Content copyright . Jay Hamilton. All rights reserved.
Bubba and the Socialist in South Carolina
By J.M. Hamilton (1-21-12)
“We are all socialist now.” – King Edward VII
I rang up Bubba this week to get his take on the South Carolina primaries. I very much respect Bubba’s opinion on political matters, after all – he called the 2010 midterms.
My readers may recall that Bubba is my red meat inhaling, beer guzzling, mescal snorting best friend from Tejas. Yes, Bubba has proven that you can snort mescal, but the worm does tend to get stuck in the straw. Bubba and I go back to younger days and simpler times, summers spent water skiing, drinking PBR, and chasing skirt (not necessarily in that order). I spent many a summer night looking up at the stars of Texas through bullet holes in Bubba’s trailer ceiling…. Lying on his living room couch in the middle of the night (yes, we drank responsibly), and at the right kind of angle, you could sometimes see satellites pass by.
“The socialist dream is over. ObamaCare is dead. Just wait until the Roberts court rules,” he yelled into the receiver. “You can’t force people to buy insurance.”
“But Bubba by that same logic,” I responded, “shouldn’t all entitlement spending be eliminated then? After all, what is social security? It’s an insurance program we all pay into. Ditto Medicare. Why I don’t think there’s a single Republican candidate, save Mr. Perry, who favors elimination of social security. And look what happened to your governor! And didn’t Bush (W) expand Medicare with Part D?”
“Look,” Bubba rejoined, “Americans despise Euro-Socialism, period. Comprende?”
“Bubba, Americans should not fear Euro-Socialism, but rather, they should fear American-Socialism, which is far more expensive and dangerous to any country’s health."
“What you talking about Willis?”
I’m talking about the most insidious kind of socialism, the kind that is rarely discussed and all but ignored in the South Carolina Republican debates:
Like the bailout of Wall Street and European Banks.
Republican candidates have a keen dislike for social spending for the elderly, disenfranchised and the poor (what they have dubbed “Euro-Socialism”), but these same Republican candidates have little to say about America’s biggest – and most recent - export to European shores… American Socialism (aka Crony Capitalism).
“I need a beer,” said Bubba.
P.S.
And to see why American-style Socialism is alive and well let’s surf over to Opensecrets.org, and review 2012 campaign financing by economic sector.
Sector Totals, 2011-2012
http://www.opensecrets.org/industries/index.php
http://www.opensecrets.org/industries/indus.php?Ind=F
http://blog.jmhamiltonpublishing.com/2010/08/15/bubba-called.aspx
____________________________________________________________________
By J.M. Hamilton (1-8-12)
"Today we have a similar debate over this... anyone know what this is... class? Anyone, anyone, anyone seen this before?... the Laffer Curve. Anyone know what this says? It says at this point on the revenue curve you will get exactly the same amount of revenue as at this point. This is very controversial. Does anyone know what Vice President George Bush called this in 1980? Anyone, Anyone? Something D-O-O economics... voodoo economics."
- Ben Stein from the movie, Ferris Bueller’s Day Off
Happy New Year!
And like prior Republican administrations, President Obama has kept strong ties to our ally in the middle-east, Israel. As quoted in the Washington Post, Chicago Mayor Rahm Emanuel had the following to say about the President’s commitment: “As I listened to the president’s speech on the Middle East, I heard him reaffirm his strong commitment to Israel’s safety, security and prosperity.”
On domestic policy, corporations have never been richer, profit margins
are high, and balance sheets - in many instances - are rich with cash.
Fed policy under the President's watch has been very generous to: the
wealthy, Wall Street Banks, and multi-national corporations. As for
the Wall Street bail-out, again, this was a legacy project - initiated -
by the Bush administration and Mr. Henry Paulson. How this President
handles the next, and inevitable, financial crisis remains to be seen;
Mr. Obama’s administration will own the next crisis.
And while
jobs are scarce - how much of this present economic environment is
created by the plutocracy, via capital strikes, globalization, and
unfair trade agreements? These are issues that could be addressed, if
the nation had a fully functioning Republican Congress that was
interested in helping out the American economy, instead of holding same
hostage for prospective political gain. Unlike a President Romney,
whose economic policies call for “borrowing and spending” as reported by
Bloomberg last week, President Obama is more fiscally
conservative and would prefer to pay as we go through a combination of
spending cuts and tax increases.
President
Obama does not appear to believe in what former President H.W. Bush
referred to as "voodoo economics." He’s a pragmatic man and probably
understands that politicians/congress doesn't have the self- discipline
to increase taxes in good economic times, which is the Keynesian
paradigm’s shortcoming.
The argument I'm
clumsily attempting to make is that, in essence, a moderate Republican
already occupies the White House, and that by the standards of a H.W.
Bush, or say, either an Eisenhower or Nixon, Obama should be the
Republican nominee. It is because the zealots within the Republican
Party have moved the political center of this nation so far right, as to
be rendered unrecognizable to many establishment Republicans from
yester-year, that we have such a conservative and pro-business
Democratic administration.
What this says for the economic and political aspirations of Democrats and Liberals is another story. If
I didn’t know better, it’s almost as if the plutocracy installed into
the White House a Trojan Republican President, wrapped in the Democratic
Party’s mantle. It is because President Obama is the
calmest, most rational, and most presidential choice, versus the
Republican field of candidates, that J.M.H. supports him for a return to
the White House. Besides, the nation hasn’t had a
foreign policy guru in the White House this gifted, since
Nixon/Kissinger teamed up to conquer the world.
___________________________________________________________________________
Dien Bien Phu & the Last Empire
by J.M. Hamilton (12-25-11)
"Colonial policy is the daughter of industrial policy." - French P.M. Jules Ferry
Lost
in the fog of war and the mists of time is a long forgotten battle. A
battle fought on the other side of the world, between the French and a
proud and indigenous people, who wanted nothing more than their freedom
from colonial rule. The U.S., at that time, pumped what would be
considered an exceptional amount of money into the French military.
Fought in the decade following WWII, and with the Korean War very much
on the minds of U.S. policy makers, surely the French could defeat this
revolutionary tribe. But it was not meant to be, the French decided to
roll the dice within Indochina's isolated hill country, near the enemy's
Laotian supply line. The French opposition knew the importance of this
battle, as international negotiations were underway in Geneva over the
regions future. The French, who had brought with them into battle mobile
bordellos, were caught off guard when they found themselves surrounded
by captured artillery pieces and anti-aircraft guns, strategically
placed on higher ground. The subsequent battle of Dien Bien Phu ended
French colonial rule in Southeast Asia, and became a rallying cry
globally for nationalist movements seeking independence from occupying
western powers. The country was subsequently divided in two at Geneva,
and Ho Chi Minh was given a foothold in North Vietnam and international
legitimacy, with which to launch a civil war that would eventually end
in American defeat two decades later.
The New York Times reported on 5-9-54 the following: "The
fall of Dien Bien Phu marks the end of an era. The ultimate military,
political and psychological reactions may either make or break the
anti-Communist front in the Far East and France as a great power... A
lost battle has tipped the scales of history in the past; Dien Bien Phu
may prove, in future accountings, to be the balance point in
contemporary history." - After Dien Bien Phu, What?
Could the Iraq war be America's Dien Bien Phu?
Before
answering that question, let's take a look at the similarities and
differences between America's wars in Iraq and Indochina. And then let's
examine the cost allocation of war.
History repeats. Both wars,
Vietnam and Iraq, were started at a time when the American public was
hyper vigilant about a perceived and real menace in the world: Communism
and Radical Islam. In both wars, political authorization for U.S.
involvement was obtained under dubious and questionable circumstances:
In Vietnam it was the Gulf of Tonkin incident that provided a catalyst,
and in Iraq it was concern over weapons of mass destruction. In both
wars the political goals and objectives were nebulous over time, and
finally denigrated into "nation building;" and in both wars, America was
either forced to leave the battlefield or requested to leave... no
longer wanted, and leaving under less than auspicious circumstances.
Time would also show that the twin threats of Communism and Arab
Radicalism would dissolve considerably with the collapse of the Soviet
Union and the rise of the Arab Spring/pro-democracy movements.
And as Vietnam proved, and as pointed out by Alan Abelson in last weeks Barron's,
Americans will not know the true cost of the Iraq war for many decades.
The Iraq war will more than likely exceed a trillion is net cost, but
that doesn't begin to account for the tremendous forgone opportunity
costs incurred by the nation, when we consider that Iraq war debt could
have been allocated to helping Americans achieve a higher education, or
if said funds were allocated to paying down the national debt, or not
expanding same. Even by today's standards, a trillion dollars is still
real money. Nor does this begin to factor in the additional economic
burden placed upon ordinary Americans, and returning soldiers, post war,
when monetary policy inevitably swings towards war debt monetization -
resulting in inflation and lower living standards.
That the real
political achievement of the Iraq war was the permanent removal of
Saddam Hussein calls into question the efficacy of Executive Order
12333, which supposedly forbids the assassination of foreign heads of
state. The reality is there are plenty of exemptions to Executive Order
12333, and so if we compare the cost of the Iraq war to say, the cost of
the mission to eliminate Osama bin Laden, well there really is no
comparison. What's the nominal cost of a bullet or a drone, versus the
extraordinary cost of Iraq War.... all to remove one man? To push the
point a step further, compare the cost, in blood and treasure, to remove
Col. Gaddafi versus Saddam Hussein?
Separately, "nation
building" (code for we no longer know what the freak we are doing here,
so we have turned this mission into a philanthropic enterprise) was a
failure in Vietnam, and only time will tell if it will prove successful
in Iraq. Recent actions by the Iraqi prime minister, like issuing an
arrest warrant for the Iraqi Vice President and further consolidating
his hold on power, already call into question whether or not a nascent
Iraqi democracy will flower and grow. What nation building really has
come to symbolize is a run up of conflict costs and expenditures, and a
financial "pig-out" by private contractors and commercial interests
within a war zone, all at U.S. tax payer expense.
Despite many
similarities, a key difference between both wars was the utilization of
conscription by U.S. forces fighting in Vietnam, versus an all volunteer
military fighting force in the Iraq War, and the resulting passive
objection to the Iraq war by U.S. society, versus the near public
rebellion over the Vietnam war. Some how it makes it more acceptable to
some Americans if the poor and the down trodden are voluntarily
sacrificed upon the altar of war, instead of the sons and daughters of
the wealthy and the middle class, via the draft. And the military
industrial complex (MIC) knows this. Former Defense Secretary Robert
Gates warned of a separation in society between an elite warrior class
and ordinary Americans.
Also of critical importance, we can see a
tremendous disconnect in the way the costs of war are passed onto
society as whole, in lieu of armed conflict's true beneficiaries. J.M.H.
argues that because of this, wars have a tendency to drag on
indefinitely. In other words if the true costs of the war were allocated
correctly, than wars would become more efficient, cost effective,
produce swifter results with less loss of human life, and pull out and
withdrawal would become more rapid. More thought might also be given to
entering into war in the first place.
