Archive for February, 2009

HOW TO CREATE PLENTY OF BETTER JOBS.

February 28, 2009

FREE TRADE  SHOULD HELP WITH EMPLOYMENT, AS LONG AS SCIENCE AND TECHNOLOGY CAN BE HARNESSED TO REESTABLISH THE BALANCE OF TRADE. A MASTER TRADITION FROM THE FRANKS, AND WONDERFUL  IF OBAMA ENACTS IT.

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Introduction and warning: The USA, with less than 4% of the world population uses more than 25% of the energy and produces more than 25% of the waste. In other words, US citizens live as if they were six times more worthy. In general the inhabitants of Western Europe and the USA cannot hope to be paid twenty times more for the same qualifications as an Indian or a Chinese on an eternal basis. The rest of the world will contest this. The only way the population of the West can hope to earn much more than the rest of the planet is by knowing much more. Tough but true.

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The present lamentable situation of increasing unemployment of the youth in the USA is the fruit of deindustrialization AND  loss of technological leadership (“detechnologization”). The later is much more important than the former. Europe has the same problem. Trade, per se, has nothing to do with it. Let me explain.

It is true that by sending Western companies overseas, jobs were lost in the West. People look at that, and they say: “trade stole my job”.

But upon second examination, that should have been an advantage, not an inconvenience. Many of the jobs sent overseas are hard and personally unrewarding, once converted to world market rates. Who wants to work 12 hours a day stitching shoes, for a few dollars a day? Car workers at General Motors make an average above US $70,000, but people doing the equivalent job in India earn a very small fraction of that. To save the GM job one has to transmogrify it into something that, because of its enormous sophistication, and the enormous sophistication of its part suppliers, could not possibly be as economically made in India.

GM, for example, could make under licence 300 miles per hour French high speed trains. Those cannot be made in India, they are too technologically advanced. (Russia has technological transfer accords with France and Germany to learn to make high speed trains over the next twenty years.)

Another positive aspect of trade is that, by creating jobs overseas, at least jobs are created there, overseas, which would not have existed, otherwise. It makes people living overseas much richer than they would have been, otherwise. Typically these people are young people, who are more adaptable. Instead of enrolling in the army, against the West, they can work in a factory, for the West (and also for themselves). That new found wealth should allow these people to buy superior European and American products. So creating jobs overseas should augment employment in the West for good, superior jobs. TRADE ALLOWS TO TRADE BAD JOBS FOR SUPERIOR ONES. So trade is good. Trade, well done, allows to trade up in life. It is globally rewarding. But maybe I should have used the conditional in the preceding paragraph, because it is not really what has happened.

Indeed, trade ought not to mean that Asia does all the work, while Western oligarchy and plutocracy get all the profits. That is extremely bad. And that is another name for the present world economic crisis. 

So how to fix the crisis? Well, first one needs to replace the industrial production sent overseas by products the oversea people want, namely something they do not do. So one needs to send them superior products.

The problem with superior USA products is that there have been increasingly fewer and fewer of them. This happened because of the policies pursued by the wealthiest Americans, those who take all the decisions, and tell politicians what to do. These are the same individuals who decided all the heavy industrialization the USA needed was represented by giants like Google and Citigroup (the first one being a media company, not really high tech, and the second being way too big to exist).  These are the same people, who, like Larry Summers, thought that “Credit Default Swaps” (worthless pieces of paper that should be outlawed) were the epitome of high technology (or at least so Summers thought in 1998, when he was the boss; considering that he is presently wrecking the entire world economy to save the “Swaps”, he apparently still believes it). These people reigned, and still do, and have debilitated the production of advanced science and technology, and the superior products deriving from them.  

Now, certainly, there can be superior products, and a Western country or two certainly live off them. Superiority of production is indeed the quasi obsessive strategy of France and Germany. France is trying to manufacture the best of everything. That policy dates from when the Franks outlawed slavery. The Franks knew what Aristotle had said a millennium earlier:”If we did not have slaves, we would need machines”. Well the Franks pursued a policy of technologization (this neologism means, in part, the policy of solving socioeconomic problems through the deliberate invention and deployment of more advanced technology).

The Franks also founded Germany, and communicated to it the same Will to Superior Technology. Great Britain used to be the third full member of that happy technological trio (until Thatcher, Major and Blair substituted the black hole of paper and money for technological superiority). The three countries, each with their philosophical inheritance from the Franks, competed with each other, and, with their immediate satellites, invented most of science and technology in use today. They are trying to pursue this nowadays, but they do not spend as much as they should (the USA spends more, but, somehow, does not perform as well as expected, a problem Japan also has).

Germany has been the world’s number one exporter for years (Germany is first in the total value of products sold, because Germany typically sells very sophisticated, advanced, irreplaceable industrial products, such as machine tools). Germany can sell its superior products at superior prices. In an important sense, that is how Germany lives (it may be overdoing it, with not enough internal demand, but that is another subject; France  leans the other way).

So it is not trade that is at fault. Quite the opposite: by sending jobs overseas, one should augment demand –work– at home because, precisely, people overseas have got richer. The developing countries have been doing their work. But many of the developed countries have not been doing what they should have been doing, because they did not prepare their citizens to be able to make very advanced products that could be sold at any price (that would solve the trade balance). Amusingly, sort of, it’s the opposite case that has started to develop: some developing countries are developing superior technologies.

Here is an example of a situation where a developing country has done, unbelievably what the West should have done. After five decades of dedicated efforts, through the Cultural Revolution, China has acquired a unique mastery in making all sorts of special crystals. Those crystals are crucial to study material science. Some crystals are used to make laser light much more powerful than what is allowed by the laser itself. Only one particular laboratory directed by a seventy-one year old Chinese called Chen knows how to make the best crystals, and it is so expert at it that Western labs have given up, and mumble ominously that it would take a fortune to catch up. Now Western labs are begging the Chinese for the crystals, because that is the only way to get laser light with such high frequency (hence high resolution when using the laser light to acquire microscopic pictures).

This is hilarious. Here, then, in this extremely strategic industry that could lead to a huge advantage, including in making laser star war weapons, China is getting ahead of the West!  And the West has admitted it can’t catch up! China has acquired a monopoly advantage on a strategic technology. The West has given up, and could be soon zapped by ultra violet Chinese laser light. Because it takes three months to make a crystal of Potassium Beryllium Fluoroborate, and that is all what the West knows! It is the same West that is so worried by Chinese spying on high technology that admits that it does not have the skills. It gets even more interesting than this: the Chinese labs have a crystal advantage, because they use scores of young people to do the labor intensive work (some of these labs employ 70 young researchers).

Hence the solution to USA decay is in plain sight. To keep the world in harmonious balance (that means with the West on top), the West needs to keep on forming the best educational and scientific achievers. And plenty of them. 

India and China and a few other countries have arrived at the same conclusion, and they are implementing it. Not because they want to invade the West and colonize it really bad, although that would be funny, but because they know progress keeps their society stable, if nothing else. They are as on a bicycle, riding progress: slowing down would mean falling into social chaos, maybe even civil war.

Thus, a huge spending on education, and science is needed in the West, if it does not want to finish as a servant of Asia. Moreover, of course, there is the terrible crisis of Global Heating, which threatens everybody, and whose only peaceful solution is extremely advanced technology. 

Scientists, engineers and general thinkers need to be rewarded financially for their professions to gain respect and avocations. They used to be, when the USA was great and heading up.

Deindustrialization and detechnologization: we have seen that movie before. That is how the Greco-Roman empire got gutted economically and politically throughout its core area: jobs were sent overseas, or taken by armies of slaves, and the lost jobs were not replaced by higher value occupations. Instead people were paid to do nothing. The republic failed within a generation, after the Gracchi brothers were assassinated. The Gracchi got assassinated because they wanted to redistribute the excessive wealth of those who had too much power (from said wealth). The Gracchi had traced all the problems of the republic to that imbalance of wealth and power.

Obama has taken the right decision by financing science more. But schools (K to 12) have to be made to excel, in worldwide comparisons (after all, Obama is Obama because he came out of one of the world’s top schools, and I mean Hawai’i’s Punahou, not Harvard). Superior schooling will allow to form young people who have skills so great that they cannot be duplicated easily overseas. Skills that will serve superior jobs producing superior products that will reestablish a correct balance of trade.

It is important that Obama’s point of view gets shared by all. Only then will the point of view, and the drive behind it, and even Obama himself, be safe. Because let’s remember that the Gracchi brothers were the most powerful elected officials in Rome in their time. Nevertheless they, and thousands of their supporters, got assassinated by the plutocrats, in a few incredible bloody days the likes of which Rome had never seen before in more than five centuries of republic. These assassinations by private plutocratic armies would not have happened if the Gracchi’s  popular support had been even more extensive, aware, and enthusiastic.

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Patrice Ayme

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Addenda: 1) Denmark has an intensive worker education program. Employers fire at will, but the state then pays them handsomely while they get a more advanced professional formation. Thus Denmark uses unemployment as a machine to produce a superior workforce.

The Danish system is widely seen as superior in Europe, and several countries are adopting some of its elements. But it’s not so easy to turn around a country such as France, which has twelve times the population of Denmark.

2) Technology is not restricted to material things (as modern software shows). The Franks made  essentially technological decisions by outlawing slavery and forcing all and any religious establishment to do universal secular education. Frankish technology (including nationalizations to raise capital) is what beat and destroyed the Arab Caliphate when it tried to invade Francia in the eight century (although the world’s best steel, and super heavy armored cavalry with giant bioengineered horses helped).

3) Youth unemployment in the West is worse than ever since Great Depression II (the one of the 1930s).  

4) Queen Bathilde of the Franks had been captured and enslaved as a teenager by a Frankish army that operated in Eastern England around 640 CE. She later married the young king (who was rather a late Roman republic style imperator), who promptly died, and she reigned for 15 years before retiring to a monastery, leaving her son in charge. She outlawed slavery in the Imperium Francorum. Another Frankish army in 1066 CE conquered all England, stayed, and liberated all the slaves (forming a pact between king and People apparently inspired by the Roman military code).

5) By the year 1,000, Western Europe was the most energy intensive place in the world. It is true to this day, if one tweaks the notion by introducing the concept of efficiency. Western Europe is the most energy intensive,, for useful work in the world (giant traffic jams , and abysmal home inefficiency artificially  bloat USA GDP). A particular case is that French productivity per hour is higher than that of the USA.

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TIME FOR RICO?

February 24, 2009

WHY THE FINANCIAL MESS HAS NOT BEEN SORTED OUT, AND HOW TO DO IT.
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Abstract: The grip of the plutocracy on the USA is astounding. Right now the economy is collapsing mostly because the Plutocracy has been punishing the People by putting the credit system in deep freeze.  The Plutocracy, this Mafia second to none, has every reason to be angry: as 10% of the People is paying mortgage reluctantly, if at all, the super giant pyramid of derivatives that made the Plutocracy so rich has collapsed. Ever since the Plutocracy has endeavored to make the People pay. The Plutocracy controls the bank holding companies, which control the banks. To appease its friendly Plutocracy, the government and its Geithner have been sending the People’s money directly to the Plutocracy. (The New York Times even revealed that the Obama administration had a plan to guarantee hedge funds returns of 20%, if they consented to invest in their little scheme).

Obviously, the government knows something we don’t, so, as a precautionary measure, since the original US Constitution had the word “people” capitalized, giving us “We The People“, I should capitalize Plutocracy too. We The Plutocracy? It goes without saying that European countries, those socialist paradises, blinded by their own Peoples, have not been exhibiting the proper respect for the hyper rich. Thus Great Britain has already nationalized 100% several big banks (nearly a year and half ago for “Northern Rock”). Yet, Great Britain’s Plutocracy, this Mafia second to none, holds the British People into a trance symbolized by the “rule of one” (“monarchy”).
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Frankly, this is painful, and it is with a heavy heart that one has to look at the truth. But what else is there to look at, when the going gets tough? Sometimes in history things do not turn out as expected. They turn into their opposite.

As the Great Depression gripped Germany, millions of honest to goodness, socialist minded Germans, revolted by “plutocrats”, voted for Adolf Hitler, thinking he would bring change for the best (as the Nazis were protesting plutocracy… while secretly bankrolled by said plutocrats!).

Average German voters had no idea that Hitler, far from being a socialist devoted to the Volk, was a pawn of the plutocracy. It was inconceivable to those good Germans that most of the greatest backers of the ultra nationalist Hitler, of this anti-American nationalist, were actually American (!) plutocrats. As Hitler started to reign, those (American!) plutocratic influences guided Hitler’s every step.

Certainly most Germans who voted for Hitler, and they voted many times, would have been amazed, as they cast their votes, at how badly things would turn out. They would have been astounded that the radical change that they had voted for, with the most audacious hope, would bring, in the fullness of time, an immense, incomprehensible disaster for Germany. (More than ten million Germans, 10% of the German population died, among other problems.)

The Obama economic team is confronting a difficult situation. Interestingly, though, in its previous incarnation under the Clinton administration, more than ten years ago, most of that economic team did more than contribute to it: it started the disaster, with fanatical market extremism. Moreover that team has not been taking the right decisions. It is as in a plane crash: too little too late can be as bad as completely wrong in all ways. The stimulus, as a stimulus, was a joke (the real stimulus was no more than 100 billion dollars; not even all the bridges scheduled for collapse are supposed to be fixed! See addendum 2).

Certainly if taxpayers voting on November 4, 2008, for Obama had know that it meant the policy of Transferring Assets to Rich People (“TARP”) would have continued unabated, even as the economy collapsed, they may have paused. As it is democracy does not have enough mechanisms to protect itself. TARP has been extremely unpopular all along. But people have no say in extremely bad decisions. The decisions are taken by 3,000 political “appointees”. Appointed by one or two elected officials.

The government of the USA has to lift the toxic assets from the banks, and remove the liabilities from the banks. Then the banks will be able to function again. As it is, the banks do not function, and credit is completely frozen. As credit is frozen, the entire world economy is suffering hypothermia. Complete freezing is not far away. The continual drop in economic activity is a disaster that mixes all of society in exploding fragments. Just an example: the city of San Francisco (750,000 inhabitants, and relatively few children) just announced that it would fire more than 500 teachers. The city of San Francisco does not have the money to keep their jobs going. It is like that all over.
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The situation seems to be this: there are banks, the banks in turn are owned by bank holding companies, which are themselves in turn owned by hedge fund managers, private equity and other elements of the worldwide plutocracy, a Mafia of a size which overwhelms understanding. The Obama people are trying to save the later, the richest of the rich. The view me as a fool, because I think beyond myself. Meanwhile, the world economy needs the banks’ core functions to be restarted. Or there will be a catastrophe, within weeks.

The credit system is frozen because the banks themselves are insolvent, their capital requirements are completely violated, they cannot lend without getting deeper in the hole. Actually, they cannot lend, by law. The rescue of TARP money has been given to the bank holding companies, which transmitted very little of it to the banks themselves. The bank holding companies kept most of the money for themselves, the salaries and bonuses of their plutocratic officers, and organized the usual happy events such as mergers and acquisitions. During these events, money splashes all over to the rich and happy class.

