Morality Play

 

The Nation’s Katrina Vanden Heuvel recently took part in a formal debate arguing against the resolution, “Good Riddance to the Mainstream Media”.

 

Her opening statement (part of a winning effort) describes the much-tarnished but still needed qualifications of the MSM; how it is the only vehicle for consistent investigative reportage, for confronting power, exposing corruption, filing transparency lawsuits, and how the collapse of regional newspapers correlates with signs of civic degradation like lower voter turnouts. While the MSM is fatally flawed and economically unsustainable, it’s still the only thing partially fulfilling those roles. So until we can develop a replacement, we have to lament the financial decline of the MSM just as much as we deplore its ideological sellout.

 

The economic deterioration of the business is certainly dire. According to reports, as of September weekday sales of print newspapers were down 10% over the previous year’s already depleted number. Ad revenue was down 28% percent from 2008, which was itself down 16.6% from the previous year. Beleaguered papers like the San Francisco Chronicle, Dallas Morning news, NY Post, Boston Globe, and USA Today were down as much as 25.8%. The NYT’s weekday circulation went below one million for the first time since the 80s. Truly, ”the two-decade erosion in newspaper circulation is looking more like an avalanche”.

 

In a vicious circle, as they cut back on content to save money, they lose more readers. (I can offer the personal anecdote that I stopped getting the Newark Star-Ledger (down 22.7%) for that reason. The old regional and local news value wasn’t there anymore. It was becoming more like an AP wire with a few New Jersey stories tacked on. Not to mention more and more frequent delivery SNAFUs.)

 

Vanden Heuvel mentions this in her statement:

 

[W]e’ve chronicled the msm’s corporate consolidation which –through the gutting of newsrooms in quest for ever higher profit margins–contributed to the journalistic crisis we confront today.

 

I would go further and say that the ideological capture I mentioned above is not only driven by this consolidation but contributes to the erosion of the audience, as the people increasingly realize how the MSM is only the flunkey of the power elites and tells only the story according to those elites.

 

Today’s (11/11) NYT business page has a bizarre specimen: “Under attack, Fed chairman studies politics”, by Edmund Andrews (of personal financial disaster fame). 

 

You have to see the fun in something like this to leaven the rage.

 

For months, he had warned — without anyone on Capitol Hill appearing to listen — that a seemingly innocuous bill to let Congress “audit” the Fed would gravely threaten the central bank’s independence.

 

Uh oh, there’s ominous foreshadowing. “Seemingly innocuous”; if only they’d listen to our brave, lonely hero’s warnings…

 

Voters had become suspicious and unnerved by the Fed because of its trillion-dollar efforts to bail out the financial system, Mr. Frank warned. If the Fed really wanted to survive the disgruntlement in both parties, he continued, Mr. Bernanke would have to step back and let him devise a compromise.

Reluctantly, the Fed chairman agreed to reduce his own visibility on the issue and let Mr. Frank take the lead.

 

Maybe it wasn’t literally a smoke-filled room (they’re all quite PC about that nowadays). But it’s still the age-old struggle of the wise mandarins against the stupid, insolent poltroons. The people get especially obnoxious when they become “voters” in a “democracy”. Kissinger would sympathize.

 

On one front, the Fed faces populist anger from both left-wing Democrats and right-wing Republicans about its power and secrecy.

 

Right. None of the criticism of the unaccountable, reckless, scofflaw Fed (from the Left, at least) is based on policy and democracy concerns. Gosh darn that soiled rag-wearing “populism”.

 

Mindful that Democrats now control the White House and Congress, Mr. Bernanke put up virtually no opposition to President Obama’s proposal for a new consumer agency that would take over the Fed’s authority over consumer lending issues. Similarly, he avoided a bruising turf battle by agreeing that the Fed would share responsibility with other regulators to monitor systemic financial risk.

 

This is a lie. The Fed has aggressively sought to protect and extend its turf throughout.

 

And if Bernanke didn’t know all along that Obama and Frank had his back on gutting the CFPA, so that he should just keep his mouth shut and let them handle the politics, he really is a political idiot in need of guidance.

 

Andrews goes on to describe how Bernanke protested against the Audit the Fed bill in “apocalyptic terms”, how critical Fed secrecy and autocracy are to the continued existence of civilization. It’s all the same terrorist language which has become all too familiar to us.

 

Directly contradicting what he said in the previous paragraph, Andrews also writes about how the “steely” Fed fought fiercely for its “role as undisputed overseer of financial institutions deemed ‘too big to fail’”.

 

In other words, in spite of himself Bernanke confirmed the need for the auditing bill. And for Frank to take him under his political tutelage.

 

What Mr. Bernanke insisted on, and what Mr. Frank vowed to prevent, was Congressional interference in Fed deliberations over monetary policy.

But whenever discussion got more specific, Fed officials insisted that monetary policy extended to many if not most of the Fed’s emergency credit programs.

Mr. Frank said he would “wall off” deliberations on basic monetary policy, and delay the release of information about the Fed’s financial operations to prevent traders from capitalizing on its moves.

Exactly what that means in practice remains unclear. Mr. Paul says he is delighted that his bill has gotten so far. But details matter, and Fed officials say they are quietly confident details will break their way.

 

It’s very clear what this means. They’re going to keep the Fed/Wall Street casino party going. With this puff piece Andrews is doing his part in the eternal struggle against the people’s rights and well-being.

 

Even where they weren’t self-selected ideologues in the first place, most business journalists are by now, pretty much of necessity, cheerleaders for the growth ideology, market fundamentalism, corporatist politics. The coverage becomes ever more corporate friendly, told from the point of view of the rich, right down to the most petty details and annoyances of their lives. The economy is represented as a bundle of metrics, leading indicators like “growth” and the various exchanges, which mostly measure how well antisocial parasites are collecting rents. Everyone in government, business, and MSM agrees, this is “the” economy.

 

Meanwhile the real economic measures which don’t look good (and have not since the 90s) are relegated to the ghetto of “lagging indicators”. This term still reflects the thousand-times-refuted-but-never-relinquished trickle down ideology.

 

When the lagging jobs indicator becomes too disastrous to dismiss, as it now has, with real unemployment at 17.5% and even the rigged anodyne U3 number over 10% (both of these at their highest in close to thirty years), the nabobs of positivity are left helpless. They can only gawk and stutter about how somehow the administration and Wall Street will figure out something.

 

So the MSM has been doing its best with the increasingly crappy material corporate fundamentalism hands them, and does the gratitude at least come through in the advertising rates? As I mentioned earlier, these continue to decline. Even where advertising volume is creeping back up, it’s mostly according to a cheaper ad run strategy, so MSM ad revenues are still moribund. How’s that “trickling down” for ya?

 

So all the MSM’s prostitution has availed them little. As they say, “the revolution devours its own children”.

 

What went wrong? Weren’t they serviceable villains enough?

 

Perhaps it’s not just the advertising model. Perhaps there’s a hopeful sign here. Perhaps the people are finally starting to see through this charade. Perhaps they’re coming to realize that the MSM is not telling our story, but the story of those who affilict us, and for those who afflict us, and telling it against us, in order to further hurt us.

 

Recently the NYT’s David Carr, one of Vanden Heuvel’s teammates at the debate, wrote of the malaise of the business press.

 

He discusses how, with the green shoots allegedly sprouting all over the place, the attitudes are getting bullish again. But what does this mean for the business press itself?

 

So you might expect the business press to be striking up the band and restocking the cigar cabinet. Instead, Forbes, a magazine that sells a beau idéal of capitalism, announced last week that it was cutting a quarter of its already decimated staff. The Wall Street Journal’s Boston bureau — historically a hothouse of game-changing business coverage — is being closed.

Fortune magazine had already cut back to 18 issues a year from 25 and this week will be whacking anew at staff along with other Time Inc. magazines. BusinessWeek was sold for parts to Bloomberg a few weeks ago.

So, while the business of business may be back, the business of covering it with heroic narratives and upbeat glossy spreads most certainly is not. And probably never will be.

 

Carr mentions the usual suspects, advertising, the shrinking pains of cost cutting and so on. But he ponders whether the fundamental premise has lost its mojo.

 

But it isn’t just that Cadillacs aren’t selling like they used to. It’s also that the people who made them, bought them and drove them seem far more mortal and less interesting than they did just a few years ago.

Business magazines used to relish explaining all the complex new financial instruments that Wall Street was using to pile up profits. But now it has become clear that the titans who were wielding those obscure tools had no idea what they were doing — even less an idea than the journalists in some cases.

And the fact that they needed billions and billions in taxpayer money to bail them out has left the former Masters of the Universe with all the social cachet of welfare recipients. In fact, people on welfare seem more deserving now that some of the rescued have come roaring back just in time for year-end bonuses.

 

They don’t make ‘em like they used to. If this media too has to be star-driven, like all American media, they’re facing a real problem now that Americans are finally starting to wise up.

 

It was always stupid to idolize businessmen as if they were celebrity entertainers, but as long as Americans believed they were all getting richer, and believed in the Randian myth of the rugged, self-reliant capitalist, such idolatry could provide the basis for a wide press circulation. If that readership is now evaporating as fast as it should be, this most corporate of media may be in trouble.

 

It’s not that the public has lost its appetite for stories about handsome men in three-piece suits who clink whiskey glasses at the end of a long, not-so-hard day while talking smack about their female co-workers. But “Mad Men” pretty much sates that need. The businessman as Colossus is by now a nostalgic impulse…

But if the consequences are removed from the equation and the feds are there to cushion any downside, riding the upside seems less magical. Writers and editors who cover business now know that the jig is up, that those bespoke suits are put on one leg at a time by men that seem far less Olympian than they once did….

Business coverage has been, at its heart, aspirational, a brand promise that suggests that if you clip the right articles, internalize the right rhetoric, then you too will end up as one of the shiny, happy people striding boldly across the pages of magazines with names like Fortune, Money, Fast Company and Wired. But nobody is going to read, let alone aspire to, magazines called Middled, Outsourced, Left Behind and Clobbered. It’s as if American business has lost custody of its own story….

But people could be forgiven for not believing in business, or business news, the way they used to.

If a recovery is under way, most Average Joes are not buying in or benefiting so far. On Friday, the Commerce Department said consumer spending actually dropped in September, the first time it had gone down in five months, and the Dow buckled 2.5 percent at the end of trading last week. Consumers clearly lack confidence in the recovery, and, by extension, the people who are supposed to make it happen. And doubt doesn’t sell magazines.

 

In The Joyful Science Nietzsche made an interesting remark on the rise of socialism. He knew little about economics or politics (and cared less) but thought he could descry a spiritual and aesthetic factor.

 

Soldiers and leaders still have far better relationships with each other than workers and employers. So far at least, culture that rests on a military basis still towers above all so-called industrial culture: the latter in its present shape is altogether the most vulgar form of existence yet. Here one is at the mercy of brute need; one has to live and has to sell oneself, but one despises those who exploit this need and buy the worker. Oddly, submission to powerful, frightening, even terrible persons, like tyrants and generals, is not experienced as nearly so painful as is this submission to unknown and uninteresting persons, which is what all the luminaries of industry are.

