Friday, December 30, 2016

Titanic

Titanic

Media vita in morte sumus

By JM Hamilton (12-30-2016)

Halifax, Nova Scotia - Visiting the 121 graves here, at Fairview Lawn Cemetery, it’s a good time to take stock. 

Looking back at 2016, it was a banner year for JMH.  Unfortunately, many of the things this blog had forecast, over the last several years, have come to pass.  The goal of JMH has always been to share w/ my readers a lifetime of accumulated experience & knowledge, and based upon the facts before us, offer insight into current events and afford the occasional forecast.  Some prognostications are rather easy… historia repetit.  And then there’s the human component, and repetition of same: error hominum.

With a foundation in economics & history, by keeping up on current events – and w/ blessings from the Goddess above – one can divine a great deal about what’s on the horizon.  It may take months or years for future events to come to pass: just as one cannot time markets, one cannot time historical events.  JMH’s piece, Establishment, originally published in 2012, and revived on this blog's present site in 2015, stands out as a singular forecast.  A more recent piece, Elites Gone Wild, outlining the blowback against “experts” (in our current time is there a greater epithet?) also comes to mind. 

Trust me, we all wish it had all turned out differently.  Many wish the elite weren’t so blinded by their own greed & rapaciousness.  And yes, JMH wishes he had been dead wrong, and that the middle class hadn’t been torn asunder by monopolies, free trade agreements, fiscal austerity, central banks & the IMF, and the lords of finance hostile takeover of the global economy.  Moreover, JMH had hoped our mainstream political parties were more interested in the wellbeing of the citizenry & country, than taking orders from plutocrats (here & now, in our Neo-Gilded Age).  When SCOTUS fatuously equates money w/ freedom of speech, all kinds of hell are bound to break loose.

Alas, its going to become a lot nastier for a great many people, including the elite, before the lessons are learned, and enlightenment comes calling.  Enlightenment & Karma – twin sisters – usually arrive when the human condition is at its most distressed and very worst.  Enough of all that, because there is work to do. 

What can we look forward to in 2017 and beyond?  This blog offered up several pieces on the globe’s pernicious debt problems in 2016, read here and here.  Private & public debt ratios around the globe are at all time highs, per the IMF.  The collateralized debt market – moral hazard defined – has been revived, thanks in large part to central bank actions.  And there are hundreds of trillions – notional value – in swaps and derivatives insuring and gambling on global debt & commodities, which had a titanic impact upon the ’08 crash and will likely have a similar impact upon the next economic crisis.  Not only does debt and debt service loads sap private & public sectors; but this tsunami of debt leads to further calls for private & public sector austerity, from institutional investors and politicians owned and operated by the plutocracy, respectively.

The correct and prudent thing  – in an orderly fashion (this, as opposed to disorderly) – is for central banks, globally, to coordinate and write down public sector debt.  Starting small and taking bigger strides with the write down of public debt, central banks could defuse several ticking time bombs: economic calamity, not unlike the ’08 crisis; calls for even greater austerity that have largely been paid for on the backs of the 99%; and, possibly, head off a universal populist revolt against the establishment, both economic & political, before it really turns nasty.  

With public debt written down, in a coordinated fashion by the world’s central banks, the current world order of currencies could be maintained.  With debt written down, governments would be freed up again to engage in social spending; rebuild crumbling, or enhance existing, infrastructure; and increase defense spending as needed.  Increased social spending and a universal guaranteed basic income are particularly important at a time when AI, globalization, automation, and job killing cartels & monopolies are crushing opportunity and wages worldwide.  Those who read JMH w/ any degree of regularity may question why this blog is suddenly supportive of central bank intervention in the global debt market, especially when it has been highly critical of central bank intervention, since ’08.  The answer is simple: up until now, central bank and Fed actions have been focused on bailing out Wall Street, the plutocracy, zombie banking & commercial institutions – in essence trickle down monetary policy – w/ a highly deleterious impact upon the 99%.

All this is to say, if monetary policy is to be utilized in the future, its firepower should be directed at stimulating aggregate demand and bolstering the fortunes of the 99%.

So what is to prevent the write down of public sector debt, and the defusing of several ticking bombs, both economic & political?  As usual, follow the money.  Wall Street banks, and the international banking cartel – largely based in London, make billions annually in selling swaps and derivative products.  These swaps and derivative products are often utilized to insure debt and gamble on same.  In order to defuse a titanic amount of global public debt, this would mean unwinding – and possibly calling for a moratorium  – on debt driven derivatives and swaps products.  Derivatives and swaps have been referred to as weapons of mass destructions by Mr. Warren Buffett, are a ticking time bomb w/in the financial markets, and are a significant cash cow for the international banking cartel.  Wall Street wouldn’t like restricting the revenue flowing off these financial WMD.  This would mean cutting off a key revenue source, and as we know, the banking cartel holds undue influence, if not outright owns, democratically elected governments, globally (witness the invasion of a large number of Goldman alums into PEOTUS Trump’s inner circle/cabinet). 

