Hillary Clinton is the Bomb!

Hillary Clinton is the Bomb!

I responded by saying that I thought that “defeating fascism and communism is a pretty big deal.” In other words, that the U.S., on balance, has done a good job of advancing the cause of freedom.

Clinton responded to this idea with great enthusiasm: “That’s how I feel! Maybe this is old-fashioned.” And then she seemed to signal that, yes, indeed, she’s planning to run for president. “Okay, I feel that this might be an old-fashioned idea, but I’m about to find out, in more ways than one.”

Hillary Clinton: 'Failure' to Help Syrian Rebels Led to the Rise of ISIS, The Atlantic - Jeffrey Goldberg - Aug 10, 2014

“History merely repeats itself.  It has all been done before.  Nothing under the sun is truly new.”  Ecclesiastes I, Chapter One, Verse Nine.

By J.M. Hamilton 8-23-14

No, Mrs. Clinton, bombing oil rich countries to do U.S. multinationals, and the MICs, bidding isn’t “old-fashioned,” it is a timeless distraction from domestic politics and real U.S. problems (i.e. Ferguson/income inequality/tax avoidance/political reform).  And it is a practice that has failed the U.S. and indigenous peoples throughout the world, repeatedly.  Foreign misadventure has left the U.S. martially winded, fiscally bankrupt, and led to blowback with unintended consequences for the U.S. and the world, time and time again. 

Among the political elite, nation building, despite the fact that the FED is printing money to keep our nation afloat, apparently, never goes out of style.  Particularly to enforce arbitrary nation state lines established by two colonial powers, post WWI.  Nation building is an expensive and repeatedly failed concept (e.g. Vietnam, Afghanistan, and Iraq). 

Bombing nations is old-fashioned, particularly when we can often utilize sanctions and international banking to achieve the same geo-political outcomes.  Witness, Mr. Putin’s stalled empire-building efforts in the Ukraine. 

But where’s the “fire-works” in sanctions and international banking?  America needs a show of force and a bogeyman to justify all that extravagant military spending.

In an economically interconnected world, the MIC doesn’t want to hear that it is obsolete.  The fable surrounding the most recent U.S. bombings in Iraq, that the cavalry had come to save Yazidi, is nothing new (read Ecclesiastes I); arguably, the latest Iraqi bombings are nothing more than an excuse to protect U.S. multinational, oligarch, and sovereign foreign interests operating in resource rich Iraq. 

Our puppet, P.M. al-Maliki, blew it, and now we have to clean up the Cheney administration’s mess, yet again.  Senator Clinton, of course, voted to support Cheney’s war in Iraq, and so maybe she’s looking for justification and vindication for that hawkish vote.  That the U.S. set current events in the Middle East in motion with the 2003 Iraq invasion, is conveniently, rarely discussed.

Neo-conmen and unintended consequences?  You bet.  You’re looking at them right now on CNN.

Our corporate owned and run U.S. news media has embedded ISIS, chronically, into the 24-hour news cycle.  Concern over a rag-tag group of mercenaries and “jihadis” has reached a fever pitch.  “This is an organization(ISIS) that has an apocalyptic end-of-days strategic vision that will eventually have to be defeated,” said the chairman, Gen. Martin E. Dempsey, as reported in the NY Times.  Clearly, something must be done, even though the U.S. is energy independent, and the U.S. has already burned at least two trillion dollars in an Iraqi money-pit.  (That’s two-trillion that could have gone to disadvantaged youth, the poor, to pay down student loans, or to rebuild America’s infrastructure.  Hell, we could have given $2 trillion to the Wall Street cartel to check again, and learn one more time that “trickle-down” economics really is a dead-end ideology.)

Haven’t we heard this fever dream before, from the Joint Chiefs?  Gulf of Tonkin, weapons of mass destruction, yellow-cake…. Oh yes, we’ve heard it all before.  Conveniently, omitted from the dialogue is that the GOP's hero, Ronald Reagan, defeated the Soviet Union without starting up a hot war. Conveniently, omitted from today’s scare-mongering from the military brass is the former Soviet Union was once declared the “evil-empire.”  It’s like each enemy we encounter is larger, more evil and malevolent than the prior.  The American public has grown so inured/jaded to the Joint Chiefs chronic cries for war, that the generals have to top themselves with each new call.  Really, ISIS is more scary than the former Soviet Union?  Yet, ISIS has no air force, no nukes, and is supported by captured U.S. military surplus, left behind in Iraq.  

Blowback? Talk about your unintended consequences. Oops.

The economic and political elite in this country have been given a freehand on foreign affairs for so long, to such deleterious effect upon the U.S. and its citizens, and our federal budget, that the alleged “isolationist,” Senator Rand Paul, is now one of the leading GOP contenders for this nation’s highest office.  And if he was running against Hillary today, he’d have my vote without question, based upon their respective positions on foreign policy alone.

We have yet to learn the true consequences of the latest wars in Iraq and Afghanistan.  Right out of the playbook, true to character, the Federal Reserve is busy printing money to inflate away U.S. war debt.

If the U.S. military is so damn effective, why are we having to go back into Iraq yet again?  If dropping bombs and playing army is the end all be all of foreign policy, why is a similar Afghanistan fiasco almost guaranteed?

Where are our so-called European allies in this matter… you know, the folks who actually are not energy independent, and do rely on Middle East oil?  Nowhere to be seen…  it’s August and the Europeans are all vacationing on the French Rivera (along with the legal community in this country).  And the Arab-League…. ?  Forget about it.

Meanwhile, back in the Sudan, Christians have been persecuted, run over, and massacred by Muslims for years…. But Khartoum isn’t oil or resource rich, Sudanese Christians are not white, and there are no U.S. multinationals operating in the region. 

Where’s the U.S. cavalry in the Sudan?  Why aren’t we bombing the Muslims in the Sudan, who are slaughtering and butchering Christian women and children, by the hundreds of thousands? 

That our “altruistic” U.S. foreign policy is based upon a foundation of hypocrisy (and is detrimental to ordinary Americans, who can’t escape paying taxes, and must pay for these foreign adventures – in some cases with their very lives), is on full display for all the world to see.  That U.S. multinational corporations, who enjoy U.S. military support globally to protect world markets, are now fleeing off shore to dodge paying taxes for their own military protection is outrageous.

