2020 & Beyond

2020 & Beyond

In an apparent rejection of the basic principles of the U.S. economy, a new poll shows that most young people do not support capitalism.

- Washington Post, Max Ehrenfreund

By J.M. Hamilton (4-28-2016)

Today, let’s kick it off with a quick quiz, and we’ll make it multiple choice.

Question:  Which political party supports: an Ayn Rand style economic policy, which leads to job killing monopolies and cartels; war without end; unlimited money flowing into political campaigns, from SuperPACs and 501(c); an opaque government, where a tremendous amount of information is classified and shielded from the public’s view; free trade agreements that export U.S. jobs offshore, and establish extra-judicial courts, where multinationals can sue sovereign nations for threatening or harming corporate profits; mass incarceration for victimless crimes, like drug possession; Wall Street uber alles; job crushing M&A fueled by hyper-accommodative Federal Reserve policy; the surveillance state and the military industrial complex that consumes more than half of Federal discretionary spending; and Federal Reserve monetary policy driven by the stock market and the financialization of the American economy???

Answers:

a)  The Republican Party;

b)  The Democratic Party;

c)   The Plutocratic Party; or

d)  All the above

If you answered, “d) All the above,” you’d be correct.  The idea that we live in a one party state, owned and operated by the plutocracy, should not be foreign concept to any keen observer of Presidents Clinton, Bush (W), or Obama.  In other words, the more things change, the more they stay the same.  Namely, thanks to neoliberal economic policies, the ends always justify the means when it comes to M&A, concentration, dereg, government and regulatory capture, tax cuts for high net worth individuals and corporations, offshore tax havens, and free money for the connected, courtesy of the Federal Reserve.

The second a politician pushes back on the Business Roundtable, the Chamber of Commerce, and any other trade organization, or lobbyist, out comes the same refrain: any action contrary to Big Biz’ demands will kill jobs, make U.S. companies uncompetitive, harm stockholder value, and/or crush quarterly profits.  And politicians from both political parties – due to the campaign finance system – swallow it and run with it, that is if they want to remain viable for re-election.

Outside of fifty to sixty-year-old social battles over reproductive rights, LGBTQ, and race issues (which the plutocracy continuously stirs up at the local, state and the federal level, via owned politicians), there is little difference between the two political parties when it comes to economic and foreign policy.  To keep the public distracted, and the illusion/pretense of choice between the two political parties  - the corporate run news media keeps the hot button social issue of the day front and center, meanwhile the nation is run by and for the aristocracy.

If you doubt me, examine closely the right-wing Clintons and their policy of triangulation, essentially adopting and co-opting the GOP’s pro- big business push.  Still doubt me, examine the plaudits Madame Hillary Clinton has received from right-wing conservatives and neocons, among them:  Dr. Kissinger, Richard Perle, Rupert Murdoch, Charles Koch, & Lord Vader himself, Dick Cheney.  How bad is it when the elites are abandoning their party, for an, alleged, Democrat?   Pretty bad.   The GOP elite have always used white evangelical protestants, during the election season; and once in power, conveniently abandoned their base, only to stir up both the base and the aforementioned social issues at the next election.  Notice how these social issues never quite get resolved:  race, gender, reproductive issues, gay and civil rights.  That’s by design.  It’s called divide & conquer, or misdirection, and it is a strategy as old as time. 

The reason why these highly worthy social issues are never quite put to bed is they provide a distraction from the true prize:  economic and civil liberties - combined, or what FDR labeled as the four freedoms.

Read my post released prior to the outcome of the 2012 Presidential election, calling the race for Obama – when by all rights he should have lost due to the economy.  In Richard Nixon and the Southern Strategy, JMH correctly noted that the demographic trends in this country would yield Richard Nixon's, and the GOP’s, Southern strategy useless and inoperable in future national elections.   Doubt me still?   Read my post from 2012, titled ESTABLISHMENT, predicting that through maleovent neglect, and evisceration of the middle class, voters would rise up and turn against the economic and political establishment, and seek out outsider candidates.

How did my prediction turn out?  See Messrs. Sanders and Trump.  Witness the rise of fascism in Europe.

Where are we going w/ all this?  The point of today’s piece is, it’s really not too late.   The Plutocracy can save itself from its worst impulses and tendencies, and restore the social contract.   Crony-capitalism and the exploitation of government, by the private sector and the elite, can be reverse engineered for the greater good.  The solution to the neoliberal economy (aka the Ayn Rand economy) is called a mixed economy, the best of both worlds:  real capitalism, w/ competition strictly enforced and monitored by the government (even free market deities, Smith & Hayek, acknowledged the need for government to set capitalism’s rules of the road), and social benefits paid to the people (the 99%), instead of those least in need (the 1%).  As James Carville said, it really is all about the economy.

