Simon Johnson: Money, Power, and the Rule of Law

The dominant political parties in the US or the UK really 'get this,' because they do not want to. They are fine with collaborating with the status quo as long as it serves them.

They have become a brothel for the monied interests and nationless corporations.

They seem to have lost their sense of honor and civic duty. It has been choked by greed and selfishness, a lack of empathy and proportion. Their hypocrisy knows no bounds

NY Times
Money, Power and the Rule of Law
By Simon Johnson
October 4, 2012

Economic policy is always torn between helping the broader social interest – lots of ordinary people – and favoring particular special interests. Unfortunately, special interests typically win out in the kind of situation we have in America in 2012, when it’s all about spending money to win friends and influence people.

The most effective way to push back against powerful special interests is to have the same rules for everyone – and to enforce those rules fairly, even when they are broken by the richest and most politically connected people in the land. Attorney General Eric Schneiderman of New York took a major step toward restoring the rule of law this week, by bringing a case against JPMorgan Chase. But it will be an uphill battle; the forces against him are incredibly strong, including some within the Obama administration.

Special interests always want to take over and organize society for their own benefit. In the terminology of economics, there are always some “rents” to be had – meaning some form of extra compensation that you get from tilting the playing field in your favor. Powerful people are always “rent-seeking,” another way of saying that they would like to feather their own nests. And such activities impose costs on society, lowering incomes and limiting opportunities for everyone else.

When money is the primary source of power, the special interests win hands down. They can create advantages for themselves. One way is through the market mechanism – as monopolists did with railroads and industrial sectors at the end of the 19th century.

Or they can capture the government and use state policies to help themselves – for example, by deregulating the financial sector and allowing excessive risk-taking in big banks. The ability to take such risks hurts all consumers and taxpayers while helping the special interests who get this advantage...

Read the rest here.

Gold Daily and Silver Weekly Charts - More Confusion and Concerns at the Comex

Light trading today despite all the overnight excitement.

Last night The Financial Times ran an online story that was their front page lead today suggesting that the CFTC was going to simply drop their four year investigation of manipulation in the silver market.

It is of course possible they would do this, but it seemed rather heavy-handed and clumsy to just drop a four year study one month before its expected release, especially since it is judged to be somewhat controversial. And it involves a futures market that has been rocked by scandal after scandal over the past two years.

Today we find out that the FT may have gotten their information wrong which is certainly a faux pas for a major news media outlet that generally would not run something like that without a dual confirmation of the facts, especially when it involves key market information.

At the end of the day, in the longer term, I am not sure that any of this matters. I think the market is heading towards a default in silver unless there is some sort of action or settlement imposed by the government and the exchange.

The metals manipulation has been as bad or even worse than LIBOR, and at some point rude reality is going to intrude given the stubbornly physical nature of bullion. At least that is what history suggests will happen after a long period of price manipulation.

But let's see what happens.

Still, this sort of nonsensical uncertainty and lack of transparency suggests that something is very wrong behind the scenes, and The Major Players and Very Serious People are trying to figure out what to do about it.

And of course, there is the impediment of the credibility trap for the government and the regulators to consider. Especially if He-Who-Must-Not-Be-Allowed-To-Fail has his tit irretrievably caught in the wringer, as they used to say, on the short side of a rising market where covering might not be 'practical.'

I hear the Brits are fit to be tied about the hypocrisy, especially after the public brow-beating they have taken over Barclays and LIBOR. And now the Yanks have the temerity to interfere with the attempts to clean their own house because of the potential collateral damage to Wall Street.

Read what Glenn Greenwald has to say about the modern rule of law with liberty and justice for some, and you will get the picture:

"You can often, and I would say more often than not, in leading opinion-making elite circles, find an expressed renouncement or repudiation of that principle...All of these acts entail very aggressive and explicit arguments that the most powerful political and financial elites in our society should not be, and are not, subject to the rule of law because it is too disruptive, it is too divisive, it is more important that we should look forward, that we find ways to avoid repeating the problem...the rule of law is not that important of a value any longer...

The law is no respecter of persons, but the law is also a respecter of reality, meaning if it is too disruptive or divisive that it is actually in our common good, not the elite criminals, but in our common good, to exempt the most powerful from the consequences of their criminal acts, and that has become the template used in each of these instances."

And for any who think that the problems are insurmountable, and that nothing can be done, here is a fine example of how wrong they can be. Each generation must take up its struggle with the principalities and powers, and dark forces in high places, especially those in their own hardened hearts.

Glenn Greenwald On the Rule of Law: With Liberty and Justice For Some

"Most of the events that we consider to be progress in American history were driven by the reverence for this concept that we are all equal under the law, that equality under the law is how we determine if we are perfecting the union...And what I think is radically different about today is not that the rule of law suddenly is not always being applied faithfully, because that has always been true. What is different about today, radically, is that we no longer bother to affirm that principle...

You can often, and I would say more often than not, in leading opinion-making elite circles, find an expressed renouncement or repudiation of that principle...All of these acts entail very aggressive and explicit arguments that the most powerful political and financial elites in our society should not be, and are not, subject to the rule of law because it is too disruptive, it is too divisive, it is more important that we should look forward, that we find ways to avoid repeating the problem...the rule of law is not that important of a value any longer...

The law is no respecter of persons, but the law is also a respecter of reality, meaning if it is too disruptive or divisive that it is actually in our common good, not the elite criminals, but in our common good, to exempt the most powerful from the consequences of their criminal acts, and that has become the template used in each of these instances."

Glenn Greenwald

I have been thinking along these lines for some time, that the rule of law in the West is becoming supplanted by a new kind of utilitarianism, relying on expediency in the service of power and the faux science of amoral economics, in order to excuse the massive frauds and criminal acts of the Anglo-American Empire that seems to be increasing.

Any concerns about the rule of law are roundly dismissed as a false concern with moral hazard as we saw so clearly in the great push for $700 Billion TARP based on a couple of handwritten sheets of paper, and a general amnesty for the perpetrators.