Divide and Conquer

Divide and Conquer

“Divide and rule, the politician cries; unite and lead, is the watchword of the wise.” – Johann Wolfgang von Goeth

By J.M. Hamilton  (3-1-14)

I was watching The Square on Netflix over the weekend, a documentary about the Egyptian Revolution, and it’s clear to me that there are forces at work in the U.S. that are not dissimilar to Egypt’s ultimate power broker, the Egyptian army.

In The Square, the 99% overthrow the highly corrupt, and Western backed, Mubarak regime; the Egyptian people of all religions band together, due to economic and political oppression, to oust the dictator.  The economic and therefore, political power in Egypt is the Egyptian military, which own broad swaths of the economy (as I’ve noted before, not unlike Iran’s Revolutionary Guard). 

We’ve seen in Egypt and in other parts of the world, and increasingly in the U.S., when too much economic and political power is concentrated into too few hands, stagnation, malaise, and social upheaval ensues.  Rising food prices set off much of the Arab Spring, and global warming may have played a part.  However, some bright economist should look at the highly possible and probable correlation between the Fed’s quantitative easing, massive global capital flows into BRICS and the developing world, increased commodity speculation, rising food and commodity costs, and subsequent global revolution(s) and revolt(s).  But I digress.

The key point for me in the movie is how the Egyptian military took a highly popular revolution and peeled off the Muslim community, and in particular the Muslim Brotherhood with promises of power, in a divide and conquer strategy.  Once the Muslims, with delusions of grandeur, were separated from everyone else, it was easy for the army to crush secular, agnostic, atheist, and Christian Egyptians still is revolt; once the Muslim Brotherhood were peeled away, and everyone else was cowed and put down, the Brotherhood were ultimately rounded up, persecuted, imprisoned and slaughtered by the Egyptian army.  Had everyone stayed together, the outcome may have been different than today’s Egyptian result, a military dictatorship.

Remember a popularly elected Egyptian President named Morsi?

In this country, we often see forty and fifty year old social issues, like yes, abortion, birth control, women’s reproductive rights, and gay rights, still dividing this nation; and quite frankly, I believe the economic and political power elite like it this way.   These and other social issues are all a highly convenient, and still a highly charged, distraction from the nation’s true problems: the concentration of economic and political power into too few hands (in the incarnation of monopolies, cartels, and private equity – supported by our two party system); a government that is for hire to the highest bidder; the elderly sucking up all the social services at the expense of the youth and our nation’s future; a run away military industrial and intelligence complex, along with run away deficit spending; a two tiered legal system that benefits the plutocracy; and the lack of economic opportunity and social mobility.   

(None of this is to say, that the aforementioned social issues weren’t worth fighting for, but my argument is they have already been won.  Only a rapidly fading core of GOP and social conservative diehards remains to fight a rearguard action, against these battles that have already been won.  Demographic trends tell us that LGBT and women’s rights are won, and will remain won.)

That said, if U.S. citizens could learn to live and let live, when it comes to social issues; if we could all band together to fight economic oppression, instead of each other, the 99% in the U.S. just might have a fighting chance.  If you want to be a fundamentalist Christian, great be one; if you want to be liberal and possibly secular, that’s great too.  The problem occurs when either side, generally - and in recent decades the Christian right, attempts to legislate morality. 

Politicians and the U.S. power brokers eat this social stridency up… because it burns up the legislative clock, and keeps truly serious economic matters (like underfunded education, tax breaks for private equity and the wealthy, and free trade agreements that ship jobs off shore) off the proverbial front pages, and prevents them from being debated by the American public and the Congress. 

It’s classic!  Divide and conquer!  In football, they call it “misdirection.”  Buy into the political chicanery at your peril.  The good news, or the bad news, depending upon one’s perspective, is the core Republican base will have passed on, within the next twenty to thirty years.  At that time, the Democratic Party will have a political monopoly.  Probably not a good thing, but good or bad, the future – and the present - looks a lot like one party rule.