And to think, we are about to put this relic from a by-gone era in the White House.  Four words:  Complete freaking horror show.  I’m all for putting a woman in the White House, but lets put the right woman in the White House.  Like, I don’t know, a person who’s ready to break with the last five decades of incredibly bad foreign policy; a person who might campaign on reinstating the draft, so that the war burden is shared by all U.S. citizens and not just the poor; a future President, who will actually make multinationals pay for their fair share of the U.S. war machine.

Has it ever occurred to our “foreign policy experts” that the reason there is so much turmoil in the Middle East is because the U.S. and Western democracies keep: propping up thug dictators who terrorize their citizens; that there is no or limited economic opportunity in these countries, and no rule of law (Middle East unemployment is the highest in the world); and so joining jihad and Allah in paradise is perhaps their only and best option?   

If you keep people poor, under-educated, and w/out the basic necessities of life, or a shred humanity, than there is bound to be war, fundamentalist religion, and rebellion (not necessarily in that order)… which keeps the MIC and the war machine humming. 

See, it works out for everybody.

It’s so much easier, and less expensive, to do a drive by, I mean fly by, and a bombing in Iraq, than to address the root causes of the problem.  Right? 

President Clinton III will show the world.  A fiscally bankrupt U.S. will be knee-deep in global blood in no time.  When one examines Mrs. Clinton’s advocacy of a jingoist and bellicose foreign policy (a rehash of Bush/Cheney), President Obama’s foreign policy of not doing “stupid stuff,” sounds exceptionally brilliant.  (Then again, with Hillary enjoying a near lock on the Democratic nomination for 2016, perhaps she’s just pandering to the political right and the foreign policy hawks, in the hopes of obtaining their vote?)

No greater authority than General Stanley McChrystal said that when you kill an enemy combatant in the Middle East, you are likely creating ten terrorists.  At the rate we are going, the U.S. actually might have something to fear.

P.S.

Do you think China would be rattling their saber in the South China Sea, and Putin would be pulling his stunt in the Ukraine, if the U.S. wasn’t hyper-ventilating and grossly overextended, by attempting to play the world’s beat cop?

Copyright JM Hamilton Publishing 2014

Coming Soon to the Street…. A Nixon Moment?

Richard Nixon is associated with many things:  The last of the big liberals (EPA, OSHA, a near deal with Senator Kennedy on healthcare – decades before Romney-care), scandal, wage and price controls, the imperial presidency, extreme paranoia, and a brilliant foreign policy (albeit, ultimately, marred by the decision to pull out of Vietnam many years too late). 

To look at today’s Republicans and Mr. Nixon… goes to show just how far right the GOP has shifted in the last forty years.  And yet, he kept the GOP in power for over forty years, with his Southern Strategy.  

Mr. Nixon personifies the politics of race.

The one thing he is not associated with, however, is ushering in the post-modern age of high finance, when he de-linked the dollar from gold.  Yes, the roots of leverage on steroids, massive debt, derivatives and swaps (the Black & Scholes paper was written in 1973), and Wall Street & Private Equity excess, arguably, go back to Nixon’s decision to leave the gold standard; in de-linking the dollar, he also ushered in the age of hyper-monetarism from the Fed, and profligate federal deficit spending from President Reagan, forward.

Mr. Nixon unleashed Lord Keynes. 

The Fed’s printing presses really began to smoke, after President Nixon’s fateful decision.  If the Lords of Finance were to build a golden idol, its visage would show the face of Nixon.

Good, bad or indifferent (friend or foe of Mr. Nixon's legacy), former President Nixon is a man worth studying for years to come.  The rise from nothing, the set-backs, perseverance in the face of overwhelming odds, and ultimately, a swan dive into the abyss.  To this day, Mr. Nixon has many things to teach us. 

He is the shadow of what remains of the American Dream.  Mr. Nixon is the embodiment of the duality of man.

- J.M.H.

 

Coming Soon to the Street….  A Nixon Moment?

“How strange is the illusion by which men sustain themselves!”  – Doctor Henry Kissinger

By J.M. Hamilton  (10-9-11)

“He stopped at the door of the Lincoln bedroom.  And he suggested that he and I pray there together.  There was no good way to end that evening or to put a period to such a tempestuous career.  And I am not sure that this was not as meaningful as any other and more appropriate than most.  Nixon’s recollection is that he invited me to kneel with him, and that I did so.  My own recollection is less clear on whether I actually knelt.  It is a trivial distinction.  In whatever posture, I was filled with a deep sense of awe which seemed its own meaning so that I did not know exactly what to pray for.  A passage of Aeschylus kept running through my mind – the verse that, as it happened, was a favorite of one of Nixon’s obsessions, Robert Kennedy:  

Pain that cannot forget

Falls drop by drop

Upon the heart

Until in our despair

There comes wisdom

Though the awful

Grace of God

Shortly after midnight — after about a half hour in the Lincoln Bedroom — I returned to my White House office.  Within a few moments Nixon called.  I must not remember our encounter that evening as a sign of weakness, he said.  He hoped that I would keep in mind the times when he had been strong.  How strange is the illusion by which men sustain themselves!  There were many occasions that Nixon identified with strength that made me uncomfortable.  This evening when he barred his soul I saw a man of tenacity and resilience.   And so I told the stricken President that if I ever spoke of that evening, it would be with respect.  He had honored me by permitting me to share with him his last free night in the White House where so many memories had united us.”

August 7, 1974 – Henry Kissinger, Secretary of State – from the book, Years of Upheaval 

Hardcore!  And if you saw the speech two days later, Nixon’s farewell address to his staff, you knew it was an iconic event in American politics, if not the key political event in the last hundred years: where a man of humble origins had climbed to the pinnacle of success, culminating in his 1972 landslide victory, only to see it all come crashing down.   Nixon said it best:  “It’s not the crime that kills you, it’s the cover up.”   The creator of the EPA, the author of wage and price controls, and the underwriter of double digit inflation (as America left the gold standard and monetary supply was goosed to aid Nixon’s ’72 re-election bid), would appear to be some whacked out liberal freak by today’s Republican Party standards.  But he was one of the brightest individuals to ever enter the White House, and on foreign policy he was a genius, witness the ultimate cold warrior’s embrace of Red China, all the better to drive a wedge between Soviet – Sino relations.  At the end of the day, Nixon was hoisted upon his own petard, and America sat paralyzed for over a year, glued to the televised Watergate hearings.  The resulting “Nixon Moment,” so well described by Doctor Kissinger, is forever branded upon the American psyche.   And indeed that is what ultimately makes this country great.

