The Elites Have Lost The Right to Rule

Tyler Durden's picture

From Michael Krieger of KAM LP

War is the growth hormone of the cancer that is big government. 

- Alex Jones

A government always finds itself obliged to resort to inflationary measures when it cannot negotiate loans and dare not levy taxes, because it has reason to fear that it will forfeit approval of the policy it is following if it reveals too soon the financial and general economic consequences of that policy. Thus inflation becomes the most important psychological resource of any economic policy whose consequences have to be concealed; and so in this sense it can be called an instrument of unpopular, that is, of antidemocratic policy, since by misleading public opinion it makes possible the continued existence of a system of government that would have no hope of the consent of the people if the circumstances were clearly laid before them. That is the political function of inflation. When governments do not think it necessary to accommodate their expenditure and arrogate to themselves the right of making up the deficit by issuing notes, their ideology is merely a disguised absolutism.

- Ludwig von Mises

How Wall Street Died

Let me take you back to the fall of 1999.  I was a senior in college without a clue what I wanted to do with my life.  Wall Street was in a boom and seemed exciting.  I had always loved the financial markets since I had first discovered them years earlier; however, I wasn’t convinced this was the profession I wanted.  I had majored in Economics at school for practical purposes but I found almost all of the courses to be extraordinarily uninspiring with the exception of a few like Corporate Finance and the Economic History of China.  It was the general micro and macro economics courses that I found the most painful to sit through.  I wasn’t alone in this assessment.  Many of my close friends were Economics majors as well and we all felt the same way (I later found out this was because we were being indoctrinated in voodoo Keynesian economics) .  So even with the Economics degree I wasn’t sure that I wanted to pursue a career in finance given the fact that I found myself more interested in subjects such as English , History and Philosophy.  Nevertheless, the firms were hiring, I had the degree and it would allow me to move back to New York City without living at home. 

What I discovered as I interviewed for jobs disturbed me right away.  Every single firm with the exception of one was completely obsessed with math.  Entire interviews revolved around “how quantitative are you” and the like.  Although I hadn’t had much experience with investing I had enough to know this line of thinking seemed preposterous.  It seemed to me only basic math skills are necessary to be a successful equity investor.  Besides that, it seemed that the key is understanding that the world is always changing rapidly under the surface and therefore what is a good business today might be bankrupt tomorrow and what is a start up today could be the next Microsoft.  This seems obvious but the skill set to figuring all this out is more geared to an appreciation of human psychology, historical cycles and cultural shifts (both fads and structural changes) than math.  What I realized later is the reason they were so focused on mathematicians and Phd’s is that Wall Street was moving away from what it was always meant to be - a conduit between the holders of capital and those that wish to deploy that capital in productive economic activity.  Rather than trying to hire a well rounded workforce of intelligent college graduates the firms were hiring a cadre of quantitative robots that would play an instrumental roll in blowing up the world’s financial system.

When you get too many people of a particular mindset (in this case highly quantitative and academic) to aggregate in a field that is very much a people business and one where “street smart” common sense is of extreme importance you are asking for serious trouble.  When you couple that with a Federal Reserve that keeps interest rates too low what you get is a bunch of quants inventing products that provide a yield sufficient for pensions and others struggling to earn a return.  Products that are completely mispriced for the risk inherent in them.  I am not placing all of the blame on the Wall Street firms (although they deserve a lot and the fact people haven’t been punished severely is a huge reason why there is no confidence on main street), rather I believe the Federal Reserve deserves 95% of it.  If it wasn’t for them manipulating the price of money to absurdly low levels you wouldn’t have had the rush into toxic products in a search for yield.  While the newly enthroned Wall Street quant army would surely have done their damage nonetheless it wouldn’t have resulted in the complete destruction of the financial and monetary system that we face today.  In a nutshell, this is how I think Wall Street died and until it gets its act together will remain a corpse.  

