October 7, 2011

One Simple Demand: Abolish Debt. Abolish Wall Street.


In the comment thread for my last post we discussed the possibility of some educational pamphleteering at the occupations. One idea was a few bullet points summing up the facts about debt, along with a recommendation to read David Graeber’s Debt: The First 5000 Years
So what might those points be? Here’s a few thoughts:
*Are you in debt?
*Are you forced into debt in order to live like a human being? It hasn’t always been this way.
*Humanity has flourished without formalized debt for most of its history.
*Formalized debt has always gone hand in hand with scarcity, tyranny, slavery, and war.
*Formalized debt is the mode of control of despotic structures like big government and big corporations.
*These structures, too, have only recently come into existence, and only along with tyranny, slavery, and war. Humanity has always done better without them. [Maybe those latter two are better to leave implicit for now? Maybe it’s better to isolate the formal debt issue, leading up to saying Wall Street and financialization shouldn’t exist.]
*Cash money is the vehicle of formalized debt.
*Wall Street exists only to preside over this unnecessary and destructive debt machine. It serves no legitimate or constructive purpose.
*History proves that we can undertake all human endeavors more fairly and efficiently without Wall Street and its debt burdens. Humanity is cooperation.
*We must redeem our human economy by building alternatives to cash and debt.
*We shall flourish again only with the abolition of Wall Street, the domination of finance, and the tyranny of money debt.
So there’s One Simple Demand right there. Abolish the debt system, abolish the finance sector, abolish Wall Street.

March 14, 2011

Corporatism is Legalized Crime


As Ted Nace points out early in his survey of corporatism, Gangs of America, the worst crimes of corporations seldom involve technical breaking of the law or the personal evil of corporate executives, but the pattern of destructive anti-social activity which corporatism (and its corrupted system of “law”) enshrines in principle as normal and normative. Corporatism is in fact the ideology and practice of formally enshrined organized crime.
The banks recently crashed the real economy, and permanent joblessness (including the waste of life termed “underemployment”) creeps toward and over 20% according to the measure. This destruction of the basis of our lives is a calculated, intentional corporate-dictated policy. Today we see quarter after quarter of corporations reporting record levels of “profit”, building up record cash hoards, and their executives personally looting these corporate hoards in the form of “bonuses”. All this even though the original stated purpose of the Bailout was to get liquidity circulating again. Today, not only does the government tolerate what’s obviously fraudulent accounting, disaster profiteering, and the obstinate refusal of corporate elites to live up to the terms of the Bailout. (I include all corporate sectors among the bailed out, since the bankster and government allegation was that all sectors would perish unless the TBTF banks were bailed out, and no other sector dissented from this, because they all expected the Bailout to trickle down to at least their own stock prices and exec comp.)
Not only does it do this, but it proclaims that this “jobless recovery” is in fact the real recovery they intended all along. Thus we have the same history as in Iraq: The initial rationale is proven to have been a Big Lie. The government then starts inventing new rationales ad hoc, temporarily proclaiming victory according to each, until forced by reality to move on to the next, further attenuated rationale and metric.
So we have Sodom-like corporate profiteering as the real economy continues to deteriorate, indeed in inverse proportion to the rising calls for “austerity”, that public amenities and civil society need to be gutted because there’s not enough existing wealth to support them.
Corporate profiteering and personal looting by executives, vs. austerity. This ratio is a direct metric of organized crime. It’s nothing but monumental, capital crime. Corporatism is the system of command economy, and trickle-down is ideology meant to justify it. But corporatism is nothing but robbery, and trickle-down nothing but the verbal part of fraud. Advocacy of it abets capital robbery. This incriminates both Washington gangs, the entire MSM, most of academia, and conservatism and liberalism as a whole.
In a formula:
Capitalism = corporatism and trickle-down = organized crime.
This is not a new kind of corporate behavior. Privateering, the formal charter to commit crimes, goes back to the 16th century, the dawn of the corporate form. Corporations were envisioned in the first place to help enable “violent crime grafted onto trade”, as Nace put it. The very term “free trade” originally referred directly to freedom from the law. Or as Hannah Arendt wrote in Origins of Totalitarianism, legalized gangsters sought to use politics to regulate their bloodshed. The British East India Company’s violent lawlessness is exactly mirrored today in the form every sort of corporate thuggery and the way corporate crimes are generally considered above and outside the law. Blackwater, explicitly declared above the law and granted a charter to literally perpetrate massacres, is merely the distillation of the way every large corporation is empowered to act, and the way they usually do act. Indeed, in principle this is the way they are required to act according to the core principle that profit-seeking is the only acceptable value. (The question of what kind of sick society would ever have enshrined such a sociopathic form in the first place I’ll leave for another time. But I’ll say here that the very existence of profit-seeking corporations reflects a self-loathing and self-destructiveness on the part of civilization itself.)
Today’s “free trade” has exactly the same criminal nature, but the term has been sanitized to refer to an economic theory rather than a legal concept of chartered outlawry.
Today it’s true in a precise sense that corporations are formally legalized criminal organizations. Take for example the repeal of the bucket laws, which used to recognize gambling as gambling whether done over dice in a back alley or stocks on an exchange. A bank couldn’t ask the state to enforce a wager any more than a two-bit hood. But these sane laws started being repealed in the 1980s. The process culminated in the CFMA in 2000. Now what was naturally unproductive antisocial gambling was legalized as a “contract”. The result was massively bloated bank profits and hideous distortions of the economy, climaxing in the crash of the real economy. (This is the intended culmination of financialization itself.) The crash was then used as the pretext for the Bailout and austerity. This entire process was premeditated and had its origin in the legalization of what are naturally outlawed acts. The massive conspiracy, dating back to the 90s, to fraudulently induce mortgages was enabled by this original legalization. And the rest of the crimes were piggybacked on these.
This is both the most extremely destructive and the most typical of the formal legalizations of organized crime which are bound up in the corporate form. While many of the subsequent crimes may still technically be illegal, they were enabled by the underlying legalization of gambling. (And once the government has been corrupted enough, even existing laws are no longer enforced, as we see every day. This is simply the de facto legalization of corporate crime.)
Yet today most people fail to see this. The magnitude of the crime, and the government imprimatur accorded it, is such that it becomes hard to register. Pro-corporate propaganda and indoctrination reinforce this self-obfuscation. This is what Hitler intended with his doctrine of the Big Lie. (This same magnitude of crime enabled by the hijacked law and corrupted polity also renders it impossible for the existing system of law to rein such crimes back in and impose any deserved justice. When the day comes that the people finally take back their country from such criminals, nothing short of a Nuremburg-level proceeding is sufficient to the task of justice.)
So we have a regime where responsibility for every crime, the robbery of trillions, international murder, slavery, the ravaging of the environment, conspiracies against plant genomes, and anything else profitable, are either directly legalized at the corporate behest or else laundered through the corporate form and dissolved.
All this is within the prescribed use of corporations. These are not “abuses”.
Here’s another example. Corporations serve as the underlying for the stock market. The stock market has a fraudulent basis in the first place, since only the first offering actually raises capital. The rest is just the same legalized gambling. It has never been anything but socially and economically destructive. And by what reality-based measure does stock price reflect value at all? Yet once you enshrine it as the most important measure of value, control fraud becomes ideologically justified. From there the next step is to change the law and/or regulation itself. Again, organized crime becomes legalized.
One of the ways the law gets changed is through pro-corporate SCOTUS decisions, like the recent one striking down most of the enforcement potential* of the “honest services” law, which was a modest attempt to retain some criminal liability for the most egregious executive fraud. This is just one example of how corporate power has corrupted our institutions, that even in the rare cases where the legislative branch tries to do part of its job, the judiciary blocks it.
[*In my previous corporatism post I referred to the double standard of law and jurisprudence enshrined by the SCOTUS where it comes to corporate speech. Corporate speech “rights” are interpreted extremely loosely, while at the same moment, in the same cases, corruption is interpreted with extreme pedantry. If there’s not a physical sack with a dollar sign drawn on it, it’s not corruption.
The SCOTUS just applied this same strict standard of “corruption” in the honest services case, declaring that the law is constitutional only where applied to explicit kickbacks and such. Obviously, this is meant to gut the law in practice, since today’s corruption is generally more sophisticated than that. But SCOTUS jurisprudence is designed to let all implicit corruption elude accountability.]
We’ll soon find out what’s the latest from the SCOTUS on unconscionable contracts of adhesion, extortionate “contracts” forced upon us through the coercion of monopoly and artificially created economic hardship. These strong-arm contracts are increasingly popular, and are imposed anywhere the corporations attain the position of dominance which enables them. In theory such contracts, just like gambling, are supposed to be unenforceable, uncontracts. But here too the SCOTUS has usually served as the corporate goon. The Lochner era was based upon the legalization of “contract” extortion, and although the court nominally abandoned this doctrine in 1937, in practice courts almost always still find such contracts valid. In the case of AT&T vs. Concepcion, AT&T’s thefts were so outrageous that the lower courts found the contracts it imposed, forestalling its victims to combine to sue as a class, to be unconscionable. But this will be the SCOTUS’ big chance to restore Lochner as official court doctrine. 
Meanwhile government contractors, starting with the weapons rackets, are implicitly encouraged to bilk the taxpayer out of billions. By now it’s not conventional corruption but systematic corporatist robbery, with the DoD and other agencies as bagmen. Robert Gates once explicitly told an audience of weapons racketeers that where it comes to the military Obama’s top priority is an ever-escalating Pentagon budget as such, as a value in its own right.
Those are just a few examples of systematic corruption, i.e. organized crime. The term kleptocracy should be understood in a profound way. Corporatism comprises a new paradigm of criminal practices, and the pro-corporate mindset is a characteristic, immutable criminal mindset. It’s not just a set of criminal actions, but an indelible criminal essence. It’s the mindset that we can no longer exist at all without being totally controlled by corporations, having all we produce monopolized and stolen by corporations, and submitting at every moment to corporate imperatives even in our very thoughts. The elites, for obvious reasons, believe this themselves. The system they’ve set up is dedicated to enforcing this corporate totalitarianism from the top down. The corporations themselves have no purpose at all except to preserve and intensify this kleptocracy, and to keep stealing.
But we know that we don’t need corporations to have a vibrant, productive economy. We know we’d be far more productive without them. Without them we would restore our prosperity, our communities, our social morality, and our democracy. The only thing in the way of our redeeming our humanity and saving our lives and freedom are a few gangsters, organized as big corporations. The corporate form is what enables this in the first place. Let’s abolish it. 

