Hillary Clinton is the Bomb!

Hillary Clinton is the Bomb!

I responded by saying that I thought that “defeating fascism and communism is a pretty big deal.” In other words, that the U.S., on balance, has done a good job of advancing the cause of freedom.

Clinton responded to this idea with great enthusiasm: “That’s how I feel! Maybe this is old-fashioned.” And then she seemed to signal that, yes, indeed, she’s planning to run for president. “Okay, I feel that this might be an old-fashioned idea, but I’m about to find out, in more ways than one.”

Hillary Clinton: 'Failure' to Help Syrian Rebels Led to the Rise of ISIS, The Atlantic - Jeffrey Goldberg - Aug 10, 2014

“History merely repeats itself.  It has all been done before.  Nothing under the sun is truly new.”  Ecclesiastes I, Chapter One, Verse Nine.

By J.M. Hamilton 8-23-14

No, Mrs. Clinton, bombing oil rich countries to do U.S. multinationals, and the MICs, bidding isn’t “old-fashioned,” it is a timeless distraction from domestic politics and real U.S. problems (i.e. Ferguson/income inequality/tax avoidance/political reform).  And it is a practice that has failed the U.S. and indigenous peoples throughout the world, repeatedly.  Foreign misadventure has left the U.S. martially winded, fiscally bankrupt, and led to blowback with unintended consequences for the U.S. and the world, time and time again. 

Among the political elite, nation building, despite the fact that the FED is printing money to keep our nation afloat, apparently, never goes out of style.  Particularly to enforce arbitrary nation state lines established by two colonial powers, post WWI.  Nation building is an expensive and repeatedly failed concept (e.g. Vietnam, Afghanistan, and Iraq). 

Bombing nations is old-fashioned, particularly when we can often utilize sanctions and international banking to achieve the same geo-political outcomes.  Witness, Mr. Putin’s stalled empire-building efforts in the Ukraine. 

But where’s the “fire-works” in sanctions and international banking?  America needs a show of force and a bogeyman to justify all that extravagant military spending.

In an economically interconnected world, the MIC doesn’t want to hear that it is obsolete.  The fable surrounding the most recent U.S. bombings in Iraq, that the cavalry had come to save Yazidi, is nothing new (read Ecclesiastes I); arguably, the latest Iraqi bombings are nothing more than an excuse to protect U.S. multinational, oligarch, and sovereign foreign interests operating in resource rich Iraq. 

Our puppet, P.M. al-Maliki, blew it, and now we have to clean up the Cheney administration’s mess, yet again.  Senator Clinton, of course, voted to support Cheney’s war in Iraq, and so maybe she’s looking for justification and vindication for that hawkish vote.  That the U.S. set current events in the Middle East in motion with the 2003 Iraq invasion, is conveniently, rarely discussed.

Neo-conmen and unintended consequences?  You bet.  You’re looking at them right now on CNN.

Our corporate owned and run U.S. news media has embedded ISIS, chronically, into the 24-hour news cycle.  Concern over a rag-tag group of mercenaries and “jihadis” has reached a fever pitch.  “This is an organization(ISIS) that has an apocalyptic end-of-days strategic vision that will eventually have to be defeated,” said the chairman, Gen. Martin E. Dempsey, as reported in the NY Times.  Clearly, something must be done, even though the U.S. is energy independent, and the U.S. has already burned at least two trillion dollars in an Iraqi money-pit.  (That’s two-trillion that could have gone to disadvantaged youth, the poor, to pay down student loans, or to rebuild America’s infrastructure.  Hell, we could have given $2 trillion to the Wall Street cartel to check again, and learn one more time that “trickle-down” economics really is a dead-end ideology.)

Haven’t we heard this fever dream before, from the Joint Chiefs?  Gulf of Tonkin, weapons of mass destruction, yellow-cake…. Oh yes, we’ve heard it all before.  Conveniently, omitted from the dialogue is that the GOP's hero, Ronald Reagan, defeated the Soviet Union without starting up a hot war. Conveniently, omitted from today’s scare-mongering from the military brass is the former Soviet Union was once declared the “evil-empire.”  It’s like each enemy we encounter is larger, more evil and malevolent than the prior.  The American public has grown so inured/jaded to the Joint Chiefs chronic cries for war, that the generals have to top themselves with each new call.  Really, ISIS is more scary than the former Soviet Union?  Yet, ISIS has no air force, no nukes, and is supported by captured U.S. military surplus, left behind in Iraq.  

