Crazy after all these years

Crazy after all these years 

ESG investing often marches under the same banner as “stakeholder capitalism,” which maintains that corporations owe obligations to a range of constituencies, not only their shareholders. Erisa [the Employee Retirement Income Security Act] requires something different of retirement plans, however: A fiduciary’s duty is to retirees alone, because under Erisa one “social” goal trumps all others—retirement security for American workers.

-       Retirees’ Security Trumps Other Social Goals - WSJ

By J.M. Hamilton 8-9-2020

Late cycle neoliberalism appears to center on two central business models: either becoming so monolithic, that said enterprise becomes a nation state (the Silicon Valley approach); or strip a firm bare, bust out its credit line, slash labor, and extract rents from the consumer before the horse gives outs (the Private Equity/Wall Street method).  

At the center of these two business models are two central themes, the desire to control every aspect of the business environment, to better ensure profitability, and given what we’ve seen as of late, a whole lot of crazy. 

And the methodology for attempting to control the business environment has been well documented: 

Competition… Eliminate or merge w/ it and become bigger; 

Government & Regulatory bodies … co-opt, capture, and own; 

Consumer… Make sure you’re the only game in town, so said consumer has few or no alternatives;

Labor… Utilize monopsony power, destroy unions, and line the Federal Courts & SCOTUS with reactionary/anti-labor jurists;

Taxation… Dodge it at all costs to starve the government of revenue;

Monetary Policy… Free money for financial engineering, industry consolidation, speculation, and to finance unearned dividends; and

Consolidation & monopoly… achieve zero oversight and M&A w/out limit.  

And it is this very desire to control & guarantee profits that has led to government paralysis in a time of crisis.  A nation governed by special interests – by profit motive – to the exclusion of all other considerations – is a nation destined for collapse.  The U.S. and the world are witnessing the culmination of special interest rule – profit rule (i.e. neoliberalism) – with the Trump Administration’s badly botched pandemic response.  A nation drowning in debt, bailing out banksters & financing credit card wars… certainly is ill prepared for a true existential threat. 

And as the two aforementioned business models become preeminent, the more we see American companies, government, management, and ownership do & say crazy.   

See Elon Musk praising communist China and telling America and US labor that basically - I paraphrase - they suck. 

We read that the Private Equity model is so ubiquitous that 20% of all US corporations are now zombies, per Deutsche Bank… that is, so indebted, and so lacking in income, that they can’t make their interest payments.  Welcome to deadbeat Corporate America, brought to you by unmitigated greed and the Federal Reserve. 

Americans survive the virus only to go immediately into bankruptcy with million-dollar medical bills, as private equity – not content to have destroyed American retail – dives into US healthcare.  And if you think Americans pay the most, per capita, for healthcare (w/ substandard outcomes), the United States hasn’t seen anything yet. 

PPP, under the CARES Act, is raided by the connected and powerful – a program designed to keep small business afloat – only to see thousands of Main Street and family run enterprises go under.  

Then there’s the optics of Trump attacking, perhaps, the only Western nation the United States runs a trade surplus with, Canada, when including services. Trump's latest tariff on Canadian aluminum smacks of desperation, election year theatrics, and misdirection.  

Meanwhile, the stock market indexes are right on top of or, in the case of the NASDAQ, have blown though pre-pandemic highs, while GDP dropped like a rock.  It seems gutting aggregate demand – screwing the U.S. consumer/labor – isn’t such a smart business practice after all. 

And finally, there was the visual of four Tech Utility CEOs completely choking in front of Congress.  And Dems, actually, surprisingly, appearing to have done their homework, unlike the billionaires in the docket defending their monopolies.  Post- November, it will be time to ramp up the FTC and Justice Department and to immediately begin breaking up the Tech Utilities. 

Absolutely strange, but perhaps the most surreal story JMH read in the last two weeks was the Bloomberg piece on Labor Secretary Scalia.  Going along with the themes of controlling your environment (good luck with that), and doing crazy, Mr. Scalia’s bright idea is to dictate to pension/retirement fund managers that they must invest based purely on shareholder value and short-term returns (irregardless of all other considerations). 

Mr. Scalia’s proposal, of course, is in retaliation to stakeholder capitalism and sustainable investing, or ESG investing, which is a direct affront to a huge GOP donor, Big Oil & Gas. 

Scalia appears to have tapped into the ultimate forms of control and crazy: Telling fund managers exactly how they must invest.  

