A New Way Forward – Restore the Economy in the Public's Interest

Public Citizen has a great response to Obama on his op-ed about regulation. Obama can be interpreted as being politic and leaning left as both the left and right think he is doing, or as this post suggests, is just leaning towards protecting big business.

Obama’s way is leading to even more bloated banks and businesses, funded in part by hidden taxpayer subsidies. Why don’t the Democrats fight back on the debt and deficit debates by pushing for ending these subsidies? That’s the big question, which when written out I guess turns out rhetorical even though that is not how I meant it.

On the eve of the Chinese President’s visit to the United States, and the intense speculation about his intentions—and ours—I found myself a dark room at the Anthology Film Archive in the East Village watching a spectacular documentary by Chinese filmmaker Zhao Liang called Petition.

It’s about the tens of thousands of people with grievances who seek redress in China at offices ostensibly set up to resolve their problems.

The right to petition is guaranteed by the Chinese Constitution—yes China has a Constitution, but it is unevenly enforced like our own. Falun Gong first tried, but failed, to bring its human rights claims to a Petition office like the bureaucratic centers shown in the film as do a small army of individuals who every day, bravely—sometimes fanatically— insist it is their human right to be heard. (In Falun Gong’s case, they were outlawed and systematically repressed for more than a decade with a large cost of lives.)

Listen to the description of Petition: “Since 1996, Zhao has documented the ‘petitioners’ who come from all over China to make complaints in Beijing about abuses committed by their local authorities. Gathered near the complaint offices, living in most cases in makeshift shelters, the complainants wait for months or years to obtain justice. Peasants thrown off their land, workers from factories which have gone into liquidation, small homeowners who have seen their houses demolished but received no compensation, they pursue justice with unceasing stubbornness, facing the most brutal intimidation and most often finding that their hopes are in vain.”

Before you put this down just to the authoritarianism and insensitivity in China, remember the song “before you ‘cuse me, take a look at yourself.”

Think of all the Americans who get nowhere fighting their City Halls or battling denials of claims by health insurance companies or foreclosures by banks. Think of the vast growth in poverty and the persistence of high unemployment. Think of the millions of Americans behind bars. We have no petitition office which I am sure must resolve some issues even if the film didn’t show that!

Our systems may be different but some of the top down ways our rulers operate are the same. Now, our two governments are about to sit down with each other to discuss common problems and stubborn differences.

“The U.S.-China summit this week could rank among the most pivotal in history,” writes Leslie Gelb who went from the New York Times to the Council on Foreign Relations to the appropriately named Daily Beast. “Presidents Barack Obama and Hu Jintao can either find fresh ways to work out increasing differences, or they can settle for friendly gasbag rhetoric that will bow to their mutual and mounting hawkish pressures. But failure to compromise on tough economic and security issues will have dangerous consequences for both leaders.”

Elite journalists tend to worry more about the tenure of elites then the well being the people. Yet, when you think about US-China relations, its not just governments that are wrestling over policy.

For example, whenever Washington summons up the courage to criticize China’s dismal and repressive human rights record, Beijing fires back with the scorecard of US police abuses and mass incarceration. They report regularly on Obama’s backpedaling on human rights here.

(And know well that the summit is being carefully stage managed by lower level officials on both sides who have already come up with some compromises that each side can use to show how flexible and responsive they are. Each side must save face after all.

In case you haven’t noticed, the world has changed with China’s economy growing faster and doing better—at least for now—than ours.

Money represents real power in this world, and ours seems to be declining while theirs is in the ascendancy.

China’s President Hu Jintao is sending contradictory signals. In one conciliatory statement, he called for the US and China to work out their mutual problems. He sounded reasonable and friendly.

“There is no denying that there are some differences and sensitive issues between us,” Hu told American newspapers, “We both stand to gain from a sound China-U.S. relationship, and lose from confrontation.”

At the same time, the Chinese are freaking out Wall Street and its cadre of henchmen in Washington by questioning the future of the dollar as the world’s reserve currency. Even as China’s investments in America’s bonds and other financial instruments has become essential for our well being and perhaps China’s as well, there are many in Beijing who don’t like the dependence on an American system that has lost them money and independence of action.

All countries have their own interests although the United States likes to pretend that everything we want is in the world’s interest. Our PR may be better but our global image is severely tarnished by our wars and the Wikileaks disclosures.

The US has been pressing the Chinese to revalue its currency for years. The Chinese often sound as if they will—but, in the end, they haven’t because to do so would hurt their economy and spark more unemployment.

Now Congress is getting into the act to add pressure on Beijing. AP reports, “Three US senators announced plans Monday to renew their effort to penalize China for what they term currency “manipulation,” on the eve of a state visit by Chinese President Hu Jintao.

