Volatility

August 4, 2011

Taking Stock

>

If anything, the stock market is even more fictive as an issue than the federal debt. And a stock market crash ought to have no more significance for real people and their real work than deficits and debt ceilings.
 
To be clear, gambling with stocks (everything that happens on “the market”) has nothing to do with investment even in principle. The capital was already raised with the initial offering. From then on the stock is just batted about unproductively by a bunch of scammers trying to get something for nothing. A lot of foolish ones lost a lot of paper money yesterday. (I’m sure the banksters will do just fine.)
 
If, as capitalist propaganda would have it, stocks are supposed to be productive investments in the real economy, then the stock market shouldn’t exist at all. So there’s my remedy. The big bucket law I’ve proposed so many times, to outlaw (in the sense of declaring the “contracts” unenforceable) all sorts of gambling, would encompass the stock market itself.
 
(Even better would be to simply get the government out of contract enforcement period. Which would mean getting rid of centralized government as such.)
 
Unfortunately, the finance sector has used the government to impose a parasitic tyranny on the core economy. That means that bizarre reifications like stocks and deficit ceilings become real forces wreaking havoc on real people and real work. As we continue our descent into a Depression far worse than that of the 1930s, we’re passing the same milestones of mass unemployment and wastage of labor goodwill, which is really the wasting of lives, alongside bountiful production which is promptly thrown worthlessly down ratholes, and even more production potential which simply goes to waste.
 
This waste, which is the result of nothing but intentional policy on the part of criminal elites, is just as profoundly destructive as the murder of physical bodies. This is the murder of souls.
 
Is there any way out of the trap? It’ll have to include breaking free of the command cash economy of the financializers. Those who will be capable of taking in hand the stagnant potential and rendering it kinetic, in order to meet the needs of those in material peril, at the same time they uplift these needy masses and turn them into kinetic producers for themselves, and who will do all this without resort to cash, taking it for granted that there’s no need for it – who will they be? Is it possible that the time banks which are sprouting up everywhere can function as training programs for such cash-transcending cadres? And could the time banks themselves function as such revolutionary nuclei?
 
That’s a lot to ask of something starting out so modestly. But then, vision must see as far as the circumstances of the day compel it. Today we must look to everything with only one question – what role can this play toward our liberation and transformation? 

December 17, 2010

Today’s Austerity and Tomorrow’s Jubilation

 

Neither the banks nor the government have any legitimacy. Austerity is a Tax imposed without representation or even the barest sovereignty. The minimal criterion for one to even debate the legitimacy of these neoliberal governments would be that they honor their existing legal and political commitments. But as we see in the US and every European country, these are only illegitimate kleptocracies whose robbery has become overt and brazen.
 
So we see the “austerity” agenda moving forward, as Obama and the Republicans collaborate on extending tax cuts for the rich while conspiring to gut Social Security. (I no longer care about the tax cuts in themselves, but I juxtapose them with the call for further gutting of social spending and privatization as smoking gun evidence of government criminality, class war robbery.) Obama is a hard core Reaganite whose cherished policy goal, what he believes will be his righteous legacy to the elites (who he sees as his constituency) for the rest of history, is to gut the entire New deal state including SS and Medicare. The “deal” he made here, extracting a few slight concessions from himself, was done only under extreme political duress. For the first time he now fears for his re-election. (Though as the “sanctimonious purist” quote demonstrates, his heart isn’t in giving even a few crumbs to the poor. He truly despises the progressives, and even political expediency can’t overcome his public expression of that loathing.)
 
But on the policy agenda he and the Republicans are 100% simpatico. He is a Republican.
 
Many wanted to argue about the politics of the payroll tax holiday. Unfortunately, many more believe the lies about its being fiscally imperiled, or even that these governmental elites care about that. But the assault on SS has nothing whatsoever to do with rational concerns about its funding. Nor does the attempt to vilify it as “welfare” rather than an entitlement have any effect. Those who argue are mired in the appeasement mentality. They think you can “persuade” incorrigible criminals not to steal whatever they feel able to steal. It’s like believing you can appease the bank by begging for a mortgage modification and continuing to pay on a delinquent mortgage, because in theory they might decide you rationally merit a mod. Um, no.
 
The people overwhelmingly support SS and want to see it strengthened.
 
The elites universally want to destroy it, because they want to steal the money for themselves, because destroying it would further weaken the people, and because they simply hate the idea of having to trickle back down any of what they’ve stolen.
 
The fact that SS is perfectly solvent and has no inherent funding problems whatsoever is meaningless in a system run by criminals, where their lies prevail. The fact is that Social Security is an account payable by the US government. The only way it can be insolvent is if the government is insolvent. That’s impossible for a government sovereign in its own currency.
 
So whenever anyone in the government claims SS is in trouble, he’s simply threatening a voluntary default on the part of the government. And whenever anyone outside the government makes a similar claim, he’s simply predicting such a sovereign default.
 
So the fact that Obama and the DC gangs are making these threats does prove the nonexistence of this government’s sovereignty. Not because that’s fiscally “true”, but because they chose to make it true. They voluntarily abdicated.
 
The facts are clear:
 
1. No one among the elites cares about the deficit or the debt. The Bailout, the wars, Pentagon budgets, Big Ag subsidies, and all other corporate welfare, prove this.
 
2. “Austerity” is not, and is not intended to be, any kind of “fiscally conservative” or “fiscally responsible” measure. By definition any such conservative, if he existed, would focus 100% on the corporate welfare listed in (1).
 
3. To give a specific example, health care costs are out of control. We all know Single Payer is the only policy which would save a huge amount instead of increasing these costs. The Obama-Republican racket bailout will only increase them; their own CBO says so. No one who supported Obamacare (like all Democrats) or will support it going forward (like Republicans who refuse to repeal it) has any right to any opinion at all on the cost of anything, or to claim any concern for “responsibility”.
 
4. Deficit terrorism like that propagated by the NYT (which is a rabid supporter or the wars and also supports the Bailout, the health racket bailout, and massive corporate welfare in general) is therefore nothing but a criminal propaganda campaign on behalf of the austerity crime agenda. It’s qualitatively similar to telling people being herded onto trains that they’re being sent to a place with better conditions. Some Nazi propagandists (“journalists”) were later tried for that.
 
5. So the people’s agenda here is clear:
 
We have to absolutely reject deficit terrorism. It’s already proven to be a false idea, and not one single person who argues in favor of it has any standing whatsoever do so, since the only true fiscally responsible position would be: Let’s end all corporate welfare, including the wars and the Bailout, and restitute everything the banks stole. Let’s institute Single Payer, which will save trillions. Then we’ll see whether or not we need to cut any social programs.
 
Since there is no such advocate, we can regard the subject as closed, and stick to a few simple demands:
 
Total Austerity for the Criminals, Not One Cent More From the People.
 
Total Austerity for Corporate Welfare.
 
No Taxes on the Non-Rich. (Meaning we must reject any new tax or tax increase which isn’t 100% upon corporations and the rich. That means rejecting everything.)
 
And refuse to even discuss deficits or the debt except in terms like the ones outlined here. Refuse to even discuss beyond: “Deficits? OK, then let’s end all corporate welfare.”
 
There’s one piece of the proposed deal which is of real interest, the allegation that it will clobber already-reeling state budgets by ending the Build America Bonds (BAB) program.
 
Even before this the moderate Chris Whalen has been saying he thought it won’t be long into 2011 before state governments will start telling mortgage debtors to stop paying mortgages but continue paying property taxes. The idea is that the states are increasingly being abandoned by the banks and the federal government. This abdication of legitimacy is becoming clear at the same time the states and localities are facing true fiscal crisis. So under those circumstances, rational state and local governments would want the people to keep the money local as much as possible. Paying the property tax before the mortgage, and if necessary only the property tax, while keeping up the property (which the banks themselves are prone to leave derelict after a foreclosure), is a way to accomplish that. Why should a state feel any call to enforce any “right” of Wall Street? On the contrary, they should declare such abdicated rights null and void.
 
If the alert about how this DC deal will further hit the states is true, that may accelerate the coming of the day Whalen was talking about.  
 
Yet another critical piece of evidence for the already massive pile: There is absolutely no legality or legitimacy whatsoever in this bank mortgage-based land dispensation.
 
It is manifest nonsense to even try to claim the homeowner has any moral or legal relationship with anyone but the local government, to whom he owes property taxes, and the community, to whom he owes his good stewardship of the property.
 
Beyond that, to pay a cent to the banks, e.g. to keep paying on an invalid mortgage, is simply to throw money into a meaningless void.
 
So just a quick recap:
 
1. The Bailout itself strips the banks of any and all valid right to exist, period. They’re history’s worst robbers, nothing more and nothing less. No citizen could possibly owe them anything.
 
