Financial Sector Induced Systemic Instability of Economy
While I believe in usefulness of capital markets, it is clear that they are double edge sword and
that banks "in a long run" tend to behave like
sociopathic individuals.
Mr. Capone may have something to say about danger of banks :-).That means that growth of
financial sector represents a direct threat to the stability of the society. Positive feedback loops
creates one financial crisis after another with the increasing magnitude leading up to a collapse of
financial system like happened in 1927 and 2008.
"Minsky's financial instability hypothesis depends critically on what amounts to a sociological
insight. People change their minds about taking risks. They don't make a one-time rational
judgment about debt use and stock market exposure and stick to it. Instead, they change their
minds over time. And history is quite clear about how they change their minds. The
longer the good times endure, the more people begin to see wisdom in risky strategies."
The Cost of Capitalism: Understanding Market Mayhem and Stabilizing our
Economic Future, by Robert Barbera
The flaw with Capitalism is that it creates its own positive feedback loop, snowballing to
the point where the accumulation of wealth and power hurts people — eventually even those at the
top of the food chain. ”
Banks are a clear case of market failure and their employees at the senior level have
basically become the biggest bank robbers of all time. As for basing pay on current revenues
and not profits over extended periods of time, then that is a clear case of market failure --
The banksters have been able to sell the “talent” myth to justify their outsized pay
because they are the only ones able to deliver the type of GDP growth the U.S. economy needs in
the short term, even if that kills the U.S. economy in the long term. You’ll be gone, I’ll be
gone.
Unfortunately, many countries go broke pursuing war, if not financially, then morally (are
the two different? – this post suggests otherwise).
I occurs to me that the U.S. is also in
that flock; interventions justified by grand cause built on fallacy, the alpha and omega of failure.
Is the financial apparatchik (or Nomenklatura, a term I like which, as many from the Soviet era,
succinctly describes aspects of our situation today) fated also to the trash heap, despite the
best efforts of the Man of the hour, Ben Bernanke?
Financialization is a Damocles sword hanging over the neoliberal society
While I believe in usefulness of capital markets, it is clear that they are double edge sword and
that banks "in a long run" tend to behave like
sociopathic individuals.
Mr. Capone may have something to say about danger of banks :-).That means that growth of financial
sector represents a direct threat to the stability of the society (Keynesianism
and the Great Recession )
Without adult supervision, as it were, a financial sector that was already inherently unstable
went wild. When the subprime assets were found to be toxic since they were based on mortgages on
which borrowers had defaulted, highly indebted or leveraged banks that had bought these now
valueless securities had little equity to repay their creditors or depositors who now came after
them. This quickly led to their bankruptcy, as in the case of Lehman Brothers, or to their being
bailed out by government, as was the case with most of the biggest banks. The finance sector
froze up, resulting in a recession—a big one—in the real economy.
Neoliberal revolution, or, as Simon Johnson called it after "quite coup" (Atlantic),
brought political power to the financial oligarchy deposed after the New Deal. Deregulation
naturally followed, with especially big role played by corrupt Clinton administration. Positive feedback loops creates one financial crisis after another with the
increasing magnitude. "Saving and loans" crisis followed by dot-com crisis of 2000, which in
turn followed by the collapse of financial system in 2008, which looks somewhat similar to what
happened in 1927. No prominent financial honcho, who was instrumental in creating "subprime
crisis" was jailed. Most remained filthy rich.
Unless the society puts severe limits on their actions like was done during New Deal,
financial firms successfully
subvert the regulation mechanisms and take the society hostage. But periodic purges with relocation
of the most active promoters of "freedom for banks" (aka free market fundamentalism) under the smoke
screen of "free market" promotion does not solve the problem of positive feedback loops that banks create
by mere existence. That's difficult to do while neoliberal ideology and related neoclassical economy
dominates the society thinking (via brainwashing), with universities playing especially negative
role -- most of economics departments are captured by neoliberals who censor any heretics. So year
after year brainwashing students enter the society without understanding real dangers that
neoliberalism brought for them. Including lack of meaningful employment opportunities.
Of course, most of high level officers of leading finance institutions which caused the crisis of
2008-2009 as a psychological type are as close to gangsters as one can get. But there is
something in their actions that does not depend on individual traits (although many of them
definitely can be classified as psychopaths), and is more related to their social position.
This situation is somewhat similar to Bolsheviks coup d'état of 1917 which resulted in capturing
Russia by this ideological sect. And in this sense quite coupe of 1980 is also irreversible in
the same sense as Bolsheviks revolution was irreversible: the "occupation" of the country by a
fanatical sect lasts until the population rejects the ideology with its (now apparent) utopian
claims.
Bolshevism which lasted
75 years, spend in such zombie state the last two decades (if we assume 1991 as the year of death of
Bolshevism, its ideology was dead much earlier -- the grave flaws in it were visible from late 60th,
if not after the WWII). But only when their ideology was destroyed both by inability to raise the standard of living
of the population and by the growing neoliberal ideology as an alternative (and a new, more powerful then Marxism high-demand
cult) Bolsheviks started to lose the grip on their power in the country. As a result Bolsheviks lost the power
only in 1991, or more correctly switched camps and privatized the country. If not inaptness of their
last General Secretary, they probably could last more. In any case after the ideology collapsed, the
USSR disintegrated (or more correctly turn by national elites, each of which wanted their peace of
the pie).
The sad truth is that the mere growth of financial sector creates additional positive feedback loops
and increases structural instability within both the financial sector itself and the society at large.
Dynamic systems with strong positive feedback loops not compensated by negative feedback loops are unstable.
As a result banks and other financial institution periodically generate a deep, devastating crisis.
This is the meaning of famous Hyman Minsky phrase "stability is destabilizing".
In other words, financial apparatchiks (or Financial Nomenklatura, a term from the Soviet era, which
succinctly describes aspects of our situation today) drive the country off the cliff because they do
not have any countervailing forces, by the strength of their political influence and unsaturable
greed. Although the following
analogy in weaker then analogy with dynamic systems with positive feedback loops, outsized financial
sector can be viewed in biological terms as cancer.
Cancer,
known medically as a malignantneoplasm, is a broad group of
diseases involving unregulated
cell growth. In cancer,
cells divide and grow
uncontrollably, forming malignant tumors, and invading nearby parts of the body. The cancer may also
spread to more distant parts
of the body through the lymphatic system
or bloodstream. Not all tumors
are cancerous; benign tumors
do not invade neighboring tissues and do not spread throughout the body. There are over 200 different
known cancers that affect humans.[1]
Like certain types of cancer they depend of weakening "tumor suppressor genes" (via "Quiet
coup" mechanism of acquiring dominant political power) which allow then to engage in uncontrolled growth, destroying
healthy cells (and first of all local manufacturing).
The other suspicion is the unchecked financialization always goes too far and the last N
percent of financial activity absorbs much more resources (especially intellectual resources) and
creates more potential instability than its additional efficiency-benefits (often zero or negative) can justify. It is hard
to imagine that a Hedge Fund Operator of the Year does anything that is even remotely socially useful to justify his
enormous (and lightly taxed) compensation. It is pure wealth redistribution up based on political domination
of financial oligarchy. Significant vulnerabilities within the shadow banking system and
derivatives are plain vanilla socially destructive. Yet they persist due to inevitable political power
grab by financial oligarchy (Quiet coup).
Again, I would like to stress that this problem of the oversized financial sector which produces
one devastating crisis after another
is closely related to the problem of a positive feedback loops. And the society in which banks are given
free hand inevitably degrades into "socialism for banks" or "casino
capitalism" -- a type of
neoliberalism with huge
inequality and huge criminality of top banking officers.
Whether we can do without private banks is unclear, but there is sound evidence that unlike growth
of manufacturing, private financial sector growth is dangerous for the society health and perverts society
goals. Like cult groups the financial world does a terrific job of "shunning" the principled individuals
and suppressing dissent (by capturing and cultivating neoliberal stooges in all major university
departments and press),
so self-destructing tendencies after they arise can't be stopped within the framework of
neoliberalism. In a way financial
firm is like sociopath inevitable produces its trail of victims (and sociopaths might be useful in battles exactly due
to the qualities such as ability to remain cool in dangerous situation, that make them dangerous in the normal course of events).
This tendency of society with unregulated or lightly regulated financial sector toward self-destruction
was first formulated as "Minsky instability hypothesis" --
and outstanding intellectual achievement of American economic Hyman Minsky (September 23, 1919 –
October 24, 1996). Who BTW was pretty much underappreciated (if not suppressed) during his lifetime because his views
were different from orthodox (and false) neoclassic economic theory which dominates US universities,
Like flat Earth theory was enforce by Catholic church before, it is fiercely enforced by an army of well paid neoliberal economics, those
Jesuits of modern era. Who prosecute heretics who question flat Earth theory even more efficiently then
their medieval counterparts; the only difference is that they do not burn the literally, only
figuratively ;-)
Former Washington University in St. Louis economics professor Hyman P. Minsky had predicted the
Great Recession decades before it happened. Hyman Minsky was a real student of the Great
Depression, while Bernanke who widely is viewed as a scholar who studied the Great Depression, in
reality was a charlatan, who just tried to explain the Great Depression from the positions of
neo-classical economy. That's a big difference.
Minsky instability hypothesis ("stability is destabilizing" under capitalism) that emerged from
his analysis of the Great Depression was based on intellectual heritage of three great thinkers in
economics (my presentation is partially based on an outstanding lecture by Steve Keen Lecture 6 on Minsky, Financial
Instability, the Great Depression & the Global Financial Crisis). We can talk about
three source of influence, there authors writing of which touched the same subject from similar
positions and were the base of Hyman Minsky great advance in understanding of mechanics of
development of financial crisis under capitalism and the critical role of financial system in it
(neoclassical economics ignores the existence of financial system in its analysis):
Minsky didn't follow the conventional version of Marxism . And it was dangerous for him to
do so due to McCarthysm. Even mentioning of Marx might lead to strakism fromthe academy those years.
McCarthy and his followers in academy did not understand the difference between Marx great analysis
of capitalism and his utopian vision of the future. Impliedly this witch hunt helped to establish
hegemony of neoclassical economy in economic departments in the USA.
While Minsky did not cited Marx in his writings and did use Marx's Labor Theory of Value his
thinking was definitely influenced by Marx’s critique of finance. We now know that he read and
admired the Capital. And that not accidental due to the fact that his parents were Mensheviks -- a
suppressed after Bolshevik revolution more moderate wing of Russian Social Democratic Party that
rejected the idea of launching the socialist revolution in Russia -- in their opinion Russia
needed first to became a capitalist country and get rid of remnants of feudalism. They escaped from
Soviet Russia when Mensheviks started to be prosecuted by Bolsheviks.
And probably the main influence on Minsky was not Marx's discussion of finance in Volume I of Capital
with a "commodity" model of money, but critical remarks scattered in Volumes II & III
(which were not edited by Marx by compiled posthumously by Engels), where he was really critical of
big banks as well as Marx's earlier works (Grundrisse,
Theories of Surplus Value) where Marx was scathing about finance:
"A high rate of interest can also indicate, as it did in 1857, that the country is undermined
by the roving cavaliers of credit who can afford to pay a high interest because they pay it out
of other people's pocket* (whereby, however, they help to determine the rate of interest
for all) and meanwhile they live in grand style on anticipated profits.
The second source on which Minsky based his insights was Irving Fisher. Irving Fisher’s
reputation destroyed by wrong predictions on stock market prices. In aftermath, developed theory to
explain the crash and published it in his book "The Debt Deflation Theory of Great
Depressions". His main points are:
Neoclassical theory assumed equilibrium but any real world equilibrium will be short-lived
since
"New disturbances are, humanly speaking, sure to occur, so that, in actual fact, any
variable is almost always above or below the ideal equilibrium."
Theoretically... there must be—over-or under-production, over- or under-consumption,..., and
over or under everything else.
It is as absurd to assume that, for any long period of time, the variables in the economic
organization, or any part of them, will "stay put," in perfect equilibrium, as to assume that the
Atlantic Ocean can ever be without a wave." (1933:339)
According to Fisher two key disequilibrium forces that push economic into the next economic
crisis are debt and subsequent deflation
The "two dominant factors" which cause depressions are "over-indebtedness to start with and
deflation following soon after"
"Thus over-investment and over-speculation are often important; but they would have far less
serious results were they not conducted with borrowed money.
That is, over-indebtedness may lend importance to over-investment or to over-speculation. The
same is true as to over-confidence.
I fancy that over-confidence seldom does any great harm except when, as, and if, it beguiles
its victims into debt." (Fisher 1933: 341; emphasis added!)
A chain reaction when overconfidence leads to over-indebtedness: Debt liquidation leads to
distress selling
Joseph Schumpeter was Joseph Schumpeter has more positive view of capitalism than the other two. He authored the theory
of creative destruction as a path by which capitalism achieves higher and higher productivity.
He capitalism as necessarily unstable, but for him this was a positive feature --
instability of capitalism the source of its creativity. His view of capitalism was highly dynamic
and somewhat resembles the view of Marx (who also thought that capitalism destroys all previous
order and create a new one):
Entrepreneurs profit by disrupting "equilibrium" of system
Finance plays essential role here by enabling entrepreneurs
To Schumpeter, entrepreneurs are people with good ideas but no money
To turn ideas into disruptive products or processes they resort to borrowing from banks
Boom caused by investment phase of entrepreneurs. New entrepreneurs undermine old or rival
products. Successful entrepreneurs repay debt, reducing money supply
In this sense the success (boom) carry the seeds of the subsequet bust because with the
success of "pioneers" draw other into thi same market and banks are more willing to finance them
seeing the success of pioneers. But when too many similar products are financed and hit the
market they create the glut and entrepreneurs who ere late to the party are unable to pay the
debts and go bankrupt desire the fact that might have superiors products (but not superior
enough). Slump caused when excessive products hit the market and there are not enough buyers.
Debt deflation follows.
Unlike Marx, who thought that the periodic crisis of overproduction is the source of
instability (as well as gradual absolute impoverishment of workers), Minsky assumed that the
key source of that instability of capitalist system is connected with the cycles of business
borrowing and fractional bank lending, when "good times" lead to excessive borrowing leading to high
leverage and overproduction and thus to eventual debt crisis (The
Alternative To Neoliberalism ):
Minsky on capitalism:
He followed Marx stating that "capitalism is inherently flawed, being prone to booms, crises
and depressions.
This instability is due to characteristics the financial system must possess and will
inevitably acquire, if it is to be consistent with full-blown capitalism.
Such a financial system will be capable of both generating signals that induce an accelerating
desire to invest and of financing that accelerating investment." (Minsky 1969b: 224)
“The natural starting place for analyzing the relation between debt and income is to take
an economy with a cyclical past that is now doing well.
The inherited debt reflects the history of the economy, which includes a period in the not
too distant past in which the economy did not do well.
Acceptable liability structures are based upon some margin of safety so that expected cash
flows, even in periods when the economy is not doing well, will cover contractual debt payments.
As the period over which the economy does well lengthens, two things become evident in board
rooms. Existing debts are easily validated and units that were heavily in debt prospered; it paid
to lever." (65)
It becomes apparent that the margins of safety built into debt structures were too great.
ans should be reduced...
As a result, over a period in which the economy does well, views about acceptable debt
structure change. In the dealmaking that goes on between banks, investment bankers, and businessmen,
the acceptable amount of debt to use in financing various types of activity and positions increases.
This increase in the weight of debt financing raises the market pnce of capital assets and
increases investment. As this continues the economy is transformed into a boom economy... ” (65)
This transforms a period of tranquil growth into a period of speculative excess
“Stable growth is inconsistent with the manner in which investment is determined in an economy
in which debt-financed ownership of capital assets exists, and the extent to which such debt financing
can be carried is market determined.
It follows that the fundamental instability of a capitalist economy is upward.
The tendency to transform doing well into a speculative investment boom is the basic instability
in a capitalist economy." (65)
The idea of Minsky moment is related to the fact that the fractional reserve banking periodically
causes credit collapse when the leveraged credit expansion goes into reverse. And mainstream economists
do not want to talk about the fact that increasing confidence breeds increased leverage. So financial
stability breeds instability and subsequent financial crisis. All actions to guarantee a market rise,
ultimately guarantee it's destruction because greed will always take advantage of a "sure thing" and
push it beyond reasonable boundaries. In other words, marker players are no rational and assume
that it would be foolish not to maximize leverage in a market which is going up. So the fractional
reserve banking mechanisms ultimately and ironically lead to over lending and guarantee the subsequent
crisis and the market's destruction. Stability breed instability.
That means that fractional reserve banking based economic system with private players (aka capitalism)
is inherently unstable. And first of all because fractional reserve banking is debt based. In
order to have growth it must create debt. Eventually the pyramid of debt crushes and crisis hit. When
the credit expansion fuels asset price bubbles, the dangers for the financial sector and the real economy
are substantial because this way the credit boom bubble is inflated which eventually burst. The damage
done to the economy by the bursting of credit boom bubbles is significant and long lasting.
Blissex said...
«When credit growth fuels asset price bubbles, the dangers for the financial sector and
the real economy are much more substantial.»
So M Minsky 50 years ago and M Pettis 15 years ago (in his "The volatility machine") had it
right? Who could have imagined! :-)
«In the past decades, central banks typically have taken a hands-off approach to asset
price bubbles and credit booms.»
If only! They have been feeding credit-based asset price bubbles by at the same time weakening
regulations to push up allowed capital-leverage ratios, and boosting the quantity of credit as
high as possible, but specifically most for leveraged speculation on assets, by allowing vast-overvaluations
on those assets.
Central banks have worked hard in most Anglo-American countries to redistribute income and
wealth from "inflationary" worker incomes to "non-inflationary" rentier incomes via hyper-subsidizing
with endless cheap credit the excesses of financial speculation in driving up asset prices.
John Kay in his January 5 2010 FT column very aptly explained the systemic instability of financial
sector hypothesis:
The credit crunch of 2007-08 was the third phase of a larger and longer financial crisis. The
first phase was the emerging market defaults of the 1990s. The second was the new economy boom and
bust at the turn of the century. The third was the collapse of markets for structured debt products,
which had grown so rapidly in the five years up to 2007.
The manifestation of the problem in each phase was different – first emerging markets, then
stock markets, then debt. But the mechanics were essentially the same. Financial institutions
identified a genuine economic change – the assimilation of some poor countries into the global economy,
the opportunities offered to business by new information technology, and the development of opportunities
to manage risk and maturity mismatch more effectively through markets. Competition to sell
products led to wild exaggeration of the pace and scope of these trends. The resulting herd enthusiasm
led to mispricing – particularly in asset markets, which yielded large, and largely illusory, profits,
of which a substantial fraction was paid to employees.
Eventually, at the end of each phase, reality impinged. The activities that once seemed so profitable
– funding the financial systems of emerging economies, promoting start-up internet businesses, trading
in structured debt products – turned out, in fact, to have been a source of losses. Lenders had to
make write-offs, most of the new economy stocks proved valueless and many structured products became
unmarketable. Governments, and particularly the US government, reacted on each occasion by
pumping money into the financial system in the hope of staving off wider collapse, with some degree
of success. At the end of each phase, regulators and financial institutions declared that
lessons had been learnt. While measures were implemented which, if they had been introduced five
years earlier, might have prevented the most recent crisis from taking the particular form it did,
these responses addressed the particular problem that had just occurred, rather than the underlying
generic problems of skewed incentives and dysfunctional institutional structures.
The public support of markets provided on each occasion the fuel needed to stoke the next crisis.
Each boom and bust is larger than the last. Since the alleviating action is also larger, the pattern
is one of cycles of increasing amplitude.
I do not know what the epicenter of the next crisis will be, except that it is unlikely to involve
structured debt products. I do know that unless human nature changes or there is fundamental change
in the structure of the financial services industry – equally improbable – there will be another
manifestation once again based on naive extrapolation and collective magical thinking. The recent
crisis taxed to the full – the word tax is used deliberately – the resources of world governments
and their citizens. Even if there is will to respond to the next crisis, the capacity to do so may
not be there.
The citizens of that most placid of countries, Iceland, now backed by their president, have found
a characteristically polite and restrained way of disputing an obligation to stump up large sums
of cash to pay for the arrogance and greed of other people. They are right. We should listen to them
before the same message is conveyed in much more violent form, in another place and at another time.
But it seems unlikely that we will.
We made a mistake in the closing decades of the 20th century. We removed restrictions that
had imposed functional separation on financial institutions. This led to businesses riddled
with conflicts of interest and culture, controlled by warring groups of their own senior employees.
The scale of resources such businesses commanded enabled them to wield influence to create a – for
them – virtuous circle of growing economic and political power. That mistake will not be easily remedied,
and that is why I view the new decade with great apprehension. In the name of free markets, we created
a monster that threatens to destroy the very free markets we extol.
While Hyman Minsky was the first clearly formulate the financial instability hypothesis, Keynes
also understood this dynamic pretty well. He postulated that a world with a large financial
sector and an excessive emphasis on the production of investment products creates instability both in
terms of output and prices. In other words it automatically tends to generate credit and asset bubbles.
The key driver is the fact that financial professionals generally risk other people’s money and due
to this fact have asymmetrical incentives:
They get big rewards when bets go right
They don’t have to pay when bets go wrong.
This asymmetry is not a new observation of this systemic problem. Andrew Jackson noted it in much
more polemic way long ago:
“Gentlemen, I have had men watching you for a long time and I am convinced that you have used
the funds of the bank to speculate in the breadstuffs of the country.When you won,
you divided the profits amongst you, and when you lost, you charged it to the bank. You tell
me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families.
That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand
families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out,
and by the grace of the Eternal God, will rout you out.”
This asymmetrical incentives ensure that the financial system is structurally biased toward
taking on more risk than what should be taken. In other words it naturally tend to slide to
the casino model, the with omnipresent reckless gambling as the primary and the most profitable mode
of operation while an opportunities last. The only way to counter this is to throw sand into the
wheels of financial mechanism: enforce strict regulations, limit money supplies and periodically
jail too enthusiastic bankers. The latter is as important or even more important as the other two because
bankers tend to abuse "limited liability" status like no other sector.
Asset inflation over the past 10 years and the subsequent catastrophe incurred is a way classic behavior
of dynamic system with strong positive feedback loop. Such behavior does not depends of personalities
of bankers or policymakers, but is an immanent property of this class of dynamic systems. And the main
driving force here was deregulation. So its important that new regulation has safety feature which make
removal of it more complicated and requiring bigger majority like is the case with constitutional issues.
Another fact was the fact that due to perverted incentives, accounting in the banks
was fraudulent from the very beginning and it was fraudulent on purpose. Essentially accounting
in banks automatically become as bad as law enforcement permits. This is a classic case of control fraud
and from prevention standpoint is make sense to establish huge penalties for auditors, which might hurt
healthy institutions but help to ensure that the most fraudulent institution lose these bank charter
before affecting the whole system. With the anti-regulatory zeal of Bush II administration the
level of auditing became too superficial, almost non-existent. I remember perverted dances with
Sarbanes–Oxley when it
was clear from the very beginning that the real goal is not to strengthen accounting but to earn fees
and to create as much profitable red tape as possible, in perfect Soviet bureaucracy style.
Deregulation also increases systemic risk by influencing the real goals of financial
organizations. At some point of deregulation process the goal of higher remuneration for the top brass
becomes self-sustainable trend and replaces all other goals of the financial organization. This
is the essence of Martin Taylor’s, the former chief executive of Barclays, article
FT.com
- Innumerate bankers were ripe for a reckoning in the Financial Times (Dec 15, 2009), which is worth
reading in its entirety:
City people have always been paid well relative to others, but megabonuses are quite new.
From my own experience, in the mid-1990s no more than four or five employees of Barclays’ then
investment bank were paid more than £1m, and no one got near £2m. Around the turn of the
millennium across the market things began to take off, and accelerated rapidly – after a pause in
2001-03 – so that exceptionally high remuneration, not just individually, but in total, was paid
out between 2004 and 2007.
Observers of financial services saw unbelievable prosperity and apparently immense value
added. Yet two years later the whole industry was bankrupt. A simple reason underlies this:
any industry that pays out in cash colossal accounting profits that are largely imaginary will go
bust quickly. Not only has the industry – and by extension societies that depend on it – been
spending money that is no longer there, it has been giving away money that it only imagined it had
in the first place. Worse, it seems to want to do it all again.
What were the sources of this imaginary wealth?
First, spreads on credit that took no account of default probabilities (bankers have been
doing this for centuries, but not on this scale).
Second, unrealised mark-to-market profits on the trading book, especially in illiquid instruments.
Third, profits conjured up by taking the net present value of streams of income stretching
into the future, on derivative issuance for example.
In the last two of these the bank was not receiving any income, merely “booking revenues”.
How could they pay this non-existent wealth out in cash to their employees? Because they had
no measure of cash flow to tell them they were idiots, and because everyone else was doing it.
Paying out 50 per cent of revenues to staff had become the rule, even when the “revenues”
did not actually consist of money.
In the next phase instability is amplified by the way governments and central banks respond to crises
caused by credit bubble: the state has powerful means to end a recession, but the policies it uses give
rise to the next phase of instability, the next bubble…. When money is virtually free – or, at least,
at 0.5 per cent – traders feel stupid if they don’t leverage up to the hilt. Thus previous bubble and
crash become a dress rehearsal for the next.
Resulting self-sustaining "boom-bust" cycle is very close how electronic systems with positive feedback
loop behave and cannot be explained by neo-classical macroeconomic models. Like with electronic
devices the financial institution in this mode are unable to provide the services that are needed.
As Minsky noted long ago (sited from Stephen Mihm
Why capitalism fails Boston Globe):
Modern finance, he argued, was far from the stabilizing force that mainstream economics portrayed:
rather, it was a system that created the illusion of stability while simultaneously creating the
conditions for an inevitable and dramatic collapse.
...our whole financial system contains
the seeds of its own destruction. “Instability,” he wrote, “is an inherent and inescapable flaw of
capitalism.”
Minsky’s vision might have been dark, but he was not a fatalist; he believed it was possible to
craft policies that could blunt the collateral damage caused by financial crises. But with a growing
number of economists eager to declare the recession over, and the crisis itself apparently behind
us, these policies may prove as discomforting as the theories that prompted them in the first place.
Indeed, as economists re-embrace Minsky’s prophetic insights, it is far from clear that they’re ready
to reckon with the full implications of what he saw.
And he understood the roots of the current credit bubble much better that neoclassical economists like
Bernanke:
As people forget that failure is a possibility, a “euphoric economy” eventually develops, fueled
by the rise of far riskier borrowers - what [Minsky] called speculative borrowers,
those whose income would cover interest payments but not the principal; and those he called
“Ponzi borrowers,” those whose income could cover neither, and could only pay their bills
by borrowing still further.
As these latter categories grew, the overall economy would shift from a conservative but profitable
environment to a much more freewheeling system dominated by players whose survival depended not on
sound business plans, but on borrowed money and freely available credit.
Minsky’s financial instability hypothesis suggests that when optimism is high and ample
funds are available for investment, investors tend to migrate from the safe hedge end of the Minsky
spectrum to the risky speculative and Ponzi end. Indeed, in the current crisis, investors tried to raise
returns by increasing leverage and switching to financing via short-term—sometimes overnight— borrowing
(Too
late to learn?):
In the church of Friedman, inflation was the ol' devil tempting the good folk; the 1980s seemed
to prove that, let loose, it would cause untold havoc on the populace. But, as Barbera notes:
The last five major global cyclical events were the early 1990s recession - largely occasioned
by the US Savings & Loan crisis, the collapse of Japan Inc after the stock market crash of 1990,
the Asian crisis of the mid-1990s, the fabulous technology boom/bust cycle at the turn of the
millennium, and the unprecedented rise and then collapse for US residential real estate in 2007-2008.
All five episodes delivered recessions, either global or regional. In no case was there a significant
prior acceleration of wages and general prices. In each case, an investment boom and an associated
asset market ran to improbable heights and then collapsed. From 1945 to 1985, there was no recession
caused by the instability of investment prompted by financial speculation - and since 1985 there
has been no recession that has not been caused by these factors.
Thus, meet the devil in Minsky's paradise - "an investment boom and an associated asset market [that]
ran to improbable heights and then collapsed".
According the Barbera, "Minsky's financial instability hypothesis depends critically on what amounts
to a sociological insight. People change their minds about taking risks. They don't make a one-time
rational judgment about debt use and stock market exposure and stick to it. Instead, they change
their minds over time. And history is quite clear about how they change their minds. The longer the
good times endure, the more people begin to see wisdom in risky strategies."
Current economy state can be called following Paul McCulley a "stable disequilibrium" very similar
to a state a sand pile. All this pile of stocks, debt instruments, derivatives, credit
default swaps and God know corresponds to a pile of sand that is on the verse of losing stability.
Each financial player works hard to maximize their own personal outcome but the "invisible hand" effect
in adding sand to the pile that is increasing systemic instability. According to Minsky, the longer
such situation continues the more likely and violent an "avalanche".
The late Hunt Taylor wrote, in 2006:
"Let us start with what we know. First, these markets look nothing like anything I've ever encountered
before. Their stunning complexity, the staggering number of tradable instruments and their interconnectedness,
the light-speed at which information moves, the degree to which the movement of one instrument triggers
nonlinear reactions along chains of related derivatives, and the requisite level of mathematics necessary
to price them speak to the reality that we are now sailing in uncharted waters.
"... I've had 30-plus years of learning experiences in markets, all of which tell me that
technology and telecommunications will not do away with human greed and ignorance. I think
we will drive the car faster and faster until something bad happens. And I think it will come, like
a comet, from that part of the night sky where we least expect it."
Banking was once a dangerous profession. In Britain, for instance, bankers faced
“unlimited liability”--that is, if you ran a bank, and the bank couldn’t repay depositors or other
creditors, those people had the right to confiscate all your personal assets and income until you
repaid. It wasn’t until the second half of the nineteenth century that Britain established
limited liability for bank owners. From that point on, British bankers no longer assumed
much financial risk themselves.
In the United States, there was great experimentation with banking during the 1800s, but those
involved in the enterprise typically made a substantial commitment of their own capital. For
example, there was a well-established tradition of “double liability,” in which stockholders were
responsible for twice the original value of their shares in a bank. This encouraged stockholders
to carefully monitor bank executives and employees. And, in turn, it placed a lot of pressure on
those who managed banks. If they fared poorly, they typically faced personal and professional ruin.
The idea that a bank executive would retain wealth and social status in the event of a self-induced
calamity would have struck everyone--including bank executives themselves--as ludicrous.
Enter, in the early part of the twentieth century, the Federal Reserve. The Fed was founded in
1913, but discussion about whether to create a central bank had swirled for years. “No one can carefully
study the experience of the other great commercial nations,” argued Republican Senator Nelson Aldrich
in an influential 1909 speech, “without being convinced that disastrous results of recurring financial
crises have been successfully prevented by a proper organization of capital and by the adoption of
wise methods of banking and of currency”--in other words, a central bank. In November 1910, Aldrich
and a small group of top financiers met on an isolated island off the coast of Georgia. There, they
hammered out a draft plan to create a strong central bank that would be owned by banks themselves.
What these bankers essentially wanted was a bailout mechanism for the aftermath of speculative
crashes -- something more durable than J.P. Morgan, who saved the day in the Panic of 1907
but couldn’t be counted on to live forever. While they sought informal government backing and substantial
government financial support for their new venture, the bankers also wanted it to remain free of
government interference, oversight, or control.
Another destabilizing fact is so called myth of invisible hand which is closely related to the myth
about market self-regulation. The misunderstood argument of Adam Smith [1776], the founder of modern
economics, that free markets led to efficient outcomes, “as if by an invisible hand” has played a central
role in these debates: it suggested that we could, by and large, rely on markets without government
intervention. About "invisible hand" deification, see
The Invisible Hand, Trumped by Darwin - NYTimes.com.
The moment in the financial system when the quantity of debt turns into quality and produces yet
another financial crisis is called Minsky moment. In other words the “Minsky moment” is the time
when an unsustainable financial boom turns into uncontrollable collapse of financial markets (aka
financial crash). The existence of Minsky moments is one of the most important counterargument against
financial market self-regulation. It also expose free market fundamentalists such as "former
Maestro" Greenspan as charlatans. Greenspan actually implicitly admitted that he is and that it was
he, who was the "machinist" who helped to bring the USA economic train off the rails in 2008
via deregulation and dismantling the New Deal installed safeguards.
Here how it is explained by Stephen Mihm in
Boston Globe in 2009
in the after math of 2008 financial crisis:
“Minsky” was shorthand for Hyman Minsky, an American macroeconomist who died over a decade
ago. He predicted almost exactly the kind of meltdown that recently hammered the global
economy. He believed in capitalism, but also believed it had almost a genetic weakness.
Modern finance, he argued, was far from the stabilizing force that mainstream economics
portrayed: rather, it was a system that created the illusion of stability while simultaneously
creating the conditions for an inevitable and dramatic collapse.
In other words, the one person who foresaw the crisis also believed that our whole financial system
contains the seeds of its own destruction. “Instability,” he wrote, “is an inherent and inescapable
flaw of capitalism.”
Minsky believed it was possible to craft policies that could blunt the collateral damage caused
by financial crises. As economists re-embrace Minsky’s prophetic insights, it is far from clear that
they’re ready to reckon with the full implications of what he saw.
Minsky theory was not well received due to powerful orthodoxy, born in the years after World War
II, known as the neoclassical synthesis. The older belief in a self-regulating, self-stabilizing
free market had selectively absorbed a few insights from John Maynard Keynes, the great economist
of the 1930s who wrote extensively of the ways that capitalism might fail to maintain full employment.
Most economists still believed that free-market capitalism was a fundamentally stable basis for an
economy, though thanks to Keynes, some now acknowledged that government might under certain circumstances
play a role in keeping the economy - and employment - on an even keel.
Economists like Paul Samuelson became the public face of the new establishment; he and others
at a handful of top universities became deeply influential in Washington. In theory, Minsky could
have been an academic star in this new establishment: Like Samuelson, he earned his doctorate in
economics at Harvard University, where he studied with legendary Austrian economist Joseph Schumpeter,
as well as future Nobel laureate Wassily Leontief.
But Minsky was cut from different cloth than many of the other big names. The descendent of immigrants
from Minsk, in modern-day Belarus, Minsky was a red-diaper baby, the son of Menshevik socialists.
While most economists spent the 1950s and 1960s toiling over mathematical models, Minsky pursued
research on poverty, hardly the hottest subfield of economics. With long, wild, white hair, Minsky
was closer to the counterculture than to mainstream economics. He was, recalls the economist L. Randall
Wray, a former student, a “character.”
So while his colleagues from graduate school went on to win Nobel prizes and rise to the top of
academia, Minsky languished. He drifted from Brown to Berkeley and eventually to Washington University.
Indeed, many economists weren’t even aware of his work. One assessment of Minsky published in 1997
simply noted that his “work has not had a major influence in the macroeconomic discussions of the
last thirty years.”
Yet he was busy. In addition to poverty, Minsky began to delve into the field of finance, which
despite its seeming importance had no place in the theories formulated by Samuelson and others. He
also began to ask a simple, if disturbing question: “Can ‘it’ happen again?” - where “it” was, like
Harry Potter’s nemesis Voldemort, the thing that could not be named: the Great Depression.
In his writings, Minsky looked to his intellectual hero, Keynes, arguably the greatest economist
of the 20th century. But where most economists drew a single, simplistic lesson from Keynes - that
government could step in and micromanage the economy, smooth out the business cycle, and keep things
on an even keel - Minsky had no interest in what he and a handful of other dissident economists came
to call “bastard Keynesianism.”
Instead, Minsky drew his own, far darker, lessons from Keynes’s landmark writings, which dealt
not only with the problem of unemployment, but with money and banking. Although Keynes had never
stated this explicitly, Minsky argued that Keynes’s collective work amounted to a powerful argument
that capitalism was by its very nature unstable and prone to collapse. Far from trending toward some
magical state of equilibrium, capitalism would inevitably do the opposite. It would lurch over a
cliff.
This insight bore the stamp of his advisor Joseph Schumpeter, the noted Austrian economist now
famous for documenting capitalism’s ceaseless process of “creative destruction.” But Minsky spent
more time thinking about destruction than creation. In doing so, he formulated an intriguing theory:
not only was capitalism prone to collapse, he argued, it was precisely its periods of economic stability
that would set the stage for monumental crises.
Minsky called his idea the “Financial Instability Hypothesis.” In the wake of a depression, he
noted, financial institutions are extraordinarily conservative, as are businesses. With the borrowers
and the lenders who fuel the economy all steering clear of high-risk deals, things go smoothly: loans
are almost always paid on time, businesses generally succeed, and everyone does well. That success,
however, inevitably encourages borrowers and lenders to take on more risk in the reasonable hope
of making more money. As Minsky observed, “Success breeds a disregard of the possibility of failure.”
As people forget that failure is a possibility, a “euphoric economy” eventually develops, fueled
by the rise of far riskier borrowers - what he called speculative borrowers, those whose income would
cover interest payments but not the principal; and those he called “Ponzi borrowers,” those whose
income could cover neither, and could only pay their bills by borrowing still further. As these latter
categories grew, the overall economy would shift from a conservative but profitable environment to
a much more freewheeling system dominated by players whose survival depended not on sound business
plans, but on borrowed money and freely available credit.
Once that kind of economy had developed, any panic could wreck the market. The failure of a single
firm, for example, or the revelation of a staggering fraud could trigger fear and a sudden, economy-wide
attempt to shed debt. This watershed moment - what was later dubbed the “Minsky moment” - would create
an environment deeply inhospitable to all borrowers. The speculators and Ponzi borrowers would collapse
first, as they lost access to the credit they needed to survive. Even the more stable players might
find themselves unable to pay their debt without selling off assets; their forced sales would send
asset prices spiraling downward, and inevitably, the entire rickety financial edifice would start
to collapse. Businesses would falter, and the crisis would spill over to the “real” economy that
depended on the now-collapsing financial system.
From the 1960s onward, Minsky elaborated on this hypothesis. At the time he believed that this
shift was already underway: postwar stability, financial innovation, and the receding memory of the
Great Depression were gradually setting the stage for a crisis of epic proportions. Most of what
he had to say fell on deaf ears. The 1960s were an era of solid growth, and although the economic
stagnation of the 1970s was a blow to mainstream neo-Keynesian economics, it did not send policymakers
scurrying to Minsky. Instead, a new free market fundamentalism took root: government was the problem,
not the solution.
Moreover, the new dogma coincided with a remarkable era of stability. The period from the late
1980s onward has been dubbed the “Great Moderation,” a time of shallow recessions and great resilience
among most major industrial economies. Things had never been more stable. The likelihood that “it”
could happen again now seemed laughable.
Yet throughout this period, the financial system - not the economy, but finance as an industry
- was growing by leaps and bounds. Minsky spent the last years of his life, in the early 1990s, warning
of the dangers of securitization and other forms of financial innovation, but few economists listened.
Nor did they pay attention to consumers’ and companies’ growing dependence on debt, and the growing
use of leverage within the financial system.
By the end of the 20th century, the financial system that Minsky had warned about had materialized,
complete with speculative borrowers, Ponzi borrowers, and precious few of the conservative borrowers
who were the bedrock of a truly stable economy. Over decades, we really had forgotten the meaning
of risk. When storied financial firms started to fall, sending shockwaves through the “real” economy,
his predictions started to look a lot like a road map.
“This wasn’t a Minsky moment,” explains Randall Wray. “It was a Minsky half-century.”
Minsky is now all the rage. A year ago, an influential Financial Times columnist confided to readers
that rereading Minsky’s 1986 “masterpiece” - “Stabilizing an Unstable Economy” - “helped clear my
mind on this crisis.” Others joined the chorus. Earlier this year, two economic heavyweights - Paul
Krugman and Brad DeLong - both tipped their hats to him in public forums. Indeed, the Nobel Prize-winning
Krugman titled one of the Robbins lectures at the London School of Economics “The Night They Re-read
Minsky.”
Today most economists, it’s safe to say, are probably reading Minsky for the first time, trying
to fit his unconventional insights into the theoretical scaffolding of their profession. If Minsky
were alive today, he would no doubt applaud this belated acknowledgment, even if it has come at a
terrible cost. As he once wryly observed, “There is nothing wrong with macroeconomics that another
depression [won’t] cure.”
But does Minsky’s work offer us any practical help? If capitalism is inherently self-destructive
and unstable - never mind that it produces inequality and unemployment, as Keynes had observed -
now what?
After spending his life warning of the perils of the complacency that comes with stability - and
having it fall on deaf ears - Minsky was understandably pessimistic about the ability to short-circuit
the tragic cycle of boom and bust. But he did believe that much could be done to ameliorate the damage.
To prevent the Minsky moment from becoming a national calamity, part of his solution (which was
shared with other economists) was to have the Federal Reserve - what he liked to call the “Big Bank”
- step into the breach and act as a lender of last resort to firms under siege. By throwing lines
of liquidity to foundering firms, the Federal Reserve could break the cycle and stabilize the financial
system. It failed to do so during the Great Depression, when it stood by and let a banking crisis
spiral out of control. This time, under the leadership of Ben Bernanke - like Minsky, a scholar of
the Depression - it took a very different approach, becoming a lender of last resort to everything
from hedge funds to investment banks to money market funds.
Minsky’s other solution, however, was considerably more radical and less palatable politically.
The preferred mainstream tactic for pulling the economy out of a crisis was - and is - based on the
Keynesian notion of “priming the pump” by sending money that will employ lots of high-skilled, unionized
labor - by building a new high-speed train line, for example.
Minsky, however, argued for a “bubble-up” approach, sending money to the poor and unskilled
first. The government - or what he liked to call “Big Government” - should become the “employer of
last resort,” he said, offering a job to anyone who wanted one at a set minimum wage. It
would be paid to workers who would supply child care, clean streets, and provide services that would
give taxpayers a visible return on their dollars. In being available to everyone, it would be even
more ambitious than the New Deal, sharply reducing the welfare rolls by guaranteeing a job for anyone
who was able to work. Such a program would not only help the poor and unskilled, he believed, but
would put a floor beneath everyone else’s wages too, preventing salaries of more skilled workers
from falling too precipitously, and sending benefits up the socioeconomic ladder.
While economists may be acknowledging some of Minsky’s points on financial instability, it’s safe
to say that even liberal policymakers are still a long way from thinking about such an expanded role
for the American government. If nothing else, an expensive full-employment program would veer far
too close to socialism for the comfort of politicians. For his part, Wray thinks that the critics
are apt to misunderstand Minsky. “He saw these ideas as perfectly consistent with capitalism,” says
Wray. “They would make capitalism better.”
But not perfect. Indeed, if there’s anything to be drawn from Minsky’s collected work, it’s that
perfection, like stability and equilibrium, are mirages. Minsky did not share his profession’s quaint
belief that everything could be reduced to a tidy model, or a pat theory. His was a kind of existential
economics: capitalism, like life itself, is difficult, even tragic. “There is no simple answer to
the problems of our capitalism,” wrote Minsky. “There is no solution that can be transformed into
a catchy phrase and carried on banners.”
It’s a sentiment that may limit the extent to which Minsky becomes part of any new orthodoxy.
But that’s probably how he would have preferred it, believes liberal economist James Galbraith. “I
think he would resist being domesticated,” says Galbraith. “He spent his career in professional isolation.”
The positive feedback loop in inherent the environment dominated by large transnationals
which funnel their excess cash into the financial system to speculate on asset appreciation.
As analysis in "The
Endless Crisis" suggests ( updating the classic 1960s analysis of the U.S. economy given by Paul
Sweezy and Paul Baran in "Monopoly Capital.") that the global economy is controlled by large
oligopolistic firms. Which boost their profits by lowering their costs and suppressing wages(on global
scale), using computerization, automation and relocating production to cheap-labor countries such
as China. Wage suppression in turn created permanent weak global demand. Which in turn dry
ups investment opportunities in expansion of existing manufacturing facilities. That forces transnationals
to funnel their excess cash into the financial system to speculate on asset appreciation. As
a result we have "permanent recession" punctuated by boom and bust cycles in financial markets.
Nature of leverage is such that it always represent a positive feedback loop. And leverage
is the essence of
Fractional reserve
banking operations. In the absence of negative control loops in a form of regulation,
purges, exiles, etc, financial system eventually loses stability which demonstrate itself in financial
crisis. Deep financial crisis often are followed by stagnation and can turn into social crisis.
The economy finds itself in a "stagnation-financialization trap" in which the only way to stimulate
growth is through the financialization process which leads to the next bubble and the next financial
crisis. Policy makers in Western countries are ready and willing to lead the world off this
cliff: "Restoring the conditions for finance-led expansion has now become the immediate object of
economic policy in the face of a persistently stagnation-prone real economy."(Foster and McChesney,
p 47). The authors add, "Not only have financial crises become endemic, they have also been growing
in scale and global impact." (Foster and McChesney, 43)
It is very difficult to gain a greater understanding of the broad social forces at play that
are shaping the financial sector, but self-destructing tendencies of the latter can be established
beyond reasonable doubt. And the problem here is not with people, although, again, I would
like to stress that a lot of financial actors are as close to psychopaths/sociopaths as one
can get. But people are better then institutions as Prince Kropotkin once remarked. The problem
is with reshaping of institutions via weakening of regulations (up to the total absence of thereof).
Regulations represent genome that guides growth and proliferation of organizational entities much
like cells in human organism. Bad genome creates cancer cells that kills the host. This
analogy with financial sector converting into cancer under a weak regulatory regime is less superficial
that one might think from the first sight. Some see the cycle in which financial sector undermines
economy the following way:
Boost Phase of Credit Expansion. Banks became dominant political force and start to
dictate the government policy.
Deregulation. Banks create for the themselves the "most favorable entity" regime including
access to government funds and taxation. Here revolving door greatly helps (see
Corruption of Regulators)
Overextended Credit Expansion and Over Capacity (dot-com bubble)
Growing Malinvestment ( there are no alternatives and one burst bubble is simply replaced
by the next. For example, dot-com bubble with the housing bubble in the case of the USA)
Impaired Debt and Policy Decisions, such as bailout of TBTF at taxpayer expense and
great cost for the economy. Please note that at this point banks have total political control,
so they essentially bail themselves out at the expense of the society.
Stalled Consumption due to shrinking of middle class and high structural unemployment.
The growing bills are passed on plebs. Cheap Money are Offered as the only Panacea Available.
Shrinking Loans and another round of Bank Speculation, this time in natural resources.
Search for Yield from Shrinking Pool of Productive Assets. Increasingly speculative
investments with high risk
Stagnation - Over-indebted economy, massive overcapacity with limited growth.
The growth of nationalism and protectionism (ref. 1920's -> 1930's). Military Keynesianism.
Oligarchy don't hesitate to sacrifice millions of plebeians in the subsequent wars that always
follow
In financial markets, socially-responsible, rational behavior isn’t optimal. That makes
reckless, self and society endangering behavior not a deviation, but a norm. That makes finance a
close relative to organized crime. In this respect Jefferson famous quote "I believe that banking
institutions are more dangerous to our liberties than standing armies" is really prophetic.
Instability is an immanent feature of dynamic systems with positive feedback loops. Financial
sector introduces a dangerous positive feedback loop into economy precipitating bubbles and subsequent
crisis. Despite artful packaging, the banking industry game is very simple, namely, they
take outsized, leveraged risks and when they work out, pay themselves handsome rewards, and when
they don’t, dump them on the taxpayer. That's why asJohn Kenneth Galbraith aptly noted "Finance
is the Achilles' heel of capitalism." While there are multiple levels and multiple meaning
on each level of this statement, instability of dynamic systems with positive feedback
loops is a fundamental property of such systems and it cannot be changed by any superficial
measures not related to the strength of feedback loop.The "inherently procyclical"
nature of the financial systemimplies thatthat perceptions of value and risk develop in parallel. Bankers always suffer from a blindness
to future dangers that are intrinsic to the system because that stand in a way of getting outsized
profits. The better the economy is doing, the higher the ratings issued by the rating agencies,
the laxer the guidelines for approving credit, the easier it becomes to borrow money and the greater
the willingness to assume risk.
Wall Street execs have been whining for two years that to reduce pay incentives and bonuses
would cost the firms their best talent. The government’s response should be YES! That’s precisely
the idea. Finance was once a means to an end: the growth of the real economy. Banking once served
industry and services. Now finance has become the end, and the real economy is subservient
to financial services (it’s no surprise that after the crisis, over-the-counter derivatives
trading quickly climbed back up to more than $600 trillion). “At some point in our recent past,
finance lost contact with its raison d’être,” European Central Bank chief Jean Claude Trichet
said earlier this year. “Finance developed a life of its own…Finance became self-referential.”
Computers brought innovations into financial markets, but at the same time greatly strengthened
and enhanced positive feedback loops inherent in financial sector. In other words
they make financial players much more dangerous for society then before. Our present system
could not exist without Web-based brokers, indexes, CDO’s, tranches, MERS, high speed trading. Computers
also have allowed dramatic increase of complexity, which often is used to hide the most dangerous
and the most reckless behavior of financial players. Computers are become an integral part of the
feedback and add gain (amplification) to the loop. The gain from computers is not bad by itself but
the trend to remove all controls or attenuations while adding this gain is bound to cause instability.
HFT seems to me one of the more obvious and stupid examples.
Complexity and luck of transparency are central to financial services firm rent seeking.
Those opportunities dramatically increases with computerization of finance and invention of complex
financial instruments. It is interesting that other industries can be allowed to teeter and
fall - steel, railroads, automobiles - but banks are considered sacrosanct. If they are, then
they should be public utilities, but good luck with this idea in captured Congress.
Megabanks automatically become an instrument for acquiring and keeping political influence
for its management ("silent coup"). Financial sector became viewed by the elite as a
solution to stagnation of industrial production and the way to fend of international competitors
playing of the US role of suppliers of global currency. As a result financial sector became a formidable
political force. Like senator Durbin put it:
And the banks -- hard to believe in a time when we're facing a banking crisis that many of
the banks created -- are still the most powerful lobby on Capitol Hill. And they frankly own the
place.
That compensates their inefficiency in internal market. Investment banks understand pretty well
that the best investment with highest return is an investment in political capital.
Saving oversized banks, however, may ruin a country’s public finances (Gros
and Micossi 2008). Take the example of Ireland; this country provided extensive financial
support to its large banks and subsequently had to seek financial assistance from the EU and the
IMF in 2010. The public finance risks posed by systemically large banks suggest that such banks
should be reduced in size.
Further evidence against big banks can be found from studies on banking technologies. Berger
and Mester (1997) estimate the returns to scale in US banking using data from the 1990s, to find
that a bank’s optimal size, consistent with lowest average costs, would be for a bank with around
$25 billion in assets. Amel et al. (2004) similarly report that commercial banks in North
America with assets in excess of $50 billion have higher operating costs than smaller banks. These
findings together suggest that today’s large banks, with assets in some instances exceeding $
1 trillion, are well beyond the technologically optimal scale.
Flawed incentives. The relationship between the rating agencies and big banks is a perfect
case study of flawed incentives and positive feedback loop within financial sector. Agencies
were unduly influenced (aka "were puppets of") by the institutions whose products they were grading.
Financial markets never play a purely passive role; they seek a political role and always
try to actively affect so-called fundamentals they are supposed to reflect. Their lobbying
efforts and regulatory capture are part of positive feedback loop that increases risks and
instability of the financial system. They tend to convert economy into what is using analogy
with military industrial complex can be called the crony capitalist financial-regulatory complex.That means that the necessary contraction of hypertrophied financial sector requires difficult
political changes which captured political establishment is unable to pursue on their own, so changes
often come packaged with violence. As Soros stated:
"These two functions that financial markets perform work in opposite directions. In
the passive or cognitive function, the fundamentals are supposed to determine market prices. In
the active or manipulative function market, prices find ways of influencing the fundamentals.
When both functions operate at the same time, they interfere with each other. The supposedly independent
variable of one function is the dependent variable of the other, so that neither function has
a truly independent variable. As a result, neither market prices nor the underlying reality is
fully determined. Both suffer from an element of uncertainty that cannot be quantified.
I call the interaction between the two functions reflexivity. Frank Knight recognized
and explicated this element of unquantifiable uncertainty in a book published in 1921,
but the Efficient Market Hypothesis and Rational Expectation Theory have deliberately ignored
it. That is what made them so misleading."
The Fiat-based currencies has additional built-in instability risks in comparison with gold
based currencies. This is not to say that gold based currencies are better. But the
ability of the US to run record current-account deficits over the past several decades is one such
effect, the effect impossible in gold standard currency environment and the US political elite (Republican
and Democrats alike) became increasingly comfortable with overconsumption. (The
World’s Financial System Has Become Unstable):
Leading Bush administration officials used to talk of the US current-account deficit being
a “gift” to the outside world. But, honestly, the US has been overconsuming – living far beyond
its means – for the past decade. The idea that tax cuts would lead to productivity gains and would
pay for themselves (and fix the budget) has proved entirely illusory. ...
[T]he net flow of capital is from emerging markets to the US – this is what it means to have
current-account surpluses in emerging markets and a deficit in the US. But the gross flow of capital
is from emerging market to emerging market, through big banks now implicitly backed by the state
in both the US and Europe. From the perspective of international investors, banks that are “too
big to fail” are the perfect places to park their reserves – as long as the sovereign in question
remains solvent. But what will these banks do with the funds?
When a similar issued emerged in the 1970’s – the so-called “recycling of oil surpluses” –
banks in Western financial centers extended loans to Latin America, communist Poland, and communist
Romania. That was not a good idea, as it led to a massive (for the time) debt crisis in 1982.
We are now heading for something similar, but on a larger scale. The banks and other financial
players have every incentive to load up on risk as we head into the cycle; they get the upside
(Wall Street compensation this year is set to break records again) and the downside goes to taxpayers.
Financial deregulation logically leads to over-trading and under-investment creating bubbles
and converting the economy into casino capitalism. The recent the ‘flash crash’ as a clear example
of the bubble and subsequent fragility such over-trading can create. Excessive trading in securities
increases instability of the economic system and creates perverted incentives for many economic actors.
The effect is similar to how drugs and alcohol chemically alter the personality, increasing the value
of instant gratification. As Hyman Minsky noted:
“In a world of businessmen and financial intermediaries who aggressively seek profit, innovators
will always outpace regulators; the authorities cannot prevent changes in the structure of portfolios
from occurring. What they can do is keep the asset-equity ratio of banks within bounds by setting
equity-absorption ratios for various types of assets. If the authorities constrain banks and are
aware of the activities of fringe banks and other financial institutions, they are in a better
position to attenuate the disruptive expansionary tendencies of our economy.”
-- Hyman Minsky, 1986
Growth of inequality connected with emergence of hypertrophied financial sector is another
positive feedback loop. Outsized pay in financial sector attracts talent and this talent
is used for destructive (or at least non-constructive) purposes. This is the situation similar to
the poor countries problem with mafia. What is so destabilizing isn’t just the high guaranteed pay
if you can break in (even though that is a huge part of it) but the allure of obscene sums of money
if you can make it to the top.
The share of US national income going to the top 1 per cent of the income distribution has risen
from 15 to 25 per cent over the past decade, mostly because of the growth in size and profitability
of the financial sector. This payments to the top percentile is a tax paid by the population (similar
to what population paid to royalty and church in middle ages) as a whole for the questionable
benefits of living in the casino capitalism economy. While the key to growth of inequality was financial
sector it also complemented by several additional trends:
Dramatic increase of renumeration of top management in all types of companies : by
increasing number of sociopath in higher echelons of financial institutions and second by destroying
morale of the firm which makes reckless moves more probable.
Due to regulatory capture. Concentrated wealth makes it easier to buy deregulation
to free itself up even more. At the same time concentrated wealth of financial sector finds fewer
productive investment outlets and naturally migrates into destructive speculation, including creating
huge speculative global capital flows. A positive feedback loop in which increase of income inequality
increase "financization" of the economy looks like:
Increase of income inequality ->
Inadequate effective demand in non-financial economy ->
Inadequate investment opportunities in non-financial economy ->
Investments flowing into parasitic financial “creativity”...
Regulatory capture, especially complete capture of the Fed (with NY Fed widely considered
to be a branch of Goldman Sachs) and SEC nullifies enforcement and creates another positive
feedback loop. "Revolving doors" provide an excellent opportunity to buy influence without overt
corruption. One recent example is Peter Orzag accepting position in Citi (Why
Citigroup) And that means that while on the job ambitious people might try to avoid to aggravate
banks. But without strong regulatory oversight banks very quickly convert themselves into wonder
machines that provides astronomic returns to brass and selected employees, high returns to
creditors, while at the end of each cycle causing huge losses to taxpayers. Banks must keep up
with their competitors, and if one does some wonder trick with somebody else money, they all must
do it to stay in business. That is why regulation is so vital in this highly competitive sector.
One cannot be virtuous as a commercial entity with obligations to shareholders and customers under
brothel rules. That why Greenspan
as an apostle of deregulation was so destructive for the US economy. This is another positive feedback
loop that feeds on itself. In search of profits which became more scares as financization takes life
out of real economy, financial firms are prone to subvert safeguards and endanger the very society
in which they operate ("financial terrorism effect". Wealth permits financial sector
to remove "sand in the wheels": vital for stability negative feedback loops in form of regulation
and, what is actually more important, strict law enforcement of existing regulations. Here
is a quote from Yves Smith post
Should the Fed Be Independent-
But there has been another thread mixed in with this: resentment at the Fed salvaging the banking
industry, with contingent and real costs, in the form of higher inflation, per
Alford’s and Leijonhufvud’s analysis. Now that many of those actions may indeed have been
the best among a set of bad choices (although I suspect economic historians will conclude the
Fed cut rates too far too fast). However, the big issue is that they involved consequences of
such magnitude that they should not have been left to the Fed. I was amazed, and was not alone,
when Congress did not dress down the Fed in its hearings on the Bear rescue for the central bank’s
unauthorized encroachment into fiscal action (ie., if any of the $29 billion in liabilities assumed
by the Fed in that rescue comes a cropper, the cost comes from the public purse). So the frustration
isn’t merely about outcomes, it’s about process, about the sense of disenfranchisement. And that
will only get worse as this crisis grinds along.
The proliferation of speculative side bets in the form of naked credit default swaps and other
derivatives can have significant negative effects on economic fundamentals such as the terms of financing,
the patterns of project selection, and the incidence of corporate and sovereign default. The
existence of zero-sum side bets on default has major economic repercussions. It has strangulating
effect starving real economy of funds as investors who are optimistic about particular company or
state instead of funding it sell protection. This diverts their capital away from potential borrowers
and channels it into collateral to support speculative positions. Naked CDSs are insurance policies
bought against some other persons property. Such as, I buy a policy against your house. Insurance
companies do not write such policies because I might decide to burn your house down. But even if
we assume that there will be no intentional damage to other’s property, we still are encouraging
diverting of funds. See
Guest Post Economic consequences of speculative side bets – The case of naked CDS « naked capitalism.
They also can create artificial demand. Conservative analyses indicates that in the peak years of
2006 and early 2007, Magnetar’s program drove the demand
for roughly 35% of subprime bonds. That fact refutes the claim that all derivatives, futures,
options and swaps are zero sum game: one person loss is another person gain.
By its nature investment banking is constantly tempted to move into grey zone and then slide
into criminal behavior. There is a profound similarity between investment bankers
and hedge funds "Masters of the Universe" and hackers. Investment bankers play a similar role in
financial system as hackers play in computer networks: they are engaged in systemic effort to undermine
existing laws and security controls. But there one important difference: investment bankers are often
obscenely rich and can buy themselves freedom after being caught. That's why criminal law should
consider financial sector crimes similar to the organized crime. "Algorithmic Terrorism”
( HFT) is one example (Nanex
- Market Crop Circle Of The Day). Nobody went to jail (yet). When you see the kind of losses
we have seen on AAA rated securities for example it is almost certainly there was there was some
kind of fraud involved. In fact growth of investment banking tend to be accompanied by large scale
fraud so this would not be unusual.
Tremendous political power that finance sector acquired due to outsized profits is channeled
toward lobbing that is socially and economically disruptive. Externalities produced by
unregulated banking sector are dangerous for society, but at the same time political power of the
financial sector created a lock in which prevents any meaningful correction. Classic Greek Tragedy
necessary follows. Regulators – and their superiors in the legislative and executive branches
– were captured both intellectually and via implicit form of corruption known as revolving doors.
"To a surprising degree, economic misfortune has correlated with low top marginal tax rates. The
top marginal tax rate at the time of the 1929 crash was 24%. After his election, Roosevelt promptly
raised it to 63% and then to 94%, and one could easily make the case that it was this rise, rather
than financial regulation, that played the primary — though certainly not the only — role in curbing
abuses by attacking greed at its source, without, by the way, damaging the economy. Roosevelt essentially
taxed away big money."
Disincentivizing greed - Page 3 - Los Angeles Times
For financial sector stability is destabilizing. Minsky financial instability hypothesis
can be simplified to the general statement that in any economy with large financial sectorstability is destabilizing as financial firms try to exploit the stable regime to extract
additional profit by increasing leverage and making excessively risky bets which serves as a tax
on real economy, strangulating it and creating the necessity for even more risky bets and higher
leverage. In the latter case large firms also implicitly transfer their risks to larger society (via
subsequent bailouts).
The cost of financial intermediation is ultimately a tax on commerce.Outsized,
predatory financial services sector poses real danger to viable businesses, to business expansion,
and to general economic productivity. Large part of activity of financial sector, especially
connected with securitized products, futures, options and derivatives is parasitic: "Banks tend to
make profits – or more accurately, extract rents – out of all proportion to any contribution they
make to the wider economy." Excessive rents weaken the real economy similar to cases
when parasite weakens the host (The
Banking Oligarchy Must Be Restrained For a Recovery to Be Sustained ). In addition to the
overhang of unindicted and undeclared fraud which is widespread due to regulatory capture, distorting
the clearing of the markets, an oversized financial sector essentially make the sum of government
tax and Wall street tax a real drag on the economy. The percentage of financial sector profits to
corporate profits recently peaked at 41%. This suggests that the scope of parasitic financial activity
is a real killer for the economy.
Weakly regulated banks tend to become classic cases of market failure and their employees
at the senior level have basically become the biggest bank robbers of all time. This tremendous
transfer of wealth is inherent in growth of financial sector. The best way to rob bank is to own
one.
Academia serves as the Fifth column of the financial sector. The financial system can
brainwash society via control of corrupt academia in classic Lysenkoism scenario. Here is relevant
quote from The Quiet
Coup
Wall Street’s seductive power extended even (or especially) to finance and economics
professors, historically confined to the cramped offices of universities and the pursuit of Nobel
Prizes. As mathematical finance became more and more essential to practical finance, professors
increasingly took positions as consultants or partners at financial institutions. Myron Scholes
and Robert Merton, Nobel laureates both, were perhaps the most famous; they took board seats at
the hedge fund Long-Term Capital Management in 1994, before the fund famously flamed out at the
end of the decade. But many others beat similar paths. This migration gave the stamp of academic
legitimacy (and the intimidating aura of intellectual rigor) to the burgeoning world of high finance.
Reaganomics (and later Rubonomics) confused ends with means... As Stiglitz noted,
. ... a financial sector is a means to a more productive economy, not an end in itself. (Financial
Times:
Towards
a better measure of well-being). Attempt to convert the USA into new Switzerland on the
strength of dollar as a reserve currency was doomed from the beginning due to the country size constrains.
Highly leveraged economies are prone to deep and prolong crisis. "The lesson of history,
then, is that even as institutions and policy makers improve there will always be a temptation to
stretch the limits. ... If there is one common theme to the vast range of crises ... it is that excessive
debt accumulation, whether it be by the government, banks, corporations, or consumers, often poses
greater systemic risks than it seems during a boom. ... Highly indebted governments, banks, or corporations
can seem to be merrily rolling along for an extended period, when bang -- confidence collapses, lenders
disappear and a crisis hits. ... Highly leveraged economies ... seldom survive forever ... history
does point to warnings signs that policy makers can look to access risk -- if only they do not become
too drunk with their credit bubble-fueled success and say, as their predecessors have for centuries,
'This time is different' Carmen Reinhart and Kenneth Rogoff (cited from
MarketWatch)
The first thing to understand is that attempt to weaken positive feedback looks via regulation, approach
that can be called “regulation as a Swiss knife” does not work without law enforcement and criminal
liability for bankers, as there is an obvious problem of corruption of regulators. In this sense the
mechanism of purges might be the only one that realistically can work.
In other words it’s unclear who and how can prevents the capture of regulators as financial sector
by definition has means to undermine any such efforts. One way this influence work is via lobbing for
appointment of pro-financial sector people in key positions. If such "finance-sector-selected" Fed chairman
does not like part of Fed mandate related to regulation it can simply ignore it as long as he is sure
that he will be reappointed. That happened with Greenspan. After such process started it became
irreversible and only after a significant, dramatic shock to the system any meaningful changes can be
instituted and as soon as the lessons are forgotten work on undermining them resumes.
In essence, the Fed is a political organization and Fed Chairman is as close to a real vice-president
of the USA as one can get. As such Fed Chairman serves the elite which rules that country, whether
you call them financial oligarchy or some other name. Actually Fed Chairman is the most powerful unelected
official in the USA. If you compare this position to the role of the Chairman of the Politburo
in the USSR you’ll might find some interesting similarities.
In other words it is impossible to prevent appointment of another Greenspan by another Reagan without
changes in political power balance. And the transition to banana republic that follows such appointment
is irreversible even if the next administration water boards former Fed Chairman to help him to write
his memoirs. That means that you need to far-reaching reform of political system to be able to
regulate financial industry and you need to understand that the measures adopted need vigilant protection
as soon as the current crisis is a distant history.
Several other source of financial instability were pointed out by others:
The logic of markets gets extended to “fictitious commodities” – land, labor, and money.Polanyi (1944) famously zeroed in on the way that the logic of markets gets extended to
“fictitious commodities” – land, labor, and money – and the way that society reacts defensively
to that illegitimate extension. Today, arguably, it is the logic of finance that has been so extended,
turning everything it touches into an asset with a speculative price.
Excessive accumulations of financial wealth – “other people’s money” – tend to undermine democratic
political forms.Brandeis (1914) thought that excessive accumulations of financial
wealth – “other people’s money” – tend to undermine democratic political forms (among other
problems). Today, arguably TBTF financial institution threaten democracy.
There are some outstanding lectures and presentation on YouTube on this topic. Among them:
Listen to this article 6 minutes 00:00 / 06:06 1x Earnings, valuation and rampant speculation have all played a role in the extraordinary bull market that began a year ago this week. The latest combination of the three has a troubling reliance on the speculative element. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. Earnings, valuation and rampant speculation have all played a role in the extraordinary bull market that began a year ago this week. The latest combination of the three has a troubling reliance on the speculative element. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. U.S. 10-year Treasury yield Source: Tullett Prebon As of March 24 % Pre-pandemic peak of S&P 500 2020 '21 0.25 0.50 0.75 1.00 1.25 1.50 1.75 2.00 S&P 500 forward price/earnings ratio Source: Refinitiv Note: Weekly data S&P 500 peak 2020 '21 12 14 16 18 20 22 24 The parallel in the stock market is stocks going up when earnings -- or rather the expectation of earnings, since the market looks ahead -- go up. There is a risk of course, just as there is with debt: The earnings might not appear, and the stock goes back down. But earnings offer the least risky form of gains, and one that we should welcome as obviously justified. From the low in the summer, 2020 earnings forecasts jumped more than 10%, and expectations for this year rose more than 8%. Stocks responded. In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The parallel in the stock market is stocks going up when earnings -- or rather the expectation of earnings, since the market looks ahead -- go up. There is a risk of course, just as there is with debt: The earnings might not appear, and the stock goes back down. But earnings offer the least risky form of gains, and one that we should welcome as obviously justified. From the low in the summer, 2020 earnings forecasts jumped more than 10%, and expectations for this year rose more than 8%. Stocks responded. In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The parallel in the stock market is the The parallel in the stock market is the hunt for the greater fool . Sure, GameStop < shares bear no relation to the reality < of the company, but I can make money from buying an overpriced stock if I can find someone willing to pay even more because they "like the stock." Wild bets became obvious this year, as newcomers armed with stimulus, or "stimmy," checks Wild bets became obvious this year, as newcomers armed with stimulus, or "stimmy," checks Wild bets became obvious this year, as newcomers armed with stimulus, or "stimmy," checks drove up the price of many tiny stocks, penny shares and those popular on Reddit discussion boards. Speculative bets such as the solar and ARK ETFs rallied up until mid-February, long after growth stocks peaked in August Price performance Source: FactSet *Russell 1000 indexes As of March 25, 7:02 p.m. ET % Invesco Solar Value* ARK Innovation Growth* Sept. 2020 '21 -25 0 25 50 75 100 125 The concern for investors: How much of the market's gain is thanks to this pure speculation, and how much to the justifiable gains of the improving economy and low rates? If too much comes from speculation, the danger is that we run out of greater fools and prices quickly drop back. The concern for investors: How much of the market's gain is thanks to this pure speculation, and how much to the justifiable gains of the improving economy and low rates? If too much comes from speculation, the danger is that we run out of greater fools and prices quickly drop back. me title= A look at how stocks moved through the pandemic suggests earnings and bond yields are still much more important than the gambling element for the market as a whole, but is still troubling. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. A look at how stocks moved through the pandemic suggests earnings and bond yields are still much more important than the gambling element for the market as a whole, but is still troubling. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. A look at how stocks moved through the pandemic suggests earnings and bond yields are still much more important than the gambling element for the market as a whole, but is still troubling. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. NEWSLETTER SIGN-UP ( Mar 26, 2021 , www.wsj.com )
[In casino capitalism] financial institutions make a living screwing over their customers
so their biggest concern is how to avoid losing lawsuits when they get sued
Neoliberal oligarchy fight against income redistribution by pushing perverted social justice
smoke screen and in effect can turn the USA in South Africa. Money quote from comments: "If I
read NASDAQ's proposal for Board representation in the Onion, I would have thought that even
these jokesters have exceeded the creativity threshold of ridiculousness I thought was possible."
and "What about the Mentally Ill? Do they get a seat? How about the Homeless?"
Three words about famele CEO and board room members: Elizabeth Holmes, Theranos. BTW what is
unclear in NASDAQ bold critical race theory support is: Can we exchange one black member for two
female members? Or not.
Also why stop at the boardrooms. Why not require the same in professional sport teams?
Nasdaq has, in its own words, embraced "the social justice movement." The
actual job of a stock exchange, however, is to ensure that trading is orderly and its listed
companies follow standard governance rules. But doing that doesn't earn the applause of the
political left. Progressive approval apparently means a lot to Nasdaq, which has officially
proposed to its regulator -- the Securities and Exchange Commission, newly chaired by Gary
Gensler -- to increase boardroom diversity through a "regulatory approach."
This proposal would require that Nasdaq-listed companies not only disclose the diversity
characteristics of their existing boards, but also retain "at least one director who
self-identifies as female," and "at least one director who self-identifies as Black or African
American, Hispanic or Latinx, Asian, Native American or Alaska Native, two or more races or
ethnicities, or as LGBTQ+."
Noncompliant firms must publicly "explain" -- in writing -- why they don't meet Nasdaq's
quotas. Nasdaq has, in its own words, embraced "the social justice movement."
The actual job of a stock exchange, however, is to ensure that trading is orderly and its
listed companies follow standard governance rules. But doing that doesn't earn the applause of
the political left. Progressive approval apparently means a lot to Nasdaq, which has officially
proposed to its regulator -- the Securities and Exchange Commission, newly chaired by Gary
Gensler -- to increase boardroom diversity through a "regulatory approach."
The Fed, in sync with the fiction writers at the Bureau of Labor Statistics (BLS), reports
consumer inflation as honestly as Al Capone reported taxable income.
Vardaman 3 hours ago
"A basket of things no one actually buys, with prices we just pull out of our
asses..."
Glock 1 hour ago
Yep, the BLS uses the CPI-W to literally avoid raising SS payments. The real rate of
inflation for seniors is close to 10% as the things they spend most of their money on like
medical care, medicine, food and utilities have gone through the roof
While the government claims they are entitled to 1.5% or less COLA's out of which comes a
bigger deduction every year for Medicare. Scam artists.
Keith Speights: Some findings were recently published in Nature magazine that
indicate that the Pfizer-BioNTech and the Moderna vaccines may provide protection for
years.
Many investors are and were hoping for annual recurring revenue from these companies'
vaccines. Brian, how troublesome is this latest data for the prospects for Pfizer, BioNTech,
and Moderna?
Brian Orelli: There's a bit of an extrapolation going on here. The researchers looked at
memory B cells, which tend to provide more long-term protection than, let's say, antibodies.
They looked at those in the lymph nodes and found the cells were there as long as 15 weeks.
Typically, they'd mostly be gone by four to six weeks. So that's the basis of this claim
that it could offer protection for years. If true, that will be a big blow obviously to vaccine
makers, at least for Moderna and BioNTech.
Pfizer would be fine because it's so diversified. It's really hard to make an argument for
the valuations of Moderna and BioNTech right now if these vaccines are one and done over a
couple of years. They really need to have ongoing sales until they can get growth from other
drugs in their pipelines.
Speights: Brian, when I first saw the story, I went to check out to see how the stocks were
performing, and Moderna is up, BioNTech was barely changed, Pfizer barely changed. It seems to
me that investors really aren't making much of this news. Do you think that's the right take at
this point?
Orelli: I think it's still too early to be able to conclude that it's definitely going to
work for years. The other issue is that we're looking at, will those B cells actually protect
against the variants?
If they don't protect against the variants, then it doesn't really matter if you have B
cells in your lymph nodes. If they're not going to protect against the variants then we're
going to have to get a booster shot anyway.
Speights: Right. Obviously, if these vaccines provide immunity for multiple years, these
companies aren't going to make nearly as much money as they expect and a lot of investors
expect. So this is a big story to watch, but like you said, really, really early right now and
too soon to maybe go drawing any conclusions at this point.
Note to Goldman: you're a bank. Stick to banky-stuff. Leave the fear **** and lies to
the professionals in the .gov and MSM.
p3scobar 7 hours ago
Goldman is the government... sooo.....
espirit 9 hours ago
If Goldman can give medical advice, so can I.
A Lunatic 9 hours ago remove link
Turning off the TV will neutralize the Delta Variant.
rag_house 9 hours ago
Just like 'Climate Change' you know it's contrived when the bankers start doing
'science.'
liberty2day 9 hours ago
when did they not?
rag_house 8 hours ago
Bankers aren't scientists. They simply dream up fake things they want to convince people
of and bribe people to try to make it seem real.
Enraged 9 hours ago remove link
Goldman Sachs Charged in Foreign Bribery Case and Agrees to Pay Over $2.9 Billion
The Goldman Sachs Group Inc. and Goldman Sachs (Malaysia) have admitted to conspiring to
violate the Foreign Corrupt Practices Act (FCPA) in connection with a scheme to pay over $1
billion in bribes to Malaysian and Abu Dhabi officials to obtain lucrative business for
Goldman Sachs, including its role in underwriting approximately $6.5 billion in three bond
deals for 1Malaysia Development Bhd. (1MDB), for which the bank earned hundreds of millions
in fees.
bond prices have nothing to do with recovery [sic]
stock prices have nothing to do with growth, except growth of the money supply
Kreditanstalt 3 hours ago
"...the price of a beer or a McDonalds in 10-years time will be exactly the same as it
is today. (Which it won't.)"
But the type who buy US government bonds don't care about the price of burgers. They
only plan to flip the thing back to the next Greater Fool...or THE FED
"... For now, loose monetary and fiscal policies will continue to fuel asset and credit bubbles, propelling a slow-motion train wreck. The warning signs are already apparent in today's high price-to-earnings ratios SPX , low equity risk premiums, inflated housing and tech assets COMP , and the irrational exuberance surrounding special purpose acquisition companies (SPACs), the crypto sector BTCUSD, , high-yield corporate debt , collateralized loan obligations, private equity, meme stocks AMC, and runaway retail day trading. ..."
"... But meanwhile, the same loose policies that are feeding asset bubbles will continue to drive consumer price inflation, creating the conditions for stagflation whenever the next negative supply shocks arrive. Such shocks could follow from renewed protectionism; demographic aging in advanced and emerging economies; immigration restrictions in advanced economies; the reshoring of manufacturing to high-cost regions; or the balkanization of global supply chains. ..."
"... More broadly, the Sino-American decoupling threatens to fragment the global economy at a time when climate change and the COVID-19 pandemic are pushing national governments toward deeper self-reliance. ..."
"... Making matters worse, central banks have effectively lost their independence, because they have been given little choice but to monetize massive fiscal deficits to forestall a debt crisis. With both public and private debts having soared, they are in a debt trap. Central banks will be damned if they do and damned if they don't, and many governments will be semi-insolvent and thus unable to bail out banks, corporations, and households. The doom loop of sovereigns and banks in the eurozone after the global financial crisis will be repeated world-wide ..."
"... When former Fed Chair Paul Volcker hiked rates to tackle inflation in 1980-82, the result was a severe double-dip recession in the United States and a debt crisis and lost decade for Latin America. But now that global debt ratios are almost three times higher than in the early 1970s, any anti-inflationary policy would lead to a depression, rather than a severe recession. The question is not if but when. ..."
Roubini warns: After 'the Minsky Moment' crashes overheated speculative markets, 'the
Volcker Moment' will will arrive to crash the debt-burdened global economy
( Project Syndicate ) -- In
April, I
warned that today's extremely loose monetary and fiscal policies, when combined with a
number of negative supply shocks, could result in 1970s-style stagflation (high inflation
alongside a recession). In fact, the risk today is even bigger than it was then.
After all, debt ratios in advanced economies and most emerging markets were much lower in
the 1970s, which is why stagflation has not been associated with debt crises historically. If
anything, unexpected inflation in the 1970s wiped out the real value of nominal debts at fixed
rates, thus reducing many advanced economies' public-debt burdens.
The warning signs are already apparent in today's high price-to-earnings ratios, low
equity risk premiums, inflated housing and tech assets, and the irrational exuberance
surrounding special purpose acquisition companies (SPACs), the crypto sector, high-yield
corporate debt, collateralized loan obligations, private equity, meme stocks, and runaway
retail day trading.
Conversely, during the 2007-08 financial crisis, high debt ratios (private and public)
caused a severe debt crisis -- as housing bubbles burst -- but the ensuing recession led to low
inflation, if not outright deflation. Owing to the credit crunch, there was a macro shock to
aggregate demand, whereas the risks today are on the supply side.
Worst of both
worlds
We are thus left with the worst of both the stagflationary 1970s and the 2007-10 period.
Debt ratios are much higher than in the 1970s, and a mix of loose economic policies and
negative supply shocks threatens to fuel inflation rather than deflation, setting the stage for
the mother of stagflationary debt crises over the next few years.
For now, loose monetary and fiscal policies will continue to fuel asset and credit
bubbles, propelling a slow-motion train wreck. The warning signs are already apparent in
today's high price-to-earnings ratios SPX , low equity risk
premiums, inflated housing and tech assets COMP , and the
irrational exuberance surrounding special purpose acquisition companies (SPACs), the crypto
sector BTCUSD, ,
high-yield corporate debt , collateralized loan obligations, private equity, meme stocks
AMC, and runaway
retail day trading.
But meanwhile, the same loose policies that are feeding asset bubbles will continue to
drive consumer price inflation, creating the conditions for stagflation whenever the next
negative supply shocks arrive. Such shocks could follow from renewed protectionism; demographic
aging in advanced and emerging economies; immigration restrictions in advanced economies; the
reshoring of manufacturing to high-cost regions; or the balkanization of global supply
chains.
Recipe for macroeconomic disruption
More broadly, the Sino-American decoupling threatens to fragment the global economy at a
time when climate change and the COVID-19 pandemic are pushing national governments toward
deeper self-reliance. Add to this the impact on production of increasingly frequent
cyberattacks on critical infrastructure and the social and political backlash against
inequality, and the recipe for macroeconomic disruption is complete.
Making matters worse, central banks have effectively lost their independence, because
they have been given little choice but to monetize massive fiscal deficits to forestall a debt
crisis. With both public and private debts having soared, they are in a debt trap. Central
banks will be damned if they do and damned if they don't, and many governments will be
semi-insolvent and thus unable to bail out banks, corporations, and households. The doom loop
of sovereigns and banks in the eurozone after the global financial crisis will be repeated
world-wide
As inflation rises over the next few years, central banks will face a dilemma. If they start
phasing out unconventional policies and raising policy rates to fight inflation, they will risk
triggering a massive debt crisis and severe recession; but if they maintain a loose monetary
policy, they will risk double-digit inflation -- and deep stagflation when the next negative
supply shocks emerge.
But even in the second scenario, policy makers would not be able to prevent a debt crisis.
While nominal government fixed-rate debt in advanced economies can be partly wiped out by
unexpected inflation (as happened in the 1970s), emerging-market debts denominated in foreign
currency would not be. Many of these governments would need to default and restructure their
debts.
At the same time, private debts in advanced economies would become unsustainable (as they
did after the global financial crisis), and their spreads relative to safer government bonds
would spike, triggering a chain reaction of defaults. Highly leveraged corporations and their
reckless shadow-bank creditors would be the first to fall, soon followed by indebted households
and the banks that financed them.
The Volcker Moment
To be sure, real long-term borrowing costs may initially fall if inflation rises
unexpectedly and central banks are still behind the curve. But, over time, these costs will be
pushed up by three factors. First, higher public and private debts will widen sovereign and
private interest-rate spreads. Second, rising inflation and deepening uncertainty will drive up
inflation risk premiums. And, third, a rising misery index -- the sum of the inflation and
unemployment rate -- eventually will demand a "Volcker Moment."
When former Fed Chair Paul Volcker hiked rates to
tackle inflation in 1980-82, the result was a severe double-dip recession in the United States
and a debt crisis and lost decade for Latin America. But now that global debt ratios are almost
three times higher than in the early 1970s, any anti-inflationary policy would lead to a
depression, rather than a severe recession. The question is not if but when.
Under these conditions, central banks will be damned if they do and damned if they don't,
and many governments will be semi-insolvent and thus unable to bail out banks, corporations,
and households. The doom loop of sovereigns and banks in the eurozone after the global
financial crisis will be repeated world-wide, sucking in households, corporations, and shadow
banks as well.
As matters stand, this slow-motion train wreck looks unavoidable. The Fed's recent pivot
from an ultra-dovish to a mostly dovish stance changes nothing. The Fed has been in a debt trap
at least since December 2018, when a stock- and credit-market crash forced it to reverse its
policy tightening a full year before COVID-19 struck. With inflation rising and stagflationary
shocks looming, it is now even more ensnared.
So, too, are the European Central Bank, the Bank of Japan, and the Bank of England. The
stagflation of the 1970s will soon meet the debt crises of the post-2008 period. The question
is not if but when.
Nouriel Roubini is CEO of Roubini Macro Associates and chief economist at Atlas Capital
Team.
Traders are addicted to trading, much like murderers fixate on murdering. The traders
noticed a slight change in the Fed's tone and sold anything tied to inflation. They whacked
gold good. Then they went after the other commodities. When they were done there, they went
after value stocks, before finishing the week by blasting a bunch of cyclical names.
25 play_arrow
ted41776 5 hours ago
the only kind of ism that has exist is sociopathism
they always end up at the top of any power pyramid and make the rules that apply to all
others but not them
same as it always was and same as it always will be
NoDebt 4 hours ago
Traders are addicted to trading, much like murderers fixate on murdering
A line I wish I had come up with.
lambda PREMIUM 4 hours ago
This was already modeled and formalized: The Gambler Fallacy.
Let us preface our inflation note with one of our favorite quotes:
"World War II was transitory"
– GMM
Inflation has eroded my purchasing power in my transitory life. Bring back the $.35 Big Mac,
which was only about 20% of the minimum wage. Now? About 40-50%... Enough to spark a
revolution?
There are also Bagdad Bobs from IEA " "World oil supply is expected to grow at a faster rate
in 2022, with the US driving gains of 1.6 million bpd from producers outside the OPEC alliance.
"
"... Just in time for Pride Month, a new exchange traded fund aims to connect with LGBTQ investors. ..."
"... LGBTQ Loyalty Holdings partners with Harris Poll to annually survey 150,000 self-identifying LGBTQ constituents across the U.S. for their views about a company's brand awareness, brand image, brand loyalty and how the firm supports the community. As noted in its prospectus , 25% of the index's weighting is derived from that survey data. ..."
Just in time for Pride Month, a new exchange traded fund aims to connect with LGBTQ investors. Two previous efforts failed to
attract enough assets.
The fund, LGBTQ + ESG100 ETF LGBT,
, launched in late May, is a passively managed, large-cap index fund that holds the top 100 U.S. companies that most align with
the LGBTQ community.
In 2019, two LGBTQ-focused ETFs were delisted: ALPS Workplace Equality Portfolio ETF and InsightShares LGBT Employment Equality
ETFs. Like this new fund, both were mostly U.S. large-cap, passive index ETFs comprising companies that received high or perfect
marks for workplace equality in the Human Rights Campaign Corporate Equality
Index , a benchmark for corporate LGBTQ policies.
The first ETF stuck around for five years, but the second barely made it two years, even though it was launched with much fanfare
by UBS. Neither gained many assets.
Bobby Blair, CEO and founder of LGBTQ Loyalty Holdings, which launched the fund with issuer ProcureAM, says community input on
holdings makes this fund different.
LGBTQ Loyalty Holdings partners with Harris Poll to annually survey 150,000 self-identifying LGBTQ constituents across the U.S.
for their views about a company's brand awareness, brand image, brand loyalty and how the firm supports the community. As noted in
its prospectus
, 25% of the index's weighting is derived from that survey data.
... the LGBTQ + ESG100 has an annual expense ratio of 0.75%.
Just in time for Pride Month, a new exchange traded fund aims to connect with LGBTQ investors. Two previous efforts failed to
attract enough assets.
The fund, LGBTQ + ESG100 ETF LGBT,
+0.91%
, launched in late May, is a passively managed, large-cap index fund that holds the top 100 U.S. companies that most align with
the LGBTQ community.
In 2019, two LGBTQ-focused ETFs were delisted: ALPS Workplace Equality Portfolio ETF and InsightShares LGBT Employment Equality
ETFs. Like this new fund, both were mostly U.S. large-cap, passive index ETFs comprising companies that received high or perfect
marks for workplace equality in the Human Rights Campaign Corporate Equality
Index , a benchmark for corporate LGBTQ policies.
The first ETF stuck around for five years, but the second barely made it two years, even though it was launched with much fanfare
by UBS. Neither gained many assets.
Bobby Blair, CEO and founder of LGBTQ Loyalty Holdings, which launched the fund with issuer ProcureAM, says community input on
holdings makes this fund different.
LGBTQ Loyalty Holdings partners with Harris Poll to annually survey 150,000 self-identifying LGBTQ constituents across the U.S.
for their views about a company's brand awareness, brand image, brand loyalty and how the firm supports the community. As noted in
its prospectus
, 25% of the index's weighting is derived from that survey data.
... the LGBTQ + ESG100 has an annual expense ratio of 0.75%.
I accept the reality except that FED said this inflation is "transitory."
The Fed description is accurate... it's just whether the transition is to
lower inflation or to runaway inflation.
Jim McCreary
The biggest single factor that will drive long-term inflation is the absence of downward
price pressure from new Chinese market entrants. Cutthroat pricing from China is the ONLY
reason the West has been able to get away with Money-Printing Gone Wild for the past 20 years
without triggering runaway inflation.
There are no new Chinese entrants because the Chinese are now all in in the world economy.
The existing Chinese competitors are seeing their costs go UP, not down, because they have
fully employed the Chinese population, and have to pay up in order to get and keep
workers.
So, without any more downward price pressure from China, this latest round of
Money-Printing Gone Wild is showing up as price inflation, and will continue to do so.
Batten down the hatches! Stagflation and then runaway inflation are coming!
Doyle Lonnegan to Johnny "Hooker" Kelly in the movie The Sting: "Your boss is quite the
card player Mr. Kelly. How does he do it?"
Kelly to Lonnegan: "He cheats."
philipat 2 days ago
It's appropriate that the entirely useless ex-PM Cameron got taken by this guy and tried
to use his influence to access free money for him from The Treasury as an "advisor"..He
didn't get any.
The Fed never had control, just s bunch of shysters running a long term hybrid ponzi
scheme.
Lordflin 54 minutes ago (Edited)
The Fed is losing control...
I suppose that is true... as the function has been to drain the people's wealth into the
coffers of the few...
The Real Satoshi 29 minutes ago remove link
Sad that Greg Hunter got kicked off youtube.
gregga777 12 minutes ago (Edited)
He is in great company, though. Anyone who offends the Marxist narratives (Politically
Correct, Multicultural, Affirmative Action, Diversity, Feminist, LGBTQQ, etc.) gets kicked
off YouTube.
pmc 36 minutes ago (Edited) remove link
...As Kissinger said "The illegal we do immediately; the unconstitutional takes a little
longer."
"... The CPI is calculated by analyzing the price of a "basket of goods." The makeup of that basket has a big impact on the final CPI number. According to WolfStreet , 10.9% of the CPI is based on durable goods (computers, automobiles, appliances, etc.). Nondurable goods (primarily food and energy) make up 26.6% of CPI. Services account for the remaining 62.5% of the basket. This includes rent, healthcare, cellphone service etc.) ..."
"... The things the government includes and excludes from the basket can make a profound difference in that final CPI number. Back in 1998, the government significantly revised the CPI metrics. Even the Bureau of Labor Statistics (BLS) admitted the changes were "sweeping." ..."
"... In 1998, the BLS followed the recommendations of the Boskin Commission. It was appointed by the Senate in 1995. Initially called the "Advisory Commission to Study the Consumer Price Index," its job was to study possible bias in the computation of the CPI. Unsurprisingly, it determined that the index overstated inflation " by about 1.1% per year in 1996 and about 1.3% prior to 1996. The 1998 changes to CPI were meant to address this "issue." ..."
"... As Peter pointed out, there is a lot of geometric weighting, substitution and hedonics built into the calculation. The government can basically create an index that outputs whatever it wants. ..."
"... Peter said there is a bit of irony in government officials and central bankers constantly complaining about "not enough inflation." ..."
"... They're the ones that are cooking the books to pretend that inflation is lower than it really is. Because what they're really trying to do is get the go-ahead to produce more inflation, which is printing money." ..."
"... And there are other things that hide inflation. For instance, shrinking packaging so there is less product sold at the same price, or substituting lower quality ingredients, or requiring consumers to assemble items themselves. ..."
"... They find different ways to lower the quality and not increase the price, and I'm sure that the government is not picking up on any of that. If the quality improves, yeah, yeah, they calculate that. But they probably ignore all the circumstances where the quality is diminished." ..."
"... The bottom line is we can't trust CPI to tell us the truth about inflation. ..."
And we're seeing rising prices all over the place, from the grocery store to the gas station. Even
the government numbers flash
warning signs . But as Peter Schiff explains in this clip from an interview with Jay Martin, it's probably even worse than we
realize because the government cooks the numbers when it calculates CPI.
The monthly rises in CPI
through the first quarter show an upward trend. The CPI in January was up 0.3%. It was up 0.4% in February. And now it's up 0.6%
in March. That totals a 1.013% increase in Q1 alone. The question is does this really reflect the truth about inflation? Peter doesn't
think it does.
The government always makes changes to their methods of measuring things, whether it's GDP, or inflation, or unemployment.
And they always tweak the numbers to produce a better result as a report card. "
Imagine if students in a school had the ability to change the metrics by which they were graded or the methodology the teacher
used to calculate their grades.
Would it surprise anybody that all of a sudden they started getting more As and Bs and fewer Cs and Ds? The government always
wants to make the good stuff better, like economic growth, and the bad stuff better, like unemployment or inflation. So, they
want to find ways to make those numbers little and the good numbers big."
The CPI is calculated by analyzing
the price of a "basket of goods." The makeup of that basket has a big impact on the final CPI number. According to WolfStreet , 10.9%
of the CPI is based on durable goods (computers, automobiles, appliances, etc.). Nondurable goods (primarily food and energy) make
up 26.6% of CPI. Services account for the remaining 62.5% of the basket. This includes rent, healthcare, cellphone service etc.)
The things the government includes and excludes from the basket can make a profound difference in that final CPI number. Back in 1998, the government significantly revised the CPI metrics. Even
the Bureau of Labor Statistics
(BLS) admitted the changes were "sweeping."
According to the BLS, periodic changes to the CPI calculation are necessary because "consumers change their preferences or new
products and services emerge. During these occasions, the Bureau reexamines the CPI item structure, which is the classification scheme
of the CPI market basket. The item structure is a central feature of the CPI program and many CPI processes depend on it."
In 1998, the BLS followed the recommendations of the Boskin Commission. It was appointed by the Senate in 1995. Initially called
the "Advisory Commission to Study the Consumer Price Index," its job was to study possible bias in the computation of the CPI. Unsurprisingly,
it determined that the index overstated inflation " by about 1.1% per year in 1996 and about 1.3% prior to 1996. The 1998 changes
to CPI were meant to address this "issue."
As Peter pointed out, there is a lot of geometric weighting, substitution and hedonics built into the calculation. The government
can basically create an index that outputs whatever it wants.
I think this period of "˜Oh wow! We have low inflation!' It's not a coincidence that it followed this major revision into how
we calculate it."
Peter said there is a bit of irony in government officials and central bankers constantly complaining about "not enough inflation."
They're the ones that are cooking the books to pretend that inflation is lower than it really is. Because what they're really
trying to do is get the go-ahead to produce more inflation, which is printing money."
Peter said the CPI will never reveal the true extent of rising prices.
And there are other things that hide inflation. For instance, shrinking packaging so there is less product sold at the same price,
or substituting lower quality ingredients, or requiring consumers to assemble items themselves.
They find different ways to lower the quality and not increase the price, and I'm sure that the government is not picking up
on any of that. If the quality improves, yeah, yeah, they calculate that. But they probably ignore all the circumstances where
the quality is diminished."
The bottom line is we can't trust CPI to tell us the truth about inflation.
Not only is this not true, the evidence shows that bubbles are called in advance. In 1999,
the Wall Street Journal had 286 articles on bubbles. Here are a few of the titles,
"When the Bubble Bursts..."
"The Bubble Won't Burst"
"Bursting Mr. Geenspan's Bubble"
"Fed `Bubble' Policy: Watch, Don't Pop'"
"Fed Governor Meyer Counters Suggestions Of a Market Bubble"
Dogecoin is now valued at more than Ford.
Economics?
Lunacy is more like it.
This is just more proof that the dollars are becoming more worthless.
Whistling past the graveyard.
...retail investors have been net buyers of stocks for 10 straight weeks, hedge funds have
been sellers, client data from BofA Global Research showed, with the four-week average of net
sales of equities by hedge funds hitting their highest levels since the firm began tracking the
data in 2008.
Archegos is a Greek word denoting leadership. The place where the eponymous family office
led UBS, and a growing roll call of investment banks, was into a morass.
"... In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. ..."
"... The parallel in the stock market is the hunt for the greater fool . Sure, GameStop shares bear no relation to the reality of the company, but I can make money from buying an overpriced stock if I can find someone willing to pay even more because they 'like the stock.' ..."
"... The concern for investors: How much of the market's gain is thanks to this pure speculation, and how much to the justifiable gains of the improving economy and low rates? If too much comes from speculation, the danger is that we run out of greater fools and prices quickly drop back. ..."
In Minsky's second stage, borrowers plan only to repay the interest, and
refinance when the main debt is due to be repaid; much company debt works like this. It is
taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go
down when the company needs to refinance, it will pay less.
The equity parallel is to gains in valuation due to lower long-term rates. As with corporate
debt, this is entirely justified and sustainable so long as rates stay low, because future
earnings are now more appealing. The danger is that rates rise, in which case the stock might
be hit no matter how earnings pan out.
A big chunk of the gains in stocks in the past year came from the sharply lower rates in the
first response to the pandemic when the Federal Reserve flooded the system with money.
Price-to-forward-earnings multiples soared. From the S&P 500's low on
March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings
12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the
10-year Treasury, already down sharply from mid-February's high, fell
further as stocks rebounded.
In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the
hope of capital gains big enough to make up the gap. Land speculators are a prime
example.
The parallel in the stock market is the
hunt for the greater fool . Sure, GameStop shares
bear no relation to the reality of the company, but I can make money from buying an overpriced stock if I can find someone
willing to pay even more because they 'like the stock.'
Wild bets became obvious this year, as newcomers armed with stimulus, or 'stimmy,' checks
drove up the price of many tiny stocks, penny shares and those popular on Reddit discussion
boards.
The concern for investors: How much of the market's gain is thanks to
this pure speculation, and how much to the justifiable gains of the improving economy and low
rates? If too much comes from speculation, the danger is that we run out of greater fools
and prices quickly drop back.
SUBSCRIBER 2 hours ago Borrowing money to gamble on the stock market is not
a very smart thing to do in my opinion. Like thumb_up 7 Reply reply Share link Report flag
R
The current financial world has been reduced to a one-legged bar-stool in a bar where
drinks are on the house. There is no scenario where this does not end well no matter how
euphoric we are in the moment.
Even those with half a brain can twig that JP Morgan are a bunch of crooks. Simply Google
"JP Morgan fines".
Those who are market savvy should Google "JP Morgan fines".
Surely in literally everly market segment the CEO, Jamie Dimond, would be banged up in
prison?!!!!!!!!!!!!!!!!!!
nsurf9 21 hours ago (Edited)
You think this guy understands that, even with more than 50% of the, country in plandemic
lock-down, shutter/closed and/or bankrupt for a solid year, the "markets" have literally
doubled.
This just means that JPM like the other whores have taken their short positions and will
now do everything in their power to ensure that they cash out.
Corporations, especially those headquartered in Georgia, have come out against the
legislation signed by Governor Kemp. Republicans describe the bill as one that addresses
election integrity while Democrats call it a voter suppression law – "Jim Crow 2.0".
Coca-Cola and Delta were among
the first to make a point to virtue-signal after the governor signed the bill, only to be
exposed as taking part in the process and giving input into the legislation. Both were fine
with the law until the governor signed it and grievance activists did their thing. Coke soon
discovered that not all of its consumers think that companies should be making policy –
that 's the job of lawmakers- and now it is trying to clean up the mess it made for itself.
Churches have increasingly played a part in American politics and this is an escalation of
that trend. Evangelical churches have shown support for conservative and Republican candidates
while black churches get out the vote for Democrats. This threat of bringing a large-scale
boycott over state legislation is a hostile action against the corporation. It's political
theatre. Groups like Black Voters Matter, the New Georgia Project Action Fund (Stacey Abrams),
and the Georgia NAACP are pressuring companies to publicly voice their opposition and the
religious leaders are doing the bidding of these politically active groups.
When SB 241 and HB 531 were working through the legislative process, the groups put pressure
on Republican lawmakers and the governor to abandon the voting reform legislation. They also
demanded that donations to any lawmakers supporting the legislation be stopped. The Georgia
Chamber of Commerce tried to remain bipartisan while still voicing support for voting rights
but then caved and expressed "concern and opposition" to some provisions . At the time,
several large Georgia companies were targeted by activists, including Aflac, Coca-Cola,
Delta Airlines, Home Depot, Southern Company and UPS.
The Georgia Chamber of Commerce previously reiterated the importance of voting rights
without voicing opposition against any specific legislation. In a new statement to CNBC, the
Georgia Chamber said it has "expressed concern and opposition to provisions found in both HB
531 and SB 241 that restrict or diminish voter access" and "continues to engage in a
bipartisan manner with leaders of the General Assembly on bills that would impact voting
rights in our state."
Office Depot came out at the time and supported the Chamber's statement. The Election
Integrity Act of 2021, originally known as Georgia Senate Bill 202, is a Georgia law
overhauling elections in the state that was signed into effect by the governor and we know what
happened. Office Depot has not delivered for the activists as they demand so now the company
faces boycott drama. The
religious leaders are taking up where the activist groups left off.
African Methodist Episcopal Bishop Reginald Jackson said the company has remained "silent
and indifferent" to his efforts to rally opposition to the new state law pushed by
Republicans, as well as to similar efforts elsewhere.
" We just don't think we ought to let their indifference stand ," Jackson said.
The leader of all his denomination's churches in Georgia, Jackson had a meeting last week
with other Georgia-based executives to urge them to oppose the voting law, but said he's had
no contact with Home Depot, despite repeated efforts to reach the company.
Faith leaders at first were hesitant to jump into the boycott game. Now the political
atmosphere has changed and they are being vocal. Jackson focused on pressuring Coca-Cola first.
After that company went along to get along, before it realized its error, Jackson moved his
focus onto other companies.
"We believe that corporations have a corporate responsibility to their customers, who are
Black, white and brown, on the issue of voting ," Jackson said. "It doesn't make any sense at
all to keep giving dollars and buying products from people that do not support you."
He said faith leaders may call for boycotts of other companies in the future.
So, here we are with Home Depot in the spotlight. There are
four specific demands leveled at Home Depot in order to avoid further action from the
activists.
Rev. Lee May, the lead pastor of Transforming Faith Church, said the coalition is "fluid
in this boycott" but has four specifics requests of Home Depot: To speak out publicly and
specifically against SB 202; to speak out against any other restrictive voting provisions
under consideration in other states; to support federal legislation that expands voter access
and "also restricts the ability to suppress the vote;" and to support any efforts, including
investing in litigation, to stop SB 202 and other bills like it.
" Home Depot, we're calling on you. I'm speaking to you right now. We're ready to have a
conversation with you. You haven't been ready up to now, but our arms are wide open. We are
people of faith. People of grace, and we're ready to have this conversation, but we're very
clear those four things that we want to see accomplished ," May said.
The Rev. Timothy McDonald III, senior pastor of the First Iconium Baptist Church, warned
this was just the beginning.
"It's up to you whether or not, Home Depot, this boycott escalates to phase two, phase
three, phase four," McDonald said. "We're not on your property -- today. We're not blocking
your driveways -- today. We're not inside your store protesting -- today. This is just phase
one."
That sounds a lot like incitement, doesn't it? Governor Kemp is speaking out, he has had
enough. He held
a press conference to deliver his comments.
"First, the left came for baseball, and now they are coming for Georgia jobs," Kemp said,
referring to MLB's decision to move this year's All-Star Game from Atlanta over the new laws.
"This boycott of Home Depot – one of Georgia's largest employers – puts partisan
politics ahead of people's paychecks."
"The Georgians hardest hit by this destructive decision are the hourly workers just trying
to make ends meet during a global pandemic. I stand with Home Depot, and I stand with nearly
30,000 Georgians who work at the 90 Home Depot stores and 15 distribution centers across the
Peach State. I will not apologize for supporting both Georgia jobs and election integrity,"
he added.
"This insanity needs to stop. The people that are pushing this, that are profiting off of
it, like Stacey Abrams and others, are now trying to have it both ways," Kemp said. "There is
a political agenda here, and it all leads back to Washington, D.C."
The governor is right. The activists are in it to federalize elections, not to look out for
Georgians, who will lose jobs over these partisan actions. The law signed by Kemp increases
voting rights, it doesn't limit them .
The Financial Instability Hypothesis (FIH) has both empirical and theoretical aspects that
challenge the classic precepts of Smith and Walras, who implied that the economy can be best
understood by assuming that it is constantly an equilibrium-seeking and sustaining system. The
theoretical argument of the FIH emerges from the characterization of the economy as a
capitalist economy with extensive capital assets and a sophisticated financial system.
In spite of the complexity of financial relations, the key determinant of system behavior
remains the level of profits: the FIH incorporates a view in which aggregate demand determines
profits. Hence, aggregate profits equal aggregate investment plus the government deficit. The
FIH, therefore, considers the impact of debt on system behavior and also includes the manner in
which debt is validated.
Minsky identifies hedge, speculative, and Ponzi finance as distinct income-debt relations
for economic units. He asserts that if hedge financing dominates, then the economy may well be
an equilibrium-seeking and containing system: conversely, the greater the weight of speculative
and Ponzi finance, the greater the likelihood that the economy is a "deviation-amplifying"
system. Thus, the FIH suggests that over periods of prolonged prosperity, capitalist economies
tend to move from a financial structure dominated by hedge finance (stable) to a structure that
increasingly emphasizes speculative and Ponzi finance (unstable). The FIH is a model of a
capitalist economy that does not rely on exogenous shocks to generate business cycles of
varying severity: business cycles of history are compounded out of (i) the internal dynamics of
capitalist economies, and (ii) the system of interventions and regulations that are designed to
keep the economy operating within reasonable bounds.
"... much like the dot-com period, there is a broad subset of stocks (mostly in technology) that have become completely untethered, particularly since the summer of 2020, from business fundamentals like earnings and even sales -- driven higher only by euphoric market participants extrapolating from a past extraordinary trajectory of prices. ..."
"... A lot of today's US stock market has become what I call a "pure price-chasing bubble." Examination of the history of comparable pure price-chasing bubbles shows there has been a set of key causal factors that contributed to these rare (I have found nine in total) market events; the presence of most of these factors has usually been necessary for markets to reach the requisite escape velocity. ..."
"... To fuel the bubble further, there was a rapid expansion of bank money beginning three years before the market peak -- but the expansion of credit was even greater, owing to an explosion of margin credit (with implied annuaized interest rates sometimes reaching 100 percent) through an informal system utilizing postdated checks ..."
"... The US market certainly exhibits an exceptional record of price appreciation, with the S&P 500 having risen by almost 500 percent over more than a decade. In contrast to most other bubbles, however, it is notable that US economic growth over this period has been relatively anemic. ..."
"... Due to a sustained high rate of corporate equity purchases financed with debt, this overarching expansion of credit has also made its way into the last decade's bull market and steepened its price trajectory. ..."
"... The role of message boards and chat rooms -- with their millions of participants, all in instant real-time contact -- has created crowd dynamics in speculative stock market favorites at a pace without parallel in other pure price-chasing bubbles. ..."
"... a peak will be reached, a decline will follow, and the psychological dynamics in play on the way up will go into reverse and will accelerate the fall. ..."
"... Moreover, in the context of a grossly underestimated mass of corporate debt, history tells us the consequences of the bursting of the US stock market bubble should be another financial crisis and another recession ..."
According to Frank Veneroso, a broad subset of today's US stock market has become what he
calls a "pure price-chasing bubble." Examination of the history of comparable pure
price-chasing bubbles shows there has been a set of key causal factors that contributed to
these rare market events.
The most extreme such case was an over-the-counter market in Kuwait called the "Souk
al-Manakh." This exemplar of a pure price-chasing phenomenon may shed light -- albeit
unflattering -- on the current US equity market, Veneroso contends.
My simple solution is to turn the vacant malls into giant marijuana growing operations,and
huge meth labs,and use the revenue from the meth and weed sales to balance the Federal
budget..As an additional plus,you put the Mexican drug cartels out of business,which can't be
a bad thing,either
FurnitureFireSale 26 minutes ago
The smile on the side of the Prime trucks looks like a big wang (Bezos's?) saying "F-U,
take THIS!" to all the small businesses. Once you see it, you cannot unsee it.
Puppyteethofdeath 14 minutes ago
Turn them into homeless shelters.
744,000 Americans filed for 1st time unemployment last week.
Every week the numbers are the same.
no cents at all 5 minutes ago
Yet mall property owners and their ilk have equity prices in the stratosphere. Same with
cruise lines. A mystery. (Although doesn't take scooby doo to understand why)
That makes Jamie brilliant. play_arrow 5 play_arrow 1
zorrosgato 10 hours ago
"flush with savings"
HA!
Yen Cross 10 hours ago
Jack, ****, Dimon? Which one was it Z/H Google moderator?
I donate at Christmas.
Basil 20 minutes ago
whats gone wrong is the cancer of progressiveism. wokeism, social justice nonsense.
Gadbous 29 minutes ago
Don't you want to just slap these people?
MuleRider 18 minutes ago
You misspelled decapitate.
GrandTheftOtto 2 hours ago
"It was a year in which each of usfaced difficult personal challenges"
boundless hypocrisy...
Mr. Rude Dog 2 hours ago remove link
" Americans know that something has gone terribly wrong, and they blame this country's
leadership: the elite, the powerful, the decision makers - in government, in business and in
civic society," he wrote.
"This is completely appropriate, for who else should take the blame?"
Lets see if he projects the problem back on the citizens...Let's see what happens.
"But populism is not policy, and we cannot let it drive another round of poor planning
and bad leadership that will simply make our country's situation worse."
I knew the so called elites could not take the blame... You know populism always makes bad
decisions with the economy, our monetary system, our infrastructure and just managing our tax
money in general...Yes I knew Jamie could not take the blame..LOL.!!!!
QE4MeASAP 2 hours ago
So Dimon is giving the state of the union instead of Biden?
Budnacho 2 hours ago
Jamie Dimon....Friend of the Little Guy....
Tomsawyer2112 PREMIUM 11 hours ago
He doesn't believe a word of what he just said. But he knows that if he wants his bank to
continue to be an extension of the government and curry favor then he needs to tow the line.
I am sure he also has his eye on a future role as Fed Lead or US Treasurer but might be tough
since he's not a diversity candidate.
oknow 2 hours ago
Someone turn off his mike, dont need your sorry *** confession
Just confiscate his wealth and make him do 9 to 5 jobs for the rest of his life.
ChromeRobot 9 hours ago remove link
This guy is a rarity in the banking industry. He's a billionaire. Running a bank I was
often told in my early years in finance was foolproof. Everybody needs money and they have
it. Hard to fk up. Somehow this "titan" has gamed it to do really well doing something
incredibly easy. Positioning yourself to be a SIFI helps too! Too big to fail has it's
perks.
a drink before the war 10 hours ago
What Jamie is really saying without saying it is " I get paid in stock options however
since the pandemic JPM and other banks haven't been allowed to do stock buy back but come
June we get back to the NORMAL and with the FED printing money and giving it to us we going
to talk this stock WAY up no matter what because I got almost two years of stock options I
gotta get paid for!"
lay_arrow 2
archipusz 10 hours ago
If you want to get to the top, you must speak the party line narrative.
The truth is something different altogether.
Eddie Haskell 10 hours ago
If you want to be a state-approved oligarch you've gotta suck the right dickie. Good
job.
Detective Miller 38 minutes ago
"Jaimie Tells Bagholders To 'Buy Buy Buy!!!'"
Onthebeach6 38 minutes ago
The US is addicted to helicoptor money.
The world looks fine to an addict until the supply is cut off.
sbin 41 minutes ago
Off shore industry
Steal pension funds
Laundering drug money
Regulatory capture.
Jimmy going to lock himself in jail and forfeit his assets?
34k of jerkoff.
Nuk Soo Kow 2 hours ago
How magnanimous of Jamie to blame elitists and civic "leaders" for the structural problems
in America. It was the banksters that pushed NAFTA and helped China engineer it's currency
against the dollar, which led to massive outflows of productive capital. It was the banksters
via the use of financial legerdemain who engineered the collapse in 2008 (not to mention
every other banking panic and collapse prior to). It's high time to throw out this den of
vipers once and for all.
Nature_Boy_Wooooo 2 hours ago
He lost me at.....
We need more cheap immigrant labor...... housing is unaffordable for many.
No **** moron!......you suppressed our wages and increased demand for housing.
PT 10 hours ago remove link
I always consult the fox when I want to know about the state of the hen house.
QuiteShocking 10 hours ago
Economic boom?? Is really just trying to get back to where we were previously before the
pandemic hit with things opening back up etc... More people have been working from home so
different spending patterns are developing.. but could change... Supply chain chaos makes it
seem like shortages and inflation etc... It may only last through 2023?? but with Dems in
charge this is not a given with their anti business slant??
same2u 11 hours ago
UBI for the rich= stock market...
Hope Copy 3 hours ago (Edited)
Jamie knows that the core of Crypto is at the CIA and that the pseudo Republic has far to
much Fascist politics at the core .. There has been a competitive failure at most all levels
of the government in recent times with a 'winner take all' at the cost of keeping competitive
practices alive (not to mention kickbacks).. Of course China is laughing even though they
have a history of cutting corners (and outright fraud) in every economic sector.
Mario Landavoz 20 minutes ago
Banker. That's all ya need to know.
Just a Little Froth in the Market 40 minutes ago
But the CEO was very candid about China...
"China's leaders believe America is in decline... The Chinese see an America that is
losing ground in technology, infrastructure and education – a nation torn and
crippled . . . and a country unable to coordinate government policies (fiscal, monetary,
industrial, regulatory) in any coherent way to accomplish national goals
This is correct.
Joe A 55 minutes ago
He is just mocking and taking a piss at everybody. That America is such a mess is because
of people like him with his scorched earth robber baron rogue capitalism. But there is a way
to redeem yourselves. Just make all your assets available to the American people. And oh,
blow your own brain out.
Abi Normal 3 hours ago remove link
What else is he supposed to say? As long as things don't go bad for Jamie it's cool.
OrazioGentile 3 hours ago
The Banksters, after years of mismanagement, borderline fraud, and endless bailouts now
see that investments in unicorn startups, selling mindless BS to each other, and the quick
buck lead to a burned out husk called America?!? Now?!? Let all of them live in the great
paradise called the Cayman Islands that they helped build and see how far they get selling
"capital instruments" to each other. The last 20 years have taught most Americans that hard
work is meaningless to get ahead IMHO.
If we are to believe authorities the USA. added 916K jobs in March, and the official
unemployment rate is at 6% (note the word official; the current official U6 unemployment rate as
of March 2021 is 10.70%; so the real number is probably much higher than 10%)
Fudging data became as prominent as it was in the USSR. The neoliberal empire can't afford objective stats.
Notable quotes:
"... monthly data is collected over a brief timeframe - just a few days - and that the calculations are seasonally adjusted. ..."
"... Yes, at least half the sheep population think they are real. It's insane how dumb people are today. ..."
I spent the last 2 weeks digging into the numbers - especially timing of the surveys and
data collection. I get the fact that weekly claims don't reflect new hires. I also realize
that monthly data is collected over a brief timeframe - just a few days - and that the
calculations are seasonally adjusted.
But let's be reasonable - how is it possible to have 700K - 800K initial jobless claims
every week and create nearly a million new jobs? Does anyone really believe any of these numbers?
Globalistsaretrash
Yes, at least half the sheep population think they are real. It's insane how dumb people
are today.
...history shows that one messy unwind can easily spread. The U.S. Office of Financial
Research finds that the ten largest hedge funds were leveraged
far more heavily than the next 40 largest funds, as of June. And many family offices may
not be counted in these statistics at all, which mostly rely on disclosure forms they are able
to avoid.
There are some obvious responses for regulators, such as mandating disclosure of the
total return swaps that allowed Archegos to build big positions out of the public eye. But
there are no easy answers to the wider challenge of overseeing leverage within the broadest
financial complex when debt is almost free.
The system has held up under the latest strain, but this isn't a victory. Archegos means one
who leads the way. Regulators must do what they can to ensure as few as possible follow.
Swiss rival Credit Suisse expects a hit in the billions of dollars from Archegos, people
with knowledge of the matter have said, while Nomura Holdings Inc. has signaled it may lose as
much as $2 billion. Analysts at JPMorgan Chase & Co. estimate the Archegos blowup may cause
as much as $10 billion of combined losses for banks.
David Herro, chief investment officer of Harris Associates -- one of Credit Suisse's biggest
shareholders -- said on Bloomberg Television on Wednesday that the Archegos incident was a
"wake-up call" for Credit Suisse and should lead to sweeping changes to its culture and
oversight practices.
Shares of Credit Suisse tumbled 21% this week on concern over the size of its potential
Archegos hit. Deutsche Bank is down 2.9%.
Casino capitalism is the fertile ground for the most sleazy types of speculators. The stock
market has become a giant slot machine financed by 401K lemmings. The marks here are 401K
investors.
Excessive leverage is a immanent feature of the pre-collapse stage of Minsky cycle. So those
who argue that we are close to another crash get some additional confirmation due to this event.
The Masters of the Universe rediscovered the hidden areas of huge risk, and like in 2008 are
afraid but can't and do not want to anything.
TBTF such as Goldman and Morgan aid the most sleazy types as they bring outsized profits for
them. So this a catch 22 as Goldman and other TBFT controls SEC not the other way around.
It would be prudent to view banksters as a special type of mafia and treat accordingly and
prohibit for them serving in government. But this is impossible under neoliberal as financial
oligarchy has all political power.
The question is: Is there another fund that's larger, that's more leveraged with the same
characteristics that could prove to be a more systemic event? That's the major concern right
now." Wall Street's hottest trades such as pure-tech plays and high-flying tech/media like the
ones bet on by Hwang -- could be unwound. The Hwang blowup wakes up investors to the realization
that many parts of the market are overvalued and it's time to sell -- and quickly as yields are
going up. For the the FAANGS, the Tesla's out there -- the fundamentals don't support the stock.
So it would be logical to a large correction.
Notable quotes:
"... The idea that one firm can quietly amass outsized positions through the use of derivatives could set off another wave of criticism directed against loosely regulated firms that have the power to destabilize markets. ..."
Much of the leverage used by Hwang's Archegos Capital Management was provided by banks
including Nomura Holdings Inc. and Credit Suisse Group AG through swaps and so-called
contracts-for-difference, according to people with direct knowledge of the deals. It means
Archegos may never actually have owned most of the underlying securities -- if any at all.
While investors who own a stake of more than 5% in a U.S.-listed company usually have to
disclose their holdings and subsequent transactions, that's not the case with positions built
through the type of derivatives apparently used by Archegos. The products, which are transacted
off exchanges, allow managers like Hwang to amass exposure to publicly-traded companies without
having to declare it.
The swift unwinding of Archegos has reverberated across the globe, after banks such as
Goldman Sachs Group Inc. and Morgan Stanley forced Hwang's firm to sell billions of dollars in
investments accumulated through highly leveraged bets. The selloff roiled stocks from Baidu
Inc. to ViacomCBS Inc., and prompted Nomura and Credit Suisse to disclose that they face
potentially significant losses on their exposure.
One reason for the widening fallout is the borrowed funds that investors use to magnify
their bets: a margin call occurs when the market goes against a large, leveraged position,
forcing the hedge fund to deposit more cash or securities with its broker to cover any losses.
Archegos was probably required to deposit only a small percentage of the total value of
trades.
The chain of events set off by this massive unwinding is yet another reminder of the role
that hedge funds play in the global capital markets. A hedge fund short squeeze during a
Reddit-fueled frenzy for Gamestop Corp. and other shares earlier this year spurred a $6 billion
loss for Gabe Plotkin's Melvin Capital and sparked scrutiny from U.S. regulators and
politicians.
The idea that one firm can quietly amass outsized positions through the use of
derivatives could set off another wave of criticism directed against loosely regulated firms
that have the power to destabilize markets.
Bob 2 days ago This is another major reminder that the stock market is not as rational as we
want to believe. A small group of very large, leveraged funds can have far more impact on the
market than dozens or hundreds of well thought out and researched programs. Sigh. Take your
lumps and move on. Hasso 2 days ago 2008 - Hwang's Tiger Asia suffered losses from the
Volkswagen short, 2012 - Hwang's Tiger Asia paid $44M to settle insider trading charges, banned
2014- Hong Kong fined him $5.3M & banned him for four years. 2021 - And here we are
again.
Tyrone 2 days ago Gee, Credit Suisse involved in sleezy investments. Again. I'm shocked, just
shocked!
Manohar 2 days ago Banks haven't learnt anything yet...you know why? Because its other people's
money and the no one gets prosecuted when they are caught with hand in the cookie jar.
killer klown 2 days ago it's a sign that the market and it's regulators have learned
nothing.........to even pretend that a penny difference in assumed earnings versus actual
earnings using the GAAP accounting (which itself says it's not exact but generally accepted
accounting principles)moves a stock is in itself a joke, this situation of a BIG BLACK BOX
calls for the complete dismantle of the derivatives market which was created to lay off risk.
Bill Hawng should be FLAT Broke his possesions seized, The board of Credit Suisse and Nomura et
all should be unemployed as of 8:31 this morning. But they won't and it's only going to happen
again and again.
Amvet 2 days ago Market manipulators have a free rein in the USA. Are politicians also
involved? Reply 16 3 George 2 days ago Just amazing how some of the world's most sleazy
characters have access to cosmic sums of money and remain under the radar and legal(???). Then
nothing seems to happen except that loads of other folk get burned while they move on to the
next bright idea. Reply 13 1 Rick 2 days ago So clearly limiting those who can purchase these
to exclude amateur players has not been successful. Recklessness is not limited to amateurs.
Mr. H. 2 days ago In 2008 high finance was playing very high risk games with clients money at
the undefined edge between legal and illegal. A bunch of firms went away along with many
billions of dollars because a bunch of players were playing CYA. They came up with the term
"too big to fail" when they were picking winners and losers. "too big to fail" is is fetid
bovine excrement. The SEC, that is the administrative government, was not doing its job! There
were many questions about government employee competence to do those jobs. The government
should have let the market place pick the winners and losers, then the government should have
prosecuted everyone who failed to perform their fiduciary duty and set a major precedent about
high risk play with other people's money; keep it legal or go to jail and lose your shirt. That
is what should happen this time too! Noone 2 days ago Almost like something that is so
dangerous and risky to both the market AND the "investor" that retail traders ARE BANNED from
doing it should.. idk.. BE ILLEGAL FOR EVERYONE? Useless SEC. Do your job right.
Philip 2 days ago Ironic that Hedge Funds are the most unhedged game going.... Dan 1 day ago
The managers of these HFs lack morality, they steal from other companies because they believe
in their twisted little minds if they set up a system whereby they can trade in dark pools with
illegal naked shorting, counterfeit shares and stock manipulation under the radar -- it makes
the crime okay. All of this criminality is been done with the aid of supplementary leverage
ratio (SLR) If they can manage to bankrupt the company they short with Government SLR they end
up paying no tax and pocket the money GME/AMC and more for example.. Bingo the most audacious
robbery attempt in the history of the state. Oh boys did they fail, wow what a spectacular
failure. Now they have to deleverage destabilizing the entire market. Do these HF managers rank
their values differently to the moral code we all live by? Obviously they do! There's no doubt
they'll get lots of time to think about their behaviour when they're in the slammer. Each case
will have to be evaluated on its own merit at some stage of course. On the face of it, all
indications points to a tradeoff that benefits themselves at the disadvantaging of other. Sad
for them! I rest my case!
Jodes 1 day ago The spikes in shares like ROKU, BIDU, SHOP and many more have huge parabolic
spikes at the top accounting for the disfunctional market as we were seeing it at the top. They
had huge buy orders to artificially spike the prices keep them up and then experts come in
after and raise price targets and put a BUY rating on the stock. Then get retail to buy in and
then drop them like a rock. Greedy and dispicibale. All probably done for a huge bonus. While
retail suffers for their greed.
Vince 2 days ago More than 100 Trillion (with a T) are moving around the world in Derivatives
each and every day., some say closer to 200 Trillion! You figure it our when THAT bubble
bursts! Reply 2 1 SniffMopWho 2 days ago Interesting how these guys make millions and billions,
just by pressing keys on a keyboard.
... 2 days ago More sleaze trying to bring down the market by making risky bets with swaps and
derivatives, yet the regulators are caught asleep again. Just more proof of incompetence by
Biden and his hired idiots at the SEC.
TL;DR- Citadel and friends have shorted the treasury bond market to oblivion using the
repo market. Citadel owns a company called Palafox Trading and uses them to EXCLUSIVELY short
& trade treasury securities. Palafox manages one fund for Citadel - the Citadel Global
Fixed Income Master Fund LTD. Total assets over $123 BILLION and 80% are owned by offshore
investors in the Cayman Islands. Their reverse repo agreements are ENTIRELY rehypothecated
and they CANNOT pay off their own repo agreements until someone pays them, first. The ENTIRE
global financial economy is modeled after a fractional reserve system that is beginning to
experience THE MOTHER OF ALL MARGIN CALLS.
THIS is why the DTC and FICC are requiring an increase in SLR deposits. The madness has
officially come full circle.
tnorth 4 hours ago
another month of completely rigged 'markets'
mtl4 4 hours ago remove link
Music is still playing, make sure you have a chair when it stops
this_circus_is_no_fun 1 hour ago remove link
Consider these two points:
Treasuries are claimed to be backed by the "full faith and credit of the United
States".
In Q1, Treasuries suffer their biggest loss in 40 years.
y_arrow
Kreditanstalt 1 hour ago (Edited)
I've always wondered why seemingly contradictory and uncorrelated assets and asset classes
alternately "soar" and "plunge" on different days, usually in random conjunction with
others...
It seems so counterintuitively...MECHANICAL...or theory-driven, rather than rational
"investing".
A little known hedge fund that blew up last week has sent shockwaves through the world of investment banking.
Shares in Credit Suisse (
CSGN.SW
)
and Nomura (
8604.T
)
sunk over 10% on Monday after both warned they faced potentially billions in losses linked to hedge fund Archegos Capital.
Banks that worked with Archegos and lent it money to buy shares were scrambling to offload Archegos' investments after a handful
of risky bets made by the hedge fund went bad. The rush to exit these positions hit public shares prices, leaving banks with huge
losses.
Hedge funds typically borrow money from banks to invest, a process known as margin trading. This allows funds to leverage up the
cash they hold and increase their positions -- potentially earning far greater returns if their bets come good. However, it also
means hedge funds can theoretically lose more money than they hold in client funds.
If trades made on margin turn sour, banks will ask a client to put up more money as collateral to limit potential losses. This
process is known as a margin call.
Archegos faced margin calls on its positions last week but failed to provide extra cash. As a result, banks began selling off
stocks held on the hedge fund's behalf -- a fire sale known in the City as liquidating positions. The business press reported on
Friday that Goldman Sachs (
GS
)
and Morgan Stanley (
MS
)
were selling huge chunks of shares in businesses including ViacomCBS (
VIAC
),
Discovery (
DISCA
)
and Chinese stocks Baidu (
BIDU
)
and Tencent Music (
TME
).
The block sales are estimated to be worth around $20bn (£14.5bn),
according
to the Financial Times
.
Shares in Credit Suisse sunk after it warned of 'significant losses' linked to the blow up at Archegos Capital. Photo:
Fabrice Coffrini/AFP via Getty Images
A little known hedge fund that blew up last week has sent shockwaves through the world of investment banking.
Shares in Credit Suisse (
CSGN.SW
)
and Nomura (
8604.T
)
sunk over 10% on Monday after both warned they faced potentially billions in losses linked to hedge fund Archegos Capital.
Banks that worked with Archegos and lent it money to buy shares were scrambling to offload Archegos' investments after a
handful of risky bets made by the hedge fund went bad. The rush to exit these positions hit public shares prices, leaving
banks with huge losses.
Hedge funds typically borrow money from banks to invest, a process known as margin trading. This allows funds to leverage up
the cash they hold and increase their positions -- potentially earning far greater returns if their bets come good. However, it
also means hedge funds can theoretically lose more money than they hold in client funds.
If trades made on margin turn sour, banks will ask a client to put up more money as collateral to limit potential losses. This
process is known as a margin call.
Archegos faced margin calls on its positions last week but failed to provide extra cash. As a result, banks began selling off
stocks held on the hedge fund's behalf -- a fire sale known in the City as liquidating positions. The business press reported
on Friday that Goldman Sachs (
GS
)
and Morgan Stanley (
MS
)
were selling huge chunks of shares in businesses including ViacomCBS (
VIAC
),
Discovery (
DISCA
)
and Chinese stocks Baidu (
BIDU
)
and Tencent Music (
TME
).
The block sales are estimated to be worth around $20bn (£14.5bn),
according
to the Financial Times
.
"Things started going wrong for Archegos when shares of companies such as Viacom started to slide mid-last week," said Michael
Brown, a senior market analyst at Caxton Business. "It was at that point that margins were called, and couldn't be provided,
hence the block sales seen Friday."
A fire sale can have a negative impact on stock prices and shares in both ViacomCBS and Discovery sunk 27% on Friday. Banks
therefore risked making less back from the sales than they lent to clients to fund the investments.
Credit Suisse on Monday warned it was facing "highly significant" losses linked to Archegos that could be "material to our
first quarter results".
The Swiss lender didn't name Archegos but said: "A significant US-based hedge fund defaulted on margin calls made last week by
Credit Suisse and certain other banks."
Credit Suisse said it was "in the process" of selling shares held by Archegos. The bank said it was "premature" to estimate
how much it would likely lose from the crisis.
"We intend to provide an update on this matter in due course," Credit Suisse said.
Shares sunk 13.4% in Zurich.
"One would assume that, judging by the size of positions sold, the 'game is up' for Archegos," Brown said.
He said it was "unlikely" that Archegos would pose a systemic risk to the financial system. Neil Wilson, chief market analyst at
Markets.com, said the hedge fund "appears to have been too concentrated in a number of risky stocks."
A hedge fund blow up is relatively unusual and Archegos' undoing has raised concerns that other funds could find themselves in
similar positions.
"Block equity-trades stemming from margin-calls on Archegos will have sent the market's spidey senses a tingle," said Bill Blain,
a senior strategist at Shard Capital. "Who is next?"
Alex Harvey, a portfolio manager at Momentum, said: "We tend to find out after the event that other funds get caught up as
sometimes hedge funds may be crowded into similar trades."
"When we look at this and think about the GameStop saga and the decline in Tesla as two examples -- what we're seeing are more and
more pockets of very unusual trading activity in some stocks," he said. "You worry that this sort of frothy trading activity in
turn creates pockets of distress among investors and banks that leads to larger unwinds and losses for financials."
"... How convinced should anyone be when dismissing the message of metrics like these? To be sure, both the market and economy are in uncharted waters. It's possible -- perhaps likely -- that old standards don't apply when something as random as a virus is behind the stress. At the same time, many a portfolio has been squandered through complacency. Market veterans always warn of fortunes lost by investors who became seduced by talk of new rules and paradigms. ..."
"... At 35, the CAPE is at its highest since the early 2000s. ..."
"... Another indicator raising eyebrows is called Tobin's Q. The ratio -- which was developed in 1969 by Nobel Prize-winning economist James Tobin -- compares market value to the adjusted net worth of companies. It's showing a reading just shy of a peak reached in 2000. T ..."
"... the signal sent by the "Buffett Indicator," a ratio of the total market capitalization of U.S. stocks divided by gross domestic product. ..."
"... Still, it's hard to ignore the risks to underlying assumptions. While rock-bottom rates underpin many of the arguments, this year has shown that the Fed still is willing to let longer-term interest rates run higher. And betting on huge upside earnings surprises is risky too -- it's rare to see a 16% beat historically. Before last year, earnings had exceeded estimates by an average 3% a quarter since 2015. ..."
"... "This happens in every bubble," said Bill Callahan, an investment strategist at Schroders. "It's: 'Don't think about the traditional value metrics, we have a new one.' It's: 'Imagine if everyone did XYZ, how big this company could be.'" ..."
"... To Scott Knapp, chief market strategist of CUNA Mutual Group, abandoning standard valuation measures because the environment has changed places investors in "pretty sketchy territory." Talk of watershed moments rendering traditional metric irrelevant as a signal, he says. "That's usually an indication we're trying to justify something," he said. ..."
Shiller P/E. Tobin's Q. Buffett Indicator. Ignore them all?
It's 'usually an indication we're trying to justify something'
Everywhere you look, there's a valuation lens that makes stocks look frothy. Also everywhere you look is someone
saying don't worry about it.
The so-called
Buffett
Indicator
. Tobin's Q. The S&P 500's forward P/E. These and others show the market at stretched levels, sometimes
extremely so. Yet many market-watchers argue they can be ignored, because this time really is different. The
rationale? Everything from Federal Reserve largesse to vaccines promising a quick recovery.
How convinced should anyone be when dismissing the message of metrics like these? To be sure, both the market and
economy are in uncharted waters. It's possible -- perhaps likely -- that old standards don't apply when something as
random as a virus is behind the stress. At the same time, many a portfolio has been squandered through complacency.
Market veterans always warn of fortunes lost by investors who became seduced by talk of new rules and paradigms.
"Every time markets hit new highs, every time markets get frothy, there are always some talking heads that argue:
'It's different,'" said Don Calcagni, chief investment officer of Mercer
Advisors
.
"We just know from centuries of market history that that can't happen in perpetuity. It's just the delusion of
crowds, people get excited. We want to believe."
Source: Robert Shiller's website
Robert Shiller is no apologist. The Yale University professor is famous in investing circles for unpopular valuation
warnings that came true during the dot-com and housing bubbles. One tool on which he based the calls is his
cyclically adjusted price-earnings ratio that includes the last 10 years of earnings.
While it's flashing warnings again, not even Shiller is sure he buys it. At 35, the CAPE is at its highest since the
early 2000s. If that period of exuberance is excluded, it clocks in at its highest-ever reading. Yet in a recent
post
,
Shiller wrote that "with interest rates low and likely to stay there, equities will continue to look attractive,
particularly when compared to bonds."
Another indicator raising eyebrows is called Tobin's Q. The ratio -- which was
developed
in
1969 by Nobel Prize-winning economist James Tobin -- compares market value to the adjusted net worth of companies.
It's showing a reading just shy of a peak reached in 2000. To Ned Davis, it's a valuation chart worth being wary
about. Still, while the indicator is roughly 40% above its long-term trend, "there may be an upward bias on the ratio
from technological change in the economy," wrote the Wall Street veteran who founded his namesake firm.
Persuasive arguments also exist for discounting the signal sent by the "Buffett Indicator," a ratio of the total
market capitalization of U.S. stocks divided by gross domestic product. While it recently reached its highest-ever
reading above its long-term trend, the methodology fails to take into consideration that companies are more
profitable than they've ever been, according to Jeff Schulze, investment strategist at ClearBridge Investments.
"It's looked extended really for the past decade, yet you've had one of the best bull markets in U.S. history," he
said. "That's going to continue to be a metric that does not adequately capture the market's potential."
At Goldman Sachs Group Inc., strategists argue that however high P/Es are, the absence of significant leverage
outside the private sector or a late-cycle economic boom points to low risk of an imminent bubble burst. While people
are shoveling money into stocks at rates that have signaled exuberance in the past, risk appetite is rebounding after
a prolonged period of aversion, according to the strategists, who also cite low interest rates.
"Today is a very different situation -- I don't think we've got a broad bubble," Peter Oppenheimer, chief global
equity strategist at the firm, said in a recent interview on Bloomberg Television. "Given the level of real rates,
where they are, it's still likely to be broadly supportive for equities versus bonds."
Another rationale employed to dismiss certain valuation metrics is the earnings cycle. Corporate America is just
emerging from a recession, with profits forecast to stage a strong comeback. The strong outlook for profits is why
many investors are giving similarly stretched valuations the benefit of the doubt. Trading at 32 times reported
earnings, the S&P 500 looks quite expensive, but with income forecast to jump 24% to $173 a share this year, the
multiple drops to about 23.
The valuation case becomes more favorable should business leaders continue to blow past expectations. For instance,
if this year's earnings come in at 16% above analyst estimates, as they did for the previous quarter, that'd imply a
price-earnings ratio of less than 20. While that exceeds the five-year average of 18, Ed Yardeni is not troubled by
what he calls "the New Abnormal."
"Valuation multiples are likely to remain elevated around current elevated levels because fiscal and monetary
policies continue to flood the financial markets with so much free money," said the founder of Yardeni Research Inc.
He predicts the S&P 500 will finish the year at 4,300, about an 8% gain from current levels.
Still, it's hard to ignore the risks to underlying assumptions. While rock-bottom rates underpin many of the arguments, this year
has shown that the Fed still is willing to let longer-term interest rates run higher. And betting on huge upside earnings
surprises is risky too -- it's rare to see a 16% beat historically. Before last year, earnings had exceeded estimates by an
average 3% a quarter since 2015.
"This happens in every bubble," said Bill Callahan, an investment strategist at Schroders. "It's: 'Don't think about the
traditional value metrics, we have a new one.' It's: 'Imagine if everyone did XYZ, how big this company could be.'"
Returns of 2%
Valuations are never useful market-timing tools because expensive stocks can get more expensive, as was the case during the
Internet bubble. Yet viewed through a long-term lens, valuations do matter. That is, the more over-valued the market is, the
lower the future returns. According to a study by Bank of America strategists led by Savita Subramanian, things like
price-earnings ratios could explain 80% of the S&P 500's returns during the subsequent 10 years. The current valuation framework
implies an increase of just 2% a year over the next decade, their model shows.
To Scott Knapp, chief market strategist of CUNA Mutual Group, abandoning standard valuation measures because the environment has
changed places investors in "pretty sketchy territory." Talk of watershed moments rendering traditional metric irrelevant as a
signal, he says.
"That's usually an indication we're trying to justify something," he said.
"In a community where the primary concern is making money, one of the necessary rules is to
live and let live. To speak out against madness may be to ruin those who have succumbed to it.
So the wise in Wall Street are nearly always silent. The foolish thus have the field to
themselves."
John Kenneth Galbraith, The Great Crash of 1929
"Foolishness is a more dangerous enemy of the good than malice. One may protest against
evil; it can be exposed and, if need be, prevented by use of force. Evil always carries within
itself the germ of its own subversion in that it leaves behind in human beings at least a sense
of unease.
In conversation with them, one virtually feels that one is dealing not at all with a person,
but with slogans, catchwords and the like that have taken possession of them. They are under a
spell, blinded, misused, and abused in their very being."
Dietrich Bonhoeffer, Prisoner for God: Letters and Papers from Prison
"The ideal subject of totalitarian rule is not the convinced Nazi or the dedicated
communist, but people for whom the distinction between fact and fiction, true and false, no
longer exists."
Hannah Arendt, The Origins of Totalitarianism
"When we trade the effort of doubt and debate for the ease of blind faith, we become
gullible and exposed, passive and irresponsible observers of our own lives. Worse still, we
leave ourselves wide open to those who profit by influencing our behavior, our thinking, and
our choices. At that moment, our agency in our own lives is in jeopardy."
Margaret Heffernan
Today was a general wash and rinse in the markets.
Wax on, wax off.
If you look at the charts you will see the deep plunges in the early trading hours in stocks
and the metals, especially silver.
Simply put, it is called running the stops.
This is not 'the government' doing this.
These are the monstrous financial entities that we have allowed lax regulation and years of
propagandizing to create, in the biggest Banks and hedge funds.
Most will run back to the familiar sources of their ideological addiction, the so-called
'news sites' that thrive on the internet and alternative radio funded by the oligarchs.
If you are one of those who cannot wait to run back to your familiar ideological watering
hole to relieve the tension of thought, you might just be one of the willfully blind and
lost.
Truth is more palatable to the sick at heart when it has been twisted out of shape.
The good news perhaps is that a cleaning out like this often proceeds a resumption of a move
higher.
First they kick off the riff raff. Oh, certainly that does not include you, but those
others, right?
Or not. It is not easy to think like a criminal when you are not privy to the same jealously
guarded information and perverse perspective on life.
On the lighter side I have experienced no side effects from the first dose of the
Coronavirus vaccine which I had the other day.
Let's see if the second shot has the same results.
The whole experience reminded me of 'Sabin Oral Sunday' back in 1960. I don't recall any
anti-vaxxer or ideologically driven whack-a-doodlism back then, but I was too young to
care. And polio shots were no fun. But it beat doing time in an iron lung.
How many people are really out of work? The answer is surprisingly difficult to ascertain.
For reasons that are likely ideological at least in part, official unemployment figures greatly
under-report the true number of people lacking necessary full-time work.
That the "reserve army of labor" is quite large goes a long way toward explaining the
persistence of stagnant wages in an era of increasing productivity.
How large? Across North America, Europe and Australia, the real unemployment rate is
approximately double the "official" unemployment rate.
The "official" unemployment rate in the United States, for example, was 5.5 percent for
February 2015. That is the figure that is widely reported. But the U.S. Bureau of Labor
Statistics keeps track of various other unemployment rates, the most pertinent being its "U-6"
figure. The U-6 unemployment rate includes all who are counted as unemployed in the "official"
rate, plus discouraged workers, the total of those employed part time but not able to secure
full-time work and all persons marginally attached to the labor force (those who wish to work
but have given up). The actual U.S. unemployment rate for February 2015, therefore, is 11 percent .
Canada makes it much more difficult to know its
real unemployment rate. The official Canadian
unemployment rate for February was 6.8 percent, a slight increase from January that
Statistics Canada attributes to "more people search[ing] for work." The official measurement in
Canada, as in the U.S., European Union and Australia, mirrors the official standard for
measuring employment defined by the International Labour Organization -- those not working at
all and who are "actively looking for work." (The ILO is an agency of the United Nations.)
Statistics Canada's closest measure toward counting full unemployment is its R8 statistic,
but the R8 counts people in part-time work, including those wanting full-time work, as
"full-time equivalents," thus underestimating the number of under-employed by hundreds of
thousands,
according to an analysis by The Globe and Mail . There are further hundreds of
thousands not counted because they do not meet the criteria for "looking for work." Thus
The Globe and Mail analysis estimates Canada's real unemployment rate for 2012 was
14.2 percent rather than the official 7.2 percent. Thus Canada's true current unemployment rate
today is likely about 14 percent.
Everywhere you look, more are out of work
The gap is nearly as large in Europe as in North America. The official European Union
unemployment rate was 9.8
percent in January 2015 . The European Union's Eurostat service requires some digging to
find out the actual unemployment rate, requiring adding up different parameters. Under-employed
workers and discouraged workers comprise four percent of the E.U. workforce each, and if we add
the one percent of those seeking work but not immediately available, that pushes the
actual unemployment rate to about 19 percent.
The same pattern holds for Australia. The Australia Bureau of Statistics revealed that its
measure of "extended labour force under-utilisation" -- this includes "discouraged" jobseekers,
the "underemployed" and those who want to start work within a month, but cannot begin
immediately -- was
13.1 percent in August 2012 (the latest for which I can find), in contrast to the
"official," and far more widely reported, unemployment rate of five percent at the time.
Concomitant with these sobering statistics is the length of time people are out of work. In
the European Union, for example, the long-term unemployment rate -- defined as the number of
people out of work for at least 12 months --
doubled from 2008 to 2013 . The number of U.S. workers unemployed for six months or longer
more than tripled from
2007 to 2013.
Thanks to the specter of chronic high unemployment, and capitalists' ability to transfer
jobs overseas as "free trade" rules become more draconian, it comes as little surprise that the
share of gross domestic income going to wages has declined steadily. In the U.S., the share has
declined from 51.5 percent in 1970 to about 42 percent. But even that decline likely
understates the amount of compensation going to working people because almost all gains in
recent decades has gone to the top one percent.
The increased ability of capital to move at will around the world has done much to
exacerbate these trends. The desire of capitalists to depress wages to buoy profitability is a
driving force behind their push for governments to adopt "free trade" deals that accelerate the
movement of production to low-wage, regulation-free countries. On a global basis, those with
steady employment are actually a minority of the world's workers.
Using International Labour Organization figures as a starting point, professors John Bellamy
Foster and Robert McChesney calculate that the "global reserve army of labor" -- workers who
are underemployed, unemployed or "vulnerably employed" (including informal workers) -- totals
2.4 billion. In contrast, the world's wage workers total 1.4 billion -- far less! Writing in
their book The Endless
Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to
China , they write:
"It is the existence of a reserve army that in its maximum extent is more than 70 percent
larger than the active labor army that serves to restrain wages globally, and particularly in
poorer countries. Indeed, most of this reserve army is located in the underdeveloped
countries of the world, though its growth can be seen today in the rich countries as well."
[page 145]
The earliest countries that adopted capitalism could "export" their "excess" population
though mass emigration. From 1820 to 1915, Professors Foster and McChesney write, more than 50
million people left Europe for the "new world." But there are no longer such places for
developing countries to send the people for whom capitalism at home can not supply employment.
Not even a seven percent growth rate for 50 years across the entire global South could absorb
more than a third of the peasantry leaving the countryside for cities, they write. Such a
sustained growth rate is extremely unlikely.
As with the growing environmental crisis, these mounting economic problems are functions of
the need for ceaseless growth. Once again, infinite growth is not possible on a finite planet,
especially one that is approaching its limits. Worse, to keep the system functioning at all,
the planned
obsolescence of consumer products necessary to continually stimulate household spending
accelerates the exploitation of natural resources at unsustainable rates and all this
unnecessary consumption produces pollution increasingly stressing the environment.
Humanity is currently consuming the equivalent of one and a
half earths , according to the non-profit group Global Footprint Network. A separate report
by WWF–World Wide Fund For Nature in collaboration with the Zoological Society of London
and Global Footprint Network, calculates that the Middle East/Central Asia, Asia-Pacific, North
America and European Union regions are each consuming about double their
regional biocapacity.
We have only one Earth. And that one Earth is in the grips of a system that takes at a pace
that, unless reversed, will leave it a wrecked hulk while throwing ever more people into
poverty and immiseration. That this can go on indefinitely is the biggest fantasy.
The EUP is cutting its own throat trying to bully China. I see the move was made as soon
as Blinken arrived and began spreading lies about both Russia and China. I know China and
Russia would like these rogue nations to uphold their honor by obeying the UN Charter, but it
seems too many have caught the Outlaw US Empire's disease and now want to return to their
Colonial ways. If the EUP ends up trashing the Comprehensive Agreement on Investment (CAI)
with China, many individual European nations are going to be very angry. China won't mind if
that's what the EUP does as is explained here :
"After China announced sanctions on 10 individuals and four entities from the EU as a
countermove to EU's unilateral sanctions against China, some people from the EU reacted
strongly, claiming China's countermeasures were "unacceptable." The European Parliament
canceled a meeting on Tuesday to discuss the Comprehensive Agreement on Investment (CAI) with
China. Some members of the European Parliament warned that the lifting of Chinese sanctions
should be a condition to promote talks on CAI. Voices that support to block the agreement in
an attempt to punish China have been hyped by some anti-China forces.
"Yet those forces should be told that the CAI between China and the EU is mutually
beneficial, rather than a gift from the EU to China. If the European Parliament wants to
obstruct the deal, taking it as a bargaining chip in interactions with China, it should first
reach a consensus among European countries. If they all agree, let's just take it as
negotiations between China and the EU never took place last year. But don't blackmail China
with the case. China despises such ugly deeds."
China's saying essentially that it will forego the benefits of trade if it isn't properly
respected and doesn't care if the EU's dire economic condition worsens because it can't stand
up for itself in the face of the world's #1 Bully, which is exactly the same line Russia has
taken.
It is not just Jens Quisling, half (or more) of the European political elite are USA
proxies.
Take for example the European green parties.
I am pretty sure that the Dutch green party is at its core a NATO/military intelligence
operation. It was created as a merger of three parties, all of whom had a distinct pacifist
and socialist signature. The new party, GroenLinks ("GreenLeft") has forgotten all of that
and has limited itself to churning out Big Climate slogans. The party leader is an obviously
hollow puppet in the image of Justin Trudeau. His opinions are handed to him by advisors in
the shade.
A few years ago, an MP for GroenLinks, Mariko Peters was enthousiastically
promoting more military missions in Afghanistan. She was also a board member of the
"Atlantische Commissie", the local Dutch chapter of the Atlantic Treaty Organisation
(the USA chapter is the more well-known Atlantic Council). If you study her antics and
associations more closely, it is pretty obvious that there is nothing green or left about
this lady and that she is an obvious atlanticist diplomat/spy type.
Currently, there are no political parties in the Netherlands that are critical of NATO.
This used to be very
different not even a very long time ago.
What the article does not mention is the association, reputedly for a six-figure salary)
of former Grüne luminary Joschka Fisher to the Nabucco pipeline project (competing with
ns2). Fischer is also a member of the council on foreign relations and a founding member even
of the European chapter ECFR.
Absurd NFT PRices Expose a Global Financial House of Cards
BY SKWEALTHACADEMY
FRIDAY, MAR 26, 2021 - 5:59
The
insanity of absurd NFT prices reveals the fraud of the global currency system. The pricing for assets worldwide has gone
insane at a time when the vast majority of the world's population became poorer, not wealthier, over the past 12 months due
to the global economic lockdowns. As an example, there was an article in the Philadelphia Inquirer the other day of
a
cassette tape of hip hop icon Nas's Illmatic album selling for $13,999
. Not a CD, but a cassette tape. A rectangular
piece of cardboard, known as an NBA trading card, for star
Luka
Doncic's rookie trading card, recently auctioned for $4.6M.
Luka Doncic is not a star that played in 1925, and for this
reason, his rookie card is worth so much. Luka Doncic entered the NBA in the 2018-19 season, less than three years ago.
Nostalgic or collector items are simply selling for insane price because, in my opinion, wealthy people have captured so
much of the world's wealth through a global currency system designed and engineered to produce this end result, that they
have no better use for their money than to pay $14,000 for a music item that the vast majority of people do not even have
the necessary hardware to actually play and to pay more than $4.5M for a piece of cardboard. Anyone that truly understands
the difference between a sound and an unsound monetary system realizes that the likelihood, under a sound monetary system,
of people paying exorbitant prices for the types of assets and NFTs described above would be a fraction of the probability
at which they are occurring today.
Banksy, a
UK-based street artist infamous for mocking the very wealthy people that pay millions for his artwork, even titling a piece
"Morons" which depicted an art auction with a framed picture of the words "I can't believe you morons actually buy this
shit". Instead of being offended by the artist's mockery, someone paid nearly 44,000 pounds for it and it recently sold
for nearly 10 times the original purchase price when the piece was destroyed and the act of destruction was turned into an
NFT. By the way Banksy also sold a very simple drawing of a girl with a red balloon that was mounted inside a frame in
which he had hidden a shredder. After it sold for $1.4M, Banksy remotely activated the hidden shredder and shredded his
artwork into thin strips as perhaps "revenge" against the idiocy of narcissistic, wealthy art collectors that can't find
any better use of their money than purchasing stencil created art for which no rational person would ever pay $1.4M. To
demonstrate the idiocy of the art world, Sotheby's immediately coined the shredding of the art piece as "the first work in
history ever created during a live auction", which art collectors worldwide seemed to accept, and thereby increased the
value of the destroyed piece of art to perhaps as high as double the original auction price at the current time and
avoiding a more rational valuation for the art piece to near zero.
I once read
a book called the $12M Stuffed Shark, in which the author revealed that US hedge fund manager Steve Cohen paid $12M to an
artist to kill a shark and put it in a vat of plexiglass sealed formaldehyde that he could display in the foyer of his
house and basically concluded, after a careful introspection into the art world, that pieces of art like pyramids built
from tiny Godiva chocolates and stainless-steel colored balloon animals
($58M
or more)
would be priced at whatever price dealers could convince the dumbest rich person it was worth. Certainly this
conclusion seemed to be supported when someone purchased an
"art
installation" of a banana taped to the wall with duct tape at a Miami Beach art gallery for $120,000 at the end of 2019
.
When people conclude that the best use for $5M or $58M is to buy a piece of cardboard or a steel balloon animal during a
period in which Rome is burning (i.e. exploding homelessness numbers in Los Angeles nearing 70,000 as evidenced
here
and
here
),
either this is a sign of the fraud of the monetary system, the decline of civilization, or both. If you have ever lived in
Los Angeles, as I have, and watch the video referenced in the second link, you will find it astonishing that massive
homeless encampments have sprung up throughout Los Angeles in areas that prior to recent years, had no homelessness.
(depending on the social media platform you may be watching this on, the soaring prices for which art that I consider to be
the lowest form of art that many do not even consider as art is selling for such absurd prices, including NFTs that I will
soon discuss, is certainly reflective of the rapid decline of civilization.
This rapid
decline of civilization is also reflected in the fact that giant titans of the tech world and social media platforms
continue to promote and push the most morally reprehensible content to the top positions of success on their platforms.
When popular YouTube Logan Paul visited the "suicide forest" in Japan and found a dead body hanging from the tree, he
filmed it and mocked the dead person and YouTube quickly promoted his video as one of their top trending videos on their
entire platform for 24 hours, until Logan Paul, not YouTube executives, deleted the video due to the outrage it provoked.
Another popular YouTuber, David Dobrik, has had many of his reprehensible videos monetize bullying and belittling of
others, often promoted on YouTube among the top trending videos. Recently Dobrik came under fire for allegedly monetizing a
video of an actual rape on his channel, and he was roundly mocked when his initial apology consisted of trying to blame the
rape victim, who was allegedly underage and too drunk to consent to sex. In his "apology", Dobrik stated he always gains
consent for his videos, but sometimes people he victimizes consent at first but then change their minds later, and that is
why it appears in many of his videos that he is monetizing morally reprehensible behavior. In any event, YouTube executives
allegedly allowed such morally and cowardly behavior to be monetized to massive sums of income for such YouTubers and seem
to be more focused on demonetizing anyone that challenges a narrative, true or false, forwarded by the oligarchs.
And as
ludicrous as are the prices paid for some of the assets I've mentioned above, the level of insanity paid for NFTs, in my
opinion, are at an even exponentially higher level. For those of you that may not know what are NFTs, Non-Fungible Tokens
are unique blockchain-based digital assets that represent an increasing number of commodities, from art and real estate to
collectibles like sports trading cards. One platform, Original Protocol, recently auctioned off the world's first NFT music
album by American DJ 3LAU. Collectively, the artist's fanbase
paid
out more than $11 million
for 33 NFTs contained on 3LAU's album Ultraviolet. In this case, since musicians are
routinely ripped off by giant record labels and often have such suffocating, unfair contracts that make it near impossible
to earn any significant income from album releases, the digitization of music in the form of NFTs that allow musicians to
control their income is a wonderful aspect of the new digital economy of NFTs.
The
Non-Fungibility of NFTs and Most Cryptocurrencies Disqualify Them for Use in Financial Derivative Currency Swaps
NFTs sell
digital representations of items, including some that used to be represented in the physical world, like trading cards and
pieces of art. As is the case in the fine art world, an NFT's price is the highest price you can convince someone to pay
for it, a pool of clients that often overlaps with the over indulgent, narcissistic people that comprise the bidders for
modern art pieces that sell for millions of dollars. Perhaps the most amazing quality of NFTs is that they actually have a
more meaningful value than any cryptocurrency not backed by any type of hard asset. For example, bitcoin is a digital
asset, but one would be hard pressed to describe its intrinsic value. One cannot say its fungibility is its price because
its price is denominated in fiat currencies with intrinsic values of near zero. Furthermore, for those that constantly and
very wrongly argue that non hard-asset backed cryptocurrencies are sound money, if bankers truly believed that bitcoin even
remotely qualified as sound money, they would have zero problem offering currency swap derivative contracts between any
fiat currency and bitcoin.
Yet, there
is not a single corporation in the entire world that has a currency swap that hedges their corporate cash treasury holdings
with bitcoin. You can never have any type of financial contract without unlimited risk if it is denominated in bitcoin in
which both parties realistically have no idea of the price range of that currency for the maturity of that contract. No
rational party will lock themselves into a contract in which a currency presents unlimited risk to them. The simple
understanding of why there are no derivative currency swaps or hedging contracts denominated in bitcoin should easily
explain to any rational person the very reason why BTC is not considered as sound money by a single banker in the entire
world. On the contrary, even as volatile in price as gold and silver may be, gold and silver mining companies routinely
hedge their inventory risk and their revenue risk of yet-to-be-mined gold and silver ounces by establishing open positions
of gold and silver futures contracts years into the future.
You can't
argue that BTC's intrinsic value is the block of the blockchain that records the transaction, because whether that block is
used to record an NFT, BTC, or ownership of real estate, a photo or song, the price represented by that block could
possibly vary from just a few dollars to several million dollars. So the blockchain has no intrinsic value either. However,
with NFTs, its value, is more uniquely determinable than the block upon which a bitcoin transaction is stored that records
the price of bitcoin, because that value is simply the highest price willing to be paid by all available bidders at any
given time. If there are no available bidders willing to bid on a particular NFT for weeks or perhaps months on end, then
one can assume the price of that NFT, even if the last paid price was $100,000, is likely zero. But even if there is one
available bidder for that NFT at a price of $1,000,000 then the market price of that NFT is $1M. Though one may state that
the bidding mechanism is much more controlled in BTC markets and that BTC could never be priced at zero or $1M per BTC in
such a cavalier manner that mimics the pricing of NFTs, the similarities between the pricing mechanisms based upon lack of
fungibility should not be ignored when considering the inherent risk imbedded in the price of BTC in its near $60,000 per
coin current price. You will either understand this risk and behave accordingly, or ignore this risk and likely expose
yourself to strong downside risk in the future at some point that should be expected but will remain unexpected to those
that cannot, or will not, accept this existing risk.
The five
biggest whales that own BTC in order from top to bottom,
are
believed to be as follows:
(1) The collective of institutions/people called Satoshi Nakamoto; (2) The FBI; (3) The
Winklevoss Twins; (4) Micree Zhan; and (5) Jihan Wu. Other notable owners among the top 10 BTC whales are Huobi, Tim Draper
and the North Korean State. In 2017, Bloomberg reported that only 1,000 people owned 40% of all BTC in the entire world.
Given that in the past two years, it has been reported that the top whales had been cornering the BTC market and increasing
their market share, it would not be surprising if they had increased their market share to 50% or perhaps even higher by
2021. In any event, this translates into 0.00012658% of the world's population likely controlling majority ownership of
BTC. I don't know of any world in which such a statistic does not translate into enormous risk.
Unanswered
Questions
But
fungibility is what reveals why cryptocurrencies like BTC and NFTs cannot ever qualify as sound money. For those that don't
understand why sound money needs to be a fungible asset, take gold for example. Fungibility essentially means that money
should never vary in its qualitative properties but only its quantitative properties. All gold has electroconductivity
properties no matter its form. Electroconductivity is an intrinsic quality of gold. Because all purified four nine gold has
the same density, the same volume will always be measured by the exact same weight in grams, again another fungible quality
of gold. However, depending on how paper gold futures markets are being manipulated and the date, that same gram of gold
will vary wildly in fiat currency price. Fiat currency price, thus can never be the quantitative property used to value
gold. Weight is the constant that should be used for gold's value when it is to be used as sound money, because this
quantitative property is always unwavering, always constant no matter if one is using gold as money in Moscow, Capetown,
Montevideo, Santiago, Montreal, Phoenix, Miami, Mogadishu, Kiev, Paris, Heidelberg, Reykjavik, Chiangmai, or Seoul.
What
quantitative property of bitcoin that is consistent and always the same across all uses? This is a question without an
answer. For this same reason, NFTs could never serve as sound money either. No matter the latest fiat currency price paid
for a Banksy "Morons" drawing set on fire, how can one determine the exchange rate for this NFT and an NFT representing a
Mark Cuban tweet. Should the Banksy NFT be priced 10 million times higher than a Mark Cuban tweet NFT? Is an NBA TopShot
NFT worth 1/1000 the price of a Banksy burning piece of art NFT? And even though NFTs have more uniqueness than say, a
satoshi of BTC, because price assigned to that uniqueness is entirely subjective, the uniqueness leaves it no more fit to
use as sound money than a cryptocurrency that has no backing of a hard asset. Miami-based art collector Pablo Rodriguez-Fraile
proved the absurd pricing mechanism for NFT when he recently sold an NFT that he acquired for $66,666 in October,
a
10-second computer-generated video clip of a slogan-covered giant Donald Trump created by digital artist Beeple
, for
mor than 100 times his original cost at $6.6M.
The last
point of irony in the BTC is the solution to the unsound global fiat currency system narrative is that many HODLers of BTC
are well aware of the oligarch's use of their power consolidation strategy of (1) Create a crisis; (2) Present the solution
to the artificially created crisis; and (3) Implement the solution to consolidate power, yet will never give any type of
consideration to the possibility of how perfectly the creation of BTC, in response to the 2008 global financial crisis,
fits this exact historical narrative that oligarchs have repeatedly implemented, instead choosing to believe that BTC is
the special unique exception to this oft-deployed strategy.
This
despite, three US employees of the Central Bank, Galina Hale, Marianna Kudlyak, and Patrick Shultz, and one US university
professor, Arvind Krishnamurthy, admitting that the premise I presented to my social media followers in December of 2017,
when BTC hit $20,000, that the introduction of the US bitcoin futures market was going to be used to slash the BTC price
drastically, essentially writing the premise for the referenced US Central Banker paper five months before it was written.
In that paper, titled "How Futures Changed Bitcoin Prices", the four authors basically echoed my premise, and stated,
"We suggest
that the rapid rise of the price of bitcoin and its decline following issuance of futures on the CME is consistent with
pricing dynamics suggested elsewhere in financial theory and with previously observed trading behavior. Namely, optimists
bid up the price before financial instruments are available to short the market (Fostel and Geanakoplos 2012). Once
derivatives markets become sufficiently deep, short-selling pressure from pessimists leads to a sharp decline in value.
While we understand some of the factors that play a role in determining the long-run price of bitcoin, our understanding of
the transactional benefits of bitcoin is too imprecise to quantify this long-run price. But as speculative dynamics
disappear from the bitcoin market, the transactional benefits are likely to be the factor that will drive valuation."
While they
did not name the players in the BTC futures markets that drove BTC prices downward from $20,000 to $3,000 in 2018, the
implication is that Central Bankers were involved in this downward spiral. And if Central Bankers were involved in this
downward spiral, the downward price spiral would of course, been far easier to execute, if Central Bankers were also among
the members of the collective that constitutes the largest BTC whale, Satoshi Nakamoto. Even though these dots, though
purely speculative, are clearly possible, most every BTC HODLer that is confident in the achievement of end-year $300,000
BTC prices or higher, will never consider this possibility, even for a nanosecond, despite heavy suggestions of three US
Central Bank employees that Central Bankers were involved in the 2018 BTC price crash. But if one did, as is the rational
and logical thing to do, then one would have far greater difficulties distinguishing the mechanisms that set the price for
NFTs and BTC. And as the introduction of the first BTC ETFs seem to be on the near horizon now, one would be smart to heed
the lessons learned after trading of BTC futures was introduced at the end of 2017. Subscribe to my
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Listen to this article 6 minutes 00:00 / 06:06 1x Earnings, valuation and rampant speculation have all played a role in the extraordinary bull market that began a year ago this week. The latest combination of the three has a troubling reliance on the speculative element. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. Earnings, valuation and rampant speculation have all played a role in the extraordinary bull market that began a year ago this week. The latest combination of the three has a troubling reliance on the speculative element. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. U.S. 10-year Treasury yield Source: Tullett Prebon As of March 24 % Pre-pandemic peak of S&P 500 2020 '21 0.25 0.50 0.75 1.00 1.25 1.50 1.75 2.00 S&P 500 forward price/earnings ratio Source: Refinitiv Note: Weekly data S&P 500 peak 2020 '21 12 14 16 18 20 22 24 The parallel in the stock market is stocks going up when earnings -- or rather the expectation of earnings, since the market looks ahead -- go up. There is a risk of course, just as there is with debt: The earnings might not appear, and the stock goes back down. But earnings offer the least risky form of gains, and one that we should welcome as obviously justified. From the low in the summer, 2020 earnings forecasts jumped more than 10%, and expectations for this year rose more than 8%. Stocks responded. In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The parallel in the stock market is stocks going up when earnings -- or rather the expectation of earnings, since the market looks ahead -- go up. There is a risk of course, just as there is with debt: The earnings might not appear, and the stock goes back down. But earnings offer the least risky form of gains, and one that we should welcome as obviously justified. From the low in the summer, 2020 earnings forecasts jumped more than 10%, and expectations for this year rose more than 8%. Stocks responded. In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The parallel in the stock market is the The parallel in the stock market is the hunt for the greater fool . Sure, GameStop < shares bear no relation to the reality < of the company, but I can make money from buying an overpriced stock if I can find someone willing to pay even more because they "like the stock." Wild bets became obvious this year, as newcomers armed with stimulus, or "stimmy," checks Wild bets became obvious this year, as newcomers armed with stimulus, or "stimmy," checks Wild bets became obvious this year, as newcomers armed with stimulus, or "stimmy," checks drove up the price of many tiny stocks, penny shares and those popular on Reddit discussion boards. Speculative bets such as the solar and ARK ETFs rallied up until mid-February, long after growth stocks peaked in August Price performance Source: FactSet *Russell 1000 indexes As of March 25, 7:02 p.m. ET % Invesco Solar Value* ARK Innovation Growth* Sept. 2020 '21 -25 0 25 50 75 100 125 The concern for investors: How much of the market's gain is thanks to this pure speculation, and how much to the justifiable gains of the improving economy and low rates? If too much comes from speculation, the danger is that we run out of greater fools and prices quickly drop back. The concern for investors: How much of the market's gain is thanks to this pure speculation, and how much to the justifiable gains of the improving economy and low rates? If too much comes from speculation, the danger is that we run out of greater fools and prices quickly drop back. me title= A look at how stocks moved through the pandemic suggests earnings and bond yields are still much more important than the gambling element for the market as a whole, but is still troubling. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. A look at how stocks moved through the pandemic suggests earnings and bond yields are still much more important than the gambling element for the market as a whole, but is still troubling. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. A look at how stocks moved through the pandemic suggests earnings and bond yields are still much more important than the gambling element for the market as a whole, but is still troubling. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. NEWSLETTER SIGN-UP
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Since June the story has reversed. Earnings forecasts have soared, and this year's earnings predictions are now
back up to match where 2020 earnings were expected to be before the recession. The bond yield has leapt almost
a full percentage point, and is higher than it was last February.
Yet, since June, the market's overall valuation is slightly up, and growth stocks are up 23%. Sure, cheap value
stocks responded as expected, rising almost a third and beating growth stocks. But if a lower bond yield
justified the rise in valuations, a higher bond yield ought to mean lower valuations, and probably outright
lower prices for growth stocks.
This is concerning but, directionally at least, is explained by the oddity of August, when bond yields rose
alongside valuation multiples and
the
biggest technology stocks leapt in price
. Measure it from the end of August, instead of the end of June,
and valuations have dropped a bit as bond yields have risen.
But the fall isn't enough to provide much comfort, and worse is that the highly speculative stocks popular with
many individual traders bucked the trend. Notable themes including electric cars, hydrogen, SPACs and wind and
solar power went into ludicrous mode until the middle of February this year, when the rise in bond yields
accelerated and the speculative stocks fell back some.
Share prices propelled more by earnings expectations than bond yields is healthy, while speculation is -- by its
nature -- fickle, and so a poor basis for holding on to a stock for long. My hope is that the contribution of pure
gambling to the overall level of the market is relatively small. But it is hard to explain why stocks should be
so much higher than before the pandemic panic when the earnings outlook is worse and bond yields are back to
where they were.
P Paul Avila SUBSCRIBER 8 hours ago U.S. stocks edged higher Wednesday as investors
awaited more testimony from Federal Reserve Chairman Jerome Powell.
Good grief. Is there any way his subordinates could prevent that? Perhaps lock him in a
supply closet until the market closes? Every time he opens his pie hole, I lose money.
W Will Bee SUBSCRIBER 8 hours ago Actually I suspect we are waiting for all the FED and
Treasury "people" to stop jawboning us so Markets can assimilate their irrelevance
Mar.24 -- Senator Elizabeth Warren (D-MA) asks Treasury Secretary Janet Yellen if she would
direct the Financial Stability Oversight Council (FSOC) to consider designating BlackRock as a
firm whose failure could threaten the financial system.
(Reuters) - Treasury Secretary Janet Yellen said on Wednesday it is important to "look
carefully" at systemic risks posed by asset managers, including BlackRock Inc, but said
designating them as systematically important financial institutions may not be the right
approach.
Yellen's remarks came in response to questions from Senator Elizabeth Warren, a longtime
Wall Street critic, who demanded to know why BlackRock and other large asset managers had not
been added to the list of designated institutions.
"I believe it is important to look very carefully at the risks posed by the asset management
industry, including BlackRock and other firms," Yellen, who as Treasury secretary, chairs the
Financial Stability Oversight Council (FSOC), which is charged with making such
designations.
"FSOC began to do that, I believe, in 2016 and 2017, but the risks it focused on were ones
having to do with open-end mutual funds that can experience massive withdrawals and be forced
to sell off assets that could create fire sales. That is actually a risk we saw materialize
last spring in March," she said.
In 2014, BlackRock and other asset managers won a battle in their fight against tighter
regulation when a panel of top financial regulators agreed to revamp their review of
asset-management firms to focus on potentially risky products and activities rather than
individual firms.
"I think that with respect to asset management, rather than focus on designation of
companies, I think it is important to focus on an activity like that and consider what the
appropriate restrictions are," Yellen said.
"The past two administrations in the US, and numerous global regulators, have studied our
industry for a decade and concluded that asset managers should be regulated differently from
banks, with the primary focus being on the industry's products and services," BlackRock said in
a statement.
The collapse of Greensill involved a predicable cast of unwise enablers, but it should
serve as a warning to the growing number of Alternative Asset buyers on the dangers of complex deals which promise much but
deliver less. Due diligence is critical in the highly illiquid alternatives sector.
You really can't make it up when it comes to the collapse of supply chain charlatan Greensill. I suspect it will make a great
film It should also send a judder down our spines, reminding us things are seldom what they seem in complex structured finance:
I'm wondering how many fund managers are quietly nervous about what's really in their alternative asset/direct lending
investment buckets this morning?
If I was a holder of complex European securitisation/receivables deals that promise much, but actually provide very little
information on the performance of underlying assets, then I might suddenly find an anxious desire to check just how they are
REALLY doing.
At least former UK premier David Cameron will be happy. A majority comprising Tory MPs on the UK's Treasury Select Committee
blocked
an inquiry
into Greensill yesterday on the basis it may be politically influenced. The fact
Call-Me-Dave
was
texting chancellor Rishi Sunak pleading for GFC to be a special case for Covid Bailout loans says it all about the dangers of
lobbying. The SNP will be equally delighted at the lack of scrutiny of dodgy dealings up in the Highlands.
The Greensill collapse is unlikely to be the last time financial chicanery is exposed as
sham. And that is why holders of European Alternatives and Asset backed transactions should be nervous. The lessons of the
Greensill deals are multiple:
Don't assume the deals you are sold are what you are told they are,
There is no substitute for deep due diligence.
Companies that look impossible to finance do not suddenly become AAA credits after a sprinkling of magic secured funding dust.
Anything promising of low-risk/high-returns from complex structuring and technical innovation is suspect.
Let's review the unfolding Greensill mess:
There over 1000 holders of the $10 bln plus of defaulted Greensill investment structures packaged and issued by Credit Suisse –
which marketed them as ultra-safe secured investments. Under the law, what the holders recover on these deals will rather depend
on how much the administrator and the courts can jemmy out of Sanjay Gupta's
dead-firm walking
;
steel and commodities business GFC Alliance. (I have no hesitation in saying GFC will go to the wall – there can't be a single
sane financial firm on the planet willing to finance them as the story of its' Greensill relationship emerges and its connected
in-house banking arrangements become clearer – although, apparently, a state rescue is under consideration to save jobs.)
Investors will be lucky to see much more than the 30% recovery already in the pot from non-Gupta related investments in the
Greensill funds – but Credit Suisse may decide to make its investors good. The reputational damage of seeing their private and
investment banking clients clobbered for their stupidity, which would negate their private banking brand, may mean it's worth
taking the hit. No wonder CS staff are very grumpy about their bonuses.
Successful financial scams require willing participants. All the usual fools are there in
the mix.
Yet again the German regulator missed what was going on in Greensill's German bank and its exposures to Gupta. The team at Credit
Suisse who agreed to warehouse Greensill originated "future receivables" and sell them as pristine secured assets have a limited
shelf life. The insurance broker who managed to convince an insurance fund the underlyings were AAA quality looks vulnerable. Or
what about the sales teams in Morgan Stanley who actually marketed the deals. Yet again Softbank is in the frame after it
invested in excess of $1.5 bln at a $4-7 bln valuation, hailing Greensill as a leading Finech, when the actual truth is that its
high-tech driven lending algos were nothing more than basic Excel spread sheets.
Greensill's financial magic was little more than sheer chutzpah – being able to persuade investors that the dull old low margin
conservative business of factoring – short-term secured lending against invoices and accounts receivable, was something
incredibly clever, undervalued and able to generate huge returns based on unique proprietary tech.
Greensill deals went further. Rather than just factoring Gupta's bills to suppliers and its invoices, the firm conjured up
"future receivables" – pledging the company's expected future earnings for lending now. That's not necessarily a bad thing – its
basic credit – but it only works if these earnings were completely predictable like obligated mortgage payments. What Greensill
was doing was lending on future earnings on very volatile commodities. Remember – oil prices went negative in 2020.
In return for funding challenging names we know Greensill took divots out these clients. It made over £36 mm financing Gupta's
deals in Scotland, and an amazing $108mm in fees from the $850mm Bluestone coal deals in the US – for which it is now being taken
to court. All these fees gave Lex Greensill the wherewithal for his private Air Greensill fleet – but didn't make the financings
any safer.
Any smart investors would probably have asked questions – but what's not to like about a deal that's secured on receivables,
offers a high coupon, is wrapped with an insurance package from reputable insurer and involves major investment firms like Credit
Suisse banking them, and Morgan Stanley marketing them?
One question is how did Greensill get away with it so long?
It was clear as early as 2017 there were major issues with some of the supply chain financing deals Greensill was putting
together. The following year a major Swiss investment group, GAM, blew up when deals a leading fund manager had bet the shop on
were questioned internally. A review by external investigators discovered a lack of information and documentation on a whole
series of Greensill deals. They questioned how due diligence was done on the deals. The fund manager was suspended and later
dismissed – triggering a redemption run on the fund. The whistle-blower was also shown the door on the back of massive client
exits.
GAM invested in the funds because it's very hard to turn down the promise of a low risk / high return deal that promised so much
more than the tiny yields available in conventional credit markets.
Despite the events at GAM, Credit Suisse went on to package $10 bln plus of Greensill deals. It was all done with an insurance
wrap from a single name put them in its safe bucket. I know other insurance firms refused the deals. The trigger for the collapse
of the Greensill scam was the withdrawl of that critical insurance – causing Credit Suisse to stop. Greensill has known for a
year Tokyo Marine (which sacked the underwriter involved) would not renew and had been unable to find alternative cover.
Perhaps Credit Suisse bought the story and Softbank link that Greensill was a remarkable new Fintech with the Midas touch of
changing dull, conservative factoring into a money machine? All that glitters is not gold.
One of the major developing themes in markets has been a shift from financial assets – which are seriously mispriced due to
monetary distortion and financial asset inflation – into real assets, the so-called alternatives market. Alternative because they
are not stocks or bonds, but cash flows and real assets. The collapse of Greensill will heighten awareness of due diligence risks
in these non-standard, off-market, asset backed alternatives. Alternative asset holders will be looking at holdings for what else
might be wobbly.
For instance, I might urge them not to be hypnotised by the assumptions underlying a well-known fund investing in music
royalties, the basis of which is also being questioned by analysts. (I certainly won't mention the fund by name as the manager is
a well-known litigant.) I have no reason to believe or disbelieve what analysts, the FT and a US investment bank have said about
it overpaying for assets or questioning the valuation hikes it puts on future revenues when it acquires catalogues. Personally I
like music assets, know their value, and, given certain circumstances the fund in question might come good. Equally.. it might
not.
To understand how these deals works its critical to understand exactly what's occurring within the structures – how real are the
assets, how the cash flows, how its accounted, and where it goes. That's why having top notch accountants and lawyers is such an
important requirement for any deal. However, if they are working in the interests of the issuers and bankers – then investors are
the likely patsies. There is a real difference between the way US and European Asset Backed deals are structured – basically US
deals are transparent. European deals tend to be opaque.
Alternative deals based on real assets and tangible cash flows are often, but not always, decorrelated from distorted financial
assets, allowing low risk deals to yield better long- term returns. They tick can the box in terms of risk vs return and provide
significant diversification away from conventional markets. The major negative is there is little pretence they will be liquid
assets. If you want to sell – even in good markets it will not be easy.
The only way you should participate in Alternative type deals is by knowing exactly what's going on. And – yes, my day job is
Head of Alternative Assets. Happy to discuss in depth any time.
Your editorial "The
Semiconductor Shortage" (March 13) is right that government action is not needed to correct
the short-term supply-demand imbalance causing the global chip shortage, but wrong that the
U.S. can "prod" its way to stronger domestic semiconductor production and more secure chip
supply chains in the long term. Global competitors haven't passed the U.S. as a location for
chip manufacturing by prodding. They've done it by funding ambitious government incentives to
lure semiconductor production to their shores.
As a result, only 12% of global manufacturing is now done in the U.S., down from 37% in
1990.
Disposable people are indispensable. Who else would fight the wars? Who would preach? Who
would short derivatives? Who would go to court and argue both sides? Who would legislate? Who
would sell red hots at the old ball game?
For too long disposable people have been misrepresented as destitute, homeless, unemployed,
or at best precariously employed. True, the destitute, the homeless, the unemployed and the
precarious are indeed treated as disposable but most disposable people pursue respectable
professions, wear fashionable clothes, reside in nice houses, and keep up with the Jones.
Disposable people are defined by what they do not produce. They do not grow food. They do
not build shelters. They do not make clothes. They also do not make the tractors used to grow
food, the tools to build shelters or the equipment to make clothes.
Although disposable people do not produce necessities what they do is not unnecessary. It is
simply that the services they provide are not spontaneously demanded as soon as one acquires a
bit of additional income. One is unlikely, however, to engage the services or purchase the
goods produced by disposable people unless one is in possession of disposable income.
Disposable income is the basis of disposable people. Conversely, disposable people are the
foundation of disposable income.
Tesla down 31%? Not a problem I will use the dividends to offset my losses. Oh wait!
BigJJ 13 minutes ago
I've never understood how Tesla could possibly make money given all the infrastructure
they had to install just to sell shoddily thrown together rusty cars that are useless when
the grid crashes.
Sound of the Suburbs 41 minutes ago (Edited)
...What was the ponzi scheme of inflated asset prices that collapsed in 2008?
El Hosel 1 hour ago (Edited)
Clearly "It's different this time", now that everybody knows "stocks only go up"...
"... Many of these new companies made outrageous, and often fraudulent, claims about their business ventures for the purpose of raising capital and boosting share prices. ..."
"... However, in the midst of the "mania," things like valuation, revenue, or even viable business models didn't matter. It was the "Fear Of Missing Out," which sucked investors into the fray without regard for the underlying risk. ..."
"... Sir Issac Newton, the brilliant mathematician, was an early investor in South Sea Corporation. Newton quickly made a lot of money and recognized the early stages of a speculative mania. Knowing that it would eventually end badly, he liquidated his stake at a large profit. ..."
"... However, after he exited, South Sea stock experienced one of the most legendary rises in history. As the bubble kept inflating, Newton allowed his emotions to overtake his previous logic and he jumped back into the shares. Unfortunately, it was near the peak. ..."
"... The story of Newton's losses in the South Sea Bubble has become one of the most famous in popular finance literature. While surveying his losses, Newton allegedly said that he could "calculate the motions of the heavenly bodies, but not the madness of people." ..."
"... Yes, this time is different. "Like all bubbles, it ends when the money runs out." – Andy Kessler ..."
I have previously discussed the importance of understanding how "physics" plays a crucial role in the stock market. As Sir Issac
Newton once discovered, "what goes up, must come down."
Andy Kessler, via the Wall Street
Journa l, recently discussed a similar point with respect to the momentum in stock prices. To wit:
"Does this sound familiar: Smart guy owns stock in March at $200, sells it in June at around $600, but then buys it back in
July and August for between $900 and $1,000. By September it's back at $200. Ouch. Tesla this year? Yahoo in 2000? Nope. That
was Sir Isaac Newton getting pulled into the great momentum trade of the South Sea Co., which cratered 300 years ago this month.
He lost the equivalent of more than $3 million today. Newton, whose second law of motion is about the momentum of a body equaling
the force acting on it, didn't know that works for stocks too."
To understand what happened to the South Sea Corporation, you need a bit of history.
The South Sea History
In 1720, in return for a loan of £7 million to finance the war against France, the House of Lords passed the South Sea Bill, which
allowed the South Sea Company a monopoly in trade with South America.
England was already a financial disaster and was struggling to finance its war with France. As debts mounted, England needed a
solution to stay afloat. The scheme was that in exchange for exclusive trading rights, the South Sea Company would underwrite the
English National Debt. At that time, the debt stood at £30 million and carried a 5% interest coupon from the Government. The South
Sea company converted the Government debt into its own shares.
They would collect the interest from the Government and then pass it on to their shareholders.
Interesting Absurdities
At the time, England was in the midst of rampant market speculation. As soon as the South Sea Company concluded its deal with
Parliament, the shares surged to more than 10 times their value. As South Sea Company shares bubbled up to incredible new heights,
numerous other joint-stock companies IPO'd to take advantage of the booming investor demand for speculative investments.
Many of these new companies made outrageous, and often fraudulent, claims about their business ventures for the purpose of
raising capital and boosting share prices. Here are some examples of these companies' business proposals (History House, 1997):
Supplying the town of Deal with fresh water.
Trading in hair.
Assuring of seamen's wages.
Importing pitch and tar, and other naval stores, from North Britain and America.
Insuring of horses.
Improving the art of making soap.
Improving gardens.
The insuring and increasing children's fortunes.
A wheel for perpetual motion.
Importing walnut-trees from Virginia.
The making of rape-oil.
Paying pensions to widows and others, at a small discount.
Making iron with pit coal.
Transmutation of quicksilver into a malleable fine metal.
For carrying on an undertaking of great advantage; but nobody to know what it is.
A Speculative Mania
However, in the midst of the "mania," things like valuation, revenue, or even viable business models didn't matter. It was
the "Fear Of Missing Out," which sucked investors into the fray without regard for the underlying risk.
Though South Sea Company shares were skyrocketing, the company's profitability was mediocre at best, despite abundant promises
of future growth by company directors.
The eventual selloff in Company shares was exacerbated by a previous plan of lending investors money to buy its shares. This "margin
loan," meant that many shareholders had to sell their shares to cover the plan's first installment of payments.
As South Sea Company and other "bubble " company share prices imploded, speculators who had purchased shares on credit went bankrupt.
The popping of the South Sea Bubble then resulted in a contagion that spread across Europe.
Newton's Folly
Sir Issac Newton, the brilliant mathematician, was an early investor in South Sea Corporation. Newton quickly made a lot of
money and recognized the early stages of a speculative mania. Knowing that it would eventually end badly, he liquidated his stake
at a large profit.
However, after he exited, South Sea stock experienced one of the most legendary rises in history. As the bubble kept inflating,
Newton allowed his emotions to overtake his previous logic and he jumped back into the shares. Unfortunately, it was near the peak.
It is noteworthy that once Newton decided to go back into South Sea stock, he moved essentially all his financial assets into
it. In general, Newton was intimately familiar with commodities and finance. As Master of the Mint, his post required him to make
many decisions that depended on market prices and conditions. The story of Newton's losses in the South Sea Bubble has become
one of the most famous in popular finance literature. While surveying his losses, Newton allegedly said that he could "calculate
the motions of the heavenly bodies, but not the madness of people."
Throughout financial history, markets have evolved from one speculative "bubble," to bust, to the next with each one being believed
"it was different this time." The slides below are from a presentation I made to a large mutual fund company. What we some common
denominators between all previous bubbles and now.
The table below shows a listing of assets classes that have experienced bubbles throughout history, with the ones related to the
current environment highlighted in yellow. It is not hard to see the similarities between today and the previous market bubbles in
history. Investors are currently chasing "new technology" stocks from Zoom to Tesla, piling into speculative call options, and piling
into leverage. What could possibly go wrong?
Oh, by the way, the slides above are from a 2008 presentation just one month before the Lehman crisis. The point here is that
speculative cycles are always the same.
The Speculative Cycle
Charles Kindleberger suggested that speculative manias typically commence with a "displacement" which excites speculative interest.
The displacement may come from either an entirely new object of investment (IPO) or from increased profitability of established investments.
The speculation is then reinforced by a "positive feedback" loop from rising prices. which ultimately induces "inexperienced investors"
to enter the market. As the positive feedback loop continues, and the "euphoria" increases, retail investors then begin to "leverage"
their risk in the market as "rationality" weakens.
The full cycle is shown below.
During the course of the mania, speculation becomes more diffused and spreads to different asset classes. New companies are floated
to take advantage of the euphoria, and investors leverage their gains using derivatives, stock loans, and leveraged instruments.
As the mania leads to complacency, fraud and manipulation enter the market place. Eventually, the market crashes and speculators
are wiped out. The Government and Regulators react by passing new laws and legislations to ensure the previous events never happen
again.
The Latest Mania
Let's go back to Andy for a moment:
"When bull markets get going, investors come out of the woodwork to pile in. These momentum investors -- I call them momos
-- figure if a stock is going up, it will keep going up. But usually, there is some source of hot air inflating stocks: either
a structural anomaly that fools investors into thinking ever-rising stock prices are real or a source of capital that buys, buys,
buys -- proverbial 'dumb money.' Think of it as a giant fireplace bellows, an accordion-like contraption that pumps in fresh oxygen
to keep flames growing." – Andy Kessler
We have seen these manias repeated throughout history.
In 1929 you could buy stocks with as little as a 5% down payment
The 1960s and '70s had the Nifty Fifty bubble.
In 1987 it was a rising dollar, portfolio insurance, and major investments by the Japanese into U.S. real estate.
In 2000, it was the new paradigm of the internet and the influx of new online trading firms like E*Trade creating liquidity
issues in Nasdaq stocks. Additionally, record numbers of companies were being brought public by Wall Street to fill investor demand.
In 2008, subprime mortgages, low interest rates, and lax lending policies, combined with a litany of derivative products inflated
massive bubbles in debt instruments.
In 2020?
What about today? Look back at the chart of the South Sea Company above. Now, the one below. See any similarities. Yes, that's
Tesla. However, you can't solely blame the Federal Reserve as noted by Andy:
"Most simply blame the Federal Reserve -- especially today, with its zero-interest-rate policy -- for pumping the hot air that
gets the momos going. Fair enough, but that's only part of the story. Long market runs have always allured investors who figure
they're smart to jump in, even if it's late.
Everyone forgets the adage, 'Don't mistake brains for a bull market.'"
As stated, while no two financial manias are ever alike, the end results are always the same. Are there any similarities in today's
market? You decide.
"From SPACs, or special purpose acquisition companies, which are modern-day blind pools that often don't end well. Today's
momos also chase stock splits, which mean nothing for a company's actual value. Same for a new listing in indexes like the S&P
500. Isaac Newton could explain the math." – Andy Kessler
You get the idea. But one of the tell-tale indications is the speculative chase of "zombie" companies which are only still alive
primarily due to the Federal Reserve's interventions.
Fixing The Cause Of The Crash
Historically, all market crashes have been the result of things unrelated to valuation levels. Issues such as liquidity, government
actions, monetary policy mistakes, recessions, or inflationary spikes are the culprits that trigger the "reversion in sentiment."
Importantly, the "bubbles" and "busts" are never the same. I previously quoted Bob Bronson on this point:
"It can be most reasonably assumed that markets are efficient enough that every bubble is significantly different than the
previous one. A new bubble will always be different from the previous one(s). Such is since investors will only bid prices to
extreme overvaluation levels if they are sure it is not repeating what led to the previous bubbles. Comparing the current extreme
overvaluation to the dotcom is intellectually silly.
I would argue that when comparisons to previous bubbles become most popular, it's a reliable timing marker of the top in a
current bubble. As an analogy, no matter how thoroughly a fatal car crash is studied, there will still be other fatal car crashes.
Such is true even if we avoid all previous accident-causing mistakes."
Comparing the current market to any previous period in the market is rather pointless. The current market is not like 1995, 1999,
or 2007? Valuations, economics, drivers, etc. are all different from cycle to the next.
Most importantly, however, the financial markets always adapt to the cause of the previous "fatal crash." Unfortunately, that
adaptation won't prevent the next one.
Yes, this time is different. "Like all bubbles, it ends when the money runs out." – Andy Kessler
"... In the Risk Alert below, the itemization of various forms of abuses, such as the many ways private equity firms parcel out interests in the businesses they buy among various funds and insiders to their, as opposed to investors' benefit, alone should give pause. And the lengthy discussion of these conflicts does suggest the SEC has learned something over the years. Experts who dealt with the agency in its early years of examining private equity firms found the examiners allergic to considering, much the less pursuing, complex abuses. ..."
"... Undermining legislative intent of new supervisory authority the SEC never embraced its new responsibilities to ride herd on private equity and hedge funds. ..."
"... The agency is operating in such a cozy manner with private equity firms that as one investor described it: It's like FBI sitting down with the Mafia to tell them each year, "Don't cross these lines because that's what we are focusing on." ..."
"... Advisers charged private fund clients for expenses that were not permitted by the relevant fund operating agreements, such as adviser-related expenses like salaries of adviser personnel, compliance, regulatory filings, and office expenses, thereby causing investors to overpay expenses ..."
"... Current SEC chairman Jay Clayton came from Sullivan & Cromwell, bringing with him Steven Peikin as co-head of enforcement. And the Clayton SEC looks to have accomplished the impressive task of being even weaker on enforcement than Mary Jo White. ..."
"... On the same side though, fraud is a criminal offence, and it's SEC's duty to prosecute. And I believe that a lot of what PE engage in would happily fall under fraud, if SEC really wanted. ..."
"... Crimogenic: Producing or tending to produce crime or criminality. An additional factor is that, in the main, the criminals do not take their money and leave the gaming tables but pour it back in and the crime metastasizes. AKA, Kleptocracy. ..."
"... You might add that the threat of consequences for these crimes makes the criminals extremely motivated to elect officials who will not prosecute them (e.g. Obama). They're not running for office, they're avoiding incarceration. ..."
"... Andrew Levitt, for instance, complained bitterly that Joe Lieberman would regularly threaten to cut the SEC's budget for allegedly being too aggressive about enforcement. Lieberman was the Senator from Hedgistan. ..."
"... More banana republic level grift. What happens when investors figure out they can't believe anything they are told? ..."
"... Can we come up with a better descriptor for "private equity"? I suggest "billionaire looters". ..."
"... Where is the SEC when Bain Capital (Romney) wipes out Toys-R-Us and Dianne Feinstein's husband Richard Blum wipes out Payless Shoes. They gain control of the companies, pile on massive debt and take the proceeds of the loan, and they know the company cannot service the loan and a BK is around the corner. ..."
"... Thousands lose their jobs. And this is legal? And we also lost Glass-Steagal and legalized stock buy-backs. The Elite are screwing the people. It's Socialism for the Rich, the Politicians and Govt Employees and Feudalism for the rest of us. ..."
We've embedded an SEC Risk Alert on private equity abuses at the end of this post. 1 What is remarkable about this
document is that it contains a far longer and more detailed list of private abuses than the SEC flagged in its initial round of examinations
of private equity firms in 2014 and 2015. Those examinations occurred in parallel with groundbreaking exposes by Gretchen Morgenson
at the New York Times and Mark Maremont in the Wall Street Journal.
At least some of the SEC enforcement actions in that era look
to have been triggered by the press effectively getting ahead of the SEC. And the SEC even admitted the misconduct was more common
at the most prominent firms.
Yet despite front-page articles on private equity abuses, the SEC engaged in wet noodle lashings. Its pattern was to file only
one major enforcement action over a particular abuse. Even then, the SEC went to some lengths to spread the filings out among the
biggest firms. That meant it was pointedly engaging in selective enforcement, punishing only "poster child" examples and letting
other firms who'd engaged in precisely the same abuses get off scot free.
The very fact of this Risk Alert is an admission of failure by the SEC. It indicates that the misconduct it highlighted five years
ago continues and if anything is even more pervasive than in the 2014-2015 era. It also confirms that its oft-stated premise then,
that the abuses it found then had somehow been made by firms with integrity that would of course clean up their acts, and that now-better-informed
investors would also be more vigilant and would crack down on misconduct, was laughably false.
In particular, the second section of the Risk Alert, on Fees and Expenses (starting on page 4) describes how fund managers are
charging inflated or unwarranted fees and expenses. In any other line of work, this would be called theft. Yet all the SEC is willing
to do is publish a Risk Alert, rather than impose fines as well as require disgorgements?
The SEC's Abject Failure
In the Risk Alert below, the itemization of various forms of abuses, such as the many ways private equity firms parcel out interests
in the businesses they buy among various funds and insiders to their, as opposed to investors' benefit, alone should give pause.
And the lengthy discussion of these conflicts does suggest the SEC has learned something over the years. Experts who dealt with the
agency in its early years of examining private equity firms found the examiners allergic to considering, much the less pursuing,
complex abuses.
Undermining legislative intent of new supervisory authority the SEC never embraced its new responsibilities to ride herd on
private equity and hedge funds.
The SEC has long maintained a division between the retail investors and so-called "accredited investors" who by virtue of having
higher net worths and investment portfolios, are treated by the agency as able to afford to lose more money. The justification is
that richer means more sophisticated. But as anyone who is a manager for a top sports professional or entertainer, that is often
not the case. And as we've seen, that goes double for public pension funds.
Starting with the era of Clinton appointee Arthur Levitt, the agency has taken the view that it is in the business of defending
presumed-to-be-hapless retail investors and has left "accredited investor" and most of all, institutional investors, on their own.
This was a policy decision by the agency when deregulation was venerated; there was no statutory basis for this change in priorities.
Congress tasked the SEC with supervising the fund management activities of private equity funds with over $150 million in assets
under management. All of their investors are accredited investors. In other words, Congress mandated the SEC to make sure these firms
complied with relevant laws as well as making adequate disclosures of what they were going to do with the money entrusted to them.
Saying one thing in the investor contracts and doing another is a vastly worse breach than misrepresentations in marketing materials,
yet the SEC acted as if slap-on-the-wrist-level enforcement was adequate.
We made fun when thirteen prominent public pension fund trustees wrote the SEC asking for them to force greater transparency of
private equity fees and costs. The agency's position effectively was "You are grownups. No one is holding a gun to your head to make
these investments. If you don't like the terms, walk away." They might have done better if they could have positioned their demand
as consistent with the new Dodd Frank oversight requirements.
Actively covering up for bad conduct . In 2014, the SEC started working at giving malfeasance a free pass. Specifically, the SEC
told private equity firms that they could continue their abuses if they 'fessed up in their annual disclosure filings, the so-called
Form ADV. The term of art is "enhanced disclosure". Since when are contracts like confession, that if you admit to a breach, all
is forgiven? Only in the topsy-turvy world of SEC enforcement.
The agency is operating in such a cozy manner with private equity firms that as one investor described it: It's like FBI sitting down with the Mafia to tell them each year, "Don't cross these lines because that's what we are focusing
on."
Specifically, as we indicated, the SEC was giving advanced warning of the issues it would focus on in its upcoming exams, in order
to give investment managers the time to get their stories together and purge files. And rather than view its periodic exams as being
designed to make sure private equity firms comply with the law and their representations, the agency views them as "cooperative"
exercises! Misconduct is assumed to be the result of misunderstanding and error, and not design.
It's pretty hard to see conduct like this, from the SEC's Risk Alert, as being an accident:
Advisers charged private fund clients for expenses that were not permitted by the relevant fund operating agreements, such
as adviser-related expenses like salaries of adviser personnel, compliance, regulatory filings, and office expenses, thereby causing
investors to overpay expenses
The staff observed private fund advisers that did not value client assets in accordance with their valuation processes or in
accordance with disclosures to clients (such as that the assets would be valued in accordance with GAAP). In some cases, the staff
observed that this failure to value a private fund's holdings in accordance with the disclosed valuation process led to overcharging
management fees and carried interest because such fees were based on inappropriately overvalued holdings .
Advisers failed to apply or calculate management fee offsets in accordance with disclosures and therefore caused investors
to overpay management fees.
We're highlighting this skimming simply because it is easier for laypeople to understand than some of the other types of cheating
the SEC described. Even so, industry insiders and investors complained that the description of the misconduct in this Risk Alert
was too general to give them enough of a roadmap to look for it at particular funds.
Ignoring how investors continue to be fleeced . The SEC's list includes every abuse it sanctioned or mentioned in the 2014 to
2015 period, including undisclosed termination of monitoring fees, failure to disclose that investors were paying for "senior advisers/operating
partners," fraudulent charges, overcharging for services provided by affiliated companies, plus lots of types of bad-faith conduct
on fund restructurings and allocations of fees and expenses on transactions allocated across funds.
The SEC assumed institutional investors would insist on better conduct once they were informed that they'd been had. In reality,
not only did private equity investors fail to demand better, they accepted new fund agreements that described the sort of objectionable
behavior they'd been engaging in. Remember, the big requirement in SEC land is disclosure. So if a fund manager says he might do
Bad Things and then proceeds accordingly, the investor can't complain about not having been warned.
Moreover, the SEC's very long list of bad acts says the industry is continuing to misbehave even after it has defined deviancy
down via more permissive limited partnership agreements!
Why This Risk Alert Now?
Keep in mind what a Risk Alert is and isn't. The best way to conceptualize it is as a press release from the SEC's Office of Compliance
Inspections and Examinations. It does not have any legal or regulatory force. Risk Alerts are not even considered to be SEC official
views. They are strictly the product of OCIE staff.
On the first page of this Risk Alert, the OCIE blandly states that:
This Risk Alert is intended to assist private fund advisers in reviewing and enhancing their compliance programs, and also
to provide investors with information concerning private fund adviser deficiencies.
Cutely, footnotes point out that not everyone examined got a deficiency letter (!!!), that the SEC has taken enforcement actions
on "many" of the abuses described in the Risk Alert, yet "OCIE continues to observe some of these practices during examinations."
Several of our contacts who met in person with the SEC to discuss private equity grifting back in 2014-2015 pressed the agency
to issue a Risk Alert as a way of underscoring the seriousness of the issues it was unearthing. The staffers demurred then.
In fairness, the SEC may have regarded a Risk Alert as having the potential to undermine its not-completed enforcement actions.
But why not publish one afterwards, particularly since the intent then had clearly been to single out prominent examples of particular
types of misconduct, rather than tackle it systematically? 2
So why is the OCIE stepping out a bit now? The most likely reason is as an effort to compensate for the lack of enforcement actions.
Recall that all the OCIE can do is refer a case to the Enforcement Division; it's their call as to whether or not to take it up.
The SEC looks to have institutionalized the practice of borrowing lawyers from prominent firms. Mary Jo White of Debevoise brought
Andrew Ceresney with her from Debeviose to be her head of enforcement. Both returned to Debevoise.
Current SEC chairman Jay Clayton came from Sullivan & Cromwell, bringing with him Steven Peikin as co-head of enforcement. And
the Clayton SEC looks to have accomplished the impressive task of being even weaker on enforcement than Mary Jo White. Clayton made
clear his focus was on "mom and pop" investors, meaning he chose to overlook much more consequential abuses by private equity firms
and hedgies. The New York Times determined that the average amount of SEC fines against corporate perps fell markedly in 2018 compared
to the final 20 months of the Obama Administration. The SEC since then levied $1 billion fine against the Woodbridge Group of Companies
and its one-time owner for running a Ponzi scheme that fleeced over 8,400, so that would bring the average penalty up a bit. But
it still confirms that Clayton is concerned about small fry, and not deeper but just as pickable pockets.
David Sirota argues that the OCIE
was out to embarrass Clayton and sabotage what Sirota depicted as an SEC initiative to let retail investors invest in private equity.
Sirota appears to have missed that that horse has left the barn and is in the next county, and the SEC had squat to do with it.
The overwhelming majority of retail funds is not in discretionary accounts but in retirement accounts, overwhelmingly 401(k)s.
And it is the Department of Labor, which regulates ERISA plans, and not the SEC, that decides what those go and no go zones are.
The DoL has already green-lighted allowing large swathes of 401(k) funds to include private equity holdings.
From a post earlier this month :
Until now, regulations have kept private equity out of the retail market by prohibiting managers from accepting capital from
individuals who lack significant net worth.
Moreover, even though Sirota pointed out that Clayton had spoken out in favor of allowing retail investors more access to private
equity investments, the proposed regulation on the definition of accredited investors in fact not only does not lower income or net
worth requirements (save for allowing spouses to combine their holdings) it in fact solicited comments on the idea of raising the
limits.
From a K&L Gates write up :
Previously, the Concept Release requested comment on whether the SEC should revise the current individual income ($200,000)
and net worth ($1,000,000) thresholds. In the Proposing Release, the SEC further considered these thresholds, noting that the
figures have not been adjusted since 1982. The SEC concluded that it does not believe modifications to the thresholds are necessary
at this time, but it has requested comments on whether the final should instead make a one-time increase to the thresholds in
the account for inflation, or whether the final rule should reflect a figure that is indexed to inflation on a going-forward basis.
It is not clear how many people would be picked up by the proposed change, which was being fleshed out, that of letting some presumed
sophisticated but not rich individuals, like junior hedge fund professionals and holders of securities licenses, be treated as accredited
investors. In other words, despite Clayton's talk about wanting ordinary investors to have more access to private equity funds, the
agency's proposed rule change falls short of that.
Moreover, if the OCIE staff had wanted to undermine even the limited liberalization of the definition of accredited investor so
as to stymie more private equity investment, the time to do so would have been immediately before or while the comments period was
open. It ended March 16 .
So again, why now? One possibility is that the timing is purely a coincidence. For instance, the SEC staffers might have been
waiting until Covid-19 news overload died down a bit so their work might get a hearing (and Covid-19 remote work complications may
also have delayed its release).
The second possibility is that OCIE is indeed very frustrated with the enforcement chief Peikin's inaction on private equity.
The fact that Peikin's boss and protector Clayton has made himself a lame duck meant a salvo against Peikin was now a much lower
risk. If any readers have better insight into the internal workings of the SEC these days, please pipe up.
______
1 Formally, as you can see, this Risk Alert addresses both private equity and hedge fund misconduct, but on reading
the details, the citing of both types of funds reflects the degree to which hedge funds have been engaging in the buying and selling
of stakes in private companies. For instance, Chatham Asset Management, which has become notorious through its ownership of American
Media, which in turn owns the National Enquirer, calls itself a hedge fund. Moreover, when the SEC started examining both private
equity and hedge funds under new authority granted by Dodd Frank, it described the sort of misconduct described in this Risk Alert
as coming out of exams of private equity firms, and its limited round of enforcement actions then were against brand name private
equity firms like KKR, Blackstone, Apollo, and TPG. Thus for convenience as well as historical reasons, we refer only to private
equity firms as perps.
2 Media stories at the time, including some of our posts, provided substantial evidence that particular abuses, such
as undisclosed termination of monitoring fees and failure to disclose that "senior advisers" presented as general partner "team members"
were in fact consultants being separately billed to fund investments, were common practices. Yet the SEC chose to lodge only marquee
enforcement actions against one prominent firm for each abuse, as if token enforcement would serve as an adequate deterrent. The
message was the reverse, that the overwhelming majority of the abuses were able to keep their ill-gotten gains and not even face
public embarrassment.
TBH, in the view of Calpers ignoring its advisors, I do have a little understanding of the SEC's point "you're grown ups" (the
worse problem is that the advisors who leach themselves to the various accredited investors are often not worth the money.
On the same side though, fraud is a criminal offence, and it's SEC's duty to prosecute. And I believe that a lot of what PE
engage in would happily fall under fraud, if SEC really wanted.
Yes, the SEC conveniently claims a conflicted authority – 1. to regulate compliance but without an "enforcement authority",
and 2. report egregious behavior to their "enforcement authority". So the SEC is less than a permissive nanny. Sort of like "access"
to enforcement authority. Sounds like health care to me.
No, this is false. The SEC has an examination division and an enforcement division. The SEC can and does take enforcement actions
that result in fines and disgorgements, see the $1 billion fine mentioned in the post. So the exam division can recommend enforcement
to the enforcement division. That does not mean it will get done. Some enforcement actions originate from within the enforcement
division, like insider trading cases, and the SEC long has had a tendency to prioritize insider trading cases.
The SEC cannot prosecute. It has to refer cases that it thinks are criminal to the DoJ and try to get them to saddle up.
Crimogenic: Producing or tending to produce crime or criminality. An additional factor is that, in the main, the criminals
do not take their money and leave the gaming tables but pour it back in and the crime metastasizes.
AKA, Kleptocracy.
Thus in 2008 and thereafter the criminal damage required 2-3 trillion, now 7-10 trillion.
Any economic expert who does not recognize crime as the number one problem in the criminogenic US economy I disregard. Why
read all that analysis when, at the end of the run, it all just boils down to bailing out the criminals and trying to reset the
criminogenic system?
You might add that the threat of consequences for these crimes makes the criminals extremely motivated to elect officials who
will not prosecute them (e.g. Obama). They're not running for office, they're avoiding incarceration.
The SEC has been captured for years now. It was not that long ago that SEC Examination chief Andrew Bowden made a grovelling
speech to these players and even asked them to give his son a job which was so wrong-
But there is no point in reforming the SEC as it was the politicians, at the beck and call of these players, that de-fanged
the SEC – and it was a bipartisan effort! So it becomes a chicken-or-the-egg problem in the matter of reform. Who do you reform
first?
Can't leave this comment without mentioning something about a private equity company. One of the two major internal airlines
in Oz went broke due to the virus and a private equity buyer has been found to buy it. A union rep said that they will be good
for jobs and that they are a good company. Their name? Bain Capital!
We broke the story about Andrew Bowden! Give credit where credit is due!!!! Even though Taibbi points to us in his first line,
linking to Rolling Stone says to those who don't bother clicking through that it was their story.
Of course I remember that story. I was going to mention it but thought to let people see it in virtually the opening line of
that story where he gives you credit. More of a jolt of recognition seeing it rather than being told about it first.
Of the three branches of government which ones are not captured by big business? If two out of three were to captured then
does it matter what the third does?
Is the executive working for the common good or for the interests of big business?
Is the legislature working for the common good or for the interests of big business?
Is the judiciary working for the common good or for the interests of big business?
In my opinion too much power has been centralised, too much of the productivity gains of the past 40 years have been monetised
and therefore made possible to hoard and centralise. SEC should (in my opinion) try to enforce more but without more support then I do not believe (it is my opinion, nothing more
and nothing less) that they can accomplish much.
The SEC is a mysterious agency which (?) must fall under the jurisdiction of the Treasury because it is a monetary regulatory
agency in the business of regulating securities and exchanges. But it has no authority to do much of anything. The Treasury itself
falls under the executive administration but as we have recently seen, Mnuchin himself managed to get a nice skim for his banking
pals from the money Congress legislated.
That's because Congress doesn't know how to effectuate a damn thing – they legislate
stuff that morphs before our very eyes and goes to the grifters without a hitch. So why don't we demand that consumer protection
be made into hard law with no wiggle room; that since investing is complex in this world of embedded funds and glossy prospectuses,
we the consumer should not have to wade through all the nonsense to make decisions – that everything be on the table. And if PE
can't manage to do that and still steal its billions then PE should be declared to be flat-out illegal.
Please stop spreading disinformation. This is the second time on this post. The SEC has nada to do with the Treasury. It is an independent regulatory agency. It however is the only financial regulator that does not keep what it kills (its own fees and fines) but is instead subject
to Congressional appropriations.
Andrew Levitt, for instance, complained bitterly that Joe Lieberman would regularly threaten
to cut the SEC's budget for allegedly being too aggressive about enforcement. Lieberman was the Senator from Hedgistan.
It should be noted that out here in the countryside of northern Michigan that embezzlement (a winter sport here while the men
are out ice fishing), theft and fraud are still considered punishable felonies. Perhaps that is simply a quaint holdover from
a bygone time. Dudley set the tone for the C of C with his Green Book on bank deregulation. One of the subsequent heads of C of
C was reported as seeing his position as "being the spiritual resource for banks". If bank regulation is treated in a farcical
fashion why should be the SEC be any different?
I was shocked to just now learn that ERISA/the Dept of Labor is in regulatory control of allowing pension funds to buy PE fund
of funds and "balanced PE funds". What VERBIAGE. Are "PE Fund of Balanced Funds" an actual category? And what distinguishes them
from good old straightforward Index Funds? And also too – what is happening before our very glazed-over eyes is that PE is high
grading not just the stock market but the US Treasury itself. Ordinary investors should be buying US Treasuries directly and retirement
funds should too. It will be a big bite but if it knocks PE out of business it would be worth it. PE is in the business of cooking
its books, ravaging struggling corporations, and boldly privatizing the goddamned Treasury. WTF?
What about the wanton destruction of the purchased companies? If this solely about the harm done to the poor investors?
If so, that is seriously wrong.
If, you know, the neoliberal "because markets" is the ruling paradigm then of course there is no harm done. The questions then
become: is "because markets" a sensible paradigm? What is it a sensible paradigm of? Is "because markets" even sensible for the
long term?
an aside: farewell, Olympus camera. A sad day. Farewell, OM-1 and OM-2. Film photography is really not replicated by digital
photography but the larger market has gone to digital. Speed and cost vs quality. Because markets. Now the vulture swoop.
Where is the SEC when Bain Capital (Romney) wipes out Toys-R-Us and Dianne Feinstein's husband Richard Blum wipes out Payless
Shoes. They gain control of the companies, pile on massive debt and take the proceeds of the loan, and they know the company cannot
service the loan and a BK is around the corner.
Thousands lose their jobs. And this is legal? And we also lost Glass-Steagal and
legalized stock buy-backs. The Elite are screwing the people. It's Socialism for the Rich, the Politicians and Govt Employees and
Feudalism for the rest of us.
"... Kane, who coined the term "zombie bank" and who famously raised early alarms about American savings and loans, analyzed European banks and how regulators, including the U.S. Federal Reserve, backstop them. ..."
"... We are only interested observers of the arm wrestling between the various EU countries over the costs of bank rescues, state expenditures, and such. But we do think there is a clear lesson from the long history of how governments have dealt with bank failures . [If] the European Union needs to step in to save banks, there is no reason why they have to do it for free best practice in banking rescues is to save banks, but not bankers. That is, prevent the system from melting down with all the many years of broad economic losses that would bring, but force out those responsible and make sure the public gets paid back for rescuing the financial system. ..."
"... In 2019, another question, alas, is also piercing. In country after country, Social Democratic center-left parties have shrunk, in many instances almost to nothingness. In Germany the SPD gives every sign of following the French Socialist Party into oblivion. Would a government coalition in which the SPD holds the Finance Ministry even consider anything but guaranteeing the public a huge piece of any upside if they rescue two failing institutions? ..."
Running in the background, though, was a new, darker theme: That the post-2008 reforms had gone too far in restricting policymakers'
discretion in crises. The trio most responsible for making the post-Lehman bailout revolution -- Ben Bernanke, Timothy Geithner,
and Henry Paulson --
expressed their
misgivings in a joint op-ed :
But in its post-crisis reforms, Congress also took away some of the most powerful tools used by the FDIC, the Fed and the Treasury
the FDIC can no longer issue blanket guarantees of bank debt as it did in the crisis, the Fed's emergency lending powers have
been constrained, and the Treasury would not be able to repeat its guarantee of the money market funds.
These powers were critical in stopping the 2008 panic The paradox of any financial crisis is that the policies necessary to
stop it are always politically unpopular. But if that unpopularity delays or prevents a strong response, the costs to the economy
become greater.
We need to make sure that future generations of financial firefighters have the emergency powers they need to prevent the next
fire from becoming a conflagration.
Sotto voce fears of this sort go back to the earliest reform discussions. But the question surfaced dramatically in Timothy Geithner's
2016 Per Jacobsson Lecture, " Are We Safer? The Case for Strengthening
the Bagehot Arsenal ." More recently, the Group of Thirty
has advanced similar suggestions -- not too surprisingly, since Geithner was co-project manager of the report, along with Guillermo
Ortiz, the former Governor of the Mexican Central Bank, who introduced the former Treasury Secretary at the Per Jacobson lecture.
Aside from the financial collapse itself, probably nothing has so shaken public confidence in democratic institutions as the wave
of bailouts in the aftermath of the collapse. The redistribution of wealth and opportunity that the bailouts wrought surely helped
fuel the populist surges that have swept over Europe and the United States in the last decade. The spectacle of policymakers rubber
stamping literally unlimited sums for financial institutions while preaching the importance of austerity for everyone else has been
unbearable to millions of people.
Especially in money-driven political systems, affording policymakers unlimited discretion also plainly courts serious risks. Put
simply, too big to fail banks enjoy a uniquely splendid situation of "heads I win, tails you lose" when they take risks. Scholars
whose research INET has supported, notably
Edward Kane , have shown how the certainty of government bailouts advantages large financial institutions, directly affecting
prices of their bonds and stocks.
For these reasons INET convened a panel at a G20 preparatory meeting in Berlin on "
Moral Hazard Issues in Extended Financial Safety Nets ."
The Power Point presentations of the three panelists are presented in the order in which they gave them, since the latter ones sometimes
comment on Edward Kane
's analysis of the European banks. Kane, who coined the term "zombie bank" and who famously raised early alarms about American
savings and loans, analyzed European banks and how regulators, including the U.S. Federal Reserve, backstop them.
Peter Bofinger
, Professor of International and Monetary Economics at the University of Würzburg and an outgoing member of the German Economic Council,
followed with a discussion of how the system has changed since 2008.
Helene Schuberth
, Head of the Foreign Research Division of the Austrian National Bank, analyzed changes in the global financial governance system
since the collapse.
The panel took place as public discussion of a proposed merger between two giant German banks, the Deutsche Bank and Commerzbank,
reached fever pitch. The panelists explored issues directly relevant to such fusions, without necessarily agreeing among themselves
or with anyone at INET.
But the point Robert Johnson, INET's President, and I
made some years back , amid an earlier wave of talk about using public money to bail out European banks, remains on target:
We are only interested observers of the arm wrestling between the various EU countries over the costs of bank rescues,
state expenditures, and such. But we do think there is a clear lesson from the long history of how governments have dealt with
bank failures . [If] the European Union needs to step in to save banks, there is no reason why they have to do it for free best
practice in banking rescues is to save banks, but not bankers. That is, prevent the system from melting down with all the many
years of broad economic losses that would bring, but force out those responsible and make sure the public gets paid back for rescuing
the financial system.
The simplest way to do that is to have the state take equity in the banks it rescues and write down the equity of bank shareholders
in proportion. This can be done in several ways -- direct equity as a condition for bailout, requiring warrants that can be exercised
later, etc. The key points are for the state to take over the banks, get the bad loans rapidly out of those and into a "bad bank,"
and hold the junk for a decent interval so the rest of the market does not crater. When the banks come back to profitability,
you can cash in the warrants and sell the stock if you don't like state ownership. That way the public gets its money back .at
times states have even made a profit.
In 2019, another question, alas, is also piercing. In country after country, Social Democratic center-left parties have shrunk,
in many instances almost to nothingness. In Germany the SPD gives every sign of following the French Socialist Party into oblivion.
Would a government coalition in which the SPD holds the Finance Ministry even consider anything but guaranteeing the public a huge
piece of any upside if they rescue two failing institutions?
There needs to be an asset tax on/break up of the megas. End the hyper-agglomeration of deposits at the tail end. Not holding
my breath though. (see NY state congressional delegation)
To be generous, tax starts at $300 billion. Even then it affects only a dozen or so US banks. But would be enough to clamp
down on the hyper-scale of the largest US/world banks. The world would be better off with lot more mid-sized regional players.
Anyone who mentions Timmy Geithner without spitting did not pay attention during the Obama reign of terror. He and Obama crowed
about the Making Home Affordable Act, implying that it would save all homeowners in mortgage trouble, but conveniently neglected
to mention that less than 100 banks had signed up. The thousands of non-signatories simply continued to foreclose.
Not to mention Eric Holder's intentional non-prosecution of banksters. For these and many other reasons, especially his "Islamic
State is only the JV team" crack, Obama was one of our worst presidents.
Fergusons graph on DBK's default probabilities coincides with the ECB's ending its asset purchase programme and entering the
"reinvestment phase of the asset purchase programme". https://www.ecb.europa.eu/mopo/implement/omt/html/index.en.html
The worst of the euro zombie banks appear to be getting tense and nervous. https://www.youtube.com/watch?v=dKpzCCuHDVY
Maybe that is why Jerome Powell did his volte-face last month on gradually raising interest rates. Note that the Fed also reduced
its automatic asset roll-off. I'm curious if the other euro-zombies in the "peers" return on equity chart are are experiencing
volatility also.
Apparently the worst fate you can suffer as long as you don't go Madoff is Fuld. According to Wikipedia his company manages
a hundred million which must be humiliating. It's not as humiliating as locking the guy up in prison would be by a very long stretch.
Greenspan famously lamented that there isn't anything the regulators can really do except make empty threats. This is dishonest.
The regulations are not carved in stone like the ten commandments. In China they execute incorrigible financiers all the time.
Greenspan was never willing to counter any problem that might irritate powerful financial constituencies. For example, during
the internet stock bubble of the late 1990's, Greenspan decried the "irrational exuberance" of the stock market. The Greenspan
Fed could have raised the margin requirement for stocks to buttress this view, but did not. As I remembered reading, Greenspan
was in poor financial shape when he got his Fed job.
His subsequent performance at the Fed apparently left him a wealthy man. Real regulation by Greenspan may have adversely affected
his wealth. It may explain why Alan Greenspan would much rather let a financial bubble grow until it pops and then "fix it".
Everybody forgets (or at least does not mention) that Greenspan was a member of the Class of '43, the (mostly Canadian) earliest
members of the Objectivist Cult with guru Ayn Rand. Expecting him to act rationally is foolish. It may happen accidentally (we
do not know why he chose to let the economy expand unhindered in 1999), but you cannot count on it. In a world with information
asymmetry expecting markets to be concerned about reputation is ridiculous. To expect them to police themselves for long term
benefit is even more ridiculous.
I think Finance is currently about 13% of the S&P 500, down from the peak of about 18% or so in 2007. I think we will have
a healthy economy and improved political climate when Finance is about 8-10% of the S&P 500 which is about where I think finance
plays a healthy, but not overwhelming rentier role in the economy.
"... She soldiered through her painful stomach ailments and secretly tape-recorded 46 hours of conversations between New York Fed officials and Goldman Sachs. After being fired for refusing to soften her examination opinion on Goldman Sachs, Segarra released the tapes to ProPublica and the radio program This American Life and the story went viral from there... ..."
"... In a nutshell, the whoring works like this. There are huge financial incentives to go along, get along, and keep your mouth shut about fraud. The financial incentives encompass both the salary, pension and benefits at the New York Fed as well as the high-paying job waiting for you at a Wall Street bank or Wall Street law firm if you show you are a team player . ..."
"But the impotence one feels today -- an impotence we should never consider permanent -- does not excuse one from remaining true
to oneself, nor does it excuse capitulation to the enemy, what ever mask he may wear. Not the one facing us across the frontier or
the battle lines, which is not so much our enemy as our brothers' enemy, but the one that calls itself our protector and makes us
its slaves. The worst betrayal will always be to subordinate ourselves to this Apparatus, and to trample underfoot, in its
service, all human values in ourselves and in others."
Simone Weil
"And in some ways, it creates this false illusion that there are people out there looking out for the interest of taxpayers, the
checks and balances that are built into the system are operational, when in fact they're not. And what you're going to see and what
we are seeing is it'll be a breakdown of those governmental institutions. And you'll see governments that continue to have policies
that feed the interests of -- and I don't want to get clichéd, but the one percent or the .1 percent -- to the detriment of everyone
else...
If TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the
same winding mountain road, but this time in a faster car... I think it's inevitable. I mean, I don't think how you can look at all
the incentives that were in place going up to 2008 and see that in many ways they've only gotten worse and come to any other conclusion."
Neil Barofsky
"Written by Carmen Segarra, the petite lawyer turned bank examiner turned whistleblower turned one-woman swat team, the 340-page
tome takes the reader along on her gut-wrenching workdays for an entire seven months inside one of the most powerful and corrupted
watchdogs of the powerful and corrupted players on Wall Street – the Federal Reserve Bank of New York.
The days were literally gut-wrenching. Segarra reports that after months of being alternately gas-lighted and bullied at
the New York Fed to whip her into the ranks of the corrupted, she had to go to a gastroenterologist and learned her stomach lining
was gone.
She soldiered through her painful stomach ailments and secretly tape-recorded 46 hours of conversations between New York Fed officials
and Goldman Sachs. After being fired for refusing to soften her examination opinion on Goldman Sachs,
Segarra released the tapes to ProPublica and
the radio program This American Life and the story went viral from there...
In a nutshell, the whoring works like this. There are huge financial incentives to go along, get along, and keep your mouth shut
about fraud. The financial incentives encompass both the salary, pension and benefits at the New York Fed as well as the high-paying
job waiting for you at a Wall Street bank or Wall Street law firm if you show you are a team player .
If the Democratic leadership of the House Financial Services Committee is smart, it will reopen the Senate's aborted inquiry into
the New York Fed's labyrinthine conflicts of interest in supervising Wall Street and make removing that supervisory role a core component
of the Democrat's 2020 platform. Senator Bernie Sanders' platform can certainly be expected to continue the accurate battle cry that
'the business model of Wall Street is fraud.'"
Michael Mackenzie and James Fontanella-Khan in New York Fri, March 5, 2021, 7:00 PM
The veteran value investor John Rogers predicted the US is headed for a repeat of the
"roaring twenties" a century ago that will finally encourage investors to dump tech stocks in
favour of companies more sensitive to the economy. The founder of Ariel Investments told the
Financial Times in an interview that value investing "dinosaurs" like him stood to win as
higher economic growth and rising interest rates took the air out of some of the hottest stocks
of recent years. The US central bank is "overly optimistic that they can keep inflation under
control", he said, and higher bond market interest rates would reduce the value of future
earnings for highly popular growth stocks such as tech companies and for the kinds of
speculative companies coming to market in initial public offerings or via deals with Spacs.
"Why does the US use the winter storm as the excuse every time?" Shu Bin, director of the
State Grid Beijing Economics Research Institute, told the Global Times on Thursday, noting
that the power grid system is very vulnerable and requires constant maintenance and
upgrade.
A report from the US Department of Energy (DOE) in 2015 said that 70 percent of power
transformers in the country were 25 years or older, 60 percent of circuit breakers were 30
years or older, and 70 percent of transmission lines are 25 years or older. And the age of
these components "degrades their ability to withstand physical stresses and can result in
higher failure rates," the report noted.
[...]
"The US has no nationwide power grid network allocation plan like China. When it
encounters extreme weather, a state won't help another state like some Chinese provinces
and regions do with flexible allocation plans," Lin Boqiang, director of the China Center
for Energy Economics Research at Xiamen University, told the Global Times on Thursday.
[...]
"China uses 50Hz across the country, like the country has the same heartbeat," he said,
adding that China has never experienced such a scale of blackouts as the US.
[...]
China has mastered the top technologies such as "UHV transmission" and "flexible DC
transmission" and started the strategic "west-east electricity transmission" and
"north-south electricity transmission" projects, which in turn offer an opportunity for the
development of the country's western region.
Not as apocalyptic as it may seem. I wrote a comment on the situation in the earlier
thread
here .
Temps are starting to move up and tomorrow (Thursday) should begin the thaw. Friday is
sunny and 47 deg F for a high, then sunny weekend and following. So we're over the worst of
it. The lowest it ever got was around 0 deg F.
The infrastructure failed - the people paid to manage this failed - everybody is angry, 10
people died so far last I heard.
Rolling blackouts, some people very much suffering, townships opening warming shelters -
probably not millions of pipes bursting. Not totally iced in, just nowhere to go. People
stayed home. Businesses stayed closed. Not totally without food, people stocked up staples in
2020.
Not that dire. Absolutely fucking disgusting, and a hardship that touched everyone - some
people got really screwed and I don't know why the treatment was uneven like that - not
demographics, something with the grid. Dire, yes, and life-threatening to some or perhaps
many (numbers not clear to me yet), but not so dire as your picture suggests. Nothing like
Katrina, except the same ineptness.
But heads will roll. The governor has mandated an investigation into the regulator, ERCOT.
What follows next is of great interest. Facts will appear. I'll post anything useful.
I heard a rumor it was getting better. Could be less blackouts. Will post now in case
power goes off ;)
This Texas debacle may light a heated debate in the USA for the next weeks, for two
reasons:
1) Texas is the big alt-right/Trumpist Festung for the foreseeable future. Their
nation-building process involve catapulting Texas as the anti-California ,
the conservative version of the Shining City on the Hill, around which the USA will be
rebuilt;
2) What is happening in Texas right now goes directly to the heart of neoliberalism, which
is the political doctrine that vertebrates the alt-right. That's why conservative ideologues
such as Tucker Carlson et al are desperately scrambling on TV and social media to blame the
outage on the so-called Green New Deal.
What is happening right now in Texas, therefore, may be another episode on the battle for
the soul of the American Empire.
Last week, a large number of small-time investors drove up the price of GameStop's (GME)
stock a
historic 1,784 percent . But this was no mere spike in some obscure stock. The stock's
price spiked in part as a result of efforts by "an army of smaller investors who have been
rallying on Reddit and elsewhere online to support GameStop's stock and beat back the
professionals." These professionals were hedge fund managers who had shorted GameStop's stock.
In other words, hedge funders were betting billions that GameStop's stock would go down. But
the price went up instead, meaning hedge funds like Melvin Capital (and Citron Research) took
"a significant loss," possibly totaling
$70 billion.
There surely were plenty of insiders on both sides of this deal. Given the complexity of
various schemes employed by seasoned investors, it seems it is very unlikely that this is just
a simple matter of little Davids taking on Wall Street Goliaths.
But it also looks like that's not all that was going on. Had this only been just another
scheme by some Wall Street insiders against some other Wall Street insiders the story would
probably have ended there.
But that's not what happened. Rather, it appears that, for many of the smaller investors who
were involved, much of this "short squeeze" was conducted for the purposes of throwing a monkey
wrench in the plans of Wall Street hedge funds which exist within the rarified world of
billionaires and their friends.
Pro–Wall Street Fearmongering
The reactions to the event from media pundits and other commentators were telling in that
there was clearly fear and outrage over the fact that business as usual on Wall Street wasn't
being enforced. Predictably, much of the reaction to the Reddit rebellion was to label it a
"fiasco," " insanity
," and something sure to leave a "
trail of destruction ." The important thing was to use words designed to make it all look
like the threat to hedge funds represents some sort of grave threat to the overall economy. Jim
Lebenthal at CNBC, for example,
declared the "short-squeeze fiasco is a threat to the proper functioning of financial
markets."
The fearmongering went beyond even the usual places we hear about financial news. On The
View , for example, Meghan McCain delivered the sort of status quo
–defending bromides we've come to expect from her. She insisted the GameStop affair could
spiral into an economy-killing disaster because
If the stock ends up plunging because of this, because of GameStop and Wall Street loses
billions, at a certain point, it will impact stocks like Apple and Disney and stocks that a
lot of average Americans do invest in, and if that happens, average Americans will end up
losing even more money.
Her comment doesn't rally make any sense, and she doesn't seem to have even a rudimentary
understanding of what happened. But her comment delivered the important point: namely, that
anything that causes volatility in the market could be a disaster for every American household.
Translation: and we should all be very, very afraid if something isn't done to keep these
Reddit people --
whom she compared to the Capitol "insurrectionists" -- under control.
Of course, in a functioning and relatively unhampered market, unusual, unexpected things
happen all the time. Entrepreneurial actors do things the incumbent firms and "experts" hadn't
counted on. This leads to "instability" and big swings in prices. This is actual capitalism,
and it doesn't mean the marketplace isn't functioning properly. In fact, it probably means the
marketplace is dynamic and responsive to consumers and other market participants.
But that's not something Wall Street insiders or their pals in Washington like in the modern
era. Although Wall Streeters love to portray themselves as capitalist captains of industry, the
fact is they have very little interest in real, competitive capitalism.
Rather, we live in the era of "too big to fail" (TBTF), when market freedom means nothing
and preserving the portfolios of powerful Wall Street institutions is what really
matters.
Decades of "Too Big to Fail"
It's based on the idea that Wall Street is just too important to the whole economy, and
Washington must intervene to make sure rich guys on Wall Street stay rich. David Stockman
explains this philosophy:
[It is] the notion that the "threat of systemic risk" and a cascading contagion of losses
form the failure of any big Wall Street institution would be so calamitous that it warranted
an exemption from free market discipline.
This goes back at least to the 1994 Mexican bailout -- which was really a bailout of
investors, not of Mexico -- which solidified the process of normalizing huge transfers of
wealth from taxpayers and dollar holders to the Wall Street elite. By then, the "Greenspan put"
was already in place, with the central bank forever poised to embrace more easy money in
pursuit of propping up stock prices. Then came the bailouts of 2008 and the covd-19 avalanche
of easy money -- all of which lopsidedly benefited Wall Street over the rest of the
economy.
This "exemption from free market discipline" is what Wall Street is all about these days.
The financial sector has become accustomed to enjoying bailouts, easy money, and the resulting
financialization which puts ever greater amounts of the US economy into the hands of Wall
Street money managers. The sector is now built on corporate welfare, not "free markets." No
matter what happens, Wall Street expects the deck to be stacked in its favor.
This is why "volatility" has become a bad word, and "stability" is now the name of the game.
It's why Lebenthal thinks anything out of the ordinary is a threat to the "proper functioning
of financial markets." If some free market innovation and inventiveness actually takes place in
some small corner of the marketplace, well, then we're all expected to get very upset.
That's the way Wall Street likes it. ay_arrow 1
Kayman 8 hours ago
The marketing slogan "Too Big Too Fail" conveniently presumed Wall Street was more
important than the Real Economy. A fatal presumption.
Wall Street is a Parasite, backstopped by the Fed, who, in turn, are backstopped by the
Nation. A crumbling nation, where the Fed strangles lending/savings intermediation, and saves
the blood suckers by bleeding the dying core of America.
wmbz 8 hours ago
"The sector is now built on corporate welfare, not "free markets."
This is NOT a new thing. Corporate welfare has been in play for a long, long time. I am
amazed how long it has taken otherwise "smart" people to grasp this fact.
The only difference is, it is out in the glaring sunlight for all to see. TPTB are damn
proud of it!
junction 7 hours ago (Edited)
Except for the involvement of WallStreetBets in temporarily blocking the hedge fund bear
raid on GameStop using "naked" shorts, it is still business as usual on Wall Street. No one
at the SEC does anything but collect a salary, issue press releases and go to lunch as the
Mafia crime families. . . oops, hedge funds run "bust out" operations on businesses. The
lapdog financial press cheered on the hedge funds as they demolished American businesses. The
same gutter journalists who are not yet linking micro-manager Bezos giving up total control
of Amazon right after his cloud service illegally de-platformed Parler for violation of
bogus. made-up community standards. But then, bigger things are afoot. Bolshevik president
Biden just approved deploying B-1 bomber to Norway for the first time. Nuclear bomb carrying
B-1 bombers. Anything to distract people from how rotten things are.
Cognitive rationalist 7 hours ago
Banking financial sector: private profits for me, public losses for thee
gladitsover 8 hours ago remove link
"..the table is tilted folks. The game is rigged.."
George Carlin
Lokiban 8 hours ago
I think it was all about showing to those unawares how corrupt and rigged Wall street
truly is and they have gotten the message out bigtime.
The only question to be asked is who became the proverbial bagholder when average people saw
their 'Bitcoin-Tulipmania' chance to get out with amazing profits and with that breaking the
promise to continue pumping gme till it hits $1500.
One has always to be carefull if these kind of actions are true populism going against the
controllers or is it controllers playing their hideous games again for a reason, like the
great reset.
Greed has never been a good advisor in these times, easy sheoplemoney. It works all the
time..
COMMENT: Message: Re Reddit "WallStreetBets"
Hi Marty,
Thanks for this blog post but I think they are not trying to make money out of short
squeezing GME really, they are trying to make a point. If you follow some of the posts you
see many stories about how badly people and their families were hurt in 2008 when not a
single banker went to prison. Stories of Fathers losing jobs and houses and descending into
alcoholism in front of their children who now are part of WallStreetBets, others who had to
live off of beans and rice or what Mama could grow in the garden and went hungry etc.
So they are not buying GME to see it rise, though that is fine, they are spending money
"they can afford to lose" to punish the hedge funds that have along with bankers hurt the
little guy repeatedly. These same people IMO have bought off our politicians, removed
regulations like Glass Steagal etc all to reap profits to the top while crushing everyone
else.
Listen in June 2008 I got laid off from Palm, in July I broke my arm ( badly ), in August
some tenants left so I tried to put that property up for sale but in September Lehman fell
and the real estate agent told me the market was OFF that I could not sell and needed to rent
it with no one renting for 5 more months. At the same time in September I had a 100K home
equity line I took out just for emergencies and since I was having one I wanted to use it
– but then Wells Fargo pulled the whole thing.
So there I was Marty, sitting on the couch with a cast from fingers to shoulder watching
the world meltdown on a tiny TV set while on lots of pain killers
I was forced to use my small 401K, and ended up using the whole thing through 9 months of
disability, two surgeries and a job search that did not yield a job until the fall of
2011.
So IMO these arrogant SOB cheating hedge fund guys should pound sand on GME for once because
the casino is rigged, heads they win, tails they win, and the taxpayers lose their jobs,
homes, and pay for their bailouts.
I say give it to 'em.
Off my soapbox
REPLY: I fully understand that. I have fought against these people my whole life. I was
more interested in learning HOW the economy functioned where they were only interested in
guaranteed trades. I guess I was the Leonardo da Vinci of finance. Instead of digging up
bodies to figure out how the anatomy functioned, I searched history and developed a computer
model to try to ascertain what made the world economy tick.
A professor from Princeton where Einstein taught said to me that I reminded him of
Einstein. I was surprised, for I did not see myself as comparable to Einstein in any way. He
then explained that what he meant was my curiosity which moved me to try to figure out what
made it all function. I came to understand what he meant. If you are not CURIOUS and seek out
knowledge, then you will NEVER discover anything new! I was not dealing with the physics of
the world, but the finance. People are attracted by this blog and Socrates for that same
reason. They have that spark of curiosity and seek to also understand what makes it all tick!
We need to teach students to be curious. That is the key to all progress we desperately need
to survive this never-ending battle of authoritarianism v independence and freedom.
I have stated many times that I had discovered the 8.6-year frequency in my research I
conducted at Princeton, University in the Firestone Library. Those were fond memories for it
was an amazing resource back then as was the Royal British Newspaper Library, which I
gathered my FOREX database by sifting through the largest newspaper collection in the
world.
This was the difference between me and the "club" where I tried to understand the movement
of the ages that caused the rise and fall of civilization and therein the economy/markets,
and the "club" which seeks to manipulate everything by sheer force armed with bribes. They
own the Southern District of New York courts, the Second Circuit, and the Department of
Justice along with the SEC and CFTC. Goldman Sachs has even stacked the SEC and CFTC with
their former people. Nobody was prosecuted despite the fact that they were involved in the
looting of capital in Malaysia and Greece. And people have the audacity to claim there was
absolutely no election fraud? There is nothing we can trust that goes on in government
anymore and it will only get far worse as we head into 2032.
I am well aware of the sentiment behind this Reddit trend. My concern is simple. Don't put
it past the "club" to be in there making this seem like a sure bet and then set everyone up
for the big crash. Be careful here going into Feb/March 2021.
Last week, a large number of small-time investors drove up the price of GameStop's (GME)
stock a
historic 1,784 percent . But this was no mere spike in some obscure stock. The stock's
price spiked in part as a result of efforts by "an army of smaller investors who have been
rallying on Reddit and elsewhere online to support GameStop's stock and beat back the
professionals." These professionals were hedge fund managers who had shorted GameStop's stock.
In other words, hedge funders were betting billions that GameStop's stock would go down. But
the price went up instead, meaning hedge funds like Melvin Capital (and Citron Research) took
"a significant loss," possibly totaling
$70 billion.
There surely were plenty of insiders on both sides of this deal. Given the complexity of
various schemes employed by seasoned investors, it seems it is very unlikely that this is just
a simple matter of little Davids taking on Wall Street Goliaths.
But it also looks like that's not all that was going on. Had this only been just another
scheme by some Wall Street insiders against some other Wall Street insiders the story would
probably have ended there.
But that's not what happened. Rather, it appears that, for many of the smaller investors who
were involved, much of this "short squeeze" was conducted for the purposes of throwing a monkey
wrench in the plans of Wall Street hedge funds which exist within the rarified world of
billionaires and their friends.
Pro–Wall Street Fearmongering
The reactions to the event from media pundits and other commentators were telling in that
there was clearly fear and outrage over the fact that business as usual on Wall Street wasn't
being enforced. Predictably, much of the reaction to the Reddit rebellion was to label it a
"fiasco," " insanity
," and something sure to leave a "
trail of destruction ." The important thing was to use words designed to make it all look
like the threat to hedge funds represents some sort of grave threat to the overall economy. Jim
Lebenthal at CNBC, for example,
declared the "short-squeeze fiasco is a threat to the proper functioning of financial
markets."
The fearmongering went beyond even the usual places we hear about financial news. On The
View , for example, Meghan McCain delivered the sort of status quo
–defending bromides we've come to expect from her. She insisted the GameStop affair could
spiral into an economy-killing disaster because
If the stock ends up plunging because of this, because of GameStop and Wall Street loses
billions, at a certain point, it will impact stocks like Apple and Disney and stocks that a
lot of average Americans do invest in, and if that happens, average Americans will end up
losing even more money.
Her comment doesn't rally make any sense, and she doesn't seem to have even a rudimentary
understanding of what happened. But her comment delivered the important point: namely, that
anything that causes volatility in the market could be a disaster for every American household.
Translation: and we should all be very, very afraid if something isn't done to keep these
Reddit people --
whom she compared to the Capitol "insurrectionists" -- under control.
Of course, in a functioning and relatively unhampered market, unusual, unexpected things
happen all the time. Entrepreneurial actors do things the incumbent firms and "experts" hadn't
counted on. This leads to "instability" and big swings in prices. This is actual capitalism,
and it doesn't mean the marketplace isn't functioning properly. In fact, it probably means the
marketplace is dynamic and responsive to consumers and other market participants.
But that's not something Wall Street insiders or their pals in Washington like in the modern
era. Although Wall Streeters love to portray themselves as capitalist captains of industry, the
fact is they have very little interest in real, competitive capitalism.
Rather, we live in the era of "too big to fail" (TBTF), when market freedom means nothing
and preserving the portfolios of powerful Wall Street institutions is what really
matters.
Decades of "Too Big to Fail"
It's based on the idea that Wall Street is just too important to the whole economy, and
Washington must intervene to make sure rich guys on Wall Street stay rich. David Stockman
explains this philosophy:
[It is] the notion that the "threat of systemic risk" and a cascading contagion of losses
form the failure of any big Wall Street institution would be so calamitous that it warranted
an exemption from free market discipline.
This goes back at least to the 1994 Mexican bailout -- which was really a bailout of
investors, not of Mexico -- which solidified the process of normalizing huge transfers of
wealth from taxpayers and dollar holders to the Wall Street elite. By then, the "Greenspan put"
was already in place, with the central bank forever poised to embrace more easy money in
pursuit of propping up stock prices. Then came the bailouts of 2008 and the covd-19 avalanche
of easy money -- all of which lopsidedly benefited Wall Street over the rest of the
economy.
This "exemption from free market discipline" is what Wall Street is all about these days.
The financial sector has become accustomed to enjoying bailouts, easy money, and the resulting
financialization which puts ever greater amounts of the US economy into the hands of Wall
Street money managers. The sector is now built on corporate welfare, not "free markets." No
matter what happens, Wall Street expects the deck to be stacked in its favor.
This is why "volatility" has become a bad word, and "stability" is now the name of the game.
It's why Lebenthal thinks anything out of the ordinary is a threat to the "proper functioning
of financial markets." If some free market innovation and inventiveness actually takes place in
some small corner of the marketplace, well, then we're all expected to get very upset.
That's the way Wall Street likes it. ay_arrow 1
Kayman 8 hours ago
The marketing slogan "Too Big Too Fail" conveniently presumed Wall Street was more
important than the Real Economy. A fatal presumption.
Wall Street is a Parasite, backstopped by the Fed, who, in turn, are backstopped by the
Nation. A crumbling nation, where the Fed strangles lending/savings intermediation, and saves
the blood suckers by bleeding the dying core of America.
wmbz 8 hours ago
"The sector is now built on corporate welfare, not "free markets."
This is NOT a new thing. Corporate welfare has been in play for a long, long time. I am
amazed how long it has taken otherwise "smart" people to grasp this fact.
The only difference is, it is out in the glaring sunlight for all to see. TPTB are damn
proud of it!
junction 7 hours ago (Edited)
Except for the involvement of WallStreetBets in temporarily blocking the hedge fund bear
raid on GameStop using "naked" shorts, it is still business as usual on Wall Street. No one
at the SEC does anything but collect a salary, issue press releases and go to lunch as the
Mafia crime families. . . oops, hedge funds run "bust out" operations on businesses. The
lapdog financial press cheered on the hedge funds as they demolished American businesses. The
same gutter journalists who are not yet linking micro-manager Bezos giving up total control
of Amazon right after his cloud service illegally de-platformed Parler for violation of
bogus. made-up community standards. But then, bigger things are afoot. Bolshevik president
Biden just approved deploying B-1 bomber to Norway for the first time. Nuclear bomb carrying
B-1 bombers. Anything to distract people from how rotten things are.
Cognitive rationalist 7 hours ago
Banking financial sector: private profits for me, public losses for thee
gladitsover 8 hours ago remove link
"..the table is tilted folks. The game is rigged.."
George Carlin
Lokiban 8 hours ago
I think it was all about showing to those unawares how corrupt and rigged Wall street
truly is and they have gotten the message out bigtime.
The only question to be asked is who became the proverbial bagholder when average people saw
their 'Bitcoin-Tulipmania' chance to get out with amazing profits and with that breaking the
promise to continue pumping gme till it hits $1500.
One has always to be carefull if these kind of actions are true populism going against the
controllers or is it controllers playing their hideous games again for a reason, like the
great reset.
Greed has never been a good advisor in these times, easy sheoplemoney. It works all the
time..
There is a massive threat to our capital markets, the free market in general, and fair
dealings overall. And no, it's not China. It's a homegrown threat that everyone has been afraid
to talk about.
Until now.
That fear has now turned into rage.
Hordes of new retail investors are banding together to take on Wall Street. They are not
willing to sit back and watch naked short sellers, funded by big banks, manipulate stocks, harm
companies, and fleece shareholders.
The battle that launched this week over GameStop between retail investors and Wall
Street-backed naked short sellers is the beginning of a war that could change everything.
It's a global problem, but it poses the greatest threat to Canadian capital markets, where
naked short selling -- the process of selling shares you don't own, thereby creating
counterfeit or 'phantom' shares -- survives and remains under the regulatory radar because
Broker-Dealers do not have to report failing trades until they exceed 10 days.
This is an egregious act against capital markets, and it's caused billions of dollars in
damage.
Make no mistake about the enormity of this threat: Both foreign and domestic schemers have
attacked Canada in an effort to bring down the stock prices of its publicly listed
companies.
In Canada alone, hundreds of billions of dollars have been vaporized from pension funds and
regular, everyday Canadians because of this, according to Texas-based lawyer James W.
Christian. Christian and his firm Christian Smith & Jewell LLP are heavy hitters in
litigation related to stock manipulation and have prosecuted over 20 cases involving naked
short selling and spoofing in the last 20 years.
"Hundreds of billions have been stolen from everyday Canadians and Americans and pension
funds alike, and this has jeopardized the integrity of Canada's capital markets and the
integral process of capital creation for entrepreneurs and job creation for the economy,"
Christian told Oilprice.com.
The Dangerous Naked Short-Selling MO
In order to [legally] sell a stock short, traders must first locate and secure a borrow
against the shares they intend to sell. A broker who enters such a trade must have assurance
that his client will make settlement.
While "long" sales mean the seller owns the stock, short sales can be either
"covered" or "naked" . A covered short means that the short seller has
already "borrowed" or has located or arranged to borrow the shares when the short sale is made.
Whereas, a naked short means the short seller is selling shares it doesn't own
and has made no arrangements to buy. The seller cannot cover or "settle" in this instance,
which means they are selling "ghost" or "phantom" shares that simply do not exist without their
action.
When you have the ability to sell an unlimited number of non-existent phantom shares in a
publicly-traded company, you then have the power to destroy and manipulate the share price at
your own will.
And big banks and financial institutions are turning a blind eye to some of the accounts
that routinely participate in these illegal transactions because of the large fees they collect
from them. These institutions are actively facilitating the destruction of shareholder value in
return for short term windfalls in the form of trading fees. They are a major part of the
problem and are complicit in aiding these accounts to create counterfeit shares.
The funds behind this are hyper sophisticated and know all the rules and tricks needed to
exploit the regulators to buy themselves time to cover their short positions. According to
multiple accounts from traders, lawyers, and businesses who have become victims of the worst of
the worst in this game, short-sellers sometimes manage to stay naked for months on end, in
clear violation of even the most relaxed securities laws.
The short-sellers and funds who participate in this manipulation almost always finance
undisclosed "short reports" which they research & prepare in advance, before paying
well-known short-selling groups to publish and market their reports (often without any form of
disclosure) to broad audiences in order to further push the stock down artificially. There's no
doubt that these reports are intended to create maximum fear amongst retail investors and to
push them to sell their shares as quickly as possible.
That is market manipulation. Plain and simple.
Their MO is to short weak, vulnerable companies by putting out negative reports that drive
down their share price as much as possible. This ensures that the shorted company in question
no longer has the ability to obtain financing, putting them at the mercy of the same funds that
were just shorting them. After cratering the shorted company's share price, the funds then
start offering these companies financing usually through convertibles with a warrant attachment
as a hedge (or potential future cover) against their short; and the companies take the offers
because they have no choice left. Rinse and Repeat.
In addition to the foregoing madness, brokers are often complicit in these sorts of crimes
through their booking of client shares as "long" when they are in fact "short". This is where
the practice moves from a regulatory gray area to conduct worthy of prison time.
Naked short selling was officially labeled illegal in the U.S. and Europe after the
2008/2009 financial crisis.
Making it illegal didn't stop it from happening, however, because some of the more creative
traders have discovered convenient gaps between paper and electronic trading systems, and they
have taken advantage of those gaps to short stocks.
Still, it gets even more sinister.
According to Christian, "global working groups" coordinate their attacks on specifically
targeted companies in a "Mafia-like" strategy.
Journalists are paid off, along with social media influencers and third-party research
houses that are funded by what amounts to a conspiracy. Together, they collaborate to spread
lies and negative narratives to destroy a stock.
At its most illegal, there is an insider-trading element that should enrage regulators. The
MO is to infiltrate a company through disgruntled insiders or lawyers close to the company.
These sources are used to obtain insider information that is then leaked to damage the
company.
Often, these illegal transactions involve paying off "informants", journalists, influencers,
and "researchers" are difficult to trace because they are made from offshore accounts that are
shut down once the deed is done.
Likewise, the "shorts" disguised as longs can be difficult to trace when the perpetrators
have direct market access to trading systems. These trades are usually undetected until the
trades fail or miss settlement. At that point, the account will move the position to another
broker-dealer and start the process all over again.
The collusion widens when brokers and financial institutions become complicit in
purposefully mislabeling "shorts" as "longs", sweeping the illegal transactions under the rug
and off of regulatory radar.
"Spoofing" and "layering" have also become pervasive techniques to avoid regulator
attention. Spoofing, as the name suggests, involves short sellers creating fake selling
pressure on their targeted stocks to drive prices lower. They accomplish this by submitting
fake offerings in "layers" at different prices to create a mirage.
Finally, these bad actors manage to skirt the settlement system, which is supposed to
"clear" on what is called a T+2 basis . That
means that any failed trades must be bought or dealt with within 3 days. In other words, if you
buy on Monday (your "T" or transaction day), it has to be settled by Wednesday.
Unfortunately, Canadian regulators have a hard time keeping up with this system, and failed
trades are often left outstanding for much longer periods than T+2. These failing trades are
constantly being traded to reset the settlement clock and move the failing trade to the back of
the line. The failures of a centralized system
According to Christian, it can be T+12 days before a failed trade is even brought to the
attention of the IIROC (the Investment Industry Regulatory Organization of Canada)
Prime Brokers and Banks are Complicit
This is one of Wall Street's biggest profit center and fines levied against them are merely
a minor cost of doing business.
Some banks are getting rich off of these naked short sellers. The profits off this kind of
lending are tantalizing, indeed. Brokers are lending stocks they don't own for massive profit
and sizable bonuses.
This layer of what many have now called a "criminal organization" is the toughest for
regulators to deal with, regardless of the illegal nature of these activities.
Prime brokers lend cash account shares that are absolutely not allowed to be lent. They lend
them to short-sellers in order to facilitate them in settling their naked shorts.
It's not that the regulators are in the dark on this. They are, in fact, handing out fines,
left and right -- both for illegal lending and for mismarking "shorts" and "longs" to evade
regulatory scrutiny. The problem is that these fines pale in comparison to the profits earned
through these activities.
And banks in Canada in particular are basically writing the rules themselves, recently
making it easier (and legal) to lend out cash account shares.
Nor do law firms have clean hands. They help short sellers bankrupt targeted companies
through court proceedings, a process that eventually leads to the disappearance of evidence of
naked shorts on the bank books.
"How much has been stolen through this fraudulent system globally is anyone's guess," says
Christian, "but the number begins with a 'T' (trillions)."
The list of fines for enabling and engaging in manipulative activity that destroys
companies' stock prices may seem to carry big numbers from the retail investor's perspective,
but they are not even close to being significant enough to deter such actions:
- The SEC charged Citigroup's principal U.S. broker-deal subsidiary in 2011 with misleading
investors about a $1 billion collateralized debt obligation (CDO) tied to the U.S. housing
market. Citigroup had bet against investors as the housing market showed signs of distress. The
CDO defaulted only months later, causing severe losses for investors and a profit of $160
million (just in fees and trading profits). Citigroup paid $285 million to settle these SEC
charges.
- In 2016, Goldman, Sachs & Co. agreed to pay $15 million to settle SEC charges that
its securities lending practices violated federal regulations. To wit: The SEC found that
Goldman Sachs was mismarking logs and allowed customers to engage in short selling without
determining whether the securities could reasonably be borrowed at settlement.
- In 2013, a Charles Schwab subsidiary was found liable by the SEC for a naked short-selling
scheme and fined
$8.2 million .
- The SEC charged two Merrill Lynch entities in 2015 with using "inaccurate data in the
course of executing short sale orders", fining them $11 million.
- And most recently, Canadian Cormark Securities Inc and two others came under the SEC's
radar. On December 21, SEC instituted cease-and-desist orders against
Cormark. It also settled charges against Cormark and two other Canada-based broker deals for
"providing incorrect order-making information that caused an executing broker's repeated
violations of Regulation SHO". According to the SEC, Cormark and ITG Canada caused more than
200 sale orders from a single hedge fund, to the tune of more than $660 million between August
2016 and October 2017, to be mismarked as "long" when they were, in fact, "short" -- a clear
violation of Regulation SHO. Cormark agreed to pay a penalty of $800,000 , while ITG Canada -- one of
the other broker-dealers charged -- agreed to pay a penalty of $200,000. Charging and fining
Cormark is only the tip of the iceberg. The real question is on whose behalf was Cormark making
the naked short sells?
- In August 2020, Bank of Nova Scotia (Scotiabank) was fined
$127 million over civil and criminal allegations in connection with its role in a massive
price-manipulation scheme.
According to one Toronto-based Canadian trader who spoke to Oilprice.com on condition of
anonymity, "traders are the gatekeeper for the capital markets and they're not doing a very
good job because it's lucrative to turn a blind eye." This game is set to end in the near
future, and it is only a matter of time.
"These traders are breaking a variety of regulations, and they are taking this risk on
because of the size of the account," he said. "They have a responsibility to turn these
trades down. Whoever is doing this is breaking regulations [for the short seller] and they know
he is not going to be able to make a settlement. As a gatekeeper, it is their regulatory
responsibility to turn these trades away. Instead, they are breaking the law willfully and with
full knowledge of what they are doing."
"If you control the settlement system, you can do whatever you want," the source
said. "The compliance officers have no teeth because the banks are making big money. They
over-lend the stocks; they lend from cash account shares to cover some of these fails for
instance, if there are 20 million shares they sold 'long', they can cover by borrowing from
cash account shares."
The Naked Truth
In what he calls our "ominous financial reality", Tom C.W. Lin, attorney at law, details how
"millions of dollars can vanish in seconds, rogue actors can halt trading of billion-dollar
companies, and trillion-dollar financial markets can be distorted with a simple click or a few
lines of code".
Every investor and every institution is at risk, writes Lin.
The naked truth is this: Investors stand no chance in the face of naked short sellers. It's
a game rigged in the favor of a sophisticated short cartel and Wall Street giants.
Now, with online trading making it easier to democratize trading, there are calls for
regulators to make moves against these bad actors to ensure that North America's capital
markets remain protected, and retail investors are treated fairly.
The recent GameStop saga is retail fighting back against the shorting powers, and it's a
wonderful thing to see - but is it a futile punch or the start of something bigger? The
positive take away from the events the past week is that the term "short selling" has been
introduced to the public and will surely gather more scrutiny.
Washington is gearing up to get involved. That means that we can expect the full power of
Washington, not just the regulators, to be thrown behind protecting the retail investors from
insidious short sellers and the bankers and prime brokers who are profiting beyond belief from
these manipulative schemes.
The pressure is mounting in Canada, too, where laxer rules have been a huge boon for
manipulators. The US short cartel has preyed upon the Canadian markets for decades as they know
the regulators rarely take action. It is truly the wild west.
Just over a year ago,
McMillan published a lengthy report on the issue from the Canadian perspective, concluding
that there are significant weaknesses in the regulatory regime.
While covered short-selling itself has undeniable benefits in providing liquidity and
facilitating price discovery, and while the Canadian regulators' hands-off approach has
attracted many people to its capital markets, there are significant weaknesses that threaten to
bring the whole house of cards down.
McMillan also noted that "the number of short campaigns in Canada is utterly
disproportionate to the size of our capital markets when compared to the United States, the
European Union, and Australia".
Taking Wall Street's side in this battle, Bloomberg notes that Wall Street
has survived "numerous other attacks" over the centuries, "but the GameStop uprising could mark
the end of an era for the public short", suggesting that these actors are "long-vilified folks
who try to root out corporate wrongdoing".
Bloomberg even attempts to victimize Andrew Left's Citron Research, which -- amid all the
chaos -- has just announced that it has exited the short-selling game after two decades.
Nothing could be further from the truth. Short sellers, particularly the naked variety, are
not helping police the markets and route out bad companies, as Bloomberg suggests. Naked short
sellers are not motivated by moral and ethical reasons, but by profit alone. They attack good,
but weak and vulnerable companies. They are not the saviors of capital markets, but the
destroyers. Andrew Left may be a "casualty", but he is not a victim. Nor likely are the hedge
funds with whom he has been working.
In a petition initiated by Change.org, the petitioners urge the SEC and FINRA to
investigate Left and Citron Research, noting: "While information Citron Research publishes are
carefully selected and distributed in ways that do not break the law at first sight, the SEC
and FINRA have overlooked the fact that Left and Citron gains are a result of distributing
catalysts in an anticipation of substantial price changes due to public response in either
panic, encouragement, or simply a catalyst action wave ride. Their job as a company is to
create the most amount of panic shortly after taking a trading position so they and their
clients can make the most amount of financial gains at the expense of regular investors."
On January 25 th , the
Capital Markets Modernization Taskforce published its final report for Ontario's Minister
of Finance, noting that while naked short selling has been illegal in the United States since
2008, it remains a legal loophole in Canada. The task force is recommending that the Ministry
ban this practice that allows for the short-selling of tradable assets without first borrowing
the security.
The National Coalition Against Naked Short Selling - Failing to Deliver Securities (NCANS),
which takes pains to emphasize that is not in any way against short-selling, notes: "Naked
short-selling transfers the risk exposure and the hedging expense of the derivatives market
makers onto the backs of equity investors, without any corresponding benefit to them. This is
fundamentally unfair, and must stop."
Across North America, the issue is about to reach a fever pitch over GameStop. For once,
regular retail investors have a voice to use against Wall Street. And for once, Washington
appears to be listening. The House and Senate both have hearings
scheduled over the GameStop saga.
Paradoxically, the same company that basically started the retail investor coup -- zero-fee
trading app Robinhood -- is now under fire for pulling the rug out from under the same
democratic movement.
After retail investors joined forces against Wall Street short-sellers to push GameStop
stock from $20 to a high of over $480 in less than a week, Robinhood made the very unpopular
move of instituting
a ban on buying for retail investors. Under the rules, Wall Street could still buy and
sell, but retail investors could only sell. This new band of investors -- which includes pretty
much all of Robinhood's clientele -- are up in arms, with customers now suing. They won't go
away, and they have Washington's ear and Twitter and Reddit's social media power. This is
shaping up to be an uprising.
What happens with GameStop next could end up dictating a new form of capital markets
democracy that levels the playing field and punishes the Mafia-like elements of Wall Street
that have been fleecing investors and destroying companies for years.
Retail investors want to clean up capital markets, and they just might be powerful enough to
do it now. That's a serious wake-up call for both naked short sellers and the investing
public.
"... Today's cultural dominance in much of the South and chunks of the Midwest by boobtoob preachers, Dominationists and the highly heretical oxymoronical "Christian" Zioni$ts can be seen as the afterbirth of cultural Calvinism. Calvinism is Talmudic in its essence and squats at the nexus of what they like to call "Judeo-Christian Civilization". ..."
The author Jafee is confused on Bentham, because Bentham was confused himself, or was a Jewish agent of mammon.
The highlighted terms accord with Benthamian Utilitarianism -- the greatest human happiness of the greatest human number.[1]
Much (but surely not all) pertinent history suggests that Bentham's thinking influenced the construction of the Preamble
The English philosopher Jeremey Bentham (1748-1832) was a defender of usury, which is the opposite of happiness for the greatest
human number.
