Volatility

June 24, 2010

Nothing Works Anymore

 

Obama’s offshore drilling exploration moratorium was typical of him – too late, too limited, anodyne, more talk than action, taken only under extreme political duress though he obviously didn’t believe in it, so he couldn’t achieve any goodwill from it anyway. Yet even in that meager way it’s still something worthwhile.
 
Or it was for a few days before a federal judge, at the request of a minor special interest, the ferries serving drill workers, overturned the moratorium, declaring it “arbitrary and capricious”. People are having trouble following the judge’s reasoning, since it’s self-evident that deepwater drilling cannot be done safely and with all the risk accounted for by voluntary market participants. In principle, not just an exploratory moratorium but banning it completely is exactly what the executive branch should do as steward of these waters and resources. The only thing which looks arbitrary and capricious is the judicial activism here. (Unless you look at the judge’s oil investments. Then perhaps the decision might not seem so arbitrary.)
 
Corporatist judicial activism has been on a roll since the Citizens United decision. The SCOTUS seems especially keen to smash all attempts to impose any sort of rational limits on election buying, no matter how modest. Now, there’s no doubt about the “supreme” court’s conscious malevolence; four of the cadre are hard-bitten corporate activists, while the other four including Stevens (leaving out Sotomayor on account of insufficient data as of yet) are at best passively corporatist*, with demented prima donna Kennedy flipping back and forth based on whatever lets him be the center of attention. 
 
[* I’ve previously proposed that the right classification of judges is not something phony like “strict” vs. “loose” construction, let alone idiocy like conservative vs. liberal.
 
Rather, since the struggle of freedom and humanity vs. tyranny as crystallized in the struggle vs. corporatism is the defining issue of our time, and since the courts are today a lawless no man’s land where the civil war is already being fought out with one judge ruling that 2 + 2 = 4, while in adjoining courtrooms on either side his “colleagues” are saying it equals 3 or 5, so it follows that the only meaningful classification of jurists is as: either corporate activists on the bench (like the Citizens United majority), or as passive corporatists (those who accept corporate personhood and the basic corporatist structure, but who oppose judicial activism on its behalf), with perhaps a diminishing few public interest advocates and even anti-corporatists here and there.]
 
The SCOTUS as a whole is by now firmly against the people and for the tyrants. We should always remember that just as we can never expect there to ever again be good legislation from the Congress, so we can’t expect any kind of systematic good from the courts, only evil.
 
But even though the court is malevolent, by now money is so entrenched in the electioneering process that these decisions will probably make little practical difference. Here as everywhere else extortion is institutionalized.
 
But even given this level of conscious malevolence and entrenched corruption, there are still those like Glenn Greenwald whose public interest good will seems strong enough, but who often remain mired in the process mentality, such as in Greenwald’s case his myopic fetishized version of the 1st Amendment. As I said in my post on Constitution and Process, this fetish of process over substance and result ends up betraying the substance and helps guarantee a result which makes a repugnant mockery of the original ideal. The 1st Amendment, like0 the Constitution itself, is not a suicide pact, but the process myopics seem intent on making it one.
 
So it’s not just malevolence, but process issues as well which congeal as a blockage in many minds to constitute an objective barrier to political transformation.
 
Every attempt at reform is always opposed by one or more selfish, sociopathic special interests. The result is always at least one versus zero (the atomized mass which today passes for “democracy” and the public interest equals zero). In the case of the upset drilling moratorium it wasn’t even Big Oil who brought the suit (though I suppose they financed it), but some rinky-dink boats which ferry oil workers to the rigs. So there will always be someone, no matter how small, ready to assert the aggregate corporate prerogative against any value no matter how critical, like the very life of the sea itself, or humanly majestic, like democracy and the public welfare. These are all helpless in the clutches of this system.
 
I’ve written plenty of times about malevolence, and that will remain my focus. But for today I wanted to point out how the problem runs even beyond malevolence. I especially reject the notion that if the problem is “just” the criminal intent of gangsters, we can simply undertake the “reform” of replacing them, but otherwise leave the structure intact, and everything will be fine from there. No. The problem is the structure. Once we have  this combination of outdated structures and longstanding organized crime having suffused the structure with its mindset for so long and so deeply that the structure has become a veritable kleptocracy, and all institutions and processes within it are systematically corrupt, hijacked and suborned, or just plain rotted, the whole thing is beyond reform and beyond redemption.
 
