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Watch The Political Central Planners: We're Doomed
Mish posted a reference to a "Simulation of a US State
Defaulting" video for a panel of "luminaries" at the Buttonwood
gathering in New York. These are our leaders: From officials in the Bush and Clinton
administration, these are the "top" people that were in positions to
decide such things, including Robert Rubin, Josh Bolten, Glenn Hubbard,
Laurence Meyer, and Laura Tyson.
In their advisory role to the President, including roles
representing the US Treasury and the Federal Reserve, they discussed for a
couple hours what to recommend to the President regarding assistance to the
fictional US State of New Jefferson that will be unable to make a $1.5B
municipal bond payment in 48 hours.
Long story short: I
watched the whole thing. The entire
video. A couple hours. I am now faced with the irksome question as
to whether a "well adjusted" person would act out aggression upon
himself or upon those around him.
Summary: Although the
scenario at times had bits of interesting dynamics (if you're interested in
back-room discussion as to what happens in such meetings), after you lose a
couple hours of your life watching them banter, they decided to recommend to
the President (a fictional female in this scenario) that the US Treasury extend
a 30-day loan to the fictional state of New Jefferson in exchange for the state
promising to be good in the future, and possibly cede sovereignty to the
Federal Government.
My conclusions:
- After significant preparation time for this scenario, it
is clear they did not have mastery of the situation dynamics, liabilities, and
issues. They sure seem to love the
process, though, and the only thing missing from the meeting were delectable
snacks. - It is easy to conclude none of these persons are
geniuses. While geniuses are rare, they
exist; unfortunately, everyone on the panel ranks somewhere between Cliff
Clavin and Doctor Nick. - While this simulation is fictional, the panelists are
not. These are your actual political and
executive central planners, at work for all to see. - None of the individuals fundamentally understand the
problem, and no "actual" solution was proposed, nor even discussed,
nor even raised as a possible topic. - We're doomed.
The ZH readership includes healthy groups of individuals
that debate whether these financial crises are "planned", or are mere
consequences from permitting us all to be ruled by central planners with
child-like mental capacity and non-childlike neuroses and psychoses. However, whether planned or not, the
stochastic component has always been the random actions of political elites
(influenced by the electorate), and the (in-)competence of their administrative
staff. We see here those administrative
central planners on their full glory.
And, it is glory like a thousand setting suns.

The issue with New Jefferson (a fictional US State, holding
no resemblance whatsoever to California, New York, Illinois,
nor even the US Federal Government) is one of excessive leverage. The answer, of course, is more leverage. And, it would be really nice if the Federal
Reserve would simply print money to "clean it up". (Yes, they actually said that. Multiple times. Not a problem, though, the Federal Reserve
said it wouldn't. Unless it decided it
needed to do so.) Another panelist
proposed more US Treasury aid to all the States in the future, as that (of
course) would be spent wisely, helping other states avoid such problems in the
future. In fact, the problem with New
Jefferson now is merely that the US Federal Government didn't in the recent
past provide more money to New Jefferson.
None of them raised the issue of leverage. None of them discussed how extending further
leverage will actually make the problem worse.
Rather, like machinations regarding Greece, if we merely kick the can
out another 30 days, we will have time to appoint a task force to "deal
with it". (No suggestions are made
as to "how" to deal with it, because that's not their job, that would
be a job for the yet-to-be-appointed task force. Rather, the only job now is to decide whether
to extend 30-day loans to New Jefferson without Congressional input if we think
New Jefferson will in-the-future cede sovereignty.)
As much as it's fun to conclude an evil authority is
central-planning the worldwide march to a single world government and single world
currency, and as much as these panelists would probably support such a thing,
their painful-to-watch performance in these couple hours merely illustrate that
Dr. Evil would never ever ever ever ever ever ever ever ever ever invite them
to be a part of the plan.

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qe2
stealing in broad daylight, just do it in an orderly fashion;
in small doses, billions or hundreds of billions, and routinely.
oh well. the first and only mandate of the fed ...( they need more
authority in difficult ponzi end times. )
what we need is an armed branch of the fed, it should really have it's
own shadow militia and stop billing the american taxpayer for using
theirs.
.
the question is who is the rightful authority of the money system.
either you believe there is a place for government or you don't.
if you believe there should be a government at all then that authority
must control the money system or become a slave. the people then must control the
government or live as slaves. anything else is tyranny.