In 1787 Jeremey Bentham wrote "In Defence of Usury." Bentham was the son of a rich lawyer, and a lawyer himself, not an economist,
which is why he was confused. Bentham created the present mis-definition of usury which prevails to today, so he was very damaging.
"The taking of grater interest than the law allows, or the taking of greater interest than is usual."
Bentham ignored hundreds of years of the Catholic Scholastics work on usury, and also ignored Aristotle. Actually Bentham attacked
Aristotle in order to spread his B.S. Bentham's father was Jewish, and Bentham also ignored the fairly strong Old Testament admonitions
against usury.
Bentham spread the same erroneous B.S. that Calvin did, and both men did enormous damage, and whether by design or confusion
are NOT for the common good. Their connections to our (((friends))) is suspicious.
A Persian Daric is a gold coin. Bentham said this: Though all money in nature is barren, though a Daric would not beget another
Daric yet for a Daric which a man borrowed he might get a ram and couple of ewes and the ewes would probably not be barren (pages
98 to 101 of his screed)
Aristotle and the Catholic Schoolmen clearly showed that it was the Ewes that were fertile, not the coins.
Bentham or Calvin could not read with comprehension and twisted words into new meanings. This twisted language persists in
the brains of modern humans as confusion.
As if every Daric is going to buy an Ewe in order to reproduce.
By 1850 John Whipple wrote "The Importance of Usury Laws – An answer to Jeremey Bentham."
"The purpose of money is to facilitate exchange. It was never intended as an article of trade, as an article possessing an
inherent value in itself, and further than as representative or test of the value of all other articles."
It undoubtedly admits of private ownership, but of an ownership that is not absolute, like the product of individual industry,
but qualified and limited by the special use for which it was designed.
And
The power of money over every other article, arises out of the artificial character given to it by the STATE , AND NOT
OUT OF THE QUALITIES OF THE MATERIAL WHICH IT IS COMPOSED.
Bentham also argued that anti-usury laws were due to prejudice against Jews. Whipple was not frightened by the Jew trick of
anti-semitism claims. Whipple said this in reply, "The real truth is this feeling which he calls prejudice is the result of the
moral instinct of mankind."
Whipple wasn't afraid of calling out the Jew.
In other words, Bentham did not have the moral instinct of mankind, but instead was a usurer, hiding behind his utilitarianism
doctrine.
My view is that the preamble general welfare clause is direct lineage that comes through Benjamin Franklin and his experiences
in the Philadelphia Colony. Franklin was definitely NOT a usurer, and was not confused on money.
The Preamble of the constitution reflects a Liebnizian metaphysic reflected in the notion of the pursuit of happiness, were
are not talking utilitarianism, but a recognition that man is made in the image of the creator, Imago Dei where happiness
reflects an acknowledgement that we are actually creative beings where happiness is a reflection of such creativity, above mere
acquisition of 'property' as the Confederacy devolved the phrase to "Life, Liberty and Property"
@Mefobills eply distorted by Calvinistic Puritanism and its "Chosen People" mythos.
Much of the religious fervor which dominated the American frontier in the latter decades of the 18th Century and early 19th–they
called it "The Great Awakening" -- was infused with the patriarchal form of religiosity as ignited by Calvinistic tropes and memes.
Today's cultural dominance in much of the South and chunks of the Midwest by boobtoob preachers, Dominationists and the
highly heretical oxymoronical "Christian" Zioni$ts can be seen as the afterbirth of cultural Calvinism. Calvinism is Talmudic
in its essence and squats at the nexus of what they like to call "Judeo-Christian Civilization".
My preference is to employ the more objectively truthful description: the "JudieChristie MagickMindfuck.
@Leonard R. Jaffee Anti-semitism card. Bentham even attacked Aristotle for corrupting Christianity.
In Bentham's book, Bentham associates some of the positive attributes of thrift with money lending. Money lending becomes on
the same plane as thrift in his worldview. An here is the coup-de-gras: Compound interest was forbidden in Bentham's day, and
Bentham urged its legalization.
A compound curve for interest is outside of nature, as the claims on nature grow exponentially. Nature does not grow exponentially.
Nature and labor cannot pay the claims, and society polarizes. Jesus started his mission on the Jubilee year, as Jubilees are
coded in the Bible to prevent polarization.
If Bentham wasn't a Jew, he certainly had the Jewish spirit. Bentham was not for the common good.
"... "I am also reading the the next focus of the little people investors is the highly manipulated precious metals markets.....I love the smell of burning Wall Street in the morning." ..."
"... Back in the Oughts when the fraudulent mortgages were grossly inflating Real Estate Investment Trusts (REITs), there were many instances of naked short selling to keep honest REITs down, activities I learned firsthand. We formed a shareholders organization that lobbied the SEC to enforce its laws but to no avail--the regulators were well captured and did zip. ..."
"... There's short selling, and then there's naked short selling. Why do the markets require naked short selling? If those hedge funds already owned the stocks that they are selling short, they would not be in such trouble now. ..."
Early this week a few amateur stock trading nerds decided to promote a stock that was heavily shortened by certain hedge funds.
The idea was to raise the stock price of Game Stop Corp., a vendor for computer games, by having lots of small stock traders to
buy into it. The hedge fund that shortened the stock, and thereby bet on a dropping stock price, would then make huge losses while
the many small buyers would potentially profit.
Instead of greed, this latest bout of speculation, and especially the extraordinary excitement at GameStop, has a different
emotional driver: anger. The people investing today are driven by righteous anger, about generational injustice, about what
they see as the corruption and unfairness of the way banks were bailed out in 2008 without having to pay legal penalties later,
and about lacerating poverty and inequality. This makes it unlike any of the speculative rallies and crashes that have preceded
it.
The movement was successful. The stock price of Game Stop Corp. rose from some $10 to over $400 within just a few days. The
short seller
had
to take cover under a larger firm:
Hedge fund Melvin Capital closed out its short position in GameStop on Tuesday after taking huge losses as a target of the
army of retail investors. Citadel and Point72 have infused close to $3 billion into Gabe Plotkin's hedge fund to shore up its
finances.
I'm shocked! Absolutely shocked to see that the game of finance is rigged!!!!/snark
There have not been market fundamentals since the beginning of financialization in 1971 when money became fiat instead of gold
backed. I find it interesting that it has taken 50 years for the cancer of financialization to fully compromise the host. It will
be interesting to see where this goes from here.
I think the speed of decline of empire is speeding up as noted by the increase in international investment in China.
I am also reading the the next focus of the little people investors is the highly manipulated precious metals markets.....I
love the smell of burning Wall Street in the morning.
"I am also reading the the next focus of the little people investors is the highly manipulated precious metals markets.....I
love the smell of burning Wall Street in the morning."
Is Max Keiser going after the silver market again? I bet he was posting on r/Wallstreetbets to stir things up!
Back in the Oughts when the fraudulent mortgages were grossly inflating Real Estate Investment Trusts (REITs), there were many
instances of naked short selling to keep honest REITs down, activities I learned firsthand. We formed a shareholders organization
that lobbied the SEC to enforce its laws but to no avail--the regulators were well captured and did zip.
We even ran full pages ads in the NY Times and WaPost to add visibility to our justifiable outrage, which was well proven when
the bubble burst.
But Obama didn't do his job and enforce the law, and the entire mess is far worse now. This episode epitomizes the amazing
amounts of corruption masquerading as well regulated markets and an equitable financial system.
I support Hudson's debt forgiveness for the main reason it will bankrupt the debt holders--the Financial Parasites--who are
also the beneficiaries of the corrupt system; and with their destruction, will allow for the rise of the Public Financial Utility
that will restore law and order to that realm of the economy. Yes, this must be seen as yet another episode of the longstanding
Class War, one of the most brazen ever.
There's short selling, and then there's naked short selling. Why do the markets require naked short selling? If those hedge
funds already owned the stocks that they are selling short, they would not be in such trouble now.
Citadel and Point72 have infused close to $3 billion into Gabe Plotkin's hedge fund to shore up its finances.
-b
How Robinhood was rigged:
Robinhood sells its orderflow to Citadel for execution. Citadel then chiselled the retail investor for pennies per trade by frontrunning (think high freq trading) before execution
of retail order, inflating the price and cheating the customer.
Citadel bailed out Citron, essentially inheriting the short position. Citadel then threatened Robinhood with refusing payment for orderflow
The wonderful world you talk about was not experienced by the peoples of Guatemala, Iran,
Chile, Honduras, Nicaragua, Mexico, Argentinia, Haiti, Vietnam, Laos, Cambodia, Iran, Iraq,
Libya, Syria and many of the homeless and destitute in the US, UK, Japan etc. The wonderful
world you describe is an illusion.
There is a line from the 1960s Science Fiction series called the Invaders from another
galaxy who wish take over the world. At the beginning of each episode the narrator says " they
wish to take over the world and make it their world".
The Transnational Financiers have been working towards that goal for centuries!!!!
Like the petrodollars, WTO better known as globalization, was formed in 1995 after the
fall of Eastern blocks ,to dominate and control the world trade in US fiat currency specially
when China with her cheap skilled labor was to become major world manufacturers of goods.
Basically like oil America agreed not to impose tariff on goods they consumed if you trade
and exported on their fiat currency which costed US nothing to produce. Obviously unlike oil
trade this globalization of trade in US dollar could not work, since unlike oil trade America
couldn't politically dominated and control the good manufacturing countries, like it could,
with small oil producing countries. The period of free trade in goods and energy is coming to
an end, therefore US needs to lower her standards of living, or to go to major wars with
other resources hungry powers to continue colonizing the third world resources and labor.
Either way the end result will be the sam as for, not so Great Britain, ottomans, Spanish,
Persian empires, the only obvious difference shorter empire.
"The middleman and the host society come in conflict because elements in each group have incompatible goals. To say this is
to deny the viewpoint common in the sociological literature that host hostility is self-generated (from psychological problems
or cultural traditions)."
Edna Bonacich, "A Theory of Middleman Minorities," 1973.
[1]
An interesting accompaniment to Nathan Cofnas's 2018 attempted debunking of Kevin MacDonald's work on Jews was the subtle resurfacing
of Steven Pinker's claim that a more plausible theory of the Jewish historical experience can be found in "Thomas Sowell's convincing
analysis of 'middleman minorities' such as the Jews, presented in his magisterial study of migration, race, conquest, and culture."
Pinker first involved himself in criticism of MacDonald's work in a
letter to Slate , in January 2000, where he made the
above comment. A mere teenager in January 2000, it was only in the wake of the Cofnas affair that I first discovered and read Pinker's
initial response to MacDonald's theory. It goes without saying that I disagreed with almost everything Pinker had to say, but I was
especially vexed by his invocation of the "middleman minority" theory, something I've been familiar with for over a decade and always
found strongly lacking. Pinker himself, of course, has relatively little expertise in the area, his only comment on the theme coming
from a quasi-memoir on Jewish intelligence written for
New Republic . Additionally, his gushing use
of persuasive language ("convincing," "magisterial") to describe Thomas Sowell's extremely derivative and now rather dated Migrations
and Cultures: A World View (1996) struck me as a wholly contrived inflation of what isn't really a rival theory at all,
and certainly not a Sowell innovation. In fact, the history of "middleman minority" theory, and especially its application to the
Jews, has a patchy, chequered, and ambiguous history that is worth exploring in its own right. The following essay is intended to
provide such a history, as well as to broadly assess the merits and inadequacies of exploring Jewish history through this lens, and
also the ways it complements, and falls short of, Kevin MacDonald's theory.
History of the Theory
The comparing of Jews with other sojourning or diaspora trading peoples is far from new, and has even been a staple of anti-Jewish
writing since at least the Enlightenment. Voltaire, for example, wrote in his Oeuvres Complètes (Geneva, 1756) and Dictionnaire
Philosophique (Basle, 1764) that "The Guebers [Parsis in the modern terminology], the Banyans [Indian merchants] and the Jews,
are the only nations which exist dispersed, having no alliance with any people, are perpetuated among foreign nations, and continue
apart from the rest of the world." [2]
In the course of his essay, however, Voltaire concluded that, some surface similarities aside, "It is certain that the Jewish nation
is the most singular that the world has ever seen." Bruno Bauer (1809 -- 1882), the German Protestant theologian, philosopher and
historian, also used the example of the Parsis and Overseas Indians, writing in The Jewish Problem (1843),
The base [of the tenacity of the Jewish national spirit] is lack of ability to develop with history, it is the reason of the
quite unhistorical character of that nation, and this again is due to its oriental nature. Such stationary nations exist in the
Orient, because there human liberty and the possibility of progress are still limited. In the Orient and in India, we still find
Parsees [sic] living in dispersion and worshipping the holy fire of Ormuz.
[3]
After Voltaire, commentary on the relationship between the economic activity of the Jews and other aspects of their behavior and
history, a key theme in modern middleman minority theory, were common points of discussion and debate. Jakob Friedrich Fries (1773
-- 1843), an avowedly anti-Semitic German philosopher, argued in his essay On the Danger to the Well-Being and Character of the
Germans Presented by the Jews (1816), that Jews adopted their historical middleman role willingly, out of a hunger for profit
and an innate sense of separateness, rather than being forced into it by broader economic structures and contexts (which again are
a major focus of modern middleman minority theory). For Fries,
Both in Germany and abroad the Jews had free states where they enjoyed every right, and even countries where they reigned --
but their sordidness, their mania for deceitful, second-hand dealing always remained the same. They shy away from industrious
occupations not because they are hindered from pursuing them but simply because they do not want to.
Following Bauer and Fries -- and before modern scholarship on the subject, the most prominent invocation of ideas similar to modern
middleman minority theory can be observed in the work of Karl Marx. In fact, Marx's essay On the Jewish Problem is an explicit
reply to Bauer, with Marx accusing Bauer of "a one-sided conception of the Jewish problem."
[4] Marx decried Bauer's focus on religious
matters, perceiving the roots of the Jewish problem to reside instead in resource competition and raw economics. In many of his arguments
and assessments of the economic and sociological position of the Jews, Marx anticipated Edna Bonacich (1940 -- ), the Jewish Marxist
anti-Zionist sociologist who essentially invented middleman minority theory in its modern form (and whose work will be discussed
below), in arguing for a structural-contextual explanation of the middleman role of the Jews. In this view, the historical development
of Capital essentially invites and entices certain sojourning or diaspora groups, including the Jews, to adopt lucrative but exploitative
and antagonistic roles within society. In the words of Marx, "we recognize therefore in Judaism a generally present anti-social element
which has been raised to its present peak by historical development , in which the Jews eagerly assisted ." [emphasis
added] These antagonistic roles then generate host hostility, which reinforces ethnocentrism and negative characteristics in the
minority, accelerating and deepening conflict.
Marx's emphasis on economic opportunity and the capitalist superstructure influenced later writers such as the German economist
Wilhelm Roscher (1817 -- 1894), Werner Sombart (1863 -- 1941), Max Weber (1864 -- 1920), and Georg Simmel (1858 -- 1918), all of
whom attempted in some form to trace the relationship of ethnicity to occupational choice (a major concern of modern middleman minority
theory), with particular attention paid to the Jews. In keeping with his flamboyant Marxism, Sombart was closest to Marx's ideas
on the Jews, arguing in The Jews and Modern Capitalism (1911) that Capital had drawn Jews into their influential, exploitative,
and lucrative roles in such a comprehensive manner that Jews had become a kind of ur-middleman minority, and thus were both the prime
movers of modern capitalism and the very embodiment of exploitative capital itself. Later, in Der moderne Kapitalismus (1913),
Sombart claimed that the middleman nature of the Jews had become endemic in society, creating generations of mere "traders," a bourgeois
"Jewish species" whose entire intellectual and emotional world is "directed to the money value of conditions and dealings, who therefore
calculates everything in terms of money." This "spirit of Moloch" compelled the entrepreneur to "make money relentlessly until at
last he conceives this as the real goal of all activity and all existence."
[5] For Sombart, the origins of the
worst of modern capitalism can be found in the early middleman role of the Jews, their medieval semi-nomadic quest for usury-derived
profit and Victorian hawking of shoddy goods being a precursor to modern advertising and the mass production of superfluous and quickly
obsolete consumer products.
Max Weber's interpretation of the Jewish middleman role was slightly softer, with Weber advancing the notion of "pariah capitalism."
Pariah capitalists, who include the Jews as well as the Parsis, the Overseas Indians, and the Overseas Chinese, are groups whose
characteristics and situational contexts make them prone to willingly adopt socially negative positions in order to obtain wealth
and influence. For Weber, capitalism itself was not intrinsically bad. The Puritans, with their industry and hard work, were held
up in Weber's The Protestant Ethic and the Spirit of Capitalism (1904/5) as exemplars of positive, "rational" capitalism.
Jews, and other pariah capitalists, however, invariably advanced a negative "irrational" capitalism typified by consumer credit,
speculation, and colonialism. According to Weber, middleman minorities or "pariah capitalist groups" perverted the essentially good
nature of capitalism because of their practice of "dual ethics," or moral double-standards, which was itself a product of their sojourning
nature and situational context. Weber also perceived Judaism itself as reinforcing the Jewish preference for pariah capitalism.
[6]
Softer still were the ideas of Wilhelm Roscher, one of the founders of the historical school of political economy. Roscher was
part of the historical economist or European Institutionalist movement (which also influenced Weber) that argued for a study of economics
based on empirical work that laid special methodological emphasis on context, rather than logical philosophy. Roscher's emphasis
on context and the historical development of capitalism are exemplified in his 1875 essay "The Status of the Jews in the Middle Ages
Considered from the Standpoint of Commercial Policy."[7] In this essay, Roscher presented capitalism as neither inherently good or
bad, and he made the argument that Jews, who like other middleman minorities were economic modernizers, were positive influences
and crucial to the development of a burgeoning economic trading system. Gideon Reuveni offers the following summary:
According to Roscher, the modernizing role of the Jews explains the change in attitudes within the social majority: from tolerance
and acceptance to exclusion and persecution. In other words, once, in the eyes of the majority the role of the Jews becomes superfluous,
resentments towards the Jews become more prevalent. This cycle in relations towards Jews, Roscher observed, was not specific to
the relationship between Jews and non-Jews but was rather a general development among many peoples who allow their economies to
be administered by a foreign and more highly cultivated people, but later, upon having reached the necessary level of development
themselves, often after intense struggles, try to emancipate themselves from this tutelage. According to Roscher, "one may defiantly
speak in this connection of a historical law here."
[8]
Similar to Roscher's ideas were the theories of the Jewish Marxist anti-Zionist Abram Leon (1918 -- 1944). Leon, a Polish Jew
said to have been executed at Auschwitz at the age of 26, published
The Jewish Question: A Marxist Interpretation around 1942, in
which he proposed that Jews were a "people-class." For Leon, "Judaism mirrors the interests of a pre-capitalist mercantile class."
He explains,
Judaism was an indispensable factor in precapitalist society. It was a fundamental organism within it. That is what explains the
two-thousand-year existence of Judaism in the Diaspora. The Jew was as characteristic a personage in feudal society as the lord and
the serf. It was no accident that a foreign element played the role of "capital" in feudal society. Feudal society as such
could not create a capitalist element; as soon as it was able to do so, precisely then it ceased being feudal. Nor was it accidental
that the Jew remained a foreigner in the midst of feudal society. The "capital" of precapitalist society existed outside of its economic
system. From the moment that capital begins to emerge from the womb of this social system and takes the place of the borrowed organ,
the Jew is eliminated and feudal society ceases to be feudal. It is modern capitalism that has posed the Jewish problem. Not because
the Jews today number close to twenty million people (the proportion of Jews to non-Jews has declined greatly since the Roman era)
but because capitalism destroyed the secular basis for the existence of Judaism. Capitalism destroyed feudal society; and with it
the function of the Jewish people-class. History doomed this people-class to disappearance; and thus the Jewish problem arose. The
Jewish problem is the problem of adapting Judaism to modern society.
Georg Simmel, an ethnically Jewish sociologist, philosopher, and critic, moved in much the same theoretical direction as Roscher
and Leon, as evidenced in his famous and still influential essay "Der Fremde" ("The Stranger") (1908). Simmel argued that certain
groups like Jews and other diaspora peoples may be members of host nations in a spatial sense but not in a social sense. They may
be in the nation, but not of it. These groups are both near and far, familiar and foreign. This contextual scenario
influences the behavior of "stranger" groups by permitting them freedom from convention and allowing them access to an alleged greater
objectivity. For Simmel, "the Stranger," the classic example of which in his estimation is the Jew, is "the person who comes today
and stays tomorrow. He is, so to speak, the potential wanderer: although he has not moved on, he has not quite overcome the freedom
of coming and going." [9] This freedom,
argues Simmel, makes "the Stranger" ideally suited to fulfil the role of middleman minority.
[10] As with Roscher's theory, which
is markedly contradicted in several key areas of the historical record, there are a number of obvious logical and evidential problems
with Simmel's theory, and these will be discussed later.
Between Simmel's 1908 essay and the 1970s, middleman minority theories continued to be advanced. With the exception of Philip
Curtin and his Cross-cultural Trade in World History (1984), these efforts were developed primarily by Jewish scholars, and
overwhelmingly within the context of trying to explicitly or implicitly explore, explain, or offer apologetics for the Jewish experience.
For example, Abner Cohen (1921 -- 2001), was an anthropologist at the University of London, who advanced, in his influential work
Urban Ethnicity (1974) and numerous other publications, the idea that there are "trading diasporas."
[11] Of particular interest are Cohen's
ideas about "visibility strategies" pursued by such groups:
The use of symbols to maintain group boundaries can thus be seen as a cultural strategy. In fact, many groups in traditional
and modern societies find that their interests are guarded better through invisible organisations such as cousinhoods, membership
in a common set of social clubs, religious ties, and informal networks, than through a highly visible, formally recognised institution.
At times, ethnic groups may need to heighten their visibility as strangers to maintain their interests while in other instances
they may wish to lower their profile and appear to be an integral part of the society.
[12]
This bears a striking similarity to the sixth chapter of Kevin MacDonald's Separation and Its Discontents , which is concerned
with visibility strategies, especially among crypto-Jews, and concludes with the argument that "this attempt to maintain separatism
while nevertheless making the barriers less visible is the crux of the problem of post-Enlightenment Judaism."
[13] In fact, beginning in the 1970s,
middleman minority theory began to develop several ideas that dovetail very well with the concept of Judaism as a group evolutionary
strategy. Nowhere is this more apparent than in the work of Edna Bonacich.
Although the modern refinement of middleman minority theory is often traced to Hubert Blalock's 1967 Toward a Theory of Minority-Group
Relations , the greater scholarly interest has been shown in Edna Bonacich's 1973 American Sociological Review article
"A Theory of Middleman Minorities." [14]
Bonacich sought to refine and systematize Blalock's theory within an anti-capitalist framework, essentially making the argument that
all group conflict in such scenarios is the result of a rational competition for resources in which group characteristics and interests
play a crucial role. A Jewish Marxist and anti-Zionist, Bonacich's interpretations borrow heavily from Marx, Sombart, Weber, Roscher,
and Leon, to the extent that Bonacich essentially concurs that capitalism created opportunities for exploitative middleman communities
and the Jews and other middleman minorities, who possess certain predisposing characteristics including dual loyalty and a level
of unscrupulousness, willingly and enthusiastically engaged in these roles.
Bonacich is well-known for her work on East Asian middleman minorities in the United States, especially her 1980 monograph
The Economic Basis of Ethnic Solidarity: Small Business in the Japanese American Community , but her earliest work on middleman
minorities clearly demonstrates a concern with the Jewish experience.
[15] In her discussion of middleman
minorities in the 1973 article, Bonacich describes Jews as "perhaps the epitome of the form." Some of the key features of the 1973
article include the arguments that Jews and other middleman minorities are essentially economic "teams," and that these teams rely
upon very high levels of ethnocentrism and related social and economic strategies, which in turn enable them to succeed in individualistic
societies. Bonacich writes,
The modern industrial capitalist treats his workers impartially as economic instruments; he is as willing to exploit his own
son as he is a stranger. This universalism, the isolation of each competitor, is absent in middleman economic activity, where
primordial ties of family, region, sect, and ethnicity unite people against the surrounding, often individualistic economy
. [emphasis added] [16]
Bonacich makes some very interesting, and controversial, remarks on the nature of conflict between middleman minorities and their
hosts, with special reference to Jews. For Bonacich, accusations that Jews have simply been scapegoats for the woes of Europeans
are based on nothing more than a "surface impression."
[17] While noting that middleman minorities "are noteworthy for the acute hostility they have faced," it remains that,
host members have reason for feeling hostile toward middleman groups. Even the extremity of the host reaction can be
understood as "conflict" behavior. The reason is that the economic and organisational power of middleman groups makes them
extremely difficult to dislodge. The difficulty of breaking entrenched middleman monopolies, the difficulty of controlling
the growth and extension of their economic power, pushes host countries to ever more extreme reactions. One finds increasingly
harsh measures, piled on one another, until, when all else fails, "final solutions" are enacted.
[18] [emphasis added]
Bonacich has also argued that Jews and other middleman minorities do engage in economic and social "dual loyalty," and that middleman
minorities do in fact "drain" resources away from host populations and can become very powerful as a result. This then frequently
causes host elites and masses to unite against the sojourning element, a conflict that can escalate rapidly if the sojourning element
refuses to give up its monopolies. Bonacich explicitly rejects any idea that "host hostility is self-generated (from psychological
problems or cultural traditions)," arguing instead that "the middleman and the host society come in conflict because elements in
each group have incompatible goals." With her apparent justification of host violence against middleman minorities, including Jews,
as well as her objective view of certain Jewish characteristics, Bonacich's theory has been heavily criticized in some quarters,
despite its ongoing influence in contemporary sociology. Robert Cherry, for example, has lamented that Bonacich's ideas on middleman
minorities "reinforce persistent, negative Jewish stereotypes."
[19]
Discussion
Before moving to an assessment of the merits and inadequacies of middleman minority theory in explaining Jewish history, it's
worth reflecting on the history of the theory in light of Steven Pinker's claim that it represents a rival, or "more convincing,"
analysis of the Jewish historical trajectory. The first problem, of course, is that, despite Pinker's lavish praise, Thomas Sowell
is not remotely regarded within scholarship as a leading or original thinker in the area of middleman minority theory. Not only does
discussion of middleman minorities form a relatively small element of Sowell's Migrations And Cultures , but what does appear
is highly derivative of the work of Edna Bonacich, Walter Zenner, and others.
A further problem is Pinker's assumption that there exists a single, unified theory on middleman minorities that will help explain
the Jewish historical experience, and that somehow this will also be sufficient to counter the theory of Kevin MacDonald, or at least
offer a more convincing framework that would allow MacDonald's ideas to be dispensed with. As should already be clear from this brief,
and incomplete, bibliographical overview, within middleman minority theory there is a plethora of often competing interpretations,
as well as a general problem of definitions. Walter Zenner, a key proponent of middleman minority theory, concedes that "we tend
to make our definitions and models fit the prototypical group. For decades, the Jews were the archetype."
[20] In other words, for a considerable
time, middleman minority theory was built around trying to explain the experience of Jews, with other groups haphazardly mapped onto
the theory in way that tried to give the impression of similarity, even where these similarities were thin to non-existent. Bonacich
has made roughly the same argument, asserting that middleman minority theory should be regarded as incomplete because it can only
point to an "ideal type," and
In reality there are problems of fit between any actual ethnic group and this picture, problems in establishing which or how
many of the traits a population need have before it can be classified as a middleman minority.
[21]
Bonacich, very reasonably in my opinion, proposes that middleman minority theory, of which she herself is a pioneer, is something
of a misnomer and should be regarded as little more than "a useful sensitiser to a host of interrelated variables."
[22] One is therefore pressed by Pinker's claim to ask not only which of the many strands of middleman minority theories Steven
Pinker is praising, but also just how "convincing" and "magisterial" he can find it given the field's leading contemporary thinkers
regard their work in such ambiguous terms.
Finally, it is not at all clear how any of the aspects of middleman minority theory obviate the need for a deeper theoretical
framework in which to understand the behaviors and contexts under study. Middleman minority theory, as remarked above, is an incomplete
tool, and has little to offer in terms of deeper explanatory value for such relevant key concepts under discussion as resource competition,
ecological strategies, visibility strategies, psychological attitudes toward the majority, and social identity theory. One of the
strong points of Kevin MacDonald's work, which is truly cross-disciplinary and unusually well-equipped in terms of the relevant historical
literature, is that is does offer such an analysis, and can be argued to fill a lot of the logical and evidential gaps of middleman
minority theory. This is not to say that the two frameworks are in opposition, but that the concept of a group evolutionary strategy
can be usefully and seamlessly integrated into middleman minority theory, especially in relation to Jews.
It's been continually remarked by many scholars in the field that Jews should be regarded as either an "ideal type," "the epitome
of the form," a singular example, or otherwise unique case -- even within the context of broad comparative approaches with other
trading diaspora peoples. The qualities that have made Jews so unique -- cultural, historical, religious, and even biological --
are rarely remarked or elaborated upon in sociological studies of middleman minorities, which are often lacking in depth in terms
of their historical analysis. As will be discussed below, Zenner, in particular, has highlighted ways in which Jews do not fit the
standard middleman minority pattern, especially in terms of their extravagant and influential involvement in the culture and politics
of the host nation (see also MacDonald's Diaspora
Peoples on the Overseas Chinese, xlii ff). Unfortunately, middleman minority literature has little to say in terms of further
explanatory theory on how or why Jews came to both define and exceed the middleman typology. Here, middleman minority theory not
only isn't a rival for MacDonald's work, it positively cries out for it.
"American Jews do not fit the sojourner pattern, since their political involvement goes far beyond the support of Jewish causes.
Much Jewish political activity, whether right, center, or left, can be related to a perception of how to make America and the
world safe for Jews. American Jewish support for domestic liberalism and internationalism can be interpreted in this way."
Walter Zenner, "American Jewry in the light of Middleman Minority Theories," 1980.
[23]
Merits of Middleman Minority Theory
The most obvious merit of middleman minority theory is that, like Kevin MacDonald's theory of a group evolutionary strategy, it
places an unusual and welcome emphasis on rational resource competition as the basis for social conflict involving certain minorities.
By offering a socio-economic explanation for hostility toward Jews, middleman minority theory represents a unique space within academia
where the otherwise ubiquitous "pure prejudice" idea that host hostility is self-generated (from psychological problems or cultural
traditions) is summarily and comprehensively dismissed. Although this has not come without criticism, as seen in Robert Cherry's
denunciation of Edna Bonacich's work as reinforcing bigotry
[24] , this emphasis has been able
to continue largely untroubled thanks to its advancement under a hardline traditional Marxist interpretive veneer.
Middleman minority theory, especially the variant advanced by Bonacich, also insists that host populations do have interests,
and that these interests are genuinely and seriously threatened by middleman minorities who drain away resources. These minorities
then use their accumulated resources to build up power and influence, sometimes even to the extent of gaining considerable economic,
social, and political monopolies over the hosts. Since these monopolies can be very difficult to dislodge, and since monopolies may
satisfy some interests of host populations or segments of host populations, middleman minority theory insists that it is rational
and somewhat inevitable that increasingly harsh and even violent measures will be taken against the offending minority. As a result,
middleman minority theory offers a far more plausible and objective understanding of group conflict than many of the ideas that dominate
the academic discussion of group conflict, especially conflict involving Jews. In addition, the outright rejection of "scapegoat"
theories as "superficial," and the lack of appeals to concepts of victimhood in such a framework, can only be described in the context
of the current academic climate as utterly refreshing.
A second major merit of middleman minority theory is the emphasis that some strands place on the characteristics of the
minorities themselves. Middleman minority theory contains within it three basic theoretical approaches. Context-based theories like
that of Roscher, and revived to some degree by Nathan Cofnas (who is particularly concerned with the urban environment-context),
argue that middleman minorities are essentially creatures of the societies in which they are found, and are for the most part created
by opportunities, status gaps, and vacuums over which they have no control and which have nothing to do with their inherent characteristics
(a slight advantage in intelligence being the only characteristic that Cofnas feels comfortable in applying). Situational theories,
like that advanced by Simmel are similar, but place more emphasis on the culturally-located role of the trader, the Stranger, and
the "sojourner as trader," as the determinant factor in the creation of middleman minorities. Culture-based, or characteristic-based,
middleman minority theories, however, tend to be more numerous, and more convincing. These theories, like that advanced by Weber
and given tacit assent by Bonacich and Zenner, place strong emphasis on the broad range of traditions, ideologies, behaviors, and
aptitudes of middleman minority groups.
The most frequently highlighted of such traits within middleman minority theory is ethnocentrism, which again dovetails with the
primary emphasis of Kevin MacDonald's theory. Ethnocentrism is acknowledged as a central factor in the maintenance of self-segregation
among middleman minority groups, and is often supported by ideological beliefs such as the caste system, or what Zenner describes
as "the Chosen People complex." [25]
Ethnocentrism in middleman minorities is presented as crucial to understanding host hostility not only because of the way it facilitates
the draining of resources from the host population, but also because of highly antagonistic correlates such as dual loyalty and a
willingness to engage in lucrative but morally destructive (for the host) trading. Walter Zenner speaks of a "double standard of
morality" that is
Expressed in dealings with outsiders, such as lending to them with interest, unscrupulous selling practices, and providing
outsiders with illicit means of gratifying their appetites, while at the same time, denying the same means to in-group members.
[26]
An excellent example of this process in action is the fact
Israel
is the largest producer and host of international online gambling sites , while making it illegal for its own citizens to use
such sites. Of course, we are talking here about a nation state rather than a minority population, but this contradiction, and the
nature of Israel within the international community, will be discussed in a critique of the narrowness of middleman minority theory
later.
A further merit of middleman minority theory is the heavy emphasis the cultural-characteristic interpretation places on group
strategies. Middleman minorities, again with Jews being held up by both Zenner and Bonacich as an exemplar or especially acute case,
are said to engage in constantly adaptive activity in order to manage their visibility, ensure their safety, advance their interests,
accumulate power and wealth, and entrench themselves ever deeper within the host. Bonacich has indicated that Jews are especially
keen to remain entrenched in the West, and the United States in particular, because it is financially and politically lucrative,
and only a catastrophic weakening of their monopolies would bring an end to existing strategies.
[27] Zenner goes as far as to claim
that "much of the content of American Jewish life can be seen as visibility strategies. Strategy here includes both unconscious mechanisms
of coping with situations and consciously formulated plans."
[28] Zenner speaks of a "dynamic process"
whereby Jews minimise visibility to avoid hostility, maximise visibility when pursuing certain interests, and generally work unceasingly
to make their image more favorable in the minds of the host. Again, all of this corresponds very well with one of the central themes
of the Culture of Critique -- the idea that Jewish involvement in certain intellectual movements could be seen in the context
of a pursuit of Jewish interests either consciously or in ways that involved unconscious motivations and self-deception. It also
maps very closely to MacDonald's framework on Jewish crypsis and other attempts to mitigate anti-Semitism, advanced in the sixth
chapter of Separation and Its Discontents .
Problems in Middleman Minority Theory
Given the prevalence of Jews in the development and promotion of the modern incarnation of middleman minority theory, including
Georg Simmel, Edna Bonacich, Abner Cohen, Abram Leon, Walter Zenner, Werner Cahnman,
[29] Donald Horowitz,
[30] Gideon Reuveni,
[31] Ivan Light, Steven J. Gold,
[32] and Robert Silverman,
[33] a reasonable concern might be
that middleman minority theory is itself an intellectual "visibility strategy." Just as it has been posited that Jews tend to support
mass migration because it will result in Jews becoming "one among many" ethnic minorities, and thus in their logic less conspicuous
and therefore safer, middleman minority theory can act to reduce Jewish visibility by offering the idea that Jews are just one among
many diaspora trading groups and their history and behavior is therefore not unique or worthy of special attention. It remains the
case that even in those interpretations which highlight negative Jewish behavior and portray host responses as rational (e.g. the
work of Bonacich and Zenner), the proposed framework still insists on some level of commonality, no matter how tenuous, with the
experiences of other minority groups, and it ultimately places the blame for conflict on a much broader context, often the impersonal
historical development of capitalism.
In other words, while the framework can deny that Jews are "victims" of host nations, these theories also deny that host nations
are truly the victims of Jewish exploitation. Both are simply argued to be the victims of capitalism, and any sense of individual
or group agency is rhetorically dissolved. Again, this acts to lower Jewish visibility and culpability and remains attractive for
that reason. There are certainly good reasons along this line of thought for proposing that Steven Pinker's promotion of the theory
over Kevin MacDonald's ideas has less to do with a serious engagement with the content of the work of Bonacich et al. and significantly
more to do with deflecting the entire conversation into an area of discussion in which Pinker feels Jews are less visible.
A major problem with middleman minority theory is that it has a very uncomfortable and unsatisfactory way of handling the obviously
unique aspects of the Jewish experience, especially in relation to the unprecedented involvement of Jews in post-Enlightenment Western
culture and politics, something for which there is absolutely no parallel among other diaspora trading groups anywhere. As has been
discussed, middleman minority theory was essentially first created, consciously or unconsciously, by scholars anxious to find a way
to explain the Jewish experience. Attempts to connect this experience, amounting to some two millennia of history, with the much
more modern and straightforward experiences of, for example, the Chinese in the Philippines or the Japanese in America, have been
doomed to the grossest of generalizations and the clumsiest of associations. This has resulted in a steady stream of admissions within
the field that the best way to interpret middleman minority theory is simply that it proposes an "ideal type" (essentially the Jews)
with unfortunate "problems of fit between any actual ethnic group and this picture [the Jewish experience]."
[34] Zenner has conceded that the
concept has been very "difficult to define so as to cover all groups so designated."
[35] All of which calls into question
whether this concept possesses any real efficacy as an analytical or predictive tool in a comparative sense at all.
An interesting point of difference between the Jewish experience and that of other diaspora trading peoples is that the latter
are acknowledged as possessing a genuine sense of sojourn. In other words, their first generations tend to be truly temporary, semi-nomadic
groups who aim to make money before eventually returning to a homeland. A subtly different experience is observed in the Jews, as
noted by Jack Kugelmass in his 1981 PhD thesis Native Aliens: The Jews of Poland as a Middleman Minority . For Kugelmass,
"the so-called "middleman" character of the Jew is seen as an aspect of the Jewish sense of sojourn, which unlike most sojourns
is ideological rather than sociological in nature ." [emphasis added] Another way of phrasing this would be to say that the Jewish
sense of sojourn is cultural-biological rather than contextual, and since the concept of sojourning has been a major feature of Jewish
life since at least the writing of the Exodus, this difference between other groups is really so stark as to require a distinct analysis
-- something offered to an unparalleled degree in Kevin MacDonald's A People That Shall Dwell Alone . In this analysis, it
would appear that, unlike a relatively small number of other peoples who have merely adopted some tactics in order to pursue a specific
diaspora trade role, Jews have, from time immemorial, given themselves over entirely to these strategies as an entire way of life
-- the "middleman minority" as a raison d'être .
This absolutely crucial distinction is linked to the remarkable fact of contemporary political life that the state of Israel exists
largely according to the same strategies employed by Jews when in a diaspora condition. As stated above, an excellent example of
the dual morality process in action is the fact Israel is the largest producer and host of international online gambling sites
, while making it illegal for its own citizens to use such sites. The creation of the state of Israel has also exacerbated, rather
than ameliorated, issues of dual loyalty in Jewish minority populations, even if these issues are more or less kept out of the public
eye through diplomatic soothing around Israeli spying and the maintenance of certain taboos in the mass media. Israel itself would
appear to be a kind of middleman minority archetype within the international community, cultivating close and lucrative ties with
the elite (the United States), while engaging in more or less unchallenged exploitative and oppressive activities against lower social
orders (Palestinians, and other
vulnerable or indebted population groups in South America).
Like the "ideal type" of middleman minority, Israel heavily drains the resources even of its allies (U.S. military and diplomatic
aid) and pursues its strategies in a ceaseless quest for security, while maintaining moral double standards and being rather shameless
in engaging in what Zenner has described as the classic overrepresentation of middleman minorities in "morally shady" activities.
[36] Even in recent years, Israel has become notorious in the
international organ trade ,
moneylending , and allegations of humanitarian atrocities. Israeli newspapers have also described their country as a "
monopoly nation " due to the intense tendency towards economic monopoly in the country's business life -- a key feature of middleman
minority life that Jews appear to continue to embody to an extent unparalleled in any other ethnic group. Further evidence for the
apparently deep-seated, rather than contextual, nature of "middleman" traits in Jews might be found in studies indicative of a biological
underpinning to Jewish ethnocentrism, such as that described by Kevin MacDonald in the Preface to the Culture of Critique
:
Developmental psychologists have found unusually intense fear reactions among Israeli infants in response to strangers, while
the opposite pattern is found for infants from North Germany. The Israeli infants were much more likely to become "inconsolably
upset" in reaction to strangers, whereas the North German infants had relatively minor reactions to strangers. The Israeli babies
therefore tended to have an unusual degree of stranger anxiety, while the North German babies were the opposite -- findings that
fit with the hypothesis that Europeans and Jews are on opposite ends of scales of xenophobia and ethnocentrism.
As well as dealing poorly with obviously unique aspects of the Jewish experience, a significant portion of middleman minority
theory is devoted to context-based narratives that are often in stark contrast to, or completely disproven by, the historical record.
With the exception of the work of Kevin MacDonald, which demonstrates a very extensive engagement with works of history, a general
weakness in all of the late twentieth-century sociological studies discussed above is the fact that, despite their incredibly ambitious
claims about the historical trajectory of capitalism or middleman minority populations, there is a quite serious neglect of any of
the relevant historiography. This leads, in the case of the modern adherents of Simmel, Roscher, and Leon, to the constant repetition
of error-laden tropes such as the idea that Jews turned to commerce because they were prohibited from owning land (rather than arriving
as profit-seeking financiers), that Jews were most often invited into nations by elites seeking a financial stimulus, or that Jews
were banished from countries once their position as loan merchant was superfluous. In fact, these three tropes, all of which remove
Jewish agency and characteristics from consideration, are essentially the pillars of context-based middleman minority theory pertaining
to Jews, and are absolutely crucial to Roscher's ideas in particular.
The historical record is now acknowledged as more or less complete in relation to the issue of the Jewish ownership of land. It
has been conclusively established, for example, that the general trend across Europe was that Jews were in fact able to possess and
own land during the centuries immediately following their initial spread and expansion in Europe (c.1000 -- 1300). Restrictions on
land ownership were later enacted as penalties for exploitation or as part of a system of elite land transfer -- e.g., the desire
of the English kings to obtain the land of indebted lesser knights, and doing so by financially compensating Jewish moneylenders
for forfeited lands they could no longer legally hold.
One of the correlates of the land ownership trope is the astonishingly naive assumption that land ownership would preclude involvement
in financial speculation. Again, the historical record contradicts this. Mark Meyerson's Princeton-published A Jewish Renaissance
in Fifteenth-Century Spain (2010), for example, offers an expansive analysis of Jewish landowners in Spain who "did not necessarily
cultivate the land themselves" and combined wine production operations worked by non-Jewish peasants with "lending operations and
tax farming." [37] Pointing to the
prevalence of early Jewish land ownership in Poland, France, and Germany, in which Jews enjoyed a "privileged status available to
few Christians," Norman Roth has described the trope that Jews were forced out of agriculture by restrictive laws and the violence
of the Crusades as "patently absurd."
[38]
The theory that Jews, and by tenuous implication other middleman minorities, were most often invited into nations by elites
seeking a financial stimulus or to fill a "status gap," is also contradicted by the historical record. The early entry and expansion
of Jews in Europe is relatively well-documented, the dominant trend being that Jews either presented themselves before elites in
order to solicit business, or that they acted as financiers for conquest and then followed in the wake of the conquerors (e.g., the
well-documented role of Jewish financiers in Norman Conquest of England and Strongbow's conquest of Ireland).
[39] Ireland's Annals of Innisfallen
(1079 A.D.) record: "Five Jews came from over sea with gifts to Tairdelbach [King of Munster], and they were sent back again over
sea." Unless Tairdelbach (Turlough O'Brien, 1009 -- 86) had undergone a dramatic change of mind, it's likely that the arrival of
the Jews hadn't been preceded by an invitation. In fact, unsolicited approaches for request to settle and establish financial activities
are in evidence from the time of O'Brien to the 1655 "Humble Address" of Manasse ben Israel to the English government.
A very common form of government documentation found in the study of Early Modern Jewish communities are the charters outlining
their terms of settlement, and these are very revealing. Rather than act as economic catalysts, Jews are more frequently observed
following the trail of already economically improving areas, hoping to profit from their advancement. As Felicitas Schmeider has
pointed out, in terms of the German context, "permission to settle Jews in a newly privileged town is one thing kings were frequently,
if not regularly, asked for, especially in the thirteenth and fourteenth centuries."
[40]
The theory that Jews were banished from countries once their position as loan merchant or general role as a middleman minority
was superfluous is also forcefully contradicted by the historical record. Just as medieval Jews perceived that they were the innocent
victims of evil Gentiles, so Jewish historiography has overwhelmingly portrayed the expulsions as the result of "rumors, prejudices,
and insinuating and irrational accusations."
[41] Context-based middleman minorities
theories absorbed these tropes and reinvented them in narratives that blamed the expulsions on the fact that Capital had simply exhausted
the usefulness of the Jews. Such understandings of the expulsions have only very recently come to be revised, most saliently in the
work of Harvard historian Rowan W. Dorin, whose 2015 doctoral thesis and subsequent publications have for the first time helped to
fully contextualize the mass expulsions of Jews in Europe during the medieval period, 1200 -- 1450.
[42]
Dorin points out that Jews were never specifically targeted for expulsion qua Jews, but as usurers, and notes that the
vast majority of expulsions in the period targeted "Christians hailing from northern Italy." Jews were expelled, like these Christian
usurers, for their actions, choices, and behaviors. What the period witnessed was not a wave of irrational anti-Jewish actions, or
for that matter an impersonal reflex of glutted Capital, but rather a widespread ecclesiastical reaction against the spread
of moneylending among Christians that eventually absorbed Jews into its considerations for common sense reasons. A number of laws
and statutes, for example Usuranum voraginem , were designed in order to provide a schedule of punishments for foreign/travelling
Christian moneylenders. These laws contained provisions for excommunication and a prohibition on renting property in certain locales.
The latter effectively prohibited such moneylenders from taking up residence in those locations, and compelled their expulsion in
cases where they were already domiciled. It was only after these laws were in effect that some theologians and clerics began to question
why they weren't also applied to Jews who, in the words of historian Gavin Langmuir, were then "disproportionately engaged in moneylending
in northern Europe by the late 12th century."
[43] The Church had historically objected
to the expulsion of Jews in the belief that their scattered presence fulfilled theological and eschatological functions. It was only
via the broader, largely common sense, application of newly developed anti-usury laws that such obstructions to confrontations with
Jews became theologically and ecclesiastically permissible, if not entirely desirable. And once this Rubicon had been crossed, it
paved the way for a rapid series of expulsions of Jewish usury colonies from European towns and cities, a process that accelerated
rapidly between the thirteenth and fifteenth centuries.
The lack of engagement with developments in historiography is worsened to a large extent by the absence of a truly cross-disciplinary
approach in most, if not all, existing middleman minority analyses. This is particularly glaring in the works of Bonacich and Zenner
which, while making multiple and apparently crucial references to conscious and unconscious group "strategies," fail to engage in
any kind of historiographical or psychological scholarly contextualization. How exactly such strategies as "visibility strategies"
can operate at group level are left completely unexplained and without any substantial evidence beyond common sense observations
of Jewish behavior. The lack of a cross-disciplinary approach in such instances doesn't necessarily mean that these ideas are wrong,
or that "visibility strategies" don't exist, but it does mean that explanations and evidence are still required. To date, the only
convincing attempt to fill in such gaps, and offer a truly cross-disciplinary approach (incorporating history, sociology, and psychology)
to the idea of group strategies, is found in the work of Kevin MacDonald.
Conclusion
As stated at the outset of this essay, it isn't at all clear how any of the aspects of middleman minority theory obviate the need
for a deeper theoretical framework in which to understand the behaviors and contexts under study. Middleman minority theory, as remarked
above, is an incomplete tool, and has little to offer in terms of deeper explanatory value for such relevant key concepts under discussion
as resource competition, ecological strategies, visibility strategies, and social identity theory. Middleman minority theory, or
at least some strands of it, is useful and valuable in the study of Jews to the extent that it places an unusual emphasis on group
conflict as arising from resource competition, the characteristics of Jews (including Jewish ethnocentrism), and the existence of
group strategies. There are, however, multiple, serious inadequacies in middleman minority theory, including the possibility that
it is in part itself a "visibility strategy," that is has a general problem of definitions, that it fails to adequately deal with
unique qualities of the Jews and their experiences, that it generally fails to engage with the historical record, and that it has
no real explanatory or predictive frameworks for many of the ideas it discusses, including group strategies. I am forced to concur
with Edna Bonacich that, in regards to the study of Jews, middleman minority theory should be conceived, at best, as "a useful sensitiser
to a host of interrelated variables."
[44]
Notes
[1] Bonacich, Edna. "A Theory
of Middleman Minorities." American Sociological Review 38, no. 5 (1973): 583 -- 94, (589).
[2] Francois-Marie Arouet de
Voltaire, Oeuvres Complètes (Geneva, 1756), Vol. 7. Ch.1. See also Dictionnaire Philosophique (Basle, 1764), Vol. 14
.
[3] B. Bauer, The Jewish Problem
( Die Judenfrage , 1843) ed Ellis Rivkin and trans. Helen Lederer (Cincinnati: Hebrew Union College -- Jewish Institute of
Religion, 1958).
[4] K. Marx, On the Jewish
Problem ( Zur Judenfrage , 1844) ed Ellis Rivkin and trans. Helen Lederer (Cincinnati: Hebrew Union College -- Jewish
Institute of Religion, 1958).
[5] W. Sombart, Der moderne
Kapitalismus , Munich and Leipzig 1913. This work was published in an English translation by E. Epstein under the title, The
Quintessence of Capitalism , London, 1915.
[6] W. P. Zenner, Minorities
in the Middle: A Cross-Cultural Analysis (Albany: State University of New York, 1991), 5.
[7] W. Roscher, "Die Stellung der Juden im Mittelalter, betrachtet vom Standpunkt der allgemeine Handelspolitik," Zeitschrift
für die gesamte Staatswissenschaft Bd. 31 (1875) S. 503 -- 526.
[8] G. Reuveni, "Prolegomena
to an "Economic Turn" in Jewish History," in G. Reuveni (ed) The Economy in Jewish History: New Perspectives on the Interrelationship
Between Ethnicity and Economic Life (Berghahn, 2011), 3.
[9] As the son of Catholic and
Lutheran converts from Judaism, Simmel's relationship to his Jewishness is fascinating in itself. See A. Morris-Reich, The Quest
for Jewish Assimilation in Modern Social Science , (New York: Routledge, 2008), chapter 4. For the influence of Simmel's stranger
minority theory see Werner Cahnman, "Pariahs, Strangers, and Court Jews -- A Conceptual Classification," Sociological Analysis, 35
(1974); C. R. Hallpike, "Some problems in Cross-Cultural Comparison," in The Translation of Culture , T. Beidelman (ed), (London:
Tavistock, 1971); Hilda Kuper, "Strangers in Plural Societies: Asians in South Africa and Uganda," in Pluralism in Africa
, Leo Kuper and M. G. Smith (eds) (Berkeley: University of California Press, 1971); Jack H. Porter, "The Urban Middleman: A Comparative
Analysis," Comparative Social Research , 4 (1981); R. A. Reminick, "The Evil Eye Belief among the Amhara of Ethiopia," Ethnology,
13 (1974), W. Shack and E. Skinner, Strangers in African Societies (Berkelely: University of California Press, 1979); Paul
Siu, "The Sojourner," American Journal of Sociology , 58, (1952).
[10] J. Stone, Racial Conflict
in Contemporary Society , (Cambridge: Harvard University Press, 1985), 96.
[11] This coinage is frequently
attributed to Philip Curtin, who employs the term in his Cross-cultural Trade in World History (1984), but the term was in
use by Cohen, within a strict thematic sense, as early as the latter's 1974 chapter "Cultural Strategies in the Organisation of Trading
Diasporas," in C. Meillassoux (ed) The Development of Indigenous Trade and Markets in West Africa (London, 1971).
[12] Quoted in W. P. Zenner,
Minorities in the Middle: A Cross-Cultural Analysis (Albany: State University of New York, 1991), 8.
[13] K. MacDonald, Separation
and Its Discontents: Toward an Evolutionary Theory of Anti-Semitism , 187.
[14] E. Bonacich, "A Theory
of Middleman Minorities." American Sociological Review 38, no. 5 (1973): 583 -- 94.
[15] E. Bonacich, The Economic
Basis of Ethnic Solidarity: Small Business in the Japanese American Community (Berekely: University of California Press, 1980).
[19] R. Cherry, "American Jewry
and Bonacich's Middleman Minority Theory," Review of Radical Political Economics , 22 (2 -- 3), 158 -- 173, 161.
[20] W. P. Zenner, Minorities
in the Middle: A Cross-Cultural Analysis (Albany: State University of New York, 1991), 10. See also W. Zenner, "American Jewry
in the light of middleman minority theories," Contemporary Jewry , 5:1 (1980), 11 -- 30, 18. Zenner argues that "As a synthetic
concept, the phrase "middleman minority" is difficult to define so as to cover all groups so designated."
[21] E. Bonacich, The Economic
Basis of Ethnic Solidarity: Small Business in the Japanese American Community (Berekely: University of California Press, 1980),
22. See also E. Bonacich, "A Theory of Middleman Minorities." American Sociological Review 38, no. 5 (1973): 583 -- 94, 585.
[27] E. Bonacich, "A Theory
of Middleman Minorities." American Sociological Review 38, no. 5 (1973): 583-94, 592.
[28] W. Zenner, "American Jewry
in the light of middleman minority theories," Contemporary Jewry , 5:1 (1980), 11-30, 23.
[29] W. Cahnman, "Pariahs, Strangers
and Court Jews," Sociological Analysis 35, 3 (1974): 155-66.
[30] D. Horowitz, Ethnic
Groups in Conflict (Berkeley: University of California Press, 1985).
[31] G. Reuveni (ed) The
Economy in Jewish History: New Perspectives on the Interrelationship Between Ethnicity and Economic Life (Berghahn, 2011).
[32] I. Light & S. J. Gold,
Ethnic Economies (Bingley: Emerald, 2000).
[33] R. Silverman, Doing
Business in Minority Markets (New York: Garland, 2000).
[34] E. Bonacich, The Economic
Basis of Ethnic Solidarity: Small Business in the Japanese American Community (Berekely: University of California Press, 1980),
22.
[35] W. Zenner, "American Jewry
in the light of middleman minority theories," Contemporary Jewry , 5:1 (1980), 11-30, 13.
[37] M. D. Meyerson, A Jewish
Renaissance in Fifteenth-Century Spain (Princeton: Princeton University Press, 2010), 111.
[38] N. Roth, Medieval Jewish
Civilization: An Encyclopedia (New York: Routledge, 2003),
[39] J. Hillaby, "Jewish Colonisation
in the Twelfth Century," in P. Skinner (ed), The Jews in Medieval Britain: Historical, Literary, and Archaeological Perspectives
(Woodbridge: Boydell Press, 2003), 36.
[40] F. Schmeider, "Various
Ethnic and Religious Groups in Medieval German Towns? Some Evidence and Reflections," in, Segregation, Integration, Assimilation:
Religious and Ethnic Groups in the Medieval Towns of Central and Eastern Europe (Burlington: Ashgate, 2009), 15.
[41] Joseph Pérez, History
of a Tragedy: The Expulsion of the Jews from Spain (Chicago: University of Illinois Press, 2007), 60.
[42] R. W. Dorin, Banishing
Usury: The Expulsion of Foreign Moneylenders in Medieval Europe, 1200 -- 1450 (Harvard PhD dissertation, 2015); R. W. Dorin, "Once
the Jews have been Expelled," Intent and Interpretation in Late Medieval Canon Law," Law and History Review , Vol. 34, No.
2 (2016), 335-362.
[43] G. Langmuir, History,
Religion, and Antisemitism (Los Angeles: University of California Press, 1990), 304.
Sowell’s A Conflict of Visions has nothing to say about race, but it and its successors pretty much nail what is wrong
with today’s progressives. And it’s the same as what was wrong with yesterday’s progressives.
If we survive 2020, this volume will be what he’s remembered for.
The Zionist thinkers understood the unnatural and dangerous situation of the Jews in the Diaspora, and seized the first opportunity
to re-reform the Jewish people as a normal nation in its homeland. In only one generation, all the Jewish communities in the Eastern
lands liquidated their affairs and joined movement. The same with the powerful Russian and Ukrainian communities, they moved (mostly)
to Israel. Last year, about 30,000 American Jews gave up their precious citizenship and moved to Israel. I foresee in two generations
a more or less Jew-less America. What I am saying is that the Jews do not like their middleman foreigner status. In Marx etc.
time there were no alternatives. Now there is Israel. Some 55% of the Jews have already moved there.
Israel is the largest producer and host of international online gambling sites, while making it illegal for its own citizens
to use such sites
It should be noted that Monaco does the same thing with its gambling casinos. It has long been unlawful for Monaco’s own Monégasque
citizens to enter into those casinos to gamble.
Also, the ultra-high level of Jewish involvement in pornography sales is another relevant area here.
One of those Jewish pornography-meisters was Jimmy ‘Jimbo’ Wales, afterwards recruited to head the CIA-Mossad Wikipedia, where
paedophilic persons have been able to persistently post fake biographies of themselves and smears against their victims. Jimmy
Wales has attended birthday parties of Israeli Presidents, and received a $1 million ‘prize’ from Tel Aviv University.
The most obvious merit of middleman minority theory is that, like Kevin MacDonald’s theory of a group evolutionary strategy,
it places an unusual and welcome emphasis on rational resource competition as the basis for social conflict involving certain
minorities. By offering a socio-economic explanation for hostility toward Jews, middleman minority theory represents a unique
space within academia where the otherwise ubiquitous “pure prejudice” idea that host hostility is self-generated (from psychological
problems or cultural traditions) is summarily and comprehensively dismissed.
The Jews like to cast themselves as “just another struggling minority trying to make it among the oppressive majority.” This
ignores the international Zionist (Jewish supremacist) agenda, and the pathological Jewish drive for totalitarian control.
Where does that drive originate? Jesus of Nazareth, apparently Hebrew, preached the opposite, and called organized Jewish hypocrisy,
greed, corruption and double standards “the Synagogue of Satan.” Of course, the corrupt Jewish Moneychangers (the Jewish establishment
of his era) in bed with the Roman Empire didn’t like that one bit, and so instigated his murder. When the cosmopolitan Hebrew
mob, prompted by the corrupt Jewish establishment, chose the criminal Barabbas over Jesus, the Jews made their choice for ideological
evil and corruption.
That is a choice they affirm time and again, day after day, year after year, century after century.
Whether one wants to read this decision as a cosmic moral judgement on the Jews, or simply as a rational economic decision
by the Jews (choosing systematic corruption and shady insider back room deals over honest work) makes no difference. They chose
the path they chose, and they affirm that decision every day through their corrupt, criminal and murderous international Zionist
works.
One doesn’t have to be a Christian to wear the Jon Carpenter sunglasses from The Live which allow one to see that the Judeo-Imperial
“ruling class are [social] aliens concealing their appearance and manipulating people to spend money, breed, and accept the status
quo with subliminal messages in mass media,” but it helps.
One doesn’t have to be a Christian to know that Jewish infiltrated Empires working in concert with a corrupt establishment
are bad news, but again, it helps.
In Britain Jews are clearly influential but the Norman ruling class has had it’s grip on the UK ever since they landed here
in 1066, indeed William the Conqueror was mentioned in the article above, he certainly had his uses for Jews, there is little
information available though as to just how many Jews arrived and what lead King William 1 to bring them over with his troops.
As of present much of inner London is owned by aristocratic families who can trace their descent to King Williams troops
Also a considerable proportion of high status people in Britain were educated at just a few private schools including a great
deal of our present government
In Britain it is often a case of who you know, not what you know that determines whether you will reach the top of society
or not, compared to other European countries like Germany and Finland in Britain there is a tendency for the higher classes to
promote people on the basis of whether they have a background in common with them rather than merit, just like the Jews.
When I was going to university there, the corner stores were all Chinese. As were the Laundromats. I suspect the children all
became doctors and lawyers and graduated from the need to continue operating them.
As per usual, Andrew Joyce demonstrates that he is an objective social scientific historian by flooding his article with a
preponderance of documentable verifiable factual data.
However, to my mind there is one ‘word’ in this 8,000+ word tour de force; one very important word that all lovers of Western
history and culture dedicated to the perpetuation of that history and culture should focus on … one word: ‘NATION’!
At the very top of his essay Joyce quotes Voltaire:
“Voltaire concluded that, some surface similarities aside ,
‘It is certain that the Jewish nation is the most singular that the world has ever seen.
’ ”
Similarly he quotes Bruno Bauer:
“The base [of the tenacity of the Jewish national spirit ] … the character of that [Jewish] nation.
..”
Some say Jews are a ‘ race’ , some say they are an ‘ethnicity’, some say they are a ‘religion’. The case
can be and is made for all these, in Voltarie’s words, “surface similarities” . However, none capture the essence of what
constitutes the basis for Jewish POWER.
Jews are a worldwide profoundly unified ideological NATION. And that ideological unity is the basis of their national power.
This unity was succinctly captured in an interview with a Mossad agent when he said:
“I can knock on the door of any Jew in the world and I will be invited in.”
Ideological unified nations are powerful nations, and are conquers. The Jews are one of the most ideologically unified nations
in the world. The power derived from that unity has allowed them to conquer the most economically and militarily powerful country
in the world – America.
Further, by conquering America, the wealthiest and most powerful country in Western Civilization, the Jews have de facto conquered
the whole of the West.
Ideological unified nations are strong.
Ideological dis-unified nations are weak.
So call ‘Color Revolutions’ are manifestations of dis-unified nations who in turn are weak and conquerable by strong unified nations.
We have seen numerous weak nation color revolutions in Africa, Middle East and Europe. Now we are experiencing an American
color revolution.
The American ‘color revolution’ is the Jewish nation delivering the ‘coup de grace’ to America and the West.
Andrew Joyce, your articles are so God-damned good!
Jewish behavior reminds me of narcissism: sense of entitlement, self-centered, feeling of superiority, manipulative and deceitful
behavior, desire for power and control, will suck a host dry, and once they’ve gotten what they want, will easily discard the
host. Highly competitive, status-oriented.
Don’t dare call them out on anything because that causes them to feel shame, and that’s like driving a stake through them.
They work behind the scenes, secretly. They must always be seen in a good light. They will smear and destroy you (your reputation,
your job, your life) if you expose them. They will retaliate in ways you would never be able to because they don’t have a conscience,
and this is why they win and are so hard to fight. Very vindictive. No qualms about lying or twisting the truth.
They are never content, always working to change things in their favor, to get the upper hand. Most people just want to live
their lives, so they acquiesce, but this is a mistake because one day you turn around to realize they now own the farm! If they
don’t get their way, they just regroup and come at you from another angle. They keep wearing you down, chipping away at you until
you give in. It is really something to behold because you just can’t believe their gall.
Their rabbis keep them in line by using fear (fear of the other), and fear is the greatest motivator/persuader. Keeps them
solidly as one. They’re constantly reminded of the Holocaust, the ovens that are lurking around every corner, as well as the injustices
they have suffered (through no fault of their own – ha!). Keeps them neurotic and they don’t stray.
@Oliver Elkington rville, Fitzroy,
Marshall, and Spencer. The Guardian , Independent and Telegraph wrote articles in 2011 and 2013 alleging such persons
still ‘run’ Britain. Lefties use this ploy to attack the Conservative Party whose members tend to be wealthy like champagne socialists.
Back to the point raised by neutral , none of the above mentioned newspapers would run similar stories on Jewry. That
is the litmus test of who really rules.
Despite being a tiny minority Jews have shaped modern Britain. This has been documented here by Joyce, Langdon and others.
Sure the middle man theory explains everything, but needs some footnotes:
-These middle men are specifically encouraged to cheat us, it’s written in their holy books
-they regard us as animals in human form, with either no souls or much lesser souls
-they regard us as having been created ONLY to serve them.
The modern industrial capitalist treats his workers impartially as economic instruments; he is as willing to exploit
his own son as he is a stranger. This universalism, the isolation of each competitor, is absent in middleman economic activity,
where primordial ties of family, region, sect, and ethnicity unite people against the surrounding, often individualistic economy.
The modern finance capitalist …..
Industrial capitalism after it was invented in the American Colonies, was characterized by injection of state capital (not
Jewish finance capital) into industry, to then improve the labor value of the population. American labor was in short supply relative
to the large land mass available.
Industrial Capitalist will treat his workers as valuable contributors, because their labor value is constantly being improved
upon by improved public health, and improved infrastructure such as roads and phone systems. Industrial Capitalist economic method
is to raise up the existing people, and not import low wage “coolie labor.”
The highest form of industrial capitalism was probably Germany, which adopted the American System through Frederick List.
Workers in industrial capitalist Germany had access to best facilities of that era, their work hours were made sensible (no
longer exploitative). Autobahns were built, and industry was built up using state capital (not finance capital) to high levels
of productivity.
Finance Capitalism is Jewish usury method. Finance Capitalism is middleman theory taken to extremes.
The middleman is a hidden string puller whose god is Moloch. The middleman is the third entity in man’s relations, usurping
the role of the King.
It is the King who is to have the role of settling disputes, dispensing with just law, and overseeing high civilization. It
is impossible to have high civilization with Jews operating as middlemen.
Finance capitalism’s big bang event is traced to Amsterdam’s Jews invading Britain.
1) Debt Spreading Private Banking .. the Bank of England in 1694. This event stripped the sovereign King of his money power
and transferred it to hidden bank stock owners.
2) Stock Market Capital. Absentee ownership of Companies. Hidden String Pullers control corporations, rather than the employees
of said companies. The first manifestation was both the Dutch and English India Companies.
3) Allowing Company stock to be on-sold into markets. The logic of prices and money (Moloch) is now tied to private banking
ledger credit entry. BOE creates the private bank credit that is used in “free markets.”
4) Corporation charters are now perpetual, and corporations are held up as being more than a god created human. Being perpetual
is more than being a human, where said human has a finite life span.
Jews are anti-logos, so everything they touch turns to shit. There is a religious and spiritual element to Jews, who are against
the natural order.
Virtually all of the “American System” politicians were assassinated. Countries that attempted to adopt “industrial capitalism”
of the American system were invaded and destroyed in world wars. The world wars were engineered in back room deals, using hidden
string pulling tactics.
America was turned in 1912, and is now under Jewish finance capitalism control. The founding fathers of America would be appalled
if they were alive today.
Hindus are like Jews–they love money and believe themselves to be a special people (as exemplified by your PM Modi and his
RSS buddies). Because of the caste system, Hindus barely tolerate lower caste Hindus.
This comment is aimed at Andrew Joyce, the writer of the article. Good job Andrew.
In addition to finance big bang event I discuss above, there was also the attack on Christianity. So the big bang event was
multi-dimensional, and informs today’s reality.
Here is your quote on Sombart:
For Sombart, the origins of the worst of modern capitalism can be found in the early middleman role of the Jews, their medieval
semi-nomadic quest for usury-derived profit and Victorian hawking of shoddy goods being a precursor to modern advertising and
the mass production of superfluous and quickly obsolete consumer products.
Here is another quote from Sombart, which I think is critical:
Werner Sombart in his book “The Jews and Modern Capitalism” came to an important conclusion.”That which is called Puritanism
is in reality Judaism.”
Our Jewish friends in Amsterdam created puritan Judeo-Christianity, which is a perversion of Jesus’ teachings. Jesus started
his mission on the Jubilee year, aiming precisely at the Pharisee class. Jesus also whipped the money changers, his only act of
violence.
Weber also has some problems in his non treatment of usury:
Max Weber’s book, “The Protestant Ethic and the Spirit of Capitalism,” created a split definition. Jewish capitalism on
one side, and Puritan (Calvanist) on the other. Jewish capitalism was speculative pariah capitalism, while Puritan was bourgeois
organization of labor. Weber excluded the problem of usury, thus obscuring what is necessary to see. The Puritan was excluded
from blame.
Let that sink for a moment. I think you understimate – as did I – just how radical this site and it’s owner are, as well as
the majority of the commenters, and just what they are tiptoeing around, and have been for some time. I also think within another
few years, their position will become explicit.
Incidentally, I argely agree that in a few decades most Jews will be flourishing in Israel, but I do think the US will always
have a large and prosperous Jewish community as well, forever. It isn’t going anywhere.
@Tom Verso th the surface of
JSI’s success that they rarely, if ever, see beheath that surface to what is obviously the real cancer of the human race. That’s
why what we’re witnessing today is nothing less than
The Pyrrhic Victory of Jewish Supremacy Inc.
For evidence look at the following:
City – New York
State – California
Country – The USA
Continent – Europe
Civilization – The West
They have conquered the above the way a tumor conquers a human organism.
He can’t – yet – express what he is really trying to say clearly and simply, he has to bury it in a thicket of dense verbiage
which is tedious to cut through.
In a few years, I think Unz will have developed to the point where writers like Joyce can make their point crystal clear in
simple language.
@AaronB e that they have developed
may eventually topple under its own weight, thereby liberating them from their tragic quest to find and hold external phantoms
responsible for their own traumas.
Clarity for Joyce would likely be something like “my father was mean, controlling and made me feel bad, he was always
trying to bring me low to make him feel big, I now need to heal to come to terms with it.”
Sorry Joyce that you feel bad. That’s real. Stop doing yourself the disservice of pretending your hurt is actually your concern
for the world or whatever. That is stupid.
Judaism is an ethnic/religious supremacist ideology that sees the rest as nothing more than cattle to be exploited, so according
to Jewish dogmas if you don’t declare the Jews to be your masters, you are technically anti-Semitic.
The 238-page document, written by the majority staff of the House Transportation
Committee, calls into question whether the plane maker or the Federal Aviation Administration
has fully incorporated essential safety lessons, despite a global grounding of the MAX fleet
since March 2019.
After an 18-month investigation, the report, released Wednesday, concludes that Boeing's
travails stemmed partly from a reluctance to admit mistakes and "point to a company culture
that is in serious need of a safety reset."
The report provides more specifics, in sometimes-blistering language, backing up
preliminary
findings the panel's Democrats released six months ago , which laid out a pattern of
mistakes and missed opportunities to correct them.
In one section, the Democrats' report faults Boeing for what it calls "inconceivable and
inexcusable" actions to withhold crucial information from airlines about one cockpit-warning
system, related to but not part of MCAS, that didn't operate as required on 80% of MAX jets.
Other portions highlight instances when Boeing officials, acting in their capacity as
designated FAA representatives, part of a widely used system of delegating oversight
authority to company employees,
failed to alert agency managers about various safety matters .
Boeing concealed from regulators internal test data showing that if a pilot took longer
than 10 seconds to recognise that the system had kicked in erroneously, the consequences
would be "catastrophic" .
The report also detailed how an alert, which would have warned pilots of a potential
problem with one of their anti-stall sensors, was not working on the vast majority of the Max
fleet . It found that the company deliberately concealed this fact from both pilots and
regulators as it continued to roll out the new aircraft around the world.
In Bed With the Regulators
Boeing's defense is the FAA signed off on the reviews. Lovely. Boeing coerced or bribed the FAA to sign off on the reviews now tries to hide behind
the FAA.
There is only one way to stop executive criminals like those at Boeing. Charge them with manslaughter, convict them, send them to prison for life, then take all of
their stock and options and hand the money out for restitution.
adr , 1 hour ago
Remember, Boeing spent enough on stock buybacks in the past ten years to fund the
development of at least seven new airframes.
Instead of developing a new and better plane, they strapped engines that didn't belong on
the 737 and called it safe.
SDShack , 21 minutes ago
What is really sad is they already had a perfectly functional and safe 737Max. It was the
757. Look at the specs between the 2 planes. Almost same size, capacity, range, etc. Only
difference was the 757 requires longer runways, but I would think they could have adjusted
the design to improve that and make it very similar to the 737Max without starting from
scratch. Instead Boeing bean counters killed the 757 and gave the world this flying coffin.
Now the world bean counters will kill Boeing.
Tristan Ludlow , 1 hour ago
Boeing is a critical defense contractor. They will not be held accountable and they will
be rewarded with additional bailouts and contract awards.
MFL5591 , 1 hour ago
Can you imagine a congress of Criminals Like Schiff, Pelosi and Schumer prosecuting
someone else for fraud? What a joke. Next up will be Bill Clinton testifying against a person
on trial for Pedophilia!
RagaMuffin , 1 hour ago
Mish is half right. The FAA should join Boeing in jail. If they are not held responsible
for their role, why have an FAA?
Manthong , 1 hour ago
"There is only one way to stop executive criminals like those at Boeing.
Charge them with manslaughter, convict them, send them to prison for life, then take all
of their stock and options and hand the money out for restitution."
Correction:
There is only one way to stop regulator criminals like those in government.
Charge them with manslaughter, convict them, send them to prison for life, then take all
of their pensions and ill gotten wealth a nd hand the money out for restitution.
Elliott Eldrich , 43 minutes ago
"There is only one way to stop executive criminals like those at Boeing.
Charge them with manslaughter, convict them, send them to prison for life, then take all
of their stock and options and hand the money out for restitution."
Ha ha ha HA HA HA HA HA! Silly rabbit, jail is for poors...
Birdbob , 1 hour ago
Accountability of Elite Perps ended under Oblaba's reign of "Wall Street and Technocracy
Architects" .White collar criminals were granted immunity from prosecution. This was put into
play by Attorney Genital Eric Holder. This was the beginning of having an orificial Attorney
Genital that facilitated the District of Criminals organized crime empire ending the 3 letter
agencies' interference. https://www.blogger.com/blog/post/edit/8310187817727287761/1843903631072834621
Dash8 , 1 hour ago
You don't seem to understand the basic principle of aircraft design...it must not require
an extraordinary response for a KNOWN problem.
Think of it this way; Ford builds a car that works great most of the time, but
occasionally a wheel will fall off at highway speeds...no problem, right? ....you just guide
the car to the shoulder on the 3 remaining wheels and all good.
Now, put your wife and kids in that car, after a day at work and the kids screaming in the
back.
Still feel good about your opinion?
canaanav , 1 hour ago
I wrote software on the 787. You are right. This was not a known problem and the Trim
Runaway procedure was already established. The issue was that the MAX needed a larger
horizontal stab and MCAS would have never been needed. The FAA doesnt have the knowledge to
regulate things like this. Boeing lost talent too, and gets bailouts and tax breaks to the
extent that they dont care.
Dash8 , 1 hour ago
But it was a known problem, Boeing admits this.
Argon1 , 41 minutes ago
LGBT & Ethnicity was a more important hiring criteria than Engineering talant.
gutta percha , 1 hour ago
Why is it so difficult to design and maintain reliable Angle Of Attack sensors? The
engineers put in layers and layers of complicated tech to sense and react to AOA sensor
failures. Why not make the sensors _themselves_ more reliable? They aren't nearly as complex
as all the layers of tech BS on top of them.
Dash8 , 1 hour ago
It's not, but it costs $$....and there you have it.
Argon1 , 37 minutes ago
Its the Shuttle Rocketdyne problem, the upper management phones down to the safety
committee and complains about the cost of the delay, take off your engineer hat and put on
your management hat. All of a sudden your project launches on schedule and the board claps
and cheers at their ability to defy physics and save $ millions by just shouting at someone
for about 60 seconds..
canaanav , 1 hour ago
Each AOA sensor is already redundant internally. They have multiple channels. I believe
they were hit with a maintenance stand and jammed. That said, AOA has never been a control
system component. It just runs the low-speed cue on the EFIS and the stick shaker. It's an
advisory-level system. Boeing tied it to Flight Controls thru MCAS. The FAA likely dictated
to Boeing how they wanted the System Safety Analysis (SSA) to look, Boeing wrote it that way,
the FAA bought off on it.
Winston Churchill , 43 minutes ago
More fundamental is why an aerodynamically stable aircraft wasn't designed in the first
place,love of money.
HardlyZero , 13 minutes ago
Yes. In reality the changed CG (Center of Gravity) due to the larger fan engine really did
setup as a "new" design, so the MAX should have been treated as "new" and completely
evaluated and completely tested as a completly new design. As a new design it would probably
double the development and test cost and schedule...so be it.
DisorderlyConduct , 1 hour ago
"Lovely. Boeing coerced or bribed the FAA to sign off on the reviews now tries to hide
behind the FAA."
No - what a shoddy analysis.
The FAA conceded many of their oversight responsibilities to Boeing - who was basically
given the green light to self-monitor. The FAA is the one that is in the wrong here.
Well, how the **** else was that supposed to end up? This is like the IRS letting people
self-audit...
Astroboy , 1 hour ago
Just as the Boeing saga is unfolding, we should expect by the end of the year other
similar situations, related to drug companies, pandemia and the rest.
8. The internet was invented by the US government, not Silicon Valley
Many people think that the US is ahead in the frontier technology sectors as a result of
private sector entrepreneurship. It's not. The US federal government created all these
sectors.
The Pentagon financed the development of the computer in the early days and the Internet
came out of a Pentagon research project. The semiconductor - the foundation of the
information economy - was initially developed with the funding of the US Navy. The US
aircraft industry would not have become what it is today had the US Air Force not massively
subsidized it indirectly by paying huge prices for its military aircraft, the profit of which
was channeled into developing civilian aircraft.
People believe that corporate executives are immune from prosecution and protected by the
fact that they are within the corporation. This is false security. If true purposeful and
intended criminal activities are conducted by any corporate executive, the courts can do what
is called "Piercing The Corporate Veil" . It is looking beyond the corporation as a virtual
person and looking at the actual individuals making and conducting the criminal
activities.
Just as a poetic discussion of the weather is not meteorology, so an issuance of moral
pronouncements or political creeds about the economy is not economics. Economics is a study of
cause-and-effect relationships in an economy.
-- Thomas Sowell
The first lesson of economics is scarcity: There is never enough of anything to satisfy all
those who want it. The first lesson of politics is to disregard the first lesson of
economics.
-- Thomas Sowell
Economics is the painful elaboration of the obvious.
The curious task of economics is to demonstrate to men how little they really know about
what they imagine they can design.
-- Friedrich von Hayek
I can't imagine economists admitting how little they actually know. If they admitted to
themselves, it would hurt their ego. If they admitted to others, it would hurt their job
prospects.
-- Joseph Mattes, Vienna (The Economist, letters December 04, 2010)
The use of mathematics has brought rigor to economics. Unfortunately, it has also
brought mortis .
-- Attributed to Robert Heilbroner
A study of economics usually reveals that the best time to buy anything is last year.
-- Marty Allen
Economic statistics are like a bikini, what they reveal is important, what they conceal is
vital
-- Attributed to Professor Sir Frank Holmes, Victoria University, Wellington, New Zealand,
1967.
Doing econometrics is like trying to learn the laws of electricity by playing the radio.
-- Guy Orcutt
Economists
The First Law of Economists: For every economist, there exists an equal and opposite
economist.
The Second Law of Economists: They're both wrong.
-- David Wildasin
"Murphys law of economic policy": Economists have the least influence on policy where they
know the most and are most agreed; they have the most influence on policy where they know the
least and disagree most vehemently.
-- Alan S. Blinder
An economist is someone who, when he finds something that works in practice, tries to make
it work in theory.
The purpose of studying economics is not to acquire a set of ready-made answers to economic
questions, but to learn how to avoid being deceived by economists.
-- Joan Violet Robinson
An economist is an expert who will know tomorrow why the things he predicted yesterday
didn't happen today.
-- Laurence J. Peter
Having a[n in] house economist became for many business people something like havinga
resident astrologer for the royal court: I don't quite understand what this fellow is saying
but there must be something to it.
-- Linden. (Jan. 11, 1993). Dreary Days in the Dismal Science. Forbes. Pp. 68-70.
Economics is the only field in which two people can get a Nobel Prize for saying exactly the
opposite thing.
Economists do it with models.
-- Heard at the LSE
Bentley's second Law of Economics: The only thing more dangerous than an economist is an
amateur economist!
Berta's Fundamental Law of Economic Rents.. "The only thing more dangerous than an amateur
economist is a professional economist."
Definition: Policy Analyst is someone unethical enough to be a lawyer, impractical enough to
be a theologian, and pedantic enough to be an economist.
Q: Why did God create economists ?
A: In order to make weather forecasters look good.
Q: Why has astrology been invented?
A: So that economy could be an accurate science.
Economists have forecasted 9 out of the last 5 recessions.
An econometrician and an astrologer are arguing about their subjects. The astrologer says,
"Astrology is more scientific. My predictions come out right half the time. Yours can't even
reach that proportion". The econometrician replies, "That's because of external shocks. Stars
don't have those".
When an economist says the evidence is "mixed," he or she means that theory says one thing
and data says the opposite.
-- Attributed to Richard Thaler, now at the Univ of Chicago
The last severe depression and banking crisis could not have been achieved by normal civil
servants and politicians, it required economists involvement.
Taxes
State run lotteries: think of them as tax breaks for the intelligent.
-- Evan Leibovitch
Inflation
Inflation is the one form of taxation that can be imposed without legislation.
-- Milton Friedman
Having a little inflation is like being a little pregnant–inflation feeds on itself
and quickly passes the "little" mark.
-- Dian Cohen
Trade and Trade Barriers
Tariffs, quotas and other import restrictions protect the business of the rich at the
expense of high cost of living for the poor. Their intent is to deprive you of the right to
choose, and to force you to buy the high-priced inferior products of politically favored
companies.
-- Alan Burris, A Liberty Primer
Perhaps the removal of trade restrictions throughout the world would do more for the cause
of universal peace than can any political union of peoples separated by trade barriers.
-- Frank Chodorov
When goods don't cross borders, soldiers will.
-- Fredric Bastiat, early French economist
The primary reason for a tariff is that it enables the exploitation of the domestic consumer
by a process indistinguishable from sheer robbery.
-- Albert Jay Nock
Regulation
Regulation - which is based on force and fear - undermines the moral base of business
dealings. It becomes cheaper to bribe a building inspector than to meet his standards of
construction. A fly-by-night securities operator can quickly meet all the S.E.C. requirements,
gain the inference of respectability, and proceed to fleece the public. In an unregulated
economy, the operator would have had to spend a number of years in reputable dealings before he
could earn a position of trust sufficient to induce a number of investors to place funds with
him. Protection of the consumer by regulation is thus illusory.
-- Alan Greenspan
You fucking academic eggheads! You don't know shit. You can't deregulate this industry.
You're going to wreck it. You don't know a goddamn thing!
-- Robert Crandall, boss of American Airlines, to an unnamed Senate lawyer in 1971
Government
The direct use of physical force is so poor a solution to the problem of limited resources
that it is commonly employed only by small children and great nations.
-- David Friedman
Government Spending
See, when the Government spends money, it creates jobs; whereas when the money is left in
the hands of Taxpayers, God only knows what they do with it. Bake it into pies, probably.
Anything to avoid creating jobs.
-- Dave Barry
I don't think you can spend yourself rich.
-- George Humphrey
Capitalism and Free Markets
A major source of objection to a free economy is precisely that it gives people what they
want instead of what a particular group thinks they ought to want. Underlying most arguments
against the free market is a lack of belief in freedom itself.
-- Milton Friedman
The most important single central fact about a free market is that no exchange takes place
unless both parties benefit.
-- Milton Friedman
The only thing worse than being exploited by capitalism is not being exploited by
capitalism.
-- Joan Violet Robinson
Manufacturing and commercial monopolies owe their origin not to a tendency imminent in a
capitalist economy but to governmental interventionist policy directed against free trade and
laissez faire.
-- Ludwig Mises, "Socialism"
If an exchange between two parties is voluntary, it will not take place unless both believe
they will benefit from it. Most economic fallacies derive from the neglect of this simple
insight, from the tendency to assume that there is a fixed pie, that one party can only gain at
the expense of another.
-- Milton Friedman
States with central-planning regimes [ ] do tend to consume much less energy (and much less
of everything else) [ ] than do Americans. There is a word for that: poverty.
-- The Politically Incorrect Guide to Socialism
Central Banks
Any system which gives so much power and so much discretion to a few men, [so] that mistakes
– excusable or not – can have such far reaching effects, is a bad system. It is a
bad system to believers in freedom just because it gives a few men such power without any
effective check by the body politic – this is the key political argument against an
independent central bank To paraphrase Clemenceau: money is much too serious a matter to be
left to the Central Bankers.
-- Milton Friedman
A central banker walks into a pizzeria to order a pizza.
When the pizza is done, he goes up to the counter get it. There a clerk asks him: "Should I
cut it into six pieces or eight pieces?"
The central banker replies: "I'm feeling rather hungry right now. You'd better cut it into
eight pieces."
Intellectual Property
For one thing, there are many "inventions" that are not patentable. The "inventor" of the
supermarket, for example, conferred great benefits on his fellowmen for which he could not
charge them. Insofar as the same kind of ability is required for the one kind of invention as
for the other, the existence of patents tends to divert activity to patentable inventions.
-- Milton Friedman
Slavery
From the experience of all ages and nations, I believe, that the work done by freemen comes
cheaper in the end than the work performed by slaves.
The work done by slaves, though it appears to cost only their maintenance, is in the end the
dearest of any. A person who can acquire no property can have no other interest but to eat as
much and to labour as little as possible.
Whatever work he does, beyond what is sufficient to purchase his own maintenance, can be
squeezed out of him by violence only, and not by any interest of his own.
-- Adam Smith
Prohibition
It is because it's prohibited. See, if you look at the drug war from a purely economic point
of view, the role of the government is to protect the drug cartel. That's literally true.
-- Milton Friedman
In the Long Run
John Maynard Keynes: "In the long run we are all dead."
Joan Robinson: "Yes, but not all at the same time."
Minimum Wage and Unemployment
The real minimum wage is zero: unemployment.
-- Thomas Sowell
All of the progress that the US has made over the last couple of centuries has come from
unemployment. It has come from figuring out how to produce more goods with fewer workers,
thereby releasing labor to be more productive in other areas. It has never come about through
permanent unemployment, but temporary unemployment, in the process of shifting people from one
area to another.
-- Milton Friedman
Misc
Talk is cheap. Supply exceeds Demand.
It is difficult to get a man to understand something when his salary depends on his not
understanding it.
-- Upton Sinclair
When you start paying people to be poor, you wind up with an awful lot of poor people.
-- Milton Friedman
of course the country could never listen to this guy .it just makes too much damn sense.
-- ryanx0 about Milton Friedman [http://www.youtube.com/watch?v=Se_TJzB9-z0]
Every individual necessarily labors to render the annual revenue of society as great as he
can. He generally neither intends to promote the public interest, nor knows how much he is
promoting it. He intends only his own gain, and he is, in this, as in many other cases, led by
an invisible hand to promote an end which was not part of his intention.
-- Adam Smith, Wealth of Nations
SOCIALISM: You have two cows. State takes one and give it to someone else.
COMMUNISM: You have two cows. State takes both of them and gives you milk.
FASCISM: You have two cows. State takes both of them and sell you milk.
NAZISM: You have two cows. State takes both of them and shoot you.
BUREAUCRACY: You have two cows. State takes both of them, kill one and spill the milk in
system of sewage.
CAPITALISM: You have two cows. You sell one and buy a bull.
Back during the Solidarity days, I heard that the following joke was being told in
Poland:
A man goes into the Bank of Gdansk to make a deposit. Since he has never kept money in a bank before, he is a little nervous.
"What happens if the Bank of Gdansk should fail?" he asks.
"Well, in that case your money would be insured by the Bank of Warsaw."
"But, what if the Bank of Warsaw fails?"
"Well, there'd be no problem, because the Bank of Warsaw is insured by the National Bank of Poland."
"And if the National Bank of Poland fails?"
"Then your money would be insured by the Bank of Moscow."
"And what if the Bank of Moscow fails?"
"Then your money would be insured by the Great Bank of the Soviet Union."
"And if that bank fails?"
"Well, in that case, you'd lose all your money. But, wouldn't it be worth it?"
All models are wrong but some are useful.
-- George Box
I'd rather be vaguely right than precisely wrong.
-- J.M.Keynes; Found in Forbes magazine 01/25/1999 issue. In the Numbers Game column by
Bernard Cohen
Far better an approximate answer to the right question, which is often vague, than an exact
answer to the wrong question, which can always be made precise.
-- J. Tukey
There is an entirely leisure class located at both ends of the economic spectrum
Wall Street is very story driven. They wasted a decade throwing money at tight oil and
lost billions. It's hard to see how this tight oil story gets resuscitated. The '10s saw free
debt, low regulatory regime, no effective alternatives to oil, skilled work force, entrenched
globalized oil markets, no pandemics, etc, and they STILL lost hundreds of billions. Wall
Street wants to lose their money in new ways. At least they get some novelty out of it.
Hey there! It's me, the stock market. I know it's weird to write you like this, but I felt
like I needed to drop a quick thank-you note for everything you've done for me this year. I
mean, your big ol' balance sheet is almost $3 trillion larger since early March! You're backing
up the truck and loading it with Treasuries and corporate bonds and bond ETFs, all to keep the
competition to stocks from fixed-income yields as limited as Jim Cramer's understanding of me.
It's been a dream come true, honestly. I mean, fess up: Have you been reading my diary?!
... ... ...
So please do me a solid and keep this thank-you note in mind when you host your virtual
Jackson Hole summit. No cowboy stuff, OK? If I hear anybody mutter something about "irrational
exuberance," I swear I'm gonna blow my top and hurt a few of these Robinhood types, you got
that? The Lord giveth, and the Lord taketh away. It's what I do -- and I'm good at it! But
right now, this is still a lot of fun for me...
"... Since the collapse of the Soviet Union, the world has not seen these levels of concentration of ownership. The Soviet Union did not die because of apparent ideological reasons but due to economic bankruptcy caused by its uncompetitive monopolistic economy. Our verdict is that the US is heading in the same direction. ..."
"... In a future instalment of this report, we will show that the oligarchization of America – the placing it under the rule of the One Percent (or perhaps more accurately the 0.1%, if not 0.01%) - has been a deliberate ideologically driven long-term project to establish absolute economic power over the US and its political system and further extend that to involve an absolute global hegemony (the latter project thankfully thwarted by China and Russia). ..."
"... In present-day United States a few major investors – equity funds or private capital - are as a rule cross-owned by each other, forming investor oligopolies, which in turn own the business oligopolies. ..."
"... A study has shown that among a sample of the 1,500 largest US firms (S&P 1500), the probability of one major shareholder holding significant shares in two competing firms had jumped to 90% in 2014, while having been just 16% in 1999. (*2). ..."
"... Institutional investors like BlackRock, Vanguard, State Street, Fidelity, and JP Morgan, now own 80% of all stock in S&P 500 listed companies. The Big Three investors - BlackRock, Vanguard and State Street – alone constitute the largest shareholder in 88% of S&P 500 firms, which roughly correspond to America's 500 largest corporations. (*3). Both BlackRock and Vanguard are among the top five shareholders of almost 70% of America's largest 2,000 publicly traded corporations. (*4). ..."
A close-knit oligarchy controls all major corporations. Monopolization of ownership in US
economy fast approaching Soviet levels
Starting with Ronald Reagan's presidency, the US government willingly decided to ignore the
anti-trust laws so that corporations would have free rein to set up monopolies. With each
successive president the monopolistic concentration of business and shareholding in America has
grown precipitously eventually to reach the monstrous levels of the present day.
Today's level of monopolistic concentration is of such unprecedented levels that we may
without hesitation designate the US economy as a giant oligopoly. From economic power follows
political power, therefore the economic oligopoly translates into a political oligarchy. (It
seems, though, that the transformation has rather gone the other way around, a ferocious set of
oligarchs have consolidated their economic and political power beginning from the turn of the
twentieth century). The conclusion that
the US is an oligarchy finds support in a 2014 by a Princeton University study.
Since the collapse of the Soviet Union, the world has not seen these levels of concentration
of ownership. The Soviet Union did not die because of apparent ideological reasons but due to
economic bankruptcy caused by its uncompetitive monopolistic economy. Our verdict is that the
US is heading in the same direction.
In a later report, we will demonstrate how all sectors of the US economy have fallen prey to
monopolization and how the corporate oligopoly has been set up across the country. This post
essentially serves as an appendix to that future report by providing the shocking details of
the concentration of corporate ownership.
Apart from illustrating the monopolization at the level of shareholding of the major
investors and corporations, we will in a follow-up post take a somewhat closer look at one
particularly fatal aspect of this phenomenon, namely the
consolidation of media (posted simultaneously with the present one) in the hands of
absurdly few oligarch corporations. In there, we will discuss the monopolies of the tech giants
and their ownership concentration together with the traditional media because they rightfully
belong to the same category directly restricting speech and the distribution of opinions in
society.
In a future instalment of this report, we will show that the oligarchization of America
– the placing it under the rule of the One Percent (or perhaps more accurately the 0.1%,
if not 0.01%) - has been a deliberate ideologically driven long-term project to establish
absolute economic power over the US and its political system and further extend that to involve
an absolute global hegemony (the latter project thankfully thwarted by China and Russia). To
achieve these goals, it has been crucial for the oligarchs to control and direct the narrative
on economy and war, on all public discourse on social affairs. By seizing the media, the
oligarchs have created a monstrous propaganda machine, which controls the opinions of the
majority of the US population.
We use the words 'monopoly,' 'monopolies,' and 'monopolization' in a broad sense and subsume
under these concepts all kinds of market dominance be it by one company or two or a small
number of companies, that is, oligopolies. At the end of the analysis, it is not of great
importance how many corporations share in the market dominance, rather what counts is the death
of competition and the position enabling market abuse, either through absolute dominance,
collusion, or by a de facto extinction of normal market competition. Therefore we use the term
'monopolization' to describe the process of reaching a critical level of non-competition on a
market. Correspondingly, we may denote 'monopoly companies' two corporations of a duopoly or
several of an oligopoly.
Horizontal shareholding – the cementation of the
oligarchy
One especially perfidious aspect of this concentration of ownership is that the same few
institutional investors have acquired undisputable control of the leading corporations in
practically all the most important sectors of industry. The situation when one or several
investors own controlling or significant shares of the top corporations in a given industry
(business sector) is referred to as horizontal shareholding . (*1). In present-day United
States a few major investors – equity funds or private capital - are as a rule
cross-owned by each other, forming investor oligopolies, which in turn own the business
oligopolies.
A study has shown that among a sample of the 1,500 largest US firms (S&P 1500), the
probability of one major shareholder holding significant shares in two competing firms had
jumped to 90% in 2014, while having been just 16% in 1999. (*2).
Institutional investors like BlackRock, Vanguard, State Street, Fidelity, and JP Morgan, now
own 80% of all stock in S&P 500 listed companies. The Big Three investors - BlackRock,
Vanguard and State Street – alone constitute the largest shareholder in 88% of S&P
500 firms, which roughly correspond to America's 500 largest corporations. (*3). Both BlackRock
and Vanguard are among the top five shareholders of almost 70% of America's largest 2,000
publicly traded corporations. (*4).
Blackrock had as of 2016 $6.2 trillion worth of assets under management, Vanguard $5.1
trillion, whereas State Street has dropped to a distant third with only $1 trillion in assets.
This compares with a total market capitalization of US stocks according to Russell
3000 of $30 trillion at end of 2017 (From 2016 to 2017, the Big Three has of course also
put on assets).Blackrock and Vanguard would then alone own more than one-third of all US
publicly listed shares.
From an expanded sample that includes the 3,000 largest publicly listed corporations
(Russell 3000 index), institutions owned (2016) about
78% of the equity .
The speed of concentration the US economy in the hands of institutions has been incredible.
Still back in 1950s, their share of the equity was 10%, by 1980 it was 30% after which the
concentration has rapidly grown to the present day approximately 80%. (*5). Another study puts
the present (2016) stock market capitalization held by institutional investors at 70%. (*6).
(The slight difference can possibly be explained by variations in the samples of companies
included).
As a result of taking into account the common ownership at investor level, it emerges that
the US economy is yet much more monopolized than it was previously thought when the focus had
been on the operational business corporation alone detached from their owners. (*7).
The
Oligarch owners assert their control
Apologists for monopolies have argued that the institutional investors who manage passive
capital are passive in their own conduct as shareholders as well. (*8). Even if that would be
true it would come with vastly detrimental consequences for the economy as that would mean that
in effect there would be no shareholder control at all and the corporate executives would
manage the companies exclusively with their own short-term benefits in mind, inevitably leading
to corruption and the loss of the common benefits businesses on a normally functioning
competitive market would bring.
In fact, there seems to have been a period in the US economy – before the rapid
monopolization of the last decade -when such passive investors had relinquished control to the
executives. (*9). But with the emergence of the Big Three investors and the astonishing
concentration of ownership that does not seem to hold water any longer. (*10). In fact, there
need not be any speculation about the matter as the monopolist owners are quite candid about
their ways. For example, BlackRock's CEO Larry Fink sends out
an annual guiding letter to his subject, practically to all the largest firms of the US and
increasingly also Europe and the rest of the West. In his pastoral, the CEO shares his view of
the global conditions affecting business prospects and calls for companies to adjust their
strategies accordingly.
The investor will eventually review the management's strategic plans for compliance with the
guidelines. Effectively, the BlackRock CEO has in this way assumed the role of a giant central
planner, rather like the Gosplan, the central planning agency of the Soviet command
economy.
The 2019 letter (referenced above) contains this striking passage, which should quell all
doubts about the extent to which BlackRock exercises its powers:
"As we seek to build long-term value for our clients through engagement, our aim is not to
micromanage a company's operations. Instead, our primary focus is to ensure board
accountability for creating long-term value. However, a long-term approach should not be
confused with an infinitely patient one. When BlackRock does not see progress despite ongoing
engagement, or companies are insufficiently responsive to our efforts to protect our clients'
long-term economic interests, we do not hesitate to exercise our right to vote against
incumbent directors or misaligned executive compensation."
Considering the striking facts rendered above, we should bear in mind that the establishment
of this virtually absolute oligarch ownership over all the largest corporations of the United
States is a relatively new phenomenon. We should therefore expect that the centralized control
and centralized planning will rapidly grow in extent as the power is asserted and methods are
refined.
Most of the capital of those institutional investors consists of so-called passive capital,
that is, such cases of investments where the investor has no intention of trying to achieve any
kind of control of the companies it invests in, the only motivation being to achieve as high as
possible a yield. In the overwhelming majority of the cases the funds flow into the major
institutional investors, which invest the money at their will in any corporations. The original
investors do not retain any control of the institutional investors, and do not expect it
either. Technically the institutional investors like BlackRock and Vanguard act as fiduciary
asset managers. But here's the rub, while the people who commit their assets to the funds may
be considered as passive investors, the institutional investors who employ those funds are most
certainly not.
Cross-ownership of oligarch corporations
To make matters yet worse, it must be kept in mind that the oligopolistic investors in turn
are frequently cross-owned by each other. (*11). In fact, there is no transparent way of
discovering who in fact controls the major institutional investors.
One of the major institutional investors, Vanguard is ghost owned insofar as it does not
have any owners at all in the traditional sense of the concept. The company claims that it is
owned by the multiple funds that it has itself set up and which it manages. This is how the
company puts it on
their home page : "At Vanguard, there are no outside owners, and therefore, no conflicting
loyalties. The company is owned by its funds, which in turn are owned by their shareholders --
including you, if you're a Vanguard fund investor." At the end of the analysis, it would then
seem that Vanguard is owned by Vanguard itself, certainly nobody should swallow the charade
that those funds stuffed with passive investor money would exercise any ownership control over
the superstructure Vanguard. We therefore assume that there is some group of people (other than
the company directors) that have retained the actual control of Vanguard behind the scenes
(perhaps through one or a few of the funds). In fact, we believe that all three (BlackRock,
State Street and Vanguard) are tightly controlled by a group of US oligarchs (or more widely
transatlantic oligarchs), who prefer not to brandish their power. It is beyond the scope of
this study and our means to investigate this hypothesis, but whatever, it is bad enough that as
a proven fact these three investor corporations wield this control over most of the American
economy. We also know that the three act in concert wherever they hold shares.
(*12).
Now, let's see who are the formal owners of these institutional investors
In considering these ownership charts, please, bear in mind that we have not consistently
examined to what degree the real control of one or another company has been arranged through a
scheme of issuing different classes of shares, where a special class of shares give vastly more
voting rights than the ordinary shares. One source asserts
that 355 of the companies in the Russell index consisting of the 3000 largest corporations
employ such a dual voting-class structure, or 11.8% of all major corporations.
We have mostly relied on www.stockzoa.com for the shareholder data. However, this and
other sources tend to list only the so-called institutional investors while omitting corporate
insiders and other individuals. (We have no idea why such strange practice is employed
The American Revolution was a catastrophe for its economy, which had to endure decades of
reconstruction. In order to neutralize the threat of the British Empire, it stroke multiple
trade deals with it.
The USA is home to the father of protectionism: Alexander Hamilton. He stated that a
national industry in its infancy should be protected from its more mature competition. The
USA followed his advice and protected its nascent industry from the British threat.
When the British Empire begun to degenerate, the Americans used the cheap British capital
in excess in the financial markets to build up their infrastructure, specially their
railways. Australia did the same.
The Founding Fathers did what they had to do in order to protect their country and make it
flourish. When the ideology of the time stated they shouldn't, they invented a new ideology
that stated they should. And the could: when the British and French tried to destroy the USA
through a sea embargo, they responded in kind (Embargo Act of 1807) and prevailed; they did
not cave in to the then imperial powers.
So, I don't understand why so many Americans are offended with China. The capitalist world
tried to keep China poor and as a raw material exporter, sweatshop conglomeration. China
didn't accept this, and decided to fight back. The result is here for all of us to see.
"Today the Department of State is updating the public guidance for CAATSA authorities
to include Nord Stream 2 and the second line of TurkStream 2. This action puts investments or
other activities that are related to these Russian energy export pipelines at risk of US
sanctions. It's a clear warning to companies aiding and abetting Russia's malign influence
projects and will not be tolerated. Get out now or risk the consequences".
Pompeo speaking at a press conference today.
CAATSA -- Countering America's Adversaries Through Sanctions Act
So Russia and Turkey are "adversaries" of the USA?
In what way?
Do these states wish to wage war against the USA?
Is it adversarial to United States interest to compete economically with the hegemon?
Who cares? Really, is Pompeo still scary? If he has a functioning brain, he should realize
that all these blatant efforts to reserve markets for America by sanctioning all its
competitors out of the picture is having the opposite effect, and frightening customers away
from becoming dependent on American products which might be withheld on a whim when America
wants political concessions. 'Will not be tolerated' – what a pompous ass. Sanction
away. The consequence is well-known to be seizure of assets held in the United States or an
inability to do business in the United States. That will frighten some into submission
– like the UK, which was threatened with the cessation of intelligence-sharing with the
USA (sure you can spare it?) if it did not drop Huawei from its 5G networks. But others will
take prudent steps to limit their exposure to such threats, in the certain knowledge that if
they work, they will encourage the USA to use the technique again.
The good news is that the unstoppable juggernaut of globalization has fallen to it's
knees. Countries and societies around the world will have to look at ways they came become
independent and self sufficient,at least to some degree. It's like "War of the Worlds"
really, the best effort of humanity to contain the plague fails, but a random natural
occurrence saves humanity from the brink of destruction. Hopefully some real scientists will
be allowed to mitigate the medical disaster, but one thing is for sure, the grand plan of
turning everyone into a nomad competing for pennies on the international market, for the sole
benefit of the richest among the rich, is dead. Some really hard times are coming for the
international nomads/ parasites, and hopefully humanity will move to some more beneficial
culture, and have a real chance to survive as a species, in the long term.
"... I agree that globalism is/will be heading into the dumpers, but I see no chance that US-based manufacturing is going to make any significant come-back. ..."
"... What market will there be for US-manufactured goods? US "consumers" are heavily in debt and facing continued downward pressures on income. ..."
"... There will certainly be, especially given the eye-opener of COVID-19, a big push to have medical (which includes associated tech) production capacities reinvigorated in the US. ..."
"... More "disposable" income goes toward medical expenditures. Less money goes toward creating export items; wealth creation only occurs through a positive increase in balance of trade. And on the opposite end of the spectrum, death, the US will likely continue, for the mid-term, to export weaponry; but, don't expect enough growth here to mean much (margins will drop as competition increases, so figure downward pressure on net export $$). ..."
"... the planet cannot comply with our economic model's dependency on perpetual growth: there can NOT be perpetual growth on a finite planet. US manufacturing requires, as it always has, export markets; requires ever-increasing exports: this is really true for all others. Higher standards of living in the US (and add in increasing medical costs which factor into cost of goods sold) means that the price of US-manufactured goods will be less affordable to peoples outside of the US. ..."
"... I'll also note that the notion of there being a cycle, a parabolic curve, in civilizations is well noted/documented in Sir John Glubb's The Fate of Empires and Search for Survival (you can find electronic bootlegged copies on the Internet)- HIGHLY recommended reading! ..."
"... All of this is pretty much reflected in Wall Street companies ramp-ups in stock-buy-backs. That's money that's NOT put in R&D or expansion. I'm pretty sure that the brains in all of this KNOW what the situation is: growth is never coming back. ..."
"... Make no mistake, what we're facing is NOT another recession or depression, it's not part of what we think as a downturn in the "business cycle," as though we'll "pull out of it," it's basically an end to the super-cycle ..."
"... We are at the peak (slightly past peak, but not far enough to realize it yet) and there is no returning. Per-capita income and energy consumption have peaked. There's not enough resources and not enough new demand (younger people, people that have wealth) to keep the perpetual growth machine going. ..."
I agree that globalism is/will be heading into the dumpers, but I see no chance that US-based manufacturing is going to
make any significant come-back.
The world's economy is in contraction. Although capital, what actual capital exists, will have to try and do something "productive,"
it is confronted by this fact, that everything is facing contraction. During times of contraction it's a game of acquisition rather
than expanding capacity: the sum total is STILL contraction; and the contraction WILL be a reduction in excess, excess manufacturing
and labor.
What market will there be for US-manufactured goods? US "consumers" are heavily in debt and facing continued downward pressures
on income. China is self-sufficient (enough) other than energy (which can be acquired outside of US markets). Most every other
country is in a position of declining wealth (per capita income levels peaked and in decline). And manufacturing continues to
increase its automation (less workers means less consumers).
There will certainly be, especially given the eye-opener of COVID-19, a big push to have medical (which includes associated
tech) production capacities reinvigorated in the US. One has to look at this in The Big Picture of what it means, and that's that
the US population is aging (and in poor health).
More "disposable" income goes toward medical expenditures. Less money goes toward
creating export items; wealth creation only occurs through a positive increase in balance of trade. And on the opposite end of
the spectrum, death, the US will likely continue, for the mid-term, to export weaponry; but, don't expect enough growth here to
mean much (margins will drop as competition increases, so figure downward pressure on net export $$).
Lastly, and it's the reason why global trade is being knocked down, is that the planet cannot comply with our economic model's
dependency on perpetual growth: there can NOT be perpetual growth on a finite planet. US manufacturing requires, as it always
has, export markets; requires ever-increasing exports: this is really true for all others. Higher standards of living in the US
(and add in increasing medical costs which factor into cost of goods sold) means that the price of US-manufactured goods will
be less affordable to peoples outside of the US.
And here too is the fact that other countries' populations are also aging. Years
ago I dove into the demographics angle/assessment to find out that ALL countries ramp and age and that you can see countries'
energy consumption rise and their their net trade balance swing negative- there's a direct correlation: go to the CIA's Factbook
and look at demographics and energy and the graphs tell the story.
I'll also note that the notion of there being a cycle, a parabolic
curve, in civilizations is well noted/documented in Sir John Glubb's The Fate of Empires and Search for Survival (you can find
electronic bootlegged copies on the Internet)- HIGHLY recommended reading!
All of this is pretty much reflected in Wall Street companies ramp-ups in stock-buy-backs. That's money that's NOT put in R&D
or expansion. I'm pretty sure that the brains in all of this KNOW what the situation is: growth is never coming back.
MANY years ago I stated that we will one day face "economies of scale in reverse." We NEVER considered that growth couldn't
continue forever. There was never a though about what would happen with the reverse "of economies of scale."
Make no mistake,
what we're facing is NOT another recession or depression, it's not part of what we think as a downturn in the "business cycle,"
as though we'll "pull out of it," it's basically an end to the super-cycle.
We will never be able to replicate the state of things
as they are. We are at the peak (slightly past peak, but not far enough to realize it yet) and there is no returning. Per-capita
income and energy consumption have peaked. There's not enough resources and not enough new demand (younger people, people that
have wealth) to keep the perpetual growth machine going.
@Rev. Spooner bout the Bill of Rights or the Constitution or community. Those are a joke
to people whose money is made transnational.
The lumpens who have never traveled out of their state have no concept of geographic
dimensions. They have never even left home. They think everyone is as patriotic as them and
will fight and die for their country and their community.
I assure none of the elite care a whit. Penthouses look the same from Manhattan to
Tokyo.
Ask the Boers in South Africa or Polish in Detroit who did not "sniff the wind" in
time.
The guy who has a gun loaded in his pocket as an insurance policy has a plan and it does
not end well for the person who hit him.
The elites have two or three passports, own businesses overseas, own houses.
Trump just changed the rules to let Wall Street's most predatory industry get its hands on hundreds of billions of dollars of
ordinary workers' retirement savings. Now his friends in private equity are celebrating.
If politics is the art of the sleight of hand, then Donald Trump is one of the deftest magicians of all time -- a master of creating
mesmerizing spectacles, while his minions quietly rob everything in sight. This David Copperfield routine has become so mundane we
are practically numb to it, but the trick Trump just pulled off for his billionaire pals was something particularly special -- it
could end up being one of the single biggest financial heists in history.
The Trump administration's new directive came just a few months after private equity billionaire Stephen Schwarzman -- who had
been pushing for the change -- poured $3 million
into a super PAC backing Trump's reelection bid.
While long-standing worker-protection regulations have prevented 401(k) plans from investing in high-risk private equity firms,
the letter now permits corporations to funnel that money to those firms, which charge notoriously giant fees.
Trump's administration argued that workers should feel fortunate and thankful that the administration will now let employers turn
their savings over to private equity barons.
"This information letter will help Americans saving for retirement gain access to alternative investments that often provide strong
returns," labor secretary Eugene Scalia said
in a statement announcing the new policy. "The letter helps level the playing field for ordinary investors and is another step
by the department to ensure that ordinary people investing for retirement have the opportunities they need for a secure retirement."
In practice, private equity firms will now be allowed to access -- and skim fees off of -- the
$9 trillion in 100
million workers' 401(k) plans and IRAs.
"If just 5 percent of the money in these retirement funds were available to private equity, it would be a windfall of $435 billion
-- real money even to private equity millionaires and billionaires,"
wrote Eileen Appelbaum of the Center for Economic and Policy Research (CEPR).
The Labor Department letter is the result of all that private equity influence -- and at a particularly opportune time. The
industry -- including
Partners Group -- has recently been fretting about a decline in fees during the COVID-19 pandemic. The letter offers the potential
for a bailout for the industry, paid for by millions of workers' retirement savings.
That said, this is not some temporary relief during a fleeting crisis -- this is the culmination of a long-term campaign by Schwarzman.
Six days after Trump was inaugurated, the Blackstone chief said that he had been dreaming of a president who would change the law
to let his firm make bank off workers' 401(k) savings.
"In life you have to have a dream," Schwarzman told analysts in
January 2017 , days after Trump's inauguration. "One of the dreams is our desire and the market's need to have more access at
retail to alternative asset products . . . A lot of people are not allowed to put those into retirement vehicles and other types.
And one of the interesting issues when you have a new government is whether they want to continue that type of prohibition or not.
Because what it's doing is denying people sort of a better retirement, and if there's a change in that area that becomes a huge opportunity
for the firm."
Like Shelley Levene's smarmy real-estate sales pitch in
Glengarry Glen Ross , Schwarzman's argument is that private equity offers ordinary Americans terrific untapped investment upside.
In his telling, workers have been unfairly deprived of these opportunities under the old laws -- and not surprisingly, both the Trump
Labor Department and some of the business press have credulously echoed that line.
"Everyday investors may soon be able to get a piece of private equity action," effused the lede of the New York Times
' report on the Labor Department letter, as if this is a sweet get-rich-quick opportunity for the average working man.
But only days after the change, a landmark
study was released, telling the real story of private equity.
The report by University of Oxford professor Ludovic Phalippou shows that in the last fifteen years, private equity firms generally
have not provided better returns to investors than low-fee stock index funds. In the process, a handful of private equity firms and
their executives have raked in roughly $230 billion in fees from investors like public pension funds and university endowments.
"This wealth transfer might be one of the largest in the history of modern finance: from a few hundred million pension scheme
members to a few thousand people working in private equity," Phalippou concludes.
Politicians have enabled this redistribution.
In Washington, federal lawmakers have
preserved a tax loophole
that allows private equity moguls to classify their winnings as capital gains rather than income, thereby paying far lower tax rates
than ordinary workers.
Meanwhile, in states and cities, local officials have continued to
direct more and more of government workers' pension savings to politically connected private equity firms. Those officials have
been hoping that private equity investments would produce outsize returns that might forestall tax hikes necessary to raise revenue
and fund the pension benefits promised to public-sector workers. But overall, those returns were not significantly better than the
stock market, and they came with giant fees.
In its letter, the Trump administration actually acknowledged some of these pitfalls of private equity investments, noting that
they involve "more complex, and typically, higher fees." But that wasn't enough to stop the Labor Department from shoving millions
of unwitting workers and retirees into private equity's maw just a few years after
Blackstone
and other major private equity firms were sanctioned
by regulators for fleecing investors.
The Quest for Dumb Money
The private equity industry is hardly short on cash -- the industry was sitting on roughly
$1.5 trillion of undeployed capital at the end of 2019. The reason the Labor Department letter is so important to the industry
is because 401(k)s and IRAs represent a particular kind of capital that private equity firms love -- so-called
"dumb money."
Unlike a share of publicly traded stock whose price is the same for all investors, a private equity investment's fees can vary
widely from investor to investor. Private equity firms are therefore always eager to find investors willing to accept the highest
possible fees. "Dumb money" refers to such investors -- entities like pension funds, 401(k) plans, and university endowments that
are pools of other people's money directed by officials with no personal skin in the investment decisions.
Wall Street sees these funds as "dumb" -- and particularly lucrative -- because the officials negotiating on retirees' or universities'
behalf may not drive as hard a bargain on fees and terms as, say, an individual billionaire or an insurance company trying to protect
its cash reserves.
This wiggle room with dumb money can be enormously lucrative for private equity firms: a recent
study by Stanford and Harvard researchers
found that had public pensions all received the same private equity fee rates, they "would have earned nearly $45 billion more on
their investments."
In other words: that is $45 billion of earnings that could have gone to retirees, but instead went to private equity firms and
other wealthy investors because pension fund managers didn't secure better fees and terms.
That part about "other unobserved investors" is key -- private equity firms explicitly say in their
SEC filings that they can and will offer different investors different fees and terms on the exact same investments. It is a
situation that has caused
some retirees to wonder whether their dumb money is being used to pad the profits of smarter, politically connected investors
who negotiate better terms in the same private equity investments.
Now that Trump's Labor Department has opened the floodgates, a lot more money could end up flowing into these opaque deals, enriching
private equity executives and their friends -- while leaving workers'
meager retirement savings even further depleted.
End Mark
David Sirota is editor-at-large at Jacobin . He edits the Too Much Information newsletter and previously served as a senior
adviser and speechwriter on Bernie Sanders's 2020 presidential campaign. You can subscribe to David Sirota's newsletter "Too Much
Information" here . Andrew Perez contributed research to this
story.
Private equity is essential a mafia style business: they aid to blled thier victim dry.
Notable quotes:
"... By the end of 2018, available cash was so tight that Prospect got a $41 million infusion from Leonard Green and members of its management, according to Moody's. The ratings firm downgraded Prospect deeper into junk last year at B3, citing "shareholder-friendly policies" and the higher leverage resulting from the $457 million dividend. ..."
"... Meanwhile, care quality ratings for seven of the 10 Prospect hospitals evaluated by the Centers for Medicare and Medicaid Services, or CMS, have declined since 2016, according to HMP Metrics, a health-care facility analytics service. CMS ranks facilities from 1 to 5 stars, with 5 being the best. ..."
"... Most Prospect hospitals sit at the bottom rungs of quality assessments, according to the agency's hospital comparison database. Nine have a two-star rating or below, placing them in the lowest 30% of rated hospitals, according to CMS data. Just one Prospect-owned hospital -- Roger Williams Medical Center in Rhode Island -- earned a three-star rating. ..."
"... "Private equity owners, seeking high returns, may be even more willing to cut costs in crucial ways than even other for-profit health care companies," she said in an interview. ..."
"... How much of this is virtue signalling by Mitt Romney and others of the elite? Is he willing to disgorge himself of the the hundreds of millions he took from Americans through his company Bain? ..."
These far right social conservatives lost yesterday and they don't even realize it. Mitt
Romney marched with BLM. Mitt is no radical on social issues (he certainly is on. Taxes on
the rich) you won't convince a single one of these hard right wing people that systemic
racism is real, even when you give examples like the North Carolina Republican Party
disenfranchising blacks "with surgical precision" or the direct evidence of the commenter
Dukeboy who states he is a retired police officer and is obviously a white supremacists. But
you don't need to convince them of anything. This is the same group who would have been
against the civil rights protests in the '60's. They aren't needed to create a massive
change.
The hubris to think that your feelings of guilt would be meaningful to black people is off
the charts.
"My local school has been underfunded for generations due to the property tax funding system
and redlining but Karen feels bad about it so all is right with the world!"-Said no black
person ever.
How much of this is virtue signalling by Mitt Romney and others of the elite? Is he
willing to disgorge himself of the the hundreds of millions he took from Americans through
his company Bain?
How much? 100% of it. Romney is a vicious corporate raider who has destroyed countless
jobs and by extension, lives. How many suicides have followed in the wake of Bain's corporate
takeovers? When Romney lived in Belmont, MA, he and his wife petitioned the town to not allow
ambulances to go down their street with sirens on. Seriously.
"... Moreover, people do distinguish between needs and wants. Americans need to eat, but they mostly don't need to eat out. They don't need to travel. Restaurant owners and airlines therefore have two problems: they can't cover costs while their capacity is limited for public-health reasons, and demand would be down even if the coronavirus disappeared. This explains why many businesses are not reopening even though they legally can. Others are reopening, but fear they cannot hold out for long. And the many millions of workers in America's vast services sector are realizing that their jobs are simply not essential. ..."
"... America's economic plight is structural. It is not simply the consequence of Trump's incompetence or House Speaker Nancy Pelosi's poor political strategy. It reflects systemic changes over 50 years that have created an economy based on global demand for advanced goods, consumer demand for frills, and ever-growing household and business debts. This economy was in many ways prosperous, and it provided jobs and incomes to many millions. Yet it was a house of cards, and COVID-19 has blown it down. ..."
In the 1960s, the US had a balanced economy that produced goods for both businesses and
households, at all levels of technology, with a fairly small (and tightly regulated) financial
sector. It produced largely for itself, importing mainly commodities.
Today, the US produces for the world, mainly advanced investment goods and services, in
sectors such as aerospace, information technology, arms, oilfield services, and finance. And it
imports far more consumer goods, such as clothing, electronics, cars, and car parts, than it
did a half-century ago.
And whereas cars, televisions, and household appliances drove US consumer demand in the
1960s, a much larger share of domestic spending today goes (or went) to restaurants, bars,
hotels, resorts, gyms, salons, coffee shops, and tattoo parlors, as well as college tuition and
doctor's visits. Tens of millions of Americans work in these sectors.
Finally, American household spending in the 1960s was powered by rising wages and growing
home equity. But wages have been largely stagnant since at least 2000, and spending increases
since 2010 were powered by rising personal and corporate debts. House values are now stagnant
at best, and will likely fall in the months ahead.
Mainstream economics pays little attention to such structural questions. Instead, it assumes
that business investment responds mostly to the consumer, whose spending is dictated equally by
income and desire. The distinction between "essential" and "superfluous" does not exist. Debt
burdens are largely ignored.
But demand for many US-made capital goods now depends on global conditions. Orders for new
aircraft will not recover while half of all existing planes are grounded. At current prices,
the global oil industry is not drilling new wells. Even at home, though existing construction
projects may be completed, plans for new office towers or retail outlets won't be launched
soon. And as people commute less, cars will last longer, so demand for them (and gasoline) will
suffer.
Faced with radical uncertainty, US consumers will save more and spend less. Even if the
government replaces their lost incomes for a time, people know that stimulus is short term.
What they do not know is when the next job offer – or layoff – will come along.
Moreover, people do distinguish between needs and wants. Americans need to eat, but they
mostly don't need to eat out. They don't need to travel. Restaurant owners and airlines
therefore have two problems: they can't cover costs while their capacity is limited for
public-health reasons, and demand would be down even if the coronavirus disappeared. This
explains why many businesses are not reopening even though they legally can. Others are
reopening, but fear they cannot hold out for long. And the many millions of workers in
America's vast services sector are realizing that their jobs are simply not essential.
Meanwhile, US household debts – rent, mortgage, and utility arrears, as well as
interest on education and car loans – have continued to mount. True, stimulus checks have
helped: defaults have so far been modest, and many landlords have been accommodating. But as
people face long periods with lower incomes, they will continue to hoard funds to ensure that
they can repay their fixed debts. As if all this were not enough, falling sales- and income-tax
revenues are prompting US state and local governments to cut spending, compounding the loss of
jobs and incomes.
America's economic plight is structural. It is not simply the consequence of Trump's
incompetence or House Speaker Nancy Pelosi's poor political strategy. It reflects systemic
changes over 50 years that have created an economy based on global demand for advanced goods,
consumer demand for frills, and ever-growing household and business debts. This economy was in
many ways prosperous, and it provided jobs and incomes to many millions. Yet it was a house of
cards, and COVID-19 has blown it down.
"Reopen America" is therefore an economic and political fantasy. Incumbent politicians crave
a cheery growth rebound, and the depth of the collapse makes possible some attractive
short-term numbers. But taking them seriously will merely set the stage for a new round of
disillusion. As nationwide protests against systemic racism and police brutality show,
disillusion is America's one big growth sector right now.
"... Russiagate became a convenient replacement explanation absolving an incompetent political establishment for its complicity in what happened in 2016, and not just the failure to see it coming. ..."
"... Because of the immediate arrival of the collusion theory, neither Wolf Blitzer nor any politician ever had to look into the camera and say, "I guess people hated us so much they were even willing to vote for Donald Trump ..."
" Russiagate became a convenient replacement explanation absolving an incompetent political establishment for its complicity
in what happened in 2016, and not just the failure to see it coming.
Because of the immediate arrival of the collusion theory, neither Wolf Blitzer nor any politician ever had to look into
the camera and say, "I guess people hated us so much they were even willing to vote for Donald Trump ."
As a peedupon all I can see is that the elite seem to be fighting amongst themselves or (IMO) providing cover for ongoing elite
power/control efforts. It might not be about private/public finance in a bigger picture but I can't see anything else that makes
sense
"... "I understand that people are angry, but they shouldn't just endanger businesses without even a thought to enriching themselves through leveraged buyouts and across-the-board terminations..." ..."
"I understand that people are angry, but they shouldn't just endanger businesses without
even a thought to enriching themselves through leveraged buyouts and across-the-board
terminations..."
"Look, we all have the right to protest, but that doesn't mean you can just rush in and
destroy any business without gathering a group of clandestine investors to purchase it at a
severely reduced price and slowly bleed it to death," said Facebook commenter Amy Mulrain,
echoing the sentiments of detractors nationwide who blasted the demonstrators for not hiring
a consultant group to take stock of a struggling company's assets before plundering.
" I understand that people are angry, but they shouldn't just endanger businesses without
even a thought to enriching themselves through leveraged buyouts and across-the-board
terminations.
It's disgusting to put workers at risk by looting. You do it by chipping away at their
health benefits and eventually laying them off. There's a right way and wrong way to do this.
"
At press time, critics recommended that protestors hold law enforcement accountable by
simply purchasing the Minneapolis police department from taxpayers.
So not only ambulance service was destroyed by private equity, they now added other specialties. I wonder is those criminals who
insert unnecessary stents in patients are connected to private equity.
Images removed
Notable quotes:
"... "You can't serve two masters. You can't serve patients and investors" ..."
"... Morganroth's defense of pandemic Botox might seem odd, but it made perfect sense within the logic of the U.S. health-care system, which has seen Wall Street investors invade its every corner, engineering medical practices and hospitals to maximize profits as if they were little different from grocery stores. At the center of this story are private equity firms, which saw the explosive growth of health-care spending and have been buying up physician staffing companies, surgery centers, and everything else in sight. ..."
"... But some doctors say that the private equity playbook, which involves buying companies, drastically cutting costs, and then selling for a profit -- the goal is generally to make an annualized return of 20% to 30% within three to five years -- creates problems that are unique to health care. "I know private equity does this in other industries, but in medicine you're dealing with people's health and their lives," says Michael Rains, a doctor who worked at U.S. Dermatology Partners , a big private equity-backed chain. "You can't serve two masters. You can't serve patients and investors." ..."
"... Yet over the past decade, lawyers devised a structure that allows investors to buy a medical practice without technically owning it: the MSO, or management service organization. Today, when an investment firm buys a doctor's office, what it's actually buying are the office's "nonclinical" assets. In theory, physicians control all medical decisions and agree to pay a management fee to a newly created company, which handles administrative tasks such as billing and marketing. ..."
"... Businessweek ..."
"... When individual doctors sell, they generally receive $2 million to $7 million each, with 30% to 40% of that paid in equity in the group. After the acquisition, doctors get a lower salary and are asked to help recruit other doctors to sell their practices or to join as employees. ..."
"... Patients, for the most part, are in the dark. Unlike when your mortgage changes hands, you usually aren't notified when a big investment firm buys your doctor. Sometimes the sign on the door bearing the physician's name stays put, and subtle changes in operations or unfamiliar fees may be the only clues that anything has happened. ..."
"... At Advanced Dermatology & Cosmetic Surgery , the largest private equity-backed group in the field, with more than 150 locations across the U.S., that sense of discomfort came shortly after Audax Group bought a controlling stake in what was then a much smaller chain in 2011. The new management team introduced a scorecard that rewarded offices with cash if they met daily and monthly financial goals, according to a lawsuit filed in 2013 against the company by one of its dermatologists. The doctor alleged that the bonus program encouraged staff to do as many procedures as possible, rather than strictly addressing patients' medical needs. ..."
"... Most dermatologists use outside labs and pathologists, but private equity-owned groups buy up existing labs and hire their own pathologists. Then doctors are encouraged to refer patients within the group and send biopsy slides to the company-owned labs, keeping the entire chain of revenue in-house. ..."
"... Now comes the cost-cutting. This is supposed to be the hallmark of private equity, and, done right, it can work to the benefit of doctors and patients. But there are pitfalls unique to medicine, where aggressive cuts can lead to problems, some of them merely inconvenient and some potentially dangerous. ..."
"... A doctor at Advanced Dermatology says that waiting for corporate approvals means his office is routinely left without enough gauze, antiseptic solution, and toilet paper. Even before the great toilet paper shortage of 2020, he would travel with a few rolls in the trunk of his car, to spare patients when an office inevitably ran out. The company declined to comment. ..."
"... One paradox of the Covid-19 pandemic has been that even as the virus has focused the entire country on health care, it's been a financial disaster for the industry. And so, while emergency room doctors and nurses care for the sick -- comforting those who would otherwise die alone, and in some cases dying themselves -- private equity-backed staffing companies and hospitals have been cutting pay for ER doctors. These hospitals, like the big medical practices, make a large portion of their money from elective procedures and have been forced into wrenching compromises. ..."
"... For investors with capital, on the other hand, the economic fallout from the virus is a huge opportunity. Stay-at-home orders have left small practices more financially strained than they've ever been. That will likely accelerate sales to private equity firms, according to Marc Cabrera, an investment banker focused on health-care deals at Oppenheimer & Co. Independent doctors or groups that previously rebuffed offers from deep-pocketed backers "will reconsider their options," he says. ..."
"... Many doctors may ultimately come to regret cashing out, but it's hard to get out once you're in. As part of an acquisition, the private equity groups typically require doctors to sign yearslong contracts, with noncompete clauses that prevent them from working in the surrounding area. ..."
Not long after Gavin Newsom, the governor of California, ordered the state's 40 million residents to stay home to stop the spread
of the new coronavirus, Dr. Greg Morganroth called his team of doctors and said their dermatology group was staying open.
Morganroth is chief executive officer of the California Skin Institute
, which he founded in 2007 as a single office in Mountain View. He's since expanded to more than 40 locations using a financing
strategy that's become exceedingly common in American health care: private equity. In this case, he took out a loan from
Goldman Sachs Group Inc. that could eventually convert to an
equity stake. CSI is now the largest dermatology chain in California.
But the Covid-19 pandemic
put Morganroth in a precarious position. Most medical procedures were characterized as
nonessential by government officials and practitioners. Doctors were closing offices, and patients were staying away to limit
their potential exposure to the virus.
CSI took a different approach. Morganroth explained his thinking on April 2 in a Zoom call with more than 170 dermatologists from
around the country organized by the Cosmetic Surgery Forum, an industry conference. Contrary to what they might have heard, Morganroth
told them, they should consider staying open during the pandemic. "Many of us are over-interpreting guidelines," he said.
For a moment there was an awkward silence. Doctors had thought they were signing up for advice on how to apply for
government money that would help them meet payroll while they were shut down; they hadn't expected to be told not to shut down
at all. Morganroth continued: "We are going to be in a two-year war, and we need to make strategic plans for our businesses that
enable us to survive and to rebound."
Back at CSI, the company's front-office staff was working the phones, calling patients in some of the worst-hit areas and reminding
them to show up for their appointments, even for cosmetic procedures such as Botox injections to treat wrinkles. During the videoconference,
Morganroth argued that offering Botox in a pandemic wasn't so different from a grocery store allowing customers to buy candy alongside
staples.
"If I had a food supply company and had to stay open, and I had meat, bread, and milk, would I stop making lime and strawberry
licorice?" Morganroth asked. "I would make everything and go forward."
From a public-health point of view, some of the doctors believed, this was questionable. Common reasons for visiting a dermatologist's
office -- skin screenings, mole removals, acne consultations -- aren't particularly time sensitive. Serious matters, such as suspected
cancers and dangerous rashes, can be handled, at least initially, with
telemedicine consultations . Then doctors can weigh the risks for their patients and determine who needs to come in. In a statement,
CSI says that it followed local and state laws for staying open, while providing "necessary care" for patients, and that it had not
required doctors to come to work.
"You can't serve two masters. You can't serve patients and investors"
Morganroth's defense of pandemic Botox might seem odd, but it made perfect sense within the logic of the U.S. health-care system,
which has seen Wall Street investors invade its every corner, engineering medical practices and hospitals to maximize profits as
if they were little different from grocery stores. At the center of this story are private equity firms, which saw the explosive
growth of health-care spending and have been buying up physician staffing companies, surgery centers, and everything else in sight.
Over the past five years, the firms have invested more than $10 billion in medical practices, with a special focus on dermatology,
which is seen as a hot industry because of the aging population. Baby boomers suffer from high rates of two potentially lucrative
conditions: skin cancer and vanity. Some estimates suggest that private equity already owns more than 10% of the U.S dermatology
market. And firms have started to expand into other specialties, including women's health, urology, and gastroenterology.
There's nothing inherently wrong with any of this. But some doctors say that the private equity playbook, which involves
buying companies, drastically cutting costs, and then selling for a profit -- the goal is generally to make an annualized return
of 20% to 30% within three to five years -- creates problems that are unique to health care. "I know private equity does this in
other industries, but in medicine you're dealing with people's health and their lives," says Michael Rains, a doctor who worked
at
U.S. Dermatology Partners , a big private equity-backed
chain. "You can't serve two masters. You can't serve patients and investors."
Investment firms, and the practices they fund, say these concerns are overblown. They point out that they're giving doctors a
financial shelter from the rapidly changing medical environment, a particularly attractive prospect now, and that money from private
equity firms has expanded care to more patients. But they've also made it next to impossible to track the industry's impact or reach.
Firms rarely announce their investments and routinely subject doctors to nondisclosure agreements that make it difficult for them
to speak publicly. Bloomberg Businessweek spoke to dozens of doctors at 10 large private equity-backed dermatology groups.
Those interviews, along with information obtained from other employees, investors, lawyers, court filings, and company records, reveal
how the firms operate, and why they sometimes fail patients.
The process is never exactly the same, but there are familiar patterns, which tend to play out in five steps.
Step 1: Marriage
The strange thing about private equity money in medicine is that for-profit investors have long been prevented from buying doctor's
offices. Corporate ownership goes against a doctrine set by the American Medical
Association , the main trade group for doctors in the U.S., and is prohibited by law in many states, including Texas and New
Jersey. For most of the past 100 years, if you wanted to make money on a medical practice, you needed to have a medical license.
Yet over the past decade, lawyers devised a structure that allows investors to buy a medical practice without technically owning
it: the MSO, or management service organization. Today, when an investment firm buys a doctor's office, what it's actually buying
are the office's "nonclinical" assets. In theory, physicians control all medical decisions and agree to pay a management fee to a
newly created company, which handles administrative tasks such as billing and marketing.
In practice, though, investors expect some influence over medical decision-making, which, after all, is connected to profits.
"When we partner with you, it's a marriage," said Matt Jameson, a managing director at BlueMountain Capital, a $17 billion firm that
recently invested in a women's health company, while speaking at a conference in New York in September. "We have to believe it. You
have to believe it. It's not going to be something where clinical is completely not touched." (When contacted by Businessweek
, Jameson asked to clarify his comments. "Doctors and other qualified healthcare professionals at the providers we've invested
in make medical decisions," he said in a statement.)
The typical buyout starts with the acquisition of a big, popular practice, often with multiple doctors and several locations,
for as much as $100 million. (Investors typically pay between 9 and 12 times annual profit.) This practice functions as an anchor,
like a name-brand department store at a shopping mall, attracting patients and doctors to the new group as it expands. Then comes
the roll-up: The private equity firm purchases smaller offices and solo practices, giving the group a regional presence.
As part of the new structure, investors deal with paperwork and save money by buying medical supplies in bulk. Crucially they
also negotiate higher insurance reimbursement rates. One dermatologist who sold her practice to the California Skin Institute says
she was surprised to find out the bigger group's payouts from insurers were $25 to $125 more per visit.
When individual doctors sell, they generally receive $2 million to $7 million each, with 30% to 40% of that paid in equity in
the group. After the acquisition, doctors get a lower salary and are asked to help recruit other doctors to sell their practices
or to join as employees.
At first, doctors are generally thrilled by all of this. They have financial security and can focus on treating patients without
the stress of running a business. Patients, for the most part, are in the dark. Unlike when your mortgage changes hands, you usually
aren't notified when a big investment firm buys your doctor. Sometimes the sign on the door bearing the physician's name stays put,
and subtle changes in operations or unfamiliar fees may be the only clues that anything has happened.
Step 2: Growth
The promise of more patients is a big draw for doctors. By sharing marketing costs and adding locations, the new companies can
advertise more and attract customers. Private equity-owned practices have been diligent users of social media, announcing newly added
doctors and posting coupons on Twitter and Instagram. But these practices can be aggressive in ways that make some doctors uncomfortable.
At Advanced Dermatology & Cosmetic Surgery , the largest
private equity-backed group in the field, with more than 150 locations across the U.S., that sense of discomfort came shortly after
Audax Group bought a controlling stake in what was then a
much smaller chain in 2011. The new management team introduced a scorecard that rewarded offices with cash if they met daily and
monthly financial goals, according to a lawsuit filed in 2013 against the company by one of its dermatologists. The doctor alleged
that the bonus program encouraged staff to do as many procedures as possible, rather than strictly addressing patients' medical needs.
In some of the company's Florida offices, the doctor alleged, medical assistants responded to the bonus structure by ticking extra
boxes on exam reports, stating that doctors checked many more areas of the body than they actually had. That led to higher patient
bills, defrauding the government under its Medicare program, according to the lawsuit. The federal government declined to join the
case, and it was dismissed about a year after it was filed. Advanced and Audax declined to comment.
One-Stop Skin Care
By buying up labs and adding specialists, private equity-owned dermatology groups get paid at every step of a patient's treatment.
Data: Estimated Medicare reimbursement rates for the Miami area, Sensus Healthcare sales presentation
Private equity-backed practices also try to increase revenue by adding more-lucrative procedures, according to doctors interviewed
by Businessweek . In dermatology, this means more cosmetics, laser treatments, radiation, and especially Mohs surgeries
-- a specialized skin cancer procedure that removes growths from delicate areas like the face and neck one layer at a time, to limit
scarring. The surgery involves expensive equipment and specialized doctors, so some large medical groups keep costs down by assembling
traveling Mohs teams, who fly in from other states. Others create mobile labs in vans that set up in clinics' parking lots.
Most dermatologists use outside labs and pathologists, but private equity-owned groups buy up existing labs and hire their own
pathologists. Then doctors are encouraged to refer patients within the group and send biopsy slides to the company-owned labs, keeping
the entire chain of revenue in-house. This takes advantage of a regulatory quirk that has made dermatology, and a handful of other
specialties, attractive to private equity. Under the 1989 Stark Law, doctors aren't allowed to make patient referrals for their own
financial gain. An exception was made for some fields because it's more convenient for patients, explains Dr. Sailesh Konda, a Mohs
surgeon and professor at the University of Florida. "But that can be abused."
Step 3: Synergy
Now comes the cost-cutting. This is supposed to be the hallmark of private equity, and, done right, it can work to the benefit
of doctors and patients. But there are pitfalls unique to medicine, where aggressive cuts can lead to problems, some of them merely
inconvenient and some potentially dangerous.
A doctor at Advanced Dermatology says that waiting for corporate approvals means his office is routinely left without enough gauze,
antiseptic solution, and toilet paper. Even before the great
toilet paper shortage of 2020, he would travel with a few rolls in the trunk of his car, to spare patients when an office inevitably
ran out. The company declined to comment.
At the country's second-biggest skin-care group, U.S. Dermatology
Partners , a former doctor says a regional manager switched to a cheaper brand of needles and sutures without consulting the
medical staff. The quality was so poor, she says, they would often break off in her patients' bodies. Mortified, she'd have to dig
them out and start over. She complained to managers but couldn't get better supplies, she says. Paul Singh, U.S. Dermatology's CEO,
says the company uses a "reputable, global vendor for medical supplies." "While our group may have standardized purchasing processes,
individual providers have the autonomy to procure specific supplies that they need for a particular patient situation or patient
population," he says in a statement.
Doctors who join a private equity-backed group generally sign contracts that state they'll never have to compromise their medical
judgment, but some say that management began to intervene there, too. Dermatologists at most of the companies say they were pushed
to see as many as twice the number of patients a day, which made them feel rushed and unable to provide the same quality of care.
Others were forced to discuss their cases with managers or medical directors, who asked the doctors to explain why they weren't sending
more patients for surgery. Multiple practices also encouraged doctors to send home Mohs surgery patients with open wounds and have
them come back the next day for stitches -- or to have a different doctor do the closure the same day -- because that would allow
the practice to collect more from insurers.
That's if doctors are performing the procedures at all. At Advanced Dermatology, several doctors say they were asked to claim
that physician assistants, or PAs, were under their supervision when they weren't seeing patients in the same building, or even the
same town. Because PAs are paid less than dermatologists, this allowed the company to keep costs low while growing the business.
In a statement, Eric Hunt, Advanced's general counsel and chief compliance officer says that having PAs on staff enables the company
to "provide access to quality dermatological care to more patients."
Step 4. Rolling Up the Roll-Up
Advanced Dermatology was sold in 2016 by Audax to Harvest
Partners LP , following a pattern that's typical in the industry. At some point, after costs have been cut and profits maximized,
most private equity-owned medical groups will be sold, often to another private equity firm, which will then try to somehow make
the company even more profitable.
Having reduced most of the obvious costs, Advanced Dermatology began skimping on more important supplies, including Hylenex, according
to doctors and other employees. The drug is an expensive reversal agent used when cosmetic fillers, which are supposed to make skin
look plumper, go wrong. Not having enough is dangerous: Patients who get an injection that inadvertently blocks a blood vessel can
be left with dead sections of skin or even go blind if they don't get enough Hylenex in a matter of hours. The company says that
it stocks Hylenex in every office that performs cosmetic procedures, and that it "has no records of any provider being denied an
order for this medication."
Advanced Dermatology also started giving even more authority to PAs, according to doctors and staff. Without enough oversight
some were missing deadly skin cancers, they say. Others were doing too many biopsies and cutting out much larger areas of skin than
necessary, leaving patients with big scars. Doctors who complained about the bad behavior say they saw PAs moved to other locations
rather than fired or given more supervision. Hunt, the company's lawyer, says that all PAs get six months of training and are supervised
by experienced doctors.
The staff coined a new medical diagnosis, "pre- pre- pre-cancer"
Advanced Dermatology also put more pressure on doctors to send biopsies to in-house labs. The move made sense financially, but
some of the doctors didn't trust the lab. One of its two pathologists in Delray Beach, Fla., Steven Glanz, had a history of misdiagnosing
benign tumors, which led patients to undergo surgeries that were later found to be unnecessary, according to doctors who worked with
him. Dermatologists who warned that Glanz was a danger to patients say that their complaints to Dr. Matt Leavitt, the group's founder
and CEO, were ignored. More procedures, doctors knew, brought in more money.
Glanz, who had been with the practice since its early days, was known to read slides under a microscope with a pistol on his desk.
After he was arrested with a handgun, a folding knife, and a vial of methamphetamine crystals, he was fired and Florida's state medical
board fined him $10,000, requiring him to complete a five-hour course on ethics before he could resume practicing. But his former
colleagues were unsettled; they knew Glanz's signature was on years of reports that determined treatment for patients. Some slides
were reevaluated, and pathologists noticed mistakes. Managers told some doctors and their staff that patients, even those who'd been
misdiagnosed and had unnecessary procedures, were not to be told. Glanz pleaded guilty to stalking and a firearms violation and was
sentenced to probation. When a reporter called his office and identified herself, the receptionist hung up. Further attempts to reach
Glanz were unsuccessful. Advanced's Hunt says that he was "formally released from employment three years ago," but did not comment
further.
Of course, some doctors pushed ethical boundaries long before private equity came into the picture. But critics of the industry,
including doctors and investors, say management teams put in place by private equity firms tend to look the other way as long as
a medical practice is profitable. Of the dermatologists with the highest biopsy rates in the country (between 4 and 11 per patient,
per year), almost 25% were affiliated with private equity-backed groups, according to Dr. Joseph Francis, a Mohs surgeon and data
researcher at the University of Florida.
Medical providers may have also been blurring ethical lines at U.S. Dermatology Partners, which was until recently on its second
private equity owner, Abry Partners LLC . At four of the
company's offices in Texas, a doctor and his PAs were doing more biopsies than necessary, according to employees. These employees
say the staff routinely called patients with benign lichenoid keratosis, small brownish blotches that usually go away on their own,
and told them the growths should be removed. Under instruction from the doctor, the staff coined a new medical diagnosis, "pre- pre-
pre-cancer," and then talked patients into coming in for removal, employees say. Singh, the U.S. Dermatology CEO, says that the company
trusts doctors to make the right decisions and that it monitors them through routine audits.
Step 5: Sell-Off
In some cases the cost-cutting either becomes impossible or leads to compromises in care too obvious to ignore. In 2016 a
DermOne LLC office in Irving, Texas, had been using a faulty
autoclave machine to sterilize surgical equipment -- the state and county health departments identified 137 patients that needed
to get tested for blood-borne diseases such as HIV and hepatitis. By 2018, DermOne's backer, Westwind Investors, wanted out.
Westwind had been one of the earliest firms to build a big dermatology business -- with practices in five states -- but others
had grown larger. After the debacle in Irving, the Nevada-based firm sold DermOne's medical records and patient lists, as well as
some of its offices, to other groups. It dissolved the remaining offices, leaving some patients abruptly without care. Westwind did
not respond to repeated requests for comment. Two other private equity-backed groups, TruDerm and Select Dermatology LLC, have also
gone out of business in the past two years.
The surviving chains have been saddled with large piles of debt they're now struggling to repay. In January, U.S. Dermatology
Partners defaulted on a $377 million loan, meaning the private equity backer, Abry Partners, had to hand over the keys to its lenders,
Golub Capital ,
Carlyle Group , and
Ares Management , which will now oversee a chain with almost
100 locations, receiving 1 million visits from patients a year. Abry did not respond to requests for comment .
For the medical groups that make it, the game plan is to eventually sell to the largest players, such as
KKR ,
Blackstone Group , and
Apollo Global Management . Pioneering investors, including Audax,
are now buying practices in other fields -- a concerning development to critics who note that the areas that are currently attracting
investment, such as urology, generally involve more invasive procedures. Should doctors performing vasectomies be thinking about
the dollar-rate returns for KKR -- or any private investor?
"It's ultimately going to backfire," says Dr. Jane Grant-Kels, a veteran dermatologist and professor at the University of Connecticut
School of Medicine. "There's a limit to how much money you can make when you're sticking knives into human skin for profit."
One paradox of the Covid-19 pandemic has been that even as the virus has focused the entire country on health care, it's been
a financial disaster for the industry. And so, while emergency room doctors and nurses care for the sick -- comforting those who
would otherwise die alone, and in some cases
dying themselves
-- private equity-backed staffing companies and hospitals have been
cutting pay for ER doctors. These hospitals, like the big medical practices, make a large portion of their money from elective
procedures and have been forced into wrenching compromises.
For investors with capital, on the other hand, the economic fallout from the virus is a huge opportunity. Stay-at-home orders
have left small practices more financially strained than they've ever been. That will likely accelerate sales to private equity firms,
according to Marc Cabrera, an investment banker focused on health-care deals at Oppenheimer & Co. Independent doctors or groups that
previously rebuffed offers from deep-pocketed backers "will reconsider their options," he says.
Many doctors may ultimately come to regret cashing out, but it's hard to get out once you're in. As part of an acquisition, the
private equity groups typically require doctors to sign yearslong contracts, with noncompete clauses that prevent them from working
in the surrounding area.
As governors throughout the nation ease restrictions on businesses, Advanced Dermatology is opening its most profitable offices
first. The company received an undisclosed sum under the Cares Act, as part of the government relief package intended for health-care
workers. Hunt, Advanced's chief compliance officer, told employees in an email earlier this month that the money would be used for
protective gear, such as masks, and to replace "millions of dollars" in lost revenue.
The group had closed most of its offices since the stay-at-home orders were issued in March, cutting pay for doctors and furloughing
staff. With cities and states beginning to consider reopening, doctors and PAs say they've been told they should be prepared for
a full schedule. Hunt says the company is following the appropriate safety measures, but employees fear it will be nearly impossible
to keep patients apart in waiting rooms. Opening in a reduced capacity, they understand, is not an option.
Trump's economic war on China comes in the shadow of an even deadlier military escalation.
And it may not stop after November, no matter who wins the election.
Economists like to
think of the wreckage caused by stock market downturns, widespread bankruptcies, and corporate
downsizing as "creative destruction." As it destroys the old and the dysfunctional, the
capitalist system continually spurs innovation, much as a forest fire prepares the ground for
new growth.
Or so the representatives of the dismal science argue.
Donald Trump, who is neither economist nor scientist, has his own version of creative
destruction. He is determined to destroy the Affordable Care Act and replace it with his own
health insurance alternative. He has torn up the Iran nuclear deal in favor of negotiating
something brand new with Tehran. He has withdrawn from the Paris climate accord and argues that the United
States is reducing carbon emissions in its own superior manner.
The problem, of course, is that Trump is very good at destruction but, despite his previous
job as a real estate mogul, exceedingly bad at construction. Indeed, there's abundant evidence
that he never intended to replace what he is destroying with anything at all. Trump has never
offered any viable alternative to Obamacare or any new negotiating framework with Iran. And
prior to the recent economic downturn, U.S. carbon emissions were increasing after several
years of decline.
Perhaps the most dangerous example of Trump's uncreative destruction is his approach to
China.
Previously, Trump said that he simply wanted to level the playing field by placing trade
with China on a fairer and more reciprocal basis, strengthening the regime of intellectual
property rights, and stopping Beijing from manipulating its currency.
He was willing to go to great lengths to accomplish this goal. The tariffs that Trump
imposed on Chinese products precipitated a trade war that jeopardized the livelihoods of
millions of American farmers and workers. The initial trade deal that the United States and
China signed in January, even though many of the U.S. tariffs remain in place, was supposed to
be the grand alternative to the old and dysfunctional trade relationship.
But here again, Trump is not telling the truth. He and his team have a very different set of
objectives. As with so many other elements of his domestic and foreign policy, Trump wants to
tear apart the current system -- in this case, the network of economic ties between the United
States and China -- and replace it with absolutely nothing at all.
Oh sure, Trump believes that U.S. manufacturers can step up to take the place of Chinese
suppliers. More recently, as the administration "turbocharges" its efforts to isolate China in
response to its purported pandemic mistakes , it has
talked of creating
an Economic Prosperity Network of trusted allies like South Korea, Australia, India, and
Vietnam. But this is all whistling in the dark, because the administration doesn't really
understand the consequences -- for the world economy, for the U.S. economy -- of tearing apart
the global supply chain in this way.
Just how poorly Trump understands all this is reflected in
his statement last week that "we could cut off the whole relationship" with China and "save
$500 billion." This from the president who erroneously believes that China
is paying the United States "billions and billions of dollars of tariffs a month." What else do
you expect from a man who received a BS in economics from Wharton?
Unlike many of the administration's other policies, however, its hardline approach to China
has some bipartisan support. Engagement with China has virtually
disappeared as a policy option in the Democratic Party. Joe Biden, the Democrats'
presumptive presidential candidate, has attempted to present himself as the tougher alternative
when it comes to China, a misguided
effort to fend off charges of his bedding down with Beijing.
Finger to the wind, Biden is crafting policies in response not just to Trump but to public
opinion. In 2017, 44 percent of Americans had a favorable view of China, compared to 47 percent
who held an unfavorable opinion of the country, according to Pew. In
this year's survey , only 26 percent looked at China positively versus 66 percent who
viewed it negatively. The latter category includes 62 percent of Democrats.
Writing for the Atlantic Council, Michael Greenwald
sums up the new conventional wisdom of the centrists:
The United States can no longer remain content with the notion of a Chinese economic
threat arising in the distant future. The advent of COVID-19 has made it more apparent than
any other time including the US-China trade war that now is the moment for the United States,
European Union, and other like-minded countries to diversify supply chains away from
China.
That's what makes Trump's uncreative destruction vis a vis China so dangerous. It may not
stop after November, no matter who wins the election.
The Great Disentanglement
China's economic shutdown at the onset of the coronavirus pandemic disrupted many global supply
chains, prompting a number of countries and corporations to accelerate their strategy of
reducing their dependency on China for components.
Rising labor costs in China, concerns over human rights abuses there, but especially the
trade war between Washington and Beijing had contributed to the
U.S. fashion industry and tech firms
like Apple rethinking their own supply chains. Japan, heavily dependent on Chinese trade,
is
using $2 billion in economic stimulus funds to subsidize the move of Japanese firms out of
China.
The Trump administration is thus swimming with the current in its effort to isolate China.
It has imposed sanctions because of China's violations of Uyghur human rights. It has levied
penalties against China for its cooperation with Iranian firms. And it has threatened to add
another set of tariffs on top of the existing ones for China's handling of the coronavirus.
Its latest initiative has been to tighten the screws on the Chinese technology firm, Huawei.
Last week, the administration announced sanctions against any firms using U.S.-made equipment
that supply the Chinese tech giant. The chief victim of these new restrictions will be the
Taiwanese firm TSMC, which supplies 90 percent of Huawei's smartphone chips.
In other words, the Trump administration is committed not only to severing U.S. economic
connections with China. It wants to put as much pressure on other countries as well to
disentangle themselves from Chinese manufacturing. Taiwan, of course, has no particular love
for Mainland China. It battles Beijing on a daily basis to get international recognition --
from other countries and from global organizations like the World Health Organization.
But the Taiwanese economy is also heavily dependent on its cross-strait neighbor. As Eleanor
Albert points
out :
China is Taiwan's largest trading partner, accounting for nearly 30 percent of
the island's total trade, and trade between the two reached $150.5 billion in 2018 (up from
$35 billion in 1999). China and Taiwan have also agreed to allow banks, insurers, and other
financial service providers to work in both markets.
And it probably won't be Huawei but Taiwan that suffers from the U.S. move. As Michael
Reilly notes
, "Huawei's size in the global market means its Taiwanese suppliers cannot easily find an
alternative customer of comparable standing to replace it." China, meanwhile, will either find
another source of chips outside the U.S. sphere, or it will do what the United States has been
threatening to do: bring production of critical components back closer to home.
Another key player in the containment of China is India. Trump's friendship with Indian
Prime Minister Narendra Modi, a right-wing Hindu nationalist, is more than simply an
ideological affection. Trump sealed
a $3 billion in military sales deal with India in February, with a trade deal still on the
horizon.
Modi, in turn, is hoping to be the biggest beneficiary of the falling out between Washington
and Beijing. "The government in April reached out to more than 1,000 companies in the U.S. and
through overseas missions to offer incentives for manufacturers seeking to move out of China,"
reports Bloomberg . "India is prioritizing medical equipment suppliers, food processing
units, textiles, leather, and auto part makers among more than 550 products covered in the
discussions."
Vietnam is another regional competitor that the United States is supporting in its
containment strategy. With only a couple hundred reported coronavirus cases and zero deaths,
Vietnam is
poised to emerge from the current crisis virtually unscathed. With low labor costs and an
authoritarian government that can enforce deals, it is already a favored alternative for
corporations looking for alternatives to China. But wildcat strikes have been happening in
greater numbers in the country, and the Vietnamese government recently
approved the country's first independent trade union.
Yet with a more technologically sophisticated infrastructure, China will continue to look
more attractive to investors than India or Vietnam.
Don't Count Out China
If your image of the Chinese economy is stuck in the 1980s -- cheap toys and mass-produced
baubles -- then you probably think that severing economic ties with the country is no big deal.
America can produce its own plastic junk, right?
But China is no longer hurrying to catch up to the West. In some ways, the West is already
in China's rearview mirror.
Huawei is well-known for the part it's playing in the rollout of 5G networks worldwide.
China is not only ahead of the curve in upgrading to 5G domestically, it is busy manufacturing
all the new tech that will run on these high-speed networks, like virtual reality and
augmented reality and AI-driven devices.
Perhaps more to the point, China is not simply part of the global supply chain. It is using
these new technologies to revolutionize the global supply chain.
For instance, it's using 3-D modeling to shorten product development. It has long integrated
drones into its distribution networks. "Chinese supply chain companies are incorporating
groundbreaking technologies like cloud-based systems, data analytics, and artificial
intelligence (AI) and using them to redesign supply chain operations," writes Adina-Laura
Achim.
And don't discount the role of a well-financed, centralized, authoritarian government. The
Trump administration is, frankly, at a huge disadvantage when it tries to pressure companies to
relocate their operations. Writes
Manisha Mirchandani:
The global technology and consumer electronics sectors are especially reliant on
China's infrastructure and specialized labor pool, neither of which will be easy to
replicate. The Chinese government is already mobilizing resources to convince producers of
China's unique merits as a manufacturing location. Zhengzhou, within Henan Province, has
appointed officials to support Apple's partner Foxconn in mitigating the disruptions caused
by the coronavirus, while the Ministry of Finance is increasing credit support to the
manufacturing sector. Further, the Chinese government is likely to channel stimulus efforts
to develop the country's high-tech manufacturing infrastructure, moving away from its
low-value manufacturing base and accelerating its vision for a technology-driven services
economy.
The Trump administration is playing the short game, trying to use tariffs and anti-Chinese
sentiment to hobble a rising power. China, on the other hand, is playing the long game,
translating its trade surpluses into structural advantages in a fast-evolving global
economy.
Will the Conflict Turn Hot?
Despite the economic ravages of the pandemic, the Pentagon continues to demand the lion's
share of the U.S. budget. It wants another $705 billion for 2021, after increasing its budget
by 20 percent between 2016 and 2020.
This appalling waste of government resources has already caused long-term damage to the
economic competitiveness of the United States. But it's all the money the Pentagon is spending
on "deterring China" that might prove more devastating in the short term.
The U.S. Navy announced
this month that it was sending its entire forward-deployed sub fleet on "contingency
response operations" as a warning to China. Last month, the U.S. Navy Expeditionary Strike
Group
sailed into the South China Sea to support Malaysia's oil exploration in an area that China
claims. Aside from the reality that oil exploration makes no economic sense at a time of record
low oil prices, the United States should be helping the countries bordering the South China Sea
come to a fair resolution of their disputes, not throwing more armaments at the problem.
There's also heightened risk of confrontation in the Taiwan Strait, the East China Sea, and
even in outer space . A huge portion of the Pentagon's budget goes toward preparing for war
with China -- and, frankly, provoking war as well.
What does this all have to do with the Great Disentanglement?
The close economic ties between the United States and China have always represented a
significant constraint on military confrontation. Surely the two countries would not risk
grievous economic harm by coming to blows. Economic cooperation also provides multiple channels
for resolving conflicts and communicating discontent. The United States and Soviet Union never
had that kind of buffer.
If the Great Disentanglement goes forward, however, then the two countries have less to lose
economically in a military confrontation. Trading partners, of course, sometimes go to war with
one another. But as the data
demonstrates , more trade generally
translates into less war.
There are lots and lots of problems in the U.S.-China economic relationship. But they pale
in comparison to World War III. Share this:
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So, yes, the West still has a realistic chance of destroying China and inaugurating a new
cycle of capitalist prosperity.
What happens with the "decoupling"/"Pivot to Asia" is that, in the West, there's
a scatological theory [go to 10th paragraph] - of Keynesian origin - that socialism can
only play "catch up" with capitalism, but never surpass it when a "toyotist phase" of
technological innovation comes (this is obviously based on the USSR's case). This theory
states that, if there's innovation in socialism, it is residual and by accident, and that
only in capitalism is significant technological advancement possible. From this, they posit
that, if China is blocked out of Western IP, it will soon "go back to its place" - which is
probably to Brazil or India level.
If China will be able to get out of the "Toyotist Trap" that destroyed the USSR, only time
will tell. Regardless, decoupling is clearly not working, and China is not showing any signs
so far of slowing down. Hence Trump is now embracing a more direct approach.
As for the USA, I've put my big picture opinion about it some days ago, so I won't repeat
myself. Here, it suffices to say that, yes, I believe the USA can continue to survive as an
empire - even if, worst case scenario, in a "byzantine" form. To its favor, it has: 1) the
third largest world population 2) huge territory, with excellent proportion of high-quality
arable land (35%), that basically guarantees food security indefinitely (for comparison, the
USSR only had 10% of arable land, and of worse quality) 3) two coasts, to the two main Oceans
(Pacific and Atlantic), plus a direct exit to the Arctic (Alaska and, de facto, Greenland and
Canada) 4) excellent, very defensive territory, protected by both oceans (sea-to-sea),
bordered only by two very feeble neighbors (Mexico and Canada) that can be easily absorbed if
the situation asks to 4) still the financial superpower 5) still a robust "real" economy -
specially if compared to the micro-nations of Western Europe and East-Asia 6) a big fucking
Navy, which gives it thalassocratic power.
I don't see the USA losing its territorial integrity anytime soon. There are separatist
movements in places like Texas and, more recently, the Western Coast. Most of them exist only
for fiscal reasons and are not taken seriously by anyone else. The Star-and-Stripes is still
a very strong ideal to the average American, and nobody takes the idea of territory loss for
real. If that happens, though, it would change my equation on the survival of the American
Empire completely.
As for Hong Kong. I watched a video by the chief of the PLA last year (unfortunately, I
watched it on Twitter and don't have the link with me anymore). He was very clear: Hong Kong
does not present an existential threat to China. The greatest existential threat to China
are, by far, Xinjiang and Tibet, followed by Taiwan and the South China Sea. Hong Kong is a
distant fourth place.
One problem with your scenario is that the US navy may be over-extended in parts of the
world where all the enemy has to do is to cut off supply lines to battleship groups and then
those ships would be completely helpless. US warships in the Persian Gulf with the Strait of
Hormuz sealed off by Iran come to mind.
Incidents involving US naval ship collisions with slow-moving oil tankers in SE Asian
waters and some other parts of of the the world, resulting in the loss of sailors, hardly
instill the notion that the US is a mighty thalassocratic force.
It's my understanding also that Russia, China and maybe some other countries have invested
hugely in long-range missiles capable of hitting US coastal cities and areas where the bulk
of the US population lives.
And if long-range missiles don't put paid to the notion that projecting power through
sending naval warships all over the planet works, maybe the fact that many of these ships are
sitting ducks for COVID-19 infection clusters might, where the US public is concerned.
I agree the new anti-ship missile technology may have changed the rules of naval
warfare.
However, it's important to highlight that, contrary to the US Army, the USN has a stellar
record. It fought wonderfully against the Japanese Empire in 1941-1945, and successfully
converted both the Pacific and the Atlantic into "American lakes" for the next 75 years. All
the Americans have nowadays it owes its Navy.
But you may be right. Maybe the USN is also susceptible to degeneration.
Of the existing 30 or so high-tech productive chains, China only enjoys superiority at 2
or 3 (see 6:48). It is still greatly dependent on the West to development and still is a
developing country.
Based on what I've read, China is on a fast track to develop technology on their own. In
addition, technology development is world-wide these days. What China can not develop itself
- quickly enough, time is the only real problem - it can buy with its economic power.
"if China is blocked out of Western IP, it will soon "go back to its place" - which is
probably to Brazil or India level."
Ah, but that's where hackers come in. China can *not* be blocked out of Western IP. First,
as I said, China can *buy* it. Unless there is a general prohibition across the entire
Western world, and by extension sanctions against any other nation from selling to China -
which is an unenforceable policy, as Iran has shown - China can buy what it doesn't have and
then reverse-engineer it. Russia will sell it if no one else will.
Second, China can continue to simply acquire technology through industrial espionage.
Every country and every industry engages in this sort of thing. Ever watch the movie
"Duplicity"? That shit actually happens. I read about industrial espionage years ago and it's
only gotten fancier since the old days of paper files. I would be happy to breach any US or
EU industrial sector and sell what I find to the Chinese, the Malaysians or anyone else
interested. It's called "leveling the playing field" and that is advantageous for everyone.
If the US industrial sector employees can't keep up, that's their problem. No one is
guaranteed a job for life - and shouldn't be.
"1) the third largest world population"
Which is mostly engaged in unproductive activities like finance, law, etc. I've read that
if you visit the main US universities teaching science and technology, who are the students?
Chinese. Indians. Not Americans. Americans only want to "make money" in law and finance, not
"make things."
"2) huge territory, with excellent proportion of high-quality arable land (35%), that
basically guarantees food security indefinitely"
In military terms, given current military technology, territory doesn't matter. China has
enough nuclear missiles to destroy the 50 Major Metropolitan Areas in this country. Losing
100-200 millions citizens kinda puts a damper on US productivity. Losing the same number in
China merely means more for the rest.
"3) two coasts, to the two main Oceans (Pacific and Atlantic)"
Which submarines can make irrelevant. Good for economic matters - *if* your economy can
continue competing. China has one coast - but its Belt and Road Initiative gives it economic
clout on the back-end and the front-end. I don't see the US successfully countering that
Initiative.
"4) excellent, very defensive territory, protected by both oceans (sea-to-sea)"
Which only means the US can't be "invaded". That's WWI and WWII thinking the US is mired
in. Today, you destroy an opponent's military and, if necessary, his civilian population, or
at least its ability to "project" force against you. You don't "invade" unless it's some weak
Third World country. And if the US can't "project" its power via its navy or air force,
having a lot of territory doesn't mean much. This is where Russia is right now. Very
defensible but limited in force projection (but getting better fast.) The problem for the US
is China and Russia are developing military technology that can prevent US force projection
around *their* borders.
"bordered only by two very feeble neighbors (Mexico and Canada) that can be easily
absorbed if the situation asks"
LOL I can just see the US "absorbing" Mexico. Canada, maybe - they're allies anyway.
Mexico, not so much. You want a "quagmire", send the US troops to take on the Mexican drug
gangs. They aren't Pancho Villa.
"4) still the financial superpower"
Uhm, what part of "Depression" did you miss? And even if that doesn't happen now,
continued financial success is unlikely. Like pandemics, shit happens in economics and
monetary policy.
"a big fucking Navy, which gives it thalassocratic power."
That can be sunk in a heartbeat and is virtually a colossal money pit with limited
strategic value given current military technology which both China and Russia are as advanced
as the US is, if not more so. Plus China is developing its own navy quickly. I read somewhere
a description of one Chinese naval shipyard. There were several advanced destroyers being
developed. Then the article noted that China has several more large shipyards. That Chinese
long coast comes in handy for that sort of thing.
China Now Has More Warships Than the U.S.
But sometimes quantity doesn't trump quality. [My note: But sometimes it does.] https://tinyurl.com/y7numhef
That's just the first article I found, from a crappy source. There are better analyses, of
course.
"I don't see the USA losing its territorial integrity anytime soon. There are separatist
movements in places like Texas and, more recently, the Western Coast. Most of them exist only
for fiscal reasons and are not taken seriously by anyone else."
I'd agree with that. I hear this "California secession" crap periodically and never
believe it. However, for state politicians, the notion of being "President" of your own
country versus a "Governor" probably is tempting to these morons. State populations are
frequently idiots as well, as the current lockdown response is demonstrating. All in all,
though, if there are perceived external military threats, that is likely to make the states
prefer to remain under US central control.
"Britain had to agree to the pact because it had lost the capability to defend the
colony.".."
That was the excuse. I believe HK was offered to China in return for Deng to open up and
turn China capitalist. Deng was not the one who
demanded HK return. Britain initiated the discussions. Deng gladly accepted although he
insisted on maintaining their authoritarian form of undemocratic government and left HK's
fate ambiguous so Britain could get support from their people and the HK elite. The party
elites were happy to be able to join the Western Elites in accumulating an unequal share of
the wealth. The Soviet elites led by the US Globalist puppet Gorbachev chose the same path
although they chose Fake Democracy and rule of the oligarchs as in the US rather than party
control of China
HK is protected against US tarrifs imposed on China goods. China exports a good chunk of
goods through HK. If Trump were really serious he would remove HK's protected status.
The timing doesn't add up. China opened up in 1972 (the famous Nixon-Mao handshake), while
the UK's agreement to give HK back was from 1984 - well into the Thatcher Era.
The most likely reason for the UK to decide to obey the lease deal was of military nature:
the valuable land necessary to defend HK was the flatland adjacent to the city proper, where
potable water comes from. It already part of the Mainland, thus rendering the defense of HK
virtually impossible without an outright invasion of the Mainland itself.
Margaret Thatcher probably didn't want to obey the treaty (99-year lease), as a good
neoliberal she was, but her military advisors probably warned her of the practical
difficulties, and, since it was a 99-year lease anyway, she must've agreed to simply allow
the treaty to be followed.
It is important to highlight that, in 1984, there were a lot of reasons the capitalist
world should be optimist about China becoming capitalist. After all, it really got off the
Soviet sphere after 1972, and Deng's reforms were - from the point of view of a vulgar
(bourgeois) economist - indeed a clear path to a capitalist restoration. It didn't cross
Thatcher's mind that China could stand its ground and remain socialist - at least not in
1984. If you read the sources of the time, you will easily see the Western elites treated
China's return to capitalism as a given.
It is still greatly dependent on the West to development and still is a developing
country.
So, yes, the West still has a realistic chance of destroying China and inaugurating a new
cycle of capitalist prosperity.
What happens with the "decoupling"/"Pivot to Asia" is that, in the West, there's
a scatological theory [go to 10th paragraph] - of Keynesian origin - that socialism can
only play "catch up" with capitalism, but never surpass it when a "toyotist phase" of
technological innovation comes (this is obviously based on the USSR's case). This theory
states that, if there's innovation in socialism, it is residual and by accident, and that
only in capitalism is significant technological advancement possible. From this, they posit
that, if China is blocked out of Western IP, it will soon "go back to its place" - which is
probably to Brazil or India level.
If China will be able to get out of the "Toyotist Trap" that destroyed the USSR, only time
will tell. Regardless, decoupling is clearly not working, and China is not showing any signs
so far of slowing down. Hence Trump is now embracing a more direct approach.
As for the USA, I've put my big picture opinion about it some days ago, so I won't repeat
myself. Here, it suffices to say that, yes, I believe the USA can continue to survive as an
empire - even if, worst case scenario, in a "byzantine" form. To its favor, it has: 1) the
third largest world population 2) huge territory, with excellent proportion of high-quality
arable land (35%), that basically guarantees food security indefinitely (for comparison, the
USSR only had 10% of arable land, and of worse quality) 3) two coasts, to the two main Oceans
(Pacific and Atlantic), plus a direct exit to the Arctic (Alaska and, de facto, Greenland and
Canada) 4) excellent, very defensive territory, protected by both oceans (sea-to-sea),
bordered only by two very feeble neighbors (Mexico and Canada) that can be easily absorbed if
the situation asks to 4) still the financial superpower 5) still a robust "real" economy -
specially if compared to the micro-nations of Western Europe and East-Asia 6) a big fucking
Navy, which gives it thalassocratic power.
I don't see the USA losing its territorial integrity anytime soon. There are separatist
movements in places like Texas and, more recently, the Western Coast. Most of them exist only
for fiscal reasons and are not taken seriously by anyone else. The Star-and-Stripes is still
a very strong ideal to the average American, and nobody takes the idea of territory loss for
real. If that happens, though, it would change my equation on the survival of the American
Empire completely.
As for Hong Kong. I watched a video by the chief of the PLA last year (unfortunately, I
watched it on Twitter and don't have the link with me anymore). He was very clear: Hong Kong
does not present an existential threat to China. The greatest existential threat to China
are, by far, Xinjiang and Tibet, followed by Taiwan and the South China Sea. Hong Kong is a
distant fourth place.
"They Saw This Day Coming" - Huawei Forges Alliances With Rival Chipmakers As
Washington's Crackdown Intensifies by Tyler Durden Fri, 05/22/2020 - 18:05 The US
Commerce Department's latest move to block companies from selling products to Huawei that were
created with American technology, equipment or software has undoubtedly hurt the Chinese
telecoms giant. But it won't be nearly enough to take it down.
Since Washington launched its campaign against Huawei two years ago (when the trade tensions
between the US and China started to heat up, as President Trump started slapping more tariffs
on foreign goods) the company has been strengthening ties with contract chipmakers in Taiwan
and elsewhere, while ramping up its own microchip-technology arm, known as HiSilicon
Technologies.
On Friday,
Nikkei reported that Huawei had initiated conversations with other mobile chipmakers to try
and figure out where it might source certain essential components for its handsets (remember,
Huawei is the second-largest cellphone maker by sales volume) and other products.
Of course, the crackdown cuts both ways, as several American companies relied heavily on
Huawei's business (they can still apply for licenses to continue selling to Huawei...so long as
Commerce approves).
As
we reported earlier this week , it's not just American chipmakers that are distancing
themselves from Huawei: some Taiwan-based chipmakers are also dropping the telecoms giant for
fear of being targeted by Treasury sanctions, including TSMC, the world's largest contract
chipmaker.
Now, Huawei is reportedly in talks with MediaTek, the world's second-largest contract chip
producer.
Huawei Technologies is seeking help from rival mobile-chip makers to withstand a U.S.
clampdown aimed at crippling the Chinese company, sources familiar with the matter told the
Nikkei Asian Review.
Huawei is in talks with MediaTek, the world's second-largest mobile chip developer after
Qualcomm of the U.S., and UNISOC, China's second-largest mobile chip designer after Huawei's
HiSilicon Technologies unit, to buy more chips as alternatives to keep its consumer
electronics business afloat, the sources said.
To work with a contract chipmaker, Huawei would still need to design its own chips. Over the
past two years, Huawei has expanded its team of engineers working on chip design to more than
10,000, Nikkei said.
To be sure, MediaTek already makes low- and medium-end chips for Huawei, evidence that the
company, which was founded by a veteran of China's PLA, and purportedly maintains strong links
to the Chinese military, has been bracing for the other shoe to drop. MediaTek, meanwhile, is
still trying to figure out if it can meet Huawei's latest bid.
"Huawei has foreseen this day coming. It started to allocate more mid- to low-end mobile
chip projects to MediaTek last year amid its de-Americanization efforts," one of the sources
said. "Huawei has also become one of the key clients for the Taiwanese mobile chip
developer's mid-end 5G mobile chip for this year."
MediaTek is evaluating whether it has sufficient human resources to fully support Huawei's
aggressive bid, as the Chinese company is asking for volume 300% above its usual procurement in
the past few years, another source familiar with the talks said.
The situation has also created an opportunity for small Chinese chipmakers (working, we
imagine, mostly with technology stolen from American and Taiwanese companies) to expand.
Huawei also seeks to deepen its collaboration with UNISOC, a Beijing-backed mobile chip
developer that relies mostly on smaller device makers as customers and mainly supports
entry-level products and devices for emerging markets. Previously, Huawei used only very few
UNISOC chips for its low-end smartphone and tablet offerings, sources said.
"The new procurement deals would be a great boost to help UNISOC further upgrade its chip
design capability," said a chip industry executive. "In the past, UNISOC was struggling quite
a bit, because it could not really secure big contracts with global leading smartphone makers
as these top smartphone makers could find better offerings elsewhere. This time could be an
opportunity that it could really seek to match the international standard."
UNISOC last year accelerated its 5G chip development to catch up with Qualcomm and
MediaTek, Nikkei has reported. More recently, the company received 4.5 billion yuan ($630
million) from China's national integrated circuit fund, the so-called Big Fund.
UNISOC is preparing to list on the Shanghai STAR tech board, the Chinese version of
Nasdaq, later this year. Qualcomm has needed a license from the U.S. Department of Commerce
to supply Huawei since mid-May of 2019.
Huawei has already expanded production of in-house mobile processors for its smartphone
business to 75%, up from 69% in 2018 and 45% in 2016, according to to data from GF Securities
cited by Nikkei. Huawei shipped 240 million smartphones in 2019. And with China now throwing
caution to the wind and cracking down on Hong Kong, we wouldn't be surprised to see more Huawei
drama in the headlines next week, with serious market repercussions for the US semiconductor
industry.
That will be an interesting chess party. The USA moved way to many plants to Chine to get out
of this conflict without major losses
Notable quotes:
"... Secretary of State Mike Pompeo slammed China as “hostile to free nations,” portraying Beijing as fundamentally opposed to the United States, on Wednesday. ..."
"... But the Secretary of State pointed to deeper issues in the relationship, claiming that “the nature of the regime is not new.” “For several decades, we thought the regime would become more like us through trade, scientific exchanges, diplomatic outreach, letting them in the [World Trade Organization] as a developing nation,” he said. “That didn’t happen.” ..."
'The regime is ideologically and politically hostile to free nations.'
Secretary of State Mike Pompeo slammed China as “hostile to free nations,”
portraying Beijing as fundamentally opposed to the United States, on Wednesday.
Tensions between the United States and China have reached a fever pitch during the
coronavirus pandemic. Pompeo’s speech at a Wednesday morning press conference laid out a
vision of a global clash between two fundamentally different societies.
“China’s been ruled by a brutal, authoritarian regime, a communist regime since
1949,” he said. “We greatly underestimated the degree to which Beijing is
ideologically and politically hostile to free nations. The whole world is waking up to that
fact.”
He added that a focus on the coronavirus pandemic “risks missing the bigger picture of
the challenge that’s presented by the Chinese Communist Party.”
The pandemic has accelerated U.S.-China tensions.
Last week, a Chinese Communist Party news threatened sanctions against U.S. lawmakers for
attempting to sue the Chinese government for the pandemic, and U.S. law enforcement accused
Chinese hackers of cyberattacks against U.S. researchers.
But the Secretary of State pointed to deeper issues in the relationship, claiming that
“the nature of the regime is not new.” “For several decades, we thought the
regime would become more like us through trade, scientific exchanges, diplomatic outreach,
letting them in the [World Trade Organization] as a developing nation,” he said.
“That didn’t happen.”
Pompeo accused the World Health Organization’s director-general Dr. Tedros Adhanom
Ghebreyesus of “unusually close ties to Beijing” that “started long before
this current pandemic.”
The Trump administration has accused China of covering up information about the novel
coronavirus—even implying that the virus emerged from a lab accident in Wuhan,
China—and pointed the finger at the World Health Organization for aiding China’s
coverup.
The Secretary of State slammed the public health group for excluding Taiwan in his Wednesday
speech, touching on a sensitive topic for Beijing.
Taiwan, an island that was once ruled by China, has ruled itself since the end of the
Chinese Civil War in 1950. Beijing considers the island a breakaway Chinese province that must
be reunited with the mainland, while Taiwan’s ruling Pan-Green Alliance leans towards
independence.
“The democratic process in Taiwan has matured into a model for the world,”
Pompeo said, congratulating President Tsai Ing-wen on her re-election. “Despite great
pressure from the outside, Taiwan has demonstrated the wisdom of giving people a voice and a
choice.”
But he shied away from changing U..S. policy towards Taiwan..
Pompeo said that work that “comports with the history of the agreements between the
United States and China is the right solution to maximize the stability there in the
straits.”
The United States acknowledged the Chinese position that “there is but one China and
Taiwan is part of China” as part of a 1979 joint communique with Beijing, and does not
officially recognize Taiwan as a state, but maintains close informal ties with the Taiwanese
government and opposes attempts to change the island’s government by force.
“The President talked about how we’re going to respond [to China], how
he’s beginning to think about responding to the calamity that has befallen the world as a
result of the actions of the Chinese Communist Party,” Pompeo said. “I don’t
want to get ahead of him in terms of talking about how the administration will respond to that,
but you can already begin to see the outlines of it.”
Matthew Petti is a national security reporter at the National Interest. Follow him on
Twitter: @matthew_petti. This article initially stated that the United States “recognized
that ‘there is but one China and Taiwan is a part of China’ in a 1979 joint
communique.” The communique actually states that the United States
“acknowledges” this as the Chinese position. The article has been updated to more
correctly reflect the communique. Image: Reuters.
"... The Chinese will not start a shooting war and the US has no guts for one. Its industry has been hollowed out not just by outsourcing but by corruption as well. The campaign of demonization against China is very obvious, how far it is working I have no way of telling. Among the 5-eyes probably quite well, in the rest of the World rather less well, I would imagine. Notably, the British economy has been hollowed out in exactly the same manner as the US's. Canada's, Australia's, NewZealand's? Could they, would they support a war? ..."
"... Right now, China is leading the vaccine race and has developed an antibody treatment for Covid-19 that should be ready this year. ..."
"... Interesting article by Escobar. If one cares to notice, this anti-China cold war is a neocon based aggression. The primary movers of it are mostly neocons or the sorts who follow the neocon lead. ..."
"... "Again! Trump is talking nonsense." Trump seems to be losing his mind right now. Even he has such crazy ideas of cutting ties with China, US politicians, businessmen and Americans would not allow him to do so, Xin Qiang, deputy director of the Center for US Studies at Fudan University, told the Global Times. ..."
"... Jin Canrong, the associate dean of Renmin University of China's School of International Studies in Beijing, told the Global Times on Thursday that Trump made very irresponsible and emotional remarks in the interview. ..."
"... "For Trump, fantasy is power; bluffing is power, so he might use the future of his country to gamble with China. Although China always believes cooperation is the only right choice for the two countries to solve the problems together, if the US unilaterally and irrationally chooses all-out confrontation, China also needs to be prepared." ..."
Washington wants to prevent Russia and China supplanting US interests. Moscow and Beijing
pursue what they see as their own legitimate interests. What we face is not a "hybrid" war or
"New Cold War" but a world war. https://www.ghostsofhistory.wordpress.com/
What we face is not a "hybrid" war or "New Cold War" but a world war.
Honestly, I don't see it. My reasoning is simple, maybe too simple. The Chinese will
not start a shooting war and the US has no guts for one. Its industry has been hollowed out
not just by outsourcing but by corruption as well. The campaign of demonization against China
is very obvious, how far it is working I have no way of telling. Among the 5-eyes probably
quite well, in the rest of the World rather less well, I would imagine. Notably, the British
economy has been hollowed out in exactly the same manner as the US's. Canada's, Australia's,
NewZealand's? Could they, would they support a war?
The other reason I think a shooting war is less likely than might appear, is that the the
MIC is doing so well with the current cold war; that it would seem stupid to allow the
massive disruption and uncertainty that a shooting war would cause to interrupt the torrent
of cash being shoveled its way at the moment.
[Hide MORE]
1990. China's economy has come to a halt. The Economist
1996. China's economy will face a hard landing. The Economist
1998. China's economy's dangerous period of sluggish growth. The Economist
1999. Likelihood of a hard landing for the Chinese economy. Bank of Canada
2000. China currency move nails hard landing risk coffin. Chicago Tribune
2001. A hard landing in China. Wilbanks, Smith & Thomas
2002. China Seeks a Soft Economic Landing. Westchester University
2003. Banking crisis imperils China. New York Times
2004. The great fall of China? The Economist
2005. The Risk of a Hard Landing in China. Nouriel Roubini
2006. Can China Achieve a Soft Landing? International Economy
2007. Can China avoid a hard landing? TIME
2008. Hard Landing In China? Forbes
2009. China's hard landing. China must find a way to recover. Fortune
2010: Hard landing coming in China. Nouriel Roubini
2011: Chinese Hard Landing Closer Than You Think. Business Insider
2012: Economic News from China: Hard Landing. American Interest
2013: A Hard Landing In China. Zero Hedge
2014. A hard landing in China. CNBC
2015. Congratulations, You Got Yourself A Chinese Hard Landing. Forbes
2016. Hard landing looms for China. The Economist
2017. Is China's Economy Going To Crash? National Interest
2018. China's Coming Financial Meltdown. The Daily Reckoning.
2019 China's Economic Slowdown: How worried should we be? BBC
2020. Coronavirus Could End China's Decades-Long Economic Growth Streak. NY Times
Forbes – May 15 2012 – Meghan Casserly The American Dream Is Alive And Well In New Jersey
American Express – November 6 2012 – Rieva Lesonsky The American Dream is Alive and Well -- and Transformed
The Telegraph – August 4 2014 – Jeremy Warner The American Dream is alive and well, if you are trained for the jobs of the future
Forbes – September 30 2015 – John Tamny – FreedomWorks Ignore The Left And Right, The American Dream Is Alive And Well
FOX Business – August 22 2016 – Steve Tobak The American Dream Is Alive and Well
Forbes India – November 1 2016 – Monte Burke The American dream is alive and well
Washington Times – June 19 2017 – Ed Feulner – Heritage Foundation The American Dream, alive and well
KEDM – July 4 2018 – Byron Moore, Argent Advisors, Inc. The American Dream is Alive and Well
New York Times – February 2 2019 – Samuel J. Abrams – American
Enterprise Institute The American Dream Is Alive and Well
Daily Caller – February 6 2019 – Steve Sanetti – NSSF Firearm Industry
Trade Association The American Dream Is Alive And Well
FOX Business – September 30 2019 – Julia Limitone Eric Trump: The American Dream is alive and well
Mail Online – October 2019 – Lauren Fruen The American Dream is still alive! Children of poor immigrants still beat US-born kids up the
ladder – just as they did 100 years ago – but now Chinese and Indian migrants
have replaced Italian and Irish as the most successful
CNBC – November 14 2019 Billionaire Bob Parsons: The American Dream is alive and well
FOX News – November 26 2019 – Carol Ross Carol Roth: The American Dream is alive and well -- Let's be thankful for it
Clarion Ledger – December 10 2019 – Lynn Evans The American Dream is alive and well, but redefined
Wall Street Journal – January 31, 2020 – Michael R. Strain, American
Enterprise Institute The American Dream Is Alive and Well
Newsweek – February 27 2020 – Lee Habeeb The American Dream Is Alive and Well. Just Ask District Taco's Osiris Hoil
The Independent Voice – May 7 2020 – Barbara Ball The American Dream is alive and well
eKenyan – May 8 2020 Opinion | The American Dream Is Alive and Well
New York Times – May 18 2020 – Michael R. Strain – American Enterprise
Institute The American Dream Is Alive and Well
Chinese strategists like Liu He publicly acknowledge that epidemics can catalyze geopolitical
changes.
Right now, China is leading the vaccine race and has developed an antibody treatment
for Covid-19 that should be ready this year.
If development is successful and if it donates the cure to the world as Xi promised
and if WHO's investigation shows China is not the source of the virus, and if
China's economy is firing on all cylinders in November, it's game over: 3-0 China.
Interesting article by Escobar. If one cares to notice, this anti-China cold war is a
neocon based aggression. The primary movers of it are mostly neocons or the sorts who follow
the neocon lead. China is one country the zionazi-gays have not been able to dominate.
Coupled with China's economic rise and appeal to developing countries, these zionazi
oligarchs are going apeshit trying to bring China down. In addition to other articles
referenced in the article, see also this Global Time report:
[MORE] "Again! Trump is talking nonsense." Trump seems to be losing his mind right now. Even he
has such crazy ideas of cutting ties with China, US politicians, businessmen and Americans
would not allow him to do so, Xin Qiang, deputy director of the Center for US Studies at
Fudan University, told the Global Times.
He noted that Trump is bluffing and acting tough toward China to win more support. Fox
News, which has been regarded as Trump's defender and is notorious for a lack of
professionalism, is also making eye-catching news to draw attention.
Jin Canrong, the associate dean of Renmin University of China's School of
International Studies in Beijing, told the Global Times on Thursday that Trump made very
irresponsible and emotional remarks in the interview.
"The China-US relationship is the most important bilateral relationship in the world and
involves huge interests of the two countries, as well as the rest of the world. Therefore, it
is not something he can cut off emotionally," Jin said.
"If the US unilaterally cuts off ties, the American people will pay a heavier price than
us, because China's domestic market is huge and 75-80 percent of Chinese manufacturers are
supplying China's market, and the 2 to 5 percent that supply the US can also be absorbed by
the domestic market," he noted.
China has nothing to be afraid of as "in the past, we didn't solve the Taiwan question
because we wanted to maintain the China-US relationship, and if the US unilaterally cuts it
off, we can just reunify Taiwan immediately since the Chinese mainland has an overwhelming
advantage to solve this long-standing problem."
"Trump is like a giant baby on the brink of a meltdown as he faces tremendous pressure due
to massive failures that caused such a high death toll," Shen Yi, an expert from Fudan
University, told the Global Times. "It's like someone who wants to show his guts when he
passes by a cemetery in midnight. He needs to shout to give himself the courage," he
said.
Shen also noted that the American companies and industries would suffer the most severe
consequences, because the supply chain has been integrated with China.
"The Chinese public would only take such bluffing as a joke," Shen said, adding that there
has been no US president in the history who has made such a ridiculous statement against
China, not even during the Cold War.
Yuan Zheng, a research fellow at the Chinese Academy of Social Sciences (CASS), said he
could not even remember any US leader who took a similar action. "His flip-flop rhetoric is
unprecedented, but we need to take a look at whether Trump will take real action," he said,
noting that there is no need to pay attention to claims that are unrealistic and
meaningless.
"For Trump, fantasy is power; bluffing is power, so he might use the future of his country
to gamble with China. Although China always believes cooperation is the only right choice for
the two countries to solve the problems together, if the US unilaterally and irrationally
chooses all-out confrontation, China also needs to be prepared."
@Godfree
Roberts China's economy won't be firing on all cylinders by November, but the important
parts of it will be. The manufacturers I talk to have weathered the worst of it, and their
order books for Q4 are more or less back to what they were in January (or at least healthy
enough to prevent soft skill losses). Many are upbeat about the future. (Not all of them will
survive, and the ones that die probably should have done so years ago.)
Compare this to the rest of Asia (Bangladesh, Pakistan, India, Cambodia, Myanmar, and
others): they are a mess. Bangladesh put all its eggs in the huge volume low quality basket
and will now pay a fatal price. Pakistan was dead before corona, and is now in a
manufacturing death spiral. India has the capacity to succeed, but is hamstrung by a
caste-based barbarism that has jettisoned all pretense of decency by throwing migrant workers
in the informal economy to their deaths. This will not be forgotten and I predict years of
trouble. The others only have a manufacturing sector because the Chinese moved their
factories there. Vietnam has some chance, and should be a big winner as China moves out of
low- to middle-end manufacturing.
Countries in South America have lost their opportunity. China passed them by years ago.
It's a tragedy, but they really have themselves to blame for it. And Africa, the last
frontier, is already dominated by China (15 years ago I'd bump into Chinese businessmen who'd
ship a 40-foot container of – 'insert any product you can think of' – to some
back of beyond place in Africa and refuse to come home until everything was sold). They've
moved up the ladder since then. Ethiopia, the fastest-growing economy on the continent, is
essentially an industrial zone for Chinese manufacturing.
Australia has become a mine/farm for China. New Zealand and Canada likewise, and a nice
place to send your teenagers to get educated and perhaps for retirement.
The EU, led by Germany, will be back on track soon. The winners here should be the former
USSR countries, with low labor costs and strong soft skills. With EU companies wanting to
bring the supply chain closer to home, this is their moment. If they screw it up, they will
spend another 30 years wondering what went wrong. I hope they won't, but if you spend any
time working with these people you know they often fail at the final hurdle (as though on
purpose – the psychology of self-destruction is their Achilles heel).
It's China's game to lose. And quite frankly, at this point, I don't see how. This has
been in the making since the late 70s. Perhaps earlier. I admire them for their intelligence,
their work ethic, their organizational capacity, their can-do spirit, and – yes –
their creativity (if you think China is Japan in the 60s, you need to spend some serious time
with younger Chinese in China).
The Chinese problem is, of course, its culture of responsibility avoidance. But even with
this issue, they are on track for a knockout victory. Most people in the West have no idea
what going on, which is exactly how You Know Who likes it.
I have no intention of letting my tribe be overrun by Chinese. But I have enough
experience to know they're smarter than my tribe, and it would be a wise thing to start
thinking more strategically and tactically about how to carve out a space in a new world most
people are unable to imagine (which is less than 10 years away).
The center of gravity of global economic power keeps moving, inexorably, toward
Asia.
it's game over
While the U.S. spent recent decades policing the world in pointless wars, China was about
the business of building an infrastructure in which all roads lead to Beijing, railroad cars
and boatloads of wealth. Just keep it coming, folks. Those roads and railroads and shipping
are linking nothing less than Eurasia, Sir Halford's World Island. It took this coronavirus
to show the imperial subjects that the Empire is naked and that China had already surpassed
it economically several years ago. It seems like it really is game over. I'm sad in a way,
but I would rather have a normal country than a hegemon; that is, if normalcy is still a
possibility.
What about the biggest hybrid war going on since centuries ago: jews (including crypto-jews,
hybrids and minions) versus everybody else?
The chinese had the full cooperation of diaspora jews (and their sayanim network) and
israelis. Specially the Chabad Lubavich.
From the referenced Global Times article, the US attack on Huawei (with its 5G leadership +
NSA proof encryption ) is at the heart of the story:
Based on Global Times sources, if the US further pinches Chinese telecommunication giant
Huawei by blocking companies such as TSMC from providing chips to the company, China will
carry out countermeasures, such as including certain US companies into its list of
"unreliable entities," imposing restrictions on or investigating US companies such as
Qualcomm, Cisco and Apple, and suspending purchases of Boeing aircraft.
The US would lose this fight. Apple for example manufactures in China with only a small
percentage of the sales price staying in China. If Apple manufacturing is shut down then
Apple is the big loser. They're already trying to move manufacturing to India but that's not
going to work.
We must be clear that coping with US suppression will be the key focus of China's
national strategy. We should enhance cooperation with most countries. The US is expected to
contain China's international frontlines, and we must knock out this US plot and make
China-US rivalry a process of US self-isolation.
China has plenty of alternative markets. US corporations mostly only sell to the US using
(now very sophisticated) Chinese manufacturing. Take this away, and Apple for example, have
no alternative supplier for the volumes, quality, sub-contractor network and export
infrastructure required.
General Qiao dismisses the possibility that Vietnam, the Philippines, Bangladesh, India
and other Asian nations may replace China's cheap workforce: "Think about which of these
countries has more skilled workers than China. What quantity of medium and high level human
resources was produced in China in these past 30 years? Which country is educating over 100
million students at secondary and university levels? The energy of all these people is
still far from being liberated for China's economic development."
True.
This will imply a concerted offensive, trying to enforce embargoes and trying to block
regional markets to Chinese companies. Lawfare will be the norm. Even freezing Chinese
assets in the US is not a far-fetched proposition anymore.
If the US steals the $ trillions China has invested in US treasuries, then the US dollar
also forfeits its claim to be the world reserve currency (safe place to hold international
trade balances).
Still, scores of nations are being asked, bluntly, by the hegemon to position themselves
once again in a "you're with us or against us" global war on terror imperative.
9/11 was fakery pumped up by the MSM to target Iraq/Iran and Covid-19 is more of the same
– this time targeting China. European states are getting tired of this game. For
example they were all dragged into supporting the Venezuela CIA coup that fizzled, and are
now trying to disentangle from it.
General Qiao counsels, "Don't think that only territorial sovereignty is linked to the
fundamental interests of a nation. Other kinds of sovereignty – economic, financial,
defense, food, resources, biological and cultural sovereignty – are all linked to the
interests and survival of nations and are components of national sovereignty."
If the US public look carefully at General Qiao's list they will realize that they have
already lost more than 50% of these sovereignties.
" General Qiao dismisses the possibility .. India and other Asian nations may replace China's
c: "Think about which of these countries has more skilled "
Everyday US. news are amplifying the bipartisan chorus against China . India is begging
for favors from USA while serenading USA with reinforcing American position.
India is stealing land from Nepal and Indian media thinks that ultranationalist of Nepal
are to blame for questioning Indian stance .
China is under a real threat of concerted attacks by the US 's opportunistic vassals.
There will be a seismic change affecting the alliances and the future .
Can China persuade Nepal Bangladesh Pakistan Sri Lanka Afghanistan Iran and Myanmar to work
together and persuade them move out of India's hegemony ?.
It's always astounding to read a geopolitical analysis by a journalist who completely ignores
the climate pollution crisis with it's impending effects overhanging every strategy any state
may envision to dominate the planet. It's as if the writer lives in an imaginary world devoid
of nature, along with his supposed expert sources and well placed powerful state movers and
shakers. This is delusional. China's cheap forced labor, making more crap for the planet's
shrinking population of affluent consumers, competing with other countries with equally
desperate workers. Countries competing to build the most dangerous bio-weapons in their
unsafe, leaky level 4 labs. All the while the atmosphere is being polluted to the point of
melting all the ice on the planet, the air is being degraded to the point of being disgusting
to see and carcinogenic to breath, the fresh water supply is being depleted and polluted, the
oceans degraded into radioactive chemical cesspools (soon to be a brown sludge inhabited by
only bacteria, viruses and fungus), the land ceded with thousands of chemicals that have no
purpose other than to kill. The existential threshold is within a few years. The geopolitical
strategy of the US and China can be summarized as a strategy to kill all sentient life on the
planet in order to have a some sort of imaginary strategic dominance. It is mass psychosis.
@foolisholdman
Old man, don't be foolish, they all hate us human scum, and will gladly go to war, are at
war. Remember how, in Catch 22, the opposing sides eventually saved a crap load of money by
geting Milo de Milo to bomb their own airfields using his supply planes? Its already
happening, us plebs are just in the way. In the end, the Protocols calls for one government
ruling what's left of mankind "with an iron staff." I cannot tell you (yet) what Zion's hold
on Beijing is, but be assured, "bring on the war" is the swill of Zion being lapped up by
little globalist piggies trying to get to the trough.
People think 'hybrid warfare" is some kind of technological term. Zion chooses its words very
carefully, and your first defence is your dictionary. The USAGE of words change with time,
the MEANING is constant. Now let's go find them hybrids, before Bill Gates can create enough
microcephalics to man his man/machine interfaced battle 'droids armed with depleted uranium
bullets and virally-delivered vaccines.
@carlusjr
Pollution sure is an important issue, one of the most important of our time, yes. The subject
matter at hand though, is mostly military, with economics as a condiment to explain the sour
taste. China might be the one manufacturing plastic turds, but it is the so-called western
media that is teaching your children the dire need to own the latest version of plastic poop.
China would not bother with plastic poop, but you voted for people who decided China makes
the best poo at the lowest cost and highest profit. Don't blame China for taking advantage of
YOUR leadership's desire to disown YOU and hand your habitat over to those who "know how to
make a profit" from your suffering, while dangling a piece of plastic poop in front of you,
calling it ambition, and deplatforming you if you refuse their offer of improved
turdiness.
But yah, now we know you hate pollution. Soon we will close down all the factories, and ban
all cars, and only those on "official business" will be alowed on aeroplanes, and then you
can breathe freely, as you stand in line, so the Special Agents can see if you have the Bill
Gates vaccine licence to visit the plastic poop and soylent green depository that we used to
call a supermarket.
A toxic racism-meets-anti-communism matrix is responsible for the predominant
anti-Chinese sentiment across the US, encompassing at least 66% of the whole
population.
No it isn't.
A hint of what is responsible is this from the same article:
"They have state of the art technology, but not the methods and production capacity. So
they have to rely on Chinese production."
Our jobs, our industry, our hard-earned intellectual property, and our money have all gone
to China. Our own leaders of industry and government are to blame for our predicament, but
our anger at China is the result.
Funny this from the Chinese General Qiao:
"as a producing country, we still cannot satisfy our manufacturing industry with our own
resources and rely on our own markets to consume our products."
No kidding, General. Your country built itself up by selling to us! We made you into our
own rival. Thanks are in order, but instead you plot to weaken us.
@Godfree
Roberts Sounds like a man who has no understanding of the science regarding the matter,
but so doesn't most of the world. Vaccine? Anti-body treatment? Does anybody know what they
are and how they work (or doesn't) or mean? From those tests to those invasive ventilators,
it shows me how people can easily be herded towards slaughter, for their safety, ofc, because
"science." And just over a mild cold no less.
So much for China's brilliance; they are as dumb or brainwashed by 'accepted science' as the
next moronic authority figure.
But exploiting the situation, that's something else that should be appreciated.
This will be China's contribution to ensuring vaccine accessibility and affordability in
developing countries." The Global South is paying attention.
Do the underdeveloped (hate the PC term "developing") countries even want a vaccine? They
have too many people anyway, any moderate dying will be an advantage to their societies. And
another point is that the anti-vaxxer movement there might be on the rise, just as it is in
America – remember how the Philippines government was watching a conspiracy video about
evil Bill Gates? I have talked to anti-vaxxer people in my Ukrainian university!
"Containment" will go into overdrive. A neat example is Admiral Philip Davidson –
head of the Indo-Pacific Command – asking for $20 billion for a "robust military
cordon" from California to Japan and down the Pacific Rim, complete with "highly
survivable, precision-strike networks" along the Pacific Rim and "forward-based, rotational
joint forces" to counteract the "renewed threat we face from great power competition."
My prediction is the US goes into a civil war > the liberals start losing > the
liberals invite the Chinese into California > the Chinese exterminate all Americans and
get a large Lebensraum in the East.
a Korea War pictorial. Nice.
It's long long ago since China made the last movie about Korea War. Too long ago that they
are in black and white.
Recently someone is preparing for a new movie: The Chosin Lake.
I really hope it will be well made. I love war movies, especially the ones on historical big
wars.
@Buzz
Mohawk I think the Western globalists though that China would be subservient to them and
not get any funny ideas, this virus is just a cover for antipathy that was building up for
years, similar to how the poor Jews being persecuted in Germany was used by propagandists to
whip up Germany sentiment, because of German economic prowess.
Western thinking is dominated by this balance of power mentality, the same mentality such
caused it to enter into two fratricidal wars not too long ago.
One can only hope this is good news for us, but I fear the globalists will just use this
time to move manufacturing to other Third World countries instead of bringing it back
home.
I agree that it was a huge mistake transferring our IP to China, they would simply have
not got to this point if we hadn't. This is also why the Chinese are not taking any chances
in their BRI, and are using Chinese labour instead of doing the more sustainable thing and
training up local workers, that would mean a destruction of their market! Sadly this will
continue, on top of the terrible policy of mass Third World immigration, we let Chinese into
out top companies and research facilities, some of whom no doubt pass this information back
home.
So the Global South is going to be "grateful" to China for coming up with vaccination after
innudating it with the Chinese virus in the first place Pepe, lay of the Mezcal because is
clouding your opaque thinking!
Let me make this clear. America is self-destructing. A malignant narcissist in charge and a
man who cannot construct a sentence is an alternative. A stock market devoid of reality and a
1 percent devoid of conscience. Any remote consideration of the other 99 percent is soley
based on profit. Any civilization that cannot reverse itself is doomed. China maybe a
shortterm factor yet not a factor in the longer considerations.
{ .. and the US has no guts for one. Its industry has been hollowed out not just by
outsourcing but by corruption as well.}
Even in the 50s when US industry was not hollowed out ( ran supreme) and China had no
nukes, US was unable to defeat China in a ground war in Korea. Of course there was talk in US
of using nukes against China (Gen. MacArthur), but cooler heads prevailed, arguing that, that
would trigger USSR to use nukes too, resulting in world wide nuclear conflagration.
Now China has nukes, and delivery systems, and US cannot possible defeat China
conventionally, so US will huff-and-puff, try to damage China financially, or steal its
holdings in US*, but nothing will come out of it.
Sad that US screwed itself over the years so badly that it is in this predicament now.
_____________________________
* There has been semi-serious talk in US of just taking $ hundreds of billions of Chinese
holdings in US as payment for ' damages' China has supposedly caused US by
Covid-19.
All this big nation state fluff stinks today as it did when the first two Western ones,
England and France had a 100 Years War and it has stunk throughout history.
We humans are born naked, helpless, and totally ignorant. We also have an evil streak in
us; vide Adam and Eve. And as Shakespeare stated we must consign ourselves to a willing death
each eve or we die. We are so haughty yet the first thing we must do upon wakening from our
nightly death is evacuate waste.
We have never respected Nature. Now we spray aluminum and plastic microns in the upper
atmosphere which we all breathe as they fall and have virtually destroyed the ozone layer and
the biosphere. We live in 1984 right now!
True libertarianism which is no aggression against person or property and backed up by
cheap, Natural Law arbitration courts works. It is that or sayonara humans.
My reasoning is simple, maybe too simple. The Chinese will not start a shooting war and
the US has no guts for one.
You may be right about the Chinese (their government looks after 1,3 billion people) and
that the US has no guts. But what is the "US"? If you mean the (mostly Jewish) ruling cabal
and their goyim political clowns and puppets, you have no reason to be so sanguine about the
"no guts". It's not their guts that will be on the line, for they will be quite happy so
sacrifice millions of the plebes for the greater good of Israel and rebooting the "economy".
War devastations (and pandemics) are the greatest source for immiserating and culling the
masses and channeling wealth to the banksters.
Facing the demise of the Jewish-led hegemony through its PNAC's "full-spectrum dominance"
– and what that could do to the SHITIS (shit-state of Israel) – it is reasonable
(in their twisted minds) to step to the brink and beyond. Besides, the most recent great wars
(the greatest carnages in the world's history) were not intended to end the way the warhawks
wanted (neither Hitler not Chamberlain wished the destruction of country or empire) but the
power dynamics unleashed by geopolitical gamesmanship suppresses reason.
@paranoid
goy Non-CO2 pollution is a non-issue. It was far worse in the USA and China 50 years ago
(air and water), and in Europe/East coast USA over 200 years ago. Wildlife populations are
also rebounding. Every time I hear some retard complaining about pollution on the internet, I
want to reach through the monitor and pepper spray them.
The zionists are in control of China and the ZUS and Russia and Europe and India and
everywhere in central and South America, and the fact is the zionist control was proven by
every country that forced their people into the forced lockdown, using this scam of a
coronavirus as an excuse.
These wars are a deversion, as the zionist install their global prison.
General Qiao dismisses the possibility that Vietnam, the Philippines, Bangladesh, India
and other Asian nations may replace China's cheap workforce: "Think about which of these
countries has more skilled workers than China. What quantity of medium and high level human
resources was produced in China in these past 30 years? Which country is educating over 100
million students at secondary and university levels? The energy of all these people is
still far from being liberated for China's economic development."
Once again, I must caveat this with the proclamation I was not and I am not an advocate
for Obama's TPP. The reason I'm not an advocate is for environmental purposes. I believe
growth is killing the living planet and soon enough will extinct humans as well as many, most
even, other species on the planet. The TPP did nothing to address growth and instead enabled
it further by enhancing global trade versus diminishing it.
That being said, the TPP was a strategy to contain China's growing influence. It was
intended to put global trade eggs in many baskets and not just in the basket labeled China.
What does Trump do? He puts all the trade eggs in China's basket under the aegis/rubric of
repatriating manufacturing to America. He put a knife in TPP and killed it but he never
brought manufacturing back to America. Now America is truly good and fucked. Over a barrel.
No options. Can you believe this moron and the cabal that's using him as a foil? Like I said
before, if Trump didn't exist, the CCP would have to invent him because more than any other
power player, be it Russia or Saudi Arabia or Israel, Trump has been extremely beneficial to
China. Under Trump's watch, China is now the most powerful country in the world. Because of
Trump, China is now the leader of the world. America, finally, has been knocked from its
perch just as England was over 100 years prior. Once knocked from the perch, there is no
regaining the status you once enjoyed. I suspect that within five years the dollar will no
longer be the world's currency. When that happens, it's lights out for America FOR REAL. All
this banter is whistling past the graveyard. What's done is done.
House Democrats who've been interfering with President Barack Obama's ability to
negotiate the Trans-Pacific Partnership are missing something very important: The trade
deal isn't primarily significant because of the economy. It matters because it's part of
the broader American geostrategic goal of containing China -- which pointedly hasn't been
invited to join the TPP.
In the new cool war, China's rising economic influence is giving it greater geopolitical
power in Asia. The TPP is, above all, an effort to push back on China's powerful trade
relationships to reduce its political clout. By weakening Obama's ability to pursue it,
congressional Democrats had been unintentionally weakening the U.S. side in the cool
war.
In all this, China is using its close economic relationship with its neighbors as
leverage to build its geopolitical position. Its ultimate goal is to displace the U.S. as
the regional hegemon. President Xi Jinping's slogan of the "Chinese dream" requires nothing
less.
The TPP aims to reduce some of China's geopolitical resurgence by damping down the
extent of China's regional trade dominance. China itself has a proposed regional trade
alliance, the Regional Comprehensive Economic Partnership, that would include 16 members
and exclude the U.S. Australia, Japan and South Korea are all involved in negotiations to
become members. The TPP is a direct, competitive counterpart to the RCEP.
Fyi, the following cartoon is per China Daily , a publication owned and run by the
CCP. It's favorable to Trump. It's clear by virtue of Trump's cozy relationship with Putin
and Xi that Trump is a communist in capitalist clothing. He is a communist trojan horse in
the oval office. But he's even more than that. He has many hats. He's a tool, a
self-promoting front man, for any tyrant or tyranny that expands his brand masquerading as a
man of the people. As if. He's a man, albeit an insane moron, of the extractive elite and the
extractive elite are transnational and transcultural. The extractive elite are a nation and
culture unto themselves and the rest of us are their slaves on this global plantation.
@Weston
Waroda Once reserved currency status of dollar is over n done with, there would be zero
need for the huge military budget. That is the silver lining of this whole thing. The wars
might finally stop. But living standards will take a hit from the devaluation of the dollar.
But but, Jobs would return through that weakened dollar as off shoring jobs would no longer
make sense. And just maybe, our political class might finally focus on domestic issues and
improve the country after 4 decades of stagnation.
@Miro23
Apple follows every single law in China. Apple makes a lot of money in China, but also pays
alot of taxes. I highly doubt it would be a target of retaliation. But other companies are
fair game. Just something I noticed.
@carlusjr
Spot on. Humans are drowning in their own filth. There's an adage, "don't shit where you
eat." Humans invented the saying but apparently don't abide by it and in fact zealously defy
it. Here we are. It will be one pandemic after another from now until human is no more. Rapid
pace, like automatic weapon fire. The center cannot hold and is not holding. Civilization is
going down. Will the Samson Option be utilized? Man's last act? Destroy the planet
entirely if he can't have it entirely? My bet is this is how it will go down. All you have to
do is extrapolate the curve.
@bigduke6
It is quite obvious why they are doing, they are using Europeans' own liberal ideology
against them. In today's Western world, nothing is worse than being a "racist" (except maybe,
just maybe a paedophile necrophiliac, but even that is a close one) as such they will use
these terms to beat down Europeans. Erdogan recently likened Greece to "Nazis", due to their
brave defiance to Third World invaders.
As if they genuinely give a shit about Nazis, a particularly European obsession due to
decades of brainwashing by the Jewish media elite. Even if one believes the textbooks in
relation to Nazi atrocities, the fact is that such things are normal for history. No other
people's beat themselves down over bad stuff they've done, hell, the Mongolians have erected
a big statue of Genghis Khan, one of the greatest mass murderers in history!
Extremely misleading headline. Since the Asia Times story is actually about economic
and political sovereignity – always a big issue for China ever since the Eight Powers
carved up the nation in the past: Germany, Japan, Russia, Britain, France, Italy,
Austria-Hungary, and the U.S.
It doesn't speak about warfare against the U.S. It speaks about meeting a threat from the
U.S. It does speak of taking Taiwan, though by avoiding outright warfare. This is not
something we should desire, but it is not war against the U.S., as the misleading headline is
intended to make people believe.
As usual most of the rubes will only read the headline and look at the pictures, maybe
skim through the text a bit, before typing out an angry post based on whether they like or
dislike whatever nation is mentioned. Much like cruzbots and Bush lovers use Breitbart
comments to screech against Iran and praise Israel. No facts needed.
"... An example, referring to Covid-19, is the capacity to produce ventilators: "Out of over 1,400 pieces necessary for a ventilator, over 1,100 must be produced in China, including final assembly. That's the US problem today. They have state of the art technology, but not the methods and production capacity. So they have to rely on Chinese production." ..."
"... The gold standard expression has come in a no-holds barred Global Times editorial : "We must be clear that coping with US suppression will be the key focus of China's national strategy. We should enhance cooperation with most countries. The US is expected to contain China's international front lines, and we must knock out this US plot and make China-US rivalry a process of US self-isolation." ..."
"... An inevitable corollary is that the all-out offensive to cripple Huawei will be counterpunched in kind, targeting Apple, Qualcom, Cisco and Boeing, even including "investigations or suspensions of their right to do business in China." ..."
"... So, for all practical purposes, Beijing has now publicly unveiled its strategy to counteract U.S. President Donald Trump's "We could cut off the whole relationship" kind of assertions. ..."
"... The politicians controlling US foreign policy are leading us straight into the 19th century, with their updated gunboat diplomacy ..."
The bulk of his argument concentrates on the shortcomings of U.S. manufacturing: "How can
the US today want to wage war against the biggest manufacturing power in the world while its
own industry is hollowed out?"
An example, referring to Covid-19, is the capacity to produce ventilators: "Out of over
1,400 pieces necessary for a ventilator, over 1,100 must be produced in China, including final
assembly. That's the US problem today. They have state of the art technology, but not the
methods and production capacity. So they have to rely on Chinese production."
... ... ...
Gloves Are Off
Now compare General Qiao's analysis with the by-now-obvious geopolitical and geo-economic
fact that Beijing will respond tit for tat to any hybrid war tactics deployed by the United
States government. The gloves are definitely off.
The gold standard expression has come in a no-holds barred Global Times editorial : "We must be
clear that coping with US suppression will be the key focus of China's national strategy. We
should enhance cooperation with most countries. The US is expected to contain China's
international front lines, and we must knock out this US plot and make China-US rivalry a
process of US self-isolation."
An inevitable corollary is that the all-out offensive
to cripple Huawei will be counterpunched in kind, targeting Apple,
Qualcom, Cisco and Boeing, even including "investigations or suspensions of their right to do
business in China."
So, for all practical purposes, Beijing has now publicly unveiled its strategy to counteract
U.S. President Donald Trump's "We could cut off the whole relationship" kind of assertions.
A toxic racism-meets-anti-communism matrix is responsible for the predominant anti-Chinese
sentiment across the U.S., encompassing at least 66 percent of the whole population. Trump
instinctively seized it – and repackaged it as his re-election campaign theme, fully
approved by Steve Bannon.
The strategic objective is to go after China across the full spectrum. The tactical
objective is to forge an anti-China front across the West: another instance of encirclement,
hybrid war-style, focused on economic war.
This will imply a concerted offensive, trying to enforce embargoes and trying to block
regional markets to Chinese companies. Lawfare will be the norm. Even freezing Chinese assets
in the U.S. is not a far-fetched proposition anymore.
Every possible Silk Road branch-out – on the energy front, ports, the Health Silk
Road, digital interconnection – will be strategically targeted. Those who were dreaming
that Covid-19 could be the ideal pretext for a new Yalta – uniting Trump, Xi and Putin
– may rest in peace.
"Containment" will go into overdrive. A neat example is Admiral Philip Davidson – head
of the Indo-Pacific Command – asking for $20 billion for a
"robust military cordon" from California to Japan and down the Pacific Rim, complete with
"highly survivable, precision-strike networks" along the Pacific Rim and "forward-based,
rotational joint forces" to counteract the "renewed threat we face from great power
competition."
Davidson argues that, "without a valid and convincing conventional deterrent, China and
Russia will be emboldened to take action in the region to supplant U.S. interests."
... ... ...
From the point of view of large swathes of the Global South, the current, extremely
dangerous incandescence, or New Cold War, is mostly interpreted as the progressive ending of
the Western coalition's hegemony over the whole planet.
Still, scores of nations are being asked, bluntly, by the hegemon to position themselves
once again in a "you're with us or against us" global war on terror imperative.
... ... ...
For the first time in 35 years, Beijing will be forced to relinquish its economic growth
targets. This also means that the objective of doubling GDP and per capita income by 2020
compared with 2010 will also be postponed.
What we should expect is absolute emphasis on domestic spending – and social stability
– over a struggle to become a global leader, even if that's not totally overlooked.
... ... ...
Internally, Beijing will boost support for state-owned enterprises that are strong in
innovation and risk-taking. China always defies predictions by Western "experts." For instance,
exports rose 3.5 percent in April, when the experts were forecasting a decline of 15.7 percent.
The trade surplus was $45.3 billion, when experts were forecasting only $6.3 billion.
Beijing seems to identify clearly the extending gap between a West, especially the U.S.,
that's plunging into de facto New Great Depression territory with a China that's about to
rekindle economic growth
Zhu , May 20, 2020 at 00:34
"A toxic mixture of racism and anti-communism" sounds about right. The Chinese government
is not submissive and the "Chinks" are getting too prosperous. That's bound to infuriate both
elite and grass-roots Americans.
Drew Hunkins , May 20, 2020 at 00:34
"For the first time in 35 years, Beijing will be forced to relinquish its economic growth
targets. This also means that the objective of doubling GDP and per capita income by 2020
compared with 2010 will also be postponed. "
Good, good, just wonderful. This will really endear the United States to the Chinese
people.
All that the Chinese govt did for its people over the last 30 years is totally eliminate
poverty, that's all. Gotta love how our Western mass media won't shut their mouths about this
small achievement.
Drew Hunkins , May 20, 2020 at 00:15
"Those who were dreaming that Covid-19 could be the ideal pretext for a new Yalta –
uniting Trump, Xi and Putin – may rest in peace."
Rest in peace, no doubt. Washington is all about unilateralism, period. This is the crux
of the issue, the rapacious capitalist-imperialists who infest Wall St, the military
contractors and corporate mass media want nothing to do with a multi-polar world. This could
lead to putting the far east on a dangerous path with U.S. warships provocatively traversing
the area.
gcw , May 19, 2020 at 21:08
The politicians controlling US foreign policy are leading us straight into the 19th
century, with their updated gunboat diplomacy . Never a thought to the impending
disaster of climate change and unparalleled social and environmental chaos, they dream
instead of yet another Cold War (Yellow-Peril 2.0), all the time sustaining a gargantuan
military establishment which is draining the life-blood from American society. The Covid-19
virus is just a warning to us: we have about 5% of the world's population, yet lead the pack
in deaths from the virus. If this monumental display of incompetence doesn't wake us up, what
will?
@utu ... He produces evidence, evidence in response to highly-coordinated anti-China
propaganda, the mountains of belligerent lies that are all that remain today of the failed
state the USA. Those lies plus its military killing millions all over the world, incessantly
destroying or attempting to destroy states simply for being independent.
The best argument I have read from the anti China camp has been that if China succeeds, US
dollar will be kaput, living standard in the USA will tanked to shit levels compare to right
now.
Why would China succeeding reduce our living standard?
@Realist If China succeeds, that means dollar as reserve currency is kaput. Without the
reserved currency status, dollar will devalue by 50% or more. Living standard auto lowers by
50% or more.
Almost every freaking day Trump and Pompeo bashing China including Huawei.. Not a day of
peace without china bashing.
Days earlier ZeroHedge, SCMP and other media reported freaking Trump and Pompeo... no
companies inside or outside USA can sell American software or technology items or chips made
with USA properties or machines to Huawei.
Meaning TSMC a Taiwan chip's foundry not permitted to sell any chips to Huawei, TSMC has
been the world's dedicated semiconductor foundry. "curtailing its chip supply, an
escalation of its campaign against the Chinese company that may also hurt Taiwan
Semiconductor Manufacturing Co."
"China has the most fab projects in the world.... 30 facilities planned, including
10/7nm processes, but trade war and economic factors could slow progress...... SMIC 's
move would put it on par with some of its foreign rivals. In addition, SMIC has
obtained $10 billion in funding to develop 10nm and 7nm. Semiconductor Manufacturing
International Corporation (SMIC) is a publicly held semiconductor foundry company, and the
largest in China.
"Wuhan Hongxin Semiconductor Manufacturing (HSMC), a logic IC foundry founded in late
2017, is gearing up for 14nm and 7nm process manufacturing eyeing to be China's most advanced
contract chipmaker.....Shang-yi Chiang, the former executive VP and co-chief operating
officer overseeing R&D for Taiwan Semiconductor Manufacturing Company (TSMC), will join a
Wuhan-headquartered foundry in China. "<
Gone are the "good 'ole days" of BRICS bonhomie when the Alt-Media Community used to sing the
praises of this nascent trade bloc and portray it as a game-changing development in
International Relations. Although promising on paper, BRICS was always destined
to be disappointing due to the irreparable differences between India and China that were
either downplayed or outright ignored by this organization's loudest advocates. The author has
been consistently warning for over the past four years that " India Is Now An American Ally " after it
clinched the Logistics Exchange Memorandum Of Agreement (LEMOA) with the US to allow the latter
to use its military infrastructure on a case-by-case "logistical" bases. Since then, India has
fully submitted to the Pentagon's "Indo-Pacific"
strategy of empowering the South Asian state as a "counterweight" China, with even Russian
Foreign Minister Lavrov loudly warning his
country's strategic partner of
the pitfalls of this scenario as recently as early January of this year while speaking at a
conference in their country.
Modi's Military Madness
Alas, whether due to long-lasting ignorance of the situation, unchecked professional
incompetence, and/or shadowy motives that can only be speculated upon, the majority of the
Alt-Media Community still refuses to recognize these facts, though the latest developments
pertaining to Indian-Chinese relations might finally cause them to reconsider their
inexplicable stance of always "covering up" for New Delhi. India has recently clashed with
China
along the Line of Actual Control (LAC) in
Indian-Occupied Kashmir 's Ladakh region and close to the Donglang Plateau (described as
"Doklam" by India and thus widely reported upon with this name in the Western Mainstream Media
and among the members of the Alt-Media Community sympathetic to New Delhi) near Sikkim where
they had their infamous three-month-long standoff
in summer 2017 (which threatened
to repeat itself in 2018). So tense has the situation become in Ladakh that China
reportedly flew several helicopters near the scene while India flew a few fighter jets,
significantly upping the ante.
India's Attempt To "Poach" Chinese-Based Companies
The backdrop against which these clashes are transpiring is India's aggressive attempt to
"poach" foreign companies from the People's Republic, which the author analyzed last month in
his piece about how " India's Selective Embrace
Of Economic Nationalism Has Anti-Chinese Motivations ". Of relevance, India has also set
aside land
twice the size of Luxembourg for such companies to exploit in the event that they decide to
re-offshore from the East Asian state to the South Asian one.
This perfectly dovetails with Trump's " trade
war " plans to encourage foreign companies to leave his country's rival and either return
home or set up shop in a friendly pro-American country instead. Of note, India is also
vehemently opposed to China's Belt & Road Initiative ( BRI ) behind the US on
the basis that its flagship project of the China-Pakistan Economic Corridor ( CPEC
) traverses through territory that New Delhi claims as its own per its maximalist approach to
the Kashmir Conflict .
Obviously, the US couldn't have found a better ally than India to thwart China's economic
plans.
The US Might Rule The WHO Via Its Indian Proxy
On the soft power front, India is
slated to assume leadership of the World Health Assembly (WHA, the governing body of the
World Health Organization, WHO) from Japan later this month, and it's already being widely
speculated in Indian media that the country might be
seriously considering taking the US' side in respect to investigating the WHO for its
alleged pro-Chinese
bias . Not only that, but India might even be receptive towards Taiwan's request to
participate in the organization's meetings, the scenario of which has already concerned China
so much that its embassy in New Delhi
felt compelled to remind the Indian leadership that doing so would violate the One China
principle. From the American perspective, this is an unprecedented opportunity for Washington
to exercise proxy leadership of the WHO through its "junior partner" of India, which could add
a speciously convincing degree of credibility to its anti-Chinese claims in an attempt to win
back the many hearts and minds that it's lost to its rival throughout the course of World War
C .
The Indo-American Hybrid War On China
Taken together, India is indisputably intensifying its American-backed Hybrid
War against China as a sign of fealty to its new ally, especially considering that it's
only officially been the US' " comprehensive global
strategic partner " since Trump's landmark visit to the country a few months back in
February and thus feels like it has something to prove. Both countries share the grand
strategic goal of "containing" China, to which end they're working hand-in-glove with one
another to carry out this concerted campaign against the People's Republic.
Building off of the idiom, the American hand is unquestionably controlling the Indian
glove after Trump cracked the whip on
Modi by forcing him to export hydroxychloroquine to
the US last month, which asserted his country's dominance as India's neo-imperial master.
Whether across the military, economic, or soft power domains, the US-Indian alliance is
doing its utmost to create serious difficulties for China. With India now suspecting China of
building an island off of its coast, ties will likely continue to worsen to the US'
benefit.
An anonymous reader shares a report: China is ready to take a series of countermeasures against
a US plan to
block shipments of semiconductors to Chinese telecom firm Huawei , including putting US
companies on an "unreliable entity list," launching investigations and imposing restrictions on
US companies such as Apple and suspending the purchase of Boeing airplanes, a source close to
the Chinese government told the Global Times. The Trump administration on Friday moved to block
shipments of semiconductors to Huawei from global chipmakers. The US Commerce Department said
it was amending an export rule and the Entity List to "strategically target Huawei's
acquisition of semiconductors that are the direct product of certain US software and
technology," according to a statement on its website. "China will take forceful countermeasures
to protect its own legitimate rights," if the US moves forward with the plan to bar essential
suppliers of chips, including Taiwan-based TSMC, from selling chips to the Chinese tech giant,
the source told the Global Times in an exclusive interview.
China will also put a lot of money into making things that it has, up to now, obtained
from the USA. It might take a few years, but China's government set up (ie one party always
in power) means that it does not have to do things to an electoral cycle.
"... Sad but true. We are all given our illusions. In US its the illusion of democracy which is a fake democracy cloaking our totalitarian reality. In China they give the people the illusion of moving towards socialism, a fake socialism to be sure, never mind all the billionaire party members (and they don't have universal health care either, its insurance based) .The people have long accepted the reality of totalitarianism so they are one step ahead. ..."
Sad but true. We are all given our illusions. In US its the illusion of democracy which
is a fake democracy cloaking our totalitarian reality. In China they give the people the
illusion of moving towards socialism, a fake socialism to be sure, never mind all the
billionaire party members (and they don't have universal health care either, its insurance
based) .The people have long accepted the reality of totalitarianism so they are one step
ahead.
Since China doesn't have another party to blame they must blame external enemies like the
US and we happily play along with tarrifs paid for by us dumb sheep who cry out in
satisfaction "take that". Lol
A fake Cold War works for us too. Trump says we are in a race for 5G and AI/Robotics with
China. We must win or all is lost to China. Social credit scores, digital ID and digital
currency along with Total Information Awareness and Full Spectrum Dominance over the
herd.
Health effects of 5G will be blamed on CoVID. Fake Science is a great tool. Scientists
never lie, they can be trusted, just like Priests . They are the Priests of the New
Technocratic World Order. Global Warming and COVID- We must believe. They say Vaccines and 5G
are good for you, just like DDT and Tobacco were said to be Good by Scientists of another
time. We must believe. Have Faith and you will earn social credit bonus points.
Reality is Fake Wrestling. Kayfabe all the way baby. Who is the face and who is the heel?
We are free to choose. So who says we don't have freedom?
But it was natural target of offshoring manufacturing during neoliberal globalization frenzy.
Now the USA needs to pay the price for the betryal of its elite.
Notable quotes:
"... China is not a natural ally of the US. It was helped for decades as a counterweight to the USSR and that policy continued after the Cold War ended because the Western elite reaped vast profits from the entry of a billion Chinese into the world labour markets. We have created a monster of arrogance and economic dynamism that refuses to take measures against novel coronaviruses springing out of their peculiar eating and aphrodisiac medicine habits. ..."
The USA is under no obligation whatsoever to be friendly to Russia, and especially not to
China which rather owes America for everything and has repaid it in death. Capital and
technology has flowed to China from America for decades. In return they sent profit to Wall
St, Wuhan made Fentanyl the death of choice for whites desperate as a result of the policies
that made China did so well out of, and now they send us a deadly epidemic.
China is not a natural ally of the US. It was helped for decades as a counterweight to
the USSR and that policy continued after the Cold War ended because the Western elite reaped
vast profits from the entry of a billion Chinese into the world labour markets. We have
created a monster of arrogance and economic dynamism that refuses to take measures against
novel coronaviruses springing out of their peculiar eating and aphrodisiac medicine
habits.
It was coffee made from beans taken from civet faeces that led to the SARS-CoV bat/ civet
recombination virus and the 2002 Sars outbreak, during which China lied about what was
happening as they subsequently admitted. The SARS-CoV 2 receptor-binding domain from
pangolins ( world's most trafficked animal, is in demand by Chinese as a male enhancer) and
it recombined with a bat virus was hundreds of times more effective a pathogen in humans than
the one from bat–civet recombination of eighteen years ago.
But that is not what the Chinese said. Researchers in Wuhan on December 31st told the
world about the Wuhan disease having been identifies as a coronavirus but said, 'It's not
highly transmissible'. As late as the the 24th of January, Doctor Fauci w gave a briefing for
senators in which he said there was very little danger to the US from the Wuhan disease.
Later that day he repeated that opinion at a press conference.
So China said it was not infectious between people and there was nothing much to worry
about. When Trump began to restrict travel into the US from China on the 31st January there
was uproar about this supposed further evidence of his xenophobia,.
President Trump has used his executive power to take a hatchet to 40 years of America's
China policy. His administration has called for a
"whole-of-government" approach to counter Beijing's unfair economic practices, initiated a
damaging trade war, banned Chinese telecommunication equipment from domestic networks, and
implemented stringent regulations to vet Chinese investments in sensitive industries.
In a novel development, the administration has begun coaxing individual states to aid the
federal government in its anti-China fervor. Speaking to the National Governors Association in
early February, Secretary of State Mike Pompeo warned that "competition with
China is not just a federal issue It's happening in your states with consequences for our
foreign policy, for the citizens that reside in your states, and indeed, for each of you."
The administration's enlisting of states in the broader U.S.-China competition has
significant economic implications for subnational actors. Increasingly hawkish incumbents, as
well as congressional candidates, could provoke economic pushback from Beijing. Many of these
officials have bought into the Republican Party's strategy of carrying out an " anti-China
assault " on the campaign trail, scapegoating Beijing for the coronavirus outbreak in the
United States instead of acknowledging the Trump administration's central role in the country's
failure to prepare itself properly.
While Washington is correct to scrutinize Chinese investments in sensitive technologies
and pursue reciprocal trade and economic relations, politically motivated, opportunistic
anti-China rhetoric could threaten individual states' cooperation with China, one of the few
remaining productive aspects of the bilateral relationship. Indeed, as Hu Xijin, editor of
Chinese tabloid Global Times, tweeted , "Beijing is already
preparing to take necessary punishment measures against some members of the US Congress, the
state of Missouri, and relevant individuals and entities."
China-skeptic sentiment in the U.S. government and on the campaign trail is not a new
phenomenon , but the
coronavirus pandemic and resultant economic crisis have afforded many politicians the cover to
push hawkish policies. Some of their proposals would benefit the United States, including
reducing
U.S. reliance on Chinese-made pharmaceutical products , a motion broadly backed by both
Republicans and Democrats. But many of their arguments are politically motivated and risk
further inflaming U.S.-China tensions and painting Beijing as an enemy, à la the Soviet
Union during the Cold War, rather than a competitor.
Senator Tom Cotton made waves last month by arguing that U.S. universities should not
accept Chinese STEM students given the chance they might return home and use their training
to drive China's scientific advances. Senators Josh Hawley and Marco Rubio have also joined the
fray, advocating that the United States reduce its reliance on China and punish the country for
failing to contain the COVID-19 outbreak. The attorneys general of Missouri and
Mississippi have filed lawsuits seeking damages from Beijing for the coronavirus.
Incumbents, however, are not the only ones wagering their political futures on China. Senate
candidates in Tennessee , Arizona , and
Alabama , among other states,
have adopted overtly hawkish stances toward Beijing, blaming China for the pandemic, painting
their opponents as soft on the country, and using the China threat to push anti-immigration
policies .
Amid Washington's anti-China turn, preserving cooperation at the state level will be
critical to maintaining any semblance of productive bilateral ties going forward. As Los
Angeles Deputy Mayor of International Affairs Nina Hachigian said at a Brookings panel
last year, "cities and states can take advantage of the trade, investment, students, climate
change cooperation, culture, and tourism China offers without really having to balance the
broader national security, geopolitical, and human rights questions."
It is no coincidence that three of the past four U.S. Ambassadors to Beijing previously
served as governors of states with deep links to China: Terry Branstad (Iowa), Gary Locke
(Washington), and John Huntsman (Utah).
The aforementioned politicians may be fighting to relocate supply chains outside of mainland
China and decouple vast sections of the two countries' economies, but their rhetoric may also
lead Beijing to move Chinese-owned businesses out of the United States or cut imports from the
country. Despite bilateral tensions, there is clear evidence that Chinese investments in the
United States can be beneficial. In the midst of the trade war, a Chinese takeover of a failing
paper mill in Maine helped revitalize a local community. In Tennessee, Chinese investments in
automotive
parts ,
mattresses , and porcelain manufacturing have benefited the state's economy. There is a
real risk that Chinese companies, seeing both politicians' and the American public's growing
distaste for China, could simply up and leave.
A more likely outcome of the growing antagonism, however, is for Beijing to engage in
economic coercion , which it uses to try to force nations, companies, and officials into
doing its bidding and punish those who do not. The Chinese Communist Party (CCP) has developed
a wide-ranging and flexible toolkit of coercive measures that it has used strategically
throughout the world.
When South Korea agreed to host the United States' Terminal High Altitude Area Defense
(THAAD) missile defense system, Beijing did not impose tariffs on Seoul despite its
displeasure. China instead
restricted flights to South Korea, drummed up nationalist sentiment among the Chinese public to
boycott South Korean goods, and even shut down China-based outlets of Lotte Group, the Korean
company on whose land THAAD was installed.
China took a similar approach with the
Philippines following a 2012 dispute over claims in the South China Sea. In order to cause
significant economic pain, Beijing tightened quality controls on agriculture exports from
Manila while stemming the flow of Chinese tourists to the Philippines. And most recently,
Beijing
threatened and then
followed through on a boycott of Australian beef after Canberra called for an independent
investigation into the origins of the coronavirus.
Beijing coerces not only countries but also private companies for perceived transgressions.
Marriott, Delta Airlines, and Zara all faced the prospect of losing business in China after
listing Taiwan, Hong Kong, or Tibet as sovereign nations. Last fall, Beijing suspended
broadcasts of NBA games after Houston Rockets general manager Daryl Morey tweeted his support for pro-democracy
protestors in Hong Kong.
If public sentiment across the United States continues to turn against China, Beijing may
begin adapting its methods of economic coercion to retaliate against states and politicians it
perceives as hostile to its interests.
Indeed, China is clearly paying attention to U.S. domestic politics and state officials'
views of China. A think tank in Beijing recently ranked
all 50 governors on their attitudes toward China, information the CCP values as it attempts to
mold the views of officials outside of Washington. As Dan Blumenthal has noted ,
Beijing "split[s] Americans into 'friends of China' who might lobby on their behalf and others
who refuse to do so [and] will not be granted access to China's massive market."
In recent years, Beijing has provided glimpses of what economic coercion in the United
States might look like. During the initial stages of the trade war, China's retaliatory tariffs
disproportionally targeted Red
states critical to Trump's 2016 election victory. Furthermore, China
identified key officials able to influence U.S. policy, such as then-Wisconsin
Representative Paul Ryan and Senate Majority Leader Mitch McConnell, and levied tariffs that
threatened jobs in and exports from their states in a bid to pressure the politicians to split
with Trump.
These actions are possible harbingers of economic pressures to come. Beijing may be tempted
to pressure local officials to influence policy from the bottom up. As the aforementioned think
tank report explicitly notes
, Beijing believes that "State-level officials 'enjoy a certain degree of diplomatic
independence,'" and that "Governors can ignore orders from the White House."
Recent downturns in public opinion in both countries, the result of several years of
increasing competition, and an emerging view that the other views the pandemic as a strategic
opportunity, could even see Beijing move beyond tariffs and drum up anti-U.S. sentiment. It
could even encourage citizens to boycott American products, the political and economic effects
of which could be devastating.
While the United States imports more from China than it exports, China-bound exports
supported around
one million U.S. jobs in 2018. According to the U.S.-China Business Council, 42 states counted
China among their top five export destinations in 2019. Chinese FDI, which peaked
at $46.5 billion in 2016, dropped to just over $3 billion in 2019 -- a decline of over 90
percent. Industries ranging from energy, agriculture, and manufacturing could be negatively
affected by an exodus of Chinese investment, a freeze on new Chinese FDI into the United
States, or increased tariffs on or bans of imports.
Given the astronomically high
unemployment rate and ballooning federal and state debt levels, U.S. states are in no
position to lose more investments or export-supporting jobs. Senator McConnell's recent call
for states to file
bankruptcy highlights their increasingly gloomy economic prospects, and already over 25
percent of state revenues have
disappeared due to the coronavirus.
The United States certainly needs to diversify its supply chains so as not to depend so much
on China. Washington has already rolled out several measures to better screen Chinese
investments in the country and limit sensitive technology exports. The increasingly prevalent
and politically expedient one-size-fits-all anti-China position espoused by many state-level
politicians, however, could endanger China-state ties, the locus of the two countries' economic
relationship, and threaten China-owned U.S.-based companies that pose no national security
threats and provide hundreds of thousands of jobs.
I recently came across a Facebook comment
from a Hongkonger, arguing that the Chinese Communist Party (CCP) is nothing communist
given China's prosperous private sector after 1979's reform . He then linked
a video to mock
the western electoral democracy that put Trump and Hitler into the office, leading to the
conclusion that the West has no credential to criticize the one-party system of China for
the lack of democracy. His comment represents the contemporary Chinese sentiment and is
quite understandable given the ongoing color revolution in Hong Kong
2019 , which is still lukewarm to this day, and the unrelenting
blame of COVID19 on China . Although the hybrid war waged on
China is unjust, the current Chinese mindset does not help to diffuse but only fuels
the conflict even further.
The Facebook comment was right about CPP not being Communist that seeks total control
of the economy by the state. Yet, China is state capitalism, an oligarchy, or crony
capitalism. China is a plutocracy by the marriage between the party leadership (the state),
and the monopolizing mega-corporations (the money) like Huawei, Ali, the four state-owned commercial
banks , and Sinopec Group .
It is far from a free-market where the only way to win a competition is to provide
excellent products, where the state has no role in deciding the winner and no ability to
finance itself by forcing the circulation of central-banknotes. China does have a private
sector – the semi-free-market, the good part of our bad plutocracy. Still, even that
part is
weathering after supreme leader Xi took power, and most Chinese do no realize that we
are marching back into a more planned, more communism, more Mao Zedong like system, slowly
but surely. In China, life is artificially expensive under the tightening state control
that imposes layers upon layers of covert taxation, to the point of causing hesitation
to have more children .
However, the west, in general, is fundamentally the same, albeit having a
façade electoral democracy where no crucial issues (i.e., war and peace, monetary
policy, and downsizing the government) are allowed into a debate.
The real private sector (not the likes of Google and Lockheed Martin) is also dying. The
states interfere with the market relentlessly, in the name of safety, welfare, and
stimulating the economy, which achieved the opposite (i.e., the 1929 great depression, 2000
dot com bubble, and 2008 housing bubble). The Federal Reserve finances the government
spending via debt, encourages malinvestment by
atrocious QE packages , which all translate into taxing away people's purchasing power
by creating tons of money out of thin air.
We see the same unholy marriage between the state and the money like big techs, big
pharma, and, most disgustingly, the Military-Industrial Complex. People are either covertly
forced, or duped into funding the nonsense by paying tax, no matter which party they
elect.
Therefore, the Chinese are right about the West not in the position of a critic, but
for the wrong reason. We either fail to realize or willfully deny that we are living
under a harsh plutocracy. Instead, we are distracted by the never losing fake debate about which system
elects the better government, since the "one-party system" is most attacked by western
pro-democracy voices.
Strangely though, both systems have seemingly good intentions, either emphasizing a
person's moral conduct and experience in low-tier office (the Chinese internal nomination),
or the people's direct control of the government (the West electoral democracy). Strangely,
both unanimously favor the use of "government power" the "right way."
Yet, power always corrupts its user by attracting the money, no matter how
well-disciplined, how experienced he/she was. A system that operates on coercive power
always finds its way to circumvent any laws and regulations meant to promote meritocracy.
Both have tried to fight cronyism rigorously with new agencies and new legislation, but in
the end, cronyism always prevails, for both. For the most part of history, the essence
of the Chinese system is not much different from the West, since they are all plutocracies
that conned the people into helplessly relying on more power to solve problems caused by
power until it collapses.
In
a 1979 Chinese opera broadcasted nationwide, the protagonist, a low tier official,
finds himself risking his political career to enforce the law on the aristocrats who made
the law; intoxicated, he yelled in desperation
"谁做管官的官," which literally is " Quis
custodiet ipsos custodes " in Chinese; in the end, he left his career behind
– adding no more to the bloated, self-conflicting bureaucracy, to preserve his
integrity. Maybe this was a coincidence, 1979 was the year the Chinese leadership decided
to let the
government govern less – kudos to them.
The year 1979, and the economic boom that followed, is
one of the most common counter-arguments from a Chinese when you criticize the draconian
practices of CCP. Admittedly, there are times the state power is not insane. In 1979 Deng
Xiaoping at least gave up
some government mandate to allow the private sector to grow , resulting in the
exploitative system we see today, nonetheless a society much more productive than Mao
Zedong's total state dominance. Some state heads refrained from moving the government
"muscle" too much, such as Jimmy Carter's
resistance to wars and money supply that reduced overspending and inflation since the
Vietnam War. In these "less bad, more sensible" eras, it is easier for people's
entrepreneurial spirit and creativity to overcome the innate
irresponsibility of centralized capital management. As a result, we saw significant
progress like the Chinese miracle, and the upswing during the Reagan presidency (even if he
turned up wars, debt, and the Fed's money machine again). Sadly, the leaderships are eager
to claim credits, creating the impression that it is the right administration resulting in
progress and recovery when it is the lack of governing that allows the people to make
sensible decisions on their own, achieving faster growth.
If we Chinese and the American attack each other's electoral system, it is like the two
worst kids in the class picking on each other over their looks rather than their poor study
and bullying of other kids, which only makes them both worse. In the real world, we leave
the unhinged growth of government power – the real enemy of all people, Chinese and
American alike, unattended.
Like that Hongkonger, most Chinese learned to mock Trump's personal, and naively
conclude that the democracy that put him (and Hilter) in the office is a joke. Some more
informed Chinese mock the media's clownish, unfair treatment of Trump, and naively conclude
that the freedom of the press is a joke. However, a bombastic president, the democracy, and
the media are not the problems; neither are the aggressive
sino-phobic policies of which Trump pretends to be in charge. The actual problem is the
monstrous government, married with big money, capable of waging costly war, funding
wasteful programs that drain the middle class to enrich a selected few, no matter who is in
the office. It can either be the well-spoken Obama loved by the media, who started
seven
wars and won the Nobel peace prize, or the bombastic, scandalous New Yorker hated by
the press, who nonetheless continued these wars. People coerced into funding this abusive
machine themselves are part of, with their hard-earned tax dollars, is the problem. Yet,
you do not see the Chinese majority mocking this miserable setup and come to realize that
we are under the same situation!
For us, the Chinese, the real issue is not the superficial corruption that the supreme
leader XI fiercely fought, nor the insanity, the incompetence, and the betrayal of the oath
of some party members. It is our innate reliance on authorities and the love of collective
glory, a part of our culture passing down through generations over more than 2400 years,
being the problem. We can never break the dynastic cycle if we do not see the path
to the self-destruction of unhinged state power, such as Mao's era . If we are still yearning
for a "just leader" to solve issues like retirement, education, and medication, still
admiring exhaustive achievements such as the Belt and Road, the South China Sea, and
Taiwan, we then have learned nothing from the downfall of thirteen dynasties and countless
hegemonies throughout the history of China. The collective conscious of the Chinese have so
far failed to realize the force driving the rise and fall of a dynasty is not the moral and
intellect of the leaders, but the people's economic freedom relatively untouched or
infringed at times, by a mixture of chance, sanity, and imperialism vainglory. The blind
reliance on leaders and the love of collective grandiosity is only compounded when the
Americans fail to take back their power from the government, who is warring with China and
covertly overtaxing them. The collective enlightenment of the Chinese population is nearly
impossible, since the tyrants in Beijing have no shortage of strawman to throw at the
people and say "that is the problem, blame the belligerent Trump and the jealous
Americans", and the Communist Dynasty will always enjoy the " mandate of heaven ".
Even with a sheep's mindset, the Chinese economy will overtake the US, despite the slow
death of its most productive private sector. The sheer momentum of the slight right turn to
liberty 40 years ago is good enough for China, since the Americans do not restore their
free-market and liberty that had made them an exceptionally productive civilization for a
long time. But then what? We Chinese are just molecules burnt to fuel the blinding flash of
a new empire not far from its fourteenth dynastic downfall, just like the Achaemenids, the
Romans, the Umayyads, the Ottomans, Napoleon's France, the British, and the Americans
before us.
Xiaoran Tong has a Ph.D. in
Epidemiology from the Michigan State University (MSU). He is originally from Kunming,
Yunan, China and arrived in the US in 2014 to pursue his Ph.D. at MSU. He is Interested in
the history of America and its similarities with ancient and contemporary
China.
Amid the ongoing diplomatic spat between Washington DC and Beijing,
which now also includes the deployment of B-1B
bombers and warships in the South China Sea , late on Monday (local time) China's Global Times
reported , citing sources close to the Chinese government, that some "hawkish" officials in
China are calling for a renegotiation the the "phase one" trade deal with Washington as well as
a "tit-for-tat approach on spiraling trade issues after US' malicious attacks on China ignited
a tsunami of anger among Chinese trade insiders."
The calls to renegotiate the current version of the deal - which has yet to be actively
implemented - emerge amid dissatisfaction because "China has made compromise for the deal to
press ahead."
While in the past, these same trade negotiators "believed that it would be worthwhile to
make certain compromise to reach a partial truce in the 22-month trade war and ease escalating
tensions", given what the Global Times called "President Donald Trump's hyping an anti-China
conspiracy that aims to cover up his mishandling of the COVID-19 pandemic", advisors close to
the trade talks have suggested Chinese officials rekindling the possibility of invalidating the
trade pact and negotiating a new one to tilt the scales more to the Chinese side, sources close
the matter told the Global Times.
A former Chinese trade official told the Global Times on condition of anonymity on Monday
that China could complete such procedures based on force majeure provisions in the pact.
"It's in fact in China's interests to terminate the current phase one deal. It is beneficial
to us. The US now cannot afford to restart the trade war with China if everything goes back to
the starting point," another trade advisor to the Chinese government told the Global Times,
pointing to the staggering US economy and the coming of the US presidential election this
year.
"After signing the phase one deal, the US intensifies crackdown in other areas such as
technology, politics and the military against China. So if we don't retreat on trade issues,
the US could be trapped," the former official noted.
Some could disagree, and counter that Trump can certainly restart the trade war especially
since it suits his pre-election agenda - after all, now that the fate of the market is entirely
in the hands of the Fed which has gone full MMT, Trump is no longer afraid by the market's
response to a renewed trade war. In fact, with over 60% of the US population seeking to
distance US from China, it would appear that Trump's best bet to winning independent votes is
precisely to keep hammering China.
Confirming this, Trump said on Friday that he was "very torn" about whether to end the
China-US phase one deal, Fox News reported, with some observers interpreting his words as
equating to a threat from the US to re-launch a trade war against China.
Then again, over the weekend, the SCMP reported that US source familiar with recent
discussions stated US officials acknowledged China was largely delivering its pledges on
structural issues such as opening market access and improving IP protection but they have yet
to agree in some details including IP action plan and easing equity caps for foreign investors.
Furthermore, the source stated fallout from the virus meant agreement on purchasing US goods
has become much more important and that many believe China needs to increase pace on
purchases.
Meanwhile, Gao Lingyun, an expert at the Chinese Academy of Social Sciences who advises the
government on trade issues, told the Global Times on Monday that China has "well documented"
Washington's usual threats after previous rounds of confrontation. That means if the trade war
restarts, "China knows how to respond, and it is able to retaliate quickly and inflict serious
harm on the US economy," Gao said.
Still, as the Global Times concludes, analysts noted that terminating the phase one trade
deal would be China's "last option" and one that China would only resort to under extremely
hostile conditions.
"... What does a developing country like China, still mired in socio-economic inequality, technological dependence, political corruption and environmental degradation do? Concentrate on its own hinterland while bidding its time? Confront the hegemon head-on which would lead to military conflict? Or control its responses while cultivating partnerships with ALL peace-loving countries, whether rich or poor, First World or Third World, Western or non-Western? ..."
Unlike Escobar, Roberts, et al, I am much more sanguine about the prospects of China's rise
which has threatened the indispensable nation of Yankistan because China was not supposed to
rise above its assigned role as the cheap cog of the globalist economy serving the Capitalist
Oligarchy of the NWO. By dint of hard work, sly cunning and shrew tactics, China outgrew its
role by becoming the hub of the international economy via its New Silk Road and the BRI.
What does a developing country like China, still mired in socio-economic inequality,
technological dependence, political corruption and environmental degradation do? Concentrate on
its own hinterland while bidding its time? Confront the hegemon head-on which would lead to
military conflict? Or control its responses while cultivating partnerships with ALL
peace-loving countries, whether rich or poor, First World or Third World, Western or
non-Western?
The rapid decoupling of China's economy away from the USA started with the GFC 2008 but has
since accelerated with Obama's "Pivot to Asia" and Trump's trade war with China. Exports to the
USA account for less than 3% of China's GDP today with 60% of those exports being either US or
foreign goods manufactured in China. So the real figure is 1% of China's GDP consists of
Chinese goods exported to the US market, consisting mostly of industrial commodities or
consumer products.
As China has already charted its own independent path of building trading/investment
partnerships with Europe, Asia, Africa and Latin America, the USA has become threatened by
China's successful decoupling from its export dependence on the US market as proven by its
hostile reaction to Xi's BRI and China's New Silk Road. In addition, the US was caught
off-guard by the sudden rise of Chinese tech firms such as Huawei which is the world's number
one vendor of telecommunications equipment with undisputed world leadership in 5G
technology.
Shocked to find its manhood as no longer exceptional, Uncle Sam feels the need to show off
to the world: "Me Gringo! Big Dick!"
China has become, over the past two decades, the planet’s second-most powerful nation after the United States. Booming
economic growth has lifted millions of its citizens out of poverty and catapulted it to the world’s second-largest economy,
while increased military spending has made it the second-largest military power (though its military spending, and nuclear
stockpile, are still a small fraction of the U.S.’s).
That growth — in both economic and military power — has led U.S. officials to conclude that they must do more to counteract
what they regard as China’s growing influence. President Obama, early in his administration, memorably vowed an “Asia pivot,”
whereby the U.S. would devote fewer resources and less attention to the Middle East and more toward China’s growing power in its
own region.
That led to some moderate escalation in adversarial relations between the two countries — including the Trans Pacific
Partnership trade agreement (TPP) and other regional skirmishes — but nothing approaching direct military confrontation.
President Trump, since taking office, has largely heaped praise on the Chinese government and its leader President Xi Jinping,
siding with Xi over democracy protests in Hong Kong and even Beijing’s handling of the coronavirus outbreak.
But this pandemic has seriously escalated tensions between the two countries given the increasingly hostile rhetoric
emanating from various sectors of the west, making it more urgent than ever to grapple with the complex relations between the
two countries and how China ought to be perceived.
The question is far more complex than the usual efforts to create a new U.S. Enemy because numerous power centres in the U.S.
and the west generally — particularly its oligarchs, Wall Street, and international capital — are not remotely hostile to
Beijing but, quite the contrary, are both fond of it and dependent upon it. That’s why — unlike with other U.S. enemies such as
Saddam Hussein, Fidel Castro, the Iranian government or Nicolas Maduro — one finds very powerful actors, from Bill Gates to
Michael Bloomberg to the consulting giant McKinsey to Trump himself, defending Chinese officials and urging better relations
with them.
That, in turn, reflects a critical reality about U.S./China relations that defies standard foreign policy frameworks: while
hawkish, pro-war political elements in both parties speak of China as an adversary that must be confronted or even punished, the
interests of powerful western financial actors — the Davos crowd — are inextricably linked with China, using Chinese markets and
abusive Chinese labor practices to maximize their profit margins and, in the process, stripping away labor protections, liveable
wages and jobs from industrial towns in the U.S. and throughout the west.
That is why standard left-wing anti-imperialism or right-wing isolationism is an insufficient and overly simplified response
to thinking about China: policy choices regarding Beijing have immense impact on workers and the economic well-being of citizens
throughout the west.
Today’s new episode of SYSTEM UPDATE is devoted to sorting through the complexities of this relationship and how to think
about China. I’m joined by two guests with radically different views on these questions: the long-time Singeporean diplomat who
served as President of the U.N. Security Council, Kishore Mahbubani, whose just-released compelling book “Has China Won?” argues
that the U.S. should view China as a friendly competitor and not as a threat to its interests; and Matt Stoller, who has worked
on issues of economic authoritarianism and the U.S. working class in multiple positions in Congress and in various think tanks,
culminating in his 2019 book “Goliath,” and who argues that China is a threat to the economic well-being of the U.S. working
class and to civil liberties in the west.
The show, which I believe provides excellent insight into how to think about these questions, debuts this afternoon at 2:oo
pm ET on the Intercept’s YouTube channel or can be viewed on the player below at 2:30 p.m. As always, a transcript of the
program will be added shortly thereafter.
Update: May 7, 1:54 p.m. EDT
The debut time for this episode has been moved by 30 minutes; it will not debut on the Intercept’s YouTube channel at 2:30 pm
ET.
I have been watching China's gradual rise in the world's GDP– as well as GDP-per-capita– charts and a concomitant fall in the United
States' position in these charts, for nearly 20 years now. The United States' decline is still relative rather than absolute. In
absolute terms, its GDP is still "Number 1!" But the decline was accelerated from 2003 on, when successive US presidents decided
to pour massive amounts of government revenues into large-scale and always disastrous military adventures all around the world. As
of last November, Brown University's "Costs of War" project
tallied the U.S. budgetary costs of these wars, FY2001-2020, to be $6.4 trillion. These were funds that could have been invested,
instead, in repair and upgrading of vital infrastructure here at home– including vital health infrastructure. But no. Instead, the
money was shoveled into the pockets of the large military contractors who then used a portion of it on expensive lobbying operations
designed to ensure that the sow of military spending continued feeding her offspring (them.)
When Donald Trump became president, in 2017, one of his early instincts was to pull back from the foreign wars. (This was about
his only sound instinct.) The military-industrial complex then proved able to slow-walk a lot of the military-retraction moves
he wanted to make One of the other abiding themes of Trump's presidency has been his desire to "decouple" the U.S. economy from the
tight integration it had developed at many levels with the economy of China, as part of broader push to halt or slow the rise of
China's power in the global system. At the economic level, we have seen the "tariff wars" and the campaign against Huawei. At the
military level, we have seen a slight escalation in the kinds of "demonstration operations" the U.S. Navy has been mounting in the
South China Sea. Mobilizing against "Chinese influence" also seems to come naturally to a president who shows no hesitation in denigrating
anyone– even US citizens and politicians– who happens not to be of pale-complected European-style hue.
With the eruption of Covid-19 in U.S. communities nationwide, Pres. Trump's pre-existing proclivity to demonize and denigrate
anything Chinese has escalated considerably– spurred on, it seems, by his evident desire to find an external scapegoat to blame for
the terrible situation Covid-19 has inflicted on Americans and to detract voters' attention from the grave responsibility he and
his administration bear for their plight.
He and his economic advisors clearly realize that, with the supply chains of major US industries still inextricably
tied
up with companies located in China and with China still
holding $1.1 trillion-worth of U.S. government debt, he
can't just cut the cord and decouple from China overnight. Yesterday, his Treasury Secretary and the US Trade Representative held
a
phone call with China's Vice Premier Liu He, the intent of which was to reassure both sides that a trade deal concluded four
months ago would still be adhered to.
But today, less than 12 hours after the reassuring joint statement released after the phone call, Trump
told Fox News that he was
"very torn" about the trade deal, and had "not decided" whether to maintain it. This, as he launches frequent verbal tirades against
China for having "caused" the coronavirus crisis. US GDP is highly inflated by counting financial moves on Wall Street (extracting
money from suckers and moving money from one hand to another) as productive activity. China's purchasing power parity already exceeds
the US and I suspect its actual GDP does as well. Only US financialization is able to mask the lack of actual productivity in the
US economy.
I am somewhat skeptical about China chances in this race. That will be much tougher environment for China from now on. And
other major technological powers such as Germany, Korea and Japan are still allied with the USA.
The major problem for China is two social systems in one box: state capitalism part controlled by completely corrupt Communist
Party (which completely abandoned the communist doctrine and became essentially a religious cult ) + no less corrupt neoliberalism
part created with the help of the West.
The level of corruption inherent in the current setup (first adopted in Soviet NEP -- New Economic Policy) is tremendous, as
the party has absolute political power and controls the major economic and financial areas while the entrepreneurs try to bribe
state officials to get the leverage and/or enrich themselves at the state expense or bypass the bureaucratic limitations/inefficiencies
imposed by the state, or offload some costs. So mafia style relationship between party officials and entrepreneurs is not an aberration,
it is a norm. And periodic "purges" of corrupt Party officials do not solve the problem. Ecological problems in China are just
one side effect of this.
Add to this the certain pre-existing tendencies within Chinese society to put greed above everything else, the tendency clearly
visible in some emigrants and to which Yen devoted one post recently. Riots in some Asians countries against Chinese diaspora
are often at least partially caused by this diaspora behavior, not only by xenophobia. Note that several African countries with
Chinese investments now intent to sue China for damages from COVID-19. This is not accidental.
Technologically the USA and its G7 satellites are still in the lead although outsourcing manufacturing to China helped Chinese
tremendously to narrow the gap. For example, Intel CPUs still dominate both desktops and servers. All major operating systems
(with the exception of some flavors of Linux) are all USA developed.
You rise important points, but I respectfully disagree with all of them.
1) I don't think China is a "State capitalism" country. The term "State capitalism" was first coined by Lenin for a very specific
situation the USSR was in. Yes, the similarities are striking - and Deng Xiaoping's reforms were clearly inspired by Lenin's NEP
- but it is important to state that the CCP actively avoided the term and built upon the concept both theoretically and in practice.
Besides, we don't need to read Lenin's works critically, an not take him as the second coming of Jesus: when he used the term
"State capitalism", he used it in a clearly desperate moment of the USSR, almost by improvisation. Lenin's last years were definitely
desperate times.
Besides, the NEP didn't culminate with the capitalist restoration of the USSR. On the contrary: it collapsed in 1926 (after
another bad harvest) and gave way to the rise of Stalin and the radical faction of the CPSU. The Five-year plans were born (1928),
and agriculture would be fully collectivized by the end of the 1930s (a process which catapulted Molotov to the second most powerful
man in the USSR during the period). By the end of WWII, the USSR had a fully collectivized economy.
