Saturday, October 29, 2022

Epic Instability & Ben Bernanke

The Nobel Memorial Prize in Economic Sciences was awarded on Monday to Ben S. Bernanke, the former Federal Reserve chair, and two other academics who have helped to reshape how the world understands the relationship between banks and financial crises.

Douglas W. Diamond, 68, of the University of Chicago, and Philip H. Dybvig, 67, of Washington University in St. Louis — two economists who created a seminal model that explained the dynamics of bank runs and financial meltdowns — won the prize alongside Mr. Bernanke, 68, who is now at the Brookings Institution in Washington.

The three economists won for a body of work that stretches back into the 1980s. Their research has delved into different aspects of how banks become vulnerable to upheaval, how bank failures worsen and extend financial disasters, and how the system might be made safer in light of those risks.

These findings have repeatedly proved relevant to real-world policy, with central bankers drawing on their lessons in 2008 during the financial meltdown and in 2020 when markets seized up at the start of the pandemic. Those policymakers included Mr. Bernanke, who was the Fed chair from 2006 to 2014.

- Three Economists, Including Ex-Fed Chair Bernanke, Win Nobel for Work on Bank Crises, NY Times

They were careless people, Tom and Daisy – they smashed up things and creatures and then retreated back into their money and vast carelessness or whatever it was that kept them together, and let other people clean up the mess they had made.

- The Great Gatsby, F. Scott Fitzgerald

By Gregg Wall (10-29-2022)

When the headlines came out a couple of weeks ago, I knew I’d have to double-back on this event… for one of the key figures, if not the key figure in the 2008 financial crisis, had just won the Nobel Prize in Economics. Often credited with saving America, perhaps the world, from another Great Depression… former Chairman of the Federal Reserve, Ben Bernanke, did so much more than that. And the aftershocks of his actions are with the United States, indeed the world, to this very day.

On the eve of the financial crisis, the US national debt was only nine trillion dollars… today, that national debt stands at no less than thirty-one trillion. And that figure is just what the US government and experts are willing to acknowledge, because there’s a great deal of funny money floating around, as the FED’s balance sheet will presently confirm.

To be sure, the godfather of Quantitative Easing (essentially, MMT for banks, billionaires, congress, multinationals, and Wall St), Ben Bernanke, must have received a great deal of inspiration from the Bank of Japan. As a student of the Great Depression, Mr. Bernanke – Helicopter Ben – was said to have only wanted to avert another Great Depression, in printing up the trillions and trillions of dollars the Federal Reserve conjured out of thin air. In short, Bernanke bailed out the billionaires, Wall St, and the powerful back in 2008… as well as the gross incompetence of the U.S. government and the failure that is libertarian ideology & laissez-faire … while leaving the poor and what remains of the American middle class to pick up the pieces. But there’s so much more. For Bernanke not only bailed out the aforementioned but he made them catastrophically wealthy. And the former FED chair also set in motion events that made ultra- accommodative central bank policies of that era … that is, trickle-down monetary policy… de facto monetary policy right up to the present day.

All this and so much more… perhaps making Ben Bernanke the most consequential individual of the twenty-first century, to date. More powerful than Presidents, more powerful than the Oligarchy & OPEC, Ben played a singular role in helping to create the world we live in today.

So, without further adieu, the Bad, the Good, and the Ugly of Ben Bernanke and ultra-accommodative monetary policy. Due to time and the limitations of this format… I can only commit so much energy. Suffice it to say, volumes could be written about the Financial Hiroshima Bernanke created & detonated. And I sincerely hope some economist or historian gives this subject matter the attention it so richly deserves.

