Imperialism vs. Politics

 

The White House recently announced its intent to pursue further “free trade” pacts. The pending pacts are with Columbia, Panama, and South Korea. It’s supposed to be part of a plan to double American exports within five years, though how on earth America can do this (other than through further dumping) remains a mystery.

 

The NYT reports that free trade cadres are hailing “the first time that the Obama administration had embraced trade liberalization vigorously.” It’s difficult to see how free trade, which is already a Hobbesian free fire zone, can become more “liberal”, but god bless ‘em they’re trying.

 

(Of course the MSM and the hacks want us to forget one of the times the Obama campaign was caught in a lie, when the shiny candidate promised to rethink NAFTA, while on the secret hotline his flunkies were assuring their Canadian counterparts that it was just a lie for the peasants.)

 

Obama’s point man before Congress is, who else, Timmy Geithner.

 

Treasury Secretary Timothy F. Geithner told a House budget hearing on Wednesday that the administration “absolutely” planned to make passage of the three trade pacts part of the new export strategy this year. “It’s not just that,” Mr. Geithner said. “We want to be in the game in Asia as they move to negotiate new agreements there.”

 

Here’s a quote from Hannah Arendt’s Origins of Totalitarianism which gets more to the essence of the matter:

 

Expansion as a permanent and supreme aim of politics is the central political idea of imperialism. Since it implies neither temporary looting nor the more lasting assimilation of conquest, it is an entirely new concept in the long history of political thought and action. The reason for this surprising originality is simply that this concept is not really political at all, but has its origin in the realm of business speculation, where expansion meant the permanent broadening of industrial production and economic transactions characteristic of the 19th century.

 

Geithner has a long, interesting record in this lawless respect. A few days ago Joshua Rosner reminded us of some of his pre-Fed handiwork, back in the Clintonian glory days of globalization, internet branding bubbles, and deregulation.

 

In truth, Geithner’s ineffectiveness in his role at NY Fed President and his current political posturing — without any policy substance to directly address too-big-to-fail or the Fed’s flawed powers to bailout firms — seems to have resulted from design rather than accident. After all, in a previous “public service” role, Geithner was the lead negotiator for the WTO’s General Agreement on Tarrifs and Trade for financial services. In this role, Geithner reported to Larry Summers, who in turn reported to Secretary of Treasury Robert Rubin. In 1998, this team won the banks EVERYTHING they requested from that treaty. From open access to new markets to unrestricted growth in equity and credit derivatives, they opened the door to rapid and deregulated growth of the large multinational banks, allowing them to become “too big to fail”. Moreover, the terms of the agreement has made it almost impossible to put the “too big to fail” genie back in the bottle without running afoul of rules of this international agreement. That was the work of Geithner as “public servant”.

 

Back then the gangsters looked like vigorous young hunting dogs, chasing the hapless panicked rabbits in the morning sun. Time magazine could actually put some of the ugliest men in the world on their cover (and in an intentionally uglified light) and seriously want you to look at them as if they were movie stars. Tom Friedman published a book dedicated to the image of a straitjacket to whose bondage we must all submit, so we might as well lie back and enjoy it. (He called it the “golden” straitjacket.) Seattle and the dotcom crash had not happened and were physically impossible. Those must have been intoxicating days for Geithner.

 

In fact this round of imperialism is not different in kind from the first round in the 19th century. The same bottleneck of finance capitalism was forcing the same irrationality and violence upon a system which has no productive path available to it. The only way out was expansion for expansion’s sake. Expansion for the sake of the system’s appetite trying to feed itself, expansion for the sake of tyranny to render possible the escalating violence which will be required to maintain ”growth”.

 

Imperialism rose out of and is a part of the growth ideology. Where growth runs up against the limits of a nation, imperialism is born. Although this new kind of growth-driven imperialism was and is usually seen as the same as old-style empire building or mercantile colonialism, this is really a sham. This is not nation-driven, state-driven, law-driven, culture-driven. It’s driven by the growth imperative of a particular mode of organizing economic activity, growth capitalism. It’s structural, inherent. It’s nothing but racketeering. 

 

Classical empire-building could only ever expand and enhance the body politic at home where it was based on expanding rather than escaping the law’s purview, integrating new areas into the law rather than setting up free fire zones. But modern imperialism, as it occurred first in the 19th century colonial heyday and now for the second time with modern globalization, is simply business speculation, gangsterism, transposed into the realm of political and foreign policy. It engages in more or less violent and extractive racketeering overseas, consolidates this as the government’s policy baseline through corruption and capture, and then brings the racketeering ideology home.

 

Financialization is one especially modern version of this non-productive, larcenous imperialism. We speak today of the Bailout which began in 2008, but really all of financialization was always this same Bailout. It was always hijacked government legalizing gang activity and where necessary directly funneling taxpayer money to the rackets. This was just stepped up to a higher level of intensity in 08.

 

Perhaps the first big step was the anti-federalist overriding of the many state bucket laws in the 80s. These laws criminalized many of today’s standard speculator practices of betting on the rise and fall of stocks and other underlying. Such gambling was not a legal contract and was relegated to the slimy dives and back alleys where it belongs. (In researching this I learned a new term. They used to call these crooks “bucketeers”, back when we still had the rule of law and these rackets were still illegal, before the law’s hijacking began in earnest in the 1980s.)

 

That this gutter casino was federally legalized, brought into the contractual open, burnished and spit-shined by academia, rolled out to a media chorus of oohs and aahs, was simply the nadir of imperial gangsterism now dignified as the pinnacle of American ingenuity, the apotheosis of the American Dream.

 

Growth is not a political concept, but an ideological dogma. It is anti-political. Its only basis in reality was the way fossil fuels could temporarily fuel it, but now facing the end of this easy fuel source it has lost its place in physical reality and become the province of ivory tower dogma, pseudo-religious fundamentalism, and the gun. Since it cannot be engaged politically, where rationality and humanity would refute it, it becomes aggressively anti-political. The “growth” cadres seek to kill all thought, all discourse, all politics. Just look at the modern media. Today’s MSM preaches a sham “happy balance”, but Arendt expounds the real nature of this balance:

 

This happy balance, however, had hardly been the inevitable outcome of mysterious economic laws, but had relied heavily on political, and even more on police institutions that prevented competitors from using revolvers. How a competition between fully armed business concerns – “empires” – could end in anything but victory for one and death for the others is difficult to understand. In other words, competition is no more a principle of politics than expansion, and need political power just as badly for control and restraint.

 

So just like expansion itself, competition is not political, but on the contrary needs politics to control it. (Arendt’s quote is ambiguous, and seems to mean the empires used politics to control themselves, sort of like how in theory the Mafia’s “commission” was supposed to regulate among the different families. Today Basel, the G20, etc. represent the same theory. But today the globalized gang wants to cast off all controls upon its own actions.) Seeking to cast off such control, the gangs have sought to dissolve politics.

 

Imperialism wants to evade politics. Having had its basis in foreign policy, it tries to bring home this characteristic combination of elitism, secrecy, and debate-killing slogans (like “growth” or “national security” or “terrorism”) to domestic politics, to foreignize it. It seeks to treat the people of the home country as a conquered colonial people.

 

So, for an example, just as Paul Bremer set up a space in Iraq devoid of all law for the mercenaries of globalism, so the system is now bringing home this lawlessness, as the federal court system seeks to absolve Blackwater of all responsibility before any law, anywhere.

 

Those are just a few examples of the lawless, anti-political core of globalization and the growth ideology. What’s considered the debate-killer? What’s our characteristic anti-intellectualism, flat-earthism? And what musters all corrupt political power against anything that’s in the public interest? Anything whose utility for growth isn’t obvious. That’s the black hole, the dead zone, the hypoxia, the doldrums, the horse latitudes, of politics. It’s the repository for all notions and expressions which are stupid, arrogant, bullying.

 

Corporatism is the tyrannical process seeking to liquidate all politics and all freedom.

