USA AS PLUTOCRACY, NOT JUST OLIGARCHY.

 

JAPAN’S “LOST DECADE” VERSUS THE ETHICAL COLLAPSE OF THE USA.

Biofeedback loops between Internet authors: an ecosystem of the mind. Paul Krugman quotes Adam Posen:

“What the Obama team is proposing is disconcertingly similar to the actions of Japanese Prime Ministers Hashimoti, Obuchi, and Mori in 1995 and 1998: Rather than ask the legislature for straightforward recapitalization money, you have the political leadership preferring to risk overpaying current owners of toxic assets rather than forcing sales. For all of Japan’s supposed intervention in markets, its government still lacked the stomach for taking over banks, let alone closing them.”

And Krugman to add: “To be fair: the Obama team really does face huge political obstacles in doing the right thing. Maybe it really can’t be done; as Rahm Emanuel said about me, “[unprintable].”

Krugman concludes: “But we shouldn’t kid ourselves. Japan is us.”

Well, that is all too generous. President Obama himself has evoked Japan’s “Lost Decade”, to justify doing nothing drastic, like firing the influence peddlers and financial scam artists in tight orbit around him (details below).

True, as I pointed out before, though, and as Krugman reminds us, it is politically dangerous for Obama to do the right thing before he has done the wrong thing for all to see. Obama needs to have the average US citizens come to the conclusion that a lot of what they learned from kindergarten on is wrong, in all sorts of ways.

For example, US citizens, to their dismay, will have to learn that: France is economically smarter, than the USA, however shocking and counterintuitive that may be, and the economic policy of the USA of spending 18% GDP in borrowed funds is “the road to hell” as the European Union president just observed.

All the more the road to hell, if one sees that a lot of the spending of money Obama does not have, is all about sending money to his hedge fund friends. Hedge funds are those contraptions reserved to multi millionaires that are trying to bury mankind; reminder: AIG was a hedge fund, plotting with other hedge funds; that it called itself an “insurance” company is irrelevant; as even Americans now know, all AIG insured were bonuses.

Most famous Americans are rich, thus in hedge funds, so they all support hedge funds. In particular opinion makers are mostly pro-hedge funds, because they are pro-themselves. They grandly call that machinery to make the rich, namely themselves, richer, “Anglo-Saxon” capitalism, in a ploy to sound patriotic. But it’s all a scam.

Summers, the chief economic adviser of Obama, instead of saying absurdities, such as claiming that he does not know any economist that favors temporary nationalizations of the banks, should be teaching the right economics to the People. But how could he? He set up the death machine that devoured the world. And he personally profited from it: he was employed by the hedge fund “Shaw”, for years. Guess who is first on line for getting a trillion dollars from the Obama team? Well, hedge fund Shaw. Next guess: where could Summers go to after Obama finally fires him? OK, hedge fund Shaw. Just a guess. If that is not ethical collapse, I don’t know what is.

Just as myself, Obama was a small child at school in a rather primitive country. In such countries one is continually confronted with natives with ironclad certainties, offering completely different perspectives on nearly everything. Obama knows well how wrong the indigenous population can be, while being very sure of itself.

So now Obama is confronting the American natives, and the natives, as usual with natives, know it all. Obama has got to know the Americans are wrong, but he cannot just tell them that, because, differently from the present author, he has to remain popular to be effective. Obama knows that locals do not take kindly to be told they are idiots, and then they dig their heels. The way out for Obama is to explore the errors first, and then suggest alternatives to the mentally challenged masses. As far as making errors, Obama is equipped with the best and brightest team that ever was. Even more than Bush, Summers and his ilk have constructed the machine that devoured America.

The machine which devoured America: the giant financial conspiracy which gulped down all of the world’s credit to pay itself fortunes in bonuses, and own as much of the world as it could.

Devoured by the few rich, materially ravenous, and morally ugly does not happen just with banking. Many other sectors of the economy of the USA are gravely affected. Health, Insurance, Credit ratings, Media, etc.

Health insurance and the health industry of the USA has also grabbed all the money for itself. Including president Obama’s “friend”, the legendary Warren Buffet, who made a fortune with health insurance and credit rating agencies (Health insurance devours American lives, and fraudulent credit ratings are at the root of enabling the financial crisis by lying about the ratings of the likes of Citigroup or AIG, Buffet clients all). But, in the USA people love money and people with money unabashedly. The more billions, the more friends you have.

Japan’s “lost decade” was bad, and Japan has not come out of it fully. [But there are also larger issues in Japan, such as the lack of immigration, the aging of the population, and the proverbial insular culture.]

Contrarily to legend, in Japan, the real GDP per person went up during the “lost decade”. In the USA, the real GDP per person went down for a full decade prior to the economy tipping out of control in the last six months. That is why I call this slump made in the USA, a depression, not a recession. It will soon have lasted longer than the Great Depression of the 1930s.

So “Japan is us” is too rosy a comparison for the USA. Japan has a distinct oligarchy, but it has stayed away from outright plutocracy since W.W.II. Financial rewards at the top have been kept reasonable, all along. Japan remembered that its oligarchy led mankind to disaster by attacking Korea, China, French Indochina, and finally the USA and South East Asia, during W.W.II. Just in China, the Japanese invasion killed twenty-million people. Ever since, Japan, sobered by radiation therapy, has kept tight reins on its plutocracy. Japan understood that plutocracy had everything to do with its ethical collapse.

The French “oligarchie” (14th century) comes from the Greek oligarkhia “government by the few”, from oligoi “few, small, little” and arkhein “to rule”. Plutocracy means that it is the wealthy, and the underground, that rules. This is the case in Banana Republics, and, now, in the USA. The Federal government has sent enormous flows of money to the wealthiest people in the world in the last few months, and a lot of it was hidden, underground [in particular AIG was used that way, as a conduit for secret money flows, in full connivance with bank holding companies, hedge funds, and the like].

Sending trillions of dollars to the corrupt hedge funds-bank holding companies complex, “without keeping track” while millions of US citizens are threatened with foreclosure out of their homes, and the Obama administration stresses out about a few dozen billions for the car industry, is par for the course.  

How does one get rid of a plutocracy when it’s firmly in control of the state? Well, revolution. Or then one elects someone one could hope was out of the system: Obama. So, as the world magazine, “The Economist” ordered Obama in its latest lead editorial: “lead, damn it”.

Instead the young chief of staff, “three seconds away from the president”, got 16.2 million dollars in two years from a bank. Rahm Emanuel was not qualified for that position, except as a lobbyist. Among ethical people, we call that a bribe from the bank holding companies, so that, when the guy is chief of staff, trillions can be sent to bank holding companies, while claiming disingenuously that the USA is the only country that ever was, which does not know how to temporarily nationalize banks.

And guess what? This is exactly was has been happening. As long as this sort of enormity is not fixed, the fact that completely corrupt people hold the levers of power, the economy of the USA will not be fixed.

The economy has been so bad, for so long, that, below the veneer of plutocratic prosperity, American society has very serious troubles. The USA is the top narco state in the world (as far as consumption is concerned: maybe, because of the plutocracy, drugs are the only way to get high?). The USA has also the highest incarceration rate in the world.

Geithner on ABC news this weekend, clear eye and bushy tail, claimed ludicrously that he “always worked in public service”. Either he deliberately lied, or he has lost track of reality. Many of those guys have such a wrapped notion of reality that, when they work for a “consultancy” such as “Kissinger and Associates”, as Geithner did, for several years, they envision themselves as in public service. It’s that bad.

***

Conclusion: There will be a bad society and a bad economy, as long as Obama is too friendly to the self described “best and brightest”, the richest, most obscene and most lying, “three second away”. The incapacity to see this, and of being outraged by it, is directly related to economic misperceptions, such as believing that the USA’s politics towards its giant banks is different from Japan’s erroneous one.

***
Patrice Ayme
http://patriceayme.com/

CHANGE THEY CAN CASH IN!

 

ONLY IN THE USA: TREASURY SECRETARY SAYS THAT IT IS NOT ENOUGH TO GIVE MONEY TO THE RICH, IT SHOULD BE DONE RESPECTFULLY.

… BUT THERE IS A BETTER WAY TO HANDLE MANY BAD ASSETS, WITH NO MONEY DOWN.

***

 

Abstract: Here is a bunch of entangled remarks and suggestions on the proposed Geithner plan. Why it has to be, why it is an outrageous give away to the plutocrats, why it will fail. And even why Obama is ready for its failure, and may even want it (if Obama is not Machiavellian, no one is!). I handle related issues, like Obama’s dismal subtracting and dividing skills (what about taking some private math lessons?). On a positive note, I propose my own mitigation to the crisis. It is international in character, and can be implemented right away (G20). I will start with this, so that I would not be viewed simply as the disparager I am.
***

Background: Giant bank holding companies in the USA have reasonably healthy cash flows, but they do not satisfy capital requirement because of crazy debts with “derivatives” that ought to have been unlawful. So they are scared of runs, and do not lend, strangling the economy. As the economy dives, capital and cash flows shrink, feeding a vicious circle.

***

TYRANOSOPHER’S BAD ASSETS MITIGATION THROUGH WORLDWIDE ABROGATION BY THE G20:
My way to extinguish many bad assets is very simple: create new international law to help, instead of just throwing money at the problem.

There are two ways out of insufferable debt: inflation, or default (inflation is actually default hidden in time). As Obama himself pointed out many of the activities prior that led to the crazy debt were “legal”. Or at least Summers said they were legal, and Summers made it so. Under Clinton, Summers, a faithful lapdog of the plutocracy, refused to regulate anything, as I pointed out in a previous essay [No Outrage Is High Enough, Patriceayme.wordpress.com, March 15, 2009]. Rubin, Summers, Geithner, Clinton, going along with the Republican Congress, enforced a system where: GREED IS GOOD, IT MAKES THE WORLD GO ROUND. So now, as Summers just pointed out, there is not enough greed, and the world does no go round anymore. The Geithner plan thus reintroduces greed to save that plutocracy the USA has become identified with.

In Europe, pride of work and the power it brings explains why the CEOs of giant extremely profitable banks make a small portion of what the propagandist heads on TV earn in the USA. [Although in France the unfolding drama of the CEO of Valeo SA, a failing auto parts company getting government help who decided to leave with a 4 million dollars golden parachute, is bringing violent reactions from the association of CEOs in France and from the government, which seems intent to pass a special law to prevent precisely this. So it is not as if the USA lived in a completely different universe!]

France and Germany are led by right wing, not obviously corrupt governments, watched by fierce public opinions that are ready to shut down the countries if severely provoked. So those conservative governments want to regulate firmly the financial markets. They will propose to outlaw many practices (including, I guess, Summers’ Credit Default Swaps without provisions). France and Germany are the heavy weights of Europe, having preserved their industry (differently from Britain) and having little financial debt (differently from Britain whose financial debt is apparently much higher than in the USA). It is usual to disparage them as welfare states, but the private French bank BNP could probably buy all the giant banks of the USA, all by itself (not that it wants to).

The USA should go along the proposal of the French and German leaders to crack down. The USA is increasingly less in a position to resist, because not only does the Franco-German attitude in this matters leads Europe, but the rest of the planet pretty much agrees with Europe. The USA has proven to be, financially, and may be economically, a giant Ponzi scheme (that’s all what the Geithner plan is, with the public holding the bag, by the way), a fraudulent racketeering organization. As Obama pointed out, some 40% of the miraculous growth of the USA in recent times was just in the financial sector, namely in that Ponzi scheme. So comparing French and American growths during those recent times is like comparing the tempting French apple to the drop dead American hemlock. [France is very happy not to have grown the way of the USA. France contented herself with simpler pleasures such as the tallest bridge in the shortest time, the biggest, most economical plane, the best, most reliable big rocket, the newest, safest, most recycling nuclear power plant, the fastest train, and the ability to contain thermonuclear fusion plasma for six minutes.]

After all countries at the G20 agree to crack down hard on financial insanity a la Summers, many practices that have bankrupted the top banks of the USA, and AIG, will be UNLAWFUL. Good. Free at last.

So, THEN, why should those debt and obligations be repaid, looking forward? If the practices are unlawful, they should be ABROGATED (a word Summers like, which means formally revoked; Summers does not understand that word, he made that clear. Summers just like to go around, and impress people with it). Why should one have to pay for a slave after slavery has been abrogated? If it’s unlawful, don’t do it anymore, that’s it. Thus a BIG PART OF THE FINANCIAL PROBLEM WOULD BE LEGISLATED AWAY.

All nations should simultaneously agree that these now unlawful debt and obligations are NOW NULL and VOID. End of the story. End of the story of transforming the USA into a society of serfs forever condemned, generation after generation, to pay for the debts their Lords Of Finance have incurred. Annihilating those obligations worldwide simultaneously will avoid imbalances. It’s like with the stimulus: if it’s deployed everywhere the same, no imbalances either.