Other areas in desperate need of attention:  Crony-capitalism, monopolies and cartels can be broken up, which in turn should create more jobs and opportunity (if M&A is largely designed to eliminate expense and labor redundancies, the reverse is also true).  The idea of utilizing financial engineering to buy back stock to boost ROE, and management pay, can be reverse engineered, turned around, and utilized to enhance worker pay and aggregate demand across the economy.  Big Biz can insist upon a tax overhaul, where they pay at a lower published tax rate (instead of no rate), and lift some of the tax burden off the middle and upper middle class.  Free trade agreements could be negotiated, and rewritten, with a bottom-up focus, instead of a top-down approach.  The separation between money and state is key.  As for the massive global (private and public) debt, there’s two choices:  write downs, or negative yields to eliminate the debt service load and principal.  Neither is appealing, but the alternatives are continued stagnation, subpar economic growth, or worse, default.  And finally, government privatization, and our global wars, and our drug war, must all come to end.... they are a huge drain upon the nation's resources.

Why would the wealthy do all this?  It’s called self-preservation.

Millennials aren’t afraid of socialism and seeing as how the elite pig-out at the government trough, daily…. Well, socialism seems to work pretty damn well for the 1%.  Millennials aren’t afraid of Big Government or government programs.  Again, the youth are only following the legacy of Wall Street bank bailouts, and multinational handouts courtesy of free trade agreements.  Bank CEOs strutted around like the world owed them something, or were they merely doing the Goddess’ work(?), while their Great Recession destroyed the global economy.  The public saw all this but the millennials paid a disproportionate price.

If we continue on our present course, if the neoliberal/laissez faire economy fails to produce jobs and opportunities (which it will), the latest generations will insist that a living wage be paid to all citizens – by the government, whether they are employed or not.  After all, how long will millennials tolerate unconscionable & usurious college debt, non-living wages, and cohabitating w/ their parents?  (Maybe it's destiny: Even with real capitalism – with real competition enforced by the government – increasingly relying upon robotics, automation, globalization, and A.I., perhaps it's only a matter of time before we are all unemployed?)

Think Messrs. Sanders and Trump are novel, and outside the political norm?  If the establishment blows this election off as an anomaly, and continues on its present course, the political extremes will, more than likely, only amplify and magnify, in 2020 and beyond.  

Copyright JM Hamilton Publishing 2016


Correction: Richard Nixon and the Southern Strategy was released on election day, not on election eve, as previously described.

Political Risk Management

Political Risk Management

“Caligula was serious, and he had no use for journalists.”

- Hunter S. Thompson: Better than Sex, Confessions of a Political Junkie 

By J.M. Hamilton 4-14-2016

Presumably Mr. Caligula had no use for whistle-blowers either, but that’s beside the point.  If you get a chance, I recommend that you read Mr. Thompson’s highly illuminating book about the ’92 Presidential campaign,  a campaign that ushered in the Clinton era.  Admittedly, Mr. Thompson was past his prime in ‘92, but his insights and wisdom were often spot on.   Hunter pegged Mr. Clinton right from the get-go as a hustler, and in the political arena, purely out for himself; but when it comes to politicians is that really such a hard guess or news?  Take a close look at Madame Hillary Clinton and you’ll find yourself staring into the eyes of a stone cold superpredator and a political opportunist, rivaled by none.  The handful of politicians that actually give a damn about the people are few and far between, and usually get run over in the passing lane (witness the pounding Mr. McGovern took at the hands of then President Richard Milhous Nixon, Circa 1972).  And surely that defeat was on Hunter’s mind as he wrote this book.

 H.S.T. and Candidate, Mr. McGovern, via the Washington Post.

It must have also been of Mr. Clinton’s (aka Slick William’s) mind, as well.  Mr. Clinton was no fool, and despite all the ‘90s GOP bashing about Bill being a “liberal,” he ushered in an entirely new era for the Democratic Party.  Clinton personified Mr. Thompson’s famous maxim, from the aforementioned book: “Politics is the art of controlling your environment.”  You better believe it, Bubba.  Many have died trying to do that very thing, the majority of course, have crashed and burned.  The Lords of Karma have a way of totally ripping up the script, the best laid plans of both mice and men, and the graveyards are filled with indispensable men.  Fate has a really nasty way of humbling the greatest among us…. So always keep a careful watch over both shoulders, at all times.  There is no such thing as paranoia, and as any citizen who has run in a U.S. Presidential election will attest to… they really are coming to get you.

That’s why only true adrenaline junkies run for the White House.