Blowback? Talk about your unintended consequences. Oops.

The economic and political elite in this country have been given a freehand on foreign affairs for so long, to such deleterious effect upon the U.S. and its citizens, and our federal budget, that the alleged “isolationist,” Senator Rand Paul, is now one of the leading GOP contenders for this nation’s highest office.  And if he was running against Hillary today, he’d have my vote without question, based upon their respective positions on foreign policy alone.

We have yet to learn the true consequences of the latest wars in Iraq and Afghanistan.  Right out of the playbook, true to character, the Federal Reserve is busy printing money to inflate away U.S. war debt.

If the U.S. military is so damn effective, why are we having to go back into Iraq yet again?  If dropping bombs and playing army is the end all be all of foreign policy, why is a similar Afghanistan fiasco almost guaranteed?

Where are our so-called European allies in this matter… you know, the folks who actually are not energy independent, and do rely on Middle East oil?  Nowhere to be seen…  it’s August and the Europeans are all vacationing on the French Rivera (along with the legal community in this country).  And the Arab-League…. ?  Forget about it.

Meanwhile, back in the Sudan, Christians have been persecuted, run over, and massacred by Muslims for years…. But Khartoum isn’t oil or resource rich, Sudanese Christians are not white, and there are no U.S. multinationals operating in the region. 

Where’s the U.S. cavalry in the Sudan?  Why aren’t we bombing the Muslims in the Sudan, who are slaughtering and butchering Christian women and children, by the hundreds of thousands? 

That our “altruistic” U.S. foreign policy is based upon a foundation of hypocrisy (and is detrimental to ordinary Americans, who can’t escape paying taxes, and must pay for these foreign adventures – in some cases with their very lives), is on full display for all the world to see.  That U.S. multinational corporations, who enjoy U.S. military support globally to protect world markets, are now fleeing off shore to dodge paying taxes for their own military protection is outrageous.

And to think, we are about to put this relic from a by-gone era in the White House.  Four words:  Complete freaking horror show.  I’m all for putting a woman in the White House, but lets put the right woman in the White House.  Like, I don’t know, a person who’s ready to break with the last five decades of incredibly bad foreign policy; a person who might campaign on reinstating the draft, so that the war burden is shared by all U.S. citizens and not just the poor; a future President, who will actually make multinationals pay for their fair share of the U.S. war machine.

Has it ever occurred to our “foreign policy experts” that the reason there is so much turmoil in the Middle East is because the U.S. and Western democracies keep: propping up thug dictators who terrorize their citizens; that there is no or limited economic opportunity in these countries, and no rule of law (Middle East unemployment is the highest in the world); and so joining jihad and Allah in paradise is perhaps their only and best option?   

If you keep people poor, under-educated, and w/out the basic necessities of life, or a shred humanity, than there is bound to be war, fundamentalist religion, and rebellion (not necessarily in that order)… which keeps the MIC and the war machine humming. 

See, it works out for everybody.

It’s so much easier, and less expensive, to do a drive by, I mean fly by, and a bombing in Iraq, than to address the root causes of the problem.  Right? 

President Clinton III will show the world.  A fiscally bankrupt U.S. will be knee-deep in global blood in no time.  When one examines Mrs. Clinton’s advocacy of a jingoist and bellicose foreign policy (a rehash of Bush/Cheney), President Obama’s foreign policy of not doing “stupid stuff,” sounds exceptionally brilliant.  (Then again, with Hillary enjoying a near lock on the Democratic nomination for 2016, perhaps she’s just pandering to the political right and the foreign policy hawks, in the hopes of obtaining their vote?)

No greater authority than General Stanley McChrystal said that when you kill an enemy combatant in the Middle East, you are likely creating ten terrorists.  At the rate we are going, the U.S. actually might have something to fear.

P.S.

Do you think China would be rattling their saber in the South China Sea, and Putin would be pulling his stunt in the Ukraine, if the U.S. wasn’t hyper-ventilating and grossly overextended, by attempting to play the world’s beat cop?