Of course, there is a far greater economic and political power, and a far greater form of democracy, that Americans can exert every day of their lives, than the biennial popular vote.  J.M.H. has argued that both political parties in this nation, outside the convenient social issues that divide and conquer us, really have metastasized into one political party.  A single political party, call it the plutocracy party, that caters and panders to the rich, the cartels, the monopolies, the professional class, and the private equity, Robber Barons.  A constant flood of money into both political parties, unleashed by a Citizens United SCOTUS' decision, insures that our democracy is owned by wealthy individuals and enterprises.

And where can ordinary Americans exert far greater influence over our democracy, than the popular vote?

Here’s a hint:  We do it every day when we vote with our dollars and wallets, not in the political arena, but in what remains of the free market. 

Collectively, Americans through their purchasing power, call it voting with dollars, can influence the behavior of corporations, cartels, monopolies, managment, boards of directors, and in turn, their respective campaign contributions.  If LGBT rights and civil rights (they’re actually one in the same) have taught Americans anything, it is that through boycotting products and services, corporate behavior can be changed; and in turn politicians owned by same businesses can be changed, when corporates cut off, or open up, the political campaign contribution spigot. 

Witness what is going on in Arizona right now, where Corporates are, allegedly, fighting extremist legislation against the gay community.

Don’t like the concentration of power in the proposed Comcast/Time Warner merger, and its impact and decisive control over internet content, or the predatory and monopolistic Comcast rates that are likely to ensue, and already exist…. replace Comcast in favor of Verizon Fios.  Find the social policy, and the treatment of Wall-Mart employees to be unacceptable, boycott Wall-Mart and shop at Target.  Find Koch Brothers politics to be retrograde, machiavellian, and counter to 21st century mores and values, than boycott Georgia-Pacific and Koch Industries products and services.

A vast data trove on business establishments that you shop at daily exists: complete with ownership information, and in the case of publicly traded companies, financial reports themselves.  That data trove is called Google, Yahoo, Bing and of course, the SEC web site.  Get educated on the businesses and establishments that you trade at.  If private equity owns and operates a business establishment, and one finds private equity’s behavior to be inimical to society’s interests (with a few enriched by a business strategy that bankrupts businesses, creates higher unemployment - via layoffs, globalization and outsourcing, which in turn erodes the tax base and creates greater welfare spending, in a never ending fugue, that will ultimately assist in bankrupting the Federal government), than don’t trade at a PE establishment. 

If the voters of the free market act in mass, the impact on corporate bottom lines, and private equity’s returns, could be enormous.

Social media has served to help organize boycotts in the past, and will provide a catalyst for the future. 

In Egypt, the army rules the country; and in America, business and corporations rule!  Have an issue or a problem, don’t complain to your local congress-person… complain and boycott against the businesses, who sponsor, support, and provide campaign contributions to the politician that supports ideas, policies, and legislation that are antithetical to your beliefs and values.  Go to the source.  Business is the true locus of power in America.

Tired of Big Pharma spending R&D dollars for new medicine on stock buy backs, mergers and acquisitions, and the constant drumbeat of drug shortages produced by same…. All at society’s expense? 

Make sure you purchase generic drugs, substitutes, and alternative medicine from Canada and Europe (that is, in markets where Big Pharma pricing is highly regulated).

If you have money, buy shares, buy lots of shares, and get seated on the board of directors, and influence management. 

But hurry!  With the U.S. government, Dems and the GOP, handing out grants of monopoly and cartel to wide swaths of the economy, Americans increasingly, have fewer and fewer options with which to play corporations off upon one another, in a classic economic and political, divide and conquer strategy.

P.S. Some will take this piece as being anti-corporate... far from it.  This piece is merely an acknowledgement that many corporates and monopolies now have the power of nation states, without any of the social responsibility.

 Copyright JM Hamilton Publishing 2014

Please Dear Goddess… no, No, NO… NOT HILLARY!!!

Please Dear Goddess… no, No, NO… NOT HILLARY!!!

“The most recent Washington Post-ABC News poll tested Clinton against other possible Democratic candidates and found 73 percent saying they favored her for the nomination. She had the backing of 74 percent of liberals, men, non-whites and those with college degrees. She had the support of 73 percent of moderates, women, whites and those without college degrees.” 