“Our message to President Hu is, ‘Welcome to America, but we want to make
sure we have a fair trading system,’” said Michigan Senator Debbie Stabenow,
who joined fellow Democrats Charles Schumer and Bob Casey in the
announcement.

The bill to be introduced in the new Congress would “vigorously address
currency misalignments that unfairly and negatively impact US trade,” the
three said in a joint statement.”

China will not be moved by this pressure move. They don’t like being bullied and have their own grievances with our economic polices including US cases filed against China at the World Trade Organization that they view as invalid and protectionist, as sops used for domestic political considerations.

The fact is that all of these get China maneuvers will not achieve what most Americans want more jobs. Writes Harvard Law Professor Mark Wu, it “is unlikely that a stronger renminbi would bring many jobs back home. Instead, companies would most likely shift labor-intensive production to Vietnam, Indonesia and other low-wage countries. And in any case many high-skilled jobs will continue to flow overseas, as long as cheaper talent can be found in India and elsewhere. Only in a few industries, like biomedical devices, would a stronger Chinese currency combined with quality issues tempt American companies to keep more manufacturing at home.”

Meanwhile, China is well aware of how to “win friends” in the US, as Reuters reports. Deals do it.

“The Chinese government kicked off a four-day U.S. trade mission on Monday by signing six deals in Houston with undisclosed U.S. companies worth $600 million, according to Chinese state media reports.

The deals came a day before Chinese President Hu Jintao arrives in the United States for a visit being billed as the most important U.S.-China summit since Deng Xiaoping’s visit to Washington 30 years ago.”

The future of our relations is not just dependent on what the leaders say or agree on at Summits. China is wary of US military power encircling them. They are being forced to spend more money than they want to on naval ships and stealth planes. This is a country that grew up with Mao’s dictum that “political power grows out of the barrel of a gun.”

As the Telegraph noted recently, “on virtually all the main issues that separate the two nations, (China) seems intransigent and uncompromising. The sense of threat is heightened by the fact that, while America is gripped by economic, social and political self-doubt, the Chinese have never been more certain of their ascendancy.”

It may be that both countries are shakier than we think. There may be no economic recovery in the United States for five years while some Hedge Funds fear, “China is a bubble close to bursting.” Reports another article in the Telegraph, “The world is looking to China as a springboard out of recession – but some hedge funds are betting the country’s credit and growth levels cannot be sustained.”

So far, neither Washington nor Beijing have realized the apocalyptic projections of their many critics. Both states still pay lip service to their ideal, but both can be unraveling.
A fancy State Dinner will not bridge the gaps that separate our two countries and “paths of development,” as the Chinese say.

The US says it wants more democracy in China but officials like Tim Geithner are upset by the debates taking place there, and pine for the days when they could deal with a dictator like Mao or Deng who, as the New York Times explained, “commanded basically unquestioned authority.”

Our leaders prefer dealing with that type of authority and wish they had it here.”

Back in Beijing, in the shabby Petition Villages where Chinese citizens soldier on in their fight for justice, or in this country where our citizens are frustrated and angry with an economic crisis appears to have no end, no one will expect much from this summit in faraway Washington where diplomatic dances produce kabuki plays filled with smiles but no real changes.

News Dissector Danny Schechter blogs for Mediachannel.org He directed the film Plunder The Crime Of Our Time (plunderthecrimeofourtime.com) Comments to dissector@mediachannel.org

Thanks to Donna for this great video:

postonomic – 12.31.10 from D. L. Golden on Vimeo.

By Danny Schechter with Cherie

The tenth year of the 21st Century has left us behind, and it can’t be too soon.

It was a year of the crumble.

The economy continued to crumble for ordinary people with little hope for a quick turnaround even as some markets surged. The hopes of the jobless for employment crumbled. The faith of the so many homeowners that they will find a way to stay in their homes facing foreclosure crumbled.

And so have the hopes of so many of us that our new Change Is Coming president would fight for us, would end the wars, would close Gitmo, would abandon torture, would make healthcare more affordable, would give us a government we could believe in; that, too, has crumbled.

Look back at the devastation of the year gone by its ugly election, bought and paid for by US Supreme Court sanctioned special interests, oil spilled by the Gulf-ful, wars escalated, climate change unabated, and Wall Street unchecked and we have to scratch our heads and wonder who is crazier, them or us.

For many of us, WikiLeaks was at least something to admire but even there, what we have learned is that we are still being lied to; trust, too, is crumbling.

Illusions die hard but die they do.

A year after the earthquake, rubble is still piled up in the streets of Haiti, which has received only 2% of the money raised to reconstruct it. We now have six active military operations underway, rating less and less coverage, only 4% of the network news fare by one count.