Therefore owned politicians would not be eager to support the concept of a controlled public debt write down either.

In addition, Banks also earn titanic amounts of money holding and speculating in public and private debt.  If central banks, internationally, were to coordinate and forgive/write down debt, yields on public debt would decline in the short and intermediate run. (The upside for banks and institutional investors however, would be that once global public debt was written down, there should be limited further need for central bank intervention into the market place, barring a black swan event.  End TBTF and decrease the speculative supply of derivatives & swaps, and the likelihood of a future black swan event is diminished even further.) 

So to be clear, Wall St. banks & shadow banking – who brought global calamity down upon the world economy, were bailed out at the expense of nearly every other person on the planet, & who own and operate world governments – have a great deal to lose by an orderly winding down of the world debt crisis.

There’s an ideological component standing in the way of a public debt write down as well.  The plutocracy embraces socialism & crony capitalism on a daily basis, when it enriches them.  But for the 99%, the ownership class advocates rugged individualism and economic Darwinism.  In short, the wealthy believe in every man for themselves, particularly when the ship of state crashes into the economic iceberg of a full-fledged financial crisis. 

Women and children first?  Hardly.  

In the ’08 financial crisis, the plutocracy jumped into the lifeboats (provided by central banks & Western governments), and left everyone else standing on a listing deck.  Witness wage & wealth inequality not seen since the last Gilded Age; witness the declining life spans of white “middle class” Americans & an opioid epidemic.

Hypocrisy aside, the robber barons often don’t want to see government succeed, but rather, they want to see it fail.  Hence, the optics of the wealthy raiding the government for private contracts, engaged in war profiteering, lobbying for a highly accommodative monetary policy, engaged in regulatory capture, pleading for & obtaining bailouts, advocating corporate welfare, pushing government privatization, supporting lax campaign finance laws, hiring a rapacious K Street lobbying army, etc., etc…   

… While – in many cases – flat out at refusing to pay taxes. 

None of this is to suggest that the billionaire class has engaged in a Soprano's style “bust out” of Western governments, tapping out government credit lines, to support tax cuts for themselves, or in the case of the U.S. - war w/out end.  Quite to the contrary, there is no need to suggest anything.  In fact, the economic elite have applied the private equity/Soprano model and have busted out Western democracies: burning government credit lines to pay for their own further enrichment, while refusing to pay for government upkeep/taxes.

Starve the government, and government assistance for the 99% ceases to exist, once the credit line is tapped out by the robber barons.
 
Which leaves the 99% dependent upon the private sector for its very existence; which means that – at a time of shrinking opportunities & jobs, globally – in essence, an employer’s job market – the captains of industry can set the going wage rate, while reaping titanic profits.  In short, many of the wealthy have a vested interest in seeing government, the social safety net, & FDR’s reforms fail.  When government(s) fails, as we have seen in Greece and quite possibly Italy, expect to hear the narrative from the corporate controlled, & owned, MSM that it was the burden of social spending, and the social safety net, that caused the collapse.  Bank bailouts, cronyism, corporate welfare, and a tax code riddled w/ loopholes have nothing to do w/ the collapse of Western Democracy and the social contract.  If you believe that, we can dry it out and fertilize your lawn.

Doubt me?

Consider this, the budget surpluses of the Clinton administration were undone by Bush’s (W) tax cuts for the wealthy and the wars in Iraq and Afghanistan.  Trickle down economics/trickle down tax cuts…. The failed zombie doctrine that refuses to die is about to be adopted all over again by the incoming Trump administration.  The new administration, however, does give us some cause for hope, and that is Mr. Trump knows all about debt and bankruptcy.  Mr. Trump also knows that the U.S. national debt is a threat to the ship of state, national security, the American people, and his second term prospects (particularly w/ some of the economic policies his administration plans on proposing).

In short, national debt must be dealt with, sooner rather than later, as it is a threat to Mr. Trump’s brand.  After all, does Mr. Trump want to be known as the POTUS that saw the U.S. government, quite possibly, fail under his watch? 