Perhaps Mr. Scalia hasn’t noticed… but if America’s pension & retirement funds were to take up Mr. Scalia’s proposal, the first stock to dump – based upon a shareholder first focus – would be the planet killing, Big Oil stocks (which have been crushed by the pandemic). And these stocks will, likely, suffer additional fallout, before this crisis is over. 

All of this is very odd.  The more the GOP and their corporate supporters beat their chest about freedom and the evils of socialism, the more their actions betray them as dictators in love with big government & welfare for the 1%. 

Copyright JM Hamilton Publishing 2020

Public Debt Forgiveness

Public Debt Forgiveness

Even with these immediate steps ... many of the poorest countries won’t be able to make the resulting debt burdens sustainable in the medium term, he said. I urge the G20 to open the door to consultations about the debt overhang itself and effective ways to reduce the net present value of both official bilateral and commercial debt for the poorest countries.

-    G20 should start talks on reducing debts of poorest countries - World Bank chief – Reuters

By J.M. Hamilton (7-26-2020)

Neoliberalism or laissez faire economics fell on its face in 2008, and the congress & FED rushed to bailout market rule.  The American people were not so fortunate.  No lessons were learned from 2008.  The crisis was papered over with trillions in debt and the wealthy didn’t suffer so much as a scratch.  In fact, they only grew wealthier.  Now, in 2020, thousands of U.S. companies, and small business owners, are going bankrupt, leaving tens of millions of Americans unemployed.  Once again, market rule – oligarchy – is a catastrophic failure… leaving America a pitiful giant – indeed, a healthcare pariah - on the world stage. 

The only thing remaining of permanence, that is to say, not propped up or bailed out w/in the U.S. economy, is the Federal government. When markets collapse, when banks crash, and businesses fail by the thousands … billionaires and multinationals bend the knee to the Federal government.  Completely the opposite of the what POTUS Reagan preached for two consecutive terms, when lethal globalism and neoliberalism was offered up as the future. 

Of course, America doesn’t create much anymore.  Commercially, the U.S. increasingly appears to be one large holding company, a corporate & tax haven… while most anything meaningful is produced & manufactured offshore, in a never-ending game of labor, regulatory, and tax arbitrage.  The goal now, the corporate mission statement, is to become too big to fail.  Make that balance sheet so big, in a given industry, that the government has to rescue the cartel or monopoly.  The corporate goal now, is to become a rent seeking utility, load the company up with debt to the breaking point – for the exclusive benefit of C-suite management and shareholders, collect rents, eviscerate American labor, and screw the consumer.  The ALEC/Neoliberal/US Chamber objective, after making sure the political duopoly is captured & owned: malign & talk down the U.S. government; defang all regulatory bodies; starve the government of revenue; tell 99% of Americans there is zero money left to spend on childcare & higher education; and bleed Medicare & Social Security dry.  

And surprise, surprise… the self-fulfilling prophecy comes to be: The Federal government, seemingly, is the problem and can’t deliver (except for unlimited bailouts for the connected & powerful).  And yet, for the duration of the pandemic, the government is the only game in town. 

It’s no accident that the United States is a house of cards built upon debt, and that financial engineering & private equity are the preeminent business practices.  The collection of rents is the path of least resistance for a very tired elite, little or no thought required; the end game of a failed neoliberal dogma.  The Federal government and the FED, too, are leveraged to the hilt, by design.  Over the last twenty years, the national debt has soared from approximately six to twenty-six trillion dollars.  And the United States has very little to show for it, but: self-aggrandizing, self-serving billionaires & monopolies.  

American healthcare is in ruins and the U.S. Senate went on break this weekend, while tens of millions of Americans don’t know where they’re going to find August rent.  

To write, the grand illusion – laissez faire economics - no longer works is an understatement.  We have in place a system that rewards billionaires & multinationals -– because they were connected enough, greedy enough, or simply at the right place, at the right time, to take advantage of all the gifts the U.S. government & society have to offer -- while leaving one in five American children living in poverty.  And the number of children living a precarious existence will surely rise.  The Ayn Rand storyline – in markets & monopoly we trust - is bust.  Toppled by an entirely foreseeable event: the plague (which has been around since the dawn of humanity). 

So how about a new paradigm?  Rather than enslave & indenture newborn Americans, from birth, so that a bunch of rent seeking utilities can mint profits, the U.S. adopts a less lethal economy: a mixed economy that favors ordinary citizen, in lieu of predatory monopolies?  Instead of the Federal government, and the FED, backstopping TBTF monopolies and utilities, idle speculation in rigged markets, inflated asset prices, crooked politicians & crony government, and an ocean of debt…. What if America wrote down the national debt – methodically & gradually to protect the currency & prevent inflation – in a coordinated event with our allies and interested parties (many of which are also up to their eyeballs in debt)? 