When banks are insolvent, or when banks simply cannot function because they have violated capital requirements, it is very well known what to do. One separates the banks from their bad assets, and give them enough capital to operate. If Bank of America was cleaned of its bad assets, and given 80 billions, it could lend a trillion (this tremendous leverage is the advantage of nationalization, as I pointed out many months ago). Since it would be a profitable business by then, private capital would come in, even from normal people themselves, and the bank could lend even more. In any case, by doing this with the handful of giant banks that need it, the lending crisis would be over. (Two-third of the banking system is owned by ten banks in the USA.)

This is the traditional way to do it. It is traditional to do it even in the USA, where it has been done for thousands of banks before. As Paul Krugman puts it, it is “as American as apple pie”. Bill Seidman’s resolution Trust Corporation did it for 747 banks. Actually apple pie is a dish enjoyed all over the world. This sort of quick solution to the bad assets problem was done all over Scandinavia, and in many other places. One speaks of “nationalization”. But it is a TRANSITION TO LIBERATION of the banks. And these are the words that ought to be used.

So, as Professor Doctor Nobel Krugman wonders, why is this not happening? (New York Times, Feb. 21 2009.) Why is the Obama administration leaving the entire world economy in free fall?

Well, people advising Obama have worked for banks (Emanuel was making more than eight million dollars a year, in a bank, for example). One can assume that they intent to work for hedge funds, private equity, etc., when they come out of the administration. So they want that system to still be out there when they come out. Geithner was the boss of all the banks in New York. So the Obama advisers are desperately trying to please their once and future masters. It’s a mafia at work, as simple as that. They did not reinstate the short sell rule, so that their friends the hedge funds can keep on organizing bear raids as the stock markets collapse. They keep on having their friends the masters of the financial universe be taxed at a maximum rate of 15%. It’s socialism for plutocrats. Let secretaries and teachers pay the high tax brackets!

The Obama economic advisers come up with mumbo-jumbo lip service and weird semantics to hide the plot, conscious or subconscious, to which their nature has fatally led them to. Their plot is that they use the pretext of the banks’ failure to transfer more taxpayer money to their relations, the private equity, the hedge funds, and various overseas investors, all very friendly. So taxpayers send money and the trusted economic advisers send the money to the richest of the rich, and, lo and behold, more has to be sent, because the banks still did not get any.

It does not seem to matter too much to Obama’s “outstanding” advisers what happens to the world economy as they try to contrive a way to send a lot of money to their plutocratic friends and colleagues, past and future. When you stand out, nothing compares.

But the truth is simple: those “geniuses”, the “outstanding” friends of the Obama advisers, contrived the greatest pyramid scheme, the greatest Ponzi scheme of all times, the derivative system, with a peak value of 600 trillion dollars. The world is worth much less than 100 trillion dollars. No taxpayers of the world can fill that hole for the rich. But still the hyper rich try to have taxpayers fill it for them. The hyper rich had it so good for so long, that is all they know.

Let’s notice in passing that some modern and well balanced states, such as France have wealthy capitalists and industrialists, but they do not have as thick a plutocratic layer as the USA. French banks are generally profitable (with profits in the billions for the big ones in 2008). The largest of these banks are as large as large USA banks. The still profitable insurance giant AXA owns the USA’s Equitable, among others, But the CEOs of these French giants are paid 5%, a twentieth, of their USA colleagues.  Thus the American plutocratic situation is not a necessity of a modern economy (the French economy is at least as diversified in high technology as that of the USA, and arguably more).

The world economy is getting so damaged by the refusal of the Obama administration to fix the banks that a bellicose issue is to be feared. Maybe the vested advisors subconsciously feel that a good war in the future would be the best of distractions. It is so abysmal, abysmal explanations are only natural.

The USA needs a new Resolution Trust Corporation, run the banks through it, clean them, and get them out of their zombie states. We are out of time. If still nothing much happens, it may be time for people to push for RICO. The Racketeer Influenced and Corrupt Organizations Act covers several of the activities that seem in plain sight. People can be convicted under RICO, not for specific acts, but for a pattern of behavior. There are 35 of those. One of them is bankruptcy. Another is securities fraud. Others are obstruction of justice, money laundering, theft, fraud…

The hyper rich in the USA have led the democracy by the nose with their plutocracy. They established for themselves fiscal paradises, places where their money was channeled to escape the IRS. Channeled by the very bank holding companies that have been getting TARP money. Not only is the People getting fleeced, it pays for getting fleeced. What we are facing, what we are contemplating, maybe the world’s largest criminal organization ever, the greatest Mafia, ever . Yes, time for RICO.
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Patrice Ayme
http://patriceayme.com/
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Addenda: 1) At the peak the part of the derivative system known as Credit Default Swaps, that Summers, Rubin and Greenspan obstinately refused to regulate, were “worth” 64 trillion dollars. (They are particularly sensitive to the collapse of housing.) The reasoning that Rubin and Summers were following was that if derivatives were regulated in the USA, they would go somewhere else. Those guys know some financial words, but they clearly do not know geography. The other great economic power in the world is the European Union, and the EU is cracking down on the plutocracy and fiscal evasion. If the USA and the EU agree, everybody else with (except in outrageous cases like the 300 billion dollars of USA-EU agricultural subsidies). So the truth is very different: derivatives made USA plutocrats hyper rich. No other country was crazy enough to develop derivatives to that extent.
Anyway, back in 1998, according to Newsweek, proceeded to “dress down, loudly and rudely” the chairwoman of the Commodity Futures Trading Commission (because she wanted regulations). Literally an old boys network.

2) The stimulus comprises many expenses that are not so, like the AMT (70 billion, always budgeted, and not a stimulus anyway), and huge payments to states to compensate in part for collapsing state budgets.  There is eight billion dollars for high speed rail, enough for 100 miles of one high speed line in a flat plain. For the entire USA. That was added at the last second, to look good.
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LAW WITHOUT RESPONSIBILITY DESTROYS SOUL AND CIVILIZATION.

February 22, 2009

 

 

SHIRKING RESPONSIBILITY BRINGS HOLOCAUSTS, SAYS THE FRENCH COUNCIL OF STATE. HISTORY CONFIRMS IT.

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Motivation: It may seem strange to worry about the concept of responsibility in an historical context as the world economic system is imploding. But the relationships are direct, philosophically and historically. The present catastrophe has been pervasively caused by a lack of responsibility. Just like the Holocaust of the Jews, and many other holocausts before or since. Responsibility is about responding. Without a mental response, no law can be enacted, let alone made appropriate to the world we live in.

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Abstract: The Romans, or more exactly a Roman empress (“Augusta”), proclaimed the notion of “State of Law”. That meant a State where no one was above the law, neither the sovereign nor the most humble subject, as she pointed out. And ever since that notion has held up in Western Europe, most of the time. An extension of it is to avoid plutocracy, and any society where the elite’s fate is disjoint from that of the common person. Nevertheless, this is not enough.

Bouts with irresponsible fascism in the twentieth century have shown that having a State of Law is not enough. Nor is it enough to have the elite share the fate of the commons. The Nazis respected the appearance of the law, but they navigated around it. In the end. They came down with their ship of state. What was absent in their universe was RESPONSIBILITY. Under Nazism, people became mentally inert. Without responsibility, intelligence itself is compromised. Absent enough intelligence, war is the only outcome.

To fully support civilization, in these increasingly delicate times, one needs a STATE OF RESPONSIBILITY. Although responsibility looks backwards, there are huge consequences, looking forward.

This essay logically hyperlinks wildly different concepts. It also uses very important true facts of history that are generally ignored. Such an ignorance of major facts falsifies historical analysis. Thus, the following essay may be found shocking, mystifying, and impenetrable. All the more since American plutocracy, the master mind of the present economic crisis, comes out of the following analysis, looking worse than ever. But this essay was meant to serve the truth, not the plutocracy.

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Overview: How does one get a holocaust? There are two views on the subject, and they are both valid, and complement each other. One view, the deep view, first loudly proclaimed by the Romans, the Christians, and Sade (and to some extent Hugo and Nietzsche, among others), is that the nature of man is (in part) evil.

The other view is not as fundamental, but it is of great practical importance. It explains how otherwise apparently decent people enact evil. Hannah Arendt, an upper class Prussian Jew, had to explain to herself why so many people she respected and loved, many of them Jews, and Jewish organizations, made the Nazi terror and holocaust possible, by collaborating with it (instead of vociferously opposing it). Arendt came out with the theory of the “banality of evil” (naturally, she was hated for it).

The way “banality of evil” works is this: by taking no responsibility, by acting real cool, by being very careful to not confront anybody, and being really very “bipartisan”, and very much beyond partisanship, one is able to take no moral stance whatsoever. Under the Nazis, most Germans acted cool, uncontroversial, apolitical, and did what they were told to do, and thought what they were told to think, all of it, low key. It was the exact opposite of etymological responsibility.

Eichmann, the well known mass murderer, indeed insisted, unbelievably, that he was so cool about everything that he was bipartisan, both Nazi and Zionist (!). His guiding light was the infinitely boring and robotic Prussian philosopher, Kant. When he took Yiddish lessons from a Jewish girl, Eichmann paid her handsomely, and he intervened many times to save Jewish friends (OK, some of them were SS).

In 2009, the French Council of State decided to do something about all this moral murkiness by proclaiming the responsibility of the State, down to its smallest action. The Council basically said that there was nothing banal about collaborating with evil. Collaborating with evil is evil, down to the last spark of irresponsibility. There is no navigation around evil. One can proclaim a new notion, that of the STATE OF RESPONSIBILITY. Whereas the Qur’an, or Kant, or Hitler, have it that superiors of apparent moral standards should be obeyed strictly, responsibility pays attention to the issues themselves.

“Responsibility” etymologically comes from offering chants and libations, in reply to something. Something happens, and one makes a show of noticing it, one addresses it in loud voice, even with chants, and by raising glasses and drinking in its honor. Thus RESPONSIBILITY IS THE OPPOSITE OF COOL, it’s about loudly reacting with great demonstrations. Responsibility mobilizes the mind. Irresponsibility puts it to sleep. Sleep is easy, mobilization is hard.

In the first month of the Obama administration, the question of unlawfulness in the Bush administration came up. Obama replied that nobody was above the law. Good. That was cool. Meanwhile, American flying robots kept on swooping over Pakistan, and bombed, and killed innocent people in Pakistan. Nothing to celebrate, nothing to make chants and libations about. In other words, it is irresponsible to rain death on Pakistan. (And it is morally indefensible, and thus a strategic contradiction, since the USA came to be fighting in the name of morality, but that is another story. In this essay I do not address morality, but the mental alertness that makes it possible to start with, be it as a theory, or as a practice.)

Should one accept the PRINCIPLE OF RESPONSIBILITY to guide civilization –the principle that issues should be loudly reacted to with great demonstrations– immediate practical consequences will unfold. Even in the present financial crisis. Should one elude the severity and the imminence of the crisis’ possible socioeconomic and diplomatic consequences, the US administration would be shirking its responsibility

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THE HOLOCAUST HAPPENED BECAUSE NOBODY TOOK RESPONSIBILITY.

The Council of State, the ultimate recourse of French citizens against the French administration, was asked by a superior court about the responsibility of the French State during the Holocaust. The Council established that the “responsibility” of the “French State” is “engaged because of actions that, not resulting from a direct pressure of the occupying power, have allowed or facilitated the deportation from France of persons victim of anti-Semitic persecutions”. The Council used the present tense. (See addendum for mistranslation and anti-French sentiment from Associated Press.)

This is remarkable, be it only because there was no constitutional French State during the occupation of France. Moreover, a lot of the victims were not French. So what is the French Council of State trying to teach? Well, a very important point about responsibility and civilization. The Council of State stood up and proclaimed that whatever the excuses, the French State was responsible for anti-Semitism in World War Two France “not resulting from a DIRECT pressure of the occupying power”. The Council embraced a notion of collective responsibility, throughout the structure of the State, and throughout its history. It does not matter that it happened more than 56 years before. It does not matter that the French State was Hitler’s one and foremost deliberate, determined enemy. It does not matter that France protected hundreds of thousand of foreign Jews. It does not matter if it happened under another administration. There was still the administrative structure of the defunct Third French republic that the Nazis had just destroyed. The State is responsible as an institution, forever, and has to recognize it, whenever and wherever.

The affirmation of responsibility of the State has philosophical and political consequences. But let’s go back to history. France confronted Hitler in August 1939 about Poland. Hitler, in his cowardice, allied himself with… Stalin. The USSR promised oil to Hitler. But France was undeterred and dragged Britain into it. Hitler attacked Poland, and France and Britain declared war. The Nazis were not ready for war, and their rage was astronomical.

Meanwhile the good old USA was trying to get out of its Great Depression II by making an economic, plutocratic and de facto military alliance with Hitler. Cool, and irresponsible.

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A QUICK RECAPITULATION OF HOW THE FALL OF FRANCE ALLOWED THE NAZIS TO MASSACRE JEWS:

So let me be blunt. In 1940, France had only one ally, unprepared Britain. The USA, the USSR, and the Nazis were all actively collaborating, against the French republic. Many American plutocrats positively hated France whose Popular Front led by the Jewish PM Blum, had introduced a lot socialist legislation (the 40-hour week, paid holidays for the workers, collective bargaining on wage claims and some nationalizations). France was a terrible example, that the American plutocrats did not want American workers to follow. Nothing would be nicer if their friends the fascists would invade France. And it is just what happened, thanks to huge technology and industrial transfers made by American plutocrats to the Nazis.

France held ten months, and then fell, well before Britain was ready. The Jews, among dozens of millions of others, died from that. Let me explain.

After Hitler came to power in 1933, the French republic prepared for war. The “minister of war” Maginot built at enormous cost his famous line of impregnable fortresses (unfortunately Belgium reneged on building its part in 1937, under USA influence, and that is where the Nazi army broke through). France also built three times as many tanks as the Nazis. France also launched a nuclear weapon program. And But at Munich, France lost her one and only prepared ally, Czechoslovakia, without firing a shot. (That was irresponsible.)

As the persecutions against Jews increased in central Europe, hundreds of thousands of Jews took refuge in France. Finally Hitler, buttressed by Wall Street, numerous US corporations and US plutocrats, plus Stalin and its Soviet Union, attacked Poland for oil. France (with an unprepared Great Britain in tow) declared war, and attacked with 45 divisions on a narrow front squeezed between Luxembourg and the Rhine, in the mountains, smacked in an impassable part of the fortified “Westwall”, the Siegfried line.

The Nazis found the going hard: the obsolete Polish army resisted fiercely. US plutocrats sent crucial technical supplies so that Hitler’s Air Force could keep on flying. Ten months later, during a very successful Franco-British offensive against the Nazis in Norway, a succession of astounding circumstances led to the unbelievable, sudden and very brutal fall of France. In 5 weeks of hard fighting, 185,000 soldiers died (and a great number of civilians, many strafed on the jammed roads). It was the hardest battle of the Western front in W.W.II.