The Elites Have Lost Their Right to Rule  

One of my favorite quotes is from Joseph Schumpeter who said “everyone has elites the important thing is to change them from time to time.”  Of course, this is what happens in a well functioning democracy.  The problem today and the reason why the United States is on the verge of some sort of revolution (I believe it will manifest as a revolution of ideas and not an armed one) is that the election of Obama has proven to everyone watching with an unbiased eye that no matter who the President is they continue to prop up an elite at the top that has been running things into the ground for years.  The appointment of Larry Summers and Tiny Turbo-Tax Timmy Geithner provided the most obvious sign that something was seriously not kosher.  Then there was the reappointment of Ben Bernanke.  While the Republicans like to simplify him as merely a socialist he represents something far worse. 

Of course it is not just Obama.  He is at the end of a long line of Presidents that think they have some sort of divine right of kings to rule.  Think about the Presidency of the United States since 1988.  Bush, Clinton, Bush…If Obama had not won the Democratic primary we would have ended up with President Hilary Clinton.  Catch my drift?  Something is not right here.  This is the United States not some sort of petty monarchy.  There is no divine right of any family or group of families to rule.  When this starts to happen you get the disaster we are now faced with.  That said, the bigger point is this.  What Obama has attempted to do is to wipe a complete economic collapse under the rug and maintain the status quo so that the current elite class in the United States remains in control.  The “people” see this ploy and are furious.  Those that screwed up the United States economy should never make another important decision about it yet they remain firmly in control of policy.  The important thing in any functioning democracy is the turnover of the elite class every now and again.  Yet, EVERY single government policy has been geared to keeping that class in power and to pass legislation that gives the Federal government more power to then buttresses this power structure down the road.  This is why Obama is so unpopular.  Everything else is just noise to keep people divided and distracted.  

Getting Into the Mind of Ben Bernanke

I do not have a clear window into the highest levels of power in many areas such as the military or the intelligence community but I do have a very good understanding of it when it comes to the financial system and the economy.  At the end of the day everyone knows that those who can create the money and credit have the ultimate power over any political system.  Therefore, at the top of the economic power of the world is the Federal Reserve and at the top of that is Ben Bernanke.  This is why I took a great deal of interest in reading the full text of his speech today.  Much will be written about it but I want to tackle it from two points.  First, who is Ben Bernanke?

You can really see into his head from reading this speech.  He is an academic who thinks he is smarter than everyone else which is why he is in the position he is in.  He thinks the key to monetary policy is to trick people into doing things that will hurt them in the end.  He believes the mal-investments he intends to push people and institutions into equals economic growth.  What surprises me so much about the investment community and the American public in general is that so many fail to understand that we live in a top down centralized economic system much more similar to China in more ways than people want to admit.  We look at how the government steers the economy in China and sneer.  How are we so different right now?
As far as the speech itself, it confirms something I mentioned several weeks ago.  Banana Ben absolutely wants to do a massive QE2 program.  The only thing holding him back is gold is near an all time high.  What he wants is gold much lower and stocks much lower to give him cover.  Gold has not cooperated so he is in a bind.  He cannot print a massive amount of money with gold here and stocks at 1055 because what happens if gold soars and stocks sell-off in the days that follow such an announcement?  What if the response in the treasury market is not as desired?  He is scared to do it here and he is right to be scared because such a reaction would be the end of the Fed right then and there.  The Fed will be gone anyway within a few years in my opinion but it’s going to fight hard to survive and if you want to make money in this market you need to understand that.  The most powerful institution in the world is fighting for its survival.  Never forget that.

So what is he going to do?  I believe that the Fed and government are doing a lot more than people think to manipulate all markets behind the scenes.  After all, they have publicly announced their manipulation in many other ways so does it make any sense whatsoever to assume they aren’t doing a plethora of other things behind the scenes?  Of course not.  I think that with the Fed in a bind they will accelerate and become ever more aggressive in behind the scenes games.  This will make markets even more volatile and extraordinarily challenging.  This is financial war make no mistake about it.  The only way in my opinion to survive this is to buy all dips in precious metals, agriculture and oil.  It is in these three areas that I expect to see the most price inflation as money eventually figures out the end game.  The end game is more and more people will eventually wake up to the fact that the markets are a hologram put in front of you by the magicians at the Fed.  That what constitutes real wealth in the years ahead will be owning food, energy and a means of exchange that will be accepted should a black market economy arise as it has in virtually all nations at one time or another throughout history.