What the workers see in the employer is usually only a cunning, bloodsucking dog of a man who speculates on all misery; and the employer’s name, shape, manner, and reputation are a matter of complete indifference to them. The manufacturers and entrepreneurs of business have been too deficient in all those forms and signs of nobility that alone make a person interesting. If the nobility of birth showed in their eyes and gestures, there might not be any socialism of the masses. For at bottom the masses are willing to submit to slavery of any kind, if only the higher-ups constantly legitimize themselves as higher, as born to command – by having noble manners. The most common man feels that nobility cannot be improvised and that one has to honor in it the fruit of long periods of time.

But the lack of higher manners and the notorious vulgarity of manufacturers with their ruddy, fat hands give him the idea that it is only accident and luck that have elevated one person above another. Well then, he reasons: let us try accident and luck! Let us throw the dice! And thus socialism is born.

 

While that may fall short of Marxian rigor, I think there is some truth to it. The people have always sought to find ways to idolize and romanticize their socioeconomic “betters”, if only to rationalize their own failure to rise up and assert themselves. But if the faltering business press is a different kind of leading indicator, perhaps this idolatry is no longer tenable, and a different sort of rational process is commencing.

 

Arendt, in Origins of Totalitarianism, described an interesting historical moment similar to our own.

 

The historian is in most such cases confronted with a very complex historical situation where he is almost at liberty, and that means at a loss, to isolate one factor as “the spirit of the time”. There are, however, a few helpful general rules. Foremost among them for our purpose is Tocqueville’s great discovery (in L’Ancien Regime et la Revolution) of the motives for the violent hatred felt by the French masses for the aristocracy at the outbreak of the Revolution – an outbreak which stimulated Burke to remark that the revolution was more concerned with “the condition of a gentleman” than with the institution of a king.

According to Tocqueville, the French people hated aristocrats about to lose their power more than it had ever hated them before, precisely because their rapid loss of real power was not accompanied by any appreciable decline in their fortunes. As long as the aristocracy held vast powers of jurisdiction, they were not only tolerated but respected. When noblemen lost their privileges, among others the privilege to exploit and oppress, the people felt them to be parasites, without any real function in the rule of the country. In other words, neither oppression nor exploitation as such is ever the main cause for resentment; wealth without visible function is much more intolerable because nobody can understand why it should be tolerated.

 

Substitute the lost belief in the economic and social function of Wall Street and the rackets, which we now know to be 100% fraudulent, destructive, and parasitic, for the lost political prerogatives of the Ancien Regime, and we have the same dynamic. Tremendous, and utterly worthless, and purely malevolent, wealth concentration.

 

Lucretius felt the change of the world in his time, the great republic riding to the height

Whence every road leads downward; Plato in his time watched Athens

Dance the down path. The future is a misted landscape, no man sees clearly, but at cyclic turns

There is a change felt in the rhythm of events, as when an exhausted horse

Falters and recovers, then the rhythm of the running hoofbeats is changed: he will run miles yet,

But he must fall….

 

Robinson Jeffers, Prescription of Painful Ends

Bank Roundup 11/9

1. The week’s most important story was every week’s most important story, the jobs front. The new federal report was devastating:

 

With the release of the jobs report on Friday, the broadest measure of unemployment and underemployment tracked by the Labor Department has reached its highest level in decades. If statistics went back so far, the measure would almost certainly be at its highest level since the Great Depression.

In all, more than one out of every six workers — 17.5 percent — were unemployed or underemployed in October. The previous recorded high was 17.1 percent, in December 1982.

This includes the officially unemployed, who have looked for work in the last four weeks. It also includes discouraged workers, who have looked in the past year, as well as millions of part-time workers who want to be working full time.

The official jobless rate — 10.2 percent in October, up from 9.8 percent in September — remains lower than the early 1980s peak of 10.8 percent.

 

The failure of the banks and the bailouts is manifest, absolute. No one’s even trying to argue that things could be worse if we hadn’t wasted all our resources, shot our last bolt, to bail out a handful of high-rolling gamblers instead of using that money for direct stimulus at the pyramid’s base, Main Street.

 

We don’t need the big banks. We never did. We didn’t need to bail them out. We’d be vastly better off if we hadn’t. 

 

Think of what $24 trillion worth of direct investment in America could have accomplished, instead of throwing it away to prop up the insolvent rackets. No greater crime has ever been committed in American history.

 

Meanwhile, in Europe they’re coming to realize that we don’t “need” these big bank structures for anything. RBS, Lloyd’s, and Northern Rock are all being forced to divest chunks of themselves as the price of their bailouts.

 

It’s not anywhere near perfect, but it’s a meaningful start. It shows governments which aren’t completely corrupt, and an ability to learn from experience. Both are clearly dead in America.

 

2. Instead, America continues to burn itself alive. After all we’ve been through, what’s the overriding impetus in Congress? Not to enact reform, but to gut what little regulation does exist.

 

The target this week was the Sarbanes-Oxley accounting reform law.

 

Sarbanes-Oxley was passed, almost unanimously, by a Republican-controlled House and a Democratic-controlled Senate. Now a Democratic Congress is gutting it with the apparent approval of the Obama administration.

The House Financial Services Committee this week approved an amendment to the Investor Protection Act of 2009 — a name George Orwell would appreciate — to allow most companies to never comply with the law, and mandating a study to see whether it would be a good idea to exempt additional ones as well.

 

By today’s standards the enactment of S-B sounds nothing short of miraculous. Passed by a large bipartisan majority just five weeks after the Worldcom scandal broke, today it sounds like the Simpsons episode where Lisa’s letter of disillusionment ends up getting her corrupt Congressman stung, arrested, indicted, and expelled from Congress all on the same day.

 

They’re going to exempt all companies worth less than $75 million and mandate a “study” to justify exempting those under $250 million. The fraudulent pretext is that reality-based accounting is too onerous for “smaller” firms, when in fact by now everyone is used to it and has no problem with it other than that it forbids them to lie.

 

The hostility of Congressional Dems to responsible accounting standards is epidemic. These are the same criminals who forced the FASB to gut mark-to-market and replace it with the so-called “mark-to-management” fantasy-based measure.

 

 

Another failure of the rule of law was reported by the NYT’s Gretchen Morgenson on Sunday, as she described how the holders of auction-rate securities have been left unable to redeem them as the vaunted “auctions” failed early in 2008.

 

Towns, student loan racketeers, tax-exempt structures like hospitals, and others issued these securities, whose interest rates were supposed to be set by weekly auctions, where the securities would be bought and sold.

 

Now that the music stopped, the auctions failed, and the end holders were left stuck with garbage paper, they’ve been trying to sue the brokers. But except in a few states who take regulation seriously, they’ve gotten nowhere.

 

This is because of the Private Securities Litigation Reform Act of 1995 (a gift of the Clinton/Emanuel NAFTA policy). This “law” sets up a Catch-22 whereby in order to have standing to sue certain kinds of finance sector con-men, you have to demonstrate a priori the specific information you can usually obtain only during discovery at trial. It’s a legal trick to place certain crimes beyond the reach of the law. Worthy of Kafka.

 

The law is working the way the Republicans and Democrats intend it to work. So far 23 class action suits over these auction rate securities have been dismissed. In fact, complainants are having better success in the privatized arbitration system set up by the industry itself.

 

 

Finally, as another contrast between the semi-serious Europeans and the childish/psychotic Americans, at the recent G-20 conference in Scotland Gordon Brown suggested some kind of Tobin tax to insure against systemic crashes. Geithner at first strongly objected, eventually grumbling that he wanted to wait for the IMF’s recommendations due next Spring.

 

Hey, don’t be too hasty. No hurry.

 

3. Floyd Norris called it “the worst idea of 2009.” Indeed, it was so bad an idea that even the Treasury Dept rejected it. But it was typical for the bank rackets.

 

This typical idea was that Goldman Sachs would buy tax credits from Fannie Mae at a discount. Because FNM is an utter ward of the state, it doesn’t have even the potemkin profits which could enable it to use a tax credit.

 

But Goldman does have these phony profits (all of it from speculation and manipulation using free Fed money), so it wanted to screw its taxpayer benefactor again by buying the credits. The obnoxious justification from the taxpayer point of view was supposed to be that this would help Fannie’s balance sheet.

 

But since they’d pay a discount and then redeem the full value of the credit, the transaction would constitute a loss to the taxpayer. That’s typical bank gratitude for you. As I said, even Treasury was too embarrassed to allow this. (BTW, cuddly supposed non-bad guy Warren Buffett also wanted in on this scam.)

 

(As Norris points out, the existence of this tax credit is also an example of how alleged capitalist “efficiency” is really corporatist looting and political cowardice. The point is to stimulate investment in low-income mortgages. It would be much cheaper for the government to directly subsidize this goal. But using rentier middlemen allows some loot to be stripped and absolves the government of having to make an “expenditure”, thereby avoiding some of the political hassle from the anti-spending shriekers, who are really only concerned about conveying the loot. The leaseback scheme I wrote about last week, which is now blowing up, is another example.

 

Here you see examples of how structurally based policy and reform is not only morally sound but pragmatically less expensive and more effective. The same principle applies at every level, especially the biggest and broadest.)

 

Goldman cut quite a figure in the media this week. The McClatchy stories detailed how Goldman systematically sold securities it was betting against at the same time.

 

In 2006 and 2007, Goldman Sachs Group peddled more than $40 billion in securities backed by at least 200,000 risky home mortgages, but never told the buyers it was secretly betting that a sharp drop in U.S. housing prices would send the value of those securities plummeting.
Goldman’s sales and its clandestine wagers, completed at the brink of the housing market meltdown, enabled the nation’s premier investment bank to pass most of its potential losses to others before a flood of mortgage defaults staggered the U.S. and global economies.

Only later did investors discover that what Goldman had promoted as triple-A rated investments were closer to junk.

Now, pension funds, insurance companies, labor unions and foreign financial institutions that bought those dicey mortgage securities are facing large losses, and a five-month McClatchy investigation has found that Goldman’s failure to disclose that it made secret, exotic bets on an imminent housing crash may have violated securities laws…….

McClatchy’s inquiry found that Goldman Sachs:

Bought and converted into high-yield bonds tens of thousands of mortgages from subprime lenders that became the subjects of FBI investigations into whether they’d misled borrowers or exaggerated applicants’ incomes to justify making hefty loans.

Used offshore tax havens to shuffle its mortgage-backed securities to institutions worldwide, including European and Asian banks, often in secret deals run through the Cayman Islands, a British territory in the Caribbean that companies use to bypass U.S. disclosure requirements.

Has dispatched lawyers across the country to repossess homes from bankrupt or financially struggling individuals, many of whom lacked sufficient credit or income but got subprime mortgages anyway because Wall Street made it easy for them to qualify.

Was buoyed last fall by key federal bailout decisions, at least two of which involved then-Treasury Secretary Henry Paulson, a former Goldman chief executive whose staff at Treasury included several other Goldman alumni.

 

They bought the mortgages from predatory lenders, securitized them, moved them around to evade the law, aggressively foreclosed on the hapless victim borrowers, got a customized bailout (Lehman allowed to fail; cushy all-upside bank holding company status (where they were never held to the restrictions); a direct $12.9 billion giveaway laundered through AIG), $23 billion altogether in bailouts, heading past $50 billion in 09 revenue, $20 billion for ”bonuses”, and God is specifically on their side. Pretty good.

