serve the rich, vultures that prey on the weak and rising living costs and the drudgery of a life compounded by a relentless bombardment of everything in life that is unattainable.

Toeparty , 10 Jun 2013 05:28
Nobody hates a market more than a monopoly and capitalism must inevitably end in monopoly as it has. For the profiteering monopolies investment especially via taxation is insane as it can only undermine their monopoly. With the economy now globalised not even a world war could sweep away the current ossified political economy and give capitalism a new lease on life. It's socialism or monopoly capitalist barbarism. Make your choice.
DracoTBastard , 10 Jun 2013 05:26

The IMF exists to lend money to governments,

Money that the governments don't actually need as they can print their own money and spend it to use their countries own resources and then raise taxes to offset the extra spending and thus maintaining monetary value. The reality is that a government should never, ever borrow money.
Malakia123 , 10 Jun 2013 03:35
The beginning period between the two world wars (1919-33) in Germany called the Weimar Republic shows us exactly what severe austerity imposed by the Treaty of Versailles caused. Because the German economy contracted severely due to reparations payments, steady inflation and severe unemployment ensued. Of course the FED having started the Great Depression in America had not helped matters much anywhere in the world. The bankers have always known that the austerity caused by having to pay off un-payable loans, that increase every year, will eventually produce countries very similar to the "Weimar Days" in pre-Hitler Germany.

They also know that drastic conditions such as these often lead to a collapse of democracy and a resurgence of Fascism.

What causes inflation is uncontrolled speculation of the kind we have seen fed by private banking at various crucial points in history, such as the Weimar Republic. When speculation is coupled with debt (owed to private banking cartels) such as we are seeing in America and Europe now, the result is disaster. On the other hand, when a government issues its own "good faith" commerce-related currency in carefully measured ways as we saw in Roman times or Colonial America, it causes supply and demand to increase together, leaving prices unaffected. Hence there is no inflation, no debt, no unemployment, and no need for income taxes.

In reality, the Weimar financial crisis began with the impossible reparations payments imposed at the Treaty of Versailles. It is very similar to the austerity being imposed on European Nations and America as we speak – regardless of the fact that the IMF is trying to pose as "the Good Cop" at the moment! The damage has been done to nations like Greece, and others are soon to follow. The uncontrollable greed of banks and corporations is leading to an implosion of severe magnitude! It's time to open their books and put a stop to these private banks right now!

brucefiiona -> MysticFish , 9 Jun 2013 20:36
@MysticFish - So the US who has a greater spend on the military than communist China is neoliberal?

Neoliberalism could not exist without massive state support. So the term is meaningless. There is nothing "liberal" about having a huge state funded military industrial complex that acts a Trojan horse for global corporations, invading other countries for resources.

The term neoliberal is not only meaningless but misleading as it implies a connection with true liberalism, of which it has no meaningful connection.

brucefiiona , 9 Jun 2013 20:28
Do away with deceptive terms like neoliberalism, capitalism, socialism, left wing and right wing and things become clearer.

At root a lot of the people who get involved in all of the above have very similar character traits - love of power, greed, deceitful, ruthlessness. Most start out with these character traits, and others gain them as a result of power.

Anyone high up in politics or business is unhinged. You have to be. The organizational structures in these things are so synthetic, the beliefs so artificial, rigid, dogmatic and inhuman that only a unhinged person could prosper in this climate.

Most reasonable people admit doubt, are willing to accept compromise, are willing to make the occasional sacrifice for the greater good. All these things are what make us human, however all these things are seen as weaknesses in the inverted world of business and politics.

Business and politics creates an environment where the must inhuman traits prosper.

fr0mn0where -> murielbelcher , 9 Jun 2013 14:42
@murielbelcher -

"no but the highly placed banking and financial class are along with their venal political mates"

For sure but are they capitalists? Although they may well own capital does their power derive from the ownership of capital? You may, or may not be interested in this lecture on the future of capitalism by John Kay.

MysticFish -> AssistantCook , 9 Jun 2013 14:28
@AssistantCook - Neoliberalism is a branch of economic ideology which espouses the value of the free-market, and removing all protective legislation, so that large companies are free to do what they want, where-ever they want, with no impediments from social or environmental considerations, or a nation's democratic preferences. Von Hayek was a major influence and Thatcher was a loyal disciple, as was the notorious dictator, Pinochet. It is economic theory, designed for vulture capitalists, and unpopular industries like fossil fuel or tobacco, and usually the 'freedom' is all one-sided.
MysticFish -> DavidPavett , 9 Jun 2013 14:12
@DavidPavett - If states are too big, then what about multinational banks and corporations? I wonder why Neoliberal ideology does not try to limit the size of these. They are cumbersome and destructive, predatory dinosaurs and yet our politicians seem mesmerised to the point of allowing them special favours, tax incentives and the ability to determine our nation's policies in matters such as energy and health. Why not 'Small is Beautiful,' when it comes to companies? It doesn't make sense to shrink the state but then let non-transparent and unaccountable, multinational companies become too powerful. One gets the feeling the country is being invaded by the interests of hostile nations, using all-too-convenient Neoliberal ideology and hidden behind a corporate mask.
Jesús Rodriguez , 9 Jun 2013 12:46
Is the IMF ever stop evading its responsibility and blaming others for the worldwide financial tragedy it has provoked? Is it ever stop hurting the working class?
theguardianisrubbish -> murielbelcher , 9 Jun 2013 07:28
@murielbelcher -

"Neo-liberalism is based on the thought of personal freedom for the rich and powerful elites is all."

No it is not that is what you want to believe. There is nothing in this statement other than an opinion based on nothing.

"Many people across the globe were lifted out of poverty between 1945-1980 so what does your statement about neo-liberalism prove"

Which countries during this period saw massive sustainable reductions in poverty without some free market model in place?

"It is you who should open your eyes and stop expecting people on here to accept your ideological beliefs and statements as facts."

I don't expect people to accept my beliefs I am just pointing out why I think their beliefs are wrong. This is a comment section the whole idea of it is to comment on different views and articles. How can you ever benefit or make an accurate decision or belief if you do not try to understand what the opposite belief is? I think nearly everything I have said has been somewhat backed up by logic or a fact, I have not said wishy washy statements like:

"Neo-liberalism is based on the thought of personal freedom for the rich and powerful elites is all."

Unless you can expand on this and give evidence or some form of an example why you think its true then it makes no sense. You are not the only commentor on this article to make a similar statement and the way people have attempted to justify it is due to bailouts but as I have said a bailout is not part of the neoliberal school of thought so if you have a problem with bailouts you don't have a problem with neoliberalism.

theguardianisrubbish -> murielbelcher , 9 Jun 2013 07:10
@murielbelcher - I don't want to go to far into Thatcherism because it is slightly off topic. The early 80s recession was a global recession and yes during the first few years unemployment soared. Why was that because the trade unions were running amok the UK was losing millions of days of work per month.

Inflation was getting out of control and the only way to solve it was a self induced recession. You cannot seriously believe that without the reforms that she implemented we would not have recovered as quick as we did nor can you argue that it was possible for her or anyone else to turn around such an inefficient industry. Don't forget the problems of the manufacturing industry go back way before Thatcher's time.

theguardianisrubbish -> someoneionceknew , 9 Jun 2013 06:34
@someoneionceknew -

"Here's your problem. You believe that banks lend savings. They don't. Loans create deposits create reserves."

I am not claiming to be an expert on this if you are then let me know and please do correct me. I agree banks do not lend deposits but they do lend savings. There is a difference putting money on deposit is different to say putting money into an ISA. I don't agree though that deposits create reserves I believe that they come from the central bank otherwise banks would be constrained by the amount of deposits in the system which is not true and something you have said is not true.

Nevertheless, the majority of liquidity in the bond markets (like most other markets) comes from institutional investors, i.e pension funds, unit trusts, insurance companies, etc. They get their money from savings by consumers as well as sometimes companies. Ok we don't always give our money to insurance companies when we save but via premiums is another way the ordinary consumer contributes to this so called "debt industry". I also said that foreign and local governments buy debt and companies invest directly into the debt market.

MysticFish -> MickGJ , 9 Jun 2013 06:17
@MickGJ - Business-friendly to who exactly: the nation or hostile overseas speculators?
theguardianisrubbish -> TedSmithAndSon , 9 Jun 2013 06:14
"In theory the banks should have been allowed to go bust, but the consequences where deemed too high (as they inevitable are). "

Iceland would disagree.

"The result is socialism for the rich using the poor as the excuse, which is the reality of neoliberalism."

Why have only the rich benefited from the bailout? You are not making any sense.

"The result is socialism for the rich using the poor as the excuse, which is the reality of neoliberalism."

Why? You cannot just say a statement like that and not expand, it makes no sense.

"Thatcher "revitalised" banking, while everything else withered and died."

...but also revitalised the economy and got everyone back to work.

"Neoliberalism is based on the thought that you get as much freedom as you can pay for, otherwise you can just pay... like everyone else."

Again you have to expand on this because it makes no sense.

"In Asia and South America it has been the economic preference of dictators that pushes profit upwards and responsibility down, just like it does here."

Don't think that is true in most cases nor would it make sense. Why would a dictator who wants as much power as possible operate a laissez-faire economy? You cannot have personal freedom without having economic freedom, it is a necessary not sufficient condition. Tell me a case where these is a large degree of political freedom but little to no economic freedom. Moreover look at the countries in Asia and South America that have adopted a neoliberal agenda and notice their how poverty as reduced significantly.

"I find it ironic that it now has 5 year plans that absolutely must not be deviated from, massive state intervention in markets (QE, housing policy, tax credits... insert where applicable), and advocates large scale central planning even as it denies reality, and makes the announcement from a tractor factory."

Who has 5 year plans?

"In theory it's one thing, the reality is entirely different."

If the reality is different to the theory then it is not neoliberalism that is being implemented therefore it makes no sense to dispute the theory. Look at where it has been implemented, the best case in the world at the moment is Hong Kong look at how well that country has performed.

"a massive lie told by rich people "

I can assure you I am not rich.

"Until we're rid of it, we're all it's slaves."

Neoliberalism is based on personal freedom. If you believe this about neoliberalism in your opinion give me one economic school of thought where this does not apply.

theguardianisrubbish -> theonionmurders , 9 Jun 2013 05:35
@theonionmurders -

"Bailouts have been a constant feature of neoliberalism."

What you are saying does not make sense. Whatever you say about that there was no where else to turn the government had to bailout out the banks a neolibralist would disagree.

"In fact the role of the state is simply reduced to a merely commissioning agent to private parasitical corporations. "

That's corporatism which so far you have described pretty well.

"History has shown the state playing this role since neoliberalism became embedded in policy since the 1970s - Long Term Capital Management, Savings and Loans, The Brady Plan, numerous PFI bailouts and those of the Western banking system during the 1982 South American, 1997 Asian and 2010 European debt crises."

What?! Bailouts have been occurring before the industrial revolution. Deregulation in the UK occurred mainly during the 80s not 70's. Furthermore financial deregulation occurred in the UK in 1986. In the USA the major piece of financial deregulation was the Gramm Leach Bliley Act which was passed in 1999. So you have just undercut your own point with the examples you gave above. You could argue Argentina and we could argue all day about the causes of that, but I would say that any government that pursues an expansionary monetary policy under a fixed ER is never going to end well.

"...policy if you won't flick through a book."

My point was that when people quote a source they tend to either quote the page that the point comes from. To be honest if this book is telling you that neoliberalism and neoclassical are significantly different (which you seemed to suggest in you earlier post) then I would suggest put the book down.

ATrueFinn -> fireman36 , 9 Jun 2013 04:17
@ fireman36 09 June 2013 1:32am

Don't like it? Change the rules.

Exactly! However:

"Google, Amazon and Apple... avoid their taxes, because they can, because they are more powerful than governments."

Yes to the first, no to the second. Corporations with revenues exceeding the GDP of a small nation have quite a lot of power: Exxon's revenue is between the GDP of Norway and Austria. In Finland Nokia generated 3 4 % of the GDP for a decade and the government bent backwards to accommodate its polite requests, including a specific law reducing the privacy of employees' emails.

Grich -> MatthewBall , 8 Jun 2013 22:29
@MatthewBall -

I am not sure if this is true. We have the same economic system (broadly speaking, capitalism) as nearly every country in the world, and the world economy is growing at a reasonable rate, at around 3-4% for 2013-14 (see http://www.imf.org/external/pubs/ft/weo/2013/01/pdf/c1.pdf for more details).

We percieve a problem in (most of) Europe and North America because our economies are growing more slowly than this, and in some cases not at all. The global growth figure comes out healthy because of strong growth in the emerging countries, like China, Brazil and India, who are narrowing the gap between their living standards and ours. So, the world as a whole isn't broken, even if our bit of it is going through a rough patch.

What you have missed, is that the lions share of the proceeds of that growth are not going to ordinary people but to a tiny minority of super rich. It is not working for the majority. http://www.nakedcapitalism.com/2010/07/58-of-real-income-growth-since-1976-went-to-top-1-and-why-that-matters.html

oriel46 -> Fachan , 8 Jun 2013 22:08
@Fachan - Except that it isn't capitalism that was being criticized here, but neoliberalism: a distinction that's often lost on neoliberals themselves, ironically.
TomorrowsWorld , 8 Jun 2013 19:58
I'm sure that Denis Healy and any number of African economists would confirm that the IMF is quite simply a refuge of absolutely last resort, when investor confidence in your economy is so shattered that the only way ahead is to open the shark gates and allow big money to plunder whatever value remains there, without the benefit of any noticeable return for your people. Greece is but one more victim of a syndrome that encompasses all the science and forensic analysis of ritual sacrifice.
murielbelcher -> OneCommentator , 8 Jun 2013 19:10
@OneCommentator - don't confuse economic deregulation which acted as handmaiden to global finance and multinationals as economic freedoms for population

China's govt was doing what china's govt had decided to do from 1978 BEFORE the election of Thatcher in 1979 or Reagan in 1980 (office from Jan 1981), so very little correlation there I think

The GATT rounds whether you agree with their aims or not were the products of the post war decades, again before Thatcher and Reagan came to power

The golden age of 1945 - 1975 or so witnessed huge rises in standards of living so your point linking neo-liberalism to rising standards of living is literally meaningless. There was an explosive growth in economic activity during the three or four post war decades

murielbelcher -> theguardianisrubbish , 8 Jun 2013 19:04
@theguardianisrubbish - you can't get away with this

She DID not get everyone back to work again. There were two recessions at either end of the 1980s. She TRIPLED unemployment during the first half of the 1980s and introduced the phenomenon of high structural unemployment and placing people on invalidity benefits to massage the headline unemployment count. Give us the figures to back up your assertion that she "got everyone back to work again." I suspect that you cannot and your statement stands for the utter nonsense that it is in any kind of reality.

A few months after she was forced out Tory Chancellor Norman Lamont in 1991 during yet another recession declared that "unemployment was a price worth paying"!!!

Neo-liberalism is based on the thought of personal freedom for the rich and powerful elites is all. Many people across the globe were lifted out of poverty between 1945-1980 so what does your statement about neo-liberalism prove

It is you who should open your eyes and stop expecting people on here to accept your ideological beliefs and statements as facts.

Because they are not: in no shape, way or form

fireman36 , 8 Jun 2013 19:03
Not very impressed to be honest. For starters:

"The IMF exists to lend money to governments, so it's comic that it wags its finger at governments that run up debt. And, of course, its loans famously come with strings attached: adopt a free-market economy, or strengthen the one you have, kissing goodbye to the Big State."

That's glib and inaccurate. A better read about the IMF from an insider: http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/307364/ Digest: the biggest problem the IMF have to deal with in bailouts is always the politics of cronyism; free-market oligarchs and government in cahoots.

"Many IMF programs "go off track" (a euphemism) precisely because the government can't stay tough on erstwhile cronies, and the consequences are massive inflation or other disasters. A program "goes back on track" once the government prevails or powerful oligarchs sort out among themselves who will govern -- and thus win or lose -- under the IMF-supported plan. The real fight in Thailand and Indonesia in 1997 was about which powerful families would lose their banks. In Thailand, it was handled relatively smoothly. In Indonesia, it led to the fall of President Suharto and economic chaos."

MickGJ -> JohnBroggio , 8 Jun 2013 18:42

@JohnBroggio - who caters for the idealist vote?

Generally whoever happens to be in opposition at the time. This made the LibDems the ideal (sorry) choice for a long time but then they broke a long-standing if unspoken promise that they would never actually be in government.

Last weekś Economist has some very interesting stuff from the British Social Attitudes survey which shows the increasing drift away from collectivist ideals towards liberalism over each succeeding generation.

The assumption shared by many round here that the young are some untapped resource of revolutionary energy is deeply mistaken

[Dec 14, 2018] Neoliberalism has spawned a financial elite who hold governments to ransom by Deborah Orr

Highly recommended!
Notable quotes:
"... The crash was a write-off, not a repair job. The response should be a wholesale reevaluation of the way in which wealth is created and distributed around the globe ..."
"... The IMF also admits that it "underestimated" the effect austerity would have on Greece. Obviously, the rest of the Troika takes no issue with that. Even those who substitute "kick up the arse to all the lazy scroungers" whenever they encounter the word "austerity", have cottoned on to the fact that the word can only be intoned with facial features locked into a suitably tragic mask. ..."
"... Yet, mealy-mouthed and hotly contested as this minor mea culpa is, it's still a sign that financial institutions may slowly be coming round to the idea that they are the problem. ..."
"... Markets cannot be free. Markets have to be nurtured. They have to be invested in. Markets have to be grown. Google, Amazon and Apple haven't taught anyone in this country to read. But even though an illiterate market wouldn't be so great for them, they avoid their taxes, because they can, because they are more powerful than governments. ..."
"... The neoliberalism that the IMF still preaches pays no account to any of this. It insists that the provision of work alone is enough of an invisible hand to sustain a market. Yet even Adam Smith, the economist who came up with that theory , did not agree that economic activity alone was enough to keep humans decent and civilised. ..."
"... Governments are left with the bill when neoliberals demand access to markets that they refuse to invest in making. Their refusal allows them to rail against the Big State while producing the conditions that make it necessary. ..."
Jun 08, 2013 | www.theguardian.com

The crash was a write-off, not a repair job. The response should be a wholesale reevaluation of the way in which wealth is created and distributed around the globe

Sat 8 Jun 2013 02.59 EDT First published on Sat 8 Jun 2013 02.59 EDT

The IMF's limited admission of guilt over the Greek bailout is a start, but they still can't see the global financial system's fundamental flaws, writes Deborah Orr. Photograph: Boris Roessler/DPA FILE T he International Monetary Fund has admitted that some of the decisions it made in the wake of the 2007-2008 financial crisis were wrong, and that the €130bn first bailout of Greece was "bungled". Well, yes. If it hadn't been a mistake, then it would have been the only bailout and everyone in Greece would have lived happily ever after.

Actually, the IMF hasn't quite admitted that it messed things up. It has said instead that it went along with its partners in "the Troika" – the European Commission and the European Central Bank – when it shouldn't have. The EC and the ECB, says the IMF, put the interests of the eurozone before the interests of Greece. The EC and the ECB, in turn, clutch their pearls and splutter with horror that they could be accused of something so petty as self-preservation.

The IMF also admits that it "underestimated" the effect austerity would have on Greece. Obviously, the rest of the Troika takes no issue with that. Even those who substitute "kick up the arse to all the lazy scroungers" whenever they encounter the word "austerity", have cottoned on to the fact that the word can only be intoned with facial features locked into a suitably tragic mask.

Yet, mealy-mouthed and hotly contested as this minor mea culpa is, it's still a sign that financial institutions may slowly be coming round to the idea that they are the problem. They know the crash was a debt-bubble that burst. What they don't seem to acknowledge is that the merry days of reckless lending are never going to return; even if they do, the same thing will happen again, but more quickly and more savagely. The thing is this: the crash was a write-off, not a repair job. The response from the start should have been a wholesale reevaluation of the way in which wealth is created and distributed around the globe, a "structural adjustment", as the philosopher John Gray has said all along.

The IMF exists to lend money to governments, so it's comic that it wags its finger at governments that run up debt. And, of course, its loans famously come with strings attached: adopt a free-market economy, or strengthen the one you have, kissing goodbye to the Big State. Yet, the irony is painful. Neoliberal ideology insists that states are too big and cumbersome, too centralised and faceless, to be efficient and responsive. I agree. The problem is that the ruthless sentimentalists of neoliberalism like to tell themselves – and anyone else who will listen – that removing the dead hand of state control frees the individual citizen to be entrepreneurial and productive. Instead, it places the financially powerful beyond any state, in an international elite that makes its own rules, and holds governments to ransom. That's what the financial crisis was all about. The ransom was paid, and as a result, governments have been obliged to limit their activities yet further – some setting about the task with greater relish than others. Now the task, supposedly, is to get the free market up and running again.

But the basic problem is this: it costs a lot of money to cultivate a market – a group of consumers – and the more sophisticated the market is, the more expensive it is to cultivate them. A developed market needs to be populated with educated, healthy, cultured, law-abiding and financially secure people – people who expect to be well paid themselves, having been brought up believing in material aspiration, as consumers need to be.

So why, exactly, given the huge amount of investment needed to create such a market, should access to it then be "free"? The neoliberal idea is that the cultivation itself should be conducted privately as well. They see "austerity" as a way of forcing that agenda. But how can the privatisation of societal welfare possibly happen when unemployment is already high, working people are turning to food banks to survive and the debt industry, far from being sorry that it brought the global economy to its knees, is snapping up bargains in the form of busted high-street businesses to establish shops with nothing to sell but high-interest debt? Why, you have to ask yourself, is this vast implausibility, this sheer unsustainability, not blindingly obvious to all?

Markets cannot be free. Markets have to be nurtured. They have to be invested in. Markets have to be grown. Google, Amazon and Apple haven't taught anyone in this country to read. But even though an illiterate market wouldn't be so great for them, they avoid their taxes, because they can, because they are more powerful than governments.

And further, those who invest in these companies, and insist that taxes should be low to encourage private profit and shareholder value, then lend governments the money they need to create these populations of sophisticated producers and consumers, berating them for their profligacy as they do so. It's all utterly, completely, crazy.

The other day a health minister, Anna Soubry , suggested that female GPs who worked part-time so that they could bring up families were putting the NHS under strain. The compartmentalised thinking is quite breathtaking. What on earth does she imagine? That it would be better for the economy if they all left school at 16? On the contrary, the more people who are earning good money while working part-time – thus having the leisure to consume – the better. No doubt these female GPs are sustaining both the pharmaceutical industry and the arts and media, both sectors that Britain does well in.

As for their prioritising of family life over career – that's just another of the myriad ways in which Conservative neoliberalism is entirely without logic. Its prophets and its disciples will happily – ecstatically – tell you that there's nothing more important than family, unless you're a family doctor spending some of your time caring for your own. You couldn't make these characters up. It is certainly true that women with children find it more easy to find part-time employment in the public sector. But that's a prima facie example of how unresponsive the private sector is to human and societal need, not – as it is so often presented – evidence that the public sector is congenitally disabled.

Much of the healthy economic growth – as opposed to the smoke and mirrors of many aspects of financial services – that Britain enjoyed during the second half of the 20th century was due to women swelling the educated workforce. Soubry and her ilk, above all else, forget that people have multiple roles, as consumers, as producers, as citizens and as family members. All of those things have to be nurtured and invested in to make a market.

The neoliberalism that the IMF still preaches pays no account to any of this. It insists that the provision of work alone is enough of an invisible hand to sustain a market. Yet even Adam Smith, the economist who came up with that theory , did not agree that economic activity alone was enough to keep humans decent and civilised.

Governments are left with the bill when neoliberals demand access to markets that they refuse to invest in making. Their refusal allows them to rail against the Big State while producing the conditions that make it necessary. And even as the results of their folly become ever more plain to see, they are grudging in their admittance of the slightest blame, bickering with their allies instead of waking up, smelling the coffee and realizing that far too much of it is sold through Starbucks.

[Dec 14, 2018] The era of neoliberalism has seen a massive increase in government, not a shrinkage. The biggest change is the role of governments - to protect markets rather than to protect the rights and dignities of its citizens

Notable quotes:
"... The era of neoliberalism has seen a massive increase in government, not a shrinkage. The biggest change is the role of governments - to protect markets rather than to protect the rights and dignities of its citizens. When viewed by outcome rather than ideological rhetoric, it becomes increasingly clear that neoliberalism has nothing to do with shrinking the state, freeing markets, or freeing the individual, and everything to do with a massive power grab by a global elite. ..."
"... What was the billions of pounds in bank bailout welfare and recession on costs all about? You tell me. All the result of the application of your extremist free market ideology? Let the banks run wild, they mess up and the taxpayer has to step in with bailout welfare and pay to clear up the recession debris ..."
"... Market participants and their venal political friends have during the past 30 years of extremist neo-liberal ideology rigged, abused, distorted and subverted their market and elite power to tilt the economic and social balance massively in their favour ..."
"... Neo liberalism = the favoured ideology of the very rich and powerful elite ..."
"... at last somebody is looking at globalisation and asking whose interests is it designed to serve? It certainly ain't for the people. ..."
"... the highly placed banking and financial class are along with their venal political mates ..."
"... We've had three decades of asset stripping in favor of the rich elites and look at the mess we're in now. ..."
"... I strongly believe that people are not being told the full story. Like the NSA surveillance revelation, the effects will not be pretty when the facts are known. No country needs the IMF. ..."
"... The mythology surrounding deficits and national debt is a religion that the world is in desperate need of debunking. Like religion, the mythology is used as a means of power and entrenchment of privilege for the Ruling Caste, not the plebs (lesser mortals). ..."
Dec 03, 2018 | www.theguardian.com
justamug , 8 Jun 2013 18:09
This article is a testament to our ignorance. Orr is no intellectual slouch, but somehow, like many in the mainstream, she still fails to address some fundamental assumptions and thus ends up with a muddled argument.

"What they don't seem to acknowledge is that the merry days of reckless lending are never going to return;"

Lending has not stopped - it's just moved out of one market into another. Banks are making profits, and banks profit are made by expanding credit.

Neoliberal ideology insists that states are too big and cumbersome, too centralised and faceless, to be efficient and responsive.

Yes and no. There is a difference between what is preached and what happens in practice. The era of neoliberalism has seen a massive increase in government, not a shrinkage. The biggest change is the role of governments - to protect markets rather than to protect the rights and dignities of its citizens. When viewed by outcome rather than ideological rhetoric, it becomes increasingly clear that neoliberalism has nothing to do with shrinking the state, freeing markets, or freeing the individual, and everything to do with a massive power grab by a global elite.
murielbelcher -> MurchuantEacnamai , 8 Jun 2013 18:06
@MurchuantEacnamai - well righty ideologues such as yourself and your venal political acolytes have utterly failed to support the case or institute measures that: "apply effective democratic governance to ensure market

What was the billions of pounds in bank bailout welfare and recession on costs all about? You tell me. All the result of the application of your extremist free market ideology? Let the banks run wild, they mess up and the taxpayer has to step in with bailout welfare and pay to clear up the recession debris

Market participants and their venal political friends have during the past 30 years of extremist neo-liberal ideology rigged, abused, distorted and subverted their market and elite power to tilt the economic and social balance massively in their favour

You the taxpayer are good enough to bail us out when we mess up but then we demand that your services are cut in return and that your employment is ever more precarious and wages depressed (at the lower end of the scale - never ever the higher of course!! That's the neo-liberal deal isn't it

Neo liberalism = the favoured ideology of the very rich and powerful elite and boy don't they know how to work its levers

freedomrespect , 8 Jun 2013 18:00
Very insightful commentary and at last somebody is looking at globalisation and asking whose interests is it designed to serve? It certainly ain't for the people. Amazing it's been approved on a UK liberal newspaper as well!
Boguille -> Fachan , 8 Jun 2013 17:57
@Fachan - There was nothing in the article about envy. It was an exposition of the failure of our present system which allows the rich to get ever richer. That would be fine if it weren't for the fact that the increasing disparity in wealth is bringing down the economy and making it less productive while leaving a large part of the population in, or on the verge of, poverty.
murielbelcher -> CaptainGrey , 8 Jun 2013 17:41
@CaptainGrey - but we're not talking about that form of capitalism are we?

Surely you must realise that there are very very different forms of capitalism. The capitalism that reigns now would not have permitted the creation of the NHS had it not been devised in the1940s when a very different type of capitalism reigned. Its political acolytes and its cheerleader press would have denounced the NHS as an extremist commie idea!!

murielbelcher -> fr0mn0where , 8 Jun 2013 17:39
@fr0mn0where - it was crumbling in the 1980s

The Chicago boys swarmed into eastern Europe after 1989 to introduce a form of gangster unbridled capitalism. The very Chicago boys led by Milton Friedman who used the dictator Pinochet's Chile as test bed for their ideology from September 1973 after the coup that overthrew Allende

murielbelcher -> fr0mn0where , 8 Jun 2013 17:35
@fr0mn0where - no but the highly placed banking and financial class are along with their venal political mates

We've had three decades of asset stripping in favor of the rich elites and look at the mess we're in now.

murielbelcher -> MatthewBall , 8 Jun 2013 17:33
@MatthewBall - social democracy

The neo-liberal order commenced only in the late 1970s - there was a very different order prior to this which was not "Soviet Socialism" as you term it.

As such this extremist rich man's ideological experiment has had a long innings and has failed as the events of 2008 laid bare for all to see - it has been tried out disastrously on live human beings for 34 years and has now been thoroughly discredited with the huge bank bailouts and financial crash and ensuing and enduring recession It was scarcely succeeding prior to this with high entrenched rates of unemployment, frequent recessions/booms and busts and unsustainable property bubbles and deregulated unstable speculative aka casino banking activity

Time for a change

RidiculousPseudonym , 8 Jun 2013 17:26
This is basically right, but a few comments.

1. Neoliberalism cannot be pinned on one party alone. It was accepted by the Thatcher government, but no Prime Minister since has seriously challenged it.

2. Neoliberalism is logically contrary to conservative values. Either there are certain moral imperatives so important that it is worth wasting money over them, or there are not. No wonder that Tories are torn in two, not to mention Labour politicians who also try to combine neoliberalism and moral principle.

3. Saying "even Adam Smith" is understandable but unfair. His work was rather enlightened in the context of mercantilism, and of course the Wealth of Nations was not his only book. Others will know his work better than me, but I think he dwells rather strongly on problems of persistent poverty.

4. The political and redistributive functions of nations are indeed damaged by neolib, but I don't think there is any realistic way of getting that power back without applying capital controls. If we apply capital controls, all hell breaks loose.

5. Ergo, we are stuck with a situation where neolib is killing democracy, distributive justice and conservative moral values, but there is nothing we can do about it without pulling the plug altogether and unleashing a sharp drop in wealth and 1930s nationalistic havoc. A bit of a tragedy, indeed.

HolyInsurgent , 8 Jun 2013 17:22

Deborah Orr: The IMF exists to lend money to governments, so it's comic that it wags its finger at governments that run up debt.

I strongly believe that people are not being told the full story. Like the NSA surveillance revelation, the effects will not be pretty when the facts are known. No country needs the IMF. Any national government with its own national currency sovereignty can pay its own debts within its own country with its own currency. International borrowing in foreign markets is the biggest myth since religion. But since neoliberalism and its inherent myths have been swallowed whole for so long, we are still at the stage where the child points and laughs at the nude emperor. The fallout from the revelation and remedy is to follow.

The problem with the Eurozone is not that the Euro is the "national" currency. Control of the Euro resides with the European Central Bank, not the Troika (European Commission, European Central Bank, IMF). The European Central Bank, as sole controller of the Euro (the "national" currency), can issue funds to constituent Eurozone states to the extent necessary. I challenge anyone to demonstrate how any central bank does not have power over its own currency!

The mythology surrounding deficits and national debt is a religion that the world is in desperate need of debunking. Like religion, the mythology is used as a means of power and entrenchment of privilege for the Ruling Caste, not the plebs (lesser mortals).

someoneionceknew -> colonelraeburn , 8 Jun 2013 17:18
@colonelraeburn - Excuse me? Private bank credit caused the housing price inflation.

Politicians were complicit in deregulating and appointing non-regulators but they didn't make the loans.

MickGJ -> DavidPavett , 8 Jun 2013 17:16

@DavidPavett - Does anyone have any idea what this is supposed to mean? There are certainly no leads on this in the link given to "the philosopher" John Gray

Gray wrote this in the Guardian in 2007:

Whether in Africa, Asia, Latin America or post-communist Europe, policies of wholesale privatisation and structural adjustment have led to declining economic activity and social dislocation on a massive scale

This doesn't seem to support Orrś assertion that he is calling for a structural adjustment, rather the opposite. I'ḿ not really familiar with Grayś work but he seems to be rather against the universal imposition of any system, new or old.
katiewm -> CaptainGrey , 8 Jun 2013 16:46
@CaptainGrey - Capitalism is not an undifferentiated mass. Late-stage neoliberal hypercapitalism as practiced in the US and increasingly in the UK is a very different beast than the traditional European capitalist social democracy or the Nordic model, which have been shown to work relatively well over time. In fact, neoliberal capitalism - the sort Orr is talking about here - is marked by increasing decline both in the state and in the economy, as inequality in wealth distribution creates a society of beggars and kings instead of spenders and savers. The gains achieved through carefully regulated capitalism won't stick around in the free-for-all conditions preferred by those whose ideology demands the sell-off of the state.
jazzdrum -> PeterWoking , 8 Jun 2013 16:16
@PeterWoking - For some parts of the world , yes they are more affluent now , but a huge part of the globe is still without food and water .

I think de regulation of the financial sector has caused a huge amount of damage to the world all round and to be honest, i expect more of the same as the Bankers are still in control.

[Dec 08, 2018] The pervert humor oin Yahoo: White House, Trudeau seek to distance themselves from Huawei move

This is Onion-style humor is no it : White House, Trudeau seek to distance themselves from Huawei move
Notable quotes:
"... A White House official told Reuters Trump did not know about a U.S. request for her extradition from Canada before he met Xi and agreed to a 90-day truce in the brewing trade war. ..."
Dec 08, 2018 | finance.yahoo.com

Huawei Technologies Co Ltd's chief financial officer, Meng Wanzhou, the 46-year-old daughter of the company's founder, was detained in Canada on Dec. 1, the same day Trump and Chinese President Xi Jinping dined together at the G20 summit in Buenos Aires.

A White House official told Reuters Trump did not know about a U.S. request for her extradition from Canada before he met Xi and agreed to a 90-day truce in the brewing trade war.

[Dec 08, 2018] White House, Trudeau seek to distance themselves from Huawei move

This is about destruction of neoliberalism. Transnational financial elite under neoliberalism is above the law. the USA blatantly breaches this convention now. And will pay the price.
This is Onion-style humor is no it : White House, Trudeau seek to distance themselves from Huawei move
Notable quotes:
"... The official, speaking on condition of anonymity, acknowledged that the arrest could complicate efforts to reach a broader U.S.-China trade deal but would not necessarily damage the process. ..."
"... Meng's detention also raised concerns about potential retaliation from Beijing in Canada, where Prime Minister Justin Trudeau sought to distance himself from the arrest. ..."
Dec 08, 2018 | finance.yahoo.com

Huawei Technologies Co Ltd's chief financial officer, Meng Wanzhou, the 46-year-old daughter of the company's founder, was detained in Canada on Dec. 1, the same day Trump and Chinese President Xi Jinping dined together at the G20 summit in Buenos Aires.

A White House official told Reuters Trump did not know about a U.S. request for her extradition from Canada before he met Xi and agreed to a 90-day truce in the brewing trade war.

Meng's arrest during a stopover in Vancouver, announced by the Canadian authorities on Wednesday, pummeled stock markets already nervous about tensions between the world's two largest economies on fears the move could derail the planned trade talks.

The arrest was made at Washington's request as part of a U.S. investigation of an alleged scheme to use the global banking system to evade U.S. sanctions against Iran, according to people familiar with the probe.

Another U.S. official told Reuters that while it was a Justice Department matter and not orchestrated in advance by the White House, the case could send a message that Washington is serious about what it sees as Beijing's violations of international trade norms.

The official, speaking on condition of anonymity, acknowledged that the arrest could complicate efforts to reach a broader U.S.-China trade deal but would not necessarily damage the process.

Meng's detention also raised concerns about potential retaliation from Beijing in Canada, where Prime Minister Justin Trudeau sought to distance himself from the arrest.

"The appropriate authorities took the decisions in this case without any political involvement or interference ... we were advised by them with a few days' notice that this was in the works," Trudeau told reporters in Montreal in televised remarks.

[Dec 08, 2018] The problem with predatory behaviour of TBTF financial institutions is probably deeper then personality of Blankfein

Sliding of the banks into criminal behaviour is a norm, not an exemption
Feb 06, 2017 | economistsview.typepad.com
pgl : February 04, 2017 at 03:41 PM, 2017 at 03:41 PM
Not that Wikipedia gets everything right but here is a snippet of what it says about the Goldman Sachs CEO:

'Blankfein testified before Congress in April 2010 at a hearing of the Senate Permanent Subcommittee on Investigations. He said that Goldman Sachs had no moral or legal obligation to inform its clients it was betting against the products which they were buying from Goldman Sachs because it was not acting in a fiduciary role. The company was sued on April 16, 2010, by the SEC for the fraudulent selling of a synthetic CDO tied to subprime mortgages. With Blankfein at the helm, Goldman has also been criticized "by lawmakers and pundits for issues from its pay practices to its role in helping Greece mask the size of its debts". In April 2011, a Permanent Subcommittee on Investigations report accused Goldman Sachs of misleading clients about complex mortgage-related investments in 2007, and Senator Carl Levin alleged that Blankfein misled Congress, though no perjury charges have been brought against Blankfein. In August of the same year, Goldman confirmed that Blankfein had hired high-profile defense lawyer Reid Weingarten'

Weingarten helped in the defense of the Worldcom thieves. Why would anyone do business with a company led by such an ethically challenged CEO?

libezkova -> pgl... , February 04, 2017 at 07:12 PM
The problem here is probably deeper then personality of Blankfein.

There is such thing as system instability of economy caused by outsized financial sector and here GS fits the bill. Promotion of psychopathic personalities with no brakes and outsize taste for risk is just an icing on the cake.

> Why would anyone do business with a company led by such an ethically challenged CEO?

Why you are assuming the other TBTF are somehow better then GS?

[Dec 08, 2018] Wall Street s corruption runs deeper than you can fathom by Robert Scheer

Notable quotes:
"... Noncompliant: A Lone Whistleblower Exposes the Giants of Wall Street. ..."
"... Noncompliant: A Lone Whistleblower Exposes the Giants of Wall Street. ..."
"... Noncompliant: A Lone Whistleblower Exposes the Giants of Wall Street. ..."
"... A Lone Whistleblower Exposes the Giants of Wall Street. ..."
Dec 08, 2018 | www.alternet.org

Originally from: Truthdig December 8, 2018, 4:38 AM GMT

Wall Street's corruption runs deeper than you can fathom | Alternet Wall Street's corruption runs deeper than you can fathom As an employee at the Federal Reserve in 2011, three years after the dissolution of Lehman Brothers, Carmen Segarra witnessed the results of this deregulation firsthand

Print 61 COMMENTS

Of the myriad policy decisions that have brought us to our current precipice, from the signing of the North Atlantic Free Trade Agreement (NAFTA) to the invasion of Iraq and the gerrymandering of House districts across the country, few have proven as consequential as the demise of Glass-Steagall . Signed into law as the U.S.A. Banking Act of 1933, the legislation had been crucial to safeguarding the financial industry in the wake of the Great Depression. But with its repeal in 1999, the barriers separating commercial and investment banking collapsed, creating the preconditions for an economic crisis from whose shadow we have yet to emerge.

Carmen Segarra might have predicted as much. As an employee at the Federal Reserve in 2011, three years after the dissolution of Lehman Brothers, she witnessed the results of this deregulation firsthand. In her new book, " Noncompliant: A Lone Whistleblower Exposes the Giants of Wall Street, " she chronicles the recklessness of institutions like Goldman Sachs and the stunning lengths the United States government went to to accommodate them, even as they authored one of the worst crashes in our nation's history.

"They didn't want to hear what I had to say," she tells Robert Scheer in the latest installment of "Scheer Intelligence." "And so I think what we have in terms of this story is really not just a failure of the banks and the regulators, but also a failure of our prosecutors. I mean, a lot of the statutes that could be used -- criminal statutes, even, that could be used to hold these executives accountable are not being used, and they have not expired; we could have prosecutors holding these people accountable."

Segarra also explains why she decided to blow the whistle on the Fed, and what she ultimately hopes to accomplish by telling her story. "I don't like to let the bad guys win," she says. "I'd rather go down swinging. So for me, I saw it as an opportunity to do my civic duty and rebuild my life. I was very lucky to be blessed by so many people who I shared the story to, especially lawyers who were so concerned about what I was reporting, who thought that the Federal Reserve was above this, who thought that the government would not fail us after the financial crisis, and who were livid."

"Noncompliant" explores one of the darkest chapters in modern American history, but with a crook and unabashed narcissist occupying the Oval Office, its lessons are proving remarkably timely. "We live in a culture where we reward bad behavior, we worship bad behavior, and it's something that needs to stop," she cautions. "Changing the regulatory culture on [a] U.S. governmental level is something that's going to take a decade, maybe two. And we need to start now, before things get worse."

Listen to Segarra's interview with Scheer or read a transcript of their conversation below:

Robert Scheer: Hi, I'm Robert Scheer, and this is another edition of "Scheer Intelligence," where the intelligence comes from my guests. Today, Carmen Segarra. She's written a book, just came out, called "Noncompliant: A Lone Whistleblower Exposes the Giants of Wall Street." And boy, did she ever. Perhaps you remember this case; it was in 2011, two, three years into the Great Recession. There was a lot of pressure from Congress that these banks be regulated in a more serious way. As a result, Carmen Segarra, someone of considerable education, was brought in. And she was assigned to do a survey of Goldman Sachs, to go over to Goldman Sachs. And I just want to preface this, people have to understand that not only is the Federal Reserve an incredibly -- the most important economic institution in the United States, but the New York Federal Reserve plays a special role being in New York. And they are basically entrusted with regulating the banks, and they are the institution that most definitely failed in that task, and helped bring about the Great Recession. Would you agree with that assessment?

Carmen Segarra: Yes, I would agree with that assessment. When I joined the Federal Reserve, as you pointed out, I was hired from outside the regulatory world, but within the legal and compliance banking world, to help fix its problems. And I was well aware of the problems that existed. And scoping the problems itself was relatively easy; I mean, within days of arriving, I had participated in meetings where you had Goldman Sachs executives, you know, lying, doublespeaking, and misrepresenting to regulatory agencies without fear of repercussions. And where I saw Federal Reserve regulators actively working to suppress and expunge from the record evidence of wrongdoing that could be used by regulatory agencies, prosecutors, and even the Federal Reserve itself to hold Goldman Sachs accountable. The question was, when I arrived, you know, are these problems fixable? And, spoiler alert: I don't think so.

RS: Well, your book really is a compelling read on, really, what one could consider the dark culture of finance capital. Most of us know very little about it; we think it's boring, it's detailed and so forth. And I was thinking of another woman observer of great education and experience, who first tipped me off as a journalist when I was trying to cover the stuff about banking deregulation and so forth, and when Clinton was president and they did the basic financial deregulation. A woman named Brooksley Born, who was head of the Commodity Futures Trading Commission, and she had your kind of background, you know; a leading lawyer with the banks, and so forth. Understood this a lot better than most of the men who were powerful, including Treasury Secretary Robert Rubin; Lawrence Summers, who took over from him and went on to be the head of Harvard; Alan Greenspan–none of them really understood these collateralized debt obligations, credit default swaps; she did. She blew the whistle on it, and they basically destroyed her. She was forced out of the Clinton administration, and what have you. Did you know about Brooksley Born's work when you got into this? Do you have any sense? I mean, this was really sort of the first major whistleblower, and she was, as you have been, basically pushed aside.

CS: Yes. I definitely knew about her. And you know, I have to say that I was, you know, just taking that historical perspective, which I think is an important point of view through which we should approach this topic. I mean, I remember when I was in law school, I was one of the very first graduating classes to graduate into a post-Glass-Steagall world. From a 50,000-foot level, I think people have a better understanding of what that means, in the sense, you know, you have all of a sudden the securities and the banking products can get together.

But from a practical standpoint, from a ground-zero level, where I was at, that essentially meant two things. From a professional standpoint, we studied and were aware of the fact that there were a bunch of people on one side of the aisle, the investment products side–you know, the collateralized debt obligations that you mentioned.

And then there were people who were on the banking side; we're talking, you know, for purposes of argument, credit cards and debit cards. And that these people, they may have known about their products, but they were highly specialized; they only knew about the one or two things that they touched, and they certainly didn't know about them and how they interacted together. And one of the things that I remember studying were not just the cases of whistleblowers, but also discussing amongst our classmates, you know, what the impact would be of all of a sudden having a class or a series of classes, graduating from law school, with people who are focusing on banking and compliance, like I was, and who are having to understand both of these products and sort of how they interact together. And what, sort of visualizing what our work life would be like, in terms of reporting to people that had an incomplete understanding of how the banking world worked. So, yes, I was definitely aware; I understood perfectly where she was coming from. And she was very much a cautionary tale for the rest of us who are lawyers. In terms of, if you find yourself in these difficult situations, you sort of game out what potentially can happen. And I certainly took it into consideration when I was gaming out whether or not to whistleblow.

RS: Well, before you get to the whistleblowing stage, I think you're being too kind to what I personally think are people who should be considered as, or at least charged and examined often with what is criminal behavior. Because ignorance is really not a good defense; when they were called before congressional committees, these knowledgeable people admitted they really didn't understand collateralized debt obligations and credit default swaps. And for people who are not that familiar, you mentioned Glass-Steagall. And what Glass-Steagall was, was one of the, really maybe the most important response of Franklin Delano Roosevelt's democratic administration to the Great Depression. And how did this terrible depression happen, how were the banks so irresponsible. And they decided the key thing was to separate investment banks from commercial bank; investment banks could be high-rollers, private money, you know what you're doing, you have knowledge; and commercial banks where you're basically protecting the assets of ordinary people, they're not knowledgeable, they're trusting your expertise. And eliminating Glass-Steagall eliminated this wall between the two kinds of banking. And the company that you went to observe, Goldman Sachs, was an investment bank. And by the working of that law, they should have been allowed to go belly-up when it turned out they had a lot of these dubious credit default swaps and collateralized debt obligations. To people who don't know, a credit default swap was a phony insurance policy pretending to cover these things, but really there's nothing backing it up. And somehow, in order to save them, they were allowed to announce they could do commercial banking. One could argue, in some ways, the barrier was lifted to help–Citigroup was of course the other one–Citibank. And these are two banks that the government stepped in to help and create this monster. Is it not the case?

CS: Yeah, that's absolutely the case. But there's a couple of things that we need to keep in mind. I mean, I think that we're all sort of educated enough to know that, you know, where there's a will, there's a way. And so if a system can be corrupted, people that are allowed to grab hold of power will corrupt it–insofar and only for so long as we allow those people to have the ability and the power to corrupt it. So ultimately, talking about more or less rules, or different rules, is productive only to a point. Because ultimately what we're talking about here is the haphazard, slap on the wrist, failure to truly enforce the rules and regulations equitably across the system. And that creates the imbalances that you see, for example, in Goldman Sachs, and that you see in the system in general. One of the things that happened as a result of Glass-Steagall coming down was that a lot of the investment bankers were allowed to take over the commercial banks. And those investment bankers knew nothing about banking, and Goldman is a great example of that. I mean, when I arrived three years in after the financial crisis, what was one of the things that was very shocking to me was going into meeting after meeting with Goldman senior management and hearing them lie, doublespeak, and most shockingly of all, insist that they didn't have to comply with the law. And that is a problem. Because a bank that doesn't believe, or management at a bank that doesn't believe they have to comply with the law–you bet they are not supervising their employees correctly, and they're not incentivizing employees correctly in terms of how to do their job. So their behavior is injecting enormous risk into the system

... ... ...

CS: The case was assigned to a judge who was friends with the attorney, I had worked with the attorney that represented the Fed. And then two days before dismissing the case, she revealed that she was married to someone who represented Goldman Sachs for a living. So, yeah, there you go. [Laughs] I mean, it's almost impossible in terms of successfully blowing the whistle. But going back to your question with respect to the recordings and having a say, I think the question that we need to be asking ourselves is this: the Federal Reserve Bank of New York, and the Federal Reserve in general, is tasked with supervising the banks. They have recorders. They have the law on their side. New York is a one person consent state. Banks, private banks, habitually record everything that goes on inside the bank, and they do it for good reason. Because they do it to stop and prevent fraud, among employees and by anybody that walks in the door. Why is the Federal Reserve not recording these executives? Why are they not preserving evidence? I think that is the question that we need to be asking ourselves. You know, what I did was not special. What I did is what the Fed should have been doing.

about:blank

Wall Street's corruption runs deeper than you can fathom | Alternet RS: Well, it was special in that [Laughs]–come on! There have been a lot of witnesses to these crimes, really, and you're the lone voice from within that system that dared to speak up. And as I said, had you not been able to document it with these tapes, you would have been just dismissed as some kind of kook. The book is called Noncompliant: A Lone Whistleblower Exposes the Giants of Wall Street. You know, what is so important is nuance and language and attitude. And the people on Wall Street can affect the protection of manners and complexity. I remember Lawrence Summers testifying in Congress on why you had to get rid of Glass-Steagall, and he said "this is very complicated." And he said the same thing Alan Greenspan said: "These people know what they're doing," and so forth. It wasn't complicated. If the Mafia did it, you'd see right through it in five minutes. Right? You were bundling a bunch of lousy deals together with some good deals, and you didn't even know what was in there, and you sold them, and you got a phony insurance contract to back it up. And yet none of these people have been, gone to jail; very few, one or two have been prosecuted as kind of a scapegoat. But the book is a great story of an American heroine–but this is what everybody should do! [Laughs] I mean, the real issue about whistleblowers like yourself is why did it take you? Where were the other folks? How many people–yeah, go ahead.

