“Thus, it should be understood that when pro-US figures use the term, 'rules-based international order,' they are not referring to anything analogous to the rule of law. Quite the opposite, they are using Orwellian language to describe a system in which essentially no rules can be established and/or observed, given that the dominant state has the prerogative to violate and/or rewrite “rules” at its whim.” Aaron Good, American Exception
Showing posts with label failure to reform. Show all posts
Showing posts with label failure to reform. Show all posts
"As I have stated strongly before, and just to reiterate, if Turkey does anything that I, in my great and unmatched wisdom, consider to be off limits, I will totally destroy and obliterate the Economy of Turkey (I’ve done before!)"
Donald J. Trump
"China uses a host of monopolizing strategies to extend its geopolitical and commercial power, everything from below cost pricing to grab market share, patent trolling, espionage, mergers, and financial manipulation. In fact, the CCP is best understood as a giant monopoly that also controls a nation of 1.4 billion people and a large military apparatus...
China’s biggest asset in gaining power was how most people in the West just didn’t realize that the CCP aimed to use it. Now China’s cover is blown. The raw exercise of power to censor a random Houston Rockets basketball executive has made millions of people take notice. Everyone knows, the Chinese government isn’t content to control its own nation, it must have all bow down to its power and authority.
Matt overstates the headline I think. The empowerment of China may have gone into higher gear with Bill Clinton perhaps, but has been fully supported by every President, both parties, and especially the moneyed interests in the US, who place their short term greed first and foremost.
Follow the money. China is certainly not alone among organizations, and even nations, in playing on the personal greed, divided loyalties, and lust for power of our political and financial class.
This in itself is nothing new. But the extent of it, and the fashionable acceptance of it amongst our society's elites, the industrialization of political corruption and big money in politics, has been breathtaking.
Stocks were wobbly for much of today.
Trading volume was lackluster and the market action for the most part was 'dull.'
There was a brief rally around the middle of the day, when Larry Kudlow lit up the trading algos with talk about the progress being made in a trade deal with China.
That wore off fairly quickly, as the human beings quickly realized this was just another story designed to pump up the markets, and that there was no substance to it.
Gold and silver were off a bit and the Dollar was marginally higher in a seesaw session.
"It is a dark day in our nation when high-level authorities will seek to use every method to silence dissent."
Martin Luther King, A Dark Day In Our Nation, Riverside Church, 30 April 1967
"The metals made it through another Non-Farm Payrolls report reasonably well. I will not be surprised at all to see the gold bulls take a sharp gut check at least once next week."
Jesse, 5 April 2019
"Nemesis, the goddess of retribution and vengeance, the punisher of pride and hubris, waits impatiently for her meeting with us."
Chalmers Johnson
I think most would agree that today qualifies as a 'sharp gut check' for the gold bulls.
The Dollar was up marginally. Silver was knocked down to the 15 handle.
Stocks were wobbly and weak.
But there are some more IPOs hovering in the wings so as long as volumes stay light the professionals will continue to prepare and maintain the launch pad for the latest round of flying pigs To that end Uber filed its IPO after the close.
Julian Assange was turned over by the Ecudorian government and arrested in the UK today. There is a comment and an illustrative story from history here.
It was funny in a very sad sort of way watching the Hillarians on MSNBC tying themselves into moral knots trying to justify the arrest and detention of Assange, obvious agent of Russia. I could only bear a brief peek or two, because it is a difficult thing to watch grown people debasing themselves so cravenly for money and access to power.
I will be watching to see what, if anything, the current crop of Democratic hopefuls have to say about this. I suspect that most if not all will fall into line under the Lady Pelosi and her minions. I suspect they will be the usual corporatists sell outs— that has been their hallmark since the 1990s. Change is coming, but slowly.
Money and power are powerful drugs, to paraphrase Rick James.
Trumpolini took the CEO defense today, saying he doesn't know anything about Wikileaks. “I know nothing about Wikileaks, it’s not my thing.” It sounded better when the Enron boys claimed they didn't anything about what was happening all around them in their own organizations.
When the president says it— well it can be a little unnerving, But as we all should realize by now, he is not cleaning up the swamp— he is picking the best and juiciest parts and trying to private label them. And going along with all the rest to get along.
Let's see if this smackdown on gold is just a one time thing to clean out the specs who were leaning into their leveraged metals positions and miners, or not.
The backbone of the power of the US, the enabler of its grossly oversized military presence around the world, is the Dollar, or more precisely, the petro-dollar. And to that end, the US tolerates and even nurtures the TBTF banks to help it enforce its financial will, through sanctions and attacks on other currencies.