November 23, 2010

Guns, Butter, and Bonuses (MMT, Money, and Deficits) Part 2


In part 1 I discussed some of the core lies of neoliberalism: That money creation is based on deposits; that we need the banks in order to create money; that money creation without risking runaway inflation is constrained by anything other than the capacity utilization of the economy; that under today’s Depression circumstances America faces any “deficit problem” at all other than the political one created by the criminals who are looking for a pretext to steal yet more trillions under the rubric of “austerity”.
Modern Monetary Theory (MMT), the latest incarnation of a much older idea once called producerism, greenbackerism, chartalism, and other names, teaches these truths. So in these senses MMT is objectively subversive of the particular status quo which afflicts us today. It means the banks have no legitimacy and shouldn’t exist at all.
Money creation is a sovereign power of the people, and a core responsibility of government if we’re to have a government at all. Whether done directly by the government or through the middleman of the banks, money creation is done out of thin air, simply by crediting the account of a loan or payment recipient. The right way to create money is to gauge the money supply to the productive capacity of the real economy. If there’s capacity underutilization, the government should engage in deficit spending to fill the gap, until it has done enough to stimulate the full productive capacity and full employment. This is MMT’s prescription, according to many of the MMTers I’ve read.
The most direct, efficient, rational, and productive way to do this is for government to directly issue money, directly credit accounts.
Contrary to popular propaganda, the banks don’t create money as a multiple of deposits, but simply create it out of thin air. They do this not for the sake of economic health, but for their privatized rent-seeking. They want nothing but control of money in order to steal as much of every transaction as possible. The banks tax economic activity at least as much as the government does, but bank taxation is far more destructive in principle. Government taxation, although usually excessive and tyrannical in practice*, can in principle be measured and used for the sake of rearranging wealth so that economic well-being and productivity is maximized. But bank taxation is never anything other than purely greedy, purely destructive, and never has any measure other than how much they can get away with stealing. That’s what the financialization of the economy is, the attachment of a permanent financial parasite to the real productive activity of a people. This parasite does nothing but suck ever larger amounts of our life blood, steadily weakening us and even achieving motor control over our actions.
[*Today we have terminal kleptocracy, and this government, itself a creature of the banks, will never tax for any purpose other than to help the banks and corporations steal. So I’m certainly not calling for this particular government to tax more. On the contrary I say we must reject and resist all new or extended taxes on the non-rich.
In this discussion I only want to establish the principle that, as a matter of reformist philosophy, for the government to resume the full money creation and taxation power from the banks would be a progressive step.
But in the end we must get rid of centralized government as well.] 
Once the banks have financialized the economy, they believe in and demand rampant deficit spending, but they want it detached from all real production. Under financialization, the currency becomes mere funny money for bankster gambling and speculation, while all losses and destructive effects are socialized on the productive people.
Toward this end, the bankster-bought government has alienated its sovereign currency and its sovereign power. Thanks to the government’s corruption and abdication, the banks create money, not for socially and economically productive ends, but for destructive profiteering.
But the government could just as easily reclaim its money sovereignty and directly issue the money, and do so toward the goal of a healthy, productive real economy. We wouldn’t need the big banks to exist at all, and could be rid of them. There would be no threat of destructive inflation from this money issuance so long as there’s major capacity overhang and unemployment in the economy, as there is today.
Meanwhile the banks encourage unhealthy corporatist deficit spending (A2 = C, in my terminology from part 1, instead of the healthy A1 = B), and neo-austerity-mongers like Krugman embark upon their own bait and switch, wanting to surreptitiously switch in A2 for the A1 they previously advocated, and the C for the B. But they face two prospects of change: The possibility of having to capitulate to deflation at some point; and the possibility that the old greenbacker idea, in today’s MMT form, will get more and more traction.
As a contingency plan, they’ve started floating trial balloons for a restored gold standard. This is an old bankster trick. In the short run, it’s standard political misdirection. In the 19th century they used to call it “sound money” and “honest money”, and this does have a surface plausibility.
In the long run, any metal standard is always used to artificially constrict the money supply among participants in the real economy, in order to force them into debt. Whether it’s a time of real inflation or real deflation, the gold standard is used the same way, as a depressant and control over the non-finance sectors, and especially the non-rich. In our circumstance, as deflation definitively sets in, a gold standard would be used by the banksters to accelerate it beyond its natural pace, in order to more effectively impose debt indenture and strangulation. A gold standard would simply be austerity by other means.
So there’s more evidence that the true reform solution, if we’re to continue with a centralized economy at all, is that:
1. The government should directly issue greenbacks;
2. toward economically productive goals.
No “finance sector” necessary.
So the reformist MMT idea is an attempted end run around the criminal hoarding of social wealth on the part of the banks and corporations. The call for direct government issuance, including deficit spending when the economy is depressed, would be an attempt to bring the circulating supply of money in line with the economy’s productive capacity and counteract the intentional withholding of money from the economy by rent-seeking criminals who hoard that money (all stolen), and who do so in order to prop up those same rents.
There are various proposals which mean in effect crediting the accounts of the unemployed. Right there we can already see a structural weakness in the concept, since it seems to assume the continuance of bank accounts. Well, maybe it could refer only to local banks, credit unions, state banks. (I’m going to expand on a few of these ideas in an upcoming post on state banking.) The proposals could be called partial refunds of our money the banks stole through the Bailout.
While I’m not calling for such a program myself, let me stress that Washington already does “credit the bank accounts” of the unemployed. It’s just that these particular unemployed are the parasites of the FIRE sector, Pentagon sector, Big Ag, and all the rest of the corporate welfare recipients who do no work at all, who only destroy. Meanwhile to give money directly to the nominal unemployed would in fact be giving the money to productive workers who are unemployed only because those same banks intentionally destroyed their jobs.
This is in fact what MMTers advocate. Here’s a typical proposal from Marshall Auerback:

What we desperately need to do is to increase our deficit by several percentage points of GDP and offer public sector jobs to all those who want one. Government as Employer of Last Resort is one idea I have been pushing (along with Randy Wray, Bill Mitchell and a host of other people). As I said in an earlier post,

The U.S. Government can proceed directly to zero unemployment by hiring all of the labor that cannot find private sector employment. Furthermore, by fixing the wage paid under this ELR program at a level that does not disrupt existing labor markets, i.e., a wage level close to the existing minimum wage, substantive price stability can be expected. Other benefits could be provided, including vacation and sick leave, and contributions to Social Security and, most importantly, health care benefits, providing scope for a bottom up reform of the current patchwork health care system……

At any rate, what we desperately need to do is to increase our deficit by several percentage points of GDP and offer public sector jobs to all those who want one. We thus have to aim to ensure public spending fills the gap left by non-government saving (a consolidated position combining the private domestic and foreign sectors) and keeps aggregate demand growing at such a rate that it provides scope for the private savings desires to be realised without compromising our public purpose goal to ensure there is sustained full employment and inclusive income distribution outcomes.

But by far the majority of the unemployed workers could be offered a minimum wage job to work on community and environmental care projects for as long as they desired. I would suggest we also raise the minimum wage so that everyone has access to decent housing and health care etc. But the ELR scheme would only be offering a wage to workers who have no market bid for their services by definition. It will give them a job, some income security, will add to aggregate demand and help stimulate a broader recovery and, in itself, will not be inflationary.