CS: Yeah, agreed. I think that's exactly right. You know, there's a number of reasons why I wrote the book. First of all, because I think it's an important contribution to the historical record. As to what is the systemic culture of corruption that exists in these regulatory agencies that are taking our taxpayer dollars and paying themselves handsome salaries to work against the American taxpayers. And then the second reason I wrote it is to incentivize people to come forward with their stories. I wasn't the only person who wanted to blow the whistle in terms of what was going on there. My circumstances were unique, and I sort of go through it in the book, in the sense that I was very lucky, for example, that the Fed refused to even negotiate the mandated settlement that they were supposed to negotiate with me. But they refused, and that allowed me to sue. There's a number of people who have gone through the process and have been silenced by, you know, getting a monetary offer and signing a settlement agreement. And we don't hear about them because they are forced not to talk. What I sort of thought about was, you know, this is just a unique–you know, I didn't ask to be in this situation, but I felt it was my civic duty. Because I do think that we need more people to really think about how in their daily lives, they can stop rewarding bad behavior. We live in a culture where we reward bad behavior, we worship bad behavior, and it's something that needs to stop, you know. Changing the culture, the regulatory culture on the U.S. governmental level is something that's going to take a decade, maybe two. And we need to start now, before things get worse. We are not in the best-off of situations as a country; you know, we have what seems like an economic boom, but it's really just a debt-fueled economic boom that is going to be temporary. And it's very tough to fix these types of cultural issues, system issues, when the hurricane of the next financial crisis hits. We need to fix it now, while we still have a semblance of peace, while we still have the sun shining. And we don't know how much longer that's going to be. I hope it's long enough to fix it. I hope that people are inspired to come forward and to think about how to make a difference in their daily lives. You know, because we need to start thinking of raising children and raising adults that are incentivized in their daily lives to reward good behavior. I think that until we create a critical mass of Americans that in their daily lives refuse to reward bad behavior, we're not going to see real systemic change.

RS: Well, we'll see change. It might not be good change. I mean, you have Donald Trump–and I want to put some oomph behind this, that it's bipartisan. Because one of the–you know, everybody, a lot of people I know are very upset about Donald Trump. He's speaking to what Hillary Clinton calls the "deplorables"; but there's a lot of people hurting out there. And if you read a study done by the Federal Reserve of St. Louis about the consequence of this economic meltdown that was engineered from places like Goldman Sachs, the human cost was incredible. I mean, people lost everything. They weren't bailed out. There was no mortgage relief. They were not helped. The banks were bailed out. And yet no one has been held accountable, and the politicians, democrats and republicans, who supported it, have gotten off scot-free.

CS: Yeah

about:blank

Wall Street's corruption runs deeper than you can fathom | Alternet CS: Yeah, I think you're absolutely right. This is not a democratic problem, this is not a republican problem. This is an American problem with worldwide impact. The U.S. dollar is a reserve currency. The world depends in large part on the American banking system to work. And for it to work, there are these rules, and these rules are there to create trust in the system and to create smooth processes in the system, so that money can be moved and the economy can continue to grow. If the world can no longer trust the American banking system because Americans cannot be trusted to regulate it, they are going to move away from the American banking system. They are going to move away from the U.S. dollar as a reserve currency. And then we are going to find ourselves in the situation that a lot of countries that are not governed by reserve currencies find themselves occasionally, from time to time, whenever they have a crisis. You know, we're talking about countries in Latin America; we're talking about countries in Africa; we're talking about countries in Asia. I hope the book will inspire people to really take a look around and realize, you know, the American consumer, the American worker, is incredibly powerful. You know, these banks cannot survive without our money. We don't have to wait for the government to keep failing us; we don't have to wait for the judiciary to keep failing us; we don't have to wait for lawyers to keep failing us. We choose who we work for. We choose where we keep our money. We can choose to protest. We can choose to call our pension funds and tell them, I want you to stop doing business with Goldman Sachs. It's what we do on a daily basis. When we stand up and we say, I am not going to be banking with these people–they will listen. It's like, they control all of these other checks and balances that were put in place in terms of the government to stop them. So now it's up to us as a people to actually do something about this.

RS: Let me take a break. And I've been talking to Carmen Segarra, who is actually the lone honest person from within the banking system that I know of who really took the story of what these people were doing, and swindling the American people, and fortunately documented it with tape recording–as they document everything; if you call the bank for information, "your conversation will be recorded to make it more efficient"–well, she turned the table on that, had the record. The book is called Noncompliant: A Lone Whistleblower Exposes the Giants of Wall Street. [omission for station break] I'm not going to be able, in the time that I have here, to do justice to this book, because the devil is in the details. I want to talk about some people who did speak up. I mentioned Brooksley Born, who was this brilliant member of the Clinton administration who got pushed out for speaking up. But when the pressure came down after the Great Recession, and the banks had to be questioned, they at Goldman Sachs turned to a Columbia University finance professor, David Beim. And he did a report. He had access to everything, he did this incredible report. We only know about it because it showed up in some footnote somewhere. And by the way, I haven't given enough credit here to the people who have helped break this story. ProPublica, who did a really terrific job on it, and the NPR show This American Life, which really did a great job. So there has been really good reporting. As you pointed out, it was absolutely shameful that Congress did not really take testimony from you; you were there as an observer–I think in a red dress, to be noticed. [Laughs]

CS: Yes. Well, you know, red is the color of martyrs.

RS: And so I want to ask you about that. Before you even went there, this guy David Beim had done a study. And William Dudley, the president of the bank, didn't even respond. He said thank you, they looked at the–and they never responded to the criticisms in that study, which were devastating. Of how the bank was operating.

CS: Yeah, but that's how the Federal Reserve Bank of New York operates. And that's, curiously enough, also how Goldman Sachs operates. They say one thing and do another. If you want to know what they're doing, just flip it, right? I mean, if they're asking for a report, that means that they plan to do nothing about it. And you know, the book sort of walks you through the story of how they played at this game of pretending to clean up the regulatory issues. I mean, the joke really was on us, the new regulators that were brought in from the industry to actually clean up the problems that were there. None of us are there at the Fed anymore. Every single one of those people that I talk about that validated my story, they're gone. And they are gone under different circumstances, some in good standing, some in less good standing, but the point is they're all gone. Because the purpose of bringing us in was not really to change things, it was to ensure that they had a smoke screen and a story to feed the press, that they would print, saying that they had indeed fixed this. And there was nothing else there to see.

about:blank

Wall Street's corruption runs deeper than you can fathom | Alternet RS: We're going to run out of time here, but I want to nail down one–this chain of responsibility. And I had just mentioned New York Fed president William Dudley, who I believe ran into some difficulty; he had ownership in something that they were trading with. But leaving that aside, he replaced Timothy Geithner. And when Goldman Sachs, when this whole banking thing happened, there was no more important individual in this country, in a position to observe it, than Timothy Geithner. He had been in the Clinton administration; he had worked for Robert Rubin and Lawrence Summers in the Clinton administration when they deregulated Wall Street. And he was rewarded for that deregulation, right, by being named to the most important regulatory position, to be head of the New York Fed. And Barack Obama in 2008, as the banking meltdown was happening, gave a speech at Cooper Union, April of 2008, blasting Wall Street. And then, when Hillary Clinton lost the primary, Barack Obama turned to Lawrence Summers and Timothy Geithner, and these people for advice, and he named Timothy Geithner to be his treasury secretary. The guy who at the New York Fed, where you went there to work and to try to supervise Goldman Sachs–he knew everything about this, and told us nothing, and he was rewarded by being made treasury secretary.

CS: When I'm saying, you know, we have to stop rewarding bad behavior, that's an example of what I'm talking about. It's like, we have a culture where we reward people for their bad behavior. And in the Fed it is a systemic problem. And it is a problem that comes from the top down. And when I was at the Fed, Ben Bernanke was head of the Fed; Bill Dudley, as you pointed out, was the head of the New York Fed; and Sarah Dahlgren was his head of supervision. This is a very small world. We're not talking about a lot of people; the culture is top-down, and everybody there just does what these people say, because if they don't they're afraid they're going to lose their jobs. So from their perspective, they have nothing to lose, because they have a bunch of workers that are going to do as they say. And they will do what is in their best corporate interests. I mean, you have Bill Dudley, who was allowed to hold on to a lot of his investments that predated his arrival at the Fed and were held at Goldman Sachs. And you know, when you have somebody who's not forced to really work for the government–as in divesting themselves of their own conflicts and truly taking taxpayer money and doing their job–then you can't expect a good result to come from that. Again, we rewarded bad behavior. And that's why I think, you know, the key here is really about taking a really good look at our daily lives and seeing, who are we rewarding on a regular basis? And we need to stop rewarding that bad behavior.

about:blank

Wall Street's corruption runs deeper than you can fathom | Alternet RS: But I want to challenge what I think is your optimism. And in fact, you are living proof that doing the right thing can be a career-ender. I haven't asked you, I mean, I assume you still have a good career; you're highly talented and competent, and you were, you know, extremely well educated. But you're not being considered to be treasury secretary or something, right? The consequences for you were quite dire, weren't they?

CS: They were. And you know, my career in banking is over on a permanent basis. But I think you sort of point out to, a little bit to my personality, and I hope it comes through in the book; I sort of talk about that fact that I'm just a very resilient person. And I just, I don't like to let the bad guys win. I'd rather go down swinging. So for me, I saw it as an opportunity to do my civic duty and rebuild my life. You know, and I was very lucky to be blessed by so many people who I shared the story to, especially lawyers who were so concerned about what I was reporting, who thought that the Federal Reserve was above this, who thought that the government would not fail us after the financial crisis, and who were livid. And I've been blessed with their support through the process of whistleblowing, and I continue to be blessed by their support even after. I have a husband who was, you know, a real hero of the story in my book, and I have been able to remake my life as a lawyer in private practice. And my clients, you know, God bless them, they trust me to help them. And I wouldn't change what I did for anything. Because I think for me–and I talk about it in the book–I think living a meaningful life is more important than making money. I think for me, making money is important insofar as it pays the bills. But once my bills are paid, it's about having a meaningful life. And I just feel very, very lucky that I have had the life that I've had, that I got to go to a Catholic school that taught me the morals that I believe in. I think that I am who I am, and I think that I would be just as moral if I had grown up Jewish, or if I had grown up a Mormon, or if I had grown up a Protestant. So I feel very blessed that I was exposed to what good values and good behavior are. I decided since I was very little that that's just the way I wanted to live my life, and that to live meaningfully was more important than anything else. And that has driven all of my decisions, and I found the experience to be rewarding. And when people talk to me about how bad things are and how things sort of look like they're never going to turn around, I tell them, no. They will turn around. We just need to believe in ourselves and be our own saviors, and be our own heroes in our own daily lives.

RS: But let me, let me challenge that. And yes, you're an exemplary person. No question. And people should read this book, Noncompliant: A Lone Whistleblower Exposes the Giants of Wall Street. But I want to focus on that word, "lone." Lone whistleblower. These people had the same great education you had at the best schools, OK? They didn't blow the whistle. No, they abetted the crime! They made it possible. They destroyed people like Brooksley Born, who dared challenge it. And the fact of the matter is, you can't expect ordinary people–even myself. You know, I did graduate work in economics, I'm a professor, blah blah blah. But I can tell you, when I went into my bank loans, I didn't know all the details and what they were talking about and everything. I counted on regulation, I counted on government, I counted on accountability, frankly, on the part of these institutions. So my view is, you can't expect ordinary people–that's why we had a distinction between investment banks and commercial banks. Commercial banks are supposed to deal with ordinary people, OK? They're supposed to hold their money, give them a fair interest rate, make loans on their houses, and help them out. And they have to be regulated, because you know, the ordinary person can't be an expert. The failure here is of the educated class. Of the superachievers. And you count on those people, yes, to do the right thing. But money talks. And the fact of the matter is, the people you went to school with, at the Ivy League schools, at the wherever–they sold us all out.

CS: I think you make a good point. But I also think that the problems are systemic and run deeper. I mean, I would point out, for example, just from a personal perspective, when I graduated both college and law school I happened to be one of those that graduated into a recession, twice. There weren't too many jobs. I didn't have too many options. I ended up working in where I ended up working because it was either that or not feed myself. And I think one of the problems that we have that is systemic is that we have allowed capitalism to create such huge imbalances in how we reward people for their daily work. So people are forced to do something that they may not even like, or may not even be good at, because they have no choice. It's a shame, because we're a big enough country, we have a lot of talent, there should be more invisible hand, central planning. This whole system where we are now turning our attention to creating computer programmers is more based on making sure that computer programming becomes a cheap, minimum-wage job where the owners of the computer companies like Apple don't have to overpay like they are doing now for those workers. So I think that there are more systemic issues than we realize. And I agree with you, I think that, you know, we were sold out by the intellectual class. But we still need to figure out–and the intellectuals are the ones who are going to help us–we need to figure out how to fix the system on a larger scale if we are going to rebalance things. And I don't have the monopoly on the answer, on all the answers, you know? I'm just a girl born in Indiana to two Puerto Rican parents, you know? [Laughs] It's not like I have any terms, in any way access to the higher echelons and how that works. But I think that we really do need to think about, in our own ways and in our own lives, how we can sort of convince other people to make the right choices on a daily basis. Because I think that if everybody takes making the right choices seriously, and realizes that we're all in the same boat–you know, we're all Americans, this is going to impact us all–I think that we can, slowly but surely, right the boat and start heading in the right direction.

RS: People should read Noncompliant –it's an important word; they weren't compliant– A Lone Whistleblower Exposes the Giants of Wall Street. And recognize that the problem with modern governance is that the decisions are made by people who don't have our common interest, who are bought off. That money talks. And one reason we have such despair now, and we go for demagogues, and we have such divisive, ugly language and ugly politics, is the so-called civilized, well-educated leaders of our country went for the money and betrayed ordinary people. I'll let you take the last word, and then we'll wrap it up.

CS: Ah, well, thank you. And again, you know, I know that you are sort of [Laughs] thinking about it from the perspective of a hopeless sort of case. But I do think that there is–and I hope people will look at it as the beginning of change. You know, yes, the book is a very sad story; the bad guys do win, for now. But just because they win the battle doesn't mean they're going to win the war. And I refuse to give up hope in the American people, and I refuse to give up hope in the American consumer. I think that we can make a difference if we try. Because I think that when we get the American people–no matter whether they're democrats, republicans, independent–when we get them educated on the topic of finance, when we get them accessible stories, they will have their say. And they matter–we matter. And it's important that they come to the table, otherwise this problem isn't going to get solved.

[Dec 08, 2018] Bill Black Who Said This A Bank Fraud Quiz by Bill Black

Big finance does behave like an organized crime. And should be treated by society as such...
Notable quotes:
"... By Bill Black, the author of The Best Way to Rob a Bank is to Own One, an associate professor of economics and law at the University of Missouri-Kansas City, and co-founder of Bank Whistleblowers United. Jointly published with New Economic Perspectives ..."
Dec 08, 2018 | www.nakedcapitalism.com
By Bill Black, the author of The Best Way to Rob a Bank is to Own One, an associate professor of economics and law at the University of Missouri-Kansas City, and co-founder of Bank Whistleblowers United. Jointly published with New Economic Perspectives

I cannot write many blogs during the fall semesters because I teach four classes (I co-teach one of them). The fall term of instruction at UMKC is now over so I am writing one piece before turning to grading. I have recently done additional research on a topic I know is of great interest -- the prosecution of elite white-collar criminals. I have organized it in the form of a game in which the reader guesses who authored the quoted passage.

Which President described the elite banksters of his era as "charlatans, chiselers and cheats?" Which Vice President criticized prosecutions, enforcement actions, and even safety rules for the elite white-collar criminals of his era in these terms?

But the number of complex regulations is only half the problem. As President [deleted] has repeatedly emphasized, it is also the adversarial and seemingly mindless enforcement methods that really get under people's skins. Business owners are sick of being treated like criminals. They see a government that just doesn't make sense, that charges them with safety violations when no one is in harm's way.

[Note that enforcement action is supposed to be 'adversarial' and that 'business owners' need to be 'treated [as] [not 'like'] criminals' when they are criminals. A safety violation that does not cause injury because no worker is in the unsafe trench when it collapsed should be charged as a safety violation because it is. A well-run company with a strong safety record takes that approach to safety. The government must too.]

Which U.S. Attorney General offered the excuse for refusing to create a national task force to prioritize the prosecution of the elite banksters of his era that the fraudsters were merely "white collar street criminals"? Which U.S. Attorney General explained in these terms why he was working with the regulators because prosecutions of elite banksters require enormous sophistication and prioritization?

[T]hese investigations most often involve complicated paper trails leading to highly sophisticated schemes which disguise illegality under the veneer of legitimate business and financial transactions.

[Note that this AG understood the essential danger that makes 'control frauds' uniquely damaging -- the fact that the CEO finds it far easier to 'disguise illegality' 'under the veneer' of seeming 'legitima[cy].']

Which U.S. President met with the Nation's U.S. Attorneys to emphasize in these terms the criticality of prosecuting elite banksters?

It takes a snake, a cold-blooded snake, to betray the trust and innocence of hard-working people," [deleted] said in a speech to his administration's U.S. attorneys in announcing his effort. "And so, if we have to look under rocks to find these white-collar criminals, then we will leave no stone unturned.

Which U.S. President proclaimed "I did not run for office to be helping out a bunch of fat cat bankers on Wall Street"? Which FBI Director characterized the level of elite fraud in failed insured institutions as 'pervasive' and explained that the fraud problem came from the top in these terms?

The American public relied upon banking institutions and financial institutions being soundly managed by people who were honest. Therefore, it is absolutely essential that this program go forward to the end no matter how long that takes.

He discounted past arguments that Texas' economy was the root cause for the state's financial crisis. "Although it was the general economic downturn in Texas that surfaced the problem, it appears to the FBI as if a pervasive pattern of fraudulent lending activity began much earlier."

Which U.S. President told the Nation's leading bankers "My administration is the only thing between you and the pitchforks"?

[Note that the President was characterizing the American people as a mob out to murder the banksters that caused the financial crisis -- and stressing that his administration would safeguard them from accountability for their crimes.]

Which U.S. Attorney General explained in these terms how he began working with the new regulator the day after he was appointed to ensure the prioritization of the most elite banksters in the ongoing financial crisis they were both confronting?

I met with [deleted] Director of [deleted], the day after he assumed office to map out a joint effort between the regulatory agencies and the Department of Justice to winnow through the mass of referrals that had already been made to ensure that we were focusing upon the most significant cases as our first priority.

Which regulatory agency made the 'mass of [criminal] referrals' the AG was referring to? How many criminal referrals did the agency make in response to its financial crisis? How many felony convictions of individuals did the Department of Justice (DOJ) obtain in 'major' cases in response to these referrals? Which senior law enforcement agency warned in September 2004 that an 'epidemic' of mortgage fraud was developing that would, he predicted, cause a financial 'crisis' if it were not stopped? Which administration "debated for months the advantages and perils of a criminal indictment against HSBC" given an FBI investigation confirming the congressional finding that the bank, between 2001 and 2010, "exposed the U.S. financial system to money laundering [by a leading drug cartel] and terrorist financing risks" [by Saudis]"? The U.S. Attorney General, at the urging of the Fed and the Comptroller of the Currency, refused to indict the bank or its senior officers who committed and profited from tens of thousands of felonies. What U.S. Attorney General testified to Congress in the following terms that the largest banks were too big to prosecute?

I am concerned that the size of some of these institutions becomes so large that it does become difficult for us to prosecute them when we are hit with indications that if you do prosecute, if you do bring a criminal charge, it will have a negative impact on the national economy, perhaps even the world economy.

Under which administration did Scott G. Alvarez, general counsel at the Federal Reserve successfully intervene with the SEC to weaken fraud penalties against some of the world's largest banks? Under which administration did Timothy Geithner, then President of the NY Fed, successfully intervene with then NY Attorney General Cuomo to caution against vigorous prosecution of elite banksters? Did this harm Geithner and Cuomo's careers? Which President unconstitutionally appointed the first Director of the Office of Thrift Supervision -- after being warned that appointing him without the Senate's 'advice and consent' would be unconstitutional? Why did the President do so -- and why did the Senate not protest the action? Which administration ended the career prospects of a top regulator they appointed when he had the audacity to bring an enforcement action against the President's son? Which U.S. Attorney General wrote: "We are presently facing the largest financial disaster in American history grounded in the betrayal of public trust by flagrant self-dealing in 'other people's money'"? Which U.S. Attorney General described the causes of the financial crisis he was investigating "the biggest white-collar swindle in history"?

For bonus points, these questions relate to a non-government party.

Who wrote the following -- and made it public?

"Our savings and loan industry has created the largest mess in the history of U.S. financial institutions," [deleted] said in a letter to the [industry trade association -- the 'league']. "The league responds to the savings and loan mess as Exxon would have responded to the oil spill from the Valdez if it had insisted thereafter on liberal use of whisky by tanker captains." [Deleted] blamed the league for 'constant and successful' lobbying over many years that prevented government regulators from cracking down on S&Ls run by 'crooks and fools' and persuaded regulators to use 'Mickey Mouse' accounting .

"It is not unfair to liken the situation now facing Congress to cancer and to liken the league to a significant carcinogenic agent ."

"Because the League has clearly misled its government for a long time, to the taxpayers' great detriment, a public apology is in order, not redoubled efforts to mislead further."

Answers : (plus the President that appointed the official):

George HW Bush Gore Mukasey (Bush II) Thornburgh (Bush I) George HW Bush Obama William Sessions (Bush II) Obama Thornburgh (Tim Ryan was the OTS Director he worked with) OTS, during the S&L debacle, made > 30,000 criminal referrals (all federal banking agencies combined made fewer than a dozen criminal referrals in response to the Great Financial Crisis) and DOJ obtained > 1,000 felony convictions in cases DOJ defined as 'major.' The FBI (through Chris Swecker) Obama 13. Holder (Obama) Bush II Bush II (No, Cuomo was elected Governor of NY and Obama appointed Geithner as Treasury Secretary) George HW Bush (the unconstitutional appointment was Danny Wall as OTS Director) George HW Bush (Tim Ryan was the OTS Director who brought the enforcement action v. Neil Bush) Thornburg (Bush I) Thornburgh (Bush I) Warren Buffett and Charles Munger (May 30, 1989).

JEHR , December 8, 2018 at 12:57 pm

The mess is caused by deregulation, money in politics, lobbying by the rich, wealth inequality, fraud in the banking system, corruption of corporations, the wealthy hiding taxes off-shore, greed, failure of democratic institutions, etc. In another way, you could say It's the Love of Money. (It is a very long list epitomized by Black's quotations from the highest offices in the land.)

Chauncey Gardiner , December 8, 2018 at 9:35 am

Concise and enlightening summary. Thank you, Bill Black. Should be taught in every high school US History and Civics class in America together with financial and monetary literacy. Interesting how pervasive this behavior has been across so called "leaders" of both legacy political parties and whose names repeatedly appear on the summary list. The damage to the social and political fabric of the nation is incalculable.

[Dec 06, 2018] Social Security benefits will go up in 2019. Find out now how big your check will be

Dec 06, 2018 | finance.yahoo.com

Social Security recipients will get a 2.8 percent increase in 2019, following a cost-of-living adjustment announced by the agency in October.

That marks the biggest hike since 2012, when the cost-of-living adjustment was 3.6 percent .

[Dec 06, 2018] Market Moves Suggest a Recession Is Unavoidable

Notable quotes:
"... In bull markets, everything works. In bear markets, the only thing that really works is short-term government and municipal bonds and cash. Ample opportunity is being given to cut exposure to risk, and it's clear that few people are taking advantage of it. They never do. ..."
Dec 06, 2018 | finance.yahoo.com
(Bloomberg Opinion) -- As a longtime market observer, what I find most interesting about the latest correction in equities has the feeling of inevitability that it will turn into something worse. It wasn't this way in late January, when everyone wanted to buy that dip. It certainly wasn't this way in 2007, when the magnitude of the recession was grossly underestimated.

Even the Federal Reserve is getting into the pessimism. Chairman Jerome Powell signaled last week that a pause in interest-rate hikes might be forthcoming. What's interesting about that is Powell surely knew that such a reference might be interpreted as bowing to pressure from President Donald Trump and yet he did it anyway. In essence, he risked the perception of the Fed's independence probably because he knows the economic data is worsening.

Just about everyone I talk to in the capital markets, including erstwhile bulls, acknowledges that things are slowing down. Yes, the Institute for Supply Management's monthly manufacturing index released earlier this week was strong, but jobless claims are ticking up and I am hearing anecdotal reports of a wide range of businesses slowing down. Even my own business is slowing. Anecdotes aside, oil has crashed, home builder stocks have been crushed, and the largest tech stocks in the world have taken a haircut. If we get a recession from this, it will be a very well-telegraphed recession. Everyone knows it is coming.

A recession is nothing to fear. We have lost sight of the fact that a recession has cleansing properties, helping to right the wrong of the billions of dollars allocated to bad businesses while getting people refocused on investing in profitable enterprises. Stock market bears are so disliked because it seems as though they actually desire a recession and for people to get hurt financially. In a way, they are rooting for a recession because they know that the down part of the cycle is necessary.

There are signs that capital has been incorrectly allocated. In just in the span of a year, there have been three separate bubbles: one in bitcoin, one in cannabis and one in the FAANG group of stocks: Facebook, Apple, Amazon.com, Netflix and Google-parent Alphabet. This is uncommon. I begged the Fed to take the punch bowl away, and it eventually did, and now yields of around 2.5 percent on risk-free money are enough to get people rethinking their allocation to risk.

Yet, I wonder if it is possible to have a recession when so many people expect one. The worst recessions are the ones that people don't see coming. In 2011, during the European debt crisis, most people were predicting financial markets Armageddon. It ended up being a smallish bear market, with the S&P 500 Index down about 21 percent on an intraday basis between July and October of that year. It actually sparked a huge bull market in the very asset class that people were worried about: European sovereign debt. We may one day have a reprise of that crisis, but if you succumbed to the panic at the time, it was a missed opportunity.

But just the other day, the front end of the U.S. Treasury yield curve inverted, with two- and three-year note yields rising above five-year note yields. Everyone knows that inverted yield curves are the most reliable recession indicators. Of course, the broader yield curve as measured by the difference between two- and 10-year yields or even the gap between the federal funds rate and 10-year yields has yet to invert, but as I said before, there is an air of inevitability about it. Flattening yield curves always precede economic weakness. They aren't much good at exactly timing the top of the stock market, but you can get in the ballpark.

I suppose all recessions are a surprise to some extent. If you are a retail investor getting your news from popular websites or TV channels, you might not be getting the whole picture. In the professional community, it is becoming harder to ignore the very obvious warning signs that a downturn is coming. In bull markets, everything works. In bear markets, the only thing that really works is short-term government and municipal bonds and cash. Ample opportunity is being given to cut exposure to risk, and it's clear that few people are taking advantage of it. They never do.

[Dec 03, 2018] Neoliberalism is just a sanitised-sounding expression, to cover-up the fact that what we are really seeing here is re-branded, far-right corporatist ideology

Notable quotes:
"... 'Neoliberalism' is just a sanitised-sounding expression, to cover-up the fact that what we are really seeing here is re-branded, far-right, corporatist ideology. ..."
"... There is a major dividing line. There are those who recognise the abuses of the system and lobby for changes and there are those who lobby for further exploitation. ..."
"... The West became over-indebted when it embraced globalisation which necessarily impoverishes the Middle and Working Classes of the developed nations. A chap called Jimmy Goldsmith warned of this and was widely condemned for it. There is another issue Guardianistas would rather not confront : you can a welfare state or you can have open borders. But you can't have both. ..."
"... Private enterprise is inefficient because at it's heart it rules out cooperation. Being happiest if it's a monopoly, there's nothing a business would like better than wipe out all competition. ..."
"... Right now, the neoliberals think that those in the Far East are the workers and those in the West are the consumers, until the Far East becomes the market and wages so low in the West that they become the workers, unless of course some kind souls decide to invest money in Education, Health and infrastructure in Africa on a huge scale, so we then have Africa as the workers and the far East as the market, and the West, apart from those who own large numbers of shares or business outright, presumably either starve to death or pull themselves up by their bootstraps, and start all over again, inventing and setting up completely new industries, providing the newly universally educated and healthy Chinese and Africans and South Americans haven't done it first. ..."
"... The economic model we have is bankrupt and in its death throes ..."
"... Except it's not. It is still very much alive and growing. ..."
"... deregulated capitalism has failed. That is the product of the last 20 years. The pure market is a fantasy just as communism is or any other ideology. In a pure capitalist economy all the banks of the western world would have bust and indeed the false value "earned" in the preceding 20 years would have been destroyed. ..."
"... "Multinationals need to recognise that paying tax is an investment. Without that tax, their markets will slowly evaporate." However, the gains for the transnational rich are immediate and enormous, while the failure of their markets is slow and, so far, almost entirely painless. ..."
"... Accountants now hold the whip hand in government and business. They know the price of everything but the value of nothing. They advocate selling off industries, outsourcing to low wage economies, zero hours contracts and deregulation (under the bogus campaign line of cutting red tape). ..."
"... Google, Amazon and Apple haven't taught anyone in this country to read. But even though an illiterate market wouldn't be so great for them, they avoid their taxes, because they can , because they are more powerful than governments. ..."
"... If you invent a set of rules that says a country that deficit spends above an arbitrary percentage of its GDP is horribly inefficient and far too high then it should not be a surprise that when that happens, it is described as such. ..."
"... But the basic problem is this: it costs a lot of money to cultivate a market – a group of consumers – and the more sophisticated the market is, the more expensive it is to cultivate them. A developed market needs to be populated with educated, healthy, cultured, law-abiding and financially secure people ..."
"... The economic model we have is bankrupt and in its death throes is gobbling up the last scintilla of surplus that can be extracted from the poor ( anyone not independently wealthy). ..."
Dec 03, 2018 | www.theguardian.com

MysticFish , 8 Jun 2013 04:29

'Neoliberalism' is just a sanitised-sounding expression, to cover-up the fact that what we are really seeing here is re-branded, far-right, corporatist ideology.

"Fascism should more properly be called corporatism because it is the merger of state and corporate power."
- Benito Mussolini

NotAgainAgain -> EllisWyatt , 8 Jun 2013 04:15
@EllisWyatt -

There is a major dividing line. There are those who recognise the abuses of the system and lobby for changes and there are those who lobby for further exploitation.

So on the one hand there are relatively rich philanthropists who are quietly supporting campaigns to redistribute wealth and our abstaining, and on the other you have people arguing for repealing employment legislation.Worst of the lot are people who pretend to care about the poor but then proceed to fill their own boots.

As consequence people like Warren Buffet should perhaps be among the good guys, whilst people like Tony Blair are the worst of lot.

Uncertainty -> RedHectorReborn , 8 Jun 2013 04:09
@RedHectorReborn - The rich have extracted all of the wealth from the wells and is now turning to fracking, regardless of the cost to us all.
thenardiers , 8 Jun 2013 04:08
All very true. The failures of markets are well documented in economics: the tendency towards monopoly, the failure to value social goods etc.

In addition, it is ironic that the arch advocates of the 'free market' came begging ( read lobbying) to their governments insisting upon public financial bailouts for themselves or their counter parties. It was the 'free markets' failure to correctly price 'risk' that was the route of the economic collapse.

As regards access to 'free markets' it seems patently obvious that if you extract the most money from that market (Amazon et al), you should contribute a fair share towards the infrastructure of that market: roads, educations, health care etc.

1nn1t -> EllisWyatt , 8 Jun 2013 04:06

@EllisWyatt - ... we have a real problem with corporations that have a default setting of minimize taxes through ever more complex structures. It can't be beyond the wit of HMRC to reduce the complexity of the tax legislation and make it harder to avoid? The prize is continued access to the UK market

We also have the problem that for half the households in the land the level of welfare and benfits rather than wages is the major determinant of their disposable income and general prosperity.

The welfare code is now comparable in size to the tax code. The tax-benefit affairs of the working poor in the UK are now becoming as complex as those of the companies that employ them.

The welfare rights industry, which is essentially tax-benefit-lawyering for claimants, is now as large and complex as the tax-lawyering industry for companies.

It really is insane that we set the minimum wage so low that it attracts income tax, and then attempt to collect tax from the employing company to fund a tax credit to top up the same low wages that the same company is paying.

marienkaefer , 8 Jun 2013 04:00
The neoliberalism that the IMF still preaches pays no account to any of this. It insists that the provision of work alone is enough of an invisible hand to sustain a market

Does it? where does it say that? An article which as usual blanket condemns "financial institutions" but actually means banks.

gyges1 , 8 Jun 2013 03:59
The West became over-indebted when it embraced globalisation which necessarily impoverishes the Middle and Working Classes of the developed nations. A chap called Jimmy Goldsmith warned of this and was widely condemned for it. There is another issue Guardianistas would rather not confront : you can a welfare state or you can have open borders. But you can't have both.
JamesValencia , 8 Jun 2013 03:59
Most interesting.

Though I'd say private enterprise is capable of building markets - but not of sustaining them. Take books: If few people know how to read, someone will start a fee paying school to teach those who can pay for it. Then books will take off. And that will generate money for some, who'll send their kids to school.

However it will always, inevitably, crash at some point: Business can build up, but will always do it in destructuve cycles - exactly like the brush fires that destroy and regenerate the savannas. As somebright spark once said: Capitalism contains the seeds of it's own destruction, or something along those lines.

And we don't want to live like that - so we have regulation, and the state.And the state fertilises, and safeguards, by cutting the grass, making mulch, and spreading the rich gooey muck all over the nice, green, verdant, state controlled pampa.

The cowboys, now, they prefer no cutting of grass, and letting their cattle chomp away undistrurbed. And now my analogy is starting to wear thin.

The bottom line: Private enterprise is inefficient because at it's heart it rules out cooperation. Being happiest if it's a monopoly, there's nothing a business would like better than wipe out all competition.

Hence, the necessity for state spending, and state regulation, which the private sector is blind to, because it can't look ahead.

Rochdalelass , 8 Jun 2013 03:57
Well said Deborah!

People are members of families, and are employers and workers, who are customers or clients, and part of their local communities and professions and trades and hobbyists/clubs who are large scale wholesale consumers who create the markets that provides employment and income to individuals who are workers. And, and, one big circle.

Right now, the neoliberals think that those in the Far East are the workers and those in the West are the consumers, until the Far East becomes the market and wages so low in the West that they become the workers, unless of course some kind souls decide to invest money in Education, Health and infrastructure in Africa on a huge scale, so we then have Africa as the workers and the far East as the market, and the West, apart from those who own large numbers of shares or business outright, presumably either starve to death or pull themselves up by their bootstraps, and start all over again, inventing and setting up completely new industries, providing the newly universally educated and healthy Chinese and Africans and South Americans haven't done it first.

OK. I was against it for a long time, but go ahead. There's no way of avoiding it. Eat the Rich. Apart from the fact that ultra thin is fashionable, and with all that dieting and exercising, they are the only people who actually get the time for lots of exercise these days, and they'll taste incredibly tough and stringy.

EllisWyatt -> CaptainGrey , 8 Jun 2013 03:56
@CaptainGrey - Ssshhh not on CiF, we all know that capitalism has failed its just that we can't point to a successful alternative model because such a thing has never existed, its just that this time its different and the model I advocate will lead us all to the sunny uplands of utopia.

Obviously there will be a little bit of coercion and oppression to get us to those sunny uplands, but you can't make an omlette etc. plus don't worry that stuff will only happen to "bad people"

CaptainGrey -> emkayoh , 8 Jun 2013 03:55
@emkayoh -

The economic model we have is bankrupt and in its death throes

Except it's not. It is still very much alive and growing. The "alternatives" have crashed and burned save Cuba and North Korea. Capitalism, especially the beneficial capitalism of the NHS, free education etc. has won and countless people have gained as a result.
bluebirds -> CaptainGrey , 8 Jun 2013 03:55
@CaptainGrey - deregulated capitalism has failed. That is the product of the last 20 years. The pure market is a fantasy just as communism is or any other ideology. In a pure capitalist economy all the banks of the western world would have bust and indeed the false value "earned" in the preceding 20 years would have been destroyed.
MylesMackie , 8 Jun 2013 03:55
In the 19th century based on experience the public services became part of the public sector to avoid corruption and corporate blackmail. The neoclassical revolution of the late 20th century has pushed us back to days when elites regarded the state as their property. Democracy was a threat which won out either through the British model or violent revolution. A small elite cannot endure if the majority feel exploited.

The Bilderberg Conference should look to the past and learn from the mistakes committed. Neoclassicism will eventually impoverish them

1nn1t -> UnevenSurface , 8 Jun 2013 03:53

@UnevenSurface - Multinationals need to recognise that paying tax is an investment. Without that tax, their markets will slowly evaporate.

"Multinationals need to recognise that paying tax is an investment. Without that tax, their markets will slowly evaporate." However, the gains for the transnational rich are immediate and enormous, while the failure of their markets is slow and, so far, almost entirely painless.
EllisWyatt -> UnevenSurface , 8 Jun 2013 03:52
@UnevenSurface - I think corporation tax is becoming obsolete given globalization and the increasing dominance of online / global distribution.

Amazon, Starbucks (and to a lesser extent Google) need to have people on the ground in their market, for customer service, distribution, warehouse staff, baristas etc. So they'll pay employer taxes etc.

The question is is that enough? I think we are missing a trick with the UK market due to outdated tax legislation that hasn't really changed in 30 years.

After the US the UK is arguably the most attractive market in the world. Large, homogenous, wealthy with a low propensity to save and a rapid rate of adoption of new technology / products. We need to think about how we can exploit this in relation to corporate taxes because even though I am far from left wing, we have a real problem with corporations that have a default setting of minimise taxes through ever more complex structures.

It can't be beyond the wit of HMRC to reduce the complexity of the tax legislation and make it harder to avoid? The prize is continued access to the UK market

bluebirds , 8 Jun 2013 03:42
Accountants now hold the whip hand in government and business. They know the price of everything but the value of nothing. They advocate selling off industries, outsourcing to low wage economies, zero hours contracts and deregulation (under the bogus campaign line of cutting red tape).

All of these policies will ultimately end up with capitalism destroying itself. Low wage stagnation will result in penniless consumers which results in no growth which results in cuttin wages to maintain shareholder returns which results in penniless consumers etc etc etc. All our institutions are gradually eroded and life for the average citizen will become more and more unpleasant.

Willsmodger , 8 Jun 2013 03:42
Profit share may be a way forward, it's not perfect, companies can effectively use it to freeze wages and benefit from unpaid overtime, that creates unemployment as four people working a couple of hours extra ever day are denying someone else a job, but used in the right way it could ensure people get a share in the wealth they help create.

At the sharp end it's tough, at the company I worked at, all the managers were summoned to a meeting in September and told they had until Christmas to increase turnover and profits, or they would be out of a job.

At the same company, one of my managers complained that a successful manager at another branch was a crook. The CEO replied 'Yes, but he's a crook that makes a million pounds in profit every year'. I wonder how Deborah's article would have gone down with him?

peterfieldman , 8 Jun 2013 03:42
Everything was easier when the U S and Europe ran the world's economies with Bank regulations, currency controls and only the establishment could avoid income, capital gains and IHT taxes and grow wealthy generation after generation. Today there are simply too many players in the global arena and the rules have been torn up. We are in a jungle where greed is rife and only the powerful and corrupt survive, shipping and burying their loot in offshore havens.

We need a new global order with a change of mentality and more morality among the world's politicians, banking and corporate leaders. Unless we end corruption and exploitation of natural resources in the poor nations and a fairer distribution of the economic wealth the world faces economic and social collapse

Febo , 8 Jun 2013 03:41

Google, Amazon and Apple haven't taught anyone in this country to read. But even though an illiterate market wouldn't be so great for them, they avoid their taxes, because they can , because they are more powerful than governments.

Is it beyond the wit of government to close these (perfectly legal) loopholes? Otherwise, what you are asking for is for these companies to make charitible donations to government - nothing wrong with that per se, but let's not hide behind the misleading term 'tax avoidance' - companies are obliged to minimise taxes within the law, face it.

Liquidity Jones -> NicholasB , 8 Jun 2013 03:35
@NicholasB -

It is perfectly clear that in much of the EU public expenditure has been horribly inefficient and far too high

If you invent a set of rules that says a country that deficit spends above an arbitrary percentage of its GDP is horribly inefficient and far too high then it should not be a surprise that when that happens, it is described as such.

Whether that has any basis in reality or, as I suspect, is only relevant within its own ridiculous framework, is surely the question.

NotAgainAgain -> Fachan , 8 Jun 2013 03:32
@Fachan -

Deborah Orr is established writer for the Guardian and Married to a Will Self whose is almost certainly a millionaire. She is one of the rich. The idea that envy is driving her politics is just utterly absurd, and suggests a total lack of reflection.

finnkn , 8 Jun 2013 03:31

But the basic problem is this: it costs a lot of money to cultivate a market – a group of consumers – and the more sophisticated the market is, the more expensive it is to cultivate them. A developed market needs to be populated with educated, healthy, cultured, law-abiding and financially secure people

Not really; Amazon is just as happy to sell us trashy films, multipacks of chocolate, obesity drugs and baseball bats to stove our neighbour's head in. There's certainly an argument to be made that companies should have a duty to invest in the infrastructure that enables their product to be transported, stored etc...but they shouldn't be expected to give a toss if their customers are unhealthy ignoramuses. A market's a market.

NotAgainAgain -> NicholasB , 8 Jun 2013 03:24
@NicholasB -

But some countries manage to do this much more efficiently and effectively than others.

In Europe it would appear to be the Social Democratic Nordic countries and Germany which has very strong employment rights. Korea's economic growth was based on government investment and a degree of protectionism. These are precisely the ideas that neoliberalism opposes.

Liquidity Jones , 8 Jun 2013 03:23
If they had adopted The Keynes Plan at the 1944 Bretton Woods conference then the IMF and the World Bank would never have been set up. We most likely would not have had the euro crisis and the problem of trade imbalances between counties would most likely have gone away.

Now that is what I call 'Keynesian'. Feel free to continue to make up your own definitions though.

kingcreosote , 8 Jun 2013 03:19
Socialism for the 1% with the rest scraping around for the crumbs in an ever more divided world run by The Bilderbergers who play the politicians like puppets.
RedHectorReborn -> emkayoh , 8 Jun 2013 03:18
@emkayoh - I am not sure its in its death throes, I think what we are seeing is capitalism attempting to transform itself again. The success of that transformation will depend on how willing people across the western world to put up with reduced welfare, poverty pay and almost no employment rights. If we say no and make things too hot for the ruling class we have a chance to take control of the future direction of our world, if not then what's the point.
NicholasB , 8 Jun 2013 03:16
This is a strange rant. Everyone agrees that free markets need to be nurtured by appropriate state institutions. But some countries manage to do this much more efficiently and effectively than others. It is perfectly clear that in much of the EU public expenditure has been horribly inefficient and far too high.

There is no contradiction between being in favour of free markets and believing that markets and societies should be nurtured appropriately. We think people should be free and all accept that they should be nurtured.

UnevenSurface , 8 Jun 2013 03:10

So why, exactly, given the huge amount of investment needed to create such a market, should access to it then be "free"?

Corporate taxation is best explained as the license that business pays to access the market -- which is in turn created through the schools, hospitals, roads, etc. that the tax pays for. Unfortunately the new Corporate Social Irresponsibility being acted out by multinationals today neatly avoids paying that license, and sooner or later will damage them. Multinationals need to recognize that paying tax is an investment. Without that tax, their markets will slowly evaporate.

emkayoh , 8 Jun 2013 03:09
The economic model we have is bankrupt and in its death throes is gobbling up the last scintilla of surplus that can be extracted from the poor ( anyone not independently wealthy).

[Dec 03, 2018] Neoliberalism is a modern curse. Everything about it is bad and until we're free of it, it will only ever keep trying to turn us into indentured labourers. It's acolytes are required to blind themselves to logic and reason to such a degree they resemble Scientologists or Jehovah's Witnesses more than people with any sort of coherent political ideology, because that's what neoliberalism actually is... a cult of the rich, for the rich, by the rich... and it's followers in the general population are nothing but moron familiars hoping one day to be made a fully fledged bastard.

Highly recommended!
Notable quotes:
"... What sticks in the neoliberalism craw is that the state provides these services instead of private businesses, and as such "rob" them of juicy profits! The state, the last easy cash cow! ..."
"... Who could look at the way markets function and conclude there's any freedom? Only a neoliberal cult member. They cannot be reasoned with. They cannot be dissuaded. They cannot be persuaded. Only the market knows best, and the fact that the market is a corrupt, self serving whore is completely ignored by the ideology of their Church. ..."
"... when Thatcher and Reagan deregulated the financial markets in the 80s, that's when the trouble began which in turn led to the immense crash in 2008. ..."
"... Neo-liberalism is just another symptom of liberal democracy which is government by oligarchs with a veneer of democracy ..."
"... The state has merged with the corporations so that what is good for the corporations is good for the state and visa versa. The larger and richer the state/corporations are, the more shyster lawyers they hire to disguise misdeeds and unethical behavior. ..."
"... If you support a big government, you are supporting big corporations as well. The government uses the taxpayer as an eternal fount of fresh money and calls it their own to spend as they please. Small businesses suffer unfairly because they cannot afford the shyster lawyers and accountants that protect the government and the corporations, but nobody cares about them. ..."
"... Deborah's point about the illogical demands of neoliberalism are indeed correct, which is somewhat ironic as neoliberalism puts objective rationality at the heart of its philosophy, but I digress... ..."
"... There would not be NHS, free education etc. without socialism; in fact they are socialism. It took the Soviet-style socialism ("statism") 70 years to collapse. The neoliberalistic capitalism has already started to collapse after 30 years. ..."
"... I'm always amused that neoliberal - indeed, capitalist - apologists cannot see the hypocrisy of their demands for market access. Communities create and sustain markets, fund and maintain infrastructure, produce and maintain new consumers. Yet the neolibs decry and destroy. Hypocrites or destructive numpties - never quite decided between Pickles and Gove ..."
"... 97% of all OUR money has been handed over to these scheming crooks. Stop bailing out the banks with QE. Take back what is ours -- state control over the creation of money. Then let the banks revert to their modest market-based function of financial intermediaries. ..."
"... The State can't be trusted to create our money? Well they could hardly do a worse job than the banks! Best solution would be to distribute state-created money as a Citizen's Income. ..."
"... To promote the indecent obsession for global growth Australia, burdened with debt of around 250 billion dollars, is to borrow and pay interest on a further 7 billion dollars to lend to the International Monetary Fund so as it can lend it to poorer nations to burden them with debt. ..."
Dec 03, 2018 | www.theguardian.com
szwalby , 8 Jun 2013 06:03
This private good, public bad is a stupid idea, and a totally artificial divide. After all, what are "public spends"? It is the money from private individuals, and companies, clubbing together to get services they can't individually afford.

What sticks in the neoliberalism craw is that the state provides these services instead of private businesses, and as such "rob" them of juicy profits! The state, the last easy cash cow!

TedSmithAndSon , 8 Jun 2013 06:01
Neoliberalism is a modern curse. Everything about it is bad and until we're free of it, it will only ever keep trying to turn us into indentured labourers. It's acolytes are required to blind themselves to logic and reason to such a degree they resemble Scientologists or Jehovah's Witnesses more than people with any sort of coherent political ideology, because that's what neoliberalism actually is... a cult of the rich, for the rich, by the rich... and it's followers in the general population are nothing but moron familiars hoping one day to be made a fully fledged bastard.

Who could look at the way markets function and conclude there's any freedom? Only a neoliberal cult member. They cannot be reasoned with. They cannot be dissuaded. They cannot be persuaded. Only the market knows best, and the fact that the market is a corrupt, self serving whore is completely ignored by the ideology of their Church.

It's subsumed the entire planet, and waiting for them to see sense is a hopeless cause. In the end it'll probably take violence to rid us of the Neoliberal parasite... the turn of the century plague.

fr0mn0where -> CaptainGrey , 8 Jun 2013 05:51
@CaptainGrey -

"Capitalism, especially the beneficial capitalism of the NHS, free education etc. has won and countless people have gained as a result."

I agree with you and it was this beneficial version of capitalism that brought down the Iron Curtain. Working people in the former Communist countries were comparing themselves with working people in the west and wanted a piece of that action. Cuba has hung on because people there compare themselves with their nearest capitalist neighbor Haiti and they don't want a piece of that action. North Korea well North Korea is North Korea.

Isn't it this beneficial capitalism that is being threatened now though? When the wall came down it was assumed that Eastern European countries would become more like us. Some have but who would have thought that British working people would now be told, by the likes of Kwasi Kwarteng and his Britannia Unchained chums, that we have to learn to accept working conditions that are more like those in the Eastern European countries that got left behind and that we are now told that our version of Capitalism is inferior to the version adopted by the Communist Party of China?

jazzdrum -> bullwinkle , 8 Jun 2013 05:51
@bullwinkle - No , when Thatcher and Reagan deregulated the financial markets in the 80s, that's when the trouble began which in turn led to the immense crash in 2008.
Eddiel899 , 8 Jun 2013 05:51
Neo-liberalism is just another symptom of liberal democracy which is government by oligarchs with a veneer of democracy.

This type of government began in America about 150 years ago with the Rockefellers, Carnegie, J.P. Morgan, Ford etc who took advantage of new inventions, cheap immigrant labour and financial deregulation in finance and social mores to amass wealth for themselves and chaos and austerity for workers.