So for the sake of argument, for the rest of this post let’s assume no criminal intent but simply the “innocent” process mentality and the “just doing my job” mentality. We can see how, no matter where we turn, no matter what we try, there’s always a seemingly insurmountable impediment to reform. We are bottlenecked. Even leaving aside actual assaults like the health racket mandate or “austerity”, nothing can be fixed.
 
I was thinking about this as I pondered the moratorium overthrow when I read a fascinating chapter early in Tocqueville’s The Ancien Regime and the Revolution. In Book 1, chapter 4, Tocqueville describes how the institutions and laws converged in all European countries, especially France, Germany, and England. By the 18th century, although everyone still was acting in accordance with the same Middle Age forms which once used to be progressive*, these now constituted stagnation. They were blocking movement, innovation, freedom.
 
[*I’ll take this opportunity to introduce one of my basic ideas. I think all historical threads (forces, ideas, entities) follow at best a life cycle of four stages. These stages are those of discovery, or when it is first evolving and pioneering; the progressive stage, where it reaches the best combination of healthfulness and utility; the decadent stage, where although its “quantity” may still be increasing, its quality stagnates, its usefulness hits diminishing returns, and it becomes a drag on motion and health; and the malevolent stage where all its effects are actively counterproductive and harmful to the people as a whole. (Throughout I’m of course speaking of the welfare and vibrance of the people, not of racketeers; their “welfare” tends to improve as the life cycle becomes decadent and then malevolent. Indeed their toxic flourishing is inversely proportional to a thing’s existential benevolence.)
 
Some obvious examples of spent life cycles are those of oil-fueled industrialism, mass capitalism, oil-fueled technology. Even the corporation may have had its brief progressive period, when it was still restrained within the bounds of the Constitution, before it quickly skipped decadence completely and became malevolent. Mass democracy first became corrupted and decadent and now, in its hijacked “inverted totalitarian” form, pseudo-democracy, is actually malevolent because it continues to prop up faith in vain reformism.]
 
So let’s read some Tocqueville. In several places I find myself substituting “Founding Fathers” for “Men of the Middle Ages” and today’s kleptocracy for sclerotic 18th century European structures.
 

It is no part of my theme to relate how this former European constitution gradually lost its power and fell into decay. I simply state that in the 18th century it was in partial ruins everywhere. The disintegration was generally less pronounced in the east of the continent and more so in the west but every country manifested this process of aging and disintegration.

This gradual collapse of the institutions peculiar to the Middle Ages can be followed in their archives. We know that each manor owned registers of land ownership called “terriers” in which, through the centuries, they recorded the boundaries of the fiefs, the holdings paying rent, the dues payable, the obligatory feudal services and the local customs. I have seen the terriers of the 14th century which are masterpieces of drafting, clarity, precision and intelligence. They become obscure, ill-formed, incomplete and muddled as they move into more recent times, despite the general progress of knowledge. It would appear that political society drifted down into barbarism at the very time when civil society was finally achieving enlightenment.

 
(I interject, this sounds similar to the current disposition of mortgage notes, specifically that the MERS regime was set up to systematically hide and lose those notes while the mortgages themselves became discorporated quiddities meant to fictively constitute “securities”, MBS and CDOs.
 
It’s part of Hernando de Soto’s depiction of the collapse of the rule of law itself through the destruction of the paper files.)
 

Even in Germany, where the old European Constitution had maintained its original features more effectively than in France, some of the institutions it had created were already everywhere being destroyed. But we can best judge the ravages of time less by observing its losses than by viewing the state of its remaining features.

Those urban institutions, which in the 13th and 14th centuries had transposed the chief German towns into small, prosperous and enlightened republics, still existed in the 18th but offered nothing more than an empty show. Their legal conditions appeared to be as vigorous as ever – the magistrates they appointed had the same names and appeared to perform the same functions – but the activity, energy, shared patriotic feeling, virile and productive virtues which they inspired had vanished. These ancient institutions had inwardly collapsed without losing their original shape.