 

(I add here one optimistic thought. Can the “war on terror” slogan indefinitely terrorize the people into conformity, docility, and where necessary fascist lynch mobs, all on behalf of the military-industrial ans security-industrial complexes, the same way the Cold War mindset and propaganda was able to do? The Cold War actually did threaten annihilation, whereas any sane person has to eventually realize that terrorism is a nuisance at worst, and cannot possibly justify a trillion dollar rathole, the gutting of the constitution, and incipient totalitarianism.

 

Is it likely the liars of the system, who are after all the real terrorists, can really keep this bogus terror going?)  

Parasites and Imperialism

 

The 19th century evolution of private casino gambling to state imperialism occurred as follows. It started when the capitalists had accumulated enough surplus capital that there was no longer any productive outlet for it within the domestic economy. They responded by exporting investment, in the form of speculation on always dubious foreign projects. They gathered momentum by inciting small investors among the masses to join the gaming. It became the familiar environment of scams and swindles. When such a bubble inevitably collapsed it wiped out the middle class and left the casino class alone with its surplus capital, right back where it started, and this time with no clear way to get the boom going again.

 

Concentrated wealth is by its nature parasitic, and where this destructive uselessness is clear to the people, its position becomes politically untenable. It was out of this parlous position that the bourgeoisie, who had so long held aloof from politics, hit on the idea of corporatism. The already existing and accelerating physical colonization overseas, which had to date been exploited in a mercantile fashion, could be leveraged for the purposes of imperial capitalism. The casino impresarios could make the globe their gaming hall, with the state serving as the hired muscle to guarantee these investments. Now the bubble could inflate more securely.

 

When the surplus wealth extractors were just private overseas gamblers, they were mere apolitical parasites. But when they demanded the institution of the privatized profits/socialized costs imperial model, they “re-entered the life of the nation”, as Arendt puts it in Origins of Totalitarianism. They became “political”, meaning anti-political.

 

The bourgeoisie had to re-politicize itself to hijack the state for this purpose. It had long demanded nothing of state and politics other than that these respect (indeed revere) the rights and prerogatives of the private sector, dedicate themselves to protecting private property, and stay out of its private affairs. Here we see what to this day is still the “conservative” ideology.

 

But now they no longer really wanted to be left alone. Now they wanted to aggressively hijack state and politics, on behalf of an aggressive deployment of private capital. We should see this as we would a criminal plotting murder, demanding everyone leave him alone during the period of his weakness, while he’s surreptitiously laying his plans, but who attacks, seizing all the powers he previously claimed to despise, the moment he feels strong enough to do so.

 

So the corporate bourgeoisie re-entered politics in order to consolidate corporate and state power and radicalize the depredations of capital. They were and are anti-political and counterrevolutionary, opposed to the essence of the civic polity we back home to us.

 

Here again we see the behavior of American corporatists (and the property rights movement in general) – their rhetoric is always defensive, while their intentions are always aggressive, and their actions become aggressive the second they feel strong enough.

 

(The economic libertarian says “your right to swing your fist stops at my face”, but what he really means is, “once I have property and power, I have the right to swing my fist anywhere I want, and if your face is in my way, tough.”)

 

So the corporatist casino, as well as its more overt military and repression operations, starts out overseas. But it’s eventually brought home as well. No big capitalist is ever a patriot; on the contrary, since he is by definition a sociopath, so as a globalist he is by definition a traitor. He will view the people of his own country as just another resource mass to be exploited in the same manner he does in the colonized countries.

 

Imperialism is, as Lenin called it, ”the highest” stage of capitalism. In my last post I discussed how prior accumulation must be repeated by the system. New pre-capitalized populations have to be assimilated as capital. Foreign imperialism seizes native populations in order to coordinate them according to imperial corporatist imperatives. In the same way, once the imperialist model is established overseas, from its point of view the population of the home country, still organized according to the earlier model, is now “pre-capitalist”, and must be coordinated according to the same imperial model.

 

Although big corporations would no doubt prefer to rule home populations through direct exploitation and oppression the way they do their overseas slaves, this was not at first politically possible, so they had to start with indirect means of coordination. There are many ways to do this. For awhile, during the times of cheap, plentiful oil, consumer co-optation was the preferred method. But as the globalized economy entered simultaneously the energy crisis and the productivity bottleneck, while America saw its real wages peak in 1973, and it became more and more impossible for consumerism to sustain itself, the only way out was financialization and consumerism fueled by exponential debt.

 

So the new domestic colonization was the despotism of debt, and the tremendous new demands and risk exposures of an economy based on a treadmill of indebtedness. This was used to enforce grimly deteriorating working conditions – wages go down, hours up, security erodes, all at exactly the time technology was supposed to be almost completely freeing us all of the bonds of work, according to the lies of capitalism and its prostitute government and media.

 

Once the workers have been economically liquidated, they can no longer play in the casino if it’s not corporatized by the state. So now they too have been enlisted to advocate the banksters’ interests. The average person instinctively opposed the Bailout as a scam, but probably agrees with the premise that ”lending has to get going again”; that we can’t have an economy at all without massive indebtedness. (I imagine most who oppose the Bailout would have a hard time explaining what they think should have and should be done, if they still want all these banks making all these loans all over the world.)

 

Arendt comments:

 

Expansion then was an escape not only for superfluous capital. More important, it protected its owners against the menacing prospect of remaining entirely superfluous and parasitical. It saved the bourgeoisie fro the consequences of maldistribution and revitalized its concept of ownership at a time when wealth could no longer be used as a factor in production within the national framework and had come into conflict with the production ideal of the community as a whole.

 

And where can we go from here? We have globalized casino, which has collapsed once and for all. There’s no longer any question of its being sustainably based on real economic activity. It’s now a zombie powered by government-to-bankster looting. Nor will the co-opted people any longer be able to participate. No new jolt of electricity can reambulate the zombie debt consumer.

 

We do have the Global War on Terror, which is a fictive attempt to revive physical expansion. But there’s no new pre-capitalist class to be coordinated on any level. No debt can be manufactured for them. The real productivity of the globe has been completely engulfed and liquidated. Those who can still eat are lucky.

 

So the real path is to a new (but really not so new, rather a distant mirror of the Dark Ages) hell of serfdom.

 

In the meantime we’ll continue for a few years in this odd twilight world of the zombie. Have you ever seen a partial solar eclipse? When I was out during one, I saw it bathe the landscape in a spooky, spectral blandness. It was kind of like the whole world turning blue from hypothermia. Rather ghastly in a subtle way.

 

That’s how this twilight looks to me. We’ll have the system stagger along trying to inflate new bubbles and ignore the imminence of new crashes, like the one looming in Greece. The holders of superfluous wealth will still try to pretend they serve a purpose and are not just worthless parasites and thieves. Everything we read in the business press has this relentless subtext, that concentrated wealth serves a purpose and deserves to exist. Here’s one ridiculous example.

 

Arendt describes their predicament of two centuries now:

 

Only the fortunate coincidence of a new class of property holders and the industrial revolution had made the bourgeoisie producers and stimulators of production. As long as it fulfilled this basic function in modern society, which is essentially a community of producers, its wealth had an important function for the nation as a whole. The owners of superfluous capital were the first section of the class to want profits without fulfilling some real social function – even if it was the function of an exploiting producer – and whom, consequently, no police could ever have saved from the wrath of the people.

 

The bourgeoisie’s rise was coincident with the rise of fossil fuels. They constructed their system on this platform. And now they’ll fall with its collapse. It’s only now, with Peak Oil, that the Marxian dynamic of the capitalists liquidating one another really begins.

 

The stolen wealth no longer serves any purpose but for the thugs to pay themselves to steal yet more.

 

Will the people arrest this crime? Or shall we muddle on through to the bitter end, the feudal Hell?

Can There Be Another Accumulation?