Abrogation, annihilation of the market, is exactly how the Tulip Craze of the seventeenth century Netherlands ended: after the market disappeared, everybody went home and did other things. The economy was fine.

What is not fine now is that the self satisfied crowd at the top of the USA is repeating the mistake of the 1930s, just because, as it is in a slightly different guise, they cannot recognize it for what it is.
***

ARE THERE OTHER LEGAL REMEDIES?

Some say that the banks deposited back with the Fed all the TARP funds they got. So they did not need anything! Indeed, 97% of loans are said to be paid back in full, on time (and 98% pay some interest). So why all the panic? Well, the banks are refusing to lend, because they are afraid of runs.

So? Well, the Obama administration could do what has been done in France, namely insuring ALL deposits, independently of their amount. No more run potential, everybody relaxes.

Obama could also force the banks to lend new mortgages (although interests are low, few mortgages are lent).

It is curious that all the preceding remedies have not been tried, before suggesting to fork another trillion to the ultra-rich.

***

GREAT DEPRESSION OF THE 1930s REDUX?
Federal Central Bank chief Bernanke did a PhD thesis on the Great Depression, and has vowed not to repeat the same mistakes made then. (The mistake pertaining to liquidity and bank failures was made at the legislative level, by the way: the Fed could not lend money it did not have, at the time, by law. Now it can create all the money it wants, and do so secretly!]

That does not mean Bernanke will succeed to do what he wants. As it is, as far as I am concerned, the government is basically repeating the same fundamental mistake. I see what Bernanke does not see. Let me explain.
What went wrong in the Great Depression of the 1930s? The government created conditions for the collapse of industry, that collapsed the banks in turn, modulo enormous debts. During the Great Depression the REAL ECONOMY WAS DESTROYED because MONEY WAS SUCKED OUT OF IT [from the industrial and banking collapses]. The present government is doing the EXACT SAME MISTAKE. The mechanism is different, the effect is the same. Sending money to hedge funds will have the same effect. One can argue that the entire economy of the USA has been sucked dry by hedge funds (there are more than 9,000 of them, some multi billion). THE MONEY (“CREDIT”) THAT HEDGE FUNDS GRAB IS AS MUCH CREDIT THAT THE REAL ECONOMY DOES NOT HAVE. The Geithner plan does not see this, and that is its Achilles’ heel.

Money needed by the real economy is sent by the TARP, Geithner, etc. to the crafty wealthy investors. Unbelievable. An example is that taxpayers of the USA sent 12 billion dollars to the French giant bank Societe Generale, which made two (2) billion Euros of profits last year, 2008. There may be an excuse in making USA taxpayers pay giant overseas banks (as long as one can show that the overseas banks got in this honestly!). But there is little excuse when the payments go to AIG’s accomplice, Goldman-Sachs.
***

HOW MUCH TOTAL DEBT AND OBLIGATIONS ARE THERE?
We do not know how much there is, it’s as simple as that. Summers, in his incarnation as Clinton’s evil financial mind, allowed bank holding companies to use giant leverage (up to 45 times). Now Geithner was asked point blank in Congress on March 24, 2009, the size of the American financial industry. He answered with the obvious, namely that it was of the order of the GDP of the USA, 14 trillion dollars. Now this industry was allowed to use 40 times leverage for years, thanks to Summers. The international standards of the Bank of International Settlements (the bank of central banks) call for a leverage of 12. The giant banks of the USA would like to get down to that (now that they have been found out!). So we can assume the financial industry has to shrink to 5 trillions [(14) x (12/40) ~ 5 ]. Thus there should be a minimum of ten trillion dollars of losses incoming, ten times the Geithner plan, three times the emergency Federal budget Obama proposes for next year. Unbearable.

Is that all? Well, the Credit Default Swaps market got up to 64 trillions. So the total debt and obligations could be north of twenty trillions. Unbearable. With my G20 solution, a lot would be abrogated at the outset. [That would give the Geithner plan more bite, and perhaps allow a Swedish solution with the nationalization of very few giant banks: Sweden did just two.]
***

THE PATH NOT TAKEN BY OBAMA AND WHY:
The present author has been tough on Obama. But Obama’s task is not easy. He may not have a choice other than playing dumb on TV. He cannot do the right thing right away, because the American People, brainwashed by decades of plutocratic propaganda, is not ready for it. The simple word and concept of “nationalization” drives American into irrationality: they have been taught this, and know it well. But nationalization is the only solution (as explained on this site for more than 6 months). If Obama did the right thing right away, since Americans have been taught that it is the wrong thing, they would reason that whatever bad happens afterwards is Obama’s fault, because Obama, in their simple minds, would have done the wrong thing.

So, basically, Obama has to walk the path that will not work, first, so that most Americans will come to the conclusion that the path leads off the cliff, that the “market” cannot be the master. So Obama’s Geithner proposes to build a market subsidized by taxpayers, so that the wealthiest of the rich can stay in command. Indeed, someone needs to be in command, and it’s not the People, because the People is deeply persuaded that the People is incompetent, and only the “best and the brightest” can “lead”. Leading, being led, have become fundamental American reflexes.

Geithner’s market plan will not work because the debts owed cannot be repaid by the People (or anybody else). They are way too large (see reasoning above, which rests on evidence, and an admission of Geithner). The enormous debts, from giant (40 times) leverage can only be ABROGATED (judges abrogate debt routinely in bankruptcies; another thing “best and brightest” Summers is oblivious of). Because there are foreign entanglements, some have said that nationalizing the bankrupt giant banks of the USA will not be easy. Instead, I turned the later observation around, and made it into a solution.

Obama thus needs time. My solution will give him some, and increase enormously the power of the Geithner plan. The economy should then be able to muddle through, until such a time that American public opinion realizes that nationalization of the top four giant bankrupt banks is unavoidable. Nationalization can be many things, but its essence will be to let the existing bank holding companies fail, yank the banks out of them, let judges abrogate unbearable contracts saddling the banks, and recapitalize the banks. At that point the banks would be owned by the People of the USA and managed by some of the thousands of competent bank managers the USA has. The banks would be immediately very profitable, and could be sold back to eager investors (foreign or domestic). The G20 abrogation of unlawful derivatives will make things easier.
***

THE GEITHNER PLAN: JUST LIKE PAULSON, BUT WORSE:
Paulson wanted to buy the “toxic assets” from the banks, all by himself, with taxpayer money, repackage them, and then to put them to auction, with private investors bidding. A strong Secretary of the Treasury could always threaten the bank holding companies with bankruptcy and criminal prosecution if they did not give him the right price forthwith.

The Geithner plan instead first arms with a colossal 970 billion dollars of taxpayer money the richest of the rich, so that they can buy the same assets through an obscure process of the richest of the rich talking to the other richest of the rich. Then the richest of the rich will have a very high probability to make huge money. If that does not work, the richest of the rich can always walk away, and all the loss is for the taxpayers. Who will be free to repeat the same stupid process at a future date, in case they have enough money and stupidity left to do so.

The “Geithner plan” as Geithner himself calls it in a subtle touch of disinformation, is the Paulson plan, with a trillion dollars for the richest of the rich to play with added. The plan violates twice the equality clause of the republic, demonstrating, once again, that the USA is something else.

Paulson was going to buy the “toxic assets” of the banks himself, enriching the class to whom he belongs. Geithner decided that this was too socialist. As behooves a plutocracy, Geithner modified the plan so that the richest of the rich could get to the money TWICE. So Geithner gives to the richest of the rich the sum of a trillion dollars of public money to manage. The richest of the rich will then debate with their friends, the richest of the rich, while making bids to persuade their other rich friends, the bankers, to sell them some assets they are reluctant to sell.

 

Thus the USA government will play for private hedge funds that it will itself create with taxpayers’ money, the role the giant bankrupt banks used to play with hedge funds, with savers’ money. If this sounds opaque, mission accomplished! Opacity is the basic idea. Instead of stealing Peter to pay Paul, Geithner will steal the public to pay the rich to pay the banksters.
***

WHY THE ENTIRE CIRCUS? IS NOT THERE ALREADY A MARKET?

There is already a market for the bad assets. It is said that the average price of the “toxic assets”, aka “legacy assets” averages around thirty cents on the dollar.

So why does Geithner want to create again what already exist? Because he wants more of a market, a bigger market with more cash flowing, so he offers massive subsidies to both buyers and sellers. thus Geithner creates a fake market, government subsidized, because he is not satisfied with the free market as it is.

One of the reason the thirty cent on the dollar bad assets market is illiquid is that the giant banks do not like it. If they sold all their bad assets at this price, the giant banks would reveal themselves to be insolvent, hence their lack of enthusiasm. The upper managements of the bank holding companies are supposed to sell the rope with whom to hang themselves, and they are not too keen.

This situation will perdure, and Geithner will not solve it.

Except of course if, in the early deals, the participants can cheat so much that they enrich themselves personally so much, that they find irresistible to partake in this trillion dollar free for the ultra-rich distribution of riches. Cheating could happen in a myriad of ways: by being on all sides of all transactions, including failed transactions, selling short, going long: all the so called ‘private investors’ are enormous trading houses familiar with all and any investment method.

In other words, Geithner is trying to bribe the ultra-rich into buying and selling the bad assets. Later Obama could come on TV and say, as he already did: “the dirty little secret is that these methods were not unlawful.” 

***

IS THE USA ON ANOTHER PLANET? NO!
Such an outrage, giving a trillion to the richest to “recover the economy”, would never fly in Europe. The entire Union would go on strike. But this is the USA. At this point US citizens do not have the mental equipment to see what is wrong with this picture. Wall Street knows this, and sees the trillions coming. Thus the national mood of the USA may well lift. How long? Well, the situation is complex. Real estate is at the root of the crisis. It is still, over all, overvalued by a minimum of 25% (from the deviance of the price/income ratio). That does not mean it cannot stay so (because interest rates are low). If real estate keeps on sinking, this “Geithner” plan, with this trillion dollars will not work, in the sense that taxpayers will lose their money. But that does not mean the Geithner plan will work anyway, in the sense of saving the economy.

What is Geithner trying to do, besides enriching his class, which is also Paulson’s and Summers’ class, the hedge fund class? To get the giant banks up to the capital ratios of the International Bank of Settlements. Why are the banks not up to these ratios? Because the managers of the bank holding companies took all the money in the banks, and made bets with them. Those bets were incredibly stupid. They depended on real estate value increasing exponentially forever. The “best and brightest” are either best and brightest idiots, or just addicted to money and power to the point of deep psychopathy. 

Geithner proposes to make more of the same sort of bets, but this time with a sure loser, the government, that is the People itself. It may work, modulo at least a second Geithner plan: all knowledgeable individuals believe that the total bank losses are at least two trillion dollars. But many serious people and institutions have much higher estimates (As I said, up to twenty trillions; I personally would not be surprised if all the losses were more than twenty trillions).

So what next after Geithner’s plan has proven to be a bottomless pit enriching the rich? The Obama administration does not want to say it will nationalize the giant banks (but it will have to come to that when Americans want their credit system back!). It is true that it will not be easy to nationalize the four largest and most bankrupt banks: there are foreign entanglements of a type no one has nationalized before. So I propose a solution, or more exactly a preliminary mitigation. My plan is to use other countries and the needed future regulations to mitigate the extent of the future toxic assets. With my plan added, the Paulson-Geithner device could finish killing the problem. Ah, yes, since the Geithner plan as it is unconstitutional, I propose to open the investment participation to all. Thus the public could profit from the tremendous leverage of public money the Obama administration intents at this point to give to only the “best and brightest”.
***

SEMANTICS TO THE RESCUE:
This is getting tiring. The USA government uses chameleonic semantic shifting, renaming continually the main concepts. There was TARP, then TAFL. There were “investment banks”, then they are no more. “Bank holding companies” are systematically confused with “banks”. Illiquid, insolvent, bankrupt are systematically transmogrified into each other. The most relevant notion is not evoked. Now “toxic assets” are called “legacy assets”. The baffled taxpayers will be happy to pay for “legacy” instead of “toxicity”. This is disinformation, this opacity is part of the plan, and it should not be. I read Geithner in the Wall Street Journal. It is pretty obvious that he makes sentences which are meant to say things that cannot be understood. Some extent over five lines… (see addendum for an example)…
***

US GOVERNMENT TO RUN WORLD LARGEST HEDGE FUNDS FOR PRIVATE INVESTORS:
So Geithner has rolled out the Paulson-Bush (-Geithner) plan again, just like last time, this time with a private sugar coating and more details. The plan consists into lending a trillion dollars of PUBLIC MONEY (970 billion more exactly) to PRIVATE INVESTORS for them to PLAY WITH. The private investors will then manage five or so hedge funds and COMPETE WITH EACH OTHER to buy the “toxic assets” of the banks. Sorry the “legacy” assets.

