Stocks and Precious Metals Charts - Vanities - The Decline of the American Republic

 

“It’s no accident that the size of the financial sector today as a percentage of GDP is at levels equaled only on the eve of the Great Depression.  Like the decade leading up to the financial crisis of 2008, the Roaring Twenties were marked by not only financial boom and technological wonder, but also massive income inequality.  Worker wages stagnated and those of the upper classes grew, bolstered in large part by stock prices.  Another similarity was a rise in debt, both public and private, which was used to mask the declining spending power of the lower and middle classes and its dampening effect on GDP growth."

Rana Foroohar, Makers and Takers, 17 May 2016


"Financial collapses that are not due to natural disasters or war are always founded in fraud. And if you dig a bit, you will find that there are individuals behind it.   It is not some random madness, but a weakness of character, a perennial gullibility, a feeling that 'everyone is doing it,' that seems to be exploited periodically by heartless individuals.  In certain periods of history they become more socially acceptable.  When things seem to come mysteriously rushed out of nowhere with little factual basis behind them, and don't make sense, then they probably don't. This holds true for the Iraq war, and the bank bailouts, MF Global, and the financial and commodity market scandals that are yet to be revealed."

Jesse, The Myth of Alan Greenspan, 10 May 2012


“Ronald Reagan and Alan Greenspan pulled off one of the greatest frauds ever perpetrated against the American people in the history of this great nation, and the underlying scam is still alive and well, more than a quarter century later.  It represents the very foundation upon which the economic malpractice that led the nation to the great economic collapse of 2008 was built.   They came up with the perfect strategy for the redistribution of income and wealth from the working class to the rich."

Allen Smith, The Greatest Fraud Ever, 14 April 2010


"Hillary's record on this subject [financial reform], and her service to Big Money, and the role that she and Bill played in gutting the progressive wing of the Democratic Party while making themselves rich on their speeches to the Big Money crowd, speaks for itself.  To expect anything different from her if she gets in office will be like the hope and change from Obama which didn't make it past his third week in office, when he brought back Clinton's financial policy team."

Jesse, Wall Street Reform and Fiscal Policy, 6 February 2016

"There is now abundant evidence of widespread, unpunished criminal behavior in the financial sector.  The evidence is now overwhelming that over the last thirty years, the U.S. financial sector has become a rogue industry.   As its wealth and power grew, it subverted America’s political system, including both political parties, government, and academic institutions in order to free itself from regulation.  The rise of predatory finance is both a cause and a symptom of an even broader, and even more disturbing, change in America’s economy and political system.   The financial sector is the core of a new oligarchy that has risen to power over the past thirty years, and that has profoundly changed American life."

Charles Ferguson, Predator Nation


"The Clintons, along with a large group of Republican Congressmen and compliant Democrats, put a 'for sale' sign not only on the Lincoln bedroom, but on the rest of the White House and the Capitol.  They certainly did not do it alone, as it was a bipartisan effort to overturn the protections established in the darker days of the Great Depression.  And it became the thing to do in Washington and New York, to partner up with big money to take the public for a wild ride.   The Clintons turned the Democrats into the Republicans, while the Republicans were turning into a mob."

Jesse, Role the Clintons Played in Enabling the 2008 Financial Crisis, 13 February 2016


"Less than two months after stepping down from the Fed, Yellen was raking in huge fees from the mega banks on Wall Street, the very banks that are supervised by the Fed.  When Yellen was nominated by President Joe Biden for the post of Treasury Secretary, she had to file a new financial disclosure form.  That form revealed that she had received more than $7 million in speaking fees, the bulk of which came from Wall Street mega banks and trading houses, after stepping down from the Fed."

Pam and Russ Martens, The Fed's Trading Scandal Broadens,, 24 October 2022


"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.  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.  This perverse mindset, which used to be a denizen of rural enclaves and big city bosses is becoming pervasive in Washington and New York."

Jesse, Wall Street's Double Agent, 9 July 2015

"It's not just America.  The whole world has sort of turned muddy.  By and large, the world is increasingly run by ignoramuses, wackos and psychotics.   This was long before Donald Trump.  But we've got more crazy people running the world now than ever.

I think it's the one reason a guy like Donald Trump ran. They understood where he was coming from. That Trump is just a blowhard. They laughed at him. They knew Trump doesn't know what he's talking about. But Trump wasn't the same old big smile and a lot of good words. 

The Democrats have been going around saying, 'We're for the people, we're for the little guy.' And all they do is run to Wall Street for money.  And the one guy that didn't, Sanders, was sabotaged by the Democratic National Committee.  If I were the Democrats I would stop worrying about Donald Trump and start talking to the American people about jobs and health care. "

Seymour Hersh, 23 July 2019


"We are coming apart as a society, and inequality is right at the core of that.  When the 90 percent are getting worse off and they’re trying to figure out what happened, they’re not people like me who get to spend four or five hours a day studying these things and then writing about them — they’re people who have to make a living and get through life.  And they’re going to be swayed by demagogues and filled with fear about the other, rather than bringing us together."

David Cay Johnston, Inequality's Looming Disaster, May 2014


“Each day we are becoming a creature of splendid glory, or one of unthinkable horror.”

C. S. Lewis

 

Stocks managed to pull themselves together and extend their rally higher, up to the key overhead resistance levels they are visited before.

Gold and silver fell a bit.

The Dollar chopped sideways.

VIX remain essentially unchanged. 

What time is the next wash and rinse?