So who or what truly
benefited then from the removal of Saddam Hussein, aside from the Shia
majority inside Iraq? Well as clearly alluded to by French Prime
Minister Jules Ferry, commercial interests clearly benefit from war
without end, colonization, and/or nation building. Big Oil was clearly
chomping at the bit to return to Iraq. And of course the U.S. military
industrial complex expanded and grew, significantly, over the last
decade, more than doubling in budgetary outlays. Not surprisingly banks
benefit with the issuance of martial debt and financing. The fact that
the U.S. government spends more on defense than the G-20 combined says
it all.
As with all wars, there are often unintended
consequences. An unintended beneficiary of Mr. Hussein's removal was
Iran; and Iran has been working to obtain a foothold inside Iraq, with
success, ever since the U.S. lead invasion.
America has to
figure out a way to be less subservient to what President Eisenhower
referred to in his farewell address to the nation as the military
industrial complex; failure to do so may mean that Iraq could become
America's Dien Bien Phu. How then might America control the costs of
war, and prevent taxpayer money, sometimes with good intentions, from
being wasted on nation building? If the cost of Iraq war was amortized
over the costs of the products and services produced by the MIC, and
passed onto foreign consumers (America being the largest arms dealer on
the planet), the price of a prolonged and protracted war would become
too great for the MIC to endure and would make MIC products and services
considerably less competitive. Likewise, if the price of the Iraq war
were presented as a cost of doing business to Big Oil or mining
interests, they would balk at the cost; and maybe the Iraq war truly
would have ended when Mr. George Bush landed on the deck of the aircraft
carrier, USS Abraham Lincoln, with the now infamous sign, "Mission
Accomplished." Thanks to the manner in which American wars are presently
billed, there is no financial incentive to rein in the cost, since the
U.S. has been living on a credit card economy for decades, and the MIC,
via its all volunteer military, has all but eliminated serious protest.
Ultimately,
if America is unsuccessful in reining in MIC costs, it could result in a
threat to national security, the loss of international prestige, as
well as, possibly cause unmitigated hardship here at home, as defense
spending takes away government services from the 99% and ultimately
leads to an increase in taxation upon all Americans, the 100%. (By way
of example, take a look at the financial situation of the so-called
PIIGS in Europe... and ask yourself, are these nations in any kind of
financial condition to fight a war on terror or handle any other
sovereign threat? The PIIG's fiscal policy, and deficit spending, is a
threat to their very own national security.) Equally tragic, back in
America, nation building exercises may leave the MIC winded and the
public less likely to support the use of force in the future, when the
U.S. may actually have very good reasons for going to war.
“Of
all the enemies to public liberty war is, perhaps, the most to be
dreaded because it comprises and develops the germ of every other. War
is the parent of armies; from these proceed debts and taxes … known
instruments for bringing the many under the domination of the few.… No
nation could preserve its freedom in the midst of continual warfare.”
— James Madison, Fourth President of the U.S.
There
is some reason for optimism however. Not everyone who enters the White
House is an opportunist or a poor war strategist. Look at George H.W.
Bush and his management of the first Gulf War; this was a war that was
fought with great precision, finite goals and objectives, and clearly
big oil and the House of Saud were among the beneficiaries of that war,
not to mention the Government of Kuwait. Arguably, the U.S. should have
submitted a substantive portion of the bill for that war to the various
governments in the Middle East and to commercial oil concerns operating
in the region.
Better yet, observe President Obama and his deft
and expert management of the overthrow of the Libyan dictator, Colonel
Gaddafi. These are excellent examples of where the U.S. military was
utilized for its intended use, as opposed to an unending nation building
exercise that only served to enrich the private contractors of war, and
the commercial interests that sweep in post-war - all at the expense of
the American people and the men and women who serve. Are we naive
enough to believe that these same commercial interests, in our present
form of democracy, do not have a considerable say in how and when
America goes to war? Do foreign governments and the MIC lobby the
congress? Assuredly and big time!
To be sure, there are many
reasons to go to war, and American leaders may in fact have the best of
intentions and the highest of ideals ( humanitarian, the spread of
democracy, and otherwise), but our leaders nor the American people
should never lose sight of the fact that there are tremendous profits to
be made in war, as well as, many interested parties and unintended
consequences and expense.
J.M.H. is a fan of President Obama's
foreign policy, and the world owes him a debt for his substantial
contribution towards the Libyan dictators removal; and America owes the
President another debt for finally extricating our service men and women
from the Iraq war.
That said, it appears that we plan on
colonizing Afghanistan for years to come, in yet another nation building
exercise. Witness last Wednesday's NY Times story, which quotes a U.S.
general as stating that America may be in Afghanistan beyond 2014. How
ironic that Afghanistan, under Americas watch, has been and remains the
worlds foremost opium purveyor. Americans, fiscal conservatives, and
liberals, who find endless war objectionable, or too damn corrupt and
expensive, may find that Republican Presidential Candidate Ron Paul
provides sharp and welcome contrast to mainstream political pandering to
the MIC. Perhaps Mr. Paul can help drag the mainstream towards his line
of thinking?
J.M.H. is grateful for the men and women who serve
their country. And Americans, as responsible participants in our
democracy, owe it to our armed forces to make sure that when our elected
officials send these men and women into harms way - it truly is for the
advancement and protection of the national interest, and not just
another nation building exercise. These men and women would also be
better served if the true costs of U.S. involvement in armed conflict
were allocated to commercial entities and foreign governments, with
vested economic and political interests, when and where possible.
After all, blood and nation building are a huge expense.
P.S.
A Pending U.S. Workout?
By J.M. Hamilton (11-24-11)
“I know who exactly who I’m talking to, Mr. Croker.” Croker’s voice was low and strong, but Harry’s high grinding whine cut through it. “I’m talking to an individual who owes this bank half a billion dollars and six other banks and two insurance companies two-hundred and eighty-five million more, that’s who I am talking to. And you know, there’s an old saying here in Atlanta, too, and that saying is ‘Money talks, and bullshit walks,’ and the time has come to talk with money, Mr. Croker. All I’m telling you is what’s already obvious. All I’m telling you are some home truths in the privacy of this room. You wanna throw this thing open to all seven banks and the two insurance companies and have a real workout session? We can do that! Happens all the time. It’ll have to be in an auditorium. Nine different lenders? We’re talking about more than a hundred people sitting in an auditorium with an audio system and microphones, and it’ll be incumbent upon every one of those lenders to pick up a microphone and tell you something over the wall speakers that I’m gonna tell you right now, very quietly, in the this little room, across the table, on behalf of only one lender, PlannersBanc, and it’s this Mr. Croker…. “ Seeing that Croker was suitably stunned by his belligerence, the Artiste paused for maximum effect and then said in a menacingly calm voice, “This is one of the worse cases of corporate mismanagement… one of the grosses violations of fiduciary obligations…. I’ve ever seen… And in my job I look down the gullet of mismanagement and malfeasance every day. You and your corporation have taken five hundred million dollars from the bank, Mr. Croker….”
From the book A Man in Full, by Tom Wolfe (Writer of the Right Stuff and the Bonfire of the Vanities)
Can you see it on the horizon? I can.The workout that is taking place in Greece and in Italy, where popular democracy has been suspended and new heads of state have been installed by the banks, could eventually arrive in the U.S.
Granted European parliamentary democracy makes the pretense of keeping up democratic appearances so much easier.
Mr. Papademos, Greece’s new Prime Minister, was formerly employed by the E.U. central bank, and Mr. Monti, Italy’s new Prime Minister, does have strong ties to Goldman Sachs (neither were popularly elected); and both bankers/technocrats/prime ministers received the blessing of the E.U.’ central banker, former Goldman alum, Mario Draghi.
So how did Europe get here and what does it bode for the U.S.? Greece and Italy are mired in debt, and in both countries the “bond vigilantes” (read: banks, hedge funds, private equity, mutual funds and wealthy individual investors) have driven swaps spreads and state bond yields to the breaking point. The “breaking point” is where interest on the national debt takes up such a large portion of the government budget that states must engage in either fiscal austerity or default. Fiscal austerity is paid for by the 99%. And default threatens the 1%. Default also triggers credit default swaps, and the equivalent to economic Hiroshima or Nagasaki in Athens or Rome. The contagion then spreads to Northern Europe/Deutsche Bank, and across the pond to the corner of Wall and Broad.
To buy more time, and to postpone economic Armageddon, the banks and Germany are presently engaged in something called a workout in Greece and Italy. Now for the uninitiated, a “workout” is a “come to Jesus/Yahweh/Muhammad moment,” where bank(s) and creditor meet and all kinds of nastiness ensues. In the private sector, assets might be sold off to repay bank loans, labor cut, new management installed, and the bank may install "friends" on the board of directors. Debt might even be “voluntarily” restructured. That’s if things go nicely. An alternative to the aforementioned is bankruptcy, Chapters Seven or Eleven. And although the popular press hasn’t picked up on it yet, a workout is exactly what is happening in Greece and Italy right now…. The banks have effectively installed their own men in the key positions in government to workout on state finances.
And as with the private sector, the workout solutions in government are not dissimilar: raise taxes (preferably upon the middle class), cut spending and social services, sell off state assets to the connected bidder (privatize), and stack government with bankers or banker friendly politicians.
So as to avoid a write down or a default, the banks want to squeeze every last drop out of fiscal policy. Think of private equity/shadow banking buying out a company on Friday, popping champagne corks on Saturday night, and handing out pink slips to employees on Monday morning. Choose your analogy.
At the end of the day, the debt must be serviced.
And the banks will do everything in their power to insure that they win, and that the creditor, in this case the public sector – the government/democracy/taxpayer – takes the hit before they do. It’s the banker’s code! After all, the creditor borrowed the money, and no matter how many financial artifices of war were deployed against said creditor/government/taxpayer, or no matter how usurious the terms, the creditor must pay.
The fact that many of these troubled governments presently under fire for their profligate ways, the U.S. included, bailed out the banks and continue to do so, repeatedly, is an entirely separate matter, as far as the banks are concerned.
In the eyes of the bank, whether it be John Q. Public maxing out his credit card, a major corporation who borrowed one too many hundreds of millions in the face of an economic downturn, or the Sovereign Government of Greece, who hid its fiscal intemperance via advisors from Goldman Sachs and the use of CDS and swaps… they are viewed all the same. They are all freaking dead beats!
Again, how does the public and private sector get here? The parallels are not dissimilar for the private and public sector. It is usually financial mismanagement, combined with rotten timing. The quote from Mr. Wolfe’s banker -the man with the Death’s Head suspenders – the workout artiste - says it best: “This is one of the worse cases of corporate mismanagement… one of the grosses violations of fiduciary obligations…. I’ve ever seen… And in my job I look down the gullet of mismanagement and malfeasance every day.”