But enough about all that because I have been writing about politics way too much, when J.M.H., as my readers are aware, likes to go deep on finance on occasion.  With that intro, today’s topic is risk management.  Yeah, please bear with me as we Tee this up.  Risk management is actually an old school business, some might say insurance, term, whereby a manager is constantly analyzing the various risks the enterprise they are managing may come across.  Moreover, how should those risks be managed, priced for, mitigated, and/or eliminated.  The term, risk management, really took off after the 2008 financial crash.  You remember, the 2008 crash when bankers and financial types under-priced debt securitization (such as CDOs and MBS), derivatives and swaps, and many other financial products in general.

How do we know the bankers and said financial types under-priced these products?  Because they had to be freaking bailed out - that’s how we know.  Wall Street had become Too Big to Fail, and the taxpayer and the Federal Reserve came calling, after the financial Hiroshima hit.   The key takeaway here, is that in a sense Wall Street had been practicing a form of risk management all along.  That is to say, the Street/Banks took the profits of the under-priced and under-collateralized financial products they sold, and the taxpayer assumed the risk and the bailout of said under-priced financial products.  In short, all went according to plan, as The Street essentially owns both political parties.

An alternative risk management play, one our hapless Congress and their owners – The Wall Street banks – halfheartedly attempted to put into place, post-Crash, was where The Street actually would price their products at an appropriate level for the risk assumed; true risk management, also, attempted to set up a cash buffer or equity position (aka collateral), so that the risk was incurred by the banks & their ownership – instead of the taxpayer – should it hit the fan, again.  But where’s the fun in that?  Where indeed?

Do you think for one nanosecond Wall Street banks are going to forego one fraction of a cent in profits (actually practice real risk management), by actually appropriately pricing and setting up collateral, or an equity buffer, for the financial fraud they sell daily?  Why would they do that when they own the Congress of the United States?  The banks like the way 2008 played out…. The banks are practicing risk management:  They pocket the profits, and you, dear taxpayer, get to bend over and assume the risk.  It’s called socializing the costs of Wall Street fraud, while profits are privatized; and it happens 24/7/365.

In short, Wall Street’s risk management, indeed the wealthy’s risk management plan, is best summed up in Mr. Thompson’s famous maxim: Once again…. Bueller? Bueller? Bueller? … Politics/Finance is the art of controlling your environment.   And the environment Wall Street controls is the political environment: The U.S. Congress, the Executive Branch, and increasingly the courts, themselves.

That said, the GOP has always been owned by Wall Street, but the Democratic Party, with its liberals and progressives, was an entirely different animal, particularly in the late 60s, 70s and very early 80s.  It wasn’t until President Reagan pointed the country hard right, less than a decade after Mr. McGovern took his savage beating, and Mr. Carter’s dreams were limited to one term, that the Democratic Party turned, as well, hard right.

Enter President William Jefferson Clinton.

Sly Willy traded in the progressivism of the New Deal and Great Society for “Triangulation,” which is fancy way of saying Mr. Clinton adopted/co-opted GOP policy.   Suddenly gone were the days when Dems looked out for ordinary Americans, the poor, and the disenfranchised.   In the 90s, the new Dems were looking out for themselves and the wealthy.  Besides, who were blacks, minorities, and lower rung whites going to turn to, if the Dems started adopting polices that were antithetical to middle class interests?  The Republicans?

Just as it took Nixon, a right- wing anticommunist, to embrace Red-China – pulling off perhaps the biggest foreign policy coup of the 20^th Century, it took an allegedly, Liberal-Dem to gut welfare, at the very same time the Clintons were pushing NAFTA and free trade. 

That is the greatest irony of President Clinton’s two terms: many of Clinton’s economic, social, and fiscal policies were conservative in nature, despite continuous vilification from the Republican Party.

Caught in the middle – with no one to champion their cause – were the poor and minorities.  Jobs being shipped offshore, via Free Trade, heh – no problem, let’s gut the social safety net.  President Reagan and the CIA looked the other way, as crack cocaine was sold to minorities in Southern California to finance Reagan’s proxy wars in Latin America…..    What a great time for President Clinton – in the midst of a crack cocaine epidemic – to clamp down on crime, ramp up the war on drugs, help establish the criminal justice industrial complex, and embrace mass incarceration.  Besides, the country had to house the unemployed somewhere after all the jobs were shipped offshore – via free trade – so why not institutionalize broad swaths of the minority community (w/in privatized prisons)?  Particularly, African-American men.  It’s no coincidence that just as Mr. Clinton had words with #BlackLivesMatter protestors this week, in the 90s, Mr. Clinton also had a Sister Souljah moment.  And it’s good to remember that Mr. Clinton attacked candidate Obama in 2008, as unelectable.  In short, our so-called “first black president (aka Mr. Clinton)” isn’t above playing the race card to obtain the white vote.

