False Gods

False Gods

"Safeguard Creation. Because if we destroy Creation, Creation will destroy us! Never forget this!" – Pope Francis

By J.M. Hamilton (5-31-2015)

There’s a great deal of news and studies out on the state of religious faith in America, various faiths’ beliefs in science, and the resulting political shakeout.  One of the charts that caught my eye was identified in a piece w/in the Washington Post (The surprising links between faith and evolution and climate denial — charted, by Chris Mooney), whereby America’s mainline faiths were lined up between two axis, denoting belief in evolution and belief in man’s impact on climate change (i.e. as indicated by greater support for environmental regulation).  Crunching data from the recent Pew Survey, most American mainline religions (Christianity being the primary religion) line up along an axis that either accepts or rejects, in many instances, evolution and man made climate change in fairly equal measure. 

What surprised the author at the Post and Josh Rosenau, from the National Center for Science Education, who took the Pew data and mapped out the graph, is the number of faiths that are accepting of man’s impact on the climate, and evolutionary theory.   However, beyond that, they are still attempting to draw conclusions (see graph here). 

For me, however, the graph is very revealing, when we couple it with other studies and findings.  As we will see shortly, Rosenau’s graph very much has a political component, as well as an educational component.  Those less likely to believe in manmade climate change and evolution, were fundamentalist Christians, such as Evangelicals, Pentecostals, and Baptists.  Those more likely to believe in same were conservative and secular Jews, Atheists, Agnostics, and Buddhists.  Falling in the middle ground are Mainline Protestant faiths, and Catholics (albeit more Catholics appear to believe in evolution than in climate change).  And now before we go much further some additional core analysis and facts:

·      The base of the Republican Party is largely made of socially conservative fundamentalist Christian groups, such as Evangelicals, Pentecostals, and Baptists.

·      A very recent Pew Study on Religion in America showed that from 2007 through 2014, the number of Americans self-identifying as Christians dropped from approximately 78% to 70%.  

·      The same study showed the religiously unaffiliated, or those as having no particular religious faith, during the same time frame, rose from 16% to 23%, almost a quarter of the U.S. population.  

·      Agnosticism and Atheism are clearly on the rise within this group, but more surprising still, or possibly not so surprising, are the number of former Christians, who have joined the unaffiliated camp.  Ex-Christians, among the adult population, now make up 19%.

·      A rising number of millennials are joining the ranks of the unaffiliated, or as having no religious faith.

·      Meanwhile, Mr. Thomas Edsal at the New York Times noted in a piece, back in 2012, entitled, The Politics of Going to College, that the more educated you are the less likely you are to vote Republican.  This was a hot topic in 2012, because Presidential Candidate Rick Santorum (yes, he’s back … he announced again this week) slammed higher education.  As a Republican, Mr. Santorum had good cause.  Demographics, the GOP’s lack of appeal to anybody other than white males, and the abandonment of the Republican Party by those with a higher education, would cost GOP nominee, Mr. Romney, the election (under circumstances and an economy that should have, presumably, led to a landslide victory in his favor).

·      In the last year or two, at least one Republican Governor, and leading GOP presidential contender, doubled down on the concept; Mr. Walker savagely cut the University of Wisconsin’s budget.  If fact, Governor Walker’s efforts can be best characterized as a full frontal assault on higher and public education.   

·      So if the GOP’s base are fundamentalist Christians, and the fundamentalist base – like the GOP – deny evolution and man’s harmful impact on the climate and the environment, and the educated are increasingly rejecting the Republican Party, does this mean that a large number of fundamentalist Christians in America lack a college degree?  Unfortunately, and verily, it is so.  We know this because of a separate study conducted by Trinity College (out of Hartford, CT), which shows fundamentalist Christians have the lowest level of educational attainment, among all faiths and secularist, within the U.S. (see page 18 of 26 w/in the PDF file).

·      Conversely, practicing and secular Jews, Eastern Religions (Buddhist and Hindus), those likely to believe in manmade harm to the environment and evolution, were more likely to have achieved a college degree and enjoy higher education.  This from the same Trinity College Study.

·      More scary still for the Republican Party is that their supporters, or base, are dying off in more rapid numbers than the Democratic Party’s base.