All this looks familiar again today with new and old oligarchs hiding behind large corporations taking advantage of the invention of the €uro, mass immigration into western Europe and deregulation of the financial "markets" and social mores to amass wealth for a super-wealthy elite and chaos and austerity for workers.

So if we want to see where things went wrong we need only go back 150 years to what happened to America. There we can also see our future?

WilliamAshbless -> CaptainGrey , 8 Jun 2013 05:49
@CaptainGrey

The beneficial capitalism of the NHS, free education etc. has won

Free education and the NHS are state institutions. As Debbie said, Amazon never taught anyone to read. Beneficial capitalism is an oxymoron resulting from your lack of understanding.

cpp4ever -> CaptainGrey , 8 Jun 2013 05:41
@CaptainGrey -

especially the beneficial capitalism of the NHS, free education etc. has won and countless people have gained as a result.

At one and the same time being privatized and having their funding squeezed, a direct result of the neoliberal dogma capitalism of austerity. Free access is being eroded by the likes of ever larger student loans and prescription costs for a start.

ATrueFinn -> SpinningHugo , 8 Jun 2013 05:41
@ SpinningHugo 08 June 2013 10:02am .

Nah. They achieved this by copying the west.

I would not go that far. The Western Capitalist Party is only now getting to be as powerful as CCP and China started the "reforms" in the late 1970s.

succulentpork , 8 Jun 2013 05:36

they avoid their taxes, because they can, because they are more powerful than governments

Let's not get carried away here. Let's consider some of the things governments can do, subject only to a 5 yearly check and challenge:

  1. force people upon pain of imprisonment to pay taxes to them
  2. pay out that tax money to whomever they like
  3. spend money they don't have by borrowing against obligations imposed on future taxpayers without their agreement
  4. kill people in wars, often from the comfort of a computer screen thousands of miles away
  5. print money and give it to whomever they like,
  6. get rid of nation state currencies and replace them with a single, centrally controlled currency
  7. make laws and punish people who break them, including the ability to track them down in most places in the world if they try and run away.
  8. use laws to create monopolies and favour special interests

Let's now consider what power apple have...

- they can make iPhones and try to sell them for a profit by responding to the demands of the mass consumer market. That's it. In fact, they are forced to do this by their owners who only want them to do this, and nothing else. If they don't do this they will cease to exist.

generalelection , 8 Jun 2013 05:26
The state has merged with the corporations so that what is good for the corporations is good for the state and visa versa. The larger and richer the state/corporations are, the more shyster lawyers they hire to disguise misdeeds and unethical behavior.

If you support a big government, you are supporting big corporations as well. The government uses the taxpayer as an eternal fount of fresh money and calls it their own to spend as they please. Small businesses suffer unfairly because they cannot afford the shyster lawyers and accountants that protect the government and the corporations, but nobody cares about them. Remember, that Green Energy is big business, just like Big Pharma and Big Oil. Most government shills have personally invested in Green Energy not because they care about the environment, only because they know that it is a safe investment protected by government for government. The same goes for large corporations who befriend government and visa versa.

... ... ...

finnkn -> NeilThompson , 8 Jun 2013 05:20
@NeilThompson - It's all very well for Deborah to recommend that the well paid share work. Journalists, consultants and other assorted professionals can afford to do so. As a self-employed tradesman, I'd be homeless within a month.
finnkn -> SpinningHugo , 8 Jun 2013 05:17
@SpinningHugo - Interesting that those who are apparently concerned with prosperity for all and international solidarity are happy to ignore the rest of the world when it's going well, preferring to prophesy apocalypse when faced with government spending being slightly reduced at home.
sedan2 -> Fachan , 8 Jun 2013 05:11
@Fachan -

Dont see a lot of solutions in this article - as long as our sentiments revolve around envy of the rich, we wont get very far

Yeah, there actually wasn't anything in this article which even smelled of "envy of the rich". Read it again.

KingOfNothing -> 1nn1t , 8 Jun 2013 05:03
@1nn1t - That is a point which just isn't made enough. This is the first group of politicians for whom a global conflict seems like a distant event.

As a result we have people like Blair who see nothing wrong with invading countries at a whim, or conservatives and UKIP who fail to understand the whole point of the European Court of Human Rights.

They seem to act without thought of our true place in the world, without regard for the truly terrible capacity humanity has for self destruction.

REDLAN1 , 8 Jun 2013 05:03
Deborah's point about the illogical demands of neoliberalism are indeed correct, which is somewhat ironic as neoliberalism puts objective rationality at the heart of its philosophy, but I digress...

The main problem with replacing neoliberalism with a more rational, and fairer system, entails that people like Deborah accept that they will be less wealthy. And that my friends is the main problem. People like Deborah, while they are more than happy to point the fingers at others, are less than happy to accept that they are also part of the problem.

(Generalisation Caveat: I don't know in actuality if Deborah would be unhappy to be less wealthy in exchange for a fairer system, she doesn't say)

Herbolzheim , 8 Jun 2013 04:49
Good critique of conservative-neoliberalism, unless you subscribe to it and subordinate any morals or other values to it. She mentions an internal tension and I think that's because conservatism and neoliberal market ideology are different beasts.
NotAgainAgain -> CaptainGrey , 8 Jun 2013 04:47
@CaptainGrey -

There are different models of capitalism quite clearly the social democratic version in Scandinavia or the "Bismarkian" German version have worked a lot better than the UKs.

DavidPavett , 8 Jun 2013 04:45

Yet, mealy-mouthed and hotly contested as this minor mea culpa is, it's still a sign that financial institutions may slowly be coming round to the idea that they are the problem.

How is it a sign of that? We are offered no clues.

What they don't seem to acknowledge is that the merry days of reckless lending are never going to return;

Try reading a history of financial crashes to dislodge this idea.

... even if they do, the same thing will happen again, but more quickly and more savagely.

This may or may not be true but here it is mere assertion.

The IMF exists to lend money to governments, so it's comic that it wags its finger at governments that run up debt.

At this point I start to have real doubts as to whether Deborah Orr has actually read even the Executive Summary of the Report this article is ostensibly a response to.

All the comments that follow about the need for public infrastructure, education, regulated markets and so on are made as if they were a criticism of the IMF and yet the IMF says many of those same things itself. The IMF position may, of course, be contradictory - but then that is something that would need to be demonstrated. It seems that Deborah has not got beyond reading a couple of Guardian articles on the issues she discusses and therefore is in no position to do this.

Thus, for example in its review of world problems of Feb 2013 the IMF comments favorably that in Bangladesh in order to boost competitiveness

Efforts are being made to narrow the skills gap with other countries in the region, as the authorities look to take full advantage of Bangladesh's favorable demographics and help create conditions for more labor-intensive led growth. The government is also scaling up spending on education, science and technology, and information and communication technology.

Which seems to be the sort of thing Deborah Orr is calling for. She should spend a little time on the IMF website before criticising the institution. It is certainly one that merits much criticism - but it needs to be informed.

And the solution to the problems? For Deborah Orr the response

... from the start should have been a wholesale reevaluation of the way in which wealth is created and distributed around the globe, a "structural adjustment", as the philosopher John Gray has said all along.

Does anyone have any idea what this is supposed to mean? There are certainly no leads on this in the link given to "the philosopher" John Gray. And what a strange reference that is. John Gray, in his usual cynical mode, dismisses the idea of progress being achieved by the EU. But then I suppose that is consistent from a man who dismisses the idea of progress itself.

... Conservative neoliberalism is entirely without logic.

The first step in serious political analysis is to understand that the people one opposes are not crazy and are not devoid of logic. If that is not clearly understood then all that is left is the confrontation of assertion and contrary assertion. Of course Conservative neoliberalism has a logic. It is one I do not agree with but it is a logic all the same.

The neoliberalism that the IMF still preaches pays no account to any of this [the need for public investment and a recognition of the multiple roles that individuals have].

Wrong again.

It insists that the provision of work alone is enough of an invisible hand to sustain a market.

And again.

This stuff can't be made up as you go along on the basis of reading a couple of newspaper articles. You actually have to do some hard reading to get to grip with the issues. I can see no signs of that in this piece.

EllisWyatt -> NotAgainAgain , 8 Jun 2013 04:43
@NotAgainAgain - We are going off topic and that is in no small part down to my own fault, so apologies. Just to pick up the point, I guess my unease with the likes of Buffet, Cooper-Hohn or even the wealthy Guardian columnists is that they are criticizing the system from a position of power and wealth.

So its easy to advocate change if you feel that you are in the vanguard of defining that change i.e. the reforms you advocate may leave you worse off, but at a level you feel comfortable with (the prime example always being Polly's deeply relaxed attitude to swingeing income tax increases when her own lifestyle will be protected through wealth).

I guess I am a little skeptical because I either see it as managed decline, a smokescreen or at worst mean spiritedness of people prepared to accept a reasonable degree of personal pain if it means other people whom dislike suffer much greater pain.

Again off topic so sorry about that

NotAgainAgain -> mountman , 8 Jun 2013 04:43
@mountman -

The critical bit is this

"There is a clear legal basis in Germany for the workplace representation of employees in all but the very smallest companies. Under the Works Constitution Act, first passed in 1952 and subsequently amended, most recently in 2001, a works council can be set up in all private sector workplaces with at least five employees."

http://www.worker-participation.eu/National-Industrial-Relations/Countries/Germany/Workplace-Representation

The UK needs to wake up to the fact that managers are sometimes inept or corrupt and will destroy the companies they work for, unless their are adequate mechanisms to hold poor management to account.

ATrueFinn -> SpinningHugo , 8 Jun 2013 04:42
@ SpinningHugo 08 June 2013 9:26am

More people lifted out of poverty in China over the last 25 years than the entire population of South America.

Maybe we need the Chinese Communist Party to take over the world?

ATrueFinn -> CaptainGrey , 8 Jun 2013 04:40
@ CaptainGrey 08 June 2013 8:43am

Capitalism, especially the beneficial capitalism of the NHS, free education etc. has won

There would not be NHS, free education etc. without socialism; in fact they are socialism. It took the Soviet-style socialism ("statism") 70 years to collapse. The neoliberalistic capitalism has already started to collapse after 30 years.

irishaxeman , 8 Jun 2013 04:40
I'm always amused that neoliberal - indeed, capitalist - apologists cannot see the hypocrisy of their demands for market access. Communities create and sustain markets, fund and maintain infrastructure, produce and maintain new consumers. Yet the neolibs decry and destroy. Hypocrites or destructive numpties - never quite decided between Pickles and Gove, y'see.
EllisWyatt -> JamesValencia , 8 Jun 2013 04:38
@JamesValencia - Actually on reflection you are correct and I was wrong in my attack on the author above. Having re-read the article its a critique of institutions rather than people so my points were wide of the mark.

I still think that well heeled Guardian writers aren't really in a position to attack the wealthy and politically connected, but I'll save that for a thread when they explicitly do so, rather than the catch all genie of neoliberalism.

bullwinkle -> bluebirds , 8 Jun 2013 04:38
@bluebirds -

@CaptainGrey - deregulated capitalism has failed. That is the product of the last 20 years. The pure market is a fantasy just as communism is or any other ideology. In a pure capitalist economy all the banks of the western world would have bust and indeed the false value "earned" in the preceding 20 years would have been destroyed.

If the pure market is a fantasy, how can deregulated capitalism have failed? Does one not require the other? Surely it is regulated capitalism that has failed?

snodgrass , 8 Jun 2013 04:36
97% of all OUR money has been handed over to these scheming crooks. Stop bailing out the banks with QE. Take back what is ours -- state control over the creation of money. Then let the banks revert to their modest market-based function of financial intermediaries.

The State can't be trusted to create our money? Well they could hardly do a worse job than the banks! Best solution would be to distribute state-created money as a Citizen's Income.

EllisWyatt -> 1nn1t , 8 Jun 2013 04:35
@1nn1t - Some good points, there is a whole swathe of low earners that should not be in the tax system at all, simply letting them keep the money in their pocket would be a start.

Second the minimum wage (especially in the SE) is too low and should be increased. Obviously the devil is in the detail as to the precise rate, the other issue is non compliance as there will be any number of businesses that try and get around this, through employing people too ignorant or scared to know any better or for family businesses - do we have the stomach to enforce this?

Thirdly there is a widespread reluctance to separate people from the largesse of the state, even at absurd levels of income such as higher rate payers (witness child tax credits). On the right they see themselves as having paid in and so are "entitled" to have something back and on the left it ensures that everyone has a vested interest in a big state dipping it hands into your pockets one day and giving you something back the next.

Broken system

1nn1t -> Uncertainty , 8 Jun 2013 04:34

@Uncertainty - Which is why the people of the planet need to join hands.

The only group of people in he UK to see that need were the generation that faced WW2 together. It's no accident that, joining up at 18 in 1939, they had almost all retired by 1984.
BruceMullinger , 8 Jun 2013 04:31
To promote the indecent obsession for global growth Australia, burdened with debt of around 250 billion dollars, is to borrow and pay interest on a further 7 billion dollars to lend to the International Monetary Fund so as it can lend it to poorer nations to burden them with debt.

It is entrapment which impoverishes nations into the surrender of sovereignty, democracy and national pride. In no way should we contribute to such economic immorality and the entire economic system based on perpetual growth fuelled by consumerism and debt needs top be denounced and dismantled. The adverse social and environmental consequence of perpetual growth defies all sensible logic and in time, in a more responsible and enlightened era, growth will be condemned.

[Dec 03, 2018] The banks put their own short-term interests above their long-term interests of financial stability

Notable quotes:
"... Socialism for the 1% with the rest scraping around for the crumbs ..."
"... Don't you think a global recession and massive banking collapse should be classified as 'crash and burn'? ..."
"... It's one of the major contradictions of modern conservatism that the raw, winner-takes-all version of capitalism it champions actually undermines the sort of law abiding, settled communities it sees as the societal ideal. ..."
"... Rich people have benefited from this more than most: they need workers trained by a state-funded education system and kept healthy by a state-funded healthcare system; they depend on lending from banks rescued by the taxpayer; they rely on state-funded infrastructure and research, and – like all of us – on a society that does not collapse. Whether they like it or not, they would not have made their fortunes without the state spending billions of pounds ..."
"... You have to be careful when you take on the banksters. Abe Lincoln John Kennedy and Hitler all tried or (in Kennedy's case planned) on the issuance of money via the state circumventing the banks. All came to a sticky end. No wonder politicians run scared of them. ..."
"... Now, that's a novel interpretation! The working people in "Communist" countries had free healthcare and education, guaranteed employment and heavily subsidized housing. The reason we have healtcare and free education is that working people in Capitalist countries would otherwise have revolted to have Socialism. In the absence of competition, there is no benefit for the Capitalist to be "beneficial". ..."
"... The banks could plainly see that they were stoking a bubble, but chose not to pass on the increased risk of lending to consumers by raising their interest rates and coolling the market. Why? Because they were making a handsome short-term profit. The banks put their own short-term interests above their long-term interests of financial stability. When the house of cards came tumbling down - we bailed them out. It was idiotic banks who failed to properly control their risk of lending that caused the crash, not interventionist politicians. ..."
Jun 08, 2013 | www.theguardian.com
JFBridge , 8 Jun 2013 08:21
Virtually everyone knows what went wrong, with the exception only of uncontrollable ultra-right neoliberal buffs who try and put the blame on everyone else with various out and out lies and deceptions, and they are thankfully petering and dying out by the day, including deluded contributors to CiF, who seem to be positively and cruelly reveling in the suffering their beloved thesis has and is causing.

So, now that we know the symptoms, what about the cure? The coalition want to make the poor and vulnerable suffer even more than they have done over the last three decades or so while still refusing to clamp down and wholly regulate the bankers, corporates and free markets, who still hold too much power like the unions in the 70's,while Ed Miliband and 'One Nation Labour' merely suggest in mild, diffident terms about financial regulation and a more balanced economy, while still not wanting to upset those nice bankers too much.

It's time they were upset though, and made to pay for their errors and recklessness; while they still award themselves bonuses and take advantage of Gideon's recent tax cut, the poor and vulnerable who were never responsible for the long recession now have money taken off them and struggle to feed, pay bills and clothe themselves and their families, supported by the Daily Fail and co. who look on them as scrounging, lazy, criminal, violent, drunken, drug addicted and promiscuous sub-humans, who deserve their fate.

There's quite a few in the middle/professional classes (many bankers) if they didn't know, but they don't bother with such, do they?

MatthewBall -> emkayoh , 8 Jun 2013 08:20
@emkayoh -

The economic model we have is bankrupt and in its death throes

I am not sure if this is true. We have the same economic system (broadly speaking, capitalism) as nearly every country in the world, and the world economy is growing at a reasonable rate, at around 3-4% for 2013-14 (see http://www.imf.org/external/pubs/ft/weo/2013/01/pdf/c1.pdf for more details).

We perceive a problem in (most of) Europe and North America because our economies are growing more slowly than this, and in some cases not at all. The global growth figure comes out healthy because of strong growth in the emerging countries, like China, Brazil and India, who are narrowing the gap between their living standards and ours. So, the world as a whole isn't broken, even if our bit of it is going through a rough patch.

This is pertinant to a discussion of Deborah Orr's article, because in it she calls for global changes:

The response from the start should have been a wholesale reevaluation of the way in which wealth is created and distributed around the globe, a "structural adjustment", as the philosopher John Gray has said all along.

My point is: I don't think this argument will work, because I don't see why the emerging countries would want wholesale change to what, for them, is quite a successful recipe, just because it going down badly in Europe. Instead, European countries need to do whatever it takes to fix their banking systems; but also learn to live within their means, and show some more of the discipline and enterprise that made them wealthy in the first place.

jazzdrum -> Uncertainty , 8 Jun 2013 08:12
@Uncertainty - I`m not defending philanthropy, i am saying in answer to some personal attacks on Miss Orr below the line, that her status as either rich or poor is irrelevant, it is her politics that count .
Tony Benn and Polly Toynbee both receive much abuse in this manner on Cif.
00000010 -> colonelraeburn , 8 Jun 2013 08:10
@colonelraeburn - You really are under the quaint illusion you are in a democracy...
MickGJ -> kingcreosote , 8 Jun 2013 08:08

@kingcreosote - Socialism for the 1% with the rest scraping around for the crumbs

And yet the rest have more crumbs than under any other conceivable system. Look at the difference that even limited market liberalisation has made to poverty in China. No loaf, no crumbs. You can always throw the loaf out of the window if you don't like the inequality and then no-one can have anything.

That's fair, isn't it?

Uncertainty -> jazzdrum , 8 Jun 2013 07:57
@jazzdrum - I don't have much time for those rich who feel guilty about their greed and do 'charity' to salve their souls. Oh and get a Knighthood as a result.

The more honest giver is the person who gives of what little they have in their purse and go without as a result. Not a tax dodge re-branded as philanthropy.

Also, such giving from the rich often has strings and may be tailored to what they think are the 'deserving poor'. I don't like that either.

Uncertainty -> CaptainGrey , 8 Jun 2013 07:54
@CaptainGrey - That is not capitalism. You cannot point to the benefits of socialism and call it capitalism.

Don't you think a global recession and massive banking collapse should be classified as 'crash and burn'?

liberalcynic -> Herbolzheim , 8 Jun 2013 07:52
@Herbolzheim - It's one of the major contradictions of modern conservatism that the raw, winner-takes-all version of capitalism it champions actually undermines the sort of law abiding, settled communities it sees as the societal ideal.
Rainborough , 8 Jun 2013 07:51
"Why, you have to ask yourself, is this vast implausibility, this sheer unsustainability, not blindingly obvious to all?"

- asked the journalist employed by an organ of the capitalist press, with an implausible air of puzzlement.

liberalcynic -> szwalby , 8 Jun 2013 07:50
@szwalby -

The state, the last easy cash cow!

Damn, you've just revealed Richard Branson's secret business plan.
AndyPerry , 8 Jun 2013 07:39
More and more people are beginning to understand this as a fundamentally political problem ( ref. @XerXes1369). The 'left' prefers to concentrate on the role of a financial elite (which is supposed to be exerting some kind of malign supernatural force on the state), to divert attention from what mainstream 'left' poltics in this society has turned out to be.
szwalby -> colonelraeburn , 8 Jun 2013 07:26
@colonelraeburn -

When the state is taking over 60% of the income of even those on minimum wages we se how, from the very top to the very bottom, that the state is the problem.

It's become a monster that will destroy us all.

I would query where you get these figures from, but where it not for the state, do you really think that somebody on the minimum wage, keeping 100% of their wages, would be able to afford, out of these wages, health care, schooling for their children, infrastructure maintenance, their own police force and army, their own legal system? This from an article in the Independent:

Rich people have benefited from this more than most: they need workers trained by a state-funded education system and kept healthy by a state-funded healthcare system; they depend on lending from banks rescued by the taxpayer; they rely on state-funded infrastructure and research, and – like all of us – on a society that does not collapse. Whether they like it or not, they would not have made their fortunes without the state spending billions of pounds.

So the state, although not perfect benefit all of us, get over it!
outragedofacton , 8 Jun 2013 07:23
You have to be careful when you take on the banksters. Abe Lincoln John Kennedy and Hitler all tried or (in Kennedy's case planned) on the issuance of money via the state circumventing the banks. All came to a sticky end. No wonder politicians run scared of them.
CaptainGrey -> WilliamAshbless , 8 Jun 2013 07:04
@WilliamAshbless -

Free education and the NHS are state institutions. As Debbie said, Amazon never taught anyone to read. Beneficial capitalism is an oxymoron resulting from your lack of understanding.

Yes they are state institutions and the tax system should be changed to prevent Amazon et al from avoiding paying their fair share. But beneficial capitalism is not an oxymoron, it is alive and present in virtually every corner of the world. Rather than accuse me of not understanding, I think you would do well to take the beam out of your eye.
ATrueFinn -> fr0mn0where , 8 Jun 2013 07:02
@ fr0mn0where 08 June 2013 10:51am

I agree with you and it was this beneficial version of capitalism that brought down the Iron Curtain. Working people in the former Communist countries were comparing themselves with working people in the west and wanted a piece of that action.

Now, that's a novel interpretation! The working people in "Communist" countries had free healthcare and education, guaranteed employment and heavily subsidized housing. The reason we have healtcare and free education is that working people in Capitalist countries would otherwise have revolted to have Socialism. In the absence of competition, there is no benefit for the Capitalist to be "beneficial".

s0lar1 -> colonelraeburn , 8 Jun 2013 06:33
@colonelraeburn -

The banks couldn't stop property hyperinflation, at 20% a year for well over a decade.

The banks could plainly see that they were stoking a bubble, but chose not to pass on the increased risk of lending to consumers by raising their interest rates and coolling the market. Why? Because they were making a handsome short-term profit. The banks put their own short-term interests above their long-term interests of financial stability. When the house of cards came tumbling down - we bailed them out. It was idiotic banks who failed to properly control their risk of lending that caused the crash, not interventionist politicians.

[Dec 03, 2018] The classic form of neoliberal corruption: The rotating door betweens banks and intelligence agencies brass

This is the key feature of modern National Security State. Note where Mueller was after his retirement and before becoming the Special Procecutor.
Dec 03, 2018 | discussion.theguardian.com

MysticFish -> gbru2505 , 8 Jun 2013 16:23

@gbru2505 -

Last week there was a story where HSBC have taken on a senior ex-MI5 person to shore up their money laundering 'problems'. They're being fined over a billion dollars by the fed for taking blood money from murderers, drug dealers and corrupt politicians.

Not the Security Services' Director General by any chance?

-- In a filing to the Bermuda Stock Exchange ("BSX"), HSBC Holdings plc (Ticker: HSBC.BH), announced the appointment of Sir Jonathan Evans to the Board of Directors.

The filing stated:

Sir Jonathan Evans (55) has been appointed a Director of HSBC Holdings plc with effect from 6 August 2013. He will be an independent non-executive Director and a member of the Financial System Vulnerabilities Committee.

Sir Jonathan's career in the Security Service spanned 33 years, the last six of which as Director General. During his career Sir Jonathan's experience included counter-espionage, protection of classified information and the security of critical national infrastructure. His main focus was, however, counter-terrorism, both international and domestic including, increasingly, initiatives against cyber threats. As Director General he was a senior advisor to the UK government on national security policy and attended the National Security Council.

He was appointed Knight Commander of the Order of the Bath (KCB) in the 2013 New Year's Honours List and retired from the Service in April 2013.

http://www.bsx.com/NewsArticle.asp?articleID=1100794622

gbru2505 , 8 Jun 2013 16:13
I think there's some really good points in the article.

Last week there was a story where HSBC have taken on a senior ex-MI5 person to shore up their money laundering 'problems'. They're being fined over a billion dollars by the fed for taking blood money from murderers, drug dealers and corrupt politicians.

Their annual fee for this guy with 20 years experience to tackle a billion dollar fine and the disfunction in their organisation? A lousy 100 k. Fee to UK for training him? 0.

Ridiculous! It should have been 10 times that for him and a finders fee of perhaps 10 million to the state.

Realistically, the state has NO clue about it's real value, or the real value of the UK population. And the example above, I think, demonstrates banks' attitude to the global demand that they clean up their act. We neef to take this lot to the cleaners before the stench gets any worse.

[Nov 17, 2018] Goldman's reputation

Notable quotes:
"... @HenryAWallace ..."
Nov 17, 2018 | caucus99percent.com

@HenryAWallace

"Reputationally, it is a disaster for Goldman,"

After you posted this I did a Google search, and guess what I found ?

'Great vampire squid' no longer -- Goldman Sachs has finally rehabbed its reputation, 10 years after the financial crisis

That's literally the headline of the article. No tongue-in-cheek.

[Nov 17, 2018] Goldman Sachs CEO is "personally outraged" at criminal behavior in his bank

I guess he thinks Lloyd Blankfein god is a real greedy thief that would screw people for a dollar.
Nov 17, 2018 | caucus99percent.com
disreputable behavior in his bank.

... ... ...

Ah, yes. Goldman Sachs is famous for their "good work and integrity".

The US Department of Justice (DOJ) has said about $4.5 billion was misappropriated from 1MDB, including some money that Goldman Sachs helped raise, by high-level officials of the fund and their associates from 2009 through 2014.

US prosecutors filed criminal charges against 2 former Goldman Sachs bankers earlier this month. One of them, Tim Leissner, pleaded guilty to conspiracy to launder money and conspiracy to violate the Foreign Corrupt Practices Act.

I'm sure it was just a "few bad apples", like Goldman Sachs's Ex-CEO Lloyd Blankfein , who was personally involved in the transaction.
You might remember Lloyd from his doing "God's Work" .

[Oct 25, 2017] When will Trump voters realize they have been had

Oct 25, 2017 | www.defenddemocracy.press

See if you can put it all together from the resumes of those in President-elect Donald Trump's closest political circle so far:

  1. Treasury secretary nominee Steven Mnuchin: Goldman Sachs.
  2. Chief strategist Steve Bannon: Goldman Sachs .
  3. Transition adviser Anthony Scaramucci: Goldman Sachs.
  4. Commerce secretary nominee Wilbur Ross: Rothschild & Co.
  5. Possible budget director Gary Cohn: Goldman Sachs.

[Oct 24, 2017] Goldman Sachs ruling America by Gary Rivlin, Michael Hudson

Highly recommended!
Notable quotes:
"... Cohn was there to offer his views about jobs and the economy. But, like the man he was there to meet, he was at heart a salesman. ..."
"... Cohn, brash and bold, wired to attack any moneymaking opportunity, pitched a fix that would put Wall Street firms at the center: Private-industry partners could help infrastructure get fixed, saving the federal government from going deeper into debt. The way the moment was captured by the New York Times , among other publications , Trump was dumbfounded. "Is this true?" he asked. Was a trillion-dollar infrastructure plan likely to increase the deficit by a trillion dollars? Confronted by nodding heads, an unhappy president-elect said, "Why did I have to wait to have this guy tell me?" ..."
"... Within two weeks, the transition team announced that Cohn would take over as director of the president's National Economic Council. ..."
"... The conflicts between the two men were striking. Cohn ran a giant investment bank with offices in financial capitals around the globe, one deeply committed to a world with few economic borders. Trump's nationalist campaign contradicted everything Goldman Sachs and its top executives represented on the global stage. ..."
"... Even before Scaramucci, Sen. Elizabeth Warren, D-Mass., had joked that enough Goldman alum were working for the Trump administration to open a branch office in the White House. ..."
"... "There was a devastating financial crisis just over eight years ago," Warren said. "Goldman Sachs was at the heart of that crisis. The idea that the president is now going to turn over the country's economic policy to a senior Goldman executive turns my stomach." Prior administrations often had one or two people from Goldman serving in top positions. George W. Bush at one point had three. At its peak, the Trump administration effectively had six. ..."
"... There are also striking similarities in their business histories. Both have a knack for weathering scandals and setbacks and coming out on top. Trump has filed for bankruptcy four times, started a long list of failed businesses (casinos, an airline, a football team, a steak company), but managed, through his best-selling books and highly rated reality TV show, to recast himself as the world's greatest businessman. During Cohn's tenure as president, Goldman Sachs faced lawsuits and federal investigations that resulted in $9 billion in fines for misconduct in the run-up to the subprime meltdown. Goldman not only survived but thrived, posting record profits -- and Cohn was rewarded with handsome bonuses and a position at the top of the new administration. ..."
"... Like any publicly traded company, there would now be pressure on Goldman Sachs to make its quarterly numbers and "maximize shareholder value." Discarding the partner model also meant the loss of a valuable restraint on risk-taking and bad behavior. Under the old system, any losses or fines came out of the partners' pockets ..."
"... Under Cohn, the firm aggressively moved into the subprime mortgage market, using Goldman's own money and that of its customers to help stoke the housing bubble. ..."
"... In just three years, Goldman Sachs had increased its trading volume by a factor of 50, which the Wall Street Journal attributed to "Cohn's successful push to rev up risk-taking and use of Goldman's own capital to make a profit" -- what the industry calls proprietary trading, or prop trading. ..."
"... "He reshaped the culture of the mortgage department into more of a trading environment." ..."
"... With Blankfein and Cohn at the top, the transformation of Goldman Sachs was complete. By 2009, investment banking had shrunk to barely 10 percent of the firm's revenues. Richard Marin, a former executive at Bear Stearns, a Goldman competitor that wouldn't survive the mortgage meltdown, saw Cohn as "the root of the problem." Explained Marin, "When you become arrogant in a trading sense, you begin to think that everybody's a counterparty, not a customer, not a client. And as a counterparty, you're allowed to rip their face off." ..."
"... Cohn was a member of Goldman's board of directors during this critical time and second in command of the bank. At that point, Cohn and Blankfein, along with the board and other top executives, had several options. They might have shared their concerns about the mortgage market in a filing with the SEC, which requires publicly traded companies to reveal "triggering events that accelerate or increase a direct financial obligation" or might cause "impairments" to the bottom line. They might have warned clients who had invested in mortgage-backed securities to consider extracting themselves before they suffered too much financial damage. At the very least, Goldman could have stopped peddling mortgage-backed securities that its own mortgage trading desk suspected might soon collapse in value. Instead, Cohn and his colleagues decided to take care of Goldman Sachs. ..."
"... At Goldman Sachs, Cohn was known as a hands-on boss who made it his business to walk the floors, talking directly with traders and risk managers scattered throughout the firm. "Blankfein's role has always been the salesperson and big-thinker conceptualizer," said Dick Bove, a veteran Wall Street analyst who has covered Goldman Sachs for decades. "Gary was the guy dealing with the day-to-day operations. Gary was running the company." While making his rounds, Cohn would sometimes hike a leg up on a trader's desk, his crotch practically in the person's face. ..."
"... At 6-foot- 2, bullet-headed and bald with a heavy jaw and a fighter's face, Cohn cut a large figure inside Goldman. Profiles over the years would describe him as aggressive, abrasive, gruff, domineering -- the firm's "attack dog." He was the missile Blankfein launched when he needed to deliver bad news or enforce discipline. Cohn embodied the new Goldman: the man who would run through a brick wall if it meant a big payoff for the bank. ..."
"... The biggest threat to Goldman was the economic health of the American International Group. ..."
"... Goldman and its clients were looking at multibillion-dollar hits to their bottom line -- a potentially fatal blow. ..."
"... But as Goldman learned a century ago, it pays to have friends in high places. The day after Lehman went bankrupt, the Bush administration announced an $85 billion bailout of AIG in return for a majority stake in the company. ..."
"... Once free of government interference, the Goldman board (which included Cohn himself) paid him a $9 million bonus in 2009 and an $18 million bonus in 2010. ..."
"... Yet the once venerated firm was now the subject of jokes on the late-night talk shows. David Letterman broadcast a "Goldman Sachs Top 10 Excuses" list (No. 9: "You're saying 'fraud' like it's a bad thing."). ..."
"... After news leaked that the firm might pay its people a record $16.7 billion in bonuses in 2009, even President Barack Obama, for whom the firm had been a top campaign donor, began to turn against Goldman, telling " 60 Minutes ," "I did not run for office to be helping out a bunch of fat-cat bankers on Wall Street." ..."
"... The firm finally acknowledged that it had failed to conduct basic due diligence on the loans its was selling customers and, once it became aware of the hazards, did not disclose them. ..."
"... "Gary was the tip of the spear for Goldman to beat back regulatory reform," said Kelleher, the financial reform lobbyist. "I used to pass him going into different agencies. They brought him in when they wanted the big gun to finish off, to kill the wounded." ..."
"... Yet defanging the Volcker Rule remained the firm's top priority. Promoted by former Fed Chair Paul Volcker, the rule would prohibit banks from committing more than 3 percent of their core assets to in-house private equity and hedge funds in the business of buying up properties and businesses with the goal of selling them at a profit. One harbinger of the financial crisis had been the collapse in the summer of 2007 of a pair of Bear Stearns hedge funds that had invested heavily in subprime loans. That 3 percent cap would have had a big impact on Goldman, which maintained a separate private equity group and operated its own internal hedge funds. But it was the restrictions Volcker placed on proprietary trading that most threatened Goldman. ..."
"... prop trading made up 48 percent of Goldman's. By one estimate , the Volcker Rule could cost Goldman Sachs $3.7 billion in revenue a year. ..."
"... Goldman had five years to prepare for some version of a Volcker Rule. Yet a loophole granted banks sufficient time to dispose of "illiquid assets" without causing undue harm -- a loophole that might even cover the assets Goldman had only recently purchased, despite the impending compliance deadline. The Fed nonetheless granted the firm additional time to sell illiquid investments worth billions of dollars. "Goldman is brilliant at exercising access and influence without fingerprints," Kelleher said. ..."
"... Just two years later, Goldman officials were again summoned by the Senate Permanent Subcommittee on Investigations to address charges that the bank under Cohn and Blankfein had boosted its profits by building a "virtual monopoly" in order to inflate aluminum prices by as much as $3 billion. ..."
"... Trump spoke of the great financial price Cohn paid to join him in the White House during his speech in Cedar Rapids. But something like the opposite was true. A huge amount of Cohn's wealth was tied up in Goldman stock. By entering government, he could sell his stake in the firm to comply with federal ethics laws. That way he could diversify his holdings and avoid roughly $50 million in capital gains taxes -- at least until he sold the replacement assets. ..."
"... As a presidential aide, Cohn did not need Senate approval. He was part of the skeletal crew that arrived at the White House on day one, giving him a critical head start on wielding his clout and cultivating his relationship with the new president. At that point, Trump was summoning Cohn to the Oval Office for impromptu meetings as many as five times a day . ..."
"... How exactly could Cohn recuse himself from matters involving Goldman when almost every aspect of his job has the potential to either grow Goldman's profits and inflate its stock price -- or tank them both? ..."
"... Yet rather than publicly recuse himself on attempts to undo Dodd-Frank, Cohn has led the charge from inside the White House. On that matter, Cohn is a walking, talking conflict of interest . ..."
"... Beyond deregulation, two other pillars of Trump's economic plan -- cutting taxes and investing in infrastructure -- would have dramatic impacts on Goldman's bottom line. ..."
Sep 17, 2017 | www.defenddemocracy.press

Steve Bannon was in the room the day Donald Trump first fell for Gary Cohn. So were Reince Priebus, Jared Kushner, and Trump's pick for secretary of Treasury, Steve Mnuchin. It was the end of November, three weeks after Trump's improbable victory, and Cohn, then still the president of Goldman Sachs, was at Trump Tower presumably at the invitation of Kushner, with whom he was friendly. Cohn was there to offer his views about jobs and the economy. But, like the man he was there to meet, he was at heart a salesman.

On the campaign trail, Trump had spoken often about the importance of investing in infrastructure. Yet the president-elect had apparently failed to appreciate that the government would need to come up with hundreds of billions of dollars to fund his plans. Cohn, brash and bold, wired to attack any moneymaking opportunity, pitched a fix that would put Wall Street firms at the center: Private-industry partners could help infrastructure get fixed, saving the federal government from going deeper into debt. The way the moment was captured by the New York Times , among other publications , Trump was dumbfounded. "Is this true?" he asked. Was a trillion-dollar infrastructure plan likely to increase the deficit by a trillion dollars? Confronted by nodding heads, an unhappy president-elect said, "Why did I have to wait to have this guy tell me?"

Within two weeks, the transition team announced that Cohn would take over as director of the president's National Economic Council.

1. GOLDMAN ALWAYS WINS

Goldman Sachs had been a favorite cudgel for candidate Trump -- the symbol of a government that favors Wall Street over its citizenry. Trump proclaimed that Hillary Clinton was in the firm's pockets, as was Ted Cruz. It was Goldman Sachs that Trump singled out when he railed against a system rigged in favor of the global elite -- one that "robbed our working class, stripped our country of wealth, and put money into the pockets of a handful of large corporations and political entities." Cohn, as president and chief operating officer of Goldman Sachs, had been at the heart of it all. Aggressive and relentless, a former aluminum siding salesman and commodities broker with a nose for making money, Cohn had turned Goldman's sleepy home loan unit into what a Senate staffer called "one of the largest mortgage trading desks in the world." There, he aggressively pushed his sales team to sell mortgage-backed securities to unaware investors even as he watched over "the big short," Goldman's decision to bet billions of dollars that the market would collapse.

Now Cohn would be coordinating economic policy for the populist president.

The conflicts between the two men were striking. Cohn ran a giant investment bank with offices in financial capitals around the globe, one deeply committed to a world with few economic borders. Trump's nationalist campaign contradicted everything Goldman Sachs and its top executives represented on the global stage.

Trump raged against "offshoring" by American companies during the 2016 campaign. He even threatened "retribution,"­ a 35 percent tariff on any goods imported into the United States by a company that had moved jobs overseas. But Cohn laid out Goldman's very different view of offshoring at an investor conference in Naples, Florida, in November. There, Cohn explained unapologetically that Goldman had offshored its back-office staff, including payroll and IT, to Bangalore, India, now home to the firm's largest office outside New York City: "We hire people there because they work for cents on the dollar versus what people work for in the United States."

Candidate Trump promised to create millions of new jobs, vowing to be "the greatest jobs president that God ever created." Cohn, as Goldman Sachs's president and COO, oversaw the firm's mergers and acquisitions business that had, over the previous three years, led to the loss of at least 22,000 U.S. jobs, according to a study by two advocacy groups. Early in his candidacy, Trump described as "disgusting" Pfizer's decision to buy a smaller Irish competitor in order to execute a "corporate inversion," a maneuver in which a U.S. company moves its headquarters overseas to reduce its tax burden. The Pfizer deal ultimately fell through. But in 2016, in the heat of the campaign, Goldman advised on a megadeal that saw Johnson Controls, a Fortune 500 company based in Milwaukee, buy the Ireland-based Tyco International with the same goal. A few months later, with Goldman's help, Johnson Controls had executed its inversion.

With Cohn's appointment, Trump now had three Goldman Sachs alums in top positions inside his administration: Steve Bannon, who was a vice president at Goldman when he left the firm in 1990, as chief strategist, and Steve Mnuchin, who had spent 17 years at Goldman, as Treasury secretary. And there were more to come. A few weeks later, another Goldman partner, Dina Powell, joined the White House as a senior counselor for economic initiatives. Goldman was a longtime client of Jay Clayton, Trump's choice to chair the Securities and Exchange Commission; Clayton had represented Goldman after the 2008 financial crisis, and his wife Gretchen worked there as a wealth management adviser. And there was the brief, colorful tenure of Anthony Scaramucci as White House communications director: Scaramucci had been a vice president at Goldman Sachs before leaving to co-found his own investment company.

Even before Scaramucci, Sen. Elizabeth Warren, D-Mass., had joked that enough Goldman alum were working for the Trump administration to open a branch office in the White House.

"There was a devastating financial crisis just over eight years ago," Warren said. "Goldman Sachs was at the heart of that crisis. The idea that the president is now going to turn over the country's economic policy to a senior Goldman executive turns my stomach." Prior administrations often had one or two people from Goldman serving in top positions. George W. Bush at one point had three. At its peak, the Trump administration effectively had six.

Earlier this summer, Trump boasted about his team of economic advisers at a rally in Cedar Rapids, Iowa. "This is the president of Goldman Sachs. Smart," Trump said . "Having him represent us! He went from massive paydays to peanuts."

Trump waved off anyone who might question his decision to rely on the very people he had demonized. "Somebody said, 'Why did you appoint a rich person to be in charge of the economy?' I said: 'Because that's the kind of thinking we want.'" He needed "great, brilliant business minds so the world doesn't take advantage of us." How else could he get the job done? "I love all people, rich or poor, but in those particular positions, I just don't want a poor person."

"Does that make sense?" Trump asked. The crowd cheered.

Years of financial disclosure forms confirm that Cohn is indeed very rich. At the end of 2016, he owned some 900,000 shares of Goldman Sachs stock, a stake worth around $220 million on the day Trump announced his appointment. Plus, he'd sold a million more Goldman shares over the previous half-dozen years. In 2007 alone, the year of the big short, Goldman Sachs paid him nearly $73 million -- more than the firm paid CEO Lloyd Blankfein. The disclosure forms Cohn filled out to join the administration indicate he owned assets valued at $252 million to $611 million. That may or may not include the $65 million parting gift Goldman's board of directors gave him for "outstanding leadership" just days before Trump was sworn in.

Like anyone taking a top job in the Trump administration, Cohn was required to sign a pledge vowing not to participate for the next two years in any matter "that is directly and substantially related to my former employer or former clients, including regulations and contracts." But presidents have sometimes issued waivers to these requirements, and it is unclear whether the Trump administration is making such waivers public.

Sens. Warren and Tammy Baldwin, a Democrat from Wisconsin, sent Cohn a letter a few days later. They brought up the $65 million bonus and asked him to publicly recuse himself from any issue that could have a direct or "significant indirect" impact on his old firm. Cohn never responded to the letter, and if he has ever received a waiver, it has not been made available to the public or the Office of Government Ethics.

"Consistent with the Trump administration's stringent ethics rules, Mr. Cohn will recuse himself from participating in any matter directly involving his former employer, Goldman Sachs," White House spokesperson Natalie Strom said. "The White House will not comment further."

The White House declined requests to make Cohn available for an interview and declined to answer a detailed set of questions.

Cohn shared the podium with fellow Goldman alum Mnuchin (the two made partner there the same year) when the administration unveiled its new tax plan, one that, if the past is prelude, had the potential to save Goldman more than $1 billion a year in corporate taxes. The president had promised to "do a number" on financial reforms implemented after the 2008 subprime crisis, including one that threatened to cost Goldman several billion dollars a year in revenues. Under Cohn, the administration has introduced new rules easing initial public offerings -- a Goldman Sachs specialty dating back to the start of the last century, when the firm handled the IPOs of Sears, Roebuck; F. W. Woolworth; and Studebaker. As Trump's top economic policy adviser, Cohn can exert influence over regulatory agencies that have shaken billions in penalties and settlements out of Goldman Sachs in recent years. And his former colleagues inside Goldman's Public Sector and Infrastructure group likely appreciate the Trump administration's infrastructure plan, which is more or less exactly as Cohn first pitched it inside Trump Tower in November.

"It's hard to see how Gary Cohn recusing himself would solve a lot of these conflicts because nearly every major decision of his job would have a significant impact, likely billions of dollars, on Goldman Sachs and its executives," said Tyler Gellasch, an attorney and former Senate staffer who helped draft Dodd-Frank, the landmark financial reform law passed in the wake of the financial meltdown. "Goldman touches nearly every aspect of the economy, from selling U.S. treasuries to helping companies go public, and the National Economic Council advises on all of that."

In the wake of last month's white supremacist rally in Charlottesville, Virginia, Cohn confessed to the Financial Times that he has "come under enormous pressure both to resign and to remain." But the man who the Washington Post has dubbed Trump's "moderate voice" declared that neo-Nazis would not force "this Jew" to leave his job. "As a patriotic American, I am reluctant to leave my post as director of the National Economic Council," Cohn told FT. "I feel a duty to fulfill my commitment to work on behalf of the American people."

Or at least a few of them. The Trump economic agenda, it turns out, is largely the Goldman agenda, one with the potential to deliver any number of gifts to the firm that made Cohn colossally rich. If Cohn stays, it will be to pursue an agenda of aggressive financial deregulation and massive corporate tax cuts -- he seeks to slash rates by 57 percent -- that would dramatically increase profits for large financial players like Goldman. It is an agenda as radical in its scope and impact as Bannon's was.

2. ALPHA MALES

Donald Trump, the "blue-collar billionaire," has taken great pains to write grit and toughness into his privileged biography. He talks of military schools and visits to construction sites with his father and wrote in "The Art of the Deal" that in the second grade, "I actually gave a teacher a black eye. I punched my music teacher because I didn't think he knew anything about music and I almost got expelled." Yet when the authors of the book "Trump Revealed: An American Journey of Ambition, Ego, Money, and Power" spoke to several of his childhood friends, none of them recalled the incident. Trump himself crumpled when asked about the incident during the 2016 campaign: "When I say 'punch,' when you're that age, nobody punches very hard."

Gary Cohn, however, is the middle-class kid and self-made millionaire Trump imagines himself to be. It appears that Cohn actually did slug a grade-school teacher in the face. "I was being abused," Cohn told author Malcolm Gladwell, who interviewed him for his book, "David and Goliath: Underdogs, Misfits, and the Art of Battling Giants," back when Cohn was still president of Goldman Sachs. As a child, Cohn struggled with dyslexia, a reading disorder people didn't understand much about when Cohn attended school in the 1970s in a suburb outside Cleveland. "You're a 6- or 7- or 8-year-old-kid, and you're in a public-school setting, and everyone thinks you're an idiot," Cohn confessed to Gladwell. "You'd try to get up every morning and say, today is going to be better, but after you do that a couple of years, you realize that today is going to be no different than yesterday." One time when he was in the fourth grade, a teacher put him under her desk, rolled her chair close, and started kicking him, Cohn said. "I pushed the chair back, hit her in the face, and walked out."

While Trump's father was a wealthy real estate developer, Cohn's father was an electrician. When Trump sought to get into the casino business, his father loaned him $14 million. When Cohn couldn't find a job after graduating from college, all his father could do was find him one selling aluminum siding. While Trump has the instincts of a reality show producer and an eye for spectacle, Cohn prefers to operate in the shadows.

But they likely recognize much of themselves in the other. Both Cohn and Trump are alpha males -- men of action unlikely to be found holed up in an office reading through stacks of policy reports. In fact, neither seems to be much of a reader. Cohn told Gladwell it would take him roughly six hours to read just 22 pages; he ended his time with the author by wishing him luck on "your book I'm not going to read." Both have a transactional view of politics. Trump switched his voter registration between Democratic, Republican, and independent seven times between 1999 and 2012. In the 2000s, his foundation gave $100,000 to the Clinton Foundation, and he contributed $4,700 to Hillary Clinton's senatorial campaigns. He even bought and refurbished a golf course in Westchester County a few miles from the Clinton home, in part, Trump once admitted, to ingratiate himself with the Clintons. Cohn is a registered Democrat who has given at least $275,000 to Democrats over the years, including to the campaigns of Hillary Clinton and Barack Obama, but also around $250,000 to Republicans, including Senate Majority Leader Mitch McConnell and Florida Sen. Marco Rubio.

There are also striking similarities in their business histories. Both have a knack for weathering scandals and setbacks and coming out on top. Trump has filed for bankruptcy four times, started a long list of failed businesses (casinos, an airline, a football team, a steak company), but managed, through his best-selling books and highly rated reality TV show, to recast himself as the world's greatest businessman. During Cohn's tenure as president, Goldman Sachs faced lawsuits and federal investigations that resulted in $9 billion in fines for misconduct in the run-up to the subprime meltdown. Goldman not only survived but thrived, posting record profits -- and Cohn was rewarded with handsome bonuses and a position at the top of the new administration.

Cohn's path to the White House started with a tale of brass and bluster that would make Trump the salesman proud. Still in his 20s and stuck selling aluminum siding, Cohn made a play that would change his life. In the fall of 1982, while visiting the company's home office on Long Island, he stole a day from work and headed to the U.S. commodities exchange in Manhattan, hoping to talk himself into a job. He overheard an important-looking man say he was heading to LaGuardia Airport; Cohn blurted out that he was headed there, too. He jumped into a cab with the man and, Cohn told Gladwell, who devoted six pages of "David and Goliath" to Cohn's underdog rise, "I lied all the way to the airport." The man confided to Cohn that his firm had just put him in charge of a market, options, that he knew little about. Cohn likely knew even less, but he assured his backseat companion that he could get him up to speed. Cohn then spent the weekend reading and re-reading a book called "Options as a Strategic Investment." Within the week, he'd been hired as the man's assistant.

Cohn soon learned enough to venture off on his own and established himself as an independent silver trader on the floor of the New York Commodities Exchange. In 1990, Goldman Sachs, arguably the most elite firm on Wall Street, offered him a job.