Copyright JM Hamilton Publishing 2014

Coming Soon to the Street…. A Nixon Moment?

Richard Nixon is associated with many things:  The last of the big liberals (EPA, OSHA, a near deal with Senator Kennedy on healthcare – decades before Romney-care), scandal, wage and price controls, the imperial presidency, extreme paranoia, and a brilliant foreign policy (albeit, ultimately, marred by the decision to pull out of Vietnam many years too late). 

To look at today’s Republicans and Mr. Nixon… goes to show just how far right the GOP has shifted in the last forty years.  And yet, he kept the GOP in power for over forty years, with his Southern Strategy.  

Mr. Nixon personifies the politics of race.

The one thing he is not associated with, however, is ushering in the post-modern age of high finance, when he de-linked the dollar from gold.  Yes, the roots of leverage on steroids, massive debt, derivatives and swaps (the Black & Scholes paper was written in 1973), and Wall Street & Private Equity excess, arguably, go back to Nixon’s decision to leave the gold standard; in de-linking the dollar, he also ushered in the age of hyper-monetarism from the Fed, and profligate federal deficit spending from President Reagan, forward.

Mr. Nixon unleashed Lord Keynes. 

The Fed’s printing presses really began to smoke, after President Nixon’s fateful decision.  If the Lords of Finance were to build a golden idol, its visage would show the face of Nixon.

Good, bad or indifferent (friend or foe of Mr. Nixon's legacy), former President Nixon is a man worth studying for years to come.  The rise from nothing, the set-backs, perseverance in the face of overwhelming odds, and ultimately, a swan dive into the abyss.  To this day, Mr. Nixon has many things to teach us. 

He is the shadow of what remains of the American Dream.  Mr. Nixon is the embodiment of the duality of man.

- J.M.H.

 

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

Copyright JM Hamilton Publishing 2014

Rage Against the Machine…?

Rage Against the Machine…?

 “Your anger is a gift.”  - Lyric from the song, Freedom, by RATM

By J.M. Hamilton  8-1-14

Time to geek out.

It was couple of years ago now.  I had the privilege of meeting with a Chief Operations Officer (C.O.O.) at a large plastic container manufacturer in the greater-Atlanta area, and viewed the factory floor.  What caught my attention about this particular company is that revenue, through both acquisitions and organic growth, along with profits, had shown significant growth over time; but corporate wide payroll had showed a steady decline over the same period.  When I asked the C.O.O. about these numbers, he responded with one word: "Automation."  He went onto say that labor, and all its associated headaches, were the company’s biggest expense.  With machines, he added, there were no tardy employees, no "dying grandmothers," and no H.R. Issues.  I must say, that factory was magnificent.

Which provides an excellent intro for today's piece.  To embrace human obsolescence and A.I. (artificial intelligence), or not to embrace human obsolescence and A.I., that is the question.  Of course Mr. Shakespeare may have been more concise and eloquent when he asked nearly the same question: "To be or not to be?"

On the Right, we have Mr. Steven Rattner... Clintonian Democrat, Wall Street Mogul, Private Equity Robber Barron, and sometimes writer for the New York Times.  More recently, Mr. Rattner served as President Obama's Car Czar.

On the Left, we have Lord Robert Skidelsky.... Professor Emeritus of Political Economy at Warwick University, a Fellow at the British Academy in history and economics; and more recently, he wrote a three-volume biography on one Lord Keynes.  Having read "The Return of the Master," Mr. Skidelsky knows his topic, well.

Rattner, Automation and the Welfare State:

Mr. Rattner wrote a piece in the New York Times this June, entitled:  Fear Not the Coming of the Robots.  In this piece he states that automation and robots are nothing to fear, and that these are good things, as they will lead to greater economic productivity, correlating into higher wages, and a migration into jobs more suitable to human endeavor, such as nursing.  He states that John Maynard Keynes was dead wrong in predicting automation would outstrip the need for, and new uses for, human labor.  As for the unemployed who cannot keep up or be retrained, fear not Mr. Rattner assures us, there is government assistance and welfare.  In particular, I found three memorable lines in this piece.  They are:

Becoming more efficient (what economists call “productivity”) has always been central to a growing economy. Without higher productivity, wages can’t go up and standards of living can’t improve.