As Auerback says, many of his colleagues support similar ideas. While I reject the specifics*, it’s good that the basic idea is spreading. It’s a cognitive rebellion against the structural bank paradigm itself, and against the deficit terrorist “austerity” propaganda and policy demands.
[*What’s wrong with specific MMT-related job creation programs:
1. They still want this job creation within the capitalist framework, and explicitly don’t want to create living wage jobs. (Edit: Cf. comments below for more on this. My critique here may not apply to every proposal.)
2. Nor are the jobs supposed to compete with the inefficient, uncompetitive private sector. So these proposals want the worst of capitalism in every aspect, the structural inefficiency and incompetence as well as the exploitation of the worker.
3. No doubt in practice the disbursement and administration would be corporatized. We saw how Obama’s idea of “job creation” is employer tax credits, i.e. another useless, expensive corporate toll booth. No other job creation program under corporate circumstances is likely to be executed any differently.
4. What these proposals really want to do is deliver a modest direct payment, but because they think it would be more politically palatable, they want to launder it through degrading makework. But I don’t think even the politics would work out that way. Nobody seems willing to learn, you can’t appease neoliberalism. Anything you try to do, good or meager, will be equally demonized. So why not demand the good, instead of a program which looks like real-life version of a caricature from a conservative polemic?
If you want a job creation program, go for the jugular, and do it with pride. Let it be real work at a real wage. Compete directly with the inefficient private sector, and proclaim that competition as a selling point, not a matter for fear and shame the way these guys seem to think it is. One can never win politically through timidity and appeasement. The best chance is always to seek to compel respect through an honest, frontal assault.]
In the end this is will all still be academic if it takes the current political parameters as given. For there to be effective fiscal policy change presupposes a general, radical political transformation. I think MMT can be part of the mix of transformative ideas, but is doomed to be relegated to arcana if its advocates see themselves as mere “reformers within the system”, and maybe not even that.
Here’s how I see things. My moral derivation from MMT (which I’m not claiming is part of MMT, but which I do claim morally and rationally follows from it) is that since money in itself has value only on account of government fiat (because government will accept it for tax purposes), therefore it follows that money can never legitimately serve as a “store of value”.
It can count as “property” only where it’s actually circulating or fermenting as a truly productive investment. Only then is it participating in the public life of the society which gives it life in the first place.
Money being hoarded, antisocial money, money as a store of value, in effect has no right to exist at all, and should be restituted to its proper owner to be put to its proper use. “Store of value” represents unproductive, parasitic hoarding of the public resource. Resources must be used productively in order to confer legitimacy of possession upon the possessor. One is a participant in the economy to the extent he is an agent of the velocity of useful, constructive activity (not mere “velocity of money”). One who’s not such a participant has no valid claim on society’s resources. That includes all rentier parasites. Hoarded “property” is nothing but stagnation, rot.
Hoarded wealth is both useless and pathological. Since all wealth is produced by people working together, even if we agreed to channel more of it through some hands than others, this could be fair and efficient only if the intent were to give them greater opportunity to enjoy the wealth only through the act of recirculating it, spending it in the real economy.
But for someone so blessed to instead hoard and financialize is a double-cross. It’s breaking the deal which distributed that wealth in the first place. (As for the “investment” justification, history has empirically proven that beyond a modicum, concentrated wealth is not productively invested but is used for unproductive, destructive speculation and gambling. In the same vein, corporations which aren’t producing but merely hoarding, as so many are today, have no right to be “taking profits” at all. By definition any such extractions are just looting. Under today’s post-capitalist conditions, the forms of capitalism are no longer valid. They’re worthless and worse than worthless. Pernicious.)
This is the basic critique of idle, useless “property”: Since all value is a cooperative endeavor, and the only rationale for allowing property rights would be to increase the cooperative value and happiness, therefore as individuals and groups we have a legitimate right to useful possession, but none to stagnant hoarded “property”. We should apply this to money, purging the “store of value” concept.
So that’s why I say sitting on wealth, relegating it to unproductivity, is useless in any practical sense, and has no moral validity because it abrogates the social contract under which it was unequally distributed in the first place. Only constructive velocity can justify inequality of distribution. (Again, wealth is cooperatively generated in the first place. Even the greatest thinker still stands on the shoulders of his predecessors, and on the education society provided him. And he then depends upon the resources of nature and the work of many others to bring his ideas to fruition.)
In all this I’m referring to large wealth concentrations. I’m not referring to attempts at saving on the part of the non-rich under this system, where people are forced by circumstances to try to save for the hardships of the future, since we have no adequate social support system or safety net. The neoliberal barbarians of today want to do away with civilization itself.
But in a human community there would never be any need or justification for unproductive hoarding. Useful possession is the measure of legitimate possession. MMT supports this with its proposition that since money is created only by the government, and only as an economic lubricant of the productivity of the people, money as a “store of value”, that is the hoarding of it, has no rational or moral legitimacy.
So getting back to MMT’s accounting identity, here’s the course of action to render things morally and rationally valid: The government can run a deficit in order to stimulate the depressed real economy (this depression being accounted for by the “surplus” hoarded by the banks and corporations), so its production recovers from the vandalism inflicted upon it by the banks, and counteracts their depressive criminal assaults which destroy jobs and relegate resources to uselessness. The government could even redeem its sovereignty and smash the criminals, restituting this stolen “private surplus” and restoring it to the productive people who are its true owners. In all this, there would be no practical reason nor moral right for the big banks to exist.
In the course of this restitution the economy’s productive potential could be focused on the transformation from the fossil fuel based “growth” economy to the post-oil steady-state economy.
Once this was done, there would no longer be a need for a government deficit, or for a centralized government at all. This could be retired as the now fully employed, fully productive steady state economy rationally and prosperously proceeds.
These ideas will become more and more apparent as the criminal disease metastasizes. For now the point here is to be aware of these facts:
1. Government will spend on anything it wants. (And so long as the economy is depressed, it can spend as much as it wants without fear of triggering inflation.) The elites, whether aware of the real nature of money or not, all implicitly agree that deficits don’t matter. Their actions prove this.
2. But the elites tell the lie that spending is constrained in order to justify cutting public interest spending and raising taxes on the non-rich.
This conjunction of 1. and 2.  explains the obvious, grotesque contradiction of a government hemorrhaging borrowed money and deficit spending on bailouts, wars, and corporate welfare at the same time it calls for “austerity”. (This juxtaposition is so patently idiotic and obscene that I don’t understand why just by itself it doesn’t trigger a revolution. Is it really possible to be so dense and/or compliant that one can’t see the manifest bad faith, indeed total criminality, of such a government?)
3. For now we can’t do much about 1., but we can expose the lie upon which 2. is based. That’s the mission of MMT.

November 9, 2010

The Corporatism of Food and the Sustainable Solution


The so-called Green Revolution was one of the great myths of our time. The Big Lie is that there was great famine around the world, caused, as Malthus would say, by the depraved profligacy of the poor. According to this lie the Green Revolution, i.e. monocropping with massive fossil fuel and chemical poison inputs, all of it under the auspices of multinational corporations, brought food to these benighted, helpless masses.
The truth is that for thousands of years the growers of the world always produced enough food for themselves and their communities. This has remained true in modern times. Natural famines are practically unrecorded in history. On the contrary, almost all mass famines have occurred in modern times, and they have all been the purely artificial result of food being stolen by non-productive classes from the productive class, under those same corporate and globalized-government distribution structures which the GR now claimed would save its own victims. But the GR was really intended to further impress this corporate global control upon them. It was really a vast example of disaster capitalism.
Much like with “consumerism” in general, the GR was never deployed the way it could have been, to provide enough goods in an equitably distributed way, so that all of us could have reduced our chore time (labor we would not choose to perform) and increased our time for truly chosen productive labor and creative leisure. Instead it produced a huge glut of mostly inferior and even destructive luxury items, to be rationed by wealth, while an ever-growing mass struggles to maintain even its original, pre-“consumer” level of consumption. The result of the GR, and probably its intent, has been to string along ever greater numbers, by now the larger part of 7 billion people, at close to a subsistence level, with billions knowing chronic food insecurity, and millions at any time experiencing acute hunger. These chronic shortages and acute famines occur amid the tremendous fossil-fueled plenty of industrial food production. This is sort of a second kind of reserve army of capitalism, but its a surplus of starvers. They first started appearing in great numbers in the 1970s. That right there proves the Green Revolution was never intended to feed the world but only the corporate profit maw. The hunger and starvation is therefore always artificially and intentionally produced by the corporate agriculture system. The most recent manifestations of this were the 2008-10 famines produced by commodity speculation and the diversion of production from food to agrofuels for Western personal cars. These examples were typical of the historical practice going back to 19th century colonialism. Elite-dominated global “trade”, really a command economy of plunder, was simply set up to replicate on a global basis the oldest systematic theft know to history, that of non-producing elites stealing food from those who produce it. This is a permanent, indelible feature of it.
I’ll add that this is a quality universal to elitist ideology, whether it’s the kind called “right” or “left” (or “center”): The farmer is a born slave whose only purpose on Earth is to be subjugated and exploited toward some better goal of the better class of people.
This all complemented the general neoliberal onslaught. The basic ideology: Food is not food, but a “commodity”. This commodity fundamentalism was forced upon the world’s people at every level possible, from globalization “development” programs to Earl Butz with his “fencerow to fencerow”, “Get Big or Get Out”, and regime of direct payments to commodity crop producers. Corporatism is the only right, while all that’s human is disenfranchised.
The full development of this logic is the financialization of food. Food is now a bankster shooting gallery, the playpen of speculators, and world food production and distribution is a casino for the bailed-out insolvent banks. Picture a hungry child neglected and kicked around on the casino floor while his drunken father, who has completely forgotten about him, gambles around the clock with the family’s life savings. (Except that this child really shouldn’t be a child at all, but a fully capable productive adult. It’s only his having been dragged into the casino in the first place which infantilized him and rendered him helpless. The gambler isn’t really his father, but an abusive stranger who kidnapped him. Neither the gambler nor the casino should exist at all, and the child’s liberation and feast shall come on the day he burns them down.)
That’s why there’s still such widespread hunger. It’s all artificial, just another manifestation of the profitable scarcity amid plenty hardwired into “capitalism”. And today the Fed’s QE2 is set to drive another round.  
This sure puts in perspective the accusations of corporate hacks and system conformists, that sustainable food advocates wouldn’t be able to feed the world if our ideas were put into practice. To begin with, unlike the corporations and their flunkey governments, we sure would try to feed everyone. Our way wouldn’t doom vast numbers to insufficient food by design.
Let’s look at the record of corporate oil-driven agriculture and its “green revolution”.
First, the Green Revolution was always based on ecological and resource deficit spending. Allegedly higher yields were the result of oil and natural gas inputs, and based on the complete depletion all the soil’s natural nutrients. The zombie soil was then to be jolted along with gas-based synthetic fertilizer and oil-based pesticides and herbicides. So the short-term production surge was at the expense of dismantling all resilient production and distribution structures, dooming all pre-oil practices to neglect and oblivion, and the soil itself to increasing sterility and erosion (since monocropped zombie soil has no resistance at all to water and wind). Once the cheap oil stops flowing, the whole thing is doomed to catastrophically collapse.
Second, has this alleged higher production actually benefited the people the way the propaganda says? Not according to this excerpt from Sharon Astyk and Aaron Newton’s A Nation of Farmers.

To discover whether we can feed the world, first we need to ask whether increased yields have actually meant more available food and nutrition. In fact, this question has been answered—even the World Bank admitted in 1986 that more food does not mean less hunger. Access to food is the primary issue—if it were not, the US would have no hungry people instead of 35 million food-insecure people. Food access is the most important issue in feeding the world, as economist Amartya Sen, among other people, has discussed at length. In Donald Freebairn’s analysis of more than 300 research reports on Green Revolution results, he found that 80 percent of them showed that inequity increased with the adoption of Green Revolution techniques.3

Or I should say, authorities starting with the corporatists’ own World Bank admit it’s a lie.
The system of destroying indigenous farming cultures based mostly on diverse crops, subsistence farming, and regional trade, and replacing it with commodity crop monoculture for globalized export, and all of it under the thumb of a bankster-dominated “market”, is clearly a campaign of class war plunder. It’s hard to imagine how anyone was ever daft enough to actually believe that the world’s non-rich would be better off this way. But then, ideology often plays the same role as religion in psychologically lubricating criminality.
Third, did the GR actually increase yields the way it claimed? This may be the result of a statistical manipulation:

Dissecting figures about hunger in World Hunger: 12 Myths, Lappé, Collins, et al. note that though figures at first seem to suggest that the Green Revolution made real gains in hunger reduction because total food available between 1970 and 1990 rose by 11 percent and the estimated number of hungry people fell from 942 million to 786 million, this is not really true. If you take China out of this discussion, the figures look very different. Removing China from the equation, the number of hungry people in the developing world rose from 536 to 597 million. And,

In South America, while food supplies rose almost 8 percent, the number of hungry people also went up, by 19 percent.… In South Asia there was 9 percent more food per person by 1990, but there were also 9 percent more hungry people. The remarkable difference in China, where the number of hungry dropped from 406 million to 189 million almost begs the question: which has been more effective at reducing hunger, the Green Revolution or the Chinese Revolution?4

This suggests that first of all, though absolute food availability is relevant, it is not as relevant as distribution and economic justice. And because China was a comparatively late adopter of Green Revolution seeds and techniques, it also suggests that the Green Revolution itself may be less important than improved agricultural techniques that apply just as much to organic agriculture as to chemical agriculture.