I think we all understand this, but it is good to keep it in mind when we see things happening that simple graft and the usual soft corruption seem inadequate to explain, like the multi-trillion dollar bailouts and the lack of meaningful prosecution for serious, serial felonies.
Praying for those who disappoint us and let us down, or themselves and their sworn office and obligations down, is difficult. But it can be rather therapeutic if you can do it well, with humility, mindful of your own weakened nature and imperfect actions.
'Only when it's dark enough can you see the stars.'
"Again the memory of those days swept over him like a nightmare— the people they had met travelling; then people who couldn't add a row of figures or speak a coherent sentence. The little man Helen had consented to dance with at the ship's party, who had insulted her ten feet from the table; the women and girls carried screaming with drink or drugs out of public places—
—The men who locked their wives out in the snow, because the snow of twenty-nine wasn't real snow. If you didn't want it to be snow, you just paid some money."
F. Scott Fitzgerald, Babylon Revisited, February 1931
"To the politician and administrator laissez-faire was simply a principle of the insurance of law and order, with the minimum cost and effort. Let the market be given charge of the poor, and things will look after themselves...
Hobbes had argued the need for a despot because men were like beasts; [Joseph] Townsend insisted that they were actually beasts and that, precisely for that reason, only a minimum of government was required.
The acceptance of near-indigency of the mass of the citizens as the price to be paid for the highest stage of prosperity was accompanied by very different human attitudes. Townsend righted his emotional balance by indulging in prejudice and sentimentalism [Dissertation on the Poor Laws]. The improvidence (lacking personal responsibility) of the poor was a law of nature, for servile, sordid, and ignoble work would otherwise not be done. (born to be vile?) Also what would become of the fatherland unless we could rely on the poor? "For what is it but distress and poverty which can prevail upon the lower classes of the people to encounter all the horrors which await them on the tempestuous ocean or on the field of battle?"
Karl Polanyi, The Great Transformation, 1944
"Thus the elements are in place: a weak legislative body, a legal system that is both compliant and repressive, a party system in which one (I would in 2019 now say either) party, whether in opposition or in the majority, is bent upon reconstituting the existing system so as to permanently favor a ruling class of the wealthy, the well-connected and the corporate, while leaving the poorer citizens with a sense of helplessness and political despair, and, at the same time, keeping the middle classes dangling between fear of unemployment and expectations of fantastic rewards once the new economy recovers.
That scheme is abetted by a sycophantic and increasingly concentrated media; by the integration of universities with their corporate benefactors; by a propaganda machine institutionalized in well-funded think tanks and conservative foundations; by the increasingly closer cooperation between local police and national law enforcement agencies aimed at identifying terrorists, suspicious aliens and domestic dissidents."
Sheldon Wolin, Inverted Totalitarianism, 2003
“Each day we are becoming a creature of splendid glory, or one of unthinkable horror.”
C. S. Lewis
The financial spokesmodels were unnerved with the rally in gold today, which was in no doubt due in some part to the weakness of the Dollar, and the stress on the physical supply with the return of China to business from their long holiday week.
As noted previously there is a relative scarcity in the 'free float' of physical gold, and the tricks and forced exchanges, and soft confiscations from other countries can only go so far in the face of a steady, almost unrelenting, demand for the real thing. With leverage of paper to bullion in the gaming markets estimated at 100 to 1, a disruption in the flow of physical supply could be rather impressive.
The concern of the financial commentators was that it is unusual for gold to rally in what appears to be a safe haven move, but with stocks also rising. Always the stock market, for this crowd. That is their major concern, their first priority. The system is God, and damn the people whom it was designed to serve and support.
Stocks did back off markedly into the close after a rather robust showing during the day. We must put our best foot forward for the rest of the world after all. And at the end of the day, we can relax the charade a bit, and pocket the grift.
Chart-wise, gold has begun to flesh out a new cup, which if it succeeds in cmpleting the formation, and if it manages subsequentlyt to break out, will target $1550 at a minimum measuring objective on the chart.
As I noted in some posts over the holiday weekend, the long bear market in gold, which was sustained by managed selling of physical gold by central banks in order to manage the market has clearly ended around 2007. The price of gold began to rally a few years earlier in anticipation of this sea change in selling and accumulation by the major players.
And so now, after a long consolidation which has followed the first leg of the new bull market, the price of gold appears to be attempting to begin its second leg, and move to take out the prior highs. Let's see if it can maintain its momentem to the rim of the cup, so to speak. At that point a retracement is often customary. Perhaps a retracement now would not be unusual after a long quick run.