Goldman Sachs was founded in the years just after the American Civil War. Marcus Goldman, a Jewish immigrant from Germany, leased a cellar office next to a coal chute in 1869. There, in an office one block from Wall Street, he bought the bad debt of local businesses that needed quick cash. His son-in-law, Samuel Sachs, joined the firm in 1882. A generation later, in 1906, the firm made its first mark, arranging for the public sale of shares in Sears, Roebuck. Goldman Sachs's influence over politics dates back at least to 1914. That year, Henry Goldman, the founder's son, was invited to advise Woodrow Wilson's administration about the creation of a central bank, mandated by the Federal Reserve Act, which had passed the previous year. Goldman Sachs men have played important roles in U.S. government ever since.

There was the occasional scandal, such as Goldman Sachs's role in the 1970 collapse of Penn Central railroad, then the largest corporate bankruptcy in U.S. history. Still, the firm built a reputation as a sober, elite partnership that served its clients ably. In 1979, when John Whitehead, a senior partner and co-chairman, set to paper what he called Goldman's "Business Principles," he began with the firm's most cherished belief: The client's interests come before all else.

Two years later, Goldman took a step that signaled the beginning of the end of that culture. In the fall of 1981, Goldman purchased J. Aron & Co., a commodities trading firm. Some within the partnership were against the acquisition, worried over how profane, often crude, trading culture would mix with Goldman's restrained, well-mannered way of doing business. "We were street fighters," one former J. Aron partner told Fortune magazine in 2008.

The J. Aron team moved into the Goldman Sachs offices in lower Manhattan, but didn't adopt its culture. Within a few years, it was producing well over $1 billion a year in profits. They were 300 employees inside a firm of 6,000, but were posting one-third of Goldman's total profits. The cultural shift, it turned out, was moving in the other direction. J. Aron, according to a book by Charles D. Ellis, a former Goldman consultant, brought to Goldman "a trading culture that would become dominant in the firm."

Lloyd Blankfein, who ascended to chairman and CEO in in 2006, started his Goldman career at J. Aron, a year after Goldman acquired the firm. "We didn't have the word 'client' or 'customer' at the old J. Aron," Blankfein told Fortune magazine two years after taking over as CEO. "We had counter-parties." Cohn joined J. Aron eight years after Blankfein did, in 1990. Four years later, Blankfein was put in charge of the firm's Fixed Income, Currency, and Commodities division, which included J. Aron. Cohn, loyal and hard-working, with an instinct for connecting with people who can help him, became Blankfein's " corporate problem solver ."

The emergence of "Bad Goldman" -- and Cohn's central role in that drama -- is really the story of the rise of the traders inside the firm. "As trading came to be a bigger part of Wall Street, I noticed that the vision changed," said Robert Kaplan, a former Goldman Sachs vice chairman, who left in 2006 after working at the firm for 23 years. "The leaders were saying the same words, but they started to change incentives away from the value-added vision and tilt more to making money first. If making money is your vision, what lengths will you not go?"

At the height of the dot-com years, a debate raged within the firm. The firm underwrote dozens of technology IPOs, including Microsoft and Yahoo, in the 1980s and 1990s, minting an untold number of multimillionaires and the occasional billionaire. Some of the companies they were bringing public generated no profits at all, while Goldman was generating up to $3 billion in profits a year. It seemed inevitable that some within Goldman Sachs began to dream of jettisoning the Goldman's century-old partnership structure and taking their firm public, too. Jon Corzine was running the firm then -- he would later go into politics in the Goldman tradition, first as a U.S. senator and then as New Jersey governor -- and was four-square in favor of going public. Corzine's second in command, Henry Paulson -- who would go on to serve as Treasury secretary -- was against the idea. But Corzine ordered up a study that supported his view that remaining private stifled Goldman's competitive opportunities and promoted Paulson to co-senior partner. Paulson soon got on board. In May 1999, Goldman sold $3.7 billion worth of shares in the company. At the end of the first day of trading, Corzine's and Paulson's stakes in the firm were each worth $205 million. Cohn's and Mnuchin's shares were each worth $112 million. And Blankfein ended up with $168 million in company stock.

Like any publicly traded company, there would now be pressure on Goldman Sachs to make its quarterly numbers and "maximize shareholder value." Discarding the partner model also meant the loss of a valuable restraint on risk-taking and bad behavior. Under the old system, any losses or fines came out of the partners' pockets. In the early 1990s, for example, the firm was involved in transactions with Robert Maxwell, a London-based media mogul who was accused of stealing hundreds of millions of pounds from his companies' pension funds. The $253 million that Goldman Sachs paid to settle lawsuits brought by pension funds over its involvement was split among the firm's 84 limited partners. Now any losses are paid by a publicly traded entity owned by shareholders, with no direct financial liability for the decision-makers themselves. In theory, Goldman could claw back bonuses in response to executives' bad behavior. But in 2016, when Goldman paid over $5 billion to settle charges brought by the Justice Department that the firm misled customers in the sale of a subprime mortgage product during Cohn's time overseeing that unit, the Goldman board declined to dock Cohn's pay. Instead, the company awarded him a $5.5 million cash bonus and another $12.6 million in company stock.

As Blankfein moved up the corporate hierarchy, Cohn rose along with him. When Blankfein was made vice chairman in charge of the firm's multibillion-dollar global commodities business and its equities division, Cohn took over as co-head of FICC, Blankfein's previous position. That meant Cohn was overseeing not just J. Aron and the firm's commodities business, but also its currency trades and bond sales. By the start of 2004, Blankfein was promoted to president and COO, and Cohn was named co-head of global securities. At that point, Cohn had authority over the mortgage-trading desk. Under Cohn, the firm aggressively moved into the subprime mortgage market, using Goldman's own money and that of its customers to help stoke the housing bubble.

Goldman was already enabling subprime predators, such as Ameriquest and New Century Financial, by providing them with the cash infusions they needed to scale up their lending to individual home buyers. Cohn would steer the firm deeper into the subprime frenzy by setting up Goldman as a patron of some of these same mortgage originators. During his tenure, Goldman snapped up loans from New Century, Countrywide, and other notorious mortgage originators and bundled them into deals with opaque names, such as ABACUS and GSAMP. Under Cohn's watchful eye, Goldman's brokers then funneled slices to customers they sold on the wisdom of holding mortgage-backed securities in their portfolios.

One such creation, GSAA Home Equity Trust 2006-2, illustrates Goldman's disregard for the quality of loans it was buying and packaging into security deals. Created in early 2006, the investment vehicle was made up of more than $1 billion in home loans Goldman had bought from Ameriquest, one of the nation's largest and most aggressive subprime lenders. By that point, the lender already had set aside $325 million to settle a probe by attorneys general and banking regulators in 49 states, who accused Ameriquest of misleading thousands of borrowers about the costs of their loans and falsifying home appraisals and other key documents. Yet GSAA Home Equity Trust 2006-2 was filled with Ameriquest loans made to more than 3,000 homeowners in Arizona, Illinois, Florida, and elsewhere. By the end of 2008, 65 percent of the roughly 1,400 borrowers whose loans remained in the deal were in default, had filed for bankruptcy, or had been targeted for foreclosure.

In just three years, Goldman Sachs had increased its trading volume by a factor of 50, which the Wall Street Journal attributed to "Cohn's successful push to rev up risk-taking and use of Goldman's own capital to make a profit" -- what the industry calls proprietary trading, or prop trading. The 2010 Journal article quoted Justin Gmelich, then the firm's mortgage chief, who said of Cohn, "He reshaped the culture of the mortgage department into more of a trading environment." In 2005, with Cohn overseeing the firm's home loan desk, Goldman underwrote $103 billion in mortgage-backed securities and other more esoteric products, such as collateralized debt obligations, which often were priced based on giant pools of home loans. The following year, the firm underwrote deals worth $131 billion.

In 2006, CEO Henry Paulson left the firm to join George W. Bush's cabinet as Treasury secretary. Blankfein, Cohn's mentor and friend, took Paulson's place. By tradition, Blankfein, a trader, should have elevated someone from the investment banking side to serve as his No. 2, so both sides of the firm would be represented in the top leadership. Instead he named Cohn, his long-time loyalist, and Jon Winkelried, who also had history on the trading side, as co-presidents and co-COOs. Winkelried, who had started at Goldman eight years before Cohn, had probably earned the right to hold those titles by himself. But Cohn had the advantage of his relationship with the CEO. Blankfein and Cohn vacationed together in the Caribbean and Mexico, owned homes near each other in the Hamptons, and their children attended the same school. Winkelreid was out in two years. The bromance between his fellow No. 2 and the top boss may have proved too much.

With Blankfein and Cohn at the top, the transformation of Goldman Sachs was complete. By 2009, investment banking had shrunk to barely 10 percent of the firm's revenues. Richard Marin, a former executive at Bear Stearns, a Goldman competitor that wouldn't survive the mortgage meltdown, saw Cohn as "the root of the problem." Explained Marin, "When you become arrogant in a trading sense, you begin to think that everybody's a counterparty, not a customer, not a client. And as a counterparty, you're allowed to rip their face off."

3. THE BIG SHORT

People inside Goldman Sachs were growing nervous. It was the fall of 2006 and, as Daniel Sparks, the Goldman partner overseeing the firm's 400-person mortgage trading department, wrote in an email to several colleagues, "Subprime market getting hit hard." The firm had lent millions to New Century, a mortgage lender dealing in the higher-risk subprime market. And now New Century was late on payments. Sparks could see that the wobbly housing market was having an impact on his department. For 10 consecutive trading days, his people had lost money. The dollar amounts were small to a behemoth like Goldman: between $5 million and $30 million a day. But the trend made Sparks jittery enough to share his concerns with the Goldman's top executives: President Gary Cohn; David Viniar, the firm's chief financial officer; and CEO Lloyd Blankfein.

Sparks, a Cohn protégé, was running the mortgage desk that his mentor, only a few years earlier, had built into a major profit center for the bank. In 2006 and 2007, a report by the Senate Permanent Subcommittee on Investigations found, the two "maintained frequent, direct contact" as Goldman worked to jettison the billions in subprime loans it had on its book. "One of my jobs at the time was to make sure Gary and David and Lloyd knew what was going on," Sparks told William Cohan, author of the 2011 book "Money and Power: How Goldman Sachs Came to Rule the World . " "They don't like surprises." Viniar summoned around 20 traders and managers to a 30th floor conference room inside Goldman headquarters in lower Manhattan. It was there, on an unseasonably warm Thursday in December 2006, that the firm decided to initiate what people inside Goldman would eventually dub "the big short."

One name tossed around during the three-hour meeting was that of John Paulson. Paulson (no relation to Goldman's former CEO) would later attain infamy when it was revealed that his firm, Paulson & Co., made roughly $15 billion betting against the mortgage market. (His personal take was nearly $4 billion.) At that point, though, Paulson was a little-known hedge fund manager who crossed Goldman's radar when he asked the firm to create a product that would allow him to take a "short position" on the real estate market -- laying down bets that a large number of mortgage investments were going to plummet in value. Goldman sold Paulson what's called a credit-default swap, essentially an insurance policy that would pay off if homeowners defaulted on their mortgages in large enough numbers. The firm would create several more swaps on his behalf in the intervening months. Eventually, as mortgage defaults began to mount, people inside Goldman Sachs came to see Paulson as more of a prophet than a patsy. Some sitting around the conference table that December day wanted to follow his lead.

"There will be big opportunities the next several months," one Goldman manager at the meeting wrote enthusiastically in an email sent shortly after it ended. Sparks weighed in by email later that night. He wanted to make sure Goldman had enough "dry powder" -- cash on hand -- to be "ready for the good opportunities that are coming." That Sunday, Sparks copied Cohn on an email reporting the firm's progress on laying down short positions against mortgage-backed securities it had put together. The trading desk had already made $1.5 billion in short bets, "but still more work to do."

Cohn was a member of Goldman's board of directors during this critical time and second in command of the bank. At that point, Cohn and Blankfein, along with the board and other top executives, had several options. They might have shared their concerns about the mortgage market in a filing with the SEC, which requires publicly traded companies to reveal "triggering events that accelerate or increase a direct financial obligation" or might cause "impairments" to the bottom line. They might have warned clients who had invested in mortgage-backed securities to consider extracting themselves before they suffered too much financial damage. At the very least, Goldman could have stopped peddling mortgage-backed securities that its own mortgage trading desk suspected might soon collapse in value. Instead, Cohn and his colleagues decided to take care of Goldman Sachs.

Goldman would not have suffered the reputational damage that it did -- or paid multiple billions in federal fines -- if the firm, anticipating the impending crisis, had merely shorted the housing market in the hopes of making billions. That is what investment banks do: spot ways to make money that others don't see. The money managers and traders featured in the film "The Big Short" did the same -- and they were cast as brave contrarians. Yet unlike the investors featured in the film, Goldman had itself helped inflate the housing bubble -- buying tens of billions of dollars in subprime mortgages over the previous several years for bundling into bonds they sold to investors. And unlike these investors, Goldman's people were not warning anyone who would listen about the disaster about to hit. As federal investigations found, the firm, which still claims "our clients' interests always come first" as a core principle, failed to disclose that its top people saw disaster in the very products its salespeople were continuing to hawk.

Goldman still held billions of mortgages on its books in December 2006 -- mortgages that Cohn and other Goldman executives suspected would soon be worth much less than the firm had paid for them. So, while Cohn was overseeing one team inside Goldman Sachs preoccupied with implementing the big short, he was in regular contact with others scrambling to offload its subprime inventory. One Goldman trader described the mortgage-backed securities they were selling as "shitty." Another complained in an email that they were being asked to "distribute junk that nobody was dumb enough to take first time around." A December 28 email from Fabrice "Fabulous Fab" Tourre, a Goldman vice president later convicted of fraud, instructed traders to focus on less astute, "buy and hold" investors rather than "sophisticated hedge funds" that "will be on the same side of the trade as we will."

At Goldman Sachs, Cohn was known as a hands-on boss who made it his business to walk the floors, talking directly with traders and risk managers scattered throughout the firm. "Blankfein's role has always been the salesperson and big-thinker conceptualizer," said Dick Bove, a veteran Wall Street analyst who has covered Goldman Sachs for decades. "Gary was the guy dealing with the day-to-day operations. Gary was running the company." While making his rounds, Cohn would sometimes hike a leg up on a trader's desk, his crotch practically in the person's face.

At 6-foot- 2, bullet-headed and bald with a heavy jaw and a fighter's face, Cohn cut a large figure inside Goldman. Profiles over the years would describe him as aggressive, abrasive, gruff, domineering -- the firm's "attack dog." He was the missile Blankfein launched when he needed to deliver bad news or enforce discipline. Cohn embodied the new Goldman: the man who would run through a brick wall if it meant a big payoff for the bank.

A Bloomberg profile described his typical day as 11 or 12 hours in the office, a bank-related dinner, then phone calls and emails until midnight. "The old adage that hard work will get you what you want is 100 percent true," Cohn said in a 2009 commencement address at American University. "Work hard, ask questions, and take risk."

There's no record of how often Cohn visited his stomping grounds after hours in the early months of 2007, but emails reveal an executive demanding -- and getting -- regular updates. On February 7, one of the largest originators of subprime loans, HSBC, reported a greater than anticipated rise in troubled loans in its portfolio, and another, New Century, restated its earnings for the previous three quarters to "correct errors." Sparks wrote an email to Cohn and others the next morning to reassure them that his team was closely monitoring the pricing of the company's "scratch-and-dent book" and already had a handle on which loans were defaults and which could still be securitized and offloaded onto customers. An impatient Cohn sent a two-word email at 5 o'clock that evening: "Any update?" The next day, an internal memo circulated that listed dozens of mortgage-backed securities with the exhortation, "Let all of the respective desks know how we can be helpful in moving these bonds." A week later, Sparks updated Cohn on the billions in shorts his firm had bought but warned that it was hurting sales of its "pipeline of CDOs," the collateralized debt obligations the firm had created in order to sell the mortgages still on its books.

In early March, Cohn was among those who received an email spelling out the mortgage products the firm still held. The stockpile included $1.7 billion in mortgage-related securities, along with $1.3 billion in subprime home loans and $4.3 billion in "Alt-A" loans that fall between prime and subprime on the risk scale. Goldman was "net short," according to that same email, with $13 billion in short positions, but its exposure to the mortgage market was still considerable. Sparks and others continued to update Cohn on their success offloading securities backed by subprime mortgages through the third quarter of 2007. One product Goldman priced at $94 a share on March 31, 2007 was worth just $15 five months later. Pension funds and insurance companies were among those losing billions of dollars on securities Goldman put together and endorsed as a safe, AAA-rated investments.

The third quarter of 2007 was ugly. A pair of Bear Stearns hedge funds failed. Merrill Lynch reported $2.2 billion in losses -- its largest quarterly loss ever. Merrill's CEO warned that the bank faced another $8 billion in potential losses due to the firm's exposure to subprime mortgages and resigned several weeks later. The roiling credit crisis also took down the CEO of Citigroup, which reported $6.5 billion in losses and then weeks later, warned of $8 billion to $11 billion in additional subprime-related write-downs.

And then there was Goldman Sachs, which reported a $2.9 billion profit that quarter. For the moment, the financial press seemed in awe of Blankfein, Cohn, and the rest of the team running the firm. Fortune headlined an article "How Goldman Sachs Defies Gravity" that said Goldman's "huge, shrewd bet" against the mortgage market "would seem to confirm the view Goldman is the nimblest, and perhaps the smartest, brokerage on Wall Street." A Goldman press release drily noted that "significant losses" in some areas -- the subprime mortgages it hadn't managed to unload -- had been "more than offset by gains on short mortgage products." A Goldman trader who played a central role in the big short was not so demure when making the case for a big bonus that year. John Paulson was "definitely the man in this space," he conceded, but he'd helped make Goldman "#1 on the street by a wide margin."

Disaster struck nine months into 2008 with the collapse of Lehman Brothers, in large part the result of its exposure to subprime losses. Hank Paulson, the Treasury secretary and former Goldman CEO, spent a weekend meeting with would-be suitors willing to take over a storied bank that on paper was now worth virtually nothing. He couldn't find a buyer. Nor could officials from the Federal Reserve, who were also working overtime to save the investment bank, founded in 1850, that was even older than Goldman Sachs. Shortly after midnight on Monday, September 15, 2008, Lehman announced that it would file for bankruptcy protection when the courts in New York opened that morning -- the largest bankruptcy in U.S. history.

Goldman Sachs wasn't immune from the crisis. The week before Lehman's fall, Goldman's stock had topped $161 a share. By Wednesday, it dropped to below $100. It had avoided some big losses by betting against the mortgage market, but the wider financial crisis was wreaking havoc on its other investments. On paper, Cohn had personally lost tens of millions of dollars. He hunkered down in an office with a view of Goldman's trading floor and worked the phone, trying to change the minds of major investors who were pulling their money from Goldman, fearful of anything riskier than stashing their cash in a mattress.

The next week, Goldman converted from a free-standing investment bank to a bank holding company, which made it, in the eyes of regulators, no different from Wells Fargo, JPMorgan Chase, or any other retail bank. That gave the firm access to cheap capital through the Fed but would also bring increased scrutiny from regulators. The bank took a $10 billion bailout from the Troubled Asset Relief Program and another $5 billion from Warren Buffett, in return for an annual dividend of 10 percent and access to discounted company stock. The firm raised additional billions through a public stock offering.

The biggest threat to Goldman was the economic health of the American International Group. Among other products, AIG sold insurance to protect against defaults on mortgage assets, which had been central to Goldman's big short. Of the $80 billion in U.S. mortgage assets that AIG insured during the housing bubble, Goldman bought protection from AIG on roughly $33 billion, according to the Wall Street Journal. When Lehman went into bankruptcy, its creditors received 11 cents on the dollar. Executives at AIG, in a frantic effort to avoid bankruptcy, had floated the idea of pushing its creditors to accept 40 to 60 cents on the dollar; there was speculation creditors like Goldman would receive as little as 25 percent. Goldman and its clients were looking at multibillion-dollar hits to their bottom line -- a potentially fatal blow.

But as Goldman learned a century ago, it pays to have friends in high places. The day after Lehman went bankrupt, the Bush administration announced an $85 billion bailout of AIG in return for a majority stake in the company. The next day, Paulson obtained a waiver regarding interactions with his former firm because, the Treasury secretary said, "It became clear that we had some very significant issues with Goldman Sachs." Paulson's calendar, the New York Times reported, showed that the week of the AIG bailout, he and Blankfein spoke two dozen times. While creditors around the globe were being forced to settle for much less than they were owed, AIG paid its counterparties 100 cents on the dollar. AIG ended up being the single largest private recipient of TARP funding. It received additional billions in rescue funds from the New York Federal Reserve Bank, whose board chair Stephen Friedman was a former Goldman executive who still sat on the firm's board. The U.S. Treasury ended up with greater than a 90 percent share of AIG, and the U.S. government, using taxpayer dollars, paid in full on the insurance policies financial institutions bought to protect themselves from steep declines in real estate prices -- chief among them, Goldman Sachs. All told, Goldman received at least $22.9 billion in public bailouts, including $10 billion in TARP funds and $12.9 billion in taxpayer-funded payments from AIG.

Goldman, once again, had come out on top.

4. THE VAMPIRE SQUID

Goldman Sachs repaid repaid its $10 billion bailout partway through 2009, less than 12 months after the loan was made. Other banks in the U.S. and abroad were still struggling but not Goldman, which reported a record $19.8 billion in pre-tax profits that year, and $12.9 billion the next. Gary Cohn went without a bonus in 2008, left to scrape by on his $600,000 salary. Once free of government interference, the Goldman board (which included Cohn himself) paid him a $9 million bonus in 2009 and an $18 million bonus in 2010.

Yet the once venerated firm was now the subject of jokes on the late-night talk shows. David Letterman broadcast a "Goldman Sachs Top 10 Excuses" list (No. 9: "You're saying 'fraud' like it's a bad thing."). Rolling Stone's Matt Taibbi described the bank as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money," a devastating moniker that followed Goldman into the business pages. After news leaked that the firm might pay its people a record $16.7 billion in bonuses in 2009, even President Barack Obama, for whom the firm had been a top campaign donor, began to turn against Goldman, telling " 60 Minutes ," "I did not run for office to be helping out a bunch of fat-cat bankers on Wall Street."

"They're still puzzled why is it that people are mad at the banks," Obama said. "Well, let's see. You guys are drawing down $10, $20 million bonuses after America went through the worst economic year that it's gone through in decades, and you guys caused the problem."

Goldman was also facing an onslaught of investigations and lawsuits over behavior that had helped precipitate the financial crisis. Class actions and other lawsuits filed by pension funds and other investors accused Goldman of abusing their trust, making "false and misleading statements," and failing to conduct basic due diligence on the loans underlying the products it peddled. At least 25 of these suits named Cohn as a defendant.

State and federal regulators joined the fray. The SEC accused Goldman of deception in its marketing of opaque investments called "synthetic collateralized debt obligations," the values of which were tied to bundles of actual mortgages. These were the deals Goldman had arranged in 2006 on behalf of John Paulson so he could short the U.S. housing market. Goldman, it turned out, had allowed Paulson to cherry-pick poor-quality loans at the greatest risk of defaulting -- a fact Goldman did not share with potential investors. "Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio," the SEC's enforcement director at the time said, "telling other investors that the securities were selected by an independent, objective third party."

Suddenly, Cohn and other Goldman officials were downplaying the big short. In June 2010, Cohn testified before the Financial Crisis Inquiry Commission, created by Congress to investigate the causes of the nation's worst economic collapse since the Great Depression. Cohn asked the commissioners how anyone could claim the firm had bet against its clients when "during the two years of the financial crisis, Goldman Sachs lost $1.2 billion in its residential mortgage-related business"? His statement was technically true, but Cohn failed to mention the billions of dollars the firm pocketed by betting the mortgage market would collapse. Senate investigators later calculated that, at its peak, Goldman had $13.9 billion in short positions that would only pay off in the event of a steep drop in the mortgage market, positions that produced a record $3.7 billion in profits.

Two weeks after Cohn's testimony, Goldman agreed to pay the SEC $550 million to settle charges of securities fraud -- then the largest penalty assessed against a financial services firm in the agency's history. Goldman admitted no wrongdoing, acknowledging only that its marketing materials "contained incomplete information." Goldman paid $60 million in fines and restitution to settle an investigation by the Massachusetts attorney general into the financial backing the firm had offered to predatory mortgage lenders. The bank set aside another $330 million to assist people who lost their homes thanks to questionable foreclosure practices at a Goldman loan-servicing subsidiary. Goldman agreed to billions of dollars in additional settlements with state and federal agencies relating to its sale of dicey mortgage-backed securities. The firm finally acknowledged that it had failed to conduct basic due diligence on the loans its was selling customers and, once it became aware of the hazards, did not disclose them.

In the final report produced by the Senate's Permanent Subcommittee on Investigations, Goldman Sachs was mentioned an extraordinary 2,495 times, and Gary Cohn 89 times. A Goldman Sachs representative declined to respond to queries on the record.

The investigations and fines were a blow to Goldman's reputation and its bottom line, but the regulatory reforms being debated had the potential to threaten Goldman's entire business model. Even before the 2008 crash, the firm's lobbying spending had grown under Lloyd Blankfein and Cohn. By 2010, the year financial reforms were being drafted, Goldman spent $4.6 million for the services of 49 lobbyists. Their ranks included some of the most well-connected figures in Washington, including Democrat Richard Gephardt, a former House majority leader, and Republican Trent Lott, a former Senate majority leader, who had stepped down from the Senate two years earlier.

Despite all those lobbyists on the payroll, Goldman made its case primarily through proxies during the debate over financial reform. "The name Goldman Sachs was so radioactive it worked to their disadvantage to be tied to an issue," said Marcus Stanley, then a staffer for Democratic Sen. Barbara Boxer and now policy director of Americans for Financial Reform. Instead, Goldman lobbied through industry groups.

Goldman's people likely knew that all of Wall Street's lobbying might could not stop the passage of the sprawling 2010 legislative package dubbed the Dodd-Frank Wall Street Reform and Consumer Protection Act. Obama was putting his muscle behind reform -- "We simply cannot accept a system in which hedge funds or private equity firms inside banks can place huge, risky bets that are subsidized by taxpayers," he said in one speech -- and the Democrats enjoyed majorities in both houses of Congress. "For Goldman Sachs, the battle was over the final language," said Dennis Kelleher of Better Markets, a Washington, D.C., lobby group that pushes for tighter financial reforms. "That way they at least had a fighting chance in the next round, when everyone turned their attention to the regulators."

There was a lot for Goldman Sachs to dislike about Dodd-Frank. There were small annoyances, such as "say on pay," which ordered companies to give shareholders input on executive compensation, a source of potential embarrassment to a company that gave out $73 million in compensation for a single year's work -- as Goldman paid Cohn in 2007. There were large annoyances, such as the requirement that financial institutions deemed too big to fail, like Goldman, create a wind-down plan in case of disaster. There were the measures that would interfere with Goldman's core businesses, such as a provision instructing the Commodity Futures Trading Commission to regulate the trading of derivatives. And yet nothing mattered to Goldman quite like the Volcker Rule, which would protect banks' solvency by limiting their freedom to make speculative trades with their own money. Unless Goldman could initiate what Stanley called the "complexity two-step" -- win a carve-out so a new rule wouldn't interfere with legitimate business and then use that carve-out to render a rule toothless -- Volcker would slam the door shut on the entire direction in which Blankfein and Cohn had taken Goldman.

It was 5:30 a.m. on Friday, June 25, 2010, when a joint House-Senate conference committee approved the final language of Dodd-Frank. By Sunday, an industry attorney named Annette Nazareth -- a former top SEC official whose firm counts Goldman Sachs among its clients -- had already sent off a heavily annotated copy of the 848-page bill to colleagues at her old agency. It was just the first salvo in a lobbying juggernaut.

Within a few months, Cohn himself was in Washington to meet with a governor of the Federal Reserve, one of the key agencies charged with implementing Volcker. The visitors log at the CFTC, the agency Dodd-Frank put in charge of derivatives reform, shows that Cohn traveled to D.C. to personally meet with CFTC staffers at least six times between 2010 and 2016. Cohn also came to the capital for meetings at the SEC, another agency responsible for the Volcker Rule. There, he met with SEC chair Mary Jo White and other commissioners. "I seem to be in Washington every week trying to explain to them the unintended consequences of overregulation," Cohn said in a talk he gave to business students at Sacred Heart University in 2015.

"Gary was the tip of the spear for Goldman to beat back regulatory reform," said Kelleher, the financial reform lobbyist. "I used to pass him going into different agencies. They brought him in when they wanted the big gun to finish off, to kill the wounded."

Democrats lost their majority in the House that November, and Goldman threw its weight behind the spate of Republican bills that followed, aimed at taking apart Dodd-Frank piece by piece. Goldman spent more than $4 million for the services of 45 lobbyists in 2011 and $3.5 million a year in 2012 and 2013. Its lobbying spending was nearly as high in the years after passage of Dodd-Frank as it was the year the bill was introduced.

Goldman lobbyists dug in on a range of issues that would become top priorities for Republicans in the wake of Donald Trump's electoral victory. Records from the Center for Responsive Politics show that Goldman lobbyists worked to promote corporate tax cuts, such as on the Tax Increase Prevention Act of 2014 and Senate legislation aimed at extending some $200 billion in tax cuts for individuals and businesses. Goldman lobbied for a bill to fund economically critical infrastructure projects, presumably on behalf of its Public Sector and Infrastructure group. Goldman had seven lobbyists working on the JOBS Act, which would make it easier for companies to go public, another bottom-line issue to a company that underwrote $27 billion in IPOs last year. In 2016, Goldman had eight lobbyists dedicated to the Financial CHOICE Act, which would have undone most of Dodd-Frank in one fell swoop -- a bill the House revived in April.

Yet defanging the Volcker Rule remained the firm's top priority. Promoted by former Fed Chair Paul Volcker, the rule would prohibit banks from committing more than 3 percent of their core assets to in-house private equity and hedge funds in the business of buying up properties and businesses with the goal of selling them at a profit. One harbinger of the financial crisis had been the collapse in the summer of 2007 of a pair of Bear Stearns hedge funds that had invested heavily in subprime loans. That 3 percent cap would have had a big impact on Goldman, which maintained a separate private equity group and operated its own internal hedge funds. But it was the restrictions Volcker placed on proprietary trading that most threatened Goldman.

Prop trading was a profit center inside many large banks, but nowhere was it as critical as at Goldman. A 2011 report by one Wall Street analyst revealed that prop trading accounted for an 8 percent share of JPMorgan Chase's annual revenues, 9 percent of Bank of America's, and 27 percent of Morgan Stanley's. But prop trading made up 48 percent of Goldman's. By one estimate , the Volcker Rule could cost Goldman Sachs $3.7 billion in revenue a year.

When regulators finalized a new Volcker Rule in 2013, Better Markets declared it a "major defeat for Wall Street." Yet the victory for reformers was precarious. "Just changing a few words could dramatically change the scope of the rule -- to the tune of billions of dollars for some firms," said former Senate staffer Tyler Gellasch, who helped write the rule. Volcker gave banks until July 2015 -- the five-year anniversary of Dodd-Frank -- to bring themselves into compliance. Yet apparently the Volcker Rule had been written for other financial institutions, not elite firms like Goldman Sachs. "Goldman Sachs has been on a shopping spree with its own money," began a New York Times article in January 2015. The bank used its own funds to buy a mall in Utah, apartments in Spain, and a European ink company. Paul Volcker expressed disappointment that banks were still making big proprietary bets, as did the two senators most responsible for writing the rule into law. That June, Cohn appeared to reassure investors that Goldman would find a workaround. Speaking at an investor conference, he said Goldman was "transforming our equity investing activities to continue to meet client needs while complying with Volcker."

Goldman had five years to prepare for some version of a Volcker Rule. Yet a loophole granted banks sufficient time to dispose of "illiquid assets" without causing undue harm -- a loophole that might even cover the assets Goldman had only recently purchased, despite the impending compliance deadline. The Fed nonetheless granted the firm additional time to sell illiquid investments worth billions of dollars. "Goldman is brilliant at exercising access and influence without fingerprints," Kelleher said.

By mid-2016, Goldman, along with Morgan Stanley and JPMorgan Chase, was petitioning the Fed for an additional five years to comply with Volcker -- which would take the banks well into a new administration. All Blankfein and Cohn had to do was wait for a new Congress and a new president who might back their efforts to flush all of Dodd-Frank. Then Goldman could continue the risky and lucrative habits it had adopted since traders like Cohn had taken over the firm -- the financial crisis be damned -- and continue raking in billions in profits each year.

Goldman's political giving changed in the wake of Dodd-Frank. Dating back to at least 1990, according to the Center for Responsive Politics, people associated with the firm and its political action committees contributed more to Democrats than Republicans. Yet in the years since financial reform, Goldman, once Obama's second-largest political donor, shifted its campaign contributions to Republicans. During the 2008 election cycle, for instance, Goldman's people and PACs contributed $4.8 million to Democrats and $1.7 million to Republicans. By the 2012 cycle, the opposite happened, with Goldman giving $5.6 million to Republicans and $1.8 million to Democrats. Cohn's personal giving followed the same path. Cohn gave $26,700 to the Democratic Senatorial Campaign Committee in 2006 and $55,500 during the 2008 election cycle, and none to its GOP equivalent. But Cohn donated $30,800 to the National Republican Senatorial Committee in 2012 and another $33,400 to the National Republican Congressional Committee in 2015, without contributing a dime to the DSCC. Cohn gave $5,000 to Massachusetts Republican Scott Brown weeks after news broke that Elizabeth Warren -- an outspoken critic of Goldman and other Wall Street players -- might try to capture his U.S. Senate seat, which she did in 2012.

Goldman Sachs, under Cohn and Blankfein, was hardly chastened, continuing to play fast and loose with existing rules even as it plunged millions of dollars into fending off new ones. In 2010, the SEC ran a sting operation looking for banks willing to trade favorable assessments by its stock analysts for a piece of a Toys R Us IPO if the company went public. Goldman took the bait, for which they would pay a $5 million fine. An employee working out of Goldman's Boston office drafted speeches, vetted a running mate, and negotiated campaign contracts for the state treasurer during his run for Massachusetts governor in 2010, despite a rule forbidding municipal bond dealers from making significant political contributions to officials who can award them business. According to the SEC, Goldman had underwritten $9 billion in bonds for Massachusetts in the previous two years, generating $7.5 million in fees. Goldman paid $12 million to settle the matter in 2012.

Just two years later, Goldman officials were again summoned by the Senate Permanent Subcommittee on Investigations to address charges that the bank under Cohn and Blankfein had boosted its profits by building a "virtual monopoly" in order to inflate aluminum prices by as much as $3 billion.

The last few years have brought more unwanted attention. In 2015, the U.S. Justice Department launched an investigation into Goldman's role in the alleged theft of billions of dollars from a development fund the firm had helped create for the government of Malaysia. Federal regulators in New York state fined Goldman $50 million because its leaders failed to effectively supervise a banker who leaked stolen confidential government information from the Fed, which hit the firm with another $36.3 million in penalties. In December, the CFTC fined Goldman $120 million for trying to rig interest rates to profit the firm.

Politically, 2016 would prove a strange year for Goldman. Bernie Sanders clobbered Hillary Clinton for pocketing hundreds of thousands of dollars in speaking fees from Goldman, while Trump attacked Ted Cruz for being "in bed with" Goldman Sachs. (Cruz's wife Heidi was a managing director in Goldman's Houston office until she took leave to work on her husband's presidential campaign.) Goldman would have "total control" over Clinton, Trump said at a February 2016 rally, a point his campaign reinforced in a two-minute ad that ran the weekend before Election Day. An image of Blankfein flashed across the screen as Trump warned about the global forces that "robbed our working class."

Goldman's giving in the presidential race appears to reflect polls predicting a Clinton win and the firm's desire for a political restart on deregulation. People who identified themselves as Goldman Sachs employees gave less than $5,000 to the Trump campaign compared to the $341,000 that the firm's people and PACs contributed to Clinton. Goldman Sachs is relatively small compared to retail banking giants.

Yet, according to the Center for Responsive Politics , no bank outspent Goldman Sachs during the 2016 political cycle. Its PACs and people associated with the firm made $5.6 million in political contributions in 2015 and 2016. Even including all donations to Clinton, 62 percent of Goldman's giving ended up in the coffers of Republican candidates, parties, or conservative outside groups.

5. TROJAN HORSE

There's ultimately no great mystery why Donald Trump selected Gary Cohn for a top post in his administration, despite his angry rhetoric about Goldman Sachs. There's the high regard the president holds for anyone who is rich -- and the instant legitimacy Cohn conferred upon the administration within business circles. Cohn's appointment reassured bond markets about the unpredictable new president and lent his administration credibility it lacked among Fortune 100 CEOs, none of whom had donated to his campaign. Ego may also have played a role. Goldman Sachs would never do business with Trump, the developer who resorted to foreign banks and second-tier lenders to bankroll his projects. Now Goldman's president would be among those serving in his royal court.

Who can say precisely why Cohn, a Democrat, said yes when Trump asked him to be his top economic aide? No doubt Cohn has been asking himself that question in recent weeks. But he'd hit a ceiling at Goldman Sachs. In September 2015, Goldman announced that Blankfein had lymphoma, ramping up speculation that Cohn would take over the firm. Yet four months later, after undergoing chemotherapy, Blankfein was back in his office and plainly not going anywhere. Cohn was 56 years old when he was invited to Trump Tower. An influential job inside the White House meant a face-saving exit -- and one offering a huge financial advantage.

Trump spoke of the great financial price Cohn paid to join him in the White House during his speech in Cedar Rapids. But something like the opposite was true. A huge amount of Cohn's wealth was tied up in Goldman stock. By entering government, he could sell his stake in the firm to comply with federal ethics laws. That way he could diversify his holdings and avoid roughly $50 million in capital gains taxes -- at least until he sold the replacement assets.

A job in the White House might also prove an outlet for his frustrations with politicians and regulators intent on reining in the worst impulses of Wall Street. Trump was Trump, but he had also vowed to dismantle financial reform. "Dodd-Frank has made it impossible for bankers to function," Trump said during the campaign. The new president had the potential to serve as a vessel for Goldman's corporate interests.

"Maybe the one thing that holds this administration together is a belief that markets know best, and the least regulation is the best regulation," said Dennis Kelleher of Better Markets. "Goldman's interests fit with that very nicely."

Trump had given Steve Mnuchin, his campaign finance chair, the grander title. But taking over as Treasury secretary meant being confirmed by the Senate. Mnuchin's confirmation vote was delayed after it was revealed that he'd neglected to list $95 million in assets (including homes in New York, Los Angeles, and the Hamptons) on his Senate Finance Committee disclosure forms and failed to disclose his ties to an offshore hedge fund registered in the Cayman Islands. Mnuchin was not confirmed until mid-February. The president's pick for commerce secretary, Wilbur Ross, a financier who had bailed out several of Trump's casinos a few decades earlier, was not confirmed until the end of February.

As a presidential aide, Cohn did not need Senate approval. He was part of the skeletal crew that arrived at the White House on day one, giving him a critical head start on wielding his clout and cultivating his relationship with the new president. At that point, Trump was summoning Cohn to the Oval Office for impromptu meetings as many as five times a day .

In early February, Trump signed an executive order giving his Treasury secretary 120 days to give him a hit list of regulations the administration could eliminate. But with Mnuchin yet to be confirmed, the task appeared to land in Cohn's eager hands. He was standing at the president's shoulder when Trump said, "We expect to be cutting a lot out of Dodd-Frank." Shares in Goldman Sachs, which had jumped by 28 percent after the election, rose another $6 a share that day. Soon Cohn was coordinating Trump's plans not only for rolling back regulations, but also for creating jobs and slashing taxes. He met with a health care specialist, along with House Speaker Paul Ryan and other Republican leaders, to discuss alternatives to the Affordable Care Act.

Proximity is power inside any White House, especially in this one, where policy often seems shaped by Trump's last conversation. Treasury is several blocks away, while Cohn's office was in the West Wing, directly across the hall from Bannon's. Operating within a chaotic administration, Cohn was reportedly energized and focused, working around the clock. Cohn is a tenacious practitioner who, after ascending to the heights of Goldman Sachs, could teach a master class on the art of seizing a leadership vacuum and building alliances. On day 39 of the new administration, the White House sent out a press release introducing the "best-in-class team" Cohn had assembled "to drive President Trump's bold plan for job creation and economic growth." The 13 advisers included familiar figures who had worked for George W. Bush or his father, but they also included at least three former lobbyists so conflicted they would need an ethics waiver to work in the White House. For instance, Michael Catanzaro , the man Cohn chose to oversee energy policy, was until last year a lobbyist for such oil, gas, and coal companies as Devon Energy and Talen Energy. Shahira Knight had been a lobbyist for Fidelity, the mutual fund giant, before joining Cohn's team.

Cohn's strategy in those early months was to make himself indispensable to the new president. Cohn emerged as one of the few people around Trump comfortable interrupting him during a meeting or openly disagreeing on points of policy. The New York Times reported that Trump often turned to Cohn during a meeting and asked him directly, "What do you want to do?" Early on, Trump referred to Cohn as "one of my geniuses" -- a quote Reuters attributed to a "source close to Cohn."

Soon, major media were painting Cohn as a leading centrist inside the Trump White House because he had staked out positions on immigration, international alliances, and global warming at odds with Bannon's hard-right nationalism. Bannon and his allies only bolstered this narrative by characterizing "Carbon Tax Cohn" and his allies, Jared Kushner and Ivanka Trump, as interlopers -- "the Democrats," as some inside the White House called them. "Within Trump's Inner Circle, a Moderate Voice Captures the President's Ear," read the headline of a Cohn profile in the Washington Post.

"Led by Gary Cohn and Dina Powell -- two former Goldman Sachs executives often aligned with Trump's elder daughter and his son-in-law -- the group and its broad network of allies are the targets of suspicion, loathing and jealousy from their more ideological West Wing colleagues," the Washington Post reported. Fueling the rage of the ideologues, Cohn and his allies were largely winning. Trump dropped Bannon from the National Security Council and elevated Powell to deputy national security adviser. When, after Charlottesville, false reports leaked that Cohn was so disgusted with the president he was resigning, blue-chip stocks slid down. Instead, Bannon was out. Cohn, despite reports that he invoked Trump's wrath for critical remarks to the Financial Times, was still in and expected to deliver the president a win on corporate taxes.

On the day it was announced that he was joining the Trump administration, Cohn said on a goodbye podcast for Goldman Sachs, "You look at the size of our capital. You look at the size of our balance sheet. You look at the size of our people -- it's just enormous." More than $40 billion had flowed into the bank in 2016, bringing the bank's assets under management to a record $1.38 trillion. That meant pressure to find ways to put that money to work -- an enormous challenge if regulators finally shut down Goldman's prop trading arm.

How exactly could Cohn recuse himself from matters involving Goldman when almost every aspect of his job has the potential to either grow Goldman's profits and inflate its stock price -- or tank them both?

"To the extent Goldman Sachs is a direct party in a matter, Gary will recuse himself," a source familiar with the situation said. But, the source added, "As NEC director, Gary is going to touch on matters on the day-to-day economy as a whole and Goldman Sachs is a participant in the economy, thus Gary will indirectly touch on things that affect Goldman Sachs along with other banks and institutions."

Yet rather than publicly recuse himself on attempts to undo Dodd-Frank, Cohn has led the charge from inside the White House. On that matter, Cohn is a walking, talking conflict of interest .

While at Goldman, Cohn had personally met with officials at the Commodity Futures Trading Commission to discuss the derivatives reform plank of Dodd-Frank, an arena in which Goldman is a dominant player. He had taken issue with rules imposed by Dodd-Frank that require banks to keep more capital on hand. Requiring banks to hold more money in reserve made them "unequivocally" safer than before 2008, he said in a 2015 interview while still Goldman's president, but he complained that Goldman was now able to lend less money, hurting profits. And then there's the Volcker Rule. Cohn, while still president of the firm, had traveled to D.C. at least twice to personally lobby regulators about its implementation.

These days, it can be hard to tell whether Cohn is speaking as a high-ranking White House official or a former Goldman Sachs executive.

In the wake of Trump's February call for a rollback in financial regulations, Cohn vowed in an interview with Bloomberg TV, "We're going to attack all aspects of Dodd-Frank." The first example he gave: the Volcker Rule, which he cast as harmful to the country's competitive advantage. In an interview that same day with Fox Business, he homed in on another Goldman obsession: Dodd-Frank's capital requirements. "Banks are forced to hoard money because they are forced to hoard capital, and they can't take any risks," he said. Mortgage, auto, credit card lending, and commercial lending are all up since 2010. Yet Cohn told Fox viewers, "We need to get banks back in the lending business, that's our No. 1 objective."

Roy Smith, a former Goldman partner now teaching at the NYU Stern School of Business, argues that Cohn should avoid the administration's effort to unwind Dodd-Frank altogether, but "at a very minimum he has to excuse himself whenever the discussion turns to Volcker." But Smith said he has trouble imagining Cohn leaving the room when Volcker comes up. "The hard part for someone like Cohn is that he knows where all the pain points are with Volcker and other parts of Dodd-Frank," Smith said. "His every instinct would be to get involved."

Beyond deregulation, two other pillars of Trump's economic plan -- cutting taxes and investing in infrastructure -- would have dramatic impacts on Goldman's bottom line.

Thanks to loopholes, many Fortune 500 corporations pay little or no corporate income tax at all. By contrast, Goldman Sachs typically pays taxes near the official 35 percent federal tax rate. In 2014, for instance, Goldman paid $3.9 billion in taxes on profits of $12.4 billion, or 31 percent. Last year, the firm's tax bill was $2.7 billion on profits of $10.3 billion, or 28 percent. In that same Fox Business interview, Cohn said that "lower corporate taxes" was the White House's "starting point" on tax reform; cuts to personal income taxes were a secondary concern.

Under the plan Cohn and Mnuchin announced last spring, what Cohn called "one of the biggest tax cuts in the American history," corporate taxes would be capped at 15 percent. If Cohn succeeds, Goldman will save massive sums: At that rate, Goldman would have paid $2 billion less in taxes in 2014, $1.4 billion less in 2015, and $1.4 billion less in 2016. The Koch brothers' network of political groups has already spent millions of dollars to promote the proposal. Even Blankfein, who the Trump campaign singled out in the commercial it ran in the final days of the campaign, acknowledged in a voicemail to employees that Trump's commitment to tax cuts, deregulation, and infrastructure "will be good for our clients and our firm."

The details of the president's "$1 trillion" infrastructure plan are similarly favorable to Goldman. As laid out in the administration's 2018 budget, the government would spend only $200 billion on infrastructure over the coming decade. By structuring "that funding to incentivize additional non-Federal funding" -- tax breaks and deals that privatize roads, bridges, and airports -- the government could take credit for "at least $1 trillion in total infrastructure spending," the budget reads.

It was as if Cohn were still channeling his role as a leader of Goldman Sachs when, at the White House in May, he offered this advice to executives: "We say, 'Hey, take a project you have right now, sell it off, privatize it, we know it will get maintained, and we'll reward you for privatizing it.'" "The bigger the thing you privatize, the more money we'll give you," continued Cohn. By "we," he clearly meant the federal government; by "you," he appeared to be speaking, at least in part, about Goldman Sachs, whose Public Sector and Infrastructure group arranges the financing on large-scale public sector deals. "Goldman Sachs is one of the largest infrastructure fund managers globally," according to infrastructure advisory firm InfraPPP Partners , "having raised more than $10 billion of capital since the inception of the business in 2006." Lost in the infamous press conference the president gave in the lobby of Trump Tower a few days after Charlottesville, with Cohn and Mnuchin visibly uncomfortable at his right flank, were Trump's remarks on infrastructure, the ostensible purpose of the event. The thrust was that the president would grease the wheels for project approvals by signing an executive order rolling back environmental impact requirements and other elements of an "overregulated permitting process."

In countless other ways, Cohn is positioned to help the firm that has been so good to him over the years. The country's National Economic Council adviser might caution a president against running too large a deficit, especially amid a healthy economy. But Goldman Sachs is in the business of finding investors to underwrite government debt. An economic adviser might caution a populist president that corporate inversions often cost jobs and tax revenue. Instead, Trump has ordered a review of policies Obama put in place to discourage them -- good news for Cohn's former colleagues. Transparency has been a watchword of initial public offerings dating back at least to the Securities and Exchange Act of 1934, but easing those rules, a step Goldman has sought, could potentially generate hundreds of millions of dollars in fees for investment banks such as Goldman. The SEC announced in June that it would allow any company going public to withhold details of its finances and strategies, an exemption previously available only to firms with under $1 billion in revenue -- more good tidings for Goldman. Just loosening the rules for IPOs, said Tyler Gellasch, the former Senate staffer, "could mean hundreds of millions of dollars more to Goldman."

In June, the Treasury Department released a statement of principles about the administration's approach to financial regulation focused on promoting "liquid and vibrant markets." Not surprisingly, the report included a call to ease capital requirements and substantially amend the Volcker Rule.

It's Cohn's influence over the country's regulators that worries Dennis Kelleher, the financial reform lobbyist. "To him, what's good for Wall Street is good for the economy," Kelleher said of Cohn. "Maybe that makes sense when a guy has spent 26 years at Goldman, a company who has repaid his loyalties and sweat with a net worth in the hundreds of millions." Kelleher recalls those who lost a home or a chunk of their retirement savings during a financial crisis that Cohn helped precipitate. "They're still suffering," he said. "Yet now Cohn's in charge of the economy and talking about eliminating financial reform and basically putting the country back to where it was in 2005, as if 2008 didn't happen. I've started the countdown clock to the next financial crash, which will make the last one look mild."

This article was reported in partnership with The Investigative Fund at The Nation Institute.