What if we wipe the public balance sheet clean, gradually?  What if the U.S. government backstopped ordinary Americans for a change: with badly needed infrastructure; a renewable energy grid, that does not destroy the planet; free college education; affordable housing; and last but not least, a guaranteed jobs program or universal basic income?  Just for starters… what if we kissed the empire, the police & surveillance state, and the money sucking military industrial complex goodbye?  Or significantly, cut the spending on bloodshed and mayhem the U.S. is involved in globally, as well as, ever increasingly, here at home?

Crime Wave

At this point, given the colossal failure of elites, multinationals & markets – as well as, the neoliberal/neocon paradigm – really, what do we have to lose…  other than thousands and thousands of American lives?  It appears that highly amoral priorities have led us to a very dark place.

How can America justify another decade, or more, of chronic depression and/or recession, another lost generation, shortened lifespans, greatly diminished economic prospects, and austerity as far as the eye can see … so that we can service trillions and trillions of debts used to bailout billionaires, multinational welfare junkies, and finance credit card wars???

The answer:  We can’t justify it, nor should Americans stand for it.  

Why pay taxes in support of an economy, an empire, and a burned-out ideology that no longer supports the majority of Americans? 

Even Wall Street banks & insurance companies - the C-suites and investors who brought us to this terrible place - have little to lose, when Treasuries are range bound at zero or near zero yields, and junk debt is grossly underpriced.  America has run the economy & government for the benefit of privileged white males, and, collectively, these same individuals have single handedly burned the country to the ground (but only after looting it). 

No wonder so many Americans are willing to toss capitalism to the curb; what passes for capitalism today – what is in fact fraud - tossed nearly half of all Americans to the curb a long time ago.  

And it’s only going to get worse from here. 

Copyright JM Hamilton Publishing 2020

Zombie Nation

 Zombie Nation

 

More than 3,000 US companies filed for bankruptcy between January and late June. For tens of thousands more that may be teetering on the edge… 

 

-       The Leveraging of America: How companies became addicted to debt - Financial Times 

 

#Bondageddon S&P said moments ago that the number of potential bond downgrades rose to a record high of 1,350 as of May 29, above the financial crisis high of 1,028 in 2009. 

 

-       Robert Burgess – Bloomberg @BobOnMarkets 

 

By J.M. Hamilton (7-12-2020)

 

It’s amazing.  A nation on top of the world, the last remaining superpower, an economy & stock market – seemingly - humming at peak performance (albeit at extreme valuations), Trump’s - racist - evangelical soldiers marching as to war (enacting Sharia law, via SCOTUS), a global empire, and an America still – somewhat – respected in the eyes of the world or at least feared …  

 

… and then, like a comet or space rock crashing into the earth during the Mesozoic Era, a virus and pandemic hits.  And the whole house of cards comes tumbling down.  

 

All is not as it seems.  

 

A political duopoly stripped bare – egomania, hubris, narcissism, & pretension are manifest; a complicit MSM; an economy leveraged to the hilt; systemic racism on full display, as the friendly neighborhood PD is revealed to be an Orwellian police state, w/ psycho killer cops; the healthcare system – the most expensive in the world – is manifestly a complete train wreck; and a so-called democracy – or republic - revealed for what it truly is.  

 

Hunter S. Thompson, back in the eighties, once wrote: “There is a lot of wreckage in the fast lane these days.”  Christ save us… nowadays the entire highway is littered – impassable – by the dangerous debris of a fallen empire.  Lady liberty is suffering unmentionable cruelty – rape even – at the hands of thug bankers, the US Chamber and the Business Roundtable; and millions upon millions of the American people are jobless and impoverished. 

 

The Treasury has been looted - and monetary policy captured - by billionaires and multinationals… w/ the full authorization of the US Congress and the Federal Reserve. 

 

Twilight.  Buy the ticket, take the ride… so walk with me, let’s take a look at a fallen star, as the Zombie Apocalypse draws near.  Please put on your mask, as the tour begins. 

 

On your right, you’ll see American businesses filing for bankruptcy at a record pace…  taking jobs, opportunity, competition, investment options and the US economy with them.  And leaving in place a predatory financial services sector, monopolies and utilities.  The American business community owed $10 trillion in debt walking into the crisis.  We can blame greed, the tax deductibility of debt, the supremacy of the private equity model, financial engineering uber alles, and government and regulatory bodies that stood by and did absolutely nothing. Instead, the politicians and the FED enabled the mercenaries who destroyed capitalism and rolled in economic statism.  The FT reports three thousand US companies have filed for bankruptcy, from January through June, and POTUS Trump, repeatedly, assures us: All is well.  