No one is above the law, at least not in the long run.

Could a similar moment of truth be coming to Wall Street?  All the signs point to yes.  After three years of economic decay and misery, a continuation of the financial crisis from 2008 to this present day, and watered down financial regulation and rules…. The Nixon Moment may soon be visited upon the Street.  Fate appears to demand it.  After all, Wall Street and European banks, and our elected officials governing same, appear to have learned little from the events that transpired in the fall of 2008, events that appear to be overtaking us all, here and now in real time.

$$$  Many economist and insiders agree that the primary reason the U.S. economy has not regained its footing is a stagnant housing market.  And the root cause of this stagnation is the banks.  Not only can they not foreclose upon a property, but for the very same reasons, I suspect these same banks are reluctant to refinance and write down mortgages.  To back up for a second, allowing consumers to refinance at record low interest rates would give consumers (aka ordinary Americans) more dollars in their pockets, that is to say discretionary income, the spark that could drive this economy forward, and transform an illiquid housing market back into recovery.  Writing down these same loans to market value would send the U.S. economy into overdrive: recession over!

The banks, and the governments, unwillingness to allow refinancing all goes back to debt securitization and the MERS system or the electronic registry of mortgages.  As we know and have widely read, mortgage foreclosure has fallen apart because of shoddy paper work, an inability to find out what bank or institutions actually possesses the mortgage, and an apparent failure of the MERS system, etc.  Plus banks also benefit, to some degree, from a seized up mortgage foreclosure process, since they no longer have to write down impaired assets on their balance sheets.   These very same reasons may also account for why banks are reluctant to refinance mortgages, which has been painfully slow.  The short answer?  During the housing boom, banks securitized mortgages and sold them to wealthy individuals and large institutional investors (Freddie and Fannie, et al.), who have come to expect a certain rate of return; however, if these same mortgages were suddenly refinanced at lower rates than the financial returns to the owners of CDOs would suddenly drop below expectations.   And there’s already an entire industry built upon litigating against the banks, which created collateralized debt obligations (CDOs), with billions in prospective legal fees and settlements on the line.   With the banks already under attack for securities fraud, lousy mortgage underwriting, and client double-dealing, the last headache they need is to lower the returns on CDO products, or to write down assets through debt forgiveness.

How big is this problem?  The New York Times reports that half the mortgages holders in the state of Arizona are underwater.  And nationwide one in five mortgage holders are a couple of fathoms below the surface, carrying debt above the value of their homes at approximately 700 to 800 billion dollars.   That’s almost a trillion dollars that could be funneled back into the economy, not to mention interest on same, instead of into the hands of banks, wealthy institutional and sovereign investors.  This same article goes on to report that even the Federal Housing Finance Authority is against debt refinancing, in direct contrast to the Obama administration’s stated refinancing goals.  And the oft given reason the tax payer supported banks, and the tax payer owned Freddie and Fannie won’t forgive debt or refinance…. Well, these fine upstanding tax payer funded organizations are all very concerned about… wait for it….. here’s the punch line…. consumer “moral hazard.”

$$$  Meanwhile, the sovereign debt crisis threatens to implode in Europe, quite possibly pushing a troubled world economy over the brink.   Despite assurances from Treasury Secretary Geithner, in last week’s congressional testimony, that the fiscal and monetary crisis in Europe doesn’t threaten the U.S. directly, J.M. Hamilton, and many of our readers, understand the opposite to be true.

“Our direct financial exposure to those governments and their financial institutions is quite small, but Europe is so large and so closely integrated with the U.S. and world economies that a severe crisis in Europe could cause significant damage by undermining confidence and weakening demand.” – Treasury Secretary Geithner.

The “closely integrated” that the Treasury Secretary is referring to would be the systematic risk posed by the six hundred trillion dollar derivative/swaps market, underwritten by Wall Street banks.  Derivatives/Swaps, legitimately, provide insurance against bank and sovereign default; derivatives/swaps, illegitimately, fuel gambling, speculation, and unprecedented economic risk to the citizens of the world.  Of course it is derivatives, hybrids, and swaps that nearly brought down the world economy in 2008, a la AIG.  Wall Street has and continues to lobby for an unfettered and unregulated derivative/swaps market place (i.e. a continuation of the financial Wild West show, which is ultimately financed by the U.S. taxpayer).   The banks get the profits from this unregulated – black -market, and the tax payer enjoys the privilege of cleaning up the mess.  There’s just one problem.   Nobody on the planet, individually or collectively, has several trillion, or even tens of trillions, to put up if European defaults trigger these swaps.  Simultaneously, the U.S. Commodity Futures Trading Commission keeps putting off rule making on these financial weapons of mass destruction; and likewise in Europe, the regulation of these products continues to be delayed and watered down.

No wonder Mr. Geithner likes to travel across the pond, and tell his European brothers to continue to bailout insolvent governments and insolvent banks.   Default, after all, just might trigger financial Armageddon.

$$$ Election season, and the Republican Party is trotting out the same old failed fables, only the message has grown more radical and shrill.  Ayn Rand has become the Party’s goddess, and the problem with our economy, per the leading candidates, is excessive government regulation; such irony when Wall Street proves, again and again, that the economic problems staring the nation down are the lack of government rules and regulation.  Meanwhile the only viable candidate, Mitt Romney, visits Jamie Dimon on Wall Street and makes pledges to boost military spending beyond the obscene amounts already spent (all the better to take the nation to war in the future, so as to distract our citizens from the economic Hiroshima that three decades of free market ideology have visited upon us all).  So much for fiscal sanity.  Meanwhile the only rational GOP candidate, John Huntsmen, isn’t even in consideration or a serious contender for nomination.  Mr. Huntsmen is too establishment, too Herbert Walker Bush, too, well, uh…  sane, cultivated and erudite, when all the Molotov throwers within the Tea-Party movement want is to do the plutocracy’s bidding and dismantle government once and for all.   The smartest GOP candidate would appear to be New Jersey Governor, Chris Christie, who decided not to run.  Brilliant!

And the ultimate bellwether of the times we live in…. my mother recently came to me and asked if she should pull her retirement money out of stock and bond mutual funds, and place said funds into FDIC insured accounts?