The Bad

Probably the greatest defect of QE and interest rate suppression is that the FED’s action were filtered through the conduit of Wall St and banks. For as much as Ben hinted at helicopter money… essentially a Universal Basic Income… a fantastic amount of Federal Reserve largesse rained down on Wall St, Bankers, Shadow banking, and multinationals that had taken up banking and shadow banking activities. Trillions and trillions were printed up and rained down on the very executives, and companies, that placed the US and global economy in a state of crisis. No one went to jail that I’m aware of and the net worth of many executives involved soared. Golden parachutes enriched the corrupt and the predatory. Billionaires were minted and their numbers grew catastrophically. Thanks to the FED, the value of financial assets soared, and banks were reporting record profits again in no time. While the middle class was crushed, homeowners and home speculators found themselves upside down on their loans.

To be sure, the crushing of American wages pre-dated the 2008 financial crisis, but the economic recovery that Dems and Obama touted was virtually non-existent for millions and millions of Americans. Which paved the way for one, Donald Trump, to become President.

Epic consolidation, M&A, TBTF, Monopolies, and the Stock Market as the great American casino…. The stock market as the sine qua non of all US economic activity…. Yes, we owe that to Bernanke. For whom, but Ben, flooded the markets with trillions and trillion of dollars… sending assets of the rich to nosebleed valuations? After 2008, the United States became a holding company, with the real economy, jobs, and the tax base shipped offshore to take full advantage of free trade (a/k/a labor, government, regulatory, judicial, and tax arbitrage). After 2008, wage & wealth inequality raged to new levels, and the oligarchy really took hold. Therefore, everything that is wrong in the U.S. today: endemic corruption, systemic moral hazard, an increasingly insular world of a handful of ‘haves’ versus the ninety-nine percent ‘have-nots’ and America’s rancid state of politics… we owe to Bernanke.

It’s all derivative and a spinoff of Ben’s actions, not unlike some cosmic, financial Big Bang.

And Wall St is the least of it. The US congress punts all major decision making to the FED. What… we have a crisis because Wall St is out of control. Call the FED. Too much debt… call the FED. Not enough debt? Call the FED. Liquidity crisis (not enough welfare for the Senate’s stock portfolio)… Call the FED. Another endless war to finance? FED. The Federal government is bankrupt again because the rich have taken everything not nailed down and own the United States… call the FED chair. What … inflation? Where the hell did that come from, call the FED. Neoliberalism and Libertarian ideology are in crisis again and an abject failure… tell the FED to print up several more trillion to paper over the crisis and paper over Dem and GOP incompetence, while the FED chair is at it.

No worries, the billionaire owned & operated MSM won’t question a thing. It’s such a problem that the congress has become an insider trading club for a bunch of mummified zombies, that is to say, worthless, highly corrupt, brain dead, and awaiting instructions from K-Street.

But wait… because there’s more. Thanks to Helicopter Ben, the United States government has become subject to the private equity model, apparently an un-hostile takeover. Where the government has been leveraged to the hilt, privatized, and the credit line looted by the privileged and the powerful, while the everyday American faces endless austerity, real wage stagnation, ever diminishing economic prospects, predatory rent-seeking, Gig economy exploitation, and government social policies stripped to the bone. The oligarchy loots the credit line -- and then robs the poor and the 99% -- to pay down the debt. It’s the PE model magnified… instead of looting businesses and multinationals, they now loot global governments (which might explain why you see unelected bankers running country after country, at various times, within the EU). And thanks to the FED and the PE model, Ben made so very successful for thieves, via easy money… the malefactors of wealth and privilege are coming for your Social Security next.

Thank you, Ben.

The Good

Ben, of course, is not entirely evil. About the best thing I can say about him is he proved Modern Monetary Policy (MMT) works. Quantitative Easing (QE) and interest rate suppression are nothing more than MMT for billionaires, congress, the Pentagon, and Wall Street.

Need a couple trillion for another endless war, and billionaires only want to cash in on the newly minted war in the Ukraine, not actually pay taxes to support it…. zero worries. Thanks to Ben and MMT, the central bank has that covered. What a relief. Yes, the FED’s printing presses finance endless wars. Apparently, the U.S. government’s financial statements run red for two reasons: ink and blood.