2) The corruption hypothesis is an attractive one - specially for the liberal middle classes of the post-war and for the Trotskyists
- but it doesn't stand the empirical test. The USA was an extremely corrupt nation from its foundation to pre-war, and it never
stopped it from growing and reaching prosperity. The Roman Empire and Republic were so corrupt that it was considered normal.
There's no evidence the PRC is historically exceptionally corrupt. However, I can see why the CCP is worried about corruption,
as it is a flank through which the West can sabotage it from within.
3) The COCOM tactic will be much harder to apply against China than against the USSR. For starters, the USSR lost circa 35%
of its GDP in WWII. This gave it a delay from which it never recovered. Second, the USSR fought against capitalism when capitalism
was at its apex. Third, the USSR collectivized and closed its economy too early, not taking into account that it still lived in
a capitalist world.
China doesn't have that now. It is fighting against capitalism in a phase where it is weakened. It is open and intimately integrated
economically with its capitalist enemies. It closed or is about to close the technological gap in many strategic sectors during
a stage where the capitalists have low retaliation capacity. It found time to close at least the GDP gap. It found time to recover
fully from its civil war and the Japanese Invasion of the Northeast.
Germany, South Korea and Japan are not technologically more advanced than the USA. This is a myth. Plus, they are too small.
They may serve as very useful - even essential - pawns for the USA-side, but I don't see any of the three ever achieving Pax
.
HiSilicon , Huawei
Technologies ' in-house semiconductor and integrated circuit design company, has surpassed
US chip giant Qualcomm in
terms of smartphone processor shipments in China for the first time amid coronavirus-linked
disruptions that have hit most major players, according to a report.
In the first quarter of 2020, HiSilicon shipped 22.21 million smartphone processors,
according to Chinese research firm CINNO's latest monthly report on China's semiconductor
industry. Although HiSilicon's shipments only increased slightly from the 22.17 million units
it shipped in the first quarter of last year, it was the only major company that did not see a
year-on-year decline in the quarter, CINNO said in a summary of the report posted on its
official WeChat account.
As a result, the Huawei subsidiary's market share surged to 43.9 per cent, from 36.5 per
cent during the same period last year, and beat Qualcomm for the first time to become China's
top smartphone processor supplier. HiSilicon's steady performance comes at a time when the
Chinese smartphone industry is being battered by delayed product launches and dampened consumer
sentiment linked to the coronavirus pandemic. Smartphone shipments in the country
slumped by 34.7 per cent – more than a third – to 47.7 million units in the
first quarter of 2020, according to a report released earlier this month by the China Academy
of Information and Communications Technology.
US-based Qualcomm, the long-time market leader, fell to second place in the latest quarter
with a year-on-year decline in its market share from 37.8 per cent to 32.8 per cent. Taiwan's
Mediatek maintained its third-place position, but also saw its market share slide year-on-year
from 14 per cent to 13.1 percent
.
Table showing the market share of smartphone processor supplies according to
CINNO Research. Source: CINNO Research / WeChat
Huawei, HiSilicon's parent company, is at the
centre of a high-profile US-China tech war. The Trump administration
added the company to its Entity List last year, citing the risk that Huawei could give
Beijing access to sensitive data from telecommunications networks. The trade blacklist
effectively bars Huawei from buying US products and services. In response, the Chinese company,
which has denied the allegations, is
ramping up its own capabilities to produce more American component-free network gear,
including through HiSilicon.
Huawei is also reportedly shifting
production of HiSilicon-designed chips
away from Taiwan Semiconductor Manufacturing Co (TSMC) and towards Shanghai-based
Semiconductor Manufacturing International Corp (SMIC) as Washington
readies new rules which would require foreign companies using US chipmaking equipment to
obtain a license before supplying chips to Huawei – a move that would directly affect
TSMC.
Over 90 per cent of Huawei phones in China now use HiSilicon processors, according to CINNO.
However, Huawei founder Ren Zhengfei said in an interview with Yahoo Finance last year that the
company would continue using chips from US vendors such as Intel and Qualcomm as long as it is
still allowed by US regulators.
In the face of the upcoming presidential elections, Republicans launched a new China Task
Force committee in US Congress on Thursday to attract attention despite its futile efforts to
pass the buck amid the pandemic. But this not-so-surprising move only shows how hysterical and
desperate Republicans have become as criticism of the government's mishandling of the domestic
coronavirus outbreak increases, experts said.
Following a series of anti-China moves the Trump administration has made when its epidemic
prevention spiraled out of control with more than 1.2 million infections - the world's largest
number - to date, House Minority Leader Kevin McCarthy announced on Thursday a proposal to set
up a new "China Task Force" which will develop legislative policies to curtail Chinese
influence. The committee currently consists of 15 Republicans with no Democrats joining.
McCarthy said the pandemic made it apparent "for a national strategy to deal with China."
The task force will hold meetings and briefings on China-related issues, which include China's
influence inside the US, presence on American campuses and control over important supply
chains, the Washington Post reported.
A search for the members in the China Task Force revealed their antagonism toward China. One
of them is Rep. Elise Stefanik, who in late April asked Secretary of State Mike Pompeo and the
attorney general to bring China to the International Court of Justice for the handling of
COVID-19, according to a report by The Adirondack Daily Enterprise.
Analysts said setting up the new China committee is the Republicans' new tactic to fuel
anti-China sentiment, but this won't help stop power from shifting from the West to East, which
was happening before the pandemic. The pandemic is very likely to speed up this process.
Democrats not joining the committee does not mean they are more China-friendly, but they
don't want Republicans to shift the focus of President Donald Trump's failure to handle the
pandemic. Since last year, both parties passed several bills regarding China's Xinjiang and
Hong Kong, interfering in China's internal affairs, Diao Daming, an associate professor at the
Renmin University of China in Beijing, told the Global Times on Friday.
Diao noted the Democrats in the Congress won't endorse the legislation but will support
other anti-China measures that the new committee aims to push forward.
"The pandemic will very likely further weaken the US and strengthen China," he said.
A man covering his face walks in Manhattan, New York on April 6 amid the serious outbreak
of COVID-19 in the US. Photo: AFP
Treating China as equals
In the past months, certain American politicians, including Pompeo, kept passing the buck,
making groundless accusations that China was responsible for the outbreak, and hyped
conspiracy theories by calling it the "China virus" to claim the virus originated from a
Wuhan lab. At Friday's media briefing, Chinese Foreign Ministry spokesperson Hua Chunying
joked that the press conference was almost all about refuting Pompeo's lies.
The extreme atmosphere has made many people in the US worry for a return of the McCarthy
era, where free speech in the country was curtailed. A former US Ambassador to China pointed
out in a CNN interview the US is now similar to Germany in the 1930s.
Li Haidong, a professor at the Institute of International Relations of the China Foreign
Affairs University, told the Global Times on Friday the task force will fuel the existing
unfriendly atmosphere toward China at the local level in the country.
Trump administration's China policy focuses on conflicts, and the task force could further
aggravate tensions, he said.
Former US Ambassador to China Max Baucus said in an interview with CNN that "The [Trump]
administration's rhetoric is so strong against China. It's over the top. We're entering a
kind of an era which is similar to Joe McCarthy back when he was red-baiting the State
Department, attacking communism."
"A little bit like Hitler in the 30s. A lot of people knew what was going on was wrong.
They knew it was wrong, but they didn't stand up and say anything about it. They felt
intimidated," he said.
Analysts warned that China needs to stay alert as the US is trying to create a new
McCarthy era of international repression on China.
But, on the other hand, we should be aware that most countries won't follow the US, Li
said.
"It's difficult for the US to mobilize the world against China. People know how selfish
and self-centered the US is. So only a few of its allies will join," he told the Global
Times.
The US interception of other countries' anti-virus medical supplies and pointing a finger
at the WHO when international cooperation is urgently needed occupied world headlines.
Meanwhile, the Chinese government had provided over 150 countries and international
organizations with supplies, hosted over 120 video conferences with health experts from more
than 160 members of the international community, and dispatched 19 medical groups to 17
countries, according to the Zhang Ming, Chinese Ambassador to the European Union, at a
Coronavirus Global Response pledging event on Monday.
Li told the Global Times that most countries, including its traditional allies, such as
Germany and France, have different demands from the US. So they won't join this wave.
As early as February 1, the European Union had dispatched tons of medical supplies to
assist China. And in March when the continent was hit hard, China immediately provided more
than 2 million protective masks and sent medical groups. Positive reactions were constantly
heard in Europe on China.
Meanwhile, it has been reported that China faces a rising wave of hostility led by the US
amid the pandemic. The discrimination against Chinese people is growing in some parts of the
world.
Li said "The rising hostility shows some Western countries are not accustomed to a rising
China. It's a challenge for them to learn to see China on an equal footing, which adds to
their anxiety."
He added that they need to learn to respect differences and deal with other countries
equally.
Analysts noted that China should step up efforts to enhance its own capabilities in
high-tech, military and other fields. It should also conduct far-reaching international
cooperation and uphold multilateralism to share its benefits with other countries, rather
than being distracted by the anti-China wave.
Cooperation amid competition
The task force on China is not the first one in the West. On April 24, several UK
Conservative MPs launched a "China Research Group" to promote "factual debate" in dealing
with the "rapidly changing nature of the relationship" between China and the UK. The group
would attempt to look "beyond" the coronavirus pandemic to "examine China's long-term
economic and diplomatic aims," BBC reported.
Kevin Hollinrake, an MP and a member of the group, told the Global Times that the group
will make some inquiries on specific policy areas. The group will look at, for example, how
the Chinese political system and business work.
It will look at certain work streams and develop fact-based reports based on those work
streams. "They may be reported back to parliament or published in the public domain,"
Hollinrake said.
Although the group was set up at a time when the virus was rampant in the UK, "the
pandemic itself is not the underlying issue," Hollinrake noted.
The China Research Group is likely to "lobby for a less cooperative approach to China, and
for the UK to align more with the US on China policy," Tim Summers, senior consulting fellow
on the Asia-Pacific program at Chatham House, told the Global Times.
However, Chris Wood, the British Consul General in Shanghai, told the Global Times that
"We will see continued discussions and collaboration. There is no global challenge that can
be solved without China's participation. We recognize that we very much want to work with
China on these big global issues, and that will continue."
In the post-coronavirus era, China and Europe might continue to seek cooperation amid
competition, analysts said, pointing out that Europe's anxieties are, to a large extent,
provoked by the US.
In the early stages of the pandemic, despite old disputes, cooperation was the mainstream
in China-Europe interactions. But things have changed since the US became the new epicenter,
Sun Keqin, a research fellow at the China Institutes of Contemporary International Relations,
told the Global Times.
Sun told the Global Times that to reduce the negative influence from the US on European
countries, China needs to make efforts to let its voice heard in international public opinion
and seek cooperation opportunities. What the US is advocating is nothing but rumors and
conspiracy, and China must smash these lies with sound and reasonable evidence and awaken
European countries, Sun said.
Casey •
19
hours ago So, is it correct that the DNC had some kind of Obama-era "chi-merica" project to
further their globalist, neolib project -- as it became obvious that the US was never going to
be able to pull off the unipolar Empire -- into the new century with a sort of US/China
alliance, with a substantial US aligned fifth-column (if that's the right phrase) working in
China to further the project? Then Trump came in a screwed that all up, trying to pretend to be
friendly to Russia, which the DNC promptly scuttled. And now the net result is Russia and China
growing relations, which is a very real nightmare for the US, the absolute worst possible
outcome for the globalists? Probably I have this all ass-backwards. Also, really, how long
would it take to relocate important industries to the US? Wouldn't that need to be a
multi-generational project because you can;t turn baristas into machinists over night? Also,
what prevents the US from taking over Venezuela right now, militarily, instead of those
apparently poorly organized attempts to infiltrate with mercenaries, as was recently
revealed?
If Uncle Sam defaults on his debts, that would be the biggest own goal ever. The whole
financial system is based on US Treasury bonds, and a default would send their value to zero.
The US Social Security Trust Fund is still worth almost three trillion dollars, most of it in
US Treasury bonds. Default means Goodbye Social Security Pensions, or at least a huge
"haircut".
I think Pompous Ass is bluffing. One reason is that Wall Street parasites have been
salivating over the Social Security trust fund for decades, and GW Bush was working on a plan
to give it to them. I don't think the bankster parasites will sit on their hands and let the
Trump idiots blow up their entire system. I think there would be a palace coup d'etat
first.
The problem here is that there is no countervailing force. Marxist idea that proletariat is
such a force proved to be yet another utopia.
Notable quotes:
"... istory's main engine of economic exploitation – the banking, creditor and financial systems' ever-increasing extraction of value through interest payments. The rentier class and FIRE sector – Finance, Insurance and Real Estate – have long succeeded in depicting themselves as part of a productive economy. Yet for centuries, these sectors were recognized as being parasitic. ..."
"... The essence of a parasite is not only to drain the host's nourishment, but to dull the host's brain so that it does not recognize that the parasite is there. ..."
Jim Vrettos : Welcome once again to the Radical Imagination. I'm your host, Jim
Vrettos. I'm a sociologist whose taught at John Jay College of Criminal Justice and Yeshiva
University here in New York.
Our guest today on the Radical Imagination is Michael Hudson. He was on our March 8th show.
We had such an overwhelmingly positive response to that show that we've asked him to return
today, and he's been gracious enough to accept.
Unlike most economists, he's been a fierce champion and advocate for the economic rights of
the poor, workers, disenfranchised and the vulnerable around the world through his scholarship
and lifelong activism. His unique economic analysis has explored h istory's main engine of
economic exploitation – the banking, creditor and financial systems' ever-increasing
extraction of value through interest payments. The rentier class and FIRE sector –
Finance, Insurance and Real Estate – have long succeeded in depicting themselves as part
of a productive economy. Yet for centuries, these sectors were recognized as being
parasitic.
Now with the United States losing some 10 million jobs in just the past two weeks and the
world awash in debt, the total world gross domestic product is $90 trillion. The public and
private debt is a mind-boggling $260 trillion. The pandemic has given this parasitic sector yet
another, even more vicious opportunity to exploit and devour humanity.
As our guest puts it, the recently passed Trump "Bank and Landlord Relief" bill, mistakenly
named the Coronavirus bill, starts by providing banks with an even larger giveaway of wealth
than they received from Obama in 2008. Helping the banks, financial and real estate sectors in
a so-called free market system is conflated with helping the industrial economy and general
living standards for most Americans. The essence of a parasite is not only to drain the
host's nourishment, but to dull the host's brain so that it does not recognize that the
parasite is there.
The US wants to сut industrial and supply dependence on China amid rising tensions between the two powers. However, not everyone
is eager to pack their bags and leave the lucrative Chinese market in the midst of the previous row.
The Trump administration has long been pushing American firms to get back to US soil, especially when trade tensions were flaring
between the two biggest global economies. Now the US has revived the trade war rhetoric again.
Read more
Asian markets plunge amid escalating US-China tensions
"We've been working on [reducing the reliance of our supply chains in China] over the last few years but we are now
turbo-charging that initiative,"
Under Secretary for Economic Growth, Energy and the Environment at the US State Department
Keith Krach told Reuters.
Krach as well as other officials told the agency that some critical and essential manufacturing should be moved from the
country, and the government may take steps on it soon. Apart from the US' seemingly favorite options of tariffs and sanctions,
the plans may include tax incentives and potential reshoring subsidies as well as closer relations with Taiwan – a move which has
always angered Beijing.
Washington is also mulling the creation of what one of the officials called 'Economic Prosperity Network' which would include
companies and groups from some
"trusted partners."
The network is set to share the same standards
"on everything
from digital business, energy and infrastructure to research, trade, education and commerce."
China's vital role in global supply chains was felt sharply amid the coronavirus pandemic as many international giants – from
tech to car industries – are reliant on the country. The pandemic has forced some US companies to seriously consider at least
partial relocation and changing supply chain strategy, according to one of the latest polls conducted by the American Chamber of
Commerce in China and its sister organization in Shanghai. However, the majority of firms said that the outbreak does push them
to turn their backs on China.
Nevertheless, one of the
"China hawks"
told Reuters that the virus created "a perfect
storm" as it
"crystallised all the worries that people have had about doing business with China"
and
the damages from Covid-19 have eclipsed possible profits.
When the trade war showed no signs of abating last year and the US and China were still hitting each other with tariffs,
another AmCham poll showed that the punitive measures were hurting US businesses operating in China. While over forty percent of
the 250 respondents were
"considering or have relocated"
production facilities outside China, some 35 percent of
companies said they would rather source within China and target the domestic market. Fewer than six percent wanted to move or
already shifted their factory operations to the US.
Set aside the enormous relocation costs – which the White House has recently pledged to cover should an American company
decide to ditch China – there is still another massive hurdle in this plan. China is still the world's top producer of rare earth
metals – the group of elements vital for production of multiple devices, from cell phones to some advanced military gear. Should
all the production be moved from China, it could ban exports of these materials. Last year Chinese media said the option was
already being mulled by Beijing, and it could consider the drastic measure again if trade war tensions further escalate.
The new rules will require licenses for US companies to sell certain items to companies
in China that support the military, even if the products are for civilian use. They also do
away with a civilian exception that allows certain US technology to be exported without a
license.
They come as relations between the United States and China have deteriorated amid the
new coronavirus outbreak
####
It's far too late and will be significantly damaging to US companies. No doubt Washington
still expects Beijing to buy Boeing airliners. If Beijing were to pull that plug, then it
would take out Arbus, P&W, GE, CFM all the suppliers, MRO ventures and collapse the whole
western airline supply chain. It would obviously kill any Chinese or Russian airline program
that has any western content . I doubt Beijing will go that far so they'll be looking
at actions, not words.
t-Rump and co need to show something sym-bollox to the American electorate that yet again
they are being 'tough on China' during this erection year but it requires China to play
along. It simply might not. It is reported that China is currently purchasing large
quantities of American LNG to fulfill 'Phase one' of t-Rump's Deal of the Century with
China.
Maybe that is the obvious counter, threatening to pull the whole DoC, starting with
dumping LNG purchases as a direct warning. t-Rump's Administration has pushed itself into a
smaller and smaller box, all of its own making. As I've always said and I still believe to be
true, the biggest threat to t-Rump's re-erection is t-Rump himself.
Paradoxically, the more Trump's belligerence and 'gut-based' trade policies damage
international trade, the more convinced his supporters become that only Trump can handle
increasingly-complicated trade relationships. This probably stems from his going into a
meeting under difficult conditions, emerging to fire off a miracle tweet, "China will now buy
massive quantities of our agricultural products", and ducking out the back without
elaboration. This leads to a misplaced belief that Trump can perform miracles, as much of a
jerk as he can be, because his loyalists rarely pay attention long enough for the rebuttal
which always comes, laying out his serial exaggerations. Remember when U.S. Steel was
building three new steel plants, on the strength of Trump's hard-ass negotiations in the
Canada-Mexico-USA Free Trade deal? Lighthizer's hard-ass negotiations, actually. Anyway,
yeah; totally made it up. He doesn't see anything wrong with making optimistic projections
which have no basis in fact.
Mind you, it would be a bit of a downer to have to explain again to Biden what 'oil' is,
every single time the subject comes up. But I wouldn't be too worried about that.
LNG is pretty cheap right now, like all energy products. I see China behaving much like
Russia; once it strikes an international bargain, it will stick to it until the terms play
out. But Trump might find a different China when he tries to strike the next agreement.
China can also take similar measures, sic (I read that) Alibaba and other gigantic Chinese
companies that rely on server farms are switching over to Chinese made chippery and not
buying foreign. Simply in lost sales for the foreseeable future is gigantic.
I imagine you are too young to remember Victor Kiam (he died in 2001) former president of the
Remington Razor Company. He had a popular line of commercials in the late 80's in which he
would say "I liked it so much, I bought the company".
The Chinese must have heard him, because they took his method to heart; Alibaba doesn't
just buy Chinese-made chips, they bought the company. Right after the United States started
up its
we-have-to-keep-priceless-American-technological-secrets-out-of-the-hands-of-the-thieving-Chinks
policies. Suit yourself, Sam.
Shanghai-based Semiconductor Manufacturing International, a $5.4 Billion company and one
of the largest such companies in China, pulled its listing from the NYSE.
In 2018, Skyworks Solutions had 83% of its business in China. Apple had 20%, but 20% of
Apple's revenue is a shitload of money. I had to laugh at the line, "Investors are
increasingly concerned over the prospect of rising global protectionism." 'Global
protectionism' pretty much covers The Donald's act.
Justin GLyn @ 65 is correct: New Zealand Prime Minister Jacinda Ardern instituted a Stage
4 lockdown in her country in mid-to-late March with the aim of eliminating the virus from
Kiwi shores. That goal is no longer feasible but
the country has begun relaxing its lockdown to Stage 3 in an effort to revive its
economy.
The US failure to anticipate blowback can be understood in one way: assuming that the US
did indeed seed the virus in Wuhan, then we might speculate that the seeding was timed to
coincide with the flu season in China and with mass preparations for Chinese New Year. The
thinking was that the virus would spread through public transportation networks throughout
the country and Beijing would have a full-time job on its hands just dealing with massive
viral outbreaks all over the country, and fail to deal with them even adequately, leading to
mass riots and eventually widespread resistance to Beijing, and maybe even the eventual
disintegration of the CCP and its overthrow. US and other expatriates would be trapped in the
country, and foreign embassies and consulates might even be torched, prompting a US-led
coalition to invade parts of the country (like the south and the southeast) and take over in
a start to the balkanisation of the country cunningly disguised as foreign help to keep
order.
The US certainly did not anticipate that Chinese people trusted enough in Beijing to be
willing to carry out whatever orders Beijing issued; the US assumption seems to be that
everywhere around the planet, people yearn to be just as individualistic and suspicious of
Big Government as Americans are, and that what they think of their local councils and
regional governments is the same as what they think of their national governments.
The reality is that in many countries, whatever people think of their local councils and
regional (state, provincial) governments may not be true of what they think of their national
governments, because the functions of the three tiers of government in their countries may
not overlap to the extent that they might do in the Anglocentric world.
Neither did the US anticipate that Chinese society could be advanced in its own way
technologically with various functions such as public health, public transport and others
integrated enough that the Chinese could respond to a rapidly spreading crisis in the way
they did. That is in part because US society and values are based on competition, mutual
suspicion and top-down orders among other things, rather than co-operation, collective
behaviour and willingness to consider solutions based on ideas from divergent yet integrated
sources.
That is a very plausible working hypothesis, and I mean it working, the main assumption is
still to be proven but it explains many other observations of fact. But I will append a
variable in the main assumption: we could even replace the initiative's agent with some
non-state actor, ie Big Pharma. I am unable to "decide" between these possibilities. Are the
Imperial forces conflicting to the extent implied? Are we yet at the point that a non-state
actor is bold enough for such an action? I really don't want to stretch a perfectly good
hypothesis but am I?
I was in China at the time when this unfolded and note the following: 1: The Chinese
cultural mindset is totally different from the Western one, and the gap much greater than
most Westerners realise. Look at the videos of the 75th Anniversary of Modern China for a few
clues 2: As the worlds largest atheist nation, death is considered final, rituals
notwithstanding So they are motivated to survive..( and focus on delicious food to this end)
3: They talk. Incessantly. It is no accident that WeChat has grown exponentially.. What
happens in one part of China is pretty quickly spread to other parts And on the Flipside,
there are surveillance cameras everywhere
So when this unfolded, Mid Spring festival when the cities were emptied, the memory of the
SARS epidemic sprang to forefront of the official mind. Xi JingPing appeared on most TV
Channels, making it clear that he was taking responsibility for the government response. And
implicitly, that if he failed, he would be gone, in keeping with the long tradition of
Chinese leadership.
At this point we decided to bail, being prime targets to host the virus. Avoided getting
quarantined in HongKong by 4 hours, and quarantine in Manus Island, Aus by one phone
call.
There were 6 temperature checks and 4 police checks on route to HongKong Airport; arriving
in New Zealand expecting some major medical checks. None. Just 2 nurses at a deck asking if
we felt OK - handed a pamphlet and sent on our way. I did try to follow up but given official
discouragement. So NZ was asleep at the wheel for weeks, and just plain lucky. However, once
NZ woke up, the response was excellent; PM Jacinda Adern's speech was masterful and the
response excellent. We had only two CoVid cases yesterday, as we move into level 3.
There are big problems in economic recovery here, but the alternative scenarios would have
been far worse. And theres got to be a reason why various luxury private jets are turning up
unannounced and often unmarked at the airports here :-)
Each of your explanations are compelling in their own way.
A few things that your explanations left out (this is not meant to be a comprehensive
list):
The strange resignation/firing of John Bolton.
The strangely good timing of the ARAMACO IPO;
Trump's strange reversal of his stated intention to not do partial trade deals with
China - he did a partial deal in January a couple of weeks after the virus became
known;
The strange non-resistance by medical establishment to Trump's failure to respond - no
one resigned as the Trump dragged his feet.
IMO any theory of deliberate release should consider these points.
Bolton's was asked to leave the administration because he was involved in pushing
development of a virus which accidentally escaped the lab -OR- willingly left to give
Trump/Deep State a scapegoat in case it became known that the use of the virus was
deliberate? In either case, the virus was already "in the wild" ...
... which would explain why no medical professional resigned in Feb/March. It was never
going to be possible to contain the virus in the West.
This would also explain why virus discussion were classified.
Trump did a trade deal with China that he knew they would have trouble to satisfy the
terms of. The ARAMACO IPO - which had been delayed several times - came just about 6 weeks
before the new virus was identified. And it was done despite the Houthi attack on ARAMACO
facilities two months before (investors should've been very wary of the continuing war at
the super high valuation).
<> <> <> <> <>
PS I do know that New Zealand had a lock-down but they did that as soon as they found
'community spread' and their vigilance has allowed them to start lifting the lock-down after
only a short period.
As the usual suspects fret over the "stability" of the Chinese Communist Party (CCP) and
the Xi Jinping administration, the fact is the Beijing leadership has had to deal with an
accumulation of extremely severe issues: a swine-flu epidemic killing half the stock; the
Trump-concocted trade war; Huawei accused of racketeering and about to be prevented from
buying U.S. made chips; bird flu; coronavirus virtually shutting down half of China.
Add to it the incessant United States government Hybrid War propaganda barrage, trespassed
by acute Sinophobia; everyone from sociopathic "officials" to self-titled councilors are
either advising corporate businesses to divert global supply chains out of China or
concocting outright calls for regime change – with every possible demonization in
between.
There are no holds barred in the all-out offensive to kick the Chinese government while
it's down.
A Pentagon cipher at the Munich Security Conference once again declares China as the
greatest
threat , economically and militarily, to the U.S. – and by extension the West,
forcing a wobbly EU already subordinated to NATO to be subservient to Washington on this
remixed Cold War 2.0.
The whole U.S. corporate media complex repeats to exhaustion that Beijing is "lying" and
losing control. Descending to sub-gutter, racist levels, hacks even accuse BRI itself of
being a
pandemic , with China "impossible to quarantine".
All that is quite rich, to say the least, oozing from lavishly rewarded slaves of an
unscrupulous, monopolistic, extractive, destructive, depraved, lawless oligarchy which uses
debt offensively to boost their unlimited wealth and power while the lowly U.S. and global
masses use debt defensively to barely survive. As Thomas Piketty has conclusively shown,
inequality always relies on ideology.
We're deep into a vicious intel war. From the point of view of Chinese intelligence, the
current toxic cocktail simply cannot be attributed to just a random series of coincidences.
Beijing has serial motives to piece this extraordinary chain of events as part of a
coordinated Hybrid War, Full Spectrum Dominance attack on China.
Enter the Dragon Killer working hypothesis: a bio-weapon attack capable of causing immense
economic damage but protected by plausible deniability. The only possible move by the
"indispensable nation" on the New Great Game chessboard, considering that the U.S. cannot win
a conventional war on China, and cannot win a nuclear war on China.
A biological warfare weapon?
On the surface, coronavirus is a dream bio-weapon for those fixated on wreaking havoc
across China and praying for regime change.
Yet it's complicated.
This report is a decent effort trying to track the origins of coronavirus. Now compare it
with the insights by Dr. Francis Boyle, international law professor at the University of
Illinois and author, among others, of Biowarfare and Terrorism . He's the man who
drafted the U.S. Biological Weapons Anti-Terrorism Act of 1989 signed into law by George H.
W. Bush.
Dr. Boyle adds, "all these BSL-4 labs by United States, Europe, Russia, China, Israel are
all there to research, develop, test biological warfare agents. There's really no legitimate
scientific reason to have BSL-4 labs." His own research led to a whopping $100 billion, by
2015, spent by the United States government on bio-warfare research: "We have well over
13,000 alleged life science scientists testing biological weapons here in the United States.
Actually this goes back and it even precedes 9/11."
Dr. Boyle directly accuses "the Chinese government under Xi and his comrades" of a cover
up "from the get-go. The first reported case was December 1, so they'd been sitting on this
until they couldn't anymore. And everything they're telling you is a lie. It's
propaganda."
The World Health Organization (WHO), for Dr. Boyle, is also on it: "They've approved many
of these BSL-4 labs ( ) Can't trust anything the WHO says because they're all bought and paid
for by Big Pharma and they work in cahoots with the CDC, which is the United States
government, they work in cahoots with Fort
Detrick ." Fort Detrick, now a cutting-edge bio-warfare lab, previously was a notorious
CIA den of mind control "experiments".
Relying on decades of research in bio-warfare, the U.S. Deep State is totally familiar
with all bio-weapon overtones. From Dresden, Hiroshima and Nagasaki to Korea, Vietnam and
Fallujah, the historical record shows the United States government does not blink when it
comes to unleashing weapons of mass destruction on innocent civilians.
For its part, the Pentagon's Defense Advanced Research Project Agency (DARPA) has spent a
fortune researching bats, coronaviruses and gene-editing bio-weapons. Now, conveniently
– as if this was a form of divine intervention – DARPA's "strategic allies" have
been chosen to develop a genetic vaccine.
The 1996 neocon Bible, the Project for a New American Century (PNAC), unambiguously
stated, "advanced forms of biological warfare that can "target" specific genotypes may
transform biological warfare from the realm of terror to a politically useful tool."
There's no question coronavirus, so far, has been a Heaven-sent politically useful tool,
reaching, with minimum investment, the desired targets of maximized U.S. global power –
even if fleetingly, enhanced by a non-stop propaganda offensive – and China relatively
isolated with its economy semi paralyzed.
Yet perspective is in order. The CDC estimated that up to 42.9 million people got sick
during the 2018-2019 flu season in the U.S. No less than 647,000 people were hospitalized.
And 61,200 died.
This report
details the Chinese "people's war" against coronavirus.
It's up to Chinese virologists to decode its arguably synthetic origin. How China reacts,
depending on the findings, will have earth-shattering consequences – literally.
Setting the stage for the Raging Twenties
After managing to reroute trade supply chains across Eurasia to its own advantage and
hollow out the Heartland, American – and subordinated Western – elites are now
staring into a void. And the void is staring back. A "West" ruled by the U.S. is now faced
with irrelevance. BRI is in the process of reversing at least two centuries of Western
dominance.
There's no way the West and especially the "system leader" U.S.
will allow it. It all started with dirty ops stirring trouble across the periphery of Eurasia
– from Ukraine to Syria to Myanmar.
Now it's when the going really gets tough. The targeted assassination of Maj. Gen.
Soleimani plus coronavirus – the Wuhan flu – have really set up the stage for the
Raging Twenties. The designation of choice should actually be WARS – Wuhan Acute
Respiratory Syndrome. That would instantly give the game away as a War against Humanity
– irrespective of where it came from.
Thank you for an excellent article on what is happening. My only criticism is that it appears
that these things "just happen". With your insight and erudition, could you please address
"why" the situation has arisen. What could be the motivation behind actions and policies
which so clearly will destroy not only the 99% but also the basic wealth of the1%?
This is not something new, but a recurrent theme in world affairs.
" Behind all the
governments and the armies there was a big subterranean movement going on, engineered by very
dangerous people." "Since I entered politics, I have chiefly had men's views confided to me
privately. Some of the biggest men in the United States, in the field of commerce and
manufacture, are afraid of something. They know that there is a power somewhere so organised,
so subtle, so watchful, so interlocked, so complete, so pervasive, that they better not speak
above their breath when they speak in condemnation of it."
-- Woodrow Wilson, 28th President of the United States (1856-1924) "So you see, my dear
Coningsby, that the world is governed by very different personages from what is imagined by
those who are not behind the scenes." -- Benjamin Disraeli, British Prime Minister
(1804-1881) President Franklin Delano Roosevelt wrote in November 1933 to Col. Edward House:
"The real truth of the matter is, as you and I know, that a financial element in the larger
centers has owned the government since the days of Andrew Jackson."
It is undeniable that China has made impressive achievements since the Maosits revolution to
date. BUT lets be realistic pre1973 China still a Nation with markedly 3th world living
standards, even today with a soft racist inuendos , people speak about the Chinese must adopt
better hygiene standards personally and privately.
Before 1973 China had mainly 3th world status, eversince Nixon (or Kissinger?) opened
China US Corporate Capitalists inundated Chinas economic landscape, in other words the real,
KEY bases for Chinas economic success remain USA Corporations majority perhaps more than 70%
of their industrial output, although China has wisely constraint, restrain the USA/World
FINANCIAL cartels..(Soros speclation against te yuan, ans Soros Opensociety inflkuence in
HongKong)
Can China remain stable internally with a growing well travel educated savvy middle
class, and a POOR lower working class with meager salaries, slave like labor conditions, and
oppressive political controls, that's a recipe for a social cauldron..
Will the Chinese proletariat demand more "democracy" western/eastern oriented
reforms??..
... ... ...
China has become GREAT because the USA decided to become poor a Spartan, byzantinne,
militaristic, mercenary rogue nation at service of the Globaloists ELITES which do not care
about that cosmological romantic lyrical notion of America.
Some will know who Hyman Minsky was, some won't. Hudson gives him the primary credit for
providing the foundation for Modern Monetary Theory, and he gets praise from Keen, Wolfe and
many others too. On the occasion of his 100th birthday, here's a
long essay that seeks the following:
"But the question still stands: Was Minsky in fact a communist? Of course not. But, a
century after his birth, it is useful to clarify often neglected aspects of his intellectual
biography."
Since Minsky's referenced so often by Hudson particularly, I think this piece will be
helpful for those of us following the serious economic issues now in play. I'd reserve an
hour for a critical read.
YOU are completely MISreading the events so yo miss the target by 90% NO it wasnt the
Russians . neither the Chinese..
IT was the FREEtraders NEOcons from Wallstreet and CFR, that transfer all american
manufacturing overseas (china) deabsing the dollar into fiat money, banktupted the USA
traesury The USA is entering its Byzanntyne Empire pahse a Spartan roque millitary nation
while inploding intrenally the Angloamerican zionists already ecided toi amke China de first
world power
@Anonymous How should I describe it? The Chinese Communist Party has formed a plutarchy
and an oligopoly "with Chinese characteristics".
Sometime before the 20th century closed, there was a term coined: the "Princelings". These
were the extravagantly wealthy offspring of many of the leadership of the CCP, and
grandchildren of the men who endured the "Long March".
"Genocide" is a term that is broadly applied to what is more accurately described as
"ethnic cleansing". The Hans have taken over Tibet and Xin Jiang, and have oppressed the
locals in a ruthless manner, that is comparable to what the Jews have done to
Palestinians.
Systematically, the Chinese are converting the indigenous populations of poorer countries
into indentured servants. These countries are so indebted to their Chinese "benefactors" that
they have no hope for redemption, unless the Chinese are prepared to forgive the loans. So
far, the Chinese have not been disposed to do so.
The effect and the consequence of these developments are close enough to warrant the
comparison.
@anon Lets add to the bigger picture. With regards to Israel: Exceptions don't make the
rule.
_______
The forces that off-shored the jobs, to then make wage arbitrage and become masters of the
universe, are the very same ones that are now demonizing China.
They are "international" in outlook, and the only national country that matters to them is
Israel.
In general, it is a "class" of people -sometimes called "Davos Man" who goes by other
names, such as globo-homo, ZOG (zionist world government), Ne0-Con, Neo-Liberal.
Globo-Homo couldn't resist the wage arbitrage that China represented after the Berlin Wall
fell in 1990. Clinton gave China effective MFN status in 1993. Wall Street begins Green Mail
Coercion Techniques against American industry to then off-shore jobs.
China also runs a simultaneous gambit against the U.S. by buying up TBills instead of
goods from U.S. main-street. This then insures that U.S. dollar is propped up against the
Yuan e.g. currency manipulation. The China/Wall Street Gambit is in full swing, and
globo-homo is happy.
Globo-Homo doesn't care about the destruction of American Mainstreet, because only prices
matter, and they are getting rich. China becomes the workshop for the world.
There are still elements within Globo-Homo that like their easy money derived from
ownership of transplanted industry.
If you look at today's propaganda emission center for China psy-ops you will see that it
is another mouthpiece and organ of the "international." They are festooned with neo-liberals
and ne0-cons.
Why the sudden shift, where China is the golden goose, to becoming the enemy?
Summary: There are two main enemies against American Mainstreet Labor. There is the
internal and international enemy of globo homo centered in Wall Street and London, and there
are elements within China that used Mercantile techniques to continue imbalanced trade and
theft of American patrimony and industry.
Globo homo has new marching orders, as they have belatedly realized that they got played.
The jig is up, you cannot operate the usury mechanism, do speculation, and RIG THE WORLD,
forever.
The U.S. military security state has communicated clearly, they don't like their
"international" supply chains and loss of U.S. domestic manufacturing. Globo Homo has long
used the US. military as a Golem which protected movement of ships from China's east
coast.
Atlantacist Method: Raw materials come into China by Ship, and finished Goods leave by
ship. Globo Homo ownership class takes the increment of production and wage arbitrage as
gains. Wall Street/London is a hero, main street is a zero.
(Bloomberg) -- Legendary short-seller Jim Chanos said he's troubled that private equity is
seeking financial aid from the federal government due to the economic impact of the coronavirus
epidemic.
"'I'm a little bemused, puzzled and somewhat outraged, I guess, that private equity would be
pushing to the front of the line to try to get taxpayer assistance," he said in an interview
Thursday on Bloomberg Television.
The Federal Reserve's move Thursday to throw a lifeline to small and mid-sized businesses
and fund the purchases of some types of high-yield bonds has has been seen by some market
participants as helping the private equity firms who owns some of these companies. Those firms
earlier this week were dealt a setback in their attempt to gain access to billions of dollars
of loans that the U.S. government is doling out to help businesses hit hard by the pandemic,
Bloomberg reported.
Chanos said a look at the year-end letters for the four biggest publicly-traded private
equity firms showed they had more than $300 billion in dry powder to put to use.
"I think private equity is possibly at a crossroads similar to where hedge funds were post
the global financial crisis," said Chanos, who runs hedge fund Kynikos Associates. "People are
going to start to judge the high fees and the illiquidity and think: 'Am I really getting the
return commensurate for the risk?"
For more articles like this, please visit us at bloomberg.com
The tectonic shifts and the trajectory of both countries (China and the USA) after this
epidemics end is unpredictable. "Chimerica" type of globalization was in decline before the
epidemic (Huawai, etc) and Trump badly wants decoupling from China. Somebody needs to pay for
those changes. It might well be us. So it is quite probable that those techno Nouveau
riche like us might be soon royally fleeced one way or another.
It might be prudent to have at least 300K in three bank accounts (in the USA only the first
100K are ensured) at 1% or less. Buying TIPs directly from Treasury is another option. I hope
your house is already fully paid.
BTW Marina can get half of your Social Security pension if her own is too small.
"... Authored by Joaquin Flores via The Strategic Culture Foundation, ..."
"... the declining rate of profit necessitated by automation, with the increasingly irrational policies, in all spheres, being pursued to salvage the ultimately unsalvageable. ..."
"... Because the present system is premised on a production-consumption and financial model, the solutions to crises are presented as population reduction and what even appears, at least in the case of Europe, as population replacement. As cliché as this may seem, this also appeared to be the policy of the Third Reich when capitalism faced its last major crises culminating in WWII. ..."
The coronavirus pandemic has shown that the twin processes of globalization and planned
obsolescence are deficient and moribund. Globalization was predicated on a number of
assumptions including the perpetuity of consumerism, and the withering away of national
boundaries as transnational corporations so required.
What we see instead is not a globalization process, but instead a process of rising
multipolarity and a rethinking of consumerism itself.
Normally a total market crash and unemployment crisis would usher in a period of militant
labor activity, strikes, walk-outs and community-labor campaigns. We've
seen some of this already . But the 'medical state of emergency' we are in, has effectively
worked like a 'lock-out' . The elites have effectively
flipped-the-script. Instead of workers now demanding a restoration of wages, hours, and
work-place rights, they are clamoring for any chance to work at all, under any conditions
handed down. Elites can 'afford' to do this because they've been given trillions of dollars to
do so. See how that works?
All our lives we've been misinformed over what a growing economy means, what it looks like,
how we identify it. All our lives we've been lied to about what technical improvement literally
means.
A growing economy in fact means that all goods and services become less expensive. That cuts
against inflation. Rather all prices should be deflating – less money ought to buy the
same (or the same money ought to buy more). Technical innovation means that goods should last
longer, not be planned for obsolescence with shorter lifespans.
Unemployment is good if it parallels price deflation. If both reached a zero-point, the
problems we believe we have would be solved.
In a revealing April 2nd article that featured on the BBC's website, Will coronavirus reverse globalisation?
it is proposed that the pandemic exposes the weaknesses and vulnerabilities of a global
supply-chain and manufacturing system, and that this in combination with the over-arching
US-China trade war would see a general tendency towards 're-shoring' of activities. These are
fair points.
But the article misses the point of the underlying problem facing economics in general:
the declining rate of profit necessitated by automation, with the increasingly irrational
policies, in all spheres, being pursued to salvage the ultimately unsalvageable.
The
Karmic Wheel of Production-Consumption
The shut-downs – which seem unnecessary in the numerous widely esteemed experts in
virology and epidemiology – appear to be aimed at stopping the production-consumption
cycle. When we look at the wanton creation of new 'money', to bailout the banks, we are told
that this will not cause inflation/debasement so long as the velocity of money is kept to a minimum.
In other words – so long as there is not a chain reaction of transactions, and the money
'stays still' – this won't cause inflation. It's a specious claim, but one which
justifies the quarantine/lock-down policy which today destroys thousands of small businesses
every day. In the U.S. alone, unemployment claims
will pass 30 million by mid April .
Likewise, this money appears real, it sits digitally as new liquidity on the computer
screens of tran-Atlantic banks – but it cannot be spent, or it tanks the system with
hyper-inflation. More to the point, the BBC piece erroneously continues to assume the necessity
of the production-consumption cycle, spinning wheat into gold forever.
The elites were not wrong to shut-down the cycle per se. The problem is that they cannot
offer the correct hardware in its place – for it puts an end to the very way that they
make money. It is this, which in turn is a major source for the maintenance of their dopamine
equilibrium and narcissist supply.
This is not an economic problem faced by 'the 1%' (the 0.03%) . It is an existential crisis
facing the meaning of their lives, where satisfaction can only be found in ever greater levels
of wealth and control, real or imagined – chasing that dragon, in search of that
ever-elusive high.
So naturally, their solutions are population reduction and other such quasi-genocidal
neo-Malthusian plans. Destruction of humanity – the number one productive-potential force
– resets the hands of time, back to a period where profit levels were higher. The
algorithmically favored coronavirus Instagram campaign of seeing city centers without people
and declaring these 'beautiful' and 'peaceful' is an example of this misanthropic principle at
play.
That the elites have chosen to shut-down the western economy is telling of an historic point
we have reached. And while we are told that production and consumption will return somewhat
'after quarantine', we also hear from the newly-emerged unelected tsars – Bill Gates et
al – that things will never
return to normal .
What we need to end is the entire theory and practice of globalization itself, including
UN
Agenda 21 and the dangerous role of 'book-talking' philanthropists like Gates and his
grossly unbalanced degree of power over policy formation in the Western sphere.
In place of waning globalization, we are seeing the reality of rising multipolarity and
inter-nationalism. With this, the end of the production-consumption cycle, based upon off-shore
production and international assembly, and at the root of it all: planned obsolescence towards
long-term profitability.
The Problem of Globalization Theory
Without a doubt, globalization theory satisfied aspects of descriptive power. But as time
marched forward, its predictive power weakened. Alternate theories began to emerge –
chief among these, multipolarity theory.
The promotion of globalization theory also raises ethical problems. Like a criminologist
'describing' a crime-wave while being invested in new prison construction, globalization theory
was as much theory as it was a policy forced upon the world by the same institutions behind its
popularization in academia and in policy formation. Therefore we should not be surprised with
the rise of solutions like those of Gates. These involve patentable 'vaccines' by for-profit
firms at the expense of buttressing natural human immunities, or using drugs which other
countries are using with effectiveness.
The truth? Globalization is really just a rebrand of the Washington Consensus
– neo-liberal think-tanks and the presumed eternal dominance of institutions like the
World Bank and the International Monetary Fund, which in turn are thinly disguised
conglomerates of the largest trans-Atlantic banking institutions.
So while globalization was often given a humanist veneer that promised global development,
modernization, the end of 'nation-states' which presumably are the source of war; in reality
globalization was premised on continuing and increasing concentration of capital towards the
19th century zones – New York, London, Berlin, and Paris.
'Internationalism' was once rooted in the existence of nations which in turn are only
possible with the existence of culture and peoples, but was hi-jacked by the trans-Atlanticist
project. Before long, the new-left 'internationalists' became champions of the very same
process of imperialism that their forbearers had vehemently opposed. Call it 'globalization'
and show how it's destroying 'toxic nationalism' and creating 'microfinance solutions for women
and girls' –
trot out Malala – and it was bought; hook, line and sinker.
This was not the new era of 'globalization', but rather the usual suspects going back to the
19th century; a 'feel-good' rebranding of the very same 19th century imperialism as described
in J.A Hobson's seminal work from 1902, Imperialism. Its touted 'inevitability' rested not on
the impossibility of alternate models, but on the authority that flows forth from gunboat
diplomacy. But sea power has given way to land power.
In many ways it aligned with the era of de-colonialization and post-colonialism. New nations
could wave their own flags and make their own laws, so long as the traditionally imperialist
western banking institutions controlled the money supply.
But what is emerging is not Washington Consensus 'globalization', but a multipolar model
based in civilizational sovereignty and difference, building products to last – for their
usefulness and not their repeatable retail potential. This cuts against the claims that global
homogenization in all spheres (moral, cultural, economic, political, etc.) was inevitable, as a
consequence of mercantile specialization.
Therefore, inter-nationalism hyphenated as such, reminds us that nations –
civilizations, sovereignty, and their differences – make us stronger as a human species.
Like against viruses, some have stronger natural immunity than others. If people were
identical, one virus could wipe-out all of humanity.
Likewise, an overly-integrated global economy leads to global melt-down and depression when
one node collapses. Rather than independent pillars that could aid each other, the
interdependence is its greatest weakness.
Multipolarity is Reality
This new reality – multipolarity – involves processes which aspects of
globalization theory also suggest and predict for, so there are some honest reasons why experts
could misdiagnose multipolarity as globalization. Overlooked was that the concentration of
capital nodes in various and globally diverse regions by continent, were not exclusively
trans-Atlantic regions as in the standard globalization model of Alpha ++ or Alpha+ cities.
This capital concentration along continental lines was occurring alongside regional economic
development and rising living standards which tended to promote the efficiency of local
transportation as opposed to ocean-travel in the production process. As regional nodes by
continent had increasingly diversified their own domestic production, a general tendency for
transportation costs to increase as individual per capita usage increased, worked against the
viability of an over-reliance on global transit lines.
But among many problems in globalization theory was that the US would always be the primary
consumer of the world's goods, and with it, the trans-Atlantic financial sector. It was also
contingent on the idea that mercantilist conceptions of specialization (by nation or by region)
would always trump autarkic models and ISI (income substitution industrialization). Again, if
middle-class consumer bases are rising in all the world's inhabited continents as multipolarity
explains and predicts, then a global production regimen rationalized towards a trans-Atlantic
consumer base as globalization theory predicts isn't quite as apt.
Because the present system is premised on a production-consumption and financial model,
the solutions to crises are presented as population reduction and what even appears, at least
in the case of Europe, as population replacement. As cliché as this may seem, this also
appeared to be the policy of the Third Reich when capitalism faced its last major crises
culminating in WWII.
Breaking the Wheel
The shutdown reveals the karmic wheel of production-consumption is in truth already broken.
We have already passed the zenith point of what the old paradigm had to offer, and it has long
since entered into a period of decay, economic and moral destruction.
Like the Christ who brings forth a new covenant or the Buddha who emerges to break the wheel
of karma, the new world to be built on the ruins of modernity is a world that liberates the
productive forces, realizing their full potential, and with it the liberation of man from the
machine of the production-consumption cycle.
Planned obsolescence and consumerism (marketing) are the twin evils that have worked towards
the simultaneous
time-wasting enslavement of 'living to work' , and have built globalization based on global
assembly and global mono-culture.
What is important for people and their quality of life is the time to live life, not be
stuck in the grind. We hear politicians and economists talking about 'everyone having a job',
as if what people want is to be away from their families, friends, passions, or hobbies. What's
more – people cannot invent, innovate, or address the greater questions of life and death
– if their nose is to the grindstone.
Now that we are living under an overt system of control, a 'medical state of emergency' with
a frozen economy, we can see that another world is possible. The truth is that most things
which are produced are intentionally made to break at a specific time, so that a re-purchase is
predictable and profits are guaranteed. This compels global supply chains and justifies
artificially induced crashes aimed at upward redistribution and mass expropriations.
Instead of allowing Bill Gates to tour the world to tout a police-state cum population
reduction scheme right after a global virus pandemic struck, one which many believe
he owns the patent for , we can instead address the issues of multipolarity, civilizational
sovereignty, and ending planned obsolescence and the global supply chain, as well as the
off-shoring it necessitates – which the BBC rightly notes, is in question anyhow.
"The vicious virus, the polarization of US politics and deepening international
divergences have plunged humanity into unprecedented uncertainties. A jumbled,
irresponsible and impulsive US greatly enhanced the risks the world is facing.
"What's worse, the US did not engage in any reflection, and the inability of its
government was only attributed to partisanship. The anti-China element in its public
opinion has been brewing with the instigation of the administration and some politicians.
This has greatly crumbled the US' self-correction ability.
"The harm on humanity caused by a virus, no matter how frightening it is, only remains
at the physical level. But the US destruction at the political level is amplifying this
crisis that endangers global governance. Even if the pandemic is put under control,
humanity has to face the turbulence post-pandemic. Such dual uncertainties have gone
beyond the imagination of people even with their decades of living experience."
IMO and contrary to the editorial's conclusion, "populist politics" had nothing to do
with Trump's beyond mediocre response; rather, it's all been ideological beginning with
the utter lack of preparation.
A policy that US allies in Europe have recently slammed as 'piracy' is set
to continue, as Washington unabashedly and unapologetically continues blocking shipments from
US soil of personal protective equipment (PPE) -- such as gowns, gloves, and N95 face masks --
which hospitals and health workers desperately need in the fight against COVID-19.
The Hill
reports that "The federal government will begin seizing exports of personal protective
equipment, or PPE, until it decides if the tools should be kept in the country to fight the
coronavirus."
The announcement was made Wednesday by US Customs and Border Protection (CBP), formalizing
an existing controversial practice under Defense Production Act (DPA) which has
recently blocked millions of masks from being exported from Minnesota-based 3M to Canada.
US customs will block all respirators, surgical masks and surgical gloves from going
abroad.
Canadian leaders blasted the move as putting lives in danger, while Germany and France
described the US policy, which has seen recent interventions against shipments from China bound
for Europe, as 'piracy'.
"FEMA and CBP are working together to prevent domestic brokers, distributors, and other
intermediaries from diverting these critical medical resources overseas,"
a joint statement indicated.
"Today's order is another step in our ongoing fight to prevent hoarding, price gouging, and
profiteering by preventing the harmful export of critically needed PPE," the White House also
said in a statement. "It will help ensure that needed PPE is kept in our country and gets to
where it is needed to defeat the virus."
It appears Trump's 'America First' policy in action at a crucial time of crisis , as the US
is the global epicenter for COVID-19, now with over 430,000 confirmed cases - most in New York
state - which has witnessed hospitals running desperately low on supplies, including
ventilators.
However, foreign governments have of late essentially warned 'what goes around comes around'
. Berlin Interior Minister Andreas Geisel at the start of the week stated bluntly of
Washington's brazen policy that it
constitutes a Wild West tactic - essentially warning Europe can play dirty too.
Japan
has allocated $2.2 billion (US) of its $993 billion emergency stimulus package to help
manufacturers relocate production out of China amid the COVID-19 pandemic which began in the
communist nation. According to SCMP , $2 billion (US) will be set aside for companies shifting
production back to Japan , while roughly $223.5 million will be spent on helping companies move
production to other countries, according to
SCMP .
Under normal circumstances, China is Japan's largest trading partner - however imports from
China plummeted nearly 50% in February as the coronavirus pandemic resulted in closed factories
and unfilled orders. Meanwhile, a planned visit by Chinese President Xi Jinping to Japan early
this month - the first such trip in a decade - was postponed with no date rescheduled.
It remains to be seen how the policy will affect Prime Minister Shinzo Abe's years-long
effort to restore relations with China.
" We are doing our best to resume economic development ," Foreign Ministry spokesman Zhao
Lijian told a briefing Wednesday in Beijing, when asked about the move. " In this process, we
hope other countries will act like China and take proper measures to ensure the world economy
will be impacted as little as possible and to ensure that supply chains are impacted as
little as possible ." -
SCMP
China's production trainwreck has revived discussion among Japanese firms over reducing
their reliance on China as a manufacturing base - while the government's panel on future
investment recommended last month that manufacturing of high-value products should shift back
to Japan - while other goods should be diversified across Southeast Asia.
"There will be something of a shift," according to Japan Research Institute economist
Shinichi Seki, who noted that Japanese companies were already considering moving out of China.
"Having this in the budget will definitely provide an impetus." That said, certain industries
such as automotive will likely stay put.
Japan exports a far larger share of parts and partially finished goods to China than other
major industrial nations, according to data compiled for the panel. A February survey by
Tokyo Shoko Research found 37 per cent of the more than 2,600 companies that responded were
diversifying procurement to places other than China amid the coronavirus crisis. -
SCMP
A sound banker, alas! is not one who foresees danger and avoids it, but one who, when
he is ruined, is ruined in a conventional and orthodox way along with his fellows, so that no
one can really blame him. Keynes via Yves
The problem is that the payment system, besides grubby coins and paper Central Bank notes
(e.g. Federal Reserve Notes), must work through private depository institutions or not at
all.
How then can we have a sound economy when it is held hostage by "sound" bankers?
And are not the banks a form of rentier – who rent the Nation its money supply?
Then where are the proposals of the MMT School to euthanize those rentiers?
Even if
they aren't exactly certain how the business model works,
Twitter blue checks and the rest of the mainstream media - having been whipped into an
anti-banker fervor by Bernie Sanders and the last glowing embers of Occupy - never pass up an
opportunity to kick private equity in the nuts.
And if there's one industry where private equity has done the most to directly harm American
public, it's health care.
Envision's Colorado headquarters
During the latter part of the Democratic primary campaign, Bernie Sanders and Elizabeth
Warren primed the pump by extolling the evils of private equity to the public every chance they
got, helping impress the term into the memory banks of legions of twentysomethings how the
industry had contributed to America's health-care crisis, along with a multitude of other
societal ills. Now, with the world in the grip of an unprecedented crisis, the industry is
about to get pilloried once again - but this, much, much bigger than before, we suspect - as
private equity-backed health-care companies, loaded down from their LBO debt binges, are forced
to make cutbacks including slashing pay for doctors and nurses in the middle of a pandemic that
has already killed nearly 9,500 Americans.
And now the KKR-backed Envision Healthcare Corp., one of the biggest medical providers
backed by private equity, is poised to become the poster-child for Wall Street greed as it
informs hundreds of doctors in its employ will not be receiving the bonus checks they had been
expecting in April. Though we suspect this isn't a complete surprise, the cuts will deprive
hundreds of doctors of roughly one-third of their total comp during an already extremely
difficult time for them and their families. The company has promised to repay them at a later
date once their financial situation has improved.
The move risks igniting a blowback that could make KKR one of "the most hated companies in
the world. Just ask Martin Shkreli.
But the reason the company's financial position is so poor in the first place is because
Envision carries more than $7 billion of debt. This debt was amassed during what was, according
to data compiled by
Bloomberg , the third-largest health-care LBO ever.
In a statement, Envision said it's "100% focused" on saving lives during this crisis, even
though its business (ambulatory surgical centers and medical staffing) shrank more than 75% in
two weeks, Bloomberg said. With so many Americans hiding at home and fearful of entering
hospitals and doctor's offices, people are delaying elective and non-emergency care at
unprecedented rates.
"We are on the front lines caring for patients during this unprecedented public health and
economic crisis," the Nashville, Tennessee-based company said. "Envision Healthcare is 100
percent focused on saving lives and sustaining the nation's fragile health-care system. The
safety net we provide for millions of patients must remain fully intact for when we get to
the other side of this national crisis."
Like many companies, Envision completely drew down its two credit lines to provide financial
flexibility in recent weeks (apparently it didn't listen to Larry Kudlow and Mnuchin). The
company spends about $1.5 billion on compensation for physicians quarterly, an insider
reportedly told BBG. The company has about $140 million to $150 million in debt payments due in
the next two weeks, according to Mike Holland of Bloomberg Intelligence, and has $650 million
of cash on its balance sheet. It has warned investors that it might need to raise more
financing if circumstances continue to deteriorate.
The biggest problem for KKR, is that some of the physician groups are planning to sue the
company; litigation could draw unwanted attention to KKR at a time when public anger is
dangerously high.
But as the 'cockroach' theory suggests, Envision isn't alone: The boom in LBOs (part of the
binge on corporate debt that also fueled the surge in buybacks) left many companies, especially
in the health-care space, where many companies were built via a series of costly mergers and
acquisitions.
There is also a tendency to think newer=better. I've heard doctors and pharmacists complain
that patients will get offended when prescribed a cheaper, older drug. They want the best and
newest, they need and deserve it!
@Redneck farmer That is because advertising works. Drug companies being allowed to
advertise guaranteed that predators, such as the Sacklers, would want to own drug companies.
More activity on the dark, unethical side of capitalism. There's an entire history of it,
opium wars, Atlantic slave trade, pornography, control of political agents through
pedophilia. The list does go on and strangely enough it's usually the same actors.
johnbrewster@77
Here's a story from today's Toronto Star. It's a neoliberalism story and goes well with Pepe
Escobar's piece in Asia Times (see above for link)
Basically the Province of Ontario stockpiled everything need for the pandemic that SARs
warned them was bound to come.
Then, a couple of years ago, they destroyed the stockpiles including 55 million
facemasks.
Now there are no face masks to be found and medical staff, inter alia, are having to take
totally unnecessary risks.
Why did this happen? Because neo-liberalism is all about profits and fiscal austerity: as
soon as the masks got beyond their 'best before' date they were destroyed - so the
manufacturers could have another bite at the cherry and sell another 55 million masks. But
then, austerity, the need to finance tax cuts for the wealthy, stepped in so the orders were
not renewed. And people will die, horrible deaths, as a result.
PS to vk # 1. Please think again. Trump has been in a trade war with China for what? a couple
of years? AND, he specifically banned imports of medical supplies from China. Other posters
wave supplied links for this idiocy.
Trump's about as innocent as jack the ripper. You may just be seeing things relatively, as
ghouls like Elliot Abrahms and disgusting Pomposity make Trump seen like an amateur.
Is the troop deployment along the Canadian border is to stop anyone interfering in the
coming chaos?
Posted by: Ian2 | Mar 26 2020 20:34 utc | 36
You have a point there --the coming chaos after the COVID-19 Health crisis.
Wondering if Trudeau knows about the fences that were erected this morning?
Maybe I missed Trump's tweet on his declaration of War.
- He has imposed more sanctions on Iranians.
- Indicted Maduro of Venezuela on narco trafficking, sponsor of terrorism; placed a $15
million bounty on his head --straight from the Panama playbook.
and this beauty - continues his trade war on China because -----
(Reuters) - Senior officials in the Trump administration agreed to new measures to
restrict the global supply of chips to China's Huawei Technologies, sources familiar with
the matter said, as the White House ramps up criticism of China over coronavirus.
The move comes as ties between Washington and Beijing grow more strained, with both
sides trading barbs over who is to blame for the spread of the disease and an escalating
tit-for-tat over the expulsion of journalists from both countries.
Under the proposed rule change, foreign companies that use U.S. chipmaking equipment
would be required to obtain a U.S. license before supplying certain chips to Huawei. The
Chinese telecoms company was blacklisted last year, limiting the company's
suppliers.[.]
"This is going to have a far more negative impact on U.S. companies than it will on Huawei,
because Huawei will develop their own supply chain," trade lawyer Doug Jacobson said.
"Ultimately, Huawei will find alternatives."[.]
Huawei has been doing just that - finding alternatives. Trade wars have been proven to end
badly. They end up going hot.
@Divine
Right American conflicts with Russia are based partly on self-serving fictions of the
military industrial complex that need an enemy for their continued existence, as well as some
more realistic conflicts involving Eastern Europe and rival interests over oil prices. The US
need for hegemony, which is highly tied to the value of the dollar as a reserve currency,
further thrusts this forward and center(and indeed, into conflict with China as well). This
all is intermingled with a [fake and hypocritical] generalized rejection of "authoritarian"
governments.
China, on the other hand, has no real current conflicts with Russia – most conflicts
involve sales of weaponry and political influence over central Asian states, nothing of vast
importance at least compared to being their the target of an enormous world-spanning
sanctions order or a dedicated trade war.
Your argument has the weird self-contradiction that the CCP both is supposedly the
mind-controlling alien brain of all Asians, while at the same time, not actually benefiting
from any specific conflict with Russia. This also ignores the fact that Asians tend to
assimilate the highest by any population(at nearly 40% intermarriage
in some segments, that Chinese students in particularly no longer tend to stay in the US(
only
20% by 2017 ), and that a overwhelming part of the demographic increase by
immigration is
Indian with long historical and cultural rivalries with China. And far more than Chinese
Americans, who often engage in racial masochism(witness Gordan Chang ), Indian Americans are vastly
more active and influential in American
politics both due to cultural reasons as well as higher verbal IQ. This isn't even
hypothetical: Indian American political writers dominate National Interest articles stressing
for more hawkish Chinese attitudes and were directly contributory to renaming the South China
Seas conflict to the "Indo-Pacific region."
I do agree that the US has long since crippled its resource base. But there's no evidence
that Trump, or anyone else, is demonstrating the barest inkling of trying to resolve it(or
that it is even possible, given the bueaucratic overload and red tape of regulations). Gould
once described evolution as a "drunkard's walk" between complexity, where organisms sometimes
fall trapped inside rail tracks, unable to stumble out.
Indian American political writers dominate National Interest articles stressing for more
hawkish Chinese attitudes and were directly contributory to renaming the South China Seas
conflict to the "Indo-Pacific region."
@Anatoly
Karlin There is apparently a large colony (100.000) of Chinese workers in Lombardy, with
direct flights between Lombardy and Wuhan, so this Italian outbreak is not a coincidence.
Many Italians in Northern Italy sold their leather goods and textiles companies to
China. Italy then allowed 100,000 Chinese from Wuhan/Wenzhou to move to Italy to work in
these factories, with direct Wuhan flights. Result: Northern Italy is Europe's hotspot for
Wuhan Coronavirus
UK had a "herd immunity" strategy from the beginning. They made no real effort at
containment. British government allowed their people to become infected, and only
began to change course after public outrage.
@Felix
Keverich The large Chinese population in Italy has been completely ignored by the media,
in fact China itself seems to have been let completely off the hook. The focus is now on how
terrible Britain and the native British people are.
Someone even posted a Tweet above by a Vietnamese person trying to claim that BRITAIN of
all countries is responsible for the outbreak in Vietnam, I mean what kind of ridiculous
logic is that? Vietnam bloody BORDERS China, the origin and epicentre of the Coronavirus
outbreak, and the Vietnamese are trying to say Britain is the cause? It beggars belief.
less globalization outside North America/Europe/Japan/Australia
You are missing the point of globalization: manufacturing in cheap Third World countries
and rewarding the local compradors with a permission to migrate to the West. That's the deal,
that's what globalization is.
With NA-Europe-Japan all you get is tourism and travel. I would be surprised if we can at
this point convince Chinese and the other cheap labor countries to do the work and forgo the
hope of migration. It was a Faustian deal and those as we know end in hell.
@AP
Calm down, man and stop the stupid blaming game. It seems that your Banderite spin also
includes bashing Chinese which, on the second thought, should not be surprising as there is
only one paymaster. Perhaps you should specialize in Ukraine only and leave China to more
competent haters.
Compare Canada and Italy on Chinese residents: Canada has 5 times more Chinese than Italy
but 62 times less infection cases and 539 times less fatalities than Italy (as of March 16).
Furthermore France and UK have more Chinese than Italy.
What about tourists: In Canada 0.75 mil Chinese tourist but in Italy 3.5 mil Chinese
tourists. So it must be the tourists, right?
So compare Japan with Italy on Chinese tourists: 8.4 mil Chinese tourist in Japan vs. 3.5
mil Chinese tourists in Italy. How many cases in Japan?
So what I am trying to convey is that the expression of the epidemic in different
countries is not congruent with the number of Chinese residents or Chinese tourist.
We will never know where the patients zero (yes plural, there are many patients zero)
really came from. For various political reasons we will not be told and what we will be told
we must be skeptical about. I found interesting data about the first infected in British
Columbia that has huge rather affluent Chinese population. There were as many Iranians as
non-Iranians on the list.
In British Columbia cases 1 to 5 were from China though it does not appear they infected
others while cases 6, 7, , 12 and 14, 15, 19 were traced to Iran. Then the case 22 was from
Iran and also case 31. Case 32 was from Italy, case 35 was from Egypt and case 37 was from
Germany. So out of first 37 cases over 50% were people came form Iran, Egypt, Germany and
Italy. My point is that while Canada has huge Chinese population (1.7 mil) and gets 700,000
Chinese visitors per year it does not look like China was the main vector. In BC it is Iran
and Europe.
One should consider a possibility whether virus introduction to Iran and the Middle East
did precede its introduction in China.
Now let's return to Italy. Most Chinese tourists go to Rome, Florence and Venice. These
cities were not affected as much as Lombardy where there is not that many tourists. So we are
told that Chinese workers could carry the virus. So look at Prato (in Tuscany near Florence)
which has the highest density of Chinese population in Italy. Wiki lists 11,882 (6.32%) for
Prato while the highest absolute number is Milan 18,918 (1.43%). The numbers are probably
outdated as most likely they do not include illegal residents.
"In a single day the positive cases of coronavirus in the province of Prato have
tripled: from 7 to 21 . It is the darkest day since the outbreak began. According to
what was announced in the afternoon of today, March 11, by the bulletin of the regional
council "
"Therefore, 314 patients are currently positive in Tuscany. This is the subdivision by
signaling areas: 71 Florence, 32 Pistoia, 21 Prato (total Asl center: 124), 43 Lucca, 40
Massa Carrara, 34 Pisa, 16 Livorno (total North West Asl: 133), 12 Grosseto, 37 Siena , 14
Arezzo (total Asl southeast: 63)."
So clearly the 2nd largest Chinese community in Italy (and first in density) with 21 cases
(out of 12,246 cases in Italy) did not contribute a lot to the corona virus outbreak in
Italy.
@AP
Calm down, man and stop the stupid blaming game. It seems that your Banderite spin also
includes bashing Chinese which, on the second thought, should not be surprising as there is
only one paymaster. Perhaps you should specialize in Ukraine only and leave China to more
competent haters.
Compare Canada and Italy on Chinese residents: Canada has 5 times more Chinese than Italy
but 62 times less infection cases and 539 times less fatalities than Italy (as of March 16).
Furthermore France and UK have more Chinese than Italy.
What about tourists: In Canada 0.75 mil Chinese tourist but in Italy 3.5 mil Chinese
tourists. So it must be the tourists, right?
So compare Japan with Italy on Chinese tourists: 8.4 mil Chinese tourist in Japan vs. 3.5
mil Chinese tourists in Italy. How many cases in Japan?
So what I am trying to convey is that the expression of the epidemic in different
countries is not congruent with the number of Chinese residents or Chinese tourist.
We will never know where the patients zero (yes plural, there are many patients zero)
really came from. For various political reasons we will not be told and what we will be told
we must be skeptical about. I found interesting data about the first infected in British
Columbia that has huge rather affluent Chinese population. There were as many Iranians as
non-Iranians on the list.
In British Columbia cases 1 to 5 were from China though it does not appear they infected
others while cases 6, 7, , 12 and 14, 15, 19 were traced to Iran. Then the case 22 was from
Iran and also case 31. Case 32 was from Italy, case 35 was from Egypt and case 37 was from
Germany. So out of first 37 cases over 50% were people came form Iran, Egypt, Germany and
Italy. My point is that while Canada has huge Chinese population (1.7 mil) and gets 700,000
Chinese visitors per year it does not look like China was the main vector. In BC it is Iran
and Europe.
One should consider a possibility whether virus introduction to Iran and the Middle East
did precede its introduction in China.
Now let's return to Italy. Most Chinese tourists go to Rome, Florence and Venice. These
cities were not affected as much as Lombardy where there is not that many tourists. So we are
told that Chinese workers could carry the virus. So look at Prato (in Tuscany near Florence)
which has the highest density of Chinese population in Italy. Wiki lists 11,882 (6.32%) for
Prato while the highest absolute number is Milan 18,918 (1.43%). The numbers are probably
outdated as most likely they do not include illegal residents.
"In a single day the positive cases of coronavirus in the province of Prato have
tripled: from 7 to 21 . It is the darkest day since the outbreak began. According to
what was announced in the afternoon of today, March 11, by the bulletin of the regional
council "
"Therefore, 314 patients are currently positive in Tuscany. This is the subdivision by
signaling areas: 71 Florence, 32 Pistoia, 21 Prato (total Asl center: 124), 43 Lucca, 40
Massa Carrara, 34 Pisa, 16 Livorno (total North West Asl: 133), 12 Grosseto, 37 Siena , 14
Arezzo (total Asl southeast: 63)."
So clearly the 2nd largest Chinese community in Italy (and first in density) with 21 cases
(out of 12,246 cases in Italy) did not contribute a lot to the corona virus outbreak in
Italy.
If this started in the USA and spread elsewhere the world would have good cause to
condemn the USA and to judge any subsequent efforts by Americans to help others as "the
least they could do."
Chinese shipments of medical goods are actually to the risk of the own population, where
hospitals are still recovering. While in some ways it is a blatant PR play, its quite a
significant cost amd self-risk that goes beyond "the least they could do."
The Chinese are showing an unprecedented amount of humanity, morality and basic decency
by giving medical aid to more than half the world in genuinely useful forms despite almost
everyone shitting on them by calling this a "Chinese virus" and other garbage.
... ... ...
Here is an article about them in the New York Times. Written soon before the onset of the
plague. It would not be written now – there's too obvious a connection between open
borders, multiculturalism, and death:
As Prato's factories went dark, people began arriving from China to exploit an
opportunity.
Most were from Wenzhou, a coastal city famed for its entrepreneurial spirit. They took
over failed workshops and built new factories. They imported fabric from China, sewing it
into clothing. They cannily imitated the styles of Italian fashion brands, while affixing a
valuable label to their creations -- "Made in Italy."
Chinese groceries and restaurants have emerged to serve the local population. On the
outskirts of the city, Chinese-owned warehouses overflow with racks of clothing destined for
street markets in Florence and Paris.
Among Italian textile workers who have veered to the right, the arrival of the Chinese
tends to get lumped together with African migration as an indignity that has turned Prato
into a city they no longer recognize.
"I don't think it's fair that they come to take jobs away from Italians," says Ms.
Travaglini, the laid-off textile worker. She claims that Chinese companies don't pay taxes
and violate wage laws, reducing pay for everyone.
Since losing her job at a textile factory nearly three years ago, Ms. Travaglini has
survived by fixing clothes for people in her neighborhood. "There are no jobs, not even for
young people," she says.
Chinese-owned factories have jobs, she acknowledges, but she will not apply. "That's all
Chinese people," she says, with evident distaste. "I don't feel at ease."
:::::::::::
Lots of Ukrainians there also. They don't bring such a virus to Italy, but they bring the
virus back to Ukraine.
::::::::::
So nice PR move after killing lots of European old people. One of the sacrificed in Milan
to this virus, Vittorio Gregotti, was an architect who helped build the city. Killed by the
Chinese virus. A symbol of native Italy replaced by migration.
@Kim
The Chinese have internal natural resources and have been vigorously working world wide to
obtain rights to, develop, and extract mineral and energy resources in order to keep
production going. See the documentary Empire of Dust about Chinese getting the rights to
African resources and developing the infrastructure to extract them. Also following the
supposed "war for oil" in Iraq the oil contracts went almost entirely to China. China has a
lot of the mines for the rare earths needed in modern technological products. The largest
single mine used to be in California. A Chinese company bought and re-opened it.
In effect they already own or have contracts for what they need and are much less leveraged
than we are.
As to whether their customers can continue to pay for it, that is a different kettle of fish.
The rest of us have been running up our credit card with them. We have been paying it off by
selling off our countries piece by piece through Chinese purchases of real estate,
businesses, port facilities etc. As China has grown economically they have been developing
their internal market to reduce dependence on Wal-Mart so that might reduce the impact of
poorer foreign markets.
In any event they own a huge infrastructure in plants tooling and human expertise for making
things. Our leaders have deliberately hollowed ours out for profits and cheaper consumer
goods.
Here was me thinking the Western elites wanted to continue making money on Chinese
growth.
Much of the US elite is sinecured in the media, foreign policy, and national security
state establishments, whose status depends on the relative power and prestige of the US
state. The relative power and prestige of the US state is jeopardized by the continued growth
of China.
If you follow US coverage of China in the US, you'll find that this US elite is generally
critical of China, although style and presentation vary. The liberal "China watchers" among
the US elite in the media and foreign policy establishment tend to focus on human rights,
democracy promotion, and liberalism as vectors to attack the Chinese state. They tend to be
polished and more subtle rather than explicitly hostile.
The US elite in the national security establishment tend to be more overt about military
containment and or confrontation with China, and on developing an anti-China coalition in the
Pacific.
Michael Hudson: [00:00:00] There's recognition that commercial banking has become
dysfunctional and that most loans by commercial banks are either against assets – in
which case the lending inflates the prices of real estate, stocks and bonds – or for
corporate takeover loans.
The economy's low-income brackets have not been helped by today's financial system. Here in
New York City, red lining and a visceral class hatred by high finance toward the poor
characterized the major banks. From the very top to the bottom, they were very clear they were
not going to lend to places with racial minorities like the Lower East Side. The Chase
Manhattan Bank told me that the reason was explicitly ethnic, and they didn't want to deal with
poor people.
A lot of people in these neighborhoods used to have savings banks. There were 135 mutual
savings banks in New York City with names like the Bowery Savings Banks, the Dime Savings Bank,
the Immigrant Savings Bank. As their names show, they were specifically to serve the low-income
neighborhoods. But in the 1980s the commercial banks convinced the mutual savings banks to let
themselves be raided. Their capital reserves of the savings banks, was just looted by Wall
Street. The depositors' equity was stripped away (leaving their deposits, to be sure). Sheila
Bair, former head of the FDIC, told me that the commercial banks' cover story was that they
were large enough to provide more capital reserves to lend for low-income neighborhoods. The
reality was that instead, they simply extracted revenue from these neighborhoods. Large parts
of the largest cities in America, from Chicago and New York to others, are underbanked because
of the transformation of commercial banks from providers of mortgages to emptiers-out, just
revenue collectors. That leaves the main recourse in these neighborhoods to pay-day lenders at
usurious interest rates. These lenders have become major new customers for Wall Street bankers,
not the poor who have no comparable access to credit.
Apart from the savings banks, of course, you had the post office banks. When I went to work
on Wall Street in the 1960s, 3 percent of U.S. savings were in the form of post office savings.
The advantage, of course, is that post offices were in every neighborhood. So you actually had
either a local community banking like savings banks – not like today's community banks,
which are commercial banks, lending largely to real estate speculators to capitalize rental
apartments into heavily mortgaged co-ops with much higher financial carrying charges – or
you had post offices. You now have a deprivation of basic bank services in much of the economy,
combined with an increasingly dysfunctional and predatory commercial banking system.
The question is, what's going to happen next time there's a bank crash? Sheila Bair wrote
about after the 2008 crash that the most corrupt bank was Citibank – not only corrupt,
but incompetent. She had wanted to take it over. But Obama and his Secretary of the Treasury,
Tim Geithner, acted as lobbyists for Citibank from the beginning, protecting it from being
taken over. But imagine what would have happened if Citibank would have been become a public
bank – or other banks that are about to have negative equity if there is a downturn in
the stock and bond and real estate market. Imagine what will happen if they were turned into
public banks. They would be able to provide the kind of credit that the commercial banking
system has refused to provide – credit to blacks, Hispanics and poor people that have
just been red-lined in what is becoming a financially polarized dual economy, one for the
wealthy and one for everyone else.
Walt McRee: [00:04:10] Well, power in that realm, of course, lies with the banking
cartel. They look at public banks as a threat. They hate competition of any sort, it seems.
Michael Hudson: [00:04:18] Of course it is a threat.
Walt McRee: [00:04:22] And even when we say, Michael, that we're not going after the
business you're already doing because you aren't lending to small, medium enterprises and so
forth – we want to take on the infrastructure that you don't want to fund, but they still
are pushing back. How will we be able to get past that?
Michael Hudson: [00:04:40] I think you should say that of course you're not going to
take business away from them, because the public community bank or government-owned bank would
not make corporate takeover loans or speculative derivative bets. It would not create the
dysfunctional credit and debt overhead that has been expanding ever since 1999 when the Clinton
administration changed the banking rules.
The problem is that the big commercial banks don't want the productive kind of loans that
public banking would make. For instance, the reason they didn't want to extend credit to the
Lower East Side or the Hudson Yards west side of New York was they wanted to sort of drive out
their residents and gentrify it, by providing the money to the big developers who socially
bulldoze these neighborhoods. Their policy is to kick out as many low-income renters or owners
as they can, and replace them by raising rents from like $50 a month to $5,000 a month. That's
what's happened on the Lower East Side from the time I first lived there to what rents are
today.
There is a fight of the economy's unproductive sector against people who want to use credit
in a productive way that actually helps the economy. I think it's a fight between good and
evil, at least between the productive and unproductive economy, between economics for the
people and economics for the One Percent.
ORDER IT NOW
Ellen Brown: [00:06:14] I wonder, though, if the Fed is going to even allow the banks
to collapse again, with what they just did with the repo market. They can step in at any time
to save anybody. I don't know that Congress, even has a say in it. What do you think?
Michael Hudson: [00:06:30] I think that's right. I've talked to Paul Craig Roberts
and we discuss whether they can just keep on keeping these zombie banks alive. Can they keep
the over-indebted zombie economy alive by the Federal Reserve manipulating the forward stock
and bond markets to support prices? It doesn't actually have to buy stocks and bonds beyond the
$4 trillion it's already put into Quantitative Easing. It can simply make manipulate the
forward market. That doesn't really cost any money until the big crash comes. So I think one
should have a discussion over what President Trump says is a boom that that he's created, with
the stock market going up. Does that mean that the economy is getting richer? Are we fine with
commercial banking the way it is, so that we don't need public banking?
I think you have to expose the fact that what's happened is artificial state intervention.
What we have in the name of free market support of the banks is not a free market at all. It's
a highly centralized market to support the predatory financial sector's wealth against the rest
of the economy. The financial sector's wealth takes the form of credit to the rest of the
economy, extracting interest and amortization, while making loans simply to increase asset
prices for real estate and financial securities, not put new means of production in place to
employ labor. So you have to go beyond the public banking issue as such, and look at the
political context. Ultimately, the way that you defend public banking is to show how the
economy works and how public banking could play a positive role in the economy as it
should work.
Ellen Brown: [00:08:14] Can you explain what you meant by forward lending? I mean,
they don't have to
Michael Hudson: [00:08:19] It's not forward lending, it's buying long. For the stock
market's Dow Jones average, they'll contract to buy all its stocks or those in the S&P 500
in one month, or one week or whatever the timeframe is, for X amount – say, 2% over what
they're selling today. Well, once the plunge protection team issues a guarantee to buy, the
market is going to raise the bid prices for these stocks up to what the Fed and the Treasury
have promised to pay for them. By the time the prices go up, the Fed doesn't actually have to
buy these stocks, because everybody's anticipated that the Fed would buy them at this 2 percent
gain. So it's a self-fulfilling prophecy. We're dealing with a government run by the banks and
the creditor powers to artificially raise asset prices, on credit. This has kept alive a system
that represents itself as creating prosperity. But it's not creating prosperity for the 99
Percent. Public banking would aim at prosperity for the 99 Percent, not just for the One
Percent.
Ellen Brown: [00:09:46] I'm writing about Mexico's AMLO, who is now who has just
announced in January that he will be building 2,700 branches of a public bank in the next two
years. He's expecting 13,000 branches ultimately, so it will be the largest bank in the
country. His reasoning is just what you're saying, that the banks have failed and have not
serviced the poor. His mandate is to help the poor, and he can't do that if they don't have
banking services.
Michael Hudson: [00:10:17] Is that national?
Ellen Brown: [00:10:18] Yes, all across the country.
Walt McRee: [00:10:22] "Loprabrador", AMLO. So we know that a public monetary source
is a public utility. Our vision is to create a network of local and state public banks. That
leads us to the view that what we really need to be targeting is the Federal Reserve, to
ultimately turn it into a publicly-owned entity. Is that folly or
Michael Hudson: [00:10:55] I think the way to get people to support this is if they
understand how the Federal Reserve was created. A few years ago I published an article in an
Indian economic journal (I think it's on my website), about how the Federal Reserve was
created.
[1] "How the U.S. Treasury avoided Chronic Deflation by Relinquishing Monetary Control to Wall
Street," Economic & Political Weekly (India), May 7, 2016. Available on Naked
Capitalism an michael-hudson.com. There was a fight by Wall Street led by J.P. Morgan.
America had a central bank until 1913 – the Treasury. Until 1913 the Treasury was
doing everything that the Federal Reserve began to do. The idea of creating the Federal Reserve
was to take power away from the Treasury. The Treasury wasn't even allowed to be on the board
as an owner of Federal Reserve stock. The idea was to take decision-making away from
Washington, away from democratic politics, and insulate the financial system from the
democratic political system by turning control over to the corporate financial centers -- Wall
Street, Chicago, and the other Federal Reserve districts. They were the same districts as those
that the Treasury already had divided the country into. Remember, these were the decades
leading up to World War I when there was a social democratic revolution from Europe to the
United States. A guiding idea was to democratize banking.
Wall Street very quickly developed a counter strategy to this. And the counter strategy was
the Federal Reserve. You're welcome to republish my article on your site. You and I both aim to
reverse the counterrevolution mounted against classical economics and social democracy. The
entity you're talking about would probably be under the aegis of the Treasury. You'd be putting
the economy back in the direction that the world was moving before World War I derailed these
efforts.
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You talk of nationalizing the Fed. I know people don't like the word nationalizing. How
about thing de-privatizing or de-Thatcherizing the Fed? You have to represent the Fed as having
stolen economic and financial policy away from the public domain. It became part of the
neoliberal project taking form in Austria in the 1930s. You're trying to restore the classical
economic vision of productive versus unproductive credit, productive versus unproductive labor,
and public money as opposed to private money. These distinctions were erased by the censorial
neoliberal counter-revolution.
It's not that you're radical, that these people had a radical revolution to carve away the
financial system from democracy. And you're restoring the classical vision of democratizing,
re-democratizing finance and banking.
Walt McRee: [00:14:12] I want to thank you for saying that, Michael, because
de-privatizing the Federal Reserve is so much more accurate and powerful. You'll recall that we
kind of exchanged a phrase when I said "institutionalized deception.". I think that's really
important. But let's say that prior to that, Stephanie Kelton gets in there, or somebody from
the MMT crowd gets into a new administration prior to de-privatizing the Fed. Does MMT have a
place to play or to emerge in that environment?
Michael Hudson: [00:14:55] Of course, and here's the role: You can leave the
commercial banks to do what they're doing, but you're not going to provide Federal Reserve
credit for them to load down the economy with unproductive debt. The question is, if you're
going to create real community banking via a public banking sector, where will it get the money
to lend out? How do we provide money to the red-lined areas of the economy to actually finance
tangible capital investment and people's living needs, not just predatory lending? The way that
MMT comes in is much like the Chicago plan for one hundred percent reserves. These community
banks will need Treasury-created depository credit beyond the deposits they raise in their
local areas.
They need more money. MMT will provide credit to these banks in exchange for their loan
originations of a productive character, on terms that borrowers can afford, with realistic
mortgages also to build public housing. The new Fed that we're talking about will be a major
depositor and will provider of the capital deposits and reserves to the banks. Right now, it
has provided $4 trillion of Quantitative Easing credit to the banks, not to put into the
economy but only to inflate the stock and bond market and make housing more expensive. Wouldn't
it be much better to provide credit to community banks that actually would make credit
available for productive economic purposes – and not for takeover loans, stock buybacks
and asset speculation?
Productive credit was what everybody expected banking to develop in the late 19th century.
Germany and Central Europe were leading the way. It was called Middle Europa banking, as
opposed to Anglo-American banking. (I discuss this contrast in Killing the Host .) That
was essentially following the classical model, as everybody expected banking to evolve prior to
World War I.
Ellen Brown: [00:17:29] Cool. That's totally what I also wrote about in my latest
book. The Federal Reserve is where you should be getting credit, so you don't have to borrow it
from somewhere else. Everybody thinks this whole repo thing is so contrived. It's
re-hypothecated. One party owns the collateral at night, the other party owns it during the
day. It's all just bluff to make it look like they borrowed something that wasn't really there.
So let's just acknowledge that all money is just credit. And like you say, if you have a good
loan, a good project to be monetized, that's the whole point of a bank. It will turn your
future productivity into something you can spend in the marketplace. And the central bank is
there to provide the credit.
Michael Hudson: [00:18:21] That's right.
Ellen Brown: [00:18:22] Turn it into dollars.
Michael Hudson: [00:18:24] That's right. My way of describing it is to look at
history, to show that this is not a utopian idea. It is what made German and Central European
banking so much more productive in the decades leading up to World War I. So we actually have
historical examples of good banking versus bad banking. But the predators won in the end.
Ellen Brown: [00:18:53] Well, regarding this whole repo thing, one big problem we
have with our public banks is the 110 percent collateralization requirement in California. How
is a bank supposed to make loans if it has to use its deposits to buy securities –
something safe and yielding low interest to back the deposits? It seems to me that what the big
banks do – and I think we could do it, too – is to take those deposits and buy
federal securities at 1.5 percent, and then they turn around and use the securities as
collateral in the repo market, where they pay 1.5 percent. In other words, they earn 1.5
percent and they pay 1.5 percent. So it's a wash. They get their money for free. I think we
could do that, too. Or are only certain players allowed to play that game, and we can't jump
in?
Michael Hudson: [00:19:50] Well, you're the lawyer. Of course they could do it. I
think one of the things that you and other progressives have recommended is that the Fed should
stop paying money to the banks for their reserve deposits. Stop giving them the free giveaway.
If you want to say, "We're against the largest welfare recipients in the country. They're not
the people you think. They're the Wall Street banks. These hypocrites want to cut back Social
Security to balance the budget. They want to cut back medical care and social services, and
make themselves the only welfare recipients."
Ellen Brown: [00:20:30] Right, agreed. But if we just stand on our high horse and say
this has to change, nothing will happen. We could do it ourselves and just show what you're
doing in contrast to what they're doing
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Michael Hudson: [00:20:44] You're asking for symmetry. They're making us carry a big
load on our back, that they don't have to carry. They're loading the dice in their own favor.
You want to unload the dice and stop the insider favoritism. You correctly represent the banks
as being insiders. You have to say, "Look, these insiders are trying to keep a monopoly." You
could use the anti-monopoly legislation that's been on the books since Teddy Roosevelt's time.
You have a lot of legal power to break up the big banks. You could treat them like I think they
could treat the pharmaceutical companies if Bernie gets in.
Walt McRee: [00:21:44] Monopolies are being challenged by the shadow banking
industry. New forms of payment exchange technologies seem to be eating away at that singular
source of credit. What's your prognosis for how that's going to evolve? Will the big banks find
a way to clamp down on that ultimately?
Michael Hudson: [00:22:05] Are we talking about cryptocurrency?
Walt McRee: [00:22:07] That would be one example, yes.
Michael Hudson: [00:22:10] Well,. you can't stop people from gambling. People think
that buying a cryptocurrency is like buying an Andy Warhol etching. Maybe it'll go up in price
if a large number of people want it. But basically, it's junk. It's very speculative. It's
certainly not stable. It goes up and down. One day there may be a solar flare that's going to
wipe out all the bank records for these things. But there is no way to stop people from doing
something that seems to be silly or gambling. You certainly will not insure them. So you will
not give them any protection against loss. You also will want to insulate the economy from
having any transactions in crypto, in these alternative money things that pose a big threat of
loss. They are not real money, because the government will not accept payment of
cryptocurrencies as taxes or for public goods and services. The government will only accept
specified forms of money. You can create any kind of swap or bet. If you want to create the
equivalent of a racetrack on horses. You can do it, but that's a financial racetrack. I think
there may be taxes on racetracks. They were unregulated for a long time. But Hollywood movies
showed that there's a lot of criminalization going on there.
Walt McRee: [00:23:59] We were all amused, well, maybe a little wondering about Max
Kaiser. Ellen and I and Tyson Slokum had some time with him over there just before you were at
his Brooklyn studio, but Max is into Bitcoin in a big way, and he sees it as the new gold.
Michael Hudson: [00:24:20] He told me that a lot of people watch his show because
they're gold bugs or they are interested in Bitcoin. I think he's tried to take a neutral view
of it, certainly in our personal conversations. He's not a gold bug and he's not a Bitcoin or
other bug. But he said that a lot of people want to find out about it, so he has guests on his
show telling people, "Here it is, take your choice." It's part of the new speculative financial
landscape, just like swamps are part of landscape for Florida real estate. So he's going to
cover the whole spectrum. Reuters produces his shows, and the audience wants to hear about
this. So he talks about what they want to hear.
Ellen Brown: [00:25:20] I think he actually does promote Bitcoin. He's heavily
invested in it and he was one of the originals, so he's obviously made a lot of money on
it.
Michael Hudson: [00:25:29] Okay.
Ellen Brown: [00:25:29] I think he agrees that it can't be a national currency. It's
too slow, too expensive, and too environmentally unfriendly. But like you say, it has been a
good investment, just like fine art or something that, if people want it, the value goes up.
Plus, there's a big black market for it, for trading and things that you don't want the
government to know about.
Michael Hudson: [00:25:57] It's a real phenomenon. I know people who benefited from
Andy Warhol. So he saw the phenomenon and he seems to have made money, but when Steve Keen and
I and others got together with him for a couple of days two months ago, the topic never came up
in discussion.
But gold did. I wonder where the gold of Libya went, for instance. Apparently it was all
taken and I understand the US gave it to ISIS. Hillary said it had to go to ISIS to act as our
Foreign Legion. We gave them Libya's weapons. Some of the gold must have just been taken by the
CIA and State Department for dirty tricks for its black operations. Certainly, America wants to
prevent any other country or large gold possessor from having enough gold to try to reinstate
it as a means of settling balance-of-payments deficits. America runs a large military deficit,
so at a certain point, the more money it spends abroad for its 800 military bases, the more
gold it would lose. Just like in General de Gaulle's time during the Vietnam War, although
actually Germany was taking more gold than France. So America wants to keep the dollar at the
center of the world financial system. That really was why it went to war with Libya, because
Libya was one of the first countries to de-dollarize and move its currency toward gold. So
you're having a group of countries – Russia, China, Iran and others – add gold to
their reserves instead of dollars. You're having a de-dollarization move throughout the world
to break free from the US ability to do what it did do Iran.
When Iran borrowed in dollars under the Shah, it used Chase Manhattan Bank as its paying
agent. It put enough money into the account to pay its foreign debts service. But then the
State Department told Chase to screw Iran and refuse to turn over the payment. Now that the
Shah wasn't running Iran, once Chase refused to turn over the payment and froze Iran's account,
that meant that Iran went into default on the entire dollarized foreign debt. It was liable for
a huge amount of capital.
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That was a warning for the rest of the world that no government could safely put its money
in an American bank or an American bank branch, or in a British branch that would act as a
subsidiary of the Pentagon. Because if you do, the bank can simply force you into default at
any time, just like the US CIA can come in and use electronic weaponry to destroy your bank
payment-clearing system. That's why the threat of cutting Russia and China and other countries
off from the Swift Interbank Clearing System led Russia to develop its own clearing system.
With a flick of a switch it can begin to work anytime United States tries to cut Russia off
from the SWIFT payments system. So you're having the whole world de-dollarize very quickly. And
right now the question is what Europe will choose. Are Germany and other countries going to
become part of the de-dollarized system, or remain part of the dollar area?
This is part of the fight against using the IT chips and the communications chips from
Huawei. Huawei did not put US spyware into the system. The United States says that if it can't
have a phone system and communications system that it can control by spyware and use to blow up
your economy, your public utilities, your electrical systems, then you're our enemy, because we
feel insecure without this control. When President Trump said that Huawei was a threat to US
national security, he meant that we don't feel secure unless we have the power to destroy any
economy that acts in any way that is independent of the United States – because you might
do something we don't like. This is the most aggressive concept of security that one could
imagine. So of course the rest of the world is seeing its own national security as having a
financial dimension. The financial dimension is to create a monetary and financial system that
minimizes connections to the dollar except to the extent of having to buy and sell dollars to
stabilize foreign exchange rate.
Ellen Brown: [00:31:31] There's a lot of talk, even among central bankers, that we
need to get off the dollar as a global reserve currency. But it seems to me that gold is also
manipulatable. I mean, it's not the ideal I had envisioned a system where instead of reserves
being a thing, like dollars or gold that you can actually trade, it would just be a measure,
like a yardstick. You would be able to compare one currency to another according to what you
could buy with it. Like you'd have a whole basket of things that everybody uses in every
country. And now that they report that kind of stuff, it wouldn't be all that hard to get the
figures and, you know, just compare and say, well, your dollar will be worth so many pesos in
Mexico or whatever. That was my idea, but what do you think?
Michael Hudson: [00:32:27] That would meet one of the criteria of money, which is as
a measure of value, but it would not do at all for international money. You have to have some
means of constraint. In other words, suppose the United States continued to run another
military budget deficit like it did in the Vietnam War. There is no way that you could use the
balance of payments as a constraint on the policy of deficit countries, which are usually the
military aggressors. The whole idea of going off gold was that under the gold standard no
country can afford to make war, because if you go to war your currency collapses. In 1976,
Herman Kahn and I went to the Treasury and – this is to answer your question. He put up a
map of the world and said, "These are the countries – Scandinavia, Western Europe, the
United States – that don't believe in gold. They're all politically stable social
democratic countries. They have faith in government. No look at these others here's the rest of
the world – India, South America, Africa and most of Asia. these are people that believe
in gold. Why do they believe in gold, but not the Protestant cultural area? Well, they don't
have faith in government. They don't trust governments. They want some option that is
independent of government. Gold is not only to bribe the border guards if they're escaping from
somewhere. They want to be free of governments that have been captured by anti-democratic,
predatory forces."
He said if you tried to think of what you would make that is an alternative to the dollar
that people could understand, well, for thousands of years, people have decided that gold and
silver. (I'm sure that you could add platinum and palladium.) So they have been the ultimate
means of settlement, and hence of international monetary constraint.
Gold isn't to be used as money. It's not to be used as a normal means of payment. What it is
to be used for is as a balance-of-payments constraint on the ability of countries to run up
chronic deficits that are mainly military in character. So I called our presentation "Gold: the
Peaceful Metal." Well, needless to say, the Treasury didn't go for that, because they said that
we had just explained how super-imperialism works via the dollar. So they didn't go back to
gold. We lost that argument.
Ellen Brown: [00:35:34] Isn't the reason we went off gold standard, though, that
there simply isn't enough gold and that we wound up leveraging it, and
Michael Hudson: [00:35:42] No, there's plenty of gold. There wasn't enough gold to
pay for the military deficit. Every month the dollars we spent in Vietnam would be turned over
to the banks in Indo-China. They were French. They'd turn the dollars over to Paris and General
de Gaulle would turn in these dollars for gold. We had to pay in gold for the military deficit,
which was the entire source of the US balance-of-payments deficits in the 50s, 60s and into the
70s. America went off gold so that it could afford to wage war without the constraint of losing
its control over the international monetary system.
Ellen Brown: [00:36:29] We went after gold domestically because it didn't work. I
mean, you had to use fractional reserve lending
Michael Hudson: [00:36:35] Yes, of course gold doesn't work domestically. It's
certainly not an appropriate domestic money supply. I'm only talking about it for settlements
among central banks internationally.
Ellen Brown: [00:36:49] But you said it's not to be traded. But if you don't, how do
you settle your balance of payments?
ORDER IT NOW
Michael Hudson: [00:36:53] It can be traded. There is a market. And you began by
saying, quite correctly, that gold prices are manipulated. Well, right now the US and the
central banks are manipulating its price to keep it low, in the same way that they're
manipulating the stock and bond market by buying forward. Except in the case of gold, they're
selling forward. If they keep agreeing to sell gold at a very low price, people will see that
if they can buy gold at this low price, why should they buy it at a higher price today, as the
price will fall and be driven down. So, yes, gold is manipulated downwards today by the U.S.
– essentially the plunge protection team acting internationally to keep the price of gold
down to discourage other countries and populations from buying it is protection against
collapse of the financial system.
So we're back to the fact that the financial system is dysfunctional. In a functional
financial system, you wouldn't need domestic reference to gold. You'd have a domestic financial
system that works fine without gold. Gold is what you have when the financial system becomes
dysfunctional and there's a breakdown.
Ellen Brown: [00:38:21] Well, it almost seems like you need some sort of global
regulator. But that's like a one-world government, which we all freak out about.
Michael Hudson: [00:38:28] You certainly don't want a one world government. Right now
all the plans for world government are neoliberal. They aim essentially to limit, to break up
democratic government regulation of corporate business, mining and monopolies. The idea of a
one-world government is to destroy any democratic government's ability to make its own laws in
the interests of labor or society. You would have a parallel government of wealth, government
of property. It's what the University of Chicago calls the Law and Economics regime. And this
is, this is fascism on an international scale. And there is a wonderful book by Quinn Slobodian
in 2008, Globalists: The End of Empire and the Birth of Nationalism , showing how these
plans were developed by fascists in the 1930s and by the fascist promoters at the University of
Chicago. The fascist promoters were people like Hayek and von Mises and the Geneva economists
around the League of Nations. So when they say they're anti-government, they're really
anti-democracy. They're for an iron-fisted government by big business, big mining and big oil
– and most of all, by big banks. That is the reason why people don't trust an
international government. It would be an international iron fist of fascism, the way the
current maneuvering of the financial classes and the rentier classes and the neocons
have arranged things.
Ellen Brown: [00:39:56] Well, I totally agree. It's quite frightening. We want
sovereignty for all our little nations, and even our little cities, states and so forth. But it
seems to me, how do you get everybody to work together? For example, Venezuela has the debt
problem that any country has that's heavily in debt to foreigners, or to vulture funds or
whatever. There's not a universally recognized court that you can go to. And, you know,
everybody agrees. It does seem like on some level we need some sort of collaborative effort
where we all agree on the rules.
Michael Hudson: [00:40:33] Absolutely right. Now, of course, the United States would
not recognize any international court. So, again, you'd have all the rest of the world
belonging to the court, and the United States as the outlier. It's like you're the healthy body
and we want to parasitize you. And it will not recognize the court. My Super-Imperialism
reviews the history of this policy.
But you're right: There should be a court that would recognize such things as odious
debt for governments. Venezuela's problem is that under the dictators that the Americans had
installed by assassination and force, Venezuela had pledged its oil reserves as collateral for
its international bonds. That gives a vested interest in the creditors to make it default and
grab its oil reserves and its investments in the United States, the oil distributors it bought.
So, yes, you do need a set of international rules for writing down bad debts. That means an
alternative to the IMF. You need an anti-IMF. Instead of acting on behalf of the creditors
imposing austerity on countries, you should create an organization representing society. And s
the interest of society is to grow. Instead of promoting austerity like the IMF does, it would
promote prosperity. Instead of financing the US government dollarization and giving US control,
it would be part of the de-dollarization group.
So you'd have a pro-growth group of nations – of the world economy – using
finance for growth and development with productive credit. You'd also have the United States
providing predatory credit, austerity, cutting back Social Security, cutting back Medicare and
having a polarizing economy that is shrinking and will end up looking like Greece or Argentina.
The rest of the world would follow more productive and less oligarchic financial policies. That
should ultimately be our global dream. But there's been little preparation for that. The
financial sector's neoliberals have o put together an almost conspiratorial Law and Economics
lobbying group to promote the Trans-Pacific Partnership and World Trade Organization rules
blocking governments from imposing anti-pollution fines or regulating monopolies or closing tax
havens. If you fine an oil company for polluting, the government is obliged under this
international law to pay the oil companies what they would have earned if they would have
continued to poison the environment. This is
Ellen Brown: [00:43:41] Shocking.
Michael Hudson: [00:43:41] Definitely. This is an international deathwish.
Ellen Brown: [00:43:45] Agreed. Totally agreed.
Walt McRee: [00:43:47] We've been speaking with economist Michael Hudson. Our thanks
to him for being on this program again. And you'll be hearing more from Michael on future
editions of It's Our Money.
Walt McRee: [00:43:59] Well, that's it for this edition of It's Our Money with Ellen
Brown. Thanks to our guests or sponsors, Public Banking Associates, and to you for listening.
Be sure to check out Ellen's latest writings on the economy and the changing world of money by
visiting ellenbrown.com. And for more information on public banking, visit
PublicBankingInstitute.org. For information on how local and state governments can obtain
professional insight and council about public banks from key national experts, visit
PublicBankingAssociates.com. I'm Walt McRee. See you next time on It's our Money with Ellen
Brown.
Notes
[1] "How the U.S. Treasury avoided Chronic Deflation by Relinquishing Monetary Control to
Wall Street," Economic & Political Weekly (India), May 7, 2016. Available on Naked
Capitalism an michael-hudson.com.
@dc.sunsets "This is why those who promise to "Plan" economic prosperity are liars and
fools, for they have the PRETENSE of knowledge, nothing more. "
Of course, this point is true -- but its posed as an absolute. No government can "plan" an
entire economy -- we know this from the failings of the USSR etc. But nor can economies be
totally unplanned. The US is not an unplanned economy: its an economy planned by the 1% for
the 1%.
Modern economies are "mixed". There is coordinated planning between the public & private
sector.
Sadly the US Gov' has renounced its responsibilities to "plan". Had the US Gov "planned" it
would never have allowed key industries, knowledge & talent to be off shored to China.
Such off shoring was a private plan by the 1% for the 1%. Worked well -- for them.
Adding complexity to an already far too complex system merely hastens blow out of
distributions that are skewed fat tails and stressed to a breaking point of systemic failure.
Greenspan purposely built a complex financial empire of asset inflation to replace Volcker's
fiscal prudence & macroprudential professionalism system wide.
Once Greenspan has locked in the asset inflation regime & deregulated Glass-Steagall
Act it was off to the races on a credit card for the largest parasite in the financial empire
governing by force.
On September 10th 2001 Donald Rumsfeld announced to the world that the ever incompetent
Pentagon had misplaced $1.3 trillion USD of taxpayer money. On September 11th 2001 Donald
Rumsfeld took part in a clandestine covert US Military operation to assassinate all of the
principle investigators & forensic Chartered Accountants that were about to uncover the
crimes taking place under Donald Rumsfeld's directorship as Pentagon executive.
The USA has always been a system of fraud by stealth of US Military force thugsterism
& all out fascist behaviour.
New York Federal Reserve Bank announced Monday it will increase its daily injections of cash
into financial markets by $50 billion to $150 billion as a protective step amid #coronavirus
epidemic.
I see your tangible assets bet and raise another $50 billion per day of presto digitizer
created out of thin air fiat.
Because I CAN!
Now what are you going to do about it huh?
If you crash our ponzi scheme, who are you going to sell your oil and gas to?
That said, in periods of past extreme economic turmoil folks like Steve Mnuchin, with the
trophy British wife, aka The King of Foreclosure, made out like bandits. He's now duce
Trump's Secretary of the Treasury. The prior Republican standard bearer, the Mitt, was also a
Vulture who participated in the hollowing out of the American Industrial Heartland, for
profit.
A life long con man and grifter coupled up with a Jewish vulture capitalist leading a
phony charge to Make America Great Again...?
A script that writes itself.
Sadly..the supposed opposition are also beholding to AIPAC, and it's dictates.
Chuck Schumer says he was appointed by God to be the Guardian of Israel. It's true, and
confirmation is available on the web.
Is he an American or an Israeli? No one should be allowed to be both, should they? Am I
right or wrong?
Why just look at the good ole boys Netanyahu's very good friend , Tabloid Star and huckster
about town the donald to see who is really the Bossman of Murika's gun toting Patriots.
Pretty sad really when you think about it. A Country that ravaged it's indigenous people
to break the land open for settlers of European descent, only to have it fall into the
clutches of a tiny tribe of foreigners who never put skin the game and came in with their
gangsterism and were always about accumulation of wealth and power for themselves.
Welcome to America, haven for the Gangs of New York and Grifters about town.
"Perhaps this will finally burst the out-of-control asset price bubble and drop-kick the
Outlaw US Empire's economy into the sewer as the much lower price will rapidly slow the
recycling of what remains of the petrodollar. Looks like Trump's reelection push just fell
into a massive sinkhole as the economy will tank."
Posted by: karlof1 | Mar 9 2020 1:29 utc | 49
....
Call me crazy- but this Virus provides great cover as to why the economy plummets, the
Murikan sheeple will eat it up. Prepare for the double media blitz on the virus AND the
economy tanking as its result.
Don't worry...just continue to go shopping and take those selfies.
It will be hard for the American people to swallow that one. From day 1 I've read a lot of
"articles" and "papers" from know-it-all Western doctors and researchers from commenters here
in this blog, all of them claiming to have very precise and definitive data on what was
happening. A lot of bombastic conclusions I've read here (including one that claimed R0 was
through the roof - it's funny how the R0 is being played down after it begun to infect the
West; suddenly, it's all just a stronger cold...).
And that's just here, in MoA's comment section. Imagine what was being published in the
Western MSM. I wouldn't be surprised there was a lot of rednecks popping their beers
celebrating the fall of China already.
Since China allegedly had a lot of idle industrial capacity - that is, if we take the
Western MSM theories seriously (including the fabled "ghost towns" stories) - then boosting
production wouldn't be a problem to China.
Disclaimer: it's normal for any kind of economy - socialist or capitalist - to have a
certain percentage of idle capacity. That's necessary in order to insure the economy against
unexpected oscillations in demand and to give space of maneuvre for future technological
progress. Indeed, that was one of the USSR's mistakes with its economy: they instinctly
thought unemployment should be zero, and waste should also be zero, so they planned in a way
all the factories always sought to operate at 100% capacity. That became a problem when
better machines and better methods were invented, since the factory manager wouldn't want to
stop production so that his factory would fall behind the other factories in the five-year
plan's goals. So, yes, China indeed has idle capacity - but it is mainly proposital, not a
failure of its socialist planning.
By the latest count, in addition to yuan loans worth 113 billion U.S. dollars granted by
financial institutions and more than 70 billion U.S. dollars paid out by insurance companies,
the Chinese government has allocated about 13 billion U.S. dollars to counter fallout from
the outbreak.
The numbers could look abstract. However, breaking the data down reveals how the money is
being carefully targeted. The government is allocating the money based on a thorough
evaluation of the system's strengths.
...
Local governments are equipped with more local knowledge that allows them to surgically
support key manufacturers or producers that are struggling.
Together, they have borne the bulk of the financial responsibility with an allocation of
equivalently more than nine billion U.S. dollars. It is carefully targeted, divided into
hundreds of thousands of individual grants that are tailor-made by and for each county, town,
city and business.
This is the mark of a socialist system.
The affected capitalist countries will simply use monetary devices (so the private sector
can offset the losses) and burn their own reserves with non-profitable palliatives such as
masks, tests, other quarantine infrastructure etc.
Sounds like US socialism. Basically corporate socialism. Loans are just dollars created out
of thin air, same as in US. Insurance payouts come from premiums, nothing socialist about
that, pure capitalism. Government hand outs to provinces, cities, state owned
corporations,well all of these are run by the party elite, its called pork. US handed out a
lot of pork during the last financial crisis. None of it trickled down to the little people.
I doubt it does in China either.
All crisis are opportunities for the elite to get richer. Those Biolake firms in Wuhan
will make out like bandits. Chinese firms will double the price of API's sold to India and
US. China will knock out the small farmer in the wake of concurrent chicken and swine flu so
the big enterprises take over, a mimicry of the US practice over the last century. China tech
firms will double up on surveillance apps, censoring tools, surveillance and toughen up
social credit restrictions. 5G will allow China to experiment with nanobots to monitor
citizens health from afar (thanks to Harvards Dr Leiber).
Oh yes, socialism with Chinese characteristics is a technocratic capitalists dream. Thats
why the West has never imposed sanctions on China since welcoming them to the global elites
club. Sanctions are reserved for those with true socialism, especially those who preach
equality and god forbid, democracy.
Call me crazy- but this Virus provides great cover as to why the economy plummets, the
Murikan sheeple will eat it up. Prepare for the double media blitz on the virus AND the
economy tanking as its result.
Don't forget the Russians.. They have to be to blame. See they just kept the price of oil low
so now the rest of the world gets gas cheaper than the USA. The USA motorist now has to bail
out the dopey frackers and shale oil ponzis.
Global envy will eat murica. Maybe they will just pull out all their troops and go home.
;)
As far as I know, no one here has mentioned that because of the
globalization drive by Clinton, Bush, and Obama, 85% of the medicines
used in the United States are manufactured in China. Even U.S. troops
depend on medicines from China! China could bring the entire health
system in the U.S. to a stop in a matter of months. This is what our inept
elites have done to America – they gave away the shop. People are beginning
to realize that manufacturing our own medicines is a matter of national
security but it'll take years to bring the factories back to the U.S. So
much for globalization.
Rod Dreher's blog IMHO is the best source for quick info on the coronavirus
because he is in touch with American M.D.'s who are married to women
from China who in turn are in contact with relatives at home and the Chinese
media. Of course, Rod himself can be hysterical at times but, apparently,
that's what it takes to have a successful blog. The M.D.'s are reporting
that the U.S. is already beginning to run out of certain medications, and
recommend stocking up on the basic necessities, i.e., recommend assuming
the mental framework of the survivalists – have plenty of canned goods, etc
and refill your prescriptions ASAP. This is what many people here seem to
forget – the coronavirus's indirect effects due to having no access to medications
may be much worse than the direct pathogenic effects.
The term Globalism has been around from at least the 1960's but its origins come from Cecil
Rhodes Round Tables which were set up around 1900 as a mechanism for Rhodes and his allies from
the British and South African Oligarchs to take over the world. Globalism is another term for
Neoliberalism, which is another term for Corporatism. It is principally pushed by Fake Liberals
who pretend to be lefties, but are actually Corporatists or Corporate Fascists.
Globalism
The aim of Globalism is to transfer all power and wealth from ordinary people to a handful
of Banking Elites, Oligarchs and major Corporate CEO's. The ultimate aim is to set up an anti
democratic, authoritarian one world government where ordinary people are effectively serfs and
have no say, in a system of Neo-Feudalism. We are very nearly already there.
This is being constantly carried out by transferring ever increasing powers from elected
local governments to massive governmental Super States, such as the EU or the Federal
government in Washington DC.
A great example of a Globalist policy was Obama's Corporate Power Grab TPP and TTIP,
Corporate protectionist deals, which transferred power from elected legislatures to
transnational tribunals staffed by Corporate lawyers acting as Judge and Jury.
"Neo-libs" are NOT Centrists. They are extremist supporters of Perpetual War, Corruption,
Corporatism, Authoritarianism & the Transfer of all wealth & power from ordinary ppl to
the Oligarchs & CEOs in the top 0.01%.
"... The Centers for Disease Control and Prevention (CDC) is not billing patients for coronavirus testing, according to Business Insider . "But there are other charges you might have to pay, depending on your insurance plan, or lack thereof," Business Insider noted. "A hospital stay in itself could be costly and you would likely have to pay for tests for other viruses or conditions." ..."
"... Congress needs to immediately pass a bill appropriating funding to cover 100% of the cost of all coronavirus testing & care within the United States. We will not have a chance at containing it otherwise. @tedlieu - as my rep, can you please ensure this is brought up? ..."
"... In the case of the Wucinskis, Kliff reported that "the ambulance company that transported [them] charged the family $2,598 for taking them to the hospital." ..."
"... Last week, the Miami Herald reported that Osmel Martinez Azcue "received a notice from his insurance company about a claim for $3,270" after he visited a local hospital fearing that he contracted coronavirus during a work trip to China. ..."
"... Did anyone expect the unconscionable greed of capitalism to cease when a public health crisis emerges? This is just testing for the virus, wait until a vaccine has been developed so expensive that the majority of the US populace can not afford it at all and people are dropping like flies. Wall Street, never-the-less, will continue to have its heydays ..."
"... The very idea that the defense and "Homeland" security budgets are bloated and additional funding approved year after year but the citizens of this country are not afforded 100% health coverage In a time of global health crisis that could become a pandemic. ..."
"Huge surprise medical bills [are] going to make sure people with symptoms don't get tested. That is bad for everyone." by
Jake Johnson, staff writer Public health
advocates, experts, and others are demanding that the federal government cover coronavirus testing and all related costs after several
reports detailed how Americans in recent weeks have been saddled with exorbitant bills following medical evaluations.
Sarah Kliff of the New York Times
reported Saturday
that Pennsylvania native Frank Wucinski "found a pile of medical bills" totaling $3,918 waiting for him and his three-year-old daughter
after they were released from government-mandated quarantine at Marine Corps Air Station in Miramar, California.
"My question is why are we being charged for these stays, if they were mandatory and we had no choice in the matter?" asked Wucinski,
who was evacuated by the U.S. government last month from Wuhan, China, the epicenter of the coronavirus outbreak.
"I assumed it was all being paid for," Wucinski told the Times . "We didn't have a choice. When the bills showed up, it was just
a pit in my stomach, like, 'How do I pay for this?'"
The Centers for Disease Control and Prevention (CDC) is not billing patients for coronavirus testing,
according
to Business Insider . "But there are other charges you might have to pay, depending on your insurance plan, or lack thereof,"
Business Insider noted. "A hospital stay in itself could be costly and you would likely have to pay for tests for other viruses or
conditions."
Lawrence Gostin, a professor of global health law at Georgetown University, told the Times that
"the most important rule of public health is to gain the cooperation of the population."
"There are legal, moral, and public health reasons not to charge the patients,"
Gostin said.
Congress needs to immediately pass a bill appropriating funding to cover 100% of the cost of all coronavirus testing & care
within the United States. We will not have a chance at containing it otherwise.
@tedlieu - as my rep, can you please ensure this
is brought up?
In the case of the Wucinskis, Kliff reported that "the ambulance company that transported [them] charged the family $2,598
for taking them to the hospital."
"An additional $90 in charges came from radiologists who read the patients' X-ray scans and do not work for the hospital," Kliff
noted.
The CDC declined to respond when Kliff asked whether the federal government would cover the costs for patients like the Wucinskis.
The Intercept 's Robert Mackey
wrote
last Friday that the Wucinskis' situation spotlights "how the American government's response to a public health emergency, like trying
to contain a potential coronavirus epidemic, could be handicapped by relying on a system built around private hospitals and for-profit
health insurance providers."
We should be doing everything we can to encourage people with
#COVIDー19 symptoms to come forward.
Huge surprise medical bills is going to make sure people with symptoms don't get tested. That is bad for everyone, regardless
of if you are insured. https://t.co/KOUKTSFVzD
Play this tape to the end and you find people not going to the hospital even if they're really sick. The federal government
needs to announce that they'll pay for all of these bills https://t.co/HfyBFBXhja
Last week, the Miami Herald reported
that Osmel Martinez Azcue "received a notice from his insurance company about a claim for $3,270" after he visited a local hospital
fearing that he contracted coronavirus during a work trip to China.
"He went to Jackson Memorial Hospital, where he said he was placed in a closed-off room," according to the Herald . "Nurses
in protective white suits sprayed some kind of disinfectant smoke under the door before entering, Azcue said. Then hospital staff
members told him he'd need a CT scan to screen for coronavirus, but Azcue said he asked for a flu test first."
Azcue tested positive for the flu and was discharged. "Azcue's experience shows the potential cost of testing for a disease
that epidemiologists fear may develop into a public health crisis in the U.S.," the Herald noted.
Sen. Bernie Sanders (I-Vt.), a 2020 Democratic presidential candidate, highlighted Azcue's case in a tweet last Friday.
"The coronavirus reminds us that we are all in this together," Sanders wrote. "We cannot allow Americans to skip doctor's visits
over outrageous bills. Everyone should get the medical care they need without opening their wallet -- as a matter of justice and
public health."
Last week, as Common Dreams
reported , Sanders argued that the coronavirus outbreak demonstrates the urgent need for Medicare for All.
The coronavirus reminds us that we are all in this together. We cannot allow Americans to skip doctor's visits over outrageous
bills.
Everyone should get the medical care they need without opening their wallet -- as a matter of justice and public health.
https://t.co/c4WQMDESHU
The number of confirmed coronavirus cases in the U.S.
surged by more than two
dozen over the weekend, bringing the total to 89 as the Trump administration continues to
publicly downplay the severity of the outbreak.
Dr. Matt McCarthy, a staff physician at NewYork–Presbyterian Hospital,
said
in an appearance on CNBC 's "Squawk Box" Monday morning that testing for the coronavirus is still not widely available.
"Before I came here this morning, I was in the emergency room seeing patients," McCarthy said. "I still do not have a rapid
diagnostic test available to me."
"I'm here to tell you, right now, at one of the busiest hospitals in the country, I don't have it at my finger tips," added
McCarthy. "I still have to make my case, plead to test people. This is not good. We know that there are 88 cases in the United
States. There are going to be hundreds by middle of week. There's going to be thousands by next week. And this is a testing issue."
Our work is licensed under a Creative Commons Attribution-Share Alike 3.0 License. Feel free to republish and share widely.
Did anyone expect the unconscionable greed of capitalism to cease when a public health crisis emerges? This is just testing
for the virus, wait until a vaccine has been developed so expensive that the majority of the US populace can not afford it at
all and people are dropping like flies. Wall Street, never-the-less, will continue to have its heydays
A wall street bank or private predator may own your emergency room. A surprise bill may await your emergency treatment above
insurance payments or in some instances all of the bill.
An effort was made recently in congress to stop surprise billings but enough dems joined repubs to kill it. More important
to keep campaign dollars flowing than keep people alive.
fernSmerl 12h I know emergency rooms are being purchased by organizations like Tenet (because they are some of
the most expensive levels of care) and M.D.s provided by large agencies. I'm not as up on this as I should be but a friend of
mine tells me that some of this is illegal. I have received bills that were later discharged by challenge. This is worth investigating
further. Atlasoldie 11h Hmmmm A virus that
overwhelmingly kills the elderly and/or those with pre-exisitng conditions.
Sounds like a medical insurance companies wet dream. As well as .gov social security/medicare wet dream.
The very idea that the defense and "Homeland" security budgets are bloated and additional funding approved year after year
but the citizens of this country are not afforded 100% health coverage In a time of global health crisis that could become a pandemic.
And as has been stated, the unconscionable idea suggested that a possible vaccine (a long way away or perhaps not developed at
all) might not be affordable to the workers who pay the taxes that fund the government? That's insane.
Another example of "American Exceptionalism." China doesn't charge its coronavirus patients, neither does South Korea. I guess
they are simply backward countries.
I own my own home after years of hard work paying it off. It's the only thing of value, besides my old truck, that I have.
If I get the virus, I will stay home and try to treat it the best I can. I can't afford to go to the hospital and pay thousands in
medical bills, with the chance that they'll come after my possessions. America, the land of the _______. Fill in the blank. (Hint:
it's no longer free).
There are other ways to protect your home. Homesteading or living trust. I'm not good at this but I know there are ways to
do it. Hopefully, it would never come to that but outcomes are not certain even with treatment in this case.
As someone
who lost a mother at 5 years old I can sympathize with your grief in losing a daughter-in-law and especially seeing her four children
orphaned. However, I think you miss the point here: This is about we becoming a society invested in each others welfare and not a
company town that commodifies everything including the health and well being of us all.
As a revision it is better but flawed. It is a cost containment bill based on the same research as the republican plan with global
budgets and block grants.
Edited: I encourage you to read this: -ttps://www.rand.org/blog/2018/10/misconceptions-about-medicare-for-all.html Giovanna-Lepore10h oldie:
Part D
Higher education is not free but they do need to become free for the students and payed by us as a society.
Part D is a scam, a Republican scam also supported by corporate democrats because of its profit motive and its privatization
Medicare only covers 80% and does not cover eye and dental care and older folks especially need these services. Medicaid helps but there are limits and one cannot necessarily use it where one needs to go.
Expanded, Improved Medicare For All is a vast improvement. because it covers everyone in one big pool and, therefore, much more dignified
than the rob Paul to pay peter system we have.
Social Security too can be improved. Why should it simply be based on the income of the person which means that a person working
in a low paying job in a capitalist system gone wild with greed will often work until they die.
Pell grants can be eliminated when we have what the French have: publicly supported education for everyone.
The demise of unions certainly did not help but it was part of the long strategy of the Right to privatize everything to the enrichment
of the few.
The overall competence that Canada is handling this outbreak, compared to the USA, is stark. First world (Canada) versus third-world
(USA). Testing is practically available for free, to any suspect person, sick or not, as Toronto alone can run 1000 tests a day and
have results in 4 hours. That is far more than all the US's capacity for 330 million people.
I wonder how long before Canada closes its borders to USAns? Me and my wife (both in a vulnerable age/medical group) should seriously
consider fleeing to my brother's place in Toronto as the first announced cases in Pittsburgh are probably only days away. What about
our poor cat though? We could try to smuggle her across the border, but she is a loud and talkative kitty
Don't want to discourage anyone from any protective measures – but the
"low down" from my veggie store today was that a lot of health professionals
shop there and they think it's being hyped by media. Did get this from my NJ Sen. Menendez –
Center for Disease and Control and Prevention (CDC)
There is currently no vaccine to prevent coronavirus disease 2019 (COVID-19). The best way to prevent illness is to avoid being
exposed to this virus. However, everyday preventive actions can help prevent the spread of respiratory diseases:
Wash your hands often
Avoid close contact with people who are sick.
Avoid touching your eyes, nose, and mouth.
Stay home when you are sick.
Cover your cough or sneeze with a tissue, then throw the tissue in the trash.
For more information : htps://www.cdc.gov/coronavirus/2019-ncov/about/prevention-treatment.html
How it spreads : The virus is thought to spread mainly from person-to-person. It may be possible that a person can get
COVID-19 by touching a surface or object that has the virus on it and then touching their own mouth, nose, or possibly their
eyes, but this is not thought to be the main way the virus spreads. [Read more.] https://www.cdc.gov/coronavirus/2019-ncov/about/transmission.html )
Symptoms : For confirmed coronavirus disease 2019 (COVID-19) cases, reported illnesses have ranged from mild symptoms to
severe illness and death. Symptoms can include fever, cough, and shortness of breath.
Don't want to discourage anyone from any protective measures – but the
"low down" from my veggie store today was that a lot of health professionals
shop there and they think it's being hyped by media.
I agree it is being hyped by the media to the point of being fear mongering. At the same time it is being ignored by the administration to such an extent that really little almost nothing is being done. At some point the two together will create an even bigger problem.
It is like the old adage: "Just because you are paranoid doesn't mean they aren't out to get you." Each over/under reach in considering the reality of the situation has its own problem, which multiply when combined. Every morning when I wake up I say a little atheistic prayer to myself before I get out of bed: "Another day and for better or
worse...".
Well, two reported here in Florida tonight. One in my county, one in the county next door. And more of the "we already knew, but told you late". One person checked into the hospital on Wednesday. We hear it Monday night.
Both were ignored far a long time it seems, and 84 in particular are being watched (roommates, friends, hospital workers not alerted
for several days, the usual). But no one knows every place they had been since becoming infected.
Oh, and they have tested a handful of people. No worry?
I can't see anyway that this level of incompetency is an accident. Spring break is just starting usually a 100's of thousand tourist
bonanza.
So the question is do they want to kill us, or just keep us in fear?
I think the later. But the end result is a crap shoot. So once again, it is a gamble with our lives.
The business of America is business. Sometimes that can go too far and this is one of those times. Making money from the loss,
distress, harm and suffering of others is perverse beyond belief.
"... With Glass-Steagall now removed, legitimate capital such as pension funds could be used to start a hedge to end all hedges. Billions were now poured into mortgage-backed securities (MBS), a market which had been artificially plunged to record-breaking interest rate lows of 1-2% for over a year by the US Federal Reserve making borrowing easy, and the returns on the investments into the MBSs obscene. ..."
"... This is the system which died in 2008. Contrary to popular belief, nothing was actually resolved. For all the talk of an "FDR revival" under Obama, speculation wasn't actually regulated under the Dodd-Frank Act or the Volker Rule of 2010. No productive credit was created to grow the real economy under a national mission as was the case in 1933-1938. ..."
"... Banks were not broken up while derivatives GREW by 40% with the new bubble concentrated in the corporate/household debt sector now collapsing. During this time, nation states continued to be stripped, as austerity was rammed down the throats of nations. ..."
"... It should be no surprise that in the midst of this despair, a creative alliance was consolidated in defense of the interests of sovereign nation states and humanity at large led by the leadership of Russia and China. ..."
"... The Eurasian nations are already firmly committed to this new system, and if the west is to qualify morally to take part in this new epoch, then the first step will be a return to a Glass-Steagall. ..."
"... Joe Kennedy was tasked by FDR with creating the regulations to reform Wall Street, thus earning him their undying enmity. ..."
"... Joe Kennedy has therefore had a hard press and been accused of the Corbyn disease of anti-semitisms, and I imagine the same old experts will be lining up to give him another kicking ..."
"... I would venture that the coronavirus rollocks is all a cover for the inevitable economic collapse. ..."
"... At last. Sanity. A brilliantly truthful article. Almost totally agree with this history of how the fuck the fucking bankers got their hands on almost fucking everything. ..."
"... Interesting article, but the conclusions are off. That solution (i.e. return to Glass-Steagall) would have worked 20 , maybe 10 years ago. We are way to passed that point. The looters are now part of the system– no one will embrace Glass-Steal. The system is on life support. ..."
(Photo by Philip FONG / AFP) (Photo by PHILIP FONG/AFP via Getty Images)
With last Monday's 1000 point stock market plunge the internet has been set ablaze with discussion of a new crash looming on the
horizon. The fact that such a chain reaction collapse was only kept at bay due to massive liquidity injections by the Federal Reserve's
overnight repo loans should not be ignored.
These injections which began in September 2019, have grown to over $100 billion per night all that to support the largest financial
bubble in human history with global derivatives estimated at $1.2 quadrillion (20 times the global GDP!).
Sadly economic illiteracy is so pervasive among today's modern economists that the real reasons for this crisis have been entirely
misdiagnosed with financial experts from CNN, to Forbes blaming the volatility on the spread of the Corona virus!
Not the Corona Virus: The real cause of the oncoming Financial collapse.
As refreshing as it is to hear candid criticisms of the system's failure and even support for the restoration of Glass-Steagall
bank separation from presidential candidates like Bernie Sanders, Tulsi Gabbard or even the lame Elisabeth Warren we find that in
each case, those candidates are on record supporting policies cooked up by the very same oligarchs they appear to despise in the
form of the Green New Deal.
In spite of what many of its progressive proponents would wish, such a global green reform would not only impose Malthusian depopulation
upon nation states globally were it accepted, but would establish a the supranational authority of a technocratic managerial elite
as enforcers of a "de-carbonization agenda".
Due to the rampant lack of comprehension of how this crisis was created such that such idiotic proposals as "green new deals"
are now seriously being suggested as remedies to our current ills, a bit of history is in order.
Some necessary background
"The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the
ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary
profit."
Franklin Delano Roosevelt, first Inaugural Address 1933
Knowing that the "money changers" had only been able to create the great bubbles of the 1920s via their access to the deposits
of the commercial banks, Franklin Roosevelt made the core of his battle against the abuses of Wall Street centre around a 1933 legislation
entitled "Glass-Steagall", named after the two federally elected officials who led the reform with FDR.
This was a bill which forced the absolute separation of productive from speculative banking, guaranteeing via the Federal Deposit
Insurance Corporation (FDIC) only those commercial banking assets associated with the productive economy, but forcing any speculative
losses arising from investment banking to be suffered by the gambler. The striking success of this law inspired other countries around
the world to establish similar bank separation.
Alongside principles of capital budgeting, public credit, parity pricing and a commitment to scientific and technological development,
a dynamic had been created that would express the greatest hope for the world, and the greatest fear for the financial empire occupying
the City of London and Wall Street.
The death of John F. Kennedy ushered in a new age of pessimism and cultural irrationalism from which our society has never recovered.
The destruction of a long term vision as exemplified by the space program, the St. Lawrence Seaway and the New Deal projects had
resulted in a tendency within the population to increasingly look upon present pleasures as the only reality, and future goods as
the mystical expression of the sum of present pleasures.
In this new philosophical setting, so alien in previous epochs, money was permitted to act as a power unto itself for short term
gains instead of serving the investments into the real productive wealth of society. With this new paradigm shift into the "now",
a new economic model was adopted to replace the industrial economic model which had proven itself in the years preceding and following
World War II.
The name for this system was "post-industrial monetarism". This would be a system ushered in by Richard Nixon's announcement of
the destruction of the fixed-exchange rate Bretton Woods system and its replacement by the "floating rate" system of post 1971 fame.
During that same fateful year of 1971, another ominous event took place: the formation of the
Rothschild Inter-Alpha Group of banks under the umbrella of the Royal Bank of Scotland, which today controls upwards of 70% of
the global financial system.
The stated intention of this Group would be found in the 1983 speech by Lord Jacob Rothschild:
"two broad types of giant institutions, the worldwide financial service company and the international commercial bank with
a global trading competence, may converge to form the ultimate, all-powerful, many-headed financial conglomerate."
This policy demanded the destruction of the sovereign nation-state system and the imposition of a new feudal structure of world
governance through the age-old scheme of controlling the money system on the one side, and playing on the vices of credulous fools
who, by allowing their nations to be ruled by the belief that hedonistic market forces govern the world, would seal their own children's
doom.
All the while, geopolitical structures foreign to the United States constitutional traditions were imposed by nests of Oxford-trained
Rhodes Scholars and Fabians who converted America into a global "dumb giant" enforcing a neo colonial program under a "Anglo-US Special
Relationship". The Dulles brothers, McGeorge Bundy, Kissinger, and Bush all represent names that advanced this British directed plan
throughout the 20th century.
London's 'Big Bang'
The great "liberalization" of world commerce began with a series of waves through the 1970s, and moved into high gear with the
interest rate hikes of Federal Reserve Chairman Paul Volcker in 1980-82, the effects of which both annihilated much of the small
and medium sized entrepreneurs, opened the speculative gates into the "Savings and Loan" debacle and also helped cartelize mineral,
food, and financial institutions into ever greater behemoths.
Volcker himself described this process as the "controlled disintegration of the US economy" upon becoming Fed Chairman in 1978.
The raising of interest rates to 20-21% not only shut down the life blood of much of the US economic base, but also threw the third
world into greater debt slavery, as nations now had to pay usurious interest on US loans.
In 1986, the City of London announced the beginning of a new era of economic irrationalism with Margaret Thatcher's "Big Bang"
deregulation. This wave of liberalization took the world by storm as it swept aside the separation of commercial, deposit and investment
banking which had been the post-world war cornerstone in ensuring that the will of private finance would never again hold more sway
than the power of sovereign nation-states.
After decades of chipping away at the structure of regulation that FDR's bold intervention into history had built, the "Big Bang"
set a precedent for similar financial de-regulation into the "Universal Banking" model in other parts of the western world.
The Derivative Time Bomb is Set
In September 1987, the 20-year foray into speculation resulted in a 23% collapse of the Dow Jones on October 19, 1987. Within
hours of this crash, international emergency meetings had been convened with former JP Morgan tool Alan Greenspan introducing a "solution"
which would have the future echoes of hyperinflation and fascism written all over it.
"Creative financial instruments" was the Orwellian name given to the new financial asset popularized by Greenspan, but otherwise
known as "derivatives".
New supercomputing technologies were increasingly used in this new venture, not as the support for higher nation building practices,
and space exploration programs as their NASA origins intended, but would rather become perverted to accommodate the creation of new
complex formulas which could associate values to price differentials on securities and insured debts that could then be "hedged"
on those very spot and futures markets made possible via the destruction of the Bretton Woods system in 1971.
So while an exponentially self-generating monster was created that could end nowhere but in a meltdown, "market confidence" rallied
back in force with the new flux of easy money. The physical potential to sustain human life continued to plummet.
NAFTA, the Euro and the End of History
It is no coincidence that within this period, another deadly treaty was passed called the North American Free Trade Agreement
(NAFTA). With this Agreement made law, protective programs that had kept North American factories in the U.S and Canada were struck
down, allowing for the export of the lifeblood of highly skilled industrial workforce to Mexico where skills were low, technologies
lower, and salaries lower still.
With a stripping of its productive assets, North America became increasingly reliant on exporting cheap resources and services
for its means of existence.
Again, the physically productive powers of society would collapse, yet monetary profits in the ephemeral "now" would skyrocket.
This was replicated in Europe with the creation of the Maastricht Treaty in 1992 establishing the Euro by 1994 while the "liberalization"
process of Perestroika replicated this agenda in the former Soviet Union. While some personalities gave this agenda the name "End
of History" and others "the New World Order", the effect was the same.
Universal Banking, NAFTA, Euro integration and the creation of the derivative economy in a space of just several years would induce
a cartelization of finance through newly legalized mergers and acquisitions at a rate never before seen. The multitude of financial
institutions that had existed in the early 1980s were absorbed into each other at great speed through the 1990s in true "survival
of the fittest" fashion. No matter what level of regulation were attempted under this new structure, the degree of conflict of interest,
and private political power was uncontrollable, as evidenced in the United States, by the shutdown of any attempt by Securities and
Exchange Commission head
Brooksley Born
to fight the derivative cancer at its early stages.
By 1999 a politically castrated Bill Clinton found himself signing into law a treaty authored by then Treasury Secretary Larry
Summers known as the Gramm-Leach-Bliley Act, which would be the final nail in the coffin for the Glass-Steagall separation of commercial
and investment banking in the United States.
The new age of unregulated trading and creation of over-the-counter derivatives caused these strange financial instruments to
grow from $60 trillion in 2000 to $600 trillion by 2008.
The 2000-2008 Frenzy
With Glass-Steagall now removed, legitimate capital such as pension funds could be used to start a hedge to end all hedges.
Billions were now poured into mortgage-backed securities (MBS), a market which had been artificially plunged to record-breaking interest
rate lows of 1-2% for over a year by the US Federal Reserve making borrowing easy, and the returns on the investments into the MBSs
obscene.
The obscenity swelled as the values of the houses skyrocketed far beyond the real values to the tune of one hundred thousand dollar
homes selling for 5-6 times that price within the span of several years.
As long as no one assumed this growth was ab-normal, and the unpayable nature of the capital underlying the leveraged assets locked
up in the now infamous "sub-primes" and other illegitimate debt obligations was ignored, then profits were supposed to just continue
infinitely. Anyone who questioned this logic was considered a heretic by the latter-day priesthood.
The stunning "success" of securitizing housing debts immediately induced a wave of sovereign wealth funds to come into prominence
applying the same model that had been used in the case of mortgage-backed securities (MBS) and collateralized debt obligations (CDO)
to the debts of entire nations.
The securitizing of bundled packages of sovereign debts that could then be infinitely leveraged on the de-regulated world markets
would no longer be considered an act of national treason, but the key to easy money.
Conclusion
This is the system which died in 2008. Contrary to popular belief, nothing was actually resolved. For all the talk of an "FDR
revival" under Obama, speculation wasn't actually regulated under the Dodd-Frank Act or the Volker Rule of 2010. No productive credit
was created to grow the real economy under a national mission as was the case in 1933-1938.
Banks were not broken up while derivatives GREW by 40% with the new bubble concentrated in the corporate/household debt sector
now collapsing. During this time, nation states continued to be stripped, as austerity was rammed down the throats of nations.
It should be no surprise that in the midst of this despair, a creative alliance was consolidated in defense of the interests
of sovereign nation states and humanity at large led by the leadership of Russia and China.
This leadership took the form of the China-led Belt and Road Initiative which has grown to embrace over 130 countries today and
looking more and more like an Asian-led version of the New Deal of the 1930s.
Indeed, China's capacity to unleash long term credit for thousands of international long term infrastructure projects was made
possible by the fact that it was the only country on the globe which had not given up the principles of bank separation which were
destroyed in every other nation.
Very few western figures stood up to this self-induced destruction over the decades, but one notable exception here worth mentioning
is the figure of the late American economist Lyndon LaRouche (1922-2019) who not only resisted this process for
over four decades , but fought alongside the Schiller Institute
to promote New Silk Road as early as 1996 .
With the 2016 Brexit and election of President Trump, a new wave of nationalist spirit has become a fire which the technocrats
have lost their capacity to snuff out.
Increasingly, the idea that nation-states have a power over the private banking system has become revived and discussion for reforming
the now dead Trans-Atlantic system is increasingly shaped not by the calls for a "New World Order" as Sir Kissinger would have liked,
but rather for a New Silk Road and a true New Deal.
The Eurasian nations are already firmly committed to this new system, and if the west is to qualify morally to take part in
this new epoch, then the first step will be a return to a Glass-Steagall.
Excellent article which I could almost understand (my eyes glaze over at any mention of filthy lucre). The author makes clear
that the world took a different trajectory after the convenient death of JFK. As I recall from a biography of his father, Ambassador
Joe, was that Joe Kennedy was tasked by FDR with creating the regulations to reform Wall Street, thus earning him their undying
enmity.
Joe Kennedy has therefore had a hard press and been accused of the Corbyn disease of anti-semitisms, and I imagine the
same old experts will be lining up to give him another kicking
Spinky ,
A New Deal? A Green New Deal or a true New Deal? After revealing all of this incredible amount of manipulation of banking without
going the final step to the ultimate controllers of the deep state, and you suggest another New Deal? What the world needs now
is for the control systems to fail, not to be re supported again with handouts from the corporatocracy to the workers. We need
to reclaim our communities with local food security via non corporate food systems based on living soils. We need to reclaim any
kind of semblance of currency sanity with local currencies and supports. We need health care based on food as medicine, food that
is not GMO and chemical based, but based on healthy local ecosystems, not transportation systems spanning the globe, controlled
by central planners of any ideological stripe. Only if we focus on our own local regions can we ever hope to have any semblance
of sanity again. We need to realize that the corporatocracy, the deep state, doesn't concern itself with ideologies other than
as tools to control us with. All they care about is control, like all neurotics. After going through that entire article outlining
the insanity of regulation and control and deregulation and infinity of financial flows and the obvious insanity of all of it,
you surely must see that the ones with the money making the systems work are totally gonzo and the best the rest of us can do
is focus on what we can do locally, like they have done in Greece. We can't control trillionaires with logical arguments. It ain't
gonna happen. Bernie Sanders can become president and he still isn't going to stop the trillionaires and their insane efforts
to control the planet. He will just be a different type of puppet with different types of handouts and control mechanisms. Voting
is pointless and so are efforts at regulation. At this point, the best we can do is abandon the system, focus on our communities
and self sufficiency locally, and try to avoid the system collapse when it falls around us.
It looks like they're rolling out the police state in the UK
https://www.bbc.com/news/uk-51708550 but we'll have to wait until tomorrow (Tuesday) to get a better idea of what the psychopaths are trying to foist on us.
I would venture that the coronavirus rollocks is all a cover for the inevitable economic collapse.
Dungroanin ,
At last. Sanity. A brilliantly truthful article. Almost totally agree with this history of how the fuck the fucking bankers got their hands on almost fucking everything.
The first quibble is that starting history at FDR ignores the period of the creation of the Fed all the way back to it's prototype
the BoE.
The second is about the creation of the Euro which ignores the political economic security desire of the evolving EU – the
EMU and it's years of alignment of the EC preceding Maastricht and the bastardisation of the original vision by the rapid enrollment
of countries and economies for Geopolitical (and even anti-EU) reasons. The EU being more likely to implement a 'Glass-Steagle'
type of alignment through the level-playing-field ever-closet-union. That chalice being liberally poisoned by the global Banker
interests.
Torontonian,
Interesting article, but the conclusions are off. That solution (i.e. return to Glass-Steagall) would have worked 20 , maybe 10 years
ago. We are way to passed that point. The looters are now part of the system– no one will embrace Glass-Steal. The system is on
life support.
"... the American-led takedown of the post-World War II international system has shattered long-standing rules and norms of behavior. ..."
"... The combination of disorder at home and abroad is spawning changes that are increasingly disadvantageous to the United States. With Congress having essentially walked off the job, there is a need for America's universities to provide the information and analysis of international best practices that the political system does not. ..."
I think this would be very informative for anybody seriously interested in the USA foreign
policy. Listening to him is so sad to realize that instead of person of his caliber we have
Pompous Pompeo, who forever is frozen on the level of a tank repair mechanical engineer, as
the Secretary of State.
Published on Feb 24, 2020
In the United States and other democracies, political and economic systems still work in
theory, but not in practice. Meanwhile, the American-led takedown of the post-World War II
international system has shattered long-standing rules and norms of behavior.
The combination of disorder at home and abroad is spawning changes that are increasingly
disadvantageous to the United States. With Congress having essentially walked off the job,
there is a need for America's universities to provide the information and analysis of
international best practices that the political system does not.
Ambassador Chas W. Freeman, Jr. is a senior fellow at Brown University's Watson
Institute for International and Public Affairs, a former U.S. Assistant Secretary of
Defense, ambassador to Saudi Arabia (during operations Desert Shield and Desert Storm),
acting Assistant Secretary of State for African Affairs, and Chargé d'affaires at
both Bangkok and Beijing. He began his diplomatic career in India but specialized in
Chinese affairs. (He was the principal American interpreter during President Nixon's visit
to Beijing in 1972.)
Ambassador Freeman is a much sought-after public speaker (see http://chasfreeman.net ) and the author of several
well-received books on statecraft and diplomacy. His most recent book, America's Continuing
Misadventures in the Middle East was published in May 2016. Interesting Times: China,
America, and the Shifting Balance of Prestige, appeared in March 2013. America's
Misadventures in the Middle East came out in 2010, as did the most recent revision of The
Diplomat's Dictionary, the companion volume to Arts of Power: Statecraft and Diplomacy. He
was the editor of the Encyclopedia Britannica entry on "diplomacy."
Chas Freeman studied at the Universidad Nacional Autónoma de México and in
Taiwan, and earned an AB magna cum laude from Yale University as well as a JD from the
Harvard Law School.
He chairs Projects International, Inc., a Washington-based firm that for more than three
decades has helped its American and foreign clients create ventures across borders,
facilitating their establishment of new businesses through the design, negotiation,
capitalization, and implementation of greenfield investments, mergers and acquisitions,
joint ventures, franchises, one-off transactions, sales and agencies in other
countries.
He is the author of several books including the most recent
Interesting times: China, America, and the shifting balance of prestige
(2013)
"... Neoliberalism and its usual prescriptions – always more markets, always less government – are in fact a perversion of mainstream economics. ..."
"... The term is used as a catchall for anything that smacks of deregulation, liberalisation, privatisation or fiscal austerity. Today it is routinely reviled as a shorthand for the ideas and practices that have produced growing economic insecurity and inequality, led to the loss of our political values and ideals, and even precipitated our current populist backlash. ..."
"... The use of the term "neoliberal" exploded in the 1990s, when it became closely associated with two developments, neither of which Peters's article had mentioned. One of these was financial deregulation, which would culminate in the 2008 financial crash and in the still-lingering euro debacle . The second was economic globalisation, which accelerated thanks to free flows of finance and to a new, more ambitious type of trade agreement. Financialisation and globalisation have become the most overt manifestations of neoliberalism in today's world. ..."
"... That neoliberalism is a slippery, shifting concept, with no explicit lobby of defenders, does not mean that it is irrelevant or unreal. Who can deny that the world has experienced a decisive shift toward markets from the 1980s on? Or that centre-left politicians – Democrats in the US, socialists and social democrats in Europe – enthusiastically adopted some of the central creeds of Thatcherism and Reaganism, such as deregulation, privatisation, financial liberalisation and individual enterprise? Much of our contemporary policy discussion remains infused with principles supposedly grounded in the concept of homo economicus , the perfectly rational human being, found in many economic theories, who always pursues his own self-interest. ..."
Neoliberalism and its usual prescriptions – always more markets, always less government – are in fact a perversion of
mainstream economics.
As even its harshest critics concede, neoliberalism is hard to pin down. In broad terms, it
denotes a preference for markets over government, economic incentives over cultural norms, and
private entrepreneurship over collective action. It has been used to describe a wide range of
phenomena – from Augusto Pinochet to Margaret Thatcher and Ronald Reagan, from the
Clinton Democrats and the UK's New Labour to the economic opening in China and the reform of
the welfare state in Sweden.
The term is used as a catchall for anything that smacks of deregulation, liberalisation,
privatisation or fiscal austerity. Today it is routinely reviled as a shorthand for the ideas
and practices that have produced growing economic insecurity and inequality, led to the loss of
our political values and ideals, and even precipitated our current populist backlash.
We live in the age of neoliberalism, apparently. But who are neoliberalism's adherents and
disseminators – the neoliberals themselves? Oddly, you have to go back a long time to
find anyone explicitly embracing neoliberalism. In 1982, Charles Peters, the longtime editor of
the political magazine Washington Monthly, published an essay titled
A Neo-Liberal's Manifesto . It makes for interesting reading 35 years later, since the
neoliberalism it describes bears little resemblance to today's target of derision. The
politicians Peters names as exemplifying the movement are not the likes of Thatcher and Reagan,
but rather liberals – in the US sense of the word – who have become disillusioned
with unions and big government and dropped their prejudices against markets and the
military.
The use of the term "neoliberal" exploded in the 1990s, when it became closely associated
with two developments, neither of which Peters's article had mentioned. One of these was
financial deregulation, which would culminate in the 2008
financial crash and in the still-lingering euro debacle . The second was economic
globalisation, which accelerated thanks to free flows of finance and to a new, more ambitious
type of trade agreement. Financialisation and globalisation have become the most overt
manifestations of neoliberalism in today's world.
That neoliberalism is a slippery, shifting concept, with no explicit lobby of defenders,
does not mean that it is irrelevant or unreal. Who can deny that the world has experienced a
decisive shift toward markets from the 1980s on? Or that centre-left politicians –
Democrats in the US, socialists and social democrats in Europe – enthusiastically adopted
some of the central creeds of Thatcherism and Reaganism, such as deregulation, privatisation,
financial liberalisation and individual enterprise? Much of our contemporary policy discussion
remains infused with principles supposedly grounded in the concept of homo
economicus , the perfectly rational human being, found in many economic theories, who
always pursues his own self-interest.
But the looseness of the term neoliberalism also means that criticism of it often misses the
mark. There is nothing wrong with markets, private entrepreneurship or incentives – when
deployed appropriately. Their creative use lies behind the most significant economic
achievements of our time. As we heap scorn on neoliberalism, we risk throwing out some of
neoliberalism's useful ideas.
The real trouble is that mainstream economics shades too easily into ideology, constraining
the choices that we appear to have and providing cookie-cutter solutions. A proper
understanding of the economics that lie behind neoliberalism would allow us to identify –
and to reject – ideology when it masquerades as economic science. Most importantly, it
would help us to develop the institutional imagination we badly need to redesign capitalism for
the 21st century.
N eoliberalism is typically understood as being based on key tenets of mainstream economic
science. To see those tenets without the ideology, consider this thought experiment. A
well-known and highly regarded economist lands in a country he has never visited and knows
nothing about. He is brought to a meeting with the country's leading policymakers. "Our country
is in trouble," they tell him. "The economy is stagnant, investment is low, and there is no
growth in sight." They turn to him expectantly: "Please tell us what we should do to make our
economy grow."
The economist pleads ignorance and explains that he knows too little about the country to
make any recommendations. He would need to study the history of the economy, to analyse the
statistics, and to travel around the country before he could say anything.
Facebook
Twitter Pinterest Tony Blair and Bill Clinton: centre-left politicians who enthusiastically
adopted some of the central creeds of Thatcherism and Reaganism. Photograph: Reuters
But his hosts are insistent. "We understand your reticence, and we wish you had the time for
all that," they tell him. "But isn't economics a science, and aren't you one of its most
distinguished practitioners? Even though you do not know much about our economy, surely there
are some general theories and prescriptions you can share with us to guide our economic
policies and reforms."
The economist is now in a bind. He does not want to emulate those economic gurus he has long
criticised for peddling their favourite policy advice. But he feels challenged by the question.
Are there universal truths in economics? Can he say anything valid or useful?
So he begins. The efficiency with which an economy's resources are allocated is a critical
determinant of the economy's performance, he says. Efficiency, in turn, requires aligning the
incentives of households and businesses with social costs and benefits. The incentives faced by
entrepreneurs, investors and producers are particularly important when it comes to economic
growth. Growth needs a system of property rights and contract enforcement that will ensure
those who invest can retain the returns on their investments. And the economy must be open to
ideas and innovations from the rest of the world.
But economies can be derailed by macroeconomic instability, he goes on. Governments must
therefore pursue a sound
monetary policy , which means restricting the growth of liquidity to the increase in
nominal money demand at reasonable inflation. They must ensure fiscal sustainability, so that
the increase in public debt does not outpace national income. And they must carry out
prudential regulation of banks and other financial institutions to prevent the financial system
from taking excessive risk.
Now he is warming to his task. Economics is not just about efficiency and growth, he adds.
Economic principles also carry over to equity and social policy. Economics has little to say about how
much redistribution a society should seek. But it does tell us that the tax base should be as
broad as possible, and that social programmes should be designed in a way that does not
encourage workers to drop out of the labour market.
By the time the economist stops, it appears as if he has laid out a fully fledged neoliberal
agenda. A critic in the audience will have heard all the code words: efficiency, incentives,
property rights, sound money, fiscal prudence. And yet the universal principles that the
economist describes are in fact quite open-ended. They presume a capitalist economy – one
in which investment decisions are made by private individuals and firms – but not much
beyond that. They allow for – indeed, they require – a surprising variety of
institutional arrangements.
So has the economist just delivered a neoliberal screed? We would be mistaken to think so,
and our mistake would consist of associating each abstract term – incentives, property
rights, sound money – with a particular institutional counterpart. And therein lies the
central conceit, and the fatal flaw, of neoliberalism: the belief that first-order economic
principles map on to a unique set of policies, approximated by a Thatcher/Reagan-style
agenda.
Consider property rights. They matter insofar as they allocate returns on investments. An
optimal system would distribute property rights to those who would make the best use of an
asset, and afford protection against those most likely to expropriate the returns. Property
rights are good when they protect innovators from free riders, but they are bad when they
protect them from competition. Depending on the context, a legal regime that provides the
appropriate incentives can look quite different from the standard US-style regime of private
property rights.
This may seem like a semantic point with little practical import; but China's phenomenal
economic success is largely due to its orthodoxy-defying institutional tinkering. China turned
to markets, but did not copy western practices in property rights. Its reforms produced
market-based incentives through a series of unusual institutional arrangements that were better
adapted to the local context. Rather than move directly from state to private ownership, for
example, which would have been stymied by the weakness of the prevailing legal structures, the
country relied on mixed forms of ownership that provided more effective property rights for
entrepreneurs in practice. Township and Village Enterprises (TVEs), which spearheaded Chinese
economic growth during the 1980s, were collectives owned and controlled by local governments.
Even though TVEs were publicly owned, entrepreneurs received the protection they needed against
expropriation. Local governments had a direct stake in the profits of the firms, and hence did
not want to kill the goose that lays the golden eggs.
China relied on a range of such innovations, each delivering the economist's higher-order
economic principles in unfamiliar institutional arrangements. For instance, it shielded its
large state sector from global competition, establishing special economic zones where foreign
firms could operate with different rules than in the rest of the economy. In view of such
departures from orthodox blueprints, describing China's economic reforms as neoliberal –
as critics are inclined to do – distorts more than it reveals. If we are to call this
neoliberalism, we must surely look more kindly on the ideas behind the most dramatic
poverty reduction in history.
One might protest that China's institutional innovations were purely transitional. Perhaps
it will have to converge on western-style institutions to sustain its economic progress. But
this common line of thinking overlooks the diversity of capitalist arrangements that still
prevails among advanced economies, despite the considerable homogenisation of our policy
discourse.
What, after all, are western institutions? The size of the public sector in OECD countries
varies, from a third of the economy in Korea to nearly 60% in Finland. In Iceland, 86% of
workers are members of a trade union; the comparable number in Switzerland is just 16%. In the
US, firms can fire workers almost at will;
French labour laws have historically required employers to jump through many hoops first.
Stock markets have grown to a total value of nearly one-and-a-half times GDP in the US; in
Germany, they are only a third as large, equivalent to just 50% of GDP.
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Twitter Pinterest 'China turned to markets, but did not copy western practices ... '
Photograph: AFP/Getty
The idea that any one of these models of taxation, labour relations or financial
organisation is inherently superior to the others is belied by the varying economic fortunes
that each of these economies have experienced over recent decades. The US has gone through
successive periods of angst in which its economic institutions were judged inferior to those in
Germany, Japan, China, and now possibly Germany again. Certainly, comparable levels of wealth
and productivity can be produced under very different models of capitalism. We might even go a
step further: today's prevailing models probably come nowhere near exhausting the range of what
might be possible, and desirable, in the future.
The visiting economist in our thought experiment knows all this, and recognises that the
principles he has enunciated need to be filled in with institutional detail before they become
operational. Property rights? Yes, but how? Sound money? Of course, but how? It would perhaps
be easier to criticise his list of principles for being vacuous than to denounce it as a
neoliberal screed.
Still, these principles are not entirely content-free. China, and indeed all countries that
managed to develop rapidly, demonstrate the utility of those principles once they are properly
adapted to local context. Conversely, too many economies have been driven to ruin courtesy of
political leaders who chose to violate them. We need look no further than
Latin American populists or eastern European communist regimes to appreciate the practical
significance of sound money, fiscal sustainability and private incentives.
O f course, economics goes beyond a list of abstract, largely common-sense principles. Much
of the work of economists consists of developing
stylised models of how economies work and then confronting those models with evidence.
Economists tend to think of what they do as progressively refining their understanding of the
world: their models are supposed to get better and better as they are tested and revised over
time. But progress in economics happens differently.
Economists study a social reality that is unlike the physical universe. It is completely
manmade, highly malleable and operates according to different rules across time and space.
Economics advances
not by settling on the right model or theory to answer such questions, but by improving our
understanding of the diversity of causal relationships. Neoliberalism and its customary
remedies – always more markets, always less government – are in fact a perversion
of mainstream economics. Good economists know that the correct answer to any question in
economics is: it depends.
Does an increase in the minimum wage depress employment? Yes, if the labour market is really
competitive and employers have no control over the wage they must pay to attract workers; but
not necessarily otherwise. Does trade liberalisation increase economic growth? Yes, if it
increases the profitability of industries where the bulk of investment and innovation takes
place; but not otherwise. Does more government spending increase employment? Yes, if there is
slack in the economy and wages do not rise; but not otherwise. Does monopoly harm innovation?
Yes and no, depending on a whole host of market circumstances.
Facebook
Twitter Pinterest 'Today [neoliberalism] is routinely reviled as a shorthand for the ideas
that have produced growing economic inequality and precipitated our current populist backlash'
Trump signing an order to take the US out of the TPP trade pact. Photograph: AFP/Getty
In economics, new models rarely supplant older models. The basic competitive-markets model
dating back to Adam Smith has been modified over time by the inclusion, in rough historical
order, of monopoly, externalities, scale economies, incomplete and asymmetric information,
irrational behaviour and many other real-world features. But the older models remain as useful
as ever. Understanding how real markets operate necessitates using different lenses at
different times.
Perhaps maps offer the best analogy. Just like economic models, maps are highly
stylised representations of reality . They are useful precisely because they abstract from
many real-world details that would get in the way. But abstraction also implies that we need a
different map depending on the nature of our journey. If we are travelling by bike, we need a
map of bike trails. If we are to go on foot, we need a map of footpaths. If a new subway is
constructed, we will need a subway map – but we wouldn't throw out the older maps.
Economists tend to be very good at making maps, but not good enough at choosing the one most
suited to the task at hand. When confronted with policy questions of the type our visiting
economist faces, too many of them resort to "benchmark" models that favour the
laissez-faire approach. Kneejerk solutions and hubris replace the richness and humility of
the discussion in the seminar room. John Maynard Keynes once defined economics as the "science
of thinking in terms of models, joined to the art of choosing models which are relevant".
Economists typically have trouble with the "art" part.
This, too, can be illustrated with a parable. A journalist calls an economics professor for
his view on whether free trade is a good idea. The professor responds enthusiastically in the
affirmative. The journalist then goes undercover as a student in the professor's advanced
graduate seminar on international trade. He poses the same question: is free trade good? This
time the professor is stymied. "What do you mean by 'good'?" he responds. "And good for whom?"
The professor then launches into an extensive exegesis that will ultimately culminate in a
heavily hedged statement: "So if the long list of conditions I have just described are
satisfied, and assuming we can tax the beneficiaries to compensate the losers, freer trade has
the potential to increase everyone's wellbeing." If he is in an expansive mood, the professor
might add that the effect of free trade on an economy's longterm growth rate is not clear
either, and would depend on an altogether different set of requirements.
This professor is rather different from the one the journalist encountered previously. On
the record, he exudes self-confidence, not reticence, about the appropriate policy. There is
one and only one model, at least as far as the public conversation is concerned, and there is a
single correct answer, regardless of context. Strangely, the professor deems the knowledge that
he imparts to his advanced students to be inappropriate (or dangerous) for the general public.
Why?
The roots of such behaviour lie deep in the culture of the economics profession. But one
important motive is the zeal to display the profession's crown jewels – market
efficiency, the invisible hand, comparative advantage – in untarnished form, and to
shield them from attack by self-interested barbarians, namely
the protectionists . Unfortunately, these economists typically ignore the barbarians on the
other side of the issue – financiers and multinational corporations whose motives are no
purer and who are all too ready to hijack these ideas for their own benefit.
As a result, economists' contributions to public debate are often biased in one direction,
in favour of more trade, more finance and less government. That is why economists have
developed a reputation as cheerleaders for neoliberalism, even if mainstream economics is very
far from a paean to laissez-faire. The economists who let their enthusiasm for free markets run
wild are in fact not being true to their own discipline.
H ow then should we think about globalisation in order to liberate it from the grip of
neoliberal practices? We must begin by understanding the positive potential of global markets.
Access to world markets in goods, technologies and capital has played an important role in
virtually all of the economic miracles of our time. China is the most recent and powerful
reminder of this historical truth, but it is not the only case. Before China, similar miracles
were performed by South Korea, Taiwan, Japan and a few non-Asian countries such as Mauritius
. All of these countries embraced globalisation rather than turn their backs on it, and they
benefited handsomely.
Defenders of the existing economic order will quickly point to these examples when
globalisation comes into question. What they will fail to say is that almost all of these
countries joined the world economy by violating neoliberal strictures. South Korea and Taiwan,
for instance, heavily subsidised their exporters, the former through the financial system and
the latter through tax incentives. All of them eventually removed most of their import
restrictions, long after economic growth had taken off.
But none, with the sole exception of Chile in the 1980s under Pinochet, followed the
neoliberal recommendation of a rapid opening-up to imports. Chile's
neoliberal experiment eventually produced the worst economic crisis in all of Latin
America. While the details differ across countries, in all cases governments played an active
role in restructuring the economy and buffering it against a volatile external environment.
Industrial policies, restrictions on capital flows and currency controls – all prohibited
in the neoliberal playbook – were rampant.
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Twitter Pinterest Protest against Nafta in Mexico City in 2008: since the reforms of the
mid-90s, the country's economy has underperformed. Photograph: EPA
By contrast, countries that stuck closest to the neoliberal model of globalisation were
sorely disappointed. Mexico provides a particularly sad example. Following a series of
macroeconomic crises in the mid-1990s, Mexico embraced macroeconomic orthodoxy, extensively
liberalised its economy, freed up the financial system, sharply reduced import restrictions and
signed the North American Free Trade Agreement (Nafta). These policies did produce
macroeconomic stability and a significant rise in foreign trade and internal investment. But
where it counts – in overall productivity and economic growth – the
experiment failed . Since undertaking the reforms, overall productivity in Mexico has
stagnated, and the economy has underperformed even by the undemanding standards of Latin
America.
These outcomes are not a surprise from the perspective of sound economics. They are yet
another manifestation of the need for economic policies to be attuned to the failures to which
markets are prone, and to be tailored to the specific circumstances of each country. No single
blueprint fits all.
A s Peters's 1982 manifesto attests, the meaning of neoliberalism has changed considerably
over time as the label has acquired harder-line connotations with respect to deregulation,
financialisation and globalisation. But there is one thread that connects all versions of
neoliberalism, and that is the
emphasis on economic growth . Peters wrote in 1982 that the emphasis was warranted because
growth is essential to all our social and political ends – community, democracy,
prosperity. Entrepreneurship, private investment and removing obstacles that stand in the way
(such as excessive regulation) were all instruments for achieving economic growth. If a similar
neoliberal manifesto were penned today, it would no doubt make the same point.
Critics often point out that this emphasis on economics debases and sacrifices other
important values such as equality, social inclusion, democratic deliberation and justice. Those
political and social objectives obviously matter enormously, and in some contexts they matter
the most. They cannot always, or even often, be achieved by means of technocratic economic
policies; politics must play a central role.
Still, neoliberals are not wrong when they argue that our most cherished ideals are more
likely to be attained when our economy is vibrant, strong and growing. Where they are wrong is
in believing that there is a unique and universal recipe for improving economic performance, to
which they have access. The fatal flaw of neoliberalism is that it does not even get the
economics right. It must be rejected on its own terms for the simple reason that it is bad
economics.
A version of this article first appeared in Boston
Review
In unusually blunt statements, top Chinese officials hit back during last weekend's Munich Security Conference at Washington's
confrontational stance toward Beijing on a range of issues, including the Chinese tech giant Huawei and China's response to the coronavirus.
Trump administration officials, supported to the hilt by top Democrats, took a particularly aggressive attitude at the conference,
warning European powers that intelligence sharing could end if Huawei equipment were used in building 5G telecommunications networks.
US Secretary of State Mike Pompeo branded "Huawei and other Chinese state-backed tech companies" as "Trojan horses for Chinese
intelligence." In his speech, US Defence Secretary Mark Esper accused Beijing of carrying out a "nefarious strategy" through Huawei.
In a bid to intensify its pressure on its European allies, the US last week announced new charges of racketeering and theft of
trade secrets against Huawei. These follow the arrest of the company's chief financial officer, Meng Wanzhou, in Canada last year
after the US filed charges of fraud and sanctions evasion, and sought her extradition.
Esper made clear that the US attack on China was across the board. He declared that under President Xi Jinping's rule, "the Chinese
Communist Party is heading even faster and further in the wrong direction -- more internal repression, more predatory economic practices,
more heavy-handedness, and most concerning for me, a more aggressive military posture."
Asked about the speeches by Pompeo and Esper, Chinese Foreign Minister Wang Yi did not mince words, branding the US allegations
as "lies." He said their remarks were part of "a common scenario" everywhere they went. "I don't want to waste our time responding
to each and every thing they've said. The thing I want to say is that all these accusations against China are lies and not based
on facts."
Wang pointed to the driving force behind the confrontation -- the US drive to ensure its continued global domination by every
available means. "The root cause of all these problems and issues is that the US does not want to see the rapid development and rejuvenation
of China, still less would they want to accept the success of a socialist country, but that is not fair, China has the right to develop."
China, with its burgeoning markets, stock exchanges, billionaires and deep social divide, is not a socialist country. In fact,
Huawei, as Wang said in countering US criticism, is a privately-owned company: the world's largest telecommunications equipment provider
with nearly 200,000 employees.
Wang described the US attack on Huawei as "immoral" and asked: "Why can't America accept that other countries' companies can also
display their talent in the economy, in technology? Perhaps deep down, it doesn't hope to see other countries develop." He accused
the US of resorting to rumours to defame Huawei and declared there was no credible evidence that the company has a so-called back
door that harms US security.
The US accusations against China and Huawei are utterly hypocritical. The revelations by the whistleblower Edward Snowden demonstrated
that the US routinely spies electronically on the world's population, including governments and government leaders, allies and rivals
alike, as well as its own citizens.
The US intelligence establishment has long relied on electronic "back doors" provided by American tech corporations to gather
intelligence. The use of Huawei equipment not only threatens the economic position of US companies, but could undermine US spying
operations.
China's forthright push back against heavy US criticism in Munich stems firstly from the relentless campaign by Washington, not
only in propaganda, but through trade war measures and a huge military build-up in Asia against Beijing. Secondly, the Chinese regime
is seeking support from the European powers. Wang's comments gained traction in Munich amid deepening conflicts between the US and
its erstwhile European allies.
Britain has given the go-ahead for the inclusion of Huawei components in non-core aspects of its 5G rollout, while Germany and
France have signaled they will do the same. The European decisions are largely driven by technical and economic factors, as Huawei
is a leader in 5G technology and produces at a lower cost.
Washington's threats to end intelligence-sharing arrangements with the European powers could end up affecting US spying operations
as much as those of its European rivals. The New York Times
The US has sought to exploit the coronavirus outbreak in China to add to the barrage of criticism against Beijing. Trump's
economic adviser Larry Kudlow last week complained about the lack of Chinese transparency over the disease. He declared that Washington
was disappointed that American health experts had not been allowed into China, and questioned Chinese statistics.
A considerable portion of Wang's speech to the Munich Security Conference was devoted to defending China's handling of the
outbreak. He said the coronavirus largely had been confined to the city of Wuhan and Hubei Province, and the number of cases outside
China was a small percentage of the total. Wang said this was the outcome of the rapid development of a test for the virus, the dispatch
of 20,000 health workers to the area and the building of new health facilities.
Wang said: "In the spirit of openness and transparency, we promptly notified the world about the outbreak and shared the genetic
sequence of the virus. We have been working closely with WHO [World Health Organisation], invited international experts to join our
ranks, and provided assistance and facilitation to foreign nationals in China."
In comments to Reuters, the Chinese foreign minister effectively criticised the harsh travel restrictions imposed by the US
on any foreign nationals coming from China. "Some countries have stepped up measures, including quarantine measures, which are reasonable
and understandable, but for some countries they have overreacted which has triggered unnecessary panic," he said.
If Washington expected European support on the issue, its hopes were dashed. Conference chairman Wolfgang Ischinger praised
China's response to the epidemic and declared it was "not getting a very fair deal I think China deserves a little bit of compassion
and cooperation, and encouragement rather than only criticism."
China's reaction to the US criticisms in Munich underscores again the sharpening geo-political rivalries and break-up of longstanding
alliances being fueled by worsening global economic conditions. Far from responding to the lack of support from Europe against China
by moderating its confrontation, the US will intensify its provocative campaign, not just against Beijing, but any threat to its
global position, including from its European allies.
For a fictional character, homo economicus has had a pretty good run
.
Since the 1950s,
this mono-motivated, self-seeking figure has stalked the pages of economics textbooks, busy deciding each
action according to a rational calculus of personal loss and gain. But more recently his territory has
shrunk as experts on human nature have demonstrated what any decent novelist could have told them: our real
selves are nothing like this.
Unfortunately, many economists still plug this flawed view of people into computer models that determine
all kinds of things that impact our lives, from how much workers get paid to how we value life or common
goods, such as a clean environment. The results can be disastrous.
Typically, economists aren't that keen on admitting that their work is deeply connected to morality --
never mind that Adam Smith himself was a moral philosopher. But if you ask a question as simple as how to
price a used car, you quickly find that moral concerns and economic activity happen together all the time.
In his 2012 book,
The Righteous Mind
, New York University social psychologist Jonathan Haidt
explored why so many perfectly intelligent people have misread human nature– and not just economists, but
plenty of psychologists and even (shocker!) people who identify as politically liberal. For him, the key to
getting to know ourselves properly lies with moral psychology, a newish strain that pulls together
evolutionary, neurological, and social-psychological research on moral emotions and intuitions.
As Haidt sees it, we are creatures driven by moral intuition and attuned to both our personal interests
as well as what's good for the groups with which we identify. He points out that in order to thrive, we have
to appreciate our complex, interactive natures and see each other more clearly and empathetically – an
observation that may be especially useful at a time when threats like climate change and the concentration
of money and power threatens all of us, no matter who we are or what groups we belong to. At the moment, we
aren't doing such a good job of this.
In Haidt's view, the conscious mind is like a press secretary spewing after-the-fact justifications for
decisions already made. Thinkers like David Hume and Sigmund Freud were certainly hip to this idea, but
somehow a lot of economists missed the memo, as did psychologists following dominant rationalist models in
the 1980s and '90s.
Haidt invites us to consider ourselves as a rider (our analytical, rational part) and an elephant (our
emotional, intuitive part). The rider holds the reins, but the beast below is in charge, urged on by the
complex interaction of genetic influence, neural wiring, and social conditioning. The rider can advise the
elephant, but the elephant calls most of the shots.
Fortunately, the elephant is quite intelligent and equipped with all sorts of intuitions that are good
for conscious reasoning. But elephants get very stubborn when threatened and like to stick to what's
familiar. The rider, for her part, is not exactly a reliable character. She's not really searching for
truth, but mostly for ways to justify what the elephant wants.
That's why a rebel economist challenging conventional thinking about subjects like human nature faces a
heavy lift. Experts have to see a lot of evidence accumulating across many studies before they reach a point
where they are finally forced to think differently. Scientific studies are even less helpful in persuading
the general public.
When I asked Haidt how the mavericks could help their cause, he noted that humans are social creatures
more influenced by people than by ideas. So, it matters
who
says something as much as
what
they say. It also makes a difference how they say it: elephants don't like to be insulted, and they lean
towards arguments made by people they like and admire. Not very rational, perhaps, but likely true.
Homo Duplex
The notion that human beings are social creatures is another strike against homo economicus. We are
selfish much of the time, but we are also "groupish," as Haidt puts it, and perhaps better described as
"homo duplex" operating on two levels. Here he offers another animal analogy, suggesting that we're 90%
chimp and 10% bee, meaning that from an evolutionary perspective, we are selfish primates with a more
recently developed a "hivish" overlay that lets us occasionally devote ourselves to helping others, or our
groups.
This helps explain why you can't predict how someone is going to vote based on their narrow
self-interest. Political opinions are like badges of social membership. We don't just ask what's in it for
us, but also what it means to our groups. Having a kid in public school doesn't tell you that a person will
support aid to public schools, probably because there are group interests in play. What unifies us in
groups, Haidt argues, are certain moral foundations that allow us to share emotionally compelling worldviews
that we can easily justify and defend against any attack by outsiders who don't share them. And we can get
pretty nasty about those outsiders.
This begins to sound like ugly tribalism, the kind of stuff that leads to war. But Haidt reminds us that
this propensity also prepares us to get along within our groups and even to cooperate on a large scale -- our
human superpower. We differ from other primates because we exhibit shared intentionality: we're able to plan
things together and work together towards a common goal. You never see two chimps carrying a log – they just
don't act in concert that way. We do, and in our groups we've developed mechanisms to suppress cheaters and
free riders and reap the benefit of division of labor. Groups of early humans may well have triumphed over
other hominids not because they smashed them with clubs , but because they out-cooperated them.
To better understand how we operate in political groups, which have lately become more antagonistic,
Haidt created a map of our moral landscape called Moral Foundations Theory which delineates multiple
"foundations" we presumably use when making moral decisions, including care/harm, fairness/cheating,
loyalty/betrayal, authority/subversion, sanctity/degradation, and liberty/oppression. (Some scholars have
challenged
his system, offering alternative maps). His research indicates that liberals and
conservatives differ in the emphasis they place on each of these foundations, with conservatives tending to
value all six domains equally and liberals valuing the first two much more than the other three.
Haidt argues that liberals tend to home in on care and fairness when they talk about policy issues, which
can put them at a disadvantage vis-à-vis conservatives, who tend to activate the whole range of foundations.
Republicans are thus better able to talk to elephants than Democrats because they possess more ways to go
for the gut, as it were. If Democrats want to win, Haidt warns, they need to think of morality as more than
just care and fairness and to try to better understand that foundations more important to conservatives,
like deference to authority or a reverence for sacredness, are not pathological, but aspects human social
evolution that have helped us survive in many situations.
When he wrote
The Righteous Mind
, Haidt noted that Democrats had espoused a moral vision that
did not resonate with many working class and rural voters. In the current presidential race, he sees some
progress on economic populism from the Bernie Sanders wing, in part because Occupy Wall Street got people
attuned to issues of fairness and the oppression of the 1%. When politicians talk about the abuse of
political and economic power, they can activate not only care and fairness concerns, but also the
liberty/oppression foundation which people respond to across the political spectrum.
But this line is also tricky because, as Haidt pointed out to me, "Americans don't really hate their
rich." (One
recent study
suggested only 25% of Americans have a negative view of the rich, though a majority said
they should be taxed more).
Haidt also worries that many Democrats, particularly elites, are currently engaging with cultural issues
by embracing a what he called a "common enemy" form of identity politics which "demonizes people at the
intersectional point of evil (white men)" rather than focusing on a "common humanity" story which "draws a
larger circle around everyone. (Haidt plunged into controversial territory with his 2018 book,
The
Coddling of the American Mind
, which argues that college campuses are shutting down useful debate
through "safetyism" that protects students from ideas considered harmful or offensive).
He observed to me that while the polarizing Donald Trump may have turned off the younger generation "for
the next few decades," Democrats may be failing "to look seriously at the ways that their social
policies -- and their messengers -- alienate many moderates." Newly "woke" white elites, for example, who see
racism as the driver of nearly every phenomenon, may be having an unintended negative effect in his view.
When they ascribe Trump's victory to racial resentment and ignore the concerns of those who fear sliding
down the economic ladder, for example, they may turn off potential allies. Call a person or a group racist
and you won't be able to convince them to support your view on anything. Their elephants aren't listening.
Haidt acknowledges that our moral matrices are not written in stone; they can and do evolve, sometimes
quite rapidly within a couple of generations. Economic forces surely act to shift attunement to moral
foundations, making people more susceptible, for example, to anti-immigration arguments. If you fail to
consider the economic influence on this kind of moral activation, you'll be less equipped to address
problems like ethnic conflict. Being able to step outside our own moral matrix is essential to persuasion.
We not only have to talk to the elephant, but see the beehive.
We also have to remember the truth is not likely to be something held by any one individual, but rather
something that emerges as a large number of flawed and limited minds exchange views on a given subject. Our
smarts and flexibility are increased by our ability to cooperate and share information. Economists, for
example, improve their understanding of human nature by opening up to other social sciences and the
humanities for insight.
There is evidence that economists are paying attention to moral psychology. In their book
Identity
Economics
, Nobel laurate
George
Akerlof
and Rachel Kranton argue that people identify with "social categories," and that each category,
whether it be Christian, mother, or neighbor, has associated norms or ideals to which people want to aspire.
Sam Bowles'
The Moral Economy
shows that monetary incentives don't work in many situations and that
policies targeting our selfish instincts can actually weaken the institutions which depend on our more
selfless impulses– including financial markets. At the Institute of New Economic Thinking (INET), the
connection between economics and morality has been explored by
INET president Rob
Johnson and political philosopher Michael Sandel
as well as thinkers like
economic historian Robert Skidelsky
and
economist Darrick Hamilton
.
All of this rather bad news for homo economicus. But pretty good news for humanity.
we're 90% chimp and 10% bee, meaning that from an evolutionary perspective, we are selfish primates
with a more recently developed a "hivish" overlay that lets us occasionally devote ourselves to helping
others, or our groups.
Well if one wants to take an "evolutionary perspective" (works for me) then obviously our instincts are
shaped to promote survival of the species and not just the individual. And if that's true then the
Randian/economics version of rational isn't rational at all. Perhaps it would be clearer to talk about this
problem in terms of rational versus irrational rather than appealing to some "altruism gene" that will
supposedly save us. IMO only that rational, intelligent, creative aspect of humans will save us from that
irrational side that is indeed totally instinctive. Somehow we've gotten this far–despite everything–"by the
skin of our teeth." Here's hoping those minds will find a path.
Over what? Carol's point about the sociology of Ayn Rand?
In point of fact, Carol, altruism is always secondary (where it appears) in nature. Selfishness
ensures the fittest genes survive to carry on the species. Only in the face of catastrophe does
altruism at
the individual level become more valuable than selfishness. So, indeed it is because of our
selfishness, because we've struggled by the skin of our teeth, that we as a species have survived and
prospered.
but, but erik, that leaves out all the energy saving advantage we get from a cohesive group
which is also determined to survive and carry on centuries of knowledge on just how to do so .
Just a quick jab: why does Haidt, and others, assume that feelings are inferior to logic and intellect?
Seems to me they are inter-twined, separate-able, but equal in value, if not dimension.
It could be a three way set-up instead of a two way (like markets, which are commonly spoken of as two:
buyer and seller, but are three: buyer, seller, and banker /money man). Man's consciousness could be 1)
feelings, 2) logic /intellect, and 3) the decider (call out to ex-prez W, so got political jab in too!).
In fairness to Haidt, I think he's more nuanced than "rationality good; feelings bad"
I have encountered more of that rather rigid approach among those who have read "Thinking Fast and
Slow" perhaps because that book doesn't do as good a job of outlining as crucial the capacity to
recognize which situations favor System 1 thinking and those which favor System 2 -- a problem compounded
by the emphasis in the book on the rather narrow range of circumstances in which System 2 is clearly
superior.
Jeez – I spent years getting an Econ degree in the homo economus/monetarist era (dark times), when I
should've been making my way through my D&D Dungeon Master's sci fi collection!
I always thought that the Professors who thought up homo economus never went with their wives (as
it was back then) to the grocery store.
The rational choice, always, was the store brand. DelMonte and all other such brands owed their
very existence to non-rational, emotional choices–by tons of people.
'Rational' just means 'consistently following an internally sound logic.' A machine does that –
following the logic of its mechanics. A computer does that – following the logic of code. An animal does
that – following the logic dictated by emotion. And an animal certainly does that better than we humans
whose behaviors become muddled by ideas. Truly, by this measure animals are better machines than humans –
more mechanical, more emotional, more logical, more rational.
That's why a rebel economist challenging conventional thinking about subjects like human nature faces
a heavy lift. Experts have to see a lot of evidence accumulating across many studies before they reach a
point where they are finally forced to think differently.
As an ex-organic chemist, I was astonished to find that more than a few scientists cling to outdated
paradigms with a tenacity that would shame the most rigid religious fundamentalist. Cf. heliobacter,
continental drift, even the heliocentric solar system.
While "continental" drift was first proposed in about 1600 AD it was not completely wrong. Like many
initial geologic theories it was partially correct. It is now known that it is not the "continents" that
move across the earth, but tectonic plates, on which the continents are located, that is creating
movement. The convection of the earths interior magma is thought to be the movement vector for the
plates.
"this propensity also prepares us to get along within our groups and even to cooperate on a large scale --
our human superpower"
Yuval Harari's central point revolves around this. Humans, like other primates, engage in "grooming"
activities to maintain group cohesion. With the development of language, this "grooming" went from picking
lice out of each other's hair (fun!) to gossiping about each other. But this behavior seems to be unable to
maintain a group size larger than 150 individuals, not surprising considering the person-to-person contact
necessary.
To gather a larger group around common goals requires myth, Harari says. Early myths involved gods, often
imagined as living in a separate world with structures parallel to our own. In a polytheistic society, the
head god related to the lesser gods as a king related to his human subjects. In the henotheistic Ancient
Near East, nations like Babylon, Assyria and even the southern Israelite kingdom of Judah envisioned a
parallel war occurring in "heaven" between the national gods when two countries went to war. These days,
there are new, completely secular myths like what Harari calls "Money" that orient our world around
materialism, competition and power.
William H. McNeill also noted the almost universal human behaviours of mass marching/dancing (which
requires and reinforces cooperation) as indicative of a social behaviour rooted in a biological need
We also have "mirror neurons" for a reason -- one that baffles the proponents of "homo economicus"
I was more interested in this article from the political perspective; i.e. what liberals get wrong.
Like many who read this site, I'm interested in the primary elections and want Bernie to win.
But Bernie's message could be better by being more attuned to some of the "Moral Foundation" issues Haidt
raises.
Take Medicare for All which, by most accounts, is the leading issue to most voters:
Talking more about Medicare being a simple and successful 50+ year program appeals to authority. Medicare
Advantage plans can be framed as subversion. Or loyalty / betrayal. Also consider sanctity / degradation.
Talking more about the 80/20 aspect of coverage addresses fairness / cheating and "free stuff"
Not talking about eliminating private insurance shows concern for liberty / oppression. I would actually
make a joke about people who would still want private insurance after M4A becomes available
Just food for thought in terms of how the ideas contained in the article could be applied.
And the next time some nefarious reporter asks how we will pay for this or that; I wish someone will just
say "Mexico will pay for it".
As an economist (M.A. in Econ), I am elated to see Jonathan Haidt's work receive this kind of attention
from serious thinkers. In addition to the reasons cited by Lynn Parramore, I believe Professor Haidt's work
validates, by building on, the work of Humanistic Economics by Professor Mark Lutz (Ph.D. UC-Berkeley) and
Dr. Kenneth Lux. Moreover, Professor Haidt's work appears, to me, to further validate the astute criticisms
of Dean Baker and Mark Weisbrot for neoclassical Marxists' use of "Rational Economic Man" in their
paradigm's modls (no "e"). Having obtained my degree about 25 years ago, basically in humanistic economics,
I am sure that adoption of such thinking by grad students in economics can help rescue humanity from its
current barbaric state. I just hope there's still time left.
On hate and having negative view on the rich
: this article mentions that "only" 25% of
Americans have a negative or very negative view of the rich". Only is the proper word? I would say that is a
lot of bad feelings. Hate is not a sane feeling and we are inclined to hate in stressful situations. So, if
25% of Americans, have these negative feelings (8% very negative) about the rich this spells quite a lot of
despair/stress. It would be interesting a comparison with other countries to evaluate if this is normal by
international standards.
I mention this because stress & despair might explain, at least partially, the relative low turnout in
general elections in the US compared with other OECD countries. Does anybody here know the evolution of
electoral turnout in the US since 1950? Has turnout declined with time?
I remembered an old David Brooks column mentioning that Americans vote their aspirations.
I'm not a fan of Brooks, but this 20 year old column may explain some USA citizens' current
attitudes..
Here is a sample quote (about a proposed Al Gore estate tax):
"The most telling polling result from the 2000 election was from a Time magazine survey that asked
people if they are in the top 1 percent of earners. Nineteen percent of Americans say they are in the
richest 1 percent and a further 20 percent expect to be someday. So right away you have 39 percent of
Americans who thought that when Mr. Gore savaged a plan that favored the top 1 percent, he was taking a
direct shot at them."
While it has been 20 years since this was published, one might suspect American "I'll be rich"
aspirations have taken a beating during this interval.
The economics profession has ridden the hydrocarbon energy spend of the last 100+ years as hydrocarbon
energy has been pulled from the ground and converted into "economic growth".
It will be interesting to see how the profession responds to future events with climate change, peak
human population and peak energy inexorably (in my view) arriving.
One thing that has happened is that over the past several decades so- called liberals have agreed with
conservatives that the market represents freedom and efficiency and the government represents the opposite.
Some younger people are rebelling, but older voters have been hearing this their whole lives without
challenge until Sanders came along.
I just read a description of a Trump rally at the NYT and I think it was accurate. The reporters just
repeated what ordinary people said there. One guy claimed the Democrats have just swung so far left he can't
support them anymore, yet on economics this simply isn't the case. Sanders just represents what Democrats
used to be on economic issues.
I enjoyed the article, and agree with the main ideas, but he was a little rough on our primate cousins.
Chimps may not cooperate by "carrying logs", but, like a lot of social animals, they work together when,
say, hunting other primates. And most social animals have a pretty well-developed sense of fairness (watch
what happens if you give one of your dogs a treat and ignore the other one).
Yes I am trying to think about what chimps would actually need to transport a log for. That famous
jocular saying by one of the researchers "we were beginning to think the difference between us was merely
cultural".
Is that a sense of fairness or a sense of competition or perhaps a sense of both? Each dog would
prefer being the favorite but will accept being the equal.
Dogs are an interesting analogy because in my observation they are, as social animals, so much like
us. Perhaps the main takeaway from the above article is the belief that there is such a thing as "human
nature" and that we have a kinship with the other species. Needless to say such a view was once anathema
in an intellectual climate dominated by religion and a human centric world view. Even now people like
Pence are "dominionists" and believe that humans have been given dominion over the planet and all its
other species because of what it says in the Bible. Power always needs to justify itself–perhaps because
of that innate sense of fairness/competition that you mention.
Haidt got me thinking about language too. His thesis could be talking about the evolution of
language itself. The evolution of rationalization. Since he seems to premise his insights on human
intuition and a certain bedrock of morality that all animals seem to have. Pre language. Can we
attribute the morality of animals to a lack of rationalization? They do seem to lack immorality. If we
were mute, but very intuitive as we are, what effect would our intuition have on our communication
skills and our actions? Raising the question here, Is language the emotional middleman that is always
(duplex) less than rational and causing all this confusion? Sort of thinking here about someone giving
an over-the-top sermon, like an economics professor claiming that we are all homo-economicus.
Morality traditionally implies conscious choice so I'm not sure that's relevant to the animal
world. Guess what I'm saying is that we are similar to certain animals in our instincts, not our
intelligence.
However the language of economic profs is deceptive since they should be saying "irrational self
interest" rather than "rational self interest." Pure selfishness usually ends up being bad even for
the selfish.
Also on this very subject, last night on Nova, the one about dogs, their domestication (or
ours?) and their amazing ability to relate – communicate. They attribute a dog's ability to
communicate to oxytocin – because they thrive on love and friendship. I do believe that because
I've only had one aloof dog and he was very wolf-like. A throwback. Indicating that evolution
tends toward love – not to be too corny. Maybe Oxytocin will save us ;-)
If by "pack animals" you mean species that live in societies I never said they didn't. But
obviously there is also cooperation on some level and social bonding. I do think this is a very
complicated subject and not easily reduced to simplifications by yours truly–not a biologist–or the
above article. But arguably the above is correct in asserting that economists themselves are
ignoring the complications.
And for those interested, here is
a paper published in 2008
that empirically demonstrates that the "Homo economicus" approach in this case
disguised in the form of "median-voter model" is bullshit regarding inequality, redistribution and public
opinion, though they regard it as intelectually compelling. Economists!
>Experts have to see a lot of evidence accumulating across many studies before they reach a point where
they are finally forced to think differently.
Ummm, the whole, underlying maybe, point of the rest of the article is that the dominant economic thought
of our age has nothing to do with evidence. Yet they overthrew Keynes. "Trust us, We're Experts" or
something like that right?
I just finished slogging through The Master and His Emissary by Iain McGilchrist, which harmonizes with
this article. Instead of the rider on an elephant, McGilchrist writes of the functions of the left and right
hemispheres of the brain, which are significantly different. The left brain is verbal, analytical, and task
oriented. It likes straight lines. (This strikes me as a description of the pseudo-accuracy and busyness of
economics.) The right brain sees a larger picture, is less talky, and is generally better at perceiving the
world around us. It is the hemisphere that can attain greater knowledge even if it is not as adept at
expressing such knowledge in words. (The "bee" part of the brain–and more than 10 percent.)
McGilchrist's book is good, but way too long, which is an irony given that he asserts that the left
brain, the emissary, is trying to subvert the master, the part of the brain less likely to go on and on and
on in words.
But this era of too many easy paradigms (economics, "free markets"), too much flimsy analysis (critical
studies, queer studies, economics, New York Times op-ed columnists), and too much talk (social media) is
very much left-brained. I think that what is wearing all of us out is the endless tsunami of word salad.
Economics, with its insistance on rationality rather than reasonableness (left brain rather than right
brain), fell into the salad bowl a long time ago.
Yes. I, too, think this is a very important book. Being retired, I don't think it's too long. I revel
in how much stuff I got for only thirty bucks (or whatever it was -- something like that.)
The neurological case is complete after 94 very dense pages. (535 citations. Pleasantly readable prose,
though, and that bizarre experiment that "proves" that porcupines are monkeys.) After that he traces the
effects and footprints of the two independent modes of thought through philosophy, art, music, and,
generally, the working of our societies from ancient to post-modern.
There's a strong parallel to Daniel Kahneman's Fast and Slow thinking, the right hemisphere being the
fast one. The one wrinkle is that language is the province of the left hemisphere, but Kahnemann finds
that fast thinking is perfectly adept at small-talk, as long as it doesn't get too abstract.
Worst for me is that now that I've read it, I've got to go back into Heidegger, all the other modern
Germans, John Dryden, classical and modern painting, religion
So how would homo economicus work out in anything other than a modern industrial system? In earlier
times, I would say that at the least they would be shunned as a danger to the community or maybe even thrown
out altogether as being incapable of working in a close-knit community. Want a modern example instead? How
about the fact that you cannot have a military based on the idea of homo economicus unless you are talking
about a band of mercenaries. This whole stupid idea is why every relationship these days whether for work,
employment, government, etc is defined by contracts. In short, it is a cookie-cutter idea that come in only
one shape.
"Since the 1950s, this mono-motivated, self-seeking figure has stalked the pages of economics
textbooks, busy deciding each action according to a rational calculus of personal loss and gain."
Advertising gave up with that sort of approach years ago.
Advertisers appeal to deep seated wants and desires and this works really well, so they haven't looked back.
Are the wealthy much more rational?
Let's have a look at adverts targeted at wealthy people.
Are they a long list of specifications and comparisons saying why these products are better?
No.
An advert for a Sunseeker luxury yacht conveys luxury, elegance, being able to get away from it all and
there is usually a young woman in the back in a bikini; the less said about that the better.
What about PR and propoganda?
How do they work?
The same as advertising really, and it's got nothing to do with appealing to rational human beings.
It works; they are not going to be doing it differently anytime soon.
A propos of nothing, long, long ago there was an ad during the Superbowl placed by Cadillac. It was
all about authority, power, celebrity, and it hardly mentioned cars at all, if it even did. Blog
commenters had to work very hard to explain how this was selling Cadillacs. IMHO, it didn't sell
Cadillacs. It told the top Cadillac executives all the things about themselves that they most longed to
hear. It didn't sell cars to wealthy people, it sold the ad itself to the Cadillac C-suite. It worked
like a charm.
Y-axis – top to bottom
X-axis – Across genders, races, etc ..
As long as the Democrats wealthy donors keep them focussed on identity politics and the X-axis, the
donors should be able to keep making progress in the reverse direction on the Y-axis.
and he's MUCH better than Haidt. I recommend this book and lots
of his earlier work, much of it done with Herbert Gintis.
Their 1976 "Schooling in capitalist America" is no less necessary
reading now than it was then, and their 1986 "Democracy & capitalism"
is maybe even more relevant now (Milanovic credits it as a forerunner
to his current "Capitalism, alone", which it is–and much more than that).
More recent stuff is referenced in "The moral economy" and pretty
much always worthwhile.
Morality is a big part of decision making, but I'll argue that is secondary to our cognitive biases that
exist at an even lower level of consciousness to enable us to retain function and decision making in the
face of an overwhelming number of variables.
The opposite of cognitive bias or perhaps the antidote is critical thinking, which must be
taught/learned, so yeah it is preposterous to assume people use solid reasoning that could only come about
with the use of critical thinking, which vasts swaths of society almost never exercise.
The article to me is all over the place, which builds on Haidt's views that seem all over the place too.
Interesting though. Comments too. The experimental data about Haidt's classifications of moral decision
making elements, and where self-described liberals and conservatives rank them in importance was
interesting. I suppose the liberals regarding only two of the six as important could be due to their college
educations. As a math professor I had once observed about a smart student in his class: "he learned his
subject too well". Or to paraphrase Othello: "One that learned not wisely but too well".
The most important takeaway from this is that we should not let economists guide the economy. Not the
economists believing in homo economicus anyway (and, while we are at it, believing in equilibrium as
well). The reason for existence of such a concept is clearly to replace ethics and morality as a guiding
principle of human economic activity with a pseudo- "natural law" (humans by nature are "economicus" –
i.e. self-interested and materialistic – phew!), which once entrenched, relieves those in power from
moral obligations because it safely explains away almost any economic outcome as result of "natural"
forces – i.e. no one to blame (globalization=natural force). It's a great tool for them. Down with it.
The asumption of rationality has been defeated by many economists, as well as psychologists,
sociologists, etc.. Carrying on about this is unncessary. Assuming that humans worry about "care and
fairness' is true. The "12" prophets of the Tanakh (Old Testament") raised this concern numerous times, and
one can find it as a major issue in the Synoptic Gospels. Smith also worried about this in his first book on
economocs, "The Theory of Moral Sentiments." The only reason for any further consideration of "rationality"
in economics is due to the attemprt by economists to treat economics as a "science" like physics. There are
also numerous misguided attempts to mathemaize economics.
But one insidious reason to pretend that economics is a "science" is to justify the idea of a "Nobel
Prize" in economics, or to give a "halo" to economists that win the "Swedish Central Bank Prize in Economic
Scholarship in Memory of Alfred Nobel."
Avner Offer and Gabriel Söderberg have written a good book about the creation of this prize, "The Nobel
Factor." Please note, the words "Nobel Prize" do not seem to appear on either the certificates or medal
awarded.
Daniel Kahneman who won the prize (justifiably, (and John Nash a famous mathematicin who won many real
prizes) notd that giving labels often transfers a false aura to those being labeled. Offer and Söderberg
noted that this is true of the label "winner of the Nobel Prize." Given that there is no decent
encompasssing theory of economics similar to Newton's Laws and how often the prizes are awarded to
economists who don't produce anything like such a theory, we should once and for all abandone the pretense
that economis is a science. It is an attempt to describe social behaviour in a very restricted context.
Leaving it to psychologists, sociologists and others has produce better undertandings of human behaviour.
So here we are, with a global economy that's very cost-efficient but not resilient. It's wonderful that Walmart has worked
out how to order a new tube of toothpaste from China the second one is pulled off a shelf in Topeka, KS. But that means there is
no deep storage to draw upon in times of disruption to the status quo. No warehouses stocked with 12 months of future goods.
Just a brilliantly-complicated supply chain thousands of miles long that has to work perfectly for things to keep running.
As an example that drives home this point: we learned during the 2011 earthquake in Japan
that there was just one single
factory making a necessary polymer gel for the odd-shaped lithium batteries used in
smartphones and iPods. There was no backup factory.
We watched closely during that enormous crisis (which also spawned the Fukushima nuclear
disaster) as electronics companies scrambled to triage their remaining supplies and attempt to
find new sources. It was very touch and go. Vast portions of the battery-fueled electronic
industry came within a whisker of simply shutting down production -- all for want of an
esoteric polymer gel.
Yes, the most cost-effective way to make that gel was to house it all in a single plant. But
it made no sense from a redundancy and resilience standpoint.
And did 'we' learn from that experience? Nope.
Supply Chain Armageddon
The global economy is more interdependent than ever. Its supply chains are built on a huge
network of dependencies with many 'single points of failure' strung along its many
branches.
Can anybody predict what will happen next? No.
But we're already seeing early failures as Chinese plants, factories and ports sit idle from
the country's massive quarantine efforts:
China set to lose out on production of 1M vehicles as coronavirus closes car plants
China exports about $70 billion worth of car parts and accessories globally, with roughly
20 percent going to the U.S.
Feb. 5, 2020, 4:32 PM EST
By Paul A. Eisenstein
China could suffer the loss of a million vehicles worth of production as factories in its
crucial automotive industry remain shuttered until at least next week -- and likely longer in
Wuhan, the "motor city" at the center of the coronavirus outbreak.
With more than 24,000 people infected, the impact of the highly contagious disease is also
beginning to be felt by automakers in other parts of the world. Hyundai is suspending
production in its South Korean plants because of a shortage of Chinese-made parts, and even
European car manufacturers could be hit: Volkswagen and BMW could see a dip of 5 percent in
their earnings for the first half of 2020, according to research firm Bernstein.
We're predicting that these auto shutdowns are just beginning. All it takes is a single
component to be unavailable and the entire line has to be shut down.
Is China the sole source for many critical components in the auto industry? Absolutely.
Here's an inside view:
On Monday, Steve Banker and I had the opportunity to speak with Razat Gaurav, CEO of
Llamasoft. Razat had some interesting takes on the outbreak, especially as it relates to the
automotive and pharmaceutical supply chains. On average it takes 30,000 parts to make a
finished automobile.
Due to the virus, production facilities have already indicated that they will have lower
than normal parts volumes. This has left companies scrambling to make contingency plans.
During my conversation with Razat, he mentioned that inventories for most of these automotive
parts are managed on a lean just-in-time basis.
This means that, on average, companies have anywhere between two and twelve weeks of
buffer inventory on-hand for automotive parts. As production volumes are decreasing, this has
the potential to cause quite the global shortage of parts. The buffer inventory will only
last so long, and once the pre-holiday supply runs dry, the industry is going to be in
serious trouble. According to Gaurav: " Most OEMs single source components for new vehicles
and China is a large supplier of those."
"Single sourcing" is exactly what it implies. There's a single factory somewhere churning
out a single component that is absolutely vital to make a motorized vehicle. If that factory
goes away for any length of time, a new source has to be identified or – worse, from a
time and cost standpoint – built from scratch.
But this vulnerability to China-dependent supply chains is by no means unique to the auto
industry:
Last month, the U.S.-China Economic and Security Review Commission held a hearing on the
United States' growing reliance on China's pharmaceutical products. The topic reminded me of
a spirited discussion described in Bob Woodward's book, Fear: Trump in the White House.
In the discussion, Gary Cohn, then chief economic advisor to President Trump, argued
against a trade war with China by invoking a Department of Commerce study that found that 97
percent of all antibiotics in the United States came from China.
That's as close to a 'sole source' as you can get.
And to put the cherry on top: guess the name of the region in China responsible for
producing all if these antibiotics? Yep, Hubei province. With Wuhan its most important
production hub.
Can we find another source for our generic drugs and antibiotics? India, possibly. But here
again we run into the same global interdependency issue:
Another industry that is feeling the impact of the coronavirus is the pharmaceutical
industry. The average buffer inventory for the pharmaceutical industry is between three and
six months. However, this does not tell the full story. Gaurav mentioned that China is
responsible for producing 40 percent of the active pharmaceutical ingredients (APIs) for the
pharmaceutical world.
Additionally, China supplies 80 percent of key starting materials (KSM's), which are the
chemicals in APIs, to India . Put together, this represents 70 percent of all APIs across the
world.
India's production is directly tied to uninterrupted supply from China:
Indian generic drugmakers may face supply shortages from China if coronavirus drags on
Feb 13 (Reuters) – Shortages and potential price increases of generic drugs from
India loom if the coronavirus outbreak disrupts suppliers of pharmaceutical ingredients in
China past April , according to industry experts.
An important supplier of generic drugs to the world, Indian companies procure almost 70%
of the active pharmaceutical ingredients (APIs) for their medicines from China.
India's generic drugmakers say they currently have enough API supplies from China to cover
their operations for up to about three months.
"We are comfortably placed with eight to 10 weeks of key inventory in place," said
Debabrata Chakravorty, head of global sourcing and supply chain for Lupin Ltd, adding that
the company does have some local suppliers for ingredients.
Sun Pharmaceuticals Industries Ltd said it has sufficient inventory of API and raw
materials for the short term and has not seen any major disruption in supplies at the
moment.
The Indian drugmaker, however, said supply has been impacted for a few API products and
the company is closely monitoring the situation. It did not identify the products.
India supplies nearly a third of medicines sold in the United States , the world's largest
and most lucrative healthcare market.
If you're dependent in any way on prescription drugs, it would be entirely rational to chase
down whether those come from China or India and, if they are, begin talks with your doctor
about alternatives or what to do if supplies get pinched.
A Fast-Moving Situation
Look, we entirely get why the authorities and media are downplaying the covid-19 pandemic.
We really do. They feel the need to manage the crisis, which means managing the public
narrative.
But c'mon. Does it make any sense for Apple's stock price to be up while its main Foxconn
manufacturing facility is all but completely shuttered?
Fewer iPhones and Airpods being made should equate with lower future earnings and thus a
lower stock price. But no, AAPL is up handily over the past month:
And this is even crazier. Does it make ANY sense for Boeing's stock to be up $12 over the
past month? As it reported its first year (2019) of NEGATIVE orders and a completely order-free
January (2020)? No, of course not.
But those are the sorts of 'signals' that the officials believe have to be sent in order to
keep the masses from catching on that something really concerning is happening.
Unfortunately, such signals work on the masses. Higher stock prices send a powerful
comforting message that "all is well".
But prudent critical thinkers, which defines those in the Peak Prosperity tribe, can readily
see through the ruse and get busy preparing themselves for what's coming.
It's Time For
Action
The situation with covid-19 is fluid, and fast-moving. Staying on top of the breaking
developments and making sense of them for you is our primary job.
But information without informed action is useless.
After all, knowing something concerning but then doing nothing about it is merely cause for
anxiety if not alarm.
The only ways to remain calm and protect your loved ones from the threat of this pandemic
are rooted in taking smart action.
Yes, we can all hope this blows over. We sincerely wish the macro-planners all the best in
shaping the narrative and keeping the macro economy somehow functioning and glued together.
But we're going to prepare as best we can, here at our micro level because that's our duty
to ourselves, to our families, and to our communities.
Creating A Resilient Defense
Against The Coronavirus
This is a huge moment in history. The first global pandemic at a time when the world economy
is sole-sourced and completely interdependent.
Nobody can predict what will happen next. Autos, drugs who knows what the next industry to
stumble will be?
Given the ridiculously high rate of infectivity of covid-19 there's really no chance of
stopping its spread. The rate is now just a equation of time, luck, and official actions to
aggressively isolate and quarantine infected individuals and communities.
Our position affords us many experienced contacts with experts throughout the world, and
those we know with deep medical training are preparing the most aggressively right now. This
outbreak has their full attention; and that informs us that it should have ours, too.
Which is why our advice is to get busy preparing yourself now.
Particularly useful for those who have recently found their way to PeakProsperity.com, it
offers both a valuable framework to use in preparing for any disaster (including pandemics) and
then details out specific action steps to take today across all aspects of your life (i.e., not
just health & hygiene) against a coronavirus outbreak in your local area.
That such cynicism was wholly justified became evident when Edward Snowden revealed the NSA
machinations. Soon thereafter Juniper Networks, a provider of large backbone equipment, was
found to
have at least two NSA backdoors in its operation system. Other 'western' telecommunication
equipment companies were similarly manipulated :
Even neutral countries firms are not off-limits to NSA manipulations. A former Crypto AG
employee confirmed that high-level US officials approached neutral European countries and
argued that their cooperation was essential to the Cold War struggle against the Soviets. The
NSA allegedly received support from cryptographic companies Crypto AG and Gretag AG in
Switzerland, Transvertex in Sweden, Nokia in Finland, and even newly-privatized firms in
post-Communist Hungary. In 1970, according to a secret German BND intelligence paper,
supplied to the author, the Germans planned to "fuse" the operations of three cryptographic
firms-Crypto AG, Grattner AG (another Swiss cipher firm), and Ericsson of Sweden.
So why was the allegedly secret CIA history of an already known story leaked right now? And
why was it also leaked to a German TV station?
If you want to understand why the US intelligence community is so freaked out about Huawei,
it's because they've been playing the same game for decades.
The warmed up Crypto AG story is a subtle smear piece against Huawei and Kapersky.
The U.S. wants to convince European countries to not buy Huawei products for their 5G
networks. It wants to remind them that telecommunication products can be manipulated. It wants
to instill fear that China would use Huawei to spy on foreign countries just like the U.S. used
Crypto AG.
This is also the reason for this recent misleading Reuters headline which the story
itself debunked:
"At the end of 2019, intelligence was passed to us by the U.S., according to which Huawei is
proven to have been cooperating with China's security authorities," the newspaper quoted a
confidential foreign ministry document as saying.
'U.S. intelligence' that is handed over to manipulate someone is of course not 'proof' for
anything.
Secretary of State Mike Pompeo declared the Chinese Communist Party "the central threat of
our times" on Thursday, even as he sought to talk up the prospects of a United States trade
deal with Britain, which rebuffed American pressure to ban a Chinese company from future
telecommunications infrastructure.
The scathing criticism of the Chinese government was the strongest language Mr. Pompeo has
used as the Trump administration seeks to convince American allies of the risks posed by
using equipment from Huawei, a Chinese technology giant.
A week after Pompeo's panic message Trump took to the phone to convince Boris Johnson who
was
not impressed :
Donald Trump's previously close relationship with UK Prime Minister Boris Johnson looks close
to collapse, following new revelations that the president slammed down the phone on him.
Trump's behaviour during last week's call was described by officials as
„apoplectic," and Johnson has now reportedly shelved plans for an imminent visit to
Washington.
...
The call, which one source described to the Financial Times as „very difficult," came
after Johnson defied Trump and allowed Chinese telecoms company Huawei the rights to develop
the UK's 5G network.
Trump's fury was triggered by Johnson backing Huawei despite multiple threats by Trump and
his allies that the United States would withdraw security co-operation with the UK if the
deal went ahead.
Trump's threats reportedly „irritated" the UK government, with Johnson frustrated at
the president's failure to suggest any alternatives to the deal.
Huawei products are pretty good, relatively cheap and readily available. They are just as
buggy as the products of other equipment providers. The real reason why the U.S. does not want
anyone to buy Huawei products is that it is the one large network company the U.S. can not
convince to provide it with backdoors.
European countries do not fear China or even Chinese spying. They know that the U.S. is
doing similar on a much larger scale. Europeans do not see China as a threat and they do not
want to get involved in the escalating U.S.-China spat:
"Whose side should your country take in a conflict between the US and China?" Source - bigger
The U.S. just
indicted four Chinese military officers for the 2017 hacking of Equifax during which
millions of addresses and financial data were stolen. The former CIA Director General Michael
Hayden
had defended such pilfering as "honorable espionage" and Equifax had made it laughably easy
to
get into its systems :
[J]ust five days after Equifax went public with its breach -- KrebsOnSecurity broke the news
that the administrative account for a separate Equifax dispute resolution portal catering to
consumers in Argentina was wide open, protected by perhaps the most easy-to-guess password
combination ever: "admin/admin."
To indict foreign military officers for spying when they simply pilfered barely protected
servers is seen as offensive. What will the U.S. do when China does likewise?
Every nation spies. It is one of the oldest trades in this world. That the U.S. is making
such a fuss about putative Chinese spying when it itself is the biggest sinner is unbecoming.
Posted by b on February 11, 2020 at 18:52 UTC |
Permalink
thanks b...no shortage of hypocrisy in all this...
regarding @ 4 mike r which @8 ian2 linked properly to, i enjoyed the last paragraph which
i think sums it up well.. here it is..
"I continue to believe that the United States cannot effectively restrict the spread of a
technology under Chinese leadership without offering a superior product of its own. The fact
that the United States has attempted to suppress Huawei's market leadership in the absence of
any American competitor in this field is one of the oddest occurrences in the history of US
foreign policy. If the US were to announce something like a Manhattan Project for 5G
broadband and solicit the cooperation of its European and Asian allies, it probably would get
an enthusiastic response. As matters stand, America's efforts to stop Huawei have become an
embarrassment."
The reason European customers trust Huawei is because Huawei uses open-source software or at
least makes their code available for inspection by customers.
Closed-source software cannot provide secrecy or security. This was vividly demonstrated
last month when
NSA revealed a critical vulnerability in Windows 10 that rendered any cryptographic
security worthless.
Rashid's simulated attack exploits CVE-2020-0601, the critical vulnerability that
Microsoft patched on Tuesday after receiving a private tipoff from the NSA. As Ars
reported, the flaw can completely break certificate validation for websites, software
updates, VPNs, and other security-critical computer uses. It affects Windows 10 systems,
including server versions Windows Server 2016 and Windows Server 2019. Other versions of
Windows are unaffected.
The flaw involves the way the new versions of Windows check the validity of certificates
that use elliptic-curve cryptography. While the vulnerable Windows versions check three ECC
parameters, they fail to verify a fourth, crucial one, which is known as a base point
generator and is often represented in algorithms as 'G.' This failure is a result of
Microsoft's implementation of ECC rather than any flaw or weakness in the ECC algorithms
themselves.
The attacker examines the specific ECC algorithm used to generate the root-certificate
public key and proceeds to craft a private key that copies all of the certificate
parameters for that algorithm except for the point generator. Because vulnerable Windows
versions fail to check that parameter, they accept the private key as valid. With that, the
attacker has spoofed a Windows-trusted root certificate that can be used to mint any
individual certificate used for authentication of websites, software, and other sensitive
properties.
I do not believe this vulnerability was a bug. It is more likely a backdoor intentionally
left in the code for NSA to utilize. Whatever the case, NSA must have known about it for
years. Why did they reveal it now? Most likely someone else had discovered the back door and
may have been about to publish it.
(I
commented on these same issues on Sputnik a few weeks ago.)
The other possible US objection is that Huawei will only let their customers spy, not third
countries.
Posted by: Paul Cockshott | Feb 11 2020 21:57 utc | 24
It reminds me a joke about Emperor Napoleon arriving in a town. The population, the
notables and the mayor are greeting him, and the Emperor says "No gun salute, hm?". Mayor
replies "Sire, we have twenty reasons. Fist, we have canons", "Enough", replied Napoleon.
Isn't the "other possible US objection" exactly "Enough"? Of course, USA is not a mere
"third country", USA is the rule maker of rule based international order.
Last year I was so mad at USA bulling Huawei and ZTE, decided to buy a Huawei Honor View
V20 PCT-L29 Smartphone. Global version on T-Mobile network . Still fumbling
at the setting. This smartphone installed GPS and BeiDou (BDS). I never used Google searches
but instead DuckDuckGo long ago
I'm amazed that Chief Poodle Boris did not obediently obey His Master's Voice.
What is going on?
I could understand if this was DNC/CIA-MI6 passing orders down the line (a la Skripal) to
upset Trump but the US Intel Community has no interest in such a snub from the UK Govt.
Obviously this isn't the UK Govt asserting their independence from US instruction because
such a thing has never happened in my lifetime.
Wierd.
Anyway, too bad I won't be able to read the thread on my phone tomorrow as Bruce has just
broken the thread with his million-character link. :-(
I'm amazed that Chief Poodle Boris did not obediently obey His Master's Voice.
What is going on?
Posted by: Ash Naz | Feb 12 2020 0:20 utc | 39
However I cringe and the obedient vassals, and Boris who may well be the Chief Poodle,
given that exceedingly cute Justin is from another breed, Newtrumplander. But even poodles
have privacy concerns, you know? What you web surf, what you buy, whom do you send gifts and
WHAT gifts (dominatrix set?). However you trust NSA to use all that info solely for good
causes, well, you know, not everyone is an exhibitionist...
I'm amazed that Chief Poodle Boris did not obediently obey His Master's Voice.
Posted by: Ash Naz | Feb 12 2020 0:20 utc | 32
The reason is said to be that they've already bought and installed a lot of the
Huawei equipment, and the new decision is just a fake, to justify the position.
The reason is said to be that they've already bought and installed a lot of the Huawei
equipment, and the new decision is just a fake, to justify the position.
The financial angle makes sense, but what is the price of disobedience?
@Piotr Berman:
But even poodles have privacy concerns
The preventing blackmail angle makes sense too
And how useful to be able to use blackmail to get allies to jump when ordered? It's often
said that Washington has no real friends, just obedient vassals.
It would appear to me that the UK, by allowing Huawei (limited) access to their market,
are achieving several advantageous outcomes.
1) They are preventing potential for a duopoly of Eriksson & Nokia on the hardware by
allowing a third player into the market.
2) By only allowing a maximum of 35% of the market share, they prevent Huawei from quickly
out-competing the others on price and capturing a monopoly.
3) They are only allowing access to the network comm's market, and not the core of the
system, which may or may not protect against unwanted data capture and intrusion (by exactly
whom remains the question - as per the article above).
4) It allows the four main network providers (especially EE, owned by BT) and the
accompanying state surveillance apparatus the ability to familiarise themselves with Huawei
tech/code/vulnerabilities which may be invaluable going forward. On this point alone, the USA
(and Australia, among others) are doing themselves a great disservice by missing out on a
learning experience from arguably the world leader in this technology.
As md|Feb 12 2020 8:29 utc|44 alluded to, they are claiming to allow clintele access to
all code (and the freedom to modify it as desired). So denying them access to a particular
market only hinders the technical understanding of the technology and its implementation,
leaving such states behind.
The USA (and its' vassal client states) once again shoot themselves in the foot in a vain
attempt to create and re-create the archetypal "boogeyman" for the populace to wring their
hands over and keep them up at night. Fools.
I enjoy David Goldman (Spengler) article at Asia Times. He accurately notes the vast lead
Huawei/China has and then provides "but we can do something" bromides. What do mean "we",
kimosabe?
Per a quote from Newt Gingrich's book ""Trump vs. China: Facing America's Greatest Threat",
quoted recently by David Goldman. Gingrich didn't say who was the greatest threat, Trump or
China.
"It is not China's fault that in 2017, 89% of Baltimore eighth graders couldn't pass their
math exam
"It is not China's fault that too few Americans in K-12 and in college study math and
science to fill the graduate schools with future American scientists
"It is not China's fault that, faced with a dramatic increase in Chinese graduate students
in science, the government has not been able to revive programs like the 1958 National
Defense Education Act
"It is not China's fault the way our defense bureaucracy functions serves to create
exactly the 'military-industrial complex' that President Dwight Eisenhower warned about
"It is not China's fault that NASA has been so bureaucratic and its funding so erratic
that there is every reason to believe that China is catching up rapidly and may outpace us.
This is because of us not because of them
"It is not China's fault that the old, bureaucratic, entrenched American
telecommunications companies failed to develop a global strategy for 5G over the 11 years
that the Chinese company Huawei has been working to become a world leader "
Here is another Orwellian irony that has been forgotten down the MemoryHole.
Way back in 2014, Edward Snowden revealed that the Americans (and the NSA in particular)
were spying on Huawei dating back to at least 2007.
This American spying occurred before the current national security hysterics about Huawei,
indeed, before most people in the USA had even heard of the company itself.
As this article states,
"In the final analysis, the NSA spying campaign against Huawei has two fundamental
purposes. First, Huawei (unlike the American telecommunications companies) does not allow the
NSA free access to its infrastructure to conduct spying on its products' users. Accordingly,
as part of its mission of spying on the entire world's population, the NSA hacked into
Huawei's systems in order to gather information traveling through its infrastructure.
Second, the spying campaign against Huawei is part of broader efforts to protect the
profits and interests of American telecommunications companies at the expense of Huawei. This
is the purpose of the NSA's particular interest in Huawei's executives and their 'leadership
plans and intentions.'"
The other possible US objection is that Huawei will only let their customers spy, not third
countries.
Posted by: Paul Cockshott | Feb 11 2020 21:57 utc | 20
So it seems. In the words of Ren Zhengfei 'When we transfer the tech, they can modify code
on top of my tech, once that's through, it's not only shielded from me, it's shielded from
everyone else in the world US 5G will be their own thing, there's no security concern, the
only concern will be the U.S. keeping American companies (which bought it) in check.'
"... The thoughtless people who constructed " globalism " overlooked that interdependence is dangerous and can have massive unintended consequences . With or without an epidemic, supplies can be cut off for a number of reasons. For example, strikes, political instability, natural catastrophes, sanctions and other hostilities such as wars, and so forth. Clearly, these dangers to the system are not justified by the lower labor cost and consequent capital gains to shareholders and bonuses to corporate executives. Only the one percent benefits from globalism. ..."
"... Globalism was constructed by people motivated by short-term greed. None of the promises of globalism have been delivered. Globalism is a massive mistake. Yet, almost everywhere political leaders and economists are protective of globalism. So much for human intelligence. ..."
If the coronavirus proves to be serious, as it does not appear to be at the present time,
many economies could be adversely affected. China is the source of many parts supplied to
producers in other countries, and China is the source of the finished products of many US firms
such as Apple. If shipments cannot be made, sales and production outside of China are affected.
Without revenues, employees cannot be paid. Unlike the financial crisis of 2008, this would be
an unemployment crisis and bankruptcy of large manufacturing and marketing corporations.
This is the danger to which globalism makes us vulnerable. If US corporations produced in
the US the products that they market in the US and the world, an epidemic in China would affect
only their Chinese sales, not threaten the companies' revenues.
The thoughtless people who constructed " globalism " overlooked that interdependence is
dangerous and can have massive unintended consequences . With or without an epidemic, supplies
can be cut off for a number of reasons. For example, strikes, political instability, natural
catastrophes, sanctions and other hostilities such as wars, and so forth. Clearly, these
dangers to the system are not justified by the lower labor cost and consequent capital gains to
shareholders and bonuses to corporate executives. Only the one percent benefits from
globalism.
Globalism was constructed by people motivated by short-term greed. None of the promises
of globalism have been delivered. Globalism is a massive mistake. Yet, almost everywhere
political leaders and economists are protective of globalism. So much for human
intelligence.
At this point of time, it is difficult to understand the hysteria over coronavirus and
predictions of global pandemic. In China there are about 24,000 infections and 500 deaths in a
population of 1.3 billion people. This is an inconsequential illness. Compared to the ordinary
seasonal flu that infects millions of people worldwide and kills 600,000, the coronavirus so
far amounts to nothing. Infections outside of China are miniscule and appear to be limited to
Chinese people. It is difficult to know for certain, because of the reluctance to identify
people by race.
Perhaps the coronavirus is just warming up and much worse is to come. If so, world Gross
Domestic Product (GDP) will take a hit. Quarantines prevent work. Finished products and parts
cannot be made and shipped. Sales cannot take place without products to sell. Without revenues
companies cannot pay employees and other expenses. Incomes decline across the world. Companies
go bankrupt.
You can take it from here.
If a deadly coronavirus pandemic or some other one does erupt and there is a world
depression, we should be very clear in our mind that globalism was the cause. Countries whose
governments are so thoughtless or corrupt as to make their populations vulnerable to disruptive
events abroad are medically, economically, socially, and politically unstable.
The consequence of globalism is world instability.
It makes sense for rich countries elites to leverage poor backwards shithole countries to
manufacture the things they need because the elites then don't have to worry about anyone but
themselves. Globalism is wonder as it bypasses all that crazy western nonsense like jobs and
wages and society and hope and such.
Globalism is nothing more than the major central banks finding ways to dump off their
inflation which is the deflation of an ever increasing number countries which the major cb's
used to deflate their currencies. The older the cb you are the worse off yo are. From a since
A.D. perspective only the Sterling is what you have to worry. From my last fiat currency
perspective its the Venisthaler that is un doing everything.
To get more zero's you have to add more nine's. They can not be added as nausem like
people think zero's are. The compensation pool has been shrinking for centuries on end now.
Globalism is an attempt to keep the pool growing at all cost which results relentless asset
appreciation. We are out of nine's. The end result of that is hyper deflation for the man and
hyper reflation for the people. Easily provable at a store named Vons owned by the treasury
retired.
That ladies and gents is your simplified street fed explanation. I am not trying to even
remotely write out the longer technical version.
Having said that meet me at what is known as the small walmart around here, which is the
home of what does MU do, what does MU do at walmart it never gets old fame for a real life
walk thru of what globalism is and looks like. We will then progress to the "Big Walmart" not
even a mile away and I will show you what an out of control system looks like.
So we are clear of what I just said. I live in the only place in the world where when a
tourist ask you where Wal Mart is, you get your choice of size. Whats the difference you
ask??? The small Wal Mart has one main entrance, the big one has three. The lady almost
smacked the **** out of the guy I got that from when she asked what the difference was. The
hand came up. You really had to be there.
Regional trade blocks with relatively balanced resource and production capabilities make
more sense. Globalisation just lead to one country seeking to 'DOMINATE' in every sphere of
global activity, raising the threats of economic and military conflict, as clearly
demonstrated and this with the aim of global enslavement to multinational corporations, the
aim of Globalism, really sick psychopathic stuff.
Regional trade blocks relatively balanced for resource and production, provide stability
within each block and lesson competition for outside resource and commercial competitiveness,
and represents a far more long term stable structure.
Within each trade block, as it is economic rather than socio-political the original
identities of each distinct region can be preserved for the long term, so that future
generations can enjoy and share in the different cultures. Race ******** is race ********,
there is only one race and all of it's people are free to share in which ever culture they
choose or combinations there of. Whether you get to move to those regions and enjoy those
cultures will be done to your personal worth, character and ability to contribute to those
societies, just the way it will be.
Some economic blocks will be far more preferable to others and will attract higher worth
individuals (character and ability to contribute to society), the least and most desirable
will become more so as higher worth individuals move to the most preferable away from the
least preferable and make the most preferable more preferable by their active presence.
I would tip the Japan Australia one to be the most preferable for this century, the next
hard to tell (there are real deep problems in the Americas caused by the USA, the EU had an
bad immigrant problem as in they let in too many bad unvetted immigrants, Africa will be what
Africa will be corrupt and Russia China it depends upon how quickly the modernise and
socially advance, the middle of the middles south east to mid east it depends how long it
takes them to come together and religion is a real problem for them).
I've been wondering if this might be some kind of Globalist Drill. It doesn't make sense,
although there is always the potential it could become worse than it is.
I thought so, too. Strangely enough, Wuhan Chinese are now repatriated from Bali back to
Wuhan?!
Instability is a necessary condition to get more conflicts and then wars going. Weapons
production must be kept up; peace and stability would make make weapons production an
expensive hobby.
This corona virus panic is interesting. RT has an interesting piece that points out that
corona virus has been officially recognized in some 8,000 odd people and 200 odd people have
died from it, we need a sense of perspective. World wide seasonal flu, kills between 350,000
and 600,000 people each year. Tuberculosis kills over 1,000,000 people each year. Malaria
kills a similar number. AIDS killed over 500,000 last year. And we're panicking about 200 or
so?
Just had an email from a company I deal with in China, the relevant passages-
2. The company has been following instructions from the Chinese government to postpone
the Spring Festival holiday to Feb. 9th, 2020 if not any further postpone. But, we believe
most of our services should be provided as usual since then.
5. We also would like your attention that there's yet no evidence or cases to support
the transmission of the novel coronavirus through packages or imported goods. According to
the Centers for Disease Control and Prevention (CDC) of the US, because of poor survivability
of these coronaviruses on surfaces, there is likely very low risk of spread from products or
packaging that are shipped over a period of days or weeks at ambient temperatures. The
National Health Commission of the People's Republic of China advises that coronavirus is
spread most often by respiratory droplets from one person to another, regular packages from
Wuhan can be received as usual. Reference links are attached as the footnote below for your
references.[1]
6. The Company will take proactive measures like ultraviolet light to ensure a safe and
healthy environment of its warehouse. Disinfection work will be conducted before each
delivery.
I like Moon aka Bernard or whatever but he says the EU needs slightly less regulation. This
stupid giant politically correct police state has like 66,000 laws and they pass 5,000 new
ones a year. Nanny police state fascism and all they do is steal money from the taxpayers of
Europe. It is a Central Bank ponzi scheme that is going to implode.
Most recent joke today is the EU Army which has pretty much no working tanks, planes or
ships. Who are they going to fight anyway? The Russians? God help Europe - maybe Russians and
Putin might reinstate Christianity in Europe and throw off the yoke of the CIA/MIC/Operation
Gladio-Mockingbird from USA.
The impression I'm getting from comments here is that there are still many Europeans (in the
broad sense, both EU and British) in complete denial.
Europe is in decline, not in ascension. The numbers just came out yesterday: 0.1% for the
EU (with France and Italy in recession); UK's number for Q4 are still one month away, but Q3
was also pathetic.
World trade (globalization) has grown to a halt. It's all maxed out already, there are no
more free trade deals to be made.
Germany is in de facto recession. Most worryingly, its industrial output is plummeting -
with only its services sector keeping the whole thing afloat. And we know that's not how the
German economy should work.
The UK is still a capitalist economy - free from the EU or not. It will not invest in
those fabled renewable energy sources from tide, wind etc. etc. if the profit rates are not
high enough. And they are not high enough. The only way, then, for those investments to
happen is if energy prices spike up - very bad news for the British people (which, fair to
say, could happen in or out of the EU, so this is not a Brexit question).
Many countries in Europe tried to invest in those renewable, but apart from insignificant
micro-nations such as Denmark, most failed to supplant the old sources. It was reduced to a
complementary source.
The only reason to think the European Peninsula can rise from the ashes is that it rose
from the ashes before (post-war miracle). But the post-war miracle was a very exceptional
historical period, where a lot of improbable variables aligned. It will certainly not happen
again.
The European peoples should stop with their dellusions of grandeur and accept a treaty of
Eurasian integration, with a subordinate status to Russia and China. You did it before with
the USA in 1945, you can do it again now with Russia/China. That is unexceptional in European
History, and can certainly happen again.
The Commonwealth long since ceased to have any meaning for the UK other than as a
vestige of an expropriative empire, which has been a caricature since 1942[.]
If you think that the land mass of the Commonwealth represents a kind of control comparable
to the EU then you need to study the last century[.]
In that comment you have attracted Her Majesty's displeasure. Suggest a read up of the 53
Commonwealth countries' property ownership in common law - in fee simple>radical
title > The Crown's underlying title in common law. Oh, add the thirteen
colonies prior to the American revolution found unpalatable.
Fun read from George Galloway @RT. Lot's of things independent minded folk can agree with but
pay particular attention to the conclusion / ending and give it a 1 to 10 reality rating.
Think of the absolutely absurd straight line that separates Canada from the U.S. West of
the great lakes.
Now think of that artificially imposed boundary and ask yourself, "What a stupid line,
surely that line wouldn't be able to instill any cultural differences between two artificial
constructs (nations)?"
(Anecdotally, I live in the Pac NW and every time I have ever crossed the border into
Canada it literally feels like you are entering a retiring, European state.)
And then ask yourself how it is possible one country has a national healthcare system
while the other abhors the idea. Or why the U.S. has the worst gun violence in the First
World while Canada has a 1/10th of that number.
Face it, regardless of lines on a map, a national identity still gives a people the choice
to galvanize and develop independently.
I think the EU is in for more trouble in the future than the UK. By the end of this decade,
several central and eastern European countries economies will have grown sufficiently that
their EU yearly subsidies will now become EU payments. In other words, the EU cash cow will
suddenly become a cash drain for some countries. In the meantime, France and Germany will
have the pick up the financial slack caused by Brexit. Put it all together and it seems to me
some trouble ahead for the EU.
I believe you have stated the underlying facts here -
"b is correct tho that the tendency of politicians pretending to be technocrats to
centralise in order to build a trade-able power base must be halted. otherwise the national
devolution movements become superseded by a Brussels top down pyramid management structure
where citizens are too removed from decision makers and the decision makers are too removed
from the results of their decisions."
That's the reason we have to leave the EU.
The next question is how.
The central fact here is that on a key point Brussels is absolutely in the right.
Frictionless access to the Single Market - what we have now - can only go with Dynamic
Alignment - continuing adherence to EU regulations. This fact was obscured during the
vacillations of the May Premiership and may still be being obscured.
Me, I think the "regulatory ecosystem" that the EU has evolved is unsound. It also goes
well beyond the technical setting of standards (most of which are set outside the EU in any
case) and affects matters far removed from the purely technical. But it's what they have and
it's not for us to attempt to change it.
Much of the hostility from the EU derives from the belief that as we leave we are trying
to change their system, and for our own benefit. All the fears of "Cherry picking" and the
rest. But it's not that they won't change. They can't, not without an entire recasting of
that regulatory ecosystem. That would cause chaos if they attempted to do it. Engrenage is
their watchword, the gradual accumulation of regulation and prescription, not demolition or
radical rebuilding.
In short, for the reasons you have given above, we have to leave. When we consider the
"how", we see that there is no magic solution that allows us to leave while continuing
trading as if we have not left. Out really does mean out.
So where's the problem?
We've built up a good many trade links with the 27, the EU countries. They are vulnerable
links, particularly the JIT links. It's going to take time to run down these links and
replace them with new. We have other links as well - through the agencies - that will also
take time to replace.
Such changes could take several years. If Brussels insists on that process happening
overnight the result is serious disruption. On the principle that the EU is so much larger
the calculation is that that disruption would hurt the UK much more than the EU. That is
Brussels' bargaining counter.
Whether Brussels is using that counter for punitive reasons or whether it is using it in
order to retain at least some control over the UK is irrelevant. The threat is there, however
you look at it.
Some think we should face the threat down. I do - I think it is bluff. Others think we
should not face it down - they fear it is not bluff. We wait to see which course the Johnson
administration will adopt, not forgetting that the previous UK administration, and certainly
the previous Parliament, didn't much like Brexit anyway - they wanted to stay in or close -
and we're not yet sure what Johnson's position is.
.
(Note - engrenage as it works in practice explained here)
"The affirmative task we have now is to actually create a new world order."
-- Vice President Joe Biden, April 5, 2013
"Out of these troubled times, our fifth objective -- a new world order -- can
emerge."
-- President George H. W. Bush, September 11, 1990
"We saw deterioration where there should have been positive movement toward a new world
order."
-- Mikhail Gorbachev, October 19, 2011
"I think that his [Obama's] task will be to develop an overall strategy for America in
this period, when really a 'new world order' can be created. It's a great
opportunity."
Remember it was the British that basically established political Zionism as a state back
in Palestine.
It was Trump that declared Jerusalem as the 'eternal capital' of anti-Christ Judaism.
Boris Johnson is a 'passionate Zionist' by his own proclamation.
This is about a realignment of Zionist interest in the English speaking world.
The EU wasn't going to play ball on the terms of American (and British) Zionism.
The English (KJV) world of eschatology demands a pseudo-Christianity to bow down to the
interests of anti-Christ Jewish nationalism. (It is why the U.S. Senate has passed
legislation making it illegal to criticize 'Israel' as 'anti-Semitic')
American evangelicals are being misrepresented by heretics like John Hagee and a
pseudo-Christianity that cares not for Jesus Christ at all but rather maintains a focus only
on 'Israel'. A dual covenant theology mixed with heresies galore served up in a controlled
media that doesn't allow for the recognition of Christianity as the real Israel against a
history of the destruction of ancient Israel because of their rejection of Jesus Christ as
the Son of God.
The New Testament Parable of the Wicked Husbandmen is Jesus foretelling and giving clear
reason for the destruction of anti-Christ Judaism in 70 AD.
The heresies of John Darby and Cyrus Scofield (again nearly exclusively in English) have
created everything from British Israelism to fear and anxiety hustling crapola such as Hal
Lindsey and The Late Great Planet Earth end of the world heresies.
On the basis of Christian heresy has emerged anti-Christ political Zionism and its vast
adherents in the English speaking world now realigning.
This is a very valuable article, probably the best written in 2019 on the topic, that discusses several important aspects of neoliberalism
better then its predecessors...
Notable quotes:
"... For some, and especially for those in the millennial generation, the Great Recession and the wars in Iraq and Afghanistan started a process of reflection on what the neoliberal era had delivered. ..."
"... neoliberal policies had already wreaked havoc around the world ..."
"... "excessively rapid financial and capital market liberalization was probably the single most important cause of the crisis"; he also notes that after the crisis, the International Monetary Fund's policies "exacerbated the downturns." ..."
"... In study after study, political scientists have shown that the U.S. government is highly responsive to the policy preferences of the wealthiest people, corporations, and trade associations -- and that it is largely unresponsive to the views of ordinary people. The wealthiest people, corporations, and their interest groups participate more in politics, spend more on politics, and lobby governments more. Leading political scientists have declared that the U.S. is no longer best characterized as a democracy or a republic but as an oligarchy -- a government of the rich, by the rich, and for the rich. ..."
"... Neoliberalism's war on "society," by pushing toward the privatization and marketization of everything, indirectly facilitates a retreat into tribalism. ..."
"... neoliberalism's radical individualism has increasingly raised two interlocking problems. First, when taken to an extreme, social fracturing into identity groups can be used to divide people and prevent the creation of a shared civic identity. ..."
"... Demagogues rely on this fracturing to inflame racial, nationalist, and religious antagonism, which only further fuels the divisions within society. Neoliberalism's war on "society," by pushing toward the privatization and marketization of everything, thus indirectly facilitates a retreat into tribalism that further undermines the preconditions for a free and democratic society. ..."
"... The second problem is that neoliberals on right and left sometimes use identity as a shield to protect neoliberal policies. As one commentator has argued, "Without the bedrock of class politics, identity politics has become an agenda of inclusionary neoliberalism in which individuals can be accommodated but addressing structural inequalities cannot." What this means is that some neoliberals hold high the banner of inclusiveness on gender and race and thus claim to be progressive reformers, but they then turn a blind eye to systemic changes in politics and the economy. ..."
"... They thought globalization was inevitable and that ever-expanding trade liberalization was desirable even if the political system never corrected for trade's winners and losers. They were wrong. These aren't minor mistakes. ..."
"... In spite of these failures, most policymakers did not have a new ideology or different worldview through which to comprehend the problems of this time. So, by and large, the collective response was not to abandon neoliberalism. After the Great Crash of 2008, neoliberals chafed at attempts to push forward aggressive Keynesian spending programs to spark demand. President Barack Obama's advisers shrank the size of the post-crash stimulus package for fear it would seem too large to the neoliberal consensus of the era -- and on top of that, they compromised on its content. ..."
"... When it came to affirmative, forward-looking policy, the neoliberal framework also remained dominant. ..."
"... It is worth emphasizing that Obamacare's central feature is a private marketplace in which people can buy their own health care, with subsidies for individuals who are near the poverty line ..."
"... Fearful of losing their seats, centrists extracted these concessions from progressives. Little good it did them. The president's party almost always loses seats in midterm elections, and this time was no different. For their caution, centrists both lost their seats and gave Americans fewer and worse health care choices. ..."
"... The Republican Party platform in 2012, for example, called for weaker Wall Street, environmental, and worker safety regulations; lower taxes for corporations and wealthy individuals; and further liberalization of trade. It called for abolishing federal student loans, in addition to privatizing rail, western lands, airport security, and the post office. Republicans also continued their support for cutting health care and retirement security. After 40 years moving in this direction -- and with it failing at every turn -- you might think they would change their views. But Republicans didn't, and many still haven't. ..."
"... Although neoliberalism had little to offer, in the absence of a new ideological framework, it hung over the Obama presidency -- but now in a new form. Many on the center-left adopted what we might call the "technocratic ideology," a rebranded version of the policy minimalism of the 1990s that replaced minimalism's tactical and pragmatic foundations with scientific ones. The term itself is somewhat oxymoronic, as technocrats seem like the opposite of ideologues. ..."
"... The technocratic ideology preserves the status quo with a variety of tactics. We might call the first the "complexity canard." ..."
"... The most frequent uses of this tactic are in sectors that economists have come to dominate -- international trade, antitrust, and financial regulation, for example. The result of this mind-set is that bold, structural reforms are pushed aside and highly technical changes adopted instead. Financial regulation provides a particularly good case, given the 2008 crash and the Great Recession. When it came time to establish a new regulatory regime for the financial sector, there wasn't a massive restructuring, despite the biggest crash in 70 years. ..."
"... Instead, for the most part, the Dodd-Frank Act was classically technocratic. It kept the sector basically the same, with a few tweaks here and there. There was no attempt to restructure the financial sector completely. ..."
"... The Volcker Rule, for example, sought to ban banks from proprietary trading. But instead of doing that through a simple, clean breakup rule (like the one enacted under the old Glass-Steagall regime), the Volcker Rule was subject to a multitude of exceptions and carve-outs -- measures that federal regulators were then required to explain and implement with hundreds of pages of technical regulations ..."
"... Dodd-Frank also illustrates a second tenet of the technocratic ideology: The failures of technocracy can be solved by more technocracy. ..."
"... Dodd-Frank created the Financial Stability Oversight Council, a government body tasked with what is called macroprudential regulation. What this means is that government regulators are supposed to monitor the entire economy and turn the dials of regulation up and down a little bit to keep the economy from another crash. But ask yourself this: Why would we ever believe they could do such a thing? We know those very same regulators failed to identify, warn about, or act on the 2008 crisis. ..."
"... In the first stage, neoliberalism gained traction in response to the crises of the 1970s. It is easy to think of Thatcherism and Reaganism as emerging fully formed, springing from Zeus's head like the goddess Athena. ..."
"... Early leaders were not as ideologically bold as later mythmakers think. In the second stage, neoliberalism became normalized. It persisted beyond the founding personalities -- and, partly because of its longevity in power, grew so dominant that the other side adopted it. ..."
"... Eventually, however, the neoliberal ideology extended its tentacles into every area of policy and even social life, and in its third stage, overextended. The result in economic policy was the Great Crash of 2008, economic stagnation, and inequality at century-high levels. In foreign policy, it was the disastrous Iraq War and ongoing chaos and uncertainty in the Middle East. ..."
"... The fourth and final stage is collapse, irrelevance, and a wandering search for the future. With the world in crisis, neoliberalism no longer has even plausible solutions to today's problems. ..."
"... The solutions of the neoliberal era offer no serious ideas for how to restitch the fraying social fabric, in which people are increasingly tribal, divided, and disconnected from civic community ..."
Welcome
to theDecade From Hell,
our look back at an arbitrary 10-year period that began with a great outpouring of hope and
ended in a cavalcade of despair.The long-dominant ideology brought us forever
wars, the Great Recession, and extreme inequality. Good riddance.
With the 2008 financial crash and the Great Recession, the ideology of neoliberalism lost
its force. The approach to politics, global trade, and social philosophy that defined an era
led not to never-ending prosperity but utter disaster. "Laissez-faire is finished," declared
French President Nicolas Sarkozy. Federal Reserve Chairman Alan Greenspan admitted in testimony
before Congress that his ideology was flawed. In an extraordinary statement, Australian Prime
Minister Kevin Rudd declared that the crash "called into question the prevailing neoliberal
economic orthodoxy of the past 30 years -- the orthodoxy that has underpinned the national and
global regulatory frameworks that have so spectacularly failed to prevent the economic mayhem
which has been visited upon us."
"... Steven Klein is a political theorist who is an Assistant Professor of Political Science at the University of Florida. He writes and teaches about democracy, the welfare state, and European political thought. ..."
A recent critique of Karl Polanyi reveals more about the limits of our current political debates than anything about the
man himself.
Globalization has not been doing so well lately. Since the 2008 financial crisis, the idea that unfettered free markets
bring unadulterated benefits to society has lost its sheen. Trump's election demolished Republican Party catechisms around
free trade. The irony of our current moment is that the center-left politicians, traditionally wary of markets, have become
the great defenders of global openness, while the opponents of globalization are gravitating to the nationalist right.
Once a relatively obscure Hungarian academic, Karl Polanyi has posthumously become one of the central figures in debates
about globalization. This recent interest in his thought has occasioned an unsympathetic treatment by Jeremy Adelman in the
Boston Review
.
Adelman, a Princeton professor, has scores to settle with Polanyi. But his article ends up revealing more about the limits
of our current political debates than anything about the man himself.
Polanyi's classic book,
The Great Transformation:
The Political and Economic Origins of Our Time
, published in 1944, argued that the utopian obsession with
self-adjusting markets had wreaked havoc in nineteenth-century European society, eventually laying the groundwork for the
rise of fascism. His once unfashionable views have witnessed a remarkable revival of late. His name is frequently invoked
when describing the dangers that global market integration poses to democracy. Polanyi has now moved one step closer to
intellectual canonization with the publication of Gareth Dale's excellent biography,
Karl Polanyi: A Life on the Left
(2016), the impetus of Adelman's article.
First, there
are
aspects of Polanyi's thought worth criticizing. His historical account of the origins of the
market society is murky. He neglects gender, race, and colonialism, although he was a supporter of anti-colonial struggles.
Yet, instead, Adelman returns to a well-worn and wrong-headed criticism of Polanyi: that his thought represents a romantic
revolt against markets in favor of a warm communalism, a stance that inevitably leads to violent nationalism and tyrannical
"collectivism."
More troubling still is Adelman's explanation for why Polanyi was supposedly attracted to romantic attacks on
liberalism. In Adelman's telling, Polanyi, who was born into an assimilated Jewish family but converted to Christianity,
suffered from a sort of intellectual Stockholm Syndrome: Excluded from European society, he romanticized his murderous
oppressors. He longed for the communal belonging that was denied to him as a Jew. And so Polanyi, Adelman declares, wanted
to "merge into the national
Volk
." This desire explains his "blind spot for reactionary nationalism," which "would
only grow with time" as he looked to the passions of nationalist belonging "as a way to restore a sense of fraternal
community." Polanyi's rejection of liberalism was thus a rejection of his own Judaism. He attacked market liberalism and
excused reactionary nationalism because of his unfulfillable desire to belong in a Europe defined by ethnic unity and
anti-Semitism.
Now, there is much to be said about Polanyi's social circumstances and life story, beautifully recounted in Dale's
biography. The complex identity of assimilated Jewish elites in the Austro-Hungarian Empire and Polanyi's lifelong
attraction to Christianity certainly informed his thinking. There is also a larger story here about the attraction of
interwar Jewish intellectuals to various strains of Christianity. Perhaps this fascination reflected a degree of
self-loathing for highly educated Jews, caught in the double binds of Jewish identity: either too assimilated and therefore
incapable of authenticity, or else clinging to their primitive roots. Or perhaps a radical interpretation of aspects of
Christianity provided such Jews with a standpoint to criticize Europe without having their criticisms dismissed on account
of their Judaism. These are all interesting and worthy questions.
For Adelman, though, Polanyi's conversion to Christianity is a bludgeon with which to attack him, a crude device to
explain Polanyi's (again supposed) hatred for European liberalism. But the idea that Polanyi, who was forced to flee
Europe, is some sort of apologist for nationalism is just plain wrong. Indeed, he viewed European liberalism's attachment
to market fundamentalism as the barrier to an alliance between democratically inclined liberals and the working masses. The
worst that could be said of him on this account is that he underestimates nationalism as a source of opposition to markets,
although he certainly was aware of the fascist threat. But his central point was always that, if we want to avoid an
authoritarian reaction to the ravages of the market, we need to develop a democratic alternative to pro-market liberalism.
To tar Polanyi with the brush of reactionary nationalism, Adelman makes some strange claims. For instance, he argues
that Polanyi affiliates Judaism with liberalism, both of which he then views as stepping stones to Christianity and
socialism, respectively. The only problem is that Polanyi explicitly associated
Christianity
, and not Judaism,
with liberalism -- Christianity revealed the principle of individual freedom that is the core of liberalism -- and, for him, both
Christianity and liberalism stood in need of a revision that would push them toward democratic socialism. Of course, deeply
internalized anti-Semitism could be more important than Polanyi's actual statements. The problem with such psychological
arguments, though, is their pointillist quality: They cohere better from afar than up close.
Reading Polanyi is admittedly a frustrating experience. He mixes high theory, historical narrative, and overheated
journalistic polemic into a distinct mélange. Yet at the center of his thinking is a brilliant idea: that the three core
"inputs" of the economy -- labor, land, and money -- are what he calls "fictitious" commodities. By this, Polanyi means that, try
as we might, workers are never going to move at a moment's notice to wherever markets dictate, markets aren't going to
replenish rivers and fields, and governments will bail out banks to keep money flowing. To take one not-exactly-random
example: Since land, to Polanyi, is more than just a resource for market exchange, so too will housing only ever be a
partial commodity. Access to housing is a vital interest, and so democracies will face pressure to introduce a variety of
regulations that "distort" housing markets. So, it is hardly surprising that the financial crisis was centered on
mortgages -- try as we might, we will never get housing markets to be the smooth, frictionless edifices imagined by
economists. A house cannot be moved like a bushel of wheat. Adelman misses the significance of these arguments because he
reduces Polanyi's thinking to the binary of morality or markets. But the central opposition, for Polanyi, is
democracy
or markets. Democratic demands for social protection conflict with the dictates of the market, a fact that is ever
more apparent in our era of financial capitalism.
Adelman boils this down to a simplistic rejection of the market as such, an inability to see how markets can function as
engines of wealth-creation and need-satisfaction. But here Polanyi fully agrees with Adelman about the remarkable potential
of markets. Polanyi's attack on market liberalism is not that it impoverishes the masses in favor of the rich. The problem
with markets, for him, is that they are
so good
at producing efficiencies that they tend to override all other
considerations. To unlock their full potential, markets require the subordination of all individual, social, and political
institutions to their dictates.
Polanyi expresses this as the tension between habitation and improvement: We cannot live off the land while we improve
the land. This is a lesson that the Greeks and other Europeans are currently learning first-hand, as the search for
long-term competitiveness through "structural reforms" leads to massive unemployment. Polanyi thinks this hunt is
politically unrealistic and potentially explosive. Societies create moral expectations around fairness, rewards for effort,
and stability that markets, by their nature, cannot meet. What is efficient from a market perspective can be profoundly
harmful from a human perspective -- Polanyi learned this as a teenager, when his father went through a traumatic bankruptcy.
If Polanyi's argument was just that markets were immiserating and destroyed communal integration, we should certainly
consign him to the dustbin of failed moral economists. Fortunately, that was not his view. But Adelman's line of attack
reveals more about our contemporary moment than it does about Polanyi. It speaks to a growing rift between liberalism and
the left. Liberals want globalization with a human face, while leftists echo Polanyi in fundamentally questioning the
undemocratic political infrastructure of our current market era. The unexpected strength of Sanders in the United States,
Mélenchon in France, and now Corbyn in the UK shows that old political dogmas are dying.
Adelman's read of Polanyi reinforces the liberal view that globalization is a done deal and left anti-globalization
rests on a romantic fantasy, one that cannot but appease the racism and nationalism of the "losers" of the market. Just as,
if you squint hard enough, you can persuade yourself that Polanyi is a sort of self-hating, pseudo-nationalist reactionary,
despite his professed socialism, so too, if you work at it, can you merge Sanders and Trump, Mélenchon and Le Pen into one
anti-globalization, anti-liberal morass.
Yet Polanyi provides a vital avenue out of this paralyzing deadlock between pro-globalization liberalism and nationalist
populism. Our contemporary market order is in crisis not because of fuzzy-headed leftists, adorned in too many buttons, who
refuse to get with the program. Nor is the crisis one last revolt from the losers of globalization, animated by the fever
dreams of white Americans and "native" Europeans. Our order is in crisis because it has failed to deliver on its own
promise of widely distributed, real growth. For Polanyi, the central problem was how to channel the reaction to such
inevitable failures in a democratic rather than authoritarian direction. Polanyi saw many different avenues toward this
goal, including Roosevelt's New Deal. Today, of course, we face different political conditions, but many similar problems:
a massively exploitative consumer credit "marketplace," the degraded power of workers, and flows of speculative capital
that undermine democracy. Tackling these issues, though, will require a more foundational rethink of a global institutional
order that facilitates market exchange above all else.
One last thought: Adelman takes capitalism's revival after World War II as an embarrassment for Polanyi. To be sure,
Polanyi failed to foresee the remarkable resiliency of capitalism, produced in part by the ability of elites to absorb the
undercurrents of his own teaching and construct a form of embedded, organized capitalism. The flipside of post-war
capitalism, though, was the creation of an environmental crisis the full scope of which has only now become apparent. If
Polanyi failed to predict the persistence of our market society, he was certainly prescient about the destructive
environmental implications of unconstrained growth. In this respect, as in many others, we should heed his warnings and
learn from his thought, as today the stakes could hardly be higher.
Steven Klein
is a
political theorist who is an Assistant Professor of Political Science at the University of Florida. He writes and teaches
about democracy, the welfare state, and European political thought.
"... The Americans are the ones who destroyed the country and wreaked havoc on it. They have refused to finish building the electrical system and infrastructure projects. They have bargained for the reconstruction of Iraq in exchange for Iraq giving up 50% of oil imports. So, I refused and decided to go to China and concluded an important and strategic agreement with it. Today, Trump is trying to cancel this important agreement. ..."
"... After my return from China, Trump called me and asked me to cancel the agreement, so I also refused, and he threatened [that there would be] massive demonstrations to topple me. Indeed, the demonstrations started and then Trump called, threatening to escalate in the event of non-cooperation and responding to his wishes, whereby a third party [presumed to be mercenaries or U.S. soldiers] would target both the demonstrators and security forces and kill them from atop the highest buildings and the US embassy in an attempt to pressure me and submit to his wishes and cancel the China agreement." ..."
"... It could also explain why President Trump is so concerned about China's growing foothold in Iraq, since it risks causing not only the end of the U.S. military hegemony in the country but could also lead to major trouble for the petrodollar system and the U.S.' position as a global financial power. Trump's policy aimed at stopping China and Iraq's growing ties is clearly having the opposite effect, showing that this administration's "gangster diplomacy" only serves to make the alternatives offered by countries like China and Russia all the more attractive. ..."
After the feed was cut, MPs who were present wrote down Abdul-Mahdi's remarks, which were
then given to the Arabic news outlet Ida'at .
Per that transcript , Abdul-Mahdi stated that:
The Americans are the ones who destroyed the country and wreaked havoc on it. They
have refused to finish building the electrical system and infrastructure projects. They have
bargained for the reconstruction of Iraq in exchange for Iraq giving up 50% of oil imports.
So, I refused and decided to go to China and concluded an important and strategic agreement
with it. Today, Trump is trying to cancel this important agreement. "
Abdul-Mahdi continued his remarks, noting that pressure from the Trump administration over
his negotiations and subsequent dealings with China grew substantially over time, even
resulting in death threats to himself and his defense minister:
After my return from China, Trump called me and asked me to cancel the agreement, so I
also refused, and he threatened [that there would be] massive demonstrations to topple me.
Indeed, the demonstrations started and then Trump called, threatening to escalate in the
event of non-cooperation and responding to his wishes, whereby a third party [presumed to be
mercenaries or U.S. soldiers] would target both the demonstrators and security forces and
kill them from atop the highest buildings and the US embassy in an attempt to pressure me and
submit to his wishes and cancel the China agreement."
"I did not respond and submitted my resignation and the Americans still insist to this day
on canceling the China agreement. When the defense minister said that those killing the
demonstrators was a third party, Trump called me immediately and physically threatened myself
and the defense minister in the event that there was more talk about this third party."
Very few English language outlets
reported on Abdul-Mahdi's comments. Tom Luongo, a Florida-based Independent Analyst and publisher of The Gold
Goats 'n Guns Newsletter, told MintPress that the likely reasons for the "surprising"
media silence over Abdul-Mahdi's claims were because "It never really made it out into official
channels " due to the cutting of the video feed during Iraq's Parliamentary session and due to
the fact that "it's very inconvenient and the media -- since Trump is doing what they want him
to do, be belligerent with Iran, protected Israel's interests there."
"They aren't going to contradict him on that if he's playing ball," Luongo added, before
continuing that the media would nonetheless "hold onto it for future reference .If this comes
out for real, they'll use it against him later if he tries to leave Iraq." "Everything in
Washington is used as leverage," he added.
Given the lack of media coverage and the cutting of the video feed of Abdul-Mahdi's full
remarks, it is worth pointing out that the narrative he laid out in his censored speech not
only fits with the timeline of recent events he discusses but also the tactics known to have
been employed behind closed doors by the Trump administration, particularly after Mike Pompeo
left the CIA to become Secretary of State.
For instance, Abdul-Mahdi's delegation to China ended on September 24, with the protests
against his government that Trump reportedly threatened to start on October 1. Reports of a
"third side" firing on Iraqi protesters were picked up by major media outlets at the time, such
as in this
BBC report which stated:
Reports say the security forces opened fire, but another account says unknown gunmen
were responsible .a source in Karbala told the BBC that one of the dead was a guard at a
nearby Shia shrine who happened to be passing by. The source also said the origin of the
gunfire was unknown and it had targeted both the protesters and security forces .
(emphasis added)"
U.S.-backed protests in other countries, such as in Ukraine in 2014, also saw evidence of a
"
third side " shooting both protesters and security forces alike.
After six weeks of intense protests , Abdul-Mahdi
submitted
his resignation on November 29, just a few days after Iraq's
Foreign Minister praised the new deals, including the "oil for reconstruction" deal, that had
been signed with China. Abdul-Mahdi has since stayed on as Prime Minister in a caretaker role
until Parliament decides on his replacement.
Abdul-Mahdi's claims of the covert pressure by the Trump administration are buttressed by
the use of similar tactics against Ecuador, where, in July 2018, a U.S. delegation at the
United Nations
threatened the nation with punitive trade measures and the withdrawal of military aid if
Ecuador moved forward with the introduction of a UN resolution to "protect, promote and support
breastfeeding."
The New York Times reported at the time that the U.S. delegation was seeking to
promote the interests of infant formula manufacturers. If the U.S. delegation is willing to use
such pressure on nations for promoting breastfeeding over infant formula, it goes without
saying that such behind-closed-doors pressure would be significantly more intense if a much
more lucrative resource, e.g. oil, were involved.
Regarding Abdul-Mahdi's claims, Luongo told MintPress that it is also worth
considering that it could have been anyone in the Trump administration making threats to
Abdul-Mahdi, not necessarily Trump himself. "What I won't say directly is that I don't know it
was Trump at the other end of the phone calls. Mahdi, it is to his best advantage politically
to blame everything on Trump. It could have been Mike Pompeo or Gina Haspel talking to
Abdul-Mahdi It could have been anyone, it most likely would be someone with plausible
deniability .This [Mahdi's claims] sounds credible I firmly believe Trump is capable of making
these threats but I don't think Trump would make those threats directly like that, but it would
absolutely be consistent with U.S. policy."
Luongo also argued that the current tensions between U.S. and Iraqi leadership preceded the
oil deal between Iraq and China by several weeks, "All of this starts with Prime Minister Mahdi
starting the process of opening up the Iraq-Syria border crossing and that was announced in
August. Then, the Israeli air attacks happened in September to try and stop that from
happening, attacks on PMU forces on the border crossing along with the ammo dump attacks near
Baghdad This drew the Iraqis' ire Mahdi then tried to close the air space over Iraq, but how
much of that he can enforce is a big question."
As to why it would be to Mahdi's advantage to blame Trump, Luongo stated that Mahdi "can
make edicts all day long, but, in reality, how much can he actually restrain the U.S. or the
Israelis from doing anything? Except for shame, diplomatic shame To me, it [Mahdi's claims]
seems perfectly credible because, during all of this, Trump is probably or someone else is
shaking him [Mahdi] down for the reconstruction of the oil fields [in Iraq] Trump has
explicitly stated "we want the oil."'
As Luongo noted, Trump's interest in the U.S. obtaining a significant share of Iraqi oil
revenue is hardly a secret. Just last March, Trump
asked Abdul-Mahdi "How about the oil?" at the end of a meeting at the White House,
prompting Abdul-Mahdi to ask "What do you mean?" To which Trump responded "Well, we did a lot,
we did a lot over there, we spent trillions over there, and a lot of people have been talking
about the oil," which was widely interpreted as Trump asking for part of Iraq's oil revenue in
exchange for the steep costs of the U.S.' continuing its now unwelcome military presence in
Iraq.
With Abdul-Mahdi having rejected Trump's "oil for reconstruction" proposal in favor of
China's, it seems likely that the Trump administration would default to so-called "gangster
diplomacy" tactics to pressure Iraq's government into accepting Trump's deal, especially given
the fact that China's deal was a much better offer. While Trump demanded half of Iraq's oil
revenue in exchange for completing reconstruction projects (according to Abdul-Mahdi), the deal
that was signed between Iraq and China would see around
20 percen t of Iraq's oil revenue go to China in exchange for reconstruction. Aside from
the potential loss in Iraq's oil revenue, there are many reasons for the Trump administration
to feel threatened by China's recent dealings in Iraq.
The Iraq-China oil deal – a prelude to something more?
When Abdul-Mahdi's delegation traveled to Beijing last September, the "oil for
reconstruction" deal was only
one of eight total agreements that were established. These agreements cover a range of
areas, including financial, commercial, security, reconstruction, communication, culture,
education and foreign affairs in addition to oil. Yet, the oil deal is by far the most
significant.
Per the agreement, Chinese firms will work on various reconstruction projects in exchange
for roughly 20 percent of Iraq's oil exports, approximately 100,00 barrels per day, for a
period of 20 years. According to Al-Monitor
, Abdul-Mahdi had the following to say about the deal: "We agreed [with Beijing] to set up a
joint investment fund, which the oil money will finance," adding that the agreement prohibits
China from monopolizing projects inside Iraq, forcing Bejing to work in cooperation with
international firms.
