Time to Change Course, Rebuild Finance and Debate 'What is The Good Life'

Jamie Galbraith is one of my favorites: He speaks clearly and holds nothing back. Elsewhere he has called for the destruction of the Financial System and a clean rebuilding of it. Makes sense, since in its current form it serves us not, and instead extracts the value of our labor and output. Finance should be a utility: Moving money from where it is to where it is needed. However, the reality is that Finance instead preys upon the majority, stripping the value from our assets (via loans and speculation), pocketing money they create akin to Counterfeiting.

As Finance grows and extracts all they can from a particular market, it continually moves on. Currently its intended prey is our public institutions: Social Security, Medicaid, Medicare, and even perhaps our public lands. Through its tools in the House and Senate, they pretend that it is the only way.

But there is a another reasonable way of viewing the current situation. Finance promised us jobs and prosperity if we cut taxes on Capital and High Incomes. We did so in 2003, with dismal job growth and stagnate gains since. It was a loan that didn't pay off. It is time to call it in: If we have learned anything over the past 20 years is that leaving money in the hands of the Finance industry and the excessively wealthy does society no good - and there is no credible argument that the majority of society need to give anything up to pay for the misdeeds of the members of the Finance Industry.

Galbraith here explains the global state of affairs very nicely, and reveals in commonsense terms how what is happening in America is not distinct or separable from what is happening in Europe - that Finance is currently in the advanced stages of destruction of the World Economy. Although speaking to a European Audience, he reveals many things about the global economy, the US Economy, and exactly how and why there are different current outcomes, but that all is not stable...

Galbraith: Change of Direction

The Irony of Ryan's Entrancement with Rand

I did the college thing of reading several of Ayn Rand's works. What struck me most was how much the landscape she was describing resembled nothing like the world I know. However, it seemed pretty obvious that she was working against the landscape she knew: Soviet Russia. Her descriptions of the difficulties for entrepreneurs, of mindless bureaucrats standing in the way, of the waste and inefficiency of a command economy all fit when you realize that is the world she is describing. And, like a school girl caught up in her first crush, Ms. Rand gushes blindly about the wonderfulness of the structure of her chosen country, America.

Although her creed, that acting out of selfishness results in the best outcomes, is neither a description of how we actually act and has been discredited as a proscription for how we should act, she does draw a clear and useful distinction between those who work and produce, and those whose actions are extractive. The bureaucrats of her old world produced nothing of use, worked to expand mini-empires with the command economy, and they were the ones who ended up with the summer homes, the cars, the better life-style, while many faced hardship enduring goods shortages (the images of the breadlines come readily to mind.)

These parasites, the one's who so steadfastly stood in the way of entrepreneurs like John Galt (from Atlas Shrugged), who condemned the working man or woman to a lifetime of ill-spent productivity by their miss-allocation of production (creating both vast waste and shortages as they ill-anticipated the needs and desires of the population); These mindless wasters of both the labor capital and intellectual capital of their countrymen: About them Ayn Rand heaped her derision. Galt's 50+ page speech in Atlas Shrugged is simply a condemnation of a command Economy and its flaws, interspersed with unchecked praise for an American-style Capitalist Economy.

The more we learn about the inner workings of the American Economy, however, places things in a new perspective. Reports about the influences and outcomes of the financial sector; reports about the actual results of applying Private Equity, keep enforcing the idea that we have built a purely extractive layer upon our vaunted production (ideas, manufacturing, services). What the entrepreneurs and laborers of America put in, our financial services (and corporate elite) take out for personal use, trading lobbying power for actual production.

American Capitalism has degenerated into a quasi-Command Economy: The Banking members of the Federal Reserve set the dollar and maintain it high to benefit those who lend (extracting great wealth for themselves along the way); Congress interests itself with passing laws that maintain wealth or provide easy avenues for those with wealth to build more; The massive corporations use their market position and power to squelch new ideas and new innovations (or buy them up and squelch them internally or, after the initial pay-out to the entrepreneur, hoard the future income from the idea for themselves, along with accounting control fraud to extract more from the economy than the production of the idea or product places in.)