Longer term a higher price in gold is likely to be accompanied by social disruption and political uncertainty as one might expect on an examination of history. Gold provides a safe harbor in troubled times. And we do seem to be lurching towards some perversely desired rendezvous with destiny, taking it to the limit, so to speak.
If by some miracle of providence we could have what a good person might wish for, rather than what they might see coming despite all their efforts, our grandchildren might not be tempted to damn us for our willful foolishness and careless pride.
We can take comfort in the undeniable fact that the future is an elusive mix of possibilities and probabilities, and that the eventual outcome is, in the final analysis, largely unknown but in the hands of Providence, as well as our own.
But beware the leaven of the Pharisees and of Herod.
"For twelve years this nation was afflicted with hear-nothing, see-nothing, do-nothing government. The nation looked to government but the government looked away. Nine mocking years with the golden calf and three long years of the scourge! Nine crazy years at the ticker and three long years in the breadlines! Nine mad years of mirage and three long years of despair!
And, my friends, powerful influences strive today to restore that kind of government with its doctrine that that government is best which is most indifferent to mankind."
Franklin D. Roosevelt, October 1936
"DNC Chairman Perez and allied power brokers keep showing that they’re afraid of the party’s progressive base. No amount of appealing rhetoric changes that reality."
Norman Solomon, After the Unity Reform Commission
“In a room where people unanimously maintain a conspiracy of silence, one word of truth sounds like a pistol shot.”
Czesław Miłosz
I guess this sort of nonsense is what happens when you allow a powerful private interest like Hillary, Inc. to take over your organization and shape its mission for their own purposes.
The result is an imperious, top down operation where only a few insiders can follow the money because they control it. And the grass roots initiatives and state organizations starve from neglect.
Budgetary and fiduciary oversight and transparency within your own organization is fundamental to any good governance. But not within a credentialed oligarchy, which is what the DNC had apparently become.
It seems to have started out as the ascendance of the self-proclaimed elite, the knowing, and their super-delegates. But in reality, all they had in addition to their professional pedigrees and places of power was the unique talent of betraying their duties in order to amass enormous amounts of money. They maintained and expanded their power by distributing the party's funds selectively, ruthlessly, and with a Machiavellian intent for the accumulation of personal wealth and power.
Surprising that a community organizer wouldn't understand that. Of course it seems like he understood very little about reform, financial or otherwise. Or wanted to.
Who are these five consultants and what did they do to earn their $700 million? Were these no-bid contracts? Who approved them?
Whatever it was, it could not have had much to do with effectively winning elections. But it had everything to do with the arrogance and self-delusions of a few largely isolated from those who they were sworn to serve and protect.
Until change comes with meaningful reform it's— DNC RIP
'Change is the law of life. And those who look only to the past or present are certain to miss the future.
A great change is at hand, and our task, our obligation, is to make that revolution, that change, peaceful and constructive for all. Those who do nothing are inviting shame as well as violence.
The problems of the world cannot possibly be solved by skeptics or cynics whose horizons are limited by the obvious realities. We need men who can dream of things that never were and ask, why not?
History is a relentless master. It has no present, only the past rushing into the future. To try to hold fast is to be swept aside.'
John F. Kennedy
'Cynicism masquerades as wisdom, but it is the farthest thing from it. Because cynics don't learn anything.
Cynicism is a self-imposed blindness, a rejection of the world because we are afraid it will hurt us or disappoint us. Cynics always say no. But saying yes begins things.'
Stephen Colbert
'All successful revolutions are the kicking in of a rotten door.'
John Kenneth Galbraith
'This generation has a rendezvous with destiny.'
Franklin Delano Roosevelt
For good or ill, after a long period of abuse and a testing of the extremities of power and the people's willingness to accept them, the only inevitability is change. Always.
History is not a given, it is not given to us. It is what we are, what we have been given, and what we make of it.
I think you would do well to watch this video below.
Too big to fail is a seven-year phenomenon created by the most powerful central banks to bolster the largest, most politically connected US and European banks. More than that, it’s a global concern predicated on that handful of private banks controlling too much market share and elite central banks infusing them with boatloads of cheap capital and other aid.
Synthetic bank and market subsidization disguised as ‘monetary policy’ has spawned artificial asset and debt bubbles - everywhere. The most rapacious speculative capital and associated risk flows from these power-players to the least protected, or least regulated, locales.
There is no such thing as isolated 'Big Bank' problems. Rather, complex products, risky practices, leverage and co-dependent transactions have contagion ramifications, particularly in emerging markets whose histories are already lined with disproportionate shares of debt, interest rate and currency related travails.