So perhaps the booster figures are primarily the result of gains in China. China was not improving from a normal baseline, but was recovering from the self-imposed disaster of the Great Leap Forward (another ideological campaign, much like neoliberalism, but the communist variety).
So if we remove the low-hanging fruit of rapidly recovering Chinese production in the 70s, which may have had little to do with GR methods anyway, we see that even in its heyday the Green Revolution was quickly running up against diminishing returns, which were meager and even negative.
Finally, the basic scam of industrial agriculture’s propaganda is that it outproduces traditional agriculture at all. This is based on the simple lie of measuring production according to some industrial metric which elides total productivity and debases human labor to the level of a pestiferous “input”.

It is commonplace to assume that organic agriculture yields less than conventional agriculture and that we would have to endure enormous losses in yield were we to give up chemical inputs. The yield increases of the Green Revolution are commonly articulated in isolation, without discussion of comparisons with organic yields. To determine how important the Green Revolution was, then, we need to go through the outputs of the Green Revolution and ask whether increased agricultural yields depend upon Green Revolution techniques. If, for example, agricultural yields depended on mechanization, we would expect mechanized agriculture to consistently out-yield hand labor. If they depend upon chemical inputs, we would expect organic agriculture to be heavily out-yielded by conventional industrial agriculture. And if they depend on plant breeding, we would expect older varieties to be out-yielded by newer ones.

Are these things true? Well, not in absolute terms. That is, small farms, which generally speaking use much less mechanization, fewer inputs and are more likely to use older plant varieties and save seed than large ones, actually are more productive per acre in total output than large farms. At the extreme ends of this, we can see this disparity in Ecology Action’s biointensive gardening methods, which offer yields per acre much, much higher than industrial agriculture can achieve—without fossil fuel inputs, using open-pollinated seeds.

But on a larger scale this is true as well. In Deep Economy, Bill McKibben argues that the 2002 Agricultural Census confirms this greater productivity of small farms using more hand labor—small farms produce more food per acre by every measure, whether calories, tons or dollars.5 What mechanization does do is reduce the amount of human labor required. However, in a world with 6.6 billion humans and growing, human labor is a widely available resource.

So corporate agriculture is more productive only from the point of view of maximizing corporate profit. Kind of a self-serving, circular reasoning, isn’t it?
The fact is that when we look at total yield, small, less fossil fuel-intensive, less mechanized farms outyield big industrial farms.

It is also true that organic agriculture as a whole can consistently match yields with conventional agriculture, suggesting that we do not depend on artificial fertilizers or pesticides. In a 2007 paper, “Organic Agriculture and the Global Food Supply,” the authors demonstrated that organic methods would offer a substantial net increase in yields in the Global South, while continuing comparable yields in the Global North. In a world-wide organic only policy “farms could produce between 2,641 and 4,381 calories per person per day compared to the current world equivalent of 2,786 calories per person per day.”

In other studies, agronomist Jules Pretty studied 200 sustainable agricultural projects in 52 countries and observed that, per hectare, sustainable practices led to a 93 percent average increase in food production. Grain yields, as discussed in his volume Agri-Culture, had average yield increase of 73 percent over studies including 4.5 million farmers.6

The Rodale Institute has been running test plots of conventionally farmed corn and soybean rotations (the practice of most Midwestern farms) against organically grown plots, where soil is maintained wholly by cover crops, and another where a fodder crop is grown and fed to cows whose manures are returned to the soil. The difference in total yields between the three plots is less than 1 percent. And during drought years, the organic plots dramatically out-yielded conventional ones because of higher organic matter in the soil. The cover-crop-fed plots produced twice as many soybeans as the conventionally farmed ones.7

As for small farms being more labor-intensive, we should see this as a feature. Once farm work is actually paid its proper living wage, and from there becomes the autonomous, self-sustaining way of life it must eventually become if we’re to overcome the challenge of the end of cheap oil and oil-fueled agriculture, it shall be the foundation of the truly democratic and broadly prosperous economies and polities humanity must finally attain.
But industrial ag’s proclaimed mission to feed the world has never been anything more than corporate propaganda. Most countries can not only feed themselves but double their production, using organic practices. But they can’t do it under bankster and corporate domination.
With Land Reform and a democratic food producer Renaissance, we can finally produce and distribute enough food for all. We the people shall grow it ourselves, manage it ourselves, and keep it all for ourselves.

November 8, 2010

The Banksters Literally Steal Our Food


At least since Malthus the flunkeys of the rich have blamed hunger under capitalism on the profligacy of the producers themselves, rather than the systematic theft of the food itself by parasites who play no role in producing it or anything else. The claim always boils down to there being “not enough food”. But the fact is that there’s always been enough food, and scarcity and hunger have always been artificially produced. This is intentionally endemic to “markets”, and is also the knock-on effect of speculative finance.
There is enough food, and it all belongs to the producers. This includes the markets for it, which should of course be as local as possible. No one who actually works advocates globalization.
We can see the truth of this wherever we look at how financialization has hijacked food markets. Starting with the 19th century crop lien system the bankster “markets” have always manipulated first the money supply and then the cycles of market pricing. The intended result was always that the farmer would have to go deeply into debt at the highest interest rate to commence the season’s planting, but could only sell at the lowest price at harvest time. Consolidation at all processing and distribution points has only increased since then.
The monetary manipulation continues to this day. Today the main vehicle is commodity speculation. Prior to 2000 commodity speculators couldn’t easily manipulate the price of food and fuel because pension funds were legally forestalled from such purely speculative bets. Goldman Sachs even used to advise buying commodities as a hedge precisely because their prices were uncorrelated with stock prices. They weren’t an “asset” targeted for manipulation in periods of a weak dollar.
That changed with the CFMA. Just as it legalized so many other forms of finance crime, the CFMA opened the floodgates to institutional “investment” in gambling on commodities. Now speculators had a potentially vast amount of capital they could induce into their attempts at manipulation of markets for food and fuel. We who actually use food and fuel became the hostages of this manipulation, the victims of these newly legalized crimes.  
Since the rates cuts which started in 2007, that is since the inception of the bank bailouts, the bankster money has flowed into the smaller oil energy and food markets. Under the Bailout, “quantitative easing” (QE) fuels this speculation. The taxpayer, including the farmer, provides the money for it. Or I should say the government steals our money and hands it over to finance gangsters and other corporate welfare patients who use it as a weapon against us.
After a brief collapse of the markets following he crash and subsequent phony stock rally, in 2010 the banksters have returned to wheat and corn in force, steadily driving up the prices since July 1st. Corn and soy are now at two-year highs, and short only of the last big speculation-driven spike in 2008.
With QE2 the Fed now wants to goose this process. By lowering mid-term rates, and thus lessening the spread between short and middle by which the banksters have been stealing free money from the people and then lending it back to us at a much higher rate, this will likely drive them out of Treasuries and further into commodities. The Fed apparently wants to further foster this speculation. It wants to drive up food and fuel prices for end users, thereby contradicting both its anti-inflation and pro-employment mandates. (It’ll probably also backstop the bets with default insurance and other less remarked upon features of the Bailout.)
(This is a metric for how overheated the stock market has become during its phony Bailout-financed rally. That the banksters ranged beyond stocks and again into commodities indicates that they believe stocks have been pumped as high as they can “reasonably”, i.e. under Bailout conditions, go. Wall Street expects that bubble can burst at any time. So they went off to inflate a new one elsewhere.) 
Meanwhile speculation-driven food crisis has been used as another opportunity for disaster capitalism. It’s the classic dynamic: The corporate predators create the problem, which forces a confused and often enraged reaction. The same criminals take advantage of the confusion and anger to push through policy change which benefits them and disadvantages the victims further. In this case the plan is to use the crisis, which is caused by the erosion of food sovereignty, to further destroy food sovereignty. Just as in the US corporate-caused food outbreaks are being used as the pretext for pro-corporate policy aggression under the guise of “food safety”, so the globalizers and many NGOs are demanding further globalization as the answer to globalization-driven food crisis. Thus the UN FAO has called for more regulation, and a better “global governance system”. We can probably expect more of the long-discredited calls for “freer” trade and greater industrial yield, although like every other feature of neoliberalism these are already proven failures at feeding the world’s people.
What’s really happening here? The real goal of all finance speculation is to use this funny money to buy up and dominate all the globe’s real assets. With direct commodity speculation, the parasites used hoarded wealth (stolen from the people via the Bailout) to drive up commodity prices, playing these markets like the stock market. This forces higher prices on the end consumers. But the farmer doesn’t get the benefit of these higher prices. Prior to the CFMA and the speculation explosion, the farmer was already mostly liquidated by corporate consolidation. Just like in every other sector, the autonomous producer has been driven out, reduced to a hired hand. Financialization softened the blow while it was taking place, through the mechanisms of cheap consumer debt and cheap consumer goods.
But now that the liquidation is largely complete, the freebie time is over. We’re hooked, and now it’s time to jack up the price. The global economy will continue its deflation while food and fuel prices will surge. We’ll now undergo full stagflation (“screwflation”, as the banksters themselves call it) even as the price of debt keeps rising. That’s how our indenture will proceed.
How are we going to fight back against this? First we need to propagate the basic ideas:
1. They are criminals.
Any animal with the power to resist understands its interest enough to respond with ferocity when another animal tries to steal its food.
So are we too stupid to understand what to do when the scavenger-predator speculator comes along? (The movie has Patton saying, “When you reach into a pile of goo that a minute ago was your best friend’s face, you’ll know what to do.” Do we?)
It’s weird how in any other context everyone knows how to identify a terrorist or a Mafia gangster, but I can read endless bland accounts of currencies “coming under attack”, and no one ever draws the obvious conclusion. It’s an inverse miracle of brainwashing Goebbels would envy.
2. What should be done? The first, reformist, goal would be to ban all speculation.
My earlier reference to the Fed’s dereliction regarding its “mandates” highlights how there’s no such thing as “the US economy”.
There’s the phony finance “economy” of Bernanke and his bankster masters, for whom this financialized pseudo-economy is the only meaningful economy, for whom asset inflation is the goal and rationale of all policy, and commodity inflation a nice side dish.
Then there’s the real economy of the real American people, and the real people of the world, who are purely the subjects and victims of these crimes and these criminals.
It’s obvious that the real economy doesn’t need the financial parasite appendage at all, and that we’d do much, much better if the finance sector ceased to exist.
So that’s what should be done on the reform level. Outlaw all speculation. We just need one big bucket law. That’s the one and only true derivatives regulation. (A public-interest government, if we could gain that, could administer legitimate hedging on the part of actual producers.)
Beyond that, we need land reform. Since the end of the fossil fuel age means we’ll need millions more small farmers, and we also need these as a social and spiritual imperative, it follows that we need sufficient land for them. Land being criminally hoarded and taken out of production will have to be redeemed.
Finally, we need fully relocalized economies of free, autonomous producers. These economies will trade on the basis of real demand, not of top-down globalist command economy fiat.
So the two tasks are:
1. How to educate for these?
2. How to organize and take action to achieve these goals?
Why seek such ends? So that the productive people, who do all the work and create all the wealth, can feed their children and heat their homes in peace, unassaulted by the verminous criminals who want these children to go hungry in the cold.