2. The failure to convey the title legally converts the mortgage to an unsecured loan in 45 states, and renders the MBS, which we already knew were worth pennies on the dollar at best, literally worthless, since the trusts were never anything but pure fraud. So the former proves the invalidity of the mortgage for the legalistically minded, while the latter is further proof that the banks are all insolvent, and the bailout was nothing but a monumental robbery committed by the government itself.
 
3. Even if one wanted to legally and/or morally argue that “the homeowner still owes somebody” on the mortgage, there’s no way to legally establish who that “somebody” might be. So I insist again that under such extreme circumstances (circumstances of course imposed unilaterally by the banks themselves), we should consider our legal obligation to be only to the local government and our moral obligation to be only to the community.
 
And again, even if in a particular case we could establish which bankster technically has a “right”, it would be irrelevant since through the immensity of their crimes all banksters have forfeit all rights to anything from us.
 
4. And now, after MERS, after robo-signing, after forged notes and allonges, we learn that the foreclosures have also been directly criminally processed in this new way. And God knows how many other ways that we don’t yet know about.
 
How could anyone coherently argue that there’s any constructive way to deal with such absolutely incorrigible criminals? Or to coexist with them at all?
 
There’s really no alternative. Jubilate In Place, or else cave in and submit once and for all to history’s most larcenous tyranny and chaotic banana republic.
 
I think by now the call for debt jubilee and smashing the banks is the truly moderate, rational, conservative, law-seeking position, while any call to still temporize with the banks at all is the real call to riot.

December 4, 2010

Let’s Take Back Our Money

 

Our goal should be total relocalized control of money. The optimal amount of centralized (“federal”*) currency and taxes is zero. Even at this early stage we should look to pioneering projects like the Brixton pound (which can be used to pay local taxes). (We also ought to think in terms of economic relocalization in the form of co-ops. This would have many advantages which I’ll discuss in future posts, but the one I want to mention here is the possibility of bringing as much diversification and exchange as possible under the rubric of cooperative share schemes, so that the parasitic central structure would have trouble getting after us even through trying to tax barter.)
 
[* Going forward I'll probably be using political relocalization terms like federation and federated more often, in addition to referring to the Orwellian name "federal government". I hope context will make the difference clear enough, and at any rate I'll try to avoid using the term federal itself except to refer to the kleptocracy, even though that's unfair to the term. And a reminder, I hope the (vast) difference between democrat and Democrat is always clear.]
 
Before I get to my affirmative ideas on money reclamation, let me quickly dispose of some negation, what I’m not really advocating.
 
As I wrote in my MMT posts (parts one and two), I do want the knowledge to spread, that in principle deficit spending is unconstrained and beneficial where the economy is depressed. There Is No Deficit Problem. It’s a fiscal terrorist lie.
 
We know for a fact that no one among the elites who claims to care about the deficit or the debt actually does. The Bailout, the wars, the Pentagon budget, Big Ag subsidies, and corporate welfare in general, all prove this. No one thinks the government spends too much as such. (We know that corporatist spending does destroy the real economy by stealing real wealth from the productive people and further enriching and empowering the criminal parasites.)
 
Therefore, we know that all deficit terrorism, all calls for “fiscal responsibility” and spending cuts, all “austerity”, is nothing but a criminal LIE on the part of politicians, media hacks, and academic prostitutes.
 
But I’m not in fact calling for more deficit spending from the kleptocracy. It’s clear that any new spending this government undertakes will only be for further corporate welfare, police state expansion, and power aggrandizement. Obama’s corporatist “stimulus”, just a bailout by other means, proves that. (The fact that “stimulus” money was used by the TSA for the pork/police state purpose of buying totalitarian scanners from a connected crony corporation, in direct defiance of the will of Congress itself, which explicitly voted against allocating funds for the scanners, should be taken as the definitive characterization of Obama’s “stimulus”, and of what any kleptocracy spending will be like.)
 
I do say that we must resist all new taxes or increased taxes on the non-rich. These mean nothing but robbery. Every cent extracted from us, through for example a VAT, would simply be handed over to the banksters and to the likes of Chertoff-connected scanner contractors. Anyone who advocates a VAT or anything like it is simply advocating corporate robbery.
 
And I do say that we must draw a line against any further cuts to any public interest spending. If anyone sincerely thinks cuts are necessary, there are trillions in worthless bailout, war, and corporate welfare spending to cut. So there’s the only answer we ever need give. Anyone whose “deficit” plan is not 100% corporate welfare cuts and increased taxes on the rich is manifestly a liar and a criminal.
 
The watchword is clear:
 
The deficit and the debt are not a problem while there’s still unemployment. Absolutely refuse to even discuss public spending cuts.
 
No Taxes for the Non-Rich.
 
Total Austerity for the Criminals, Not One Cent More From the People.
 
So there’s the basic negative strategy for how the people should regard the central kleptocracy.
 
Affirmatively, we must take back our money sovereignty. Money is nothing but a unit of account among participants in a real economy, and is based on their productive activities. No one but the participants themselves has a right to create or exchange it. Money creation is a core feature of the people’s sovereignty. If a legitimate government existed, by definition it would directly issue money based upon the productivity of the real economy, toward the goal of the overall distributed health of this economy, and of the productive society at large. No “finance sector” would or could exist at all in a legitimate system.
 
So it follows that for a government to abdicate the money creation power to private banks, in the form of “the Fed”, is to abdicate sovereignty itself, and to become illegitimate. We know the Fed serves no legitimate purpose. The only reason it exists is to give the bankster racket its main rent extraction point, and indeed to enable the bank rackets to exist at all. Abolish the Fed, take back the money creation, and we abolish the banksters. Similarly, shadow banking serves only destructive, larcenous purposes and has no right to exist by any measure. So as political demands I support calling for the abolition of the Fed, repeal of the CFMA, and the reinstatement of one big bucket law.
 
Not that I expect the kleptocracy to actually do any such thing, but the Fed may be the most politic target, and the call to End the Fed may be a good wedge behind which to push the rest of the anti-bank, anti-”austerity”, and affirmative money sovereignty ideas.
 
The basic principle and practice of money distribution including credit must be that the community lends to itself, on collateral of future productivity. One existing blueprint for this, alas never put into practice, was Charles Macune’s sub-treasury idea. As described in Lawrence Goodwyn’s The Populist Moment:
 

Through [Macune's] sub-treasury system, the federal government would underwrite the cooperatives by issuing greenbacks to provide credit for the farmer’s crops, creating the basis of a more flexible national currency in the process; the necessary marketing and purchasing facilities would be achieved through government-owned warehouses, or “sub-treasuries”, and through federal sub-treasury certificates paid to the farmer for his produce – credit which would remove furnishing merchants, commercial banks, and chattel mortgage companies from American agriculture. The sub-treasury “certificates” would be government-issued greenbacks, “full legal tender for all debts, public and private”…

 
In principle, this can be done at the local, state, or federal level. But I think it’s a lost cause to do more than state the possibilities for federal money creation. We should focus more practical work at the state level, where public banking is an idea on the rise.
 

North Dakota broke new ground nearly a century ago, but the true potential of publicly-owned banks remains to be explored. Nearly all of our money today is created by banks when they extend loans. We the people have given away our sovereign money-creating power to private, for-profit lending institutions, which have used it to siphon wealth from the productive economy. If we were to take that power back, we could generate the credit we need to underwrite a whole cornucopia of projects that we don’t even consider because we think we lack the “money.” We have the labor and we have the materials; we just lack the “liquidity” necessary to put them together to create products and services.

 
North Dakota provides proof of principle: State-level public banking works. Banks have been proposed in California, Washington, Michigan, Illinois, Vermont, and elsewhere.
 
This could be a big decentralizing step. The basic idea as it exists is for the state to lend for productive purposes within the state’s real economy. This could easily be ramified into something like a state subtreasury system.
 
From there the possibilities roll out to distant vistas. Perhaps the next step, or better yet a concurrent one, would be for the state to issue its own currency for use within the statewide co-op, certainly for state and local taxes. This could dovetail with a state breaking Wall Street at least within its borders by calling upon the people to Jubilate In Place: stop paying their mortgages, stay in the house, keep paying property taxes. Such an economy could largely sustain itself, and encourage collaborative efforts in other states.
 
This is to envision steps toward decentralization, anti-corporate liberation, relocalization. Of course the road from centralized kleptocracy and corporate tyranny to full relocalization and democracy is a long one.