For the public sector this means, simply: Politicians have over promised on public services and social programs (or failed to reign in the costs of those programs by conducting fair and honorable negotiations with the vendors for government programs, say Big-Pharma), underfunded their liabilities, low balled taxes to appease the rich (or in the case of Greece haven’t even bothered to collect taxes), and presto… you have massive amounts of government debt, that the bankers assume is bullet proof and/or are all too happy to fund. Besides, aside from interest payments, the bankers clean up on the issuance of government debt with fees and commissions, arbitrage generates more fees, and so does CDS, swaps and hedges, which insures government debt or allows gambling against same. The bankers also assume, when it’s convenient, that world governments will not default, and can always raise revenue or print additional monies. Always.
Yes, having a little debt or venture capital is all good, when the economy is rocking, the birds are singing, and demographic trends favor your government. But when the advanced economies budgets are shredded by bank bailouts and the resulting chaos, central banks who pushed the pedal to the metal on printing presses, the birds are dying, and demographic trends are sucking the state dry…. Well, it’s no time to be beholden to the banker, because bankers don’t do sob stories.
If you are a winter enthusiast, don’t worry about climate change and it’s impact upon ice and snow… why just stop by any Wall Street bank branch, and look into that banker’s heart and soul and find a veritable winter wonderland. ‘Tis the Season!
But I digress, because as flinty and as cold as a banker might be as an enabler, there’s always the enabled. And in the case of the United States of America, the Republican Party “pimped” the nation out to Wall Street, through mismanagement of state finances for the last thirty years. The GOP, or certainly their laissez faire ideology, did it to us. Starting with Reagan, the Republicans gave us the credit card economy, they took the governors off the economic engine of capitalism (by stripping away bank regulation), they floored the printing presses at the Fed (courtesy of the Maestro), and they removed all fiscal sanity with monolithic tax cuts for those who could most afford to pay, the rich. A neo-gilded age was born, complete with excesses that F. Scott Fitzgerald never dreamed of. Western governments were overrun with newly minted plutocrats, bankers, and plutocratic wannabes, complete with Bunga-Bunga parties. Of course, the bankers were there all along, right by the side of the GOP - dispensing campaign contributions and whispering sweet nothings, like ‘the economy will roll forever, the good times will last forever, the U.S. is strong - it can always pay down its debt at some future date.’ Shortly after the 2008 crash…the mother of all fiscal hangovers kicked in, and now the mirror that reflects the state of the union is fractured… not that many heads of state from that era want to look into the mirror.
When’s the last time this country heard profound wisdom from former President Bush (W)? Surely, Mr. Bush has ideas on how to cure the nation‘s ills. No? Or how about the former VP, the man without a pulse, who said deficits don’t matter?
Democracies perish when special interests learn they can vote themselves public largess, and many advanced economies/democracies have often become nations of special interests. This is why strong democratic government with strong government leadership is so important, and the word “NO” is the most powerful word in the English language. Ultimately, to rein this fiscal mess in and remove the bankers from the seats of government, there needs to be real reform on taxation, but just as importantly, on the supply side of the government equation. That is to say, if America wants to get its fiscal house in order, we need leadership who is willing to offend very wealthy and powerful special interests, who provide government services: that would be doctors, hospitals, big pharma, defense contractors, and bankers, just for starters.
Failure to do so may just mean that we see a President Blankfein in our lifetimes. Ah, his hair is not right, make it Prime Minister Dimon.
As this blog has stated previously, J.M.H. will take a tax and spend Liberal, over a borrow and spend Republican any day. Both parties favor big government… the difference between the two parties lies in whom the respective parties believe should be the beneficiary of government largess: the Democrats favor the people, the Republicans favor the Three Bs: banks, big oil, and billionaires. At least with the Democrats, you get fiscal responsibility and you pay as you go. With Republicans you get massive debt and the Wall Street cartel's frosty embrace. I call it a death grip.
Finally, there are some who say that the solution is to turn on the printing presses. But we have already seen this movie. Piling debt on top of more debt, w/out real fiscal reform just buys a little more time and a lot more agony. Ultimately, this global train wreck we are all witnessing has a date with destiny.
And Destiny, she’s been stood up and she’s pissed!
P.S. We would all do well to remember the last thirty years the next time Republicans and Wall Street propose to privatize Medicare and Social Security.
We’d also do well to remember where Presidential Candidate Romney made his money, with Wall Street’s co-evil twin, shadow banking’ Private Equity.
And speaking of workouts, how about the workout purchasers of derivatives and swaps are receiving over Greek sovereign debt, presently. The International Swaps and Derivatives Association (ISDA), run by you guessed it, the Wall Street Cartel, appears to be putting pressure on the holders of credit default swaps to “voluntarily” accept a haircut on Greek debt of up to 50%, w/out seeking the insurance protection afforded by same. Seems that the banks, many of whom probably reside on the other side of the transaction, or put another way may in fact be the swaps counterparty, surprise, don’t want to pay out. Hence, investors who haven’t figured it out already are learning the obvious once again: the banks, who control governments and politicians, write their own rules. Contracts and the rule of law be damned!
What does this bode for the future of the swaps and derivatives market? The impact could be immeasurable. If purchasers of these swaps and derivatives feel that the game is rigged and banks, or counterparties, don’t intend to pay out on these insurance products in the event of default - governments, business and individuals will stop purchasing them, and so follows the purchase of debt and other obligations derivatives and swaps are designed to insure.
Happy Thanksgiving!
_____________________________________________________________
Democracy in Flames and Sovereignty under Fire!
By J.M. Hamilton (11-11-11)
“Thus was parliamentary democracy finally interred in Germany. Parliament had turned over its constitutional authority to Hitler and thereby committed suicide…” - William L. Shirer, The Rise and Fall of the Third Reich
It doesn’t take much to overturn a democracy or democratic institutions: economic chaos, unchecked fear, a couple of gallons of gasoline, and a few matches. That’s all it took in Germany in the 1930’s, when the Nazis burned down the Reichstag (Germany’s emblem of democracy and the equivalent to the U.S. Congress). Communist were of course blamed and used as scapegoats. In the resulting fear and turmoil, civil rights were suspended by Germany’s President Hindenburg, allowing Hitler to round up and exterminate any and all political opposition without due process. A short time later the aptly named “Enabling Act” was passed and a dictatorship was born - all perfectly legal and sanctioned by the state. Hitler said the suspension of both German civil liberties and democracy itself, was all for the German peoples protection. It was through fear and uncertainty that Hitler seized that which the Nazis could not obtain democratically, hegemonic and absolute power over the German state.
Today in Europe and America we see the erosion of democratic institutions at every turn. And what global banking oligarchs cannot accomplish by a flood of money into the political process, or by the purchase of politicians, is won through the coercive power of the state, as former bank executives cruise through the revolving door and operate key government positions – again, all perfectly legal and sanctioned by the state. (e.g. Witness the recent coronation of Goldman Sachs alum, Mario Draghi, as head of the E.U.’ central bank, who is said to have wrote the book on hiding government debt via the use of swaps and derivative products; or check out another Goldman alum who runs the Commodities Futures Trading Commission (CFTC), Mr. Gensler… and some people wonder why the CFTC has delayed implementation of new derivative/swaps rules and regulations?)
Per the New York Times’ Thomas Friedman, there’s a reason why 61 house members sit on the congressional Financial Services Committee.
In the cradle of democracy last week, Greek Prime Minister, George Papandreou, dared defy the established order of things, that of banking uber alles, and actually sought a referendum by the people on the proposed E.U. Greek bailout package. Now this bailout package promises a write down on Greek debt of 50%, when the market values the haircut to bond holders at no less than 80% (what a deal for the bank or institution who picks up this debt at the fireside sale price, because if the bailout holds, they will more than double their money, all at the expense and suffering of the taxpayer – both U.S. and European); moreover, the proposed bailout would in all probability consign Greece to austerity and economic decline for at least a decade or more. Not that the alternative, default, hyper-inflation, capital flight magnified, and a return to the drachma, would have been much better. But the resulting outcry from the European and U.S. political elites was so stunning and sharp in response to the referendum, it merely proves the point that the J.M. Hamilton blog made in an editorial a couple of weeks ago (entitled, Fear and Loathing – Globally), namely, that the elites fear democracy. Mr. Papandreou retreated and cancelled democracy/the referendum, which would have finally given Greek citizens an opportunity to weigh in on their nation’s financial crisis.
Meanwhile, in Italy, a media mogul and a septuagenarian playboy, also known at the Italian Prime Minister, has “voluntarily” submitted his government and its budget to International Monetary Fund (IMF) oversight and scrutiny. Now, submitting your government budget for IMF review is very much like the indignity, and an infringement upon sovereignty, that the Greeks have already endured and continue to suffer, that of sovereign budgetary oversight by interested third parties.
Moreover, it is an indignity and threat to sovereignty that the United States Congress would never tolerate, at least not yet. You’ve got to hand it to the bankers, however, they would never tarnish and soil their bespoke suits with gasoline and matches. That’s entirely unnecessary, especially when the banks can burn down democracy with threats of a “Lehman event,” a capital strike, dumping sovereign debt, or by making financial bets against the very nations that have repeatedly bailed them out. (Note: In yet another assault on pesky democracy, both the democratically elected Italian and Greek prime ministers, Berlusconi and Papandreaou, are being replaced by “technocrats,” which is a fancy word for saying that Messrs. Monti and Papademos are more than likely BBF or Banker Buddies Forever. Messrs Monti and Papademos have not been popularly elected, but will most likely run both Italy and Greece, presumably, for Wall Street’s and E.U. Bank benefit.)
Three years after the last financial crisis, politicians are desperate to avoid another “Lehman event,” which is code for the global systematic risk posed by international banking, derivatives, and credit default swaps. Aside from the economic damage such an event would cause the global economy, already strained state budgets, and the havoc it would reek upon global currencies, the political elite are worried that the European and U.S. electorate might begin asking very pointed questions. Namely, what have these same politicians done over the last three years to prevent the banking crisis that is unfolding before our eyes, here and now in real time?
And that’s a question no politician, who wants to be elected or re-elected, appears to want to answer. Why? Because in the U.S. both political parties share blame for catering to Wall Street, and the lack of rules, regulation, and oversight since the 2008 financial crisis.
At the end of the day, international banking is the tail that has been wagging world governments, democracy, and the global economy with ever more frequent and deleterious effects. Multi-national corporations wised up to the games these Wall Street sharks play a while ago, and have hoarded colossal amounts of cash, in essence becoming their own banks, so as to avoid dealings with same.
But the public isn’t quite as fortunate.