 

No wonder they lost money only one day in Q3, and only twice in Q2. (God must’ve been having a bad day.)

 

The McClatchy piece includes plenty of debate on the legalities of Goldman’s securitization scam. It just goes to show how corrupt the law is. Any normal person would look at this and immediately agree with economist Laurence Kotlikoff, “This is fraud and should be prosecuted.”

 

4. As always, there were plenty of antics that transcended normal rent-seeking and reached the level of derangement, as these criminals lose all sense of restraint even for the sake of political show. I already discussed some of them here.

 

One new outrage was how Goldman, JPM, Citi and others were blessed with allotments of the scarce H1N1 vaccine.

 

As Naked Capitalism’s Yves Smith put it:

 

It should come as no surprise that those at the top of the food chain get preferential treatment on all levels. But this still stinks to high heaven. Employees of the Goldman, the Fed, Citigroup, and other banks are getting H1N1 vaccine allotments out of proportion to what can be justified from a public health standpoint. In particular, Goldman has gotten more than Lenox HIll hospital, which needs it not just for the sick but more important, for workers (not only does the public need to keep front-line health care workers in as good shape as possible, but if they get the infection, they become disease vectors fast, given the number of people they see).

 

Healthcare workers are supposed to dispense these only according to CDC guidelines for high-risk groups. But it’s absurd on its face to think these rentiers won’t, if they think it helpful, expropriate these allotments the same way they do every other resource. That’s what they do, period. You cannot regulate them.

 

Of course, private corporations should never be dispensation nodes for a vaccine. Even now there are plenty of public nodes available. So clearly the only reason to do this was to politically satisfy the likes of Goldman.

 

(Besides, if you were really going to use a company in good faith, wouldn’t you repose the allotments at a factory or some other place where real American workers could benefit from it, rather than the utterly worthless, utterly expendable parasites at Goldman?)

 

5. Is there any there there for the real economy regarding the stock market’s rally? Not according to a new post by George Washington. He comments on a Daniel Gross Slate piece which finds that the domestic fundamentals don’t justify the stock surge. Domestic consumption and revenues are down.

 

Instead, multinationals headquartered in America are collecting the bulk of their profit overseas. The Dow, the NASDAQ, the SP 500, are weighted toward big globalized corporations, not Main Street. They’ve saturated the domestic market; in recent years ”growth” has been overseas. So the stock market could be a good Main St indicator only via trickle-down.

 

Gross: “It could be that the notion the stock market is an accurate gauge of the domestic economy’s temperature is outdated”.

 

Yes – the market rally is a Big Lie. The discrepancy is yet more proof for the already-proven fact that globalization does not benefit America.

 

It was always a bald lie that it would benefit American workers, and as we’ve seen in recent years its alleged benefit to “consumers” was also illusory. The American consumer was a construct of debt. Now that exponential debt has collapsed, this consumer has blown away in the wind.

 

(Walmartization was always conceptually incoherent when it claimed you could smash the worker yet still keep the same person as a healthy consumer. For some incomprehensible reason a lot of otherwise intelligent people tried to believe this manifest impossibility.)

 

The globalization scam was never anything but another form of the trickle-down scam. Yet even liberal economists mostly blathered about how it was “good for the economy”.

 

But all this ever proved is that there’s no such thing as the economy. Cui bono.

 

6. To wrap up with something stupid from MSMland. This NYT article describes the cultural reaction in the finance and business world to the recent insider trading busts.

 

But instead of taking the tone that if the law is being enforced then criminals better stop committing crimes or at least be more careful, the piece basically depicts them as decent people now caught up in a Kafkaesque labyrinth.

 

For executives in these two worlds, passing along information and gossip is a way of life and a necessity for business. But many executives have begun watching their words in recent weeks. Authorities who sounded an alarm for corporate America now publicize their use of tools like wiretaps and confidential informants once reserved for mob kingpins. That has given even simple conversations a maddening new complexity….

Nathan J. Muyskens, a government enforcement lawyer at Shook, Hardy & Bacon, said that clients had been asking him if they should send companywide e-mail messages reminding people not to say anything questionable, even a joke, on the phone. He said he told them they should…..

“I’ve heard that there have certainly been memos going out: ‘Think of the phone just as you think of your e-mail these days,’ ” he said. “We always say, ‘Think of that e-mail as being on the front page of The New York Times before you hit the send button,’ and now it’s exactly the same for the phone.”…..

Mike Kwatinetz, a former Wall Street technology analyst and now a venture capitalist at Azure Capital Partners, said that when a company recently considered going public, he scheduled sessions with lawyers to train the board and executives about what they could and could not say.

Many venture capitalists have told him that when one of their portfolio companies goes public, they immediately resign from the board because they are worried about the legal ramifications of serving on the board of a public company…..

This newfound caution may continue for some time.

“At least for a few years, when operating executives are having dinner with friends and lovers who work in hedge funds, they’re going to be way more careful about what they say,” Mr. Marks said.

 

No:

 

1. If the law is being enforced at all it’s only because their criminality knows no bounds.

 

2. If they don’t like it, tell them to stop being leeches and get real jobs. 

The Banks vs. Democracy (3 of 3)

 

In theory a corporatist system can still produce value and provide services for the citizenry, albeit at the price of expensive rents extracted by parasite in business and government. A gangster can still provide a real service.

 

But as we look at the America of today, at a bloated finance sector incapable of adding any  value, of producing anything other than distortions, bubbles, collapses, and of doing anything throughout other than looting; when we look at a health care system which only becomes more expensive while providing less service, and expels ever more people from any access to care short of the emergency room; at an agricultural system which provides an ever less nutritious, more toxic diet, and which is rapidly losing even its virtue of inexpensiveness as prices steadily climb, and all this as it becomes economically impossible for anyone other than a handful of industrial rackets to engage in farming, and only through the most fossil fuel intensive, soil depleting, and environmentally destructive monoculture farming methods; when we see how every public service degrades, every amenity is canceled, every space enclosed, privatization and expropriation becoming the order of the day; when we see thieves and thugs closing in from every direction while barbed wire fences are going up along every horizon, and the horizons closing in; at this point we have nothing left of “government” in any real sense of the term, let alone democracy, but just kleptocracy.

 

Kleptocracy, alternatively cleptocracy or kleptarchy, from Greek klepto (theft) and kratos (rule), is a term applied to a government that extends the personal wealth and political power of government officials and the ruling class (collectively, kleptocrats), via the embezzlement of state funds at the expense of the wider population, sometimes without even the pretense of honest service. Political corruption is closely tied to the internal workings of a Kleptocracy. Not an “official” form of government (cf democracy, republic, monarchy, theocracy) the term is a pejorative used to describe governments perceived to be highly corrupt.

Kleptocracies are often dictatorships or some other form of autocratic and nepotist government, or lapsed democracies that have transformed into oligarchies. A kleptocratic ruler typically treats his country’s treasury as though it were his own personal bank account.

 

Lapsed democracies that have transformed into oligarchies. Let’s see.

 

The effects of a kleptocratic regime or government on a nation are typically adverse in regards to the faring of the state’s economy, political affairs and civil rights. Kleptocracy in government often vitiates prospects of foreign investment and drastically weakens the domestic market and cross-border trade. As the kleptocracy normally embezzles money from its citizens by misusing funds derived from tax payments, or money laundering schemes, a kleptocratically structured political system tends to degrade nearly everyone’s quality of life.

 

Adverse to the economy: The crash and bailout leading by design toward the next crash.

 

Adverse to political affairs: Practically no variation, two corporatist parties, corporate media, the acceptable political discourse and policy runs from rightist (i.e. “liberal”, by MSM standards) to hard right (“conservative” or even “centrist”/”moderate”).

 

Adverse to civil rights: The assault on civil liberties; erosion of legal standing and other hurdles against access to the law; the attack on net neutrality (and the whole public space which is growing in the blogosphere); and all the ways in which rights and liberties have been monetized so that they exist in theory only, not in reality, except for the rich.

 

Degrades nearly everyone’s quality of life: All services are being degraded or abolished: infrastructure (a $2.6 trillion maintenance backlog to keep things like bridge collapse from happening), roads, public transportation, public health, public parks, public legal services, libraries, education, renewable energy, environmental protection, policing (the focus is on drug war privateering, SWAT-type militarization, the prison-industrial complex, all primarily profit-seeking, to the detriment of the real safety of the citizenry; general surveillance and ratcheting up terror through media scares, “contempt of cop” brutality, creeping Taser totalitarianism, growing resignation to Nazi tactics).

 

In addition, the money that kleptocrats steal is often taken from funds that were earmarked for public amenities, such as the building of hospitals, schools, roads, parks and the like – which has further adverse effects on the quality of life of the citizens living under a kleptocracy. The quasi-oligarchy that results from a kleptocratic elite also subverts democracy (or any other political format the state is ostensibly under).

 

They seldom have to directly steal this, since the money is usually “legally” voted onto the loot conveyor. Health care funding is systematically funneled to the insurance and Big Drug rackets, student lending money to the banks. Whatever’s left over after the systematic theft is stolen as earmarks.

 

The Republicans are the aggressive ideologues of kleptocracy, while the Democrats are either de facto gangsters or enablers of Republican stealing. It’s not that the Dems are any less consciously malevolent than the Reps, they’re just more cowardly and scatterbrained about it.

 

And then there’s the personal factor, which these days is more and more likely to support the criminal status quo.

 

I quote this at length because I think it captures the larger situation exactly. It identifies the ridgelines. And in doing so, it clearly reveals why Obama is, at bottom, a conservative, notwithstanding some cultural inclinations to the contrary. When all is said and done, he wants to change things as little as possible, his desire for change is driven by a perceived necessity to avoid disaster, and the priorities and parameters of change are dictated by doing as much as possible for those representing existing power, and doing as little as possible for everyone else. This is what classic Burkean conservatives believe in, along with the ideal of unifying the polity, and marginalizing all divisive forces.

Divisive forces, for those not clued in, means you and me, pardners. Every bit as much as Rush Limbaugh and Glenn Beck. For a classic conservative like Obama, it really makes no difference whatsoever if the divisive forces are right or rational. All that matters is that they resist going along. And because of Obama’s essential conservatism, it’s you and I who are the problem in Obama’s eyes. Not Baucus, Nelson, Lieberman & the like. You and I. We are the problem.

 

This is certainly part of the Obama pathology. His personal ideology is clearly right-of-center, but even more deeply he wants to uphold the status quo no matter what it is. So no matter in what kind of society he existed, his main priority would be to say to everyone “don’t rock the boat”.

 

It’s our great misfortune that this innate conservative, this innate apologist for all entrenched crime, is in power at such a time of travail and such an impulse, such a mandate, for revolutionary change.

 

What has been the result in every similar historical situation in recent decades? In Chile, in Bolivia, through much of the rest of Latin America, the same assault led to the betrayal and destruction, often violent, of democracy. In Poland, Solidarity sold out the people. In South Africa the Freedom Charter was trashed. Everywhere democratic political promises were the Big Lie front behind which the shock assault of massive gangsterism stood ready to attack.