“Yes, mom, and while you are at it, buy some gold on the next dip.  It’s all about capital preservation now, thanks to the Fed.”

They say there are no atheist in fox holes, and that on the weekend after 9-11 normally empty churches and synagogues were filled to the rafters.  My guess is that a Nixon Moment is not too far around the bend for our elected officials and the Wall Street plutocracy.  I pray not, but the writing appears to be on the Street.  Could the next boom market be in Bible, Torah, and journals of faith publishing?

And, possibly, coming to the Street soon, the sound of rampaging bulls, albeit not the kind of “bulls” we normally associate with the Street – signifying a rallying market.  No the bulls I have in mind maybe covered in Kevlar and armed with mace, rubber tipped bullets, and riot shields, all the better to protect the denizens on the corner of Wall and Broad from angry U.S. citizens.

P.S.   “Alas, how terrible is wisdom, when it brings no profit to the wise.” – Sophocles

Copyright JM Hamilton Publishing 2014

Rage Against the Machine…?

Rage Against the Machine…?

 “Your anger is a gift.”  - Lyric from the song, Freedom, by RATM

By J.M. Hamilton  8-1-14

Time to geek out.

It was couple of years ago now.  I had the privilege of meeting with a Chief Operations Officer (C.O.O.) at a large plastic container manufacturer in the greater-Atlanta area, and viewed the factory floor.  What caught my attention about this particular company is that revenue, through both acquisitions and organic growth, along with profits, had shown significant growth over time; but corporate wide payroll had showed a steady decline over the same period.  When I asked the C.O.O. about these numbers, he responded with one word: "Automation."  He went onto say that labor, and all its associated headaches, were the company’s biggest expense.  With machines, he added, there were no tardy employees, no "dying grandmothers," and no H.R. Issues.  I must say, that factory was magnificent.

Which provides an excellent intro for today's piece.  To embrace human obsolescence and A.I. (artificial intelligence), or not to embrace human obsolescence and A.I., that is the question.  Of course Mr. Shakespeare may have been more concise and eloquent when he asked nearly the same question: "To be or not to be?"

On the Right, we have Mr. Steven Rattner... Clintonian Democrat, Wall Street Mogul, Private Equity Robber Barron, and sometimes writer for the New York Times.  More recently, Mr. Rattner served as President Obama's Car Czar.

On the Left, we have Lord Robert Skidelsky.... Professor Emeritus of Political Economy at Warwick University, a Fellow at the British Academy in history and economics; and more recently, he wrote a three-volume biography on one Lord Keynes.  Having read "The Return of the Master," Mr. Skidelsky knows his topic, well.

Rattner, Automation and the Welfare State:

Mr. Rattner wrote a piece in the New York Times this June, entitled:  Fear Not the Coming of the Robots.  In this piece he states that automation and robots are nothing to fear, and that these are good things, as they will lead to greater economic productivity, correlating into higher wages, and a migration into jobs more suitable to human endeavor, such as nursing.  He states that John Maynard Keynes was dead wrong in predicting automation would outstrip the need for, and new uses for, human labor.  As for the unemployed who cannot keep up or be retrained, fear not Mr. Rattner assures us, there is government assistance and welfare.  In particular, I found three memorable lines in this piece.  They are:

Becoming more efficient (what economists call “productivity”) has always been central to a growing economy. Without higher productivity, wages can’t go up and standards of living can’t improve.

In fact, productivity growth in recent years has been sluggish (an even scarier concern). 

Hence, the greater need for automation, per Mr. Rattner, and…

But technology is not the prime culprit behind our languid employment and income growth. That honor belongs to globalization, and particularly the ability of companies to substitute far less expensive and increasingly skilled labor in developing countries.

Now, in direct rebuttal to Mr. Rattner, if we check in with the Bureau of Labor Statistics, we can see that productivity has been on a steady rise in this country, throughout the 90’s and all the way through 2007.  It was at that time (2007) that Mr. Rattner’s friends, Wall Street Banks, Shadow Banking, and Private Equity, damned near destroyed the global economy with debt securitization, greed, moral hazard, and highly illiquid, unregulated, and uncollateralized swaps and derivative products (CDOs and MBS).  At which point (2007), U.S. gains in productivity slowed down dramatically.  Not because of the lack of technology or effort on the part of those remaining American workers lucky enough to hold jobs; but rather, I would argue that productivity gains dried up due to the lack of aggregate demand, as a result of the spike in unemployment and underemployment caused by the banking crisis, and due to a sharp reduction in CAPEX spending.  Consolidation and combination (i.e. M&A) in industry after industry, also means that monopolies and cartels are no longer forced to compete, and so greater efficiency and productivity is not only not required (nor is customer service important), but the cost of greater efficiency may actually detract from short term monopolistic profits. 

In fact, the financial crisis is chiefly responsible for an idle workforce, and idle factories with excess capacity.  Mr. Rattner, a product of Wall Street, conveniently forgets to mention this.

Moreover, Mr. Rattner, also strategically omits that he and his colleagues on the Street have been the primary beneficiaries of America’s growing productivity and automation over the last two decades, with the overwhelming majority of the profits and wage growth going to the one percent.  Meanwhile, the middle-class is 20% poorer today than it was in 1984.  So much for the theory that higher productivity leads to higher wages.

Could Mr. Rattner, a founding member of Quadrangle, a private equity firm, have a vested interest in automation, robots, and A.I.?  You bet.  After all, if the last three decades are any indication, Mr. Rattner and the financial elite stand to make a financial killing from the increased productivity correlated with increased automation, all at the middle class’ expense. 

Instead of fearing automation, Mr. Rattner points out that “globalization” is the real job killer in America.  I guess a private equity Titan would know, since private equity has been responsible for more pink slips and greater off-shoring of labor, than any other American industry.  As for the safe loving embrace of the welfare state he promises displaced workers…. it seems that many of Mr. Rattner’s friends, who have the most to gain from automation, are moving their businesses offshore in the latest tax dodge called “inversions” (because they don’t want to pay for the social state that Clintonian Democrats advocate, as a substitute for gainful employment and a living wage). 

Seems that many CEOs have seen the future, and while robots and A.I. bodes well for their income statements, automation does not bode well for the middle-class nor future growing ranks of unemployed and underemployed in need of government assistance; and these CEOs and their companies are, technically, fleeing offshore (to dodge paying taxes), while enjoying all the benefits and protections America has to offer.