Halifax, Nova Scotia




On April 15, 1912, the “indestructible” Titanic sailed into waters, off the coast of Newfoundland, hit an iceberg, and on her maiden voyage sank.  Human error (sailing into dangerous waters at too great a speed), hubris, a lack of proper safety precautions & warning systems cost more than 1,500 people their lives, in the freezing North Atlantic waters.  It was perhaps the 20th century's most infamous shipping disaster. 

In the subsequent investigations, blame was not assigned to the owners and shipbuilders; but some good did come of the disaster, that possibly prevented future occurrences.  Through regulation and government intervention, into the passenger line market place, ships were required to: carry more lifeboats and conduct lifeboat safety drills, passenger ships were designed w/ a greater safety focus, onboard communications systems were required to be manned around the clock, and an international ice patrol was formed to check for unsafe conditions/icebergs in the North Atlantic.

The Titanic is ripe with analogies and metaphors that align perfectly with the 2008 financial crisis, and the world debt crisis that exists today.

Unlike the Titanic disaster…  in our most recent financial crisis, the elite and the captains of finance did not go down w/ the banks & shadow banking; but rather, in 2008, the elite – by owning and co-opting government & central banks – rescued themselves at the expense of everyone else (especially women, children, the poor, and the disenfranchised).  Unlike the Titanic disaster, proper reforms were not engaged in nor adopted, post-2008 crash: TBTF banks exist to this very day; debt is at dangerously high proportions; the ticking time bomb of disorderly default scenarios - private & public - are very much w/ us; and the WMD of derivatives, repos, & swaps ---- all lying in wait against the ships of state and the global economy, like so many icebergs in the sea.

One would like to think the 121 Titanic victims resting in Halifax, Nova Scotia - a fraction of the total - did not die in vain.  Due to their deaths, the capitalists  - who owned the Titanic – recognized the need for greater regulation and government intervention to insure passenger, and their own financial, safety.  Too bad, the super-predators, the billionaire class, and Wall Street banksters haven’t learned the same lessons from the ’08 crisis.



Copyright JM Hamilton Publishing 2016

Saturday, December 10, 2016

Non-benevolent Dictators & A Global Economic Civil War

Non-benevolent Dictators & A Global Economic Civil War

See if you can put it all together from the resumes of those in President-elect Donald Trump’s closest political circle so far:

Treasury secretary nominee Steven Mnuchin: Goldman Sachs.

Chief strategist Steve Bannon: Goldman Sachs.

Transition adviser Anthony Scaramucci (& Treasury Sec nominee): Goldman Sachs.

Commerce secretary nominee Wilbur Ross: Rothschild & Co.

Possible budget director Gary Cohn (& White House economist candidate): Goldman Sachs.

Potential secretary of state Mitt Romney: Bain Capital.

Trump is just getting started. Check out that “swamp draining.” The whole thing is just draining before our eyes! Take that, Wall Street! Take that, “international financial cabal!”


By J.M. Hamilton  (12-10-2016)


President – elect Trump is not even in the White House yet, and he’s already managed to upset nearly every constituency:  the left, the right, neocons, foreign policy experts, the plutocracy, CEOs, foreign heads of state, economist (fresh & salt water schools), neoliberals, establishment GOP types, free trade supporters, liberals, libertarians, his own base of support…. Well, you get the picture.

Which to me anyway, means he must be doing some things right. 

Seems that Mr. Trump aims to shake things up.  That is to say, shake things up for everyone, excepting possibly Government $achs. 

Setting off liberals and the left have been Mr. Trump’s cabinet nominees, many of whom hold points of view directly counter to Trump’s positions on the campaign trail.  For instance, Trump railed against Goldman Sachs, and Wall Street executives, during the campaign and ran ads against same.  And yet, his proposed cabinet and advisors are chock-a-block full of Goldman $achs & banking alums.  Is it a coincidence that Wall Street bank stocks have soared, since the election?  Many of the cabinet nominees, also, are billionaires and multi-millionaires, and no few of these in number contributed significantly to Mr. Trump's campaign.


Looks like 1600 Pennsylvania Avenue may very well become swamp - central. 

Quite possibly the most egregious nominee is Senator Sessions for attorney general.  Mr. Sessions, from Alabama, has a racist past, but even more concerning are the Senator’s positions, and voting record, on civil, gay, and voting rights.   The Republican Party, impresarios at planting false news, will almost assuredly paint Mr. Sessions as a champion of civil rights & voting rights.  Left unsaid is that Sessions is, indeed, a champion of civil rights & voting rights…  for wealthy white men.