In the end, the elites will be overthrown and a power vacuum will form.  The transition period will be extremely difficult as the elites will fight their demise to the end.  For you see, they care nothing for you they care about their power and control.  Nevertheless, rulers have always only ruled by the will (or apathy) of the people and when the people become overly taxed and abused they always rebel.  The main thing to think about is what kind of society do we want to rebuild from the ashes.  I am of the view that it must be a return to the Constitution and an elimination of central banking power and secrecy.  Let’s not fall for a demagogue or be pushed into a war when things are at their worst.

Have a great weekend,

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trav7777's picture

You voted for obama, bitch

SRV - ES339's picture

Which means he didn't vote for McCain / Palin... can't blame him for that!

Turd Ferguson's picture

No shit.

February 10, 2008. The day the Turd quit the Republican Party and became "unaffiliated".

Careless Whisper's picture

ladeez and gentlemen. (r) and (d) are both the same. wake up. they both work for the banksters, not the people. with the exception of the honorable ron paul.

want to see gov out of control? welcome to the suburbs of new york city, where a local poleece chief makes $301,534 per year for fighting "crime", which really means giving out tickets for those that can't drive 55 on the highway. but that's a bargain of a salary for the good taxpayers because last year a neighboring small town poleece chief made $550,000.

i have no idea why they think they are worth 4x the salary of an f.b.i. agent.

you can't make this shit up.


Caviar Emptor's picture

We only got the silly party and the very silly party now.

Gold bitchez!

Marla And Me's picture

Oh, it has the potential to get plenty sillier still.  Ladies and gentlemen, let me introduce Charlie Rangel's last contribution to a stellar carreer </s>:  H.R. 5741, aka the "Universal National Service Act "

Rangel submitted this bill to committee on July 15, 2010.  The act's purpose is "[t]o require all persons in the United States between the ages of 18 and 42 to perform national service, either as a member of the uniformed services or in civilian service in furtherance of the national defense and homeland security, to authorize the induction of persons in the uniformed services during wartime to meet end-strength requirements of the uniformed services, and for other purposes."  This required national service will last two years. 

Thank you Charlie for all your hard work.  Future generations will stand in awe of your sacrifice for the public good... 

Cathartes Aura's picture

National service is the usual term for compulsory military service programmes in countries including Austria, Denmark, Finland, Germany, Greece, Guyana, Israel, Iran, Malaysia, Mexico, Norway, the Republic of China (Taiwan), Russia, Singapore, South Korea, Sweden, Switzerland and Turkey. Conscription in the United States was called Selective Service and continued until 1973. Most NATO countries discontinued obligatory military service in the 1970s. Israel was the only country to conscript young women as well as young men for military service in the late 20th century.

well done Charlie. . . good luck with those "ethics violations". . .

Marla And Me's picture

Somehow, those things have a way of going away when one plays the good soldier...  I expect Rangel to now retire without a blemish on his record...

jeff montanye's picture

seriously, building on the schumpeter quote above about changing elites, doesn't it seem as if the most likely chance of getting some of the reforms required to transition to a more sustainable nation and world involve the policies associated with ron paul and, really, very few others at the national level?  these include an end to the wars in asia, the too big to fail, and the ersatz wars on drugs and terrorism; fiscal sustainability; a transparent and competent monetary system; a vast reduction in the military industrial complex; and a return of civil and economic liberties.  this paradigm would seem to offer the least destructive and most likely to succeed path to a better future.  so who's his v.p. (because he may well not complete a term if elected)?

ISEEIT's picture

+1000000 (seems to be a common accolade at ZH). I am directly responsible for the survival and well being of six beautiful individuals, and many more who I would hope to be useful for if required. I appreciate your post- collapse considerations, but to be frank, I am far more unsettled by the reality that appears far too likely to precede the establishment of any new structure.

Scares the shit out of me only because of the potential harm to the people I love most. I would be fine in a tent for a while, what I really fear is a violent attempt to cling to power by the old guard, and more specifically by those who they incite to act for them.'s picture

harm to the people I love most. I would be fine in a tent for a while,

how ya going be fine in a tent with 6 beautiful people? need a big tent, especially if they are females, which i am sure they all are. how do you take the time and write on a blog, with all these people needing you?