So going back to Mr. Rosenau and his outstanding questions, it’s really not surprising…. The more educated you are, the more likely you are to be a mainstream Protestant, Jew, practice an Eastern religion (such as Buddhism), or be a secularist or unaffiliated.  You are also less likely to vote for the Republican Party, and tend to accept enlightenment and science.  In short, if you enjoy greater education, and still have a faith, science compliments your faith and belief in the Goddess above.  Some persons of faith even prefer to believe that enlightenment and science are gifts from our creator.

These are generalizations based upon the aforementioned recent studies, and there are exceptions to these generalizations.  Moreover, holding a college degree does not automatically make one educated or enlightened, and there are many educated people who hold no degree.

We also maybe witnessing the polarization of religious faiths, and the politicization of religion in America, on a scale heretofore unseen or acknowledged, particularly among fundamentalist Christians.  Which might account for a large number of millennials rejecting faith, the expanding numbers of the unaffiliated, and rising number of ex-Christians. 

Note:  If your exposure to Christianity is based upon fundamentalist Christianity, the rejection of science, and the acceptance of the GOP…. One might understand the millennials’ inclination to run for the unaffiliated hills.  Full disclosure: Your humble author does consider himself to be very much affiliated with Christ (he prays Christ is affiliated with him), and is a recovering Republican.  Moreover, I am a huge supporter of Senator Warren, and think Mr. Rand Paul is on track in many instances – certainly not all.  Mr. Paul’s attack on government surveillance of U.S. citizens is both inspiring and 100% accurate.

The Pew Study shows Catholics, and Mainline Protestant faiths, getting hit hardest by the declining number Americans willing to acknowledge their faith.  As I wrote in my piece last spring, Revolutionary Messiah, Pope Francis appears to be a blessing from above and the timing of his ascension couldn’t have been better for Christians and Catholics.  Indeed, the Pope seems intent on dragging the Vatican and the Roman Curia - kicking and screaming - into the 21^st Century’s blinding light.  Pope Francis has pushed rising income and wealth inequality to the forefront, and attacked an economic system that bails out the wealthy on the backs of the poor.  When it comes to homosexuality, perhaps in acknowledgement of a large number of homosexuals within the Church’s clergy, the Holy Father responded: Who am I to judge?  (The Vatican’s condemnation this week of Ireland's gay marriage plebiscite, and outcome, was very disappointing.)  The Pope has also been involved in foreign affairs, recognizing the Palestinian State, and bringing together the U.S. and Cuba.  And the Pope has stated that evolution is not incompatible with the teachings of Christ; and that man made climate change is a real threat. 

For real fireworks look forward to the Pope’s speech before the U.S. Congress later this year… it should have many GOP Congresspersons sweating, profusely.

In short, the Holy Father walks the walk, and talks the talk; and holds true, again and again, to the teachings of Christ:  love your neighbor as yourself; judge not others; and as Christ did, advocacy for uplifting the poor, here on this earth.  Christ also taught us to be in awe of the Goddess’ creation and power, and certainly that must include respect for ourselves and the planet.  If the Pope would allow women to enter the priesthood, and acknowledged their reproductive rights, he’d be batting a thousand.  Having said that, Pope Francis has already wildly exceeded many Catholic’s expectations. 

What then to make of fundamentalist Christian faiths and sects?  It’s sort of a chicken and egg argument:  1) Are fundamentalist Christians so myopic in their faith, so bent on the return of Christ and the Rapture, that they have completely written off the planet, indeed - possibly praying for its demise - in an end of days apocalypse (that they are completely unaware of GOP policies)?  Or 2) do fundamentalist Christians, and their leadership, really support the GOP’s agenda of: unlimited carbon poisoning for the Goddess’ creation, the planet; denial of science and evolution; war against women; tax cuts for the rich; bailouts for the wealthy… indentured servitude for the poor; the U.S. criminal/prison industrial complex that preys upon minorities and the poor; raging income and wealth inequality and the crony economy; the GOP’s support for free trade agreements that have left a smoking crater in the U.S. and European economies, and lead to third world exploitation; religious, gender, sexual orientation, and socio-economic bigotry…. And on and on and on? 