In contrast, the partisan wars are all TV News covered over and over again, with Fox charging, MSNBC responding, and Jon Stewart joking.

And yes, we need, oh do we ever, need humor. Laughing always beats crying.

Hats off to our humorists and satirists, and writers of parodies and timely humor –The Andy Borowitzs’, The Onion crowd, the Lee Papas, the Lizz Winstead’s, Driftglass, Baratunde Thurston, Lee “fox is a festival of ignorance and parade of propaganda” Camp, Jeff Kreisler, et.al to keep us sane, to make us realize the absurdity of what we are dealing with, so we don’t feel compelled to marshal facts to slay arguments that have none, and don‘t, literally or metaphorically, do a “Mark Madoff” in the darkness of our bedrooms.

Clowns have always masked and helped us cope with the deeper pains we carry with us.

Yet, “rallies to restore sanity” have proven less effective that rallies for authoritarianism. Muslim bashing and the nightly Fox snarl designed to inflame and incite as the polarization deepens with every day. If you think it’s been bad, just wait as the new DC Congress, and its hanger-ons dominate the discourse. Even Dick Cheney is getting back into the act, again. .

There seems to be nowhere to go but down.

The pragmatic compromisers of the democratic center may convince themselves they are “getting it done” in DC, but they are also alienating the Democratic Party base and disgusting all those who believed it would be or could be different. Some bills were passed in the lame duck session with greater symbolic value than substance. The Democrats seemed to have done more after they lost then when they ruled the roost.

Now it seems clear, they will move further to the right in a Clintonian bid to co-opt the Republicans by trashing the unions and slicing the safety net as the poor grow in numbers and silence.

Already, there are new escalations in Afghanistan, a rising military budget that went uncommented upon, and more repressive laws to come.

There will be a price to be paid for their legacy of spinelessness and corporate complicity.

The media still remains at the center of our conundrum, as we argued ten years ago when we founded the media issues network, Mediachannel.org, to advocate for fundamental media change. That movement was co-opted by well-funded groups like Free Press that discouraged media activism to promote inside the beltway lobbying. Look at the smoking ruins of their long and pricey fight for net neutrality and you can see where that got us. Organizations like Media Matters come up with valuable revelations but exist to push partisanship, not media change.

So we are left where we started, as David Swanson argues, with the need to support independent media, arguing “we need an alternative not only to Fox News but also to the rest of the corporate media.  This is the easiest and most important project anyone can work on.  The dream of persuading the labor movement (which can’t even strongly oppose corporate trade agreements when the president is a Democrat) to invest in a new television network should be abandoned.  If the George Soros’s of the world haven’t figured out that there’s a communications problem, they never will.  But we already have what we need; we just need to make it bigger, and we can do so.  We should invest in TheRealNews.com, Thom Hartmann, Free Speech TV, Link TV, GRIT TV, Democracy Now, Pacifica Radio, community radio stations, blogs and web sites. 

We should make use of foreign outlets that, for their own reasons, are willing to provide decent coverage of US politics: Al Jazeera, ATN, RT-America, etc.  Unsubscribe from the New York Times, stop contributing to any purchasing of ads in it, stop reading it, and read the Guardian online instead.  Get connected online, and people will send you the occasional good article or video that all lousy outlets produce.  Share that one further, but promote a good website that’s hosting it, not the corporate source.”

And let’s also get behind WikiLeaks as they fight for transparency and accountability by governments and media. We need to support not only Mediachannel but sites like CrooksandLiars.com, FiredogLake.com, Global Research, Consortium News, Z Net, Huff Post, Op Ed News, etc., etc.

At the same time, we have to go back to an old idea for which online interaction and an email barrage is no substitute: organizing real people.

There are more of us than they there are of them but they are organized and focused and we are mostly reactive and emotional. They are strategic and we are tactical, easily outraged by personalities like Sarah Palin, and their inflammatory statements, with no orchestrated agenda of our own except to raise money for politicians we really can’t trust.

We seem to have lost the capacity for independent political action

As James Kwak wrote on Baseline Scenario, there is a reason for this. Progressives are captured by symbolic politics while the right is committed to substantive goals. He cites the view of Murray Edelman who divides the political sphere into insiders and outsiders.

“Insiders are basically special interests: small in number but well organized and with specific goals. Outsiders, or the “unorganized masses,” are the rest of us: we have some interests, but we are poorly organized to pursue them and therefore are generally unsuccessful. In particular, Outsiders suffer from poor and limited information, and therefore are especially susceptible to political symbols.”

He cites Arnold Kling’s summary of Edelman’s insights:

“Given these differences, the Insiders use overt political dramas as symbols that placate the masses while using covert political activity to plunder them. What we would now call rent-seeking succeeds because Outsiders are dazzled by the symbols while Insiders grab the substance.”