Risk levels remain elevated, and the underlying fundamentals of the equity markets are shaky.

Stagflation, that most improbable of natural outcomes, spawned by a twisted monetary and fiscal policy has come to pass.  

How was it forecast here some years ago, when most were arguing for the inevitability of deflation, or the abandonment of any rational perspective on monetary policy?

You have hardened your hearts, and surrendered yourself to lies.

How can you hope to understand anything?

Have a pleasant evening.

Stocks and Precious Metals Charts - And the Band Played On - Our Audacious Oligarchy

 

"We've become, now, an oligarchy instead of a democracy.  I think that's been the worst damage to the basic moral and ethical standards to the American political system that I've ever seen in my life." 

Jimmy Carter 

 

"They claim to be super-patriots, but they would destroy every liberty guaranteed by the Constitution.  They demand free enterprise, but are the spokesmen for monopoly and vested interest." 

Henry Wallace, April 1944

 

"Our plutocracy, whether the hedge fund managers in Greenwich, Connecticut, or the Internet moguls in Palo Alto, now lives like the British did in colonial India: ruling the place but not of it."

Mike Lofgren, The Deep State 

 

"Our future could be one in which continued tumult feeds the looting of the financial system, and we talk more and more about exactly how our oligarchs became bandits and how the economy just can’t seem to get into gear." 

Simon Johnson, The Quiet Coup, May 2009

 

“The main problem in any democracy is that crowd-pleasers are generally brainless swine who can go out on a stage and whip their supporters into an orgiastic frenzy— then go back to the office and sell every one of the poor bastards down the tube for a nickel apiece.” 

Hunter S. Thompson

 

"But there is a sort of 'Ok guys, you're mad, but how are you going to stop me' mentality at the top."

Robert Johnson, Audacious Oligarchy

Stocks moved lower again today, and went out near their lows.

Gold and silver were hit hard in the early trading, but managed to take back a good chun of their losses by the close.

The physical kilo bar inventory in Hong Kong is getting rather low again.  

Time to scour more physical out of the ETFs?

The Dollar rose on higher Treasury yields.

Congress engaged in the usual toothless showmanship in discussing the economy in testimony today.

I am sitting all in cash in my short term account now , although I did flip a few miners off the morning bloodbath.

Agnico-Eagle will be acquiring Kirkland Lake in a 'merger of equals (kind of).

The saga of the gambling Fed Presidents continues, and so we have another fine piece from the Martens today here.

Apparently a Fed President was actively placing short term million dollar directional bets, including the SP futures, during the crisis and the bailouts, with pockets full of insider information.

Must have been like shooting fish in a barrel.

And it was all legal so they say, and ethical.   But details are being stonewalled.

All in all not extraordinary, in this attractive but deceitful world of routine abuse of honor, office, power, and the truth.

Have a pleasant evening. 

Stocks and Precious Metals Charts - Mini-Me - Fed Reform and Quad Witch Option Expiration

 

"A man who lies to himself is often the first to take offense. it sometimes feels very good to take offense, doesn't it?  And surely he knows that no one has offended him, and that he himself has invented the offense and told lies just for the beauty of it, that he has exaggerated for the sake of effect, that he has picked up on a word and made a mountain out of a pea--he knows all of that, and still he is the first to take offense, he likes feeling offended, it gives him great pleasure.” 

Fyodor Dostoevsky 

 

“The point of modern propaganda isn't only to misinform or push an agenda. It is to exhaust your critical thinking, to annihilate truth.” 

Garry Kasparov 

 

"Unhappiness comes to each of us because we think ourselves at the center of the world, because we have the miserable conviction the we alone suffer to the point of unbearable intensity."

Jacques Lusseyran

 

“The official philosophies of the totalitarian regimes unanimously brand as nonsensical the idea that there exists a single objective truth valid for everybody. The official philosophies of the totalitarian regimes deny the inherent value of thought.  For them thought is not a light but a weapon: its function, they say, is not to discover reality as it is, but to change and transform it with the purpose of leading us towards what is not.”

Alexandre Koyré 

 

Stocks took a fairly convincing swoon this morning, falling straight down to underlying support.

But mirabile dictu, equities regained most of their losses in the late afternoon and finished with a small loss.

The Dollar rallied up to just short of the 93 handle.

Gold and silver were whacked pretty convincingly along with most of the associated miners.

I was sitting all in cash, in part because I didn't like the feel of the market.  And I still don't.

I did buy a couple of small mining positions in the metals today, on the of chance this is just quad witch shenanigans and not the beginning of something more profoud.

Nice save on the stock indices into the close.  That made me doubt the sincerity of this market.

But you never know.

There will be a quad witch stock option expiration on Friday, the third of this year.

The banks must be restrained, the financial system reformed, and the economy brought back into balance, before there can be any sustained recovery. 

Given the extent of the corruption of the major monopolized industries and the political system by big money I am not optimistic about when meaningful reform will happen. 

Certainly not with the 'self-review' of the Fed's ethics that Chairman Powell has just proposed. 

The best way to manage a scandal in your own house is to lead the investigation of it.

But as Hermann Hesse once wrote, 'When the suffering becomes acute enough, one goes forward.'

Have a pleasant evening.

Stocks and Precious Metals Charts - Balancing Act

"It has been the longest bull market in modern history, enabled by massive Central Bank intervention. But with trade wars raging, Brexit, Presidential impeachment over something, etc., there remains a significant risk of a recession over the next 12 months.