The agreement is similar to one negotiated
between Iraq and China in 2015 when Abdul-Mahdi was serving as Iraq's oil minister. That
year, Iraq joined China's Belt and Road Initiative in a deal that also involved exchanging oil
for investment, development and construction projects and saw China awarded several projects as
a result. In a notable similarity to recent events, that deal was put on hold due to "political
and security tensions" caused by unrest and the surge of ISIS in Iraq, that is until
Abdul-Mahdi saw Iraq rejoin the
initiative again late last year through the agreements his government signed with China
last September.
Chinese President Xi Jinping, center left, meet with Iraqi Prime Minister
Adil Abdul-Mahdi, center right, in Beijing, Sept. 23, 2019. Lintao Zhang | AP
Notably, after recent tensions between the U.S. and Iraq over the assassination of Soleimani
and the U.S.' subsequent refusal to remove its troops from Iraq despite parliament's demands,
Iraq quietly announced that it would dramatically increase its oil exports to China to
triple the
amount established in the deal signed in September. Given Abdul-Mahdi's recent claims about
the true forces behind Iraq's recent protests and Trump's threats against him being directly
related to his dealings with China, the move appears to be a not-so-veiled signal from
Abdul-Mahdi to Washington that he plans to deepen Iraq's partnership with China, at least for
as long as he remains in his caretaker role.
Iraq's decision to dramatically increase its oil exports to China came just one day after
the U.S. government
threatened to cut off Iraq's access to its central bank account, currently held at the
Federal Reserve Bank of New York, an account that
currently holds $35 billion in Iraqi oil revenue. The account was
set up after the U.S. invaded and began occupying Iraq in 2003 and Iraq currently removes
between $1-2 billion per month to cover essential government expenses. Losing access to its oil
revenue stored in that account would lead to the "
collapse " of Iraq's government, according to Iraqi government officials who spoke to
AFP .
Though Trump publicly promised to rebuke Iraq for the expulsion of U.S. troops via
sanctions, the threat to cut off Iraq's access to its account at the NY Federal Reserve Bank
was delivered privately and directly to the Prime Minister, adding further credibility to
Abdul-Mahdi's claims that Trump's most aggressive attempts at pressuring Iraq's government are
made in private and directed towards the country's Prime Minister.
Though Trump's push this time was about preventing the expulsion of U.S. troops from Iraq,
his reasons for doing so may also be related to concerns about China's growing foothold in the
region. Indeed, while Trump has now lost his desired share of Iraqi oil revenue (50 percent) to
China's counteroffer of 20 percent, the removal of U.S. troops from Iraq may see American
troops replaced with their Chinese counterparts as well, according to Tom Luongo.
"All of this is about the U.S. maintaining the fiction that it needs to stay in Iraq So,
China moving in there is the moment where they get their toe hold for the Belt and Road
[Initiative]," Luongo argued. "That helps to strengthen the economic relationship between Iraq,
Iran and China and obviating the need for the Americans to stay there. At some point, China
will have assets on the ground that they are going to want to defend militarily in the event of
any major crisis. This brings us to the next thing we know, that Mahdi and the Chinese
ambassador discussed that very thing in the wake of the Soleimani killing."
Indeed, according to news reports, Zhang Yao -- China's ambassador to Iraq -- " conveyed
Beijing's readiness to provide military assistance" should Iraq's government request it
soon after Soleimani's assassination. Yao made the offer a day after Iraq's parliament voted to
expel American troops from the country. Though it is currently unknown how Abdul-Mahdi
responded to the offer, the timing likely caused no shortage of concern among the Trump
administration about its rapidly waning influence in Iraq. "You can see what's coming here,"
Luongo told MintPress of the recent Chinese offer to Iraq, "China, Russia and Iran are
trying to cleave Iraq away from the United States and the U.S. is feeling very threatened by
this."
Russia is also playing a role in the current scenario as Iraq initiated talks with Moscow
regarding the
possible purchase of one of its air defense systems last September, the same month that
Iraq signed eight deals, including the oil deal with China. Then, in the wake of Soleimani's
death, Russia
again offered the air defense systems to Iraq to allow them to better defend their air
space. In the past, the U.S.
has threatened allied countries with sanctions and other measures if they purchase Russian
air defense systems as opposed to those manufactured by U.S. companies.
The U.S.' efforts to curb China's growing influence and presence in Iraq amid these new
strategic partnerships and agreements are limited, however, as the U.S. is increasingly relying on China
as part of its Iran policy, specifically in its goal of reducing Iranian oil export to zero.
China remains Iran's main crude oil and condensate importer, even after it reduced its imports
of Iranian oil significantly following U.S. pressure last year. Yet, the U.S. is now attempting to
pressure China to stop buying Iranian oil completely or face sanctions while also
attempting to privately sabotage the China-Iraq oil deal. It is highly unlikely China will
concede to the U.S. on both, if any, of those fronts, meaning the U.S. may be forced to choose
which policy front (Iran "containment" vs. Iraq's oil dealings with China) it values more in
the coming weeks and months.
Furthermore, the recent signing of the "phase one" trade deal with China revealed another
potential facet of the U.S.' increasingly complicated relationship with Iraq's oil sector given
that the trade deal
involves selling U.S. oil and gas to China at very low cost , suggesting that the Trump
administration may also see the Iraq-China oil deal result in Iraq emerging as a potential
competitor for the U.S. in selling cheap oil to China, the world's top oil importer.
The Petrodollar and the Phantom of the Petroyuan
In his televised statements last week following Iran's military response to the U.S.
assassination of General Soleimani, Trump insisted that the U.S.' Middle East policy is no
longer being directed by America's vast oil requirements. He
stated specifically that:
Over the last three years, under my leadership, our economy is stronger than ever before
and America has achieved energy independence. These historic accomplishments changed our
strategic priorities. These are accomplishments that nobody thought were possible. And
options in the Middle East became available. We are now the number-one producer of oil and
natural gas anywhere in the world. We are independent, and we do not need Middle East
oil . (emphasis added)"
Yet, given the centrality of the recent Iraq-China oil deal in guiding some of the Trump
administration's recent Middle East policy moves, this appears not to be the case. The
distinction may lie in the fact that, while the U.S. may now be less dependent on oil imports
from the Middle East, it still very much needs to continue to dominate how oil is traded and
sold on international markets in order to maintain its status as both a global military
and financial superpower.
Indeed, even if the U.S. is importing less Middle Eastern oil, the petrodollar system --
first forged in the 1970s -- requires that the U.S. maintains enough control over the global
oil trade so that the world's largest oil exporters, Iraq among them, continue to sell their
oil in dollars. Were Iraq to sell oil in another currency, or trade oil for services, as it
plans to do with China per the recently inked deal, a significant portion of Iraqi oil would
cease to generate a demand for dollars, violating the key tenet of the petrodollar
system.
Chinese representatives speak to defense personnel during a weapons expo organized
by the Iraqi defense ministry in Baghdad, March, 2017. Karim Kadim | AP
The takeaway from the petrodollar phenomenon is that as long as countries need oil, they
will need the dollar. As long as countries demand dollars, the U.S. can continue to go into
massive amounts of debt to fund its network of global military bases, Wall Street bailouts,
nuclear missiles, and tax cuts for the rich."
Thus, the use of the petrodollar has created a system whereby U.S. control of oil sales of
the largest oil exporters is necessary, not just to buttress the dollar, but also to support
its global military presence. Therefore, it is unsurprising that the issue of the U.S. troop
presence in Iraq and the issue of Iraq's push for oil independence against U.S. wishes have
become intertwined. Notably, one of the architects of the petrodollar system and the man who
infamously described U.S. soldiers as "dumb, stupid animals to be used as pawns in foreign
policy", former Secretary of State Henry Kissinger, has been advising
Trump and informing his China policy since 2016.
This take was also expressed by economist Michael Hudson,
who recently noted that U.S. access to oil, dollarization and U.S. military strategy are
intricately interwoven and that Trump's recent Iraq policy is intended "to escalate America's
presence in Iraq to keep control of the region's oil reserves," and, as Hudson says, "to back
Saudi Arabia's Wahabi troops (ISIS, Al Qaeda in Iraq, Al Nusra and other divisions of what are
actually America's foreign legion) to support U.S. control of Near Eastern oil as a buttress of
the U.S. dollar."
Hudson further asserts that it was Qassem Soleimani's efforts to promote Iraq's oil
independence at the expense of U.S. imperial ambitions that served one of the key motives
behind his assassination.
America opposed General Suleimani above all because he was fighting against ISIS and other
U.S.-backed terrorists in their attempt to break up Syria and replace Assad's regime with a
set of U.S.-compliant local leaders – the old British "divide and conquer" ploy. On
occasion, Suleimani had cooperated with U.S. troops in fighting ISIS groups that got "out of
line" meaning the U.S. party line. But every indication is that he was in Iraq to work
with that government seeking to regain control of the oil fields that President Trump has
bragged so loudly about grabbing. (emphasis added)"
Hudson adds that " U.S. neocons feared Suleimani's plan to help Iraq assert control of its
oil and withstand the terrorist attacks supported by U.S. and Saudi's on Iraq. That is what
made his assassination an immediate drive."
While other factors -- such as pressure
from U.S. allies such as Israel -- also played a factor in the decision to kill Soleimani,
the decision to assassinate him on Iraqi soil just hours before he was set to meet with
Abdul-Mahdi in a diplomatic role suggests that the underlying tensions caused by Iraq's push
for oil independence and its oil deal with China did play a factor in the timing of his
assassination. It also served as a threat to Abdul-Mahdi, who has claimed that the U.S.
threatened to kill both him and his defense minister just weeks prior over tensions directly
related to the push for independence of Iraq's oil sector from the U.S.
It appears that the ever-present role of the petrodollar in guiding U.S. policy in the
Middle East remains unchanged. The petrodollar has long been a driving factor behind the U.S.'
policy towards Iraq specifically, as one of the key triggers for the 2003 invasion of Iraq was
Saddam Hussein's decision to sell Iraqi oil in Euros opposed to dollars beginning in the year
2000. Just weeks before the invasion began, Hussein boasted that Iraq's Euro-based oil revenue
account was earning a higher interest rate than
it would have been if it had continued to sell its oil in dollars, an apparent signal to other
oil exporters that the petrodollar system was only really benefiting the United States at their
own expense.
Beyond current efforts to stave off Iraq's oil independence and keep its oil trade aligned
with the U.S., the fact that the U.S. is now seeking to limit China's ever-growing role in
Iraq's oil sector is also directly related to China's publicly known efforts to create its own
direct competitor to the petrodollar, the petroyuan.
Since 2017, China has made its plans for the petroyuan -- a direct competitor to the
petrodollar -- no secret, particularly after China eclipsed the U.S. as the world's largest
importer of oil.
The new strategy is to enlist the energy markets' help: Beijing may introduce a new way to
price oil in coming months -- but unlike the contracts based on the U.S. dollar that currently dominate global
markets, this benchmark would use China's own currency. If there's widespread adoption, as the
Chinese hope, then that will mark a step toward challenging the greenback's status as the
world's most powerful currency .The plan is to price oil in yuan using a gold-backed futures contract in
Shanghai, but the road will be long and arduous."
If the U.S. continues on its current path and pushes Iraq further into the arms of China and
other U.S. rival states, it goes without saying that Iraq -- now a part of China's Belt and Road
Initiative -- may soon favor a petroyuan system over a petrodollar system, particularly as the
current U.S. administration threatens to hold Iraq's central bank account hostage for pursuing
policies Washington finds unfavorable.
It could also explain why President Trump is so concerned about China's growing foothold
in Iraq, since it risks causing not only the end of the U.S. military hegemony in the country but
could also lead to major trouble for the petrodollar system and the U.S.' position as a global
financial power. Trump's policy aimed at stopping China and Iraq's growing ties is clearly having
the opposite effect, showing that this administration's "gangster diplomacy" only serves to make
the alternatives offered by countries like China and Russia all the more attractive.
One can see how all these recent wars and military actions have a financial motive at their
core. Yet the mass of gullible Americans actually believe the reasons given, to "spread
democracy" and other wonderful things. Only a small number can see things for what they really
are. It's very frustrating to deal with the stupidity of the average person on a daily basis.
This is not Trump's policy, it is American policy and the variation is in how he implements
it. Any other person would have fallen in line with it as well. US policy has it's own inner
momentum that can't change course. The US depends upon continuation of the dollar as the
world's reserve currency. Were that to be lost the US likely would descend into chaos without
end. When the USSR came apart it was eventually able to downsize into the Russian state. We
don't have that here; there is no core ethnicity with it's own territory left anymore, it's
just a jumble. For the US it's a matter of survival.
The Chinese, for now, are not contradicting the Trump administration on the promise of
Chinese mega-purchases, because when Trump is more amicable their interests align. If an empty
promise that wasn't even made means the trade war de-escalation goes on, that is fine with
them. They would like to calm the markets as much as Trump would, and in this way they have
added leverage on Trump. Should they change their minds they can always explode the fiction
later on and injure Trump, perhaps strategically right around October.
Now that the dust has settled on the US-China trade deal and analysts have had some time to
pore over its 90+ pages, various chapters and (non-binding) terms that comprise the body of the
agreement, one high-level observation noted by Rabobank, is that the agreement foresees the
total amount of goods exports from the US to China to reach above $ 290BN by end-2021.
The implication of this is that the chart for US exports to China should basically look like
this for the next two years:
As Rabobank's senior economist Bjorn Giesbergen writes, t here are probably very few
economists that would deem such a trajectory feasible (except for the perpetually cheerful
economics team at Goldman , of course), seeing that it took the US more than 15 years to
raise exports from around USD16bn in 2000 to USD 130bn in 2017.
Moreover, the Chinese purchases of goods are beneficial to US companies, but at the cost of
other countries, and the agreement is only for two years. If China will buy more aircraft from
the US, that could be to the detriment of the EU.
According to the document "the parties project that the trajectory of increases will
continue in calendar years 2020 through 2025." But "to project" does not sound as firm as
"shall ensure." So, as the Rabo economist asks, "are we going to see a repetition of the 2019
turmoil caused by the phase 1 trade negotiations after those two years? Or is this supposed to
be solved in the phase 2 deal that is very unlikely to be made? What's more, while the
remaining tariffs provide leverage for US trade negotiators, they are still a tax on US
importers and US consumers of Chinese goods."
But before we even get there, going back to the chart shown above, Bloomberg today points
out something we have pointed out in the past, namely that China's $200 billion, two-year
spending spree negotiated with the Trump administration appears increasingly difficult to
deliver, and now a $50 billion "hole" appears to have opened up : that is the amount of U.S.
exports annually left out and many American businesses still uncertain about just what the
expectations are.
Some background: while Trump officials stressed the reforms aimed at curbing
intellectual-property theft and currency manipulation that China has agreed to in the "phase
one" trade deal signed Wednesday, the Chinese pledge to buy more American exports has become an
emblem of the deal to critics and supporters alike.
The administration has said those new exports in manufactured goods, energy, farm shipments
and services will come over two years on top of the $130 billion in goods and $57.6 billion in
services that the U.S. sent to China in 2017 -- the year before the trade war started and
exports were hit by Beijing's retaliatory measures to President Donald Trump's tariffs.
And while
Goldman said it is certainly feasible that China can ramp up its purchases of US goods ,
going so far as providing a matrix "scenario" of what such purchases could look like
that now appears virtually impossible, because as Bloomberg notes, the list of goods
categories in the agreement covers a narrower group of exports to China that added up to $78.8
billion in 2017, or $51.6 billion less than the overall goods exports to the Asian nation that
year. The goods trade commitment makes up $162.1 billion of the $200 billion total, with $37.9
billion to come from a boost in services trade such as travel and insurance.
Here, the math gets even more ridiculous:
The target for the first year that the deal takes effect is to add $63.9 billion in
manufactured goods, agriculture and energy exports. According to Bloomberg economist Maeva
Cousin's analysis, that would be an increase of 81% over the 2017 baseline. In year two, the
agreement calls for $98.2 billion surge in Chinese imports, which would require a 125%
increase over 2017.
Importantly for China, the deal requires those purchases to be "made at market prices based
on commercial considerations," a caveat which spooked commodities traders, and led to a sharp
drop in ags in the day following the deal's announcement.
Can China pull this off? Yes, if Beijing tears up existing trade deals and supply chains and
imposes explicit procurement targets and demands on China's local business. As Bloomberg notes,
"critics argue that such pre-ordained demand amounts to a slide into the sort of
government-managed trade that U.S. presidents abandoned decades ago" and the very sort of act
of central planning that U.S. officials have , paradoxically, spent years trying to convince
China to walk away from.
This may also explain why a key part of the trade deal will remain secret: the purchase plan
is based on what the administration insists is a specific – if classified – annex
of Chinese commitments. "The 20-page public version of that annex lists hundreds of products
and services from nuclear reactors to aircraft, printed circuits, pig iron, soybeans, crude oil
and computer services but no figures for purchases."
Going back to the critics, it is this convoluted mechanism that has them arguing that
China's stated targets will likely never be met: "This is ambitious and it will create some
stresses within the supply system," said Craig Allen, the president of the U.S.-China Business
Council.
That's not all: as Allen said, among the outstanding questions was whether China would lift
its retaliatory duties on American products as the US keeps its tariffs on some $360 billion in
imports from China as Trump seeks to maintain leverage for the second phase of
negotiations.
Allen also made clear the overall purchase schedule left many U.S. companies uncomfortable
even as they saw benefits in other parts of the deal. "The vast majority of our members are
looking for no more than a level playing field in China," Allen said. "We are not looking for
quotas or special treatment."
As a result, for many manufacturers what is actually changing -- and what China has
committed to instead of given a "best efforts" promise to achieve -- remains unclear.
Major exporters such as Boeing Co., whose CEO Dave Calhoun attended Wednesday's signing
ceremony, have stayed mum about what exactly the deal will mean for their business with China.
In an attempt to "clarify", Trump tweeted that the deal includes a Chinese commitment to buy
$16 billion to $20 billion in Boeing planes. It was unclear if he meant 737 MAX planes which
nobody in the world will ever voluntarily fly inside again.
Finally, prompting the latest round of cronyism allegations, Trump's new China pact also
includes plans for exports of American iron and steel , "a potential gain for an industry close
to the president that has benefited from his tariffs and complained about Chinese production
and overcapacity for years." As Bloomberg adds, the text of the agreement lists iron and steel
products ranging from pig iron to stainless steel wire and railway tracks, but steel industry
sources said they had been caught by surprise and not been given any additional details on
China's purchase commitments.
It is unclear why Beijing would need US product s: after all, in its scramble to erect ghost
cities and hit a goalseeked GDP print, China produces more than 50% of the world's steel,
drawning criticism from around the world – if not Greta Thunberg – for the massive
coal-derived pollution that comes from flooding global markets with cheap steel.
This partly explains why the US is taking its battle on 5G technology with the Chinese so
seriously. As a faltering global leader, the Americans do not take it kindly when China tries
to snatch a lunch right from under their nose. As such, the US-China trade war goes beyond
economics and ideology. It is about global domination across every conceivable technology that
consumers and governments worldwide are addicted to these days.
Metaphorically, technology is the new opium that rakes in money, power and control. Take a
look at the way consumers across the world are utilizing technologies. From smartphones to
mobile apps, from cloud-computing to cybersecurity, trillions of dollars are being spent by
consumers and their governments. The Americans were laughing their way to the bank until the
Chinese came along and upset their game.
As greed has no boundary or limit, every challenger or opposition to the consumption of this
"new opium" means a loss in revenue, power and control for the US and its preferred allies.
Sharing the spoils with others is looking like an inconceivable option for them at this
stage.
To call the tension between the US and China a trade war undermines this greater reality.
From unilateral sanctions to outright destruction of economies, it is starting to look as if
the US is using technology to regain global domination at all costs.
"... Trump is covering his retraction by calling it a trade deal. China's part of the deal is to agree to purchase the US goods that it already intended to purchase. ..."
The first thing
to understand is that it is not a trade deal. It is Trump backing off his tariffs when he
discovered that the tarrifs fall on US goods and American consumers, not on China. Trump is
covering his retraction by calling it a trade deal. China's part of the deal is to agree to
purchase the US goods that it already intended to purchase.
The purpose of tariffs is to protect domestic producers from foreign competition by raising
the price of imported goods. What Trump, his administration, and the financial press did not
understand is that at least half of the US trade deficit with China is the offshored goods
produced in China by such corporations as Apple, Nike, and Levi. The offshored production of US
global corporations counts as imports when they are brought into the US to be sold to
Americans. Thus, the cost of the tariffs were falling on US corporations and US consumers.
Tariffs are not an effective way to bring offshored US manufacturing home. If Trump or any
US government wants to bring US manufacturing back to the US from its offshored locations, the
way to achieve this result is to change the way the US taxes corporations. The rule would be:
If a US corporation produces in the US with US labor for US markets, the firm's profits are
taxed at a low rate. If the corporation produces products for the US market abroad with foreign
labor, the tax rate will be high enough to more than wipe out the labor cost savings.
As I have emphasized for years, the offshoring of US manufacturing has inflicted massive
external costs on the United States. Middle class jobs have been lost, careers ended, living
standards of former US manufacturing workers and families have dropped. The tax base of cities
and states has shrunk, causing cutbacks in public services and undermining municipal and state
pension funds. You can add to this list. These costs are the true cost of the increased profits
from the lower foreign labor and compliance costs. A relatively few executives and shareholders
benefitted at the expense of a vast number of Americans.
This is the problem that needs to be addressed and corrected.
...if nothing had happened in the US-China trade war. Well, me might have gotten to where we
are supposed to be with the deal
..a honest question. In terms of the environment and global climate, is it a good thing that
farmers will be producing more monoculture grains, dairy, beef and pork for export?
There has been much hype about the signing of Phase One (and probably only) US-China trade
deal. However based on a front page story in today's Washington Post, there is not much there.
The US did not raise tariffs as planned, but tarifsf still remain on two thirds of the sectors
that had them, although some were halved. But numerous US sectors see no change at all and are
now viewing the situation as not likely to improve, with them suffering losses of business
likely to return. Among those are chemicals, apparel retailers, and auto parts. In these and
other sectors there is not much reduction of uncertainty regarding US-China trade, so not
likely much increase in investment.
The main items in it besides no worsening of tariffs, China has made promises not to
pressure US firms to turn over technology and also to increase imports from the US by $200
billion over the next two years, especially in energy and agriculture. So maybe US soybean
farmers will no longer need the bailouts of billions of $ Trump has been providing to them.
However, such promises have been made in the past.
As it is, I am watching commentators on Bloomberg, and about the most any of them are
willing to say is that this "puts a floor" on the "deterioration" of US-China trade relations.
That is far from some dramatic breakthrough, and most of the tariffs put on as part of the
US-China trade war remain in place.
Barkley Rosser
spencer , January 16, 2020 3:49 pm
This looks like it may be a way to make it a status quo or back burner issue until after
the election.
Of course Trump will always be able to blow it up if he decides that would be to his
advantage.
Bert Schlitz , January 16, 2020 4:53 pm
I don't see how they "buy" 200 billion worth of goods. The Chinese economy is slowing and
that is why purchases were flattening by 2014.
Its noise and circuses.
pgl , January 16, 2020 5:48 pm
Bert – I agree. Menzie Chinn over at Econbrowser has a lot of details on this noise
and circus. Check it out!
There has been much hype about the signing of Phase One (and probably only) US-China trade
deal. However based on a front page story in today's Washington Post, there is not much there.
The US did not raise tariffs as planned, but tarifsf still remain on two thirds of the sectors
that had them, although some were halved. But numerous US sectors see no change at all and are
now viewing the situation as not likely to improve, with them suffering losses of business
likely to return. Among those are chemicals, apparel retailers, and auto parts. In these and
other sectors there is not much reduction of uncertainty regarding US-China trade, so not
likely much increase in investment.
The main items in it besides no worsening of tariffs, China has made promises not to
pressure US firms to turn over technology and also to increase imports from the US by $200
billion over the next two years, especially in energy and agriculture. So maybe US soybean
farmers will no longer need the bailouts of billions of $ Trump has been providing to them.
However, such promises have been made in the past.
As it is, I am watching commentators on Bloomberg, and about the most any of them are
willing to say is that this "puts a floor" on the "deterioration" of US-China trade relations.
That is far from some dramatic breakthrough, and most of the tariffs put on as part of the
US-China trade war remain in place.
spencer , January 16, 2020 3:49 pm
This looks like it may be a way to make it a status quo or back burner issue until after
the election.
Of course Trump will always be able to blow it up if he decides that would be to his
advantage.
Bert Schlitz , January 16, 2020 4:53 pm
I don't see how they "buy" 200 billion worth of goods. The Chinese economy is slowing and
that is why purchases were flattening by 2014.
Its noise and circuses.
pgl , January 16, 2020 5:48 pm
Bert – I agree. Menzie Chinn over at Econbrowser has a lot of details on this noise
and circus. Check it out!
Coming decade could see the US take on Russia, China and Iran over the New Silk Road
connection
The Raging Twenties started with a bang with the targeted assassination of Iran's General
Qasem Soleimani.
Yet a bigger bang awaits us throughout the decade: the myriad declinations of the New Great
Game in Eurasia, which pits the US against Russia, China and Iran, the three major nodes of
Eurasia integration.
Every game-changing act in geopolitics and geoeconomics in the coming decade will have to be
analyzed in connection to this epic clash.
The Deep State and crucial sectors of the US ruling class are absolutely terrified that
China is already outpacing the "indispensable nation" economically and that Russia has
outpaced
it militarily . The Pentagon officially designates the three Eurasian nodes as
"threats."
Hybrid War techniques – carrying inbuilt 24/7 demonization – will proliferate
with the aim of containing China's "threat," Russian "aggression" and Iran's "sponsorship of
terrorism." The myth of the "free market" will continue to drown under the imposition of a
barrage of illegal sanctions, euphemistically defined as new trade "rules."
Yet that will be hardly enough to derail the Russia-China strategic partnership. To unlock
the deeper meaning of this partnership, we need to understand that Beijing defines it as
rolling towards a "new era." That implies strategic long-term planning – with the key
date being 2049, the centennial of New China.
The horizon for the multiple projects of the Belt and Road Initiative – as in the
China-driven New Silk Roads – is indeed the 2040s, when Beijing expects to have fully
woven a new, multipolar paradigm of sovereign nations/partners across Eurasia and beyond, all
connected by an interlocking maze of belts and roads.
The Russian project – Greater Eurasia –
somewhat mirrors Belt & Road and will be integrated with it. Belt & Road, the Eurasia
Economic Union, the Shanghai Cooperation Organization and the Asia Infrastructure Investment
Bank are all converging towards the same vision.
Realpolitik
So this "new era", as defined by the Chinese, relies heavily on close Russia-China
coordination, in every sector. Made in China 2025 is encompassing a series of techno/scientific
breakthroughs. At the same time, Russia has established itself as an unparalleled technological
resource for weapons and systems that the Chinese still cannot match.
At the latest BRICS summit in Brasilia, President Xi Jinping told Vladimir Putin that "the
current international situation with rising instability and uncertainty urge China and Russia
to establish closer strategic coordination." Putin's response: "Under the current situation,
the two sides should continue to maintain close strategic communication."
Russia is showing China how the West respects realpolitik power in any form, and Beijing is
finally starting to use theirs. The result is that after five centuries of Western domination
– which, incidentally, led to the decline of the Ancient Silk Roads – the Heartland
is back, with a bang, asserting its preeminence.
On a personal note, my travels these past two years, from West Asia to Central Asia, and my
conversations these past two months with analysts in Nur-Sultan, Moscow and Italy, have allowed
me to get deeper into the intricacies of what sharp minds define as the Double Helix. We are
all aware of the immense challenges ahead – while barely managing to track the stunning
re-emergence of the Heartland in real-time.
In soft power terms, the sterling role of Russian diplomacy will become even more paramount
– backed up by a Ministry of Defense led by Sergei Shoigu, a Tuvan from Siberia, and an
intel arm that is capable of constructive dialogue with everybody: India/Pakistan, North/South
Korea, Iran/Saudi Arabia, Afghanistan.
This apparatus does smooth (complex) geopolitical issues over in a manner that still eludes
Beijing.
In parallel, virtually the whole Asia-Pacific – from the Eastern Mediterranean to the
Indian Ocean – now takes into full consideration Russia-China as a counter-force to US
naval and financial overreach.
Stakes in Southwest Asia
The targeted assassination of Soleimani, for all its long-term fallout, is just one move in
the Southwest Asia chessboard. What's ultimately at stake is a macro geoeconomic prize: a
land bridge from the Persian Gulf to the Eastern Mediterranean.
Last summer, an Iran-Iraq-Syria trilateral established that "the goal of negotiations is to
activate the Iranian-Iraqi-Syria load and transport corridor as part of a wider plan for
reviving the Silk Road."
There could not be a more strategic connectivity corridor, capable of simultaneously
interlinking with the International North-South Transportation Corridor; the Iran-Central
Asia-China connection all the way to the Pacific; and projecting Latakia towards the
Mediterranean and the Atlantic.
What's on the horizon is, in fact, a sub-sect of Belt & Road in Southwest Asia. Iran is
a key node of Belt & Road; China will be heavily involved in the rebuilding of Syria; and
Beijing-Baghdad signed multiple deals and set up an Iraqi-Chinese Reconstruction Fund (income
from 300,000 barrels of oil a day in exchange for Chinese credit for Chinese companies
rebuilding Iraqi infrastructure).
A quick look at the map reveals the "secret" of the US refusing to pack up and leave Iraq,
as demanded by the Iraqi Parliament and Prime Minister: to prevent the emergence of this
corridor by any means necessary. Especially when we see that all the roads that China is
building across Central Asia – I navigated many of them in November and December –
ultimately link China with Iran.
The final objective: to unite Shanghai to the Eastern Mediterranean – overland, across
the Heartland.
As much as Gwadar port in the Arabian Sea is an essential node of the China-Pakistan
Economic Corridor, and part of China's multi-pronged "escape from Malacca" strategy, India also
courted Iran to match Gwadar via the port of Chabahar in the Gulf of Oman.
So as much as Beijing wants to connect the Arabian Sea with Xinjiang, via the economic
corridor, India wants to connect with Afghanistan and Central Asia via Iran.
Yet India's investments in Chabahar may come to nothing, with New Delhi still mulling
whether to become an active part of the US "Indo-Pacific" strategy, which would imply dropping
Tehran.
The Russia-China-Iran joint naval exercise in late December, starting exactly from Chabahar,
was a timely wake-up for New Delhi. India simply cannot afford to ignore Iran and end up losing
its key connectivity node, Chabahar.
The immutable fact: everyone needs and wants Iran connectivity. For obvious reasons, since
the Persian empire, this is the privileged hub for all Central Asian trade routes.
On top of it, Iran for China is a matter of national security. China is heavily invested in
Iran's energy industry. All bilateral trade will be settled in yuan or in a basket of
currencies bypassing the US dollar.
US neocons, meanwhile, still dream of what the Cheney regime was aiming at in the past
decade: regime change in Iran leading to the US dominating the Caspian Sea as a springboard to
Central Asia, only one step away from Xinjiang and weaponization of anti-China sentiment. It
could be seen as a New Silk Road in reverse to disrupt the Chinese vision.
Battle of the Ages
A new book, The Impact of China's Belt and Road
Initiativ e , by Jeremy Garlick of the University of Economics in Prague, carries the
merit of admitting that, "making sense" of Belt & Road "is extremely difficult."
This is an extremely serious attempt to theorize Belt & Road's immense complexity
– especially considering China's flexible, syncretic approach to policymaking, quite
bewildering for Westerners. To reach his goal, Garlick gets into Tang Shiping's social
evolution paradigm, delves into neo-Gramscian hegemony, and dissects the concept of "offensive
mercantilism" – all that as part of an effort in "complex eclecticism."
The contrast with the pedestrian Belt & Road demonization narrative emanating from US
"analysts" is glaring. The book tackles in detail the multifaceted nature of Belt & Road's
trans-regionalism as an evolving, organic process.
Imperial policymakers won't bother to understand how and why Belt & Road is setting a
new global paradigm. The NATO summit in London last month offered a few pointers. NATO
uncritically adopted three US priorities: even more aggressive policy towards Russia;
containment of China (including military surveillance); and militarization of space – a
spin-off from the 2002 Full Spectrum Dominance doctrine.
So NATO will be drawn into the "Indo-Pacific" strategy – which means containment of
China. And as NATO is the EU's weaponized arm, that implies the US interfering on how Europe
does business with China – at every level.
Retired US Army Colonel Lawrence Wilkerson, Colin Powell's chief of staff from 2001 to 2005,
cuts to the chase: "America exists today to make war. How else do we interpret 19 straight
years of war and no end in sight? It's part of who we are. It's part of what the American
Empire is. We are going to lie, cheat and steal, as Pompeo is doing right now, as Trump is
doing right now, as Esper is doing right now and a host of other members of my political party,
the Republicans, are doing right now. We are going to lie, cheat and steal to do whatever it is
we have to do to continue this war complex. That's the truth of it. And that's the agony of
it."
Moscow, Beijing and Tehran are fully aware of the stakes. Diplomats and analysts are working
on the trend, for the trio, to evolve a concerted effort to protect one another from all forms
of hybrid war – sanctions included – launched against each of them.
For the US, this is indeed an existential battle – against the whole Eurasia
integration process, the New Silk Roads, the Russia-China strategic partnership, those Russian
hypersonic weapons mixed with supple diplomacy, the profound disgust and revolt against US
policies all across the Global South, the nearly inevitable collapse of the US dollar. What's
certain is that the Empire won't go quietly into the night. We should all be ready for the
battle of the ages.
An extremely rare candid and somewhat precise piece of journalism by the NYT (albeit telling
the story from the point of view of the Americans/capitalists):
What it does not do is tackle the root causes of the trade war. The deal leaves
untouched Beijing's subsidies for homegrown industries and its firm control over crucial
levers of its hard-charging economy . The deal also keeps in place most of Mr. Trump's
tariffs on $360 billion worth of Chinese goods, a much heavier tax than Americans pay for
products from practically anywhere else.
Solving those issues could take years.
Interesting to see what the Americans consider to be China's "root causes of the trade
war". And we still have people who believe the war against China is not a war between
capitalism and socialism, but between "freedom and tyranny". Pure middle class liberal
dellusion of grandeur.
--//--
In the last open thread, in my first comment, I highlighted how fast the Western MSM gave
up the idea the Labour Party should have its first female leader in order to prop up their
guy, Keir Starmer (literally the only male still in the dispute right now). The reason, of
course, is that his main rival - Rebecca Long-Bailey - is Corbyn's successor and, as such,
has Momentum's (and, probably, of the unions) support.
I have been stating here for some time now that the function of the middle class is to
serve as the battering ram of the capitalists. They are the class tasked with fabricating the
narratives and "theories" which all the society should believe and never question. They are
what that 007 villain (Spectre) called "visionaires", or what the far-rightists in America
call "the experts".
If that's true, then postmodernism is their ideological weapon of choice nowadays.
doesn't matter in which order they're read, but Escobar's
latest intersects with Alastair
Crooke's to provide Big Picture perspective.
Towards his conclusion, Escobar cites retired US Army Colonel Lawrence Wilkerson, Colin
Powell's chief of staff from 2001 to 2005:
"We are going to lie, cheat and steal to do whatever it is we have to do to continue this
war complex. That's the truth of it. And that's the agony of it."
But nowhere in the citation does Wilkerson say that any of this effort's being done to
defend the USA, whereas its beyond clear that Iran, China and Russia are all working to
protect their nations and people. Rather, it appears as if "the profound disgust and revolt
against US policies all across the Global South" is finally being adopted by a majority of
the USA's polity as it becomes clear that all the lying, cheating and stealing is being done
at the expense of the 99% for the 1%'s benefit.
As Crooke alludes, wagging the dog a la Clinton might save Trump from being convicted and
removed by the Senate, but such a move will likely cost him the election, although much
depends on how those controlling the D-Party behave in the face of Sanders winning the
nomination via the primaries prior to the Convention.
Under the text of the Phase One deal - which
was released later in the day by the Office of the US Trade Representative - both sides
agree that they can formally complain to each other if either feels the other side is not
holding up its end of the bargain.
China Accepts Deal to Buy $200Bln in US Goods
First and foremost, the document obliges Beijing to purchase at least $200 billion worth of
US goods over the next two years.
"During the two-year period from January 1, 2020, through December 31, 2021, China shall
ensure that purchases and imports into China from the United States of the manufactured
goods, agricultural goods, energy products, and services identified in Annex 6.1 exceed the
corresponding 2017 baseline amount by no less than $200 billion", the text of the agreement
reads.
The agreement said China
will ensure that it buys $32.9 billion worth of US manufactured goods this year and $44.8
billion in 2021; $12.5 billion in US agricultural goods this year and $19.5 billion in 2021;
$18.5 billion in US energy products this year and $33.9 billion in 2021; and $12.8 billion in
US services this year and $25.1 billion in 2021.
US, China Agree to Protect Patents,
Fight Abuse of Trade Secrets
The United States and China agreed to protect patents, particularly in pharmaceuticals, and
ban counterfeit products and the misappropriation of trade secrets.
"China shall permit pharmaceutical patent applicants to rely on supplemental data to satisfy
relevant requirements for patentability, including sufficiency of disclosure and inventive
step, during patent examination proceedings, patent review proceedings, and judicial
proceedings", the text of the deal said. "The United States
affirms that existing US measures afford treatment equivalent to that provided for in
this Article".
Beijing and Washington also resolved to strengthen cooperation and coordination in combating
piracy, including counterfeiting on e-commerce platforms, in the agreement.
On the protection of trade secrets, the United States said China will treat as "urgent" the
use, or attempted use, of claimed trade secret information and provide its judicial authorities
the authority to order a preliminary injunction based on case facts and circumstances.
Washington pledged to do the same for China.
China to Boost US Energy Imports by $52
Bln
China also agreed to increase purchases of US energy products by $52 billion in the next two
years.
The US energy products will be part of the total $200 billion worth of US goods that China
will import through 2021, according to the agreement.
"For the category of energy products no less than $18.5 billion above the corresponding 2017
baseline amount is purchased and imported into China from the United States in calendar year
2020, and no less than $33.9 billion above the corresponding 2017 baseline amount is
purchased and imported into China from the United States in calendar year 2021", the text of
the deal said.
The agreement listed the US energy products that China will be buying as: crude oil,
liquefied natural gas, refined petroleum and coal.
China is the world's largest buyer of oil and the United States is the largest producer of
the commodity.
Oil prices, which hit five-week lows earlier on Wednesday, pared their losses after the
energy deal was announced by the US and Chinese governments.
Avoiding Currency
Manipulations
Under the Phase One deal China agrees to not engage in currency manipulation for the purpose
of achieving trade advantages over the United States.
"The Parties
shall refrain from competitive devaluations and not target exchange rates for competitive
purposes, including through large-scale, persistent, one-sided intervention in exchange
markets," the agreement states.
The United States and China will communicate regularly and consult on foreign exchange
markets, activities and policies as well as consult with each other regarding the International
Monetary Fund's assessment of the exchange rate of each country, the agreement states.
The agreement states that the United States and China should achieve and maintain a
market-determined exchange rate regime.
The agreement comes after two years of wrangling and numerous halts in discussions, during
which both sides piled hundreds of billions of dollars of tit-for-tat tariffs on each
other.
Despite the signing of the accord, the Trump administration
will maintain tariffs on $360 billion of Chinese goods in an attempt to hold Beijing
accountable to the deal, US officials said. The Chinese government has also said it will decide
later on the tariffs it has imposed on US imports, which last stood at $185 billion in
value.
The US-China trade war sparked in January 2019, when the Trump administration announced
duties on Chinese-made solar panels and washing machines. The Trump administration has since
placed tariffs on $550 billion worth of Chinese products.
'Phase Two' Will End US-China
Trade War?
US Treasury Secretary Steve Mnuchin commented earlier on Wednesday on the agreement and said
that certain technology and cybersecurity issues would be resolved in the next chapter of the
deal to end the trade dispute.
"I think a very significant amount of the technology issues are in Phase One. There are other
certain areas of services away from financial services that will be in Phase Two. There are
certain additional cybersecurity issues that will be in Phase Two [...] There still more
issues to deal with and we'll address those", Mnuchin said, cited by CNBC.
Although the timing and details of Phase Two remain vague, Mnuchin ruled out Huawei being
included,
claiming that the Chinese tech giant is part of "the national security dialogue".
Trump claimed during a news conference on Wednesday that he does not foresee a Phase Three
trade agreement with China, expecting to conclude the trade negotiations with Phase
Two.
"We've already begun discussions on a Phase 2 deal", Pence said, cited by Fox Business.
Trump said earlier that inking of the second phase of the deal may have to wait until after
the 2020 presidential election to allow time to negotiate a better agreement.
Phase One and Phase Two could reportedly ease trade tensions between the two major economic
powers but it would unlikely settle the dispute, The Washington Post reported.
According to the media outlet, the Trump administration is developing new export control
regulations aimed at limiting flows of sophisticated technology to China, while US officials
embarked on closely scrutinizing potential Chinese investments in the United States. Media
reports of alleged new economic and technology levies against Beijing sparked speculation
among analysts that Phase Three should not be excluded.
Rich countries embraced trade multilateralism when it suited them, and now they're abandoning it. That may not be such a bad thing.
The World Trade Organization (WTO) is on its last legs now that the Trump administration has blocked the appointment or reappointment
of judges to the appeals court of its Dispute Settlement Mechanism -- which is the central pillar of the 24-year-old multilateral
body.
Do I regret the demise of the World Trade Organization now that Trump is on a unilateral trade rampage? No. I always saw the WTO
and unilateralism as two faces of U.S. power deployed against those countries seeking to remake the world trading order in a more
equitable and just direction.
Multilateralism and unilateralism have, since the end of the Second World War, been alternative strategies for global hegemony
preferred by competing factions of the U.S. ruling elite.
The Democrats preferred multilateralism because they felt it would both institutionalize the U.S.'s hegemonic status in the world
trading order at the same time that it would make it more legitimate by obtaining the consent of its allies. Republicans, however,
felt that the exercise of U.S. power should be as little constrained by global rules and institutions as possible.
These two views clashed head-on in 1948 during the debate over the ratification of the Havana Charter, which would have established
the International Trade Organization (ITO). After having participated in the negotiations, the Democratic administration of President
Truman did not submit it to the Senate for ratification, worried that the Republicans would successfully block it. The Republicans
argued that ratifying the Havana Charter would be unconstitutional since no legal code could stand above the U.S. Constitution, and
that a treaty governing trade would do precisely that.
Republicans and Democrats agreed to a compromise: the much weaker General Agreement on Tariffs and Trade (GATT), which had little
checks on U.S. trade practices and did not bring under its ambit the global agricultural trade that U.S. corporations dominated.
With trade making up only a small part of U.S. gross domestic product (GDP) then, the U.S. was not worried about the absence of strong
rules on global trade, and felt these would only harm the bottom line of its emerging transnational corporations.
Paradoxically, GATT allowed the rise of a number of formerly minor trading countries into major actors in global trade, which
would not have been possible within an iron-clad free trade regime. These were mainly economies from East Asia like South Korea,
Taiwan, and Malaysia that engaged in aggressive export policies while building up manufacturing industries protected by high tariffs
and import quotas. At the same time, by the 1970s and 1980s, trade accounted for a greater part of U.S. GDP than in the late 1940s,
and U.S. corporations wanted fewer restrictions on their penetration of foreign markets.
So Washington changed its mind in the 1980s, and both Republicans and Democrats agreed to push for a strengthened global trade
regime.
The U.S. was confident that it would benefit mainly its corporations which it saw as the most competitive in the world. The European
Union decided to join the bandwagon for a strengthened international trade regime mainly because, like Washington, it wanted to dump
its massive agricultural surpluses on developing countries.
Leading industries in Europe, the U.S., and Japan -- like the automobile, information, and pharmaceutical industries -- also had
a joint interest in preventing the emergence of new competitors from East and Southeast Asia by making the latter's liberal acquisition
of complex technologies (dubbed "intellectual piracy") a violation of trade rules, or by preventing them from using trade restrictions
to build up their industries.
The result was the World Trade Organization, which came into being in 1995. The WTO, from the perspective of U.S. interests, was
a set of rules and institutions that would promote, consolidate, and legitimize structures of global trade ensuring the hegemony
of US interests.
While free trade was the rhetoric of the WTO, the achievement of monopoly was actually the aim of the WTO's three most important
agreements.
The Agreement on Agriculture (AOA) institutionalized the dumping of U.S. and European surpluses on developing countries by forcing
the latter to end their import quotas and lower their tariffs. The Trade Related Intellectual Property Rights Agreement (TRIPs) sought
to institutionalize U.S. corporations' monopoly of high technology by outlawing reverse engineering and other methods used by developing
countries to get universal access to knowledge. The Trade Related Investment Measures Agreement (TRIMs) sought to prevent countries
from imitating Japan, South Korea, and Malaysia and using trade policy, like reducing imported inputs into finished goods in favor
of local inputs, to build up industries that became significant competitors both in local and global markets.
Then, in 2003, with the heft provided by India, Brazil, and China (a WTO member since 2001), the developing countries in the WTO
were able to prevent the U.S. and EU's attempt to dismantle government protection of small farmers. They foiled attempts to tighten
the already very restrictive TRIPs Agreement, and prevented the joint U.S.-EU attempt to bring investment, government procurement,
and competition policy under the ambit of the WTO.
Following this, the U.S. abandoned the multilateral route. After the Fifth Ministerial of the WTO collapsed in Cancun in 2003,
the Republican Bush administration's Special Trade Representative Robert Zoellick warned: "As the WTO members ponder the future,
the U.S. will not wait: we will move towards free trade with can-do countries."
Over the next few years, the U.S. and the EU preferred to put their efforts into forging bilateral trade agreements or limited
multilateral agreements, like the Trans-Pacific Partnership (TPP) that was the fallback position favored by the Obama administration.
So Trump did not initiate the move back to unilateralism -- he merely brought to its climax, with his trade war with China, a swing
back to unilateralism that had begun with the George W. Bush administration in 2003.
Indeed, Trump's blocking of judges to the WTO's appellate court is simply an extension of the policy of blocking the appointment
or reappointment of judges practiced earlier by the supposedly multilateralist Obama administration. The most notorious trade act
of the U.S. under Obama was its ouster in 2016 of Appellate Body Member Seung Wha Chang of South Korea on the grounds that it did
not agree with the distinguished South Korean jurist's judgments in four trade disputes involving the U.S.
The result, the current global trading system, is a hodge-podge featuring a weakened WTO, failed trade agreements like the TPP,
stalemated or slow-moving negotiations like the Regional Comprehensive Economic Partnership (RCEP), developing country trade arrangements
like Mercosur, bilateral treaties like the South Korea-U.S. free trade agreement, and non-institutionalized bilateral and unilateral
initiatives.
This may, in fact, be the least undesirable of outcomes. For many developing countries, the era of the weak GATT regime from 1948
to 1995 was a dynamic era that left them a lot of development space owing to the lack of pressure for them to open up their agricultural
and manufacturing sectors, weak trade dispute mechanisms, and the absence of anti-development pro-developed country regimes like
TRIPs.
Instead of the chaos that neoliberal ideologues warn us against, current conditions might, in fact, be moving in the direction
of a hybrid GATT-like system that would hold out a larger space for efforts at genuine sustainable development by the global South.
Share this:
One of the principal actors in the Anti-Globalization Movement, FPIF commentator Walden Bello is the author of Deglobalization:
Ideas for a New World Economy (Zed, 2000) and Revisiting and Reclaiming Deglobalization (Focus on the Global South, 2019). He can
be contacted at waldenbello@yahoo.com . This article originally
appeared in German in the German periodical Welt-Sichten, Nov 7, 2019
"... These anecdotal stories about Invitation Homes being quick to evict tenants may prove to be the trend rather than the exception, given Blackstone's underlying business model. Securitizing rental payments creates an intense pressure on the company to ensure that the monthly checks keep flowing. For renters, that may mean you either pay on the first of the month every month, or you're out. ..."
Tucker could have done a number on Trump friend Schwarzman too.Mark my words you're gonna have another melt down now that all the people who
lost their home and ended up in rentals stop paying their rent that is now 2 1/2 times what
their mortgage was.
This is another fake bubble being securitized and sold off. Just like putting people into
houses with ARMs who couldnt afford them when the rates went up, Scharzman will fill up his
rentals to 99% occupancy with special deals to sell them to investors, when the special deal
period runs out and the rent goes up people will move out looking for cheaper housing and the
securities wont be worth shit.
Blackstone Group , CEO Stephen A. Schwarzman Buys Houses in Bulk to Profit from Mortgage
Crisis
You can hardly turn on the television or open a newspaper without hearing about the nation's
impressive, much celebrated housing recovery. Home prices are rising! New construction has
started! The crisis is over! Yet beneath the fanfare, a whole new get-rich-quick scheme is
brewing.
Over the last year and a half, Wall Street hedge funds and private equity firms have quietly
amassed an unprecedented rental empire, snapping up Queen Anne Victorians in Atlanta,
brick-faced bungalows in Chicago, Spanish revivals in Phoenix. In total, these deep-pocketed
investors have bought more than 200,000 cheap, mostly foreclosed houses in cities hardest hit
by the economic meltdown.
Wall Street's foreclosure crisis, which began in late 2007 and forced more than 10 million
people from their homes, has created a paradoxical problem. Millions of evicted Americans
need a safe place to live, even as millions of vacant, bank-owned houses are blighting
neighborhoods and spurring a rise in crime. Lucky for us, Wall Street has devised a solution:
It's going to rent these foreclosed houses back to us. In the process, it's devised a new
form of securitization that could cause this whole plan to blow up -- again.
Since the buying frenzy began, no company has picked up more houses than the Blackstone
Group, a major private equity firm. Using a subsidiary company, Invitation Homes, Blackstone
has grabbed houses at foreclosure auctions, through local brokers, and in bulk purchases
directly from banks the same way a regular person might stock up on toilet paper from
Costco.
In one move, it bought 1,400 houses in Atlanta in a single day. As of November, Blackstone
had spent $7.5 billion to buy 40,000 mostly foreclosed houses across the country. That's a
spending rate of $100 million a week since October 2012. It recently announced plans to take
the business international, beginning in foreclosure-ravaged Spain.
Few outside the finance industry have heard of Blackstone. Yet today, it's the largest
owner of single-family rental homes in the nation -- and of a whole lot of other things, too.
It owns part or all of the Hilton Hotel chain, Southern Cross Healthcare, Houghton Mifflin
publishing house, the Weather Channel, Sea World, the arts and crafts chain Michael's,
Orangina, and dozens of other companies.
Blackstone manages more than $210 billion in assets, according to its 2012 Securities and
Exchange Commission annual filing. It's also a public company with a list of institutional
owners that reads like a who's who of companies recently implicated in lawsuits over the
mortgage crisis, including Morgan Stanley, Citigroup, Deutsche Bank, UBS, Bank of America,
Goldman Sachs, and of course JP Morgan Chase, which just settled a lawsuit with the
Department of Justice over its risky and often illegal mortgage practices, agreeing to pay an
unprecedented $13 billion fine.
In other words, if Blackstone makes money by capitalizing on the housing crisis, all these
other Wall Street banks -- generally regarded as the main culprits in creating the conditions
that led to the foreclosure crisis in the first place -- make money too.
An All-Cash Goliath
In neighborhoods across the country, many residents didn't have to know what Blackstone
was to realize that things were going seriously wrong.
Last year, Mark Alston, a real estate broker in Los Angeles, began noticing something
strange happening. Home prices were rising. And they were rising fast -- up 20 percent
between October 2012 and the same month this year. In a normal market, rising home prices
would mean increased demand from homebuyers. But here was the unnerving thing: the
homeownership rate was dropping, the first sign for Alston that the market was somehow out of
whack.
The second sign was the buyers themselves.
"I went two years without selling to a black family, and that wasn't for lack of trying,"
says Alston, whose business is concentrated in inner-city neighborhoods where the majority of
residents are African American and Hispanic. Instead, all his buyers -- every last one of
them -- were besuited businessmen. And weirder yet, they were all paying in cash.
Between 2005 and 2009, the mortgage crisis, fueled by racially discriminatory lending
practices, destroyed 53 percent of African American wealth and 66 percent of Hispanic wealth,
figures that stagger the imagination. As a result, it's safe to say that few blacks or
Hispanics today are buying homes outright, in cash. Blackstone, on the other hand, doesn't
have a problem fronting the money, given its $3.6 billion credit line arranged by Deutsche
Bank. This money has allowed it to outbid families who have to secure traditional financing.
It's also paved the way for the company to purchase a lot of homes very quickly, shocking
local markets and driving prices up in a way that pushes even more families out of the
game.
"You can't compete with a company that's betting on speculative future value when they're
playing with cash," says Alston. "It's almost like they planned this."
In hindsight, it's clear that the Great Recession fueled a terrific wealth and asset
transfer away from ordinary Americans and to financial institutions. During that crisis,
Americans lost trillions of dollars of household wealth when housing prices crashed, while
banks seized about five million homes. But what's just beginning to emerge is how, as in the
recession years, the recovery itself continues to drive the process of transferring wealth
and power from the bottom to the top.
From 2009-2012, the top 1 percent of Americans captured 95 percent of income gains. Now,
as the housing market rebounds, billions of dollars in recovered housing wealth are flowing
straight to Wall Street instead of to families and communities. Since spring 2012, just at
the time when Blackstone began buying foreclosed homes in bulk, an estimated $88 billion of
housing wealth accumulation has gone straight to banks or institutional investors as a result
of their residential property holdings, according to an analysis by TomDispatch. And it's a
number that's likely to just keep growing.
"Institutional investors are siphoning the wealth and the ability for wealth accumulation
out of underserved communities," says Henry Wade, founder of the Arizona Association of Real
Estate Brokers.
But buying homes cheap and then waiting for them to appreciate in value isn't the only way
Blackstone is making money on this deal. It wants your rental payment, too.
Securitizing Rentals
Wall Street's rental empire is entirely new. The single-family rental industry used to be
the bailiwick of small-time mom-and-pop operations. But what makes this moment unprecedented
is the financial alchemy that Blackstone added. In November, after many months of hype,
Blackstone released history's first rated bond backed by securitized rental payments. And
once investors tripped over themselves in a rush to get it, Blackstone's competitors
announced that they, too, would develop similar securities as soon as possible.
Depending on whom you ask, the idea of bundling rental payments and selling them off to
investors is either a natural evolution of the finance industry or a fire-breathing
chimera.
"This is a new frontier," comments Ted Weinstein, a consultant in the real-estate-owned
homes industry for 30 years. "It's something I never really would have dreamt of."
However, to anyone who went through the 2008 mortgage-backed-security crisis, this new
territory will sound strangely familiar.
"It's just like a residential mortgage-backed security," said one hedge-fund investor
whose company does business with Blackstone. When asked why the public should expect these
securities to be safe, given the fact that risky mortgage-backed securities caused the 2008
collapse, he responded, "Trust me."
For Blackstone, at least, the logic is simple. The company wants money upfront to purchase
more cheap, foreclosed homes before prices rise. So it's joined forces with JP Morgan, Credit
Suisse, and Deutsche Bank to bundle the rental payments of 3,207 single-family houses and
sell this bond to investors with mortgages on the underlying houses offered as collateral.
This is, of course, just a test case for what could become a whole new industry of
rental-backed securities.
Many major Wall Street banks are involved in the deal, according to a copy of the private
pitch documents Blackstone sent to potential investors on October 31st, which was reviewed by
TomDispatch. Deutsche Bank, JP Morgan, and Credit Suisse are helping market the bond. Wells
Fargo is the certificate administrator. Midland Loan Services, a subsidiary of PNC Bank, is
the loan servicer. (By the way, Deutsche Bank, JP Morgan Chase, Wells Fargo, and PNC Bank are
all members of another clique: the list of banks foreclosing on the most families in
2013.)
According to interviews with economists, industry insiders, and housing activists, people
are more or less holding their collective breath, hoping that what looks like a duck, swims
like a duck, and quacks like a duck won't crash the economy the same way the last flock of
ducks did.
"You kind of just hope they know what they're doing," says Dean Baker, an economist with
the Center for Economic and Policy Research. "That they have provisions for turnover and
vacancies. But have they done that? Have they taken the appropriate care? I certainly
wouldn't count on it." The cash flow analysis in the documents sent to investors assumes that
95 percent of these homes will be rented at all times, at an average monthly rent of $1,312.
It's an occupancy rate that real estate professionals describe as ambitious.
There's one significant way, however, in which this kind of security differs from its
mortgage-backed counterpart. When banks repossess mortgaged homes as collateral, there is at
least the assumption (often incorrect due to botched or falsified paperwork from the banks)
that the homeowner has, indeed, defaulted on her mortgage. In this case, however, if a single
home-rental bond blows up, thousands of families could be evicted, whether or not they ever
missed a single rental payment.
"We could well end up in that situation where you get a lot of people getting evicted not
because the tenants have fallen behind but because the landlords have fallen behind," says
Baker.
Bugs in Blackstone's Housing Dreams
Whether these new securities are safe may boil down to the simple question of whether
Blackstone proves to be a good property manager. Decent management practices will ensure high
occupancy rates, predictable turnover, and increased investor confidence. Bad management will
create complaints, investigations, and vacancies, all of which will increase the likelihood
that Blackstone won't have the cash flow to pay investors back.
If you ask CaDonna Porter, a tenant in one of Blackstone's Invitation Homes properties in
a suburb outside Atlanta, property management is exactly the skill that Blackstone lacks. "If
I could shorten my lease -- I signed a two-year lease -- I definitely would," says
Porter.
The cockroaches and fat water bugs were the first problem in the Invitation Homes rental
that she and her children moved into in September. Porter repeatedly filed online maintenance
requests that were canceled without anyone coming to investigate the infestation. She called
the company's repairs hotline. No one answered.
The second problem arrived in an email with the subject line marked "URGENT." Invitation
Homes had failed to withdraw part of Porter's November payment from her bank account,
prompting the company to demand that she deliver the remaining payment in person, via
certified funds, by five p.m. the following day or incur "the additional legal fee of $200
and dispossessory," according to email correspondences reviewed by TomDispatch.
Porter took off from work to deliver the money order in person, only to receive an email
saying that the payment had been rejected because it didn't include the $200 late fee and an
additional $75 insufficient funds fee. What followed were a maddening string of emails that
recall the fraught and often fraudulent interactions between homeowners and
mortgage-servicing companies. Invitation Homes repeatedly threatened to file for eviction
unless Porter paid various penalty fees. She repeatedly asked the company to simply accept
her month's payment and leave her alone.
"I felt really harassed. I felt it was very unjust," says Porter. She ultimately wrote
that she would seek legal counsel, which caused Invitation Homes to immediately agree to
accept the payment as "a one-time courtesy."
Porter is still frustrated by the experience -- and by the continued presence of the
cockroaches. ("I put in another request today about the bugs, which will probably be canceled
again.")
A recent Huffington Post investigation and dozens of online reviews written by Invitation
Homes tenants echo Porter's frustrations. Many said maintenance requests went unanswered,
while others complained that their spiffed-up houses actually had underlying structural
issues.
There's also at least one documented case of Blackstone moving into murkier legal
territory. This fall, the Orlando, Florida, branch of Invitation Homes appeared to mail
forged eviction notices to a homeowner named Francisco Molina, according to the Orlando
Sentinel. Delivered in letter-sized manila envelopes, the fake notices claimed that an
eviction had been filed against Molina in court, although the city confirmed otherwise. The
kicker is that Invitation Homes didn't even have the right to evict Molina, legally or
otherwise. Blackstone's purchase of the house had been reversed months earlier, but the
company had lost track of that information.
The Great Recession of 2016?
These anecdotal stories about Invitation Homes being quick to evict tenants may prove to
be the trend rather than the exception, given Blackstone's underlying business model.
Securitizing rental payments creates an intense pressure on the company to ensure that the
monthly checks keep flowing. For renters, that may mean you either pay on the first of the
month every month, or you're out.
Although Blackstone has issued only one rental-payment security so far, it already seems
to be putting this strict protocol into place. In Charlotte, North Carolina, for example, the
company has filed eviction proceedings against a full 10 percent of its renters, according to
a report by the Charlotte Observer.
About 9 percent of Blackstone's properties, approximately 3,600 houses, are located in the
Phoenix metro area. Most are in low- to middle-income neighborhoods.
Forty thousand homes add up to only a small percentage of the total national housing
stock. Yet in the cities Blackstone has targeted most aggressively, the concentration of its
properties is staggering. In Phoenix, Arizona, some neighborhoods have at least one, if not
two or three, Blackstone-owned homes on just about every block.
This inundation has some concerned that the private equity giant, perhaps in conjunction
with other institutional investors, will exercise undue influence over regional markets,
pushing up rental prices because of a lack of competition. The biggest concern among many
ordinary Americans, however, should be that, not too many years from now, this whole rental
empire and its hot new class of securities might fail, sending the economy into an
all-too-familiar tailspin.
"You're allowing Wall Street to control a significant sector of single-family housing,"
said Michael Donley, a resident of Chicago who has been investigating Blackstone's rapidly
expanding presence in his neighborhood. "But is it sustainable?" he wondered. "It could all
collapse in 2016, and you'll be worse off than in 2008."
This is not surprising that this has happened. All of the de-regulation on Wall Street,
lobbied for by Wall Street has allowed this to transpire.
Congress does not even read the bills that they sign into law, let alone write them!
Many are written by ALEC American Legislative Exchange Council, the Chamber of Commerce,
the Realtor's assosiation, the Medical Industrial Complex, public employee unions, and
various other special interest groups!
Why is it a pressing issue to actively promote homosexuality? What is the point? That is
really strange! There is a difference between not actively discriminating and actively
promoting!
Are they trying to worsen the AIDS epidemic or lower the birth rate? It does not make
sense to be actively promoting and encouraging homosexuality.
@Colin
Wright There are many venture capitalist that are not Jewish.. Venture Capitalist don't
always advertise their wealth. Not everybody in Wall Street or the City of London is
Jewish.
I think it is important to separate the Jews from the Zionist , many in that
small group (Zionist) are Jewish and Christian but most Jews and most Christians are
neither Venture Capitalist nor Zionist. Time after time I have asked my Jewish friends are
you are Zionist, and most say they do not really know what Zionism is? Zionism hosts many
races among its members; in the states, Christian Zionism is big, maybe bigger even than
Jewish Zionism.. see Christian Zionism : The Tragedy and the Turning: the cause of our
Conflicts (on DVD) by http://www.Whit.org. .
Zionism is an economic system. Zionism is a winner take all system of Economics .
Zionism is like an adult version of the game called King of the Mountain. In such a game,
no one is allowed to play unless they first have sufficient resources to be counted, and
are then willing to and believe they are personally capable of defeating the then residing
well armed king (Oligarch). IMO, all Jews everywhere, would be well advised to avoid being
labelled a Zionist<=hence the reason ?
Zionism is not the same as Judaism, its not a race, its not a religion, its not even
a culture, it is an economic system with virus like attributes.
@Lot
You are quibbling. You are prevaricating. You are obfuscating.
Joyce has assembled a powerful case against a known cast of financial parasites. This
phenomena is hardly new. It brings to mind another financial scandal of a generation ago
that was chronicled in James B. Stewart's book 'Den of Thieves'.
The mega-wealthy swindlers of that era were also all Jews: Boesky, Siegel, Levine,
Milken, among others. Some twenty years later, another Wall Street Jew, Bernie Madoff,
succeeds in pulling off the biggest fraud in US history. There's a pattern here.
Yet all you can do, Lot, is deflect, denigrate, and deny.
Joyce is giving us more actual names. These are the actual perps as well as institutions
they hide behind. These ruthless predators collude with one another as they exploit the
labor of millions of gentiles worldwide, then shower Jewish causes and philanthropies with
their loot. Their tribal avarice is revolting. And insatiable.
Do you deny this phenomena?
Is it all just another 'anti-Semitic canard'?
You even claim [Joyce] is
"retarded and highly uninformed".
Retarded?
He's brilliant and persuasive.
Uninformed?
He's erudite and scholarly.
You, Lot, are demonstrating again devious tribal dishonesty. It's glaring, it's
shameful, and it's obvious. This is a trait I've observed in virtually all of your
writings. You invariably deflect and deny. But Jewish criminality is real.
Joyce aptly concludes:
[T]he prosperity and influence of Zionist globalism rests to an overwhelming degree on
the predations of the most successful and ruthless Jewish financial parasites.
This is a Jewish conspiracy to make Jews look terrible. Congress should slam the breaks
here. The de-regulation of the powerful combined with the over-regulation of the powerless
is criminally wreckless. Kind of like the friends don't let friends drive drunk approach.
Congress slam the breaks, yeah right, that'll happen! Lol!
@Colin
Wright Andrew Carnegie left behind institutions like Carnegie Hall, Carnegie-Mellon
University, and over 2500 Free Libraries from coast to coast, in a time when very little
was done to help what we now call the "underprivileged".
In fact, he gave away 90% of his massive fortune–about $75 Billion in current
dollars. Funding, in the process, many charities, hospitals, museums, foundations and
institutions of learning. He was a major benefactor of negro education.
He was a staunch anti-imperialist who believed America should concentrate its energies
on peaceful endeavors rather than conquering and subduing far-off lands.
Although they are even more keen to put their names on things, today's robber barons
leave behind mainly wreckage.
Jews are destroying the world. Everywhere they go, they leave behind nations in ruins. Look
at Europe, Africa and the Americas, Jews have left their ugly footprints. Corruption,
prostitution, drugs and human trafficking are their trade.
@anon
A combination of both I would say, although some would like to make it out that
Anglo-Saxons were the epitome of honour, they too resorted to morallly abject tricks and
swindles to acquire their wealth.
WASPs allowed Jews into their lands and both of them struck a sort of implicit contract
to work together to loot the world, when the word had been sucked dry, the conflict between
Jews and WASPs began and Hitler and the National Socialists were a last gasp attempt to
save the WASP side from being beaten, in the end higher Jewish verbal IQ gave them the
upper edge in the ability to trick people.
It is hard to feel sorry for WASPs, they struck a deal with the Jews centuries ago to
work together and were backstabbed, what is happening to these Third World countries will
now happen to WASP countries, it is poetic justice. Luckily the torch of civilisation will
continue by way of East Asia and Eastern Europe, who were true conservatives in that all
they wished was prosperity for their people in their own lands without any aggressive
foreign policy moves.
Basically, WASPs thought that they could win in the end, but they were out Jew'd and now
they are crying.
The one difference you will notice is that certain subsections of WASPs, notable the
British, actually did build infrastructure in the countries they looted, this to me was
borne out of a sense of guilt, so to be fair, WASPs were not as parasitic and ruthless as
Jews.
But in the end, the more ruthless wins. To quote the Joker
@Lot
Kyle Bass's fund is called 'Hayman', maybe because the MSM loathe the Bass family that
fellow Texican Bass is not related to. They are not the only ones aware of the drawbacks of
a name. Elliot is Singer's middle one.
The article bounces back and forth between two completely different fields: private
equity and distressed debt funds
If someone owes you money and you cannot collect, you factor the account, (sell it on)
and then people who are going to be a lot less pleasant about it will pay them a visit and
have a 'talk' with them. While it is good to have a domestic bankruptcy regime in which
innovation and entrepreneurship is encouraged– to the extent that people are not
routinely gaming the system–I don't see why Argentina should benefit. Singer became
notorious for what he did to Argentina after he bought their debt, and he is pretty upfront
about not caring who objects. Puerto Rico is neither foreign or protected by Chapter 9 of
the U.S. Bankruptcy Code so it is a borderline case, which is probably why the people
collecting that debt tried to hide who they were.
The way he took down Jonathan Bush and others led to Bloomberg dubbing Singer 'The
World's Most Feared Investor'. Singer buys into companies where he sees the management as
as failing to deliver maximum value to the shareholders, then applies pressure to raise the
share price (in Bush's case extremely personal pressure) that often leads to the departure
of the CEO and sale of the company. That immediate extra value for the shareholder Singer
creates puts lots of working people out a job. Because of Singer and his imitators, CEO's
are outsourcing and importing replacements for indigenous workers in those services that
cannot be outsourced. All the while loath to foster innovation that could bring about long
term growth, because that would interfere with squeezing out more and more shareholder
value.
Singer is less like a vulture than a rogue elephant that is killing the breeding pair
white rhinos on a game reserve, and they are going extinct. Well it's a good thing! Thanks
to Singer et al (including Warren Buffett) Trump got elected. According to someone in jail
with Epstein, he had an anecdote about Trump being asked by a French girl what 'white
trash' was, and Trump replied 'It's me without the money'.
Trump is now essentially funded by three Jews -- Singer, Bernard Marcus, and
Sheldon Adelson, together accounting for over $250 million in pro-Trump political money.
In return, they want war with Iran.
All to the good. Iran won't leave Saudi Arabia (serious money) alone so Iran is going to
have to be crushed as a threat to the Saud family like Saddam before it anyway. If the Jews
think they are causing it, let 'em think so.
https://www.unz.com/pgiraldi/trump-creates-a-new-nation/
When the Israelis occupy nearly all of the West Bank with Donald Trump's approval and
start "relocating" the existing population, who will be around to speak up? No one, as by
that time saying nay to Israel will be a full-fledged hate crime and you can go to jail
for doing so
Loudspeaker goes off " All Anti–Zionist Jews to Times Square ".
@Colin
Wright No judeophile, but it's 90% demagogic horsehit.
God forbid anybody should ever have to pay back money they borrow! Why, that's utterly
Jewish!
These so-called "vulture" funds didn't originate the debt. They simply purchased already
existing debt at deeply discounted prices either because the debt was already in default or
was at imminent risk of defaulting, which is why the debt sells at a heavy discount, since
existing debt holders are often happy to sell cheap and get something rather than hold on
and risk getting nothing.
What Joyce zeroes in on is these vulture funds' willingness to use all legal avenues to
force debtors to make good on their debts, including seizing the collateral the debtors
pledged when they borrowed the money. Joyce chooses to characterize this practice as
"Jewish," implying that gentile creditors would instead be overcome with compassion and let
the debtors off the hook and wear the loss themselves.
What Joyce regards as a defect of "vulture" funds, others might regard as an benefit.
The size of these funds, their legal expertise, and their political connections mean that
borrowers can more successfully be held to account. If I owned, say, Puerto Rican debt in
my retirement account, the chances that I could make Puerto Rico honor its obligations are
much slimmer.
None of this is to suggest that finance, as we today know it, is perfect and that it
couldn't be reformed in any way to make its operation more conducive to nationalistic
social values, only that anti-cap ideologues like Joyce weave lurid tales of malfeasance
out of completely humdrum market economics (which is precisely the same market economics
that Tucker Carlson learned about too, btw).
Mr. Joyce
Your obsession with us will prove to be your downfall.
Jewish people have always stood against tyranny against the working class, the poor and
other people of color.
The phrases and catch words that you used to vilify Jews are in many cases pulled from the
age old tropes used to demonize Jews for centuries and are anti-Semitic through and
through. They can't be overlooked nor hidden by claims of legitimate political
disagreements.
We know that it is not only the Jewish community that is at risk from unchecked
antisemitism, but also other communities that white nationalists target.
I find it very offensive that people like you continue to demonize us for no reason.
I dare you to hold a debate with me on this so called "Jewish Influence".
I am not even hiding my name here.
A central premise of conventional media wisdom has collapsed. On Thursday, both the
New York Times
and
Politico
published
major articles reporting that Bernie Sanders really could win the Democratic presidential nomination. Such acknowledgments
will add to the momentum of the Bernie 2020 campaign as the new year begins -- but they foreshadow a massive escalation of
anti-Sanders misinformation and invective.
Throughout 2019, corporate media routinely asserted that the Sanders campaign had
little chance of winning the nomination. As is so often the case, journalists were echoing each other more than paying
attention to grassroots realities. But now, polling numbers and other
indicators
on
the ground are finally sparking very different headlines from the media establishment.
Those stories, and others likely to follow in copycat news outlets, will heighten the energies of Sanders supporters and
draw in many wavering voters. But the shift in media narratives about the Bernie campaign's chances will surely boost the
decibels of alarm bells in elite circles where dousing the fires of progressive populism is a top priority.
For corporate Democrats and their profuse media allies, the approach of
disparaging
and
minimizing Bernie Sanders in 2019 didn't work. In 2020, the next step will be to trash him with a vast array of full-bore
attacks.
Along the way, the corporate media will occasionally give voice to some Sanders defenders and supporters. A few
establishment Democrats will decide to make nice with him early in the year. But the overwhelming bulk of Sanders media
coverage -- synced up with the likes of such prominent corporate flunkies as Rahm Emanuel and Neera Tanden as well as Wall Street
Democrats accustomed to ruling the roost in the party -- will range from condescending to savage.
When the Bernie campaign wasn't being
ignored
by
corporate media during 2019, innuendos and mud often flew in his direction. But we ain't seen nothing yet.
With so much at stake -- including the presidency and the top leadership of the Democratic Party -- no holds will be barred. For
the forces of corporate greed and the military-industrial complex, it'll be all-out propaganda war on the Bernie campaign.
While reasons for pessimism are abundant, so are ample reasons to understand that
a
Sanders presidency is a real possibility
. The last places we should look for political realism are corporate media outlets
that distort options and encourage passivity.
Bernie is fond of quoting a statement from Nelson Mandela: "It always seems impossible until it is done."
From the grassroots, as 2020 gets underway, the solution should be clear: All left hands on deck.
Elections aren't real. Democrats will nominate Joe Biden to lose the election. Trump will remain as fascist
strongman and the dems will continue to blame his neoconservative policies on his white trash constituency.
Bernie serves a few important functions.
1. he keeps the radicals from leaving the plantation and going 3rd party.
2. his promotion of progressive policies will make Biden less popular and help him lose to Trump
3. Bernie and his "socialism" can then be blamed for losing the election to Trump
Unfortunately this comment will be buried in this monstrosity of a thread- now at over 300 comments
with only about a third of them having a much relevance.
You might consider re-posting in reply
to one of the foremost comments. Your simple realism will certainly not be well received during the
campaign hallucinations.
I've often wondered how it is people could believe the elections could have any positive and
lasting impact on their lives if they have been through a couple of cycles. Do they not also wonder
how it is that these election (marketing) campaigns now stretch out for well over a year nowadays
demanding everyone's political attention, energy and resources. To say it is a colossal waste does
not quite capture the enormity of the mind job being to people.
Your simple realism will certainly not be well received during the campaign hallucinations.
Yeah, yeah, sure, sure. You "realists" who are true believers that you have the Truth and have a calling to
preach the Truth absolutely must stand against the unwashed masses who claim that your "reality" isn't even
intersubjectively verifiable, much less dialectical & material [eta
& historical
].
I quite enjoyed what SteelPirate/LaborSolidarity had to say about you attempting to gain a vanguard
following by trolling lib-prog sites.
Never pay attention to anyone who claims what's "real" and what isn't. Politics certainly doesn't
exist in the realm of an objective, concrete, physical, naturalistic, materialistic reality which is
shared by a consensus of rational observers. At best, politics deals with intersubjectively verifiable
social phenomena. Thus, politics is mostly idealistic in the belief that each mind generates its own
reality.
This realization is the topic of intersubjective verifiability, as recounted, for example, by Max Born
(1949, 1965)
Natural Philosophy of Cause and Chance
, who points out that all knowledge, including
natural or social science, is also subjective. p. 162: "Thus it dawned upon me that fundamentally
everything is subjective, everything without exception. That was a shock."
Noam Chomsky on Bernie Sanders's Chances of Success- "...the chances he can be elected are pretty small."
(Waiting with bated breath for copious downvotes by those who hate the truth and hate reality).
Most of who support Sanders know that his presidency will involve an uphill battle. Chomsky is
being realistic.
But there really is no better option for meaningful change working within the
political system than supporting Sanders. it is also important to note that "Our Revolution" has
energized many young activists, encouraging them to continue the fight. This goes beyond politics
to social and economic issues. If Sanders leaves us with a movement, this may turn out to be more
important than the presidency in the long run.
Keep working for effective moral and economic justice and democracy!
Well, I have said this several times, it's not the microscopic left that you need to convince, it's
the majority of self-identifying Democrats not supporting Sanders that you need to convince. I am
repelled by the Democratic Party, but there are millions who identify as Democrats and many are
proud of it. You need to convince them, not us.
Yes, although I don't think that those who support a Leftist agenda--whether you actually call them
Leftists or not--are quite so microscopic a group as you imply. But you don't need to convince me
or most others here (probably) that Sanders isn't perfect, or that it will be difficult for him to
be elected president. We already know; we simply consider him the best option within this context
of voting.
Have you ever thought of turning your approach to systemic commentary (which is valid
and interesting, BTW, I'm not discounting it) around and saying what candidates you support-- in
this context being discussed of voting-- instead of which ones you don't? And then explaining why
such support would be effective?
I would say that what is wrong with the world is more a fault of the economic and political
system than of Sanders alone--who not only plays small part in causing what is wrong, but a
significant part in trying to correct it. Yes, he works within the system. That is a given. It may
be, as Chris Hedges thinks, that there is no hope working within the system. But Noam Chomsky's
approach also bears serious consideration that even Hedges doesn't discount. Voting will only be a
small part of what brings about change, but it may make some slight difference--if you can stomach
it. And it only takes a small amount of time.
"In a system of immense power, small differences can translate into large outcomes."
I don't see much of an argument that Sanders will be no better as president than Trump (and if
you think so, I'd like to hear you argue it). I suspect you find the compromise unpalatable. I can
understand that. I, too, draw the line at a certain point. I couldn't vote for HRC.
Yes, Sanders isn't perfect. Chomsky also said another important thing: "We're all compromised."
Everyone who is a citizen of the US is compromised, and bears some measure of responsibility for
the military interventions undertaken by our government. Perhaps we should renounce our
citizenship, refuse to pay taxes, etc. But most of us don't -- not even those of us committed to
activist work in other ways -- significant ways -- to make things better.
But you don't need to convince me or most others here (probably) that Sanders isn't perfect
-for me it isn' that he's not perfect, it's that I think he sucks
"In a system of immense power, small differences can translate into large outcomes."
-funny, that's a favorite line of Democrats
I get that, but it doesn't negate that Sanders's chances are next to nil.
Your suggestion of me signaling whom I support would fall on deaf ears around here. I have said
this many times- I will probably for the Green Party candidate or the Socialist Equality Party
candidate. If only a Democrat and Republican appear on the ballot then I would refuse to vote even
if I had to pay a fine. I am not in the habit of telling anyone whom to vote for unless asked.
Before a 3rd can succeed, the fantasy that the fix can come through the Democrats needs to be
destroyed. Not to worry, in due time it will be obvious.
My guess/bet is that
V4V
believes that the truth "We're all compromised" doesn't apply to him.
He sees himself as a truth-knower and a truth-teller.
He won't commit to logical argumentation.
He'll preach the truth to you.
I saw this video long ago--and agreed with it. But though Sanders' chances are small, they're still
vastly larger than the NONEXISTENT chances of success of the purist, "Born to Lose" left. Why not just
admit that you've totally given up and simply like to spent your time bitching and criticizing those of
us with some (albeit small) hope?
simply like to spent your time bitching and criticizing those of us with some (albeit small) hope?
-straw man
That isn't what I do because I couldn't care less whom Democrats support and vote for. Typically, I post
some unpleasant truth about Sanders, like his lackluster polling numbers or his support for neoliberal
warmongers and sit back and watch the ad hominems and downvotes roll in. I am not normally on the attack, I am
usually on the receiving end.
I admit that I see this forum as a form of entertainment. I admit I have zero expectation that someone to my
liking will be elected president and that the system is going to change anytime soon. Do I believe it possible?
Yes, I believe it is possible, I just don't believe it possible using the corrupt, Democratic Party as a
vehicle and that's where we differ.
And that the crux of our issue- you believe the Democratic Party can be used a vehicle to convert the
CIA/Wall Street/War Inc. Democrats into the peoples' party, and I do not. If the needed changes are ever to
arrive, it will be in spite of the Democrats not because of them. I hope you stick around because in due time
I'll be telling you, "Told ya so."
The problem with your position is that, unlike Sanders, you don't seem to understand that a third
candidate party candidate hasn't a snowball's chance in hell of being president unless if s/he
somehow gets more electoral votes that
both
the major parties combined. If not, it goes to
the house, and in the current partisan atmosphere, would be decided for the candidate of the House
majority.
The major parties have a death-grip on the presidency while the electoral college exists.
You don't seem to understand that Sanders has a snowball's chance in hell of being the Democratic
Party candidate for many reasons including the DNC arguing in court it is a private corporation and
can legally rig primary and the trusty superdelegates for Biden.
What I propose is a movement
outside the Democratic Party in inside it. I believe any attempt to reform the Democratic Party is
doomed to fail. All this whistling in the dark over Sanders is a distraction and a kicking the can
down the road to the time you Democrats
finally
realize it isn't going to work. You
obviously didn't learn it in 2016, and I would be surprised if you learn it once Sanders tanks and
begins campaigning for Biden just like he did Clinton. I will promise this, I'll say, "I told ya
so" in a matter of months. That's okay, play it again, Sam.
People believe they need others to tell them what to do and give them the illusion somebody cares about
them and has their best interests at heart. That's an archetype in the brain that goes back to our
baby/childhood when we were dependent on our caregivers for sustenance, comfort and life itself.That's
where the original concept of needing "leaders" comes from. But, what happens is psyco/sociopaths see
this weakness in humanity and force their way to the top, to herd and exploit the gullible sheeple for
their own agendas and selfish interests. No matter who rises to the top, she/he got their through the
same system that's been going on since tribes had their chief; chief's lieutenant and witch
doctor/shaman. Those three keep the tribe in line with their own desires. Chief through brute force, his
lieutenant through information and witch doctor through religion and "spiritual" services; and all three
require tribute and fees from the rest of the tribe. So, you will see, regardless of who the next POTUS
will be, that same structure, although more complex today, will repeat itself. New boss/old boss, same
ol' same ol'. All power has to be returned to the people at the local level before Wash. starts WWIII.
But, if that happens, at least we won't have to worry about global warming with a nuclear winter after
the bombs drop.
"... I don't even know what capitalism means anymore. It doesn't seem like it's an actual free market system. Seems like it is slavery for the little guy, and parasitism for the rich. Maybe we should ditch the word capitalism for usuryism. ..."
"... That scary thought has crossed my mind, too, Art. I've even started wondering if this whole impeachment circus is really part of an elaborate plot to guarantee Trump's re-election. I mean, would Pelosi's insane actions make the slightest sense otherwise? And everyone has noted how this is such a 'Jew coup,' haven't they? It all looks so suspicious ..."
"... It looks like it was Browder who killed Magnitsky, so that he can't spill the beans. And then in an act of ultimate chutzpah played the victim and promoted Magnitsky act. ..."
You and other whites here are like the bad guys in every horror movie ever made, who gets shot five times, or stabbed ten,
or blown up twice, and who will eventually pass -- even if it takes four sequels to make it happen -- but who in the meantime
keeps coming back around, grabbing at our ankles as we walk by, we having been mistakenly convinced that you were finally dead
this time. Fair enough, and have at it. But remember how this movie ends. Our ankles survive.
YOU DO NOT.
Talk about deflection. Any nation, empire, culture or civilization wherein the Jewish collective gains critical mass and ultimately
absolute power turns into a real horror, not a movie. The Jews may be said to be the true prototype of the "bad guys in
every horror movie", since they can only be gotten rid of by very rigorous means taken in the healthiest and most vigorous cultures
and societies. Indeed, antisemitism itself is the healthy immunological reaction of a flourishing culture, and its lack thereof
the pathology of a moribund one.
Woke Christians of European provenance have nothing to envy the Jew (the archetypal Jew) over. We realize that the true measure
of success is not primarily monetary or the fulfillment of cheap ambitions, but a spiritual and cultural one. On the contrary,
the Jewish hatred against Christian Europe and the civilization that it constructed is engendered out of sheer envy and malice,
because Jewry understands that is would never be capable of constructing anything similar, and never has. In all of the arts,
Jewry has produced nothing of note.
This is not to say that individual Jews have not made contributions to the arts and sciences, but they have done so only by
participation in gentile culture, not qua Jews. Jewry only tears down and deconstructs; it is not creative in the sense of high
art, and can thrive only in the swamp of gentile decadence and moral putrefaction. Whatever Jewry touches, it turns to merde.
@Anon specifically
push them away from materialism and desire for money and power, even at the expense of others. That is the exact point
of religion (self-improvement) btw, so the next question is – is the Jewish religion effective?
At which point, the Jewish ideology becomes the wolf in the hen house – because it fails to tame the human away from such materialistic
desire (as it btw claims it does best).
Should the hens be allowed to point out what they see as a wolf? Yes.
That the supposed wolf then obfuscates and justifies their actions by pointing to others, mostly, betrays that it is, in fact,
a wolf.
I have become totally disenchanted with the SEC. Stupid, Evil, Crazy! It would not surprise me if they are the ones that have
been terrorizing me, with stupid, evil, crazy chants through appliances after illegallly implaced RFIDs, microchips, or sensors
illegally implanted in my ears and nose that started after my first phone was hacked in 2017! Can't expect stupid people not to
be stupid, evil people not to be evil, and crazy people not to be crazy! They were just born that way!
"The US will become minority white in 2045 Census projects " :
"During that year [2045] whites will comprise 49.7 per cent of the population in contrast to 24.6 per cent for Hispanics ,
13.1 per cent for Blacks , 7.9 per cent for Asians and 3.8 per cent for multi-racial populations " Are these projections good
or bad for the "Jewish people " ?
Nov 22, 2013 Thomas DiLorenzo – The Revolution Of 1913
From the Tom Woods show Loyola economics professor Thomas DiLorenzo discusses three events from 1913 that greatly escalated
the transmogrification of America from the founder's vision (limited government) to its current state (unlimited government).
@Lot sons of
Abraham name their businesses after themselves (I'm sure this will insincerely be attributed to some fear of native kulaks' repressed
urge-to-pogrom, even in Finland or Japan.) The other is an observation made by an associate of a famous Austrian landscapist:
even merely remarking on their origins causes these guys mental distress.
Here in the melting pot, the difference couldn't be any starker. You can make small talk with any flavor of goy based on it:
that's a Polish name, isn't it? Yeah, how did you know! Try this one with Levy or Nussbaum down at The Smith Group or The
Jones Foundation and watch them plotz.
Jews have always weaponized usury. Long before Christianity, Jews operated the East/West mechanism on donkey caravan trade
routes. Silver would drain from the West, and Gold would drain from the east, while Jewish caravaneers would take usury on exchange
rate differences. This operated for thousands of years.
Haibaru donkey bones have been discovered outside of Sumer. The Aiparu/Haibaru (Hebrew) tribes were formed as merchants operating
between city states. In those days, psychopaths and criminals would be excommunicated from civilized city states, and would take
up with the wandering merchant tribe.
Why do you think the Jew is always interested in owing the money power? Why do you think the Jew perpetually stands outside
the walls of the city state, plotting its destruction?
History tells us things, and we had better listen. That is – real history, not what you learned in (((public skool))). There
are two ways to deal with the Jew: 1) Remove him from your country. 2) Limit him.
Limiting was done by Byzantium under Justinian. The Jew was limited FROM money counting/banking; limited from participation
in government; limited from access to pervert young minds – especially as school teachers and professors.
It takes a King or Tsar who cares about his population, and is willing to eject or filter out toxins from the body politic.
(((Democracy))) is a failed form of government, whereby monied Oligarchs control the polity by compromat and pulling strings.
You are not going to be able to vote your way out of the Jew problem.
@Ilya G Poimandres
edina. Ergo, Wahabbi Islam and the Takfiri's are doctrinaly correct, while Judaizer Christians (those that worship the old
testament) are out of alignment and heretics.
Judaism is actually a new religion that came into being after 73 AD, when the verbal tradition (Caballa) became written down
into Talmud.
Our Jewish friends have always been practicing usury, going back to since forever.
Our Jewish friends, I count as worse that Islamics. However two wrongs don't make a right. Islam badly needs reform or to be
expunged. Talmudic Judaism is by far the worst religion on the planet, and its adherents must malfunction by definition.
@Onebornfree
You are missing something because you are unwilling to adapt and learn with new information. This makes you an ideologue.
Libertarianism IS A JEWISH CONSTRUCT.
There are no such things as free markets. Money's true nature is law, not gold. Money didn't come into being with barter and
other nonsense lolbertarians believe.
Most of the luminaries that came up with "libertarian" economics are Jews, and it is a doctrine of deception. The idea is to
confuse the goyim with thoughts and ideas that make them easy pickings.
A determined in-group of predators operating in unison, will take down an "individual" every-time.
Don't expect anything to improve with Jay Clayton as SEC Chair, and his wife and her father Gretchen Butler Clayton who was
CEO of CSC and mysterious WMB Holdings which share the same address in addition to many Goldman Sachs divisions. Gretchen was
employed by Goldman Sachs as an attorney from 1999-2017. Many companies affiliated with the Panama Papers share the same address
as well.
Jewish people have treated me better than my own White Euro family.
Jews are tribal, gee what a surprise after 1000's of years of people trying to wipe them out . and so their charity is within
the tribe, but there is no charity within the tribe among Whites.
Jews, along with Asians and at least some Africans, believe in not just climbing the ladder, but in actually helping others
– at least family – up it also. Whites believe in climbing the ladder and then pulling it up after them.
I was explaining to a friend recently: My (relative) has proven that if I showed up at their door, starving, they'd not give
me a cheese sandwich, while in my experience, strangers have been overall a fairly kind lot and a stranger, 50/50, might. Therefore,
while I find the idea of robbing or burning down the house of a stranger abhorrent, I don't mind the idea so much when it involves
a person who's proven to be cold and evil.
For more on this, see the book Angela's Ashes. The Irish family could have stayed in New York where they were being befriended
by a Jewish family. There was a ray of hope. The Irish kids, at least, would have been fed, steered into decent schooling, etc.
But foolishly they went back to Ireland, to be treated like utter dogshit by their fellow White family and "people".
Most of the predation going on in the US and worldwide is being done by WASPS who are using Jews as a convenient scapegoat.
Finally! An intelligent criticism of Trump for a change. So tired of the brainless Democrat/MSM impeachment circus.
They make me feel like a reflexive MAGAtard just for defending the constitution, logic, etc., from their never-ending stream of
inanities. Meanwhile, the real problem with Trump is not that he's Hitler; it's that he's not Hitler enough!
I am also so tired of Zionist-loving cucks bleeting on about the evils of the CRA without ever considering the role played
by the (((profiteers))) who lobbied such policies into law in the first place. Realize that what Paul Singer does for a living
used to be illegal in this country up until recently. That's right: US bankruptcy law used to forbid investors from buying up
debt second-hand at a discount and then trying to reclaim the entire face value from the debtor. But I see all kinds of
people even on this thread blaming the victim instead -- 'Damn goyishe deadbeats!' Whatever
What Singer and the other Jewish vultures engage in is not productive, and isn't even any recognisable form of work or business.
It is greed-motivated parasitism carried out on a perversely extravagant and highly nepotistic scale. In truth, it is Singer
and his co-ethnics who believe that money can be printed on the backs of productive workers, and who ultimately believe they
have a right to be "showered by free stuff promised by politicians."
@anon maintain
your honor, and manners and still succeed. Jews take the easy low road of deception and cheating. WASP take the higher road of
harder work and ethical business practice.
"Permit me to issue and control the money of a nation and I" care not who makes its laws"
That is what Mayer Amschel Rothchild said in the 1750s. Now, is it a stretch of my imagination to believe the Central Banks
of the West, all Jewish controlled, would unfairly favor their 'own' when issuing or disbursing the money they are permitted to
create.
We are not allowed to audit the Federal Reserve, so we know not what they do with it beyond what they tell us. In 2016 it was
discovered that between the year 1999 and 2016 well over $23 trillions had been stolen from just 2 departments of our government,
the DoD and HUD. (Someone should look at NASA). Is it possible the seed money, for not only Venture capitalists schemes but also
buying governments and law makers, has been diverted, shoveled out of the back door of these corrupt central banks and into the
hands of their fellow jews?
Anyway, the more exposure articles like this get the closer we get to ending their reign.
@Mefobills
he pressure will only be towards violence – for any nation or faith!
Judaism has monopolized for millennia though, and still acts as a victim. Different kettle of fish.
Also, you can debate the positives and negatives of Islam with a Muslim (not as a rabid ignoramus of course – you must be polite,
and have learnt something, as well as be open to learning more). Almost every debate with a Jew about Judaism has started with,
continued with, and ended with name calling for me however.
Judaism fails as a religion because it does not encourage the practitioner to look at themselves when confronted with error,
Islam still does imo.
Your statement: "Jews actually collaborated extensively in the imposition of tyranny on the working class in Eastern Europe
from 1917 to 1991" not only applies to Europe, but the united States of America as well.
1. Re Sidney, Nebraska: Maybe I'm missing something but wasn't it Cabela's owners, for example co-founder and chairman Jim
Cabela, who sold Cabela, not Elliot Management (Singer et al)? I gather Elliot Management owned only 11% of the company. Was that
enough to force them to sell?
2. The article confuses honest straightforward loans with tax farming and government corruption. Loans can be very useful,
e.g. for a car to get to a job, or for a house so you build up equity instead of paying rent.
According to the Talmud, we goyim are not the descendants of Adam and Eve, like the Jews. No, we are the bastard progeny
of Adam's first wife, Lilleth, who eloped with the demon Samael. So we goyim are really all half-demons and therefore we are an
abomination in the sight of Jew-hova, and we get what we deserve at the hands of his 'chosen people'.
@Colin Wright
to get carried away with this. Figures such as Andrew Carnegie, while impeccably gentile, were hardly paragons of scrupulous
ethics and disinterested virtue.
Andrew Carnegie built something that made life better for people. Making steel is a beneficial thing.
These evil vulture Jews build nothing – they make people poorer. They suck the wealth out of people who have little. They know
100% what they are doing.
Jesus expressed anger against the money changers on the temple steps.
It is OK for you to have natural human feelings and be angry at these Jew bastards.
@anon ith him
on this trip. It was an awful experience – consistent with all the books I read on psychopaths and also that book Jewish History,
Jewish Religion, the weight of 3000 years
Another very wealthy American mother of a friend asked her South African friends (also jews) to help her book trips in South
Africa (and they of course recommended only their Jewish friends) – it's their son who told me this.
So a lot of backstabbing, cultural nepotism and actively (but in a hidden way as most psychopaths like to do) they do at wakening
and isolating their host. That's their only advantage – not intelligence (at least in my experience )
I don't even know what capitalism means anymore. It doesn't seem like it's an actual free market system. Seems like it
is slavery for the little guy, and parasitism for the rich. Maybe we should ditch the word capitalism for usuryism.
@Ilya G Poimandres
o – including offensive war. I used the term political authority on purpose, because Islam is more than just a religion, it
is a political-theocratic construct that is all-encompassing.
There may not be a specific verse allowing aggressive violence, but there is something going on based on the data. (I admit
to being a lay-man and not an expert on minutia of Islam. I don't want to go there based on what I already know to be true.)
In Christianity, if there are calls for aggressive violence it is OUT OF ALIGNMENT because of super-session. Christian adherents
who do this are Judaizers, and have to use the old testament for justification.
'Everywhere they go, they leave behind nations in ruins. "
-- They always find the willing local collaborators ready to make a big profit. Who can forget Dick Cheney, the Enemy of Humanity?
The same kind of unrestricted criminality and amorality lives on in Tony Blair the Pious.
The fact that this Catholic weasel and major criminal Tony Blair is still not excommunicated tells all we need to know about
the Vatican.
Assange is rotting in a prison, while Tony Blair and Ghislaine Maxwell are roaming free. The Jewish connections pay off.
@J Adelman
s as "strong advocates for a robust and close relationship with Ukraine," the Democratic senators declared, "We have supported
[the] capacity-building process and are disappointed that some in Kyiv appear to have cast aside these [democratic] principles
to avoid the ire of President Trump," before demanding Lutsenko "reverse course and halt any efforts to impede cooperation with
this important investigation
And yet Trump pulls the Jews ever closer. A ruling race of ubermenschen now.
'No reason'.
Can you imagine what American Blacks and savage Hispanics let alone whites are going to do if the US economy craters like the
Russian economy, and everything is transferred to the banks?
Yeah . fine idea. I've always maintained there are two uses of the word "capitalism" industrial capitalism or competition of
ideas vs. financial capitalism, the Darwinian struggle for the most ruthless bankster to rig the "markets" most efficiently.
Whether we give it new terminology I don't care much . but I sure wish people would understand the difference, one way of another
!
@alex in San Jose
AKA digital Detroit as extended, and had aunts and uncles and cousins, who lived in the general area for centuries, then there
would be a network to fall back on.
See slaughter of the cities by Jones:
And yes, the FIRE sector and impetus behind the destruction of your extended family was JEWISH. The breakdown of neighborhoods
and ethnics was on purpose.
The Jew is anti-logos, and whatever he touches he destroys. (There are exceptions of course – but these people no longer possess
a negative Jewish spirit.)
Sorry your family was destroyed. When whites become un-moored they don't know how to act.
Quite bizarre post. First,he makes a half ass defense of Jew character.(Weinstein, Epstein don't represent jews! Well, they
kind of do. Any jew who is called to accounts for his crimes automatically does not represent jews! )
if you think it's wrong to buy or try to collect on defaulted debt, what is the alternative set of laws and behavior you
are recommending? If debts can simply be repudiated at will, capitalism cannot function.
Capitalism includes money. You can't separate the risks in lending from other risks. Bad investors should be punished and good
investors rewarded. Resources should be well allocated. Otherwise it's not capitalism.
These insane Boomers seem to think that there is a Jewish coup underway to remove Trump because of all the things that Jews
are saying in Jewish publications and every single person involved being Jewish and stuff.
@Germanicus
About the Carnegie donated "Peace Palace" in The Hague, presently the seat of the In ternational Court of Justice:
Germanicus claims:
They are a function of Empire in Hague, who protect empire criminals, and assume a non existent legitimacy and jurisdiction
as a private entity to take down empire opponents.
Such as this ruling for instance:
Guardian 3 Oct.2018:
International court of justice orders US to lift new Iran sanctions
Mike Pompeo indicates US will ignore ruling, after judges in The Hague find unanimously in favor of Iran
"What Joyce regards as a defect of "vulture" funds, others might regard as an benefit. "
-- Of course. I hope you did not miss the fact that the Jewish vulture funds -- ruthless, unethical, and leaching on goyim
-- contribute to the Jewish Holocaust Museum.
Is not it touching that the same bloody destroyers of nations demand from the same nations a very special reverence -- out
of ethical considerations, of course -- towards the Jewish victims of WWII? But only Jewish victims.
All others were not victims but casualties. See Iraq, Syria, Libya, and Ukraine. See the unlimited hatred of ziocons towards
Russia.
" but maybe a few leftist thinkers would receive a much needed electric shock if they were to see the JQ framed in marxist
terms " – I would not count on the effect of the electric shock on the leftist thinkers. The role of Jewish Bolsheviks in
the Cheka, NKVD, GULAGs, genocides by famine has been known from the very beginning and yet it left no impact on the leftist thinkers.
Browder's case is really interesting. http://www.ihr.org /jhr/v17/v17n6p13_Michaels.html
"According to Harvard University scholar Graham Allison, who is also a former US assistant Secretary of Defense, ordinary
Russians have experienced, on average, a 75 percent plunge in living standards since 1991 -- almost twice the decline in Americans'
income during the Great Depression of the 1930s. But in the midst of this widespread economic misery, a small minority has grown
fabulously wealthy since the end of the Soviet era."
"Although Jews make up no more than three or four percent of Russia's population, they wield enormous economic and political
power in that vast and troubled country. "At least half of the powerful 'oligarchs' who control a significant percentage of the
economy are Jewish," the Los Angeles Times has cautiously noted. (See also: D. Michaels, "Capitalism in the New Russia," May-June
1997 Journal, pp. 21-27.)"
It's interesting how the appeal of Eduard Topol to Jews in Russia is now starting to echo Jewish calls in the United States
for Jews to stop the path they are currently on.
Here is the complete text of Topol's extraordinary "Open Letter to Berezovksy, Gusinsky, Smolensky, Khodorkovsky and other
Oligarchs," translated for the Journal by Daniel Michaels from the text published in the respected Moscow paper Argumenty i Fakty
("Arguments and Facts"), No. 38, September 1998:
Magnitsky and Bill Browder is also really interesting.
It turns out that a large measure of the Russiagate story arose because Russian lawyer Natalia Veselnitskaya, who traveled
to America to challenge Browder's account, arranged a meeting with Donald Trump Jr. and other Trump campaign advisers in June
2016 to present this other side of the story.
Then we had Democrats actually literally word for word doing what they accuse Trump of doing in Ukraine.
"It got almost no attention, but in May [2018], CNN reported that Sens. Robert Menendez (D-N.J.), Richard J. Durbin (D-Ill.)
and Patrick J. Leahy (D-Vt.) wrote a letter to Ukraine's prosecutor general, Yuriy Lutsenko, expressing concern at the closing
of four investigations they said were critical to the Mueller probe. In the letter, they implied that their support for U.S. assistance
to Ukraine was at stake. Describing themselves as "strong advocates for a robust and close relationship with Ukraine," the Democratic
senators declared, "We have supported [the] capacity-building process and are disappointed that some in Kyiv appear to have cast
aside these [democratic] principles to avoid the ire of President Trump," before demanding Lutsenko "reverse course and halt any
efforts to impede cooperation with this important investigation."
What's the first rule of Communist and Satanist Saul Alinsky? Always accuse your opponents of what you are doing.
Imagine having a Grandfather as the literal Chairman of the American Communist Party, and all the amazing lessons you would
learn about political maneuvering and ideology.
And it's amazing.
Browder's story is that Russian officials stole his companies seals and then fraudulently formulated a tax avoidance scheme
with a complete paper trail that they fabricated against him in totem. Precisely matching the amount of money he was trying to
remove from their country, like those other Jewish Oligarchs who imposed conditions that were multiples worse then even the American
depression.
When under oath it turns out that Magnitsky wasn't even a lawyer at all, and didn't go to law school. Why did the media owned
by Mormons of course keep saying that Magnitsky was Browder's lawyer?
Why did the Russians fraudulently fabricate a paper-trail for another Jewish Oligarch to steal money out of Russia? Just like
they colluded with Trump when a Russian lawyer sought to explain what happened. Because that totally happened.
Maybe the problem isn't Capitalism. Maybe, when even the ur-Shabbos goys at National Review are shaking their head and washing
their hands like Pilate, maybe it's a different problem.
Yet Trump holds these people ever close to his beating heart.
And then there are all these connections to Jeffrey Epstein that are like an explosion linking all these people.
Poor old Russia. Even Putin isn't worse then what came before.
t class is not tied to any territory has been observable since 1960.
I don't have time now to look up how many of 199 directors are Jews . but I know enough of the economic history of various
countries to know that Jews were the first business and finance globe trotters,,,,.from Spain to Amsterdam, France to Africa ,
etc.etc. Jew were first hired as reps and facilitators by the gentile business owners especially because of their breather tribal
contacts in many countries ..that was their stepping stone to becoming transnational capitalist themselves.
Understanding our global capitalist ruling elite and who they are is not rocket science
Yet more evidence is piling up that Donald J Trump is the Great Betrayer. A man who had the biggest mandate in post war history
to clean up the Swamp that is D.C., reform Immigration to save America and reform the economy for American workers. He has squandered
all of it while pandering to Jews.
When the Donald is revealed as the Great Betrayer where will Jews run? Yes, they have several back up plans. Patagonia, Ukraine
and Israel.
Imagine that. They have their own country and 2 back up plans. It is really tough being a hated, oppressed minority.
being much more cautious in their borrowing since the borrowing cost is so high.
Instead, this current arrangement basically uses bond funds to put up a false front, telling a debtor they can borrow at 2%
when the real rate should be at 20% given the known risks, then the debtor goes crazy borrowing because it's so cheap to borrow,
and when they can't pay back, the bond gets sold to the vultures who come collecting at 20% or they seize assets.
This is no different than the subprime mortgage crap, except now that is regulated so they go after sovereign debt and corporate
debt instead. These vultures need to go die period.
This is a great, concise overview of Canadian media influence by the "silent" Jewish overlords via Golden Tree.
I tried copy/paste of your comment on CBC, but it did NOT last 2minutes before being suspended!!
I am sorry to have used your comment without your permission, but I am going to "misspell" some words to defeat the algorithm
to get your message across.
@Lot e, and
these golfy-sounding names (Elliot, Monarch, GoldTree, OakTree, Canyon, Tilden Park) fit the perception. We whites receive the
society's hate for the wealth disparities created by high finance.
4. No, it is not difficult to do finance differently. Every other investor has higher patience for poor countries in Central
America and Africa, and they all look at Elliot with confused scorn.
And, things would probably run fine without hyper-aggressive multi-billionaires in pushing the courts to f- over those who
default on debts they owe to the maximum degree. Japan and Norway do quite fine with businesses that are run by gentle and humble
goys who feel ashamed at the thought of getting "too rich."
You will be thrown out.
You will have to choose between Israel, Ukraine and Patagonia. No one else will take you.
You have destroyed our politics, media and economy.
You are not respected.
You buy compliance with money.
You have bankrupted the U.S. dollar with debt pursuing Israel's enemies.
Ben Franklin and the American revolution was almost put in a similar pinch by the Amsterdam banker Jean DeNeufville. In a letter
to John Adams, 14 December 1781*, Franklin explained that DeNeufville wanted as security for a loan "all the lands, cities, territories,
and possessions of the said Thirteen States, which they may have or possess at present, and which they may have or possess in
the future, with all their income, revenue, and produce, until the entire payment of this loan and the interests due thereon."
Franklin considered that "extravagant" but Newhouse rejoined, "this was usual in all loans and that the money could not otherwise
be obtained". Franklin retold in this lengthy letter, "Besides this, I was led to understand that it would be very agreeable to
these gentlemen if, in acknowledgment of their zeal for our cause and great services in procuring this loan, they would be made
by some law of Congress the general consignee of America, to receive and sell upon commission, by themselves and correspondents
in the different ports and nations, all the produce of America that should be sent by our merchants to Europe."
Talk about shooting the moon
While Wikipedia says DeNeufville was Mennonite, Franklin concluded with this colorful -- and bitter -- remark , "By this time,
I fancy, your Excellency is satisfied that I was wrong in supposing John de Neufville as much a Jew as any in Jerusalem, since
Jacob was not content with any per cents, but took the whole of his brother Esau's birthright, and his posterity did the same
by the Canaanites, and cut their throats into the bargain; which, in my conscience, I do not think Mr. John de Neufville has the
least inclination to do by us while he can get any thing by our being alive. I am, with the greatest esteem, etc., ✪ B. Franklin."
Perhaps it was just an expression based on an earlier stereotype?
*Bigelow, 1904. The Works of Benjamin Franklin, Vol. 9 Letters and Misc. Writings
@steinbergfeldwitzcohen
o to Uganda and Ugandans were willing, but NO Zion had to have Palestine, and they got it through war, deception, and murder.
It was funded by usury, as stolen purchasing power from the Goyim.
The fake country of Israel, is not the biblical Israel, and it came into being by maneuverings of satanic men determined to
get their way no matter what, and is supported by continuous deception. Even today's Hebrew is resurrected from a dead language,
and is fake. Many fake Jews (who have no blood lineage to Abraham), a fake country, and fake language. These fakers, usurers,
and thieves do indeed have their eyes set on Patagonia, what they call the practical country.
I've been to TOO. However I can't bring myself to start commenting on a white nationalist website. I will admit I am unable
to articulate this discomfort presently.
As to your point about Marx – I actually forgot about his work on the JQ. The Saker, who is a columnist on this site, referenced
Marx's essay on the JQ some time ago. I must have not read the whole thing or I'd have remembered it. I didn't know that Marxism
originated with anti-Semitism, but that is fascinating. I have encountered some Marxists in my time and they focus exclusively
(predictably) on the cis-white-male patriarchy, or whatever occupies their brainwashed minds after an Introduction to Gender Studies
class.
@Anon repudiated
at will, capitalism cannot function."
Is this children's capitalist theory class time? throwing around some simple slogans for a susceptible congregation of future
believers?
Should be quite obvious that people, groups of people, if not whole nations , can be forced and or seduced into depths by means
of certain practices. There are a thousand ways of such trickery and thievery, these are not in the theory books though. In these
books things all match and work out wonderfully rationally
Then capitalism cannot function? Unfortunately it has become already dysfunctional, if not a big rotten cancer.
@J Adleman
Ezekiel 21:25 25 'Now to you, O profane, wicked prince of Israel, whose day has come, whose iniquity shall end
Jeremiah 5:9 Shall I not punish them for these things?" says the LORD. "And shall I not avenge Myself on such a nation as this?
As Jesus said which of the prophets have you not killed or persecuted? The truth hurts. As for me I do not hate Jews ..I feel
terribly sad for a people that are capable of greatness and squandered the gifts given to them by God. Are you a holy nation?
Don't make me laugh. Repent. Your time is coming. No more running and hiding. Deception will no longer save you only acceptance
of the Messiah.
he can't be bargained with,he can't reasoned with,he doesn't feel pity,remorse,or fear " In other words – a 'culture' as a
PSYCHOPATH it's a well-oiled psychopath support group
Hey! Don't mention anything a Jew ever did, especially usury, or else the entire cult will go up in a holocaustal mushroom
cloud of emo nasal whining. In Judaism you've got a fanatical sect that systematically selects and brainwashes its members to
inculcate extreme values of two Big Five personality axes: high neuroticism and low intellect (where intellect means open-mindedness.)
Note the existential crisis triggered by a straightforward lecture from The Society for the Study of Unbelievably Obvious Shit.
Of course Israel is holocausting the Palestinians. This is what happens when the founding myth of a nation is, We wiped em
all out and then they wiped us almost all out so now we gotta wipe em all out etc., etc., etc.
@J.W. en a
narcissist and a psychopath is that the former need people to like them whereas psychopaths genuinely could not care less (although
they learn early that acting as if they do can be very helpful , as can always trying to elicit sympathy etc).
As I noticed while reading a few books on psychopathy (I was inspired to after reading Steve Job's biography) – their whole 'culture'
is structured as a (collective ) PSYCHOPATH.
It seems that (collectively) they cannot care about others even if they wanted to. Due to their sickness
I am not saying they are all that way – but overall their 'culture' seems to be that way
The Sacklers occupy a hoity-toity rung in the philanthropy universe, as they have given enough $$$ to Harvard for H to paste
their name on its museum housing I believe its whole Asian art collection.
Students have now protested Harvard's high-profile gift of probity and cultural status to the Sacklers via, literally, an "Aushangerschild"
on a major university museum. Harvard protests back: Jeez, if we don't take the Sacklers' dough we might be obliged to stop taking
the dough from Exxon, etc.
@Anon ou are
right that loans should be repaid – it is immoral to allow a well connected mafia to change all the laws and remove protections
while pushing up prices of everything because it suits the lender (who has a licence to print).
They basically lend money that does not exist and get interest for that. So the more sheeple are tricked into borrowing the better
for them, but the worse for everyone else
They should not be allowed to bribe politicians to remove all the protection that was there since 1920s I think.
It's a marriage from hell: easy to bribe Anglosheep meets the masters of predatory bribing who own the printing press
That stupid cuck Trump just got impeached by the House. Thats a good lesson to everybody how much good Jew-ass kissing does
for you .you get stabbed in the back anyway lol
Couldn't have happened to a more deserving and treacherous scumbag!
But he should have been impeached for his treachery to the constitution and to the American people for his slavish devotion
to all things Jewish!
True, but irrelevant. The Jews that matter don't read the Talmud or believe in "Adam and Eve."
It's 2020. The Jewish religion is "The Holocaust" and we're all "Nazis."
Frankly, it's these traditional religious notions of "anti-semitism" that get in the way of understanding what is, at the core,
an ethnic issue. It's Sheldon Adelson, the Zionist entity in Palestine, and the ADL that are the problem, not some looney-tunes
rabbi living in Brooklyn.
The other side of the explanation is the lacking of reaction of the victim, the american people. The least that the people
that loot the world trough and with the USA power should do, is ,at least ,let us,the american people, a free ride.
Not illegal in the Talmud either but most certainly illegal in all of the countries that DynCorp was caught profiting from
this type of business. For some reason they never seem to suffer for their exposure suggesting that they may be wielding the same
influence that Epstein had over our elected officials.
We dont have to get back to the Singer of this world but to our own politicians ,that allowed them to do this to us,and to
the world.In this kind of abusive realtionship the 2 sides are to blame.
@Just passing through
h and then moved over to the West with their newfound gains, buying up properties, forcing prices up for the natives. The
western corporations not only wanted cheap products to export back to the U.S., but they were also developing a whole new market
– Chinese consumers who would buy their products as well. Double plus good!
And once in the West, the Chinese and the Indians stick to their groups. They hire their own, promote their own, do business
together. A lot of corruption, money laundering, cheating, taking advantage of and bending laws. Rule of law? Code of ethics?
Morals? Do unto others? They never learned it. Opportunistic dual citizens.
I would not count on the effect of the electric shock on the leftist thinkers. The role of Jewish Bolsheviks in the Cheka,
NKVD, GULAGs, genocides by famine has been known from the very beginning and yet it left no impact on the leftist thinkers.
It unfortunately has not had much of an effect on a lot of people in the West, who remain ignorant or in denial of the role
played by Jewish Bolsheviks in historic mass murders and totalitarian repression.
Waiting for the Hollywood movie to tell the story.
This is why you need to start with Zarlinga, as there is no BS to lead you astray. Hudson tends to drill the bulls-eye too.
There is so much deception in the field of money and economy, that it is easy to get caught up in false narratives, like one-born
free libertarianism. Usury flows fund the deception, even to the point of leaving out critical passages in translations, such
as in Aristotle's works. Or, important works are bought up and burned.
Michael Hudson is the leading economist resurrecting Classical Economics. Reading all of Hudson and Zarlinga will take some
time and effort, but it is good to take a first step.
@Anon According
to Wikipedia : " The armed rebellion of the Mau Mau was the culminating response to Colonial rule . Although there had been previous
instances of violent resistance to colonialism , the Mau Mau revolt was the most prolonged and violent anti-colonial warfare in
the British Colonial colony. From the start the land was the primary British interest in Kenya ."
Just as the Kenyans suffered the consequences of British colonialism , the "Palestinians will suffer
the consequences of Zionist colonialism until Israel's original sin is boldly confronted and justly remedied "
foreignpolicyjournal.com
distinction of Jewish investors versus gentile investors – on average, of course – is their use of bribery to get the force
of government behind them. Rather than taking a bet about some group being able to pay back some bonds and letting the chips
fall where they may, Jews start bribing or influencing politicians to force that group to pay back the bonds.
Buy some bonds, charge outrageous fees, bribe officials in some form or other, get govt to force the payment of bonds and outrageous
fees. Rinse and repeat. Jews have been doing this in some form aor another for 1500 years. It's why the peasants get a tad angry
at both the Jews and their bribed politicians/nobility.
Trump is in league with the Jews? Yeah, who isn't? Obama's lips are still sore from kissing Jewish Wall Street bankers' asses
(notice that none of them went to jail). Same with the Clinton's.
You can get politicians to pass all sorts of laws in your favor if you've got enough dirt on them. After all, your side owns
the media, Hollywood, academia, the courts, the banks.
If dirt doesn't work, you can always threaten to impeach them in order to get what you want.
But Trump is also revealing every last dirty one of them (accidentally or on purpose). People see them now.
J Adelman comes out swinging. He's such a tough guy. But does he make sense? Does he care if he makes sense? The writer is
talking about those Jews who are vulture capitalists. He's not talking about every Jew. Isn't it a little odd that nearly all
of these funds are run by Jews? Can your corrupt mind accept that fact and address the question? Or are you going to bore us with
your religion and by that I mean your obsession with anti-semitism, which is your religion.
'Hmm -- The day after Trump in inaugurated for his second term -- will Iran be in his crosshairs? We need to think very
seriously about that!
My guess is Iran is in the crosshairs. Trump probably promised he'd start the war as soon as he was elected the first time
-- but he putzed around, and now it's almost 2020. Adelson et al are pissed -- but Trump's got a point. If he starts the war
now the unknown Democrat will win -- and do you trust their word instead? They just gotta trust Trump. Let him get reelected
-- then he'll come through.
This is one of those cases where I'll be happy to be proved wrong -- but such is my suspicion.
Stop splitting hairs. Is this the best you can do? Are you one of Lot's cronies? I don't normally address petty matters of
this kind but Joyce is describing a multitude of sins and misconduct orchestrated by various Jewish financiers around the globe.
It is not merely one phenomenon; thus, 'phenomena' fits. Go troll someone else.
Typical Jew baiting article. Mitt Romney isn't a "Jew" Ashish Masih isn't. Many more examples of gentiles taking advantage
of their brothers. May as well consider the Walton family of Wal-Mart to be vultures as well since they benefit the most from
this system, they're so called Christians, not Jews.
The problem is capitalism. Author seems to suggest that a moral economic system has been corrupted. The system was designed
in an era of widespread slavery folks. Its an immoral system that requires theft, slavery, war, immigration, all the things you
hate, to survive. The system is working exactly as it is designed to work. Exploit workers, the environment and resources, shift
all the profits from workers to the owners of capital, period. Welcome to the late stage, it eats and destroys itself
From the days of the colonists slaughtering the Injuns and stealing their land. The days of importing African slaves, and indentured
servants. The days of child labor and factory owners hiring Pinkertons to gun down workers who protested shitty wages and working
conditions. The good ol days of the gilded age. Now the age of offshoring to China or some other lower wage nation. Overthrowing
leaders not willing to let their resources and people be plundered and enslaved, driving refugees to our borders fleeing violence
and poverty. Importing H1B workers to drive down wages. It was always a corrupt system of exploitation/theft/slavery. This is
nothing new and doesn't require "Jews" to be immoral.
And all these so called "Christians" like Pastor Pence approve. Usury and capitalism run amok. I'm sure Jesus is smiling down
on all these Bible toting demons who allow their fellow man to be exploited by the parasites. Sad!
Good for Tucker. He has his moments I'd watch his show if he wasn't a partisan hack. But that will never happen working for
Fox or any other corporate media.
Trump loves his daughter and she is married to a Jew. If they're not getting their way, I could see them telling Trump: "Sad
what happened at the Pittsburgh synagogue, isn't it? Sure hope nothing like that happens to your daughter."
I don't envy Trump. He not only is up against the Democrats, but he is also fighting the globalist neocons in his own party.
Both parties want open borders and more war, something Trump does not believe in. As far as I can see, he's throwing them bones
in order to shut them up. If he gets elected again, which I think he will, we might see a different Trump. Who knows.
Rather amusing to read our resident Jewish apologists carrying on about the absolute sanctity of the necessity of collecting
debts to the functioning of the capitalistic system. These nations and corporate entities that are now in thrall of the Wall Street
Jews , were herded into debt by that other faction of the capitalist system, the dealers in easy money. Snookering the rubes into
lifelong debt, telling them that money is on the tap, promoting unsustainable spending habits and then let the guillotine come
down, for the vultures to feed on. They are two sides of the same coin.
Its damned funny that the rich Jews nowadays are absolutely addicted to usury, rentier activities, and debt collection, when
the Bible itself condemns such activities. But they are our elder brothers in faith according to some.
Carnegie was a Protestant. The Protestant cancer serves it's Jewish masters. Read 'The Jewish Revolutionary Spirit' by E. Michael
Jones. There is definitely a revolutionary nature to the international Jew just as there is to their Protestant dupes. Jewish
nature is to subvert the natural order and the west was built by the guidance of LOGOS. The Catholic Faith created by God guided
the creation of the west. These Jewish exploits are a result of the Wests rejection of its nature and its enslavement
1. rich or poor, creditor or debtor, in the final analysis, ultimately, all will become equal in the grave. the filthy rich
might decide to lay their corpses in coffins made of gold, but it will be in vain. the sorrows and the joys of this fleeting world
shall quickly pass like the shadow.
2. talmudics feel the need to accumulate money in order to have sense of security since they were stateless for two millennia.
paradoxically, amount of wealth is indirectly proportional to a sense of security, provoking backlash from aggrieved host people.
3. establishment of State of Israel did not reduce the need for the accumulation but has only heightened it since now talmudics
feel the need to support it so that she could maintain military superiority over neighbouring threats.
4. as long as Palestinians are not free and Israel does not make peace, talmudics will continue to meddle in American politics.
if you don't want to save the Palestinians for the sake of humanity and truth or justice, at least you should do it for your own
sake.
5. loan sharking, vulture whatever, etc., is the ugliness of big capitalism with capital C, what is beyond sickening is the promotion
of sodomy. if one becomes poor or homeless, it's a pity. to go against nature is an abomination.
6. by using such words as "homosexual" you have accepted the paradigm of the social engineers and corruptors, and are therefore
collaborating with them. words have consequences since that is how we convey ideas unless you own Hollywood and can produce your
own moving pictures too.
7. talmudics is a better word than as a great American scholar says, since people who promote sodomy are absolutely opposed to
the Torah (O.T.). those who still struggle to follow it couldn't care less what happens to benighted goyim, only becoming reinforced
in pride of their own purity as opposed to disgraced nations. thus, practically, they too are talmudics, alien to the spirit of
the ancient holy fathers and prophets of Israel. the word "Orthodox" has been stolen and now has lost all meaning or it means
the exact opposite of what it originally meant.
8. Blessed are the meek, for they shall inherit the earth. Matthew 5:5
Well there's nothing wrong in principle about specialists in valuing distressed debt and managing it nuying such debt and using
the previously established mechanisms for getting value out of their investment. So the problem is how they go about enforcing
their rights and the lack of regulation to mitigate hardship in hard cases.
Still it is notable that it should, overwhelmingly be a Jewish business and such a powerful medium for enriching Jewish causes
and communities at the expense of poor Americans.
George Bush needed Tony Blair's support to attack Iraq , Donald Trump now has the support of Boris Johnson to attack Iran :
"Boris Johnson refuses to rule out military intervention on Iran ." metro.co.uk
It is said that the "deep state " removed Theresa May from office as she was "too soft" on Iran . As you suggest the attack
will not happen until Trump's second term unless, in the meantime , there is a false flag attack like 9/11 which can be blamed
on the Iranians .
While Whites theoretically still have the numbers to affect/determine the outcome of elections, a majority of Whites usually
stay home because they are tired of the 'evil of two lessers' choice they are offered -- even voting for Trump got them little/nothing.
I said nothing of an electoral solution to America's problems the problems will not be solved that way.
That scary thought has crossed my mind, too, Art. I've even started wondering if this whole impeachment circus is really
part of an elaborate plot to guarantee Trump's re-election. I mean, would Pelosi's insane actions make the slightest sense otherwise?
And everyone has noted how this is such a 'Jew coup,' haven't they? It all looks so suspicious
What our Jewish friends have done to Argentina, through maneuvering the elections, killing dissidents, and marking territory,
is a cautionary tale to anybody woke enough to see with their own eyes.
@Mefobills
mo.. maybe other than when 100% of the Ummah agree on something, I read that could remove a surah of the Quran, like a voice of
God. That rhymes nicely imo.
Of course how to judge which ruling to use? I agree, it brings in a casuistry into the faith that generally helps to confuse..
I don't know much about it though yet.
I think Islam preaches a decent message, but the average practitioner is open to misinterpret it quite a bit. This is a failing
of the teaching.. but I think Mohammed's message was corrupted like Christ's message pretty much straight after his death. Gospel
of Thomas and Tolstoy's rewrites all the way for something closer imo.
@sally n in
iniquity, and that is where your eye should gaze, not necessarily at the FED or any central bank.
The debt money system and finance capitalism is state sponsored usury, and is a Jewish construct.
Vulture capitalism is simply vultures buying up or creating distressed assets and then changing the law, or using force to
then collect face value of the debt instrument or other so called asset. Vultures will use hook or crook to force down what they
are buying, and hook or crook to force up what they are selling. God's special people can do this because when they look in the
mirror, they are god, and are sanctioned to do so.
Maybe the vulture should replace the bald eagle as America's favorite bird since our dear shabbos goy President Trump and cohorts
are undermining the First Amendment and trying to make it a crime to criticize Jews and/or Israel. Oh and don't think I am promoting
the other Zionist and their shabbos goy on the demshevik side. The Jew CONTROLS both sides and "our" two party system has become
Jew vs. Jew, not republican vs. democrat. Lenin said that the best way to control the opposition was to lead it and (((they)))
are at it AGAIN.
@Ilya G Poimandres
zies, who twist scripture. Judaism, especially Talmudic Judaism is Kabala and utterances of the sages, and it morphs and changes
over time. For example, after Sabatai Sevi, the Kol-Neidre was weaponized, and this construct is used by today's Zionists to wreak
havoc. Before Sabatai, there was Hillel, who weaponized usury.
Yes, I agree about Christianity changing quite a bit. In the first 300 years it was much different than today, especially after
the Arien controversy was settled by Constantine's maneuvering of Bishops at council of Nicea. For example, before; reincarnation
was part of Christian doctrine, and after; reincarnation was excluded.
I have long maintained that libertarianism/capitalism is really like a kind of Calvinism for atheists. Calvinists used to assume
that, since whatever happened was God's will and God's will was invariable good, then whatever happened was good. Likewise, many
modern cucks seem to have just substituted The Market for God. Morally speaking, it all lets man off the hook for anything that
results–especially when those men happen to be Jewish financiers!
No, boys and girls, The Market is not inherently good. It requires that a moral system be superimposed on top of it in order
to make it moral.
@Anon k of
this MI6 asset (and potential killer) who tried to fleece Russia, you probably can benefit from watching a movie by Nekrasov about
him. See references in:
It looks like it was Browder who killed Magnitsky, so that he can't spill the beans. And then in an act of ultimate chutzpah
played the victim and promoted Magnitsky act.
There is no defending these jewish malefactors. It has been pointed out that immorality is a disposition to be found in every
ethnicity. The problem is that the jews with that disposition are more clever than folks from other ethnicities with the same
dispostion. Being more clever, they are outstandinly better at depradation. I don't see how and why the recognition of the existence
of evil jews justifies the author's hatred of jews as a whole.
Colin, I'm going to assume this is a rhetorical question, as there is not one example that would cause you to suspect there
is really any doubt about the types of organizations that the Sacklers are donating their ill-gotten wealth to.
@Digital Samizdat
ocities, including the murder of civilians, predominantly Jews and Poles under the Nazi German administration. The term
Banderites was also used by the Bandera followers themselves, and by others during the Holocaust, and the massacres of Poles
and Jews in Volhynia and Eastern Galicia by OUN-UPA in 1943–1944.
@Digital Samizdat
and infest England, is not well understood by the average Goy.
Our modern world is a direct line back to this big-bang event. Christian Zionism goes back much further in time than to just
Cyrus Scofield and Darby. Our Jewish friends in Amsterdam were even publishing bibles at great expense, to then push the narrative
that the "people of god and old testament" deserve to return to England.
(The usurers had been previously kicked out of England by King Edward in 1290. The usurers had been plying their game, and
"putting house to house" to where English citizens were being dispossessed from their own lands.)
@Anonymouse
y Jewish as were the Bolsheviks of a hundred years ago, and they have greatly benefited from the political immunity provided by
this totally bizarre inversion of historical reality. Partly as a consequence of their media-fabricated victimhood status, they
have managed to seize control over much of our political system, especially our foreign policy, and have spent the last few years
doing their utmost to foment an absolutely insane war with nuclear-armed Russia. If they do manage to achieve that unfortunate
goal, they will surely outdo the very impressive human body-count racked up by their ethnic ancestors, perhaps even by an order-of-magnitude
or more.
@Mefobills
ted into being seen as the greatest victims, a transformation so seemingly implausible that future generations will surely
be left gasping in awe.
Aided by no small part by chutzpah. The uncanny ability to ability to call black white and to call good evil. With no cultural
love of truth to anchor them in reality. Thus detached, they are free to invent an alternate reality. I wonder if they do not
suffer from cognitive dissonance. They seem genetically protected from it.
They are actually self-deluded and want to infect the rest of us with their visions of victimhood.
@Realist ;
votes these greedy corrupt politicians into office? Hint: It is Whites who are the majority.
My first comment to you was #256 -- again "for the record": I did not give enough of a damn about you or your idiotic
statement ("Stupid Whites are responsible for allowing this to happen") to comment/reply to you before you mentioned voting
.
"LOL"
And I don't appreciate it when people attribute specific words, views, or thoughts to me that I did not express
-- make a note of it, asshole.
Descendants of this immigration wave are the liberal jews pushing the jew coup against Trump. This is why they are from Ukraine
(former pale of settlement area) or Russian haters.
To my mind, Trump is a Christian Zionist and has naturally allied with Bibi and the Zionist religious factions, such as Chabbad/Likkud.
Since U.S. has been fully infiltrated, then having Mossad and its agents on your side, is a strategy to keep from being suicided
by the deep state, like JFK.
I'm willing to give Trump some lee-way, given the circumstances of our current reality.
Only when operating within the confines of Western Christian culture, or forced into western education by the Tsars, did Jews
break free to be productive. And even then that production came at high cost to the host societies.
In other words, a good argument can be made, that if Jews had never infiltrated into Western Civilization, then said Westerners
would have been much better off.
Sorry if real history is butt-hurting.
Today's Iran is another model on how to deal with the Jew problem. Jews are limited there in the same way as was done in Byzantium.
@Colin Wright
ow" href="https://www.counterpunch.org/2019/12/18/impeachment-what-lies-beneath/">over at CounterPunch
So here's my entirely speculative tea-leaf reading: If there's a hidden agenda behind the urgency to remove Trump, one that
might actually garner the votes of Republican Senators, it is to replace him with a president who will be a more reliable and
effective leader for a military attack on Iran that Israel wants to initiate before next November. Spring is the cruelest season
for launching wars.
His story is that the Israelis consider Pence to be more reliable. Who knows
No wonder that the majority of Jews do not want to live in the Jewish State. too many Jews there.
They are quetching about antisemitism while attacking the western civilization -- from the assault on the First Amendment to the
cheerleading for more wars for Israel in the Middle East.
No one keeps the Jews from joining their brethren in Israel. There is no need to sing "Next year in Jerusalem." Enough already.
Just go there -- and stay there.
@Mefobills
ons that distract us from seeing the top of the pyramid. However, it would appear that Marx finally gets to finance in Volume
Three of Capital. I could read the whole thing myself, but I would rather simply ask you what you think. How do you reconcile
Marx the Illuminati Jewish agent with Marx the perspicacious critic of capitalism? Where were his real loyalties? Did he stick
the dynamite at the end of his magnum opus instead of at the beginning in order to hide it from his finance masters, whom he knew
would never actually read that far? Was he attempting to assuage a guilty conscience by sneaking the truth into a footnote?
@annamaria
are quetching about antisemitism while attacking the western civilization -- from the assault on the First Amendment to
the cheerleading for more wars for Israel in the Middle East.
The complete lack of shame it takes to act like this is amazing to me. Also the hubris it would take. Though if you see yourself
as a chosenite, those behaviors fit.
Apparently if you hang around then long enough, the behavior is contagious. Biden's shady Ukrainian dealings, which are 100%
real are being denied and instead projected onto Trump. It's infecting our politics. The shabbos goy are emulating their masters.
@redmudhooch
ts since the cave but that is not capitalism. Capitalism is Usury – profit for the sake of profit independent of usefulness,
welfare, community, lifestyle.
.
And as was argued by the great German economist/sociologist Werner Sombart, Capitalism was really invented by Jews However as
E Michael Jones has argued, Protestantism – particularly Anglo Calvinism- was a backsliding of Christianity into Jewish materialism
– the spiritual basis for capitalism. So everything seemingly goes around and around. Capitalism cannot be blamed solely on the
Jews but Jews can never be abstracted from the evils of capitalism. We have to keep both balls in the air
Grab a small piece of paper. Add some fancy, symbolic stuff to it, like a fire-breathing dragon, with big, burning eyes, named
' Nimajneb , the faerie overlord, that hovers over an upside-down pyramid. Oh, and you'll need a number, let's say, '100.'
Done. Print it out. Walk to the nearest person, say, "I've got here a $100 bill," and see what happens
Yet, the FED can take the same little piece of paper, sprinkle some magic dust on it, et voilà, you've got your $100 greenback
[aka IOU $100 banknote].
Money makes the world go round?
Spin out of control into a state of utter madness, I'd say.
@Buddy can
read through economic history or texts and spot the lies and fakery. So where does that leave the average layman to turn and not
be hoaxed?
Sorry it is so hard out there to navigate. I commend you for trying. I'm feeling pressure to write a book, because even Hudson
does not initiate people from level zero up to someone advanced enough to resist the hoaxers.
Richard Werner is pretty good, but you have to navigate around his favoritism of private banking. Money is law.. and he doesn't
want to acknowledge that. This is what you run into, and the only way is for you to navigate as best you can and see if things
ring true.
Real science has been suppressed and removed from the public sphere. Or it's been perverted for mass surveillance and social
command and control and dual systems.
I fully believe that execrable demons like Soros never die because they're getting baby blood from orphans passed through some
heinous engine into their vile bodies.
Meanwhile, we're forced to deal with nonsense like anthropogenic climate change, string theory, dark matter and other Jewry
the sole purpose of which is to centralise power over mind and body in the hand of Jews and Masons.
The Zionist racial bigotry behind S447 was foreshadowed by Israel Singer of the World Jewish Congress in 1996:
"More than 3 million Jews died in Poland and Poles will not be the heirs of Polish Jews. We will never allow it. We will
harass them until Poland is ice covered again. If Poland fails to satisfy Jewish demands, it will be publicly humiliated and
attacked internationally . – secretary general of the World Jewish Congress"
Notice the guy's last name – Singer. This is another form of Jewish mafia vulture capitalism, using any means to hurt the masses.
What is S447?
Section 3 of Act 447, the provision for heirless property, is the part that reveals the law's intent. Under existing laws,
heirless property becomes the property of the state. After WW2 there was a lot of property without owners (whether owned by
Poles or Jews), and it has been sold ever since. This law has the potential to cause national havoc, as the vast majority of
Poles own their own homes. Even in the relatively cosmopolitan capital of Warsaw, 79% of city-dwellers own their homes and
apartments.
Under S447, any Polish-Jew or descendent of said Polish Jew can lay claim to property to property deemed heirless and sold
after the war, thus all land that can be claimed to have been owned by Jews before 1939 will be transferred to the global Jewish
diaspora. If this law is put into practice, approximately 30% of Warsaw homeowners will be forced to pay "rent" to random Jews
claiming to be Holocaust survivors or their descendants in New York City and Tel Aviv.
How would this "law" work in Poland?
Under S447, any Polish-Jew or descendent of said Polish Jew can lay claim to property to property deemed heirless and sold
after the war, thus all land that can be claimed to have been owned by Jews before 1939 will be transferred to the global Jewish
diaspora. If this law is put into practice, approximately 30% of Warsaw homeowners will be forced to pay "rent" to random Jews
claiming to be Holocaust survivors or their descendants in New York City and Tel Aviv.
Trump was "impeached" for not giving arms freely to ZUS controlled Ukraine. The arms have been used to shell and kill civilians
in East Ukraine. Yet, Trump should be impeached for pushing this Jewish Mafia vulture like capitalism on Poland.
Pressure from the US government is only reason this law is even being considered. While Donald Trump appeals to the West
and Polish patriotism in his speeches, his government's actions say something radically different. Last February, US Secretary
of State Mike Pompeo demanded the Polish state pass this law. Last August, the American congress urged more pressure on the
Polish state to get S447 through.
"Tucker Carlson's recent attack on the activities of Paul Singer's vulture fund"
Yup, the bricks and mortar outdoor gear shops, Cabela's + Bass Pro need 2 HQs. Nebraska could have stopped it but instead chose
farm subsidies, forever war, and pensions for government workers. To have that much spending excess in the government spending
you need high efficiency from the civilian sector.
The reaction in Nebraska seems to be a big yawn. My guess is Cabela was constantly trying to reduce their state and local taxes,
at some point keeping the low wage retail jobs while dumping the high wage HQ jobs made sense, short term, so they sold Sidney
NB down the river.
Candidate targets Sasse on Sidney response, other issues
"Nobody tried anything," was the compaint(sic) Innis heard on his visits to the struggling community.
Well mefo let me tell you a funny story.This guy i know made some nasty comments about jews and not long after he got cancer.His
doctor,a jewish cancer specialist put him back on his feet.
Know what the funny part is.He still makes the same comments.
Few escaped the pervasive prejudice, however. In the early 1900s, Dr. Paul Ehrlich, a German Jew who discovered a treatment
for syphilis and is considered the father of chemotherapy, popularized the term "magic bullet" to describe a medical compound
that would "aim exclusively at the dangerous intruding parasites" yet not "touch the organism itself."
But though Dr. Ehrlich was awarded the Nobel Prize in 1908, he was not made a full professor at a university until 1914, a
year before he died. (That posting was at the University of Frankfurt, in the year of its founding.) In the 1930s, as the Nazis
came to power, his name was removed from textbooks and taken off Frankfurt's street signs. Paul-Ehrlich-Strasse regained its name
only after World War II.
@ANZ of bankers
and religious fanatics or a land-based theocratic toy-state of Israel.
It is the spirit of parasitism that is "infectious" and works against patriotism. Hense the local profiteers, from Rumsfeld
to McCain, Biden, Brennan, Pelosi, Rubio and the likes who have been hastening the demise of the US for the immediate monetary
compensation tied to the allegiance to the Jewish cause. The zionized NYT and the presstituting stink tanks the Atlantic Council
(affiliated with the openly subversive Integrity Initiative), American Enterprise Institute and such have been working openly
against the US interests and for ziocon interests.
"Herzyl admired the Germans of the day, and wanted Jews to be like the German's he so admired. Herzyl thought that if Jews
had their own country of Zion, they would settle down and become normal people."
-- The dream was an illusion. When the meme "is it good for the Jew?" beats all and any moral principles, then the world gets
a nation of thieves and murderers quetching non-stop about their eternal victimhood. Pathetic.
From the position of the USA Secretary of State, Madeleine Albright pushed for the bombing of the Federal Republic of Yugoslavia
in 1999, when NATO planes bombed without a UN mandate. She also supported the jihad in Bosnia during 1992-1995, and the manipulation
of the facts about Srebrenica, but also personally earned from the privatization of Kosovo Telecommunications. She should,
therefore, bear the consequences of her political decisions and acknowledge responsibility for the bloodshed, in which thousands
of civilians were killed.
But in fairness, the Koch brothers are no damn good for the nation either.
No, they are (were) not. However, they also got a lot of negative media attention while these Jewish vulture capitalists
have mostly been given a pass. Also, whites are about 55% of the population while Jews are about 2%.
@silviosilver
er because the debt was already in default or was at imminent risk of defaulting, which is why the debt sells at a heavy
discount, since existing debt holders are often happy to sell cheap and get something rather than hold on and risk getting
nothing.
If A enters into a contract with B to borrow money, and then fails to be pay it back to B, why should C be able to come in
and buy the debt from B and expect to be paid back? A entered into a contract with B, not C. And why should C expect to be able
to employ the machinery of state coercion to force A to honor a contract that A didn't even make with C in the first place? Mr. Anon , says:
December 21, 2019
at 7:37 pm GMT
@Thales the Milesian
ters sent representatives to a small central government. This form of government was usurped in 1913, by the "money powers,"
and these money powers use elections as a veneer to sanction their behind the scenes rule.
Here is another quote from the Ivan the Terrible article, which sums things up:
n 1601, just a few years after Ivan's death, Russia was starving, leaderless and under attack. Again, under elite rule,
with no ruling monarch, Russia was plunged into years of war and violence. Fighting oligarchy has been the traditional job
of any monarch and is the ultimate purpose of government.
@Robjil olves
to the "were so smart" and look at the medical advances, nobel prizes, etc. we've contributed.
Conveniently left out of account, is that these advances would have been done anyway in their absence. The goyim do possess
the intelligence and fortitude to solider on without jews in our midst, and in-fact, when jews are absent from our civilizations,
advancement accelerates.
The best thing for a jew to do is turn his back on the tribe, and re-join humanity.
To any Jew reading this . walk away from the tribe. Man-up and get some intestinal fortitude, leave the parasite method behind
you, and join humanity.
I'm feeling pressure to write a book, because even Hudson does not initiate people from level zero up to someone advanced
enough to resist the hoaxers.
Have you considered writing articles? Series of articles could later on become raw material for a book. Perhaps easier path
to take and could perhaps provide useful feedback along the way.
It sure looks like you could write far more informative and interesting articles than many writers here on Unz because of your
broad perspective. The big picture is always more interesting and I agree with you about the importance of the subject.
@Mr. Anon d
by these degenerate types of people in order to take illicit gains.
In the U.S., (I'm an American), these usury flows funnel into the press – to where the press becomes owned, so that these Oligarchic
interests can continue to take rents and unearned income through their various schemes.
I might add, our intelligent UNZ readers, have noticed that the U.S. mainstream press is predominantly Jewish owned. Intelligent
people notice patterns are some of us are unwilling to look away. No amount of deception through the mainstream press can reduce
the revulsion moral people instinctively feel when watching vultures operate.
@Bookish1 ing
whiteness has never been more urgent.' By Mark Levine"
When challenged for apparently encouraging genocide, Levine and his cronies answer that "whiteness", as they are employing
the term, is merely an accidental property as opposed to an essential quality. So stripping an organism of its whiteness will
not diminish it to any significant degree, does not threaten its very existence, merely prunes it into a more acceptable shape.
And yet when some poor misguided soul has the temerity to put up a sign saying "It's Okay To Be White", the Mark Levines of
the world have a cow. Suddenly, "white" is not a mere accidental quality at all.
The Koch Brothers (what's left of them; one died recently) are industrialists. They build things people want. They are innovators.
Yes, the Koch Brothers are filthy rich but they employ tens of thousands of people in the US alone.
Most importantly, the Koch Bros. are not parasitic, money-skimming extractors or wealth like the vulture capitalists described
by Joyce.
@Mefobills
s and schemes. The advantage of their technique is that it does not leave a positive trace but a negative trace. It is much more
difficult to notice absence than presence. You can't see all the money that is constantly being vacuumed out of the economy. It
doesn't leave a visible hole. And since none of us has ever witnessed firsthand what a rent-free economy might actually look like
(since they are not allowed to exist), we internalize the belief that such an economy goes against natural law, when in fact the
contrary is true.
Is there any way for you to link to more of your writing without giving away your identity?
Paul Ralph Ehrlich (born May 29, 1932) is an American biologist, best known for his warnings about the consequences of population
growth and limited resources.[2][3] He is the Bing Professor of Population Studies of the Department of Biology of Stanford University
and president of Stanford's Center for Conservation Biology.
Under S447, any Polish-Jew or descendent of said Polish Jew can lay claim to property to property deemed heirless and sold
after the war, thus all land that can be claimed to have been owned by Jews before 1939 will be transferred to the global Jewish
diaspora.
Let's make a variant of the Polish S447 applicable to Palestinians and find out how much the illegal occupiers of Palestine
like to see 'justice.'
@mcohen eir
factories full of low IQ but compliant workers. 3) The finance banking class who want new debts to pay off old debts. New Debtors
help fund a new debt cycle. 4) New people through population replacement, destroy the history and cohesion of the host country.
By de-racinating and destroying the host people, then Plutocrats can continue with their thefts unchallenged.
The debt money cycle is something like a pyramid, where it sucks upward toward plutocracy. Plutocrats and Oligarchs then emit
hypnosis and propaganda through the owned press to maintain their status. The funnel, or bottom of the pyramid wants new debts
and new debtors.
how do entities like Puerto Rico get so far in debt in the first place? so many problems because of what appeared to be
incompetent and comatose government.
Yes, ultimately the blame must lie with the voters: they picked douche, when they should have picked turd.
@Daniel Rich
l, Germany and Russia were both strangled. The US's turn is now. The US wants to strangle Poland too with this s447 law. Trump
should have been impeached for pushing this law on Poland.
Pressure from the US government is only reason this law is even being considered. While Donald Trump appeals to the West
and Polish patriotism in his speeches, his government's actions say something radically different. Last February, US Secretary
of State Mike Pompeo demanded the Polish state pass this law. Last August, the American congress urged more pressure on the
Polish state to get S447 through.
The real eureka moment for me came when I finally understood that money and debt were created at the same time on opposite
sides of the ledger. Only the two columns are not equal. One column grows through magic while the other does not. Once the
sorcery has been wrought, the creditors can simply sit back and wait as the mechanism eventually transfers all the wealth in
the world to them.
That is pretty good. Economics and most equations do not codify time. The equal sign cannot comprehend time, so most of the
math used in economics textbooks is telling lies.
Also, as I mentioned earlier, the bad guys put their thumb on the scale and call things equal. They do this with swaps of unlike
kinds. For example, you can build up housing prices with bubble economics, then collapse the economy by preventing new loans,
or doing call-in loans. That then forces prices downward. The bankster/vulture class then forces a swap of the asset to collapse
(cancel) the debt instrument. In this case, the house is transferred to creditor to erase debts. The house transfers to collapse
a money contract, which is a swap of unlike kinds. Vultures do the same thing, they don't necessarily want money in exchange for
the debt instrument they have bought.
With regards to double entry hypothecation – at the first instance of time, when debt instrument is signed ONLY THEN IS IT
A MIRROR. The credit created and the debt claims are 1:1 only at the instant (minus fees). Later in time, the debt claims grow
while the credit created does not. This is why debt claims destroy the natural world, as people rape the world converting forests
to board feet of lumber, to then make a price, to then fetch money.
In the first cycles of a loan it is ALL USURY. Worse it is seignorage. Seignorage is greater purchasing power now, whereas
the money is worth less later.
In the first cycles of the loan, the bank credit that you pay back, virtually none of it goes to paying off principle. The
credit decrements the asset side of your ledger (your savings go down) and then point at the banker, to increase the asset side
of his ledger. In the first cycles of the loan, your liability column (principle on the loan) goes down only slightly or not at
all.
This is pure usury, plain and simple. There is little to risk the loan emitter either, as a house is fungible and can be grabbed
by law. If a real asset is attached to the double entry ledger, it is to lower risk to the creditor (banker), not the debtor.
A double entry ledger can lie, or tell the truth. It would tell the truth if we used fees in this case and didn't hypothecate
new credit. But, then again, as you mention most people are locked into a hypnotic trance.
The proper way to do things is with sovereign money, not private corporate bank money at usury.
Whenever a nations people demand their sovereignty, they are attacked by the usual suspects. A lot of people don't want to
admit that both world wars were started by the finance class, with Jews as leading agents, to then demonize Germany.
Germany had the temerity under the Kaiser to run an Industrial Capitalist Mixed Economy using its own sovereign credit, and
then Hitler resurrected this system in 1933.
renegadetribune.com ; "US Court sentences Israeli CEO to 22 years
for scamming Americans , media ignore it ":
"The company specifically targeted the elderly and the vulnerable , one of over 100 companies perpetrating a scam called binary
options Israel permitted the scam to go on for a decade "
Will Trump pardon him before he leaves office ? The Jerusalem Post : " Trump pardons Israeli drug smuggler" after serving just
4 years of a 20 year sentence .
Contracts often have provisions for successors and assignees. The real question is whether the weaker party was sufficiently
strong to know what they were signing and have a good chance of being able to carry out their side of the bargain. Many sovereign
buyers are about as good risk as an unemployed man who wants to buy a car on credit.
@Just passing through
countries have been looted, the Jews have turned on the Whites and the latter are now crying that their criminal comrades
have now betrayed them."
It's called comeuppance.
But IQ doesn't explain fully but the readiness to believe the west . Congo is particularly a sad case. It has been fighting
a war for last 60 years .
As far as Belgium is concerned, that nations should be swamped to the brim with Congolese making it burst at the seams .
Who cares if some moronic Trump supporters get all shook up in Battle Creek . Who gives a toss ?
Trump is a fraud , a huckster a corrupt filthy white thrash
@geokat62 iven
the environmental damage said industries have caused. The vulture capitalists recover debt from failed states. A worthy cause
indeed, especially for investors.
mark green says:
December 21, 2019 at 9:53 pm GMT • 100 Words
@FvS
The Koch Brothers (what's left of them; one died recently) are industrialists. They build things people want. They are innovators.
Yes, the Koch Brothers are filthy rich but they employ tens of thousands of people in the US alone.
Most importantly, the Koch Bros. are not parasitic, money-skimming extractors or wealth like the vulture capitalists described
by Joyce.
@mcohen ly
able to secure large amounts of debt at very favourable interest rates. But this very soon changed. The vultures at GS, after
peering into the Greece's true financial records, knew how vulnerable Greek finances were and were betting heavily against Greek
sovereign debt by shorting it. This soon drove borrowing rates sky high which made it nearly impossible for the Greek govt to
roll over their short term debt obligations.
So, thanks to the vulture capitalists at GS, a large percentage of the Greek population has been suffering and will continue
to suffer under the austerity policies that were introduced in the wake of the financial crises.
@annamaria
d us out from the classic American tradition into the modern Zionist vision. These turncoats are a uniquely despicable lot since
they come with smiles and handshakes to kill the soul of our nation.
If history serves as a guide, it will take a government led by s strongman to right this ship. Democracy has proven too easily
corruptible by a private banking cartel that can print its way to dominance. This cartel will select, groom, install and maintain
their double agents into our political, economic and cultural spheres.
Here is the most plain lesson I can take from this: don't allow privatized money as the national currency.
@mcohen
oycott abroad. It did this by using a barter system: equipment and commodities were exchanged directly with other countries,
circumventing the international banks. This system of direct exchange occurred without debt and without trade deficits. Germany's
economic experiment, like Lincoln's, was short-lived; but it left some lasting monuments to its success, including the famous
Autobahn, the world's first extensive superhighway.1
Greece or any nation need not be in "debt". It is a game, a game of money printed out of thin air. All Greece has to do, is
give up the debt game. Barter game is a better game.
Roger Elletson, in his excellent book "Money: A Medium of Power"(Amazon), defines the purpose of usury: "Under the current
monetary regime, the effect, and indeed the purpose, of usury is to create compounding (think 'little by little') monetary claims
from usurers against the productive output and underlying assets of nations."
@Robjil n proportion
to the economies needs, as is what happened in Germany. Hitler laughed at the gold-men, and considered gold money as a tool used
by the Jews in their "international capital game."
Purchasing power was put into the German economy using Oeffa and Mefo bills. When the bills were discounted (redeemed) at a
bank, said bank turned around and presented the bills to the Central Bank (Reichsbank). Reichsbank then created new Reichsmarks
to pay off the Bills. In this way millions of marks of new credit flooded into the German economy. By 1938 the tax roles in Germany
had almost tripled, and it was not due to Gold or "international credit."
All that you and I really know about Mefobills is that information about the nature of money and economics is being freely
given and appears to be much appreciated according to other commenters. We don't know anything about what other activities Mefobills
is engaged in so your comment is nonsense thinly disguised as petty insults.
In Billions for the Bankers, Debts for the People (1984), Sheldon Emry commented:
Germany issued debt-free and interest-free money from 1935 and on, accounting for its startling rise from the depression to
a world power in 5 years. Germany financed its entire government and war operation from 1935 to 1945 without gold and without
debt, and it took the whole Capitalist and Communist world to destroy the German power over Europe and bring Europe back under
the heel of the Bankers. Such history of money does not even appear in the textbooks of public (government) schools today.
The underdog in Israel are Palestinians. The Chosen, in Israel and elsewhere, treat them like vermin. The Israeli chosen are
the most color-conscious and racist people in the Western world.
I would say WASP's and Jews savaged Germany in WW2. Perhaps then the Jews turned on the WASPS. But WASP's are a curious bunch.
They seem to have absolutely no loyalty to their own people. Look at what they have done to the English white working class. WASP's
also are very enamored of Jews. If anything their loyalty sees to be to the Jews and not their own
That may be the case in the Exodus dramas but the idea of 'who is thy brother' was already made clear earlier in Genesis –
the story of Abel and Cain. The later Jews and the Christians merely rediscovered what was the original plan : that is, that all
mankind share one brotherhood under one God.
So the Greek debt was caused by the purchase of too many weapons to defend against other countries like Turkey in NATO, an
American-led organization that promises to provide security to all its member states? So the populace of a treaty-bound ally should
suffer US-enforced austerity to have weapons so that vulture capitalists can enjoy large profits which they largely funnel to
Jewish causes while the Jewish state never is expected to suffer austerity for weapons?
@MrFoSquare
. The texts are diabolically equivocal and ingeniously interlocking. The exoteric interpretation is innocent (Torah) and full
of plausible deniability, the esoteric interpretation is malevolent (Talmud), and the ultra-esoteric interpretation (Kabbalah)
is Satanic. At the very bottom you have the ultimate esoteric language of gematria. The good news is that it is easy to see through
the necromancy once you understand how money magic functions. But this is only possible if we refuse the temptation of greed.
We have not done a very good job of resisting greed, and those of us who succumb to this temptation deserve to be swindled.
@Achilles Wannabe
re to be Jewish, people like Joyce would be on the case saying it was all da jooz, but he isn't very keen to blame WASPs for
the black-on-white violence in American public schools, makes ya wonder.
WASP's also are very enamored of Jews. If anything their loyalty sees to be to the Jews and not their own
Jews have always been present in the elite, WASPs identify with Jews because they identfy with the elite. I am quite sure even
to this day, WASPs and Jews are working together, it is just that the lower rungs of White society are being overwhelmed first
and it seems unlikely that these North-Eastern WASPs will feel the pain any time soon.
New England Neo-Calvinists never saw Southern and Border Anglo-Celts as brothers. Not at all. Thus the Civil War. As for their
closer kin, poorer Mayflower, etc., descendants, they mixed in with Germans, Scandinavians, and, horror of horrors, the Irish,
as they moved West. Bing Crosby was a Mayflower descendant.
Joyce's conclusions -- that any of this behavior is uniquely "Jewish" -- are absurd. The facts he cites refer to no more than
simply the standard operations of the market economy.
Some people just loath the very concept of credit and finance, so they reflexively praise any "analysis" which they believe
justifies their anger.
Others are casting about for somebody or something to blame for their own incompetence -- the poor, downtrodden debtor "victims"
-- and they too are happy to have their failings explained away.
On the substantive issues, this essay is just hot air.
@jack daniels
e financial system by allowing widespread bank failures. But the banking executives whose criminal incompetence and, in some
cases, corruption led to the crisis should definitely have been jailed, or at least permanently barred from ever working in the
industry again. (Liberal egalitarianism shouldn't so lightly get off the hook either. After all, it is lunatic egalitarians who
insisted that blacks and hispanics are just as good credit risks as whites, and who demanded that banks extend loans even to obvious
deadbeats.)
This is an infinitely more important issue than bellyaching about "vulture" funds and trying to portray them as uniquely Jewish.
@Wyatt what
they owe – in other words, to just give their money away?
And if there's a predilection among jewish men to engage in predatory lending and collecting tactics that is disproportionate
to their of the population, there's something about their genes or their culture that shapes them to be this way.
Okay, but so what? Given that there's nothing immoral – and much that is beneficial – about lending and borrowing, why should
this be any more of an issue than that west Africans genes help them excel at sportsball or east Asians genes at math and engineering?
Jewish elites are infinitely more tribal and ethnocentric than WASP elites, which is demonstrated by their charitable giving,
which is far more narrowly focused on specifically Jewish causes than that of WASP elites is focused on specifically WASP causes.
Given their small numbers, Jewish elites usually must make tactical alliances with Gentile elites; but when their ethnic interests
conflict with general elite interests (e.g., Marxist class conflicts), the former will almost always prevail. Hence, any WASP
"loyalty" to Jews as a group is foolish.
@Mefobills
this month's Executive Order Jews extracted from Trump declaring Jews to be a distinct race/nationality.
Usury is a power relation, where you steal from others because you can. Laws are changed to enable the thefts.
The people of Euro lineage, i.e., the descendants of Christendom, usually don't steal even when they easily could because they
are naturally indifferent as to materialism, their complimentary instinctive drives being 1) for adventure in overcoming challenges
while staying within the bounds of ethical self-restraint; and 2) intellectual curiosity to learn what's out there and how to
harmoniously survive and coexist with realities discovered.
"The Jewish crime rate tends to be higher than that of non-Jews and other religious groups for white-collar offenses, that
is, commercial or commercial finance.
*Also where special laws have been enacted for religious groups the crime rate among Jews tended to be even higher.
*Jews are found to be significantly over-represented in both fraudulent and genuine bankruptcies (almost ten times the rate of
non-Jews)."
@annamaria
t's not news to me that hyperethnocentric Jewish financiers help fund hyperethnocentric Jewish organizations.
Ultimately, though, that funding is a consequence of Jewish participation in the economy. So if that in itself is wrong, then
this essay is not so much a criticism of Jewish behavior, but crosses over into a criticism of Jewish existence – how are
you supposed to live if you're barred from economic participation? – which to me is a different kettle of fish altogether. As
much as I hate the term, that's something even I would call anti-semitic (note the absence of sneer quotes, which for me are practically
mandatory).
@Mr. Anon er
appetite for risk. See, sometimes I don't know that I'm not going to be repaid; it's just that I now assess the prospects
of being repaid as failing to meet some risk criterion I have. Other people's risk assessments differ from mine, which creates
a market for existing debt.
Sometimes the market highly irrationally prices financial assets – most evident (in hindsight) at market peaks and troughs
– so there are certainly some good opportunities in distressed debt. I just don't see that "vulture" funds which scan the market
looking for distressed debt are doing anything fundamentally different to any other buyers of debt.
@Hibernian
ch and Germans from NY and the middle colonies like the Rockefellers Roosevelt's. Basically they are individualized deracinated
people who are not even brothers to each other. They worship mammon – money and power. Jews are of course anything but deracinated.
They are however the world's leading usurers so the WASP with his Protestant Ethic – usury sanctified – is bawled over by them
– not just financially but psychologically. They have handed the Jews their universities, their cultural institutions. They are
a people who gave themselves up to a people for whom there is no one but themselves. The rest of us are just along for the ride
– treacherous as it is
I'd be very surprised if the last sentence of the above excerpt was true. Also it's a no brainer that US courts are more favorable
to foreigners than third world courts are.
No, but they shouldn't necessarily expect to get it. They took the risk in lending to a bad credit-risk. At least they provided
something of value – the money. Singer's fund provides nothing of value. They're just parasites.
Should they simply be forced to "lend" to people who are completely unwilling to pay what they owe – in other words, to
just give their money away?
Nobody forced them to lend anything. They did it of their own accord. They didn't have to make the loans. They could have done
something else with the money.
Elsztain and Mindlin, both Top Jews, now control Argentina.
Elsztain and Mindlin's close connections to a merging network of some of the most powerful globalists in the world today
suggest their role to be one of sniffing out the opportunities and laying the groundwork for hostile take-over of resources
and infrastructure by these elite scavengers who prey upon target nations, protected from view by the likes of Elsztain and
Mindlin, who are little more than mafia outreach agents."
@silviosilver
nterest in relations with Israel comes as a number of Central and South American countries, notably Brazil, have adopted increasingly
pro-Israel positions in line with policies of US President Donald Trump.
Guatemala opened a new embassy in Jerusalem al-Quds in occupied Palestine shortly after the US formally transferred its embassy
from Tel Aviv to the city in May 2018, which prompted worldwide condemnation and anger among Palestinians.
In August, Honduras also recognized Jerusalem al-Quds as the the so-called capital of Israel and announced that it sought to
open a diplomatic office there.
@mcohen callously
don't care about the suffering they cause, or sadistically delight in it. The more distressed mortgages they can find at a discount,
the more homes they can seize, the more non-co-ethnics they can render homeless, the happier they are. Like Gordon Gekko, and
unlike bankers who lend money for production of goods, they don't produce anything -- -they simply parasitize the lending and
borrowing of the productive economy.
If they are an asset to society, if their activities are a boon to society, let them practice those activities exclusively in
Israel and among their own coethnics elsewhere, and contravene Talmudic injunctions.
Okay, but so what? Given that there's nothing immoral – and much that is beneficial – about lending and borrowing, why should
this be any more of an issue than that west Africans genes
You don't get the difference between the Jewish white collar crime and Africans being good at sports ball?
That comparison doesnt make sense.
@silviosilver
history of Jews in Russia during the Bolshevik revolution? The kettle and fish fit right: Mr. Snger has been financing the
Holo-museums while destroying the lives of the millions in South America. Pushing the ball-point (!) written story of Anne Frank
upon American kids while immiserating hundreds of thousands of Argentian kids is morally ugly. Ugly.
As for antisemitism, the involvement of US leading zionists, and the Jewish State itself, in supporting Ukrainian banderites
(self-proclaimed neo-nazi) has buried the canard of antisemitism forever. There is no hope for the moral recovery of your Holobiz
Museums and "eternal victimhood" memes.
Actually we get the Jewish version of the history of Jews in Germany as we get the Jewish version of our own history – founding
to Trump. It is breathtaking how Jews, Semophiles and people who are intimidated by Jews and Semophiles have created how we understand
ourselves. This has been going on since Dec 7, 1941. There is almost no one left who remembers when stand up Euro Gentiles wrote
history
@annamaria
in a speech he gave at Brown in 1966, George Lincoln Rockwell addressed the role of Jews in the Russian Revolution -- you can
listen to the speech here –>
Brown link -- he covers
similar material in a 1967 speech at UCLA –>
UCLA link
.
One must take lessons from the great ruler Frederick the Great of Prussia about how to deal with Jewish scams. You see, Jewish
scams have a long history. And most of these Jewish scamsters donate a lot of money to Jewish organisations.
Well Frederick the Great came up with a novel and effective solution to all this. He just charged the official Jewish organisations
the amount in money in loss to Prussian society due to such scams. Guess What? The Jewish scams stopped. Totally stopped.
"Oy Vey" screamed the Jews, "All the money ended up in the hands of the cursed goyim and all our efforts and hard work in scamming
went to waste. "
Makes me wonder if Democracy is really a better form of government than Monarchy.
Joyce's article contends that the victims of these Jewish vulture capitalists are overwhelmingly goyim, while the ultimate
benefactors (through their charitable donations) are Jews. You never dispute, let alone refute, this contention. However, you
do contend that these vulture capitalists somehow benefit society as a whole (through some sort of economic "discipline" or whatever),
but resent the suggestion that they confine this beneficial discipline (like they confine their charitable donations) to Jews,
a suggestion you call "antisemitic".
Yeah, that is it. In college I knew a Brahmin intimately. I was struck by the contrast between her quiet classic WASP disdain
towards ordinary white conventionality and her near awe of what I thought of as Jewish vulgarity -chutzpah.
There was something ersatz Semitic in the original New England Puritanism = a sort of Jewish 1.0. Now the WASP's think the
Jews are better at their game than they are. They are right of course. The question is should anyone be playing that game.
Singer's fund provides nothing of value. They're just parasites.
We were talking about the nature of bonds. The fact bond/debt can be bought and sold does provide value – it makes it
more likely that the credit which business need to expand and to hire workers will be provided, and provided at a lower interest
rate. So the existence of the Singers of the world, troubling as it might be to you or me (in my case, given what he does with
his money), is best regarded as providing indirect value – in the sense that they make our credit system possible.
@silviosilver
thin air, then loaned out at interest and/or against real assets as collateral, and/or perhaps traded by 'vultures' -- or
the part of the "credit system" that burdens millions of young adults with debt in the form of student loans, which ultimately
is also money created out of nothing and loaned to them.
Within a few years, interest on the national debt will be the second largest federal expenditure, i.e. even greater than defense
spending -- always left unexplained is why the US, a sovereign entity with the authority to issue currency, has to borrow money
to run a deficit.
Fractional reserve banking (unstable and exploitative) and assignment of debt to assignees/purchasers (provided the borrower
has agreed to a covenant allowing this) are two separate issues. It is possible to have either one without the other. The idea
that you're released from your debt if your lender dies or moves to a far off city or gets worn out trying to collect or whatever
is a notion worthy of a junior high school juvenile delinquent. Also if national sovereignty means the right to welsh on debts,
then no one in his right mind will lend to a sovereign nation and then they cannot get credit.
(of course this will have consequences too; living beyond one's means indefinitely always does eventually).
Student loan debt is massively detrimental to affordable family formation -- I also see it as immoral to burden
young people in this way.
Multi-generational national indebtedness is profoundly immoral -- it's a disgrace that there is little to no recognition
of this, or outrage about what is going on.
@eah edit
system" that burdens millions of young adults with debt in the form of student loans, which ultimately is also money created
out of nothing and loaned to them.
That's much more a consequence of the prevailing American attitude towards higher education – that individuals should pay for
it rather than the state – than it is the monetary system.
If fractional reserve banking is nothing more than "creating money out of nothing," then don't you ever ask yourself how it
is that a bank could find itself in financial trouble? Why doesn't it just create some more money out of thin air and put itself
back in the black?
@eah ts, although
for individuals some are protected, or a repayment plan (for individuals) or a reorganization plan (for corporations.) It requires
the payment of often large legal fees. It's not equivalent to walking away (although sometimes it looks like close to the same
thing) or having the debt forgiven based on political pressure, and it doesn't have anything to do with whether any of the creditors
are assignees who bought the paper, or not.
Printing press finance just means that government, instead of private interests, defrauds the people. Edison was a great inventor
but hardly a sophisticated economic and /or political thinker.
@eah out better
than others. If paying $0.10 on the dollar automatically made you rich, the world would have a lot more billionaires than it does
now. The rate would quickly be bid up to $0.95 on the dollar in no time flat. Also, legal fees and other collection costs (towing
away or storing ships, etc.) need to be taken into account.
I suspect that Mr. Singer may use his political influence to get the US, and likely some other governments, to aid in the collections.
That is an issue in itself. That is where the ethical issue lies. As another poster mentioned, the way he uses his money (his
idea of the good of society) is also an issue.
The answer to your last sentence is that the government places limits through reserve requirements. If this were not so a run
on the bank could end the charade. Sometimes these runs still happen and the FDIC steps in. Unlike the government, the bank has
to redeem its paper (checks and passbooks) on demand. The government has not done this for private parties since 1933, or for
foreign governments since 1971. It can and does tell you to just continue circulating the paper, which creditors are required
to accept, no matter how watered down it is.
@Hibernian
it has full authority to do, instead of selling debt , taxpayers, including future generations of taxpayers, are nor
burdened with interest payments, nor with repayment of principal .
Edison was a great inventor but hardly a sophisticated economic and /or political thinker.
Sure bud, whatever you say -- the essential question here is, was he correct in his statement re debt issuance and who benefits
from it, also its disadvantages, vs dollar issuance? -- the answer is yes, he clearly was: it makes no sense for a government
to sell debt when it can just spend money .
@silviosilver
uch more a consequence of the prevailing American attitude towards higher education – that individuals should pay for it rather
than the state – than it is the monetary system.
Sure, right -- BOOM!, suddenly the "the prevailing American attitude towards higher education", also young people, just
changed, and within a generation or so, it was decided to exploit the hell out of them and burden them with huge amounts of
debt .
"LOL" -- you are naive.
Regardless of the etiology, student debt is immoral and something must be done about it.
Bankruptcy law, like other laws, limits the discretion of judges. Sure, in practice, this is aspirational. As is the notion
that some judges deviations from the law are motivated by fairness.
"LOL" -- yeah, "what's the difference?" -- at least in the case of a government spending money into existence, which it
has full authority to do, instead of selling debt, taxpayers, including future generations of taxpayers, are nor burdened with
interest payments, nor with repayment of principal.
A super iconoclast vis a vis businessmen, especially if they're Jewish, but a true believer that Government is the same
thing as The People, or at least represents them perfectly or almost perfectly.
it makes no sense for a government to sell debt when it can just spend money.
And it makes no sense to work, save, be frugal, borrow only as necessary, and pay back what you borrow, when you can write
bad checks oh wait Government is Divinely Anointed! It is of the People, by the People, and for the People!
Which one of us is being obtuse? I'll leave it as an exercise for the student.
So, can anyone tell my why Jewish people would want to fund homosexual causes? What benefit does it give them? I'm just beginning
to understand the mass migration thing, but still neither of these seem explicitly Jewish. Doesn't the Torah ban homosexuality?
Just wondering
Carnegie was born in 1836 in Dunfermline, Fife. His father was a handloom weaver and an active Chartist who marched for the
rights of the working man. So when Andrew went to sleep every night knowing he had starved, beaten and killed his factory workers,
he spent his $$$$ trying to assuage his conscience.
Andrew is not a hero, hero's don't kill their employees by starvation and shooting!
Despicable man, trying to pave his way to Heaven.
Similar to Mr. Bloomberg who states that his path to heaven is assured by his good works.
Carnegie was born in 1836 in Dunfermline, Fife. His father was a handloom weaver and an active Chartist who marched for the
rights of the working man. So when Andrew went to sleep every night knowing he had starved, beaten and killed his factory workers,
he spent his $$$$ trying to assuage his conscience.
Andrew is not a hero, hero's don't kill their employees by starvation and shooting!
Despicable man, trying to pave his way to Heaven.
Similar to Mr. Bloomberg who states that his path to heaven is assured by his good works.
This was the Frankfurt School's great insight. The best way to undermine a sense of nationalism is to divide the people through
the promotion of identity politics, including LGBTQ.
Some of what Paul Singer does with his money: create front organizations to recruit Christians in the effort to make the Middle
East safe for Israel, and the world safe for Jews:
This guy is competing for world's top butt goy. Unfortunately there is a lot of competition. The author, Robert Nicholson,
is President of Philos Project, a pro-Zionist "Christian" organization that is funded by Paul Singer.
The above tweet refers to this piece in the NY Post by Robert Nicholson, director of the 'Philos Project':
An interesting blog post from a few years ago (2015) re the sudden appearance of the 'Philos Project' -- even today it is difficult
to find info (eg financial) on this organization:
I had hoped to welcome 2020 with a optimistic post.
Alas, the current news cycle has thrown up little cause for optimism.
Instead, what has caught my eye today: 2019 closes with release of a new study showing the FDA's failure to police opioids manufacturers
fueled the opioids crisis.
This is yet another example of a familiar theme: inadequate regulation kills people: e.g. think Boeing. Or, on a longer term,
less immediate scale, consider the failure of the Environmental Protection Agency, in so many realms, including the failure to curb
emissions so as to slow the pace of climate change.
In the opioids case, we're talking about thousands and thousands of people.
On Monday, Jama
Internal Medicine published research concerning the US Food and Drug Administration's (FDA) program to reduce opioids abuse.
The FDA launched its risk evaluation and mitigation strategy – REMS – in 2012. Researchers examined nearly 10,000 documents, released
in response to a Freedom of Information ACT (FOA) request, to generate the conclusions published by JAMA.
In 2011, the F.D.A. began asking the makers of OxyContin and other addictive long-acting opioids to pay for safety training
for more than half the physicians prescribing the drugs, and to track the effectiveness of the training and other measures in
reducing addiction, overdoses and deaths.
But the F.D.A. was never able to determine whether the program worked, researchers at the Johns Hopkins Bloomberg School of
Public Health found in a new review, because the manufacturers did not gather the right kind of data. Although the agency's approval
of OxyContin in 1995 has long come under fire, its efforts to ensure the safe use of opioids since then have not been scrutinized
nearly as much.
The documents show that even when deficiencies in these efforts became obvious through the F.D.A.'s own review process, the
agency never insisted on improvements to the program, [called a REMS]. . .
The FDA's regulatory failure had serious public health consequences, according to critics of US opioids policy, as reported by
the NYT:
Dr. Andrew Kolodny, the co-director of opioid policy research at the Heller School for Social Policy and Management at Brandeis,
said the safety program was a missed opportunity. He is a leader of
a group of physicians who had encouraged the F.D.A.
to adopt stronger controls, and a frequent critic of the government's response to the epidemic.
Dr. Kolodny, who was not involved in the study, called the program "a really good example of the way F.D.A. has failed to regulate
opioid manufacturers. If F.D.A. had really been doing its job properly, I don't believe we'd have an opioid crisis today."
Now, as readers frequently emphasize in comments: pain management is a considerable problem – one I am all too well aware of,
as I watched my father succumb to cancer. He ultimately passed away at my parents' home.
Although these drugs "can be clinically useful among appropriately selected patients, they have also been widely oversupplied,
are commonly used nonmedically, and account for a disproportionate number of fatal overdoses," the authors write.
The FDA was unable, more than 5 years after it had instituted its study of the opioids program's effectiveness, to determine whether
it had met its objectives, and this may have been because prior assessments were not objective, according to CNN:
Prior analyses had largely been funded by drug companies, and a 2016 FDA advisory committee "noted methodological concerns
regarding these studies," according to the authors. An inspector general report also concluded in 2013 that the agency "lacks
comprehensive data to determine whether risk evaluation and mitigation strategies improve drug safety."
In addition to failing to evaluate the effective of the limited steps it had taken, the FDA neglected to take more aggressive
steps that were within the ambit of its regulatory authority. According to CNN:
"FDA has tools that could mitigate opioid risks more effectively if the agency would be more assertive in using its power to
control opioid prescribing, manufacturing, and distribution," said retired FDA senior executive William K. Hubbard in an
editorial that accompanied the study. "Instead of bold, effective action, the FDA has implemented the Risk Evaluation and
Mitigation Strategy programs that do not even meet the limited criteria set out by the FDA."
One measure the FDA could have taken, according to Hubbard: putting restrictions on opioid distribution.
"Restricting opioid distribution would be a major decision for the FDA, but it is also likely to be the most effective policy
for reducing the harm of opioids," said Hubbard, who spent more than three decades at the agency and oversaw initiatives in areas
such as regulation, policy and economic evaluation.
Perhaps the Johns Hopkins study will spark moves to reform the broken FDA, so that it can once again serve as an effective regulator.
This could perhaps be something we can look forward to achieving in 2020 (although I won't hold my breath).
Or, perhaps if enacting comprehensive reform is too overwhelming, especially with a divided government, as a starting point: can
we agree to stop allowing self-interested industries to finance studies meant to assess the effectiveness of programs to regulate
that very same industry? Please?
"... For corporate Democrats and their profuse media allies, the approach of disparaging and minimizing Bernie Sanders in 2019 didn't work. In 2020, the next step will be to trash him with a vast array of full-bore attacks. ..."
"... When the Bernie campaign wasn't being ignored by corporate media during 2019, innuendos and mud often flew in his direction. But we ain't seen nothing yet. ..."
A central premise of conventional media wisdom has collapsed. On Thursday, both the
New York Times
and
Politico
published
major articles reporting that Bernie Sanders really could win the Democratic presidential nomination. Such acknowledgments
will add to the momentum of the Bernie 2020 campaign as the new year begins -- but they foreshadow a massive escalation of
anti-Sanders misinformation and invective.
Throughout 2019, corporate media routinely asserted that the Sanders campaign had
little chance of winning the nomination. As is so often the case, journalists were echoing each other more than paying
attention to grassroots realities. But now, polling numbers and other
indicators
on
the ground are finally sparking very different headlines from the media establishment.
Those stories, and others likely to follow in copycat news outlets, will heighten the energies of Sanders supporters and
draw in many wavering voters. But the shift in media narratives about the Bernie campaign's chances will surely boost the
decibels of alarm bells in elite circles where dousing the fires of progressive populism is a top priority.
For corporate Democrats and their profuse media allies, the approach of
disparaging
and
minimizing Bernie Sanders in 2019 didn't work. In 2020, the next step will be to trash him with a vast array of full-bore
attacks.
Along the way, the corporate media will occasionally give voice to some Sanders defenders and supporters. A few
establishment Democrats will decide to make nice with him early in the year. But the overwhelming bulk of Sanders media
coverage -- synced up with the likes of such prominent corporate flunkies as Rahm Emanuel and Neera Tanden as well as Wall Street
Democrats accustomed to ruling the roost in the party -- will range from condescending to savage.
When the Bernie campaign wasn't being
ignored
by
corporate media during 2019, innuendos and mud often flew in his direction. But we ain't seen nothing yet.
With so much at stake -- including the presidency and the top leadership of the Democratic Party -- no holds will be barred. For
the forces of corporate greed and the military-industrial complex, it'll be all-out propaganda war on the Bernie campaign.
While reasons for pessimism are abundant, so are ample reasons to understand that
a
Sanders presidency is a real possibility
. The last places we should look for political realism are corporate media outlets
that distort options and encourage passivity.
Bernie is fond of quoting a statement from Nelson Mandela: "It always seems impossible until it is done."
From the grassroots, as 2020 gets underway, the solution should be clear: All left hands on deck.
Elections aren't real. Democrats will nominate Joe Biden to lose the election. Trump will remain as fascist
strongman and the dems will continue to blame his neoconservative policies on his white trash constituency.
Bernie serves a few important functions.
1. he keeps the radicals from leaving the plantation and going 3rd party.
2. his promotion of progressive policies will make Biden less popular and help him lose to Trump
3. Bernie and his "socialism" can then be blamed for losing the election to Trump
Unfortunately this comment will be buried in this monstrosity of a thread- now at over 300 comments
with only about a third of them having a much relevance.
You might consider re-posting in reply
to one of the foremost comments. Your simple realism will certainly not be well received during the
campaign hallucinations.
I've often wondered how it is people could believe the elections could have any positive and
lasting impact on their lives if they have been through a couple of cycles. Do they not also wonder
how it is that these election (marketing) campaigns now stretch out for well over a year nowadays
demanding everyone's political attention, energy and resources. To say it is a colossal waste does
not quite capture the enormity of the mind job being to people.
Your simple realism will certainly not be well received during the campaign hallucinations.
Yeah, yeah, sure, sure. You "realists" who are true believers that you have the Truth and have a calling to
preach the Truth absolutely must stand against the unwashed masses who claim that your "reality" isn't even
intersubjectively verifiable, much less dialectical & material [eta
& historical
].
I quite enjoyed what SteelPirate/LaborSolidarity had to say about you attempting to gain a vanguard
following by trolling lib-prog sites.
Never pay attention to anyone who claims what's "real" and what isn't. Politics certainly doesn't
exist in the realm of an objective, concrete, physical, naturalistic, materialistic reality which is
shared by a consensus of rational observers. At best, politics deals with intersubjectively verifiable
social phenomena. Thus, politics is mostly idealistic in the belief that each mind generates its own
reality.
This realization is the topic of intersubjective verifiability, as recounted, for example, by Max Born
(1949, 1965)
Natural Philosophy of Cause and Chance
, who points out that all knowledge, including
natural or social science, is also subjective. p. 162: "Thus it dawned upon me that fundamentally
everything is subjective, everything without exception. That was a shock."
Noam Chomsky on Bernie Sanders's Chances of Success- "...the chances he can be elected are pretty small."
(Waiting with bated breath for copious downvotes by those who hate the truth and hate reality).
Most of who support Sanders know that his presidency will involve an uphill battle. Chomsky is
being realistic.
But there really is no better option for meaningful change working within the
political system than supporting Sanders. it is also important to note that "Our Revolution" has
energized many young activists, encouraging them to continue the fight. This goes beyond politics
to social and economic issues. If Sanders leaves us with a movement, this may turn out to be more
important than the presidency in the long run.
Keep working for effective moral and economic justice and democracy!
Well, I have said this several times, it's not the microscopic left that you need to convince, it's
the majority of self-identifying Democrats not supporting Sanders that you need to convince. I am
repelled by the Democratic Party, but there are millions who identify as Democrats and many are
proud of it. You need to convince them, not us.
Yes, although I don't think that those who support a Leftist agenda--whether you actually call them
Leftists or not--are quite so microscopic a group as you imply. But you don't need to convince me
or most others here (probably) that Sanders isn't perfect, or that it will be difficult for him to
be elected president. We already know; we simply consider him the best option within this context
of voting.
Have you ever thought of turning your approach to systemic commentary (which is valid
and interesting, BTW, I'm not discounting it) around and saying what candidates you support-- in
this context being discussed of voting-- instead of which ones you don't? And then explaining why
such support would be effective?
I would say that what is wrong with the world is more a fault of the economic and political
system than of Sanders alone--who not only plays small part in causing what is wrong, but a
significant part in trying to correct it. Yes, he works within the system. That is a given. It may
be, as Chris Hedges thinks, that there is no hope working within the system. But Noam Chomsky's
approach also bears serious consideration that even Hedges doesn't discount. Voting will only be a
small part of what brings about change, but it may make some slight difference--if you can stomach
it. And it only takes a small amount of time.
"In a system of immense power, small differences can translate into large outcomes."
I don't see much of an argument that Sanders will be no better as president than Trump (and if
you think so, I'd like to hear you argue it). I suspect you find the compromise unpalatable. I can
understand that. I, too, draw the line at a certain point. I couldn't vote for HRC.
Yes, Sanders isn't perfect. Chomsky also said another important thing: "We're all compromised."
Everyone who is a citizen of the US is compromised, and bears some measure of responsibility for
the military interventions undertaken by our government. Perhaps we should renounce our
citizenship, refuse to pay taxes, etc. But most of us don't -- not even those of us committed to
activist work in other ways -- significant ways -- to make things better.
But you don't need to convince me or most others here (probably) that Sanders isn't perfect
-for me it isn' that he's not perfect, it's that I think he sucks
"In a system of immense power, small differences can translate into large outcomes."
-funny, that's a favorite line of Democrats
I get that, but it doesn't negate that Sanders's chances are next to nil.
Your suggestion of me signaling whom I support would fall on deaf ears around here. I have said
this many times- I will probably for the Green Party candidate or the Socialist Equality Party
candidate. If only a Democrat and Republican appear on the ballot then I would refuse to vote even
if I had to pay a fine. I am not in the habit of telling anyone whom to vote for unless asked.
Before a 3rd can succeed, the fantasy that the fix can come through the Democrats needs to be
destroyed. Not to worry, in due time it will be obvious.
My guess/bet is that
V4V
believes that the truth "We're all compromised" doesn't apply to him.
He sees himself as a truth-knower and a truth-teller.
He won't commit to logical argumentation.
He'll preach the truth to you.
I saw this video long ago--and agreed with it. But though Sanders' chances are small, they're still
vastly larger than the NONEXISTENT chances of success of the purist, "Born to Lose" left. Why not just
admit that you've totally given up and simply like to spent your time bitching and criticizing those of
us with some (albeit small) hope?
simply like to spent your time bitching and criticizing those of us with some (albeit small) hope?
-straw man
That isn't what I do because I couldn't care less whom Democrats support and vote for. Typically, I post
some unpleasant truth about Sanders, like his lackluster polling numbers or his support for neoliberal
warmongers and sit back and watch the ad hominems and downvotes roll in. I am not normally on the attack, I am
usually on the receiving end.
I admit that I see this forum as a form of entertainment. I admit I have zero expectation that someone to my
liking will be elected president and that the system is going to change anytime soon. Do I believe it possible?
Yes, I believe it is possible, I just don't believe it possible using the corrupt, Democratic Party as a
vehicle and that's where we differ.
And that the crux of our issue- you believe the Democratic Party can be used a vehicle to convert the
CIA/Wall Street/War Inc. Democrats into the peoples' party, and I do not. If the needed changes are ever to
arrive, it will be in spite of the Democrats not because of them. I hope you stick around because in due time
I'll be telling you, "Told ya so."
The problem with your position is that, unlike Sanders, you don't seem to understand that a third
candidate party candidate hasn't a snowball's chance in hell of being president unless if s/he
somehow gets more electoral votes that
both
the major parties combined. If not, it goes to
the house, and in the current partisan atmosphere, would be decided for the candidate of the House
majority.
The major parties have a death-grip on the presidency while the electoral college exists.
You don't seem to understand that Sanders has a snowball's chance in hell of being the Democratic
Party candidate for many reasons including the DNC arguing in court it is a private corporation and
can legally rig primary and the trusty superdelegates for Biden.
What I propose is a movement
outside the Democratic Party in inside it. I believe any attempt to reform the Democratic Party is
doomed to fail. All this whistling in the dark over Sanders is a distraction and a kicking the can
down the road to the time you Democrats
finally
realize it isn't going to work. You
obviously didn't learn it in 2016, and I would be surprised if you learn it once Sanders tanks and
begins campaigning for Biden just like he did Clinton. I will promise this, I'll say, "I told ya
so" in a matter of months. That's okay, play it again, Sam.
People believe they need others to tell them what to do and give them the illusion somebody cares about
them and has their best interests at heart. That's an archetype in the brain that goes back to our
baby/childhood when we were dependent on our caregivers for sustenance, comfort and life itself.That's
where the original concept of needing "leaders" comes from. But, what happens is psyco/sociopaths see
this weakness in humanity and force their way to the top, to herd and exploit the gullible sheeple for
their own agendas and selfish interests. No matter who rises to the top, she/he got their through the
same system that's been going on since tribes had their chief; chief's lieutenant and witch
doctor/shaman. Those three keep the tribe in line with their own desires. Chief through brute force, his
lieutenant through information and witch doctor through religion and "spiritual" services; and all three
require tribute and fees from the rest of the tribe. So, you will see, regardless of who the next POTUS
will be, that same structure, although more complex today, will repeat itself. New boss/old boss, same
ol' same ol'. All power has to be returned to the people at the local level before Wash. starts WWIII.
But, if that happens, at least we won't have to worry about global warming with a nuclear winter after
the bombs drop.
As usual, I find your analysis and commentary honest and accurate. However, I do take exception to your pulling out
these canards:
"Trump's contempt of Congress and attempt to get Volodymyr Zelensky, the Ukrainian president, to open an
investigation of Joe Biden and his son, Hunter, in exchange for almost $400 million in U.S. military aid and allowing
Zelensky to visit the White House are impeachable offenses"
Trump has certain executive privileges and him being
guilty of contempt of Congress should be up to the Supreme Court to decide. Jonathan Turley in his testimony made
that quite clear. Military aid was never mentioned in the phone call. Zelensky was unaware aid would be withheld. So
if Trump were using the money as a means to induce Zelensky to do those favors, it was a totally botched one. To
quote Dr. Strangelove, "The whole point of the doomsday machine is lost...if you keep it a secret!"
New avenues for accountability and oversight became possible in Washington, D.C., in 2019, following the
election of a new Democratic Party majority in the House (and the most diverse Congress ever) in the 2018
midterms. As a result, Democrats took hold of the subpoena power that rests in the House of Representatives,
along with the power to set the agenda across congressional committees. As a result, 2019 has been full of
important moments for congressional oversight of both the Trump administration and private business. Here
are five of the most important moments in congressional oversight in 2019.
1. Betsy DeVos, Are You "Too Corrupt" or "Too Incompetent"? ...
2. Big Bank CEOs Are Stumped by Simple Budgets ...
3. Wells Fargo Announces Plan to Divest From Private Prisons in Congressional Testimony ...
4. Rep. Ilhan Omar vs. Elliott Abrams ...
5. Voting to Impeach the President ...
The only people who lie and obfuscate facts as much as Trump and his GOP cult are neo progressive demagogues
and propaganda buffs like Chris 'regime-change-in-America' Hedges.
Absolutely bush should have been impeached, convicted, removed and executed for war crimes and mass murder.
But because he wasn't doesn't mean that our orange Fuhrer shouldn't be.
He is the most dangerous authoritarian propagandist and threat to this country since Hitler.
NObama was a horrible POTUS for the 99% and is THE reason why we have trump, but he didn't poison every aspect
of the government and everything else like your orange Fuhrer is doing, which is the exact same tactic that
Hitler used to create Nazi Germany.
The generic Left is ignoring this aspect of the Trump impeachment circus . The whole farce IS political. Now
Senator Lisa Murkowski wants her Republican Party to rise above politics ( and do the wrong thing ? ). In the
past three years when did the Democrat Party ever rise above politics ? Politics USA is always CLASS politics,
always IMPERIALIST , MILITARIST politics . All the " liberal " Democrats have been slobbering over the
UN-ELECTED shadow government of the United States , the National Security Police State , slobbering over FBI,
CIA bureaucrats , uniformed officials of the Pentagon War Crimes Machine . Join them ?
This Senator Lisa
Murkowski -no surprise - is in good standing with the Israel Lobby collectively determined to nullify the 2016
presidential election . NEWS clip :
[ "There are about 6 million Jewish people living in America, so as a percentage it's quite small, but in
terms of influence its quite big," Farage said. Farage seemed to question why Israel was not facing
election-meddling accusations, saying Israeli groups "have a voice within American politics" but "I don't think
anybody is suggesting that the Israeli government tried to affect the result of the American elections."]
Did not the Kafkaesque Trump impeachment hearings look and sound like Old Yiddish Theater soap opera ? How
many working class Christian Americans have heartfelt moral and cultural ties to the Ukraine of all places, now
celebrating its first Jewish friend of Zionist Apartheid Israel president ? Who in the USA authorized this
character to wage a proxy war against post-communist Russia ? WE THE PEOPLE ?
Guess WHO is promoting the HATE RUSSIA, New McCarthyism ?
$748 billion in 2020 for the military death machine equals $23 MILLION A SECOND.
How many schools or
hospitals could have been built, how many roads or bridges repaired, how many students educated with the money
the MIC has squandered in the few seconds it has taken me to write this?
We are destroying our people from the inside out. This is treason.
A central premise of conventional media wisdom has collapsed. On Thursday, both the
New York Times
and
Politico
published
major articles reporting that Bernie Sanders really could win the Democratic presidential nomination. Such acknowledgments
will add to the momentum of the Bernie 2020 campaign as the new year begins -- but they foreshadow a massive escalation of
anti-Sanders misinformation and invective.
Throughout 2019, corporate media routinely asserted that the Sanders campaign had
little chance of winning the nomination. As is so often the case, journalists were echoing each other more than paying
attention to grassroots realities. But now, polling numbers and other
indicators
on
the ground are finally sparking very different headlines from the media establishment.
Those stories, and others likely to follow in copycat news outlets, will heighten the energies of Sanders supporters and
draw in many wavering voters. But the shift in media narratives about the Bernie campaign's chances will surely boost the
decibels of alarm bells in elite circles where dousing the fires of progressive populism is a top priority.
For corporate Democrats and their profuse media allies, the approach of
disparaging
and
minimizing Bernie Sanders in 2019 didn't work. In 2020, the next step will be to trash him with a vast array of full-bore
attacks.
Along the way, the corporate media will occasionally give voice to some Sanders defenders and supporters. A few
establishment Democrats will decide to make nice with him early in the year. But the overwhelming bulk of Sanders media
coverage -- synced up with the likes of such prominent corporate flunkies as Rahm Emanuel and Neera Tanden as well as Wall Street
Democrats accustomed to ruling the roost in the party -- will range from condescending to savage.
When the Bernie campaign wasn't being
ignored
by
corporate media during 2019, innuendos and mud often flew in his direction. But we ain't seen nothing yet.
With so much at stake -- including the presidency and the top leadership of the Democratic Party -- no holds will be barred. For
the forces of corporate greed and the military-industrial complex, it'll be all-out propaganda war on the Bernie campaign.
While reasons for pessimism are abundant, so are ample reasons to understand that
a
Sanders presidency is a real possibility
. The last places we should look for political realism are corporate media outlets
that distort options and encourage passivity.
Bernie is fond of quoting a statement from Nelson Mandela: "It always seems impossible until it is done."
From the grassroots, as 2020 gets underway, the solution should be clear: All left hands on deck.
Elections aren't real. Democrats will nominate Joe Biden to lose the election. Trump will remain as fascist
strongman and the dems will continue to blame his neoconservative policies on his white trash constituency.
Bernie serves a few important functions.
1. he keeps the radicals from leaving the plantation and going 3rd party.
2. his promotion of progressive policies will make Biden less popular and help him lose to Trump
3. Bernie and his "socialism" can then be blamed for losing the election to Trump
Unfortunately this comment will be buried in this monstrosity of a thread- now at over 300 comments
with only about a third of them having a much relevance.
You might consider re-posting in reply
to one of the foremost comments. Your simple realism will certainly not be well received during the
campaign hallucinations.
I've often wondered how it is people could believe the elections could have any positive and
lasting impact on their lives if they have been through a couple of cycles. Do they not also wonder
how it is that these election (marketing) campaigns now stretch out for well over a year nowadays
demanding everyone's political attention, energy and resources. To say it is a colossal waste does
not quite capture the enormity of the mind job being to people.
Your simple realism will certainly not be well received during the campaign hallucinations.
Yeah, yeah, sure, sure. You "realists" who are true believers that you have the Truth and have a calling to
preach the Truth absolutely must stand against the unwashed masses who claim that your "reality" isn't even
intersubjectively verifiable, much less dialectical & material [eta
& historical
].
I quite enjoyed what SteelPirate/LaborSolidarity had to say about you attempting to gain a vanguard
following by trolling lib-prog sites.
Never pay attention to anyone who claims what's "real" and what isn't. Politics certainly doesn't
exist in the realm of an objective, concrete, physical, naturalistic, materialistic reality which is
shared by a consensus of rational observers. At best, politics deals with intersubjectively verifiable
social phenomena. Thus, politics is mostly idealistic in the belief that each mind generates its own
reality.
This realization is the topic of intersubjective verifiability, as recounted, for example, by Max Born
(1949, 1965)
Natural Philosophy of Cause and Chance
, who points out that all knowledge, including
natural or social science, is also subjective. p. 162: "Thus it dawned upon me that fundamentally
everything is subjective, everything without exception. That was a shock."
Noam Chomsky on Bernie Sanders's Chances of Success- "...the chances he can be elected are pretty small."
(Waiting with bated breath for copious downvotes by those who hate the truth and hate reality).
Most of who support Sanders know that his presidency will involve an uphill battle. Chomsky is
being realistic.
But there really is no better option for meaningful change working within the
political system than supporting Sanders. it is also important to note that "Our Revolution" has
energized many young activists, encouraging them to continue the fight. This goes beyond politics
to social and economic issues. If Sanders leaves us with a movement, this may turn out to be more
important than the presidency in the long run.
Keep working for effective moral and economic justice and democracy!
Well, I have said this several times, it's not the microscopic left that you need to convince, it's
the majority of self-identifying Democrats not supporting Sanders that you need to convince. I am
repelled by the Democratic Party, but there are millions who identify as Democrats and many are
proud of it. You need to convince them, not us.
Yes, although I don't think that those who support a Leftist agenda--whether you actually call them
Leftists or not--are quite so microscopic a group as you imply. But you don't need to convince me
or most others here (probably) that Sanders isn't perfect, or that it will be difficult for him to
be elected president. We already know; we simply consider him the best option within this context
of voting.
Have you ever thought of turning your approach to systemic commentary (which is valid
and interesting, BTW, I'm not discounting it) around and saying what candidates you support-- in
this context being discussed of voting-- instead of which ones you don't? And then explaining why
such support would be effective?
I would say that what is wrong with the world is more a fault of the economic and political
system than of Sanders alone--who not only plays small part in causing what is wrong, but a
significant part in trying to correct it. Yes, he works within the system. That is a given. It may
be, as Chris Hedges thinks, that there is no hope working within the system. But Noam Chomsky's
approach also bears serious consideration that even Hedges doesn't discount. Voting will only be a
small part of what brings about change, but it may make some slight difference--if you can stomach
it. And it only takes a small amount of time.
"In a system of immense power, small differences can translate into large outcomes."
I don't see much of an argument that Sanders will be no better as president than Trump (and if
you think so, I'd like to hear you argue it). I suspect you find the compromise unpalatable. I can
understand that. I, too, draw the line at a certain point. I couldn't vote for HRC.
Yes, Sanders isn't perfect. Chomsky also said another important thing: "We're all compromised."
Everyone who is a citizen of the US is compromised, and bears some measure of responsibility for
the military interventions undertaken by our government. Perhaps we should renounce our
citizenship, refuse to pay taxes, etc. But most of us don't -- not even those of us committed to
activist work in other ways -- significant ways -- to make things better.
But you don't need to convince me or most others here (probably) that Sanders isn't perfect
-for me it isn' that he's not perfect, it's that I think he sucks
"In a system of immense power, small differences can translate into large outcomes."
-funny, that's a favorite line of Democrats
I get that, but it doesn't negate that Sanders's chances are next to nil.
Your suggestion of me signaling whom I support would fall on deaf ears around here. I have said
this many times- I will probably for the Green Party candidate or the Socialist Equality Party
candidate. If only a Democrat and Republican appear on the ballot then I would refuse to vote even
if I had to pay a fine. I am not in the habit of telling anyone whom to vote for unless asked.
Before a 3rd can succeed, the fantasy that the fix can come through the Democrats needs to be
destroyed. Not to worry, in due time it will be obvious.
My guess/bet is that
V4V
believes that the truth "We're all compromised" doesn't apply to him.
He sees himself as a truth-knower and a truth-teller.
He won't commit to logical argumentation.
He'll preach the truth to you.
I saw this video long ago--and agreed with it. But though Sanders' chances are small, they're still
vastly larger than the NONEXISTENT chances of success of the purist, "Born to Lose" left. Why not just
admit that you've totally given up and simply like to spent your time bitching and criticizing those of
us with some (albeit small) hope?
simply like to spent your time bitching and criticizing those of us with some (albeit small) hope?
-straw man
That isn't what I do because I couldn't care less whom Democrats support and vote for. Typically, I post
some unpleasant truth about Sanders, like his lackluster polling numbers or his support for neoliberal
warmongers and sit back and watch the ad hominems and downvotes roll in. I am not normally on the attack, I am
usually on the receiving end.
I admit that I see this forum as a form of entertainment. I admit I have zero expectation that someone to my
liking will be elected president and that the system is going to change anytime soon. Do I believe it possible?
Yes, I believe it is possible, I just don't believe it possible using the corrupt, Democratic Party as a
vehicle and that's where we differ.
And that the crux of our issue- you believe the Democratic Party can be used a vehicle to convert the
CIA/Wall Street/War Inc. Democrats into the peoples' party, and I do not. If the needed changes are ever to
arrive, it will be in spite of the Democrats not because of them. I hope you stick around because in due time
I'll be telling you, "Told ya so."
The problem with your position is that, unlike Sanders, you don't seem to understand that a third
candidate party candidate hasn't a snowball's chance in hell of being president unless if s/he
somehow gets more electoral votes that
both
the major parties combined. If not, it goes to
the house, and in the current partisan atmosphere, would be decided for the candidate of the House
majority.
The major parties have a death-grip on the presidency while the electoral college exists.
You don't seem to understand that Sanders has a snowball's chance in hell of being the Democratic
Party candidate for many reasons including the DNC arguing in court it is a private corporation and
can legally rig primary and the trusty superdelegates for Biden.
What I propose is a movement
outside the Democratic Party in inside it. I believe any attempt to reform the Democratic Party is
doomed to fail. All this whistling in the dark over Sanders is a distraction and a kicking the can
down the road to the time you Democrats
finally
realize it isn't going to work. You
obviously didn't learn it in 2016, and I would be surprised if you learn it once Sanders tanks and
begins campaigning for Biden just like he did Clinton. I will promise this, I'll say, "I told ya
so" in a matter of months. That's okay, play it again, Sam.
People believe they need others to tell them what to do and give them the illusion somebody cares about
them and has their best interests at heart. That's an archetype in the brain that goes back to our
baby/childhood when we were dependent on our caregivers for sustenance, comfort and life itself.That's
where the original concept of needing "leaders" comes from. But, what happens is psyco/sociopaths see
this weakness in humanity and force their way to the top, to herd and exploit the gullible sheeple for
their own agendas and selfish interests. No matter who rises to the top, she/he got their through the
same system that's been going on since tribes had their chief; chief's lieutenant and witch
doctor/shaman. Those three keep the tribe in line with their own desires. Chief through brute force, his
lieutenant through information and witch doctor through religion and "spiritual" services; and all three
require tribute and fees from the rest of the tribe. So, you will see, regardless of who the next POTUS
will be, that same structure, although more complex today, will repeat itself. New boss/old boss, same
ol' same ol'. All power has to be returned to the people at the local level before Wash. starts WWIII.
But, if that happens, at least we won't have to worry about global warming with a nuclear winter after
the bombs drop.
As usual, I find your analysis and commentary honest and accurate. However, I do take exception to your pulling out
these canards:
"Trump's contempt of Congress and attempt to get Volodymyr Zelensky, the Ukrainian president, to open an
investigation of Joe Biden and his son, Hunter, in exchange for almost $400 million in U.S. military aid and allowing
Zelensky to visit the White House are impeachable offenses"
Trump has certain executive privileges and him being
guilty of contempt of Congress should be up to the Supreme Court to decide. Jonathan Turley in his testimony made
that quite clear. Military aid was never mentioned in the phone call. Zelensky was unaware aid would be withheld. So
if Trump were using the money as a means to induce Zelensky to do those favors, it was a totally botched one. To
quote Dr. Strangelove, "The whole point of the doomsday machine is lost...if you keep it a secret!"
New avenues for accountability and oversight became possible in Washington, D.C., in 2019, following the
election of a new Democratic Party majority in the House (and the most diverse Congress ever) in the 2018
midterms. As a result, Democrats took hold of the subpoena power that rests in the House of Representatives,
along with the power to set the agenda across congressional committees. As a result, 2019 has been full of
important moments for congressional oversight of both the Trump administration and private business. Here
are five of the most important moments in congressional oversight in 2019.
1. Betsy DeVos, Are You "Too Corrupt" or "Too Incompetent"? ...
2. Big Bank CEOs Are Stumped by Simple Budgets ...
3. Wells Fargo Announces Plan to Divest From Private Prisons in Congressional Testimony ...
4. Rep. Ilhan Omar vs. Elliott Abrams ...
5. Voting to Impeach the President ...
The only people who lie and obfuscate facts as much as Trump and his GOP cult are neo progressive demagogues
and propaganda buffs like Chris 'regime-change-in-America' Hedges.
Absolutely bush should have been impeached, convicted, removed and executed for war crimes and mass murder.
But because he wasn't doesn't mean that our orange Fuhrer shouldn't be.
He is the most dangerous authoritarian propagandist and threat to this country since Hitler.
NObama was a horrible POTUS for the 99% and is THE reason why we have trump, but he didn't poison every aspect
of the government and everything else like your orange Fuhrer is doing, which is the exact same tactic that
Hitler used to create Nazi Germany.
The generic Left is ignoring this aspect of the Trump impeachment circus . The whole farce IS political. Now
Senator Lisa Murkowski wants her Republican Party to rise above politics ( and do the wrong thing ? ). In the
past three years when did the Democrat Party ever rise above politics ? Politics USA is always CLASS politics,
always IMPERIALIST , MILITARIST politics . All the " liberal " Democrats have been slobbering over the
UN-ELECTED shadow government of the United States , the National Security Police State , slobbering over FBI,
CIA bureaucrats , uniformed officials of the Pentagon War Crimes Machine . Join them ?
This Senator Lisa
Murkowski -no surprise - is in good standing with the Israel Lobby collectively determined to nullify the 2016
presidential election . NEWS clip :
[ "There are about 6 million Jewish people living in America, so as a percentage it's quite small, but in
terms of influence its quite big," Farage said. Farage seemed to question why Israel was not facing
election-meddling accusations, saying Israeli groups "have a voice within American politics" but "I don't think
anybody is suggesting that the Israeli government tried to affect the result of the American elections."]
Did not the Kafkaesque Trump impeachment hearings look and sound like Old Yiddish Theater soap opera ? How
many working class Christian Americans have heartfelt moral and cultural ties to the Ukraine of all places, now
celebrating its first Jewish friend of Zionist Apartheid Israel president ? Who in the USA authorized this
character to wage a proxy war against post-communist Russia ? WE THE PEOPLE ?
Guess WHO is promoting the HATE RUSSIA, New McCarthyism ?
$748 billion in 2020 for the military death machine equals $23 MILLION A SECOND.
How many schools or
hospitals could have been built, how many roads or bridges repaired, how many students educated with the money
the MIC has squandered in the few seconds it has taken me to write this?
We are destroying our people from the inside out. This is treason.
The article bounces back and forth between two completely different fields: private equity
and distressed debt funds. The latter is completely defensible. A lot of bondholders,
probably the majority, cannot hold distressed or defaulted debt. Insurance companies often
can't by law. Bond mutual funds set out in their prospectuses they don't invest in anything
rated lower than A, AA, or whatever. Even those allowed to hold distressed debt don't want
the extra costs involved with doing so, such as carefully following bankruptcy proceedings
and dealing with delayed and irregular payments.
The author is not a finance expert but he correctly spotlights flaws of so-called 'predatory
capitalism' which is disproportionately Jewish.
Private equity is rife with vices like asset-stripping and looting e.g Eddie Lampert
('Jewishness' member) plus El Trumpo appointee Steven Mnuchin at Sears.
Vulture funds often load all sorts of costs, even frivolous ones, and extra interest charges
on the original debt to maximize profit.
Some countries have the Duplum rule which limits the amount you are liable to a creditor
when you default on a debt.
@Robjil
ssociates, was overwhelmingly effective. Before a crucial shareholder vote on the Lee's
planned merger, Samsung Securities CEO Yoon Yong-am said:
"We should score a victory by a big margin in the first battle, in order to take the
upper hand in a looming war against Elliott, and keep other speculative hedge funds from
taking short-term gains in the domestic market."
When the vote finally took place a few days ago, a conclusive 69.5% of Samsung
shareholders voted in favor of the Lee proposal, leaving Elliott licking its wounds and
complaining about the "patriotic marketing" of those behind the merger.
@J
Adelman perpetual victim .everyone hates me without a reason. My sin is greater than I
can bear (Cain) everyone who comes across me will kill me. I spend my time wandering the
earth (boo ho). And despite slaying your brother you are accorded divine protection.
Jesus said (paraphrasing here) that if the unclean spirit is cast out of a man and is not
replaced with something wholesome he takes "seven other spirits" into himself and becomes
totally insane. You did this to yourself and you will realize that your problem is no longer
with man but with God himself. Jacob the deceiver has wrestled all his life against his
fellow man and triumphed but now he will confront God himself. Get ready to meet your Maker
and see how far your excuses will get you with the Almighty.
@J
Adelman nder. Jewish business behavior has a retarding effect on societies. It's
prominent, large, rapacious and extremely selfish.
As long as Jews made their money then fuck everybody else.
Yes, it's unfair when innocent Jews suffer. When the actions of other members of it's DNA
choose schemes and dishonorable ways to make money it's going to happen.
Stop acting like innocent victims all the time. This narcissistic stance might explain why
Jews are hated seemingly everywhere. Relationships with narcissists are no fun and the means
necessary to break free are often hurtful and unfortunate for everyone involved.
Jews see themselves as the ingroup, and the "goyim" as the outgroup. Since Whites are the
"outgroup" it's not just acceptable, but praiseworthy, to exploit them. To "beat" them at
war.
The problem is that Whites wrongly do not see Jews as an outgroup – something that
Jews themselves take great pains to discourage via their various front groups like the
ADL.
There is no "technical" fix, there is no objective "system" that can change this dynamic.
There is no "level playing field."
Whites need to ostracize Jews at all levels. Boycott, Divest and Sanction – not just
their apartheid regime of Jew bigotry in Zionist-occupied Palestine, but at every level of
society, business, civil institutions, etc.
Jews are destroying the world. Everywhere they go, they leave behind nations in ruins.
Look at Europe, Africa and the Americas, Jews have left their ugly footprints. Corruption,
prostitution, drugs and human trafficking are their trade.
@Just
passing through obs time and time again throughout their history, to the point bishops
and priests would harbor Jews in the cathedrals and lock the doors before the peasants could
arrest them.
Indeed, the infighting among Whites promoted by the likes of Jones is yet again another
assist from Catholic powers to their partners, the Jews.
The popular "neo-reactionary/NRx" movement, started by the Ashkenazi Curtis Yarvin, is yet
another "right-wing" fad that blames Calvinists for all the problems in the world.
Jews are blameless, yet again another White ethnicity/religion is at fault.
No wonder Jews get away with what they do. Whites are too busy infighting over false
history demonizing various rival cults.
So, the "vultures" flew out to the West after devouring the Russian empire and now with
the help of the likes of the homeboy or more like a two bit whore, Ben Sasse, they've
descended on America and have started gutting it out.
Where will they fly next? White Christians don't want them and black/brown Muslims can't
stand them but perhaps China is their next destination being that they have shipped most of
the jobs out there and the whole lot of them are marrying "Chinese-American" women in droves
for good measure.
In the coming battle of the titans, the one who's name can't be pronounced, viz. Yahweh,
hopefully has better guns than Jehovah and Allah, for it sure is gonna need it when the
latter two gang up on it maybe Buddha will give it a helping hand being that they're
practically in-laws now!
@Father
O'Hara ians and Chinese (South Asians) are the richest in both countries (except for Jews
of course).
What I have found is that these two groups come from a debt-averse culture, their kids
actually live with their parents until they have saved enough money for a house and other
such things required to start a family.
Whites meanwhile are WAY to trusting of these faceless financial institutions, they get
into debt very easily and thus become slaves, if you have kids, the first thing you should
educate them about is finance and debt, don't throw them out to the dogs either, it's tragic
to see some getting into debt and then having other problems like drugs and alcohol
addictions.
Wow what a confused mess. Here's a summary: Vulture capitalism is bad for no particular
reason but only an evil anti-Semite (like you) would dare criticize capitalism.
I think the term "vulture capitalism" is calumnious to vultures, who, as carrion birds,
perform a useful and purifying function in nature.
The Jews as a collective, i.e., the Jews who identify as such, concur in the death
sentence of Christ handed down by their Sanhedrin and espouse the Talmudic mitzvah of killing
the best of the gentiles (which naturally implies elevating the worst of the gentiles to
power and prominence) are more to be likened to plague bearing rodents. Unlike vultures, rats
feast on corruption and putrescence, spread disease and also kill the living.
We embrace the finance capitalist worldview at our peril. In its essence, it is nothing
but the worship of money making and profiteering as the supreme aspiration of life,
irregardless of its horrible effects on our compatriots and fellow humans. In doing so, we
become Jews at heart.
There is nothing wrong with industry and the profit motive per se. Predatory finance
contributes nothing to the well being of a nation and the needs of the physical economy- it
is supremely toxic and corrosive of both. It must be expunged and its champions expropriated
and exiled. People like the odious Peter Singer have no place in a moral world; they ought to
be first expropriated, then exiled as far away from their host societies as possible.
I was personally wounded by the anti gay rhetoric peppered across this article. I can't
help making the association that Paul singer's son came out as gay and that this must be the
source of the author's animus against him and the others. Shakespeare, who was also
homosexual, described this state of mind as "a green eyed monster," i.e. jealousy. I'm
mortified that other members of the commentariat have not taken issue with this. Maybe we
would be more compassionate to the denizens of middle America if they allowed our most basic
civil rights.
Oh those kind jews have always been for the working class? But there is a white working
class and jews want them extinct from the face of the earth. Read 'Abolishing whiteness has
never been more urgent.' By Mark Levine
@silviosilver
ors to default was CAUSED BY the big Wall Street firms' irresponsible behavior.
Also, most people do tend to temper economic contracts with a degree of compassion.
Gentile capitalism does not exist in a vacuum.
I recall reading about a young female environmentalist who was refusing to leave a
venerable redwood tree that was scheduled to be cut down. The WASP businessman who owned the
tree was extremely patient with the girl, tried to win her over, threw her food and drinks,
and so on. The land with the tree was then sold to some Jewish firm. At that point the
article left off. The tree was cut down with no further negotiation.
The greatest jewish vulture fund is the zionist privately owned feral reserve aka the FED
, is creates money out of thin air and feeds this money to the otherwise bankrupt zionist
banks and not just here in the ZUS but in Europe, and the BIS is the vulture fund of vulture
funds owned by the zionists, the biggest scam in the history of the world.
By the way, Tucker Carlson said that 911 truthers were nuts, that says it all about
him.
@Colin
Wright usual with Joyce (and not only Joyce of course). You take something that is human,
talk of Jews, point to that something in Jews, and pretend, trusting that your readers will
pretend the same, that it's a Jewish-specific something.
Because if you were to say: everyone does this, everywhere, but when Jews do it it's just on
a larger scale, then you'd be shining light on the fact that what changes with Jews is just
skills, and that they are intelligent enough to co-operate more than the others.
Like when Mac Donald speaks of Jewish self-deception.
I feel I am swimming in self-deception everytime I talk with people (more so with women), and
they aren't Jewish. Do people do anything, but self-deceive?
So?
Jews are doing to White countries what Whites and Jews did to India, no honour amongst
thieves, the ones with the higher verbal IQ wins.
Also it is important to note that the reason India came under the sway of Anglo-Zionist
banking cartels so easily was because how divided it was, I reckon that is why they are
promoting mass immigration. Import lots of different groups, then run lots of race-baiting
stories to distract the plebs from their financial machinations.
This is why Jews are well represented in non-antisemitic White Nationalist organisations
like Jared Taylor's AmRen, they are great at playing both sides.
And he funded the building of the Peace Palace ("Vredespaleis") in The Hague, presently
the seat of the International Court of Justice, an institution not held in high esteem in
the home country of the generous donor.
@Wally
't really engage in lofty ambitons to dominate the world and as such are intact at the moment
and seem like they will remain that way for a long time, they are the true conservatives,
WASPs have always had a Jewish streak within their corrupt souls and are now paying the price
for engaging with a criminal race.
Why do you think Epstein has all these Gentiles in his pocket? You think do-gooding
gentiles just randomly decided to get into bed with Epstein and Co.? How many East Asians and
Eastern Euros do you see terrified of being outed as paedophiles.
Don't deceive yourselves, all debts are paid in the end, especially when the creditors are
Jews.
" it is truly remarkable that vulture funds like Singer's escaped major media attention
prior to this ."
Not really. The Jew's grip is starting to slip now, though. More and more people are
becoming aware that they are virulent parasites and always have been.
@Mulegino1
l capitalism is the competition of ideas, innovation, efficient manufacturing and quality
products made and produced by honest companies. That competition can, in theory at least,
make people (and companies) "try harder". But only when a company's success is determined by
the strength of its products, not by the "deals" it cuts with Jewish financial, advertising,
"marketing" and swindling rackets, designed to line the pockets of the Jew while destroying
honest competition by Gentiles who struggle to play fair and innovate.
Jewish vulture "capitalism" contributes NOTHING of value to any company or any culture. It
never has and never will.
@Colin
Wright sity, and over 2500 Free Libraries from coast to coast, in a time when very little
was done to help what we now call the "underprivileged".
In fact, he gave away 90% of his massive fortune–about $75 Billion in current
dollars. Funding, in the process, many charities, hospitals, museums, foundations and
institutions of learning. He was a major benefactor of negro education.
He was a staunch anti-imperialist who believed America should concentrate its energies on
peaceful endeavors rather than conquering and subduing far-off lands.
Although they are even more keen to put their names on things, today's robber barons leave
behind mainly wreckage.
@anon
who were true conservatives in that all they wished was prosperity for their people in their
own lands without any aggressive foreign policy moves.
Basically, WASPs thought that they could win in the end, but they were out Jew'd and now
they are crying.
The one difference you will notice is that certain subsections of WASPs, notable the
British, actually did build infrastructure in the countries they looted, this to me was borne
out of a sense of guilt, so to be fair, WASPs were not as parasitic and ruthless as Jews.
But in the end, the more ruthless wins. To quote the Joker
Andrew Carnegie left behind institutions like Carnegie Hall, Carnegie-Mellon University,
and over 2500 Free Libraries from coast to coast, in a time when very little was done to
help what we now call the "underprivileged".
And he funded the building of the Peace Palace ("Vredespaleis") in The Hague, presently
the seat of the International Court of Justice, an institution not held in high esteem in the
home country of the generous donor.
Clowns should be increasingly used in redundancy (layoff, firing) meetings until it
becomes the norm and employers start to compete with each other to offer the best clown
redundancy experience and promote it as a benefit.
It would also create clown jobs, which would probably require more clown schools, meaning
that the tuition prices would go through the roof and young people dreaming of becoming
redundancy clowns would either have to come from wealth or take out massive clown loans to
fund their education for clown universities and grad schools. Shareholders can only take so
much top line costs and Wall Street pressure would force corporations to improve return on
investment and reduce redundancy clown labor expenses. Sadly, redundancy clowns would find
themselves training their own replacements – HB1 clowns from "low cost" countries.
Employers would respond to quality criticisms of the HB1 clown experience by publishing
survey results showing very similar almost ex-employee satisfaction with the new clowns.
Eventually, of course, redundancy clowns will be replaced by AI and robots. It's just the
future and we will need to think about how to adapt to it today by putting in place a UBI for
the inevitable redundant redundancy clowns.
This is a Marxist critique of neoliberalism. Not necessary right but they his some relevant
points.
Notable quotes:
"... The ideology of neoliberal capitalism was the promise of growth. But with neoliberal capitalism reaching a dead end, this promise disappears and so does this ideological prop. ..."
"... The ex ante tendency toward overproduction arises because the vector of real wages across countries does not increase noticeably over time in the world economy, while the vector of labor productivities does, typically resulting in a rise in the share of surplus in world output. ..."
"... While the rise in the vector of labor productivities across countries, a ubiquitous phenomenon under capitalism that also characterizes neoliberal capitalism, scarcely requires an explanation, why does the vector of real wages remain virtually stagnant in the world economy? The answer lies in the sui generis character of contemporary globalization that, for the first time in the history of capitalism, has led to a relocation of activity from the metropolis to third world countries in order to take advantage of the lower wages prevailing in the latter and meet global demand. ..."
"... The current globalization broke with this. The movement of capital from the metropolis to the third world, especially to East, South, and Southeast Asia to relocate plants there and take advantage of their lower wages for meeting global demand, has led to a desegmentation of the world economy, subjecting metropolitan wages to the restraining effect exercised by the third world's labor reserves. Not surprisingly, as Joseph Stiglitz has pointed out, the real-wage rate of an average male U.S. worker in 2011 was no higher -- indeed, it was marginally lower -- than it had been in 1968. 5 ..."
"... This ever-present opposition becomes decisive within a regime of globalization. As long as finance capital remains national -- that is, nation-based -- and the state is a nation-state, the latter can override this opposition under certain circumstances, such as in the post-Second World War period when capitalism was facing an existential crisis. But when finance capital is globalized, meaning, when it is free to move across country borders while the state remains a nation-state, its opposition to fiscal deficits becomes decisive. If the state does run large fiscal deficits against its wishes, then it would simply leave that country en masse , causing a financial crisis. ..."
"... The state therefore capitulates to the demands of globalized finance capital and eschews direct fiscal intervention for increasing demand. It resorts to monetary policy instead since that operates through wealth holders' decisions, and hence does not undermine their social position. But, precisely for this reason, monetary policy is an ineffective instrument, as was evident in the United States in the aftermath of the 2007–09 crisis when even the pushing of interest rates down to zero scarcely revived activity. 6 ..."
"... If Trump's protectionism, which recalls the Smoot-Hawley tariff of 1931 and amounts to a beggar-my-neighbor policy, does lead to a significant export of unemployment from the United States, then it will invite retaliation and trigger a trade war that will only worsen the crisis for the world economy as a whole by dampening global investment. Indeed, since the United States has been targeting China in particular, some retaliatory measures have already appeared. But if U.S. protectionism does not invite generalized retaliation, it would only be because the export of unemployment from the United States is insubstantial, keeping unemployment everywhere, including in the United States, as precarious as it is now. However we look at it, the world would henceforth face higher levels of unemployment. ..."
"... The second implication of this dead end is that the era of export-led growth is by and large over for third world economies. The slowing down of world economic growth, together with protectionism in the United States against successful third world exporters, which could even spread to other metropolitan economies, suggests that the strategy of relying on the world market to generate domestic growth has run out of steam. Third world economies, including the ones that have been very successful at exporting, would now have to rely much more on their home market ..."
"... In other words, we shall now have an intensification of the imperialist stranglehold over third world economies, especially those pushed into unsustainable balance-of-payments deficits in the new situation. By imperialism , here we do not mean the imperialism of this or that major power, but the imperialism of international finance capital, with which even domestic big bourgeoisies are integrated, directed against their own working people ..."
"... In short, the ideology of neoliberal capitalism was the promise of growth. But with neoliberal capitalism reaching a dead end, this promise disappears and so does this ideological prop. To sustain itself, neoliberal capitalism starts looking for some other ideological prop and finds fascism. ..."
"... The first is the so-called spontaneous method of capital flight. Any political formation that seeks to take the country out of the neoliberal regime will witness capital flight even before it has been elected to office, bringing the country to a financial crisis and thereby denting its electoral prospects. And if perchance it still gets elected, the outflow will only increase, even before it assumes office. The inevitable difficulties faced by the people may well make the government back down at that stage. The sheer difficulty of transition away from a neoliberal regime could be enough to bring even a government based on the support of workers and peasants to its knees, precisely to save them short-term distress or to avoid losing their support. ..."
"... The third weapon consists in carrying out so-called democratic or parliamentary coups of the sort that Latin America has been experiencing. Coups in the old days were effected through the local armed forces and necessarily meant the imposition of military dictatorships in lieu of civilian, democratically elected governments. Now, taking advantage of the disaffection generated within countries by the hardships caused by capital flight and imposed sanctions, imperialism promotes coups through fascist or fascist-sympathizing middle-class political elements in the name of restoring democracy, which is synonymous with the pursuit of neoliberalism. ..."
"... And if all these measures fail, there is always the possibility of resorting to economic warfare (such as destroying Venezuela's electricity supply), and eventually to military warfare. Venezuela today provides a classic example of what imperialist intervention in a third world country is going to look like in the era of decline of neoliberal capitalism, when revolts are going to characterize such countries more and more. ..."
"... Despite this opposition, neoliberal capitalism cannot ward off the challenge it is facing for long. It has no vision for reinventing itself. Interestingly, in the period after the First World War, when capitalism was on the verge of sinking into a crisis, the idea of state intervention as a way of its revival had already been mooted, though its coming into vogue only occurred at the end of the Second World War. 11 Today, neoliberal capitalism does not even have an idea of how it can recover and revitalize itself. And weapons like domestic fascism in the third world and direct imperialist intervention cannot for long save it from the anger of the masses that is building up against it. ..."
The ideology of neoliberal capitalism was the promise of growth.
But with neoliberal capitalism reaching a dead end, this promise disappears and so does this
ideological prop.
Harry Magdoff's The Age of
Imperialism is a classic work that shows how postwar political decolonization does not
negate the phenomenon of imperialism. The book has two distinct aspects. On the one hand, it
follows in V. I. Lenin's footsteps in providing a comprehensive account of how capitalism at
the time operated globally. On the other hand, it raises a question that is less frequently
discussed in Marxist literature -- namely, the need for imperialism. Here, Magdoff not only
highlighted the crucial importance, among other things, of the third world's raw materials for
metropolitan capital, but also refuted the argument that the declining share of raw-material
value in gross manufacturing output somehow reduced this importance, making the simple point
that there can be no manufacturing at all without raw materials. 1
Magdoff's focus was on a period when imperialism was severely resisting economic
decolonization in the third world, with newly independent third world countries taking control
over their own resources. He highlighted the entire armory of weapons used by imperialism. But
he was writing in a period that predated the onset of neoliberalism. Today, we not only have
decades of neoliberalism behind us, but the neoliberal regime itself has reached a dead end.
Contemporary imperialism has to be discussed within this setting.
Globalization and
Economic Crisis
There are two reasons why the regime of neoliberal globalization has run into a dead end.
The first is an ex ante tendency toward global overproduction; the second is that the
only possible counter to this tendency within the regime is the formation of asset-price
bubbles, which cannot be conjured up at will and whose collapse, if they do appear, plunges the
economy back into crisis. In short, to use the words of British economic historian Samuel
Berrick Saul, there are no "markets on tap" for contemporary metropolitan capitalism, such as
had been provided by colonialism prior to the First World War and by state expenditure in the
post-Second World War period of dirigisme . 2
The ex ante tendency toward overproduction arises because the vector of real wages
across countries does not increase noticeably over time in the world economy, while the vector
of labor productivities does, typically resulting in a rise in the share of surplus in world
output. As Paul Baran and Paul Sweezy argued in Monopoly Capital , following the lead of
Michał Kalecki and Josef Steindl, such a rise in the share of economic surplus, or a shift
from wages to surplus, has the effect of reducing aggregate demand since the ratio of
consumption to income is higher on average for wage earners than for those living off the
surplus. 3
Therefore, assuming a given level of investment associated with any period, such a shift would
tend to reduce consumption demand and hence aggregate demand, output, and capacity utilization.
In turn, reduced capacity utilization would lower investment over time, further aggravating the
demand-reducing effect arising from the consumption side.
While the rise in the vector of labor productivities across countries, a ubiquitous
phenomenon under capitalism that also characterizes neoliberal capitalism, scarcely requires an
explanation, why does the vector of real wages remain virtually stagnant in the world economy?
The answer lies in the sui generis character of contemporary globalization that, for the
first time in the history of capitalism, has led to a relocation of activity from the
metropolis to third world countries in order to take advantage of the lower wages prevailing in
the latter and meet global demand.
Historically, while labor has not been, and is still not, free to migrate from the third
world to the metropolis, capital, though juridically free to move from the latter to the
former, did not actually do so , except to sectors like mines and plantations, which
only strengthened, rather than broke, the colonial pattern of the international division of
labor. 4
This segmentation of the world economy meant that wages in the metropolis increased with labor
productivity, unrestrained by the vast labor reserves of the third world, which themselves had
been caused by the displacement of manufactures through the twin processes of
deindustrialization (competition from metropolitan goods) and the drain of surplus (the
siphoning off of a large part of the economic surplus, through taxes on peasants that are no
longer spent on local artisan products but finance gratis primary commodity exports to
the metropolis instead).
The current globalization broke with this. The movement of capital from the metropolis to
the third world, especially to East, South, and Southeast Asia to relocate plants there and
take advantage of their lower wages for meeting global demand, has led to a desegmentation of
the world economy, subjecting metropolitan wages to the restraining effect exercised by the
third world's labor reserves. Not surprisingly, as Joseph Stiglitz has pointed out, the
real-wage rate of an average male U.S. worker in 2011 was no higher -- indeed, it was
marginally lower -- than it had been in 1968. 5
At the same time, such relocation of activities, despite causing impressive growth rates of
gross domestic product (GDP) in many third world countries, does not lead to the exhaustion of
the third world's labor reserves. This is because of another feature of contemporary
globalization: the unleashing of a process of primitive accumulation of capital against petty
producers, including peasant agriculturists in the third world, who had earlier been protected,
to an extent, from the encroachment of big capital (both domestic and foreign) by the
postcolonial dirigiste regimes in these countries. Under neoliberalism, such protection
is withdrawn, causing an income squeeze on these producers and often their outright
dispossession from their land, which is then used by big capital for its various so-called
development projects. The increase in employment, even in countries with impressive GDP growth
rates in the third world, falls way short of the natural growth of the workforce, let alone
absorbing the additional job seekers coming from the ranks of displaced petty producers. The
labor reserves therefore never get used up. Indeed, on the contrary, they are augmented
further, because real wages continue to remain tied to a subsistence level, even as
metropolitan wages too are restrained. The vector of real wages in the world economy as a whole
therefore remains restrained.
Although contemporary globalization thus gives rise to an ex ante tendency toward
overproduction, state expenditure that could provide a counter to this (and had provided a
counter through military spending in the United States, according to Baran and Sweezy) can no
longer do so under the current regime. Finance is usually opposed to direct state intervention
through larger spending as a way of increasing employment. This opposition expresses itself
through an opposition not just to larger taxes on capitalists, but also to a larger fiscal
deficit for financing such spending. Obviously, if larger state spending is financed by taxes
on workers, then it hardly adds to aggregate demand, for workers spend the bulk of their
incomes anyway, so the state taking this income and spending it instead does not add any extra
demand. Hence, larger state spending can increase employment only if it is financed either
through a fiscal deficit or through taxes on capitalists who keep a part of their income
unspent or saved. But these are precisely the two modes of financing state expenditure that
finance capital opposes.
Its opposing larger taxes on capitalists is understandable, but why is it so opposed to a
larger fiscal deficit? Even within a capitalist economy, there are no sound economic
theoretical reasons that should preclude a fiscal deficit under all circumstances. The root of
the opposition therefore lies in deeper social considerations: if the capitalist economic
system becomes dependent on the state to promote employment directly , then this fact
undermines the social legitimacy of capitalism. The need for the state to boost the animal
spirits of the capitalists disappears and a perspective on the system that is epistemically
exterior to it is provided to the people, making it possible for them to ask: If the state can
do the job of providing employment, then why do we need the capitalists at all? It is an
instinctive appreciation of this potential danger that underlies the opposition of capital,
especially of finance, to any direct effort by the state to generate employment.
This ever-present opposition becomes decisive within a regime of globalization. As long as
finance capital remains national -- that is, nation-based -- and the state is a nation-state,
the latter can override this opposition under certain circumstances, such as in the post-Second
World War period when capitalism was facing an existential crisis. But when finance capital is
globalized, meaning, when it is free to move across country borders while the state remains a
nation-state, its opposition to fiscal deficits becomes decisive. If the state does run large
fiscal deficits against its wishes, then it would simply leave that country en masse ,
causing a financial crisis.
The state therefore capitulates to the demands of globalized finance capital and eschews
direct fiscal intervention for increasing demand. It resorts to monetary policy instead since
that operates through wealth holders' decisions, and hence does not undermine their
social position. But, precisely for this reason, monetary policy is an ineffective instrument,
as was evident in the United States in the aftermath of the 2007–09 crisis when even the
pushing of interest rates down to zero scarcely revived activity. 6
It may be thought that this compulsion on the part of the state to accede to the demand of
finance to eschew fiscal intervention for enlarging employment should not hold for the United
States. Its currency being considered by the world's wealth holders to be "as good as gold"
should make it immune to capital flight. But there is an additional factor operating in the
case of the United States: that the demand generated by a bigger U.S. fiscal deficit would
substantially leak abroad in a neoliberal setting, which would increase its external debt
(since, unlike Britain in its heyday, it does not have access to any unrequited colonial
transfers) for the sake of generating employment elsewhere. This fact deters any fiscal effort
even in the United States to boost demand within a neoliberal setting. 7
Therefore, it follows that state spending cannot provide a counter to the ex ante
tendency toward global overproduction within a regime of neoliberal globalization, which makes
the world economy precariously dependent on occasional asset-price bubbles, primarily in the
U.S. economy, for obtaining, at best, some temporary relief from the crisis. It is this fact
that underlies the dead end that neoliberal capitalism has reached. Indeed, Donald Trump's
resort to protectionism in the United States to alleviate unemployment is a clear recognition
of the system having reached this cul-de-sac. The fact that the mightiest capitalist
economy in the world has to move away from the rules of the neoliberal game in an attempt to
alleviate its crisis of unemployment/underemployment -- while compensating capitalists
adversely affected by this move through tax cuts, as well as carefully ensuring that no
restraints are imposed on free cross-border financial flows -- shows that these rules
are no longer viable in their pristine form.
Some Implications of This Dead End
There are at least four important implications of this dead end of neoliberalism. The first
is that the world economy will now be afflicted by much higher levels of unemployment than it
was in the last decade of the twentieth century and the early years of the twenty-first, when
the dot-com and the housing bubbles in the United States had, sequentially, a pronounced
impact. It is true that the U.S. unemployment rate today appears to be at a historic low, but
this is misleading: the labor-force participation rate in the United States today is lower than
it was in 2008, which reflects the discouraged-worker effect . Adjusting for this lower
participation, the U.S. unemployment rate is considerable -- around 8 percent. Indeed, Trump
would not be imposing protection in the United States if unemployment was actually as low as 4
percent, which is the official figure. Elsewhere in the world, of course, unemployment
post-2008 continues to be evidently higher than before. Indeed, the severity of the current
problem of below-full-employment production in the U.S. economy is best illustrated by capacity
utilization figures in manufacturing. The weakness of the U.S. recovery from the Great
Recession is indicated by the fact that the current extended recovery represents the first
decade in the entire post-Second World War period in which capacity utilization in
manufacturing has never risen as high as 80 percent in a single quarter, with the resulting
stagnation of investment. 8
If Trump's protectionism, which recalls the Smoot-Hawley tariff of 1931 and amounts to a
beggar-my-neighbor policy, does lead to a significant export of unemployment from the
United States, then it will invite retaliation and trigger a trade war that will only worsen
the crisis for the world economy as a whole by dampening global investment. Indeed, since the
United States has been targeting China in particular, some retaliatory measures have already
appeared. But if U.S. protectionism does not invite generalized retaliation, it would only be
because the export of unemployment from the United States is insubstantial, keeping
unemployment everywhere, including in the United States, as precarious as it is now. However we
look at it, the world would henceforth face higher levels of unemployment.
There has been some discussion on how global value chains would be affected by Trump's
protectionism. But the fact that global macroeconomics in the early twenty-first century will
look altogether different compared to earlier has not been much discussed.
In light of the preceding discussion, one could say that if, instead of individual
nation-states whose writ cannot possibly run against globalized finance capital, there was a
global state or a set of major nation-states acting in unison to override the objections of
globalized finance and provide a coordinated fiscal stimulus to the world economy, then perhaps
there could be recovery. Such a coordinated fiscal stimulus was suggested by a group of German
trade unionists, as well as by John Maynard Keynes during the Great Depression in the 1930s.
9
While it was turned down then, in the present context it has not even been discussed.
The second implication of this dead end is that the era of export-led growth is by and large
over for third world economies. The slowing down of world economic growth, together with
protectionism in the United States against successful third world exporters, which could even
spread to other metropolitan economies, suggests that the strategy of relying on the world
market to generate domestic growth has run out of steam. Third world economies, including the
ones that have been very successful at exporting, would now have to rely much more on their
home market.
Such a transition will not be easy; it will require promoting domestic peasant agriculture,
defending petty production, moving toward cooperative forms of production, and ensuring greater
equality in income distribution, all of which need major structural shifts. For smaller
economies, it would also require their coming together with other economies to provide a
minimum size to the domestic market. In short, the dead end of neoliberalism also means the
need for a shift away from the so-called neoliberal development strategy that has held sway
until now.
The third implication is the imminent engulfing of a whole range of third world economies in
serious balance-of-payments difficulties. This is because, while their exports will be sluggish
in the new situation, this very fact will also discourage financial inflows into their
economies, whose easy availability had enabled them to maintain current account deficits on
their balance of payments earlier. In such a situation, within the existing neoliberal
paradigm, they would be forced to adopt austerity measures that would impose income deflation
on their people, make the conditions of their people significantly worse, lead to a further
handing over of their national assets and resources to international capital, and prevent
precisely any possible transition to an alternative strategy of home market-based growth.
In other words, we shall now have an intensification of the imperialist stranglehold over
third world economies, especially those pushed into unsustainable balance-of-payments deficits
in the new situation. By imperialism , here we do not mean the imperialism of this or
that major power, but the imperialism of international finance capital, with which even
domestic big bourgeoisies are integrated, directed against their own working people.
The fourth implication is the worldwide upsurge of fascism. Neoliberal capitalism even
before it reached a dead end, even in the period when it achieved reasonable growth and
employment rates, had pushed the world into greater hunger and poverty. For instance, the world
per-capita cereal output was 355 kilograms for 1980 (triennium average for 1979–81
divided by mid–triennium population) and fell to 343 in 2000, leveling at 344.9 in 2016
-- and a substantial amount of this last figure went into ethanol production. Clearly, in a
period of growth of the world economy, per-capita cereal absorption should be expanding,
especially since we are talking here not just of direct absorption but of direct and indirect
absorption, the latter through processed foods and feed grains in animal products. The fact
that there was an absolute decline in per-capita output, which no doubt caused a decline in
per-capita absorption, suggests an absolute worsening in the nutritional level of a substantial
segment of the world's population.
But this growing hunger and nutritional poverty did not immediately arouse any significant
resistance, both because such resistance itself becomes more difficult under neoliberalism
(since the very globalization of capital makes it an elusive target) and also because higher
GDP growth rates provided a hope that distress might be overcome in the course of time.
Peasants in distress, for instance, entertained the hope that their children would live better
in the years to come if given a modicum of education and accepted their fate.
In short, the ideology of neoliberal capitalism was the promise of growth. But with
neoliberal capitalism reaching a dead end, this promise disappears and so does this ideological
prop. To sustain itself, neoliberal capitalism starts looking for some other ideological prop
and finds fascism. This changes the discourse away from the material conditions of people's
lives to the so-called threat to the nation, placing the blame for people's distress not on the
failure of the system, but on ethnic, linguistic, and religious minority groups, the
other that is portrayed as an enemy. It projects a so-called messiah whose sheer
muscularity can somehow magically overcome all problems; it promotes a culture of unreason so
that both the vilification of the other and the magical powers of the supposed leader
can be placed beyond any intellectual questioning; it uses a combination of state repression
and street-level vigilantism by fascist thugs to terrorize opponents; and it forges a close
relationship with big business, or, in Kalecki's words, "a partnership of big business and
fascist upstarts." 10
Fascist groups of one kind or another exist in all modern societies. They move center stage
and even into power only on certain occasions when they get the backing of big business. And
these occasions arise when three conditions are satisfied: when there is an economic crisis so
the system cannot simply go on as before; when the usual liberal establishment is manifestly
incapable of resolving the crisis; and when the left is not strong enough to provide an
alternative to the people in order to move out of the conjuncture.
This last point may appear odd at first, since many see the big bourgeoisie's recourse to
fascism as a counter to the growth of the left's strength in the context of a capitalist
crisis. But when the left poses a serious threat, the response of the big bourgeoisie typically
is to attempt to split it by offering concessions. It uses fascism to prop itself up only when
the left is weakened. Walter Benjamin's remark that "behind every fascism there is a failed
revolution" points in this direction.
Fascism Then and Now
Contemporary fascism, however, differs in crucial respects from its 1930s counterpart, which
is why many are reluctant to call the current phenomenon a fascist upsurge. But historical
parallels, if carefully drawn, can be useful. While in some aforementioned respects
contemporary fascism does resemble the phenomenon of the 1930s, there are serious differences
between the two that must also be noted.
First, we must note that while the current fascist upsurge has put fascist elements in power
in many countries, there are no fascist states of the 1930s kind as of yet. Even if the fascist
elements in power try to push the country toward a fascist state, it is not clear that they
will succeed. There are many reasons for this, but an important one is that fascists in power
today cannot overcome the crisis of neoliberalism, since they accept the regime of
globalization of finance. This includes Trump, despite his protectionism. In the 1930s,
however, this was not the case. The horrors associated with the institution of a fascist state
in the 1930s had been camouflaged to an extent by the ability of the fascists in power to
overcome mass unemployment and end the Depression through larger military spending, financed by
government borrowing. Contemporary fascism, by contrast, lacks the ability to overcome the
opposition of international finance capital to fiscal activism on the part of the government to
generate larger demand, output, and employment, even via military spending.
Such activism, as discussed earlier, required larger government spending financed either
through taxes on capitalists or through a fiscal deficit. Finance capital was opposed to both
of these measures and it being globalized made this opposition decisive . The
decisiveness of this opposition remains even if the government happens to be one composed of
fascist elements. Hence, contemporary fascism, straitjacketed by "fiscal rectitude," cannot
possibly alleviate even temporarily the economic crises facing people and cannot provide any
cover for a transition to a fascist state akin to the ones of the 1930s, which makes such a
transition that much more unlikely.
Another difference is also related to the phenomenon of the globalization of finance. The
1930s were marked by what Lenin had earlier called "interimperialist rivalry." The military
expenditures incurred by fascist governments, even though they pulled countries out of the
Depression and unemployment, inevitably led to wars for "repartitioning an already partitioned
world." Fascism was the progenitor of war and burned itself out through war at, needless to
say, great cost to humankind.
Contemporary fascism, however, operates in a world where interimperialist rivalry is far
more muted. Some have seen in this muting a vindication of Karl Kautsky's vision of an
"ultraimperialism" as against Lenin's emphasis on the permanence of interimperialist rivalry,
but this is wrong. Both Kautsky and Lenin were talking about a world where finance capital and
the financial oligarchy were essentially national -- that is, German, French, or British. And
while Kautsky talked about the possibility of truces among the rival oligarchies, Lenin saw
such truces only as transient phenomena punctuating the ubiquity of rivalry.
In contrast, what we have today is not nation-based finance capitals, but
international finance capital into whose corpus the finance capitals drawn from
particular countries are integrated. This globalized finance capital does not want the world
to be partitioned into economic territories of rival powers ; on the contrary, it wants the
entire globe to be open to its own unrestricted movement. The muting of rivalry between major
powers, therefore, is not because they prefer truce to war, or peaceful partitioning of the
world to forcible repartitioning, but because the material conditions themselves have changed
so that it is no longer a matter of such choices. The world has gone beyond both Lenin and
Kautsky, as well as their debates.
Not only are we not going to have wars between major powers in this era of fascist upsurge
(of course, as will be discussed, we shall have other wars), but, by the same token, this
fascist upsurge will not burn out through any cataclysmic war. What we are likely to see is a
lingering fascism of less murderous intensity , which, when in power, does not
necessarily do away with all the forms of bourgeois democracy, does not necessarily physically
annihilate the opposition, and may even allow itself to get voted out of power occasionally.
But since its successor government, as long as it remains within the confines of the neoliberal
strategy, will also be incapable of alleviating the crisis, the fascist elements are likely to
return to power as well. And whether the fascist elements are in or out of power, they will
remain a potent force working toward the fascification of the society and the polity, even
while promoting corporate interests within a regime of globalization of finance, and hence
permanently maintaining the "partnership between big business and fascist upstarts."
Put differently, since the contemporary fascist upsurge is not likely to burn itself out as
the earlier one did, it has to be overcome by transcending the very conjuncture that produced
it: neoliberal capitalism at a dead end. A class mobilization of working people around an
alternative set of transitional demands that do not necessarily directly target neoliberal
capitalism, but which are immanently unrealizable within the regime of neoliberal capitalism,
can provide an initial way out of this conjuncture and lead to its eventual transcendence.
Such a class mobilization in the third world context would not mean making no truces with
liberal bourgeois elements against the fascists. On the contrary, since the liberal bourgeois
elements too are getting marginalized through a discourse of jingoistic nationalism typically
manufactured by the fascists, they too would like to shift the discourse toward the material
conditions of people's lives, no doubt claiming that an improvement in these conditions is
possible within the neoliberal economic regime itself. Such a shift in discourse is in
itself a major antifascist act . Experience will teach that the agenda advanced as part of
this changed discourse is unrealizable under neoliberalism, providing the scope for dialectical
intervention by the left to transcend neoliberal capitalism.
Imperialist
Interventions
Even though fascism will have a lingering presence in this conjuncture of "neoliberalism at
a dead end," with the backing of domestic corporate-financial interests that are themselves
integrated into the corpus of international finance capital, the working people in the third
world will increasingly demand better material conditions of life and thereby rupture the
fascist discourse of jingoistic nationalism (that ironically in a third world context is not
anti-imperialist).
In fact, neoliberalism reaching a dead end and having to rely on fascist elements revives
meaningful political activity, which the heyday of neoliberalism had precluded, because most
political formations then had been trapped within an identical neoliberal agenda that appeared
promising. (Latin America had a somewhat different history because neoliberalism arrived in
that continent through military dictatorships, not through its more or less tacit acceptance by
most political formations.)
Such revived political activity will necessarily throw up challenges to neoliberal
capitalism in particular countries. Imperialism, by which we mean the entire economic and
political arrangement sustaining the hegemony of international finance capital, will deal with
these challenges in at least four different ways.
The first is the so-called spontaneous method of capital flight. Any political formation
that seeks to take the country out of the neoliberal regime will witness capital flight even
before it has been elected to office, bringing the country to a financial crisis and thereby
denting its electoral prospects. And if perchance it still gets elected, the outflow will only
increase, even before it assumes office. The inevitable difficulties faced by the people may
well make the government back down at that stage. The sheer difficulty of transition away from
a neoliberal regime could be enough to bring even a government based on the support of workers
and peasants to its knees, precisely to save them short-term distress or to avoid losing their
support.
Even if capital controls are put in place, where there are current account deficits,
financing such deficits would pose a problem, necessitating some trade controls. But this is
where the second instrument of imperialism comes into play: the imposition of trade sanctions
by the metropolitan states, which then cajole other countries to stop buying from the
sanctioned country that is trying to break away from thralldom to globalized finance capital.
Even if the latter would have otherwise succeeded in stabilizing its economy despite its
attempt to break away, the imposition of sanctions becomes an additional blow.
The third weapon consists in carrying out so-called democratic or parliamentary coups of the
sort that Latin America has been experiencing. Coups in the old days were effected through the
local armed forces and necessarily meant the imposition of military dictatorships in lieu of
civilian, democratically elected governments. Now, taking advantage of the disaffection
generated within countries by the hardships caused by capital flight and imposed sanctions,
imperialism promotes coups through fascist or fascist-sympathizing middle-class political
elements in the name of restoring democracy, which is synonymous with the pursuit of
neoliberalism.
And if all these measures fail, there is always the possibility of resorting to economic
warfare (such as destroying Venezuela's electricity supply), and eventually to military
warfare. Venezuela today provides a classic example of what imperialist intervention in a third
world country is going to look like in the era of decline of neoliberal capitalism, when
revolts are going to characterize such countries more and more.
Two aspects of such intervention are striking. One is the virtual unanimity among the
metropolitan states, which only underscores the muting of interimperialist rivalry in the era
of hegemony of global finance capital. The other is the extent of support that such
intervention commands within metropolitan countries, from the right to even the liberal
segments.
Despite this opposition, neoliberal capitalism cannot ward off the challenge it is facing
for long. It has no vision for reinventing itself. Interestingly, in the period after the First
World War, when capitalism was on the verge of sinking into a crisis, the idea of state
intervention as a way of its revival had already been mooted, though its coming into vogue only
occurred at the end of the Second World War. 11
Today, neoliberal capitalism does not even have an idea of how it can recover and revitalize
itself. And weapons like domestic fascism in the third world and direct imperialist
intervention cannot for long save it from the anger of the masses that is building up against
it.
Samuel Berrick Saul, Studies in British Overseas Trade, 1870–1914
(Liverpool: Liverpool University Press, 1960).
Paul A. Baran and Paul M. Sweezy, Monopoly Capital (New York:
Monthly Review Press, 1966).
One of the first authors to recognize this fact and its significance was Paul Baran in
The Political Economy of
Growth (New York: Monthly Review Press, 1957).
For the role of such colonial transfers in sustaining the British balance of payments and the
long Victorian and Edwardian boom, see Utsa Patnaik, "Revisiting the 'Drain,' or Transfers
from India to Britain in the Context of Global Diffusion of Capitalism," in Agrarian
and Other Histories: Essays for Binay Bhushan Chaudhuri , ed. Shubhra Chakrabarti and
Utsa Patnaik (Delhi: Tulika, 2017), 277-317.
Federal Reserve Board of Saint Louis Economic Research, FRED, "Capacity Utilization:
Manufacturing," February 2019 (updated March 27, 2019), http://fred.stlouisfed.org .
This issue is discussed by Charles P. Kindleberger in The World in Depression,
1929–1939 , 40th anniversary ed. (Oakland: University of California Press,
2013).
Joseph Schumpeter had seen Keynes's The Economic Consequences of the Peace as
essentially advocating such state intervention in the new situation. See his essay, "John
Maynard Keynes (1883–1946)," in Ten Great Economists (London: George Allen
& Unwin, 1952).
Utsa Patnaik is Professor Emerita at the Centre for Economic Studies and Planning,
Jawaharlal Nehru University, New Delhi. Her books include Peasant Class Differentiation (1987),
The Long Transition (1999), and The Republic of Hunger and Other Essays (2007). Prabhat Patnaik
is Professor Emeritus at the Centre for Economic Studies and Planning, Jawaharlal Nehru
University, New Delhi. His books include Accumulation and Stability Under Capitalism (1997),
The Value of Money(2009), and Re-envisioning Socialism(2011).
"... The real unemployment rate is probably somewhere between 10%-12%. ..."
"... The U-6 also includes what the labor dept. calls involuntary part time employed. It should include the voluntary part time as well, but doesn't (See, they're not actively looking for work even if unemployed). ..."
"... But even the involuntary part time is itself under-estimated. I believe the Labor Dept. counts only those involuntarily part time unemployed whose part time job is their primary job. It doesn't count those who have second and third involuntary part time jobs. That would raise the U-6 unemployment rate significantly. The labor Dept's estimate of the 'discouraged' and 'missing labor force' is grossly underestimated. ..."
"... The labor dept. also misses the 1-2 million workers who went on social security disability (SSDI) after 2008 because it provides better pay, for longer, than does unemployment insurance. That number rose dramatically after 2008 and hasn't come down much (although the government and courts are going after them). ..."
"... The way the government calculates unemployment is by means of 60,000 monthly household surveys but that phone survey method misses a lot of workers who are undocumented and others working in the underground economy in the inner cities (about 10-12% of the economy according to most economists and therefore potentially 10-12% of the reported labor force in size as well). ..."
"... The SSDI, undocumented, underground, underestimation of part timers, etc. are what I call the 'hidden unemployed'. And that brings the unemployed well above the 3.7%. ..."
The real unemployment rate is probably somewhere between 10%-12%. Here's why: the 3.7% is
the U-3 rate, per the labor dept. But that's the rate only for full time employed. What the
labor dept. calls the U-6 includes what it calls discouraged workers (those who haven't looked
for work in the past 4 weeks). Then there's what's called the 'missing labor force'–i.e.
those who haven't looked in the past year. They're not calculated in the 3.7% U-3 unemployment
rate number either. Why? Because you have to be 'out of work and actively looking for work' to
be counted as unemployed and therefore part of the 3.7% rate.
The U-6 also includes what the labor dept. calls involuntary part time employed. It
should include the voluntary part time as well, but doesn't (See, they're not actively looking
for work even if unemployed).
But even the involuntary part time is itself under-estimated. I believe the Labor Dept.
counts only those involuntarily part time unemployed whose part time job is their primary job.
It doesn't count those who have second and third involuntary part time jobs. That would raise
the U-6 unemployment rate significantly. The labor Dept's estimate of the 'discouraged' and
'missing labor force' is grossly underestimated.
The labor dept. also misses the 1-2 million workers who went on social security
disability (SSDI) after 2008 because it provides better pay, for longer, than does unemployment
insurance. That number rose dramatically after 2008 and hasn't come down much (although the
government and courts are going after them).
The way the government calculates unemployment is by means of 60,000 monthly household
surveys but that phone survey method misses a lot of workers who are undocumented and others
working in the underground economy in the inner cities (about 10-12% of the economy according
to most economists and therefore potentially 10-12% of the reported labor force in size as
well). The labor dept. just makes assumptions about that number (conservatively, I may
add) and plugs in a number to be added to the unemployment totals. But it has no real idea of
how many undocumented or underground economy workers are actually employed or unemployed since
these workers do not participate in the labor dept. phone surveys, and who can blame them.
The SSDI, undocumented, underground, underestimation of part timers, etc. are what I
call the 'hidden unemployed'. And that brings the unemployed well above the 3.7%.
Finally, there's the corroborating evidence about what's called the labor force
participation rate. It has declined by roughly 5% since 2007. That's 6 to 9 million workers who
should have entered the labor force but haven't. The labor force should be that much larger,
but it isn't. Where have they gone? Did they just not enter the labor force? If not, they're
likely a majority unemployed, or in the underground economy, or belong to the labor dept's
'missing labor force' which should be much greater than reported. The government has no
adequate explanation why the participation rate has declined so dramatically. Or where have the
workers gone. If they had entered the labor force they would have been counted. And their 6 to
9 million would result in an increase in the total labor force number and therefore raise the
unemployment rate.
All these reasons–-i.e. only counting full timers in the official 3.7%;
under-estimating the size of the part time workforce; under-estimating the size of the
discouraged and so-called 'missing labor force'; using methodologies that don't capture the
undocumented and underground unemployed accurately; not counting part of the SSI increase as
unemployed; and reducing the total labor force because of the declining labor force
participation-–together means the true unemployment rate is definitely over 10% and
likely closer to 12%. And even that's a conservative estimate perhaps." Join the debate on
Facebook More articles by: Jack Rasmus
Jack Rasmus is author of the recently published book, 'Central Bankers at the End of
Their Ropes: Monetary Policy and the Coming Depression', Clarity Press, August 2017. He blogs
at jackrasmus.com and his twitter handle
is @drjackrasmus. His website is http://kyklosproductions.com .
"Few economists worked at the Federal Reserve in the early 1950s. Those who were on the
staff of America's central bank were relegated to the basement, at a safe remove from the
corridors where real decisions were made.
Economists had their uses, allowed William McChesney Martin, then the Fed's chairman. But
they also had 'a far greater sense of confidence in their analyses than I have found to be
warranted'. They were best kept down with the surplus furniture and the rats." •
Indeed!
It's just too bad being elected President doesn't come with a 90-day probationary
period that many employers use, because if they did Mike Pence would be considering a 2nd
Term run right now.........
"Government set to inject more than $1 Trillion into US economy this year, but poorly
targeted and still isn't enough to improve the lives of most people".
Spot-on . Whenever I read this nonsense in the NYT or elsewhere I always ask myself the
same question ' Is this deliberate or are they really ignorant ? ' . I suspect the latter,
but I could be wrong.
Excuse me, how can the deficit be increasing [with Trump tax cuts]?
I was told that a simple bell curve graph called the 'Laffer Curve' indicates that cutting
taxes increases growth which increases revenue. Its simply mathematics.
Well, Lawrence H. Summers is right to worry when he says "Can central banking as we know
it be the primary tool of macroeconomic stabilization in the industrial world over the next
decade?"
I remember when Qaddafi was murdered and Libya fell. Within the first day or two a central
bank was set up in Libya. And look how well that is working out for them.
"It sure is weird that the labor market is the only place where the magic of the
marketplace -- price! -- doesn't work."
I also hear weirdness about price considerations when I read investment advice for workers
and their 401ks.
"Don't worry about the price. Invest now as much as you can. You can't predict the market
"
(Looks down at Twitter feed).
Haha so right and we mistakenly claim that economists don't know how the real economy
works. They know, and part of that knowledge is that you need to shill the BS for those with
the money if you wanna get your own piece of said pie.
Hongkong is no longer of great importance for bejing as a financial and trading locus. up and
down the south china sea coast are many cities of far greater importance than Hongkong.
perhaps when the PLA finish in hongkong they can come over here and deal with antifa since
our government at any level does not appear to have the sense or spine to do it
themselves
Some of the other stuff we've encouraged, such as The EU, ETFs, Hi-Frequency Trading, Neil
Woodford and Deutsche Bank look likely to be highly effective vectors of short-term economic
destruction and destabilization
(Edited version of the speech given by the TJ Wormwood, Chief Demonic Officer –
Finance, Lord of 3rd Ring of the 7th Circle, to invited audience at Davos.)
Dear Colleagues,
As you all know, I've been wrecking finance for millennia. [Pause for effect]
Nearly every major big idea, evolutionary leap forward, invention and discovery has improved
the miserable lot of mankind only through their ability to monetise it. Forget the theft of
fire – being able to monetise fire by attracting pretty and willing mates around a warm
campfire, or cooking the food others have hunted, is what mattered. Strip out the noise, and
the rise of mankind is largely due to improvements in the efficiency and ease of means of
exchange.
From the realisation hunters could barter their furs for other goods, to the rise of complex
products to finance global growth – the innovation of financial markets has been a major
driver of success for the Other Side in raising the wellbeing and prosperity of mankind. Pretty
much anything that holds back or disrupts trade, increases costs and holds back services is
naturally positive for our goal of global destabilisation.
So, here is the big plan:
Since 2007 we've been turning the Other Side's successful innovation of financial markets
against them. Global Financial Markets are incredibly rich in opportunities to distort truth,
hide lies, and undermine mankind – generating immediate greed, envy, suspicion and anger.
We've uncovered previously unimaginable ways in which to financially screw the World with
consequences that impact everyone.
We've overlaid the programme with our mastery and understanding of temptation, human greed,
avarice and pride, while adding subtlety and cunning. We merely suggest and advise. We are
facilitating the train-wreck of the global economy by destroying asset values while confounding
their understanding of money and wealth – the pillars of their society.
At its simplest form we are manipulating and driving constant market instability to keep
mankind distracted. Uncertainty clouds their future expectations – so we keep it raining.
A Mortgage crisis one year, followed by a Sovereign Debt crisis the next, spiced with a couple
of bank failures, and threats of global trade war. Overlay with confusion and distraction such
as social media, fake news, Bitcoin and populism, and it all works rather well.
Keep their leaders arguing. Keep the blame game going.
Our success can be seen in current financial asset prices. These are now hopelessly inflated
and distorted by foolish post financial crisis policy decisions. They are bubbles set to pop.
Empower the regulators and bureaucrats to compromise finance through zealous over-regulation,
making banking safer by destroying it. Usher in a new era of trade protectionism, the end of
Free Trade and increase the suspicion some countries are manipulating their currencies for
economic advantage. Sprinkle some dust of political catastrophe, the collapse of law, undo the
fair, just and caring society, while adding some eye of newt and complex environmental threats.
Make the rich so rich they don't notice, and the poor so poor they become invisible. If the
markets remain uncertain, then it distracts mankind from addressing these issues, making
society less stable!