A lesson of 2010: we have to reject this thinking and find ways to work together and educate each other, or find ourselves further marginalized.

Happy “News” Year and new decade.

News Dissector Danny Schechter edits Mediachannel.org witth editorial support from “dissectrix” Cherie Welch. In 20ll. we will be launching a campaign for a “jailout, “not a bailout on Wall Street as called for in the film PLUNDER The Crime of Our Time. (Plunderthecrimeofourtime.com). Comments to dissector@mediachannel.org

In the days of Stalin’s Russia, not only would dissidents “disappear” but also
even in the pre-digital era, photographs of officials at May Day reviewing
stands would be erased from photographs when their political stars fell.
Our own “Kremlinologists” would know who was in, and who was out by
comparing last year’s pictures with this years.

That’s one way of concealing information.

Just last week, Republicans on the Financial Crisis Inquiry Commission
pushed to have certain words removed from the report they were writing
because they posed a conflict to their view that only the government was to
blame for the financial collapse

Explained economist Paul Krugman, “Last week, reports Shahien Nasiripour
of The Huffington Post, all four Republicans on the commission voted
to exclude the following terms from the report: “deregulation,” “shadow
banking,” “interconnection,” and, yes, “Wall Street.”

When Democratic members refused to go along with this insistence that the
story of Hamlet be told without the prince, the Republicans went ahead and
issued their own report, which did, indeed, avoid using any of the banned
terms.”

In our media today, omission of images and ideas is as key to sanitizing the
news as is commission, What is not reported or perhaps even known is often
more important than stories that are twisted by bias.

Enter Wikileaks and an age-old battle between our right to know and their
right to keep us from knowing. Its critics make a fetish about keeping secrets
as if it is a holy duty and not a system of keeping the public uninformed
about what their government is doing in its name.

The public has a right to know if officials are saying one thing in private and

another in public, if they are concealing information or just plain lying.

The Pentagon Papers showed us that wars could be waged deceptively,
based on deliberate falsehoods. Wikileaks revelations about the Iraq and
Afghanistan wars tell a similar story. We have learned how torture and
civilian deaths were pervasive—and covered up.

Veteran investigative reporter Bob Parry argues that in the national security
area, journalists—and the people—need leaks from officials of conscience.

He writes:

“Whatever the unusual aspects of the case, the Obama administration’s
reported plan to indict WikiLeaks founder Julian Assange for conspiring
with Army Pvt. Bradley Manning to obtain U.S. secrets strikes at the heart
of investigative journalism on national security scandals.

That’s because the process for reporters obtaining classified information
about crimes of state most often involves a journalist persuading some
government official to break the law either by turning over classified
documents or at least by talking about the secret information. There is
almost always some level of “conspiracy” between reporter and source.

Contrary to what some outsiders might believe, it’s actually quite
uncommon for sensitive material to simply arrive “over the transom”
unsolicited. Indeed, during three decades of reporting on these kinds of
stories, I can only recall a few secret documents arriving that way to me.”

It’s not just the government that hides behind secrecy rules it puts in place.
The private sector does too—with the complicity of much of the media,
which did not warn us about the financial crisis that was building. We didn’t
learn about the pervasive fraud in the banking and real estate industries and
still don’t know the full extent of the crimes of Wall Street.

Do we have to wait for historians to tell us that the stories we are being told
are a crock?

Anyone remember reading about the Spanish American war. That’s the one
which also marked the beginnings of “yellow journalism” when screaming

headlines and falsified photos were used to mobilize the public for war.

Back then, at the turn of the last century, an American battleship, the
USS Maine sank in Havana Harbor. The incident sparked a battle
cry, “REMEMBER THE MAINE.” We were told that “THEY” sank it.
The incident led to war which later spread to the Philippines at a cost of six
million lives.

80 years later, a submersible submarine went down to the remains of the
Maine on the harbor floor. What they found was that no one — no terrorists,
no Spaniards, no Cubans, nobody sank the Maine. There had been an
accident in the engine room. The whole war was based on a well publicized
event that never happened.

If we had known that at the time, many lives would have been saved and the
direction of US foreign policy might not have gone in an imperial direction.

So, back to today:

What do we gain from persecuting and prosecuting Bradley Manning who
was among three million people with access to the diplomatic cables we are
now reading about? What will we gain by jailing or killing (as some right
wingers advocate) Julian Assange who is already being called “the Che
Guevara of the Information Age”?

The CIA’s murder of the original Guevara created a global martyr whose
image is still among the most popular icons in the world. Guevara had his
own problems with hostile women. One, Molly Gonzales, tried to break
through barricades upon his arrival in New York with a seven-inch hunting
knife. He later became famous for saying, “the true revolutionary is guided
by a great feeling of love.”

