That much of the "news" is artifice and propaganda is a given. How can a society make good decisions about its future when the "facts" such as the unemployment rate are massaged and manipulated, and so many of the "reforms" are simulacra designed by the very wolves supposedly being tamed? Answer: it can't. The same question can be asked of a society in which the "editorial" side of the mainstream media is dominated by an "Argument Industry" that pours gasoline on every conflict and avoids solutions like a vampire avoids the Cross and garlic. Finding solutions would decimate the "Argument Industry" and slash profits. That leaves us with the same question: How can a society make good decisions about its future when every challenge is conflated into extremes that cannot abide compromise or even recognize "outside the box" solutions? Answer: it can't.
The impression that bankers and regulators have seems to be that banks are doing customers a favour by holding onto their money and occasionally losing it all buying junk securities. Nope. In a free market, banks that tried to charge customers for the privilege would be laughed out of the marketplace. Banks — by their very definition as intermediaries — generate profits from making good investments, not by charging customers for the privilege of holding their money. Unfortunately this isn’t a free market, and banks can (and probably will) co-ordinate with each other to keep the market uncompetitive. Barriers to entry make it difficult to impossible for new players to enter the market and dislodge the status quo.
Here in the U.S., I think that The Bernank’s plan was to pretend they didn’t need to print more money, get commodity prices down and then hope that the economy would respond favorably to that development. This wouldn’t have negated the need for more printing; however, it would have bought time and allowed for a potentially lesser degree of action. Instead, what has happened is that the global ponzi is completely and totally incapable of holding itself together without consistent and increasingly large infusions of Central Bank money. The debt burden is too large, the mal-investments too pervasive, the corruption too systemic. The whole house of cards that is the global economy will vanish into dust rather quickly without more and more printing. So what do you think they are going to do? If I am correct, and the U.S. economy itself is now in the early stages of what will probably turn into a serious economic slowdown, then it will not be easily stopped with incremental Central Bank policies. The fact that they have waited this long and the fact that the global economy is in the midst of a serious slowdown tells me one thing. They are way behind the curve and by the time they realize this it will be too late to stem the momentum. That said, I do expect them to respond and the fact that things will have gotten much worse than they expected will mean a major response. I’m not talking operation twist part deux. I mean a serious print. Potentially the BIG ONE.
The story of Facebook’s disappointing IPO is a gripping tale, and it holds some valuable lessons. But it concerns an event that has already happened. Forget Facebook — there are far more interesting events in play and that will affect you, if only at the margins. They haven’t happened yet, and they may not happen at all. But if they do, you’d sure as hell better have a plan.
Forget "austerity"and political theater--the only way to truly comprehend the Eurozone is to understand the Neocolonial-Financialization Model, as that's the key dynamic of the Eurozone. In the old model of Colonialism, the colonizing power conquered or co-opted the Power Elites of the region, and proceeded to exploit the new colony's resources and labor to enrich the "center," i.e. the home empire. In Neocolonialism, the forces of financialization (debt and leverage controlled by State-approved banking cartels) are used to indenture the local Elites and populace to the banking center: the peripheral "colonials" borrow money to buy the finished goods sold by the "core," doubly enriching the center with 1) interest and the transactional "skim" of financializing assets such as real estate, and 2) the profits made selling goods to the debtors.
In essence, the "core" nations of the E.U. colonized the "peripheral" nations via the financializing euro, which enabled a massive expansion of debt and consumption in the periphery.
Imagine, if you will, a fantastic near future in which the United States is facing an unmitigated economic implosion. Not just a mere market crash, or a stint of high unemployment, but a full spectrum collapse driven by unsustainable debt spending and hyperinflationary printing. The American people witness multiple credit downgrades of U.S. Treasury mechanisms, the dollar loses its reserve status, devaluation of the currency runs rampant, and the prices of commodities and imported goods immediately skyrocket. In the background of this disaster, a group of financial elite with dreams of a new centralized economic and political system use the chaos to encourage a removal of long held civil liberties; displacing Constitutional protections they deem “outdated” and no longer “practical” in the midst of our modern day troubles. This group then institutes draconian policies through the executive orders of a puppet president, including indefinite detention, assassination, and even martial law against citizens... With modern computer driven weaponry at their fingertips, any resistance appears futile. Some Americans, though, do their homework, and discover that most successful revolutions against better equipped opponents utilize low tech methods in highly intelligent ways. They study the inherent weaknesses of the enemy weapons platforms using readily available online manuals and scientific journals. They realize that these pieces of equipment costing millions of dollars each can be defeated using methods that cost little more than pocket change. A war of economic attrition ensues.