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 20, 2010

Guns, Butter, and Bonuses (Money, Deficits, And MMT) 1 of 2

Filed under: Corporatism, Globalization, Sovereignty and Constitution — Tags: , — Russ @ 3:33 am

 

As we sink into economic depression, everywhere we hear the deficit and public debt crisis alarms summoning us to cut spending, raise taxes (on the non-rich, while those for the rich are cut further), “sacrifice”. This sacrifice is never to be undertaken by those who have already monopolized the vast majority of the wealth of the country. The top 1% of the rich hoard one third of America’s wealth. The top 10% has extracted two thirds. Yet all the calls for “austerity” fall on the lower cohorts, and the lower on the wealth and income scale one is, the more onerous the burden. This is as clear as class war and civil war can get short of the actual shooting.
 
The question, as in every other case where then non-rich act against their own interests, is why are so many people going along with this scam that there’s such a thing as a “deficit problem”? It’s manifest that no one among the elites actually believes this. Everyone, without exception, of whatever nominal politics, implicitly agrees that this government, sovereign in its own currency, spending in a Depression economy, can spend as much as it wants, at will.
 
The Bailout, the wars, the Pentagon’s obscene budget, Big Ag subsidies, corporate welfare in general, prove this.
 
So the only question is, will the government spend at will to further enrich and empower the parasites and criminals, or will it spend to help the productive people?
 
The only, indirect way in which deficit spending destroys the real economy is that corporatist government spending further empowers the criminals to steal yet more real wealth from the productive people, and it imposes the opportunity cost of spending foregone which could have benefited the people as we sink into an economic Depression.
 
It’s not really an opportunity cost, though, since that implies a trade-off had to be made. The government could easily spend on guns, bank bonuses, and butter. It could loot on behalf of the corporations at the same time that it spends to restore to the people (“trickles back down”) some of the wealth which was stolen from them. But the spending on guns and bonuses and the refusal to spend on butter are all part of the same class war strategy. As is the whole deficit terrorist line of propaganda.
 
MMT educators stress the accounting identity involved here. In a closed system where the government runs a sovereign currency, a government deficit or surplus has to equal the private sector surplus or deficit. Adding globalization spreads the accounts among many governments and national private sectors, but the globe itself is still closed. (Indeed viewing globalization as a de facto One World Government in terms of MMT can help highlight the class unity of the global elites and the vicious war they wage on all the world’s peoples.)
 
The best MMT resources include Naked Capitalism, Warren Mosler, Corrente, Kansas City, and the Billy Blog.
 
So here’s the right way to look at this identity: If we let the public sector = A, and the private sector equal B, and any surplus on one side must be matched by a deficit on the other side, by accounting identity we have A = B. The real question isn’t the “is A sustainable?” of the deficit alarmists. It’s very clear that every single elite and flack, no exceptions, implicitly claims that deficits in A are no problem at all where A is corporatist spending and B is corporate hoarding and the ratholes of the rich. It’s only to the extent that A still includes any public interest spending whatsoever that they suddenly go into deficit shock mode.
 
So let’s join this battle but make the terms explicit. Everyone agrees deficits are no problem, and only tactically tells lies in a particular situation (where they want to impose “austerity”). So clearly there are actually two kinds of A = B. There’s A2 as corporatist spending, with the surpluses of B made up of corporate hoarding (let’s call that C); and there’s A1 as public interest spending, where the B surplus could eventually become savings on the part of the people.
 
So the question becomes, given that we all act as if A is unlimited, will we let the criminals continue to make the identity be A2 = C, or will we compel the restoration of some legitimacy and rule of law by forcing it back toward A1 = B?
 
So activists can leave aside the “is A sustainable?” question as moot. Instead we say, “for whatever A, and no matter what the posterity of A, the real fight is to smash the A2 = C paradigm, and compel the A1 = B.” That’s given the current political circumstance. As I’ll get to in part 2, the real goal is a healthy economy where the velocity of money would be such that A and B would always be close to equal, with the decentralized money supply always just a little out front of productive capacity, which would always be fully engaged.
 
For this post, I want to discuss further the reformist nature of MMT and its explicit prescriptions. It’s reformist because it’s based on continued large-scale taxation in the sovereign currency administered by a central government. It recognizes that under our status quo the private banks create money out of thin air, at best in anticipation of deposits. They do not lend multiples of existing deposits, the way the popular misconception has it. MMT states the politically incorrect obvious: Governments could do the same exact thing, and do it far more efficiently. The banks produce nothing but merely erect a toll booth and drag a chain across the river. The government could directly produce the same fiat money the banks do, but wipe out all the middlemen, purge all the rents, and render the money creation and distribution far more rational, efficient, and fair.
 
We see how apologists for the banksters have no problem with the most profligate spending out of thin air on every kind of bailout and bonus and boondoggle, as long as the money creation out of thin air is channeled through the banks. But they throw a fiscal conservative fit over any spending which might benefit the people. So here the fact that private banks create money out of thin air is a dirty little secret everyone agrees to keep quiet, and no one sees as dangerous. But it’s a scandal if someone suggests the government sovereign in its own currency can do the same thing based on actual economic production.
 
MMTers just want to do as Alinsky said, “make them live up to their own rules”. The government can freely and openly act according to the exact same principles and practices which it and the banks currently act upon surreptitiously. The difference being that actual stimulus could possibly help reform and restore the productive economy, while bailouts, war, the Pentagon, and all other forms of corporate welfare are purely destructive spending, just cannibalizing what’s left of the principal. The banks don’t manage the money supply toward economic health and a fair distribution. They manage it only toward stealing as much as possible. Pure robbery.
 
The is antithetical to the standard view that the elite parasites create wealth. The fact is that the productive people create ALL wealth, and a legitimate government would create money to reflect that. A legitimate government would do so for the benefit of productivity and prosperity. This means the money supply should always reflect the capacity of the real economy, and should especially be a vector reflecting productive potential.
 
An anti-sovereign rogue government, on the other hand, alienates its money sovereignty to banks and even to globalization cadres. It does so for the benefit of parasites and criminals, to put money creation and management in their hands. In this case the criminals hijack the natural fiat money creation to financialize the economy, and/or to artificially restrict the money supply, as in the case of a gold standard (more on that in Part 2).
 
The truth is:
 
1. Money is created out of thin air. This creation may or may not be based on the productive capacity of the real economy. The money may or may not be deployed for the benefit of the real economy, as opposed to thrown down rent-extraction ratholes while the real economy depresses and dies. So there’s two kinds of accounting identities, the legitimate, benevolent A1 = B, and the hijacked, destructive A2 = C.
 
2. There’s no natural limit on rational, effective A1 deficit spending so long as there’s capacity underutilization and unemployment.
 
3. We do in fact have profligate thin-air money creation and rampant deficit spending, but it’s irrational and ineffective spending. It’s simply the government embezzling from the people and acting as corporate bagman, conveying the loot to private racketeers.
 
The fact that all this spending is taking place with little objection from the “fiscal conservatives” proves that all their fear-mongering about Social Security and other social spending is a lie.
 
4. So the rational, moral, and practical course of action is to end ALL corporate welfare and instead create the money and spend it on a real jobs program and a real infrastructure transition to the post-oil age. That’s MMT-style reformism.
 
The fact that the fiscal terrorists in the media and think tanks get everything exactly backwards proves their malevolent agenda. They’re enemies of the people.
 
In Part 2 I’ll discuss that further, and explore the real possibilities of this reform agenda.

August 29, 2010

Kleptodicy and the NYT’s New Public Editor

Filed under: Mainstream Media — Tags: , — Russ @ 7:52 am

 

Scold, scourge, wreaker of cold justice: apparently, that’s what’s expected of the public editor.

 
With those words the NYT’s new Public Editor, Arthur Brisbane, kicks off his tenure. If only it were so.
 
He describes an introductory interview with an NYT reporter, his own nervousness over everyone demanding to know, “Why would you want this job?” It is hard to understand why Brisbane’s predecessors wanted it. So far the job has been mostly to go through the motions of pretending to impose accountability, mostly in the eyes of organized conservatives, while pretending the paper’s real class war agenda doesn’t exist.
 
The pro-bank ideology of the business page and the paper’s general war-mongering propaganda, both of which dominate the alleged reportage, seldom comes under the “public editor’s” purview. Clark Hoyt was far more comfortable joining in with the NYT’s campaign to destroy ACORN than he ever would have been of forced to deal with the paper’s reportage of the Peterson/Obama assault on Social Security and democracy.
 

The public editor is a radical concept.

 
Um, no, it’s a self-evident, common sense concept among people of good will. It’s radical only among criminals.
 
If I were the one asking the questions my first would be:
 
Do you believe the core job of a journalist is to afflict the comfortable and comfort the afflicted, as Murrow put it?
 