So to say, Mr. Rattner’s piece is self-serving, is as big an understatement, as automation and resulting unemployment are inevitable.  Mr. Rattner’s op-ed piece appears to have run as a direct counterpoint to Mr. Skidelsky’s piece, which ran in Project Syndicate (an economics and global policy website).  Mr. Skidelsky’s write up is entitled: The Rise of the Robots.

Skidelsky, Keynes and a Paradigm Shift:

Mr. Skildelsky, too, has seen the future, and unfortunately, it’s not very bright for human labor, at least in the short run.  Quoting The Master, he states:  “But it is hard to resist the conclusion that ‘technological unemployment,’ as John Maynard Keynes called it, will continue to rise, as more and more people become redundant.”

Other salient points made in The Rise of the Robots:

On the contrary, it must be right in the very long run: sooner or later, we will run out of jobs.

But technological progress is now eating up the better jobs, too. A wide range of jobs that we now think of as skilled, secure, and irreducibly human may be the next casualties of technological change.  As a recent article in the Financial Times points out, in two areas notoriously immune to productivity increases, education and health care, technology is already reducing the demand for skilled labor. Translation, data analysis, legal research – a whole range of high-skilled jobs may wither away. So, what will the new generation of workers be trained for?

What is noticeable, though, is that structural unemployment – the unemployment that remains even after economies have recovered – has been on an upward trend over the last 25 years.

Hence, Mr. Skidelsky makes a direct counterpoint to those economist, who state that present unemployment and underemployment is cyclical.

Mr. Skidelsky’s proposed solutions to the conundrum that A.I. and machines present the wage earner are:  Option One, adopting the German model, that is to say, job sharing with the attendant reduction in hours worked and wages earned, per employee.  And Option Two, get ready for a great deal more “leisure.”  

Leisure?  How so?  How could anyone think about leisure if they are unemployed and without means?  Well, Mr. Skidelsky hints at it: 

This would be possible if the gains from automation were not mostly seized by the rich and powerful, but were distributed fairly instead.  Rather than try to repel the advance of the machine, which is all that the Luddites could imagine, we should prepare for a future of more leisure, which automation makes possible. But, to do that, we first need a revolution in social thinking.

The paradigm shift in “social thinking” that Mr. Skidelsky is referring to is already occurring.  In some U.S. political circles, Libertarian and Liberal, many have noted that the system (legal, political, economic, financial, and educational) is rigged.  If that is indeed true, it’s not hard to imagine some brave economist calling for the redistribution of ill-gotten wealth, if not flat out wealth confiscation.  Conservatives, reactionaries, and the one percent will immediately cry out that “communism” is, and forever will be, an absolute failure (Of course, these are the same individuals, who were in fact bailed out of the 2008 financial crisis by the U.S. government, and to this very day, by the Federal Reserve). 

But before we write off Mr. Skidelsky’s calls for greater “leisure” for all citizens, consider the following.

The last experiment in communism was in the former U.S.S.R.   That experiment did indeed, fail because humans were still required to provide the labor for that command economy.  The U.S.S.R. and communism failed because: If you pay a worker the same slave wages, whether they show up for work or not… they might as well stay home and get drunk on state subsidized Russian vodka. 

Machines, however, are unemotional.  Automation, as pointed out by the plastics C.O.O. at the beginning of this piece, do not respond to incentives or disincentives, or the desire to lay in bed or on a beach.  Machines don’t have “dead grandmothers,” or H.R. issues, and they work tirelessly, which means “the revolution in social thinking” that Mr. Skidelsky is writing about, is not only possible but it very well may be highly probable. 

Which further begs the question: Long before A.I. takes over, and the last worker shuts off the last light in a cube farm, will the 99% have to figure out what to do with the one percent and all their newly found wealth?

Monarchies were overthrown, globally, in the 18^th, 19^th, and 20^th centuries and their wealth was often confiscated and redistributed to the democratic state; could today’s “monarchs” (i.e. the one percent), in the neo-guilded age, suffer a similar fate?

Imagine.  Many of today’s CEOs, banks and private equity firms running around consolidating entire industries into monopolies and cartels, so as to guarantee monopolistic profits for the one percent; and perhaps, in the process, making these same monopolistic industries ripe and all too easy targets for nationalization, government and machine sponsored takeovers, and the redistribution of wealth in a more egalitarian manner (and entire corporations confiscated as reparations for: retroactive taxes dodged and owed, and a rigged and crony economic and political system)?

As stated on this page on more than one occasion, monopolies are creatures of the state, and little more than "socialism by private proxy."  Once machines takeover, the transition from private to public ownership is not hard to fathom.

Going totally high tech… one might imagine keeping these cartels and monopolies out of the hands of all too easily corrupted governments and politicians; but rather, would it be possible that these industries are placed into the hands of a public or non-profit trust to advance the public good, and could this public trust or non-profit, in turn, be run by a computer and A.I.?

Under current circumstances, democracy could become a direct threat to the one percent, which helps to explain Citizens United and McCutcheon SCOTUS decisions, corporations deploying inversions, and a gerrymandered House of Representatives.

Mr. Skidelsky hints at one possible vision of the future.  The question is will the financial elite and Mr. Rattner pull up, before destroying what remains of the free market?

Copyright JM Hamilton Publishing 2014

History is written by Winners…

History is written by Winners…

#53

When rich speculators prosper
While farmers lose their land;
when government officials spend money
on weapons instead of cures;
when the upper class is extravagant and irresponsible
while the poor have nowhere to turn-
all this is robbery and chaos.
It is not in keeping with the Tao.

-       Tao Te Ching, Lao Tzu (Stephen Mitchell)

By J.M. Hamilton 7-19-14

Random thoughts and musings this long, hot month of July, and in particular, how future generations will  – through the prism of time and futurity - view America, and today’s ruling elite.  My immediate guess is that today’s ruling oligarchs will not be viewed by successive generations favorably, and if our ancestors are looking down, do they shake their heads in shame and wonder?  Let’s examine the following current events to possibly gain a better perspective, and learn how history may be written and play-out.