October 22, 2010

Jubilate! Mortgages and Property


The Street Enters the House - Umberto Boccioni

The implications of the Land Scandal keep rippling out to ever more distant shores of political possibility. By now it has sunk into the public consciousness: Your alleged bank may not have the note on your mortgage. It may only be posing as the real owner of your house. It may have no legal right, even according to its own bank-friendly laws, to foreclose if you stop paying the mortgage. Show Me the Note!
People understand that the reason they’re losing their homes is not because of any moral failing on their own part, but because the banks have systematically destroyed America’s jobs through their program of forced globalization, outsourcing, offshoring, downsizing, and consolidation. The main goal of all of these, other than direct looting on the part of banksters, was to destroy all decent American jobs. At the same time the banks undermined the economy and all social protections to the point that losing one’s job or having a medical emergency is likely to trigger a personal mortgage crisis. (As is often pointed out, only in the banksters’ America does losing one’s job mean losing one’s health insurance. This system of a double-hit was intentionally set up by the corporatists as a form of socioeconomic terrorism. It’s meant to quash dissent among the work force.)
The people understand that the same banks who presided over the massive bubble propaganda then willfully burst that bubble, dumping overboard and underwater many of the housedebtors they induced into extravagant mortgages they can now no longer afford, on houses worth far less than they borrowed. These bloated loans were all predatory loans. The bubble was a fabrication, the bloated housing prices were a fabrication, the loans and municipal taxes and bonding based upon them were fabrications. Every lender and every government was guilty of massive, willful fraud. Now that the bubble has burst, prices are seeking their real economic level. So by definition anyone who’s underwater is the victim of lending fraud.
The fraud extended to the federal government. The only priorities of both kleptocratic parties are to reflate the bubble, prop up the zombie banks, and help them continue looting. This has forced the government into all sorts of policy contortions, trying to navigate the contradictions of a situation where everyone wants to keep prices up but also wants to foreclose, which would bring more housing stock onto the already grossly oversupplied market. (And we’re learning about the conflicts of interest between the servicers, who have an incentive to foreclose, and the MBS investors who do not, since the phony “value” of their toxic assets depends upon extending and pretending with everything including the mortgages.)
Facing these paradoxes, the administration launched its HAMP scam. The goal was to lie to distressed housedebtors, telling them if they keep paying for the time being they’ll get a permanent mod. In reality Obama never intended to give anyone mods, but only to string people along, forestalling any ideas they were having about walking away, inducing a few more payments out of them, before the servicer lowered the boom once and for all.
If there were ever any doubt about this, the fact that Obama, as per his normal corporatist procedure, put the servicers themselves in charge of the mod application process, in direct contradiction of their own interest, should dispel it. That proved right from the start what the real plan was.
The people are learning how the banks, in their rush to securitize these fraudulent loans, separated the note from the lien and didn’t convey title along the Rube Goldberg chain of sponsors and depositors and trustees, thereby rendering the trusts themselves illegal, the MBS as nothing but unsecured loans now of zero value (so the banks we already knew were insolvent are now known to be in far worse shape than previously thought), the liens as phony “liens” that are also fraudulently referring to unsecured loans, and the houses themselves in legal limbo.
We know how once people started to wise up the banks simply set up Taylorist conveyor belts to churn out fraudulent affidavits. When judges started getting suspicious of all these lost-note affidavits, the fraud progressed to actual fabrication of documents. One company presented a price list.
We know that the banks are worthless, useless, criminal, parasitic, insolvent, obnoxious, and stupid. We know they have no right to exist at all, that every cent they’ve stolen (including the “bonuses”) has to be taken back in restitution, and that what’s supposed to be our government is really an illegitimate rogue kleptocracy which has committed itself not only to refusing to put a stop to the crimes of the banksters, but to helping them continue these crimes. The core policy of Bailout America is to steal taxpayer money and hand it over to the banks, in order to prop up their insolvency and enable them to continue gambling and looting. This is the essence of what this government does, and all other policy is defined by it.
We the people know all this, and when it comes literally to our homes we’re confronted with it in the starkest, most questionable form, and it is indeed causing us to start to ask some hard questions.
The three questions of the relationship of the banks and the land are these:
1. Does your particular bank own your particular mortgage? Or is it just lying about that?
2. Should banks – parasitic, insolvent, criminal, and since the Bailout the property of the people – be allowed or considered to own land at all? Isn’t this illegitimate on its face?
3. Does the very concept of unproductive ownership of land make any sense? Shouldn’t that be done away with as a counterproductive, immoral practice which only breeds the kind of criminal parasitism which so afflicts us today? Weren’t the “American Dream” and the “ownership society” nothing but scams to cover up bank looting? (Let’s recall how “ownership society” was the Bush slogan for his big push to privatize Social Security.)
I know that I’m still an outlier in asking #3. But it seems that the banksters have gratuitously, out of sheer idiotic greed, caused #1 to become a question in the first place, perhaps the central political question of the day. And having voluntarily, in an unforced error put #1 in play, they’ve reinforced the still-small but existing trend toward people starting to ask #2. And if #2 comes widely into play, #3 logically follows.
Just as the pro-bank scum try to keep the debtor-bashing propaganda going, but with less and less success, so they also keep saying, “even if the bank can’t produce the note, you still owe the debt.”
Here’s a typical example I found funny:

Joseph R. Mason, a finance professor who holds the Louisiana Bankers Association chair at Louisiana State University, said that concerns about proper foreclosure documentation were overblown. At the end of the day, he said, even if the banks botched the paperwork, homeowners who didn’t make their mortgage payments still needed to be held accountable.

“You borrowed money,” he said. “You are obligated to repay it.”

(I think it’s funny that LSU has a “Louisiana Bankers Association chair”. Actually I appreciate the honesty of that. Most of corporate academia is more deceptive about its prostitution.)
I keep asking the same question in response to this and never get an answer. Assuming I granted that “you are obligated to repay” a debt like this, to whom would you owe it?
The banks are criminal organizations. Morally no one should feel the need to owe them anything. Legally there’s also no obligation to pay off a “contract”, written by a loanshark, based on fraud. Granted, the disposition of such a legal claim would depend on how bank-friendly the judge was, but we’ve already seen judges willing to follow the spirit and letter of the law here.
Similarly, if we think it’s the government, as owner of many of the mortgages through the GSEs, as well as the real owner of the banks themselves, who owns the debt, the answer has to be that this is not the people’s government but a rogue criminal organization serving really as the banks’ flunkey and thug even though it’s actually their owner. So paying the government would be similarly immoral.
No, I think that if the debt exists, its an orphan debt owed to no one in particular, and therefore payable to no one in particular, which is as good as saying it doesn’t exist.
To put it another way: While the debt is not owed to the government, it is owed to the people. And since there’s no direct way to pay it to the people, the right way to discharge it is to stop paying the banks, and stay in the house. That’s the way one practices citizenship under these bank-created conditions. The good citizen resists the banks in any way possible. This is the most direct way of striking at them. Refusal to pay the fraudulent debt not owed to the banks is the way to pay the true debt we owe to ourselves and to one another as citizens.
I’m not the only one thinking this way. Read these excellent pieces on “the coming middle class anarchy”. Here’s just one of the snowballing anecdotes establishing how the words, Show Me the Note, strike terror in the hearts of the banksters. This is something for which their goon government has no fix. Not if a critical mass of people find the will to do it.
And how fortuitous! We decry how Americans are unwilling to leave the comforts of their homes to get out in the streets to protest, but here the Street has entered the House, the arena of protest has literally come home, and it’s the home itself which is at stake, in a fight to the finish with the banksters.
Compare today to where we were a year ago, when Brent White’s excellent paper on “strategic defaults” said you have to credibly threaten to walk away in order to get a mod. Now the debtor is in a much stronger position, if he’s willing to take advantage of it. He can credibly threaten to stop paying completely and stay in the house.
Nor is it just some radical bloggers saying this. These ideas are percolating closer to the mainstream. Chris Whalen is certainly no firebrand. Yet even he is saying that as the federal government continues to coddle the banks, state governors may end up calling upon people to “keep paying property taxes, stop paying the mortgage, and stay in your home”.
I don’t agree that Obama is unconscious in the sense Whalen means. I think he’s very intentionally dedicated to serving the banks and consciously doesn’t care if this dooms America to a Second Great Depression (although he probably thinks it won’t be that bad; but he certainly doesn’t care about impoverishment and suffering).
But I love the implication that this will have federalism ramifications, as state governments will have to take up some of the power the federal government has abdicated. Whalen thinks we’ll end up with mortgage moratoria in fifty states, but on a state-by-state basis, and implicitly in defiance of the federal government, at first.
So he sees power devolving in the right direction, downward, as a result of this “cancer” as he calls it. (Of course he thinks that’ll just be a temporary stopgap until “democracy does the right thing”. But we know he’s wrong about that part.)
Every housedebtor, distressed or not, underwater or not, should:
1. Stop paying the mortgage;
2. Stay in the house.
If America jubilated that way, it would be a good start toward our desperately needed Land Recourse. America needs two million small farmers. Feeding ourselves post-Peak Oil will require all land to be put into food production. The elites want to do this on the basis of feudal enslavement, but political freedom and moral integrity require that it be done on a democratic food stewardship basis. A bottom-up mortgager jubilee can be a great first step toward this.
And it can provide the base for a wider, greater debt jubilation. Other system debtors need to consider their positions. Here’s just one example: We have a growing legion of unemployable student debtors, burdened by massive indentures which cannot be discharged even in bankruptcy. These victims of a bank/government/university propaganda scam were swindled into taking out massive undischargeable loans for an “education” meant not to humanistically educate but to provide a credential (a Stamp) certifying that one jumped through a formal hoop and paid an exorbitant toll. This extortion payment, it was promised, would guarantee one a lucrative “career”.
But then those same banks intentionally crashed the economy, unilaterally reneging on the system’s side of the student debt deal. Now those college degrees are worthless. But the debt remains, for as long as the victims of this fraud choose to let it remain. Some are suing their universities for fraud, and that’s a good start.
But here as everywhere else where a debt to the big banks or government (where in a case like this the government simply socialized the exposure to the debt while privatizing the lender profit) exists, the real action is to strike at the senior criminal. That’s always the bankster. In the case of student debt, where the banksters’ rigged law has foreclosed even bankruptcy as an option, where the bank has placed its relationship with the debtor into the state of nature, the debtor has NO system recourse. The only option of student debtors is to form a default union and default as a bloc.
So there’s one example where the problem is harder to solve, but where the spirit of debt revolt can find a way. Ground zero for the spirit of jubilation, and for the general Revolt Against the Banksters, is the mortgage crisis.
Demand to see the note, and resolve not to pay one cent more until they show the note or give you a real modification. A real mod, meaning a principal writedown; the people in Lira’s example still look like they’re going to let Wells Fargo off too easy.
Better yet, demand to see the note, but resolve to stop paying period. If enough people did this, we’d break the banks over our knee. The government’s malice would sputter out in impotent fulminations. This one small step for an individual debtor would collectively be a giant leap toward taking back our country.