What created the crisis in the past was tremendous leverage to buy over valued assets related to real estate. Where did the money come from? It came from the public, through the banks. The largest banks did this so much, they got BANKRUPT when real estate values went down. Why? Because some buyers defaulted (refused to pay mortgage). For any old fashion bank, that is not a problem: they foreclose, and take a manageable loss. but for the giant banks managed by, and profiting to plutocrats, it was a disaster, because they were highly leveraged.

The Obama administration wants to keep on going with the myth that the largest banks are not bankrupt. Still, they are, though, so money needs to be sent to them. Sending money directly to the bank holding companies is called TARP, but the public has had enough of the idea of sending money directly to the people who caused the problem.

So the Obama administration has come up with a more opaque way of doing the same thing exactly. The next slice of TARP funds, 150 billion dollars, is to be sent through the Paulson plan. [Now Geithner calls it “my plan”, so we will know it thereafter as Geithner’s plan.]

Before the money was sent to hedge funds indirectly, now it is going to be sent to them directly, and then, through the hedge funds, to the banks. It is the same as before, but this time, in reverse, hoping to baffle the public, whose money it is, grabbed by other hands.
***

THE MATHEMATICS OF OBAMA’S GIFT TO HEDGE FUNDS:
OK, I will put most of that in an appendix. Even extremely well educated doctors have complained when I slip equations in my discourse (Why? An equation is just a sentence!). Nevertheless, the ruse of the plan rests in its arithmetic, so it has to be evoked. The basic story is that the tremendous leverage with public money allows private investors to make tremendous money with very little risk. Say an asset price could be anywhere between 50 and 150, giving it an expected value of 100. In the average expected case, that of paying 100, the private friends of Geithner stand to make 50 for every 15 they risk. So they have as much chance to lose 15 as to gain 50. This is in the case when the government would lend 85 to the private investors. Overall though, the leverage should be higher, since Geithner proposes that the FDIC and Treasury mobilize 970 billion dollars while the private investors would bring in 30 billions.

This is of course grossly unfair to the public.
***

ARE OBAMA’S MATH SKILLS UP TO SNUFF?
Now the real question is this: do we expect Barack Obama to understand the arithmetic of the plan Geithner proposes? Not necessarily. Mr. Obama has the most charming giant smile he used all the time on “Sixty Minutes” and on the Leno Show, as the host evoked the calamity out there. But earlier in the week, he pointed out to an audience in California that, by raising the top bracket from 36% to 39.5%, he augmented taxes by only “3%” for taxpayers in the upper bracket of the working class.

In other words, according to Barack, the following equation is correct: [39.5% – 36%]/ 36 = 3%. Well, Barack went to law school, and he is now president, but it is not clear that his mastery of mathematics is enough for him to get a correct QUALITATIVE feeling about the world. Indeed: 39.5% – 36% = 3.5% . To complete his computation correctly, student Barack had now to divide 3.5% by 36. Oops, did student Barack forget to do that? Never mind, quick, send another 17,000 soldiers to kill and get killed in Afghanistan.

Completing his computation for him, we see that Barack augmented taxes of the working class enjoying the upper bracket by close to 10%, not 3%. (Meanwhile Obama leaves the hedge fund class with a low 15% bracket … but that is the same old underlying story: guys should take care of their own: with a ten million dollar fortune, Barack Obama does not belong to the working class anymore, he needs a break.)
***

Conclusion: THE PLUTOCRACY OF THE USA WILL DO WHATEVER IT WANTS:

In a non plutocracy, say in a democracy, nationalization of giant banks would proceed (if needed! It’s not even clear that it is needed, unbelievably!). With a trillion dollars, there is plenty enough to recapitalize all the large insolvent banks of the USA. Instead that trillion (and another one coming behind the administration has alluded to) is to be given to hedge funds to play with. Only in the USA.

The severity of Barack to normal people of the working class with good incomes compares poorly with his enormous generosity for hedge funds and the wealthiest of the wealthy. Not only those get taxed at a maximum of 15%, but now he gives them another TRILLION dollar to play with. Just a trillion, you may object? OK, it is not just a trillion above what was already given. More is to come. Entities as diverse as Goldman-Sachs and PIMCO puts the hole in the banks.

Obama has to work around the admiration and adulation the People of the USA has been conditioned to have for the richest of the rich. This shows up with the admiration and adulation for Barack’s “friend”, Warren Buffet. In Europe, Buffet would be in jail. In the USA, it’s everybody’s respected grand father. Just like Madoff before his fall.

It’s all psychoanalysis at this point. The USA is on the couch, all messed up in its self contradictory mind. The world is watching in disbelief. France and China are providing stern advice. But the Obama administration, his Geithner and his unbelievable Summers keep on giving to the richest of the rich, hoping to recover what never was, true prosperity from making the richest of the rich, richer. As I argued in another essay, this Great Depression started under Summers, ten years ago (Obama is now repeating that line, by mentioning “flat” incomes in the last decade; but the incomes were down, when measured against inflation).

In a debauch of hypocrisy, the USA is doing the exact opposite from what it has forced dozens of nations in identical financial crises to do. That was to cut spending, private and public, rise interest rates, get punished, and bear it.
***

Patrice Ayme
***

Punch line addendum: Here is a typical quote from Geithner: “Moving forward, we as a nation must work together to strike the right balance between our need to promote the public trust and using taxpayer money prudently to strengthen the financial system, while also ensuring the trust of those market participants who we need to do their part to get credit flowing to working families and businesses — large and small — across this nation.” In other words, People, send money to the Rich in such a way that the Rich can trust you!  You need the Rich! [Geithner from the Wall Street Journal, March 23, 2009, “My Plan for Bad Bank Assets”.]
***

PLUTOCRATIC PROPAGANDA BEFORE G20.

DESPERATE AMERICAN PLUTOCRACY PROPOSES TO DISSOLVE EUROPE.
***

Abstract: The American plutocracy has American public opinion wrapped around its little finger. This deal with the Devil has been going on for nearly a century, and provided with a thrilling high. But so doing it wrecked the essential and delicate machinery of real democracy inside. The similarities with the Roman republic rise and fall have been poignant. If I pointed at the most devastating examples of these abyssal depths, most American readers would consider I have lost all respectability, and would stop reading. (So I will not do so now, but examples are on Tyranosopher.com.)

The latest propaganda aims at preserving the bread and butter of the plutocracy of the USA, a worldwide financial system greatly resting on lies, tax heavens and other hidden exploitation schemes, served and organized by the machinery of the entire government and upper society. Although the American People have been compliant so far, the Europeans have had enough. The European Union has a social charter. The EU is not a plutocracy, but a democracy, by law. So the EU wants strong regulations for finance. The plutocracy of the USA knows this, and has started an intense propaganda campaign to prevent the EU to crack down. A smear campaign against the core of Europe is part of it. Top US editorialists are apparently being recruited to howl an anti-European message. (While this was going on, Obama, in the last few days, came out to favor the rule of law. In other words, Obama seems inclined to impose tough and clever regulations to the financial system (as Sarkozy and Merkel want, and as Summers does not). Just as I warned Obama about Summers-Geithner and their ilk, the essay below warns him, and those who genuinely support change, that even opinion makers I often agree with, can be 100% wrong on crucial advice. Why? Well, they are well paid, and they go to the same cocktail parties as those who pay them. That’s where the friendly “recruiting” I alluded to is done. It’s a class phenomenon. The great heights of the CEO class is surrounded by a friendly cloud of pundits that brings it life bearing moisture. Just as there is a CEO class, there is a class of fellow travelers that depends upon the plutocracy as it is, and, when push comes to shove, they express thoughts that the plutocracy lives by. All together, they constitute the reigning oligarchy. It’s understandable, but it should be fought.) 
***

Overview: The International Monetary Fund has suggested to spend 2% of GDP of stimulus in all and every country. This is an excellent, probably minimal idea. Otherwise some countries could ride on the back of the stimuli of others. But one has to be careful about what qualifies as a stimulus, and what does not. A true stimulus cannot consist of welfare catch up, or of stealing Peter (the Federal taxpayer) to pay Paul (the taxpayer deprived of local state services and employment). More than two-thirds of the “stimulus” in the USA is fake that way, some is even an anti-stimulus. All in all, the USA is spending less in real stimulus than say, France. Worse: the USA has stopped investing into itself for decades. Thus, as Vice President Biden found out to his dismay, a rusted bridge he was kicking holes into cannot be repaired right away: plans have to be proposed by engineers, bids have to be compared, and debated, administrations have to decide, politicians have to approve, etc. Meanwhile no work-hour intensive work is started. So much for “shovel ready”.

By comparison, France’s excellent infrastructure is an ongoing work. France is now feeding 2,000 projects with its stimulus. Most of these projects were ongoing, and are just been accelerated.  This also shows that the USA stimulus has no meaning if it does not come back year after year. An example: the USA stimulus has 8 billion dollars for high speed rail (added at the last second by the White House, it is said). It would probably cost more to make the Washington-Boston corridor high speed. The San Francisco high speed train terminal, by itself, would cost a billion dollars. San Francisco cannot decide if it should go ahead or not, the Federal funds being completely insufficient. 

Instead of thinking carefully about what it all means, what is a stimulus and what is not, and instead of pondering which financial regulations are needed, many top editorialists in the USA are obviously finding too heart wrenching, or shall we say stomach wrenching, to criticize the American elite. Instead, they are reverting to carp, or more exactly shark, with very misleading and sometimes outright false accusations against Europe. I give three examples below. Paul Krugman, usually sensible, goes as far as suggesting that Europe would be better without the European Union and without the Euro. He gets so agitated that he self contradicts blatantly (see below). OK, it is difficult for American opinion makers to recognize that they have been cuddling with evil, but the timing is such that it reminds one a bit too much of the blind support for G. W. Bush in the early years of the Iraq war. It calls into question the independence of American intellectuals (generously supposing there is such a thing) with the plutocracy that feeds it and celebrates it.

This sudden hysteria occurred conveniently just before the G20 summit, where the main subject ought to be how to prevent American plutocracy to keep on ruling the world in a diabolical way forcing everybody else to serfdom. The Europeans should not be distracted by the tactics of the USA, and remember that is the same crowd as before, even if the figurehead has changed colors.
*** 

USA PROPAGANDA CAUGHT IN THE ACT:
Why did G. W. Bush have an 85% approval in the US polls as he destroyed Iraq? I am not talking here just about the invasion, but about the wanton destruction that followed it. As the horrors unfolded on TV, US citizens approved. What held US minds in such a strong grip?

US citizens were told so many horror stories by the media, propagandists, editorials, and various talking heads, that they believed them all. After all, that is all they heard: the yellow cake, the mushroom cloud, the biological labs on wheel, Saddam Hussein in bed with Bin Laden. Nobody was there to scream that was all absurd. Americans are trained to disrespect screaming and respect their government, and especially their plutocracy. When the richest of the rich come on the screen, they pay attention. or so it was before the present crisis. Now cracks are appearing all over. Revered figures, such as Warren Buffet, owner of a major credit evaluation agency at the heart of the crisis, belong in the dock, answering tough questions from the public prosecutor. Thanks to years of propaganda, Mr. Buffet, long the world’s richest man, has been viewed for decades with abject respect and trust by the awe struck American natives.

As Hitler pointed out with glee, if lies are big enough, people will believe them, because they are unaccustomed to big lies. The idea, made quite clear at the time of the Iraq war, was to finance the war by seizing Iraqi oil. Nobody was there to scream that was a violation of the Geneva Conventions. “Defense” Secretary Rumsfeld came on, and, in measured tones, called Geneva “quaint”. He has not been prosecuted yet (outlaws are prosecuted in the USA, except if they belong to the oligarchy). It was clear what interest the plutocracy of the USA had in the matter of the invasion of Iraq.

Fast forward to 2009. Now the plutocracy is fighting for the survival of its way of life. It has now become clear to everyone that it is, to put it mildly, in need of tough regulations (and “punishments” as Fed Chief Bernanke put it in the first interview ever given by a Fed Chief, March 15, 2009). At the G20 meeting in London in April. France and Germany want tough regulations for the financial industry. I myself proposed an arsenal of science fiction regulations several month ago. I proposed tough trading limits and drastic limits on derivatives and leverage, driven by the aim of making the market machinery shock absorbent instead of shock amplifying. Investing should not be about a Monte Carlo rigged by the richest of the rich. Instead it should be about retirement and sovereign funds.