The irony in all this is that when the oligarchy, or the oligarchy’s U.S. government, needs a handout for the rich or another war, the FED’s printing presses switch on in seconds. The second the talk shifts to restoring some semblance of dignity to essential Americans… and the GOP trot out the inflation narrative. Hence, the mantra… please repeat it with me: QE for billionaires and the MIC is good; MMT to fund entitlements and a safety net for labor and working-class Americans is bad.

It’s what all the GOP are spouting on the campaign trail, as they get ready to retake congress and gut Social Security and Medicare. (Notice however, Biden and the Dems are hardly innocent here... listening to Larry Summers, Biden has bought on to austerity and a higher interest rate regime to contain price gouging. Basically, attacking consumers & labor; and reneging on his 2020 Build Back Better campaign pledge. Clueless Dems can't figure out why they are in deep trouble as the midterm elections draw ever closer.) And the very nasty reality, so-called inflation is little more than The Grand Rip-Off, all over again: Soaring consumer price gouging, Big Oil thuggery, Wall St speculation… and RECORD PROFITS.

Taken right out of the ‘70s. And just like the ‘70s, it’s American consumers and labor that are being crushed.

The Ugly

In writing all this, we easily forget the FED has two mandates: stable prices and full employment. And while Ben and the FED enjoyed stable prices for a long period of time, the consolidation and M&A Ben fostered and financed -- with easy TAXPAYER money -- has led to unprecedented monopoly and monopsony. Which, of course, generated unprecedented monopoly pricing power and monopsony power over small business, labor, benefits, and wages.

In short, easy money for Wall St had led, as previously mentioned, to unprecedented economic, and therefore, political power, throughout the U.S. economy and government. Nice monopoly – slave wage – economy you created Ben. Wonderful oligarchy, you created Ben. (In fairness, Ben has had a lot of help, from Ms. Yellen and Mr. Powell, both of whom continued Ben’s work.)

And we think money in politics is bad. Money printing by central banks, in the 21^stcentury, has created some of the most polarizing disruptions, distortions, and inequality in the history of humanity. Disruptions, distortions, and inequality that will not be easy to unwind or unravel. You see, the oligarchy likes their rigged economy & government, their rigged FED, and they will not surrender it lightly, if ever. All of which is nothing more than a threat to sound democratic government, the fourth estate, and human rights. Easy money & debt are the handmaiden of endless war.

Central bank easy money, w/out sound economic and social policies emanating from the legislative body & government… is, well, as we have seen, dangerous.

And full employment, the other FED mandate? Well, as Big Oil, monopolies, and Wall St wage their war against Democrats and any hint of government intervention against the failures & excesses of the libertarian economy, it appears that max employment will eventually be a casualty of the FED’s policies, both QE and QT.

Do you smell that … smells like recession, perhaps a great depression? All the variables are properly aligned (including incompetent and corrupt policy makers, who have attacked aggregate demand instead of taking on and addressing the price gougers, aggregate supply). Remember girls & boys, recessions/depressions can be both economic and political… a display of economic power, government policy, and brute political force. As a bank regulator, the Federal Reserve has entirely failed. Instead of stability, Ben and the Federal Reserve have wrought epic instability, and have played a key role in creating & installing oligarchy, as heads of states. The wealth of the nation redistributed and transferred to seven hundred - plus billionaires, via the central bank.

And my final words on all this… how is it that Mr. Nobel winner is virtually unknown by the majority of Americans? How is it that the most powerful branch of government, The Federal Reserve, is mostly unheard of and the least understood by the American public?

That’s not by accident. And if America is ever to heal, mend, and recover, that must change.

Enjoy that award, Mr. Bernanke.