October 7, 2010

Sham Meritocracy and Cloaked Elitism

Filed under: Bailouts Only Reopened the Casino, Law — Tags: — Russ @ 5:41 am


Naked Capitalism recently had a guest post which falls into the category of well-meant but really pernicious, as it still wants to pretend there’s a “good” elitism and a bad elitism, and all we need to do is reform the elites.
Thus it centers on an alleged meritocratic argument, that we need to exalt “what you know” over “who you know”. In theory that’s right, but it has nothing to do with today’s kleptocracy or any other system where What You Know is largely dictated by a system based on Who You Know. So even if tomorrow we instated a meritocratic educational system, for example, the “merit” would still be measured according to a What which was dictated by the interests of the rich and powerful. “Talent” would remain the same Orwellian term and concept it is today.
What You Know vs. Who You Know is largely a false distinction by now, since more and more the “what” is not reality-based but rather dictated by the criminal interests of the “who”. (It’s the same as how we no longer have innovation but only “innovation”.)
This piece seems to think the “what” of today’s system isn’t simply extortion on top of embezzlement on top of robbery.
“Lobbying” is part of the extortion racket.
Therefore, this is absurd:
A plausible argument can be made that former staffers would be high earners even if political connections did not matter.
Mind you, that’s referring to Congressional “staffers” as these productive Randian heroes. But in fact the entire careers of most of these worthless persons are based on nothing but being functionaries of a parasitic criminal system which has been set up for the sake nothing but its own preservation and aggrandizement.
(I’d love to learn what the author thinks any of these people actually do even in principle, “even if political connections didn’t matter”. The answer is that if political connections didn’t matter, none of these “jobs” would exist. But there would be far more real jobs for real citizens.) 
It’s long been a truism (and is true) that the law is made intentionally complex for the professional benefit of lawyers. This is just a modern version of the Church’s old monopoly of knowledge on how to stay out of hell. This knowledge too was made gratuitously complex, was forbidden to be translated into the vernacular, etc.
Today we have the same thing with financial sector “products”, the whole insane complexity of the global financialization. None of it serves any purpose whatsoever but the direct profiteering of the banks and the tollbooths they’re able to set up everywhere thanks to their own totally artificial and unproductive system and the “laws” accompanying it.
Thus we had the many real-economy companies lobbying against the proposed changes in derivatives regulation, not because the system benefits them but because they’re unable to understand the existing system and are intimidated. The banks can always plausibly threaten to subvert or blow up the existing system if they’re not given free rein.
And we’re all too familiar with the fraudulent “state secrets” doctrine and the general Big Lie that we need to trust and obey our betters when they claim there’s some peril only they have the mystical knowledge to avert. The “war on terror” has been the main example in recent years, though they’re trumping up “cyberwar” as we speak.
Today when somebody says “you need to hire me to give you advice” it’s usually a stick-up. It’s someone who placed a bomb on your car now offering advice on how you can drive without detonating it.
Even where it’s not directly a matter of who one knows, most examples of what a lobbyist/consultant/professional etc. knows really boil down to which gang he’s from. It seldom involves any reality-based need for real knowledge.
The main piece of real knowledge today is that we don’t need any of these elite advice-givers and knowledge monopolists at all, for anything.

July 29, 2010

How A “Great Recession” Is Lied to an End (Zandi and Blinder)


Yesterday saw the release of a report, “the first of [its] kind”, purporting to gauge the “comprehensive…effects of the financial-market policies”, i.e. the Bailout including the Obama corporate stimulus, on the economy.
It’s really just a propaganda broadside, written by two hacks, the appropriately named Alan Blinder, and Moody’s own Mark Zandi. It goes without saying that we regard Moody’s with all the respect it deserves, and especially its much-vaunted (by Zandi in this paper) “Analytics Model”, which they used for the report, is supposed to inspire not laughter but awe. (It’s also encouraging to learn that their methodology is similar to that used by the administration and the CBO, and that the results obtained were similar. Now that’s good company.)
I won’t bother parsing their phony baloney numbers, since I’m instead going to focus on the ideology of the piece. But their basic claim is that without the government’s actions, “GDP in 2010 would be about 11.5% lower, employment would be less by some 8.5 million jobs, and the nation would now be experiencing deflation.” They believe most of this effect is from the Bailout proper, with some added effect from the stimulus.
This tabloid sure has a flashy title: “How the Great Recession Was Brought to an End”. So evidently “great recession” is their term for the GDP hiccup as the Bailout took over from the “normal”, “Great Moderation” version of neoliberal kleptocracy; kleptocracy 1.0. So at least when it comes from Obama hacks we can range that term alongside “jobless recovery”, since that’s the “recovery” being hailed in this piece, the alleged “end” of this “Great Recession.” The recovery is jobless, all right; everything the administration says and does is intended to normalize permanent unemployment at >9% (the bogus U3), closer to c. 20 % (U6). This report says (p.19) that while the NAIRU is currently decreed to be 5.5%, the real goal is to normalize at 9%. Thus this paper can cheerfully feature >9% unemployment through at least 2012 as part of the End of the Great Recession. Let the good times roll. (Meanwhile, if the Great Recession has really Ended, why is Obama leading this drumbeat for “austerity”? That sounds like a contradiction. Nowhere do Zandi and Blinder say anything like, “all this is predicated on gutting Social Security, the way “the markets” are allegedly demanding. But then, they omit a lot of things, as I’ll get to shortly.)
What are the basic premises of this tract? What reality does it deny?
Most of all, it denies the astronomical bloat of housing prices and all the toxic assets derived from these prices. Without the Bailout “the nation would now be experiencing deflation”? (p.1) The nation has to experience deflation. That’s a law of reality where your prices were blown up to become an $8 trillion bubble. But ZB (ZandiBlinder) says insolvent assets should be propped up. “The volume of transactions was small, but the TALF appears to have improved the pricing of these assets, thus reducing pressure on the system as a whole.” (p.11) (Until the next crash.)
Deflation must be the result as reality finally takes a hand. Exponential growth is unsustainable. So by ZB’s own contention the Bailout did nothing but temporarily stave off the inevitable, guaranteeing far worse destruction in the end, and having allowed untold trillions more in social wealth to have been destroyed by the banksters, and all for no purpose at all but to enable these criminals to continue looting. This is the Mission Accomplished ZB celebrates. Their basic method in deriving all these conclusions is founded in (and founders upon) a metric of the exponential debt machine.

Our basic approach was to treat the financial policies as ways to reduce credit spreads, particularly the three credit spreads that play key roles in the Moody’s Analytics model: The so-called TED spread between three-month Libor and three-month Treasury bills; the spread between fixed mortgage
rates and 10-year Treasury bonds; and the “junk bond” (below investment grade) spread over Treasury bonds. All three of these spreads rose alarmingly during the crisis, but came tumbling down once the financial medicine was applied. The key question for us was how much of the decline in credit spreads to attribute to the policies, and here we tried several different assumptions. All of this is discussed in Appendix B.

Throughout the piece they propagate the fraudulent theme and term “recovery”, resorting constantly to class war obfuscations like “the U.S. economy”. Whose “economy”? Of course, measures like “GDP” in themselves, aside from all their other problems, fraudulently aggregate the positions of diametrically opposed interests locked in a zero sum struggle. Look again to the term “jobless recovery”, really think about it, really draw in a breath to sense how redolent of crime this all is.
What did this study project as the cost of the next crash? The next, far worse crash which has been rendered inevitable by the Bailout, but could have been averted by letting the permanently insolvent system crash once and for all then rather than later? Well, the “study” left that out. Obviously this study has zero validity unless it projects this cost and factors it in.
How did they estimate the Bailout’s ongoing cost? Scores of millions more daily? Even if one believed their numbers for the TARP, the facilities, and so on, what about those toxic MBS stinking up the balance sheets of the Fed and the GSEs, both officially authorized to embezzle taxpayer money unto infinity in order to keep this toxic crap propped up for the sake of the banksters’ balance sheets, to accommodate their control fraud and personal “bonus” looting? Is any of that in there? It is not.
How did they calculate the fiscal reverberations of the even more intensified anti-democratic stranglehold of the banks and even more obscene wealth inequality, both of these direct (and intended) effects of the Bailout? There are no class war costs factored in at all. It’s just like the idiots who parsed the health racket bailout with an electron microscope trying to find the alleged way it was marginally better than the status quo. I didn’t see any of them factoring in the monstrous costs of further entrenching the insurance and drug rackets, or the costs of forcing the people to buy worthless protection at extortionate prices, the same way any Mafia gang would enforce.
With those preceding questions I was still talking about quantifiable money costs. I suppose it could go without saying that the whole thing is a repulsive exercise in sociopathic wonkery and technocracy. Not a word about morality, justice, freedom. Not a word about how the worst robbers in history are getting off scot free (so far), get to keep the trillions they stole, and are being allowed to continue committing the same crimes which already destroyed the economy, stealing billions more in the exact same way. Justice has been spit upon. Morality has been raped. By their own testimony here Zandi and Blinder are committed to our permanent enslavement under the tyranny of these finance terrorists. As if, even if any of the numbers in here were true, that could be meaningful compared to the cost of our servitude in perpetuity.
Here’s just a few quotes on the theme, and I’ll have some more going forward:
“Without capital injections from the federal government, the financial system might very well have collapsed.” (p.12)
“The financial system is still not functioning properly…but it is stable. Evidence of normalization in the financial system is evident in the sharp narrowing of credit spreads.” (p.12)
So our jobless recovery takes place under the auspices of a system which “isn’t functioning properly”, but which at least is “stable” from the point of view of the criminals. Which is of course all that matters. That’s what is to be “normalized”. (I came into this piece intending to refer to how Obama was seeking to “normalize” permanent unemployment above 9%. I wasn’t surprised to see ZB using that word as well.)
“TARP has also been useful in mitigating systemic risks posed by the mountain of toxic assets owned by financial institutions. Because institutions are uncertain of these assets’ value and thus of their own capital adequacy, they have been less willing and able to provide credit.” (p.12)
“Institutions are uncertain of these assets’ value” means they’ve been uncertain how far the government will go to prop up worthless paper at exorbinant prices.