I sure as hell hope, for the fundamentalist sake, it’s the former.

Fundamentalist Christian support for the GOP really boils down to nescience versus malintent (or shades of grey somewhere in between).  Given the lack of education within these tribes, and how the flock is being led astray by educated church leadership, the GOP, FOX news, and talk radio….  it’s entirely possible that benign or willful ignorance is at play.  It’s long been acknowledged that a principle strategy of the GOP is to play the fear card, and they do it very well.  Of course, the antidote for fear is education, which helps explain why the GOP is adamantly opposed to higher education….. there goes the Republican Party’s electoral base.

But who am I to judge?

Otherwise, the fundamentalist appear to the aligned with a political party that not only doesn’t adhere to the teachings of Christ, but may have joined the other side.  As for the GOP, they pander to their base during election time, and then promptly ignore them until the next election cycle; unless of course, it is to legislate a false morality, for the American Taliban.  So much for the separation between church and state. 

The GOP led culture wars are a convenient distraction from real economic issues: The GOP’s agenda of holy wars without end - that have bankrupted the nation; and ever rising wage and wealth inequality, caused in no small measure by free trade and trickle down tax policies. 

And speaking of false gods….  Some Americans have turned Ayn Randian capitalism into a new faith and religion.  Arguably, the unappointed leader of this new religion is none other than Mr. Warren Buffett.  Admirers and stockholders travel to Omaha annually to hear Mr. Buffett pontificate on the new faith, at Berkshire Hathaway’s annual shareholders meeting.  Spun out with folksy charm, the billionaire makes it all sound easy, that he’s a man of the people, and he genuinely cares.  And that you too, with perseverance, can become wealthy beyond imagination. 

However, when we closely examine Berkshire Hathaway’s actions, vis a vis some of Mr. Buffett’s comments, inconsistencies come to light:

1)   Mr. Buffett has been said to lament the tax rates he and other plutocrats pay (which are often non-existent to exceptionally low), versus the tax rates, say his secretary pays.  But then we learn that Mr. Buffett helped finance Burger King’s recent tax inversion or tax avoidance scheme.  My guess is this is just the tip of the iceberg in Berkshire’s efforts to keep their conglomerates effective tax rate well below his secretary’s tax rate.

2)   Mr. Buffett said that the plutocracy has been engaged in class warfare against the poor and the middle class for sometime, and that his side won.  And yet, if anything, Berkshire Hathaway’s lobbying efforts have picked up steam, particularly under the Obama Administration.  Looks like Berkshire’s class warfare is not about to let up anytime soon.

3)   Mr. Buffet has called the Federal Reserve the greatest hedge fund around.  Mr. Buffet would know, since he and his companies have been one of the largest beneficiaries of the Fed’s actions.  Actions that have done little to turn the economy around, and have harmed the middle class.

4)   Warren has called derivatives and swaps financial weapons of mass destruction.  And yet, Mr. Buffett’s companies play with these weapons and have profited from them immensely; these weapons are also largely reinsured by the American Public (meaning the taxpayer does not profit from these instruments of mass destruction, but is called upon to pick up the pieces, when they go off – see the 2008 financial crisis.)

5)   Many of the monopolies and oligopolies Mr. Buffet’s conglomerate holds are able to make exceptional amounts of money, because the products are well known, and often enjoy relatively inelastic demand.  Meaning Mr. Buffett can set price.  In such a market, it does little harm to Mr. Buffett’s profits, and certainly less harm to the businesses themselves, to pay his employees a living wage.  And yet, Mr. Buffett has been quoted recently as stating that higher minimum wages will harm the working poor.  His statist solution: Have our bankrupt federal government expand the tax credit for the working poor.  In this manner, Mr. Buffet’s monopolistic profits go untouched, and the working poor continue to be the State's wards.

Mr. Buffett certainly is no god, or even a free market deity; but he certainly is a crony economy master.

P.S.

And finally, kudos and accolades to Messrs. James Baker III and Bruce Bartlett (both former Reagan Administration officials) for telling the truth about Israel and Fox News, respectively.  These men actually harken back to a time when the GOP stood for something, as opposed to the blind worship of the rich and the powerful conducted by today's GOP.