If we look at the normalized change in the 10Y-3M curve minus normalized change in 10Y yields, we can see a heightened recession risk. Lower yields and steeper curves are not a good recipe. And then we have the decline in S&P 500 earnings estimates. Recession coming?"

Anthony Sanders, Confounded Interest


"Day by day the money-masters of America become more aware of their danger, they draw together, they grow more class-conscious, more aggressive. The [first world] war has taught them the possibilities of propaganda; it has accustomed them to the idea of enormous campaigns which sway the minds of millions and make them pliable to any purpose.

American political corruption was the buying up of legislatures and assemblies to keep them from doing the people's will and protecting the people's interests; it was the exploiter entrenching himself in power, it was financial autocracy undermining and destroying political democracy. By the blindness and greed of ruling classes the people have been plunged into infinite misery."

Upton Sinclair, The Brass Check

Stocks slumped again today on renewed concerns about global trade.

December 15^th may be a date of interest, tariff-wise.

As you can see from the charts, the major stock indices managed to crawl back up to a reasonable level of trend support.

The rest of the week into the Non-Farm Payrolls Report should tell us the story.

Gold and silver had a nice rally higher after a long coiling process.

But we are still well within the short term declining (coiling?) patterns on the chart. So no breakout yet.

The underpinnings of the market are vulnerable to exogenous shocks. So I would proceed with caution.

The equity and high yield bond markets are leaning heavily on the Fed's balance sheet. And that may not be a longer term sustainable arrangement, and certainly not any formula for sustainable economic recovery.

What would I do?  Reform.   It's obvious.  The system is bent, and consciously so, to sweep the wealth up to a few 'at the top.'  It's a racket.

But the credibility trap will not allow the powers that be and their enablers and politicians to consider it as an option, or even to cite systemic imbalance and corruption as a problem.   Those that do are ignored, smeared, and villified by those that thrive on the existing imbalance.

The banks must be restrained, and balance restored to the economy, and the dark money power limited from its manipulation of policy, politics, and public discourse, before there can be any sustainable recovery.

Have a pleasant evening.

Regulatory Capture: The Banks and the System That They Have Corrupted

"But the impotence one feels today— an impotence we should never consider permanent— does not excuse one from remaining true to oneself, nor does it excuse capitulation to the enemy, what ever mask he may wear.  Not the one facing us across the frontier or the battle lines, which is not so much our enemy as our brothers’ enemy, but the one that calls itself our protector and makes us its slaves.  The worst betrayal will always be to subordinate ourselves to this Apparatus, and to trample underfoot, in its service, all human values in ourselves and in others."

Simone Weil


"And in some ways, it creates this false illusion that there are people out there looking out for the interest of taxpayers, the checks and balances that are built into the system are operational, when in fact they're not.  And what you're going to see and what we are seeing is it'll be a breakdown of those governmental institutions.  And you'll see governments that continue to have policies that feed the interests of -- and I don't want to get clichéd, but the one percent or the .1 percent -- to the detriment of everyone else...

If TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car... I think it's inevitable. I mean, I don't think how you can look at all the incentives that were in place going up to 2008 and see that in many ways they've only gotten worse and come to any other conclusion."

Neil Barofsky


"Written by Carmen Segarra, the petite lawyer turned bank examiner turned whistleblower turned one-woman swat team, the 340-page tome takes the reader along on her gut-wrenching workdays for an entire seven months inside one of the most powerful and corrupted watchdogs of the powerful and corrupted players on Wall Street – the Federal Reserve Bank of New York.

The days were literally gut-wrenching. Segarra reports that after months of being alternately gas-lighted and bullied at the New York Fed to whip her into the ranks of the corrupted, she had to go to a gastroenterologist and learned her stomach lining was gone.

She soldiered through her painful stomach ailments and secretly tape-recorded 46 hours of conversations between New York Fed officials and Goldman Sachs. After being fired for refusing to soften her examination opinion on Goldman Sachs, Segarra released the tapes to ProPublica and the radio program This American Life and the story went viral from there...

In a nutshell, the whoring works like this. There are huge financial incentives to go along, get along, and keep your mouth shut about fraud. The financial incentives encompass both the salary, pension and benefits at the New York Fed as well as the high-paying job waiting for you at a Wall Street bank or Wall Street law firm if you show you are a team player.

If the Democratic leadership of the House Financial Services Committee is smart, it will reopen the Senate’s aborted inquiry into the New York Fed’s labyrinthine conflicts of interest in supervising Wall Street and make removing that supervisory role a core component of the Democrat’s 2020 platform. Senator Bernie Sanders’ platform can certainly be expected to continue the accurate battle cry that 'the business model of Wall Street is fraud.'"

Pam Martens, Wall Street on Parade

This is a good example of both regulatory capture and the credibility trap that co-opts those who benefits from the system as it is, even if it is by turning a blind eye and saying nothing, going along to get along, taking the 'bullet or the bribe.'

Never assume that because a person, such as media analyst or reporter, is highly paid that they are somehow beyond the temptation to violate their trust.  Quite the contrary.   They do not believe that change can come because they have anaesthetized their integrity as a matter of convenience.  And when called upon, they will support and defend and excuse the system as it is, at first by their inaction, and then by their willing cooperation.

The corruption takes a person one seemingly innocuous decision and event at a time.  their separate their fingers, one by one, until they finally let their souls slip through and fall— and they belong to the darkness of this world.  And at the end of the day, for what?   A little more money, the patina of prestige and superiority, access to power?