Former Vice President Dick Cheney & the Failed War in Iraq

Dick Cheney’s advocacy for the war in Iraq is well known.  The history of lies, half-truths and misinformation told by the Bush Administration, to drag this country into the Iraq war, are by now well known.  Trillions of U.S. dollars will ultimately be wasted on the Iraq and Afghanistan wars, complete with thousands of U.S. war dead, and hundreds of thousands of Iraqi citizens killed.  The mission in Iraq was poorly defined, and executed from the beginning, and the Bush Administration in a last ditch effort hung its hat on a so-called  “surge” and one General Patreaus; but the “surge” was little more than a payoff to Iraqi Sunni and Baath Party insurgents.   When the payoffs ceased, and U.S. troops finally pulled out, the inevitable happened under a Shiite dictator: The country broke out into civil war.

Now, with Chancellor Cheney’s legacy and war are on line, and his epitaph nearly complete, this warmonger and his neo-conmen continue to clamor for an exercise in futility.  Fortunately, neither Republicans nor Democrats are listening, or buying what Mr. Cheney is selling.  The irony in all this is that Mr. Cheney dodged the Vietnam War, another failed nation building exercise, and served in the Nixon administration, along with one Donald Rumsfeld.  So if anyone should have known what a catastrophe Iraq would become, it was Richard.  Mr. Cheney evaded Vietnam with five draft deferments and was quoted by the W. Post as stating: “I had other priorities in the 60s than military service.”  Spoken like a true armchair quarterback, and an elitist.  I wonder if he’d feel differently if his two daughters were on the front line?

Probably not.

The Iraq war however, was never about protecting America or Americans, or spreading democracy.  Historians will be quick to note that Iraq sits on one of the largest deposits of proven oil reserves in the world, and Mr. Cheney, as the former CEO of Halliburton and Kellogg, Brown and Root (oil field and defense contractors) wanted at those reserves, and wanted those DOD contracts.  As this blog has pointed out on more than several occasions, America goes to war for oil, and to protect multinational and foreign sovereign interests.  Essentially, the nation’s fighting force, manned by the nation’s poor in today’s all volunteer military, were being sacrificed on the altar of war for multinational/KBR profits, to make the Sovereigns and Monarchs wealthier, and to protect global oligarchs’ assets.  Remember, Iraq had absolutely nothing to do with 9-11.  Fortunately, the U.S. has wised up to Mr. Cheney, and many of us wonder if he’d like to give up the heart he received, courtesy of the U.S. taxpayer he has so little regard for.  Republicans espouse fiscal conservatism and welfare cuts for those in need, but when it comes the DOD, the NSA, and warfare, the sky is the limit, even at the risk of running the nation into the ground, fiscally.

President Obama, in direct contrast to Mr. Cheney, has done everything in his power to keep this nation out of armed conflict, and has won geo-political conflicts time and time again, w/out the use of standing armies or nation building exercises.   Just like another President Mr. Cheney failed to learn from, named Ronald Reagan, who won the cold war w/out firing a shot.

The Chamber of Commerce and Exxon’s Love Affair with Dictator Putin – “Scary” Indeed

Like many of us, I too, work for corporate America, and I am proud of the job I am privileged to hold and the company I work for.  But too many corporations today, take a very “quarterly statement” view of the world.   Multinationals want all the privileges of a sovereign state, but none of the social responsibility.  Too many corporations and billionaires want the rights of the individual and to dictate U.S. domestic and foreign policy, like the monarchs of old, and they absolutely abhor attempts to hold them responsible for criminal conduct.  

Mega-corporations are unwilling to run for public office, at least yet. 

President Carlyle Group?   Maybe someday, but for now, better to manipulate and pay-off (make campaign contributions) Congress from the shadows, and engage in regulatory capture.

The arrogance and unmitigated greed of the Chamber of Commerce was on full display recently, when the Chamber lobbied Congress to back off on pursuing sanctions against Dictator Putin, one of the darkest despots in the world today.  The Chamber represents the interest of many U.S. multinationals, who are presently working in the former Soviet Union, under the regime of a communist thug and Ex-KGB agent (whose respect for human rights and the rule of law are non-existent).  Gee, did it ever occur to Exxon that prudent political risk-management might give them pause before leaping into Mother Russia?  And did Mr. Rex Tillerson, along with the Chamber, really think he could dictate U.S. foreign policy, and help finance the Russian military? 

Why not.  Multinationals have been dictating policy to the U.S. government for years, particularly Republican administrations, but Demos too.  Far be it for Exxon and the Chamber to lobby Dictator Putin, directly, and demand that he abandon Crimea, the Ukraine, and respect human rights.  Instead the Chamber followed and lobbied via the path of least resistance, our crony – gerrymandered – U.S. congress (essentially doing Putin's bidding).  That the policy dictated by Exxon and the Chamber is often myopic, greed-centric, and all too often inimical to the interests of the vast majority of Americans, let alone citizens of the world….. well, that’s business as usual.  The Chamber and Exxon are so used to having their every word executed upon by our government officials, as they work from the periphery, the shadows and K Street.  Exxon also, courtesy of Mr. Cheney, made a big investment in Iraq…. Only to, recently, bail and flee.  How long before multinationals, and the Chamber, flee the former U.S.S.R…. just like British Petroleum did sometime ago?

Don't forget Exxon, along with Big Oil, receives billions in tax subsidies... that's billions that you, Dear Taxpayer, pay for out of your own pockets. 

And what will the historians say about the integrity and responsibility of the Chamber's and Exxon's deal with, and advocacy for, the Devil?

Nine Monarchs

The founding fathers did a terrific job on many aspects of the constitution.  The whole checks and balances thing, to this day, plays out in many instances.  Perhaps too much so - given Congress’ failure to act, in the hopes of showing up a President that they absolutely loathe.  What were the founders possibly thinking, however, when they created the judicial branch?  If there ever was an ultra-elitist and most undemocratic body in our government, than this is it, SCOTUS.  These nine justices can sit on this court for generations, pull “stuff” out of the air, contradict their own rulings interminably, revise their own rulings behind the scenes and after the fact (w/out notice to the American people, let alone legal scholars); and continually, have found new ways to hold back society, women, minorities and the human race. 