 

 

Crime and no reason, treason and no rhyme,

All struggle and hope stolen once again

As license to commit the ancient crime…

 

Corporatism is incapable of living within its means. That it drives everyone into debt, either through the participants’ own greed or because everyone else is drafted into a debt economy, is not just the calculated strategy of predatory lending and the exploitation of leverage. Unsustainable indebtedness is hardwired into the system itself.

 

This is because profit-seeking activity, once it goes beyond the smallest, localized level, is always inefficient and always loses money. This is a friction law just as binding as friction in physics. The only way mass capitalism is able to persist at all, let alone construct the monumental edifices of industrialism, consumerism, and hi-technology, is by externalizing more and more of its costs – on the future, on the environment, and on the dispossessed people.

 

Because the corporate machine can never turn an absolute profit, it has to start out with a feudal treasure hoard it can draw upon until it’s powerful enough to extract a “capitalist” surplus from the earth and the workers. The preliminary accumulation of this hoard is called primitive accumulation. This is Marx’s term for the violent privatization of public land and resources during the feudal stage of economic development. But capitalism is so costly and inefficient that even its surplus can’t sustain it. It still keeps running itself into the ground.

 

This boils down to the basic contradiction of capitalism. The capitalist seeks to maximize production even as he impoverishes his intended consumer base by hacking away at the workers’ wages. Inevitable he overproduces and is burdened with surplus capital.

 

In The Origins of Totalitarianism Hannah Arendt describes the puzzle:

 

The tremendously increased wealth produced by capitalist production under a social system based on maldistribution had resulted in “oversaving” – that is, the accumulation of capital which was condemned to idleness within the existing national capacity for production and consumption. This money was actually superfluous, needed by nobody though owned by a growing class of somebodies. The ensuing crises and depressions during the decades preceding the era of imperialism had impressed upon the capitalists the thought that their whole economic system of production depended upon a supply and demand that from now on must come from outside of capitalist society. Such supply and demand came from inside the nation, so long as the capitalist system did not control all its classes together with its entire productive capacity. When capitalism had pervaded the entire economic structure and all social strata had come into the orbit of its production and consumption system, capitalists clearly had to decide either to see the whole system collapse or to find new markets, that is, to penetrate new countries which were not yet subject to capitalism and therefore could provide a new noncapitalistic supply and demand.

 

The system has to keep refeudalizing itself and repeating the original accumulation. This in turn requires that there always be a new frontier of natural resources to be mined and labor not yet under the yoke.

 

The system attempts various ways of keeping the economy stimulated. Technological innovation may temporarily develop new markets. Same for government military spending. The final frontier has been globalization and financialization, propping up the consumer with exponential debt.

 

But all of these have long since passed into the twilight of diminishing returns. IT has been a far less productive sector than previous frontiers, while finance and the military industrial complex simply destroy wealth on a massive scale, and this wealth can and will never be replaced.

 

Arendt evokes the delusive spirit of Gilded Age Europe as it partied on the brink of the abyss:

 

As matters stood, imperialism spirited away all troubles and produced that deceptive feeling of security, so universal in pre-war Europe, which deceived all but the most sensitive minds. Peguy in France and Chesterton in England knew instinctively that they lived in a world of hollow pretense and that its stability was the greatest pretense of all. Until everything began to crumble, the stability of obviously outdated political structures was a fact, and their stubborn unconcerned longevity seemed to give the lie to those who felt the ground tremble under their feet. The solution of the riddle was imperialism. The answer to the fateful question: why did the European comity of nations allow this evil to spread until everything was destroyed, the good as well as the bad, is that all governments knew very well that their countries were secretly disintegrating, that the body politic was being destroyed from within, and that they lived on borrowed time.

 

We’ve now sustained the first shock of the final stage of oil-fueled corporatism. With Peak Oil and the breaking of the exponential debt curve we’ve reached the absolute limit of capitalist expansion. The ultimate original accumulation was the unearned inheritance of the fossil fuel hoard. This can no longer keep the system operating in the pseudo-black. Now the system begins its contraction. Yet the primitive accumulation must be repeated. There must always be a slave class.

 

There’s only one place left to look for these slaves. State capitalism went as far as it could in assimilating new human strata, as masters and as slaves. Most remained slaves, while in the West a relatively large number were co-opted as the “middle class”, as part of the competition class rather than the resource class. But now the system contracts, and this middle class will have to be dissolved. It will have to be defenestrated and restored to original serf status. That’s the process now unfolding.

 

Imperialism and globalization were stages in capitalist expansion assimilating more cohorts of slaves. It reached its maximum in the 1970s and 1980s. It started blowing bubbles to buy time while preparing to roll its own domestic socioeconomic wave back. Like a vast pincers movement in war, it will now seek to complete the operation, to liquidate the welfare state of the Western “middle class” (always a sham, always based on foreign slavery), liquidate its “officer corps” (Marx) (the “bourgeoisie”, one by one, hundreds by hundreds, thousands by thousands), and so on until the wave is rolled back to the original feudal nobles. That’s what we’re doing today.

 

In the meantime they’re tactically caught between the imperatives to reflate the bubble and yet deflate it enough to provide space and fuel for the reflation. They’ve been struggling to thread the needle with the string they’re pushing on. (Is that a mixed metaphor? You can thread a needle with a string. Unless it’s too thick, and that’s why you can only push on it…)

 

Is there any question that the system is now a terminal zombie? If there were any possible productive way out, any way to productively grow, to revitalize the real economy, why don’t they do it? Corruption isn’t enough to explain it. If a real economic way out for “growth” existed, there’d be a constituency for it. But there is none, in government, business, the media.

 

Of course, that the only ”options on the table” would be growth option is because the only elite constituencies extant are the extractive, competitive cadres. A public interest cadre doesn’t exist. If it did, then we would have the opposite, constructive option: to wind down the empire, wind down the system, to use what wealth remains to downsize, deconsumerize, decentralize, relocalize.

 

Instead, via the Bailout War and the Global War on Terror (the Permanent War), they’re imposing tyranny and regressing to feudalism while looting the last pennies.

More on Strategic Defaults

 

According to new research cited by the NYT, there’s some movement in the willingness of underwater homeowners to walk away:

 

New research suggests that when a home’s value falls below 75 percent of the amount owed on the mortgage, the owner starts to think hard about walking away, even if he or she has the money to keep paying.

 

This would be an advance over previous research, which found that even where underwater by hundreds of thousands of dollars, only a minority of homeowners would seriously think about walking away.

 

The article describes a typical borrower:

 

With prices now down by about 30 percent, underwater borrowers fall into two groups. Some have owned their homes for many years and got in trouble because they used the house as a cash machine. Others, like Mr. Koellmann in Miami Beach, made only one mistake: they bought as the boom was cresting.

It was April 2006, a moment when the perpetual rise of real estate was considered practically a law of physics. Mr. Koellmann was 23, a management consultant new to Miami.

Financially cautious by nature, he bought a small, plain one-bedroom apartment for $215,000, much less than his agent told him he could afford. He put down 20 percent and received a fixed-rate loan from Countrywide Financial.

 

Most people who are underwater became so in this fashion. You come of age, you have the financial wherewithal, you’re ready to buy a home, all your life you’ve been pumped full of propaganda about the American Dream, and how the core of the American Dream is to own a home. Under those circumstances, very few people stop to think, “this is a housing bubble, these prices are unsupportable, the bubble will have to burst soon, so we better just rent for now and see what happens.”

 

Although the liars of government and the market fundamentalist think tanks now say people should have been thinking that way, at the time they were all saying the exact opposite. The last thing they ever want anyone to do is think. Just as they don’t want anyone to think now, about what’s happened, who is to blame, and what people should now be doing.

 

The United States Treasury falls into the skeptical camp.

“The overwhelming bulk of people who have negative equity stay in their homes and keep paying,” said Michael S. Barr, assistant Treasury secretary for financial institutions.