Copyright JM Hamilton Publishing 2015

Unfair Trade

Unfair Trade

If we continue to let our trade policy be dictated by special interests, then American workers will continue to be undermined, and public support for robust trade will continue to erode. That might make sense to the Washington lobbyists who run Senator McCain’s campaign, but it won’t help our nation compete. Allowing subsidized and unfairly traded products to flood our markets is not free trade.

-President Obama, Speech in Flint, MI (6-15-2008)

By J.M. Hamilton  (5-19-2015)

In the mid-eighties, the introductory econ course I took presented free trade as a panacea for all the world’s problems.  The macro concept was simple:  Some nations were better at producing goods and services than other nations, so free trade allowed each nation to specialize and produce what it produced best.  This in turn led to lower costs for consumers, who were largely free trade’s beneficiaries.  It was also supposed to raise the living standards of workers around the globe.

Some thirty odd years - and many free trade agreements - later, the fruits, spoils, and dangers of free trade surround us.  For multinationals, private equity and the global banking cartel, perhaps free trade ranks among the top reasons for ever growing wage and wealth inequality, seen among Western democracies.  In brief, the spoils of free trade have gone to the one percent, and the balance of the population has paid dearly.  That would be the dangers of free trade:  displaced workers; higher government social spending to pay for services for those out of work; greater resulting deficit spending; higher taxes for those who pay taxes (and cannot dodge same); the ghettoization of the rust belt and middle America; and a never ending excuse for the Federal Reserve to continue to suppress interest rates and print money.

Quite simply, free trade is just another example of top-down economic policy dictated by the financial power elite, whereby the wealthy get wealthier, at the expense of the middle class and the poor.  Like the transfer of wealth described in my last piece on the Federal Reserve’s policy of interest rate suppression; here again, free trade transfers wealth from 99% to the 1% (in short, globalization cuts wages and fattens profits margins).  And thanks to SCOTUS decisions, Citizens United and McCutcheon, almost all career politicians cater to the one percent, with an occasional sop or nod thrown by Dems to the remnants of the middle class (when their vote is needed).

In short, free trade in its present incarnation is little more than wage, labor, regulatory, environmental, and tax arbitrage; that is to say, multinationals play nation states, and politicians, off one another in a race to the bottom, and at the expense of everyone else.  Again, top down economic policy in action.

What makes this topic so heated right now, is that President Obama – alleged champion of the poor and the middle class – has done a complete 180 degree turn on free trade, and has reversed the rhetoric he’s championed when he ran for the presidency in 2008.  That the President has joined with the aforementioned multinationals, banking cartel, private equity, and the Republican Party, in eviscerating the middle class once again, with yet another proposed free trade agreement (TPP), is of singular importance (particularly when said President is less than two years away from re-joining the private sector).  Add in the President's decision to allow Shell to drill in the Arctic, during a global energy glut, and the optics look bad. 

More noteworthy still, the Democratic Party has finally found its spine (her name is Senator Warren), and told President Obama and the GOP to pound sand last week, when fast track legislation green lighting the pending free trade agreement (TPP) came up in the Senate and was voted down.  Fast track essentially, would give the President and multinationals TPP/free trade carte blanche, plus another six years to do whatever the plutocracy pleased, subject to simple Senate majority approval.  Given the reactionary nature of the U.S. Senate, and their eagerness to please any multinational or plutocrat who contributes to their campaign, fast track undoubtedly will be manipulated to a very bad end.

As we can see free trade is insidious enough, but what makes TPP, and fast track, particularly galling are a number of added features:

·      First off, we don’t know what’s in the agreement because it’s classified.  When President Obama talks down to his free trade opponents (Dems, unions, and liberals), he not only belittles democratically elected officials, but also slams democracy, intelligence, and transparency.  It also begs the question, why the double standards in the President's free trade thinking?

·      Secondly, TPP assures corporate autocracy over the power of democratically elected governments and sovereign nations, by establishing extra-judicial panels, outside the rule of law, that will decide matters for corporations, when sovereign nations put into place laws, policies, reforms, regulations, or even minimum wages that threaten a corporation’s profits.  This provision basically puts into the trade agreement, what Washington and SCOTUS have been advocating for some time, that is to say, the primacy of corporations over: democracy, the people, and global governments. 