 

And now in America the vicious government of George Bush, not even remotely a normal if extreme presidential adminstration but rather a cabal of gangsters, was just the prelude to this Big Lie. Obama and the Democratic party stood for “Change”? Emanuel said “never let a crisis go to waste”?

 

Oh yes, but not at all in the sense they lied into people. The exact opposite. These take their place among the classical totalitarian lies as meaning the exact opposite of what they claimed to mean. The change was an even more radical, more systematic corporatist assault, this time open, brazen, the spear point being the Too Big To Fail bailouts. Meanwhile, even more than under Bush, the Global War on Terror is officially enshrined as the permanent state of Bailout America’s foreign policy. It’s a war policy, now and forever, for as long as this government exists.

 

An excellent piece by Adam Levitan is especially suggestive regarding how it’s not just trillions of our dollars but our democracy itself which has been stolen by the rackets.

 

Everything involved is political. Don’t let them fool you for a minute into thinking that any of this is dictated by economic “necessity”, that the bailouts are unfortunate but necessary, or the GWOT is unfortunate but necessary. These are chosen instruments of aggressive literal and socioeconomic warfare by the rackets and the rich upon democracy and the people of the world.

 

Where politics is hijacked by $24 trillion worth (and that’s just the bailout) of looting expeditions, there’s not much space left for democracy, as we see with the bogus bag of ”reforms” being touted.

 

As for the hijacking of foreign policy by money and militarization, perhaps we were too fast to say Obama did nothing to receive that Nobel. Certainly the Europeans needed him to be completely on board with the bailouts. That’s the only kind of “peace” TPTB all over the West care about nowadays.

 

And we were silly enough to wonder if the “peace” prize should be given to someone who has escalated a war which already looks permanent (and sounds so in his rhetoric).

 

That’s not where peace is at nowadays for the financial power structure. Remember what “Great Moderation” always meant under predatory globalization. Not what it sounds like. 

 

The Orwellian Peace of the Great Moderation and the Global War on Terror. Change for Bailout America.

 

As the enemies of the Constitution often say, “the constitution is not a suicide pact”. They use this ideal to attack civil liberties, jobs, and freedom, to replace them with fear, poverty, and enslavement, all for the sake of gangsters led by the banks. The capture is complete.

 

And they are clearly organizing for physical violence. They already have the professional Nazi structure (the “SS” element) in place in the form of Blackwater and other mercenary structures. Now they’re organizing their Brownshirts in the form of the teabaggers.

 

They clearly intend a bloodbath, and yet everyone sleeps and even laughs. There’s zero will among the people to organize for their economic or even their physical existence. I just can’t get over the blindness.

 

I don’t know how to solve everything at once, but one policy plank is absolutely clear: Smash the Banks.

 

Too Big to Fail is Too Big to Exist. break them up. If I had the wherewithal I’d start a political movement founded on this one policy imperative. Just as all large-scale corporate and political crime now flows from the banks, so Smashing them is the solution from which every other solution would flow.

 

As Nicholas Taleb said:

 

[Interviewer]: Are you saying the U.S. shouldn’t have done all those bailouts? What was the alternative?

NT: Blood, sweat and tears. A lot of the growth of the past few years was fake growth from debt. So swallow the losses, be dignified and move on. Suck it up.

 

There’s no other way out. For those who fear, suck it up. This is the only way to break through to the world free of fear, one of FDR’s great Four Freedoms.

 

The complete capture and enclosure of our democracy, our government, our economy, our politics, our land, our hopes and dreams, our future as human beings, our very souls, is before our eyes.

 

Is freedom our ideal or not?

 

Our big banks have demonstrated an unmatched ability to take over regulators and to convince politicians that a dangerous financial structure is good for America. These same people will almost certainly render ineffective whatever new regulations you put in place. More broadly, how can you run a well-functioning political system when a few large banks are so powerful?
The key insight at the heart of breaking up Standard Oil in 1911 was that it was too big to regulate. That breakup may have been good for competition; it was certainly good for democracy.

As Nicolas Trist – secretary to President Andrew Jackson – said about the incredibly powerful privately owned Second Bank of the United States, “Independently of its misdeeds, the mere power, — the bare existence of such a power, — is a thing irreconcilable with the nature and spirit of our institutions.” (Schlesinger, The Age of Jackson, p.102)

 

Break up the banks.

The Banks vs. Democracy (2 of 3)

We’ve been discussing how the banks assault democracy. The system which has been compiling for decades now, and which has reached its fullest development with the bailouts, is corporatism.

 

According to classical economic theory, the feudal stage of development was based on unproductive parasites squatting on land, resources, serfs, and slaves, extracting rents from these, and hoarding the surplus. “Capitalism”, where the property owner was himself a dynamic engine of productivity who would use the surplus he extracted as investment toward further productivity, was supposed to obliterate feudal vestiges as part of his historic mission.

 

Of course, this romantic Randian vision of the capitalist was always a caricature, but in theory it should have contained a grain of truth. Surely a capitalist economy should have been able to keep the capital in circulation among at least quasi-productive enterprises. That’s what their ideologues always claimed it would do.

 

But instead, out of the internal contradictions of capitalism, namely its propensity to overproduce even as it underconsumes (because in exploiting the worker it liquidates its own consumer base), a new feudal class arose in the form of the modern finance sector. It started out claiming to facilitate capital distribution so that money could shift from the overinvested sectors and regions to underinvested ones, and in this way overcome the contradiction.

 

This was inherently a kind of scam or ponzi scheme, since the contradiction was endemic and financial markets could only protract the process, not overcome it. But right from the start the sector went beyond its distributive function and invented casino games to play with the money it was handling. Soon money was flowing in which never had the pretense of seeking a real investment, but was only seeking to spin the Roulette wheel. Soon the banks were disparaging, neglecting, and outright abandoning the original, allegedly “productive” function they had been inaugurated to fulfill.

 

Soon there was a vast casino, flush with capital, squatting on the back of the real economy. Pumping from both veins and arteries, it sucked resources from the country. It prevented rather than facilitated any rational capital distribution. On the contrary it generated monstrous distortions in the economy, encouraging money to flow wherever ponzi schemes could be erected in the form of asset bubbles. These assets could be real but fixed, like land, or phony, like stocks and securities. In no case were they generating new, productive value.

 

Every racketeer buys politicians and regulators, but finance lobbying is perhaps the most pernicious, as it has such an easy cash flow by the nature of its business, and its crimes can more easily be enabled by the government without there being obvious scars in the short run. (In an episode of The Simpsons the crooked pol tells the timber lobbyist, “People are going to notice those trees are gone”. That’s not often immediately the case with the kinds of forests the banks hack down.) Plus the finance sector, as wirepuller for all the money flows, naturally comes to orchestrate many of the crimes of every other sector.

 

(It’s bizarre when somebody like Alan Greenspan affects great surprise over what has happened. By the market fundamentalists’ own ideological premise they should have expected looting, since it is indeed in the financiers’ interest and is therefore “rational” from their point of view. To ignore this they had to have believed their own hype about there being no class war or systemic organized crime, that we instead have a capitalist Volksgemeinschaft. You’re not supposed to snort your own stuff.

 

Still, in the long run there’s really something just absolutely weird and self-defeating about the lobbying ideology. The thing that’s most broken, absolutely beyond repair, is the institutionalized psychopathy of it. That level of greed and selfishness. By now every corporate interest is objectively incapable of looking at anything other than from the point of view of the most deranged short-term selfishness. I say “short term” because they seem oblivious and unconcerned with even their own long term profit prospects and political prospects. Their own refusal to do anything but hunker in the bunker in the face of any reform proposal, anything which could possibly benefit the people, who are after all the consumers these businesses depend upon, is suicidal. The same is true of their resistance to anything which could reform the economy, which could try to find a way toward new productive sectors.

 

In both cases they just want to squeeze the last drops of blood out of a dying man rather than delay gratification for a moment or accept one marginally smaller payday in order to restore him to health, and never mind that his revived labor would over the long run produce far more “profit”. They don’t care. They demand, they shriek, for whatever little bit they can get right now.

 

This can never be fixed. The rackets (and any sector which has reached the level of a powerful lobby is a racket) have to be absolutely destroyed.

 

They’ve come to these conclusions themselves, which is why they’ve bet everything on a feudal terror state, as I describe below.)

 

Perhaps most tragically, as the salaries and “bonuses” paid by the sector have bloated beyond the levels of obscenity, while the absolutely despicable mainstream media has whitewashed this obscenity and presided over the reinvention of the fat, greedy banker as sexy “master of the universe”, a generation of intelligent, potentially very constructive people was lost to crime. Those who could have been creative scientists, engineers, journalists, teachers, professionals working for the public interest, instead herded themselves onto Wall Street. (The equally despicable corporatized universities help to organize this cattle drive).

 

What was the opportunity cost of this decimated potential? All the talent which whored itself out to become “talent”? When the Nazi Einsatzgruppen liquidated the intelligentsia and professional classes of Poland and the occupied regions of the USSR, they were accomplishing a similar, just more violent, cleansing.

 

In the end, corrupting politics, academia, and media/entertainment, that is the propaganda nexus, finance “capitalism”, which was hardly real capitalism in the first place, and has long since solidified into a feudal parasite structure, becomes so meshed with the functioning of the state that they’re a single, symbiotic co-organism.

 

Corporatism is the economic doctrine associated with fascism in the political realm. Where the economics of it comes first, and then runs into political trouble, the politics will follow. Finance monopoly capitalism has become trapped in its own bottleneck. It depends completely upon exponential debt to prop up an otherwise dispossessed zombie middle class, and this debt/growth depends upon cheap, plentiful oil.

 

Now that neither is any longer sustainable through ”ordinary” exploitative policy, policy has to become extraordinary. Therefore, to counter Peak Oil, the corporate government has embarked upon the Global War on Terror. To counter the political backlash from the collapse of the populace into serfdom, the state must become totalitarian. It must use surveillance and database technology and professional terror (provided by the security-industrial complex) to enforce this from the top down, and it must rile up the lumpenproletariat mob as “teabaggers” in order to provide mob terror from below and keep the serf class fighting among itself. (The GWOT is supposed to function dialectically by both securing the oil and the globalization markets while enforcing “patriotic” conformity at home. Thus it does double duty in propping up the system. It’s also the training ground for violence cadres. The real intended deployment front for mercenaries from Blackwater and others is right here in our cities.)

 

So the banks sit atop the pyramid, the corporate state heirarchy, with the rest of the corporate welfare recipients radiating out and down.. They intend to ride a boom-bust roller-coaster as long as they can. They’ll play their own casino games and collect fees from all the other players, and then via the government hand themselves bailouts during the crashes. When this can no longer be sustained politically, they’ll resort to oppression and terror.

 

So we see the dying of democracy. It was first corrupted beyond what had been possible under earlier economic, technological, and communications conditions. By now it has been completely degraded into a mere corporatist pseudo-democracy. Eventually they’ll attempt a final, overt, de jure coup, worthy of the banana republic we’ve already become.