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THE CEASE FIRE OF JUNE 1940 BETWEEN FRANCE AND THE NAZIS:

In June 1940, the Nazi tanks were all the way down to Bordeaux. In an elaborated deception, the French nuclear program, its team and materials had escaped to Britain (the Nazis were led to believe that they had sunk it all, but the boats had been substituted). More than half of France had been overrun by the Nazi army, most of the French army in France had been destroyed, hundreds of thousands of people had been killed in a few weeks. Nevertheless, France had an empire spanning the planet, and quite a few forces in it. The French government could have fled to North Africa, then either French territory (Algeria) or under French protectorate (Morocco, Tunisia), and fight from there. It was feasible: the French and British navies could lock the Mediterranean. Although the French and British air forces had suffered enormous losses, France still had hundreds of modern planes, and Hitler’s Air Force had lost 2,000 planes. Churchill had an even better idea: joint nationality with Britain.

The idiotic French Prime Minister, influenced by his anti-English mistress, instead agreed to a ceasefire with the Nazis. It was not peace: Germany was still the enemy, and millions of French soldiers were kept in captivity. But the armed forces stayed where they were, so half of metropolitan France was not occupied by the Nazis (it would be two years later).

The cease fire of France with Hitler would have been a grievous mistake if the USA had been on the side of Britain and France: then France could have easily held North Africa. But as it was, and quite to the contrary, the “USA”, in its globality as a country and a plutocracy, was busy supporting Hitler’s war effort.

But the French were dispirited from having to fight the USA, the USSR, and the Nazis. They had had enough. They did not feel like doing most of the fighting and dying once again as they had done in W.W.I, while others got all the fruits, and interfered with the peace process. So many Frenchmen were killed in W.W.I, that fewer soldiers were drafted than in 1914, the population being smaller. Moreover the USA, as a State and plutocracy, had played an ambiguous role after WWI. The USA seized German property in 1919, only to redistribute it to US plutocrats supporting the Nazis. Then, starting in 1934, the US government had been deliberately hostile to France. With gigantic direct investment in Hitler’s Reich, the more extreme it got, the USA incited many nations (such as Mussolini’s Italy) to turn hostile to France. The USA refused to accept Jewish refugees. At some point a trans oceanic liner full of German Jews was sent back directly to Hitler, after the USA connived to have it not accepted in Cuba or the Americas. So many foreign Jews were trapped in France.

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THE DOUBLE FACED, UNCONSTITUTIONAL PSEUDO STATE OF VICHY:

In the city of Vichy, a few French officials formed what came to be known as the Vichy government, to give orders from above to the French administration (a Geneva convention obliged the occupying power, Nazi Germany, to preserve a French administration; the USA violated that Geneva convention during the early years of its occupation of Iraq, with catastrophic consequences). Vichy was unconstitutional. Other French officials constituted the “France Libre”. Roosevelt and the USA, still unfriendly to France, recognized Vichy. Britain recognized Free France (June 1940).

The Nazis wanted to exterminate the Jews. France, however, did not discriminate on the basis of religion, and no religious census had been held since 1874. So the Nazis did not know where the Jews were. Craftily, the Nazis asked the Jews to come and make themselves known (German ordinance of 21 September 1940). 150,000 Jews did so in Paris alone. It was a case of asking the sheep to come register at the slaughterhouse, and 150,000 sheep volunteered.

The Nazis arrested 4,000 Jewish men here, a few thousands there. But they requested more. With hundreds of thousands of Nazi troops in France, the Parisian police was in no position to say no. The roundup was aimed at Jews from Germany, Austria, Poland, Czechoslovakia, Russia and those whose origins couldn’t be determined, aged from 16 to 50. There were to be exceptions for women “in advanced state of pregnancy or who were breast-feeding”, but “to save time, the sorting will be made not at home but at the first assembly center”. The age of 16 supported the fiction that the Jews were rounded up because they were needed for work in the East. Children were supposed to be sent to Jewish foundations in France.

The Nazis expected to arrest at least 22,000 foreign Jews in Paris. At 4 am on 16 July 1942, 12,884 Jews were arrested: 4,051 children, 5,802 women and 3,031 men. Many thousands had been warned by the resistance, or the police let them go. (In July 1942, a study by the French resistance evaluated that no more than 5% of the French police supported fascism. Two-thirds supported the British, although Britain was conducting bombing raids over France.)

In the end, out of 76,000 Jews deported from France who died, 26,000 were French citizens, and the rest were foreigners (they should have been in the USA, not stuck in France!). According to Karsfeld, a Nazi hunter, 40% of those Jews were arrested by French police.

Many Vichy officials (including Bousquet and Mitterand) were both collaborating and resisting, and it was often not clear what they were mostly doing. For example, the top IBM official in France was ordered by the Nazis to find all the Jews in France, but in truth he was finding out all young men that could be drafted in a new French army, in metropolitan France and North Africa. When a new French army of a million men appeared out of Africa, while Jews had proven elusive, the Nazis finally understood. The double agent was arrested, tortured and executed.

One has to understand that throughout the war, millions of French people were prisoner or deported to Germany. POWs, STO (Service du Travail Obligatoire, Obligatory Work Service). Hundreds of thousands suspected of resistance, or just grabbed in the streets were sent directly to concentration camps. The last train convoy of deported French left Paris on August 15, 1944. 2,200 men and 400 women, directly for the Buchenwald extermination camp. These were not happy times for France. Overall, the world spanning French empire lost nearly two million killed, most of them civilians.

In August 1944, the Paris police, Gendarmerie and resistance revolted. There was heavy fighting. Worried by the massacre going on in Warsaw (where the Nazis were systematically destroying the city with the Soviet army watching at a safe distance), the French Second Armored division of general Leclerc charged through Nazi defenses in a spectacular advance, suffering heavy losses. Officially 3,200 German soldiers were killed in action during this Parisian battle of the French against the Nazis.

So what to think of this pseudo-state of Vichy? One can compare with the Netherlands. There was no Dutch government in charge. The Netherlands was under direct occupation by the Nazis. The local IBM guys collaborated with the Nazis, and it was easy anyway, because all the Jews were registered in the Netherlands. Nearly 100% of the Dutch Jews living in the Netherlands were assassinated. Whereas most of the Jews in France survived, because they were able to hide.

The most amazing part of it all is that although French officials went to the USA to reveal the Holocaust of the Jews, and a few US newspaper talked about it (New York Times, Boston Globe). The Holocaust was mostly hidden by the Allies themselves. Secrecy, or rather, not talking about it, was the most important enabler of the Holocaust though. Put in front of its responsibility, the German people would have stopped supporting the Nazis.

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WHO WAS ULTIMATELY RESPONSIBLE OF THE MASSACRE OF THE JEWS?

After Germany and Austria, the USA is probably the State that was the most responsible of the holocaust of the Jews. For example, although nearly all Jews died in the Netherlands, and the USA looked very far removed from that massacre, it was not so. Research using IBM electro-mechanical computers allowed the Nazis to find the Jews throughout Europe. Those machines needed continual delicate servicing managed from New York. So it was all over Europe, in all what the Nazis did, since Hitler had given IBM the monopoly of organizing and computing.

The USA, as a State, kept allowing many US plutocrats and corporations to collaborate with the Nazis, as a country, throughout 1940 and 1941 (courageously Roosevelt was fighting Hitler as much as he could, but he did not control Congress and Wall Street, which were stridently pro-Nazi). Many US corporations collaborated throughout the war, such as IBM. When Nazism fell, they stayed where the Nazis had installed them. Heads we send you to Auschwitz work for P. Bush, tails we liberate you, and you work for us.

Although the USA knew very well that France harbored hundreds of thousands of foreign, often illegal Jews, who were in extreme danger if France fell, it refused to help the French republic, which was in total war with the Nazis. Even after having being told in detail by the French, as early as December 1940, that the Nazis had already deliberately assassinated at least 700,000 Jews, the USA, as a State, refused to advertise this holocaust, and deliberately ignored it all the way through the war.

WHY WAS THE HOLOCAUST KEPT SECRET BY THE ALLIES?

Let’s stop here for a moment. The USA and Britain should have joined in with the French, and loudly make it known that any person collaborating with the holocaust of the Jews would see the full power of the law bearing down on them upon liberation from the Nazi scourge. Why did this not happen?

It is strange that it did not happen. If the world had been told that the Nazis were deliberately killing entire populations, it would have helped the war effort tremendously. The German population would have been confronted to what the Nazis were really doing, it would have been confronted to its responsibilities. The Third Reich was a totalitarian, fascist state, but it was mostly policed willingly by the Germans themselves, by the fact the Germans were so cool, and so legally minded (typically people who engaged in civil disobedience. were not brought to trial, because the Nazis were afraid of the law). The Gestapo was very small in Germany itself, a few thousand men, all the more small since it was spread all over occupied Europe. As the war proceeded a lot of the German police found itself exerting terror in foreign countries. If the Germans, who worried about their own morality, had been told they were all complicit in massive mass murder, they would have reconsidered their enthusiasm for Nazism. Since Germany was mostly self policed, the Nazis would have been unable to keep on ruling. The coup against Hitler, “Valkyrie”, would certainly have worked.

Well, nobody thought of accusing Germany of mass murder in a timely manner. Perhaps, the Jews were not as popular in the USA as they have become since. It advantaged a lot of the plutocrats, who had been pulling the strings of fascism all along, to see the war to its bitter end. As it was they were able to establish a better control for their own capitalist system after the war (they did not have to share with the diminished Europeans, that is).

The American and British governments decided to stay silent about the Holocaust of the Jews. They did nothing positive to prevent the extermination. They were busted by their own generals, who were disgusted by what they saw, when they liberated the concentration camps. Some American generals stood up, and, with great demonstrations, loudly exhibited the holocaust for all to see: that is the very definition of being responsible.

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RESPONSIBILITY ACCEPTED: THE CASE OF GENERAL EDWIN ROMMEL:

W.W.II was a complicated mess. And a learning process. An example is the career of general Rommel. Although a general in the regular German army, the Wehrmacht, Rommel started as a dedicated Nazi and an admirer of Hitler. In May 1940, he and his superior, Guderian, played a crucial role in the defeat of France. Guderian lied to the German High Command: although he had been ordered to stay where he was, he threw all the ten tank divisions of the German army in a deep, concentrated and fast, crazy stab inside France. It came close to disaster when heavy French tanks, that the Germans could not destroy, came within a kilometer of Guderian’s headquarters. But in six days of no sleep and continual attack, the German tank army cut France in two, and reached the sea. After 360,000 British and French troops escaped at Dunkirk, it was time to finish the job. The German army veered south. French resistance was fierce. The French army invented what has come to be known as the hedgehog defense, fortifying villages, and inflicting heavy losses on the enemy. That was clearly the last moment when the USA could have done the right thing —declare war to Hitler— but it did not.

The Nazis got seriously exasperated, because the French would not quit. On the river Somme, Franco-Senegalese troops stopped Rommel’s own Seventh Panzer division for three days, inflicting serious losses. The Franco-Senegalese surrendered when they were out of ammunitions. The Nazis executed them all, soldiers and officers, European and African, black and white alike. The first blatant criminal violation of the rules of war in W.W.II.

Two years later exactly, Rommel, now heading the Afrika Korps and the Italian army, had the British 8th army in a desperate retreat, in disarray after the fall of Tobruk. To kill it, Rommel devised a plan to sweep in the desert really fast, and cut it from behind. As the Afrika Korps executed that move, the leading Italian armored division, soon followed by the entire Afrika Korps, crashed in the desert into the Free French troops of general Koenig. Amazingly, the French brigade held two weeks, before getting the order of retreat from the Brits. That gave time to prepare the victory of El Alamein (had this not happened, the Afrika Korps was supposed to go all the way to Iraq). Hitler was very impressed, and told his cabinet: “See, gentlemen, the French are the best soldiers in the world after us, and that is why France needs to be completely eradicated.” The ultimate backhanded compliment: you are very cute, so you need to be destroyed absolutely.

Later Rommel commanded all Nazi forces in France. By then his heart had changed. Too much France will do that, even to hard core Nazis. The SS Panzer division, Das Reich, rushed towards Normandy from southern France after the Allied landings. But it was slowed and suffered losses from French resistance attacks. Enraged, an officer of Das Reich ordered that all the inhabitants of a French village to be burned alive. More than 600 died. Rommel, though, found this intolerable, and ordered the arrest of the SS officer for war crimes (he died before his arrest). At the same time, Rommel ordered the Wehrmacht to lock up the SS throughout France, as part of the coup against Hitler. At that point Rommel stood up, and expressed his stand as loudly as possible, against Hitler. He had accepted his responsibility for the crimes of Nazism.

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IF THERE IS NO RESPONSIBILITY, THERE IS NO CIVILIZATION:

Most European countries recognized the grave violations of civilization engineered by the Nazis and their collaborators. The Nazis tried to enact the worst of what they read in the Bible, with greater technological efficiency. If it was not going to be an ongoing temptation, it had to be struck down. The Waffen SS had been highly successful recruiting young Europeans all over Europe, hundreds of thousands of them (mimicking the method of transnational recruitment inaugurated by Napoleon). It was important to show to the youth that Nazism was not a happy outcome. The Netherlands’ attitude was typical: the death penalty, which had been outlawed for 140 years, was reestablished.

France was the original and fundamental enemy of Hitler. Hitler personally wanted to annihilate France, a passion many of his closest colleagues did not share. The ultimate irony is that as he groveled inside his burrow in Berlin, the Nazi dictator was defended by Waffen SS from the LVF (Legion des Volontaires Francais, the Legion of French Volunteers), helped by Scandinavians SS and the Hitler Jugend. Adult Germans had deserted him, in his hour of need and pain. Tellingly, a few months earlier, some of the fighting of the French LVF had been against German volunteers fighting the Nazis. So some French volunteers fighting for the Nazis fought some German troops fighting against the Nazis; this shows that here was a dimension to fascism that transcended nationalities (the German State would pay for the retirement of many Europeans foreigners that served the Nazis for 50 years)… If anything, all these intrinsic contradictions of fascism taught most Germans the futility to be on the wrong side of civilization. If anything the close call that France suffered in W.W.II, taught the reconstructed French republic that even greater zeal in the defense of civilization was called for. Two percent (2%) of the population had collaborated with the Nazis, but that was 2% too many.

There had been many thousands of rabid collaborators of the Nazis and French fascists during the war. France executed up to 40,000 French fascists, Nazis, or collaborators after the war, more than all other countries together (although Russia exterminated millions of Nazis and Germans, by using against the German population the Nazi method of deliberately massive collateral damage, these were not legal executions).

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TO AVOID HOLOCAUSTS, NO RESPONSIBILITY IS SMALL ENOUGH. A STATE OF LAW IS NOT ENOUGH, A STATE OF RESPONSIBILITY IS NECESSARY:

Given that the Nazis existed, controlled Germany and Austria, and were persecuting the Jews, the ultimate responsibility for the Holocaust of the Jews fell on the United States of America. The French did what they could. But it backfired, to some extent. The USA has never admitted any responsibility in the Holocaust, or the Third Reich. But the bloody paws of American plutocrats were all over Nazified Europe, from the use of Texas oil by the fascists during their conquest of Spain (that used to make Hitler laugh), to IBM computers organizing all the details of the extermination machine, and roughly anything in between, thanks to massive technological transfers from US corporations to the Nazis (Ford and Watson (IBM) got the highest Nazi decorations, P. Bush was the most trusted collaborator and manager, etc…).