Who then can stand against the world, when power and money are assumed and created out of nothing, and distributed in an unjust, interconnected system of favors and services, without duty and without honor?

And so those captured in this system excuse and accept their own part in it, for their personal benefit and professional ego and advancement, that heady feeling of sophistication and acceptance by the worldly.

It's an old story  It is so old that at times it seems as if distant, just a story from another time— a fable.   But it is real.  It is the very fundamental core of this reality.  It is the continuing struggle.

It is, in the end, the only thing that matters, the only triumph or personal tragedy.  It is the only consequence that you will dwell upon, when the husk is stripped bare, and you yourself face the only certainty in this world alone, and as your truly are.

The Warning: A Financial Cauldron of Very High Leverage and Interwoven Risks

"The current bubbles in junk bonds and foreign debt are not in any way driving the economy. Presumably we are seeing somewhat more investment as a result of the fact that uncreditworthy companies were able to borrow at a low cost, but there is no notable boom in such investment.

Similarly, if foreign borrowers have a harder time getting access to credit, it may be bad news for them, but the impact on the U.S. economy will be limited.

If some banks or other financial institutions have over committed themselves in these areas, the plunge in prices may threaten their survival. This could lead to some late nights for folks at the Fed and other regulators, but it will not pose a major risk to the economy."

Dean Baker, Bubbles that We Have to Worry About and Bubbles We Don't, 18 December 2015

And how large was Long Term Capital Management? And the Knickerbocker Trust?

Could they have been said to be 'driving the economy?

And most importantly, is the failure of any major financial institution likely to be an 'isolated incident' in this current financial structure?

I like Dean Baker quite a bit, and read his column every day, often linking to it.

But he may be greatly underestimating the size and interconnectedness and the leverage in the derivatives markets, which while it is a bit harder to see than the housing or tech bubbles is nonetheless there and even more deadly.

It is not the bubble itself that causes the problem alone, but the context in which a risk like that develops, the 'transmission' of the failure throughout the system.  Often in a system that has become sufficiently vulnerable the actual event that causes a collapse can seem relatively minor, until it is examined with an open systems mind after the fact.

The system is at the heart of the problem, not the source of the particular failure that sets its tumbling.

Should one ignore the estimated notional size of the $1.2 quadrillion global derivatives market. And the estimates that put it at more than 10 times the total world GDP.

Oh yes, I know, the insurance and cross-party netting surely mitigates these risks.  And this is the same bad estimate and theory that feeds and precedes almost every major financial panic and crisis.

What happens when a large failure of a 'single institution' takes down a major counterparty affecting multiple financial firms in a cascading of mispriced risks?

Suddenly these theoretically controlled derivatives turn into a tsunami of cross party financial contagion.   This is the real risk, not the derivatives themselves, but their size and their relative fragility to the unexpected, and the concentration of their holdings in a few systemically important places.

Does Dean really believe that it may be too bad for some 'foreign borrowers' but the exceptional American financial system will be able to withstand the winds that blow through the world markets?

What is the estimate of the damage that can be done when confidence fails and there is a widespread and sudden withdrawal of liquidity and a freezing of the short term global credit markets from an enormously interconnected and grossly leveraged financial system that resembles a pyramid scheme?

Are we going to go through all of this again, with the hopes that only the Fed and few Bank regulators will have some sleepless nights but otherwise all is well?   The last time they quickly panicked and went to the Congress with a blank check and a threat of civil chaos.

And what is so different now?   Now they are like the 300 Spartans, willing to risk all and lay down their careers for the sake of the American public, saving them from the consequences a financial system that has been gorging itself on the rich rewards of massive speculation?

Are you kidding me?

Genuine financial reform and hard systemic firewalls like Glass-Steagall are the only remedy.  And we most certainly do not have them now.

Why are there so many plans that now include the 'bail-ins' of public savings and pensions?

I am not fear-mongering.  I am raising all of the hard questions that politicians like Elizabeth Warren and Bernie Sanders have been asking, and which have largely gone unanswered behind a wall of opaque secrecy inside a crony club of the revolving door,  with deriding dismissals and vague assurances of hope for change.

And we had all of that before the financial crisis of 2008 as well.

Remember Brooksley Born?

"We didn't truly know the dangers of the market, because it was a dark market," says Brooksley Born, the head of an obscure federal regulatory agency -- the Commodity Futures Trading Commission [CFTC] -- who not only warned of the potential for economic meltdown in the late 1990s, but also tried to convince the country's key economic powerbrokers to take actions that could have helped avert the crisis. "They were totally opposed to it," Born says. "That puzzled me. What was it that was in this market that had to be hidden?"

PBS Frontline, The Warning

And the risks are still hidden, and growing rather than diminishing, such is the tide of the influence of Big Banking and Big Money.

In this current financial system, no TBTF Bank is an island of secular failure anywhere in the world.

Power: The Essence of Corrupt Banking and Politics Is to Grow and Control the Debt

"Events have satisfied my mind, and I think the minds of the American people, that the mischiefs and dangers which flow from a national [central] bank far over-balance all its advantages. The bold effort the present bank has made to control the Government, the distresses it has wantonly produced, the violence of which it has been the occasion in one of our cities famed for its observance of law and order, are but premonitions of the fate which awaits the American people should they be deluded into a perpetuation of this institution or the establishment of another like it."

Andrew Jackson, Sixth Annual Message, December 1, 1834


"Another cause of today’s instability is that we now have a society in America, Europe and much of the world which is totally dominated by the two elements of sovereignty that are not included in the state structure: control of credit and banking, and the corporation.