 

(Does anybody really doubt, if the Republicans can ever get the White House back, that next time they will be dead set on hanging onto it no matter what they have to do? Especially if their 2012 candidate is a Man on a Horse like Petraeus? Of course that would really be Wall Street making that decision. The only reason I say “Republican” rather that “Democrat”, given their identical solicitude for the banks, is that on the whole Reps are aggressive, Dems are cowards, so if I were a corporatist coup plotter I’d have confidence in Reps and not Dems.)          

The Banks vs. Democracy (1 of 3)

America was founded in revolution, seeking freedom. The vehicle was supposed to be democracy.

 

The organizer, the revolutionist, the activist or call him what you will, who is committed to a free and open society is in that commitment anchored to a complex of high values. These values include the basic morals of all organized religions; their base is the preciousness of human life. These values include freedom, equality, justice, peace, the right to dissent; the values that were the banners of hope and yearning of all revolutions of men, whether the French Revolution’s “Liberty, Fraternity, Equality”, the Russians’ “Bread and Peace”, the brave Spanish people’s “Better to die on your feet than live on your knees”, or our Revolution’s “No Taxation Without Representation”. They include the values in our own Bill of Rights. If a state voted for school segregation or a community organization voted to keep blacks out, and claimed justification by virtue of the “democratic process”, then this violation of the value of equality would have converted democracy into a prostitute. Democracy is not an end; it is the best political means available toward the achievement of these values.

-Saul Alinsky, Rules For Radicals

 

There are many reasons we’ve lost democracy, but lately they all involve entrenched money, and especially that wielded by the banks.

 

The banks are directly anti-democratic in the way they use money to buy politicians, corrupt and capture regulators, weaken pending legislation and twist it to their own ends, and secure the nonenforcement of existing legislation.

 

What has this bought them? First a Hobbesian free-fire business zone where there are almost no limitations on the finance sector’s activities. Speculation, manipulation, predatory lending, blowing up asset bubbles, con-job complexity, fraudulent ”innovation”, enabling and extracting fees from the self-reinforcing calcification of every sector towards monopoly, mining productive economies for ever more extortionate rents, converting this to personal loot via the “bonus” scam, looting their own companies to enhance this personal embezzlement, are all fair in hate and war.

 

Second, when it all blew up, they bought the direct shredding of the Constitution by their Washington brothel. Taxation without representation, to the tune of twenty four trillion dollars in welfare handouts and free risk exposure.

 

A large part of these trillions has come in the form of Federal Reserve largesse. The Fed’s quantitative easing is the favorite mode of loot conveyance because the Fed is completely unaccountable to democracy. One of the few bipartisan initiatives of our time, the bill to establish democracy’s right to audit the Fed, has been quashed by one hired thug, Mel Watt of BofAland North Carolina.

 

Meanwhile the Fed continues to stonewall all demands that it make public the names of the banks who have received all this easing, and how much they got.

 

In itself lack of transparency is the death of democracy. Everywhere we are losing the simple right to demand that sunlight be shone upon all government actions. The natural tendency toward secrecy by presidential administrations was radically escalated and systematized into a core principle by Bush and Cheney. Now Obama has taken full ownership of this autocratic secrecy ideology and sought to extend it.

 

(Where it comes to the banks we talk a lot about zombies, but in its aversion to sunlight and ardent embrace of the darkness, our government appears in the semblance of a vampire. Of course, the bloodsucking goes with this too. And, if government is supposed to be a faithful watchdog, but has instead turned into a predatory wolf, we can also call it a werewolf. I should have written this on Halloween.)

 

And now this lawless, autocratic, irresponsible, unaccountable Fed, which has always refused on principle to perform the regulatory functions it already possesses (it instead claims it’s only supposed to come in afterward to clean up the mess), is seeking to extend its purview over all aspects of resolution authority and other things too.

 

This dovetails nicely with the collective will of the administration and the Congressional establishment to use the call for finance reform as a mere propaganda exercise, just going through the motions of reform, while they increase autocratic bank and government power. Thus even as the already dictatorial Fed is set to enclose even more terrain once trodden by the people and the people’s interest, so Tim Geithner is trying to rectify the errors of last year by making good on Paulson’s attempt to have himself anointed as Treasury Dictator. Under administration proposals Treasury’s powers would become just as unaccountable and unbounded, just as aggressive and beyond the law, as those of the Fed.

 

And that “oversight council” which was supposed to share resolution authority with the Fed, in order to counterbalance the Fed’s anti-democracy, pro-bank agenda? Whether it has any real power in theory or not, it’s going to be chaired by: the Treasury secretary, who is himself in the process of being removed from the oversight of the law.

 

So who is supposed to oversee the overseers? Nobody, apparently. Another phony non-regulatory scam, and another brick in the wall of totalitarianism.

 

This is what bank wealth has bought, this is what bank power has wrought. The lobbyists now work around the clock in a factory producing bad legislation, bad execution, bad jurisprudence. This factory is really a crematoria – for the public good, for democracy, for humanity, for freedom.

 

All of this is done in the interest of class war. We are saddled with a parasitic, bloodsucking oligarchy.

 

That’s the direct bank attack on our democratic existence. Meanwhile the banks have led the way along the more ponderous curve of expropriating America through insidious wealth concentration.

 

From 1945 to 1973 all economic cohorts in America were doing better. Since 1973, the year of peak real wages, this social plenitude has been reversed. The bottom 90% have lost, badly. The 90-99% cohort has still gained but at a decreasing rate. Only the top 1% has increased its rate of accumulation.

 

From the 70s through 1983, the top 1% took in no more than 10% of income, while the bottom 90% earned around 67%. By 2007, the earnings of the bottom 90% had been degraded to 50% of income while the top 1% were extracting 24%.

 

It was the financialization of the real economy which played the pivotal role in this campaign of expropriation, along with globalism, technologization, union-busting, and other attacks, all financed by the banks.

 

(If you’re wondering how under these circumstances the American “consumer” can be revived, fear not. According to Bank of America fantasyland, the endlessly debunked trickle-down lie is finally going to come true.

 

The well-heeled might be able to save the U.S. economy from a long period of dismally weak consumer spending — if only we don’t jack up their taxes.

That’s one conclusion to draw from a new Bank of America Merrill Lynch report this week, “The Myth of the Overlevered Consumer.”

The report hammers home what you might already suspect: The consumer debt problem in the economy really is a debt problem for the middle class. The need to work off a chunk of that debt will sap middle-class families’ spending power for perhaps years to come.

By contrast, the upper 10% of income earners face a much smaller debt burden relative to income and net worth. Those people should have ample spending power to help fuel an economic recovery.

 

That’s what the banks say justifies the wealth monopoly they’ve wrought.

 

Well, that and God being on their side.) 

 

Extreme wealth concentration, just like psychotic government and corporate secrecy, is the death of democracy. It distorts all institutions. The economy sees its finance sector bloated, asset bubbles blown. This in turn destabilizes the entire economy, so that everyone not rich is left insecure, his position deteriorating.

 

All politics becomes corrupted – representatives, agencies, elections. The rich buy the media, which is why the news is no longer reality based but corporatist. Concentrated wealth seeks by its nature to destroy wages, work conditions, the social safety net, the environment, all community life. It forces the monetization of everything, the destruction of all public amenities, spaces, prerogatives.

 

It enforces the complete dispossession and disenfranchisement of anyone who cannot conform to its rat race totalitarianism, and the steady depletion of everyone who can stay on that treadmill, as they have to run faster and faster, with ever more weight piled upon their backs, in order to stay in place.

“It’s Gonna Be A Good Christmas”

And you were worried about Christmas:

 

Now is the time of year when a Wall Streeter’s fancy turns, not so lightly, to thoughts of bonuses.

Inside major financial companies, the annual rite of tallying bonuses is about to begin, with a sense of relief and even elation that would have been unthinkable only a year ago. After all those federal bailouts, many banks are turning handsome profits. Top producers are looking forward to blowout paydays once again.

 

Yes, things are looking good on Wall Street. It may be cold outside in the for real people, but the sun is shining on the Ancien Regime. All the plans of the Fed or the pay czar to regulate this Winter Palace are just throwing sand against the wind.

 

In particular, the good earners, the soldiers, are getting a nice piece of this year’s take:

 

What is most remarkable about the estimate, compiled by Johnson Associates, is how quickly pay is expected to rebound for traders — Wall Street’s current kings and queens of ka-ching.

For people who trade bonds, commodities and currencies, bonuses are expected to soar as much as 60 percent, to around their pre-crisis levels. A typical senior fixed-income trader can expect a total pay package of about $930,000 in cash and stock, compared with a package last year of about $695,000. Paychecks for stock and derivatives traders are likely to jump by half that much. Bonuses for investment bankers, by contrast, are projected to rise 15 to 20 percent. Star performers could see their paychecks surge even higher.

 

As Robert De Niro’s Jimmy Conway says in Goodfellas, “It’s gonna be a good Christmas!”

But what about this?

 

“This is a year of two different worlds,” said Alan Johnson, of Johnson Associates. “It’s not a broad-based recovery.”

 

Surely he’s referring to the abyss between Wall Street and Main Street?

 

Not at all! As the NYT’s Eric Dash concurs:

 

But while the economic fortunes of Wall Street and Main Street have diverged, so too have the fortunes of certain employees within the financial industry. This will be an unusually lopsided year for bonuses. While traders are looking forward to fat bonuses, payouts for people working in asset management, corporate and retail banking and the insurance businesses are expected to be flat or even down, according to the study.

Given the decline in the once-booming mergers and acquisition business, bonuses for certain dealmakers could fall 10 to 15 percent. And the once-gilded paychecks of hedge fund managers are expected to decline 15 to 25 percent. Private equity executives will be among the hardest hit, with their year-end bonuses falling 20 to 25 percent as they struggle to sell many of their investments.

 

Still, it’s good to see that they acknowledge the real suffering in the world as we enter the holiday season.

 

This is nothing but divvying up the stolen loot, every cent of it heisted from the taxpayers.

 

1. None of them would even exist without the bailouts.

 

2. Cash is fungible, and if there’s even one cent of public money or risk exposure outstanding, that’s our cent they’re using for “bonuses”.

 

3. The TARP is just the tip of the iceberg, so paying it back is a minor step on a long road toward self-sufficiency whose end is in fact impossible for these zombies to achieve. There’s the TALF, the other facilities, FDIC guarantees and other backstops. Twenty four trillion dollars outstanding. They owe every cent of that.

 

4. Even if they paid every outstanding cent, there would still be the Too Big To Fail premium.

 

That’s our money. All of it.

 

Yet they think God is their copilot.

Anti-Competition Judo

Recently in the news:

 

For 35 years, William John Woods has made wooden toys for children. Each one of the 2,000 or so he makes each year passes through his hands at his shop in Ogunquit, Maine, and no child, he said, has ever been hurt by one of his small boats, cars, helicopters or rattles.

But now he and others like him — makers of small toys and owners of toy resale shops and boutique stores — say their livelihood is being threatened by federal legislation enacted in the last year to protect children from toxic toys through more extensive testing. Big toymakers, including those whose tainted imports from China led to the recall of 45 million toys and spurred Congress to take action, have more resources and are able to comply with the new law’s requirements.