Instead of preparing for regulations, a flurry of editorials have appeared in the USA accusing Europe to be at fault, for this, that, and the other thing. A bit more, and it would be reminiscent of the anti-French frenzy of 2003. What is going on? The White House only wants to hear about stimulus. Inside the USA, Lawrence Summers, the architect of the modern, strident plutocracy (see the preceding post), and his Geithner are fighting to keep their system of America-for-the-Rich-and-only-the-richest-of-the-rich, intact. And regulations would kill it, that was Summers’ point in 1998, and it is Summers’ point today.
***  

IMPOSSIBLE IS NOT FRENCH:
Roger Cohen, who had been reasonable for years, having apparently recovered from his acute case of Middle East invasion mania, suddenly took leave of his senses, claiming that France was a “temptation Obama should resist”. Cohen admitted that “one has to be crazy not to live in France”, except for one thing: “possibility“. No “possibility” in France, guys. Those French never got to the realm of the possible. Cohen was obviously unaware of the famous trait of French culture that the French remind to each other all the time as a proverb: “Impossible n’est pas francais”: impossible is not French. Cohen does not know that nothing excites the French as much as a supposed impossibility. That is the root of French progressivism. The French progress is not all about justice, but also about the excitement of the challenge of making the impossible impossible. Although Americans love challenges, the French love them even more, and that is why France produces deeper intellectuals. As the divine Marquis de Sade concluded, having tried everything else before, including personally instigating the revolution of 1789, the greatest outrage is writing.

Then the New Times Editorial board came out with a blast against an alleged lack of stimulus in Europe in general, and in France in particular. The argument was that the French stimulus was only 1.4% of GDP, whereas Obama’s was 4.8%. Well, sure, but the methodology behind the semantics was completely in error: more than two-thirds of the Obama stimulus is not a stimulus at all, by European definition. Stimuli like that have been legally imposed in Europe, for decades. (The IMF has very different stimulus numbers, with a different methodology removing the economic stabilizers, the USA number is then 2% of GDP, Spain 2.3%, Germany 1.5%, UK 1.4%…)

Ten percent, 10%, of the Obama “stimulus” was a total cheat (the AMT tax relief belongs to the general budget). Of the rest, half was a zero sum game to compensate partially the collapse in local States’ spending, and the other half an attempt to imitate ephemerally a small of the automatic stabilizers that are in the French budget on a permanent basis. When one has done the math, the true stimulus of the USA comes out smaller than the French stimulus. Moreover, since States’ spending is collapsing and the Obama “stimulus” has spending reductions, the entire contraption is deeply flawed and functions often as an ANTI-STIMULUS. (Because straight tax rebates when people are desperately saving is only money that disappear from the system; by definition, the stimulus ought to be about creating jobs, not creating savings. In the European Union, a 15% minimum Added Value Tax is imposed; that feeds the automatic stabilizers, free education, heath care, research, and other mandated government activities; the point being that in this recessionary context, rebates feed the recession, whereas taxes can feed economic stability.)

In comparison, the French stimulus was launched in December 2008, when France was not yet in recession (although the USA already was). The French stimulus is already feeding thousands “shovel ready” projects, and is expected to be at full power in April. It includes work on four very high speed, 250 mph, electric train lines. “Weatherization” dear to Obama, is not in it. “Weatherization is mandatory in Europe, thanks to enormous energy prices, and other laws.

Finally the honorable Paul Krugman was rolled out, with a blistering editorial: “A Continent Adrift”.  Tell us more Paul: “Europe is facing at least as severe a slump as the United States, yet has failed to respond effectively to the downturn.” Because the USA, with its failure to nationalize its grotesque bank holding companies and to fire its corrupt managers, has responded effectively? In the only (half) French bank that was nationalized, Dexia, the management was fired within an hour of getting the money.
***

WHEN KRUGMAN TURNS ANTI-EUROPEAN:
Here is Paul Krugman going ballistic: …”the situation in Europe worries me even more than the situation in America. Just to be clear, I’m not about to rehash the standard American complaint that Europe’s taxes are too high and its benefits too generous. Big welfare states aren’t the cause of Europe’s current crisis… The clear and present danger to Europe right now comes from a different direction — the continent’s failure to respond effectively to the financial crisis. Europe has fallen short in terms of both fiscal and monetary policy: it’s facing at least as severe a slump as the United States, yet it’s doing far less to combat the downturn. On the fiscal side, the comparison with the United States is striking. Many economists, myself included, have argued that the Obama administration’s stimulus plan is too small, given the depth of the crisis. But America’s actions dwarf anything the Europeans are doing….a major reason for the lack of fiscal action: there’s no government in a position to take responsibility for the European economy as a whole. What Europe has, instead, are national governments, each of which is reluctant to run up large debts to finance a stimulus that will convey many if not most of its benefits to voters in other countries.”

Sorry? Europe is doing nothing? Who has been nationalizing banks? Did the USA nationalize banks? Britain, Ireland, Belgium, The Netherlands, Luxembourg and France nationalized several banks. Germany, after claiming it would never do such a thing, because it was a reminder of the 1930s, spent 100 billion Euros trying to recapitalize “Hypo Real Estate” (which, as its name indicates, is partly owned by a US investment group), and is moving towards nationalization.

Maybe America’s actions dwarf whatever, but America is at the bottom of the canyon that it dug by itself. Even after the recent flurry of American activity, the total government spending of the USA is clearly inferior to that of Germany and Britain (which are above 45% of their GDP). France’s latest number is 52% of GDP. So the claim that “Europe has come short in fiscal policy” is fully contradicted by the facts. In very measured terms, and all due respect for the jetlagged Krugman, it’s a big misrepresentation. 

After hammering his counterfactual fiscal “fact”, Krugman bemoans the lack of European unity:

You might expect monetary policy to be more forceful. After all, while there isn’t a European government, there is a European Central Bank. But the E.C.B. isn’t like the Fed, which can afford to be adventurous because it’s backed by a unitary national government.

It does not come to Paul Krugman’s mind that Europeans believe more in saving than spending money they do not have (credit). Then the honorable Paul, having jetted to Spain to provide advice, succeeds to completely self contradict himself in a few sentences:

“…there’s a deeper problem: Europe’s economic and monetary integration has run too far ahead of its political institutions. The economies of Europe’s many nations are almost as tightly linked as the economies of America’s many states — and most of Europe shares a common currency… But  — a government that has already moved to share the risks of the Fed’s boldness, and will surely cover the Fed’s losses if its efforts to unfreeze financial markets go bad. The E.C.B., which must answer to 16 often-quarreling governments, can’t count on the same level of support. Europe, in other words, is turning out to be structurally weak in a time of crisis. The biggest question is what will happen to those European economies that boomed in the easy-money environment of a few years ago, Spain in particular.For much of the past decade Spain was Europe’s Florida, its economy buoyed by a huge speculative housing boom. As in Florida, boom has now turned to bust. Now Spain needs to find new sources of income and employment to replace the lost jobs in construction. In the past, Spain would have sought improved competitiveness by devaluing its currency. But now it’s on the euro — and the only way forward seems to be a grinding process of wage cuts. This process would have been difficult in the best of times; it will be almost inconceivably painful if, as seems all too likely, the European economy as a whole is depressed and tending toward deflation for years to come. Does all this mean that Europe was wrong to let itself become so tightly integrated? Does it mean, in particular, that the creation of the Euro was a mistake?”

Asking whether a tight European integration, this chronological side of Adolf Hitler, is justified, indicates that even the best of Americans know way too little history. Or at least not enough to draw the correct precautionary and moral conclusions. Plus, it is a contradiction to bemoan that Europe is both not unitary enough, and then to claim that national interest rates should be freed to jump all around nation by nation, as the natives see fit, on the spur of the moment. But, what are contradictions, when Europe is in the way?
***

WHY EUROPE WILL PERDURE:
When the nations of Europe had their own currencies and fixed their own interest rates, not only there were wars, but there were also cycles of bust and booms, as countries were competing with each other this way or that, voluntarily undermining their own currencies to encourage their industries (and the later led to the former). Why don’t we do the same in the USA? Some states in the USA are doing much less well than others, so why does not Krugman give them their own currency, and their own interest rates? That would dissolve the USA, but Krugman does not give us any argument against that.

The financial crisis simply shows that Europe has to be integrated more. Europe, and the Euro, just the same as the USA, and its Dollar, were built for more fundamental reasons than satisfying local potentates. Actually they were built precisely to prevent the local potentates from playing with interest rates and currencies. The idea was that preventing them to have their own currency diminished the powers of the local potentates (“potentates” derive  from potentia, power). The basic idea was to weaken local potentates so much that they could not wage war against each other. In Mexico, there is a quasi civil war, because the drug lords, the new local potentates, have become all too strong.

The Civil War of the USA was all about how much power the local potentates could have. The States of the South wanted to secede, and Lincoln instead decided to use force to maintain the Union. That killed and wounded about 3% of the total population. Out of a total population of thirty-one millions, 625,000 were killed and another half a million seriously wounded. Now Lincoln is viewed as a hero because he had the courage to use an ocean of blood to preserve the union by force (canceling slavery was only an afterthought, a strategic trick the British had inaugurated during the Revolutionary War).

That Spain and others will have somewhat difficult years ahead, sure. But Spain, Greece and Portugal are doing better than under the fascist regimes, inspired by the USA, that the European construction kicked out. Spain had an enormous boom for decades, and now, well, a readjustment is called for. No big deal. Hopefully it will correspond to an economic switch out of tourism and construction. The Spanish government is keen to clean up the coast from too much concrete: instead of frantically constructing, a bit of deconstruction is called for…

The French stimulus is not less than the Obama true stimulus, and kicked in early (2008). True the German government has been slow and self contradictory, but it’s a coalition government arguing with itself, and several elections are coming within months. Now Germany mostly agrees with France on everything, which is all that truly matters to find European solutions to European crises.

INFLUENTIAL AMERICAN EDITORIALISTS ARE SUDDENLY SCREAMING AGAINST EUROPE, SO THAT THEIR PRECIOUS PLUTOCRACY CAN REIGN AGAIN:
The upper layers of the USA are an incestuous mixture of money, politics, and propaganda, deeply entangled with each other. It reminds one quite a bit of the similar mix in the upper layers of the Roman republic, and one knows how that ended.

Both Germany and France want to regulate financial markets heavily. The last time they were in this situation, with a US made disaster on their hands, was the early 1930s, and the USA had lost control of its economy and its mind. France and Germany remember very well how this all ended. It ended with Hitler, a mentally deranged piece of social wreck that was elected to the highest office. It is this author’s informed opinion that the plutocrats of the USA were perhaps the most important force that made Hitler all he could be.

Thus Germany and France want rigor now. And so the USA would rather talk about something else, like Europe having a bad hair day. Why? Because New York and London profited enormously from their giant Ponzi schemes. New York and London would rather like to refurbish these financial schemes that made them rich without much effort. If New York and London could not leverage themselves anymore by abusing the rest of the world with colossal dishonesty, these two cities may have to depend upon other industries than “finance”. They will have to work harder for their riches. Now a lot of opinion makers live and work in the New York area (including the afore mentioned Cohen and Krugman, and some hedge fund fanatics such as Thomas Friedman, the well known pro-invasion propagandist of the New York Times, three times “Pulitzer”). Such inhabitants favor their hometown. The concentration of media within miles of Wall Street make them loving to Wall Street.

Well, it will not happen. Not anymore. The world is seriously not amused by American shenanigans this time. The editorialists of the USA are barking in vain.

The crisis in Europe should not be overestimated: some banks failed spectacularly, but many French banks had multi billion dollar profits in 2008, and real estate in Lyon is still peaking (!). Although governments are heavily in debt, French deficit this year is expected to be 5.5% of GDP, whereas that of the USA is expected to be 12%. But the overall debt of individuals is much lower than in the USA. Nationalizations of the European financial institutions that were under capitalized the most, should allow the credit machine to get restarted more smoothly. Americans do not understand that credit is much less important for European individuals. Europeans are free individuals that save and own, not serfs living in bondage, giving gages of death (mort-gages) to banks.  It is always cheaper to provide oneself with capital from savings than from credit. 

The greatest danger to Europe would be an attack against the European construction. It will not happen, but countries in Eastern Europe will have to learn that their boss is not in Washington. I would not call that a crisis. I would call that a solution. And getting to know the truth of history. It was not France and Britain that gave Eastern Europe to Stalin. It was Washington. Divide et impera.
***

Tyranosopher
https://patriceayme.wordpress.com/
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Addenda: 1) Krugman is in Spain, advising. But if it is to advise to get out of the Union and the Euro, he would provide Spain with a typical self serving American “advice”. Krugman would then be to Spain what Summers is for Obama, or eminent American academics were to Russia. In the early 1990s, the Russian government, with colossal naivety, brought in various famous economists of the USA for advice (Sachs of Harvard, etc.). The self serving “advice” of the Americans was to go plutocratic, in other words to build a money Mafia like the ruling CEO-investment bank class of the USA.