There as some things we're really proud of, including the Euro, Social Media, Investment
Banks, the Tech Boom, and especially Quantitative Easing (which is still delivering confusion
and pain). New Monetary Theory could prove even better – it shows tremendous potential to
thoroughly unsettle confidence in money. Cybercurrencies are particularly fun – despite
coming up with the idea, neither we, nor even the distinguished members of our panel of eternal
guests, understand the why of them. They are libertarian nonsense – so, naturally we
continue to encourage them as get-rich-quick schemes, but they also further undermine
confidence in money and government. We made something up in a bar one night and called it a
Distributed Ledger - the humans ran with it and invented Blockchain, whatever that might
be..
Some of the other stuff we've encouraged, such as The EU, ETFs, Hi-Frequency Trading, Neil
Woodford and Deutsche Bank look likely to be highly effective vectors of short-term economic
destruction and destabilisation, triggering systemic market events and regulatory backlashes
across markets. We are only now exploring the full potential of market illiquidity to rob
billions of pensioners of their savings.
We've persuaded investors to overturn proven tried and tested investment strategies and
wisdoms, nurturing a whole range of overpriced unprofitable US Tech "Unicorn" companies which
we are confident will prove utterly over-hyped and largely worthless. The success of social
media, data mining and new tech has increased levels of dissatisfaction and envy –
especially in our target younger demography.
The way we successfully pinned the blame on banks for the Global Financial Crisis –
despite the fact it was people who wanted mortgages to buy houses and fast cars - ensured
global regulators would over-react. We've allowed regulators to focus on banks while we target
the next financial crisis in other parts of the financial ecosystem.
Regulators forced the banks to de-risk. But risk does not disappear - it just goes somewhere
else. While banks understood risk and had massive staffs to manage risk, risk is now
concentrated in the hands of "investment managers" who are singularly ill-equipped to withstand
the next credit crunch and global recession, (which we've planned for next October – Save
the Date cards have been sent).
We are particularly pleased that many banks now exceed the 2.3 compliance officers for every
profitable banker ratio. Compliance and regulatory costs now exceed 10% of income at some
European banks – a stunning success and substantially decreasing the efficiency of
banking and exchanges.
We've some great new financial ideas we are still experimenting with, some of which show
great promise for further weakening society. Facebook Money is going to be a cracker, and I
particularly like the Spaceship to Mars project if only they knew what awaits them
By hiding inflation in the stock market, we assisted the accumulation of massive wealth by a
tiny percentage of the population to ferment income inequality dissatisfaction. When capital is
concentrated and the workers under the cosh, it creates all the right conditions for weak
disjointed government to aid and abet the rise of destabilising populism.
It's highly satisfying to watch the instability we've created in financial markets drive
fear and distrust across society. The debt crisis we engineered led to global financial
austerity, job insecurity, and rising inequality. We were surprised how easily we pushed the
Gig economy concept to further exploit and cow workers through regulators and authorities
– they barely noticed. Over this we've layered whole new levels of anxiety such as the
unknowns of data theft, the rise in envy coefficients through social media, fake news while
fuelling social distrust through resentment.
We've managed to persuade Governments to follow damaging and contradictory policies. As
society reeled in the wake of the financial crisis, we persuaded policy makers to cut back
spending through "austerity" spending programmes, simultaneously bailing out bankers while
flooding the financial economy with free money through Quantitative Easing.
Effectively we've split the world into two economies. A real economy which is sad, miserable
and deflating, and a financial economy that's insanely optimistic, massively inflated and ripe
to pop on the back of free money.
The resentment, instability, fear and general sense of decay has paid dividends in our drive
to break society by undermining the credibility of the political classes. Our approach to
politics has been simple – deskill the political classes, reduce their effectiveness as
leaders, while engineering economic, social and financial instability to drive rampaging
populist politics – just like in 1932! Populism may ultimately prove short-lived, but
it's difficult to see how the political classes will recover their power in time to reverse the
damages being done to the global environment.
While markets have burned, society become increasingly riven, and politics has failed, we've
distracted the humans from the rising levels of carbon dioxide in the atmosphere which
threatens to create global warming and rising sea levels, while plastics poison the oceans and
soil erosion threatens agriculture.
Now I love the ravenous hunger and sharp pointy teeth of polar bears as much as the next
demon, but needs must... needs must. I was also rather fond of the dinosaurs...
Our approach to ensuring destructive climate change has proved very effective. We've
supported, financed and advised the loudest green lobbies to ensure their message looks
ill-considered, wrong and economic suicide. We also paid big bucks to fund the loudest climate
change deniers. Our innovation of fake news to discredit and mitigate anything positive means
climate change remains a crank topic – even as our polar bears drown.
Meanwhile, through our dominance of global boardrooms and investment firms, we've made sure
that large corporates have bought-out and stifled new technologies that could solve the
environmental crisis.
Our future looks great – because their future is bleak!
Looks like the world order established after WWIII crumbed with the USSR and now it is again the law if jungles with the US as the
biggest predator.
Notable quotes:
"... The root cause is clear: After the crescendo of pretenses and deceptions over Iraq, Libya and Syria, along with our absolution of the lawless regime of Saudi Arabia, foreign political leaders are coming to recognize what world-wide public opinion polls reported even before the Iraq/Iran-Contra boys turned their attention to the world's largest oil reserves in Venezuela: The United States is now the greatest threat to peace on the planet. ..."
"... Calling the U.S. coup being sponsored in Venezuela a defense of democracy reveals the Doublethink underlying U.S. foreign policy. It defines "democracy" to mean supporting U.S. foreign policy, pursuing neoliberal privatization of public infrastructure, dismantling government regulation and following the direction of U.S.-dominated global institutions, from the IMF and World Bank to NATO. For decades, the resulting foreign wars, domestic austerity programs and military interventions have brought more violence, not democracy ..."
"... A point had to come where this policy collided with the self-interest of other nations, finally breaking through the public relations rhetoric of empire. Other countries are proceeding to de-dollarize and replace what U.S. diplomacy calls "internationalism" (meaning U.S. nationalism imposed on the rest of the world) with their own national self-interest. ..."
"... For the past half-century, U.S. strategists, the State Department and National Endowment for Democracy (NED) worried that opposition to U.S. financial imperialism would come from left-wing parties. It therefore spent enormous resources manipulating parties that called themselves socialist (Tony Blair's British Labour Party, France's Socialist Party, Germany's Social Democrats, etc.) to adopt neoliberal policies that were the diametric opposite to what social democracy meant a century ago. But U.S. political planners and Great Wurlitzer organists neglected the right wing, imagining that it would instinctively support U.S. thuggishness. ..."
"... Perhaps the problem had to erupt as a result of the inner dynamics of U.S.-sponsored globalism becoming impossible to impose when the result is financial austerity, waves of population flight from U.S.-sponsored wars, and most of all, U.S. refusal to adhere to the rules and international laws that it itself sponsored seventy years ago in the wake of World War II. ..."
"... Here's the first legal contradiction in U.S. global diplomacy: The United States always has resisted letting any other country have any voice in U.S. domestic policies, law-making or diplomacy. That is what makes America "the exceptional nation." But for seventy years its diplomats have pretended that its superior judgment promoted a peaceful world (as the Roman Empire claimed to be), which let other countries share in prosperity and rising living standards. ..."
"... Inevitably, U.S. nationalism had to break up the mirage of One World internationalism, and with it any thought of an international court. Without veto power over the judges, the U.S. never accepted the authority of any court, in particular the United Nations' International Court in The Hague. Recently that court undertook an investigation into U.S. war crimes in Afghanistan, from its torture policies to bombing of civilian targets such as hospitals, weddings and infrastructure. "That investigation ultimately found 'a reasonable basis to believe that war crimes and crimes against humanity." ..."
"... This showed that international finance was an arm of the U.S. State Department and Pentagon. But that was a generation ago, and only recently did foreign countries begin to feel queasy about leaving their gold holdings in the United States, where they might be grabbed at will to punish any country that might act in ways that U.S. diplomacy found offensive. So last year, Germany finally got up the courage to ask that some of its gold be flown back to Germany. U.S. officials pretended to feel shocked at the insult that it might do to a civilized Christian country what it had done to Iran, and Germany agreed to slow down the transfer. ..."
"... England refused to honor the official request, following the direction of Bolton and U.S. Secretary of State Michael Pompeo. As Bloomberg reported: "The U.S. officials are trying to steer Venezuela's overseas assets to [Chicago Boy Juan] Guaido to help bolster his chances of effectively taking control of the government. The $1.2 billion of gold is a big chunk of the $8 billion in foreign reserves held by the Venezuelan central bank." ..."
"... But now, cyber warfare has become a way of pulling out the connections of any economy. And the major cyber connections are financial money-transfer ones, headed by SWIFT, the acronym for the Society for Worldwide Interbank Financial Telecommunication, which is centered in Belgium. ..."
"... On January 31 the dam broke with the announcement that Europe had created its own bypass payments system for use with Iran and other countries targeted by U.S. diplomats. Germany, France and even the U.S. poodle Britain joined to create INSTEX -- Instrument in Support of Trade Exchanges. The promise is that this will be used only for "humanitarian" aid to save Iran from a U.S.-sponsored Venezuela-type devastation. But in view of increasingly passionate U.S. opposition to the Nord Stream pipeline to carry Russian gas, this alternative bank clearing system will be ready and able to become operative if the United States tries to direct a sanctions attack on Europe ..."
"... The U.S. overplaying its position is leading to the Mackinder-Kissinger-Brzezinski Eurasian nightmare that I mentioned above. In addition to driving Russia and China together, U.S. diplomacy is adding Europe to the heartland, independent of U.S. ability to bully into the state of dependency toward which American diplomacy has aimed to achieve since 1945. ..."
"... By following U.S. advice, countries have left themselves open to food blackmail – sanctions against providing them with grain and other food, in case they step out of line with U.S. diplomatic demands. ..."
"... It is worthwhile to note that our global imposition of the mythical "efficiencies" of forcing Latin American countries to become plantations for export crops like coffee and bananas rather than growing their own wheat and corn has failed catastrophically to deliver better lives, especially for those living in Central America. The "spread" between the export crops and cheaper food imports from the U.S. that was supposed to materialize for countries following our playbook failed miserably – witness the caravans and refugees across Mexico. Of course, our backing of the most brutal military dictators and crime lords has not helped either. ..."
"... But a few years ago Ukraine defaulted on $3 billion owed to Russia. The IMF said, in effect, that Ukraine and other countries did not have to pay Russia or any other country deemed to be acting too independently of the United States. The IMF has been extending credit to the bottomless it of Ukrainian corruption to encourage its anti-Russian policy rather than standing up for the principle that inter-government debts must be paid. ..."
"... It is as if the IMF now operates out of a small room in the basement of the Pentagon in Washington. ..."
"... Anticipating just such a double-cross, President Chavez acted already in 2011 to repatriate 160 tons of gold to Caracas from the United States and Europe. ..."
"... It would be good for Americans, but the wrong kind of Americans. For the Americans that would populate the Global Executive Suite, a strong US$ means that the stipends they would pay would be worth more to the lackeys, and command more influence. ..."
"... Dumping the industrial base really ruined things. America is now in a position where it can shout orders, and drop bombs, but doesn't have the capacity to do anything helpful. They have to give up being what Toynbee called a creative minority, and settle for being a dominant minority. ..."
"... Having watched the 2016 election closely from afar, I was left with the impression that many of the swing voters who cast their vote for Trump did so under the assumption that he would act as a catalyst for systemic change. ..."
"... Now we know. He has ripped the already transparent mask of altruism off what is referred to as the U.S.-led liberal international order and revealed its true nature for all to see, and has managed to do it in spite of the liberal international establishment desperately trying to hold it in place in the hope of effecting a seamless post-Trump return to what they refer to as "norms". Interesting times. ..."
"... Exactly. He hasn't exactly lived up to advanced billing so far in all respects, but I suspect there's great deal of skulduggery going on behind the scenes that has prevented that. ..."
"... To paraphrase the infamous Rummy, you don't go to war with the change agent and policies you wished you had, you go to war with the ones you have. That might be the best thing we can say about Trump after the historic dust of his administration finally settles. ..."
"... Yet we find out that Venezuela didn't managed to do what they wanted to do, the Europeans, the Turks, etc bent over yet again. Nothing to see here, actually. ..."
"... So what I'm saying is he didn't make his point. I wish it were true. But a bit of grumbling and (a tiny amount of) foot-dragging by some pygmy leaders (Merkel) does not signal a global change. ..."
"... Currency regime change can take decades, and small percentage differences are enormous because of the flows involved. USD as reserve for 61% of global sovereigns versus 64% 15 years ago is a massive move. ..."
"... I discovered his Super Imperialism while looking for an explanation for the pending 2003 US invasion of Iraq. If you haven't read it yet, move it to the top of your queue if you want to have any idea of how the world really works. ..."
"... If it isn't clear to the rest of the world by now, it never will be. The US is incapable of changing on its own a corrupt status quo dominated by a coalition of its military industrial complex, Wall Street bankers and fossil fuels industries. As long as the world continues to chase the debt created on the keyboards of Wall Street banks and 'deficits don't matter' Washington neocons – as long as the world's 1% think they are getting 'richer' by adding more "debts that can't be repaid (and) won't be" to their portfolios, the global economy can never be put on a sustainable footing. ..."
"... In other words, after 2 World Wars that produced the current world order, it is still in a state of insanity with the same pretensions to superiority by the same people, to get number 3. ..."
"... Few among Washington's foreign policy elite seem to fully grasp the complex system that made U.S. global power what it now is, particularly its all-important geopolitical foundations. As Trump travels the globe, tweeting and trashing away, he's inadvertently showing us the essential structure of that power, the same way a devastating wildfire leaves the steel beams of a ruined building standing starkly above the smoking rubble." ..."
"... He's draining the swamp in an unpredicted way, a swamp that's founded on the money interest. I don't care what NYT and WaPo have to say, they are not reporting events but promoting agendas. ..."
"... The financial elites are only concerned about shaping society as they see fit, side of self serving is just a historical foot note, Trumps past indicates a strong preference for even more of the same through authoritarian memes or have some missed the OT WH reference to dawg both choosing and then compelling him to run. ..."
"... Highly doubt Trump is a "witting agent", most likely is that he is just as ignorant as he almost daily shows on twitter. On US role in global affairs he says the same today as he did as a media celebrity in the late 80s. Simplistic household "logics" on macroeconomics. If US have trade deficit it loses. Countries with surplus are the winners. ..."
"... Anyhow frightening, the US hegemony have its severe dark sides. But there is absolutely nothing better on the horizon, a crash will throw the world in turmoil for decades or even a century. A lot of bad forces will see their chance to elevate their influence. There will be fierce competition to fill the gap. ..."
"... On could the insane economic model of EU/Germany being on top of global affairs, a horribly frightening thought. Misery and austerity for all globally, a permanent recession. Probably not much better with the Chinese on top. I'll take the USD hegemony any day compared to that prospect. ..."
"... Former US ambassador, Chas Freeman, gets to the nub of the problem. "The US preference for governance by elected and appointed officials, uncontaminated by experience in statecraft and diplomacy, or knowledge of geography, history and foreign affairs" https://www.youtube.com/watch?annotation_id=annotation_882041135&feature=iv&src_vid=Ge1ozuXN7iI&v=gkf2MQdqz-o ..."
"... Michael Hudson, in Super Imperialism, went into how the US could just create the money to run a large trade deficit with the rest of the world. It would get all these imports effectively for nothing, the US's exorbitant privilege. I tied this in with this graph from MMT. ..."
"... The Government was running a surplus as the economy blew up in the early 1990s. It's the positive and negative, zero sum, nature of the monetary system. A big trade deficit needs a big Government deficit to cover it. A big trade deficit, with a balanced budget, drives the private sector into debt and blows up the economy. ..."
The end of America's unchallenged global economic dominance has arrived sooner than expected, thanks to the very same Neocons
who gave the world the Iraq, Syria and the dirty wars in Latin America. Just as the Vietnam War drove the United States off gold
by 1971, its sponsorship and funding of violent regime change wars against Venezuela and Syria – and threatening other countries
with sanctions if they do not join this crusade – is now driving European and other nations to create their alternative financial
institutions.
This break has been building for quite some time, and was bound to occur. But who would have thought that Donald Trump would become
the catalytic agent? No left-wing party, no socialist, anarchist or foreign nationalist leader anywhere in the world could have achieved
what he is doing to break up the American Empire. The Deep State is reacting with shock at how this right-wing real estate grifter
has been able to drive other countries to defend themselves by dismantling the U.S.-centered world order. To rub it in, he is using
Bush and Reagan-era Neocon arsonists, John Bolton and now Elliott Abrams, to fan the flames in Venezuela. It is almost like a black
political comedy. The world of international diplomacy is being turned inside-out. A world where there is no longer even a pretense
that we might adhere to international norms, let alone laws or treaties.
The Neocons who Trump has appointed are accomplishing what seemed unthinkable not long ago: Driving China and Russia together
– the great nightmare of Henry Kissinger and Zbigniew Brzezinski. They also are driving Germany and other European countries into
the Eurasian orbit, the "Heartland" nightmare of Halford Mackinder a century ago.
The root cause is clear: After the crescendo of pretenses and deceptions over Iraq, Libya and Syria, along with our absolution
of the lawless regime of Saudi Arabia, foreign political leaders are coming to recognize what world-wide public opinion polls reported
even before the Iraq/Iran-Contra boys turned their attention to the world's largest oil reserves in Venezuela: The United States
is now the greatest threat to peace on the planet.
Calling the U.S. coup being sponsored in Venezuela a defense of democracy reveals the Doublethink underlying U.S. foreign
policy. It defines "democracy" to mean supporting U.S. foreign policy, pursuing neoliberal privatization of public infrastructure,
dismantling government regulation and following the direction of U.S.-dominated global institutions, from the IMF and World Bank
to NATO. For decades, the resulting foreign wars, domestic austerity programs and military interventions have brought more violence,
not democracy.
In the Devil's Dictionary that U.S. diplomats are taught to use as their "Elements of Style" guidelines for Doublethink, a "democratic"
country is one that follows U.S. leadership and opens its economy to U.S. investment, and IMF- and World Bank-sponsored privatization.
The Ukraine is deemed democratic, along with Saudi Arabia, Israel and other countries that act as U.S. financial and military protectorates
and are willing to treat America's enemies are theirs too.
A point had to come where this policy collided with the self-interest of other nations, finally breaking through the public
relations rhetoric of empire. Other countries are proceeding to de-dollarize and replace what U.S. diplomacy calls "internationalism"
(meaning U.S. nationalism imposed on the rest of the world) with their own national self-interest.
This trajectory could be seen 50 years ago (I described it in Super Imperialism [1972] and Global Fracture [1978].) It had to
happen. But nobody thought that the end would come in quite the way that is happening. History has turned into comedy, or at least
irony as its dialectical path unfolds.
For the past half-century, U.S. strategists, the State Department and National Endowment for Democracy (NED) worried that
opposition to U.S. financial imperialism would come from left-wing parties. It therefore spent enormous resources manipulating parties
that called themselves socialist (Tony Blair's British Labour Party, France's Socialist Party, Germany's Social Democrats, etc.)
to adopt neoliberal policies that were the diametric opposite to what social democracy meant a century ago. But U.S. political planners
and Great Wurlitzer organists neglected the right wing, imagining that it would instinctively support U.S. thuggishness.
The reality is that right-wing parties want to get elected, and a populist nationalism is today's road to election victory in
Europe and other countries just as it was for Donald Trump in 2016.
Trump's agenda may really be to break up the American Empire, using the old Uncle Sucker isolationist rhetoric of half a century
ago. He certainly is going for the Empire's most vital organs. But it he a witting anti-American agent? He might as well be – but
it would be a false mental leap to use "quo bono" to assume that he is a witting agent.
After all, if no U.S. contractor, supplier, labor union or bank will deal with him, would Vladimir Putin, China or Iran be any
more naïve? Perhaps the problem had to erupt as a result of the inner dynamics of U.S.-sponsored globalism becoming impossible
to impose when the result is financial austerity, waves of population flight from U.S.-sponsored wars, and most of all, U.S. refusal
to adhere to the rules and international laws that it itself sponsored seventy years ago in the wake of World War II.
Dismantling International Law and Its Courts
Any international system of control requires the rule of law. It may be a morally lawless exercise of ruthless power imposing
predatory exploitation, but it is still The Law. And it needs courts to apply it (backed by police power to enforce it and punish
violators).
Here's the first legal contradiction in U.S. global diplomacy: The United States always has resisted letting any other country
have any voice in U.S. domestic policies, law-making or diplomacy. That is what makes America "the exceptional nation." But for seventy
years its diplomats have pretended that its superior judgment promoted a peaceful world (as the Roman Empire claimed to be), which
let other countries share in prosperity and rising living standards.
At the United Nations, U.S. diplomats insisted on veto power. At the World Bank and IMF they also made sure that their equity
share was large enough to give them veto power over any loan or other policy. Without such power, the United States would not join
any international organization. Yet at the same time, it depicted its nationalism as protecting globalization and internationalism.
It was all a euphemism for what really was unilateral U.S. decision-making.
Inevitably, U.S. nationalism had to break up the mirage of One World internationalism, and with it any thought of an international
court. Without veto power over the judges, the U.S. never accepted the authority of any court, in particular the United Nations'
International Court in The Hague. Recently that court undertook an investigation into U.S. war crimes in Afghanistan, from its torture
policies to bombing of civilian targets such as hospitals, weddings and infrastructure. "That investigation ultimately found 'a reasonable
basis to believe that war crimes and crimes against humanity."
[1]
Donald Trump's National Security Adviser John Bolton erupted in fury, warning in September that: "The United States will use any
means necessary to protect our citizens and those of our allies from unjust prosecution by this illegitimate court," adding that
the UN International Court must not be so bold as to investigate "Israel or other U.S. allies."
That prompted a senior judge, Christoph Flügge from Germany, to resign in protest. Indeed, Bolton told the court to keep out of
any affairs involving the United States, promising to ban the Court's "judges and prosecutors from entering the United States." As
Bolton spelled out the U.S. threat: "We will sanction their funds in the U.S. financial system, and we will prosecute them in the
U.S. criminal system. We will not cooperate with the ICC. We will provide no assistance to the ICC. We will not join the ICC. We
will let the ICC die on its own. After all, for all intents and purposes, the ICC is already dead to us."
What this meant, the German judge spelled out was that: "If these judges ever interfere in the domestic concerns of the U.S. or
investigate an American citizen, [Bolton] said the American government would do all it could to ensure that these judges would no
longer be allowed to travel to the United States – and that they would perhaps even be criminally prosecuted."
The original inspiration of the Court – to use the Nuremburg laws that were applied against German Nazis to bring similar prosecution
against any country or officials found guilty of committing war crimes – had already fallen into disuse with the failure to indict
the authors of the Chilean coup, Iran-Contra or the U.S. invasion of Iraq for war crimes.
Dismantling Dollar Hegemony from the IMF to SWIFT
Of all areas of global power politics today, international finance and foreign investment have become the key flashpoint. International
monetary reserves were supposed to be the most sacrosanct, and international debt enforcement closely associated.
Central banks have long held their gold and other monetary reserves in the United States and London. Back in 1945 this seemed
reasonable, because the New York Federal Reserve Bank (in whose basement foreign central bank gold was kept) was militarily safe,
and because the London Gold Pool was the vehicle by which the U.S. Treasury kept the dollar "as good as gold" at $35 an ounce. Foreign
reserves over and above gold were kept in the form of U.S. Treasury securities, to be bought and sold on the New York and London
foreign-exchange markets to stabilize exchange rates. Most foreign loans to governments were denominated in U.S. dollars, so Wall
Street banks were normally name as paying agents.
That was the case with Iran under the Shah, whom the United States had installed after sponsoring the 1953 coup against Mohammed
Mosaddegh when he sought to nationalize Anglo-Iranian Oil (now British Petroleum) or at least tax it. After the Shah was overthrown,
the Khomeini regime asked its paying agent, the Chase Manhattan bank, to use its deposits to pay its bondholders. At the direction
of the U.S. Government Chase refused to do so. U.S. courts then declared Iran to be in default, and froze all its assets in the United
States and anywhere else they were able.
This showed that international finance was an arm of the U.S. State Department and Pentagon. But that was a generation ago,
and only recently did foreign countries begin to feel queasy about leaving their gold holdings in the United States, where they might
be grabbed at will to punish any country that might act in ways that U.S. diplomacy found offensive. So last year, Germany finally
got up the courage to ask that some of its gold be flown back to Germany. U.S. officials pretended to feel shocked at the insult
that it might do to a civilized Christian country what it had done to Iran, and Germany agreed to slow down the transfer.
But then came Venezuela. Desperate to spend its gold reserves to provide imports for its economy devastated by U.S. sanctions
– a crisis that U.S. diplomats blame on "socialism," not on U.S. political attempts to "make the economy scream" (as Nixon officials
said of Chile under Salvador Allende) – Venezuela directed the Bank of England to transfer some of its $11 billion in gold held in
its vaults and those of other central banks in December 2018. This was just like a bank depositor would expect a bank to pay a check
that the depositor had written.
England refused to honor the official request, following the direction of Bolton and U.S. Secretary of State Michael Pompeo.
As Bloomberg reported: "The U.S. officials are trying to steer Venezuela's overseas assets to [Chicago Boy Juan] Guaido to help bolster
his chances of effectively taking control of the government. The $1.2 billion of gold is a big chunk of the $8 billion in foreign
reserves held by the Venezuelan central bank."
Turkey seemed to be a likely destination, prompting Bolton and Pompeo to warn it to desist from helping Venezuela, threatening
sanctions against it or any other country helping Venezuela cope with its economic crisis. As for the Bank of England and other European
countries, the Bloomberg report concluded: "Central bank officials in Caracas have been ordered to no longer try contacting the Bank
of England. These central bankers have been told that Bank of England staffers will not respond to them."
This led to rumors that Venezuela was selling 20 tons of gold via a Russian Boeing 777 – some $840 million. The money probably
would have ended up paying Russian and Chinese bondholders as well as buying food to relieve the local famine.
[4] Russia denied this report, but Reuters has confirmed is that Venezuela has sold 3 tons of a planned 29 tones of gold to the
United Arab Emirates, with another 15 tones are to be shipped on Friday, February 1.
[5] The U.S. Senate's Batista-Cuban hardliner Rubio accused this of being "theft," as if feeding the people to alleviate the
U.S.-sponsored crisis was a crime against U.S. diplomatic leverage.
If there is any country that U.S. diplomats hate more than a recalcitrant Latin American country, it is Iran. President Trump's
breaking of the 2015 nuclear agreements negotiated by European and Obama Administration diplomats has escalated to the point of threatening
Germany and other European countries with punitive sanctions if they do not also break the agreements they have signed. Coming on
top of U.S. opposition to German and other European importing of Russian gas, the U.S. threat finally prompted Europe to find a way
to defend itself.
Imperial threats are no longer military. No country (including Russia or China) can mount a military invasion of another major
country. Since the Vietnam Era, the only kind of war a democratically elected country can wage is atomic, or at least heavy bombing
such as the United States has inflicted on Iraq, Libya and Syria. But now, cyber warfare has become a way of pulling out the
connections of any economy. And the major cyber connections are financial money-transfer ones, headed by SWIFT, the acronym for the
Society for Worldwide Interbank Financial Telecommunication, which is centered in Belgium.
Russia and China have already moved to create a shadow bank-transfer system in case the United States unplugs them from SWIFT.
But now, European countries have come to realize that threats by Bolton and Pompeo may lead to heavy fines and asset grabs if they
seek to continue trading with Iran as called for in the treaties they have negotiated.
On January 31 the dam broke with the announcement that Europe had created its own bypass payments system for use with Iran
and other countries targeted by U.S. diplomats. Germany, France and even the U.S. poodle Britain joined to create INSTEX -- Instrument
in Support of Trade Exchanges. The promise is that this will be used only for "humanitarian" aid to save Iran from a U.S.-sponsored
Venezuela-type devastation. But in view of increasingly passionate U.S. opposition to the Nord Stream pipeline to carry Russian gas,
this alternative bank clearing system will be ready and able to become operative if the United States tries to direct a sanctions
attack on Europe.
I have just returned from Germany and seen a remarkable split between that nation's industrialists and their political leadership.
For years, major companies have seen Russia as a natural market, a complementary economy needing to modernize its manufacturing and
able to supply Europe with natural gas and other raw materials. America's New Cold War stance is trying to block this commercial
complementarity. Warning Europe against "dependence" on low-price Russian gas, it has offered to sell high-priced LNG from the United
States (via port facilities that do not yet exist in anywhere near the volume required). President Trump also is insisting that NATO
members spend a full 2 percent of their GDP on arms – preferably bought from the United States, not from German or French merchants
of death.
The U.S. overplaying its position is leading to the Mackinder-Kissinger-Brzezinski Eurasian nightmare that I mentioned above.
In addition to driving Russia and China together, U.S. diplomacy is adding Europe to the heartland, independent of U.S. ability to
bully into the state of dependency toward which American diplomacy has aimed to achieve since 1945.
The World Bank, for instance, traditionally has been headed by a U.S. Secretary of Defense. Its steady policy since its inception
is to provide loans for countries to devote their land to export crops instead of giving priority to feeding themselves. That is
why its loans are only in foreign currency, not in the domestic currency needed to provide price supports and agricultural extension
services such as have made U.S. agriculture so productive. By following U.S. advice, countries have left themselves open to food
blackmail – sanctions against providing them with grain and other food, in case they step out of line with U.S. diplomatic demands.
It is worthwhile to note that our global imposition of the mythical "efficiencies" of forcing Latin American countries to
become plantations for export crops like coffee and bananas rather than growing their own wheat and corn has failed catastrophically
to deliver better lives, especially for those living in Central America. The "spread" between the export crops and cheaper food imports
from the U.S. that was supposed to materialize for countries following our playbook failed miserably – witness the caravans and refugees
across Mexico. Of course, our backing of the most brutal military dictators and crime lords has not helped either.
Likewise, the IMF has been forced to admit that its basic guidelines were fictitious from the beginning. A central core has been
to enforce payment of official inter-government debt by withholding IMF credit from countries under default. This rule was instituted
at a time when most official inter-government debt was owed to the United States. But a few years ago Ukraine defaulted on $3
billion owed to Russia. The IMF said, in effect, that Ukraine and other countries did not have to pay Russia or any other country
deemed to be acting too independently of the United States. The IMF has been extending credit to the bottomless it of Ukrainian corruption
to encourage its anti-Russian policy rather than standing up for the principle that inter-government debts must be paid.
It is as if the IMF now operates out of a small room in the basement of the Pentagon in Washington. Europe has taken
notice that its own international monetary trade and financial linkages are in danger of attracting U.S. anger. This became clear
last autumn at the funeral for George H. W. Bush, when the EU's diplomat found himself downgraded to the end of the list to be called
to his seat. He was told that the U.S. no longer considers the EU an entity in good standing. In December, "Mike Pompeo gave a speech
on Europe in Brussels -- his first, and eagerly awaited -- in which he extolled the virtues of nationalism, criticised multilateralism
and the EU, and said that "international bodies" which constrain national sovereignty "must be reformed or eliminated."
[5]
Most of the above events have made the news in just one day, January 31, 2019. The conjunction of U.S. moves on so many fronts,
against Venezuela, Iran and Europe (not to mention China and the trade threats and moves against Huawei also erupting today) looks
like this will be a year of global fracture.
It is not all President Trump's doing, of course. We see the Democratic Party showing the same colors. Instead of applauding democracy
when foreign countries do not elect a leader approved by U.S. diplomats (whether it is Allende or Maduro), they've let the mask fall
and shown themselves to be the leading New Cold War imperialists. It's now out in the open. They would make Venezuela the new Pinochet-era
Chile. Trump is not alone in supporting Saudi Arabia and its Wahabi terrorists acting, as Lyndon Johnson put it, "Bastards, but they're
our bastards."
Where is the left in all this? That is the question with which I opened this article. How remarkable it is that it is only right-wing
parties, Alternative for Deutschland (AFD), or Marine le Pen's French nationalists and those of other countries that are opposing
NATO militarization and seeking to revive trade and economic links with the rest of Eurasia.
The end of our monetary imperialism, about which I first wrote in 1972 in Super Imperialism, stuns even an informed observer like
me. It took a colossal level of arrogance, short-sightedness and lawlessness to hasten its decline -- something that only crazed
Neocons like John Bolton, Elliot Abrams and Mike Pompeo could deliver for Donald Trump.
[2] Patricia Laya, Ethan Bronner and Tim Ross,
"Maduro Stymied in Bid to Pull $1.2 Billion of Gold From U.K.," Bloomberg, January 25, 2019. Anticipating just such a double-cross,
President Chavez acted already in 2011 to repatriate 160 tons of gold to Caracas from the United States and Europe.
Well, if the StormTrumpers can tear down all the levers and institutions of international US dollar strength, perhaps they
can also tear down all the institutions of Corporate Globalonial Forced Free Trade. That itself may BE our escape . . . if there
are enough millions of Americans who have turned their regionalocal zones of habitation into economically and politically armor-plated
Transition Towns, Power-Down Zones, etc. People and places like that may be able to crawl up out of the rubble and grow and defend
little zones of semi-subsistence survival-economics.
If enough millions of Americans have created enough such zones, they might be able to link up with eachother to offer hope
of a movement to make America in general a semi-autarchik, semi-secluded and isolated National Survival Economy . . . . much smaller
than today, perhaps likelier to survive the various coming ecosystemic crash-cramdowns, and no longer interested in leading or
dominating a world that we would no longer have the power to lead or dominate.
We could put an end to American Exceptionalism. We could lay this burden down. We could become American Okayness Ordinarians.
Make America an okay place for ordinary Americans to live in.
If Populists, I assume that's what you mean by "Storm Troopers", offer me M4A and revitalized local economies, and deliver
them, they have my support and more power to them.
That's why Trump was elected, his promises, not yet delivered, were closer to that then the Democrats' promises. If the Democrats
promised those things and delivered, then they would have my support.
If the Democrats run a candidate, who has a no track record of delivering such things, we stay home on election day. Trump
can have it, because it won't be any worse.
I don't give a damn about "social issues." Economics, health care and avoiding WWIII are what motivates my votes, and I think
more and more people are going to vote the same way.
Good point about Populist versus StormTrumper. ( And by the way, I said StormTRUMper, not StormTROOper). I wasn't thinking
of the Populists. I was thinking of the neo-etc. vandals and arsonists who want us to invade Venezuela, leave the JCPOA with Iran,
etc. Those are the people who will finally drive the other-country governments into creating their own parallel payment systems,
etc.
And the midpoint of those efforts will leave wreckage and rubble for us to crawl up out of. But we will have a chance to crawl
up out of it.
My reason for voting for Trump was mainly to stop the Evil Clinton from getting elected and to reduce the chance of near immediate
thermonuclear war with Russia and to save the Assad regime in Syria from Clintonian overthrow and replacement with an Islamic
Emirate of Jihadistan.
Much of what will be attempted " in Trump's name" will be de-regulationism of all kinds delivered by the sorts of basic Republicans
selected for the various agencies and departments by Pence and Moore and the Koch Brothers. I doubt the Populist Voters wanted
the Koch-Pence agenda. But that was a risky tradeoff in return for keeping Clinton out of office.
The only Dems who would seek what you want are Sanders or maybe Gabbard or just barely Warren. The others would all be Clinton
or Obama all over again.
I couldn't really find any details about the new INSTEX system – have you got any good links to brush up on? I know they made
an announcement yesterday but how long until the new payment system is operational?
arguably wouldn't it be better if for USD hegemony to be dismantled? A strong USD hurts US exports, subsidizes American consumption
(by making commodities cheaper in relative terms), makes international trade (aka a 8,000-mile+ supply chain) easier.
For the sake of the environment, you want less of all three. Though obviously I don't like the idea of expensive gasoline,
natural gas or tube socks either.
It would be good for Americans, but the wrong kind of Americans. For the Americans that would populate the Global Executive
Suite, a strong US$ means that the stipends they would pay would be worth more to the lackeys, and command more influence.
Dumping the industrial base really ruined things. America is now in a position where it can shout orders, and drop bombs,
but doesn't have the capacity to do anything helpful. They have to give up being what Toynbee called a creative minority, and
settle for being a dominant minority.
Having watched the 2016 election closely from afar, I was left with the impression that many of the swing voters who cast
their vote for Trump did so under the assumption that he would act as a catalyst for systemic change.
What this change would consist of, and how it would manifest, remained an open question. Would he pursue rapprochement with
Russia and pull troops out of the Middle East as he claimed to want to do during his 2016 campaign, would he doggedly pursue corruption
charges against Clinton and attempt to reform the FBI and CIA, or would he do both, neither, or something else entirely?
Now we know. He has ripped the already transparent mask of altruism off what is referred to as the U.S.-led liberal international
order and revealed its true nature for all to see, and has managed to do it in spite of the liberal international establishment
desperately trying to hold it in place in the hope of effecting a seamless post-Trump return to what they refer to as "norms".
Interesting times.
Exactly. He hasn't exactly lived up to advanced billing so far in all respects, but I suspect there's great deal of skulduggery
going on behind the scenes that has prevented that. Whether or not he ever had or has a coherent plan for the havoc he has
wrought, he has certainly been the agent for change many of us hoped he would be, in stark contrast to the criminal duopoly parties
who continue to oppose him, where the daily no news is always bad news all the same. To paraphrase the infamous Rummy, you
don't go to war with the change agent and policies you wished you had, you go to war with the ones you have. That might be the
best thing we can say about Trump after the historic dust of his administration finally settles.
Look on some bright sides. Here is just one bright side to look on. President Trump has delayed and denied the Clinton Plan
to topple Assad just long enough that Russia has been able to help Assad preserve legitimate government in most of Syria and defeat
the Clinton's-choice jihadis.
That is a positive good. Unless you are pro-jihadi.
Clinton wasn't going to "benefit the greater good" either, and a very strong argument, based on her past behavior, can be made
that she represented the greater threat. Given that the choice was between her and Trump, I think voters made the right decision.
Hudson's done us a service in pulling these threads together. I'd missed the threats against the ICC judges. One question:
is it possible for INSTEX-like arrangements to function secretly? What is to be gained by announcing them publicly and drawing
the expected attacks? Does that help sharpen conflicts, and to what end?
Maybe they're done in secret already – who knows? The point of doing it publicly is to make a foreign-policy impact, in this
case withdrawing power from the US. It's a Declaration of Independence.
It certainly seems as though the 90 percent (plus) are an afterthought in this journey to who knows where? Like George C.Scott
said while playing Patton, "The whole world at economic war and I'm not part of it. God will not let this happen." Looks like
we're on the Brexit track (without the vote). The elite argue with themselves and we just sit and watch. It appears to me that
the elite just do not have the ability to contemplate things beyond their own narrow self interest. We are all deplorables now.
The end of America's unchallenged global economic dominance has arrived sooner than expected
Is not supported by this (or really the rest of the article). The past tense here, for example, is unwarranted:
At the United Nations, U.S. diplomats insisted on veto power. At the World Bank and IMF they also made sure that their
equity share was large enough to give them veto power over any loan or other policy.
And this
So last year, Germany finally got up the courage to ask that some of its gold be flown back to Germany. Germany agreed
to slow down the transfer.
Doesn't show Germany as breaking free at all, and worse it is followed by the pregnant
But then came Venezuela.
Yet we find out that Venezuela didn't managed to do what they wanted to do, the Europeans, the Turks, etc bent over yet
again. Nothing to see here, actually.
So what I'm saying is he didn't make his point. I wish it were true. But a bit of grumbling and (a tiny amount of) foot-dragging
by some pygmy leaders (Merkel) does not signal a global change.
"So what I'm saying is he didn't make his point. I wish it were true. But a bit of grumbling and (a tiny amount of) foot-dragging
by some pygmy leaders (Merkel) does not signal a global change."
I'm surprised more people aren't recognizing this. I read the article waiting in vain for some evidence of "the end of our
monetary imperialism" besides some 'grumbling and foot dragging' as you aptly put it. There was some glimmer of a buried lede
with INTEX, created to get around U.S. sanctions against Iran ─ hardly a 'dam-breaking'. Washington is on record as being annoyed.
Currency regime change can take decades, and small percentage differences are enormous because of the flows involved. USD
as reserve for 61% of global sovereigns versus 64% 15 years ago is a massive move. World bond market flows are 10X the size
of world stock market flows even though the price of the Dow and Facebook shares etc get all of the headlines.
And foreign exchange flows are 10-50X the flows of bond markets, they're currently on the order of $5 *trillion* per day. And
since forex is almost completely unregulated it's quite difficult to get the data and spot reserve currency trends. Oh, and buy
gold. It's the only currency that requires no counterparty and is no one's debt obligation.
That's not what Hudson claims in his swaggering final sentence:
"The end of our monetary imperialism, about which I first wrote in 1972 in Super Imperialism, stuns even an informed
observer like me."
Which is risible as not only did he fail to show anything of the kind, his opening sentence stated a completely different reality:
"The end of America's unchallenged global economic dominance has arrived sooner than expected" So if we hold him to his first
declaration, his evidence is feeble, as I mentioned. As a scholar, his hyperbole is untrustworthy.
No, gold is pretty enough lying on the bosom of a lady-friend but that's about its only usefulness in the real world.
Always bemusing that gold bugs never talk about gold being in a bubble . yet when it goes south of its purchase price speak
in tongues about ev'bal forces.
thanks Mr. Hudson. One has to wonder what has happened when the government (for decades) has been shown to be morally and otherwise
corrupt and self serving. It doesn't seem to bother anyone but the people, and precious few of them. Was it our financial and
legal bankruptcy that sent us over the cliff?
Indeed! It is to say the least encouraging to see Dr. Hudson return so forcefully to the theme of 'monetary imperialism'.
I discovered his Super Imperialism while looking for an explanation for the pending 2003 US invasion of Iraq. If you
haven't read it yet, move it to the top of your queue if you want to have any idea of how the world really works. You can
find any number of articles on his web site that return periodically to the theme of monetary imperialism. I remember one in particular
that described how the rest of the world was brought on board to help pay for its good old-fashioned military imperialism.
If it isn't clear to the rest of the world by now, it never will be. The US is incapable of changing on its own a corrupt
status quo dominated by a coalition of its military industrial complex, Wall Street bankers and fossil fuels industries. As long
as the world continues to chase the debt created on the keyboards of Wall Street banks and 'deficits don't matter' Washington
neocons – as long as the world's 1% think they are getting 'richer' by adding more "debts that can't be repaid (and) won't be"
to their portfolios, the global economy can never be put on a sustainable footing.
Until the US returns to the path of genuine wealth creation, it is past time for the rest of the world to go its own way with
its banking and financial institutions.
In other words, after 2 World Wars that produced the current world order, it is still in a state of insanity with the same
pretensions to superiority by the same people, to get number 3.
UK withholding Gold may start another Brexit? IE: funds/gold held by BOE for other countries in Africa, Asian, South America,
and the "stans" with start to depart, slowly at first, perhaps for Switzerland?
Where is the left in all this? Pretty much the same place as Michael Hudson, I'd say. Where is the US Democratic Party in all
this? Quite a different question, and quite a different answer. So far as I can see, the Democrats for years have bombed, invaded
and plundered other countries 'for their own good'. Republicans do it 'for the good of America', by which the ignoramuses mean
the USA. If you're on the receiving end, it doesn't make much difference.
Agreed! South America intervention and regime change, Syria ( Trump is pulling out), Iraq, Middle East meddling, all predate
Trump. Bush, Clinton and Obama have nothing to do with any of this.
" So last year, Germany finally got up the courage to ask that some of its gold be flown back to Germany. "
What proof is there that the gold is still there? Chances are it's notional. All Germany, Venezuela, or the others have is
an IOU – and gold cannot be printed. Incidentally, this whole discussion means that gold is still money and the gold standard
still exists.
What makes you think that the gold in Fort Knox is still there? If I remember right, there was a Potemkin visit back in the
70s to assure everyone that the gold was still there but not since then. Wait, I tell a lie. There was another visit about two
years ago but look who was involved in that visit-
And I should mention that it was in the 90s that between 1.3 and 1.5 million 400 oz tungsten blanks were manufactured in the
US under Clinton. Since then gold-coated tungsten bars have turned up in places like Germany, China, Ethiopia, the UK, etc so
who is to say if those gold bars in Fort Knox are gold all the way through either. More on this at --
http://viewzone2.com/fakegoldx.html
It wasn't last year that Germany brought back its Gold. It has been ongoing since 2013, after some political and popular pressure
build up. They finished the transaction in 2017. According to an article in Handelblatt (but it was widely reported back then)
they brought back pretty much everything they had in Paris (347t), left what they had in London (perhaps they should have done
it in reverse) and took home another 300t from the NY Fed. That still leaves 1236t in NY. But half of their Gold (1710t) is now
in Frankfurt. That is 50% of the Bundesbanks holdings.
They made a point in saying that every bar was checked and weighed and presented some bars in Frankfurt. I guess they didn't
melt them for assaying, but I'd expect them to be smart enough to check the density.
Their reason to keep Gold in NY and London is to quickly buy USD in case of a crisis. That's pretty much a cold war plan, but
that's what they do right now.
Regarding Michal Hudsons piece, I enjoyed reading through this one. He tends to write ridiculously long articles and in the
last few years with less time and motivation at hand I've skipped most of his texts on NC as they just drag on.
When I'm truly fascinated I like well written, long articles but somehow he lost me at some point. But I noticed that some
long original articles in US magazines, probably research for a long time by the journalist, can just drag on for ever as well
I just tune out.
This is making sense. I would guess that tearing up the old system is totally deliberate. It wasn't working so well for us
because we had to practice too much social austerity, which we have tried to impose on the EU as well, just to stabilize "king
dollar" – otherwise spread so thin it was a pending catastrophe.
Now we can get out from under being the reserve currency – the currency that maintains its value by financial manipulation
and military bullying domestic deprivation. To replace this old power trip we are now going to mainline oil. The dollar will become
a true petro dollar because we are going to commandeer every oil resource not already nailed down.
When we partnered with SA in Aramco and the then petro dollar the dollar was only backed by our military. If we start monopolizing
oil, the actual commodity, the dollar will be an apex competitor currency without all the foreign military obligations which will
allow greater competitive advantages.
No? I'm looking at PdVSA, PEMEX and the new "Energy Hub for the Eastern Mediterranean" and other places not yet made public.
It looks like a power play to me, not a hapless goofball president at all.
So sand people with sociological attachment to the OT is a compelling argument based on antiquarian preferences with authoritarian
patriarchal tendencies for their non renewable resource . after I might add it was deemed a strategic concern after WWII .
Considering the broader geopolitical realities I would drain all the gold reserves to zero if it was on offer . here natives
have some shiny beads for allowing us to resource extract we call this a good trade you maximize your utility as I do mine .
Hay its like not having to run C-corp compounds with western 60s – 70s esthetics and letting the locals play serf, blow back
pay back, and now the installed local chiefs can own the risk and refocus the attention away from the real antagonists.
Indeed. Thanks so much for this. Maybe the RICS will get serious now – can no longer include Brazil with Bolsonaro. There needs
to be an alternate system or systems in place, and to see US Imperialism so so blatantly and bluntly by Trump admin –
"US
gives Juan Guaido control over some Venezuelan assets" – should sound sirens on every continent and especially in the developing
world. I too hope there will be fracture to the point of breakage. Countries of the world outside the US/EU/UK/Canada/Australia
confraternity must now unite to provide a permanent framework outside the control of imperial interests. The be clear, this must
not default to alternative forms of imperialism germinating by the likes of China.
" such criticism can't begin to take in the full scope of the damage the Trump White House is inflicting on the system of global
power Washington built and carefully maintained over those 70 years. Indeed, American leaders have been on top of the world for
so long that they no longer remember how they got there.
Few among Washington's foreign policy elite seem to fully grasp the complex system that made U.S. global power what it
now is, particularly its all-important geopolitical foundations. As Trump travels the globe, tweeting and trashing away, he's
inadvertently showing us the essential structure of that power, the same way a devastating wildfire leaves the steel beams of
a ruined building standing starkly above the smoking rubble."
I read something like this and I am like, some of these statements need to be qualified. Like: "Driving China and Russia together".
Like where's the proof? Is Xi playing telephone games more often now with Putin? I look at those two and all I see are two egocentric
people who might sometimes say the right things but in general do not like the share the spotlight. Let's say they get together
to face America and for some reason the later gets "defeated", it's not as if they'll kumbaya together into the night.
This website often points out the difficulties in implementing new banking IT initiatives. Ok, so Europe has a new "payment
system". Has it been tested thoroughly? I would expect a couple of weeks or even months of chaos if it's not been tested, and
if it's thorough that probably just means that it's in use right i.e. all the kinks have been worked out. In that case the transition
is already happening anyway. But then the next crisis arrives and then everyone would need their dollar swap lines again which
probably needs to cleared through SWIFT or something.
Anyway, does this all mean that one day we'll wake up and a slice of bacon is 50 bucks as opposed to the usual 1 dollar?
Driving Russia and China together is correct. I recall them signing a variety of economic and military agreement a few years
ago. It was covered in the media. You should at least google an issue before making silly comments. You might start with the report
of Russia and China signing 30 cooperation agreements three years ago. See
https://www.rbth.com/international/2016/06/27/russia-china-sign-30-cooperation-agreements_606505
. There are lots and lots of others.
He's draining the swamp in an unpredicted way, a swamp that's founded on the money interest. I don't care what NYT and
WaPo have to say, they are not reporting events but promoting agendas.
The financial elites are only concerned about shaping society as they see fit, side of self serving is just a historical
foot note, Trumps past indicates a strong preference for even more of the same through authoritarian memes or have some missed
the OT WH reference to dawg both choosing and then compelling him to run.
Whilst the far right factions fight over the rudder the only new game in town is AOC, Sanders, Warren, et al which Trumps supporters
hate with Ideological purity.
Highly doubt Trump is a "witting agent", most likely is that he is just as ignorant as he almost daily shows on twitter. On
US role in global affairs he says the same today as he did as a media celebrity in the late 80s. Simplistic household "logics"
on macroeconomics. If US have trade deficit it loses. Countries with surplus are the winners.
On a household level it fits, but there no "loser" household that in infinity can print money that the "winners" can accumulate
in exchange for their resources and fruits of labor.
One wonder what are Trumps idea of US being a winner in trade (surplus)? I.e. sending away their resources and fruits of labor
overseas in exchange for what? A pile of USD? That US in the first place created out of thin air. Or Chinese Yuan, Euros, Turkish
liras? Also fiat-money. Or does he think US trade surplus should be paid in gold?
When the US political and economic hegemony will unravel it will come "unexpected". Trump for sure are undermining it with
his megalomaniac ignorance. But not sure it's imminent.
Anyhow frightening, the US hegemony have its severe dark sides. But there is absolutely nothing better on the horizon, a crash
will throw the world in turmoil for decades or even a century. A lot of bad forces will see their chance to elevate their influence.
There will be fierce competition to fill the gap.
On could the insane economic model of EU/Germany being on top of global affairs, a horribly frightening thought. Misery and
austerity for all globally, a permanent recession. Probably not much better with the Chinese on top.
I'll take the USD hegemony any day compared to that prospect.
Michael Hudson, in Super Imperialism, went into how the US could just create the money to run a large trade deficit with the
rest of the world. It would get all these imports effectively for nothing, the US's exorbitant privilege. I tied this in with this graph from MMT.
The trade deficit required a large Government deficit to cover it and the US government could just create the money to cover
it.
Then ideological neoliberals came in wanting balanced budgets and not realising the Government deficit covered the trade deficit.
The US has been destabilising its own economy by reducing the Government deficit. Bill Clinton didn't realize a Government surplus is an indicator a financial crisis is about to hit. The last US Government surplus occurred in 1927 – 1930, they go hand-in-hand with financial crises.
Richard Koo shows the graph central bankers use and it's the flow of funds within the economy, which sums to zero (32-34 mins.).
The Government was running a surplus as the economy blew up in the early 1990s. It's the positive and negative, zero sum, nature of the monetary system. A big trade deficit needs a big Government deficit to cover it. A big trade deficit, with a balanced budget, drives the private sector into debt and blows up the economy.
It should be remembered Bill Clinton's early meeting with Rubin, where in he was informed that wages and productivity had diverged –
Rubin did not blink an eye.
That bill alone makes Warren a viable candidate again, despite all her previous blunders. She is a courageous woman, that
Warren. And she might wipe the floor with the completely subservant to Israel lobby Trump. Who betrayed his electorate
in all major promises.
Notable quotes:
"... Not only would Warren's legislation prohibit some of the most destructive private equity activities, but it would end their ability to act as traditional asset managers, taking fees and incurring close to no risk if their investments go belly up. The bill takes the explicit and radical view that: ..."
"... Private funds should have a stake in the outcome of their investments, enjoying returns if those investments are successful but ab-1sorbing losses if those investments fail. ..."
"... Critics will say that Warren's bill has no chance of passing, which is currently true but misses the point. ..."
"... firms would share responsibility for the liabilities of companies under their control, including debt, legal judgments, and pension obligations to "better align the incentives of private equity firms and the companies they own." The bill, if enacted, would end the tax subsidy for excessive leverage and closes the carried interest loophole. ..."
"... The bill also seeks to ban dividends to investors for two years after a firm is acquired. Worker pay would be prioritized in the bankruptcy process, with guidelines intended to ensure affected employees are more likely to receive severance pay and pensions. It would also clarify gift cards are consumer deposits, ensuring their priority in bankruptcy proceedings. If enacted, private equity managers will be required to disclose fees, returns, and political expenditures. ..."
"... This is a bold set of proposals that targets abuses that hurt workers and investors. Most readers may not appreciate the significance of the two-year restriction on dividends. One return-goosing strategy that often leaves companies crippled or bankrupt in its wake is the "dividend recap" in which the acquired company takes on yet more debt for the purpose of paying a special dividend to its investors. Another strategy that Appelbaum and Batt have discussed at length is the "op co/prop co." Here the new owners take real estate owned by the company, sell it to a new entity with the former owner leasing it. The leases are typically set high so as to allow for the "prop co" to be sold at a richer price. This strategy is often a direct contributor to the death of businesses, since ones that own their real estate usually do so because they are in cyclical industries, and not having lease payments enables the to ride out bad times. The proceeds of sale of the real estate is usually dividended out to the investors, hence the dividend restriction would also pour cold water on this approach. ..."
"... However, there is precedent in private equity for recognizing joint and several liability of an investment fund for the obligations of its portfolio companies. In a case that winded its way through the federal courts until last year ( Sun Capital Partners III, LP v. New England Teamsters & Trucking Indus. Pension Fund ), the federal court held that Sun Capital Partners III was liable under ERISA, the federal pension law, for the unfunded pension obligations of Scott Brass, a portfolio company of that fund. The court's key finding was that Sun Capital played an active management role in Scott Brass and that its claim of passive investor status therefore should not be respected. ..."
"... Needless to say, private equity firms have worked hard to minimize their exposure to the Sun Capital decision, for example by avoiding purchasing companies with defined benefit pension plans. The Warren bill, however, is so broad in the sweep of liability it imposes that PE firms would be unlikely to be able to structure around it. It is hard to imagine the investors in private equity funds accepting liability for what could be enormous sums of unfunded pension liabilities ultimately flowing onto them. Either they would have to set up shell companies to fund their PE investments that could absorb the potential liability, or they would have to give up on the asset class. Either way, it would mean big changes to the industry and potentially a major contraction of it. ..."
"... I am surprised that Warren sought to make private equity funds responsible for the portfolio company debts by "joint and several liability". You can get to economically pretty much the same end by requiring the general partner and potentially also key employees to guarantee the debt and by preventing them from assigning or buying insurance to protect the guarantor from being liable. There is ample precedent for that for entrepreneurs. Small business corporate credit cards and nearly all small business loans require a personal guarantee. ..."
"... Warren's bill also has strong pro-investor provisions. It takes on the biggest feature of the ongoing investor scamming, which is the failure of PE managers to disclose to the investors all of the fees they receive from portfolio companies. The solution proposed by the bill to this problem is exceedingly straightforward, basically proclaiming, "Oh yeah, now you will have to disclose that." The bill also abolishes the ability of private equity managers to claim long term capital gains treatment on the 20 percent of fund profits that they receive, which is unrelated to the return on any capital that the private equity managers may happen to invest in a fund. ..."
"... We need a reparations movement for all those workers harmed by private equity. Seriously. ..."
"... It's so nice to see someone taking steps to protect the rights and compensation of the people actually doing the work at the companies and putting their interests first in case of bankruptcy. That those who worked hardest to make the company succeed were somehow the ones who took it in the shorts the worst has always struck me as a glaring inequity bordering on cruelty. ..."
Elizabeth Warren's
Stop Wall Street Looting Act , which is co-sponsored by Tammy Baldwin, Sherrod Brown, Mark Pocan and Pramila Jayapal, seeks to
fundamentally alter the way private equity firms operate. While the likely impetus for Warren's bill was the spate of private-equity-induced
retail bankruptcies, with Toys 'R' Us particularly prominent, the bill addresses all the areas targeted by critics of private equity:
how it hurts workers and investors and short-changes the tax man, thus burdening taxpayers generally.
"When the music stops, in terms of liquidity, things will be complicated. But as long as the
music is playing, you've got to get up and dance. We're still dancing,"
"A baited banker thus desponds,
From his own hand foresees his fall,
They have his soul, who have his bonds;
'Tis like the writing on the wall.
How will the caitiff wretch be scared,
When first he finds himself awake
At the last trumpet, unprepared,
And all his grand account to make!
For in that universal call,
Few bankers will to heaven be mounters;
They'll cry, 'Ye shops, upon us fall!
Conceal and cover us, ye counters!'
When other hands the scales shall hold,
And they, in men's and angels' sight
Produced with all their bills and gold,
'Weigh'd in the balance and found light!'
"... When tariffs went up from 0 to 10% on some product categories last year, many suppliers agreed to absorb half that amount (5%) in exchange for larger orders. The logic was as follows: higher orders lead to better deals with component suppliers and to higher production efficiencies, which means lower costs. ..."
"... Do you ship American wood for processing in China and re-exporting to the US? You might have issues getting that material into China as smoothly as before. And then, the US Customs office might give you a hard time when you bring the goods in, too! ..."
"... Who knows what non-monetary barriers the Chinese will erect. One can count on their creativity ..."
"... Several US companies asked our company to look for assembly plants in Vietnam and, in those cases where we found some options, they were much more expensive than China. There is a reason why China's share of hard goods production in Asia has kept growing in recent years -- competition is often non-existent. ..."
"... Now, with China's products suddenly much more expensive, what are these competing countries going to do? Won't they take advantage of it and push wages further up, at least for the export manufacturing sector? ..."
"... Mexico should be the clear winner of this trade war. They are next to the US, their labor cost is comparable to that of China, and many American companies have long had extensive operations there. ..."
Based on
allthe
articles I have read about the current geopolitical situation, I am not optimistic about
the affect of the US-China trade war on American importers. Dan Harris, who wrote "
the US-China Cold War start now, " announced that a "mega-storm" might be coming, and he
may be right.
Now, if things turn out as bad as predicted, and if tariffs apply on more goods imported
from China to the US -- and at higher rates -- what does it mean for US importers?
What
will the damage from the US-China trade war look like?
These are my thoughts about who or what is going to be hit hard by the ongoing 'trade
war:'
1. Small importers will be hit much harder than larger ones
If you work with very large Chinese manufacturers, many of them have already started to set
up operations outside of mainland China, for the simple reason that most of their customers
have been pushing for that.
They are in Vietnam, Malaysia, etc. And this is true in most industries -- from apparel to
electronics.
Do they still have to import most of their components from China? It depends on their
footprints. As I wrote before :
You set up a mammoth plant and you don't want your high-value component suppliers to be
more than 1 hour away from you, for just-in-time inventory replenishment? They can be
requested to set up a new manufacturing facility next to you.
2. A higher total cost of goods purchased from China
This one is obvious. If you have orders already in production, they will cost you more than
expected.
The RMB might slide quite a bit, and that might alleviate the total cost. I hope you have
followed my advice and started paying your suppliers in RMB , to benefit
from it automatically.
Beijing might also give other forms of subsidies to their exporters. They might be quite
visible (e.g. a higher VAT rebate) or totally 'under the table'.
3. Difficult
negotiations with Chinese suppliers
Can you say the tariffs are Beijing's fault, and so your suppliers should absorb the
tariffs? That's not going to work.
When tariffs went up from 0 to 10% on some product categories last year, many suppliers
agreed to absorb half that amount (5%) in exchange for larger orders. The logic was as follows:
higher orders lead to better deals with component suppliers and to higher production
efficiencies, which means lower costs.
When tariffs go from 10% to 35%, what else can US buyers give their counter-parties?
Payments in advance? Lower quality standards? I don't believe that.
4. Difficulties at
several levels in the supply chain
Do you ship American wood for processing in China and re-exporting to the US? You might have
issues getting that material into China as smoothly as before. And then, the US Customs office
might give you a hard time when you bring the goods in, too!
Who knows what non-monetary barriers the Chinese will erect. One can count on their
creativity
5. Short-term non-elasticity of alternative sources
There are a finite number of Vietnamese export-ready manufacturers that can make your
orders. And, chances are, their capacity is already full. If you haven't prepared this move for
months (or years), other US companies have. The early bird gets the worm
Same thing with Thailand, Indonesia, India, and so on, with the exception of apparel and
(maybe) footwear.
Several US companies asked our company
to look for assembly plants in Vietnam and, in those cases where we found some options, they
were much more expensive than China. There is a reason why China's share of
hard goods production in Asia has kept growing in recent years -- competition is often
non-existent.
6. Faster cost increases in other low-cost Asian countries
Now, with China's products suddenly much more expensive, what are these competing countries
going to do? Won't they take advantage of it and push wages further up, at least for the export
manufacturing sector?
There could be some 'silver linings' due to the trade war
It is not all bad news though. We may see these benefits caused by China and the USA
slugging it out too:
7. Many opportunities for Mexico
Mexico should be the clear winner of this trade war. They are next to the US, their labor
cost is comparable to that of China, and many American companies have long had extensive
operations there.
8. Rapid consolidation in the Chinese manufacturing sector
The fittest will survive. Many uncompetitive manufacturers and traders will fold. Consolidation
will accelerate. I often look at what happened in Japan and South Korea . Each of these countries
developed very fast and, when the going got tough, the export manufacturing sector got
devastated. Only the most competitive survived.
9. Relaxed enforcement of anti-pollution
regulations in China?
I'd bet that, if the tariffs hit hard, far fewer operations will get closed for
environmental reasons. Preserving employment and social peace will prevail.
Over the last two years, a different, in some ways unrecognizable Larry Summers has been appearing in newspaper editorial pages.
More circumspect in tone, this humbler Summers has been arguing that economic opportunities in the developing world are slowing,
and that the already rich economies are finding it hard to get out of the crisis. Barring some kind of breakthrough, Summers says,
an era of slow growth is here to stay.
In Summers's recent writings, this sombre conclusion has often been paired with a surprising political goal: advocating for a
"responsible nationalism". Now he argues that politicians must recognise that "the basic responsibility of government is to maximise
the welfare of citizens, not to pursue some abstract concept of the global good".
One curious thing about the pro-globalisation consensus of the 1990s and 2000s, and its collapse in recent years, is how closely
the cycle resembles a previous era. Pursuing free trade has always produced displacement and inequality – and political chaos, populism
and retrenchment to go with it. Every time the social consequences of free trade are overlooked, political backlash follows. But
free trade is only one of many forms that economic integration can take. History seems to suggest, however, that it might be the
most destabilising one.
... ... ...
The international systems that chastened figures such as Keynes helped produce in the next few years – especially the Bretton
Woods agreement and the General Agreement on Tariffs and Trade (Gatt) – set the terms under which the new wave of globalisation
would take place.
The key to the system's viability, in Rodrik's view, was its flexibility – something absent from contemporary globalisation,
with its one-size-fits-all model of capitalism. Bretton Woods stabilised exchange rates by pegging the dollar loosely to gold, and
other currencies to the dollar. Gatt consisted of rules governing free trade – negotiated by participating countries in a series
of multinational "rounds" – that left many areas of the world economy, such as agriculture, untouched or unaddressed. "Gatt's purpose
was never to maximise free trade," Rodrik writes. "It was to achieve the maximum amount of trade compatible with different nations
doing their own thing. In that respect, the institution proved spectacularly successful."
Partly because Gatt was not always dogmatic about free trade, it allowed most countries to figure out their own economic objectives,
within a somewhat international ambit. When nations contravened the agreement's terms on specific areas of national interest, they
found that it "contained loopholes wide enough for an elephant to pass", in Rodrik's words. If a nation wanted to protect its steel
industry, for example, it could claim "injury" under the rules of Gatt and raise tariffs to discourage steel imports: "an abomination
from the standpoint of free trade". These were useful for countries that were recovering from the war and needed to build up their
own industries via tariffs – duties imposed on particular imports. Meanwhile, from 1948 to 1990, world trade grew at an annual average
of nearly 7% – faster than the post-communist years, which we think of as the high point of globalisation. "If there was a golden
era of globalisation," Rodrik has written, "this was it."
Gatt, however, failed to cover many of the countries in the developing world. These countries eventually created their own system,
the United Nations conference on trade and development (UNCTAD). Under this rubric, many countries – especially in Latin America,
the Middle East, Africa and Asia – adopted a policy of protecting homegrown industries by replacing imports with domestically produced
goods. It worked poorly in some places – India and Argentina, for example, where the trade barriers were too high, resulting in
factories that cost more to set up than the value of the goods they produced – but remarkably well in others, such as east Asia,
much of Latin America and parts of sub-Saharan Africa, where homegrown industries did spring up. Though many later economists and
commentators would dismiss the achievements of this model, it theoretically fit Larry Summers's recent rubric on globalisation:
"the basic responsibility of government is to maximise the welfare of citizens, not to pursue some abstract concept of the global
good."
The critical turning point – away from this system of trade balanced against national protections – came in the 1980s. Flagging
growth and high inflation in the west, along with growing competition from Japan, opened the way for a political transformation.
The elections of Margaret Thatcher and Ronald Reagan were seminal, putting free-market radicals in charge of two of the world's
five biggest economies and ushering in an era of "hyperglobalisation". In the new political climate, economies with large public
sectors and strong governments within the global capitalist system were no longer seen as aids to the system's functioning, but
impediments to it.
Not only did these ideologies take hold in the US and the UK; they seized international institutions as well. Gatt renamed itself
as the World Trade Organization (WTO), and the new rules the body negotiated began to cut more deeply into national policies. Its
international trade rules sometimes undermined national legislation. The WTO's appellate court intervened relentlessly in member
nations' tax, environmental and regulatory policies, including those of the United States: the US's fuel emissions standards were
judged to discriminate against imported gasoline, and its
ban on imported shrimp caught without turtle-excluding
devices was overturned. If national health and safety regulations were stricter than WTO rules necessitated, they could only
remain in place if they were shown to have "scientific justification".
The purest version of hyperglobalisation was tried out in Latin America in the 1980s. Known as the "Washington consensus", this
model usually involved loans from the IMF that were contingent on those countries lowering trade barriers and privatising many of
their nationally held industries. Well into the 1990s, economists were proclaiming the indisputable benefits of openness. In an
influential 1995 paper, Jeffrey Sachs and Andrew Warner wrote: "We find no cases to support the frequent worry that a country might
open and yet fail to grow."
But the Washington consensus was bad for business: most countries did worse than before. Growth faltered, and citizens across
Latin America revolted against attempted privatisations of water and gas. In Argentina, which followed the Washington consensus
to the letter, a grave crisis resulted in
2002 , precipitating an economic collapse and massive street protests that forced out the government that had pursued privatising
reforms. Argentina's revolt presaged a left-populist upsurge across the continent: from 1999 to 2007, leftwing leaders and parties
took power in Brazil, Venezuela, Bolivia and Ecuador, all of them campaigning against the Washington consensus on globalisation.
These revolts were a preview of the backlash of today.
Rodrik – perhaps the contemporary economist whose views have been most amply vindicated by recent events – was himself a beneficiary
of protectionism in Turkey. His father's ballpoint pen company was sheltered under tariffs, and achieved enough success to allow
Rodrik to attend Harvard in the 1970s as an undergraduate. This personal understanding of the mixed nature of economic success may
be one of the reasons why his work runs against the broad consensus of mainstream economics writing on globalisation.
"I never felt that my ideas were out of the mainstream," Rodrik told me recently. Instead, it was that the mainstream had lost
touch with the diversity of opinions and methods that already existed within economics. "The economics profession is strange in
that the more you move away from the seminar room to the public domain, the more the nuances get lost, especially on issues of trade."
He lamented the fact that while, in the classroom, the models of trade discuss losers and winners, and, as a result, the necessity
of policies of redistribution, in practice, an "arrogance and hubris" had led many economists to ignore these implications. "Rather
than speaking truth to power, so to speak, many economists became cheerleaders for globalisation."
In his 2011 book The Globalization Paradox
, Rodrik concluded that "we cannot simultaneously pursue democracy, national determination, and economic globalisation." The
results of the 2016 elections and referendums provide ample testimony of the justness of the thesis, with millions voting to push
back, for better or for worse, against the campaigns and institutions that promised more globalisation. "I'm not at all surprised
by the backlash," Rodrik told me. "Really, nobody should have been surprised."
But what, in any case, would "more globalisation" look like? For the same economists and writers who have started to rethink
their commitments to greater integration, it doesn't mean quite what it did in the early 2000s. It's not only the discourse that's
changed: globalisation itself has changed, developing into a more chaotic and unequal system than many economists predicted. The
benefits of globalisation have been largely concentrated in a handful of Asian countries. And even in those countries, the good
times may be running out.
Statistics from Global Inequality
, a 2016 book by the development economist Branko Milanović, indicate that in relative terms the greatest benefits of globalisation
have accrued to a rising "emerging middle class", based preponderantly in China. But the cons are there, too: in absolute terms,
the largest gains have gone to what is commonly called "the 1%" – half of whom are based in the US. Economist Richard Baldwin has
shown in his recent book, The Great Convergence, that nearly all of the gains from globalisation have been concentrated in six countries.
Barring some political catastrophe, in which rightwing populism continued to gain, and in which globalisation would be the least
of our problems – Wolf admitted that he was "not at all sure" that this could be ruled out – globalisation was always going to slow;
in fact, it already has. One reason, says Wolf, was that "a very, very large proportion of the gains from globalisation – by no
means all – have been exploited. We have a more open world economy to trade than we've ever had before." Citing The Great Convergence,
Wolf noted that supply chains have already expanded, and that future developments, such as automation and the use of robots, looked
to undermine the promise of a growing industrial workforce. Today, the political priorities were less about trade and more about
the challenge of retraining workers , as technology renders old jobs obsolete and transforms the world of work.
Rodrik, too, believes that globalisation, whether reduced or increased, is unlikely to produce the kind of economic effects it
once did. For him, this slowdown has something to do with what he calls "premature deindustrialisation". In the past, the simplest
model of globalisation suggested that rich countries would gradually become "service economies", while emerging economies picked
up the industrial burden. Yet recent statistics show the world as a whole is deindustrialising. Countries that one would have expected
to have more industrial potential are going through the stages of automation more quickly than previously developed countries did,
and thereby failing to develop the broad industrial workforce seen as a key to shared prosperity.
For both Rodrik and Wolf, the political reaction to globalisation bore possibilities of deep uncertainty. "I really have found
it very difficult to decide whether what we're living through is a blip, or a fundamental and profound transformation of the world
– at least as significant as the one that brought about the first world war and the Russian revolution," Wolf told me. He cited
his agreement with economists such as Summers that shifting away from the earlier emphasis on globalisation had now become a political
priority; that to pursue still greater liberalisation was like showing "a red rag to a bull" in terms of what it might do to the
already compromised political stability of the western world.
Rodrik pointed to a belated emphasis, both among political figures and economists, on the necessity of compensating those displaced
by globalisation with retraining and more robust welfare states. But pro-free-traders had a history of cutting compensation: Bill
Clinton passed Nafta, but failed to expand safety nets. "The issue is that the people are rightly not trusting the centrists who
are now promising compensation," Rodrik said. "One reason that Hillary Clinton didn't get any traction with those people is that
she didn't have any credibility."
Rodrik felt that economics commentary failed to register the gravity of the situation: that there were increasingly few avenues
for global growth, and that much of the damage done by globalisation – economic and political – is irreversible. "There is a sense
that we're at a turning point," he said. "There's a lot more thinking about what can be done. There's a renewed emphasis on compensation
– which, you know, I think has come rather late."
"... He would be given a lavish reception in Riyadh, where he would deliver a speech thanking our Saudi allies for leading the brave fight against "Iranian homophobia." ..."
On the bright side, if ever there were a candidate who might be inclined to rethink our
relationship with the Saudis, it's Buttigieg.
Oh, who am I kidding? He would be given a lavish reception in Riyadh, where he would
deliver a speech thanking our Saudi allies for leading the brave fight against "Iranian
homophobia."
"... Across-the-board rivalry with China is becoming an organising principle of US economic, foreign and security policies. ..."
"... An effort to halt China's economic and technological rise is almost certain to fail. Worse, it will foment deep hostility in the Chinese people. In the long run, the demands of an increasingly prosperous and well-educated people for control over their lives might still win out. But that is far less likely if China's natural rise is threatened. ..."
"... The tragedy in what is now happening is that the administration is simultaneously launching a conflict between the two powers, attacking its allies and destroying the institutions of the postwar US-led order. ..."
The disappearance of the Soviet Union left a big hole. The "war on terror" was an inadequate replacement. But China ticks all boxes.
For the US, it can be the ideological, military and economic enemy many need. Here at last is a worthwhile opponent. That was the
main conclusion I drew from this year's Bilderberg meetings.
Across-the-board
rivalry with China is becoming
an organising principle of US economic, foreign and security policies.
Whether it is Donald Trump's organizing principle is less important. The US president has the gut instincts of a nationalist and
protectionist. Others provide both framework and details. The aim is US domination. The means is control over China, or separation
from China.
Anybody who believes a rules-based multilateral order, our globalised economy, or even harmonious international relations, are
likely to survive this conflict is deluded. The astonishing
white paper on the
trade conflict
, published on Sunday by China, is proof. The -- to me, depressing -- fact is that on many points Chinese positions are right.
The US focus on
bilateral imbalances is economically illiterate. The view that theft of intellectual property has caused huge damage to the US
is
questionable . The proposition that China has grossly violated its commitments under its 2001 accession agreement to the World
Trade Organization is hugely exaggerated.
Accusing China of cheating is hypocritical when almost all trade policy actions taken by the Trump administration are in breach
of WTO rules, a fact implicitly conceded by its determination
to destroy the
dispute settlement system .
A dispute over the terms of market opening or protection of intellectual property might be settled with careful negotiation. Such
a settlement might even help China, since it would lighten the heavy hand of the state and promote market-oriented reform.
But the issues are now too vexed for such a resolution. This is partly because of the bitter breakdown in negotiation. It is still
more because the US debate is increasingly over whether integration with China's state-led economy is desirable. The fear over Huawei
focuses on national security and technological autonomy.
[Neo]liberal commerce is increasingly seen as "trading with the enemy".
A framing of relations with China as one of zero-sum conflict is emerging. Recent remarks by Kiron Skinner, the US state department's
policy planning director (a job once held by cold war strategist George Kennan) are revealing. Rivalry with Beijing,
she suggested at a
forum organised
by New America , is "a fight with a really different civilisation and a different ideology, and the United States hasn't had
that before".
She added that this would be "the first time that we will have a great power competitor that is not Caucasian". The war with Japan
is forgotten.
But the big point is her framing of this as a civilizational and racial war and so as an insoluble conflict. This cannot be accidental.
She is also still in her job. Others present the conflict as one over ideology and power.
Those emphasising the former point to President Xi Jinping's Marxist rhetoric and the reinforced role of the
Communist party . Those emphasising the latter point to China's rising economic might. Both perspectives suggest perpetual conflict.
This is the most important geopolitical development of our era. Not least, it will increasingly force everybody else to take sides
or fight hard for neutrality. But it is not only important. It is dangerous. It risks turning a manageable, albeit vexed, relationship
into all-embracing conflict, for no good reason. China's ideology is not a threat to liberal democracy in the way the Soviet Union's
was. Rightwing demagogues are far more dangerous.
An effort to halt China's economic and technological rise is almost certain to fail. Worse, it will foment deep hostility in the
Chinese people. In the long run, the demands of an increasingly prosperous and well-educated people for control over their lives
might still win out. But that is far less likely if China's natural rise is threatened.
Moreover, the rise of China is not an important cause of western malaise. That reflects far more the indifference and incompetence
of domestic elites. What is seen as theft of intellectual property reflects, in large part, the inevitable attempt of a rising economy
to master the technologies of the day. Above all, an attempt to preserve the domination of 4 per cent of humanity over the rest is
illegitimate.
This certainly does not mean accepting everything China does or says. On the contrary, the best way for the west to deal with
China is to insist on the abiding values of freedom, democracy, rules-based multilateralism and global co-operation. These ideas
made many around the globe supporters of the US in the past.
They still captivate many Chinese people today. It is quite possible to uphold these ideas, indeed insist upon them far more strongly,
while co-operating with a rising China where that is essential, as over protecting the natural environment, commerce and peace.
A blend of competition with co-operation is the right way forward. Such an approach to managing China's rise must include co-operating
closely with like-minded allies and treating China with respect.
The tragedy in what is now happening is that the administration is simultaneously launching a conflict between the two powers,
attacking its allies and destroying the institutions of the postwar US-led order.
Today's attack on China is the wrong war, fought in the wrong way, on the wrong terrain. Alas, this is where we now are.
It has become a cliché to quote William Butler Yeats’s poem “The
Second Coming,” written almost 100 years ago in the aftermath of World War I. But no one has said it better: “Things fall
apart; the centre cannot hold; / Mere anarchy is loosed upon the world . . . And what rough beast, its hour come round at last, /
Slouches toward Bethlehem to be born?”
Donald Trump's decision to raise duties on Chinese goods from ten to 25 percent of additional $200 billion of China exports
came into force. It is unclear how this will work and how much the US consumers will pay. Probably half of this raise
so from 5% to 10% which might be not very noticeable outside such items as shoes and clothing. The cost of Chinese's shoes already
is quite high -- plastic regular $60-30 with discounts on holiday. Leather -- $100-$50 and almost no discounts.
Trump uses his favorite "bully in the schoolyard" style, a typical the American foreign policy tactic to direct, lawless
pressure. First, they accuse partners of violations, to introduce restrictions on this basis (and at the same time to plunge world
markets into panic), and then to agree on the resumption of negotiations. But the previous decisions about tariffs were left, of
course, in force.
His gambit to conclude a deal with North Korea collapsed in failure in Hanoi in February, and
it is a huge blow to his self-styled image of a master dealmaker. Trump also faces a flurry
of congressional subpoenas at home from Democrats who now control the House of
Representatives. Hence with mounting legal and political troubles, Trump is cornered and
desperately needs a conclusion to the prolonged trade war with China, which has netted zero
benefits for him.
The prospect of a trade deal with China remains as elusive as ever, despite Trump's
increased tariffs to pressure China to come to the negotiating table with the list of
concession that he wants. It is highly unlikely that China will grant Trump the concessions
he wants. China remembers clearly the deal that Tokyo concluded with Washington in the 1990s
that caused Japan to slip into economic stagnation for many years. That period has now been
dubbed Japan's "lost decade."
China is not dumb and it will not concede to Trump.
Worse still, the move to increase tariffs took place while Chinese Vice-Premier Liu He was
in Washington to negotiate with the Trump administration.
It is a blunder by Trump and will be perceived by the Chinese as a cheap shot against
President Xi Jinping. The tariffs hike came despite Xi's
"beautiful letter" to Trump, and it is a massive loss of face for the Chinese leader to
see his group of officials return home from Washington with no deal to conclude the trade
war.
Xi could not afford to look weak in front of his people and he knows that millions of
Chinese netizens access information about the outside world by using virtual private networks
(VPNs) to circumvent the Great Firewall. Many ordinary Chinese know about the trade war's
latest developments and should any deal with Trump infringe on China's core interests, it
will be political suicide for Xi.
One of the main reasons the US-China trade talks broke down was that Washington's demands
were unpalatable to China. Some of the demands from the US, such as an end to government
support for state companies in specific industries and a streamlined approval process for
genetically engineered US crops, are a direct challenge to the Communist Party of China's
control of the economy.
Since Xi took office, he has extended the party's reach into every corner of Chinese
society, and every businessman in China who aspires to reach the top of the hierarchy knows
that they must receive the blessing of the party. It is not surprising that even Jack Ma, who
is one of China's most internationally recognizable figures, has been revealed to be a member
of the CPC after years of denial.
Hence in the face of renewed pressure from Trump, Xi and the Chinese government have
reached the conclusion that it is better to bear the consequences of increased tariffs than
to concede to US demands.
Xi is in for the long haul and can well afford to ride out the storm. And based on Trump's
past negotiations such as his failed bid to pressure House Democrats to fund his wall on the
Mexican border, which led to the longest government shutdown in US history, Xi knows that the
chances are good that Trump will blink first.
Looks like pendulum start swinging against privatization...
Notable quotes:
"... As corporate profits are the private sector's yardstick of success, privatized monopolies are likely to abuse their market power to maximize rents for themselves. Thus, privatization tends to burden the public, e.g., if charges are raised. ..."
"... In most cases, privatization has not closed the governments' fiscal deficits, and may even worsen budgetary problems. Privatization may worsen the fiscal situation due to loss of revenue from privatized SOEs, or tax evasion by the new privatized entity. ..."
"... In most cases, profitable SOEs were privatized as prospective private owners are driven to maximize profits. Fiscal deficits have often been exacerbated as new private owners use creative accounting to avoid tax, secure tax credits and subsidies, and maximize retained earnings. ..."
"... As a rule of thumb, I'd say that any privatisations that require the introduction of convoluted pseudo-market structures or vast new regulatory bureaucracies or which derive most of their ongoing income from the public sector are likely to be contrary to the long-term public interest. In the UK, unfortunately, all these ships sailed a long time ago ..."
"... Chicago is the proving grounds for thirty or so years of the Democrats' surrender to neoliberalism and austerity politics. Let us not forget, brethren and sistren, that Rahm is the Spawn of Bill + Hill as well as dear friend and advisor of Obama. So there is the work of Daley to undo and the work of the Clintonians to undo. It will take more than one term for Lightfoot. ..."
"... Privatization, at any cost, is no longer a choice. We have abused the pension system and now the public must pay for private companies to provide the most basic services. ..."
"... I keep thinking that perhaps an Act could or should be introduced here in UK (same for the States, i suppose), which should ensure that all politicians that enable any type of privatisation of public resources or PFI arrangement (yes that old chesnut), should be made personally responsible for the results therof. ..."
"... And any losses to the public accidentally or "accidentally" occasioned by such commandeering over public resources, to be treated like deliberate misappropriation by the said public officials. With the financial and custodial penalties as may be appropriate. ..."
"... lots of private services that are suspiciously similar to public utilities in terms of natural monopoly, such as cable TV, internet and even railroads. Maybe these should be nationalized and treated more like public services. It can work when they're adequately funded and oversight accountability has teeth; major airports are a good example. ..."
"... Plus the state giveaways includes tens of millions of dollars each year in corporate tax credits in the name of job creation. A report by the nonprofit " Good Jobs First " revealed that over 300 Illinois companies are keeping the state taxes paid by their employees. EDGE- the Economic Development in a Growing Economy is a corporate freebie tax credit, which is partly from the state personal income taxes paid by workers. That's right, the biggest welfare queens are the corporations collecting and keep their employees state income tax payments. ..."
"... Can it get worse? According to the Chicago Trib , "The Chicago Mercantile Exchange (CME), for example, with billions of untaxed contracts worth well over a quadrillion dollars, and whose profit margin in recent years is higher than any of the top 100 companies in the nation, had the hubris to demand an $85 million per year tax break. They got it." The money is there to secure the pensions and budget but has been diverted to the corporate welfare queens for honoring us mere serfs with their presence in the humble fiefdom of Illinois. ..."
"... Michael Hudson, to his immense credit, explains the pernicious effects of privatization of common goods repeatedly throughout his work, and demonstrates that it has been with us at least as long as the ancient practice of land alienation and rural usury. ..."
Posted on April 7,
2019 by Jerri-Lynn Scofield Jerri-Lynn
here. Another succinct post by Jomo Kwame Sundaram that makes clear the "benefits" of
privatization are not evenly distributed, and in fact, typically, "many are even worse off"
when the government chooses to transfer ownership of the family silver.
Note that SOE is the acronym for state owned enterprise.
For those interested in the topic, see also another short post by the same author from last
September, debunking other arguments to promote the privatization fairy, Revisiting
Privatization's Claims .
By Jomo Kwame Sundaram, former UN Assistant Secretary General for Economic Development.
Originally published at Inter Press
Service
In most cases of privatization, some outcomes benefit some, which serves to legitimize the
change. Nevertheless, overall net welfare improvements are the exception, not the rule.
Never is everyone better off. Rather, some are better off, while others are not, and
typically, many are even worse off. The partial gains are typically high, or even negated by
overall costs, which may be diffuse, and less directly felt by losers.
Privatized Monopoly Powers
Since many SOEs are public monopolies, privatization has typically transformed them into
private monopolies. In turn, abuse of such market monopoly power enables more rents and
corporate profits.
As corporate profits are the private sector's yardstick of success, privatized monopolies
are likely to abuse their market power to maximize rents for themselves. Thus, privatization
tends to burden the public, e.g., if charges are raised.
In most cases, privatization has not closed the governments' fiscal deficits, and may even
worsen budgetary problems. Privatization may worsen the fiscal situation due to loss of revenue
from privatized SOEs, or tax evasion by the new privatized entity.
Options for cross-subsidization, e.g., to broaden coverage are reduced as the government is
usually left with unprofitable activities while the potentially profitable is acquired by the
private sector. Thus, governments are often forced to cut essential public services.
In most cases, profitable SOEs were privatized as prospective private owners are driven to
maximize profits. Fiscal deficits have often been exacerbated as new private owners use
creative accounting to avoid tax, secure tax credits and subsidies, and maximize retained
earnings.
Meanwhile, governments lose vital revenue sources due to privatization if SOEs are
profitable, and are often obliged to subsidize privatized monopolies to ensure the poor and
underserved still have access to the privatized utilities or services.
Privatization Burdens Many
Privatization burdens the public when charges or fees are not reduced, or when the services
provided are significantly reduced. Thus, privatization often burdens the public in different
ways, depending on how market power is exercised or abused.
Often, instead of trying to provide a public good to all, many are excluded because it is
not considered commercially viable or economic to serve them. Consequently, privatization may
worsen overall enterprise performance. 'Value for money' may go down despite ostensible
improvements used to justify higher user charges.
SOEs are widely presumed to be more likely to be inefficient. The most profitable and
potentially profitable are typically the first and most likely to be privatized. This leaves
the rest of the public sector even less profitable, and thus considered more inefficient, in
turn justifying further privatizations.
Efficiency Elusive
It is often argued that privatization is needed as the government is inherently inefficient
and does not know how to run enterprises well. Incredibly, the government is expected to
subsidize privatized SOEs, which are presumed to be more efficient, in order to fulfil its
obligations to the citizenry.
Such obligations may not involve direct payments or transfers, but rather, lucrative
concessions to the privatized SOE. Thus, they may well make far more from these additional
concessions than the actual cost of fulfilling government obligations.
Thus, privatization of profitable enterprises or segments not only perpetuates exclusion of
the deserving, but also worsens overall public sector performance now encumbered with remaining
unprofitable obligations.
One consequence is poorer public sector performance, contributing to what appears to be a
self-fulfilling prophecy. To make matters worse, the public sector is then stuck with financing
the unprofitable, thus seemingly supporting to the privatization prophecy.
Benefits Accrue to Relatively Few
Privatization typically enriches the politically connected few who secure lucrative rents by
sacrificing the national or public interest for private profit, even when privatization may not
seem to benefit them.
Privatization in many developing and transition economies has primarily enriched these few
as the public interest is sacrificed to such powerful private business interests. This has, in
turn, exacerbated corruption, patronage and other related problems.
For example, following Russian voucher privatization and other Western recommended reforms,
for which there was a limited domestic constituency then, within three years (1992-1994), the
Russian economy had collapsed by half, and adult male life expectancy fell by six years. It was
the greatest such recorded catastrophe in the last six millennia of recorded human history.
Soon, a couple of dozen young Russian oligarchs had taken over the commanding heights of the
Russian economy; many then monetized their gains and invested abroad, migrating to follow their
new wealth. Much of this was celebrated by the Western media as economic progress.
As a rule of thumb, I'd say that any privatisations that require the introduction of
convoluted pseudo-market structures or vast new regulatory bureaucracies or which derive most
of their ongoing income from the public sector are likely to be contrary to the long-term
public interest. In the UK, unfortunately, all these ships sailed a long time ago
After the recent Chicago municipal elections, I wrote up some notes on the reasons for the
discontent. This article by Sundaram explains exactly how these schemes work. Further, you
can apply his criteria of subsidies for the rich, skimming, and disinheriting the middle
class and poor to all of the following instances in Chicago.
If I may–some for instances of how Sundaram's observations turn up in U.S.
cities:
Chicago is the proving grounds for thirty or so years of the Democrats' surrender to
neoliberalism and austerity politics. Let us not forget, brethren and sistren, that Rahm is
the Spawn of Bill + Hill as well as dear friend and advisor of Obama. So there is the work of
Daley to undo and the work of the Clintonians to undo. It will take more than one term for
Lightfoot.
Consider:
–Parking meters and enforcement have been privatized, starving the city of funds and,
more importantly, of its police power.
–Taxes have been privatized in TIFs, where money goes and is never heard from
again.
–There have been attempts to privatize the park system in the form of the Lucas museum
and the current Obama Theme Park imbroglio, involving some fifty acres of park land.
–The school system has been looted and privatized. The Democrats are big fans of
charter schools (right, "Beto"), seeing them as ways to skim money off the middle class and
the poor.
–Fare collection on public transit has been privatized using a system so deliberately
rudimentary and so deliberately corrupt that it cannot tell you at point of service how much
you have paid as fare.
–Boeing was enticed to Chicago with tax breaks. Yes, that Boeing, the one that now
deliberately puts bad software in your airplane.
–Property tax assessment has been an opaque system and source of skimming for
lawyers.
–Zoning: Eddie Burke, pond scum, is just the top layer of pollution.
–And as we have made our descent, all of these economic dogmata have been enforced by
petty harassment of the citizenry (endless tickets) and an ever-brutal police force.
And yet: The current Republican Party also supports all of these policies, so let's not
pretend that a bunch of Mitch McConnell lookalikes are headed to Chicago to reform it.
Providing professional services i.e. architecture, engineering, etc. for a public entity,
local or federal, does not yield unreasonable profits. Typically, the public agencies have
their own staff to monitor and cost control a project. The professional services provided to
private developers yields far more profit- oftentimes twice the profits associated with
public agency work. Most professional services companies will transition their work to the
public agencies during a recession.
At any rate, especially in Illinois, privatizing the work to avoid pension liabilities is
no longer a choice. Michael Madigan pension promises will require the public to maintain a
public service budget with no staff to fill potholes. Essentially, these are the no work jobs
made popular by the Soprano crew twenty years ago.
Discussion of the downside of the privatization of public services is merely an
oscillation from discussing the weather, the Bears or any other kitchen table discussion
– nothing more than pleasant small talk to pass the time.
Privatization, at any cost, is no longer a choice. We have abused the pension system and
now the public must pay for private companies to provide the most basic services.
The question is, what can one do to help arrest this wholesale theft of public resources
and their expropriation into the hands of well connected. " Public", as in, it is the working
public over the last 100 or 200 years that created (or paid for), the electricity grid, or
public schools, or entire armed or police forces
I keep thinking that perhaps an Act could or should be introduced here in UK (same for the
States, i suppose), which should ensure that all politicians that enable any type of
privatisation of public resources or PFI arrangement (yes that old chesnut), should be made
personally responsible for the results therof.
And any losses to the public accidentally or "accidentally" occasioned by such
commandeering over public resources, to be treated like deliberate misappropriation by the
said public officials. With the financial and custodial penalties as may be appropriate.
Anybody out there with similar thoughts or should i really try harder and give up on
drugs?
I vociferously disagree with the assertion that the wrecking of pension funding in the
past is the reason we are forced to leave privatization schemes in place today.
In a similar vein, the are lots of private services that are suspiciously similar to
public utilities in terms of natural monopoly, such as cable TV, internet and even railroads.
Maybe these should be nationalized and treated more like public services. It can work when
they're adequately funded and oversight accountability has teeth; major airports are a good
example.
Let's not forget the privatization of the
Chicago Skyway , not once but twice.
Plus the state giveaways includes tens of millions of dollars each year in corporate tax
credits in the name of job creation. A report by the nonprofit " Good Jobs
First " revealed that over 300 Illinois companies are keeping the state taxes paid by
their employees. EDGE- the Economic Development in a Growing Economy is a corporate freebie
tax credit, which is partly from the state personal income taxes paid by workers. That's
right, the biggest welfare queens are the corporations collecting and keep their employees
state income tax payments.
Can it get worse? According to the
Chicago Trib , "The Chicago Mercantile Exchange (CME), for example, with billions of
untaxed contracts worth well over a quadrillion dollars, and whose profit margin in recent
years is higher than any of the top 100 companies in the nation, had the hubris to demand an
$85 million per year tax break. They got it." The money is there to secure the pensions and
budget but has been diverted to the corporate welfare queens for honoring us mere serfs with
their presence in the humble fiefdom of Illinois.
Paging Mike Madigan- The Institute on Taxation and Economic Policy lists Illinois as one
of the "Terrible Ten" most tax-regressive states, imposing a much higher rate on poor
residents for sales and excise taxes, property taxes and income taxes. Al Capone would be
proud of him.
Michael Hudson, to his immense credit, explains the pernicious effects of privatization of
common goods repeatedly throughout his work, and demonstrates that it has been with us at
least as long as the ancient practice of land alienation and rural usury.
Natural monopolies ought to be nationalised, full stop.
I support public ownership of natural monopolies, however it would be helpful if these
pieces contained data, case studies or footnoted entries providing some empirical evidence of
the author's thesis.
This article comes at a time when the clarion call for privatizing Eskom, SA's electricity
utility, is hitting deafening levels. To the private sector, efficiency = maximizing profits
by making the "bloated" enterprise lean (aka cutting the workforce) and quite literally mean
(aka cutting services to "unprofitable" segments of the market, iow, the poor and
vulnerable). When profits soar because the holy grail of efficiency is achieved, the
mainstream business press brings out the champagne and toasts this "success" as proof that
the previously "moribund" (they always exaggerate the state of things) monopolistic monolith
has been given a new lease on life by privatizing it and the template is set for rescuing
other "ailing" SOEs.
The drawbacks are never laid out as cleary as they are in this article and the plight of
those worst affected, whether laid-off workers or those whose services have been cut, never
makes it into the headlines.
And then there is prison privatization where the burden of operation and maintaining the
institution should clearly be on the public so as to be constant reminder of the burden,
among others reasons. The motivations by private prison operators to reduce services and
costs out of site of the pesky prying eyes of the public are manifold.
Privatization is a great way to avoid having user fees wasted by providing services, and
instead put to better use funding the re-election campaigns of politicians supporting
privatization. Plus, it provides much-needed consulting fees for former politicians as well
as job-creating 7-figure salaries for the CEOs,
(/snark, if you couldn't tell)
On a side note, the Dilbert comic strip is written about private industry ,
There was a rudimentary plan
put forward last June that recommended some pretty substantial privatizations of U.S.
government assets and services which include:
-Privatizing the US Post Office ( through an Initial Public Offering or outright sale to a
private entity ).
-Sell off U.S. government owned electricity transmission lines ( U.S. government owns 14% of
this nations power transmission lines through TVA, Southwestern Power Administration, Western
Area Power Administration, and Bonneville Power Administration ).
-Spin-off the Federal Aviation Administrations air traffic control operations into a private
nonprofit entity.
-Spin-off the Department of Transportations operations of the Saint Lawrence Seaways Locks
and Channels into a private non-profit entity.
-End the federal conservatorship of Fannie Mae and Freddie Mac, then regulate a new system of
private guarantors for their MBS securities.
At heart, the problem with privatization is that marketing to a government-employed
purchaser or "purchase influencer" is ridiculously cheap, due to their poor accountability
strictures.
This is abetted by the Katamari Damacy process (self-accretionary tendency) of money and
power.
In Oz the electricity grids were privatized as they would be cheaper that way – or
so people were told. Instead, the cost of electricity has risen sharply over the years to the
point that it is effecting elections on both the State and Federal level as the price hikes
are so controversial. A problem is that those companies have to pay back the loans used to
buy the public electricity grids and as well, the senior management award themselves sky-high
wages because they are totally worth it. These are factors that were never present when it
was publicly owned. And just to put the boot in, those very same companies have been
'gold-plating' the electricity grid for their gain-
Meanwhile, whatever money the governments made selling their electricity companies has
been long spent on white elephants or buying themselves re-elections by giving out goodies to
voters.
buying themselves re-elections by giving out goodies to voters.
I don't reside in the states, so I don't see much of the detail of daily life. What are
these "goodies" of which you speak? In what I am able to read on the internet, people aren't
being given goodies any more. At least the old-time politicians handed out jobs, and turkeys
at Christmas. The current crop do hand out jobs to their kids and immediate family, but not
so much to anyone else.
The county "poorhouse" in Lebanon County, PA over the years evolved into a bare-bones but
very well run nursing home with caring, long-term staff. The Republican county commissioners,
however, year after year, avoided raising taxes by underfunding the retirement plan for the
employees. Then, "suddenly" there was a crisis because the underfunding had become legally
untenable.
The solution was to sell the operation to a for-profit operator to fund the pansion plan
shortfall at the minimal level required legally. In the next contract, the new owner cut
health care and other benefits. The wages had always been minimal and he was free of the old
pension plan requirements.
The employees went on strike for many months, the owner brought in replacements from
companies that specialize in that service, until the employees had to cave in.
I had been counting on that facility when my sister was diagnosed with Alzheimers. I have
family that is able to step in so she is provided for. Many others in the county are not so
fortunate. Here are some staff comments: https://www.indeed.com/cmp/Cedar-Haven-Healthcare-Center/reviews?fcountry=ALL
" instead of trying to provide a public good to all, many [ordinary working people] are
excluded because it is not considered commercially viable or economic to serve them."
There are also social and class dimensions to the exclusion. Private Internet Service
Providers (ISPs) in the USA have made the "not commercially viable or economic to serve them"
argument for decades when pressed about their refusal to wire the entire country. Their
"business model" leaves millions without reliable broadband service in a variety of settings,
from rural areas and small towns to inner cities and low income suburbs. In many cases,
citizens in those areas have no access to broadband at all.
When small towns and counties in the US have taken the initiative to wire their
localities, the ISPs have bribed state legislatures to pass laws prohibiting public broadband
throughout the rest of the state. Talk about subversion of democracy! Insult to injury: the
ISPs who wailed about "unfair competition" to state legislators then refuse to wire areas
throughout the rest of the state.
Lack of universal and affordable broadband has two major effects:
➤ Local governments are shut out of economic opportunities because they lack
connectivity. They are unable to shepherd business startups and existing businesses that need
broadband to thrive. People move away. Businesses relocate or downsize. Local economies are
left with erroding tax bases and boarded up downtowns.
➤ Children and young people in "broadband deserts" cannot tap into the many sources
of learning that exist on the web. In particular, they don't have the opportunity to learn
anything about frontend or backend web development applications such as, html, php, Ruby on
Rails, Photoshop or Indesign.
That is one reason the US tech industry lacks workers from different backgrounds. Most
tech workers grew up in areas the ISPs considered "commercially viable". In addition, many
tech workers are self taught to some degree, even those with computer science degrees. It is
difficult to be self taught if you lack access to the most basic resources and tools.
"... Donald Trump is about to break the record of withdrawing his promises faster than any other US president in history. It's not only the fact that his administration has been literally taken over by Goldman Sachs, the top vampire-bank of the Wall Street mafia. ..."
"... The 'anti-establishment Trump' joke has already collapsed and the US middle class is about be eliminated by the syndicate of the united billionaires under Trump administration. ..."
"... Paul Singer whose nickname is "the vulture", he didn't get that nickname because he is a sweet an honest businessman. This is the guy who closed the Delphi auto plants in Ohio and sent them to China and also to Monterrey-Mexico. Donald Trump as a candidate, excoriated the billionaires who sent Delphi auto parts company down to Mexico ..."
"... Paul Singer has two concerns: one of them is that we eliminate the banking regulations known as Dodd–Frank. He is called 'the vulture' cause he eats companies that died. He has invested heavily in banks that died. He makes his billions from government bail-outs, he has never made a product in his life, it's all money and billions made from your money, out of the US treasury ..."
"... The Mercers are the real big money behind Donald Trump. When Trump was in trouble in the general election he was out of money and he was out of ideas and he was losing. It was the Mercers, Robert, who is the principal at the Renaissance Technologies, basically investment banking sharks, that's all they are. They are market gamblers and banking sharks, and that's how he made his billions, he hasn't created a single job as Donald Trump himself like to mention. ..."
"... Both the vulture and the Mercers, they don't pay the same taxes as the rest. They don't pay regular income taxes. They have a special billionaires loophole called 'carried interest'. ..."
"... They were two candidates who said that they would close that loophole: one was Bernie Sanders and the other, believe it or not, was Donald Trump, it was part of his populist movie, he said ' These Wall Street sharks, they don't build anything, they don't create a single job, when they lose we pay, when they win, they get a tax-break called carried interest. I will close that loophole. ' Has he said a word about that loophole? It passed away. ..."
Donald Trump is about to break the record of withdrawing his promises faster than any other US president in history. It's
not only the fact that his administration has been literally taken over by Goldman Sachs, the top vampire-bank of the Wall Street
mafia.
Recently, Trump announced another big alliance with the vulture billionaire, Paul Singer, who, initially, was supposedly against
him. It looks like the Trump big show continues.
The 'anti-establishment Trump' joke has already collapsed and the US middle class is about be eliminated by the syndicate of the
united billionaires under Trump administration.
As Greg Palast told to Thom Hartmann:
Paul Singer whose nickname is "the vulture", he didn't get that nickname because he is a sweet an honest businessman. This
is the guy who closed the Delphi auto plants in Ohio and sent them to China and also to Monterrey-Mexico. Donald Trump as a candidate,
excoriated the billionaires who sent Delphi auto parts company down to Mexico.
Paul Singer has two concerns: one of them is that we eliminate the banking regulations known as Dodd–Frank. He is called 'the
vulture' cause he eats companies that died. He has invested heavily in banks that died. He makes his billions from government bail-outs,
he has never made a product in his life, it's all money and billions made from your money, out of the US treasury.
He is against what Obama created, which is a system under Dodd–Frank, called 'living wills', where if a bank starts going bankrupt,
they don't call the US treasury for bail-out. These banks go out of business and they are broken up so we don't have to pay for the
bail-out. Singer wants to restore the system of bailouts because that's where he makes his money.
The Mercers are the real big money behind Donald Trump. When Trump was in trouble in the general election he was out of money
and he was out of ideas and he was losing. It was the Mercers, Robert, who is the principal at the Renaissance Technologies, basically
investment banking sharks, that's all they are. They are market gamblers and banking sharks, and that's how he made his billions,
he hasn't created a single job as Donald Trump himself like to mention.
Both the vulture and the Mercers, they don't pay the same taxes as the rest. They don't pay regular income taxes. They have a
special billionaires loophole called 'carried interest'.
They were two candidates who said that they would close that loophole: one
was Bernie Sanders and the other, believe it or not, was Donald Trump, it was part of his populist movie, he said ' These Wall
Street sharks, they don't build anything, they don't create a single job, when they lose we pay, when they win, they get a tax-break
called carried interest. I will close that loophole. ' Has he said a word about that loophole? It passed away.
His political activities include funding the Manhattan Institute for Policy Research and he has written against raising taxes
for the 1% and aspects of the Dodd-Frank Act. Singer is active in Republican Party politics and collectively, Singer and others affiliated
with Elliott Management are "the top source of contributions" to the National Republican Senatorial Committee.
A number of sources have branded him a "vulture capitalist", largely on account of his role at EMC, which has been called a vulture
fund. Elliott was termed by The Independent as "a pioneer in the business of buying up sovereign bonds on the cheap, and then going
after countries for unpaid debts", and in 1996, Singer began using the strategy of purchasing sovereign debt from nations in or near
default-such as Argentina, ]- through his NML Capital Limited and Congo-Brazzaville through Kensington International Inc. Singer's
business model of purchasing distressed debt from companies and sovereign states and pursuing full payment through the courts has
led to criticism, while Singer and EMC defend their model as "a fight against charlatans who refuse to play by the market's rules."
In 1996, Elliott bought defaulted Peruvian debt for $11.4 million. Elliott won a $58 million judgment when the ruling was overturned
in 2000, and Peru had to repay the sum in full under the pari passu rule. When former president of Peru Alberto Fujimori was attempting
to flee the country due to facing legal proceedings over human rights abuses and corruption, Singer ordered the confiscation of his
jet and offered to let him leave the country in exchange for the $58 million payment from the treasury, an offer which Fujimori accepted.
A subsequent 2002 investigation by the Government of Peru into the incident and subsequent congressional report, uncovered instances
of corruption since Elliott was not legally authorized to purchase the Peruvian debt from Swiss Bank Corporation without the prior
approval of the Peruvian government, and thus the purchase had occurred in breach of contract. At the same time, Elliott's representative,
Jaime Pinto, had been formerly employed by the Peruvian Ministry of Economy and Finance and had contact with senior officials. According
to the Wall Street Journal, the Peruvian government paid Elliott $56 million to settle the case.
After Argentina defaulted on its debt in 2002, the Elliott-owned company NML Capital Limited refused to accept the Argentine offer
to pay less than 30 cents per dollar of debt. With a face value of $630 million, the bonds were reportedly bought by NML for $48
million, with Elliott assessing the bonds as worth $2.3 billion with accrued interest. Elliott sued Argentina for the debt's value,
and the lower UK courts found that Argentina had state immunity. Elliott successfully appealed the case to the UK Supreme Court,
which ruled that Elliott had the right to attempt to seize Argentine property in the United Kingdom. Alternatively, before 2011,
US courts ruled against allowing creditors to seize Argentine state assets in the United States. On October 2, 2012 Singer arranged
for a Ghanaian Court order to detain the Argentine naval training vessel ARA Libertad in a Ghanaian port, with the vessel to be used
as collateral in an effort to force Argentina to pay the debt. Refusing to pay, Argentina shortly thereafter regained control of
the ship after its seizure was deemed illegal by the International Tribunal for the Law of the Sea. Alleging the incident lost Tema
Harbour $7.6 million in lost revenue and unpaid docking fees, Ghana in 2012 was reportedly considering legal action against NML for
the amount.
His firm... is so influential that fear of its tactics helped shape the current 2012 Greek debt restructuring." Elliott was termed
by The Independent as "a pioneer in the business of buying up sovereign bonds on the cheap, and then going after countries for unpaid
debts", and in 1996, Singer began using the strategy of purchasing sovereign debt from nations in or near default-such as Argentina,
Peru-through his NML Capital Limited and Congo-Brazzaville through Kensington International Inc. In 2004, then first deputy managing
director of the International Monetary Fund Anne Osborn Krueger denounced the strategy, alleging that it has "undermined the entire
structure of sovereign finance."
we wrote that " Trump's rhetoric is concentrated around a racist delirium. He avoids to take direct position
on social matters, issues about inequality, etc. Of course he does, he is a billionaire! Trump will follow the pro-establishment
agenda of protecting Wall Street and big businesses. And here is the fundamental difference with Bernie Sanders. Bernie says no more
war and he means it. He says more taxes for the super-rich and he means it. Free healthcare and education for all the Americans,
and he means it. In case that Bernie manage to beat Hillary, the establishment will definitely turn to Trump who will be supported
by all means until the US presidency. "
Yet, we would never expect that Trump would verify us, that fast.
"Monopoly" is such an ugly term. We prefer to call it "market power" these days, because of
course it's a good thing if the job creators and their enterprises have more power to do all
the good things they do for us.
It's clearly class warfare, if not racism, to use the term of abuse, "monopoly", when you
mean "market power".
"... While the Tea Party was critical of status-quo neoliberalism -- especially its cosmopolitanism and embrace of globalization and diversity, which was perfectly embodied by Obama's election and presidency -- it was not exactly anti-neoliberal. Rather, it was anti-left neoliberalism-, it represented a more authoritarian, right [wing] version of neoliberalism. ..."
"... Within the context of the 2016 election, Clinton embodied the neoliberal center that could no longer hold. Inequality. Suffering. Collapsing infrastructures. Perpetual war. Anger. Disaffected consent. ..."
"... Both Sanders and Trump were embedded in the emerging left and right responses to neoliberalism's crisis. Specifically, Sanders' energetic campaign -- which was undoubtedly enabled by the rise of the Occupy movement -- proposed a decidedly more "commongood" path. Higher wages for working people. Taxes on the rich, specifically the captains of the creditocracy. ..."
"... In other words, Trump supporters may not have explicitly voted for neoliberalism, but that's what they got. In fact, as Rottenberg argues, they got a version of right neoliberalism "on steroids" -- a mix of blatant plutocracy and authoritarianism that has many concerned about the rise of U.S. fascism. ..."
"... We can't know what would have happened had Sanders run against Trump, but we can think seriously about Trump, right and left neoliberalism, and the crisis of neoliberal hegemony. In other words, we can think about where and how we go from here. As I suggested in the previous chapter, if we want to construct a new world, we are going to have to abandon the entangled politics of both right and left neoliberalism; we have to reject the hegemonic frontiers of both disposability and marketized equality. After all, as political philosopher Nancy Fraser argues, what was rejected in the election of 2016 was progressive, left neoliberalism. ..."
"... While the rise of hyper-right neoliberalism is certainly nothing to celebrate, it does present an opportunity for breaking with neoliberal hegemony. We have to proceed, as Gary Younge reminds us, with the realization that people "have not rejected the chance of a better world. They have not yet been offered one."' ..."
In Chapter 1, we traced the rise of our neoliberal conjuncture back to the crisis of liberalism during the late nineteenth and
early twentieth centuries, culminating in the Great Depression. During this period, huge transformations in capitalism proved impossible
to manage with classical laissez-faire approaches. Out of this crisis, two movements emerged, both of which would eventually shape
the course of the twentieth century and beyond. The first, and the one that became dominant in the aftermath of the crisis, was the
conjuncture of embedded liberalism. The crisis indicated that capitalism wrecked too much damage on the lives of ordinary citizens.
People (white workers and families, especially) warranted social protection from the volatilities and brutalities of capitalism.
The state's public function was expanded to include the provision of a more substantive social safety net, a web of protections for
people and a web of constraints on markets. The second response was the invention of neoliberalism. Deeply skeptical of the common-good
principles that undergirded the emerging social welfare state, neoliberals began organizing on the ground to develop a "new" liberal
govemmentality, one rooted less in laissez-faire principles and more in the generalization of competition and enterprise. They worked
to envision a new society premised on a new social ontology, that is, on new truths about the state, the market, and human beings.
Crucially, neoliberals also began building infrastructures and institutions for disseminating their new' knowledges and theories
(i.e., the Neoliberal Thought Collective), as well as organizing politically to build mass support for new policies (i.e., working
to unite anti-communists, Christian conservatives, and free marketers in common cause against the welfare state). When cracks in
embedded liberalism began to surface -- which is bound to happen with any moving political equilibrium -- neoliberals were there
with new stories and solutions, ready to make the world anew.
We are currently living through the crisis of neoliberalism. As I write this book, Donald Trump has recently secured the U.S.
presidency, prevailing in the national election over his Democratic opponent Hillary Clinton. Throughout the election, I couldn't
help but think back to the crisis of liberalism and the two responses that emerged. Similarly, after the Great Recession of 2008,
we've saw two responses emerge to challenge our unworkable status quo, which dispossesses so many people of vital resources for individual
and collective life. On the one hand, we witnessed the rise of Occupy Wall Street. While many continue to critique the movement for
its lack of leadership and a coherent political vision, Occupy was connected to burgeoning movements across the globe, and our current
political horizons have been undoubtedly shaped by the movement's success at repositioning class and economic inequality within our
political horizon. On the other hand, we saw' the rise of the Tea Party, a right-wing response to the crisis. While the Tea Party
was critical of status-quo neoliberalism -- especially its cosmopolitanism and embrace of globalization and diversity, which was
perfectly embodied by Obama's election and presidency -- it was not exactly anti-neoliberal. Rather, it was anti-left neoliberalism-,
it represented a more authoritarian, right [wing] version of neoliberalism.
Within the context of the 2016 election, Clinton embodied the neoliberal center that could no longer hold. Inequality. Suffering.
Collapsing infrastructures. Perpetual war. Anger. Disaffected consent. There were just too many fissures and fault lines in
the glossy, cosmopolitan world of left neoliberalism and marketized equality. Indeed, while Clinton ran on status-quo stories of
good governance and neoliberal feminism, confident that demographics and diversity would be enough to win the election, Trump effectively
tapped into the unfolding conjunctural crisis by exacerbating the cracks in the system of marketized equality, channeling political
anger into his celebrity brand that had been built on saying "f*** you" to the culture of left neoliberalism (corporate diversity,
political correctness, etc.) In fact, much like Clinton's challenger in the Democratic primary, Benie Sanders, Trump was a crisis
candidate.
Both Sanders and Trump were embedded in the emerging left and right responses to neoliberalism's crisis. Specifically, Sanders'
energetic campaign -- which was undoubtedly enabled by the rise of the Occupy movement -- proposed a decidedly more "commongood"
path. Higher wages for working people. Taxes on the rich, specifically the captains of the creditocracy.
Universal health care. Free higher education. Fair trade. The repeal of Citizens United. Trump offered a different response to
the crisis. Like Sanders, he railed against global trade deals like NAFTA and the Trans-Pacific Partnership (TPP). However, Trump's
victory was fueled by right neoliberalism's culture of cruelty. While Sanders tapped into and mobilized desires for a more egalitarian
and democratic future, Trump's promise was nostalgic, making America "great again" -- putting the nation back on "top of the world,"
and implying a time when women were "in their place" as male property, and minorities and immigrants were controlled by the state.
Thus, what distinguished Trump's campaign from more traditional Republican campaigns was that it actively and explicitly pitted
one group's equality (white men) against everyone else's (immigrants, women, Muslims, minorities, etc.). As Catherine Rottenberg
suggests, Trump offered voters a choice between a multiracial society (where folks are increasingly disadvantaged and dispossessed)
and white supremacy (where white people would be back on top). However, "[w]hat he neglected to state," Rottenberg writes,
is that neoliberalism flourishes in societies where the playing field is already stacked against various segments of society,
and that it needs only a relatively small select group of capital-enhancing subjects, while everyone else is ultimately dispensable.
1
In other words, Trump supporters may not have explicitly voted for neoliberalism, but that's what they got. In fact, as Rottenberg
argues, they got a version of right neoliberalism "on steroids" -- a mix of blatant plutocracy and authoritarianism that has many
concerned about the rise of U.S. fascism.
We can't know what would have happened had Sanders run against Trump, but we can think seriously about Trump, right and left
neoliberalism, and the crisis of neoliberal hegemony. In other words, we can think about where and how we go from here. As I suggested
in the previous chapter, if we want to construct a new world, we are going to have to abandon the entangled politics of both right
and left neoliberalism; we have to reject the hegemonic frontiers of both disposability and marketized equality. After all, as political
philosopher Nancy Fraser argues, what was rejected in the election of 2016 was progressive, left neoliberalism.
While the rise of hyper-right neoliberalism is certainly nothing to celebrate, it does present an opportunity for breaking
with neoliberal hegemony. We have to proceed, as Gary Younge reminds us, with the realization that people "have not rejected the
chance of a better world. They have not yet been offered one."'
Mark Fisher, the author of Capitalist Realism, put it this way:
The long, dark night of the end of history has to be grasped as an enormous opportunity. The very oppressive pervasiveness
of capitalist realism means that even glimmers of alternative political and economic possibilities can have a disproportionately
great effect. The tiniest event can tear a hole in the grey curtain of reaction which has marked the horizons of possibility under
capitalist realism. From a situation in which nothing can happen, suddenly anything is possible again.4
I think that, for the first time in the history of U.S. capitalism, the vast majority of people might sense the lie of liberal,
capitalist democracy. They feel anxious, unfree, disaffected. Fantasies of the good life have been shattered beyond repair for most
people. Trump and this hopefully brief triumph of right neoliberalism will soon lay this bare for everyone to see. Now, with Trump,
it is absolutely clear: the rich rule the world; we are all disposable; this is no democracy. The question becomes: How will we show
up for history? Will there be new stories, ideas, visions, and fantasies to attach to? How can we productively and meaningful intervene
in the crisis of neoliberalism? How can we "tear a hole in the grey curtain" and open up better worlds? How can we put what we've
learned to use and begin to imagine and build a world beyond living in competition? I hope our critical journey through the neoliberal
conjuncture has enabled you to begin to answer these questions.
More specifically, in recent decades, especially since the end of the Cold War, our common-good sensibilities have been channeled
into neoliberal platforms for social change and privatized action, funneling our political energies into brand culture and marketized
struggles for equality (e.g., charter schools, NGOs and non-profits, neoliberal antiracism and feminism). As a result, despite our
collective anger and disaffected consent, we find ourselves stuck in capitalist realism with no real alternative. Like the neoliberal
care of the self, we are trapped in a privatized mode of politics that relies on cruel optimism; we are attached, it seems, to politics
that inspire and motivate us to action, while keeping us living in competition.
To disrupt the game, we need to construct common political horizons against neoliberal hegemony. We need to use our common stories
and common reason to build common movements against precarity -- for within neoliberalism, precarity is what ultimately has the potential
to thread all of our lives together. Put differently, the ultimate fault line in the neoliberal conjiuicture is the way it subjects
us all to precarity and the biopolitics of disposability, thereby creating conditions of possibility for new coalitions across race,
gender, citizenship, sexuality, and class. Recognizing this potential for coalition in the face of precarization is the most pressing
task facing those who are yearning for a new world. The question is: How do we get there? How do we realize these coalitional potentialities
and materialize common horizons?
Ultimately, mapping the neoliberal conjuncture through everyday life in enterprise culture has not only provided some direction
in terms of what we need; it has also cultivated concrete and practical intellectual resources for political interv ention and social
interconnection -- a critical toolbox for living in common. More specifically, this book has sought to provide resources for thinking
and acting against the four Ds: resources for engaging in counter-conduct, modes of living that refuse, on one hand, to conduct one's
life according to the norm of enterprise, and on the other, to relate to others through the norm of competition. Indeed, we need
new ways of relating, interacting, and living as friends, lovers, workers, vulnerable bodies, and democratic people if we are to
write new stories, invent new govemmentalities, and build coalitions for new worlds.
Against Disimagination: Educated Hope and Affirmative Speculation
We need to stop turning inward, retreating into ourselves, and taking personal responsibility for our lives (a task which is ultimately
impossible). Enough with the disimagination machine! Let's start looking outward, not inward -- to the broader structures that undergird
our lives. Of course, we need to take care of ourselves; we must survive. But I firmly believe that we can do this in ways both big
and small, that transform neoliberal culture and its status-quo stories.
Here's the thing I tell my students all the time. You cannot escape neoliberalism. It is the air we breathe, the water in which
we swim. No job, practice of social activism, program of self-care, or relationship will be totally free from neoliberal impingements
and logics. There is no pure "outside" to get to or work from -- that's just the nature of the neoliberalism's totalizing cultural
power. But let's not forget that neoliberalism's totalizing cultural power is also a source of weakness. Potential for resistance
is everywhere, scattered throughout our everyday lives in enterprise culture. Our critical toolbox can help us identify these potentialities
and navigate and engage our conjuncture in ways that tear open up those new worlds we desire.
In other words, our critical perspective can help us move through the world with what Henry Giroux calls educated hope. Educated
hope means holding in tension the material realities of power and the contingency of history. This orientation of educated hope knows
very well what we're up against. However, in the face of seemingly totalizing power, it also knows that neoliberalism can never become
total because the future is open. Educated hope is what allows us to see the fault lines, fissures, and potentialities of the present
and emboldens us to think and work from that sliver of social space where we do have political agency and freedom to construct a
new world. Educated hope is what undoes the power of capitalist realism. It enables affirmative speculation (such as discussed in
Chapter 5), which does not try to hold the future to neoliberal horizons (that's cruel optimism!), but instead to affirm our commonalities
and the potentialities for the new worlds they signal. Affirmative speculation demands a different sort of risk calculation and management.
It senses how little we have to lose and how much we have to gain from knocking the hustle of our lives.
Against De-democratization: Organizing and Collective Coverning
We can think of educated hope and affirmative speculation as practices of what Wendy Brown calls "bare democracy" -- the basic
idea that ordinary' people like you and me should govern our lives in common, that we should critique and try to change our world,
especially the exploitative and oppressive structures of power that maintain social hierarchies and diminish lives. Neoliberal culture
works to stomp out capacities for bare democracy by transforming democratic desires and feelings into meritocratic desires and feelings.
In neoliberal culture, utopian sensibilities are directed away from the promise of collective utopian sensibilities are directed
away from the promise of collective governing to competing for equality.
We have to get back that democractic feeling! As Jeremy Gilbert taught us, disaffected consent is a post-democratic orientation.
We don't like our world, but we don't think we can do anything about it. So, how do we get back that democratic feeling? How do we
transform our disaffected consent into something new? As I suggested in the last chapter, we organize. Organizing is simply about
people coming together around a common horizon and working collectively to materialize it. In this way, organizing is based on the
idea of radical democracy, not liberal democracy. While the latter is based on formal and abstract rights guaranteed by the state,
radical democracy insists that people should directly make the decisions that impact their lives, security, and well-being. Radical
democracy is a practice of collective governing: it is about us hashing out, together in communities, what matters, and working in
common to build a world based on these new sensibilities.
The work of organizing is messy, often unsatisfying, and sometimes even scary. Organizing based on affirmative speculation and
coalition-building, furthermore, will have to be experimental and uncertain. As Lauren Berlant suggests, it means "embracing the
discomfort of affective experience in a truly open social life that no
one has ever experienced." Organizing through and for the common "requires more adaptable infrastructures. Keep forcing the existing
infrastructures to do what they don't know how to do. Make new ways to be local together, where local doesn't require a physical
neighborhood." 5 What Berlant is saying is that the work of bare democracy requires unlearning, and detaching from, our
current stories and infrastructures in order to see and make things work differently. Organizing for a new world is not easy -- and
there are no guarantees -- but it is the only way out of capitalist realism.
Getting back democratic feeling will at once require and help us lo move beyond the biopolitics of disposability and entrenched
systems of inequality. On one hand, organizing will never be enough if it is not animated by bare democracy, a sensibility that each
of us is equally important when it comes to the project of determining our lives in common. Our bodies, our hurts, our dreams, and
our desires matter regardless of our race, gender, sexuality, or citizenship, and regardless of how r much capital (economic,
social, or cultural) we have. Simply put, in a radical democracy, no one is disposable. This bare-democratic sense of equality must
be foundational to organizing and coalition-building. Otherwise, we will always and inevitably fall back into a world of inequality.
On the other hand, organizing and collective governing will deepen and enhance our sensibilities and capacities for radical equality.
In this context, the kind of self-enclosed individualism that empowers and underwrites the biopolitics of disposability melts away,
as we realize the interconnectedness of our lives and just how amazing it feels to
fail, we affirm our capacities for freedom, political intervention, social interconnection, and collective social doing.
Against Dispossession: Shared Security and Common Wealth
Thinking and acting against the biopolitics of disposability goes hand-in-hand with thinking and acting against dispossession.
Ultimately, when we really understand and feel ourselves in relationships of interconnection with others, we want for them as we
want for ourselves. Our lives and sensibilities of what is good and just are rooted in radical equality, not possessive or self-appreciating
individualism. Because we desire social security and protection, we also know others desire and deserve the same.
However, to really think and act against dispossession means not only advocating for shared security and social protection, but
also for a new society that is built on the egalitarian production and distribution of social wealth that we all produce. In this
sense, we can take Marx's critique of capitalism -- that wealth is produced collectively but appropriated individually -- to heart.
Capitalism was built on the idea that one class -- the owners of the means of production -- could exploit and profit from the collective
labors of everyone else (those who do not own and thus have to work), albeit in very different ways depending on race, gender, or
citizenship. This meant that, for workers of all stripes, their lives existed not for themselves, but for others (the appropriating
class), and that regardless of what we own as consumers, we are not really free or equal in that bare-democratic sense of the word.
If we want to be really free, we need to construct new material and affective social infrastructures for our common wealth. In
these new infrastructures, wealth must not be reduced to economic value; it must be rooted in social value. Here, the production
of wealth does not exist as a separate sphere from the reproduction of our lives. In other words, new infrastructures, based on the
idea of common wealth, will not be set up to exploit our labor, dispossess our communities, or to divide our lives. Rather, they
will work to provide collective social resources and care so that we may all be free to pursue happiness, create beautiful and/or
useful things, and to realize our potential within a social world of living in common. Crucially, to create the conditions for these
new, democratic forms of freedom rooted in radical equality, we need to find ways to refuse and exit the financial networks of Empire
and the dispossessions of creditocracy, building new systems that invite everyone to participate in the ongoing production of new
worlds and the sharing of the wealth that we produce in common.
It's not up to me to tell you exactly where to look, but I assure you that potentialities for these new worlds are everywhere
around you.
While U.S. politicians from both parties have given standing ovations for the
U.S. oil and gas industry , investors appear to be losing their enthusiasm. The so-called
shale revolution, the fracking miracle, may have resulted in record oil and gas production in
North America, but the real miracle -- in which shale companies make money fracking that oil
and gas -- has yet to occur.
"Stocks have reached a permanently high plateau", "subprime is contained", "there's no
icebergs this far south" and now "The Fed's balance sheet is not the threat that people seem to
think it is."
Man's ability to willfully ignore 'downside possibilities' and remain cognitively dissonant
far longer than logic (or their pocketbook) should allow seems to know no bound and none other
than
The Federal Reserve's Bill Dudley just unleashed what could be the piece de resistance of
"nothing to see here, move along" agitprop.
Great Picture' Cowboying a Nuke while discussing confidence in the FED, quite appropo'
!
TRUTH @ 9:00; Plus this week, Friday will be Huge !
Should a seated President jail someone that attempted his Assassination, or a Former
President that planned to Nuke the Yellowstone Super Volcano Caldera, or someone that sold
email password to China and CC copied all 'to and from' messages including those highly
Confidential, or blame a former President for planning 911 False Flag attack, or expose
Planned Parenthoods first Amputating tongues for silently shipping in bulk, or expose
Democrat history of Decades of Projecting blame while committing War Crimes, or end 19 Year
War in Afghanistan ( Longest War ) then Syria against Last Night's Congressional Vote to keep
status quo, or 'take a knee' and quit being President !
CLEVELAND -- In a devastatingly sad overestimation of his influence in the professional
world, local father Bruce Tenety, 54, expressed the heartbreaking belief Monday that his
connections could help his son Justin, a recent college graduate, find a job. "You know, I
actually have a friend in the media business, and if you shoot him an email and meet up for
coffee, he just might be able to hook you up with something," said Tenety, who depressingly
appeared to be under the impression that this tenuous contact from a conference he attended
three years ago would not only remember his name, but would also be willing to extend an offer
of employment to a 23-year-old he knows nothing about.
"I also know a guy who works at a PR firm in Mayfield Heights. Old Gary definitely owes me
one from back in the day.
Hell, you could probably call him up right now and get an interview this week. Just tell him
you're Bruce's kid."
At press time, sources confirmed Tenety had noticed his name was suspiciously absent from
the references section on his son's most recent job application.
The bottom line is that this preoccupation with the 'headline number' for the current month
as a single datapoint that is promoted by Wall Street and the Government for official economic
data is misleading.
The effective method of considering a heavily adjusted and revised data series like this is
with a trend analysis of at least seven to twelve observations, and more if you can get
them.
But, that makes for a much less interesting and convenient narrative.
And as for the median wage and income -- it is still too weak to sustain an economic
recovery.
Stocks were a bit weak today, despite all this fabulous economic data, having exhausted the
sugar rush that was spoonfed to them by their friendly neighborhood Federal Reserve.
Money quote: " neoliberalism is the fight of finance to subdue society at large, and to
make the bankers and creditors today in the position that the landlords were under
feudalism."
Notable quotes:
"... ... if you take the Bible literally, it's the fight in almost all of the early books of the Old Testament, the Jewish Bible, all about the fight over indebtedness and debt cancellation. ..."
"... neoliberalism is the fight of finance to subdue society at large,and to make the bankers and creditors today in the position that the landlords were under feudalism. ..."
"... They call themselves free marketers, but they realize that you cannot have neoliberalism unless you're willing to murder and assassinate everyone who promotes an alternative ..."
"... Just so long as you remember that most of the strongest and most moving condemnations of greed and money in the ancient and (today) western world are also Jewish--i.e. Isaiah, Jeremiah, Micah, the Gospels, Letter of James, etc. ..."
"... The history of Jewish banking after the fall or Rome is inextricable from cultural anti-judaism of Christian west and east and de facto marginalization/ghettoization of Jews from most aspects of social life. The Jewish lending of money on interest to gentiles was both necessary for early mercantilist trade and yet usury was prohibited by the church. So Jewish money lenders were essential to and yet ostracized within European economies for centuries. ..."
"... Now Christianity has itself long given up on the tradition teaching against usury of course. ..."
"... In John, for instance most of the references to what in English is translated as "the Jews" are in Greek clearly references to "the Judaeans"--and especially to the ruling elite among the southern tribe in bed with the Romans. ..."
Just finished reading the fascinating
Michael Hudson interview I linked to on previous thread; but since we're discussing Jews
and their religion in a tangential manner, I think it appropriate to post here since the
history Hudson explains is 100% key to the ongoing pain us humans feel and inflict. My
apologies in advance, but it will take this long excerpt to explain what I mean:
"Tribes: When does the concept of a general debt cancellation disappear historically?
"Michael: I guess in about the second or third century AD it was downplayed in the Bible.
After Jesus died, you had, first of all, St Paul taking over, and basically Christianity was
created by one of the most evil men in history, the anti-Semite Cyril of Alexandria. He
gained power by murdering his rivals, the Nestorians, by convening a congress of bishops and
killing his enemies. Cyril was really the Stalin figure of Christianity, killing everybody
who was an enemy, organizing pogroms against the Jews in Alexandria where he ruled.
"It was Cyril that really introduced into Christianity the idea of the Trinity. That's
what the whole fight was about in the third and fourth centuries AD. Was Jesus a human, was
he a god? And essentially you had the Isis-Osiris figure from Egypt, put into Christianity.
The Christians were still trying to drive the Jews out of Christianity. And Cyril knew the
one thing the Jewish population was not going to accept would be the Isis figure and the
Mariolatry that the church became. And as soon as the Christian church became the
establishment rulership church, the last thing it wanted in the West was debt
cancellation.
"You had a continuation of the original Christianity in the Greek Orthodox Church, or the
Orthodox Church, all the way through Byzantium. And in my book And Forgive Them Their Debts,
the last two chapters are on the Byzantine echo of the original debt cancellations, where one
ruler after another would cancel the debts. And they gave very explicit reason for it: if we
don't cancel the debts, we're not going to be able to field an army, we're not going to be
able to collect taxes, because the oligarchy is going to take over. They were very explicit,
with references to the Bible, references to the jubilee year. So you had Christianity survive
in the Byzantine Empire. But in the West it ended in Margaret Thatcher. And Father
Coughlin.
"Tribes: He was the '30s figure here in the States.
"Michael: Yes: anti-Semite, right-wing, pro-war, anti-labor. So the irony is that you have
the people who call themselves fundamentalist Christians being against everything that Jesus
was fighting for, and everything that original Christianity was all about."
Hudson says debt forgiveness was one of the central tenets of Judaism: " ... if
you take the Bible literally, it's the fight in almost all of the early books of the Old
Testament, the Jewish Bible, all about the fight over indebtedness and debt
cancellation. "
Looks like I'll be purchasing Hudson's book as he's essentially unveiling a whole new,
potentially revolutionary, historical interpretation.
@ karlof1 with the Michale Hudson link....thanks!!
Here is the quote that I really like from that interview
"
Michael: No. You asked what is the fight about? The fight is whether the state will be taken
over, essentially to be an extension of Wall Street if you do not have government planning.
Every economy is planned. Ever since the Neolithic (era), you've had to have (a form of)
planning. If you don't have a public authority doing the planning, then the financial
authority becomes the planners. So globalism is in the financial interest –Wall Street
and the City of London, doing the planning, not governments. They will do the planning in
their own interest. So neoliberalism is the fight of finance to subdue society at
large,and to make the bankers and creditors today in the position that the landlords were
under feudalism.
"
karlof1, please email me as I would like to read the book as well and maybe we can share a
copy.
And yes, it is relevant to Netanyahoo and his ongoing passel of lies because humanity has
been told and been living these lives for centuries...it is time to stop this shit and grow
up/evolve
@13 / 78 karlof1... thanks very much for the links to michael hudson, alastair crooke and the
bruno maraces articles...
they were all good for different reasons, but although hudson is being criticized for
glossing over some of his talking points, i think the main thrust of his article is very
worthwhile for others to read! the quote to end his article is quite good "The question is,
who do you want to run the economy? The 1% and the financial sector, or the 99% through
politics? The fight has to be in the political sphere, because there's no other sphere that
the financial interests cannot crush you on."
it seems to me that the usa has worked hard to bad mouth or get rid of government and the
concept of government being involved in anything.. of course everything has to be run by a
'private corp' - ie corporations must run everything.. they call them oligarchs when talking
about russia, lol - but they are corporations when they are in the usa.. slight rant..
another quote i especially liked from hudson.. " They call themselves free marketers,
but they realize that you cannot have neoliberalism unless you're willing to murder and
assassinate everyone who promotes an alternative ." that sounds about right...
@ 84 juliania.. aside from your comments on hudsons characterization of st paul "the
anti-Semite Cyril of Alexandria" further down hudson basically does the same with father
coughlin - https://en.wikipedia.org/wiki/Charles_Coughlin..
he gets the anti-semite tag as well.. i don't know much about either characters, so it's
mostly greek to me, but i do find some of hudsons views especially appealing - debt
forgiveness being central to the whole article as i read it...
it is interesting my own view on how money is so central to the world and how often times
I am incapable of avoiding the observation of the disproportionate number of Jewish people in
banking.. I guess that makes me anti-semite too, but i don't think of myself that way.. I
think the obsession with money is killing the planet.. I don't care who is responsible for
keeping it going, it is killing us...
Just so long as you remember that most of the strongest and most moving condemnations
of greed and money in the ancient and (today) western world are also Jewish--i.e. Isaiah,
Jeremiah, Micah, the Gospels, Letter of James, etc.
The history of Jewish banking after the fall or Rome is inextricable from cultural
anti-judaism of Christian west and east and de facto marginalization/ghettoization of Jews from
most aspects of social life. The Jewish lending of money on interest to gentiles was both
necessary for early mercantilist trade and yet usury was prohibited by the church. So Jewish
money lenders were essential to and yet ostracized within European economies for
centuries.
Now Christianity has itself long given up on the tradition teaching against usury of
course.
I too greatly admire the work of Hudson but he consistently errs and oversimplifies
whenever discussing the beliefs of and the development of beliefs among preNicene followers
of the way (as Acts puts is) or Christians (as they came to be known in Antioch within
roughly eight or nine decades after Jesus' death.) Palestinian Judaism in the time of Jesus
was much more variegated than scholars even twenty years ago had recognized. The gradual
reception and interpretation of the Dead Sea Scrolls in tandem with renewed research into
Phili of Alexandria, the Essenes, the so-called Sons of Zadok, contemporary Galilean zealot
movements styles after the earlier Maccabean resistance, the apocalyptism of post exilic
texts like Daniel and (presumably) parts of Enoch--all paint a picture of a highly diverse
group of alternatives to the state-Church once known as Second Temple Judaism that has been
mistaken as undisputed Jewish "orthodoxy" since the advent of historical criticism.
The
Gospel of John, for example, which dates from betweeen 80-120 and is the record of a much
earlier oral tradition, is already explicitly binitarian, and possibly already trinitarian
depending on how one understands the relationship between the Spirit or Advocate and the Son.
(Most ante-Nicene Christians understood the Spirit to be *Christ's* own spirit in distributed
form, and they did so by appeal to a well-developed but still largely under recognized strand
in Jewish angelology.)
The "theological" development of Christianity occurred much sooner
that it has been thought because it emerged from an already highly theologized strand or
strands of Jewish teaching that, like Christianity itself, privileged the Abrahamic covenant
over the Mosaic Law, the testament of grace over that of works, and the universal scope of
revelation and salvation as opposed to any political or ethnic reading of the "Kingdom."
None
of these groups were part of the ruling class of Judaean priests and levites and their
hangers on the Pharisees.
In John, for instance most of the references to what in English is
translated as "the Jews" are in Greek clearly references to "the Judaeans"--and especially to
the ruling elite among the southern tribe in bed with the Romans.
So the anti-Judaism/Semiti
of John's Gispel largely rests on a mistranslation. In any event, everything is much more
complex than Hudson makes it out to be. Christian economic radicalism is alive and well in
the thought of Gregory of Nysa and Basil the Great, who also happened to be Cappadocian
fathers highly influential in the development of "orthodox" Trinitarianism in the fourth
century.
I still think that Hudson's big picture critique of the direction later Christianity
took is helpful and necessary, but this doesn't change the fact that he simplifies the
origins, development, and arguably devolution of this movement whenever he tries to get
specific. It is a worthwhile danger given the quality of his work in historical economics,
but still one has to be aware of.
"... As our society rushes toward technological ataraxia , it may do us some good to ponder the costs of what has become Silicon Valley's new religious covenant. For the enlightened technocrat and the venture capitalist, God is long dead and buried, democracy sundered, the American dream lost. These beliefs they keep hush-hushed, out of earshot of their consumer base. Best not to run afoul of the millions of middle-class Americans who have developed slavish devotions to their smartphones and tablets and Echo Dots, pouring billions into the coffers of the ballooning technocracy. ..."
"... The problem with Silicon Valley elites is a bit simpler than that. They are all very smart, but their knowledge is limited. They know everything about electronics, computers, and coding, but know little of history, philosophy, or the human condition. Hence they see everything as an engineering problem, something with an optimal, measurable solution. ..."
"... As Tucker Carlson is realizing, Artificial Intelligence eliminating around 55% of all jobs (as the Future of Employment study found) so that wealthy people can have more disposable income to demand other services also provided by robots is madness. This is religious devotion either to defacto anarcho-capitalism, transhumanism, or both. ..."
"... @TheSnark -- valid observation: The Silicon Valley elites " know everything about electronics, computers, and coding, but know little of history, philosophy, or the human condition." Religion is not an engineering issue. Knowing a little about history, philosophy, human condition would help them to understand that humans need something for their soul. And the human soul is not described by boolean "1"s or "0"s ..."
"... Zuckerberg's comment about the Roman Empire is bizzare.to say the least. Augustus didn't create "200 years of peace". The Roman Empire was constantly conquering its neighbors. And of the first 5 Roman Emperors, Augustus was the only one who defintly died of natural causes ..."
"... This time period was an extremely violent time period. The fact that Zuckerberg doesn't realize this, indicates to me that while he is smart at creating a business, he is basically a pseudo-intellectual ..."
They've rejected God and tradition in favor of an egoistic radicalism that sees their fellow man as expendable.
As our society rushes toward technological ataraxia , it may do us some good to ponder the costs of what has become
Silicon Valley's new religious covenant. For the enlightened technocrat and the venture capitalist, God is long dead and buried,
democracy sundered, the American dream lost. These beliefs they keep hush-hushed, out of earshot of their consumer base. Best not
to run afoul of the millions of middle-class Americans who have developed slavish devotions to their smartphones and tablets and
Echo Dots, pouring billions into the coffers of the ballooning technocracy.
While Silicon Valley types delay giving their own children screens, knowing full well their deleterious effects on cognitive and
social development (not to mention their addictive qualities), they hardly bat an eye when handing these gadgets to our middle class.
Some of our Silicon oligarchs have gone so far as to call these products "demonic," yet on they go ushering them into schools, ruthlessly
agnostic as to whatever reckoning this might have for future generations.
As they do this, their political views seem to become more radical by the day. They as a class represent the junction of meritocracy
and the soft nihilism that has infiltrated almost every major institution in contemporary society. By day they inveigh against guns
and walls and inequality; by night they decamp into multimillion-dollar bunkers, safeguarded against the rest of the world, shamelessly
indifferent to their blatant hypocrisy. This cognitive dissonance results in a plundering worldview, one whose consequences are not
yet fully understood but are certainly catastrophic. Its early casualties already include some of the most fundamental elements of
American civil society: privacy, freedom of thought, even truth itself.
Hence a recent
New York Times profile of Silicon Valley's anointed guru, Yuval Harari. Harari is an Israeli futurist-philosopher whose apocalyptic
forecasts, made in books like Homo Deus: A Brief History of Tomorrow , have tantalized some of the biggest names on the political
and business scenes, including Barack Obama, Bill Gates, and Mark Zuckerberg. The Times portrays Harari as gloomy about the
modern world and especially its embrace of technology:
Part of the reason might be that Silicon Valley, at a certain level, is not optimistic on the future of democracy. The more
of a mess Washington becomes, the more interested the tech world is in creating something else, and it might not look like elected
representation. Rank-and-file coders have long been wary of regulation and curious about alternative forms of government. A separatist
streak runs through the place: Venture capitalists periodically call for California to secede or shatter, or for the creation
of corporate nation-states. And this summer, Mark Zuckerberg, who has recommended Mr. Harari to his book club, acknowledged a
fixation with the autocrat Caesar Augustus. "Basically," Mr. Zuckerberg told The New Yorker, "through a really harsh approach,
he established 200 years of world peace."
Harari understands that liberal democracy is in peril, and he's taken it upon himself to act as a foil to the anxieties of the
elite class. In return, they regale him with lavish dinner parties and treat him like their maharishi. Yet from reading the article,
one gets the impression that, at least in Harari's view, this is but a facade, or what psychologists call "reaction formation." In
other words, by paying lip service to Harari, who is skeptical of their designs, our elites hope to spare themselves from incurring
any moral responsibility for the costs of their social engineering. And "social engineering" is not a farfetched term to use. A portion
of the Times article interrogates the premise of Aldous Huxley's dystopian 1932 novel Brave New World , which tells
the story of a totalitarian regime that has anesthetized a docile underclass into blind submission:
As we boarded the black gull-wing Tesla Mr. Harari had rented for his visit, he brought up Aldous Huxley. Generations have
been horrified by his novel "Brave New World," which depicts a regime of emotion control and painless consumption. Readers who
encounter the book today, Mr. Harari said, often think it sounds great. "Everything is so nice, and in that way it is an intellectually
disturbing book because you're really hard-pressed to explain what's wrong with it," he said. "And you do get today a vision coming
out of some people in Silicon Valley which goes in that direction."
Here, Harari divulges with brutal frankness the indisputable link between private atheism and political thought. Lacking an immutable
ontology, man is left in the desert, unmoored from anything to keep his insatiable passions in check. His pride entices him into
playing the role of God.
At one point in the article, Harari wonders why we should even maintain a low-skilled "useless" class, whose work is doomed to
disappear over the next several decades, replaced by artificial intelligence. "You're totally expendable," Harari tells his audience.
This is why, the Times says, the Silicon elites recommend social engineering solutions like universal income to try and mitigate
the more unpleasant effects of that "useless" class. They seem unaware (or at least they're incapable of admitting) that human nature
is imperfect, sinful, and can never be perfected from on high. Since many of the Silicon breed reject the possibility of a
timeless, intelligent metaphysics (to say nothing of Christianity), such truisms about our natures go over their heads. Metaphysics
aside, the fact that our elites are even thinking this way to begin with -- that technology may render an entire underclass "expendable"
-- is in itself cause for concern. (As Keynes once quipped, "In the long run we are all dead.")
Harari seems to have a vendetta against traditions -- which can be extrapolated to the tradition of Western civilization writ
large -- for long considering homosexuality aberrant. He is quoted as saying, "If society got this thing wrong, who guarantees it
didn't get everything else wrong as well?" Thus do the Silicon elites have the audacity to shirk their entire Western birthright,
handed down to them across generations, in the name of creating a utopia oriented around a modern, hyper-individualistic view of
man.
When man abandons God, he begins to channel his religious desire, more devouring than even his sexual instinct, into other worldly
outlets. Thus has modern liberalism evolved from a political school of thought into an out-and-out ecclesiology, one that perverts
elements of Christian dogma into technocratic channels. (Of course, one can debate whether this was liberalism's intent in the first
place.) Our elites have crafted for themselves a new religion. Humility to them is nothing more than a vice.
The reason the elites are entertaining alternatives to democracy is because they know that so long as we adhere to constitutional
government -- our American system, even in its severely compromised form -- we are bound to the utterly natural constraints hardwired
by our framers (who, by the way, revered Aristotle and Jesus). Realizing this, they seek alternative forms in Silicon Valley social
engineering projects, hoping to create a regime that will conform to their megalomaniacal fancies.
If there is a silver lining in all this, it's that in the real word, any such attempt to base a political regime on naked ego
is bound to fail. Such things have been tried before, in our lifetimes, no less, and they have never worked because they cannot work.
Man should never be made the center of the universe because, per impossible, there is already a natural order that cannot
be breached. May he come to realize this sooner rather than later. And may Mr. Harari's wildest nightmares never come to fruition.
Paul Ingrassia is a co-host of the Right on Point podcast. To listen to his podcast, click
here .
"in the real word, any such attempt to base a political regime on naked ego is bound to fail. Such things have been tried before,
in our lifetimes, no less, and they have never worked because they cannot work."
But they can create hells on earth for many decades, in which millions are consumed, until played out.
As Kipling so aptly put it, in the final stanzas of a poem:
As it will be in the future, it was at the birth of Man
There are only four things certain since Social Progress began.
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool's bandaged finger goes wabbling back to the Fire;
And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins,
As surely as Water will wet us, as surely as Fire will burn,
The Gods of the Copybook Headings with terror and slaughter return!
"The reason the elites are entertaining alternatives to democracy is because they know that so long as we adhere to constitutional
government -- our American system, even in its severely compromised form -- we are bound to the utterly natural constraints hardwired
by our framers (who, by the way, revered Aristotle and Jesus)."
Um, you do know that one of the gravest dangers the founders feared was democracy? And the bulwarks they put in place are all
meant to constraint majority rule? Now, if the argument you are making that the elites have so corrupted the hoi polloi that only
rule by a minority of REAL AMERICANS can save us, say so, don't do the idiotic dodge of invoking democratic arguments while obviously
advocating minority rule.
The problem with Silicon Valley elites is a bit simpler than that. They are all very smart, but their knowledge is limited.
They know everything about electronics, computers, and coding, but know little of history, philosophy, or the human condition.
Hence they see everything as an engineering problem, something with an optimal, measurable solution.
As a result, they do not even understand the systems they have built; witness Zuckerberg struggling to get Facebook under control.
If they go the way the author fears it will be by accident, not design. Despite their smarts, they really don't know what they
are doing in terms of society.
As Tucker Carlson is realizing, Artificial Intelligence eliminating around 55% of all jobs (as the Future of Employment study
found) so that wealthy people can have more disposable income to demand other services also provided by robots is madness. This
is religious devotion either to defacto anarcho-capitalism, transhumanism, or both.
They're literally selling out human existence for their own myopic short-term gain, yet have a moral superiority complex.
I suppose the consensus is that the useless class gets welfare depending on their social credit score. Maybe sterilization will
lead to a higher social credits score. Dark days are coming.
@TheSnark -- valid observation: The Silicon Valley elites " know everything about electronics, computers, and coding, but
know little of history, philosophy, or the human condition." Religion is not an engineering issue. Knowing a little about history,
philosophy, human condition would help them to understand that humans need something for their soul. And the human soul is not
described by boolean "1"s or "0"s
Western Culture is struggling to adapt to the new communication technologies that inhabit the Internet. That the developers of
these technologies see themselves as gods of a sort is entirely consistent with human history and nature.
The best historical example of how new communication technology can change society occurred about 500 years ago, when the printing
press was developed in Europe. A theologian and professor named Martin Luther (Perhaps you have heard of him?) composed a list
of 95 discussion questions regarding the then-current activities of The Church. That list, known as the "95 Theses" was posted
on the chapel door in Wittenburg, Germany. Before long, the list was transcribed and published. The list, and many responses,
were distributed throughout Europe. The Protestant Reformation was sparked.
The Press and Protestant Reformation it launched remains a primary foundation of today's Western Culture. It has initiated
much violence, much dissension, war with millions of deaths, The Enlightenment, and much else. The printing press ushered in the
modern era.
Just as the printing press enabled profound change in the world 500 years ago, The Internet is prompting similar disruption
today. I think we are in the early stages, and estimate that our great great grandchildren will be among the first to fully appreciate
what has been gained and lost as a result of this technology.
So the arrogance of religious believers convinced that they know "the TRUTH!", are the only ones to do so, and are justified in
forcing non-believers to act as "God says!" is to be completely ignored?
Methinks we're seeing a huge case of projection here .
The problem is also that once those religious foundations are gone, they don't come back easily. How can you talk to an atheist/muslim/buddhist
who doesn't even believe that lying is always sin? People in the west have started to think that all our nice freedoms and comfort
have magically come from the heart of humans, that we are all somehow equal and want the same things but the bible tells us the
real story: The heart is deceitful above all things, and desperately wicked.
Then we have religions who fundamentally do not even view death as a problem. Now this is where we enter the danger zone. In
the west we have lived on such a good, superior Christian foundation we seem to have forgotten how truly horrible and inferior
the alternatives are. Suddenly you get people who endorse cannibalism and child sacrifice again, I have seen this myself. How
do you even explain to somebody that this is wrong when he fundamentally disagrees on the morality of killing?
People don't understand that Christian morality was hard fought for, they refuse to understand that human beings do not have
a magical switch that makes them disapprove of murder.
Thousands were burned alive in England just for wanting to read the bible. It is like a technological innovation. We found
a trick in the human condition, we discovered the truth about humanity. Now these coddled silicon valley people who have grown
up in a Christian society with Christian morality and protections in their arrogance think that Christian behavior is the base
of human morality anyway and needs no protection. Thanks to them in no small part the entire world is currently doing its utmost
to reject the reality of the bible. We see insane propositions that say we should not judge people. Or that everyone is equal.
Of course the bible never says that with the meaning they imply, but it was coopted beautifully for their own evil agenda. Yes
evil, did I mention that our technocratic genius overlords don't believe in that either?
How can you talk with somebody that has rejected the most base truths of human life. How can you say a murderer is equal to
a non-criminal? You must understand that these new age fake Christians truly think like this, they truly believe that everyone
is equal. You can't allow yourself to think that 'oh they just mean we are all equal like.. on a human level, in our humanity'.
Nono, I made the mistake to be too charitable with them. They actually think we are all equal no matter what. I found it hard
to believe that we have degenerated so much, I have been in a quasi state of shock for a long time over this.
Zuckerberg's comment about the Roman Empire is bizzare.to say the least. Augustus didn't create "200 years of peace". The
Roman Empire was constantly conquering its neighbors. And of the first 5 Roman Emperors, Augustus was the only one who defintly
died of natural causes
This time period was an extremely violent time period. The fact that Zuckerberg doesn't realize this, indicates to me that
while he is smart at creating a business, he is basically a pseudo-intellectual
"... the Davos crew is trying to combat populism, according to The Washington Post . It is kind of amazing that the rich people at Davos would not understand how absurd this is. ..."
"... The real incredible aspect of Davos is that so many political leaders and news organizations would go to a meeting that is quite explicitly about rich people trying to set an agenda for the world. ..."
"... It is important to remember, the World Economic Forum is not some sort of international organization like the United Nations, the OECD, or even the International Monetary Fund. It is a for-profit organization that makes money by entertaining extremely rich people. The real outrage of the story is that top political leaders, academics, and new outlets feel obligated to entertain them. ..."
"... Davos ought to be treated as a conspiracy against labor, representative government, environmental regulation and decent living standards, but of course our admiring national press corps doesn't see it that way -- their bosses attend, after all. ..."
"... It may be best to avoid the term "populist" because it tends to be applied indiscriminately to the likes of Trump and to leftist reformers. Or if it is used for Trump it should be "fake populist". Opposition to corporatist globalization can be populistic, but Trump's version so far has been mostly fake. ..."
"... Two kinds of populism: rightwing populism (which often looks like fascism) and leftwing populism. They are quite different critters and they don't have a lot to do with each other though they agree on a few things. ..."
"... People REALLY need to re-read 1984 & refresh their memories of Orwellian good-is-bad brainwashing ..."
"... Trump is a rightwing populist, but it is very confusing. In the US anyway and often in general, rightwing populists are NOT the enemies of the rich. Note Mussolini and Hitler. Fascism really is a type of rightwing populism. ..."
"... Rightwing populism pretends to be for the people and is to some extent (protectionism, isolationalism, nationalism) but in a lot of other ways, it's just fake and it's always a cover for class rule and rule by the rich. ..."
"... The rich will go to fascism or rightwing populism if they get a threat from the Left (read Trotsky), but they don't really like them very much, think they are classless brutes, barbarians, racists, bigots, etc. ..."
"... They're not worried about Donnie. He's no class traitor. They're worried about the populism of the Left and possibly about rightwing populism in Europe. Bolzonaro and Trump are hardly threats to capital. ..."
"... He pretends to be a populist because it helps him. For example, he doesn't care about illegal immigration. He's been happy to hire undocumented workers his whole life, even now in office. But it gets his base fired up so he rails about immigration. He has no ideology, he will use whatever helps him. ..."
"... Rightwing populism is NOT cool in my boat. Rightwing populism is Bolsonaro. It's Duterte too, but that's a bit different, he's a bit more pro-people. Erdogan is a rightwing populist too, but he's rather socialist. Marie Le Pen is out and out socialist and she gets called rightwing populist. Orban is 5X more socialist than Venezuela and he gets called rightwing populist. It's all very confusing. ..."
"... But in the US and Latin America, rightwing populism is ugly stuff all right, and it tends to be associated with fascism! ..."
Let's see, cattle ranchers are against vegetarianism, coal companies are against restricting CO2 emissions, and the Davos crew
is trying to combat populism, according to
The Washington Post . It is kind of amazing that the rich people at Davos would not understand how absurd this is.
Yeah, we get that rich people don't like the idea of movements that would leave them much less rich, but is it helpful to their
cause to tell us that they are devoting their rich people's conference to combating them? The real incredible aspect of Davos
is that so many political leaders and news organizations would go to a meeting that is quite explicitly about rich people trying
to set an agenda for the world.
It is important to remember, the World Economic Forum is not some sort of international organization like the United Nations,
the OECD, or even the International Monetary Fund. It is a for-profit organization that makes money by entertaining extremely rich
people. The real outrage of the story is that top political leaders, academics, and new outlets feel obligated to entertain them.
And the fact that so many Americans -(and especially American workers) still mistake Von Clownstick as a so called ''Populist''
- and being on their side - is... unbearable!
He IS in fact a rigthwing populist of a sort. That's what rightwing populism in the US looks like, and what it's always looked
like. Bunch of crap huh? Gimme Marie Le Pen any day.
"The real incredible aspect of Davos is that so many political leaders and news organizations would go to a meeting that is
quite explicitly about rich people trying to set an agenda for the world." \
Agreed - like how people almost worship British Royals.. or American celebrities... and yet, unfortunately, isn't it true that
the greedmongers at Davos are not "trying," but rather "largely succeeding" at setting said world agenda?
Nothing to see here, folks, move right along . . .
Davos and TED Talks. One entertains the rich, the other the smart. The skiing is better at Davos, the ideas are better at a
TED Talk. Just remember, most of the rich aren't smart and most of the smart aren't rich. So it's all rather silly, 'though it's
easier to get rich if you're smart than it is to get smart if you're rich. Don't ask me how I know that, but I'll tell you, if
you have an ounce of human kindness in you, learning the second half of that lesson is more painful than the first.
None of this would be half as much fun outside the glare of publicity, or if not heavily spiced with the envy of the excluded.
Ishi--I don't disagree with you. Just not as stupid as the Davos drivel. Perhaps I should have said 'less bad' ideas, but I
liked the cadence of 'better' and 'better.' Gotta have cadence if you want to get the People Marching.
Davos ought to be treated as a conspiracy against labor, representative government, environmental regulation and decent
living standards, but of course our admiring national press corps doesn't see it that way -- their bosses attend, after all.
Firstly we have to treat the so called ''Populists'' as a conspiracy against labor - because they pretended in the utmost conspirational
way to be on labors side.
While It always was as clear as mud that Davos was a Party of the Rich!
It may be best to avoid the term "populist" because it tends to be applied indiscriminately to the likes of Trump and to
leftist reformers. Or if it is used for Trump it should be "fake populist". Opposition to corporatist globalization can be populistic,
but Trump's version so far has been mostly fake.
You guys need to read up. Two kinds of populism: rightwing populism (which often looks like fascism) and leftwing populism.
They are quite different critters and they don't have a lot to do with each other though they agree on a few things.
That's basically my take, too. The term is purposely misused by the propagandists to get normal people thinking "Populism"
must be something they don't like. People REALLY need to re-read 1984 & refresh their memories of Orwellian good-is-bad brainwashing.
[and even "brainwashing" is an orwellian term! Brain-NUMBING, maybe... but nothing's getting cleaned, that's for sure]
Nope US rightwing populism has often looked a lot like Trump's crap. I mean some of it was better. I have a soft spot for Huey
Long. But in the US, rightwing populism just helps the rich mostly and it tends to be fascist.
''The term is purposely misused by the propagandists to get normal people thinking "Populism" must be something they don't
like'' You mean some con-artists have conned people who liked the term ''Populism'' into liking idiocy - racism and nationalism?.
Trump is a rightwing populist, but it is very confusing. In the US anyway and often in general, rightwing populists are
NOT the enemies of the rich. Note Mussolini and Hitler. Fascism really is a type of rightwing populism.
Rightwing populism pretends to be for the people and is to some extent (protectionism, isolationalism, nationalism) but
in a lot of other ways, it's just fake and it's always a cover for class rule and rule by the rich.
The rich will go to fascism or rightwing populism if they get a threat from the Left (read Trotsky), but they don't really
like them very much, think they are classless brutes, barbarians, racists, bigots, etc.
But the rich allow them because they think they can control them and not let them get out of hand. This is what happened in
Germany. This is what often happens actually.
In a sense, rightwing populism IS fake populism because it pretends to be for the people while often fucking them over with
rightwing class rule via fascism. It's still populism, it's just not for the people. It's fraudulent, iike most rightwing bullshit.
- AND! -
to suggest - or imply? - that the type of ''Populism'' Trump -(and other so called ''Populists) represent - IS to ''leave the
Davos Crowd much less rich'' -
could be the funniest thing ever written on this blog?
They're not worried about Donnie. He's no class traitor. They're worried about the populism of the Left and possibly about
rightwing populism in Europe. Bolzonaro and Trump are hardly threats to capital.
He pretends to be a populist because it helps him. For example, he doesn't care about illegal immigration. He's been happy
to hire undocumented workers his whole life, even now in office. But it gets his base fired up so he rails about immigration.
He has no ideology, he will use whatever helps him.
and to makes sure not to be misunderstood - I also think Davos is ''pathetic'' and ''hypocritical'' - and everything
else one wants to throw at it -
BUT as one of my favorite American Philosophers said:
"Nothing in all the world is more dangerous than sincere ignorance and conscientious stupidity."
And I think he meant the current ''Populists'' of this planet! -(and lets include especially the Brazilian one too)
But isn't it GREAT- that also ''the rich'' are starting to battle morons and a...holes like Baron von Clownsticks -(or the
nationalistic idiots in the UK - or the Neo Nazis in Germany?) -
For I while I thought I was left ALL alone in order to battle the type of ''Populism''- which is nothing else than the sick
racist phantasies of some nationalistic a...holes?
Rightwing populism is NOT cool in my boat. Rightwing populism is Bolsonaro. It's Duterte too, but that's a bit different,
he's a bit more pro-people. Erdogan is a rightwing populist too, but he's rather socialist. Marie Le Pen is out and out socialist
and she gets called rightwing populist. Orban is 5X more socialist than Venezuela and he gets called rightwing populist. It's
all very confusing.
But in the US and Latin America, rightwing populism is ugly stuff all right, and it tends to be associated with fascism!
Free market is possible only under strict government regulation. Without government regulation free market quickly
deteriorates into the law of jungles. Such a paradox ;-)
And if financial oligarchy gets to power as they got via coup d'état in the USA in late 7th, it is only a matter of time before
the society collapses. They are very destructive to the society at large. Probably more so then organized crime. But wait. They
actually can be viewed as special type of organized prime as is "The best way to rob the bank is to own it".
Notable quotes:
"... Idiots on here are always going on about how we don't got capitalism, if we only had capitalism, we don't got free markets, if only we had free markets, then everything would be hunky-dory. Without any proof, of course, because there never was and never will be a "free" "market." The US has plenty capitalism. And everything sucks. And they want more. Confused, stupid, disingenuous liars. ..."
"... Free markets are crookedness factories. As a PhD from Chicago Business School told me, "Free markets?! What free markets?! There is no free market! It's all crooked!" ..."
Idiots on here are always going on about how we don't got capitalism, if we only had
capitalism, we don't got free markets, if only we had free markets, then everything would be
hunky-dory. Without any proof, of course, because there never was and never will be a "free"
"market." The US has plenty capitalism. And everything sucks. And they want more. Confused,
stupid, disingenuous liars.
Look, what you call "capitalism" and "free markets" just means scams to make rich people
richer. You read some simple-minded description of some pie-in-the-sky theory of some perfect
world where rational actors make the best possible decisions in their own interest without
any outside interference, and you actually think you are reading a description of something
real.
I'll tell you what's real. Crookedness. Free markets are crookedness factories. As a
PhD from Chicago Business School told me, "Free markets?! What free markets?! There is no
free market! It's all crooked!"
Voters around the world revolt against leaders who won't improve their lives.
Newly-elected Utah senator Mitt Romney kicked off 2019 with an op-ed in the Washington Post
that savaged Donald Trump's character and leadership. Romney's attack and Trump's response
Wednesday morning on Twitter are the latest salvos in a longstanding personal feud between the
two men. It's even possible that Romney is planning to challenge Trump for the Republican
nomination in 2020. We'll see.
But for now, Romney's piece is fascinating on its own terms. It's well-worth reading. It's a
window into how the people in charge, in both parties, see our country.
Romney's main complaint in the piece is that Donald Trump is a mercurial and divisive
leader. That's true, of course. But beneath the personal slights, Romney has a policy critique
of Trump. He seems genuinely angry that Trump might pull American troops out of the Syrian
civil war. Romney doesn't explain how staying in Syria would benefit America. He doesn't appear
to consider that a relevant question. More policing in the Middle East is always better. We
know that. Virtually everyone in Washington agrees.
Corporate tax cuts are also popular in Washington, and Romney is strongly on board with
those, too. His piece throws a rare compliment to Trump for cutting the corporate rate a year
ago.
That's not surprising. Romney spent the bulk of his business career at a firm called Bain
Capital. Bain Capital all but invented what is now a familiar business strategy: Take over an
existing company for a short period of time, cut costs by firing employees, run up the debt,
extract the wealth, and move on, sometimes leaving retirees without their earned pensions.
Romney became fantastically rich doing this.
Meanwhile, a remarkable number of the companies are now bankrupt or extinct. This is the
private equity model. Our ruling class sees nothing wrong with it. It's how they run the
country.
Mitt Romney refers to unwavering support for a finance-based economy and an internationalist
foreign policy as the "mainstream Republican" view. And he's right about that. For generations,
Republicans have considered it their duty to make the world safe for banking, while
simultaneously prosecuting ever more foreign wars. Modern Democrats generally support those
goals enthusiastically.
There are signs, however, that most people do not support this, and not just in America. In
countries around the world -- France, Brazil, Sweden, the Philippines, Germany, and many others
-- voters are suddenly backing candidates and ideas that would have been unimaginable just a
decade ago. These are not isolated events. What you're watching is entire populations revolting
against leaders who refuse to improve their lives.
Something like this has been in happening in our country for three years. Donald Trump rode
a surge of popular discontent all the way to the White House. Does he understand the political
revolution that he harnessed? Can he reverse the economic and cultural trends that are
destroying America? Those are open questions.
But they're less relevant than we think. At some point, Donald Trump will be gone. The rest
of us will be gone, too. The country will remain. What kind of country will be it be then? How
do we want our grandchildren to live? These are the only questions that matter.
The answer used to be obvious. The overriding goal for America is more prosperity, meaning
cheaper consumer goods. But is that still true? Does anyone still believe that cheaper iPhones,
or more Amazon deliveries of plastic garbage from China are going to make us happy? They
haven't so far. A lot of Americans are drowning in stuff. And yet drug addiction and suicide
are depopulating large parts of the country. Anyone who thinks the health of a nation can be
summed up in GDP is an idiot.
The goal for America is both simpler and more elusive than mere prosperity. It's happiness.
There are a lot of ingredients in being happy: Dignity. Purpose. Self-control. Independence.
Above all, deep relationships with other people. Those are the things that you want for your
children. They're what our leaders should want for us, and would want if they cared.
But our leaders don't care. We are ruled by mercenaries who feel no long-term obligation to
the people they rule. They're day traders. Substitute teachers. They're just passing through.
They have no skin in this game, and it shows. They can't solve our problems. They don't even
bother to understand our problems.
One of the biggest lies our leaders tell us that you can separate economics from everything
else that matters. Economics is a topic for public debate. Family and faith and culture,
meanwhile, those are personal matters. Both parties believe this.
Members of our educated upper-middle-classes are now the backbone of the Democratic Party
who usually describe themselves as fiscally responsible and socially moderate. In other words,
functionally libertarian. They don't care how you live, as long as the bills are paid and the
markets function. Somehow, they don't see a connection between people's personal lives and the
health of our economy, or for that matter, the country's ability to pay its bills. As far as
they're concerned, these are two totally separate categories.
Social conservatives, meanwhile, come to the debate from the opposite perspective, and yet
reach a strikingly similar conclusion. The real problem, you'll hear them say, is that the
American family is collapsing. Nothing can be fixed before we fix that. Yet, like the
libertarians they claim to oppose, many social conservatives also consider markets sacrosanct.
The idea that families are being crushed by market forces seems never to occur to them. They
refuse to consider it. Questioning markets feels like apostasy.
Both sides miss the obvious point: Culture and economics are inseparably intertwined.
Certain economic systems allow families to thrive. Thriving families make market economies
possible. You can't separate the two. It used to be possible to deny this. Not anymore. The
evidence is now overwhelming. How do we know? Consider the inner cities.
Thirty years ago, conservatives looked at Detroit or Newark and many other places and were
horrified by what they saw. Conventional families had all but disappeared in poor
neighborhoods. The majority of children were born out of wedlock. Single mothers were the rule.
Crime and drugs and disorder became universal.
What caused this nightmare? Liberals didn't even want to acknowledge the question. They were
benefiting from the disaster, in the form of reliable votes. Conservatives, though, had a ready
explanation for inner-city dysfunction and it made sense: big government. Decades of
badly-designed social programs had driven fathers from the home and created what conservatives
called a "culture of poverty" that trapped people in generational decline.
There was truth in this. But it wasn't the whole story. How do we know? Because virtually
the same thing has happened decades later to an entirely different population. In many ways,
rural America now looks a lot like Detroit.
This is striking because rural Americans wouldn't seem to have much in common with anyone
from the inner city. These groups have different cultures, different traditions and political
beliefs. Usually they have different skin colors. Rural people are white conservatives,
mostly.
Yet, the pathologies of modern rural America are familiar to anyone who visited downtown
Baltimore in the 1980s: Stunning out of wedlock birthrates. High male unemployment. A
terrifying drug epidemic. Two different worlds. Similar outcomes. How did this happen? You'd
think our ruling class would be interested in knowing the answer. But mostly they're not. They
don't have to be interested. It's easier to import foreign labor to take the place of
native-born Americans who are slipping behind.
But Republicans now represent rural voters. They ought to be interested. Here's a big part
of the answer: male wages declined. Manufacturing, a male-dominated industry, all but
disappeared over the course of a generation. All that remained in many places were the schools
and the hospitals, both traditional employers of women. In many places, women suddenly made
more than men.
Now, before you applaud this as a victory for feminism, consider the effects. Study after
study has shown that when men make less than women, women generally don't want to marry them.
Maybe they should want to marry them, but they don't. Over big populations, this causes a drop
in marriage, a spike in out-of-wedlock births, and all the familiar disasters that inevitably
follow -- more drug and alcohol abuse, higher incarceration rates, fewer families formed in the
next generation.
This isn't speculation. This is not propaganda from the evangelicals. It's social science.
We know it's true. Rich people know it best of all. That's why they get married before they
have kids. That model works. But increasingly, marriage is a luxury only the affluent in
America can afford.
And yet, and here's the bewildering and infuriating part, those very same affluent married
people, the ones making virtually all the decisions in our society, are doing pretty much
nothing to help the people below them get and stay married. Rich people are happy to fight
malaria in Congo. But working to raise men's wages in Dayton or Detroit? That's crazy.
This is negligence on a massive scale. Both parties ignore the crisis in marriage. Our
mindless cultural leaders act like it's still 1961, and the biggest problem American families
face is that sexism is preventing millions of housewives from becoming investment bankers or
Facebook executives.
For our ruling class, more investment banking is always the answer. They teach us it's more
virtuous to devote your life to some soulless corporation than it is to raise your own
kids.
Sheryl Sandberg of Facebook wrote an entire book about this. Sandberg explained that our
first duty is to shareholders, above our own children. No surprise there. Sandberg herself is
one of America's biggest shareholders. Propaganda like this has made her rich.
We are ruled by mercenaries who feel no long-term obligation to the people they rule.
They're day traders. Substitute teachers. They're just passing through. They have no skin in
this game, and it shows.
What's remarkable is how the rest of us responded to it. We didn't question why Sandberg was
saying this. We didn't laugh in her face at the pure absurdity of it. Our corporate media
celebrated Sandberg as the leader of a liberation movement. Her book became a bestseller: "Lean
In." As if putting a corporation first is empowerment. It is not. It is bondage. Republicans
should say so.
They should also speak out against the ugliest parts of our financial system. Not all
commerce is good. Why is it defensible to loan people money they can't possibly repay? Or
charge them interest that impoverishes them? Payday loan outlets in poor neighborhoods collect
400 percent annual interest.
We're OK with that? We shouldn't be. Libertarians tell us that's how markets work --
consenting adults making voluntary decisions about how to live their lives. OK. But it's also
disgusting. If you care about America, you ought to oppose the exploitation of Americans,
whether it's happening in the inner city or on Wall Street.
And by the way, if you really loved your fellow Americans, as our leaders should, if it
would break your heart to see them high all the time. Which they are. A huge number of our
kids, especially our boys, are smoking weed constantly. You may not realize that, because new
technology has made it odorless. But it's everywhere.
And that's not an accident. Once our leaders understood they could get rich from marijuana,
marijuana became ubiquitous. In many places, tax-hungry politicians have legalized or
decriminalized it. Former Speaker of the House John Boehner now lobbies for the marijuana
industry. His fellow Republicans seem fine with that. "Oh, but it's better for you than
alcohol," they tell us.
Maybe. Who cares? Talk about missing the point. Try having dinner with a 19-year-old who's
been smoking weed. The life is gone. Passive, flat, trapped in their own heads. Do you want
that for your kids? Of course not. Then why are our leaders pushing it on us? You know the
reason. Because they don't care about us.
When you care about people, you do your best to treat them fairly. Our leaders don't even
try. They hand out jobs and contracts and scholarships and slots at prestigious universities
based purely on how we look. There's nothing less fair than that, though our tax code comes
close.
Under our current system, an American who works for a salary pays about twice the tax rate
as someone who's living off inherited money and doesn't work at all. We tax capital at half of
what we tax labor. It's a sweet deal if you work in finance, as many of our rich people do.
In 2010, for example, Mitt Romney made about $22 million dollars in investment income. He
paid an effective federal tax rate of 14 percent. For normal upper-middle-class wage earners,
the federal tax rate is nearly 40 percent. No wonder Mitt Romney supports the status quo. But
for everyone else, it's infuriating.
Our leaders rarely mention any of this. They tell us our multi-tiered tax code is based on
the principles of the free market. Please. It's based on laws that the Congress passed, laws
that companies lobbied for in order to increase their economic advantage. It worked well for
those people. They did increase their economic advantage. But for everyone else, it came at a
big cost. Unfairness is profoundly divisive. When you favor one child over another, your kids
don't hate you. They hate each other.
That happens in countries, too. It's happening in ours, probably by design. Divided
countries are easier to rule. And nothing divides us like the perception that some people are
getting special treatment. In our country, some people definitely are getting special
treatment. Republicans should oppose that with everything they have.
What kind of country do you want to live in? A fair country. A decent country. A cohesive
country. A country whose leaders don't accelerate the forces of change purely for their own
profit and amusement. A country you might recognize when you're old.
A country that listens to young people who don't live in Brooklyn. A country where you can
make a solid living outside of the big cities. A country where Lewiston, Maine seems almost as
important as the west side of Los Angeles. A country where environmentalism means getting
outside and picking up the trash. A clean, orderly, stable country that respects itself. And
above all, a country where normal people with an average education who grew up in no place
special can get married, and have happy kids, and repeat unto the generations. A country that
actually cares about families, the building block of everything.
What will it take a get a country like that? Leaders who want it. For now, those leaders will
have to be Republicans. There's no option at this point.
But first, Republican leaders will have to acknowledge that market capitalism is not a
religion. Market capitalism is a tool, like a staple gun or a toaster. You'd have to be a fool
to worship it. Our system was created by human beings for the benefit of human beings. We do
not exist to serve markets. Just the opposite. Any economic system that weakens and destroys
families is not worth having. A system like that is the enemy of a healthy society.
Internalizing all this will not be easy for Republican leaders. They'll have to unlearn
decades of bumper sticker-talking points and corporate propaganda. They'll likely lose donors
in the process. They'll be criticized. Libertarians are sure to call any deviation from market
fundamentalism a form of socialism.
That's a lie. Socialism is a disaster. It doesn't work. It's what we should be working
desperately to avoid. But socialism is exactly what we're going to get, and very soon unless a
group of responsible people in our political system reforms the American economy in a way that
protects normal people.
If you want to put America first, you've got to put its families first.
Adapted from Tucker Carlson's monologue from "Tucker Carlson Tonight" on January 2,
2019.
"... America's "ruling class," Carlson says, are the "mercenaries" behind the failures of the middle class -- including sinking marriage rates -- and "the ugliest parts of our financial system." He went on: "Any economic system that weakens and destroys families is not worth having. A system like that is the enemy of a healthy society." ..."
"... He concluded with a demand for "a fair country. A decent country. A cohesive country. A country whose leaders don't accelerate the forces of change purely for their own profit and amusement." ..."
"... The monologue and its sweeping anti-elitism drove a wedge between conservative writers. The American Conservative's Rod Dreher wrote of Carlson's monologue, "A man or woman who can talk like that with conviction could become president. Voting for a conservative candidate like that would be the first affirmative vote I've ever cast for president. ..."
"... The Two-Income Trap: Why Middle-Class Parents Are Growing Broke ..."
"... Carlson wanted to be clear: He's just asking questions. "I'm not an economic adviser or a politician. I'm not a think tank fellow. I'm just a talk show host," he said, telling me that all he wants is to ask "the basic questions you would ask about any policy." But he wants to ask those questions about what he calls the "religious faith" of market capitalism, one he believes elites -- "mercenaries who feel no long-term obligation to the people they rule" -- have put ahead of "normal people." ..."
"... "What does [free market capitalism] get us?" he said in our call. "What kind of country do you want to live in? If you put these policies into effect, what will you have in 10 years?" ..."
"... Carlson is hardly the first right-leaning figure to make a pitch for populism, even tangentially, in the third year of Donald Trump, whose populist-lite presidential candidacy and presidency Carlson told me he views as "the smoke alarm ... telling you the building is on fire, and unless you figure out how to put the flames out, it will consume it." ..."
"... Trump borrowed some of that approach for his 2016 campaign but in office has governed as a fairly orthodox economic conservative, thus demonstrating the demand for populism on the right without really providing the supply and creating conditions for further ferment. ..."
"... Ocasio-Cortez wants a 70-80% income tax on the rich. I agree! Start with the Koch Bros. -- and also make it WEALTH tax. ..."
"... "I'm just saying as a matter of fact," he told me, "a country where a shrinking percentage of the population is taking home an ever-expanding proportion of the money is not a recipe for a stable society. It's not." ..."
"... Carlson told me he wanted to be clear: He is not a populist. But he believes some version of populism is necessary to prevent a full-scale political revolt or the onset of socialism. Using Theodore Roosevelt as an example of a president who recognized that labor needs economic power, he told me, "Unless you want something really extreme to happen, you need to take this seriously and figure out how to protect average people from these remarkably powerful forces that have been unleashed." ..."
"... But Carlson's brand of populism, and the populist sentiments sweeping the American right, aren't just focused on the current state of income inequality in America. Carlson tackled a bigger idea: that market capitalism and the "elites" whom he argues are its major drivers aren't working. The free market isn't working for families, or individuals, or kids. In his monologue, Carlson railed against libertarian economics and even payday loans, saying, "If you care about America, you ought to oppose the exploitation of Americans, whether it's happening in the inner city or on Wall Street" -- sounding very much like Sanders or Warren on the left. ..."
"... Capitalism/liberalism destroys the extended family by requiring people to move apart for work and destroying any sense of unchosen obligations one might have towards one's kin. ..."
"... Hillbilly Elegy ..."
"... Carlson told me that beyond changing our tax code, he has no major policies in mind. "I'm not even making the case for an economic system in particular," he told me. "All I'm saying is don't act like the way things are is somehow ordained by God or a function or raw nature." ..."
"All I'm saying is don't act like the way things are is somehow ordained by God."
Last Wednesday, the conservative talk show host Tucker Carlson started a fire on the right after airing a prolonged
monologue on his show that was, in essence, an indictment of American capitalism.
America's "ruling class," Carlson says, are the "mercenaries" behind the failures of the middle class -- including sinking
marriage rates -- and "the ugliest parts of our financial system." He went on: "Any economic system that weakens and destroys families
is not worth having. A system like that is the enemy of a healthy society."
He concluded with a demand for "a fair country. A decent country. A cohesive country. A country whose leaders don't accelerate
the forces of change purely for their own profit and amusement."
The monologue was stunning in itself, an incredible moment in which a Fox News host stated that for generations, "Republicans
have considered it their duty to make the world safe for banking, while simultaneously prosecuting ever more foreign wars." More
broadly, though, Carlson's position and the ensuing controversy reveals an ongoing and nearly unsolvable tension in conservative
politics about the meaning of populism, a political ideology that Trump campaigned on but Carlson argues he may not truly understand.
Moreover, in Carlson's words: "At some point, Donald Trump will be gone. The rest of us will be gone too. The country will remain.
What kind of country will be it be then?"
The monologue and its sweeping anti-elitism drove a wedge between conservative writers. The American Conservative's Rod Dreher
wrote of Carlson's monologue,
"A man or woman who can talk like that with conviction could become president. Voting for a conservative candidate like that would
be the first affirmative vote I've ever cast for president." Other conservative commentators scoffed. Ben Shapiro wrote in
National Review that Carlson's monologue sounded far more like Sens. Bernie Sanders or Elizabeth Warren than, say, Ronald Reagan.
I spoke with Carlson by phone this week to discuss his monologue and its economic -- and cultural -- meaning. He agreed that his
monologue was reminiscent of Warren, referencing her 2003
bookThe Two-Income Trap: Why Middle-Class Parents Are Growing Broke . "There were parts of the book that I disagree
with, of course," he told me. "But there are parts of it that are really important and true. And nobody wanted to have that conversation."
Carlson wanted to be clear: He's just asking questions. "I'm not an economic adviser or a politician. I'm not a think tank
fellow. I'm just a talk show host," he said, telling me that all he wants is to ask "the basic questions you would ask about any
policy." But he wants to ask those questions about what he calls the "religious faith" of market capitalism, one he believes elites
-- "mercenaries who feel no long-term obligation to the people they rule" -- have put ahead of "normal people."
But whether or not he likes it, Carlson is an important voice in conservative politics. His show is among the
most-watched television programs in America. And his raising questions about market capitalism and the free market matters.
"What does [free market capitalism] get us?" he said in our call. "What kind of country do you want to live in? If you put
these policies into effect, what will you have in 10 years?"
Populism on the right is gaining, again
Carlson is hardly the first right-leaning figure to make a pitch for populism, even tangentially, in the third year of Donald
Trump, whose populist-lite
presidential candidacy and presidency Carlson told me he views as "the smoke alarm ... telling you the building is on fire, and unless
you figure out how to put the flames out, it will consume it."
Populism is a rhetorical approach that separates "the people" from elites. In the
words of Cas
Mudde, a professor at the University of Georgia, it divides the country into "two homogenous and antagonistic groups: the pure people
on the one end and the corrupt elite on the other." Populist rhetoric has a long history in American politics, serving as the focal
point of numerous presidential campaigns and powering William Jennings Bryan to the Democratic nomination for president in 1896.
Trump borrowed some of that approach for his 2016 campaign but in office has governed as a fairly orthodox economic conservative,
thus demonstrating the demand for populism on the right without really providing the supply and creating conditions for further ferment.
When right-leaning pundit Ann Coulter
spoke with Breitbart Radio about Trump's Tuesday evening Oval Office address to the nation regarding border wall funding, she
said she wanted to hear him say something like, "You know, you say a lot of wild things on the campaign trail. I'm speaking to big
rallies. But I want to talk to America about a serious problem that is affecting the least among us, the working-class blue-collar
workers":
Coulter urged Trump to bring up overdose deaths from heroin in order to speak to the "working class" and to blame the fact
that working-class wages have stalled, if not fallen, in the last 20 years on immigration. She encouraged Trump to declare, "This
is a national emergency for the people who don't have lobbyists in Washington."
Ocasio-Cortez wants a 70-80% income tax on the rich. I agree! Start with the Koch Bros. -- and also make it WEALTH tax.
These sentiments have even pitted popular Fox News hosts against each other.
Sean Hannity warned his audience that New York Rep. Alexandria Ocasio-Cortez's economic policies would mean that "the rich people
won't be buying boats that they like recreationally, they're not going to be taking expensive vacations anymore." But Carlson agreed
when I said his monologue was somewhat reminiscent of Ocasio-Cortez's
past comments on the economy , and how even a strong economy was still leaving working-class Americans behind.
"I'm just saying as a matter of fact," he told me, "a country where a shrinking percentage of the population is taking home
an ever-expanding proportion of the money is not a recipe for a stable society. It's not."
Carlson told me he wanted to be clear: He is not a populist. But he believes some version of populism is necessary to prevent
a full-scale political revolt or the onset of socialism. Using Theodore Roosevelt as an example of a president who recognized that
labor needs economic power, he told me, "Unless you want something really extreme to happen, you need to take this seriously and
figure out how to protect average people from these remarkably powerful forces that have been unleashed."
"I think populism is potentially really disruptive. What I'm saying is that populism is a symptom of something being wrong," he
told me. "Again, populism is a smoke alarm; do not ignore it."
But Carlson's brand of populism, and the populist sentiments sweeping the American right, aren't just focused on the current
state of income inequality in America. Carlson tackled a bigger idea: that market capitalism and the "elites" whom he argues are
its major drivers aren't working. The free market isn't working for families, or individuals, or kids. In his monologue, Carlson
railed against libertarian economics and even payday loans, saying, "If you care about America, you ought to oppose the exploitation
of Americans, whether it's happening in the inner city or on Wall Street" -- sounding very much like Sanders or Warren on the left.
Carlson's argument that "market capitalism is not a religion" is of course old hat on the left, but it's also been bubbling on
the right for years now. When National Review writer Kevin Williamson
wrote
a 2016 op-ed about how rural whites "failed themselves," he faced a massive backlash in the Trumpier quarters of the right. And
these sentiments are becoming increasingly potent at a time when Americans can see both a booming stock market and perhaps their
own family members struggling to get by.
Capitalism/liberalism destroys the extended family by requiring people to move apart for work and destroying any sense
of unchosen obligations one might have towards one's kin.
At the Federalist, writer Kirk Jing
wrote of Carlson's
monologue, and a
response
to it by National Review columnist David French:
Our society is less French's America, the idea, and more Frantz Fanon's "Wretched of the Earth" (involving a very different
French). The lowest are stripped of even social dignity and deemed
unworthy of life . In Real America, wages are stagnant, life expectancy is crashing, people are fleeing the workforce, families
are crumbling, and trust in the institutions on top are at all-time lows. To French, holding any leaders of those institutions
responsible for their errors is "victimhood populism" ... The Right must do better if it seeks to govern a real America that exists
outside of its fantasies.
J.D. Vance, author of
Hillbilly Elegy
, wrote that the [neoliberal] economy's victories -- and praise for those wins from conservatives -- were largely meaningless
to white working-class Americans living in Ohio and Kentucky: "Yes, they live in a country with a higher GDP than a generation ago,
and they're undoubtedly able to buy cheaper consumer goods, but to paraphrase Reagan: Are they better off than they were 20 years
ago? Many would say, unequivocally, 'no.'"
Carlson's populism holds, in his view, bipartisan possibilities. In a follow-up email, I asked him why his monologue was aimed
at Republicans when many Democrats had long espoused the same criticisms of free market economics. "Fair question," he responded.
"I hope it's not just Republicans. But any response to the country's systemic problems will have to give priority to the concerns
of American citizens over the concerns of everyone else, just as you'd protect your own kids before the neighbor's kids."
Who is "they"?
And that's the point where Carlson and a host of others on the right who have begun to challenge the conservative movement's orthodoxy
on free markets -- people ranging from occasionally mendacious bomb-throwers like Coulter to writers like
Michael Brendan Dougherty -- separate
themselves from many of those making those exact same arguments on the left.
When Carlson talks about the "normal people" he wants to save from nefarious elites, he is talking, usually, about a specific
group of "normal people" -- white working-class Americans who are the "real" victims of capitalism, or marijuana legalization, or
immigration policies.
In this telling, white working-class Americans who once relied on a manufacturing economy that doesn't look the way it did in
1955 are the unwilling pawns of elites. It's not their fault that, in Carlson's view, marriage is inaccessible to them, or that marijuana
legalization means more teens are smoking weed (
this probably isn't true ). Someone,
or something, did this to them. In Carlson's view, it's the responsibility of politicians: Our economic situation, and the plight
of the white working class, is "the product of a series of conscious decisions that the Congress made."
The criticism of Carlson's monologue has largely focused on how he deviates from the free market capitalism that conservatives
believe is the solution to poverty, not the creator of poverty. To orthodox conservatives, poverty is the result of poor decision
making or a
lack of virtue that can't be solved by government programs or an anti-elite political platform -- and they say Carlson's argument
that elites are in some way responsible for dwindling marriage rates
doesn't make sense .
But in French's response to Carlson, he goes deeper, writing that to embrace Carlson's brand of populism is to support "victimhood
populism," one that makes white working-class Americans into the victims of an undefined "they:
Carlson is advancing a form of victim-politics populism that takes a series of tectonic cultural changes -- civil rights, women's
rights, a technological revolution as significant as the industrial revolution, the mass-scale loss of religious faith, the sexual
revolution, etc. -- and turns the negative or challenging aspects of those changes into an angry tale of what they are
doing to you .
And that was my biggest question about Carlson's monologue, and the flurry of responses to it, and support for it: When other
groups (say, black Americans) have pointed to systemic inequities within the economic system that have resulted in poverty and family
dysfunction, the response from many on the right has been, shall we say,
less than
enthusiastic .
Really, it comes down to when black people have problems, it's personal responsibility, but when white people have the same
problems, the system is messed up. Funny how that works!!
Yet white working-class poverty receives, from Carlson and others, far more sympathy. And conservatives are far more likely to
identify with a criticism of "elites" when they believe those elites are responsible for the
expansion of trans
rights or creeping secularism
than the wealthy and powerful people who are investing in
private prisons or an expansion
of the
militarization of police . Carlson's network, Fox News, and Carlson himself have frequently blasted leftist critics of market
capitalism and efforts to
fight
inequality .
I asked Carlson about this, as his show is frequently centered on the turmoils caused by "
demographic change
." He said that for decades, "conservatives just wrote [black economic struggles] off as a culture of poverty," a line he
includes in his monologue .
He added that regarding black poverty, "it's pretty easy when you've got 12 percent of the population going through something
to feel like, 'Well, there must be ... there's something wrong with that culture.' Which is actually a tricky thing to say because
it's in part true, but what you're missing, what I missed, what I think a lot of people missed, was that the economic system you're
living under affects your culture."
Carlson said that growing up in Washington, DC, and spending time in rural Maine, he didn't realize until recently that the same
poverty and decay he observed in the Washington of the 1980s was also taking place in rural (and majority-white) Maine. "I was thinking,
'Wait a second ... maybe when the jobs go away the culture changes,'" he told me, "And the reason I didn't think of it before was
because I was so blinded by this libertarian economic propaganda that I couldn't get past my own assumptions about economics." (For
the record, libertarians have
critiqued Carlson's
monologue as well.)
Carlson told me that beyond changing our tax code, he has no major policies in mind. "I'm not even making the case for an
economic system in particular," he told me. "All I'm saying is don't act like the way things are is somehow ordained by God or a
function or raw nature."
And clearly, our market economy isn't driven by God or nature, as the stock market soars and unemployment dips and yet even those
on the right are noticing lengthy periods of wage stagnation and dying little towns across the country. But what to do about those
dying little towns, and which dying towns we care about and which we don't, and, most importantly, whose fault it is that those towns
are dying in the first place -- those are all questions Carlson leaves to the viewer to answer.
"... You should have come here in the 90's to see a shock of the Doctrine to face social trauma of "PGR"(Huge National Farms) workers (it's the electorate of PiS (Law and Justice)), Miners near Wałbrzych, workers of textile industry near łódź bereft of everything from day to day (literally). Even the contemporary visit might ensure you quite a thrill if you knew where to look. Most of the firms that would easily survive if given some protectionism were hostily taken over by a foreigner capital and shut down with their production instantly replaced by imported goods. ..."
"... I do remember his speeches well. Form the spectrum offered by the Chicago boys he chosen the hardest option. It was Michnik and Kuroń who opted for less "Chicago" direction. But they were in minority. The prevailing Zeitgeist of the period caused words "social", "common" to be treated as a curse and socially stigmatizing. ..."
"... For a better understanding what went wrong you may take example of railroad privatization and compare it to the Czech way. ..."
"... the global elite perspective is that a quick way to rid the globe of the problems we face is to kill off enough people so that the problem dissipates -- war, fraud, nationalism/racism used to point the finger at the other (making it easier for people to harm one another or look the other way (Arendt). ..."
"... Efficiency requires a variety of gains, returns, profits and fairness. Otherwise it is simply theft. And when all is accounted for there might not be any profit to be had in the real world. Only in the minds of the neoliberals. Efficiency is something that should be accounted for carefully so that no vital systems are harmed. ..."
The level of the naivety of Barkley Rosser is astounding.
Poland was a political project, the showcase for the neoliberal project in Eastern Europe and the USSR. EU was pressed to provide
large subsidies, and that marionette complied. The commenter ilpalazzo (above) is right that there has been " a tremendous development
in real estate and infrastructure mostly funded by the EU that has been a serious engine of growth." Like in Baltics and Ukraine,
German, French, Swedish and other Western buyers were most interested in opening market for their products and getting rid of
local and xUSSR competitors (and this supported and promoted Russophobia). With very few exceptions. University education system
also was partially destroyed, but still fared better than most manufacturing industries.
I remember talking to one of the Polish professors of economics when I was in Poland around 1992. He said that no matter how
things will develop, the Polish economy will never be allowed to fail as the USA is interested in propelling it at all costs.
Still, they lost quite a bit of manufacturing: for example all shipbuilding, which is ironic as Lech Wałęsa and Solidarity emerged
in this industry.
Eventually, Poland emerged as the major US agent of influence within the EU (along with GB) with the adamant anti-Russian stance.
Which taking into account the real state of Polish manufacturing deprived of the major market is very questionable. Later by joining
sanctions, they lost Russian agricultural market (including all apple market in which they have a prominent position).
But they have a large gas pipeline on their territory, so I suspect that like Ukraine they make a lot of money via transit
fees simply due to geographic. So they parochially live off rent -- that why they bark so much at North Stream 2.
Polish elite is a real horror show, almost beyond redemption, and not only in economics. I do not remember, but I think it
was Churchill who said " Poland is a greedy hyena of Europe." This is as true now as it was before WWII.
Gosh! I used to actively fight the commies here in the 80's. But then with Balcerowicz I almost regretted it. as to your words:
"Balcerowicz himself at one point advocated something pretty much like what came to pass, a gradual privatization and
maintaining most of the sociaal safety net while advocating shock monetary policies to bring inflation under control."
– They derail.
You should have come here in the 90's to see a shock of the Doctrine to face social trauma of "PGR"(Huge National Farms)
workers (it's the electorate of PiS (Law and Justice)), Miners near Wałbrzych, workers of textile industry near łódź bereft of
everything from day to day (literally). Even the contemporary visit might ensure you quite a thrill if you knew where to look.
Most of the firms that would easily survive if given some protectionism were hostily taken over by a foreigner capital and shut
down with their production instantly replaced by imported goods.
I do remember his speeches well. Form the spectrum offered by the Chicago boys he chosen the hardest option. It was Michnik
and Kuroń who opted for less "Chicago" direction. But they were in minority. The prevailing Zeitgeist of the period caused words
"social", "common" to be treated as a curse and socially stigmatizing.
For a better understanding what went wrong you may take example of railroad privatization and compare it to the Czech way.
Don't believe the official statistics, we have a huge part of our working poors here. Their voice will never be heard as they
live in a subsistence economy and the've got neither time nor power to shout struggling to survive..
One wonders why there is a need to revisit Klein's thesis to debunk parts of it in this moment?
And the point is so small in this article about Poland, that one wonders why a James Madison prof of econ does not have more
time to look at significant problems everywhere instead of parse the progressive beast?
In my lifetime, I have not witnessed a time where more of the political machinery has drifted to the right -- caught in the
headlights of what Chris Hedges calls the illusion of democracy in the decay of capitalism.
Its important to not forget Gina Haspel's contribution here and torture -- how torture (economic, physical, and social shock)
is implicated, vaulting her to the head of our top Spy agency --
It reminds me of a recent article from Arundhati Roy's, that the global elite perspective is that a quick way to rid the
globe of the problems we face is to kill off enough people so that the problem dissipates -- war, fraud, nationalism/racism used
to point the finger at the other (making it easier for people to harm one another or look the other way (Arendt).
China is wisely looking at the efficiency of state owned enterprises with a reluctance to privatize them. It will become very
clear now that everyone is sobering up from the collapse of the USSR that neoliberal capitalist efficiency (profits) can only
be made by socializing costs and externalizing everything that reduces their bottom line with answers like "That ain't mine."
If even the doofuses at Davos are looking at various forms of "capital" (social, political, civil, environmental, etc.) they
have begun to mitigate their global catastrophe.
Efficiency requires a variety of gains, returns, profits and fairness. Otherwise it is simply theft. And when all is accounted
for there might not be any profit to be had in the real world. Only in the minds of the neoliberals. Efficiency is something that
should be accounted for carefully so that no vital systems are harmed.
Barkley insists on a left-right split for his analysis of political parties and their attachment to vague policy tendencies
and that insistence makes a mess of the central issue: why the rise of right-wing populism in a "successful" economy?
Naomi Klein's book is about how and why centrist neoliberals got control of policy. The rise of right-wing populism is often
supposed (see Mark Blyth) to be about the dissatisfaction bred by the long-term shortcomings of or blowback from neoliberal policy.
Barkley Rosser treats neoliberal policy as implicitly successful and, therefore, the reaction from the populist right appears
mysterious, something to investigate. His thesis regarding neoliberal success in Poland is predicated on policy being less severe,
less "shocky".
In his left-right division of Polish politics, the centrist neoliberals -- in the 21st century, Civic Platform -- seem to disappear
into the background even though I think they are still the second largest Party in Parliament, though some seem to think they
will sink in elections this year.
Electoral participation is another factor that receives little attention in this analysis. Politics is shaped in part by the
people who do NOT show up. And, in Poland that has sometimes been a lot of people, indeed.
Finally, there's the matter of the neoliberal straitjacket -- the flip-side of the shock in the one-two punch of "there's no
alternative". What the policy options for a Party representing the interests of the angry and dissatisfied? If you make policy
impossible for a party of the left, of course that breeds parties of the right. duh.
Likbez,
Bruce,
Blowback from the neoliberal policy is coming. I would consider the current situation in the USA as the starting point
of this "slow-motion collapse of the neoliberal garbage truck against the wall." Neoliberalism like Bolshevism in 1945 has
no future, only the past. That does not mean that will not limp forward in zombie (and pretty bloodthirsty ) stage for another
50 years. But it is doomed, notwithstanding recently staged revenge in countries like Ukraine, Argentina, and Brazil.
Excessive financialization is the Achilles' heel of neoliberalism. It inevitably distorts everything, blows the
asset bubble, which then pops. With each pop, the level of political support of neoliberalism shrinks. Hillary defeat would
have been impossible without 2008 events.
At least half of Americans now hate soft neoliberals of Democratic Party (Clinton wing of Bought by Wall Street technocrats),
as well as hard neoliberal of Republican Party, which created the " crisis of confidence" toward governing neoliberal elite in
countries like the USA, GB, and France. And that probably why the intelligence agencies became the prominent political players
and staged the color revolution against Trump (aka Russiagate ) in the USA.
The situation with the support of neoliberalism now is very different than in 1994 when Bill Clinton came to power.
Of course, as Otto von Bismarck once quipped "God has a special providence for fools, drunkards, and the United States of America."
and another turn of the technological spiral might well save the USA. But the danger of never-ending secular stagnation is substantial
and growing. This fact was admitted even by such dyed-in-the-wool neoliberals as Summers.
This illusion that advances in statistics gave neoliberal access to such fine-grained and timely economic data, that now it
is possible to regulated economy indirectly, by strictly monetary means is pure religious hubris. Milton Friedman would
now be laughed out the room if he tried to repeat his monetarist junk science now. Actually he himself discarded his monetarist
illusions before he died.
We probably need to the return of strong direct investments in the economy by the state and nationalization of some assets,
if we want to survive and compete with China. Australian politicians are already openly discussing this, we still lagging because
of "walking dead" neoliberals in Congress like Pelosi, Schumer, and company.
But we have another huge problem, which Australia and other countries (other than GB) do not have: neoliberalism in the USA
is a state religion which completely displaced Christianity (and is hostile to Christianity), so it might be that the lemming
will go off the cliff. I hope not.
The only thing that still keeps neoliberalism from being thrown out to the garbage bin of history is that it is unclear what
would the alternative. And that means that like in 1920th far-right nationalism and fascism have a fighting chance against
decadent neoliberal oligarchy.
Previously financial oligarchy was in many minds associated with Jewish bankers. Now people are more educated and probably
can hang from the lampposts Anglo-Saxon and bankers of other nationalities as well ;-)
I think that in some countries neoliberal oligarchs might soon feel very uncomfortable, much like Soros in Hungary.
As far as I understood the level of animosity and suppressed anger toward financial oligarchy and their stooges including some
professors in economics departments of the major universities might soon be approaching the level which existed in the Weimar
Republic. And as Lenin noted, " the ideas could become a material force." This true about anger as well.
There is probably an optimum size of financial sector after which it easily go out of control
and start grabbing political power. So it is important to prohibit banksters to participate in
political activity of any kind or in lobbing. Lobbing by financial sector should be criminalized.
They also should be prohibited from hired any for government employee for 10 years after he/she
left this/her position in government (revolving door style of corruption).
The other interesting point is that taxes can server as powerful inhibitor of destructive
behaviour of financial sector. So the fight for the level of taxation of particular social groups
is the most important political fight in modern society.
Also some actions of banksters sho</blockquote>uld be criminalized with high duration
of jail term, just to create negative incentives for certain types of behavior. For example
selling insurance without adequate capital to cover loses. Also important is to criminalize
changing more then a minimum fees (say, 0.25% a year) in 401K accounts as well as provided
insufficiently diversified 401k portfolios.
This was a fascinating piece, very readable for those of us with minimal financial
education. However, since this is such a good explainer for the layman, I think it would be
very beneficial to explain how big a difference 1% in fees makes for an investor over a
lifetime. I know personally when I used to compare funds the difference between 1 and 2% in
fees seemed negligible. But then I saw that fantastic PBS Frontline on this topic
and saw how much that 1% could cost me over a lifetime! I now have everything that I
personally manage in index funds!
You can't really argue with what has been said, and all (of us) involved in the sector
know it is massive rip off.
While a free market advocate, I think a first step would be to introduce meaningful fee
caps on all state promoted or mandated saving arrangements (eg ISAS, and Pensions), on the
grounds that the market is skewed by the government intervention that creates the glut of
forced buyers, and so to correct that imbalance the market (i.e. consumers) need protection
through fee caps. I'd say no more than 20 – 25bps should be permitted for all ISAS and
pension savings (DC or DB). Individual wealthy investors (investments of more than say
£5m?) can pay what they like.
>>The job of the finance sector is simply to manage existing resources. It creates
nothing.
This is a dubious assertion, but you clearly believe it. How then, can you in good
conscience, charge 1.25% (plus indirect costs for the funds you hold in client portfolios) to
manage people's money when you yourself admit you are adding no value?
(source: http://strubelim.com/wp/our-funds/ar-fund/
)
There are 6000 publicly traded companies. Some of them will have rising stock prices, some
falling. If a money manager can steer you to the rising ones, he is doing something of value.
It doesn't mean he created anything physical that didn't exist before. He's doing a service
for you that would otherwise have taken you some time and effort to do, and that's what you
pay for.
Yes, it's a different definition of value. The growth of financial services has been
outpacing the growth of other sectors to a monstrous scale, and that makes this distinction
important. It signals a kind of corruption that can only mean high inflation and decoupling
money from economic output.
I don't follow. How is financial services different from any other kind of services, in
the impact on inflation? Why not also actors, barbers, or any other service profession?
The growth of the financial sector might be explained by the fact that it is the industry
most able to exploit computers, and the first to do so on a large scale.
The corruption is, I think, a separate issue that is present whenever other people's money
is involved. Financial services and government are simply more involved that way than most
other industries, and have been all along, dating to long before the recent growth.
Corruption is not impossible in any industry, just more attractive when the numbers are
larger.
Corruption is never a separate in ANY corporate activity. The TAX CODE treats the wealth
of the .01% radically different than Income from Labor, because all Taxes on Capital Gains
are deferred until taken and are not TAXED as ordinary income. The TAX CODE is responsible
for the corruption of our government because it has put real POWER, the Power of Wealth in
the hands of the .01%, to buy whatever it wants, while labor and the poor spend everything
they earn or are given , every single year to survive in a economic culture designed for the
benefit of the .01%, something no one will write about!
Change the TAX CODE and the Corruption of Society will end!
Barbers and actors being paid for their labor do not have the same impact on inflation as
a bank giving out loans and consumer credit at interest. It's not equivalent at all.
Corruption in financial industries is what this article is discussing. If it's a separate
issue, I'm confused as to the point of talking about this at all!
No, I wasn't, though I have heard that. My theory of markets, and human group behavior in
general, is a statistical approach. There are averages, distributions, and temporary
equilibriums, but the interesting parts are the outliers. I guess that is more of a quantum
flavor than Newtonian. Over time, economies behave cyclically. Much of nature and human group
behavior is cyclical.
"This argument hinges on everyone that purchases these services knowing their true
value."
In a literal sense, you are correct, it is an imperfect measure of value. However, I think
it is far and away the most reliable one we have as value is extremely subjective. I don't
think it is right or prudent for third, non cost bearing parties to preempt decisions made by
consenting adults, rather, I would accord them the dignity of free choice. There are many
things that consumers purchase that I do not understand, why anyone would pay a premium for a
fast car seems like a waste of money to me, for example. Why anyone would pay money to golf,
not to mention the huge cost in terms of time it takes to get through 18 holes, seems like a
waste of money to me. These are things that make no sense to me because I do not see the
value there. But, I recognize that people have various tastes and preferences, and I respect
that and presume that individuals know themselves and their own tastes and preferences better
than I (or someone else) does. Therefore, when someone values something that I do not
understand, I tend to believe it is a result of a difference in preference, rather than they
are too dumb to figure out what they like, or that they are "tricked" into buying something
and hence need protection delivered by those who fancy themselves as enlightened enough to
see the real truth. Nothing about this is unique to the financial industry, by the way.
"Countless services and products we rely on were funded by taxes to make them profitable.
They are "worthwhile" but apparently not "profitable" enough to invest in. Making money and
creating value aren't the same thing. Ideally, everyone decides what is worthwhile."
Apparently not enough people decided these services and products were worthwhile, so
politicians decided they were worthwhile and used the force and power of government to get
them done. Substituting preferences of politicians, spending other people's money for those
of millions of individuals spending their own money does not seem like an efficient way to
allocate resources.
"... The following is a transcript of CounterPunch Radio – Episode 19 (originally aired September 21, 2015). Eric Draitser interviews Michael Hudson. ..."
"... The Troika and IMF doctrine of austerity and privatization ..."
ED: Thanks so much for coming on. As I mentioned already, the title of your book –
Killing the Host: How Financial Parasites and Debt Bondage Destroy the Global Economy –
is an apt metaphor. So parasitic finance capital is really what you're writing about. You
explain that it essentially survives by feeding off what we might call the real economy. Could
you draw out that analogy a little bit? What does that mean? How does finance behave like a
parasite toward the rest of the economy?
MH: Economists for the last 50 years have used the term "host economy" for a country that
lets in foreign investment. This term appears in most mainstream textbooks. A host implies a
parasite. The term parasitism has been applied to finance by Martin Luther and others, but
usually in the sense that you just talked about: simply taking something from the host.
But that's not how biological parasites work in nature. Biological parasitism is more
complex, and precisely for that reason it's a better and more sophisticated metaphor for
economics. The key is how a parasite takes over a host. It has enzymes that numb the host's
nervous system and brain. So if it stings or gets its claws into it, there's a soporific
anesthetic to block the host from realizing that it's being taken over. Then the parasite sends
enzymes into the brain. A parasite cannot take anything from the host unless it takes over the
brain.
The brain in modern economies is the government, the educational system, and the way that
governments and societies make their economic policy models of how to behave. In nature, the
parasite makes the host think that the free rider, the parasite, is its baby, part of its body,
to convince the host actually to protect the parasite over itself.
That's how the financial sector has taken over the economy. Its lobbyists and academic
advocates have persuaded governments and voters that they need to protect banks, and even need
to bail them out when they become overly predatory and face collapse. Governments and
politicians are persuaded to save banks instead of saving the economy, as if the economy can't
function without banks being left in private hands to do whatever they want, free of serious
regulation and even from prosecution when they commit fraud. This means saving creditors
– the One Percent – not the indebted 99 Percent.
It was not always this way. A century ago, two centuries ago, three centuries ago and all
the way back to the Bronze Age, almost every society has realized that the great destabilizing
force is finance – that is, debt. Debt grows exponentially, enabling creditors ultimately
to foreclose on the assets of debtors. Creditors end up reducing societies to debt bondage, as
when the Roman Empire ended in serfdom.
About a hundred years ago in America, John Bates Clark and other pro-financial ideologues
argued that finance is not external to the economy. It's not extraneous, it's part of the
economy, just like landlords are part of the economy. This means that if the financial sector
takes more revenue out of the economy as interest, fees or monopoly charges, it's because
finance is an inherent and vital part of the economy, adding to GDP, not merely siphoning it
off from producers to pay Wall Street and the One Percent. So our economic policy protects
finance as if it helps us grow, not siphons off our growth.
A year or two ago, Lloyd Blankfein of Goldman Sachs said that the reason Goldman Sachs'
managers are paid more than anybody else is because they're so productive. The question is,
productive of what? The National Income and Product Accounts (NIPA) say that everybody is
productive in proportion to the amount of money they make/take. It doesn't matter whether it's
extractive income or productive income. It doesn't matter whether it's by manufacturing
products or simply taking money from people, or simply by the fraud that Goldman Sachs,
Citigroup, Bank of America and others paid tens of millions of dollars in fines for committing.
Any way of earning income is considered to be as productive as any other way. This is a
parasite-friendly mentality, because it denies that there's any such thing as unearned income.
It denies that there's a free lunch. Milton Friedman got famous for promoting the idea that
there's no such thing as a free lunch, when Wall Street knows quite well that this is what the
economy is all about. It's all about how to get a free lunch, with risks picked up by the
government. No wonder they back economists who deny that there's any such thing!
ED: To get to the root of the issue, what's interesting to me about this analogy that we're
talking about is that we hear the term neoliberalism all the time. It is an ideology I that's
used to promote the environment within which this parasitic sort of finance capital can
operate. So could you talk a bit about the relationship between finance capital and
neoliberalism as its ideology.
MH: Today's vocabulary is what Orwell would call DoubleThink. If you're going to call
something anti-liberal and against what Adam Smith and John Stuart Mill and other classical
economists described as free markets, you pretend to be neoliberal. The focus of Smith, Mill,
Quesnay and the whole of 19th-century classical economics was to draw a distinction between
productive and unproductive labor – that is, between people who earn wages and profits,
and rentiers who, as Mill said, "get rich in their sleep." That is how he described landowners
receiving groundrent. It also describes the financial sector receiving interest and "capital"
gains.
The first thing the neoliberal Chicago School did when they took over Chile was to close
down every economics department in the country except the one they controlled at the Catholic
University. They started an assassination program of left wing professors, labor leaders and
politicians, and imposed neoliberalism by gunpoint. Their idea is you cannot have anti-labor,
deregulated "free markets" stripping away social protections and benefits unless you have
totalitarian control. You have to censor any idea that there's ever been an alternative, by
rewriting economic history to deny the progressive tax and regulatory reforms that Smith, Mill,
and other classical economists urged to free industrial capitalism from the surviving feudal
privileges of landlords and predatory finance.
This rewriting of the history of economic thought involves inverting the common vocabulary
that people use. So, the idea of the parasitism is to replace the meaning of everyday words and
vocabulary with their opposite. It's DoubleThink.
Democratic vs. oligarchic government and their respective economic doctrines
ED: I don't want to go too far off on a tangent, but you mentioned the example of Chile's 1973
coup and the assassination of Allende to impose the Pinochet dictatorship. That was a
Kissinger/Nixon operation as we know, but what's interesting about that is Chile was
transformed into a sort of experimental laboratory to impose the Chicago school economic model
of what we now would call neoliberalism. Later in our conversation I want to talk a bit about
some recent laboratories we have seen in Eastern Europe, and now in Southern Europe as well.
The important point about neoliberalism is the relationship between totalitarian government and
this form of economics.
MH: That's right. Neoliberals say they're against government, but what they're really
against is democratic government. The kind of governments they support are pre-referendum
Greece or post-coup Ukraine. As Germany's Wolfgang Schäuble said, "democracy doesn't
count." Neoliberals want the kind of government that will create gains for the banks, not
necessarily for se the economy at large. Such governments basically are oligarchic. Once high
finance takes over governments as a means of exploiting the 99 Percent, it's all for active
government policy – for itself.
Aristotle talked about this more than 2,000 years ago. He said that democracy is the stage
immediately proceeding oligarchy. All economies go through three stages repeating a cycle: from
democracy into oligarchy, and then the oligarchs make themselves hereditary. Today, Jeb Bush
wants to abolish the estate tax to help the emerging power elite make itself into a hereditary
aristocracy. Then, some of the aristocratic families will fight among themselves, and take the
public into their camp and promote democracy, so you have the cycle going all over again.
That's the kind of cycle we're having now, just as in ancient Athens. It's a transition from
democracy to oligarchy on its way to becoming an aristocracy of the power elite.
ED: I want to return to the book in a second but I have to interject that one particular
economist hasn't been mentioned yet: Karl Marx. It's an inversion of Marx as well, because
Marx's labor theory of value was that that value ultimately is derived from labor. Parasitic
finance capital is the opposite of that. It may increase prices without value.
MH: Correct, but I should point out that there's often a misinterpretation of the context in
which the labor theory of value was formulated and refined. The reason why Marx and the other
classical economists – William Petty, Smith, Mill and the others – talked about the
labor theory of value was to isolate that part of price that wasn't value. Their purpose was to
define economic rent as something that was not value. It was extraneous to production, and was
a free lunch – the element of price that is charged to consumers and others that has no
basis in labor, no basis in real cost, but is purely a monopoly price or return to privilege.
This was mainly a survival of the feudal epoch, above all of the landed aristocracy who were
the heirs of the military conquers, and also the financial sector of banking families and their
heirs.
The aim of the labor theory of value was to divide the economy between excessive price
gouging and labor. The objective of the classical economists was to bring prices in line with
value to prevent a free ride, to prevent monopolies, to prevent an absentee landlord class so
as to free society from the legacy of feudalism and the military conquests that carved up
Europe's land a thousand years ago and that still underlies our property relations.
The concept and theory of economic rent
ED: That's a great point, and it leads me into the next issue that I want to touch on. You've
mentioned the term already a number of times: the concept of economic rent. We all know rent in
terms of what we have to pay every month to the landlord, but we might not think about what it
means conceptually. It's one of the fabrics with which you've woven this book together. One of
the running themes, rent extraction, and its role in the development of what we've now termed
this parasitic relationship. So, explain for laymen what this means – rent extraction
– and how this concept evolved.
MH: To put the concept of economic rent in perspective, I should point out when I went to
get my PhD over a half a century ago, every university offering a graduate economics degree
taught the history of economic thought. That has now been erased from the curriculum. People
get mathematics instead, so they're unexposed to the concept of economic rent as unearned
income. It's a concept that has been turned on its head by "free market" ideologues who use
"rent seeking" mainly to characterize government bureaucrats taxing the private sector to
enhance their authority – not free lunchers seeking to untax their unearned income. Or,
neoclassical economists define rent as "imperfect competition" (as if their myth of "perfect
competition" really existed) stemming from "insufficient knowledge of the market," patents and
so forth.
Most rent theory was developed in England, and also in France. English practice is more
complex than America. The military conquers imposed a pure groundrent fee on the land, as
distinct from the building and improvements. So if you buy a house from a seller in England,
somebody else may own the land underneath it. You have to pay a separate rent for the land. The
landlord doesn't do anything at all to collect land rent, that's why they call them rentiers or
coupon clippers. In New York City, for example, Columbia University long owned the land
underneath Rockefeller Center. Finally they sold it to the Japanese, who lost their shirt. This
practice is a carry-over from the Norman Conquest and its absentee landlord class.
The word "rent" originally was French, for a government bond (rente). Owners received a
regular income every quarter or every year. A lot of bonds used to have coupons, and you would
clip off the coupon and collect your interest. It's passively earned income, that is, income
not actually earned by your own labor or enterprise. It's just a claim that society has to pay,
whether you're a government bond holder or whether you own land.
This concept of income without labor – but simply from privileges that had been made
hereditary – was extended to the ideas of monopolies like the East India Company and
other trade monopolies. They could produce or buy goods for, let's say, a dollar a unit, and
sell them for whatever the market will bear – say, $4.00. The markup is "empty pricing."
It's pure price gouging by a natural monopoly, like today's drug companies.
To prevent such price gouging and to keep economies competitive with low costs of living and
doing business, European kept the most important natural monopolies in the public domain: the
post office, the BBC and other state broadcasting companies, roads and basic transportation, as
well as early national airlines. European governments prevented monopoly rent by providing
basic infrastructure services at cost, or even at subsidized prices or freely in the case of
roads. The guiding idea is for public infrastructure – which you should think of as a
factor of production along with labor and capital – was to lower the cost of living and
doing business.
But since Margaret Thatcher led Britain down the road to debt peonage and rent serfdom by
privatizing this infrastructure, she and her emulators other countries turned them into
tollbooth economies. The resulting economic rent takes the form of a rise in prices to cover
interest, stock options, soaring executive salaries and underwriting fees. The economy ends up
being turned into a collection of tollbooths instead of factories. So, you can think of rent as
the "right" or special legal privilege to erect a tollbooth and say, "You can't get television
over your cable channel unless you pay us, and what we charge you is anything we can get from
you."
This price doesn't have any relation to what it costs to produce what they sell. Such
extortionate pricing is now sponsored by U.S. diplomacy, the World Bank, and what's called the
Washington Consensus forcing governments to privatize the public domain and create such
rent-extracting opportunities.
In Mexico, when they told it to be more "efficient" and privatize its telephone monopoly,
the government sold it to Carlos Slim, who became one of the richest people in the world by
making Mexico's phones among the highest priced in the world. The government provided an
opportunity for price gouging. Similar high-priced privatized phone systems plague the
neoliberalized post-Soviet economies. Classical economists viewed this as a kind of theft. The
French novelist Balzac wrote about this more clearly than most economists when he said that
every family fortune originates in a great theft. He added that this not only was undiscovered,
but has come taken for granted so naturally that it just doesn't matter.
If you look at the Forbes 100 or 500 lists of each nation's richest people, most made their
fortunes through insider dealing to obtain land, mineral rights or monopolies. If you look at
American history, early real estate fortunes were made by insiders bribing the British Colonial
governors. The railroad barrens bribed Congressmen and other public officials to let them
privatize the railroads and rip off the country. Frank Norris's The Octopus is a great novel
about this, and many Hollywood movies describe the kind of real estate and banking rip-offs
that made America what it is. The nation's power elite basically begun as robber barons, as
they did in England, France and other countries.
The difference, of course, is that in past centuries this was viewed as corrupt and a crime.
Today, neoliberal economists recommend it as the way to raise "productivity" and make countries
wealthier, as if it were not the road to neofeudal serfdom.
The Austrian School vs. government regulation and pro-labor policies
ED: I don't want to go too far off on a tangent because we have a lot to cover specific to your
book. But I heard an interesting story when I was doing a bit of my own research throughout the
years about the evolution of economic thought, and specifically the origins of the so-called
Austrian School of Economics – people like von Mises and von Hayek. In the early 20th
century they were essentially, as far as I could tell, creating an ideological framework in
which they could make theoretical arguments to justify exorbitant rent and make it seem almost
like a product of natural law – something akin to a phenomenon of nature.
MH: The key to the Austrian School is their hatred of labor and socialism. It saw the danger
of democratic government spreading to the Habsburg Empire, and it said, "The one thing we have
to stop is democracy. Their idea of a free market was one free of democracy and of democratic
government regulating and taxing wealthy rentiers. It was a short step to fighting in the
streets, using murder as a "persuader" for the particular kind of "free markets" they wanted
– a privatized Thatcherite deregulated kind. To the rentiers they said: "It's either our
freedom or that of labor."
Kari Polanyi-Levitt has recently written about how her father, Karl Polanyi, was confronted
with these right-wing Viennese. His doctrine was designed to rescue economics from this school,
which makes up a fake history of how economics and civilization originated.
One of the first Austrian's was Carl Menger in the 1870s. His "individualistic" theory about
the origins of money – without any role played by temples, palaces or other public
institutions – still governs Austrian economics. Just as Margaret Thatcher said, "There's
no such thing as society," the Austrians developed a picture of the economy without any
positive role for government. It was as if money were created by producers and merchants
bartering their output. This is a travesty of history. All ancient money was issued by temples
or public mints so as to guarantee standards of purity and weight. You can read Biblical and
Babylonian denunciation of merchants using false weights and measures so see why money had to
be public. The major trading areas were agora spaces in front of temples, which kept the
official weights and measures. And much exchange was between the community's families and the
public institutions.
Most important, money was brought into being not for trade (which was conducted mainly on
credit), but for paying debts. And most debts were owed to the temples and palaces for pubic
services or tribute. But to the Austrians, the idea was that anything the government does to
protect labor, consumers and society from rentiers and grabbers is deadweight overhead.
Above all, they opposed governments creating their own money, e.g. as the United States did
with its greenbacks in the Civil War. They wanted to privatize money creation in the hands of
commercial banks, so that they could receive interest on their privilege of credit creation and
also to determine the allocation of resources.
Today's neoliberals follow this Austrian tradition of viewing government as a burden,
instead of producing infrastructure free of rent extraction. As we just said in the previous
discussion, the greatest fortunes of our time have come from privatizing the public domain.
Obviously the government isn't just deadweight. But it is becoming prey to the financial
interests and the smashers and grabbers they have chosen to back.
ED: You're right, I agree 100%. You encounter this ideology even in the political
sociological realm like Joseph Schumpeter, or through the quasi-economic realm like von Hayek
in The Road to Serfdom.
MH: Its policy conclusion actually advocates neo-serfdom. Real serfdom was when families had
to pay all their income to the landlords as rent. Centuries of classical economists backed
democratic political reform of parliaments to roll back the landlords' power (and that of
bankers). But Hayek claimed that this rollback was the road to serfdom, not away from it. He
said democratic regulation and taxation of rentiers is serfdom. In reality, of course, it's the
antidote.
ED: It's the inversion you were talking about earlier. We're going to go into a break here
in a minute but before we do I want to touch on one other point that is important in the book,
again the book, Killing the Host: How Financial Parasites and Debt Bondage Destroyed the Global
Economy, available from CounterPunch – very important that people pick up this book.
MH: And from Amazon! You can get a hard copy for those who don't want to read on
computers.
Finance as the new mode of warfare
ED: Yes, and on amazon as well, thank you. This issue that I want to touch on before we go to
the break is debt. On this program a couple of months ago I had the journalist John Pilger. He
and I touched on debt specifically as a weapon, and how it is used as a weapon. You can see
this in the form of debt enslavement, if you want to call it that, in postcolonial Africa. You
see the same thing in Latin America where, Michael, I know you have a lot of experience in
Latin America in the last couple of decades. So let's talk a little bit, if we could, before we
go to the break, about debt as a weapon, because I think this is an important concept for
understanding what's happening now in Greece, and is really the framework through which we have
to understand what we would call 21st-century austerity.
MH: If you treat debt as a weapon, the basic idea is that finance is the new mode of
warfare. That's one of my chapters in the book. In the past, in order to take over a country's
land and its public domain, its basic infrastructure and its mineral resources, you had to have
a military invasion. But that's very expensive. And politically, almost no modern democracy can
afford a military invasion anymore.
So the objectives of the financial sector – of Wall Street, the City of London or
Frankfurt in Germany – is to obtain the land. You can look at what's happening in Greece.
What its creditors, the IMF and European Central Bank (ECB) want are the Greek islands, and
they want the gas rights in the Aegean Sea. They want whatever buildings and property there is,
including the museums.
Matters are not so much different in the private sector. If you can get a company or
individual into debt, you can strip away the assets they have when they can't pay. A
Hayek-style government would block society from protecting itself against such asset stripping.
Defending "property rights" of creditors, such "free market" ideology deprives the rest of the
economy – businesses, individuals and public agencies. It treats debt writedowns as the
road to serfdom, not the road away from debt dependency.
In antiquity, private individuals obtained labor services by making loans to families in
need, and obliging their servant girls, children or even wives to work off the loan in the form
of labor service. My Harvard-based archaeological group has published a series of five books
that I co-edited, most recently Labor in the
Ancient World . Creditors (often palace infrastructure managers or collectors) would get
people into bondage. When new Bronze Age rulers started their first full year on the throne, it
was customary to declare an amnesty to free bond servants and return them to their families,
and annul personal debts as well as to return whatever lands were forfeited. So in the Bronze
Age, debt serfdom and debt bondage was only temporary. The biblical Jubilee law was a literal
translation of Babylonian practice that went back two thousand years.
In America, in colonial times, sharpies (especially from Britain) would lend farmers money
that they knew the farmer couldn't pay, then they would foreclose just before the crops came
in. Right now you have corporate raiders, who are raiding whole companies by forcing them into
debt, and then smashing and grabbing. You now have the IMF, European Central Bank and
Washington Consensus taking over whole countries like Ukraine. The tactic is to purposely lend
them the money that clearly cannot be repaid, and say, "Oh you cannot pay? Well, we're not
going to take a loss. We have a solution." The solution is to sell off public enterprises, land
and natural resources. In Greece's case, 50 billion euros of its property, everything that it
has in the public sector. The country is to be sold off to foreigners (including domestic
oligarchs working out of their offshore accounts). Debt leverage is thus the way to achieve
what it took armies to win in times past.
ED: Exactly. One last point on that as well. I want to get your comment on and we see this
in post-colonial Africa, especially when the French and the British had to nominally give up
control of their colonies. You saw debt become an important tool to maintain hegemony within
their spheres of influence. Of course, asset stripping and seizing control, smashing and
grabbing was part of that. But also it is the debt servicing payments, it is the cycle of debt
repayment and taking new loans on top of original loans to service the original loans –
this process this cycle is also really an example of this debt servitude or debt bondage.
MH: That's correct, and mainstream economics denies any of this. It began with Ricardo,
who's brothers were major bankers at the time, and he himself was the major bank lobbyist in
England. Right after Greece won its independence from Turkey, the Ricardo brothers made a
rack-renting loan to Greece at far below par (that is, below the face value that Greece
committed itself to pay). Greece tried to pay over the next century, but the terms of the loan
ended up stripping and keeping it on the edge of bankruptcy well into the 20th century.
But Ricardo testified before Parliament that there could be no debt-servicing problem. Any
country, he said, could repay the debts automatically, because there is an automatic
stabilization mechanism that enables every country to be able to pay. This is the theory that
underlines Milton Friedman and the Chicago School of monetarism: the misleading idea that debt
cannot be a problem.
That's what's taught now in international trade and financial textbooks. It's false
pleading. It draws a fictitious "What If" picture of the world. When criticized, the authors of
these textbooks, like Paul Samuelson, say that it doesn't matter whether economic theory is
realistic or not. The judgment of whether an economic theory is scientific is simply whether it
is internally consistent. So you have these fictitious economists given Nobel Prizes for
promoting an inside out, upside down version of how the global economy actually works.
ED: One other thing that they no longer teach is what used to be called political economy.
The influence of the Chicago School, neoliberalism and monetarism has removed classical
political economy from academia, from the Canon if you will. Instead, as you said, it's all
about mathematics and formulas that treat economics like a natural science, when in fact it
really should be more of a historically grounded social science.
MH: The formulas that they teach don't have government in them,. If you have a theory that
everything is just an exchange, a trade, and that there isn't any government, then you have a
theory that has nothing to do with the real world. And if you assume that the environment
remains constant instead of using economics to guide public and national policy, you're using
economics for the opposite of what the classical economists did. Adam Smith, Mill, Marx, Veblen
– they all developed their economic theory to reform the world. The classical economists
were reformers. They wanted to free society from the legacy of feudalism – to get rid of
land rent, to take money creation and credit creation into the public domain. Whatever their
views, whether they were right wingers or left wingers, whether they were Christian socialists,
Ricardian socialists or Marxian socialists, all the capitalist theorists of the 19th century
called themselves socialists, because they saw capitalism as evolving into socialism.
But what you now have, since World War I, is a reaction against this, stripping away of the
idea that governments have a productive role to play. If government is not the director and
planner of the economy, then who is? It's the financial sector. It's Wall Street. So the
essence of neoliberalism that you were mentioning before, is indeed a doctrine of central
planning. It states that the central planning should be done by Wall Street, by the financial
sector.
The problem is, what is the objective of central planning by Wall Street? It's not to raise
living standards, and it's not to increase employment. It is to smash and grab. That is the
society we're in now.
A number of chapters of my book (I think five), describe how the Obama administration has
implemented this smash and grab, doing the exact opposite of what he promised voters. Obama has
implemented the Rubin-omics [Robert Rubin] doctrine of Wall Street to force America into what
looks like a chronic debt depression.
ED: Exactly right. I couldn't agree more. Let's take a short break and we'll continue the
discussion. Again, I'm chatting with Michael Hudson about his new book, Killing the Host: How
Financial Parasites and Debt Bondage Destroy the Global Economy.
The case of Latvia: Is it a success story, or a neoliberal disaster?
ED: I want to go back to some of the important issues that we introduced or alluded to in the
first part of our discussion. As I was mentioning to you off-air, a couple years ago I twice
interviewed your colleague Jeffrey Sommers, with whom you've worked and co-published a number
of papers. We talked a lot about many of the same issues that you and I are touching on.
Specifically Sommers – and I know you as well – did a lot of work in Latvia, a
country in the former Soviet space in Eastern Europe on the Baltic Sea. Your book has a whole
chapter on it, as well as references throughout the book.
So let's talk about how Latvia serves as a template for understanding the austerity model.
It is touted by technocrats of the financial elite as a major success story – how
austerity can work. I find it absurd on so many different levels. So tell us what happened in
Latvia, what the real costs were, and why neoliberals claim it as a success story.
MH: Latvia is the disaster story of the last two decades. That's why I took it as an object
lesson. You're right, it was Jeff Sommers who first brought me over to Latvia. I then became
Director of Economic Research and Professor of Economics at the Riga Graduate School of
Law.
When Latvia was given its independence when the Soviet Union broke up in 1991, a number of
former Latvians had studied at George Washington University, and they brought neoliberalism
over there – the most extreme grabitization and de-industrialization of any country I
know. Latvians, Russians and other post-Soviet countries were under the impression that U.S.
advisors would help them become modernized like the U.S. economy – with high living and
consumption standards. But what they got was advice to emulate American experience. It got
something just the opposite – how to enable foreign investors and bankers to carve it up,
dismantle its industry and become a bizarre neoliberal experiment.
You may remember the Republican presidential candidate Steve Forbes, who in 2008 proposed a
flat tax to replace progressive taxation. The idea never could have won in the United States,
but Latvia was another story. The Americans set the flat tax at an amazingly low 12 percent of
income – and no significant property tax on real estate or capital gains. It was a
financial and real estate dream, and created a classic housing and financial bubble.
Jeff and I visited the head of the tax authority, who told us that she was appointed because
she had done her PhD dissertation on Latvia's last land value assessment – which was in
1917. They hadn't increased the assessments since then, because the Soviet economy didn't have
private land ownership and didn't even have a concept of rent-of-location for planning
purposes. (Neither did Russia.)
Latvia emerged from the Soviet Union without any debt, and also with a lot of real estate
and a highly educated population. But its political insiders turned over most of the government
enterprises to themselves. Latvia had been a computer center and also the money-laundering
center of the Soviet leadership already in the late 1980s (largely as a byproduct of Russian
oil exports through Ventspils), and Riga remains the money-laundering city for today's
Russia.
Privatizing housing and other property led to soaring real estate prices. But this bubble
wasn't financed by domestic banks. The Soviet Union didn't have private banks, because the
government had simply created the credit to fund the economy as needed. The main banks in a
position to lend to Latvia were Swedish and other Scandinavian banks. They pounce on the
lending opportunities to opened up by an entire nation whose real estate had almost no tax on
it. The result was the biggest real estate bubble in the world, along with Russia's. Latvians
found that in order to buy housing of their own, they had to go deeply into debt. Assets were
only given to insiders, not to the people.
A few years ago there was a reform movement in Latvia to stop the economic bleeding. Jeff
and I brought over American property appraisers and economists. We visited the leading bank,
regulatory agencies. Latvia was going broke because its population had to pay so much for real
estate. And it was under foreign-exchange pressure because debt service on its mortgage loans
was being paid to the Swedish and foreign banks. The bank regulator told us that her problem
was that her agency's clients are the banks, not the population. So the regulators thought of
themselves as working for the banks, even though they were foreign-owned. She acknowledged that
the banks were lending much more money than property actually was worth. But her regulatory
agency had a solution: It was to have not only the buyer be obligated to pay the mortgage, but
also the parents, uncles or aunts. Get the whole family involved, so that if the first signer
couldn't pay the cosigners would be obligated.
That is how Latvia stabilized its banking system. But it did so by destabilizing the
economy. The result is that Latvia has lost 20 percent of its population over the past decade
or so. For much the same reasons that Greece has lost 20 percent of its population, with
Ireland in a similar condition. The Latvians have a joke "Will the last person who leaves in
2020 please turn off the lights at the airport."
The population is shrinking because the economy is being run by looters, domestic and
foreign. I was shown an island in the middle of the Daugava river that runs to the middle of
Latvia, and was sold for half a million dollars. Our appraisers said that it's worth half a
billion dollars, potentially. There are no plans to raise the property tax to recapture these
gains for the country – so that it can lower its heaviest labor taxes in the world,
nearly half each paycheck for income tax and "social security" spending so that finance and
real estate won't be taxed.
A few years ago, I was at the only meeting of INET (George Soros's group) that I was invited
to, and in the morning one of the lead talks was on how Latvia was a model that all countries
could follow to balance the budget. Latvia has balanced the budget by cutting back public
spending, reducing employment and lowering wage levels while indebting its population and
forcing to immigrate. The neoliberal strategy is to balance by selling off whatever remains in
the public domain. Soros funded a foundation there (like similar ones he started in other
post-Soviet countries) to get a part of the loot.
These giveaways at insider prices have created a kleptocracy obviously loyal to neoliberal
economics. I go into the details in my chapter. It's hard to talk about it without losing my
temper, so I'm trying to be reasonable but it's a country that was destroyed and smashed. That
was the U.S. neoliberal model alternative to post-Stalinism. It wasn't a new American economy.
It was a travesty.
Why then does the population continue to vote for these neoliberals? The answer is, the
neoliberals say, the alternative is Stalinism. To Latvians, this means exile, deportations and
memories of the old pro-Russian policy. The Russian-speaking parties are the main people
backers of a social democracy party. But neoliberals have merged with Latvian nationalists.
They are not only making the election over resentment against the Russian-speaking population,
but the fact that many are Jewish.
I find it amazing to see someone who is Jewish, like George Soros, allying with anti-Semitic
and even neo-Nazi movements in Latvia, Estonia, and most recently, of course, Ukraine. It's an
irony that you could not have anticipated deductively. If you had written this plot in a
futuristic novel twenty years ago, no one would have believed that politics could turn more on
national and linguistic identity politics than economic self-interest. The issue is whether you
are Latvian or are Russian-Jewish, not whether you want to untax yourself and make? Voting is
along ethnic lines, not whether Latvians really want to be forced to emigrate to find work
instead of making Latvia what it could have been: an successful economy free of debt. Everybody
could have gotten their homes free instead of giving real estate only to the kleptocrats.
The government could have taxed the land's rental value rather than letting real estate
valuation be pledged to pay banks – and foreign banks at that. It could have been a
low-cost economy with high living standards, but neoliberals turned in into a smash and grab
exercise. They now call it an idea for other nations to follow. Hence, the U.S.-Soros strategy
re Ukraine.
ED: That's an excellent point. It's a more extreme case for a number of reasons in Ukraine
– the same tendency. They talk about, "Putin and his gaggle of Jews." That's the idea,
that Putin and the Jews will come in and steal everything – while neoliberals plan to
appropriate Ukraine's land and other resources themselves. In this intersection between
economics and politics, Latvia, Lithuania, Estonia – the Baltic States of the former
Soviet Union – are really the front lines of NATO expansion. They were some of the first
and most pivotal countries brought into the NATO orbit. It is the threat of "Russian
aggression" via the enclave at Kaliningrad, or just Russia in general. That is the threat they
use to justify the NATO umbrella, and simultaneously to justify continuing these economic
policies. So in many ways Russia serves as this convenient villain on a political, military and
economic level.
MH: It's amazing how the popular press doesn't report what's going on. Primakov, who died a
few months ago, said during the last crisis a few years ago that Russia has no need to invade
Latvia, because it owns the oil export terminals and other key points. Russia has learned to
play the Western game of taking countries over financially and acquiring ownership. Russia
doesn't need to invade to control Latvia any more than America needs to invade to control Saudi
Arabia or the Near East. If it controls exports or access to markets, what motive would it have
to invade? As things stand, Russia uses Latvia it as a money laundering center.
The same logic applies to Ukraine today. The idea is that Russia is expansionary in a world
where no one can afford to be militarily expansionary. After Russia's disaster in Afghanistan,
no country in the world that's subject to democratic checks, whether it's America after the
Vietnam War or Russia or Europe, no democratic country can invade another country. All they can
do is drop bombs. This can't capture a country. For that you need major troop commitments.
In the trips that I've taken to Russia and China, they're in a purely defensive mode.
They're wondering why America is forcing all this. Why is it destroying the Near East, creating
a refugee problem and then telling Europe to clean up the mess it's created? The question is
why Europe is willing to keep doing this. Why is Europe part of NATO fighting in the Near East?
When America tells Europe, "Let's you and Russia fight over Ukraine," that puts Europe in the
first line of fire. Why would it have an interest in taking this risk, instead of trying to
build a mutual economic relationship with Russia as seemed to be developing in the 19th
century?
ED: That's the ultimate strategy that the United States has used – driving a wedge
between Russia and Europe. This is the argument that Putin and the Russians have made for a
long time. You can see tangible examples of that sort of a relationship even right now if you
look at the Nord Stream pipeline connecting Russian energy to German industrial output –
that is a tangible example of the economic relationship, that is only just beginning between
Russia and Europe. That's really what I think the United States wanted to put the brakes on, in
order to be able to maintain hegemony. The number one way it does that is through NATO.
MH: It's not only put the brakes on, it has created a new iron curtain. Two years ago,
Greece was supposed to privatize 5 billion euros of its public domain. Half of this, 2.5
billion, was to be the sale of its gas pipeline. But the largest bidder was Gazprom, and
America said, "No, you can't accept the highest bidder if its Russian." Same thing in Ukraine.
It has just been smashed economically, and the U.S. says, "No Ukrainian or Russian can buy into
the Ukrainian assets to be sold off. Only George Soros and his fellow Americans can buy into
this." This shows that the neoliberalism of free markets, of "let's everybody pay the highest
price," is only patter talk. If the winner in the rigged market is not the United States, it
sends in ISIS or Al Qaeda and the assassination teams, or backs the neo-Nazis as in
Ukraine.
So, we're in a New Cold War. Its first victims, apart from Southern Europe, will be the rest
of Europe. You can imagine how this is just beginning to tear European politics apart, with
Germany's Die Linke and similar parties making a resurgence.
The Troika and IMF doctrine of austerity and privatization
ED: I want to return us back to the book and some other key issues that you bring up that I
think are most important. One that we hear in the news all the time, and you write extensively
about it in the book, is the Troika. That's the IMF, the European Central Bank (ECB) and the
European Commission. It could be characterized as the political arm of finance capital in
Europe, one that imposes and manages austerity in the interest of the ruling class of finance
capital, as I guess we could call them. These are technocrats, not academically trained
economists primarily (maybe with a few exceptions), but I want you to talk a bit about how the
Troika functions and why it's so important in what we could call this crisis stage of
neoliberal finance capitalism.
MH: Basically, the Troika is run by Frankfurt bankers as foreclosure and collection agents.
If you read recently what former Greek finance minister Yanis Varoufakis has written, and his
advisor James Galbraith, they said that when Syriza was elected in January, they tried to
reason with the IMF. But it said that it could only do what the European Central Bank said, and
that it would approve whatever they decided to do. The European Central Bank said that its role
wasn't to negotiate democracy. Its negotiators were not economists. They were lawyers. "All we
can say is, here's what you have to pay, here's how to do it. We're not here to talk about
whether this is going to bankrupt Greece. We're just interested in in how you're going to pay
the banks what they're owe. Your electric companies and other industry will have to go to
German companies, the other infrastructure to other investors – but not from Russia."
It's much like England and France divided up the Near East after World War I. There's a kind
of a gentlemen's agreement as to how the creditor economies will divide up Greece, carving it
up much like neighboring Yugoslavia to the north.
In 2001 the IMF made a big loan to Argentina (I have a chapter on Argentina too), and it
went bad after a year. So the IMF passed a rule, called the No More Argentinas rule, stating
that the Fund was not going to participate in a loan where the government obviously can not
pay.
A decade later came the Greek crisis of 2011. The staff found that Greece could not possibly
pay a loan large enough to bail out the French, German and other creditors. So there has to be
a debt write-down of the principal. The staff said that, and the IMF's board members agreed.
But its Managing Director, Strauss-Kahn wanted to run for the presidency of France, and most of
the Greek bonds were held by French banks. French President Sarkozy said "Well you can't win
political office in France if you stiff the French banks." And German Chancellor Merkel said
that Greece had to pay the German banks. Then, to top matters, President Obama came over to the
G-20 meetings and they said that the American banks had made such big default insurance
contracts and casino gambles betting that Greece would pay, that if it didn't, if the Europeans
and IMF did not bail out Greece, then the American banks might go under. The implicit threat
was that the U.S. would make sure that Europe's financial system would be torn to pieces.
ED: And Michael, I just want to clarify, I guess it's sort of a question: about what you're
talking about here in terms of Geithner and Obama coming in: These would be credit default
swaps and collateralized debt obligations?
MH: Yes. U.S. officials said that Wall Street had made so many gambles that if the French
and German banks were not paid, they would turn to their Wall Street insurers. The Wall Street
casino would go under, bringing Europe's banking system down with it. This prompted the
European Central Bank to say that it didn't want the IMF to be a part of the Troika unless it
agreed to take a subordinate role and to support the ECB bailout. It didn't matter whether
Greece later could pay or not. In that case, creditors would smash and grab. This lead the some
of the IMF European staff to resign, most notably Susan Schadler, and later to act as whistle
blowers to write up what happened.
The same thing happened again earlier this year in Greece. Lagarde said that the IMF doesn't
do debt reduction, but would give them a little longer to pay. Not a penny, not a euro will be
written down, but the debt will be stretched out and perhaps the interest rate will be lowered
– as long as Greece permits foreigners to grab its infrastructure, land and natural
resources.
The staff once again leaked a report to the Financial Times (and maybe also the Wall Street
Journal) that said that Greece couldn't pay, there's no way it can later sell off the IMF loan
to private bondholders, so any bailout would be against the IMF's own rules. Lagarde was
embarrassed, and tried to save face by saying that Germany has to agree to stretch out the
payments on the debt – as if that somehow would enable it to pay, while its assets pass
into foreign hands, which will remit their profits back home and subject Greece to even steeper
deflation.
Then, a few weeks ago, you have the Ukraine crisis and the IMF is not allowed to make loans
to countries that cannot pay. But now the whole purpose is to make loans to countries who can't
pay, so that creditors can turn around and demand that they pay by selling off their public
domain – and implicitly, force their population to emigrate.
ED: Also, technically they're not supposed to be making loans to countries that are at war,
and they're ignoring that rule as well.
MH: That's the second violation of IMF rules. At least in the earlier Greek bailout, Strauss
Kahn got around the "No More Argentinas" rule by having a new IMF policy that if a country is
systemically important, the IMF can lend it the money even if it can't pay, even though it's
not credit-worthy, if its default would cause a problem in the global financial system (meaning
a loss by Wall Street or other bankers). But Ukraine is not systemically important. It's part
of the Russian system, not the western system. Most of its trade is with Russia.
As you just pointed out, when Lagarde made the IMF's last Ukrainian loan, she said that she
hoped its economy would stabilize instead of fighting more war in its eastern export region.
The next day, President Poroshenko said that now that it had got the loan, it could go to war
against the Donbass, the Russian speaking region. Some $1.5 billion of the IMF loan was given
to banks run by Kolomoisky, one of the kleptocrats who fields his own army. His banks send the
IMF's gift abroad to his own foreign banks, using his domestic Ukrainian money to pay his own
army, allied with Ukrainian nationalists flying the old Nazi SS insignia fighting against the
Russian speakers. So in effect, the IMF is serving as an am of the U.S. military and State
Department, just as the World Bank has long been.
ED: I want to interject two points here for listeners who haven't followed it as closely.
Number one is the private army that you're talking about – the Right Sector which is
essentially a mercenary force of Nazis in the employ of Kolomoisky. They're also part of what's
now called the Ukrainian National Guard. This paramilitary organization that is being paid
directly by Kolomoisky. Number two – and this relates back to something that you were
saying earlier, Michael – that IMF loan went to pay for a lot of the military equipment
that Kiev has now used to obliterate the economic and industrial infrastructure of Donbass,
which was Ukraine's industrial heartland. So from the western perspective it's killing two
birds with one stone. If they can't strip the assets and capitalize on them, at least they can
destroy them, because the number one customer was Russia.
MH: Russia had made much of its military hardware in Ukraine, including its liftoff engines
for satellites. The West doesn't want that to continue. What it wants for its own investors is
Ukraine's land, the gas rights in the Black Sea, electric and other public utilities, because
these are the major tollbooths to extract economic rent from the economy. Basically, US/NATO
strategists want to make sure, by destroying Ukraine's eastern export industry, that Ukraine
will be chronically bankrupt and will have to settle its balance-of-payments deficit by selling
off its private domain to American, German and other foreign buyers.
ED: Yes, that's Monsanto, and that's Hunter Biden on the Burisma board (the gas company).
It's like you said earlier, you wouldn't even believe it if someone would have made it up. It's
so transparent, what they're doing in Ukraine.
Financialization of pension plans and retirement savings
I want to switch gears a bit in the short time we have remaining, because I have two more
things I want to talk about. Referring back to this parasitical relationship on the real
economy, one aspect that's rarely mentioned is the way in which many regular working people get
swindled. One example that comes to my mind is the mutual funds and other money managers that
control what pension funds and lots of retirees invest in. Much of their savings are tied up in
heavily leveraged junk bonds and in places like Greece, but also recently in Puerto Rico which
is going through a very similar scenario right now. So in many ways, US taxpayers and
pensioners are funding the looting and exploitation of these countries and they're then
financially invested in continuing the destruction of these countries. It's almost like these
pensioners are human shields for Wall Street.
MH: This actually is the main theme of my book – financialization. Mutual funds are
not pension funds. They're different. But half a century ago a new term was coined: pension
fund capitalism, sometimes called pension fund socialism. Then we got back to Orwellian
doublethink when Pinochet came to power behind the natural alliance of the Chicago School with
Kissinger at the State Department. They immediately organized what they called labor
capitalism. n labor capitalism labor is the victim, not the beneficiary. The first thing they
did was compulsory setting aside of wages in the form of ostensible pension funds controlled by
the employers. The employers could do whatever they wanted with it. Ultimately they invested
their corporate pension funds in their own stocks or turned them over to the banks, around
which their grupo conglomerates were organized. They then simply drove the businesses with
employee pension funds under, wiping out the pension fund liabilities – after moving the
assets into their captive banks. Businesses were left as empty corporate shells.
Something similar happened in America a few years ago with the Chicago Tribune. Real estate
developer Sam Zell borrowed money, bought the Tribune, using the Employee Stock Ownership Plan
(ESOP) essentially to pay off the bondholders. He then drove/looted the Tribune into bankruptcy
and wiped out the stockholders. Employees brought a fraudulent conveyance suit.
Already fifty years ago, critics noted that about half of the ESOPs are wiped out, because
they're invested by the employers, often in their own stock. Managers give themselves stock
options, which are given value by employee purchases. Something similar occurs with pension
funds in general. Employee wages are paid into pension funds, which bid up the stock prices in
general. On an economy-wide basis, employees are buying the stock that managers give
themselves. That's pension fund capitalism.
The underlying problem with this kind of financialization of pensions and retirement savings
is that modern American industry is being run basically for financial purposes, not for
industrial purposes. The major industrial firms have been financialized. For many years General
Motors made most of its profits from its financial arm, General Motors Acceptance Corporation.
Likewise General Electric. When I was going to school 50 years ago, Macy's made most of its
money not by selling products, but by getting customers to use its credit cards. In effect, it
used its store to get people to use its credit cards.
Last year, 92% of the earnings of the Fortune 100 companies were used for stock buy-backs --
corporations buying back their stock to support its price – or for dividend payouts, also
to increase the stock's price (and thus management bonuses and stock options). The purpose of
running a company in today's financialized world is to increase the price of the stock, not to
expand the business. And who do they sell the stock to? Essentially, pension funds.
There's a lot of money coming in. I don't know if you remember, but George W. Bush wanted to
privatize Social Security. The idea was to spend all of its contributions – the 15+% that
FICA withholds from workers paychecks every month – into the stock market. This would
fuel a giant stock market boom. Money management companies, the big banks, would get an
enormous flow of commissions, and speculators would get rich off the inflow. It would make
billionaires into hundred-billionaires. All this would soar like the South Sea Bubble, until
the American population began to age – or, more likely, begin to be unemployed. At that
point the funds would begin to sell the stocks to pay retirees. This would withdraw money from
the stock market. Prices would crash as speculators and insiders sold out, wiping out the
savings that workers had put into the scheme.
The basic idea is that when Wall Street plays finance, the casino wins. When employees and
pension funds play the financial game, they lose and the casino wins.
ED: Right, and just as an example for listeners – to make what Michael was just
talking about it even more real – if we think back to 2009 and the collapse of General
Motors, it was not General Motors automotive manufacturing that was collapsing. It was GMAC,
their finance arm, which was leveraged on credit default swaps, collateralized debt obligations
and similar financial derivatives – what they call exotic instruments. So when Obama
comes in and claimed that he "saved General Motors," it wasn't really that. He came in for the
Wall Street arm of General Motors.
Obama's demagogic role as Wall Street shill for the Rubinomics gang
MH: That's correct. He was the Wall Street candidate, promoted by Robert Rubin, who was
Clinton's Treasury Secretary. Basically, American economic policies can run by a combination of
Goldman Sachs and Citigroup, often interchangeably.
ED: This was demonstrated very clearly in the first days of Obama taking office. Who does he
meet with to talk about the financial crisis? He invites the CEOs of Goldman Sachs and JP
Morgan, Bank of America, Citi and all of the rest of them. They're the ones who come to the
White House. It's been written about in books, in the New Yorker and elsewhere. Obama basically
says, "Don't worry guys, I got this."
MH: Ron Suskind wrote this. He said that Obama said, "I'm the only guy standing between you
and the pitchforks. Listen to me: I can basically fool them." (I give the actual quote in my
book.) The interesting thing is that the signs of this meeting were all erased from the White
House website, but Suskind has it in his book. Obama emerges as one of the great demagogues of
the century. He may be even worse than Andrew Jackson.
ED: So much of it is based on obvious policies and his actions. The moment he came to power
was a critical moment when action was needed. Not only did he not take the right action, he did
exactly what Wall Street wanted. In many ways we can look back to 2008 when he was championing
the TARP, the bailout, and all the rest of that. None of that would have been possible without
Obama. That's something that Democrats like to avoid in their conversations.
MH: That's exactly the point. It was Orwellian rhetoric. He ran as the candidate of Hope and
Change, but his real role was to smash hope and prevent change. By keeping the debts in place
instead of writing them down as he had promised, he oversaw the wrecking of the American
economy.
He had done something similar in Chicago, when he worked as a community organizer for the
big real estate interests to tear up the poorer neighborhoods where the lower income Blacks
lived. His role was to gentrify them and jack up property prices to move in higher-income
Blacks. This made billions for the Pritzker family. So Penny Pritzker introduced him to Robert
Rubin. Obama evidently promised to let Rubin appoint his cabinet, so they appointed the vicious
anti-labor Rahm Emanuel, now Chicago's mayor, as his Chief of Staff to drive any Democrat to
the left of Herbert Hoover out of the party. Obama essentially pushed the Democrats to the
right, as the Republicans gave him plenty of room to move rightward and still be the "lesser
evil."
So now you have people like Donald Trump saying that he's for what Dennis Kucinich was for:
a single payer healthcare program. Obama fought against this, and backed the lobbyists of the
pharmaceutical and health insurance sectors. His genius is being able to make most voters
believe that he's on their side when he's actually defending the Wall Street special interests
that were his major campaign contributors.
ED: That's true. You can see that in literally every arena in which Obama has taken action.
From championing so-called Obamacare, which is really a boon for the insurance industry, to the
charter schools to privatize public education and also become a major boon for Wall Street, for
Pearson and all these major education corporations. In terms of real estate, in the
gentrification, all the rest. Literally every perspective, every angle from which you look at
Obama, he is a servant of finance capital of investors, not of the people. And that's what the
Democratic Party has become, delivering its constituency to Wall Street.
A left-wing economic alternative
MH: So here's the problem: How do we get the left to realize this? How do we get it to talk
about economics instead of ethnic identity and sexual identity and culture alone? How do we get
the left to do what they were talking about a century ago – economic reform and how to
take the side of labor, consumers and debtors? How do we tell the Blacks that it's more
important to get a well paying job? That's the way to gain power. I think Deng said: "Black
cat, white cat, it doesn't matter as long as it catches mice." How do we say "Black president,
white president, it doesn't matter, as long as they give jobs for us and help our community
economically?"
ED: I think that's important and I want to close with this issue: solutions. One of the
things I appreciate in reading your book is that it is broken up into sections. The final
section, I think, is really important. You titled it: "There Is An Alternative." That is of
course a reference to Margaret Thatcher's TINA (There Is No Alternative). That ideology and
mindset took over the left, or at least the nominally left-wing parties. So you're saying that
there is an alternative. In that section you propose a number of important reforms. You argue
that they would restore industrial prosperity. Now, I'm not asking you to name all of them, to
run down the list, but maybe touch on a little bit of what you included, and why that's
important for beginning to build this alternative.
MH: There are two main aims that classical economists had 200 years ago. One was to free
society from debt. You didn't want people to have to spend their lives working off the debt,
whether for a home, for living or to get an education. Second, you wanted to fund industry, not
by debt but by equity. That is what the Saint-Simonians and France did. It's what German
banking was famous for before World War I. There was a debate in the English speaking
countries, especially in England saying that maybe England and the Allies might lose World War
I because the banks are running everything, and finance should be subordinated to fund
industry. It can be used to help the economy grow, not be parasitic.
But instead, our tax laws make debt service tax deductible. If a company pays $2 billion a
year in dividends, a corporate raider can buy it on credit and, if there's a 50% stock rate, he
can pay $4 billion to bondholders instead of $2 billion to stockholders. Over the past twenty
years the American stock market has become a vehicle for corporate raiding, replacing equity
with debt. That makes break-even costs much higher.
The other point I'm making concerns economic rent. The guiding idea of an economic and tax
system should be to lower the cost of living and doing business. I show what the average
American wage earner has to pay. Under the most recent federal housing authority laws, the
government guarantees mortgage loans that absorb up to 43% of family income. Suppose you pay
this 43% of income for your home mortgage, after the 15% of your wages set aside for Social
Security under FICA.
Instead of funding Social Security out of the general budget and hence out of what is still
progressive taxation, Congress has said that the rich shouldn't pay for Social Security; only
blue-collar workers should pay. So if you make over $115,000, you don't have to pay anything.
In addition to that 15% wage tax, about 20% ends up being paid for other taxes – sales
taxes, income taxes, and various other taxes that fall on consumers. And perhaps another 10%
goes for bank loans besides mortgages – credit card loans, student loans and other
debts.
That leaves only about 25% of what American families earn to be spent on goods and services
– unless they borrow to maintain their living standards. This means that if you would
give wage earners all of their food, all their transportation, all their clothing for nothing,
they still could not compete with foreign economies, because so much of the budget has to go
for finance, insurance and real estate (FIRE). That's why our employment is not going to
recover. That's why our living standards are not going to recover.
Even if wages do go up for some workers, they're going to have to pay it to the bank for
education loans, mortgage loans (or rent), bank debt and credit card debt, and now also for our
amazingly expensive and rent-extracting medical insurance and health care and medications. The
result is that if they try to join the middle class by getting higher education and buying a
home, they will spend the rest of their lives paying the banks. They don't end up keeping their
higher wages. They pay them to the banks.
ED: You don't have to tell me. I'm living that reality. Interestingly, in that final section
of your book you talk about alternatives, like a public banking option that many people have
discussed. You talk about the Social Security cap that you were just mentioning, and focus on
taxing economic rent. Some critics would suggest that these sorts of reforms are not going to
be able to salvage the capitalist model that is so ensconced in the United States. So I want to
give you a chance to sort of present that argument or maybe rebut it.
MH: I won't rebut that criticism, because it's right. Marx thought that it was the task of
industrial capitalism to free economies from the economic legacies of feudalism. He saw that
the bourgeois parties wanted to get rid of the "excrescences" of the industrial capitalist
marketplace. They wanted to get rid of the parasites, the landowners and usurious creditors.
Marx said that even if you get rid of the parasites, even if you socialize finance and land
that he dealt with in volume II and III of Capital, you're still going to have the Volume I
problem. You're still going to have the exploitation problem between employers and employees
– the labor/capital problem.
My point is that most academic Marxists and the left in general have focused so much on the
fight of workers and labor unions against employers that they tend to overlook that there's
this huge FIRE sector – Finance, Insurance, and Real Estate – tsunami is swamping
the economy. Finance is wrecking industry and government, along with labor. The reforms that
Marx expected the bourgeois parties to enact against rentiers haven't occurred. Marx was overly
optimistic about the role of industrial capitalism and industrialized banking to prepare the
ground for socialism.
This means that until you complete the task of freeing of society from feudalism –
corrosive banking and economic rent as unearned income – you can't solve the industrial
problems that Marx dealt with in Volume I. And of course even when you do solve them, these
problems of labor exploitation and markets will still exist.
ED: Yes, absolutely. Well we're out of time. I want to thank you for coming onto the
program. Listeners, you heard it. There's so much information to digest here. The book is
really brilliant, I think essential reading, required reading – Killing the Host: How
Financial Parasites and Debt Bondage Destroy the Global Economy, available through
CounterPunch, as well as on Amazon. Michael Hudson professor of economics at University of
Missouri Kansas City, his work is all over the place. Find it regularly on CounterPunch, as
well as on his website michael-hudson.com. Michael Hudson thanks so much for coming on
CounterPunch Radio.