Brisbane’s own statement of principle, such as it is, doesn’t inspire confidence:
 

And, so you know, I do bring certain articles of belief to this.

I believe a news organization needs to be aggressive. When caution trumps ambition, something dies.

I believe there is no conspiracy. Neither Arthur O. Sulzberger Jr. nor Bill Keller is the Wizard of Oz, dictating an agenda from behind a screen. Rather, The Times comes together like parallel computing: many lines simultaneously flowing through a filter, hitting the driveway and flashing on a screen. It is very messy.

I believe that journalists should leave their political views at the door when they report and edit the news. I’m a registered Democrat who voted for Barack Obama and then Scott Brown, so, as you can see, I have already left my views at the door!

 
Those sure are peculiar “articles of belief”. Notice the total lack of any proclaimed principle. It’s purely process, purely instrumental. “Aggressive” – on behalf of what? “Ambition” to do what?
 
The very fact of this lacuna here implies what really fills it: The NYT’s mission is to preserve, and do what it can to intensify and entrench, the corporatist status quo. This is its ambition, and it is aggressive in the service of this ambition.
 
As for the “conspiracy theory” strawman, obviously once the whole cadre’s been selected for a certain ideology and even more for a certain temperament and mindset, there’s little need for a Keller to still play the Wizard of Oz. In the same way, Dimon and Blankfein probably don’t need to micromanage everything Keller, or Obama, does. (Although all those phone calls with Geithner are ambiguous evidence. Is Geithner really such a pathetic tool that he needs such constant guidance, or maybe emotional validation?)
 
Of course I do accept that execution at the NYT is often sloppy, which contrary to Brisbane’s assertion is not evidence of the absence of agenda, but only of incompetence in execution.
 
Brisbane’s disclosure about his voting habits, if true, is questionable. He seems to think it should be impressive that he’s a registered Dem who voted for Obama and then for the Republican in a pseudo-critical Senate race. (The criticality being bogus because the “60 vote” meme is fraudulent in every way; nobody with a simple majority ever needed more than 51 vote for anything, and once the Dems had their mythical 60 votes it served mainly to embarrass them, since they still had no intention of passing reform legislation.)
 
It’s of course discreditable that somebody so allegedly experienced and intelligent, who allegedly cares about the public interest, would still be supporting either kleptocratic party. (It’s another version of the theodicy question, which clearly has no valid answer. Brisbane must either lack intelligence, or else he actually doesn’t care about the people but only the elites. The same applies to all who call themselves Democrats or support them. What should we call it -”kleptodicy”?)
 
Here’s a suggestion for Brisbane, if he really wanted to be this public interest ombudsman. He could start with today’s spotlight editorial on Obama’s feckless economic policy.
 

First, he needs to keep driving home that he is committed to addressing the deficit…

 
It’s of course a lie that from the point of view of the non-rich the deficit as such is any problem at all, let alone “the first”, most pressing problem.
 
On the contrary the overwhelming weight of practical experience as well as theory prove that in a Depression the government should spend as long as such spending is directly for the people’s well-being. Getting money into the people’s hands, where it will then be productively spent, is the only practical and moral measure, if one truly wants to avert the worst of an economic downturn, if one truly wants the public good. (By contrast corporate welfare spending like the Bailout, the permanent war, Pentagon budgets, Big Ag subsidies, etc. do nothing to help the people or reinvigorate economic circulation. These are just ratholes where potentially productive wealth goes to die. Typically, it’s precisely this kind of spending which is “off the table” for Obama’s deficit terrorist commission.)
 
But just like the rest of the MSM, just like the business and political elites in whose service the MSM plays its stenographer role, the NYT systematically engages in deficit terrorism. This is because it does not want the people’s well-being, it does not want productive circulation of money, it does not want to avert the Depression.
 
On the contrary it wants the further unproductive concentration of wealth. It wants to help the gangster elite further loot the people. It wants the Depression to come in slowly, its harshness proceeding at just the right pace such that the people feel helpless before inexorable fate, but not so fast that they lash out in hopeless desperation. (Again, this is no “conspiracy theory”, there’s no need for a master wirepuller; the whole cadre by training and temperament is on board with the project, and once you accept the premise the strategy and tactics are obvious enough that an ideological version of the invisible hand goes to work. The messiness in the execution is simply the difference between best practice and the competence to carry it out.)
 
Deficit terrorism is meant to directly afford new looting opportunities, to misdirect the people’s attention from real problems toward fake scapegoats and fraudulent “solutions” (to the people’s credit, they seem to be rejecting the propaganda of Obama’s Social Security privatization campaign), and to shred what little is left of any kind of socioeconomic stability and sense of security.
 
The NYT, as an aggressive practitioner of deficit terrrorsim, is a conscious traitor against the people. As I said, experience and proven theory both prove every word of it to be a Big Lie. So will the new ombudsman make this his main project, and really act as a Public Editor? Or will he pack his columns with controversies over the social gossip blogs, the way Hoyt loved to do? Will he, like his predecessors, act as the “public editor”? I know what I expect from a guy who votes for Obama and Scott Brown and who talks in the sociopathic way of the above quote about unprincipled ambition and aggression.

June 30, 2010

New Feudal War Part 3: “Austerity”

Filed under: Globalization, Neo-feudalism — Tags: , — Russ @ 1:21 am
      .
.
By now all the major activities of big corporations and government combine in a nexus of organized crime.
 
In principle the finance sector’s activity is meant to help corporations and governments cover up for the fact that all sectors are mature, that it’s been many years since there’s been any real growth, and that most large entities are in the red if not insolvent. This covered up as long as it could for the structural collapse of the debt economy, resource depletion, and the fact that much of what wealth is still being produced is simply embezzled from society by a handful of gangsters. The criminals, in corporations and governments, engage in this control fraud to pretend the money is still there and growing. That’s the nominal fraud mode.
 
When the ponzi scheme blows up, as with American mortgages, everything shifts into disaster capitalist mode. The system pretends the blowup is some kind of act of god, force majeure which is nobody’s fault. It’s also the implicit will of god that the rich who benefited from the bubble don’t have to divest themselves to cover the losses now that all those “profits” are proven to have been fictional.
 
The fact that these profits and other extractions are not restituted is proof that the fiction was really an intentional fraud, and that every cent taken out was conscious stealing. Obviously, if they had taken profits in good faith, now that the paper wealth has been destroyed they’d feel compelled to return what they now admit was improperly extracted. And if someone didn’t feel so compelled, the government, if it were acting in good faith, would compel him. So that’s proof: The money was intentionally stolen, and the government was intentionally complicit.
 
So the Temple of Robbery decrees that all prior looting is untouchable, sacrosanct. Rather, all the pain must fall on the same people who were looted the first time around. They must undergo “austerity”, be “adjusted”.
 
All this is in order to prop up the fiction of the original fraud, and to enable that looting to continue.
 
I discussed the Bailout in Part 2 (and in many other posts). This was the next evolution of neoliberalism. Once the bubble, the bank balance sheets, and the whole corporate welfare economy which radiated out from it reached a critical mass, it became impossible for the corporate system to sustain crashes, get up and dust itself off, and continue. Either the insolvent zombie banks had to be propped up and the bubble reflated, or the whole system would collapse, vaporizing the kleptocracy’s power along with the wealth it stole. Now the government had to turn the economy into a command economy. Economically if not yet politically, Bailout America and Bailout Eurozone are no longer anything but fascist corporate states.
 
But now the Bailout is running up against the same limits the prior bubble economy did. Structurally it changed nothing, and thus has all the same problems as before, and faces the same crisis. The banks and governments are just as bankrupt, the ponzi economy is just as baseless, only the fraud is even bigger. The Tower of Babel is just as unstable and doomed, it’s now only higher and more top-heavy. So governments know they’re reaching the end of the Bailout’s rope. The people have dangled and thrashed for long enough at the end of the noose, the rope must break. So they’re looking to set the corpse on fire instead.
 
The last big juicy plums are public pensions and other existing public property. The banksters want to have their government thugs directly steal this property the people already paid for with their taxes or in contract negotiations. In Greece the target is public worker pensions and other elements of duly negotiated compensation. France, Germany, and now Britain are under the assault of specific robbery plans. Ireland and Latvia have already been torched and are nothing but writhing piles of smoking ash.
 
In the US Obama, acting as flunkey stooge for Pete Peterson, has taken the lead in preparing the assault. He wanted to have members of Congress set up an unconstitutional commission which would dictate legislation to be rubber-stamped, but for once Congress stuck up for itself and refused. So instead Obama convened his own Star Chamber, loaded with Republican, Democratic, and corporate thieves. They all have a special hatred for the people’s entitlement property, and the latter two were already targeting it back in the Clinton years.
 