These are free of political controls and social responsibility and have largely monopolized power in Western Civilization and in American society. They are ruthlessly going forward to eliminate land, labor, entrepreneurial-managerial skills, and everything else the economists once told us were the chief elements of production.

The only element of production they are concerned with is the one they can control: capital."

Professor Carroll Quigley, Oscar Iden Lecture Series 3, 1976

Money is power.  And those who control the money, if they have the will for it, can use it as a means to incredible power, to create debt, and to control it, thereby controlling the debtors, both as individuals, as communities, as regions, and whole nations.

This is the story of global trade deals, the Dollar, and the foul marriage between politics, money, and central banking.   The more discretion and secrecy that is granted to those who create money and debt, the more vulnerable is the freedom of the people.

This is the story of Cyprus, of Greece, and of the Ukraine.

And there will be more.

This will to power is as old as Babylon, and as evil as hell.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations.

Each central bank, in the hands of men like Montagu Norman of the Bank of England, Benjamin Strong of the New York Federal Reserve Bank, Charles Rist of the Bank of France, and Hjalmar Schacht of the Reichsbank, sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

Professor Carroll Quigley, Tragedy and Hope, 1966


"He promises you illumination, he offers you knowledge, science, philosophy, enlargement of mind. He scoffs at times gone by; he scoffs at every institution which reveres them.

He prompts you what to say, and then listens to you, and praises you, and encourages you. He bids you mount aloft. He shows you how to become as gods.

Then he laughs and jokes with you, and gets intimate with you; he takes your hand, and gets his fingers between yours, and grasps them, and then you are his."

John Henry Newman

An Open Letter About Austerity, Debt, and Public Policy from Alex Tsipras

As we read this, let us keep in mind that the Banks were mired in bad debts that were created by their fraudulent activities and speculation, and that they were massively bailed out by the people, in the most gentle and accommodating of terms if not outright subsidies.

And now they would prey on those who have saved them, seeking to extend more debts, and harsher terms, not only to Greece but to the poor and middle class of their own countries, in order to make them like slaves to unresolvable burdens, stripped of freedom and assets by a corrupt judiciary and politicians.

Even now, QE is being extended to buy unpayable and overvalued debts from the Banks, to free their balance sheets, and to give them more power to financially oppress the public.

"Most of you, dear Handesblatt readers, will have formed a preconception of what this article is about before you actually read it. I am imploring you not to succumb to such preconceptions. Prejudice was never a good guide, especially during periods when an economic crisis reinforces stereotypes and breeds bigotry, nationalism, even violence.

In 2010, the Greek state ceased to be able to service its debt. Unfortunately, European officials decided to pretend that this problem could be overcome by means of the largest loan in history on condition of fiscal austerity that would, with mathematical precision, shrink the national income from which both new and old loans must be paid. An insolvency problem was thus dealt with as if it were a case of illiquidity.

In other words, Europe adopted the tactics of the least reputable bankers who refuse to acknowledge bad loans, preferring to grant new ones to the insolvent entity so as to pretend that the original loan is performing while extending the bankruptcy into the future. Nothing more than common sense was required to see that the application of the 'extend and pretend' tactic would lead my country to a tragic state. That instead of Greece's stabilization, Europe was creating the circumstances for a self-reinforcing crisis that undermines the foundations of Europe itself.

My party, and I personally, disagreed fiercely with the May 2010 loan agreement not because you, the citizens of Germany, did not give us enough money but because you gave us much, much more than you should have and our government accepted far, far more than it had a right to. Money that would, in any case, neither help the people of Greece (as it was being thrown into the black hole of an unsustainable debt) nor prevent the ballooning of Greek government debt, at great expense to the Greek and German taxpayer.

Indeed, even before a full year had gone by, from 2011 onwards, our predictions were confirmed. The combination of gigantic new loans and stringent government spending cuts that depressed incomes not only failed to rein the debt in but, also, punished the weakest of citizens turning people who had hitherto been living a measured, modest life into paupers and beggars, denying them above all else their dignity. The collapse of incomes pushed thousands of firms into bankruptcy boosting the oligopolistic power of surviving large firms. Thus, prices have been falling but more slowly than wages and salaries, pushing down overall demand for goods and services and crushing nominal incomes while debts continue their inexorable rise. In this setting, the deficit of hope accelerated uncontrollably and, before we knew it, the 'serpent's egg' hatched – the result being neo-Nazis patrolling our neighbourhoods, spreading their message of hatred.

Despite the evident failure of the 'extend and pretend' logic, it is still being implemented to this day. The second Greek 'bailout', enacted in the Spring of 2012, added another huge loan on the weakened shoulders of the Greek taxpayers, "haircut" our social security funds, and financed a ruthless new kleptocracy.

Respected commentators have been referring of recent to Greece's stabilization, even of signs of growth. Alas, 'Greek-covery' is but a mirage which we must put to rest as soon as possible. The recent modest rise of real GDP, to the tune of 0.7%, signals not the end of recession (as has been proclaimed) but, rather, its continuation. Think about it: The same official sources report, for the same quarter, an inflation rate of -1.80%, i.e. deflation. Which means that the 0.7% rise in real GDP was due to a negative growth rate of nominal GDP! In other words, all that happened is that prices declined faster than nominal national income. Not exactly a cause for proclaiming the end of six years of recession!