All the powers of the Middle Ages that still remained were attacked by the same disease and displayed the same disintegration and the same slow decline. Still more, everything which was associated with the old constitution and had retained an almost clear imprint of it, without exactly belonging to it, directly lost its vitality. From that contact the aristocracy became infected with senile decay. Political liberty itself, whose achievements had permeated the whole Middle Ages, appeared to be stricken by barrenness wherever it still bore the particular characteristics it had gained from the medieval period. Wherever provincial assemblies had preserved their ancient constitution in an unchanged state they halted the progress of civilization rather than fostered it. It might be said that they were alien and almost impervious to the new spirit of the time. The antiquity of these institutions had not made them respected. Quite the contrary, they lost any credit even as they grew old and, strange to relate, they inspired all the more hatred as they seemed less capable of causing harm through their increasing decay. “The present state of things”, said a German writer, a contemporary and friend of this old regime, “appears to have become generally painful for everyone and occasionally contemptible. It is strange to see how people now judge unfavorably everything that is old. New impressions come to light at the heart of our families and upset their orderliness. Even our housewives no longer wish to put up with their old furniture.” Yet in Germany, at the same time as in France, society was thriving and enjoyed a growing prosperity. But everything which was alive, active, and creative was recent in origin, not only new but in conflict with the past.

Royalty shared nothing in common with the royalty of the Middle Ages, possessed other powers, occupied another position, had another spirit and inspired other feelings; the administration of the state extended everywhere, settling upon the remnants of local powers; the hierarchy of public officials increasingly replaced the government of the nobility. All these new powers acted according to procedures and followed ideas which men of the Middle Ages had either not known of had condemned. These had their links in fact to a state of society beyond their experience.

 
Let’s look briefly at a few examples. Again, I’m trying to leave out the main factor, intentional gangsterism and greed, and just mention the underlying structure and process factors, as well as some “innocent” motivations.
 
We started out with Obama’s energy policy, if one wants to call it that. Really Obama has no energy policy other than continuing the doomed status quo of corporatism, the technology cult, and massive consumption. It’s these very prejudices, ingrained far beyond the imperatives of greed, which help set up such objective psychological barriers to a rational energy policy. There’s also the refusal to accept resource constraints like Peak Oil, this refusal bolstered by all the dogmas and delusions of economic ideology (as well as the delusion that economics is a science). There’s also the tremendous sunk cost of cars and suburbia and the mass-energy infrastructure, entrenched Big Oil and Big Coal (not referring to their greed but their silhouette on the cultural horizon) and the new ethanol racket, trying to become Big Ethanol through the nurturing of its father, Big Ag and its mother, corporate environmentalism.
 
All of these represent big chunks of existence whose gravity serves as a form of propaganda in itself. People look at the sheer size and media presence of structures and become resigned, even if they wish they could sweep the landscape clean. They end up passively embracing what they consider laws of being.
 
As for the legal laws, everywhere you look these are set up to put up massive passive resistance to change even where the enemies of change don’t actively attack. Thus the 2005 and 2007 energy bills massively entrenched existing rackets and set what are meant to be “accepted” levels of renewable energy development. Since these were bipartisan bills enacted with great media fanfare, they’re meant to encode the status quo energy regime in our very spiritual and political DNA. Obama’s would-be energy bill is meant to continue this totalitarian process, adding cap and trade to the racketeering mix. (Needless to say, it would do nothing to mitigate greenhouse gases nor is it meant to.)
 
The same enshrinement exercise played out with the Bailout, with the health racket bailout, and is now continuing with the sham finance bill. The way the bills have been negotiated is also meant to further entrench the new legislative paradigm (there was a time where majorities sometimes really did want to legislate as per their constitutional mandate; no more) where everyone commences in the full understanding  either that nothing in the Status Quo will be changed, or else its assault on the people will be escalated. Maybe nobody even knows which of these it’ll end up being; either way the process is to put on a political show, with various cadres either delegated or self-appointed to play doomed heroes or misdirectional villains, while in the end they try to smear out responsibility for the real villainy among themselves while the flacks call it all “progress”. I stress that although everyone’s intent may be villainous, they’re also enshrining a process whose mechanism is meant to be immutable. Even if you came into Congress sincerely seeking reform, you’re quickly made to understand that that’s not Congress’s business, and you can either fall into line or get out. So far they’ve all fallen into line.
 