The Left has every reason to be concerned, and the Dems & Liberals in the Senate will need to do their job and grill the plutocracy that makes up the Trumpian cabinet.  Where appropriate & possible, unite with Senate Republicans to bork a nominee or two.  Many of Trump’s cabinet picks are alarming.  However, if he runs the White House like he does his business empire, most decision making will roll back up to Mr. Trump.  If Trump truly is a micromanager, then his cabinet nominees may amount to little more than window dressing.  Let’s hope that’s the case, and Mr. Trump keeps a firm decision making grip.

The MSM has been going over the top on nearly all things Trump, some of it warranted.  But surprisingly, when Trump has done the right thing – like standing up for ordinary Americans, democracy, the taxpayer, and jobs – the MSM has tended to look for an ulterior motive, or a theory, to further denigrate Trump.  A word to the wise offered to journalist & the MSM, your going to loose credibility pretty quick, if you trash every thing this man does.  Given that the MSM, pollsters, and many journalist were already entrenched in the Clinton camp during the election, it won’t take much before the MSM is written off altogether by the general public, as little more than a propaganda arm for the liberal establishment.

Trust me, POTUS Trump will give the MSM plenty to talk & write about, over the next four years, and there will be many issues where “the pragmatist” entering the White House will need a push from the public and the fourth estate (no less so then had there been a POTUS Clinton).  But to trash him on everything….?

So what has Mr. Trump done that is positive, that perhaps the MSM should have been more upbeat about?

JMH thought the outreach to Taiwan was beautiful for many reasons.  One, Taiwan is a democracy.  America – rarely, if ever - pays lip service anymore to democracy and human rights.  In fact, quite to the contrary, seems that are closest “allies & friends” are terrorist thug regimes, like the Royal House of Saud.  (Kudos to the NY Times this week for running a terrific piece on how the Saudis have been playing two U.S. administrations for willing fools, in the War on Terror) Two, the outreach/phone call upset the largest totalitarian regime on the planet, China.  It’s okay for China to communicate with its proxy – rabid pit bull – North Korea, but the U.S. cannot speak to an ally and a democracy?  Three, Trump’s outreach greatly upset a U.S. foreign policy (FP) establishment that has completely reached the end of its rope, in credibility & morality terms.  (I’m still looking for the tectonic rift the FP eminentos said was going to open up, and swallow the U.S. whole.) 

If the U.S. can reach out to Cuba, which JMH applauded, then surely America can reach out to, and promote, a democratic regime like Taiwan.

In August, Reuters presented a news item on trillion(s) dollar accounting errors in the DOD’s budget.  This week, the Washington Post presented a news piece on how the Pentagon attempted to suppress a study demonstrating $125 billion in Pentagon waste and fraud.  All this at a time, when the U.S. has gone broke engaged in endless nation building exercises around the globe, to the detriment of the women & men who serve - and our budgetary & domestic affairs.  That’s why it was completely surprising & refreshing to hear of Trump’s demand that the U.S. cancel a new Air Force One project w/ Boeing, citing run away costs & expense.  Said Mr. Trump: “It’s going to be over $4 billion for the Air Force One program, and I think it’s ridiculous.  I think Boeing is doing a little bit of a number. We want Boeing to make a lot of money, but not that much money.”

The reality is the military industrial complex – basically a cartel, like nearly every other American industry – has had its hand in the government till for decades.   Boeing and others, like Lockheed Martin, define diseconomies of scale, waste, abuse, and fraud, and are the antithesis of capitalism.  So to hear our new POTUS pipe up about the abuse, is both to be encouraged & welcomed…. Hopefully, there will be even more cancellations, audits, and actions taken to insure the American taxpayer is no longer abused, and the brave women & men who serve enjoy the best equipment & services available.

Mr. Trump recently lived up – to some degree – to a campaign promise to save Carrier jobs in Indiana.  The actual number of jobs saved is in dispute, particularly when the CEO indicates many of the saved jobs will later be lost to automation.  What’s not in dispute is that Mr. Trump used a combination of carrot (tax incentives) and stick (the threat of losing federal contracts) to compel Carrier to stay in Indiana.  Given that we live in a period of untrammelled crony-capitalism, when’s the last time the Cult of the Imperial CEO bowed down to a President and his demand that jobs stay in America?  The backroom deal, the means, and the method by which Trump compelled Carrier to maintain Indiana jobs, it’s all worthy of debate.  (JMH, and others of greater stature, have argued for less carrot, and far more stick.)  Regardless, the end result should be celebrated… saving U.S. jobs.