They are all liars… oh sorry, meant to say lawyers.  If there was ever a profession that needed to be placed upon a leash, it is the legal profession.  Shakespeare was quoted in Henry VI , “The first thing we do, let’s kill all the lawyers.”  A thought that must have crossed many an American’s mind, whom ever had to sit in a U.S. court of law.  (That’s not say there aren’t quality legal professionals out there with morals and scruples; I’ve met several over the years.) The founding fathers were fleeing persecution, tyranny, and King George’s autocracy… why on earth, give SCOTUS unlimited power?  Or is it simply a matter of this court growing more powerful over the span of time, and granting themselves powers un-enumerated by the constitution?  Maybe our founders never anticipated the life expectancy of today’s SCOTUS members, vis a vis 1787’s life expectancy.

This most recent coven (The Roberts Court) has done more damage to the rights of man, and expanded exponentially the rights of corporations and wealthy individuals to usurp the democratic process, then any court heretofore.  The hubris and arrogance surrounding five of these nine monarchs is astounding.  If there was ever a body in need of term limits, this is it; if there ever was a crime perpetrated by our founding fathers against the American people, than this is the place.  As it stands today, future historians might suggest SCOTUS has become a tool of the plutocracy.  Citizens United, McCuthcheon…. These SCOTUS decisions spell out the death of democracy, and an accelerated race to destroy the middle-class.

By way of example, Justice Scalia was appointed by Ronald Reagan nearly thirty years ago to the most powerful court on the planet, and is quite possibly the most reactionary politician, within the federal government today.  How grounded is this man, or sane for that matter – just two years shy of being an octogenarian, and what possibly could this man know about the reality 99% of Americans face daily?  (The CIA fact book estimates the median age of Americans at 37.6 years of age.  This means half of all Americans are at least forty years, or more, younger than Justice Scalia.  Chew on your olive for moment and ponder that fact, as you sip on your extra dry martini this summer weekend.)  And yet, Justice Scalia, when his vote is tied to four other justices, has the power to usurp democratically elected congressional and executive branches, purely on a whim, and all too often in favor of the true puppet masters, the oligarchs.

A Destroyer of the Economy and Opportunity: Private Equity Equals Bankruptcy!

Capitalism's claim to fame is that it creates jobs, opportunity, and most effectively and efficiently produces goods and services (and I still believe that); and yet, there is a class of business in our society today that makes a killing for an elite few by eliminating jobs, crushing opportunity, and after maxing out a company's credit line - all too often runs said company into bankruptcy.  I write of course, of private equity.  The fact that many companies, who are owned by private equity firms, ultimately, end up in bankruptcy court is not in dispute. 

The NY Times reported that 50% of the bankruptcies reported in 2008 were either presently owned by private equity (PE) firms, or previously owned by PE firms.  No greater icon of capitalism than Warren Buffett was recently quoted as stating that he rued the day he ever heard of TXU (aka Energy Future Holdings), which is one of the largest PE bankruptcies, if not the largest, reported to date.

PE consistently burns investors, businesses, employees, and on a macro level is highly deleterious to the tax base and the overall economy.  And yet, because these pirates are hugely wealthy, they are all too often celebrated.  That there business is successfully based upon unseemly amounts of debt, and leveraging a rigged tax code, is beside the point.

What will future generations say about a business model that destroys opportunity, jobs, and is the primary catalyst for globalization and M&A activity, that all too often leads to industries dominated by monopolies and cartels?  Cerberus, Apollo, Carlyle Group, KKR, Blackstone.... These folks do not liberate companies, they destroy them.

The fact that one of these fat cats can buy up a copy of the Magna Carta, or an original copy of the Declaration of Independence, and place it on display for the public view.... Does not for one second atone for the economic carnage caused by private equity, the lives destroyed, and the careers cut short.  Not to mention PE’s ruinous results for our Federal government, which is left holding the bag with a diminished tax base and higher relief payments for displaced workers.  

Private Equity is nothing to emulate and does not even qualify as capitalism, it is something to be shut down and abolished.  Interestingly enough, some GOP members have not learned from Mr. Romney's example, and now it appears that Mr. Jeb Bush is involved in the same business practices.

Which raises the question, just how serious is Mr. Bush about a presidential candidacy, or is his interest in seeking the republican nomination more about hiking up his speaking fees?

Tax Cheats,  A-Hoy!

"Double Irish, Dutch Sandwich, Check the Box," and private equity's personal favorite, "Carried Interest," these are all the names of tax dodges employed by wealthy Americans, corporations, and multinationals to greatly reduce their tax burden, if not eliminate it altogether.  Which means you, Dear 99%, get to pay a significantly higher tax rate so as to pay for the shortfall that occurs when the rich don't pay their equitable share.  The wealthy in turn re-invest the tax dollars they should have paid in to ventures, such as: undermining democracy (i.e. buying off - sorry, meant to say making "campaign contributions" to -  politicians for political support), lobbying for tax holidays and maintaining and expanding additional tax loopholes, and M&A activity - which as described above kills jobs, opportunity, and causes wages to stagnate.

All of this I described in a piece a little over a year ago, entitled:  Your Tax Dollars at Work.

Now I would argue that not paying taxes - leaving your fellow Americans left to pay higher taxes on your tax-dodging behalf - is not only quintessentially Un-American, but I think we can argue that it is near treasonous (as it leaves our federal government in a perilous fiscal state).  Many of these corporations employing these dodges earn millions, if not billions,directly from government contracts: G.E., Booz Allen owned by Carlyle Group, assorted defense contractors, and medical care providers.  And members of Big Oil, who enjoy tax subsidies - despite making billions - are probably one of the primary beneficiaries of our extravagant DOD and attempts to police the world. And then there's Big Pharma, who not only charges full price for their medicine in America (perhaps the only Western Democracy where this is allowed, which is a huge expense to the nation), but also deploys the latest tax loophole du jour, called "Inversion."

Inversion is where American companies (who enjoy: the rule of law in America; America's defense forces affording unprecedented protection; her crony political system - the best money can buy; and her captured courts, regulatory system and tax code) buy a foreign company, so that they can transfer their headquarters outside U.S. borders to avoid paying U.S. taxes altogether.

Leaving you, Dear Fellow Americans, left holding the bag, with higher tax payments, higher national debt, and decreased government services.  Here's a number to put on these tax cheats, the cumulative price tag on all this legalized corporate tax fraud is estimated by our own government to be $12 trillion over the next decade.

The only thing more Un-American than the companies who leave our shores to duck out on their tax responsibility, are the politicians in Congress, who voted these loopholes into place, and who are “paid” contributions not to reform our perfidious tax code.