A similar but cross-branch process boondoggle is the net neutrality mess, where nobody in the government can seem to figure out for themselves where the power should be – with the executive (the FCC)? or the Congress? or the lawless courts (as the DC appellate court recently claimed in its own piece of judicial activism)? The result, of course, is that the telecom rackets win. All this squabbling imprints people with the process notion that process is both inscrutable and critically important, thereby fogging their eyes against the fact that either the FCC or Congress can enforce net neutrality at will; who does it doesn’t matter much; the point is for someone to do it.
 
Those are a few examples of how the existing system, not only on account of the malign intent of the actors, but also on account of its own inertial processes and mindsets, is a pit of stagnation and obstruction where no constructive change can be accomplished. It’s the same existential congealment as that which confronted the rising people of France and Europe in the 18th century.
 
There’s one big difference between the world Tocqueville described and today. Writing of the days of the ascent of fossil fuels, the ascent of the Industrial Revolution, of mass democracy, of the aspirations of the Enlightenment, he described an ascending new vibrance running into a bottleneck. But today, in the time of Peak Oil, the collapse of exponential debt, the permanent stagnation of capitalism and its calcification into corporatist oligopoly, in our post-democratic, neo-feudal time, we’re more like fugitives who are bottlenecked as we try to escape.
 
Can we find our own vibrance? Something like the cooperative movement of the 19th century Farmers’ Alliance, and the political self-respect it engendered according to author Lawrence Goodwyn? Relocalization as a movement needs a focusing action which involves cooperative work toward real economic self-reliance and political rediscovery. Such a movement, flowing as water around and under the dead rock of the kleptocracy (in the best Sun-Tzu tradition), is clearly the only possible solution. But we need to find the ideas and actions to render it vibrant. 

October 15, 2009

Disaster Capitalism Institutionalized

 

So the bank hearings are on, and from day one it’s clear that the goal is to pretend to seek reform, really gut it, and as much as possible extend the predatory opportunities for the banks and every other kind of criminal.
 
Barney Frank is emerging as one of the ultimate criminals of our age. His up-front solicitude for the rackets is even more brazen than it was a year ago when he was Bush’s point man in the House for the bailouts. He has already declared that he rejects any measure which would place the rackets in an “untenable position” regarding their ability to extract extreme rents out of their extortion activities. Thus the proposed Consumer Financial Protection Agency has already been gutted in principle.
 
On Wednesday Frank went further to declare that he wouldn’t tolerate anything which might even be “unsettling” in the eyes of the Big Banks. The day’s main action centered on proposed derivatives regulation. This notion was already a joke, but yesterday it turned into deranged farce as Frank orchestrated an orgy of exemptions.
 
Even with health care it wasn’t this clear this quickly that there is zero intention of seeking reform here. That every word of it is a LIE. That they will only entrench and, where possible, compound their crimes. Frank has now said, explicitly, many times, that his one and only priority and wish is to defend the prerogatives of financial monopolies.
 
The Obama administration supports every aspect of this betrayal. It crippled derivatives regulation in its inception and already caved in on the CFPA. 
 
And the assault on the CFPA continues. Having already defanged the CFPA, stripped it of everything which would tend to make crime “untenable”, the rackets are now moving to the offensive. Their chosen water carrier, Democrat Melissa Bean, introduced an amendment which would have the neutered CFPA pre-empt the sometimes more aggressive state regulation. Thus we see the continuation of Bush’s assault on federalism on behalf of corporate rackets.
 
If this succeeds, we’ll again have what started as the promise of “reform” hijacked and turned into a further assault on the people.
 