Just as this parasitic behavior was detrimental to the well-being and expansion of old Russia, so, too, this parasitic behavior has profound negative consequences for America's future. As labor is squashed, less demand is created for the production of the entrepreneur, curtailing the advancements that can and will be realized. As the benefits of the productive classes flow more and more to the parasitic classes, the velocity of money slows, reducing the opportunities for new ideas to enter the market; as the money available to educate all decreases, the number of fertile minds (and hence the number of innovations) decreases, leaving America a second-(or worse!) class producer and member of the world stage.

The irony arises, then, because all of these self identified acolytes of Rand are members of this parasitic class: From Greenspan to Geithner, from Cantor to Bernanke, from Romney to Ryan: Each is a member of the extractive classes, producing nothing, but extracting greatly. None of them would be heroes in a Rand novel, but rather would be the derided antagonists, standing in the way (and ultimately failing) the onslaught of a true producing giant. I think that Galt would smite them with a snort!

Ireland America's Future If...

...The policies advocated by the Romney campaign are enacted, according to Paul Krugman. Ireland's 14% unemployment (30% youth unemployment) are a direct result of the austerity measures enacted by Ireland's leaders: Low corporate taxes, diminished government spending, etc.

It just seems counter-intuitive to me that high unemployment benefits anyone over the long term. But, it's short-term, "I've got mine, go get your own" thinking that underlies so many of the difficulties we face today, I guess I shouldn't be surprised.

Privilege and Easter

Last night we watched Cecile DeMille's 1956 classic, “The Ten Commandments”.

The root of this story is the slavery of the Hebrew people at the hands of the Egyptians, and their eventual deliverance into freedom and ultimately nationhood. Their slavery is depicted as cruel and unrelenting; they are basically used and thrown away when no longer able to do the manufacturing demanded of them by their privileged masters. One of the earliest stories in the Christian anthology places a premium on self-determination, on freedom, on the evils of enslavement.

Today I was reading Dylan Ratigan, and he writes (fn1):

“The policy machinations happen on the other side of the Pacific, not just in America. In March 2006, write[sic] Brendan Smith, Tim Costello, and Jeremy Brecher in Asia Times, the Chinese government proposed a new labor law that would have improved working conditions moderately. In response, the American Chamber of Commerce in Shanghai, as well as US corporations such as General Electric, Wal-Mart, and even Google lobbied against the law, and in some cases threatened to leave China for countries such as Pakistan and Thailand if it passed. By December, the Chinese government had revised the draft law to limit workers' rights in the areas of contracts, collective bargaining, and severance, among others.”

He was writing about the nearly intolerable working conditions at many Chinese manufacturing plants, notably those exposed at Foxconn (maker of iPads, iPhones, and iPods and other Apple products). The workers there have been dubbed 'iSlaves', and for all practical purposes, they are slaves: forced to perform a small set of tasks repeatedly for barely more than sustenance living; their work hours controlled by their masters; many falling prey to central nervous system disorders at an early age as a result of the chemicals they use; and then thrown aside without any further compensation from either their company or their government.(fn4)

The eye-opener is that American companies lobbied against an improvement in working conditions: That Americans felt it was their privilege to be the beneficiaries of the exploitation of poor Chinese citizens. We shouldn't be surprised, though: A lowering of labor standards in China, along with preferential trade status, brings about a lowering of labor standards in America, opening the doors to greater exploitation of the American laborer, along with increased profits for the corporate executives and shareholders who employ said laborers.

Today is Easter – the Holiest Day on the Christian calendar, and the celebration of the life of Jesus. Interestingly, in his teachings, Jesus was consistently against privilege: In his Sermon on the Mount he spoke of the blessedness of the merciful, of the evil that awaits he who attempts to serve two masters and store up money on earth; after the last supper he knelt down and washed his disciples' feet, proclaiming “Now that I, your Lord and Teacher, have washed your feet, you also should wash one another's feet. I have set you an example that you should do as I have done for you.” (fn2) Jesus spent his life preaching, teaching, and living against privilege.