 

One of the results of America’s consumer debt binge was a massive market in cheap, shoddy toys mass-produced by big corporations. Each year $22 billion worth are imported from overseas. As always with globalization, they are manufactured under unregulated conditions by near-slave labor. It’s a feature, not a bug, of globalism that there are few or no environmental or safety standards for these products.

 

So inevitably there was a toy safety crisis involving lead-painted Chinese imports. And in the typical American way, solving the real structural problem (big globalized producers with zero responsibilities and complete incentives to externalize all costs) was off the table.

 

Instead they groped for an ad hoc kludge “regulation”, and the result was 2008’s Consumer Product Safety Improvement Act. While it’s too early to tell if the thing will work the way system activists hope intended for it to work, we can already see its real function from the point of view of those who crafted it.

 

The law, the Consumer Product Safety Improvement Act, was overwhelmingly passed by Congress in August 2008. For the first time, it set out mandatory safety standards for products used by children under the age of 12 and required toy manufacturers to test their products to prove that they were safe.

New regulations will not go into effect until February, but many of the big toy companies are not waiting — they are already testing toys in their labs, which have been certified by the Consumer Product Safety Commission, or through third parties….

Small toymakers and sellers are particularly irked by the fact that the new law allows large toy manufacturers, like Mattel, to conduct their product safety tests in their own labs, which must be certified by the federal government, while handicrafters would have to use third-party labs.

“They’re the ones who got us into this mess, and they can do their testing on their own,” said Jill Chuckas, secretary of the Handmade Toy Alliance and owner of Crafty Baby in Stamford, Conn….

“This is absurd,” said Mr. Woods, whose toys are made of maple, walnut and cherry and finished with walnut oil and beeswax from a local apiary. He estimates it would cost him $30,000 — a figure he calculated from having to pay $400 in required tests for each of the 80 or so different items he produces — to show that they are not toxic.

“I use beeswax,” Mr. Woods said. “The law was targeted at large toymakers using lead. There was no exclusion for benign products.”

 

Since we currently live in a feudal, not a capitalist, system, we can be sure that every regulation will seek to enhance the power of big producers toward monopoly, and to preserve and intensify existing monopolies.

 

Since this is also the age of permanent man-made disaster, and since every disaster (like the Chinese leaded toys) will conjure its call for a “new law”, it follows that every piece of disaster legislation will be subject to disaster capitalist lobbying judo.

 

The goal in every case is to set the new regulations and compliance fees/taxes in such a way that they’re a major, perhaps insurmountable, barrier for small market players and would-be small entrants, while being at worst a minor nuisance to the entrenched big outfits.

 

Another recent system disaster was salmonella in peanut butter. This and other food-borne illnesses brought on a gaggle of proposed new laws, which ended up epitomized in HR2749, which passed the House last summer and whose Senate version is pending.

 

Here too the disaster is caused by industrial production, and real reform would break up the ag rackets and decentralize the food production and distribution system. (Not to mention how coming energy transformations will require us to decentralize and defossilize the agricultural system whether we want to or not.)

 

So what was on the mind of this bill’s crafters?

 

The bill imposes burdensome requirements while not specifically targeting the industrial food system and food imports, where the real food safety problems lie. Small farms and local food processors are part of the solution to food safety, yet HR 2749 takes a one-size-fits-all approach subjecting local producers to the same regulations as industrial firms. The bill gives FDA much more power than it has had in the past while making the agency less accountable for its actions.

The bill would impose annual registration fees of $500 on all facilities holding, processing, or manufacturing food and require that such facilities also engaged in the transport or packing of food maintain pedigrees of the origin and previous distribution history of the food…..

The bill was amended shortly before it was voted on to exempt on-farm processors who sell more than half of their product by value directly to consumers or who process grain for sale to other farms. A small family farm could lose their exempt status if they for example make jams or syrup to sell and do not produce all of the ingredients themselves. They would then be required to register annually and be subject to random, unannounced inspections where they would be required to produce detailed records of their business…

Even facilities that only engage in intrastate commerce would be regulated under this bill(infringing on state sovereignty). Current law only allows federal inspection of factories, warehouses, or establishments of firms that engage in interstate commerce.

Under this bill individuals that fail to register a facility, misbrand a product, and are not conducting a hazard analysis or filling out required paper work can face up to 10 years in prison and $100,000 in fines, this could include the family farm that was not aware they fell under the these regulations. Also each day during which a violation continues shall be considered a separate offense.

By imposing the same standards, fees, and penalties on small producers, that historically are not the sources of food borne illness, as large multinational corporations puts the small producer at a disadvantage.

There are no provision in the bill to protect farmers if the FDA makes a mistake and destroys a crop that turns out to not be the source of a problem.

 

There’s strong evidence that the swine fu arose at a Smithfield facility in Mexico. This was only a prelude. Factory farms are veritable bioweapons factories, and inevitably they’ll serve as vector for a superbug that will kill millions. It’s just a matter of time. These lawmakers, corporate execs, shareholders, and lobbyists will become mass murderers when that pandemic arises.

 

Many of the problems with food borne illness could be solved simply by good enforcement of the regulations we already have and educating individuals on proper handling of raw foods and cooking techniques. H.R.2749 would be harmful to America’s small agri-businesses and have little benefit to food safety.

 

Anyone who really cares about disease arising from our food system would regard it as critical that we break up the CAFOs immediately. That this bill not only does not do that, but helps further entrench them while assaulting small producers, clearly displays the unserious, corrupt, and treasonous nature of our existing legislative cadre (and the naivete of many activists).

(Also puts the “war on terror”, and the alleged need to relinquish all our liberties for a cheap, fraudulent sense of “security” into perspective, doesn’t it?)

 

So this what we must consider when we ponder proposed bank regulations like the resolution authority scheme. The very notion that in a crash there would ever be the political will to tax anybody to bail out a stricken bank is absurd on its face. We know today’s politics don’t work that way.

 

But in addition to that we must be suspicious of the anti-competitive tendency of every piece of legislation today. Too Big To Fail has already generated tremendous disaster monopoly opportunities for the TBTFs.

 

Now this thing proposes to tax every entity with $10 billion in assets to bail out insolvent structures with hundreds of billions. Granted, $10 billion is a lot of money in absolute terms, but relative to the system it’s not all that much. (When CIT, with $80 billion in assets, was not bailed out, many theorized that that number may be under the TBTF floor.) It’s in the bag that if a measly $11 billion bank was going under, nobody would bail it out. Yet under this proposal it would be taxed to prop up the likes of Citi.

 

This is perhaps part of the reason the small banks have exhibited such lethargy in the face of the bailout and all calls for reform. They may have a fatalistic damned-if-you-do, damned-if-you-don’t attitude regarding how any regulation is likely to redound to the rackets’ benefit and their detriment. (Baseline Scenario did several posts analyzing this possibility, including a discussion of the contribution of a particularly perceptive commenter. )

 

These homegrown toymakers are banding together to portray themselves as victims of bureaucrats and consumer advocates, and have started letter-writing campaigns to Congress.

The Handmade Toy Alliance, which has a section of its Web site titled “Countdown to Extinction,” sponsored a march on Washington last April and continues to buttonhole members of Congress. Still others have hired the Washington lobbying firm of Rudy Giuliani.

 

For now it looks like all people can do. Of course under these conditions all the self-portrayal and letter-writing in the world can do nothing by itself. But when you hire Giuliani’s firm, that’s your bona fides that you played the real game and paid your protection money. It’s not enough to get you what you want, but it can at least get you into the room where you can then crawl and beg.

 

It’s not good having to live in the real world these days…

 

Thrift shops and used-toy stores have also joined the fight. Thrift stores say they have had to clear their stores of old toys and children’s clothes out of concern that some items might not be safe. Children’s books made before 1985, for example, contain lead in their ink.

“It’s been devastating for us,” said Kitty Boyce, owner of the Kid’s Closet in Rochester, Ill., who has emptied her shop of much of her children’s merchandise and is selling adult items instead. “For us, there will be no bottom line this year.”

Adele R. Meyer, executive director of the National Association of Resale and Thrift Shops, based in St. Clair Shores, Mich., said much of the new law made little sense. “People are taking away all items for children 12 and under,’ she said.

“But how many 8-, 9- and 10-year-olds are going to be eating books?”

Bank Roundup

1. The Center for Economic and Policy Research recently put out a report detailing the value of the Too Big To Fail premium. The is the discount the socialized banks get when they borrow money because their lenders can rest assured that the government is propping up those banks, will not let them fail, and will make good any losses they sustain if anything bad does happen.

 

The report’s main findings:

 

The spread between the average cost of funds for smaller banks and
the cost of funds for institutions with assets in excess of $100 billion averaged 0.29 percentage
points in the period from the first quarter of 2000 through the fourth quarter of 2007, the last
quarter before the collapse of Bear Stearns. In the period from the fourth quarter of 2008 through
the second quarter of 2009, after the government bailouts had largely established TBTF as official
policy, the gap had widened to an average of 0.78 percentage points.

If this gap is attributable to the TBTF policy, it implies a substantial taxpayer subsidy for the TBTF
banks. In effect, because of the government safety net being extended to investors who lend money
to these banks, the TBTF banks are able to borrow at a much lower cost than banks who must
borrow based on their own credit worthiness. The increase in the gap of 0.49 percentage points
implies a government subsidy of $34.1 billion a year to the 18 bank holding companies with more
than $100 billion in assets in the first quarter of 2009.

 

It’s true that the report only asserts this as correlation, not as proven causality, but I think we all understand the drill by now. As their own ideology says, these banks, if not their benighted customers, are “rational” where it comes to every kind of arbitrage dodge, and they price in every government advantage they can get. After all, they pay enough for it in lobbying and bribes. So we can rest assured that this spread is no accident and has no other causality than the TBTF put. Wouldn’t the lender have to be irrational to not do things that way? Not performing his due diligence and fiduciary duty?

 

This is one example of how reported bank profits have been bogus. The Too Big To Fail premium is a phony rent generated by corporatist government policy, not a legitimate capitalist return. The banks are not profitable, they are bankrupt. The bailouts are only propping up zombies.

 

2. As we know, in spite of Bush and Obama lies, the banks are not lending and were never really meant to lend. Instead the bailouts have allowed them to keep the casino running, as both administrations intended.

 

These days it’s the carry trade that’s all the rage. It sounds fun: You get free dollars from the Fed, convert them to other currencies, play various stock markets and asset bubbles, rake in rents, all the while helping to manipulate currencies to further weaken the dollar, then cash back into dollars when most advantageous and pay back in depleted dollars the loan you got for free in the first place.

 

So let’s put this another way. Even as the administration and the G20 claim they want to rectify currency and trade “imbalances”, and even as the administration claims it wants to revive American exports, which implies a stronger dollar, it gives away house money to a handful of freewheeling parasites and lets them play globetrotting manipulation games. All of these are bets against the dollar, and therefore against everything the administration claims it wants to achieve. Indeed, they’re against what we as a country would need to achieve if this “growth” is ever supposed to return.

 

Yes, the bailouts sure are working as a public interest policy.