This is exactly parallel to what we’ve seen play out with health care. The basic plan is the same: Claim you’re going to seek reform, use misdirection (the idea of the public option, the idea of the CFPA), make secret deals with the rackets, in Congress have the already weakened proposals be utterly castrated and then turned into anti-public weapons, try to pass as reactionary and predatory a bill as possible.
 
Thus we went through: public option (itself always meant to be only a distraction from single-payer, to be dropped afterward) – trigger – exchanges – co-ops – trigger again – opt-out – now trigger again, every step of the way the increasingly desperate attempt of Obama and his fellow right-wing Democrats to maintain the corporatist integrity of the bill against the nasty incursion of the public interest in the form of a strong public plan. (Which was never supposed to have still been part of the debate toward the end. Only grass-roots activism, against Obama’s fierce opposition, has kept it there.)
 
Thus with health care the goal is to use a mandate to round up a conscript market for the insurance racket, who have already proclaimed that they’ll use that position to tremendously raise their rates. Why wouldn’t they? They’d have the power and they always have the intention.
 
(Something similar played out in House climate change legislation, where the ACES bill was hijacked to grandfather in the vast emissions of industrial agriculture, to forbid the EPA to use indirect land use emissions calculations (to take into account the deforestation caused by biofuel production), and strip the EPA of its already-existing regulatory authority under the Clean Air Act. So a weaker bill is being used to drive out an existing, theoretically stronger law.)
 
Just so that it’s not all about big corporations, we see the same fascist aggression at every level. Everywhere anything that was meant to try to improve our lives is turned into a weapon. Hybrid cars are, in my prognostication, an inadequate solution to energy, environmental, and social problems. The problem is the personal car itself, not just that it’s powered by gasoline. But hybrids still represent an attempt to lessen some of the problems.
 
An ancillary benefit is how quiet they are. Noise pollution is one of the worst curses of our age, one of the things which contradicts the term “civilization”. So if nothing else hybrids modestly help with this, no?
 
No. While it’s true that quiet cars represent a hazard to people who aren’t paying attention to their surroundings, any concerns here are miniscule compared to the social benefit of less noise. But a pro-noise lobby has managed to put the issue on the table, in response the industry has floated the idea of artificially adding noise to the car’s function, and guess what happens next?
 
According to the NYT, they want to seize the opportunity to launch a further noise assault. Given a peaceful space and the alleged need to fill that space with minimally functional sound, they’re of course going to pander to all the worst elements of vanity and aggression. Your hybrid can be customized, loud, violent! You can be the driving the social equivalent of a Hummer and still be eco-friendly!
 

Indeed, just as cellphones have ring tones, “car tones” may not be far behind — an option for owners of electric vehicles to choose the sound their cars emit.
Working with Hollywood special-effects wizards, some hybrid auto companies have started tinkering in sound studios, rather than machine shops, to customize engine noises. The Fisker Karma, an $87,900 plug-in hybrid expected to go on sale next year, will emit a sound — pumped out of speakers in the bumpers — that the company founder, Henrik Fisker, describes as “a cross between a starship and a Formula One car…”

“One possibility is choosing your own noise,” said Nathalie Bauters, a spokeswoman for BMW’s Mini division, who added that such technology could be added to one of BMW’s electric vehicles in the future….

“It should be a manually operated noisemaker, a button on the steering wheel triggering a recording of your choice,” he said. “It could play ‘In-a-Gadda-Da-Vida,’ or anything you like.”

 
It’s striking how quickly, effortlessly the dynamic runs from alleged need to frill and vanity, from low-maintenance to high-maintenance, from social to anti-social. (And how a typically an MSM article makes this transition.)
 
I mentioned this at such length because it’s an example of how multi-level the basic antisociality is, how the corruption of “consumerism” runs way beyond just profit-seeking (although the profiteers certainly take advantage of the opportunities it affords).
 
More importantly, it’s an example of the basically malevolent nature of all consumerism, including the “green” kind. I’ve written before about how green consumerism is an element of resource fascism. Here we see an example.
 
Everywhere we see how any attempt within this system to improve things will instead be hijacked by criminals for reactionary purposes, to make things worse.
 