Ultimately, the only thing that will rein the banks in, and the threat to global security and stability they represent, is to allow them to fail and subsequently nationalize them. If the global banking model the world is headed towards, willingly or unwillingly, is that of utility banking (i.e. elementary/pedestrian lending without the proprietary trading), then why not nationalize the cartel, install new management, and preserve as many banking jobs as possible, when these institutions inevitably fail again? As it stands, the banks often prey upon anybody or any institution, private or public, they come into contact with; and as often as not operate to the detriment of legitimate business, the world economy, and world governments. World governments are tapped out after bailing out international banking, repeatedly, and now the banks are demanding fiscal austerity, so that governments have the means to bailout the banks, yet again.
And to insure that the global political system continues to favor banks, these same institutions now appear to be installing their own heads of state. Democracy be damned.
Outlawing and unwinding existing naked shorts (e.g. speculative derivatives instruments) is also a must, if we are avoid repeating the same mistakes ad nauseum. In the last bubble, the speculative instrument of choice was mortgages, and in the coming crisis, as predicted by J.M. Hamilton, it is sovereign debt. In both instances, the banks have suspended all business prudence in exchange for the fast buck, with the full knowledge that governments will bail them out again, since they are too big to fail. Isn’t it time to stop this cycle? The failed banking institutions can always be returned to the private sector, post re-org.
As this blog has alluded to before, global democracies, as a general rule, don’t allow megalomaniacs to hold and operate standing armies or to possess nuclear weapons (or they do a great deal to suppress, contain, and avoid the reoccurrence of such individuals as Herr Hitler).
Containing these rogues is a matter of global security for world markets and the consumers within those markets.
If that’s the case, then why would business leaders and global governments allow something possibly more insidious than nukes, say international banking in its present incarnation, to be left in the hands of private sector dictatorships?
PS: For those who think that our banks, shadow banking, and exchanges are over-regulated… please explain it to the fine investors of MF Global, who relied upon CME -the self- regulating futures trading exchange - to protect their interests. A lot of farmers and investors are missing millions of dollars, because of this unregulated market and exchange, and some could face financial ruin.
http://blog.jmhamiltonpublishing.com/2011/11/10/futures-trading-but-a-light-regulatory-hand-is-now-being-called-into-question-after-the-collapse-of-mf-global-the-brokerage-firm-run-by-jon-s-corzine-until-last-week.aspx____________________________________________________________________
The Good, The Bad and The Ugly
By J.M. Hamilton (10-23-11)
“Such ingratitude after all the times I have saved your life.” – Clint Eastwood (aka The Good)
Perhaps I’m dating myself, but I still think The Good, The Bad and The Ugly (GBU) is one of the greatest movies ever filmed. Shot by Mr. Sergio Leone, GBU is the final act of the Dollars Trilogy, starring Clint Eastwood (as Blondie, the Good), Lee Van Cleef (as Angel Eyes or the Bad), and Eli Wallach (as Tuco, the Ugly). Together these three seek their fortune in a Civil War landscape, with all the mayhem and moral ambiguity that often surrounds war. For even “the Good” in this movie doesn’t exactly have a heart of gold. Mr. Eastwood was no Gene Autry, or even Gary Cooper, and the story would be disfigured if he was. The menace coming out of Mr. Eastwood’s eyes is only matched by pure evil pouring forth from Mr. Cleef’s fearsome visage; and Tuco, Mr. Wallach, looks throughout the movie like a rat that has been cornered and can’t decide to fight or flee but either way, you know better than to turn your back. Tuco is always trying to figure out his next three moves.
This story of course is a love story, although the love interest is gold.
Without giving away the ending, the movie concludes at the center of Sad Hill Cemetery in what is referred to by some as a Mexican Standoff; that is a three-way gunfighter face off, in which almost assuredly someone is going down. Only one of the three knows in which grave a cache of gold is buried and a ticket to a much easier life.
Today’s global financial crisis is not dissimilar to a Mexican Standoff, with the three principle actors in our play being the public, the banks, and the politicians. Politicians are being held accountable by the public, who are beginning to reassert themselves after a long period of bank bailouts, and wealth transfer from governments/public to the banks (whether it be through the inter-generational wealth larceny that is the Fed’s quantitative easing, or via an alphabet soup of government programs designed to give the banks billions at every turn, or through a stream of favorable court ruling that are pro-bank). The American and European public has never really had say in any of these government programs, Fed policy or judicial rulings, and has not been the beneficiary of trillions in government largess. No that degree of love and financial assistance appears only destined for the one percent, the banks. And now, res publica, the 99%, is beginning to reassert itself with violence in the streets, protests, and the power of the ballot box (its weapons in our story).
Of course, the banks too, perhaps presently best personified by Deutsche Bank’s Mr. Ackerman, play their part, literally holding a financial and economic gun to the heads of the politicians and the public as well. And the bank’s preferred financial weapon of choice is a global web of credit default swaps and derivatives contracts with hundreds of trillions in notional value. That and the banks, if they are made unhappy, just might go on a capital strike, the equivalent to a nuclear first strike upon the global economy. The politicians caught in the middle realize the solutions to the sovereign debt crisis, which have been peddled to date, are no longer working: monetary easing, fiscal stimulus, and sovereign debt piled upon more sovereign debt. In short the political game of Russian Roulette many pols have been playing has nearly run its course.
The politicians have increasingly found themselves corned, faced with choices and solutions that may cost them their careers, outright public revolt at election time, or cut off from future bank contributions to their re-election campaigns. Clearly Greece and many sovereign nations need debt restructuring, and the banks – prolific holders of sovereign debt - don’t want to take the hit (i.e. “haircuts” and write downs). Nor does bank management want their stock holdings and options watered down with public money and yet another government capital infusion (such a buzz-kill to any bank CEO’s stock portfolio).
The public, and in particular within Europe, the German community , are tired of carrying the freight for the excesses of others.
The “excesses” being: nations and politicians, who have lived beyond their means, and who refuse to hold the banks accountable; and of course, banks, who thrive upon the incompetence and moral depravity of some elected officials, and insist upon (and obtain through regulatory and government capture) the continuance of an unregulated and an opaque CDS/Swaps market …. all the better to hold the public, world governments, and economies hostage, guarantee future bank bailouts, and insist upon fiscal austerity - born by the middle and lower classes - as the solution to the debt crisis.
Politicians and banks are staring back at the public, who has learned too to vote themselves largess, via social spending. Ah the pitfalls of democracy.
I don’t’ have to tell you who the Good, the Bad or the Ugly is in our current picture… you can figure it out, but let’s just say that no one actor is entirely pure, but some of the players in this drama, clearly, are less evil.
Either way, this movie too, will have a denouement, and just like in The Good, The Bad and The Ugly, there will be winners and losers, and someone will ride away with the gold.
Mexican standoffs are never pretty.
P.S. For those who didn’t like last week’s editorial, Fear and Loathing – Globally, and its central message against free trade/arbitrage…. Please take a look at China with all its barriers to trade, and its tremendous economic success, and tell me once again why free trade is beneficial to America?
________________________________________________________________________
By J.M. Hamilton (10-16-11)
“Politics is the art of controlling your environment.” - Hunter S. Thompson
“Strange
memories on this nervous night in Las Vegas. Five years later? Six? It
seems like a lifetime, or at least a Main Era—the kind of peak that
never comes again. San Francisco in the middle sixties was a very
special time and place to be a part of. Maybe it meant something. Maybe
not, in the long run . . . but no explanation, no mix of words or music
or memories can touch that sense of knowing that you were there and
alive in that corner of time and the world. Whatever it meant. . . .
History is hard to know, because of all the hired bullshit, but even
without being sure of “history” it seems entirely reasonable to think
that every now and then the energy of a whole generation comes to a head
in a long fine flash, for reasons that nobody really understands at the
time—and which never explain, in retrospect, what actually happened.
There was madness in any direction, at any hour. If not across the Bay,
then up the Golden Gate or down 101 to Los Altos or La Honda. . . . You
could strike sparks anywhere. There was a fantastic universal sense
that whatever we were doing was right, that we were winning. . . .
And that, I think, was the handle—that sense of inevitable victory over
the forces of Old and Evil. Not in any mean or military sense; we
didn’t need that. Our energy would simply prevail. There was no point in
fighting—on our side or theirs. We had all the momentum; we were riding
the crest of a high and beautiful wave. . . .
So now, less
than five years later, you can go up on a steep hill in Las Vegas and
look West, and with the right kind of eyes you can almost see the
high-water mark—that place where the wave finally broke and rolled
back.”
- Hunter S. Thompson, Fear and Loathing in Las Vegas, Circa 1971
Could a tide of sixties idealism, a tide- also - of pure economic and political survival, be rolling back in? As I explained to my Texas friend, Bubba, this week, while the caricature of the sixties is one of free love, drugs, and tie dye, the reality is the sixties were a time of political rebellion against the establishment and the economic-political elite. The military industrial complex and the politicians, who fed same, LBJ/Nixon, put the fear of god into all classes of society with the Draft and Vietnam War. Americans felt excluded from the decision making process that significantly impacted their lives, with their son’s and daughter’s – of all classes of society - drafted into a badly managed war that few appreciated or wanted, except for the power elite, the corporations, and stockholders, who profit from war.
Separately, the social fabric was torn further when Post WWII black servicemen and GIs, treated as equals in Europe, returned to America’s Jim Crow, and decided they had enough. These black men and women, who had risked their lives for America to help defeat Nazism, and would later help stop the tide of Communism, were not going to allow themselves any longer to be marginalized and excluded from the American dream. And a mass movement was born.
The resulting rebellion, the sixties, was born out of desperation and a feeling that the political elite, and the corporations who rule same, had ignored, or worse, abandoned them. In short, this was a rebellion born of fear, a struggle over life and death, and the realignment of economic and political responsibilities and sensitivities. Once the goals were realized (the end of the Vietnam War, and much later the end of the Draft, and the birth of civil rights), the better part of sixties rebellion was eventually co-opted into the mainstream, while the excesses of the movement were used by the establishment to tar and vilify it, as run by dilettantes and undesirables. Might history repeat itself once again?
Today’s budding struggles in both Europe and the U.S., indeed globally, are also driven by fear and instincts for survival, and the feeling of societal abandonment by the plutocracy, who are catering to banks and major corporations, at the expense of the politically disenfranchised. People may laugh at the naiveté and the innocence of the Occupy Wall Street crowd, but they are possibly the vanguard of economic and political rebellion that will be with the U.S. and Europe for as long as the financial crisis continues; and as the liabilities and excesses of Wall Street, and European banks, are transferred from the private sector onto the backs of those who can afford it the least, the poor and the middle class, this crisis is likely to be with us for awhile. With Japan pointing the way to America’s and Europe’s foreseeable future, one of endless bank bailouts, wealth destruction, and an economic fugue of recession and depression, Occupy Wall Street is a possible prelude to much darker forces that could, eventually, rip the lid off social stability. This nascent movement will likely metastasize into what remains of the middle class, as the real unemployment and underemployment rate continues to rise, economic opportunity and the safety net is rent and shredded by cries for fiscal austerity, and reactionary forces continue to advocate for and insist upon living with the fantasy/delusion of a free market economic system (when the reality is we are all living under quasi- free market/socialist regimes, globally).