.
ps. i hear bernanke is being advised by bernie madoff as we speak. i say
let the man out and let him earn his redemption working at the fed where
he belongs.
pps. it is all just stealing and counterfeiting in broad daylight.
just wait until the authorities figure it out, there will be hell to pay!
hehehehe
ppss. "no one speaks english and everything is broken." t.w.
.
Thomas Jefferson said in 1802:
'I believe that
banking institutions are more dangerous to
our liberties than standing armies.
If the American people ever allow
private banks to control the issue of their
currency, first by inflation, then by
deflation, the banks and corporations that will
grow up around the banks will deprive the people
of all property - until their children
wake-up homeless on the continent their fathers
conquered.'
A superb article, Mikla. Thank you for posting it.
It reiterates a theme that I've seen a lot of with this crisis: "Never attribute to malice what can adequately be explained by stupidity". Which isn't to say that there isn't malice out there. Incompetence seems to be ruling the day.
stupidity is just a passive aggressive form of malice.
New Jefferson
they are obviously trying to belittle the good name of Thomas Jefferson, and you know damn well he would NEVER cede control to the feds.
Well, they couldn't just call it Jefferson.
There has already been a state with that name.
No problem, the new leader of the disenfranchized Obamorons is Jon Stewart New Messiah, who held his 'Restoring Sanity' rally in DC and gave forth the message 'Simmer down, now!'
Ok if blacks, women, etc had simmered down they'd still be riding in the back of the bus and the ladies would be watching as husband goes to vote...clearly 'simmer down now' isn't a great tactic for change over the course of world history.
But what does Jon Stewart care? He's a multi billionaire who got Obama in office, now its carry the water time for the Dems again, without trying to appear like thats what hes doing too much.
I'm starting to tire of ZHers who decry debt with one hand and support Two Santa Claus RepubliKeynesianism with the other.
If I don't see some support for actual fiscal restraint - including higher taxes - I'm going to start thinking that this blog is less about Austrianism than it is about yet more RepubliKeynesian propaganda.
The gold standard is not a new idea and it's not magic.
Supporting a gold standard does NOT make you a fiscal conservative.
While not specifically related to this article, "taxes" are irrelevant. There is no scenario by which even a 100% tax rate (assuming people will continue to work at that rate) will cover these debts.
Quite literally, the US taxpayer is irrelevant.
The article does not discuss either of the topics in that statement.
Mikla,
I'm sorry if I got ahead of you on the implications of your article. I thought they were pretty clear.
What your article does decry, is "leverage". Reducing public-sector leverage is certainly a valid idea and a pillar of Austrian economics, per Mises.
What neither you, nor anyone else on ZH seems to be willing to do is to actually address how that leverage might be reduced, other than vague notions.
If, as you (and Mises) suggest the debt can't be paid back, then the alternative is debt repudiation - and nobody on ZH dares suggest that. If it can be paid back, then clearly more money should be diverted from consumption into debt reduction - and that means increased taxes even if government expenditures are reduced.
In the absence of any kind of a plan or positive suggestion, this talk about "central planners" is reduced to nothing more than a lot of prattle and RepubliKeynesian propaganda.
As for the "one world currency" well, what's a gold standard if not a "one world currency"????
I am consistently specific: Default. These debts cannot be repaid. Therefore, we can discuss the terms of the default. There are many options. Outright repudiation, bond haircuts, debasing the currency, cooperative restructuring, etc.
The panelists did not even consider that as a topic to be raised. In contrast, IMHO, that is the *only* topic of discussion.
Debt repudiation is one option. Dissolving the sovereign entity is another. There are others. Unfortunately, only adults can have these discussions. Apparently the panelists are not ready for that.
It cannot be paid back. Further, we disagree on the government's ability execute policy to increase its tax revenue (but we probably agree it wants to increase revenue if it could figure out how to do so).
It is time to talk about structured default. Businesses are smart enough to structure for bankruptcy while they still have cash in the bank. Cash on-hand gives you more flexibility, and more options regarding "what comes out on the other side". These central planners are not that smart.
Further, they have no duty *except* for central planning. The description is apt. Perhaps you have an alternative?
That is a very large, but unrelated topic (e.g., the article did not talk about "gold").
Mikla and blindman, thank you for your refreshingly honest replies.
Anyone who reads my posts knows two things:
1) I don't embrace Austrianism because of serious technical deficiencies - at least in today's Austrianism.
2) I do, however, think Austrianism is an honest and forthright solution to the problem of economic collapse, even if I don't endorse those choices.
Where I think right and left can come together is on debt repudiation/default/restructuring. To me, it's an utter inevitability.