Copyright JM Hamilton Publishing 2022

Saturday, October 15, 2022

The Private Sector Fails Again

Mark Carney, GFANZ co-chair, has already publicly admonished Race to Zero for going “too far.” Jakob Thomae, an advisory board member of GFANZ, says he expects parts of GFANZ will eventually sever ties with Race to Zero and seek a more tailored decarbonization methodology to appease members.

Allowing the sub-alliances, whose boards are heavily represented by the finance industry, to set their own terms is a dangerous move, according to climate nonprofits.

Members of the finance industry have warned they’ll only be able to achieve their net-zero goals if the governments of the countries in which they’re based provide adequate frameworks that ultimately encourage their clients to step up.

- Wall Street Bankers Told They Can Set Own CO2 Terms After Spat, Bloomberg

By Gregg Wall (10-15-2022)

The world is burning, and flooding, with Wall Street and billionaires torching the planet for astronomical Big Oil & Gas profits and gain… and good old Mark Carney – co-chair of GFANZ (Glasgow Financial Alliance for Net Zero) – is waving the white flag of surrender and the yellow flag of cowardice and appeasement. In order to keep a consortium of private sector leviathans together, under the rubric of GFANZ, Messrs. Carney and Bloomberg have given the Wall St. banking cartel carte blanche to set their own rules, that is to say, self-regulate fossil fuels finance.

(Note: GFANZ is basically a trade organization or lobbying group, designed to protect the interests of its members… while holding up a Net-Zero fig leaf & the preeminence of market based sollutions, as its stated goal. Mr. Carney is former head of the BOC and BOE... he now works for Brookfield Asset Management, which has significant fossil fuels holdings. Mr. Bloomberg is a multi-billionaire, many times over, is renowned for providing Bloomberg terminals/trading & information tools to Wall St. Together, Messrs. Bloomberg & Carney are GFANZ co-chairs and their conflicts of interest -- in setting guidance and metrics for Net-Zero -- are far, far too numerous to count. And GFANZ, arguably, has been an abject failure. Their actualized achievement, to date, appears to be to waste increasingly precious time, while billionaires, despots, dictators, fossil fuels boardrooms & shareholders, & Wall St. all cash in. Cha-Ching. Cha-Ching.)

Which is to say, when it comes to financing fossil fuels, there will likely be no, or limited, restrictions. Last I checked, the globe, and particularly the West, is suffering from the fallout of forty-two years of laissez-faire, libertarian industrial policy, and allowing billionaires, multinationals, and Wall St. to do anything, to anyone, they please. Multi-trillion bailouts come and go; Wall St. and monopolies are bailed out repeatedly; Congress ducks responsibility and worse, fails to hold elites responsible & accountable; the national debt spirals ever higher; and the number and magnitude of new crises grows and grows.

At the root of it all -- failed Reaganomics, Thatcherism; the 2008, 2020 financial crises; and the ongoing Climate Catastrophe -- in short, greed, self-regulation, and moral hazard. Moral hazard is a fancy term to describe situations where those in power can essentially get away with nearly anything, because they know the government, or rather, central banks will bail them out. Until the government no longer has the means to do so, as we saw in the United Kingdom over the last couple of weeks. More to the point at hand, how do you bailout a planet that has been destroyed by fossil fuels?

And behind the GFANZ illusion, behind the self-regulatory smoke & mirrors … rests the greatest of all delusions: that the private sector and the wise girls and boys in boardrooms and C-suites – and the almighty profit motive – will ride to the rescue and save us all.

It’s the greatest lie ever told.

If we are to survive, if we are to escape the epic failure that is neoliberalism… it will take courageous, moral leaders within governments. Leaders, who aren’t bought off to be little more than cheap salespersons for a failed status quo (i.e., trickle-down and supply-side economics); leaders, who are willing to harness and support the preeminent powers of the state, over the private sector & profit motive, in the service of their citizens. And above all, leaders, who are willing to do more than talk but actually deliver, again and again (in direct opposition to oligarchy). Greed and the profit motive have their place in the economy, but almost always completely fail in moments of crisis (crises which greed and the profit motive often create).