How quintessentially, GOP!

If it all sounds very Republican, that’s because it was.  Riding shot gun with President Clinton was the Speaker of the House, the beady-eyed, Newt Gingrich.  And President Clinton would score three, coveted, annual balanced budgets, an event that has not been achieved since.  Meanwhile, much of the Reagan and Bush tax cuts for the wealthy remained in place for President Clinton’s two terms.  To his credit, and true to the Keynesian model, Mr. Clinton did raise taxes ever so slightly.  The Clinton tax increase, coupled w/ the unprecedented Dot.com boom, helped in no small way to balance the federal budget. 

President Clinton blazed a trail, and the economic and political elite couldn’t have been happier.  Now, the wealthy had two political parties working for them.  The Plutocracy owned both political establishments, and hence, the government itself.  It is also no coincidence that the 2008 financial crisis struck under President Bush’s (W) watch, but President Obama – beholden to Wall Street – and the current incarnation of Clintonian politics – continued with the Wall Street bank bailouts set in motion by a Republican administration.   And the beneficiaries of the Bush/Obama bailouts?  Well, that’s obvious…  thanks to the bailouts and the Federal Reserve, wage and wealth inequality have reached proportions last seen during the Gilded Age.  The Wall Street banks are more concentrated and powerful than ever before.  The banks, private equity, and shadow banking own everything, including the souls of politicians.

As with all things extreme, and in line with Newton’s third law, there was eventually blowback.  Blowback in the form of an anti-establishment backlash seen during this 2016 Presidential campaign season, where outsider candidates, Sanders and Trump, are leading insurgencies that the American public has largely embraced.  Both Sanders and Trump stomping all over formerly sacrosanct free trade agreements; both Sanders and Trump calling for America to pull back from its many - go it alone - wars, and a Pax Americana foreign policy.  And the American public – much to the frustration and fear of the establishment – is eating it up.  Hillary, stuck in the 90s, cannot believe her eyes.  Volumes could be written about how the “mainstream” GOP candidate is now the Molotov Cocktail devotee, U.S. Senator from Texas, Ted Cruz.

In the parlance of our times, WTF(reak)!

Which brings us to my final point.  Mr. Thompson was 100% correct, politics is the art of controlling one’s environment, and good political risk management – in the year of our Lord 2016 -  calls for dramatic action.  That’s why President Obama, a cold hearted pragmatist, must throw Madame Hillary Clinton under the wheels of the populist bus, running at preternatural speed towards destiny. 

Grandma Clinton has reversed herself on so many of her 90s Establishment policies that she is literally morphing into Senator Sanders before our very eyes.  Why the sudden change within the Clintonian heart?  In short, the public has woken to realize the political interests of the plutocracy are absolutely crushing the middle class.  Sorry to say, no one, and I mean no one, believes Madame Clinton is going to “get ‘er done,” with a Republican held House of Representatives (unless “getting ‘er done” means bringing back Slick Willy’s Pro- Plutocracy agenda).   Moreover, Hillary attracts voters, who will likely be dead w/in the next generation (then again, the Clintons aren't above digging up the dead to increase voter turnout).  I know that’s cold, but the calculus of political reality is colder still.  Besides POTUS Obama's legacy is at stake.  Meanwhile, Senator Sanders is the future… not only does he attract the youth vote by both exceptional and extraordinary margins, but women (particularly single-women), and increasingly minority voters, too.   

Does President Obama want to saddle his legacy with the GOP loving Clinton?  Or does he go with the future, POTUS Sanders?  Cool, analytical risk management, and poll after poll, demonstrates the obvious choice.  As events have overtaken the GOP Establishment in real time, the Democratic Party’s civil-war is already underway and being waged.  And it’s long overdue… call it blowback for neglecting and screwing over the nation, to further profits for the few.  What Mr. Romney, I believe, referred to as the "takers."  The only "takers" I know – the true socialist – are the 1%, caught w/ their hand in the government till, time and time again.

Sorry Bill and Hillary, but you are a political liability, a liability that should be subject to prudent political risk management.  The Establishment’s time, to run this country into the ground, has reached its inevitable conclusion, and a political revolution is overtaking both political parties.  That leaves us with the question of the moment, one of great import:  Does Obama possess the courage to pull the indictment trigger?  

Many would say count the indictment out, but this campaign season - and the great chess game that is presidential politics - has been turned on its head.

Copyright JM Hamilton Publishing 2016