Also, believe it or not Progressives want a balanced budget. Yes, they want a budget that spends more on social programs, but that's about priorities. Different people have different views on what they should be. Every Progressive I know also sees the reality of a possible "Keynesian endpoint" and the danger and undesirability of debt.
All Progressives I know are also extremely uneasy about the dangers a large government poses to liberty. They see the greatest threat in different places, but there's still agreement.
If deficit-tax RepubliKeynesianism was thrown out the window, I think most Progressives would be willing to throw DemoKeynesianism out the window.
The question is one of confronting the owners of debt - the people who think they are entitled to a "risk-free" rate of return on their savings simply because they have money.
Mises wrote of: "...a futile attempt to go beyond the limits of human action and to create an orbit of security and eternity removed from the transitoriness and instability of earthly affairs. What an arrogant presumption to borrow and to lend money for ever and ever, to make contracts for eternity, to stipulate for all times to come!"
Return on savings - and even capital preservation - comes from the productiveness of the real economy. It's not a right. It's not a rational expectation in the absence of economic growth.
@ "what's a gold standard if not a "one world currency"????"
it is a standard. a standard does not a currency make. and it is also
as arbitrary as anything else as it comes down to adherence to a set of
agreed upon facts which are all subject to dispute or otherwise negotiated
away into oblivion. or it does come down to "trust" in the unknown or
post rational state of acceptance. history is replete with instances of
people or persons committing crimes to possess others gold. it is no
solution. imo. and even commandments don't work!
.
so.
i suggest debt repudiation entirely as the fed concocted these price levels
to enrich the banks, and it didn't work without a bailout. it did turn
a generation into permanent debt slaves to the banks however, so i say
repudiate all of it and kick the fed to the curb and let the banks fail.
spend our last dime bringing the boys back home and start all over.
and i'm on z.h.
ps. the debts can never be repaid. they were made from thin air and should
be paid back with the same thin air. end the fed.
'Gold standard'...OK! As long as youre prepared for the entire US monetary base to be about $250 billion in total, because thats what the US has in gold reserves, SUPPOSEDLY!
Actually, fine with me! Lets go back to the days when a good suit cost = about 1 oz of gold and was about $20!
Nice. I like this post. We can only hope for better things soon.
The fallacy of your post is that you assume these people want to actually fix the problem you have identified. You danced around the issue, but didn't quite get there .... the problem they seek to fix is how to completely subordinate the sovereignty of New Jefferson without any real threat to their moves coming on grounds of constitutionality. You do that by increasing the morphine drip to ease the pain until the patient finally arrests, and then you sieze the body and harvest the organs, skin, blood, etc. of which it is composed, i.e. the tax-paying citizens and the useful apparati of state. In that scenario, they did just fine.
Mikla - is there a video available of a bunch of top level advisors planning a false flag "attack" maybe involving ink-jet bombs or tanks? If so, I'd like to see it. Maybe they reserve the real smart people for planning stuff like that.... I don't know. I just know what I read here on ZeroHedge.
test
A very good example of what Mikla is talkng about is an esteemed Prof at MIT with all the uber credentials named Simon Johnson. Intellectually very high on anyone's list. He and another "elite Progressive academic" write the "Baseline Scenario" blog. He took great pains is disclosing the misdeeds and criminality in his book "13 Bankers", but he is hard pressed to understand why the FinReg Bill did not outlaw TBTF. Totally oblivious to the real world.
Some people, including Obamaism big gubmint types, get their jollies by controlling other people.
They'll be coming for your booze one day...: http://www.washingtonpost.com/wp-dyn/content/article/2010/10/31/AR201010...
Could states rights take center stage when the dollar makes it's final plunge? More fiscally Conservative states will not be willing to carry the water for states that played the fiddle. Best ones to ride it out will be the farmland and energy rich states.
One might hope that, but perhaps more likely the crisis is used to create a one world currency, which of course, would need one world governance.
Amen to that. I live in one of those states where things are still very good compared to the rest of the nation. The other half refuses to even let me can food anymore becuase it makes us look "funny", even though her mother and mine did it all the time years ago. She thinks I am an alarmist and hoarder; she will find out the hard way I fear while the rest of us suffer all because we looked "funny"
Do it when she's out shopping.
OP is correct.
There is no evil genius at the top. It may seem hard to believe, but there is far more arrogance than intelligence up that high. Intelligence would NEVER cut it moving up the ladder. Only sucking up gets you high enough along with some good luck and the right connections.