While the effectiveness of any individual element certainly can be debated, there is little doubt that in total, the policy response was highly effective. If policymakers had not reacted as aggressively or as quickly as they did, the financial system might still be unsettled, the economy might still be shrinking, and the costs to U.S. taxpayers would have been vastly greater.

Why? What would it have cost to achieve our liberation from financialization? ZB don’t say, but they do lay out their four allowable scenarios (and therefore the four they supposedly tested).

To quantify the economic impacts of the fiscal stimulus and the financial-market policies such as the TARP and the Fed’s quantitative
easing, we simulated the Moody’s Analytics’ model of the U.S. economy under four scenarios:

1. a baseline that includes all the policies actually pursued

2. a counterfactual scenario with the fiscal stimulus but without the financial policies

3. a counterfactual with the financial policies but without fiscal stimulus

4. a scenario that excludes all the policy responses.

The differences between Scenario 1 and Scenario 4 provide the answers we seek about the impacts of the panoply of anti-recession policies. Scenarios 2 and 3 enable us to decompose the overall impact into the components stemming from the fiscal stimulus and financial initiatives. All simulations begin in the first quarter of 2008 with the start of the Great Recession, and end in the fourth quarter of 2012. (p.4)

So it’s three corporatist policy responses plus doing nothing. Not modeled: Letting Wall Street perish while the government mustered its resources for a Main Street triage. Or they could have tried a truly Keynesian/New Deal, a direct stimulus and job creation program with no Bailout or corporatist stimulus. Those are just two examples of alternatives which ZB declare in principle to be unpolicies. That’s because they’re corporatist ideologues.

While all of these questions deserve careful consideration, it is clear that laissez faire was not an option; policymakers had to act. Not responding would have left both the economy and the government’s fiscal situation in far graver condition. We conclude that Ben Bernanke was probably right when he said that “We came very close in October [2008] to Depression 2.0.”

While the TARP has not been a universal success, it has been instrumental in stabilizing the financial system and ending the recession. The Capital Purchase Program gave many financial institutions a lifeline when there was no other. Without the CPP’s equity infusions, the entire system might have come to a grinding halt. TARP also helped shore up asset prices, and protected the system by backstopping Fed and Treasury efforts to keep large financial institutions functioning.(p.7)

It’s also fitting that they began their simulations in Q1 2008, since the ideology of the piece is that we can and should return to the status quo ante, say 2005.
“Broadly speaking, the government set out to accomplish two goals: to stabilize the sickly financial system and to mitigate the burgeoning recession, ultimately restarting economic growth.” (p.2)
Actually that’s three goals. ZB regards restarting growth as more of a magical process than a goal, no doubt. That’s the way it is with believing in something according to fundamentalist faith. But exponential growth cannot be sustained, and in fact the real economy hasn’t grown in over a decade. All so-called growth has been just the same old financial tricks. As for the two proclaimed goals, mitigating the recession is meaningless in itself, if there’s no plan for a better world to be the result; and “stabilizing” (there’s that Orwellian word again) the rackets is a positive evil.
ZB rewrites TARP history:

The Troubled Asset Relief Program (TARP) was established on October 3, 2008 in response
to the mounting financial panic. As originally conceived, the $700 billion fund was to buy “troubled assets” from struggling financial institutions in order to re-establish their financial viability. But because of the rapid unraveling of the financial system, the funds were used for direct equity infusions into these institutions instead and ultimately for a variety of other purposes.

As I recall, it wouldn’t have been sufficient to buy the toxic crap at the prices the banksters were demanding, so Plan B was accounting “forbearance” (i.e. abetting fraud) while “injecting capital”, i.e. shoveling loot.

But with the banks deteriorating rapidly and asset purchases extremely complex [I like that euphemism for bankster intransigence], the TARP was quickly shifted to injecting capital directly into major financial institutions. Initially, this meant buying senior preferred stock and warrants in the nine largest American banks, a tactic subsequently extended to other banks…..

The largest use of the TARP funds has been to recapitalize the banking system via the Capital Purchase Program. At its conception, the CPP was expected to amount to $250 billion. Instead, its peak in early 2009 was actually about $205 billion, and as financial conditions have improved, many of the nation’s largest banks have repaid the funds. There is only $67 billion outstanding in the CPP. Banks also paid an appropriately high price for their TARP funds in the forms of restrictions on dividends and executive compensation, and additional regulatory oversight. These costs made banks want to repay TARP as quickly as possible. Since nearly all CPP funds are expected to be repaid eventually with interest, with additional
proceeds from warrant sales, the CPP almost certainly will earn a meaningful profit for taxpayers.

I like the touch about the “appropriately high price.” But this can’t hide how grotesqueries like BofA and Citi were allowed to pay back the TARP in order to resume bonus looting, all of it enabled by government-sanctioned accounting fraud. It’s all a propaganda exercise, just like the bogus stress tests.
ZB joins in, proclaiming the stress tests valid:

The Treasury and Federal Reserve ordered the 19 largest bank holding companies to conduct comprehensive stress tests in the spring of 2009, to determine if they had sufficient capital to withstand further adverse circumstances—and to raise more capital if necessary. Once the results were made public, the stress tests and subsequent capital raising restored confidence in the banking system.

They move on to flat out lies about the TARP and the housing market.

The housing bubble and bust were the proximate causes of the financial crisis, setting off a vicious
cycle of falling house prices and surging foreclosures. Policymakers appear to have broken this cycle with an array of efforts, including the Fed’s actions to bring down mortgage rates, an increase in conforming loan limits, a dramatic expansion of FHA lending, a series of tax credits for homebuyers, and the use of TARP funds to mitigate foreclosures. While the housing market remains troubled, its steepest declines are in the past…..

In fact, TARP has been a substantial success, helping to restore stability to the financial system and to end the freefall in housing and auto markets. Its ultimate cost to taxpayers will be a small fraction of the headline
$700 billion figure: A number below $100 billion seems more likely to us, with the bank bailout component probably turning a profit.(p.2)

Even if that turned out to be technically true, we of course can’t legitimately separate the TARP from the Bailout in general. (Or say TARP = Bailout.) But we’re very familiar with the Big Lie of doing so.
As for the bubble-headed dogma about permanently reflating the bubble (“This time housing prices will go up forever!”, ZB are evidently screaming), I think we know how ridiculous that is. But they’re sure trying hard. Indeed, they even bring in Phil Gramm for a cameo:

Three rounds of tax credits for home purchasers were also instrumental in stemming the housing crash. The credit that expired in November was particularly helpful in breaking the deflationary psychology that was gripping the market. (p.16)

So they ape Gramm’s “nation of whiners” having a “mental recession”.
Finally, to reiterate that unemployment normalization figure: “Unemployment is still close to 10% at the end of 2010, but closer to 9% by the end of 2011.” (p.4)
This will have been two years since the official End of the “great recession”. Zandi and Blinder don’t venture further, but we’ve heard plenty from the administration to the effect that Obama considers this figure permanent. That’s what they’re willing to say politically. We can only imagine what the real desired number is, as the destruction of what few real jobs remain in Bailout America continues at full fury.
Meanwhile the hacks will do what they can to make it all look normal, and like a “recovery”. All we the peasants have to do as we free fall into impoverishment and indenture is retain faith in magic words like “recovery” and “growth”.
This “study” by Zandi and Blinder will try to do its part whitewashing the Bailout’s infinite crimes. And as they say, “we welcome other efforts to estimate these effects.” No doubt there will be such efforts.
If only an effort like the one I wrote today could get the same dissemination.

July 17, 2010

Finance Reform Sham, CFPA Sham, SEC/Goldman Sham


I’ve written more than enough on the sham finance bill and didn’t see the need for another piece on it . (My most recent.) But I thought this post mortem was true and typical.

The ink is not even dry on the new rules for Wall Street, and already, the bankers are a step ahead of everyone else.

In ways large and small, the broad overhaul of the nation’s financial regulatory system that was approved by Congress on Thursday will eat into the profits of the nation’s banks.

So after spending many millions of dollars to lobby against the legislation, bankers are now turning to Plan B: Adapting to the rules and turning them to their advantage.

Even when it comes to what is perhaps the biggest new rule — barring banks from making bets with their own money — banks have found what they think is a solution: allowing some traders to continue making those wagers, as long as they also work with clients.

Banking chiefs concede they intend to pass many of the costs associated with the bill to their customers. The legislation, which is expected to be signed into law by President Obama next week, is intended to address the causes of the 2008 economic crisis and curb the most risky behavior on Wall Street.

“If you’re a restaurant and you can’t charge for the soda, you’re going to charge more for the burger,” said Jamie Dimon, the chairman and chief executive of JPMorgan Chase, after his bank reported a $4.8 billion profit for the second quarter on Thursday. “Over time, it will all be repriced into the business.”