·      Thirdly, and perhaps Senator Elizabeth Warren’s biggest concern, fast track would allow future administrations - for a period of up to six years - to overthrow financial rules and regulations, via existing or future free trade agreements, or amendments.

·      And finally, as a sweetener and payoff to Dems, the Administration threw in welfare and government programs for workers, whose jobs will be shipped overseas by TPP.  The fact that the U.S., arguably, has gone bankrupt supporting workers (and the resulting steady erosion of the tax base), whose jobs have already been shipped overseas, courtesy of prior free trade agreements, appears to be beside the point.

The irony is President Obama has often touted middle-class economics but then sides with the plutocracy, and the GOP, in pushing for free trade legislation that is antithetical to America’s poor, middle, and upper-middle classes’ economic existence.  Worse still, multinationals have shown again and again that America and Americans are something to be exploited, and multinational allegiance is solely to their own bottom line.  And yet, day in and day out, multinational entities are who Washington serves.

So what might the President do, or a future President do to reverse course?

Well rather than adopt top down economic policy, a future President might try bottom up economic policy, middle class economics, or policies that insure labor's dignity.   Such a President might start by adopting policies establishing equilibrium in global labor pay, regulation, and tax rates.  For instance, future administrations might work towards:

A) Establishing a global minimum wage of $15.00 per hour;

B) Establish a global forty hour work week, and eliminate all child labor;

C)  Mandate equal pay for women and men, world wide;

D) Create minimal – universal - environmental standards (air, earth and water) for all nations (utilizing California rules and regs, as the gold standard);

E)  Create a minimum corporate tax across all nations, as well as, a tax on wealth (and eliminate all tax havens); and

F)  With a portion of these taxes set up a global economic and environmental enforcement, and audit division at the U.N., to insure that these provisions are enforced, taxes are collected, and regulations are met across the globe.

G) And finally, medical care needs to be established as a basic human right, not a benefit.

This is what Democrats should be fighting for in America, and in future international trade agreements, a level playing field for all businesses and employees – regardless of geography or nation state.  Trade policy should not be dictated from the top down, by the plutocracy and politicians owned by same; but rather, it should be focused on those w/out a voice in Washington, the 99%, which in turn supports higher aggregate demand.

One can already hear the elite protest such policies, as “job killers.”  But as we all know by now, the true job killers are multinationals, the Wall Street banks, private equity, and free trade agreements.

Free trade agreements have enriched those, who are already wealthy beyond measure, at the expense of crippling America, the American middle-class, and creating a permanent underclass of citizens, and America’s ghettoization.  President Obama tells us that globalization and free trade cannot be reversed, many of us beg to differ, and know better.  President Obama has also been quoted as stating that the “perfect is the enemy of the good,” but we are nowhere close to perfect or good, when it comes to free trade agreements or the American economy.

To reverse current free trade dogma, all it takes is will, and leaders who are not enthralled by the high priests of a failed free trade ideology, money, and corporate power.  Maybe the GOP and President Obama should take another look at one of the greatest protectionist Presidents of the 20th Century, Ronald Reagan and his economic success.

After all, one cannot dine on inexpensive Chinese produced iPhones, particularly if one is unemployed.

Copyright JM Hamilton Publishing 2015

The Downward Spiral…

The Downward Spiral…

The world would be better off if most governments pursued policies that boosted growth through domestic demand, rather than beggar-thy-neighbor export measures.