When holocausts happen, it is not just because of one man. For example King Saint Louis IX of France hated the Jews and wanted them and unbelievers killed, but he could not change either the law nor the national mood, and this desire of him stayed a holly wish (circa 1250 CE). The same happened again with Luther: Luther loathed the Jews, wrote about the pleasure it would give him to see them suffer, but he could not do anything about it, being just one hate monger. One had to wait for Hitler, a popular elected politician, carried by substantial national will, who was able to radically change the laws (those laws Hitler overturned, going back to the Carolingian empire of the Franks, were twelve centuries old). So holocausts happen because of a tribal, or national will and mindset. Even when emperor Justinian went out and killed millions of Christians so that he could better rule by dividing everybody against everybody, in the end it’s the general abysmal state in which the Roman empire had fallen, its general state of irresponsibility and immorality, that made it possible (circa 650 CE).

The republican State is an immensely powerful structure, and its laws can be applied ferociously. That is why the symbol of the Roman and French republic is the fasces, and the motto of the USA, “E Pluribus Unum”, which puts in words part of what the fasces depict (OK, it is not exactly the US motto, but we won’t get into this arcane subject). This enormous power of the State needs to be applied very carefully. Now, more than ever. It is said that one Soviet captain prevented his superior, exasperated and rendered half mad by small American depth charges shaking his submarine, to answer with a nuclear torpedo to blow up the US fleet, during the Cuban missile crisis. (That would have launched W.W.III.)

There is a whole calculus of responsibility. So far it has been hidden in the shadows. It needs to be brought up in the open, to be taught, and so that everybody can learn it. If all officers, in any State, know that their State, and thus they themselves, will not be able to escape prosecution in the future, as long as a future there is, people are going to be much careful in what they do.

Should one accept this more demanding principle to guide civilization, it has immediate practical consequences. For example the Obama administration has not been responding swiftly to the catastrophic freezing of credit in the USA. Moreover, not only is the US State responsible of this, but of the preceding work of the Paulson-Geithner-Bush team. To be a ruling politician is to be responsible of what the State did before. Whatever happened before, the responsibility of the State is engaged. Instead of acting cool, to insist that it is business as usual, that our friends the plutocrats are outstanding geniuses that should stay in power for ever, the State should stand up and loudly address the monster in the room, and chant the battle cry.

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NO RESPONSIBILITY, NO MIND:

The truth will always be more complicated than what is behind Quantum Mechanics, and that is everywhere, and nobody knows what it is. The law, like all behaviors of society, is about the truth. Looking for the law, either to make it or abide by it, cannot happen without responsibility. Without responsibility the truth, and the law, could never be addressed, they may as well be in another universe. (That is how the Nazis operated: not enough people call them on respecting the law; when people did, they were often successful, and if enough people had, Nazism would have grinded to a halt.)

The truth is that the situation of the planet, and humankind, has never been more fragile. The present financial and economic crisis is really nothing relative to what is brewing. The economy is of course the prime agent of that catastrophic brew. Not taking measures against the major threats is irresponsible. That ought to impose a change of the modus operandi, considering the alternatives.

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Patrice Ayme

https://patriceayme.wordpress.com/

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Addenda: 1) The Associated Press, with a not so subtle anti-French slant reported, February 17, 2009, that: “France’s role in Holocaust legally recognized: France’s top judicial body formally recognized the nation’s role in deporting Jews to Nazi death camps during the Holocaust… Jewish groups welcomed the ruling by the Council of State, the clearest legal acknowledgment to date of France’s role in the Holocaust. Nearly 70 years ago, the Vichy government helped deport some 76,000 people – including 11,000 children – from Nazi-occupied France to concentration camps during the war. Fewer than 3,000 returned alive. The Council said that the French government of the time “allowed or facilitated the deportation from France of victims of anti-Semitic persecution… In an absolute rupture with the values and principles notably of the dignity of the human person … these anti-Semitic persecutions provoked exceptional damage of extreme gravity,” it said.

The statement legally formalized a historic gesture by then-President Jacques Chirac in 1995, when he became the first French leader to say the nation bore responsibility for the deportation of Jews in wartime France. Chirac broke with the official position that France’s Vichy regime was not synonymous with the French state. Since Chirac’s speech, deportees and their families have won special state pensions and other compensation for their suffering. Some $639 million has been paid out by a state commission established in 2000.”

Actually the translation is very incorrect in several ways, but will be helpful to anti-French plutocrats in the USA, who are legions. Indeed, they are afraid that the model of exploitation that they have imposed in the USA would be replaced by the more social, more equitable society in France.

So the Conseil d’Etat did not recognize the “nation” as responsible, but that the “responsibility” of the “French state” is “engaged”. By doing this, it made the French State into something that still should be viewed as existing even when it is just an unconstitutional decapitated administration. This atemporal view means that responsibility cannot be escaped inside an administrative structure .

2) Adolf Eichmann identified himself as a Zionist in 1939 in a conversation with Anny Stern. “‘Are you a Zionist?’ Adolph Eichmann, Hitler’s specialist on Jewish affairs, asked her. ‘Jawohl,’ she replied. ‘Good,’ he said, ‘I am a Zionist, too. I want every Jew to leave for Palestine.'” (L. Dickstein, “Hell’s Own Cookbook”, The New York Times, Book Review Section, (17 November 1996), p. 7).

3) It is amazing how much people, organizations, and even victims, erred in their answer to Nazism. They did not respond well. Mostly their response was too quiet, too accommodative. There was a response, but there was no responsibility (i.e., no great demonstrations, no great chants, and libations to the inchoating horror).

Hannah Arendt herself reflected the mental crosscurrents. She was the lover of a big time Nazi. But she was also an anti-Nazi heroine. She actively resisted, spied on the Nazis, was arrested by the Gestapo for it, and expulses to France.

As she pointed out in details the unfortunate complicity of many Jews and Jewish organizations in the Holocaust, she was dragged into the dirt by people who had never done anything against the Nazis. Arendt attacked mostly the Jewish Councils’ tractations with the Nazis, but there was much more.

She went to Jerusalem, and she listened to Eichmann. That is when she forged her sentence “the banality of evil”. Arendt was a top philosopher, and she was taken aback by how much Eichmann claimed to have been guided by Kant. Kant, indeed, at the bottom, is the philosopher of irresponsibility. Kant just ask people to obey the boss, and do it calmly, cooly, without fuss. Of course the boss is perfect (that’s implicit).

4) THE FACILITY OF IRRESPONSIBILITY: So Arendt discovered the banality of (some forms) of evil. Did we discover something new above? Well, aside from the necessity of the State of Responsibility, maybe we discovered the facility of irresponsibility. Those Jewish organizations Arendt criticized chose the easy way out in the moment.  With Hitler everybody tended to do so. Even the French did in 1936 (when Hitler invaded the Rhineland, a German territory that was supposed to be left demilitarized). Each time, the alternatives were too grim. When people are in danger of losing everything, they are often facing situations in which their own actions would have adverse, maybe irremediable consequences. Then it’s often unbearable to them that their own conditions would worsen at their own hand, so they tend to freeze, and do nothing. Examples: when people have to fight back, and risk the consequences of this counter-hostility, or when they have to flee, and leave everything behind, and risk starting with little if anything at all.

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http://tyranosopher.blogspot.com/

THE WAY OUT (AND WHY IT IS NOT CHOSEN)

February 20, 2009

 

A PARTICULARLY CONCISE STATEMENT OF THE CRISIS, AND HOW TO REMEDY IT. FOLLOWED BY TECHNICAL ADDENDA AND WHY OBAMA IS CHOSING THE WRONG STRATEGY.

Overview: This is a companion essay to Paul Krugman’s “Who’ll stop the pain?” (NYT, Feb. 20, 2009). As Krugman puts it: “The Obama administration’s policy initiatives will help in this difficult period — but they are intended to mitigate the slump, not end it. No doubt this recession will pass — but how, and when?”

This is not simply a credit crisis, it’s entangled with efficiency and energy crises. They all have to be addressed simultaneously, leading to counterintuitive strategies (rising some taxes). As usual, I propose the usual solution. In the addenda, I make some extremely specific recommendations, down to which technologies to push or transfer. So far Obama has chosen instead to continue the general path of fixing the broken, and vicious system many of his closest advisers have profited from (this is explained in the final addendum). 

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This is indeed Great Depression III. The (inflation adjusted) median income has been going down since 1998 (when Summers and Geithner were already in charge).

Understanding how one got there leads to the way out.

First,  of course, between 1989 and mid-1995, the United States of America owned asset management company, the Resolution Trust Corporation nationalized 747 banks (so called “Savings and Loans”) with total assets of $394 billion. Mr. Bill Seidman was in charge  of this. The average bank was kept in US government hands from three to four months during which time it was cleaned of its bad assets, reorganized, and finally sold. This was so successful that Sweden imitated the method, and later Japan resolved its decade long crisis by putting Mr. Seidman in charge of saving its own banking sector, after a decade slump. Why Mr. Obama did not follow the same strategy on day one is, at first sight, baffling (the mystery is elucidated in the last section of the addendum).

Instead the US credit market have been left in deep freeze, causing enormous damage to the world economy. Comparable damage in the past has led to world war. In a few weeks the situation has degraded to a level that is worse, in some ways, than the Great Depression II in the 1930s, the one that brought Nazism and World War Two.

Second, it would be better if Mr. Obama, after he finishes laughing about Sweden, would take a crash course on the Scandinavian banking crisis, and learn two things:

1) The way the Swedes and other Scandinavians solved their very similar banking crisis was by being ruthlessly efficient: they wanted their economy restarted ASAP, and the best way was to bring back to life the dying banks. So they nationalized, separated the bad assets, and the banks were functioning again. Then the now profitable banks were sold. The Swedes acted way early and swiftly: the bad loans were only 13% of GDP and they acted as the banks went below their capital requirements of 8%. The present situation in the USA is way worse: the bad loans approach 40% of GDP. And the sick banks, thanks to the huge leverage they used recently, on weird derivatives that don’t really exist, are probably in way worse shape than the Swedish banks were.

2) Scandinavia has the population of Canada, and was easily pulled out of its dive by the world economic expansion. Whereas the USA is huge and in free fall, and the EU is just as enormous, and shrinking about as fast. So nothing big and strong is going to come to the rescue of those two. Moreover the USA has united political command, with Obama as Lord and Master, whereas the Europeans are divided. The whole world is waiting for Obama to make miracles, but that will not happens as long as he listens to those among his associates who are mesmerized by banks (and future rich paybacks they envision for themselves?). 

It is conventional among American bankers to have mild contempt for Sweden, but the real GDP per person is higher than in the USA. Nevertheless, careful studies have shown that, to this day, Sweden is poorer than it would have been without crisis. The same hold all countries with similar crises. Real damage is made to the economy while the bank holding companies (the plutocrats) keep most taxpayer money for themselves.

So much for the conventional part of the present problem, the excess of credit. The USA had turned from a capitalist country to a creditist country, making bankers rich, and everyone poorer (see the movie “The International” for elaboration).

But the crisis detonated in 2008 after a run-up of energy prices, which forced the subprime tribe to choose between mortgage and forage. Meanwhile, and revealingly, housing prices were still going up in France. Why? Because the French economy is much more efficient than the US economy. The CO2 emissions of France are less than a third that of the USA, per person. The impact of high energy prices in France was not as hard.

This brings in both a complicating factor in the present crisis, and a solution. The crisis is compounded by LACK OF ENERGY EFFICIENCY. If the US economy rose suddenly from its ashes on its own, energy prices would immediately flare up again, and the economy would be placated again, as it was last summer. The solution, the only way to break the cycle, is to make the US economy much more efficient, ASAP.

So all efficient technologies have to be pushed, and will provide a lot of new work. This means solar, wind, grid, trains (light rail and transcontinental very high speed), biofuels (maybe cellulosic, better from sun and algae), nuclear (safe and closed cycle), and the most efficient car and plane technologies. All this will work only if energy is made expensive when it is not. So energy taxes have to be brought up (that is counterintuitive in a recession, but it is not exactly a recession as ever seen before).

This is a very heavy industry solution, a massive reindustrialization, the ultimate war against greenhouse heating. Even relaunching the nuclear industry safely will play an important role, because it will allow to coordinate a worldwide effort to make nuclear into something strictly civil (that means extremely strict worldwide inspections and drastic cut backs in nukes). If the greenhouse heating is not fought back soon, there will be world war. So, conceptually, fighting heating, recession, and war fits together.

The USA has domineering positions in some industries: planes, nanotechnology, biotech, and should push its advantage to the maximum in these sectors, to reestablish the balance of trade. Where it is weak (trains, cars), it should purchase European technology transfers (as Russia is doing with trains, China with planes, and Chrysler with Fiat). That would be quick and efficient, the technological equivalent of nationalization of zombie banks. General motors could be making high speed trains in months.

There are ways, but there is no time, It’s all about real infrastructure, and real efficiency, not the poverty of the illusion of money.

Patrice Ayme
http://patriceayme.com/

 

Addenda: TECHNICAL DETAILS: 1) The Swedish solution was similar to the US Resolution Trust Corporation (a “bad bank” that got rid of the bad assets). Not all big banks were nationalized in Sweden: one declined the government offer, and rose private capital. All banks did great, very quickly, and the crisis was over in two years.

2) Not only does Sweden have a higher GDP per person, but the effective GDP is much higher, a lot of services Americans have to pay for, coming for free in Sweden. GDP is a blunt and distorting instrument: it goes up in traffic jams. So a lot of the high US GDP per person is just high waste per person with lipstick.

3) Some giant French banks made profits in 2008. BNP saw its profits halved, but they were still three billion Euros. Societe Generale doubled its profits to two billion Euros. Giant insurer AXA (who owns Equitable in the USA) is still profitable. And so on. One large French bank () is sick, from having gorged itself on to many US derivatives. Another French bank wants to gobble that “Caisses d’Epargne”, but the later’s management, little interested by firing itself, has been dragging its feet, and the French government gave a deadline.

4) Coal is not an acceptable technology. Carbon capture and storage, as presently proposed, would make coal prohibitively expensive, and way too complicated to use. It consists in somehow capturing and liquefying the CO2, and then carrying it far away in trains. Then it would be injected, by very deep drilling, far from any city. A lot of the explosive power of volcanoes comes from CO2, that is why care has to be taken.

There maybe a solution for coal plants in the desert, by combining enormous emissions of CO2 that coal creates, with algae. Algae not only make excellent biofuel, but they absorb CO2 like crazy.  But that avenue has not been explored.