MH: It's great to be here. It's been a wonderful discussion.
The key point is that financial industry needs to be strictly regulated and suppressed, because after a cirtain point it stage
coup d'état, banksters come to power and turn the industry into cancer for the society with it uncontrolled parasitic growth.
Notable quotes:
"... In economics, the financial sector is typically lumped in with the insurance sector and real estate (the financial portion of the real estate sector, not construction) sector. Together, the sectors are often abbreviated and called the FIRE sector. In this article I will talk mainly about the finance portion of the FIRE sector since it is by far the largest, most visible, and most corrupt. ..."
"... The job of the finance sector is simply to manage existing resources . It creates nothing. Therefore, the smaller the financial sector is the more real wealth there is for the rest of society to enjoy. The bigger the financial sector becomes the more money it siphons off from the productive sectors. ..."
"... Neither of these two friendly fellows actually does much, if anything, in the way of actual investing. Sure, they learn the lingo, dress sharply, and probably know more than the average Joe, but they don't call the shots. That happens at Big Bank HQ. ..."
"... Somewhere in the belly of the beast there is a gaggle of highly paid, largely worthless economists and market technicians. Using some combination of tea leaves, voodoo, crystal balls, and tarot cards, these guys come up with the selection of one-size-fits-most, happy-meal portfolios that clients will be invested in. Actually, scratch that. Portfolios aren't assembled using all kinds of mystical methods; they are assembled using cold hard cash. (It's the finance sector. Did you think they spoke a language other than green?) See, various mutual fund companies pay marketing fees and other dubiously legal payments to the advisory firms to get them to sell their funds. In 2010, mutual fund companies paid $3.5B in perfectly legal "pay to play" schemes to get their funds featured in various investment lineups. ..."
"... One significant source of profit for the financial sector has been exploiting public, taxpayer-owned infrastructure. It should be blatantly obvious that these deals are bad for citizens, as the fees charged to citizens for use of the asset must not only cover servicing costs and maintenance capital expenditures but must also generate profit for the firms buying the assets. ..."
"... As the financial sector funnels more and more resources into lobbying and bribes (let's face it, campaign contributions are nothing more than legal bribery), it has been able to strip an ever-greater amount of state-owned assets from the public. Public asset strip mining is one of the chief causes of the increasing profitability of the financial sector. ..."
Before I begin this article want to make the point that what I'm about to say doesn't apply to everyone in the industry. While
the average mutual fund, broker, wealth manager, and hedge fund charges high fees and delivers poor results it doesn't apply to everyone.
I know lots of good, honest hedge fund managers that charge reasonable fees. I know lots of wealth managers that act in their client's
best interest and don't gouge them on fees. Unfortunately these are the exceptions rather than the rule.
Over the past year or so, the issue of rising income inequality in the United States (and even worldwide) has come front and center.
Most of what I've read has focused on wages, union membership, unemployment, taxation, government subsidy, and executive pay issues.
There is one issue whose role I think is overlooked in the mainstream media: the role the financial sector plays in exacerbating
income inequality. In fact, I believe the financial sector is one of the prime causes, and at its current point is perhaps the greatest
parasite in human history. It is sucking wealth from the productive sectors of the economy at an unprecedented rate.
Before we go any further, I want to define the term "income inequality." When I use that term, I am referring to the fact that,
on average, the incomes and standard of living of American workers is not keeping pace with productivity. I'm also using the term,
in part, to explain why workers and executives in some parts of the economy are overpaid in relation to the benefits they provide.
What I am not doing is making a blanket statement that money should be taken away from successful, hardworking people and
given or "redistributed" to the lazy.
The Role of the Financial Sector
In economics, the financial sector is typically lumped in with the insurance sector and real estate (the financial portion
of the real estate sector, not construction) sector. Together, the sectors are often abbreviated and called the FIRE sector.
In this article I will talk mainly about the finance portion of the FIRE sector since it is by far the largest, most visible, and
most corrupt.
The problem is that the financial, insurance, and real estate (FIRE) sectors do not actually produce any goods or services. If
you go on Google Finance you'll see it divides the economy into ten sectors: energy, basic materials, industrials, cyclical consumer
goods, non-cyclical consumer goods, financials, healthcare, technology, telecommunications, and utilities.
The nine nonfinancial sectors all produce goods or services. For example, the energy sector companies drill for our oil and refine
it into gasoline (e.g., ExxonMobil); the basic materials sector mines our iron (BHP Billiton) and refines it into steel (Nucor);
the industrial sector produces the mining equipment (Caterpillar) used by the previously mentioned sectors; the cyclical consumer
goods sector produces our cars (Ford) or sells our everyday items (Wal-Mart); the non-cyclical consumer goods sector sells the things
we need no matter what, such as groceries (Safeway); the healthcare sector provides the medicines that heal us (Johnson & Johnson);
the technology sector gives us the computers and software we use (Apple); the telecommunications sector gives us the ability to communicate
(Verizon); and the utility sector gives us the power to run our homes and businesses (Duke Energy).
The financial sector? Well, according to Harvard professor Greg Mankiw, chief academic apologist for the financial sector, this
is what it's supposed to do:
Those who work in banking, venture capital, and other financial firms are in charge of allocating the economy's investment resources.
They decide, in a decentralized and competitive way, which companies and industries will shrink and which will grow.
The job of the finance sector is simply to manage existing resources . It creates nothing. Therefore, the smaller
the financial sector is the more real wealth there is for the rest of society to enjoy. The bigger the financial sector becomes the
more money it siphons off from the productive sectors.
The graph below shows how the financial sector has grown since 1960. The figures are shown as a percentage of investment (using
both gross and net investment).
Graphic source: Jacobin Magazine
As you can see, the financial sector has almost doubled or tripled in size since 1960. That means it is extracting double or triple
the amount of money from the real economy!
Just how much?
I want to go through several areas of the economy to show you how the financial sector is extracting money and offering no benefit.
The Grift in Your Retirement Plan
I want to start with the industry I work in, wealth management. When I started my business, I was cognizant of how investors were
ill served by the traditional model of wealth management and vowed to run my business differently. Unfortunately, a vast majority
of the financial industry has built an unrivaled apparatus for extracting huge sums of money from retirees and mom-and-pop investors.
Say, you're sitting on your couch, watching TV and thinking about retirement. You just got part of your inheritance and think
investing it for the future would be a sensible idea. Imagine you haven't the slightest idea how to get started. Then a commercial
comes on with Tommy Lee Jones telling you how trustworthy Ameriprise is. Maybe you hear the reassuring voice of John Houseman pitching
Smith Barney, or you might see the iconic bull charging across the desert for Merrill Lynch.
Say you decide to go down to your local brokerage and meet with a financial advisor. His (or her) pitch sounds good, so you decide
to become a client.
The first problem is the guy you met. Remember how he told you he has his finger on the pulse of the market, he has access to
the best investment research, he is always taking continuing education classes, and he is always monitoring your portfolio? He isn't.
He could be a complete moron. He got hired (and survived and thrived) because he is a good salesman. Nothing less and nothing more.
He takes his orders on what to sell from the top -- the gaggle of people with their fingers in your retirement pie, helping themselves
to regular bites.
The first person behind the scenes telling our hapless salesman what to do is some sort of office, district, or regional manager.
This is manager is just like the salesman but with more ambition. Almost all of these guys were promoted from sales, and their job
is do an impersonation of Alec Baldwin from Glengarry Glen Ross, yelling at the underperformers ("Coffee is for closers!") to get
out there and sell the turd of the month. ("XYZ Mutual Fund Company just paid our firm $200M," this manager says, "so get out there
and sell their funds! And, Jones, if you don't gross $20,000 by the end of this month you're fired! Meeting adjourned.")
Neither of these two friendly fellows actually does much, if anything, in the way of actual investing. Sure, they learn the
lingo, dress sharply, and probably know more than the average Joe, but they don't call the shots. That happens at Big Bank HQ.
Somewhere in the belly of the beast there is a gaggle of highly paid, largely worthless economists and market technicians.
Using some combination of tea leaves, voodoo, crystal balls, and tarot cards, these guys come up with the selection of one-size-fits-most,
happy-meal portfolios that clients will be invested in. Actually, scratch that. Portfolios aren't assembled using all kinds of mystical
methods; they are assembled using cold hard cash. (It's the finance sector. Did you think they spoke a language other than green?)
See, various mutual fund companies pay marketing fees and other dubiously legal payments to the advisory firms to get them to sell
their funds. In 2010, mutual fund companies
paid $3.5B in perfectly legal "pay to play" schemes to get their funds featured in various investment lineups.
You, the investor, are usually charged somewhere around 1% to 1.5% of assets annually for this "service." I've seen clients charged
as much as 1.65% and I've come across firms advertising fees as high as 2% per year for clients with small account balances. For
large portfolios (typically $1M or more) the fees start going down and I've seen rates as low as .5% or less. These fees are split
up between your advisor, the district manager, and the firm itself. Keep in mind that these are fees before any investments have
been made!
So who actually makes the investments in stocks and bonds? It's the portfolio managers at the mutual fund companies. According
to the Investment Company Institute 2011 Fact Book (the ICI is a pro-mutual fund organization), the average mutual fund in
2010 charged 1.47% of assets annually. That's in addition to an average up-front sales charge of 1%.
Why so expensive? Well, the funds are towing a lot of dead weight. According to the ICI 2013 Fact Book, only 42% of mutual
fund employees were employed in fund management positions or fund administrative positions. The rest, 58%, were employed in either
investor servicing (34%) or sales and distribution (24%) job functions.
Like any good infomercial says, "But wait! There's more!" When you buy a stock or bond, you can't just go grab it off the shelf
like you are shopping at Wal-Mart. You need to go through a brokerage. A 1999 study by Chalmers, Edelen, and Kadlec found that the
average mutual fund incurs trading expenses of .78% per annum. A newer study in 2004 by Karceski, Livingston, and O'Neal found brokerage
commissions cost funds around .38% per annum, or .58% if you account for the effect trading large blocks of stock has on the bid-ask
spread.
But wait! There's more! Mutual funds and your average retail investor are relatively unsophisticated, so a new industry has popped
up to take advantage of them. It's called "high frequency trading" or HFT for short. These are powerful computers programmed to take
advantage of "dumb" traders in the market. These HFT firms place their computers physically next to the stock exchange computers
in the datacenters and buy access to market quotes milliseconds before they are made public. They use these and other advantages
to skim
profits from other legitimate investors (that is, people buying stocks because they want to own part of the underlying company).
All told, it's not uncommon to see investors incurring annual expenses of 2%, all the way up to 4% per year.
Institutions and the Rich Have the Same Problem
The problem isn't just limited to Joe Six-pack Retiree. Large institutional investors, such as pension funds, and "sophisticated"
rich investors get taken to the cleaners too.
Once upon a time someone came up with a great idea: Since an all-stock portfolio is volatile, why not "hedge" the portfolio and
sell some stocks short? If you bet that good stocks will go up (buying stocks in the good companies or going long) and bad stocks
will go down (selling the stock short) then you could limit volatility and maybe make some extra money. (You'd make money both when
the good stocks went up and the bad stocks went down). It was and is a pretty good idea when done correctly. Unfortunately, the term
"hedge fund," like the term "mutual fund," has lost its original meaning. The term hedge fund is now used to refer to any type of
pooled investment vehicle that is limited to select clients (usually rich, sophisticated investors and institutions, although the
rules vary worldwide).
The rule of thumb is that hedge funds charge a 2% per year management fee and keep 20% of all profits, the proverbial "2 and 20"
compensation. According to a
WSJ article , this
old adage isn't too far off; the average hedge fund charges 1.6% per year and keeps 18% of profits.
In 2012, hedge funds removed $50.5B from their investors' pockets. In fact, according to an article in Jacobin Magazine, the top
25 hedge fund managers make more money than the CEOs of all S&P 500 companies combined. Combined!
Have they earned it? Well, the answer seems to be no. I pulled the last four years of return data for two hedge fund indices:
the Barclays Hedge Fund Index and the Credit Suisse AllHedge Index. These two indices track thousands of hedge funds across the globe.
I compared them with the returns of the Vanguard Total World Stock Index Fund and the Vanguard Total World Bond Market Index Fund
as well as a 50/50 portfolio of the two Vanguard Funds. All returns shown are net of fees.
The Vanguard stock fund trounced both hedge fund indices, and the Credit Suisse index managed only to beat the returns of bonds
by .01%.
Right about now you will hear the howls of the "hedgies" complaining. I wasn't quite fair to the hedge funds. A lot, but not all,
of them are hedged so returns in down markets will be better and four years isn't a terribly long time to look at.
The two graphs below show the returns for the Credit Suisse index since 2004 and the maximum drawdowns (losses) since 2004.
First, over 10 years the returns for hedge funds are atrocious, only about 25% in total. They do have a point that the draw downs
are lower. The maximum losses experienced during the downturn only averaged about 25%. Fine, but the Vanguard Total Bond Market Index
had barely any draw downs during the crisis and returned over 50% during a similar time period.
Unfortunately, Vanguard does not have return data for any of its World Stock funds for a complete 2008 calendar year so I was
unable to get exact data for my 50/50 portfolio. But I'd be willing to bet it beats the hedge fund indices on a risk adjusted basis.
When you hear about underfunded pension plans, part of the blame lies with pension investment committees and their investments
in hedge funds. These funds, in aggregate, have not earned the fees they charge and have instead funneled the money of retirees into
the hands of a wealthy few.
I'm not alone in reaching this conclusion. Pension funds are slowly starting to see the light and
reducing their allocations to "alternative" investments, such as hedge funds, and
reallocating the capital to indexed products or negotiating with the funds for lower fees.
It's not just the traditional investment arena where the financial sector has run wild. Its unending quest for siphoning money
from the economy has spilled out into other areas.
Speculation in Commodities Costs Main Street Billions
Speculation by the financial sector in the commodities market is impacting the entire world. The passage of the Commodities Futures
Modernization Act (CFMA) has allowed big banks to engage in almost limitless speculation in the commodities market. Wall Street has
convinced everyone from individual investors to pension funds and endowments that they need to include commodities in their portfolios
for deworsification, I mean, diversification purposes. Between investors plowing more than $350B into the commodities market and
what appears to be outright manipulation of commodities prices, the financial sector has increased the costs of everything from wheat
to heating oil and aluminum to gasoline.
An executive for MillerCoors testified that manipulation of the aluminum market cost manufacturers over $3B. The World Bank estimated
that in 2010, 44 million people worldwide were pushed into poverty because of high food prices. The chief cause?
More than 100 studies
agree the cause is speculation in the commodities market. (Goldman Sachs made
$440M in 2012
from food market speculation.) For Americans who love their cars (and SUVs), the biggest impact might be felt at the gas pump where
experts estimate
that financial speculation has added anywhere from $1 to $1.50 to gas prices.
For more information on speculation in the commodities, I recommend Matt Taibbi's
excellent pieces, in-depth information at Better Markets , or some
of myarticles on commodities.
If you think it's bad enough that Wall Street is raising the price of your food, heating oil, gasoline, and Pepsi, then wait until
you get a load of one of the Street's other ingenious ideas for helping themselves to more of your money.
Corruption of Public Infrastructure
One significant source of profit for the financial sector has been exploiting public, taxpayer-owned infrastructure. It should
be blatantly obvious that these deals are bad for citizens, as the fees charged to citizens for use of the asset must not only cover
servicing costs and maintenance capital expenditures but must also generate profit for the firms buying the assets.
The first and most obvious examples of this type of fraud (I choose to use the term "fraud" because I believe that is exactly
what these deals are) are government entities selling public, taxpayer-owned infrastructure, such as road, bridges, parking facilities,
and ports, to the private sector so that they can extract rent from the users. The deals are usually touted as saving taxpayers money
and letting the "more efficient" private sector better manage the asset. This is false. Many studies show private ownership of public
goods does not lead to any cost savings. A comprehensive econometric
study done in 2010 of all available public vs. private studies by Germa Bel, Xavier Fageda, Mildred E. Warner at the University
of Barcelona found no cost saving in privatizing public water or solid waste management services and infrastructure.
The case is no different when it comes to public roads. A
2007 paper by US PIRG found that
privatizing roads never benefits citizens. Financial firms were typically able to buy the assets on the cheap and then raise toll
rates while usually sneaking language into the agreements that prevented governments from building competing infrastructure. The
paper presented evidence that the Indiana Toll Road lease will cost taxpayers at least $7.5B.
One of the most egregious examples of the financial sector extracting rent is the
2009 sale of Chicago's parking meters
to a consortium led by Morgan Stanley. Shortly after the lease was finalized, rates at many parking meters increased (in some case
by quadruple the amount). The Chicago Inspector General found that the city was underpaid by almost $1B for the lease. Meanwhile,
in 2010 Morgan Stanley banked $58 million in profits from the parking meters. With
no way
out of the deal , the citizens of Chicago are now paying Morgan Stanley for the right to use assets they used to own!
The second way in which taxpayers are exploited by the financial sector is so-called public-private partnerships (also referred
to as PPP or P 3 ). There is no set definition for what constitutes a PPP arrangement, and it is possible some might be
beneficial in limited circumstances. I want to focus on one specific type of PPP that enriches the financial sector: when public
projects are privately financed. There is absolutely no reason for any government project to ever require paying "rent" to the financial
sector in the form of financing.
The United States federal government is the monopoly supplier of US dollars. It can add them to the economy at will through deficit
spending or remove them via taxation. There is no earthly reason for a public entity to be forced to depend on the private sector
to provide any type of financing. The only constraint on whether or not money should be spent is whether the economy is at full capacity
(full employment and full industrial capacity utilization) where the additional deficit spending may cause inflation.
State and local governments are unable to issue currency and therefore must depend on revenue raised via taxation, distributions
from the federal government, or money raised through bond issuance. Even then, studies have shown that PPPs are more expensive compared
to the state or local entity securing financing through the municipal bond market.
As the financial sector funnels more and more resources into lobbying and bribes (let's face it, campaign contributions are
nothing more than legal bribery), it has been able to strip an ever-greater amount of state-owned assets from the public. Public
asset strip mining is one of the chief causes of the increasing profitability of the financial sector.
So far we've dealt with examples that are pretty easy to see. Everyone who owns a car knows that gas prices have been rising too
fast and food is more expensive. The citizens of Chicago know they are getting shafted on the parking meter deal since parking rates
have quadrupled. But there are hidden areas of the economy where the financial sector is ripping off the public too.
Interest Rate Manipulation
Do you know what LIBOR is? And what it's used for? A lot of financial types read my newsletters, so I'm sure some of you do. But
the average man or woman on the street likely does not.
LIBOR stands for London Interbank Offered Rate and is the average interest rate banks in London estimate that they would be charged
if they borrowed from other banks. This rate is used worldwide by mortgage lenders, credit card agencies, banks, and other financial
institutions to set interest rates. By some estimates, more than $350T in financial products, derivatives, and contracts are tied
to LIBOR.
In 2012, it was discovered that, since 1991, banks were falsely inflating or deflating the interest rates they reported. (Remember
banks essentially make up their own interest rates and report them with the results being essentially averaged and reported as LIBOR.)
The banks did this in order to profit from trades or to make themselves look more creditworthy than they were.
The Macquarie Group estimated that the
manipulation of LIBOR cost investors $176B. (Keep in mind this is an estimate coming from a financial firm, so it would be prudent
to assume it's on the low end.)
Andrew Lo, a finance professor at MIT, said the fraud "dwarfs by orders of magnitude any financial scam in the history of the
markets."
Food Stamps (SNAP) and Welfare (TANF)
I highly doubt any of my clients or readers are beneficiaries of the SNAP or "food stamps" program and are probably not very familiar
with it. While it is nominally a government program it has been corrupted by the big banks. Benefits are provided electronically
via debit cards (EBT cards). JP Morgan
has made over $500M
from 2004 to 2012 providing EBT benefits to 18 states. The banks then are free to reap fees from users for such things as cash
withdraws for TANF benefits, out of network ATM fees, lost card replacement fees, and even customer service calls.
I believe you can judge how profitable a service is to a company how much it spends on lobbying. In the case of JPMorgan, its
bribes, I mean campaign contributions to Agriculture Committee (SNAP is part of the Department of Agriculture) members increased
sharply after it entered the EBT market in 2004.
(Graphic source: GAI via data from CRP) Summary
A bloated and out-of-control financial sector does not add any value to society. Society benefits when the financial sector is
kept as small as possible.
The financial sector is a parasite that depends on its host organism, the productive sector of the economy, to fuel its profits.
The larger the financial sector grows, the more wealth it extracts from the productive sectors of the economy. With all due respect
to Matt Taibbi, Goldman Sachs isn't a vampire squid; the entire financial sector is the vampire squid with its tentacles reaching
into the pockets of citizens everywhere and sucking out money.
Quite a damning critique, and if I may step away from the main point I have to ask: why is it that some guys involved with
finance, Strubel as well as Auerback, Mosler and Ritholtz, talk like this while so many in the field do not? Does everyone involved
"know" all this but most simply choose to put on blinders?
Great Article about the .01% "Taker Class". This can all end by the 99% demanding a change to the TAX CODE! Yet another clear
indication of the manipulation of the "Giver Class" by government!
Its truly frightening to see how the public has been blindsided/mislead about the root causes of rapid income inequality. As
a social worker I am somwhat familiar with the SNAP benefit program Depressing to think JP Morgan Chase skimmed at least 500m
over an eight year period for SNAP and welfare benefits. I suppose this is the new age enclosure movement where Wall Street is
picking up public assets for pennies on the dollar and charging enormous rents..
The questions is.. what happens when it is used up?? A scorched wasteland of dysfunctional infrastruture/gated communites housing
a tiny elite protected from beggars, street criminals, and gang bandits??
Excellent article. Easy for a layperson to understand and covers a good portion of the pervasive, ongoing, worldwide financial
system theft. I worked for a stock brokerage firm years ago while studying for the series 7. Once I figured out they were all
just well-dressed telemarketers, I quit and found a more productive job. Remember 'dogs of the Dow' ?
A very well-written and eye-opening post – thanks, Ben. I think the formulation of this central point may be a little skewed,
though: " the smaller the financial sector is the more real wealth there is for the rest of society to enjoy. The bigger the financial
sector becomes the more money it siphons off from the productive sectors."
I think this formulation may be somewhat muddling the real-vs.-financial dichotomy that MMT revolves around. Sort of by definition,
the financial sector is 100 percent nominal – even when it posits ownership of real assets, it is really just money-valuing them,
applying the unit-of-account property of money. The ownership is an abstraction. The owner of a share of stock or a gold ETF has
no concrete interaction with the company or commodity in question. So, contrasting the total size of the financial sector to the
totality of real wealth available – for those members of society who do *not* receive income from the financial sector – leaves
me scratching my head. I'm not clear what is being measured. I know that profits flowing to the financial sector have exploded
from around two percent of total corporate profits in the 1950s to around forty percent now. This means it is over-charging for
its so-called services, but I think the real-economy effects are non-linear, and more complex than this.
Regarding the financial sector's growing tendency to siphon off money from the productive sectors – yes, they do this. But
it is up to the state, with its currency-issuing and taxing powers, to regulate how far this process goes and what happens next.
In a recent post, J.D. Alt took note of the ephemeral nature of the financial sector's nominal money-wealth. It is "fictitious
capital". Electronic poker chips. Just zeros and ones, really. As long as the plutocrats simply hoard them – use them to keep
score – the state can just replace them by increasing spending. I also tend to think that the consumption spending of the .01
percent is rather inelastic. They already have everything they want. Keynes' attitude was to let them live it up, up to a point,
and then tax the excess back when they die.
For me, the most important part of your post is the section on commodity speculation and infrastructure privatization. This
truly is a huge deal, a clear interaction with the real economy and a terrible crime, actually. Again, though, it is up to the
state to permit these outrages or ban them – we used to ban them but we stopped. So. One more big thank-you to the Big Dog, I
guess. To think – before Clinton, America actually based aid to poor children on their ages and their poverty rather than the
supposed moral imperfections of their parents. We even had no-fee food stamps.
Obviously, the other reason we can't just let the one percent play their casino games is that they eventually blow up the real
economy, as a totality, through financial crises and destabilization. And, due to all the fabulist monetary propaganda out there,
there is now a big reservoir of public opinion and political will *in favor* of financial collapse. The libertarians and other
Paul-Partiers think it would do us all good. And bring back the gold standard. And "End the Fed", and all the rest of that good
19th Century stuff. I'm not a ready-for-Hillary kind of guy in general, but is it possible to imagine a scarier idea than President
Rand?
While most of your specific criticisms are quite valid, I think your brush is a bit too broad. "The problem is that the financial,
insurance, and real estate (FIRE) sectors do not actually produce any goods or services. "
This is obviously false. I have many times used services provided by banks, credit unions, insurance companies, and real estate
brokers and agents. It would be practically impossible to find the right house to buy, to sell it for a fair price, to get the
loan necessary to buy it, or to protect myself and my family from a catastrophic loss without their services.
It is undoubtedly true that most of the volatility of the FIRE sector since 1990 is due to speculation and parasitical activities,
but there is undoubtedly also some growth of useful services that has facilitated growth of the other sectors, not detracted from
it. Thus it is not always true that "the smaller the financial sector is the more real wealth there is for the rest of society
to enjoy".
Bottom line, you have a good point. Excessively broad statements might be more dramatic, but if they are not true they don't
help your cause.
I have gotten real value from real estate brokers. Did you ever try to sell a house without one? Qualify the serious buyers
and deal with the lookie-loos? And the government paperwork!! I've always gotten my money's worth.
No, the fire doesn't care if you have insurance, but the insurance company will advise you on how to prevent fires and minimize
the damage. Paying an insurance company has protected me from paying the unaffordable high cost of the insured risks. The service
provided by insurance is not incident prevention, it is management of financial risk, and it does that very well. My claims have
been handled quickly and fairly. I had one unusual case where I thought the insurance company should have paid me more than their
original offer (the nation-wide blue book value of the car didn't reflect the unique situation in my State), and after discussion
they agreed with me and paid. I've been with them for over 40 years and I'm very happy with their services.
If you want your bank to create wealth for you, you're looking in the wrong place. Banks are good for storing and protecting
your money, and many will do that for you without fees, and even pay you interest. They'll let you use their computers to pay
your creditors, also without charge. They'll even give you short-term interest-free loans, and pay you cash rebates, if you use
their credit cards. I like my banks' services, too. And, of course, if you want to borrow money they will lend it to you and if
your payment is late they don't break your legs. They will make a profit, though. That's why they do it. You don't have to participate
if you don't want to.
Not every bank is Goldman Sachs, and not every insurance company is AIG. Those are good examples of companies that often serve
no useful purpose, but there are many others who do provide useful services at a reasonable cost.
Although I can be sympathetic of the no-value creation thesis in the financial industry, comparing the performance of hedge
funds with the recent performance of bonds is a no big no-no, because it assumes a negative correlation between equities and bonds.
If one look at the world markets in the last 100 years, that has been the exception rather than the rule.
And you forgot to mention the important roles of capital markets in deploying capital and financing companies through IPOs,
bond offers, etc.
You missed another big point, negative real interest rates. The Fed Funds Rate is currently 0%-0.25%, while real inflation
is much higher. (The CPI is not an accurate measure of inflation.) Big banks can profit by borrowing at 0% and buying stuff (bonds,
stocks, commodities, real estate, politicians, whatever).
On LIBOR, here's another interesting bit. Cities and states lost a TON of money on interest rate swaps with banks. What was
sold as a "hedge" wound up blowing up and costing a fortune.
This was a fascinating piece, very readable for those of us with minimal financial education. However, since this is such a
good explainer for the layman, I think it would be very beneficial to explain how big a difference 1% in fees makes for an investor
over a lifetime. I know personally when I used to compare funds the difference between 1 and 2% in fees seemed negligible. But
then I saw that fantastic PBS Frontline
on this topic and saw how much that 1% could cost me over a lifetime! I now have everything that I personally manage in index
funds!
You can't really argue with what has been said, and all (of us) involved in the sector know it is massive rip off.
While a free market advocate, I think a first step would be to introduce meaningful fee caps on all state promoted or mandated
saving arrangements (eg ISAS, and Pensions), on the grounds that the market is skewed by the government intervention that creates
the glut of forced buyers, and so to correct that imbalance the market (i.e. consumers) need protection through fee caps. I'd
say no more than 20 – 25bps should be permitted for all ISAS and pension savings (DC or DB). Individual wealthy investors (investments
of more than say £5m?) can pay what they like.
>>The job of the finance sector is simply to manage existing resources. It creates nothing.
This is a dubious assertion, but you clearly believe it. How then, can you in good conscience, charge 1.25% (plus indirect
costs for the funds you hold in client portfolios) to manage people's money when you yourself admit you are adding no value?
I know this was for Ben, but there's a pretty simple answer to that question: They don't charge 1.25% because they create value,
they're charging a fee to access the profit created by companies they invest in. Say I told you that I knew a guy named Jimmy
who was going to make three bucks for every buck he gets, and I asked if you'd lend me a dollar to give to Jimmy with the promise
that he'd give me 1.50 cents of it. I'd want to keep 25 cents but you can have 1.25, and so you agree. I didn't create the 2 extra
dollars of value -- Jimmy did -- but I feel justified in asking for a cut because I gave you the tip about Jimmy's value creation
ability.
At least, that is my understanding of Ben's statement.
There are 6000 publicly traded companies. Some of them will have rising stock prices, some falling. If a money manager can
steer you to the rising ones, he is doing something of value. It doesn't mean he created anything physical that didn't exist before.
He's doing a service for you that would otherwise have taken you some time and effort to do, and that's what you pay for.
Yes, it's a different definition of value. The growth of financial services has been outpacing the growth of other sectors
to a monstrous scale, and that makes this distinction important. It signals a kind of corruption that can only mean high inflation
and decoupling money from economic output.
I don't follow. How is financial services different from any other kind of services, in the impact on inflation? Why not also
actors, barbers, or any other service profession? The growth of the financial sector might be explained by the fact that it is
the industry most able to exploit computers, and the first to do so on a large scale.
The corruption is, I think, a separate issue that is present whenever other people's money is involved. Financial services
and government are simply more involved that way than most other industries, and have been all along, dating to long before the
recent growth. Corruption is not impossible in any industry, just more attractive when the numbers are larger.
Corruption is never a separate in ANY corporate activity. The TAX CODE treats the wealth of the .01% radically different than
Income from Labor, because all Taxes on Capital Gains are deferred until taken and are not TAXED as ordinary income. The TAX CODE
is responsible for the corruption of our government because it has put real POWER, the Power of Wealth in the hands of the .01%,
to buy whatever it wants, while labor and the poor spend everything they earn or are given , every single year to survive in a
economic culture designed for the benefit of the .01%, something no one will write about!
Change the TAX CODE and the Corruption of Society will end!
Barbers and actors being paid for their labor do not have the same impact on inflation as a bank giving out loans and consumer
credit at interest. It's not equivalent at all.
Corruption in financial industries is what this article is discussing. If it's a separate issue, I'm confused as to the point
of talking about this at all!
I don't think your explanation is correct. Why wouldn't I go directly to Jimmy in that case and cut out the middle man since
he is offering no value add? The fact is, the middle man, Ben, in this case, believes that he can identify superior companies
to invest his clients money in and earn a greater return. This is Ben's value add and why he charges 1.25%.
Golfer John is correct and that point, essentially, blows a hole in Ben's thesis here that the financial sector adds no value
because they only manage "existing resources". Steering capital to the good ideas that improve consumer wealth and generate a
return is a value add and the fact that millions of transactions like this happen voluntarily between consenting adults further
supports this.
Physics tells us that matter cannot be created or destroyed, so the same resources that are on this earth today are the same
ones that were here 10,000 years ago. So, in that sense, Apple is simply managing "existing resources" when they build the iphone,
Toyota simply managing "existing resources" when they build a car, and UPS and US Mail are merely moving "existing resources"
from one location to another when they make deliveries, must be no value add there right?
Asserting that the financial sector only manages existing resources, and then citing that as proof of no value add is simply
a non sequiter.
No, I wasn't, though I have heard that. My theory of markets, and human group behavior in general, is a statistical approach.
There are averages, distributions, and temporary equilibriums, but the interesting parts are the outliers. I guess that is more
of a quantum flavor than Newtonian. Over time, economies behave cyclically. Much of nature and human group behavior is cyclical.
Paul -- That's true, and a good analogy, except you're getting a bit reductive with the term "existing resources". I agree
that "no value" is a bit extreme, which is why I became more interested in the -type- of value.
John – My physics is flawed to the extent that the law of conservation of matter is flawed, this I admit. I am much more economist
than physicist though so better that I get my physics wrong and econ right! I see a lot of similarities between the two, as well
as crucial differences, but I don't want to get too off topic.
Briana – "No Value is a bit extreme"
I agree, and as the absurdly hyperbolic title* of this article states, the author takes it to an even greater extreme – namely
that the financial sector is actually a systematic destroyer of value (parasite) that is created by all of the other industries.
The crux of his assertion rests on that they only "manage existing resources" and also calling Greg Mankiw an apologist, neither
strikes me as an intellectually rigorous argument.
And interestingly, on his own firm's website, the author apparently contradicts the thesis of this article when advertising
his financial services and the fees he charges for his own value add. I can think of several explanations for this, none of which
are particularly flattering, others can draw their own conclusions.
*a worse parasite than all of the murderous dictatorial regimes in human history that have institutionalized the slaughter
and torture of millions? Really? I note this because it is so obviously false that it makes the rest of the content seem unserious
and shallow even if valid points exist. Acidic comments tend to preach to the already converted, but perhaps that is the goal
here.
Yeah, ok. I should know better, Paul. My brain tried to rationalize the argument by making it less extreme. The goal probably
was to mobilize the choir to go Occupy Wall Street for a few more months, haha.
Those valid points shouldn't be ignored because of the poorly handled hyperbole, though. The financial sector does have a great
capacity to act as a parasite by overvaluing their services and squandering wealth generated by other industries instead of reinvesting
it in worthwhile, valuable enterprises; or using that wealth to essentially 'gamble' or invent money that is not attached to any
real value (i.e. shorting or credit default swaps). As the fruits of these behaviors are becoming obvious, it gets harder to justify
policies that allow them to happen.
In many ways that is my point. You found those "valid points" obviously correct before reading the article, so it rang true
despite the extreme hyperbole. I did not find those points self-evidently true so this poorly constructed argument relying on
clearly false assumptions struck me as uncompelling.
For example, how does one "overvalue their services"? If one charges too much, no one is forced to buy. I may find Ben's management
fee of 1.25% to be overvaluing himself, but I have the option of not paying and instead going to less expensive alternatives.
Why wouldn't the financial industry invest in "worthwhile valuable enterprises" if they provide a worthwhile return? After
all, aren't they driven by an insatiable desire for profit? Who determines what enterprises are worthwhile?
I do not see anything inherently wrong with short selling. Indeed, the ability to short a stock is simply expressing a view
about its value, and leads to greater and more accurate price discovery. What is wrong with shorting a stock if one believes it
is overpriced relative to its instrinsic value? Is it not preferable that prices reflect underlying economic fundamentals rather
than being disconnected from such? Shorting puts downward pressure on prices, and helps prevent overvaluation.
Credit Default Swaps are nothing more than insurance against a bond default. There is nothing inherently wrong with insurance.
I'm not suggesting that you, here in the comments, need to write a paper elaborating on those, just that this article did a
poor job of pursuading, though again, I am coming to the realization that I am likely not the intended audience.
This discussion in the comments has actually been more fruitful than the article itself.
(Sorry for the late response, I've been away for a few days.)
"For example, how does one "overvalue their services"?"
This argument hinges on everyone that purchases these services knowing their true value. It's very simplistic to say that if
someone purchases it, that is the real value. It gets complicated when you take into account the psychological pressures of purchasing
behavior, such as "middle-price" preferences, "money you don't see is money you don't miss" and other tricks that are employed
to get people to pay higher prices.
"Why wouldn't the financial industry invest in "worthwhile valuable enterprises" if they provide a worthwhile return? After
all, aren't they driven by an insatiable desire for profit? Who determines what enterprises are worthwhile?"
Countless services and products we rely on were funded by taxes to make them profitable. They are "worthwhile" but apparently
not "profitable" enough to invest in. Making money and creating value aren't the same thing. Ideally, everyone decides what is
worthwhile.
"I do not see anything inherently wrong with short selling."
Shorting is basically a bucket shop in disguise.
"Credit Default Swaps are nothing more than insurance against a bond default. There is nothing inherently wrong with insurance."
"This argument hinges on everyone that purchases these services knowing their true value."
In a literal sense, you are correct, it is an imperfect measure of value. However, I think it is far and away the most reliable
one we have as value is extremely subjective. I don't think it is right or prudent for third, non cost bearing parties to preempt
decisions made by consenting adults, rather, I would accord them the dignity of free choice. There are many things that consumers
purchase that I do not understand, why anyone would pay a premium for a fast car seems like a waste of money to me, for example.
Why anyone would pay money to golf, not to mention the huge cost in terms of time it takes to get through 18 holes, seems like
a waste of money to me. These are things that make no sense to me because I do not see the value there. But, I recognize that
people have various tastes and preferences, and I respect that and presume that individuals know themselves and their own tastes
and preferences better than I (or someone else) does. Therefore, when someone values something that I do not understand, I tend
to believe it is a result of a difference in preference, rather than they are too dumb to figure out what they like, or that they
are "tricked" into buying something and hence need protection delivered by those who fancy themselves as enlightened enough to
see the real truth. Nothing about this is unique to the financial industry, by the way.
"Countless services and products we rely on were funded by taxes to make them profitable. They are "worthwhile" but apparently
not "profitable" enough to invest in. Making money and creating value aren't the same thing. Ideally, everyone decides what is
worthwhile."
Apparently not enough people decided these services and products were worthwhile, so politicians decided they were worthwhile
and used the force and power of government to get them done. Substituting preferences of politicians, spending other people's
money for those of millions of individuals spending their own money does not seem like an efficient way to allocate resources.
I agree with you on purchasing decisions. People should be free to determine value. I'm not saying people are always dumb,
but I do think they are manipulated. If you want to believe they are not, that is up to you, but apparently you've never seen
advertising. The financial industry advertises itself heavily, especially in consumer credit markets and insurance. But if we're
going to gauge something as nebulous as "true value", it requires a level of conscientiousness from everyone, and accepting whatever
people purchase as reflecting it's actual value is a quick way to guarantee abuse, especially when you have something like consumer
credit. If people are free to determine value, they should also be held to the consequences of their choices, which is currently
not the case in the financial industry and increasingly in the general population.
"Apparently not enough people decided these services and products were worthwhile, so politicians decided they were worthwhile
and used the force and power of government to get them done. Substituting preferences of politicians, spending other people's
money for those of millions of individuals spending their own money does not seem like an efficient way to allocate resources."
You mean like electricity, phone services, railroads, airlines, fortified wheat, water treatment, the internet, satellites,
healthcare.. the list could go on and on. It is less efficient (a word that really needs to be defined clearly, but I'll assume
I know what you mean!), and it happens because otherwise it wouldn't be possible, and yet it becomes widely adopted and lauded
none-the-less; progress, they say. Like I said, worthwhile and profitable are not 1-to-1 correlation, just as willingness to purchase
doesn't necessarily indicate true value.
I thought you might have some interesting opinion on the CDS as money creation I'm still trying to figure that one out!
"... Bankers, pharmaceutical giants, Google, Facebook ... a new breed of rentiers are at the very top of the pyramid and they're sucking the rest of us dry @rcbregman ..."
"... 'A big part of the modern banking sector is essentially a giant tapeworm gorging on a sick body' ..."
"... This piece is about one of the biggest taboos of our times. About a truth that is seldom acknowledged, and yet – on reflection – cannot be denied. The truth that we are living in an inverse welfare state. These days, politicians from the left to the right assume that most wealth is created at the top. By the visionaries, by the job creators, and by the people who have "made it". By the go-getters oozing talent and entrepreneurialism that are helping to advance the whole world. ..."
"... To understand why, we need to recognise that there are two ways of making money. The first is what most of us do: work. That means tapping into our knowledge and know-how (our "human capital" in economic terms) to create something new, whether that's a takeout app, a wedding cake, a stylish updo, or a perfectly poured pint. To work is to create. Ergo, to work is to create new wealth. ..."
"... But there is also a second way to make money. That's the rentier way : by leveraging control over something that already exists, such as land, knowledge, or money, to increase your wealth. You produce nothing, yet profit nonetheless. By definition, the rentier makes his living at others' expense, using his power to claim economic benefit. ..."
"... For those who know their history, the term "rentier" conjures associations with heirs to estates, such as the 19th century's large class of useless rentiers, well-described by the French economist Thomas Piketty . These days, that class is making a comeback. (Ironically, however, conservative politicians adamantly defend the rentier's right to lounge around, deeming inheritance tax to be the height of unfairness.) But there are also other ways of rent-seeking. From Wall Street to Silicon Valley , from big pharma to the lobby machines in Washington and Westminster, zoom in and you'll see rentiers everywhere. ..."
"... It may take quite a mental leap to see our economy as a system that shows solidarity with the rich rather than the poor. So I'll start with the clearest illustration of modern freeloaders at the top: bankers. Studies conducted by the International Monetary Fund and the Bank for International Settlements – not exactly leftist thinktanks – have revealed that much of the financial sector has become downright parasitic. How instead of creating wealth, they gobble it up whole. ..."
"... In other words, a big part of the modern banking sector is essentially a giant tapeworm gorging on a sick body. It's not creating anything new, merely sucking others dry. Bankers have found a hundred and one ways to accomplish this. The basic mechanism, however, is always the same: offer loans like it's going out of style, which in turn inflates the price of things like houses and shares, then earn a tidy percentage off those overblown prices (in the form of interest, commissions, brokerage fees, or what have you), and if the shit hits the fan, let Uncle Sam mop it up. ..."
"... Bankers are the most obvious class of closet freeloaders, but they are certainly not alone. Many a lawyer and an accountant wields a similar revenue model. Take tax evasion . Untold hardworking, academically degreed professionals make a good living at the expense of the populations of other countries. Or take the tide of privatisations over the past three decades, which have been all but a carte blanche for rentiers. One of the richest people in the world, Carlos Slim , earned his millions by obtaining a monopoly of the Mexican telecom market and then hiking prices sky high. The same goes for the Russian oligarchs who rose after the Berlin Wall fell , who bought up valuable state-owned assets for song to live off the rent. ..."
"... Even paragons of modern progress like Apple, Amazon, Google , Facebook, Uber and Airbnb are woven from the fabric of rentierism. Firstly, because they owe their existence to government discoveries and inventions (every sliver of fundamental technology in the iPhone, from the internet to batteries and from touchscreens to voice recognition, was invented by researchers on the government payroll). And second, because they tie themselves into knots to avoid paying taxes, retaining countless bankers, lawyers, and lobbyists for this very purpose. ..."
"... Even more important, many of these companies function as "natural monopolies", operating in a positive feedback loop of increasing growth and value as more and more people contribute free content to their platforms. Companies like this are incredibly difficult to compete with, because as they grow bigger, they only get stronger. ..."
"... Most of Mark Zuckerberg's income is just rent collected off the millions of picture and video posts that we give away daily for free. And sure, we have fun doing it. But we also have no alternative – after all, everybody is on Facebook these days. Zuckerberg has a website that advertisers are clamouring to get onto, and that doesn't come cheap. Don't be fooled by endearing pilots with free internet in Zambia. Stripped down to essentials, it's an ordinary ad agency. In fact, in 2015 Google and Facebook pocketed an astounding 64% of all online ad revenue in the US. ..."
"... Rentierism is, in essence, a question of power. That the Sun King Louis XIV was able to exploit millions was purely because he had the biggest army in Europe. It's no different for the modern rentier. He's got the law, politicians and journalists squarely in his court. That's why bankers get fined peanuts for preposterous fraud, while a mother on government assistance gets penalised within an inch of her life if she checks the wrong box. ..."
"... The biggest tragedy of all, however, is that the rentier economy is gobbling up society's best and brightest. Where once upon a time Ivy League graduates chose careers in science, public service or education, these days they are more likely to opt for banks, law firms, or trumped up ad agencies like Google and Facebook. When you think about it, it's insane. We are forking over billions in taxes to help our brightest minds on and up the corporate ladder so they can learn how to score ever more outrageous handouts. ..."
"... One thing is certain: countries where rentiers gain the upper hand gradually fall into decline. Just look at the Roman Empire. Or Venice in the 15th century. Look at the Dutch Republic in the 18th century. Like a parasite stunts a child's growth, so the rentier drains a country of its vitality. ..."
Bankers, pharmaceutical giants, Google, Facebook ... a new breed of rentiers are at the very top of the pyramid and they're
sucking the rest of us dry @rcbregman
'A big part of the modern banking sector is essentially a giant tapeworm gorging on a sick body'.
This piece is about one of the biggest taboos of our times. About a truth that is seldom acknowledged, and yet – on reflection
– cannot be denied. The truth that we are living in an inverse welfare state. These days, politicians from the left to the right assume that most wealth is created at the top. By the visionaries, by the job
creators, and by the people who have "made it". By the go-getters oozing talent and entrepreneurialism that are helping to advance
the whole world.
Now, we may disagree about the extent to which success deserves to be rewarded – the philosophy of the left is that the strongest
shoulders should bear the heaviest burden, while the right fears high taxes will blunt enterprise – but across the spectrum virtually
all agree that wealth is created primarily at the top.
So entrenched is this assumption that it's even embedded in our language. When economists talk about "productivity", what they
really mean is the size of your paycheck. And when we use terms like "
welfare
state ", "redistribution" and "solidarity", we're implicitly subscribing to the view that there are two strata: the makers and
the takers, the producers and the couch potatoes, the hardworking citizens – and everybody else.
In reality, it is precisely the other way around. In reality, it is the waste collectors, the nurses, and the cleaners whose shoulders
are supporting the apex of the pyramid. They are the true mechanism of social solidarity. Meanwhile, a growing share of those we
hail as "successful" and "innovative" are earning their wealth at the expense of others. The people getting the biggest handouts
are not down around the bottom, but at the very top. Yet their perilous dependence on others goes unseen. Almost no one talks about
it. Even for politicians on the left, it's a non-issue.
To understand why, we need to recognise that there are two ways of making money. The first is what most of us do: work. That means
tapping into our knowledge and know-how (our "human capital" in economic terms) to create something new, whether that's a takeout
app, a wedding cake, a stylish updo, or a perfectly poured pint. To work is to create. Ergo, to work is to create new wealth.
But there is also a second way to make money.
That's the rentier way : by leveraging control over something that already exists, such as land, knowledge, or money, to increase
your wealth. You produce nothing, yet profit nonetheless. By definition, the rentier makes his living at others' expense, using his
power to claim economic benefit.
'From Wall Street to Silicon Valley, zoom in and you'll see rentiers everywhere.'
For those who know their history, the term "rentier" conjures associations with heirs to estates, such as the 19th century's large
class of useless rentiers, well-described by the
French economist
Thomas Piketty . These days, that class is making a comeback. (Ironically, however, conservative politicians adamantly defend
the rentier's right to lounge around, deeming inheritance tax to be the height of unfairness.) But there are also other ways of rent-seeking.
From Wall Street to Silicon Valley , from big
pharma to the lobby machines in Washington and Westminster, zoom in and you'll see rentiers everywhere.
There is no longer a sharp dividing line between working and rentiering. In fact, the modern-day rentier often works damn hard.
Countless people in the financial sector, for example, apply great ingenuity and effort to amass "rent" on their wealth. Even the
big innovations of our age – businesses like Facebook
and Uber – are interested mainly in expanding the rentier economy. The problem with most rich people therefore is not that they are
coach potatoes. Many a CEO toils 80 hours a week to multiply his allowance. It's hardly surprising, then, that they feel wholly entitled
to their wealth.
It may take quite a mental leap to see our economy as a system that shows solidarity with the rich rather than the poor. So I'll
start with the clearest illustration of modern freeloaders at the top: bankers. Studies conducted by the
International Monetary Fund and the
Bank for International Settlements – not exactly leftist
thinktanks – have revealed that much of the financial sector has become downright parasitic. How instead of creating wealth, they
gobble it up whole.
In other words, a big part of the modern banking sector is essentially a giant tapeworm gorging on a sick body. It's not creating
anything new, merely sucking others dry. Bankers have found a hundred and one ways to accomplish this. The basic mechanism, however,
is always the same: offer loans like it's going out of style, which in turn inflates the price of things like houses and shares,
then earn a tidy percentage off those overblown prices (in the form of interest, commissions, brokerage fees, or what have you),
and if the shit hits the fan, let Uncle Sam mop it up.
The financial innovation concocted by all the math whizzes working in modern banking (instead of at universities or companies
that contribute to real prosperity) basically boils down to maximizing the total amount of debt. And debt, of course, is a means
of earning rent. So for those who believe that pay ought to be proportionate to the value of work, the conclusion we have to draw
is that many bankers should be earning a negative salary; a fine, if you will, for destroying more wealth than they create.
Bankers are the most obvious class of closet freeloaders, but they are certainly not alone. Many a lawyer and an accountant wields
a similar revenue model.
Take
tax evasion . Untold hardworking, academically degreed professionals make a good living at the expense of the populations of
other countries. Or take the tide of privatisations over the past three decades, which have been all but a carte blanche for rentiers.
One of the richest people in the world,
Carlos Slim , earned his millions by obtaining a monopoly of the Mexican telecom market and then hiking prices sky high. The
same goes for the Russian oligarchs who rose after the
Berlin Wall fell , who bought up valuable state-owned assets for song to live off the rent.
But here comes the rub. Most rentiers are not as easily identified as the greedy banker or manager. Many are disguised. On the
face of it, they look like industrious folks, because for part of the time they really are doing something worthwhile. Precisely
that makes us overlook their massive rent-seeking.
Take the pharmaceutical industry. Companies like
GlaxoSmithKline and
Pfizer regularly
unveil new drugs, yet most real medical breakthroughs are made quietly at government-subsidised labs. Private companies mostly manufacture
medications that resemble what we've already got. They get it patented and, with a hefty dose of marketing, a legion of lawyers,
and a strong lobby, can live off the profits for years. In other words, the vast revenues of the pharmaceutical industry are the
result of a tiny pinch of innovation and fistfuls of rent.
Even paragons of modern progress like Apple, Amazon, Google
, Facebook, Uber and Airbnb are woven from the fabric of rentierism. Firstly, because they owe their existence to government discoveries
and inventions (every sliver of fundamental technology in the iPhone, from the internet to batteries and from touchscreens to voice
recognition, was invented by researchers on the government payroll). And second, because they tie themselves into knots to avoid
paying taxes, retaining countless bankers, lawyers, and lobbyists for this very purpose.
Even more important, many of these companies function as "natural monopolies", operating in a positive feedback loop of increasing
growth and value as more and more people contribute free content to their platforms. Companies like this are incredibly difficult
to compete with, because as they grow bigger, they only get stronger.
Aptly characterising this "platform capitalism" in an article,
Tom Goodwin writes : "Uber, the world's largest taxi company, owns no vehicles. Facebook, the world's most popular media owner,
creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world's largest accommodation provider,
owns no real estate."
Facebook
Twitter
Pinterest 'Every sliver of fundamental technology in the iPhone, from the internet to batteries and from touchscreens to voice
recognition, was invented by researchers on the government payroll.' Photograph: Regis Duvignau/Reuters
So what do these companies own? A platform. A platform that lots and lots of people want to use. Why? First and foremost, because
they're cool and they're fun – and in that respect, they do offer something of value. However, the main reason why we're all happy
to hand over free content to Facebook is because all of our friends are on Facebook too, because their friends are on Facebook because
their friends are on Facebook.
Most of Mark Zuckerberg's income is just rent collected off the millions of picture and video posts that we give away daily for
free. And sure, we have fun doing it. But we also have no alternative – after all, everybody is on Facebook these days. Zuckerberg
has a website that advertisers are clamouring to get onto, and that doesn't come cheap. Don't be fooled by endearing pilots with
free internet in Zambia. Stripped down to essentials, it's an ordinary ad agency. In fact, in 2015 Google and Facebook pocketed an
astounding
64% of all online ad revenue in the US.
But don't Google and Facebook make anything useful at all? Sure they do. The irony, however, is that their best innovations only
make the rentier economy even bigger. They employ scores of programmers to create new algorithms so that we'll all click on more
and more ads.
Uber has
usurped the whole taxi sector just as
Airbnb has upended the hotel industry and Amazon has overrun the book trade. The bigger such platforms grow the more powerful
they become, enabling the lords of these digital feudalities to demand more and more rent.
Think back a minute to the definition of a rentier: someone who uses their control over something that already exists in order
to increase their own wealth. The feudal lord of medieval times did that by building a tollgate along a road and making everybody
who passed by pay. Today's tech giants are doing basically the same thing, but transposed to the digital highway. Using technology
funded by taxpayers, they build tollgates between you and other people's free content and all the while pay almost no tax on their
earnings.
This is the so-called innovation that has Silicon Valley gurus in raptures: ever bigger platforms that claim ever bigger handouts.
So why do we accept this? Why does most of the population work itself to the bone to support these rentiers?
I think there are two answers. Firstly, the modern rentier knows to keep a low profile. There was a time when everybody knew who
was freeloading. The king, the church, and the aristocrats controlled almost all the land and made peasants pay dearly to farm it.
But in the modern economy, making rentierism work is a great deal more complicated. How many people can explain a
credit default swap
, or a collateralised debt obligation ? Or the revenue
model behind those cute Google Doodles? And don't the folks on Wall Street and in Silicon Valley work themselves to the bone, too?
Well then, they must be doing something useful, right?
Maybe not. The typical workday of Goldman Sachs' CEO may be worlds away from that of King Louis XIV, but their revenue models
both essentially revolve around obtaining the biggest possible handouts. "The world's most powerful investment bank," wrote the journalist
Matt Taibbi about
Goldman Sachs , "is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything
that smells like money."
But far from squids and vampires, the average rich freeloader manages to masquerade quite successfully as a decent hard worker.
He goes to great lengths to present himself as a "job creator" and an "investor" who "earns" his income by virtue of his high "productivity".
Most economists, journalists, and politicians from left to right are quite happy to swallow this story. Time and again language is
twisted around to cloak funneling and exploitation as creation and generation.
However, it would be wrong to think that all this is part of some ingenious conspiracy. Many modern rentiers have convinced even
themselves that they are bona fide value creators. When current Goldman Sachs CEO
Lloyd Blankfein
was asked about the purpose of his job, his straight-faced answer was that he is "
doing God's
work ". The Sun King would have approved.
The second thing that keeps rentiers safe is even more insidious. We're all wannabe rentiers. They have made millions of people
complicit in their revenue model. Consider this: What are our financial sector's two biggest cash cows? Answer: the housing market
and pensions. Both are markets in which many of us are deeply invested.
Recent decades have seen more and more people contract debts to buy a home, and naturally it's in their interest if
house
prices continue to scale new heights (read: burst bubble upon bubble). The same goes for pensions. Over the past few decades
we've all scrimped and saved up a mountainous pension piggy bank. Now pension funds are under immense pressure to ally with the biggest
exploiters in order to ensure they pay out enough to please their investors.
The fact of the matter is that feudalism has been democratised. To a lesser or greater extent, we are all depending on handouts.
En masse, we have been made complicit in this exploitation by the rentier elite, resulting in a political covenant between the rich
rent-seekers and the homeowners and retirees.
Don't get me wrong, most homeowners and retirees are not benefiting from this situation. On the contrary, the banks are bleeding
them far beyond the extent to which they themselves profit from their houses and pensions. Still, it's hard to point fingers at a
kleptomaniac when you have sticky fingers too.
So why is this happening? The answer can be summed up in three little words: Because it can.
Rentierism is, in essence, a question of power. That the Sun King Louis XIV was able to exploit millions was purely because he
had the biggest army in Europe. It's no different for the modern rentier. He's got the law, politicians and journalists squarely
in his court. That's why bankers get fined peanuts for preposterous fraud, while a mother on government assistance gets penalised
within an inch of her life if she checks the wrong box.
The biggest tragedy of all, however, is that the rentier economy is gobbling up society's best and brightest. Where once upon
a time Ivy League graduates chose careers in science, public service or education, these days they are more likely to opt for banks,
law firms, or trumped up ad agencies like Google and Facebook. When you think about it, it's insane. We are forking over billions
in taxes to help our brightest minds on and up the corporate ladder so they can learn how to score ever more outrageous handouts.
One thing is certain: countries where rentiers gain the upper hand gradually fall into decline. Just look at the Roman Empire.
Or Venice in the 15th century. Look at the Dutch Republic in the 18th century. Like a parasite stunts a child's growth, so the rentier
drains a country of its vitality.
What innovation remains in a rentier economy is mostly just concerned with further bolstering that very same economy. This may
explain why the big dreams of the 1970s, like flying cars, curing cancer, and colonising Mars, have yet to be realised, while bankers
and ad-makers have at their fingertips technologies a thousand times more powerful.
Yet it doesn't have to be this way. Tollgates can be torn down, financial products can be banned, tax havens dismantled, lobbies
tamed, and patents rejected. Higher taxes on the ultra-rich can make rentierism less attractive, precisely because society's biggest
freeloaders are at the very top of the pyramid. And we can more fairly distribute our earnings on land, oil, and innovation through
a system of, say, employee shares, or a
universal basic
income .
But such a revolution will require a wholly different narrative about the origins of our wealth. It will require ditching the
old-fashioned faith in "solidarity" with a miserable underclass that deserves to be borne aloft on the market-level salaried shoulders
of society's strongest. All we need to do is to give real hard-working people what they deserve.
And, yes, by that I mean the waste collectors, the nurses, the cleaners – theirs are the shoulders that carry us all.
This article published 10 years ago looks like it was written yesterday. The more things change in the USA casino
capitalism the more they stay the same
Now Trump tariffs will cause drop in consumption. What will follow it not very clear.
Hypertrophied growth of financial system is cancer. It is a parasitic institution much like cancer cells in human body.
Notable quotes:
"... The Federal Reserve made tragic policy errors most certainly with regard to interest rates. They were hampered by a lack of coordinated effort because of the official US policy focus on liquidation and non-interference, along with mass bank failures which rendered their attempts to reflate the money supply as largely futile. ..."
"... But good policies applied with vigor during a period of economic illness may be like forcing patients seriously ill with pneumonia to swim laps and run in marathons because you think such physical activity is inherently good and beneficial in itself at all times. ..."
"... Today it seems to us that the Fed and Treasury are trying to cure our current problems by filling the banks full of liquidity with the idea that it will eventually trickle down to the real economy through their toll gates. ..."
"... We believe this will not work. The financial system is rotten, and not only in its toxic and fraudulent assets. It is a weakened, rotten timber that will provide scant leverage for the rescue attempts. ..."
The 1920's were marked by a credit expansion, a significant growth in consumer debt, the
creation of asset bubbles, and the proliferation of financial instruments and leveraged
investments. The Federal Reserve expanded the money supply and the Republican government
pursued a laissez-faire approach to business.
This helped to create a greater wealth disparity, and saddled a good part of the public with
debts on consumables that were vulnerable to an economic contraction.
The bursting of the credit bubble triggered the stock market Crash of 1929. The Hoover
administration's response was guided by Secretary of the Treasury Andrew Mellon. As noted by
Herbert Hoover in his memoirs, "Mellon had only one formula: 'Liquidate labor, liquidate
stocks, liquidate the farmers, liquidate real estate.'"
Indeed, the collapse of consumption and credit, and the ensuing 'do nothing' policy of
liquidation by the government crippled the economy and drove unemployment up to the incredible
24% level at the climax of the liquidation and deleveraging.
Although some assets fared better than others, virtually everything was caught up in the
cycle of liquidation and everything was sold: stocks, bonds, farms, even long dated US
Treasuries, all of them collapsing into the bottom in late 1932.
The Federal Reserve made tragic policy errors most certainly with regard to interest rates.
They were hampered by a lack of coordinated effort because of the official US policy focus on
liquidation and non-interference, along with mass bank failures which rendered their attempts
to reflate the money supply as largely futile.
Thrifty management of the credit and monetary levels when the economy is balanced in the
manufacturing, service, export-import, and consumption distribution levels is a good policy to
follow.
But good policies applied with vigor during a period of economic illness may be like forcing
patients seriously ill with pneumonia to swim laps and run in marathons because you think such
physical activity is inherently good and beneficial in itself at all times.
Additionally, monetary expansion alone also does not work, as can be seen in the early
attempts by the Fed to expand the monetary base without policy initiatives to support expansion
and consumption. Hoover's administration raised the income tax and cut spending for a balanced
budget.
A combined monetary and government bias to stimulating consumption while restoring balance
and correcting the errors that fostered the credit bubble is the more effective course of
action.
Today it seems to us that the Fed and Treasury are trying to cure our current problems by
filling the banks full of liquidity with the idea that it will eventually trickle down to the
real economy through their toll gates.
We believe this will not work. The financial system is rotten, and not only in its toxic and
fraudulent assets. It is a weakened, rotten timber that will provide scant leverage for the
rescue attempts.
Better to cauterize the bleeds in the financial system and assume a 'trickle up' approach by
reaching the econmy through the individual rather than the individual through the banks.
Provide secure FDIC insurance to everyone to a generous degree , and let those banks who
must fail, fail. You will encourage reform and savings, we guarantee it. Stimulate work and
wages, and then consumption, and the financial system will follow.
While the financial system as it is constituted today remains the centerpiece of our
economy, we cannot sustainably recover since it is a source of recurring infection.
Globalists like to cite the introduction of the Smoot-Hawley tariffs as a major factor in
the development of the Great Depression. This appears to be largely unsubstantiated, and
attributable to a dogmatic bias to international trade as a panacea for failing domestic
demand.
In fact, before Smoot-Hawley both exports and imports were in a steep decline as consumption
collapsed around the world. If the US had declared itself open for free trade, to whom would
they sell, and who in the US would buy? Consumption was in a general collapse around the world.
Smoot Hawley did not help, but it also did not hurt because it was largely irrelevant.
It is a lesser discussed topic, but the US held the majority of the gold in the world in
1930 as the aftermath of their position as an industrial power in World War I and the expansion
that followed. Since the majority of the countries were on some version of the gold standard,
one could make a case that the US had an undue influence on the 'reserve currency of the world'
at that time, and its mistaken policies were transmitted via the gold standard to the rest of
the world.
The nations that exited the Great Depression the soonest, those who recovered more quickly
and experienced a shallower economic downturn, were those who stimulated domestic consumption
via public works and industrial policies: Japan, Germany, Italy, Sweden.
As a final point, we like to show this chart to draw a very strong line under the fact that
the liquidationist policy of the Hoover Administration caused most assets to suffer precipitous
declines. Certainly some fared better than others, such as gold which was pegged, and silver
which declined but not nearly as much as industrial metals and certainly financial instruments
like stocks which declined 89% from peak to trough.
FDR devalued the dollar by 40%, but he never followed Britain off the gold standard,
maintaining fictitious support by outlawing domestic ownership. As the government stepped away
from its liquidationist approach the economy gradually recovered and the money supply
reinflated, despite the carnage delivered to the US economy and the world, provoking the rise
of militarism and statist regimes in many of the developed nations.
There is a fiction that the economy never really recovered, and FDR's policies failed and
only a World War caused the recovery. In fact, if one cares to look at the situation more
closely, the recession of 1937 was a result of the aggressive military buildup for war in the
world, the diversion of capital and resources to non-productive goods and services, and of
course the general reversal of the New Deal by the US Supreme Court and the Republican minority
in Congress.
As an aside, it is interesting to read about the efforts of some US industrialists to foster
a fascist solution here in the US, as their counterparts and some of them had done in
Europe.
What finally put the world on the permanent road to recovery was the savings forced by the
lack of consumer goods during World War II and the rebuilding of Europe and Asia, devastated by
war, significantly aided by the policies of the Allied powers.
A Depression following a Crash caused by an asset bubble collapse is a terrible thing
indeed. But it does not have to be a prolonged ordeal.
Governments can and do make policy errors that prolong the period of adjustment, most
notably instituting an industrial policy that discourages domestic consumption and money supply
growth in a desire to obtain foreign reserves through exports.
From what we have seen thus far, we believe that the Russian experience in the 1990's is
going to be closer to what lies ahead for the US. Unless the US adopts an export driven, low
domestic consumption, high savings policy bias, non-productive military buildup and public
works, and discourages population growth we don't believe the Japanese experience will be
repeated.
Preventing the banking system from collapsing is a worthy objective. Perpetuating the
symptom of fraud and abuse and 'overreach' that was becoming pervasive in the system before the
collapse is not sustainable, instead leading to more frequent and larger collapses.
Balance will be restored, and a reversion to the means will occur, one way or the other. It
would be most practical to accomplish this in a peaceful, sustainable manner, with justice and
toleration.
In 1906 the great statistician Francis Galton observed a competition to guess the weight of
an ox at a country fair. Eight hundred people entered. Galton, being the kind of man he was,
ran statistical tests on the numbers. He discovered that the average guess was extremely close
to the weight of the ox. This story was told by James Surowiecki, in his entertaining book The
Wisdom of Crowds. 2
Not many people know the events that followed. A few years later, the scales seemed to
become less and less reliable. Repairs would be expensive, but the fair organiser had a
brilliant idea. Since attendees were so good at guessing the weight of an ox, it was
unnecessary' to repair the scales. The organiser would simply ask everyone to guess the weight,
and take the average of their estimates.
A new problem emerged, however. Once weight-guessing competitions became the rage, some
participants tried to cheat. They even tried to get privileged information from the farmer who
had bred the ox. But there was fear that, if some people had an edge, others would be reluctant
to enter the weight-guessing competition. With few entrants, you could not rely on the wisdom
of crowds. The process of weight discovery would be damaged.
So strict regulatory rules were introduced. The farmer was asked to prepare three monthly
bulletins on the development of his ox. These bulletins were posted on the door of the market
for everyone to read. If the farmer gave his friends any other information about the beast,
that information was also to be posted on the market door. And anyone who entered the
competition who had knowledge about the ox that was not available to the world at large would
be expelled from the market. In this way the integrity of the weight-guessing process would be
maintained.
Professional analysts scrutinised the contents of these regulatory' announcements and
advised their clients on their implications. They' wined and dined farmers; but once the
farmers were required to be careful about the information they' disclosed, these lunches became
less useful. Some smarter analysts realised that understanding the nutrition and health of the
ox wasn't that useful anyway. Since the ox was no longer being weighed -- what mattered was the
guesses of the bystanders -- the key' to success lav not in correctly assessing the weight of
the ox but in correctly' assessing what others would guess. Or what other people would guess
others would guess. And so on.
Some people -- such as old Farmer Buffett -- claimed that the results of this process were
more and more divorced from the realities of ox rearing. But he was ignored. True, Farmer
Buffett's beasts did appear healthy and well fed, and his finances ever more prosperous; but he
was a countryman who didn't really understand how markets work.
International bodies were established to define the rules for assessing the weight of the
ox. There were two competing standards -- generally accepted ox-weighing principles, and
international ox-weighing standards. But both agreed on one fundamental principle, which
followed from the need to eliminate the role of subjective assessment by any individual. The
weight of the ox was officially defined as the average of everyone's guesses.
One difficulty was that sometimes there were few, or even no, guesses of the weight of the
ox. But that problem was soon overcome. Mathematicians from the University of Chicago developed
models from which it was possible to estimate what, if there had actually been many guesses as
to the weight of the ox, the average of these guesses would have been. No knowledge of animal
husbandry was required, only a powerful computer.
By' this time, there was a large industry of professional weight-guessers, organisers of
weight-guessing competitions and advisers helping people to refine their guesses. Some people
suggested that it might be cheaper to repair the scales, but they' were derided: why go back to
relying on the judgement of a single auctioneer when you could benefit from the aggregated
wisdom of so many clever people?
And then the ox died. Amid all this activity', no one had remembered to feed it.
SEATTLE -- Deciding at the last minute to hold off due to ethical concerns, Amazon founder
and CEO Jeff Bezos reportedly set aside his latest cost-cutting initiative Wednesday after
realizing it was actually human slavery. "On the surface, it seemed plausible -- owning our
employees' bodies, implementing a mandatory 18-hour workday, restricting their movements, and
not compensating them with anything besides minimal food and shelter -- but then it started to
sound really familiar in a bad way," said Bezos, who acknowledged his fears were confirmed when
Amazon's general counsel kept reporting back that such labor arrangements had been illegal
throughout the United States since 1865. "It's too bad; the increased efficiency and cost
savings would have been tremendous. And now I have to go explain to our shareholders why I
spent $1.8 million outfitting all of our managers with bullwhips, shackles, and branding
irons." Bezos went on to describe the setback as temporary, saying it wouldn't matter in five
to 10 years when his entire workforce was robots.
CHICAGO -- Saying it was ultimately a small price to pay in exchange for the splendid spectacle that has followed, millions of
Americans admitted Thursday that they didn't really mind having their Facebook data stolen if it meant getting to watch that
little fucker squirm.
'Trickle down effect' - the favourite buzzword of neoliberal supporters. I'd like to see
trickle down effect tried at the local pub on the taps by the local mp. Imagine what would
happen. Definitely doesn't pass the pub test.
That'd be like astronomers saying that although Hellenic astrology is pseudoscientific nonsense they can probably do business
with Ptolemaic or Hindu astrology. Other scientists would laugh and call astronomy the dismal physics. Isn't it about time economists
like yourself just told the knuckle dragging ideologues - of whatever colour and salinity - to fuck off?
"... 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. ..."
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.
"... It was Bolton who a week ago intentionally damaged U.S. relations with China. ..."
"... Meng Wanzhou is a daughter of the founder and main owner of Huawei, Ren Zhengfei, and was groomed to be his successor. The company is extremely well regarded in China. It is one its jewel pieces and, with 170,000 employees and $100 billion in revenues, an important political actor. ..."
"... The arrest on December 1 happened while president Trump was negotiating with president Xi of China about trade relations. Trump did not know about the upcoming arrest but Bolton was informed of it ..."
"... It was a trap. The arrest is a public slap in the face of China and to Xi personally. It will not be left unanswered. Whatever Trump may have agreed upon with Xi is now worthless. John Bolton intentionally sabotaged the talks and the U.S. relations with China. ..."
"... Having read this in context with the comments (especially those by Denk and others) previous on this topic, I would ask if anyone can provide a time line of US clandestine negative (and sometimes fatal) actions against high level Chinese engineers and telecoms. Again, the above summary is outstanding. ..."
"... The terrifying aspect is Bolton, Pompeo - puppets both for shadow power players - have no constraints whatsoever, and obviously operate without any constraint or regard for our severely (cognitively and emotionally) challenged president ..."
"... The timing of this arrest - while Trump and Xi are dining and Sabrina Meng is on her way to the G-20 conference gives a loud message that Trump is serves at the pleasure of his neocon staff - and son in law, the latter being instrumental in the firing of Rex Tillerson, the hiring of Bolton, Pompeo and the impending firing of Gen. Kelly. ..."
"... Trump is a global front for a different approach to maintaining global hegemony but make no mistake, Trump is not fronting for you ..."
"... Arresting US business execs by China is a mistake that would be cheered by Bolton and Navarro. The provocation of arresting Meng is designed by the Trump team to provoke China to arrest US business leaders and thus destroy their direct investment into China. ..."
"... The enemy of China is not US businesses but rather the neocon dominated US govt. To impact this group, China needs to cut off their drug supply(their financing) thru no longer buying their USTs to finance and enable their massive military spending and financial aggression. ..."
"... Canada's role in this is shocking. It is all of a piece with the surrender to the USA in the Trade negotiations whereby, inter alia, Canada is not allowed to enter into Trade agreements with 'non-market' economies. The non-market formulation being code for unapproved by Uncle Sam. No doubt the Nazi Freeland is running this show. In this she is ably seconded by the 'opposition' Tories and the social fascist NDP which is as enthusiastic for war against China as it is for an attack on the Donbas. ..."
"... Those who talk about Trump, Pompeo, Bolton, Kelly, etc. direct our attention to a shell game. They are all in on the scam. How better to say it? There is one party: the war party. Trump is a member of TEAM USA. US political maestros dance to the tune of the Deep State/neolibcon. ..."
"... With respect to Foreign Policy, how much real difference is there between Clinton, Bush, Obama, and Trump? They have all supported MIC, Israel, and expanding the Empire - aka Job #1 ..."
"... Bolton works for Adelson probably Pompeo does too. So Trump can't fire their crazy asses any time he chooses. ..."
"... Adelson has made millions with his gambling dens. In some ways it's a bit like what the East India Company did with opium. ..."
"... I think we can assume that the arrest was not an unwelcome surprise for Trump, or he would have reversed it. He knew, and accepts it. It's total asymmetric war on China. The arrest was on December 1. Trump twitter, Dec 7 China talks are going very well! here ..."
"... Does the fact that Huawei recently passed Apple for the number 2 phone sales have anything to do with this ..."
"... CNN: A judge in the US District Court for the Eastern District of New York issued a warrant for Meng's arrest on August 22, it was revealed at the hearing Friday here . She was arrested on December 1. Meng didn't know about this "issued warrant?" How does this 'system of laws' work, anyhow? Perhaps the warrant issue was classified secret, for US national security? ..."
"... The problem with Iran is (as was with Iraq, Libya, Venezuela, and even Syria) that a country with an independent/non-aligned foreign policy has control of a large quantity of valuable natural resources for which there is a constant and relatively insatiable demand. If they cannot be controlled they they should be destroyed so they cannot pursue their own agenda and ignore the dictates of the west. China and Russia are this problem writ large, and they have nukes and a means of delivery to all corners of the globe... ..."
Neocons Sabotage Trump's Trade Talks - Huawei CFO Taken Hostage To Blackmail ChinaWilly2 , Dec 7, 2018 2:30:00
PM |
link
CNN reports that White House chief of staff John Kelly is
expected
to resign soon . There have been similar rumors before, but this time the news may actually be true. That is bad for Trump
and U.S. policies. Kerry is one a the few counterweights to national security advisor John Bolton. His replacement will likely
be whoever Bolton chooses. That will move control over Trump policies further into the hands of the neo-conservatives.
It was Bolton who a week ago intentionally damaged U.S. relations with China.
The U.S. Justice Department arranged for Canada to arrest the chief financial officer of Huawei, Meng Wanzhou, over alleged
U.S. sanctions violations with regards to Iran. The case is not over the sanction Trump recently imposed, but over an alleged
collision with the sanction regime before the nuclear deal with Iran. The details are still unknown.
Meng Wanzhou is a daughter of the founder and main owner of Huawei, Ren Zhengfei, and was groomed to be his successor.
The company is extremely well regarded in China. It is one its jewel pieces and, with 170,000 employees and $100 billion in revenues,
an important political actor.
The arrest on December 1 happened while president Trump was negotiating with president Xi of China about trade relations.
Trump did not know about the upcoming arrest but
Bolton was informed of it:
While the Justice Department did brief the White House about the impending arrest, Mr. Trump was not told about it. And the
subject did not come up at the dinner with Mr. Xi. Mr. Trump's national security adviser, John R. Bolton, said on NPR that
he knew about the arrest in advance, ..
Bolton surely should have informed Trump before his dinner with Xi, in which Bolton took part, but he didn't.
It was a trap. The arrest is a public slap in the face of China and to Xi personally. It will not be left unanswered. Whatever
Trump may have agreed upon with Xi is now worthless. John Bolton intentionally sabotaged the talks and the U.S. relations with
China.
Posted by b at
02:00 PM |
Comments (76) - I almost starting to feel sorry for D.A.A.D. Trump.
- We have seen in the last years that the US has been (deliberately) ratcheting up tensions in the Far East. And the summit between
Trump & Kim Jung Un was a severe threat for that (deliberate) increase of tensions. But the US & european media have told their
readers/listener/watchers that China was to blame for the increase of tensions.
The death of Shoucheng Zhang, by falling from a building, supposedly due to depression, reminded me of an incident I had read
about years ago, of another scientist's death in 1953 in vaguely similar circumstances. I had forgotten the fellow's name but
I remembered the incident had something to do with the CIA and the administration of LSD so I used those two terms along with
"fall" and "window" and was able to dig up the details.
In 1953, CIA researcher Frank Olson was administered LSD without his consent by researchers working in the Project MK Ultra
program. Olson became severely depressed and resigned from the CIA. He was later found dead, apparently after falling out of a
motel building through a window, and his death was ruled a suicide. In the 1970s, his family ordered an autopsy and the autopsy
showed that Olson had died from head injury trauma before falling through the window. A CIA agent was found to have been staying
at the same motel in a separate room at the time Olson died. The family sued the US government and received $750,000 in compensation
and an apology from the CIA. https://thoughtcatalog.com/jeremy-london/2018/08/mkultra-conspiracy/
One wonders if Zhang's death had been, ahem, "arranged" according to that template. The description of Zhang from the Stanford
University News website's obituary that B linked to in his post does not sound like a profile of someone who suffered depression
on and off.
This has to be embarrassing as hell to Trump - he should be absolutely furious with Bolton and Pompeo. And all this for violating
sanctions on Iran? I feel like on crazy pills. We live in interesting times.
So, if Bolton sabotaged Trump's efforts to do some sort of deal with China, in whose interest is Bolton working. You'd think that
a trade deal with China would be good for the US. Is Bolton working against US interest.
If we accept the Globalist/Nationalist
framework, then does this not mean that Bolton is helping the nationalists against US interests. And what are the implications
of that.
Trump's rapid departure from Argentina may well have been motivated by receiving the information about the arrest after the well
hyped dinner. If that is the case, Bolton should have been fired on the spot. The lack of any statement about this affair from
Trump is curious. There may be an element of blackmail at play here too, related to Mueller's machinations ahead of the G20. A
malignancy is loose, no doubt.
Thank you for this excellent column. Having read this in context with the comments (especially those by Denk and others) previous
on this topic, I would ask if anyone can provide a time line of US clandestine negative (and sometimes fatal) actions against
high level Chinese engineers and telecoms. Again, the above summary is outstanding.
The terrifying aspect is Bolton, Pompeo - puppets both for shadow power players - have no constraints whatsoever, and obviously
operate without any constraint or regard for our severely (cognitively and emotionally) challenged president, as this report
makes clear.
The timing of this arrest - while Trump and Xi are dining and Sabrina Meng is on her way to the G-20 conference gives a
loud message that Trump is serves at the pleasure of his neocon staff - and son in law, the latter being instrumental in the firing
of Rex Tillerson, the hiring of Bolton, Pompeo and the impending firing of Gen. Kelly.
I can't believe that Trump did not know about the detention of Meng Wanzhou before hand. Trump is a TV actor and he is apprenticing
for a higher spot for himself and family is the elite pecking order.
While we might want to give Trump credit for being who
he is, the elite that fronted him know exactly what his style and penchants are. Trump is a global front for a different approach
to maintaining global hegemony but make no mistake, Trump is not fronting for you nor I
From the perspective of China, their most appropriate response in this complicated situation IMO, should be to accelerate their
gradual reduction of USTs.
All those articles about how China will hurt itself if it gradually sells down USTs are nonsense articles placed into the media
to throw off attention to what is already happening. Russia and Turkey have alrdy done it on a smaller scale, it's a no-brainer
that China can do it also. Why should China finance the US govt to wage war on itself?
If China and other countries gradually stop buying USTs, actual demand will collapse and many other holders will sell or reduce
likewise. Mnuchin is fantasizing when he says there will still be strong demand. Any demand will be from the US Treasury buying
its own USTs, like a dog licking its own rear quarters.
Arresting US business execs by China is a mistake that would be cheered by Bolton and Navarro. The provocation of arresting
Meng is designed by the Trump team to provoke China to arrest US business leaders and thus destroy their direct investment into
China.
The enemy of China is not US businesses but rather the neocon dominated US govt. To impact this group, China needs to cut
off their drug supply(their financing) thru no longer buying their USTs to finance and enable their massive military spending
and financial aggression.
How to do that without crashing the markets n decreasing China's own assets? Sell and reduce USTs gradually. And pretend
u r not doing it. Eventually the lack of buying will force the Fed to raise rates or force the US Treasury to buy its own USTs,
further debasing the US dollar.
In history, all empires fall this way, they keep on printing or taking out the silver content until their currency gets debased
into nothing, and nobody wants it.
Looks like Bolton wants war with China. I recall he was hired during the North Korea talks to add a bit of muscle and now Trump
is stuck with him whether he likes it or not.
Re. Meng....apparently she faces fraud charges related to the Skycom affair. Of course that is just what we're told. Who knows
what kind of pressure she will come under once they get her in the US.
1959, CIA disobeyed Pres Eisenhower's ban on further overflights of USSR until after his summit meeting with Khrushchev. Then
the U-2 was brought down over USSR and the live pilot captured. The US officially denied it happened.
The USSR cancelled the summit meeting.
At first, Eisenhower claimed to have no knowledge of the operation and was outraged when the truth revealed. UN Ambassador
Stevenson made a vehement speech at the UN denying it happened, followed immediately with USSR producing both the plane's wreckage
and its pilot.
Then USSR showed the pilot and wreckage was publicly displayed. Pilot F G Powers had safely bailed-out and was put on-trial
in Moscow, convicted and then allowed to return to the US.
Mission Accomplished! by the unelected leaders of the US [who were certain their man Nixon would be the next President, followed
by quick re-capture of Cuba and then war in Vietnam. Both those operations already directly involved Nixon, who was fully "in"
on The Bay of Pigs and, earlier, plans for US "support" of Saigon leaders in "South" Vietnam with whom he established communications
during his 1953 visit as Ike's new Vice-President.]
...that data on this is more shocking then i realized.. the death of prof zhang - apparent suicide, is bizarre here..
i agree that the usa has been taken over by small minded neo cons that would try to use meng wanzhou as leverage.. the fact
Bolton knew and Trump didn't.. i am not buying that, or Bolton is more manipulative then i realized.. they are all that stupid
though.. i hope Canada doesn't allow this, but under the wuss Justin Trudeau, i am not holding my breath..
@ 12 dh... wanted for ignoring us sanctions on iran from 2009 to 2014... what the fuck has that to do with canada?? is canada
now doing book keeping, and everything else for the usa? the usa can go fuck themselves.. if Canada wasn't a 2 bit vassal state,
that is what we would tell the usa..
Today is Dec.7, a day in 1941 that Pres. Roosevelt aptly called "A Day of Infamy," as the Japanese military attacked Pearl
Harbor.
We now know that the very top echelons of US government first correctly anticipated and then knew precisely when and how the
attack would occur. The 3,000 (+/-) GI's who were sacrificed were considered "acceptable losses." (The 3,000 civilians who were
sacrificed on 9/11 were also considered "acceptable losses.") "Infamy" is an accurate word for US .gov conduct.
(Pls, do not comment to this OT. Wait for the next open thread, if you must.)
Looks like Trump was out of the loop. Trudeau is mainly photo-op material only. This would have been Chrystia Freeland, the
Nazi grand-daughter's file.
In Australia - endless media trumpeting the closed door to Chinese telcos from Australia and New Zealand but one has to go out
of one's way to discover our neighbor Papua New GUINEA has continued using HuaHwei products albeit under U S pressure not to do
so
1/ "... the rise first of Communism and then of Islam as world forces opposing imperialism."
Has Islam, in fact, been in opposition
to imperialism? For the most part, as in India/Pakistan, it has been a very useful imperialist foil against nationalism and socialism.
There have been sincere and effective muslim campaigns against imperialism but equally there have been imperialist financed 'islamic'
campaigns against enemies of the Empire.
2/ Canada's role in this is shocking. It is all of a piece with the surrender to the USA in the Trade negotiations whereby,
inter alia, Canada is not allowed to enter into Trade agreements with 'non-market' economies. The non-market formulation being
code for unapproved by Uncle Sam. No doubt the Nazi Freeland is running this show. In this she is ably seconded by the 'opposition'
Tories and the social fascist NDP which is as enthusiastic for war against China as it is for an attack on the Donbas.
I used to be a member of this, once mildly socialist party. I am proud to say that I was expelled.
Washington has asked Ottawa to arrest Meng Wanzhou and to extradite her. The motive for the war undertaken by Washington against
Huawei is deep-rooted and spurious are the justifications.
The heart of the problem is that the Chinese firm uses a system of encryption that prevents the NSA from intercepting its communications.
A number of governments and secret services in the non-Western world have begun to equip themselves exclusively with Huawei materials,
and are doing so to protect the confidentiality of their communications.
The covers/excuses for this war are theft of intellectual property or in the alternative, trade with Iran and North Korea,
and violating rules of competition by benefitting from national subsidies.
The Five Eyes is a system of electronic espionage by Australia, Canada, the United States, New Zealand and the United Kingdom.
They have begun to exclude Huawei from their auctions.
Those who talk about Trump, Pompeo, Bolton, Kelly, etc. direct our attention to a shell game. They are all in on the scam.
How better to say it? There is one party: the war party. Trump is a member of TEAM USA. US political maestros dance to the tune
of the Deep State/neolibcon.
Fine distinctions between senior US govt officials make me want to tear my hair out. In US
govt only whistle-blowers are white knights. Everyone else is engaging in good guy/bad guy bullshit and controlled opposition.
With respect to Foreign Policy, how much real difference is there between Clinton, Bush, Obama, and Trump? They have all
supported MIC, Israel, and expanding the Empire - aka Job #1.
- Bolton was appointed under pressure from one Sheldon Adelson, who was a (large) donor to the Trump campaign. In that regard,
it was (nearly) impossible for Trump to fire Bolton.
In terms of Frank Olsen, there is a very good six part documentary series on Netflix called "Wormwood". Most important are
the interviews with Olsen's son. His search for the truth took many years (too many years) and he finally uncovered the final
levels of deceit. Worth the time.
@14 ".. wanted for ignoring us sanctions on iran from 2009 to 2014... what the fuck has that to do with canada?? "
Absolutely nothing james. I suspect they are using that charge, rather than getting into 5G backdoor whatever, to make the
extradition process go faster. They don't want it to drag on for years.
Surely it's Bolton who must go. That was an enormous betrayal. The one thing that Trump had going for him was the performance
of the stock market. His neocon enemies in the form of Bolton, managed to strike two blows simultaneously; increase conflict with
China and tank the market.
Too many posters letting Trump off the hook here. He's a brilliant 4D chess master but at the same time he's also a vulnerable
naif who lets neocons, ziofascists and other hostile entities keep hijacking his administration for their own ends? Bit of a problem
there. You can't have it both ways.
Occam's Razor says the Trump administration's foreign policy, possibly with Russia as an exception, is run with the full approval
of Donald John Trump. He's no friend of China, remember, and Steve Bannon's plan to befriend Russia was designed to keep it from
partnering with China against the United States.
It's almost 2019 and like the Obots of 2010 it's time to accept that your man is a busted flush, a fraud, an American exceptionalist
through and through.
The "fraud" charge goes back to 2009/10, and concerns an alleged misrepresentation over the relationship between a company called
SkyComm and Huawei. The alleged sanction violation by SkyComm had nothing to do with Iran's nuclear or military programs, and
may not have even proceeded beyond a negotiation phase. The alleged "fraud", or misrepresentation, rests on a technical interpretation
of complicated interlocking corporate structures. The prosecutors and the defence will likely both be correct in their presentations,
as it is a muddle, but the well has already been poisoned by the now well-publicized accusations that Huawei is a Communist trojan
horse. It's very thin gruel to proceed with such a high profile arrest.
The heart of the problem is that the Chinese firm uses a system of encryption that prevents the NSA from intercepting its communications.
A number of governments and secret services in the non-Western world have begun to equip themselves exclusively with Huawei
materials, and are doing so to protect the confidentiality of their communications.
And not only the governments and secret services, Huawei is widely popular all along EU amongst the common working class user
( which means millions and millions of users....) especially because of its advantageous price and great capabilities.... I myself
own a Huawei device, my friends own Huaweis....Glad to hear that "Five Eyes" can not spy on us....I am very fidel to marks/services
who do not deceive me, but after knowing this new "capability", I am thinking in keeping Huawei as my header mark....Just waiting
for them to launch the laptop "Five Eyes" waterproof and I will be throwing this old one to the trash bin....
@32,36
I wonder how Adelson would react to a Chinese boycott of his casinos in Macau and Singapore? A lot of his wealth has come from
Chinese gamblers. Given Adelson's connections to Bolton and Trump, it would seem like an obvious pressure point.
@38 lili... denk was discussing this on the open thread yesterday.. see his links @68 / 76 and etc
on this page.. no one is discussing
this..
@48 peter au.. it certainly appears that way.. funny thing how trump sold himself on a number of topics, but not that one..
meanwhile, i guess the loot from adelson is quite good... stick with me and you don't need any stickin russian oligarch.. what
is quite amazing is how blind the average amerikkkan is to all this.. they are still stuck on the mueller investigation which
has been running on empty for some time... they would never do an investigation on isreal, or zionists influence on us elections,
as it is too friggin' obvious for anyone looking... better to skip that and continue to serve israel.. thus the constant fixation
with iran..
or russia and china, as the case may be... the top 3 evil countries, according to obama, or was that north korea.. i guess trump
will have to revise it.. the usa is pathetic.. canada is not far behind..
Trump didn't know b/c the NYTimes said so?
I've got this bridge....
China's response may not be immediate, but it will come.
I'm reminded of the sudden death of Vice Adm. Scott Stearney, commander of the Navy's 5th Fleet, Persian Gulf, discovered inside
his home in Bahrain last weekend, a "suspected suicide."
Iran always gets even.
To those of us that understand that all/most of the politicians are working for the same team, it should be easy to see the good
cop/bad cop dynamic being used here.
If b thinks Trump is a good cop, as he presents him here (yes, b has written that he disagrees with all/most of what Trump
does) as do other commenters that post here, I would posit that "they" are being successful in working that meme at this time.
China will not back down and now will play hardball back, but in a globalist sense I expect them to continue to take the high
road as the West mires itself further in the muck of its religion of private finance.
Another commenter mentioned the strategy of China dumping its massive amount of US Treasuries. I think we are getting to that
moment and the response of the US is to default on whomever is holding its debt...............
and then the war we have been in for some time turns serious.
The problem the elite have is making the public have the fervor to slaughter themselves for the purpose of continuing a society
run by and only servicing the elite. I don't understand how they have managed all these centuries but here we are, a bit still
in the dark ages of a thousand years ago.
I think we can assume that the arrest was not an unwelcome surprise for Trump, or he would have reversed it. He knew, and
accepts it. It's total asymmetric war on China. The arrest was on December 1. Trump twitter, Dec 7 China talks are going
very well! here
This is a 100% neocon clusterfuck. It is vital to the success of Trump's Drain The Swamp strategy that The Swampers be given every
opportunity to put their anti-US influence on public display. At least now we know which weirdos are responsible for the US policy
of "Let's do SOMETHING, even it it's stupid."
I've been scouring the 'News' and the www for evidence that China agreed to uphold US sanctions on Iran to an extent that would
invite the US to punish China for disregarding US whims. No luck, so far.
What makes this story entertaining is that the US has not only surrendered its lead in Military Tech, from the Good Old Days,
but Computer and Communications Tech too. You have to be pretty desperate to admit a blunder of that magnitude, albeit obliquely,
as in this case.
Unlikely that few in Trump's cabinet or Senate Foreign Relations committee could even pass the physics section of a college entrance
exam, and have little idea what quantum encryption even is (Chinese published on it first a couple of years ago).
That presumption alone suggests Pompeo Bolton etc are just finger puppets ... which oligarch has all those cia contracts again?
They are in well over their heads. They can't even keep up with the Russians. They will likely get stung by Chinese scorpions
without even knowing what hit them!
Another 'unintended consequence' of the neocon gambit to embarrass Trump by by-passing him, will be renewed interest in something
Vlad said in one of Oliver Stone's Putin's Interviews.
In the context of Vlad's feelings about POTUS Trump, Vlad said words to the effect that it's too soon to say. Everyone knows
that AmeriKKKa has been run by the Permanent Bureaucracy (not the POTUS). A lot of people would have been 'too busy' to watch
the Putin Interviews but World Leaders, everywhere, would not have been among them. So as of December 1, 2018, that cat is well
and truly out of the bag and all eyes, as usual, are on Trump. Again.
CNN: A judge in the US District Court for the Eastern District of New York issued a warrant for Meng's arrest on August 22,
it was revealed at the hearing Friday
here . She was arrested on December
1. Meng didn't know about this "issued warrant?" How does this 'system of laws' work, anyhow? Perhaps the warrant issue was classified
secret, for US national security?
Actually, I fear, it's a conspiracy of intel agencies, security advisors and courts to conduct domestic and foreign policy.
It's a non-elected "government" which elected politicians can't touch. For those that doubt it, check out this important interview
with intel whistleblowers Shipp, Binney and Kiriakou which describes Washington corruption is
here . (h/t Carlton Meyer)
Politicians can't touch this secret government lest their security clearances be removed.
@70
In the two-hour interview John Kiriakou points out that the intel agencies have their favorite courts. His delayed case, resurrected
by Obama, was heard by a court in eastern Virginia, which had a 98% conviction rate. They got him for a couple years in prison.
General Petraeus, however, who did much worse, had his case heard in a court in western Virginia, and he got probation. It appears
that the US District Court for the Eastern District of New York is good for anti-China warrants.
D B@70 I read that she was aware of the warrant and avoided traveling to the USA because of it as she had been doing to ?" visit
her son who was in school here"? but likely thought Canada safe. Wrong.
So China seems fearful to me - detaining the head of INTERPOL for instance and re-educating the Uyghurs en mass, plus the heavy
internet censorship. But they cannot disengage from the west economically without risking social upheaval. Nor can the US afford
to disengage from China for roughly the same reason (unlike Russia from whom the US gets rocket engines but little else they cannot
obtain from other sources).
In a few years time (2, or perhaps 3) both Russia and China will have deployed weapons that can deter anything but a full on
nuclear attack, and their military capability will continue to advance. US strategy seems to be to disrupt, slow, and sabotage
both to the extent it is able using economic and political weapons and military posturing. I don't believe it can catch up and
this creates extra danger - the longer it waits the greater the gap will be - economic and military. Many of the responses seem
borderline hysterical to me - not a good thing.
The problem with Iran is (as was with Iraq, Libya, Venezuela, and even Syria) that a country with an independent/non-aligned
foreign policy has control of a large quantity of valuable natural resources for which there is a constant and relatively insatiable
demand. If they cannot be controlled they they should be destroyed so they cannot pursue their own agenda and ignore the dictates
of the west. China and Russia are this problem writ large, and they have nukes and a means of delivery to all corners of the globe...
"... 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. ..."
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!
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.
"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?
@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.
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?
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.
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.
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:
force people upon pain of imprisonment to pay taxes to them
pay out that tax money to whomever they like
spend money they don't have by borrowing against obligations imposed on future taxpayers
without their agreement
kill people in wars, often from the comfort of a computer screen thousands of miles
away
print money and give it to whomever they like,
get rid of nation state currencies and replace them with a single, centrally controlled
currency
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.
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.
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.
@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.
@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.
@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.
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)
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.
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.
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.
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.
@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.
"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."
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.
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.
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.
@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.
@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?
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.
@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.
@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.
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.
After Democratic party was co-opted by neoliberals there is no way back. And since Obama the trend of Democratic Party is
toward strengthening the wing of CIA-democratic notthe wing of the party friendly to workers. Bought by Wall Street leadership is
uncable of intruting any change that undermine thier current neoliberal platform. that's why they criminally derailed Sanders.
Notable quotes:
"... When you think about the issue of how exactly a clean-energy jobs program would address the elephant in the room of private accumulation and how such a program, under capitalism, would be able to pay living wages to the people put to work under it, it exposes how non threatening these Green New Deals actually are to capitalism. ..."
"... To quote Trotsky, "These people are capable of and ready for anything!" ..."
"... "Any serious measures to stop global warming, let alone assure a job and livable wage to everyone, would require a massive redistribution of wealth and the reallocation of trillions currently spent on US imperialism's neo-colonial wars abroad." ..."
"... "It includes various left-sounding rhetoric, but is entirely directed to and dependent upon the Democratic Party." ..."
"... "And again and again, in the name of "practicality," the most unrealistic and impractical policy is promoted -- supporting a party that represents the class that is oppressing and exploiting you! The result is precisely the disastrous situation working people and youth face today -- falling wages, no job security, growing repression and the mounting threat of world war." - New York Times tries to shame "disillusioned young voters" into supporting the Democrats ..."
"... It is an illusion that technical innovation within the capitalist system will magically fundamentally resolve the material problems produced by capitalism. But the inconvenient facts are entirely ignored by the corporate shills in the DSA and the whole lot of establishment politicians, who prefer to indulge their addiction to wealth and power with delusions of grandeur, technological utopianism, and other figments that serve the needs of their class. ..."
"... First it was Obama with his phoney "hope and change" that lured young voters to the Dumbicrats and now it's Ocacia Cortez promising a "green deal" in order to herd them back into the Democratic party--a total fraud of course--totally obvious! ..."
"... from Greenwald: The Democratic Party's deceitful game https://www.salon.com/2010/... ..."
they literally ripped this out of the 2016 Green Party platform. Jill Stein spoke repeatedly
about the same exact kind of Green New Deal, a full-employment, transition-to-100%-renewables
program that would supposedly solve all the world's problems.
When you think about the issue of how exactly a clean-energy jobs program would address
the elephant in the room of private accumulation and how such a program, under capitalism,
would be able to pay living wages to the people put to work under it, it exposes how non
threatening these Green New Deals actually are to capitalism.
In 2016, when the Greens made
this their central economic policy proposal, the Democrats responded by calling that platform
irresponsible and dangerous ("even if it's a good idea, you can't actually vote for a
non-two-party candidate!"). Why would they suddenly find a green new deal appealing now
except for its true purpose: left cover for the very system destroying the planet.
To quote
Trotsky, "These people are capable of and ready for anything!"
"Any serious measures to stop global warming, let alone assure a job and livable wage to
everyone, would require a massive redistribution of wealth and the reallocation of trillions
currently spent on US imperialism's neo-colonial wars abroad."
Their political position not only lacks seriousness, unserious is their political
position.
"It includes various left-sounding rhetoric, but is entirely directed to and dependent
upon the Democratic Party."
For subjective-idealists, what you want to believe, think and feel is just so much more
convincing than objective reality. Especially when it covers over single-minded class
interests at play.
"And again and again, in the name of "practicality," the most unrealistic and impractical
policy is promoted -- supporting a party that represents the class that is oppressing and
exploiting you! The result is precisely the disastrous situation working people and youth
face today -- falling wages, no job security, growing repression and the mounting threat of
world war." - New York Times tries to shame "disillusioned young voters" into supporting
the Democrats
It is an illusion that technical innovation within the capitalist system will magically
fundamentally resolve the material problems produced by capitalism. But the inconvenient
facts are entirely ignored by the corporate shills in the DSA and the whole lot of
establishment politicians, who prefer to indulge their addiction to wealth and power with
delusions of grandeur, technological utopianism, and other figments that serve the needs of
their class.
First it was Obama with his phoney "hope and change" that lured young voters to the
Dumbicrats and now it's Ocacia Cortez promising a "green deal" in order to herd them back
into the Democratic party--a total fraud of course--totally obvious!
Only an International Socialist program led by Workers can truly lead a "green revolution" by
expropriating the billionaire oil barons of their capital and redirecting that wealth into
the socialist reconstruction of the entire economy.
Alexandria Ocasio-Cortez's "Green New Deal" is a nice laugh. Really, it sure is funny hearing
these lies given any credence at all. This showmanship belongs in a fantasy book, not in real
life. The Democratic Party as a force for good social change Now that's a laugh!
Lies, empty promises, meaningless tautologies and morality plays, qualified and conditional
declarations to be backpedalled pending appropriate political expediencies, devoid any
practical content that is what AOC, card carrying member of DSA, and in fact young energetic
political apparatchik of calcified political body of Dems establishment, duty engulfs. And
working for socialist revolution is no one of them.
What kind of socialist would reject socialist revolution, class struggle and class
emancipation and choose, as a suppose socialist path, accommodation with oligarchic ruling
elite via political, not revolutionary process that would have necessarily overthrown ruling
elite.
What socialist would acquiesce to legalized exploitation of people for profit, legalized
greed and inequality and would negotiate away fundamental principle of egalitarianism and
working people self rule?
Only National Socialist would; and that is exactly what AOC campaign turned out to be all
about.
National Socialism with imperial flavor is her affiliation and what her praises for
Pelosi, wife of a billionaire and dead warmonger McCain proved.
Now she is peddling magical thinking about global change and plunge herself into falacy of
entrepreneurship, Market solution to the very problem that the market solutions were designed
to create and aggravate namely horrific inequality that is robbing people from their own
opportunities to mitigate devastating effects of global change.
The insidiousness of phony socialists expresses itself in the fact that they lie that any
social problem can be fixed by current of future technical means, namely via so called
technological revolution instead by socialist revolution they deem unnecessary or
detrimental.
The technical means for achieving socialism has existed since the late 19th century, with the
telegraph, the coal-powered factory, and modern fertilizer. The improvements since then have
only made socialism even more streamlined and efficient, if such technologies could only be
liberated from capital! The idea that "we need a new technological revolution just to achieve
socialism" reflects the indoctrination in capitalism by many "socialist" theorists because it
is only in capitalism where "technological growth" is essential simply to maintain the
system. It is only in capitalism (especially America, the most advanced capitalist nation,
and thus, the one where capitalism is actually closest towards total crisis) where the dogma
of a technological savior is most entrenched because America cannot offer any other kind of
palliative to the more literate and productive sections of its population. Religion will not
convince most and any attempt at a sociological or economic understanding would inevitably
prove the truth of socialism.
"... The original "New Deal," which included massive public works infrastructure projects, was introduced by Democratic President Franklin Roosevelt in the 1930s amid the Great Depression. Its purpose was to stave off a socialist revolution in America. It was a response to a militant upsurge of strikes and violent class battles, led by socialists who were inspired by the 1917 Russian Revolution ..."
"... Since the 2008 crash, first under Bush and Obama, and now Trump, the ruling elites have pursued a single-minded policy of enriching the wealthy, through free credit, corporate bailouts and tax cuts, while slashing spending on social services. ..."
"... To claim as does Ocasio-Cortez that American capitalism can provide a new "New Deal," of a green or any other variety, is to pfile:///F:/Private_html/Skeptics/Political_skeptic/Neoliberalism/Historyromote an obvious political fiction." ..."
"The original "New Deal," which included massive public works infrastructure projects,
was introduced by Democratic President Franklin Roosevelt in the 1930s amid the Great
Depression. Its purpose was to stave off a socialist revolution in America. It was a response
to a militant upsurge of strikes and violent class battles, led by socialists who were
inspired by the 1917 Russian Revolution that had occurred less than two decades before.
American capitalism could afford to make such concessions because of its economic
dominance. The past forty years have been characterized by the continued decline of American
capitalism on a world stage relative to its major rivals. The ruling class has responded to
this crisis with a social counterrevolution to claw back all gains won by workers. This has
been carried out under both Democratic and Republican administrations and with the assistance
of the trade unions.
Since the 2008 crash, first under Bush and Obama, and now Trump, the ruling elites have
pursued a single-minded policy of enriching the wealthy, through free credit, corporate
bailouts and tax cuts, while slashing spending on social services.
To claim as does Ocasio-Cortez that American capitalism can provide a new "New Deal," of a
green or any other variety, is to pfile:///F:/Private_html/Skeptics/Political_skeptic/Neoliberalism/Historyromote an obvious political fiction."
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" .
"... The Democratic Party split into a four-headed monster comprised of Wall Street patrons seeking favors, war hawks and their corporate allies looking for new global rumbles, the permanent bureaucracy looking to always expand itself, and the various ethnic and sexual minorities whose needs and grievances are serviced by that bureaucracy. It's the last group that has become the party's most public face while the party's other activities – many of them sinister -- remain at least partially concealed. ..."
"... the Republicans are being forced to engage on some real issues, such as the need for a coherent and effective immigration policy and the need to redefine formal trade relations. (Other issues like the insane system of medical racketeering and the deadly racket of the college loan industry just skate along on thin ice. And then, of course, there's the national debt and all its grotesque outgrowths.) ..."
"... Meanwhile, the Democratic Party has become the party of bad ideas and bad faith, starting with the position that "diversity and inclusion" means shutting down free speech, an unforgivable transgression against common sense and common decency. It's a party that lies even more systematically than Mr. Trump, and does so knowingly (as when Google execs say they "Do no Evil"). Its dirty secret is that it relishes coercion, it likes pushing people around, telling them what to think and how to act. Its idea of "social justice" is a campus kangaroo court, where due process of law is suspended. And it is deeply corrupt, with good old-fashioned grift, new-fashioned gross political misconduct in federal law enforcement, and utter intellectual depravity in higher education. ..."
"... I hope that the party is shoved into an existential crisis and is forced to confront its astounding dishonesty. I hope that the process prompts them to purge their leadership across the board. ..."
Back in the last century, when this was a different country, the Democrats were the "smart"
party and the Republicans were the "stupid" party.
How did that work?
Well, back then the Democrats represented a broad middle class, with a base of factory
workers, many of them unionized, and the party had to be smart, especially in the courts, to
overcome the natural advantages of the owner class.
In contrast, the Republicans looked like a claque of country club drunks who staggered
home at night to sleep on their moneybags. Bad optics, as we say nowadays.
The Democrats also occupied the moral high ground as the champion of the little guy. If not
for the Dems, factory workers would be laboring twelve hours a day and children would still be
maimed in the machinery. Once the relationship between business and labor was settled in the
1950s, the party moved on to a new crusade on even loftier moral high ground: civil rights,
aiming to correct arrant and long-lived injustices against downtrodden black Americans. That
was a natural move, considering America's self-proclaimed post-war status as the world's Beacon
of Liberty. It had to be done and a political consensus that included Republicans got it done.
Consensus was still possible.
The Dems built their fortress on that high ground and fifty years later they find themselves
prisoners in it. The factory jobs all vamoosed overseas. The middle class has been pounded into
penury and addiction.
The Democratic Party split into a four-headed monster comprised of Wall Street patrons
seeking favors, war hawks and their corporate allies looking for new global rumbles, the
permanent bureaucracy looking to always expand itself, and the various ethnic and sexual
minorities whose needs and grievances are serviced by that bureaucracy. It's the last group
that has become the party's most public face while the party's other activities – many of
them sinister -- remain at least partially concealed.
The Republican Party has, at least, sobered up some after getting blindsided by Trump and
Trumpism. Like a drunk out of rehab, it's attempting to get a life. Two years in, the party
marvels at Mr. Trump's audacity, despite his obvious lack of savoir faire. And despite a
longstanding lack of political will to face the country's problems,the Republicans are being
forced to engage on some real issues, such as the need for a coherent and effective immigration
policy and the need to redefine formal trade relations. (Other issues like the insane system of
medical racketeering and the deadly racket of the college loan industry just skate along on
thin ice. And then, of course, there's the national debt and all its grotesque outgrowths.)
Meanwhile, the Democratic Party has become the party of bad ideas and bad faith, starting
with the position that "diversity and inclusion" means shutting down free speech, an
unforgivable transgression against common sense and common decency. It's a party that lies even
more systematically than Mr. Trump, and does so knowingly (as when Google execs say they "Do no
Evil"). Its dirty secret is that it relishes coercion, it likes pushing people around, telling
them what to think and how to act. Its idea of "social justice" is a campus kangaroo court,
where due process of law is suspended. And it is deeply corrupt, with good old-fashioned grift,
new-fashioned gross political misconduct in federal law enforcement, and utter intellectual
depravity in higher education.
I hope that Democrats lose as many congressional and senate seats as possible.I hope that
the party is shoved into an existential crisis and is forced to confront its astounding
dishonesty. I hope that the process prompts them to purge their leadership across the board. If
there is anything to salvage in this organization, I hope it discovers aims and principles that
are unrecognizable from its current agenda of perpetual hysteria. But if the party actually
blows up and disappears, as the Whigs did a hundred and fifty years ago, I will be content. Out
of the terrible turbulence, maybe something better will be born.
Or, there's the possibility that the dregs of a defeated Democratic Party will just go
batshit crazy and use the last of its mojo to incite actual sedition. Of course, there's also a
distinct possibility that the Dems will take over congress, in which case they'll ramp up an
even more horrific three-ring-circus of political hysteria and persecution that will make the
Spanish Inquisition look like a backyard barbeque. That will happen as the US enters the most
punishing financial train wreck in our history, an interesting recipe for epic political
upheaval.
In my own words then. According to Cook the power elites goal is to change its
appearance to look like something new and innovative to stay ahead of an electorate who are
increasingly skeptical of the neoliberalism and globalism that enrich the elite at their
expense.
Since they do not actually want change they find actors who pretend to represent change
, which is in essence fake change. These then are their insurgent candidates
Trump serves the power elite , because while he appears as an insurgent against the
power elite he does little to change anything
Trump promotes his fake insurgency on Twitter stage knowing the power elite will counter
any of his promises that might threaten them
As an insurgent candidate Trump was indifferent to Israel and wanted the US out of
Syria. He wanted good relations with Russia. He wanted to fix the health care system,
rebuild infrastructure, scrap NAFTA and TTIPS, bring back good paying jobs, fight the
establishment and Wall Street executives and drain the swamp. America First he said.
Trump the insurgent president , has become Israel's biggest cheerleader and has launched
US missiles at Syria, relations with Russia are at Cold War lows, infrastructure is still
failing, the percentage of people working is now at an all time low in the post housewife
era, he has passed tax cuts for the rich that will endanger medicare, medicaid and social
security and prohibit infrastructure spending, relaxed regulations on Wall Street, enhanced
NAFTA to include TTIPS provisions and make US automobiles more expensive, and the swamp has
been refilled with the rich, neocons , Koch associates, and Goldman Sachs that make up the
power elites and Deep State Americas rich and Israel First
@34 pft... regarding the 2 cook articles.. i found they overly wordy myself...
however, for anyone paying attention - corbyn seems like the person to vote for given how
relentless he is being attacked in the media... i am not so sure about trump, but felt cook
summed it up well with these 2 lines.. "Trump the candidate was indifferent to Israel and
wanted the US out of Syria. Trump the president has become Israel's biggest cheerleader and
has launched US missiles at Syria." i get the impression corbyn is legit which is why the
anti-semitism keeps on being mentioned... craig murrary is a good source for staying on top
of uk dynamics..
(a) talk coherently
(b) have some kind of movement consisting of people that agree with what is says -- that
necessitates (a)
Then he could staff his Administration with his supporters rather than a gamut of
conventional plutocrats, neocons, and hacks from the Deep State (intelligence, FBI and
crazies culled from Pentagon). As it is easy to see, I am describing an alternate reality.
Who is a Trumpian member of the Administration? His son-in-law?
The swamps been filled with all kinds of vile creatures since the Carter administration.
This is when the US/UK went full steam ahead with neoliberal globalism with Israel directing
the war on terror for the Trilateral Empire (following Bibis Jerusalem conference so as to
fulfill the Yinon plan). 40 years of terror and financial mayhem following the coup that took
place from 1963-1974. After Nixons ouster they were ready to go once TLC Carter/Zbig kicked
off the Trilateral era. Reagan then ran promising to oust the TLC swamp but broke his
promise, as every President has done since .
There's a new film out regarding (il)legal finance: Scenes From the Spider's Web .
Some will find the information provided by Hudson in his interview segment
astounding and shocking, but somehow not altogether surprising.
The entire documentary "The Spider's Web: Britain's Second Empire" by Michael Oswald is
worth watching as an introduction to the corruption in the global finance industry. https://www.youtube.com/watch?v=np_ylvc8Zj8
And when you finish watching that - twice, three times, however many times you need for
all the information to sink in - you can read Nicholas Shaxson's excellent book "Treasure
Islands:Tax Havens and the Men who Stole the World", on which the documentary leans heavily
for information and structure.
"... Since the 80s, the stock market capitalization to GDP ratio has been much higher than the historical norm, higher than when the US had higher rates of growth. ..."
"... In financialized economies with inflated asset prices, people have low savings and can't even afford to buy real estate or can only afford it by taking on lots of debt and having to depend on further price inflation so that they don't go underwater. In countries with financial repression, public debt tends to be low and interest rates tend to be low and capital gets directed towards industry ..."
"... Well like I said earlier, this is a matter of one's values and views on political economy. If one prefers asset price inflation and a capital structure of heavily indebted households and young adults, then there's nothing wrong and everything is rosy. ..."
"... Household income overall, not just wages, has stagnated. ..."
Whether it's an irrational criticism or not depends on one's values and
views on political economy. To some, the financial sector has manifestly
failed at allocating capital properly and is filled with rent seeking. Others
will point to its size and the capitalization of financial markets as evidence
of its value and importance.
What's the evidence that it has failed at allocating capital successfully?
No shortage of rent-seeking of course. But if there's one thing I've
learned it's that bagholders are gonna bag. This isn't some hypothetical either, look at countries without sophisticated
financial markets. People are forced to save by speculating in real estate,
and credit is often not available to business unless the state makes it
available (perfectly reasonable in such economies to be fair).
Since the 80s, the stock market capitalization to GDP ratio has been
much higher than the historical norm, higher than when the US had higher
rates of growth.
There have been several bubbles, and consumer debt has
risen significantly while income has stagnated and startup formation is
at a 40 year low. Capital allocation has been very unproductive. It's caused
lots of asset price inflation and increased debt without producing new assets
and income streams. Capital allocation is highly centralized and it has
the same problems communist economies have with central planning where capital
is centralized in the state. A lot of unproductive activity and rent seeking.
In financialized economies with inflated asset prices, people have low
savings and can't even afford to buy real estate or can only afford it by
taking on lots of debt and having to depend on further price inflation so
that they don't go underwater. In countries with financial repression, public
debt tends to be low and interest rates tend to be low and capital gets
directed towards industry.
Since the 80s, the stock market capitalization to GDP ratio has been
much higher than the historical norm, higher than when the US had higher
rates of growth.
Stock prices were unusually low in the 1970s, as epitomized by BusinessWeek's
famous 1979 The Death of Equities cover. In addition to reversion to the mean, several other factors made stocks
more valuable since that time.
The collapse of inflation and interest rates increased the net present
value of stocks, the rise of emerging markets with poor domestic capital
markets increased foreign demand for stocks, America's persistent trade
deficit further increased foreign demand for American assets, and the low-cost
trading and 401k revolutions.
Well like I said earlier, this is a matter of one's values and views
on political economy. If one prefers asset price inflation and a capital
structure of heavily indebted households and young adults, then there's
nothing wrong and everything is rosy.
Household income overall, not just wages, has stagnated.
Startup formation is still at a 40 year low, despite all the noise about
venture capital and Silicon Valley.
ROC and ROE are based on corporate income, which are at historical highs.
The rest of your comment is just econ 101 and biz school corp finance
and accounting 101 hand waving to justify the status quo.
Your whole argument in the original post is that Tesla and SpaceX could
not get the capital that they have without Musk committing fraud and violating
a bunch of laws. In other words, two new industrial firms with tremendous
brand value and advancing decades ahead of the competition (
https://www.nextbigfuture.com/2018/05/every-3-5-years-spacex-is-adding-a-decade-lead-on-competitors.html
) could not have been capitalized otherwise.
"... But to an extent hardly imaginable in 2008, all the world's leading economies are locked in a perpetually escalating cycle of economic warfare. This global trade war is spearheaded by the Trump White House, which sees trade sanctions and tariffs, such as the onslaught it launched against Turkey, as an integral component of its drive to secure the United States' geopolitical and economic interests at the expense of friend and foe alike. ..."
"... But while they are deeply divided as to their economic and geo-political objectives, the capitalist ruling classes are united on one essential question. However the next stage of the ongoing breakdown of world capitalism proceeds, they will all strive by whatever means considered necessary to make the working class the world over pay for it. ..."
"... In 2008, capitalist governments around the world, above all in the US, derived enormous benefit from the decades-long suppression of the class struggle by the trade unions and the parties of the political establishment. The rescue operation they carried out on behalf of parasitic and criminal finance capital would not have been possible without it ..."
"But to an extent hardly imaginable in 2008, all the world's leading economies are locked
in a perpetually escalating cycle of economic warfare. This global trade war is spearheaded
by the Trump White House, which sees trade sanctions and tariffs, such as the onslaught it
launched against Turkey, as an integral component of its drive to secure the United States'
geopolitical and economic interests at the expense of friend and foe alike.
The character of world economy has undergone a major transformation in the past decade in
which economic growth, to the extent it that it occurs, is not driven by the development of
production and new investments but by the flow of money from one source of speculative and
parasitic activity to the next."
"But while they are deeply divided as to their economic and geo-political objectives, the
capitalist ruling classes are united on one essential question. However the next stage of the
ongoing breakdown of world capitalism proceeds, they will all strive by whatever means
considered necessary to make the working class the world over pay for it.
This is the lesson from the past decade which, in every country, has seen a deepening
attack on wages, social conditions and living standards as wealth is redistributed up the
income scale, raising social inequality to unprecedented heights.
In 2008, capitalist governments around the world, above all in the US, derived enormous
benefit from the decades-long suppression of the class struggle by the trade unions and the
parties of the political establishment. The rescue operation they carried out on behalf of
parasitic and criminal finance capital would not have been possible without it."
This is kind of symbolic and amazing figures: 34 billions are spend in casinos each year. and that's just official figure...
Notable quotes:
"... Casinos and Gambling are a tax on the ignorant and the indigent. ..."
"... Economist, Michael Hudson recently said in an interview that economics trumps politics every time. I am an observer of casinos and gambling in it's many forms. I am someone who has been fleeced by vulture capitalists and unscrupulous financial types as well as government officials in charge of business financial assistance schemes that don't deliver. ..."
"... Another version of how ''Brave New World'' has come to pass. The documentaries: ''The Century of the Self'' and ''HyperNormalisation 2016'' by Adam Curtis explain how we have been subdued. This lady professor is very knowledgable. Excellent episode. ..."
"... Completing the circle of predatory capitalism. Government controlled by oligarchy/plutoracry that see us, the citizens, as enemies of the state. ..."
On this week's episode of On Contact, Chris Hedges discusses the ramifications of casino culture in America with Professor Natasha
Dow Schüll, author of " Addiction by Design: Machine Gambling in Las Vegas". RT Correspondent Anya Parampil examines how gambling
has become our premier form of entertainment and escape.
Economist, Michael Hudson recently said in an interview that economics trumps politics every time. I am an observer of
casinos and gambling in it's many forms. I am someone who has been fleeced by vulture capitalists and unscrupulous financial types
as well as government officials in charge of business financial assistance schemes that don't deliver.
Often the two ie the vultures and the government officials work in tandem.
I have extreme distaste for these zombies and an always on the alert. I am bowled over with how an overwhelming number of people
in society are scammed day in and day out and having their lives ruined. I fear it will shatter life as we know it not for individuals
only but for whole nations. People must pay more attention to attention to what this video says and what Michael Hudson explains
in his books .....Killing the Host and Junk Economics are his most recent ones.
I liked what she had to say, but I wonder why she didn't go a bit deeper into the operant conditioning aspect considering that's
what Skinner's work was based on. Why intermittent rewards work so well, and why the dopamine spike curve is so important in conditioning
a behavior in anything with a limbic system. Important because understanding how dopamine and dopamine spikes work came largely
from gambling research for slot machines. Technology that was built on Skinner's work by the gov and then business marketing along
with gov propaganda, then gambling. If people understood how it worked and where the technology came from they would be much less
likely to let gambling addiction happen in the first place.
I come from a family of gamblers, at least on my father's side. My dad towed us around to the racetracks and billiards parlors
until we were old enough to drive, and card games for money were a frequent family activity for us. I never felt attracted to
gambling, and often feel bored by the prospect. Needless to say, with advanced age I now find myself estranged from my remaining
siblings. What had occurred to me some time ago is how living life is such a gamble. Outcomes can always vary, from planning and
preparing for a career to going to the market for groceries. Games of chance seem to furnish a microcosm of the life experience,
where participants are allowed an illusion of greater control and the outcomes tend to be uniformly immediate. It also allows
you to ignore your greater life experience. Maybe that's the "zone" so many enjoy. I didn't remember what "March Madness" is.
Until all those slots were shown I thought they were talking about something similar to Black Friday. Now that I remember, it
hits me that my brother and sister undoubtedly have their bets down in multiple pools.
Another version of how ''Brave New World'' has come to pass. The documentaries: ''The Century of the Self'' and ''HyperNormalisation
2016'' by Adam Curtis explain how we have been subdued. This lady professor is very knowledgable. Excellent episode.
23:50 right on. We selfie generation are
too busy trolling the media and playing games to think, meditate, analyze, understand and act for our fellow man or a healthier
future for our country. It's all about me and my short-term gratifications.
Casino-Disasterism Capitalism is well named -- All of the engineered mechano-psychological traits used to make longshot escapist-gambling
popular, lucrative and addicting, based on the faux-goals of numb indulgence, cultivating of cheap-thrill delights, pandering
to the conceits of synthetic wastrel satisfactions and dead-end fatalism -- is evident in the terminal phase of the global corporate
deepstate technoracy of Empire Inc. that is pillaging and plundering its way across the planet, securitizing the earth right out
from under our feet! ~ ; )
Professor Natasha Dow Schüll said Trump won the presidential election, because Trump used his casino expertise to manipulate
voters. Based on the news I've seen, Trump was a failed casino owner. Trump is a con-artist who uses his massive inheritance,
multiple bankruptcies, privatized large gains, socialized larger losses, and sales hype in order "to win". Trump, Obama, and Bush
Jr. are good examples of how the average person lacks the talent, training, and experience to manage his/her own nation. Democracy,
majority tyranny, mob rule, or dumb-mock-crazy elections are modern myths.
The Clinton era, signified so much. Basically, in regard to this aspect, the very ending of any culture whatsoever; gambling
casinos took over our down-towns, and our oldest landmarks. I went in once and saw those carpets and nearly puked. Now she tells
why they are so ugly. Why any human being would find that appealing reminds me of Kissinger's infamous quote: "We've successfully
made the public so dumb, I cannot die. For there is no one to replace me.."
"... Well, it comes down to the myths we've been sold. Myths that are ingrained in our social programming from birth, deeply entrenched, like an impacted wisdom tooth. These myths are accepted and basically never questioned. ..."
"... Our media outlets are funded by weapons contractors, big pharma, big banks, big oil and big, fat hard-on pills. (Sorry to go hard on hard-on pills, but we can't get anything resembling hard news because it's funded by dicks.) The corporate media's jobs are to rally for war, cheer for Wall Street and froth at the mouth for consumerism. It's their mission to actually fortify belief in the myths I'm telling you about right now. Anybody who steps outside that paradigm is treated like they're standing on a playground wearing nothing but a trench coat. ..."
"... The criminal justice system has become a weapon wielded by the corporate state. This is how bankers can foreclose on millions of homes illegally and see no jail time, but activists often serve jail time for nonviolent civil disobedience. Chris Hedges recently noted , "The most basic constitutional rights have been erased for many. Our judicial system, as Ralph Nader has pointed out, has legalized secret law, secret courts, secret evidence, secret budgets and secret prisons in the name of national security." ..."
"... This myth (Buying will make you happy) is put forward mainly by the floods of advertising we take in but also by our social engineering. Most of us feel a tenacious emptiness, an alienation deep down behind our surface emotions (for a while I thought it was gas). That uneasiness is because most of us are flushing away our lives at jobs we hate before going home to seclusion boxes called houses or apartments. We then flip on the TV to watch reality shows about people who have it worse than we do (which we all find hilarious). ..."
"... According to Deloitte's Shift Index survey : "80% of people are dissatisfied with their jobs" and "[t]he average person spends 90,000 hours at work over their lifetime." That's about one-seventh of your life -- and most of it is during your most productive years. ..."
"... Try maintaining your privacy for a week without a single email, web search or location data set collected by the NSA and the telecoms. ..."
Our society should've collapsed by now. You know that, right?
No society should function with this level of inequality (with the possible exception of one of those prison planets in a "Star
Wars" movie). Sixty-three percent of Americans
can't afford a $500 emergency
. Yet Amazon head Jeff Bezos is now
worth a record $141 billion . He could literally end world hunger for multiple years and still have more money left over than
he could ever spend on himself.
Worldwide,
one in
10 people only make $2 a day. Do you know how long it would take one of those people to make the same amount as Jeff Bezos has?
193 million years . (If they only buy single-ply toilet paper.) Put simply, you cannot comprehend the level of inequality in our
current world or even just our nation.
So shouldn't there be riots in the streets every day? Shouldn't it all be collapsing? Look outside. The streets aren't on fire.
No one is running naked and screaming (usually). Does it look like everyone's going to work at gunpoint? No. We're all choosing to
continue on like this.
Why?
Well, it comes down to the myths we've been sold. Myths that are ingrained in our social programming from birth, deeply entrenched,
like an impacted wisdom tooth. These myths are accepted and basically never questioned.
I'm going to cover eight of them. There are more than eight. There are probably hundreds. But I'm going to cover eight because
(A) no one reads a column titled "Hundreds of Myths of American Society," (B) these are the most important ones and (C) we all have
other shit to do.
Myth No. 8 -- We have a democracy.
If you think we still have a democracy or a democratic republic, ask yourself this: When was the last time Congress did something
that the people of America supported that did not align with corporate interests? You probably can't do it. It's like trying to think
of something that rhymes with "orange." You feel like an answer exists but then slowly realize it doesn't. Even the Carter Center
and former President Jimmy Carter believe that America has been
transformed into
an oligarchy : A small, corrupt elite control the country with almost no input from the people. The rulers need the myth that
we're a democracy to give us the illusion of control.
Myth No. 7 -- We have an accountable and legitimate voting system.
Gerrymandering, voter purging, data mining, broken exit polling, push polling, superdelegates, electoral votes, black-box machines,
voter ID suppression, provisional ballots, super PACs, dark money, third parties banished from the debates and two corporate parties
that stand for the same goddamn pile of fetid crap!
What part of this sounds like a legitimate election system?
No, we have what a large Harvard study called the
worst election system in the Western world . Have you ever seen where a parent has a toddler in a car seat, and the toddler has
a tiny, brightly colored toy steering wheel so he can feel like he's driving the car? That's what our election system is -- a toy
steering wheel. Not connected to anything. We all sit here like infants, excitedly shouting, "I'm steeeeering !"
And I know it's counterintuitive, but that's why you have to vote. We have to vote in such numbers that we beat out what's stolen
through our ridiculous rigged system.
Myth No. 6 -- We have an independent media that keeps the rulers accountable.
Our media outlets are funded by weapons contractors, big pharma, big banks, big oil and big, fat hard-on pills. (Sorry to go hard
on hard-on pills, but we can't get anything resembling hard news because it's funded by dicks.) The corporate media's jobs are to
rally for war, cheer for Wall Street and froth at the mouth for consumerism. It's their mission to actually fortify belief in the
myths I'm telling you about right now. Anybody who steps outside that paradigm is treated like they're standing on a playground wearing
nothing but a trench coat.
Myth No. 5 -- We have an independent judiciary.
The criminal justice system has become a weapon wielded by the corporate state. This is how bankers can foreclose on millions
of homes illegally and see no jail time, but activists often serve jail time for nonviolent civil disobedience. Chris Hedges
recently noted , "The most basic constitutional
rights have been erased for many. Our judicial system, as Ralph Nader has pointed out, has legalized secret law, secret courts, secret
evidence, secret budgets and secret prisons in the name of national security."
If you're not part of the monied class, you're pressured into releasing what few rights you have left. According to
The New
York Times , "97 percent of federal cases and 94 percent of state cases end in plea bargains, with defendants pleading guilty
in exchange for a lesser sentence."
That's the name of the game. Pressure people of color and poor people to just take the plea deal because they don't have a million
dollars to spend on a lawyer. (At least not one who doesn't advertise on beer coasters.)
Myth No. 4 -- The police are here to protect you. They're your friends .
That's funny. I don't recall my friend pressuring me into sex to get out of a speeding ticket. (Which is essentially still
legal in 32
states .)
The police in our country are primarily designed to do two things: protect the property of the rich and perpetrate the completely
immoral war on drugs -- which by definition is a war on our own people .
We lock up more people than
any other country on earth
. Meaning the land of the free is the largest prison state in the world. So all these droopy-faced politicians and rabid-talking
heads telling you how awful China is on human rights or Iran or North Korea -- none of them match the numbers of people locked up
right here under Lady Liberty's skirt.
Myth No. 3 -- Buying will make you happy.
This myth (Buying will make you happy) is put forward mainly by the floods of advertising we take in but also by our social engineering. Most of us feel a
tenacious emptiness, an alienation deep down behind our surface emotions (for a while I thought it was gas). That uneasiness is because
most of us are flushing away our lives at jobs we hate before going home to seclusion boxes called houses or apartments. We then
flip on the TV to watch reality shows about people who have it worse than we do (which we all find hilarious).
If we're lucky, we'll make enough money during the week to afford enough beer on the weekend to help it all make sense. (I find
it takes at least four beers for everything to add up.) But that doesn't truly bring us fulfillment. So what now? Well, the ads say
buying will do it. Try to smother the depression and desperation under a blanket of flat-screen TVs, purses and Jet Skis. Now does
your life have meaning? No? Well, maybe you have to drive that Jet Ski a little faster! Crank it up until your bathing suit flies
off and you'll feel alive !
The dark truth is that we have to believe the myth that consuming is the answer or else we won't keep running around the wheel.
And if we aren't running around the wheel, then we start thinking, start asking questions. Those questions are not good for the ruling
elite, who enjoy a society based on the daily exploitation of 99 percent of us.
Myth No. 2 -- If you work hard, things will get better.
According to Deloitte's Shift
Index survey : "80% of people are dissatisfied with their jobs" and "[t]he average person spends 90,000 hours at work over their
lifetime." That's about one-seventh of your life -- and most of it is during your most productive years.
Ask yourself what we're working for. To make money? For what? Almost none of us are doing jobs for survival anymore. Once upon
a time, jobs boiled down to:
I plant the food -- >I eat the food -- >If I don't plant food = I die.
But nowadays, if you work at a café -- will someone die if they don't get their super-caf-mocha-frap-almond-piss-latte? I kinda
doubt they'll keel over from a blueberry scone deficiency.
If you work at Macy's, will customers perish if they don't get those boxer briefs with the sweat-absorbent-ass fabric? I doubt
it. And if they do die from that, then their problems were far greater than you could've known. So that means we're all working to
make other people rich because we have a society in which we have to work. Technological advancements can do most everything that
truly must get done.
So if we wanted to, we could get rid of most work and have tens of thousands of more hours to enjoy our lives. But we're not doing
that at all. And no one's allowed to ask these questions -- not on your mainstream airwaves at least. Even a half-step like universal
basic income is barely discussed because it doesn't compute with our cultural programming.
Scientists say it's quite possible artificial intelligence will take away
all human jobs in 120 years . I think they know that will
happen because bots will take the jobs and then realize that 80 percent of them don't need to be done! The bots will take over and
then say, "Stop it. Stop spending a seventh of your life folding shirts at Banana Republic."
One day, we will build monuments to the bot that told us to enjoy our lives and leave the shirts wrinkly.
And this leads me to the largest myth of our American society.
Myth No. 1 -- You are free.
... ... ...
Try sleeping in your car for more than a few hours without being harassed by police.
Try maintaining your privacy for a week without a single email, web search or location data set collected by the NSA and the telecoms.
Try signing up for the military because you need college money and then one day just walking off the base, going, "Yeah, I was
bored. Thought I would just not do this anymore."
Try explaining to Kentucky Fried Chicken that while you don't have the green pieces of paper they want in exchange for the mashed
potatoes, you do have some pictures you've drawn on a napkin to give them instead.
Try using the restroom at Starbucks without buying something while black.
We are less free than a dog on a leash. We live in one of the hardest-working, most unequal societies on the planet with more
billionaires than ever .
Meanwhile,
Americans
supply 94 percent of the paid blood used worldwide. And it's almost exclusively coming from very poor people. This abusive vampire
system is literally sucking the blood from the poor. Does that sound like a free decision they made? Or does that sound like something
people do after immense economic force crushes down around them? (One could argue that sperm donation takes a little less convincing.)
Point is, in order to enforce this illogical, immoral system, the corrupt rulers -- most of the time -- don't need guns and tear
gas to keep the exploitation mechanisms humming along. All they need are some good, solid bullshit myths for us all to buy into,
hook, line and sinker. Some fairy tales for adults.
815M people chronically malnourished according to the UN. Bezos is worth $141B.
$141B / 815M people = $173 per person. That would definitely not feed them for "multiple years". And that's only if Bezos could
fully liquidate the stock without it dropping a penny.
" Point is, in order to enforce this illogical, immoral system, the corrupt rulers -- most of the time -- don't
need guns and tear gas to keep the exploitation mechanisms humming along. All they need are some good, solid bullshit myths for
us all to buy into, hook, line and sinker. Some fairy tales for adults. "
Seems like there's tear gas in the air and guns are going to be used soon. The myths are dying on the tongues of the liars.
Molon Labe!....and I'm usually a pacifist.
"American Society Would Collapse If It Weren't For Invasions Of Foreign Countries, Murdering Their People, Stealing Their Oil
Then Blaming Them For Making The US Do It."
Well, in a world driven by oil, it is entirely bogus to suggest that citizens have to work their asses off. That was the whole
point of the bill of goods that was sold to us in the late 70's and early 80'. More leisure time, more time for your family and
personal interests.
Except! It never happened. All they fucking did was reduce real wages and force everyone from the upper middle class down,
into a shit hole.
But, they will pay for their folly. Guaran-fucking-teed.
As one who has hoed many rows of cotton in 115F temperatures as well as picking cotton during my childhood and early adolescence
during weekends and school holidays, I concur. It was a very powerful inducement to get a good education back when schools actually
taught things and did not tolerate backtalk or guff from students instead of babysitting them. It worked, and I ended up writing
computer software for spacecraft, which was much fun than working in the fields.
"... How much proof would I need to lend my voice to the escalation of tensions between two nuclear superpowers? Mountains. I personally would settle for nothing less than hard proof which can be independently verified by trusted experts like the Veteran Intelligence Professionals for Sanity. ..."
"... Is that a big ask? Yes. Yes it is. That's what happens when government institutions completely discredit themselves as they did with the false narratives advanced in the manufacturing of support for the Iraq invasion. You don't get to butcher a million Iraqis in a war based on lies, turn around a few years later and say "We need new cold war escalations with a nuclear superpower but we can't prove it because the evidence is secret." That's not a thing. Copious amounts of hard, verifiable proof or GTFO. So far we have no evidence besides the confident-sounding assertions of government insiders and their mass media mouthpieces, which is the same as no evidence. ..."
As
we just discussed , some major news stories have recently dropped about what a horrible horrifying menace the Russian Federation
is to the world , and as always I have nothing to offer the breathless pundits on CNN and MSNBC but my completely unsatisfied skepticism.
My skepticism of the official Russia narrative remains so completely unsatisfied that if mainstream media were my husband I would
already be cheating on it with my yoga instructor.
I do not believe the establishment Russia narrative. I do not believe that Donald Trump colluded with the Russian government to
rig the 2016 election. I do not believe the Russian government did any election rigging for Trump to collude with. This is not because
I believe Vladimir Putin is some kind of blueberry-picking girl scout, and it certainly isn't because I think the Russian government
is unwilling or incapable of meddling in the affairs of other nations to some extent when it suits them. It is simply because I am
aware that the US intelligence community lies constantly as a matter of policy, and because I understand how the burden of proof
works.
At this time, I see no reason to espouse any belief system which embraces as true the assertion that Russia meddled in the 2016
elections in any meaningful way, or that it presents a unique and urgent threat to the world which must be aggressively dealt with.
But all the establishment mouthpieces tell me that I must necessarily embrace these assertions as known, irrefutable fact. Here are
five things that would have to change in order for that to happen:
1. Proof of a hacking conspiracy to elect Trump.
The first step to getting a heretic like myself aboard the Russia hysteria train would be the existence of publicly available
evidence of the claims made about election meddling in 2016, which rises to the level required in a post-Iraq invasion world. So
far, that burden of proof for Russian hacking allegations has not come anywhere remotely close to being met.
How much proof would I need to lend my voice to the escalation of tensions between two nuclear superpowers? Mountains. I personally
would settle for nothing less than hard proof which can be independently verified by trusted experts like the Veteran Intelligence
Professionals for Sanity.
Is that a big ask? Yes. Yes it is. That's what happens when government institutions completely discredit themselves as they did
with the false narratives advanced
in the manufacturing of support for the Iraq invasion. You don't get to butcher a million Iraqis in a war based on lies, turn around
a few years later and say "We need new cold war escalations with a nuclear superpower but we can't prove it because the evidence
is secret." That's not a thing. Copious amounts of hard, verifiable proof or GTFO. So far we have no evidence besides the confident-sounding
assertions of government insiders and their mass media mouthpieces, which is the same as no evidence.
2. Proof that election meddling actually influenced the election in a meaningful way.
Even if Russian hackers did exfiltrate Democratic party emails and give them to WikiLeaks, if it didn't affect the election, who
cares? That's a single-day, second-page story at best, meriting nothing beyond a "Hmm, interesting, turns out Russia tried and failed
to influence the US election," followed by a shrug and moving on to something that actually matters.
After it has been thoroughly proven that Russia meddled in the elections in a meaningful way, it must then be established that
that meddling had an actual impact on the election results.
3. Some reason to believe Russian election meddling was unwarranted and unacceptable.
The US government,
by a very wide margin , interferes in the elections of other countries far, far more than any other government on earth does.
The US government's
own
data shows that it has deliberately meddled in the elections of 81 foreign governments between 1946 and 2000,
including Russia in the nineties.
This is public knowledge. A former CIA Director
cracked jokes about it on Fox News earlier this year.
If I'm going to abandon my skepticism and accept the Gospel According to Maddow, after meaningful, concrete election interference
has been clearly established I'm going to need a very convincing reason to believe that it is somehow wrong or improper for a government
to attempt to respond in kind to the undisputed single worst offender of this exact offense. It makes no sense for the United States
to actively create an environment in which election interference is something that governments do to one another, and then cry like
a spanked child when its election is interfered with by one of the very governments whose elections the US recently meddled in.
This is nonsense. America being far and away the worst election meddler on the planet makes it a fair target for election meddling
by not just Russia, but every country in the world. It is very obviously moral and acceptable for any government on earth to interfere
in America's elections as long as it remains the world's worst offender in that area. In order for Russia to be in the wrong if it
interfered in America's elections, some very convincing argument I've not yet heard will have to be made to support that case.
4. Proof that the election meddling went beyond simply giving Americans access to information about their government.
If all the Russians did was simply show Americans
emails of Democratic Party officials talking
to one another and circulate some
MSM articles as claimed in the
ridiculous Russian troll farm allegations , that's nothing to get upset about. If anything, Americans should be upset that they
had to hear about Democratic Party corruption through the grapevine instead of having light shed on it by the American officials
whose job it is to do so. Complaints about election meddling is only valid if that election meddling isn't comprised of truth and
facts.
5. A valid reason to believe escalated tensions between two nuclear superpowers are worthwhile.
After it has been proven beyond a reasonable doubt that Russia did indeed meddle in the US elections in a meaningful way, and
after it has then been proven beyond a reasonable doubt that Russia actually influenced election results in a significant way, and
after the case has been clearly made that it was bad and wrong for Russia to do this instead of fair and reasonable, and after it
has been clearly proven that the election meddling went beyond simply telling Americans the truth about their government, the question
then becomes what, if anything, should be done about it?
If you look at the actions that this administration has taken over the last year and a half, the answer to that question appears
to be harsh sanctions, NATO expansionism, selling arms to Ukraine, throwing out diplomats, increasing military presence along Russia's
border, a Nuclear Posture Review which is much more aggressive toward Russia, repeatedly bombing Syria, and just generally creating
more and more opportunities for something to go catastrophically wrong with one of the two nations' aging, outdated nuclear arsenals,
setting off a chain of events from which there is no turning back and no surviving.
And the pundits and politicians keep pushing for more and more escalations, at this very moment braying with one voice that Trump
must aggressively confront Putin about Mueller's indictments or withdraw from the peace talks. But is it worth it? Is it worth risking
the life of every terrestrial organism to, what? What specifically would be gained that makes increasing the risk of nuclear catastrophe
worthwhile? Making sure nobody interferes in America's fake elections? I'd need to see a very clear and specific case made, with
a 'pros' and 'cons' list and "THE POTENTIAL DEATH OF LITERALLY EVERYTHING" written in big red letters at the top of the 'cons' column.
Rallying the world to cut off Russia from the world stage and cripple its economy has been been a goal of the US power establishment
since the collapse of the Soviet Union, so there's no reason to believe that even the people who are making the claims against Russia
actually believe them. The goal is
crippling Russia to handicap China , and ultimately to shore up global hegemony for the US-centralized empire by preventing the
rise of any rival superpowers. The sociopathic alliance of plutocrats and intelligence/defense agencies who control that empire are
willing to threaten nuclear confrontation in order to ensure their continued dominance. All of their actions against Russia since
2016 have had everything to do with establishing long-term planetary dominance and nothing whatsoever to do with election meddling.
Those five things would need to happen before I'd be willing to jump aboard the "Russia! Russia! Russia!" train. Until then I'll
just keep pointing to the total lack of evidence and how very, very far the CIA/CNN Russia narrative is from credibility.
* * *
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Local news differs because it is mixed with first-hand experience, as well as second-hand reports from witnesses–neighbors and
friends.
Gossip is one way of regulating this local flow of information. It provides details about who can be believed, and who might
embellish.
Locally, there is an organic structure of information flow. This alone doesn't make it accurate, but it gets closer by triangulating
from where you get your information.
And the further you get from the ability to triangulate from different sources, the faker news gets. I don't mean different sources,
as in, different news outlets. I mean first-hand knowledge mixed with historical context, access to first-hand accounts, information
about the reliability of witnesses and experts, and so on.
The further away the news gets from you, the harder it is to mix the news with other intelligence. At that point, it is easier
to manipulate the truth.
But even if a piece of news about a far-off event is not attempting to misconstrue the truth, it could do so inadvertently. Without
the full context of what is happening, events across the world can give the wrong impression.
The conflict in Syria is the perfect example of fake news. You have a complicated event with many different sides and no clear
good guys. There are few first-hand accounts from people we know personally. There are some entities who wish to purposely distort
the truth and others which want to hide the full extent of their actions.
All I can do to find out is trust various news sources. And that is what I mean when I say everything is fake news. Just picking
which events to report on truthfully can end up presenting a basically fake story.
The Same Old Story
Years ago it was easy to control the spread of information. There were only a handful of television networks and newspapers. All
news passed through the channels of official gatekeepers before making its way to the consumer.
But already the government was creating and disseminating fake news through programs like Project Mockingbird. The
CIA had thousands of journalists on its payroll to disseminate false news and
bury certain real reports.
So the government's problem is not fake news. Governments are concerned that they have lost their monopoly control of fake news.
They were the gatekeepers.
Social media "has made things much worse," because it "offers an easy route for non-journalists to bypass journalism's gatekeepers,
so that anyone can 'publish' anything, however biased, inaccurate or fabricated," says John Huxford, an Illinois State University
journalism professor.
"Journalism's role as the 'gatekeeper' of what is and isn't news has always been controversial, of course. But we're now seeing
just how bad things can get when that function breaks down."
Are we seeing how bad things can get? It seems that there was always fake news, but at one time, everyone believed it. Now there
is fake news, and no one trusts any news. That is a better situation to be in. It is the rejection of manipulation by the elites,
the gatekeepers.
Distrust in unverifiable news is better than blind trust in government propaganda. Better to hold agnostic beliefs about certain
national events, versus believing what the government feeds us.
My default position is distrust of the government. So whatever narrative they seem to be pushing, if not outright false, has a
purpose behind it. They are trying to shape the behavior of the masses and very rarely is this beneficially to individuals.
Huxford said many internet users are not adept at telling fake news from the real thing, making the role of major news organizations
critical.
"This is why Trump falsely labelling the mainstream media as 'fake news' is so toxic," he said.
"It means that, at a time when there is a lot of fabrication and falsehoods swirling through the system, the credibility of
the most reliable sources of news is being undermined."
As someone who believes in a grassroots approach to solving problems, starting with individuals, I am naturally averse to the
idea of controllers from on high making decisions for me.
And that is why I think it is beneficial to have more distrust in news the further it gets from you, and rather use what you can
confirm to live personally as you see fit.
Probably the best example of this is people signing up for the military directly after 9/11 to go kick some al-Qaida ass. They
trusted the national news to deliver accurate facts about what happened, and how to stop it from happening again. And they threw
themselves into the fight without having an accurate picture of why, or how the war they were signing up for would help.
In the end, they may have ended up supporting a worse regime than the one they were fighting.
Never knowing what you can believe is not ideal. But it beats a false sense of security that the news you get is real. It isn't.
And if people are finally waking up to that, perhaps they will stop lining up to fight other people's wars.
You don't have to play by the rules of the corrupt politicians, manipulative media, and brainwashed peers.
There is still no countervailing force to oppose neoliberalism. Instead we observe internal development of neoliberalism toward
national neoliberalism and the rejection of neoliberal globalization.
Notable quotes:
"... Neoliberalism is the intensification of the influence and dominance of capital; it is the elevation of capitalism, as a mode
of production, into an ethic, a set of political imperatives, and a cultural logic. It is also a project: a project to strengthen, restore,
or, in some cases, constitute anew the power of economic elites. ..."
"... It should be recalled that, in his Grundrisse , Marx explicitly argued that capital is a process that puts into motion all
of the other dimensions of modern economic, political, social, and cultural life. It creates the wage system, influences values, goals,
and the ethics of individuals, transforms our relation to nature, to ourselves, and to our community, and constantly seeks to mold state
imperatives until they are in harmony with its own. ..."
"... Neoliberalism is therefore not a new turn in the history of capitalism. It is more simply, and more perniciously, its intensification,
and its resurgence after decades of opposition from the Keynesian welfare state and from experiments with social democratic and welfare
state politics. ..."
"... Neoliberalism, as Harvey tells us, quoting Paul Treanor in the process, 'valuesmarket exchange as "an ethic in itself, capable
of acting as a guide to all human action, and substituting for all previously held ethical beliefs," it emphasises the significance
of contractual relations in the marketplace. It holds that the social goodwill be maximised by maximising the reach and frequency of
market transactions, and it seeks to bring all human action into the domain of the market.' (p. 3) ..."
"... Neoliberalism is not simply an ethic in abstract, however. Rather, the locus for its influence has become the 'neoliberal state',
which collapses the notion of freedom into freedom for economic elites. ..."
"... 'neoliberalisation was from the very beginning a project to achieve the restoration of class power,' ..."
"... 'a political project to re-establish the conditions for capital accumulation and to restore the power of economic elites ..."
"... another crucial dimension of his argument, namely that neoliberalism is a liberalism for economic elites only; that liberal
aspects of the polity are decreased ..."
"... that neoliberal regimes will slowly erode institutions of political democracy since 'the freedom of the masses would be restricted
in favour of the freedoms of the few ..."
"... The focus on individual rights, the centrality of property rights, a culture of individualism, consumption, and a market-based
populism, all served as means by which the policies of neoliberalism – and the massive inequalities that have emerged over the past
two decades – were able to gain widespread support. Political liberalism becomes eroded by the much more powerful forces of economic
liberalism. ..."
"... The story of capitalism, for Harvey, always seems to play the same dire tune. But the global expansion of capital is premised
on what he terms 'accumulation by dispossession.' ..."
"... accumulation under globalisation continues to expand by dispossessing people of their economic rights and of various forms
of ownership and economic power. ..."
"... Neoliberalism's rhetoric of individual freedom, and equality, and its promise of prosperity and growth, are slowly being revealed
as falsities. ..."
"... Soon, Harvey believes, it will become evident that all of economic life and institutions are solely for the benefit of a single,
small social class. Therefore, theoretical insight – such as Harvey has proffered here – needs to constantly nourish the various opposition
movements that currently exist. ..."
"... While we can use Harvey's brilliant and deeply insightful analysis of the structural mechanisms of neoliberalism, it has to
be admitted that there are only rumblings of discontent in the United States or China, and no hint of a mass movement against the realities
of capitalism. ..."
...Marx, after all, according to Harvey, had shown that – unlike the liberal paradigm that was, and still is, predominant in the
social sciences – the split between fact and value had been overcome. No longerwas it sufficient to talk about social phenomena without
invoking political even practical evaluations of them.
Harvey's most recent book, A Brief History of Neoliberalism , dissects the inner workings of what has come to be one of
the most salient features of late 20thand early 21st century economic and social life: the gradual shift, throughout the nations
of the global economy, toward economic and social policies that have given an increased liberality and centrality to markets, market
processes, and to the interests of capital. If Harvey's enduring perspective – and one which admittedly| echoes orthodox Marxism
– has been to put the mechanics of the capitalist mode of production at the center of every aspect of modernity (and of postmodernity
as well), then his most recent contribution deviates little from that course.
<p>Harvey's contention is that we are witnessing, through this process of neoliberalisation, the deepening penetration of capitalism
into political and social institutions as well as cultural consciousness itself. Neoliberalism is the intensification of the
influence and dominance of capital; it is the elevation of capitalism, as a mode of production, into an ethic, a set of political
imperatives, and a cultural logic. It is also a project: a project to strengthen, restore, or, in some cases, constitute anew the
power of economic elites. The essence of neoliberalism, for Harvey, can be characterised as a rightward shift in Marxian class
struggle.
This analysis stems from Marx's insight about the nature of capital itself. Capitalis not simply money, property, or one economic
variable among others. Rather,capital is the organising principle of modern society. It should be recalled that, in his Grundrisse
, Marx explicitly argued that capital is a process that puts into motion all of the other dimensions of modern economic, political,
social, and cultural life. It creates the wage system, influences values, goals, and the ethics of individuals, transforms our relation
to nature, to ourselves, and to our community, and constantly seeks to mold state imperatives until they are in harmony with its
own.
Neoliberalism is therefore not a new turn in the history of capitalism. It is more simply, and more perniciously, its intensification,
and its resurgence after decades of opposition from the Keynesian welfare state and from experiments with social democratic and welfare
state politics.
Neoliberalism, as Harvey tells us, quoting Paul Treanor in the process, 'valuesmarket exchange as "an ethic in itself, capable
of acting as a guide to all human action, and substituting for all previously held ethical beliefs," it emphasises the significance
of contractual relations in the marketplace. It holds that the social goodwill be maximised by maximising the reach and frequency
of market transactions, and it seeks to bring all human action into the domain of the market.' (p. 3)
Neoliberalism is not simply an ethic in abstract, however. Rather, the locus for its influence has become the 'neoliberal
state', which collapses the notion of freedom into freedom for economic elites. 'The freedoms it embodies reflect the interests
of private property owners, businesses, multinational corporations and financial capital.' (p. 7) The neoliberal state defends the
new reach and depth ofcapital's interests and is defined against the 'embedded liberalism' of the several decades following World
War II when 'market processes and entrepreneurial andcorporate activities were surrounded by a web of social and political constraints
and a regulatory environment that sometimes restrained but in other instances led the way in economic and industrial strategy.' (p.
11)
Neoliberalism and the neoliberal state have been able to reverse the various political and economic gains made under welfare state
policies and institutions. This transformation of the state is an effect of the interests of capital and its reaction to the embedded
liberalism of the post war decades. Taking the empirical analysis – and the hypothesis – from the French economists Gérard Duménil
and Dominique Lévy, and their important book Capital Resurgent, Harvey argues that 'neoliberalisation was from the very beginning
a project to achieve the restoration of class power,' (p. 16) 'a political project to re-establish the conditions for capital
accumulation and to restore the power of economic elites .' (p. 19)
This notion of a revolution from above to restore class power is the basso ostinato of Harvey'sa nalysis, the bass line continuously
repeated throughout the book that grounds the argument.
He sees the first historical instance of this revolution from above in Pinochet's Chile. The violent coup against Salvador Allende,
which installed Pinochet to power, was followed by a massive neoliberalisation of the state. The move toward privatisation and the
stripping away of all forms of regulation on capital was one of the key aspects of the Pinochet regime. While the real grounding
of a neoliberal theory began much earlier with thinkers such as Friedrich von Hayek and Milton Friedman, among others, its first
real empirical manifestation was Pinochet's Chile.
Of course, this also allows Harvey to illustrate another crucial dimension of his argument, namely that neoliberalism is a
liberalism for economic elites only; that liberal aspects of the polity are decreased . It is Harvey's fear – along with Karl
Polanyi– that neoliberal regimes will slowly erode institutions of political democracy since 'the freedom of the masses would
be restricted in favour of the freedoms of the few .'(p. 70)
Insulating economic institutions such as central banks from majority rule is central, especially since neoliberalism – particularly
in developed economies –revolves around financial institutions. 'A strong preference,' Harvey argues, 'exists for government by executive
order and by judicial decision rather than democraticand parliamentary decision-making.' (p. 66)
America and England constitute Harvey's next two cases for his thesis. Thatcher in Britain and Reagan in the United States were
both pivotal figures, not so much because of their economic policies, but, more importantly, because of their success in the 'construction
of consent.' The political culture of both countries began to accept neoliberal policies. The focus on individual rights, the
centrality of property rights, a culture of individualism, consumption, and a market-based populism, all served as means by which
the policies of neoliberalism – and the massive inequalities that have emerged over the past two decades – were able to gain widespread
support. Political liberalism becomes eroded by the much more powerful forces of economic liberalism.
Another theme that Harvey explores – understandably, given his background inhuman geography – is the phenomenon of uneven spatial
development. In China, Harvey's fourth case, we see the rapid expansion of a neoliberal ethos. Markets were significantly liberalised
and an economic elite was reconstituted virtually overnight, in early 1980s, amid Deng Xiaoping's economic reforms. The result has
been extreme inequality between regions.
Coastal urban areas, where industry and finance are concentrated, have become massive epicenters of economic power and activity,
sucking in surplus labor from agrarian hinterlands which, as a result of the economic growth of these metro regions, have begun sinking
into poverty. Harvey sees this reality in China being mirrored throughout the globe, and the results are common: a pattern of rising
economic and social inequality which increases the marginalisation of large sectors of national populations and concentrates ever
more sectors of capital within certain regions and among certain groups.
Neoliberalisation, therefore, effects a return to some of the most entrenched forms of social inequality and injustice that characterised
the industrial expansion during the late 19th century in the West. The story of capitalism, for Harvey, always seems to play
the same dire tune. But the global expansion of capital is premised on what he terms 'accumulation by dispossession.'
This concept – developed more fully in Harvey's previous book, The New Imperialism (2003) – argues that accumulation
under globalisation continues to expand by dispossessing people of their economic rights and of various forms of ownership and economic
power.
Harvey defines it best:
By [accumulation by dispossession] I mean the continuation and proliferation of accumulation practices which Marx had treated
of as 'primitive' or 'original' during the rise of capitalism. These include the commodification and privatization of land and
the forceful expulsion of peasant populations ; conversion of various forms of property rights (common, collective, state, |etc.)
into exclusive private property rights (most spectacularly represented by China); suppression of rights to the commons; commodification
of labor power and the suppression of alternative (indigenous) forms of production and consumption; colonial, neocolonial, and
imperial processes of appropriation of assets (including natural resources); monetization of exchange and taxation, particularly
of land; the slave trade (which continues particularly in the sex industry); and usury, the national debt and, most devastating
of all the use of the credit system as a radical means of accumulation by dispossession. (p. 159)But it also includes – for working
people in developed nations – the 'extraction of rents from patents and intellectual property rights and the diminution or erasure
of various forms of common property rights (such as state pensions, paid vacations, and access to education and health care).'
(p. 160)
Neoliberalism, therefore, can only continue its process of accumulation by dispossessing people of what they own, or to what they
have always had rights. In the end, Harvey tells us, the way out of this situation – not surprisingly – is are connection of theory
and practice. But his analysis is, once again, subtle and takes stock of present political realities.
The plethora of social movements need to forma 'broad-based oppositional programme', which sees the activities of the economic
elites as fundamentally impinging on traditionally held beliefs about egalitarianism and fairness. Crisis, for Harvey as with any
orthodox Marxist, is always looming.
Neoliberalism's rhetoric of individual freedom, and equality, and its promise of prosperity and growth, are slowly being revealed
as falsities.
Soon, Harvey believes, it will become evident that all of economic life and institutions are solely for the benefit of a single,
small social class. Therefore, theoretical insight – such as Harvey has proffered here – needs to constantly nourish the various
opposition movements that currently exist. The dialogue between theory and practice is the only sure wayt o take advantage of
the moment when a new crisis – financial or otherwise –bursts forth onto the scene. The deepest hope is that such a moment will foster
a basis 'for a resurgence of mass movements voicing egalitarian political demandsand seeking economic justice, fair trade, and greater
economic security.' (p. 204)
Harvey's position is explicitly anti-capitalist, and his hope is that the rhetoric of neoliberalism will be unmasked by the various
realities – most specifically, massive economic inequalities – that it spawns. Only then will social movements be able to gain political
traction, and move society toward some form of social, economic and political transformation.
Harvey's logic is seductive, and his ruminations on 'freedom's prospect' are compelling. But political and cultural realities
cannot be simply reduced to the mechanisms of capital and accumulation. While we can use Harvey's brilliant and deeply insightful
analysis of the structural mechanisms of neoliberalism, it has to be admitted that there are only rumblings of discontent in the
United States or China, and no hint of a mass movement against the realities of capitalism.
There is too little attention paid – and here the deficits of the orthodox Marxist approach can be sensed – to the way that the
culture of consent has found a deep affinity with American liberalism. Louis Hartz, in his classic, The Liberal Tradition in America
, was perhaps most correct when he predicted that the contours of American liberalism would lead to the acceptance of quasi-authoritarian
political and social norms.
China – lacking any democratic tradition – has not seen a mass movement arise to combat the inequality that has swollen over the
last two decades, either.
But the question of social movements remains open. There is no guarantee what you get with a mass movement of the disaffected
– one can think of Venezuela's Hugo Chavez, in this regard. Harvey does not look into such issues, but they need to be considered
since history – even the history of capitalism – cannot be viewed as cyclical and politics does not spring mechanistically from economic
conditions.
But despite this, Harvey's book is deeply insightful, rewarding and stimulating. His ability to thematise the imperatives of the
most recent manifestation of capitalist accumulation – most specifically the recent trends in economic inequality, the shifts in
urban cultural and political life, and the economic logic that currently drives the process of globalization – is nothing short of
virtuosic and his ideas should become a central part of the current discourse on globalisation, economic inequality, and the erosion
of democratic politics throughout the globe. His history of neoliberalism may indeed be brief, but the richness and profundity of
this volume is without question.
Michael J. Thompson is an advisory editor of Democratiya and is also the founder and editor of Logos: A Journal of Modern
Society & Culture (www.logosjournal. com). He is Assistant Professor of Political Science at William Paterson University. His next
book, Confronting Neoconservatism: The Rise of the New Right in America, is forthcoming from NYU Press. a journal of politics and
ideas
"... However, the truth – at least in retrospect – was that, in the Cold War years, the Soviets were actually doing Washington a strange, if unnoted, favor. Across much of the Eurasian continent, and other places from Cuba to the Middle East, Soviet power and the never-ending contest for influence and dominance that went with it always reminded American leaders that their own power had its limits. ..."
"... This, as the 21st century should have (but hasn't) made clear, was no small thing. It still seemed obvious then that American power could not be total. There were things it could not do, places it could not control, dreams its leaders simply couldn't have. Though no one ever thought of it that way, from 1945 to 1991, the United States, like the Soviet Union, was, after a fashion, "contained." ..."
"... In those years, the Russians were, in essence, saving Washington from itself. Soviet power was a tangible reminder to American political and military leaders that certain areas of the planet remained no-go zones (except in what, in those years, were called "the shadows"). ..."
"... The Soviet Union, in short, rescued Washington from both the fantasy and the hell of going it alone, even if Americans only grasped that reality at the most subliminal of levels. ..."
Think of it as the all-American version of the human comedy: a great power that eternally
knows what the world needs and offers copious advice with a tone deafness that would be
humorous, if it weren't so grim.
If you look, you can find examples of this just about
anywhere. Here, for instance, is a passage in The New York Times from a piece on the
topsy-turvy Trumpian negotiations that preceded the Singapore summit. "The Americans and South
Koreans," wrote
reporter Motoko Rich, "want to persuade the North that continuing to funnel most of the
country's resources into its military and nuclear programs shortchanges its citizens' economic
well-being. But the North does not see the two as mutually exclusive."
Think about that for a moment. The US has, of course, embarked on a trillion-dollar-plus
upgrade of its already massive nuclear arsenal (and
that's before the cost overruns even begin). Its Congress and president have for years proved
eager to sink at least a
trillion dollars annually into the budget of the national security state (a figure that's
still rising and
outpaces by far that of any other power on the planet), while its own infrastructure
sags and crumbles. And
yet it finds the impoverished North Koreans puzzling when they, too, follow such an extreme
path.
"Clueless" is not a word Americans ordinarily apply to themselves as a country, a people, or
a government. Yet how applicable it is.
And when it comes to cluelessness, there's another, far stranger path the United States has
been following since at least the George W Bush moment that couldn't be more consequential and
yet somehow remains the least noticed of all. On this subject, Americans don't have a clue. In
fact, if you could put the United States on a psychiatrist's couch, this might be the place to
start.
America contained
In a way, it's the oldest story on Earth: the rise and fall of empires. And note the plural
there. It was never – not until recently at least – "empire," always "empires."
Since the 15th century, when the fleets of the first European imperial powers broke into the
larger world with subjugation in mind, it was invariably a contest of many. There were at least
three or sometimes significantly more imperial powers rising and contesting for dominance or
slowly falling from it.
This was, by definition, the history of great powers on this planet: the challenging rise,
the challenged decline. Think of it for so many centuries as the essential narrative of
history, the story of how it all happened until at least 1945, when just two "superpowers," the
United States and the Soviet Union, found themselves facing off on a global scale.
Of the two, the US was always stronger, more powerful, and far wealthier. It theoretically
feared the Russian Bear, the Evil Empire , which it
worked assiduously to " contain " behind that famed Iron
Curtain and whose adherents in the US, always modest in number, were subjected to a mania of
fear and suppression.
However, the truth – at least in retrospect – was that, in the Cold War years,
the Soviets were actually doing Washington a strange, if unnoted, favor. Across much of the
Eurasian continent, and other places from Cuba to the Middle East, Soviet power and the
never-ending contest for influence and dominance that went with it always reminded American
leaders that their own power had its limits.
This, as the 21st century should have (but hasn't) made clear, was no small thing. It still
seemed obvious then that American power could not be total. There were things it could not do,
places it could not control, dreams its leaders simply couldn't have. Though no one ever
thought of it that way, from 1945 to 1991, the United States, like the Soviet Union, was, after
a fashion, "contained."
In those years, the Russians were, in essence, saving Washington from itself. Soviet power
was a tangible reminder to American political and military leaders that certain areas of the
planet remained no-go zones (except in what, in those years, were called "the shadows").
The Soviet Union, in short, rescued Washington from both the fantasy and the hell of going
it alone, even if Americans only grasped that reality at the most subliminal of levels.
That was the situation until December 1991 when, at the end of a centuries-long imperial
race for power (and the never-ending arms race that went with it), there was just one gigantic
power left standing on Planet Earth. It told you something about the thinking then that, when
the Soviet Union imploded, the initial reaction in Washington wasn't triumphalism (though that
came soon enough) but utter shock, a disbelieving sense that something no one had expected,
predicted, or even imagined had nonetheless happened. To that very moment, Washington had
continued to plan for a two-superpower world until the end of time.
America
uncontained
Soon enough, though, the Washington elite came to see what happened as, in the phrase of the
moment, " the end of
history ." Given the wreckage of the Soviet Union, it seemed that an ultimate victory had
been won by the very country its politicians would soon come to call "the last superpower," the
"
indispensable " nation, the " exceptional
" state, a land great beyond imagining (until, at least, Donald Trump hit
the campaign trail with a slogan that implied greatness wasn't all-American any more).
In reality, there were a variety of paths open to the "last superpower" at that moment.
There was even, however briefly, talk of a "peace dividend" – of the possibility that, in
a world without contesting superpowers, taxpayer dollars might once again be invested not in
the sinews of war-making but of peacemaking (particularly in infrastructure and the well-being
of the country's citizens).
Such talk, however, lasted only a year or two and always in a minor key before being
relegated to Washington's attic. Instead, with only a few rickety "rogue" states left to deal
with – like gulp North Korea, Iraq and Iran – that money never actually headed
home, and neither did the thinking that went with it.
Consider it the good fortune of the geopolitical dreamers soon to take the reins in
Washington that the first Gulf War of 1990-1991, which ended less than a year before the Soviet
Union collapsed, prepared the way for quite a different style of thinking. That instant victory
led to a new kind of militarized dreaming in which a highly tech-savvy military, like the one
that had driven Iraqi autocrat Saddam Hussein's forces out of Kuwait in such short order, would
be capable of doing anything on a planet without serious opposition.
And yet, from the beginning, there were signs suggesting a far grimmer future. To take but
one infamous example, Americans still remember the Black Hawk Down moment of 1993
when the world's greatest military fell victim to a Somali warlord and local militias and found
itself incapable of imposing its will on one of the least impressive not-quite-states on the
planet (a place
still frustrating that military a quarter-century later).
In that post-1991 world, however, few in Washington even considered that the 20th century
had loosed another phenomenon on the world, that of insurgent national liberation movements,
generally leftist rebellions, across what had been the colonial world – the very world of
competing empires now being tucked into the history books – and it hadn't gone away. In
the 21st century, such insurgent movements, now largely religious, or terror-based, or both,
would turn out to offer a grim new version of containment to the last
superpower.
Unchaining the indispensable nation
On September 11, 2001, a canny global jihadist by the name of Osama bin Laden
sent his air force (four hijacked US passenger jets) and his precision weaponry (19
suicidal, mainly Saudi followers) against three iconic targets in the American pantheon: the
Pentagon, the World Trade Center, and undoubtedly the Capitol or the White House (neither of
which was hit because one of those jets crashed in a field in
Pennsylvania). In doing so, in a sense bin Laden not only loosed a literal hell on Earth, but
unchained
the last superpower.
William Shakespeare would have had a word for what followed: hubris. But give the top
officials of the Bush administration (and the neocons who supported them) a break. There had
never been a moment like it: a moment of one. A single great power left alone, triumphant, on
planet Earth. Just one superpower – wealthy beyond compare, its increasingly high-tech
military unmatched, its only true rival in a state of collapse – had now been challenged
by a small jihadist group.
To president Bush, vice-president Dick Cheney, and the rest of their crew, it seemed like
nothing short of a heaven-sent opportunity. As they came out of the shock of 9/11, of that "
Pearl
Harbor of the 21st century ," it was as if they had found a magic formula in the ruins of
those iconic buildings for the ultimate control of the planet. As secretary of defense Donald
Rumsfeld would instruct an aide
at the Pentagon that day, "Go massive. Sweep it up. Things related and not."
Within days, things related and not were indeed being swept up. The country was almost
instantly said to be "at war," and soon that conflict even had a name, the Global War on
Terror. Nor was that war to be against just al-Qaeda, or even one country, an Afghanistan
largely ruled by the Taliban. More than 60 countries said to have "terror
networks" of various sorts found themselves almost instantly in the administration's potential
gunsights. And that was just to be the beginning of it all.
In October 2001, the invasion of Afghanistan was launched. In the spring of 2003, the
invasion of Iraq followed, and those were only the initial steps in what was increasingly
envisioned as the imposition of a Pax Americana on the Greater Middle East.
There could be no doubt, for instance, that Iran and Syria, too, would
soon go the way of Iraq and Afghanistan. Bush's top officials had been nursing just such dreams
since, in 1997, many of them formed a
think-tank (the first ever to enter the White House) called the Project for the New American
Century and began to write out what
were then the fantasies of figures nowhere near power. By 2003, they were power itself and
their dreams, if anything, had grown even more grandiose.
In addition to imagining a political Pax Republicana in the United States, they truly
dreamed of a future planetary Pax Americana in which, for the first time in history, a single
power would, in some fashion, control the whole works, the Earth itself.
And this wasn't to be a passing matter either. The Bush administration's "unilateralism"
rested on a conviction that it could actually create a future in which no country or even bloc
of countries would ever come close to matching or challenging US military power. The
administration's National Security Strategy of 2002 put the
matter bluntly: The US was to "build and maintain" a military, in the phrase of the moment,
" beyond challenge
."
They had little doubt that, in the face of the most technologically advanced, bulked-up,
destructive force on Earth, hostile states would be "shocked and awed" by a simple demonstration of
its power, while friendly ones would have little choice but to come to heel as well. After all,
as Bush said at a Veterans of
Foreign Wars convention in 2007, the US military was "the greatest force for human liberation
the world has ever known."
Though there was much talk at the time about the "liberation" of Afghanistan and then Iraq,
at least in their imaginations the true country being liberated was the planet's lone
superpower. Although the Bush administration was officially considered a "conservative" one,
its key officials were geopolitical dreamers of the first order and their vision of the world
was the very opposite of conservative. It harkened back to nothing and looked forward to
everything.
It was radical in ways that should have, but didn't, take the American public's breath away;
radical in ways that had never been seen before.
Shock and awe for the last
superpower
Think of what those officials did in the post-9/11 moment as the ultimate act of greed. They
tried to swallow a whole planet. They were determined to make it a planet of one in a way that
had never before been seriously imagined.
It was, to say the least, a vision of madness. Even in a moment when it truly did seem
– to them at least – that all constraints had been taken off, an administration of
genuine conservatives might have hesitated. Its top officials might, at least, have approached
the post-Soviet situation with a modicum of caution and modesty.
But not George W Bush, Dick Cheney, Donald Rumsfeld and pals. In the face of what seemed
like the ultimate in possibilities they proved clueless when it came to the possibility that
anything on Earth might have a shot at containing them.
Even among their critics, who could have imagined then that, more than 16 years later,
having faced only lightly armed enemies of various sorts, still wealthy beyond compare, still
with a military funded in a way the next seven
countries couldn't cumulatively match,
the United States would have won literally nothing?
Who could have imagined that, unlike so many preceding imperial powers (including the US of
the earlier Cold War era), it would have been able to establish control over nothing at all;
that, instead, from Afghanistan to Syria, Iraq deep into Africa, it would find itself in a
state of "
infinite war " and utter frustration on a planet filled with ever more failed
states , destroyed
cities , displaced people , and
right-wing "populist" governments, including the one in Washington?
Who could have imagined that, with a peace dividend no longer faintly conceivable, this
country would have found itself not just in decline, but – a new term is needed to catch
the essence of this curious moment – in what might be called self-decline?
Yes, a new power, China, is finally rising – and doing so on a planet that seems
itself to be
going down . Here, then, is a conclusion that might be drawn from the quarter-century-plus
in which America was both unchained and largely alone.
The Earth is admittedly a small orb in a vast universe, but the history of this century so
far suggests one reality about which America's rulers proved utterly clueless: After so many
hundreds of years of imperial struggle, this planet still remains too big, too disparate, too
ornery to be controlled by a single power. What the Bush administration did was simply take one
gulp too many and the result has been a kind of national (and planetary) indigestion.
Despite what it looked like in Washington once upon a time, the disappearance of the Soviet
Union proved to be no gift at all, but a disaster of the first order. It removed all sense of
limits from America's political class and led to a tale of greed on a planetary scale. In the
process, it also set the US on a path to self-decline.
The history of greed in our time has yet to be written, but what a story it will someday
make. In it, the greed of those geopolitical dreamers will intersect with the greed of an ever
wealthier, ever more gilded 1%, of the billionaires who were preparing to swallow whole the
political system of that last superpower and grab so much of the wealth of the planet, leaving
so little for others.
Whether you're talking about the urge to control the planet militarily or financially, what
took place in these years could, in the end, result in ruin of a historic kind. To use a
favored phrase from the Bush years, one of these days we Americans may be facing little short
of "regime change" on a planetary scale. And what a piece of shock and awe that's likely to
prove to be.
All of us, of course, now live on the planet Bush's boys tried to swallow whole. They left
us in a world of infinite war, infinite harm, and in Donald Trump's America where cluelessness
has been raised to a new power.
Decimation of anti-war forces and flourishing of Russophobia are two immanent features of the US neoliberalism. As long as
the maintinace fo the US global neoliberal empire depends of weakening and, possibly, dismembering Russia it is naive to expect any
change. Russian version of soft "national neoliberalism" is not that different, in principle form Trump version of hard
"netional neoliberalism" so those leaders might have something to talk about. In other words as soon as the USA denounce
neoliberal globalization that might be some openings.
Ten ways the new US-Russian Cold War is increasingly becoming more dangerous than the one we survived.
The political epicenter of the new Cold War is not in far-away Berlin, as it was from the late 1940s on, but directly on
Russia's borders, from the Baltic states and Ukraine to the former Soviet republic of Georgia. Each of these new Cold War fronts
is, or has recently been, fraught with the possibly of hot war. US-Russian military relations are especially tense today in the Baltic
region, where a large-scale NATO buildup is under way, and in Ukraine, where a US-Russian proxy war is intensifying. The "Soviet
Bloc" that once served as a buffer between NATO and Russia no longer exists. And many imaginable incidents on the West's new Eastern
Front, intentional or unintentional, could easily trigger actual war between the United States and Russia. What brought about this
unprecedented situation on Russia's borders -- at least since the Nazi German invasion in 1941 -- was, of course, the exceedingly
unwise decision, in the late 1990s, to expand NATO eastward. Done in the name of "security," it has made all the states involved
only more insecure.
Proxy wars were a feature of the old Cold War, but usually small ones in what was called the "Third World" -- in Africa,
for example -- and they rarely involved many, if any, Soviet or American personnel, mostly only money and weapons. Today's US-Russian
proxy wars are different, located in the center of geopolitics and accompanied by too many American and Russian trainers, minders,
and possibly fighters. Two have already erupted: in Georgia in 2008, where Russian forces fought a Georgian army financed, trained,
and minded by American funds and personnel; and in Syria, where in February
scores
of Russians were killed by US-backed anti-Assad forces . Moscow did not retaliate, but it has pledged to do so if there is "a
next time," as there very well may be. If so, this would in effect be war directly between Russia and America. Meanwhile, the risk
of such a direct conflict continues to grow in Ukraine, where the country's US-backed but politically failing President Petro Poroshenko
seems increasingly tempted to launch another all-out military assault on rebel-controlled Donbass, backed by Moscow. If he does so,
and the assault does not quickly fail as previous ones have, Russia will certainly intervene in eastern Ukraine with a truly tangible
"invasion." Washington will then have to make a fateful war-or-peace decision. Having already reneged on its commitments to the Minsk
Accords, which are the best hope for ending the four-year Ukrainian crisis peacefully, Kiev seems to have an unrelenting impulse
to be a tail wagging the dog of war. Certainly, its capacity for provocations and disinformation are second to none, as evidenced
again last week by the faked "assassination and resurrection" of the journalist Arkady Babchenko.
The Western, but especially American, years-long demonization of the Kremlin leader, Putin, is also unprecedented. Too
obvious to reiterate here, no Soviet leader, at least since Stalin, was ever subjected to such prolonged, baseless, crudely derogatory
personal vilification. Whereas Soviet leaders were generally regarded as acceptable negotiating partners for American presidents,
including at major summits, Putin has been made to seem to be an illegitimate national leader -- at best "a KGB thug," at worst a
murderous "mafia boss."
Still more, demonizing Putin has generated a
widespread Russophobic vilification
of Russia itself , or what The New York Times and other mainstream-media outlets have taken to calling "
Vladimir Putin's Russia ." Yesterday's enemy was Soviet Communism. Today it is increasingly Russia, thereby also delegitimizing
Russia as a great power with legitimate national interests. "The Parity Principle," as Cohen termed it during the preceding Cold
War -- the principle that both sides had legitimate interests at home and abroad, which was the basis for diplomacy and negotiations,
and symbolized by leadership summits -- no longer exists, at least on the American side. Nor does the acknowledgment that both sides
were to blame, at least to some extent, for that Cold War. Among influential American observers
who at least
recognize the reality of the new Cold War , "Putin's Russia" alone is to blame. When there is no recognized parity and shared
responsibility, there is little space for diplomacy -- only for increasingly militarized relations, as we are witnessing today.
Meanwhile, most of the Cold War safeguards -- cooperative mechanisms and mutually observed rules of conduct that evolved
over decades in order to prevent superpower hot war -- have been vaporized or badly frayed since the Ukrainian crisis in 2014,
as the
UN General Secretary António Guterres, almost alone, has recognized : "The Cold War is back -- with a vengeance but with a difference.
The mechanisms and the safeguards to manage the risks of escalation that existed in the past no longer seem to be present." Trump's
recent missile strike on Syria carefully avoided killing any Russians there, but here too Moscow has vowed to retaliate against US
launchers or other forces involved if there is a "next time," as, again, there may be. Even the decades-long process of arms control
may, we are told by an
expert , be coming to an "end." If so, it will mean an unfettered new nuclear-arms race but also the termination of an ongoing
diplomatic process that buffered US-Soviet relations during very bad political times. In short, if there are any new Cold War rules
of conduct, they are yet to be formulated and mutually accepted. Nor does this semi-anarchy take into account the new warfare technology
of cyber-attacks. What are its implications for the secure functioning of existential Russian and American nuclear command-and-control
and early-warning systems that guard against an accidental launching of missiles still on high alert?
Russiagate allegations that the American president has been compromised by -- or is even an agent of -- the Kremlin are
also without precedent. These allegations have had profoundly dangerous consequences, among them the nonsensical but mantra-like
warfare declaration that "Russia attacked America" during the 2016 presidential election; crippling assaults on President Trump every
time he speaks with Putin in person or by phone; and making both Trump and Putin so toxic that even most politicians, journalists,
and professors who understand the present-day dangers are reluctant to speak out against US contributions to the new Cold War.
Mainstream-media outlets have, of course, played a woeful role in all of this. Unlike in the past, when pro-détente
advocates had roughly equal access to mainstream media, today's new Cold War media enforce their orthodox narrative that Russia is
solely to blame. They practice not diversity of opinion and reporting but "confirmation bias." Alternative voices (with, yes, alternative
or opposing facts) rarely appear any longer in the most influential mainstream newspapers or on television or radio broadcasts. One
alarming result is that "disinformation" generated by or pleasing to Washington and its allies has consequences before it can be
corrected. The fake Babchenko assassination (allegedly ordered by Putin, of course) was quickly exposed, but not the alleged Skripal
assassination attempt in the UK, which led to the largest US expulsion of Russian diplomats in history before London's official version
of the story began to fall apart. This too is unprecedented: Cold War without debate, which in turn precludes the frequent rethinking
and revising of US policy that characterized the preceding 40-year Cold War -- in effect, an enforced dogmatization of US policy
that is both exceedingly dangerous and undemocratic.
Equally unsurprising, and also very much unlike during the 40-year Cold War, there is virtually no significant opposition
in the American mainstream to the US role in the new Cold War -- not in the media, not in Congress, not in the two major political
parties, not in the universities, not at grassroots levels. This too is unprecedented, dangerous, and contrary to real democracy.
Consider only the thunderous silence of scores of large US corporations that have been doing profitable business in post-Soviet Russia
for years, from fast-food chains and automobile manufacturers to pharmaceutical and energy giants. And contrast their behavior to
that of CEOs of PepsiCo, Control Data, IBM, and other major American corporations seeking entry to the Soviet market in the 1970s
and 1980s, when they publicly supported and even funded pro-détente organizations and politicians. How to explain the silence of
their counterparts today, who are usually so profit-motivated? Are they too fearful of being labeled "pro-Putin" or possibly "pro-Trump"?
If so, will this Cold War continue to unfold with only very rare profiles of courage in any high places? 9. And then there is the
widespread escalatory myth that today's Russia, unlike the Soviet Union, is too weak -- its economy too small and fragile, its leader
too "isolated in international affairs" -- to wage a sustained Cold War, and that eventually Putin, who is "punching above his weight,"
as the cliché has it, will capitulate. This too is a dangerous delusion.
As Cohen has shown previously ,
"Putin's Russia" is hardly isolated in world affairs, and is becoming even less so, even in Europe, where at least five governments
are tilting away from Washington and Brussels and perhaps from their economic sanctions on Russia. Indeed, despite the sanctions,
Russia's energy industry and agricultural exports are flourishing. Geopolitically, Moscow has many military and related advantages
in regions where the new Cold War has unfolded. And no state with Russia's modern nuclear and other weapons is "punching above its
weight." Above all, the great majority of Russian people have rallied behind Putin because t
hey believe
their country is under attack by the US-led West . Anyone with a rudimentary knowledge of Russia's history understands it is
highly unlikely to capitulate under any circumstances.
Finally (at least as of now), there is the growing war-like "hysteria" often commented on in both Washington and Moscow. It
is driven by various factors, but television talk/"news" broadcasts, which are as common in Russia as in the United States, play
a major role. Perhaps only an extensive quantitative study could discern which plays a more lamentable role in promoting this frenzy
-- MSNBC and CNN or their Russian counterparts. For Cohen, the Russian dark witticism seems apt: "Both are worst" ( Oba khuzhe
). Again, some of this American broadcast extremism existed during the preceding Cold War, but almost always balanced, even
offset, by truly informed, wiser opinions, which are now largely excluded.
Is this analysis of the dangers inherent in the new Cold War itself extremist or alarmist? Even SOME usually reticent specialists
would seem to agree with Cohen's general assessment. Experts gathered by a centrist Washington think tank
thought that on a scale of 1 to 10,
there is a 5 to 7 chance of actual war with Russia. A former head of British M16 is
reported as saying
that "for the first time in living memory, there's a realistic chance of a superpower conflict." And a respected retired Russian
general tells
the same think tank that any military confrontation "will end up with the use of nuclear weapons between the United States and
Russia."
In today's dire circumstances, one Trump-Putin summit cannot eliminate the new Cold War dangers. But US-Soviet summits traditionally
served three corollary purposes. They created a kind of security partnership -- not a conspiracy -- that involved each leader's limited
political capital at home, which the other should recognize and not heedlessly jeopardize. They sent a clear message to the two leaders'
respective national-security bureaucracies, which often did not favor détente-like cooperation, that the "boss" was determined and
that they must end their foot-dragging, even sabotage. And summits, with their exalted rituals and intense coverage, usually improved
the media-political environment needed to enhance cooperation amid Cold War conflicts. If a Trump-Putin summit achieves even some
of those purposes, it might result in a turning away from the precipice that now looms
"... I encountered a wonderful concept the other day on the Keiser Report, where they said in passing that the great irony of the Hegemon's position was that it couldn't use its massive financial power because whenever it did, it simply forced alternatives to arise. ..."
"... This is why every financial move by Trump is producing the opposite result. Another ZH article says that the Russian sell-off of US Treasuries was a move to cover Rusal and the sanctions placed on its former CEO, Deripaska. Mr. Trump Attacks Aluminum, Russia Attacks The Debt . ..."
"... Every time the US flaunts its Dollar supremacy, it pushes customers away from the Dollar. ..."
"... The US has power left in the financial sector, but can't use it. The US has no power left in the military area, and cannot show it. Syria, Korea, the theaters are growing where the US has had to step down. ..."
"... Even the fog of propaganda is wearing increasingly thin. The US State Department just issued a warning to its people about traveling to Russia. It's risky, they say. But ticket sales for the World Cup are up by 25% from the US, the largest foreign customer ..."
The take away quote:
"
"What we've witnessed, since 2008, is the unbridled ability of the so-called people at the top to implement socialism for the
banks," Prins tells me. "If anyone had said we are going to give $21 trillion to the global banking sector, it would never have
happened – so we've had a backdoor process instead, under the pretense it would help ordinary people."
Excellent article, thanks for the link. Nomi knows all this stuff, and she's right. And Liam Halligan, a financial journalist
I greatly respect, wrote the article. Recommended.
~~
I encountered a wonderful concept the other day on the Keiser Report, where they said in passing that the great irony of the
Hegemon's position was that it couldn't use its massive financial power because whenever it did, it simply forced alternatives
to arise.
This is why every financial move by Trump is producing the opposite result. Another ZH article says that the Russian sell-off
of US Treasuries was a move to cover Rusal and the sanctions placed on its former CEO, Deripaska.
Mr. Trump Attacks
Aluminum, Russia Attacks The Debt .
The tariffs on aluminum compelled the Chinese to create a Yuan-denominated futures contract
on industrial metals - convertible to gold at Shanghai, of course. The instability of the overnight tariffs created a more enduring
stability than before, resting on gold, which satisfies concerns about transfers between nations.
Every time the US flaunts its Dollar supremacy, it pushes customers away from the Dollar.
~~
But it's not just Trump, nor just the financial markets. It's every theater and every plane of activity. Every use of bullying,
drives former allies away. Every posture of aggression runs the supreme risk that the US military will be exposed as ineffective,
and if that happens, the Pentagon is finished, and the generals know it.
The US has power left in the financial sector, but can't use it. The US has no power left in the military area, and cannot
show it. Syria, Korea, the theaters are growing where the US has had to step down.
Even the fog of propaganda is wearing increasingly thin. The US State Department just issued a warning to its people about
traveling to Russia. It's risky, they say. But ticket sales for the World Cup are up by 25% from the US, the largest foreign customer.
I'll have to stop, but fortunately, the examples go on and on.
Mate would have got the idea from Stephen Cohen, Russia expert, Nation contributor and husband of the Nation editor. But Cohen
has certainly got it from Alt-media - here or similar...
"... By Laura Basu, a Marie Curie Research Fellow at Cardiff School of Journalism, Media and Culture. Originally published at openDemocracy ..."
"... This ideology spread through the media from the 1980s ..."
"... Fast-forward to April 2009, barely 6 months after the announcement of a £500 billion bank bailout. A media hysteria was nowraging around Britain's deficit . While greedy bankers were still taking some of the blame, the systemic problems in finance and the problems with the free-market model had been forgotten. Instead, public profligacy had become the dominant explanation for the deficit. The timeline of the crisis was being erased and rewritten. ..."
"... These measures were a ramped-up version of the kinds of reforms that had produced the crisis in the first place. This fact, however, was forgotten. These 'pro-business' moves were enthusiastically embraced by the media, far more so than austerity. Of the 5 outlets analysed (The BBC, Telegraph, Sun, Guardian and Mirror), only the Guardian rejected them more frequently than endorsing them. ..."
"... "One of the saddest lessons of history is this: If we've been bamboozled long enough, we tend to reject any evidence of the bamboozle. We're no longer interested in finding out the truth. The bamboozle has captured us. It's simply too painful to acknowledge, even to ourselves, that we've been taken. Once you give a charlatan power over you, you almost never get it back." ..."
"... This post is disheartening in so many ways. Start with "media hysteria" -- adding yet another glib coinage to hide a lack of explanation behind a simple but innapt analogy like the endless "addictions" from which personifications of various abstract entities suffer. ..."
"... This coinage presupposes a media sufficiently free to be possessed by hysteria. Dancing puppets might with some art appear "hysterical". And the strange non-death of Neoliberalsm isn't so strange or poorly understood in 2018 though the detailed explanation hasn't reached as many as one might have hoped, including the authors of this brief post. Consider their unhappy mashup of thoughts in a key sentence of the first paragraph: "This power has been maintained with the help of a robust ideology centred on free markets (though in reality markets are captured by corporations and are maintained by the state) and the superiority of the private sector over the public sector." The tail of this sentence obviates the rest of the post. And we ought not ignore the detail that Neoliberalism believes in the Market as a solution to all problems -- NOT the 'free market' of neoclassical economics or libertarian ideology. ..."
"... From "media hysteria" the post postulates "amnesia" of a public convinced of "greedy bankers" who need regulation. In the U.S. the propaganda was more subtle -- at least in my opinion. We were fed the "bad apples" theory mocked in a brief series of media clips presented in the documentary film "Inside Job". Those clips suggest a better explanation for the swift media transitions from banking reform to balanced budgets and austerity with more tax cuts for the wealthy than "amnesia" or "hyper-amnesia". The media Corporations are tightly controlled by the same forces that captured Corporations and -- taking the phrase "the superiority of the private sector over the public sector" in the sense that a superior directs an inferior [rather than the intended(?) sense] -- direct and essentially own our governments. ..."
"... The remarkable thing about public discourse and political and economic news reporting is how superficial it has become, so devoid of a foundation of any kind in history or theory. You can not have an effective critique of society or the economy or anything, if you do not see a system with a history and think it matters. Neoliberalism has become what people say when they think none of it really matters; it is all just noise. ..."
"... "Neoliberalism has become what people say when they think none of it really matters; it is all just noise." ..."
"... I also think that the crisis of neoliberalism echos a problem caused by capitalism, itself. I think David Harvey stated that "capitalism doesn't solve problems, it often just moves them around". ..."
"... Matt Stoller tweet from August 2017, as germane now as ever: "The political crisis we are facing is simple. American commerce, law, finance, and politics is organized around cheating people." ..."
"... George Orwell noted that the middle class Left couldn't handle dealing with real working class people, although there isn't the same huge gulf these days, I believe there is still a vestige of it due to the British class system. The Fabians set up shop in the East End around the turn of the last century & directly rubbed shoulders with the likes of Coster Mongers – a combination that led to a strike that was one of the first success stories in the attempt to get a few more crumbs than what was usually allowed to fall from the top table. ..."
"... If Neoliberalism is now being noticed I imagine that it is because of it's success in working it's way up the food chain. After all these same Middle classes for the most part did not care much for the plight of the poor during those Victorian values. Many could not wait to employ maids of all work who slaved for up to fourteen hours a day with only Sunday afternoon's off. The Suffragettes had a real problem with this as their relatively comfortable lives would soon descend into drudgery without their servants. ..."
"... Coincidentally, the NYT article on Austerity Britain is the closest I have read to an accurate picture that I have seen for a good while. ..."
"... It's also not a new thing. British media worship of neoliberalism has been growing since the 1980s, at the same time as newspapers have been closing and media sources of all kinds laying off their staff. 2008 was a temporary blip, and since the average journalist has the attention span of a hamster, it was back to usual a few months later. Once the crash stopped being "news" old patterns reasserted themselves. I wonder, incidentally, how many economics journalists in the UK actually remember the time before neoliberalism? ..."
"... Consuming corporate media is increasingly a bizarro-world experience. Even something like the Trump scandal/constitutional crisis/investigation seems like the arrogant internecine warfare of corrupt factions of the establishment. Meanwhile, Americans are increasingly living out of their cars. ..."
"... 1. Oligarchs having captured thoroughly the media, the legislatures and the judiciary, (as well as large parts of what might be construed as "liberal" political organisations e.g. the Democratic Party of the USA) ..."
Posted on
May 29, 2018 by Yves Smith Yves here. I'm sure readers
could write a US version of this timeline despite the fact that we had a second crisis and
bailout, that of way more foreclosures than were warranted, thanks to lousy incentives to
mortgage servicers and lack of political will to intervene, and foreclosure fraud to cover up
for chain of title failures.
By Laura Basu, a Marie Curie Research Fellow at Cardiff School of Journalism, Media and
Culture. Originally published at
openDemocracy
It hasn't escaped many people's attention that, a decade after the biggest economic crash of
a generation, the economic model producing that meltdown has not exactly been laid to rest.
The crisis in the
NHS and the
Carillion and Capital scandals are testament to that. Sociologist Colin Crouch wrote a book
in 2011 about the 'strange non-death of neoliberalism', arguing that the neoliberal model is
centred on the needs of corporations and that corporate power actually intensified after the
2008 financial meltdown. This power has been maintained with the help of a robust ideology
centred on free markets (though in reality markets are captured by corporations and are
maintained by the state) and the superiority of the private sector over the public sector. It
advocates privatisation, cuts in public spending, deregulation and tax cuts for businesses and
high earners.
This ideology
spread through the media from the 1980s , and the media have continued to play a key
role in its persistence through a decade of political and economic turmoil since the 2008
crash. They have done this largely via an acute amnesia about the causes of the crisis, an
amnesia that helped make policies like austerity, privatisation and corporate tax breaks appear
as common sense responses to the problems.
This amnesia struck at dizzying speed. My research carried out at Cardiff University shows
that in 2008 at the time of the banking collapse, the main explanations given for the problems
were financial misconduct ('greedy bankers'), systemic problems with the financial sector, and
the faulty free-market model. These explanations were given across the media spectrum,
with even the Telegraph and Sun complaining about a lack of regulation . Banking reform was
advocated across the board.
Fast-forward to April 2009, barely 6 months after the announcement of a £500
billion bank bailout.
A media hysteria was nowraging around Britain's deficit . While greedy bankers were still
taking some of the blame, the systemic problems in finance and the problems with the
free-market model had been forgotten. Instead, public profligacy had become the dominant
explanation for the deficit. The timeline of the crisis was being erased and
rewritten.
Correspondingly, financial and corporate regulation were forgotten. Instead, austerity
became the star of the show, eclipsing all other possible solutions to the crisis. As a
response to the deficit, austerity was mentioned 2.5 as many times as the next most covered
policy-response option, which was raising taxes on the wealthy. Austerity was mentioned 18
times more frequently than tackling tax avoidance and evasion. Although coverage of austerity
was polarized, no media outlet rejected it outright, and even the left-leaning press implicitly
(and sometimes explicitly) backed 'austerity lite'.
In 2010, the Conservative-Lib Dem government announced £99 billion in spending cuts
and £29 billion in tax increases per year by 2014-15. Having made these 'tough choices',
from 2011 the coalition wanted to focus attention away from austerity and towards growth (which
was, oops, being stalled by austerity). To do this, they pursued a zealously 'pro-business'
agenda, including privatisation, deregulation, cutting taxes for the highest earners, and
cutting corporation tax in 2011, 2012, 2013, and in 2015 and 2016 under a Conservative
government.
These measures were a ramped-up version of the kinds of reforms that had produced the
crisis in the first place. This fact, however, was forgotten. These 'pro-business' moves were
enthusiastically embraced by the media, far more so than austerity. Of the 5 outlets analysed
(The BBC, Telegraph, Sun, Guardian and Mirror), only the Guardian rejected them more frequently
than endorsing them.
The idea behind these policies is that what's good for business is good for everyone. If
businesses are handed more resources, freed from regulation and handed tax breaks, they will be
encouraged to invest in the economy, creating jobs and growth. The rich are therefore 'job
creators' and 'wealth creators'.
This is despite the fact that these policies have an impressive fail rate. Business
investment and productivity growth remain low, as corporations spend the savings not on
training and innovation but on share buy-backs and shareholder dividends. According to the
Financial Times, in 2014, the top 500 US companies
returned 95 per cent of their profits to shareholders in dividends and buybacks. Meanwhile,
inequality is spiralling and in the UK more than a million
people are using food banks .
Poverty and inequality, meanwhile, attracted surprising little media attention. Of my sample
of 1,133 media items, only 53 had a primary focus on living standards, poverty or inequality.
This
confirms other researchshowing a lack of media attention to these issues . Of these 53
items, the large majority were from the Guardian and Mirror. The coverage correctly identified
austerity as a primary cause of these problems. However, deeper explanations were rare. Yet
again, the link back to the 2008 bank meltdown wasn't made, let alone the long-term causes of
that meltdown. Not only that, the coverage failed even to identify the role of most of the
policies pursued since the onset of the crisis in producing inequality – such as
the bank bailouts, quantitative easing, and those 'pro-business' measures like corporation tax
cuts and privatisation.
And so it seems we are living with a hyper-amnesia , in which it is increasingly
difficult to reconstruct timelines and distinguish causes from effects. This amnesia has helped
trap us in a neoliberal groundhog day. The political consensus around the free market model
finally seems to be breaking. If we are to find a way out, we will need to have a lot more
conversations about how to organise both our media systems and our economies.
Tick-Tock.
It depends. Do you believe the worst can be avoided or do you believe the world is already
knee deep in all the things we're told to be afraid will happen? There is a big difference
between organizing for reform and organizing to break capture.
" Turning and turning in the widening gyre
The falcon cannot hear the falconer;
Things fall apart; the centre cannot hold;
Mere anarchy is loosed upon the world,
The blood-dimmed tide is loosed, and everywhere
The ceremony of innocence is drowned;
The best lack all conviction, while the worst
Are full of passionate intensity.
Surely some revelation is at hand;
Surely the Second Coming is at hand "
W.B. Yeats
I suppose we can take some succour from the fact that WWI (and the Spanish flu) seemed to
be a harbinger of worse to come but we're still here
The hyper-amnesia ground hog problem described in the post happens, in part, because the
'centre continues to hold'. It demonstrates the center can, and does, hold. We don't want the
centre to hold. We want it to disappear and get replaced by policies and perspectives keen on
an economy (and society) that works for all, not just some
I know what you're saying and I tend to agree. But the centre to Yeats (my interpretation,
anyway) is that there is a cultural centre both apart from but also part of the social
centre, and when that centre goes all hell breaks loose. Meaning of events becomes very
confused or impossible to understand on many levels.
Then, it's often the little people (and don't go making jokes about leprechauns) that get
crushed in the confusion.
We should reflect about the root causes of why our information is not informing us. How
can decades go by with the meme "smoking has not been conclusively proven to cause cancer" or
now "the science of climate change is inconclusive", not to mention countless similar horror
stories in pharma. Bullshit about the effectiveness of supply side economics is no
different.
Somehow we collectively need to expect and demand more objectivity from our information
sources. We fall for the fox guarding hen houses scam over and over, from TARP bailouts, to
FDA approvals to WMD claims. Not sure of the answer, but I know from talking with my boomer
parents, skepticism about information sources is not in the DNA of many information
consumers.
"One of the saddest lessons of history is this: If we've been bamboozled long enough, we
tend to reject any evidence of the bamboozle. We're no longer interested in finding out the
truth. The bamboozle has captured us. It's simply too painful to acknowledge, even to
ourselves, that we've been taken. Once you give a charlatan power over you, you almost never
get it back."
― Carl Sagan, The Demon-Haunted World: Science as a Candle in the Dark
One of Sagan's best, I loaned this out to a not terribly thoughtful acquaintance and I was
told it was "too preachy".
I guess Sagan proves himself correct time and time again.
It is also worth noting that a number of newspapers lauded Hitler's rise to power –
they overlooked violence against Jews because the trains ran on time. Nor should we ignore
disinformation campaigns, led by newspapers (e.g. Hearst and cannabis). In general, each
media outlet is a reflection of its owners, most of whom are rich and adverse to any
suggestion that we "tax the rich."
I've come to the conclusion that we don't have a media anymore. I was watching MSNBC this
AM discuss the "missing" 1500 immigrant children. The agency responsible says it calls the
people who now have the kids, but most of the people don't call back within the 30-day
requirement period.
Now the next logical questions to ask the rep would be: What happens after 30 days? Do you
keep calling them? Do send out investigators?" But are these questions asked? No. Instead we
get speculation or non-answers. It's the same with every issue.
The internet is not any better. Many articles are just repeating what appears elsewhere
with no one checking the facts, even on respected sites. I also got a chain email today
regarding petition for a Constitutional Convention. The impetus is a list of grievances
ranging from "a congressman can retire after just one term with a full pension" to "children
of congressmen don't have to pay back college loans." I already knew most of the claims
weren't true but the 131 recipients of the organization I belong to didn't. I did find out
that this chain email has been circulating on the internet for five years and it is the work
of a conservative groups whose real aim is to stop abortion and make Christianity the law of
the land. I was not surprised.
I have said for years that there is no news on the news. And I have repeated this meme for
just as long: There is a reason why America is called Planet Stupid.
Now the next logical questions to ask the rep would be: What happens after 30 days? Do
you keep calling them? Do send out investigators?" But are these questions asked? No.
Instead we get speculation or non-answers. It's the same with every issue.
Even competent reporting takes practice, time, and effort, even money sometimes. The same
with even half way competent governing. Neither is rewarded, and are often punished, for
doing nowadays; asking as a follow-up question "did you call the local police or send over a
pair of ICE officers just to politely knock on the door?" Police do people checks all the
time. "I haven't see so and so for a week", or "my relative hasn't returned my calls for a
month, can you?" It is possible that the paperwork just got lost and asking the
guardians/family some questions personally would solve.
But all that is boring bovine excrement, which is just not done.
This post is disheartening in so many ways. Start with "media hysteria" -- adding yet
another glib coinage to hide a lack of explanation behind a simple but innapt analogy like
the endless "addictions" from which personifications of various abstract entities suffer.
This coinage presupposes a media sufficiently free to be possessed by hysteria. Dancing
puppets might with some art appear "hysterical". And the strange non-death of Neoliberalsm
isn't so strange or poorly understood in 2018 though the detailed explanation hasn't reached
as many as one might have hoped, including the authors of this brief post. Consider their
unhappy mashup of thoughts in a key sentence of the first paragraph: "This power has been
maintained with the help of a robust ideology centred on free markets (though in reality
markets are captured by corporations and are maintained by the state) and the superiority of
the private sector over the public sector." The tail of this sentence obviates the rest of
the post. And we ought not ignore the detail that Neoliberalism believes in the Market as a
solution to all problems -- NOT the 'free market' of neoclassical economics or libertarian
ideology.
From "media hysteria" the post postulates "amnesia" of a public convinced of "greedy
bankers" who need regulation. In the U.S. the propaganda was more subtle -- at least in my
opinion. We were fed the "bad apples" theory mocked in a brief series of media clips
presented in the documentary film "Inside Job". Those clips suggest a better explanation for
the swift media transitions from banking reform to balanced budgets and austerity with more
tax cuts for the wealthy than "amnesia" or "hyper-amnesia". The media Corporations are
tightly controlled by the same forces that captured Corporations and -- taking the phrase
"the superiority of the private sector over the public sector" in the sense that a superior
directs an inferior [rather than the intended(?) sense] -- direct and essentially own our
governments.
The essayist complains that poverty and the manifest failures of neoliberalism get little
critical attention, but she leads off, "It hasn't escaped many people's attention . . ."
The remarkable thing about public discourse and political and economic news reporting is
how superficial it has become, so devoid of a foundation of any kind in history or theory.
You can not have an effective critique of society or the economy or anything, if you do not
see a system with a history and think it matters. Neoliberalism has become what people say
when they think none of it really matters; it is all just noise.
Another thing to recall was how quickly talk of nationalizing banks evaporated. Even Paul
Krugman, among others were supporting the idea that "real capitalists nationalize".
Once LIBOR came down, and the lending channels began to reopen, the happy talk ensued and
the amnesia kicked in strongly.
I also think that the crisis of neoliberalism echos a problem caused by capitalism,
itself. I think David Harvey stated that "capitalism doesn't solve problems, it often just
moves them around".
The financial crisis and austerity have now manifested themselves into a media crisis of
elites and elite legitimacy (BREXIT, Trump's election, etc). The ability to manufacture
consent is running into increased difficulty. I don't think the financial crisis narrative
shift helped very much at all. A massive crime requires an equally massive cover-up,
naturally.
Why, it's almost as if 90% of all media outlets are owned by 5 multibillion dollar
conglomerates, controlled by the top 0.1%, for the purposes of protecting their unearned
parasitic power, and the employees making six-to-low-seven figures are on the Upton Sinclair
"paycheck demands I not understand it" model.
Or it's amnesia.
Matt Stoller tweet from August 2017, as germane now as ever: "The political crisis we are
facing is simple. American commerce, law, finance, and politics is organized around cheating
people."
A big thumbs up for that! Sobotka was a hero in very dark times.
As my brother-in-law puts it: The American Dream used to be "work hard in a useful job,
raise a family of citizens, retire with dignity, and hand the controls to the next
generation." Now? It's just "Win the lottery."
Problem is, "The Lottery" is right out of Shirley Jackson.
Agreed. The author is inclined to interpret at the level of cumulative effect -- apparent
forgetting -- and to ignore how fear -- of editors, of owners -- plays any role. Her proposed
unveiling of a coercive process becomes yet another veiling of it.
Sadly the narrative of details is lost to history The German landesbanks who had
guaranteed payments in loan pools in the USA were allowed to skirt thru crash and burn by the
agencies (moody s&p and your little fitch too) fake and shake ratings process But all
things German are magical Having lived thru NYC Mac Corp effective bankruptcy of man hat
tan..
it was amusing watching the hand wave given when the city of Berlin actually defaulted
.
My own view for what it is worth is that the Guardian pays some lip service to the plight
of the UK's " Deplorables ", but like most of it's readership does not really give a damn. A
state of being exacerbated by Brexit similar to the situation in the US with Trump. It's much
easier to imagine hordes of racist morons who inhabit places that you have no direct
experience of, than to actually go & take a look. It's also very easy to be in favour of
mass immigration if it does not effect your employment, housing & never likely to spoil
your early morning dawn chorus with a call to prayer.
Unfortunately it has been left to the Right to complain about such things as the Rotherham
abuse scandal, which involved a couple of thousand young girls, who I suspect are worth less
to some than perhaps being mistaken as a racist. There are also various groups made up of
Muslim women who protest about Sharia councils behaviour to their sex, but nobody in the
media is at all interested.
George Orwell noted that the middle class Left couldn't handle dealing with real working
class people, although there isn't the same huge gulf these days, I believe there is still a
vestige of it due to the British class system. The Fabians set up shop in the East End around
the turn of the last century & directly rubbed shoulders with the likes of Coster Mongers
– a combination that led to a strike that was one of the first success stories in the
attempt to get a few more crumbs than what was usually allowed to fall from the top
table.
As for Mirror readers, I suspect that the majority are either the voiceless or are too
busy fighting to avoid the fate of those who find themselves availing of food banks, while
being labelled as lazy scroungers all having expensive holidays, twenty kids, about thirty
grand a year, while being subjected to a now updated more vicious regime of that which was
illustrated by " I, Daniel Blake ".
If Neoliberalism is now being noticed I imagine that it is because of it's success in
working it's way up the food chain. After all these same Middle classes for the most part did
not care much for the plight of the poor during those Victorian values. Many could not wait
to employ maids of all work who slaved for up to fourteen hours a day with only Sunday
afternoon's off. The Suffragettes had a real problem with this as their relatively
comfortable lives would soon descend into drudgery without their servants.
Coincidentally, the NYT article on Austerity Britain is the closest I have read to an
accurate picture that I have seen for a good while.
It's also not a new thing. British media worship of neoliberalism has been growing since
the 1980s, at the same time as newspapers have been closing and media sources of all kinds
laying off their staff. 2008 was a temporary blip, and since the average journalist has the
attention span of a hamster, it was back to usual a few months later. Once the crash stopped
being "news" old patterns reasserted themselves. I wonder, incidentally, how many economics
journalists in the UK actually remember the time before neoliberalism?
"And so it seems we are living with a hyper-amnesia"
Consuming corporate media is increasingly a bizarro-world experience. Even something like
the Trump scandal/constitutional crisis/investigation seems like the arrogant internecine
warfare of corrupt factions of the establishment. Meanwhile, Americans are increasingly
living out of their cars.
The corporate media forgets the causes of the worst economic crisis since the Depression,
and it put Trump in a position to be elected. Trump was the Republican nominee because he was
relentlessly promoted by the media -- because ratings, because neoliberal rigged markets.
Break up the media monopolies, roll back Citizens United, enforce the fairness
doctrine.
" Consuming corporate media is increasingly a bizarro-world experience the Trump
scandal/constitutional crisis/investigation is nothing other than internecine warfare between
corrupt factions of the establishment."
I think there are several issues here for Americans, which can partially be applied to the
Europeans.
First, the American nation as whole only has short term memory. It is our curse.
Second, those with the money spend a lot of money, time and effort the late 19th century
covering up, massaging, or sometimes just creating lies about the past. American and British
businesses, governments, and even private organizations are masters at advertising and
propaganda. Perhaps the best on Earth.
Third, the people and the institutions that would counter this somewhat, independent
unions, multiple independent media, tenured professors at functioning schools, even
non-neoliberalized churches, and social organizations like bowling, crocheting, or heck, the
Masons would all maintain a separate continuing body of memory and knowledge.
Lastly, we are all freaking terrified somewhere inside us. Those relative few who
are not are fools, and most people, whatever their faults, truly are not fools. Even if they
act like one. Whatever your beliefs, position, or knowledge, the knowing of the oncoming
storm is in you. Money or poverty may not save you. The current set of lies, while they are
lies, gives everyone a comfortable known position of supporting or opposing in the same old,
same old while avoiding thinking about whatever catastrophe(s) and radical changes we all
know are coming. The lies are more relaxing than the truth.
Even if you are one of society's homeless losers, who would welcome some changes, would
you be comfortable thinking about just how likely it is to be very traumatic? Hiding behind
begging for change might be more comfortable.
"Even if you are one of society's homeless losers, who would welcome some changes, would
you be comfortable thinking about just how likely it is to be very traumatic? Hiding behind
begging for change might be more comfortable."
On the contrary, the upheaval the "losers" have been subjected to will be turned around
and used as a just cause for rectification. Trumatic consequences can be unpredictable and
this is why society should have socio-economic checks and balances to prevent an economic
system running amok. Commonsense that necessitates amnesia for neoliberalism to seem
viable.
1. Oligarchs having captured thoroughly the media, the legislatures and the judiciary, (as
well as large parts of what might be construed as "liberal" political organisations e.g. the
Democratic Party of the USA)
2. the seemingly inexorable trend to wealth concentration in the hands of said
oligarchs
..one asks oneself.."What is one to do?"
My own response, (and I acknowledge straight off its limited impact), is to do the
following:
1. support financially in the limited ways possible media channels such as Naked
Capitalism that do their level best to debunk the lies and deceptions perpetrated by the
oligarchs
2. support financially social organisations and structures that are genuinely citizen
based and focused on a sustainable future for all
3. Do very very limited monitoring of the oligarch's "lies and deceptions" (one needs to
understand one's enemies to have a chance to counter them) and try on a personal level, in
one's day to day interactions, to present counter arguments
We cannot throw in the towel. We must direct our limited financial resources and personal
efforts to constructive change, as, for the 99%..there are no "bunker" to run to when the
"proverbial" hits the fan..as it must in the fullness of time.
Yep. One has to go ahead and do what one can. It all makes a difference. Thanks for your
strategy, Peter Phillips. Limited impact is not no impact, and we don't have the luxury of
despairing because there is only a bit we can do.
Yet this has been going on forever – – this past Sunday, for the first time I
recall, I finally heard an accurate Real News story filed on the Bobby Kennedy assassination
(50th anniversary coming this June 6, 2018) by the BBC World Service.
They actually noted that there were multiple shooters, that Sen. Kennedy was shot from
behind, not the front where Sirhan was located, etc., etc.
I guess we do occasionally witness Real News – – – just that it takes 50
years or so to be reported . . .
In his final report in a three-part series, Guccifer 2's West
Coast Fingerprint , the Forensicator discovers evidence that at least one operator behind
the Guccifer 2.0 persona worked from the West Coast of the United States.
The Forensicator's earlier findings stated that Guccifer 2.0's NGP-VAN files were
accessed locally on the East Coast, and in another analysis they suggested
that a file published by Guccifer 2.0 was created in the Central time zone of the United
States. Most recently, a former DNC official refuted the DNC's initial allegations that Trump opposition files
had been ex-filtrated from the DNC by Russian state-sponsored operatives.
So, if Guccifer 2.0's role was negated by the statements of the DNC's own former "official"
in a 2017 report by the Associated Press
, why do we now return our attention to the Guccifer 2.0 persona, as we reflect on the last
section of new findings from the Forensicator?
The answer: Despite almost two years having passed since the appearance of the Guccifer 2.0
persona, legacy media is still trotting
out the shambling corpse of Guccifer 2.0 to revive the legitimacy of the Russian hacking
narrative. In other words, it is necessary to hammer the final nail into the coffin of the
Guccifer 2.0 persona.
As previously noted, In his final report in
a three-part series, the Forensicator
discusses concrete evidence that at least one operator behind the Guccifer 2.0 persona worked
from the West Coast of the United States. He writes:
"Finally, we look at one particular Word document that Guccifer 2 uploaded, which had
"track changes" enabled. From the tracking metadata we deduce the timezone offset in effect
when Guccifer 2 made that change -- we reach a surprising conclusion: The document was likely
saved by Guccifer 2 on the West Coast, US ."
The Forensicator spends the first part of his report evaluating indications that Guccifer
2.0 may have operated out of Russia. Ultimately, the Forensicator discards those tentative
results. He emphatically notes:
"The PDT finding draws into question the premise that Guccifer 2 was operating out of
Russia, or any other region that would have had GMT+3 timezone offsets in force. Essentially,
the Pacific Timezone finding invalidates the GMT+3 timezone findings previously
described."
The Forensicator's new West Coast finding is not the first evidence to indicate that
operators behind the Guccifer 2.0 persona were based in the US. Nine months ago,
Disobedient Media , reported on the Forensicator's analysis ,
which showed (among other things) that Guccifer 2.0's "ngpvan" archive was created on the East
Coast. While that report received the vast majority of attention from the public and legacy
media,
Disobedient Media later reported on another analysis done by the Forensicator, which
found that a file published by Guccifer 2.0 (on a different occasion) was probably created in
the Central Timezone of the US.
Adding to all of this, UK based analyst and independent journalist Adam Carter presented his own analysis which also showed
that the Guccifer 2.0 Twitter persona interacted on a schedule which was best explained by
having been based within the United States.
The chart above shows a box which spans regular working hours. It indicates that unless
Guccifer 2.0 worked the night shift, they were likely working out of the US. Though this last
data point is circumstantial, it is corroborated by the previously discussed pieces of
independently verifiable hard evidence described by the Forensicator.
When taking all of these separate pieces into account, one observes a convergence of
evidence that multiple US-based operators were behind the Guccifer 2.0 persona and its
publications. This is incredibly significant because it is based on multiple pieces of concrete
data; it does not rely on "anonymous sources within the government," nor contractors hired by
the DNC. As a result, much of the prior legacy press coverage of Guccifer 2.0 as a Russia-based
agent can be readily debunked.
Such tangible evidence stands in contrast to the claims made in a recently published
Daily Beast article, which reads more
like a gossip column than serious journalism. In the Daily Beast's recital, the outlet cites an
anonymous source who claims that a Moscow-based GRU agent was behind the Guccifer 2.0
operation, writing :
"Guccifer 2.0, the "lone hacker" who took credit for providing WikiLeaks with stolen
emails from the Democratic National Committee, was in fact an officer of Russia's military
intelligence directorate (GRU), The Daily Beast has learned. It's an attribution that
resulted from a fleeting but critical slip-up in GRU tradecraft.
But on one occasion, The Daily Beast has learned, Guccifer failed to activate the VPN
client before logging on. As a result, he left a real, Moscow-based Internet Protocol address
in the server logs of an American social media company, according to a source familiar with
the government's Guccifer investigation.
Working off the IP address, U.S. investigators identified Guccifer 2.0 as a particular GRU
officer working out of the agency's headquarters on Grizodubovoy Street in Moscow."
[The Daily Beast , March 22, 2018]
Clearly, the claim made in the Daily Beast's report is in direct contradiction with the
growing mound of evidence suggesting that Guccifer 2.0 operated out of the United States. A
detailed technical breakdown of the evidence confirming a West-Coast "last saved" time and how
this counters the claims of the Daily Beast can be found in the Forensicator's
work.
The Forensicator explained to Disobedient Media that their discovery process was initiated
by the following Tweet by Matt Tait ( @pwnallthings ), a security blogger and journalist.
Tait noticed a change revision entry in one of the Word documents published in Guccifer 2.0's
second
batch of documents, (uploaded 3 days after Guccifer 2.0 first appeared on the scene).
The Forensicator corrects Tait, stating that the timestamp is in "wall time," (local time)
not UTC. The Forensicator explains that Tait's mistake is understandable because the "Z" suffix
usually implies "Zulu" (GMT) time, but that isn't the case for "track changes" timestamps. The
Forensicator writes that the document Tait refers to in his Tweet is named
Hillary-for-America-fundraising-guidelines-from-agent-letter.docx ; it has Word's "track
changes" feature enabled. Guccifer 2.0 made a trivial change to the document, using the
pseudonym, "Ernesto Che," portrayed below:
The Forensicator correlated that timestamp ("12:56:00 AM") with the document's "last saved"
timestamp expressed in GMT, as shown below courtesy of the Forensicator's
study :
Based on the evidence discussed above, the Forensicator concludes that Guccifer 2.0 saved
this file on a system that had a timezone offset of -7 hours (the difference between 0:56 AM
and 7:56 AM GMT). Thus, the system where this document was last changed used Pacific Timezone
settings.
The logical conclusion drawn from the preceding analysis is that Guccifer 2.0 was operating
somewhere on the West Coast of the United States when they made their change to that document .
This single finding throws into shambles any other conclusions that might indicate that
Guccifer 2.0 was operating out of Russia. This latest finding also adds to the previously cited
evidence that the persona was probably operated by multiple individuals located in the United
States.
Taken all together, the factual basis of the Russian hacking story totally collapses. We are
left instead with multiple traces of a US-based operation that created the appearance of
evidence that Kremlin-allied hackers had breached the DNC network. Publicly available data
suggests that Guccifer 2.0 is a US-based operation. To this, we add:
The Forensicator's
recent findings that Guccifer 2.0 deliberately planted "Russian fingerprints" into his first
document, as reported by
Disobedient Media.
A former DNC official's statement that a document with so-called "Russian fingerprints"
was not in fact taken from the DNC, as reported by Disobedient
Media .
In the course of the last nine months this outlet has documented the work of the
Forensicator, which has indicated that not only were Guccifer 2.0's "ngp-van" files accessed
locally on the East Coast of the US, but also that several files published by the Guccifer 2.0
persona were altered and saved within the United States. The "Russian fingerprints" left on
Guccifer 2.0's first document have been debunked, as has the claim that the file itself was
extracted from the DNC network in the first place. On top of all this, a former DNC official
withdrew the DNC's initial allegations that supported the "Russian hack" claim in the first
place.
One hopes that with all of this information in mind, the long-suffering Guccifer 2.0 saga
can be laid to rest once and for all, at least for unbiased and critically thinking
observers.
Snowden talked about the NSA or is it CIA, had the ability to leave Russian
fingerprints.
All of this was the "insurance" to frame Trump who they knew would win when they saw that
Hillary rallies had 20 people only showing up few old lesbians and nobody else.
Meanwhile, Snowden risked his life and liberty to show us evidence that the NSA developed
technology to make it appear even with expert analysis that NSA hacking originated from a
foreign power.
While it is
undeniable that neoliberals routinely disparage the state, both back then and now, it does not
follow that they are politically libertarian or, as David Harvey would have it, that they are
implacably opposed to state interventions in the economy and society. Harvey's error is
distressing, since even Antonio Gramsci understood this: "Moreover, laissez-faire liberalism,
too, must be introduced by law, through the intervention of political power: it is an act of
will, not the spontaneous, automatic expression of economic facts." 6
From the 1940s onward, the distinguishing characteristic of neoliberal doctrines and practice
is that they embrace this prospect of repurposing the strong state to impose their vision of a
society properly open to the dominance of the market as they conceive it. Neoliberals from
Friedrich Hayek to James Buchanan to Richard Posner to Alexander Rüstow (who invented the
term Vitalpolitik , which became Foucault's "biopolitics") to Jacques Rueff, not to
mention a plethora of figures after 1970, all explicitly proposed policies to strengthen the
state. 7
Friedman's own trademark proposals, like putting the money supply on autopilot, or replacing
public schools with vouchers, required an extremely strong state to enforce them. While
neoliberal think tanks rile up the base with debt clocks and boogeyman statistics of ratios of
government expenditure to GDP, neoliberal politicians organize a host of new state activities
to fortify their markets. They extravagantly increase incarceration and policing of those whom
they deem unfit for the marketplace. They expand both state and corporate power to exercise
surveillance and manipulation of subject populations while dismantling judicial recourse to
resist such encroachments. Neoliberals introduce new property rights (like intellectual
property) to cement into place their extensions of market valuations to situations where they
were absent. They strengthen international sanctions such as the Trans-Pacific Partnership and
investor-state dispute settlement schemes to circumvent and neutralize national social
legislation they dislike. They bail out and subsidize private banking systems at the cost of
many multiples of existing national income. And they define corporations as legal persons in
order to facilitate the buying of elections.
The blue-sky writings of neoliberals with regard to the state are, if anything, even more
daunting. In the imaginary constitution proposed in Hayek's Law, Legislation and Liberty
, he suggests that politicians be rendered more powerful : in the imagined upper
legislative house, Hayek stipulates, only men of substantial property over age forty-five would
be eligible to vote or be elected; no political parties would be allowed; and each member would
stand for a hefty fifteen-year term. 8
This illustrates the larger neoliberal predisposition to be very leery of democracy, and thus
to stymie public participation through the concentration of political power in fewer hands.
James Buchanan proposed something very similar. 9
This is just about as far from libertarianism as one could get, short of brute
dictatorship.
So here is the answer to my first question: people think the label "neoliberalism" is an
awful neologism because the neoliberals have been so good at covering their tracks, obscuring
what they stand for, and denying the level of coherence which they have achieved in their long
march to legitimacy. Back when some of these proposals were just a gleam in Hayek's eye, they
did explicitly use the term "neoliberalism" to describe the project that, back then, did not
yet exist -- even Milton Friedman used it in print! 10
But once their program looked like it would start to jell, and subsequently start reshaping
both the state and the market more to their liking, they abruptly abjured any reference to that
label, and sometime in the later 1950s, following the lead of Hayek, they began to call
themselves "classical liberals." This attempt at rebranding was an utter travesty because, as
they moved from reconceptualization of one area of human experience to another, the resulting
doctrines contradicted classical liberalism point by point, and term by term. It might be
worthwhile for us who come after to insist upon the relevance of things that put the
neo- in neoliberalism.
What's New about Neoliberalism?
In a nutshell, classical liberalism imagined a night watchman state that would set the
boundaries for the natural growth of the market, like a shepherd tending his flock. Markets
were born, not made. The principles of good governance and liberty would be dictated by natural
rights of individual humans, or perhaps by the prudent accretion of tradition. People needed to
be nurtured first to find themselves, in order to act as legitimate citizens in liberal
society. Society would be protected from the disruptive character of the market by something
like John Stuart Mill's "harm principle": colloquially, the freedom of my fist stops at the
freedom of your face. The neoliberals were having none of that, and explicitly said so.
Far from trying to preserve society against the unintended consequences of the operations of
markets, as democratic liberalism sought to do, neoliberal doctrine instead set out actively to
dismantle those aspects of society which might resist the purportedly inexorable logic of
"catallactics," and to reshape it in the market's image. For neoliberals, freedom and the
market would be treated as identical. Their rallying cry was to remove the foundation of
liberty from natural rights or tradition, and reposition it upon an entirely novel theory
concerning what a market was, or should be. They could not acknowledge individual natural
rights, because they sought to tutor the masses to become the agent the market would be most
likely to deem successful. The market no longer gave you what you wanted; you had to capitulate
to what the market wanted. All areas of life could be better configured to behave as if they
were more market-like. Gary Becker, for example, a member of the Mont Pèlerin Society,
proposed a market-based approach to allow for a socially optimal level of crime, and advocated
a revolutionary extension of marginal calculus to include the "shadow costs" and benefits
associated with "children, prestige or esteem, health, altruism, envy, and pleasure of the
senses." Becker even proposed an economic model of the "dating market," one consequence of
which was the proposition that polygamy for successful, wealthy men could be politically
rationalized. And voilà! The Sunday New York Times produced an article saying
just that, as if it were real news. Classical liberals like Mill or Michael Oakeshott would be
spinning in their graves. 11
The intellectual content of neoliberalism is something that warrants sustained discussion,
but this can only happen once critical historians can admit they are no longer basing their
evaluations on the isolated writings of a single author. There is no convenient crib sheet
describing what the modern neoliberal thought collective (for brevity, NTC) actually believes.
Nevertheless, neoliberalism does have certain themes that are regularly sounded in emanations
from the NTC:
(1) "Free" markets do not occur naturally. They must be actively constructed through
political organizing.
(2) "The market" is an information processor, and the most efficient one possible -- more
efficient than any government or any single human ever could be. Truth can only be validated by
the market.
(3) Market society is, and therefore should be, the natural and inexorable state of
humankind.
(4) The political goal of neoliberals is not to destroy the state, but to take control of
it, and to redefine its structure and function, in order to create and maintain the
market-friendly culture.
(5) There is no contradiction between public/politics/citizen and
private/market/entrepreneur-consumer -- because the lat ter does and should
eclipse the former.
(6) The most important virtue -- more important than justice, or anything else -- is
freedom, defined "negatively" as "freedom to choose," and most importantly, defined as the
freedom to acquiesce to the imperatives of the market.
(7) Capital has a natural right to flow freely across national boundaries.
(8) Inequality -- of resources, income, wealth, and even political rights -- is a good
thing ; it prompts productivity, because people envy the rich and emulate them; people who
complain about inequality are either sore losers or old fogies, who need to get hip to the way
things work nowadays.
(9) Corporations can do no wrong -- by definition. Competition will take care of all
problems, including any tendency to monopoly.
(10) The market, engineered and promoted by neoliberal experts, can always provide solutions
to problems seemingly caused by the market in the first place: there's always "an app for
that."
(11) There is no difference between is and should be : "free" markets both
should be (normatively) and are (positively) the most efficient economic system,
and the most just way of doing politics, and the most empirically true
description of human behavior, and the most ethical and moral way to live -- which in
turn explains, and justifies, why their versions of "free" markets should be and, as
neoliberals build more and more power, increasingly are universal. 12
No wonder outsiders are dazed and confused. The neoliberal revolutionaries, contemptuous of
tradition, conjured a fake tradition to mask their true intentions. They did this while
explicitly abjuring the label of "conservative." But there is one more reason that outsiders
tend to think it a mistake to posit an effective intellectual formation called "neoliberalism."
Nowadays we doubt that ideas, and particularly political ideas, are the product of the
concerted efforts of some thought collective stretching over generations, engaging in critique
and reconstruction, fine-tuning and elaborating doctrine, while keeping focused upon problems
of implementation and feasibility. Indeed, that doubt is evidence of neoliberal preconceptions
having seeped into all of our thought processes. Yet that is an exact description of how
neoliberalism developed, in the manner (as I insist on calling it) of a thought collective:
sanctioned members are encouraged to innovate and embellish in small ways, but an excess of
doctrinal heresy gets one expelled from participation. Central dogmas are not codified or
dictated by any single prophet; no one delivers the Tablets down from the "Mont"; and you
cannot adequately understand neoliberalism solely by reading Hayek or Milton Friedman, for that
matter. While we can locate its origins in 1947, it has undergone much revision since then, and
is still a hydra-headed Gorgon to this very day.
The furor is all about the "illegitimate" victories of Brexit and Trump's campaign. Does the average user care if s/he is micro-targetted
by political advertisements based on what they already believe?
No, because they already believe they're right, so what's wrong with a little confirmation bias? Most of us spend significant
amounts of energy seeking out sources of information confirming what we already believe; micro-targetting just makes our lives
that little bit less effortful.
This hypothesis about JFK preserves currency for along time: "When JFK started dismantling the CIA Deep State and ending the
Cold War with the USSR, Dulles dispatched a CIA hit-squad to gun down the President. (RFK and Nixon immediately understood the assassination
was a CIA-led wet-works operation since they chaired the assassination committees themselves in the past). "
Notable quotes:
"... The liberal order aka the New British Empire, was born 70 years ago by firebombing and nuking undefended civilian targets. It proceeded to launch serial genocidal rampages in the Koreas, SE Asia, Latin America until finally burning down a large portion of the Middle East. ..."
"... The liberal order is dying because it is led by criminally depraved Predators who have pauperized the labor force and created political strife, though the populists don't pose much threat to the liberal-order Predators. ..."
"... However by shipping the productive Western economies overseas to Asia, the US in particular cannot finance and physically support a military empire or the required R&D to stay competitive on the commercial and military front. ..."
The usual self-serving swill from the Best and the Brightest of the Predator Class out of the CFR via Haas.
The liberal order aka the New British Empire, was born 70 years ago by firebombing and nuking undefended civilian targets.
It proceeded to launch serial genocidal rampages in the Koreas, SE Asia, Latin America until finally burning down a large portion
of the Middle East.
The fact that there has not been a catastrophic nuclear war is pure dumb luck. The Deep State came within seconds of engineering
a nuclear cataclysm off the waters of Cuba in 1962. When JFK started dismantling the CIA Deep State and ending the Cold War with
the USSR, Dulles dispatched a CIA hit-squad to gun down the President. (RFK and Nixon immediately understood the assassination
was a CIA-led wet-works operation since they chaired the assassination committees themselves in the past).
The liberal order is dying because it is led by criminally depraved Predators who have pauperized the labor force and created
political strife, though the populists don't pose much threat to the liberal-order Predators.
However by shipping the productive Western economies overseas to Asia, the US in particular cannot finance and physically
support a military empire or the required R&D to stay competitive on the commercial and military front.
So the US Imperialists are being eclipsed by the Sino-Russo Alliance and wants us to believe this is a great tragedy. Meanwhile
the same crew of Liberal -neoCon Deep Staters presses on with wars and tensions that are slipping out of control.
"... And, quoting his colleague Archon Fung from the Harvard Kennedy School, " American politics is no longer characterized by the rule of the median voter, if it ever was. Instead, in contemporary America the median capitalist rules as both the Democratic and Republican parties adjust their policies to attract monied interests." And finally Mr. Ringen adds, "American politicians are aware of having sunk into a murky bog of moral corruption but are trapped." ..."
"... Trump merely reflects the dysfunctionality and internal contradictions of American politics. He is the American Gorbachev, who kicked off perestroika at the wrong time. ..."
"... Global financial services exercise monopolistic power over national policies, unchecked by any semblance of global political power. Trust is haemorrhaging. The European Union, the greatest ever experiment in super-national democracy, is imploding ..."
"... Probably this is because the Western model of neoliberalism does not provide any real freedom of commerce, speech, or political activity, but rather imposes a regime of submission within a clearly defined framework. ..."
"... america is going through withdraw from 30 years of trickledown crap. the young are realizing that the shithole they inherit does not have to be a shithole, and the old pathetic white old men who run the show will be dead soon. ..."
"... The liberal order is dying because it is led by criminally depraved Predators who have pauperized the labor force and created political strife, though the populists don't pose much threat to the liberal-order Predators. ..."
"... However by shipping the productive Western economies overseas to Asia, the US in particular cannot finance and physically support a military empire or the required R&D to stay competitive on the commercial and military front. ..."
"... So the US Imperialists are being eclipsed by the Sino-Russo Alliance and wants us to believe this is a great tragedy. Meanwhile the same crew of Liberal -neoCon Deep Staters presses on with wars and tensions that are slipping out of control. ..."
Haass writes: " Liberalism is in retreat. Democracies are feeling the effects of growing populism. Parties of the political extremes
have gained ground in Europe. The vote in the United Kingdom in favor of leaving the EU attested to the loss of elite influence.
Even the US is experiencing unprecedented attacks from its own president on the country's media, courts, and law-enforcement institutions.
Authoritarian systems, including China, Russia, and Turkey, have become even more top-heavy. Countries such as Hungary and Poland
seem uninterested in the fate of their young democracies
"We are seeing the emergence of regional orders. Attempts to build global frameworks are failing."
Haass has previously made alarmist statements , but this
time he is employing his rhetoric to point to the global nature of this phenomenon. Although between the lines one can easily read,
first of all, a certain degree of arrogance -- the idea that only we liberals and globalists really know how to administer foreign
policy -- and second, the motifs of conspiracy.
"Today's other major powers, including the EU, Russia, China, India, and Japan, could be criticized for what they are doing,
not doing, or both."
Probably this list could be expanded by adding a number of Latin American countries, plus Egypt, which signs arms deals with North
Korea while denying any violation of UN sanctions, and the burgeoning Shiite axis of Iran-Iraq-Syria-Lebanon.
But Haass is crestfallen over the fact that it is Washington itself that is changing the rules of the game and seems completely
uninterested in what its allies, partners, and clients in various corners of the world will do.
" America's decision to abandon the role it has played for more than seven decades thus marks a turning point. The liberal
world order cannot survive on its own, because others lack either the interest or the means to sustain it. The result will be
a world that is less free, less prosperous, and less peaceful, for Americans and others alike."
Richard Haass's colleague at the CFR, Stewart Patrick, quite agrees with the claim that it is
the US itself that is burying the liberal world order . However, it's not doing it on its own, but alongside China. If the US
had previously been hoping that the process of globalization would gradually transform China (and possibly destroy it, as happened
to the Soviet Union earlier), then the Americans must have been quite surprised by how it has actually played out. That country modernized
without being Westernized, an idea that had once been endorsed by the leader of the Islamic revolution in Iran, Ayatollah Khomeini.
Now China is expanding its influence in Eurasia in its own way, and this is for the most part welcomed by its partner countries.
But this has been a painful process for the US, as it is steadily and irrevocably undermining its hegemony.
"Its long-term ambition is to dismantle the U.S. alliance system in Asia, replacing it with a more benign (from Beijing's perspective)
regional security order in which it enjoys pride of place, and ideally a sphere of influence commensurate with its power.
China's Belt and Road initiative is part and parcel of this effort, offering not only (much-needed) infrastructure investments
in neighboring countries but also the promise of greater political influence in Southeast, South, and Central Asia. More aggressively,
China continues to advance outrageous jurisdictional claims over almost the entirety of the South China Sea , where it continues
its island-building activities, as well as engaging in provocative actions against Japan in the East China Sea," writes Patrick.
And as for the US:
"The United States, for its part, is a weary titan, no longer willing to bear the burdens of global leadership, either economically
or geopolitically.
Trump treats alliances as a protection racket, and the world economy as an arena of zero-sum competition. The result is a fraying
liberal international order without a champion willing to invest in the system itself. "
One can agree with both authors' assessments of the changed behavior of one sector of the US establishment, but this is about
more than just Donald Trump (who is so unpredictable that he has
staffed his own team with a member of the very swamp he was preparing to drain) and North American populism. One needs to look
much deeper.
"Today, American democratic exceptionalism is defined by a system that is dysfunctional in all the conditions that are needed
for settlement and loyalty...
Capitalism has collapsed into crisis in an orgy of deregulation. Money is transgressing into politics and undermining democracy
itself ."
And, quoting his colleague Archon Fung from the Harvard Kennedy School, " American politics is no longer characterized by
the rule of the median voter, if it ever was. Instead, in contemporary America the median capitalist rules as both the Democratic
and Republican parties adjust their policies to attract monied interests." And finally Mr. Ringen adds, "American politicians are
aware of having sunk into a murky bog of moral corruption but are trapped."
Trump merely reflects the dysfunctionality and internal contradictions of American politics. He is the American Gorbachev,
who kicked off perestroika at the wrong time. Although it must be conceded that if Hillary Clinton had become president, the
US collapse would have been far more painful, particularly for the citizens of that country. We would have seen yet more calamitous
reforms, a swelling influx of migrants, a further decline in the nation's manufacturing base, and the incitement of new conflicts.
Trump is trying to keep the body of US national policy somewhat alive through hospice care, but what's really needed is a major restructuring,
including far-reaching political reforms that would allow the country's citizens to feel that they can actually play a role in its
destiny.
These developments have spread to many countries in Europe, a continent that, due to its transatlantic involvement, was already
vulnerable and susceptible to the current geopolitical turbulence. The emergence of which, by the way, was largely a consequence
of that very policy of neoliberalism.
Stein Ringen continues on that score:
"Global financial services exercise monopolistic power over national policies, unchecked by any semblance of global political
power. Trust is haemorrhaging. The European Union, the greatest ever experiment in super-national democracy, is imploding
"
It is interesting that panic has seized Western Europe and the US -- the home of transatlanticism, although different versions
of this recipe for liberalism have been employed in other regions -- suffice it to recall the experience of Singapore or Brazil.
But they don't seem as panicked there as in the West.
Probably this is because the Western model of neoliberalism does not provide any real freedom of commerce, speech, or political
activity, but rather imposes a regime of submission within a clearly defined framework. Therefore, the destruction of the current
system entails the loss of all those dividends previously enjoyed by the liberal political elites of the West that were obtained
by speculating in the stock market, from the mechanisms of international foreign-exchange payments (the dollar system), and through
the instruments of supranational organizations (the UN, WTO, and World Bank). And, of course, there are the fundamental differences
in the cultural varieties of societies.
In his book The Hidden God, Lucien Goldmann draws some interesting conclusions, suggesting that the foundations of Western culture
have rationalistic and tragic origins, and that a society immersed in these concepts that have "abolish[ed] both God and the community
[soon sees] the disappearance of any external norm which might guide the individual in his life and actions." And because by its
very nature liberalism must carry on, in its mechanical fashion, "liberating" the individual from any form of structure (social classes,
the Church, family, society, and gender, ultimately liberating man from his very self), in the absence of any standards of deterrence,
it is quite logical that the Western world was destined to eventually find itself in crisis. And the surge of populist movements,
protectionist measures, and conservative policies of which Haass and other liberal globalists speak are nothing more than examples
of those nations' instinct for self-preservation. One need not concoct conspiracy theories about Russia or Putin interfering in the
US election (which Donald Trump has also denied, noting only that support was seen for Hillary Clinton, and it is entirely true that
a portion of her financial backing did come from Russia). The baseline political decisions being made in the West are in step with
the current crisis that is evident on so many levels. It's just that, like always, the Western elites need their ritual whipping
boy(although it would be more accurate to call it a human sacrifice). This geopolitical shake-up began in the West as a result of
the implicit nature of the very project of the West itself.
But since alternative development scenarios exist, the current system is eroding away. And other political projects are starting
to fill the resultant ideological void -- in both form as well as content.
Thus it's fairly likely that the current crisis of liberalism will definitively bury the unipolar Western system of hegemony.
And the budding movements of populism and regional protectionism can serve as the basis for a new, multipolar world order.
Oh, Wicked Witch of the West Wing, the cleansing fire awaits thy demise! Those meds can only keep you standing for so long.
Keep tripping. Keep stumbling. Satan calls you to him. The day approacheth. Tick tock tick tock. 👹😂
Democracy ultimately melts down into chaos. We have a perfectly good US Constitution, why don't we go back to using it as written?
That said, I am for anything that makes the elites become common.
Democracy is a form of government. Populism is a movement. Populist movements come about when the current form of government
is failing ... historically it seems they seldom choose wisely.
Ridiculous cunt Hillary thinks after getting REJECTED by the voters in the USA that somehow being asked to "go the fuck away
and shut the fuck up" makes her a women's leader. The cocksucker Soros and some of these other non-elected globalist should keep
in mind that while everybody has a right to an opinion: it took the Clinton Crime Family and lots of corruption to create the
scandals that sets a Clinton Crime Family member aside, and why Soros was given a free pass on election meddling and not others
requires congressional investigation and a special prosecutor. And then there is that special kind of legal and ignorant opinion
like David Hogg who I just disagree with, making him in my opinion and many fellow NRA members a cocksucker and a cunt. I'd wish
shingles on David Hogg, Hillary Clinton, and Soros.
america is going through withdraw from 30 years of trickledown crap. the young are realizing that the shithole they inherit
does not have to be a shithole, and the old pathetic white old men who run the show will be dead soon.
all i see is a bunch of fleeting old people who found facebook 10 years late are temporarily empowered since they can now connect
with other equally impotent old people.
The usual self-serving swill from the Best and the Brightest of the Predator Class out of the CFR via Haas.
The liberal order aka the New British Empire, was born 70 years ago by firebombing and nuking undefended civilian targets.
It proceeded to launch serial genocidal rampages in the Koreas, SE Asia, Latin America until finally burning down a large portion
of the Middle East.
The fact that there has not been a catastrophic nuclear war is pure dumb luck. The Deep State came within seconds of engineering
a nuclear cataclysm off the waters of Cuba in 1962. When JFK started dismantling the CIA Deep State and ending the Cold War with
the USSR, Dulles dispatched a CIA hit-squad to gun down the President. (RFK and Nixon immediately understood the assassination
was a CIA-led wet-works operation since they chaired the assassination committees themselves in the past).
The liberal order is dying because it is led by criminally depraved Predators who have pauperized the labor force and created
political strife, though the populists don't pose much threat to the liberal-order Predators.
However by shipping the productive Western economies overseas to Asia, the US in particular cannot finance and physically
support a military empire or the required R&D to stay competitive on the commercial and military front.
So the US Imperialists are being eclipsed by the Sino-Russo Alliance and wants us to believe this is a great tragedy. Meanwhile
the same crew of Liberal -neoCon Deep Staters presses on with wars and tensions that are slipping out of control.
Liberalism is anything but liberal... and I suppose that is the problem with it. It aims to do to the western world what Mao
did to China and Stalin did to Russia. Many people were murdered or imprisoned and people had no rights, just obligations to dictators
and their cronies.
I think this world is past the point where any benefit is gained from having "owners of the people", benevolent or otherwise.
And we certainly do not benefit from perverted demonic entities even if they come bearing technology. The price is too high.
Populism goes along with essential freedoms for the human race.-
As I told the idiotic retards who argued with me on Prodigy fucking 27 years ago, China will not change because of increased
trading and the West making them wealthier. In fact, just the opposite. I wonder if they have caught on yet?
Like many high demand cults neoliberalism is a trap, from which it is very difficult to escape...
Notable quotes:
"... A large, open-border global free market would be left, not subject to popular control but managed by a globally dispersed, transnational one percent. And the whole process of making this happen would be camouflaged beneath the altruistic stylings of a benign humanitarianism. ..."
"... Globalists, as neoliberal capitalists are often called, also understood that democracy, defined by a smattering of individual rights and a voting booth, was the ideal vehicle to usher neoliberalism into the emerging world. Namely because democracy, as commonly practiced, makes no demands in the economic sphere. Socialism does. Communism does. These models directly address ownership of the means of production. Not so democratic capitalism. This permits the globalists to continue to own the means of production while proclaiming human rights triumphant in nations where interventions are staged. ..."
"... The enduring lie is that there is no democracy without economic democracy. ..."
This 'Washington Consensus' is the false promise promoted by the West. The reality is quite
different. The crux of neoliberalism is to eliminate democratic government by downsizing,
privatizing, and deregulating it. Proponents of neoliberalism recognize that the state is the
last bulwark of protection for the common people against the predations of capital. Remove the
state and they'll be left defenseless .
Think about it. Deregulation eliminates the laws. Downsizing eliminates departments and their
funding. Privatizing eliminates the very purpose of the state by having the private sector take
over its traditional responsibilities.
Ultimately, nation-states would dissolve except perhaps for armies and tax systems. A large, open-border global free
market would be left, not subject to popular control but managed by a globally dispersed, transnational one percent. And the
whole process of making this happen would be camouflaged beneath the altruistic stylings of a benign humanitarianism.
Globalists, as neoliberal capitalists are often called, also understood that democracy, defined
by a smattering of individual rights and a voting booth, was the ideal vehicle to usher
neoliberalism into the emerging world. Namely because democracy, as commonly practiced, makes
no demands in the economic sphere. Socialism does. Communism does. These models directly
address ownership of the means of production. Not so democratic capitalism. This permits the
globalists to continue to own the means of production while proclaiming human rights triumphant
in nations where interventions are staged.
The enduring lie is that there is no democracy
without economic democracy.
What matters to the one percent and the media conglomerates that disseminate their worldview is
that the official definitions are accepted by the masses. The real effects need never be known.
The neoliberal ideology (theory) thus conceals the neoliberal reality (practice). And for the
masses to accept it, it must be mass produced. Then it becomes more or less invisible by virtue
of its universality.
"... In a short span of time in the 1970s, dozens of think tanks were established across the western world and billions of dollars were spent proselytizing the tenets of the Powell Memo in 1971, which galvanized a counter-revolution to the liberal upswing of the Sixties. The neoliberal economic model of deregulation, downsizing, and privatization was preached by the Reagan-Thatcher junta, liberalized by the Clinton regime, temporarily given a bad name by the unhinged Bush administration, and saved by telegenic restoration of the Obama years. ..."
"... Today think tanks like the Heritage Foundation, the Brookings Institute, Stratfor, Cato Institute, American Enterprise Institute, Council on Foreign Relations, Carnegie Endowment, the Open Society Foundation, and the Atlantic Council, among many others, funnel millions of dollars in donations into cementing neoliberal attitudes in the American mind. ..."
"... The ideological assumptions, which serve to justify what you could call neocolonial tactics, are relatively clear: the rights of the individual to be free of overreach from monolithic institutions like the state. Activist governments are inherently inefficient and lead directly to totalitarianism. Markets must be free and individuals must be free to act in those markets. People must be free to choose, both politically and commercially, in the voting booth and at the cash register. ..."
"... This conception of markets and individuals is most often formulated as "free-market democracy," a misleading conceit that conflates individual freedom with the economic freedom of capital to exploit labor. So when it comes to foreign relations, American and western aid would only be given on the condition that the borrowers accepted the tenets of an (highly manipulable) electoral system and vowed to establish the institutions and legal structures required to fully realize a western market economy. ..."
In Christopher Nolan's captivating and visually dazzling film Inception, a practitioner of
psychic corporate espionage must plant and idea inside a CEO's head. The process is called
inception, and it represents the frontier of corporate influence, in which mind spies no longer
just "extract" ideas from the dreams of others, but seed useful ideas in a target's
subconscious.
Inception is a well-crafted piece of futuristic sci-fi drama, but some of the ideas it
imparts are already deeply embedded in the American subconscious.
The notion of inception, of hatching an idea in the mind of a man or woman without his or
her knowledge, is the kernel of propaganda, a black art practiced in the States since the First
World War. Today we live beneath an invisible cultural hegemony, a set of ideas implanted in
the mass mind by the U.S. state and its corporate media over decades. Invisibility seems to
happen when something is either obscure or ubiquitous. In a propaganda system, an overarching
objective is to render the messaging invisible by universalizing it within the culture.
Difference is known by contrast. If there are no contrasting views in your field of vision,
it's easier to accept the ubiquitous explanation. The good news is that the ideology is
well-known to some who have, for one lucky reason or another, found themselves outside the
hegemonic field and are thus able to contrast the dominant worldview with alternative opinions.
On the left, the ruling ideology might be described as neoliberalism, a particularly vicious
form of imperial capitalism that, as would be expected, is camouflaged in the lineaments of
humanitarian aid and succor.
Inception 1971
In a short span of time in the 1970s, dozens of think tanks were established across the
western world and billions of dollars were spent proselytizing the tenets of the Powell
Memo in 1971, which galvanized a counter-revolution to the liberal upswing of the Sixties.
The neoliberal economic model of deregulation, downsizing, and privatization was preached by
the Reagan-Thatcher junta, liberalized by the Clinton regime, temporarily given a bad name by
the unhinged Bush administration, and saved by telegenic restoration of the Obama years.
The
ideology that underlay the
model saturated academia, notably at the University of Chicago, and the mainstream media,
principally at The New York Times. Since then it has trickled down to the general populace, to
whom it now feels second nature.
Today think tanks like the Heritage Foundation, the Brookings
Institute, Stratfor, Cato Institute, American Enterprise Institute, Council on Foreign
Relations, Carnegie Endowment, the Open Society Foundation, and the Atlantic Council, among
many others, funnel millions of dollars in donations into cementing neoliberal attitudes in the
American mind.
The ideological assumptions, which serve to justify what you could call neocolonial tactics,
are relatively clear: the rights of the individual to be free of overreach from monolithic
institutions like the state. Activist governments are inherently inefficient and lead directly
to totalitarianism. Markets must be free and individuals must be free to act in those markets.
People must be free to choose, both politically and commercially, in the voting booth and at
the cash register.
This conception of markets and individuals is most often formulated as
"free-market democracy," a misleading conceit that conflates individual freedom with the
economic freedom of capital to exploit labor. So when it comes to foreign relations, American
and western aid would only be given on the condition that the borrowers accepted the tenets of
an (highly manipulable) electoral system and vowed to establish the institutions and legal
structures required to fully realize a western market economy.
These demands were supplemented
with notions of the individual right to be free of oppression, some fine rhetoric about women
and minorities, and somewhat more quietly, a judicial understanding that corporations were
people, too. Together, an unshackled economy and an unfettered populace, newly equipped with
individual rights, would produce the same flourishing and nourishing demos of mid-century
America that had been the envy of humanity.
The crisis of neoliberalism is at the core of current anti-Russian campaign.
Notable quotes:
"... So, as long as Russia remained open to the West's political maneuvering and wholesale thievery, every thing was hunky-dory. But as soon as Vladimir Putin got his bearings (during his second term as President) and started reassembling the broken state, then western elites became very concerned and denounced Putin as an "autocrat" and a "KGB thug." ..."
"... As the Western countries' elites were implementing a policy of political and economic containment of Russia, old threats were growing and new ones were emerging in the world, and the efforts to do away with them have failed. I think that the main reason for that is that the model of "West-centric" globalization, which developed following the dismantling of the bipolar architecture and was aimed at ensuring the prosperity of one-seventh of the world's population at the expense of the rest, proved ineffective. It is becoming more and more obvious that a narrow group of "chosen ones" is unable to ensure the sustainable growth of the global economy on their own and solve such major challenges as poverty, climate change, shortage of food and other vital resources . ..."
"... The American people need to look beyond the propaganda and try to grasp what's really going on. Russia is not Washington's enemy, it's a friend that's trying to nudge the US in adirection that will increase its opportunities for peace and prosperity in the future. Lavrov is simply pointing out that a multipolar world is inevitable as economic power becomes more widespread. This emerging reality means the US will have to modify its behavior, cooperate with other sovereign nations, comply with international law, and seek a peaceful settlement to disputes. It means greater parity between the states, fairer representation in global decision-making, and a narrower gap between the world's winners and losers. ..."
"... Admit it: The imperial model has failed. It's time to move on. ..."
The United States has launched a three-pronged offensive on Russia. First, it's attacking Russia's economy via sanctions and oil-price
manipulation. Second, it's increasing the threats to Russia's national security by arming and training militant proxies in Syria
and Ukraine, and by encircling Russia with NATO forces and missile systems. And, third, it's conducting a massive disinformation
campaign aimed at convincing the public that Russia is a 'meddling aggressor' that wants to destroy the foundation of American democracy.
(Elections)
In response to Washington's hostility, Moscow has made every effort to extend the olive branch. Russia does not want to fight
the world's biggest superpower any more than it wants to get bogged down in a bloody and protracted conflict in Syria. What Russia
wants is normal, peaceful relations based on respect for each others interests and for international law. What Russia will not tolerate,
however, is another Iraq-type scenario where the sovereign rights of a strategically-located state are shunted off so the US can
arbitrarily topple the government, decimate the society and plunge the region deeper into chaos. Russia won't allow that, which is
why it has put its Airforce at risk in Syria, to defend the foundational principle of state sovereignty upon which the entire edifice
of global security rests.
The majority of Americans believe that Russia is the perpetrator of hostilities against the United States, mainly because the
media and the political class have faithfully disseminated the spurious claims that Russia meddled in the 2016 elections. But the
allegations are ridiculous and without merit. Russia-gate is merely the propaganda component of Washington's Full Spectrum Dominance
theory, that is, disinformation is being used to make it appear as though the US is the victim when, in fact, it is the perpetrator
of hostilities against Russia. Simply put, the media has turned reality on its head. Washington wants to inflict as much pain as
possible on Russia because Russia has frustrated its plan to control critical resources and pipeline corridors in Central Asia and
the Middle East. The Trump administration's new National Defense Strategy is quite clear on this point. Russia's opposition to Washington's
destabilizing interventions has earned it the top spot on the Pentagon's "emerging rivals" list. Moscow is now Public Enemy#1.
Washington's war on Russia has a long history dating back at least 100 years to the Bolshevik Revolution of 1917. Despite the
fact that the US was engaged in a war with Germany at the time (WW1), Washington and its allies sent 150,000 men from 15 nations
to intervene on behalf of the "Whites" hoping to staunch the spread of communism into Europe. In the words of British Prime Minister
Winston Churchill, the goal was "to strangle the Bolshevik baby in its crib."
According to Vasilis Vourkoutiotis from the University of Ottawa:
" the Allied intervention in the Russian Civil War.. was a failed attempt to eradicate Bolshevism while it was still weak .As
early as February 1918 Britain supported intervention in the civil war on behalf of the Whites, and in March it landed troops
in Murmansk. They were soon joined by forces from France, Italy, Japan, the United States, and ten other nations. Eventually,
more than 150,000 Allied soldiers served in Russia
The scale of the war between the Russian Reds and Whites, however, was such that the Allies soon realized they would have little,
if any, direct impact on the course of the Civil War unless they were prepared to intervene on a far grander scale. By the end
of April 1919 the French had withdrawn their soldiers .British and American troops saw some action in November 1918 on the Northern
Front but this campaign was of limited significance in the outcome of the Civil War. The last British and American soldiers were
withdrawn in 1920. The main Allied contributions to the White cause thereafter were supplies and money, mostly from Britain .
The chief purpose of Allied intervention in Soviet Russia was to help the Whites defeat the Reds and destroy Bolshevism." (Allied
Intervention in the Russian Revolution", portalus.ru)
The reason we bring up this relatively unknown bit of history is because it helps to put current events into perspective. First,
it helps readers to see that Washington has been sticking its nose in Russia's business more than a century. Second, it shows that–
while Washington's war on Russia has ebbed and flowed depending on the political situation in Moscow– it has never completely ended.
The US has always treated Russia with suspicion, contempt and brutality. During the Cold War, when Russia's global activities put
a damper on Washington's depredations around the world, relations remained stretched to the breaking point. But after the Soviet
Union collapsed in December, 1991, relations gradually thawed, mainly because the buffoonish Boris Yeltsin opened the country up
to a democratization program that allowed the state's most valuable strategic assets to be transferred to voracious oligarchs for
pennies on the dollar. The plundering of Russia pleased Washington which is why it sent a number of prominent US economists to Moscow
to assist in the transition from communism to a free-market system. These neoliberal miscreants subjected the Russian economy to
"shock therapy" which required the auctioning off of state-owned resources and industries even while hyperinflation continued to
rage and the minuscule life savings of ordinary working people were wiped out almost over night. The upshot of this Washington-approved
looting-spree was a dramatic uptick in extreme poverty which intensified the immiseration of tens of millions of people. Economist
Joseph Stiglitz followed events closely in Russia at the time and summed it up like this:
"In Russia, the people were told that capitalism was going to bring new, unprecedented prosperity. In fact, it brought unprecedented
poverty, indicated not only by a fall in living standards, not only by falling GDP, but by decreasing life spans and enormous
other social indicators showing a deterioration in the quality of life ..
(Due to) the tight monetary policies that were pursued firms didn't have the money to even pay their employees . they didn't
have enough money to pay their pensioners, to pay their workers .Then, with the government not having enough revenue, other aspects
of life started to deteriorate. They didn't have enough money for hospitals, schools. Russia used to have one of the good school
systems in the world; the technical level of education was very high. (But they no longer had) enough money for that. So it just
began to affect people in every dimension of their lives .
The number of people in poverty in Russia, for instance, increased from 2 percent to somewhere between 40 and 50 percent, with
more than one out of two children living in families below poverty. The market economy was a worse enemy for most of these people
than the Communists had said it would be. It brought Gucci bags, Mercedes, the fruits of capitalism to a few .But you had a shrinking
(economy). The GDP in Russia fell by 40 percent. In some (parts) of the former Soviet Union, the GDP, the national income, fell
by over 70 percent. And with that smaller pie it was more and more unequally divided, so a few people got bigger and bigger slices,
and the majority of people wound up with less and less and less . (PBS interview with Joseph Stiglitz, Commanding Heights)
So, as long as Russia remained open to the West's political maneuvering and wholesale thievery, every thing was hunky-dory.
But as soon as Vladimir Putin got his bearings (during his second term as President) and started reassembling the broken state, then
western elites became very concerned and denounced Putin as an "autocrat" and a "KGB thug." At the same time, Washington continued
its maniacal push eastward using its military catspaw, NATO, to achieve its geopolitical ambitions to control vital resources and
industries in the most populous and prosperous region of the coming century, Eurasia. After promising Russian President Gorbachev
that NATO would never "expand one inch to the east", the US-led military alliance added 13 new countries to its membership, all of
them straddling Russia's western flank, all of them located, like Hitler, on Russia's doorstep, all of them posing an existential
threat to Russia's survival. NATO forces now routinely conduct provocative military drills just miles from the Russian border while
state-of-the-art missile systems surround Russia on all sides. (Imagine Russia conducting similar drills in the Gulf of Mexico or
on the Canadian border. How would Washington respond?)
Russian Foreign Minister Sergey Lavrov gave an excellent summary of post Cold War history at a gathering of the Korber Foundation
in Berlin in 2017. Brainwashed Americans who foolishly blame Russia for meddling in the 2016 elections, should pay attention to what
he said.
LAVROV– "Ever since the fall of the Berlin Wall we have shown our cards, trying to do our best to assert the values of equal
partnership in international affairs .Back in the early 1990s, we withdrew our troops from Eastern and Central Europe and the
Baltic states and dramatically downsized our military capacity near our western borders
When the cold war era came to an end, Russia was hoping that this would become our common victory – the victory of both the
former Communist bloc countries and the West. The dreams of ushering in shared peace and cooperation seemed near to fruition.
However, the United States and its allies decided to declare themselves the sole winners, refusing to work together to create
the architecture of equal and indivisible security. They made their choice in favor of shifting the dividing lines to our borders
– through expanding NATO and then through the implementation of the EU's Eastern Partnership program
As the Western countries' elites were implementing a policy of political and economic containment of Russia, old threats
were growing and new ones were emerging in the world, and the efforts to do away with them have failed. I think that the main
reason for that is that the model of "West-centric" globalization, which developed following the dismantling of the bipolar architecture
and was aimed at ensuring the prosperity of one-seventh of the world's population at the expense of the rest, proved ineffective.