Russia went ahead, and soon was the property of tycoons associated to the Anglo-Saxon plutocracy. It was a disaster for Russia. Russia entered a depression: the median income collapsed, so did life expectancy. Soon many Russian plutocrats, prosecuted for theft, fled to London where the local plutocracy welcomed their billions, and called them freedom fighters. (Putin is still trying to get out of this rabid infection of Anglo-Saxon style plutocracy, with dubious, but probably unavoidable methods…) What the plutocracy of the USA wants, and those that support it want, is more people like them, worldwide. Because the American plutocracy will long stay the senior partner, it augments its power base, and its imperium, to have obedient servants and collaborators, worldwide. 

2) Long ago, in the 1920s, Wall Street and associated plutocrats of the USA organized and financed German remilitarization, and German military reindustrialization, and the Nazis themselves (these are not words in vain: Wall Street created IG Farben, the world’s largest chemical monopoly, for example; Wall Street armed the Nazis, smuggled their weapons, etc.). Without enormous help, aiding and abetting from top US plutocrats and industries, the Nazis would have gone nowhere: the German military would have snuffed them. Instead the Nazis became all what they could be, thanks to the plutocrats of the USA (this is explained in detail in several essays on Tyranosopher.com).  

3) Some will say that the strident argument that Krugman makes about Europe not stimulating enough is only fair. The idea being that the USA makes the effort of spending while Europe, or more exactly the Eurozone, stands back, and counts its Euros, selfishly avoiding to get into debt much further. 

As I said above, this argument ignores the fact that the French government has already maxed out at governmental spending equal to 52% of GDP. But there is another argument buttressing this one.  Geithner has barked against China keeping its currency too low (according to The Economist it may be too low by 3%, nothing to bark frantically about…). That is ironical, in light of the governmentally controlled short term interest rates being at 0% in the USA. Japan is also at 0%, and Great Britain at .5%. In comparison the Eurozone interest is has just been lowered at 1.5%, which is relatively gigantic. What the USA, japan and Great Britain are doing is called quantitative easing, creating huge quantities of Dollars, Yens and Pounds. So the Euro climbs relative to the other currencies, and this destroys Eurozone exports (German exports were down 20% year over year in January, while French industrial production fell more than 15%). The European Central Bank, the ECB, is focused on not letting inflation and (related) overall debt get out of control. Sarkozy has been critical of ECB’s chief Trichet. Trichet was tight as Banque de France chief. But, just as the Fed could not lend money it did not have in the 1930s, by a law that was changed since, the ECB, by statute, and differently from the Fed, is supposed to worry only about inflation, not the overall economy.

Thus Krugman should complain about the ECB, first, and not so much about stimulating, which is already maximum. But Trichet has the reputation to be very serious and well informed, and he is supported by the chiefs of the national central banks, so may be Krugman does not want to be seen as criticizing such a noble and prestigious assembly of governmental bankers. Such is the trap of respectability…

*** 

NO OUTRAGE IS HIGH ENOUGH.

 

SUMMERS HINTS AT OBAMA’S ADMINISTRATION PLOT TO  GUARANTEE PROFITS TO THE RICHEST OF THE RICH. WHY NO NATIONALIZATIONS, WHY THEY ARE STALLING FOR TIME, AND WHY “THE ONLY SOLUTION IS TO BE UNFAIR”. (Namely to transfer ever more money from the poor to the richest of the rich.)

*** 

Overview: Obama chief economic adviser, Lawrence Summers, came on TV (ABC and CBS). I watched both shows. Summers confirmed in person that the plan of the OBAMA administration was to guarantee a huge profit to the richest people in the USA, under the guise of a bank rescue plan. Since the People of the USA is not quite ready to fall further into this scheme, he, and opinion makers such as Thomas Friedman, have been put in charge to prepare the People for this eventuality.

By contrast in France all top executives of all companies getting any sort of governmental help have agreed to not get any bonuses, even though some of the French banks are making multibillion dollars profits, and even though the help there was forced, not clearly needed, and relatively small.

Summers was asked three times whether the government had asked to give up the bonuses voluntarily. Summers never answered the question.

What is going on? Why are those who made the USA destitute getting hundreds of billion of dollars from taxpayers, whereas those who make billions for France agree to be paid a small fraction of what a TV anchor earns in the USA? Why is the American elite paid astronomically more than the French elite? It is not a question of size: the USA is bigger than France, true, but not so much bigger that it does things that France cannot do. (Besides the European Union, France on a large scale, is nearly twice the population of the USA.)

France is a republic (res-publica: thing-public). In France the government serves the public, or the public goes by the millions in the streets, and screams so loud, the government is forced to hear it. As the Athenians had it, democracy is not just about one man, one vote, with a few democratic institutions added. Democracy is also about one man, one voice. Equally. That is why people go into the streets in France, and why the government listens (besides, Paris, with 16 million people, is the largest production center between Tokyo and New York, whereas Washington is just a government town; if the government of the USA were in New York, it would think differently).

Modern media amplify just the voices of a handful of individuals, and drown the voices of the majority. They are easily bought by the wealthiest to utter the non sense that the wealthiest want the majority to believe. The Athenians of the age of Pericles would have never called that democracy.

The USA is something else. Ever since he made it so that Credit Default Swaps would not be regulated, Summers, the architect of the world financial calamity, has served the plutocracy, just as the plutocracy has served him, and, hopefully, just as it will serve him ever more. Of these beautiful morrows the sinister doom of the USA is made.

The world needs to know this. If the USA cannot be saved, at least other countries should take legal measures and regulations at the G20 meeting to cordon off the USA, contain the infection, and roll back the plutocracy of the USA in its American cage. There it can stink all it wants. Maybe China wants to invest much more in France, a country of laws, rather than ever again in the USA?.
***

Lawrence Summers came on TV today, and he was asked why taxpayer money is used to give 170 million of dollars in bonuses to the very people at AIG that caused the problem to start with. Some particular individuals of the particular division most at fault for the calamity are getting 6.5 million dollars of taxpayer money, in bonuses. 

(This has happened before, by the way.)

It is to “attract the best and the brightest”, replied Summers. Dreamland. The “best and the brightest” caused the worst financial crisis in 75 years? Giving money to the people who caused the problem, giving them ever more money, in gigantic amounts, is what Summers called “THE PILLAR OF THE PLAN”. There he was on TV, saying that was “the pillar”. Sending ever more money to those who should be in jail. Yes, “THE PILLAR”. Not two pillars, just one. One gigantic phallic symbol for the people of the USA to admire and adulate.

Besides giving the money to these crooks because they are “the best and the brightest”, Summers, after saying it is “outrageous”, just for lip service, claimed that another reason to give them huge amounts of money is that “Contracts cannot be rescinded.”

Summers obviously does not know contract law. He actually mentioned there was such a thing, but as he mumbled and stumbled through the concept, he made clear he knew nothing about it. All he knows is that it was supposed to be a good talking point to fend off suggestions that taxpayer money should not be sent to “the best and the brightest”.

Summers obviously never heard of “force majeure” (acts of God): confronted to superior extraneous forces, private parties can pull out of private contracts. This is used all the time, for example in the oil industry (where the contracts are much larger).

Moreover. the legislators, in the democratically controlled chamber of representatives and Senate, have an option to change the law and force the abrogation of contracts.

But of course, not only did the richest give hundreds of millions to Congress, they are promising even more to politicians after they get out (as the example of ex-Senator Daschle demonstrated: Daschle made many millions in a few years, with the drug companies, and so Obama chose him as Secretary of the Drug Companies, with a 600 billion dollar budget, but they both got caught, for once. So Obama said on all channels :”I screwed up!”. Screwed up being caught, or something else? He did not explain. Anyway, good presidential trick, using slang: it deflects the attention from analyzing carefully the outrageous act committed by the new president to being surprised by the unrefined language he used.)

Summers also said he wanted to sell banking assets to private investors who would be “GUARANTEED A PROFIT”. In other words, in the USA, the government is into guaranteeing profits to the richest. With taxpayer money.  Summers does not seem to know that the government of the USA is supposed to represent “We The People”. For Summers, the government’s role is to guarantee profits to rich investors.

How to explain such a behavior? Could it be that Summers is preparing for himself a future, highly lucrative career, when,  those “private investors” he wants to “guarantee the profits” of will reward him? After he left the White House, Bill Clinton was given 200 million dollars by the richest and dirtiest (tin pot dictators, billionaires doing dirty deals with dubious governments, etc.). Why would not Summers want to preserve that system? Why would the “best and the brightest” want to become president of the USA if there were not hundred of millions as reward on the other side?

When Bill Clinton was selected as democratic candidate for the US presidency, he was informed that Rubin, the CEO of Goldman-Sachs, a so called “Investment bank”, would be his Treasury secretary. Goldman-Sachs has directed the politicians of the USA for years. In exchange, they get richly rewarded. 

“Investment banks” were outfits created to turn around the banking act of 1933. That act separated banking from other financial tricks, and limited leverage, in accordance with international treaties. Rubin, with his Assistant Summers, then proceeded to extend to the entire banking system the violation of the Banking Act of 1933, passed in the Great Depression to prevent a return of the Great Depression (namely the rich stealing the poor until the country is broke). Rubin and Summers did this to be able to send the entire money of the people of the USA to hedge funds and private equity under the form of leverage.  The idea was to allow the banks to use tremendous leverage, thus making the Federal Reserve itself a part of the conspiracy (because the Fed, by allowing the banks to create that money, provided the leverage).

Now the system has unraveled, because the fake investments (such as Summers’ Credit Default Swaps) have proven to be fake. The very concept of investment bank is gone, and so is the tremendous leverage (forty times, in total violation of international law). So how do the rich keep on getting richer? Well, by “guaranteeing the profits of the hedge funds and private equity”. Since it’s obviously a very big idea, Summers and his handlers are stalling for time, letting the crisis rot long enough to make the situation so unbearable that the people of the USA will agree to have them have their way.

In the USA, the rich are not just rewarded more, they are adulated, and called geniuses. Government officials who, like Paulson, buy themselves islands, are respected members of the their community. It is difficult for Summers right now, but if he goes through this, he will very rich, and thus very respected. Anyway Obama calls Summers “outstanding” several times a day, that should help.

Then the same major TV news network showed Thomas Friedman, the celebrated partisan of the invasion of Iraq, who explained, smiling, that “the only solution to the present problem is to be unfair”. He said, smiling that there was one trillion dollars of private money out there, ready to come in, it just needs the government to guarantee a return. It probably helps Mr. Friedman that, as a multimillionaire, he probably has millions parked in hedge funds and private equity (thus paying basically no taxes).

In truth, the USA and other government believe that there is 11 trillion dollars in tax heavens. The people “owning” some of these eleven trillions also own the USA, and they direct the government of the USA by promising its officials riches beyond their imagination, when they come out of their $160,000 government jobs. As long as they take the right decisions now.

In France several of the giant banks made several billion dollars of profits each. Societe’ Generale doubled its profits to 2 billion dollars, BNP made three billion dollars… Of profits. In 2008.  The salaries of the bosses of these banks is usually around two million Euros. These are typical salaries for top French executives (such as Goshn, the boss of Renault-Nissan, or the boss of Total, the oil giant).

 
These highly profitable private French banks are not to be nationalized, of course, and they are independent of the government. Nevertheless, with an eye to the crisis, the French government interfered and insured all deposits in banks without limits (no limits: 100 million accounts are insured). Prompted by the French president, all the bank executives, and other top executives (such as Goshn) agreed not to take any bonuses this year. Total is paying a huge voluntary tax.

Traditionally these French banks executives receive compensations of the order of 1/20 of their colleagues from the USA. BNP, the largest private bank in the Eurozone, is big enough to gobble Citigroup.

The rest of the world is looking at the plutocracy of the USA, and just cannot believe it. Plutocracy means the power of evil rich. So much power they have: first they took all the depositors’ money, and gave it to their friends, or themselves, operating as hedge funds, or private equity. Now they do the same, directly by sucking up taxpayer money. Differently from Madoff, they operate their Ponzi scheme in plain sight. In France, the whole country would go on strike, but, in the USA, well, it’s literally, business as usual…

How could there be an end in sight?
***

Patrice Ayme
http://patriceayme.com/
***

 

Addendum: Some are bound to say that I exaggerate. How could Obama, supposedly from the left, have nominated as main adviser the person that dismantled the “Banking Act of 1933”? ( The Banking Act of 1933 is nicknamed “Glass-Steagall” according to its sponsors, Glass was a Senator, and ex-Treasury Secretary, and Steagall was a Congressman.)