 

Over on the left you’ll see the American rating agencies – the fabled, Big Three – that not only blew it, repeatedly, leading up to the 2008-2009 financial crisis, but screwed up all over again, here & now, in 2020.  A little over a decade ago it was mortgage backed securities that received full blessing from the Big Three, and now, it’s all that suspect leveraged debt that was teetering on a BBB- credit rating (and is, subsequently, being – or in the process of being - downgraded to JUNK, as a result of an entirely foreseeable event).  Hundreds upon hundreds of bond downgrades – headed towards a thousand, plus, now - and assuredly more to come.  Just how many times does the world have to be burned by these rating agency clowns, before we insist upon real reform (i.e. their breakup, and making sure bondholders & investors pay for these institutions, not - moral hazard defined - the companies and countries issuing the debt). 

 

Up over yonder, you’ll see the Federal Reserve burning the nation’s credit line - and manipulating monetary policy - once again, to bailout: banks, shadow banking, hedge funds, private equity firms, billionaires, multinationals, pensions, and the bond & stock market, itself.  The FED has been extremely adept at laundering taxpayer money through the debt and stock markets, enriching plutocrats and C-suite management teams with vast sums, while the American people are handed at $1200 check and told simply, “good luck.” It’s no accident that wage and wealth inequality has soared, and the number of American billionaires has spiked, over the last twenty years… correlating precisely with the rise of the U.S. national debt from $5 trillion to the specious number of $26 trillion, today.  That’s a lot of welfare for a band of psychopaths, whose success seems to be predicated on developing the latest gee-whiz tech gadget, app, or, in the case of private equity, burning companies to the ground. 

 

Behind us you’ll see a US government that is perfectly incapable of governing, imagination, or stewardship.  The congress is, by and large, compromised – order takers, if you will – doing ownership’s bidding, and rearranging the deck chairs.  As the pandemic struck, the congress was too busy adjusting their stock portfolios to warn the American people.  The duopoly puts on a great show – aided and abetted by the corporately controlled MSM - of their differences; but on stealing the American people blind - for themselves and their donors - the two parties are unified, in lock step, and in agreement.  Apparently, the congress, governors, and POTUS will say and do anything - on the oligarchy’s behalf - to get the pandemic economy rolling again.  And if America leads the world in viral cases and deaths, that’s a price the political elite are perfectly willing to see essential - working - Americans pay (as politicians shelter in place and receive premium healthcare). 

 

Three blocks up you’ll find a disease that, to date, is more deadly than any virus… the very thing Eisenhower warned us about: The military industrial complex.  There’s never enough money to lift Americans out of poverty, to provide a UBI or Medicare for All, but Congress has a trillion, per annum, for a bankrupting US empire, the Police & Surveillance state, and the military industrial complex. 

 

Fraud & waste defined. 

 

So what do you think?  Do you like what the elite have done with the place?

 

That’s the end of the guided tour… for anyone who cares to learn more, there’s plenty of information online, in regards the looting and sacking of the United States by a predatory oligarchy.  Please be careful as you exit the ride. 

 

 

  

 

 

 

 

At the end of the day, what do you call mindless creatures, who would destroy democracy, freedom, and rig the government in their favor for personal gain… Boomers?

 

What of so-called business leaders, who would throw away capitalism & freedom in favor of guaranteed profits & socialized losses, as well as, repeated government sponsored bailouts – courtesy of the US taxpayer and future generations…   Billionaires?  

 

And how to delineate what appear to be the walking dead, who would deny systemic racism, and support the abuse & murder of gays, minorities & women.  And these same individuals are perfectly willing to sacrifice their own economic future, in trade, for hate & white supremacy… do we categorize them as Racists?  I think so. 

 

To be sure, I’ve never been fond of generalizations or stereotypes, but what if they are sometimes appropriate?  Boomers, billionaires, and racists… many - if not all, in the case of the latter - are the same to me.  All too often, in too many instances, these are the people who have suspended compassion, empathy and reason for a death cult.  And if they cannot have the U.S. on their terms, they are perfectly willing to see America burned down, and willing to take our children’s future with them in the process. 

 

Zombies by any other name.

 

Copyright JM Hamilton Publishing 2020

Social Costs & American Healthcare

Social Costs & American Healthcare

 

By J.M. Hamilton (6-27-2020)

 

Social costs are the expense bore by society, at large, for the production of certain goods and services; and yet, these costs, or future liabilities, generally, are not factored into the retail price of the good or service.  As ninety-nine percent of American society is disenfranchised by the political duopoly (i.e. Establishment Dems and GOP), social costs are a topic that is, conveniently, rarely discussed. 