5) Coal is subsidized, because it does not have to pay for the gigantic damage it causes (let alone the thousands dying, from breathing and mining). The USA has 600 coal plants, and gets more than half of its electricity from coal (the world average is  40%). A lot of US production has been transferred to China, which has been building like one coal plant a week, to serve that demand. The Chinese are aware of the problem, because they find difficult to breathe and see. But of course, it’s a world problem: the greenhouse heating has been accelerating, with now methane eruption from melting permafrost. 

6) The USA has an “open” nuclear cycle: fuel is “burned” once, with extremely low efficiency, creating huge amounts of nuclear waste. The “closed” nuclear cycle recovers the partially “burned” fuel, and remixes it , to create new nuclear fuel (“MOX”: Mixed OXide). That MOX is then burned again and again. France pioneered  that advanced technology and uses it on all its reactors. France even dismantled American nuclear warheads, and made fuel out of it. France also made nuclear fuel that way for Japan and Germany. France has been building a plant in the USA to transform nukes into fuel. For some obscure reason,  pertaining to the US Congress, MOX is not allowed in US reactors.

7) The French company Areva makes the EPR, an advanced nuclear reactor. A young French communist mayor is very happy that his charming town by the sea will see the construction of the newest EPR. Sarkozy wants to build more, to “export electricity”, something France already does massively (through below the sea cables going to Britain). Siemens, which has part of the consortium making the EPR, wants to pull out, obviously to make its own, and sell them worldwide. Siemens already has profited greatly by competing with the French Alsthom in constructing very high speed trains. In other words, although they cooperate, France and Germany, compete ferociously in high technology. This is even more true with cars, where the German card is the highest quality, whereas the French have chosen extremely low CO2 emission. The French go to European authorities, push for ever lower CO2 emissions, the German, and mostly Daimler-Benz, scream, the CO2 emissions go down, and so on. This is good, because very low CO2 is what the world needs.

8] Sweden had decided, for various philosophical and technological reasons to abandon nuclear technology thirty years ago. No new reactors were supposed to be built, all the old ones, closed. Due to a completely changed situation and technology, following Italy, Sweden has now reverted itself, and will follow Finland (which is building a nuclear reactor, an EPR), and build new nuclear reactors. In the end, France’s long held argument that nuclear technology is clean, and a good weapon against greenhouse heating, has been followed.

9) France builds 40% of the vehicles of the planet with CO2 emissions of less than 125 grams of CO2 per kilometer, the soon coming newest European standards. The present requirements are 160 grams per km. The present US fleet average is 330 grams per kilometer.

10) Alsthom makes the very high speed trains TGV and the new AGV (they go faster than their Japanese competition). The AGV is supposed to operate more efficiently, at the higher speed of 225 miles per hour (360 kms per hour). Siemens has operated his own trains in regular operations in Spain at up to 400 kmh (250 mph). Alsthom, having bought an Italian company that made them, makes trains that lean in turns, allowing to go at high speeds without changing the tracks. Russia is buying a lot of these (and the technology will be transferred, according to a precise schedule, so the Russians will industrialize, as they will increasingly put Russian content in the trains; a similar agreement has been made with Siemens). 

11) WHY IS THE OBAMA ADMINISTRATION SO FRIENDLY TO HEDGE FUNDS, BANK HOLDING COMPANIES, AND PRIVATE EQUITY?

As the New York Times revealed (Feb. 20), the Obama administration hopes to encourage new lending by effectively subsidizing the profits of firms that serve as bankers to the banks, such as hedge funds. Guaranteed profits would be astronomical: 20%!

Is that change one can believe in?

The day after he was elected president, Obama went to work at a hedge fund in Chicago. Unbelievable, but true, according to press reports. Many of Obama closest advisors were made rich by the financial system as it is (Emanuel being an example). Some (Summers, Geithner) were causal agents that set up the financial system as it is, more than ten years ago. It is no wonder that they have decided to spend all their energy repairing the failed system. So there they are among the debris of the crash, hoping the debris will fly again, bringing gasoline to the smoldering ruins…

Basic fairness would require that many of these gentlemen observe that they are part of, and party to the problem, and to excuse themselves from counsel. But, immense profits for the few have created a firestorm of greed that has burned all and any normal human emotion, including basic decency. All they know is that they deserve their place at the trough.

As Barack Obama put it: “we have different traditions and cultures in this country”.

***

PA

GREAT DEPRESSION III.

February 17, 2009

 

AND SOME STEPS TO GET OUT OF IT. PLUS EDUCATING OBAMA ON  NATIONALIZATIONS OF BANKS DURING FINANCIAL CRISES.
***

Overview: Brandishing a new definition and an observation, we claim that the USA is in a Great Depression. The entire US economy had become a paper contraption (25% of the market capitalization was financials, now it’s gone below 10%). This economy was built with too much paper (money, and abusive contracts, derivatives, etc.). It went up in smoke under the free market conditions of  high energy prices, due  to its enormous inefficiency. The incapacity of the US economy to sustain high energy prices caused the catastrophic failure of the credit bubble. Underlying this was over use (and abuse!) of credit (as I detailed in other essays, the plutocratic machine over-exploited with credit).

To build a sustainable capitalist (let alone green) economy, the first thing to do is to get rid of the highly leveraged paper economy hiding below the TARP.

Unfortunately that was the main contribution of the Rubin-Summers-Geithner plutocratic cabal during the Clinton administration. Behind it were plutocratic conspiracies from the likes of Goldman-Sachs (both Rubin and Paulson were CEOs of Goldman, and, as the business channel CNBC puts it “they have their minions all over the government” Feb. 16). Many prestigious economists: Krugman, Stiglizt, etc., vociferously disagree with the followers of Goldman-Sachs, Rubin, and their paper economy.

The economy needs to made more efficient.  So it needs to be built around strong civilizational, energy and employment multipliers. Examples of such multipliers: the efficient economy and the knowledge economy. In the later, the wealth creating multiplier effect can be as high as 8, and probably much more.

We are in an excellent position to reflate, because we have a situation of war with planetary heating (known by the euphemism of “climate change”). It’s an excellent occasion to create a command economy in some crucial sectors (without having to go to war against other people).

Not that there is a choice in the banking sector. The banking and financial crisis of the USA is incomparably more severe than the Scandinavian and Japanese crises of the 1990s. So the least the Obama administration could do is to apply swiftly the traditional, one and only, remedy, to such a crisis. It’s technically accomplished by a technique called “receivership” in the USA. And “nationalization” anywhere else. (Americans get easily afraid of that word, because the reigning plutocratic oligarchy frowns on it!) A nationalization is temporary, and saves all the essential functions of a bank. The later point is why to nationalize. As long as this does not happen, the economy will keep on plunging.

In the addendum, we deconstruct part of a strange interview Obama gave about nationalization of banks and financial crises. The aim is not to make fun of Obama, but to gently improve his mental performance. There is no greater economic multiplier than correct knowledge. Obama is unfortunately surrounded by economic advisers that contributed to the problem to start with, so it’s hard for him to know any better.
***

***

Paul Krugman (New York Times, Monday, February 15, 2009) notices that: “Last week the Federal Reserve released the results of the latest Survey of Consumer Finances, a triennial report on the assets and liabilities of American households. The bottom line is that there has been basically no wealth creation at all since the turn of the millennium: the net worth of the average American household, adjusted for inflation, is lower now than it was in 2001.”

Another, probably even more striking downward sloping fact has been the inflation adjusted median income. It has been going down since 1998, after Rubin’s silly attempt at building the economy with money alone, to make more money alone. That ultimate bridge to nowhere, made entirely of paper fell apart. Dutifully, Alan Greenspan papered it over by a succession of bubbles.

I would propose the downward sloping median income on the scale of a decade, as the definition of a GREAT DEPRESSION. Thus, the USA is in its Third Great Depression since the Civil War. It has been going on for more than ten years. Our chief Obama has celebrated this by putting back in charge the Rubin-Summers-Geithner team that organized that disaster more than a decade ago. A funny illustration that, even confronted to its own dismal record, the elite does not lose its cool, knowing full well, that the bigger the lie, the bigger it has a chance to work.

To reflate, one cannot reflate with bridges to nowhere. The nature of the reflation has to be the building of an infrastructure that is a CIVILIZATION MULTIPLIER. And also an efficiency multiplier: the efficient GDP per hour would have to augment as a result of the stimulus (train lines, light rail or high speed, in the right places, are a typical such multiplier, because their efficiency is enormous, so they augment the efficiency of the entire economy). As it is, I read that two-third of the stimulus consists in not-long-term stimulative, low multiplier tax rebates, and emergency payments to compensate for the already ongoing catastrophic collapse of the budgets of the states. The real stimulus, once the Alternative Minimum Tax is removed, cannot be more than 200 billions. And even then.

In relative size this is like the French stimulus, but that one consists of 1,000 public work projects, including no less than four extremely efficient and profitable 250 miles per hour electric high speed train lines. As I was just implying, the CO2 emission of high speed electric trains is negligible relative to that of cars and planes. The US average in electric production from coal (50%) is higher than the planetary average (40%).

The USA got in enormous debt, private and public, to build a non sense economy, highly inequitable, a castle in the sky on top of a cloud. That cloud economy is so highly inefficient, that it cannot function under world free market conditions. Then it evaporates. What happens is that the price of oil is so high that the US economy seizes, as was demonstrated last summer (suddenly having to choose between fueling their car to go to work, and shopping, or having a roof, forced millions of US citizens to become delinquent on their mortgages).

Now capital, human, financial and intellectual, is needed to create an American economy that makes more sense, and is as sustainable, at least as a capitalist system, as those of France, Germany and a few other Western European countries.

The British model, long celebrated by the plutocrats, was a curious half way house between European welfare, and the usual general deindustrialization, born of delocalization and laissez faire, “compensated” by financialization of everything. It, too, is collapsing spectacularly.

Building a sustainable economy, let alone a green one, is not going to be easy. Time, thus energy, is being presently wasted (as the Rubin-Summers-Geithner team searches desperately inside the viscera of the financial system for a sign from the gods, as superstitious Romans used to).

At some point the American financial system (the banks and hedge funds) created an unregulated derivative market worth half a dozen times more than the value of the entire world combined, the result of astronomical leverage. Now this has collapsed, thus the median institution involved in this is insolvent. That means the median big bank and median big hedge fund have got to be insolvent (we do not need a detailed proof; big bank executives have claimed we do not have a detailed proof, so we do not know what we are talking about; but a non existence proof in mathematics typically gloss over the details).

Whereas hedge funds are basically useless, the basic functions of the banks and other credit markets are crucial to the real economy. But they have lost all their capital, and more, in the derivatives’ collapse. In all probability. Hence, contrarily to what the Obama administration, and its falsely naive Treasury Secretary claims, there is not enough private capital ready to jump in (and even if there were, which there is not, why would it?).

An imminent solution is to put the large banks in “RECEIVERSHIP” (“nationalization”, in layman’s terms), and institute a COMMAND ECONOMY around the core functions of the capitalist system (since there is not enough capital, nor the will to use the little there is). This is nothing new: the USA, like other top capitalist countries, has many pieces of its economy that are mandated (defense, air traffic control, even doctors’ duties, etc.). Contrarily to what some have implied, this is not to destroy the capitalist system, but to bury the previous one, presently trashing around and bouncing wildly, in its agony, put it out of its misery, and replace it by a much better one: the king is dead, long live the king!

Another imminent decision should be to remove from financial and economic decision making all and any persons that caused most of the problem in the first place (from upper managements of banks “too big to exist ” as Volcker put it, to past Treasury Secretaries, and their assistants that cling to the past). Those “experts” caused a Great Depression. Great Depression is what they are expert at. Why should they be in charge, again, and be rewarded, and be called “outstanding”? Because they have all the money? And because once those who crave for power are done with political power, money is all what’s left for them to crave for?

Now, of course, it may be crafty to force the Rubin-Summers-Geithner team clean up its own mess. After they are done, they can be fired, and a serious economy be build up by real thinkers.
***

Patrice Ayme.
***

Addendum: OBAMA STRUGGLING WITH THE CONCEPT OF NATIONALIZATION: Obama came up with a strange interview on ABC news, that was going all over the place about nationalizations and the financial crisis. It was self contradictory on the largest scale, and misinformed. It may have been a Trojan Horse (as a suspicious Paul Krugman pointed out cogently in his blog). Namely by making so badly the case against nationalizations, that they can become the only logical solution. A good tactic for the Machiavellian politician is to make the worst possible case for what one intents to demolish in the apparent guise of supporting it.

In the interview, Obama berated Japan for its “lost decade”. He forgets to tell us what was “lost”. During the so called “lost decade”, the real, inflation adjusted GDP per person was going up in Japan. By that measure the USA is in recession since sometimes in 2007.

Obama has a strange interpretation of the crisis: “Well, you know, Wall Street, I think, is hoping for an easy out on this thing and there is no easy out. Essentially, what you’ve got are a set a banks that have not been as transparent as we need to be in terms of what their books look like.”

In truth, what you have, essentially is 14 large American banks, so big that they have been manipulating minds and markets, and they are all insolvent, because twenty-million people have decided not to be their serfs anymore.

Then Obama goes metaphysical: “And we’re going to have to hold out the Band-Aid a little bit and go ahead and just be clear about some of the losses that have been made because until we do that, we’re not going to be able to attract private capital into the marketplace. And so, you know, I think that you have two choices in this situation: You can prolong the agony and shareholders will be happy until they’re not happy, and that could be a year from now or two years from now, or, in the case of Japan, eight years later. Or you can just go ahead and acknowledge that, yeah, there’s a lot of work that has to be done to put these banks back on a firmer footing.”

Hold out the “Band-Aid” a little bit? What does that mean? It sounds all very measured and cool, but meaning what? Time is of the essence, and it’s not about “Band-Aid”. Why would shareholders be happy as it is now? Has Obama been following the financial news? The S&P financial sector market capitalization has dropped by well in excess of eighty percent. Nor were the Japanese shareholders happy as their own stocks fell more than eighty percent too, during the period he speaks of.

Terry Moran of ABC News: “Can you say how much, ballpark figure, that will cost the American taxpayer? A trillion, a trillion-five, two trillion?

Obama: I can’t say the ballpark figure. What I can say is —

Terry Moran: Why not?

Obama: Well, because ultimately, what happens is going to depend on how the markets respond over the long term, not today or the next day but a month from now or two months from now. How effective we are in actually cleaning out some of these bad assets out of these banks.”

The time span of Obama is interesting: months. But this is hinged on a housing crisis, and this sort of crisis is decade long. Overall the banks nationalized during the Scandinavian banking crisis were profitable to the taxpayers, but, twenty years later, some are still partially nationalized. 

After Tim Geithner’s uninspired and uninspiring act, Barack Obama tried another stab at questions about nationalization. As Paul Krugman put it kindly, his answers were “not very good”. Actually it was way worse: foreigners were deprecated, although they underwent what the USA will surely have to undergo, the only final solution to an enormous financial crisis. Despising Sweden in 2009 about banks is like despising France in 2003 about Iraq. And Obama becomes all hot, just because he does not know the semantics of “receivership” and “nationalization”. They are the same. “Receivership” is how the USA nationalizes banks, and the USA does this to several banks all and any week of all and any year, since ever and ever. The Rubin-Summers-Geithner crowd does not want to do it because it’s their own banks and that of their friends, and family and future employers one is talking about.