- Nouriel Roubini, The Dollar Joins the Currency Wars, Project Syndicate

By J.M. Hamilton  (5-8-15)

The world has become a giant hedge fund for the global financial elite, and Central Banksters, who supply same with an ocean of liquidity.  That inexpensive liquidity, the toy of the financial elite (the 1%), is an ever growing tsunami of debt that taxpayers around the globe are responsible for.  The fable the globe’s citizens have been told, since the 2008 global financial crisis, was debt monetization, or the printing of money, was necessary as a short term measure to provide financial markets with liquidity, lost, or withdrawn by the private sector.  That short term play has extended into extra innings and nearly eight years later has become an addiction, that seemingly no central banker or global government can kick.  But don’t take my word for it, let the facts speak for themselves:

1)   Forbes ranks the U.S. among the top seven nations with the highest debt to GDP ratio (unfortunately, these ratios don’t begin to cover unfunded future liabilities);

2)  The trope we were told is that central banks needed to print money to ease the path to debt deleveraging; but per Marketwatch, private and government debt of major economies, between 2007 and the present day, has climbed from 381% to 420% of GDP;

3)  The financial repression engaged in by global central banks, especially the Federal Reserve, has added $1.6 trillion in transfer payments from savers, insurance companies, foreign investors, and pension funds, and gave these funds to the governments of the U.S., U.K. and to the Eurozone, and the global financial elite, in the form of lower borrowing cost.  This comes from the McKinsey Global Institute, but let’s drop the fancy language, and call it what it is:  Theft, perpetrated by central banks against Western democracies’ citizens.

4)  Meanwhile, the Wall Street banking cartel has grown more powerful, owns more of the world’s assets, wealth and income, and writes over $700 trillion in swaps and derivatives - that are reinsured by the American public.  Thanks to the Obama Administration and a Republican led Congress, the very banking institutions that brought the global economy to its knees are back on top and writing their own financial rules and regulations.

5)  Former Chairman, Mr. Ben Bernanke, after running what Mr. Warren Buffett referred to as the "greatest hedge fund" in the world, The Federal Reserve, now advises not one but two private sector hedge funds.

This, in summary, is our global debt based economy, and this debt and central banks policies are largely responsible for the sustained record rates of unemployment, lower aggregate demand, financial engineering conducted by major corporations, and the formation of monopolies and cartels – financed by cheap debt - across the world wide economy.  Why worry about record rates of unemployment/underemployment, record amounts of global debt, and wage suppression, when the fat cats at the top are happy, right? 

After all, it is the Wall Street cartel who plays a large role in financing elections.

Of course, the boys and girls, who run central banks globally, could see all of this coming half a globe away.  It was Japan where present central bank “experiments” were first tried, back in the early nineties and on into the present day.  All of which ended very badly for Japan:  high unemployment, stagnating economy, recession, underemployment and unemployment, malaise, a liquidity trap, and a slavish devotion to banks (at the expense of the economy and the 99%).  Sound familiar?

In short, the lost Japanese decade(s).

Yes, quantitative easing failed in Japan, it failed in America, and it bombed in Europe.  The 2014 and 2015 drop in oil prices did more to revive the American economy for the poor and the middle class, than any of the Federal Reserve’s, post-crisis, extremist measures ever did.  If you don’t believe in trickle down tax policies, than surely you can’t believe in trickle down monetary policy. 

So why does the Fed and central banks continue to engage in these activities?

Well as mentioned, Banks, shadow banking and private equity eat up the free liquidity, as it allows them leverage up and prey upon the 99%.  In short, the lower their borrowing costs, the greater their margins.

Politicians love the Fed’s and central bank policies, as it allows them to escape governing.  Heh, why make the tough – potentially career limiting - fiscal decisions on taxation, government outlays, and budget cuts, when the Fed’s on the job printing money?  It’s so much easier to posture and campaign 24/7/365.

And big business loves it too.   Aggregate demand is down, as is revenue and income for your goods and services, that’s a no brainer…. Use the Fed’s largess to buyout a competitor, cuts jobs via a reorg, consolidate industries into monopolies and cartels, and do the ubiquitous stock buyback.  After all the money is free, so why not?  And major corporations are locking into the present record low interest rates for the long term.

The plutocracy loves it, because the Fed's and central banks' actions affirmed and preserved, and saved, their position in society.  If the Fed and central banks had not acted in 2008, many a plutocrat would have found themselves in humble circumstances, and there would have been rioting in the streets, banksters would have been hung in effigy, and the Wall Street cartel would have been smashed.

Arguably, all the Fed and centrals banks have done is put off the day of reckoning, using mountains of debt to buy time.  Debt on top of more debt, buys time, but only compounds the problem.