It was widely viewed in 1933 that the banks had caused the Great Depression, that bankers were “banksters”, as President Roosevelt called them. Roosevelt came in, and closed all the banks by executive order. For four days, as he cleaned house. Roosevelt was a man of strength and belief.

Summers was Treasury Secretary in 1999, under president Bill Clinton. He organized the repeal of the Banking Act of 1933, completely deregulating the banks (in violation of international treaties on capital requirements). Here it is from a 1999 New York Times article:

“Treasury Secretary Lawrence H. Summers said in an interview, “At the end of the 20th century, we will at last be replacing an archaic set of restrictions with a legislative foundation for a 21st-century financial system.” The measure, Summers added, “would provide significant benefits to the national economy.”

This is a pattern. Fast forward to mid March 2009, ten years later. In remarks to a private dinner at the U.S. Chamber of Commerce on Wednesday, Summers was even blunter, according to attendees. Summers said this: “Before, we had too much greed and too little fear. Now, we have too much fear and too little greed.”

Greed is back, greed is good, etc. Summers is the real life Gordon Gekko, of the movie “Wall Street”. But Summers is real, and his powers are immensely greater.

As most people have lost immense wealth, the richest of the rich, no doubt forewarned, are holding back, ready to buy the world on the cheap. Summers knows this perfectly well: on Friday he smugly announced that 50 trillions (50,000 billion dollars) had been lost world wide (half of the world entire value, including a lot of retirement funds). Meanwhile Summers is ready to transfer the remaining assets to the richest of the rich: 11 trillion dollars in tax heavens should help!

***

P/S (March 17): AIG paid bonuses of $1 million or more to 73 employees at its financial-products division, including 11 who no longer work for the company, New York Attorney General Andrew Cuomo said. The top 10 bonus recipients received a combined $42 million.

PROGRESSIVE: MORAL, SUPERIOR, TRADITIONAL.

PROGRESSIVISM IS THE FRANK ESSENCE OF THE USA. ANYTHING ELSE IS A CONTRADICTION.

*** 

Abstract: Progressivism is the essence of the most successful civilizations. Progressivism was the piece that the Greco-Roman civilization did not have enough of, so it degenerated in slavery, intellectual and political fascism, unending war in the Middle East, theocracy, chaos. But progressivism was the strategy of the Franks, and its superiority explains why the Franks replaced the Greco-Romans. Progressivism grew moral progress, and, in turn, from it, it blossomed ever more. Progressivism is why the West, including the USA, has succeeded. So far.
***

However, the USA has lost its way. Decades of deliberate philosophical obscurantism and anti-intellectual propaganda by the plutocracy did it. It is time to apply the antidote, the philosophical source of Western civilization. Hint: it is not crucifixion, and it is not slavery. Nor is it found among merchants.

A plutocrat, Bernard Madoff, stole 65 billion dollars, and got caught. After a few months hanging around his seven million dollars penthouse, enjoying his 900 million dollar stolen fortune, justice was finally served, and he went to jail. Celebrating, the financial markets rallied 10%.

This is no accident: plutocracy unchained, stealing hundreds of billions, even trillions, in full view, is bad our civilization, and bad for the markets. When people discovered that hedge funds and private equity could keep on feeding at the trough of taxpayer money, a form of officially sanctioned theft, they understood that the game was rigged. So they rushed for the exit. Of course it helped the financial collapse that the hedge funds were given full latitude to keep on doing naked shorting, and on a down tick, with president Obama’s apparent benediction. (Such conspiracies against the public had been outlawed during the Great Depression of the 1930s, but, starting with Summers and then Bush, they were reintroduced, because it was felt that the task of the government was to serve the oligarchy.)

Our materialistic civilization is founded on technology and science, which are supported by a view of morality where man is free, or, as they used to say, Frank.

The USA itself was formed from a confused rivalry of Britain and France, then the most advanced and powerful empires in the world. The two countries themselves had been created by the Franks, seven and thirteen centuries earlier, respectively. The philosophy of the Franks, progressivism, is pervasive in the spiritual fundaments of France and Britain. The Greco-Roman civilization had not been guided by that philosophy, far from it.

Socrates’ philosophy was all about a better oligarchy, there was little progress. Whereas the Franks freed the slaves: that was progress.

How did the reign of progressivism come to be?

Some French love to evoke their “ancestors the Gauls”. Well, that is funny, but obviously there is got to be a good reason for the country to be called France (“FRANCIA”), and not Gaul (“GALLIA”). The French may mostly have Gallic genes (and also German and Semitic genes), but what matters is where the philosophy of France came from. That philosophy came from the Franks, not Plato. Here is the basic story:

1) The Gauls were Celts, and the Celts invaded all of Western Europe. They came from the northeast: those Celts were Germans. This became clear when the Romans got into Belgium, and were surprised that Germanic tribes attacked them to help their fellow Celts. The Celts were very fierce militarily: they invaded from Ireland to Anatolia, seizing Rome on the way. The Romans took 350 years to get even.

The name “Gaul” comes from the Romans making fun of the Celts by deprecating them as “cocks” (“Gallia”). Cocks are nonavian dinosaurs who are combative, not too bright, except in appearance, diminutive, loud and into self advertising. The Romans saw these characteristics in the Celts. The newly denominated “Gauls”, with a great sense of humor, did not mind flaunting as qualities what the Romans saw as defects.

To flaunt them some more, they made the point to keep their hair long (“Gallia Comida”), spiting the Roman artifice to keep hair close to zero, to facilitate hand to hand combat.

2) Celtic society, for all their technological innovations (pants, barrel, Gallic reaper, tall ocean going sail ships) was led by an oligarchy and a theocracy (the “Druids”). It mixed a mild plutocracy with a hysterical theocracy.

Writing existed, but was limited to the Druids. Human sacrifices in horrible fires were lively performances (that disgusted the Romans, especially when they got themselves roasted). Elections happened but power tended to be hereditary. This Celtic society was very far from the egalitarian and mass educated Roman republic, with its millions of voting citizens.

When the Romans came in, progressive Gauls welcomed them. Then Caesar, anxious to emulate Alexander, in spite of his advanced age, seized three quarters of Gaul, all of Gallia Comida, by force. There was a massive war. Caesar won, but he had exceeded orders and was called back to Rome for war crimes. Interestingly, that was it: Gaul would not revolt again against Roman civilization (although it did against bad emperors). Instead, apparently happy to have embraced superior features of the Roman civilization, a Gallo-Roman society thrived, and was soon richer than Italy.

3) The Franks were in a league by themselves. They were maritime Germans, Dutch, actually, primitive, but used to trade along the rivers. They were all about progressivism, to achieve superiority. As the Gallo-Romans before them, they embraced the progress Roman civilization brought. Roman lawyers (probably Roman army generals) wrote the law of the Franks, in original Latin, the “Lex Salica” (Salica, from salt, the sea…). Formidable warriors, the Franks played Viking for a while, raiding estuaries and rivers of the Roman empire, all the way into Iberia, while fighting and cooperating with elements of the Roman army. After fighting Constantine, they made a pact with him, and gaily helped him conquer the entire empire for himself.

4) The Franks were clearly latently anti-Christian, probably because, having helped Constantine grab power, they knew that Christianity was just a sham, a fraud, an instrument for acquiring more power. Later the main general of the Roman army, Argobast, a Frank, went to war against Constantius II, Constantine’s son and sole emperor of the Romans (circa 350 CE). Argobast opposed Constantius II’s fanatical Catholicism. Argobast was defeated, by a miracle, of course. But soon Frankish generals and their children were all over the empire. Soon the entire empire was Christian. The Catholics proceeded to physically eliminate all the other Christians, all the Neo-Platonists, most of the Jews, all the thinkers, the books, etc. The Catholics eliminated all, but they could not touch the Franks. The Franks flaunted their paganism, but they were the strongest element of the Roman army (Clovis’ father was buried in the immensely expensive Roman imperial purple, which can only mean he had the rank of imperator in the Roman army).

5) At that point, the Roman empire was a total mess. Starved of revenues, the government was ever weaker. To compensate, it got ever more fascist, and ever more theocratic. In the “Occidental Part”, the bishops tried to govern. In the Orient, Caesaropapism reigned: the emperor was playing head of the church. Christianism flew from church to church, wings drenched in blood. An example: emperor Justinian’s rabid Christianism brought tremendous suffering and destruction to most of the Orient, holocausting entire regions from religious hatred, opening the way to the Persian armies, and then to the Arabs’ astoundingly ferocious little army.

Having colonized a sizable part of northern Gaul with their farmers, the Franks, whose population was growing fast, finally made their move to clean the mess German invaders and Catholic fanatics had made of Gaul.

From their trading past, having interfaced with roughly all the actors, they negotiated with everybody. The rest, they chopped their heads off. They declared themselves Catholics, and soon fabricated a new society on a basis that kept only a reinterpretation of the best from Catholic philosophy (”love your friends and family, and as many women as you can, ” etc.).

6) The Franks believed in progress, probably because, in a few centuries, while they progressed civilizationally so much, the world fell into their lap, so they naturally deduced that the former led to the later. That was self reinforcing, and they kept going in the same way. Since Germania did not know slavery (at least not to the grotesque extent of the Greco-Romans), the Franks outlawed it, and pushed high technology to compensate for cheap labor.

The Franks numbers were small relatively to the millions of Gallo-Romans, so it was vital that superiority rested on the world’s best weapons, and that included the most ferocious and domineering philosophy they could contrive. Catholicism was made to serve secularism. When the Muslims invaded, the rich, and especially the church, were nationalized, to finance the war, and so on. (It is titillating to see Obama struggle with the concept of nationalization, when it was a no brainier for Charles Martel, Charles The Hammer, inventor of industrial strength Muslim “martyrdom”.)

7) Ever since Francia (now “France”) has been, overall, progressive.

Born as a strategy, progressivism may have become epigenetical in nature. Due to the Frankish conquest of most of Europe, and crushing influence on the rest, it became the core European nature. The Frankish intellectual impact went everywhere, as in the “Carolingian minuscule” most of the planet uses to write with. Any distinction between Francia and Germania is irrelevant, because, well, the Franks not only made central and eastern Europe as one country, but they even created German as a written language. Conquering every single last piece of Germania had been one of the Franks’ main obsessions, it lasted four centuries, and, after they satisfied it, they did not see the need for an empire anymore (Western Franks left Eastern Franks to their own instruments, not even bothering to send them an emperor to elect.).

8] The progressivism of the Franks helps to explain the conquest of Germania: they could, and did present themselves as the advocates of progress, by brandishing their newly fanged version of God. (Something the fascist, fanatically Christian, but non progressive Romans could not do!) The progressivism of the Franks also explains the easy conquest of England by the Duke of Normandy and his French army. They delivered the 20% of the population who were slaves, and Guillaume, Guglielmus Dux Normanniae, set up an intricate and advanced political system, inspired by the Roman republic. Later southern French such as Montfort pushed the parliament back up to Roman power levels (as in the Toulouse Montfort came from).

9) Of course the USA is an addendum to this story. Even some of the most brutal and cynical American ways originated directly from the Franks, who invented them to succeed where the Romans had failed (conquering Germany). The USA inherited the progressivism of the Franks, but undermined it by being too lenient to plutocracy. This later, perverse tradition goes on to this day, as the lamentable story of the giant banks, which were used to leverage plutocracy, demonstrates.

The reason for this weakness is that English America was founded as a plutocracy (that is by the evil rich) in 1608 CE, as the “London company”. The “London Company” used slave labor. Those “servants” lived under terror. They were drawn and quartered if they eloped with the Native Americans. Later real slaves were imported from Africa, burning some alive from time to time kept them in line. Tobacco made English America rich.

So the USA is animated by a self contradiction, and differs deeply from its Franco-British parents (or the rest of Europe, which never officially reintroduced slavery on European soil).

Progressive thinking has been the underlying philosophy of France for more than 15 centuries. It spectacularly abated sometimes, in a vain attempt to achieve control of the rambunctious natives, or during emergencies (such as the Black Plague). Sometimes, the leader was incredibly stupid. Saint Louis is a good example. He was the son of his formidable mother, often reigning queen, a fanatical catholic straight from Castile. Although this Louis IX was all for justice, and progress that way, he engaged in ruinous and criminal crusades against southern French, Middle Easterners, and extreme anti-Judaism.