[Oct 24, 2017] When will Trump voters realize they've been had Defend Democracy Press

Oct 24, 2017 | www.defenddemocracy.press

See if you can put it all together from the resumes of those in President-elect Donald Trump's closest political circle so far:

  1. Treasury secretary nominee Steven Mnuchin: Goldman Sachs.
  2. Chief strategist Steve Bannon: Goldman Sachs .
  3. Transition adviser Anthony Scaramucci: Goldman Sachs.
  4. Commerce secretary nominee Wilbur Ross: Rothschild & Co.
  5. Possible budget director Gary Cohn: Goldman Sachs.

[Oct 08, 2017] Financialization: theoretical analysis and historical perspectives by Costas Lapavitsas

Highly recommended!
The author introduces an important notion of 'financial expropriation' which is at the core of "casino capitalism". Role of finance as a mediator between people and privatized services led to extraction of new type of rent.
Notable quotes:
"... Financial capital permeates economic activity, and interacts with financial markets in ways capable of generating enormous profits but also precipitating global crises. ..."
"... The economic processes - and the social relations - characteristic of financialization represent a milestone in the development of capitalism. ..."
"... A long boom occurred, lasting until 1973-74, during which production became increasingly dominated by transnational monopolistic enterprises, while finance operated under a system of controls domestically and internationally. For nearly three decades, the US was the dominant economic force in global production and trade. ..."
"... . Since the 1970s, there have been profound changes in production methods deriving from information and telecommunications technologies. Transnational enterprises have become dominant over global production and international trade. The centre of gravity of global productive capacity has partly shifted from mature economies in the West toward rising economies in the East, primarily China. ..."
"... The most striking feature of the period, however, has been the rise of finance, the start of which can be usefully placed in the late 1970s. The financial sector had become progressively larger in the 1950s and 1960s, while still operating within the regulatory framework characteristic of the long post-war boom ..."
"... The three decades that followed have witnessed unprecedented expansion of financial activities, rapid growth of financial profits, permeation of economy and society by financial relations, and domination of economic policy by the concerns of the financial sector. At the same time, the productive sector in mature countries has exhibited mediocre growth performance, profit rates have remained below the levels of the 1950s and 1960s, unemployment has generally risen and become persistent, and real wages have shown no tendency to rise in a sustained manner. ..."
"... Bretton Woods had enforced the convertibility of the US dollar into gold at S35 to the ounce, thus fixing exchange rates during the long boom. Its collapse led to the gradual emergence of alternative international monetary arrangements based on the US dollar functioning as inconvertible quasi-world-money. The new arrangements have generated considerable instability of exchange and interest rates, thereby spurring the growth of international financial markets. ..."
"... Growth of international capital flows during the same period, partly in response to exchange and interest rate instability, has led to financialization in developing countries. ..."
"... The ascendancy of central banks is hardly surprising, since financialization in general would have been impossible without active and continuous intervention by the state. Financialization has depended on the state to deregulate the financial system with regard to prices, quantities, functions and cross-border flows of capital. Equally, financialization has depended on the state to regulate the adequacy of own capital, the management of risk, and the rules of competition among financial institutions. ..."
"... Ultimately, however, the rise of finance has resulted from changes deep within capitalist accumulation. Three characteristic tendencies of accumulation in mature countries have shaped financialization as a structural transformation of contemporary capitalism. First, non-financial enterprises have become increasingly involved in financial processes on an independent basis, often undertaking financial market trans-actions on own account. The financialization of industrial and commercial enterprises has affected their profitability, internal organization, and investment outlook. Non-financial enterprises have become relatively more remote from banks and other financial institutions. Second, banks have focused on transacting in open financial markets with the aim of making profits through financial trading rather than through outright borrowing and lending. At the same time banks have turned toward individual and household income as a source of profit, often combining trading in open markets with lending to households, or collecting household savings. Third, individuals and households have come increasingly to rely on the formal financial system to facilitate access to vital goods and services, including housing, education, health, and transport. The savings of households and individuals have also been increasingly mobilized by the formal financial system. ..."
"... Financialization reflects a growing asymmetry between production and circulation - particularly the financial component of the latter - during the last three decades. The asymmetry has arisen as the financial conduct of non-financial enterprises, banks and households has gradually changed, thus fostering a range of aggregate phenomena of financialization. A telling aspect of the transformation has been the rise of profits accruing through financial transactions, including new forms of profit that could even be unrelated to surplus value. This process is summed up as 'financial expropriation' in subsequent chapters. ..."
"... The most important development in the evolution of derivatives trading in recent years has been the move to cash settlement of the contract, thus freeing the counter- parties from the need to deliver the underlying asset. On this basis, derivatives have become essentially a punt on the future direction of the price of the underlying asset that is subsequently settled in cash. ..."
"... In effect, the derivative has become what could be called a contract-for-differences - an agreement between buyer and seller to exchange the difference between the current value of a share, currency, commodity, or index and its value at maturity of the contract. ..."
"... the core of the enormously expanded derivatives markets lie a few international banks, which have also been one of the driving forces of financialization. Banks are the pillar of contemporary of the 1980s to the end of the 2000s the notional outstanding appears to have doubled every two or three years for most of the period. ..."
"... These dealers werelarge global banks that were also fundamental to financialization. The same banks were among the largest participants in the exchange-traded markets, though data is hard to obtain for the latter. There is no doubt, however, that the large dealer banks were heavily involved in the management of the 'exchanges', including determination of risk management procedures and 'margin' levels. ..."
"... In short, the banks that dominate derivatives trading are also the banks that set the interest rate at which derivatives are traded and valued, although the banks are not obliged to trade at the declared rate. No wonder, then, that one of the most egregious scandals of financialization appears to be the manipulation of the LIBOR by large dealer banks, a matter which has been under police investigation since 2010. ..."
"... The problem is not a few 'rotten apples' amidst the LIBOR committee, criminally colluding with each other and with brokers to influence the LIBOR. Rather, a deeply flawed structure has allowed dealer banks to dominate derivatives markets while effectively manipulating the terms of derivatives trading. ..."
Jan 14, 2014 | www.amazon.com

Extracted from the chapter 1 of this book Profiting Without Producing How Finance Exploits Us All Costs

1. Introduction: the rise and rise of finance

The crisis of the 2000s will prove fertile ground for economic historians for decades to come with regard to both its causes and consequences. However, the crisis has already had one definite outcome: it has finally lifted the curtain on the transformation of mature and developing capitalist economies during the last three decades, confirming the pivotal role of finance, both domestically and internationally. Financial capital permeates economic activity, and interacts with financial markets in ways capable of generating enormous profits but also precipitating global crises. In terms that will be used throughout this book, contemporary capitalism is 'financialized' and the turmoil commencing in 2007 is a crisis of 'financialization'.

The economic processes - and the social relations - characteristic of financialization represent a milestone in the development of capitalism. The catalyst of crisis in 2007 was speculative mortgage lending to the poorest workers in the US during the 2000s, the loans being subsequently traded in 'securitized' form in global financial markets. It is hard to exaggerate what an extraordinary fact this is. Under conditions of classical, nineteenth-century capitalism it would have been unthinkable for a global disruption of accumulation to materialize because of debts incurred by workers, including the poorest. But this is precisely what has happened under conditions of financialized capitalism, an economic and social system that is much more sophisticated than its nineteenth-century predecessor.

Financialization has emerged gradually during recent decades, and its content and implications are the focus of this book. To be sure, capitalist economies are continually restructured due to pressures of competition and to the underlying drive to maintain profitability. However, some transformations have a distinctive historical significance, and financialization is one of those. The change that has taken place in mature capitalist economies and societies since the late 1970s requires appropriate attention to be paid to finance. Consider the following features of financialization to substantiate this claim. Context and structural aspects of financialization

Mature capitalism has been historically marked by deep transformations of economy and society. Toward the end of the nineteenth century, for instance, there emerged new methods of production in heavy industry, accompanied by the rise of monopolistic, joint-stock enterprises. The change coincided with a long depression, 1873-96, and led to a rebalancing of global productive power away from Britain and toward the US and Germany. Similarly, at the end of the Second World War, mass consumption emerged across several developed countries based on methods of mass production. A long boom occurred, lasting until 1973-74, during which production became increasingly dominated by transnational monopolistic enterprises, while finance operated under a system of controls domestically and internationally. For nearly three decades, the US was the dominant economic force in global production and trade.

The transformation represented by financialization is of a similar order of importance. Since the 1970s, there have been profound changes in production methods deriving from information and telecommunications technologies. Transnational enterprises have become dominant over global production and international trade. The centre of gravity of global productive capacity has partly shifted from mature economies in the West toward rising economies in the East, primarily China. Meanwhile, the institutional framework of capitalist activity has been altered as deregulation has prevailed in important markets, above all, for labour and finance. Throughout this period, accumulation has lacked dynamism in mature countries, inequality was exacerbated, and crises have become sharper and more frequent.

The most striking feature of the period, however, has been the rise of finance, the start of which can be usefully placed in the late 1970s. The financial sector had become progressively larger in the 1950s and 1960s, while still operating within the regulatory framework characteristic of the long post-war boom. However, even by the late 1970s, the domestic and international importance of finance remained modest.

The three decades that followed have witnessed unprecedented expansion of financial activities, rapid growth of financial profits, permeation of economy and society by financial relations, and domination of economic policy by the concerns of the financial sector. At the same time, the productive sector in mature countries has exhibited mediocre growth performance, profit rates have remained below the levels of the 1950s and 1960s, unemployment has generally risen and become persistent, and real wages have shown no tendency to rise in a sustained manner.

An asymmetry has emerged between the sphere of production and the ballooning sphere of circulation. The rise of finance has been predicated 011 a radical alteration of the monetary framework of capitalist accumulation, both internationally and domestically. International monetary conditions have been stamped by the collapse of the Bretton Woods Agreement in 1971-73. Bretton Woods had enforced the convertibility of the US dollar into gold at S35 to the ounce, thus fixing exchange rates during the long boom. Its collapse led to the gradual emergence of alternative international monetary arrangements based on the US dollar functioning as inconvertible quasi-world-money. The new arrangements have generated considerable instability of exchange and interest rates, thereby spurring the growth of international financial markets.

Growth of international capital flows during the same period, partly in response to exchange and interest rate instability, has led to financialization in developing countries. Domestic monetary conditions, in contrast, have been marked by the steady accumulation of power by central banks as controllers of credit money backed by the state. Central banks have emerged as the dominant public institution of financialization, the defender of the interests of the financial sector.

The ascendancy of central banks is hardly surprising, since financialization in general would have been impossible without active and continuous intervention by the state. Financialization has depended on the state to deregulate the financial system with regard to prices, quantities, functions and cross-border flows of capital. Equally, financialization has depended on the state to regulate the adequacy of own capital, the management of risk, and the rules of competition among financial institutions. Even more decisively, financialization has depended on the state to intervene periodically to underwrite the solvency of banks, to provide extraordinary liquidity and to guarantee the deposits of the public with banks.

Ultimately, however, the rise of finance has resulted from changes deep within capitalist accumulation. Three characteristic tendencies of accumulation in mature countries have shaped financialization as a structural transformation of contemporary capitalism. First, non-financial enterprises have become increasingly involved in financial processes on an independent basis, often undertaking financial market trans-actions on own account. The financialization of industrial and commercial enterprises has affected their profitability, internal organization, and investment outlook. Non-financial enterprises have become relatively more remote from banks and other financial institutions. Second, banks have focused on transacting in open financial markets with the aim of making profits through financial trading rather than through outright borrowing and lending. At the same time banks have turned toward individual and household income as a source of profit, often combining trading in open markets with lending to households, or collecting household savings. Third, individuals and households have come increasingly to rely on the formal financial system to facilitate access to vital goods and services, including housing, education, health, and transport. The savings of households and individuals have also been increasingly mobilized by the formal financial system.

The transformation of the conduct of non-financial enterprises, banks and households constitutes the basis of financialization. Examining these relations theoretically and empirically, and thus establishing the deeper content of financialized capitalism, is the main task of this book. Hie concepts and methods deployed for the purpose derive from Marxist political economy. To summarize, the capitalist economy is treated as a structured whole that comprises different spheres of activity - namely production, circulation, and distribution - among which production is dominant. Both production and circulation possess their own internal logic, even though the two spheres are inextricably linked. Production creates value; its motive is profit (surplus value) deriving from the exploitation of labour; its aim is the accumulation of capital. Circulation does not create value; it results in profits, but these derive mostly - though not exclusively - from redistributing surplus value. Finance is a part of circulation, but also possesses mechanisms standing aside commodity trading and its corresponding flows of money. The traded object of finance is loanable money capital, the cornerstone of capitalist credit. Production, circulation and distribution give rise to class relations, pivoting on the ownership of the means of production, but also determined by the appropriation of profits.

Financialization reflects a growing asymmetry between production and circulation - particularly the financial component of the latter - during the last three decades. The asymmetry has arisen as the financial conduct of non-financial enterprises, banks and households has gradually changed, thus fostering a range of aggregate phenomena of financialization. A telling aspect of the transformation has been the rise of profits accruing through financial transactions, including new forms of profit that could even be unrelated to surplus value. This process is summed up as 'financial expropriation' in subsequent chapters. New social layers have emerged as financial profit has burgeoned.

Financial markets and banks

It might seem paradoxical at first sight to associate financialization with the conduct of banks, given that the rise of finance has had far more extravagant aspects. Financializa- tion, for instance, appears to relate more to the global spread of financial markets, the proliferation of traded financial instruments, and the emergence of novel, market-re- lated financial transactions, rather than to the behaviour of banks. Compared to the expanding and rapidly changing world of financial markets, banks seem old-fashioned and even staid. And yet, as is shown in the rest of the book, banks have been a decisive factor in the financialization of capitalism. Banks remain the cornerstone of contempo- rary finance and several of the most visible market-related features of financialization emanate from banks. It is not accidental that the crisis of financialization in the late 2000s has revolved around banks rather than other financial institutions.

To establish the importance of banks in the course ot financialization consider some general features of the derivatives markets, arguably the most prominent finan- cial markets of recent years.1 Simply put, a derivative is a contract that establishes a claim on an underlying asset - or on the cash value of that asset - which must be executed at some definite point in the future. The underlying asset could be a com- modity, such as wheat; or another financial asset, such as a bond; or a financial price, for example the value of a currency; or even an entirely non-economic entity like the weather. The units of the underlying asset stated on the contract and multiplied by the spot price define the notional value of the derivative. Historically, derivatives have been associated with agricultural production: a forward or a futures contract would specify the quantity and price of an agricultural commodity that would be delivered at a definite point in the future. A forward contract would be a private agreement between two parties agreeing to trade some specific output at a certain price and time (e.g., the wheat produced by one of the contracting parties); a futures contract would also be a private agreement between two parties but the commodity traded would be generic (e.g., any wheat of a certain type and quality).

Capitalist farmers could use derivatives to hedge against unforeseen fluctuations in the price of output. In addition to hedging, derivatives could also be used to speculate on the future movement of prices, or to arbitrage among different markets exhibiting unwarranted price divergences in the underlying asset. Thus, the standard way of intro- ducing derivatives in textbooks is as instruments that make for hedging, speculation or arbitrage among market traders.* Derivatives markets are typically perceived as spontaneously emerging entities which supplement the services offered by the markets in underlying assets, and hence improve the efficiency of the capitalist economy. Even with this simple definition of derivatives, a key distinction is apparent - one between a contract that meets the specific conditions of two counterparties (a for- ward) and a contract that is more generic and could be traded freely in open mar- kets (a future). The former is similar to an over-the-counter derivative, the latter to an exchange-traded derivative. They represent two different ways of undertaking the trading process - the forward depends on the specific decisions of the trading parties, the future depends on the impersonal and 'third' institution of the 'exchange' which organizes the trading. The exchange' standardizes futures contracts, steps between buyers and sellers to clear purchases and sales by the counterparties and, critically, demands a daily 'margin' in cash as protection from failure to meet contracted obli- gations at maturity.

The most important development in the evolution of derivatives trading in recent years has been the move to cash settlement of the contract, thus freeing the counter- parties from the need to deliver the underlying asset. On this basis, derivatives have become essentially a punt on the future direction of the price of the underlying asset that is subsequently settled in cash. Consequently, the trading of derivatives has come to include underlying assets that could never be delivered, such as a stock market index.

In effect, the derivative has become what could be called a contract-for-differences - an agreement between buyer and seller to exchange the difference between the current value of a share, currency, commodity, or index and its value at maturity of the contract. If the difference is positive, the seller pays the buyer; if it is negative, the buyer is the one who loses money. Profit, in this context, depends on the difference between a fixed financial parameter and its uncertain value in the future.4

Spurred by cash settlement, the growth ol derivatives markets in the years of financialization has been breathtaking: from practical irrelevance in the 1980s, their notion- al sum in 2011 was in the vicinity of 700 trillion US dollars for over-the-counter and probably a similar sum for exchange-traded derivatives.' Yet, at the core of the enormously expanded derivatives markets lie a few international banks, which have also been one of the driving forces of financialization. Banks are the pillar of contemporary of the 1980s to the end of the 2000s the notional outstanding appears to have doubled every two or three years for most of the period.

Consider now the role of banks in these enormous markets. The importance of banks is most apparent in the over-the-counter market, which naturally lacks the organizing role played by the exchange' in the exchange-traded market. Banks func- tion as market-makers, that is, as agents that stand ready to buy and sell in the over- the-counter market; they are the dealers that are integral to market functioning. Banks also provide the necessary market infrastructure through vital market institutions such as the International Swaps and Derivatives Association (ISDA). Table 2 classifies over-the-counter transactions in terms of the counterparties, which are split into dealer banks, other financial institutions, and non-financial customers.8

... ... ...

Approximately US sjotn is not allocated either because it refers to commodity derivatives, or because it represents adjustments in BIS statistics. In practice, over-the-counter derivatives function as banking instruments. Almost a third of the trading in over-the-counter derivatives in 2011 took place in dealer-to-deal- er transactions, while all transactions had at least one dealer bank as a counterparty. There were, perhaps, seventy sizeable dealer banks in about twenty countries transact- ing with many thousands of end users of derivatives; indeed, concentration appears to have been even greater than that, and perhaps fifteen to twenty dealers controlled the overwhelming bulk of over-the-counter trading across the world."

These dealers werelarge global banks that were also fundamental to financialization. The same banks were among the largest participants in the exchange-traded markets, though data is hard to obtain for the latter. There is no doubt, however, that the large dealer banks were heavily involved in the management of the 'exchanges', including determination of risk management procedures and 'margin' levels.

Given the dominant presence of banks in the derivatives markets, it is hardly surprising that banks have encouraged the broadening of derivatives trading to include underlying assets with which they are most familiar - financial securities. Table 2 shows that less that ю percent of over-the-counter transactions actually involved non-financial enterprises: the great bulk comprised transactions that took place among financial institutions, and thus referred mostly to financial derivatives. In fact, growth in the derivatives markets has generally been dominated by inter- est-rate and foreign-exchange derivatives; since the early 2000s the strongest growth has been in credit default swaps (CDS), which are briefly discussed in Part III of this book.10

The price of financial derivatives depends, among other factors, on the rate of interest, and the rate that is typically used to value most financial derivatives is the London Interbank Offered Rate (LIBOR). The LIBOR is determined by a committee comprising several of the banks that dominate the derivatives markets; its determination involves the simple averaging of interest rates (excluding outliers) submitted by LIBOR committee banks daily. These are rates at which the LIBOR banks think that they can borrow from each other, although no LIBOR bank is obliged to undertake borrowing at the submitted rate. The LIBOR acts as a rate of interest that determines the value of derivatives, but it is not a rate of interest in the normal sense since no actual transactions need to take place at the rates declared by the committee banks.

In short, the banks that dominate derivatives trading are also the banks that set the interest rate at which derivatives are traded and valued, although the banks are not obliged to trade at the declared rate. No wonder, then, that one of the most egregious scandals of financialization appears to be the manipulation of the LIBOR by large dealer banks, a matter which has been under police investigation since 2010.

The problem is not a few 'rotten apples' amidst the LIBOR committee, criminally colluding with each other and with brokers to influence the LIBOR. Rather, a deeply flawed structure has allowed dealer banks to dominate derivatives markets while effectively manipulating the terms of derivatives trading.

Banks are at the heart of the derivatives markets which have been such a prominent feature of financialization. Derivatives markets rely on banks, in particular on the price-making skills and general organizational capabilities of banks. Indeed, banks are so dominant in derivatives markets that they are even capable of manipulating the key rate on the basis of which derivatives prices are formed. The vast growth of derivatives markets reflects in part the turn of banks toward trading in open financial markets, which is one of the fundamental tendencies of financialization. In sum, at the root of financialization lie the vast banks of mature and other economies. The theoretical and empirical analysis of financialization in the rest of this book, therefore, focuses on banks as well as non-financial enterprises and households.

[Oct 07, 2017] Goldman Sachs' Abacus Program had its banksters create designed-to-fail financial products for customers (they were called 'muppets'), so that GS could then bet against them!

Oct 07, 2017 | discussion.theguardian.com

KSurin -> Elysiumfire , 1 Jan 2014 19:12

I wondered how a bank could sell toxic assets to another financial institution, and even more, that other institutions would buy them.

Or flogging designed to fail financial products to one's own customers?

Goldman Sachs' Abacus Program had its banksters create designed-to-fail financial products for customers (they were called 'muppets'), so that GS could then bet against them!

[Oct 07, 2017] Finances hold on our everyday life must be broken by Costas Lapavitsas

Highly recommended!
Yves Smith's ebook is available free here. It covers the same set of topics and is useful add on to Costas Lapavitsas book.
Notable quotes:
"... Financialisation represents a historic and deep-seated transformation of mature capitalism. Big businesses have become "financialised" as they have ample profits to finance investment, rely less on banks for loans and play financial games with available funds. Big banks, in turn, have become more distant from big businesses, turning to profits from trading in open financial markets and from lending to households. Households have become "financialised" too, as public provision in housing, education, health, pensions and other vital areas has been partly replaced by private provision, access to which is mediated by the financial system. Not surprisingly, households have accumulated a tremendous volume of financial assets and liabilities over the past four decades. ..."
"... Financialisation has also created new forms of profit associated with financial markets and transactions. Financial profit can be made out of any income, or any sum of money that comes into contact with the financial sphere. Households, for example, generate profits for finance as debtors (mostly by paying interest on mortgages) but also as creditors (mostly by paying fees and charges on pension funds and insurance). Finance is not particular about how and where it makes its profits, and certainly does not limit itself to the sphere of production. It ranges far and wide, transforming every aspect of social life into a profit-making opportunity. ..."
"... Financialised capitalism is, thus, a deeply unequal system, prone to bubbles and crises – none greater than that of 2007-09. What can be done about it? The most important point in this respect is that financialisation does not represent an advance for humanity, and very little of it ought to be preserved. Financial markets are, for instance, able to mobilise advanced technology employing some of the best-trained physicists in the world to rebalance prices across the globe in milliseconds. This "progress" allows financiers to earn vast profits; but where is the commensurate benefit to society from committing such expensive resources to these tasks? ..."
"... The debate should focus on why neoliberalism was seen as the panacea to the relatively socialist post-War consensus. Neoliberalism is an ideology which has not even begun to be deconstructed. Like religion, the myths (concerning deficits and debt, for example) have been exposed here in CiF but not the global public -- and must be eventually. ..."
"... Big Brother=Neoliberalism=The Market=The Party=Enforcement ..."
"... Don't delude yourself. A capitalist "society" must have control over its citizens as intensive as a socialist one - just look at GCHQ/NSA. That it is exercised through markets and advertising instead of propaganda is neither here nor there. ..."
"... Thatcher's and Reagan's vicious, vile strikebreaking and the support they got from the supposedly free press and supposedly impartial judiciary in that is a good example. ..."
"... "The right way to think about it is that the financial industry must be doing something incredibly useful or it would not exist." What a ridiculous thing to say. By the same reasoning both bubonic plague and child abusers are both doing something incredibly useful, otherwise they would not exist. ..."
"... Classical economics generally sees things the way you do, and attempts to match up economics with reality. Neoclassical economics on the other hand, which is the system we're currently using, has little concern with reality. So the specific problem involves our economic system diverging from reality. ..."
"... Compounding factors involve the sociopathic nature of the individuals involved. For example, we think nothing about starting a war (generating profit for our military machine), then rebuilding the ravaged country (generating profit for our construction companies). In neoclassical economics that's just damned good business (the banks and corporations taking profits, the taxpayer footing the bill). ..."
"... There have always been alpha males and alpha females even, people who are very competitive, workaholics, who are leaders, who must be in charge. ..."
"... I think the difference in the last 30 years was Thatcherism and in very short order Reaganism. Adam Curtis says that Thatcher and her campaign manager were ardent anti-communists, they saw Britain in the grip of the unions as a kind of moral decay rotting the nation from the inside out (the enemy within) and they were both obsessed with Churchill, so they embarked on a Methodist 'the devil makes work for idle hands' market philosophy aimed at encouraging people to be self-sufficient, independent, have Victorian values, be as successful as possible and all that stuff. ..."
"... I think another thing is that capitalism then was still in its infancy of the turbo-on-steroids stage. For that cancer to truly metastasize we needed the personal computer network revolution that enabled globalisation, ..."
"... I agree that financialisation is a parasitic activity that will bring the body politic to its knees - and in the not too near future. This is capitalism that really doesn't give f**k about the environment or anyone who is not earning these obscene bucks shuffling electronic wizardry around to nobody's benefit but their own. ..."
"... Whose value system is overly competitive with the desire to win.. How can it be otherwise when we, ourselves, have brainwashed the children since the 1980s. We have given them Gameboys, Xboxes and the WoW where the emphasis is on winning. Play this for hours every day and the message becomes ingrained -- WIN ..."
"... The USSR had to be heavily militarized because its very existence depended on being able to defend itself against the aggressive USA and its little helpers, Nato-countries. It was surrounded by US military bases. That is the same US that went and murdered millions in SE Asia to "fight Communism". ..."
"... The article is about a global issue, not only your backyard. The people of UK can consider themselves lucky compared with billions of others. But what would you care. ..."
"... The financial sector, CEOs, oligarchs etc run on good old fashioned greed - a commodity not about to run out anytime soon. Is it even 'reversible' ? ..."
Jan 01, 2014 | www.theguardian.com

Finance's hold on our everyday life must be broken The rampant capitalism that has brought the market into every corner of society needs to be reined in 'Financial calculation evaluates everything in pennies and pounds, transforming the most basic goods – above all, housing – into "investments".'

The rampant capitalism that has brought the market into every corner of society needs to be reined in

The mature economies of the modern world, particularly the United States and Britain, are often described as "financialised". The term reflects the ascendancy of the financial sector. Even more important, it conveys the penetration of the financial system into every nook and cranny of society, including housing, education, health and other areas of life that were previously relatively immune.

Evidence that financialisation represents a deep transformation of mature economies is offered by the global crisis of 2007-09 . The crisis originated in the elephantine US financial system, and was associated with speculation in housing. For a brief period it led to serious questioning of mainstream economic theory and policy: how to confront the turmoil, and what to do about the diseased financial system; are new economic theories needed? However, after six years it is clear that very little has changed. Financialisation is here to stay.

Consider, for instance, the policies to confront the crisis. First, public funds were injected into banks to boost capital. Second, public liquidity was made available to banks to sustain their operations. Third, public interest rates were driven to zero to enable banks to make secure profits by lending to their own customers at higher rates.

This extraordinary public largesse towards private banks was matched by austerity and wage reductions for workers and households. As for restructuring finance, nothing fundamental has taken place. The behemoths that continue to dominate the global financial system operate in the knowledge that they enjoy an unspoken public guarantee. The unpalatable reality is that financialisation will persist, despite its costs for society.

Financialisation represents a historic and deep-seated transformation of mature capitalism. Big businesses have become "financialised" as they have ample profits to finance investment, rely less on banks for loans and play financial games with available funds. Big banks, in turn, have become more distant from big businesses, turning to profits from trading in open financial markets and from lending to households. Households have become "financialised" too, as public provision in housing, education, health, pensions and other vital areas has been partly replaced by private provision, access to which is mediated by the financial system. Not surprisingly, households have accumulated a tremendous volume of financial assets and liabilities over the past four decades.

The penetration of finance into the everyday life of households has not only created a range of dependencies on financial services, but also changed the outlook, mentality and even morality of daily life. Financial calculation evaluates everything in pennies and pounds, transforming the most basic goods – above all, housing – into "investments". Its logic has affected even the young, who have traditionally been idealistic and scornful of pecuniary calculation. Fertile ground has been created for neoliberal ideology to preach the putative merits of the market.

Financialisation has also created new forms of profit associated with financial markets and transactions. Financial profit can be made out of any income, or any sum of money that comes into contact with the financial sphere. Households, for example, generate profits for finance as debtors (mostly by paying interest on mortgages) but also as creditors (mostly by paying fees and charges on pension funds and insurance). Finance is not particular about how and where it makes its profits, and certainly does not limit itself to the sphere of production. It ranges far and wide, transforming every aspect of social life into a profit-making opportunity.

The traditional image of the person earning financial profits is the "rentier", the individual who invests funds in secure financial assets. In the contemporary financialised universe, however, those who earn vast returns are very different. They are often located within a financial institution, presumably work to provide financial services, and receive vast sums in the form of wages, or more often bonuses. Modern financial elites are prominent at the top of the income distribution, set trends in conspicuous consumption, shape the expensive end of the housing market, and transform the core of urban centres according to their own tastes.

Financialised capitalism is, thus, a deeply unequal system, prone to bubbles and crises – none greater than that of 2007-09. What can be done about it? The most important point in this respect is that financialisation does not represent an advance for humanity, and very little of it ought to be preserved. Financial markets are, for instance, able to mobilise advanced technology employing some of the best-trained physicists in the world to rebalance prices across the globe in milliseconds. This "progress" allows financiers to earn vast profits; but where is the commensurate benefit to society from committing such expensive resources to these tasks?

Financialisation ought to be reversed. Yet such an entrenched system will never be reversed by regulation alone. Its reversal also requires the creation of public banking that would operate with a new spirit of public service. It also needs effective controls to be applied to private banking as well as to international flows of capital. Not least, it requires new methods of meeting the financial requirements of households, as well as of small and medium enterprises. There is an urgent need for communal and associational ways to provide housing, education, health and other basic goods and services for working people, breaking the hold of finance on everyday life.

Ultimately, financialisation will not be reversed without an ambitious programme to re-establish the superiority of the social over the private, and the collective over the individual in contemporary society. Reversing financialisation is about reining in the rampant capitalism of our day.

Costas Lapavitsas's latest book is Profiting Without Producing: How Finance Exploits Us All

ATrueFinn -> Mizzentop , 3 Jan 2014 08:11

The Berlin Wall kept people in - that was its primary purpose.

Few people know what the Berlin Wall was. It was a wall around West Berlin, which was not a part of West Germany but an occupied territory within the GDR. An American president called himself a Berliner, which means a Berliner Pfannkuchen, i.e. a doughnut (technically, not by shape and content.)

But whatever. The good people of the UK nowadays seem to wish there was a Rumanian Wall and a Bulgarian Wall to keep people in. I gather quite a few in the former West Germany would like a wall to keep the Ossies in.

HolyInsurgent -> AhBrightWings , 2 Jan 2014 22:51

Why Reagan and Thatcher were allowed to gut functioning...societies so that a handful could prosper remains the great mystery.

On the contrary. Reagan and Thatcher were convenient advocates of a growing conservative consensus. The convergence of institutions must have begun before their tenure because neoliberalism became the dominant consensus by the time of their leadership.

The debate should focus on why neoliberalism was seen as the panacea to the relatively socialist post-War consensus. Neoliberalism is an ideology which has not even begun to be deconstructed. Like religion, the myths (concerning deficits and debt, for example) have been exposed here in CiF but not the global public -- and must be eventually.

Big Brother=Neoliberalism=The Market=The Party=Enforcement

Gegenbeispiel -> Mizzentop , 2 Jan 2014 17:19

Don't delude yourself. A capitalist "society" must have control over its citizens as intensive as a socialist one - just look at GCHQ/NSA. That it is exercised through markets and advertising instead of propaganda is neither here nor there.

Thatcher's and Reagan's vicious, vile strikebreaking and the support they got from the supposedly free press and supposedly impartial judiciary in that is a good example.

Mowglia -> JohnJohnJohnJohn , 2 Jan 2014 15:49

"The right way to think about it is that the financial industry must be doing something incredibly useful or it would not exist." What a ridiculous thing to say. By the same reasoning both bubonic plague and child abusers are both doing something incredibly useful, otherwise they would not exist.

Perhaps you could explain to me what exactly it is that these socialists are doing that is so useful?

Mowglia -> londongapp , 2 Jan 2014 15:40

It is the essential difference between wealth and money that is constantly missed by Politicians and Economists.

Classical economics generally sees things the way you do, and attempts to match up economics with reality. Neoclassical economics on the other hand, which is the system we're currently using, has little concern with reality. So the specific problem involves our economic system diverging from reality.

Compounding factors involve the sociopathic nature of the individuals involved. For example, we think nothing about starting a war (generating profit for our military machine), then rebuilding the ravaged country (generating profit for our construction companies). In neoclassical economics that's just damned good business (the banks and corporations taking profits, the taxpayer footing the bill).

Mowglia -> Claire Bouskill , 2 Jan 2014 15:25

isnt it amazing that Marx predicted over 150 years ago that the greedy capitalists would be their own gravediggers

I never read Marx, although it sounds like he knew a bit about human nature and simply took the system to its logical conclusion. I'm not anti-capitalism. I believe it was a useful development in human history, similar to religion and feudalism. But now it's time to say goodbye and find a new way of doing things. There's no point in flogging a dead horse, unless you're part of the 1%.
MereMortal -> ScroogeJr , 2 Jan 2014 14:47
I haven't really given that aspect of it much thought. When I was growing up, we played Monopoly or Risk or Cluedo, we went outside, we raced, played cowboys and indians and the rest.

There have always been alpha males and alpha females even, people who are very competitive, workaholics, who are leaders, who must be in charge.

I think the difference in the last 30 years was Thatcherism and in very short order Reaganism. Adam Curtis says that Thatcher and her campaign manager were ardent anti-communists, they saw Britain in the grip of the unions as a kind of moral decay rotting the nation from the inside out (the enemy within) and they were both obsessed with Churchill, so they embarked on a Methodist 'the devil makes work for idle hands' market philosophy aimed at encouraging people to be self-sufficient, independent, have Victorian values, be as successful as possible and all that stuff.

I can well believe that, it's just that they stirred up the whole thing without ever thinking through the terrible potential downsides. That's a major problem with politics, fanatical zealots who claim to have the solution for all the problems a nation faces.

I think another thing is that capitalism then was still in its infancy of the turbo-on-steroids stage. For that cancer to truly metastasize we needed the personal computer network revolution that enabled globalisation, partly because then, it was possible for people to source more and more and more income streams without the commensurate ability to truly monitor the quality of the investments or to manage the human relations that actually motivate people to feel appreciated and to do good work.

That's my sixpence worth anyway.

zavaell , 2 Jan 2014 14:34
Fighting talk. I agree that financialisation is a parasitic activity that will bring the body politic to its knees - and in the not too near future. This is capitalism that really doesn't give f**k about the environment or anyone who is not earning these obscene bucks shuffling electronic wizardry around to nobody's benefit but their own.

Maybe regulation per se is not the main answer, but it sure as hell needs a politician to stand up and say what is said in this article.

ScroogeJr -> MereMortal , 2 Jan 2014 12:46
Whose value system is overly competitive with the desire to win.. How can it be otherwise when we, ourselves, have brainwashed the children since the 1980s. We have given them Gameboys, Xboxes and the WoW where the emphasis is on winning. Play this for hours every day and the message becomes ingrained -- WIN
ATrueFinn -> Mizzentop , 2 Jan 2014 09:37

The failure of the USSR owed much to its militarism but don't you see that a society like that HAS to be heavily militarized because its very existence depends on having total control over its citizens.

The USSR had to be heavily militarized because its very existence depended on being able to defend itself against the aggressive USA and its little helpers, Nato-countries. It was surrounded by US military bases. That is the same US that went and murdered millions in SE Asia to "fight Communism".

TwoWolvesAndALamb , 2 Jan 2014 08:48
You are spot on with this:

Consider, for instance, the policies to confront the crisis. First, public funds were injected into banks to boost capital. Second, public liquidity was made available to banks to sustain their operations. Third, public interest rates were driven to zero to enable banks to make secure profits by lending to their own customers at higher rates.

Yet it seems you still blame the private sector for accepting the favorable situation rather than the state for causing it:

Ultimately, financialization will not be reversed without an ambitious program to re-establish the superiority of the social over the private, and the collective over the individual in contemporary society.

A shift towards the rights of the individual would see the state have less power to bail out the banks. Your solution is to give the source of the problem yet more power. The banks couldn't bail themselves out - they needed the state to take the funds from the citizens. Why do you find the state so blameless as to suggest they need more influence?

theonionmurders -> selfraisingfred , 2 Jan 2014 08:40

Remind me, because maybe I missed something, but which bit of the post-war German economic miracle had them seeking a bailout from the IMF?

I'll tell you. West Germany was allowed to default twice on massive post-war loans in 1946 and 1948 thereby requiring IMF loans to finance it's day-to-day running.

TheGreenLion -> Tenthred , 2 Jan 2014 08:40
My current company needs debt to pay for the machinery and running costs to create products. These are sold for profit and the debt repaid. Without the initial debt the products, the salaries, the taxable income would not exist. Debt is banned in Islamic countries – it is not a coincidence that from being streets behind 1000 years ago, the Western world is now considerably more developed
theonionmurders -> Trilbey , 2 Jan 2014 08:23
Yves Smith's ebook is available free here.
harlequinmod -> JohnJohnJohnJohn , 2 Jan 2014 08:09
I think what sticks in the craw of socialists is that these financial corporations and people working in finance would be out of work if it hadn't been for Government intervention and taxpayer money. There is a real irony in having had to listen how great Thatcher was for breaking the unions, smashing nationalized industries on the basis of free market principles only to have to bail out the biggest advocates of the free market. Especially when the cause of the longest and deepest recession in memory was caused by those financial corporations and people working in finance.

Do I envy these people? Not really, they are on the whole treated like sh1t and they are so attached to their money that they are like mewling, whimpering children when faced with the threat of losing their jobs.

Claire Bouskill -> Mowglia , 2 Jan 2014 07:16
Isn't it amazing that marx predicted over 150 years ago that the greedy capitalists would be their own gravediggers as they continue to pauperize the workers to extract more profit , drive down wages and replace jobs with machinery. Forgetting it is the workers who buy the commodities and if they cannot buy , the system will collapse in on itself
QueenBoadicea -> Tenthred , 2 Jan 2014 07:13
So will the likes of Wonga and other payday lenders should be closed down and the directors face court proceedings for usury?

This is an interesting article: http://unemploymentmovement.com/forum/chat-a-rap/5926-welcome-to-the-usury-kingdom

But seeing as the Anglican church has shares in Wonga, this made me wake up to the hypocrisy of the church http://cesc.net/scholarweb/swabey/swabey.pdf

Mizzentop -> Gegenbeispiel , 2 Jan 2014 06:28
Your problem is that that you may desire a non-aspirational society, but that's just not how people are. The human spirit is aspirational and competitive - whether you think that's desirable or not doesn't matter. Consequently, the type of society you want is only possible if that human spirit can be quashed and contained.

The failure of the USSR owed much to its militarism but don't you see that a society like that HAS to be heavily militarised because its very existence depends on having total control over its citizens. Without guns and walls, people would have just refused to be cowed and would have left.

In simple terms, human beings are imperfect individuals driven by passions, ambitions and desires which result in bad things happening but more often good things. Whether we like the fact that we are imperfect is immaterial - we are what we are and no enforced system which seeks to contain our individuality will ever succeed in the long run.

Yossarian247 -> Hikeybikeychick , 2 Jan 2014 05:47
As bullydoggy says - its land (and I would add debt too).

This Nationwide graph shows price rising 2.7 times adjusted for inflation from q3 1983 – q3 2007. This is 6.5 times in nominal terms.

Residential Land Prices
- Looking at figures for South East England from the same period aug 1983-july 07, it increases further, 13 times nominally - and this was an area with the 3rd lowest increase in nominal terms! (At the bottom of the page - 'download the full residential land value data')

The excellent film RealEstate4Ransom may help explain things, or the transcript may be quicker.

Also a less mentioned part of the increase in 'value' is as Positive Money point out the amount of debt created to purchase one.

succulentpork -> Febo , 2 Jan 2014 05:45
There is no reason that interest can't be paid from the existing stock of money. Play a game of monopoly and you will see that it is possible. Your argument has a false composition within it. The central bank is an arm of the government to all intents and purposes. To consider it as a case of the private sector holding the government over a barrel is silly. The state is the one with a monopoly over money.
Artusov , 2 Jan 2014 05:25
It's fairly simple. Split Banking into ' High Street ' stuff [ as in the good old days ] and the newer riskier stuff . You could even have a State Bank. If an investment company goes bust - let them - no bail outs - no public money. is lost. Have people who know what they are doing in the Treasury and FSA - This hasn't happened so far.

Have a sensible rate of higher tax , get them to spend it here and /or tax luxury goods at higher rates. Rich people like to spend money - encourage it. Encourage philanthropy, endowments to Universities etc.

EllisWyatt -> ATrueFinn , 2 Jan 2014 05:16

Communism has not been tried anywhere, so you don't know whether it works or not. Neoliberalism has now been tried quite enough for us to know that it does not

No what you call neoliberalism might have been tried but not true neoliberalism, that will work brilliantly, all you need to do is give me the reigns of power and let me get on with it, trust me...

Not convinced? about as convincing as your claim that communism has not been properly tried so maybe we should give it a go?

Artusov -> botany , 2 Jan 2014 04:22
' Tobin tax on financial transactions can be of help. '

Unless universally applied [ AND done properly ] this would be an extremely STUPID idea. Do you think for one moment that Wall Street [ or even, say, Moscow ] would ever do this ? The following points should be noted :-

1. Tried in Sweden - didn't work and abandoned

2. 70 % would come from the City - to disappear into the EU coffers never to be seen again apart from extra lunch portions for Van Rumpy Pumpy and his unelected catamites

3. A perfectly respectable international business may need to transfer collateral [ security ] from one subsidiary to another every day [ to cope with different trading zones ]. This sort of transaction happens hundreds of thousands of time a day in the City - twice a day at 0.1 % over 250 trading days for a £ 1 million, say, is a huge amount of money.

So what will happen ? - the tax will either get handed on to the customer [ which may well be a pensioner's or worker's Pension Fund ]

OR gets done in a more expensive way [ again , cost handed on to customer ]

OR Firm decamps elsewhere

IE - NO-ONE BENEFITS

The armchair anarchists and toy-town Trots may jump and down with glee but the City provides a significant chunk of GDP - If you want to be Greece but without the sunshine or being bailed out by the the Germans then so be it.

Febo -> succulentpork , 2 Jan 2014 04:18

If I understand you correctly, I think you are suggesting that to pay interest more money must be created as debt. I've seen this suggested quite often but I think it is a fallacy of composition.

If you were to think about money as a fixed quantity of gold you could pose the same question, how could interest be paid out on the gold in more gold? Quite easily, some of the gold just gets called interest payments as it changes hands, and that's it. No new gold is required.

Under a gold standard interest is paid by the "natural" growth in the money supply resulting from gold mining.
Under a fiat system the only way the intest could be paid would be if non-debt based money were issued which would require monetary reform. Yes, that's right, under our system the govt cannot issue money - it must borrow it from the central bank, which, in the case of the USA, is a group of private banks.

wh1952 -> ATrueFinn , 2 Jan 2014 04:17

The article is about a global issue, not only your backyard. The people of UK can consider themselves lucky compared with billions of others. But what would you care.

Quite. But do you think any one of the "socialists" raging on about nasty neo-liberals and capitalists have twigged that if a fairer system was applied that few in the UK would see any increase in their standard of living?

Freeport -> Mowglia , 2 Jan 2014 04:10

Sure thing mate, it'd be my pleasure! Are you REALLY sure you want to take the risk though?

It would mean you suddenly accumulate a rather large debt...

Nope the debts yours. I just want the cash, and money is bad. Apparently.

Of course we could... financialise the debt. You could roll the debt up and and sell it to people based on whether or not they think you'll pay it. Oh hang on... we've just killed the article because that's bad too.

Freeport -> someoneionceknew , 2 Jan 2014 04:08

It is a transfer.

No. Its an exchange. Each side gets something. Lets take a simple example. I buy a cake at a bakery. I get a cake, in exchange for money. The baker gets money for the cake. The baker (not being a moron) knows how much the ingredients, energy, time and so on the cake has cost. Some of that money goes to pay for these bits of the cake. The remainder is profit. The baker, in turn pays the suppliers. They also know what it cost to get their supplies ready for the baker, and add a little bit more for profit. So... show me the transfer, rather than the exchange.

Profit is income less spending. Somebody else's spending is your income.

Yes. Well done.

ATrueFinn -> Jonesey505 , 2 Jan 2014 03:49

Neither communism or crony capitalism work, so why not a free market system

Communism has not been tried anywhere, so you don't know whether it works or not. Neoliberalism has now been tried quite enough for us to know that it does not. Free market inevitably leads to neoliberalism, otherwise it is not free.

CaptCrash -> bilejones , 2 Jan 2014 03:44
That's right blame the only body which is accountable to you, and can be controlled by you, if only you'd get off your arse
frontalcortexes -> Denny O'Connor , 2 Jan 2014 03:43
It is always amusing to watch the rantings of someone living in the safest, most prosperous, more socially equal, society in the history of man ranting and raving for Communism or a Benevolent Dictator, or something; anything but this.

Were it in my power I would cheerfully transport you to the 12th Century where you could enjoy the benefits of living (shortly) free of Financialism.

Why not make it the 4th century and the collapse of the Western Roman Empire through excessive debt servitude? Or indeed fast forward into the 21st century with the decline of Western capitalist economies for the same reason and the undesirable triumph of Chinese Communist market capitalism through its use of Abba Lerner's Functional Finance?

Tenthred -> grauniadreader101 , 2 Jan 2014 03:40
"I think Christ's attack on the money lenders (which may have been a big part of what cost him his life) and the Islamic prohibition of usury falls into this category. Look what lending money at interest has done to our society."

I agree, and it surely lies at the root of the whole financial mess. if we hadn't allowed interest, the whole confection of finance divorced from enabling trade would not have arisen in the first place.

Diverting from the topic a bit, I'm not so sure about your first paragraph. I'm always struck by a thing the great traveller Freya Stark said:

"I think, with the possible exception of the act of love, water rights have caused more trouble than anything else in human history"

But I am not qualified to discuss the role of Sin - though I'm very grateful for your introduction of it to this threadlet, where it has born much fruit of useful points - so I'll have to leave the ethics there, I think!

ATrueFinn -> greensox , 2 Jan 2014 03:39
The Nordic countries did rather well until quite recently. Then the Neoliberalist religion arrived.
botany , 2 Jan 2014 03:37
Tobin tax on financial transactions can be of help.

We tax the food for children but not speculators play with money. France and Germany can take the lead to let the computers send a small sum on every transaction back to the people. That would be one of the few good things from EU. Otherwise let poor people starve and let the speculators play to death of our countries.

ATrueFinn -> wh1952 , 2 Jan 2014 03:37

So how many people rely on food banks? Is it half of us? One in ten, one in a hundred, one in a thousand?

The article is about a global issue, not only your backyard. The people of UK can consider themselves lucky compared with billions of others. But what would you care.

Daveinireland -> Diogenes44 , 2 Jan 2014 03:16

1. Public banking - it has no ties to corporate/international banking. N. or S. Dakota's "public bank" - begun about 90 years ago by a bunch of conservative farmers who despised the rise of bankster power.

How is this a model? The Bank of North Dakota operates more like the Bank of England than a retail bank, it doesn't offer retail services except for student loans.

2. Community-based markets - see the most famous one in Spain.
There are several one in all places, Ohio.

You may as well offer up the edinburgh bicycle cooperative as a model. Co-op exist all over the work, but they are a rounding error in the global economy. There is a place for them, but they are not going to take over from companies.

ATrueFinn -> KatieL , 2 Jan 2014 02:51

the capitalism which lets people pile up enough money to fund billion-dollar research programmes.

Such programmes are mostly funded by governments using tax money. Even in pharmaceutics the fundamental innovations and inventions are largely done in universities.

Little to do with your capitalism. Well, except that the profits of your benevolent pharmaceutical companies are exceptionally high.

hugaddict , 2 Jan 2014 02:48

Reversing financialisation is about reining in the rampant capitalism of our day.

The financial sector, CEOs, oligarchs etc run on good old fashioned greed - a commodity not about to run out anytime soon. Is it even 'reversible' ?

steverandomno , 1 Jan 2014 21:54
To summarize, you imply that capitalism and 'the market' are exemplified by government bailouts of massively overinflated banks, to allow them to continue benefiting from government created arbitrages of securitized debt and artificial regulatory economies of scale.

You go on to suggest that people's choices of dependence on large financial corporations is bad, but then imply that they would be better off if they were instead dependent on a single monopoly corporation to which they have no choice in belonging.

This is the problem with almost all attacks on capitalism and free markets. They incorrectly ascribe our present system to the same and fail to recognise the similarities between dysfunctional private and public corporate entities.

KSurin -> succulentpork , 1 Jan 2014 20:34

Making up a term - financialisation - and using to describe all use of money and also certain aspects of finance itself actual makes analysing problems harder. You are actually over generalising which makes you prone to creating narrative fallacies.

Porky, the term 'financialisation' has wide currency in economics, and refers to a specific set of transformations in the structure of accumulation. It is not used 'to describe all banking', etc. The Oxford-trained economist Thomas Palley provides this succinct definition of it:

Financialization is a process whereby financial markets, financial institutions, and financial elites gain greater influence over economic policy and economic outcomes.

Financialization transforms the functioning of economic systems at both the macro and micro levels.