The problem is the Fed’s and the ECB’s policies come at a price, and the price is born by ordinary Americans and Europeans, daily.  You don’t have to be from Greece to know that an avalanche of debt is bad news for your country and fellow citizens.  In the U.S., consumers and workers, or would be workers, are beset on all sides:  If they’re not being robbed in their savings accounts, certificates of deposit, bond yields, or pension fund returns, than they are getting the shaft on tax policy, as the wealthy dodge paying taxes, and the middle class and upper middle class are forced to pay higher taxes to help service an ever growing debt load.  And since corporations can engage in the aforementioned financial engineering to hit earnings targets, and mint profits through oligopoly and monopoly, they don’t have to worry about high rates of unemployment, deficient aggregate demand, or paying a living wage.  In short, it’s an employer’s job market, and high rates of unemployment and underemployment are only further aggravated by central bank policies, globalization, and labor saving technology. 

The banking cartel and financial power elite, once they were bailed out, went back to their highly leveraged gambling and market manipulation; but the banks noticed, after having been bailed out, that many countries – like Ireland, Greece, Italy, Spain and Portugal – had high debt to GDP ratios.  So the banks demanded austerity and cuts in government services for the poor and the middle class, all to better insure that said governments would not run the risk of defaulting on their debt, and so as to better service their debt loads.  And many banks, chasing yield (yield that has been beaten down by Central Banksters printing money), hold considerable amounts of government debt, with little regard for the risk/reward involved.  Unfortunately, that’s true of many investors searching for a safe haven.

It says volumes when the safe haven debt has become junk bonds.  Blame rests squarely on global central bank policies.  All of which are engaged in currency manipulation, whether it be QE, purchasing alternative currencies, printing money, or interest rate suppression.  And the Federal Reserve is at the top of the list.

The problem is the debt continues to mount.  And the hell of it is the poor and the middle class, and the youth, have had to pay for this crisis for seven consecutive years.  In short, government debt represents a huge drag on the global economy, and the mounting debt is escalating in a vicious downward spiral.  Japan’s central bank devalues its currency to help exports and the E.C.B. responds in kind…. Chasing bond yields into negative territory, as too much money is chasing too few bond opportunities. 

It’s a global Ponzi scheme.  Who will get left holding a bag full of worthless bonds?  How many times can governments and central banks double-down?

So looking at the government’s tool kit, economist and politicians aren’t left with a lot of options:  fiscal policy is tapped out, since governments have over spent on bailouts for the elite (and in the case of the U.S., wars paid for on a credit card), and politicians refuse to tax their core constituency, the aristocracy; and monetary policy – as illustrated in Japan, America and Europe – has only served to enrich those who took the economy down.

Which leaves an unpalatable but very real option: The application of haircuts to government debt. 

And therein lies the multi-trillion dollar/euro question: how to apply haircuts without setting off a Lehman event or worse?

The haircuts I’m writing about are not like those that transpired in Cyprus, where depositor funds were confiscated to pay for Cyprus bank losses; nor are we talking about the haircuts applied in Argentina, where the government seized pension funds.  No, the haircuts that I’m  writing about – in a perfect world - would be applied to the very enterprises that put the world economy into the swamp, the global banking cartel.

But how exactly?  The answer is slowly and cautiously.  In the case of Greece, where citizens – and in particular the youth and children - have paid dearly for corrupt and inept government leadership over the course of decades, and austerity imposed by the Troika, one could start by freezing interest payments and principle payments on the national debt.  Without austerity and the debt service load, the Greek economy would have an opportunity to heal.  Once the economy was healed by achieving a benchmark unemployment figure, say 5%, the country would be expected to begin to make principle payments once again.  The principle payments could be tied to GDP growth.  But this is key, interest payments would default, retroactively, to zero.  In exchange for the elimination of interest payments on all government debt, Greece would agree not to take on any additional government debt until such time as all existing government debt/principle was paid off in full (but debt payment/principle payment, and this is key, would be predicated upon first achieving a sustained healthy economy).  By forcing Greece to live within its means, it would also require the government to buttress its tax collection system, address its crony economy, fight fraud in government, and would likely cause the government to renegotiate some its government employee pay and pensions. 