 

They also want to propagate this theme that no one’s thinking about this, no one’s doing it. A core goal of government and MSM propaganda is to make the thinking person feel isolated, atomized, alien.

 

But it’s a lie.

 

If you read the article you’ll see how, just like with every other such article, they can’t find any independent voice to argue the “con” position, just bank and Treasury flacks.

 

Of course the government refuses to do the only two things which could help, demand permanent mods based on writedowns of principal, and empowering bankruptcy judges to impose cramdowns.

 

Similarly, the banks absolutely refuse to negotiate in good faith:

 

Mr. Koellmann applied last fall to Bank of America for a modification, noting that his income had slipped. But the lender came back a few weeks ago with a plan that added more restrictive terms while keeping the payments about the same.

“That may have been the last straw,” Mr. Koellmann said.

 

But people still burden themselves with scruples they know the banks don’t share:

 

Most of all, though, he struggles with the ethical question.

“I took a loan on an asset that I didn’t see was overvalued,” he said. “As much as I would like my bank to pay for that mistake, why should it?”

 

Why should it? Because it’s a gang of con men. Because it was a participant in a massive swindle. You bought at a bubble price way beyond what any real economy would have justified. That bubble was blown up by the banks, including your bank. Why shouldn’t it have to eat the loss now that prices are returning to reality?

 

The extent of the brainwashing is amazing. It’s just like American factory workers who say “The owner has a right to fire us, shut down the factory and move it overseas. That’s capitalism.” (Some actually think that.)

 

It’s like the old philosophical question, Why do people believe in free will? It’s obviously false, and often counterproductive. The answer is that some want to use the idea as a weapon on behalf of vested interests, while others, among the downtrodden, want to cling at all costs to the illusion of agency, as the only way to maintain their dignity. But rather than find their belief in freedom through fighting back against the oppressor, they find it in the easier, lazier, less dangerous path of identifying with him and pretending they support the oppression even when they’re its victims.

 

We can see this the way this manifests ideologically where it comes to economic issues. The racket ideologue says, “the borrower knew what he was doing, he’s at fault.” Meanwhile the borrower, rather than admit he was had, sides with the bank. That way he can vicariously join in the warm glow of the bank’s successful con job, even though he’s the mark, and it’s at his continuing financial expense.

 

(Though I really can’t see how the captured factory worker gets even that out of it, since by no stretch of the imagination can he blame himself, can he? What’s he supposed to say – “It’s my fault for demanding a living wage and safe work conditions”?)

 

But hopefully things are changing. If this research is correct, we’re moving in the right direction.

 

Here’s another underwater homeowner:

 

“It doesn’t seem right that I can rent a place somewhere for half of what I’m paying,” he said. “I told my bank, ‘Just take a little bite out of what I owe. That would ease me up. Isn’t that why the president gave you all this money?’ ”

Bank of America did not agree, so Mr. Figliola, who is 48, sees no recourse other than walking away. “I don’t believe this is the right thing to do,” he said, “but I’ve got to survive.”

 

It sounds like he’s not all the way there yet, but he’s coming round to seeing that it is the right thing to do. 

Get Rid of Fannie and Freddie

 

Obama’s new budget includes this juicy quote:

 

The administration continues to monitor the situation of the G.S.E.’s closely and will continue to provide updates on considerations for longer-term reform of Fannie Mae and Freddie Mac as appropriate.

 

That signifies the Bailout’s main theater. As the NYT article says, the TARP model of the Bailout is being winded down. The new frontier is the potentially infinite government buys of MBS, laundered through the GSEs, Fannie Mae and Freddie Mac.

 

This is sweet because it’s off-budget. Obama can declaim about the budgetary horrors of support for CSP deployment and how the National Park Service is a clear and present danger, while happily embezzling trillions under the counter. Bailouts laundered through Fannie and Freddie let Obama commit capital accounting fraud. 

 

I’ve said a lot about the evils of the Bailout, but I don’t think I explicitly said get rid of the GSEs completely, so let’s say that clearly today.

 

If we’re going to have mass capitalism, then the government shouldn’t be turning the housing market into a command economy in the first place. Or, if they really want to encourage home “ownership”, the government should lend directly. But we should eradicate all the parasitic middlemen who have glommed onto the GSE gravy train.

 

Supposedly the “private sector” does things more “efficiently”. That was the rationale for this kind of Rube Goldberg structure, although having government backstop it all through the mortgage deduction, the FHA, and the GSEs, was already a contradiction to begin with.

 

This was always ideologically dubious. But even if it were ever plausible that the private sector would be more efficient in using government money, we now know that was false, and therefore to still argue this is a LIE.

 

We now know that every private sector participant just imposes a bloodsucking tax, sets up a parasitic toll booth. In this hypercomplex, hyperinefficient contraption, every layer of middlemen just extracts more useless rent, just lays another chain across the river.

 

If we as a society want this sector to be a planned economy, then do it directly. Otherwise let the vaunted “free market” do its voodoo.

 

But what we have is what the free market ideologues really wanted all along – a corporatist command economy which socializes all risk and responsibility while letting private gangsters lay their chains across the stream to extract all the “profit”. This kind of command economy is dedicated to conveying taxpayer money to worthless parasites. That’s the one and only purpose of this intentionally complexified, inefficient process.

 

The purpose of the GSEs is to embezzle taxpayer money and launder it toward the pockets of private racketeers.

 

The banks pretend to want to get rid of Fannie and Freddie, saying they’d like to stop the government competing with them, but this is really just a highfalutin version of “Keep your government hands off my Medicare!”

 

The banks really love the GSEs because that’s the only conduit for the government to keep the Bailout going, to keep asset prices propped up, so the banks can still pretend all that toxic garbage rotting on their balance sheets isn’t worthless, so they can pretend they’re not insolvent.

 

We should look at the Bailout as an ongoing version of a fascist “seizure of power”. That’s the term the Nazi party used for the 1933 process, and the parallel is compelling. It’s a simultaneous process of undermining, subversion, systematic theft and expropriation, while trying to make it all look normal, and at any rate to represent it as necessary.

 

If we comprehend the Permanent War, the so-called Global War on Terror, as being analogous to the Nazi violence of 1933, the parallel becomes even more complete.

 

This seizure of power is subversive, thoroughgoing, and totalitarian in intent.

 

The Bailout War and the Permanent War are two sides of the same coin. America is the treasure being plundered. We see the pirates clearly. So will we resist them? And how will we resist them?

 

Finding an answer to the second question depends upon answering Yes to the first. (Those who insist on having an answer to the second before saying Yes are simply cowards or sellouts who would never say Yes under any circumstances.)

Teabaggers

 

Anybody who follows politics, and especially who’s interested in breaking up the Washington stranglehold, probably wonders about the Teabaggers.

 

The basics seem clear enough. At the outset Dick Armey and others formed an Astroturf group, and the right wing power structure propagated a general top-down meme, of Tea Parties raging against the government. Lots of people, most of whom never seemed to have a problem with big government, Wall Street, and obscene deficit spending while Bush was in office, suddenly discovered that they were enraged by all these things.

 

But since then the movement has perhaps gotten beyond the control of its original handlers, while the more relatively disreputable elements of the Republican party like Palin and Bachmann try to co-opt it.

 

The general theme seems to have played a significant role in the Republican establishment candidate’s upset victory in Massachusetts. He successfully pretended to be an outsider. Meanwhile a “real” teabagger supported by Palin lost a Congressional race in upstate New York. But if that election were held today he might’ve won.

 

The first real test of the movement’s effect on electoral politics will come in November. How many establishment Reps will they primary? Will they run any 3rd party candidates? To what extent will the Reps have to pretend to be populists to appease them?

 

Of course, since the Democrats have incomprehensibly defined themselves as the ultimate party of the big business sell-out, it was already a no-brainer for Reps to run as populists in 2010. This should play well with the ever-gullible “independent” swing voter.