Progressivism was used as a weapon in the civil war between the various provinces of France and England. The rebellious French nobles who led England, and various huge provinces they owned on the continent, finally beat Paris at its own game, by installing an even more progressive regime. The six centuries of glorified civil that ensued between England and France were not for the best. As they sat among the ruins in 1815, the leaders in France and England finally understood that war between them attacked progress itself, and dismantled civilization. The silly Franco-British civil war was given up. To celebrate, hand in hand, they went to attack China, destroy some of the world best architecture, and then, still hand in hand, invaded Crimea. The mental leadership of Germany, that is Francia, Pars Orientalis, took another few generations to get the message that the European civil war and division was over.

The case of the rambunctious child of France and Britain, the USA, is not clear. To have been founded four centuries ago as private equity using human flesh for leverage does not help. Intellectual and emotional habits were then formed that Europe tried very hard to quit for centuries, if not millennia.

Like Germany when she was going the wrong way, the USA tends to insist it is different, and its definition of “progressive” tends to involve military technology unchained, primitive philosophy, full speed backwards, and exuberant self glorification to the point of ignoring all and any instruction from other countries, or history itself. Or at least so it was before the USA came under Obama’s merciful skill and tender care. And so it was, before the USA discovered the hard way that the oligarchy leading it is a corrupt plutocracy that led the entire planet astray, and made it closer to a banana republic than to a leading European democracy.

Under the Greco-Romans, the top civilization extended from Scotland to Mesopotamia. Unfortunately under general fascism boosted by diabolical Christian terror, progressivism was given up, and the few surviving intellectuals fled for their lives.  Persia to the East became more intellectually advanced than the mess Caesaropapism imposed next door. Caesaropapism became Caliphism, that Islamism with the exact same consequences: mental stagnation. The poor Muslims imitated the “Oriental Part” of the Roman empire, all too well. So did Moscow. Advanced civilization retreated to Western Europe, where, under Frankish, Celtic and Germanic influence, and plain lack of influence of Roman fascism, Christianism became a tool rather than a soul, and progressivism reigned.

Progressivism is the essence of the spirit of Western civilization. Although deeply influenced by what happened before, it is profoundly non Greco-Roman, and non Judeo-Christian. The Franks abstracted this by claiming their own ancestors escaped from burning Troy, ready to form a free, non sexist society.

We need to escape back to the future, as they did.
***

Patrice Ayme

***

 

Addenda: 1) The FBI conceded in early March that it had 530 Madoff-like (big fraud) enquiries ongoing. Another large fraud surfaced, around 10 billion dollars, from Sanford Investment. The president of Ecuador claimed the CIA was involved. Unsurprisingly, Sanford was not targeted by the FBI. the rot is deep.

***

2) An American friend made fun of my assertion that Western Europe had outlawed slavery, by claiming he was “serfing” the Internet. His idea being that serfdom was a form of slavery. This is a popular sentiment in the USA, because it allows Americans to claim Europeans were slave masters too, they just did not figure it out yet.

Well, first, there was no racial component in serfdom.

Second, serfs could not be sold, and were not owned. Families were leased a piece of land divided among villagers according to the numbers of capable hands. Some days of the year, the entire production went to the local lord. In exchange the lord had duties: defense, police, judiciary, etc… Some serfs resented farming, and fled. After 30 days, if not caught, they were free of their obligations, for life. As the cities grew, serfdom became ever more irrelevant and was formally on its way out by 1,300 CE (it was officially outlawed by the French revolution, but it had disappeared already by 1500 CE from France, and 1574 CE in England; the story in Eastern Europe was different (“later serfdom”), as usual, for some of the reasons quoted above next to the word “Moscow”; by the way, Christianity was very friendly to slavery: bishops were some of the biggest slave owners around 400 CE.) 

THE FINANCIAL CRISIS IN A NUTSHELL.

 

BANKING BELONGS TO CIVILIZATION, BUT SUMMERS DOES NOT.

There are the banks, the bank holding companies, the derivatives, and those who own the later, in particular the hedge funds. The banks are crucial to the economy and Western civilization. They have two basic functions: guarding people’s money and leveraging it to extend credit. These two functions define what banking is as an institution of civilization.

In the last decade the money manipulators of the bank holding companies took all the money deposited inside the banks to make unregulated bets on contracts between very rich private parties. These bets had nothing to do with the economy, and were not part of the banks’ fiduciary mission. Those contracts represented no value whatsoever. They were unregulated promises to reimburse defaults in various payment streams.  Some of these promises were outright ridiculous, like promises to reimburse private parties if the governments of the USA or of the French republic were to default on their bonds (presumably after nuclear war). Other of these unregulated promises were to reimburse mortgages, if those defaulted. As millions of mortgages went down, none of these promises could be fulfilled.

This “Credit Default Swap” (CDS) system was set up by Larry Summers, Obama’s chief economic “adviser”. In 1998 Summers, then Assistant Treasury Secretary, refused to regulate it. He vociferously opposed the Commodity Futures Trading Commission (CFTC) when the later tried to regulate the CDS. Now Summers is telling Obama that, if they just wait “a month or two”, housing prices will recover and Summers’ system will be fine: the CDS will have value again, hence the bank holding companies, etc.

Civilization is crashing as the world waits for Dr. Summers’ astounding latest brainwork. Last time, he destroyed the banking system as a civilizing institution, now he is taking on the world economy, strangling it to death like the obscenely fat Jabba the Hut in Star Wars. Meanwhile Dr. Summers made a remarkable stint as Harvard president during which he advertised his opinion that women were mentally inferior to men in all sorts of way (the head of the CFTC Summers screamed after was a woman, naturally).

The truth is this: housing prices may recover in 10 years. Not sooner.

The banks need to be able to recover their institutional place in civilization right away. Every single day that passes with the credit system not operational poses a grave strategic threat to civilization. It is not just that Islamist radicals will point out that free market capitalism does not work. As the world economy collapses, very dangerous political disruptions around the planet happen. The parts of the world more in need of development, the poorest and the most fragile, are the most affected. People are already dying.

For a reminder, the Nazis had absolutely no traction in Germany in 1929. Then the “Great Depression” crashed world commerce. Germany (and France) were innocent bystanders (the bubble had originated in Britain and the USA). The German economy crashed. In 1932 the Nazis assassinated more than 10,000 Germans, and were pulling one-third of the electorate, more than anyone else. After a second election gave the same result, Hitler was named Chancellor in January 1933.

This time is different. This time, dozens of countries can make nuclear weapons. Someday it may be obvious that Credit Default Summers brought scorching summers of thermonuclear suns.

The statesmen of the right (James Baker, Lindsey Graham, Alan Greenspan) understand this, the extreme danger of all this. They have courageously called for (of course temporary) nationalizations. The idea is to yank the banks away from the predators that suck them dry, yank them away from the bank holding companies, yank them away from the derivatives and the hedge funds. Then the banks will be free, and free to extend credit. Since they have enormous leverage, just freeing Citi and Bank of A, and endowing them with as much capital as AIG, would free two trillion dollars of potential credit. Amazingly, those statesmen from the right criticized Obama from the left.

Many, if not most, or all, of the Credit Default Swaps should be declared null and void. The CDS were never legal tender anyway, so why is Obama exchanging them against legal tender? Taxpayers are drained of substance to pay extremely rich parties, some of them private, some foreign government. These are the greatest transfers of money from the poor to the hyper rich ever seen, and there is no accounting that “We The People” can see. The US government has obstinately refused to say who the money was going to.

What are these ‘hedge funds” and that “private equity”? They are outfits using tremendously leverage, in other words, tremendous amounts of money the bank holding companies have given them, to “invest” in various tricks. Many of these tricks were made unlawful during the Great Depression, because they had been used by the hyper rich to get richer while driving most people to misery, and destroying the economy. During the last 15 years of Clinton, Rubin, Summers, Geithner, Greenspan, Bush, and their various republican cohorts, the laws of the Great Depression protecting people against the richest thieves were removed. Guess what? The hyper rich are back, and they want all the blood of the economy. And guess what? The great depression is back. Same causes, same effects.

On November 4, 2008, Barack Obama was elected president of the USA. On November 5, 2008, he went to work at a hedge fund. Truly outstanding. But does this have to do with the fact so much taxpayers’ money is sent to hedge funds? Because if not there, then where? Private equity?
***

Patrice Ayme.
***

Addendum: The maximum leverage banks were allowed under international law was 12 times (a regulation of the bank of international settlements). Then the Banking Act of 1933 (“Glass-Steagall”) was repelled (under the leadership of Clinton, Rubin, Summers, and Geithner), and, within a few years, the US government allowed a leverage up to 40 (this allowed to feed the hedge funds, the private equity, and provided the wealthiest of the rich with ever more leverage; now they have to be rescued with taxpayer money, lest they become so poor, the very essence of the social pyramid (the so called “financial system”) would crumble, presumably leaving the People of the USA without leaders).

2) Lawrence Summers, as Harvard president, on the inferiority of women: ”Research in behavioral genetics is showing that things people previously attributed to socialization weren’t due to socialization after all.”

Summers insinuates that, because women are, in the average, shorter in stature and lighter in weight, they come short in “overall IQ”, and “mathematical and scientific ability”. He hides this craftily by talking about the “standard deviation” (probably because well designed tests show no difference between the mathematical and scientific abilities of boys and girls, so Summers weasels out by pointing out most geniuses are males, before swooping back to insinuate most females come short). Here is Summers in his own words: 

“It does appear that on many, many different human attributes-height, weight, propensity for criminality, overall IQ, mathematical ability, scientific ability -there is relatively clear evidence that whatever the difference in means -which can be debated- there is a difference in the standard deviation, and variability of a male and a female population.”

Then, according to listeners, Summers said that women do not have the same ”innate ability” or ”natural ability” as men. Asked later for explanations, Summers weaseled out some more: ”It’s possible I made some reference to innate differences… I did say that you have to be careful in attributing things to socialization… That’s what we would prefer to believe, but these are things that need to be studied.” Which other things “need to be studied” according to Summers? The “innate ability”, or “natural ability” of non-white people?

Why does this matter? Because Lawrence Summers is one the main architects of the US economy and financial system in the last 12 years, if not the most important of them all, and he sees Barack Obama every day, distilling ever more poisonous pseudo scientific mumbo jumbo.

Summers is widely viewed as a genius, influential people listen to him. From my point of view, it is just the other way around. Summers, like the top executives in the top banks of the USA, and AIG, is either immensely incompetent, or immensely corrupt, or both. To go in front of an entire audience of top female mathematicians and scientists and claim that “behavioral genetics” demonstrate they are freaks is neither smart, nor benign. It is stupid, and nasty. That influential people in the USA cannot see this, and just go around singing the praises of the “outstanding” Summers compounds the stupidity and nastiness.

Oh, by the way, let’s not forget to mention that there is NO “behavioral genetics” supporting Summers’ outrageous statements. He made that up (This shows that, when he goes to Barack, he will probably present as hard data things he made up). Also Summers is motivated by anger: his extremely extensive remarks, all about the inferiority of women were made during a “Conference on Diversifying the Science & Engineering Workforce”. So much will to be offensive, in  front of so many female scientists and mathematicians, can only be explained by an ardent desire to exact vengeance. After all, as a woman in attendance pointed out, he claims he is a genius, but he is only an economist. And the worst one, at that. Who caused the world’s worst financial crisis, is the worst. Not all correct thinking is complicated.

***

STIMULATE MORE OR PERISH SOON

 

OFFER WORLDWIDE REGULATION IN EXCHANGE FOR WORLDWIDE STIMULUS AT THE G20 TO AVOID CRUISING TO OBLIVION.

***
Abstract: The Obama administration shows every evidence to not have understood how catastrophic the situation is. It keeps on having a void for a bank policy. The exponential function, the most important function in mathematics, now masquerades as the unemployment number, and it’s nothing that a lawyer can talk around. The existing stimulus, too little, too late, is impotent in face of this tsunami. On current trends, the worst numbers reached during the Great Depression will be seen again by September 2009, in seven months. After that, it’s bad science fiction. A real, pure jobs stimulus package of a trillion dollars on top of the existing one is needed right away. A deal has to be made with the rest of the G20: worldwide financial regulations in exchange for stimulus and derivative forgiveness. I explain and suggest.

But, with several of the architects of the disaster providing leadership and advice on the American side, it is hard to be optimistic.
***
[This is a complement to Paul Krugman’s March 09, 2009, editorial in the New York Times, “Behind The Curve” (with which I agree wholeheartedly). My original (more compact) comment kindly published by the New York Times is on http://tyranosopher.blogspot.com/.]]
***

The fierce recession of 1982 has often been compared to the present slump. Up to a month ago most economists would evoke 1982 only to declare that 2009 was not as bad. That comparison was unhinged to start with. The recession of 1982 was the consequence of extremely high interest rates deliberately inflicted by Fed Chief Paul Volcker to break the back of inflation. The short term interest rates were brought above 23%. The recession of 1982 was an act of will. Volcker’s will.