Maybe the real reason that the Treasury offered China direct access (thus cutting out the middleman and offering China cheaper access than ever) was precisely because China was selling, and because the Treasury was concerned about the effect on rates, and wanted to give China some incentive to keep buying. As Jon Huntsman noted in a 2010 cable leaked by Wikileaks, the PBOC has felt pressured to keep buying, and as various PBOC officials have hinted in recent months, China is actively seeking to convert out of treasuries and into gold. And that makes sense — treasuries are yielding ever deeper negative real rates. People holding treasuries are losing their purchasing power. No wonder the treasury is willing to cut Wall Street out of the deal. And it isn’t like the Treasury would have taken this move lightly — cutting Wall Street out of the equation is a slap in the face to Wall Street
In the Garden of Eden there is no scarcity. Food, clothing, and shelter in are abundance. Resources merely fall from the heavens upon command. It is economic paradise precisely because economics does not exist. The universal laws that hold in the world of scarce goods vanquish in the land of the plenty. The vision of Eden is the politician’s main source of employment. That is, promising to lead the suffering masses toward utopia by government decree makes for great electoral results. The voting fodder ignorant of economics falls in line to cast a ballot to grant themselves other people’s money. But of course many voters don’t see it this way. Their vision of the state is that of Eden. They see the bureaucrats and enforcers capable of tapping an infinite pot of wealth to pass along prosperity to those subservient enough to put them in office. This in turn has lead to the establishment of the welfare state and its plethora of entitlement programs. For those who see the modern day welfare state as corrosive to the productive capacity of any given country, no where is this theory more evident than the scheme of unemployment insurance.
The current financial crisis, may progress to a phase where people demand and hoard dollar bills but take electronic deposit credits only at a discount which increases until electronic deposit credits are repudiated entirely. The Federal Reserve would be powerless to solve the problem, because while they can create unlimited electronic deposit credits they can’t create unlimited paper dollar bills, “money you can fold” as Professor Antal Fekete calls it. There would be a glut of electronic deposits, but a shortage of dollar bills. Before the financial crisis metastasized in 2008, Fekete wrote a paper that I think is underappreciated and under-discussed: "Can We Have Inflation and Deflation at the Same Time?" In his paper, he discussed the “tectonic rift” between paper Federal Reserve Notes (i.e. dollar bills) and electronic deposits. By statute, the Federal Reserve cannot print dollar bills without collateral (e.g. Treasury bonds). Also, they have limited printing press capacity that is insufficient to keep up with a catastrophic crisis.
Our entire society is in a downward social and economic spiral. We are just at different levels of decay (Dante’s circles of hell). At the current pace it won’t be long before I’m writing about the 50 States of Squalor. It is virtually impossible to reverse a decline that has been underway for the last three decades. We sold our souls to Wall Street and chose a debt financed illusion of wealth over productive savings and investment which would have led to real wealth. Our choices are reflected in the continued deterioration and decay along West Chester Pike and the squalor that is West Philly. Grey and decay will carry the day. The words on the Statue of Liberty should be revised from, ”Give me your tired, your poor, Your huddled masses yearning to breathe free”, to “we have become your indebted, materialistic, obese, aging masses yearning for the government to protect and sustain us as our once great nation decays.”
As a nation, we have chosen this path. We made the choices and now we will suffer the consequences.