The notion of free markets, mechanisms where buyers and sellers can meet to exchange securities or various kinds of goods, in which each participant has access to the same information, is a fallacy. Transparency in trading across global financial markets is a fallacy. Not only are markets rigged by, and for, the biggest players, so is the entire political-financial system.
The connection between democracy and free markets is interesting though. Democracy is predicated on the idea that every vote counts equally, and in the utopian perspective, the government adopts policies that benefit or adhere to the majority of those votes. In fact, it's the minority of elite families and private individuals that exercise the most control over America's policies and actions.
The myth of a free market is that every trader or participant is equal, when in fact the biggest players with access to the most information and technology are the ones that have a disproportionate advantage over the smaller players. What we have is a plutocracy of government and markets. The privileged few don't care, or need to care, about democracy any more than they would ever want to have truly "free" markets, though what they do want are markets liberated from as many regulations as possible. In practice, that leads to huge inherent risk.
Michael Lewis' latest book on high frequency trading seems to have struck some sort of a national chord. Yet what he writes about is the mere tip of the iceberg covered in my book. He's talking about rigged markets - which have been a problem since small investors began investing with the big boys, believing they had an equal shot.
I'm talking about an entirely rigged political-financial system.
I like Dean Baker quite well, and often link to his columns. On most things we are pretty much on the same page.
And to his credit he was one of the few 'mainstream' economists to actually see the housing bubble developing, and call it out. Some may claim to have done so, and can even cite a sentence or two where they may have mentioned it, like Paul Krugman for example. But very few spoke about doing something about it while it was in progress. The Fed was aware according to their own minutes, and ignored it.
The difficulty we have in the economics profession, I fear, is a great deal of herd instinct and concern about what others may say. And when the Fed runs their policy pennants up the flagpole, only someone truly secure in their thinking, or forsworn to some strong ideological interpretation of reality or bias if we are truly honest, dare not salute it.
Am I such a person? Do I actually see a fragile financial system that is still corrupt and highly levered, grossly mispricing risks? Or am I just seeing things the way in which I wish to see them?
That difficulty arises because economics is no science. It involves judgement and principles, and weighs the facts far too heavily based upon 'reputation' and 'status.' And of course I have none of those and wish none.
But it makes the point which I have made over and again, that all of the economic models are faulty and merely a caricature of reality. And therefore policy ought not to be dictated by models, but by policy objectives and a strong bias to results, rather than the dictates of process or methods. In this FDR had it exactly right. If we find something does not stimulate the broader economy or effect the desired policy objective, like tax cuts for the rich, using that approach over and over again is certainly not going to be effective.
Economics are a form of social and political science. And with the political and social process corrupted by big money, what can we expect from would be 'philosopher kings.'
The housing bubble was no 'cause' of the latest financial crisis. More properly it was the tinder and the trigger event. The S&L crisis was just as great, if not greater. Why then did it not bring the global financial system to its knees?
The interconnectedness of the global system with its massive and underregulated TBTF Banks, the widespread and often fraudulent mispricing of risk, all make cause for a financial system to be 'fragile.' In this thinking Nassim Taleb is far ahead of the common economic thought as a real 'systems thinker.' The Fed is not a systemic thinking organization because they are owned by the financial status quo, and real systemic reform rarely comes from within.
I see the same fragility which existed from 1999 to 2008 still in the system, only grown larger, global, and more profoundly influencing the political processes.
The only question is what 'trigger event' might set it spinning, and how great of a magnitude will it have to be in order to do so. The more fragile the system, the less that is required to knock it off its underpinnings.
And a crisis is not a binary, singular event. There is the 'trigger' and the dawning perception of risks, and the initial responses of the political, social, and regulatory powers to consider.
There is no point in debating this, because the regulators and powerful groups like the Fed are caught in a credibility trap, which prevents them from seeing things as they are, and saying so.
So Mr. Baker, rather than looking for the bubble, let's say we have a fragile system still disordered and mispricing risk, with a few very large banks engaging in reckless speculation, mispricing risk for short term profits, manipulating markets, and distorting the processes designed to maintain a balance in the economy.
Rather than hold out for a 'new bubble' as your criterion, perhaps we may also consider that the patient is still on full life support after the last bubble and crisis. Why do we need to find a new source of malady when the old one is still having its way?
I think if one exercises clear and open judgement, they can see that we have stirred up the same pot of witches brew that has made the system fragile and vulnerable to an exogenous shock, and has kept it so.