And well he should have: For it is privilege, and the seeking of privilege that leads us to acceptance of exploitation and slavery of others; prejudice is our natural defense against the cognitive dissonance that arises when we treat another human as sub- or unworthy.

But, I wonder. Some 70-80 million adults attended Easter Services today in America (fn3). Did they connect the dots? Richard Feynman, the Nobel Physicist, observed that most intelligence is fragile: That information gained in one area or endeavor is seldom transferred to another, even when the situation is an exact transformation. Dr Feynman was renowned for solving problems in chemistry and biology (in addition to his physics), correctly recognizing that the problem was solvable using a transformation of the mathematics and methods he knew.

Jesus spoke against privilege. Moses spoke against slavery. If we connect the line between the two:

Enslavement of the Hebrews was wrong. Enslavement of the Jews (by the Romans) was wrong. Enslavement of the American Negro was wrong. Enslavement of the Chinese Peasantry is wrong. Using the situation of the Chinese peasantry to push the American laborer back towards enslavement is wrong.

How many who attended Easter Services today will wake up tomorrow with a renewed interest in living a life without privilege; will recognize that privilege is what drives them to demand of their leaders (and drives our leaders themselves) to increase exploitation of 'others' around the world; that it is only through the exploitation of those, like the Chinese, that we have all that we have?

Relinquishing privilege can be painful, and leaves us with less material goods, although it strengthens our moral character. Privilege and slavery have been human social constants for most of human civilization. But, humans were not made to toil in poor conditions for the benefit of another; humans were not made to be abused by the whims of a master; each human was made to live a life of free determination, choosing his or her own path, choosing what to do and who to help during his mortal journey, and reaping the rewards thereof. Each should have the ability to work in conditions that are safe, with remuneration above sustenance, without fear of losing their job or their livelihood because some business owners have found a new group of people somewhere to exploit or enslave.

Everywhere and anywhere we see abuse of privilege leading to exploitation of another we must speak out. As the Pharaohs were to the Hebrews, so those today who feel that it is in their power, their privilege to live a life above while at the same time denying freedom to others, especially under the guise of 'employment', must be called out. The executives who would fight to deny a moderate increase in the working conditions of overseas laborers; the executives who would fight to decrease working conditions for their fellow Americans; the lawmakers who allow trade imbalances to continue that make it too easy for Americans to lose sight of the evils of privilege and slavery and so invest their money and talent in exploiting rather than producing; All must made to hear our desire to end both, and to fear our wrath if they do not.

Speaking out against slavery and privilege occupy a place in our oldest writings; We've understood for more than 3000 years that such a relationship is against our very moral fiber. Sadly, our work constructing a society built on a more positive relationship is still very much nascent, constantly thwarted by the powerful and our own innate desire to have more than our neighbor; and our unwillingness, once we find ourselves privileged, to move to strike such thinking from our minds and hearts and promote ideas that are fair to all.

Not the easy road, but if one lesson can be gleaned from today, it is that the correct path is not the easy one. Imagine for just a moment how the difficulties facing us might appear differently if we were to strike privilege and prejudice (and the acceptance of exploitation) from our thinking, from our doing, from the very structure of our society. 

(fn1) Dylan Ratigan. “Greedy Bastards” Loc 995, Kindle Edition, 2011.

(fn2) Jesus washes disciples feet. John 13, v14-15. NIV

(fn3) Estimated Easter Christian Attendance – 70-80 million adults (approximately 1/3 of the nation) - pulled from Wikipedia, Pew Research (59 million average Sunday attendance, Easter approx. 33% higher)

(fn4) No, I am not picking on Apple. I was chagrined to learn that my Kindle was most likely made either there or at an equivalent factory - and that much of what we purchase with the 'Made In China' sticker has aspects of that, although electronics are likely the worst.

What? The Fed is an Old-Boys Club of Backscratching Bankers!