 

(This is also a bet against the broader conceit that China has “decoupled” and is going to rise as the great white hope for a new consumer base to replace the defunct West. Here again, the bets Goldman and other speculators are making display how they do not believe this is going to happen. The status quo currency imbalance will remain policy, and China will not let its currency rise while it builds a real consumer economy. Instead it will continue with its phony stimulus, which has conjured up little but asset bubbles and makework for the same old export-oriented infrastructure.

 

Just like the American banks, the system as a whole is insolvent. Bailouts here and around the world are only propping up zombies and keeping the casinos open.

 

And this is all setting us up for an even worse crash. Just as the asset speculators built a financialized Tower of Babel upon an evanescent real economic base to bring the recent crash, so now they’re building the new one even faster and taller and more top-heavy, upon even less of a base.

 

Yep, the bailouts are sane policy.)

 

3. From the propaganda front, it’s funny how they say that breaking up the Too Big To Fails would render American banks globally uncompetitive. Just yesterday Morgan Stanley CEO John Mack whined about this at the Fed meetings to discuss the proposed new executive payout guidelines.

 

But is this really true? More to the point, do they really believe this and care about this? As detailed by Joshua Rosner, the evidence says No:

 

*Those countries with the largest banks as a percentage of GDP (Iceland, Ireland, Switzerland) demonstrated that a concentration of banking power can cause significant sovereign risk and tilt global economic playing fields away from that country.
*The likely breakups of ING, Lloyds and KBC suggest that it is we who seek to support an unlevel playing field where we subsidize our TBTF banks while other nations recognize the policy failures of moral hazard. If we continue down this path we will likely be at risk of violating international fair trade regimes.
*When the “unlevel playing field” argument is cited, keep in mind this reasoning supports the disadvantaging of 8000+ community banks relative to our largest banks, all in the name of protecting big banks from governmentally- subsidized international competition.
*There is no longer any evidence that, beyond a cost of capital advantage that comes with implied government support, there are sustainable and tangible economies of scale arising from being the largest. The financial supermarket concept has been proven a failure. The only ones who benefit are the high-level executives.
*We must demand that our legislators no longer allow unelected officials at the independent Federal Reserve to sign international accords created by the TBTF banks through supra-national bodies like the Basel Committee.
*Are we to believe that if we did not have such large and globally dominant firms, US borrowers might be paying more that the 29% interest that several of the TBTF firms are now charging on their card accounts? Perhaps we should think about what advantage our population has gained as a result of our financial institutions being such a large part of our economy or being globally dominant.
*Since when did we accept a national strategy of following rather than leading? When we do what is right, others follow. As example, consider the bank secrecy havens – they made money for a bit. Now, even the Swiss and the Cayman authorities are coming around to our view.
*We are already at a disadvantage given that the largest foreign banks operate in the US without any tier one capital requirement and yet mostlarge foreign banks have not built a bricks and mortar presence here. Nobody screams about their undercapitalization nor has that undercapitalization caused deposits to migrate to foreign banks.

 

As we saw with the CEPR report, the TBTF banks have acted in an anti-competitive way throughout their existence. They’ve leveraged the crash they created and the bailout they bought for pennies on the billion to use their monopoly position as a club against any smaller bank who has any connection at all with main Street. 

 

They antisocially blew up the bubbles for profit, then used their bought flunkies to get the bailout enacted to directly loot the taxpayers, and now use that loot for casino speculation. It’s disaster capitalism across the board, monopoly predation.

 

So much for any concerns over ”competition”.

 

4. Interesting article in the NYT this morning. Buttressed by a June Supreme Court ruling, several state attorneys general are suing or plan to sue the big banks for predatory lending.

 

This ad hoc* decision overturned a 2004 OCC rule which preempted state laws regarding mortgage and credit card fraud. The Bush administration wanted to let banks run wild in a lawless free-fire zone, and only some pesky state laws stood in their way. The result was the bubble and the crash.

 

Now those states who care have a chance to resume doing their jobs upholding the public interest.

 

(True to form, the banks’ immediate, reflex response was to issue an extortionate threat: any lawsuits will drive up “compliance costs”. Which means, nothing will change, they’ll continue squeezing every drop of blood they can out of us, just as before, but now they’ll blame it on having to answer to the law.

 

They also trotted out the standard corporate lie about the “patchwork of regulations”. But such patchworks can exist only where the rackets themselves succeeded in gutting federal regulation.)

 

So here we see laws which may once again be enforced after the banks forestalled their enforcement for six years.

 

Meanwhile, we should always keep in mind that the fact we’re having to talk at all these days about TBTF resolution authority means that the Prompt Corrective Action Law is not being enforced.

 

PCA is the law which requires the government to seize and if necessary break up insolvent banks. But both Bush and Obama considered enforcing this law upon the big banks to be a non-starter.

 

So the bailouts were a policy of anarchy and technical crime right from the inception.

 

* This was one decent SCOTUS decision. But the Court is on a deranged roller coaster ride because it’s in the hands of the capricious and directionless Anthony Kennedy. Unfortunately his whimsy more often falls on the side of corporate anarchy, and sure enough a horrid decision looms in the case of Citizens United vs. FEC, where the court looks ready to completely destroy our already trashed elections by opening them up completely to the pollution of corporate money. There will no longer be any limits at all to corporate lies, bribes, and blackmail, if this rogue, radically reactionary court does what it looks set to do. They say Kennedy is eager.

 

5. Who needs the TBTFs? Europe doesn’t think they do. This was listed in Rosner’s piece quoted above, versus the lie that America needs the big banks in order to be competitive.

 

And what about the original rationale for the bailouts? That we needed the big banks for lending?

 

Well look who’s looking to divest itself of that business:

 

The other part contains businesses that Citigroup executives hope to exit or unload. This includes asset management and consumer lending, such as residential and commercial real estate, as well as auto loans and student loans. Citigroup is also selling some of the many companies it acquired in recent years. In the weak economy, however, buyers are few.

 

Citi. The poster child for the bailout itself, the monstrous commercial bank we just had to save.

 

But not to worry; they have a plan.

 

Citigroup plans to undo much of what it did during a period some insiders call the lost decade — with events that included merging with Travelers Group in 1998 and a huge, dizzying expansion of its asset base. To untangle the company, Mr. Pandit has split Citigroup in half. One part consists of operations that Citigroup executives consider central to the bank’s future; these include retail banking worldwide, investment banking and transaction services for institutional clients.

 

Yessir. They’re going into “exciting” banking. Gonna be the next Goldman, they are.

 

Why did we need to bail them out (and keep bailing them out) again?

 

6. The small banks and credit unions are doing what they can.

 

7. Here’s something pleasant: the leaseback windfall demand. It looks like among the suckers for all these exotic financial instruments and scams were state transit authorities. (Since in our rotten system everyone wants something for nothing, governments are always looking for ways to provide services without directly paying for them, which would require taxation. Here the scam was to privatize public property, then lease it back from the banks.)

 

Much of the insurance for this scheme was written by AIG. But the banks wrote the contracts such that when their self-created crash drove AIG out of business, the contracts would trigger immediate margin calls on the public agencies.

 

So the insolvent banks, already bailed out with billions in stolen taxpayer money, as a result of the crash they triggered, now get to turn around and demand another windfall from those same taxpayers.

 

Some of their depredations go beyond even the new-normal bounds of audacity. There’s gouging, and then there’s medieval torture. But clearly these psychopaths are so irretrievably beyond any sense of limits that they can no longer even look to their political self-interest.

 

Eventually they’re going to trigger their own absolute destruction. They’re clearly incapable of stopping short of that.

Bailout War

As we enter year two of Bailout America and reach the end of year two of the official bank-created recession, and as we continue further and deeper into the decades-long quagmire of financialization and the devastation of the real economy, we should look to the state of what’s supposed to be our democracy as well, since it has been just as degraded as our wages, just as hollowed out as our manufacturing, just as fictitious as our “growth”.

Last fall the Bush administration tried to seize the ultimate disaster opportunity when it sought to steamroll Congress into passing a three-page authorization which would have made Henry Paulson a veritable dictator. They threatened a complete meltdown, that by Monday “there might not be an economy” unless Congress stampeded. The “leadership” was suitably terrified, which reinforced their normal corporatism and cowardice. They did all they could to deliver the “emergency” war powers Bush and Paulson sought. (That’s exactly how the inception of the bailouts should be seen, as an internal economic war authorization, and very similar to the Enabling Act demanded and obtained by Hitler in 1933.)

 

By some miracle the House at first listened to the fierce wisdom of the people who immediately saw this for the coup d’etat it was. But the miracle was ephemeral. The coup plotters added a few pages and toned down a few provisions. They added some limits and oversight authority. Meanwhile the corporate media kept up a drumbeat similar to the SA troopers outside the Reichstag shouting in unison, “We want the Enabling Act or there’ll be hell to pay!”, while an astroturf telephone and e-mail campaign laid seige to the holdouts. “We want the Bailout or there’ll be hell to pay!” It was a classic top-down/bottom-up vise.

 

Congress caved and Bailout America was officially established. The result wasn’t perfect from the looters’ point of view. They’d had to compromise on those limits, deadlines, oversight.

 

But one year in Obama and Geithner are trying to finish the job. They’ve proposed, as part of the general package of phony reforms being bandied about, that Treasury war authorization be made permanent, that there no longer be independent oversight, and that there be no limits on time frames or funds conveyed to the Too Big To Fail rackets. When Congressman Brad Sherman, wanting to avert this “TARP on steroids”, asked Geithner if he could accept a $1 trillion limit on his discretion, Geithner flatly said No. He’s demanding complete bailout dictator power.

 

(All this comes as another TBTF corpse, GMAC, staggers up to the trough for the third time. It’s been a year since the crisis hit and two bailouts already for GMAC, a dog so decrepit and diseased that its own daddy, Cerberus, won’t put money into it. Yet in all this time not only has the administration done nothing to unwind and dismantle it, or any other TBTF entity, but every policy has sought to make them bigger, more unsustainable, to further concentrate them, further entrench them.)

 

You put all this together and it’s clear that this administration, beyond even the normal standard of corrupt government, is nothing but the hired thug arm of the bank rackets. This is the one and only priority. Bush was always rightly pegged as a childish warmonger who wanted to let big corporations loot the country. Obama was rightly questioned for running a vacuous campaign based on nothing but charisma and vaporous rhetoric. What would be the basis of an Obama presidency, and how would it represent Change from Bush?

 

Now we see that Obama represents not change from but the refinement of Bush corporatism. The core of his policy is delivering the country to the Wall Street racketeers as a mine and a playground. The pretext is the crisis, the vehicle is the bailout. Every other policy flows from this.

 

So the overthrow of democracy and institutionalization of looting remains the same, but it’s more focused, better organized. It has more of a sense of permanency.

 

Just as the Global War on Terror is intended to now be permanent (Gates and others consistently refer to the ”Long War” and “our wars”), so the Bailout War will now be permanent. The GWOT represents the institutionalization of military Keynesianism (that is, the state as dedicated corporatist buyer to the military-industrial complex), the security- and prison-industrial complexes, and rising authoritarianism, fostered by the power of these complexes as well as by MSM propaganda. The astroturf teabaggers will supplement with street terror from below, if necessary.