 

But the question is to what extent these teabaggers, someone’s potential base, will actually hold office-holders to populist promises. If they really are all just Astroturfed goons, then the answer is “not much”.

 

That, like all the other questions, goes back to the original question. Is this a real movement or just an Astroturf which is organizing a lot of inchoate frustration, letting them blow off steam while shepherding them to the polls to vote for corporate Republicans?

 

Today the NYT has a forum on the issue. I’ll summarize the takes of the commentators and then conclude with a few impressions.

 

They start with data. Pollster Neil Newhouse summarizes an NBC/WSJ poll his firm ran. He reports that 14% of the overall electorate had a “very positive” view of the Tea Party. Of these, 74% are Republicans, 78% identify themselves as ideological conservatives, 87% are white, 60% are over 50 years old, 46% have a college degree, 64% have faith in Fox News, and 77% consider the upcoming election to be very important (rating it 9 or 10 on a scale of 1 to 10; this is vs. 40% overall who rate it so highly).

 

That sounds grim. The typical teabagger is an angry old right-wing white guy who worships Glenn Beck.

 

On the other hand Andrew Kohut of the Pew Center looks at the same poll and emphasizes how only 49% of respondents have an opinion on the teabaggers at all. The results were 28% positive, 21% negative, 20% neutral, and 31% unsure or never heard of them. He emphasizes how independent voters are generally centrists who aren’t attracted to extremism, though in the same breath he concedes that independents are getting angrier about Wall Street and government spending, the things most likely to drive them in the Teabagger direction.

 

Journalist Bob Moser thinks he has seen a change in the movement. In 2009 he was at a rally where Texas governor (establishment Rep) Rick Perry led the crowd in chanting for “states’ rights”. But this month, he reports, a Perry skipped a similar Texas rally, where the congregants loudly condemned both parties. Gone were the “Obama is Hitler” signs. This time round the signs read things like “Law Makers/Law Breakers/No Difference” and “He Works For the Man”. He calls them ”a collective voice simply hollering Hell No!” vs. the establishment across the board.

 

History professor Rick Schenkman reminds readers that in spite of some high-profile examples of stupidity (“Keep your government hands off my Medicare!”; “Nice job, morans”), on the whole Teabaggers are no dumber than any other group of voters. (Which is true.) He emphasizes how “they hold no monopoly on what may be thought of as their distinguishing characteristics – fearfulness, anger, and a lack of knowledge.” Then he goes on to offer advice to the Republican party on how to exploit them.

 

Finally, Micah Sifry, author of a book on 3rd parties in the US, compares the Tea Party to the Perot movement. The demographics are similar – rural and suburb, downwardly mobile, little appeal to the big cities. The big differences are the Perot movement’s “left wing” vs. globalization and the demand for political reform (the Teabaggers seem to have no will toward that), that Perot was never about hate while many Teabaggers are clearly racists, and the movement as a whole looks tolerant of racism, and that it doesn’t have a Leader.

 

He thinks that without a strong leader they’ll probably fail to form a viable 3rd party, but will factionalize and perhaps split the anti-Democrat vote. The real challenge is to the Republicans. The last time they faced such a nativist surge, with the Birchers, Buckley and others led the party past and against such parochialism. But can anyone do that for them now? Sifry doesn’t name names, but I think of the likes of Brooks, Frum, Noonan and others who have gingerly expressed some skepticism regarding Palin and the Teabaggers.

 

Kohut also harped on the criticality of the Leader. I agree that there being one pivotal leader can be a boon to a movement, but it’s not always necessary. But the main deficiency in his (and many others’) view on this is how he rushes right to celebrity culture. That’s typical American thinking. He says he can’t imagine a movement being viable without hiring an already famous person to be its celebrity leader. He cites Perot as an example.

 

But that’s really a counterexample. That’s why the Reform Party accomplished nothing in the long run. It never built itself up from the grass roots, never let itself evolve organically. The measure of a real movement is when you see its own indigenous people rise from obscurity to become leaders and then stay independent. (Of course, the establishment goal is always to find the guy shouting “Hell No!” the most articulately and buy him off. It’s worked so far for both Reps and Dems.)

 

As for independent voters being centrists who are repelled by ”extremism” (never mind that “the center” of our politics and economy is at a neoliberal corporatist extreme), that may be true in general, but the decades of the system’s lies about a “great moderation” are over. We’re entering upon extreme times, and these extreme times, the extreme suffering they’ll inflict upon ever greater numbers of people, will render what the system calls “extreme” politics more and more attractive to the masses.

 

(Kohut also cites reports of divisions among the Teabaggers as “not a good sign”. Not a good sign for what? This movement’s not even a year old. If the division is between Astroturf and some real movement force, such a division would be the best sign (for them). We already know the Tea Party started as an Astroturf; the only question is whether it remains that way, just a goon roundup for the Republicans.)

 

I don’t like the looks of the Teabaggers so far. At least some of them are fascists aching for murder. But if the real groundswell among them is a sincere will to overthrow the entire corporate tyranny, and not just gut government to let the rackets run wild (the goal toward which the Republicans are trying to co-opt them), that would be a great human resource. At least they want to fight.

 

God knows there’s almost zero will to fight among ”progressives”.

 

What are we here to do? To organize all the anti-system fear and rage. Fear and rage are the right feelings to have. The more penetrating your fear, and the more passionate your rage, the more accurate an assessment you have, and the more righteous your moral and spiritual position is.

 

To shout, Hell No!, is to be on the right side of things. The question is whether people are going to shout the whole No, vs. corporations and government, or let their passion and action be derailed.

 

We’ll certainly be seeing a lot more of this alleged populism of the Right.

 

Now if we could only find the true populism which transcends all zombie political categories….    

Analysis of Strategic Defaults – Conclusion

 

(Concluding the discussion of Brent White’s report on underwater mortgages.)

 

In spite of the destruction of the housing market and the wholesale massacre of jobs across the economy (eight million and counting), the collapse of social services just when they are most needed, and the overall sense of peril, the Obama administration just like the Bush before it has gratified itself solely through bailouts for the same banks who destroyed the economy. This unconcern for the suffering people is epitomized in the administration’s anemic response to the mortgage meltdown.

 

Obama’s modification plan is like a caricature of fecklessness. In theory it allows a narrowly defined subset of homeowners to refinance part of their mortgages at somewhat lower rates. The bloated principal, usually the result of predatory lending and bubble-blowing, is sacrosanct. And that’s just the theory.

 

In practice the banks grudgingly grant some temporary mods in order to string people along, but have refused to make any significant number of permanent mods. To help with obstructionism and obfuscation they tend to “lose” the intricate paperwork required for the applications, or play gotcha on technicalities.

 

All of this was predictable. Everybody knows the one and only real relief would be to write down principal to reality-based values. But this would hurt the banks’ balance sheets and profits. It would also contradict the entire reflate-the-bubble agenda, which is the only policy the Wall Street-Fed system has left.

 

Government policy has focused completely on making the monthly payments more affordable, which in turn is based on the premise that if homeowners can afford the payments, they won’t walk away even if underwater. This is consistent with data from earlier, less severe housing busts and dovetails with the government’s propaganda program to discourage defaults through reinforcement of guilt and fear.

 

But even here they’ve been incompetent and venal. The HAMP simply defines “affordable” by the procrustean measure of the monthly payment not exceeding 30% of income, without reference to any other factor including negative equity. There are many ways that 30% may be unaffordable or otherwise irrational, but the government just wants to steamroll people into accepting that this is a good program which has the public’s best interests at heart.

 

There have been various well-meaning but equally weak alternative proposals, like using stimulus money to buy out underwater mortgages or provide grants to struggling homeowners. These are clearly meant to prop up bank assets. Stiglitz wanted the government to directly write mortgages at low interest rates.