Look at this panel...Bob Jewbin? He's a mfing crook. Bolten? Abrasive moron. The rest of them? Same shit. What does this show? That the "leadership" DOES know one thing - how to play the red/blue "bipartisan" thing so that they cannot be BLAMED.
These people are truly NOT intelligent enough to know what the fuck is happening. They will have advisers that will give them advice and they will poll "experts" and this is a total CYA move. Then they will say no one could have seen this coming...
The "leadership" is the same cast of failed insider characters. Smart people, true geniuses, cannot get INTO these clubs, ok?
Look, trust me on this...wtf would some arrogant, conceited asshole silver spoon born-into elite want with a goddamned genius in the room telling him, "you're a stupid fool. If it weren't for your parents' money, you'd be nothing"?? Elites and aristocrats don't WANT smart people around; they want suckups, sycophants, and yes-men! Marie Antoinette was an elite...how smart was SHE with that eat cake thing?
At some point in these families there was genius, but mean reversion makes downward migration inevitable. Organizationally, what matters most is status quo and pleasing your boss.
I have always felt that we have a series of expedient and greedy decisions being made by lots of individuals, not necessarily following a grand plan or scheme. More like, hey if I don't write a mortgage to this deadbeat, someone else will, I might as well get the fee. Sort of an everybody's doing it mindset. Same with politicians. Telling expedient lies with a focus on a 24 hour news cycle, and knowing that anything said about something three months out will be long forgotten before then.
On the other hand, it looks to me like people like George Soros have found ways to be incredibly influential in moving us to a new world order by carefully applying relatively small amounts of money to key pressure points on the system. In watching him, I do begin to wonder if there is a grander scheme at play.
Look at these fucking apparatchiks. Worth their weight in soap.
The System. The Government and the FED has lost their Credibility.
Can it be restored? Maybe in 20 to 30 years. But, printing Money only helps to deteriorate it futher.
When a group of intelligent individuals decide to loot a nation's treasury they obfuscate the actions by wars, endless discussions of the merits of various policies, immersing arguments in statements about national security policy and global response, invoking deep intellectual analysis, hindsite, and historical analysis. Behind it all is just a group of criminals stealing the national wealth. If you don't believe this ask yourself if you have seen one single action by this group that points to any other possibility.
Nicely put
Mikla, Thanks for responding to my question in Bruce's "Fed Eats Treasury" piece. I'm still trying to determine the level of the potential nightmare we will be living. Will it be like "Back to the Future ll" or "Mad Max" or something altogether different. All I know for sure is the future in front of us will not be as comfortable as the recent past has been, at least not for the Western World.
IMHO, it won't be "Mad Max". Further, IMHO, the US isn't headed towards dictatorship. Rather, I'd expect the most likely scenario is breakup, or regionalization, driven by increased focus on States' Rights.
The only reason the US Federal Government gets to "do what it does" is because it *buys off* the States. It can do that because it can print, and issue debt that it never intends to repay, and the States cannot. However, that's about to be taken away from it, so the States will merely repudiate their debts (municipal bondholders will be screwed), and the States will establish a new system within and among themselves.
There won't be any reason for Kansas to subsidize California seven-figure pensions. It won't happen, and doesn't need to happen.
Rather, what will be *most* interesting is the process *within* a State to restructure. Some States have non-stupid legislatures, but a States like California, Illinois, and New York are *so* screwed up that I'd assume you'd get exodus, a hard collapse, and then a re-structuring long *after* other States get their act together.
States are proposing bills for their own currency. When that starts in earnest, and because it will be PMs, a new (old) universal currency will be (re)instituted, and the federal and state debt will be just numbers on a page looked at decades from now and pondered for their absurdity. Why reinvent the wheel?
"IMHO, it won't be "Mad Max". Further, IMHO, the US isn't headed towards dictatorship. Rather, I'd expect the most likely scenario is breakup, or regionalization, driven by increased focus on States' Rights."
As of now...at this vantage point in time...I would have to agree.
There was some Russian cat who said the same thing a few years back...although for cultural reasons instead of economic if I recall.
At any rate...gird your loins, it seems some of the powers that be are going full on to save an unworkable "theory" and cut adrift any lefty hangers on to it.
I had no idea that Haaahvaaahd U even had a libertarian economist on staff...LOL...apparently the hold has become so tenuous Jefferey Miron has been unleashed just in time for Halloween ;-)
At your leisure;
http://www.realclearmarkets.com/blog/519.pdf
Also, we are pontificating in a vacuum. Americans have decided they are immune to the ancient cycles of violence. Confusion in the US would be a perfect time to launch an attack. The US populace is fat and ignorant.