Its principal impacts are to (1) elevate the significance of the financial sector relative to the real sector, (2) transfer income from the real sector to the financial sector, and (3) increase income inequality and contribute to wage stagnation. Additionally, there are reasons to believe that financialization may put the economy at risk of debt deflation and prolonged recession.

Financialization operates through three different conduits: changes in the structure and operation of financial markets, changes in the behavior of nonfinancial corporations, and changes in economic policy.

Countering financialization calls for a multifaceted agenda that (1) restores policy control over financial markets, (2) challenges the neoliberal economic policy paradigm encouraged by financialization, (3) makes corporations responsive to interests of stakeholders other than just financial markets, and (4) reforms the political process so as to diminish the influence of corporations and wealthy elites.

See http://www.levyinstitute.org/pubs/wp_525.pdf

paradise33 , 1 Jan 2014 20:30
The financialisation of UK society reached a farcical nadir when the DWP began describing benefit claimants as 'customers'.

Interestingly, in this case the 'customer' is frequently 'wrong' - and is punished accordingly.

Elephantmoth -> wh1952 , 1 Jan 2014 20:28
For some, 'Too much is not enough'. If you want the facts about who is paying for the worship of individual whims, see this:
http://www.poverty.ac.uk/sites/default/files/attachments/The_Impoverishment_of_the_UK_PSE_UK_first_results_summary_report_March_28.pdf
KSurin -> selfraisingfred , 1 Jan 2014 19:54

They used interest rates to control inflation, come what may, which is precisely what Maggie instigated after any ideas of cooperation had been rejected by the unions, during Callaghan's time in office.

Thatcher used interest rates to create unemployment, not control inflation.

Sir Alan Budd (a top Treasury civil servant and Thatcher adviser, a strong supporter of monetarism, who became Provost of The Queen's College, Oxford) let this cat out of the bag:

"The Thatcher government never believed for a moment that [monetarism] was the correct way to bring down inflation. They did however see that this would be a very good way to raise unemployment. And raising unemployment was an extremely desirable way of reducing the strength of the working classes. [...] What was engineered – in Marxist terms – was a crisis of capitalism which re- created the reserve army of labour, and has allowed the capitalists to make high profits ever since."

Quoted in Nick Cohen, "Gambling with our future", New Statesman, 13 January 2003, page 13.

Raytrek -> kimdriver , 1 Jan 2014 19:54
The way I see it is you have the elite class, made of leaders, executives, industrialists, experts, then you have the common hordes.

Common people are like a horse, the elite are like the rider, the horse doesn't mind the rider, the rider is firm with the reigns and keeps the horse controlled, but then if the rider starts to pull too firmly on the reins, the bridle causes discomfort, even pain, to the horse, with the crop whipping and the spurs digging in, you push the horse too far and it will throw you.

The rider will inevitably, albeit gingerly, get back in the saddle, a little wiser. I have no problem with this setup, but I know the rider has a short memory, and it is a case of taking care of all your horses, not just the one you ride, because nags are always trouble and they are worth a lot more when well taken care of.

This is a bad analogy, I know, but it is basically true; a phenomenal amount of problems in communities and the world are due to inadequacies, unfortunately the symptoms of these inadequacies are also big business and the economy would be disturbed by solving them, so we see "austerity" preserving what we should be curing.

mereEngineer , 1 Jan 2014 19:53
Make Bank executives personally responsible for the liabilities of the banks they are directors of. Just like entrepreneurs are often personally responsible for their companies debts.
londongapp , 1 Jan 2014 19:44
I am not sure I would use the description of 'Financialisation'. I would describe it more as the difference between wealth and money. Money is a means of exchange. It is not wealth. In London it is possible to buy a one bedroomed flat for over one million pounds. In some parts of the country a similar flat could be bought for forty thousand pounds or less. The wealth is the property and the money is the means of exchange. Just because my house goes up in value does not mean I have more wealth. My house is unchanged. It is true that if I sold my house and realised the money I might then be able buy a similar house for less money else where. Then with the surplus money I could exchange that for more wealth in the form of goods elsewhere. However as a society no wealth has been generated.
Only if money is used to create wealth in the form of goods and some services does wealth of society increase.
It is the essential difference between wealth and money that is constantly missed by Politicians and Economists.
Herbolzheim -> someoneionceknew , 1 Jan 2014 19:43
of course you are right

left and right, governments - ideally democratically elected - have bossed markets. sometimes rightly so.

Herbolzheim -> MawalTrees , 1 Jan 2014 19:40
good post mate. Thanks for taking the time

Raytrek -> kimdriver , 1 Jan 2014 19:39
Ideally it would be about drawing lines of decency between rights and responsibility; of course everyone wants more rights than responsibility and will fight for that, wether they are just an ordinary person or someone who actually has a high impact sphere of influence, and most people will allow that person that right because they view thing in terms relative to their own context and basically want the same thing.

It isn't about doing anything at gun point, it is about drawing clear lines of decency between rights and responsibility, at which point it becomes a case of people knowing what they and others can and cannot, should and should not, get away with. It isn't about punishment or forcing people to do this or that, it is about natural repercussion that comes from inconsiderate behaviour, it is about logically creating an environment that doesn't want to see you lynched.

[Oct 05, 2017] How Billionaires become Billionaires

Notable quotes:
"... A small number of the financial swindlers, including executives from Wall Street's leading banks (Goldman Sachs, J. P. Morgan etc), paid fines – but no one went to prison for the gargantuan fraud that drove millions of Americans into misery. ..."
Oct 05, 2017 | www.unz.com

Through favorable legal rulings and illegal foreclosures, the bankers evicted 9.3 million families. Over 20 million individuals lost their properties, often due to illegal or fraudulent debts.

A small number of the financial swindlers, including executives from Wall Street's leading banks (Goldman Sachs, J. P. Morgan etc), paid fines – but no one went to prison for the gargantuan fraud that drove millions of Americans into misery.

There are other swindler bankers, like the current Secretary of Treasury Steve Mnuchin, who enriched themselves by illegally foreclosing on thousands of homeowners in California. Some were tried; all were exonerated, thanks to the influence of Democratic political leaders during the Obama years.

[Oct 04, 2017] The Trump-Goldman Sachs Tax Cut for the Rich by Jack Rasmus

Notable quotes:
"... The Trump Plan is actually the product of the former Goldman-Sachs investment bankers who have been in charge of Trump's economic policy since he came into office. Steve Mnuchin, the Treasury Secretary, and Gary Cohn, director of Trump's economic council, are the two authors of the Trump tax cuts. They put it together. They are also both former top executives of the global shadow bank called Goldman Sachs. ..."
"... Given that economic policy under Trump is being driven by bankers, it's not surprising that the CEO of the biggest US banks, Morgan Stanley, admitted just a few months ago that a reduction of the corporate nominal income tax rate from the current 35% nominal rate to a new nominal rate of 20% will provide the bank an immediate windfall gain of 15%-20% in earnings. ..."
"... Big multinational companies like Apple, i.e. virtually all the big tech companies, big Pharma corporations, banks and oil companies, pay no more than 12-13% effective tax rates today -- not the 35% nominal rate. ..."
"... Tech, big Pharma, banks and oil companies are the big violators of offshore cash hoarding/tax avoidance schemes. Microsoft's effective global tax rate last year was only 12%. IBM's even less, at 10%. The giant drug company, Pfizer paid 18% and the oil company, Chevron 14%. One of the largest US companies in the world, General Electric, paid only 1%. When their nominal rate is reduced to 20% under the Trump plan, they'll pay even less, likely in the single digits, if that. ..."
"... Tax cutting for business classes and the 1% has always been a fundamental element of Neoliberal economic policy ever since the Reagan years (and actually late Jimmy Carter period). Major tax cut legislation occurred in 1981, 1986, and 1997-98 under Clinton. George W. Bush then cut taxes by $3.4 trillion in 2001-04, 80% of which went to the wealthiest households and businesses. He cut taxes another $180 billion in 2008. Obama cut another $300 billion in his 2009 so-called recovery program. When that faltered, it was another $800 billion at year end 2010. He then extended the Bush tax cuts that were scheduled to expire in 2011 two more years. That costs $450 billion each year. And in 2013, cutting a deal with Republicans called the 'fiscal cliff' settlement, he extended the Bush tax cuts of the prior decade for another ten years. That cost a further $5 trillion. Now Trump wants even more. He promised $5 trillion in tax cuts during his election campaign. So the current proposal is only half of what he has in mind perhaps. ..."
"... Neoliberal tax cutting in the US has also been characterized by the 'tax cut shell game'. The shell game is played several ways. ..."
"... To cover the shell game, an overlay of ideology covers up what's going on. There's the false argument that 'tax cuts create jobs', for which there's no empirical evidence. There's the claim US multinational corporations pay a double tax compared to their competitors, when in fact they effectively pay less. There's the lie that if corporate taxes are cut they will automatically invest the savings, when in fact what they do is invest offshore, divert the savings to stock and bond and other financial markets, boost their dividend and stock buybacks, or stuff the savings in their offshore subsidiaries to avoid paying taxes. ..."
"... All these neoliberal false claims, arguments, and outright lies continue today to justify the Trump-Goldman Sachs tax plan -- which is just the latest iteration of neoliberal tax policy and tax offensive in the US. The consequences of the Trump plan, if it is passed, will be the same as the previous tax giveaways to the 1% and their companies: it will redistribute income massively from the middle and working classes to the rich. Income inequality will continue to worsen dramatically. ..."
"... Nothing will change so long as the Corporate Party of America is allowed to continue its neoliberal tax giveaways, its tax cutting 'shell games', and is allowed to continue to foment its ideological cover up. ..."
Oct 04, 2017 | www.counterpunch.org

Contradicting Trump, the independent Tax Policy Center has estimated in just the first year half of the $2 trillion plus Trump cuts will go to the wealthiest 1% households that annually earn more than $730,000. That's an immediate income windfall to the wealthiest 1% households of 8.5%, according to the Tax Policy Center. But that's only in the first of ten years the cuts will be in effect. It gets worse over time.

According to the Tax Policy Center, "Taxpayers in the top one percent (incomes above $730,000), would receive about 50 percent of the total tax benefit [in 2018]". However, "By 2027, the top one percent would get 80 percent of the plan's tax cuts while the share for middle-income households would drop to about five percent." By the last year of the cuts, 2027, on average the wealthiest 1% household would realize $207,000, and the even wealthier 0.1% would realize an income gain of $1,022,000.

When confronted with these facts on national TV this past Sunday, Trump's Treasury Secretary, Steve Mnuchin, quickly backtracked and admitted he could not guarantee every middle class family would see a tax cut. Right. That's because 15-17 million (12%) of US taxpaying households in the US will face a tax hike in the first year of the cuts. In the tenth and last year, "one in four middle class families would end up with higher taxes".

The US Economic 'Troika'

The Trump Plan is actually the product of the former Goldman-Sachs investment bankers who have been in charge of Trump's economic policy since he came into office. Steve Mnuchin, the Treasury Secretary, and Gary Cohn, director of Trump's economic council, are the two authors of the Trump tax cuts. They put it together. They are also both former top executives of the global shadow bank called Goldman Sachs. Together with the other key office determining US economic policy, the US central bank, held by yet another ex-Goldman Sachs senior exec, Bill Dudley, president of the New York Federal Reserve bank, the Goldman-Sachs trio of Mnuchin-Cohn-Dudley constitute what might be called the 'US Troika' for domestic economic policy.
The Trump tax proposal is therefore really a big bankers tax plan -- authored by bankers, in the interest of bankers and financial investors (like Trump himself), and overwhelmingly favoring the wealthiest 1%.

Given that economic policy under Trump is being driven by bankers, it's not surprising that the CEO of the biggest US banks, Morgan Stanley, admitted just a few months ago that a reduction of the corporate nominal income tax rate from the current 35% nominal rate to a new nominal rate of 20% will provide the bank an immediate windfall gain of 15%-20% in earnings. And that's just the nominal corporate rate cut proposed by Trump. With loopholes, it's no doubt more.

The Trump-Troika's Triple Tax-Cut Trifecta for the 1%

The Trump Troika has indicated it hopes to package up and deliver the trillions of $ to their 1% friends by Christmas 2017. Their gift will consist of three major tax cuts for the rich and their businesses. A Trump-Troika Tax Cut 'Trifecta' of $ trillions.

1.The Corporate Tax Cuts

The first of the three main elements is a big cut in the corporate income tax nominal rate, from current 35% to 20%. In addition, there's the elimination of what is called the 'territorial tax' system, which is just a fancy phrase for ending the fiction of the foreign profits tax. Currently, US multinational corporations hoard a minimum of $2.6 trillion of profits offshore and refuse to pay US taxes on those profits. In other words, Congress and presidents for decades have refused to enforce the foreign profits tax. Now that fiction will be ended by officially eliminating taxes on their profits. They'll only pay taxes on US profits, which will create an even greater incentive for them to shift operations and profits to their offshore subsidiaries. But there's more for the big corporations.

The Trump plan also simultaneously proposes what it calls a 'repatriation tax cut'. If the big tech, pharma, banks, and energy companies bring back some of their reported $2.6 trillion (an official number which is actually more than that), Congress will require they pay only a 10% tax rate -- not the current 35% rate or even Trump's proposed 20%–on that repatriated profits. No doubt the repatriation will be tied to some kind of agreement to invest the money in the US economy. That's how they'll sell it to the American public. But that shell game was played before, in 2004-05, under George W. Bush. The same 'repatriation' deal was then legislated, to return the $700 billion then stuffed away in corporate offshore subsidiaries. About half the $700 billion was brought back, but US corporations did not invest it in jobs in the US as they were supposed to. They used the repatriated profits to buy up their competitors (mergers and acquisitions), to pay out dividends to stockholders, and to buy back their stock to drive equity prices and the stock market to new heights in 2005-07. The current Trump 'territorial tax repeal/repatriation' boondoggle will turn out just the same as it did in 2005.

2. Non-Incorporate Business Tax Cuts

The second big business class tax windfall in the Trump-Goldman Sachs tax giveaway for the rich is the proposal to reduce the top nominal tax rate for non-corporate businesses, like proprietorships and partnerships, whose business income (aka profits) is treated like personal income. This is called the 'pass through business income' provision.

That's a Trump tax cut for unincorporated businesses -- like doctors, law firms, real estate investment partnerships, etc. 40% of non-corporate income is currently taxed at 39.6% (the top personal income tax rate). Trump proposes to reduce that nominal rate to 25%. So non-incorporate businesses too will get an immediately 14.6% cut, nearly matching the 15% rate cut for corporate businesses.

In the case of both corporate and non-corporate companies we're talking about 'nominal' tax rate cuts of 14.6% and 15%. The 'effective' tax rate is what they actually pay in taxes -- i.e. after loopholes, after their high paid tax lawyers take a whack at their tax bill, after they cleverly divert their income to their offshore subsidiaries and refuse to pay the foreign profits tax, and after they stuff away whatever they can in offshore tax havens in the Cayman Islands, Switzerland, and a dozen other island nations worldwide.

For example, Apple Corporation alone is hoarding $260 billion in cash at present -- 95% of which it keeps offshore to avoid paying Uncle Sam taxes. Big multinational companies like Apple, i.e. virtually all the big tech companies, big Pharma corporations, banks and oil companies, pay no more than 12-13% effective tax rates today -- not the 35% nominal rate.

Tech, big Pharma, banks and oil companies are the big violators of offshore cash hoarding/tax avoidance schemes. Microsoft's effective global tax rate last year was only 12%. IBM's even less, at 10%. The giant drug company, Pfizer paid 18% and the oil company, Chevron 14%. One of the largest US companies in the world, General Electric, paid only 1%. When their nominal rate is reduced to 20% under the Trump plan, they'll pay even less, likely in the single digits, if that.

Corporations and non-corporate businesses are the institutional conduit for passing income to their capitalist owners and managers. The Trump corporate and business taxes means companies immediately get to keep at least 15% more of their income for themselves -- and more in 'effective' rate terms. That means they get to distribute to their executives and big stockholders and partners even more than they have in recent years. And in recent years that has been no small sum. For example, just corporate dividend payouts and stock buybacks have totaled more than $1 trillion on average for six years since 2010! A total of more than $6 trillion.

But all that's only the business tax cut side of the Trump plan. There's a third major tax cut component of the Trump plan -- i.e. major cuts in the Personal Income Tax that accrue overwhelmingly to the richest 1% households.

3. Personal Income Tax Cuts for the 1%

There are multiple measures in the Trump-Troika proposal that benefits the 1% in the form of personal income tax reductions. Corporations and businesses get to keep more income from the business tax cuts, to pass on to their shareholders, investors, and senior managers. The latter then get to keep more of what's passed through and distributed to them as a result of the personal income tax cuts.

The first personal tax cut boondoggle for the 1% wealthiest households is the Trump proposal to reduce the 'tax income brackets' from seven to three. The new brackets would be 35%, 25%, and 12%.

Whenever brackets are reduced, the wealthiest always benefit. The current top bracket, affecting households with a minimum of $418,000 annual income, would be reduced from the current 39.6% to 35%. In the next bracket, those with incomes of 191,000 to 418,000 would see their tax rate (nominal again) cut from 28% to 25%. However, the 25% third bracket would apply to annual incomes as low as $38,000. That's the middle and working class. So households with $38,000 annual incomes would pay the same rate as those with more than $400,000. Tax cuts for the middle class, did Trump say? Only tax rate reductions beginning with those with $191,000 incomes and the real cuts for those over $418,000!

But the cuts in the nominal tax rate for the top 1% to 5% households are only part of the personal income tax windfall for the rich under the Trump plan. The really big tax cuts for the 1% come in the form of the repeal of the Inheritance Tax and the Alternative Minimum Tax, as well as Trump's allowing the 'carried interest' tax loophole for financial speculators like hedge fund managers and private equity CEOs to continue.

The current Inheritance Tax applies only to those with estates of $11 million or more, about 0.2 of all the taxpaying households. So its repeal is clearly a windfall for the super rich. The Alternative Minimum Tax is designed to ensure the super rich pay something, after they manipulate the tax loopholes, shelter their income offshore in tax havens, or simply engage in tax fraud by various other means. Now that's gone as well under the Trump plan. 'Carried interest', a loophole, allows big finance speculators, like hedge fund managers, to avoid paying the corporate tax rate altogether, and pay a maximum of 20% on their hundreds of millions and sometimes billions of dollars of income every year.
Who Pays?

As previously noted, folks with $91,000 a year annual income get no tax rate cuts. They still will pay the 25%. And since that is what's called 'earned' (wage and salary) income, they don't get the loopholes to manipulate, like those with 'capital incomes' (dividends, capital gains, rents, interest, etc.). What they get is called deductions. But under the Trump plan, the deductions for state and local taxes, for state sales taxes, and apparently for excess medical costs will all disappear. The cost of that to middle and working class households is estimated at $1 trillion over the decade.

Trump claims the standard deduction will be doubled, and that will benefit the middle class. But estimates reveal that a middle class family with two kids will see their standard deduction reduced from $28,900 to $24,000. But I guess that's just 'Trump math'.

The general US taxpayer will also pay for the trillions of dollars that will be redistributed to the 1% and their companies. It's estimated the federal government deficit will increase by $2.4 trillion over the decade as a result of the Trump plan. Republicans in Congress have railed over the deficits and federal debt, now at $20 trillion, for years. But they are conspicuously quiet now about adding $2.4 trillion more -- so long as it the result of tax giveaways to themselves, their 1% friends, and their rich corporate election campaign contributors.

And both wings of the Corporate Party of America -- aka Republicans and Democrats -- never mention the economic fact that since 2001, 60% of US federal government deficits, and therefore the US debt of $20 trillion, are attributable to tax cuts by George W. Bush and Barack Obama: more than $3.5 trillion under Bush and more than $7 trillion under Obama. (The remaining $10 trillion of the US debt due to war and defense spending, price gouging by the medical industry and big pharma driving up government costs for Medicare, Medicaid, and other government insurance, bailouts of the big banks in 2008-09, and interest payments on the debt).

The 35-Year Neoliberal Tax Offensive

Tax cutting for business classes and the 1% has always been a fundamental element of Neoliberal economic policy ever since the Reagan years (and actually late Jimmy Carter period). Major tax cut legislation occurred in 1981, 1986, and 1997-98 under Clinton. George W. Bush then cut taxes by $3.4 trillion in 2001-04, 80% of which went to the wealthiest households and businesses. He cut taxes another $180 billion in 2008. Obama cut another $300 billion in his 2009 so-called recovery program. When that faltered, it was another $800 billion at year end 2010. He then extended the Bush tax cuts that were scheduled to expire in 2011 two more years. That costs $450 billion each year. And in 2013, cutting a deal with Republicans called the 'fiscal cliff' settlement, he extended the Bush tax cuts of the prior decade for another ten years. That cost a further $5 trillion. Now Trump wants even more. He promised $5 trillion in tax cuts during his election campaign. So the current proposal is only half of what he has in mind perhaps.

Neoliberal tax cutting in the US has also been characterized by the 'tax cut shell game'. The shell game is played several ways.

In the course of major tax cut legislation, the elites and their lobbyists alternate their focus on cutting rates and on correcting tax loopholes. They raise rates but expand loopholes. When the public becomes aware of the outrageous loopholes, they then eliminate some loopholes but simultaneously reduce the tax rates on the rich. When the public complains of too low tax rates for the rich, they raise the rates but quietly expand the loopholes. They play this shell game so the outcome is always a net gain for corporations and the rich.

Since Reagan and the advent of neoliberal tax policy, the corporate income tax share of total US government revenues has fallen from more than 20% to single digits well below 10%. Conversely, the payroll tax has doubled from 22% to more than 40%. A similar shift within the personal income tax, steadily around 40% of government revenues, has also occurred. The wealthy pay less a share of the total and the middle class pays more. Along the way, token concessions to the very low end of working poor are introduced, to give the appearance of fairness. But the middle class, the $38 to $91,000 nearly 100 million taxpaying households foot the bill for both the 1% and the bottom. This pattern was set in motion under Reagan. His proposed $752 billion in tax cuts in 1981-82 were adjusted in 1986, but the net outcome was more for the rich and their corporations. That pattern has continued under Clinton, Bush, Obama and now proposed under Trump.

To cover the shell game, an overlay of ideology covers up what's going on. There's the false argument that 'tax cuts create jobs', for which there's no empirical evidence. There's the claim US multinational corporations pay a double tax compared to their competitors, when in fact they effectively pay less. There's the lie that if corporate taxes are cut they will automatically invest the savings, when in fact what they do is invest offshore, divert the savings to stock and bond and other financial markets, boost their dividend and stock buybacks, or stuff the savings in their offshore subsidiaries to avoid paying taxes.

All these neoliberal false claims, arguments, and outright lies continue today to justify the Trump-Goldman Sachs tax plan -- which is just the latest iteration of neoliberal tax policy and tax offensive in the US. The consequences of the Trump plan, if it is passed, will be the same as the previous tax giveaways to the 1% and their companies: it will redistribute income massively from the middle and working classes to the rich. Income inequality will continue to worsen dramatically. US multinational corporations will begin again to divert profits, and investment, offshore; profits brought back untaxed will result in mergers and acquisitions, dividend payouts, and financial markets investment. No real jobs will be created in the US. The wealthy will continue to pump their savings into financial asset markets, causing further bubbles in stocks, exchange traded funds, bonds, derivatives and the like. The US economy will continue to slow and become more unstable financially. And there will be another financial crash and great recession -- or worse. Only this time, the vast majority of US households -- i.e. the middle and working classes -- will be even worse off and more unable to weather the next economic storm.

Nothing will change so long as the Corporate Party of America is allowed to continue its neoliberal tax giveaways, its tax cutting 'shell games', and is allowed to continue to foment its ideological cover up. More articles by: Jack Rasmus

Jack Rasmus is the author of ' Systemic Fragility in the Global Economy ', Clarity Press, 2015. He blogs at jackrasmus.com . His website is www.kyklosproductions.com and twitter handle, @drjackrasmus.

[Sep 19, 2017] Con Of The Century by Rod Dreher

Notable quotes:
"... Within the next 18 months, US Steel announced that the nation's largest steel producer was also shutting down 16 plants across the nation including their Ohio Works in Youngstown, a move that eliminated an additional 4,000 workers here. That announcement came one day before Jones and Laughlin Steel Corp. said they were cutting thousands of jobs at their facilities in the Mahoning Valley, too. ..."
"... Within a decade 40,000 jobs were gone. Within that same decade, 50,000 people had left the region, and by the next decade that number was up to 100,000. Today the 22 miles of booming steel mills and the support industries that once lined the Mahoning River have mostly disappeared -- either blown up, dismantled or reclaimed by nature. ..."
"... Candidate Trump promised to create millions of new jobs, vowing to be "the greatest jobs president that God ever created." Cohn, as Goldman Sachs's president and COO, oversaw the firm's mergers and acquisitions business that had, over the previous three years, led to the loss of at least 22,000 U.S. jobs, according to a study by two advocacy groups. Early in his candidacy, Trump described as "disgusting" Pfizer's decision to buy a smaller Irish competitor in order to execute a "corporate inversion," a maneuver in which a U.S. company moves its headquarters overseas to reduce its tax burden. The Pfizer deal ultimately fell through. But in 2016, in the heat of the campaign, Goldman advised on a megadeal that saw Johnson Controls, a Fortune 500 company based in Milwaukee, buy the Ireland-based Tyco International with the same goal. A few months later, with Goldman's help, Johnson Controls had executed its inversion. ..."
"... "There was a devastating financial crisis just over eight years ago," Warren said. "Goldman Sachs was at the heart of that crisis. The idea that the president is now going to turn over the country's economic policy to a senior Goldman executive turns my stomach." Prior administrations often had one or two people from Goldman serving in top positions. George W. Bush at one point had three. At its peak, the Trump administration effectively had six. ..."
"... The Trump economic agenda, it turns out, is largely the Goldman agenda, one with the potential to deliver any number of gifts to the firm that made Cohn colossally rich. ..."
"... If Cohn stays, it will be to pursue an agenda of aggressive financial deregulation and massive corporate tax cuts -- he seeks to slash rates by 57 percent -- that would dramatically increase profits for large financial players like Goldman. It is an agenda as radical in its scope and impact as Bannon's was. ..."
"... The story tracks Gary Cohn's impressive rise from an aluminum siding salesman to a Goldman Sachs top leader. In the mid-2000s, Goldman saw that the housing market was a bubble waiting to pop, and arranged its position to take advantage of the coming collapse ..."
"... Politically, 2016 would prove a strange year for Goldman. Bernie Sanders clobbered Hillary Clinton for pocketing hundreds of thousands of dollars in speaking fees from Goldman, while Trump attacked Ted Cruz for being "in bed with" Goldman Sachs. (Cruz's wife Heidi was a managing director in Goldman's Houston office until she took leave to work on her husband's presidential campaign.) Goldman would have "total control" over Clinton, Trump said at a February 2016 rally, a point his campaign reinforced in a two-minute ad that ran the weekend before Election Day. An image of Blankfein flashed across the screen as Trump warned about the global forces that "robbed our working class." ..."
"... It's Cohn's influence over the country's regulators that worries Dennis Kelleher, the financial reform lobbyist. "To him, what's good for Wall Street is good for the economy," Kelleher said of Cohn. "Maybe that makes sense when a guy has spent 26 years at Goldman, a company who has repaid his loyalties and sweat with a net worth in the hundreds of millions." Kelleher recalls those who lost a home or a chunk of their retirement savings during a financial crisis that Cohn helped precipitate. "They're still suffering," he said. "Yet now Cohn's in charge of the economy and talking about eliminating financial reform and basically putting the country back to where it was in 2005, as if 2008 didn't happen. I've started the countdown clock to the next financial crash, which will make the last one look mild." ..."
"... Trump ( and the GOP generally) are running the William Henry Harrison routine. Talk about the plain common working people, mix in some log cabins and hard cider, describe anyone who wants to raise wages as an effete elitist, and the downsize, merge, consolidate, offshore, the better to profit from the misery of others. ..."
"... I don't think the Establishment has any idea of the level of dissatisfaction and discontent there is in the electorate, as their plan is short to mid-term doom. ..."
Sep 17, 2017 | www.theamericanconservative.com
Michele Paccione/Shutterstock Salena Zito has a moving NYPost piece about the day that began the destruction of Youngstown, Ohio, and "sowed the seeds of Trump." Excerpts:

From then on, this date in 1977 would be known as Black Monday in the Steel Valley, which stretches from Mahoning and Trumbull counties in Ohio eastward toward Pittsburgh. It is the date when Youngstown Sheet and Tube abruptly furloughed 5,000 workers all in one day.

The bleeding never stopped.

Within the next 18 months, US Steel announced that the nation's largest steel producer was also shutting down 16 plants across the nation including their Ohio Works in Youngstown, a move that eliminated an additional 4,000 workers here. That announcement came one day before Jones and Laughlin Steel Corp. said they were cutting thousands of jobs at their facilities in the Mahoning Valley, too.

Within a decade 40,000 jobs were gone. Within that same decade, 50,000 people had left the region, and by the next decade that number was up to 100,000. Today the 22 miles of booming steel mills and the support industries that once lined the Mahoning River have mostly disappeared -- either blown up, dismantled or reclaimed by nature.

If a bomb had hit this region, the scar would be no less severe on its landscape.

More:

The events of Black Monday forever changed not only the Steel Valley, but her people and eventually American culture and politics. Just last year the reverberations were felt in the presidential election when many hard-core Democrats from this area broke from their party to vote for Donald Trump, a Republican who promised to bring jobs back to the Heartland.

Even today, after the election, the Washington establishment still hasn't processed or properly dissected its effects. Economic experts predicted that the service industry would be the employment of the future. Steel workers were retrained to fill jobs in that sector, which was expected to sustain the middle class in the same way that manufacturing did.

It did not. According to a study done by the Midwest Center for Research the average salary of a steel worker in the late 1970s was $24,772.80. Today, according to the most recent Bureau of Labor statistics, the medium household income in the Mahoning Valley is $24,133.

Now that they have the working man's champion in the White House, what's he doing for them? Here are Gary Rivlin and Michael Hudson, writing in The Intercept , about how Goldman Sachs more or less runs the Trump administration. Excerpts:

Trump raged against "offshoring" by American companies during the 2016 campaign. He even threatened "retribution,"­ a 35 percent tariff on any goods imported into the United States by a company that had moved jobs overseas. But [Gary] Cohn laid out Goldman's very different view of offshoring at an investor conference in Naples, Florida, in November. There, Cohn explained unapologetically that Goldman had offshored its back-office staff, including payroll and IT, to Bangalore, India, now home to the firm's largest office outside New York City: "We hire people there because they work for cents on the dollar versus what people work for in the United States."

Candidate Trump promised to create millions of new jobs, vowing to be "the greatest jobs president that God ever created." Cohn, as Goldman Sachs's president and COO, oversaw the firm's mergers and acquisitions business that had, over the previous three years, led to the loss of at least 22,000 U.S. jobs, according to a study by two advocacy groups. Early in his candidacy, Trump described as "disgusting" Pfizer's decision to buy a smaller Irish competitor in order to execute a "corporate inversion," a maneuver in which a U.S. company moves its headquarters overseas to reduce its tax burden. The Pfizer deal ultimately fell through. But in 2016, in the heat of the campaign, Goldman advised on a megadeal that saw Johnson Controls, a Fortune 500 company based in Milwaukee, buy the Ireland-based Tyco International with the same goal. A few months later, with Goldman's help, Johnson Controls had executed its inversion.

With Cohn's appointment [as his economic adviser], Trump now had three Goldman Sachs alums in top positions inside his administration: Steve Bannon, who was a vice president at Goldman when he left the firm in 1990, as chief strategist, and Steve Mnuchin, who had spent 17 years at Goldman, as Treasury secretary. And there were more to come. A few weeks later, another Goldman partner, Dina Powell, joined the White House as a senior counselor for economic initiatives. Goldman was a longtime client of Jay Clayton, Trump's choice to chair the Securities and Exchange Commission; Clayton had represented Goldman after the 2008 financial crisis, and his wife Gretchen worked there as a wealth management adviser. And there was the brief, colorful tenure of Anthony Scaramucci as White House communications director: Scaramucci had been a vice president at Goldman Sachs before leaving to co-found his own investment company.

Even before Scaramucci, Sen. Elizabeth Warren, D-Mass., had joked that enough Goldman alum were working for the Trump administration to open a branch office in the White House.

"There was a devastating financial crisis just over eight years ago," Warren said. "Goldman Sachs was at the heart of that crisis. The idea that the president is now going to turn over the country's economic policy to a senior Goldman executive turns my stomach." Prior administrations often had one or two people from Goldman serving in top positions. George W. Bush at one point had three. At its peak, the Trump administration effectively had six.

Ex-Goldmanista Steve Bannon's White House agenda was not in Goldman's interest, though. But now he's gone. More:

The Trump economic agenda, it turns out, is largely the Goldman agenda, one with the potential to deliver any number of gifts to the firm that made Cohn colossally rich.

If Cohn stays, it will be to pursue an agenda of aggressive financial deregulation and massive corporate tax cuts -- he seeks to slash rates by 57 percent -- that would dramatically increase profits for large financial players like Goldman. It is an agenda as radical in its scope and impact as Bannon's was.

The story tracks Gary Cohn's impressive rise from an aluminum siding salesman to a Goldman Sachs top leader. In the mid-2000s, Goldman saw that the housing market was a bubble waiting to pop, and arranged its position to take advantage of the coming collapse. The Intercept continues:

Cohn was a member of Goldman's board of directors during this critical time and second in command of the bank. At that point, Cohn and Blankfein, along with the board and other top executives, had several options. They might have shared their concerns about the mortgage market in a filing with the SEC, which requires publicly traded companies to reveal "triggering events that accelerate or increase a direct financial obligation" or might cause "impairments" to the bottom line. They might have warned clients who had invested in mortgage-backed securities to consider extracting themselves before they suffered too much financial damage. At the very least, Goldman could have stopped peddling mortgage-backed securities that its own mortgage trading desk suspected might soon collapse in value.

Instead, Cohn and his colleagues decided to take care of Goldman Sachs.

Goldman would not have suffered the reputational damage that it did -- or paid multiple billions in federal fines -- if the firm, anticipating the impending crisis, had merely shorted the housing market in the hopes of making billions. That is what investment banks do: spot ways to make money that others don't see. The money managers and traders featured in the film "The Big Short" did the same -- and they were cast as brave contrarians. Yet unlike the investors featured in the film, Goldman had itself helped inflate the housing bubble -- buying tens of billions of dollars in subprime mortgages over the previous several years for bundling into bonds they sold to investors. And unlike these investors, Goldman's people were not warning anyone who would listen about the disaster about to hit. As federal investigations found, the firm, which still claims "our clients' interests always come first" as a core principle, failed to disclose that its top people saw disaster in the very products its salespeople were continuing to hawk.

What follows is an amazing, very detailed story about how Goldman maneuvered successfully through the rubble of the economic collapse, and came out on top. And then, get this:

Politically, 2016 would prove a strange year for Goldman. Bernie Sanders clobbered Hillary Clinton for pocketing hundreds of thousands of dollars in speaking fees from Goldman, while Trump attacked Ted Cruz for being "in bed with" Goldman Sachs. (Cruz's wife Heidi was a managing director in Goldman's Houston office until she took leave to work on her husband's presidential campaign.) Goldman would have "total control" over Clinton, Trump said at a February 2016 rally, a point his campaign reinforced in a two-minute ad that ran the weekend before Election Day. An image of Blankfein flashed across the screen as Trump warned about the global forces that "robbed our working class."

So Trump won -- and staffed up with Goldman machers -- Gary Cohn most important of all:

There's ultimately no great mystery why Donald Trump selected Gary Cohn for a top post in his administration, despite his angry rhetoric about Goldman Sachs. There's the high regard the president holds for anyone who is rich -- and the instant legitimacy Cohn conferred upon the administration within business circles. Cohn's appointment reassured bond markets about the unpredictable new president and lent his administration credibility it lacked among Fortune 100 CEOs, none of whom had donated to his campaign. Ego may also have played a role. Goldman Sachs would never do business with Trump, the developer who resorted to foreign banks and second-tier lenders to bankroll his projects. Now Goldman's president would be among those serving in his royal court.

Finally:

It's Cohn's influence over the country's regulators that worries Dennis Kelleher, the financial reform lobbyist. "To him, what's good for Wall Street is good for the economy," Kelleher said of Cohn. "Maybe that makes sense when a guy has spent 26 years at Goldman, a company who has repaid his loyalties and sweat with a net worth in the hundreds of millions." Kelleher recalls those who lost a home or a chunk of their retirement savings during a financial crisis that Cohn helped precipitate. "They're still suffering," he said. "Yet now Cohn's in charge of the economy and talking about eliminating financial reform and basically putting the country back to where it was in 2005, as if 2008 didn't happen. I've started the countdown clock to the next financial crash, which will make the last one look mild."

Read the whole thing. Please, do. It is staggering to think that here we are, a decade after the crash, and here we are.

Tonight (Sunday), PBS begins airing Ken Burns' and Lynn Novick's long Vietnam War documentary. I'll write more about it this week. I've watched it, and to call it landmark television is to vastly undersell it. It comes to mind reading the Goldman-Trump piece because it revealed, however inadvertently, how little we Americans learned from the Vietnam experience when it came time to invade Iraq.

Twenty, thirty years from now, don't be surprised if some American president proposes a "this time, it's different" invasion of another foreign country. And don't be surprised if we the people cheer for him. We're suckers for this kind of thing. Here's Kevin Williamson, on Trump's epic flip-flop on immigration and DACA:

What did they expect? Trump is a serial bankrupt who has betrayed at least two-thirds of the wives he's had and who lies compulsively -- who invented an imaginary friend to lie to the press on his behalf. He has screwed over practically everyone who has ever trusted him or done business with him, and his voters were just another in a long series of marks. They gave him that 280ZX with no down payment -- and no prospect of repossessing it until 2020 at the earliest. Poor Ann Coulter is somewhere weeping into her gin: "I bet on a loser," she explains.

It was a dumb bet.

With no market-oriented health-care reform and no hawkish immigration reform and the prospects of far-reaching tax reform looking shaky -- even though Republicans exist for no obvious purpose other than cutting taxes -- Trump is still looking for his big win. Even those who were willing to suspend the fully formed adult parts of their brains and give him the benefit of the doubt are coming around to the realization that he has no beliefs and no principles, and that he will sell out any ally, cause, or national interest if doing so suits his one and only true master in this life: his vanity. He didn't get rolled by Pelosi and Schumer: His voters got rolled by him. That's the real deal.

Cheers to you, Youngstown!

When Youngstown (so to speak) figures out what's been done to it, politics in this country is going to get very, very interesting. In the meantime:

Some of Trump's base is happy to let him cut deals with Pelosi and Schumer so long as he tweets gifs of Hillary and CNN logos. WWE BS.

! Ben Shapiro (@benshapiro) September 17, 2017

//platform.twitter.com/widgets.js 116 Responses to Con Of The Century ← Older Comments Newer Comments →

grumpy realist , says: September 18, 2017 at 10:30 am

Given Trump's history of betraying everyone he's been involved with (wives, businesses, family members) why are people surprised?

And no, I don't suspect Trump supporters to ever turn on him. Whatever he does, they'll find a way to excuse it and cast the blame of "the media", "those liberals", "those people", and "them" instead. It's easier for them to allow themselves to be ripped off, over and over again, than to admit to themselves that they were fools who fell victim to a con man.

(And no, I don't place much credence in Ann Coulter's hissy fit. She's just trying to keep the TV cameras on her as long as possible. Like usual.)

Roy Fassel , says: September 18, 2017 at 10:32 am
The world has changed. It used to be ."what is good for General Motors is good for America."

Multinational corporations tend to have most of their revenue growth outside of the USA today. Some companies like Apple manufacture their phones overseas, and most sales are overseas. This complicates all historical comparisons. The world is much more interconnected these days and we are all "God's children" living in all parts of the globe. Nationalism that is practiced by Trump eventually ends with a 1930s in Europe. BLAME creates hatred which then becomes to great uniter.

This all will not end on the plus side.

Sam M , says: September 18, 2017 at 10:33 am
Matt W

"Be charitable. It's VERY hard for someone to admit that they were fooled. It will be interesting to see all the mechanisms of denial."

Will it be interesting? Or entirely predictable? We have a model: All the ostensibly progressive people who for years voted Democrat and essentially ended up with a huge bait and switch. Which is not the divide in the Democratic Party, with the social justice left now ascendant and angry, because they got an awful lot of Dont Ask, Don't Tell and Clinton-era mass incarceration for their loyalty. While the union-wing got Goldman Sachs stuff.

All those people got rolled the same way Trump is rolling people now. So now we have BLM and Bernie Sanders and basically nothing in between.

So yeah. That's what we will get on the right.

Roger II , says: September 18, 2017 at 10:39 am
Trump has always been an ethically-challenged con man. I would still like to hear someone identify an actual policy that would help Youngstown. The truth is that steel industry jobs are gone, and they aren't coming back. Illegal immigration had nothing (or next to nothing) to do with that and has next to nothing to do with the fact that Youngstown has not developed other jobs for its citizens. Trump never proposed any concrete solutions, but quite frankly neither has JD Vance. Democrats have -- Obamacare, training programs, increased minimum wage, financial aid, more support for unions -- but by and large the white working class has rejected those policies. So maybe Youngstown should figure out what it wants from Trump or anyone else.
Allen , says: September 18, 2017 at 10:51 am
"The faithful man has perished from the earth, and there is no one upright among men. They all lie in wait for blood; every man hunts his brother with a net. That they may successfully do evil with both hands-the prince asks for gifts, the judge seeks a bribe, and the great man utters his evil desire; so they scheme together." Micah 7:2-3 (NKJV)

The more things change, the more they stay the same.

collin , says: September 18, 2017 at 11:14 am
Trump raged against "offshoring" by American companies during the 2016 campaign. He even threatened "retribution,"­ a 35 percent tariff on any goods imported into the United States by a company that had moved jobs overseas.

Again, can somebody explain to me how in the hell this is going to be done as free trade is 50%+ popular and any changes in a deal, such as NAFTA, will have serious negative economic consequences in certain parts of the nation. Rip up NAFTA, Iowas LOSES BIG!

Also, in terms of employment the steel industry is not that large anymore. It has about 80K workers today which is significantly about 90% less in the 1980s. And we produce almost (about ~95%) as much steel today as in the 1980s. So steel tariffs will increase steel jobs by 10% which is 8K workers and construction will lose 1% of 730K which is almost 8K workers. So somebody has to show me the benefit of steel tariffs as I don't see it.

Purple Tortoise , says: September 18, 2017 at 11:29 am
[NFR: But that's not really the point. The point is that Trump *specifically* ran against Goldman Sachs and what it represents. And now look. It simply won't do to say, "But Hillary would have been worse." Maybe so, but at this point, that strikes me as a way of rationalizing Trump's failure to keep his promises. -- RD]

Actually, I see it as rationalizing on the part of the NeverTrumpers for why they were justified in offering the voters a sh*t sandwich and why the voters were wrong to go with Trump in the hope of not being forced to eat a sh*t sandwich. Now that Trump has gone back on his promises, the NeverTrumpers are rationalizing that it proves they were right all along because the voters didn't escape the promised sh*t sandwich.

Jeff R , says: September 18, 2017 at 11:35 am
I would dearly love to help them out, and rebuild their cities. It would be the right thing to do. But as long as they keep voting for republicans (and yes, republicans are more corporate and Wall Street friendly then the democrats, Hillary Clinton notwithstanding), they are going to continue to decline.

As a Baltimore resident, I find this statement hilarious.

BlairBurton , says: September 18, 2017 at 11:37 am
http://www.thedailybeast.com/i-told-you-so-trump-is-a-conman-in-chief

"As members of the reviled Never Trump movement, it's not just an end-zone celebration play to say we warned you. We warned you over and over that Trump's brand isn't success; it's betrayal. We warned you that he believes in nothing, and so he will break any promise, shaft any ally, and abandon any position. Hate us all you want, but if you think this is the last time he'll shank his faithful, you might want to review the last 40 years of his personal and business behavior."

Donald , says: September 18, 2017 at 11:37 am
"There is a subset of voters who look upon their politician in an unhealthy God-like/3rd world fashion; much more tangible on the Left, but there on the Right as well."

This is correct, except for that ludicrous claim that it is worse on the Left. It's obvious on both sides and it's been that way forever.

I despise Trump. I am glad he is making deals with Democrats, but the Goldman Sachs thing is horrible. There was always a faint chance he could have governed as a populist, pushing massive infrastructure projects to create jobs, for instance. I thought that would appeal to his vanity as someone who builds things. No such luck.

Sawbuck , says: September 18, 2017 at 12:02 pm
It isn't just the steel industry. You underestimate the level of rage out there in flyover country – and the towns where the service workers live next to the towns where the 1% live because the workers cannot afford the uptown costs – they really will be fine if the whole system burns to ash.

They are used to being poor and will last longer.

Richard Morton , says: September 18, 2017 at 12:05 pm
VikingLS (at 10:19pm) hits the mark, IMO. I'd be interested to hear more. Playing the "con man" card gets stale & tiresome fast. Thanks also to Rob G for recommended reading (at 7:08am). So, Rod, won't a good shot of Ben Op faith and virtue also help make America industrious again? It is hard work, but is it impossible to imagine or too complex to do? If you think so, I think you underestimate us–and our Lord.
Captain P , says: September 18, 2017 at 12:15 pm
So long as the Clintonistas don't find a new figurehead, bet on Sanders winning in 2020. If anyone's a true opponent of neoliberal economic policies, he is.
Phillip , says: September 18, 2017 at 12:16 pm
Yes, Trump is bad, is going back on promises, etc. etc.

But what's the freaking alternative?

Give me an actual name that is not worse.

Siarlys Jenkins , says: September 18, 2017 at 12:31 pm
Trump ( and the GOP generally) are running the William Henry Harrison routine. Talk about the plain common working people, mix in some log cabins and hard cider, describe anyone who wants to raise wages as an effete elitist, and the downsize, merge, consolidate, offshore, the better to profit from the misery of others.

Now, what could have been done in 1977? That was the beginning of Jimmy Carter's term, his first year in office. At the time, he was a conservative southern Democrat, America's first born-again Christian president, despised by liberals, who tried to run Ted Kennedy against him in the 1980 Democratic primary, producing plenty of material for Ronald Reagan campaign commercials in the general election.

It would have taken a VERY comprehensive plan and some long-term investments. The steel plants were aging and uncompetitive. The companies laid off thousands because they didn't think it worth investing billions in new plants, new technology, etc. A few plants that employees pooled their hard-earned savings to buy turned out to be unsustainable too. A good stop TOWARD a more sensible socialist economy would have been a law providing that IF a company employing more than 1000 workers wanted to shut a plant, a government agency has first option to buy, at a price no greater than original investment minus all depreciation taken on corporate tax returns (that is, next to nothing).

Then it would have taken billions in federal financing to do the upgrade. Why do this? Well, considering the economic and social costs of all the crime, drug networks, drug treatment, alcoholism, etc. in the forty years since, it might have been a net cost savings. This is how socialism becomes a paying proposition, rather than "running out of other people's money."

But a sustainable program has to be geared to production people will actually need and use and want and buy. Production of stuff that piles up because there is no market for it is not sustainable. Something could have been done, but there was no will. Democrats were, then as now, afraid of their own shadow, and addicted to putting band-aids on long-term problems. Republicans, then as now, were addicted to "market forces," which, of course, are what triggered the catastrophe. What passed for a "left" at that time was too busy debating whether Deng or the Gang of Four were the true heroes of proletarian revolution and holding May Day picnics where 90 percent of participants were college graduates. They weren't reading the business pages.

It is also the case that Hillary Clinton was in bed with Goldman.

True, and relevant, but hardly in contradiction with what Dux Bellorum said.

Dux Bellorum, Austinopole , says: September 18, 2017 at 12:33 pm

[NFR: This is simplistic trolling and you know it. It is also the case that Hillary Clinton was in bed with Goldman. Remember the private Wall Street speech she gave, released by Wikileaks, in which she talked about how one needed to have "a public and a private position"? We would have been equally screwed by a Clinton.2 presidency, and a conventional Republican one. My anger at Trump over this is that he promised to be something different -- and, being fabulously wealthy, he didn't depend on the largesse of financial titans to make his living. He was in a position to change things -- yet on economic issues, he's turned out to be as bad or worse than those he ran against in both parties. -- RD]

It would be trolling if we were describing a single election, sure, but the comment refers to the very, very long alliance between social conservatives and business conservatives, which, in the south, goes back to the nineteenth century. Institutional Christian powers have been taking money and power from business interests to enforce their particular visions of what everyone should live like, and it's had the effect of giving them more and more power over an ever-shrinking and ever more miserable kingdom.

There's that lovely idea that by their fruits shall one know ideas, I think that Youngstown, in synecdoche, is a great example of the fruits of that particular idea.

$0.02,

DBA

Weldon , says: September 18, 2017 at 12:44 pm
The problem with this line of thought is that it would lead you to expect that Trump won Rust Belt voters whose chief concern was jobs and the economy. But he didn't; Clinton (narrowly) did. Trump won Rust Belt voters whose chief concern was "cultural decline".

Somehow the economic narrative got way off from what the data actually show: on election day, Trump underperformed recent Republican candidates in every economic cohort *except* households making $70K-$100K. This is the group you need to look at to explain his appeal.

Donald , says: September 18, 2017 at 12:45 pm
"Just shocking that a politician went back on a campaign promise. Throw the bum out. Shocking."

And this silly sort of cynicism is exactly why politicians think they can get away with breaking any and every promise they make.

Deplorable MD , says: September 18, 2017 at 12:50 pm
These can be true:

1. I am unhappy with certain (even "many") Trump decisions.
2. I remain happy I voted for Trump over Clinton.

What would it take for me to instead have wished I voted Clinton over Trump?..some combination of the following:

1. An increase in taxes on the working and professional class.
2. An offensive ground invasion of foreign country.
3. The nomination and Senate approval of a doctrinaire Liberal to the Supreme Court.
4. Policies that would lead to increased working class and poor immigrants to our country.