Allow me to submit to you that this sorry attempt to recruit a new version of 'Greek statistics', in order to declare the ongoing Greek crisis over, is an insult to all Europeans who, at long last, deserve the truth about Greece and about Europe. So, let me be frank: Greece's debt is currently unsustainable and will never be serviced, especially while Greece is being subjected to continuous fiscal waterboarding. The insistence in these dead-end policies, and in the denial of simple arithmetic, costs the German taxpayer dearly while, at once, condemning to a proud European nation to permanent indignity. What is even worse: In this manner, before long the Germans turn against the Greeks, the Greeks against the Germans and, unsurprisingly, the European Ideal suffers catastrophic losses.

Germany, and in particular the hard-working German workers, have nothing to fear from a SYRIZA victory. The opposite holds. Our task is not to confront our partners. It is not to secure larger loans or, equivalently, the right to higher deficits. Our target is, rather, the country's stabilization, balanced budgets and, of course, the end of the grand squeeze of the weaker Greek taxpayers in the context of a loan agreement that is simply unenforceable. We are committed to end 'extend and pretend' logic not against German citizens but with a view to the mutual advantages for all Europeans.

Dear readers, I understand that, behind your 'demand' that our government fulfills all of its 'contractual obligations' hides the fear that, if you let us Greeks some breathing space, we shall return to our bad, old ways. I acknowledge this anxiety. However, let me say that it was not SYRIZA that incubated the cleptocracy which today pretends to strive for 'reforms', as long as these 'reforms' do not affect their ill-gotten privileges. We are ready and willing to introduce major reforms for which we are now seeking a mandate to implement from the Greek electorate, naturally in collaboration with our European partners.

Our task is to bring about a European New Deal within which our people can breathe, create and live in dignity.

A great opportunity for Europe is about to be born in Greece on 25th January. An opportunity Europe can ill afford to miss.

Alex Tsipras, An Open Letter to the People of Germany About That Which You Were Never Told

 

Related: 
Greek PM Freezes Privatisations

Anti-Austerity Party Gathers Support in Spain

US Power Elite: An Echo Chamber of Illusions, Delusions, and Subsequent Policy Errors

"A monopoly on the means of communication may define a ruling elite more precisely than the celebrated Marxian formula of monopoly in the means of production."

Robert Anton Wilson

I watched the latter part of a televised discussion called Surveillance 2015 which included Sallie Krawchek, Mohamed El-Erian, Sheila Bair, and Mario Gabelli with Tom Keane as host at the high-toned, dark-wooded drinking salon in the Waldorf-Astoria in New York City.

 

There is no one in the discussion that you could dislike, as they are all affable and intelligent people who are most likely very good company at a cocktail party and acknowledged as subject matter experts in their own areas.

 

I may have missed the first part where hopefully they discussed some things that they understand, like the workings of the US markets, although that is no guarantee of a frank and open discussion. Or maybe I was spared the usual self-congratulatory success fest.  Mission accomplished, and all that.

 

But the groupthink when it came to discussing global events was absolutely stunning in its glib triumphalism and selective shallowness.

 

Their read on Putin and the situation with Russia was almost sad in its cartoon like shallowness.  Russia is on the ropes, and it is just a question whether Putin folds now, or does something stupid to distract his people, like cutting off the energy to Europe and driving them into recession. The odds are fifty- fifty.

 

But the US is pristine, above it all, the global puppet master.   Exceptional and winning!

 

I think that pat description of Russia with an economy that is on the edge, with the option to do something stupid to take the peoples' minds off their misery, fits Obama and the new Congress just as well as Russia.  The difference is that we are seeing things from within the dollarsphere of wealth illusion.

 

How can one discussion the global situation without getting around to including China until at the very end, almost as an afterthought?   And to discuss Russia's options without including China and a few other emerging countries which is still where the growth remains?  At least real growth in building infrastructure and actual products, instead of just overcharging each other for healthcare and financial services and calling it growth?

 

Part of the problem I am sure is that we are given to the phenomenon of mistaking wealth for intelligence, and on subjects in which the person has little to no expertise beyond that which an intelligent person who read newspapers and magazines might gather.  There is quite a bit of that going around.  Traders and bureaucrats making policy calls is like watching a fox hunt, to paraphrase Oscar Wilde:  the unspeakable in full pursuit of the indigestible.

 

When the US gets blindsided next year, and I think it is more like 75-25 that they will, it is will be because the power elite in the US is living in an echo chamber of their own thoughts, sharing a distorted vision of their own country, not to mention the world, from the cocoons of Washington and New York City.

 

When they do the wrong things, and respond clumsily and ineffectively again and again, we should have no confusion about why they are doing so.   They are marching to the beat of a very different drummer. 

 

What a brave new world, that is so dangerously out of touch with the shared reality of their fellows, and the rest of the world. 

 

 

 

Why The Democrats Got Their Clocks Cleaned

The Democrats failed to make the most of a great moment in history because there was no Democrat brave enough, independent enough, to energize their party around the mandate for reform given to them overwhelmingly by the people in 2008.

Remember when everyone thought that the Republican party was dead, completely and utterly repudiated in 2008?  And how they have risen from the dead!

Obama was a pawn of the moneyed interests before he even took office.  He didn't sell out;  he was a well engineered product with a well targeted brand, selected and groomed for it.  

Less a politician than a thoroughly modern manager, Obama's primary objectives are to please his shareholders, whomever those may be.   And they were certainly not the people who voted for him.   He is not any kind of progressive or reformer once one scratches the surface.