ISEEIT's picture

I don't sleep much. And yes, my wife and the other beautiful people include an extraordinary two year old Granddaughter, three really like able sons and a really lovable person who is the Mother of my Granddaughter.

It's my reality and I love it.

Spalding_Smailes's picture

No need to answer Kathy she is a drunk ....'s picture

i just don't hold my liquor well. i always, pretty much always have a bed really really close by when i drink alcohol.

THE 4th Quadrant's picture

I hope you have one of those hospital Overbed Tables that you keep your computer on so you can keep the lolz going while incapacitated.'s picture

i am so glad you likke to share sooooooo much about your personal love life and people. well i am happy for you, now goooooooo away,.

i have to go get my delete button fixed.

ISEEIT's picture

So sorry bitch, I've got a problem with booze to. That's the problem.

Oh my God! Not me?

Give it a rest.


nhsadika's picture

$1 trillion in personal taxes collected / year - $ 1trillion military/security/war state = $0

Everything else is running on fumes (of ink jet printers).


ISEEIT's picture

Just the site of Marla's name drew me to respond. Love your post too.


Hephasteus's picture

First Name Fuck

Middle Name Your

Last Name War

All signed up.

Coast Watcher's picture

Rangel has put this in four or five times now, going back into the Bush II days when he did it to embarrass Bush over the war and what Rangel calls the unequal racial mix of the combat forces. It never gets out of committee, doesn't even get a cosponsor most times. The strange thing is that he put it in again during Obama's presidency. The bill went in before the ethics blow-up. Interesting.

Marla And Me's picture

Thanks for the heads up Coast Watcher.  The problem that I have with this bill is that both parties have been using this language and pushing for some kind of mandatory civil service for the country for quite some time now.  Both Obama and McCain brought this kind of language up in their campaigns.  Given the language of the bill, and the fact that they seem to enjoy ramming through huge bill through Congress without reading them, I'm not inclined to trust our elected officials too much these days.

Geoff-UK's picture

Democrat:  a man who wants to drive us to Socialism at 95 mph.

Republican:  a man who feels very strongly we should keep the speedometer at 55.

Al Gorerhythm's picture

No, they're folk who want you to believe that the speedo' is registering 55, whilst traveling at the same speed as the Dems.

Bananamerican's picture

no, Republicans want you to WEAR a speedo while they DO you!

Democrats want to GIVE you a FREE speedo.

DosZap's picture

No,they give you one, and tell you not to wear it,tell you Ben Dover, and we will load you up!.

The Dems are really the Fudgepacker Party.(Broke Baaaack Mountain Party).

ISEEIT's picture

Not inclined eh? WTF?

You ought to be so utterly creeped out that your soul cringes and you immediately recoil in disgust.

wake the roach's picture

Citizen corps, Americorps, Senior corps yada yada yada... Yep, that is the future of "employment" and in time will become completely voluntary... What else are we going to do with our time when 90% plus of todays resource waste employment soon becomes history and the rest of our labor is largly replaced by technology... Welcome to what Marx correctly envisioned as pure communism...

Like it or not, capitalism is dead (as a means to produce monetary profit via labor by increasing energy consumption)...Tomorrows economic medium of energy exchange will be through credits (initially labelled rations) that are distributed freely and equally leaving every individual to pursue there own self interest which in a large part means voluntary service to others...

"From each according to his ability, to each according to his need"...

Collectivist hell or the painful beginning of a future of unlimited global wealth and human potential?... Who the fuck knows but you are welcome to quote me on this 5 years or so from now... Welcome to Obamas vision ;-)


tmosley's picture

This is the dumbest thing I have ever heard.

Where do you think this magic technology is ging to come from that will produce everything that people need?  Who do you think is going to allocate the fruits of their production?  Who is going to maintain them.  People don't do any of this for free.  If you think they will, then you are welcome to join your Komrads in North Korea.

Hulk's picture

Never, ever, question magic technology tmosley, its all the hopium we have left...