Ours is a new world order of disorder and disaster, and “the policeman is there to preserve disorder”. Most business opportunities will be disaster capitalist opportunities, and they will do all they can to increase these opportunities. Thus we see how all activities of corporate rackets are depredations and how the government governs in order to maximize pain, hardship, struggle, impoverishment, fear, violence, and extraction for the rackets. That’s how they’re governing on health care, and that’s how they’re governing on the banks.
 
The evidence is incontrovertible, the case is closed: “Reform” within this system is a LIE.

April 5, 2009

“Subprime Carbon”

 

Friends of the Earth has released a report written by Michelle Chan entitled  Subprime Carbon: Rethinking the World’s Largest New Derivatives Market (report linked  here ). This refers to the securitization of emissions permits and offsets which are the two most common mechanisms in setting up a cap and trade. Carbon trading in general is futures derivative trading. As Chan says, the seller “promises to deliver carbon allowances or credits in a certain quantity, at a certain price, at a specified date”. The market is small now, but according to CFTC commissioner Bart Chilton it could become “the biggest of any derivatives product”.
 
Chan defines subprime carbon as “futures contracts to deliver carbon that carry a relatively high risk of not being fulfilled, and could collapse in value”. These are most likely to come from offset projects, “because sellers can make promises to deliver carbon credits before credits are issued for a project or even before greenhouse gas reductions have been verified”.  
 
As we’ve been learning, large, complex, ill-regulated entities and systems which have a free hand in “innovating” financial instruments are the Typhoid Marys of the globalist economy. All reasonable people agree that our main program here must be to downsize and deconsolidate these entities, unwind their complexity, and severely regulate them so that they never again become so large, so trustified, so complex that they can put this gun to our heads again.
 
So where we propose an extensive new system to impose a carbon price and cap, it seems like a no-brainer that we should do so in a way which does not run against the general definancialization of the economy. It should not provide a new way for financial entities to run ponzi schemes and blow up bubbles.
 
While I’m not writing here to attack the concept of cap and trade in principle, I do think that the specific proposals put forward so far have not been sufficiently active in trying to prevent a carbon bubble. This is the subject of the FoE report.
 
After giving an overview of the financial crisis in general and what must be done to prevent a recurrence, the report delves into how reforms should be applied specifically to a cap and trade. With the entry of finance speculators into the carbon market we’re already seeing all the same things we saw in the last bubble: exaggerated or fraudulent promises, derivation, bundling of “assets” of very different putative values, slice and dice, securitization. This speculation already represents most of the world carbon market – over 70%.  They are asset managers, investment banks, carbon funds. Chan says “two thirds of carbon investment funds were not established to help companies comply with carbon caps, but rather for capital gains purposes”. 
 
This is the reason why the 1990s SO2 trading market does not provide an adequate model. The financialization of any trading market is far more complex. Carbon speculators, especially those involved in “offset aggregation”, the bundling and tranching of offset projects, are generating the same opaque and excessive risk as with previous financial tricks. Chan also sees conflicts of interest, as the same investment bank may be involved in rating projects for offset credits even as it is managing or owning carbon portfolios.
 
These speculators, according to the report, will also drive up prices and render them more volatile. They represent a clear danger to effective mitigation policy and general financial stability. While we want a rational carbon price, we don’t want one artificially inflated beyond what’s reasonable or politically sustainable. Most of all we want a stable carbon price, since the whole point here is to rationally cap and rationally mitigate, and that won’t be possible with the market caroming all over the place.
 
According to Chan, because the carbon market, unlike most other financial markets, is being artificially, politically created*, it is therefore more susceptible to the pitfalls of lobbying and regulatory capture, and therefore needs special insulation from the political system. (So the report also affirms that we need real campaign finance reform.) The primary market will lobby for safety valves and off-ramps, for the creation of more offset assets, and for opacity regarding cap compliance. The secondary market will want all this plus the same old deregulated wasteland where it can generate its “instruments”.      
 
[* ALL markets beyond basic barter economies are artificially and politically created by governments. But it’s a core element of the right wing project to deny this and claim governments hinder markets; that markets can somehow exist without the strong hand of strong government assisting them every step of the way. This is of course a lie.]
 