If we examine how America and Europe got here, it appears that the worst excesses of both capitalism and socialism have collided, and reanimated into crony capitalism and crony democracy, the worst of all worlds. Let’s then examine some of the recent political and economic events and trends for a snap shot in how we got here and what might be done.
As Mr. Thompson said, “Politics is the art of controlling your environment,” and the plutocracy manages the 99% of us, politically, like a virtuoso violinist plays a Stradivarius. The plutocracy actually fears democracy and the law of large numbers, because it is something that they cannot control; but where there is a will there is often a way, for what the the one percent lack for in votes, they more than make up for it in money, and money is how the one percent control “democracy,” their political environment, and 99% of us. With the Roberts Court’s Citizen’s United decision, the plutocracy can control the public through a flood of unlimited political campaign contributions, and hence control party nominees, the political parties themselves, and who gets elected in the vast majority of instances. Money then is the river that feeds the political sea, and controls and reigns in populist impulses, at the expense of the majority. Money controls the politicians, the political message, and the issues that are debated and discussed (e.g. during the recent Republican presidential debates, the issue of unemployment, bank bailouts, and possible solutions for the housing market are rarely if ever mentioned or discussed in any kind of detail). These same power brokers to a very large degree also control the media and its output, and hence the questions posed to candidates. Those politicians, who are elected, are so beholden to monied interests that they might as well be remote controlled robots, operated via remote feed; these politicians, in turn, vote for and maintain the lower tax rates that allow for the massive accumulation of wealth into the hands of a few, who in turn use this font to perpetuate their power (i.e. through the subversion of democracy).
If you think I’m just some crank with too much time on his hands, let’s hear what the King-Daddy of all plutocrats has to say on the matter, Mr. Warren Buffett (the living embodiment of F.D.R.):
“There has been class warfare going on,” Buffett, 81, said in a Sept. 30 interview with Charlie Rose on PBS. “It’s just that my class is winning. And my class isn’t just winning, I mean we’re killing them.”
The global power elite also use their money to subvert populist uprisings, internationally. Witness the Royal House of Saud’ deft and expert management of the Arab Spring (recently written about in Foreign Affairs), with the removal of the Egyptian Dictator, which was replaced by the far more oppressive Egyptian military and intelligence apparatus. The Egyptian military, of course, dominates the Egyptian economy and politics. The prosecution of Egyptian President Mubarak is nothing more than a side show, a distraction, red meat for the masses, while the popular uprising is subverted and controlled from within, by the money and power of the oil rich Saudis and the rise of the Saudi supported Muslim Brotherhood. This example reminds us of how another popular uprising in America, the Tea Party movement, was co-opted and harnessed by the billionaire Koch Brothers, ultimately to serve their own ends (i.e. the continuation of their privileged tax status, and to insure the rules and regulations that govern their industries remain pro-Koch – all under the guise of perpetuating free market principles).
Of course the plutocracy is all for the “free market,” as long as it serves their ends, but the free market also has a nasty downside, which is bankruptcy and putting corporate management teams on the street when they fail. Hence, the plutocracy is not in favor of the free market when it threatens their own interests, and this is when they go running to the government tit for bailout monies (e.g. Wall Street during the 2008 financial crisis, up to the present day). Hence, the plutocracy also favors socialism, when it favors them, although you’ll never hear them endorse it.
What this all adds up to is crony capitalism and crony democracy. As predicted by J.M. Hamilton, the masses it seems, the 99%, are beginning to wake up, and they don’t like what they see: the instability the massive concentration of wealth creates, and the subversion of democratic institutions that results from same.
The ninety-nine percent are controlled politically and economically, like a puppet on a string. Economically, globalism, free market ideology, and free trade dogma also insure that the masses and the message are controlled, via the number of jobs that are made available, and the opportunity that is created, when, where, and in what country, by the oligarchs and interlocking boards.
“Free trade” is nothing more than regulatory, tax and labor arbitrage by any other name. Large
multi-national manufacturers scour the globe, looking for the most
advantageous trade laws, regulatory regimes, labor costs, and tax laws
and rates. Factor in the logistical costs of transporting
foreign manufactured goods and services to their ultimate
destination/market, plus the exchange rate, and you have “free trade.” There’s
just one problem, practiced in the extreme, arbitrage leaves advanced
economies, and its citizens and labor, in a state of economic and
political paralysis, as production, jobs, and tax revenue are shifted to
emerging markets. And while advanced economies and
consumers maybe the beneficiaries of cheaper imported goods, from
arbitrage and emerging markets (i.e. BRIC nations), those inexpensive
goods and services don’t do the consumer a damn bit of good, if said
consumer is unemployed. At the end of the day, one can't dine on iPad.
To combat “free trade” dogma, and encourage emerging markets to develop their own self –sustaining middle class and economies, America needs to embrace the actions of President Reagan and focus on fair trade agreements that benefit American labor and the U.S. tax base. The best way to do that is via trade policy reciprocity, that is to say, with the imposition of taxes and tariffs upon imported products that neutralizes to the manufacturer the benefits that accrue from arbitrage. Until there is global parity in tax laws, labor markets, and rules and regulation governing industry and business, there is no other way than import taxes, tariffs and trade barriers, unless Americans are satisfied with high unemployment, declining economic opportunity, deficit spending, a shrinking tax base, and the resulting social upheaval. In short, if you like one in five Americans being on the government dole (and a 25% childhood poverty rate), with those numbers likely to rise, then continue to embrace free trade. This is why the Obama administrations support and passage of three Bush-era free trade agreements last week was so disappointing to many Democrats and labor.
Reciprocity should also be the U.S. tax policy in regards corporate profit repatriation.
By managing the economy, the plutocracy also manages our elected officials and their prospects for re-election. By inflating prices at the pump, or inflating the price of basic consumer goods and services (or by decreasing the number of jobs, as a result of same), through financial speculation, or simply by controlling supply, and the deployment of capital, the monied interests can also expand and contract the economy, and the political fortunes of our elected officials. President Obama and some of the “manufactured economic conditions” he has had to contend with, some possibly of his own making, immediately come to mind.
What can be done then to prevent the resulting societal unrest? These proposals are neither novel nor new; they are basically, just common sense.
Push for higher tax rates on the rich,
who are better organized and smarter than we are, or certainly have the
resources to accentuate their god given talents, in the furtherance of
their goal of global economic domination. By raising the tax rates upon
the rich, we effectively de-fang them and preserve democracy. It also
pushes the plutocracy to focus and work harder on sustaining and
preserving their own wealth and status - this means they have less time
to "screw over" the 99%. Republicans like to wax nostalgic about the
50's and the Eisenhower Presidency, when the upper income tax rate was
90%... why not return there?
Advocate and push elected officials for caps on campaign contributions, the amounts of money that can be spent on campaigns, and push for limits on the amount of time our politicians can campaign. The year around campaign cycle, with unlimited flow of money, has lead to an abdication of responsibility, and a vacuum that the elite exploit. The Supreme Court might not like it, and view such restrictions as a violation of free speech, but in its present incarnation, the Roberts Court is just another plutocratic tool. Besides, our system of checks and balances allows our legislative body to create new laws to counteract the worst tendencies/rulings of this judicial body, and vice versa. The judicial smoke screen about money and free speech aside, what makes a democracy, ultimately, is the citizenry’s ability to vote (not the amount of money spent on a campaign, or the duration of the election cycle).
Encourage your elected officials to adopt fair trade agreements that protect America, American labor, and the U.S. tax base. America has been exploited long enough by multi-national manufacturing interests to maximize their profit margin, and developing nations, as a dumping ground for their social problems (i.e. poverty and unemployment). It’s time for emerging markets to create their own advanced economies and their own middle class, all the better to create greater opportunity for all, globally, and as a countervailing force against the downward economic spiral advanced economies present to the world today. At the end of the day is the world better off with more advanced economies or fewer?
Advocate against excessive corporate combinations, oligopoly and monopoly. We
have seen time and time again, where these combinations are risk
management nightmares, lead to greater inefficiency, and ultimately
failure (e.g. UBS just lost a couple billion and saw their CEO
dismissed). The failure of these institutions often leads
to great economic stress, and bailouts at the public’s expense (take
for instance, the Wall Street cartel). What these excessive combinations do achieve, however, is the greater enrichment of the elite at the expense of their clients, consumers, and the general public.
Communism doesn’t work, which is the ultimate combination of the means of production under a single entity…. Why would the free market’s equivalent to communism, monopolies and oligopolies, work any better?
It’s time for an honest conversation with the American public, and the citizens of the world, about the right mix of free market principles and socialism, as a matter of economic policy. I call it the big girl/big boy conversation. The free market demagoguery that reactionary forces have foisted upon us all for so long has lead to some of the greatest economic and political abuses in the 20th and early 21st centuries, often with the 99% paying the price. Socialism, and free markets in there purest forms, presently, do not exist, and would lead to the worst of all worlds: it’s time that the public was educated accordingly. Therefore, what should be open to debate and discussion, among the electorate and candidates for office, is the appropriate capitalistic and socialistic mix within the economy and society?
The plutocracy is at a cross roads… ultimately, they can rein themselves in via reform, or allow events to continue to spin out of control, and watch in dismay at the rising tide of economic instability and social unrest. The current picture is none too bright for anybody: the 99% or 1%. Ultimately, the political wave that broke in the sixties and receded, so well described by Mr. Thompson, did so because the plutocracy yielded to public demands for a more politically just and civil society. However, this victory did not come easily or quickly, and was paid for at tremendous cost.
Now the question, some forty to fifty years later, is will the plutocracy yield and allow for a more economically just society? There’s only one way to contain the fear and loathing unleashed, globally, and that is to contain the worst excesses of the ruling class. Flexibility is key.
P.S. On this date in history, the NY Times reports: “October 16, 1793- Marie Antoinette was beheaded during the French Revolution,” seems that the Parisian 99% were not content with their cake.
______________________________________________________________
Coming Soon to the Street…. A Nixon Moment?