– Washington Post, For Democrats looking to post-Obama era, how populist a future?  2-15-14

By J.M. Hamilton (2-16-14)

It’s telling.

My 28 year old niece, we’ll call her Brooke, supports Mme. Hillary Clinton for President.  Brooke just picked up her M.B.A. from Texas A&M, has held a well paying job for six years, and is about to buy her first home.  Brooke is smart, not married, very hard working, and is discovering her political leanings.  Her “leanings” are decidedly liberal, and she loves Real Time with Bill Maher.  Brooke hails from San Antonio, and in an otherwise sea of political red, Brooke is consistent with her national demographic, and where San Antonio is headed, politically.  That is very much like her sister city 75 miles to the north, Austin, very liberal. 

Texting each other, I had to remind Brooke that Mrs. Clinton isn’t liberal, and neither was the Clinton administration.  Sure, it started out liberal enough, but Mr. Clinton decided to a make a deal with the devil, and hired none other than the most rabid reactionary’s (Republican Senator Jesse Helms) campaign advisor, to gain re-election in 1996.  Chameleon like, the Clintons have been playing ball with the Wall Street cartel, and the plutocracy ever since, just like today’s core Democratic Party.  The reality is today’s Democratic Party is positively Clintonian, and about as right wing as they come (see President Obama).  Today’s Democratic Party has out “republicaned” the Republicans in catering to the wealthy, monopolies and cartels, and the military industrial and intelligence complex (or MIIC). 

In short, today’s Democratic Party is where the GOP was about fifty years ago; that is before the Republican Party became unstable, irrational (attacking Senator McCain?), hooked on Ayn Rand, and grew dependent upon a septua- & octogenarian religious right for a political base.

For Brooke, and all young liberals out there, here’s a friendly reminder of just some of what went down during the Clinton years:

1)   Clinton’s Treasury Secretary was Mr. Robert Rubin, Chairman of Citigroup and Goldman Sachs Alum, and a huge proponent of financial deregulation.  The very same financial deregulation that took down the U.S. and her economy in 2008.   President Clinton called Mr. Rubin the greatest Treasury Secretary since “Alexander Hamilton.”

2)   Mr. Rubin, and his deputy, Mr. Lawrence Summers, not only played a key role in abolishing/repealing the Glass-Steagell Act, (which turned Wall Street into a casino, in which banks wagered with the public’s money) but they both sponsored and supported the deregulation of the derivatives and swaps market.  This unregulated market was a direct contributor to the 2008 financial crisis.

3)    Only after the fact did the laissez faire – Mr. Rubin, acknowledge the important role government had to play in financial markets, when he stated in a Newsweek article:  “the market-based model must be combined with strong and effective government, nationally and transnationally, to deal with critical challenges that markets won't adequately address."  Sounds like Mr. Rubin has gone liberal.

4)   Clinton’s Treasury Secretary, Mr. Rubin, and Mr. Summers, both shouted down Ms. Brooksley Born, Chairperson of the Commodity Futures Trading Commission… who felt that derivatives and swaps should be regulated and controlled. 

5)   The derivatives and swaps market, unregulated during the Clinton years, is used to leverage up businesses and banks, often with off balance sheet transactions, to squeeze out profits but at the cost of tremendous leverage/risk to industry, banks, taxpayers, and the national economy.  Today, the swaps and derivatives markets is grossly under-collateralized and worth hundreds of trillions in notional value.  None other than Mr. Warren Buffett calls swaps and derivatives “financial weapons of mass destruction.”

6)   Federal Reserve Chairman, Alan Greenspan (an Ayn Rand devotee), was re-appointed by President Clinton, and Mr. Greenspan flooded the economy with money, which was a direct contributor to the housing bubble and the financial crisis in 2008.

7)   The Gramm-Leach-Bliley Act was passed during the Clinton years, which through a “complimentary activities provision,”allowed banks to corner markets in commodities, and elevate the cost of living for all Americans.