Here are the banksters openly saying they’ll never take less than the extortionate amount they already extract. They regard their robberies as their divine right. As if we needed it, there’s a further declaration of war upon us, and further confirmation that humanity and the banksters cannot coexist in the same world.
So I think that’s adequate commentary on this vile sham of a “reform” bill.
Meanwhile, in order to confirm for anyone who still had doubts about whether or not Obama ever wanted a real CFPA, Geithner has gone out to oppose the appointment of Elizabeth Warren as its chief. (For a good post on Geithner as wingnut welfare poster boy, a complete failure throughout his worthless life at being anything other than a serviceable villain, see here.)
We knew this already, after the original white paper was so weak, eschewing vanilla requirements, and when the administration then without a fight let the thing be subverted and “pre-empted” in the House. So it’s no surprise today when they’re still hacking away at any possible effectiveness on its part, though that’s already a moot point. As I’ve always said, if you have to rely upon heroic personnel for effective regulation, then you can’t have sustained effective regulation over time. In a corporatist system, “regulation” can’t work.
Now, after howls of protest, the administration is publicly backpedaling, disclaiming any such opposition. So no doubt more nonsense will ensue.
I’ll just mention that the canonization of Warren seems overblown to me. She’s an administration cadre, a Harvard cadre, supports the system, supports the Bailout. The best one can say is that maybe she’s as good as it gets within the system, which is saying little.
Indeed, from the public interest point of view, wouldn’t it be better if someone more obnoxious were appointed? That would render the scam more brazen, obvious, and offensive. If you agree the bill’s a sham and want the people to understand that, why would you want an anodyne piece of window dressing like Warren to be part of it? It contradicts our educational mission.
It’s in light of this that we should consider the Goldman settlement. It’s a $550 million fine, and Goldman admits a marketing “mistake” and pledges to “reform” its policies. The SEC will distribute some of the proceeds to ACA and IKB, and Goldman agrees this amount is not mitigatory of any future civil awards. There’s all the standard crap about how Goldman agrees to closer oversight and how the SEC pledges to provide that oversight. It looks like a de facto global settlement as far as the SEC’s concerned.
I suppose from the reformist point of view there’ll be endless argument over whether or not this is a win for Goldman. From the point of view of taking back our country from these gangsters, the only question is whether or not this was a significant step toward the complete destruction of Goldman and all casino banking.
It seems not to be. On the contrary, the “best” case scenario seems to be that gamblers outside the bank hope the settlement will circumscribe the way Goldman can rig the game to the clients going forward.
But the game itself, which is purely destructive from any broader point of view, is to continue in its full ferocity.
Indeed, if the perception here is that the game will be less rigged vs. the client gamblers, then the settlement is a retrograde step, since one of the few good trends we’ve been seeing is the growing realization that Goldman’s a criminal against everyone including its own clients.
So anything that seems to improve the position of the clients is bad for the American people. From our point of view, it would’ve been better if the settlement had more obviously been a whitewash. Or even if Goldman had fought all the way and won. Insidiousness is always worse.
The corporate media will do all they can to spin this as a win for everyone, and as sufficient regulatory vigilance. Thus the NYT is calling it a “high-water mark” for regulators, trying to simultaneously exalt it as a big win but also lower expectations going forward. The spin will be: The SEC/Obama got tough, “investors” will be better protected; but Goldman is also vindicated of the worst charges, and implicitly the casino is now in better shape, and the American people should have more confidence in it going forward.
It’s all a Big Lie.

June 18, 2010

Democracy Sausage


“If enacted, Brown-Kaufman would have broken up the six biggest banks in America,” a senior Treasury official said. “If we’d been for it, it probably would have happened. But we weren’t, so it didn’t.”

I’d love for this quote to be the epitaph for this administration.
This open gloat that “We could have fought for the people and chose to fight against them.” It should be applied not just to the Kaufmann-Brown Break-Up-the-Banks amendment, but to everything (not an exhaustive list, but just some highlights) – single-payer instead of handing over the American people as a cash cow to the insurance gangsters, ending the war instead of escalating it, restoring civil liberties instead of further assaulting them, restoring the rule of law instead of further destroying it, breaking our captivity to oil and the oil rackets instead of tightening the bonds, ending corporate welfare instead of opening the sluice gates even wider, smashing all rackets instead of further entrenching them, eradicating the finance parasite instead of defending and further empowering it, thereby guaranteeing that the final crash and Depression will be as destructive and painful as possible.

“If enacted, Brown-Kaufman would have broken up the six biggest banks in America,” a senior Treasury official said. “If we’d been for it, it probably would have happened. But we weren’t, so it didn’t.”

That brings us to the sham finance sausage squeezing through the corporate congressional processors. Sinclair’s descriptions in The Jungle are apt but as metaphors still fall short of really capturing the evil and gutter repugnance of this magnitude of crime in action, the utter subhuman smallness of the criminals involved, the blackness of the primate heart.
They still keep trying to pretend. Today we learn that the conferencers really want an expanded Fed audit. But we already know that the Senate rejects this. That’s why Sanders had to pre-gut his amendment to even get a vote. (And what a vote! 96-0. It’s not just Soviet elections and Nazi plebiscites which can do that.) So this is just Frank putting on a show for the loser “progressives” in the House, so they can feel validated before they cave in and vote for a gutted audit or none at all.
The record is almost a clean sweep – this sausage-maker expelled all actual meat and squeezed together only the most filth-ridden fragments of snout, fatback, entrails, feces……
1. The critical thing is of course breaking up the Too Big To Fail banks. This was rejected completely in the form of the Kaufmann-Brown amendment. As we see with his self-written epitaph, the Obama administration is bragging about having killed it. Here Obama is eager to take personal responsibility.
Right there, it’s already game over. So long as the rackets exist, they will function as an extortion racket and general arsonist, raised to the level of tyranny. This is Bailout America. The 96-0 vote can stand in as a symbolic 30s style plebiscite, to give us that old European flavor.
2. Second most important would be derivatives reform, and here true reform would be nothing less than demolition of the casino. Only legitimate hedging by legitimate businesses should have legal status, while all mere betting should be relegated to the back alleys where it belongs. Outlaw all speculation. Simple bucket laws, and non-enforcement of sham “contracts” which are nothing but infinitely more destructive versions of sports betting, are what we need.
The bill does nothing remotely like this. The House version pretended, not to outlaw speculation but merely to place it on public exchanges. But even this meager measure was gutting by exempting, not just legitimate hedging, but “currency hedging”, which can pretty much be defined to include anything and everything. Which was the intent.
The Senate version, pushed by Blanche Lincoln under the duress of her primary campaign, is also loaded with loopholes and Trojan horses. But it does contain one strong piece – banks who want to play in the casino would have to give up their Fed window access. In other words, you can be a gambler or a welfare queen, but not both.
That this is the only piece in the entire mess with real bite is evidenced by the report that the banks are willing to concede the sham version of the “Volcker Rule” in order to focus their energies on defeating this gambling restriction. How can the congress possibly contemplate not letting the banksters keep playing casino games with free public money? That would strike at the core of their business model. Capitalism, right?
Lincoln herself, having won the primary but facing almost-certain defeat in November, looks ready to abandon her own amendment. I’d say there’s about zero chance anything better than the sham House version will be in the final bill, maybe with some of the bad parts of the Senate version added.
3. We already discussed the Fed audit. This looks like where they’ll play their political pretense game.
4. “Resolution authority” is a fraud in principle, since we already know from the 2008 experience that in the crisis nothing will be “resolved”, everyone will be bailed out, no matter what law is in place. The PCA law already confers resolution authority and requires that it be exercised. Why would anyone think a new law would be any different.
(Still believing or not believing in resolution authority is a good metric for one’s ability to learn from experience. As is everything involving racket “reform”.)
Both bills pretended to set up this sham authority. The House version pretended it would collect funds from the banks ahead of time to facilitate the resolutions. In this space I called it a sham “Financial Superfund”. Since the tax would be levied on banks far smaller than the TBTFs, it was even in principle another monopoly-entrenching measure, another socializing of risk and cost. And we know that in practice even if they did pre-collect such a fund and even if they did use it to take TBTFs into receivership, it wouldn’t be remotely sufficient, and the taxpayers would end up making up the massive difference. Just like with the original Superfund.
Meanwhile the Senate version was more honest and dropped the superfund idea, implicitly acknowledging that the taxpayers would be on the hook for the resolutions.
Obama, of course, prefers the Senate version.
And we know that in practice no collapsing TBTF will be “resolved”. To the extent it’s within the system’s power, it will always be bailed out as is. (Even the administration admits this.)
5. The vaunted CFPA has been a joke from the start. Obama pretended to want strong vanilla requirements, even said so in a white paper.
But remember:

“If enacted, [a real CFPA] would have [imposed real restrictions on] the six biggest banks in America,” a senior Treasury official said. “If we’d been for it, it probably would have happened. But we weren’t, so it didn’t.”

Obama didn’t fight for a strong, independent CFPA; by his own testimony that means he didn’t want a strong, independent CFPA.
Now he says that out of competing sham versions, he prefers the Senate version which includes car dealers but would be housed in the Fed, which guarantees it will do nothing at all no matter what its theoretical scope, over the House version which is loaded with more loopholes (the Senate version has many of those too) and is more overtly pre-emptive of stronger state laws, but would stand alone as a regulator, outside the Fed.
We already know Dodd would prefer to get rid of it completely, while Frank is presumably content with his kabuki version, playing to that House crowd again. So I expect something like the Senate version to be in the final bill.
6. There’s lots of other nonsense. The Franken amendment which would’ve tried to fix the absurd situation of the credit-rated hiring their own credit raters (even Dodd admits it’s ridiculous: “just saying it alone, it screams out for a resolution”) was thrown out. None of the Senate’s aspiring Glass-Steagal type amendments even made it into the Senate version, let alone having a chance in the conference.
I already mentioned how Wall Street is said to have decided to let Obama have his little volcker rule, which is also laden with enough loopholes that nobody has to worry about it cramping the banks’ style in any real way. (In the Senate version, it wouldn’t even be enacted until after a period of “study”, i.e. post-legislative lobbying.)
The NYT has been peddling hype about how hard the poor lobbyists are having it. All that means at most is that having gotten 95% of what they wanted, that last 5% gets more difficult. Diminishing returns, E=mc2 and all. After all, the politicians have to pretend, and then there’s randomness such that something small might squeeze through the nets. On the whole, I’d say the lobbyists can congratulate themselves on a (mostly easy) job well done, and it’s a testament to their professionalism that they’re still fighting hard for that last 5% and whining about it to the MSM. And how compassionate of the papers to report so sensitively on that whining.
But nobody has to worry. If it goes through, the volcker rule isn’t going to hurt anybody. After all, it’s Obama’s baby.
And what do we know about Obama, where it comes to anything which could possibly constrain the rackets and empower democracy?

“If we’d been for it, it probably would have happened. But we weren’t, so it didn’t.”

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