The report is especially skeptical of carbon offsets, which even in principle are close to being junk carbon, let alone in practice. (Joe Romm and others call them “rip-offsets”.) These are prone to the abuses of:
 
1. Just being out and out scams;
 
2. Claiming inflated emissions reductions – even given good faith on the part of everyone involved, it’s very hard to accurately determine how much carbon remains sunk by e.g. foregoing deforestation of a particular tract (and of course everyone involved has a financial, political, and/or emotional incentive to err on the side of inflation);
 
3. Then there’s the seemingly intractable additionality issue. To deserve and under most policies receive offset credit a carbon-reducing project must be such that it would never have been built except to receive the offset credit. But this is fiendishly difficult to ascertain, since almost nothing is going to have only the carbon-reducing benefit; it will have other uses as well, and how do you prorate the multi-levelled motivations that went into something?
 
This is probably impossible to really figure out, and so those opposed to offsets take this as prime evidence for why we shouldn’t have them at all in government carbon policy, while those who are gung-ho (as a rule those who stand to profit from them) say we should just give up on additionality and give credit to everything.
 
Such a promiscuous offset policy would be a rich feeding ground for financial predators on the hunt for derivation opportunities. The more irresponsible and unaccountable something is in principle, and offsets are certainly dubious, the more readily it can be securitized, since the whole point of the finance scam is to become as unanchored from reality as possible and then really get to work manipulating people’s perceptions. They set up a hall of mirrors where each new image more monstrously distorts the last, and they seek to arbitrage the distortions.
 
All of this, as it burgeons, would spread new securitization throughout the financial system, creating new systemic risk. Then when the inevitable carbon crash comes, we’d have the same kind of reverberation as we have today – in this case, first for the compliance buyers (the actual emitters who needed the underlying allowances), and then on through the general economy. (I imagine under those circumstances the first thing to go would be actually having to comply with the cap.) 
 
All of it – first the risk of it, then the actual crash and economic destruction – would be for the benefit of a handful of FIRE sector cadres. Just as with the current crash.
 
Therefore, Chan says, we must not create the new carbon trading system without robust regulation. FoE recommends a hard cap, quarterly auctions (hopefully frequent enough to limit arbitrage opportunities), a published set price, the limitation of participants to regulated entities and those actually able to emit (Chan compares this to last summer’s anti-speculator proposal that oil futures trading be limited to those physically able to receive delivery), and bans on offsets, secondary market trading, and allowance hoarding.
 
The report gives these basic guidelines for regulation:  
 
1. Carbon must be specifically factored into general Wall St reform. The basic problems are the same. We know “self-regulation” doesn’t work (I can’t resist repeating Willem Buiter’s great line, “Self-regulation is to regulation as self-importance is to importance”), yet carbon traders have already called for it. We also need regulatory coordination, not an easily gamed patchwork. Regulatory gaps need to be closed. Much general reform sentiment is focused on CDSs, yet most carbon trades OTC. So as important as it is to fix the destruction wrought by the CFMA, we also need emphasis on shifting carbon trades from OTC to public exchanges.
 
2. Carbon trading also needs its own specific regulation, which must be dealt with in the carbon legislation. Chan surveys the many carbon-trading legislative proposals, with their attempts to find the right policies and  ways of distributing authority among FERC, EPA, CFTC, SEC. (A problem is proposals which want to give EPA the lead authority over trading. This could be fine if we only have a primary market among the emitters themselves. But the EPA is not set up to deal with any secondary derivatives market among finance speculators.)
 
3. The size and complexity of the trading market must be limited and simple, to foster price stability, keep out speculators as much as possible, and prevent the proliferation of subprime carbon. The goal must be to reduce the space available for a carbon bubble to inflate. Since speculation, derivatives markets, and bubbles are based on perceived arbitrage opportunities, measures that seek a stable price like a firm cap and frequent auctions provide a habitat hostile to this bubbling.
 
(I have to add here, since the entire political and economic elite are looking for nothing but the next bubble opportunity, since that’s the only way they can hope to prop up the debt economy a little longer, for them a report like this must read like an advertisement or how-to manual. They’ll just say they can avoid the “abuses” this time around.)
 