A new crisis does not have to happen. This is the vain comfort in these sorts of 'black swan' events, being hard to predict. But they can be more likely given the right conditions, and I fear little will be done about this one until even those who are quite personally comfortable with things as they are begin to feel the pain,
The problem is not a 'bubble.' The problem is pervasive corruption, fraud, and lack of meaningful reform. The 'candidate' is the financial system itself, with its outsized hedge funds and the TBTF Banks with their serial crime sprees and accommodative regulators in particular.
And if one cannot see that in this rotten system with its brazenly narrow rewarding of a select few with the bulk of new income, then there is little more that can be said.
Neil Irwin, a writer for the NYT Upshot section, had an interesting debate with himself about the likely future course of the economy. He got the picture mostly right in my view, with a few important qualifications.
"First, his negative scenario is another recession and possibly a financial crisis. I know a lot of folks are saying this stuff, but it's frankly a little silly. The basis of the last financial crisis was a massive amount of debt issued against a hugely over-valued asset (housing). A financial crisis that actually rocks the economy needs this sort of basis.
If a lot of people are speculating in the stock of Uber or other wonder companies, and reality wipes them out, this is just a story of some speculators being wiped out. It is not going to shake the economy as a whole. (San Francisco's economy could take a serious hit.)
Anyhow, financial crises don't just happen, there has to be a real basis for them. To me the housing bubble was pretty obvious given the unprecedented and unexplained run-up in prices in the largest market in the world. Perhaps there is another bubble out there like this, but neither Irwin nor anyone else has even identified a serious candidate. Until someone can at least give us their candidate bubble, we need not take the financial crisis story seriously.
If we take this collapse story off the table, then we need to reframe the negative scenario. It is not a sudden plunge in output, but rather a period of slow growth and weak job creation. This seems like a much more plausible story...
Anyhow, a story of slow job growth and ongoing wage stagnation would look like a pretty bad story to most of the country. It may not be as dramatic as a financial crisis that brings the world banking system to its knees, but it is far more likely and therefore something that we should be very worried about."
"The enormous gap between what US leaders do in the world and what Americans think their leaders are doing is one of the great propaganda accomplishments of the dominant political mythology."
Michael Parenti
Most economists and financial analysts think that 'currency war' merely refers to the competitive devaluations that nations sometimes engage in to help boost their domestic economies, as they had done in the 1930's for example.
This time the currency war is a much more profound confrontation of differing agendas revolving around the historically unusual role of the US dollar, based on nothing more than the will of the Federal Reserve and the 'full faith and credit' of the US, as the reserve currency for global central banks and international trade.
When a single nation begins to wield such an 'exorbitant privilege' to underwrite the speculative excesses of a crony capitalist banking system, and perhaps even more importantly, as an instrument in support of their international policy, one ought not be surprised that the rest of the world will begin to resist it.
A currency must be policy neutral, without regard to any party if it is to be a true medium of exchange. Can this still be said of the US Dollar as it has been managed, especially since 1990?
As Alan Greenspan once correctly pointed out, but certainly did not heed when he was at the Fed, if a fiat dollar is managed by monetary policy such that it emulates gold, then it will be perceived as fair, and will certainly be above the particular domestic issues or international policy biases of a single nation that de facto wields the reserve currency status.
"And so it is an odd situation where all the central bankers -- while none of them are advocating a return to the gold standard -- nonetheless try to replicate the various types of interest rate policies that the gold standard would have created. And it is an interesting question whether you call that regulation, or basically functioning of a central bank in stabilizing the economy."
It might help one to understand this if they were to imagine a world in which Russia, for example, in a quirk of history had established the ruble as the benchmark currency for the world. The ruble was recommended for use by all nations as the means of paying for oil, and for settling international trade even when Russia is not involved in the transaction. Each country was thereby compelled to hold a substantial portion of its international reserves in rubles.
And how would one be likely to react if the Russian Central Bank started using the ruble as an instrument of their international policy and extension of their quest for imperial power? What if they began creating more rubles to underwrite the domestic bubbles which were created in their own corrupted financial system to bail out their banks and oligarchs?
And let's be serious and think 'like the other guys' for a moment. What if some other nation that held the enormous power of the world's reserve currency was exhibiting a crop of candidates for their leader like the current choices for the US Presidency? I would expect that some of the rhetoric being tossed about in these debates would send a chill to the very bottom of our toes. Who could place their confident trust in their good and selflessly wise judgement to do the right things for other nations around the world, even if it might not favor the powerful special interests that give them so many millions in campaign donations?
Would you be content if your own government went quietly along with this abusive sort of monetary system? Is this not indeed taxation without representation when the money supply is expanded and handed over directly to the hands of a few Bankers?