I imagine there are more, but these are some of the important points. I can muddle through a temporary ill mannered President and don't have a problem getting dirty to avoid the above.

BD , says: September 18, 2017 at 12:54 pm
Judging from the reaction of Trumpers in this comment thread it's pretty clear that there is literally nothing he could do that would cause them to abandon him. They will rationalize anything he does.

During the campaign, some of them said "well if he betrayed us on immigration then we'd leave him" and the biggest crimes committed by the Rubios of the world was that they cut deals far better (from restrictionist points of view) than this. So it's clear how they react to a betrayal–simply pretend it's not a betrayal, or that any non-Trump alternative would have been worse.

It's looking like they have become a cult.

Venice , says: September 18, 2017 at 12:56 pm
I'm always amazed at how loyal Trump supporters are. At times he was voted in to totally disrupt Washington, at other times he was supposed to make deals to keep the peace.
Look, Trump was always part of Wall Street. This was always going to happen. I don't think it's a bad thing but I do feel bad for the people who voted for him expecting anything different.
BD , says: September 18, 2017 at 1:01 pm
"It's not whether he makes deals. It's on whether they are good deals. The DACA deal would not be a good one if it follows what has been outlined."

That's not true. It's an excellent deal for the Democrats and Republican immigration doves.

For immigration restrictionists? Well, for them this puts them next on the long list of people who made the mistake of trusting Donald Trump.

BD , says: September 18, 2017 at 1:06 pm
"It's easy to criticize but a lot more difficult to say what they should have done. So tell me, who should they have supported? And don't say "Anybody but Trump" – that's not an answer."

This is a fair question, but they easily could have organized around another candidate who represented what they believed in (surely Trump is not the only person in the world who favored cutting back immigration–it's a very popular position in the GOP grass roots). Pat Buchanan ran on it in the '90s.

But to say "let's get behind the guy whose track record practically screams at you that you're going to get backstabbed" seems worse than even staying home. What are the chances now that next time a candidate runs on those issues anyone is going to believe him?

TR , says: September 18, 2017 at 1:13 pm
I suggest taking Wes seriously ("Could be better, could be much worse"). I have a suspicion his position is probably the norm.

In any case, some politicians pay for their "sins," some don't. I have an awful feeling, Trump will fall into the latter category.

TR , says: September 18, 2017 at 1:22 pm
A side note: John_M's correction of the steel plant closures makes sense. At the time they happened, it was not unusual to point out that American steel was uncompetitive even in a fair market (which didn't exist). Failure to modernize was a big factor.

And even if evil capitalism and elitist government may have been behind the closings, one should point out that a lot of less bright capitalists lost their shirts.

Potato , says: September 18, 2017 at 1:30 pm
They know they're getting screwed, in Youngstown and elsewhere. For some reason they don't care. They'll stick with Trump to the bitter end.
EngineerScotty , says: September 18, 2017 at 1:33 pm
And the standards keep getting lower and lower
Loudon is a Fool , says: September 18, 2017 at 1:46 pm
+1000 @ Old West

Any legislation. Congress doesn't need to pass some thing. They could pass any thing. Except they can't pass any thing. Not a single thing. They're incapable of governing. It's thoroughly depressing. As Williamson has noted previously, the wily McConnell is just the wrong man for the job. Trump's broken promises are nearly 100% McConnell's leadership failures. Could any other GOP president overcome McConnell's incompetence? Maybe. But that's a lot of incompetence to overcome. The Democrats are terrible human beings. But they know how to pass legislation. So if you want to pass some legislation and your choices are the Democrats or McConnell do you really have a choice as to the party you're going to approach?

Rosita , says: September 18, 2017 at 2:11 pm
Have to agree with all the Trump voters and supporters on this thread. None of them voted on principles; as they have stated, more on emotion, affinity and bread and butter issues. Your points about Trump's betrayals ring hollow. Everybody understood that Trump's positions are malleable and that was part of the package. Even when his policies begin to hurt his supporters, that will be a necessary evil to shore up the cultural and social solidarity that Trump represents. Plain and simple.
Polichinello , says: September 18, 2017 at 2:16 pm
All of this info was there–and being spouted loudly by the left–during the campaign.

This is the deal you (not you, Rod, since you didn't vote for him..) made for Gorsuch. We'll all get to see how bad a deal it was in the next years.

Given the Left's attitude to free speech these days and judicial overreach, totally worth it. Totally.

Hound of Ulster , says: September 18, 2017 at 2:23 pm
Everyone who voted for Trump based on ANYTHING he said during the campaign is a sucker. We warned you, but you wouldn't listen and just wanted to watch the 'libtards' cry.

Fools

Polichinello , says: September 18, 2017 at 2:25 pm
To be honest, I never understood how Trump was going to bring these jobs back as automation was the primary cause and the connection of Illegal Immigrants was not significant. Please show the direct lines of DACA Immigrants to manufacturing jobs in the Rust Belt?

They increase the labor pool that will compete with those people whose jobs have been eliminated by automation. Moreover, they require the same public spending (actually more), so now those people affected by automation are left with less government succour, as resource now have to be diverted to people who entered the country illegally.

I, for one, understand that some sort of compromise solution will need to be reached to deal with the Dacaritos, but let's not wave our hands and pretend this is all the fault of Skynet and that inflating the number of no- to low-skilled people in the pool will have no effect.

Be aware, too, that we're NOT discussing just a few hundred thousand people here, as the deals being thrown around will go up into the millions, once you factor in chain migration, as well as the knock on effect of encouraging yet more illegal immigration with the promise of future amnesties.

Alex Curbelo , says: September 18, 2017 at 2:26 pm
Mr. Dreher routinely gets into the pitfall of context denial when it comes to Trump.

Given the state of the country, and especially what the Republican and Democratic parties have given us for the last 40 years, no one (including Mr. Dreher) will ever be able to make the case that supporting Trump was not the rational way to go despite the risks. It was the right way to go under the circumstances and given the horrid alternatives that the GOP gave us in the primaries and the Democratic Party gave us for the general.

More importantly, just because Trump may be fake doesn't mean he did not tap into real issues. The reason Trump won is that, again, he tapped into very real issues.

YM , says: September 18, 2017 at 2:31 pm
Since I discovered your blog, Rod, I have wondered, why would you have your blog on such a lame website. Now I know – its your way or the highway. No choosing between imperfect choices.
ludo , says: September 18, 2017 at 2:39 pm
Just as the Clinton campaign disintegrated into a vacuous, visionless, vapor which the ultimately voters did not care to inhale, so too the Trump administration is in the premature process of decay into an amorphous, gelatinously unrecognizable politico-administrative life-form ("neither fish nor foul," "because you are lukewarm!neither hot nor cold "), perhaps to better camouflage and disguise the creedless (nihilistic) plutocratic pillaging of what remains of the non-oligarchically captured corpse (or, at least, despoiled and desecrated body) of a once proud and productively positive Middle Class government and state.
The Color of Celery , says: September 18, 2017 at 2:46 pm
Maybe Elizabeth Warren needs to be president if there is going to be something done about Goldman Sachs.

[NFR: If she weren't so fanatically down-the-line liberal on social issues, I'd strongly consider voting for her. -- RD]

Alex Curbelo , says: September 18, 2017 at 2:48 pm
A deal with Pelosi/Schumer would make sense on infrastructure but not DACA. Trump will not survive this betrayal on DACA. People aren't stupid.

There is a debate in the informed pro-Trump community -- is Trump a con artist, sell out, traitor, or man who means well but whose hands are tied. On one side, you have people bending over backwards to defend pretty transparently treacherous moves by Trump's on the grounds that he has little real choice. The argument is that because Trump's Jacksonian agenda is being monolithically and implacably opposed by the top leadership of both parties, the courts, the military, the IC, the banks and big corps, etc. (our true rulers), Trump has to bide his time, cut deals, and play Nth dimensional chess until he can move forward with his real populist agenda.

The other side of the argument is that Trump is just a con artist. When pro-Trump people try to argue to me that Trump's hands are tied, I also counter by pointing out the factors that are under Trump's control. Trump can't control Ryan, McConnell, etc. but what can he control. Trump can certainly control who works for him! Which means the strongest evidence that Trump never meant it can be found just by looking at who he has working for him. He gave top jobs to establishment figures like McMaster, Kelly and Cohn.

I can understand the claim that CIA and other deep state figures, McConnell, etc. won't go along with Trump and have been working overtime to sabotage Trump -- those things are true -- but what then is Trump's excuse for giving jobs to people like McMaster and Cohn?

Kushner and Cohn (and really most likely Lloyd Blankfein himself) have mostly neutralized Trump's economic, immigration and trade agenda in areas where the president has a lot to autonomy to act independent of the courts and Congress, while McMaster has done the same on the foreign policy front. And John Kelly, by all accounts, now has Trump under de facto house arrest, having reportedly cut off Trump from all of his remaining advisors that support the original MAGA agenda.

These are dark days for anyone who recognizes that the issues that propelled Trump to victory are real. Nothing ever changes because our true rulers are not the people we elect.

Finally, the idea that Trump pulled off the con of the century does not hold up. That honor belongs to the post-1980 Republican party for pulling off the longest and greatest con over the largest number of people ever. Trump can't come close.

Noah172 , says: September 18, 2017 at 2:52 pm
Who did Kevin Williamson favor in the 2016 primaries? Jeb? Rubio? Cruz?

Here is the reality that Williamson and his ilk refuse to acknowledge. If any of Trump's Republican rivals were in his position now:

The federal government would not be appreciably smaller.

Obamacare would not be fully repealed/replaced.

A bigger amnesty would be at least under consideration, if not already enacted.

The personal income tax would not be abolished or turned into a flat tax.

We'd be in a regime change war with Assad (and thus Putin).

Paul Ryan-ish "entitlement reform" would not be enacted.

Latinos and millenials would not love the Republican Party.

Homosexual marriage would not be rolled back.

These other Republicans (most to all of whom would have lost to HRC) would not have been so successful enacting the movement con agenda, which is unpopular and internally contradictory.

Voucherize Medicare + open borders + neocon wars + free trade + PC pandering = balanced budgets, prosperity for all, and a "permanent Republican majority"?

And Trump is the con man?

walking horse , says: September 18, 2017 at 2:54 pm
"Just shocking that a politician went back on a campaign promise. Throw the bum out. Shocking."

This is in fact shocking. It's shocking at least on the order of Bush the Elder's reversal of "read my lips: no new taxes", which cost him a second term.

I see that Trump has opened a US military base in Israel, the first ever, which is one of the stupidest acts in recent American history.

all of which suggests that Trump will soon be history himself

swb , says: September 18, 2017 at 2:59 pm
Given the comment section, there is no indication that his voters are judging his progress based on any criteria that is usually applied to normal politicians. Real benefits are not actually a criterion used by his voters. If trump can find enough scapegoats to blame for things, I believe that qualifies as progress for his voters because that makes them feel better. Since he is adapt at generating controversy and thereby creating appropriate new groups to blame I do not really see reason why this virtuous cycle could not continue for two terms.

I mean seriously, bush junior sent off their sons and daughters to vacation in the desert and thousands of them did not come back and he got two terms. Trumps voters are not going to be upset just because he lies to them.

lllurker , says: September 18, 2017 at 3:00 pm
"Or cancelling Obama regulations such as the one that required any buildings re-built with federal money needs to take rising sea levels into account?"

I didn't even know that was a thing. (The regs themselves.)

As I followed the Houston and then FL news, once I would get past all the human suffering my mind always seemed to end up in the same place: "We're not really so stupid that we're actually gonna rebuild in these same low-lying places?"

I know this only applies to certain areas, and that the storm over Houston was pretty freakish and perhaps a one-of-a-kind. But some of these areas are destined to flood so much over the coming decades that they will eventually have to be abandoned, at least as building sites. So in the meantime how many billions are we going to put on Uncle Sam's credit card, to be paid by coming generations, for rebuilding doomed structures?

I hope there are controls in place that at least force the people who in the worst places to move elsewhere.

Mike Alexander , says: September 18, 2017 at 3:05 pm
Kronstein1963 writes:
It's easy to criticize but a lot more difficult to say what they should have done. So tell me, who should they have supported?

They should have voted for Sanders in the primaries and then the GOP nominee in the general. By doing this they would have helped further the economic nationalist message by demonstrating significant support for a serious anti-Wall street message. By putting Trump in there they established empirically that

populist economic nationalism = Goldman Sachs.

Populist economic nationalism is now a dead letter

Noah172 , says: September 18, 2017 at 3:18 pm
I'm in holding mode on Trump right now. I'm wait-and-see on where DACA negotiations go, and I'll call my Representative and Senators to voice my opposition to amnesty (and support for some of the restrictionist bills pending). Here's the possibilities of what the past week's DACA drama means to me:

Looks, quacks like a duck: Trump sincerely wanted to agree to amnesty, with little in return, with the Democrats, got blowback from his troops, and backtracked by seeming to insist on tougher demands.

Total sellout: Trump will go for amnesty, with no meaningful concessions, base voters (and small donors) be damned.

4D chess: Trump was using talk of amnesty and delaying a fight over the wall to lure the Democrats into negotiation so he could then drop tougher demands on them (end to chain migration), which he knows they will reject, setting them up to look like extremists and have a government shutdown fight (which, e.g., Congressman Luis Gutierrez openly wants) right before Christmas.

In the first possibility, I'm upset and undecided for 2020, but at least Trump listened to his troops after only a few days of Breitbart and Twitter screaming at him. That's more than you can say for GWB, John McCain, or Paul Ryan.

In the second possibility, I'm through with Trump, for good.

In the third, I'm OK with political chess-playing in principle, but you gotta do it right. It's dangerous, especially for Trump, hated as he is by all TPTB, even in his own party, to demoralize and confuse your core fan base (and small donation base, I repeat) in attempt to lure the opposition into a political trap.

I can't tell if possibility 1 or 3 is the truth (2 is unlikely but frighteningly possible). In any case, I don't see a DACA amnesty happening because too few Republicans will risk it, Trump seems to be offering a trade which the Democrats will never ever accept (only DACA applicants for RAISE Act and maybe wall or some interior enforcement), and some Democrats (Gutierrez and company) are so stupid and greedy and fanatical that they think they are entitled to a massive amnesty with literally nothing in return, not even fake border enforcement (Schumer and Pelosi are trying to talk sense into their backbenchers, we'll see to what avail).

Rusty , says: September 18, 2017 at 3:23 pm
It's almost as though the last 40 years of Youngstown citizens felt *entitled* to having those good jobs replaced, in their town, w/o having to move or re-invent themselves.
cdugga , says: September 18, 2017 at 3:38 pm
I am not buying the we were fooled thing in the least. Like, the don is putting health care and DACA in the hands of republican legislators and all they have to do is legislate. They have not and cannot. Now we are reading about the don's betrayal of labor on TAC? This is not any sort of news whatsoever. Someday, maybe after some environmental disaster in appalachia, we will read about how the don betrayed the amerian people by crippleing regulations designed to protect their air and water. As if that was something new too. No, what we are seeing here is what I have been seeing since the rise of the don. If he is successful, it is because we supported and voted for him. If he does what anyone paying attention saw him doing already, then we can say, well, he never was a true conservative anyway. All this, is just more of the same ole lies of omission and lies to deny responsibility and place blame on anyone but ourselves. How many columns have I read here about how the don was the fault, not of the people that actually voted for him, but the fault of those gay transgender mexican muslim blacks and their secularist enablers. And the beat goes on.
Oh, and I was mortified when trump was elected but not at all surprised. He followed every standard GOP strategy including the tried and true decisive pander to the NRA. If he did do anything different, it was to claim in a much more outright manner that we were being victimized by immigrants and all those other non-deserving people. He even set the bait for people like me, by saying he would go after wall street and the hedge funds that shorted the whole world in the financial collapse.
But in this pile on, we should give the don credit where it is due. He has successfully exposed the republican party for what it has always been about. And putting healthcare and DACA into republican legislator's hands is going to be much more revealing about who has been fooling the fools than anything the don himself has done.
lllurker , says: September 18, 2017 at 3:39 pm
"Steel workers were retrained to fill jobs in that sector, which was expected to sustain the middle class in the same way that manufacturing did.

It did not. According to a study done by the Midwest Center for Research the average salary of a steel worker in the late 1970s was $24,772.80. Today, according to the most recent Bureau of Labor statistics, the medium household income in the Mahoning Valley is $24,133."

There seems to be some misperceptions regarding the wages that were paid in old-line manufacturing industries vs modern service jobs. The most important thing to understand is that the once strong wages and benefits in the steel and auto and other similar industries had nothing to do with the sort of work the people were doing. The pay and benefits were a direct result of the employees having strong unions and the unions having favorable federal legislation in place.

The truth is that the jobs themselves were often awful, especially in steel. And dangerous. But the jobs didn't require any more experience or ability from a new hire than the fast food industry requires today.

It is just a quirk of the way the industrialization of the country played out that the industrial sector ended up, at least for awhile, with employee-friendly compensation packages. In fact had it all gone the other way, and the service sector grown first, before manufacturing, many of the problems the non-college educated crowd face today wouldn't even exist. Manufacturing has become especially sensitive to labor costs because companies can choose to build factories in other countries where salaries are low. Most of the country's service industry isn't like that.

VikingLS , says: September 17, 2017 at 8:59 pm
"When Youngstown (so to speak) figures out what's been done to it, politics in this country is going to get very, very interesting."

Rod what are you going to do to change this? The Ben Op doesn't help.

[NFR: I dunno, Viking, I guess I'm waiting on you to tell me what to do. You know perfectly well that the Benedict Option is not about changing American politics, but about the life of the church. Besides, it is not the case that I or anybody else has to have a "solution" to offer before we can criticize what we see. I doubt very much you apply that standard to your own judgments of the world. -- RD]

Planet Albany , says: September 17, 2017 at 9:03 pm
Since I voted for Trump and you did not, doesn't that put me in a better position to judge whether Trump's willingness to make deals with Dems on DACA, taxes and infrastructure amounts to betrayal? Answer: It doesn't. It's what I want him to do. He campaigned on making deals, including with Russia, which I also want to see to keep the peace. Just hold the line on social issues, and we're good.
Trey , says: September 17, 2017 at 9:08 pm
But I thought we were a bunch of hicks that did not understand the constitutional checks and balances and the need for compromise and when we found out Trump was not able to be a dictator we would turn on him.
Corwin , says: September 17, 2017 at 9:35 pm
The problem is Youngstown won't figure it out. They, and so many other small and industrial towns across the country, are looking for a solution on their terms. They have had the last 30 plus years to update, and some have, like Pittsburgh. Meanwhile, the people who have figured this out left for greener pastures a long time ago.

I would dearly love to help them out, and rebuild their cities. It would be the right thing to do. But as long as they keep voting for republicans (and yes, republicans are more corporate and Wall Street friendly then the democrats, Hillary Clinton notwithstanding), they are going to continue to decline.

Francis E Blangeard , says: September 17, 2017 at 9:36 pm
To a large extent Goldman Sachs is the 'Deep State'.
Adamant , says: September 17, 2017 at 9:40 pm
I was in Youngstown just the other week. You could no more thoroughly destroy a city than if you had the Air Force flyover and reduce it to rubble via saturation bombing. You could say the exact same thing about 1000 other towns here in the Rust Belt. The main source of economic activity is methamphetamine production and heroin trafficking, and the ruination of generations yet unborn is baked in.

"So Trump won -- and staffed up with Goldman machers -- Gary Cohn most important of all"

As did Obama, and Bush, and Clinton, and on and on unti the heat death of the universe. Wall. Street. Always. Wins. Like the Military Industrial Complex always wins.

And they will continue to win until we can decide as a people to put our cultural distinctions and differences aside and defeat them. Because they are going to exsanguinate your tribe of traditionalist Christian conservatives as surely as they will my tribe. Say what you want about the political praxis of Occupy Wall Street, at least they were yelling at the right buildings.

I'd like to bring an old word back into our political currency: solidarity.

Wes , says: September 17, 2017 at 10:17 pm
Still a happy Trump supporter here; unphased by the presence of Goldman Sachs employees (the horror!) or of deals with Democrats. Could be better, could be much worse.
VikingLS , says: September 17, 2017 at 10:19 pm
[NFR: I dunno, Viking, I guess I'm waiting on you to tell me what to do. You know perfectly well that the Benedict Option is not about changing American politics, but about the life of the church. Besides, it is not the case that I or anybody else has to have a "solution" to offer before we can criticize what we see. I doubt very much you apply that standard to your own judgments
of the world. -- RD]

Actually I do try and hold myself to a standard along those lines. People don't always like my suggestions, but I do have them. I wouldn't have asked you that question if I didn't have an idea what I think you, or at least somebody at TAC, needs to do.

Someone needs to talk about what Trump getting elected as a Republican with his platform says about the voters, even if he himself seems to have pulled a bait and switch. Not what liberals say it means ("Clinton was a bad candidate" at best "America is racist" at worst.) This is conference worthy.

Nothing against you and Larrison, you're both fine writers, but is it possible to get the other writers here to write more? What's the difference between yourself and say, Bill Kaufman in TAC's structure?

Someone, it doesn't have to be you, but someone, needs to spend serious time looking at the Conservative movement in new media. That's looking like where the future is, not the New York Times op-ed page. There really are people who supported Trump who are both aware that Trump isn't keeping his campaign promises, and are discussing what their next move is going to be.

Try and resist the temptation to write variations of "Trump voters must feel stupid now". As opposed to what? Having Clinton as president? Do you honestly think if Clinton was president you wouldn't be writing some version of "Wow, I knew Clinton was going to be bad, but I didn't realize she'd be THIS bad." In a little over 3 years, it will be a different story, but for a lot of people a Clinton presidency where she kept her promises would be worse.

I am going to write you a personal email. I actually have taken a pretty serious personal professional hit because of this election, and I STILL don't regret my vote. This is not all academic for me.

Old West , says: September 17, 2017 at 10:41 pm
Trump would have signed any legislation a GOP controlled House and Senate passed.

ANY.

It wouldn't even need to have been good.

Making a deal with the Dems is his way of punishing the GOP for being incompetent.

At this point I'm still feeling betrayed by them. But I reserve the option of adding him to the list.

Sam M , says: September 17, 2017 at 10:42 pm
It's hilarious how selective people are about economics. Nothing to be done about the steel industry. Just how markets work. Too bad so sad Youngsville.

Unless you are cool. Like Amazon. And cities will slobber all over themselves to say to hell with the market, we need to subsidize development. And give the richest guy in the world free stuff:

https://www.google.com/amp/s/mobile.nytimes.com/2017/09/07/technology/amazon-headquarters-north-america.amp.html

Elon Musk has received at least $5 billion in subsidies:

https://www.google.com/amp/www.latimes.com/business/la-fi-hy-musk-subsidies-20150531-story,amp.html

Hmm. It's almost like it's only poor schmucks who have to suffer the ups and downs of the free market.

collin , says: September 17, 2017 at 10:51 pm
I am sorry but this happened almost 40 years ago and I remember when conservatives like Reagan were dancing on the death of union graves in the 1980s. Conservative loved when Reagan fired union air traffic controllers. And one reason why I voted for Bill Clinton because in 1992 he campaigned on the jobs of tomorrow as was honest to the American people that many of these jobs were not coming. (And the second fall in manufacturing was occurring in 1992 as well.) To be honest, I never understood how Trump was going to bring these jobs back as automation was the primary cause and the connection of Illegal Immigrants was not significant. Please show the direct lines of DACA Immigrants to manufacturing jobs in the Rust Belt?

Agreed, as long as he rub in his Grand Victory over HRC, conservatives will take anything from Trump.

The Sicilian Woman , September 17, 2017 at 11:16 pm
Just hold the line on social issues, and we're good.

Such was/is the hope of social conservatives with whom I share the same values but who voted for Trump and whom I suspect will be badly betrayed.

Purple Tortoise , September 17, 2017 at 11:16 pm
I didn't vote for or against Trump -- the election winner was foreordained in my state -- but I am surprised to hear these "I told you sos". Despite Trump's betrayals, I am not at all convinced that the situation would be any better now had Hillary Clinton or an establishment Republican been elected. In fact, being cozy with Wall Street and immigration amnesty is exactly what Hillary Clinton or an establishment Republican would have done. So I can see how Trump is now and always has been a worse alternative from the viewpoint of the Republican establishment, but I can't see how Trump even now is a worse alternative than the Republican establishment or Hillary Clinton from the viewpoint of the typical Trump voter.

[NFR: But that's not really the point. The point is that Trump *specifically* ran against Goldman Sachs and what it represents. And now look. It simply won't do to say, "But Hillary would have been worse." Maybe so, but at this point, that strikes me as a way of rationalizing Trump's failure to keep his promises. -- RD]

The Owners , says: September 17, 2017 at 11:19 pm
@Planet Albany – "Since I voted for Trump [ ] Trump's willingness to make deals with Dems on DACA, taxes and infrastructure amounts to betrayal? Answer: It doesn't. It's what I want him to do. He campaigned on making deals, including with Russia, which I also want to see to keep the peace. Just hold the line on social issues, and we're good."

I voted for him too. Making deals witn Dems on DACA isn't "holding the line on social issues", obviously.

Trump's a total prisoner of DC, Wall Street, and Silicon Valley now. We need a new president. Thanks for Neil Gorsuch, Donnie. 'Bye.

Kronsteen1963 , September 17, 2017 at 11:19 pm
So, who were the people of Youngstown supposed to support? Hillary Clinton and a Democratic party that is visciously hostile to their social values? Jeb Bush and a Republican Party that's indifferent to their plight, and considers them to be lazy losers? Both parties support immigration and trade policies that are killing these people because it benefits their corporate and Chamber of Commerce contributors. Only one guy spoke to their situation: Donald Trump.

I don't like Trump – never have. And I didn't vote for him. I lived in Maryland – Clinton was going to win that state easily. My vote didn't matter so I voted 3rd party as a protest vote. But, I understand why people voted for Trump. They were desperate and he was THE ONLY CANDIDATE in either party that talked to their struggles. This is not a failure of the voters. It's the criminally negligent failure of both political parties to address the problems facing ordinary America.

It's easy to criticize but a lot more difficult to say what they should have done. So tell me, who should they have supported? And don't say "Anybody but Trump" – that's not an answer.

Walter Sobchak , September 17, 2017 at 11:24 pm
Shapiro is right. Planet Albany is one of the Trumpeters who love the personality, and who would not care if Trump shot somebody in the middle of Fifth Avenue. Their problem is that Trump can flip the Bird at the Media and the Cultural elite all he wants, but he will not affect system in the slightest, because he has no understanding of its structure and no plane to affect it in any way.
Glaivester , says: September 17, 2017 at 11:32 pm
Since I voted for Trump and you did not, doesn't that put me in a better position to judge whether Trump's willingness to make deals with Dems on DACA, taxes and infrastructure amounts to betrayal? Answer: It doesn't. It's what I want him to do.

It's not whether he makes deals. It's on whether they are good deals. The DACA deal would not be a good one if it follows what has been outlined.

John_M , says: September 17, 2017 at 11:47 pm
Trump is taking his supporters for a ride.

When I got out of graduate school I was offered a job by a steel company research lab – so yes, I was somewhat of a steel metallurgist. I went into micro-electronics instead. When I turned down their job offer, I told them that they would survive the Japanese competition, but that I thought that the mini-mills would decimate them.

The research lab closed down 3 years later as the steel company restructured.

Even without import competition, the steel industry we knew in the 1970's was doomed. The facilities were antique and the development of the basic oxygen furnace and the sophisticated electric arc remelt furnaces obsoleted much of the existing infrastructure. If you look at a Nucor mill now, you won't see many employees.

Even without any import issues, there would not have been many employees left.

Imports were – and are – a problem. But the carnage was done by technology and automation. The politicians do not seem to be very willing to discuss this – automation doesn't give the simple villain of the Chinese, Indians, Ukrainians, .

Philly guy , says: September 17, 2017 at 11:53 pm
If you look at the present day, we are still fighting over theVietnam war, as the pro and con sides are roughly the same as 40 years ago, middle class hippies vs "working class whites".
ANDREW ALLADIN , September 17, 2017 at 11:53 pm
Hillary Clinton would have easily defeated Ted Cruz, Marco Rubio, or Jeb Bush. Cruz is still stuck in his Reagan impersonation; Rubio wants to go to war with Russia over Ukraine, Crimea, Georgia, Syria, etc; and Jeb couldn't even bring himself to criticize the war in Iraq because of family loyalty.

Ben Shapiro charges $10,000 to give the same speech over and over again to college students. It's always the same: SJWs are whiny children, Millennials need to grow up, socialism sucks, the Alt-Right are losers, blah! blah! blah! A nice living if you can get it and he's got it.

Trump was and is still the lesser of two evils. I think of Trump the same way Christians in Syria think of Assad. Or Christians in Iraq thought about Saddam Hussein. There's always someone worse waiting to take over.

Some fellow Christians are facing bankruptcy because they refuse to provide services for a gay wedding. This isn't some whiny college campus SJW showdown. That's where my concern is. I really couldn't care less about Goldman Sachs. I don't earn enough to care. Don't care about DACA or The Wall either. Sorry.

Christian liberty is the only issue I'm voting on. And Trump will always be the lesser of two evils. Always. Always. Always.

Alex Brown , says: September 17, 2017 at 11:54 pm
So Trump is a crook, and Hillary too. I suspect much of 'Youngstown' knew that. When other choice did the system offered, from 150 millions eligible potential candidates?

Yes, things may get even more interesting. Haven't tried Sanderistas yet, have we?

ADC Wonk , says: September 18, 2017 at 12:44 am
Just hold the line on social issues, and we're good.

@Planet Albany -- how do you feel about tax "reform" that blows the budget even more, and gives the bulk of the benefit to the top 1%-ers? Or cancelling Obama regulations such as the one that required any buildings re-built with federal money needs to take rising sea levels into account? Or p!ssing off Mexico so much that that they are turning to Argentina and Brazal to purchase their wheat and corn (NAFTA uncertainties).

cecelia , says: September 18, 2017 at 2:10 am
good Rod get angry see what is happening maybe when people see how they have been betrayed then maybe they will be open to something honest
KS , says: September 18, 2017 at 2:13 am
@planet Albany,

What would Trump have to do that would make you feel he has betrayed you? Don't worry he will do it, but somehow I suspect you and the rest of the Trump faithful will stick by him anyway. This is a cult, not a political following. He is one of 'you' and so anything he does is ok.

Dux Bellorum, Austinopole , says: September 18, 2017 at 3:09 am
Those people who are dying in Youngstown because of a government working in cooperation with corporate interests to enrich shareholders no matter the cost of American lives may take great solace in the knowledge that the people making those decisions and benefitting from them said some words sometimes about how gay relationships are objectively disordered, and those outside of the zones of suffering may feel sad for those deaths, but must understand that they are martyrs who gave their lives in the war to prevent gay people from getting health insurance for their families.

$0.02,

DBA

[NFR: This is simplistic trolling and you know it. It is also the case that Hillary Clinton was in bed with Goldman. Remember the private Wall Street speech she gave , released by Wikileaks, in which she talked about how one needed to have "a public and a private position"? We would have been equally screwed by a Clinton.2 presidency, and a conventional Republican one. My anger at Trump over this is that he promised to be something different -- and, being fabulously wealthy, he didn't depend on the largesse of financial titans to make his living. He was in a position to change things -- yet on economic issues, he's turned out to be as bad or worse than those he ran against in both parties. -- RD]

Deplorable MD , September 18, 2017 at 6:51 am
Con? We are always being conned by politicians. There is a subset of voters who look upon their politician in an unhealthy God-like/3rd world fashion; much more tangible on the Left, but there on the Right as well.

I voted Trump fully expecting to be conned, hopeful that one or two promises would become reality. So far I am pleased with the level of duplicity.

Ping Lin , says: September 18, 2017 at 6:55 am

Twenty, thirty years from now, don't be surprised if some American president proposes a "this time, it's different" invasion of another foreign country. And don't be surprised if we the people cheer for him.

20 or 30 years?? Try three. We're barreling towards war with North Korea and half the country will be cheering the President (whoever it is) on.

Sam (A Different One) , says: September 18, 2017 at 6:59 am
So because Trump has failed to deliver on promises to the working class, said working class should abandon Trump for whom? The Liberals, who hate them? The GOP types, like Williamson, who also hate them?
Rob G , says: September 18, 2017 at 7:08 am
re: Youngstown, etc., The New Minority by Justin Gest is worth a read. It's a sociological study of the white working class in two comparable areas, Youngstown and East London, and what happened when industry failed. The book was written before DT won the GOP nomination, but it does take Trump's primary run into consideration. The work that Gest did is based on survey results and interviews he conducted with residents during time spent as an "embedded" researcher.
Liam , says: September 18, 2017 at 7:18 am
None of which should be a surprise to anyone who paid even a modicum of critical attention.
markw , says: September 18, 2017 at 7:33 am
For many years we have heard U.S. politicians sanctimoniously intoning that Chinese politicians legitimacy depended on their creating jobs. This last election Jeb Bush and others found out this applies to them also, to their astonishment. Trump has the wind at his back on this front with the economy going forward, but can't count on this continuing thru the next election.
Michelle , says: September 18, 2017 at 7:34 am
For those of us who always thought Trump was a huckster with no principles other than self-aggrandizement, his behavior as president comes as no surprise. He's never made a promise he couldn't break. But, like all successful hucksters, he knows his mark and knows, on an instinctive level, how to appeal to their hopes and fears to close the sale. I'm not sure what it would take to break through the rationalizations of his base, but it would have to be something pretty spectacular.
markw , says: September 18, 2017 at 7:35 am
The comment that stuck with me in the first PBS segment was that Diem owned us. This seems to apply today to Israel, probably Saudi, and who else?
Matt W , says: September 18, 2017 at 7:38 am
Be charitable. It's VERY hard for someone to admit that they were fooled.

It will be interesting to see all the mechanisms of denial. I suspect that the reality of Trump will be dismissed in the same way as the reality of Climate Change.

1. God would never allow such a terrible event to happen to His beloved USA
2. It's all the fault of (NON-WHITE) foreigners
3. FAKE NEWS!
4. It's actually a good thing

Philly guy , says: September 18, 2017 at 7:40 am
As during the Vietnam war, the real battle continues, middle class hippies vs white working class.
Jack B. Nimble , September 18, 2017 at 7:42 am
' When Youngstown (so to speak) figures out what's been done to it, politics in this country is going to get very, very interesting .'

Republicans know what they are doing, and as long as there are more scapegoats available and more vote suppression techniques to be tried, they aren't worried about losing elections. Consider this example:

Mr. Dreher's own senior US senator is pushing a last-ditch ACA repeal and replace bill, called GCHJ, that would strip federal $$ from states like Louisiana that expanded Medicaid on the federal dime. How much money is involved?

In 2026 alone, La. would lose $3.2 billion while Texas, Mississippi and Alabama would collectively gain 11.3 billion in new federal $$. Put another way, La. with its 1.4% of the US population would shoulder 4% of the total cuts mandated by GCHJ in 2026. Then a tidal wave of more federal cuts arrives in 2027.

Why would Dr. Bill Cassidy, who formerly worked in Louisiana's notorious charity hospital system before entering politics and reaching the US Senate, seek to hurt his own constituents this way? In brief, many in Louisiana oppose Medicaid and food stamps because they see the federal benefits going mostly to 'those people.' If voters in La. are conned, it is because they have conned themselves.

Source: https://www.cbpp.org/research/health/like-other-aca-repeal-bills-cassidy-graham-plan-would-add-millions-to-uninsured

MH - Secular Misanthropist , says: September 18, 2017 at 7:54 am

When Youngstown (so to speak) figures out what's been done to it, politics in this country is going to get very, very interesting.

It will be Snowball's fault!

[NFR: Perfect! -- RD]

Prof. Woland , says: September 18, 2017 at 8:31 am
If any of this is surprising to people on the right, it's because of willful denial during the campaign.

All of this info was there–and being spouted loudly by the left–during the campaign.

This is the deal you (not you, Rod, since you didn't vote for him..) made for Gorsuch. We'll all get to see how bad a deal it was in the next years.

PS–Trump's base will never leave him. If he were to eat a live baby on TV, they'd find a way to justify it.

connecticut farmer , September 18, 2017 at 8:40 am
" how little we Americans learned from the Vietnam experience when it came time to invade Iraq."

Amen! As in the lyrics of that Pete Seeger song "Where Have All The Flowers Gone"?":

"When will they ever learn? When will they ever learn?"

Polichinello , says: September 18, 2017 at 9:06 am
He didn't get rolled by Pelosi and Schumer: His voters got rolled by him. That's the real deal.

This is the part where the Never-Trumpers are overplaying their hand. They act as if they were offering a better alternative. They were not. On trade, immigration and foreign policy, all other 16 candidates were worse–significantly worse. Each promised to re-run the Bush Administration, except they'd make Putin the new Saddam Hussein.

It's as if they were the team that lost conference championship, and then gloated when the the team that won it went on to lose the Super Bowl. How about they spend a little more time looking at their own positions and trying to figure out why a significant plurality (often a large majority in a number of states) outright rejected them?

None of them have done this. They dare not anger their Boomer donors, I guess. Got to keep those cruises going!

Again, even if everything they say about Trump is true, he is still better than them.

Philip Martin , September 18, 2017 at 9:12 am
The money power of Wall Street infiltrated and changed the Democratic Party sometime after the LBJ years. As a result, we have a one-party-system with a lib and a con wing. The wings differ on social issues, and they sweep the crumbs off the table to different constituencies.

However, after 40 years of this BS, can we really expect the children and grandchildren of displaced steelworkers (who symbolize all the outsourced, discarded workers in the U.S.) to rise in anger with torches and pitchforks? Sad to say, but the victims of this betrayal so far are passively standing by. I am not calling for violent revolution, but instead for a party that puts the needs and aspirations of the average person at the head of the table. If the Democratic Party won't do it, and yet won't go away, then a serious effort needs to made to foster a new party.

Polichinello , says: September 18, 2017 at 9:13 am
It's worth noting, too, that the Trump base has been melting down phone lines in Washington protesting Amnesty.

Obviously, it's your blog, Rod, so you can do what you like with it, but why not take a look at this issue itself instead of post after post taking victory laps about that Horrible Mr. Trump? What do you think would be a good deal? Should there be some limited amnesty (which I favor)?

Uncle Billy , says: September 18, 2017 at 9:19 am
Goldman Sachs is the fourth branch of government. They are indeed "too big to fail." Perhaps we should stop fighting them and try to somehow get them working for the common good. I don't know how this could be done, but it is worth a try.
Wes , says: September 18, 2017 at 9:20 am
[NFR: But that's not really the point. The point is that Trump *specifically* ran against Goldman Sachs and what it represents. And now look. It simply won't do to say, "But Hillary would have been worse." Maybe so, but at this point, that strikes me as a way of rationalizing Trump's failure to keep his promises. -- RD]

Putting things into context is precisely the point.

ROB , says: September 18, 2017 at 9:23 am
Just shocking that a politician went back on a campaign promise. Throw the bum out. Shocking.
KD , says: September 18, 2017 at 9:33 am
No Quarter, Rod!
Sheldon , says: September 18, 2017 at 9:36 am
I'm not remotely surprised to read in these precincts that the Democrats, particularly Clinton, are just as much in the bag for Wall Street as Trump and the Republicans. Too bad it's completely untrue. Even if Clinton were so inclined, which she certainly wouldn't be to nearly the same extent, major elements in the Democratic party and Congress would be pushing for policies far removed from the plutocratic – as they have for years, for increased financial and antitrust regulation, higher taxes on the 1%, limits on CEO pay, environmental controls, minimum wage, and on and on and on. There is no such significant political element among Republican officeholders, either at the state or federal level. The argument that "Democrats (especially evil Hillary) are just as bad" – all evidence to the contrary – is really just an after-the-fact rationalization to justify one's prior support for what is clearly one of the most financially and morally corrupt administrations in our history.
KingP , says: September 18, 2017 at 9:44 am
It is amazing how much research and
socio-political commentary is necessary in order to prove that an amoral, egomaniac MTV-era pseudo-celebrity apparently intends to govern the country like an amoral, egomaniac MTV-era pseudo-celebrity. In other words, he is a narcissistic goofball who will tell anyone anything in order to get press or money.

Who knew? Apparently not enough of us to prevent the cartoon presidency.

Daniel R. Baker , September 18, 2017 at 9:56 am
And when the people of Youngstown realize Trump has betrayed them, they will turn left, and turn hard. The next Bernie Sanders cannot be stopped, for the same reason Trump couldn't be stopped: because he will simply take the party away from the establishment. As I said last year, when you elect Marius, Sulla follows.

I'm not surprised that Trump can't see this coming. I am a bit surprised that Goldman Sachs apparently doesn't either.

KD , says: September 18, 2017 at 9:58 am
The politics of immigration restriction is interesting. The restrictionists have clear and strong preferences.

"Popular opinion" may be against restrictionism (or not given the media lens), but at the end of the day, most of public against restrictionism has a soft level of support mostly for virtue signalling purposes. They don't actually care.

The business lobby cares a lot, and the ethnonationalist/racialist wing of the Democrats, and that is about all.

Playing games with DACA is going to open the GOP to nasty primary battles, which judging from 2016, the Establishment candidates will be vulnerable. Also, supporting these schlock sentimental policies aren't going to win them any votes, anymore than giving money to refugee assistance or homeless shelters.

I don't think the Establishment has any idea of the level of dissatisfaction and discontent there is in the electorate, as their plan is short to mid-term doom. (Polling has 9% of Americans identifying as "Alt-Right" post-Charlottesville, and about another 30% you can describe as "Alt-Lite". These are mostly the people who will vote in GOP Primaries in 2018.)

[Feb 04, 2017] Fish rots from the head and in Goldman Sachs it rots from the head too.

Feb 04, 2017 | economistsview.typepad.com
pgl : February 04, 2017 at 03:41 PM
Not that Wikipedia gets everything right but here is a snippet of what it says about the Goldman Sachs CEO:

'Blankfein testified before Congress in April 2010 at a hearing of the Senate Permanent Subcommittee on Investigations. He said that Goldman Sachs had no moral or legal obligation to inform its clients it was betting against the products which they were buying from Goldman Sachs because it was not acting in a fiduciary role. The company was sued on April 16, 2010, by the SEC for the fraudulent selling of a synthetic CDO tied to subprime mortgages. With Blankfein at the helm, Goldman has also been criticized "by lawmakers and pundits for issues from its pay practices to its role in helping Greece mask the size of its debts". In April 2011, a Permanent Subcommittee on Investigations report accused Goldman Sachs of misleading clients about complex mortgage-related investments in 2007, and Senator Carl Levin alleged that Blankfein misled Congress, though no perjury charges have been brought against Blankfein. In August of the same year, Goldman confirmed that Blankfein had hired high-profile defense lawyer Reid Weingarten'

Weingarten helped in the defense of the Worldcom thieves. Why would anyone do business with a company led by such an ethically challenged CEO?

libezkova -> pgl... February 04, 2017 at 07:12 PM
The problem here is probably deeper then personality of Blankfein.

There is such thing as system instability of economy caused by outsized financial sector and here GS fits the bill. Promotion of psychopathic personalities with no brakes and outsize taste for risk is just an icing on the cake.

> Why would anyone do business with a company led by such an ethically challenged CEO?

Why you are assuming the other TBTF are somehow better then GS?

[Jan 13, 2017] Central bankers today irresistibly bring to mind the Wizard of Oz. Its the characters missing virtues that grab me: a heart, a brain, and courage. Central bankers today lack all three

Notable quotes:
"... First, the brain. Two generations ago, almost every economist knew what a catastrophe a deficiency of effective demand could create. And in a real crunch, they knew what to do about that. They realized you couldn't push on a string, so somebody - the government - had to borrow and spend when private markets would not. From the 1980s on, though, the fundamental Keynesian point - the Principle of effective Demand -disappeared in a cloud of statistical double-talk that, when you deconstruct it, turns out to imply estimating potential output as a lagged function of whatever foolish policy is being pursued. ..."
"... Central bankers didn't take this giant step backwards to pre-Keynesian economics by themselves. In that sense, it's unfair to say they have only themselves to blame. But they swallowed it whole, helped subsidize it, and cheered it on. Now that they have rediscovered that monetary policy can't levitate a broken economy, except by beggaring the neighbors, it's time they admitted their errors and stopped acting like they could control everything... ..."
"... Next, courage. In the good old days, central bankers were given to heady talk about "taking away the punch bowl" before the party really got going. That may have been mostly rhetoric, but it at least paid lip service to some value bigger than banking... ..."
Jan 13, 2017 | economistsview.typepad.com
JohnH -> Peter K.... January 13, 2017 at 08:31 AM

Thomas Ferguson: "Central bankers today irresistibly bring to mind the Wizard of Oz. It's the characters' missing virtues that grab me: a heart, a brain, and courage. Central bankers today lack all three.

First, the brain. Two generations ago, almost every economist knew what a catastrophe a deficiency of effective demand could create. And in a real crunch, they knew what to do about that. They realized you couldn't push on a string, so somebody - the government - had to borrow and spend when private markets would not. From the 1980s on, though, the fundamental Keynesian point - the Principle of effective Demand -disappeared in a cloud of statistical double-talk that, when you deconstruct it, turns out to imply estimating potential output as a lagged function of whatever foolish policy is being pursued.

Central bankers didn't take this giant step backwards to pre-Keynesian economics by themselves. In that sense, it's unfair to say they have only themselves to blame. But they swallowed it whole, helped subsidize it, and cheered it on. Now that they have rediscovered that monetary policy can't levitate a broken economy, except by beggaring the neighbors, it's time they admitted their errors and stopped acting like they could control everything...

Next, courage. In the good old days, central bankers were given to heady talk about "taking away the punch bowl" before the party really got going. That may have been mostly rhetoric, but it at least paid lip service to some value bigger than banking...

The Fed took risks to save the banking system, but is already telling us we are close to full employment and professing to be alarmed about "inflation," when anyone can see that banks, insurers, and pension funds are clamoring for rate rises, just as in the 1930s. Both institutions need to start thinking about someone besides the financial community. If they don't, I do not doubt that we will not have seen the last of the anger that Donald Trump and Senator Bernie Sanders mobilized in such disparate ways in the United States..."

Meanwhile 'liberal' worshippers of unsubstantiated 'crowding out' theories are eager to stifle fiscal stimulus by having the Fed take away the punch bowl before the party starts.

JohnH -> JohnH... , January 13, 2017 at 08:32 AM
Link: http://www.nakedcapitalism.com/2017/01/tom-ferguson-monetary-policy-cant-levitate-broken-economy.html

[Dec 09, 2016] Why Trade Deficits Matter

Dec 09, 2016 | economistsview.typepad.com
Jared Bernstein and Dean Baker:
Why Trade Deficits Matter, The Atlantic : However one feels about Donald Trump, it's fair to say he has usefully elevated a long-simmering issue in American political economy: the hardship faced by the families and communities who have lost out as jobs have shifted overseas. For decades, many politicians from both parties ignored the plight of these workers, offering them bromides about the benefits of free trade and yet another trade deal, this time with some "adjustment assistance."
One of Trump's economic goals is to lower the U.S.'s trade deficit-which is to say, shrink the discrepancy between the value of the country's imports and the value of its exports. Right now, the U.S. currently imports $460 billion more than it exports, meaning it has a trade deficit that works out to about 2.5 percent of GDP. Given that the job market is still not back to full strength and the U.S. has been losing manufacturing jobs-there are 60,000 fewer now than at the beginning of this year, according to the Bureau of Labor Statistics -economists would be wise to question their assumption that such a deficit is harmless. ...
Is the U.S. trade deficit a problem whose solution would help American workers? ...

anne -> sanjait... , December 08, 2016 at 06:10 PM
Looks to me like "global power" comes from a lot more than military spending, and if its jobs we want, then military spending is a decent short run stimulus but long run waste in terms of productive expenditure.

[ Very important argument. ]

anne -> anne... , December 08, 2016 at 06:38 PM
https://en.wikipedia.org/wiki/The_Great_Illusion

The Great Illusion is a book by Norman Angell, first published in the United Kingdom in 1909 under the title Europe's Optical Illusion and republished in 1910 and subsequently in various enlarged and revised editions under the title The Great Illusion.

Angell argued that war between industrial countries was futile because conquest did not pay. J.D.B. Miller writes: "The 'Great Illusion' was that nations gained by armed confrontation, militarism, war, or conquest." The economic interdependence between industrial countries meant that war would be economically harmful to all the countries involved. Moreover, if a conquering power confiscated property in the territory it seized, "the incentive to produce [of the local population] would be sapped and the conquered area be rendered worthless. Thus, the conquering power had to leave property in the hands of the local population while incurring the costs of conquest and occupation."

Angell said that arms build-up, for example the naval race that was happening as he wrote the book in the early 1910s, was not going to secure peace. Instead, it would lead to increased insecurity and thus increase the likelihood of war. Only respect for international law, a world court, in which issues would be dealt with logically and peaceably would be the route for peace.

A new edition of The Great Illusion was published in 1933; it added "the theme of collective defence." Angell was awarded the Nobel Peace Prize in 1933. He added his belief that if France, Britain, Poland, Czechoslovakia, etc. had bound themselves together to oppose all military aggression, including that of Hitler's, and to appeal to world justice for solution to countries' grievances, then the great mass of reasonable Germans would have stepped up and stopped Hitler from leading their country into an unwinnable war, and World War II would have been avoided.

New Deal democrat -> sanjait... , December 08, 2016 at 06:11 PM
Really, go screw yourself.

In 1909 a book was published saying that free trade would make the world prosperous forever. In the U.S. It was called "the Grand Illusion." Unfortunately Kaiser Wilhelm appeared not to get the message.