Terry Moran: There are a lot of economists who look at these banks and they say all that garbage that’s in them renders them essentially insolvent. Why not just nationalize the banks?

President Obama: “Well, you know, it’s interesting. There are two countries who have gone through some big financial crises over the last decade or two. One was Japan, which never really acknowledged the scale and magnitude of the problems in their banking system and that resulted in what’s called “The Lost Decade.” They kept on trying to paper over the problems. The markets sort of stayed up because the Japanese government kept on pumping money in. But, eventually, nothing happened and they didn’t see any growth whatsoever.

Sweden, on the other hand, had a problem like this. They took over the banks, nationalized them, got rid of the bad assets, resold the banks and, a couple years later, they were going again. So you’d think looking at it, Sweden looks like a good model. Here’s the problem; Sweden had like five banks. [LAUGHS] We’ve got thousands of banks. You know, the scale of the U.S. economy and the capital markets are so vast and the problems in terms of managing and overseeing anything of that scale, I think, would — our assessment was that it wouldn’t make sense. And we also have different traditions in this country.

Obviously, Sweden has a different set of cultures in terms of how the government relates to markets and America’s different. And we want to retain a strong sense of that private capital fulfilling the core — core investment needs of this country.

And so, what we’ve tried to do is to apply some of the tough love that’s going to be necessary, but do it in a way that’s also recognizing we’ve got big private capital markets and ultimately that’s going to be the key to getting credit flowing again.”

 

Actually there were more than two countries that have gone through some big financial crises. There have been 124 “systemic” banking crises since 1970 (bad debts soared and much of the banking sector was insolvent). Most were in emerging countries. But the list also includes half a dozen crashes in rich countries, from Japan’s slump after its property bubble burst in the late 1980s, to the Scandinavian bank crises in the early 1990s. All involved deep recessions, required massive government intervention to clean up bust banks, and led to big increases in public debt as economies shrank while government spending soared. The speeds of recovery differed dramatically: Japan endured what Obama calls the “lost decade”, whereas South Korea returned to strong growth within two years of its 1997 banking disaster. Sweden acted swiftly. Non performing loans in Sweden were 13% of GDP at the peak, 35% at the peak in Japan. They are already 40% of GDP in the USA, and we are not at the peak. The USA is the world biggest debtor. Japan got into its crisis as one of the world’s greatest creditors having the largest savings.

Obama makes fun of Sweden. We will see how long that lasts. Even after years of mergers and acquisition and concentration of the banking sector, Sweden had 130 banks, not “five”.

Also the crisis was all over Scandinavia. Finland was hit twice harder than Norway and Sweden. Interestingly, Sweden imitated to a great extent the USA’s own RTC, the Resolution Trust Corporation, with the aim of getting the creditworthiness of the real economy restarted ASAP.  

In similar circumstances, Mexico used a different resolution, more discriminative, quite clever, but slower. Obama, though, should find out that he does not have time. The very size of the US economy does not allow for procrastination: differently from Scandinavia, or Mexico, no big wide world out there will pull it out of its dive. So Obama’s reasoning -or should we say Summer’s, or Rubin’s- is upside down. Precisely because the US economy is huge it needs a huge, swift solution right away, before the collapse gathers more momentum.

Obama evokes tradition, to justify doing nothing effective, as if it were the national religion, and he were the president of Yemen. Indeed, the USA has become a very conservative country. It is the only one in the world to still use a system of units from the Middle Ages. Even North Korea, Saudi Arabia and Zimbabwe are not that mentally retarded. 

Making fun of foreigners is not necessarily a good way to learn one’s lessons, looking forward. What we are in danger of observing here, once again, is American arrogance. What we should be observing, instead, is American humility. The main philosophical drive of the US economy in the last 40 years has proven to be a lot of dangerously hot air.

***

(For much more details please consult the Feb. 12, 2009, issue of The Economist, in particular the article: “Worse than Japan? [Look carefully and the answer could be yes].” (page 81.)

http://www.economist.com/finance/displaystory.cfm?story_id=13110352)).

STOP HUMORING THE PLUTOCRACY.

February 15, 2009

 

A RECAP OF THE NATURE OF THE CRISIS, AND WHY THE INSUFFICIENCY OF THE ANSWER SO FAR.

***

Abstract: The present crisis in the USA was a long time coming. Viewed from a historical perspective, it is a typical power grab by a plutocracy, now encountering low key but determined resistance from the People. Viewed that way, it’s a good thing. We put it all in perspective, and comment on how to get out of it: stimulate, nationalize the banks so that they can be put back to work right away, and put the plutocracy back in its cage. Jared Diamond suggests to make the rich and the politicians “suffer even more”. We elucidate Treasury Secretary Geithner’s pathetic performance as the latest trick of the plutocracy and its servants to hold onto their ill deserved power and gains. Obama’s attempt to change the world for the better is confronted to an Evil so great that it baffles understanding. Apparently hyperbolic, but we explain.
***

PLUTOCRACY ON THE ROPES, CONFUSION, PROCRASTINATION:
Technical semantic note, introduction, and overview: Many people, such as Jared Diamond do not (yet) use the word and concept of “plutocracy”, they use instead dozens of words and concepts that the word “plutocracy” contains all in a neat ten letters. Others, such as Bill Moyers of PBS, meekly prefer the word “oligarchy”. Olig-archy means literally in Greek “few-rule”, the rule of the few, of a small elite. Sure, but there is more. Studies of all sorts of primate societies show that rule tends to be inherited (often through conniving, influence yielding females). In complex human societies, the first vehicle of inheritance of rule and power is wealth, and it is best managed by the Dark Side. Both concepts are nicely semantically fusioned in the God of the underground, Pluto (underground is where wealth is, and eternal fire, hell too). This is serious business: for the 200th anniversary of the birth of Charles Darwin, the ideas of his more formidable predecessor, Lamarck, are being reinstated with a vengeance. It is clear now that the behavior one is submitted to as a child, or simply as a descendant of one’s ancestors, activate the master and slave mentalities. It’s not just among baboons that the descendants of slaves become slaves themselves. It is not only among rats that the descendants of the stressed are stressed. It is true for entire human nations, races, civilizations.  

It is with pleasure that I extensively quote below Jared Diamond, the famous anthropologist. Diamond has neatly come to my point of view that plutocracy is the cause of societal collapse.

Obama passed a sort of stimulus (but not as big as it looks because it contains the AMT reduction, which is always there, and it contains some replenishment for the local states budgets, that are collapsing). That stimulus was OK, but a lot of the tax cuts are useless, they just sap at necessary State initiated investing (and they are a Damocles sword over the poor: giving gifts does not beat giving jobs).

But then Geithner presented a sketch of a plan to make a plan, a ridiculous performance making only clear that he was sending more good money and power to his plutocratic mentors that caused the problem to start with. Then Obama tried to sound knowledgeable about the Scandinavian banking crisis, and used that as a financial guide, looking forward. Too bad, it was “not very good” as (2008 Economics Nobel Laureate) Paul Krugman put it. We will address Obama’s broadside against Sweden in a companion essay. Obama also spoke about Japan, there again missing the essential lesson, which is that if you do not nationalize the banks right away, you will stimulate in vain. Instead Obama repeated well known slogans about Japan, that went to a cross purpose to his blast about Sweden. In other words, according to Obama: Obama, laughing, finds himself deep, while he gives Sweden and Japan a sound zero for poorly executed policy, and being generally ridiculous countries. Change you can’t begin to see.

What do these mental crosswinds mean? The answer is that the conspiracy of the plutocracy against the People is still ongoing. As far as the plutocracy is concerned, Obama is just a change of gear. The plutocracy is stressed, true, but it is still going on strong. Geithner, in a strange semantical pirouette, makes virtue of necessity, by claiming that it will be “tested”, and that stress is good. The plutocracy used to boast that greed was good, now it is stress that is good. The plutocracy is highly adaptive: after all it can pay the best intellectuals, and train them to have the right ideas. (This is nothing new: in Imperial Rome, prostituted intellectuals would be paid billions to be intelligently stupid, and comfort the pro plutocratic propaganda against the People). The Obama administration is confused and incoherent, because it is thoroughly penetrated by the plutocracy (some people call it the oligarchy).
***

WHICH SOCIETIES SURVIVE? THOSE WHERE THE PLUTOCRACY STAYS WITHIN BOUNDS, SAYS JARED DIAMOND:
Professor Jared Diamond gave an interview to the US Public Broadcasting Service, Friday, February 12, 2009. He was asked point blank if he could tell of a particular characteristic that made some societies survive, whereas others collapse. That was the central question Diamond tried to address in his book “Collapse. How societies choose to fail, or to succeed”. (It is a question that I have answered from varied angles and degrees of depth. I am happy to report that Diamond’s main answer now fits into my explanatory context. It did not use to.)

Diamond’s answer was sharper than in his book: “It seems to me that one of the predictors of a happy versus an unhappy outcome, has to do with the role of the elite or the decision makers or the politicians, or the rich people within the society. If the society is structured so that the decision makers themselves suffer from the consequences of their decisions, then they are motivated to make decisions that are good for the whole of society. If the decision makers can make decisions that insulate themselves from the rest of society then they are likely to make decisions that are bad for the rest of society.”

One should immediately think of Mr. Rahm Emanuel, Obama’s chief of staff, who is supposed to spearhead the implementation of “change you can believe in”. Although he has no background in science, economics, finance, history or philosophy, just a master of “speech” and a voluntary stint in the Israeli army, and after being an adviser to Bill Clinton, he took a vacation from politics for two years, just long enough to receive more than sixteen (16) million dollars from a bank. Open Secrets reported that Emanuel “was the top House recipient in the 2008 election cycle of contributions from hedge funds, private equity firms and the larger securities/investment industry”. During his original 2002 campaign, Emanuel “indicated his support of President Bush’s position on Iraq”. Now we have to call Emanuel “outstanding” and thank him, a “wealthy businessman”, to do “public service” for us all. Washington politicians say these sorts of things all day long, so they can awe the People with each other outstandingness.

The world stands with bated breath. How likely is it that Rahm Emanuel is going to be tough with the system of corruption that has made him so wealthy, so easily? Change you can’t believe in. Such a degree of official corruption is unknown anywhere else in the world (at least, there, they hide their corruption below more than a TARP!). Now, of course, maybe Mr. Emanuel is a creature of immense moral strength, and, after having immersed himself in the system, maybe he will detonate, and take it down. The audacity of hope.

A case in point, according to Jared Diamond: “the place that they call the City of New Orleans”. One can ask “why over ten years, people in New Orleans did not spend a few hundred millions building appropriate dikes”. Diamond’s answer: “Rich people are living on high ground In New Orleans. Compare with the Netherlands, where “the system of dikes has been called one the Seven Wonders of the World”. “Rich people are not allowed to have mansions on top of the dikes, everybody is down in the polders. Politicians and rich people know that if the dikes failed, they would die”.

And Diamond insists that: “I would like to see the rich people suffer even more, and the politicians suffer even more. Because then they would be motivated to solve all our problems. People often ask me predictions. But that depends so heavily upon which choices we will make, and I don’t know what choices we will make. I don’t know, for example if Obama will be able to pull the country with him, or if we will revert to infighting and a stalemate”.

Well, Obama’s fortune is just about five million dollars, whereas his good friend Rahm has piled up already at least 15 millions. The Clintons are flying high above the rest, with well above 100 million dollars. But then people who have contributed absolutely enormous amount of money, considering their quasi negligible savings, to the democratic campaign, were condemned to receive through the Internet powerful whining, from, say Joe and Jill Biden, to help reimburse Hilary’s debt. That was a few millions, and Hillary is worth more than 100 millions. In the USA, the plutocrats and their servants have no shame. They apparently will not rest as long as the entire population is not reduced to abject servitude. But, and that is the crisis, the Population has started to revolt.
*** .

THE PLUTOCRATIC SCHEME EXPOSED:
I have been trying to explain why the plutocracy always try to take over: it is a force that evolution has built. In a nutshell, hominids, although intrinsically good, are also intrinsically bad. It is actually good that they are bad, in the grandest scheme of things, otherwise hominids would have fallen victim of their own success. Badness, Evil, the Dark Side, is an ecological necessity insuring the survival of the species, by regularly culling it before it can waste its life support systems. In other words, it has never been needed as much. The only question is: who is going to be the ultimate boss? Is it going to be our good side, the Side of Light, or the Dark Side? By directing so much of US power and creativity towards the Pentagon and the plutocracy, the USA has answered that it prefers the Dark Side as the leading metaprinciple.

The Dark Side, Evil, is also one of the two factors insuring a constant pressure, in all societies, towards the creation of an ever mightier, all devouring plutocracy (the other factor is purely mathematical: capital creates ever more capital, proportionally to itself, so exponentially increases). The United States of America is nothing special this way: it has let its plutocracy run amok. And now, as it tries to corral the beast back to reality, the later is acting completely crazy.   

Obama goes around, trying to finesse it, trying to make friends with everybody. But, apparently unbeknownst to his charmed life, he is confronting absolute Evil, enormous forces that their own proponents themselves do not understand. (An example of such proponents is Rush Limbaugh, one of the servants paid hundreds of millions by the plutocracy to spout its message of Evil and seduce the mob with mental waste). Ultimately, these forces want nothing more than to destroy all of civilization: this is the call of the beast, of the human beast in distress, ready to exterminate all.

Extermination: that’s how the species survive. That’s how good people become terrible in a flash. So the “republicans”, the plutocrats, the forces of Evil, start with the State. Succumbing to the Dark Side has its own seduction, its own hormonal rush: the plutocracy can drug itself on wanton destruction. In a nice anecdote, Rush Limbaugh is himself a big time drug addict. The plutocracy made sure that he would escape jail. The audacity of dope.

In truth, it’s all about power, and things have come to a head. The “republican” agenda, starting with Nixon (not Eisenhower), has been to give more power to the plutocracy. The Republican Party is not the party of Lincoln anymore. To a great extent, the Secession War was a war of the industrialized north plutocracy against the much less democratic, enslaving southern plutocracy (which wanted to escape its northern competitor). So the Civil War can be viewed as a war against an inhuman plutocracy. The republican president Eisenhower was, also in the line of traditional modern US presidency, a partisan of industrialization and of giant stimulus such as the construction of the freeway Interstate system (that he decided). Eisenhower also used the military to enforce school desegregation (Eisenhower did not have just a dream, like Martin Luther King; Eisenhower had an army, and he used it against the racist; although MLK was nice, the much harder decision to confront racism with armed force was taken by Eisenhower, not Martin Luther King).