8)   One of President Clinton’s achievements was the passage of NAFTA (or North American Free Trade Agreement), an agreement – like other free trade agreements -  that was ultimately responsible for shipping hundreds of thousands of U.S. jobs offshore.

9)   President Clinton’s well known affair with Monica Lewinsky, also coincided with convenient distractions in U.S. foreign policy, in what some have called a classic “wag the dog” strategy. 

10) The nation breathed a collective sigh of relief when the Clintons left the White House, Mr. Clinton having narrowly escaped impeachment for lying about his affair to special prosecutor, Kenneth Starr.

While Mrs. Clinton is obviously not Mr. Clinton, and vice versa, is there any doubt that she played a key role in the Clinton administration’s policies?  Her politics, since leaving the White House, reveal little doubt.  Like the Democratic Party itself, her politics and policies are purely Clintonian (that is to say conservative and pro-plutocracy), from supporting a dubious war in Iraq, to her unquestioned support for the MIIC.

It’s equally telling, when the GOP waxes nostalgic for the Clinton years; and more telling still when General Petraeus endorses the former First Lady.

Sure the GOP misses bubba, a loveable rogue from Arkansas.  If I’m truly honest with myself, J.M.H. has noted and praised Mr. Clinton’s balanced budgets and his pro-business tilt.  But the Clintons have become synonymous with political empire, scandal, and maintenance of the status quo.   A status quo which places political intrigue, wealth, and senior citizens, over the nation’s fiscal health, the average citizen's welfare, and the nation's youth.

Would we expect anything less from a President Hillary Clinton? 

And just because Mr. Clinton is now 67, does it mean that the White House staff would be any safer?  Between Viagra and testosterone injections, and the fact that senior citizens are as randy, if not randier, than teens… if anything, the government might have to a build a wall between #42 and White House employees.

All kidding aside, Liberals think outside the box.  They defy the status quo and the establishment, like President Richard Nixon (Republican) signing EPA, Clean Air Act, and OSHA legislation, or President Johnson (Democrat) signing the Civil Rights Act of 1964.  These men knew when they signed these acts/legislation, that they were pissing off both the establishment and their political base.  When President Johnson signed Civil Rights legislation, he was said to have quipped that the Democratic Party just lost the South for decades.

At a time when the nation is mired in Clintonian politics, when money buys those in power, when the divide between the “haves and the have nots” is greater than ever, when the NSA does an electronic “procto exam” on every U.S. citizen, when Federal spending is subsidized by the Federal Reserve's printing presses… would a Madame President Clinton really rein any of the nation’s problems in? 

Mrs. Clinton is the establishment.

I understand my niece wanting to see a woman President.  If Brooke wants to see a true liberal enter the White House, someone who will defy the establishment and upset the status quo, and address the nation’s problems, than this is what a liberal looks like:

(Photo from the Washington Post)

If we want real change, we should respectfully bag the ultimate insider, and draft the Senator from Massachusetts. 

Copyright JM Hamilton Publishing 2014

P.S.   J.M.H. believes the 22nd Amendment prohibits Mrs. Clinton from running for President, yet again.  Having, arguably, served the nation already for two consecutive terms in the White House, Mrs. Clinton should not be allowed to run again.  Her candidacy is unconstitutional.

All of this and nothing

All of this and nothing

By J.M. Hamilton (3-12-11)

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.    

- Ernest Hemingway

In the song All of This and Nothing, Richard Butler’s lyrics take us on a journey describing a shattered romantic relationship and the wreckage left in its wake.  The song contains one of the most haunting saxophone intros known to rock and roll.   Per Mr. Butler of the Psychedelic Furs, the abandoned flat that hosted the relationship doesn’t contain much of anything, but assorted debris, painful memories, and “a picture of the queen.”   Inflation is a lot like a problematic relationship… perhaps a love story that comes to nearly the same ending throughout history, a very bad one. 