If China didn't have those $$$$trillions, they wouldn't feel empowered to change boundary lines by force. We wouldn't be worried about a new arms race.

As for solutions, a trade weighted tariff that kicked in after a certain period/percentage would work just fine, probably similar to the wage equalization tariff I suggested the other day. A VAT might accomplish a similar result.

But seriously, you and everyone who thinks like you can go screw yourselves. Your myopic elitism has gotten us here. I wish you nothing but pain.

DrDick -> sanjait... , December 08, 2016 at 07:06 PM
"then military spending is a decent short run stimulus"

No it is not. It is very ineffective and wasteful. You would get much better return on your investment by spending on repairing and upgrading civic infrastructure.

DrDick -> sanjait... , December 08, 2016 at 07:02 PM
Bull. What we need is enforceable labor and environmental standards and protections so that the corporate greed heads will have less incentive to outsource their production to places lacking any of those things. This is all about maximizing rents by ruthlessly exploiting vulnerable labor in the developing world and by being able to poison and devastate their countries at will.
Victory Lap Dancer : , December 08, 2016 at 05:27 PM

U.S. currently imports $460 billion more than it exports, meaning
"
~J B & D B~~

... meaning that We the People print up t-bonds valued at $460 then trade these bonds for Federal Reserve Notes printed up by FG-s worth $460 then use same notes to buy same amount of running shoes, shot glasses, etc.

We print up genuine t-bonds for their counterfeit products that look like the real thing. Huh! The question is :

How can we do more of this without those foreigner suckers catching on, getting wise to the scam?

For one, we can make sure that we don't print up more of our genuine paper than their demand for it. Get it? So long as their demand continues to be great enough to raise the price of our tiny slips of paper, we are cool.

When we are printing too much, the price of our paper falls, buys less, has less buying power. Less buying power is what we call inflation. More buying power is what we call deflation. Got it?

Print less thus keep popularity of our printed numbers up. Tell me something!

What happens when our workers lose jobs to foreigner suckers who dig our printed numbers?

Job loss to foreigners slows down the domestic development of robotics, artificial intelligence, and the singularity that will inevitably detonate all jobs globally. What will that detonation do to our life style of excessive overpopulation.

Don't ask, but don't
tell --

Donald A. Coffin : , -1
The usual response to a trade deficit is that the country running the deficit sees its currency decline in value. This lowers the effective price of its exports and raises the effective price of its imports. Assuming nothing peculiar about the price elasticities of demand for exports and import, this should lead to a shrinking trade deficit. From 1973 to 1998, the dollar appreciated steadily, and the (nominal) trade deficit expanded only slightly. From 1998 to 2005, the dollar continued to appreciate--but the (nominal) trade deficit exploded, increasing by a factor of (roughly) 10 by 2006. Then, as the dollar began depreciating (in 2002), the trade deficit began to shrink. Since about 2008, the dollar has been appreciating again.

What needs most to be explained is the explosion of the trade deficit between 1998 and 2006; about half of the increase in the trade deficit was between 1998 and 2002; the other half between 2002 and 2006.

[Dec 02, 2016] The incomes of the financial sector are mostly pure rents so there are fewer gains from trade possible here than there are for more productive sectors. Trade negotiations on this are therefore more win-lose rather than potentially win-win

Notable quotes:
"... The incomes of the financial sector are mostly pure rents so there are fewer gains from trade possible here than there are for more productive sectors. Trade negotiations on this are therefore more 'win-lose' rather than potentially 'win-win'. ..."
Dec 02, 2016 | crookedtimber.org

derrida derider 11.29.16 at 2:09 am 5

T's right – the economic impact of Brexit on the UK will overwhelmingly depend on how the EU "passport" entitlements for the banks are negotiated. And of course the Germans (with Frankfurt) and the French (with Paris) have a strong incentive to make sure that a good slab of the City's business goes to them.

The incomes of the financial sector are mostly pure rents so there are fewer gains from trade possible here than there are for more productive sectors. Trade negotiations on this are therefore more 'win-lose' rather than potentially 'win-win'.

I think the result will certainly be lower aggregate GDP for the UK but it might well be better distributed (eg London property prices may be less absurd). The City has long made the rest of the UK economy suffer from a form of Dutch disease through an overvalued pound sterling. So those Sunderland Brexit voters might prove ultimately correct in their assessment of their economic interests – just not in the way they think.

[Sep 12, 2016] Future Economists Will Probably Call This Decade the 'Longest Depression'

Sep 12, 2016 | economistsview.typepad.com
Brad DeLong:
Future Economists Will Probably Call This Decade the 'Longest Depression' : ... Back before 2008, I used to teach my students that during a disturbance in the business cycle, we'd be 40 percent of the way back to normal in a year. The long-run trend of economic growth, I would say, was barely affected by short-run business cycle disturbances. There would always be short-run bubbles and panics and inflations and recessions. They would press production and employment away from its long-run trend -- perhaps by as much as 5 percent. But they would be transitory.
After the shock hit, the economy would rapidly head back to normal. The equilibrium-restoring logic and magic of supply and demand would push the economy to close two-fifths of the gap to normal each year. After four years, only a seventh of the peak disturbance would remain.
In the aftermath of 2008, Stiglitz was indeed one of those warning that I and economists like me were wrong. Without extraordinary, sustained and aggressive policies to rebalance the economy, he said, we would never get back to what before 2008 we had thought was normal.
I was wrong. He was right. ...

[May 29, 2016] Goldman raised their price target (causing a rally in the stock) hours before underwriting a capital raise that cause a decline in Tesla's stock

peakoilbarrel.com
Brian Rose, 05/18/2016 at 6:34 pm
Toolpush,

I found it amusing that Goldman raised their price target (causing a rally in the stock) hours before underwriting a capital raise that cause a decline in Tesla's stock.

Although, to be fair there are SEC rules that are very explicit, with severe consequences, if Goldman Sachs' underwriting dept talked or leaked anything to their analysts.

Goldman Sachs does plenty of shady things to make a profit – like selling Mortgage Backed Securities as AAA investments, and simultaneously, knowing they're crap, betting on them going bad (covered in the critically acclaimed documentary "Inside Job"), or helping Greece hide their budget deficit with accounting magic… so they can sell them debt… that they know will go bad.

However, as odd as it is, none of those actions were illegal. THIS would actually be illegal, and Goldman Sachs is smarter than that. I'd guess it is a genuine coincidence.

On a separate note, I find it important to note that Tesla FIRST scouted out battery suppliers to supplement their battery supply 1 DAY before announcing the amount of their capital raise.

My hypothesis, Tesla's accelerated Model 3 ramp-up meant that they will need a large supply of additional batteries as the Gigafactory will not be able to accelerate it's schedule enough to match the accelerated vehicle production ramp.

This also tells me that Tesla is confident enough in their accelerated Model 3 production schedule that they needed to arrange a multi-million dollar contract with battery suppliers to supplement their capacity until the Gigafactory can meet demand.

likbez, 05/18/2016 at 11:00 pm
Although, to be fair there are SEC rules that are very explicit, with severe consequences, if Goldman Sachs' underwriting dept talked or leaked anything to their analysts.

This is all about corruption of regulators and impunity of TBTF financial institutions under neoliberalism - which is an immanent feature of neoliberalism aka "casino capitalism"…

Goldman's role in the growth of casino capitalism in the USA is similar to that of other players, except for one thing: Goldman didn't believe its own hype. The now famous Rolling Stone magazine article in 2009 by Matt Taibbi unforgettably referred to Goldman Sachs, the world's most powerful investment bank, as a "great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." ( http://www.forbes.com/sites/jakezamansky/2013/08/08/the-great-vampire-squid-keeps-on-sucking/ )

https://www.bostonglobe.com/opinion/2016/05/12/the-age-impunity/LHBxamqFENCs3W6lvWnCIJ/story.html

Impunity is epidemic in America. The rich and powerful get away with their heists in broad daylight. When a politician like Bernie Sanders calls out the corruption, the New York Times and Wall Street Journal double down with their mockery over such a foolish "dreamer." The Journal recently opposed the corruption sentence of former Virginia governor Bob McDonnell for taking large gifts and bestowing official favors - because everybody does it. And one of its columnists praised Panama for facilitating the ability of wealthy individuals to hide their income from "predatory governments" trying to collect taxes. No kidding.

Our major institutions, the ones that should know better, are often gross enablers of impunity. Consider my alma mater, Harvard University, and its recent nuptial with hedge-fund manager John Paulson. Paulson was the co-conspirator with Goldman Sachs of one of the most notorious scams of the recent financial bubble.

http://www.softpanorama.org/Skeptics/Financial_skeptic/Casino_capitalism/Systemic_instability_of_financial_sector/TBTF/Goldman_Sachs/index.shtml

Professional financial hackers have a lot of common with the organized crime. And not only in respect to common addictions to cocaine and prostitutes. But there is a subtle difference: financial hackers make it daily (and very lucrative) business to figure out ways to abide by the letter of the law while violating its spirit. Although the claim that they do not break the law has very little credibility. They do break the law, but at the same time their political influence is big enough to keep them out of jail. In 2012 Lanny Breuer, then the head of the Justice Department's criminal division openly admitted that. In a speech at the New York City Bar Association he said that he felt that it was his duty to consider the health of the company, the industry, and the markets in deciding whether or not to file charges. Which in case of Goldman represents insurmountable obstacle to criminal prosecution.
In any case GS converted itself into a special type of TBTF company, the company that specialized in hacking financial system. And in a large company internal politic can turn really destructive both to the firm and society at large. In fact, in large companies there are people with very high IQ at the top with personal traits that makes them more dangerous in comparison with bosses of Mexican gangs. It also makes internal political battles more vicious. BTW, a lot of psychopaths have above average IQ.

In a way the USA never had a subprime crisis. What we had was systemic, neoliberalism-induced crisis that involves FED, government, congress, banking, ratings, insurance, investment and financial industries (the banks were at the center of this crime syndicate and they were the largest beneficiaries of the crimes committed), one manifestation of which was 2008 subprime crisis. Large banks became huge, dominant political force and based on their political weight, they hacked the financial system in the same way computer hackers hack computers systems to suit their short term needs and first of all for enrichment of the brass (appetite for "make money fast" schemes was greatly raised during dot-com crisis).
As Simon Johnson wrote in May 2009 the USA had a The Quiet Coup with banks becoming the most favored and the most protected industry of the Congress. Financial system is essentially a system of rules. If a rich and powerful organization is directed toward hacking the rules: finding weaknesses and exploiting them it is undistinguishable from mafia in a very precise meaning of the term (organize crime syndicate with strong ethnic component), only more sophisticated. Again they are not gangsters in traditional meaning of this word, they are of a hackers, and as such they are much more difficult to prosecute. As a comment to blog post at EconomistView by "Eric" (Paul Krugman The Unwisdom of Elites) aptly stated:
Villains….who exactly? The principle reason that there have been few prosecutions of high level bankers is that not so much that got done was illegal. Reckless, maybe. But even here is it really reckless behavior if you have a belief - which turns out to be true - that public finances will bear the downside risks on your behalf?
In hindsight it feels like these things should have been illegal, but the available serious punishments, such as not bailing out AIG, not allowing various investment firms to become bank holding entites, not backstopping the GSEs (read their debt issues and you'll see that nowhere is a claim made for public backing), not taking first loss positions on Bear Stearn assets, etc., etc., were foregone by voluntary actions by public officials.
Make peace with the truth that there will be no sweeping prosecutions, least of all by the federal government of the USA.

[May 19, 2016] The Great Vampire Squid Keeps On Sucking - Forbes

[Apr 24, 2016] Theres a new parliamentary group in UK on Limits to Growth that had its first meeting this week

Notable quotes:
"... 'There's an interesting theory – called the 'green paradox' – that low oil prices are in part the reaction of an industry fearful of the impacts of climate change policy on its future revenues. ..."
"... The German economist Hans-Werner Sinn has argued that "if suppliers feel threatened by a gradual greening of economic policies.. they will extract their stocks more rapidly" thus pushing their prices down' ..."
peakoilbarrel.com
George Kaplan , 04/22/2016 at 2:14 am
There's a new parliamentary group in UK on Limits to Growth that had it's first meeting this week.

'A 2015 analysis of the remaining fossil fuel resources in China, USA, Canada and Australia, which includes unconventional resources, suggests that overall oil production is in fact peaking already'

I hadn't heard this before:

'There's an interesting theory – called the 'green paradox' – that low oil prices are in part the reaction of an industry fearful of the impacts of climate change policy on its future revenues.

The German economist Hans-Werner Sinn has argued that "if suppliers feel threatened by a gradual greening of economic policies.. they will extract their stocks more rapidly" thus pushing their prices down'

http://limits2growth.org.uk/wp-content/uploads/2016/04/Jackson-and-Webster-2016-Limits-Revisited.pdf

[Mar 03, 2016] Barriers to Productivity Growth

economistsview.typepad.com
Chris Dillow:
Barriers to productivity growth : "The limits to productivity growth are set only by the limits to human inventiveness" says John Kay. This understates the problem. There are other limits. I'd mention two which I think are under-rated.
One is competition. Of course, this tends to increase productivity in many ways. But it has a downside. The fear of competition from future new technologies can inhibit investment today: no firm will spend £10m on robots if they fear a rival will buy better ones for £5m soon afterwards. ...
The second is that, as Brynjolfsson and MacAfee say , "significant organizational innovation is required to capture the full benefit of…technologies."
For example, Paul David has described (pdf) how the introduction of electricity into American factories did not immediately raise productivity much, simply because it merely replaced steam engines. It was only when bosses realized that electric motors allowed factories to be reorganized – dispensing with the need for machines to be close to a central power source – that productivity soared, as workflow improved and new cheaper buildings could be used. This took many years.
It's not just organizational change that's needed, though..., I suspect that if IT is to have (further?) productivity-enhancing effects, they require socio-organizational change. ...
However, there are always obstacles to the social and organizational change necessary for technical change to lead to productivity gains. These might be cognitive – such as the Frankenstein syndrome or "not invented here " mentality. Or they can be material. Socio-technical change is a process of creative destruction, the losers from which kick up a stink; think of taxi-drivers protesting against Uber.
Worse still, these losers aren't always politically weak Ludditites. They can be well-connected bosses of incumbent firms, or managers seeking to maintain their power base. ...
The big question facing us is, therefore: do we have the right set of institutions to foster the socio-organizational change that beget productivity growth? These require a mix of healthy markets, to maximize ecological diversity; a financial system which backs risky new-comers; property rights which incentivise innovation; and state intervention that facilitates all these whilst not being captured by Luddites. If our politics weren't so imbecilic, this question would be getting a lot more attention than it is.

Related: How concerned should we be about business investment and productivity growth? - Nick Bunker .

Posted by Mark Thoma on Thursday, March 3, 2016 at 10:51 AM in Economics , Productivity | Permalink Comments (97)

[Dec 19, 2015] The Enduring Relevance of "Manias, Panics, and Crashes"

Notable quotes:
"... Manias, Panics, and Crashes ..."
"... The New International Money Game ..."
"... Manias, Panics and Crashes ..."
"... Why Minsky Matters ..."
"... Manias, Panics and Crashes ..."
"... Manias, Panics and Crashes ..."
December 17, 2015 | Angry Bear

by Joseph Joyce

The Enduring Relevance of "Manias, Panics, and Crashes"

The seventh edition of Manias, Panics, and Crashes has recently been published by Palgrave Macmillan. Charles Kindleberger of MIT wrote the first edition, which appeared in 1978, and followed it with three more editions. Robert Aliber of the Booth School of Business at the University of Chicago took over the editing and rewriting of the fifth edition, which came out in 2005. (Aliber is also the author of another well-known book on international finance, The New International Money Game.) The continuing popularity of Manias, Panics and Crashes shows that financial crises continue to be a matter of widespread concern.

Kindleberger built upon the work of Hyman Minsky, a faculty member at Washington University in St. Louis. Minsky was a proponent of what he called the "financial instability hypothesis," which posited that financial markets are inherently unstable. Periods of financial booms are followed by busts, and governmental intervention can delay but not eliminate crises. Minsky's work received a great deal of attention during the global financial crisis (see here and here; for a summary of Minksy's work, see Why Minsky Matters by L. Randall Wray of the University of Missouri-Kansas City and the Levy Economics Institute).

Kindleberger provided a more detailed description of the stages of a financial crisis. The period preceding a crisis begins with a "displacement," a shock to the system. When a displacement improves the profitability of at least one sector of an economy, firms and individuals will seek to take advantage of this opportunity. The resulting demand for financial assets leads to an increase in their prices. Positive feedback in asset markets lead to more investments and financial speculation, and a period of "euphoria," or mania develops.

At some point, however, insiders begin to take profits and withdraw from the markets. Once market participants realize that prices have peaked, flight from the markets becomes widespread. As prices plummet, a period of "revulsion" or panic ensues. Those who had financed their positions in the market by borrowing on the promise of profits on the purchased assets become insolvent. The panic ends when prices fall so far that some traders are tempted to come back into the market, or trading is limited by the authorities, or a lender of last resort intervenes to halt the decline.

In addition to elaborating on the stages of a financial crisis, Kindleberger also placed them in an international context. He wrote about the propagation of crises through the arbitrage of divergences in the prices of assets across markets or their substitutes. Capital flows and the spread of euphoria also contribute to the simultaneous rises in asset prices in different countries. (Piero Pasotti and Alessandro Vercelli of the University of Siena provide an analysis of Kindleberger's contributions.)

Aliber has continued to update the book, and the new edition has a chapter on the European sovereign debt crisis. (The prior edition covered the events of 2008-09.) But he has also made his own contributions to the Minsky-Kindleberger (and now –Aliber) framework. Aliber characterizes the decades since the early 1980s as "…the most tumultuous in monetary history in terms of the number, scope and severity of banking crises." To date, there have been four waves of such crises, which are almost always accompanied by currency crises. The first wave was the debt crisis of developing nations during the 1980s, and it was followed by a second wave of crises in Japan and the Nordic countries in the early 1990s. The third wave was the Asian financial crisis of 1997-98, and the fourth is the global financial crisis.

Aliber emphasizes the role of cross-border investment flows in precipitating the crises. Their volatility has risen under flexible exchange rates, which allow central banks more freedom in formulating monetary policies that influence capital allocation. He also draws attention to the increases in household wealth due to rising asset prices and currency appreciation that contribute to consumption expenditures and amplify the boom periods. The reversal in wealth once investors revise their expectations and capital begins to flow out makes the resulting downturn more acute.

These views are consistent in many ways with those of Claudio Borio of the Bank for International Settlements (see also here). He has written that the international monetary and financial system amplifies the "excess financial elasticity," i.e., the buildup of financial imbalances that characterizes domestic financial markets. He identifies two channels of transmission. First, capital inflows contribute to the rise in domestic credit during a financial boom. The impact of global conditions on domestic financial markets exacerbates this development (see here). Second, monetary regimes may facilitate the expansion of monetary conditions from one country to others. Central bankers concerned about currency appreciation and a loss of competitiveness keep interest rates lower than they would otherwise, which furthers a domestic boom. In addition, the actions of central banks with international currencies such as the dollar has international ramifications, as the current widespread concern about the impending rise in the Federal Funds rate shows.

Aliber ends the current edition of Manias, Panics and Crashes with an appendix on China's financial situation. He compares the surge in China's housing markets with the Japanese boom of the 1980s and subsequent bust that initiated decades of slow economic growth. An oversupply of new housing in China has resulted in a decline in prices that threatens the solvency of property developers and the banks and shadow banks that financed them. Aliber is dubious of the claim that the Chinese government will support the banks, pointing out that such support will only worsen China's indebtedness. The need for an eighth edition of Manias, Panics and Crashes may soon be apparent.

cross posted with Capital Ebbs and Flows

[Nov 12, 2015] These 425 Goldman Bankers Just Hit The Jackpot

Zero Hedge

It's that time of year.... when the bank-that-does-God's-work chooses who to bless with mass affluence. This year 425 Goldman Sachs' employees were annointed "Managing Directors" which according to Emolumnet.com means an average annual comp of approximately $1 million.

[Oct 28, 2015] The Full Details Of How Goldman Criminally Obtained Confidential Information From The New York Fed

Zero Hedge
Two days ago we reported that the saga of Rohit Bansal, Goldman's "leaker" at the Fed is coming to a close with the announcement of a criminal case filed against Goldman's deep throat who had previously spent 7 years at the NY Fed, and was about to spend some time in prison, and who had been providing Goldman with confidential information sourced from his contact at the NY Fed for months, as a result of which Goldman would be charged a penalty.

Moments ago the NY DFS announced that the best connected hedge fund in the world would pay $50 million to the New York State Department of Financial Services and "accept a three-year voluntary abstention from accepting new consulting engagements that require the Department to authorize the disclosure of confidential information under New York Banking Law"

Goldman Sachs would also admit that a Goldman employee engaged in the criminal theft of Department confidential supervisory information; Goldman Sachs management failed to effectively supervise its employee to prevent this theft from occurring; and Goldman failed to implement and maintain adequate policies and procedures relating to post-employment restrictions for former government employees.

Below are the unbelievable, details of just how Goldman was getting material information from the NY Fed, from the FDS:

Violation of Post-employment Restrictions

On July 21, 2014, an individual began work at Goldman, Sachs & Co. as an Associate in the Financial Institutions Group ("FIG") of the Investment Banking Division ("IBD"). The Associate reported to a Managing Director and a Partner at Goldman.

Prior to his employment at Goldman, from approximately August 2007 to March 2014, the Associate was a bank examiner at the U.S. Federal Reserve Bank of New York ("the New York Fed"). His most recent position at the New York Fed was as the Central Point of Contact ("CPC") – the primary supervisory contact for a particular financial institution – for an entity regulated by the Department (the "Regulated Entity").

In March 2014, the Associate was required to resign from his position at the New York Fed for, among other reasons, taking his work blackberry overseas without obtaining prior authorization to do so and for attempting to falsify records to make it look like he had obtained such authorization, and for engaging in unauthorized communications with the Federal Reserve Board.

The Associate was hired in large part for the regulatory experience and knowledge he had gained while working at the New York Fed. Prior to hiring him, the Partner and other senior personnel interviewed and called the Associate several times, and the Partner took him out to lunch and dinner.

Prior to starting at Goldman, in May 2014, the Associate informed the Partner of potential restrictions on his work, due to his previous employment at the New York Fed, and specifically as the CPC for the Regulated Entity. The Partner advised the Associate to consult the New York Fed to obtain clarification regarding any applicable restrictions.

Accordingly, the Associate inquired with the New York Fed Ethics Office and was given a "Notice of Post-Employment Restriction," which he completed and signed with respect to his supervisory work for the Regulated Entity. The Associate provided this form to Goldman. This Notice of Post-Employment Restriction read that the Associate was prohibited "from knowingly accepting compensation as an employee, officer, director, or consultant from [the Regulated Entity]" until February 1, 2015.

On May 14, 2014, the Associate forwarded this notice of restriction to the Partner, the Managing Director, and an attorney in Goldman's Legal Department. In his email, the Associate also included guidance from the New York Fed, stating, in short, that a person falls under the post-employment restriction if that person "directly works on matters for, or on behalf of," the relevant financial institution.

Despite receiving this notice and guidance, Goldman placed the Associate on Regulated Entity matters from the outset of his employment. As further detailed below, the Associate also schemed to steal confidential regulatory and government documents related to that same Regulated Entity in advising that client.

Unauthorized Possession and Dissemination of Confidential Information

During his employment at Goldman, the Associate wrongfully obtained confidential information, including approximately 35 documents, on approximately 20 occasions, from a former co-worker at the New York Fed (the "New York Fed Employee"). These documents constituted confidential regulatory or supervisory information – many marked as "internal," "restricted," or "confidential" – belonging to the Department, the New York Fed or the Federal Deposit Insurance Corporation (the "FDIC"). The Associate's main conduit for receiving information from the New York Fed was his former coworker, the New York Fed Employee, who has since been terminated for this conduct. While still employed at the New York Fed, the New York Fed Employee would email documents to the Associate's personal email address, and the Associate would subsequently forward those emails to his own Goldman work email address.

On numerous occasions, the Associate provided this confidential information to various senior personnel at Goldman, including the Partner and the Managing Director, as well as a Vice President and another associate who perform quantitative analysis for Goldman. In several instances where the Associate forwarded confidential information to other Goldman personnel, the Associate wrote in the body of the email that the documents were highly confidential or directed the recipients, "Please don't distribute." At least nine documents that the Associate provided to Goldman constituted confidential supervisory information under New York Banking Law § 36(10). Pursuant to the statute, such confidential supervisory information shall not be disclosed unless authorized by the Department. The documents included draft and final versions of memoranda regarding and examinations of the Regulated Entity, as well as correspondence related to those examinations.

At least 17 confidential documents that the Associate had improperly received from the New York Fed – seven of which constituted confidential supervisory information under New York Banking Law § 36(10) – were found in hard copy on the desk of the Managing Director. Additional hard copy documents were found on the desks of the Vice President and the other associate, including at least one document constituting confidential supervisory information under New York Banking Law § 36(10).

On August 18, 2014, the Associate shared three documents pertaining to enterprise risk management with the Managing Director, writing, "Below is the ERM request list, work program and assessment framework we used for ERM targets. Again this is highly confidential as its not public and has not been issued a[s] guidance yet. Not sure where it is at anymore due to internal politics. I worked on this framework and guidance within the context of a system working group with the Fed system. We ran several pilots to test it was well. Please don't distribute." The Managing Director replied, "I won't. Will review on plane tomorrow to DC." The documents were marked as "Internal-FR" or "Restricted-FR."

Part of Goldman's work for the Regulated Entity included advisory services with respect to a potential transaction. A certain component of the Regulated Entity's examination rating was relevant to the transaction. The Regulated Entity's examinations were conducted jointly by the FDIC, DFS and the New York Fed. As described below, the Associate used confidential information regarding the Regulated Entity's examination rating – obtained both from his prior employment at the New York Fed and from his contacts there – and conveyed this information to the Managing Director, who then conveyed the information to the Regulated Entity on September 23, 2014, in advance of it being conveyed by the regulators.

On August 16, 2014, the Associate emailed the Managing Director regarding the regulators' perspective on the Regulated Entity's forthcoming examination rating, writing "You need to speak to [the CEO of the Regulated Entity] about scheduling a meeting with all 3 agencies ASAP. He needs to meet with them and display and discuss all the improvements and corrections they have made during the last examination cycle."

On September 23, 2014, the Associate attended the birthday dinner of the New York Fed Employee at Peter Luger Steakhouse, along with several other New York Fed employees. Immediately after the dinner, the Associate emailed the Managing Director, divulging confidential information concerning the Regulated Entity, specifically, the relevant component of the upcoming examination rating. The Associate wrote, "…the exit meeting is tomorrow and looks like no [change] to the [relevant] rating. I heard there won't be any split rating… [The Regulated Entity] should have listened to you with the advice…hopefully [the CEO] will now know you didn't have phony info."

In this email, the Associate also provided advice to relay to the Regulated Entity's management, stating that they should "keep their cool, not get defensive and not say too much unless the regulators have a blatant fact wrong" as it "will go off better for them in the long run. Believe it or not the regulator's [sic] look for reaction and level of mgmt respectiveness [sic] during these exit meetings." The Managing Director replied "Let's discuss . . . I'm seeing [the CEO of the Regulated Entity] tmw afternoon alone."

Later that night, the Associate followed up with another email to the Managing Director, writing, "I feel awful not being there to wrap up 2013. I would have been able to pull all this through. I was a real advocate for all the work they have done." He also offered to join a meeting with the CEO of the Regulated Entity if the Managing Director wanted.

On September 26, 2014, Goldman had an internal call regarding the calculation of certain asset ratios, during which there was disagreement over the appropriate method. During the call, the Associate circulated an internal New York Fed document – which the Associate had recently obtained from the New York Fed Employee – relating to the calculation, to the call participants, writing, "Pls keep confidential?" Following the group call, the Partner called the Associate to discuss the document, including where he had obtained it, and the Associate told him that he had obtained it from the New York Fed. The Partner then called the Global Head of IBD Compliance to report the matter and forwarded the document.

Compliance Failures, Failure to Supervise and Violation of Internal Policies

After receiving notice of the Associate's prohibition on working on matters for the Regulated Entity, Goldman, including the Partner and the Legal Department, failed to take any steps to screen the Associate from such prohibited work. Instead, Goldman affirmatively placed the Associate on matters for the Regulated Entity beginning on his first day, and added the Associate to the official Goldman database as a member of the Regulated Entity "Team" – a team led by the Partner.

Goldman failed to provide training to personnel regarding what constituted confidential supervisory information and how it should be safeguarded. While Goldman policies provided that confidential information received from clients should only be shared on a "need to know" basis, Goldman did not distinguish between this broader category of confidential information and the type of confidential supervisory information belonging to a regulator or other government agency, which is protected by law, such as confidential supervisory information under New York Banking Law § 36(10). Indeed, Goldman policies failed to adequately address Department confidential supervisory information.

As noted above, the Associate also violated Goldman's internal policy on "Use of Materials from Previous Employers," which states that work that personnel have done for previous employers, and confidential information gained while working there, should not be brought into Goldman or used or disclosed to others at Goldman without the express permission of the previous employer.

* * *

The Managing Director is safe, as are all other Goldman employees: nobody aside for Bansal who was merely trying to impress his superiors, has anything to worry about.

Anyone else found to have obtained at least "35 confidential documents" from the Fed on at least "20 occassions" would be sent straight to jail with a prison sentence anywhere between several decades and life.

Goldman's punishment? 0.6% of its 2014 Net Income.

Duc888

How could this happen? Seriously. Aren't the FED and GS separate entities?

Oh, wait.....

LetThemEatRand

The fact that these documents were sent via email only tells me how widespread this is. Most of these guys are probably smart enough to put a paper copy in their briefcase and deliver it to Goldman the old fashioned way bankers do things (over drinks and coke at a strip bar).

But when "everyone is doing it," a guy may get careless and start using email, figuring what the fuck.

Urban Redneck

Did Goldman's Marketing Department write that release for their FRBNY subsidiary??? They deserve the $50 million fine for being an embarrassment to scheming bankers everywhere. This is a company that has destroyed companies, entire economies, and countless (not so little) investors by placing their own financial interests above their clients and regularly using inside information and access to do so. Then Goldman is "caught" when they turn themselves in (not that they had a lot of choice given the amateur hour performance) for actually "helping" one of their clients (for once)... This whole thing stinks, in more ways than one.

Sudden Debt

What a joke!!!

GS and JPM ARE THE FED!!!

and that "fine"... THAT'S THEIR DONUT BUDGET!!

J J Pettigrew

Bagels....please!

Elliott Eldrich

"Feel sorry for the poor schmuck, cuffed and heading to a sallyport, to be booked, and serve 6 months in jail, for stealing a carton of ciggs..."

Little crimes are punished with great fervor, while the biggest criminals get their wrists slapped. This is outrageous, and I just have to ask how much more we are supposed to bear before breaking?

Lord Ariok

I Love my Country and Hate Our Government. But If our government isn't "Gangster" well believe it there will be another "Government" that is even more "Gangster" then ours to take the number 1 spot in the Syndicate. The way I see it if we have to do this in order to compete with China's Level of Corruption. Damn Chinese Efficiency. ~ Lord Ariok

venturen

they have Bill Dudley...they were worried that this underling would do something. Heck Goldman gives the orders not the other way around

Bay of Pigs

The William Dudley is the main man at the FED (and the BIS), not Yellin or Fischer.

"Prior to joining the Bank in 2007, Mr. Dudley was a partner and managing director at Goldman, Sachs & Company and was the firm's chief U.S. economist for a decade. Prior to joining Goldman Sachs in 1986, he was a vice president at the former Morgan Guaranty Trust Company. Mr. Dudley was an economist at the Federal Reserve Board from 1981 to 1983.

In 2012, Mr. Dudley was appointed chairman of the Committee on the Global Financial System of the Bank for International Settlements (BIS). Previously, Mr. Dudley served as chairman of the former Committee on Payment and Settlement Systems of the BIS from 2009 to 2012. He is a member of the board of directors of the BIS and chairman of the Economic Club of New York."

http://www.newyorkfed.org/aboutthefed/orgchart/dudley.html

[Sep 16, 2015] Bankers Will Be Jailed In The Next Financial Crisis

"...For the first time, I found routine agreement among delegates that the banking industry had become synonymous with organized crime. "
Sep 16, 2015 | Zero Hedge

Submitted by Mike Krieger via Liberty Blitzkrieg blog,

Jesus College, Cambridge hosted, once more, the world's leading Symposium on Economic Crime, and over 500 distinguished speakers and panelists drawn from the widest possible international fora, gathered to make presentations to the many hundreds of delegates and attendees.

What became very quickly clear this year was the general sense of deep disgust and repugnance that was demonstrated towards the global banking industry.

I can say with some degree of certainty now that a very large number of academics, law enforcement agencies, and financial compliance consultants are now joined, as one, in their total condemnation of significant elements of the global banking sector for their organised criminal activities.

Many banks are widely identified now as nothing more than enterprise criminal organisations, who engage in widespread criminal practice and dishonest conduct as a matter of course and deliberate commercial policy.

– From the excellent article: The Banking Criminals Exposed

My prediction is that bankers will be jailed in the next economic/financial crisis. Lots and lots of bankers.

It may seem to many that those working within this profession will remain above the law indefinitely in light of the lack of any accountability whatsoever since the collapse of 2008. It may seem that way, but extrapolating this trend into the future is to ignore a monumentally changed political environment around the world. From the ascendancy of Donald Trump and Bernie Sanders here in the U.S., to Jeremy Corbyn becoming Labour leader in the UK, big changes are certainly afoot.

I have become convinced of this change for a little while now, but we won't really see evidence of it until the next collapse. However, something I read earlier today really brought the point home for me. Rowan Bosworth-Davies recently attended the 33rd Cambridge International Symposium on Economic Crime and provided us with some notes in an excellent piece titled, The Banking Criminals Exposed. Here are a few excerpts:

Jesus College, Cambridge hosted, once more, the world's leading Symposium on Economic Crime, and over 500 distinguished speakers and panelists drawn from the widest possible international fora, gathered to make presentations to the many hundreds of delegates and attendees.

This Symposium has indeed become an icon among other international gatherings of its knd and over the years, it has proved to be highly influential in the driving and development of international policy aimed at combating international financial and economic crime.

What became very quickly clear this year was the general sense of deep disgust and repugnance that was demonstrated towards the global banking industry.

I can say with some degree of certainty now that a very large number of academics, law enforcement agencies, and financial compliance consultants are now joined, as one, in their total condemnation of significant elements of the global banking sector for their organised criminal activities.

Many banks are widely identified now as nothing more than enterprise criminal organisations, who engage in widespread criminal practice and dishonest conduct as a matter of course and deliberate commercial policy.

Speaker after speaker addressed the implications of the scandalous level of PPI fraud, whose repayment and compensation schedules now run into billions of pounds.

Some speakers struggled with the definition of such activity as 'Mis-selling' and needed to be advised that what they were describing was an institutionalized level of organised financial crimes involving fraud, false accounting, forgery and other offenses involving acts of misrepresentation and deceit.

One of the side issues which came out of this and other debates, was the general and genuine sense of bewilderment that management in these institutions concerned, (and very few banks and financial houses have escaped censure for this dishonest practice) have walked away from this orgy of criminal antics, completely unscathed. The protestations from management that these dishonest acts were carried out by a few rogue elements, holds no water and cannot be justified.

In the end, I sat there, open-mouthed while evidence against the same old usual scum-bag financial institutions, was unrolled, and a lengthy list of agencies, all apparently dedicated to dealing with fraud and financial crime, lamely sought to explain why they were powerless to help these victims.

This was followed by a lengthy list of names of major law firms, and Big 5 accounting firms who were willing to join with these pariah banks to bring complex and expensive legal actions against these victims, bankrupting them, forcing them from their homes, repossessing properties they had worked for years to create, while all the time, the regulators and the other agencies, including to my shame and regret, certain spineless police forces, stood by and sought to justify their inaction.

At one stage, we were shown how banks ritually and deliberately take transcripts of telephone calls made between complainants and the bank, and deliberately and systematically go through these conversations, re-editing them and reproducing them in a format which is much more favourable to the bank.

For the first time, I found routine agreement among delegates that the banking industry had become synonymous with organised crime. Many otherwise more conservative attendees expressed their grave concern and their repugnance at the way in which so many of our most famous banking names were now behaving. It is becoming very much harder to believe that the banks will be able to rely on the routine support they have traditionally enjoyed from most ordinary members of the public.

The election of Jeremy Corbyn to the leadership of the labour Party means that banking crime and financial fraud will now become an electoral issue.

But now, the new Labour leadership will focus the attention of the electorate on the relationship between the Tory party and their very crooked friends in the City, and the degree of protection that the Square Mile gangsters and their Consiglieri, their Capos, and their Godfathers will become much more identifiable. Bank crime will now become much more identifiable as a City practice and their friends in the Tories will be seen as being primary beneficiaries.

Things are moving in the direction of justice. At a glacial place for sure, but moving they are.

pot_and_kettle

When they're swinging from lamp posts lining Broadway and Water St,
*then * I'd call it progress.

Til then, same old same old...

11b40

There were over 1,000 felony prosecutions that came out of the Savings & Loan fiasco in the 80's, with a 90% conviction rate.

But, to your point, these were not the big Wall Street Bankers. Mostly just your local common banker thief and his cronies, with a few politicians thrown in for good measure. No big fish were prosecuted during the Depression era, either.

vincent

A reminder of how JPM saved its own ass in 2008. Worth bookmarking....

The Secret Bailout of JP Morgan

http://www.webofdebt.com/articles/banking-bailout.php

Ulludapattha

Dream on, Mike. Just who will jail the banksters? They own the governments of USA, Canada, and Western Europe. Not a chance in my lifetime.

GCT

Politicians and the judicial branch are in the banks pockets. I will believe it when I see it to be honest. I have yet to see real bankers or for that matter politicians go to jail. As long as the big fines are paid nothing will change. Must be nice to create money from nothing to pay these fines and fucking your customers over at the same time.

Fahque Imuhnutjahb

Wishful thinking. If any justice is to be meted out then the "little people" will have to take it upon themselves.

And by little people I mean the plebes, not dwarves; but the dwarves are welcome to help, unless of course

some of them are little bankers, then they're not welcome, but the rest are. Glad we got that cleared up.

[Aug 29, 2015] Mass Protests Sweep Malaysian Capital As Anger At Goldman-Backed Slush Fund Boils Over

Aug 29, 2015 | Zero Hedge

If we told you that thousands of protesters donning bright yellow shirts had taken to the streets to call for the ouster of a leader in an important emerging market, you'd be forgiven for thinking we were talking about Brazil, where President Dilma Rousseff is facing calls for impeachment amid allegations of fiscal book cooking and government corruption.

But on this particular weekend, you'd be wrong.

We're actually talking about Malaysia, where tens of thousands of demonstrators poured into the streets of Kuala Lumpur on Saturday to call for the resignation of Prime Minister Najib Razak whose government has been accused of obstructing an investigation into how some $700 million from 1Malaysia Development Berhad mysteriously ended up in Najib's personal bank account.

1MDB was set up by Najib six years ago and has been the subject of intense scrutiny for borrowing $11 billion to fund questionable acquisitions. $6.5 billion of that debt came from three bond deals underwritten by Goldman, whose Southeast Asia chairman Tim Leissner is married to hip hop mogul Russell Simmons' ex-wife Kimora Lee who, in turn, is good friends with Najib's controversial wife Rosmah Manso.

You really cannot make this stuff up.

What Goldman did, apparently, is arrange for three private placements, one for $3 billion and two for $1.75 billion each back in 2013 and 2012, respectively. Goldman bought the bonds for its own book at 90 cents on the dollar with plans to sell them later at a profit (more here from FT). Somewhere in all of this, $700 million allegedly landed in Najib's bank account and the going theory is that 1MDB is simply a slush fund.

So you can see why some folks are upset, especially considering Rosmah has a habit of having, how shall we say, rich people problems, like being gouged $400 for a home visit by a personal hairstylist. Here's The New York Times with more on the protests:

Tens of thousands of demonstrators in Malaysia defied police orders on Saturday, massing in the capital in a display of anger at the government of Prime Minister Najib Razak, who has been accused of corruption involving hundreds of millions of dollars.

The demonstration in central Kuala Lumpur, which has been planned for weeks, has been declared illegal by the Malaysian police, and the government on Friday went as far as to pass a decree banning the yellow clothing worn by the antigovernment protesters.

But the demonstrators, who represent a broad coalition of civic organizations in Malaysia, including prominent lawyers, asserted their right to protest on Saturday.

The government has acknowledged that Mr. Najib received the money in 2013 and said it was a donation from undisclosed Arab royalty.

One group of protesters on Saturday carried the image of a giant check in the amount of 2.6 billion ringgit, with a sign that read, "You really think we are stupid?"

The group organizing the protest goes by the name Bersih, which means clean in Malay

Calls for Mr. Najib to resign have come both from within his party, which is divided, and from the opposition. One junior member of Mr. Najib's party, the United Malays National Organization, filed a lawsuit against Mr. Najib on Friday asking for details of how the money was spent.

Of course the most prominent voice calling for Najib's ouster is that of the former Prime Minister Mahathir Mohamad. "I don't believe it is a donation. I don't believe anybody would give [that much], whether an Arab, or anybody," he says.

Meanwhile, Malaysia is facing a re-run of the 1997/98 financial crisis as the ringgit plunges amid broad-based pressure on emerging markets. With FX reserves now sitting under $100 billion some fear a return to capital controls (let's just call it the "1998 option") is just around the corner despite the protestations of central bank chief Zeti Akhtar Aziz. Here's BofAML:

Capital controls are not likely, but the possibility cannot be dismissed, despite <assurances from Zeti. Introducing controls will be a regressive move and a huge setback, hurting the economy and financial sector, and derailing any ambitions of becoming an international Islamic financial center. Malaysia's reputation and credibility remain tainted by the capital controls of 1998, even after almost two decades.

The ringgit has depreciated almost 13% year-to-date, the worst performing EM Asian currency. FX reserves fell to $94.5bn at mid-August, falling below the $100bn threshold and down by about $9bn in July alone. At the peak, FX reserves were $141bn in May 2013. Cover to short-term external debt is only 1x, while cover to imports stands at 5.9 months. Downside risks remain given looming Fed rate hikes, China's RMB devaluation and the political crisis over 1MDB. Malaysia's vulnerability is also heightened by high leverage (household, quasi-public and external) and a fragile fiscal position (heavy oil dependence, off balance sheet liabilities)

The current crisis has not reached the extreme stress seen during the Asian financial crisis, when draconian capital controls were eventually introduced in September 1998. During that episode, the ringgit collapsed by about 89% from peak to trough at its worst (to 4.71 from 2.49 against the USD). The ringgit has depreciated some 26% in the current crisis. During that episode, the KLCI fell by about 79% from peak to trough (from 1,271 to 263) at its worst. The KLCI today has fallen by only about 12% from its recent peak. Nevertheless, downside risks remain given looming Fed rate hikes, China's RMB devaluation and the political crisis.

So in short, Malaysia is on the brink of political and financial crisis, and it looks as though the nuclear route (capital controls) may be just around the corner, which would of course only serve to alienate the country's financial system at a time when the government looks to be on the brink of collapse. What's particularly interesting here is the timing. Mahathir Mohamad famously clashed with George Soros during the '98 crisis, going so far as to brand the billionaire a "moron". Now that the country's "founding father" is looking to oust Najib, it will be interesting to see what role he plays in shaping Malaysia's response to the current financial crisis and on that note, we'll leave you with a quote from Dr. Mahathir ca. 1997:

"I know I am taking a big risk to suggest it, but I am saying that currency trading is unnecessary, unproductive and immoral. It should be stopped. It should be made illegal. We don't need currency trading. We need to buy money only when we want to finance real trade."

[Aug 09, 2015] Goldman Hires Former Head Of NATO To Deal With DONG Scandal

"...Anders Fogh Rasmussen served as the 12th Secretary General of NATO." Now it serves Golman. Nothing essentially changed.
Zero Hedge
Back in January 2014, we reported that Goldman's merchant banking unit rushed to buy an 18% in Denmark's DONG Energy (that would be Danish Oil & Natural Gas) company for $1.5 billion. The result was an immediate grassroots resistance campaign, as hundreds of thousands of Danes refused to hand over their DONG to the vampire squid for various reasons, not the least of which was granting Goldman veto rights over changes to DONG's leadership and strategy, a right usually reserved for buyers of 33% of an entity. A bigger reason for the Danish anger at the Goldman DONG deal, was that as The Local reported a few months later, the sale "did not include a massive deal that both parties knew was imminent, shortchanging the company's value by as much as 20 billion kroner."

Which was to be expected: as we further said in January 2014, "if Goldman is involved, it guarantees future benefits for the Vampire Squid". Sure enough:

Denmark lost out on billions of kroner when it sold partial ownership of Dong Energy to American investment firm Goldman Sachs in January 2014, Politiken reported Wednesday.

When the Danish government sold an 18 percent stake of Dong to Goldman Sachs, the Finance Ministry calculated the company's value at 31.5 billion kroner ($4.6 billion).

But just three months later, Dong was granted the rights to instal a massive offshore wind park supported by the United Kingdom. According to Politiken, that deal shot Dong's value up to over 50 billion kroner but was not calculated into the Goldman Sachs sale despite both Dong and the investment firm being fully aware of it.

Politiken also reports that the looming deal was common knowledge throughout the wind industry.

As a result, the locals were less than delighted to learn the details of yet another Goldman pillaging of taxpayers, one which allowed Goldman to make a substantial return on its investment in just months courtesy of what was information which the government either did not have access to, or simply refused to notice.

Bloomberg further reports that "the Goldman deal left an indelible mark on Danish politics. Disagreement over the Wall Street bank's investment in state assets prompted a junior party in the former Social Democrat-led administration to quit the coalition in protest. Danes gathered in their thousands in front of the parliament to protest against the sale."

Indeed, the deal caused a rift in the former Social Democrat-led coalition, culminating in the departure of a junior member, the Socialist People's Party. The government of Helle Thorning-Schmidt that oversaw the Goldman deal was ousted in the June 2014 elections, paving the way for a Liberal government led by Lars Loekke Rasmussen. He served as finance minister under Fogh Rasmussen and was also prime minister from 2009 until 2011.

Fast forward over a year, and a shaken Denmark still refuses to let Goldman fully off the hook when recently the government decided to let lawmakers see secret documents on Goldman Sachs Group Inc.'s purchase of the 18% stake in DONG. However, as Goldman reports, this glimpse into the fine details of the Goldman decision making process will probably be a one-off. To wit:

"The government says it's making an exception in the case of Goldman's 2014 investment in Dong Energy A/S after lawmakers on a committee overseeing the sale complained they weren't given full access to the relevant files. Bjarne Corydon, who was finance minister at the time, said the information contained in the transaction papers was too sensitive even for the parliament committee."

Almost as "sensitive" as when Goldman's former employee and then Treasury Secretary Hank Paulson tried to pass an open-ended "three-page termsheet" bailout of, well, Goldman Sachs through Congress in 2008... and ultimately succeeded.

But while Goldman's domination of all legislative matters in the US is well known and nobody will dare to make much of a fuss over it, in Denmark things are different.

Finance Minister Claus Hjort Frederiksen said this month he will release the documents more than a year after the transaction went through as lawmakers continue to argue over the deal. Goldman and PFA have said they have no objection to the files being made public.

Would the deal be unwound if it is discovered that Goldman had conspired and manipulated (with significant kickbacks) the government of Helle Thorning-Schmidt to fast track the deal which Goldman knew would be a huge IRR in just a few short months? It is unlikely:

Rene Christensen, a spokesman for the Danish People's Party which lobbied to have the documents released, said there's no risk their contents might trigger political demands that a new deal be negotiated.

"Altering the deal isn't really what it's about," Christensen said by phone. "It's about having had a finance minister who said he couldn't trust the committee." Denmark's lawmakers deserve to know "what was so important about this deal that we weren't allowed to see more details," he said.

Martin Hintze, a partner at Goldman who sits on the board of Dong, was quoted by Berlingske as saying the bank has no objections to having the documents made public.

Of course it wouldn't - any objections would be seen as confirmation the sale process was improper.

Which is why Goldman decided to go for the "sure thing" jugular, and just to make absolutely sure it controls the DONG process, Goldman hired none other than Anders Fogh Rasmussen, the former Danish prime minister who governed Denmark from 2001 until 2009 "to help tackle the political hurdles the bank has encountered since buying into a state utility last year."

Why hire him? Because the current Danish prime minister, Lars Loekke Rasmussen, just happened to be the subordinate and finance minister under the "other" Rasmussen, the one Goldman just hired: Anders Fogh.

Because if buying current and former government leaders to control the decision-making process works in the US and every other developed nation, why not in Denmark.

But that's not all: in this particular case, Goldman gets bonus influence points because in addition to purchasing the former Danish PM, and by implication, the current PM and his former fin-min protégé, and assuring the DONG scandal quietly goes away, Goldman just hired the former head of NATO: from 2009 to 2014 Anders Fogh Rasmussen served as the 12th Secretary General of NATO.

In other words, with one hiring decision, Goldman not only assured its financial dominance over Denmark, but is now sure to capitalize on whatever military developments NATO unleashes in the coming weeks, which by the looks of things will involve Goldman funding every group in the upcoming Syrian invasion and the resulting latest and greatest war in the middle east.

Money Counterfeiter

'The central institution in almost every modern nation is its central bank. Here is where unofficial sovereignty lies (in both senses). Central bankers do not claim this authority; they merely exercise it. They let politicians take the hit for economic failures. They call the shots, because they control the central institution: money.

The mark of sovereignty never changes in history: coinage. There is usually a politician on a coin. This goes back to 600 B.C. Ethelbert Stauffer was a theologian, an historian, and an expert in numismatics. He wrote his great little book, Christ and the Cae