What Greek political party would better have the moral authority to make such reforms, than the socialist presently in power?

In short, Greece would be the master of its destiny again, instead of being stripped down, privatized, and sold off to its creditors (which appears to be the wet dream of the International Banking cartel: all nations and citizens of the world indentured to banks for life).  Laws would need to be passed to protect bank balance sheets holding Greek debt; that is to say, the Troika, the E.C.B., the I.M.F., and the governments of the E.U., would need to re-write the terms of the outstanding Greek debt, so that payment was predicated upon the Greek economy’s health.  (By rewriting Greek bond terms in such a fashion, a technical default could be prevented; in fact, who needs retroactive terms, simply retire the existing debt, and reissue new debt at the proposed terms, zero interest or negative yields.) The Troika took on and swapped out the majority of Greece’s debt, with private sector banks in 2012. 

And the ISDA would have to be involved so that suspension of Greece’s interest payments would not constitute a “credit event,” and trigger swaps and derivatives payments.  Such products, in fact, would need to be unwound.

Yet another alternative, rather than have Greek debt revert to zero percent interest, is to apply negative interest or coupons, that is now frequently seen among healthier E.U. members’ bond issuance (e.g. Germany).  The existing Greek government debt, with revised debt terms and negative yields, could run out in perpetuity – until the negative yield, itself, liquidated the principle.  To repeat: If Greece’s debt was retired at negative yields, retroactively or under new debt issuance, the principle debt would write itself down, as the negative yields took hold.  But this is key, with the retroactive application of negative yields, the I.M.F., the E.C.B. and European governments would not suffer a default or a haircut, at least not technically.  These institutions probably would not like the outcome, but if so inclined, they could tax the global banking cartel (which appears to be flush and full of profits) to mitigate or pay for the loss. 

Many of my readers may laugh at such a scheme, but what’s the alternative, a disorderly default scenario?  A credit event triggering swaps and derivatives, and financial Armageddon?   An involuntary haircut applied to interest payments and principle?   What Bill Gross referred to as a "financial supernova" that could bring the whole house of cards down?  Lawsuits against Goldman Sachs for selling derivatives and repos to Greece that obscured the amount of debt the Greek government held, and took it off balance sheet, so as to allow Greece to gain E.U. admittance?

The idea of a retroactive zero coupon rate, or perhaps even negative yields, should come as a surprise to no one, since E.C.B. policies have led to negative interest rates for government debt in parts of Europe already.  If the E.U. was truly combined, not just on monetary policy, but fiscal and tax policy as well, Greece would incur a much lower yield on its government debt anyway.

It is because of a lack of fiscal union, and perverse austerity heaped upon Greece’s poor and middle class (in essence another round of bank bailouts), that Greece now finds itself, per the Economist, with more debt today (315 billion euros), than in 2009 (301 billion euros).  These numbers despite the ’10 and ’12 haircuts and write downs to Greek debt that have already been applied.  However, at nearly the same amount of national debt, Greece’s debt to GDP ratio has climbed from 127% in 2009 to 175% today, as the Greek economy lay crippled in the road over the same time frame.

The central banks have had their time to apply their alchemy, and all they have done is bailout the elite, the plutocracy and the banks, at the expense of creating unsustainable amounts of debt foisted upon the public.  As the global debt mounts, the world can ill afford to let these policies continue.  The answer, as painful as it may be in the short run, is write downs; and a leash placed upon central bank activities. 

The multi-trillion dollar/euro question is will the write downs/haircuts be voluntary or involuntary? 

And will the Sword of Damocles, Wall Street swaps and derivative products, which will only compound the problem of write downs - exponentially, be defused?  As these products are reinsured by the public, the answer should be easy.  They should be banned, unless the direct counterparties are willing to put up the collateral to cover the loss. 

P.S.

Irony or ironies, Ms. Janet Yellen, Chairperson of the Federal Reserve, stated this week that stock valuations are inflated, while bond yields are suppressed.  One wonders if Ms. Yellen sees a correlation between these events and seven years of failed Fed policy?

Copyright JM Hamilton Publishing 2015