The intransigence of the Anglo-American financial establishment to recognize the legitimate issues of the rest of the world with regards to the manner in which they have conducted their control of the IMF, the World Bank, and the international reserve currency has ignited a currency war that is now becoming increasing visible, to just about everyone it seems except for those sequestered in their ivory towers at the heart of the Empire. Or perhaps they think it too dangerous to even acknowledge that it exists, because then they might be compelled to render an opinion on it.
This is a 'big event' and it is all the more remarkable because the policy makers in the US act as though it is not even happening, or is not happening for any of the reasons for which it is. They prefer to view it as a challenge to their authority, and to react uncompromisingly and with force.
I think that historians will find the start of the currency war in the Asian currency crises and the fall of the Russian ruble in the 1990's, with the roots of it in the closing of the gold window by Nixon in 1971. But from the following essay it seems that China and a few astute Western observers have marked it as being visible from March 2015.
But whatever the date of its commencement, this dispute over the international monetary regime is the basis for the ongoing currency war that seeks to rebalance the terms of international trade and finance.
It is the old story of the very powerful resisting change that benefits the few of them inordinately. And as in so many wars of the past, those few who benefit from it do not include the bottom 90% of their own people at the least.
Most economists and analysts are ignoring this, or are unaware of it. When they do finally wake up they will likely get busy finding ways to justify it, or dismiss it as an issue, and 'prove' that there is nothing wrong with it. And very few will acknowledge the price of it in terms of economic stagnation and human misery. All is well.
Here is an excerpt of a recent article that was published in Chinese and then translated into English in the journal of the International Monetary Institute in Beijing. (It is a little funny that they published his last name as Widdlekoop, but if you were writing in hanzi would you know if a similar looking character is upside down?)
Has the US Lost its Role as the Underwriter of the Economic System?
By Willem Middlekoop
The recent news that Britain aspires to become one of the founding members of the new Asian Infrastructure Investment Bank (AIIB), has shocked many. Larry Summers, who served as a Secretary of the US Treasury between 1999 and 2001, immediately understood the significance of these developments, and wrote in an op-ed for the Washington Post: 'March 2015 may be remembered as the moment the United States lost its role as the underwriter of the global economic system. I can think of no event since Bretton Woods comparable to the combination of China's effort to establish a major new institution and the failure of the United States to persuade dozens of its traditional allies, starting with Britain, to stay out.‘
This British announcement was highly criticized by the US. The Financial Times quoted an unnamed US official: 'We are wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power. This decision was taken after no consultation with the US.‘
Summers was also highly critical of the US‘ strategy toward the newly founded AIIB: 'The U.S. misjudged the situation tremendously, put pressure on allies and developing countries to under no circumstances be part of AIIB. Largely because of resistance from the right (neo-conservatives more precisely), the United States stands alone in the world in failing to approve International Monetary Fund governance reforms that Washington itself pushed for in 2009. By supplementing IMF resources, this change would have bolstered confidence in the global economy. More important, it would come closer to giving countries such as China and India a share of IMF votes commensurate with their increased economic heft.‘
With Britain and many more major European countries signing up as founding members of the AIIB, the US economic hegemony has been dealt an enormous blow. For the first time since the end of the Second World War, the US is not in the driving seat during the foundation of a highly significant global institution. Of course, this will not change the world economic system overnight, but when we look back in five, ten or even fifteen years‘ time, March 2015 may be remembered as a turning point in economic history...
Another criticism is that the US move to more neoliberalism and global capitalism since the 1980‘s, has led to a change in the functions of the IMF. Critics claim allies of the US receive 'bigger loans with fewer conditions‘. Foreign governments who are non-allies have to sacrifice their political autonomy in exchange for IMF-funds and often have to sell assets crucial for their economy to foreign (often US) companies.
The former Tanzanian President Julius Nyerere, who was angered that debt-ridden African states were forced to hand over their sovereignty to the IMF (and World Bank), once asked: 'Who elected the IMF to be the ministry of finance for every country in the world?‘ And now the Chinese have openly asked for a 'new world wide central bank‘.
Joseph Stiglitz, a former chief economist at the World Bank, has also agreed that the IMF 'was reflecting the interests and ideology of the Western financial community‘. The 'helpful hand‘ by the IMF and World Bank towards military dictatorships friendly to the West‘ has been criticized as well.
It might be remembered as the start of an openly Chinese confrontation with the US over the world‘s economic leadership. As Summers points out, all of this has taken place because the Chinese leadership has had to wait a full five years for a change in the IMF-voting structure...