 

But all this nibbling at the fringes is still designed to ignore the obvious yet illusion-shattering fact that there’s no way out of this but for principal to come down. These “values” were the result of a fantastic bubble, and now reality wants to deflate. Principal must come down, principal must come down, and principal must come down. If lenders won’t write it down, homeowners will have to default, one way or another, voluntary walkaway or final involuntary default.

 

The only worthwhile policy suggestion was to empower bankruptcy judges to write down the mortgages themselves. But this has been repeatedly rejected by both parties. Anyway, this could directly help only those who were on the verge of involuntary default because they couldn’t afford the payments. It would do little for those saddled with underwater mortgages but who technically can afford to keep paying.

 

Besides modifications of principal and cramdowns, White suggests several other helpful things the government could do if it really wanted to help people. It could cease from fear-mongering and provide accurate information on the financial and legal implications of default. An excellent reform would be to amend the Fair Credit Reporting Act. As we said in part 3, when the lender rats out the defaulting borrower to the credit rackets, he’s adding an extralegal punitive element which is not a legitimate part of the contract. From p. 45:

 

The suggestion that Congress should amend the Fair Credit Reporting Act to prevent lenders from reporting mortgage defaults is premised upon the underlying mortgage contract, in which lenders agree to hold the house alone as collateral. In the case of underwater mortgages, however, the portion of the mortgage above the home’s present value essentially becomes unsecured. Lenders compensate for this by holding the borrowers’ credit score, and thus their human worth, as collateral – thereby altering the underlying agreement that the home serves as the sole collateral. As a consequence, lenders are often able to reap the benefit, but escape the costs, of their bargain.

 

If instead of being able to engage in this blackmail the lender had to either deal fairly with the borrower or take back the property in the event if default, so that the lender had an incentive to work out a deal whereby both parties shared the hit from the debubbling of the loan price, we’d have far more equitable outcomes in individual cases, and take a real step toward tackling the systemic problem.

 

White comments, “the proposal to eliminate the credit threat is, at heart, a market-based solution. It should thus be preferable to a government bailout of homeowners or a government take-over of the lending industry.” The end result, contrary to the scare stories from detractors, would likely be fewer defaults, as lenders would now have the incentive to seriously negotiate much earlier in the process.

 

So we have:

 

1. Amend the act, stop the fear-mongering, give accurate info.

 

2. People will then be more willing to walk away, which is the point.

 

3. Yet people still prefer not to walk even when they have this information, so even when underwater they’ll usually still want to stay if they can make a deal.

 

4. Now lenders would have the incentive to find a mutually satisfactory deal.

 

5. End result, fewer defaults.

 

“Moreover, barring the reporting of mortgage defaults could have positive effects on future lender behavior.” (p. 51) Where the outrageous asymmetry between lender and borrower no longer holds, the lender will no longer have such an incentive for such reckless, predatory lending. Doing away with the asymmetry would force lenders, and therefore the system as a whole, back to the responsible conduct everyone in power claims to revere. We’d get back to the basics of lending and borrowing based on realistic price-to-rent ratios and solid down payments.

 

As White acknowledges, all of this is predicated on a government which actually serves the public interest and a finance sector which isn’t completely psychopathic. In other words, it presupposes a world which does not exist. As we know, we have no such government. The best ideas, principal reduction, forced cramdowns, and ending credit reporting extortion, are all repugnant to it.

 

White brings up the possibility of bottom-up public education (p.44):

 

Understanding norm asymmetry suggests other possibilities. One solution that naturally follows, for example, would be for the government – or some consumer advocacy group – to begin a public education campaign encouraging underwater homeowners to walk if their lender is unwilling to negotiate. Whether or not such an approach would be effective, it would likely be so distasteful to most policy makers, and many readers of this article, that this idea will not be pursued further here.

 

I trust readers of this blog won’t find the idea so distasteful.

 

(Of course the whole paper is “pursuing the idea”. Is this a contradiction of the claim that education doesn’t work? The answer is that factual education within the existing sociomoral indoctrination regime doesn’t work much. But if informational education was coupled with new moral education, maybe that could work. It hasn’t been tried.)

 

White concludes:

 

Regardless of the precise policy prescription, it is time to put to rest the assumption that a borrower who exercises the option to default is somehow immoral or irresponsible. To the contrary, walking away may be the most financially responsible choice if it allows one to meet one’s unsecured credit obligations or provide for the future economic stability of one’s family. Individuals should not be artificially discouraged on the basis of “morality” from making financially prudent decisions, particularly when the party on the other side is amorally operating according to market norms and could have acted to protect itself by following prudent underwriting practices. The current housing bust should be viewed for what it is: a market failure – not a moral failure on the part of American homeowners. That being the case, it is time to take morals out of the picture and search for an equitable solution to the negative equity problem.

 

A market failure, not a moral failure on the part of homeowners. I only disagree with the final sentence about taking morals out of this completely. For this was not just a market failure but a tremendous moral failure on the part of the system. The big banks are not just amoral but immoral. We need a restored morality, which must grow again from the ground up. We won’t find remnants of it in existing structures.

 

And as I wrote at the outset, history proves that you can’t fight ideas, however twisted, with reason alone. We need new ideas to completely overcome the discredited ones.

 

If our great project is to take back the country from corporate tyranny and relocalize our economies for the sake of human freedom and resource sustainability, then taking back the land is a key part of the mission.

 

Dissolving the false social morality of mortgage debt, and the premise which underlies it, that banks should hold the feudal land monopoly, can be a potent weapon for this mission.

 

We don’t know exactly how we the people shall flow as water into the crevices of the seemingly impregnable fortress, but we shall do so. We’ll erode, we’ll undermine, we’ll loosen and weaken them, in the end we shall bring them down. 

Analysis of Strategic Defaults (4 of 5)

 

Public propaganda, internalized false guilt, and extralegal punitive features of the system outside the mortgage contract collude to produce what Brent White calls “the asymmetry of homeowner and lender norms.” (p.35)

 

Here’s the basic question:  If it’s an equal contract, then why is the borrower’s obligation to pay somehow considered paramount over the lender’s agreed-upon obligation to take back the property in lieu of payment?

 

The borrower’s “promise to pay” is held to a moral and social norm very different from the lender’s obligation to take back the house if the borrower walks away. These are equal in the eyes of the law and the market, yet only the lender is considered a purely legal, market actor, and absolved of adherence to any moral or social norm. But the borrower is considered to be fully exposed and answerable to both realms.

 

The moral and social pressure on the underwater borrower to keep paying for as long as he can is meant to remove from the lender legal responsibility to have the contract executed through his taking back the property when the borrower walks.

 

This is tremendously unjust. The lender generally has a huge advantage in expertise, knowledge, and understanding of the market and the contract. Clearly it’s the lender’s responsibility far more than the borrower’s to ensure that the terms of the contract are equitable in the first place (especially since appraisals, though paid for by the borrower, are usually arranged by the lender; existentially, “expert” “professionals” are always in cahoots on some level).

 

All the government and media hype about “responsibility” is especially ironic when we consider how the bubble distorted the market. We described earlier how the normal price-to-rent ratio for responsible homebuying was around 15 to 1 (White p.8 ). So how ”responsible” were lenders who were writing mortgages at a national average of 23-1 at the peak of the bubble, reaching 38-1 in the most bloated markets? You want irresponsibility, don’t start with the borrowers, start with the lenders. Of course the bubble is completely the responsibility of the banks, the government, and the media. All this violated the most basic economic precepts. As White comments, “if personal responsibility is the operative value, then lenders who ignored basic economic principles (of which they should have been aware) should bear at least equal responsibility to homeowners for issuing collateralized loans that were far in excess of the intrinsic value of the home.”

 

Lenders traditionally operated according to a model which showed a strong correlation between loan-to-value ratio and default. So they generally only made loans under conditions where it was unlikely default would become the financially rational course for the borrower.

 

But as they gathered more data they found that in fact few borrowers are “ruthless” the way the textbooks say (meaning they would quickly walk once they went underwater). So they priced borrower ignorance and moral servility into their models and embarked upon ever more reckless lending, departing ever further from any responsible concept of how well these mortgages could maintain positive equity.