In fact, productivity growth in recent years has been sluggish (an even scarier concern). 

Hence, the greater need for automation, per Mr. Rattner, and…

But technology is not the prime culprit behind our languid employment and income growth. That honor belongs to globalization, and particularly the ability of companies to substitute far less expensive and increasingly skilled labor in developing countries.

Now, in direct rebuttal to Mr. Rattner, if we check in with the Bureau of Labor Statistics, we can see that productivity has been on a steady rise in this country, throughout the 90’s and all the way through 2007.  It was at that time (2007) that Mr. Rattner’s friends, Wall Street Banks, Shadow Banking, and Private Equity, damned near destroyed the global economy with debt securitization, greed, moral hazard, and highly illiquid, unregulated, and uncollateralized swaps and derivative products (CDOs and MBS).  At which point (2007), U.S. gains in productivity slowed down dramatically.  Not because of the lack of technology or effort on the part of those remaining American workers lucky enough to hold jobs; but rather, I would argue that productivity gains dried up due to the lack of aggregate demand, as a result of the spike in unemployment and underemployment caused by the banking crisis, and due to a sharp reduction in CAPEX spending.  Consolidation and combination (i.e. M&A) in industry after industry, also means that monopolies and cartels are no longer forced to compete, and so greater efficiency and productivity is not only not required (nor is customer service important), but the cost of greater efficiency may actually detract from short term monopolistic profits. 

In fact, the financial crisis is chiefly responsible for an idle workforce, and idle factories with excess capacity.  Mr. Rattner, a product of Wall Street, conveniently forgets to mention this.

Moreover, Mr. Rattner, also strategically omits that he and his colleagues on the Street have been the primary beneficiaries of America’s growing productivity and automation over the last two decades, with the overwhelming majority of the profits and wage growth going to the one percent.  Meanwhile, the middle-class is 20% poorer today than it was in 1984.  So much for the theory that higher productivity leads to higher wages.

Could Mr. Rattner, a founding member of Quadrangle, a private equity firm, have a vested interest in automation, robots, and A.I.?  You bet.  After all, if the last three decades are any indication, Mr. Rattner and the financial elite stand to make a financial killing from the increased productivity correlated with increased automation, all at the middle class’ expense. 

Instead of fearing automation, Mr. Rattner points out that “globalization” is the real job killer in America.  I guess a private equity Titan would know, since private equity has been responsible for more pink slips and greater off-shoring of labor, than any other American industry.  As for the safe loving embrace of the welfare state he promises displaced workers…. it seems that many of Mr. Rattner’s friends, who have the most to gain from automation, are moving their businesses offshore in the latest tax dodge called “inversions” (because they don’t want to pay for the social state that Clintonian Democrats advocate, as a substitute for gainful employment and a living wage). 

Seems that many CEOs have seen the future, and while robots and A.I. bodes well for their income statements, automation does not bode well for the middle-class nor future growing ranks of unemployed and underemployed in need of government assistance; and these CEOs and their companies are, technically, fleeing offshore (to dodge paying taxes), while enjoying all the benefits and protections America has to offer.

So to say, Mr. Rattner’s piece is self-serving, is as big an understatement, as automation and resulting unemployment are inevitable.  Mr. Rattner’s op-ed piece appears to have run as a direct counterpoint to Mr. Skidelsky’s piece, which ran in Project Syndicate (an economics and global policy website).  Mr. Skidelsky’s write up is entitled: The Rise of the Robots.

Skidelsky, Keynes and a Paradigm Shift:

Mr. Skildelsky, too, has seen the future, and unfortunately, it’s not very bright for human labor, at least in the short run.  Quoting The Master, he states:  “But it is hard to resist the conclusion that ‘technological unemployment,’ as John Maynard Keynes called it, will continue to rise, as more and more people become redundant.”

Other salient points made in The Rise of the Robots:

On the contrary, it must be right in the very long run: sooner or later, we will run out of jobs.

But technological progress is now eating up the better jobs, too. A wide range of jobs that we now think of as skilled, secure, and irreducibly human may be the next casualties of technological change.  As a recent article in the Financial Times points out, in two areas notoriously immune to productivity increases, education and health care, technology is already reducing the demand for skilled labor. Translation, data analysis, legal research – a whole range of high-skilled jobs may wither away. So, what will the new generation of workers be trained for?