"Holder doubtless seriously believed at first that in a time of financial crisis, he was doing the right thing in constructing new forms of justice for banks, where nobody but the shareholders actually had to pay for crime. You've heard of victimless crimes; Holder created the victimless punishment.
But in the end, it was pretty convenient, wasn't it, that "the right thing" also happened to be the strategy that preserved Democratic Party relationships with big-dollar donors, kept the client base at Holder's old firm nice and fat, made the influential rich immeasurably richer and allowed Eric Holder himself to crash-land into a giant pile of money upon resignation.
What a coincidence! In any civilized country, it'd be a scandal. In America, though, he's just another guy selling whatever he can to get by. It was just too bad that what Holder had to sell was the criminal justice system."
Holder was no rogue political appointee. He was very much in the mainstream of the Wall Street wing of the Democratic Party, founded by the Clintons. Obama did nothing to reform it and added Big Healthcare and Big Pharma into the corporatist money mix.
And so these reformers, throwing their constituency under the bus, have become the facilitators of the deep capture of our regulatory and political system in a bipartisan effort to get rich.
This is not to say that these are malevolently evil people by nature. Although a few are. Most are just people, being carried along by an unsustainable tide of cynicism and personal greed that has imprinted itself on the minds of our privileged elites.
They choose to commit criminal acts through a wonderful power of rationalization, in a downward spiral of moral decline. One day they wake up and see the monstrous things they may have done, not in one grand moment in the dramatic rejection of the good, but in a thousand small choices and personal exceptions of self-indulgence.
The worldview of the self-appointed elite is that now that I have gone to the right schools, said the right words, protected the right people, taken the right jobs and done the right things, now I get to cash in and get in filthy rich on easy money and the looting of the real economy. I am finally gettin' paid. This perverse mindset, which used to be a denizen of rural enclaves and big city bosses is becoming pervasive in Washington and New York.
It has all the hallmarks of the kind of dual class system that is specifically prohibited by the framers of the Bill of Rights. But who will watch the watchers when 'everyone is doing it.'
The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.
“Crime, once exposed, has no refuge but in audacity.”
Tacitus
With campaign finance reform, the need to reform the financial markets is one of the greatest social policy issues of our time.
Simon Johnson is one of the few 'name' economists who recognizes this and is willing to talk about it.
There is a bitter campaign being waged in the think tanks and the media against reform. The campaign is similar to that which was waged for almost a decade to overturn Glass-Steagall.
Getting rid of bad government by eliminating all government is just giving the real perpetrators what they wish. What we need are the kind of rules and regulation that Simon Johnson and Elizabeth Warren talk about here.
It is the kind of reform that Franklin Roosevelt worked to put into place that lasted for almost 70 years, until the forces of Wall Street were able to guile the people into handing over their pursestrings to them once again.
What is discouraging is the deep involvement of both sides of the aisle in the Congress in enabling this sad corruption of the markets and the financial system-- for money. And in particular how the moral and intellectual processes of the state have become corrupted by the power of the moneyed interests.
To put a fine point on it, once the professional classes become cowed or corrupt, reform of the process through systemic means is exceptionally difficult. What we have is deep capture and the credibility trap reinforcing the worst of the abuses through a series of punishments and rewards.
And what may be particularly galling is when insiders who are at the locus of the corruption, like our recent crop of presidential candidates on both sides, talk about how they will change things, while the money is still flowing through their hands, and the spin is flowing out of their mouths.
And alas, even some of the reformers seem more interested in getting some of their own power and money than in promoting real reform. We have a problem, not at the periphery of our actions, but at the moral root of our thinking.
I have always enjoyed listening to economist Robert Johnson's brief excerpt below, because it highlights the very crux of the problem. Unless some of the well to do and the professional classes shake off the lure of big money and the credibility trap, and start acting responsibly, this is going to end very badly.
And make no mistake, there are some of the self-deluded and their servants who see that turmoil that may come as just another opportunity for their looting and a rise to greater power as they energize the mob for their own ends. But they forget the great lesson of history, that once the madness is unleashed, it tends to serve none but itself.
Why should anyone stop lying and cheating, when they are so profitable under the rule of the modern gods of the market, power and money? Why stop at all? And then comes the inescapable agent of the downfall of excess, Nemesis, with all that it implies.
I have no illusions. Given the state of our condition, ninety nine percent of those who read this will go on and do absolutely nothing differently for themselves or their people. But it is in the moral one percent that there is some hope for peaceful, evolutionary change.
The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.