There’s been a lot of excitement in the past year over the rise of North American oil production and the promise of increased oil production across the whole of the Americas in the years to come. National security experts and other geo-political observers have waxed poetic at the thought of this emerging, hemispheric strength in energy supply. What’s less discussed, however, is the negligible effect this supply swing is having on lowering the price of oil, due to the fact that, combined with OPEC production, aggregate global production remains mostly flat. But there’s another component to this new belief in the changing global landscape for oil: the dawning awareness that OPEC’s power has finally gone into decline. You can read the celebration of OPEC’s waning in power in practically every publication from Foreign Policy to various political blogs and op-eds.
Here are a few prominent questions that George W. Bush might want to consider answering before slinking off back to Crawford:
- Why did you ignore the CIA’s warnings in the summer of 2001 that al-Qaeda could strike “imminently”?
- Why did you pledge in the 2000 election debates that you were against nation building, and then embark on not one but two nation-building programs in Iraq and Afghanistan?
- You increased the Federal debt by 86%; to what extent do you accept the blame for America’s debt troubles?
- You reappointed Alan Greenspan as the Fed Chairman; to what extent do you accept that his easy money policies caused the bubble that burst in 2008?
- Were the 2008 bailouts of well-connected banks and financial corporations engineered by your administration compatible with a supposedly “free-market” “capitalist” system? Doesn’t bailing out banks create dangerous moral hazard?
- How can a nation simultaneously claim to be a liberator while also practising torture?
- You swore to uphold the Constitution, yet passed the PATRIOT Act that authorised warrantless wiretapping, and mass surveillance in contravention of the Fourth Amendment. Do you realise that you violated your oath of office?
My sense is that the government has been watching the number of expatriates rise over the years, and simultaneously watching the value of the exit tax fall… and they’ve been looking for an excuse to make sweeping (i.e. retroactive) changes. Eduardo Saverin is the perfect excuse. The Facebook co-founder’s recent renunciation of US citizenship has become a rallying cry for politicians to go back in time and steal money from former citizens retroactively…plus establish a larger base for future tax revenues. This is a truly despicable thing to do considering that these former citizens followed the appropriate rules at the time, paid the tax, and moved on with their lives. Now Uncle Sam wants to go back in time to unilaterally change the deal, and expect everyone to abide even though they’re not even citizens anymore. The arrogance is overwhelming. More importantly, this bill is also a major deterrent for people who are thinking about renouncing US citizenship today.
Asking "what is wealth?" seems needless because we all know what wealth is: never having to work again, endless leisure, endless consumption of the "good things of life," being waited on hand and foot, luxurious belongings, vehicles and homes, a life of travel and sport, trust funds, stacks of secure gold, and so on. All this is "obvious," but is that certainty illusory? There are many people with $2 million in net worth, a significant number with $20 million, and more than a few with $200 million. All would be considered wealthy by the average household earning $63,000 annually with a total net worth of less than $100,000, not to mention the 61 million American wage-earners who pull down less than $20,000 a year who own negligible net worth. Those with a mere $2 million may not reckon themselves wealthy, if their eyes are fixed on those with $20 million. But if a wealthy person suddenly discovers they are riddled with fast-growing cancer, then they quickly lose interest in financial wealth except in terms of what medical treatment it can buy. There really isn't much more modern medicine can do for someone worth $200 million than it can for someone worth $2 million; once one's life and health are at risk, then conceptions of "wealth" are drastically reordered: health is wealth, and nothing else matters.
I had the privilege of seeing Roger Waters perform ‘The Wall’ to a live crowd of over 40,000 fans at the LA Coliseum on Saturday night– the second time I’ve seen the show on this tour. It was an amazing production– I wholeheartedly recommend the experience as it’s something that no DVD or album recording could possibly reproduce. At one point, Waters paused his set and began telling the audience about Jean Charles de Menezes, a 27-year old Brazilian national who was shot *8-times* by British police several years ago at a south London tube station after being mistakenly identified as a terrorist. The police, adhering to the ‘shoot first, ask questions later’ model of peace enforcement, have never been held accountable for taking the life of an innocent man at point blank range. “If we stand at the top of the slope and give our governments, and particularly our police, too much power, it’s a very long and dangerous slippery slope to the bottom,” Waters said. The crowd went berserk, roaring with approval.