Assange is being accused of sexual crimes in Sweden, a country, ironically,
recently condemned by Amnesty International for not enforcing its own laws
against rape. Now, the Wikileaker in chief, is being targeted by the leak of a
Swedish police document detailing charges against him. (They are charges,
not facts and may be serious under Swedish law.)

The ongoing and well-orchestrated war on Wikileaks is also outraging
millions worldwide who see the United States as a secretive and

manipulative colossus that lives on lies and deception.

For many, this issue has reached a level of hysteria which, like the “Red
Hunts” of the 1920s and the commie “crimes” of the cold war era, will only
bring more shame to a Washington desperate to change the story away from
the content of the leaked cables to allegations of wrongdoing by Assange.
The Administration is also virtually torturing the man who dumped the
documents, Bradley Manning, in Gtmo-like conditions, in an effort to turn
hum against Assange. He has yet to be tried.

We can’t put leaks genie back in the bottle. We might do better reflecting
on the meaning of these disclosures for our democracy and media. The
big secret is the one we don’t want to see: that we are building support and
respect for Wikileaks even as officials fulminate against it.

News Dissector Danny Schechter directed Plunder The Crime of
Our Time, a film on DVD about the financial crisis as a crime story,
(Plunderthecrimeofourtime.com) Comments to dissector@mediachannel.org

The questions of deficits and debts are not at all black and white. For example, they’re gray enough to hold the $14 trillion US debt and leave many well intentioned people arguing whether this is good, bad, or indifferent. There is no formula for how much debt is too much, particularly if you’re a nation state, and a nation state that prints their own currency. Now individuals, businesses, or other non-money printing entities find out when debt is too great when they can’t pay off what they have and no one will lend you anymore money. However, if you can print your own money, in the end, the only real measure of too much debt is inflation and/or the destruction of the currency.

Deficits and debts are effects with underlying causes. All debt isn’t bad, in fact investment debt, that is something which over the course of time will be paid off and creates more wealth is both necessary and good. However, debt created to simply continue an untenable status quo is bad debt, leading eventually to insolvency. And this is the great question of American debt, both public and private. Rob Johnson of New Deal 2.0 has an important talk looking at America’s debt question. It accompanied a longer paper he co-authored with Tom Ferguson and that is well worth reading.

In the talk and paper, Johnson makes some important points in discussing the whole US debt question. First, he has asks how much debt is too much and he points to the currently popular notion put out by Rinehart and Rogoff, authors of the book, This Time’s Different, that at 90% of debt to GDP, debt becomes detrimental. He’s skeptical and gives his reasons. I’d have to agree. While the 90% formula comes from subsequent articles, I read the book and it gives academic writing a bad name. The historical figures beyond fifty years are at best not rigorous and many would have little value. So, if the 90% trigger is based on that, it’s at best very soft. Good enough for economics I suppose. Johnson and Ferguson then put out some interesting points on how we account the debt, and these are valid.

Their second point is the more important point of what caused the debt, and here they hit the nail on the head. It is the capture of our politics and government by the moneyed interests of Wall Street and mega-corporations. Most importantly, Johnson points out the problem of the military-industrial complex and its strength due to the fact that for over a half-century now, it has become one of the greatest generators of pork in DC and has protected itself by divvying up the spoils across congressional districts to insure protection. This is an especially timely point as at comes at the fifty year anniversary of Ike’s farewell address warning on the military-industrial complex. Unfortunately, the warning went unheeded, and even more unfortunately, Ike set the precedent for American politicians leaving office to lament the mess they had made and complain about an increasingly broken system as they washed their hands of it.

Johnson and Ferguson conclude by focusing on the scourge of money in politics and particularly its impact on our financial system and of course the resulting trillions of dollars the financial crisis added to the debt. Which, directly goes to the question, “Can we grow out of this debt?” To which my answer is no, not until our financial and political systems are fixed. And that “growth” is going to be different than the past century’s industrial growth with which we are familiar.

With the help of money poured into the political system over the past 30 years, the financial industry exploded both public and private debt in America to the point where it is no longer simply a debt problem, it is now a money problem. Debt is in many ways money, and what the financial industry has done is created a vast pool of money at the top or tangential to the real economy, requiring ever more money from this financial pool for any given amount of economic activity. It has done this by increasing debt for every economic activity, say for example credit cards for consumption, and at a larger level with securitization releasing what should be illiquid debt, say mortgages, immediately back into the greater liquid money pool. This has tremendously distorted the real economy and made the entire system liquidity junkies, which is provided by the Fed with both cheap interest rates, and as that became insufficient, directly monetizing the debt.