OldTrooper's picture

Let's see what the Constitution says about mandatory national service:

Amendment 13
1. Neither slavery nor involuntary servitude, except as a punishment for crime
whereof the party shall have been duly convicted, shall exist within the United
States, or any place subject to their jurisdiction.

2. Congress shall have power to enforce this article by appropriate

Thanks, but I think me and mine will skip national service.

wake the roach's picture

Haha yeah, I'm sure that most of the worlds middle/upper class share your feelings today but that will change when the supermarket shelves are empty...

Remember that you are vastly outnumbered by the great disillusioned... The worlds population that capitalisms wealth and freedom forgot...

Do not underestimate the power of the social force that will be created when the worlds disillusioned are given economic freedom from the profit/labor system... Then provided with the tools and entrusted with the responsibility of becoming a valued contributer to the common wealth... Just sayin, think about it...


"Today Americans would be outraged if U.N. troops entered Los Angeles to restore order; tomorrow they will be grateful! This is especially true if they were told there was an outside threat from beyond whether real or promulgated, that threatened our very existence. It is then that all peoples of the world will pledge with world leaders to deliver them from this evil. The one thing every man fears is the unknown. When presented with this scenario, individual rights will be willingly relinquished for the guarantee of their well being granted to them by their world government."


Henry Kissinger...









Bendromeda Strain's picture

Politicians are such small minded plagiarists. Some cat named John said it much better a couple thousand years ago from his "writer's retreat" at the island of Patmos.


tmosley's picture

You can only "free" the people from the profit/labor system at the point of a gun.  You have to continue pointing the gun at them forever.  Eventually, the gun will get heavy, and hte workers will get lazy.  Nothing will get done, and all will starve together.  That is the fruit of your demented ideology.

People doing what is best for themselves, while not intruding on the natural rights of others is what leads to an increase in societal capital.  NOTHING ELSE.  Every time some fat-fingered government, or some mind-expanded hippy has tried, it has ended in disaster, or at best, a reversion to primative tribalism.

Gwynplaine's picture
Gwynplaine (not verified) wake the roach Aug 28, 2010 11:53 AM

wake - after the supermarket shelves are empty, it's every man for himself. 

No doubt the next plan is for a command economy, but that just creates a zombie state (still standing but dead).  Soviet Russia lasted about 75 years. Castro's Cuba is pushing 60 right now.  Yep, we can sqeeze a few more generations out of this turnip going that route - pity anyone who will be alive in 2080 though.

Ultranaut's picture

You forgot China. I guess they don't really fit with your argument though. I do think the rise of China has provided a new model the capitalist elites of the world find inspiring....

DosZap's picture

Yep,getting real close to Amending their Constitutions.

Whats that smell's picture

The reasoning is if a rich kid has to go to war there will not be as many "wars of choice" At least the kids dad will have to bribe a congressman to  get the child a soft job, Or the youth could do the Ted Nugent thing in boot camp. Rangel is a small time looter, what about all the white collar republican criminals?

grunion's picture

They are doing fine, right along with the misguided, out-of-touch democrat criminals.

New_Meat's picture

What's that?

This "rich kid" myth has been debunked so many times.  Mac Owens has kept up with and re-confirmed, e.g.:

Seems that the "dark green" types stay longer in Combat Service Support jobs, "light green" types going for the adventure in combat arms.  All of that is statistical, nothing to suggest that has any individual bearing.  Brother Roscoe would rip out my ... er ... tongue otherwise.

Rangel is just angling for the draft so the young crowd can experience tear gas up close and personal; then have something to tell their grandkids about.

- Ned

IQ 145's picture

 "He wants Gold to be much lower"; people in Hell want ice water, or so they tell me.

Alexandre Stavisky's picture

Everybody knows that the boat is leaking
Everybody knows that the captain lied
Everybody got this broken feeling
Like their father or their dog just died

Everybody talking to their pockets
Everybody wants a box of chocolates
And a long stem rose
Everybody knows

Everybody knows that you love me baby
Everybody knows that you really do
Everybody knows that you've been faithful
Ah give or take a night or two
Everybody knows you've been discreet
But there were so many people you just had to meet
Without your clothes
And everybody knows