This report gives a good rundown on the potential pitfalls awaiting a carbon policy which bulls ahead without properly safeguarding against its own hijacking by the FIRE trust. Although the report doesn’t go into the underlying stability of the cap and trade concept per se, we can infer that the concept seems inherently vulnerable to this kind of abuse, and that where it comes to any cap and trade legislation, we must be vigilant in scrutinizing its trading setup and safeguards. If these are inadequate, this is sufficient reason to reject the bill.
 
That’s not just a general economic concern abstracted from the core focus of mitigating carbon emissions. On the contrary, the more a carbon trading system becomes the playground of the finance sector, the more it will be hijacked toward the goal of maximizing “trade”, and therefore the less firm the cap will be.  

March 20, 2009

Carbon Shock

If it’s true that disaster capitalism is the practice of swooping in upon the victims of some catastrophe to impose through “shock treatment” (Milton Friedman’s own term) the predatory corporatist and neo-feudalist regime they could never achieve by democratic means, then its most extreme and logical manifestation is where you artificially manufacture the disaster with the intent of using it to impose this regime.
 
Just as we’ve seen precisely that with resource imperialism, the “Green” revolution, petrodollar recycling, Cold War proxy wars, the drug war, and other gambits, so now we’re starting to see the outlines of a carbon war.
 
1. The West has already emitted to the point that the climate crisis is upon us, and shows no signs of mitigation.
 
2. The globalization cabal, through programs like the so-called Clean Development Mechanism, claims to be seeking mitigation but is actually funding further carbon-intensive development, like the largest coal-fired plants on earth in India.
 
3. While the rich West (and other high-emission free riders) clearly has an moral obligation to pay for adaptation measures in the poor countries being hit by the climate crisis, it is instead seizing the opportunity for the standard globalist predatory lending, which loans are always intended to be the lever to indenture the country and loot its resources and labor.
 
4. Although we still have the old-style denier guttersnipes with us, clearly the sophisticated exploiter view of climate change is that propagated by Lomborg and others, that the best way to deal with it is to “help” the world adapt to it, while “helping” them to industrialize themselves. Once all that’s achieved, only then, through some kind of invisible hand, the world will together mitigate emissions, and everything will be fine.
 
But until then, nothing special regarding emissions should be done. Just the adaptation/industrialization program, which sounds suspiciously like the latest repackaging of the same globalist offensive. You can see how well this dovetails with the World Bank program.
 
5. Similarly, there’s an attempt among policy advocates to impose a top-down consensus that “offsets” must be an important part of any climate policy. Whether these are preached as intrinsically good (e.g. many politicians and some enviros) or as a necessary political evil (most enviros), the result is the same – a gambit which counteracts mitigation in the industrial countries while helping pry open the privatization door in the non-industrialized (and probably doing little or nothing to mitigate there either).
 
6. Finally, we can only speculate on how precisely the malefactors of finance will try to use carbon permit trading (where again, a top-down imposition of “consensus” is being sought among mainstream environmentalism) to inflate a new paper bubble.
What is not a matter for speculation is the fact  (A) that they will attempt it, and (B) that the government will fully support such a bubble.
 
[All government monetary and most fiscal policy at this point, as well as almost all commentary, is overwhelmingly focused on just one thing: how to inflate another bubble, since the debt/growth ponzi system cannot survive without it. It really should be called a “bubble economy”, and indeed a bubble society.
 
Right now their preferred goal and conscious policy is to try to reinflate the housing bubble. Thus we have all the focus on trying to “stabilize” the still-inflated housing prices, and send them rising again, when clearly housing prices are seeking a reality-based level and still have a ways to go.
 
But they’ll certainly happily grab hold of any opportunity that comes along. So we can expect permit trading to become a central part of the fray. But it won’t work if a rigorous cap is truly enforced. So we can expect ever-more ramified trading, as caps become ever-more gossamer.]
 
Add this manifestation of the growth imperative to the globalist gambit outlined above, and we have the outlines of a carbon class war from above, at home and abroad, on the people and the earth.