Thus, we get to the point of money creation, and what we have seen first and foremost in the massive debt creation of the past 30 years is an abuse of the money creation monopoly given to the Fed and the banks a century ago. We need to look again at this monopoly and we will find not only is it not necessary, it is detrimental. It has certainly never been democratic. Many aspects of money creation need not go through the banks, the monopoly should be broken, but that would require a rethinking, reforming, and evolving of our political economy.

Cross-posted from Archein: deficts, debt, money, and democracy

Little remarked upon has been the price of oil return to $90 a barrel. The last time we saw $90 was two years ago, as oil rapidly retreated from its $147 all time high, with the global economy in full meltdown along side the financial mess. But the more relevant time oil hit $90 was the first, October of 2007, which was the official start of the recession. In watching the American economy sputter and shake as oil climbed mid-decade, the question was at what price does the cheap oil dependent American economy no longer function well? I concluded somewhere around $90 a barrel, which if we’re already there, doesn’t bode well for vigorous future growth prospects.

Another question is why is oil at $90 a barrel when, as nice piece on Seeking Alpha points out, US oil demand is down 7% from its 2007 historical highs and “developed world is still down 4.5% from its 2007 high, which has led to a substantial increase in global inventories of crude and crude products. We currently have 10% more global inventory of crude products than we did back in 2004 when crude prices started their march higher.”

The simple answer to this is dysfunctional commodity markets and the Fed’s pumping dollars into a corrupt and dysfunctional financial/banking system. They have to go somewhere, and they’re going into equity and commodity markets, creating asset inflation across the planet. Which now acts as a corruption tax on the rest of us, as inflated assets prices are just another way our financial lords extract money from all of us without in anyway providing value to the economy.

We have a dysfunctional/corrupt economy at this point, pretty much in every aspect, and whether its the Fed or the soon to be enacted DC tax cuts, simply pouring money into a dysfunctional/corrupt economy helps matter neither in the short or long run. We have completely missed the high tide of the recent crisis, failing in anyway to change the course our economy has been set on for the last thirty years. Instead we have locked in an economy that works for ever fewer and grows an ever starker line between haves and have-nots — an untenable position for any republic.

One thing we have seen is the growth of power in the Fed, which has now been institutionalized over the past two years. The most radical element of the tax cuts, and don’t kid yourself it’s a very radical bill, and may very well, as planned, lead to a short-term funding problem rather quickly. So my suggestion, in two years as the Fed hauls out QE IV, we begin associating the buys with actual programs. So in 2013, as the now perpetual payroll tax cuts cause a short-term funding problem, Ben puts it to the bondholders, “This week’s fifty billion is for social security? Yay or Nay?” Ok, I forgot to add we make the bondholders sort of an extra-constitutional senate. And there you have it, as the French say, “voila”, a cutting of social security.

So Caesar comes to America, as the old German said, first time tragedy, second time farce.

Hitler, Churchill, Mussolini, Stalin, Roosevelt–towering figures that the world would never see the likes of again, men who relied on their own resolve, for better or worse, every one of them prepared to act alone, indifferent to approval–indifferent to wealth or love, all presiding over the destiny of mankind and reducing the world to rubble. Coming from a long line of Alexanders and Julius Caesars, Genghis Khans, Charlemagnes, and Napoleans, they carved up the world like a dainty dinner. Whether they parted their hair in the middle or wore a viking helmet, they would not be denied and were impossible to reckon with–rude barbarians stampeding across the earth and hammering out their own ideas of geography. — Chronicles, Bob Dylan

The American people, to our great credit, have never been imperialists, and the public story fed on the empire was always a version of the satirical quip the ancients used on the Romans, “They conquered an empire defending themselves.” But with the fall of the Soviet Union, certain segments of the American “intelligentsia” began to push for an American embrace of, and pride in, empire. This effort was particularly intense after 9/11, but it never moved very far. The Atlantic became a main promoter of imperial propaganda, and Robert Kaplan its hack propagandist in-chief. If you ever read Mr. Kaplan, you will find he’s both deeply paranoid and very clever. Amazingly, he has traveled the world being scared witless at pretty much everything he finds. Combined with active tutorial from the great Sith lord himself, Darth Kissinger, Mr. Kaplan became our premier intellectual imperialist. Though he’s never had much popular impact, in the great halls of government, far from any democratic interference where the decisions on America’s global interests are made, Mr. Kaplan is tragically influential.

So, it’s always distressing to see Mr. Kaplan’s thinking pop-up, especially in a long op/ed in the Washington Post, where far too many will take it seriously. Mr. Kaplan’s piece, as always, is first and foremost a lament for the great days of the Cold War, when one good empire confronted one bad empire. He writes,

Now the other pillar of the relative peace of the Cold War, the United States, is slipping, …There will be no sudden breakdown on our part, as the United States, unlike the Soviet Union, is sturdily maintained by economic and political freedom. Rather, America’s ability to bring a modicum of order to the world is simply fading in slow motion.