Nixon was completely different from Lincoln and Eisenhower. He had been a principal in the fascistic witch hunt of McCarthyism. He was tricky rather than principled. He turned the US health care system towards giant exploitation by corporations (HMOs), and used public finance to do so. Reagan only accentuated the movement towards the dismantlement of the State, but he had to fight the democratic Congress inch by inch. Nevertheless, the plutocrats were able to impose their entire logical universe, complete with specious facts and biased semantics. Thus the word “republican” is ironical: it’s all about the plutocracy. It is not about the public-thing (res-publica), but it’s all about the power of Pluto. As a result of 40 years of efforts, a much more powerful plutocracy has risen over the land, and has inspired plutocracies of the world to rise ever higher, all over the world. Whereas the Socialist International, or the Communist International envisioned all the proletarians of the world to unite, it’s the plutocrats of the entire world that united. Easy to do. There is no international legal framework to contain them: the plutocracy is global, the law is local. The core of the system was the USA because some countries (particularly France) resisted the plutocracy better. (The Gini index, that measures inequality in a society, saw the French and US graphs cross each other, the French one going down, the US one, going up).
***

RUBINOMICS AND PLUTOCRACY; CHANGE FOR THE WORST:
By the time Clinton was elected, it did not really matter what he truly wanted. Rubin, a head of Goldman Sachs, was sent to him to tell him what to do: “make the bond traders happy”. That made Clinton curse, but he did what he was told, and has been well rewarded since. The Rubin group of the Clinton administration was a plutocratic instrument enforcing plutocratic policy. Summers was a trusted aide, and became Treasury Secretary, when Rubin left for more profitable pastures. Geithner, a graduate of Kissinger and Associates, an international company plotting for profit and influence (where he spent three years), was a protégé of both Summers and Rubin (and no doubt Kissinger, thus Nixon, etc…).

Under Rubin’s illuminated guidance, the US heavy industry fell behind, evaporated, or left for China. The plutocracy profited from this by being the indispensable intermediary, worldwide. Rubin amused the People with a bubble or two. But the median income started to go down around 1998. The median income has been nominally flat, but it has been down, inflation adjusted (using the CPI), and dramatically so if one does use just the fake CPI, but the real inflation. Once again, that was Rubin’s great work, not Bush. Bush helped with, but he did not launch the pauperization program. 
***

WHY THE PLUTOCRACY IS AT BAY:
Now, just as it was getting richer and more powerful than ever, the plutocracy is suddenly at bay. Why? Unexpectedly, it has been betrayed by its main basis of support, the so far supine US population, that had been carefully trained to act anti-French (that is why anti-French propaganda is a basic staple of the US mental diet ever since Kennedy got assassinated). That means US citizens have been trained to behave as if anything that smacks of the revolutionary behaviors that gave birth simultaneously to the French and American revolutions is in poor taste. Instead, the epitome of modern American taste is to act submissive, and celebrate the riches of the rich, and admire the wisdom of trickle down economics, and all Americans feel proud that Warren Buffet, the world’s richest man, is their grand father. Reagan told them to be good dogs around the table of the rich, and they would get crumbs, so they have been behaving ever since, while the sumptuous dinner of the rich was served, for ever and ever (in truth, average median income has been going down since Rubin, under Clinton).

But now the plutocratic plan of turning the US population into relative serfs has encountered a serious road block. Suddenly, people have had enough. They got to the psychological breaking point, as the subprime plot turned into obvious servitude (thanks to adjustable rate mortgages, and other fine print).

Suddenly 10% of the present and future would-be serfs are refusing to pay the “gages of death” (“mort-gages”). Yes, that’s twelve million homes. The US serfs have discovered that they were paying outrageous rents to the plutocratic banks. Big knowledge, big disaster. The plutocratic banks, and their plutocratic associates, the hedge funds, and foreign powers, had taken all the money, and leveraged it for several times the value of the world, in a hare brain plot for seizing all the power now. So suddenly, all the money was gone. What to do? Well, steal more from people, that is where the money is. Moreover, the banksters reasoned, on the ground that if they did not get the money, the People’s money in savings accounts would disappear, and also, if not, there will be no more banks, hence no more capitalistic and creditist economy. They may even  indeed steal your savings, as they are at it, if you irritate them too much Which savings, anyway? They already spent your savings on their private jets, giant yachts, mansions all over the world, residences in fiscal paradises. private schools, private clubs and golf courses from which to plot further… Now, if you want your savings, you will have to pay your taxes. And don’t forget the bonus for the bankers, or, as they have decided to call it on February 11 2008: the “award”.

Confronted to the collapse of its fist order scheme, the reaction of the plutocracy has been to save its income, by switching to a diabolical second order scheme. In that scheme, the People itself was panicked into bringing voluntarily the money to the bankers.

The plutocracy (and especially Geithner, as the supervisor of Wall Street, and Paulson, a plutocrat, ex head of Goldman Sachs, just like Rubin) invented TARP (Transferring Assets to Rich Plutocrats). TARP, as its name indicates, also covered up, from its very nature as a TARP, what has really happened, namely the extent to which the plutocracy stole and leveraged itself with People’s money, to make itself ever richer and powerful. Hey, if the plutocrats got rich enough, maybe they could have private armies and seize power outright, as happened to Rome (circa 100 BCE). They warmed to the practice in Iraq, sending up to 100,000 private mercenaries there (and it worked, as far as they were concerned). Ah, just when they were within reach!

After the plutocracy got to power in Rome, pushing itself above the republic (that went on in name!), it never quit. So plutocracy can be a sort of black hole that it is very hard to come out of. In the West, it is only when the Roman plutocracy had to leave space to the Frankish plutocracy, that its power went down, six centuries later. The Franks (the “Free”) were more democratic, and spread the wealth much more, to the point they were not keen for the very imperial structure that they built over four centuries (and gave it up, although it went on in a loser system, Feudal Europe). Republics reappeared slowly, over a millennium (first around northern Italy and Russia). The collapse into plutocracy has happened all over, all the time. It happened even to the Mongols, shortly after they had conquered China (that would have made Genghis Khan, a man of substance, furious). The Ming rebellion put an end to that non sense. But, having come from a religious mob, threw the baby out with the bath.
***

OBAMA FIRST THREE WEEKS, OR HOW THE PLUTOCRACY HOPES TO GET OUT OF IT:
The conspiracy of the plutocracy against the People is coming to a head right here, right now. The Obama administration is confused and incoherent, because while Obama is fully aware of the need for real economics (the good part of the stimulus), some of his administration is thoroughly penetrated by the plutocracy and Rubinomics.

Obama’s great desire seems to be that, by being kind and considerate to the mighty, the mighty will be kind and considerate in return. It has worked so far, at least for him, and for the party of hope and change. But now the stakes are higher. Whereas the plutocracy long saw Obama as a nice dark, innocuous horse, it is starting to feel that if everybody agrees with him, he could turn into a problem. So it surrounded him with a tight guard of plutocrats and their devoted servants, basically the same one that was used under Clinton (and that led to the disaster of the so called “Bush” years; appropriate graphs show that Great Depression Number Three of the USA started in 1998, under Clinton, although, of course, Bush did deteriorate the situation with his insistence on God and war).

Hence the laughable performance of Timothy Geithner, the Secretary of the Treasury. As Maureen Dowd of the NYT pointed out: “for starters, the 47-year-old’s voice kept cracking”. Geithner has been raised in the shadow of the plutocracy, he knows its power, he is eager to please it, but he also knows the extent of the fraud of claiming that there is no instant solution of the problem of the US financial crisis (because there is). Geithner knows that he is trying to save the skin of the plutocracy, while risking the economy of the USA, even the world, while doing so, and the walls are coming in pretty fast. History is being made, and it’s recorded for posterity. It will be easy, later on to point out how disingenuous Geithner was, and how terribly responsible of the unfolding crisis he was. 

The plutocracy is not without hope: it has the Rubin team back in power, all around Obama, putting the right ideas in his head (such as his pathetic broadside at Sweden, that I will answer in another essay, point by point). Geithner came out all vague, because he is trying to gain time, and avoid what would really hit the plutocracy, namely nationalization. Geithner hopes, against all hope, that, somehow, by using the anti democratic, Dark Side powers of hedge funds, foreign powers and the Federal reserve, plus a utopian rise of the housing market, he will be able to see the derivatives of real estate turn away from extinction. Meanwhile the American People gets all the disadvantages of nationalization, and none of the advantages. The American People is asked to give money to the big banks dozens of times in amounts that are dozens of time what they are worse. In exchange, the plutocrats pay themselves extravagant bonuses, salaries, dividends, and gorge themselves on their continuing power.
***

PUT THE PLUTOCRATIC MONKEYS BACK IN A CAGE, FAST, THERE IS SERIOUS WORK TO DO TO AVOID A PLANETARY CATACLYSM:
So what is next? The plutocrats underestimate their opposition, and show signs of decomposition: all they could find is a little boy like Geithner to make their case, sweating at the brow, meek, incoherent, to insist that People should keep on Transferring Assets to Rich Plutocrats. There were giant demonstrations, with millions of protesters … In France.  Those were observed in the USA, and maybe, just maybe, the long buried revolutionary fiber of the US citizen will stir. The taxpayers and serfs of the USA have had it, and the USA is not all alone (as Rome was). In Rome, the confrontation between People and plutocracy was a solitary struggle: the plutocrats used their private armies, killing thousands of protesting citizens.

Seven centuries later, when the Roman Christian plutocracy tried to crush the last intellectuals, the situation had changed. Rome had degenerated so much that it had real competition, not just from the half educated Germans, but from Persia’s Sassanid dynasty, and the increasingly agitated Arabs. The intellectuals and their books fled Romano-Christian terror to Sassanid Persia, and Persia helped them enormously, even unleashing an enormous offensive on their behalf, all the way to the Mediterranean (that help from Persia is mostly how the books of antiquity survived: they passed to the Arabs next). Nowadays, the plutocracy is less powerful in many other countries than the in the USA (France is an example). These countries resist better the pauperization and plutocratization that threatens the USA. That, in turn, may show the American People that a bit of assertiveness is the best way to resist the loud oppression of the unhinged plutocracy.

It is not just a question of whether the USA will become the world’s largest banana republic. In a way, that is already the case, since astronomical corruption is how it is in Washington. More drastically, as we I will explain later, the fate of the planet is at stake.
***

Patrice Ayme
http://patriceayme.com/

***

 

Note: Both Congress and the Administration are entangled with the plutocracy. Just two vignettes, on top of what was said above: the present Congress got about 200 million dollars for its election campaign. That’s just the flag on top of the iceberg. Much larger, still, is the promise of cushy jobs, and great influence, upon graduation from Congress. As the Daschle example or the Emanuel example showed, one is talking about many millions of dollars in very few years. These Transfers of Assets to Rich People creates an imbalance of the whole economy, and lots of terrible decisions.

Geithner hired as his chief-of-staff, the lobbyist from Goldman Sachs. The new deputy secretary of state was, until last year, a CEO of Citigroup. Another CFO from Citigroup is assistant to the president, and deputy national security advisor for International Economic Affairs. One of his deputies also came from Citigroup. A new member of the president’s Economic Recovery Advisory Board comes from UBS, which is investigated for helping rich clients evade taxes. And so on, and so forth, down the plutocratic hole…

FSP: FOOLISH STEADY PAUPERIZATION

February 10, 2009

PLUTOCRACY REFUSES TO SURRENDER PROFIT MACHINE. GEITHNER INTENT TO KEEP THROWING PUBLIC MONEY AT BIG BAD PLUTOCRACY.

***

US Treasury Secretary Geithner talked, and said little that was new, besides introducing a few silly irritants and red herrings. It was all shock and awe: the shock that there was no awe.

An innovation was to move away from the tarnished acronym TARP (Transferring Assets to Rich People), and distract us with a new acronym, “FSP”. OK, Geithner wants to create a public-private fund to buy a few things. The private, and the public funds would be coming from the heart of darkness (democracy would disappear down a black hole ; see addenda). This is a waste of time, money, energy, economy. The Treasury Secretary wants to keep on supporting the very system that caused the problem (as Nobel Laureate and past World Bank economic chief Stiglitz pointed out already; his solution, the one I long advocated, is to let failed banks fail, and then nationalize them). 

Geithner’s main idea is to go on as before, using public money to allow the failed financial system to operate as before. No change of system. Same old geniuses and masters of the universe at the helm of the sinking USA Titanic.

As usual the same old wish to make a plan, sometimes. Geithner talks “transparency”, but he wants to use the Federal Reserve bank, which operates in secrecy, escaping scrutiny. He attacks the preceding administration, he forgets that he was part of it (destroying the bank Lehman Brothers, nearly brought down the world financial system, because it was a major US bond market maker, besides being a major bank; two people were in the room, taking the decision of destruction: Paulson and Geithner). Lehman should have been saved, and nationalized. But the general metaprinciple of the flawed preceding (and current) administration is that CONTINUATION AND DESTRUCTION ARE BETTER THAN NATIONALIZATION. Continuation of the destruction of the economy.

Now Geithner talks about making the banks undergo a “STRESS TEST”. As if the collapse of the US financial system were not stressful enough, Geithner is going to help, by stressing banks some more. That’s what is called gallows humor.

Geithner wants to use public money to buy “toxic assets” (mostly an euphemism for financial and real estate derivatives, and “securitizations”, the grouping of vast ill liquid assets into tradable concepts). The problem? Oh, oops… The US Secretary of the Treasury still has no way to evaluate how much those are worth. He calls this the “valuation problem”, and wants to use public funds to solve it (!). His plan, as usual, thus is to have the plan to make a plan to value “toxic assets”. While spending public money, zillions of it, doing so. People, you always wanted to know how much the rich are worth, and Geithner will find out, using your money. On the Seventh Day, Geithner shall rest. What a genius! Imagine some guy in a toxic dump, talking about making a plan to value the toxic waste, instead of getting rid of it. That’s Geithner for you. The janitor who does not clean stuff, but has a plan to see it some day. 

On the positively fluffy side, we will talk more about FSP instead of TARP (Transferring Assets to rich People). FSP will reveal itself to not be the Financial Stability Plan that the administration wishes it to be, in its colossal naivety. Instead reality will reveal it to be, in the fullness of time, a Foolish Steady Pauperization.

The Foolish Steady Pauperization will keep on being caused by the inability to get rid of the derivatives and securitizations of the real estate market that weigh on the banks’ books. (Instead of getting rid of them, Geithner wants to “get these markets (of derivatives) working again”.) So, as far as the eye can see, instead of getting credit flowing again, good public money will be thrown after bad, because the amount of derivative losses has got to be so enormous that it cannot be fixed. So money is thrown into a black hole.

To start afresh, the derivatives related to real estate should be declared null and void (OK, one could be a bit more subtle, making them more null and more void as their order of derivation augments). Moreover, because incompetent managers have not been thrown out, they will keep on profiting from the flows of cash, managing them to allow further the expression of their powers. They keep on covering every thing up with the TARP. Instead the first thing that should have been done is getting these people out and away, so the books can be open by non biased observers, and exposed to the public.

Let’s imagine the financial system is a plane. Well, the plane has crashed. OK, it still floats, it is going down the Hudson. What Geithner proposes to do now, is to throw more cash at it, and it fly it again. That is his radical solution, and in his simplicity, he believes, it’s just a matter of time before the plane will soar again. Well, sorry, but it won’t fly again. That plane is all broken up inside.