The alleged rationale for this is that “deficits” are the big problem with the economy’s prospects. This is an obvious lie in three ways. 
 
1. We already know that the financialized economy is a giant ponzi scheme and that the dollar and the euro are bad jokes. Who can possibly take the economy seriously when as much as a quadrillion dollars nominal worth of toxic derivatives are waiting to collapse? Who can possibly take the dollar seriously when Bernanke is now saying the Fed’s going to run its own balance sheet up to $5 trillion to try to keep the Bailout going?
 
So while the buck’s definitely going to break, it ain’t gonna be the relatively solvent* Social Security, in itself just fine through the 2040s, which does it.
 
2. Both theory and the historical evidence demonstrate that when the economy is operating so far below capacity, and the government is the only possible spender, it must do so if the goal is jumping the economy’s battery. That’s the only thing which could bring recovery and restore growth. Otherwise you get Hoover, or 1937.
 
(Now we know “recovery” and “growth” are shams. But all these deficit terrorists claim to be seeking those. So how odd that they’re demanding a course of action which has already been proven to fail, and rejecting the course of action, stimulus, which has been proven to work, in attaining what they claim to want to attain?)
 
3. Obviously, anyone who sincerely was concerned about deficits and the integrity of the dollar would want to start with all the dead weight in the budget (not to mention the vast bailout and war spending which has been frauded off the budget). He’d want to end the Bailout and the war, slash bloated Pentagon budgets, institute single payer (which is far less expensive for the government and society than maintaining the insurance racket parasite), end subsidies for Big Oil, Big Ag, and simply eradicate all corporate welfare. Then we’d see how the deficit looked, before we thought about a government default on debts owed to the people, who have already paid for their Social Security and Medicare, and which Obama and the banks now want simply to steal.
 
That’s very clearly what any sincere budget conservative would advocate. He’d start by wanting to purge the bank rackets, insurance rackets, weapons rackets.
 
As I said in a comment somewhere, if you think you may be overweight and may need to go on a diet, but you also have a giant leech gouging into your throat to suck out all your blood, you better burn the leech off first.
 
So it’s very clear that the deficit terrorists calling for “austerity” and gutting programs like Social Security are lying about the reason they allege. On the other hand the proximate cause we keep hearing, that it’s necessary for the morale of “the markets”, while moronic (since the markets show no signs of being particularly concerned about the dollar, the pound, or the euro right now, nor did Ireland’s self-immolation do anything for the market’s confidence in its bonds), comes closer to the truth in spite of itself.
 
The market is a terrorist holding a detonator, and its message at every point is, “Meet my demands or I’ll blow us all up.” We’ve seen this play out many times, from the collapse of Lehman to the TARP first being voted down through many other confidence pressure points through the negotiations over a Fed audit. And the threats are always there too. How often do we see someone on Wall Street or in government say, “Such and such should be done, while this and that shouldn’t, otherwise the markets won’t like it”?
 
So since the banks view austerity as the next stage of kleptocracy, it follows that they’re ready to deploy the market terrorist tactic to force compliance. Dissenters like Krugman who complain that the threat makes no sense are missing the point, perhaps being willfully obtuse. The threat doesn’t need to make sense on rational or evidence-based grounds; it’s better if it doesn’t. As long as the hostages understand the underlying demands, the more irrational terrorism is, the better. So I have no doubt if Obama’s Robbery Commission can’t get the ball rolling fast in Congress, we’ll be seeing market “demonstrations”.
 
So there’s the austerity assault. It’s meant to free up extra loot for the Bailout and delay the destruction of the dollar for a little while. It’s also meant to further plunge the people into impoverishment, misery, demoralization, and debt servitude. That’ll be the subject of Part 4.
 
But it’s the Bailout itself, and the finance sector itself, which are really destroying the dollar and all other global currencies. If we really wanted to stabilize the economy, we’d start by wiping out the gangsters and restituting everything they stole which hasn’t already been destroyed. We would not let them continue to steal what little we have left.
 
 
 
[*From time to time I try to remind readers that while we do know that in fact everything about this economy is insolvent on account of Peak Oil and the unsustainability of exponential debt, nevertheless the time frame for the unwind, how exactly it will happen (hyperinflation, deflation, dollar default, or most likely all of the above), how precipitous the descent will be, are all still up for grabs.
 
So there's still be a real question of what's sacrificed sooner and what later, and how painful the whole descent has to be. I'd say things like Social Security or single payer, while ultimately unsustainable, could be sustained for a greater or lesser periods depending upon the political choices we make as a people, and this in turn could make a significant difference mitigating suffering, or increasing it.
 
Dmitri Orlov has written extensively on how residual Soviet infrastructure greatly lessened the blow of the collapse of the USSR for the Russian people. Unfortunately, it looks like we idiot Americans are intent on destroying what little buffers we have left just before the collapse. We really want to make it as hard on ourselves as possible, and for no reason at all than so that a few vermin thugs can luxuriate a few days longer.
 
The kleptocracy and everyone who shills for austerity are vicious sadists who want to increase the pain in order for the Blankfeins and Obamas to get to hang on a little longer in the lifestyle to which they've become accustomed.
 
So I hope it doesn't sound inconsistent if I say in one place the system must radically decentralize while in another I call upon people the fight for their Social Security. The difference is just a matter of chronology, short/mid range vs. long range.
 
I'm going to devote a post to specifically that topic, boondoggles vs. bridges vs. what's really sustainable, sometime soon.]
.
.
 

 
 

 

June 22, 2010

How Kleptocracy Congealed (The New Feudal War 1 of 4)

 

Beyond the simplest town hall and tribal communities, all governments are to some extent corrupt, and all economies contain legalized racketeering. But this doesn’t mean every system is a kleptocracy. We can’t be so profligate with superlatives without rendering concepts useless, although that too is a common modern disease. I’d wager it’s part of the indoctrination plan to have the perception spread that “everything has always been like this”. It fits in with the Status Quo Lie, that today’s status quo is really the normal baseline, a law of the universe. If people believe the situation is not just superficially similar to e.g. the Gilded Age, but exactly the same, then they can believe the solution is the same - time and “reform”. But this is not in fact the case.
 
The fundamental difference between today’s situation and that of past corruptions is its basis in the physical limits of Peak Oil. To describe the process one way, throughout the ascent of the oil age, the overall economic pie was getting bigger, and the goal of the elite gangsters was to steal from this growing pie. Although the goal of capitalism is always to either exacerbate existing scarcities or artificially generate scarcity where the natural state is abundance, cheap oil afforded such a surplus that it was actually difficult enough to generate artificial scarcity that it was politically easier for the elites to let the workers keep a relatively high proportion. This people’s piece of the pie wasn’t remotely proportional to their rightful share (that would be 100%), but it was still high by historic standards. This was the basis of the West’s mid-20th century temporary mass middle class.The gangsters temporarily had greater leeway to both satiate their avarice (within the political limits they temporarily acknowledged, which were also imposed by the Cold War, as I’ll get to below) and allow a broad wealth distribution.
 
That’s one way to look at the effect of the oil surplus. A parallel process was how all economic sectors were temporarily able to use cheap oil to undergo exponential “growth”. This temporarily generated what we call capitalist profits. (The classical economists like Smith and Ricardo and the critics like Marx never understood how they were really discussing an economic system based on investment and distribution of surplus from the fossil fuel drawdown. A “special case” economics indeed.)
 
The first thing to give was this economic growth process. Even if the oil surplus had been infinite, the sectors of the economy do have limits to entrepreneurial innovation. At some point the major innovations are complete, what’s left is more or less pointless tinkering, and the sector is mature.
 
In a previous post I summarized what happens next, and rather than reinvent the wheel I’ll just present it again here, if it pleases the court.
 

1. As capitalism matured it should, according to reality and to its own textbooks, have seen profits fall to marginal levels. There should be very little profit left in the economy by now. Instead, the entire economy should have long since been functioning smoothly and efficiently, with sufficient goods and services in every sector, while government largely shrunk as it would have little role to play as economic arbiter. There would be rough equality of wealth and power distribution, little wealth and power concentration. Democracy would become steadily more healthy and strong.

This is how capitalism was supposed to function. This is what its promoters always promised. This is what would have happened, if every word hadn’t always been a lie.

2. In the reality of greed fundamentalism, elites were never textbook capitalists but always gangsters. No one ever wanted to be a capitalist. No one ever wanted to compete and innovate. They wanted to concentrate wealth and power, period.

As capitalism reached its terminal profit crisis in the latter 20th century, the power elites resolved to deploy an ever more aggressive command economy. They’d use the power of government to substitute extorted and stolen rents for their diminishing “capitalist” profits.