The GAO released its report on the Federal Reserve Wednesday: Yves Smith has a nice summary.

And, just as many have long known: Those at the top build networks to ensure they remain at the top regardless of how they perform - the meritocracy breaks down under their myriad conflicts of interest. Everyone screams about individual accountability when its some poor individual who cannot afford to repay their bank loan, but no-one seems to care that none (as in zero!) of the major bank executives were held accountable for their roles in undermining the worth of their banks, counterfeiting the nation's currency through liar's loans, and their ultimate thievery of the production of a nation. Now we have it a little clearer: Literally, the fox is guarding the hen house!

We need leaders (are you listening, candidates?) who will make it a priority to wind-down the financial sector back to a size that is beneficial to society, rather than a cancer that sucks more and more of the life-blood of a nation in its greed. Candidates that will vow to staff the regulatory agencies (the Fed, the SEC) with people of diverse backgrounds and affiliations who will regulate, rather than remunerate, those under regulation.

Anyone? Anyone?

Senate Spending Bill Loaded with Earmarks?

According to the Bloomberg report on the $1.2 Trillion Senate Omnibus Spending bill, it is a monstrosity loaded with spending earmarks. Senate Republicans are indicating that they will vote to kill the bill, a “porked-up monstrosity [who's supporters] would forfeit any claim to fiscal responsibility and economic conservatism”.

So, just what constitutes a 'loaded' or 'packed' spending bill? Well, reading a little deeper, it means that more than 88 of the 100 Senators have obtained earmarks for their projects. Which means that at least 29 of the Republicans now vowing to kill the bill worked to gain earmarks for their pet projects! (I'm not picking on Republicans per se here, I'm not so naive as to believe Democrats have never pulled this same tactic.) What a win-win for them: They can posture that they are fiscally conservative, denounce the earmarking practice, but just in the off-chance that the bill succeeds, their home state gets some dough, and they can go home, and in a political two-face, tell their constituents about how much money they brought home to them to create jobs!

And, how much money are we talking here? What does 'porked-up' mean? Well, it means that the bill contains....wait for it.....

....wait for it....

$8 billion dollars in earmarks!

Stop. The entire bill is $1200 billion dollars. That means that without the earmarks, it would still be roughly $1200 billion dollars. $8 billion comprises just 2/3rds of 1% of the total.

Wow. Definitions in DC just don't match how we define words in the rest of the country. Like porker. If you were 1% overweight, I wouldn't refer to you as a porker, I probably wouldn't even notice (you'd be, what, 1.5 lbs heavier than you should be? Maybe 2 lbs?)

Like monstrosity. As Utah Senator Bob Bennett points out, the earmarks (300 pages of the 1294 page document), by indicating where some money is to go, provide transparency and prevent the White House from diverting that money to its pet projects. Maybe not a best practice, but certainly far from anything monstrous.

Like Integrity. Out here, integrity means you do and say the same thing everywhere, to everyone - that you can be trusted. In DC, however, it appears that you stand up for your ideology when you can be heard and seen, all the while sneaking some extra money in for your folks back home under the pretense that...hell, we don't actually know what pretense those hacks would make! But, do you suppose that when they are congratulating themselves about the $91 million (on average) each brought home to their state, that they are admitting that they did it via the very process they claim to loathe?


Like Bias. Due to media bias towards conflict and sensationalism*, the real details of the bill, things that really matter (how much for Defense? how much for Medicaid/Medicare? How much for Federal government? How much for Education? How much for roads/bridges/infrastructure?) aren't even mentioned.

Like Honesty. Doesn't have a separate meaning to folks back home, because it is a word that has been stripped of all meaning within our governing chambers.

*Borrowed from my friend Cameron who, correctly, pointed out that the media doesn't really have a left/right bias, but is biased towards whoever is creating the most strife.

Bibliography (just in case you can't follow the link above)
http://www.bloomberg.com/news/2010-12-15/trillion-dollar-bill-packed-with-earmarks-in-u-s-senate.html