The private sector is correct about one thing. It will take governments to set the objectives & standards for the private sector, in order to save the planet. (Moreover, these standards must be easily understood, quantifiable, objective, easily measured, subject to audit, subject to substantial penalties for failure to meet goals, and lead not to Net-Zero but to elimination of fossil fuels to the fullest extent possible.) But what is also equally true is that when the private sector co-opts & buys governments, captures regulatory bodies, infiltrates the government with their own people, and lobbies and buys off elected politicians, there’s very little chance that government will do its job.

Therefore, blame rests entirely upon greed, laissez-faire, and oligarchy. The planet is but one of many crises. From the pandemic to extreme poverty and wage & wealth inequality… to collapsing food supplies, epic price gouging from our monopoly – slave wage – economy… just scratch the surface and you’ll find the parties responsible.

And throwing money at a police & surveillance state, or a new war, isn’t going to save us.

Saturday, October 1, 2022

OLIGARCHY

“Experience demands that man is the only animal which devours his own kind, for I can apply no milder term to the general prey of the rich upon the poor.”

His thoughts on globalization? “Merchants (billionaires) have no country. The mere spot that they stand on does not constitute so strong an attachment as that from which they draw their gains.”

“The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.”

“Experience hath shewn, that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted into tyranny.”

- Jefferson

By Gregg Wall (10-1-2022)

Western democracy is often referred to as experiments… laboratories with unique policies, where differing nations can learn from one another. But what we have recently seen, despite some nation’s leaning left or right, is that the same, nearly identical problems are occurring and reoccurring with greater and greater frequency (both at the economic and political level). And while the MSM, particularly the American MSM, likes to sneer at the proles for believing there’s some global cabal in charge of governments… There’s little dispute that countries in the West, so-called democracies, have nearly universally agreed upon and implemented policies of globalization and neoliberalism in a race to the bottom. And notably, with highly damaging and deleterious consequences. There’s also little dispute that a handful of individuals have gotten extremely wealthy off these policies, have extraordinary sway over ‘democracies’ and supranational bodies, despite the obvious and repeated failure of libertarian industrial policies and the resulting statist solutions (i.e. repeated bank, billionaire, and market bailouts & welfare, as well as, exceptional and extreme tax avoidance by this elite cadre… deregulation too, has been an extraordinary boon to this group). In fact, and not to place too fine a point on it… it’s the bailouts & state intervention, itself, particularly central bank machinations, that really magnified the oligarchy’s wealth.

The net result of all this is, citizens of all classes are beginning to see through the veil, the pretense and the illusion. And it’s not so grand. Many are beginning to throw around the word oligarchy, frequently and often… and is it any wonder? Huge sums of money have been flowing into elections and the very worst of what humanity has to offer often find themselves in power, those that are highly amendable to corruption and lies. Naturally, citizens lose faith in democracy… but what they are really losing faith in is a putrid and rigged facsimile of democracy. One version of democracy, the very worst kind, called kleptocracy and oligarchy. All of this is to say, those that hate our current version of democracy are really going to have a problem with the authoritarianism and fascism that is, likely, to follow.

Call me a romantic but I haven’t lost complete faith in humanity, and with the right people in power… I believe democracy is redeemable and fully capable of doing great things. Three examples stood out in the last two weeks of the misery I am writing about, democracy gone bad… notice within these three hideous examples, the near uniformity of the economic models, the obvious political crisis, and the endemic corruption and oligarchy involved.

Let’s start with Italy then. Italy has had problems with cronyism and corruption for years. Governments come and go like people change undergarments. Colossal and catastrophic debt was accumulated bailing out banks and the rich, during the 2008 financial crisis… a banking crisis that is ongoing to the present day. Along comes a Goldman Sachs banker, who was not formally voted into office, and he’s installed essentially as head of state. The banker’s stated objective, over the course of time, has been to implement & impose austerity upon the citizenry – in the hopes of paying for the colossal debt accumulated bailing out banks and the rich on the backs of labor & the poor. Our banker friend, Mr. Draghi, also wants to impose neoliberal reforms … these reforms are little more than an attack upon labor, and for the exclusive benefit of the banks, billionaires, monopolies, multinationals, and shadow banking.