 

Putting all this together – the asymmetry of expertise and information, the departure of lenders from longstanding prudent practice, and their expectation of preying upon the irrational, emotional mindset of underwater borrowers – we can see how lenders deserve the great bulk of the blame for these bollixed contracts, and should have to shoulder the bulk of the burden. “One might argue, in fact, that the value of personal responsibility would require lenders to own up to their share of the blame, and work with underwater homeowners by voluntarily writing off some of the negative equity.” (pp.37-38) This would be the operation of real responsibility, real morality. But as we know lenders haven’t been called to moral account the way borrowers have.

 

But what about their economic interest in mods? Surely it’s better for their bottom line to modify these mortgages rather than see them default? But as White found, their models have taken borrower complaisance into account. They’re taking advantage of the very fear and guilt their media campaign seeks to nurture. Since according to their models most underwater borrowers will not default as long as they can make the payments, it’s in fact not in the lenders’ interest to make any real mods.

 

So directly counter to morality and what would be sound economics in a truly capitalist system, lenders and government have conspired to foist the responsibility and the losses onto the reeling mortgagees.

 

Here’s the way the “negotiation” often goes. Say a homeowner with a good credit score requests a mod. The lender believes the homeowner will do anything he can to avoid the guilt of default, the shame of foreclosure, and the terror of a damaged credit report. So the lender will say he won’t negotiate until the borrower is 30 days delinquent. If the borrower misses that payment, the lender will then say not till you’re 90 days derelict. After 90 days they’ll say your score is already too impaired for you to qualify for a mod. All the while the borrower is harassed with notices meant to shame and threaten him over his deteriorating status and the dire consequences of complete default.

 

Throughout the process the lender is playing the odds that the borrower will resume paying rather than face the full impact of foreclosure. Only if the lender really believes the borrower will walk, will he seriously discuss a modification. Only then would it be in his interest.

 

So we can see why Obama’s modification program has been such a failure. Even if the administration was sincere (doubtful), the lender absolutely does not want to modify. He wants to extract full payments as long as possible. He’s betting on the homeowner’s conformism.

 

White sums up (p.40):

 

Most lenders will, in other words, take full advantage of the asymmetry of norms between lender and borrower and will use the threat of damaging the borrower’s credit score to bring the borrower into compliance. Additionally, many lenders will only bargain when the threat of damaging the homeowner’s credit has lost its force and it becomes clear to the lender that foreclosure is imminent absent some accommodation. On a fundamental level, the asymmetry of moral norms for borrowers and market norms for lenders gives lenders an unfair advantage in negotiations related to the enforcement of contractual rights and obligations, including the borrower’s right to exercise the put option. This imbalance is exaggerated by the credit reporting system, which gives lenders the power to threaten borrowers’ human worth and social status by damaging their credit scores – scores that serve as much as grades for moral character as they do for creditworthiness. The result is a predictable imbalance in which individual homeowners have borne a huge and disproportionate burden of the housing collapse.

 

There’s the basic imbalance. Technically, legally, contractually it ought to be 50-50. In practice the system is heavily rigged in favor of the lender.

 

In part 5 we’ll look at prescriptions for how to correct this injustice.

The Real State of the Onion

 

State of the Union is an odd title unless this speech is going to sound a sincere alarm over the centrifugal forces of crime and antisociality spinning this “union” to pieces. We know we’re not going to hear any such alarm.

 

The state of the union according to Obama is a joke. We know with absolute clarity that Obama’s state is a nightmare of bailouts, war, secrecy, destruction of civil liberties, the imperial presidency, and the tyranny of corporatism.

 

We are clear that he and his party don’t care about jobs, health reform, farm reform, food reform, energy reform, or reform of any sort.

 

I don’t doubt Obama consciously fails to understand himself. His cognitive dissonance looks deeply engrained. Asked to grade his performance so far, he didn’t even demur to answer but leapt to give himself a “B+”. The only reason he didn’t give himself an A is because he thinks, however stellar his performance thus far, there’s always room for improvement.

 

And we’ve seen ad nauseum how the Democrats think Massachusetts, O’s plummeting approval ratings, and other political boners are all because of inadequate messaging; none of them are about flawed substance.

 

Today administration flacks say that in tonight’s speech Obama will ”take responsibility” but not the blame.

 

How do you do that? Would you let your ten year old get away with that? “OK, it’s my responsibility, I’m sorry, but it’s not my fault”?

 

I remember Rumsfeld saying something like, ”I don’t know where people get the notion that just because you’re head of an organization that you’re responsible for what happens in it.” (I couldn’t find the quote, but I think it was at the same assembly where he said “you go to war with the army you have, not the one you want”.)  

 

(I’m often reminded of the “army you have” notion when I hear Democrat hacks saying “you govern with the Democratic party you have, not the one you want”. But then these hacks remind me of Bush hacks with every lying word they say.)

 

Again: Bailouts, yes we can. War, yes we can. Ever-bloating Pentagon budgets, yes we can. Insurance racketeering, yes we can. Torture, yes we can. Secrecy, yes we can. Disappearing people, yes we can. Anything which empowers tyrannical corporations, yes we can. Anything which empowers tyrannical government, yes we can.

 

Jobs, no we can’t. Reform, no we can’t. Anything which benefits the people, no we can’t. Morality, spirit, happiness, justice, freedom, no we can’t.

 

That’s how we can classify, for example, all the lying gambits emitting from his lying “populist” epiphany.

 

Size limits on banks! No, they’ll just be capped at their existing monopoly sizes. maybe. For now.

 

No more prop trading for government-backstopped banks! Except for all the loopholes. On second thought, any restriction will be the exception. And of course we won’t touch the structural pathology of prop trading as such, which shouldn’t exist at all; of financial speculation as such, which shouldn’t exist at all.

 

Help for the middle class! In the form of mere crumbs. Insulting, really, when you compare it to the looting on behalf of the banks, health insurance rackets, weapons contractors, and others.

 

And now cuts in non-defense spending. That wouldn’t put a dent in the debt, wouldn’t comfort the afflicted, wouldn’t afflict the comfortable, and would on the contrary afflict the afflicted on behalf of the comfortable. No one can even figure out who the political constituency for that is supposed to be. It looks absolutely idiotic from any point of view.

 

Through it all Obama continues to support “Heckuva job, Bennie” Bernanke.

 

Bennie is doing a heckuva job for the banksters, as since December the ceiling on the Fed’s MBS purchases on the taxpayers’ bill, the ONLY thing which is still propping up the insolvent zombie system, are now in principle infinite.

 

(Meanwhile Robert Gates has similarly assured weapons dealers that Pentagon budgets are to be expanded without limit, purely for the dealers’ sakes, as explicit corporatist administration policy.)

 

That’s what Obama really thinks of the budget and its deficit.

 

And that’s why he self-refutes all his newfound anti-bankster talk with his support for Bennie.

 

Meanwhile we’re actually starting to zero in on the first identifiable de jure crime, the Fed’s money laundering through AIG. Testimony is coming up today.

 

From here the next step is the assault on ALL Fed secrecy. This secrecy is intended to cover up crime, to cover up the magnitude of the Bailout, to cover up how insolvent all the banks are, how the entire premise of the Bailout is a lie.

 

It’s a refutation on principle of Obama’s claims to ”transparency” and confirms his imperial pretensions; that Obama agrees with Cheney on the imperial presidency and executive secrecy as a principle, a privilege, a prerogative.

 

That they even went so far as to try to claim “national security” as justification for AIG secrecy provides a case study in the general national security lie; how we must assume it’s ALWAYS a lie.

 

Let’s hope these hearings go somewhere, though the pattern indicates it’ll be a whitewash.

 

And this can still only nibble at the fringes of the great crime, for which we must someday convene a new Nuremburg Tribunal.