He adds,

Currency wars. Terrorist attacks. Military conflicts. Rogue regimes pursuing nuclear weapons. Collapsing states. And now, massive leaks of secret documents. What is the cause of such turbulence? The absence of empire.

Phew, there’s so much wrong with this, it’s hard to know where to start. As, I stated, Mr. Kaplan’s view of the world comes from a very deep, call it an existential fear, those thus frightened are great advocates of order, desperately appealing for its existence even if it’s not there. Yes, there was certain “order” to the Cold War world, but to call it orderly is simply crack-pot, just ask South-East Asia, Africa, or Central and great parts of South America. Mr. Kaplan is a great fantasist, but all great empires need their myth-makers.

However, Mr. Kaplan is correct. America’s ability to impact the planet to its self-interest is indeed lessening. Most amazingly, it is America’s actions of the last 20 years that have most accelerated “the anarchy” Mr. Kaplan most deeply fears. In Mr. Kaplan’s eyes, the greatest promoters of our neo-global anarchy are the Chinese and Iranians. He writes,

While the Soviet Union and the United States were both missionary powers motivated by ideals – communism and liberal democracy – through which they might order the world, China has no such grand conception. It is driven abroad by the hunger for natural resources (hydrocarbons, minerals and metals) that it requires to raise hundreds of millions of its citizens into the middle class.

and,

Yes, empires impose order, but that order is not necessarily benevolent, as Iran’s budding imperial domain shows. U.S. threats against Iran lack credibility precisely because of our imperial fatigue resulting from Iraq and Afghanistan. Out of self-interest we will probably not involve ourselves in another war in the Middle East – even as that very self-interest could consign the region to a nuclear standoff.

To say these statements are incredulous gives them far too much credit. The statement on the Chinese and natural resources has absolutely zero credibility coming from the capital of nation that is 5% of the world’s population and uses 25% of the world’s resources. America’s policy toward the Mid-East has for seventy years been shaped by one concern and one concern only, and sorry AIPAC, it’s oil.

Better is Mr. Kaplan’s dread of the American foreign policy establishment’s greatest fear, the great Iranian threat. Bureaucracies have long memories. It’s amusing to hear Mr. Kaplan talk of Iran’s “imperial domain”, not since Darius right? But in Mr. Kaplan’s mind, Iranian imperial influence extends a foot passed their border in Afghanistan, Iraq, and Turkey — some empire.

Mr. Kaplan finally gets to the real point of his piece, building a bigger navy, for which he’s become a prominent shill over the passed few years. He concludes,

Americans rightly lack an imperial mentality. But lessening our engagement with the world would have devastating consequences for humanity. The disruptions we witness today are but a taste of what is to come should our country flinch from its international responsibilities.

Again, most of the disruptions we’re observing today are not from America’s lessening our engagement with the world, they are in many instances the results of an over half-century Pax Americana. We need to understand one of history’s great lessons, the weight of Rome’s imperial conquests eventually crushed the republic. In the last fifty years, the US has shaped global events to a greater extent than any nation, led by great promoters of fear and paranoia like Mr. Kaplan. It has had at best mixed results abroad, but it has been completely detrimental domestically. The United States needs to lessen our engagement with the world and begin worrying about our problems at home, we can start by slashing the military budget and our oil use.

At a time, when for the first time in history, a great number of the people living have some notion we share a relatively small and limited planet, America can help lead a world ordered not on the dominant self-interests of one or two countries, but with an understanding of the mutual common interests of six billion souls.

Cross-posted: Archein: on empire

You pays your money and you takes your choice.
– Aldous Huxley

In this era of neo-bipartisanship, the one thing we could get Mr. Obama and the new congress to agree on is a re-branding effort. Let’s be officially called USA INC. A few decades from now, people will look back at 2008 as the year of the official start of state capitalism. It is the year, mega-corporate dominance became unchallenged. You could pick a couple events of that year that best illustrate the dawning of corporate rule, most importantly the subservience of all our democratic institutions, but the most obvious were the actions of the Fed.

The Fed was giving money to everyone and everybody with some sort of ranking in the Fortune 500, and then some. The big banks, investment banks, foreign banks, foreign governments, GE, and Harley Davidson. Everyone who was anyone got money, all done with no democratic oversight. The most important thing to understand is the precedent the dumping a bunch of money into the system created — a system of too big to fail. If you’re above a certain size, you are now perpetual, there is no ability for the system to correct. Following this precedent, the ECB announced today, it will pump euros, estimates of two trillion and up, to keep the present European system perpetually operating.