 
This was happening in tandem with other political processes. Even during the time of the expanding pie, America was completing the sellout of its revolutionary birthright. As Hannah Arendt discusses in On Revolution, at the end of WWII it was clear that the colonial empires of Europe would be challenged everywhere by revolutionary movements. These would all necessarily be nationalist in part, but the rest of their ideological content was up for grabs. That many like the Vietminh would become communist was not a foregone conclusion. Among many anti-colonial insurgents, the American Revolutionary tradition was held in high esteem. America had total freedom to choose the path of encouraging these national revolutions along the lines of its own heritage.
 
Instead the US government chose the opposite path. It chose to trash its own revolutionary heritage, go rogue against its own best angels, and become the ultimate counter-revolutionary power. It chose everywhere to try to help sclerotic, decrepit Europe prop up its vapid imperialism. Although the propaganda lie was that this had to be done to counteract communist aggression, in fact communism instead was the beneficiary of America’s abandoning the field. Given the anti-colonial movements of the Global South, looking to the competing revolutionary heritage powers for assistance and inspiration, America simply punted and betrayed itself, and communism entered the vacuum left behind.
 
So to sum up, post-WWII, with the advent of the Cold War and the inevitable liquidation of the anachronistic colonial empires, America chose the path of counter-revolution rather than to compete as a revolutionary power. Meanwhile domestically it sought to co-opt the workers.
 
Vietnam was a milestone toward greater aggression and unsustainability for this reactionary agenda. It was an exercise in consolidating the military-industrial complex and in driving fiscal recklessness, which would culminate in Nixon closing the gold window in 1971. So the Vietnam-driven deficits were already unsustainable while the dollar could still be redeemed for gold, such that the system had to retrench even before the oil shocks set in starting in 1973, although this was foreshadowed by the American production Peak in 1970. (To get a little ahead of myself, we can compare this to the financial collapse of 2007-08 and say that in both cases the unsustainability of the finance structure in itself brought on the crisis before the energy fundamentals forced it. So in both cases the reckless financial “choice” preceded the structural change, but only as a preview.)    
 
As I said, this was bound to happen even without the looming end of the oil age. But in fact the US oil Peak was an alarm bell. Not that the system widely consciously registered it, but everyone sensed that oil supplies would be getting tighter in the future. Combining this with the end of “legitimate capitalist profits”, the system was clear in its mind that the temporary middle class would now have to be liquidated.
 
Here’s how I described how this was planned out, and how it’s been done:
 

Globalization and financialization comprised the campaign of oligopoly capitalism to prop itself up while stringing along the Western middle classes. They substituted debt for production while obscuring the assault on all public amenities and power. Real wages have steadily eroded since the 70s while wealth concentration has exponentially risen. (That juxtaposition right there is a basic metric of robbery.) The system attacked unions on every political and “legal” level. Social Security has been steadily undermined via ploys like the rigging of inflation metrics (to fraudulently depress COLA increases). Other entitlements have been similarly eroded. Globalization’s open border for unskilled labor provides the basic force of gravitation for all wages, while outsourcing and offshoring destroyed many mid-level jobs completely, forcing and ever greater number of workers into the undifferentiated unskilled mass. (The system did somewhat protect most kinds of professionals for a long time, but now that’s been eroding for many as well.) Walmartization provides a kind of linchpin, the direct conduit for addicting ex-citizens to cheap consumerism while directly destroying self-proprietors and middle class jobs in general, along with the communities anchored by the people who held such jobs.

In this way the temporary “middle class”, fueled by debt and cheap oil, had the carpet slowly pulled out from under it. Meanwhile the basic unproductivity of the Western system was covered up by bubbles, culminating in the housing bubble (itself fueled propagandistically by the Big Lie that you should rely on your house to provide for your retirement, not any other pension; this nicely provided cover while public entitlements and private pensions were gradually being subverted).

 
So we had the basic structural change. Peak Oil meant an expanding pie would first stop expanding and then start shrinking. This would radically exacerbate the dropping of the profit rate. This was structurally challenging a system whose “normal” aggression and greed had already been stepped up in the post-war era.
 
Combining these three determinants, two structural and one political, the gangsters saw that the only way they could continue large-scale extractions at all would be to radically intensify them. Since stealing each dollar would get harder and harder, it followed that you no longer had the luxury of conceding any wealth to the people who actually produce it. Allowing the existence of a middle class in principle was a luxury of the mid-century. The gangster elite no longer saw itself as having that luxury. You now had to try to steal every cent, and you had to be as systematic and ruthless as possible in doing it.
 
History since the 1970s has been primarily the playing out of this endgame. I’ll just describe the strategy and tactics as they were conceived and played, though they’re mostly epiphenomena of the structural forces of Peak Oil and the transformation from alleged capitalism to confirmed corporatism.
 
The ideology and strategy for all this was neoliberalism.  This was accompanied by such strands as economic “libertarianism”, AKA anarcho-capitalism as its more honest adherents called it, and neoclassical economics, AKA monetarism (with its “liberal” variant, the “neoclassical synthesis”). Buckley conservatism gave it a culturally respectable sheen, while Goldwater and later Reagan added a nimbus of pseudo-heroism. At the more scurrilous level, the Big Lies included the “ownership society”, “trickle-down” supply-side economics, the Laffer curve, and later “third way” politics and “compassionate conservatism”. We were allegedly going to move from a manufacturing economy to a “service economy”, and later to an “information economy”.
 
Maybe the most concise expression of the battle plan written up in one place was Lewis Powell’s 1971 corporatist strategy memo. This is a classical example of totalitarian reversal – for every word of its accusations against the enemies of American business, it’s meant to be read, “this is what we should be doing”. (He stays in character throughout.) 
 
All of this was enlisted to justify the replacement of a human society with the exponential debt treadmill. The now targeted middle class was supposed to go into debt and look to its “investments”, while quietly social spending was diverted to gangster plunder, regulation of the corporate gangs was gutted, public property was everywhere given away to private looters at pennies on the dollar, public spaces everywhere were privatized, and democracy itself was completely pimped out.
 
Everything was wrapped up in a propaganda package which justified intensifying wealth concentration, skyrocketing executive extractions, a war of extermination against unions, and the offshoring/outsourcing/downsizing of all decent American jobs. Globalization shills like Mankiw and Krugman promised all of these were temporary growing pains on the road to paradise, but like all totalitarian flacks they were simply lying about this.
 
All of this was worked out in principle in the 70s. The oil shocks gave the project new urgency, as the global rape wouldn’t work without ready cheap oil. The Nixon administration worked out the deal with OPEC whereby its oil would be priced and purchased with dollars. This gave the now fiat reserve currency a de facto “real” basis to replace the gold-based Bretton Woods basis Nixon had just abrogated. In return the US promised to prop up the undemocratic plutocracies of the Middle East against all democratic pressures. This was formally enshrined in the Carter Doctrine, which declared that anything which could interfere with the flow of Mideast oil was aggression against the US. Although advertised against foreign troublemakers, the real target was clearly people’s activists among the Arabs. There was probably also an implied military threat if OPEC producers didn’t deal.
 
Meanwhile under the scheme of petrodollar recycling, the dollars the West paid for oil would be put right back in the Western banks, who would lend it at predatory rates to developing countries for their own oil purchases. Every time OPEC received the dollars they’d extract some and send the rest back to the banks, who would extract some and lend the rest to third world elites, who would extract some and send the rest back to OPEC while saddling their own hapless peoples, who received none of the benefits, with the debt.
 
The goal was for the banks and OPEC to profit, for the West and corrupt regimes around the undeveloped world to get their oil, while the poor of the world would be forced to pay for all of it. Since they could never actually pay these odious debts, neoliberalism in the guise of its thug organizations the IMF and World Bank would stand ready to swoop in with a “structural adjustment”, which basically meant the complete looting of the helpless country. All its natural resources, and what little public property the people may have managed to accumulate, and what little social safety net they may have managed to stitch together, would all be confiscated to pay the debts these people never incurred, but which were criminally inflicted upon them.
 
(In part 3 of this series I’ll describe how, under the new name “austerity”, this same structural adjustment is being brought home to the Western countries themselves.)
 
Another detail was the transformation of the finance sector. It was of course always a gang of thieves, but it didn’t fully rationalize itself until the 70s and 80s. This was the period of the switch from partnerships as the common organizational model to limited liability corporations, and later to public corporations. The trend here is clear – enabling first the owners, and eventually the officers, to unshoulder all responsibility and risk, first on society, and later on the “owners” themselves (shareholders).
 