The confrontational Trump didn’t stop w/ Carrier, however.  A week ago last Sunday, Trump placed corporate & multinational America on notice that they faced 35% tariffs for goods manufactured overseas and dumped on U.S. shores.  Trump, citing planned tax cuts for business and reduced regulatory burdens by his administration, appears to plan on creating a virtual corporate Xanadu for American business.  The price of admission to the pleasure-dome appears to be a return of U.S. jobs to American soil.  Not w/out coincidence, Apple’s iPhone manufacturer in China  - Foxconn – said it was presently studying bringing some of its manufacturing operations to the United States.  Trump also tagged Big Pharma w/ a threat.

Rattling CEO cages is one thing.  It was equally gratifying to see congressional republicans – many of whom are establishment types owned and operated by the Business Roundtable, the U.S. Chamber & the Billionaire class – show their true colors: rejecting Trump’s tariff proposal and rejecting the American workers Trump is attempting to help.  House Republicans, in particular, quickly announced that they would not be following Trump’s lead on tariffs.  Academics and a former Treasury Secretary, namely Lawrence Summers (one of the key architects of the 2008 financial crisis), quickly denounced Mr. Trump's tariff proposal as a threat to capitalism. 

The sheer hypocrisy of GOP, and Mr. Summers, arguments surrounding the tariffs being a threat to capitalism is galling.  Apparently, it’s perfectly acceptable when corporations & multinationals rig the economy in their favor, by owning the government, & via the same crony- government’s authorization/sanction of monopolies & cartels.  But when Americans elect a populist politician to roll back crony capitalism and globalism…. Government intervention is suddenly unacceptable and a threat to the free market. 

Do we live in a ruinous neoliberal economy?  Yes. 

But let’s not delude ourselves into thinking that an economy - dominated by government sanctioned cartels & monopolies - has anything to do w/ the free market.

This same crew will be whining about diminished returns next, due to higher U.S. labor costs; but the fact remains: unsustainable monopolistic & predatory returns of recent years were inflated by a crony government – a government that should have been doing its job by protecting labor, the consumer, and the free market.  In short, today’s profits/returns have been inflated by crony capitalism, concentration, cartel, globalism, tax avoidance, and corporate welfare wearing the mask of free trade & the free market.  These exceptionally high profits are due for a reset, albeit some of the higher American labor costs maybe offset by lower taxes and the lower costs of complying w/ a less rigorous regulatory regime.





Let’s see, Mr. Trump, in roughly a week’s time, has upset multinationals, House Republicans, sent paroxysms of fear through the MIC/DOD, and angered a very oppressive totalitarian regime.  Would Dems, liberals, or progressives hope for anything less from say a POTUS Sanders?  Trump is not even in the White House yet, but if he is successful in bringing jobs back to America, shouldn’t both sides of the political spectrum celebrate?  And could have Hillary or Sanders achieved these things?  Just as it took an ardent anti-communist, Richard Nixon, to reach out to China, and it took a faux-liberal, like POTUS Clinton, to cut back the welfare state, it will likely take a Republican administration to do a reset on our highly toxic crony economy, and remind U.S. CEOs of their duty to America, first, and their shareholders, second.

Who knows, Mr. Trump just might save American capitalism from itself?  Then again, maybe these recent events are little more then a head fake – an audible for a misdirection play at the line of scrimmage…  and the cabinet appointees, and the hiring of Government $achs, foreshadow Trump’s true direction?






To be sure JMH is not drinking the Trumpian Kool-Aid just yet.   Trumps populist movement in the U.S. is part of a larger global phenomenon, best described as an economic Civil War.  Fed up w/ the Davos elite and so-called experts, a populist movement sent the Italian PM packing this week in a referendum that ultimately became about his administration.  South Korea told its crony & corrupt head of state her time was up as well, and Europe elected its first Green Party head of state within Austria.  This latter event was heralded by the MSM as blowback against populism, but if the MSM thinks the Green Party is anything but populism from the Left, then they have a great deal to learn.  And who can forget another U.K. led revolt earlier this year, nicknamed Brexit.

A global economic Civil War is being fought by the 99% against the non-benevolent dictatorships of the billionaire class, who have co-opted and purchased democracies around the globe.  Citizens  - from advanced economies - around the world are tired of suffering austerity, backroom double-dealing w/in their governements, in some cases high unemployment, and declining living standards, so that an elite few can become wealthier than the Vatican.  The billionaire class – and their minions, the political class - will not surrender willingly; they will likely fight the blowback against their greed to the bitter end, and in particular, they plan on holding onto government power as long as possible.

If the non-benevolent dictatorships of the billionaire class, wearing the mask of democracy, do not reform then they only have themselves to blame for continued global change, instability, and volatility

… And the darkness that will likely follow.



Copyright JM Hamilton Publishing 2016