Many schools of thought think this will inevitably lead to inflation, but that’s never seemed quite right. Mr. Greenspan proved long ago, that you can keep asset prices inflated, while the resulting “trickle” into the economy wouldn’t cause larger inflationary pressures. This was especially true if you could keep pressure on wages and deflate manufacturing costs with a massive off-shoring of production to lower wage areas of the planet.  In turn, this allows the great pool of money floating in the asset markets to seek greater growth, thus, higher profit areas of the planet, outside the old industrial eras of Europe, the US, and Japan, after all, this is very much still an industrial capital system.

With all the dumping, or if you prefer transference of money by the central banks to the top of the system, the trick for state capitalism in avoiding inflation is to keep too much of the money from seeping to the bottom. In Europe, as demonstrated by Ireland and Greece, this is done by cutting the public sector, the social safety net, and increasing unemployment. In the US, it has been done with high unemployment and what will soon be with Mr. Obama and the new Congress a no doubt vigorous cutting of government spending.

I couldn’t figure out how this was all working and where it leads to, but Ames in an email last night gave me the precedent from Russia in the 90s stating,

Well maybe Russia offers an explanation. Let me think: in the 90s, especially 92-96 or so, something like this happened: Almost everyone’s wages went to worthless, everyone’s savings and pensions were definitely worthless, connected banks and industrial outfits and bankers wound up getting shitloads of Central Bank-printed rubles pumped their way, and an oligarchy class grew out of that, but at the same time, there was so little PHYSICAL money in most parts of the country that by the mid-90s, barter was I believe more common than money for goods. This went on until Putin took power, or shortly after he took power (and oil started rising too). He rationalized the corruption.

The result though was that assets bubbled out of control a few times and collapsed spectacularly twice plus once somewhat spectacularly in 1995, before Yeltsin stole the ’96 election (which sparked the big final bubble of that era). Inflation for consumer goods was a nagging problem, but that was largely because a) Russian industry collapsed and everything was imported, and b) the government rolls grew massively with bureaucrats who all wet their beaks at every stage of the distribution/sale. Still, I think inflation was kept in check from total hyperinflation by a classic monetarist policy, in fact that was the condition of each succeeding World Bank/IMF loan: that the money wasn’t distributed to the people, only to the financial system.

OK, yes, a bit more extreme then where we are, but all the processes are the same. I guess the lesson here is state capitalism will end the same way as state communism did, with eventual systemic insolvency due to an inability to correct though the protecting and institutionalizing of an unsustainable status quo.

We need to get on a different path, the future lies in part with restoring and reforming this republic.

From USA INC

Martin Wolf has a piece in the FT that both gets to the heart of financial matters, while inadvertently showing the insolvency of our economic thinking. In the end, Mr. Wolf’s piece is a defense of fiscal spending in reaction to deflation. In so doing, he makes the case, but confusedly, of the importance of understanding the difference between assets and debt. Wolf writes,

But the time has come to look at the longer-run implications. This is particularly important when one considers fiscal consolidation. On this I make a simple point: it is not just about debt; it must also be about assets.

Mr. Wolf’s argument is confused because, at a financial level, debts and assets these days are in many instances the same thing, accounted for differently in separate books. Mr. Wolf attempts correctly, but not convincingly to offer a little clarification stating,

Yet governments should not sacrifice the future to the pressures of the present. What is the sense of cutting spending today if the result is a poorer country tomorrow? This point turns on its head the refrain that we should at all costs avoid burdening the future with additional debt. We should indeed avoid burdening the future with unproductive debt. Yet productive debt is not a burden, but a blessing.

The problem here, and it is a big one, is matters of finance and money are not integrated into modern economic philosophizing. That Mr. Wolf, who understands finance better than 99% of those writing on economic matters, is maybe confused, reveals how conventional thinking on such matters offers little help in extracting us from the problems the world finds itself mired.

The greatest argument for those advocating more fiscal stimulus is there is no inflation, but inflation is not the only symptom of a malfunctioning or dysfunctional financial/monetary/economic system. Insolvency is also an important measure. In a functioning market system, insolvency at the individual and business level are important mechanisms for balancing the system. However, insolvency at industry wide levels, such as banking or housing, or at a national level, are signals of much greater problems, problems not simply corrected by pouring in more money.

Mr. Wolf’s piece once again ignores, as does almost all modern economic analysis, the problems of financial bubbles. They are first and foremost a problem of the financial/monetary system, and secondly, depending on their size and length, tremendously distort the underlying real physical economy. In all cases, bubbles are manifestations of unsustainable practices. They create unproductive debt. Thus, the dichotomy Mr. Wolf addresses between productive and unproductive debt is important and key to understanding our future, but more difficult to discern after large bubbles. Wolf continues, seeming to not really believe the distinction. He states,