At the behest of Wall Street this drive to send every corporation public added the feature that stock price became the most important measure of a firm’s “health”. Productivity, real innovation and profitability, meant nothing next to short-run goosing of the stock price. Needless to say the welfare of the workers meant nothing. The goal here was to transform the entire economy into a casino for the benefit of the gamblers of the finance sector. They figured, with the end of the oil age the real economy as we’ve known it is doomed anyway, so we might as well run the risk of blowing it up prematurely for the sake of our personal profit.
 
The also had the benefit of setting up the stock market as a combination of dictator and terrorist. Even politicians who might have wanted to act in the public interest against the banks were prone to be intimidated by the market’s threats and tantrums. Most pols, of course, were happy to use the market’s “expected” reactions as a pretext for the crimes they already wanted to commit. This is taking on especially chilling significance today in the runup to “austerity”, as I’ll describe in part 3. The stock market terrorist also holds hostage the middle class in the form of its promised pensions, which have all been inextricably linked with the fortunes of the market. The message has long been clear – don’t get uppity, worker bee, or your 401(k) gets it.
 
This was all part of financialization, whose structural basis was the previously mentioned impossibility of keeping “real” profits up. Turning the flow of capital itself, previously a mechanism of capitalism, into the very core and purpose of the machine, was a way to temporarily garner fabulous rents. Again, since the real economy was doomed anyway, there was no reason not to take the finance sector, previously a periodically troublesome epiphenomenon of capitalism’s normal boom-bust cycle, and turn it into a pure extortion racket and con ring to maximize profiteering off the ultimate bubble and the ultimate bust, both of which would be engineered by this very racket.
 
(The exponential surge of “innovation” in financial “products” was part of this as well, a primary mechanism of its functioning.)  
 
All of this was already progressing through the 1980s. But the Cold War still imposed some restraints upon it, both because of the direct threat of the Soviet bloc and also because as long as the USSR existed it offered a political alternative to Western neoliberalism. With the collapse of the Soviet Union and the end of the Cold War this last restraint was removed. Now Western corporate aggression could rage forth in its full fury. In spite of the Big Lie, no “peace dividend” ever materialized, nor was it ever intended to. Irving Kristol wrote a manifesto openly declaring that with the Soviet Union gone, the West must greatly increase its military spending and aggression. This is exactly what was done, as planned. Thus every allegation throughout the Cold War about the West’s fundamental aggression was fully confirmed. It was a textbook example of what Arendt called a core trait of totalitarianism, that it steps up its aggression and its terror after the war has been won. So it was with neoliberalism.
 
From here on there was no restraint on plundering expeditions, especially in the former Soviet bloc countries; on terrorism and war as the response to any resistance or dissent; on disaster capitalism as the response to any opportunity anywhere which left people damaged and weakened. There is never a moment where any consideration enters the minds of Western leaders other than power and plunder. Everything is gauged at every moment according to those vicious imperatives.
 
And so today we have the full-blown kleptocracy. It rose out of, first, the imperative of gangsterism to survive as long as possible in the face of Peak Oil and the stagnation of the capitalist profit rate, and second to profiteer as much as possible off the final big binge and bubble which oil and debt were going to afford before burning out. The goal for the elites was simply to loot as much as possible, amass as much power as possible, impoverish and disempower the people as much as possible, undermine or destroy democracy; and to position themselves to prevent any democratic adaptation to the post-oil world, but instead to reimpose feudalism, constituting themselves as a new version of the medieval elite.
 
In parts 2-4 I’ll describe how this is meant to play out. Part 2 will recap the Bailout and describe its status today.
 
 

June 10, 2010

Eurozone Lethal Zone

 

An update on the latest stage of the crash in the tottering Eurozone. Over the past week the calls for calm were throttled into incoherency by new waves of bad news. Redolent of Greece last fall, Hungary announced that its impending budget deficits will be worse than expected. This resounded ominously among the similarly precarious budgetary perches throughout Eastern Europe. It’s unclear how exposed Austrian banks are. (By which I mean, whether they’re far more insolvent than we previously thought. Of course, all the banks are insolvent.)
 
Meanwhile Ireland, already deeply enmeshed in bailouts and “austerity”, indicated that its own ongoing bailout will soon need another bailout. But all of us who scoffed at there being any such thing as a final, sustainable Greek bailout were of course just being silly, right?
 
The Greek and Icelandic protestors who are in combat against embarking upon the bailout-austerity path in the first place are now proven correct. They saw what happened to Latvia, how the austerity immolation is burning the people alive while the bailout helped the banksters only. Now they see the same thing playing out in Ireland. Keep fighting.
 
Meanwhile the speculators, the finance terrorists, are extending their attacks from the Mediterranean countries to Belgium and France itself. Suddenly all “safe havens” other than the dollar itself don’t look so safe.
 
The response among the Eurozone’s stronger ( a relative term) economies looks to be pre-emptive austerity. Germany and the UK have announced the usual package of cuts in public sector jobs and spending. They’ve made the usual failure to announce any “sacrifice” on the part of the banks or the rich whatsoever.
 
Meanwhile Timmy Geithner of all people was in Europe to suggest that the trade surplus countries should NOT be thinking about austerity and what in the US would be called “fiscal responsibility”, that is gutting public spending in order to benefit the banks. Instead they should forget about deficits for now and focus on increasing domestic consumption.
 
Needless to say Timmy’s not becoming a born-again Keynesian. Rather, as he thrashes about looking for a way out of Bailout America’s debtor predicament, one of the mutually contradictory things he wants is to correct “trade imbalances”, and that would mean Europe imports more from the US. Trade imbalance of course means lowering the US trade deficit. So the euro has to become stronger relative to the dollar, which seems like it shouldn’t be so hard given the Fed’s churning out of free money to the banks and the US treasury’s continued profligate borrowing. But then in the same breath Geithner also wants the Chinese to stop “manipulating” the renminbi, by which he means they should let the Fed’s currency manipulation prevail to the point that the dollar strengthens vs. the renminbi. But how devalued can a currency get? The Fed already wants Goldman’s and JPM’s borrowing costs to be zero or better. The “primary dealer” banks actually lend the money they borrow from the Fed to the Treasury at a higher rate; they’re thus being paid by the government to borrow from the government. (Since, as MMT demonstrates, the currency is public property, if the Fed prints the currency it’s by definition part of the government. Having the Fed exist at all is simply adding unnecessary complexity for the purpose of enabling bank looting. It’s obvious from the public interest point of view the Treasury should directly issue the currency.)
 
So how can any of that work? Ask Timmy. It’s a complete mystery to sane people. Meanwhile, in spite of the Fed’s and Treasury’s heroic efforts to destroy the dollar, it’s still even now the last resort of for the markets, the last “safe” haven. Therefore try as they might they can’t weaken it enough against other currencies.
 
Prior to the crisis the EU was close to being in trade balance, and that’s the course Geithner was trying to convince them to maintain. But instead they’re starting to bail out on the Bailout, each man looking out for himself.
 
To Geithner’s pleadings, Merkel responded, “NEIN!” The Germans are trying to break free of the external round of bailouts (where they’re expected to dig deeper as bailout creditors, even as Geithner wants them to stop being such immense trade creditors; the contradictions abound), while they of course try to continue to bail out their domestic finance sector, and do it all while scapegoating those nasty spendthrift deadbeat “PIIGS”. But Germany has been so much in surplus and the Mediterranean economies so much in debt because the Eurozone strait jacket relatively devalued the euro in France and Germany while overvaluing it in the South. That can no longer hold. Therefore Merkel also shouted, “ACHTUNG! AUSTERITY!” It turns out she wants the German people to have to pay after all. Just, instead of being liquidated to directly bail out the Greek rich and indirectly bail out the German and French banks, they’re to be liquidated to directly bail out the German banks. I wonder how many German teabaggers will fall for that one? So far election polls and results look somewhat better than in Bailout America. Merkel’s neoliberal coalition’s being rejected.
 
At the same time French prime minister Sarkozy was heard to chirp happily, “I see only good news in parity between the euro and the dollar”. (Which is too much for the Germans, not wanting that much of a euro devaluation; thus we see more daylight between tottering France and the relatively stronger Germany. But don’t worry, in the end every debt domino will fall.) ECB honcho Trichet is mouthing the party line of deficit terrorists everywhere, we must give the markets what they may someday want, much lower deficits.
 
For everyone it’s going to be “beggar thy neighbor”, try to make him go into debt and not you. (Why this moral slogan? Funny how capitalism and “free markets” are supposed to be so dispassionate and “rational”, except where the game is going against a player. Then it’s suddenly immoral. How dare you try to beggar thy neighbor! Don’t you know we’re all in the same boat?)
 