Inflation often serves to provide temporary economic relief, and provides a smokescreen to a nation’s real problems, which often require long term and economically painful solutions (call it a structural reconfiguration).   Politicians and central bankers often deploy inflation, as a means to an end: namely, achieving victory during the next election cycle.  The short term beneficiaries of inflation are the financial and political elite, who know better, but ride the wave – enriching themselves – while the general population, ultimately, suffers with the aftermath: unemployment, a stagnant economy, soaring costs for commodities and services, and a stumbling currency.  The economic sugar rush that is inflation can have the look and feel of a normal economic recovery – initially, while hiding festering problems that desperately need to be addressed, like global banking, run away government debt, and the lack of a national energy policy, driven by predatory oil monopolies.

Of course, inflation eventually catches up with everyone – even the elite: politicians fall, governments are overturned or change parties, corporations fail, and fortunes are eroded and spent.   Take a look at the following chart showing the S&P 500 results through the seventies, pretty stagnant stuff (for the babes in the woods out there, the '70's and early '80's were a period of rampant U.S. inflation):

According to the CIA fact book, the median age in this country is thirty-six.  This means nearly half of the U.S. population wasn’t around in the seventies and early eighties, or was getting ready to enter kindergarten.   The hypnotic – sleeper effect quality of QE2, present monetary policy, lulls the nation into a false calm, a sense that something is being done about the public’s problems, which gives our elected leaders an opportunity not to address the politically undesirable problems that lay before them: like cutting social security, Medicare, Medicaid, or reining in corporate welfare and tax breaks, and defense spending.

And the Chamber of Commerce was afraid of the “uncertainty” allegedly created by the Democratic Party’s feeble, half-hearted, and weak attempts to overturn three decades of financial deregulation, culminating Dodd-Frank (banking legislation that is so pathetically weak that Republicans aren’t threatening to overturn it).   Brothers, sisters, and business community… you haven’t seen anything until you have lived with double digit inflation.  Inflation is the father of economic uncertainty, as we are all about to discover or rediscover.  And it’s already here.

Fear and unemployment will drive the 2012 election.  No surprise.  And this creates a problem/ opportunity, which is Washington feels the need to do something, like enrich themselves and their friends, the oligarchs.  But with two wars going, record budget deficits/federal stimulus, and the Fed printing money like there’s no tomorrow, if the power elite are still struggling to get this relationship/economy off the ground or put a dent in unemployment – then we as a nation are in very big trouble.   Usually a war kick starts the economy.  Trillions in deficit spending… the “relationship” heats up and goes into overdrive.  Fed hits the switch on the printing presses and the economic honey moon begins.  

The problem created by Washington’s solution this time, as this blog has argued, is that all the government’s efforts are directed at propping up Wall Street banks, the Wall Street produced fallout in the housing sector, or ameliorating the effects of same, VERY LITTLE OF WHICH IS TRICKLING DOWN TO MAIN STREET – UNLESS YOU CATER TO THE RICH.  U.S. Republican and Democratic leadership replaces one bubble with another, via war-booms, deficit spending, or asset bubbles in housing, stocks or commodities – created out of thin air by the Fed.  And with the herd stumbling back into the stock market in record numbers, how long before the elite banks, and the government, takes their profits out of the stock market and run?

Our “capitalist society” is hooked on a very bad relationship with big government, with 40 percent or greater of GDP coming from government spending.  It is unsustainable, and as Mr. Herbert Stein, Richard Nixon’s Counsel of Economic Advisors chairman, so eloquently stated:  “If something cannot go on forever, it will stop.”  Can a global restructuring of debt be around the corner?  Watch the PIIGS in Europe closely, for the answer to that question.

Inflation stands for the ultimate debasement of the dollar, and the defilement of the American dream!  And the unintended consequences of QE2 are stacking up like so many couples headed for divorce court.  While the Fed maybe trying to kick start the economy with a boom in manufacturing, to replace the boom it had previously helped create in housing, with easy money policies designed to make dollar denominated U.S. manufacturing goods more affordable overseas, this love interest may be short lived; this is because emerging and foreign markets are already raising interest rates to stave off QE2 induced capital inflows and inflation.  Interest rate hikes in developing nations will have a contractionary effect upon their economies, and slow down demand for U.S. manufactured goods.  So America manufacturing will be faced with less global demand at a time when demand here at home is very limited, because we are still suffering the ravages of the last crisis created by the Fed and Wall Street banks.  Meanwhile, the inflationary effects of QE2 may very well be felt in this country for years to come (And can we see QE3 around the corner to bailout state, county and municipal government?  Yes we can.).