***

Patrice Ayme
http://patriceayme.com/

http://tyranosopher.blogspot.com/

***

 

 

Addenda:

1) I do not share Paul Krugman’s very cautious optimism who says in his blog: “So what is the plan? I really don’t know, at least based on what we’ve seen today. But maybe, maybe, it’s a Trojan horse that smuggles the right policy into place.”

The core of Geithner’s wishful thinking seems to be that real estate will turn around, and thus so will derivatives and securitization related to real estate. This is erroneous, because real estate is still overvalued. For the good of the real economy, it needs to go down some more. (That can be done while lowering the burden on real estate owners if they can refinance at lower interest rates; right now they can’t. because the banks are not lending… since their capital is either non existent, or too low, or as long as the banks and insurance companies that they are doing business with are suspected to be insolvent).

Instead the US Treasury should face the fact that real estate values will keep on going down. That has to be slowed down, and homeowners real or potential should be helped.

The next thing to do is to separate the bad “assets”, those worthless derivatives and securitizations, creating a contemporary equivalent of the Resolution Trust Corporation (more than 1,000 banks will fail, but more than 1,000 Savings and Loans failed in the times of the RTC). 

Geithner present plan does not seem to have features that can be morphed into this.

***

 

2) The Geithner plan is to get financing from the black, Dark Side money of the hedge funds and the foreign powers. On top of this, he will add money from the Federal Reserve. As Robert Reich, economics professor at UC Berkeley, and the courageous,and correct adversary of Robert Rubin in Clinton’s government, puts it:

“Most members of Congress and 99.9 percent of the public are unaware that the Fed has already committed over $2.5 trillion to the financial system, in order to get credit markets moving again — but with limited results so far. It’s easy to do things through the Fed because there’s scant political oversight of it, and the Fed’s dealings don’t show up as additions to the federal budget deficit. (Yes, we live in a democracy, but not when it comes to the Fed.)”

Geithner wants to create that public-private secret, black, dark fund in the amount of a “trillion dollars” (he suggested). This brings immediately another problem: according to Goldman Sachs the hole in the banks balances is already 5.7 trillion dollars. So Geithner would be about five trillion dollars short. I personally do not see any reason why the hole would not be much larger.

***

WHY THE SLUMP

February 7, 2009

 

DEVOURING CIVILIZATION BY LACK OF INFRASTRUCTURE FOR THE PEOPLE, AND TOO MUCH FOR THE PLUTOCRACY.
***
Abstract: The process of decay the USA has engaged into has been seen before. A particularly clear case is that of the decline of the Greco-Roman empire. The ever more greedy Roman plutocracy, and its rampant anti-intellectualism were central, as were games and throwing money at the people (“tax cuts”). The Imperium Francorum got out of the Greco-Romano-Christian mess through a drastic philosophical revolution backed up by force.

The same illness calls for a similar remedy.
***

What caused the slump? The disorganization of the US economy, its inefficiency and inequity, increasing until the system became unsustainable, and 10% of those who had to pay the gages of death (that is what mortgage means in its original French) refused to pay them. The financial system, overburdened, and overleveraged in mysterious ways by the money manipulators, then collapsed. All large US banks are INSOLVENT, a secret that the plutocracy, with an insolent sense of humor, hid below a TARP (Transferring Assets to Rich People).

Resources were plundered by financial parasites, while necessary sectors of the real economy were left to die. The hurricane winds of bad morality tore through the economic landscape until too few things of value were left for sustenance. In the end, the decimated public sector did not support the arena of the free market with enough of the correct public infra-structure (the structure below the free markets).

Moreover, there was ever more money, hence power. in ever relatively fewer hands. The very existence of such an imbalance, especially when it is always increasing, leads those who enjoy it, to get hypnotized by the Dark Side, that they come to see as their benefactor, their way, the way, their God. Soon the plutocrats reinforced darkness by tweaking the institutions, the laws, the culture. Their cruel epigenetics rose to the fore. Thus goes the power of the Underground, of pluto-cracy, ever more obsessive, possessive, all encompassing. (Precious stones and minerals are also underground, not just the darkest emotions, so Pluto, the God of the underground, is often equated with money; but the original sense is more general.) Plutocracy unchained made the average person ever more impotent, robbing them of income, employment, political power.

To hypnotize the masses, the plutocracy persuaded them that they could be rich too, if only they borrowed enough from the plutocracy. That was a nice trap: the more credit, the better the masses felt, and the more the plutocrats made money. The USA became a CREDITIST country rather than a capitalist one (the capital is in China, and in fiscal paradises, escaping the IRS).

Finally the plutocrats came to realize they would make better money overseas, in a form of neocolonialism that allowed them to escape the burdensome laws and regulation democratic civilization had invented to rule itself. The US eco-nomy (“house-management”) became even more impotent. Indeed it came to depend upon other countries for:

Energy procurement
Manufactured goods
Savings
Entertainment (“War on Terror”, imperial overstretch, invading and bombing various countries).

Why such a strange organization? Well, guess who was the indispensable intermediary? The plutocracy (yes it intermingles with itself internationally).

How did this all happen? Very simple: THE PLUTOCRACY SET UP GLOBAL TRADE, BUT WITHOUT GLOBAL LAW.

The plutocracy is global, the law is local. The plutocracy is strong, and reaches all over, the law is weak, and its meek little hand has no reach at all. The plutocracy is about world trade, the law is about savages living in huts in the jungle. And if you don’t like it, the plutocracy has always a gunboat or two to show you.

Understanding this suggests an immediate solution to the global financial and economic crisis; set a global authority (an IFA, International Financial Authority) and pass global legislation (some of the details of what should be passed I exposed previously).

Ultimately an energy cost spike buried that self destructive madness. Borrowing oneself to wealth revealed itself to be borrowing oneself to death. The middle class quit on the plutocracy, so the plutocracy asked for a TARP to hid the horror, and extract a few last gulps of the money nectar. Now the plutocracy is busy hiding its tracks by having its employees push legislation to “Buy American”. Cute. Nothing like a good war, even a trade war, to distract the masses. Maybe one should invade Iran?

Those who make a mix of naivety and submission into a personal religion will hint that the description above makes no sense: why would a society let that happen to itself? Why would a society let itself be eaten alive by its ravenous plutocracy?

But that is what happened. We just explained how it goes: once the Dark Side is engaged, it’s self justifying, by piling ever more of itself onto itself. (The root causes of this, of Evil, have to do with ecology in the grandest sense, so they are as deep as life itself. No averting of one’s eyes, no averting of one’s mind, will resolve the mechanism without mayhem, once it gets rolling, because well, it is made FOR mayhem. Ecology is made whole by mayhem, that’s the old fashion way. The human point of view is to prevent mayhem with intelligent intervention.)

The crisis started where it was invented, in the USA, but it is a world crisis, because the US model of economy in the principal service of plutocracy extended worldwide.

Historical examples abound of societies where an increasingly hubristic plutocracy drove the society that supported it, the society that it overlorded over, to complete destruction.

It is exactly what happened to the Roman empire. Rome was the most advanced civilization, with maybe 25% of humankind. Still it collapsed, and a casual contemplation of the facts show that the collapse was first internal. The Roman INFRASTRUCTURE COLLAPSED FIRST, STARTING WITH THE MORAL AND MASS EQUITY INFRASTRUCTURE. That collapse happened for bad, but powerful reasons, and that is why they tend to recur in all civilizations. Those reasons have to do with the intrinsic nature of human beings and the nature of capital and the exponential function. Left undomesticated and unrestrained, those laws of nature devour civilization. The first collapse turned the Roman republic into the “Principate”, a pseudo republic with reduced mental capability. It was ever more downhill after that.

The USA is following the same pattern. But remember that, between the first clear signals that something was very wrong until the collapse of the republic (Gracchi to Sulla) there was 54 years. The collapse was not instantaneous.

So what should be done? Invert it all. This is the (not so simple) task confronting the Obama administration. It will need to enact powerful new legislation.

It can be done. The history of Europe after the disintegration of the Greco-Roman empire is pretty much a struggle to invert what went wrong with the Greco-Romano-Christian socioeconomy. The first three important measures taken by the Franks in the West were to block the attack of the Christian superstition against education, the second was to throw out a lot of sexism, the third was to outlaw slavery. All these decisions led the economy of Western Europe to become the most energy intensive in the world, by the year 1000. At least for a while, the society was reborn in the liberty, equality, fraternity arena (recent archeological studies show this).

The remedy to the situation nowadays is similar. First the plutocracy should be put back in its cage. That was attempted in Rome by the Gracchi brothers, a pair of tribunes in 2nd century BC who proposed to pass land reform legislation in the Roman republic to redistribute wealth. They, and thousands of supporters were murdered by private armies of the plutocracy (think about Blackwater running amok inside the USA, paid by Halliburton).

The Franks rolled plutocracy back (in part by redistributing land to themselves, in part by outlawing slavery, in part by making inheritance laws more equitable).

Then, just as under the Franks, superstition should be pushed back, reason and education re-expanded. It is no accident that the USA is not evolving: only 40% of US citizens believe in the theory of evolution. No need to evolve one’s society when it has been ordained by God. By comparison, 80% of the French believe in the theory of evolution, and the French are always pushing to evolve their own society (OK, some will say that the French are particularly friendly to evolution because the French research biology professor Lamarck discovered the theory of evolution, around 1800; the Englishman Lyell was Lamarck’s  student, and then Darwin studied under both of them; but it was only natural that evolution theory be discovered in the country, and at the time, when the shattering philosophical evolution of making the Rights Of Man universal had just been proclaimed; emotions are made to melt reason, and allow it to crystallize anew, stronger and better).

The Franks had replaced the exploitation of man by man, by the exploitation of nature by man. Europe, from Holland to Britain, to the Alps, got covered with windmills and waterwheels (the Romans had waterwheel technology, and it was deployed industrially in Gaul, archeology has shown, but no doubt slavery blocked its full deployment throughout the empire).

One should aim to take social, technological, and industrial measures to make the economy much more ENERGY EFFICIENT than it has been in the past.

Indeed, it’s not enough to just use ever more energy. The Franks discovered this during the middle Middle Ages. Carbon from the forests, was necessary for both energy and construction. Nobody owned them, everybody overexploited them. Moreover, forests occupied land where Middle Age peasants wanted to plant crops. So Europe ran out of forests. (The European population peaked around 1300 CE, before collapsing by more than half). Central governments in France and Germany and Italy had to take drastic measures against deforestation (all the way to “banning” people from some areas, under the penalty of death, as happened in the French Alps; the Dominican republic had to take somewhat similar measures in recent decades to avoid the fate of its neighbor, Haiti).

What counts is not absolute energy usage (as all too many US citizens believe, from lack of careful analysis). What counts is EFFICIENT WORK (“Work” is taken here in the sense found in physics textbooks). That efficient work should be increased. Overall energy consumption should be decreased. In these crucial parameters, the USA has faltered very badly (France is three time more efficient in carbon usage by unit of GDP than the USA). This all came to roost in 2008, when a spike in energy crisis caused by speculators broke the back of the US consumer (hence the US, and then world economy). Now 10% of US mortgage holders are delinquent, or, otherwise said, they have gone on strike.

By the way, all the decisions taken by the Franks were top down, and had to do with new legislation imposed by a powerful State, the Imperium Francorum. There was nothing “bipartisan” about any of this. The Franks did not sit down with their Christian opposition to make a half way deal. OK, actually they did, but that was only tactical. Less than two centuries after the Franks had taken power, the Christian church had been deprived of the terror it exerted over the educational system, and of the slaves it used, and was ordered to deliver secular education. The Franks named their own bishops. Then they basically financed their own religious institutions, and put themselves inside.  

So the post Greco-Romano-Christian reforms of the early Middle Ages, the true renaissance, had every thing to do with a new imperial State thinking it knew what it was doing, and breaking by force the old conceptual order of the Greco-Romans (outlawing their slavery and sexism), and the conceptual order of the Christians (who had been assaulting reason and education to promote their superstitious rule). Taxation and legislation also broke the extravagant Greco-Roman plutocracy.

Finally when the undefeated Islamist armies invaded Francia, the Franks NATIONALIZED the Christian church. This was a counter intuitive move; Islam invades, Franks nationalize Christianity. But this nationalization allowed the Frankish government to have money to pay for the largest MOBILE army seen since early imperial Rome (the nationalization also made the point that this war was not about religion, but about saving what the Franks called “Europe”). That implied payments to support the families of the drafted soldiers. This was another form of socialism, that was invented just for the occasion (the Roman army never used such a modern system to allow soldiers to have families, but two different systems that did not survive, because they were not as good).

In conclusion, Western civilization, in its sustainable form, was founded on the enforcement of new philosophy, more clever, and more energy efficient and energy and freedom friendly. The Greco-Roman world inventivity had degenerated in a few centuries, but the new order of mind in Western Europe allowed it to survive for 15 centuries, and counting.

The Franks (that is, the “Free”) invented the rights of man (no more slavery), equity (kings were in theory elected by all), beat back superstition, invented nationalization and pushed socialization (taking care of soldiers’ families) where Rome had not gone. Inheritance laws insured that wealth would be distributed (that broke the empire in small pieces). This all brought an economic boom.

So observe the illness, and then repeat its cure. The cure was to break the old mental framework that supported the plutocracy by a deeper philosophical understanding of what happened, allowing to build better and greater things on top of it.

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Patrice Ayme
http://patriceayme.com/

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Note on insolvency: Goldman Sachs just came with a number of around six trillion dollars of default for the large banks; but a giant British bank (RBS) asserted weeks ago that all US banks were insolvent; our own reasoning, for a very long time, has been that somebody had got to have bought the hundreds of trillions of insolvent derivative trades, and if not the giant banks, then who? The Credit default Swaps by themselves were 60 trillions. After nationalization, all these contracts have to declared null, void and unlawful.

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Note on evolution: Why is it so hard for the Anglo-Saxons to admit evolution? Because evolving is antagonistic to the God given plutocracy. So the plutocracy always insists that God figured it all out, and nothing should be changed by little men, from God’s magnificent masterpiece, in which God given profit and exploitation dominates.

Jean-Baptiste Lamarck, although having the most prestigious scientific position in France, and having made huge discoveries (he “discovered” and named invertebrates, among other things), was made fun of for the theory of evolution, and died in modest circumstances. So now Darwin, a relative dilettante, has all the glory.

As Lyell put it when he was 27: “I devoured Lamarck… his theories delighted me… I am glad that he has been courageous enough and logical enough to admit that his argument, if pushed as far as it must go, if worth anything, would prove that men may have come from the Ourang-Outang. But after all, what changes species may really undergo!… That the Earth is quite as old as he supposes, has long been my creed.”

Darwin made studies on birds similar to, and inspired by, those the French research professor Lamarck had made on clams. Lamarck’s, clam studies unambiguously revealed that the evolution of clams had occurred, over gigantic extents of time.

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Note on the Roman military versus the Franks: The Roman army never used a modern system to allow soldiers to have families, while being soldiers. Instead it used two different systems that did not survive, because they were not as good. The republican system was to settle old soldiers that often had made 40 years (!) of service, the late imperial one was to settle the army outright (making it static, so the small German armies walked around it!).