As I’ve written, the system’s reaching the limits of what the Bailout can do by itself. The bailout’s unsustainability is now manifest, as mass defaults are imminent at every fractal level. As always, the entire bubble wants to deflate, and gravity becomes ever more insistent as more bailout weight is added to the agglomeration of debt. Perhaps in most places (but not in the US, alas) we’re at the political limits of the Bailout as well.
 
That’s why they’re moving on to the next step, “austerity”. They already foreclosed and repossessed your car. Now they’re going to directly mug you for what’s in your wallet. That’s also the purely economic reason (as opposed to any Peak Oil reason) why “free trade” will have to break down. It was always a scam to benefit the elites only, but now those elites will have to start throwing one another overboard, beggaring their neighbors.
 
But all of this can be swept away at any moment if the whole Tower of Babel simply crashes down all at once. That’s a possibility, and who knows what will trigger it. But whatever happens, our journey into the post-debt, post-oil age has commenced, and we should be preparing. That’s why I hope we in America look to a new convention.
 
As for Europe, they better look to their nation-states where relevant, and in most cases to their medieval cities. Because the ridiculous “European Union” sure won’t be making the trip with us.

May 10, 2010

Stock Market: Flaw, Conspiracy, Terror

Filed under: Bailouts Only Reopened the Casino — Tags: — Russ @ 3:03 pm

 

So last Thursday was one of the craziest single days we’ve had since the Bailout began. While in Congress two serious reform measures seemed to have chance but were of course beaten back, one voted down and one gutted, the stock market performed its oddest dance yet.
 
Everyone’s still perplexed or outraged by the market’s bizarre behavior. The day was already storming along at tremendous volume and losing hundreds of points when at 2:41 the Dow commenced a 1000 point plunge in 15 minutes, followed by an improbable surge. At the bell the Dow was down 347.8 points on the day.
 
During the pivotal 25 minutes the trading behaved suspiciously. Small players found themselves boxed out. Liquidity often disappeared. Prices which were supposed to flow continuously were making dubious quantum leaps. What really happened?
 
Before getting to that, let’s pause to put the stock market in context. We all know this stuff, but I think it helps to have reminders so that we always keep the big picture in mind. So the right context for any discussion of the stock market is:
 
1. It has become in principle parasitic. It does not exist to channel available investment capital to productive investments as per the market fundamentalist lies. At best the real investment capital flows in during the IPO. After that stocks exist mostly as a pair of dice or a deck of cards. Almost everything that happens in the market is stuff which should be relegated to the realm of extralegal, noncontractual gambling.
 
2. Institutional investors have been assimilated into this casino. The goal of this is to further enforce the submission and compliance of the people. For example, anyone with a private pension (and I think the same is true of most or all state pensions) is held hostage by the stock market, since most of the money is in stocks. For years now they’ve been trying to do the same with Social Security privatization, and this seems to be Obama’s ultimate goal.
 
3. Even the way the market’s run is a scam in practice. That brings us to Thursday’s action.
 
Everyone correctly rejects the MSM bullshit about a “fat finger”. That’s nonsense, as this piece demonstrates. The surge in volume was well underway before the crash.
 
So what are the levels of the structural “flaws” in this system, from structural stupidity to greed to systematic political terrorism to conspiracy theory?
 
A. Structurally the system seems prone to let itself be stampeded as events trigger procyclical algorithms which turn steep downward trending into avalanches. The “circuit breakers” allegedly built into the system to forestall such chain reactions seem to have failed in this case.
 
Meanwhile even as the sell side was going berserk, the vaunted liquidity and market making functions (which are supposed to be the reason HFT is allowed to exist) abdicated.
 
According to Yves Smith’s anonymous correspondent:
 

3. While the market was well offered, it was not well bid. Liquidity disappeared. For example, in P&G, 200 shares traded at $44.10 at 2:51:04 in the afternoon and one second later, at 2:51:05, three hundred shares traded at $47.08. That’s a three dollar jump in one second. Bids disappeared, spreads blew out, and no one was trading except a handful of orphaned algo orders, stop sell orders, and maybe a few opportunists who had loaded up the order book with low ball bids (“just in case”). High frequency accounts and electronic market makers were, by all accounts, nowhere to be found.

It boils down to this: this episode exposed structural flaws in how a trade is implemented (think orphaned algo orders) and it exposed the danger of leaving market making up to a network of entities with no mandate to ensure the smooth and orderly functioning of the market (think of the electronic market makers and high freqs who can pull bids instantaneously as opposed to a specialist on the floor who has a clearly defined mandate to provide liquidity).

 
So this is the big mystery – where did these guys run off to, and why?
 
B. Everyone has a variation on the obvious answer – it was a scam. It was greed-based market manipulation. It would’ve been orchestrated to force sell orders to pile up, so big players could buy them up more cheaply. (As for how they could be confident the price would then surge back up, who knows – secret government buys?)
 
On its face this is plausible, since we know there’s no level of con or crime which would abash these gangsters. The only limit to their crimes is their capacity to commit them. Everyone agrees on this, which is why the only debate seems to be whether this level of orchestrated market manipulation is possible yet.
 
C. Then we get to the politics of the day. Much to the chagrin of Obama, Dodd, and Wall Street, those nasty peasants got uppity enough that the Senate actually had to vote on the Brown-Kaufmann break-up-the-banks amendment, while the Sanders Fed audit amendment also loomed big. These were both defeated, B-K by a 61-33 vote, with half the Democrats rushing to vote against the people, while Sanders was induced to cave in to the point that his audit will be a castrated one-time-only publication of the history of now-defunct Fed facilities. Meanwhile open money operations going forward will remain outside the bounds of accountability, democracy, constitutionality. (And that’s just the deal as we heard so far; there’s still time for it to get worse, for Sanders to cave in completely, as he’s done before like with his single-payer amendment to the health racket bailout bill.)
 
The stock market has a history throughout the Bailout of punishing anything which looked bearish on the Bailout itself. When Lehman was allowed to go bankrupt, when the TARP was first voted down, when Geithner was irresolute in describing how the new administration would push forward with the Bailout, and on up to the feared and loathed amendments on Thursday, upon these and other discouraging stimuli the market has tanked.
 
It’s clear that this is no accident, that on the contrary this is systematic terrorist action intended to strike fear in the people and punish any sign of action or inaction in the public interest.
 
D. However, I don’t think we need to assume there’s actually some master cabal, the way this piece speculates. It’s a chilling piece. (And the Senator is an excellent portrayal of the cowardly “progressive” who can’t bear the thought of anybody breaking a nail, so he caves in as soon as there’s any trouble.)
 
I’m not saying it’s impossible that there actually is a secret council of the highest Wall Street elites which decides exactly when and how to tank the market, and sends down orders to that effect. (And I’m not sure how politically useful such a conspiracy theory could be.) But I doubt it. There’s no need for some master coven to literally plot things to that extent. Everybody on Wall Street knows what the Street wants to do. Unlike the workers (alas…), they have a clear perspective on their short-term interest (long-term interest’s a different story) and good discipline, so they act as a group. When they see the Bailout and their gangster prerogatives under any kind of significant pressure or uncertainty, they act to punish America. That’s a core verity of Bailout America, and how the real America has been kidnapped and stowed away. It’s an elite version of herd behavior.
 
So while A through C are clearly true, and this clearly is blackmail, that’s enough to explain the phenomena we’ve seen. C is both necessary and sufficient, though D could also be true.
 
So in conclusion, we see how the system is set up to begin with in a reckless, sociopathic way. It can never, other than by accident, provide any of the benefits alleged for it (anything from the grand purpose of rationally directing investment capital to guaranteeing liquidity during an acute market plunge). In fact these guarantees represent political fraud, since “legally” the entities, the traders and “market makers”, have no such mandates.
 
Ironically, the short story I linked above is too lenient on the system, since it implies that events this severe could only occur through a strenuous, coordinated action by the finance cabal. But the reality allows for disasters to occur by accident or absent-mindedness as well.
 
But this doesn’t absolve them of criminal intent. Although I don’t think cadres receive orders in sealed packets to tank the market when Congress is getting uppity, that’s just because they don’t need to.
 
Whether or not they have means to orchestrate exactly that kind of crash, they certainly have means, motive, and opportunity to crash the market in general. The ideological algorithm is simple:
 
Progress for the Bailout, for corporatism, secrecy, congressional freeze-outs of “populist” amendments, etc. = good, seek market stability, bull, buy.
 
Any hint that ideas in the public interest are advancing or even getting a hearing = bad, seek chaos, bear, sell, crash.
 
The stock market’s often insane, and the one time it has a coherent agenda is where it functions as a collective terrorist entity, like a malevolent column of army ants.
Older Posts »

The Silver is the New Black Theme Blog at WordPress.com.

Follow

Get every new post delivered to your Inbox.

Join 243 other followers