No More Cheating: Restoring the Rule of Law in Financial Markets
By Simon Johnson
The political debate about finance in the US is often cast as markets versus regulation, as if “more regulation” means the efficiency of private sector decisions will necessarily be impeded or distorted. But this is the wrong way to think about the real policy choices that – like it or not – are now being made. The question is actually what kind of markets do you want: fair and well-functioning, with widely shared benefits; or deceptive, dangerous, and favoring just a relatively few powerful people?
In a speech on Wednesday, Senator Elizabeth Warren (D., MA) laid out a vision for better financial markets. This is not a left-wing or pro-big government agenda. Senator Warren’s proposals are, first and foremost, pro-market. She wants – and we should all want – financial firms and markets that work for customers, that encourage innovation, and that do not build up massive risks which can threaten the financial system and bring down the economy.
Senator Warren puts forward two main sets of proposals. The first is to more strongly discourage the deception of customers. This is hard to argue against. Some parts of the financial sector are well-run, providing essential services at reasonable prices and with sound ethics throughout. Other parts of finance have drifted, frankly, into deceiving people – on fees, on risks, on terms and conditions – as a primary source of profits. We don’t allow this kind of cheating in the non-financial sector and we shouldn’t allow it in finance either.
The unfortunate and indisputable truth is that our rule-making and law-enforcement agencies completely fell asleep prior to 2008 with regard to protecting borrowers and even depositors against predation. Even worse, since the financial crisis, the Securities and Exchange Commission, the Justice Department, and the Federal Reserve Board of Governors proved hard or near impossible to awake from this slumber.
We need simple, clear rules that ensure transparency and full disclosure in all financial transactions – and we need to enforce those rules. This is what was done with regard to securities markets after the debacle of the early 1930s...
"The problem of the last three decades is not the 'vicissitudes of the marketplace,' but rather deliberate actions by the government to redistribute income from the rest of us to the one percent. This pattern of government action shows up in all areas of government policy."
Dean Baker
"Most of them became wealthy by being well connected and crooked. And they are creating a society in which they can commit hugely damaging economic crimes with impunity, and in which only children of the wealthy have the opportunity to become successful. That’s what I have a problem with. And I think most people agree with me."
Unfortunately it appears that the political process is bogged down in fighting an ideological trench warfare in which both sides are taking top down positions about what is right and wrong, without the ability to address the actual conditions that plague their nation in the sixth year of The Recovery™.
It reminds one of an old beer marketing campaign, in which one cadre of devotees yells 'Less filling' and the other shouts back, 'Tastes great!'
Why is this? What causes such willing blindness to what is actually happening?
In this corrupt political process, the deeply complicit politicians say and do what they are being paid to think, say, and do by a narrow band of powerful constituents amongst the competing moneyed interests.
They seem less like political parties than competing crime families. And they are deeply entrenched in exactly what has gone wrong. So deeply, with such strong ties to past mistakes, influence peddling, and corrupt practices, that they can no longer even speak freely and frankly about it.
They talked about change and hope, but they never let up on deception and fear.
Nobody's right, if everybody's wrong..
Reforming the Fed: Who’s Right; Who’s Wrong?
By Pam Martens and Russ Martens
February 26, 2015
...Republicans are locked in some kind of mind warp where the remedy for every problem is to deregulate. Despite six years of books, academic studies, investigative findings, and a 600-page report from the Financial Crisis Inquiry Commission proving that deregulation was responsible for the financial crash of 2008 – the greatest financial implosion since the Great Depression – Republicans refuse to let facts get in the way of pushing for more deregulation.
Democrats on the other hand, despite overwhelming proof that the Dodd-Frank Wall Street Reform and Consumer Protection Act has actually allowed Wall Street to grow systemically more dangerous and more corrupt since its passage, is irrationally wedded to this legislation.
No amount of evidence will change the Democrats’ position on Dodd-Frank. JPMorgan gambling with hundreds of billions of bank depositors’ money in the London Whale fiasco where $6.2 billion got flushed down the toilet will not change their mind. Cartel activity among the big banks in the interest rate market, precious metals market, foreign currency market will not change their mind. Bank chat rooms called “The Bandits Club,” “The Mafia” and “The Cartel,” where brazen market rigging is alleged to have occurred will not change their mind. Endless criminal investigations and multi-billion dollar settlements will not change their mind. Scandal after scandal destroying public trust in Wall Street and its regulators will not change their mind...
Let us pray for those whose hearts are hardened against His grace and loving kindness by greed, fear, and pride, and the seductive illusion and crushing isolation of evil.
We pray that we all may experience the three great gifts of our Lord's suffering and triumph: repentance, forgiveness, and thankfulness. And in so doing, may we obtain abundant life, and with it the peace that surpasses all understanding.
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