“How strange is the illusion by which men sustain themselves!” - Doctor Henry Kissinger
By J.M. Hamilton (10-9-11)“He stopped at the door of the Lincoln bedroom. And he suggested that he and I pray there together. There was no good way to end that evening or to put a period to such a tempestuous career. And I am not sure that this was not as meaningful as any other and more appropriate than most. Nixon’s recollection is that he invited me to kneel with him, and that I did so. My own recollection is less clear on whether I actually knelt. It is a trivial distinction. In whatever posture, I was filled with a deep sense of awe which seemed its own meaning so that I did not know exactly what to pray for. A passage of Aeschylus kept running through my mind – the verse that, as it happened, was a favorite of one of Nixon’s obsessions, Robert Kennedy:
Pain that cannot forget
Falls drop by drop
Upon the heart
Until in our despair
There comes wisdom
Though the awful
Grace of God
Shortly after midnight --- after about a half hour in the Lincoln Bedroom --- I returned to my White House office. Within a few moments Nixon called. I must not remember our encounter that evening as a sign of weakness, he said. He hoped that I would keep in mind the times when he had been strong. How strange is the illusion by which men sustain themselves! There were many occasions that Nixon identified with strength that made me uncomfortable. This evening when he barred his soul I saw a man of tenacity and resilience. And so I told the stricken President that if I ever spoke of that evening, it would be with respect. He had honored me by permitting me to share with him his last free night in the White House where so many memories had united us.”
August 7, 1974 – Henry Kissinger, Secretary of State – from the book, Years of Upheaval
Hardcore! And if you saw the speech two days later, Nixon’s farewell address to his staff, you knew it was an iconic event in American politics, if not the key political event in the last hundred years: where a man of humble origins had climbed to the pinnacle of success, culminating in his 1972 landslide victory, only to see it all come crashing down. Nixon said it best: “It’s not the crime that kills you, it’s the cover up.” The creator of the EPA, the author of wage and price controls, and the underwriter of double digit inflation (as America left the gold standard and monetary supply was goosed to aid Nixon’s ’72 re-election bid), would appear to be some whacked out liberal freak by today’s Republican Party standards. But he was one of the brightest individuals to ever enter the White House, and on foreign policy he was a genius, witness the ultimate cold warrior’s embrace of Red China, all the better to drive a wedge between Soviet - Sino relations. At the end of the day, Nixon was hoisted upon his own petard, and America sat paralyzed for over a year, glued to the televised Watergate hearings. The resulting “Nixon Moment,” so well described by Doctor Kissinger, is forever branded upon the American psyche. And indeed that is what ultimately makes this country great.
No one is above the law, at least not in the long run.
Could a similar moment of truth be coming to Wall Street? All the signs point to yes. After three years of economic decay and misery, a continuation of the financial crisis from 2008 to this present day, and watered down financial regulation and rules…. The Nixon Moment may soon be visited upon the Street. Fate appears to demand it. After all, Wall Street and European banks, and our elected officials governing same, appear to have learned little from the events that transpired in the fall of 2008, events that appear to be overtaking us all, here and now in real time.
$$$ Many economist and insiders agree that the primary reason the U.S. economy has not regained its footing is a stagnant housing market. And the root cause of this stagnation is the banks. Not only can they not foreclose upon a property, but for the very same reasons, I suspect these same banks are reluctant to refinance and write down mortgages. To back up for a second, allowing consumers to refinance at record low interest rates would give consumers (aka ordinary Americans) more dollars in their pockets, that is to say discretionary income, the spark that could drive this economy forward, and transform an illiquid housing market back into recovery. Writing down these same loans to market value would send the U.S. economy into overdrive: recession over!
The banks, and the governments, unwillingness to allow refinancing all goes back to debt securitization and the MERS system or the electronic registry of mortgages. As we know and have widely read, mortgage foreclosure has fallen apart because of shoddy paper work, an inability to find out what bank or institutions actually possesses the mortgage, and an apparent failure of the MERS system, etc. Plus banks also benefit, to some degree, from a seized up mortgage foreclosure process, since they no longer have to write down impaired assets on their balance sheets. These very same reasons may also account for why banks are reluctant to refinance mortgages, which has been painfully slow. The short answer? During the housing boom, banks securitized mortgages and sold them to wealthy individuals and large institutional investors (Freddie and Fannie, et al.), who have come to expect a certain rate of return; however, if these same mortgages were suddenly refinanced at lower rates than the financial returns to the owners of CDOs would suddenly drop below expectations. And there’s already an entire industry built upon litigating against the banks, which created collateralized debt obligations (CDOs), with billions in prospective legal fees and settlements on the line. With the banks already under attack for securities fraud, lousy mortgage underwriting, and client double-dealing, the last headache they need is to lower the returns on CDO products, or to write down assets through debt forgiveness.
How big is this problem? The New York Times reports that half the mortgages holders in the state of Arizona are underwater. And nationwide one in five mortgage holders are a couple of fathoms below the surface, carrying debt above the value of their homes at approximately 700 to 800 billion dollars. That’s almost a trillion dollars that could be funneled back into the economy, not to mention interest on same, instead of into the hands of banks, wealthy institutional and sovereign investors. This same article goes on to report that even the Federal Housing Finance Authority is against debt refinancing, in direct contrast to the Obama administration’s stated refinancing goals. And the oft given reason the tax payer supported banks, and the tax payer owned Freddie and Fannie won’t forgive debt or refinance…. Well, these fine upstanding tax payer funded organizations are all very concerned about… wait for it….. here’s the punch line…. consumer “moral hazard.”
$$$ Meanwhile, the sovereign debt crisis threatens to implode in Europe, quite possibly pushing a troubled world economy over the brink. Despite assurances from Treasury Secretary Geithner, in last week’s congressional testimony, that the fiscal and monetary crisis in Europe doesn’t threaten the U.S. directly, J.M. Hamilton, and many of our readers, understand the opposite to be true.
“Our direct financial exposure to those governments and their financial institutions is quite small, but Europe is so large and so closely integrated with the U.S. and world economies that a severe crisis in Europe could cause significant damage by undermining confidence and weakening demand.” – Treasury Secretary Geithner.
The “closely integrated” that the Treasury Secretary is referring to would be the systematic risk posed by the six hundred trillion dollar derivative/swaps market, underwritten by Wall Street banks. Derivatives/Swaps, legitimately, provide insurance against bank and sovereign default; derivatives/swaps, illegitimately, fuel gambling, speculation, and unprecedented economic risk to the citizens of the world. Of course it is derivatives, hybrids, and swaps that nearly brought down the world economy in 2008, a la AIG. Wall Street has and continues to lobby for an unfettered and unregulated derivative/swaps market place (i.e. a continuation of the financial Wild West show, which is ultimately financed by the U.S. taxpayer). The banks get the profits from this unregulated - black -market, and the tax payer enjoys the privilege of cleaning up the mess. There’s just one problem. Nobody on the planet, individually or collectively, has several trillion, or even tens of trillions, to put up if European defaults trigger these swaps. Simultaneously, the U.S. Commodity Futures Trading Commission keeps putting off rule making on these financial weapons of mass destruction; and likewise in Europe, the regulation of these products continues to be delayed and watered down.
No wonder Mr. Geithner likes to travel across the pond, and tell his European brothers to continue to bailout insolvent governments and insolvent banks. Default, after all, just might trigger financial Armageddon.
$$$ Election season, and the Republican Party is trotting out the same old failed fables, only the message has grown more radical and shrill. Ayn Rand has become the Party’s goddess, and the problem with our economy, per the leading candidates, is excessive government regulation; such irony when Wall Street proves, again and again, that the economic problems staring the nation down are the lack of government rules and regulation. Meanwhile the only viable candidate, Mitt Romney, visits Jamie Dimon on Wall Street and makes pledges to boost military spending beyond the obscene amounts already spent (all the better to take the nation to war in the future, so as to distract our citizens from the economic Hiroshima that three decades of free market ideology have visited upon us all). So much for fiscal sanity. Meanwhile the only rational GOP candidate, John Huntsmen, isn’t even in consideration or a serious contender for nomination. Mr. Huntsmen is too establishment, too Herbert Walker Bush, too, well, uh… sane, cultivated and erudite, when all the Molotov throwers within the Tea-Party movement want is to do the plutocracy’s bidding and dismantle government once and for all. The smartest GOP candidate would appear to be New Jersey Governor, Chris Christie, who decided not to run. Brilliant!
And the ultimate bellwether of the times we live in…. my mother recently came to me and asked if she should pull her retirement money out of stock and bond mutual funds, and place said funds into FDIC insured accounts?
“Yes, mom, and while you are at it, buy some gold on the next dip. It’s all about capital preservation now, thanks to the Fed.”
They say there are no atheist in fox holes, and that on the weekend after 9-11 normally empty churches and synagogues were filled to the rafters. My guess is that a Nixon Moment is not too far around the bend for our elected officials and the Wall Street plutocracy. I pray not, but the writing appears to be on the Street. Could the next boom market be in Bible, Torah, and journals of faith publishing?
And, possibly, coming to the Street soon, the sound of rampaging bulls, albeit not the kind of “bulls” we normally associate with the Street - signifying a rallying market. No the bulls I have in mind maybe covered in Kevlar and armed with mace, rubber tipped bullets, and riot shields, all the better to protect the denizens on the corner of Wall and Broad from angry U.S. citizens.
P.S. “Alas, how terrible is wisdom, when it brings no profit to the wise.” - Sophocles
http://blog.jmhamiltonpublishing.com/categories/Editorial.aspx
_____________________________
Power is never dearer as when it is fleeting or under threat…
“The Department of
Justice law suit against the AT&T/T-Mobile combination, hopefully, sends a
message to the nation's monopolies and oligopolies that it is no longer open
season on the American consumer, the economic engine that drives demand and top
line growth.”
By J.M. Hamilton (9-11-11)
It is the political season, which means for some of us the synapses will be
burning red hot, and the serotonin, the lubricant for the brain, will be
evaporating off the cranial engine. It's not easy being a political
junkie, but as far as blood sports go nothing else quite compares. That
said, why the political season must start just a couple of months after the
last election is beyond reason. Don't these guys and gals ever work?
Apparently not. As noted by Arthur
Levitt (former SEC Chair and Policy Advisor to Goldman Sachs) on a recent Bloomberg
podcast hosted by Tom Keene and Ken Prewitt, Congress has passed only
28 pieces of legislation this year, much of which was not germane to our
economic nightmare.
Nice. The country is staring into the abyss, and the 112th Congress takes
a two year holiday to campaign. Of course, the only thing more unpopular
than President Obama is the Republican lead congress, with their approval
ratings at half the Presidents.
It seems that the Republican lead congress is more interested in scoring points
with its political base than in helping this President tackle the really tough
issues; the thought being, come November 2012,the nastier the economy is the
greater the chances of an Obama defeat. However, with Obama willing to
meet the Republicans half way on most issues (and in some instances actually
co-opting the GOP), the public, and maybe even the Chamber of Commerce, may end
up supporting the President in 2012, as the sane and rational choice.