That became clear in his first 100 days with his appointments.  And in his defense, the Democrats on the whole have been throwing their constituents under the bus for the sake of Wall Street money since 1992.  So Obama was not so much a betrayer as a fake, a member of the Wall Street wing of the Democratic party.  He is always fumbling, and making excuses, but at the end of the day, he did as he was told. 

The Democratic leadership has tried to bridge a gap between representing the people and fattening their wallets, and have ended up pleasing few.  They won't become the party of the moneyed interests because they cannot sell out more deeply than their counterparts.  And as for their traditional constituency in the working class, the only rejoinder is, 'the other guys are worse.'  And the other guys say the same thing to their base about them.  And no one is getting served, except the one percent.

I think that the 'other guys' are going to be worse, and people are just going to have to see how bad things can get, again, before they can get any better. 

From an FDR 1936 campaign speech in Madison Square Garden:

"For nearly four years you have had an Administration which instead of twirling its thumbs has rolled up its sleeves. We will keep our sleeves rolled up.

We had to struggle with the old enemies of peace—business and financial monopoly, speculation, reckless banking, class antagonism, sectionalism, war profiteering.

They had begun to consider the Government of the United States as a mere appendage to their own affairs. We know now that Government by organized money is just as dangerous as Government by organized mob.

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me—and I welcome their hatred.

I should like to have it said of my first Administration that in it the forces of selfishness and of lust for power met their match. I should like to have it said of my second Administration that in it these forces met their master."

Bernie Sanders: Breaking Big Money's Grip on US Elections

Not likely with both major parties swilling at the Big Money troughs, during and after office.

The first step will be to get the politicians to care what the people think and want again, and not treat them with such casual disdain and contempt.



Breaking Big Money’s Grip on Elections from BillMoyers.com on Vimeo.

Jeff Sachs: The Pathological Environment on Wall Street (and in Washington, London, and Berlin)

"But there is a sort of  'Ok guys, you're mad, but how are you going to stop me' mentality at the top."

Robert Johnson, Audacious Oligarchy

Thanks to Bill Still for making this available on the web, and thanks to several people who sent it to me.

It is remarkably similar to something I wrote earlier today, but I am certainly not the only one.  Reform and the lack thereof is the 800 pound gorilla in the room.

Sachs certainly livened up a clubby conference of complacent financerati in the Pennsylvania Room at the Federal Reserve Bank of Philadelphia. The topic is "Fixing the Banking System for Good."  It is not so much what Jeff Sachs said alone, but also how out of touch with reality that group of people may be.

I find this interesting because just today Mary Jo White, the new head of the SEC, has indicated that their policy would be to 'move along' and not look at the financial crisis any longer.

This will continue until there is a problem too large to hide, and the confidence breaks. And then good luck controlling the reaction in the global markets. 

But for now they don't care, because they are operating within hermetically sealed capsules of personal privilege, and are locked into an odd form of group think and willful denial which I call the credibility trap.   In times of general deceit, telling the truth becomes a revolutionary act. 

And it is killing the economic recovery. 

And for now, anyone who speaks out, who speaks the truth, is ignored, ridiculed, marginalized, and threatened sometimes subtly and sometimes not, and generally isolated because no one will stand up with them. 

Neither austerity or stimulus will work until there is genuine reform. 

Don't forget that the CBC's documentary on the precious metals market is on this evening.  I will post a link with the commentary later, and will link to a video when it becomes available.

There is a strong push for change, and an even greater resistance from those whose paychecks and allegiances require them to oppose it.  This generally makes for an interesting episode in history.

Listen to this carefully. 

Thank you to Janet Tavakoli for this:

"I believe we have a crisis of values that is extremely deep, because the regulations and the legal structured need reform. But I meet a lot of these people on Wall Street on a regular basis right now. I'm going to put it very bluntly. I regard the moral environment as pathological. And I'm talking about the human interactions that I have. I've not seen anything like this, not felt it so palpably.

These people are out to make billions of dollars and nothing should stop them from that. They have no responsibility to pay taxes, they have no responsibility to their clients, they have no responsibility to people... counterparties in transactions. They are tough, greedy, aggressive, and feel absolutely out of control, in a quite literal sense. And they have gamed the system to a remarkable extent and they have a docile president, a docile White House and a docile regulatory system that absolutely can't find its voice. It's terrified of these companies.

If you look at the campaign contributions, which I happened to do yesterday for another purpose, the financial markets are the number one campaign contributors in the U.S. system now. We have a corrupt politics to the core, I'm afraid to say... both parties are up to their necks in this.

... But what it's led to is this sense of impunity that is really stunning and you feel it on the individual level right now. And it's very very unhealthy, I have waited for four years... five years now to see one figure on Wall Street speak in a moral language. And I've have not seen it once. And that is shocking to me. And if they won't, I've waited for a judge, for our president, for somebody, and it hasn't happened. And by the way it's not gonna happen any time soon, it seems.

Goldman, Banking, Washington, and Business Ethics: Cultural Observations from Two Smiths

"I'm a very firm believer that a liar is a cheat and a thief and a crook. I don't like liars. I never lie. I always told my own child, "If you murder somebody, tell me. I'll help you hide the body. But don't you lie to me."

"We don't pay taxes. Only the little people pay taxes."

Leona Helmsley


"There is not a more perilous or immoral habit of mind than the sanctifying of success.”

Lord Acton

I wish that C-Span would permit their videos to be 'embeddable.'

Greg's talk is excellent, and thanks to C-Span the video quality is good.