Naturally, this Italian banking dictatorship implodes, and the people have a visceral reaction to the corporatists, centrists, and oligarchy that installed said banker. Naturally, the people look for solutions outside failed centrists… left and right, and, in this instance, the extreme right, fascists win the Italian election. My readers should know that it takes a special of kind of neoliberal failure (characterized by excessive attention to the needs of billionaires), globalist failure for Italians to reinstall a form government last seen at the end of World War 2, a form of government – fascism – that leveled Europe.

Next comes the U.K. And, with slight modification, I can almost install the proceeding two paragraphs, and apply them to yet another Western democracy. Let’s begin then: The U.K. has had problems with cronyism and corruption for years. British prime ministers come and go like people change undergarments, but absolutely nothing changes. Colossal and catastrophic debt was accumulated bailing out banks and the rich, during the 2008 financial crisis…. banking and financial services crises that will likely reoccur, to varying degrees, due to overreliance on ultra-accommodative central bank (BOE) policies. Along comes a new prime minister, who was not formally voted into the office; and she’s installed to the near exclusive benefit of right-wing extremists and wealthy backers. The new PM’s stated objective is to embrace 42-year-old trickle-down ideology and austerity. Allegedly, in the hopes of spurring the economy, and paying for the colossal debt accumulated bailing out banks and the wealthy on the backs of labor & the poor (and to further, enrich corporate backers and wealthy donors beyond all measure).

But, ironically enough, markets aren’t having it… because, by now, even markets – which generally approve of trickle-down and welfare for the rich – know that tax cuts for the wealthy lead to greater and greater national debt. And the UK increasingly, like so many Western governments, looks tapped out. So much of the national wealth has been transferred to an elite cadre of financiers & plutocrats.

The pound plummets as does PM Truss’ political fortunes. And the last PM the Queen installed now appears to be the source of universal public condemnation… at a time that the UK is rocked by a moribund economy, serial price gouging (aka inflation), and an energy crisis. If you can get past the needless human costs, mayhem & mortality… gee, isn’t libertarian industrial policy – a/k/a greed as a central ruling ideology - entertaining, perhaps too thrilling? It’s like a bad B horror movie - or television serial - run entirely, predictably off the rails.

My third example is none other than the United States… and we need not repeat the exercise. Many of the globalist, neoliberal problems - mentioned in the prior two examples - are rife throughout the United States: from a highly corrupt, failed two-party system, a gangster oligarchy, a banker - billionaire welfare state, all the way to American labor, public that has been set upon by a vicious pack of demonic wolves (stripped of nearly all social services and crushed by anti-unionism, anti-labor policies run amok).

The universal themes, then, that run throughout all three examples are highly corrupt centrist, corporatist political parties that have completely failed their citizens. The adoption of economic & political policies that systemically prey upon the people, specifically the consumer and labor. The absolute failure to hold concentration and monopoly power in check. Catastrophic public and private debt, which is nothing less than a redistribution scheme for the wealthy. Greed, dysfunctional - monopoly & oligopoly controlled - markets, and a deregulated state, as the key ruling economic ideology. Elites that are perfectly willing to use division and hate to perpetuate a failed status quo. And a ruling oligarchy that is entirely out of control… but above all, a complete lack of willingness, by anybody in charge, to face facts and adopt reforms (because of a kleptocracy and oligarchy that only responds to the next quarterly statement & returns).

And the crises are just beginning to pile up, after four decades of chronic abuse, looting, and the rape of humanity. And I didn’t even touch on the American elite’s lust for endless war and endless war profits.