And yet, these costs, or liabilities, are both real and can be astronomical. 

JMH has written about social costs before... perhaps not directly, but certainly touched upon the subject in write ups on Big Oil and Gun manufacturing.  Read here and here. 

 

Take U.S. Big Oil, for instance… the modern-day Death Star of our times.  Here, the social costs for producing gas & oil not only includes planetary destruction, disease & fatalities from pollution, but for American citizens, endless Middle East war (and the resulting austerity and lack of social services that are cut off, as a result of the cost for these wars).

 

The social costs associated with the Big Oil industry run in the tens of trillions, minimum… merely, by assigning $50,000, per head, to the lives of the planet’s 7.8 billion human occupants.  

 

In the past, JMH has recommending imposing strict liability and criminal sanctions on Boardrooms and C-suites, as a means by which to address social costs.  But if we really want to call attention to social costs, we should assign expense, liability, & numbers.  Moreover, we should allocate social costs – not only to the businesses, themselves (say Exxon Mobil’s financial statements) - but to a US government that is, ultimately, responsible & captured by this industry.

 

Since multinationals, in this example, can’t bear the social costs of its business model, those costs will ultimately fall upon the US taxpayer for cleanup and remediation.  Social cost, unaccounted for in the retail price of a product or service, is just one more means by which the wealthy privatize profits, while socializing losses; one more means by which toxic liabilities are transferred from private ledgers to public balance sheets.

 

Taken to its logical conclusion, if unfunded liabilities – resulting from social costs – were to suddenly appear on America’s Federal balance sheet, the US government would be bankrupt.  No amount of money printing (aka debt monetization by the FED) could cover these liabilities and future fiscal outlays, w/out serious ramifications for the dollar as a storehouse of value and as the global fiat currency.  And given the acceleration of climate change, arguably, this is a bill that is rapidly coming due. 

 

There are many, many industries generating astronomical social costs.  Start accounting for social costs, and the path to real economic reform, and structural change, may begin in earnest. 

 

 

 

 

 

 

 

 

If we take nothing else from today’s piece, please remember this: Social costs, picked up by taxpayers, are just more welfare for big biz & Wall St.  As we let the concept of social costs sink in, and the assignment of liability … think about all those billionaires and multinationals who are pushing to reopen the economy – in the middle of a pandemic – and America’s failing for-profit healthcare system.

 

Think about the tragic surge in coronavirus cases w/in the GOP states of Arizona, Florida, and Texas.   

 

Why would these businesses, and billionaires, want to risk harm to the American consumer and the labor pool, by reopening the economy prematurely?

 

To answer that question, we have to ask: Who pays for American healthcare?  We know the taxpayer pays for publicly provided healthcare (see Medicare and Medicaid); and we know billionaires and multinationals do everything in their power to dodge taxation and increasingly, pay less and less US taxes.

 

We know that US employers have increasingly shifted the cost of private healthcare insurance onto the backs of America’s - disenfranchised - labor pool. 

 

The bottom line: billionaires, multinationals - pushing to reopen the US economy – increasingly, are NOT responsible for medical costs (except to profit by them).  As with taxation, the oligarchy has become extremely adept at dodging US medical expense, as well as, the social contract.  

 

That is to say, the social costs of opening up the economy prematurely – w/out adequate medical care for the resulting viral catastrophe – are borne on the backs, and lives, of the American consumer and taxpayer (who cannot dodge taxation or medical expense).  

 

This callousness, greed, & myopia is setting America, the US economy, and labor up for a great, great fall.  All so that some highly, non-essential, C-suites and billionaires can make their quarterly targets. 

 

Does America’s, owned, political duopoly – Establishment Dems & GOP – care about any of this?  Absolutely not. They’re too worried about their stock portfolios.

 

So how do we make this right?  

 

Assign medical costs - in this instance, the social costs for a premature restart - to the donor class, billionaires and multinationals, for a grossly incompetent and negligent economic reopening.  And suddenly, we may see an oligarchy that actually cares about something more than their bonuses, capital gains, and financial engineering. 

 

Who knows?  The oligarchy might actually insist upon a highly efficient, single-payer, healthcare system.

 

Such is the, potential, power of placing a number on social costs, and making sure these liabilities are borne by protected industries & plutocrats (or allocated to the Federal balance sheet, already very much encumbered by long term debts accrued bailing out the financial aristocracy & Wall St.).

 

Copyright JM Hamilton Publishing 2020