Stranger things have happened. Comparatively, Obama is looking good, as
opposed to radicals on the right who sent the nascent economic recovery
careening into the ditch, over the debt ceiling increase.
As noted in last week’s editorial, Heart of Darkness, the
President on the foreign policy is batting near a thousand, showing great moxie
and courage. So much so that even the most ardent Neo-Con should be
applauding: President Reagan wanted Kaddafi, and President Bush wanted
OBL.... President Obama took them both out.
On domestic policy however, it has been a different story, and the shame
of it is the President didn't hit the ground running harder on the banking
crisis, or the jobs situation, at the very beginning of his term. But
perhaps the President, under the advice and direction of Messrs. Geithner and
Summers, wasn't told just how bad things were or how bad they were going to
get. What is clear is the tremendous focus and political capital spent
on "Healthcare Reform" appears to have been wasted energy and time,
given our pressing economic state. President Obama probably felt that if
so much money was going to Wall Street, how come a pet Democratic project, like
universal healthcare, could not be addressed. After all, President Bush
(W) expanded big government with Medicare, Part D (or as we like to call it,
the Big Pharma entitlement act).
All Presidents, however, deserve time to learn on the job, and Obama inherited
a complete economic nightmare scenario from former President Bush (W); the
inverse of what President Bush inherited from President Clinton. In fact,
J.M. Hamilton would argue that the President was set up and robbed of his
"F.D.R. moment" by Messrs. Henry Paulson, Fed Chair Bernanke, and Tim
Geithner, who bailed out the banks rather than letting them collapse into
bankruptcy and reorganization (hence setting up this administration for the
drawn out economic catastrophe the U.S. and Europe finds itself in). Of
course with this President picking Mr. Geithner as his Treasury Secretary, and
Larry Summers on the President's Council of Economic Advisers, the continuation
of the Bush Presidency - Wall Street bailout policies was all but guaranteed.
What we now know, based upon the G.M. example, is that the country most likely
would have been much better off had we let the banks collapse into an expedited
re-org, nationalized, haircuts delivered to bond holders, mortgages and
commercial loans written down (providing immediate relief to American business
and the consumer), and when the smoke cleared release the financial
institutions back into the wilds of the private sector, albeit broken up - so
as to prevent future moral hazard - and under the scrutiny of a much deeper
regulatory regime.
If this had been done, the country would already be on the mend, Europe would
have had a road map, and Japan might have had some regret, instead of looking
upon the American economic scene knowingly.
Instead we crawl along, Japanese style, in global economic malaise.
The great thing, however, about the predicament the U.S. finds itself in is
the President and the Congress have a tremendous opportunity; that is to
say, the nation's economic situation is so dire that they have a golden moment
to address real problems, rather than use the Fed and monetary policy as a
crutch, or throwing more money at a problem, which is the standard fiscal
audible in Washington. The Fed has used up all its monetary policy ammunition,
and is gambling with intermediate and long term health of the dollar with each
new round of quantitative easing (not to mention severe inflation).
Moreover, this blog argues that as long as the Fed continues to throw money at
the banks, instead putting caveats and conditions on QE3 and its use, expect
more of the same: in short the Fed is just enabling the banks. The
Federal budget is in shambles, so that each new round of fiscal stimulus
actually creates greater debt or taxation (both of which are, ultimately,
contractionary). In short, the fiscal policy shell game we have been
privy to for the last couple of decades is played out.
This means that the President and the
Congress must address real problems head on, if they are to pull the nation out
of this mess. And since we all agree jobs is priority one, this means the
government must address impediments to job creation. Some of the largest
hindrances to job creation are: the insipid taxation monopolies impose upon the
American public, a house marketing that is illiquid and still in decline, and
banks that do not function in their traditional role, that of lending money to
the private sector (but rather, gamble with bailout money in the stock market,
commodities, or in offshore investments, a la BRIC nations).
And we are already seeing signs that the President is making an effort to
confront some of these issues: namely, by taking on the AT&T/T-Mobile
combination, and in filing suit, via Freddie and Fannie, against the Wall
Street Cartel that defrauded and took down this nation's economy.
This blog has made the argument over many editorials that the nation's
monopolies, like Big Oil, Big Pharma, and the Wall Street banking cartel,
create a huge drag on the U.S. and global economy and in fact, are a detriment
to the many U.S. businesses that operate, legitimately, in competitive
environments.
Why? Because when you’re a monopoly, if demand is inelastic enough, you
can charge pretty much whatever you damn well please, and the resulting tax on
society (read: usurious profits) kills discretionary spending, kills jobs, and
saps economic opportunity.
It's the Republican supply side argument applied to private sector monopolistic
taxation; it's the mirror of the Laffer curve held up to opprobrious monopolistic
profits.
The Department of Justice law suit against the AT&T/T-Mobile combination,
hopefully, sends a message to the nation's monopolies and oligopolies that it
is no longer open season on the American consumer, the economic engine that
drives demand and top line growth. If the DOJ was properly funded not
only could it take a harder line on future M & A activity, where
appropriate; but it might begin to revisit some of the past combinations that
occurred over the last couple of decades, and take on industries that prey upon
Americans, such as big oil.
Besides with stock prices trending down, the breakup value of some of
these too big to fail institutions is greater than their present market cap.
In shorthand, stockholders, too, would benefit from knocking some of
these Goliaths down to size.
The Federal Housing Finance Agency law suit against the Wall Street cartel
is, possibly, another effort by this administration to tackle a becalmed U.S.
economy. An effort that could potentially force Wall Street banks into
reorg. And what is the problem? Many bailouts later, many uber
banks are still financial basket cases, loaded up with impaired assets,
illiquid assets, and much of it erroneously valued on their balance sheets.
Tack on billions of liabilities in prospective litigation costs and
outcomes, over underwriting fraud, securities fraud, and robo-signing from the
2008 debacle, and if these firms were audited under legitimate "mark to
market" accounting guidelines, many banks would have to be restructured,
immediately (which means write downs, and relief for the American consumer that
could turn this economic ship around).
As it stands however, the banks are in denial, management teams are
intransigent with siege mentality, and bank investment is focused not upon
American business, but upon on playing the stock market, as noted recently by Alan
Abelson in Barron's Magazine: "... banks have gone whole
hog into high frequency trading, which accounts for seventy percent of the
turnover on the exchanges."
And we wonder why American small business is
shut down, crippled and can't find a banker to lend them a dime....it's because
the banks are gambling on Wall Street with U.S. bailout money, or choking on
sovereign debt.
If this administration finally forces Wall Street to restructure, directly or
indirectly, through any number of means (litigation or regulatory), it could
unlock the key to economic recovery by unfreezing credit markets, and clearing
out residential and commercial real estate markets; in short the
President appears to be rolling up his sleeves and tackling some of the key
road blocks to economic recovery (albeit not as aggressively as we would like):
bank restructuring, consumer debt restructuring, and reining in job killing monopolies,
like the Wall Street cartel.
The administration appears to be on the right path, the question is can and
will Obama seize the moment, or is it too late to have a real impact on the
economy and the 2012 Election results? With his presidency under threat
by unemployment and underemployment, President Obama maybe pressed into taking
bold action.
Power is never dearer as when it is fleeting or under threat.
Undoubtedly, taking on banks could take awhile, with opaque accounting rules
being what they are, the banks can hide their insolvency for years, and the
DOJ, SEC, FTC, CFTC, Et Al., are all being held back, budgetarily, by the
Republican lead congress. As such the Republican Party, who proudly
withholds money from these regulatory bodies, would appear to be in favor of
job killing monopolies, and the credit and housing market's worst nightmare,
the Wall Street cartel.
P.S.
And the other shoe that
must drop if the jobs issue is to be addressed is globalization and unfair
trade practices; that is to say, the fallacy of “free trade” must be tackled.
Ronald Reagan, as reported by the Cato Institute, was one of the
greatest protectionist Presidents of the 20th Century, despite his rhetoric.
And after decades of Republican and Democratic administrations exporting
U.S. jobs offshore, it's time for both parties to emulate Reagan and start
negotiating fair trade agreements that benefit U.S. labor and the U.S. tax
base. But that is for another editorial and another day.
http://blog.jmhamiltonpublishing.com/2010/07/05/thinking-the-unthinkable.aspx
_________________________
Heart of Darkness
By J.M. Hamilton (9-5-11)
"Mistah Kurtz -- he dead."
For thrills and chills, I have never been much into fiction. The cold hard realities of this world provide all the excitement, drama, and surreal energy I’ll ever need. Why just open up your New York Times, and be prepared for shock and awe. However, on occasion I have come across a piece of fiction that hits home. The story puts the hook into me because of the core truth it exposes about the human condition. Such a work is Heart of Darkness by Joseph Conrad, which I believe is the greatest story ever told. This story has everything: empire, anthropolatry, mass murder, and capitalist excess. Oh, did I mention cannibals?
And of course, ultimately, it’s a love story!
Heart of Darkness is a study in what Carl Jung would refer to as the “duality of man,” unchecked power, and the megalomania that often follows. Having studied power for decades, the story rings true on many levels. A wunderkind goes into the jungle to seek his fortune so that he can marry above his caste. Driven by this love and his passions, Mr. Kurtz loses himself, and with his tribe of warriors in deepest dark Africa begins cutting off heads, so as to gather more ivory. As more ivory accumulates and is sent back to Mr. Kurtz’s corporate masters, his fame and reputation grows, often to his business colleague’s dismay. The more Mr. Kurtz enriches others the greater the license he is given. Sound familiar?