One positive unintended consequence from QE2 is the democratic revolution throughout the Arab world.   It appears that these folks have been under the boot heel of European and U.S. sponsored thugs for decades and they are not going to take it anymore.  Rather than rejoice at the possible freedom of the enslaved and impoverished, the big fear here at home is that rising oil prices may stall a nascent economic recovery, and U.S. political aspirations for re-election.   What our elected leaders and business community may fail to realize is that monarchies and military dictatorships are both highly unstable, and that Arab democracies will be just as hungry to sell BRICS, Europe and the U.S oil, if not more so, as the cutthroats who presently run the Arab world.   And if, per chance, during this time of governmental transition throughout the Persian Gulf, oil prices should spike, than the U.S. should look upon it as an opportunity to, finally, reduce our dependence upon foreign energy, and start hooking up U.S. transportation and power facilities to natural gas and alternative energy.  But I digress.

In 1979 my father, a smart man on many financial matters, explained certificates of deposit to me, and said that he could tie my meager amount of savings into a C.D. that would earn roughly 14%.  I was young and distracted by other things, like skirts and hotties, but even with my short attention span fourteen percent seemed like a good deal.  The problem was that by late 1979, early 1980, my “real rate of return,” that is my return adjusted for inflation, at an interest rate of 14%, was probably negative or minus five to six percent.  And that’s inflation.  No matter how fast your earnings and wages may climb the cost of goods and services, once those inflationary expectations are set, often rise faster.  It is very destabilizing.

That is until a Gandhi – like figure comes along at the Fed, an economic marriage counselor if you will, and says enough is enough, we are going to strangle inflation, even if the short term economic pain or cure is almost as great as the inflationary illness, itself.  Unfortunately, there are not many Paul Volckers in the world, and we have certainly not seen his like at the Fed, since his departure.  Had Paul Volcker not saved us from inflation, the U.S. might have continued to plod along with stagflation, indefinitely, or worse, really gone off course, “Weimar style.”

At the end of the day:  When you weaken a country, as both our political parties have done for years, with excessive and unsupported government spending, weak business regulation, unfunded foreign adventures, and loose monetary policies, you set a country up for problems and possible failure.   Those in the know, the elite and the politicians, can sometime plan ahead and via currency arbitrage, protect their interests and assets (all at the expense of the nation).  Shucks, politicians and the elite may even profit from the demise of a countries currency and economy, through the purchase of credit default swaps (C.D.S.) and derivative contracts; that is as long as the counter-party to that financial instrument has the assets to pay off, in the event of collapse or default. 

You see, one really is gambling when Americans purchase C.D.S. betting against the dollar and the U.S., because if such a bet comes to fruition, in all probability there would be no U.S. government in any semblance of financial shape to bailout the counter-parties.

As happened in Iceland, it has been written that many of the government officials who were responsible for the collapse of that nation’s banking system, currency and economy, took out hedging positions against their own country.   So there’s a flag right there.  But with derivatives contracts not open to public purview on open exchanges, how is the U.S. public to know that we won’t be left, like a jilted lover, with anything other than “a picture of the queen?”

P.S.
There are some who may still argue that there is no inflation, but if we study the history of the consumer price index (CPI), we know that the government took out unimportant items, such as food, commodities, and fuel a long time ago.  Apparently, price spikes that affect the vox populi are inconvenient economic and political truths.   As for interest rate inflation, as Mr. William Gross so well noted on the PIMCO web-site this month,the Fed dominates, that is to say, purchases 70% of Treasury debt issuance; effectively crowding out the bond vigilantes, who would, undoubtedly, demand higher yields and insist upon Federal budgetary and monetary policy reform. 

In response to the Fed’s monetization of the national debt, both Messrs. Hemingway’s and Stein’s comments immediately come to mind.

Copyright JM Hamilton Publishing 2014