The solution for inversion is easy.  If a company leaves America to dodge taxes… they should not be allowed to operate in the market that controls 25% of world GDP, the United States.  Inversion should equal a ban on operating within American markets.  These same companies who leave, should also have their patents and licenses revoked, and their U.S. assets sold to the highest bidder company, that operates in America, pays taxes in America, and hires Americans.  This same solution could be applied to American companies that want to offshore their labor.

In brief, the political Left doesn't have to make the case for wealth confiscation.  Companies who leave U.S. shores to dodge paying taxes, are making the case for wealth confiscation, themselves. 

Unfortunately, I could continue further writing about the moral decline of some American corporations, but I'm running out of time: A car company, bailed out by the American taxpayer, who makes a deadly product, and then ignores the problem…. And on, and on, and on!

So let’s go back now, to the primary premise of this piece, and based upon the evidence above, try and learn how future generations (e.g. our children and grand children) might view us?    

Well, not very well, unfortunately. 

GOP presidential candidate Romney and SCOTUS believe corporations are people.  Granted not all corporations are the same, and “no,” not all corporations are evil.  Like ordinary citizens, the picture on corporations is mixed.  There are many well meaning companies and businesses out there, who want nothing more than to provide a quality/safe product or service, and make a reasonable profit.  And there are many who do just that.  Business in America is as American as apple pie.  

However, perhaps far too many businesses, corporations, and multinationals are run by management teams and/or board of directors that would appear to have sociopathic tendencies, or are perhaps anti-social, or equally treacherous, maybe are Anti-American.  Before affording an analogy tied into the examples above as proof, let’s define “sociopath,” shall we? 

The Diagnostic and Statistical Manual of Mental Disorders (DSM IV-TR) is another widely used tool for the diagnosis and it defines sociopath traits as:

A) Pervasive pattern of disregard for and violation of the rights of others occurring since age 15 years, as indicated by three or more of the following:

1.    Failure to conform to social norms with respect to lawful behaviors as indicated by repeatedly performing acts that are grounds for arrest

2.    Deception, as indicated by repeatedly lying, use of aliases, or conning others for personal profit or pleasure

3.    Impulsiveness or failure to plan ahead

4.    Irritability and aggressiveness, as indicated by repeated physical fights or assaults

5.    Reckless disregard for safety of self or others

6.    Consistent irresponsibility, as indicated by repeated failure to sustain consistent work behavior or honor financial obligations

7.    Lack of remorse as indicated by being indifferent to or rationalizing having hurt, mistreated, or stolen from another

B) The individual is at least age 18 years.

C) There is evidence of conduct disorder with onset before age 15 years.

D) The occurrence of antisocial behavior is not exclusively during the course of schizophrenia or a manic episode.

 

Now, if corporations are people, and an ordinary American was to be a proponent of say: unlimited warfare (quite possibly for personal gain), like I don’t know, former Halliburton CEO, Mr. Dick Cheney; and this same “American” person was to back (provide U.S. technological support and financial assistance to) one of the most notorious dictators on the planet, named Putin ---- like the Chamber of Commerce and Exxon; and this American person destroyed businesses, jobs and economic opportunity by maxing out corporate credit lines, and sending acquired companies, repeatedly, into bankruptcy, as Private Equity does everyday; and this “American”/possible Sociopath/possible Psychopath refused to pay taxes, but reaped all the rewards of their citizenship (and in fact reaped significant wealth from their relations with government officials, SCOTUS, and a rigged tax code)…. Like various U.S. companies deploying tax inversions and tax dodges from a loophole laden tax code…… Well, we’d probably throw this individual in jail for life?   

In fact, where I came from, Texas, some people might just dispense with the jail time altogether, and find themselves a rope.  (Personally, I'm not a fan of frontier justice.  The worst punishment is to let someone rot in a corporate run U.S. prison, and deal with the U.S. courts.  Welcome to the 10th ring of hell.)

Or maybe, Americans would make this person Vice President of the United States.

Yet, Mr. Romney assures us, as does SCOTUS, that corporations are people, too.  Apparently, some corporations can get away with unlimited warfare, advocate bombings for no sane or rational reason (or based upon a pack of lies), stealing national resources from sovereign peoples, holding down women and minorities, cheating on taxes, and running businesses into the ground, and crushing the economy for personal gain (while thumbing their nose at America and planting their freak-flag on foreign soil).

That my dear friends, is how our children and grandchildren are likely to view us, after this country has been thoroughly raped, sacked, and looted… and our kids and grand-kids are left with nothing, but a mountain of federal debt.  For not only are We The People the victims of these various nefarious acts, but we are also – in a democratic society – the enablers.

Many of us, my GOP friends in particular, love to blame the government for society's ills and problems, but perhaps it's time to take a very hard look at the enterprises and mega-wealthy individuals, who are the true puppet masters (and pull the strings on a congress - with a single digit approval rating, and SCOTUS).

They say that history is written by winners.  Well, if this is the future we are bequeathing our children, than I’m afraid we are all going to be viewed as losers, especially many of the wealthiest among us.

The wealthy and their minions will say this piece smacks of class warfare, and we can't have that; but no greater authority on the matter than Mr. Warren Buffett has said that the rich have been practicing class warfare on the 99% for decades.  Guess who won in the short run?

P.S.  

Here’s the Top Eight Reasons, we know we are in the middle of yet another Bubble caused by the Federal Reserve and Central Banksters, globally:

1)    Individual investors are flooding back into the stock market, at the market’s peak (a sure sign that the "pros" are about to take their winnings and leave).

2)    Private Equity executives talk about their returns and their market conditions, as being “biblical.”

3)    Junk debt is at record low interest rates, and bond offerings often afford no protective covenants or conditions.

4)    Business fundamentals and the economy are marginal at best, but the stock market continues to soar to record heights.

5)    M&A activity is red hot, fueled by cheap debt.

6)    There’s so much free money lying around, that the only thing CEOs can think of to do with it, are stock buybacks (again at a market peak?).

7)    Insiders are selling stock, not purchasing it. 

And the top reason we know we are in another Bubble:

8)    The Federal Reserve and Central Banksters deny that we are in a Bubble.  

They are always, allegedly, the last to know.  Fear not, however, there’ll be plenty of time to bail.  The market won’t falter until after the 2014 mid-term elections.

Copyright JM Hamilton Publishing 2014