Heart of Darkness was published in 1899, and the story is set in the colonialism of the period, but examples of Mr. Kurtz and his behavior can be seen everywhere at the genesis of the twenty-first century. The troubled times we find ourselves in amplify and magnify these figures as they stride across the business and political landscape, indeed across the globe. Many of these figures exhibit myopia that excludes nearly all social conscience, an all consuming goal, great economic or political power, and in some instances enjoy a cult following. Often some or all ethical and moral restraint is abandoned so as to achieve “the dream,” even at the expense of the destruction of others, and ultimately, themselves. That pretty much defines what I like to call Heart of Darkness syndrome or HDS. Please read on, as the blog offers up examples of HDS here in 2011.
$$$ Mr. Lloyd – Doing God’s Work – Blankfein exhibits many of the characteristics of HDS. His problems are legendary, but to sum up include selling short the American Dream and the American economy, and of course, client double-dealing. His singleness of purpose is manifest to all; his ethical bypass complete, as he continues to fight and lobby for the very rules and regulations (or the lack thereof) that brought this nation’s economy to its knees. Not content to having enriched his company, Goldman Sachs, and his management team many times over, he has insured his and Goldman’s success by purchasing all the politicians Goldman’s money can buy, and placing his employees in the highest chambers of global government. And he probably believes he is doing “God’s work,” after all Mr. Blankfein does his best to operate within the confines of the rules Goldman’s attorneys lobbied for, created, and helped to legislate. Mr. Blankfein and his cadres seem oblivious to the human toll and suffering he and his banking peers on Wall Street have created. And my favorite thought from Goldman, recently released, was the assurance that the hiring of Reid Winegarten, criminal defense attorney, was “routine.”
$$$Secretary of the Treasury, Tim Geithner - Mr. Geithner, as the former head of the New York Fed, we are often told helped save this nation from ruin and another great depression, with a little help from his friends Messrs. Henry Paulson, Fed Chairmen Bernanke, and Larry Summers. But three years into the economic quagmire many Americans and businesses find themselves in, Mr. Geithner and his colleagues appear not to have saved the American economy so much, as have bailed out the banks, repeatedly. And the trickle down from these banks just hasn’t happened, just ask Shadow Government Statistic, who show true unemployment and underemployment creeping north of 22%. By not restructuring the Wall Street banks and not writing down home loans, when America had a chance, Mr. Geithner and his colleagues have consigned the U.S. housing market, and indeed the Western economies, to years and years of economic turmoil and malaise. Trust me, the fun is just beginning. However, the ultimate cost will not even be borne by this generation, but rather, it will fall upon our children and future generations. It is they, and ourselves, who will have to deal with a devalued currency and debt piling ever higher, as good money is thrown after bad - all for the enrichment and aggrandizement of a few, and at the expense of virtually all.
If President Obama loses his bid for re-election in 2012, he will have to thank Tim Geithner for the outcome. By the way, the transparent assurances of Mr. Buffet aside, it’s never too late to nationalize and restructure the banks, starting with Bank of America. Why look at GM, who was nationalized and restructured, and just reported record sales figures, up eighteen percent!
$$$The Republican Party and the Politics of the Heart of Darkness – The Republican party’s disdain and visceral objection to the President taps right into the Heart of Darkness. What does it say when the Senate Republican Leader’s primary goal is not the betterment of his home state of Kentucky or the country, the job for which he was presumably elected, but rather unseating the President of the United States. This party of which I was once a proud member, has completely run off the rails, and now is run by megalomaniacal billionaires, the intolerant, and those who politically exploit the evangelicals and Christian community. Ironically, the party of Christ, as the Republican Party would have you believe, worships money and is the lap dog of corporate interests, often at the expense of all other considerations. If the GOP was really adhering to the teachings of Christ they would be providing aid and assistance to the poor and the elderly, not shutting down government assistance or attempting to privatize same. Governor Rick Perry’s connections to the plutocracy and fund raising capabilities are legendary, and yet, he wants to kill social security.
There’s just one problem, the Republican Party and the Chamber of Commerce are rapidly finding themselves turned inside out, by the alleged extremes within the party tent, many of whom are anti- multinational, anti-Wall Street, and anti-Fed. Seems that some of the elements within the party can appreciate, greatly, American business and capitalism, but don’t share a similar fondness for cartels and monopolies who exploit government largess, tax loopholes, and the legislative process. This party claims the mantle of fiscal responsibility while often presiding, from the White House, over the greatest Keynesian raid heretofore known to man, from Reagan through Bush (W). Hypocrisy defined.
$$$Steve Jobs and Apple Computer. Talk about singular focus, look no further than Mr. Jobs. The man truly is great, and has changed America and the world in so many different ways, often for our betterment. But could Mr. Jobs be greater? By hiring U.S. labor, instead of exploiting labor on foreign shores, one economist estimates Apple’s profit margin on the iPhone would drop from 60% to 50%. Not a terrible price to pay for helping out your home country, right? Or by insisting that Apple’s vendors in China pay a fair living wage, with a normalized work week, Mr. Job’s would set a standard for multi-nationals, and bring the differences between U.S. labor and China’s labor market one more step closer to parity or equilibrium. Mr. Jobs could also insist that vendors in the Pacific Rim not hire child labor, or pollute. Mr. Jobs will go down in history as a tremendous talent and inventor, but might he have been greater? Instead of employing more American’s we have a company that exploits U.S. tax law and is sitting on more cash than the U.S. Treasury presently has on hand.
With great power comes great responsibility; U.S. corporations want to be treated like royalty, but often eschew a great deal of the social responsibility that comes with that privilege. That is to say, corporations often enjoy greater privilege and deference under the law, than any single citizen would ever be accorded; and yet, often get away with crimes that no citizen could ever escape, individually. If corporations want to be accorded great privilege should they not be held to a commensurate standard?
The annual drive for the United Way is great, but could Corporate America do more? Apple computer, and the cult of personality that follows Mr. Jobs, could change the corporate/social responsibility dynamic if they so choose, and with a minimal hit to their bottom line. In fact, this blog argues that any short term reduction in income – as a result of a renewed commitment to the United States and its citizens - could be made up for, in terms of profits, many times over in the intermediate and longer term.
Speaking of great works of fiction, probably the greatest lie told over the last three years has been that the Obama administration is anti-business. Take a look at the productivity gains of the American corporation, the increases in net income, and the mountains of cash many of these entities lay upon, and convince me that this administration is anti- business. Meanwhile, American labor has not seen a real increase in income over the last two decades.
$$$ Exxon Mobil: This story is priceless, but first a little history. On August 23, 1939, Adolph Hitler signed a deal with the devil, Joseph Stalin. Also known as the Molotov – Ribbentrop Pact, the deal basically carved up Poland and Northern and Eastern Europe between the two ambitious men. The “deal with the devil” eventually disintegrated with Hitler’s Operation Barbarossa, and the Russian winter. (Hitler apparently learned nothing from another person exhibiting HDS, Napoleon Bonaparte, who made the same mistake in attacking Russia too late in the summer, and was also fighting wars on too many fronts. We can all be thankful that Hitler was apparently not a student of history.)
Fast forward to this week, when Rex Tillerson’s Exxon Mobil signed, perhaps, another deal with the devil, Ex- KGB and now Russian Prime Minister, Vladimir Putin. For a look into what Exxon stockholders can come to expect from a deal with Vlad, examine the tough love dished out to a present Russian partner, British Petroleum, from this week’s N.Y. Times:
MOSCOW — Police officers armed with assault rifles Wednesday raided the Moscow offices of the British oil giant BP, carrying out a type of ritual armed search of white-collar premises that is common enough here to have a nickname, “masky show.”
The timing of the raid, however, highlighted this peculiar type of Russian risk for another company — ExxonMobil, which just a day earlier agreed to take over the very Arctic exploration deal that fell through for BP.
BP is still involved in a dispute with its Russian partners over that oil-exploration deal; the police search was related to a lawsuit pending in a Siberian court.
Russia is as important for BP’s oil production as the United States, so even though the company has had such problems here for years, its share price often nudges up or down in response to police raids or the arrests of employees.
The police raids on Moscow’s glassy high-rises where foreign banks and oil companies have offices unnerve employees and disrupt business. They are called “masky shows” for the balaclavas often worn by the black-clad police.
What makes Tillerson’s deal so unique is not that he is getting into bed with a reformed commie, after all President –“ I can do business with this man” - Bush was snookered by Mr. Putin, too; but Exxon must know that the prospects for any longevity to this partnership cannot be good. Many multi-nationals have sought to do business in the former Soviet Republic, only to find themselves shaken down by corruption, subjected to police state tactics, and with little recourse in a country where the rule of law often does not exist.
Of course, the allure of drilling in the Arctic Sea has to be a huge draw for Exxon, what with the U.S. still concerned about the Alaskan coast and its environment, why not do an “end around” U.S. energy policy and hook up with the Ruskies? Selah! If there’s a catastrophe, who’s likely to know if a few million barrels of the sticky black stuff dumps into the Arctic Ocean during a period of endless polar nights? (Polar bear au chocolat? Exxon appears down with that.) Since this deal will have to be ratified by the congress and involves giving Mr. Putin’s Russia a share of Exxon’s U.S. assets, how much of this “dance” by Exxon is sincere, and how much of it is a way to put pressure on the U.S. government to open up the Alaskan coast to Exxon?
Only time will tell, however, one thing is clear: If you thought the banking crisis threw a wrench in the global economy take a look at the economic and foreign policy ramifications of the largest U.S. corporation, and a key energy provider, doing business with the Russian Prime Minister. Does the U.S. really want a Russian Premier (who often exhibits HDS) holding U.S. policy hostage via his arrangement with Exxon? Mr. Putin, said of the deal: “The scale of the investment is very large. It’s scary to utter such huge figures.” Scary, indeed.
The Heart of Darkness syndrome is everywhere these days, and you don’t even have turn on the news to see it first hand, why look right next door. One might see HDS exhibited in local judges, politicians, school superintendants, and even teachers, anywhere where near absolute power has the potential to corrupt, absolutely. Men and women will often make mistakes, and become entranced by a goal, mission or dream. And it’s this passion that can also, if channeled correctly, drive men and women to achieve great things. The question is can the person with HDS pull up before it’s too late, or like Kurtz will the situation end in personal destruction and substantial collateral damage?
Mr. Kurtz died before reaching his goal of being reunited with his lover, his “intended.”
She never came to know his final words, which were: “The horror! The horror!”
At the end, Mr. Kurtz came to rest where all the indispensable men and women of the world ultimately come to lay, in a dark grave, and possibly answering to a much higher power.
P.S. I know the economy sucks, but is President Obama kicking some serious tail or what? I mean if these were normal times, this guy would be coasting to victory in 2012. Let’s look at his foreign policy score card, shall we?
Osama bin Laden: Check.
Colonel Gaddafi, check.
Wind up Mission in Iraq, check.
Start and conclude a war in Libya with multinational political, economic, and military support to prevent genocide by a ruthless dictator, setting a new benchmark for U.S. foreign policy: Check again.
Ushering in a new – hopefully less costly - age in the U.S. military, that of covert operations, drones, cyber-ops, and less dependence on standing armies: CHECK!
Pulling the hell out of Afghanistan… Under Review/Pending.
Foreign Policy grade for the Commander in Chief, and showing the Republican Party how to actually hunt down scum bags and win: A
Note: If Obama was a Republican, the GOP would be singing his praises right now.
Note, if the U.S. can exit Afghanistan, possibly as the election nears, we predict that the President’s poll numbers will enjoy a boost. Then America can say, definitively, “mission accomplished.” Coming soon, the Presidents score card on U.S. domestic policy. This blog has seen some promise from this administration on domestic matters, like having the Justice Department take on the AT&T monopoly, and combination with T-Mobile. The government’s law suit against the banks, initiated this week, over the fraud associated with mortgage debacle is another great start. Potential here is limitless, as an agent of real change. Obviously, jobs is priority one!
Finally, see the film adaptation of Heart of Darkness with Mr. Francis Coppola’s Apocalypse Now. I highly recommend it.