 

Similarly, the Bailout War institutionalizes the government as primarily a loot conveyor to the finance sector (and, using Wall St as conduit, to other sectors and to the GWOT), while here authoritarianism takes the form of releasing the government’s fiscal powers from any democratic accountability. This will dovetail with the Fed’s existing anti-democratic unaccountability in its monetary policy, to remove the government from all taxpayer oversight and accountability.

 

Put the bailouts and the Global War on Terror together, see them being used to pursue the policy of resource fascism, and you have a complete precis of what this power structure intends to do in the coming decades of Peak Oil energy descent. It’ll be serfdom for an increasing majority, the looting of our wealth, labor, and blood, and the creeping totalitarianism which won’t be creeping much longer.

 

We’ll have come full circle to the original taxation without representation. After over 230 years we’ve come back to ground zero. American history must end here or start anew.

Peak Oil and Health Care Reform

 

Political junkies, policy wonks, and the mainstream media, as well as a few people who actually care about the results, have been capitvated by this year’s health care reform show.

 

The sorry story can be summed up as follows. After having campaigned on Change and the promise of real health care reform, Obama and the Democratic leadership instead sought to hijack the concept of reform and use it for the benefit of the insurance and drug rackets by herding together a conscript market of forced consumers through an individual mandate. The money for all this would supposedly come from government subsidies, to the point that the bill’s real purpose is clearly another racket bailout, via the mechanism of junk mandated “insurance” which won’t really expand coverage or cut down on costs, but will expand racket balance sheets.

 

The only real reform solution, single-payer Medicare for All, was politically achievable but ideologically odious to Obama. Instead the administration played a bait-and-switch game with the public option. This was meant to divert progressives away from single-payer long enough for that idea to die completely.

 

As soon as this was accomplished the whole political and media crew then tried to backpedal from the public option as well. They alternately tried to gut it with triggers or neuter the concept through exchanges or co-ops or just disparage it completely.

 

Only fierce opposition from the grassroots and the blogosphere kept the concept in play at all, to the point that now something called a “public option” is looking likely to appear in the final bill.

 

But this too is going to be a phony PO. It’s just been gutted in other ways – participation pool, rate negotiation, breadth of subsidies, and so on.

 

In the end, reform was always a scam. We know by now that this corporatist system will never reform anything. Every major step it takes will be in exactly the wrong direction, the path of propping up zombie structures and looting the people for the benefit of those structures.

 

But what if we did get a real public health plan or single payer? Even real reform like this would still face an even greater looming crisis, Peak Oil.

 

The last 150 years of medical advance have been coincident with the fossil fuel platform. Has this advance been caused by cheap, plentiful oil?

 

Oil is used in antibiotics, antihistamines, psychiatric medications, medicated skin creams, many other drugs, vitamins; tubing, catheters, syringes; operating tables and other infrastructure; all sorts of hi-tech machines; it is the lifeblood of the electrical generation and transportation systems upon which modern medicine depends – everything from global transportation of medical products to ambulance runs.

 

“Oil allows for complexity”. It allows for ever greater specialization, more procedures quantitatively and qualitatively. The esoterica of medical technology and treatment which allows for top-of-the-line care for the rich is unthinkable without that oil platform. The system has become ever more resource intensive.

 

This is related to the ecological costs of the oil-based “growth” model for health care. There’s the upstream costs: Extraction, manufacturing; transportation of the raw materials. The downstream costs include how drugs contaminate groundwater and drinking water, and how the incineration of plastic medical waste pollutes the air.

 

These and many other externalities of the system sicken people and add to health costs. So in a feedback loop the system adds to its own burden.

 

This leads to the broader ethics of the system. Modern medical ethics are rather myopic, almost completely focused on the patient at hand, with zero focus on the environmental and energy aspects of the system which in turn have bad effects on general health. A reformed, holistic medical ethics would take the big picture into account. We need not just the microethic but the macroethic.

 

This was never so clear as it is today as we undergo the interlinked economic and Peak Oil crises. By now everyone’s aware of the eroding health care prospects of the non-rich.

 

What’s happening today: People are postponing elective surgery; waiting for preventable problems to become acute and then rushing to the emergency room; if they can afford “insurance” at all, getting the lowest-cost, highest-deductible and co-pay, most restricted coverage plan, and then getting care based on the lowest-cost treatment; hospitals and medical schools face wage cuts/freezes, job cuts, grant money drying up; local and public health systems are on the verge of shutting down completely (just like public legal services).

 

This is all under the momentary circumstances of relatively depressed oil prices.

 

I’ve written a lot on how the exponential debt/growth system cannot be restored beyond perhaps a temporary zombification of a year or two. Here I’ll discuss the implications of this for health care.

 

Even as we ooze into depression, oil prices are already back up in the $80 range based on nothing but the animal spirits of the phony rally. If there is a temporary zombie “recovery”, oil prices will surge once more the moment consumption actually increases. (Meanwhile we’ll hit classical Peak Oil within five years.)

 

Growth cannot really resume. The debt unwinding (personal, business, government) has only just begun, and cannot be completed.   

 

This will place a hard ceiling over the recovery and only accelerate the debt deflation cycle, leading to more wage and benefit cuts and job loss, and subsequent inability to afford health care. At the same moment, oil-based medical costs will also be rising.

 

Just like pretty much everything else in America, the health care system is based and completely dependent upon growth. It requires an ever-growing pie, and all its structures and processes are built on this. Americans have been spending twice as much on health care as any other industrialized country, 16% of GDP and rising, all under conditions of a “growing” pie (growth based on debt).

 

The medical culture is based on speed and heroic levels of care (for those who can afford these), without concern for cost or consumption levels. It’s all based on exponential growth. The investment model (high-tech, high-impact, high quantity) and the funding model (grants and endowments for medical schools as well as ever-rising tuition, supported by a corporatist debt structure) assume infinite growth. The government tax base is shrinking at a frightening rate, so there’s less and less public funding available for anything. Yet the leadership, public and private, still envisions (and budgets) everything based on growth.

 

Today the key to EVERY socioeconomic and political dynamic is that everything we have was developed under conditions of a growing pie, and now the pie will be shrinking.

 

(And don’t forget the boomer “retirement”. Here too, their health care presupposed a growing economy. Many of them also had retirement investment nest eggs. But now the economy’s shrinking, and we can imagine how well those investments are going to hold up.) 

 

Because of this, coupled with the existing curve of rising health costs, these costs as a proportion of the shrinking economy are going to skyrocket. At the same time as the zombie middle class must face up to the fact of its own economic liquidation and impoverishment, it will face health costs which are absolutely insurmountable.

 

This is all calculated to enslave us in everything but the physical chains.

 

(So think of that every time you see a politician, corporate thug, media cadre, or right winger making light of the situation and trying to block reform. He’s laughing at us as he shovels more dirt onto the grave of our dreams, a grave he personally dug for us.

 

And remember that when you consider how Obama and his Dems betrayed and destroyed reform.)

 

So we are now passing the Peak. What will we be seeing post-Peak, during energy descent? Prices of oil and electricity will rise steadily. More acutely, there will be spot shortages and blackouts. These will come with increasing frequency. They’ll affect the non-rich first, and as long as possible the rich will monopolize all energy for themselves (first through rationing by ability to pay, then by rationing through violence and tyranny).

 

There will be fewer hospitals, which will exacerbate transportation difficulties (already laboring under high fuel prices and perhaps shortages). Health professionals will be less able to profitably and energetically specialize, but will be driven back toward generalization. This effect will be multiplied as the medical education system unwinds, starved of its financial wherewithal.

 

If health insurance companies still exist, they’ll find it harder and harder to profitably invest an ever-smaller bag of loot from a diminishing customer pool, as fewer and fewer people can afford insurance. (I write that in the expectation that there’s no way government will be able to enforce this vile “mandate” even if they do legislate it. According to the proposals being batted around, whatever they do isn’t going to kick in until 2013. Very courageous on the part of Obama and the senators up for re-election before then. But 2013 is pretty much the outer bound for depletion from existing oil fields to be outrun by demand, as the effect of all the projects cancelled on account of this past year’s credit crunch comes home to roost. Thanks to all that oil which won’t be flowing, by 2013 the real Peak Oil effect will be in full force. The Depression will really set in at that point.)

 

(And so Peak Oil provides a clue to this politically insane mandate concept. The insurers know that the system is blowing up. They’re going to be the first big victims of Walmart-style consumer cannibalism, as their own racketeering has destroyed their customer base. The mandate really is intended to be a bailout, to counteract those shrinking pools. So it’s not just an aggressive roundup, but a defensive bailout measure as well.)

 

The health insurance bailout mandate is an example of the broader resource fascist agenda. Health commentator Dan Bednarz comments that “Most Americans tell pollsters they believe health care is a human right, not a privilege awarded those with higher income.” But Bednarz correctly foresees that under shrinking pie conditions the rich will seek to claim health care and every other resource through the simple expedient of might makes right. They’ll try to prop up the existing high-end dominated system, making the people pay for it even as access is limited to the rich.

 

You’ll get to break your back and receive no care for it, so that they can still get nose-jobs and botox.

 

Bednarz starkly lays out our choices: If we continue with the status quo we’ll increasingly have a two-tiered ”Ferrari and jalopy” system until even this has to collapse. (And I doubt even the jalopy will run for long.)

 

Or we can muster the political will to truly change the system.

 

Mainstream medicine has the understandable bias that medicine – expensive, high-maintenance, high-tech – is not only the most important but the only thing. This is all it’s ever known under conditions of exponential growth driven by cheap oil.

 

But soon, for ever growing numbers of people, food, shelter, physical safety, and basic medicine will be paramount. (I add with hope, maintaining (or restoring) a sense of community.)

 

A restored public interest health care system would have as its first priority providing crisis care to the impoverished masses. It’s not a stretch to say it’ll have to be reconstituted along the lines of relief organizations like Doctors Without Borders. (Indeed, DWB may in fact find its services needed in America before long. We already could have used them after Katrina.)

 

This may be looking ahead five years or so. How to get there from here? How can we look at today’s debate and see any possibility of a coherent path from here to the outcome we need to reach?

 

The only obvious principle is that there’s no inconsistency between anticipating tomorrow’s financial collapse and seeking deficit spending today for a real public option or single-payer. We know that the dollar is doomed. So does everybody else. That’s why the powers that be are running up bills for bailouts, wars, weapons, tax cuts for the rich. They know they’ll never have to pay for any of it. The direct cost of this capital theft and the opportunity cost are incalculable.

 

So if the people could seize control of this process, we could stop binging on all that worthless, antisocial, criminal dross. We could instead use the remaining power of the dollar, what social wealth we still have, to rebuild the safety net and ease the energy transition. (The health care and energy bills should be interconnected, and should have same broad goal.)

 

A revolutionized health care system, focusing on the needs of the real citizens and not the luxuries of antisocial parasites, would be the centerpiece of such a safe transition.

 

Even if you doubt Peak Oil’s dire promises, you could look at real health reform as another stimulus. A healthier populace, less work days lost, a more productive and creative work force, reduced health care expenditure, more disposable income…it’s as Keynesian as it gets.

 

So either way, political or fundamental, the political revolution or the social, all the signposts, all the paths trodden by prior and present wisdom, point to this reform goal. All we have to do is fight.