Greg Smith Speaking At Stanford on His Experience at Goldman and Reasons for the Corrosive Decline in Business Ethics


Speaking of excellent essays on corruption, Yves Smith has written a wonderful piece titled, Jack Lew’s Grotesque Citi Employment Deal and the Institutionalization of Corruption.

Corruption, facilitated by the credibility trap, is the biggest problem facing the West today. That is the real subsidy, the most debilitating entitlement.

It is the belief of the elite that the power of their office is an achievement that rewards them with the right to lie, cheat and steal, both for themselves and their friends.

Although it is most important to understand that they would be shocked and insulted if one uses those words, lie, cheat and steal, to describe what they are doing.  They view themselves as exceptionally hard working, as obligated by their natural gifts and superiority.

Through a long indoctrination that starts sometimes in their families, but is most often affirmed in their elite schools and with their circle of privileged friends, they learn to rationalize selective moral behaviour not as immoral but as 'the entitlement of success.'  And they are supported by a horde of morally ambivalent enablers who will tell them whatever they wish to hear.

There are one set of rules for themselves and their friends, and another set of rules for the rest.

Few who actually do evil consciously choose to be evil.  They rationalize what they do in any number of ways, but the deceit often hinges on their own natural superiority, and the objectification and denigration of the other.  We are makers, and they are takers. Although many may work hard, they see their own work as having special value and merit, while the actions of the others are inconsequential and unworthy.

Given enough time, their rationalizations become an ideology, desensitized to the meaning and significance of others outside their own select group.  This supremacy of ideology empties their souls, and opens the door to mass privation and even murder, although rarely done by their own hands.

This is what Glenn Greenwald calls 'justice for some.' Or even earlier what George Orwell captured in the slogan, 'Some animals are more equal than others.'

And just to be clear on this, with regard to the Anglo-American political situation, the tragedy is not that just some are corrupted, which is always the case. The tragedy is that the Democrats and the Labour Party learned that they could become as servilely corrupted by Big Money as the Republicans and the Conservative Party, while maintaining the illusion of serving their traditional political base.

And it has rewarded them very well in terms of extraordinarily well-funded political power, and almost unbelievable personal enrichment afterwards.  

In such a climate of corruption,  political discourse loses the vitality of ideas and compromise for the general good, and take on the character of competing gangs and crime families, engaged in aggressive schemes and protracted turf wars, tottering from one pitched battle and crisis to another.

"A credibility trap is a condition wherein the financial, political and informational functions of a society have been compromised by corruption and fraud, so that the leadership cannot effectively reform, or even honestly address, the problems of that system without impairing and implicating, at least incidentally, a broad swath of the power structure, including themselves.

The status quo tolerates the corruption and the fraud because they have profited at least indirectly from it, and would like to continue to do so. Even the impulse to reform within the power structure is susceptible to various forms of soft blackmail and coercion by the system that maintains and rewards.

And so a failed policy and its support system become self-sustaining, long after it is seen by objective observers to have failed. In its failure it is counterproductive, and an impediment to recovery in the real economy. Admitting failure is not an option for the thought leaders who receive their power from that system.

The continuity of the structural hierarchy must therefore be maintained at all costs, even to the point of becoming a painfully obvious hypocrisy.

And you know how I feel about this.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

The problem which the modern world has not yet grappled is how to react to the rise of a global elite, which considers itself the children of a power which is above national restraints, and a law unto themselves.

Their success has been propelled by the dominance of Anglo-American financialization, and the rise of oligarchies in Russia, China, Latin America, and India.  Countervailing power has been co-opted and subsumed.  Any opposition has become marginalized and isolated.

The new oligarchs are supported by their fiat currencies, which together the increase of insubstantial 'cashlessness' in wealth,  provides the ability to define and allocate value at will. 

They have a penchant towards globalization and deregulation to support selective justice, to the extreme detriment of local rule, and individual choice and freedom.   Above all, they are a law unto themselves, above what they consider subhuman restraint.  Übermenschen.

“Our light-speed, globally connected economy has led to the rise of a new super-elite that consists, to a notable degree, of first- and second-generation wealth. Its members are hardworking, highly educated, jet-setting meritocrats who feel they are the deserving winners of a tough, worldwide economic competition—and many of them, as a result, have an ambivalent attitude toward those of us who didn't succeed so spectacularly. Perhaps most noteworthy, they are becoming a transglobal community of peers who have more in common with one another than with their countrymen back home. Whether they maintain primary residences in New York or Hong Kong, Moscow or Mumbai, today's super-rich are increasingly a nation unto themselves...

A multibillion-dollar bailout and Wall Street’s swift, subsequent reinstatement of gargantuan bonuses have inspired a narrative of parasitic bankers and other elites rigging the game for their own benefit. And this, in turn, has led to wider—and not unreasonable—fears that we are living in not merely a plutonomy, but a plutocracy, in which the rich display outsize political influence, narrowly self-interested motives, and a casual indifference to anyone outside their own rarefied economic bubble."

Chrystia Freeland, The Rise of the New Global Elite

Of course this tendency is not new in history, as it is a facet of the human heart, and the empires of the past. But the scope of it is something rarely seen before this. And it is supported by technologies for mass action and control that seem terrifyingly powerful and new.

And as hard as it may be to believe, this too shall pass. But as always, we have some work to do in our own time.

“The mills of God grind slowly, yet they grind exceeding small;
Though with patience He stands waiting, with exactness He grinds all.”

Henry Wadsworth Longfellow