 

In the meantime we can dispose of Obama’s stupid speech.   

 

“State of the Union” is an odd title for a speech describing the progress of the class war from above. It’s a document of America’s continuing descent into a gangland cesspool. But since it will be a package of lies, the Orwellian title is blandly appropriate.

 

This speech, like all the other lying words oozing from this criminal politician and every other politician of the criminal system, will only insult our intelligence and our deepest instinct for morality, our deepest demand for justice.

Analysis of Strategic Defaults (3 of 5)

 

In part 2 of our analysis of Brent White’s paper on strategic mortgage defaults we saw how the homeowner’s decision not to walk away from an underwater mortgage, seemingly irrational on paper, is driven by emotional factors – shame, guilt, and fear. But these aren’t just feelings people naturally have. Rather they are systematically and aggressively drilled into us by the government, the banks, and the corporate media.

 

Economists shilling for the banks have raised the alarm that if people start to think strategic defaulting is OK, or if mortgage modification policy seems to encourage the act, this may trigger an avalanche of walkaways. It’s true that once defaults become prominent in a neighborhood, they may become contagious as the guilt and fear wear off. (As we discussed in parts 1 and 2, the fact that a region is economically depressed doesn’t seem sufficient to set off this contagion. Rather, it takes time and the sight of others defaulting to wear down moral resistance and trepidation.)

 

The government has taken (modest) action to try to prevent foreclosures from snowballing in the first place. But they have not sought to do this by lowering the principal on bloated mortgages, which would be disadvantageous to the lenders. Rather, programs like the HAMP claim only to seek to lower monthly payments.

 

White comments, “implicit in this approach is the assumption that home owners are unlikely to default on their mortgage if they can ‘afford’ the monthly payment.” So even as academic studies pretend homeowners are “ruthless” as per neoclassical theory, and even as these studies are brandished by opponents of real relief, the real life power cadres believe and act as if people are really not so ruthless. On the contrary, they bank on people being conformist, inertial, docile.

 

Government policy depends upon the effects of fear and guilt to keep people vainly throwing money at an underwater situation, against their own interests.

 

To sum up:

 

1. TPTB fear contagious defaults once ingrained fear and guilt wear off. They want to prevent these defaults for as long as it’s profitable for banks not to foreclose.

 

2. They do not want to lower principal, since this would hurt lender profiteering.

 

3. They believe that as long as the homeowner can afford the payments he’s likely to stay put and keep paying no matter how underwater he is. This is because of that fear and guilt.

 

4. So the preferred policy is to at least pretend to permanently modify payments, while reinforcing fear and guilt through propaganda.

 

White cites further numbers from the Guiso/Sapienza/Zingales study: 45% of homeowners would walk away if they were down $300,000. But only 38% of those who think it’s immoral to default would do so under those circumstances, and that’s for the 87% of the whole who do think it’s immoral. That means over 90% of those who don’t believe it’s immoral to walk away would do so if down that badly.

 

So we can see how those with a vested interest in preventing strategic defaults must seek to instill and reinforce feelings of shame and guilt. And since shame and guilt alone aren’t enough, they also seek to generate fear of the consequences of default.

 

White points out how “the clear message to American homeowners from nearly all fronts is that one has a moral responsibility to pay one’s mortgage.” (p. 25) It starts at the top with Obama himself lauding the “responsibility” of those who continue to pay, and the harm to “our common values” wrought by those who do not. Henry Paulson, finding time away from stealing from the Treasury on behalf of his old frat Goldman Sachs, was more severe: “And let me emphasize, any homeowner who can afford his mortgage payment but chooses to walk away from an underwater property is simply a speculator – and one who is not honoring his obligations.”

 

(This was presumably not a Goldman recruitment pitch, yet many have pointed out how Paulson seems to have a different attitude toward their speculators. As Felix Salmon put it, Paulson would have fired anyone at GS who acted according to the morality he’s proclaiming here.)

 

The corporate media has constructed a wall of moralizing sound, much of it harsh. Fox News especially calls those who fight back vs. the banks “deadbeats”, “obscene”, and compares them to appeasers of the Nazis. The MSM triumphs words like “responsibility”, ”honor”, “contracts”, “ethics”. Needless to say, all such terms are used unironically, with no self-awareness, and completely unanchored from any real moral frame of reference, by a corrupt media whose main purpose by now is to shill for the Bailout and for bank and government policy which are in fact obscene, and utterly irresponsible, dishonorable, unethical. It’s our own government and media who are obscene. But Orwell has never had such a field day.

 

When the media feature someone who defaulted they often shield his identity to reinforce for the viewers the notion that he’s some kind of derelict. What’s more, even the credit counseling agencies, who in theory should be giving people unbiased information on their options, including the rational upside to strategic default, have joined the propaganda chorus. In fact, such “non-profit” agencies as the National Foundation for Credit Counseling (whose rep goes around to interviews blathering about people’s “responsibilities”) are really funded by the lenders, and serve as funnels for lender propaganda.

 

So when the system “speaks with one voice” (p.29) in framing this as an issue of individual morality, involving core American values, it distracts the focus from the responsibility of banks and government. It seeks to put the burden of responsibility for the bubble collapse on the individual and remove it from the system. What’s more, when the media and non-profits blare the same message, seeming to speak as if from “among” the people, they misdirect attention away from how the banks and the government are the real organizers of this propaganda, and how that propaganda flows from the top down.

 

In this sense, the MSM and non-profits serve as classical front organizations. Or today we can also call them Astroturfs.

 

The same dynamic plays out with the misinformation campaign to instill fear. White quotes the ever-eager Time magazine: “What is real is how completely a foreclosure wrecks your finances. Near term, you might get slammed with a massive tax bill, since forgiven debt can be subject to income tax. Long term, car loans and – you guessed it – home loans will be much harder to come by. How’s that for walking away? This is the American Dream ended in disaster.” (p.30)

 

Wow. Awful. In part 1 we discussed how exaggerated this is, and how any such damage can be mitigated.

 

It’s an endlessly repeated set pattern. The MSM story first questions the morality of walking away and then quotes an “expert” on how disastrous it’ll be for your credit.

 

Guilt and fear in tandem operate synergistically. They reinforce one another. So the system seeks to maximize both to obscure the facts about the financial benefits of walking away. The media seldom gives a detailed account of the rational upside. They’re especially unlikely to give a non-alarmist account of the likely repercussions for one’s credit score. On the contrary it’s precisely here where they seek to raise panic.

 

Credit scores have been the focus of their own microcosmic social indoctrination. People are encouraged to believe that a good score is a source of pride, a formal validation of character. The government explicitly claims the score measures character, calling it a “mechanism for investigating and evaluating the credit worthiness, credit standing, credit capacity, character, and general reputation of consumers” (in the Fair Credit Reporting Act).

 

A bad score, on the other hand, is supposed to denote bad character, that one is shifty and disreputable. The system does indeed want the dire warnings in the media to reflect reality. The tyranny of the score is intended to reward or penalize you everywhere. The fact that it doesn’t really live up to this is not for lack of malign intent on the system’s part.

 

When coupled with moral indoctrination, the stick of a bad score seeks to impose emotional suffering as a transaction cost of any action counter to the interests of the banks.

 

All of this takes place on an extra-legal basis. The contract should be clear on the responsibilities and recourse of the lender and borrower. The collateral is the property itself, not the good name and general socioeconomic prospects of the borrower. If someone borrows from you and you agree upon collateral for the loan, and he fails to pay you back, and you seize the collateral, you don’t then get to punch him in the face as well.

 

Similarly, the borrower walks, the lender takes the property, the contract is complete. For the lender to then go and trash his credit is the added punch in the face. Yet the government lets them do that, even though it’s outside what any reasonable contract, any rule of law, would allow.  

 

In part 4 we’ll go into detail about how this is lawless, how it’s really the lender who conspired against the borrower to write a faulty contract and then shift the onus of that contract onto the borrower.