It is becoming more and more obvious that a narrow group of "chosen ones" is unable to ensure the sustainable growth of the global
economy on their own and solve such major challenges as poverty, climate change, shortage of food and other vital resources .
The latest events are clear evidence that the persistent attempts to form a unipolar world order have failed .The new centers
of economic growth and concomitant political influence are assuming responsibility for the state of affairs in their regions.
Let me reiterate that the emergence of multipolar world order is a fact and a reality. Seeking to hold back this process and keep
the unfairly gained privileged positions is going to lead nowhere. We see increasing examples of nations raising their voice in
defense of their right to decide their own destiny ." (Sergey Lavrov, Russian Foreign Minister)
The American people need to look beyond the propaganda and try to grasp what's really going on. Russia is not Washington's
enemy, it's a friend that's trying to nudge the US in adirection that will increase its opportunities for peace and prosperity in
the future. Lavrov is simply pointing out that a multipolar world is inevitable as economic power becomes more widespread. This emerging
reality means the US will have to modify its behavior, cooperate with other sovereign nations, comply with international law, and
seek a peaceful settlement to disputes. It means greater parity between the states, fairer representation in global decision-making,
and a narrower gap between the world's winners and losers.
Who doesn't want this? Who doesn't want to see an end of the bloody US-led invasions, the countless drone assassinations, the
vast destruction of ancient civilizations, and the senseless slaughter of innocent men, women and children? Who doesn't want to see
Washington's wings clipped so the bloodletting stops and the millions of refugees and internally displaced can return to their homes?
Lavrov offers a vision of the future that all peace-loving people should welcome with open arms.
Admit it: The imperial model has failed. It's time to move on.
"... he Dems disgust me with their neo-McCarthyism and the Repubs disgust me because of the way they are playing out their hand right now as well. Games within corrupt games, and yet normal behavior especially in waning empires (or other types of polities, including powerful int'l corporations). ..."
"... Chapter 14 of Guns, Germs and Steel is titled "From Egalitarianism to Kleptocracy" and it used to be available online but my old link is dead and I couldn't find a new one. But a basic definition should suffice: "Kleptocracy, alternatively cleptocracy or kleptarchy, is a form of political and government corruption where the government exists to increase the personal wealth and political power of its officials and the ruling class at the expense of the wider population, often without pretense of honest service." I have no idea how one turns this around and I doubt it's even possible. ..."
"... The Real Reason Establishment Frauds Hate Trump and Obsess About Russia https://libertyblitzkrieg.com/2018/02/20/the-real-reason-establishment-frauds-hate-trump-and-obsess-about-russia/ ..."
"... Blaming Russia for all the nation's problems serves several key purposes for various defenders of the status quo. For discredited neocons and neoliberals who never met a failed war based on lies they didn't support, it provides an opportunity to rehabilitate their torched reputations by masquerading as fierce patriots against the latest existential enemy. Similarly, for those who lived in denial about who Obama really was for eight years, latching on to the Russia narrative allows them to reassure themselves that everything really was fine before Trump and Russia came along and ruined the party. ..."
"... he doesn't provide the same feel good quality to empire that Obama did. He's simply not the warm and fuzzy salesman for oligarchy and empire Obama was, thus his inability to sugarcoat state-sanctioned murder forces a lot of people to confront the uncomfortable hypocrisies in our society that many would prefer not to admit. ..."
"... I can't stand Kushner's smirky face and got a good chuckle from this prince's fall as I am not a fan of his passion for Israel. But I don't think he's a stupid idiot either. He's probably very smart in business, but he seems to have no feel for politics. Trump is much better at it than Kushner. Of course they are going after Kushner as a way to attack and disadvantage Trump. Politics is a form of warfare after all. ..."
"... My take is that Trump survives but mostly contained by the Borg ..."
jsn @16 & 40, in complete agreement with you. Great comments! T he Dems disgust me
with their neo-McCarthyism and the Repubs disgust me because of the way they are playing out
their hand right now as well. Games within corrupt games, and yet normal behavior especially
in waning empires (or other types of polities, including powerful int'l corporations).
Chapter 14 of Guns, Germs and Steel is titled "From Egalitarianism to Kleptocracy" and
it used to be available online but my old link is dead and I couldn't find a new one. But a
basic definition should suffice: "Kleptocracy, alternatively cleptocracy or kleptarchy, is a
form of political and government corruption where the government exists to increase the
personal wealth and political power of its officials and the ruling class at the expense of
the wider population, often without pretense of honest service." I have no idea how one turns
this around and I doubt it's even possible.
Back when I used to subscribe to STRATFOR, founder George Friedman always made a point of
evaluating the elites of whatever country he was analyzing and how they operated amongst
themselves and relative to the people and how effective they were or were not in governing a
country. But he never did that for the US. I would have paid extra for that report! But of
course he could not stay in business if he did such a thing as those people are his
clients.
I think Mike Krieger over at Liberty Blitzkrieg nails it from another perspective with
this post:
Blaming Russia for all the nation's problems serves several key purposes for various
defenders of the status quo. For discredited neocons and neoliberals who never met a failed
war based on lies they didn't support, it provides an opportunity to rehabilitate their
torched reputations by masquerading as fierce patriots against the latest existential enemy.
Similarly, for those who lived in denial about who Obama really was for eight years, latching
on to the Russia narrative allows them to reassure themselves that everything really was fine
before Trump and Russia came along and ruined the party.
By throwing every problem in Putin's lap, the entrenched bipartisan status quo can tell
themselves (and everybody else) that it wasn't really them and their policies that voters
rejected in 2016, rather, the American public was tricked by cunning, nefarious Russians.
Ridiculous for sure, but never underestimate the instinctive human desire to deny
accountability for one's own failures. It's always easier to blame than to accept
responsibility.
That said, there's a much bigger game afoot beyond the motivations of individuals looking
to save face. The main reason much of the highest echelons of American power are united
against Trump has nothing to do with his actual policies. Instead, they're terrified that --
unlike Obama -- he's a really bad salesman for empire. This sort of Presidential instability
threatens the continuance of their well oiled and exceedingly corrupt gravy train. Hillary
Clinton was a sure thing, Donald Trump remains an unpredictable wildcard.
... Obama said all the right things while methodically doing the bidding of oligarchy. He
captured the imagination of millions, if not billions, around the world with his soaring
rhetoric, yet rarely skipped a beat when it came to the advancement of imperial policies. He
made bailing out Wall Street, droning civilians and cracking down on journalists seem
progressive. He said one thing, did another, and people ate it up. This is an extraordinarily
valuable quality when it comes to a vicious and unelected deep state that wants to keep a
corrupt empire together.
Trump has the exact opposite effect. Sure, he also frequently says one thing and then does
another, but he doesn't provide the same feel good quality to empire that Obama did. He's
simply not the warm and fuzzy salesman for oligarchy and empire Obama was, thus his inability
to sugarcoat state-sanctioned murder forces a lot of people to confront the uncomfortable
hypocrisies in our society that many would prefer not to admit.
------------
I can't stand Kushner's smirky face and got a good chuckle from this prince's fall as
I am not a fan of his passion for Israel. But I don't think he's a stupid idiot either. He's
probably very smart in business, but he seems to have no feel for politics. Trump is much
better at it than Kushner. Of course they are going after Kushner as a way to attack and
disadvantage Trump. Politics is a form of warfare after all.
My take is that Trump survives but mostly contained by the Borg
Money quote: "And even given that, I would have to qualify the nature of the threats. Russia and China are best described as adversaries
or competitors rather than enemies as they have compelling interests to avoid war, even if Washington is doing its best to turn them
hostile. Neither has anything to gain and much to lose by escalating a minor conflict into something that might well start World War
3. Indeed, both have strong incentives to avoid doing so, which makes the actual threat that they represent more speculative than real.
And, on the plus side, both can be extremely useful in dealing with international issues where Washington has little or no leverage,
to include resolving the North Korea problem and Syria, so the US has considerable benefits to be gained by cultivating their cooperation."
Notable quotes:
"... And even given that, I would have to qualify the nature of the threats. Russia and China are best described as adversaries or competitors rather than enemies as they have compelling interests to avoid war, even if Washington is doing its best to turn them hostile. Neither has anything to gain and much to lose by escalating a minor conflict into something that might well start World War 3. Indeed, both have strong incentives to avoid doing so, which makes the actual threat that they represent more speculative than real. And, on the plus side, both can be extremely useful in dealing with international issues where Washington has little or no leverage, to include resolving the North Korea problem and Syria, so the US has considerable benefits to be gained by cultivating their cooperation. ..."
"... Cohen-Watnick is thirty years old and has little relevant experience for the position he holds, senior director for intelligence on the National Security Council. But his inexperience counts for little as he is good friend of son-in-law Jared Kushner. He has told the New York Times ..."
"... Both Cohen-Watnick and Harvey share the neoconservative belief that the Iranians and their proxies in Syria and Iraq need to be confronted by force, an opportunity described by Foreign Policy ..."
"... What danger to the U.S. or its actual treaty allies an Iranian influenced land corridor would constitute remains a mystery but there is no shortage of Iran haters in the White House. Former senior CIA analyst Paul Pillar sees "unrelenting hostility from the Trump administration" towards Iran and notes "cherry-picking" of the intelligence to make a case for war, similar to what occurred with Iraq in 2002-3. And even though Secretary of Defense James Mattis and National Security Advisor H.R. McMaster have pushed back against the impulsive Cohen-Watnick and Harvey, their objections are tactical as they do not wish to make U.S. forces in the region vulnerable to attacks coming from a new direction. Otherwise they too consider Iran as America's number one active enemy and believe that war is inevitable. Donald Trump has unfortunately also jumped directly into the argument on the side of Saudi Arabia and Israel, both of which would like to see Washington go to war with Tehran on their behalf. ..."
"... You forgot the third significant potential threat from a friendly nation, i.e. Israel. Israel will sabotage any effort to normallize relations with Russia or even Iran. They will resort to false flag operations to start a war with Iran. ..."
"... The problem with this White House, as well as the previous ones, is that none of the so-called experts really understand the Middle East. The US is not interested in having friendly relations with all nations. All her efforts are towards one goal, the world domination. Even if President Trump wanted to normalize relations with Russia, the MSM, the democrats, as well as, his republican opponents will not let him. ..."
"... That is why the constan drumbeat of Russia's meddling in the 2016 election despite the fact that no proof has been given so far. Similarly, the "Iran has nuclear weapons" narrative is constantly repeated, the reports by IAEA and the 17 Intelligence Agencies to the contrary not withstanding. ..."
"... The elevation of Muhammad bin Salman to the Crown Prince position will only make the Middle East situation worse. Israel will be able to manipulate him much more easily than the old guard. ..."
"... The titanic elephant in the room -- that US foreign policy is not governed by "rationality" but by "special interests" seems .missing ..."
"... Trump has no control of most government functions, particularly foreign affairs. The Deep State takes care of that for him. The Deep State has been calling the shots for decades and all Presidents who weren't assassinated have complied. Democracies never work and ours quit long ago. ..."
"... I fully agree that attacking Iran would be yet another disaster but I don't understand why Saudi Arabia is portrayed as an 'enemy', the 'real' one, no less, in alt-media circles like this. I mean let's be honest with ourselves. KSA is the definition of a vassal state. Has been so since the state established established relations with the USA in the 1940s and the status was confirmed during the 1960s under King Faisal. Oil for security. Why pretend that they have any operational clearance from the US? ..."
"... The BIGGEST threat to the USA is from within, as we are nothing more than an occupied colony of Apartheid Israel, paying that bastard state tributes each year in the form of free money and weapons, political backing at the UN, and never tire of fighting her wars of conquest. ..."
"... The also have a choke-hold on Congress, which is always eager to wag their tail and hope their Yid Overlord gives them a treat and not a dressing-down in the Jew MSM, which is a career killer. ..."
"... Israel's current "agreements" and its "kowtowing" to Saudi Arabia speaks VOLUMES. Once again, Israel is about to get others to do their "dirty work" for them. ..."
"... There's no alternative to Saudi royal family rule of the peninsula. Who's there to replace them? Any other group, assuming there might be one somewhere waiting in the wings, would probably be anti-American and not as compliant as the Saudis. They've spent gigantic sums in the endless billions buying military equipment from the US, weapons they can't even fully use, as a way of making themselves indispensable customers. Many other billions of petrodollars find their way westward into our financial systems. They collaborate with the US in various schemes throughout the Muslim world using their intelligence services and money in furtherance of US goals. ..."
"... Mattis still seems stuck with his Iran obsession. Shame I thought he had the intellectual curiosity to adapt. Trump has good instincts, I hope Tillerson comes to the fore, and Bannon stays influential. ..."
"... Iran is US enemy #1 not only because it is against that country smaller than New Jersey with less people (Israel) but also because Iran has been a model for other countries to follow because of its intransigence to US oppression and attacks, financial political and cyber. As the world becomes multi-polar, Iran's repeated wise reactions to the world hegemon have been an inspiration to China and others to go their own way. The US can't stand that. ..."
"... Contrary to the popular view, Wahabism is necessary to keep the local population under control. Particularly the minority Shia population who live along the eastern coast, an area, which incidentally also has the all the oil reserves. USA fully understands this. Which is why they not only tolerated Wahabism, but strongly promoted it during Afghan jihad. The operation was by and large very successful btw. It was only during the '90s when religion became the new ideology for the resistance against the empire across the Muslim world. Zero surprise there because the preceding ideology, radical left wing politics was completely defeated. Iran became the first country in this pattern. The Iranian left was decimated by the Shah, another vassal. So the religious right became the new resistance. ..."
"... And as far as the KSA is considered, Wahabi preachers aren't allowed to attack the USA anyway. If any individual preacher so much as makes a squeak, he will be bent over a barrel. There won't be any "coming down very hard on Saudi Arabia" because USA already owns that country. ..."
"... The British Empire 'made' the House of Saud. Thinking it wise to use Wahhabism to control Shia Islam is like thinking it wise to use blacks to control the criminal tendencies of Mexicans. ..."
It is one of the great ironies that the United States, a land mass protected by two broad oceans while also benefitting from the
world's largest economy and most powerful military, persists in viewing itself as a potential victim, vulnerable and surrounded by
enemies. In reality, there are only two significant potential threats to the U.S. The first consists of the only two non-friendly
countries – Russia and China – that have nuclear weapons and delivery systems that could hit the North American continent and the
second is the somewhat more amorphous danger represented by international terrorism.
And even given that, I would have to qualify the nature of the threats. Russia and China are best described as adversaries
or competitors rather than enemies as they have compelling interests to avoid war, even if Washington is doing its best to turn them
hostile. Neither has anything to gain and much to lose by escalating a minor conflict into something that might well start World
War 3. Indeed, both have strong incentives to avoid doing so, which makes the actual threat that they represent more speculative
than real. And, on the plus side, both can be extremely useful in dealing with international issues where Washington has little or
no leverage, to include resolving the North Korea problem and Syria, so the US has considerable benefits to be gained by cultivating
their cooperation.
Also, I would characterize international terrorism as a faux threat at a national level, though one that has been exaggerated
through the media and fearmongering to such an extent that it appears much more dangerous than it actually is. It has been observed
that more Americans are killed by falling furniture than by terrorists in a year but terrorism has a particularly potency due to
its unpredictability and the fear that it creates. Due to that fear, American governments and businesses at all levels have been
willing to spend a trillion dollars per annum to defeat what might rationally be regarded as a relatively minor problem.
So if the United States were serious about dealing with or deflecting the actual threats against the American people it could
first of all reduce its defense expenditures to make them commensurate with the actual threat before concentrating on three things.
First, would be to establish a solid modus vivendi with Russia and China to avoid conflicts of interest that could develop
into actual tit-for-tat escalation. That would require an acceptance by Washington of the fact that both Moscow and Beijing have
regional spheres of influence that are defined by their interests. You don't have to like the governance of either country, but their
national interests have to be appreciated and respected just as the United States has legitimate interests within its own hemisphere
that must be respected by Russia and China.
Second, Washington must, unfortunately, continue to spend on the Missile Defense Agency, which supports anti-missile defenses
if the search for a modus vivendi for some reason fails. Mutual assured destruction is not a desirable strategic doctrine
but being able to intercept incoming missiles while also having some capability to strike back if attacked is a realistic deterrent
given the proliferation of nations that have both ballistic missiles and nukes.
Third and finally, there would be a coordinated program aimed at international terrorism based equally on where the terror comes
from and on physically preventing the terrorist attacks from taking place. This is the element in national defense that is least
clear cut. Dealing with Russia and China involves working with mature regimes that have established diplomatic and military channels.
Dealing with terrorist non-state players is completely different as there are generally speaking no such channels.
It should in theory be pretty simple to match threats and interests with actions since there are only a handful that really matter,
but apparently it is not so in practice. What is Washington doing? First of all, the White House is deliberately turning its back
on restoring a good working relationship with Russia by insisting that Crimea be returned to Kiev, by blaming Moscow for the continued
unrest in Donbas, and by attacking Syrian military targets in spite of the fact that Russia is an ally of the legitimate government
in Damascus and the United States is an interloper in the conflict. Meanwhile congress and the media are poisoning the waters through
their dogged pursuit of Russiagate for political reasons even though nearly a year of investigation has produced no actual evidence
of malfeasance on the part of U.S. officials and precious little in terms of Moscow's alleged interference.
Playing tough to the international audience has unfortunately become part of the American Exceptionalism DNA. Upon his arrival
in Warsaw last week, Donald Trump doubled down on the
Russia-bashing, calling on Moscow to "cease its destabilizing activities in Ukraine and elsewhere and its support for hostile regimes
including Syria and Iran." He then recommended that Russia should "join the community of responsible nations in our fight against
common enemies and in defense of civilization itself."
The comments in Warsaw were unnecessary, even if the Poles wanted to hear them, and were both highly insulting and ignorant. It
was not a good start for Donald's second overseas trip, even though the speech has otherwise been interpreted as a welcome defense
of Western civilization and European values. Trump also followed up with a two hour plus discussion with President Vladimir Putin
in which the two apparently agreed to differ on the alleged Russian hacking of the American election. The Trump-Putin meeting indicated
that restoring some kind of working relationship with Russia is still possible, as it is in everyone's interest to do so.
Fighting terrorism is quite another matter and the United States approach is the reverse of what a rational player would be seeking
to accomplish. The U.S. is rightly assisting in the bid to eradicate ISIS in Syria and Iraq but it is simultaneously attacking the
most effective fighters against that group, namely the Syrian government armed forces and the Shiite militias being provided by Iran
and Hezbollah. Indeed, it is becoming increasingly clear that at least some in the Trump Administration are seeking to use the Syrian
engagement as a stepping stone to war with Iran.
As was the case in the months preceding the ill-fated invasion of Iraq in 2003, all buttons are being pushed to vilify Iran. Recent
reports suggest that two individuals in the White House in particular have been pressuring the Trump administration's generals to
escalate U.S. involvement in Syria to bring about a war with Tehran sooner rather than later. They are Ezra Cohen-Watnick and Derek
Harvey, reported to be holdovers from the team brought into the White House by the virulently anti-Iranian former National Security
Adviser Michael Flynn.
Cohen-Watnick is thirty years old and
has little relevant experience for the position he holds, senior director for intelligence on the National Security Council.
But his inexperience counts for little as he is good friend of son-in-law Jared Kushner. He has told the New York Times
that "wants to use American spies to help oust the Iranian government," a comment that reflects complete ignorance, both regarding
Iran and also concerning spy agency capabilities. His partner in crime Harvey, a former military officer who advised General David
Petraeus when he was in Iraq, is the NSC advisor on the Middle East.
Both Cohen-Watnick and Harvey share the neoconservative belief that the Iranians and their proxies in Syria and Iraq need
to be confronted by force,
an opportunity described by Foreign Policy magazine as having developed into "a pivotal moment that will determine whether
Iran or the United States exerts influence over Iraq and Syria." Other neocon promoters of conflict with Iran have described their
horror at a possible Shiite "bridge" or "land corridor" through the Arab heartland, running from Iran itself through Iraq and Syria
and connecting on the Mediterranean with Hezbollah in Lebanon.
What danger to the U.S. or its actual treaty allies an Iranian influenced land corridor would constitute remains a mystery
but there is no shortage of Iran haters in the White House. Former senior CIA analyst Paul Pillar
sees "unrelenting hostility from the Trump administration" towards Iran and notes "cherry-picking" of the intelligence to make
a case for war, similar to what occurred with Iraq in 2002-3. And even though Secretary of Defense James Mattis and National Security
Advisor H.R. McMaster have pushed back against the impulsive Cohen-Watnick and Harvey, their objections are tactical as they do not
wish to make U.S. forces in the region vulnerable to attacks coming from a new direction. Otherwise they too consider Iran as America's
number one active enemy and believe that war is inevitable. Donald Trump has unfortunately also jumped directly into the argument
on the side of Saudi Arabia and Israel, both of which would like to see Washington go to war with Tehran on their behalf.
The problem with the Trump analysis is that he has his friends and enemies confused. He is actually supporting Saudi Arabia, the
source of most of the terrorism that has convulsed Western Europe and the United States while also killing hundreds of thousands
of fellow Muslims. Random terrorism to kill as many "infidels and heretics" as possible to create fear is a Sunni Muslim phenomenon,
supported financially and doctrinally by the Saudis. To be sure, Iran has used terror tactics to eliminate opponents and select targets
overseas, to include several multiple-victim bombings, but it has never engaged in anything like the recent series of attacks in
France and Britain. So the United States is moving seemingly inexorably towards war with a country that itself constitutes no actual
terrorist threat, unless it is attacked, in support of a country that very much is part of the threat and also on behalf of Israel,
which for its part would prefer to see Americans die in a war against Iran rather that sacrificing its own sons and daughters.
Realizing who the real enemy actually is and addressing the actual terrorism problem would not only involve coming down very hard
on Saudi Arabia rather than Iran, it would also require some serious thinking in the White House about the extent to which America's
armed interventions all over Asia and Africa have made many people hate us enough to strap on a suicide vest and have a go. Saudi
financing and Washington's propensity to go to war and thereby create a deep well of hatred just might be the principal causative
elements in the rise of global terrorism. Do I think that Donald Trump's White House has the courage to take such a step and change
direction? Unfortunately, no.
Saudi Arabia is THE worst nation in the Middle East.
Why does the US follow along blindly? Well, it is a WASP thing. We are the new Brit Empire. By the height of the Victorian
era, virtually all English Elites were philoSemitic. Roughly half of the UK WASP Elite philoSemitism was pro-Jewish and half was
pro-Arabic/Islamic. And by the time of WW1, the English Elite pro-Arabic/Islamic faction came to adore the house of Saud. So,
our foreign policy is merely WASP culture continuing to ruin most of the rest of the world, including all the whites ruled by
WASP Elites.
In reality, there are only two significant potential threats to the U.S. The first consists of the only two non-friendly
countries – Russia and China – that have nuclear weapons and delivery systems that could hit the North American continent and
the second is the somewhat more amorphous danger represented by international terrorism.
No, the only threats are the following three:
Too many Meso-Americans invading from the border. These people have totally changed the SW and may drastically alter parts
of US as well. This is an invasion. Meso-Americans are lackluster, but Too Many translates into real power, especially in elections.
The other threat is Hindu-Indian. Indians are just itching to unload 100s of millions of their kind to Anglo nations. Unlike
Chinese population that is plummeting, Indian population is still growing.
The other threat, biggest of all, is the Negro. It's not Russian missiles or Chinese troops that turned Detroit into a hellhole.
It is Negroes. And look at Baltimore, New Orleans, Selma, Memphis, Oakland, St. Louis, South Side Chicago, etc.
Afromic Bomb is more hellish than atomic bomb. Compare Detroit and Hiroshima.
Also, even though nukes are deadly, they will likely never be used. They are for defensive purposes only. The real missiles
that will destroy the West is the Afro penis. US has nukes to destroy the world, but they haven't been used even during peak of
cold war. But millions of Negro puds have impregnanted and colonized white wombs to kill white-babies-that-could-have-been and
replaced them with mulatto Negro kids who will turn out like Colin Kapernick.
The real missile gap is the threat posed by negro dong on white dong. The negro dong is so potent that even Japanese women
are going Negroid and having kids with Negro men and raising these kids as 'Japanese' to beat up real Japanese. So, if Japan with
few blacks is turning like this, imagine the threat posed by Negroes on whites in the West.
Look at YouTube of street life and club life in Paris and London. Negro missiles are conquering the white race and spreading
the savage genes.
Look how Polish women welcomed the Negro missile cuz they are infected with jungle fever. ACOWW will be the real undoing of
the West.
Besides what Priss Factor said above the following is to be reinforced with every real American man, woman and child.
Israel , which for its part would prefer to see Americans die in a war against Iran rather that sacrificing its
own sons and daughters.
Israel, the REAL enemy! ,
@K India is looking to unload hindus to U.S? Quite the opposite. India is 'losing' its best brains to the U.S so its
trying to attract them back to their country. For eg: The chief- architect of IBM's Watson is a Hindu Indian and so is the
head of IBM's neuro-morphic computing. These people are advancing western technology.... civilian and also defense (IBM
is collaborating with the American defense organization DARPA) instead of helping India achieve technological competence.
And most of other super intelligent Indians also India is losing them to the west.
(i dont hate the west for doing that. Any country in amercia's place would have done the same. It is india's job to keep
its best brains working for it and not for others. And india is trying its best to do that albeit unsuccessfully.)
100 Words #UNRIG adds AMERICA FIRST, NOT ISRAEL to Agenda.
."A.I.P.A.C.. you're outta business!"
Due to slanderous attacks by a Mossad internet psy-op, Steele now prioritizes Israeli malign influence on US. Also, check out
Cynthia McKinney's twitter.
#UNRIG – Robert David Steele Weekly Update
@Durruti Nice action approach
to cure ills of society.
Enclosing copy of flier we have distributed - with a similar approach at a cure.
*Flier distributed is adjusted & a bit more attractive (1 sheet - both sides).
The key is to Restore the Republic, which was definitively destroyed on November 22, 1963.
Feel free to contact.
Use this, or send me a note by way of a response.
For THE RESTORATION OF THE REPUBLIC
"We hold these truths to be self-evident: that all men are created equal governments are instituted among men, deriving their
just powers from the consent of the governed; that whenever any form of government becomes destructive of these ends, it is the
right of the people to alter or abolish it and to institute new government, laying its foundation on such principles "
The above is a portion of the Declaration of Independence, written by Thomas Jefferson.
We submit the following facts to the citizens of the United States.
The government of the United States has been a Totalitarian Oligarchy since the military financial aristocracy destroyed
the Democratic Republic on November 22, 1963 , when they assassinated the last democratically elected president, John Fitzgerald
Kennedy , and overthrew his government. All following governments have been unconstitutional frauds. Attempts by Robert
Kennedy and Martin Luther King to restore the Republic were interrupted by their murder.
A subsequent 12 year colonial war against Vietnam , conducted by the murderers of Kennedy, left 2 million dead in a
wake of napalm and burning villages.
In 1965, the U.S. government orchestrated the slaughter of 1 million unarmed Indonesian civilians.
In the decade that followed the CIA murdered 100,000 Native Americans in Guatemala .
In the 1970s, the Oligarchy began the destruction and looting of America's middle class, by encouraging the export of industry
and jobs to parts of the world where workers were paid bare subsistence wages. The 2008, Bailout of the Nation's Oligarchs
cost American taxpayers $13trillion. The long decline of the local economy has led to the political decline of our hard working
citizens, as well as the decay of cities, towns, and infrastructure, such as education.
The impoverishment of America's middle class has undermined the nation's financial stability. Without a productive foundation,
the government has accumulated a huge debt in excess of $19trillion. This debt will have to be paid, or suffered by future generations.
Concurrently, the top 1% of the nation's population has benefited enormously from the discomfiture of the rest. The interest rate
has been reduced to 0, thereby slowly robbing millions of depositors of their savings, as their savings cannot stay even with
the inflation rate.
The government spends the declining national wealth on bloody and never ending military adventures, and is or has recently
conducted unconstitutional wars against 9 nations. The Oligarchs maintain 700 military bases in 131 countries; they spend as much
on military weapons of terror as the rest of the nations of the world combined. Tellingly, more than half the government budget
is spent on the military and 16 associated secret agencies.
The nightmare of a powerful centralized government crushing the rights of the people, so feared by the Founders of the United
States, has become a reality. The government of Obama/Biden, as with previous administrations such as Bush/Cheney, and whoever
is chosen in November 2016, operates a Gulag of dozens of concentration camps, where prisoners are denied trials, and routinely
tortured. The Patriot Act and The National Defense Authorizations Act , enacted by both Democratic and Republican
factions of the oligarchy, serve to establish a legal cover for their terror.
The nation's media is controlled, and, with the school systems, serve to brainwash the population; the people are intimidated
and treated with contempt.
The United States is No longer Sovereign
The United States is no longer a sovereign nation. Its government, The Executive, and Congress, is bought, utterly owned
and controlled by foreign and domestic wealthy Oligarchs, such as the Rothschilds, Rockefellers, and Duponts , to name only
a few of the best known.
The 2016 Electoral Circus will anoint new actors to occupy the same Unconstitutional Government, with its controlling International
Oligarchs. Clinton, Trump, whomever, are willing accomplices for imperialist international murder, and destruction of nations,
including ours.
For Love of Country
The Restoration of the Republic will be a Revolutionary Act, that will cancel all previous debts owed to that unconstitutional
regime and its business supporters. All debts, including Student Debts, will be canceled. Our citizens will begin, anew, with
a clean slate.
As American Founder , Thomas Jefferson wrote, in a letter to James Madison:
"I set out on this ground, which I suppose to be self evident, 'that the earth belongs in usufruct to the living':"
"Then I say the earth belongs to each of these generations, during it's course, fully, and in their own right. The 2d. Generation
receives it clear of the debts and incumberances of the 1st. The 3d of the 2d. and so on. For if the 1st. Could charge it with
a debt, then the earth would belong to the dead and not the living generation."
Our Citizens must restore the centrality of the constitution, establishing a less powerful government which will ensure
President Franklin Roosevelt's Four Freedoms , freedom of speech and expression, freedom to worship God in ones own way, freedom
from want "which means economic understandings which will secure to every nation a healthy peace time life for its inhabitants
" and freedom from fear "which means a world-wide reduction of armaments "
Once restored: The Constitution will become, once again, the law of the land and of a free people. We will establish a government,
hold elections, begin to direct traffic, arrest criminal politicians of the tyrannical oligarchy, and, in short, repair the damage
of the previous totalitarian governments.
In reality, there are only two significant potential threats to the U.S. The first consists of the only two non-friendly
countries – Russia and China – that have nuclear weapons and delivery systems that could hit the North American continent and
the second is the somewhat more amorphous danger represented by international terrorism.
You forgot the third significant potential threat from a friendly nation, i.e. Israel. Israel will sabotage any effort
to normallize relations with Russia or even Iran. They will resort to false flag operations to start a war with Iran.
The problem with this White House, as well as the previous ones, is that none of the so-called experts really understand
the Middle East. The US is not interested in having friendly relations with all nations. All her efforts are towards one goal,
the world domination. Even if President Trump wanted to normalize relations with Russia, the MSM, the democrats, as well as, his
republican opponents will not let him.
That is why the constan drumbeat of Russia's meddling in the 2016 election despite the fact that no proof has been given
so far. Similarly, the "Iran has nuclear weapons" narrative is constantly repeated, the reports by IAEA and the 17 Intelligence
Agencies to the contrary not withstanding.
The elevation of Muhammad bin Salman to the Crown Prince position will only make the Middle East situation worse. Israel
will be able to manipulate him much more easily than the old guard.
The western world is dependent on oil, especially ME oil. Saudi Arabia was made the USA's main oil supplier at the end of 1944.
The Saud dynasty depends on the USA. That the Saudis would sponsor terrorism, why would they ? And which terrorism is Muslim terrorism
?
Sept 11 not, Boston not, Madrid and London very questionably. We then are left with minor issues, the Paris shooting the biggest.
That Saudi Arabia is waging war in Yemen certainly is with USA support. The Saudi army does what the USA wants them to do.
Mr. Giraldi, you forgot to mention Israel as one of America's biggest liabilities besides Saudi Arabia. But with such amateur
dramatics in the White House and on the Security Council, the US is destined for war but only against the wrong enemy such as
Iran. If the Saudis and the right-wing Netanyahu regime want to get after Iran they should do it alone. They surely will get a
bloody nose. Americans have shed enough blood for these rascal regimes. President Trump should continue with his rapprochement
towards Russia because both nation states have more in common than expected.
I'm a little disappointed in this article. Not that it's a bad article per se: perfectly rational, reasonable, academic even.
But unfortunately, it's simply naive.
"Realizing who the real enemy actually is and addressing the actual terrorism problem would not only involve coming down very
hard on Saudi Arabia rather than Iran, it would also require some serious thinking in the White House about the extent to which
America's armed interventions all over Asia and Africa have made many people hate us enough to strap on a suicide vest and have
a go."
Realize who the real enemy is ? Come down hard on the Saud's ? No -- really ?
The titanic elephant in the room -- that US foreign policy is not governed by "rationality" but by "special interests" seems
.missing. Israel, the Saudi's themselves, the MIC & so on & so forth ARE the special interests who literally "realise" US Policy.
Well, the real enemy of the people are the real terrorists behind the scenes. Those who planned the 9/11 false flag.
Those who sent the Anthrax letters to resisting congress members. Those who pre-planned the wars of aggression in the whole middle
east.
So any appeal to the "White House" is almost pointless since the White House is one element of the power structure captured
by the war-criminal lunatics.
To change something people in the US should at first stop buying their war criminal lying mass media.
Then they should stop supporting ANY foreign intervention by the US and should stop believing any of the preposterous lies
released by the media, the state dept., or any other neocon outlet.
Actually Trump was probably elected because he said he was anti-intervention and anti-media. But did it help?
The US needs mass resistance (demonstrations, strikes, boycotts, non-participation, sit-ins, grass-root information, or whatever)
against their neocon/zionist/mafia/cia power groups or nothing will change.
We need demonstrations against NATO, against war, against false flag terrorism, against using terrorists as secret armies,
against war propaganda!
B.t.w. Iran has always been one of the main goals. Think of it: Why did the US attack Afghanistan and Iraq? What have those
two countries in common? (Hint: a look on the map helps to answer this question.)
I am beginning to get interested in why some people are sure 9/11 was a false flag affair covered up by a lot of lies.
So may I try my opening question on you. How much, if any of it, have you read of the official 9/11 commission report? ,
"The White House is targeting Iran but should instead focus on Saudi Arabia"
Trump has no control of most government functions, particularly foreign affairs. The Deep State takes care of that for
him. The Deep State has been calling the shots for decades and all Presidents who weren't assassinated have complied. Democracies
never work and ours quit long ago.
I fully agree that attacking Iran would be yet another disaster but I don't understand why Saudi Arabia is portrayed as an 'enemy',
the 'real' one, no less, in alt-media circles like this.
I mean let's be honest with ourselves. KSA is the definition of a vassal state. Has been so since the state established
established relations with the USA in the 1940s and the status was confirmed during the 1960s under King Faisal. Oil for security. Why pretend that they have any operational clearance from the US?
Contrary to the popular view, Wahabism is necessary to keep the local population under control. Particularly the minority Shia
population who live along the eastern coast, an area, which incidentally also has the all the oil reserves.
USA fully understands this. Which is why they not only tolerated Wahabism, but strongly promoted it during Afghan jihad. The
operation was by and large very successful btw.
It was only during the '90s when religion became the new ideology for the resistance against the empire across the Muslim world.
Zero surprise there because the preceding ideology, radical left wing politics was completely defeated. Iran became the first
country in this pattern. The Iranian left was decimated by the Shah, another vassal. So the religious right became the new resistance.
And as far as the KSA is considered, Wahabi preachers aren't allowed to attack the USA anyway. If any individual preacher so
much as makes a squeak, he will be bent over a barrel. There won't be any "coming down very hard on Saudi Arabia" because USA
already owns that country.
So what's the answer? Well, props to Phillip as he understood – "it would also require some serious thinking in the White House
about the extent to which America's armed interventions all over Asia and Africa have made many people hate us enough to strap
on a suicide vest and have a go."
Your analysis starts too late. The US supports Wahhabism and the House of Saud because the pro-Arabic/Islamic English
Elites of 1910 and 1920 and 1935 supported Wahhabism and the House of Saud.
The British Empire 'made' the House of Saud,
Thinking it wise to use Wahhabism to control Shia Islam is like thinking it wise to use blacks to control the criminal
tendencies of Mexicans.
In reality, there are only two significant potential threats to the U.S. The first consists of the only two non-friendly
countries – Russia and China – that have nuclear weapons and delivery systems that could hit the North American continent and
the second is the somewhat more amorphous danger represented by international terrorism.
No, the only threats are the following three:
Too many Meso-Americans invading from the border. These people have totally changed the SW and may drastically alter parts
of US as well. This is an invasion. Meso-Americans are lackluster, but Too Many translates into real power, especially in elections.
The other threat is Hindu-Indian. Indians are just itching to unload 100s of millions of their kind to Anglo nations. Unlike
Chinese population that is plummeting, Indian population is still growing.
The other threat, biggest of all, is the Negro. It's not Russian missiles or Chinese troops that turned Detroit into a hellhole.
It is Negroes. And look at Baltimore, New Orleans, Selma, Memphis, Oakland, St. Louis, South Side Chicago, etc.
Afromic Bomb is more hellish than atomic bomb. Compare Detroit and Hiroshima.
Also, even though nukes are deadly, they will likely never be used. They are for defensive purposes only. The real missiles
that will destroy the West is the Afro penis. US has nukes to destroy the world, but they haven't been used even during peak of
cold war. But millions of Negro puds have impregnanted and colonized white wombs to kill white-babies-that-could-have-been and
replaced them with mulatto Negro kids who will turn out like Colin Kapernick.
The real missile gap is the threat posed by negro dong on white dong. The negro dong is so potent that even Japanese women
are going Negroid and having kids with Negro men and raising these kids as 'Japanese' to beat up real Japanese. So, if Japan with
few blacks is turning like this, imagine the threat posed by Negroes on whites in the West.
Look at youtube of street life and club life in Paris and London. Negro missiles are conquering the white race and spreading
the savage genes.
Look how Polish women welcomed the Negro missile cuz they are infected with jungle fever. ACOWW will be the real undoing of
the West.
Replies: @Sowhat And what grudge
is that? The only two I can find are connected. The deposing of our puppets, the Assads and the nationalization of their natural
resources. I have the impression that it removes around future hegemon and the rich gas reserves off their coast and the decades
long desire to run a pipeline west to the Mediterranean.
The BIGGEST threat to the USA is from within, as we are nothing more than an occupied colony of Apartheid Israel, paying that
bastard state tributes each year in the form of free money and weapons, political backing at the UN, and never tire of fighting
her wars of conquest.
You won't see Israeli troops in the streets, since their confederates control the economy thru their control of the FED and
US Treasury and most of those TBTF banks, which we always bail out, no matter the cost.
The also have a choke-hold on Congress, which is always eager to wag their tail and hope their Yid Overlord gives them
a treat and not a dressing-down in the Jew MSM, which is a career killer.
The WH is also Israeli territory, especially now with a Jew NYC slumlord now Trump's top adviser and his fashion model faux
Jew daughter egging Daddy on to kill more Arab babies, since she can't stand the sight of dead babies
@Paul Well, the real enemy of
the people are the real terrorists behind the scenes. Those who planned the 9/11 false flag. Those who sent the Anthrax letters
to resisting congress members. Those who pre-planned the wars of aggression in the whole middle east.
So any appeal to the "White House" is almost pointless since the White House is one element of the power structure captured
by the war-criminal lunatics.
To change something people in the US should at first stop buying their war criminal lying mass media.
Then they should stop supporting ANY foreign intervention by the US and should stop believing any of the preposterous lies
released by the media, the state dept., or any other neocon outlet.
Actually Trump was probably elected because he said he was anti-intervention and anti-media. But did it help?
The US needs mass resistance (demonstrations, strikes, boycotts, non-participation, sit-ins, grass-root information, or whatever)
against their neocon/zionist/mafia/cia power groups or nothing will change.
We need demonstrations against NATO, against war, against false flag terrorism, against using terrorists as secret armies,
against war propaganda!
B.t.w. Iran has always been one of the main goals. Think of it: Why did the US attack Afghanistan and Iraq? What have those
two countries in common? (Hint: a look on the map helps to answer this question.) I am beginning to get interested in why some
people are sure 9/11 was a false flag affair covered up by a lot of lies. So may I try my opening question on you. How much, if
any of it, have you read of the official 9/11 commission report?
@eah The WH should focus on
the USA. And what grudge is that? The only two I can find are connected. The deposing of our puppets, the Assads and the nationalization
of their natural resources. I have the impression that it removes around future hegemon and the rich gas reserves off their coast
and the decades long desire to run a pipeline west to the Mediterranean.
Israel's current "agreements" and its "kowtowing" to Saudi Arabia speaks VOLUMES. Once again, Israel is about to get others
to do their "dirty work" for them.
The point that everybody seems to miss is the fact that Judaism and Islam are inextricably linked. In fact, one could safely
argue that Islam is an arabicized form of Judaism.
1. Both Judaism and Islam promote their own forms of supremacy, relegating non-adherents as "lesser human beings", or in Judaism's
take "no better than livestock, albeit with souls, to be used for the advantage of the jew".
2. Both systems proscribe lesser (or no) punishment for those of each respective "tribe" who transgress against "outsiders"
-- goyim
or infidels. Both systems proscribe much harsher punishments against "outsiders" who transgress against those of each respective
"tribe".
3. When it comes to "equality under law", Israel is no better than Saudi Arabia, as a jew who has a disagreement with an "outsider"
will always have the advantage of a judicial system which almost always rules for the jew.
4. Both Judaism and Islam have taken it upon themselves to be arbiters of what the rest of the world should follow, demanding
that "outsiders" conform to what THEY believe, thinking that they know what is best (for the rest of us). Just look at the demands
moslems (who are guests in western Europe) make of local non-moslem populations.
Read the jewish Talmud and islamic Koran you will find virtually identical passages that demonize and marginalize those of
us who are "goyim" or "infidels".
A pox on both their houses
Now before I say what I'm going to say I want to say that Israel has the right to define and defend her interests just
as China, Russia and USA do, as Geraldi says above. No nation or people can be denied this (without force).
Having said that, I am grateful to you, anarchyst, for having pointed out the familial similarities between Islam and
Judaism. In addition to what you say there is the fact that the Jewish genome is virtually identical to that of the Palestinians--except
for that of Ashkenazi Jews who are more than half European.
As far as I can see, Ashkenazi Jews have an existential choice. They can identify with their European half whereby they
acknowledge that the Greeks and not Moses made the greatest contributions to humanity (and more particularly, their humanity)
or they can go with their atavistic Semitic side and regress to barbarism. Science, Logic, Math, History, Architecture,
Drama and Music or blowing up Buddhas and shrouding your women. Take your pick.
Of course, this is sorta unfair in as much as they were kicked out of Europe and now dwell in the ME where if they try
to act like Europeans they will be persecuted by their neighbors as apostates. The Jews do indeed have a tough row to hoe.
, @bjondo Jews/Judaism
bring death, destruction, misery.
Muslims/Islam (minus Western creation of "Muslim"terrorists) brought golden ages to many areas.
Christianity and Islam elevate the human spirit. Judaism degrades.
June 7, 2017 We Have Met the Evil Empire and It Is Us
Life in America was pure injustice, the lash and the iron boot, despite the version of history we have been given by the Ford
and Rockefeller Foundations who "re-invented" America and its history through taking control of public education in the late 1940s.
You see, the multi-generational ignorance we bask in today is not unplanned. The threat represented by advances in communications
and other technology was recognized and dealt with, utterly quashed at birth.
@anarchyst Israel's current
"agreements" and its "kowtowing" to Saudi Arabia speaks VOLUMES. Once again, Israel is about to get others to do their "dirty
work" for them.
The point that everybody seems to miss is the fact that Judaism and Islam are inextricably linked. In fact, one could safely argue
that Islam is an arabicized form of Judaism.
1. Both Judaism and Islam promote their own forms of supremacy, relegating non-adherents as "lesser human beings", or in Judaism's
take "no better than livestock, albeit with souls, to be used for the advantage of the jew".
2. Both systems proscribe lesser (or no) punishment for those of each respective "tribe" who transgress against "outsiders"--goyim
or infidels. Both systems proscribe much harsher punishments against "outsiders" who transgress against those of each respective
"tribe".
3. When it comes to "equality under law", Israel is no better than Saudi Arabia, as a jew who has a disagreement with an "outsider"
will always have the advantage of a judicial system which almost always rules for the jew.
4. Both Judaism and Islam have taken it upon themselves to be arbiters of what the rest of the world should follow, demanding
that "outsiders" conform to what THEY believe, thinking that they know what is best (for the rest of us). Just look at the demands
moslems (who are guests in western Europe) make of local non-moslem populations.
Read the jewish Talmud and islamic Koran...you will find virtually identical passages that demonize and marginalize those of
us who are "goyim" or "infidels".
A pox on both their houses... Now before I say what I'm going to say I want to say that Israel has the right to define and defend
her interests just as China, Russia and USA do, as Geraldi says above. No nation or people can be denied this (without force).
Having said that, I am grateful to you, anarchyst, for having pointed out the familial similarities between Islam and Judaism.
In addition to what you say there is the fact that the Jewish genome is virtually identical to that of the Palestinians–except
for that of Ashkenazi Jews who are more than half European.
As far as I can see, Ashkenazi Jews have an existential choice. They can identify with their European half whereby they acknowledge
that the Greeks and not Moses made the greatest contributions to humanity (and more particularly, their humanity) or they can
go with their atavistic Semitic side and regress to barbarism. Science, Logic, Math, History, Architecture, Drama and Music or
blowing up Buddhas and shrouding your women. Take your pick.
Of course, this is sorta unfair in as much as they were kicked out of Europe and now dwell in the ME where if they try to act
like Europeans they will be persecuted by their neighbors as apostates. The Jews do indeed have a tough row to hoe.
Trump is torn between Israel's permanent need to weaken its powerful neighbors (Iraq, Iran) and the necessity to protect the USA
from terrorists attacks.
Iran is an hypothetical threat to Israel, Saudi Arabia has proven to be a threat to the world.
In Tehran and other Iranian cities including Iran's holiest, that is, most conservative cities like Mashad. there are taxi
companies owned and run by women.
Tehran traffic makes NYC look like Mayberry RFD; many Iranians use small motorcycles to commute and take care of daily chores.
It's not at all uncommon to see an Iranian woman in full chador driving a motorcycle with a child and parcels in tow.
Iranian women could offer to teach the women of Saudi Arabia to drive.
@Wizard of Oz I am beginning
to get interested in why some people are sure 9/11 was a false flag affair covered up by a lot of lies. So may I try my opening
question on you. How much, if any of it, have you read of the official 9/11 commission report? A better question: Have YOU read
The Commission: The Uncensored History of the 9/11 Investigation by Phillip Shenon?
There's no alternative to Saudi royal family rule of the peninsula. Who's there to replace them? Any other group, assuming
there might be one somewhere waiting in the wings, would probably be anti-American and not as compliant as the Saudis. They've
spent gigantic sums in the endless billions buying military equipment from the US, weapons they can't even fully use, as a way
of making themselves indispensable customers. Many other billions of petrodollars find their way westward into our financial systems.
They collaborate with the US in various schemes throughout the Muslim world using their intelligence services and money in furtherance
of US goals.
They live the royal life thanks to being able to use the money from their nation's resource wealth as their own personal kitty,
living in palaces, buying obscene amounts of jewelry and other luxury goods, and so on. They'll never give that up and being a
close ally of the US affords them protection which of course they pay for. They may be seen as an enemy by the average person
but not at the elite level with whom they all consort and roll around in the money with.
Mattis still seems stuck with his Iran obsession. Shame I thought he had the intellectual curiosity to adapt. Trump has
good instincts, I hope Tillerson comes to the fore, and Bannon stays influential.
Iran is US enemy #1 not only because it is against that country smaller than New Jersey with less people (Israel) but also
because Iran has been a model for other countries to follow because of its intransigence to US oppression and attacks, financial
political and cyber. As the world becomes multi-polar, Iran's repeated wise reactions to the world hegemon have been an inspiration
to China and others to go their own way. The US can't stand that.
@Paul Well, the real enemy of
the people are the real terrorists behind the scenes. Those who planned the 9/11 false flag. Those who sent the Anthrax letters
to resisting congress members. Those who pre-planned the wars of aggression in the whole middle east.
So any appeal to the "White House" is almost pointless since the White House is one element of the power structure captured
by the war-criminal lunatics.
To change something people in the US should at first stop buying their war criminal lying mass media.
Then they should stop supporting ANY foreign intervention by the US and should stop believing any of the preposterous lies
released by the media, the state dept., or any other neocon outlet.
Actually Trump was probably elected because he said he was anti-intervention and anti-media. But did it help?
The US needs mass resistance (demonstrations, strikes, boycotts, non-participation, sit-ins, grass-root information, or whatever)
against their neocon/zionist/mafia/cia power groups or nothing will change.
We need demonstrations against NATO, against war, against false flag terrorism, against using terrorists as secret armies,
against war propaganda!
B.t.w. Iran has always been one of the main goals. Think of it: Why did the US attack Afghanistan and Iraq? What have those
two countries in common? (Hint: a look on the map helps to answer this question.) "Well, the real enemy of the people are the
real terrorists behind the scenes. Those who planned the 9/11 false flag."
Saudi Arabia is THE worst nation in the Middle East.
Why does the US follow along blindly? Well, it is a WASP thing. We are the new Brit Empire. By the height of the Victorian
era, virtually all English Elites were philoSemitic. Roughly half of the UK WASP Elite philoSemitism was pro-Jewish and half was
pro-Arabic/Islamic.
And by the time of WW1, the English Elite pro-Arabic/Islamic faction came to adore the house of Saud.
So, our foreign policy is merely WASP culture continuing to ruin most of the rest of the world, including all the whites ruled
by WASP Elites. SECOND worst,my friend.
@Chad I fully agree that attacking
Iran would be yet another disaster but I don't understand why Saudi Arabia is portrayed as an 'enemy', the 'real' one, no less,
in alt-media circles like this.
I mean let's be honest with ourselves. KSA is the definition of a vassal state. Has been so since the state established
established relations with the USA in the 1940s and the status was confirmed during the 1960s under King Faisal. Oil for security.
Why pretend that they have any operational clearance from the US?
Contrary to the popular view, Wahabism is necessary to keep the local population under control. Particularly the minority
Shia population who live along the eastern coast, an area, which incidentally also has the all the oil reserves. USA fully understands
this. Which is why they not only tolerated Wahabism, but strongly promoted it during Afghan jihad. The operation was by and large
very successful btw. It was only during the '90s when religion became the new ideology for the resistance against the empire across
the Muslim world. Zero surprise there because the preceding ideology, radical left wing politics was completely defeated. Iran
became the first country in this pattern. The Iranian left was decimated by the Shah, another vassal. So the religious right became
the new resistance.
And as far as the KSA is considered, Wahabi preachers aren't allowed to attack the USA anyway. If any individual preacher
so much as makes a squeak, he will be bent over a barrel. There won't be any "coming down very hard on Saudi Arabia" because USA
already owns that country.
So what's the answer? Well, props to Phillip as he understood - "it would also require some serious thinking in the White House
about the extent to which America's armed interventions all over Asia and Africa have made many people hate us enough to strap
on a suicide vest and have a go."
Bingo. Your analysis starts too late. The US supports Wahhabism and the House of Saud because the pro-Arabic/Islamic English
Elites of 1910 and 1920 and 1935 supported Wahhabism and the House of Saud.
The British Empire 'made' the House of Saud. Thinking it wise to use Wahhabism to control Shia Islam is like thinking it
wise to use blacks to control the criminal tendencies of Mexicans.
1,000 Words @RobinG#UNRIG
adds AMERICA FIRST, NOT ISRAEL to Agenda.
..................."A.I.P.A.C.. you're outta business!"
Due to slanderous attacks by a Mossad internet psy-op, Steele now prioritizes Israeli malign influence on US. Also, check out
Cynthia McKinney's twitter.
#UNRIG - Robert David Steele Weekly Update Nice action approach to cure ills of society.
Enclosing copy of flier we have distributed – with a similar approach at a cure.
*Flier distributed is adjusted & a bit more attractive (1 sheet – both sides).
The key is to Restore the Republic, which was definitively destroyed on November 22, 1963.
Feel free to contact.
Use this, or send me a note by way of a response.
For THE RESTORATION OF THE REPUBLIC
"We hold these truths to be self-evident: that all men are created equal governments are instituted among men, deriving their
just powers from the consent of the governed; that whenever any form of government becomes destructive of these ends, it is the
right of the people to alter or abolish it and to institute new government, laying its foundation on such principles "
The above is a portion of the Declaration of Independence, written by Thomas Jefferson.
We submit the following facts to the citizens of the United States.
The government of the United States has been a Totalitarian Oligarchy since the military financial aristocracy destroyed
the Democratic Republic on November 22, 1963 , when they assassinated the last democratically elected president, John Fitzgerald
Kennedy , and overthrew his government. All following governments have been unconstitutional frauds. Attempts by Robert
Kennedy and Martin Luther King to restore the Republic were interrupted by their murder.
A subsequent 12 year colonial war against Vietnam , conducted by the murderers of Kennedy, left 2 million dead in a
wake of napalm and burning villages.
In 1965, the U.S. government orchestrated the slaughter of 1 million unarmed Indonesian civilians.
In the decade that followed the CIA murdered 100,000 Native Americans in Guatemala .
In the 1970s, the Oligarchy began the destruction and looting of America's middle class, by encouraging the export of industry
and jobs to parts of the world where workers were paid bare subsistence wages. The 2008, Bailout of the Nation's Oligarchs
cost American taxpayers $13trillion. The long decline of the local economy has led to the political decline of our hard working
citizens, as well as the decay of cities, towns, and infrastructure, such as education.
The impoverishment of America's middle class has undermined the nation's financial stability. Without a productive foundation,
the government has accumulated a huge debt in excess of $19trillion. This debt will have to be paid, or suffered by future generations.
Concurrently, the top 1% of the nation's population has benefited enormously from the discomfiture of the rest. The interest rate
has been reduced to 0, thereby slowly robbing millions of depositors of their savings, as their savings cannot stay even with
the inflation rate.
The government spends the declining national wealth on bloody and never ending military adventures, and is or has recently
conducted unconstitutional wars against 9 nations. The Oligarchs maintain 700 military bases in 131 countries; they spend as much
on military weapons of terror as the rest of the nations of the world combined. Tellingly, more than half the government budget
is spent on the military and 16 associated secret agencies.
The nightmare of a powerful centralized government crushing the rights of the people, so feared by the Founders of the United
States, has become a reality. The government of Obama/Biden, as with previous administrations such as Bush/Cheney, and whoever
is chosen in November 2016, operates a Gulag of dozens of concentration camps, where prisoners are denied trials, and routinely
tortured. The Patriot Act and The National Defense Authorizations Act , enacted by both Democratic and Republican
factions of the oligarchy, serve to establish a legal cover for their terror.
The nation's media is controlled, and, with the school systems, serve to brainwash the population; the people are intimidated
and treated with contempt.
The United States is No longer Sovereign
The United States is no longer a sovereign nation. Its government, The Executive, and Congress, is bought, utterly owned
and controlled by foreign and domestic wealthy Oligarchs, such as the Rothschilds, Rockefellers, and Duponts , to name only
a few of the best known.
The 2016 Electoral Circus will anoint new actors to occupy the same Unconstitutional Government, with its controlling International
Oligarchs. Clinton, Trump, whomever, are willing accomplices for imperialist international murder, and destruction of nations,
including ours.
For Love of Country
The Restoration of the Republic will be a Revolutionary Act, that will cancel all previous debts owed to that unconstitutional
regime and its business supporters. All debts, including Student Debts, will be canceled. Our citizens will begin, anew, with
a clean slate.
As American Founder , Thomas Jefferson wrote, in a letter to James Madison:
"I set out on this ground, which I suppose to be self evident, 'that the earth belongs in usufruct to the living':"
"Then I say the earth belongs to each of these generations, during it's course, fully, and in their own right. The 2d. Generation
receives it clear of the debts and incumberances of the 1st. The 3d of the 2d. and so on. For if the 1st. Could charge it with
a debt, then the earth would belong to the dead and not the living generation."
Our Citizens must restore the centrality of the constitution, establishing a less powerful government which will ensure
President Franklin Roosevelt's Four Freedoms , freedom of speech and expression, freedom to worship God in ones own way, freedom
from want "which means economic understandings which will secure to every nation a healthy peace time life for its inhabitants
" and freedom from fear "which means a world-wide reduction of armaments "
Once restored: The Constitution will become, once again, the law of the land and of a free people. We will establish a government,
hold elections, begin to direct traffic, arrest criminal politicians of the tyrannical oligarchy, and, in short, repair the damage
of the previous totalitarian governments.
are studying US states and ranking them according to financial stability measures. The states with biggest problems -- Illinois,
California, New Jersey, Connecticut -- are in the mess they are in largely because of pension liability issues: some pensions
are unfunded or underfunded.
I recall that ten years ago about a dozen Jewish organizations formed the "Iran Task Force," ** whose primary activity was
to persuade managers of State pension funds to divest from Iran-connected companies; that is, corporations & banks, etc. that
did business with Iran. I recall very clearly that Arnold Schwartznegger was the poster child for California's vanguard role in
divesting from such nasty nasty companies, in accord with the wishes of Jewish Israel-firsters.
Perhaps the Mercatus scholars could prepare an exercise in alternative financial history: What shape would the US economy,
and the various States's economies, be in if the US were NOT so overwhelmingly influenced by Israel firsters, and were NOT persuaded,
Against Our Better Judgment, to entangle themselves in Israel's nefarious activities?
____
** The 2007 Iran Task Force is NOT the same as the group formed in 2015 or so, embedded in US House/Senate, with Joe Lieberman
and Michael Hayden playing prominent roles in attempting to influence the Iran Deal.
The 2007 initiative was sponsored by groups such as ZOA, RJC, AIPAC, etc., and / or spun off groups such as Foundation for
Defense of Democracy, United Against Nuclear Iran.
Nationalism really represent a growing threat to neoliberalism. It is clear the the rise of
nationalism was caused by the triumph of neoliberalism all over the globe. As neoliberal
ideology collapsed in 2008, thing became really interesting now. Looks like
1920th-1940th will be replayed on a new level with the USA neoliberal empire under stress from
new challengers instead of British empire.
Rumor about the death of neoliberalism are slightly exaggerated ;-). This social system still
has a lot of staying power. you need some external shock like the need of cheap oil (defined as
sustainable price of oil over $100 per barrel) to shake it again. Of some financial crisis similar
to the crisis of 2008. Currently there is still
no alternative social order that can replace it. Collapse of the USSR discredited both socialism even
of different flavors then was practiced in the USSR. National socialism would be a step back from
neoliberalism.
Notable quotes:
"... The retreat of [neo]liberalism is very visible in Asia. All Southeast Asian states have turned their backs on liberal democracy, especially Indonesia, the Philippines and Myanmar in the last decade. This NYT article notes that liberalism has essentially died in Japan, and that all political contests are now between what the west would consider conservatives: https://www.nytimes.com/2017/10/15/opinion/liberalism-japan-election.html ..."
"... What is today called "Liberalism" and "Conservatism" both are simply corrupted labels applied to the same top-down corporate-fascistic elite rule that I think Mr. Buchanan once referred to as "two wings of the same bird of prey." ..."
"... Nobody at the top cares about 'diversity.' They care about the easy profits that come from ever cheaper labor. 'Diversity' is not suicide but rather murder: instigated by a small number of very powerful people who have decided that the long-term health of their nations and civilization is less important than short-term profits and power. ..."
"... Hillary and Obama are to the right of the President that Buchanan served in his White House. Richard Nixon was to the Left of both Hillary and Obama. I can't even imagine Hillary accepting and signing into law a 'Clean Water Act' or enacting Price Controls to fight inflation. No way. Heck would freeze over before Hillary would do something so against her Banker Backers. ..."
"... It's sure that financial (neo)liberalism was in a growth phase prior to year 2000 (under Greenspan, the "Maestro") with a general belief that the economy could be "fine tuned" with risk eliminated using sophisticated financial instruments, monetary policy etc. ..."
"... If [neo] Liberalism is a package, then two heavy financial blows that shook the whole foundation were the collapse of the dot.com bubble (2000) and the mortgage bubble (2008). ..."
"... And, other (self-serving) neoliberal stories are now seen as false. For example, that the US is an "advanced post-industrial service economy", that out-sourcing would "free up Americans for higher skilled/higher wage employment" or that "the US would always gain from tariff free trade". ..."
"... The basic divide is surely Nationalism (America First) vs. Globalism (Neo-Liberalism), as shown by the last US Presidential election. ..."
"... Neoliberalism, of which the Clintons are acolytes, supports Free Trade and Open Borders. Although it claims to support World Government, in actual fact it supports corporatism. This is explicit in the TPPA Trump vetoed. Under the corporate state, the state controls the corporations, as Don Benito did in Italy. Under corporatism, the corporations tell the state what to do, as has been the case in America since at least the Clinton Presidency. ..."
"... But I recall that Pat B also said neoconservatism was on its way out a few years after Iraq war II and yet it's stronger than ever and its adherents are firmly ensconced in the joint chiefs of staff, the pentagon, Congress and the White House. It's also spawned a close cousin in liberal interventionism. ..."
Asked to name the defining attributes of the America we wish to become, many liberals would answer
that we must realize our manifest destiny since 1776, by becoming more equal, more diverse and more
democratic -- and the model for mankind's future.
Equality, diversity, democracy -- this is the holy trinity of the post-Christian secular state
at whose altars Liberal Man worships.
But the congregation worshiping these gods is shrinking. And even Europe seems to be rejecting
what America has on offer.
In a retreat from diversity, Catalonia just voted to separate from Spain. The Basque and Galician
peoples of Spain are following the Catalan secession crisis with great interest.
The right-wing People's Party and far-right Freedom Party just swept 60 percent of Austria's vote,
delivering the nation to 31-year-old Sebastian Kurz, whose anti-immigrant platform was plagiarized
from the Freedom Party. Summarized it is: Austria for the Austrians!
Lombardy, whose capital is Milan, and Veneto will vote Sunday for greater autonomy from Rome.
South Tyrol (Alto Adige), severed from Austria and ceded to Italy at Versailles, written off by
Hitler to appease Mussolini after his Anschluss, is astir anew with secessionism. Even the Sicilians
are talking of separation.
By Sunday, the Czech Republic may have a new leader, billionaire Andrej Babis. Writes The Washington
Post, Babis "makes a sport of attacking the European Union and says NATO's mission is outdated."
Platform Promise: Keep the Muslim masses out of the motherland.
To ethnonationalists, their countrymen are not equal to all others, but superior in rights. Many
may nod at Thomas Jefferson's line that "All men are created equal," but they no more practice that
in their own nations than did Jefferson in his
... ... ...
European peoples and parties are today using democratic means to achieve "illiberal" ends. And
it is hard to see what halts the drift away from liberal democracy toward the restrictive right.
For in virtually every nation, there is a major party in opposition, or a party in power, that holds
deeply nationalist views.
European elites may denounce these new parties as "illiberal" or fascist, but it is becoming apparent
that it may be liberalism itself that belongs to yesterday. For more and more Europeans see the invasion
of the continent along the routes whence the invaders came centuries ago, not as a manageable problem
but an existential crisis.
To many Europeans, it portends an irreversible alteration in the character of the countries their
grandchildren will inherit, and possibly an end to their civilization. And they are not going to
be deterred from voting their fears by being called names that long ago lost their toxicity from
overuse.
And as Europeans decline to celebrate the racial, ethnic, creedal and cultural diversity extolled
by American elites, they also seem to reject the idea that foreigners should be treated equally in
nations created for their own kind.
Europeans seem to admire more, and model their nations more, along the lines of the less diverse
America of the Eisenhower era, than on the polyglot America of 2017.
And Europe seems to be moving toward immigration polices more like the McCarran-Walter Act of
1950 than the open borders bill that Sen. Edward Kennedy shepherded through the Senate in 1965.
Kennedy promised that the racial and ethnic composition of the America of the 1960s would not
be overturned, and he questioned the morality and motives of any who implied that it would.
Liberalism is the naivete of 18th century elites, no different than today. Modernity as you
know it is unsustainable, mostly because equality isn't real, identity has value for most humans,
pluralism is by definition fractious, and deep down most people wish to follow a wise strongman
leader who represents their interests first and not a vague set of universalist values.
Blind devotion to liberal democracy is another one of those times when white people take an
abstract concept to weird extremes. It is short-sighted and autistically narrow minded. Just because
you have an oppressive king doesn't mean everyone should be equals. Just because there was slavery/genocide
doesn't mean diversity is good.
The retreat of [neo]liberalism is very visible in Asia. All Southeast Asian states have turned their
backs on liberal democracy, especially Indonesia, the Philippines and Myanmar in the last decade.
This NYT article notes that liberalism has essentially died in Japan, and that all political contests
are now between what the west would consider conservatives:
https://www.nytimes.com/2017/10/15/opinion/liberalism-japan-election.html
Good riddance. The idea that egalitarianism is more advanced than hierarchy has always been
false, and flies against the long arc of history. Time for nationalists around the world to smash
liberal democracy and build a new modernity based on actual humanism, with respect to hierarchies
and the primacy of majorities instead of guilt and pathological compassion dressed up as political
ideology.
"Liberalism" is not dying. "Liberalism" is dead, and has been since at least 1970.
What is today called "Liberalism" and "Conservatism" both are simply corrupted labels applied
to the same top-down corporate-fascistic elite rule that I think Mr. Buchanan once referred to
as "two wings of the same bird of prey."
Nobody at the top cares about 'diversity.' They care about the easy profits that come from
ever cheaper labor. 'Diversity' is not suicide but rather murder: instigated by a small number
of very powerful people who have decided that the long-term health of their nations and civilization
is less important than short-term profits and power.
Its been dead for nearly 20 years now. Liberalism has long been the Monty Python parrot nailed
to its perch. At this point, the term is mainly kept alive in right-wing attacks by people who
lack the imagination to change their habitual targets for so long.
To my eye, the last 'liberal' politician died in a susupicious plane crash in 2000 as the Bush
Republicans were taking the White House by their famous 5-4 vote/coup and also needed to claim
control of the Senate. So, the last authentic 'liberal' Senator, Paul Wellstone of MN was killed
in a suspicious plane crash that was never properly explained.
Hillary and Obama are to the right of the President that Buchanan served in his White House.
Richard Nixon was to the Left of both Hillary and Obama. I can't even imagine Hillary accepting
and signing into law a 'Clean Water Act' or enacting Price Controls to fight inflation. No way.
Heck would freeze over before Hillary would do something so against her Banker Backers.
And, at the root, that is the key. The 'Liberals' that the right now rails against are strongly
backed and supported by the Wall Street Banks and other corporate leaders. The 'Liberals' have
pushed for a government Of the Bankers, By the Bankers and For the Bankers. The 'Liberals' now
are in favor of Endless Unconstitutional War around the world.
Which can only mean that the term 'Liberal' has been so completely morphed away from its original
meanings to be completely worthless.
The last true Liberal in American politics was Paul Wellstone. And even by the time he died
for his sins, he was calling himself a "progressive" because after the Clintons and the Gores
had so distorted the term Liberal it was meaningless. Or it had come to mean a society ruled by
bankers, a society at constant war and throwing money constantly at a gigantic war machine, a
society of censorship where the government needed to control all music lyrics, the same corrupt
government where money could by anything from a night in the Lincoln Bedroom to a Presidential
Pardon or any other government favor.
Thus, 'Liberals' were a dead movement even by 2000, when the people who actually believed in
the American People over the profits of bankers were calling themselves Progressives in disgust
at the misuse of the term Liberal. And now, Obama and Hillary have trashed and distorted even
the term Progressive into bombing the world 365 days a year and still constantly throwing money
at the military machine and the problems it invents.
So, Liberalism is so long dead that if you exumed the grave you'd only find dust. And Pat must
be getting senile and just throwing back out the same lines he once wrote as a speechwriter for
the last Great Lefty President Richard Nixon.
Another question is whether this is wishful thinking from Pat or some kind of reality.
I think that he's right, that Liberalism is a dying faith, and it's interesting to check the
decline.
It's sure that financial (neo)liberalism was in a growth phase prior to year 2000 (under
Greenspan, the "Maestro") with a general belief that the economy could be "fine tuned" with risk
eliminated using sophisticated financial instruments, monetary policy etc.
If [neo] Liberalism is a package, then two heavy financial blows that shook the whole foundation
were the collapse of the dot.com bubble (2000) and the mortgage bubble (2008).
And, other (self-serving) neoliberal stories are now seen as false. For example, that the
US is an "advanced post-industrial service economy", that out-sourcing would "free up Americans
for higher skilled/higher wage employment" or that "the US would always gain from tariff free
trade".
In fact, the borderless global "world is flat" dogma is now seen as enabling a rootless hyper-rich
global elite to draw on a sea of globalized serf labour with little or no identity, while their
media and SWJ activists operate a scorched earth defense against any sign of opposition.
The basic divide is surely Nationalism (America First) vs. Globalism (Neo-Liberalism),
as shown by the last US Presidential election.
A useful analogy might be Viktor Orbán. He started out as a leader of a liberal party, Fidesz,
but then over time started moving to the right. It is often speculated that he started it for
cynical reasons, like seeing how the right was divided and that there was essentially a vacuum
there for a strong conservative party, but there's little doubt he totally internalized it. There's
also little doubt (and at the time he and a lot of his fellow party leaders talked about it a
lot) that as he (they) started a family and having children, they started to realize how conservatism
kinda made more sense than liberalism.
With Kurz, there's the possibility for this path. However, he'd need to start a family soon
for that to happen. At that age Orbán was already married with children
Neoliberalism, of which the Clintons are acolytes, supports Free Trade and Open Borders.
Although it claims to support World Government, in actual fact it supports corporatism. This is
explicit in the TPPA Trump vetoed. Under the corporate state, the state controls the corporations,
as Don Benito did in Italy. Under corporatism, the corporations tell the state what to do, as
has been the case in America since at least the Clinton Presidency.
Richard Nixon was a capitalist, not a corporatist. He was a supporter of proper competition
laws, unlike any President since Clinton. Socially, he was interventionist, though this may have
been to lessen criticism of his Vietnam policies. Anyway, his bussing and desegregation policies
were a long-term failure.
Price Control was quickly dropped, as it was in other Western countries. Long term Price Control,
as in present day Venezuela, is economically disastrous.
Let's hope liberalism is a dying faith and that is passes from the Western world. If not it will
destroy the West, so if it doesn't die a natural death then we must euthanize it. For the evidence
is in and it has begat feminism, anti-white racism, demographic winter, mass third world immigration
and everything else that ails the West and has made it the sick and dying man of the world.
But I recall that Pat B also said neoconservatism was on its way out a few years after
Iraq war II and yet it's stronger than ever and its adherents are firmly ensconced in the joint
chiefs of staff, the pentagon, Congress and the White House. It's also spawned a close cousin
in liberal interventionism.
What Pat refers to as "liberalism" is now left wing totalitarianism and anti-white hatred and
it's fanatically trying to remain relevant by lashing out and blacklisting, deplatforming, demonetizing,
and physically assaulting all of its enemies on the right who are gaining strength much to their
chagrin. They resort to these methods because they can't win an honest debate and in a true free
marketplace of ideas they lose.
Petras did not mention that it was Carter who started neoliberalization of the USA. The subsequent election of Reagan signified
the victory of neoliberalism in this country or "quite coup". The death of New Deal from this point was just a matter
of time. Labor relations drastically changes and war on union and atomization of workforce are a norm.
Welfare state still exists but only for corporation and MIC. Otherwise the New Deal society is almost completely dismanted.
It is true that "The ' New Deal' was, at best, a de facto ' historical compromise' between the capitalist class
and the labor unions, mediated by the Democratic Party elite. It was a temporary pact in which the unions secured legal recognition
while the capitalists retained their executive prerogatives." But the key factor in this compromise was the existence of the USSR as
a threat to the power of capitalists in the USA. when the USSR disappeared cannibalistic instincts of the US elite prevailed over caution.
Notable quotes:
"... The earlier welfare 'reforms' and the current anti-welfare legislation and austerity practices have been accompanied by a series of endless imperial wars, especially in the Middle East. ..."
"... In the 1940's through the 1960's, world and regional wars (Korea and Indo-China) were combined with significant welfare program – a form of ' social imperialism' , which 'buy off' the working class while expanding the empire. However, recent decades are characterized by multiple regional wars and the reduction or elimination of welfare programs – and a massive growth in poverty, domestic insecurity and poor health. ..."
"... modern welfare state' ..."
"... Labor unions were organized as working class strikes and progressive legislation facilitated trade union organization, elections, collective bargaining rights and a steady increase in union membership. Improved work conditions, rising wages, pension plans and benefits, employer or union-provided health care and protective legislation improved the standard of living for the working class and provided for 2 generations of upward mobility. ..."
"... Social Security legislation was approved along with workers' compensation and the forty-hour workweek. Jobs were created through federal programs (WPA, CCC, etc.). Protectionist legislation facilitated the growth of domestic markets for US manufacturers. Workplace shop steward councils organized 'on the spot' job action to protect safe working conditions. ..."
"... World War II led to full employment and increases in union membership, as well as legislation restricting workers' collective bargaining rights and enforcing wage freezes. Hundreds of thousands of Americans found jobs in the war economy but a huge number were also killed or wounded in the war. ..."
"... So-called ' right to work' ..."
"... Trade union officials signed pacts with capital: higher pay for the workers and greater control of the workplace for the bosses. Trade union officials joined management in repressing rank and file movements seeking to control technological changes by reducing hours (" thirty hours work for forty hours pay ..."
"... Trade union activists, community organizers for rent control and other grassroots movements lost both the capacity and the will to advance toward large-scale structural changes of US capitalism. Living standards improved for a few decades but the capitalist class consolidated strategic control over labor relations. While unionized workers' incomes, increased, inequalities, especially in the non-union sectors began to grow. With the end of the GI bill, veterans' access to high-quality subsidized education declined ..."
"... With the election of President Carter, social welfare in the US began its long decline. The next series of regional wars were accompanied by even greater attacks on welfare via the " Volker Plan " – freezing workers' wages as a means to combat inflation. ..."
"... Guns without butter' became the legislative policy of the Carter and Reagan Administrations. The welfare programs were based on politically fragile foundations. ..."
"... The anti-labor offensive from the ' Oval Office' intensified under President Reagan with his direct intervention firing tens of thousands of striking air controllers and arresting union leaders. Under Presidents Carter, Reagan, George H.W. Bush and William Clinton cost of living adjustments failed to keep up with prices of vital goods and services. Health care inflation was astronomical. Financial deregulation led to the subordination of American industry to finance and the Wall Street banks. De-industrialization, capital flight and massive tax evasion reduced labor's share of national income. ..."
"... The capitalist class followed a trajectory of decline, recovery and ascendance. Moreover, during the earlier world depression, at the height of labor mobilization and organization, the capitalist class never faced any significant political threat over its control of the commanding heights of the economy ..."
"... Hand in bloody glove' with the US Empire, the American trade unions planted the seeds of their own destruction at home. The local capitalists in newly emerging independent nations established industries and supply chains in cooperation with US manufacturers. Attracted to these sources of low-wage, violently repressed workers, US capitalists subsequently relocated their factories overseas and turned their backs on labor at home. ..."
"... President 'Bill' Clinton ravaged Russia, Yugoslavia, Iraq and Somalia and liberated Wall Street. His regime gave birth to the prototype billionaire swindlers: Michael Milken and Bernard 'Bernie' Madoff. ..."
"... Clinton converted welfare into cheap labor 'workfare', exploiting the poorest and most vulnerable and condemning the next generations to grinding poverty. Under Clinton the prison population of mostly African Americans expanded and the breakup of families ravaged the urban communities. ..."
"... President Obama transferred 2 trillion dollars to the ten biggest bankers and swindlers on Wall Street, and another trillion to the Pentagon to pursue the Democrats version of foreign policy: from Bush's two overseas wars to Obama's seven. ..."
"... Obama was elected to two terms. His liberal Democratic Party supporters swooned over his peace and justice rhetoric while swallowing his militarist escalation into seven overseas wars as well as the foreclosure of two million American householders. Obama completely failed to honor his campaign promise to reduce wage inequality between black and white wage earners while he continued to moralize to black families about ' values' . ..."
"... Obama's war against Libya led to the killing and displacement of millions of black Libyans and workers from Sub-Saharan Africa. The smiling Nobel Peace Prize President created more desperate refugees than any previous US head of state – including millions of Africans flooding Europe. ..."
"... Forty-years of anti welfare legislation and pro-business regimes paved the golden road for the election of Donald Trump ..."
"... Trump and the Republicans are focusing on the tattered remnants of the social welfare system: Medicare, Medicaid, Social Security. The remains of FDR's New Deal and LBJ's Great Society -- are on the chopping block. ..."
"... The moribund (but well-paid) labor leadership has been notable by its absence in the ensuing collapse of the social welfare state. The liberal left Democrats embraced the platitudinous Obama/Clinton team as the 'Great Society's' gravediggers, while wailing at Trump's allies for shoving the corpse of welfare state into its grave. ..."
"... Over the past forty years the working class and the rump of what was once referred to as the ' labor movement' has contributed to the dismantling of the social welfare state, voting for ' strike-breaker' Reagan, ' workfare' Clinton, ' Wall Street crash' Bush, ' Wall Street savior' Obama and ' Trickle-down' Trump. ..."
"... Gone are the days when social welfare and profitable wars raised US living standards and transformed American trade unions into an appendage of the Democratic Party and a handmaiden of Empire. The Democratic Party rescued capitalism from its collapse in the Great Depression, incorporated labor into the war economy and the post- colonial global empire, and resurrected Wall Street from the 'Great Financial Meltdown' of the 21 st century. ..."
"... The war economy no longer fuels social welfare. The military-industrial complex has found new partners on Wall Street and among the globalized multi-national corporations. Profits rise while wages fall. Low paying compulsive labor (workfare) lopped off state transfers to the poor. Technology – IT, robotics, artificial intelligence and electronic gadgets – has created the most class polarized social system in history ..."
"... "The collaboration of liberals and unions in promoting endless wars opened the door to Trump's mirage of a stateless, tax-less, ruling class." ..."
"... Corporations [now] are welfare recipients and the bigger they are, the more handouts they suck up ..."
"... Corporations not only continuously seek monopolies (with the aid and sanction of the state) but they steadily fine tune the welfare state for their benefit. In fact, in reality, welfare for prols and peasants wouldn't exist if it didn't act as a money conduit and ultimate profit center for the big money grubbers. ..."
"... The article is dismal reading, and evidence of the failings of the "unregulated" society, where the anything goes as long as you are wealthy. ..."
"... Like the Pentagon. Americans still don't readily call this welfare, but they will eventually. Defense profiteers are unions in a sense, you're either in their club Or you're in the service industry that surrounds it. ..."
The American welfare state was created in 1935 and continued to develop through 1973. Since then, over a prolonged period, the
capitalist class has been steadily dismantling the entire welfare state.
Between the mid 1970's to the present (2017) labor laws, welfare rights and benefits and the construction of and subsidies for
affordable housing have been gutted. ' Workfare' (under President 'Bill' Clinton) ended welfare for the poor and displaced
workers. Meanwhile the shift to regressive taxation and the steadily declining real wages have increased corporate profits to an
astronomical degree.
What started as incremental reversals during the 1990's under Clinton has snowballed over the last two decades decimating welfare
legislation and institutions.
The earlier welfare 'reforms' and the current anti-welfare legislation and austerity practices have been accompanied by a
series of endless imperial wars, especially in the Middle East.
In the 1940's through the 1960's, world and regional wars (Korea and Indo-China) were combined with significant welfare program
– a form of ' social imperialism' , which 'buy off' the working class while expanding the empire. However, recent decades are characterized
by multiple regional wars and the reduction or elimination of welfare programs – and a massive growth in poverty, domestic insecurity
and poor health.
New Deals and Big Wars
The 1930's witnessed the advent of social legislation and action, which laid the foundations of what is called the ' modern
welfare state' .
Labor unions were organized as working class strikes and progressive legislation facilitated trade union organization, elections,
collective bargaining rights and a steady increase in union membership. Improved work conditions, rising wages, pension plans and
benefits, employer or union-provided health care and protective legislation improved the standard of living for the working class
and provided for 2 generations of upward mobility.
Social Security legislation was approved along with workers' compensation and the forty-hour workweek. Jobs were created through
federal programs (WPA, CCC, etc.). Protectionist legislation facilitated the growth of domestic markets for US manufacturers. Workplace
shop steward councils organized 'on the spot' job action to protect safe working conditions.
World War II led to full employment and increases in union membership, as well as legislation restricting workers' collective
bargaining rights and enforcing wage freezes. Hundreds of thousands of Americans found jobs in the war economy but a huge number
were also killed or wounded in the war.
The post-war period witnessed a contradictory process: wages and salaries increased while legislation curtailed union rights via
the Taft Hartley Act and the McCarthyist purge of leftwing trade union activists. So-called ' right to work' laws effectively
outlawed unionization mostly in southern states, which drove industries to relocate to the anti-union states.
Welfare reforms, in the form of the GI bill, provided educational opportunities for working class and rural veterans, while federal-subsidized
low interest mortgages encourage home-ownership, especially for veterans.
The New Deal created concrete improvements but did not consolidate labor influence at any level. Capitalists and management still
retained control over capital, the workplace and plant location of production.
Trade union officials signed pacts with capital: higher pay for the workers and greater control of the workplace for the bosses.
Trade union officials joined management in repressing rank and file movements seeking to control technological changes by reducing
hours (" thirty hours work for forty hours pay "). Dissident local unions were seized and gutted by the trade union bosses
– sometimes through violence.
Trade union activists, community organizers for rent control and other grassroots movements lost both the capacity and the
will to advance toward large-scale structural changes of US capitalism. Living standards improved for a few decades but the capitalist
class consolidated strategic control over labor relations. While unionized workers' incomes, increased, inequalities, especially
in the non-union sectors began to grow. With the end of the GI bill, veterans' access to high-quality subsidized education declined.
While a new wave of social welfare legislation and programs began in the 1960's and early 1970's it was no longer a result of
a mass trade union or workers' "class struggle". Moreover, trade union collaboration with the capitalist regional war policies led
to the killing and maiming of hundreds of thousands of workers in two wars – the Korean and Vietnamese wars.
Much of social legislation resulted from the civil and welfare rights movements. While specific programs were helpful, none of
them addressed structural racism and poverty.
The Last Wave of Social Welfarism
The 1960'a witnessed the greatest racial war in modern US history: Mass movements in the South and North rocked state and federal
governments, while advancing the cause of civil, social and political rights. Millions of black citizens, joined by white activists
and, in many cases, led by African American Viet Nam War veterans, confronted the state. At the same time, millions of students and
young workers, threatened by military conscription, challenged the military and social order.
Energized by mass movements, a new wave of social welfare legislation was launched by the federal government to pacify mass opposition
among blacks, students, community organizers and middle class Americans. Despite this mass popular movement, the union bosses at
the AFL-CIO openly supported the war, police repression and the military, or at best, were passive impotent spectators of the drama
unfolding in the nation's streets. Dissident union members and activists were the exception, as many had multiple identities to represent:
African American, Hispanic, draft resisters, etc.
Under Presidents Lyndon Johnson and Richard Nixon, Medicare, Medicaid, OSHA, the EPA and multiple poverty programs were implemented.
A national health program, expanding Medicare for all Americans, was introduced by President Nixon and sabotaged by the Kennedy Democrats
and the AFL-CIO. Overall, social and economic inequalities diminished during this period.
The Vietnam War ended in defeat for the American militarist empire. This coincided with the beginning of the end of social welfare
as we knew it – as the bill for militarism placed even greater demands on the public treasury.
With the election of President Carter, social welfare in the US began its long decline. The next series of regional wars were
accompanied by even greater attacks on welfare via the " Volker Plan " – freezing workers' wages as a means to combat inflation.
Guns without butter' became the legislative policy of the Carter and Reagan Administrations. The welfare programs were based
on politically fragile foundations.
The Debacle of Welfarism
Private sector trade union membership declined from a post-world war peak of 30% falling to 12% in the 1990's. Today it has sunk
to 7%. Capitalists embarked on a massive program of closing thousands of factories in the unionized North which were then relocated
to the non-unionized low wage southern states and then overseas to Mexico and Asia. Millions of stable jobs disappeared.
Following the election of 'Jimmy Carter', neither Democratic nor Republican Presidents felt any need to support labor organizations.
On the contrary, they facilitated contracts dictated by management, which reduced wages, job security, benefits and social welfare.
The anti-labor offensive from the ' Oval Office' intensified under President Reagan with his direct intervention
firing tens of thousands of striking air controllers and arresting union leaders. Under Presidents Carter, Reagan, George H.W. Bush
and William Clinton cost of living adjustments failed to keep up with prices of vital goods and services. Health care inflation was
astronomical. Financial deregulation led to the subordination of American industry to finance and the Wall Street banks. De-industrialization,
capital flight and massive tax evasion reduced labor's share of national income.
The capitalist class followed a trajectory of decline, recovery and ascendance. Moreover, during the earlier world depression,
at the height of labor mobilization and organization, the capitalist class never faced any significant political threat over its
control of the commanding heights of the economy.
The ' New Deal' was, at best, a de facto ' historical compromise' between the capitalist class and the labor
unions, mediated by the Democratic Party elite. It was a temporary pact in which the unions secured legal recognition while the capitalists
retained their executive prerogatives.
The Second World War secured the economic recovery for capital and subordinated labor through a federally mandated no strike
production agreement. There were a few notable exceptions: The coal miners' union organized strikes in strategic sectors and some
leftist leaders and organizers encouraged slow-downs, work to rule and other in-plant actions when employers ran roughshod with special
brutality over the workers. The recovery of capital was the prelude to a post-war offensive against independent labor-based political
organizations. The quality of labor organization declined even as the quantity of trade union membership increased.
Labor union officials consolidated internal control in collaboration with the capitalist elite. Capitalist class-labor official
collaboration was extended overseas with strategic consequences.
The post-war corporate alliance between the state and capital led to a global offensive – the replacement of European-Japanese
colonial control and exploitation by US business and bankers. Imperialism was later 're-branded' as ' globalization' . It
pried open markets, secured cheap docile labor and pillaged resources for US manufacturers and importers.
US labor unions played a major role by sabotaging militant unions abroad in cooperation with the US security apparatus: They worked
to coopt and bribe nationalist and leftist labor leaders and supported police-state regime repression and assassination of recalcitrant
militants.
' Hand in bloody glove' with the US Empire, the American trade unions planted the seeds of their own destruction at home.
The local capitalists in newly emerging independent nations established industries and supply chains in cooperation with US manufacturers.
Attracted to these sources of low-wage, violently repressed workers, US capitalists subsequently relocated their factories overseas
and turned their backs on labor at home.
Labor union officials had laid the groundwork for the demise of stable jobs and social benefits for American workers. Their collaboration
increased the rate of capitalist profit and overall power in the political system. Their complicity in the brutal purges of militants,
activists and leftist union members and leaders at home and abroad put an end to labor's capacity to sustain and expand the welfare
state.
Trade unions in the US did not use their collaboration with empire in its bloody regional wars to win social benefits for the
rank and file workers. The time of social-imperialism, where workers within the empire benefited from imperialism's pillage, was
over. Gains in social welfare henceforth could result only from mass struggles led by the urban poor, especially Afro-Americans,
community-based working poor and militant youth organizers.
The last significant social welfare reforms were implemented in the early 1970's – coinciding with the end of the Vietnam War
(and victory for the Vietnamese people) and ended with the absorption of the urban and anti-war movements into the Democratic Party.
Henceforward the US corporate state advanced through the overseas expansion of the multi-national corporations and via large-scale,
non-unionized production at home.
The technological changes of this period did not benefit labor. The belief, common in the 1950's, that science and technology
would increase leisure, decrease work and improve living standards for the working class, was shattered. Instead technological changes
displaced well-paid industrial labor while increasing the number of mind-numbing, poorly paid, and politically impotent jobs in the
so-called 'service sector' – a rapidly growing section of unorganized and vulnerable workers – especially including women and minorities.
Labor union membership declined precipitously. The demise of the USSR and China's turn to capitalism had a dual effect: It eliminated
collectivist (socialist) pressure for social welfare and opened their labor markets with cheap, disciplined workers for foreign manufacturers.
Labor as a political force disappeared on every count. The US Federal Reserve and President 'Bill' Clinton deregulated financial
capital leading to a frenzy of speculation. Congress wrote laws, which permitted overseas tax evasion – especially in Caribbean tax
havens. Regional free-trade agreements, like NAFTA, spurred the relocation of jobs abroad. De-industrialization accompanied the decline
of wages, living standards and social benefits for millions of American workers.
The New Abolitionists: Trillionaires
The New Deal, the Great Society, trade unions, and the anti-war and urban movements were in retreat and primed for abolition.
Wars without welfare (or guns without butter) replaced earlier 'social imperialism' with a huge growth of poverty and homelessness.
Domestic labor was now exploited to finance overseas wars not vice versa. The fruits of imperial plunder were not shared.
As the working and middle classes drifted downward, they were used up, abandoned and deceived on all sides – especially by the
Democratic Party. They elected militarists and demagogues as their new presidents.
President 'Bill' Clinton ravaged Russia, Yugoslavia, Iraq and Somalia and liberated Wall Street. His regime gave birth to the
prototype billionaire swindlers: Michael Milken and Bernard 'Bernie' Madoff.
Clinton converted welfare into cheap labor 'workfare', exploiting the poorest and most vulnerable and condemning the next
generations to grinding poverty. Under Clinton the prison population of mostly African Americans expanded and the breakup of families
ravaged the urban communities.
Provoked by an act of terrorism (9/11) President G.W. Bush Jr. launched the 'endless' wars in Afghanistan and Iraq and deepened
the police state (Patriot Act). Wages for American workers and profits for American capitalist moved in opposite directions.
The Great Financial Crash of 2008-2011 shook the paper economy to its roots and led to the greatest shakedown of any national
treasury in history directed by the First Black American President. Trillions of public wealth were funneled into the criminal banks
on Wall Street – which were ' just too big to fail .' Millions of American workers and homeowners, however, were '
just
too small to matter' .
The Age of Demagogues
President Obama transferred 2 trillion dollars to the ten biggest bankers and swindlers on Wall Street, and another trillion
to the Pentagon to pursue the Democrats version of foreign policy: from Bush's two overseas wars to Obama's seven.
Obama's electoral 'donor-owners' stashed away two trillion dollars in overseas tax havens and looked forward to global free trade
pacts – pushed by the eloquent African American President.
Obama was elected to two terms. His liberal Democratic Party supporters swooned over his peace and justice rhetoric while
swallowing his militarist escalation into seven overseas wars as well as the foreclosure of two million American householders. Obama
completely failed to honor his campaign promise to reduce wage inequality between black and white wage earners while he continued
to moralize to black families about ' values' .
Obama's war against Libya led to the killing and displacement of millions of black Libyans and workers from Sub-Saharan Africa.
The smiling Nobel Peace Prize President created more desperate refugees than any previous US head of state – including millions of
Africans flooding Europe.
'Obamacare' , his imitation of an earlier Republican governor's health plan, was formulated by the private corporate
health industry (private insurance, Big Pharma and the for-profit hospitals), to mandate enrollment and ensure triple digit profits
with double digit increases in premiums. By the 2016 Presidential elections, ' Obama-care' was opposed by a 45%-43% margin
of the American people. Obama's propagandists could not show any improvement of life expectancy or decrease in infant and maternal
mortality as a result of his 'health care reform'. Indeed the opposite occurred among the marginalized working class in the old 'rust
belt' and in the rural areas. This failure to show any significant health improvement for the masses of Americans is in stark contrast
to LBJ's Medicare program of the 1960's, which continues to receive massive popular support.
Forty-years of anti welfare legislation and pro-business regimes paved the golden road for the election of Donald Trump
Trump and the Republicans are focusing on the tattered remnants of the social welfare system: Medicare, Medicaid, Social Security.
The remains of FDR's New Deal and LBJ's Great Society -- are on the chopping block.
The moribund (but well-paid) labor leadership has been notable by its absence in the ensuing collapse of the social welfare
state. The liberal left Democrats embraced the platitudinous Obama/Clinton team as the 'Great Society's' gravediggers, while wailing
at Trump's allies for shoving the corpse of welfare state into its grave.
Conclusion
Over the past forty years the working class and the rump of what was once referred to as the ' labor movement' has contributed
to the dismantling of the social welfare state, voting for ' strike-breaker' Reagan, ' workfare' Clinton, ' Wall Street crash' Bush,
' Wall Street savior' Obama and ' Trickle-down' Trump.
Gone are the days when social welfare and profitable wars raised US living standards and transformed American trade unions
into an appendage of the Democratic Party and a handmaiden of Empire. The Democratic Party rescued capitalism from its collapse in
the Great Depression, incorporated labor into the war economy and the post- colonial global empire, and resurrected Wall Street from
the 'Great Financial Meltdown' of the 21 st century.
The war economy no longer fuels social welfare. The military-industrial complex has found new partners on Wall Street and
among the globalized multi-national corporations. Profits rise while wages fall. Low paying compulsive labor (workfare) lopped off
state transfers to the poor. Technology – IT, robotics, artificial intelligence and electronic gadgets – has created the most class
polarized social system in history. The first trillionaire and multi-billionaire tax evaders rose on the backs of a miserable
standing army of tens of millions of low-wage workers, stripped of rights and representation. State subsidies eliminate virtually
all risk to capital. The end of social welfare coerced labor (including young mother with children) to seek insecure low-income employment
while slashing education and health – cementing the feet of generations into poverty. Regional wars abroad have depleted the Treasury
and robbed the country of productive investment. Economic imperialism exports profits, reversing the historic relation of the past.
Labor is left without compass or direction; it flails in all directions and falls deeper in the web of deception and demagogy.
To escape from Reagan and the strike breakers, labor embraced the cheap-labor predator Clinton; black and white workers united to
elect Obama who expelled millions of immigrant workers, pursued 7 wars, abandoned black workers and enriched the already filthy rich.
Deception and demagogy of the labor-
If the welfare state in America was abolished, major American cities would burn to the ground. Anarchy would ensue, it would be
magnitudes bigger than anything that happened in Ferguson or Baltimore. It would likely be simultaneous.
I think that's one of the only situations where preppers would actually live out what they've been prepping for (except for
a natural disaster).
I've been thinking about this a little over the past few years after seeing the race riots. What exactly is the line between
our society being civilized and breaking out into chaos. It's probably a lot thinner than most people think.
I don't know who said it but someone long ago said something along the lines of, "Democracy can only work until the people
figure out they can vote for themselves generous benefits from the public treasury." We are definitely in this situation today.
I wonder how long it can last.
While I agree with Petras's intent (notwithstanding several exaggerations and unnecessary conflations with, for example, racism),
I don't agree so much with the method he proposes. I don't mind welfare and unions to a certain extent, but they are not going
to save us unless there is full employment and large corporations that can afford to pay an all-union workforce. That happened
during WW2, as only wartime demand and those pesky wage freezes solved the Depression, regardless of all the public works programs;
while the postwar era benefited from the US becoming the world's creditor, meaning that capital could expand while labor participation
did as well.
From then on, it is quite hard to achieve the same success after outsourcing and mechanization have happened all over the world.
Both of these phenomena not only create displaced workers, but also displaced industries, meaning that it makes more sense to
develop individual workfare (and even then, do it well, not the shoddy way it is done now) rather than giving away checks that
probably will not be cashed for entrepreneurial purposes, and rather than giving away money to corrupt unions who depend on trusts
to be able to pay for their benefits, while raising the cost of hiring that only encourages more outsourcing.
The amount of welfare given is not necessarily the main problem, the problem is doing it right for the people who truly need
it, and efficiently – that is, with the least amount of waste lost between the chain of distribution, which should reach intended
targets and not moochers.
Which inevitably means a sound tax system that targets unearned wealth and (to a lesser degree) foreign competition instead
of national production, coupled with strict, yet devolved and simple government processes that benefit both business and individuals
tired of bureaucracy, while keeping budgets balanced. Best of both worlds, and no military-industrial complex needed to drive
up demand.
The American welfare state was created in 1935 and continued to develop through 1973. Since then, over a prolonged period,
the capitalist class has been steadily dismantling the entire welfare state.
Wrong wrong wrong.
Corporations [now] are welfare recipients and the bigger they are, the more handouts they suck up, and welfare for
them started before 1935. In fact, it started in America before there was a USA. I do not have time to elaborate, but what were
the various companies such as the British East India Company and the Dutch West India Companies but state pampered, welfare based
entities? ~200 years ago, Herbert Spencer, if memory serves, pointed out that the British East India Company couldn't make a profit
even with all the special, government granted favors showered upon it.
Corporations not only continuously seek monopolies (with the aid and sanction of the state) but they steadily fine tune
the welfare state for their benefit. In fact, in reality, welfare for prols and peasants wouldn't exist if it didn't act as a
money conduit and ultimate profit center for the big money grubbers.
Well, the author kind of nails it. I remember from my childhood in the 50-60 ties in Scandinavia that the US was the ultimate
goal in welfare. The country where you could make a good living with your two hands, get you kids to UNI, have a house, a telly
ECT. It was not consumerism, it was the American dream, a chicken in every pot; we chewed imported American gum and dreamed.
In the 70-80 ties Scandinavia had a tremendous social and economic growth, EQUALLY distributed, an immense leap forward. In the
middle of the 80 ties we were equal to the US in standards of living.
Since we have not looked at the US, unless in pity, as we have seen the decline of the general income, social wealth fall way
behind our own.
The average US workers income has not increased since 90 figures adjusted for inflation. The Scandinavian workers income in the
same period has almost quadrupled. And so has our societies.
The article is dismal reading, and evidence of the failings of the "unregulated" society, where the anything goes as long
as you are wealthy.
Between the mid 1970's to the present (2017) labor laws, welfare rights and benefits and the construction of and subsidies
for affordable housing have been gutted. 'Workfare' (under President 'Bill' Clinton) ended welfare for the poor and displaced
workers. Meanwhile the shift to regressive taxation and the steadily declining real wages have increased corporate profits
to an astronomical degree.
What does Hollywood "elite" JAP and wannabe hack-stand-up-comic Sarah Silverman think about the class struggle and problems
facing destitute Americans? "Qu'ils mangent de la bagels!", source:
https://en.wikipedia.org/wiki/Let_them_eat_cake
Like the Pentagon. Americans still don't readily call this welfare, but they will eventually. Defense profiteers are unions
in a sense, you're either in their club Or you're in the service industry that surrounds it.
As other commenters have pointed out, it's Petras curious choice of words that sometimes don't make too much sense. We can probably
blame the maleable English language for that, but here it's too obvious. If you don't define a union, people might assume you're
only talking about a bunch of meat cutters at Safeway.
The welfare state is alive and well for corporate America. Unions are still here – but they are defined by access and secrecy,
you're either in the club or not.
The war on unions was successful first by co-option but mostly by the media. But what kind of analysis leaves out the role
of the media in the American transformation? The success is mind blowing.
America has barely literate (white) middle aged males trained to spout incoherent Calvinistic weirdness: unabased hatred for
the poor (or whoever they're told to hate) and a glorification of hedge fund managers as they get laid off, fired and foreclosed
on, with a side of opiates.
There is hardly anything more tragic then seeing a web filled with progressives (management consultants) dedicated to disempowering,
disabling and deligitimizing victims by claiming they are victims of biology, disease or a lack of an education rather than a
system that issues violence while portending (with the best media money can buy) that they claim the higher ground.
""Democracy can only work until the people figure out they can vote for themselves generous benefits from the public
treasury." We are definitely in this situation today."
Quite right: the 0.01% have worked it out & US democracy is a Theatre for the masses.
I don't know who said it but someone long ago said something along the lines of, "Democracy can only work until the people
figure out they can vote for themselves generous benefits from the public treasury."
Some French aristocrat put it as, once the gates to the treasury have been breached, they can only be closed again with gunpowder.
Anyone recognize the author?
The author doesn't get it. What we have now IS the welfare state in an intensely diverse society. We have more transfer spending
than ever before and Obamacare represents another huge entitlement.
Intellectuals continue to fantasize about the US becoming a Big Sweden, but Sweden has only been successful insofar as it has
been a modest nation-state populated by ethnic Swedes. Intense diversity in a huge country with only the remnants of federalism
results in massive non-consensual decision-making, fragmentation, increased inequality, and corruption.
The welfare state is alive and well for corporate America. Unions are still here – but they are defined by access and
secrecy, you're either in the club or not.
They are largely defined as Doctors, Lawyers, and University Professors who teach the first two. Of course they are not called
unions. Access is via credentialing and licensing. Good Day
Bernie Sanders, speaking on behalf of the MIC's welfare bird: "It is the airplane of the United States Air Force, Navy, and
of NATO."
Elizabeth Warren, referring to Mossad's Estes Rockets: "The Israeli military has the right to attack Palestinian hospitals
and schools in self defense"
Barack Obama, yukking it up with pop stars: "Two words for you: predator drones. You will never see it coming."
It's not the agitprop that confuses the sheep, it's whose blowhole it's coming out of (labled D or R for convenience) that
gets them to bare their teeth and speak of poo.
What came first, the credentialing or the idea that it is a necessary part of education? It certainly isn't an accurate indication
of what people know or their general intelligence – although that myth has flourished. Good afternoon.
For an interesting projection of what might happen in total civilizational collapse, I recommend the Dies the Fire series of
novels by SM Stirling.
It has a science-fictiony setup in that all high-energy system (gunpowder, electricity, explosives, internal combustion, even
high-energy steam engines) suddenly stop working. But I think it does a good job of extrapolating what would happen if suddenly
the cities did not have food, water, power, etc.
Spoiler alert: It ain't pretty. Those who dream of a world without guns have not really thought it through.
It has been pointed out repeatedly that Sweden does very well relative to the USA. It has also been noted that people of Swedish
ancestry in the USA do pretty well also. In fact considerably better than Swedes in Sweden
"During my whole career at Goldman Sachs - 1967 to 1991 - I never owned a foreign stock or emerging market bonds. Now I have
hundreds of millions of dollars in Russia, Brazil, Argentina and Chile, and I worry constantly about the dollar-yen rate. Every
night before I go to bed I call in for the dollar-yen quote, and to find out what the Nikkei is doing and what the Hang Seng Index
is doing. We have bets in all these markets. Right now Paul [one of my traders] is long [on] the Canadian dollar. We have bets all
over the place. I would not have worried about any of these twenty years ago. Now I have to worry about all of them."
Economic globalization is probably the most fundamental transformation of the world's political and economic arrangements since
the Industrial Revolution. Decisions made in one part of the world more and more affect people and communities elsewhere in the
world. Sometimes the consequences of globalization are positive, liberating inventive and entrepreneurial talents and accelerating
the pace of sustainable development. But at other times they are negative, as when many people, especially in less-developed countries,
are left behind without a social safety net. Globalization undermines the ability of the nation to tax and to regulate its own economy.
This weakens the power of sovereign nations relative to that of large transnational corporations and distorts how social and economic
priorities are chosen.
Economic globalization is most often associated with rapid growth in the flow of goods and services across international borders.
Indeed, the economic "openness" of a nation is often measured by the value of its exports, imports, or their sum when compared to
the size of its economy. Economic globalization also involves large investments from outside each nation, often by transnational
corporations. These corporations often combine technology and know-how with their investments that enhance the productive capacity
of a nation. Previous position papers of the Mobilization, contained in Speaking of Religion & Politics: The Progressive Church
Tackles Hot Topics2, have dealt with globalization primarily in these terms.
But international trade and investment are only part of the openness that has come to be called globalization. Another part,
and arguably the most important, is the quickening flow of financial assets internationally. While a small portion of this flow
is directly associated with the "real" economy of production and exchange, its vast majority is composed of trades in the "paper"
economy of short-term financial markets. This paper economy is enormous: The value of global financial securities greatly exceeds
the value of annual world output of goods and services. Moreover, the paper economy often contributes to crises in the real economy.
Thus it is important to the well being of humanity and the planet as a whole, yet it is little understood by most people. This essay
undertakes to provide a basic understanding of this paper economy, especially as its more speculative features have multiplied during
the last two or three decades, so that Christians and others concerned about what is happening in our world can join in an intelligent
discussion of how the harmful consequences of financial markets can be controlled.
Financial markets 101
To better understand this paper economy, one first needs to know something about foreign exchange markets, international money
markets, and "external" financial markets.
In an open economy, domestic residents often engage in international transactions. American car dealers, for example, buy Japanese
Toyotas and Datsuns, while German computer companies sell electronic notebooks to Mexican businessmen. Similarly, Australian mutual
funds invest in the shares of companies all over the world, while the treasurer of a Canadian transnational corporation parks idle
cash in 90-day Bank of England notes. Most of these transactions require one or more participants to acquire a foreign currency.
If an American buys a Toyota and pays the Japanese Toyota dealer in dollars, for example, the latter will have to exchange the dollars
for yens in order to have the local currency with which to pay his workers and local suppliers.
The foreign exchange market is the market in which national currencies are traded. As in any market, a price must exist at which
trade can occur. An exchange rate is the price of a unit of domestic currency in terms of a foreign currency. Thus, if the exchange
rate of the dollar in terms of the Japanese yen increases, we say the dollar has depreciated and the yen has appreciated. Similarly,
a decrease in the dollar/yen exchange rate would imply an appreciation of the dollar and a depreciation of the yen.
Foreign exchange markets can be classified as spot markets and forward markets. In spot markets currencies are bought and sold
for immediate delivery and payment. In forward markets, currencies are bought or sold for future delivery and payment. A U.S. music
company, say, enters into a contract to buy British records for delivery in 30 days. To guard against the possibility of the dollar/pound
exchange rate increasing in the meantime, the company buys pounds forward, for delivery in 30 days, at the corresponding forward
exchange rate quoted today. This is called hedging.
Of course, there has to be a counterpart to the music company's forward purchase of pounds. Who is the seller of those pounds?
The immediate seller would be a commercial bank, as in the spot market. But the bank only acts as an intermediary. The ultimate
seller of forward pounds may be another hedger, like the music company, but with a position just its opposite. Suppose, for example,
that an American firm or individual has invested in 30-day British securities that it wants to convert back into dollars after the
end of 30 days. The investor may decide to sell the pound proceeds forward in order to assure itself of the rate at which the pounds
are to be converted back into dollars after 30 days.
Another type of investor may be providing the forward contract bought by the music company. This is the speculator, who attempts
to profit from changes in exchange rates. Depending on their expectations, speculators may enter the forward market either as sellers
or as buyers of forward exchange. In this particular case, the speculator may have reason to believe that the dollar/pound exchange
rate will decrease in the next 30 days, permitting him to obtain the promised pounds at a lower price in the spot market 30 days
hence.
The main instruments of foreign exchange transactions include electronic bank deposit transfers and bank drafts, bills of exchange,
and a whole array of other short-term instruments expressed in terms of foreign currency. Thus, foreign exchange transactions do
not generally involve a physical exchange of currencies across borders. They generally involve only changes in debits and credits
at different banks in different countries. Very large banks in the main financial centers such as New York, London, Brussels and
Zurich, account for most foreign exchange transactions. Local banks can provide foreign exchange by purchasing it in turn from major
banks.
Although the foreign exchange market is dispersed in many cities and countries, it is unified by keen competition among the highly
sophisticated market participants. A powerful force keeping exchange rate quotations in different places in line with each other
is the search on the part of market participants for foreign exchange arbitrage opportunities. Arbitrage is the simultaneous purchase
and sale of a commodity or financial asset in different markets with the purpose of obtaining a profit from the differential between
the buying and selling price.
When foreign exchange is acquired in order to engage in international transactions involving the purchase or sale of goods and
services, it is said that international trade has taken place in the real economy. When international transactions involve the purchase
or sale of financial assets, they are referred to as international financial transactions. They constitute the paper economy.
Financial markets are commonly classified as capital markets or money markets. Capital markets deal in financial claims that
reach more than one year into the future. Such claims include shares of stock, bonds, and long-term loans, among others. Money markets,
on the other hand, deal in short-term claims, with maturities of less than one year. These include marketable government securities
(like Treasury bills), large-denomination certificates of deposit issued by banks, commercial paper (representing short-term corporate
debt), money market funds, and many other kinds of short-term, highly liquid (easily transferable) financial instruments. It is
these short-term money market securities that account for most of the instability in the global paper economy.
Buying or selling a money market security internationally involves the same kind of foreign exchange risk that plagues buyers
or sellers of merchandise internationally. If one wishes to guard against the possibility of an increase or decrease in the foreign
exchange rate, one can insure against such fluctuations by "covering" in the forward market. By the same token, the decision about
whether to own domestic or foreign money market securities is not simply a comparison of the rates of interest paid on otherwise
comparable securities, because one must also take into account the gain (or loss) from purchasing foreign currency spot and selling
it forward. Thus, choosing the security with the highest return does not necessarily imply the one with the highest interest rate.
People who trade in international money markets, moreover, need to take into account many other variables, including the costs
of gathering and processing information, transaction costs, the possibility of government intervention and regulation, other forms
of political risk, and the inability to make direct comparisons of alternative assets. Speculating in international money markets
is a risky proposition.
International money markets involve assets denominated in different currencies. External financial markets involve assets denominated
in the same currency but issued in different political jurisdictions. Eurodollars, for example, are dollar deposits held outside
the United States (offshore), such as dollar deposits in London, Zurich, or even Singapore banks. The deposits may be in banks owned
locally or in the offshore banking subsidiaries of U.S. banks. Deutsche mark deposits in London banks or pound sterling deposits
in Amsterdam banks also are examples of external deposits. They are referred to as eurocurrency deposits. (The advent of a new common
currency in the European Community - the Euro - will require the development of new nomenclature for external financial markets)
External banking activities are a segment of the wholesale international money market. The vast majority of eurocurrency transactions
fall in the above $1 million value range, frequently reaching the hundreds of millions (or even billion) dollar value. Accordingly,
the customers of eurobanks are almost exclusively large organizations, including multinational corporations, government entities,
hedge funds, and international organizations, as well as eurobanks themselves. Like domestic banks, eurobanks that have excess reserves
may make loans denominated in eurocurrencies, expanding the supply of eurocurrency deposits. The eurocurrency market funnels funds
from lending countries to borrowing countries. Thus, it performs an important function as global financial intermediator.
Early history
The origins of what Karl Polanyi3 called haute finance can be traced to Renaissance Italy,
where as early as 1422 there were seventy-two bankers or bill-brokers in or near the Mecato Vecchio of Florence.4
Many combined trade with purely financial business. By the middle of the fifteenth century, the Medici of Florence had opened branches
in Bruges, London and Avignon, both as a means of financing international trade and as a way of marketing new kinds of financial
assets. Many banking terms and practices still in use today originated in the burgeoning financial centers of Renaissance Europe.
By the early seventeenth century, the Dutch and East India Companies began issuing shares to the public in order to fund imperial
enterprises closely linked to Holland and Britain. Their shares were made freely transferable, permitting development of a secondary
financial market for claims to future income. Amsterdam opened a stock exchange in 1611, and shortly thereafter, the British government
began issuing lottery tickets, an early form of government bonds, to finance colonial expansion, wars and other major areas of state
expenditure. A lively secondary market in these financial instruments also emerged.5
Throughout these early years, financial markets were anything but riskless and stable. Consider the famous Dutch tulip mania
of 1630, for example. This speculative bubble saw prices of tulip bulbs reach what seemed like absurd levels, yet "the rage among
the Dutch to possess them [tulips] was so great that the ordinary industry of the country was neglected." Some investors in Britain
and France shared this "irrational exuberance," though it was centered mostly in Holland. Then, not unlike speculative bubbles of
more recent vintage, prices crashed6, pushing the economy into a depression and leaving many
investors angry and confused.
Paris developed into an early financial center in the eighteenth century, but the Revolution of 1789 dissipated its power. The
New York Stock Exchange was formally organized in 1792 and the official London Stock Exchange opened in 1802. The expansion westward
of the railroads in the U.S. offered the financial community opportunity to sell railway shares and bonds that quickly became dominant
in the financial markets. Indeed, the bond markets of London, Paris, Berlin, and Amsterdam were vehicles for collecting massive
amounts of European savings and transferring it at higher returns to the emerging markets of the U.S., Canada, Australia, Latin
America and Russia in the century preceding World War I.
Forward markets soon developed, especially in the U.S., in order to counter the impact of long distances and unpredictable weather.
As capital and money markets expanded, other new financial instruments came into use. Joint stock companies were formed, enabled
by legislation that clarified the distinction between the owners and managers of corporations. This, in turn, helped stimulate the
growth of the American stock market in the late nineteenth century. To be sure, financial markets did not grow continuously in the
nineteenth century. Lending to the emerging markets was interrupted by defaults in the 1820s, 1850s, 1870s and 1890s, but each wave
of default was confined to a relatively small number of countries, permitting growth of financial flows to resume.7
In the four decades leading up to World War I, a truly worldwide economy was forged for the first time, extending from the core
of Western Europe and the U.S. to latecomers in Eastern Europe and Latin America and even to the countries supplying raw materials
on the periphery. Central to this expansion of trade and investment was an expanding system of finance that girded the globe. The
amount was enormous: between 1870 and 1914 something like $30 billion,8 the equivalent in
2002 dollars of $550 billion, was transferred to recipient countries, in a world economy perhaps one-twelfth as large as today's.
During this "Gilded Age" of haute finance, the risks of participating in international trade and investment were generously shared
with governments and the banking system. The reason is that foreign exchange rates were kept reasonably stable by the commitment
of most governments to the "high" gold standard. In this way, businesses and individuals engaging in international transactions
were reasonably certain that the value of their contracts was not going to change before they matured. Their exchange risk was shared
with government by its willingness to buy or sell gold in order to keep the exchange rate constant. Because of this assurance, financial
flows were reasonably free of regulation.
They were not immune from crises, however. When the sources of financial capital temporarily dried up, capital-importing countries
occasionally found they could not expand export earnings sufficiently to avoid suspending interest payments on their debts or abandoning
gold parity. On two occasions, the United States faced this possibility. The first was in 1893, when it switched in a sharp economic
downturn to bimetallism (which caused William Jennings Bryan to denounce the "cross of gold"), and the second was in 1907, which
led to the creation of the Federal Reserve System, handing to the government the function of lender of last resort previously carried
out by Wall Street banks under the tutelage of J. Pierpont Morgan.
In his magisterial book The Great Transformation, Karl Polanyi reflected on the pervasive influence of haute finance on the policies
of nations even in this "Gilded Age." The globalising financial markets and the gold standard, according to Polanyi, left very little
room for states, especially smaller ones, to adopt monetary and fiscal policies independent of the new international order. "Loans,
and the renewal of loans, hinged upon credit, and credit upon good behavior. Since, under constitutional government ..., behavior
is reflected in the budget and the external value of the currency cannot be detached from the appreciation of the budget, debtor
governments were well advised to watch their exchanges carefully and to avoid policies which might reflect upon the soundness of
budget positions." Thus, even one hundred years ago the then-dominant world power, Great Britain, speaking as it did so often through
the voice of the City of London, "prevailed by the timely pull of a thread in the international monetary network.9
Following World War I, the United States emerged not merely as a creditor country but as the primary source of new international
financial flows. At first, the principal borrowers were the national governments of the stronger countries, but as the boom in security
underwriting developed in the U.S, numerous obscure provinces, departments and municipalities found it possible to sell their bonds
to American investors.10 Just as domestic construction, land, and equity markets went through
speculative rises in the 1920s, so too did the U.S. experience a speculative surge in foreign investment. In the aftermath of successive
defaults by foreign debtors in 1932, the Senate Committee on Banking and Currency concluded:
The record of the activities of investment bankers in the flotation of foreign securities is one of the most scandalous chapters
in the history of American investment banking. The sale of these foreign issues was characterized by practices and abuses that violated
the most elementary principles of business ethics.11
Speculation in the stock markets leading up to 1929 offers still another window on the instability of short-term financial flows.
A speculative market can be defined as one in which prices move in response to the balance of opinion regarding the future movement
of prices rather than responding normally to changes in the demand for and supply of whatever is priced. Helped by the willingness
of Wall Street to allow people to buy stocks on margin, people were only too ready to bet prices would rise as long as others thought
so too. Day after day and month after month the price of stocks went up in 1927. The gains by later standards were not large, but
they had an aspect of great reliability. Then in 1928, the nature of the boom changed. "The mass escape into make-believe, so much
a part of the true speculative orgy, started in earnest.12
Following World War I, the gold standard itself took on new form. Nations were allowed to hold their international reserves in
either gold or foreign exchange. This worked for a while in the 1920s, but as speculation mounted and balances of payments disequilibria
grew, fears of devaluation led central banks to try to replace their foreign-exchange holdings with specie in a "scramble for gold."
The worldwide result of these shifts in central bank portfolios was an overall contraction of the supply of money and credit that
sapped aggregate demand and forced prices to fall and output levels to shrink. Thus, it can be argued - persuasively in our view
- that the Great Depression of the 1930s was as much, if not more, the result of mismanagement of money and credit as it was the
result of protectionist policies. Protectionist policies were more likely the result of slowed growth and stalled trade. Countries
that broke with the gold-exchange standard early, such as Britain in 1931, and pursued more expansionary monetary policies fared
somewhat better.
The Bretton Woods system
During the darkest days of World War II, a radically new economic architecture was designed for the postwar world at a New Hampshire
ski resort called Bretton Woods. With the competitive devaluation and protectionist policies of the 1930s still fresh in their minds,
the mostly British and American delegates to the conference wanted most of all to design a system with fixed exchange rates that
did not rely on national gold hoards to keep exchange rates stable. They decided to depend instead on strict controls of international
financial movements. In this way, they hoped to allow countries to pursue full-employment policies through appropriate monetary
(money and credit) and fiscal (tax and spending) policies without some of the anxieties associated with open financial markets.
The role of monetary and financial stabilizer was given to the International Monetary Fund (IMF), which was provided with modest
funds to assist nations to adjust imbalances in their external payments obligations. The International Bank for Reconstruction and
Development (IBRD, later the World Bank) assumed the task of helping to finance post-war reconstruction.13
The IMF as it emerged from Bretton Woods had inadequate reserves to advance money for the long periods that many countries require
for "soft-landings" from big current-account deficits. It would make only short-term loans. To make sure that borrowing nations
were constrained, "conditionality" attached to IMF loans became standard practice, even in the early years of the Fund's operation.
Policy limitations and "performance targets" tied to credit lines advanced under "standby agreements" began in the middle 1950s
and were universal by the 1960s, long before the notions of "stabilization" and "structural adjustment" came into common parlance.
The Bretton Woods agreement also imposed a foreign exchange standard by which exchange rates between major currencies were fixed
in terms of the dollar, and the value of the dollar was tied to gold at a U.S. guaranteed price of thirty-five dollars per ounce.
By devising a system that controlled financial movements and assisted with the adjustment of countries' balances of payments, the
new system succeeded in keeping exchange rates remarkably stable. They were changed only very occasionally, e.g., as when the value
of sterling relative to the dollar was reduced in 1949 and again in 1966. This meant that companies doing business abroad did not
need to worry constantly about the risk of exchanging one currency for another.
Among the reasons for this remarkable stability was the willingness of the central banks of other countries to hold an increasing
proportion of their official reserves in the form of U.S. dollars. It was an essential part of the system that the dollars held
by other countries would be seen as IOUs backed by the U.S. offer to exchange them for gold at a fixed pre-war price. But as the
balance-of-payments of the U.S. moved more deeply into deficits in the 1960s, there were more and more U.S. dollars held by other
countries, and this so-called "dollar overhang" became disturbingly large.15 General de
Gaulle called it "the exorbitant privilege," meaning that the Americans were paying their bills - for defense spending to fight
the Vietnam War among other things - with IOUs instead of real resources in the form of exports of goods and services.
Strict control over financial movements began to weaken as early as the 1950s, when the first eurodollar (later eurocurrency)
deposits were made in London. At first a trickle, limited originally to Europe, these offshore banking operations soon expanded
worldwide. The American "Interest Equalization Tax" (IET) instituted in 1963 raised the costs to banks of lending offshore from
their domestic branches.16 The higher external rates led dollar depositors such as foreign
corporations to switch their funds from onshore U.S. institutions to eurobanks. Thus, the real effect of the IET was to encourage
the dollar to follow the foreigners abroad, rather than the other way around. Eurobanks paid higher interest rates on deposits and
loaned eurocurrencies at lower rates than U.S. banks could at home. Still another large inflow of eurodeposits occurred in 1973-74
as the Organization of Petroleum Exporting Countries (OPEC) began "recycling" their surplus dollar earnings through eurobanks. Because
of their existence, a country such as Brazil could arrange within a reasonably regulation-free environment to obtain multimillion-dollar
loans from a consortium of offshore American, German and Japanese banks and thereby finance its oil imports. Net eurocurrency deposit
liabilities that amounted to around $10 billion in the mid-1960s, grew to $500 billion by 1980.
These eurocurrency transactions taught the players in financial markets how to shift their deposits, loans, and investments from
one currency to another whenever exchange rates or interest rates were thought to be ready to change. Even the ability of central
banks to regulate the supply of money and credit was undermined by the readiness of commercial banks to borrow and lend offshore.
Hence, the effectiveness of regulatory mechanisms that had been put in place to implement the Bretton Woods agreement - interest
rate ceilings, lending limits, portfolio restrictions, reserve and liquidity requirements - gradually eroded as offshore transactions
started to balloon.
The world economy developed at unprecedented rates during the roughly twenty-five years immediately following World War II. Growth
and employment rates during these years were at historic highs in most countries. Productivity also advanced rapidly in most developing
countries as well as in the technological leaders. These facts suggest that the system devised at Bretton Woods worked reasonably
well, despite occasional adjustments. To be sure, it helped to sow the seeds of its own destruction by failing to retain operational
control of international financial flows. But the twenty-five years of its survival leading up to August 15, 1971, when President
Nixon closed the gold window, have nonetheless come to be called by some economic historians the "Golden Years."
Controlling private risk
Fixed exchange rates did not last long after the U.S. stopped exchanging gold for claims on the dollar held by foreign central
banks. The pound sterling was allowed to float against the dollar in July, 1972. Japan set the yen free to float in February, 1973,
and most European currencies followed suit shortly thereafter. The Bretton Woods gold-dollar system was doomed.
The fact that exchange rates no longer were fixed meant that companies doing business in different countries had to cope with
the day-to-day shifts in the dollar's rate of exchange with other currencies. The risks of unexpected changes in the value of international
contracts suddenly had shifted from the public to the private sector. Corporate finance officers now had to hedge against possible
exchange losses by buying a currency forward and investing the equivalent in the short-term money market, or by investing in the
eurocurrency market. The corporations' banks, in turn, tried to match each foreign currency transaction with another contrary transaction
in order not to leave each of the banks exposed to foreign exchange risk overnight. Since no single bank was likely to balance its
foreign exchange positions exactly, the need arose to swap deposits in different currencies in order to match corporate hedging
transactions and to square the bank's books.
The price of this forward cover on inter-bank transactions - that is to say, the premium or discount on a currency's spot value
- has tended to accord with the differences between interest-rates offered for eurocurrency deposits in different currencies. This
is the connection between the foreign exchange market and the short-term credit markets, between exchange rates and interest rates.
Whenever exchange rates move up or down, therefore, their influence is immediately transmitted through the eurocurrency markets
to the credit markets.
It is this scramble to avoid private risk that accounted for the dramatic rise in international financial movements following
the demise of the Bretton Woods system. By 1973, daily foreign exchange trading around the world varied between $10 and $20 billion
per day. This amount was approximately twice the value of world trade at the time. Bank of International Settlements data suggests
that the daily average of foreign exchange trading had climbed by 1980 to about $80 billion, and that the ratio between foreign
exchange trading and international trade was more nearly ten to one. The data for 1992 was $880 billion and fifty to one, respectively;
for 1995, $l,260 billion and seventy to one; and for 2000, almost $1,800 and ninety to one.
There is very little doubt, therefore, that the lion's share of international financial flows is relatively short-run. Indeed,
about eighty percent of foreign exchange transactions are reversed in less than seven business days. Only a very small proportion
is used to finance international trade and direct foreign investment. The vast majority must be used with the expectation of gain
or to avoid losses that may result from changes in the value of financial assets. In general terms, they are speculative, made in
hope of capital gain or to hedge against potential capital loss, or to seek the gains of arbitrage based on slight differences in
rates of return in different financial centers.
Foreign exchange markets and markets for money and credit seem remote and abstract to most people. This section introduces the
real institutions that operate these markets and assesses the nature of their power.
Commercial banks They take deposits, lend money, and create credit to the extent their capitalization allows. In
Europe, they tend to combine commercial and investment banking services, but in the U.S. and Japan they are still kept at least
partially separate by regulation. The foreign exchange trading facilities of the largest commercial banks, e.g. Citibank and
J.P.Morgan/Chase in the U.S., tend to dominate the market. The banking industry as a whole represents the largest pool of world
financial capital.
Investment banks They facilitate international payments, manage new issues of stocks and bonds, advise on mergers
and acquisitions in all industries, and engage in securities and foreign exchange trading as allowed by law. Investment banks
(previously called merchant banks in the U.K.) have specialized in particular kinds of derivative products. Derivatives are
financial contracts whose value is based upon the value of other underlying financial assets such as stocks, bonds, mortgages
or foreign exchange.
Brokerage houses They handle the bulk of stock exchange transactions and a major part of foreign exchange transactions.
Investment banks recently have acquired several of the main brokerage houses in the U.S. The development of investor-friendly
methods of buying and selling securities, e.g., over-the-counter markets and electronic brokerage, also have diminished the
role of independent brokerage houses.
Mutual funds They are pools of funds provided by clients that are run by professional investment managers. These
collective investments are held in portfolios with various mixes of money-market instruments, bonds and equities. Mutual funds
account for the second largest pool of global financial capital.
Hedge funds They resemble mutual funds, but they are much less restricted in investment activities and techniques.
Their customers are high net-worth individuals and large institutional investors. They specialize in complex financial instruments
and tend to take significant speculative positions, especially on expected future changes in macroeconomic conditions. They
exploit arbitrage opportunities embedded in the relative prices of related securities. They frequent offshore centers and tax
havens.
Tax havens Offshore centers and tax havens shelter perhaps $10 trillion of wealth from capital and income taxation.
The British Virgin Islands, the Bahamas, Bermuda, the Cayman Islands, Dublin and Luxembourg are among the most important. Many
hedge funds are registered there.
Wealthy individuals They are an important source of funds, as many of them invest their liquid funds in financial
markets. They account for about eighty percent of hedge fund investors.
Private pension funds They function like annuities, receiving funds today in return for a promise to pay future benefits.
With large pools of funds to invest, they tend to depend on investment banks, mutual funds or hedge funds to supervise placement
of their assets in global financial markets.
Insurance companies They pool risks by selling protection against the loss of property, income, or life. Since the
risks they insure have various durations, they call for varied investment strategies. A portion of their funds is invested in
short-term financial instruments, often through mutual and hedge funds.
Transnational corporations They produce and sell goods and services in a number of countries. Their finance departments
seek the best ways to raise and transfer funds across borders, and administer the transfer prices18
of international trade conducted within the corporation. Some even have in-house corporate banks.
According to recent work by political scientists, the power of these financial actors is based in part on a complicated "process
of multiplication" of loans, assets and transactions. Many investors in financial markets buy financial instruments on very thin
margins, based on loans obtained by pledging the assets as collateral. This is called "leverage" in the jargon of financial markets.
In turn, the borrowed funds are invested in other financial assets, multiplying the demand for credit and financial assets. As demand
rises, more sophisticated financial assets are invented, including many forms of financial derivatives. A major portion of the accumulated
debt remains serviceable only as long as the prices of most assets will rise or at least remain relatively stable. If prices turn
down, they easily can lead to a chain-reaction. If investors respond instinctively like a herd, they will bring a far-reaching collapse
that constitutes a crisis.
As the flow of financial assets climbs, some bankers, brokers, and managers of financial institutions become prominent players
in the competition for investor dollars. Some become known for picking profitable places to invest and for promoting their selections
successfully. This can influence markets if people have confidence in their advice. A notorious example of the influence of prominent
players was the attack on British sterling in 1992 by George Soros' Quantum Fund. Believing that sterling was overvalued, the Fund
quietly established credit lines that allowed it to borrow $15 billion worth of sterling and sell it for dollars at the then "overvalued"
price. Its purpose, of course, was to pay back the loan with cheaper pounds after they had depreciated. Having gone long on dollars
and short on sterling, Soros decided to speak up noisily. He publicized his short-selling and made statements in newspapers that
the pound would soon be devalued. It wasn't long before sterling was devalued; he made $1 billion in profit.
The point can be made more generally: financial markets are subject to manipulation because they have become socially structured.
Market leaders and financial gurus are admired and followed (at least until very recently). The heavyweights thus dominate the business.
An obvious consequence of this is that there is a strong tendency in financial markets for further concentration of resources.
Another source of the power of financial actors is their obvious affinity for the rampant free-market philosophy of neo-liberalism.
The freedom with which they move financial capital around depends, of course, on the market-friendly policies of the so-called Washington
Consensus.19 As long as they are seen as part of the governing coalition, they derive special
powers to regulate themselves rather than be controlled by an independent government agency or civil society. Their power also is
reinforced by the activities of several collective associations of financial actors,20
which lobby on their behalf.
One more source of power for the financial actors is their knowledge that if they are big enough and sufficiently interlaced
with other financial actors, then the "system" will keep them from failing. Consider the case of Long-term Capital Management, a
hedge fund partnership started in 1994. It was able to borrow from various banks the equivalent of forty times its capitalization
in order to make bets on changes in the relative prices of bonds in the U.S. and abroad. When the Russian government announced a
devaluation and debt moratorium in August, 1998, it produced losses that the fund could not sustain. Nor could some of the banks
that had loaned large amounts to the fund. Accordingly, the Federal Reserve Bank of New York, fearful that the risk to the entire
system was too high, orchestrated a private rescue operation by fourteen banks and other financial institutions, which re-capitalized
the company for $3.5 billion.
Financial actors also have the power indirectly to influence non-financial actors such as firms or states. By providing economic
incentives to gamble and speculate on financial instruments, global financial markets divert funds from long-term productive investments.
In all probability, they also encourage banks and financial institutions to maintain a regime of higher real interest rates that
reduce the ability of productive enterprises to obtain credit. The volatility of global financial markets, moreover, brings uncertainty
and volatility in interest rates and exchange rates that are harmful to various sectors of the real economy, particularly international
trade.
The above stories about George Soros and Long-term Capital Management are good illustrations of the consequences for non-financial
actors of actions by financial actors. Both episodes are examples of games that are basically zero-sum, at least in the short-run.
Nothing new was produced; no new values were created. In the 1992 case about speculating against sterling, the Quantum Fund's profits
were at the expense of the British government, especially the Bank of England, and British taxpayers. In 1998, the losses suffered
by Long-term Capital Management came out of the pockets of the stockholders of the banks that bailed it out, as the stock-market
value of their shares depreciated. Hence, the financial system tends to feed itself by drawing more resources from other sectors
of the economy, undermining the vitality of the real economy.
Consequences of global financial flows
The dominant economic ideology of the last twenty-five years has been embodied in the so-called Washington Consensus. It is a
"market-friendly" ideology that traces its roots to longstanding policies of the IMF that encourage macroeconomic "stabilization;"
to adoption by the World Bank of ideas in vogue in Washington early in the Reagan period concerning deregulation and supply-side
economics; to the zeal of the Thatcher government in England for privatizing public enterprises; and perhaps most of all to the
neo-liberal tendencies of the business community and the economics profession in the U.S. The implementation of these policies of
economic "reform," by first "stabilizing" the macro-economy and then "adjusting" the market so that it can perform more efficiently,
are supposed to pay off in the form of faster output growth and rising real incomes
Among these policy prescriptions is financial liberalization in both the developed and the developing countries. Domestically
it is achieved by weakening or removing controls on interest and credit and by diluting the differences between banks, insurance
and finance companies. International financial liberation, on the other hand, demands removal of controls and regulations on both
the inflows and outflows of financial instruments that move through foreign exchange markets. It is the implementation of these
reforms that is perhaps the single most important cause of the surge in global financial flows. To be sure, the influence of technological
advances has broken the natural barriers of space and time for financial markets as twenty-four hour electronic trading has grown.
The fact that throughout most of the 1980s and 1990s the developed countries suffered from over-capacity and overproduction in manufacturing
may also have led the owners of financial capital to look for alternative profit opportunities.
It now is time to ask whether the implementation of all these reforms, on balance, has produced good or bad results. The focus
of this section will be mostly on the consequences of large and expanding international financial flows. After all, they are the
main concern of this essay. But first, we should ask whether or not the policies of growth and rising real incomes promoted by the
Washington Consensus have borne fruit.
Growth and income
There is little doubt that the introduction of the Washington Consensus' policy mix expanded the volume of international trade.
As a result, trade in goods and services has grown at more than twice the rate of global gross domestic product (GDP), and developing
countries' share of trade has risen from 23 to 29 percent. Increasing numbers of firms from developing countries, like their industrial-country
counterparts, engage in transnational production and adopt a global perspective in structuring their operations. The flow of foreign
direct investments and foreign portfolio investments has multiplied even more rapidly than trade, despite the financial instability
experienced in Asia, Brazil, Russia, and elsewhere in recent years.
The effects of liberalization have not been uniformly favorable, however. After at least ten full years of experience with the
Washington Consensus, several recent studies have begun to assess the consequences for developing countries of this experiment in
more open markets.21 Except for the years of crisis in a number of the countries studied,
most developing countries achieved moderate growth rates of gross domestic product in the 1990s - considerably higher than in the
l980s in Africa and Latin America during the debt crisis, but remarkably unchanged in most other regions. Moreover, average annual
growth in the 1990s was slightly lower than in the twenty-five years preceding the debt crisis when a strategy of substituting domestic
production for imports was in fullest use. When population growth rates are taken into consideration, the growth rate of per capita
income in the developing countries studied during the 1990s also was somewhat lower than in the 1960s and 1970s. Toward the end
of the 1990s, growth tapered off in many countries due to emerging domestic financial crises or external events. There is little
evidence in these figures, therefore, to suggest the strategy of liberalization boosted growth rates appreciably.
Nor did the distribution of income improve in most developing countries in the 1990s. On the contrary, virtually without exception
the wage differentials between skilled and unskilled workers rose with liberalization. The reasons for this varied widely among
countries, but one of the most important reasons was the fact that the number of relatively well-paid jobs in sectors of the economy
involved with international trade, though growing, was insufficient to absorb available workers, forcing many workers into more
precarious and poorly paid employment in the non-traded, informal trade, and service sectors or where traditional agriculture served
as a sponge for the labor market. Between the mid-1960s and the late-1990s, the poorest 20 percent of the world population saw its
share of income fall from 2.3 to 1.4 percent. Meanwhile, the share of the wealthiest quintile increased from 70 to 85 percent.22
Risk and reward
While all markets are imperfect and subject to failure, financial markets are more prone than others to fail because they are
plagued with three particular shortcomings: asymmetric information, herd behavior and self-fulfilling panics. Asymmetric information
is a problem whenever one party to an economic transaction has insufficient information to make rational and consistent decisions.
In most financial markets where borrowing and lending take place, borrowers usually have better information about the potential
returns and risks associated with the investments to be financed by the loans than do the lenders. This becomes especially true
as financial transactions disperse across the globe, often between borrowers and lenders of widely different cultures.
Asymmetric information leads to adverse selection and moral hazard. Adverse selection occurs when, say, lenders have too little
information to choose from among potential borrowers those who are most likely to use the loans wisely. The lenders' gullibility,
therefore, attracts more unworthy borrowers. Moral hazard occurs when borrowers engage in excessively risky activities that were
unanticipated by lenders and lead to significant losses for the lender. Yet another form of moral hazard occurs when lenders indulge
in lending indiscriminately because they assume that the government or an international institution will bail them out if the loans
go awry.
A good illustration of asymmetric information is the story of bank lending following OPEC's large increase in oil prices following
1973. Awash in cash, the oil exporters deposited large amounts in commercial banks that then perfected the Euro-currency loan for
developing countries. Eager to put excess reserves to use, the banks spent little time discriminating among potential borrowers,
in part because they believed host governments or international agencies would guarantee the loans. At the same time, developing
countries found they could readily borrow not only to import oil, but also to increase other kinds of expenditures. This meant they
could use borrowed funds to maintain domestic spending rather than be forced to adjust to the new realities of higher prices for
necessary imports. There is considerable evidence that moral hazard also was present in the Mexican crises in 1982 and 1994, and
in the Southeast Asian crises in 1997-8.
Yet another illustration of asymmetric information is the tendency of financial firms, especially on Wall Street and in the City
of London, to invent ever more complex derivatives to shift risk around the financial system. The market for these products is growing
rapidly, both on futures and options exchanges (two of the several places where derivatives are traded). A financial engineer, for
example, can take the risk in, say, a bond and break it down into a series of smaller risks, such as that inflation will reduce
its real value or that the borrower will default. These smaller risks can then be priced and sold, using derivatives, so that the
bondholder keeps only those risks he wishes to bear. But this is not a simple task, particularly when it involves assets with risk
exposures far into the future and which are traded so rarely that there is no good market benchmark for setting the price. Enron,
for instance, sold a lot of these sorts of derivatives, booking profits on them immediately even though there was a serious doubt
about their long-term profitability. Stories of huge losses incurred in derivative trading are legion. The real challenge before
central banks and regulatory bodies is to curb speculative behavior and bring discipline in derivative markets.
A second source of risk in financial markets is the tendency of borrowers and lenders alike to engage in herd behavior. John
Maynard Keynes, writing in the 1930s, suggested that financial markets are like "beauty contests." His analogy was to a game in
the British Sunday newspapers that asked readers to rank pictures of women according to their guess about the average choice by
other respondents. The winner, therefore, does not express his own preferences, but rather anticipates "what average opinion expects
average opinion to be." Accordingly, Keynes thought that anyone who obtained information or signals that pointed to swings in average
opinion and to how it would react to changing events had the basis for substantial gain. Objective information about economic data
was not enough. Rather, simple slogans "like public expenditure is bad," "lower unemployment leads to inflation," "larger deficits
lead to higher interest rates," were then the more likely sources of changes in public opinion. What mattered was that average opinion
believed them to be true, and that advance knowledge of, say, more public spending, lower unemployment, or larger deficits, respectively,
offered the speculator a special advantage.
A financial market that operates as a beauty contest is likely to be highly unstable and prone to severe changes. One reason
for this is that people trading in financial assets, even today, know very little about them. People who hold stock know little
about the companies that issued them. Investors in mutual funds know little about the stocks their funds are invested in. Bondholders
know little about the companies or governments that issued the bonds. Even knowledgeable professionals are often more concerned
with judging how swings in conventional opinion might change market values rather than with the long-term returns on investments.
Indeed, since careful analysis of risks and rewards is costly and time consuming, it often makes sense for fund managers and traders
to follow the herd. If they decide rationally not to follow the herd, their competence may be seriously questioned. On the other
hand, if fund managers follow the herd and the herd suffers losses, few will question their competence because others too suffered
losses. When financial markets are operated like a beauty contest, everyone wants to sell at the same time and nobody wants to buy.
The financial markets behaved as predicted shortly after several industrial countries, including the U.S. and Germany, abolished
all restrictions on international capital movements in 1973. The new system proved to be highly volatile, with exchange rates, interest
rates, and financial asset-prices subject to large short-term fluctuations. The markets also were susceptible to contagion when
financial tremors spread from their epicenter to other countries and markets that seemingly had little connection with the initial
problem. In less than five years, it already was clear that both the surpluses and the deficits on the major countries' balance
of payments were getting larger, not smaller, despite significant changes in the exchange rates.
In some cases, a financial crisis can be self-fulfilling. A rumor can trigger a self-fulfilling speculative attack, e.g. on a
currency, that may be baseless and far removed from the economic fundamentals (unlike the Soros story above). This can cause a sudden
shift in the herd's intentions and lead to unanticipated market movements that create severe financial crises. Consider, for example,
the succession of major financial crises that have pock-marked the recent history of international financial markets, including
Latin America's Southern Cone crisis of 1979-81, the developing-country debt crisis of 1982, the Mexican crisis of 1994-95, the
Asian crisis of 1997-98, the Russian crisis of 1998, the Brazilian crisis of 1999, and the Argentine crisis of 2001-02.
Perhaps the Asian crisis of 1997-98 is the most interesting in this regard, for there were relatively few signals beforehand
of impending crisis. All the main East Asian economies displayed in 1994-96 low inflation, fiscal surpluses or balanced budgets,
limited public debt, high savings and investment rates, substantial foreign exchange reserves and no signs of deterioration before
the crisis. This background has led many analysts to suppose that the crisis was a mere product of the global financial system.
But what could have triggered the herd to stampede out of Asian currencies? No doubt several factors were at work. Before the crisis
that started in the summer of 1997, there was a rise in short-term lending to Asians by Western and Japanese banks with little or
no premiums, a fact that the Bank for International Settlement raised questions about. Alert investors, especially hedge funds,
also noticed that substantial portions of East and Southeast Asian borrowings were going into non-productive assets and real estate
that often were linked to political connections. In fact, some of the funds pouring into non-productive assets were coming out of
the productive sector, mortgaging the longer-term viability of some real economies. Information about the structure and policies
of financial sectors was opaque. Thus, opinions began to change among key lenders about the regulation of financial sectors in several
Asian countries and their destabilizing lack of transparency. Suddenly, several important hedge funds reduced their exposure by
shorting currency futures, followed quickly by Western mutual funds. The calling of loans led quickly to deep depression in several
Asian countries. It has been estimated that the Asian crisis and its global repercussions cut global output by $2 trillion in 1998-2000.
Loss of government autonomy
Both economic theory and the experience of managing the external financial affairs of nations tell us that it is virtually impossible
to maintain (1) full financial mobility, (2) a fixed exchange rate, and (3) freedom to seek macro-economic balance (full employment
with little inflation) with appropriate monetary and fiscal policies. Only two of these policy objectives can be consistently maintained.
If the authorities try to pursue all three, they will sooner or later be punished by destabilizing financial flows, as in the run
up to the Great Depression around 1930 and in the months before sterling's collapse 1992. If a government tries to stimulate its
economy with lax monetary policy, for example, and players with significant market power like George Soros sense that at a fixed
exchange rate, foreigners will be unwilling to lend enough to finance the country's current account deficit, they will begin to
flee the home currency in order to avoid the capital losses they will suffer if and when there is a devaluation. If reserve losses
accelerate and more players follow suit, crisis ensues. The authorities are forced to devalue, interest rates soar, and the successful
attackers sit back to count their profits.
For nations wishing to retain reasonably independent monetary and fiscal authority in order to cater to domestic needs, the solution
is to allow the exchange rate to move up or down as conditions in the foreign exchange markets dictate, or to establish some sort
of control over the movement of financial instruments in and out of the country, or to devise some combination of these two adjustment
mechanisms. The debate over whether fixed or flexible exchange rates is the wiser policy continues to rage in academic quarters
and in finance ministries all over the world. For the most part, the international business community prefers reasonably fixed exchange
rates in order to minimize their costs of hedging foreign currency positions. Thus instituting some form of control over speculative
financial movements may be an appropriate solution to the "trilemma."
The capacity of a nation to levy enough taxes to finance needed public expenditures is another important reason to retain independent
authority. A central function of government has been to insulate domestic groups from excessive market risks, particularly those
originating in international transactions. This is the way governments have maintained domestic political support for liberalizing
trade and finance throughout the postwar period. Yet many governments are less able today to help citizens that are injured by freer
markets with unemployment compensation, severance payments, and adjustment assistance because the slightest hint of raising taxes
to pay for these vital public services leads to capital flight in a world of heightened financial mobility.
This is a dilemma. Increased integration into the world economy has raised the need of governments to redistribute tax revenues
or implement generous social programs in order to protect the vast majority of the population that remains internationally immobile.
At the same time, governments find themselves less able to maintain the safety nets needed to preserve social stability. It seems
reasonable to suppose, therefore, that doing things that will bolster the ability of governments to levy sufficient taxes - curbing
tax avoidance by transnational corporations, controlling offshore tax havens, regulating capital flight - would help make globalization
slightly more democratic.
Winners and losers
The people who benefit from speculative financial movements are, for the most part, better educated and wealthier than the vast
majority of fellow citizens. They are the elites, whatever the country. As noted above, they have fewer connections to the real
economy of production and exchange than most people. And their purpose in trading financial assets, again for the most part, is
to make a profit quickly rather than wait for an investment project to mature.
People who do not participate directly in the buying and selling of short-term financial instruments are nonetheless influenced
indirectly by the macroeconomic instability and contagion that often accompany interruptions in financial market flows. This is
true for people both in developed and developing countries. In developed countries, the voracious appetite of financial markets
for more and more resources saps the vitality of the real economy - the economy that most people depend upon for their livelihood.
It has been shown that real interest rates rise as a result of the expansion of speculative financial markets. This rise in real
interest rates, in turn, dampens real investment and economic growth while serving to concentrate wealth and political power within
a growing worldwide rentier class (people who depend for their income on interest, dividends, and rents).23
Rather, the long-term health of the economy depends upon directing investable funds into productive investments rather than into
speculation.
In developing countries, attracting global investors' attention is a mixed blessing. Capital market inflows provide important
support for building infrastructure and harnessing natural and human resources. At the same time, surges in money market inflows
may distort relative prices, exacerbate weakness in a nation's financial sector, and feed bubbles. As the 1997 Asian crisis attests,
financial capital may just as easily flow out of as into a country. Unstable financial flows often lead to one of three kinds of
crises:
Fiscal crises. The government abruptly loses the ability to roll over foreign debts and attract new foreign loans, possibly
forcing the government into rescheduling or default of its obligations.
Exchange crises. Market participants abruptly shift their demands from domestic currency assets to foreign currency assets,
depleting the foreign exchange reserves of the central bank in the context of a pegged exchange rate system.
Banking crises. Commercial banks abruptly lose the ability to roll over market instruments (i.e., certificates-of-deposit)
or meet a sudden withdrawal of funds from sight deposits, thereby making the banks illiquid and possibly insolvent.
Although these three types of crises sometimes appear singly, they more often arrive in combination because external shocks or
changed market expectations are likely to occur simultaneously in the market for government bonds, the foreign exchange market,
and the markets for bank assets. Approximately sixty developing countries have experienced extreme financial crises in the past
decade.24
The vast majority of people in the developing world suffer from these convulsive changes. They are tired of adjusting to changes
over which they exercise absolutely no control. Most people in these countries view Western capitalism as a private club, a discriminatory
system that benefits only the West and the elites who live inside "the bell jars" of poor countries. Even as they consume the consumer
goods of the West, they are quite aware that they still linger at the periphery of the capitalist game. They have no stake in it,
and they believe that they suffer its consequences. As Hernando deSoto puts it, "Globalization should not be just about interconnecting
the bell jars of the privileged few."25
Social solidarity
Karl Polanyi in The Great Transformation sought to explain how the "liberal creed" contributed to the catastrophes of war and
depression associated with the first half of the twentieth century. Polanyi's central argument, which in fact can be traced back
to Adam Smith, is that markets do indeed promote efficiency and change, but that they achieve this through undermining social coherence
and solidarity. Markets must therefore be embedded within social institutions that mitigate their negative consequences.
The evidence of more recent times suggests that the global spread of free-market policies has been accompanied by the decline
of countervailing institutions of social solidarity. Indeed, a main feature of the introduction of market-friendly policies has
been to weaken local institutions of social solidarity. Consider, for example, the top-down policy prescriptions of the IMF and
World Bank during the developing world's debt crisis in the 1980s. These policies evolved into an intricate web of expected behaviors
by developing countries. In order for developing countries to expect private businesses and financial interests to invest funds
within their borders and to boost the growth potential of domestic economies, they needed to drop the "outdated and inefficient"
policies that dominated development strategies for most of the postwar period and adopt in their place policies that are designed
to encourage foreign trade and freer financial markets. Without significant adjustments in the ways economies were managed, it was
suggested, nations soon would be left behind.
The list of Washington Consensus requirements was long and daunting:
Make the private sector the primary engine of economic growth
Maintain a low rate of inflation and price stability
Shrink the size of the state bureaucracy
Maintain as close to a balanced budget as possible, if not a surplus
Eliminate or lower tariffs on imported goods
Remove restrictions on foreign investment
Get rid of quotas and domestic monopolies
Increase exports
Privatize state-owned industries and utilities
Deregulate capital markets
Make currency convertible
Open industries, stock, and bond markets to direct foreign ownership
Deregulate the economy to promote domestic competition
Eliminate government corruption, subsidies and kickbacks
Open the banking and telecommunications systems to private ownership and competition
Allow citizens to choose from an array of competing pension options and foreign-run pension and mutual funds.
In a provocative article, Ute Pieper and Lance Taylor point out that market outcomes often conflict with other valuable social
institutions. In addition, they emphasize that markets function effectively only when they are "embedded" in society. The authors
then look carefully at the experience of a number of developing countries as they struggled to comply with the policy prescriptions
of the IMF and the Fund. In almost every case, they demonstrate conclusively that the impact of these efforts was to make society
an "adjunct to the market."26
An appropriate balance is not being struck between the economic and non-economic aspirations of human beings and their communities.
Indeed, the evidence is mounting that globalization's trajectory can easily lead to social disintegration - to the splitting apart
of nations along lines of economic status, mobility, region, or social norms. Globalization not only highlights and exacerbates
tensions among groups; it also reduces the willingness of internationally mobile groups to cooperate with others in resolving disagreements
and conflicts.
Policy options
History confirms that free-markets are inherently volatile institutions, prone to speculative booms and busts. Overshooting,
especially in financial markets, is their normal condition. To work well, free markets need not only regulation, but active management.
During the first half of the post-war era, world markets were kept reasonably stable by national governments and by a regime of
international cooperation. Only lately has a much earlier idea been revived and made an orthodoxy - the idea adopted by the Washington
Consensus that, provided there are clear and well-enforced rules-of-the-game, free markets can be self-regulating because they embody
the rational expectations that participants form about the future.
On the contrary, since markets are themselves shaped by human expectations, their behavior cannot be rationally predicted. The
forces that drive markets are not mechanical processes of cause and effect, as assumed in most of economic theory. They are what
George Soros has termed "reflexive interactions."27 Because markets are governed by highly
combustible interactions among beliefs, they cannot be self-regulating.
The question before us then, is what could be done to better regulate financial markets and to bring active management back into
the task of "embedding" markets in society, rather than the other way around? Monetary authorities such as the Federal Reserve System
in the U.S. and the central banks of other countries were formed long ago in order to dampen the inherent instabilities of financial
market in their home countries. But the evolution of an international regulatory framework has not kept pace with the globalization
of financial markets. The International Monetary Fund was not designed to cope with the volume and instability of recent financial
trends.
Capital controls
Given the problems outlined above about short-term speculative financial transactions, one might wonder why national policy-makers
have not insulated their financial markets by imposing some sort of control over financial capital. The answer, of course, is that
some have continued trying to do so despite discouragement from the IMF. For example, some have put limitations on the quantity,
conditions, or destinations of financial flows. Others have tried to impose a tax on short-term borrowing by national firms from
foreign banks. This is said to be "market-based" because it operates by altering the cost of foreign funds. If such transactions
were absolutely prohibited, they would be called "non-market" interventions.
A more extreme form of financial capital controls, one that controls movement of foreign exchange across international borders,
also has been tried in a number of countries. This form of control requires that some if not all foreign currency inflows be surrendered
to the central bank or a government agency, often at a fixed price that differs from that which would be set in free market. The
receiving agency then determines the uses of foreign exchange. The absence of exchange controls means that currencies are "convertible."
The neo-liberal argument opposing financial capital controls asserts that their removal will enhance economic efficiency and
reduce corruption. It is based on two basic propositions in economic theory that depend for their proof on perfectly competitive
markets in the real economy and perfectly efficient gatherers and transmitters of information in financial markets. Neither assumption
is realistic in today's world. Indeed, a number of empirical studies have reported the effectiveness of capital controls in controlling
capital flight, curbing volatile capital flows and protecting the domestic economy from negative external developments.
Developing countries have only recently abandoned, or still maintain, a variety of control regimes. Latin American countries
traditionally have used market-based controls, putting taxes and surcharges on selected financial capital movements or tying them
up in escrow accounts. Non-market based restrictions were more common in Asia until the early 1990s. Many commentators believe that
their sudden removal in the early 1990s was a contributing cause to the Asian financial crises in 1997-8. The experience of two
countries, Malaysia and Chile, with capital controls is especially instructive.
Malaysia, unlike its Asian neighbors, was reluctant to remove its restrictions on external borrowing by national firms unless
they could show how they could earn enough foreign exchange to service their debts. Then when the Asian crises hit, its government
imposed exchange controls, in effect making its local currency that was held outside the country inconvertible into foreign exchange.
After the ringget was devalued, exporters were required to surrender foreign currency earnings to the central bank in exchange for
local currency at the new pegged rate. The government also limited the amount of cash nationals could take abroad, and it prohibited
the repatriation of earnings on foreign investments that had been held for less than one year. Thus, Malaysia's capital controls
were focused mostly on controlling the outflow of short-term financial transactions. Happily, the authorities were able to stabilize
the currency and reduce interest rates, leading to a degree of domestic recovery.28
Chile, on the other hand, tried to limit the inflow of short-term financial transactions. It did so by imposing a costly reserve
requirement on foreign-owned capital held in the country for less than one year. Despite attempts to stimulate foreign direct investment
of the funds, most of the reserve deposits were absorbed in the form of increased reserves at the central bank. In turn, this created
a potential for expanding the money supply, which the government feared would lead to inflation. Rather than allow this to happen,
the government "sterilized" the inflows by selling government bonds from its portfolio. But this pushed down the prices of bonds
and pushed up the interest rates on them, discouraging business investment. Finally, when prices of copper (Chile's primary export)
fell sharply in 1998, the control regime was scrapped.29
The tobin tax
A global tax on international currency movements was first proposed by James Tobin, a Yale University economist, in 1972.30
He suggested that a tax of one-quarter to one percent be levied on the value of all currency transactions that cross national borders.
He reasoned that such a tax on all spot transactions would fall most heavily on transactions that involve very short round-trips
across borders. In other words, it would be speculators with very short time-horizons that the tax would deter, rather than longer-term
investors who can amortize the costs of the tax over many years. For example, the yearly cost of a 0.2 percent round trip tax would
amount to 48 percent of the value of the traded amount if the round trip were daily, 10 percent if weekly and 2.4 percent if monthly.
Since at least eighty percent of spot transactions in the foreign exchange markets are reversed in seven business days or less,
the tax could have a profound effect on the costs of short-term speculators.
Of course, for those who believe in the efficiency of markets and the rationality of expectations, a transactions tax would only
hinder market efficiency. They argue that speculative sales and purchases of foreign exchange are mostly the result of "wrong" national
monetary and fiscal policies. While we readily admit that national policies sometimes do not accord with desired objectives, they
nonetheless have little relevance for speculators focused on the next few seconds, minutes or hours.
Tobin did not intend for his proposal to involve a supranational taxation authority. Rather, governments would levy the tax nationally.
In order to make the tax rate uniform across countries, however, an international agreement would have to be entered into by at
least the principal financial centers. The revenue obtained from the tax could be designated for each country's foreign exchange
reserve for use during periods of instability, or it could be directed into a common global fund for uses like aid to the poorest
nations. In the latter case, the feasibility of the tax also would depend on an international political agreement. The revenue potential
is sizeable, and could run as high as $500 billion annually.
There are two other advantages often cited by proponents of the Tobin tax. Tobin's original rationale for a foreign exchange
transactions tax was to enhance policy autonomy in a world of high financial capital mobility. He argued that currency fluctuations
often have very significant economic and political costs, especially for producers and consumers of traded goods. A Tobin tax, by
breaking the condition that domestic interest rates may differ from foreign interest rates only to the extent that the exchange
rate is expected to change (see p. 10), would allow authorities to pursue different policies than those prevailing abroad without
exposing them to large exchange rate movements. More recent research suggests that this is only a very modest advantage.31
An additional advantage of the tax is that it could facilitate the monitoring of international financial flows. The world needs
a centralized data-base on all kinds of financial flows. Neither the Bank for International Settlements nor the IMF has succeeded
in providing enough information to monitor them all. This information should be regularly shared among countries and international
institutions in order to collectively respond to emerging issues.
The feasibility issues raised by the Tobin tax are more political than technical. One of the issues is about the likelihood of
evasion. All taxes suffer some evasion, but that has rarely been a reason for avoiding them. Ideally all jurisdictions should be
a party to any agreement about a common transactions tax, since the temptation to trade through non-participating jurisdictions
would be high. Failing that, one could levy a penalty on transactions with "Tobin tax havens" of, say, double the normal tax rate.
Moreover, one could limit the problem of substituting untaxed assets for taxed assets by applying the tax to forwards, swaps and
possibly other contracts.
Tobin and many others have assumed that the task of managing the tax should be assigned to the IMF. Others argue that the design
of the tax is incompatible with the structure of the IMF and that the tax should be managed by a new supranational body. Which view
will prevail depends upon the resolution of other outstanding issues. The Tobin tax is an idea that deserves careful consideration.
It should not be dismissed as too idealistic or too impractical. It addresses with precision the problems of excessive instability
in the foreign exchange markets, and it yields the additional advantage of providing a means to assist those in greater need.
Reforming the IMF
The IMF was established in 1944 to provide temporary financing for member governments to help them maintain pegged exchange rates
during a period of internal adjustment. With the collapse of the pegged exchange rate regime in 1971, that responsibility has been
eclipsed by its role as central arbiter of financial crises in developing countries. As noted above (p. 20), these crises may be
of three different kinds: fiscal crises, foreign exchange crises, and banking crises.
Under current institutional arrangements, a nation suffering a serious fiscal crisis that could easily lead to default must seek
temporary relief from its debts from three different (but interrelated) institutions: the IMF, which is sometimes willing to renegotiate
loans in return for promises to adopt more stringent policies (see above); the so-called Paris Club that sometimes grants relief
on bilateral (country to country) credits; and the London Club that sometimes gives relief on bank credits. This is an extremely
cumbersome process that fails to provide debtor countries with standstill protection from creditors, with adequate working capital
while debts are being renegotiated, or with ways to ensure an expeditious overall settlement. The existing process often takes several
years to complete.
There is a growing consensus that this problem is best resolved with creation of a new international legal framework that provides
for de facto sovereign bankruptcy. This could take the form of an International Bankruptcy Code with an international bankruptcy
court, or it could involve a less formal functional equivalent to its mechanisms: automatic standstills, priority lending, and comprehensive
reorganization plans supported by rules that do not require unanimous consent. Jeffrey Sachs recommends, for example, that the IMF
issue a clear statement of operating principles covering all stages of a debtor's progression through "bankruptcy" to solvency.
A new system of emergency priority lending from private capital markets could be developed, he suggests, under IMF supervision.
He also feels that the IMF and member governments should develop model covenants for inclusion in future sovereign lending instruments
that allow for priority lending and speedy renegotiation of debt claims.32
At the Joint Meeting of the IMF and the World Bank in September, 2002, the policy committee directed the IMF staff to develop
by April, 2003, a "concrete proposal" for establishing an internationally recognized legal process for restructuring the debts of
governments in default. It also endorsed efforts to include "collective action" clauses in future government bond issues to prevent
one or two holdout creditors from blocking a debt-restructuring plan approved by a majority of creditors. The objective of both
proposals is to resolve future debt crises quickly and before they threaten to destabilize large regions, as happened in Southeast
Asia in 1997-98.
Member countries rarely receive support from the IMF any longer to maintain a particular nominal exchange rate. Because financial
capital is so mobile now, pegged exchange rates probably are unsupportable. But there are special times when the IMF still might
give such support during a foreign exchange crisis. International lending to support a given exchange rate is legitimate if the
government is trying to establish confidence in a new national currency, or if its currency is recovering from a severe bout of
hyperinflation. Ordinarily the foreign exchange should be provided from an international stabilization fund supervised by the IMF.
National central banks usually supervise and regulate the domestic banking sector. Thus, banking crises normally are handled
by domestic institutions. This may not be possible, however, if the nation's banks hold large short-term liabilities denominated
in foreign currencies. If the nation's central bank has insufficient reserves of foreign currencies to fund a large outflow of foreign
currencies, there may be circumstances when the IMF or other lenders may wish to act as lenders-of-last-resort to a central bank
under siege. Nations like Argentina that have engaged in "dollarization" are learning about the downside risks of holding large
liabilities denominated in foreign currencies. The best way to avoid this problem is for governments and central banks to restrict
the use of foreign currency deposits or other kinds of short-term foreign liabilities at domestic banks.
Overall, what is most needed is the availability of more capital in developing countries and much quicker responses, amply funded,
to emerging financial crises.. George Soros has argued powerfully that the IMF needs to establish a better balance between crisis
prevention and intervention.33 The IMF has made some progress in prevention by introducing
Contingency Credit Lines (CCLs). The CCL rewards countries that follow sound policies by giving them access to IMF credit lines
before rather than after a crisis erupts. But CCL terms were set too high and there have been no takers. Soros also has recommended
the issuance of Special Drawing Rights (SDRs) that developed-countries would donate for the purpose of providing international assistance.
Its proceeds would be used to finance "the provision of public goods on a global scale as well as to foster economic, social, and
political progress in individual countries."34
A growing number of civil society institutions, however, oppose giving more money to the IMF unless it is basically reformed.
They point out that it is a committed part of the Washington Consensus, the application of whose policies have made societies adjuncts
of the market. They see the IMF as an instrument of the U.S. government and its corporate allies. The conditions it attaches to
loans for troubled countries often do more to protect the interests of first world investors than to promote the long-term health
of the developing countries. The needed chastening of speculative investors does not occur under these circumstances. There is evidence
that in several major crises, IMF requirements for assisting nations have in fact worsened the situation and protracted the crises.
The IMF opposed the policies that enabled Malaysia to weather the crisis in Southeast Asia, for example, while it urged the failed
policies of other Southeast Asian nations. The vast literature cited by Pieper and Taylor (p. 22) is a convincing chronicle of earlier
missteps. For such reasons as these, some civil society institutions argue that, unless IMF policies are changed, giving the institution
more money will do more harm than good.
Fortunately, the IMF's policies are beginning to change, partly as a result of criticisms by civil society institutions, but
more through recognition of the seriousness of the problems with the present system. In the wake of recent financial crises, leaders
in the IMF as well as the World Bank are looking for ways to reform the international financial architecture. Arguably, their emphasis
is shifting away from slavish devotion to the prescriptions of the Washington Consensus and toward more state intervention in financial
markets. Joseph Stiglitz, the Nobel Laureate who has been particularly critical of the IMF, nonetheless acknowledges that its policy
stances are improving.35
The IMF has begun to recognize the importance of at least functional public interventions in markets and the need to provide
more supporting revenues. It has realized that controls on external financial movements and prudent regulation can help contain
financial crises. It has abandoned the doctrine, long the backbone of structural adjustment policies, that raising the local interest
rate will stimulate saving and thereby growth. Both the IMF and the World Bank have rolled over or forgiven the bulk of official
debt owed by the poorest economies.
Whether these and other promising changes in IMF thinking and policy formation are sufficient to assure that its future responses
to crises will be benign still is not clear. While celebrating what they view as belated improvements, many critics of the IMF among
civil society institutions are not convinced that they are sufficiently basic. Even if the IMF avoids repeating some of its more
egregious mistakes, some believe that it is likely to continue to function chiefly for the benefit of the international financial
community rather than the masses of people. Rather, they believe that, at least in the long term, it would be much better for control
over international finance to reside in new institutions under a restructured United Nations. They favor the U.N. because it has
a broader mandate, is more open and democratic, and, in its practice, has given much greater weight to human, social, and environmental
priorities.
Many civil society institutions want the primary focus of reform to be on taming speculation, restoring the control of their
economies to nations, and embedding economies in the wider society. They believe that if these policies are adopted there will be
less need for large funding to deal with financial crises. There remains, however, the fact that such crises are occurring and will
continue to occur for some time. The IMF is the only institution positioned to respond to these crises. Hence, even for those who
sympathize with the goals of the civil society institutions, there is a strong argument for more financing for the IMF.
A world financial authority
A variety of public and private citizens and institutions have recently proposed the establishment of a World Financial Authority
(WFA) to perform in the domain of world financial markets what national regulators do in domestic markets. Some believe it should
be built upon the foundation of global financial surveillance and regulation that have already been laid by the Bank for International
Settlements in Basel, Switzerland. Others regard it as a natural extension of the activities of the IMF. Still others are less interested
in the precise institutional form it would take than in the clear delineation of the tasks that need to be done by someone.
Its first task probably should be to provide sufficient and timely financial assistance during crises to avert contagion and
defaults. This requires a lender-of-last-resort with sufficient resources and authority to disperse rescue money quickly. Perhaps
the best example to date is the bailout loan to Mexico by the U.S. Treasury and the IMF at the end of 1994. It supplied sufficient
liquidity for Mexico to make the transition back to stability and to pay back the loans ahead of time. The management of the Asian
crises in 1997-8, on the other hand, was badly handled. The bailout packages offered by the IMF were not only significantly smaller
than in the Mexico case; they also were constrained with so many conditions that a year later only twenty percent of the funds had
been disbursed. This slow response to the crisis probably worsened the contagion. Surprisingly, the error was repeated in the Russian
crisis in 1998 and the Brazilian crisis in 1999.
A World Financial Authority also should provide the necessary regulatory framework within which the IMF or a successor institution
can develop as a lender-of-last-resort. As long as domestic regulatory procedures function properly, there will be no need for a
world authority to be involved, any more than to certify that domestic regulatory procedures are effective. In countries where domestic
financial regulation is unsatisfactory, the WFA would assist with regulatory reform. In this way, the WFA could aid financial reconstruction,
reduce the likelihood of moral hazard, and give confidence to backers of the operation.
There is little appetite today, especially in Washington, to create a new international bureaucracy. This fact gives support
to the idea of building the WFA from the existing infrastructure of the Bank for International Settlements (BIS). The BIS is a meeting
place for national central bankers who have constructed an increasingly complicated set of norms, rules and decision-making procedures
for handling and preventing future crises. Its committees and cooperative cross-border regulatory framework enjoy the confidence
of governments and of the financial community. It may well be the best place to govern an international regulatory authority at
the present time.
Theological and ethical considerations
While Christian theology cannot provide us with detailed recommendations on how to correct the adverse consequences of speculative
financial movements, it can provide us with an empowering perspective or worldview. Our theological expressions of the faith describe
the source of our spiritual energy and hope. They betray our ultimate values and the source of our ethical norms. They shape how
we perceive and judge the "signs of the times."
God's world and human responsibilities
Nothing in creation is independent of God. "The earth is the Lord's and all that is in it, the world, and all those who live
in it." (Ps. 24:1 NRSV) Thus, no part of the creation - whether human beings, other species, the elements of soil and water, even
human-made things - is our property to use as we wish. All is to be treated in accord with the values and ground rules of a loving
God, their ultimate owner, who is concerned for the good of the whole creation. All of God's creation therefore deserves to be treated
with appropriate care and concern, no matter how remote from one's daily consciousness or existence.
The doctrine of creation reminds us that our ultimate allegiance is not to the nationalistic and human-centered values of our
culture, but rather to the values of the loving Maker of heaven and earth. When we seek plenty obsessively, consume goods excessively,
compete against others compulsively, or commit ourselves to Economic Fate, we are worshiping false gods. Modern idolatries are often
encountered in economic forms, just as in the New Testament's warnings about the spiritual perils of prosperity in the parables
of the rich, hoarding fool (Luke 12:15-21) and the rich youth (Matt. 19:16-24 and Luke 18:18-25).
The fact that so much of financial speculation is divorced from the real economy of production and exchange suggests that its
paper transactions are more like bets in a casino than an essential component of God's real economy, which seeks the good of all
creation. It is wrong to subject people to the effects of wholesale gambling. The fact that the practice of financial speculation
is secretive, compulsively competitive, and frequented by lone rangers, moreover, hints at a cult of false idols. Its practitioners,
including especially day-traders, seem interested only in exceedingly short-term personal financial advantage, unconcerned about
the long-term consequences of their actions or their impact on others. This also indicates a degree of idolatry that contradicts
the doctrine of creation.
Image of God
The conviction that human beings have a God-given dignity and worth (Gen. 1:26-28) unites humanity in a universal covenant of
rights and responsibilities - the family of God. All humans are entitled to the essential conditions for expressing their human
dignity and for participation in defining and shaping the common good. These rights include satisfaction of basic biophysical needs,
environmental safety, full participation in political and economic life, and the assurance of fair treatment and equal protection
of the laws. These rights define our responsibilities in justice to one another, locally, nationally and - because they are human
rights - internationally.
Financial speculation often leads to unmanageable floods of funds into and out of host societies, creating unwanted bubbles and
panics. Financial speculators normally ignore the human consequences of their activities on the rights of people in host societies,
where economic adjustments are shared widely and painfully. Their primary interest is short-term personal financial gain. The absence
of a sense of covenantal unity with their brothers and sisters of the developing world is a sad commentary on the governing ethic
of speculators in the capital markets. Their arrogance calls for some form of control over foreign exchange and financial capital
markets.
Justice in covenant
The rights and responsibilities associated with the image of God are inextricably tied to the stress on justice in Scripture
and tradition. We render to others their due because of our loving respect for their God-given dignity and value. The God portrayed
in Scripture is the "lover of justice" (Ps. 99:4, 33:5, 37:28, 11:7; Isa. 30:18, 61:8; Jer. 9:24). Justice is at the ethical core
of the biblical message. Faithfulness to covenant relationships, moreover, demands a justice that recognizes special obligations,
"a preferential option" to widows, orphans, the poor, and aliens, which is to say the economically vulnerable and politically oppressed.
Hence, the idea of the Jubilee Year (Lev. 25) was meant to prevent unjust concentrations of power and poverty. Jesus' ministry embodies
concern for the rights and needs of the poor; He befriended and defended the dispossessed and the outcasts.
The fact that the liberalization of trade and finance has failed to improve the distribution of incomes, indeed, that it has
widened the gap between rich and poor in virtually every country, is not a sign of distributive justice but of its opposite. The
standard of living for the least skilled, least mobile, and poorest citizens of many developing countries has declined absolutely.
This, too, is an unjust result of a broken system. The fact that governments that wish to assist the vulnerable and weak of their
societies are less able to do so, in part because they no longer can levy sufficient taxes on foreign interests, is a violation
of justice in community.
Sin and judgment
Sin is a declaration of autonomy from God, a rebellion against the sovereign source of our being. It makes the self and its values
the center of one's existence, in defiance of God's care for all. Sin tempts us to value things over people, measuring our worth
by the size of our wealth and the quantity of goods we consume, rather than by the quality of our relationships with God and with
others. Sin involves injustice because its self-centeredness defies God's covenant of justice, grasping more than one's due and
depriving others of their due.
Sin is manifested not only in individuals, but also in social institutions and cultural patterns. These structural injustices
are culturally acceptable ways of giving some individuals and groups of people advantage over others. Because they are pervasive
and generally invisible, they compel our participation. They benefit some and harm many others. Whether or not we deserve blame
as individuals and churches for these social sins depends in part on whether we defend or resist them, tolerate or reject them.
The fact that the freeing of financial markets has permitted financial speculators to engage in high-risk gambles without regard
to the consequences for others is abundant evidence of both individual and institutional sin. The policies of the Washington Consensus
frequently lead to adverse consequences for the poor and the environment, even as its proponents gain advantages from the implementation
of such policies. They are another serious expression of social sin in our time. These policies inevitably increase the concentration
of economic power in fewer hands. The fact that the global spread of free-market policies has led to the decline of countervailing
institutions of
social solidarity means that it is easier for the centers of economic power to corrupt governments, control markets, alienate
neighbors, manipulate public opinion, and contribute to a sense of political impotency in the public.
The Church's mission and hope
The church is called to be an effective expression of the Reign of God, which Jesus embodied and proclaimed. This ultimate hope
is a judgment on our deficiencies
and a challenge to faithful service. God's goal of a just and reconciled world is not simply our final destiny but an agenda
for our earthly responsibilities. We are called to be a sign of the Reign of God, on earth as it is in heaven, to reflect the coming
consummation of God's new covenant of shalom to the fullest extent possible.
A new financial architecture
In her path-breaking book, Casino Capitalism,36 Susan Strange likens the Western financial
system to a vast casino. As in a casino,
"the world of high finance today offers the players a choice of games. Instead of roulette, blackjack, or poker, there is dealing
to be done - the foreign-exchange market and all its variations; or in bonds, government securities or shares. In all these markets
you may place bets on the future by dealing forward and by buying or selling options and all sorts of other recondite financial
inventions. Some of the players - banks especially - play with very large stakes. There are also many quite small operators. There
are tipsters, too, selling advice, and peddlers of systems to the gullible. And the croupiers in this global finance casino are
the big bankers and brokers. They play, as it were, "for the house.' It is they, in the long run, who make the best living."
She goes on to observe that the big difference between ordinary kinds of gambling and speculation in financial markets is that
one can choose not to gamble at roulette or poker, whereas everyone is affected by "casino capitalism." What goes on in the back
offices of banks and hedge funds "is apt to have sudden, unpredictable and unavoidable consequences for individual lives."
It is this volatility, this instability in financial markets that has given rise to recurring financial crises. They must be
tamed. In the wake of recent financial crises, people are beginning to look for ways to reform the international financial architecture.
Although it is difficult to move from general theological convictions to specific proposals, we offer the following suggestions
for consideration by Christians and other persons of good will.
Capital controls should be an integral part of national strategies to tame the financial system. They can be made an effective
and meaningful tool to protect and insulate the domestic economy from volatile capital flows and other negative external developments.
Regulatory and supervisory measures should supplement capital controls when appropriate. They should include regulation
of financial derivatives and hedge funds. Regulation is a necessary complement to domestic capital controls. Nations influenced
by hedge funds and their complex financial instruments should seek international cooperation, including the governments of host
countries, to regulate their practices.
A new international legal framework should be created, which provides for de facto sovereign bankruptcy. The existing international
system for dealing with insolvent governments is woefully inadequate. Provision must be made for automatic standstills, priority
lending, and planned reorganizations.
An international transactions tax (like the Tobin tax) should be designed and implemented to discourage short-term speculative
capital movements. It is neither "too idealistic" nor "too impractical." It would reduce short-term trading and strengthen the
defensibility of the exchange rate regime.
International cooperation should be sought to curb dubious activities of offshore financial centers. Strict international
regulation and supervision of offshore centers is essential to curb tax and regulatory evasions. They also are a primary conduit
for money laundering and various criminal activities.
The IMF's responsibilities as a lender-of-last-resort should be enhanced, expanding its authority and resources to make
possible quick action to avert financial crises. The IMF must have effective and swift mechanisms to increase the Fund's access
to official monies in times of crisis, including authority to borrow directly from financial markets under those circumstances.
A World Financial Authority based on the cross-border regulatory framework of the Bank for International Settlements should
be developed. It should provide the necessary regulatory framework within which the IMF or a successor organization can develop
as a lender-of-last-resort.
Of these recommendations, perhaps the most controversial is that more funds be given to the IMF. We noted above that much of
the criticism of the IMF is justified. We also acknowledged that the IMF is improving its policies. We hope that these improvements
will continue. Meanwhile, there is no other viable candidate to serve as lender-of-last-resort - an absolutely essential feature
of any new financial architecture.
The major reason some civil society institutions resist funding the IMF further is its history of misguided structural adjustment
policies, policies that are now widely recognized to have caused widespread suffering. We hope that recent changes will improve
this situation as well and enable the IMF to perform the important role we recommend for it.
Along with the World Bank, it is beginning to contextualize its performance criteria and conditionalities, taking much more seriously
the unique circumstances of particular economies. It is listening more and nitpicking less. To be sure, the IMF is not likely to
abandon its policy of making its loans conditional on the adoption by borrowing countries of mutually agreed economic policies.
Even so, there is considerable evidence that when it has had more resources on hand, conditionality has been correspondingly wiser
and less draconian.
The IMF now recognizes that it can leave more decisions to developing countries partly because these have better informed and
more sophisticated employees than was once the case. Certainly in Latin America and Asia and increasingly in Africa, country economic
teams are better qualified technically than the lower rung Ph.D.s from American and European universities to whom the IMF and World
Bank entrust their missions. Local economists can do financial programming and standard macroeconomic modeling as well as or better
than the people from Washington can; they also know how to do investment project analysis. To be sure, decisions about financial
and project plans must include input from many other elements of a society.
We can encourage the IMF (and World Bank) to reverse the typical procedure in setting conditions for multilateral loans. Instead
of waiting for it to specify the policies that must be followed to justify additional financing, country economic teams, in consultation
with other agencies of their government, should be allowed to propose economic programs to the IMF. Disagreements between Washington
staff assessments and the local teams could be resolved directly or by third-party arbitration. The scope of economic conditionality
could also be restricted, for example, just to a balance-of-payments target, while the country could pursue its own agenda regarding
inflation, income distribution, and growth.
What Christians can do
A primary part of the "principalities and powers" referred to in the Bible is composed of the political-economic institutions
and processes that govern how people relate economically to each other and to God's whole creation. The church has a stake in their
design. Yet many church members feel powerless to change basic political-economic reality. They think either that the economic conditions
of society result "naturally" from the forces of markets that are only marginally within the power of human control, or that economic
conditions result from powerful interests that are beyond the reach of ordinary citizens. Thus, there's nothing that can be done
about it, or there's nothing we can do about it.
On the contrary, Mobilization for the Human Family believes that the political economy is shaped by deliberate social policy
decisions; that conditions at any given time are the result of those decisions; that conditions can be changed by human decisions;
and that the will of a nation's and the world's citizens about what the commitments and purposes of the nation and the world should
be can be expressed in the political economy through the framework of democratic process provided in our national and transnational
polity. Accordingly, we offer below some suggestions for action that may be taken by individual Christians and by our churches and
their denominations to correct some correctable flaws of financial globalization.
Actions by individual Christian
Pray for persons working in governments, international organizations, institutions, and non-governmental organizations who
are trying to work toward a better world, including especially a world financial architecture that better assures fairness in
capital markets.
In the management of personal and family investments, seek fuller understanding of the uses to which the banks, companies,
mutual funds, and investment counselors are putting your money. Avoid speculative investments that are likely to be made without
regard to their consequences for others.
Reflect upon decisions about work and career choices that are consistent with a Christ-like commitment to economic justice
for all.
Organize Bible study in your local congregation, where possible together with people of other backgrounds and life-styles,
to learn and identify with God's continuing struggle to seek economic justice in the world.
Commit oneself to some voluntary organization that is trying to promote greater economic justice in the local and/or global
economy.
Become involved politically in your area or nation, seeking political and economic change in the direction of economic justice.
Actions by churches and denominations
Concern for economic justice must be fully reflected in the prayer life, worship, and educational programs and mission outreach
of all congregations.
Seek assistance from members who work for banks, brokerage houses, and mutual funds to help mould an educational program
that will assist members of the congregation to become more socially responsible investors.
Seek collaborative programs among clusters of congregations, perhaps with the aid of local Councils of Churches, to provide
educational opportunities where Christians and other faith groups can come to understand some of the complex economic issues
amidst which they live and work. Since virtually nothing is now available to explain the problems of financial speculation,
this paper could be used to assist study of this phenomenon.
Over and beyond educational programs, local churches - again perhaps best working together in the same neighborhood or town
- can enter into a deliberate dialogue or partnership with one or more voluntary bodies in the civic society, so as to put their
energies into the health of the wider society. Engagement with the International Forum on Globalization (l009 General Kennedy
Avenue #2, San Francisco, CA 94129) is a good way to explore the means of influencing the debate on the globalization of trade
and finance.
At the denominational level, churches should review their investment criteria to reassure themselves that social responsibility
is a primary goal of their financial management.
Also at the denominational level, agencies responsible for the formation of social witness policies need to monitor global
economic indicators on a continuing basis in order to assist its programmatic agencies to form effective and timely social witness
regarding the local and national consequences of the globalization of trade and finance.
Want to know more?
Globalization is a vast topic. For a general introduction, see Sarah Anderson and John Cavanagh, Field Guide to the Global Economy
(New York: New Press, 2000) and Thomas Friedman, The Lexus and the Olive Tree: Understanding Globalization (New York: Farrar Straus
Giroux, 1999). A classic introduction to the financial side of globalization is Susan Strange, Casino Capitalism, (New York: Mnchester
University Press, 1986). See also Kavaljit Singh, The Globalisation of Finance: A Citizen's Guide (London: Zed Books, 1999) and
John Eatwell and Lance Taylor, Global Finance at Risk: The Case for International Regulation (New York: The New Press, 2000). The
best introduction to the Tobin Tax is Mahbub ul Haq et al (eds), The Tobin Tax: Coping with Financial Volatility (New York: Oxford
University Press, 1996). For how church people might react, see Pamela Brubaker, Globalization at What Price? (Cleveland: Pilgrim
Press, 2001).
Questions For Discussion
How have the linkages and interconnections of international finance impacted your life? On balance, do you regard them as
advantages or disadvantages for a healthy Christian life?
The frequency and severity of recent financial crises have fueled calls for a radical redesign of the rules of global finance.
If you were the advisor to an international commission asked to design "A New International Financial Architecture," what would
you recommend?
Do you favor allowing sovereign nations to declare bankruptcy? What Christian traditions might be invoked to support or
deny such an action?
A growing number of civil society institutions oppose giving more money to the IMF. They point out that it is part of the
Washington Consensus, the application of whose policies have made societies adjuncts of the market. Yet this paper suggests
that the IMF needs more money. As a committed Christian, which view do you favor?
Is it too late to expect justice in a globalizing world? Since much of the direction the global economy has taken is irreversible,
how can a balance between market and society be negotiated? How might Christians play a role in those negotiations?
And I feel like the Democrats get so distracted. They have been talking about sexual
harassment and stuff instead of the TAX BILL. It is so damn easy to get them to take their
eyes off the ball! and get played again and again. . . and TRAGIC given the consequences . .
.
It's the perfect "distraction". Allows them to engage in virtue-signaling and "fighting
for average Americans". It's all phony, they always "lose" in the end getting exactly what
they wanted in the first place, while not actually having to cast a vote for it.
It's all related, less safety net and more inequality means more desperation to take a
job, *ANY* job, means more women putting up with sexual harassment (and workplace bullying
and horrible and illegal workplace conditions etc.) as the price of a paycheck.
Horrible Toomey's re-election was a parallel to the Clinton/Trump fiasco. The Democrats
put up a corporate shill, Katie McGinty that no-one trusted.
"Former lobbyist Katie McGinty has spent three decades in politics getting rich off the
companies she regulated and subsidized. Now this master of the revolving-door wants
Pennsylvania voters to give her another perch in government: U.S. Senator." Washington
Examiner.
She was a Clintonite through and through, that everyone, much like $Hillary, could see
through.
To paraphrase the Beatles, you say you want a revolution but you don't really mean it. You
want more of the same because it makes you feel good to keep voting for your Senator or your
Congressman. The others are corrupt and evil, but your guys are good. If only the others were
like your guys. News flash: they are all your guys.
America is doomed. And so much the better. Despite all America has done for the world, it
has also been a brutal despot. America created consumerism, super-sizing and the Kardashians.
These are all unforgivable sins. America is probably the most persistently violent country in
the world both domestically and internationally. No other country has invaded or occupied so
much of the world, unless you count the known world in which case Macedonia wins.
This tax plan is what Americans want because they are pretty ignorant and stupid. They are
incapable of understanding basic math so they can't work out the details. They believe that
any tax cut is inherently good and all government is bad so that is also all that matters.
They honestly think they or their kids will one day be rich so they don't want to hurt rich
people. They also believe that millionaires got their money honestly and through hard work
because that is what they learned from their parents.
Just send a blank check to Goldman Sachs. Keep a bit to buy a gun which you can use to
either shoot up a McDonalds or blow your own brains out.
And some people still ask me why I left and don't want to come back. LOL
Macedonia of today is not the same are that conquered the world. They stole the name from
Greeks.
That being said, the US is ripe for a change. Every policy the current rulers enact seems
to make things better. However, I suspect a revolution would kill majority of the population
since it would disrupt the all important supply chains, so it does not seem viable.
However, a military takeover could be viable. If they are willing to wipe out the most
predatory portions of the ruling class, they could fix the healthcare system, install a
high-employment policy and take out the banks and even the military contractors. Which could
make them very popular.
Yeah, right. Have you seen our generals? They're just more of the same leeches we
have everywhere else in the 0.01%. Have you seen any of the other military dictatorships
around the world, like actually existing ones? They're all brilliantly corrupt and total
failures when it comes to running any sort of economy. Not to mention the total loss of civil
rights. Americans have this idiotic love of their military thanks to decades of effective
propaganda and think the rule of pampered generals would somehow be better than the right to
vote. Bleh.
This is a military dictatorship. The fourth and sixth amendments have been de facto
repealed. Trump cared about one thing and one thing only, namely to repeal the estate tax. He
is the ultimate con man and this was his biggest con. It is truly amazing how he accomplished
this. He has saved his family a billion $$$. He will now turn over governing to the generals
and Goldman Sachs. He may even retire. Truly amazing. One has to admire the sheer perversity
of it all. When will the American electorate get tired of being conned? The fact is they have
nothing but admiration for Trump. We live in a criminal culture, winner take all. America
loves its winners.
There is an old 2003 David Brooks column in which he mentions that
"The Democrats couldn't even persuade people to oppose the repeal of the estate tax, which
is explicitly for the mega-upper class. Al Gore, who ran a populist campaign, couldn't even
win the votes of white males who didn't go to college, whose incomes have stagnated over the
past decades and who were the explicit targets of his campaign. Why don't more Americans want
to distribute more wealth down to people like themselves?"
Then Brooks goes on to explain
"The most telling polling result from the 2000 election was from a Time magazine survey
that asked people if they are in the top 1 percent of earners. Nineteen percent of Americans
say they are in the richest 1 percent and a further 20 percent expect to be someday. So right
away you have 39 percent of Americans who thought that when Mr. Gore savaged a plan that
favored the top 1 percent, he was taking a direct shot at them."
The Republicans have conditioned people to believe government services (except for
defense/military) are run poorly and need to be "run like a business" for a profit.
The problem is that not all government services CAN be profitable (homeless care, mental
health care for the poor, EPA enforcement, OSHA enforcement). And when attempts are made to
privatize some government operations such as incarceration, the result is that the private
company tries to maximize profits by pushing for laws to incarcerate ever more people.
The history of the USA as viewed by outsiders, maybe 50 years hence, will be that of a
resource consuming nation that spent a vast fortune on military hardware and military
adventures when it had little to fear due to geography, a nation that touted an independent
press that was anything but, a nation that created a large media/entertainment industry which
helped to keep citizens in line, a nation that fostered an overly large (by 2 or 3 times per
Paul Whooley) parasitical financial industry that did not perform its prime capital
allocation task competently as it veered from bubble to bubble and a nation that managed to
spend great sums on medical care without covering all citizens.
But the USA does have a lot of guns and a lot of frustrated people.
Maybe Kevlar vests will be the fashion of the future?
The provision to do away with the estate tax, if not immediately, in the current versions
(House and Senate) is great news for the 1%, and bad for the rest of us.
And if more people are not against that (thanks for quoting the NYTImes article), it's the
failure of the rest of the media for not focusing more on it, but wasting time and energy on
fashion, sports, entertainment, etc.
he provision to do away with the estate tax . . . is great news for the 1%
I think it's even a little more extreme than that. The data is a few years old, but it is
only the top 0.6% who are affected by estate taxes in the United States. See the data at
these web sites:
The military adventures were largely in support of what Smedley Butler so accurately
called the Great "Racket" of Monroe Doctrine colonialism and rapacious extractive
"capitalism" aka "looting."
It took longer and costed the rich a bit more to buy up all the bits of government, but
the way they've done will likely be more compendious and lasting. Barring some "intervening
event(s)".
While Republicans show their true colors, im out there seeing a resurgence of civil
society. And im starting to reach Hard core Tea Party types. Jobs, Manufacturing, Actual
Policy.
Stagnation that is gripping several of the world's largest economies should be viewed as a secular, long term phenomenon, not
something transient. It is connected with the neoliberalism entering a new phase of its development, when New Deal was already
devoured, 90% or so of population standard of living slides and thus there are no direct mechanisms to increase consumer demand.
Notable quotes:
"... Stagnation is gripping several of the world's largest economies and many view this as secular, not transient. ..."
"... Above all, ideology must conceal, denigrate, diminish, slander and distract from the ONE effective strategy that workers collectively have. This is the spectre that haunts all economics. ..."
"... For many of those who consume the bottom layers of it, what they are ingesting is a barbarous Pink Slime cultural sludge that makes them stupid, frivolous, dependent, impulsive and emotionally erratic – something like perpetual 15 year olds. ..."
"... In the center, we have the neoliberals, who are convinced that our world will spontaneously and beneficially organize itself if only we turn the macroeconomic tumblers and stumble on the right interest rate, or inflation rate, or some other version of the One Parameter to Rule Them All mindset. They are also too devoted to the religion of demand-goosing: the idea that everything will be all right as long as we generate enough "demand" – as though it makes no difference whether people are demanding high fructose cotton candy or the collected works of Shakespeare. ..."
"... Profits and income share at the top soared; wages and income share at the bottom fell, and employment was maintained by speculative bubbles and increasing debt until the last bubble burst, and the system collapsed. ..."
"... How is an increasing deficit and QE supposed to solve our problems in this situation other than by propping up a failed system that makes the rich richer and the poor poorer by increasing government debt? ..."
"... It seems quite clear to me that it is going to take a very long time for the system to adjust to this situation in the absence of a fall in the value of the dollar and the concentration of income. That kind of adjustment means reallocating resources in a very dramatic way so as to accommodate an economy in which resources are allocated to serve the demands of the wealthy few in the absence of the ability of those at the bottom to expand their debt relative to income. ..."
"... It was the fall in the concentration of income that led to mass markets (large numbers of people with purchasing power out of income) that made investment profitable after WW II in the absence of speculative bubbles, and it was the increase in the concentration of income that led to the bubble economy we have today that has led us into the Great Recession. ..."
"... I think neoliberalism naturally leads to secular stagnation. This is the way any economic system that is based on increasing of inequality should behave: after inequality reached certain critical threshold, the economy faces extended period of low growth reflecting persistently weak private demand. ..."
"... The focus on monetary policy and the failure to enact fiscal policy options is structural defect of neoliberalism ideology and can't be changed unless neoliberal ideology is abandoned. Which probably will not happen unless another huge crisis hit the USA. 2008 crisis, while discrediting neoliberalism, was clearly not enough for the abandonment of this ideology. Like in most cults adherents became more fanatical believers after the prophecy did not materialized. ..."
"... In a way behaviour of the USA elite in this respect is as irrational as behavior of the USSR elite. My impression is that they will stick to neoliberal ideology to the bitter end. But at the same time they are much more reckless. Recent attempt to solve economic problems by unleashing a new wars and relying of war time mobilization so far did not work. Including the last move is this game: Russia did not bite the offer for military confrontation that the USA clearly made by instilling coup d'état in Ukraine. ..."
This column argues that many economies need both demand-side stimulus and supply-side reform to close the output gap and restore
potential-output growth. A combined monetary-fiscal stimulus – i.e. helicopter money – is needed to close the output gap, and
this should be accompanied with extensive debt restructuring, policies to halt rising inequality, and additional public infrastructure
investment.
Selected Skeptical Comments
Sandwichman -> anne:
Workers, collectively, have a single, incontrovertible lever for effecting change -- withholding their labor power. Nothing
-- not even imprisonment or death -- can prevent workers from withholding their labor power! Kill me and see how much work you
can get out of me.
This is the elementary fact that the elites don't want workers to know. "It is futile!" "It is a fallacy!" "You will only hurt
yourselves!"
Once one comprehends the strategic importance of making the withholding of labor power taboo, everything else falls into place.
Economics actually makes sense as a persuasive discourse to dissuade from the withholding of labor power.
Above all, ideology must conceal, denigrate, diminish, slander and distract from the ONE effective strategy that workers
collectively have. This is the spectre that haunts all economics.
Dan Kervick:
Good stuff by Buiter et al, but here are some suggested additions to the litany of supply side woes:
1. Ineffective economic organization, both inside corporate firms and outside of them.
a. Many corporations are now quite dysfunctional as engines of long-term value creation – but not dysfunctional as vehicles
of short-term value extraction for their absurdly over-incentivized key stakeholders.
b. The developed world societies are facing an extreme failure of strategic economic leadership, at both the national and global
level, and at both the formal level of government and the informal level of visionary public intellectuals and industrial "captains".
There is no coherent consensus on which way lies the direction of progress. Since nobody is setting the agenda for what the future
looks like, risk trumps confidence everywhere and nobody knows what to invest in.
2. Dyspeptic dystopianism. The intellectual culture of our times is polluted by obsessive, nail-biting negativity and
demoralizing storylines preaching hopelessness: the robots are going to destroy all the jobs; the Big One is going to bury everything,
the real "neutral" interest rate is preposterously negative, etc. etc. etc. With so much doom and gloom in the air, there is no
reason to invest wealth, rather than consume it. Robert Schiller touched on this at a recent talk at LSE.
3. The popular culture of 2015 America is – as in so many other areas - a tale of two cultural cities.For many
of those who consume the bottom layers of it, what they are ingesting is a barbarous Pink Slime cultural sludge that makes them
stupid, frivolous, dependent, impulsive and emotionally erratic – something like perpetual 15 year olds. People like this
can be duped by the most shallow demagoguery and consumerist manipulation, and can't organize themselves to pursue their enlightened
self-interest. Enlightened artists and cultural custodians need to step up, organize and find a way to seize the American mind
back from the clutches of consumer capitalist garbage-mongers and philistine society-wreckers.
4. Laissez faire backwardness. We are struggling under left-right-center conspiracy of Pollyanna freedom fools, who
despite their constant kvetching at one another all share in common the view that progress is self-organizing.
On the left we have the Chomsky and Graeber-style "libertarian socialists" who are convinced we could have a functioning and
prosperous society in which seemingly every action is voluntary and spontaneous, nobody is ever compelled to do anything that
their delicate little hearts don't throb to do, and who seemingly have no idea of what it takes even to run a carrot farm.
On the right, we have the clueless paranoid libertarians who think the whole world should revolve around their adolescent desire
not to be "tread on", and seem to have no idea of what it takes – and what it took historically - to build a livable civilization.
In the center, we have the neoliberals, who are convinced that our world will spontaneously and beneficially organize itself
if only we turn the macroeconomic tumblers and stumble on the right interest rate, or inflation rate, or some other version of
the One Parameter to Rule Them All mindset. They are also too devoted to the religion of demand-goosing: the idea that everything
will be all right as long as we generate enough "demand" – as though it makes no difference whether people are demanding high
fructose cotton candy or the collected works of Shakespeare.
5. I'm an optimist! This is all going to change. We have nearly reached Peak Idiocracy. We're on the verge of a new age of
social organization and planning and a return to mixed economy common sense and public-spirited mobilization and adulthood. This
will happen because ultimately all of those teenagers will stop denying reality, and stop struggling to escape the realization
that a more organized and thoughtfully planned way of life is the only thing that will work in our small, resource strapped, crowded
21st century planet.
George H. Blackford:
Since the 80s, US companies have been buying abroad to sell at home as foreign countries used our trade deficits to depress
their exchange rates. Profits and income share at the top soared; wages and income share at the bottom fell, and employment
was maintained by speculative bubbles and increasing debt until the last bubble burst, and the system collapsed.
There seem to be no more bubbles in the offing. The dollar is overvalued. Debt relative to income is unprecedented, and the
concentration of income has created stagnation for lack of investment opportunities.
How is an increasing deficit and QE supposed to solve our problems in this situation other than by propping up a failed
system that makes the rich richer and the poor poorer by increasing government debt? Does anyone really believe this sort
of thing can go on forever in the absence of a fall in the value of the dollar and in the concentration of income? Who's going
to be left holding the bag when this system collapses again?
It seems quite clear to me that it is going to take a very long time for the system to adjust to this situation in the
absence of a fall in the value of the dollar and the concentration of income. That kind of adjustment means reallocating resources
in a very dramatic way so as to accommodate an economy in which resources are allocated to serve the demands of the wealthy few
in the absence of the ability of those at the bottom to expand their debt relative to income.
We didn't smoothly transition from an agricultural economy to one based on manufacturing. That transition was plagued with
a great deal of civil unrest, speculative bubbles, booms and busts that eventually led to a collapse of the system and the Great
Depression.
And we didn't smoothly transition out of the Great Depression. That was ended by WW II and dramatic changes in our economic
system, the most dramatic changes being the role and size of government and the fall in the concentration of income for thirty-five
years after 1940.
It was the fall in the concentration of income that led to mass markets (large numbers of people with purchasing power
out of income) that made investment profitable after WW II in the absence of speculative bubbles, and it was the increase in the
concentration of income that led to the bubble economy we have today that has led us into the Great Recession.
What this means to me is that we are not going to get out of the mess we are in today in the absence of some kind of catastrophe
comparable to WW II if we, and the rest of the world, do not come to grips with the fundamental problem we face in this modern
age, namely, the trade deficit and the concentration of income.
I think neoliberalism naturally leads to secular stagnation. This is the way any economic system that is based on increasing
of inequality should behave: after inequality reached certain critical threshold, the economy faces extended period of low growth
reflecting persistently weak private demand.
An economic cycle enters recession when total spending falls below expected by producers and they realize that production level
is too high relative to demand. What we have under neoliberalism is kind of Marx constant crisis of overproduction.
The focus on monetary policy and the failure to enact fiscal policy options is structural defect of neoliberalism ideology
and can't be changed unless neoliberal ideology is abandoned. Which probably will not happen unless another huge crisis hit the
USA. 2008 crisis, while discrediting neoliberalism, was clearly not enough for the abandonment of this ideology. Like in most
cults adherents became more fanatical believers after the prophecy did not materialized.
The USA elite tried partially alleviate this problem by resorting to military Keynesianism as a supplementary strategy. But
while military budget was raised to unprecedented levels, it can't reverse the tendency. Persistent high output gap is now a feature
of the US economy, not a transitory state.
"Top everything" does not help iether (top cheap oil is especially nasty factor). Recent pretty clever chess gambit to artificially
drop oil price playing Russian card, and sacrificing US shall industry like a pawn (remember that Saudi Arabia is the USA client
state) was a very interesting move, but still expectation are now so low that cheap gas stimulus did not work as expected in the
USA. It would be interesting to see how quickly oil will return to early 2014 price level because of that. That will be the sign
that gambit is abandoned.
In a way behaviour of the USA elite in this respect is as irrational as behavior of the USSR elite. My impression is that
they will stick to neoliberal ideology to the bitter end. But at the same time they are much more reckless. Recent attempt to
solve economic problems by unleashing a new wars and relying of war time mobilization so far did not work. Including the last
move is this game: Russia did not bite the offer for military confrontation that the USA clearly made by instilling coup d'état
in Ukraine.
Now it look like there is a second attempt to play "madman" card after Nixon's administration Vietnam attempt to obtain concession
from the USSR by threatening to unleash the nuclear war.
"... An interview by Gordon T. Long of the Financial Repression Authority. Originally published at his website ..."
"... One of the most important distinctions that investors have to understand is the difference between secular and cyclical trends Let us begin with definitions from the Encarta® World English Dictionary: ..."
"... Secular – occurring only once in the course of an age or century; taking place over an extremely or indefinitely long period of time ..."
"... Cycle – a sequence of events that is repeated again and again, especially a causal sequence; a period of time between repetitions of an event or phenomenon that occurs regularly ..."
"... Secular stagnation is when the predators of finance have eaten too many sheeple. ..."
"... Real estate rents in this latest asset bubble, whether commercial or residential, appear to have been going up in many markets even if the increases are slowing. That rent inflation will likely turn into rent deflation, but that doesn't appear to have happened yet consistently. ..."
"... Barter has always existed and always will. Debt money expands and contracts the middle class, acting as a feedback signal, which never works over the long term, because the so encapsulated system can only implode, when natural resource liquidation cannot be accelerated. The whole point is to eliminate the initial requirement for capital, work. Debt fails because both sides of the same coin assume that labor can be replaced. The machines driven by dc technology are not replacing labor; neither the elites nor the middle class can fix the machines, which is why they keep accelerating debt, to replace one failed technology only to be followed by the next, netting extortion by whoever currently controls the debt machine, which the majority is always fighting over, expending more energy to avoid work, like the objective is to avoid sweating, unless you are dumb enough to run on asphalt with Nike gear. ..."
"... . . . The whole argument for privatization, for instance, is the opposite of what was taught in American business schools in the 19th century. The first professor of economics at the Wharton School of Business, which was the first business school, was Simon Patten. He said that public infrastructure is a fourth factor of production. But its role isn't to make a profit . It's to lower the cost of public services and basic inputs to lower the cost of living and lower the cost of doing business to make the economy more competitive. But privatization adds interest payments, dividends, managerial payments, stock buybacks, and merges and acquisitions . Obviously these financialized charges are factored into the price system and raise the cost of living and doing business . ..."
GORDON LONG: Thank you for joining us. I'm Gordon Long with the Financial Repression Authority. It's my pleasure to have with
me today Dr. Michael Hudson Professor Hudson's very well known in terms of the FIRE economy to-I think, to a lot of our listeners,
or at least he's recognized by many as fostering that concept. A well known author, he has published many, many books. Welcome, Professor
Hudson.
MICHAEL HUDSON: Yes.
LONG: Let's just jump into the subject. I mentioned the FIRE economy cause I know that I have always heard it coming from yourself-or,
indirectly, not directly, from yourself. Could you explain to our listeners what's meant by that terminology?
HUDSON: Well it's more than just people getting fired. FIRE is an acronym for Finance, Insurance and Real Estate. Basically that
sector is about assets, not production and consumption. And most people think of the economy as being producers making goods and
services and paying labor to produce them – and then, labour is going to buy these goods and services. But this production and consumption
economy is surrounded by the asset economy: the web of Finance, Insurance, and Real Estate of who owns assets, and who owes the debts,
and to whom.
LONG: How would you differentiate it (or would you) with what's often referred to as financialization, or the financialization
of our economy? Are they one and the same?
HUDSON: Pretty much. The Finance, Insurance, and Real Estate sector is dominated by finance. 70 to 80% of bank loans in North
America and Europe are mortgage loans against real estate. So instead of a landowner class owning property clean and clear, as they
did in the 19 th century, now you have a democratization of real estate. 2/3 or more of the population owns their own
home. But the only way to buy a home, or commercial real estate, is on credit. So the loan-to-value ratio goes up steadily. Banks
lend more and more money to the real estate sector. A home or piece of real estate, or a stock or bond, is worth whatever banks are
willing to lend against it
As banks loosen their credit terms, as they lower their interest rates, take lower down payments, and lower amortization rates
– by making interest-only loans – they are going to lend more and more against property. So real estate is bid up on credit. All
this rise in price is debt leverage. So a financialized economy is a debt-leveraged economy, whether it's real estate or insurance,
or buying an education, or just living. And debt leveraging means that a larger proportion of assets are represented by debt. So
debt equity ratios rise. But financialization also means that more and more of people's income and corporate and government tax revenue
is paid to creditors. There's a flow of revenue from the production-and-consumption economy to the financial sector.
LONG: I don't know if you know Richard Duncan. He was with the IMF, etc, and lives in Thailand. He argues right now that capitalism
is no longer functioning, and really what he refers to what we have now is "creditism." Because in capitalism we have savings that
are reinvested into productive assets that create productivity, which leads to a higher level of living. We're not doing that. We
have no savings and investments. Credit is high in the financial sector, but it's not being applied to productive assets. Is he valid
in that thinking?
HUDSON: Not as in your statement. It's confused.
LONG: Okay.
HUDSON: There's an enormous amount of savings. Gross savings. The savings we have that are mounting up are just about as large
as they've ever been – about, 18-19% of the US economy. They're counterpart is debt. Most savings are lent out to borrowers se debt.
Basically, you have savers at the top of the pyramid, the 1% lending out their savings to the 99%. The overall net savings may be
zero, and that's what your stupid person from the IMF meant. But gross savings are much higher. Now, the person, Mr. Duncan, obviously-I
don't know what to say when I hear this nonsense. Every economy is a credit economy.
Let's start in Ancient Mesopotamia. The group that I organized out of Harvard has done a 20-study of the origins of economic structuring
in the Bronze Age, even the Neolithic, and the Bronze Age economy – 3200 BC going back to about 1200 BC. Suppose you're a Babylonian
in the time of Hammurabi, about 1750 BC, and you're a cultivator. How do you buy things during the year? Well, if you go to the bar,
to an ale woman, what she'd do is write down the debt that you owe. It was to be paid on the threshing floor. The debts were basically
paid basically once a year when the income was there, on the threshing floor when the harvest was in. If the palace or the temples
would advance animals or inputs or other public services, this would be as a debt. It was all paid in grain, which was monetized
for paying debts to the palace, temples and other creditors.
The IMF has this Austrian theory that pretends that money began as barter and that capitalism basically operates on barter. This
always is a disinformation campaign. Nobody believed this in times past, and it is a very modern theory that basically is used to
say, "Oh, debt is bad." What they really mean is that public debt is bad. The government shouldn't create money, the government shouldn't
run budget deficits but should leave the economy to rely on the banks. So the banks should run and indebt the economy.
You're dealing with a public relations mythology that's used as a means of deception for most people. You can usually ignore just
about everything the IMF says. If you understand money you're not going to be hired by the IMF. The precondition for being hired
by the IMF is not to understand finance. If you do understand finance, you're fired and blacklisted. That's why they impose
austerity programs that they call "stabilization programs" that actually are destabilization programs almost wherever they're imposed.
LONG: Is this a lack of understanding and adherence to the wrong philosophy, or how did we get into this trap?
HUDSON: We have an actively erroneous view, not just a lack of understanding. This is not by accident. When you have an error
repeated year after year after year, decade after decade after decade, it's not really insanity doing the same thing thinking it'll
be different. It's sanity. It's doing the same thing thinking the result will be the same again and again and again. The result
will indeed be austerity programs, making budget deficits even worse, driving governments further into debt, further into reliance
on the IMF. So then the IMF turns them to the knuckle breakers of the World Bank and says, "Oh, now you have to pay your debts by
privatization". It's the success. The successful error of monetarism is to force countries to have such self-defeating policies that
they end up having to privatize their natural resources, their public domain, their public enterprises, their communications and
transportation, like you're seeing in Greece's selloffs. So when you find an error that is repeated, it's deliberate. It's not insane.
It's part of the program, not a bug.
LONG: Where does this lead us? What's the roadmap ahead of us here?
HUDSON: A thousand years ago, if you were a marauding gang and you wanted to take over a country's land and its natural resources
and public sector, you'd have to invade it with military troops. Now you use finance to take over countries. So it leads us into
a realm where everything that the classical economists saw and argued for – public investment, bringing costs in line with the actual
cost of production – that's all rejected in favor of a rentier class evolving into an oligarchy. Basically, financiers – the
1% – are going to pry away the public domain from the government. Pry away and privatize the public enterprises, land, natural resources,
so that bondholders and privatizers get all of the revenue for themselves. It's all sucked up to the top of the pyramid, impoverishing
the 99%.
LONG: Well I think most people, without understanding economics, would instinctively tell you they think that's what's happening
right now, in some way.
HUDSON: Right. As long as you can avoid studying economics you know what's happened. Once you take an economics course you step
into brainwashing. It's an Orwellian world.
LONG: I think you said it perfectly well there. Exactly. It gets you locked into the wrong way of thinking as opposed to just
basic common sense. Your book is Killing the Host . What was the essence of its message? Was it describing exactly what we're
talking about here?
HUDSON: Finance has taken over the industrial economy, so that instead of finance becoming what it was expected to be in the 19
th century, instead of the banks evolving from usurious organizations that leant to governments, mainly to wage war, finance
was going to be industrialized. They were going to mobilize savings and recycle it to finance the means of production, starting with
heavy industry. This was actually happening in Germany in the late 19 th century. You had the big banks working with government
and industry in a triangular process. But that's not what's happening now. After WW1 and especially after WW2, finance reverted to
its pre-industrial form. Instead of allying themselves with industry, as banks were expected to do, banks allied themselves with
real estate and monopolies, realizing that they can make more money off real estate.
The bank spokesman David Ricardo argued against the landed interest in 1817, against land rent. Now the banks are all in favor
of supporting land rent, knowing that today, when people buy and sell property, they need credit and pay interest for it. The banks
are going to get all the rent. So you have the banks merge with real estate against industry, against the economy as a whole. The
result is that they're part of the overhead process, not part of the production process.
LONG: There's a sense that there's a crisis lying ahead in the next year, two years, or three years. The mainstream economy's
so disconnected from Wall Street economy. What's your view on that?
HUDSON: It's not disconnected at all. The Wall Street economy has taken over the economy and is draining it. Under what economics
students are taught as Say's Law, the economy's workers are supposed to use their income to buy what they produce. That's why Henry
Ford paid them $5 a day, so that they could afford to buy the automobiles they were producing.
LONG: Exactly.
HUDSON: But Wall Street is interjecting itself into the economy, so that instead of the circular flow between producers and consumers,
you have more and more of the flow diverted to pay interest, insurance and rent. In other words, to pay the FIRE sector. It all ends
up with the financial sector, most of which is owned by the 1%. So, their way of formulating it is to distract attention from today's
debt quandary by saying it's just a cycle, or it's "secular stagnation." That removes the element of agency – active politicking
by the financial interests and Wall Street lobbyists to obtain all the growth of income and wealth for themselves. That's what happened
in America and Canada since the late 1970s.
LONG: What does an investor do today, or somebody who's looking for retirement, trying to save for the future, and they see some
of these things occurring. What should they be thinking about? Or how should they be protecting themselves?
HUDSON: What all the billionaires and the heavy investors do is simply try to preserve their wealth. They're not trying to make
money, they're not trying to speculate. If you're an investor, you're not going to outsmart Wall Street billionaires, because the
markets are basically fixed. It's the George Soros principle. If you have so much money, billions of dollars, you can break the Bank
of England. You don't follow the market, you don't anticipate it, you actually make the market and push it up, like the Plunge Protection
Team is doing with the stock market these days. You have to be able to control the prices. Insiders make money, but small investors
are not going to make money.
Since you're in Canada, I remember the beginning of the 1960s. I used to look at the Treasury Bulletin and Federal Reserve
Bulletin figures on foreign investment in the US stock market. We all used to laugh at Canada especially. The Canadians don't
buy stocks until they're up to the very top, and then they lose all the money by holding these stocks on the downturn. Finally, when
the market's all the way at the bottom, Canadians decide to begin selling because they finally can see a trend. So they miss the
upswing until they decide to buy at the top once again. It's hilarious to look at how Canada has performed in the US bond market,
and they did the same in the silver market. I remember when silver was going up to $50. The Canadians said, "Yes, we can see the
trend now!" and they began to buy it. They lost their shirts. So, basically, if you're a Canadian investor, move.
LONG: So the Canadian investors are a better contrarian indicator than the front page cover, you're saying.
HUDSON: I'd think so. Once they get in, you know the bubble's over.
LONG: Absolutely on that one. What are you currently writing? What is your current focus now?
HUDSON: Well, I just finished a book. You mentioned Killing the Host . My next book will be out in about three months:
J is for Junk Economics . It began as a dictionary of terms, so I can provide people with a vocabulary. As we got in the argument
at the beginning of your program today, our argument is about the vocabulary we're using and the words you're using. The vocabulary
taught to students today in economics – and used by the mass media and by government spokesmen – is basically a set of euphemisms.
If you look at the television reports on the market, they say that any loss in the stock market isn't a loss, it's "profit taking".
And when they talk about money. the stock market rises – "Oh that's good news." But it's awful news for the short sellers it wipes
out. Almost all the words we get are kind of euphemisms to conceal the actual dynamics that are happening. For instance, "secular
stagnation" means it's all a cycle. Even the idea of "business cycles": Nobody in the 19 th century used the word "business
cycle". They spoke about "crashes". They knew that things go up slowly and then they plunge very quickly. It was a crash. It's not
the sine curve that you have in Josef Schumpeter's book on Business Cycles . It's a ratchet effect: slow up, quick down. A
cycle is something that is automatic, and if it's a cycle and you have leading and lagging indicators as the National Bureau of Economic
Research has. Then you'd think "Oh, okay, everything that goes up will come down, and everything that goes down will come up, just
wait your turn." And that means governments should be passive.
Well, that is the opposite of everything that's said in classical economics and the Progressive Era, when they realized that economies
don't recover by themselves. You need a-the government to step in, you need something "exogenous," as economist say. You need something
from outside the system to revive it. The covert idea of this business cycle analysis is to leave out the role of government. If
you look at neoliberal and Austrian theory, there's no role for government spending, and no role of public investment. The whole
argument for privatization, for instance, is the opposite of what was taught in American business schools in the 19 th
century. The first professor of economics at the Wharton School of Business, which was the first business school, was Simon Patten.
He said that public infrastructure is a fourth factor of production. But its role isn't to make a profit. It's to lower the cost
of public services and basic inputs to lower the cost of living and lower the cost of doing business to make the economy more competitive.
But privatization adds interest payments, dividends, managerial payments, stock buybacks, and merges and acquisitions. Obviously
these financialized charges are factored into the price system and raise the cost of living and doing business.
LONG: Well, Michael, we're-I thank you for the time, and we're up against our hard line. I know we didn't have as much time as
we always like, so we have to break. Any overall comments you'd like to leave with our listeners who might be interested this school
of economics?
HUDSON: Regarding the downturn we're in, we're going into a debt deflation. The key of understanding the economy is to look at
debt. The economy has to spend more and more money on debt service. The reason the economy is not recovering isn't simply because
this is a normal cycle. And It's not because labour is paid too much. It's because people are diverting more and more of their income
to paying their debts, so they can't afford to buy goods. Markets are shrinking – and if markets are shrinking, then real estate
rents are shrinking, profits are shrinking. Instead of using their earnings to reinvest and hire more labour to increase production,
companies are using their earnings for stock buybacks and dividend payouts to raise the share price so that the managers can take
their revenue in the form of bonuses and stocks and live in the short run. They're leaving their companies as bankrupt shells, which
is pretty much what hedge funds do when they take over companies.
So the financialization of companies is the reverse of everything Adam Smith, John Stuart Mill, and everyone you think of as a
classical economist was saying. Banks wrap themselves in a cloak of classical economics by dropping history of economic thought from
the curriculum, which is pretty much what's happened. And Canada-I know since you're from Canada, my experience there was that the
banks have a huge lobbying power over government. In 1979, I wrote for the IRPP Institute there on Canada In the New Monetary
Order . At that time the provinces of Canada were borrowing money from Switzerland and Germany because they could borrow it at
much lower interest rates. I said that this was going to be a disaster, and one that was completely unnecessary. If Canadian provinces
borrow in Francs or any other foreign currency, this money goes into the central bank, which then creates Canadian dollars to spend.
Why not have the central bank simply create these dollars without having Swiss francs, without having German marks? It's unnecessary
to have an intermediary. But the more thuggish banks, like the Bank of Nova Scotia, said, "Oh, that way's the road to serfdom." It's
not. Following the banks and the Austrian School of the banks' philosophy, that's the road to serfdom. That's the road
to debt serfdom. It should not be taken now. It lets universities and the government be run by neoliberals. They're a travesty of
what real economics is all about.
LONG: Michael, thank you very much. I learned a lot, appreciate it; certainly appreciate how important it is for us to use the
right words on the right subject when we're talking about economics. Absolutely agree with you. Talk to you again?
Interesting, but after insulting Duncan, Hudson says the banks stopped partnering with industry and went into real estate,
which sounded like what Duncan said.
I mention this because for a non- expert like myself it is sometimes difficult to tell when an expert is disagreeing with someone
for good reasons or just going off half- cocked. I followed what Hudson said about the evils of the IMF, but didn't see where
Duncan had defended any of that, unless it was implicit in saying that capitalism used to function better.
"As we got in the argument at the beginning of your program today, our argument is about the vocabulary we're using and the
words you're using. The vocabulary taught to students today in economics – and used by the mass media and by government spokesmen
– is basically a set of euphemisms ."Almost all the words we get are kind of euphemisms to conceal the actual dynamics that are
happening."
May consider it's about recognizing and deciphering the "doublespeak", "newspeak", "fedspeak", "greenspeak" etc, whether willing
or unwitting using words for understanding and clarifying as opposed to misleading and confusing dialectic as opposed to sophistry.
What I objected to was the characterization of today's situation as "financialization." I explained that financialization is
the FIRST stage - when finance WORKS. We are now in the BREAKDOWN of financialization - toward the "barter" stage.
Treating "finance" as an end stage rather than as a beginning stage overlooks the dynamics of breakdown. It is debt deflation.
First profits fall, and as that occurs, rents on commercial property decline. This is already widespread here in New York, from
Manhattan (8th St. near NYU is half empty) to Queens (Austin St. in Forest Hills.).
I wrote an article you might be interested in reading. It outlines a tax policy which would help prevent what you are discussing
in your article. The abuse of credit to receive rents and long term capital gains.
Thank you for another eye-opening exposition. My political economy education was negative (counting a year of Monetarism and
Austrian Economics around 1980), so I appreciate your interviews as correctives.
From your interview answer to the question about what we, the 99+% should do,I gathered only that we should not try to beat
the market. Anything more than that?
From my understanding, post Plaza banking lost most of its traditional market to the shadow sector, as a result, expanded off
into C/RE and increasingly to Financialization of everything sundry.
Disheveled Marsupial interesting to note Mr. Hudson's statement about barter, risk factors – ?????
One of the most important distinctions that investors have to understand is the difference between secular and cyclical
trends Let us begin with definitions from the Encarta® World English Dictionary:
Secular – occurring only once in the course of an age or century; taking place over an extremely or indefinitely long period
of time
Cycle – a sequence of events that is repeated again and again, especially a causal sequence; a period of time between repetitions
of an event or phenomenon that occurs regularly
Secular stagnation is a condition of negligible or no economic growth in a market-based economy . When
per capita income stays at relatively high levels, the percentage of savings is likely to start exceeding the percentage of longer-term
investments in, for example, infrastructure and education, that are necessary to sustain future economic growth. The absence of
such investments (and consequently of the economic growth) leads to declining levels of per capita income (and consequently of
per capita savings). With the reduced percentage savings rate converging with the reduced investment rate, economic growth comes
to a standstill – ie, it stagnates. In a free economy, consumers anticipating secular stagnation, might transfer their savings
to more attractive-looking foreign countries. This would lead to a devaluation of their domestic currency, which would potentially
boost their exports, assuming that the country did have goods or services that could be exported.
Persistent low growth, especially in Europe, has been attributed by some to secular stagnation initiated by stronger European
economies, such as Germany, in the past few years.
Words. What they mean depends on who's talking.
Secular stagnation is when the predators of finance have eaten too many sheeple.
Markets are shrinking – and if markets are shrinking, then real estate rents are shrinking, profits are shrinking.
Real estate rents in this latest asset bubble, whether commercial or residential, appear to have been going up in many
markets even if the increases are slowing. That rent inflation will likely turn into rent deflation, but that doesn't appear to
have happened yet consistently.
Perhaps he meant to say that markets are going to shrink as the debt deflation becomes more evident?
Yes, I think we are into turnip country now. Figure 1 in
this
prior article looks clear enough – even if you don't like the analysis that went with it. Wealth inequality still climbs but
income inequality has plateaued since Clinton I. Whatever the reasons for that, the 1% should be concerned – where is the ROI?
Barter has always existed and always will. Debt money expands and contracts the middle class, acting as a feedback signal,
which never works over the long term, because the so encapsulated system can only implode, when natural resource liquidation cannot
be accelerated. The whole point is to eliminate the initial requirement for capital, work. Debt fails because both sides of the
same coin assume that labor can be replaced. The machines driven by dc technology are not replacing labor; neither the elites
nor the middle class can fix the machines, which is why they keep accelerating debt, to replace one failed technology only to
be followed by the next, netting extortion by whoever currently controls the debt machine, which the majority is always fighting
over, expending more energy to avoid work, like the objective is to avoid sweating, unless you are dumb enough to run on asphalt
with Nike gear.
Labor has no problem with multiwhatever presidents, geneticists, psychologists, or economists, trying to hunt down and replace
labor, in or out of turn, but none are going to be any more successful than the others. Trump is being employed to bypass the
middle class and cut a deal. There is no deal. Labor is always going to pay males to work and their wives to raise children. Obviously,
the majority will vote for a competing economy, and it is welcome to do so, but if debt works so well, why is the majority voting
to kidnap our kids with public healthcare and education policies.
I'm not sure I heard an answer to the question of what people, who might be trying to save for the future or plan for retirement,
can do? Is the point that there isn't anything? Because I'm definitely between rocks and hard places
Yeah, he basically said there is no good savings plan. Big-money interests have rigged the rules and are now manipulating the
market (this used to be the definition of what was NOT allowed). Thus, they use computer algorithms to squeeze small amounts out
of the market millions of times. This means that the "investments" are nothing of the sort. You don't "invest" in something for
milliseconds. He said that the 1% are mostly just trying to hold on to what they have. Very few trust the rigged markets.
Low rent & cheap energy are key to the arts & innovations. My model has to work for airports, starts at the fuel farm as the
CIA & MI6 Front Page Avjet did. Well before that was Air America. I wonder if now American Airlines itself is a Front.
All of America is a Front far as I can about tell. Hadn't heard that Manhattan rents were coming down. Come in from out of
town, how you going to know? Not supposed to I guess.
I got that textbook and I liked that guy John Commons. He says capitalism is great, but it always leads to Socialism because
of unbridled greed.
The frenzy to find another stable cash currency showing in Bit Coin and the discussion of Future Tax Credits while the Euro
is controlled by the rent takers demands change on both sides of the Atlantic.
We got shot dead protesting the war, and civil rights backlash is the gift that keeps giving to the Southerners looking up
every day in every courthouse town, County seat is all about spreading fear and desperation.
How to change it all without violence is going to be really tricky.
. . . So, basically, if you're a Canadian investor, move.
LONG: So the Canadian investors are a better contrarian indicator than the front page cover, you're saying.
HUDSON: I'd think so. Once they get in, you know the bubble's over.
When one reads the financial press in Canada, every dollar extracted by the lords of finance is a glorious taking by brilliant
people at the top of the financial food chain from the stupid little people at the bottom, but when it counts, there was silence,
in cooperation with Canada's one percent.
The story starts about five years ago, with smart meters. Everyone knows what they are, a method by which electrical power
use can be priced depending on the time of day, and day of the week.
To make this tasty, Ontario's local utilities at first kept the price the same for all the time, and then after all the meters
were installed, came the changes, phased in over time. Prices were increased substantially, but there was an out. If you changed
your living arrangements to live like a nocturnal rodent and washed your clothes in the middle of the night, had supper later
in the evening or waited for weekend power rates you could still get low power rates, from the three tier price structure.
The local utilities bought the power from the government of Ontario power generation utility, renamed to Hydro One, and this
is where Michael Hudson's talk becomes relevant.
The successful error of monetarism is to force countries to have such self-defeating policies that they end up having to
privatize their natural resources, their public domain, their public enterprises, their communications and transportation, like
you're seeing in Greece's selloffs. So when you find an error that is repeated, it's deliberate. It's not insane. It's
part of the program, not a bug .
LONG: Where does this lead us? What's the roadmap ahead of us here?
HUDSON: A thousand years ago, if you were a marauding gang and you wanted to take over a country's land and its natural
resources and public sector, you'd have to invade it with military troops. Now you use finance to take over countries. So it leads
us into a realm where everything that the classical economists saw and argued for – public investment, bringing costs
in line with the actual cost of production – that's all rejected in favor of a rentier class evolving into an oligarchy. Basically,
financiers – the 1% – are going to pry away the public domain from the government. Pry away and privatize the public enterprises,
land, natural resources, so that bondholders and privatizers get all of the revenue for themselves. It's all sucked up to the
top of the pyramid, impoverishing the 99% .
Eighteen months ago, there was an election in Ontario, and the press was on radio silence during the whole time leading up
to the election about the plans to "privatize" Hydro One. I cannot recall one instance of any mention that the new Premier, Kathleen
Wynne was planning on selling Hydro One to "investors".
Where did this come from? Did the little people rise up and say to the politicians "you should privatize Hydro One" for whatever
reason? No. This push came from the 1% and Hydro One was sold so fast it made my head spin, and is now trading on the Toronto
Stock exchange.
At first I though the premier was an economic ignoramus, because Hydro One was generating income for the province and there
was no other power supplier, so one couldn't even fire them if they raised their prices too high.
One of the arguments put forward by the 1% to privatize Hydro One was a classic divide and conquer strategy. They argued that
too many people at Hydro One were making too much money, and by privatizing, the employees wages would be beat down, and the resultant
savings would be passed on to customers.
Back to Michael Hudson
. . . The whole argument for privatization, for instance, is the opposite of what was taught in American business schools
in the 19th century. The first professor of economics at the Wharton School of Business, which was the first business school,
was Simon Patten. He said that public infrastructure is a fourth factor of production. But its role isn't to make a profit
. It's to lower the cost of public services and basic inputs to lower the cost of living and lower the cost of doing
business to make the economy more competitive. But privatization adds interest payments, dividends, managerial payments,
stock buybacks, and merges and acquisitions . Obviously these financialized charges are factored into the price system
and raise the cost of living and doing business .
Power prices have increased yet again in Ontario since privatization, and Canada's 1% are "making a killing" on it. There has
been another change as well. Instead of a three tier price structure, there are now two, really expensive and super expensive.
There is no longer a price break to living like a nocturnal rodent. The 1% took that for themselves.
I am so tired of seeing that old lie about Old Henry and the $5 a day. I realize it was just a tossed off reference to something
most people believe for the purpose of describing a discarded policy, but the fact is very, very few of Old Henry's employees
ever got that pay. See, there were strings attached.
Old Henry hired a lot of spies, too. He sent them around to the neighborhoods where his workers lived (it was convenient having
them all in Detroit). If the neighbors saw your kid bringing a bucket of beer home from the corner tavern for the family, you
didn't get the $5.
If your lawn wasn't mowed to their satisfaction, you didn't get the $5. If you were thought not to bathe as often as they liked,
you didn't get the $5. If you didn't go to a church on Sundays, you didn't get the $5. If you were an immigrant and not taking
English classes at night school, you didn't get the $5. There were quite a lot of strings attached. The whole story was a public
relations stunt, and Old Henry never intended to live up to it; he hated his workers.
"... Primates with about exponentially increasing physical technologies continue to deliberately ignore and misunderstand themselves as much as is humanly possible, due to the history of warfare making and maintaining the currently existing political economy, whose maliciousness is manifesting through runaway vicious feedback loops, whereby the excessively successful control of Civilization through applications of the methods of organized crime are resulting in that Civilization manifesting runaway criminal insanities. Indeed, in that context, where there is almost nothing but the central core of triumphant organized crime, namely bankster dominated governments, surrounded by various layers of controlled "opposition" groups, which stay within the same bullshit-based frames of reference regarding those phenomena, the overall situation is that society becoming about exponentially sicker and insane. ..."
"... In general, "Asset Managers" are stuck inside taking for granted that everything they do has become almost totally based on being able to enforce frauds, despite some of them noticing the increasingly blatant ways that there are accumulating apparent anomalies in those systems, as vicious feedback loops drive those systems to become about exponentially more fraudulent, and therefore increasingly unbalanced. To come to better terms with those apparent anomalies requires going through series of intellectual scientific revolutions and profound paradigm shifts, which overall become ways that human beings better understand themselves as manifestations of general energy systems. However, since doing so requires recognizing how and why governments are necessarily the biggest forms of organized crime, dominated by the best organized gangsters, the banksters, it continues to be politically impossible to accomplish that. ..."
"... At each open, algos compute the increase in their AUM from the prior day and their margin reach. They then begin buying. All algos do this. Buying whenever cash/margin exists; selling whenever profit targets exist. On pullbacks, the algos withdraw, volume evaporates, minimizing the drop. The algos collectively increase equity prices without consideration of the value of the money involved. Not valuations. No fundamentals. Just ones and zeroes. Just a program. ..."
Macro-prudential regulations follow financial crises, rarely do they precede one. Even when evidence is abundant of systemic risks
building up, as is today, regulators and policymakers have a marked tendency to turn an institutional blind eye, hoping for imbalances
to fizzle out on their own – at least beyond the duration of their mandates. It does not work differently in economics than it does
for politics, where short-termism drives the agenda, oftentimes at the expenses of either the next government, the broader population
or the next generation.
It does not work differently in the business world either, where corporate actions are selected based on the immediate gratification
of shareholders, which means pleasing them at the next round of earnings, often at the expenses of long-term planning and at times
exposing the company itself to disruption threats from up-and-comers.
Long-term vision does not pay; it barely shows up in the incentive schemes laid out for most professions . Economics is no exception.
Orthodoxy and stillness preserve the status quo, and the advantages hard earned by the few who rose from the ranks of the establishment
beforehand.
Yet, when it comes to Central Banking, and more in general policymaking, financial stability should top the priority list. It
honorably shows up in the utility function, together with price stability and employment, but is not pursued nearly as actively as
them. Central planning and interventionism is no anathema when it comes to target the decimals of unemployment or consumer prices,
yet is residual when it comes to master systemic risks, relegated to the camp of ex-post macro-prudential regulation. This is all
the more surprising as we know all too well how badly a deep unsettlement of financial markets can reverberate across the real economy,
possibly leading into recessions, unemployment, un-anchoring of inflation expectations and durable disruption to consumer patterns.
There is no shortage of reminders for that in the history books, looking at the fallout of dee dives in markets in 1929, 2000 and
2007, amongst others.
Intriguingly, the other way round is accepted and even theorized. Manipulating bond and stock prices, directly or indirectly,
is mainstream policy theory today. From Ben Bernanke's 'portfolio balance channel theory', to the relentless pursuit of the 'wealth
effect' via financial repression under Janet Yellen and Haruhiko Kuroda, to Mario Draghi tackling the fragmentation of credit markets
across the EU via direct asset purchases, the practice has become commonplace. To some, like us, the 'wealth effect' may be proving
to be more of an 'inequality effect' than much, leading to populism and constantly threatening regime change, but that is beyond
the scope of this note today.
What we want to focus on instead is the direct impact that monetary interventionism like Quantitative Easing ('QE') and Negative
or Zero Interest Rate Policies ('NIRP' or 'ZIRP') have on the structure of the market itself, how they help create a one-sided investment
community, oftentimes long-only, fully invested when not levered up, relying on record-highs for bonds and stocks to perpetuate themselves
endlessly - despite a striking disconnect from fundamentals, life-dependent on the lowest levels of volatility ever seen in history
. The market structure morphed under the eyes of policymakers over the last few years, to become a pressure cooker at risk of blowing-up,
with a small but steadily growing probability as times goes by and the bubble inflates. The
positive feedback loops between monetary flooding and the private investment
community are culpable for transforming an ever present market risk into a systemic risk, and for masking as peaceful what is instead
an unstable equilibrium and
market fragility.
Positive Feedback Loops create divergence from general equilibrium, and Systemic Risks
Positive feedback loops , in finance like in biology, chemistry, cybernetics, breed system instability, as they orchestrate a
further divergence from equilibrium . An unstable equilibrium is defined as one where a small disturbance is sufficient to trigger
a large adjustment.
QE and NIRP have two predominant effects on markets: (i) relentless up-trend in stocks and bonds (the 'Trend Factor') , dominated
by the buy-the-dip mentality, which encapsulates the 'moral hazard' of investors knowing Central Banks are prompt to come to their
rescue (otherwise known as 'Bernanke/Yellen/Kuroda/Draghi put'), and (ii) the relentless down-trend in volatility the 'Volatility
Factor').
Two Factors Explain All: Trend and Volatility
The most fashionable investment strategies these days are directly impacted by either one or both of these drivers. Such strategies
make the bulk of the overall market, after leverage or turnover is taken into account : we will refer to them in the following as
'passive' or 'quasi-passive' . The trend impacts the long-only community, crowning it as a sure winner, making the case for low-
cost passive investing. The low volatility permeates everything else, making the case for full- investment and leverage.
The vast majority of investors these days are not independent from the QE environment they operate within : ETFs and index funds,
Risk Parity funds and Target Volatility vehicles, Low Volatility / Short Volatility vehicles, trend-chasing algos, Machine Learning-inspired
funds, behavioral Alternative Risk Premia funds. They are the poster children of the QE world. We estimate combined assets under
management of in excess of $8trn across the spectrum. They form a broad category of 'passive' or 'quasi-passive' investors, as are
being mechanically driven by two main factors: trend and volatility.
Source: Fasanara Presentations | Market Fragility
- How to Position for Twin Bubbles Bust, 16 th October 2017. The slide is described in details in this
video recording.
Extraordinary monetary policies have feedback loops with the asset management industry as a whole, reinforcing the effects on
markets of such policies in a vicious – or virtuous - cycle . QE and NIRP help a large number of investment strategies to flourish,
validating their success and supporting their asset gathering in the process, and are in return helped in boosting bond and stock
markets by their flows joining the already monumental public flows.
Private flows so reach singularity with public flows, and the whole market economy morphs into a one big common bet on ever-rising
prices, in shallow volatility. Here is the story of how $15trn of money printing by major Central Banks in the last ten years, of
which $3.7trn in 2017 alone, is joined by total assets of $8trn managed into buying the same safe and risk assets across, with leverage,
indiscriminately.
How Market Risk became Systemic Risk
Let's give a cursory look at the main players involved (a recent presentation we did is recorded
here) . As markets trend higher, no matter what happens (ever against the
shocked disbeliefs of Brexit, Trump, an Italian failed referendum and nuclear threats in North Korea), investors understand the outperformance
that comes from pricing risks out of their portfolios entirely and going long-only and fully-invested. Whoever under-weighs positions
in an attempt to be prudent ends up underperforming its benchmarks and is then penalized with redemptions. Passive investors who
are long-only and fully invested are the winners, as they are designed to be bold and insensitive to risks. As Central Banks policies
reduce the level of interest rates to zero or whereabouts, fees become ever more relevant, making the case for passive investing
most compelling. The rise of ETF and passive index funds is then inevitable.
According to JP Morgan, in the last 10 years, $2trn left active managers in equities and $2trn entered passive managers (pag.39
here) . We may be excused for thinking they are the
same $ 2trn of underlying investors progressively pricing risk provisions out of books, de facto , while chasing outperformance and
lower fees.
To be sure, ETFs are a great financial innovation, helping reducing costs in an expensive industry and giving entry to markets
previously un-accessible to most investors. Yet, what matters here is their impact on systemic risks, via positive feedback loops.
In circular reference, beyond Central Banks flows, markets are helped rise by such classes of valuations-insensitive passive investors,
which are then rewarded with further inflows, with which they can then buy more. The more expensive valuations get, the more they
disconnect from fundamentals, the more divergence from equilibrium occurs, the larger fat-tail risks become.
In ever-rising markets, 'buy-and-hold' strategies may only possibly be outsmarted by 'buy-the-dip' strategies. Whatever the outcome
of risk events, be ready to buy the dip quickly and blindly. As more investors design themselves up to do so, the dips are shallower
over time, leading to an S&P500 that never lost 3% in 2017, an historical milestone. Machine learning is another beautiful market
innovation, but what is there to learn from the time series of the last several years, if not that buy- the-dip works, irrespective
of what caused the dip. Big Data is yet another great concept, shaping the future of us all. Yet, most data ever generated in humankind
dates back three years only, in and by itself a striking limitation. The quality of the deduction cannot exceed the quality of the
time series upon which the data science was applied. If the time series is untrustworthy, as is heavily influenced by monumental
public flows ($300bn per months), what trust can we put on any model output originating from it? What pattern recognition can we
really be hopeful of getting, in the first place? May some of it just be a commercial disguise for going long, selling volatility
and leveraging up in various shapes or forms? What is hype and what is real? A short and compromised data series makes it hard, if
not possible, to really know. Once public flows abate and price discovery is let free again, then and only then will we be in a position
to know the difference.
Low volatility does what trending markets alone cannot. A state of low volatility presents the appearance of
stuporous, innocuous, narcotized markets, thus
enticing new swathes of unfitting investors in, mostly retail-type 'weak hands'. Weak hands are investors who are brought to like
investments by certain characteristics which are uncommon to the specific investment itself, such as featuring a low volatility.
It is in this form that we see bond-like investors looking at the stock market for yield pick-up purposes, magnetized by levels of
realized volatility similar to what fixed income used to provide with during the Great Moderation. It is in this form that Tech companies
out of the US have started filling the coffers of not just Growth ETF, where they should rightfully reside, but also Momentum ETF,
and even, incredibly, Low-Volatility ETF.
Low volatility is also a dominant input for Risk Parity funds and Target Volatility vehicles . The lower the volatility, the higher
the leverage allowed in such players, mechanically. All of which are long-only players, joining public flows, again helping the market
rise to record levels in the process, in circular reference. Rewarded by new inflows, the buying spree gathers momentum, in a virtuous
circle. Valuations are no real input in the process, volatility is what matters the most. Volatility is not risk, except for them
it is.
It goes further than that. It is not only the level of volatility that count, but its direction too . As volatility implodes,
relentlessly, into historical lows never seen before in history, a plethora of investment strategies is launched to capitalize on
just that, directly: Short Volatility vehicles . They are the best performing strategy of the last decade, by and large. The problem
here is that, due to construction, as volatility got to single-digit territory, relatively small spikes are now enough to trigger
wipe-out events on several of these instruments. Our analysis shows that if equity volatility doubles up from current levels (while
still being half of what it was as recently as in August 2015), certain Short Vol ETFs may stand to lose up to 75% or more. Moreover,
short positions on long-vol ETFs can lose up to 250% of capital. For some, 'termination events' are built into contracts for sudden
losses of this magnitude, meaning that the notes would be prematurely withdrawn. It is one thing to expect a spike in volatility
to cause losses, it is quite another to know that a minor move is all it takes to trigger a default event.
On such spikes in volatility, Morgan Stanley Quant Derivatives Strategy desk warns further that market makers may be forced to
rebalance their exposure non-linearly on a spike in volatility. A drop in the S&P 500 of 5% in one day may trigger approximately
$ 400mn of Vega notional of rebalancing (pag.48 here)
. We estimate that half a trillion dollars of additional selling on S&P stocks may occur following a correction of between 5% and
10%. That is a lot of selling, pre-set in markets, waiting to strike. Unless you expect the market to not have another 5% sell-off,
ever again.
What do ETFs, Risk Parity and Target Vol vehicles, Low Vol / Short Vol vehicles, trend-chasing algos, Machine Learning, behavioral
Alternative Risk Premia, factor investing have in common? Except, of course, being the 'winners take all' of QE-driven markets. They
all share one or more of the following risk factors: long-only, fully invested when not leveraged-up, short volatility, short correlation,
short gamma Thanks to QE and NIRP, the whole market is becoming one single big position.
The 'Trend Factor' and the 'Volatility Factor' are over-whelming, making it inevitable for a high- beta, long-bias, short-vol
proxy to disseminate across. Almost inescapably so, given the time series the asset management industry has to deal with, and derive
its signals from.
Several classes of investors may move to sell in lock-steps if and when markets turn. The boost to asset prices and the zero-volatility
environment created the conditions for systemic risks in the form of an over-compensation to the downside. Record-low volatility
breeds market fragility, it precedes system instability.
Flows Matter, Both Ways!
We will know soon if the fragility of markets is that bad. The undoing of loose monetary policies (NIRP, ZIRP) will create a liquidity
withdrawal of over $1 trillion in 2018 alone (pag.61-62
here) . The reaction of the passive and quasi-passive communities will determine the speed of the adjustment in the pricing for
both safe and risk assets, and how quickly risk provisions will re- enter portfolios. Such liquidity withdrawal will represent the
first real crash-test for markets in 10 years.
As public spending on Wall Street abates, the risk is evident of seeing the whole market turning with it. The shocks of Trump
and Brexit did not manage to derail markets for long, as public flows were overwhelming. Flows is what mattered, above all elusive,
over-fitting economic narratives justifying price action at the margin. Flows may matter again now as they fade
Systemic Risk is Not Just About Banks: Look at Funds
The role of trending markets is known when it comes to systemic risks: a not sufficient but necessary condition. Most trends do
not necessarily lead to systemic risks, but hardly systemic risks ever build up without a prolonged period of uptrend beforehand.
Prolonged uptrends in any asset class hold the potential to instill the perception that such asset class will grow forever, irrespective
of the fundamentals, and may thus lead to excessive risk taking, excess leverage, the formation of a bubble and, ultimately, systemic
risks. The mind goes to the asset class of real estate, its undeterred uptrend into 2006/2007, its perception of perpetuity ("we
have never had a decline in house prices on a nationwide basis''
Ben Bernanke) , the credit bubble built on banks hazardous activities on subprime mortgages as a result, and the systemic risks
which emanated, with damages spanning well beyond the borders of real estate.
The role of volatility is also well-researched, especially low volatility. Hayman Minsky, in his "
Financial Instability
Hypothesis '' in 1977, analyses the behavioral changes induced by a reduction of volatility, postulating that economic agents
observing a low risk are induced to increase risk taking, which may in turn lead to a crisis: "stability is destabilizing". In a
recent study, Jon Danielsson, Director
of the Systemic Risk Centre at the LSE, finds unambiguous support for the 'low volatility channel', insofar as prolonged periods
of low volatility have a strong predictive power over the incidence of a banking crisis, owing to excess lending and excess leverage
. The economic impact is the highest if the economy stays in the low volatility environment for five years : a 1% decrease in volatility
below its trend translates in a 1.01% increase in the probability of a crisis. He also finds that, counter-intuitively, high volatility
has little predictive power : very interesting, when the whole finance world at large is based on retrospective VAR metrics, and
equivocates high volatility for high risk.
Both a persistent trend and prolonged low-volatility can lead banks to take excessive risks. But what about their impact on the
asset management industry?
Thinking at the hard economic impact of the Great Depression (1929-1932) and the Great Recession (2007-2009), and the eminent
role played by banks in both, it comes as little surprise that the banking sector captures all the attention. However, what remains
to be looked into, and perhaps more worrying in today's environment, is the role of prolonged periods of uptrend and low-vol on the
asset management industry
In 2014, the Financial Stability Board (FSB), an international body that makes recommendations to G20 nations on financial risks,
published a consultation paper asking whether fund managers might need to be designated as " global systemically important financial
institution " or G-SIFI, a step that would involve greater regulation and oversight. It did not result in much, as the industry lobbied
in protest, emphasizing the difference between the levered balance sheet of a bank and the business of funds.
The reason for asking the question is evident: (i) sheer size , as the AM industry ballooned in the last few years, to now represent
over [15trnXX] for just the top 5 US players!, (ii) funds have partially substituted banks in certain market-making activities, as
banks dialed back their participation in response to tighter regulation and (iii) , funds can indeed do damage: think of LTCM in
1998, the fatal bailout of two Real Estate funds by Bear Stearns in 2007, the money market funds 'breaking the buck' in 2008 amongst
others.
But it is not just sheer size that matters for asset managers. What may worry more is the positive feedback loops discussed above
and the resulting concentration of bets in one single global pot , life-dependent on infinite momentum/trend and ever-falling volatility.
Positive feedback loops are the link for the sheer size of the AM industry to become systemically relevant. Today more than ever,
they morph market risks in systemic risks.
Volatility will not forever be low, the trend will not forever go: how bad a damage when it stops? As macro prudential policy
is not the art of "whether or not it will happen" but of "what happens if", it is hard not to see this as a blind spot for policymakers
nowadays.
I have never seen it this bad, the numbers are all moutof wack!
It seems many of us are drawn to a good illusion and this proves true for most people in their daily life as well. In some
ways, it could be said that our culture has become obsessed with avoiding what is real.
We must remember that politicians and those in power tend to throw people under the bus rather than rise up and take responsibility
for the problems they create. The article below looks at how we have grown to believe things are fine.
The real estate boom features all the unknowns in today's thinking, which is why they are global.
This simple equation is unknown.
Disposable income = wages – (taxes + the cost of living)
You can immediately see how high housing costs have to be covered by wages; business pays the high housing costs for expensive
housing adding to costs and reducing profits. The real estate boom raises costs to business and makes your nation uncompetitive
in a globalised world.
The unproductive lending involved that leads to financial crises.
The economy gets loaded up with unproductive lending as future spending power has been taken to inflate the value of the nation's
housing stock. Housing is more expensive and the future has been impoverished.
" banks make their profits by taking in deposits and lending the funds out at a higher rate of interest" Paul Krugman, 2015.
He wouldn't know, that's financial intermediation theory.
Bank lending creates money, which pours into the economy fuelling the boom; it is this money creation that makes the housing
boom feel so good in the general economy. It feels like there is lots of money about because there is.
The housing bust feels so bad because the opposite takes place, and money gets sucked out of the economy as the repayments
overtake new lending. It feels like there isn't much money about because there isn't.
They were known unknowns, the people that knew weren't the policymakers to whom these things were unknown.
The global economy told policymakers there was something seriously wrong in 2008, but they ignored it, I didn't.
They had pushed Greece into debt deflation by cutting Government spending with austerity.
It wasn't just the IMF, the Troika all went along with this fatally flawed policy, this means the ECB and EU Commission also
didn't know what they were doing.
Richard Koo had watched as Western "experts" told Japan to cut Government spending and seen the fall in GDP as the economy
went downhill. The only way to get things going again was to increase Government spending and he has had decades to work out what
was going on.
The Troika's bad economics has been wreaking havoc across the Club-Med.
Another superficially correct analysis of "Positive Feedback Loops create divergence from general equilibrium, and Systemic
Risks." The vicious feedback loops which have the most leverage are all aspects of the funding of the political processes, which
have resulted in runaway systems of legalized lies, backed by legalized violence, the most important of which are the ways that
the powers of public governments enforce frauds by private banks, the big corporations that have grown up around those big banks.
About exponentially advancing technologies have enabled enforced frauds to become about exponentially more fraudulent. The
underlying drivers were the ways that the combined money/murder systems developed, whose social successfulness became more and
more based on maximizing maliciousness. From a superficial point of view, those results may appear to be due to incompetence,
however, from a deeper point of view those results make sense as due to the excessively successful applications of the methods
of organized crime through the political processes, due to the vicious feedback loops of the funding of those political processes.
The only connections between human laws and natural laws are the abilities to back up lies with violence. Natural selection
pressures have driven Globalized Neolithic Civilization to develop the most dishonest artificial selection systems possible, while
the continuation of the various vicious feedback loops that made and maintained those developments are driving about exponentially
increasing dishonesty. Although the laws of nature are not going to stop working, and the laws of nature underpinned the runaway
development of excessively successful vicious feedback loops of organized crime, on larger and larger scales, to result in Globalized
Neolithic Civilization, the overall results are that Civilization is becoming about exponentially more psychotic. Since Civilization
necessarily operates according to the principles and methods of organized crime, while those who became the biggest and best organized
forms of organized crime, namely, banker dominated governments, also necessarily became most dishonest about themselves, and yet,
their bullshit social stories continue to dominate the public schools, and mainstream mass media, as well as the publicly significant
controlled "opposition" groups.
Political economy is INSIDE human ecology, and therefore, the greatest systematic risks are to be found in the tragic trajectory
of human ecologies which are almost totally buried under maximized maliciousness. "Public debates" about the human death control
systems are based on previously having being as deceitful and treacherous as possible regarding those topics. The most extreme
forms of that manifest as the ways that money is measurement backed by murder. Of course, that the debt controls are backed by
the death controls are issues which are generally not publicly admitted nor addressed.
Global Neolithic Civilization has become almost totally based on being able to enforce frauds, in ways which have become about
exponentially more fraudulent, as the vicious feedback loops which enable that to happen automatically reinforce themselves to
get worse, faster. The almost total triumph of enforced frauds has resulted in social "realities" which are becoming exponentially
more insane, since the social successfulness of enforced frauds requires the most people do not understand that, because they
have been conditioned to not want to understand that. Rather, almost everyone takes for granted deliberately ignoring and misunderstanding
the laws of nature in the most absurdly backward ways possible, because of the long history of successful warfare based on deceits
and treacheries becoming the more recent history of successful finance based on enforcing frauds, despite that tragic trajectory
of vicious feedback loops resulting in about exponentially increasing overall fraudulence.
Various superficially correct analyses, such as the one in the article above, are typical of the content on Zero Hedge , which
does not come remotely close to recognizing the degree to which the dominate natural languages and philosophy of science have
undergone series of compromises with the biggest bullies' bullshit-based world views, which became the banksters' bullshit about
economics. Although it is theoretically possible for human beings to better understand themselves and Civilization, it continues
to become more and more politically impossible to do so, due to the ever increasing vicious feedback loops of enforced frauds
achieving symbolic robberies ...
Although the laws of nature are never going to stop working, it is barely possible to exaggerate the degree to which Civilization
overall is becoming about exponentially more psychotic, due to the social "realities" based on successfully enforcing frauds becoming
more and more out of touch with the surrounding, relatively objective, physical and biological facts. The various superficially
correct analyses presented on Zero Hedge regarding that kind of runaway collective psychosis, driven by the vicious feedback loops
of the funding of all aspects of the funding of the political processes, tend to always grossly understate the seriousness of
that situation, especially including the crucial issues of how to operate the human murder systems after the development of weapons
of mass destruction, which is unavoidable due to the rapid development of globalized electronic monkey money frauds, backed by
the threat of force from apes with atomic weapons.
Those who believe that possessing precious metals, or cryptocurrencies, etc., are viable solutions to those problems are not
remotely close to being in the right order of magnitude. Although there is no doubt that exponentially more "money" is being made
out of nothing as debts, in order to "pay" for strip-mining the natural resources of a still relatively fresh planet, and so,
there is no doubt that the exponentially decreasing value of that "money" is driving the accumulation of apparent anomalies, such
as outlined in the article above, the actually crucial issues continue to be the ways that money is measurement backed by murder,
as the most abstract ways that private property are claims backed by coercions. Stop-gap individual responses to the runaway fraudulence,
such as faith in possessing precious metals or cryptocurrencies, make some relative sense in terms of the public "money" supplies
becoming exponentially more fraudulent, but otherwise dismally fail to be in the ball park of the significant issues driven by
prodigious progress in physical sciences, WITHOUT any genuine progress in political sciences, other than to continue to be able
to better enforce bigger frauds, through the elaborations of oxymoronic scientific dictatorships, which adamantly refuse to become
more genuinely scientific about themselves.
Primates with about exponentially increasing physical technologies continue to deliberately ignore and misunderstand themselves
as much as is humanly possible, due to the history of warfare making and maintaining the currently existing political economy,
whose maliciousness is manifesting through runaway vicious feedback loops, whereby the excessively successful control of Civilization
through applications of the methods of organized crime are resulting in that Civilization manifesting runaway criminal insanities.
Indeed, in that context, where there is almost nothing but the central core of triumphant organized crime, namely bankster dominated
governments, surrounded by various layers of controlled "opposition" groups, which stay within the same bullshit-based frames
of reference regarding those phenomena, the overall situation is that society becoming about exponentially sicker and insane.
That Civilization has been driven by natural selection pressures to manifest runaway psychoses is not going to stop the laws
of nature from continuing to work through that Civilization. However, that will nevertheless drive the currently dominate artificial
selection systems to become increasingly psychotic, in ways whereby their vicious feedback loops are less and less able to be
sanely responded to ... Although some human beings have better and better understood some general energy systems, e.g., electric
and atomic energy, etc., since warfare was the oldest and best developed forms of social science and engineering, whose successfulness
was based on being able to maximize maliciousness, and since those then enabled successful finance to become based on runaway
enforced frauds, human beings living within Globalized Neolithic Civilization are so hidebound by adapting to living inside those
vicious feedback loops based on being able to enforce frauds that those human beings are mostly unwilling and unable to better
understand themselves as also manifestations of general energy systems.
As the report, embedded in the article, begins by quoting Leonardo da Vinci:
"Learn how to see. Realize that everything connects to everything else."
In general, "Asset Managers" are stuck inside taking for granted that everything they do has become almost totally based
on being able to enforce frauds, despite some of them noticing the increasingly blatant ways that there are accumulating apparent
anomalies in those systems, as vicious feedback loops drive those systems to become about exponentially more fraudulent, and therefore
increasingly unbalanced. To come to better terms with those apparent anomalies requires going through series of intellectual scientific
revolutions and profound paradigm shifts, which overall become ways that human beings better understand themselves as manifestations
of general energy systems. However, since doing so requires recognizing how and why governments are necessarily the biggest forms
of organized crime, dominated by the best organized gangsters, the banksters, it continues to be politically impossible to accomplish
that.
At each open, algos compute the increase in their AUM from the prior day and their margin reach. They then begin buying.
All algos do this. Buying whenever cash/margin exists; selling whenever profit targets exist. On pullbacks, the algos withdraw,
volume evaporates, minimizing the drop. The algos collectively increase equity prices without consideration of the value of the
money involved. Not valuations. No fundamentals. Just ones and zeroes. Just a program.
"... Well, again, what he was doing was running a program of a certain scale, of a large scale, through a set of standard macroeconomic assumptions. And that, again, is a reasonable exercise. If you ask me what my personal view is, I've written a whole book called The End of Normal in which I lay out reasons for my chronic pessimism about the capacity of the world economy to absorb a great deal more rapid economic growth. ..."
"... But that's not in the standard models, and it would not be appropriate to layer that on to a forecast of this kind. What Friedman was criticized for was not for putting his thumb on the scale, but for failing to put his thumb on the scale. In fact, that was the reasonable thing to do ..."
"... So what we had here was a, what was essentially an academic exercise that produced a result that was highly favorable to the Sanders position, and showed that if you did an ambitious program you would get a strong growth response. It's reasonable, certainly, for the first three or four years that that would transpire in practice. And what happened was that people who didn't like that result politically jumped on it in a way which was, frankly speaking, professionally irresponsible, in my view. It was designed to convey the impression, which it succeeded in doing for a brief while through the broad media, that this was not a reputable exercise, and that there were responsible people on one side of the debate, and irresponsible people on the other. ..."
"... The true nature of Capitalism has obviously been forgotten over time. Today we think it brings prosperity to all, but that was certainly never the intention. Today's raw Capitalism is showing its true nature with ever rising inequality. Capitalism is essentially the same as every other social system since the dawn of civilization. The lower and middle classes do all the work and the upper, leisure Class, live in the lap of luxury. The lower class does the manual work; the middle class does the administrative and managerial work and the upper, leisure, class live a life of luxury and leisure. ..."
"... The nature of the Leisure Class, to which the benefits of every system accrue, was studied over 100 years ago. "The Theory of the Leisure Class: An Economic Study of Institutions", by Thorstein Veblen. (The Wikipedia entry gives a good insight. It was written a long time ago but much of it is as true today as it was then. This is the source of the term conspicuous consumption.) We still have our leisure class in the UK, the Aristocracy, and they have been doing very little for centuries. The UK's aristocracy has seen social systems come and go, but they all provide a life of luxury and leisure and with someone else doing all the work. ..."
"... Feudalism – exploit the masses through land ownership. Capitalism – exploit the masses through wealth (Capital) ..."
"... Now the competition has gone, the US middle class is being wiped out. The US is going third world, with just rich and poor and no middle class. Raw Capitalism can only return Capitalism to its true state where there is little demand and those at the bottom live a life of bare subsistence. ..."
"... "The Marxian capitalist has infinite shrewdness and cunning on everything except matters pertaining to his own ultimate survival. On these, he is not subject to education. He continues wilfully and reliably down the path to his own destruction" ..."
"... "We came, we saw, he died" rinse and repeat for 5,000 years. ..."
"... By the 1920s, mass production techniques had improved to such an extent that relatively wealthy consumers were required to purchase all the output the system could produce and extensive advertising was required to manufacture demand for the chronic over-supply the Capitalist system could produce. ..."
"... They knew that if wealth concentrated too much there would not be enough demand. ..."
"... Fiscal conservatism, which champions a balanced budget and expenditure restraints, is often hailed as a politico-economic philosophy as well as a policy of financial responsibility. In practice, it has been used as an argument against free spending by governments which can lead to high levels of debt and inflation. It has not been a positive philosophy which advocates the pro-growth and stability benefits coming from balanced budgets. Rather, it is a negative one – reacting against excessive spending and its consequences. This is probably why modern examples of fiscal conservatism in the United States and the United Kingdom have not led to sustainable growth or a significant reduction in public debt. Instead, in the case of the Ronald Reagan era in the US in the 1980s, public debt soared as fiscal conservatism and other policies were abandoned. ..."
"... Galbraith is probably my favorite economist, and eminently reasonable here. It makes me think that Sanders should have used him, or someone like him as an adviser/in house economist, rather than relying on external analyses like Friedman. ..."
"... Is the American public, trained/indoctrinated to think of the USG budget in terms of a household budget analogy, ready for MMT? ..."