What is noticeable, though, is that structural unemployment – the unemployment that remains even after economies have recovered – has been on an upward trend over the last 25 years.

Hence, Mr. Skidelsky makes a direct counterpoint to those economist, who state that present unemployment and underemployment is cyclical.

Mr. Skidelsky’s proposed solutions to the conundrum that A.I. and machines present the wage earner are:  Option One, adopting the German model, that is to say, job sharing with the attendant reduction in hours worked and wages earned, per employee.  And Option Two, get ready for a great deal more “leisure.”  

Leisure?  How so?  How could anyone think about leisure if they are unemployed and without means?  Well, Mr. Skidelsky hints at it: 

This would be possible if the gains from automation were not mostly seized by the rich and powerful, but were distributed fairly instead.  Rather than try to repel the advance of the machine, which is all that the Luddites could imagine, we should prepare for a future of more leisure, which automation makes possible. But, to do that, we first need a revolution in social thinking.

The paradigm shift in “social thinking” that Mr. Skidelsky is referring to is already occurring.  In some U.S. political circles, Libertarian and Liberal, many have noted that the system (legal, political, economic, financial, and educational) is rigged.  If that is indeed true, it’s not hard to imagine some brave economist calling for the redistribution of ill-gotten wealth, if not flat out wealth confiscation.  Conservatives, reactionaries, and the one percent will immediately cry out that “communism” is, and forever will be, an absolute failure (Of course, these are the same individuals, who were in fact bailed out of the 2008 financial crisis by the U.S. government, and to this very day, by the Federal Reserve). 

But before we write off Mr. Skidelsky’s calls for greater “leisure” for all citizens, consider the following.

The last experiment in communism was in the former U.S.S.R.   That experiment did indeed, fail because humans were still required to provide the labor for that command economy.  The U.S.S.R. and communism failed because: If you pay a worker the same slave wages, whether they show up for work or not… they might as well stay home and get drunk on state subsidized Russian vodka. 

Machines, however, are unemotional.  Automation, as pointed out by the plastics C.O.O. at the beginning of this piece, do not respond to incentives or disincentives, or the desire to lay in bed or on a beach.  Machines don’t have “dead grandmothers,” or H.R. issues, and they work tirelessly, which means “the revolution in social thinking” that Mr. Skidelsky is writing about, is not only possible but it very well may be highly probable. 

Which further begs the question: Long before A.I. takes over, and the last worker shuts off the last light in a cube farm, will the 99% have to figure out what to do with the one percent and all their newly found wealth?

Monarchies were overthrown, globally, in the 18^th, 19^th, and 20^th centuries and their wealth was often confiscated and redistributed to the democratic state; could today’s “monarchs” (i.e. the one percent), in the neo-guilded age, suffer a similar fate?

Imagine.  Many of today’s CEOs, banks and private equity firms running around consolidating entire industries into monopolies and cartels, so as to guarantee monopolistic profits for the one percent; and perhaps, in the process, making these same monopolistic industries ripe and all too easy targets for nationalization, government and machine sponsored takeovers, and the redistribution of wealth in a more egalitarian manner (and entire corporations confiscated as reparations for: retroactive taxes dodged and owed, and a rigged and crony economic and political system)?

As stated on this page on more than one occasion, monopolies are creatures of the state, and little more than "socialism by private proxy."  Once machines takeover, the transition from private to public ownership is not hard to fathom.

Going totally high tech… one might imagine keeping these cartels and monopolies out of the hands of all too easily corrupted governments and politicians; but rather, would it be possible that these industries are placed into the hands of a public or non-profit trust to advance the public good, and could this public trust or non-profit, in turn, be run by a computer and A.I.?

Under current circumstances, democracy could become a direct threat to the one percent, which helps to explain Citizens United and McCutcheon SCOTUS decisions, corporations deploying inversions, and a gerrymandered House of Representatives.

Mr. Skidelsky hints at one possible vision of the future.  The question is will the financial elite and Mr. Rattner pull up, before destroying what remains of the free market?

Copyright JM Hamilton Publishing 2014