I hear bones crunching under Mako's tanks.
Mako? Who he?
Well...anythings possible I guess.
Tanks need fuel though. They need support personnel. They also need men to man them with a willingness to kill their fellow countrymen. I would say the odds are vastly against that at this point.
I think we'll take it back just like the Czech's...I hope so...in the meantime...we have an election in Fla. for a senator between a black guy, a brown guy and an orange guy...I'm goin brown...LOL.
SeeYa
They also need men to man them with a willingness to kill their fellow countrymen. I would say the odds are vastly against that at this point.
Those men are easy to get. Soldiers follow orders. Rebels are those that do not follow orders. The soldiers will be sent to crush the rebels and they will perform that task to the best of their ability.
DDR's Nationale Volksarmee were quite happy to shoot anyone crossing the border, outbound. NKVD the same. The Americans are no different.
If things unfold that way, it would not be so much Mad Max, but more like the "postman". However, I don't think it will evolve that way. I fear more the scenario where the government continues to be more invasive and continues to take more, and control more. More like the Soviet Union in the 70's. We all continue to grow poorer, and wait in longer and longer lines for fewer and fewer things. Self sufficiency is the answer in either scenario.
Agreed.
central planners have mastered compartmentalization - the primary tool for plausible deniability. some of these "people" are hacks and sycophants who are oblivious to how they are manipulated. others are quite aware.
these politburo hacks are not here to provide solutions. lamenting its absence is to be blinded by trivia. these "people" are the public face of their puppet masters. every conspiracy needs a useful idiot.
drawing deep conclusions about what is controlled and not controlled from this spectacle would be a grave error.
In communism people use people.
In capitalism, the reverse is true.
Don Levit
"you can say that again." anon.
The problem is the level of power people have over other people, it does not matter wheather the person is A. Einstein or G. W. Bush, just look at the jail experiment in the "Stanford Prison Experiment", give people power and they will abuse it
What I hate about democracy is that other people signing their lives and independence to the 'government' is also signing MY liberty over to them wheather I like it or not, like ie. 51% want 'free' healthcare they vote for it and than stick me with the bill, how fuking stupid is that ? I ask how fukin stupid is democracy, but just because the 'majority' wants it you have to play the sheep part and get skinned
That is why my WAR is not with the government my war is with the ordinary citizens(sure there is maybe 5% out there who are on my side) but I treat every1 as an enemy by default, I make partisan war against the people, someone asks me for directions I tell him the opposite way, will never hold the elevator for anyone, will never yield way, will never come to the rescue if i see an accident, etc. I am as unsocial as is practical
And that's why we set up a Republic, not a Democracy - A Republic of Laws, not a Democracy of mob rule.
http://www.wimp.com/thegovernment/
You sound like a great person to hang out with. Care to get a beer sometime? I feel like if we could only get the rest of the population to act like this, we could have some real, positive change in the country.
It's not just democracy. All government is based on the notion that one person can sign another person up to a "social contract" which is complete nonsense. In the name of protection governments do all the things that if an individual did would be called "criminal." Government is nothing more than a collection of individuals purporting to hold some special sovereign power over a certain mass of land and those who live on it. It's a big pile of bull.
After watching the video, I expect more economic misery and death.
"... and possibly cede sovereignty to the Federal Government"
this will probably be a condition of any bailouts at the state level
by accepting a federal bailout the states would no longer have the benefit of the 10th amendment
10th Amendment: "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people. "
This is a *big* topic that they did not (seriously) touch upon. In short, nobody knows this answer (it is Constitutionally dubious at many levels).
In the specific discussion, an "Emergency Financial Commission" would be established *within* the State, NOT within the Federal Government (which would most likely be Unconstitutional at the State level). Then, to accept the loan (or possibly upon failure to repay the loan in 30 days), the State must cede its legislative authority to that Emergency Financial Commission. In effect, the State would be under receivership to itself, and the State Legislature would have no (budgetary) authority. A question was raised as to how to handle a State Legislature 2/3rds majority in opposition to decisions by the Emergency Financial Commission, but the panelists didn't think that was a big deal.
In effect, the citizens of that state would then have no representation (e.g., their State Legislature would have no power).
The panelists thought this was a reasonable (and possibly the best) course of action.
Interestingly, the Dept. of Education has failed to emphasize the important linchpin nature of the 10th Amendment. Go figure.
Great post. "We" are doomed, but I have food storage and bullets.