"... To me, too many of the supposed (and actual) intellectuals and high level advisers were experts in rationalizing and explaining the chosen party views, but still employed the Cato Institute suggestion to use "Leninist" propaganda techniques as put forth in the 1996 Newt Gingrich/Frank Luntz GoPac memo, "Language: A Key Mechanism of Control." ..."
"... Galbraith said casually about the thesis of his new book: This really is the new normal for capitalism – meaning low growth – because there is not much growth left. ..."
PERIES: James, the Council of Economic Advisors, they put out economic forecasts each year. And there has been some wildly
optimistic ones. For example, if you look at the 2010 predictions for 2012 and 2013 they have not quite been attained. And one would
say it was done in the interest of trying to make the administration that they were serving more impressive. But what accounts for
this particular attack on Friedman's projection and other fellow economists?
GALBRAITH: This was a classic case of professional bad manners and rank-pulling. What we had here were four former chairs
of the president's Council of Economic Advisors, and two from President Obama, two from President Clinton, who decided to use their
big names and their titles in order to launch an attack on a professor of economics at the University of Massachusetts who had written
a paper evaluating the Sanders economic program.
It's likely that the four bigwigs thought that Professor Friedman was a Bernie Sanders supporter. In fact, as of that time he
was a Hillary Clinton supporter and a modest donor to her campaign. What he had done was simply to write his evaluation of the economic
effects of the ambitious Sanders reform program. The four former council chairs announced that on the basis of their deep commitment
to rigor and objectivity, they had discovered that this forecast was unrealistic. And what I pointed out was that that claim was
based on no evidence and no analysis whatsoever. And when you pressed down on it you found that it was simply based on the obvious
fact that we haven't seen the kinds of growth rates that Professor Friedman's analysis suggested the Sanders program would produce.
And for a very simple reason: the Sanders program is bigger. It's more ambitious than anything we've seen in recent years, so it's
not surprising that when you put it through a model it generates a higher growth rate.
So that was the basic underlying facts, and these guys, two men and two women, announced that they, that it was a disreputable
study, but failed to present any analysis that suggested they'd actually even read the paper before they denounced it. And that's
what I pointed out in my counter letter, in a number of articles that have appeared since.
PERIES: James, so in your letter, how do you counter them? What methods did you use to come to your conclusions?
GALBRAITH: Well, I, no need to say anything beyond the fact that I had looked in their letter for the rigor that they were
so proud of, for the objectivity and the analysis that they were so proud of, and I'd found that they had not done any. They had
not made any such claim, not done any such work.
So that began to provoke a discussion. It's fair to say ultimately, without apologizing for effectively launching an ad hominem
attack on an independent academic researcher, one of the former chairs, Christina Romer of President Obama's council, and her husband
David Romer, a fellow economist, did produce a paper in which they spelled out their differences with the, with the Friedman paper.
But that, again, raised another set of interesting issues which we've continued to discuss at various, various outlets of the press.
PERIES: Now, James Friedman's claim that the growth rate from Sanders' plan to be around 5.3 percent. And some economists,
including Dean Baker at the Center for Economic Policy and Research, have claimed that this is unrealistic. What do you make of that?
GALBRAITH: Well, the question is whether it is an effect, let's say, a reasonable projection, of putting the Sanders program
into an economic model. And the answer to that question, yes, Professor Friedman did a reasonable job. He spelled out what the underlying
assumptions that he was using were. He spelled out the basic rules of thumb that macroeconomists had used for decades to assess the
effects of an economic program. In this case, an expansionary economic program. And he ran them through his model and reported the
results, a perfectly reasonable thing to do.
Now, one can be skeptical. And I am, and Dean Baker is, lots of people are skeptical that the world would work out quite that
way, because lots of things, in fact, happen which are not accounted for in a model. And we've talked, we've basically put together
a list of things that you think might be problematic. But the exercise here was not to put everything into paper that might happen
in the world. The exercise was to take the kind of bare bones that economists use to assess and to compare the consequences of alternative
programs, and to ask what kind of results do you get out? And that's what, again, what Jerry Friedman did. It was a reasonable exercise,
he came up with a reasonable answer, and he reported it.
PERIES: Now, Friedman seems to think that the rate of full employment in 1999 is attainable. However, many labor economists
seem to think that the larger share of the elderly currently in society compared to 1999 explains some of the lack of labor participation,
which creates a lower full employment ceiling that's contradicting Friedman's report. Your thoughts on that?
GALBRAITH: Well, I think it is a fact that the population is getting older. But as, I think, any economist would tell you,
that when you offer jobs in the labor market, the first thing that happens is the people who are looking for work take those jobs.
The second thing that happens is that people who might look for work when jobs were available start coming back into the labor market.
And if that is not enough to fill the vacancies that you have, it's perfectly open to employers to raise their wages so as to bring
more people in, or to increase the pace at which they innovate and substitute technology for labor so that they don't need the work.
So there's no real crisis involved in the situation if it turns out five years from now we're at 3.5 percent unemployment, and
they were beginning to run short of labor. That's not a reason to, at this stage, say no, we're not going to engage in the exercise
and run a more expansionary, vigorous reform program, a vigorous infrastructure project, a major reform of healthcare, a tuition-free
public education program. All of those things, which were part of what Friedman put into his paper, should be done anyway. The fact
that the labor market forecast might prove to have some different, the labor market might have different characteristics in five
years' time is from our present point of view just a, it's an academic or a theoretical proposition, purely.
PERIES: And Friedman's paper, he looks at a ten-year forecast. Did you feel that when you looked at the specifics of that,
including college, universal healthcare, infrastructure spending and of course, expanding Social Security and so on, that those categories
and his predictions or projections, rather, made sense to you?
GALBRAITH:Well, again, what he was doing was running a program of a certain scale, of a large scale, through a set
of standard macroeconomic assumptions. And that, again, is a reasonable exercise. If you ask me what my personal view is, I've written
a whole book called The End of Normal in which I lay out reasons for my chronic pessimism about the capacity of the world economy
to absorb a great deal more rapid economic growth.
But that's not in the standard models, and it would not be appropriate to layer that on to a forecast of this kind. What Friedman
was criticized for was not for putting his thumb on the scale, but for failing to put his thumb on the scale. In fact, that was the
reasonable thing to do.
On the contrary, and on the other side, when Christina and David Romer did put out their forecast, their own criticism of the
Friedman paper, they concluded by asserting that if this program were tried, inflation would soar. So they there were making an allegation
for which, again, they had no evidence and no plausible model, that in the world in which we presently live would produce that result.
So what we had here was a, what was essentially an academic exercise that produced a result that was highly favorable to the
Sanders position, and showed that if you did an ambitious program you would get a strong growth response. It's reasonable, certainly,
for the first three or four years that that would transpire in practice. And what happened was that people who didn't like that result
politically jumped on it in a way which was, frankly speaking, professionally irresponsible, in my view. It was designed to convey
the impression, which it succeeded in doing for a brief while through the broad media, that this was not a reputable exercise, and
that there were responsible people on one side of the debate, and irresponsible people on the other.
And that was, again, something that–an impression that could be conveyed through the mass media, but would not withstand scrutiny,
and didn't withstand scrutiny, once a few of us stood up and started saying, okay, where's your evidence, on what are you basing
this argument? And revealed the point, which the Romers implicitly conceded, and I give them credit for that, that in order to criticize
a fellow economist you need to do some work.
The true nature of Capitalism has obviously been forgotten over time. Today we think it brings prosperity to all, but that
was certainly never the intention. Today's raw Capitalism is showing its true nature with ever rising inequality. Capitalism is
essentially the same as every other social system since the dawn of civilization. The lower and middle classes do all the work
and the upper, leisure Class, live in the lap of luxury. The lower class does the manual work; the middle class does the administrative
and managerial work and the upper, leisure, class live a life of luxury and leisure.
The nature of the Leisure Class, to which the benefits of every system accrue, was studied over 100 years ago. "The Theory
of the Leisure Class: An Economic Study of Institutions", by Thorstein Veblen. (The Wikipedia entry gives a good insight. It was
written a long time ago but much of it is as true today as it was then. This is the source of the term conspicuous consumption.)
We still have our leisure class in the UK, the Aristocracy, and they have been doing very little for centuries. The UK's aristocracy
has seen social systems come and go, but they all provide a life of luxury and leisure and with someone else doing all the work.
Feudalism – exploit the masses through land ownership. Capitalism – exploit the masses through wealth (Capital)
Today this is done through the parasitic, rentier trickle up of Capitalism:
a) Those with excess capital invest it and collect interest, dividends and rent.
b) Those with insufficient capital borrow money and pay interest and rent.
All this was much easier to see in Capitalism's earlier days.
Malthus and Ricardo never saw those at the bottom rising out of a bare subsistence living. This was the way it had always been
and always would be, the benefits of the system only accrue to those at the top.
It was very obvious to Adam Smith:
"The Labour and time of the poor is in civilised countries sacrificed to the maintaining of the rich in ease and luxury. The
Landlord is maintained in idleness and luxury by the labour of his tenants. The moneyed man is supported by his extractions from
the industrious merchant and the needy who are obliged to support him in ease by a return for the use of his money. But every
savage has the full fruits of his own labours; there are no landlords, no usurers and no tax gatherers."
Like most classical economists he differentiated between "earned" and "unearned" wealth and noted how the wealthy maintained
themselves in idleness and luxury via "unearned", rentier income from their land and capital.
We can no longer see the difference between the productive side of the economy and the unproductive, parasitic, rentier side.
This is probably why inequality is rising so fast, the mechanisms by which the system looks after those at the top are now hidden
from us.
In the 19th Century things were still very obvious.
1) Those at the top were very wealthy
2) Those lower down lived in grinding poverty, paid just enough to keep them alive to work with as little time off as possible.
3) Slavery
4) Child Labour
Immense wealth at the top with nothing trickling down, just like today.
This is what Capitalism maximized for profit looks like. Labour costs are reduced to the absolute minimum to maximise profit.
The beginnings of regulation to deal with the wealthy UK businessman seeking to maximise profit, the abolition of slavery and
child labour. The function of the system is still laid bare. The lower class does the manual work; the middle class does the administrative
and managerial work and the upper, leisure, class live a life of luxury and leisure. The majority only got a larger slice of the
pie through organised Labour movements.
By the 1920s, mass production techniques had improved to such an extent that relatively wealthy consumers were required to
purchase all the output the system could produce and extensive advertising was required to manufacture demand for the chronic
over-supply the Capitalist system could produce. They knew that if wealth concentrated too much there would not be enough demand.
In the 1950s, when Capitalism had healthy competition, it was essential that the Capitalist system could demonstrate that it was
better than the competition. The US was able to demonstrate the superior lifestyle it offered to its average citizens.
Now the competition has gone, the US middle class is being wiped out. The US is going third world, with just rich and poor
and no middle class. Raw Capitalism can only return Capitalism to its true state where there is little demand and those at the
bottom live a life of bare subsistence.
When you realise the true nature of Capitalism, you know why some kind of redistribution is necessary and strong progressive
taxation is the only way a consumer society can ever be kept functioning.
A good quote from John Kenneth Galbraith's book "The Affluent Society", which in turn comes from Marx.
"The Marxian capitalist has infinite shrewdness and cunning on everything except matters pertaining to his own ultimate
survival. On these, he is not subject to education. He continues wilfully and reliably down the path to his own destruction"
Marx made some mistakes but he got quite a lot right.
Perhaps, Western civilization had already cultivated and concentrated psychopathic personality traits in its elite before Capitalism
ever begun. Early European history is an endless procession of wars at home and abroad as the elite took their wealth by force
and the masses were kept in check by force whenever necessary.
No peaceful group could ever survive this relentless onslaught of millennia. This psychopathic elite then took their warlike
ways to every corner of the earth. The wealthy elite from this era then became the wealthy elite of the next Capitalist era. Even
today their bloodlust cannot be sated as they look to control a global empire.
Certainly countless hundreds of peaceful, responsible, inclusive, open, empathetic indigenous societies have been co-opted/overthrown
by the western model.
Yes, but it's not just the western model that overthrows peaceful societies. The empires of China, the Japanese monarchies,
the empires of India (together with a cringeworthy caste system), the human sacrificing Aztecs, Mayas, and Incas, all prove that
tyranny is not a western invention.
When a local population becomes too large to be supported by simple egalitarian hunting and gathering, something else is required.
That something is agriculture, and almost inevitably, the organization, specialization, and partial urbanization required by large
scale agricultural society leads to exploitation and tyranny. This is seen in the earliest societies for which we have a written
record, Sumer and Egypt.
Thanks for the explanations of Veblen and Galbraith, which I find enduring basics over more than 100 years of speculation,
real investment, and the best way to keep consumer society healthy.
My unschooled, simple, way to measure the health of an economy is in the Velocity of Money in the real economy of useful products
and services. It appears to be very far below where it was when we did our best, and lower than when we first started measuring
it near the beginning of the Great Depression.
By the 1920s, mass production techniques had improved to such an extent that relatively wealthy consumers were required
to purchase all the output the system could produce and extensive advertising was required to manufacture demand for the chronic
over-supply the Capitalist system could produce.
They knew that if wealth concentrated too much there would not be enough demand.
Of course the Capitalists could never find it in themselves to raise wages and it took the New Deal and Keynesian thinking
to usher in the consumer society.
Fiscal conservatism, which champions a balanced budget and expenditure restraints, is often hailed as a politico-economic
philosophy as well as a policy of financial responsibility. In practice, it has been used as an argument against free spending
by governments which can lead to high levels of debt and inflation. It has not been a positive philosophy which advocates the
pro-growth and stability benefits coming from balanced budgets. Rather, it is a negative one – reacting against excessive spending
and its consequences. This is probably why modern examples of fiscal conservatism in the United States and the United Kingdom
have not led to sustainable growth or a significant reduction in public debt. Instead, in the case of the Ronald Reagan era in
the US in the 1980s, public debt soared as fiscal conservatism and other policies were abandoned.
A Monetarily Sovereign government does not need to reduce debt. In the U.S. (which is Monetarily Sovereign) federal so-called
"debt" is actually the total of deposits in T-security accounts at the Federal Reserve Bank. In short, "debt" is bank deposits.
Why anyone would want to reduce the size of deposits at the world's safest bank is a mystery to me - other than the misleading
use of the word "debt."
While all bank accounts are, in fact, debt of banks, most banks boast about the size of their depositors' accounts.
Contrary to popular myth, federal debt (i.e. deposits at the FRB) does not lead to inflation. America's "debt" has grown more
than 9,000% in the past 75 years, and the Fed is struggling to create inflation.
Galbraith is probably my favorite economist, and eminently reasonable here. It makes me think that Sanders should have
used him, or someone like him as an adviser/in house economist, rather than relying on external analyses like Friedman. It
would possibly have given his program more gravitas – first amongst elites, and then more generally. At least it would have had
a chance of changing the broader discussion. Whether you agree with it or not, right now the general MSM reporting on the Sanders
plan is that it doesn't add up.
This is speculative, but since Prof. Kelton is actually the economist for the Minority (the Democrats) of the Senate Banking
committee, there may be reasons of protocol that Sanders isn't using her policy ideas at the moment.
Another possibility is that trying to introduce a new economic paradigm while running for the nomination may be a bridge too
far. If Sanders tried to explain to people that taxes don't fund federal spending, etc., heads would explode.
I'm also not sure how one would use Prof. Kelton's ideas without bringing in a whole bunch of MMT concepts. Maybe if Sanders
wins the nomination he can begin to bring some of these ideas into the conversation.
He won't use her ideas simple because the American voter in not yet amenable to the facts of
Monetary Sovereignty .
Try explaining even to your best friend that:
1. Unlike state and local taxes, Federal taxes do not fund federal spending.
2. Even if FICA were eliminated, Social Security and Medicare benefits dramatically could (and should) be increased. There are
no federal "trust funds."
3. Federal deficits are necessary for economic growth
4. Federal "debt" is nothing more than deposits in T-security accounts at the Federal Reserve Bank.
5. America never has had, and is absolutely in no danger of, hyper-inflation.
Perhaps, if Bernie wins the election, he will be freer to educate the masses, as well as the economics community, but meanwhile
he has to claim the popular myth that federal spending has to be "paid for" by taxes.
Is the American public, trained/indoctrinated to think of the USG budget in terms of a household budget analogy, ready
for MMT? I think it's politically OK to use MMT informed policies–"deficits don't matter"–as the Republicans have, but not
OK to openly acknowledge doing so. MMT runs head on into bedrock beliefs like the protestant moral virtues of thrift and fiscal
responsibility. People cling to this stuff as tightly as they cling to their religion and guns.
MMT is a volatile, explosive doctrine. Tell an ordinary off-the-street taxpayer that Federal taxes don't fund Federal expenditures,
that Federal taxes destroy the money they collect and so keep inflation at desired levels, and ready yourself to answer this:
"If I'm just paying taxes so the money can be burned, why should I pay taxes? What good does paying taxes for that do me,
or people like me?"
And be prepared not to have your answer heard, comprehended, or accepted, after it is given.
It could lead directly and quickly to the end of a system of tax collection based on voluntary compliance. It could ignite
a revolution.
MMT is an unpopular doctrine. Whether it is the true theory, or a truer theory than others, of the state of the world–is not
the point.
She can't. She's his staffer (on the Senate Budget Committee) so she is now allowed to work on the campaign. It would be a
big ethics violation and would produce a scandal. Staffers cannot work on any of their bosses campaigns, including re-elections.
Remember, they are government employees, not on Sanders' personal payroll.
My old party has worked hard to try discredit James Galbraith. I was faced with some ridicule from a Bush era international
negotiator for trying to read "The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too" in
an airport waiting area.
To me, too many of the supposed (and actual) intellectuals and high level advisers were experts in rationalizing and explaining
the chosen party views, but still employed the Cato Institute suggestion to use "Leninist" propaganda techniques as put forth
in the 1996 Newt Gingrich/Frank Luntz GoPac memo, "Language: A Key Mechanism of Control."
I don't oppose them (at that level) expressing their well thought out views, even using the "persuasive" techniques described
in the document at http://www.informationclearinghouse.info/article4443.htm
but I do fault them for trying to prevent people from freely exploring far more comprehensive information and views.
We left the party ancestors had founded and stayed loyal to for 5 generations, though, because of the lower level dirty tricksters
("opposition researchers") that wanted us to corrupt the processes as one fund raiser told me, "We have to fight dirtier than
Democrats."
Galbraith is a voice that must be listened to, just as there may be many others that we should be able to listen to (as I assume
we could have under the old "Fairness Doctrine" before the corporate take over of almost all fully accessible media).
stg Galbraith said casually about the thesis of his new book: This really is the new normal for capitalism – meaning low
growth – because there is not much growth left. So maybe we are headed for a no growth world in which stability and sustainability
dictate enterprise which is used to maintain a steady state – so that sounds more socialist than capitalist out of necessity.
I believe this is our future too. And I think I understand Varoufakis' and Galbraith's "modest proposal" in a clearer light because
growth must be used going forward not willy-nilly, but to achieve our ends. And also too – a while back the link that effectively
said we had it backwards when we assume that capitalism supports socialism – because capitalism in reality lives off and is only
possible under sufficient socialism. And it seems the 4 presidential advisors are more out to lunch than their letter showed.
Can't respond to all the nonsense. I just read Wolfer's piece and it seems to miss the point (as with the Romers), as noted
in the following 2 articles. I especially recommend the 2nd one from John Cassidy in the New Yorker.
as usual, i hear a lot "they" failed conservatism, never, Conservatism is just the age old avenue to "scam" the other. Bush
"failed" at conservatism, i.e., it was Bush's fault not the ideology of Conservatism. on and on, this self repeated/reinforced
"idea" that we have just not "found" the correct "application" of the ideal/reality that is Conservatism.
it does get old, too. all the people killed due to Conservatism and its' perpetrators. Greed, in other words, and the age old
scam with "new and improved" tactics. These people have no concept of what "society" is, why we are all interrelated. to scam
one is to scam us all. and these people are definitely not Christian in the "Jesus Christ" i've always heard about. Whatsoever
you do unto the poor, you do unto me!
i just suppose psychopaths use any avenue for their "crimes." as i've heard, too, any great fortune is usually the result of
a great crime.
"... "China is the world leader in payments made by mobile devices", ..."
"... Financial Times ..."
"... Financial Times ..."
"... Financial Times ..."
"... 80% recognize that the Congress is dysfunctional and 86% believe that Washington is dishonest. Never has an empire of such limitless power crumbled and declined with so few accomplishments. ..."
Lumpen Capitalism refers to an economic system in which the financial and military sector
exploits the state treasury and productive economy for the 1% of the population.)
Introduction
US journalists and commentators, politicians and Sinologists spend considerable time and space
speculating on the personality of China's President Xi Jinping and his appointments to the leading
bodies of the Chinese government, as if these were the most important aspects of the entire 19th
National Congress of the Communist Party of China (October 18-24, 2017) .
(The 19th National Congress was attended by 2,280 delegates representing 89 million members.)
Mired down in gossip, idle speculation and petty denigration of its leaders, the Western press
has once again failed to take account of the world-historical changes which are currently taking
place in China and throughout the world.
World historical changes, as articulated by Chinese President Xi Jinping, are present in the vision,
strategy and program of the Congress. These are based on a rigorous survey of China's past, present
and future accomplishments.
The serious purpose, projections and the presence of China's President stand in stark contrast
to the chaos, rabble-rousing demagogy and slanders characterizing the multi-billion dollar US Presidential
campaign and its shameful aftermath.
The clarity and coherence of a deep strategic thinker like President Xi Jinping contrasts to the
improvised, contradictory and incoherent utterances from the US President and Congress. This is not
a matter of mere style but of substantive content.
We will proceed in the essay by contrasting the context, content and direction of the two political
systems.
China: Strategic Thinking and Positive Outcomes
China, first and foremost, has established well-defined strategic guidelines that emphasize macro-socio-economic
and military priorities over the next five, ten and twenty years.
China is committed to reducing pollution in all of its manifestations via the transformation of
the economy from heavy industry to a high-tech service economy, moving from quantitative to qualitative
indicators.
Secondly, China will increase the relative importance of the domestic market and reduce its dependence
on exports. China will increase investments in health, education, public services, pensions and family
allowances.
Thirdly, China plans to invest heavily in ten economic priority sectors. These include computerized
machinery, robotics, energy saving vehicles, medical devices, aerospace technology, and maritime
and rail transport. It targets three billion (US) dollars to upgrade technology in key industries,
including electrical vehicles, energy saving technology, numerical control (digitalization) and several
other areas. China plans to increase investment in research and development from .95% to 2% of GDP.
Moreover, China has already taken steps to launch the 'petro-Yuan', and end US global financial
dominance.
China has emerged as the world's leader in advancing global infrastructure networks with its One
Belt One Road (Silk Road) across Eurasia. Chinese-built ports, airports and railroads already connect
twenty Chinese cities to Central Asia, West Asia, South-East Asia, Africa and Europe. China has established
a multi-lateral Asian Infrastructure Investment Bank (with over 60 member nations) contributing 100
billion dollars for initial financing.
China has combined its revolution in data collection and analysis with central planning to conquer
corruption and improve the efficiency in credit allocation. Beijing's digital economy is now at the
center of the global digital economy. According to one expert, "China is the world leader in
payments made by mobile devices", (11 times the US). One in three of the world's start-ups,
valued at more than $1 billion, take place in China ( FT 10/28/17, p. 7). Digital technology
has been harnessed to state-owned banks in order to evaluate credit risks and sharply reduce bad
debt. This will ensure that financing is creating a new dynamic flexible model combining rational
planning with entrepreneurial vigor (ibid).
As a result, the US/EU-controlled World Bank has lost its centrality in global financing. China
is already Germany's largest trading partner and is on its way to becoming Russia's leading trade
partner and sanctions-busting ally.
China has widened and expanded its trade missions throughout the globe, replacing the role of
the US in Iran, Venezuela and Russia and wherever Washington has imposed belligerent sanctions.
While China has modernized its military defense programs and increased military spending, almost
all of the focus is on 'home defense' and protection of maritime trade routes. China has not engaged
in a single war in decades.
China's system of central planning allows the government to allocate resources to the productive
economy and to its high priority sectors. Under President Xi Jinping, China has created an investigation
and judicial system leading to the arrest and prosecution of over a million corrupt officials in
the public and private sector. High status is no protection from the government's anti-corruption
campaign: Over 150 Central Committee members and billionaire plutocrats have fallen. Equally important,
China's central control over capital flows (outward and inward) allows for the allocation of financial
resources to high tech productive sectors while limiting the flight of capital or its diversion into
the speculative economy.
As a result, China's GNP has been growing between 6.5% – 6.9% a year – four times the rate of
the EU and three times the US.
As far as demand is concerned, China is the world's biggest market and growing. Income is growing
– especially for wage and salaried workers. President Xi Jinping has identified social inequalities
as a major area to rectify over the next five years.
The US: Chaos, Retreat and Reaction
In contrast, the United States President and Congress have not fashioned a strategic vision for
the country, least of all one linked to concrete proposals and socio-economic priorities, which might
benefit the citizenry.
The US has 240,000 active and reserve armed forces stationed in 172 countries. China has less
than 5,000 in one country – Djibouti. The US stations 40,000 troops in Japan, 23,000 in South Korea,
36,000 in Germany, 8,000 in the UK and over 1,000 in Turkey. What China has is an equivalent number
of highly skilled civilian personnel engaged in productive activity around the world. China's overseas
missions and its experts have worked to benefit both global and Chinese economic growth.
The United States' open-ended, multiple military conflicts in Afghanistan, Iraq, Syria, Libya,
Yemen, Niger, Somalia, Jordan and elsewhere have absorbed and diverted hundreds of billions of dollars
away from productive investments in the domestic economy. In only a few cases, military spending
has built useful roads and infrastructure, which could be counted a 'dual use', but overwhelmingly
US military activities abroad have been brutally destructive, as shown by the deliberate dismemberment
of Yugoslavia, Iraq and Libya.
The US lacks the coherence of China's policy making and strategic leadership. While chaos has
been inherent in the politics of the US 'free market' financial system, it is especially widespread
and dangerous during the Trump regime.
Congressional Democrats and Republicans, united and divided, actively confront President Trump
on every issue no matter how important or petty. Trump improvises and alters his policies by the
hour or, at most, by the day. The US possesses a party system where one party officially rules in
the Administration with two militarist big business wings.
US has been spending over 700 billion dollars a year to pursue seven wars and foment 'regime changes'
or coups d'état on four continents and eight regions over the past two decades. This has only caused
disinvestment in the domestic economy with deterioration of critical infrastructure, loss of markets,
widespread socioeconomic decline and a reduction of spending on research and development for goods
and services.
The top 500 US corporations invest overseas, mainly to take advantage of low tax region and sources
of cheap labor, while shunning American workers and avoiding US taxes. At the same time, these corporations
share US technology and markets with the Chinese.
Today, US capitalism is largely directed by and for financial institutions, which absorb and divert
capital from productive investments, generating an unbalanced crisis-prone economy. In contrast,
China determines the timing and location of investments as well as bank interest rates, targeting
priority investments, especially in advanced high-tech sectors.
Washington has spent billions on costly and unproductive military-centered infrastructure (military
bases, naval ports, air stations etc.) in order to buttress stagnant and corrupt allied regimes.
As a result, the US has nothing comparable to China's hundred-billion-dollar 'One Belt-One Road'
(Silk Road) infrastructure project linking continents and major regional markets and generating millions
of productive jobs.
The US has broken global linkages with dynamic growth centers. Washington resorts to self-defecating,
mindless chauvinistic rhetoric to impose trade policy, while China promotes global networks via joint
ventures. China incorporates international supply linkages by securing high tech in the West and
low cost labor in the East.
Big US industrial groups' earnings and rising stock in construction and aerospace are products
of their strong ties with China. Caterpillar, United Technologies 3M and US car companies reported
double-digit growth on sales to China.
In contrast, the Trump regime has allocated (and spent) billions in military procurement to threaten
wars against China's peripheral neighbors and interfere with its maritime commerce.
US Decline and Media Frenzy
The retreat and decline of US economic power has driven the mass media into a frenzy of idiotic
ad hominem assaults on China's political leader President Xi Jinping. Among the nose pickers in print,
the scribes of the Financial Times take the prize for mindless vitriol. Mercenaries and
holy men in Tibet are described as paragons of democracy and 'victims' of a flourishing modernizing
Chinese state lacking the 'western values' (sic) of floundering Anglo-American warmongers!
To denigrate China's system of national planning and its consequential efforts to link its high
tech economy with improving the standard of living for the population, the FT journalists
castigate President Xi Jinping for the following faults:
For not being as dedicated a Communist as Mao Zedong or Deng Xiaopeng For being too 'authoritarian'
(or too successful) in his campaign to root out corrupt officials. For setting serious long-term
goals while confronting and overcoming economic problems by addressing the 'dangerous' level of debt.
While China has broadened its cultural horizon, the Anglo-Saxon global elite increases possibility
of nuclear warfare. China's cultural and economic outreach throughout the world is dismissed by the
Financial Times as 'subversive soft power'. Police-state minds and media in the West see
China's outreach as a plot or conspiracy. Any serious writer, thinker or policymaker who has studied
and praised China's success is dismissed as a dupe or agent of the sly President Xi Jinping. Without
substance or reflection, the FT (10/27/17) warns its readers and police officials to be
vigilant and avoid being seduced by China's success stories!
China's growing leadership in automobile production is evident in its advance towards dominating
the market for electric vehicles. Every major US and EU auto company has ignored the warnings of
the Western media ideologues and rushed to form joint ventures with China.
China has an industrial policy. The US has a war policy. China plans to surpass the US and Germany
in artificial intelligence, robotics, semi-conductors and electric vehicles by 2025. And it will
-- because those are its carefully pronounced scientific and economic priorities.
Shamelessly and insanely, the US press pursues the expanding stories of raging Hollywood rapists
like the powerful movie mogul, Harvey Weinstein, and the hundreds of victims, while ignoring the
world historic news of China's rapid economic advances.
The US business elites are busy pushing their President and the US Congress to lower taxes for
the billionaire elite, while 100 million US citizens remain without health care and register decreased
life expectancy! Washington seems committed to in State-planned regression.
As US bombs fall on Yemen and the American taxpayers finance the giant Israeli concentration camp
once known as 'Palestine', while China builds systems of roads and rail linking the Himalayas and
Central Asia with Europe.
While Sherlock Holmes applies the science of observation and deduction, the US media and politicians
perfect the art of obfuscation and deception.
In China, scientists and innovators play a central role in producing and increasing goods and
services for the burgeoning middle and working class. In the US, the economic elite play the central
role in exacerbating inequalities, increasing profits by lowering taxes and transforming the American
worker into poorly-paid temp-labor – destined to die prematurely of preventable conditions.
While Chinese President Xi Jinping works in concert with the nation's best technocrats to subordinate
the military to civilian goals, President Trump and his Administration subordinate their economic
decisions to a military-industrial-financial-Israeli complex. Beijing invests in global networks
of scientists, researchers and scholars. The US 'opposition' Democrats and disgruntled Republicans
work with the giant corporate media (including the respectable Financial Times ) to fund
and fabricate conspiracies and plots under Trump's Presidential bed.
Conclusion
China fires and prosecutes corrupt officials while supporting innovators. Its economy grows through
investments, joint ventures and a great capacity to learn from experience and powerful data collection.
The US squanders its domestic resources in pursuing multiple wars, financial speculation and rampant
Wall Street corruption.
China investigates and punishes its corrupt business and public officials while corruption seems
to be the primary criteria for election or appointment to high office in the US. The US media worships
its tax-dodging billionaires and thinks it can mesmerize the public with a dazzling display of bluster,
incompetence and arrogance.
China directs its planned economy to address domestic priorities. It uses its financial resources
to pursue historic global infrastructure programs, which will enhance global partnerships in mutually
beneficial projects.
It is no wonder that China is seen as moving toward the future with great advances while the US
is seen as a chaotic frightening threat to world peace and its publicists as willing accomplices.
China is not without shortcomings in the spheres of political expression and civil rights. Failure
to rectify social inequalities and failure to stop the outflow of billions of dollars of illicit
wealth, and the unresolved problems with regime corruption will continue to generate class conflicts.
But the important point to note is the direction China has chosen to take and its capacity and
commitment to identify and correct the major problems it faces.
The US has abdicated its responsibilities. It is unwilling or unable to harness its banks to invest
in domestic production to expand the domestic market. It is completely unwilling to identify and
purge the manifestly incompetent and to incarcerate the grossly corrupt officials and politicians
of both parties and the elites.
Today overwhelming majorities of US citizens despise, distrust and reject the political elite.
Over 70% think that the inane factional political divisions are at their greatest level in over 50
years and have paralyzed the government.
80% recognize that the Congress is dysfunctional and 86% believe that Washington is dishonest.
Never has an empire of such limitless power crumbled and declined with so few accomplishments.
China is a rising economic empire, but it advances through its active engagement in the market
of ideas and not through futile wars against successful competitors and adversaries. As the US declines,
its publicists degenerate.
The media's ceaseless denigration of China's challenges and its accomplishments is a poor substitute
for analysis. The flawed political and policy making structures in the US and its incompetent free-market
political leaders lacking any strategic vision crumble in contrast to China's advances.
"... By Dániel Oláh, a macroeconomic analyst at Hungary's Ministry for National Economy, Forecasting and Modeling Unit. He received his master's degree in economics from Central European University. Originally published at Evonomics . ..."
"... But what if modeling is just an euphemism for modern ideologies? Think of the efforts of neoclassical macroeconomics – for instance, DSGE models – to find the philosophical notion of equilibrium, irrespective of the non-equilibrium nature of the real world, let alone income inequalities. (But also think of Mannheim's paradox that the critique of an ideology – like this article – is also ideological.) ..."
"... Hayek's model was working as an ideology in real life, not at all different from that of the Soviet side. At least we get this impression if we take a look at the cartoon version of Hayek's Road to Serfdom ..."
"... So, Hayek's well-written piece of social philosophy was turned into a black-and-white, stylized world, where keeping the wartime planning roles of the government deterministically leads to the planning of thinking, recreation and disciplining of all individuals. ..."
"... The support for neoliberal policies by one of the largest companies presents how economic theory is embraced – and transformed – by the big business in the 20 th century. ..."
"... The intellectual revolution against the state was building on several new theories, arguing for the ineffectiveness of economic policies. These theories were needed to convince academicians of the intellectual merits of neoclassical economics, allowing them to sympathesize with the neoliberal framework. Milton Friedman argued that active discretionary fiscal and monetary policies are harmful or ineffective because of timing problems among others. As for fiscal policy, the permanent income hypothesis also tried to argue that short-term demand management is ineffective because if they think it to be temporary people save their additional income from the government instead of spending it. New classical macroeconomics was building on the Ricardian equivalence theory to show the same – that a temporary tax cut won't boost consumption, since people know that they have to cover the costs of that policy later. Friedman also explained the new phenomena of stagflation, stating that people adjust their expectations so that an increasing money supply results in only higher inflation, but unemployment remains the same. ..."
"... But this leads to the main paradox of neoliberalism. Its economic system needs a strong state, even at the expense of constraining democracy, to guarantee property rights and the working of the free market, while actively maintaining the rule of neoliberal social philosophy. At the same time some of its proponents tend to dismiss strong states (Mirowski, 2013). In fact, laissez faire was the last thing neoliberals wanted to achieve. This paradoxical stance towards the state led Milton Friedman, the policy entrepreneur to become an advisor of the Chilean dictator, Augusto Pinochet to transform Chile into a policy playground. ..."
"... The Road to Serfdom ..."
"... "I share all your worries and concerns as expressed in The Road to Serfdom and I'm going to go into politics and put it all right." ..."
"... "No you're not! Society's course will be changed only by a change in ideas. First you must reach the intellectuals, the teachers and writers, with reasoned argument. It will be their influence on society which will prevail, and the politicians will follow" (Hayek, 2001: p. 19) . ..."
"... Without Fisher, no IEA; without the IEA and its clones, no Thatcher and quite possibly no Reagan; without Reagan, no Star Wars; without Star Wars, no economic collapse of the Soviet Union. Quite a chain of consequences for a chicken farmer! ..."
"... The neoliberal ideology was successful from the perspective of the big business. The eighties is marked by the start of declining wage shares all over the world, as the distribution of produced added value reflected the strenghtening of global capital. ..."
"... Source: Haldane (2015) ..."
"... The point for neoliberalism is not to make a model that is more adequate to the real world, but to make the real world more adequate to its model ..."
But this leads to the main paradox of neoliberalism. Its economic system needs a strong
state, even at the expense of constraining democracy, to guarantee property rights and the
working of the free market, while actively maintaining the rule of neoliberal social
philosophy. At the same time some of its proponents tend to dismiss strong states (Mirowski,
2013). In fact, laissez faire was the last thing neoliberals wanted to achieve. This
paradoxical stance towards the state led Milton Friedman, the policy entrepreneur to become
an advisor of the Chilean dictator, Augusto Pinochet to transform Chile into a policy
playground.
If there should be "markets in everything," it follows there should be markets in selling
off bits of the state. That works until it doesn't, as (I would argue) the Tory heirs of Maggie
Thatcher are discovering.
By Dániel Oláh, a macroeconomic analyst at Hungary's Ministry for National
Economy, Forecasting and Modeling Unit. He received his master's degree in economics from
Central European University.
Originally published at Evonomics .
Social classes have always embraced ideas and social philosophies. Not only to understand
and interpret the real world, but most importantly to change it to their benefit. These
theories (primarily in social science) have become beweaponed ideas called ideologies, as they
are used to influence rather than to understand the human universe. Of course the two are
related: the nature of our understanding, i.e. what we consider important and what we leave out
from our theoretical framework, is called modelling.
But what if modeling is just an euphemism for modern ideologies? Think of the efforts of
neoclassical macroeconomics – for instance, DSGE models – to find the philosophical
notion of equilibrium, irrespective of the non-equilibrium nature of the real world, let alone
income inequalities. (But also think of Mannheim's paradox that the critique of an ideology
– like this article – is also ideological.)
The great Austrian economist Friedrich Hayek didn't favor mathematical modeling, but he had
clear philosophical models in his head. One of his most famous statements is related to the
slippery road to dictatorships: if you introduce a little bit of state involvement in the
economy, you have already stepped on this messy road to serfdom. The main intention of this
model was to call for action and to raise awareness against the increasing governments in an
era when the battle between the West and the East hadn't yet been decided.
Hayek's model was working as an ideology in real life, not at all different from that of
the Soviet side. At least we get this impression if we take a look at the cartoon
version of Hayek's Road to Serfdom . This was his main work on social philosophy
and economics, arguing for individualism and liberalism. Hayek's argumentation in defense of a
minimal state was so powerful that General Motors decided to sponsor the production of the
comic version.
So, Hayek's well-written piece of social philosophy was turned into a black-and-white,
stylized world, where keeping the wartime planning roles of the government deterministically
leads to the planning of thinking, recreation and disciplining of all individuals.
The support for neoliberal policies by one of the largest companies presents how
economic theory is embraced – and transformed – by the big business in the 20
th century.
Theoretical Innovations as Part of an Anti-State Ideology
The Keynesian era lasted for a long time, providing stability and increasing real wages for
workers. In the seventies, a seismic paradigm shift happened with the returning of
pre-Keynesian neoclassical ideas. Roger E. Backhouse (2005) took the numerous
reasons for this change into account. The period of full employment lasted for so long that it
was easy to forget that it wasn't a natural order, but the result of conscious policies. In
this world, the disadvantages of the market was hidden by active governments, which opened the
possibility to turn the critical attention towards the state. Especially in the wake of the new
economic crisis that brought stagflation. Keynesian economics wasn't prepared for such new
economic environment just like its neoclassical counterpart was shocked by the 1929 crisis.
The intellectual revolution against the state was building on several new theories,
arguing for the ineffectiveness of economic policies. These theories were needed to convince
academicians of the intellectual merits of neoclassical economics, allowing them to
sympathesize with the neoliberal framework. Milton Friedman argued that active discretionary
fiscal and monetary policies are harmful or ineffective because of timing problems among
others. As for fiscal policy, the permanent income hypothesis also tried to argue that
short-term demand management is ineffective because if they think it to be temporary people
save their additional income from the government instead of spending it. New classical
macroeconomics was building on the Ricardian equivalence theory to show the same – that a
temporary tax cut won't boost consumption, since people know that they have to cover the costs
of that policy later. Friedman also explained the new phenomena of stagflation, stating that
people adjust their expectations so that an increasing money supply results in only higher
inflation, but unemployment remains the same.
These theories traced the stagflation phenomena back to policy errors of the government. The
rational expectations hypothesis argued that economic policy can't fool people for long since
citizens use all new available information rationally when they react to activist government
policies. The time inconsistency of governments also meant that discretionary policies may lead
to economic harm, so long-term, rule-based policies and commitment to these will be credible
and efficient.
Another direction of theories focused directly on the sins of politicians and the
government. Public choice theories applied the standard economic theories to politicians and
politics, desanctualizing the sphere of politics and transforming it to the area of market
forces, emphasizing that decision makers are also just as rational self-interested actors as
everyone else. The conclusion was that we can't expect politicians to determine and follow the
public interest. It's better to restrict them as much as we can – argues James M.
Buchanan, Gordon Tullock and George Stigler, who were committed members of the Hayekian,
neoliberal Mont Pelerin Society, the cradle of neoliberalism founded in 1947. Tullock developed
another theory as well: the concept of rent-seeking to call the attention to the capture of the
state by interest groups.
In parallel, new macroeconomic models, like most versions of the real-business cycle theory,
visioned an economy where the government has no role to play any more: economic fluctuations
don't mean that there is a problem with the economy. No government, no cry (and always
equilibrium) – sings the RBC model of the time.
Neoclassical theorists offered an alternative: the introduction of market forces and
property rights in all walks of life. Eugene Fama developed the efficient market hypothesis in
Chicago, meaning that prices on the financial market always reflect all relevant, available
information. The implication is that the market should be left to itself, allowing company
managers to maximize shareholder value for the sake of the whole economy. The impossibility
theorem of Kenneth Arrow also proved that the perfect, general economic equilibrium exists,
which implies the efficiency of competitive markets.
Arrow developed his theories at RAND Corporation, the Cold War think tank established by the
US government, which was a main actor on the theoretical battlefield between the US and the
Soviet Union. As Sonja Amadae (2003) argues, several of the
theories mentioned above – the rational choice framework – provided the theoretical
empowerment of Western liberal democracy with a limited state. She shows that there was
considerable governmental efforts in the US after World War II to create new ideas, proving the
validity and superiority of liberal democracy in a world where socialist planning was admired
also by Western intellectuals and societies.
It's not surprising that Francis Fukuyama, who was also a member of RAND Corporation, made
the political statement in 1989 that the liberal democracy with its neoliberal economic system
is the best and final one in our history.
Empowered Ideas in Action
The Keynesian era was ended by an economic crisis, but also by political factors. The big
business wanted to achieve a policy change because labor gained strong political positions
between 1950 and 1970 (Harvey, 2007). Keynesian employment policies provided strong power to
labor unions, which were primary allies in determining economic policies. But this led to the
decrease of profit rates. A new globalization, based on the neoliberal thought collective was
the reaction of business to its relatively marginalized position in governance to increase its
bargaining power (Backhouse, 2005 ; Skidelsky, 2010).
And business groups strongly supported the intellectual revolution (Mirowski & Plehwe
2009), which created the attracting utopia of the market, where the government is a needless
actor. In this world, the entrepreneur is the value-creating hero, a completely perfect
economic actor, and needs to be strongly supported – by a passive and small state, and
also by the rest of the society.
But this leads to the main paradox of neoliberalism. Its economic system needs a strong
state, even at the expense of constraining democracy, to guarantee property rights and the
working of the free market, while actively maintaining the rule of neoliberal social
philosophy. At the same time some of its proponents tend to dismiss strong states (Mirowski,
2013). In fact, laissez faire was the last thing neoliberals wanted to achieve. This
paradoxical stance towards the state led Milton Friedman, the policy entrepreneur to become an
advisor of the Chilean dictator, Augusto Pinochet to transform Chile into a policy
playground.
The paradox appears when Hayek accepts sponsorship of General Motors. This is so, because he
was the main opposition to any kind of planning in the economy. These issues were known by the
core intelligentsia of the Mont Pelerin Society – as Mirowski
(2013) argues –, but weren't communicated through the media. The communication that
the society is a theoretical descendant of the classical school was clearly false.
This paradox didn't prevent the Hayekian thought collective to become an ideology. They
declared that the main objective was to change the way people think: the main goal of the
society wasn't to develop scientific theories – many different schools of thought were
represented in the society – but to save and promote values they believe in. The
conscious strategy to become the mainstream was a distinctive feature of the neoliberals.
The appearance of the successful businessmen Antony Fisher symbolized how the big business
embraced neoliberal ideas. He was amazed by The Road to Serfdom , so much that he
approached Hayek in 1945 at the London School of Economics. Just like David Ricardo more than
hundred years before, Fisher wanted to go into politics to influence policy.
Fisher commented to Hayek:
"I share all your worries and concerns as expressed in The Road to Serfdom and I'm going
to go into politics and put it all right."
The response of Hayek was:
"No you're not! Society's course will be changed only by a change in ideas. First you
must reach the intellectuals, the teachers and writers, with reasoned argument. It will be
their influence on society which will prevail, and the politicians will follow"
(Hayek, 2001: p. 19) .
Although eight society members won Nobel prize in economics, the society hadn't set high
academic standards for its members in order to attract representatives of the big business and
other influencers.
To change the ideas of the public, neoliberals created a theoretical building of several
floors. The basis is the methodology of positive economics, upon which the economic theories
rest. And the final floor is the neoliberal ideology – as Claude Hillinger
(2006) argues (this is what Mirowski
(2013) calls a Russian doll).
Milton Friedman and George Stigler – with the help of corporate and political support
– found the adequate tool to empower their ideas, which was the network of think-tanks,
the use of scholarships provide by them, and the intensive use of media. This think-tank
network wasn't for creating new ideas, but for being a gatekeeper and disseminating the
existing set of ideas, and the „philosophy of freedom". Not only Backhouse (2005) ,
but also Adam Curtis (2011) , the British
documentary film-maker also researched how Fisher created his global think-tank network,
spreading the libertarian values of individual and economic – but never social and
political – freedom, and also the freedom for capital owners from the state.
According to Curtis (2011) , the
„ideologically motivated PR organisations" intended to achieve a technocratic, elitist
system, which preserves actual power structures. As he notes, the successful businessmen
created The Atlas Economic Research Foundation in 1981, which established 150 think-tanks
around the globe. These institutions were set up based on the model of Institute for Economic
Affairs (IEA), a think tank founded in 1955 by Fisher, which is a good example how the
marginalized group of neoliberal thinkers got into intellectual and political power. Today,
"more than 450 free-market organizations in over 90 countries" serve the "cause of liberty" through the network. The network of
Fisher was largely directed by the members of Mont Pelerin Society (Djelic, 2014).
So we could add an imaginary upper floor to the neoliberal building, through which the
commentators of seemingly independent think tanks represented very similar ideas –
without informing the public that in terms of ideologies, it's not free to choose. At the same
time, as Mirowski
(2013) shows, the network promoted itself towards investors arguing that companies should
invest in the production of transformative ideas, becoming policy products for final
consumption in the end. (These investors are called edupreneurs by Rob Johnson (
2017 ), who gives a
revealing account of how philantrophists recreated the new parton-client model of the
Renaissance in modern science.)
The second-hand dealers of ideas could indeed make a political difference. As Oliver Letwin
British MP argued :
" Without Fisher, no IEA; without the IEA and its clones, no Thatcher and quite possibly no
Reagan; without Reagan, no Star Wars; without Star Wars, no economic collapse of the Soviet
Union. Quite a chain of consequences for a chicken farmer! ".
Achieving a Successful Upward Redistribution
The neoliberal ideology was successful from the perspective of the big business. The
eighties is marked by the start of declining wage shares all over the world, as the
distribution of produced added value reflected the strenghtening of global capital. These
years also meant the start of opening of the real wage-productivity
gap , resulting in a previously unseen phenomena, the stagnating incomes of the middle
class. At the same time, as a result of tax decreases inspired by the neoliberal political
program the income of the top 10 percent started to increase dramatically in Great Britain and
in the US, which were the homeland of the neoliberal counterrevolution (Alvaredo et al., 2013;
Piketty-Saez, 2014).
Source: Haldane (2015)
The policy mistakes, arising from the philosophical and ideological nature of the neoliberal
economics to achieve deregulation, were reflected in the increasing number of financial and
economic crises. Margaret Thatcher, who once contributed to the development of libertarian
think-tanks personally, having seen the soaring unemployment rates despite the implementation
of neoliberal set of policies, argued in 1985 that she never believed in monetarist theories.
The Washington Consensus, based on static neoclassical economics, turned a blind eye to the
dynamic phenomena of institutions, thus contributed to the deep recessions in post-socialist
countries in Central Europe. " The point for neoliberalism is not to make a model that is
more adequate to the real world, but to make the real world more adequate to its model "
– argues Simon Clarke (2005) . Meanwhile,
according to David Colander
(2004) , neoliberal economics reversed the attitude of classical thinkers, concluding that
markets are the best, while their predecessors in the 18-19 th centuries were
stating that markets are the least of all evils.
Neoliberalism created the (econo)mist of scientism and economism, decreasing pluralism in
economics. These mechanisms to indoctrinate young scholars into the simplistic but often
irrelevant models are needed to stabilize the scientific paradigm and the social-economic
system built on it (
Earle et. al, 2016 ; Kwak, 2016 ).
This distinctive feature of this system – as Dean Baker (2016) shows – is the protectionism of the
capital owners and the maintenance of upward redistribution towards them, at the expense of
wage growth of the labor force – this is why neoliberalism needs to capture the
state.
But what is behind the neoliberal (econo)mist? Let's hope that it's not the road to
serfdom.
He surely meant "patron-client" relationships, which were very important to science in
Europe the 16th-19th centuries when there were no funding agencies of the kind we have today,
such as NSF, NIH, etc. It's a bit disheartening to think that we are moving back in that
direction.
In the seventies, a seismic paradigm shift happened with the returning of pre-Keynesian
neoclassical ideas.
The "Backhouse (2005)" link in the first paragraph of the section "Theoretical Innovations
as Part of an Anti-State Ideology" is no longer valid. Although its 2009 publication shows
it's not the precise article Oláh cites, it appears that this article
by the same author nicely summarizes the same material . It's an interesting read and not
too long given the history it covers.
From that perspective, all one has to do is look at the gross failures of the 'econometric
models' that neoliberal economists embraced.
Exhibit A is those economists who ran around in the early 1990s waving the output of
econometric models that 'proved' that NAFTA would raise wages and living standards for
workers in both Mexico and the United States.
Exhibit B is those economists who promoted deregulation of the California electricity
market in the late 1990s, again based on neoliberal ideas such as the one cited in the
article: The impossibility theorem of Kenneth Arrow also proved that the perfect, general economic
equilibrium exists, which implies the efficiency of competitive markets.
Exhibit C is deregulation of the financial industry in the late 1990s, elimination of
Glass-Steagall rules on separation of investment and commercial banking, which set the stage
for the 2008 economic collapse, again based on neoliberal economic ideology.
The conclusion, really, is that today's academic economic discipline is highly flawed
– it is barely descriptive, with zero predictive value. The above quote about the
'impossibility theorem' – this is the kind of thing that ecological sciences examined
and dispensed with many decades ago. For example, theories about 'ecological equilibrium'
gave rise to fire suppression strategies; today ecologists recognize these were flawed, that
natural disturbances (fire, landslides, etc.) are a fundamental feature of ecological
systems.
Incidentally, isn't this why economists are sequestered away in business departments in
academic system, so that they don't have to face real scientific criticism? Econometric
modeling is nothing but garbage based on false assumptions – but how many academic
economic careers are built on such dissertations?
Exhibit A is those economists who ran around in the early 1990s waving the output of
econometric models that 'proved' that NAFTA would raise wages and living standards for
workers
That's the objective of a well paid economist. Produce the correct form of mumbo-jumbo
which suits you clients' end, and retire into a well paid environment, such as President of
Harvard.
Economics is for "might makes right," not about truth in the "scientific method"
sense.
But what is behind the neoliberal (econo)mist? Let's hope that it's not the road to
serfdom.
"Benevolent dictatorships" involoving some form of serfdom (actual or virtual) are the
norm through human history and can be quite stable and productive (England, various Chinese
dynasties, Italian city-states). Time will tell if present day benevolent dictatorships such
as Russia, China or Vietnam will also be. Non-benevolent dictatorships (Aztec, Mayan, Mongol,
Stalinist) did not. Syria is a toss-up, but illustrates the unpredictability of human
behavior; the govt there largely left you alone if you kept quiet (as opposed to the extreme
example of say N. Korea ), but look what happened.
Here in America the Neoliberal BeneDicta is Wall St/Global Cap, and the Young Turks of that
class (the Fang & other tech billionaires – and it is a class ) lead the
charge for the universal basic income, similar to free bread for Roman citizens 2000 years
ago. And is the universal hand-held device (free in America if you're poor), used primarily
for distraction, gossip and entertainment really all that different than free admission to
the Coluseum?
"But what if modeling is just an euphemism for modern ideologies?"
If the model is fuzzy, say 70 pages of words with signs of 2nd derivatives and no fixed
points, you can guarantee you're curve fitting and thus just mathematizing ideology.
If you give yourself a hard problem, with clear values and only a few words where you can
really check whether you're fooling yourself, then it's not. Ask Feynmann about this.
But a lot of economics papers look like the first -- I see pages and pages of words, then
a curve that would fit almost anything, then words and word, finally a few tables and an
exercise in curve fitting.
That's the issue with soft sciences -- people tend to cheat with math.
Ha Joon Chang wrote an exellent book, "Economics: The User's Guide" which has a few choice
quotes on that issue:
[Unquestioning acceptance of economic pronouncements] exists mainly because, especially
in the last few decades, people have been led to believe that, like physics or chemistry,
economics is a 'science', in which there is only one correct answer to everything; thus
non-experts should simply accept the 'professional consensus' and stop thinking about
it.
Economics can never be a science in the sense that physics or chemistry is. There are
many different types of economic theory, each emphasizing different aspects of complex
reality, making different moral and political value judgements and drawing different
conclusions. Moreover, economic theories constantly fail to predict real-world developments
even in areas on which they focus, not least because human beings have their own free will,
unlike chemical molecules or physical objects.
If we take ecology, for example, the recolonization of an area destroyed by volcanism,
it's very hard to predict the exact species composition that will eventually result. We
generally don't think of plants, insects, birds, etc. as having much 'free will', either. So
predicting what humans will do is clearly more difficult. A comparable economic problem is
what the recovery from war or depression will end up looking like. Anyone claiming to have
'hard mathematical forecasts' for such future outcomes – well, they're just trying to
sell you something. "We base everything on hard math" is just a marketing tactic. As Ha Joon
Chang further notes:
In the run-up to the 2008 economic crisis, the majority of the economics profession was
preaching to the world that markets are rarely wrong and that modern economics has found
ways to iron out those few wrinkles that markets may have; Robert Lucas, the 1995 winner of
the Nobel Prize in Economics [*the Sveriges Riksbank Prize in Economic Sciences in Memory
of Alfred Nobel] had declared in 2003 that the 'problem of depression prevention has been
solved.' So most economists were caught by surprise by the 2008 global financial crisis.
Not only that, they have not been able to come up with decent solutions to the ongoing
aftermaths of that crisis.
I would suggest they are engaging in a form of intellectual subterfuge. They know that a
pretentious sprinkling of math on anything tends to limit mainstream critique, and hardens
claims into "indisputable facts" (facts that, by implication, were arrived at with scientific
rigor as the guiding principle). Pull out a paper with some curves and formulas in it,
present its contents as "laws of economics" and yourself as an expert, then you've gone a
long way towards quietening dissent and extracting consent. It's when such unquestioning
consent comes from our ruling classes that we run into trouble.
Long ago when I took a course on the calculus of variations [a topic I never really
understood and never used -- but which I believe to be extremely important as an area of
knowledge and study -- one of many I regret having ignorance of] the professor -- in the
mathematics department -- often commented about how frequently he encountered bad mathematics
and false reasoning used in the mathematics he reviewed in economics papers -- papers he had
sometimes scoured looking for examples to use for the textbook he'd written [a truly
excellent textbook now available from Dover Books]. He said the economists seemed intent on
mis-using Hamiltonians where a more simple use of the calculus of variations [simple for him
-- ugh!] would have more easily provided an answer and also revealed the errors in their
models.
I see at least 3 internal contradictions or logical inconsistencies in the so called
neo-liberal policies.
1. State is essential to protect "the interests" , but not to the extent of promoting "the
rest". It is a delicate balancing act in framing the laws and regulations. Sometimes, these
laws come back to haunt "the interests" themselves. – unintended consequences.
2. interests of Oligopolies are to be protected as the cost of perfect competition –
in the name of free markets and market competition !!!
3. These policies result in monotonically increasing level of concentration of wealth and
power. The end result will be only a handful of people will ultimately own the entire wealth
in the world. The top 10 percenters will end up being losers to the top 1 percenters and the
top 1 percenters will also end up being losers to the top 0.1 percenters and so on. It is
like killing the goose laying the golden eggs.
Simplify -- the Market knows All. If at first policies fail -- build a better Market --
and if that requires the coercion of the State how is that a problem?
If the top 0.1 percenters own the entire wealth in the world -- how is that a problem? As
for geese laying golden eggs -- who cares as long as you have enough golden eggs to make all
the ducks stand in line and march to your songs.
Deflects blame, shifts criticism, and avoids responsibility. It's as factual as saying
"its god's will," and equally effective at dismissing any attempt for change.
"The impossibility theorem of Kenneth Arrow also proved that the perfect, general economic
equilibrium exists, which implies the efficiency of competitive markets."
Cite? I thought Arrow's impossibility proves that all general voting system can fail to
satisfy perfect justice, by his axioms of perfect justice for voting (transitivity, et al). I
don't see how that proves general economic equilibrium, given that in general most
theoretical systems fail to have a stable equilibrium -- steady state is an exception, not a
general condition. Or is there another Arrow's impossibility theorem?
Too much passive voice, a little shy on agency. Think tanks, for example, were not
"found", but created by the patrons of neoliberal academics, rather like taking their ribs
and forming new partners, whose utterances needn't survive the rigors and self-criticism of
traditional academic life.
As Mirowski and others contend at length, neoliberalism is a political tool for those
desiring the outcomes it espouses. A "self-regulating" market, a contradiction in terms, is a
market substantially controlled by its strongest actors. By neoliberal definition, that
excludes government. As Klein argues, its policy experiments sometimes had to be implemented
at the point of a gun (Friedmanites in Chile, Argentina, Brazil), owing to their consequences
being so obviously against the interests of so many.
Now that neoliberalism has become the established church, it will take a reformation to
dislodge it. The predictable response will be that we should follow a diet of worms.
The phrase "the road to serfdom" implies we are still on it. I suggest instead, that for
most people, we are already "there." We may not be "tied to the land" but we are tied to a
pre-existing "job," one that pays just enough to keep us alive and not too disgruntled. (If
you don't work, you don't eat. We can own land, but not enough to be self-sufficient.) The
option of living off the land no longer exists because all of the land is "owned" now. So,
like serfs, there is nowhere to go where the options are different. There is no road out of
serfdom. As much as the elites like to beat the drum of entrepreneurism and social mobility,
these things do not exist for huge swaths of our society.
Civilization was created so the many could serve the few. Civilizations were created by
religious elites and carried on by a coalition of religious coercion and physical coercion:
the basic equation was to get the "subjects" to produce a surplus which the elites would
confiscate so they could live (usually as lavishly as possible). Slavery and war were
upscaled to feed the system.
Has all of this changed because iPhones? I suggest not. Slavery still exists, wage slavery
exists, poverty is still prevalent, and the rich keep getting richer. Is this what
civilization is for? Any outside observer would have to conclude that any other goal for
civilization is not yet observable.
But advances in energy, nutrition, public health and other sciences have made life much
easier and actually occasionally enjoyable for untold millions whose ancestors were truly
dirt poor.
The question is, will the advances be enough to prevent violent revolution? England, Spain,
Japan, Argentina, Thailand dodged violent class-based revolution, while France, Russia,
China, Bolivia, Haiti, Vietnam, Cambodia and Iran did not. I don't think it's truly
predictable for a given society.
Re the above and yesterday's discussion of neoliberalism–while it's been a long time
I recall many of the arguments put forth by the Washington Monthly crowd who became the
journalistic spearhead for the revival of neoliberalism–Democratic party version.
Charlie Peters and his acolytes saw what they called neoliberalism as a reform movement. Some
had also been involved in Ralph Nader's consumer groups and the thrust was that large
institutions in both government and business had become ossified and inefficient. The Big
Three auto makers were the poster children for this with their exploding Pintos and low
quality cars made by supposedly indifferent but union protected laborers. From this
perspective the reduction of regulations was a way of encouraging competition that would make
entrenched bureaucracies accountable. Kahn's airline deregulation for example was promoted as
a boon that would benefit travelers by reducing airline ticket prices (and it did for a
time). I'm not sure the movement could simply be put down as a plot by business interests.
The Washington Monthly's Peters claimed to be an old style FDR liberal.
But as in Orwell's Animal Farm, the revolutionaries quickly became overlords and as
corrupt as the institutions they were criticizing. Many moved to Peretz' New
Republic -- not exactly a hotbed of idealism.
Perhaps the takeaway is that theories matter less than the quality of the individuals
involved. These days the leadership ranks of both parties and the academics who support them
very much need the boot.
This think-tank network wasn't for creating new ideas, but for being a gatekeeper and
disseminating the existing set of ideas, and the "philosophy of freedom".
Awareness of gatekeeper roles and their ramifications is one issue of grave concern to
many citizens. There are variations of the role playing in different parts of society whether
in the Ivory Tower, Think Tanks (self-designated with initial capitals), media or other
areas. Recently, that role in media has come under scrutiny as seen during and after the US
campaign and election. Who gets to control what appears as news, and will the NY Times
editorial board cede any of that, for example?
The increasing impact of social media in dissemination of information and use of
influencers represents a type of Barbarians at the Literal Gate. The boards and think tanks
won't easily relinquish their positions, any more than the gatekeepers of prior eras would
willingly do so.
This era is unsettling to the average person on the street, and particularly to those
living on the street, because they have been told one thing with certainty and gravitas and
then found out something else that was materially opposed. In the meantime, truth continues
to seek an audience.
The assertion you selected from today's post seems clearly false to me. The think-tank
organizations definitely create new ideas and often conflict with each other. Their topics
and views also tend to dominate discussions and steal the oxygen from outside ideas.
They are schools of agnotology flooding discussion of every policy with their "answers"
and contributing to the Marketplace of ideas.
As flora points out in yesterday's George Monbiot/Gaius Publius neoliberalism thread,
Hayek and Mieses grew up under Habsburg absolutism; Ayn Rand grew up under Romanov
absolutism. All that they knew of the actual non-theoretical experience of democracy and free
markets came from the insecurity of coming of age under the chaos of the collapse of those
two empires during the break to re-arm during 1919-1939 in what should be seen as a single
1914-1945 European war.
The founders of neoliberalism appear in these descriptions to suffer for a nostalgia for
pre-war absolutism that self-interested western capitalists have been happy anoint themselves
to fill. Their alien neoliberal ideology is nothing but absolutist-nostalgic garbage, shoved
down the throats of its victims via simplistic but well-funded propaganda. Neoliberalism's
false premise of the benevolence of the absolutism of wealth is quite literally the road to
serfdom for the rest of humanity.
The kleptocrats of the world are struggling to find a workable power sharing solution to
keep their rule intact. The power of the neoliberal order is that it has beguiled the masses
into believing that satisfying short term personal wants constitutes a meaningful social
order. The constant churn and turnover of consumer goods is the purpose of life instead of
participating in the construction and maintenance of lasting, stable social institutions and
customs. This is the culmination of turning citizens into consumers. It is a different form
of bondage and slavery. The perfect system of enslaving oneself.
The trouble with the neoliberal order its that the old tools in maintaining its power and
relevance are reaching limits. As technology democratizes the use of force, it is more
difficult to impose ones will. Also, as the weapons become more devastating, their use would
instantly disrupt the entire network supporting the political structure. Imagine the
consequence of a nuclear exchange. Neoliberalism needs an existing social structure upon
which to deploy its parasitic ideology and methods. As Michael Hudson aptly described in his
Killing the Host, once that social structure is weakened or destroyed, neoliberalism will be
incapable of functioning. It would have to become naked totalitarianism in order to
survive.
The question has always been how do you justify and deal with inequality. With human
stupidity, climate change, and planetary resource depletion bearing down on every society,
how that question is answered rises to the fore and cannot be papered over with greater reams
of propaganda. It seems we are once again on the verge of a truly Revolutionary era- like it
or not.
Since the 60s all of our Big Boondoggles like Star Wars were embezzlements. The neoliberal
mandate quoted above "The point for neoliberalism is not to make a model that is more adequate
to the real world, but to make the real world more adequate to its model" is pure hubris. And
it has finally run its course by serving us all up a big fat mess. It is very encouraging to
see this essay cite so many recent analysts. It's beginning to look like critical mass.
Most
of us are thinking about the stock market these days and anticipating a downturn if not a
crash. But what if they triggered a crash and nobody came? What if the stock market just
stagnates and sits there? The only buyer these days is the Fed but the Fed might refuse to
"expand its balance sheet". And in perfect circular logic, this prevents the stock market
from crashing because nobody's buying. And where does this leave neoliberal economies and
their governments? It will be a tad embarrassing. And also too what if nobody wants to become
a worked-to-death entrepreneur with a crappy idea just to make a profit and keep running the
squirrel wheel? We don't have to be a capitalist, socialist, or free market society at all.
The only thing we are required to be is just. Constitutionally.
I wish you were right that " the neoliberal order [is] reaching [its] limits" but I am
afraid your observation: "It would have to become naked totalitarianism in order to survive"
-- may be all too true and all too likely. I've been trying to come to grips with what a "
truly Revolutionary era- like it or not" -- could mean.
The Keynesian truth seems highly classified top secret material. That the first two
postulates of the Ricardian theory are flawed, should not be spoken of. Neo-liberal mantra
dictates life and evolution itself at some point, wealth dictates the ability to
procreate.
Unfortunately for the neo-liberal elite, the end of the "endless" expansionary period of
the "new" industrial age ( globalism ) has come, just as it had at the end of the development
of the United States. Demand, it seems, once again, can no longer equal supply. The reward (
wage unit ) no longer far outweighs the disutility of labor, no more is it marginal, and gone
is the efficiency of capital. The great casinos in the sky have crashed and burned, replaced
with a hollow shell of freedom, or perhaps it is only the lie of it. A rich man gambled
greatly on those casinos falling down and it is an even more rich man who gambles with him on
ever greater portions of real estate, blood, slavery and tax cuts. Perhaps savings indeed
should equal investment. Investment in our children and society. Critical thinking, our
greatest unit of trade value, even until disposable neo-liberal ideology has been washed away
by the ever changing tide of common sense.
Economic philosophies come down to questions of morals and ethics: what is 'good' and why;
what is 'bad' and why? (These questions often come down to the philosophical questions about
"the one and the many"*)
Some (brief) history of moral philosophy in business, or markets:
"Plato is known for his discussions of justice in the Republic, and Aristotle explicitly
discusses economic relations, commerce and trade under the heading of the household in his
Politics. His discussion of trade, exchange, property, acquisition, money and wealth have an
almost modern ring, and he makes moral judgments about greed, or the unnatural use of one's
capacities in pursuit of wealth for its own sake, and similarly condemns usury because it
involves a profit from currency itself rather than from the process of exchange in which
money is simply a means. .
"John Locke developed the classic defense of property as a natural right. For him, one
acquires property by mixing his labor with what he finds in nature.7 Adam Smith is often
thought of as the father of modern economics with his An Inquiry into the Nature and Causes
of the Wealth of Nations. Smith develops Locke's notion of labor into a labor theory of
value. In modern times commentators have interpreted him as a defender of laissez-faire
economics, and put great emphasis on his notion of the invisible hand. Yet the commentators
often forget that Smith was also a moral philosopher and the author of The Theory of Moral
Sentiments. For him the two realms were not separate."
-Dr. Richard T. DeGeorge
https://www.scu.edu/ethics/focus-areas/business-ethics/resources/a-history-of-business-ethics/
Now to this article:
"The great Austrian economist Friedrich Hayek didn't favor mathematical modeling, but he had
clear philosophical models in his head. One of his most famous statements is related to the
slippery road to dictatorships: ."
This is a moral claim or ethical claim: Dictatorships are bad.** Well, I accept that
statement. I judge dictatorships bad. I do not want a dictatorship oppressing me or my fellow
citizens for any reason.
Hayek feared oppression from an unchecked left, imo.
Again, from De George:
"Marx claimed that capitalism was built on the exploitation of labor. Whether this was for
him a factual claim or a moral condemnation is open to debate; but it has been taken as a
moral condemnation since 'exploitation' is a morally charged term and for him seems clearly
to involve a charge of injustice. Marx's claim is based on his analysis of the labor theory
of value, according to which all economic value comes from human labor." (ibid- from link
above)
No doubt the old USSR became despotic, supposedly in the name of ending exploitation of
labor. (Gulags?)
Back to Olah's paper and definitions. The following line could be rewritten to fit the
Marxist USSR moral claims with no loss in accuracy.
"But this leads to the main paradox of neoliberalism communism. Its
economic system needs a strong state, even at the expense of constraining democracy, to
guarantee property worker rights and the working of the free
market communal, while actively maintaining the rule of neoliberal
Marxist social philosophy."
It's easy to imagine neoliberalism leading to the same despotic conditions in mirror image
of the old communist states. Crushing individuals in the name of Market Rights and neoliberal
market philosophy, from an unchecked Marketism.
-- -- -- -- -- -- -- -- -- -- –
* "The question which haunts the dialectical culture is this: how to have unity without
totally undifferentiated and meaningless oneness? If all things are basically one, the
differences are meaningless, divisions false, and definitions are sophistications, in that
the tyranny, or destiny, of oneness is the truth of all being. [my aside: neoliberalism]But,
if all things are basically many, and if plurality is ultimate, then the world dissolves into
unrelated particulars and becomes, as some thinkers insist, not a universe but a multiverse,
and every atom is in a sense its own law and being. [communism] The first leads to the
breakdown of differences and the liberty of atomistic individualism and particularity; the
second is the breakdown of fundamental law into nihilism and the retreat of men and their
arts into isolated and private universes"
― Rousas John Rushdoony, The One And The Many: Studies In The Philosophy Of Order And
Ultimacy
"The great Austrian economist Friedrich Hayek didn't favor mathematical modeling, but he
had clear philosophical models in his head. One of his most famous statements is related to
the slippery road to dictatorships: "
Dictatorship is a bad and an immoral form of government – whether from the left
(communists) or the right (Marketists). Hayek and neoliberals only consider the danger from
the left, not from the right. This is moral philosophy, as Adam Smith knew. A technical claim
for efficiency is not a moral claim to justice or the good. There is no moral claim in
neoliberalism that withstands examination. imo.
It may be time to revisit the socialist calculation debate of the mid-1930 where, over a
period of vears, von Mises and von Hayek debated socialist economists like Oskar Lange and
A.P. Lerner.
Mises argued that capitalism allowed for a much broader participation in decision-making
than that permitted by the cult of nationalization and planning. At that time much of the
Left chose to ignore this critique by pointing to the evidence of capitalist failure and
apparent Soviet success in rehabilitating the Soviet economy and embarking on a road to
industrialization.
Lange responded to Mises's challenge by conceding that planning, even carried out by the
most democratic of governments would lack proper economic criteria and that to prevent a
relapse into more authoritarian solutions, socialist planning authorities would need to
develop a simulated market with a system of shadow prices that could be used to compare
different paths to development
Hayek, in the early 1940s, further developed the Austrian critique through his argument
that collectivist ownership would erase responsibility for investment decisions making it
impossible to accurately assess the responsibility for mistakes.
Hayek also pointed to the fragmented and dispersed character of economic knowledge, and as
as Mirowski has argued in his new book "The Knowledge We Have Lost in Information,"–
managed to establish the first commandment of neo-liberalism "that markets's don't so much
exist to allocate given physical resources so much as to integrate and disseminate something
called knowledge." and " that the market ceased to look like a mechanical conveyor belt and
instead began to take on the outlines of a computer."
Mirowski adds that It was this new image of markets as superior information processors
that has apparently swept everyone along from-neoclassical theorists to market
socialists."
Is it true that the Austrian critique can only be met by a case for socialist
self-management and .public enterprise that bases itself on the dispersed character of
economic knowledge and refuses the tempting delusion of a totally planned economy?
How does the Left today respond to the Hayek/Mises arguments of the 1940s, with their
attempted vindication of entrepreneurship, risk-taking, innovation and the need to make
economic agents responsible in the use of resources?
"How does the Left today respond ?" Very good question! I would add to that "How does the
Left respond to the Market as an epistemology?"
I'll attempt a half-assed answer to the question of " attempted vindication of
entrepreneurship, risk-taking, innovation and the need to make economic agents responsible in
the use of resources?" [The question I posed is highly problematic for me. Once I accepted
Mirowski's assertion that Neoliberals really truly believe this nonsense of the Market as an
information processor -- an arbiter of the Truth -- I was flummoxed. I cannot argue with what
to me is absurd. However Mirowski convincingly argues that addressing the central absurdity
of the Neoliberal Ideology is crucial to any argument with its true believers.]
I'm very old fashioned I admit. I believe humankind has a number of personality types each
suited to select and fill various niches in society. There are builders and makers of things.
There are those who empathize and care for others. There are those who like to grow things
and raise and care for animals. There are those who invent and make new things and think new
ways. There are those who teach. There are those who conserve -- and those who break away and
cast out in new directions -- pathfinders. There are those who like to decide and direct as
well as those quite happy to follow reasonable direction. This is the merest thumbnail sketch
but you should see the flesh of a very old concept of human society.
The entrepreneur is but one more type of individual in human society. Entrepreneurs are
neither special not specially deserving of acclaim or riches. However what they do is useful.
Society benefits by sharing a small portion of resources to entrepreneurs while also
absorbing some of their risks of failure so that both gain. If an entrepreneur achieves
success that benefits society and there is little cost in sharing a somewhat greater part of
that gain with the entrepreneur as an encouragement. I have met and known some I regard as
"true" entrepreneurs. They did indeed hope to make a financial gain from their efforts and
risk -- but that was NOT what motivated them. That was not their core.
The classic Liberal notion that an entrepreneur deserves and has right to all of the gain
from their actions is very difficult for me to argue. Like the Neoliberal notion of the
Market as epistemology this Liberal notion strikes me as an absurdity. I am again
flummoxed.
I found this post very confusing and it stimulated what to me is a confusing maelstrom of
comments. I'll stick with the title of this post rephrasing it as "How Economic Theories
Serve the Power Elite". I don't believe the Rich and Big Business are equivalent to the
entirety of the Power Elite but I do believe they have achieved a degree of prominence --
perhaps as a result of sponsoring Neoliberalism. I think of Neoliberalism as an ideology
rather than a school of economic theories. So I should rephrase the title again as "How
Ideologies Serve the Power Elite."
I believe Phillip Mirowski captures the most complete and accurate depiction of Neoliberal
Ideology. I also believe the C. Wright Mills and his successor G. William Domhoff have
captured the essential structures of Political Power in their characterization of the Power
Elite.
So -- How do Ideology and Political Power interact? What is their dynamic? Altandmain
pointed to a very troubling paragraph in the Michal Kalecki essay in yesterday's comments.
Looking at that essay once more I am troubled also by its conclusion. Kalecki concludes the
potential for a rise of Fascism -- as in the political/economic definition of the term -- in
1943 America was slight and would be mitigated by the progressive politics in sway during
those times. I would argue that the Ideology of Nazi Fascism achieved dominion over the
existing Power Elites in Germany [as well as the business interests in the US who supplied
money and expertise to the German Reich]. I also believe the Ideology of Soviet Communism
achieved dominion over the Power Elites in Russia. In both cases Ideology drove the State
toward horrendous actions I cannot reconcile as providing any service to a Power Elite.
The Power Elites of much of the world embrace and bolster the Ideologies of Neoliberalism
using them as tools to consolidate their power and line their pockets. What is the chance
Neoliberalism might cast off its leash and what kind of world might we see as a result?
Does the ascendance of an Ideology represent a cusp -- a singularity -- not well accounted
for in the structural analysis of Political Power?
"... Google is algorithmically burying leftist news and opinion sources such as Alternet, Counterpunch, Global Research, Consortium News, and Truthout, among others. ..."
"... my political essays are often reposted by right-wing and, yes, even pro-Russia blogs. I get mail from former Sanders supporters, Trump supporters, anarchists, socialists, former 1960s radicals, anti-Semites, and other human beings, some of whom I passionately agree with, others of whom I passionately disagree with. As far as I can tell from the emails, none of these readers voted for Clinton, or Macron, or supported the TPP, or the debt-enslavement and looting of Greece, or the ongoing restructuring of the Greater Middle East (and all the lovely knock-on effects that has brought us), or believe that Trump is a Russian operative, or that Obama is Martin Luther Jesus-on-a-stick. ..."
"... What they share, despite their opposing views, is a general awareness that the locus of power in our post-Cold War age is primarily corporate, or global capitalist, and neoliberal in nature. They also recognize that they are being subjected to a massive propaganda campaign designed to lump them all together (again, despite their opposing views) into an intentionally vague and undefinable category comprising anyone and everyone, everywhere, opposing the hegemony of global capitalism, and its non-ideological ideology (the nature of which I'll get into in a moment). ..."
"... Although the term has been around since the Fifth Century BC, the concept of "extremism" as we know it today developed in the late Twentieth Century and has come into vogue in the last three decades. During the Cold War, the preferred exonymics were "subversive," "radical," or just plain old "communist," all of which terms referred to an actual ideological adversary. ..."
"... Which is why, despite the "Russiagate" hysteria the media have been barraging us with, the West is not going to war with Russia. Nor are we going to war with China. Russia and China are developed countries, whose economies are entirely dependent on global capitalism, as are Western economies. The economies of every developed nation on the planet are inextricably linked. This is the nature of the global hegemony I've been referring to throughout this essay. Not American hegemony, but global capitalist hegemony. Systemic, supranational hegemony (which I like to prefer "the Corporatocracy," as it sounds more poetic and less post-structural). ..."
"... Global capitalism, since the end of the Cold War (i.e, immediately after the end of the Cold War), has been conducting a global clean-up operation, eliminating actual and potential insurgencies, mostly in the Middle East, but also in its Western markets. Having won the last ideological war, like any other victorious force, it has been "clear-and-holding" the conquered territory, which in this case happens to be the whole planet. Just for fun, get out a map, and look at the history of invasions, bombings, and other "interventions" conducted by the West and its assorted client states since 1990. Also, once you're done with that, consider how, over the last fifteen years, most Western societies have been militarized, their citizens placed under constant surveillance, and an overall atmosphere of "emergency" fostered, and paranoia about "the threat of extremism" propagated by the corporate media. ..."
"... Short some sort of cataclysm, like an asteroid strike or the zombie apocalypse, or, you know, violent revolution, global capitalism will continue to restructure the planet to conform to its ruthless interests. The world will become increasingly "normal." The scourge of "extremism" and "terrorism" will persist, as will the general atmosphere of "emergency." There will be no more Trumps, Brexit referendums, revolts against the banks, and so on. Identity politics will continue to flourish, providing a forum for leftist activist types (and others with an unhealthy interest in politics), who otherwise might become a nuisance, but any and all forms of actual dissent from global capitalist ideology will be systematically marginalized and pathologized. ..."
"... C. J. Hopkins is an award-winning American playwright, novelist and satirist based in Berlin. His plays are published by Bloomsbury Publishing (UK) and Broadway Play Publishing (USA). His debut novel, ZONE 23 , is published by Snoggsworthy, Swaine & Cormorant. He can reached at cjhopkins.com or consentfactory.org . ..."
"... That is certainly what the geopolitical establishment is hoping for, but I remain skeptical of their ability to contain what forces they've used to balance the various camps of dissenting proles. They've painted themselves into a corner with non-white identity politics combined with mass immigration. The logical conclusion of where they're going is pogroms and none of the kleptocracy seem bold enough to try and stop this from happening. ..."
"... Germany is the last EU member state where an anti EU party entered parliament. In the last French elections four out of every ten voters voted on anti EU parties. In Austria the anti EU parties now have a majority. So if I were leading a big corporation, thriving by globalism, what also the EU is, I would be worried. ..."
"... This is a great article. The author's identification of "normality" & "extremism" as Capitalism's go-to concepts for social control is spot on accurate. That these terms can mean anything or nothing & are infinitely flexible is central to their power. ..."
Back in October of 2016, I wrote
a somewhat divisive essay in which I suggested that political dissent is being systematically
pathologized. In fact, this process has been ongoing for decades, but it has been significantly accelerated
since the Brexit referendum and the Rise of Trump (or, rather, the Fall of Hillary Clinton, as it
was Americans' lack of enthusiasm for eight more years of corporatocracy with a sugar coating of
identity politics, and not their enthusiasm for Trump, that mostly put the clown in office.)
In the twelve months since I wrote that piece, we have been subjected to a concerted campaign
of corporate media propaganda for which there is no historical precedent. Virtually every major organ
of the Western media apparatus (the most powerful propaganda machine in the annals of powerful propaganda
machines) has been relentlessly churning out variations on a new official ideological narrative designed
to generate and enforce conformity. The gist of this propaganda campaign is that "Western democracy"
is under attack by a confederacy of Russians and white supremacists, as well as "the terrorists"
and other "extremists" it's been under attack by for the last sixteen years.
I've been writing about this campaign for a year now, so I'm not going to rehash all the details.
Suffice to say we've gone from
Russian operatives hacking the American elections to "Russia-linked" persons "apparently" setting
up "illegitimate" Facebook accounts, "likely operated out of Russia," and publishing ads that are
"indistinguishable from legitimate political speech" on the Internet. This is what the corporate
media is presenting as evidence of
"an unprecedented foreign invasion of American democracy," a handful of political ads on Facebook.
In addition to the Russian hacker propaganda, since August, we have also been treated to relentless
white supremacist hysteria and daily reminders from the corporate media that
"white nationalism is destroying the West." The negligible American neo-Nazi subculture has been
blown up into a biblical Behemoth inexorably slouching its way towards the White House to officially
launch the Trumpian Reich.
At the same time, government and corporate entities have been aggressively restricting (and in
many cases eliminating) fundamental civil liberties such as freedom of expression, freedom of the
press, the right of assembly, the right to privacy, and the right to due process under the law. The
justification for this curtailment of rights (which started in earnest in 2001, following the September
11 attacks) is protecting the public from the threat of "terrorism," which apparently shows no signs
of abating. As of now, the United States has been in
a State of Emergency for over sixteen years. The UK is in
a virtual State of Emergency . France is now in the process of enshrining
its permanent State of Emergency into law. Draconian counter-terrorism measures have been
implemented throughout the EU . Not just
the notorious American police but
police
throughout the West have been militarized . Every other day we learn of some
new emergency security measure designed to keep us safe from "the terrorists," the "lone wolf
shooters," and other "extremists."
Conveniently, since the Brexit referendum and unexpected election of Trump (which is when the
capitalist ruling classes first recognized that they had a widespread nationalist backlash on their
hands), the definition of "terrorism" (or, more broadly, "extremism") has been expanded to include
not just Al Qaeda, or ISIS, or whoever we're calling "the terrorists" these days, but anyone else
the ruling classes decide they need to label "extremists." The FBI has designated Black Lives Matter
"Black Identity Extremists." The FBI and the DHS have designated Antifa
"domestic terrorists."
Whatever your opinion of these organizations and "extremist" persons is beside the point. I'm
not a big fan of neo-Nazis, personally, but neither am I a fan of Antifa. I don't have much use for
conspiracy theories, or a lot of the nonsense one finds on the Internet, but I consume a fair amount
of alternative media, and I publish in CounterPunch, The Unz Review, ColdType, and other non-corporate
journals.
I consider myself a leftist, basically, but my political essays are often reposted by right-wing
and, yes, even pro-Russia blogs. I get mail from former Sanders supporters, Trump supporters, anarchists,
socialists, former 1960s radicals, anti-Semites, and other human beings, some of whom I passionately
agree with, others of whom I passionately disagree with. As far as I can tell from the emails, none
of these readers voted for Clinton, or Macron, or supported the TPP, or the debt-enslavement and
looting of Greece, or the ongoing restructuring of the Greater Middle East (and all the lovely knock-on
effects that has brought us), or believe that Trump is a Russian operative, or that Obama is Martin
Luther Jesus-on-a-stick.
What they share, despite their opposing views, is a general awareness that the locus of power
in our post-Cold War age is primarily corporate, or global capitalist, and neoliberal in nature.
They also recognize that they are being subjected to a massive propaganda campaign designed to lump
them all together (again, despite their opposing views) into an intentionally vague and undefinable
category comprising anyone and everyone, everywhere, opposing the hegemony of global capitalism,
and its non-ideological ideology (the nature of which I'll get into in a moment).
As I wrote in that essay a year ago, "a line is being drawn in the ideological sand." This line
cuts across both Left and Right, dividing what the capitalist ruling classes designate "normal" from
what they label "extremist." The traditional ideological paradigm, Left versus Right, is disappearing
(except as a kind of minstrel show), and is being replaced, or overwritten, by a pathological
paradigm based upon the concept of "extremism."
* * *
Although the term has been around since the Fifth Century BC, the concept of "extremism" as
we know it today developed in the late Twentieth Century and has come into vogue in the last three
decades. During the Cold War, the preferred exonymics were "subversive," "radical," or just plain
old "communist," all of which terms referred to an actual ideological adversary.
In the early 1990s, as the U.S.S.R. disintegrated, and globalized Western capitalism became the
unrivaled global-hegemonic ideological system that it is today, a new concept was needed to represent
the official enemy and its ideology. The concept of "extremism" does that perfectly, as it connotes,
not an external enemy with a definable ideological goal, but rather, a deviation from the norm. The
nature of the deviation (e.g., right-wing, left-wing, faith-based, and so on) is secondary, almost
incidental. The deviation itself is the point. The "terrorist," the "extremist," the "white supremacist,"
the "religious fanatic," the "violent anarchist" these figures are not rational actors whose ideas
we need to intellectually engage with in order to debate or debunk. They are pathological deviations,
mutant cells within the body of "normality," which we need to identify and eliminate, not for ideological
reasons, but purely in order to maintain "security."
A truly global-hegemonic system like contemporary global capitalism (the first of this kind in
human history), technically, has no ideology. "Normality" is its ideology an ideology which erases
itself and substitutes the concept of what's "normal," or, in other words, "just the way it is."
The specific characteristics of "normality," although not quite arbitrary, are ever-changing. In
the West, for example, thirty years ago, smoking was normal. Now, it's abnormal. Being gay was abnormal.
Now, it's normal. Being transgender is becoming normal, although we're still in the early stages
of the process. Racism has become abnormal. Body hair is currently abnormal. Walking down the street
in a semi-fugue state robotically thumbing the screen of a smartphone that you just finished thumbing
a minute ago is "normal." Capitalism has no qualms with these constant revisions to what is considered
normal, because none of them are threats to capitalism. On the contrary, as far as values are concerned,
the more flexible and commodifiable the better.
See, despite what intersectionalists will tell you, capitalism has no interest in racism, misogyny,
homophobia, xenophobia, or any other despotic values (though it has no problem working with these
values when they serve its broader strategic purposes). Capitalism is an economic system, which we
have elevated to a social system. It only has one fundamental value, exchange value, which isn't
much of a value, at least not in terms of organizing society or maintaining any sort of human culture
or reverence for the natural world it exists in. In capitalist society, everything, everyone, every
object and sentient being, every concept and human emotion, is worth exactly what the market will
bear no more, no less, than its market price. There is no other measure of value.
Yes, we all want there to be other values, and we pretend there are, but there aren't, not really.
Although we're free to enjoy parochial subcultures based on alternative values (i.e., religious bodies,
the arts, and so on), these subcultures operate within capitalist society, and ultimately conform
to its rules. In the arts, for example, works are either commercial products, like any other commodity,
or they are subsidized by what could be called "the simulated aristocracy," the ivy league-educated
leisure classes (and lower class artists aspiring thereto) who need to pretend that they still have
"culture" in order to feel superior to the masses. In the latter case, this feeling of superiority
is the upscale product being sold. In the former, it is entertainment, distraction from the depressing
realities of living, not in a society at all, but in a marketplace with no real human values. (In
the absence of any real cultural values, there is no qualitative difference between Gerhard
Richter and Adam Sandler, for example. They're both successful capitalist artists. They're just selling
their products in different markets.)
The fact that it has no human values is the evil genius of global capitalist society. Unlike the
despotic societies it replaced, it has no allegiance to any cultural identities, or traditions, or
anything other than money. It can accommodate any form of government, as long as it plays ball with
global capitalism. Thus, the window dressing of "normality" is markedly different from country to
country, but the essence of "normality" remains the same. Even in countries with state religions
(like Iran) or state ideologies (like China), the governments play by the rules of global capitalism
like everyone else. If they don't, they can expect to receive a visit from global capitalism's Regime
Change Department (i.e., the US military and its assorted partners).
Which is why, despite the "Russiagate" hysteria the media have been barraging us with, the
West is not going to war with Russia. Nor are we going to war with China. Russia and China are developed
countries, whose economies are entirely dependent on global capitalism, as are Western economies.
The economies of every developed nation on the planet are inextricably linked. This is the nature
of the global hegemony I've been referring to throughout this essay. Not American hegemony, but global
capitalist hegemony. Systemic, supranational hegemony (which I like to prefer "the Corporatocracy,"
as it sounds more poetic and less post-structural).
We haven't really got our minds around it yet, because we're still in the early stages of it,
but we have entered an epoch in which historical events are primarily being driven, and societies
reshaped, not by sovereign nation states acting in their national interests but by supranational
corporations acting in their corporate interests. Paramount among these corporate interests is the
maintenance and expansion of global capitalism, and the elimination of any impediments thereto. Forget
about the United States (i.e., the actual nation state) for a moment, and look at what's been happening
since the early 1990s. The US military's "disastrous misadventures" in Iraq, Libya, Afghanistan,
Syria, and the former Yugoslavia, among other exotic places (which have obviously had nothing to
do with the welfare or security of any actual Americans), begin to make a lot more sense.
Global capitalism, since the end of the Cold War (i.e, immediately after the end of the Cold
War), has been conducting a global clean-up operation, eliminating actual and potential insurgencies,
mostly in the Middle East, but also in its Western markets. Having won the last ideological war,
like any other victorious force, it has been
"clear-and-holding" the
conquered territory, which in this case happens to be the whole planet. Just for fun, get out a map,
and look at the history of invasions, bombings, and other "interventions" conducted by the West and
its assorted client states since 1990. Also, once you're done with that, consider how, over the last
fifteen years, most Western societies have been militarized, their citizens placed under constant
surveillance, and an overall atmosphere of "emergency" fostered, and paranoia about "the threat of
extremism" propagated by the corporate media.
I'm not suggesting there's a bunch of capitalists sitting around in a room somewhere in their
shiny black top hats planning all of this. I'm talking about systemic development, which is a little
more complex than that, and much more difficult to intelligently discuss because we're used to perceiving
historico-political events in the context of competing nation states, rather than competing ideological
systems or non-competing ideological systems, for capitalism has no competition . What it
has, instead, is a variety of insurgencies, the faith-based Islamic fundamentalist insurgency and
the neo-nationalist insurgency chief among them. There will certainly be others throughout the near
future as global capitalism consolidates control and restructures societies according to its values.
None of these insurgencies will be successful.
Short some sort of cataclysm, like an asteroid strike or the zombie apocalypse, or, you know,
violent revolution, global capitalism will continue to restructure the planet to conform to its ruthless
interests. The world will become increasingly "normal." The scourge of "extremism" and "terrorism"
will persist, as will the general atmosphere of "emergency." There will be no more Trumps, Brexit
referendums, revolts against the banks, and so on. Identity politics will continue to flourish, providing
a forum for leftist activist types (and others with an unhealthy interest in politics), who otherwise
might become a nuisance, but any and all forms of actual dissent from global capitalist ideology
will be systematically marginalized and pathologized.
This won't happen right away, of course. Things are liable to get ugly first (as if they weren't
ugly enough already), but probably not in the way we're expecting, or being trained to expect by
the corporate media. Look, I'll give you a dollar if it turns out I'm wrong, and the Russians, terrorists,
white supremacists, and other "extremists" do bring down "democracy" and launch their Islamic, white
supremacist, Russo-Nazi Reich, or whatever, but from where I sit it looks pretty clear tomorrow belongs
to the Corporatocracy.
C. J. Hopkins is an award-winning American playwright, novelist and satirist based in Berlin.
His plays are published by Bloomsbury Publishing (UK) and Broadway Play Publishing (USA). His debut
novel,
ZONE
23 , is published by Snoggsworthy, Swaine & Cormorant. He can reached at
cjhopkins.com or
consentfactory.org .
Brilliant Article. But this has been going on for nearly a century or more. New York Jewish bankers
fund the Bolshevik revolution which gets rid of the Romanov dynasty and many of the revolutionaries
are not even Russian. What many people do not know is that many Western companies invested money
in Bolshevik Russia as the Bolsheviks were speeding up the modernising of the country. What many
do not know is that Feminism, destruction of families and traditional societies, homoerotic art
etc . was forced on the new Soviet population in a shock therapy sort of way. The same process
has been implemented in the West by the elites using a much slower 'boiling the frog' method using
Cultural Marxism. The aim of the Soviet Union was to spread Communism around the World and hence
bring about the One World Government as wished by the globalists. Their national anthem was the
'Internationale'. The globalists were funding revolutionary movements throughout Europe and other
parts of the world. One such attempt went extremely wrong and that was in Germany where instead
of the Communists coming in power, the National Socialists come in power which was the most dangerous
challenge faced by the Zio/globalists/elite gang. The Globalists force a war using false flag
events like Pearl Harbour etc and crushed the powers which challenged their rule i.e. Germany,
Japan and Italy. That is why Capitalist USA funded Communist Soviet Union using the land lease
program, which on the surface never makes any sense.
However in Soviet Russia, a power struggle leads to Stalin destroying the old Communist order
of Lenin Trotsky. Trotsky and his supporters leave the Soviet Union. Many of the present Neo Cons
are ex Trotskyites and hence the crazy hatred for Russia even today in American politics. These
Neocons do not have any principles, they will use any ideology such as Communism, Islam, twisted
Western Conservatism anything to attain their global goals.
Now with Stalin coming to power, things actually improved and the war with Hitler's Third Reich
gave Stalin the chance to purge many old school globalist commies and then the Soviet Union went
towards a more nationalist road. Jews slowly started losing their hold on power with Russians
and eventually other Soviets gaining more powerful positions. These folks found the ugly modern
art culture of the early Soviet period revolting and started a new movement where the messages
of Socialism can be delivered with more healthy beautiful art and culture. This process was called
'Social Realism'. So strangely what happened was that the Capitalist Christian West was becoming
more and more less traditional with time (Cultural Marxism/Fabien Socialism via media, education,
Hollywood) while the Eastern block was slowly moving in an opposite direction. The CIA (which
is basically the intelligence agency arm of Wall Street Bankers) was working to stop this 'Social
Realism' movement.
These same globalists also funded Mao and pulled the rug under Chiang Kai Shek who they were
supporting earlier. Yes, Mao was funded by the Rockerfeller/ Rothschild Cabal. Now, even if the
Globalists were not happy with Stalin gaining power in the Soviet Union (they preferred the internationalist
Trotskyites), they still found that they could work out with the Soviet Union. That is why during
the 2nd World war, the USA supports the USSR with money and material, Stalin gets a facelift as
'friendly Uncle Joe' for the Western audience. Many Cossack families who had escaped the Soviet
Union to the West were sent to their deaths after the War to the Soviet Union. Why? Mr. Eden of
Britain who could not stand Hitler wanted a New World Order where they could work with the more
murderous Soviet Union.
Now we have the cold war. What is not known is that behind the scenes at a higher level, the
Americans and the Soviets cooperated with each other exchanging technology, basically the cold
war was quite fake. But the Cold war gave the American government (basically the Globalists) to
take American Tax payers hard earned money to fund many projects such as Star Wars programme etc
All this was not needed, as a gentleman named Keenan had shown in his book that all the Americans
needed to do was to make sure Japan, Germany and Britain did not fall to the Soviets, that's it.
Thus trillions of American tax payer money would be saved. But obviously the Military Industrial
Complex did not like that idea. Both the Soviet and the American governments got the excuse spend
their people's hard money on weapons research as well as exchanging some of that technology in
the back ground. It is during this period that the precursor to the Internet was already developed.
Many of the technology we use today was already invented much earlier by government agencies but
released to the people later.
Then we have the Vietnam war. Now you must realise that the Globalist government of America
uses wars not only to change enemy societies but also the domestic society in the West. So during
the Vietnam War, the US government using the alphabet agencies such as the CIA kick start the
fake opposition hippie movements. The CIA not only drugged the Vietnamese population using drugs
from the Golden Triangle but later released them on the home population in the USA and the West.
This was all part of the Cultural Marxist plan to change or social engineer American/ Western
society. Many institutes like the Travestock Institute were part of this process. For example
one of the main hochos of the Cultural Marxism, a Mr. Aderno was closely related to the Beatles
movement.
Several experiments was done on mind control such as MK Ultra, monarch programming, Edward
Bernay's works etc Their aim was to destroy traditional Western society and the long term goal
is a New World Order. Blacks for example were used as weapons against Whites at the same time
the black social order was destroyed further via the media etc
Now, Nixon going to China was to start a long term (long planned) process to bring about Corporate
Communism. Yes that is going to be economic system in the coming New World Order. China is the
test tube, where the Worst of Communism and the Worst of Crony Capitalism be brought together
as an experiment. As the Soviet Union was going in a direction, the globalist was not happy about
(it was becoming more nationalist), they worked to bring the Soviet Union down and thus the Soviet
experiment ended only to be continued in China.
NATO today is the core military arm of the globalists, a precursor to a One World Military
Force. That explains why after the Warsaw pact was dismantled, NATO was not or why NATO would
interfere in the Middle East which is far away from the Atlantic Ocean.
The coming Cashless society will finally lead to a moneyless or distribution society, in other
words Communism, that is the long term plan.
My point is, many of the geo political events as well as social movements of the last century
(feminism for example) were all planned for a long time and are not accidents. The coming technologies
like the internet of things, 5G technology, Cashless society, biometric identification everywhere
etc are all designed to help bring about the final aim of the globalists. The final aim is a one
world government with Corporate ruled Communism where we, the worker bees will be living in our
shitty inner city like ghetto homes eating GM plastic foods and listening to crappy music. That
is the future they have planned for us. A inner city ghetto like place under Communism ruled by
greedy evil corporates.
"Short some sort of cataclysm, like an asteroid strike or the zombie apocalypse, or, you know,
violent revolution, global capitalism will continue to restructure the planet to conform to its
ruthless interests."
That is certainly what the geopolitical establishment is hoping for, but I remain skeptical
of their ability to contain what forces they've used to balance the various camps of dissenting
proles. They've painted themselves into a corner with non-white identity politics combined with
mass immigration. The logical conclusion of where they're going is pogroms and none of the kleptocracy
seem bold enough to try and stop this from happening.
That is certainly what the geopolitical establishment is hoping for, but I remain skeptical
of their ability to contain what forces they've used to balance the various camps of dissenting
proles.
There must be some evidence for your assertions about the long term plans and aims of globalists
and others if there is truth in them. The sort of people you are referring to would often have
kept private diaries and certainly written many hundreds or thousands of letters. Can you give
any references to such evidence of say 80 to 130 years ago?
.. puzzling that the writer feels the need to virtue-signal by saying he "doesn't have much
time for conspiracy theories" while condemning an absolutely massive conspiracy to present establishment
lies as truth.
That is one of the most depressing demonstrations of the success of the ruling creeps that
I have yet come across.
Germany is the last EU member state where an anti EU party entered parliament. In the last
French elections four out of every ten voters voted on anti EU parties. In Austria the anti EU
parties now have a majority. So if I were leading a big corporation, thriving by globalism, what
also the EU is, I would be worried.
"See, despite what intersectionalists will tell you, capitalism has no interest in racism, misogyny,
homophobia, xenophobia, or any other despotic values (though it has no problem working with these
values when they serve its broader strategic purposes). Capitalism is an economic system, which
we have elevated to a social system. It only has one fundamental value, exchange value, which
isn't much of a value, at least not in terms of organizing society or maintaining any sort of
human culture or reverence for the natural world it exists in. In capitalist society, everything,
everyone, every object and sentient being, every concept and human emotion, is worth exactly what
the market will bear no more, no less, than its market price. There is no other measure of value."
This is a great article. The author's identification of "normality" & "extremism" as Capitalism's
go-to concepts for social control is spot on accurate. That these terms can mean anything or nothing
& are infinitely flexible is central to their power.
Mr Hopkins is also correct when he points out that Capitalism has essentially NO values (exchange
value is a value, but also a mechanism). Again, Capitalism stands for nothing: any form of government
is acceptable as long as it bows to neoliberal markets.
However, the author probably goes to far:
"Nor are we going to war with China. Russia and China are developed countries, whose economies
are entirely dependent on global capitalism, as are Western economies. The economies of every
developed nation on the planet are inextricably linked. This is the nature of the global hegemony
I've been referring to throughout this essay. Not American hegemony, but global capitalist hegemony.
Systemic, supranational hegemony".
Capitalism has no values: however the Masters of the capitalist system most certainly do: Capitalism
is a means, the most thorough, profound means yet invented, for the attainment of that value which
has NO exchange value: POWER.
Capitalism is a supranational hegemony – yet the Elites which control it, who will act as one
when presented with any external threats to Capitalism itself, are not unified internally. Indeed,
they will engage in cut throat competition, whether considered as individuals or nations or as
particular industries.
US Imperialism is not imaginary, it is not a mere appearance or mirage of Capitalism, supranational
or not. US Imperialism in essence empowers certain sets of Capitalists over other sets. No, they
may not purposely endanger the System as a whole, however, that still leaves plenty of space for
aggressive competition, up to & including war.
Imperialism is the political corollary to the ultimate economic goal of the individual Capitalist:
Monopoly.
Psychologically daring (being no minstrel to corporatocracy nor irrelevant activism and other
"religions" that endorse the current world global system as the overhead), rationally correct,
relevant, core definition of the larger geo-world and deeper "ideological" grounding( in the case
of capitalism the quite shallow brute forcing of greed as an incentive, as sterile a society as
possible), and adhering to longer timelines of reality of planet earth. Perfectly captures the
"essence" of the dynamics of our times.
The few come to the authors' through-sites by many venue-ways, that's where some of the corporocratic
world, by sheer statistics wind up also. Why do they not get the overhand into molding the shallow
into anything better in the long haul. No world leader, no intellectual within power circles,
even within confined quarters, speaks to the absurdity of the ongoing slugging and maltering of
global human?
The elites of now are too dumb to consider the planet exo-human as a limited resource. Immigration,
migration, is the de facto path to "normalization" in the terms of the author. Reducing the world
population is not "in" the capitalist ideology. A major weakness, or if one prefers the stake
that pinches the concept of capitalism: more instead of quality principles.
The game changers, the possible game changers: eugenics and how they play out as to the elites
( understanding the genome and manipulating it), artificial intelligence ( defining it first,
not the "Elon Musk" definition), and as a far outlier exo-planetary arguments.
Confront the above with the "unexpected", the not-human engineered possible events (astroids
and the like, secondary effects of human induced toxicity, others), and the chances to get to
the author's "dollar" and what it by then might mean is indeed tiny.
As to the content, one of the utmost relevant articles, it is "art" to condense such broad
a world view into a few words, it requires a deep understanding foremost, left to wonder what
can be grasped by most reading above. Some-one try the numbers?, "big data" anyone, they might
turn out in favor of what the author undoubtedly absorbed as the nucleus of twenty-first thinking,
strategy and engineering.
This kind of thinking and "Harvard" conventionality, what a distance.
Great article, spot on. Indeed we are all at the mercy now of a relatively small clique of ruthless
criminals who are served by armies of desensitized, stupid mercenaries: MBAs, politicians, thugs,
college professors, "whorenalists", etc. I am afraid that the best answer to the current and future
dystopia is what the Germans call "innere Emigration," to psychologically detach oneself
from the contemporary world.
Thus, the only way out of this hellhole is through reading and thinking, which every self-respecting
individual should engage in. Shun most contemporary "literature" and instead turn to the classics
of European culture: there you will find all you need.
For an earlier and ever so pertinent analysis of the contemporary desert, I can heartily recommend
Umberto Galimberti's I vizi capitali e i nuovi vizi (Milan, 2003).
And yes, another verbally strong expression of the in your face truth, though for so few to
grasp. The author again has a deep understanding, if one prefers, it points to the venueway of
coming to terms, the empirical pathway as to the understanding.
"Plasticky" society is my preferred term for designating the aberrance that most (within the
elites), the rest who cares (as an historical truth), do not seem to identify as proper cluelessness
in the light of longer timelines. The current global ideology, religion of capitalism-democracy
is the equivalent of opportunistic naval staring of the elites. They are not aware that suffocation
will irreversibly affect oneself. Not enough air is the equivalent of no air in the end.
The negligible American neo-Nazi subculture has been blown up into a biblical Behemoth inexorably
slouching its way towards the White House to officially launch the Trumpian Reich.
While the above is true, I hope most folks understand that the basic concept of controlling
people through fear is nothing new. The much vaunted constitution was crammed down our collective
throats by the rich scoundrels of the time in the words of more than one anti-federalist through
the conjuring of quite a set of threats, all bogus.
I address my most fervent prayer to prevent our adopting a system destructive to liberty
We are told there are dangers, but those dangers are ideal; they cannot be demonstrated.
- Patrick Henry, Foreign Wars, Civil Wars, and Indian Wars -- Three Bugbears, June 5, 7,
and 9, 1788
Bottom line: Concentrated wealth and power suck.The USA was ruled by a plutoligarchy from its
inception, and the material benefits we still enjoy have occurred not because of it but
despite it.
For today's goofy "right wing" big business "conservatives" who think the US won WW2, I got news
for you. Monopoly capitalism, complete with increasing centralization of the economy and political
forces were given boosts by both world wars.
It was precisely in reaction to their impending defeat at the hands of the competitive storms
of the market tha t business turned, increasingly after the 1900′s, to the federal government
for aid and protection. In short, the intervention by the federal government was designed,
not to curb big business monopoly for the sake of the public weal, but to create monopolies
that big business (as well as trade associations smaller business) had not been able
to establish amidst the competitive gales of the free market. Both Left and Right have been
persistently misled by the notion that intervention by the government is ipso facto leftish
and anti-business. Hence the mythology of the New-Fair Deal-as-Red that is endemic on the Right.
Both the big businessmen, led by the Morgan interests, and Professor Kolko almost uniquely
in the academic world, have realized that monopoly privilege can only be created by the
State and not as a result of free market operations.
-Murray N. Rothbard, Rothbard Left and Right: The Prospects for Liberty, [Originally appeared
in Left and Right, Spring 1965, pp. 4-22.]
It was all about connecting the dots really. Connecting the dots of too many books I have gobe
through and videos I have seen. Too many to list here.
You can get a lot of info from the book 'Tragedy and Hope' by Carroll Quigley though he avoids
mantioning Jews and calls it the Anglo American establishment, Anthony Sutton however I completely
disagree about funding of the Third Reich but he does talk a lot about the secret relationship
between the USA and the USSR, Revilo Oliver etc.. etc Well you could read the Protocols. Now if
you think that the protocols was a forgery, you gotta see this, especially the last part.
Also check this out
Also check out what this Wall Street guy realised in his career.
Also this 911 firefighter, what he found out after some research
Capitalism is an economic system, which we have elevated to a social system. It only
has one fundamental value, exchange value, which isn't much of a value, at least not in terms
of organizing society or maintaining any sort of human culture or reverence for the natural
world it exists in. In capitalist society, everything, everyone, every object and sentient
being, every concept and human emotion, is worth exactly what the market will bear no more,
no less, than its market price. There is no other measure of value.
This looks like the "financialization" of society with Citizens morphing into Consumers.
And it's worth saying that Citizenship and Consumership are completely different concepts:
Citizenship – Dictionary.com
1. – the state of being vested with the rights, privileges, and duties of a citizen.
2. – the character of an individual viewed as a member of society;behavior in terms of the
duties, obligations, and functions of a citizen:
an award for good citizenship.
The Consumer – Dictionary.com
1. a person or thing that consumes.
2. Economics. a person or organization that uses a commodity or service.
A good citizen can then define themselves in a rather non-selfish, non-financial way as for
example, someone who respects others, contributes to local decisions (politically active), gains
respect through work and ethical standards etc.
A good consumer on the other hand, seems to be more a self-idea, essentially someone who buys
and consumes a lot (financial idea), has little political interest – and probably defines themselves
(and others) by how they spend money and what they own.
It's clear that US, and global capitalism, prefers active consumers over active citizens, and
maybe it explains why the US has such a worthless and dysfunctional political process.
Some folks are completely unable to connect the dots even when spoon fed the evidence. You'll
note that some, in risible displays of quasi-intellectual arrogance, make virtually impossible
demands for proof, none of which they'll ever accept. Rather, they flock to self aggrandizing
mythology like flies to fresh sewage which the plutoligarchy produces nearly infinitely.
Your observations appear pretty accurate and self justifying I'd say.
Look up the film director Aaron Russo (recently deceased), discussing how David Rockefeller
tried to bring him over to the dark side. Rockefeller discussed for example the women's movement,
its engineering. Also, there's Aldous Huxley's speech The Ultimate Revolution, on how drugs are
the final solution to rabble troubles–we will think we're happy even in the most appalling societal
conditions.
I can only say Beware of Zinn, best friend of Chomsky, endlessly tauted by shysters like Amy
Goodman and Counterpunch. Like all liberal gatekeepers, he wouldn't touch 911. I saw him speak
not long before he died, and when questioned on this he said, 'That was a long time ago, let's
talk about now.'
This from a professed historian, and it was only 7 years after 911. He seemed to have the same
old Jewish agenda, make Europeans look really bad at all times. He was always on message, like
the shyster Chomsky. Sincerely probing for the truth was not part of his agenda; his truths were
highly selective, and such a colossal event as 911 concerned him not at all, with the ensuing
wars, Patriot Acts, bullshit war on Terror, etc etc
" capitalism has no interest in racism, misogyny, homophobia, xenophobia, or any other despotic
values (though it has no problem working with these values when they serve its broader strategic
purposes). Capitalism is an economic system, which we have elevated to a social system."
This is a typical Left Lie. Capitalism in its present internationalist phase absolutely requires
Anti-Racism to lubricate sales uh, internationally and domestically. We are all Equal.
Then, the ticking-off of the rest of the bad isms, and labeling them 'despotic' is another
Leftwing and poetic attack on more or less all of us white folks, who have largely invented Capitalism,
from a racialist point of view.
"Poetic" because it is an emotional appeal, not a rational argument. The other 'despotisms'
are not despotic, unless you claim, like I do that racial personalities are more, or less despotic,
with Whites being the least despotic. The Left totalitarian thinks emotional despotism's source
is political or statist. It are not. However, Capitalism has been far less despotic than communism,
etc.
Emotional Despotism is part of who Homo Sapiens is, and this emotional despotism is not racially
equal. Whites are the least despotic, and have organized law and rules to contain such despotism.
Systems arise naturally from the Human Condition, like it or not. The attempt here is to sully
the Capitalist system, and that is all it is. This article itself is despotic propaganda.
Arguably, human nature is despotic, and White civilization has attempted to limit our despotic
nature.
This is another story.
As for elevating capitalism into a 'social system' .this is somewhat true. However, that is
not totally bad, as capitalism delivers the goods, which is the first thing, after getting out
of bed.
The second thing, is having a conformable social environment, and that is where racial accord
enters.
People want familiar and trustworthy people around them and that is just the way human nature
is genetic similarity, etc.
Beyond that, the various Leftie complaints-without-end, are also just the way it is. And yes
they can be addressed and ameliorated to some degree, but human nature is not a System to be manipulated,
even thought the current crop of scientistic lefties talk a good storyline about epigenetics and
other Hopes, false of course, like communist planning which makes its first priority, Social Change
which is always despotic. Society takes care of itself, especially racial society.
As Senator Vail said about the 1924 Immigration Act which held the line against Immigration,
"if there is going to be any changing being done, we will do it and nobody else." That 'we' was
a White we.
Capitalism must be national. International capital is tyranny.
US oil companies make about five cents off a single gallon of gasoline, on the other hand US
Big Government taxes on a single gallon are around seventy-one cents for US states & rising, the
tax is now $1.00 per gallon for CA.
IOW, greedy US governments make fourteen to twenty times what oil companies make, and it is
the oil companies who make & deliver the vital product to the marketplace.
And that is just in the US. Have a look at Europe's taxes. My, my.
Some agendas require the "state sponsored" part to be hidden.
That is part of the reason why the constitutional convention was held in secret as well.
The cunning connivers who ram government down our throats don't like their designs exposed,
and it's an old trick which nearly always works.
Here's Aristophanes on the subject. His play is worth a read. Short and great satire on the
politicians of the day.
SAUSAGE-SELLER
No, Cleon, little you care for his reigning in Arcadia, it's to pillage and impose on the
allies at will that you reckon; y ou wish the war to conceal your rogueries as in a mist,
that Demos may see nothing of them, and harassed by cares, may only depend on yourself for
his bread. But if ever peace is restored to him, if ever he returns to his lands to comfort
himself once more with good cakes, to greet his cherished olives, he will know the blessings
you have kept him out of, even though paying him a salary; and, filled with hatred and rage,
he will rise, burning with desire to vote against you. You know this only too well; it is
for this you rock him to sleep with your lies.
The first loyalty of jews is supposed to be to jews.
Norman Finkelstein is called a traitor by jews, the Dutch jew Hamburger is called a traitor
by Dutch jews, he's the chairman of 'Een ander joodse geluid', best translated by 'another jewish
opinion', the organisation criticises Israel.
Jewish involvement in Sept 11 seems probable, the 'dancing Israelis', the assertion that most
jews working in the Twin Towers at the time were either sick or took a day off, the fact that
the Towers were jewish property, ready for a costly demolition, much abestos in the buildings,
thus the 'terrorist' act brought a great profit.
Can one expect a jew to expose things like this ?
On his book, I did not find inconsistencies with literature I already knew.
The merit of the book is listing many events that affected common people in the USA, and destroying
the myth that 'in the USA who is poor has only himself to blame'.
This nonsense becomes clear even from the diaries of Harold L Ickes, or from Jonathan Raban
Bad Land, 1997.
As for Zinn's criticism of the adored USA constitution, I read that Charles A Beard already
in 1919 resigned because he also criticised this constitution.
Indeed, in our countries about half the national income goes to the governments by taxes, this
is the reason a country like Denmark is the best country to live in.
"... 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. ..."
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.
"... Now, despite what the Russian propagandists will tell you, this recent outbreak of fascistic behavior has nothing whatsoever to do with these people's frustration with neoliberalism or the supranational Corporatocracy that has been expanding its global empire with total impunity for twenty-five years. And it definitely has nothing at all to do with supranational political unions, or the supersession of national sovereignty by corporate-concocted "free trade" agreements, or the relentless privatization of everything, or the fear that a lot of people have that their cultures are being gradually erased and replaced with a globalized, corporate-friendly, multicultural, market-based culture, which is merely a simulation of culture, and which contains no actual cultural values (because exchange value is its only operative value), but which sells the empty signifiers of their eviscerated cultural values back to them so they can wear their "identities" like designer brands as they hunch together in silence at Starbucks posting pictures of themselves on Facebook. ..."
"... No, this discontent with the political establishment, corporate elites, and the mainstream media has nothing to do with any of that. It's not like global Capitalism, following the collapse of the U.S.S.R. (its last external ideological adversary), has been restructuring the entire planet in accordance with its geopolitical interests, or doing away with national sovereignty, and other nationalistic concepts that no longer serve a useful purpose in a world where a single ideological system (one backed by the most fearsome military in history) reigns completely unopposed. If that were the case, well, it might behoove us to question whether this outbreak of Nazism, racism, and other forms of "hate," was somehow connected to that historical development and maybe even try to articulate some sort of leftist analysis of that. ..."
"... a world where a single ideology rules the planet unopposed from without ..."
"... Brexit is about Britons who want their country back, a movement indeed getting stronger and stronger in EU member states, but ignored by the ruling 'elites'. ..."
"... A lot of these so called "revolutions" are fomented by the elite only to be subverted and perverted by them in the end. They've had a lot of practice co-opting revolutions and independence movements. ..."
"... "Independence" is now so fashionable (as was Communism among the "elite" back in the '30s), that they are even teaching and fostering independence to kids in kindergarten here in the US. That strikes me as most amusing. Imagine "learning" independence in state run brainwashing factories. ..."
Well all right, let's review what happened, or at least the official version of what
happened. Not Hillary Clinton's version of what happened, which Jeffrey St. Clair so
incisively skewered , but the Corporatocracy's version of what happened, which overlaps
with but is even more ridiculous than Clinton's ridiculous version. To do that, we need to
harken back to the peaceful Summer of 2016, (a/k/a the
"Summer of Fear" ), when the United States of America was still a shiny city upon a hill
whose beacon light guided freedom-loving people, the Nazis were still just a bunch of ass
clowns meeting in each other's mother's garages, and Russia was, well Russia was Russia.
Back then, as I'm sure you'll recall, Western democracy, was still primarily being menaced
by the lone
wolf terrorists, for absolutely no conceivable reason, apart from the terrorists' fanatical
desire to brutally murder all non-believers. The global Russo-Nazi Axis had not yet reared its
ugly head. President Obama, who, during his tenure, had single-handedly restored America to the
peaceful, prosperous, progressive paradise it had been before George W. Bush screwed it up, was
on The Tonight Show with Jimmy Fallon slow
jamming home the TPP . The Wall Street banks had risen from the ashes of the 2008 financial
crisis, and were buying back all the foreclosed homes of the people they had fleeced with
subprime mortgages. American workers were enjoying the freedom and flexibility of the new gig
economy. Electioneering in the United States was underway, but it was early days. It was
already clear that Donald Trump was literally
the Second Coming of Hitler , but no one was terribly worried about him yet. The Republican
Party was in a shambles. Neither Trump nor any of the other contenders had any chance of
winning in November. Nor did Sanders, who had been defeated, fair and square, in the Democratic
primaries, mostly because of
his racist statements and crazy, quasi-Communist ideas. Basically, everything was hunky
dory. Yes, it was going to be terribly sad to have to bid farewell to Obama, who had bailed out
all those bankrupt Americans the Wall Street banks had taken to the cleaners, ended all of Bush
and Cheney's wars, closed down Guantanamo, and just generally served as a multicultural messiah
figure to affluent consumers throughout the free world, but Hope-and-Change was going to
continue. The talking heads were all in agreement Hillary Clinton was going to be President,
and there was nothing anyone could do about it.
Little did we know at the time that an epidemic of Russo-Nazism had been festering just
beneath the surface of freedom-loving Western societies like some neo-fascist sebaceous cyst.
Apparently, millions of theretofore more or less normal citizens throughout the West had been
infected with a virulent strain of Russo-Nazi-engineered virus, because they simultaneously
began exhibiting the hallmark symptoms of what we now know as White Supremacist Behavioral
Disorder, or Fascist Oppositional Disorder (the folks who update the DSM are still arguing over
the official name). It started with the Brexit referendum, spread to America with the election
of Trump, and there have been a rash of outbreaks in Europe, like
the one we're currently experiencing in Germany . These fascistic symptoms have mostly
manifest as people refusing to vote as instructed, and expressing oppressive views on the
Internet, but there have also been more serious crimes, including several assaults and murders
perpetrated by white supremacists (which, of course, never happened when Obama was President,
because the Nazis hadn't been "emboldened" yet).
Now, despite what the Russian propagandists will tell you, this recent outbreak of
fascistic behavior has nothing whatsoever to do with these people's frustration with
neoliberalism or the supranational Corporatocracy that has been expanding its global empire
with total impunity for twenty-five years. And it definitely has nothing at all to do with
supranational political unions, or the supersession of national sovereignty by
corporate-concocted "free trade" agreements, or the relentless privatization of everything, or
the fear that a lot of people have that their cultures are being gradually erased and replaced
with a globalized, corporate-friendly, multicultural, market-based culture, which is merely a
simulation of culture, and which contains no actual cultural values (because exchange value is
its only operative value), but which sells the empty signifiers of their eviscerated cultural
values back to them so they can wear their "identities" like designer brands as they hunch
together in silence at Starbucks posting pictures of themselves on Facebook.
No, this discontent with the political establishment, corporate elites, and the
mainstream media has nothing to do with any of that. It's not like global Capitalism, following
the collapse of the U.S.S.R. (its last external ideological adversary), has been restructuring
the entire planet in accordance with its geopolitical interests, or doing away with national
sovereignty, and other nationalistic concepts that no longer serve a useful purpose in a world
where a single ideological system (one backed by the most fearsome military in history) reigns
completely unopposed. If that were the case, well, it might behoove us to question whether this
outbreak of Nazism, racism, and other forms of "hate," was somehow connected to that historical
development and maybe even try to articulate some sort of leftist analysis of that.
This hypothetical leftist analysis might want to focus on how Capitalism is fundamentally
opposed to Despotism, and is essentially a value-decoding machine which renders everything and
everyone it touches essentially valueless interchangeable commodities whose worth is determined
by market forces, rather than by societies and cultures, or religions, or other despotic
systems (wherein values are established and enforced arbitrarily, by the despot, the church, or
the ruling party, or by a group of people who share an affinity and decide they want to live a
certain way). This is where it would get sort of tricky, because it (i.e., this hypothetical
analysis) would have to delve into the history of Capitalism, and how it evolved out of
medieval Despotism, and how it has been decoding despotic values for something like five
hundred years. This historical delving (which would probably be too long for people to read on
their phones) would demonstrate how Capitalism has been an essentially progressive force in
terms of getting us out of Despotism (which, for most folks, wasn't very much fun) by fomenting
bourgeois revolutions and imposing some semblance of democracy on societies. It would follow
Capitalism's inexorable advance all the way up to the Twentieth Century, in which its final
external ideological adversary, fake Communism, suddenly imploded, delivering us to the world
we now live in a world where a single ideology rules the planet unopposed from without
, and where any opposition to that global ideology can only be internal, or insurgent, in
nature (e.g, terrorism, extremism, and so on). Being a hypothetical leftist analysis,
it would, at this point, need to stress that, despite the fact that Capitalism helped deliver
us from Despotism, and improved the state of society generally (compared to most societies that
preceded it), we nonetheless would like to transcend it, or evolve out of it toward some type
of society where people, and everything else, including the biosphere we live in, are not
interchangeable, valueless commodities exchanged by members of a global corporatocracy who have
no essential values, or beliefs, or principles, other than the worship of money. After having
covered all that, we might want to offer more a nuanced view of the current neo-nationalist
reaction to the Corporatocracy's ongoing efforts to restructure and privatize the rest of the
planet. Not that we would support this reaction, or in any way refrain from calling
neo-nationalism what it is (i.e., reactionary, despotic, and doomed), but this nuanced view
we'd hypothetically offer, by analyzing the larger sociopolitical and historical forces at
play, might help us to see the way forward more clearly, and who knows, maybe eventually
propose some kind of credible leftist alternative to the "global neoliberalism vs.
neo-nationalism" double bind we appear to be hopelessly stuck in at the moment.
Luckily, we don't have to do that (i.e., articulate such a leftist analysis of any such
larger historical forces). Because there is no corporatocracy not really. That's just a fake
word the Russians made up and are spreading around on the Internet to distract us while the
Nazis take over. No, the logical explanation for Trump, Brexit, and anything else that
threatens the expansion of global Capitalism, and the freedom, democracy, and prosperity it
offers, is that millions of people across the world, all at once, for no apparent reason, woke
up one day full-blown fascists and started looking around for repulsive demagogues to swear
fanatical allegiance to. Yes, that makes a lot more sense than all that complicated stuff about
history and hegemonic ideological systems, which is probably just Russian propaganda anyway, in
which case there is absolutely no reason to read any boring year-old pieces, like this one in TheEuropeanFinancialReview , or this report by
Corporate Watch , from way back in the year 2000, about the rise of global corporate
power.
So, apologies for wasting your time with all that pseudo-Marxian gobbledygook. Let's just
pretend this never happened, and get back to more important matters, like statistically proving
that Donald Trump got elected President because of racism, misogyny, transphobia, xenophobia,
or some other type of behavioral disorder, and pulling down Confederate statues, or kneeling
during the National Anthem, or whatever happens to be trending this week. Oh, yeah, and
debating punching Nazis, or people wearing MAGA hats. We definitely need to sort all that out
before we can move ahead with helping the Corporatocracy remove Trump from office, or at least
ensure he remains surrounded by their loyal generals, CEOs, and Goldman Sachs guys until the
next election. Whatever we do, let's not get distracted by that stuff I just distracted you
with. I know, it's tempting, but, given what's at stake, we need to maintain our laser focus on
issues related to identity politics, or else well, you know, the Nazis win.
C. J. Hopkins is an award-winning American playwright, novelist and satirist based in
Berlin. His plays are published by Bloomsbury Publishing (UK) and Broadway Play Publishing
(USA). His debut novel, ZONE 23 , is
published by Snoggsworthy, Swaine & Cormorant. He can reached at cjhopkins.com or consentfactory.org .
Yesterday evening on RT a USA lady, as usual forgot the name, spoke about the USA. In a
matter of fact tone she said things like 'they (Deep State) have got him (Trump) in the
box'.
They, Deep State again, are now wondering if they will continue to try to control the
world, or if they should stop the attempt, and retreat into the USA.
Also as matter of fact she said 'the CIA has always been the instrument of Deep State, from
Kenndy to Nine Eleven'.
Another statement was 'no president ever was in control'.
How USA citizens continue to believe they live in a democracy, I cannot understand.
Yesterday the intentions of the new Dutch government were made public, alas most Dutch
also dot not see that the Netherlands since 2005 no longer is a democracy, just a province of
Brussels.
Brexit is about Britons who want their country back, a movement indeed getting
stronger and stronger in EU member states, but ignored by the ruling 'elites'.
No doubt many do want their country back, but what concerns me is that all of a sudden we
have the concept of "independence" plastered all over the place. Such concepts don't get
promoted unless the ruling elites see ways to turn those sentiments to their favor.
A lot of these so called "revolutions" are fomented by the elite only to be subverted
and perverted by them in the end. They've had a lot of practice co-opting revolutions and
independence movements. (And everything else.)
"Independence" is now so fashionable (as was Communism among the "elite" back in the '30s),
that they are even teaching and fostering independence to kids in kindergarten here in the
US. That strikes me as most amusing. Imagine "learning" independence in state run
brainwashing factories.
"Now, despite what the Russian propagandists will tell you, this recent outbreak of
fascistic behavior has nothing whatsoever to do with these people's frustration with
neoliberalism or the supranational Corporatocracy that has been expanding its global empire
with total impunity for twenty-five years. And it definitely has nothing at all to do with
supranational political unions, or the supersession of national sovereignty by
corporate-concocted "free trade" agreements, or the relentless privatization of everything,
or the fear that a lot of people have that their cultures are being gradually erased and
replaced with a globalized, corporate-friendly, multicultural, market-based culture, which
is merely a simulation of culture, and which contains no actual cultural values (because
exchange value is its only operative value), but which sells the empty signifiers of their
eviscerated cultural values back to them so they can wear their "identities" like designer
brands as they hunch together in silence at Starbucks posting pictures of themselves on
Facebook."
Very impressed with this article, never really paid attention to CJ's articles but that is
now changing!
The paper is two years old. Looks how his prediction fared. Stagnation is still with us
althouth low oil prices lifted all the boats. But this period is coming to the end.
Notable quotes:
"... The financial crisis that erupted in 2008 challenged the foundations of orthodox economic theory and policy. At its outset, orthodox economists were stunned into silence as evidenced by their inability to answer the Queen of England's simple question (November 5th, 2008) to the faculty of the London School of Economics as to why no one foresaw the crisis. ..."
"... Six years later, orthodoxy has fought back and largely succeeded in blocking change of thought and policy. The result has been economic stagnation ..."
"... Perspective # 3 is the progressive position which is rooted in Keynesian economics and can be labeled the "destruction of shared prosperity hypothesis" ..."
"... It is identified with the New Deal wing of the Democratic Party and the labor movement, but it has no standing within major economics departments owing to their suppression of alternatives to economic orthodoxy. ..."
"... However, financial excess is just an element of the crisis and the full explanation is far deeper than just financial market regulatory failure According to the Keynesian destruction of shared prosperity hypothesis, the deep cause is generalized economic policy failure rooted in the flawed neoliberal economic paradigm that was adopted in the late 1970s and early 1980s. ..."
"... globalization reconfigured global production by transferring manufacturing from the U.S. and Europe to emerging market economies. This new global division of labor was then supported by having U.S. consumers serve as the global economy's buyer of first and last resort, which explains the U.S. trade deficit and the global imbalances problem. ..."
"... This new global division of labor inevitably created large trade deficits that also contributed to weakening the aggregate demand (AD)generation process by causing a hemorrhage of spending on imports (Palley, 2015) ..."
"... Finance does this through three channels. First, financial markets have captured control of corporations via enforcement of the shareholder value maximization paradigm of corporate governance. Consequently, corporations now serve financial market interests along with the interests of top management. Second, financial markets in combination with corporations lobby politically for the neoliberal policy mix. ..."
"... Third, financial innovation has facilitated and promoted financial market control of corporations via hostile take-overs, leveraged buyouts and reverse capital distributions. Financial innovation has therefore been key for enforcing Wall Street's construction of the shareholder value maximization paradigm. ..."
"... The second vital role of finance is the support of AD. The neoliberal model gradually undermined the income and demand generation process, creating a growing structural demand gap. The role of finance was to fill that gap. Thus, within the U.S., deregulation, financial innovation, speculation, and mortgage lending fraud enabled finance to fill the demand gap by lending to consumers and by spurring asset price inflation ..."
"... this AD generation role of finance was an unintended consequence and not part of a grand plan. Neoliberal economists and policymakers did not realize they were creating a demand gap, but their laissez-faire economic ideology triggered financial market developments that coincidentally filled the demand gap. ..."
"... the financial process they unleashed was inevitably unstable and was always destined to hit the wall. There are limits to borrowing and limits to asset price inflation and all Ponzi schemes eventually fall apart. ..."
"... the long duration of financial excess made the collapse far deeper when it eventually happened. It has also made escaping the after-effects of the financial crisis far more difficult as the economy is now burdened by debts and destroyed credit worthiness. That has deepened the proclivity to economic stagnation. ..."
"... The neoliberal labor market flexibility agenda explicitly attacks unions and works to shift income to wealthier households. ..."
"... That model inevitably produces stagnation because it produces a structural demand shortage via (i) its impact on income distribution, and (ii) via its design of globalization which generates massive trade deficits, wage competition and off-shoring of jobs and investment. In terms of the three-way contest between the government failure hypothesis, the market failure hypothesis and the destruction of shared prosperity hypothesis, the economic policy debate during the Great Recession was cast as exclusively between government failure and market failure. ..."
"... This attitude to fiscal policy reflects the dominance within the Democratic Party of "Rubinomics", the Wall Street view associated with former Treasury Secretary Robert Rubin, that government spending and budget deficits raise real interest rates and thereby lower growth. According to that view, the US needs long-term fiscal austerity to offset Social Security and Medicare Side-by-side with the attempt to reflate the economy, the Obama administration also pushed for major overhaul and tightening of financial sector regulation via the Dodd- Frank Act (2010). ..."
"... The Obama administration's softcore neoliberalism would have likely generated stagnation by itself, but the prospect has been further strengthened by Republicans. ..."
"... The Obama administration was to provide fiscal stimulus to jump start the economy; the Fed would use QE to blow air back into the asset price bubble; the Dodd-Frank Act (2010) would stabilize financial markets; and globalization would be deepened by further NAFTA-styled international agreements. This is a near-identical model to that which failed so disastrously. Consequently, stagnation is the logical prognosis. ..."
"... Consequently, the economy is destined to repeat the patterns of the 1990s and 2000s. However, the US economy has also experienced almost twenty more years of neoliberalism which has left its economic body in worse health than the 1990s. That means the likelihood of delivering another bubble-based boom is low and stagnation tendencies will likely reassert themselves after a shorter and weaker period of expansion ..."
This paper examines the major competing interpretations of the economic crisis in the US and
explains the rebound of neoliberal orthodoxy. It shows how US policymakers acted to stabilize
and save the economy, but failed to change the underlying neoliberal economic policy model.
That failure explains the emergence of stagnation, which is likely to endure
Current economic
conditions in the US smack of the mid-1990s. The 1990s expansion proved unsustainable and so
will the current modest expansion. However, this time it is unlikely to be followed by
financial crisis because of the balance sheet cleaning that took place during the last
crisis
Revised 1: This paper has been prepared for inclusion in Gallas, Herr, Hoffer and Scherrer
(eds.), Combatting Inequality: The Global North and South , Rouledge, forthcoming in
2015.
The crisis and the resilience of neoliberal economic orthodoxy
The financial crisis that erupted in 2008 challenged the foundations of orthodox economic
theory and policy. At its outset, orthodox economists were stunned into silence as evidenced by
their inability to answer the Queen of England's simple question (November 5th, 2008) to the
faculty of the London School of Economics as to why no one foresaw the crisis.
Six years later,
orthodoxy has fought back and largely succeeded in blocking change of thought and policy. The
result has been economic stagnation
This paper examines the major competing interpretations of
the economic crisis in the US and explains the rebound of neoliberal orthodoxy. It shows how US
policymakers acted to stabilize and save the economy, but failed to change the underlying
neoliberal economic policy model.
That failure explains the emergence of stagnation in the US
economy and stagnation is likely to endure.
Current economic conditions in the US smack of the
mid-1990s. The 1990s expansion proved unsustainable and so will the current modest expansion.
However, this time it is unlikely to be followed by financial crisis because of the balance
sheet cleaning that took place during the last crisis.
Competing explanations of the
crisis
The Great Recession, which began in December 2007 and includes the financial crisis of 2008,
is the deepest economic downturn in the US since the World War II. The depth of the downturn is
captured in Table 1 which shows the decline in GDP and the peak unemployment rate. The
recession has the longest duration and the decline in GDP is the largest. The peak unemployment
rate was slightly below the peak rate of the recession of 1981-82. However, this ignores the
fact that the labor force participation rate fell in the Great Recession (i.e. people left the
labor force and were not counted as unemployed) whereas it increased in the recession of
1981-82 (i.e. people entered the labor force and were counted as unemployed).
Table 1. Alternative measures of the depth of US recessions.
... ... ...
Table 2 provides data on the percent change in private sector employment from business cycle
peak to trough. The 7.6 percent loss of private sector jobs in the Great Recession dwarfs other
recessions, providing another measure of its depth and confirming it extreme nature. 2 Over the
course of the 1981-82 labor force participation rose from 63.8 percent to 64.2 percent, thereby
likely increasing the unemployment rate. In contrast, over the course of the Great Recession
the labor force participation rate fell from 66.0 percent to 65.7 percent, thereby likely
decreasing the unemployment. The decrease in the labor force participation rate was even
sharper for prime age (25 – 54 years old) workers, indicating that the decrease in the
overall participation rate was not due to demographic factors such as an aging population.
Instead, it was due to lack of job opportunities, which supports the claim that labor force
exit lowered the unemployment rate. Table 2. U.S. private employment cycles, peak to trough.
Source: Bureau of labor statistics and author's calculations.
... ... ...
Broadly speaking there exist three competing perspectives on the crisis (Palley, 2012).
Perspective # 1 is the hardcore neoliberal position which can be labeled the
"government failure hypothesis" . In the U.S. it is identified with the Republican
Party and with the economics departments of Stanford University, the University of Chicago,
and the University of Minnesota.
The hardcore neoliberal government failure argument is that
the crisis is rooted in the U.S. housing bubble and its bust. The claim is that the bubble
was due to excessively prolonged loose monetary policy and politically motivated government
intervention in the housing market aimed at increasing ownership. With regard to monetary
policy, the Federal Reserve pushed interest rates too low for too long following the
recession of 2001.
With regard to the housing market, government intervention via the
Community Reinvestment Act and Fannie Mae and Freddie Mac, drove up house prices and
encouraged homeownership beyond peoples' means.
Perspective # 2 is the softcore neoliberal position, which can be labeled the "market
failure hypothesis" . It is identified with the Obama administration, the Walls Street
and Silicon Valley wing of the Democratic Party, and economics departments such as those at
MIT, Yale and Princeton. In Europe it is identified with "Third Way" politics.
The softcore
neoliberal market failure argument is that the crisis is due to inadequate financial sector
regulation. First, regulators allowed excessive risk-taking by banks. Second, regulators
allowed perverse incentive pay structures within banks that encouraged management to engage
in "loan pushing" rather than "sound lending." Third, regulators pushed both deregulation and
self-regulation too far. Together, these failures contributed to financial misallocation,
including misallocation of foreign saving provided through the trade deficit, that led to
financial crisis. The crisis in turn deepened an ordinary recession, transforming it into the
Great Recession which could have become the second Great Depression absent the extraordinary
policy interventions of 2008-09
Perspective # 3 is the progressive position which is rooted in Keynesian economics and
can be labeled the "destruction of shared prosperity hypothesis".
It is identified
with the New Deal wing of the Democratic Party and the labor movement, but it has no
standing within major economics departments owing to their suppression of alternatives to
economic orthodoxy. The Keynesian "destruction of shared prosperity" argument is that
the crisis is rooted in the neoliberal economic paradigm that has guided economic policy for
the past thirty years. An important feature of the argument is that, though the U.S. is the
epicenter of the crisis, all countries are implicated as they all participated in the
adoption of a systemically flawed policy paradigm. That paradigm infected finance via
inadequate regulation, enabling financial excess that led to the financial crisis of 2008.
However, financial excess is just an element of the crisis and the full explanation is far
deeper than just financial market regulatory failure According to the Keynesian destruction
of shared prosperity hypothesis, the deep cause is generalized economic policy failure rooted
in the flawed neoliberal economic paradigm that was adopted in the late 1970s and early
1980s.
For the period 1945 - 1975 the U.S. economy was characterized by a "virtuous circle"
Keynesian growth model built on full employment and wage growth tied to productivity growth.
This model is illustrated in Figure 1 and its logic was as follows. Productivity growth drove
wage growth, which in turn fuelled demand growth and created full employment. That provided an
incentive for investment, which drove further productivity growth and supported higher wages.
This model held in the U.S. and, subject to local modifications, it also held throughout the
global economy - in Western Europe, Canada, Japan, Mexico, Brazil and Argentina.
Figure 1. The 1945 – 75 virtuous circle Keynesian growth model. Wage growth Demand
growth Full employment Productivity growth Investment
After 1980 the virtuous circle Keynesian
growth model was replaced by a neoliberal growth model. The reasons for the change are a
complex mix of economic, political and sociological reasons that are beyond the scope of the
current paper. The key changes wrought by the new model were:
Abandonment of the commitment
to full employment and the adoption of commitment to very low inflation;
Severing of the
link between wages and productivity growth.
Together, these changes created a new economic
dynamic. Before 1980, wages were the engine of U.S. demand growth. After 1980, debt and asset
price inflation became the engine The new economic model was rooted in neoliberal economic
thought. Its principal effects were to weaken the position of workers; strengthen the position
of corporations; and unleash financial markets to serve the interests of financial and business
elites.
As illustrated in figure 2, the new model can be described as a neoliberal policy box
that fences workers in and pressures them from all sides. On the left hand side, the corporate
model of globalization put workers in international competition via global production networks
that are supported by free trade agreements and capital mobility.
On the right hand side, the
"small" government agenda attacked the legitimacy of government and pushed persistently for
deregulation regardless of dangers. From below, the labor market flexibility agenda attacked
unions and labor market supports such as the minimum wage, unemployment benefits, employment
protections, and employee rights. From above, policymakers abandoned the commitment of full
employment, a development that was reflected in the rise of inflation targeting and the move
toward independent central banks influenced by financial interests.
Figure 2. The neoliberal
policy box. Globalization WORKERS Abandonment of full employment Small Government Labor Market
Flexibility
Corporate globalization is an especially key feature. Not only did it exert
downward inward pressures on economies via import competition and the threat of job
off-shoring, it also provided the architecture binding economies together. Thus, globalization
reconfigured global production by transferring manufacturing from the U.S. and Europe to
emerging market economies. This new global division of labor was then supported by having U.S.
consumers serve as the global economy's buyer of first and last resort, which explains the U.S.
trade deficit and the global imbalances problem.
This new global division of labor inevitably
created large trade deficits that also contributed to weakening the aggregate demand
(AD)generation process by causing a hemorrhage of spending on imports (Palley, 2015)
An
important feature of the Keynesian hypothesis is that the neoliberal policy box was implemented
on a global basis, in both the North and the South. As in the U.S., there was also a structural
break in policy regime in both Europe and Latin America. In Latin America , the International
Monetary Fund and World Bank played an important role as they used the economic distress
created by the 1980s debt crisis to push neoliberal policy
They did so by making financial
assistance conditional on adopting such policies. This global diffusion multiplied the impact
of the turn to neoliberal economic policy and it explains why the Washington Consensus enforced
by the International Monetary Fund and World Bank has been so significant. It also explains why
stagnation has taken on a global dimension.
III The role of finance in the neoliberal
model
Owing to the extraordinarily deep and damaging nature of the financial crisis of 2008,
financial market excess has been a dominant focus of explanations of the Great Recession.
Within the neoliberal government failure hypothesis the excess is attributed to ill-advised
government intervention and Federal Reserve interest rate policy. Within the neoliberal market
failure hypothesis it is attributed to ill-advised deregulation and failure to modernize
regulation.
According to the Keynesian destruction of shared prosperity hypothesis neither of
those interpretations grasps the true significance of finance. The government failure
hypothesis is empirically unsupportable (Palley, 2012a, chapter 6), while the market failure
hypothesis has some truth but also misses the true role of finance That role is illustrated in
Figure 3 which shows that finance performed two roles in the neoliberal model. The first was to
structurally support the neoliberal policy box. The second was to support the AD generation
process. These dual roles are central to the process of increasing financial domination of the
economy which has been termed financialization (Epstein, 2004, p.3; Krippner, 2004, 2005;
Palley, 2013). Figure 3. The role of finance in the neoliberal model. The role of finance:
"financialization" Supporting the neoliberal policy box Aggregate demand generation Corporate
behavior Economic policy Financial innovation The policy box shown in Figure 2 has four sides.
A true box has six sides and a four sided structure would be prone to structural weakness.
Metaphorically speaking, one role of finance is to provide support on two sides of the
neoliberal policy box, as illustrated in Figure 4.
Finance does this through three channels.
First, financial markets have captured control of corporations via enforcement of the
shareholder value maximization paradigm of corporate governance. Consequently, corporations now
serve financial market interests along with the interests of top management. Second, financial
markets in combination with corporations lobby politically for the neoliberal policy mix.
The
combination of changed corporate behavior and economic policy produces an economic matrix that
puts wages under continuous pressure and raises income inequality.
Third, financial innovation
has facilitated and promoted financial market control of corporations via hostile take-overs,
leveraged buyouts and reverse capital distributions. Financial innovation has therefore been
key for enforcing Wall Street's construction of the shareholder value maximization paradigm.
Figure 4. Lifting the lid on the neoliberal policy box. The neoliberal box Corporations
Financial markets
The second vital role of finance is the support of AD. The neoliberal model
gradually undermined the income and demand generation process, creating a growing structural
demand gap. The role of finance was to fill that gap. Thus, within the U.S., deregulation,
financial innovation, speculation, and mortgage lending fraud enabled finance to fill the
demand gap by lending to consumers and by spurring asset price inflation
Financialization
assisted with this process by changing credit market practices and introducing new credit
instruments that made credit more easily and widely available to corporations and households.
U.S. consumers in turn filled the global demand gap, along with help from U.S. and European
corporations who were shifting manufacturing facilities and investment to the emerging market
economies.
Three things should be emphasized.
First, this AD generation role of finance was an
unintended consequence and not part of a grand plan. Neoliberal economists and policymakers did
not realize they were creating a demand gap, but their laissez-faire economic ideology
triggered financial market developments that coincidentally filled the demand gap.
Second, the
financial process they unleashed was inevitably unstable and was always destined to hit the
wall. There are limits to borrowing and limits to asset price inflation and all Ponzi schemes
eventually fall apart. The problem is it is impossible to predict when they will fail. All that
can be known with confidence is that it will eventually fail.
Third, the process went on far
longer than anyone expected, which explains why critics of neoliberalism sounded like Cassandras (Palley, 1998, Chapter 12). However,
the long duration of financial excess made the
collapse far deeper when it eventually happened. It has also made escaping the after-effects of
the financial crisis far more difficult as the economy is now burdened by debts and destroyed
credit worthiness. That has deepened the proclivity to economic stagnation.
IV
Evidence
Evidence regarding the economic effects of the neoliberal model is plentiful and clear
Figure 5 shows productivity and average hourly compensation of non-supervisory workers (that is
non-managerial employees who are about 80 percent of the workforce). The link with productivity
growth was severed almost 40 years ago and hourly compensation has been essentially stagnant
since then.
Figure 5.
... ... ...
Table
3 shows data on the distribution of income growth by business cycle expansion across the
wealthiest top 10 percent and bottom 90 percent of households. Over the past sixty years there
has been a persistent decline in the share of income gains going to the bottom 90 percent of
households ranked by wealth. However, in the period 1948 – 1979 the decline was gradual.
After 1980 there is a massive structural break and the share of income gains going to the
bottom 90 percent collapses. Before 1980, on average the bottom 90 percent received 66 percent
of business cycle expansion income gains. After 1980, on average they receive just 8 percent.
Table 3. Distribution of income growth by business cycle expansion across the wealthiest top 10
percent and bottom 90 percent of households. Source: Tcherneva (2014), published in The New
York Times , September 26, 2014. '49- '53 '54- '57 '59- '60 '61- '69 '70- '73 '75- '79
'82- '90 '91- '00 '01- '07 '09- '12 Average Pre-1908 Average Post-1980 Top 10% 20% 28 32 33
43 45 80 73 98 116 34% 92% Bottom 90% 80% 72 68 67 57 55 20 27 2 -16 66% 8%
Figure 6
shows the share of total pre-tax income of the top one percent of households ranked by wealth.
From the mid-1930s, with the implementation of the New Deal social contract, that share fell
from a high of 23.94 percent in 1928 to a low of 8.95 percent in 1978. Thereafter it has
steadily risen, reaching 23.5 percent in 2007 which marked the beginning of the Great
Recession. It then fell during the Great Recession owing to a recession-induced fall in
profits, but has since recovered most of that decline as income distribution has worsened again
during the economic recovery. In effect, during the neoliberal era the US economy has retraced
its steps, reversing the improvements achieved by the New Deal and post-World War II
prosperity, so that the top one percent's share of pre-tax income has returned to pre-Great
Depression levels.
Figure 6. US pre-tax income share of top 1 percent. Source:
http://inequality.org/income-inequality/. Original source: Thomas Piketty and Emanuel Saez
(2003), updated at http://emlab.edu/users/saez.
As argued in Palley (2012a, p. 150-151) there
is close relationship between union membership density (i.e. percent of employed workers that
are unionized) and income distribution. This is clearly shown in Figure 7 which shows union
density and the share of pre-tax income going to the top ten percent of wealthiest households.
The neoliberal labor market flexibility agenda explicitly attacks unions and works to shift
income to wealthier households.
Share of income going to the top 10 percent 2013: 47.0% Union
membership density 11.2% 0% 10% 20% 30% 40% 50% 60% 1917 1923 1929 1935 1941 1947 1953 1959
1965 1971 1977 1983 1989 1995 2001 2007 2013 Source: Data on union density follows the
composite series found in Historical Statistics of the United States; updated to 2013 from
unionstats.com. Income inequality (share of income to top 10%) from Piketty and Saez,
"Income
Inequality in the United States, 1913-1998, Quarterly Journal of Economics , 118(1),
2003, 1-39. Updated Figure 7. Union membership and the share of income going to the top ten
percent of wealthiest households, 1917 – 2013. Source: Mishel, Gould and Bivens (2015).
Table 4 provides data on the evolution of the U.S. goods and services trade balance as a share
of GDP by business cycle peak. Comparison across peaks controls for the effect of the business
cycle. The data show through to the late 1970s U.S. trade was roughly in balance, but after
1980 it swung to massive deficit and the deficits increased each business cycle. These deficits
were the inevitable product of the neoliberal model of globalization (Palley, 2015) and they
undermined the AD generation process in accordance with the Keynesian hypothesis.
Table 4. The
U.S. goods & services trade deficit/surplus by business cycle peaks, 1960 – 2007.
Sources: Economic Report of the President, 2009 and author's calculations. Business cycle
peak year Trade balance ($ millions) GDP ($ billions) Trade balance/ GDP (%) 1960 3,508
526.4 0.7 1969 91 984.6 0.0 1973 1,900 1,382.7 0.1 1980 -25,500 2,789.5
-0.9 1981 -28,023 3,128.4 -0.9 1990 -111,037 5,803.1 -1.9 2001 -429,519
10,128.0 -4.2 2007 -819,373 13,807.5 -5.9
Finally, Figure 8 shows total domestic debt
relative to GDP and growth. This Figure is highly supportive of the Keynesian interpretation of
the role of finance. During the neoliberal era real GDP growth has actually slowed but debt
growth has exploded. The reason is the neoliberal model did nothing to increase growth, but it
needed faster debt growth to fill the demand gap created by the model's worsening of income
distribution and creation of large trade deficits. Debt growth supported debt-financed consumer
spending and it supported asset price inflation that enabled borrowing which filled the demand
gap caused by the neoliberal model. Figure 8. Total domestic debt and growth (1952-2007).
Source: Grantham, 2010.
V The debate about the causes of the crisis: why it matters
The importance of the debate about the causes of the crisis is that each perspective
recommends its own different policy response. For hardcore neoliberal government failure
proponents the recommended policy response is to double-down on the policies described by the
neoliberal policy box and further deregulate markets; to deepen central bank independence and
the commitment to low inflation via strict rules based monetary policy; and to further shrink
government and impose fiscal austerity to deal with increased government debt produced by the
crisis For softcore neoliberal market failure proponents the recommended policy response is to
tighten financial regulation but continue with all other aspects of the existing neoliberal
policy paradigm. That means continued support for corporate globalization, socalled labor
market flexibility, low inflation targeting, and fiscal austerity in the long term.
Additionally, there is need for temporary large-scale fiscal and monetary stimulus to combat
the deep recession caused by the financial crisis.
However, once the economy has recovered,
policy should continue with the neoliberal model For proponents of the destruction of shared
prosperity hypothesis the policy response is fundamentally different. The fundamental need is
to overthrow the neoliberal paradigm and replace it with a "structural Keynesian" paradigm.
That involves repacking the policy box as illustrated in Figure 9.
The critical step is to take
workers out of the box and put corporations and financial markets in so that they are made to
serve a broader public interest. The key elements are to replace corporate globalization with
managed globalization that blocks race to the bottom trade dynamics and stabilizes global
financial markets; restore a commitment to full employment; replace the neoliberal
anti-government agenda with a social democratic government agenda; and replace the neoliberal
labor market flexibility with a solidarity based labor market agenda.
The goals are restoration
of full employment and restoration of a solid link between wage and productivity growth.
Figure
9. The structural Keynesian box Corporations & Managed Financial Markets Globalization Full
Employment Social Democratic Government Solidarity Labor Markets
Lastly, since the neoliberal
model was adopted as part of a new global economic order, there is also need to recalibrate the
global economy. This is where the issue of "global rebalancing" enters and emerging market
economies need to shift away from export-led growth strategies to domestic demand-led
strategies. That poses huge challenges for many emerging market economies because they have
configured their growth strategies around export-led growth whereby they sell to U.S.
consumers.
VI From crisis to stagnation: the failure to change
Massive policy interventions, unequalled in the post-war era, stopped the Great Recession
from spiraling into a second Great Depression. The domestic economic interventions included the
2008 Troubled Asset Relief Program (TARP) that bailed out the financial sector via government
purchases of assets and equity from financial institutions; the 2009 American Recovery and
Reinvestment Act (ARRA) that provided approximately $800 billion of fiscal stimulus, consisting
of approximately $550 billion of government spending and $250 billion of tax cuts; the Federal
Reserve lowering its interest target to near-zero (0 - 0.25 percent); and the Federal Reserve
engaging in quantitative easing (QE) transactions that involve it purchasing government and
private sector securities. At the international level, in 2008 the Federal Reserve established
a temporary $620 billion foreign exchange (FX) swap facility with foreign central banks.
That
facility provided the global economy with dollar balances, thereby preventing a dollar
liquidity shortage from triggering a wave of global default on short-term dollar loans that the
financial system was unwilling to roll-over because of panic.3
Additionally, there was
unprecedented globally coordinated fiscal stimulus arranged via the G-20 mechanism. 3
The FX
swaps with foreign central banks have been criticized as being a bail-out for foreign
economies. In fact, they saved the US financial system which would have been pulled down by
financial collapse outside
Despite their scale, these interventions did not stop the recession
from being the deepest since 1945, and nor did they stop the onset of stagnation. Table 5 shows
how GDP growth has failed to recover since the end of the Great Recession, averaging just 2.1
percent for the five year period from 2010 – 2014. Furthermore, that period includes the
rebound year of 2010 when the economy rebounded from its massive slump owing to the
extraordinary fiscal and monetary stimulus measures that were put in place
Table 5. U.S. GDP
growth. Source: Statistical Annex of the European Union, Autumn 2014 and author's calculations.
The growth rate for 2014 is that estimated in October 2014.
Table 6 shows employment creation in the five years after the end of recessions, which provides
another window on stagnation. The job creation numbers show that the neoliberal model was
already slowing in the 1990s with the first episode of "jobless the US.
Many foreign banks
operating in the US had acquired US assets financed with short-term dollar borrowings. When the
US money market froze in 2008 they could not roll-over these loans in accordance with normal
practice. That threatened massive default by these banks within the US financial system, which
would have pulled down the entire global financial system.
The Federal Reserve could not lend
directly to these foreign banks and their governing central banks lacked adequate dollar
liquidity to fill the financing gap. The solution was to lend dollars to foreign central banks,
which then made dollar loans to foreign banks in need of dollar roll-over short-term financing.
recovery".
It actually ground to stagnation in the 2001 – 2007 period, but this was
masked by the house price bubble and the false prosperity it created. Stagnation has persisted
after the Great Recession, but the economic distress caused by the recession has finally
triggered awareness of stagnation among elites economists. In a sense, the Great Recession
called out the obvious, just as did the little boy in the Hans Anderson story about the
emperor's new suit
Table 6. U.S. private sector employment creation in the five year period
after the end of recessions for six business cycles with extended expansions. Source: Bureau of
labor statistics and author's calculations. * = January 1980 the beginning of the next
recession Recession end date Employment at recession end date (millions) Employment five years
later (millions) Percent growth in employment Feb 1961 45.0 52.2 16.0% Mar 1975 61.9 74.6*
20.5% Nov 1982 72.8 86.1 18.3% March 1991 90.1 99.5 10.4% Nov 2001 109.8 115.0 4.7% June 2009
108.4 117.1 8.0% The persistence of stagnation after the Great Recession raises the question
"why"? The answer is policy has done nothing to change the structure of the underlying
neoliberal economic model.
That model inevitably produces stagnation because it produces a
structural demand shortage via (i) its impact on income distribution, and (ii) via its design
of globalization which generates massive trade deficits, wage competition and off-shoring of
jobs and investment. In terms of the three-way contest between the government failure
hypothesis, the market failure hypothesis and the destruction of shared prosperity hypothesis,
the economic policy debate during the Great Recession was cast as exclusively between
government failure and market failure.
With the Democrats controlling the Congress and
Presidency after the 2008 election, the market failure hypothesis won out and has framed policy
since then. According to the hypothesis, the financial crisis caused an exceptionally deep
recession that required exceptionally large monetary and fiscal stimulus to counter it and
restore normalcy. Additionally, the market failure hypothesis recommends restoring and
renovating financial regulation, but other than that the neoliberal paradigm is appropriate and
should be deepened In accordance with this thinking, the in-coming Obama administration
affirmed existing efforts to save the system and prevent a downward spiral by supporting the
Bush administration's TARP, the Federal Reserve's first round of QE (November/December 2008)
that provided market liquidity, and the Federal Reserve's FX swap agreement with foreign
central banks
Thereafter, the Obama administration worked to reflate the economy via passage of
the ARRA (2009) which provided significant fiscal stimulus. With the failure to deliver a
V-shaped recovery, candidate Obama became even more vocal about fiscal stimulus However,
reflecting its softcore neoliberal inclinations, the Obama administration then became much less
so when it took office. Thus, the winners of the internal debate about fiscal policy in the
first days of the Obama administration were those wanting more modest fiscal stimulus.4
Furthermore, its analytical frame was one of temporary stimulus with the 4 Since 2009 there has
been some evolution of policy positions characterized by a shift to stronger support for fiscal
stimulus. This has been especially marked in Larry Summers, who was the Obama administration's
goal of long-term fiscal consolidation, which is softcore neoliberal speak for fiscal austerity
Seen in the above light, after the passage of ARRA (2009), the fiscal policy divide between the
Obama administration and hardcore neoliberal Republicans was about the speed and conditions
under which fiscal austerity should be restored.
This attitude to fiscal policy reflects the
dominance within the Democratic Party of "Rubinomics", the Wall Street view associated with
former Treasury Secretary Robert Rubin, that government spending and budget deficits raise real
interest rates and thereby lower growth. According to that view, the US needs long-term fiscal
austerity to offset Social Security and Medicare Side-by-side with the attempt to reflate the
economy, the Obama administration also pushed for major overhaul and tightening of financial
sector regulation via the Dodd- Frank Act (2010).
That accorded with the market failure
hypothesis's claim about the economic crisis and Great Recession being caused by financial
excess permitted by the combination of excessive deregulation, lax regulation and failure to
modernize regulation Finally, and again in accordance with the logic of the market failure
hypothesis, the Obama administration has pushed ahead with doubling-down and further
entrenching the neoliberal policy box. This is most visible in its approach to globalization.
In 2010, free trade agreements modelled after NAFTA were signed with South Korea, Colombia and
Panama. The Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment
Partnership (TTIP), two mega-agreements negotiated in secrecy and apparently bearing chief
economic adviser when it took office. This shift has become a way of rewriting history by
erasing the memory of initial positions. That is also true of the IMF which in 2010-2011 was a
robust supporter of fiscal consolidation in Europe. similar hallmarks to prior trade
agreements, are also being pushed by the Obama administration
The Obama administration's softcore neoliberalism would have likely generated stagnation by itself, but the prospect has
been further strengthened by Republicans.
Thus, in accordance with their point of view,
Republicans have persistently pushed the government failure hypothesis by directing the policy
conversation to excessive regulation and easy monetary policy as the causes of the crisis.
Consequently, they have consistently opposed strengthened financial regulation and demands for
fiscal stimulus.
At the same time, they have joined with softcore neoliberal Democrats
regarding doubling-down on neoliberal box policies, particularly as regards trade and
globalization Paradoxically, the failure to change the overall economic model becomes most
visible by analyzing the policies of the Federal Reserve, which have changed the most
dramatically via the introduction of QE. The initial round of QE (QE1) was followed by QE2 in
November 2010 and QE3 in September 2012, with the Fed shifting from providing short-term
emergency liquidity to buying private sector financial assets.
The goal was to bid up prices of
longer term bonds and other securities, thereby lowering interest rates on longer-term
financing and encouraging investors to buy equities and other riskier financial assets. The
Fed's reasoning was lower long-term rates would stimulate the economy, and higher financial
asset prices would trigger a positive wealth effect on consumption spending. This makes clear
the architecture of policy.
The Obama administration was to provide fiscal stimulus to jump
start the economy; the Fed would use QE to blow air back into the asset price bubble; the
Dodd-Frank Act (2010) would stabilize financial markets; and globalization would be deepened by
further NAFTA-styled international agreements. This is a near-identical model to that which
failed so disastrously. Consequently, stagnation is the logical prognosis.
VII
Déjà vu all over again: back to the 1990s but with a weaker economy
The exclusion of the destruction of shared prosperity hypothesis, combined with the joint
triumph of the market failure and government failure hypotheses, means the underlying economic
model that produced the Great Recession remains essentially unchanged. That failure to change
explains stagnation. It also explains why current conditions smack of "déjà vu
all over again" with the US economy in 2014-15 appearing to have returned to conditions
reminiscent of the mid-1990s.
Just as the 1990s failed to deliver durable prosperity, so too
current optimistic conditions will prove unsustainable absent deeper change The
déjà vu similarities are evident
in the large US trade deficit that has started
to again deteriorate rapidly;
a return of the over-valued dollar problem that promises to
further increase the trade deficit and divert jobs and investment away from the US economy;
a
return to reliance on asset price inflation and house price increases to grow consumer demand
and construction;
a return of declining budget deficits owing to continued policy disposition
toward fiscal austerity; a return of the contradiction that has the Federal Reserve tighten
monetary policy when economic strength triggers rising prices and wages that bump against the
ceiling of the Fed's self-imposed 2 percent inflation target; and renewal of the push for
neoliberal trade agreements
All of these features mean both policy context and policy design
look a lot like the mid-1990s. The Obama administration saved the system but did not change it
Consequently, the economy is destined to repeat the patterns of the 1990s and 2000s. However,
the US economy has also experienced almost twenty more years of neoliberalism which has left
its economic body in worse health than the 1990s. That means the likelihood of delivering
another bubble-based boom is low and stagnation tendencies will likely reassert themselves
after a shorter and weaker period of expansion
This structurally weakened state of the US
economy is evident in the further worsening of income inequality that has occurred during the
Great Recession and subsequent slow recovery.
... ... ...
Thomas I. Palley, Senior Economic Policy Advisor, AFL-CIO Washington, D.C. mail@thomaspalley.com
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. ..."
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.
"... 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' ? ..."
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
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.
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
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.
Perhaps you could explain to me what exactly it is that these socialists are doing that is
so useful?
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).
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%.
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.
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.
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 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".
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?
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.
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
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.
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
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.
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')
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.
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.
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?
' 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.
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.
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?
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.
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.
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.
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?
"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!
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Among interesting ideas that Mirkowski presented in this lecture are "privatization of science" -- when well paid
intellectual prostitutes produce the reuslt which are expected by their handlers. the other is his thought
on the difference between neoclassical economics and neoliberalism. Neoliberalism believes in state
intervention and this intervention should take the form of enforcing market on all spheres of human
society.
Another interesting idea that neoliberalism in many cases doe not need the success of its ideas.
The failure can also be exploited for enforcing "more market" on the society.
In other words market fundamentalism has all features of civil religion and like in Middle Ages
it is enforced from above. heretics are not burned at the stake but simply ostracized.
Notable quotes:
"... how it is that science came to be subordinate to economics and the very future of nature to be contingent upon the market. ..."
"... As a leading exponent of the Institutional school, he has published formal treatments of financial markets that update Minsky's 'financial instability hypothesis' for the world of computerised derivative trading. ..."
Life and Debt: Living through the Financialisation of the Biosphere
How can it be that the climate crisis, the biodiversity crisis and the deepest financial crisis
since 1930s have done so little to undermine the supremacy of orthodox economics?
The lecture will preview material from Mirowski's new book: Never Lt a Serious Crisis Go to Waste:
How Neoliberalism Survived the Financial Meltdown (Verso, 2013).
In this lecture, Professor Mirowski responds to the question of how it is that science came
to be subordinate to economics and the very future of nature to be contingent upon the market.
Charting the contradictions of the contemporary political landscape, he notes that science denialism,
markets for pollution permits and proposals for geo-engineering can all be understood as political
strategies designed to neutralize the impact of environmentalism, as they all originated in the network
of corporate-sponsored think-tanks that have made neoliberal accounts of society, politics and the
economy so prevalent that even the most profound crises are unable to shake their grip on the political
imagination.
For those of us who are still paying attention, the task of constructing an alternative politics
of science and markets is a vital one.
Philip Mirowski is Carl E. Koch Professor at the University of Notre Dame, Indiana. His most famous
book, More Heat Than Light: Economics as Social Physics (1989) established his reputation as a formidable
critic of the scientific status of neoclassical economics. His Machine Dreams: Economics becomes
a Cyborg Science (2002) presents a history of the Cold War consolidation of American economic orthodoxy
in the same intellectual milieu that produced systems theory, the digital computer, the atomic bomb,
the strategy of Mutually Assured Destruction, and the 'think tank'. The Road from Mont Pelerin: the
Making of the Neoliberal Thought Collective (with Dieter Plewhe, 2009), drawn from the archives of
the Mont Pelerin Society and the Chicago School, presents a scholarly history of neoliberalism: the
political movement initiated by Friedrich Hayek and Milton Friedman in the 1940s, which has since
become the world's dominant philosophy of government.
As a leading exponent of the Institutional school, he has published formal treatments of financial
markets that update Minsky's 'financial instability hypothesis' for the world of computerised derivative
trading.
This lecture is presented by the UTS Cosmopolitan Civil Societies Research Centre and the Australian
Working Group on Financialisation at the University of Sydney.
"... Following Frances Fox Piven, "neoliberal economic policies" refers to the set of policies carried out, in the name of individualism and unfettered markets, for "the deregulation of corporations, and particularly of financial institutions; the rollback of public services and benefit programs; curbing labor unions; 'free trade' policies that would pry open foreign markets; and wherever possible the replacement of public programs with private markets" (Piven, 2007: 13). ..."
"... The case of the United States is particularly useful to examine because its elites have projected themselves as "first among equals" of the globalization project ( Bello , 2006), and it is the place of the Global North where the neoliberal project has been pursued most resolutely and has advanced the farthest. In other words, the experiences of American workers illuminate the affects of the neoliberal project in the Global North to the greatest extent, and suggest what will happen to working people in other northern countries should they accept their respective government's adoption of such policies. ..."
"... However, it is believed that the implementation of these neoliberal economic policies and the cultural wars to divert public attention are part of a larger, conscious political program by the elites within this country that is intended to prevent re-emergence of the collective solidarity among the American people that we saw during the late 1960s-early 1970s (see Piven, 2004, 2007) -- of which the internal breakdown of discipline within the US military, in Vietnam and around the world, was arguably the most crucial (see Moser, 1996; Zeiger, 2006) -- that ultimately challenged, however inchoately, the very structure of the established social order, both internationally and in the United States itself. ..."
Most contemporary discussions of globalization, and especially of the impact of neoliberal economic
policies, focus on the countries of the Global South (see, for example, Bond, 2005; Ellner and Hellinger,
eds., 2003; a number of articles in Harris, ed., 2006; Klein, 2007; Monthly Review, 2007;
and, among others, see Scipes, 1999, 2006b). Recent articles arguing that the globalization project
has receded and might be taking different approaches (Bello, 2006; Thornton, 2007) have also focused
on the Global South. What has been somewhat discussed (see Giroux, 2004; Piven, 2004; Aronowitz,
2005) but not systematically addressed, however, is what has been the impact of globalization and
especially related neoliberal economic policies on working people in a northern country?
[i]
This paper specifically addresses this question by looking at the impact of neoliberal economic
policies on working people in the United States . Following Frances Fox Piven, "neoliberal economic
policies" refers to the set of policies carried out, in the name of individualism and unfettered
markets, for "the deregulation of corporations, and particularly of financial institutions; the rollback
of public services and benefit programs; curbing labor unions; 'free trade' policies that would pry
open foreign markets; and wherever possible the replacement of public programs with private markets"
(Piven, 2007: 13).
The case of the United States is particularly useful to examine because its elites have projected
themselves as "first among equals" of the globalization project ( Bello , 2006), and it is the place
of the Global North where the neoliberal project has been pursued most resolutely and has advanced
the farthest. In other words, the experiences of American workers illuminate the affects of the neoliberal
project in the Global North to the greatest extent, and suggest what will happen to working people
in other northern countries should they accept their respective government's adoption of such policies.
However, care must be taken as to how this is understood. While sociologically-focused textbooks
(e.g., Aguirre and Baker, eds., 2008; Hurst, 2007) have joined together some of the most recent thinking
on social inequality -- and have demonstrated that inequality not only exists but is increasing --
this has been generally presented in a national context; in this case, within the United States.
And if they recognize that globalization is part of the reason for increasing inequality, it is generally
included as one of a set of reasons.
This paper argues that we simply cannot understand what is happening unless we put developments
within a global context: the United States effects, and is affected by, global processes.
Thus, while some of the impacts can be understood on a national level, we cannot ask related questions
as to causes -- or future consequences -- by confining our examination to a national level: we absolutely
must approach this from a global perspective (see Nederveen Pieterse, 2004, 2008).
This also must be put in historical perspective as well, although the focus in this piece will
be limited to the post-World War II world. Inequality within what is now the United States today
did not -- obviously -- arise overnight. Unquestionably, it began at least 400 years ago in Jamestown
-- with the terribly unequal and socially stratified society of England's colonial Virginia before
Africans were brought to North America (see Fischer, 1989), much less after their arrival in
1619, before the Pilgrims. Yet, to understand the roots of development of contemporary social
inequality in the US , we must understand the rise of " Europe " in relation to the rest of the world
(see, among others, Rodney, 1972; Nederveen Pieterse, 1989). In short, again, we have to understand
that the development of the United States has been and will always be a global project and, without
recognizing that, we simply cannot begin to understand developments within the United States .
We also have to understand the multiple and changing forms of social stratification and resulting
inequalities in this country. This paper prioritizes economic stratification, although is not limited
to just the resulting inequalities. Nonetheless, it does not focus on racial, gender or any other
type of social stratification. However, this paper is not written from the perspective that economic
stratification is always the most important form of stratification, nor from the perspective
that we can only understand other forms of stratification by understanding economic stratification:
all that is being claimed herein is that economic stratification is one type of social stratification,
arguably one of the most important types yet only one of several, and investigates the issue of economic
stratification in the context of contemporary globalization and the neoliberal economic policies
that have developed to address this phenomenon as it affects the United States.
Once this global-historical perspective is understood and after quickly suggesting in the "prologue"
why the connection between neoliberal economic policies and the affects on working people
in the United States has not been made usually, this paper focuses on several interrelated issues:
(1) it reports the current economic situation for workers in the United States; (2) it provides a
historical overview of US society since World War II; (3) it analyzes the results of US Government
economic policies; and (4) it ties these issues together. From that, it comes to a conclusion about
the affects of neoliberal economic policies on working people in the United States .
Prologue: Origins of neoliberal economic policies in the United States
As stated above, most of the attention directed toward understanding the impact of neoliberal
economic policies on various countries has been confined to the countries of the Global South. However,
these policies have been implemented in the United States as well. This arguably began in 1982, when
the Chairman of the US Federal Reserve, Paul Volcker, launched a vicious attack on inflation -- and
caused the deepest US recession since the Great Depression of the late 1920s-1930s.
However, these neoliberal policies have been implemented in the US perhaps more subtly than in
the Global South. This is said because, when trying to understand changes that continue to take place
in the United States, these economic policies are hidden "under" the various and sundry "cultural
wars" (around issues such as drugs, premarital sex, gun control, abortion, marriages for gays and
lesbians) that have been taking place in this country and, thus, not made obvious: most Americans,
and especially working people, are not aware of the changes detailed below.
[ii]
However, it is believed that the implementation of these neoliberal economic policies and
the cultural wars to divert public attention are part of a larger, conscious political program
by the elites within this country that is intended to prevent re-emergence of the collective solidarity
among the American people that we saw during the late 1960s-early 1970s (see Piven, 2004, 2007) --
of which the internal breakdown of discipline within the US military, in Vietnam and around
the world, was arguably the most crucial (see Moser, 1996; Zeiger, 2006) -- that ultimately challenged,
however inchoately, the very structure of the established social order, both internationally and
in the United States itself. Thus, we see both Democratic and Republican Parties in agreement
to maintain and expand the US Empire (in more neutral political science-ese, a "uni-polar world"),
but the differences that emerge within each party and between each party are generally confined to
how this can best be accomplished. While this paper focuses on the economic and social changes going
on, it should be kept in mind that these changes did not "just happen": conscious political decisions
have been made that produced social results (see Piven, 2004) that make the US experience -- at the
center of a global social order based on an "advanced" capitalist economy -- qualitatively different
from experiences in other more economically-developed countries.
So, what has been the impact of these policies on workers in the US?
1) The current situation for workers and growing economic inequality
Steven Greenhouse of The New York Times published a piece on September 4, 2006, writing
about entry-level workers, young people who were just entering the job market. Mr. Greenhouse noted
changes in the US economy; in fact, there have been substantial changes since early 2000, when the
economy last created many jobs.
Median incomes for families with one parent age 25-34 fell 5.9 per cent between 2000-2005.
It had jumped 12 per cent during the late '90s. (The median annual income for these families today
is $48,405.)
Between 2000-2005, entry-level wages for male college graduates fell by 7.3 per cent (to $19.72/hr)
Entry-level wages for female college graduates fell by 3.5 per cent (to $17.08)
Entry-level wages for male high school graduates fell by 3.3 per cent (to $10.93)
Entry-level wages for female high school graduates fell by 4.9 per cent (to $9.08)
Yet, the percentage drop in wages hides the growing gap between college and high school graduates.
Today, on average, college grads earn 45 per cent more than high school graduates, where the gap
had "only" been 23 per cent in 1979: the gap has doubled in 26 years (Greenhouse, 2006b).
A 2004 story in Business Week found that 24 per cent of all working Americans received
wages below the poverty line ( Business Week , 2004).
[iii] In January 2004, 23.5 million
Americans received free food from food pantries. "The surge for food demand is fueled by several
forces -- job losses, expired unemployment benefits, soaring health-care and housing costs, and the
inability of many people to find jobs that match the income and benefits of the jobs they had." And
43 million people were living in low-income families with children (Jones, 2004).
A 2006 story in Business Week found that US job growth between 2001-2006 was really based
on one industry: health care. Over this five-year period, the health-care sector has added 1.7 million
jobs, while the rest of the private sector has been stagnant. Michael Mandel, the economics editor
of the magazine, writes:
information technology, the great electronic promise of the 1990s, has turned into one of
the greatest job-growth disappointments of all time. Despite the splashy success of companies
such as Google and Yahoo!, businesses at the core of the information economy -- software, semi-conductors,
telecom, and the whole range of Web companies -- have lost more than 1.1 million jobs in the past
five years. These businesses employ fewer Americans today than they did in 1998, when the Internet
frenzy kicked into high gear (Mandel, 2006: 56) .
In fact, "take away health-care hiring in the US, and quicker than you can say cardiac bypass,
the US unemployment rate would be 1 to 2 percentage points higher" (Mandel, 2006: 57).
There has been extensive job loss in manufacturing. Over 3.4 million manufacturing jobs have been
lost since 1998, and 2.9 million of them have been lost since 2001. Additionally, over 40,000 manufacturing
firms have closed since 1999, and 90 per cent have been medium and large shops. In labor-import intensive
industries, 25 per cent of laid-off workers remain unemployed after six months, two-thirds of them
who do find new jobs earn less than on their old job, and one-quarter of those who find new jobs
"suffer wage losses of more than 30 percent" (AFL-CIO, 2006a: 2).
The AFL-CIO details the US job loss by manufacturing sector in the 2001-05 period:
Computer and electronics: 543,000 workers or 29.2 per cent
Semiconductor and electronic components: 260,100 or 36.7 per cent
Electrical equipment and appliances: 152,500 or 26 per cent
Vehicle parts: 153,400 or 18.6 per cent
Machinery: 289,400 or 19.9 per cent
Fabricated metal products: 235,200 or 13.3 per cent
Primary metals: 144,800 or 23.5 per cent
Transportation equipment: 246,300 or 12.1 per cent
Furniture products: 58,500 or 13.4 per cent
Textile mills: 158,500 or 43.1 per cent
Apparel 220,000 or 46.6 per cent
Leather products: 24,700 or 38.3 per cent
Printing: 159,300 or 19.9 per cent
Paper products: 122,600 or 20.4 per cent
Plastics and rubber products: 141,400 or 15 per cent
Chemicals: 94,900 or 9.7 per cent
Aerospace: 46,900 or 9.1 per cent
Textiles and apparel declined by 870,000 jobs 1994-2006, a decline of 65.4 per cent (AFL-CIO,
2006a: 2).
As of the end of 2005, only 10.7 per cent of all US employment was in manufacturing -- down from
21.6 per cent at its height in 1979 -- in raw numbers, manufacturing employment totaled 19.426 million
in 1979, 17.263 million in 2000, and 14.232 million in 2005.
[iv] The number of production workers
in this country at the end of 2005 was 9.378 million.
[v] This was only slightly above
the 9.306 million production workers in 1983, and was considerably below the 11.463 million as recently
as 2000 (US Bureau of Labor Statistics, 2006b). As one writer puts it, this is "the biggest long-term
trend in the economy: the decline of manufacturing." He notes that employment in the durable goods
(e.g., cars and cable TV boxes) category of manufacturing has declined from 19 per cent of all employment
in 1965 to 8 per cent in 2005 (Altman, 2006). And at the end of 2006, only 11.7 per cent of all manufacturing
workers were in unions (US Bureau of Labor Statistics, 2007).
In addition, in 2004 and 2005, "the real hourly and weekly wages of US manufacturing workers have
fallen 3 per cent and 2.2 per cent respectively" (AFL-CIO, 2006a: 2).
The minimum wage level went unchanged for nine years: until recently when there was a small increase
-- to $5.85 an hour on July 24, 2007 -- US minimum wage had remained at $5.15 an hour since September
1, 1997 . During that time, the cost of living rose 26 percent. After adjusting for inflation, this
was the lowest level of the minimum wage since 1955. At the same time, the minimum wage was only
31 per cent of the average pay of non-supervisory workers in the private sector, which is the lowest
share since World War II (Bernstein and Shapiro, 2006).
In addition to the drop in wages at all levels, fewer new workers get health care benefits with
their jobs: [vi] in 2005, 64 per
cent of all college grads got health coverage in entry-level jobs, where 71 per cent had gotten it
in 2000 -- a 7 per cent drop in just five years. Over a longer term, we can see what has happened
to high school grads: in 1979, two-thirds of all high school graduates got health care coverage in
entry-level jobs, while only one-third do today (Greenhouse, 2006b). It must be kept in mind that
only about 28 per cent of the US workforce are college graduates -- most of the work force only has
a high school degree, although a growing percentage of them have some college, but not college degrees.
Because things have gotten so bad, many young adults have gotten discouraged and given up. The
unemployment rate is 4.4 per cent for ages 25-34, but 8.2 per cent for workers 20-24. (Greenhouse,
2006b).
Yet things are actually worse than that. In the US , unemployment rates are artificially low.
If a person gets laid off and gets unemployment benefits -- which fewer and fewer workers even get
-- they get a check for six months. If they have not gotten a job by the end of six months -- and
it is taking longer and longer to get a job -- and they have given up searching for work, then not
only do they loose their unemployment benefits, but they are no longer counted as unemployed: one
doesn't even count in the statistics!
A report from April 2004 provides details. According to the then-head of the US Federal Reserve
System, Alan Greenspan, "the average duration of unemployment increased from twelve weeks in September
2000 to twenty weeks in March [2004]" (quoted in Shapiro, 2004: 4). In March 2004, 354,000 jobs workers
had exhausted their unemployment benefits, and were unable to get any additional federal unemployment
assistance: Shapiro (2004: 1) notes, "In no other month on record, with data available back to 1971,
have there been so many 'exhaustees'."
Additionally, although it's rarely reported, unemployment rates vary by racial grouping. No matter
what the unemployment rate is, it really only reflects the rate of whites who are unemployed because
about 78 per cent of the workforce is white. However, since 1954, the unemployment rate of African-Americans
has always been more than twice that of whites, and Latinos are about 1 1/2 times that of whites.
So, for example, if the overall rate is five percent, then it's at least ten per cent for African-Americans
and 7.5 per cent for Latinos.
However, most of the developments presented above -- other than the racial affects of unemployment
-- have been relatively recent. What about longer term? Paul Krugman, a Nobel Prize-winning Princeton
University economist who writes for The New York Times, pointed out these longer term affects:
non-supervisory workers make less in real wages today (2006) than they made in 1973! So, after inflation
is taken out, non-supervisory workers are making less today in real terms that their contemporaries
made 33 years ago (Krugman, 2006b). Figures provided by Stephen Franklin -- obtained from the US
Bureau of Statistics, and presented in 1982 dollars -- show that a production worker in January 1973
earned $9.08 an hour -- and $8.19 an hour in December 2005 (Franklin, 2006). Workers in 2005 also
had less long-term job security, fewer benefits, less stable pensions (when they have them), and
rising health care costs. [vii]
In short, the economic situation for "average Americans" is getting worse. A front-page story
in the Chicago Tribune tells about a worker who six years ago was making $29 an hour, working
at a nuclear power plant. He got laid off, and now makes $12.24 an hour, working on the bottom tier
of a two-tiered unionized factory owned by Caterpillar, the multinational earth moving equipment
producer, which is less than half of his old wages. The article pointed out, "Glued to a bare bones
budget, he saved for weeks to buy a five-pack of $7 T-shirts" ( Franklin , 2006).
As Foster and Magdoff point out:
Except for a small rise in the late 1990s, real wages have been sluggish for decades. The
typical (median-income) family has sought to compensate for this by increasing the number of jobs
and working hours per household. Nevertheless, the real (inflation-adjusted) income of the typical
household fell for five years in a row through 2004 (Foster and Magdoff, 2009: 28).
A report by Workers Independent News (WIN) stated that while a majority of metropolitan
areas have regained the 2.6 million jobs lost during the first two years of the Bush Administration,
"the new jobs on average pay $9,000 less than the jobs replaced," a 21 per cent decline from $43,629
to $34,378. However, WIN says that "99 out of the 361 metro areas will not recover jobs before 2007
and could be waiting until 2015 before they reach full recovery" (Russell, 2006).
At the same time, Americans are going deeper and deeper into debt. At the end of 2000, total US
household debt was $7.008 trillion, with home mortgage debt being $4.811 trillion and non-mortgage
debt $1.749 trillion; at the end of 2006, comparable numbers were a total of $12.817 trillion; $9.705
trillion (doubling since 2000); and $2.431 trillion (US Federal Reserve, 2007-rounding by author).
Foster and Magdoff (2009: 29) show that this debt is not only increasing, but based on figures from
the Federal Reserve, that debt as a percentage of disposable income has increased overall from 62%
in 1975 to 96.8% in 2000, and to 127.2% in 2005.
Three polls from mid-2006 found "deep pessimism among American workers, with most saying that
wages were not keeping pace with inflation, and that workers were worse off in many ways than a generation
ago" (Greenhouse, 2006a). And, one might notice, nothing has been said about increasing gas prices,
lower home values, etc. The economic situation for most working people is not looking pretty.
In fact, bankruptcy filings totaled 2.043 million in 2005, up 31.6 per cent from 2004 (Associated
Press, 2006), before gas prices went through the ceiling and housing prices began falling in mid-2006.
Yet in 1998, writers for the Chicago Tribune had written, " the number of personal bankruptcy
filings skyrocketed 19.5 per cent last year, to an all-time high of 1,335,053, compared with 1,117,470
in 1996" (Schmeltzer and Gruber, 1998).
And at the same time, there were 37 million Americans in poverty in 2005, one of out every eight.
Again, the rates vary by racial grouping: while 12.6 per cent of all Americans were in poverty, the
poverty rate for whites was 8.3 percent; for African Americans, 24.9 per cent were in poverty, as
were 21.8 per cent of all Latinos. (What is rarely acknowledged, however, is that 65 per cent of
all people in poverty in the US are white.) And 17.6 per cent of all children were in poverty (US
Census Bureau, 2005).
What about the "other half"? This time, Paul Krugman gives details from a report by two Northwestern
University professors, Ian Dew-Becker and Robert Gordon, titled "Where Did the Productivity Growth
Go?" Krugman writes:
Between 1973 and 2001, the wage and salary income of Americans at the 90th percentile
of the income distribution rose only 34 percent, or about 1 per cent per year. But income at the
99th percentile rose 87 percent; income at the 99.9th percentile rose 181 percent; and income
at the 99.99th percentile rose 497 percent. No, that's not a misprint. Just to give you a sense
of who we're talking about: the nonpartisan Tax Policy Center estimates that this year, the 99th
percentile will correspond to an income of $402,306, and the 99.9th percentile to an income of
$1,672,726. The Center doesn't give a number for the 99.99th percentile, but it's probably well
over $6 million a year (Krugman, 2006a) .
But how can we understand what is going on? We need to put take a historical approach to understand
the significance of the changes reported above.
(2) A historical look at the US social order since World War II
When considering the US situation, it makes most sense to look at "recent" US developments, those
since World War II. Just after the War, in 1947, the US population was about six per cent of the
world's total. Nonetheless, this six per cent produced about 48 per cent of all goods and services
in the world! [viii] With Europe
and Japan devastated, the US was the only industrialized economy that had not been laid waste. Everybody
needed what the US produced -- and this country produced the goods, and sent them around the world.
At the same time, the US economy was not only the most productive, but the rise of the industrial
union movement in the 1930s and '40s -- the CIO (Congress of Industrial Organizations) -- meant that
workers had some power to demand a share of the wealth produced. In 1946, just after the war, the
US had the largest strike wave in its history: 116,000,000 production days were lost in early 1946,
as industry-wide strikes in auto, steel, meat packing, and the electrical industry took place across
the United States and Canada , along with smaller strikes in individual firms. Not only that, but
there were general strikes that year in Oakland , California and Stamford , Connecticut . Workers
had been held back during the war, but they demonstrated their power immediately thereafter (Lipsitz,
1994; Murolo and Chitty, 2001). Industry knew that if it wanted the production it could sell, it
had to include unionized workers in on the deal.
It was this combination -- devastated economic markets around the world and great demand for goods
and services, the world's most developed industrial economy, and a militant union movement -- that
combined to create what is now known as the "great American middle class."
[ix]
To understand the economic impact of these factors, changes in income distribution in US society
must be examined. The best way to illuminate this is to assemble family data on income or wealth
[x] -- income data is more available,
so that will be used; arrange it from the smallest amount to the largest; and then to divide the
population into fifths, or quintiles. In other words, arrange every family's annual income from the
lowest to the highest, and divide the total number of family incomes into quintiles or by 20 percents
(i.e., fifths). Then compare changes in the top incomes for each quintile. By doing so, one can then
observe changes in income distribution over specified time periods.
The years between 1947 and 1973 are considered the "golden years" of the US society.
[xi] The values are presented
in 2005 dollars, so that means that inflation has been taken out: these are real dollar values,
and that means these are valid comparisons.
Figure 1: US family income, in US dollars, growth and istribution, by quintile, 1947-1973 compared
to 1973-2001, in 2005 dollars
Source: US Commerce Department, Bureau of the Census (hereafter, US Census Bureau) at
www.census.gov/hhes/www/income/histinc/f01ar.html
. All dollar values converted to 2005 dollars by US Census Bureau, removing inflation and comparing
real values. Differences and percentages calculated by author. Percentages shown in both rows labeled
"Difference" show the dollar difference as a percentage of the first year of the comparison.
Data for the first period, 1947-1973 -- the data above the grey line -- shows there was
considerable real economic growth for each quintile . Over the 26-year period, there was approximately
100 per cent real economic growth for the incomes at the top of each quintile, which meant incomes
doubled after inflation was removed; thus, there was significant economic growth in the society.
And importantly, this real economic growth was distributed fairly evenly . The data in
the fourth line (in parentheses) is the percentage relationship between the difference between 1947-1973
real income when compared to the 1947 real income, with 100 per cent representing a doubling of real
income: i.e., the difference for the bottom quintile between 1947 and 1973 was an increase
of $11,386, which is 97 per cent more than $11,758 that the top of the quintile had in 1947. As can
be seen, other quintiles also saw increases of roughly comparable amounts: in ascending order, 100
percent, 107 percent, 101 percent, and 91 percent. In other words, the rate of growth by quintile
was very similar across all five quintiles of the population.
When looking at the figures for 1973-2001, something vastly different can be observed. This is
the section below the grey line. What can be seen? First, economic growth has slowed considerably:
the highest rate of growth for any quintile was that of 58 per cent for those who topped the
fifth quintile, and this was far below the "lagger" of 91 per cent of the earlier period.
Second, of what growth there was, it was distributed extremely unequally . And the growth
rates for those in lower quintiles were generally lower than for those above them: for the bottom
quintile, their real income grew only 14 per cent over the 1973-2001 period; for the second quintile,
19 percent; for the third, 29 percent; for the fourth, 42 percent; and for the 80-95 percent, 58
percent: loosely speaking, the rich are getting richer, and the poor poorer.
Why the change? I think two things in particular. First, as industrialized countries recovered
from World War II, corporations based in these countries could again compete with those from the
US -- first in their own home countries, and then through importing into the US , and then ultimately
when they invested in the United States . Think of Toyota : they began importing into the US in the
early 1970s, and with their investments here in the early '80s and forward, they now are the largest
domestic US auto producer.
Second cause for the change has been the deterioration of the American labor movement: from 35.3
per cent of the non-agricultural workforce in unions in 1954, to only 12.0 per cent of all American
workers in unions in 2006 -- and only 7.4 per cent of all private industry workers are unionized,
which is less than in 1930!
This decline in unionization has a number of reasons. Part of this deterioration has been the
result of government policies -- everything from the crushing of the air traffic controllers when
they went on strike by the Reagan Administration in 1981, to reform of labor law, to reactionary
appointments to the National Labor Relations Board, which oversees administration of labor law. Certainly
a key government policy, signed by Democratic President Bill Clinton, has been the North American
Free Trade Act or NAFTA. One analyst came straight to the point:
Since [NAFTA] was signed in 1993, the rise in the US trade deficit with Canada and Mexico
through 2002 has caused the displacement of production that supported 879,280 US jobs. Most of
these lost jobs were high-wage positions in manufacturing industries. The loss of these jobs is
just the most visible tip of NAFTA's impact on the US economy. In fact, NAFTA has also contributed
to rising income inequality, suppressed real wages for production workers, weakened workers' collective
bargaining powers and ability to organize unions, and reduced fringe benefits (Scott, 2003:
1).
These attacks by elected officials have been joined by the affects due to the restructuring of
the economy. There has been a shift from manufacturing to services. However, within manufacturing,
which has long been a union stronghold, there has been significant job loss: between July 2000 and
January 2004, the US lost three million manufacturing jobs, or 17.5 percent, and 5.2 million since
the historical peak in 1979, so that "Employment in manufacturing [in January 2004] was its lowest
since July 1950" (CBO, 2004). This is due to both outsourcing labor-intensive production overseas
and, more importantly, technological displacement as new technology has enabled greater production
at higher quality with fewer workers in capital-intensive production (see Fisher, 2004). Others have
blamed burgeoning trade deficits for the rise: " an increasing share of domestic demand for manufacturing
output is satisfied by foreign rather than domestic producers" (Bivens, 2005).
[xiii] Others have even attributed
it to changes in consumer preferences (Schweitzer and Zaman, 2006). Whatever the reason, of the 50
states, only five (Nevada, North Dakota, Oregon, Utah, and Wyoming) did not see any job loss in manufacturing
between 1993-2003, yet 37 lost between 5.6 and 35.9 per cent of their manufacturing jobs during this
period (Public Policy Institute, 2004).
However, part of the credit for deterioration of the labor movement must be given to the labor
movement itself: the leadership has been simply unable to confront these changes and, at the same
time, they have consistently worked against any independent action by rank-and-file members.
[xiv]
However, it must be asked: are the changes in the economy presented herein merely statistical
manipulations, or is this indicating something real?
This point can be illustrated another way: by using CAGR, the Compound Annual Growth Rate. This
is a single number that is computed, based on compounded amounts, across a range of years, to come
up with an average number to represent the rate of increase or decrease each year across the entire
period. This looks pretty complex, but it is based on the same idea as compound interest used in
our savings accounts: you put in $10 today and (this is obviously not a real example) because you
get ten per cent interest, so you have $11 the next year. Well, the following year, interest is not
computed off the original $10, but is computed on the $11. So, by the third year, from your $10,
you now have $12.10. Etc. And this is what is meant by the Compound Annual Growth Rate: this is average
compound growth by year across a designated period.
Based on the numbers presented above in Figure 1, the author calculated the Compound Annual Growth
Rate by quintiles (Figure 2). The annual growth rate has been calculated for the first period, 1947-1973,
the years known as the "golden years" of US society. What has happened since then? Compare results
from the 1947-73 period to the annual growth rate across the second period, 1973-2001, again calculated
by the author.
Figure 2: Annual percentage of family income growth, by quintile, 1947-1973 compared to 1973-2001
What we can see here is that while everyone's income was growing at about the same rate in the
first period -- between 2.51 and 2.84 per cent annually -- by the second period, not only had growth
slowed down across the board, but it grew by very different rates: what we see here, again,
is that the rich are getting richer, and the poor poorer.
If these figures are correct, a change over time in the percentage of income received by each
quintile should be observable. Ideally, if the society were egalitarian, each 20 per cent of the
population would get 20 per cent of the income in any one year. In reality, it differs. To understand
Figure 3, below, one must not only look at the percentage of income held by a quintile across the
chart, comparing selected year by selected year, but one needs to look to see whether a quintile's
share of income is moving toward or away from the ideal 20 percent.
Figure 3: Percentage of family income distribution by quintile, 1947, 1973, 2001.
Population by quintiles
1947
1973
2001
Top fifth (lower limit of top 5percent, or 95th Percentile)-- $184,500
[xv]
Unfortunately, much of the data available publicly ended in 2001. However, in the summer of 2007,
after years of not releasing data any later than 2001, the Census Bureau released income data up
to 2005. It allows us to examine what has taken place regarding family income inequality during the
first four years of the Bush Administration.
Figure 4: US family income, in US dollars, growth and distribution, by quintile,
2001-2005, 2005 US dollars
Lowest 20%
Second 20%
Middle 20%
Fourth 20%
Lowest level of top 5%
2001
$26,467
$45,855
$68,925
$103,828
$180,973
2005
$25,616
$45,021
$68,304
$103,100
$184,500
Difference
(4 years)
-$851
(-3.2%)
-$834
(-1.8%)
-$621
(-.01%)
-$728
(-.007%)
$3,527
(1.94%)
Source: US Census Bureau at
www.census.gov/hhes/www/income/histinc/f01ar.html
. (Over time, the Census Bureau refigures these amounts, so they have subsequently converted
amounts to 2006 dollar values. These values are from their 2005 dollar values, and were calculated
by the Census Bureau.) Differences and percentages calculated by author.
Thus, what we've seen under the first four years of the Bush Administration is that for at most
Americans, their economic situation has worsened: not only has over all economic growth for any quintile
slowed to a minuscule 1.94 per cent at the most, but that the bottom 80 per cent actually lost income;
losing money (an absolute loss), rather than growing a little but falling further behind the top
quintile (a relative loss). Further, the decrease across the bottom four quintiles has been suffered
disproportionately by those in the lowest 40 per cent of the society.
This can perhaps be seen more clearly by examining CAGR rates by period.
We can now add the results of the 2001-2005 period share of income by quintile to our earlier
chart:
Figure 5: Percentage of income growth per year by percentile, 1947-2005
As can be seen, the percentage of family income at each of the four bottom quintiles is less in
2005 than in 1947; the only place there has been improvement over this 58-year period is at the 95th
percentile (and above).
Figure 6: Percentage of family income distribution by quintile, 1947, 1973, 2001, 2005.
Population by quintiles
1947
1973
2001
2005
Top fifth (lower limit of top 5percent, or 95th Percentile)-- $184,500
What has been presented so far, regarding changes in income distribution, has been at the group
level; in this case, quintile by quintile. It is time now to see how this has affected the society
overall.
Sociologists and economists use a number called the Gini index to measure inequality. Family income
data has been used so far, and we will continue using it. A Gini index is fairly simple to use. It
measures inequality in a society. A Gini index is generally reported in a range between 0.000 and
1.000, and is written in thousandths, just like a winning percentage mark: three digits after the
decimal. And the higher the Gini score, the greater the inequality.
Looking at the Gini index, we can see two periods since 1947, when the US Government began computing
the Gini index for the country. From 1947-1968, with yearly change greater or smaller, the trend
is downward, indicating reduced inequality: from .376 in 1947 to .378 in 1950, but then downward
to .348 in 1968. So, again, over the first period, the trend is downward.
What has happened since then? From the low point in 1968 of .348, the trend has been upward. In
1982, the Gini index hit .380, which was higher than any single year between 1947-1968, and the US
has never gone below .380 since then. By 1992, it hit .403, and we've never gone back below .400.
In 2001, the US hit .435. But the score for 2005 has only recently been published: .440 (source:
http://www.census.gov/hhes/www/income/histinc/f04.html
). So, the trend is getting worse, and with the policies established under George W. Bush, I
see them only continuing to increase in the forthcoming period. [And by the way, this increasing
trend has continued under both the Republicans and the Democrats, but since the Republicans have
controlled the presidency for 18 of the last 26 years (since 1981), they get most of the credit --
but let's not forget that the Democrats have controlled Congress across many of those years, so they,
too, have been an equal opportunity destroyer!]
However, one more question must be asked: how does this income inequality in the US, compare to
other countries around the world? Is the level of income inequality comparable to other "developed"
societies, or is it comparable to "developing" countries?
We must turn to the US Central Intelligence Agency (CIA) for our data. The CIA computes Gini scores
for family income on most of the countries around the world, and the last time checked in 2007 (August
1), they had data on 122 countries on their web page and these numbers had last been updated on July
19, 2007 (US Central Intelligence Agency, 2007). With each country listed, there is a Gini score
provided. Now, the CIA doesn't compute Gini scores yearly, but they give the last year it was computed,
so these are not exactly equivalent but they are suggestive enough to use. However, when they do
assemble these Gini scores in one place, they list them alphabetically, which is not of much comparative
use (US Central Intelligence Agency, 2007).
However, the World Bank categorizes countries, which means they can be compared within category
and across categories. The World Bank, which does not provide Gini scores, puts 208 countries into
one of four categories based on Gross National Income per capita -- that's total value of goods and
services sold in the market in a year, divided by population size. This is a useful statistic, because
it allows us to compare societies with economies of vastly different size: per capita income removes
the size differences between countries.
The World Bank locates each country into one of four categories: lower income, lower middle income,
upper middle income, and high income (World Bank, 2007a). Basically, those in the lower three categories
are "developing" or what we used to call "third world" countries, while the high income countries
are all of the so-called developed countries.
The countries listed by the CIA with their respective Gini scores were placed into the specific
World Bank categories in which the World Bank had previously located them (World Bank, 2007b). Once
grouped in their categories, median Gini scores were computed for each group. When trying to get
one number to represent a group of numbers, median is considered more accurate than an average, so
the median was used, which means half of the scores are higher, half are lower -- in other words,
the data is at the 50th percentile for each category.
The Gini score for countries, by Gross National Income per capita, categorized by the World Bank:
Figure 7: Median Gini Scores by World Bank income categories (countries selected by US Central
Intelligence Agency were placed in categories developed by the World Bank) and compared to 2004 US
Gini score as calculated by US Central Intelligence Agency (CIA)
Income category
Median Gini score
Gini score, US (2004)
Low income countries (less than $875/person/year)
.406
.450
Lower-middle income countries (between $876-3,465/person/year)
.414
.450
Upper-middle income countries (between $3,466-10,725/person/year
.370
.450
Upper-income countries (over $10,726/person/year
.316
.450
As can be seen, with the (CIA-calculated) Gini score of .450, the US family income is more
unequal than the medians for each category, and is more unequal than some of the poorest countries
on earth, such as Bangladesh (.318 -- calculated in 2000), Cambodia (.400, 2004 est.), Laos (.370-1997),
Mozambique (.396, 1996-97), Uganda (.430-1999) and Vietnam (.361, 1998). This same finding also holds
true using the more conservative Census Bureau-calculated Gini score of .440.
Thus, the US has not only become more unequal over the 35 years, as has been demonstrated above,
but has attained a level of inequality that is much more comparable to those of developing countries
in general and, in fact, is more unequal today than some of the poorest countries on Earth. There
is nothing suggesting that this increasing inequality will lessen anytime soon. And since this increasing
income inequality has taken place under the leadership of both major political parties, there is
nothing on the horizon that suggests either will resolutely address this issue in the foreseeable
future regardless of campaign promises made.
However, to move beyond discussion of whether President Obama is likely to address these and related
issues, some consideration of governmental economic policies is required. Thus, he will be constrained
by decisions made by previous administrations, as well as by the ideological blinders worn by those
he has chosen to serve at the top levels of his administration.
3) Governmental economic policies
There are two key points that are especially important for our consideration: the US Budget and
the US National Debt. They are similar, but different -- and consideration of each of them enhances
understanding.
A) US budget. Every year, the US Government passes a budget, whereby governmental officials
estimate beforehand how much money needs to be taken in to cover all expenses. If the government
actually takes in more money than it spends, the budget is said to have a surplus; if it takes in
less than it spends, the budget is said to be in deficit.
Since 1970, when Richard Nixon was President, the US budget has been in deficit every year
except for the last four years under Clinton (1998-2001), where there was a surplus. But this
surplus began declining under Clinton -- it was $236.2 billion in 2000, and only $128.2 billion in
2001, Clinton 's last budget. Under Bush, the US has gone drastically into deficit: -$157.8 billion
in 2002; -$377.6 billion in 2003; -$412.7 billion in 2004; -$318.3 billion in 2005; and "only"-$248.2
billion in 2006 (Economic Report of the President, 2007: Table B-78).
Now, that is just yearly surpluses and deficits. They get combined with all the other surpluses
and deficits since the US became a country in 1789 to create to create a cumulative amount, what
is called the National Debt.
B) US national debt. Between 1789 and1980 -- from Presidents Washington through
Carter -- the accumulated US National Debt was $909 billion or, to put it another way, $.909 trillion.
During Ronald Reagan's presidency (1981-89), the National Debt tripled, from $.9 trillion to $2.868
trillion. It has continued to rise. As of the end of 2006, 17 years later and after a four-year period
of surpluses where the debt was somewhat reduced, National Debt (or Gross Federal Debt) was $8.451
trillion (Economic Report of the President, 2007: Table B-78).
To put it into context: the US economy, the most productive in the world, had a Gross Domestic
Product (GDP) of $13.061 trillion in 2006, but the National Debt was $8.451 trillion -- 64.7 per
cent of GDP -- and growing (Economic Report of the President, 2007: Table B-1).
In April 2006, one investor reported that "the US Treasury has a hair under $8.4 trillion in outstanding
debt. How much is that? He put it into this context: " if you deposited one million dollars into
a bank account every day, starting 2006 years ago, that you would not even have ONE trillion dollars
in that account" (Van Eeden, 2006).
Let's return to the budget deficit: like a family budget, when one spends more than one brings
in, they can do basically one of three things: (a) they can cut spending; (b) they can increase taxes
(or obviously a combination of the two); or (c) they can take what I call the "Wimpy" approach.
For those who might not know this, Wimpy was a cartoon character, a partner of "Popeye the Sailor,"
a Saturday morning cartoon that was played for over 30 years in the United States . Wimpy had a great
love for hamburgers. And his approach to life was summed up in his rap: "I'll gladly give you two
hamburgers on Tuesday, for a hamburger today."
What is argued is that the US Government has been taking what I call the Wimpy approach to its
budgetary problems: it does not reduce spending, it does not raise taxes to pay for the increased
expenditures -- in fact, President Bush has cut taxes for the wealthiest Americans
[xvi] -- but instead it sells
US Government securities, often known as Treasuries, to rich investors, private corporations or,
increasingly, to other countries to cover the budget deficit. In a set number of years, the US Government
agrees to pay off each bond -- and the difference between what the purchaser bought them for and
the increased amount the US Government pays to redeem them is the cost of financing the Treasuries,
a certain percentage of the total value. By buying US Treasuries, other countries have helped keep
US interest rates low, helping to keep the US economy in as good of shape as it has been (thus, keeping
the US market flourishing for them), while allowing the US Government not to have to confront its
annual deficits. At the end of 2006, the total value of outstanding Treasuries -- to all investors,
not just other countries -- was $8.507 trillion (Economic Report of the President, 2007: Table B-87).
It turns out that at in December 2004, foreigners owned approximately 61 per cent of all outstanding
US Treasuries. Of that, seven per cent was held by China ; these were valued at $223 billion (Gundzik,
2005).
The percentage of foreign and international investors' purchases of the total US public debt since
1996 has never been less than 17.7 percent, and it has reached a high of 25.08 per cent in September
2006. In September 2006, foreigners purchased $2.134 trillion of Treasuries; these were 25.08 per
cent of all purchases, and 52.4 per cent of all privately-owned purchases (Economic Report of the
President, 2007: Table B-89). [xvii]
Altogether, "the world now holds financial claims amounting to $3.5 trillion against the United
States , or 26 per cent of our GDP" (Humpage and Shenk, 2007: 4).
Since the US Government continues to run deficits, because the Bush Administration has refused
to address this problem, the United States has become dependent on other countries buying Treasuries.
Like a junky on heroin, the US must get other investors (increasingly countries) to finance
its budgetary deficits.
To keep the money flowing in, the US must keep interest rates high -- basically, interest rates
are the price that must be paid to borrow money. Over the past year or so, the Federal Reserve has
not raised interest rates, but prior to that, for 15 straight quarterly meetings, they did. And,
as known, the higher the interest rate, the mostly costly it is to borrow money domestically, which
means increasingly likelihood of recession -- if not worse. In other words, dependence on foreigners
to finance the substantial US budget deficits means that the US must be prepared to raise interests
rates which, at some point, will choke off domestic borrowing and consumption, throwing the US economy
into recession. [xviii]
Yet this threat is not just to the United States -- according to the International Monetary Fund
(IMF), it is a threat to the global economy. A story about a then-recently issued report by the IMF
begins, "With its rising budget deficit and ballooning trade imbalance, the United States is running
up a foreign debt of such record-breaking proportions that it threatens the financial stability of
the global economy ." The report suggested that net financial obligations of the US to the rest of
the world could equal 40 per cent of its total economy if nothing was done about it in a few years,
"an unprecedented level of external debt for a larger industrial country" according to the report.
What was perhaps even more shocking than what the report said was which institution said it: "The
IMF has often been accused of being an adjunct of the United States , its largest shareholder" (Becker
and Andrews, 2004).
Other analysts go further. After discussing the increasingly risky nature of global investing,
and noting that "The investor managers of private equity funds and major banks have displaced national
banks and international bodies such as the IMF," Gabriel Kolko (2007) quotes Stephen Roach, Morgan
Stanley's chief economist, on April 24, 2007: "a major financial crisis seemed imminent and that
the global institutions that could forestall it, including the IMF, the World Bank and other mechanisms
of the international financial architecture, were utterly inadequate." Kolko recognizes that things
may not collapse immediately, and that analysts could be wrong, but still concludes, "the transformation
of the global financial system will sooner or later lead to dire results" (Kolko, 2007: 5).
What might happen if investors decided to take their money out of US Treasuries and, say, invest
in Euro-based bonds? The US would be in big trouble, would be forced to raise its interest
rates even higher than it wants -- leading to possibly a severe recession -- and if investors really
shifted their money, the US could be observably bankrupt; the curtain hiding the "little man" would
be opened, and he would be observable to all.
Why would investors rather shift their investment money into Euro-bonds instead of US Treasuries?
Well, obviously, one measure is the perceived strength of the US economy. To get a good idea of how
solid a country's economy is, one looks at things such as budget deficits, but perhaps even more
importantly balance of trade: how well is this economy doing in comparison with other countries?
The US international balance of trade is in the red and is worsening: -$717 billion in
2005. In 1991, it was -$31 billion. Since 1998, the US trade balance has set a new record for being
in the hole every year, except during 2001, and then breaking the all time high the very next
year! -$165 B in 1998; -$263 B in 1999; -$378 B in 2000; only -$362 B in 2001; -$421 B in 2002;
-$494 B in 2003; -$617 B in 2004; and - $717 B in 2005 (Economic Report of the President, 2007: Table
B-103). According to the Census Department, the balance of trade in 2006 was -$759 billion (US Census
Bureau, 2007).
And the US current account balance, the broadest measure of a country's international financial
situation -- which includes investment inside and outside the US in addition to balance of trade
-- is even worse: it was -$805 B in 2005, or 6.4 per cent of national income. "The bottom line is
that a current account deficit of this unparalleled magnitude is unsustainable and there is no hope
of it being painlessly resolved through higher exports alone," according to one analyst (quoted in
Swann, 2006). Scott notes that the current account deficit in 2006 was -$857 billion (Scott, 2007a:
8, fn. 1). "In effect, the United States is living beyond its means and selling off national assets
to pay its bills" (Scott, 2007b: 1).
[xix]
In addition, during mid-2007, there was a bursting of a domestic "housing bubble," which has threatened
domestic economic well-being but that ultimately threatens the well-being of global financial markets.
There had been a tremendous run-up in US housing values since 1995 -- with an increase of more than
70 per cent after adjusting for the rate of inflation -- and this had created "more than $8 trillion
in housing wealth compared with a scenario in which house prices had continued to rise at the same
rate of inflation," which they had done for over 100 years, between 1890 and 1995 (Baker, 2007: 8).
This led to a massive oversupply of housing, accompanied with falling house prices: according
to Dean Baker, "the peak inventory of unsold new homes of 573,000 in July 2006 was more than 50 per
cent higher than the previous peak of 377,000 in May of 1989" (Baker, 2007: 12-13). This caused massive
problems in the sub-prime housing market -- estimates are that almost $2 trillion in sub-prime loans
were made during 2005-06, and that about $325 billion of these loans will default, with more than
1 million people losing their homes (Liedtke, 2007) -- but these problems are not confined to the
sub-prime loan category: because sub-prime and "Alt-A" mortgages (the category immediately above
sub-prime) financed 40 per cent of the housing market in 2006, "it is almost inevitable that the
problems will spill over into the rest of the market" (Baker, 2007: 15). And Business Week
agrees: "Subprime woes have moved far beyond the mortgage industry." It notes that at least five
hedge funds have gone out of business, corporate loans and junk bonds have been hurt, and the leveraged
buyout market has been hurt (Goldstein and Henry, 2007).
David Leonhardt (2007) agrees with the continuing threat to the financial industry. Discussing
"adjustable rate mortgages" -- where interest rates start out low, but reset to higher rates, resulting
in higher mortgage payments to the borrower -- he points out that about $50 billion of mortgages
will reset during October 2007, and that this amount of resetting will remain over $30 billion monthly
through September 2008. "In all," he writes," the interest rates on about $1 trillion worth of mortgages
or 12 per cent of the nation's total, will reset for the first time this year or next."
Why all of this is so important is because bankers have gotten incredibly "creative" in creating
new mortgages, which they sell to home buyers. Then they bundle these obligations and sell to other
financial institutions and which, in turn, create new securities (called derivatives) based on these
questionable new mortgages. Yes, it is basically a legal ponzi scheme, but it requires the continuous
selling and buying of these derivatives to keep working: in early August 2007, however, liquidity
-- especially "financial instruments backed by home mortgages" -- dried up, as no one wanted to buy
these instruments (Krugman, 2007). The US Federal Research and the European Central Bank felt it
necessary to pump over $100 billion into the financial markets in mid-August 2007 to keep the international
economy solvent (Norris, 2007).
So, economically, this country is in terrible shape -- with no solution in sight.
On top of this -- as if all of this is not bad enough -- the Bush Administration is asking for
another $481.4 billion for the Pentagon's base budget, which it notes is "a 62 per cent increase
over 2001." Further, the Administration seeks an additional $93.4 billion in supplemental funds for
2007 and another $141.7 billion for 2008 to help fund the "Global War on Terror" and US operations
in Iraq and Afghanistan (US Government, 2007). According to Stockholm International Peace Research
Institute (SIPRI), in 2006, the US "defense" spending was equivalent to 46 per cent of all military
spending in the world, meaning that almost more money is provided for the US military in one year
than is spent by the militaries of all the other countries in the world combined (SIPRI, 2007).
And SIPRI's accounting doesn't include the $500 billion spent so far, approximately, on wars in
Afghanistan and Iraq .
In short, not only have things gotten worse for American working people since 1973 -- and especially
after 1982, with the imposition of neoliberal economic policies by institutions of the US Government
-- but on-going Federal budget deficits, the escalating National Debt, the need to attract foreign
money into US Treasuries, the financial market "meltdown" as well as the massive amounts of money
being channeled to continue the Empire, all suggest that not only will intensifying social problems
not be addressed, but will get worse for the foreseeable future.
4) Synopsis
This analysis provides an extensive look at the impact of neoliberal economic policies enacted
in the United States on American working people. These neoliberal economic policies have been enacted
as a conscious strategy by US corporate leaders and their governmental allies in both major political
parties as a way to address intensifying globalization while seeking to maintain US dominance over
the global political economy.
While it will be a while before anyone can determine success or failure overall of this elite
strategy but, because of is global-historical perspective, sufficient evidence is already available
to evaluate the affects of these policies on American working people. For the non-elites of this
country, these policies have had a deleterious impact and they are getting worse. Employment data
in manufacturing, worsening since 1979 but especially since 2000 (see Aronowitz, 2005), has been
horrific -- and since this has been the traditional path for non-college educated workers to be able
to support themselves and their families, and provide for their children, this data suggests social
catastrophe for many -- see Rubin (1995), Barnes (2005), and Bageant (2007), and accounts in Finnegan
(1998) and Lipper (2004) that support this -- because comparable jobs available to these workers
are not being created. Thus, the problem is not just that people are losing previously stable, good-paying
jobs -- as bad as that is -- but that there is nothing being created to replace these lost jobs,
and there is not even a social safety net in many cases that can generally cushion the blow (see
Wilson, 1996; Appelbaum, Bernhardt, and Murnane, eds., 2003).
Yet the impact of these social changes has not been limited to only blue-collar workers, although
the impact has been arguably greatest upon them. The overall economic growth of the society has been
so limited since 1973, and the results increasingly being unequally distributed since then, that
the entire society is becoming more and more unequal: each of the four bottom quintiles -- the bottom
80 per cent of families -- has seen a decrease in the amount of family income available to each quintile
between 2001-05. This not only increases inequality and resulting resentments -- including criminal
behaviors -- but it also produces deleterious affects on individual and social health (Kawachi, Kennedy
and Wilkinson, eds., 1999; Eitzen and Eitzen Smith, 2003). And, as shown above, this level of inequality
is much more comparable internationally to "developing" countries rather than "developed" ones.
When this material is joined with material on the US budget, and especially the US National Debt,
it is clear that these "problems" are not the product of individual failure, but of a social order
that is increasingly unsustainable. While we have no idea of what it will take before the US economy
will implode, all indications are that US elites are speeding up a run-away train of debt combined
with job-destroying technology and off-shoring production, creating a worsening balance of trade
with the rest of the world and a worsening current account, with an unstable housing market and intensifying
militarism and an increasingly antagonistic foreign policy: it is like they are building a bridge
over an abyss, with a train increasingly speeding up as it travels toward the bridge, and crucial
indicators suggest that the bridge cannot be completed in time.
Whether the American public will notice and demand a radical change in time is not certain --
it will not be enough to simply slow the train down, but it must turn down an alternative track (see
Albert, 2003; Woodin and Lucas, 2004; Starr, 2005) -- but it is almost certain that foreign investors
will. Should they not be able to get the interest rates here available elsewhere in the "developed"
parts of the world, investors will shift their investments, causing more damage to working people
in the United States .
And when this economic-focused analysis is joined with an environmental one -- George Monbiot
(2007) reports that the best science available argues that industrialized countries have to reduce
their carbon dioxide emissions by 90 per cent by the year 2030 if we are to have a chance to stop
global warming -- then it is clear that US society is facing a period of serious social instability.
5) Conclusion
This article has argued that the situation for working people in the United States, propelled
by the general governmental adoption of neoliberal economic policies, is getting worse -- and there
is no end in sight. The current situation and historical change have been presented and discussed.
Further, an examination and analysis of directly relevant US economic policies have been presented,
and there has been nothing in this analysis that suggests a radical, but necessary, change by US
elected officials is in sight. In other words, working people in this country are in bad shape generally
-- and it is worse for workers of color than for white workers -- and there is nothing within the
established social order that suggests needed changes will be effected.
The neoliberal economic policies enacted by US corporate and government leaders has been a social
disaster for increasing numbers of families in the United States .
Globalization for profit -- or what could be better claimed to be "globalization from above" --
and its resulting neoliberal economic policies have long-been recognized as being a disaster for
most countries in the Global South. This study argues that this top-down globalization and the accompanying
neoliberal economic policies has been a disaster for working people in northern countries as well,
and most particularly in the United States .
The political implications from these findings remains to be seen. Surely, one argument is not
only that another world is possible, but that it is essential.
[Kim Scipes is assistant professor of sociology , Purdue University, North Central, Westville
, IN 46391. The author's web site is at
http://faculty.pnc.edu/kscipes .This paper was given at the 2009 Annual Conference of the United
Association for Labor Education at the National Labor College in Silver Spring , MD. It has been
posted at Links International Journal of Socialist
Renewal with Kim Scipes' permission.]
* * *
Note to labor educators: This is a very different approach than you usually take. While
presenting a "big picture," this does not suggest what you are doing is "wrong" or "bad." What it
suggests, however, is that the traditional labor education approach is too limited: this suggests
that your work is valuable but that you need to put it into a much larger context than is generally
done, and that it is in the interaction between your work and this that we each can think out the
ways to go forward. This is presented in the spirit of respect for the important work that each of
you do on a daily basis.
"... Two of my criticisms about Krugman/Friedman, etc is that is 'free markets' are supposed to substitute for policy in the government sphere. Except very telling except when we're talking about funding the security state. ..."
"... The other is that the real power of markets is that in a real free market (not a Potemkin one) decisions are made often at the point where needs, information, incentives, and economic power come together. But where the large scale decisions the governments have to make, markets fail. Policy though doesn't. But Neoliberals hate policy. ..."
"... Well, duh. "Policy" and "Capitalism" don't go together and never have. When you enact policy, you destroy the ability to make profit and you get the 1970's. ..."
"... Free market is a neoliberal myth, the cornerstone of neoliberalism as a secular religion. Somewhat similar to "Immaculate Conception" in Catholicism. ..."
"... In reality market almost by definition is controlled by government, who enforces the rules and punish for the transgressions. ..."
"... Also note interesting Orwellian "corruption of the language" trick neoliberals use: neoliberals talk about "free market, not "fair market". ..."
"... After 2008 few are buying this fairy tale about how markets can operate and can solve society problems independently of political power, and state's instruments of violence (the police and the military). This myths is essentially dead. ..."
"... Friedmanism is this sense a flavor of economic Lysenkoism. Note that Lysenko like Friedman was not a complete charlatan. Some of his ideas were pretty sound and withstood the test of time. But that does not make his less evil. ..."
Krugman's refusal to endorse fiscal stimulus unless the economy is at zero lower bound. That is
not only anti-Keynesian, it plays directly into the hands of the debt fear mongers. (Krugman is
also worried about the debt.)
[ Only correct to a degree, economic weakness is recognized. ]
Two of my criticisms about Krugman/Friedman, etc is that is 'free markets' are supposed to substitute
for policy in the government sphere. Except very telling except when we're talking about funding
the security state.
The other is that the real power of markets is that in a real free market (not a Potemkin one)
decisions are made often at the point where needs, information, incentives, and economic power
come together. But where the large scale decisions the governments have to make, markets fail. Policy
though doesn't. But Neoliberals hate policy.
Well, duh. "Policy" and "Capitalism" don't go together and never have. When you enact policy,
you destroy the ability to make profit and you get the 1970's.
likbez -> Gibbon1... , -1
Free market is a neoliberal myth, the cornerstone of neoliberalism as a secular religion.
Somewhat similar to "Immaculate Conception" in Catholicism.
In reality market almost by definition is controlled by government, who enforces the rules
and punish for the transgressions.
Also note interesting Orwellian "corruption of the language" trick neoliberals use: neoliberals
talk about "free market, not "fair market".
After 2008 few are buying this fairy tale about how markets can operate and can solve society
problems independently of political power, and state's instruments of violence (the police and
the military). This myths is essentially dead.
But like Adventists did not disappear when the Second Coming of Christ did not occurred in
predicted timeframe, neoliberals did not did not disappeared after 2008 either. And neither did
neoliberalism, it just entered into zombie, more bloodthirsty stage.
The fact that even the term
"neoliberalism" is prohibited in the US MSM also helped. It is king of stealth ideology, unlike
say, Marxists, neoliberals do not like to identify themselves as such. The behave more like members
of some secret society, free market masons.
Friedmanism is this sense a flavor of economic Lysenkoism. Note that Lysenko like Friedman
was not a complete charlatan. Some of his ideas were pretty sound and withstood the test of time.
But that does not make his less evil.
And for those who try to embellish this person, I would remind his role in 1973 Chilean coup
d'état ( https://en.wikipedia.org/wiki/1973_Chilean_coup_d%27%C3%A9tat
) and bringing Pinochet to power. His "Chicago boys" played a vital role in the events. This
man did has blood on his hands.
Of course, bringing a reign of terror to Chile was not why the CIA had sponsored him. The reason
he was there was to reverse the gains of the Allende social democracy and return control of the
country's economic and political assets to the oligarchy. Pinochet was convinced, through supporters
among the academics in the elite Chilean universities, to try a new series of economic policies,
called "neoliberal" by their founders, the economists of the University of Chicago, led by an
economist by the name of Milton Friedman, who three years later would go on to win a Nobel Prize
in Economics for what he was about to unleash upon Chile.
Friedman and his colleagues were referred to by the Chileans as "the Chicago Boys." The term
originally meant the economists from the University of Chicago, but as time went on, as their
policies began to disliquidate the middle class and poor, it took on a perjorative meaning. That
was because as the reforms were implemented, and began to take hold, the results were not what
Friedman and company had been predicting. But what were the reforms?
The reforms were what has come to be called "neoliberalism." To understand what "neoliberal"
economics is, one must first understand what "liberal" economics are, and so we'll digress briefly
from our look at Chile for a quick
"... Why it is bizarre. This is the political regime we are living in: there are now two war parties in the USA now: DemoRats and Repugs, not only one as in good old days. ..."
Pentagon spokesman Captain Jeff Davis said in an official statement:
"Russian forces were notified in advance of the strike using the established
deconfliction line. U.S. military planners took precautions to minimize
risk to Russian or Syrian personnel located at the airfield."
I guess they could say this was the right thing to do...
"It's always bizarre when liberals turn all hawkish and warmongering."
Why it is bizarre. This is the political regime we are living in:
there are now two war parties in the USA now: DemoRats and Repugs, not only
one as in good old days.
How Hillary is different from Senator McShame is unclear to me.
"... Comparative advantage is an absurdity. Protectionism is the only way to wealth, yet economists brainwashed generations of 17 and 18 year olds to believe that up was down and free trade would help the US. ..."
"... This is a new "flat earth" cult. And pretty well paid one: academic economists recently became something like lackeys of financial oligarchy and get some crump from the financial oligarchy table in return to promoting neo-classical economics, as a valuable for neoliberals pseudo-science. ..."
"... People who "do not fit" are filtered at early stages, much like in political parties. Nepotism is another factor. Having relatives in high positions (like is the case with Summers), being member of the dominant ethnic clan, or being a friend of an influential economist (like academic Mafiosi Andrei Shleifer) greatly helps... ..."
"... The most interesting part about this pseudoscience is how well it fits together (reminding me Marxism, to which it was a reaction). ..."
Will the American Economic Association ever apologize to the American people
for helping to destroy the country with their absurd, simple-minded free
trade preaching?
Comparative advantage is an absurdity. Protectionism is the only
way to wealth, yet economists brainwashed generations of 17 and 18 year
olds to believe that up was down and free trade would help the US.
AEA should toast itself in the ruins of Ohio, North Carolina or Iowa
- pick any one of the thousands of ruined cities to gloat over.
libezkova -> Will US Economists apologize for destroying the US? Free trade
ruined America,
April 11, 2017 at 04:48 PM
You are simply naïve.
This is a new "flat earth" cult. And pretty well paid one: academic
economists recently became something like lackeys of financial oligarchy
and get some crump from the financial oligarchy table in return to promoting
neo-classical economics, as a valuable for neoliberals pseudo-science.
Tremendous value of neoclassical economics for neoliberals is that they
can use mathiness (trying to imitate physics) to obscure the promotions
of neoliberal thinking. In fact, neoclassical economics is the major tool
of indoctrination into "free market" nonsense of university students.
People who "do not fit" are filtered at early stages, much like in
political parties. Nepotism is another factor. Having relatives in high
positions (like is the case with Summers), being member of the dominant
ethnic clan, or being a friend of an influential economist (like academic
Mafiosi Andrei Shleifer) greatly helps...
People who do not fit but have tremendous talent are often suppressed.
Like was the case with Hyman Minsky (and he was lucky that his career was
at late stages during the full triumph of neoliberalism -- he managed to
get a tenured professor position in 1965 when he was 46)
The most interesting part about this pseudoscience is how well it
fits together (reminding me Marxism, to which it was a reaction).
Set of neoclassical myths such as "efficient market hypothesis", "rational
expectations", "generalized stochastic equilibrium", "invisible hand", comprise
a pretty coherent "secular religion". It may even have some minor value
as a mathematical theory of some fictitious economic space (almost like
in a computer game like Civilization) that never existed and will never
exist.
But it is sold differently and tends to produce predictions and prescriptions
(highly politicized in their nature) in line with neoliberal thinking. That's
why it is maintained and promoted.
So expecting them to apologize is nonsense.
You can benefit from re-reading recent discussion of Karl Polanyi famous
book "The Great Transformation" in this blog
Another interesting question is how neoliberalism and neo-classical economics
survived the financial meltdown. Here Professor Phillip Mirowski has some
interesting insights:
What's missing in each and every case above -- at least in the USA! -- is
countervailing power. 6% labor union density in private business is equivalent
to 20/10 blood pressure in the human body: it starves every other healthy
process.
It is not just labor market bargaining power that has gone missing, it
is not only the lost political muscle for the average person (equal campaign
financing, almost all the votes), it is also the lack of machinery to deal
with day-to-day outrages on a day-to-day basis (that's called lobbying).
Late dean of the Washington press corps David Broder told a young reporter
that when he came to DC fifty years ago (then), all the lobbyists were union.
Big pharma's biggest rip-offs, for profit school scams, all the stuff you
hear about for one day on the news but no action is ever taken -- that's
because there is no (LABOR UNION) mechanism to stay on top of all (or any)
of it (LOBBYISTS).
It is a chicken and egg problem. Before large scale automation and globalization,
unions "negotiated" themselves their power, which was based on employers
having much fewer other choices. Any union power that was ever legislated
was legislated as a *result* of union leverage, not to enable the latter
(and most of what was legislated amounts to limiting employer interference
with unions).
It is a basic feature of human individual and group relations that when
you are needed you will be treated well, and when you are not needed you
will be treated badly (or at best you will be ignored if that's less effort
overall). And by needed I mean needed as a specific individual or narrowly
described group.
What automation and globalization have done is created a glut of labor
- specifically an oversupply of most skill sets relative to all the work
that has to be done according to socially mediated decision processes (a
different set of work than what "everybody" would like to happen as long
as they don't have to pay for it, taking away from other necessary or desired
expenditure of money, effort, or other resources).
Maybe when the boomers age out and become physically too old to work,
the balance will tip again.
Same thing with the internet - it has been hailed as a democratizing force,
but instead it has mostly (though not wholly) amplified the existing power
differentials and motivation structures.
Anecdotally, a lot of companies and institutions are either restricting
internal internet access or disconnecting parts of their organizations from
the internet altogether, and disabling I/O channels like USB sticks, encrypting
disks, locking out "untrusted" boot methods, etc. The official narrative
is security and preventing leaks of confidential information, but the latter
is clearly also aimed in part at whistleblowers disclosing illegal or unethical
practices. Of course that a number of employees illegitimately "steal" data
for personal and not to uncover injustices doesn't really help.
Surely there is a huge difference between the labor market here and the
labor market in continental Europe -- though labor there faces the same
squeezing forces it faces here. Think of German auto assembly line workers
making $60 an hour counting benefits.
Think Teamster Union UPS drivers -- and pity the poor, lately hired (if
they are even hired) Amazon drivers -- maybe renting vans.
The Teamsters have the only example here of what is standard in continental
Europe: centralized bargaining (aka sector wide labor agreements): the Master
National Freight Agreement: wherein everybody doing the same job in the
same locale (entire nation for long distance truckers) works under one common
contract (in French Canada too).
Imagine centralized bargaining for airlines. A few years ago Northwest
squeezed a billion dollars in give backs out of its pilots -- next year
gave a billion dollars in bonuses to a thousand execs. Couldn't happen under
centralized bargaining -- wouldn't even give the company any competitive
advantage.
"What's missing in each and every case above -- at least in the USA! --
is countervailing power."
It was deliberately destroyed. Neoliberalism needs to "atomize" work
force to function properly and destroys any solidarity among workers. Unions
are anathema for neoliberalism, because they prevent isolation and suppression
of workers.
Amazon and Uber are good examples. Both should be prosecuted under RICO
act. Wall-Mart in nor far from them.
Rising fatalities from heart disease and stroke, diabetes, drug overdoses,
accidents and other conditions caused the lower life expectancy revealed
in a report by the National Center for Health Statistics .
== quote ==
Anne Case and Angus Deaton garnered national headlines in 2015 when they
reported that the death rate of midlife non-Hispanic white Americans had
risen steadily since 1999 in contrast with the death rates of blacks, Hispanics
and Europeans. Their new study extends the data by two years and shows that
whatever is driving the mortality spike is not easing up.
... ... ..
Offering what they call a tentative but "plausible" explanation, they
write that less-educated white Americans who struggle in the job market
in early adulthood are likely to experience a "cumulative disadvantage"
over time, with health and personal problems that often lead to drug overdoses,
alcohol-related liver disease and suicide.
== end of quote ==
Greed is toxic. As anger tends to accumulate, and then explode, at some
point neoliberals might be up to a huge surprise. Trump was the first swan.
"... My observation is that the New Class (professionals, lobbyists, financiers, teachers, engineers, etc.) have ruled the country in recent decades. For much of the twentieth century this class was in some tension with corporations, and used their skills at influencing government policy to help develop and protect the welfare state, since they needed the working class as a counterweight to the natural influence of corporate money and power. However, somewhere around 1970 I think this tension collapsed, since corporate managers and professionals realized that they shared the same education, background and interests. ..."
"... This "peace treaty" between former rivals allowed the whole newly enlarged New Class to swing to the right, since they really didn't particularly need the working class politically anymore. And since it is the hallmark of this class to seek prestige, power and money while transferring risk away from themselves, the middle class and blue collar community has been the natural recipient. Free trade (well, for non-professionals, anyway), neoliberalism, ruthless private equity job cutting, etc., etc. all followed very naturally. The re-alignment of the Democratic Party towards the right was a natural part of this evolution. ..."
"... They also sense that organized politics in this country – being chiefly the province of the New Class – has left them with little leverage to change any of this. ..."
"... the New Class has very strong internal solidarity – and since somebody has to pay for these little mistakes, everyone outside that class is "fair game." ..."
"... So in that sense–to the extent that you define liberal as the ideology of the New Class (neoliberal, financial-capitalistic, big corporate-friendly but opposed to non-meritocratic biases like racism, sexism, etc.) is "liberalism", I think it is reasonable to say that it has bred resistance and anger among the "losers." As far as having "failed", well, we'll see: the New Class still controls almost all the levers of power. It has many strategies for channeling lower-class anger and I think under Trump we'll see those rolled out. ..."
"... Perhaps some evolution in "the means of production" or in how governments are influenced will ultimately develop to divide or downgrade the New Class, and break its lock on the corridors of power, but I don't see it on the horizon just yet. If anyone else does, I'd love to hear more about it. ..."
"... A little puzzled by the inclusion of teachers, alongside financiers and the like, in William Meyer's list of the New Class rulers. Enablers of those rulers, no doubt, but not visibly calling the shots. But then I'm probably just another liberal elitist failing to recognize my own hegemony, like Chris. ..."
"... I assume he meant certain professors [of economics]. Actually on @4, there's a good chapter on the topic in a Thomas Franks latest. ..."
Obviously Mr. Deerin is, on its face, utilizing a very disputable definition
of "liberal."
However, I think a stronger case could be made for something like Mr.
Deerin's argument, although it doesn't necessarily get to the same conclusion.
My observation is that the New Class (professionals, lobbyists, financiers,
teachers, engineers, etc.) have ruled the country in recent decades. For
much of the twentieth century this class was in some tension with corporations,
and used their skills at influencing government policy to help develop and
protect the welfare state, since they needed the working class as a counterweight
to the natural influence of corporate money and power. However, somewhere
around 1970 I think this tension collapsed, since corporate managers and
professionals realized that they shared the same education, background and
interests.
Vive la meritocracy. This "peace treaty" between former rivals allowed
the whole newly enlarged New Class to swing to the right, since they really
didn't particularly need the working class politically anymore. And since
it is the hallmark of this class to seek prestige, power and money while
transferring risk away from themselves, the middle class and blue collar
community has been the natural recipient. Free trade (well, for non-professionals,
anyway), neoliberalism, ruthless private equity job cutting, etc., etc.
all followed very naturally. The re-alignment of the Democratic Party towards
the right was a natural part of this evolution.
I think the 90% or so of the community who are not included in this class
are confused and bewildered and of course rather angry about it. They
also sense that organized politics in this country – being chiefly the province
of the New Class – has left them with little leverage to change any of this.
Watching the bailouts and lack of prosecutions during the GFC made
them dimly realize that the New Class has very strong internal solidarity
– and since somebody has to pay for these little mistakes, everyone outside
that class is "fair game."
So in that sense–to the extent that you define liberal as the ideology
of the New Class (neoliberal, financial-capitalistic, big corporate-friendly
but opposed to non-meritocratic biases like racism, sexism, etc.) is "liberalism",
I think it is reasonable to say that it has bred resistance and anger among
the "losers." As far as having "failed", well, we'll see: the New Class
still controls almost all the levers of power. It has many strategies for
channeling lower-class anger and I think under Trump we'll see those rolled
out.
Let me be clear, I'm not saying Donald Trump is leading an insurgency
against the New Class – but I think he tapped into something like one and
is riding it for all he can, while not really having the slightest idea
what he's doing.
Perhaps some evolution in "the means of production" or in how governments
are influenced will ultimately develop to divide or downgrade the New Class,
and break its lock on the corridors of power, but I don't see it on the
horizon just yet. If anyone else does, I'd love to hear more about it.
A little puzzled by the inclusion of teachers, alongside financiers
and the like, in William Meyer's list of the New Class rulers. Enablers
of those rulers, no doubt, but not visibly calling the shots. But then I'm
probably just another liberal elitist failing to recognize my own hegemony,
like Chris.
"... Warren, who first made the argument, was speaking out against the idea that calling for higher taxes on the rich constitutes class warfare, saying: There is nobody in this country who got rich on his own-nobody. You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory -- and hire someone to protect against this -- because of the work the rest of us did. ..."
"... This is a fundamentally Polanyian point about the embeddedness of markets in society, and the always unnatural nature of income distribution. Polanyian arguments arise pretty naturally as rebuttals to certain libertarian notions of how economies should work, which may be one reason that certain Democrats sometimes sound like Polanyi. ..."
"... But Polanyi also helps explains some of the tensions within the Democratic Party. One of the divides within the Democratic primary between Bernie Sanders and Hillary Clinton has been between a social-democratic and a "progressive" but market-friendly vision of addressing social problems. Take, for example, health care. Sanders proposes a single-payer system in which the government pays and health care directly, and he frames it explicitly in the language of rights: "healthcare is a human right and should be guaranteed to all Americans regardless of wealth or income." ..."
"... Sanders here offers a straightforward defense of decommodification -- the idea that some things do not belong in the marketplace-that is at odds with the kind of politics that the leadership of the Democratic Party has offered more or less since Carter and the narrow policy "wonk" focus that tends to dominate coverage. ..."
"... Socialism is, essentially, the tendency inherent in an industrial civilization to transcend the self-regulating market by consciously subordinating it to a democratic society. It is the solution natural to industrial workers who see no reason why production should not be regulated directly and why markets should be more than a useful but subordinate trait in a free society. From the point of view of the community as a whole, socialism is merely the continuation of that endeavor to make society a distinctively human relationship of persons. ..."
"... Sanders's particular notion of a political revolution-in which people use democracy to change the rules governing our national political economy-is very Polanyian. Polanyi's socialism has a certain modern appeal when the more traditionally Marxist idea of having the state seize the means of production has been abandoned even by most who identify as socialists. Instead, Polanyi's relevance for today lies in his arguments that markets need to be subjected to democratic control, that human beings resist being transformed fully into commodities, and a fully realized market society is both impossible, undesirable, and at odds with genuine liberty and freedom. ..."
Not at all. Democrats have taken up Polanyian arguments in response to many of the market-fundamentalist
notions that the Tea Party has helped to circulate in recent years. The most notable example might
be President Obama and Elizabeth Warren's "you didn't build that" faux-controversy from 2011 and
2012. Warren, who first made the argument, was speaking out against the idea that calling
for higher taxes on the rich constitutes class warfare, saying:
There is nobody in this country who got rich on his own-nobody. You built a factory out there?
Good for you. But I want to be clear. You moved your goods to market on the roads the rest of
us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because
of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding
bands would come and seize everything at your factory -- and hire someone to protect against this
-- because of the work the rest of us did.
This is a fundamentally Polanyian point about the embeddedness of markets in society, and
the always unnatural nature of income distribution. Polanyian arguments arise pretty naturally
as rebuttals to certain libertarian notions of how economies should work, which may be one reason
that certain Democrats sometimes sound like Polanyi.
But Polanyi also helps explains some of the tensions within the Democratic Party. One of
the divides within the Democratic primary between Bernie Sanders and Hillary Clinton has been
between a social-democratic and a "progressive" but market-friendly vision of addressing social
problems. Take, for example, health care. Sanders proposes a single-payer system in which the
government pays and health care directly, and he frames it explicitly in the language of rights:
"healthcare is a human right and should be guaranteed to all Americans regardless of wealth or
income."
Clinton, meanwhile, describes affordable health care as a right. Clinton also wants higher
education to remain a market commodity, because she says that if the government paid, it would
needlessly be giving a free ride to the children of the wealthy and the upper-middle class. Clinton's
reasoning appeals to ideas of market efficiency, while Sanders, in stating that "Education should
be a right, not a privilege," appeals to ideas of community beyond markets.
Sanders here offers a straightforward defense of decommodification -- the idea that some
things do not belong in the marketplace-that is at odds with the kind of politics that the leadership
of the Democratic Party has offered more or less since Carter and the narrow policy "wonk" focus
that tends to dominate coverage.
Whether or not Sanders has read Polanyi-similar language about economic and social rights was
also present in FDR's New Deal, which Sanders argues is the basis of his brand of socialism-Polanyi's
particular definition of socialism sounds like one Sanders would share:
Socialism is, essentially, the tendency inherent in an industrial civilization to transcend
the self-regulating market by consciously subordinating it to a democratic society. It is the
solution natural to industrial workers who see no reason why production should not be regulated
directly and why markets should be more than a useful but subordinate trait in a free society.
From the point of view of the community as a whole, socialism is merely the continuation of that
endeavor to make society a distinctively human relationship of persons.
Sanders's particular notion of a political revolution-in which people use democracy to
change the rules governing our national political economy-is very Polanyian. Polanyi's socialism
has a certain modern appeal when the more traditionally Marxist idea of having the state seize
the means of production has been abandoned even by most who identify as socialists. Instead, Polanyi's
relevance for today lies in his arguments that markets need to be subjected to democratic control,
that human beings resist being transformed fully into commodities, and a fully realized market
society is both impossible, undesirable, and at odds with genuine liberty and freedom.
Sanders's campaign has shown that a political platform favoring decommodification and a retreat
from the extremes of society's subordination to markets has deep appeal. The future of the party
does not belong to Bernie Sanders himself, but the Karl Polanyi Democrats are here to stay.
This is the second in a series of projected posts that try to look at the Trump administration
and right wing populism through the lens of different books (the first – on civil society – is
here). The last post was mostly riffing on Ernest Gellner. Today, it's another middle-European
exile intellectual – Karl Polanyi.
"... Warren, who first made the argument, was speaking out against the idea that calling for higher taxes on the rich constitutes class warfare, saying: There is nobody in this country who got rich on his own-nobody. You built a factory out there? Good for you. But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding bands would come and seize everything at your factory -- and hire someone to protect against this -- because of the work the rest of us did. ..."
"... This is a fundamentally Polanyian point about the embeddedness of markets in society, and the always unnatural nature of income distribution. Polanyian arguments arise pretty naturally as rebuttals to certain libertarian notions of how economies should work, which may be one reason that certain Democrats sometimes sound like Polanyi. ..."
"... But Polanyi also helps explains some of the tensions within the Democratic Party. One of the divides within the Democratic primary between Bernie Sanders and Hillary Clinton has been between a social-democratic and a "progressive" but market-friendly vision of addressing social problems. Take, for example, health care. Sanders proposes a single-payer system in which the government pays and health care directly, and he frames it explicitly in the language of rights: "healthcare is a human right and should be guaranteed to all Americans regardless of wealth or income." ..."
"... Sanders here offers a straightforward defense of decommodification -- the idea that some things do not belong in the marketplace-that is at odds with the kind of politics that the leadership of the Democratic Party has offered more or less since Carter and the narrow policy "wonk" focus that tends to dominate coverage. ..."
"... Socialism is, essentially, the tendency inherent in an industrial civilization to transcend the self-regulating market by consciously subordinating it to a democratic society. It is the solution natural to industrial workers who see no reason why production should not be regulated directly and why markets should be more than a useful but subordinate trait in a free society. From the point of view of the community as a whole, socialism is merely the continuation of that endeavor to make society a distinctively human relationship of persons. ..."
"... Sanders's particular notion of a political revolution-in which people use democracy to change the rules governing our national political economy-is very Polanyian. Polanyi's socialism has a certain modern appeal when the more traditionally Marxist idea of having the state seize the means of production has been abandoned even by most who identify as socialists. Instead, Polanyi's relevance for today lies in his arguments that markets need to be subjected to democratic control, that human beings resist being transformed fully into commodities, and a fully realized market society is both impossible, undesirable, and at odds with genuine liberty and freedom. ..."
Not at all. Democrats have taken up Polanyian arguments in response to many of the market-fundamentalist
notions that the Tea Party has helped to circulate in recent years. The most notable example might
be President Obama and Elizabeth Warren's "you didn't build that" faux-controversy from 2011 and
2012. Warren, who first made the argument, was speaking out against the idea that calling
for higher taxes on the rich constitutes class warfare, saying:
There is nobody in this country who got rich on his own-nobody. You built a factory out there?
Good for you. But I want to be clear. You moved your goods to market on the roads the rest of
us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because
of police forces and fire forces that the rest of us paid for. You didn't have to worry that marauding
bands would come and seize everything at your factory -- and hire someone to protect against this
-- because of the work the rest of us did.
This is a fundamentally Polanyian point about the embeddedness of markets in society, and
the always unnatural nature of income distribution. Polanyian arguments arise pretty naturally
as rebuttals to certain libertarian notions of how economies should work, which may be one reason
that certain Democrats sometimes sound like Polanyi.
But Polanyi also helps explains some of the tensions within the Democratic Party. One of
the divides within the Democratic primary between Bernie Sanders and Hillary Clinton has been
between a social-democratic and a "progressive" but market-friendly vision of addressing social
problems. Take, for example, health care. Sanders proposes a single-payer system in which the
government pays and health care directly, and he frames it explicitly in the language of rights:
"healthcare is a human right and should be guaranteed to all Americans regardless of wealth or
income."
Clinton, meanwhile, describes affordable health care as a right. Clinton also wants higher
education to remain a market commodity, because she says that if the government paid, it would
needlessly be giving a free ride to the children of the wealthy and the upper-middle class. Clinton's
reasoning appeals to ideas of market efficiency, while Sanders, in stating that "Education should
be a right, not a privilege," appeals to ideas of community beyond markets.
Sanders here offers a straightforward defense of decommodification -- the idea that some
things do not belong in the marketplace-that is at odds with the kind of politics that the leadership
of the Democratic Party has offered more or less since Carter and the narrow policy "wonk" focus
that tends to dominate coverage.
Whether or not Sanders has read Polanyi-similar language about economic and social rights was
also present in FDR's New Deal, which Sanders argues is the basis of his brand of socialism-Polanyi's
particular definition of socialism sounds like one Sanders would share:
Socialism is, essentially, the tendency inherent in an industrial civilization to transcend
the self-regulating market by consciously subordinating it to a democratic society. It is the
solution natural to industrial workers who see no reason why production should not be regulated
directly and why markets should be more than a useful but subordinate trait in a free society.
From the point of view of the community as a whole, socialism is merely the continuation of that
endeavor to make society a distinctively human relationship of persons.
Sanders's particular notion of a political revolution-in which people use democracy to
change the rules governing our national political economy-is very Polanyian. Polanyi's socialism
has a certain modern appeal when the more traditionally Marxist idea of having the state seize
the means of production has been abandoned even by most who identify as socialists. Instead, Polanyi's
relevance for today lies in his arguments that markets need to be subjected to democratic control,
that human beings resist being transformed fully into commodities, and a fully realized market
society is both impossible, undesirable, and at odds with genuine liberty and freedom.
Sanders's campaign has shown that a political platform favoring decommodification and a retreat
from the extremes of society's subordination to markets has deep appeal. The future of the party
does not belong to Bernie Sanders himself, but the Karl Polanyi Democrats are here to stay.
This is the second in a series of projected posts that try to look at the Trump administration
and right wing populism through the lens of different books (the first – on civil society – is
here). The last post was mostly riffing on Ernest Gellner. Today, it's another middle-European
exile intellectual – Karl Polanyi.
"... [Neo]liberalism that needs monsters to destroy can never politically engage with its enemies. It can never understand those enemies as political actors, making calculations, taking advantage of opportunities, and responding to constraints. It can never see in those enemies anything other than a black hole of motivation, a cesspool where reason goes to die. ..."
"... Hence the refusal of empathy for Trump's supporters. Insofar as it marks a demand that we not abandon antiracist principle and practice for the sake of winning over a mythicized white working class, the refusal is unimpeachable. ..."
"... Such a [neo]liberalism becomes dependent on the very thing it opposes, with a tepid mix of neoliberal markets and multicultural morals getting much-needed spice from a terrifying right. Hillary Clinton ran hard on the threat of Trump, as if his presence were enough to authorize her presidency. ..."
"... Clinton waged this campaign on the belief that her neoliberalism of fear could defeat the ethnonationalism of the right. ..."
"... In the novel, what begins as a struggle against inherited privilege results in the consolidation of a new ruling class that derives its legitimacy from superior merit. This class becomes, within a few generations, a hereditary aristocracy in its own right. Sequestered within elite institutions, people of high intelligence marry among themselves, passing along their high social position and superior genes to their progeny. Terminal inequality is the result. The gradual shift from inheritance to merit, Young writes, made "nonsense of all their loose talk of the equality of man": ..."
"... Losing every young person of promise to the meritocracy had deprived the working class of its prospective leaders, rendering it unable to coordinate a movement to manifest its political will. ..."
"... A policy of benign neglect of immigration laws invites into our country a casualized workforce without any leverage, one that competes with the native-born and destroys whatever leverage the latter have to negotiate better terms for themselves. The policy is a subsidy to American agribusiness, meatpacking plants, restaurants, bars, and construction companies, and to American families who would not otherwise be able to afford the outsourcing of childcare and domestic labor that the postfeminist, dual-income family requires. At the same time, a policy of free trade pits native-born workers against foreign ones content to earn pennies on the dollar of their American counterparts. ..."
"... Four decades of neoliberal globalization have cleaved our country into two hostile classes, and the line cuts across the race divide. On one side, college students credential themselves for meritocratic success. On the other, the white working class increasingly comes to resemble the black underclass in indices of social disorganization. On one side of the divide, much energy is expended on the eradication of subtler inequalities; on the other side, an equality of immiseration increasingly obtains. ..."
[Neo]liberalism that needs monsters to destroy can never politically engage with its enemies.
It can never understand those enemies as political actors, making calculations, taking advantage
of opportunities, and responding to constraints. It can never see in those enemies anything other
than a black hole of motivation, a cesspool where reason goes to die.
Hence the refusal of empathy for Trump's supporters. Insofar as it marks a demand that we
not abandon antiracist principle and practice for the sake of winning over a mythicized white working
class, the refusal is unimpeachable. But like the know-nothing disavowal of knowledge after
9/11, when explanations of terrorism were construed as exonerations of terrorism, the refusal of
empathy since 11/9 is a will to ignorance. Far simpler to imagine Trump voters as possessed by a
kind of demonic intelligence, or anti-intelligence, transcending all the rules of the established
order. Rather than treat Trump as the outgrowth of normal politics and traditional institutions -
it is the Electoral College, after all, not some beating heart of darkness, that sent Trump to the
White House - there is a disabling insistence that he and his forces are like no political formation
we've seen. By encouraging us to see only novelty in his monstrosity, analyses of this kind may prove
as crippling as the neocons' assessment of Saddam's regime. That, too, was held to be like no tyranny
we'd seen, a despotism where the ordinary rules of politics didn't apply and knowledge of the subject
was therefore useless.
Such a [neo]liberalism becomes dependent on the very thing it opposes, with a tepid mix of
neoliberal markets and multicultural morals getting much-needed spice from a terrifying right. Hillary
Clinton ran hard on the threat of Trump, as if his presence were enough to authorize her presidency.
Where Sanders promised to change the conversation, to make the battlefield a contest between a
multicultural neoliberalism and a multiracial social democracy, Clinton sought to keep the battlefield
as it has been for the past quarter-century. In this single respect, she can claim a substantial
victory. It's no accident that one of the most spectacular confrontations since the election pitted
the actors of Hamilton against the tweets of Trump. These fixed, frozen positions - high
on rhetoric, low on action - offer an almost perfect tableau of our ongoing gridlock of recrimination.
Clinton waged this campaign on the belief that her neoliberalism of fear could defeat the
ethnonationalism of the right. Let us not make the same mistake twice. Let us not be addicted
to "the drug of danger," as Athena says in the Oresteia, to "the dream of the enemy that
has to be crushed, like a herb, before [we] can smell freedom."
The term "meritocracy" became shorthand for a desirable societal ideal soon after it was coined
by the British socialist Sir Michael Young. But Young had originally used it to describe a dystopian
future. His 1958 satirical novel, The Rise of the Meritocracy, imagines the creation and growth of
a national system of intelligence testing, which identifies talented young people from every stratum
of society in order to install them in special schools, where they are groomed to make the best use
possible of their innate advantages.
In the novel, what begins as a struggle against inherited privilege results in the consolidation
of a new ruling class that derives its legitimacy from superior merit. This class becomes, within
a few generations, a hereditary aristocracy in its own right. Sequestered within elite institutions,
people of high intelligence marry among themselves, passing along their high social position and
superior genes to their progeny. Terminal inequality is the result. The gradual shift from inheritance
to merit, Young writes, made "nonsense of all their loose talk of the equality of man":
Men, after all, are notable not for the equality, but for the inequality, of their endowment.
Once all the geniuses are amongst the elite, and all the morons are amongst the workers, what meaning
can equality have? What ideal can be upheld except the principle of equal status for equal intelligence?
What is the purpose of abolishing inequalities in nurture except to reveal and make more pronounced
the inescapable inequalities of Nature?
I thought about this book often in the years before the crack-up of November 2016. In early 2015,
the Harvard sociologist Robert Putnam published a book that seemed to tell as history the same story
that Young had written as prophecy. Our Kids: The American Dream in Crisis opens with an evocation
of the small town of Port Clinton, Ohio, where Putnam grew up in the 1950s - a "passable embodiment
of the American Dream, a place that offered decent opportunity for all the kids in town, whatever
their background." Port Clinton was, as Putnam is quick to concede, a nearly all-white town in a
pre-feminist and pre-civil-rights America, and it was marked by the unequal distribution of power
that spurred those movements into being. Yet it was also a place of high employment, strong unions,
widespread homeownership, relative class equality, and generally intact two-parent families. Everyone
knew one another by their first names and almost everyone was headed toward a better future; nearly
three quarters of all the classmates Putnam surveyed fifty years later had surpassed their parents
in both educational attainment and wealth.
When he revisited it in 2013, the town had become a kind of American nightmare. In the 1970s,
the industrial base entered a terminal decline, and the town's economy declined with it. Downtown
shops closed. Crime, delinquency, and drug use skyrocketed. In 1993, the factory that had offered
high-wage blue-collar employment finally shuttered for good. By 2010, the rate of births to unwed
mothers had risen to 40 percent. Two years later, the average worker in the county "was paid roughly
16 percent less in inflation-adjusted dollars than his or her grandfather in the early 1970s."
Young's novel ends with an editorial note informing readers that the fictional author of the text
had been killed in a riot that was part of a violent populist insurrection against the meritocracy,
an insurrection that the author had been insisting would pose no lasting threat to the social order.
Losing every young person of promise to the meritocracy had deprived the working class of its
prospective leaders, rendering it unable to coordinate a movement to manifest its political will.
"Without intelligence in their heads," he wrote, "the lower classes are never more menacing
than a rabble."
We are in the midst of a global insurrection against ruling elites. In the wake of the most destructive
of the blows recently delivered, a furious debate arose over whether those who supported Donald Trump
deserve empathy or scorn. The answer, of course, is that they deserve scorn for resorting to so depraved
and false a solution to their predicament - and empathy for the predicament itself. (And not just
because advances in technology are likely to make their predicament far more widely shared.) What
is owed to them is not the lachrymose pity reserved for victims (though they have suffered greatly)
but rather a practical appreciation of how their antagonism to the policies that determined the course
of this campaign - mass immigration and free trade - was a fully political antagonism that was disregarded
for decades, to our collective detriment.
A policy of benign neglect of immigration laws invites into our country a casualized workforce
without any leverage, one that competes with the native-born and destroys whatever leverage the latter
have to negotiate better terms for themselves. The policy is a subsidy to American agribusiness,
meatpacking plants, restaurants, bars, and construction companies, and to American families who would
not otherwise be able to afford the outsourcing of childcare and domestic labor that the postfeminist,
dual-income family requires. At the same time, a policy of free trade pits native-born workers against
foreign ones content to earn pennies on the dollar of their American counterparts.
In lieu of the social-democratic provision of childcare and other services of domestic support,
we have built a privatized, ad hoc system of subsidies based on loose border enforcement - in effect,
the nation cutting a deal with itself at the expense of the life chances of its native-born working
class. In lieu of an industrial policy that would preserve intact the economic foundation of their
lives, we rapidly dismantled our industrial base in pursuit of maximal aggregate economic growth,
with no concern for the uneven distribution of the harms and the benefits. Some were enriched hugely
by these policies: the college-educated bankers, accountants, consultants, technologists, lawyers,
economists, and corporate executives who built a supply chain that reached to the countries where
we shipped the jobs. Eventually, of course, many of these workers learned that both political parties
regarded them as fungible factors of production, readily discarded in favor of a machine or a migrant
willing to bunk eight to a room.
Four decades of neoliberal globalization have cleaved our country into two hostile classes,
and the line cuts across the race divide. On one side, college students credential themselves for
meritocratic success. On the other, the white working class increasingly comes to resemble the black
underclass in indices of social disorganization. On one side of the divide, much energy is expended
on the eradication of subtler inequalities; on the other side, an equality of immiseration increasingly
obtains.
Even before the ruling elite sent the proletariat off to fight a misbegotten war, even before
it wrecked the world economy through heedless lending, even before its politicians rescued those
responsible for the crisis while allowing working-class victims of all colors to sink, the working
class knew that it had been sacrificed to the interests of those sitting atop the meritocratic ladder.
The hostility was never just about differing patterns in taste and consumption. It was also about
one class prospering off the suffering of another. We learned this year that political interests
that go neglected for decades invariably summon up demagogues who exploit them for their own gain.
The demagogues will go on to betray their supporters and do enormous harm to others.
If we are to arrest the global descent into barbarism, we will have to understand the political
antagonism at the heart of the meritocratic project and seek a new kind of politics. If we choose
to neglect the valid interests of the working class, Trump will prove in retrospect to have been
a pale harbinger of even darker nightmares to come.
The Last but not LeastTechnology is dominated by
two types of people: those who understand what they do not manage and those who manage what they do not understand ~Archibald Putt.
Ph.D
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Canada makes it much more difficult to know its real unemployment rate. The official Canadian unemployment rate for February was 6.8 percent, a slight increase from January that Statistics Canada attributes to "more people search[ing] for work." The official measurement in Canada, as in the U.S., European Union and Australia, mirrors the official standard for measuring employment defined by the International Labour Organization -- those not working at all and who are "actively looking for work." (The ILO is an agency of the United Nations.)
Cleaning
Up Trump's Global Mess
Trump's
Mexico Tariffs Are About White Nationalism, Not Trade
Trump's
Trade War Is About Trump, Not China
Why
Spend $54 Billion More on the Pentagon? To Start a War, Obviously.
Making
China Great Again