This recession is different. It is not an act of will by one man. It is structural, the result of a stupid, erroneous and arrogant philosophy of civilization, long sustained by the wealthy manipulators who profited from it. This recession is a civilizational failure. Thus, the causes of the present recession are much deeper than those of the Great Depression of the 1930s.

Indeed, the Great Depression of the 1930s was just a big bust after a big boom. The big boom was also an act of will, a misguided attempt to support the British (!) economy by friends in the US government, who also liked to see their class make a bundle.

The bust of 1929 got politically and financially mismanaged, and turned into a catastrophe as the US Senate tried to get out of it with a trade war onto the world. The world retaliated, and the USA, at the time the world’s largest exporter, went down hard. Now the population of the USA is more than twice what it was in the 1930s, but the world’s greatest exporter is Germany (this hints to the structural problem).

Thus the present recession is much more serious. It follows from decades of misallocations of economic efforts. It follows from Nixon making health into profit, and Reagan’s voodoo economics. It follows from the decision by Clinton-Rubin-Summers-Geithner-Greenspan and republican cohorts to found the economy on hedge funds and private equity, leveraged out to the maximum by gigantic banking monopolies. To make all of this possible, that happy crowd repealed the Banking Act of 1933 (the so called Glass-Steagall Act). This allowed unregulated Credit Default Swaps and Structured Investment Vehicles, and allowed to take out various rules on short sales, etc. Summers is a fierce defender of that approach to the universe, and saved the Credit Default Swaps from regulation by the Commodity and Futures Trading board in 1998. 

That dismantlement of the New Deal and anti-depressionary measures created enormous social and earning imbalances that made society dysfunctional. The immensely powerful plutocrats were free to escape legislation by sending all sorts of jobs overseas. Concurrently, and even more dangerously, the USA government developed a total disdain for an energy efficient economy by choosing to do the exact opposite of Europe. Instead of energy efficiency, the military budget was cranked up and oil rich nations invaded or threatened to be so. The median salary has been going down for 11 years, since Summers was in power in 1998, which means that this depression has seen already 11 summers.

By unit of GDP, the USA emits more than three times as much CO2 than France: as Rubin and Summers and Geithner were building giant monopolistic banks full of themselves and their friends, the real infrastructure of the USA was left to die. Meanwhile the countries of the EU forced energy prices way high inside Europe to force their economies to become ever more energy efficient. When the world economic boom brought energy prices too high, weakened by years of useless, Orwellian war, the completely inefficient USA broke down spectacularly. It turned out that the financial system was corrupt to the core.

Obama is facing an utter catastrophe. But, he keeps on sending taxpayer money to the flaming wrecks of the abominable bank holding companies and their hidden counterparts. In a New York Times interview on March 6, he informs us that he uses television to watch basketball. I guess it’s more lively than the utter destruction out there.

Then Obama goes to see Summers, who orchestrated the Credit Default Swaps in 1998. Summers has got to be happy: everyday that goes by, more taxpayer money is sent to the counterparts of the few giant institutions who lent all the money to the hedge funds, private equity, etc. So the wealthy people Summers love are getting relatively richer everyday (while, and because most of the People become poorer). Tomorrow the world will be theirs even more than it was yesterday: the dream goes on.

These are not ranting charges; Obama did not reinstate various short sale rules that had been put in to stop the Great Depression of the 1930s. Thus his friends in the hedge funds make a killing destroying the stock market investments that constitute most of the retirements dozen of millions of US citizens have. The same friendly hedge fund managers enjoy their maximum 15% tax rate. Indeed, as Obama insists, he is “not socialist”. is there an adjective for “hedge-fundist”?

Obama is facing catastrophe, but he does not look at the right indicators, or he cannot read them: the unemployment rate is a NON LINEAR curve. One can just look at it, and sees this: it’s clearly a quadratic curve, or an exponential.

Obama does not understand what this means: he knows basketball and law. For science, he has advisers. For economics, he has the guys who caused the disaster in the first place. But he cannot look at the graph of unemployment and realize, as a mathematician does, what it is telling him. The exponential function has not been taught to him. He has probably never solved a differential equation in his life. This non linear graph, totally obviously means that the catastrophe is feeding on itself, that the rate of increase of the catastrophe is proportional to how big it already is. The real unemployment rate is already 15% (and even though most people in the USA need some sort of employment to get health care, so people will accept whatever job in the USA, differently from, say, France, where they get health care, no matter what).

At the present rate of augmentation, by September, the official, doctored unemployment rate should be above 13% (it’s 8.1% now, but it jumped from 7.5%; multiply (.6%) by 7, and exponentiate a bit, to get above 13%). Now one should stop for a moment here. The 8.1% is the so called U3 unemployment measure. By counting officially “discouraged workers” it gets to 8.5%. U3 is not how unemployment was measured in the Great Depression of the 1930s (the unemployment then peaked at 24.75% in 1933, the year Hitler was elected).

Unemployment as measured in the Great Depression of the 1930s was more like U6, the broadest measure of unemployment in the USA today. U6 is now at 14.8%. The speed, and self feeding of the disaster is such that, by September, Obama maybe facing 25% real unemployment, exactly as in 1933. Probably many in Obama’s entourage will scoff, reading this. But that is the catastrophe that they should try to avoid. It is also the exact catastrophe the graphs point to. It is also the catastrophe that the weakness of their stimulus made unavoidable (just 2% of GDP, once removed the non-stimulus spending in the stimulus).

Interestingly the real stimulus in the USA is arguably of the same relative size as the French stimulus (although France just entered recession, and although France has mandated, very strong automatic economic stabilizers that kick in when the economy goes down, because of huge spending on social services; by the way, the unemployment rate in France is now significantly lower than in the USA; French U3 counts a lot of unemployed that the USA one does not count).

There are many things that Obama could have put in a real trillion dollars stimulus: rail is an example. Light and high speed: there is a huge need for both in their electric version (very efficient rail could save the car companies). Electric rail would provide for a huge number of jobs, and high quality jobs (the technology should imported from France and/or Germany). Car companies could be mobilized to build electric rail under license (making the rail industry “shovel ready”).

Another huge need is to go to a closed nuclear cycle (like France, and now Japan, the UK, Germany). It’s not a question of liking nuclear or not; the open nuclear cycle now used in the USA is an ecological monstrosity, and an enormous waste.

Solar thermal and big wind should be pushed too (this Obama does with the electric grid, to some extent; but his grid spending is less than the French-Swiss-Italian spend on just one of the three giant high speed rail tunnel through the Alps they are now building). In general “green” spending should work, but if and only if it is accompanied by TAXING CARBON (in partricular, fuel). Taxing carbon makes the green market profitable and will mitigate the deficits. All this is big industry, not gimmicky like the Internet (Obama does not find the Internet “reliable”, as I pointed out in the preceding essay, so why does he push it? See “The Audacity of Dope”).

Soon, the way he is presently going, Obama will have sent all the money to his hedge funds and private equity and foreign friends, the mysterious counterparts derivative contracts with the corrupt giant banks, and insurance. There will be no more money, and then what? What would have been achieved? Taxpayers will have tried to make whole some of the contracts that should have been declared unlawful to start with?

It would be better for the would be beneficiaries of said contracts to take their losses, so that the banks can start afresh. Many other countries do not want to see this financial non sense anymore, ever again. So they want to re-regulate the financial industry. Obama should let them have their way, in exchange for a larger stimulus on their part (one cannot over stimulate in the USA, and have other countries profit from the USA stimulus while saving their own creditworthiness).

If this deal is not cut, it’s 1933-1941 all over again. Remember that the USA pulled out of that with the command economy of a world war in 1942. And that happened because the command economy of Roosevelt was too little, too late. That incrementalism of Roosevelt led to a prolonged slump that made the armed forces of the USA so weak, and the mind of the USA so confused, that the USA was unable to stand by France and Britain to stop Hitler in Munich. Instead, many very powerful rogue elements of the USA plutocracy helped Adolf Hitler. People with names such as Watson (IBM), Ford, Bush, Harriman, Texaco, Standard Oil, etc. Many got Hitler’s highest decorationin 1938-39.

This sounds incredible today. But it is as incredible to use a void as a banking policy today. Roosevelt’s incrementalism looks decisive in comparison: after all, FDR closed all the banks for four days, the day of his inauguration on March 5, allowing 1,000 banks to restart with a clean bill of health on March 10. Well, Obama is two months after his inauguration, and, instead of having taken desicive action like FDR, he makes a parody of what serious people have suggested to do about the banking problem (nationalize, fire managment, void the derivatives).

Of great times, great minds are made. High time for greatness!
***

Patrice Ayme
https://patriceayme.wordpress.com/

***

Addenda: 1) My essay on a new method to better avoid catastrophes rolls over Descartes’ “Cartesian method”. It fully applies here: Obama ought to start from the worst possibility: 1933 in September 2009, and then he should do whatever needs to be done to avoid this very unhappy outcome. Making the four largest banks, or pieces there from, fully functional should be number one top priority and that can only go through declaring all derivatives null and void, since there is so much of them.

2) As Paul Krugman says, if the situation deteriorated much further, as seems likely, by the time Obama comes for a real stimulus(instead of pushing, as he did, for his social agenda), nobody will be listening to him. Articles of impeachment may sound more appropriate by September (with the Dow below 1,000, say, and wars flaring around the world). This sounds ludicrous, but is it more ludicrous than Geithner’s plan to wait six more months to see how the insolvent banks were doing? Of course, I espouse Obama’s social agenda. But distant plans should not be the order of the day, when the house is on fire. 

3) Some people, cheaply making points by sounding reasonable have suggested that: “The President recognises that there are big uncertainties and that neither he nor those immediately around him have all the answers. Six weeks in to his term he is on the steepest of learning curves – chiding him (and his team) for being behind the curve does not make much sense.” (as a certain Ed Randall from London put it to Krugman). Cute, elegant, intelligent sounding and definitively nastily dumb: Roosevelt was ready to act on day one, and he did act on day one, as described above. In Obama’s team one finds some of the pyromaniacs that set up the fire, and so on. If it’s all crazy, it’s not my fault. Describing the insane as if they were reasonable may be pretty, but that is just as insane. Folly is always reasonable to the maniacs. It takes wisdom to denounce it.

This entire situation is not just about people getting poorer: the Great Depression was followed by the holocaust of about 3% of the world population (more than 70 million dead, including to up to 6 million Jews). To underestimate the gravity of the slump is a moral fault.

4) I did not bother with the numbers of wealth destruction and production shortfall above (although I had them in mind). They are changing too fast. The official number of GDP shortfall is three trillion dollars (so, just to stand still, one would need three trillion dollars of stimulus). But soon it will be more. Wealth destruction is above 23 trillion worldwide.  

5) Regulating finance heavily looking forward is a no brainier, and it is hard to see how Obama, supposedly liberal, could resist it, when the right wing German Chancellor and French President propose it. The argument has been made that the UK and the USA would suffer most since they were the main dens of financial plotting. But regulations would make a lot of present day derivatives unlawful, thus it could be argued that those saddling the huge USA banks should be declared null and void. Now, some of the money from the derivative “contracts” is owed to Europe, so the Europeans would get their regulations (as they should), but would have to tighten their belts (a bit further). And USA banks would get a huge boost.

 

***

THE AUDACITY OF DOPE

ARE “WE” TOTALLY CONFUSED?

Throughout, Obama has insisted that the Internet was whatever it was that would do it all. He hangs around Google guys. He says that the “Internet was key to economic recovery”. Typically, on Dec 6, 2008, after President-Elect Obama laid out the key parts of his economic recovery plan during his weekly address, he turned to the Internet and told the country that he intends to “renew our information superhighway… It is unacceptable that the United States ranks 15th in the world in broadband adoption. Here, in the country that invented the Internet, every child should have the chance to get online, and they’ll get that chance when I’m President- because that’s how we’ll strengthen America’s competitiveness in the world,”

Ah, competitiveness, beating out the other guy, what would we be without? Obama insisted that: “Better access would spread knowledge, promote entrepreneurship and make this country more competitive globally.”

OK, fast forward to March 7, 2009. Obama was interviewed by the New York Times on board Air Force One, as he was going “home”. “Obama said he did not watch much television, except basketball games. Mr. Obama rode to the White House partly on his savvy use of new technology, and he has a staff-written blog on his presidential Web site. Even so, he said he did not find blogs to be reliable, citing the economy as one example.” Obama persisted:

“Part of the reason we don’t spend a lot of time looking at blogs,” he said, “is because if you haven’t looked at it very carefully, then you may be under the impression that somehow there’s a clean answer one way or another — well, you just nationalize all the banks, or you just leave them alone and they’ll be fine.”

So, on one hand, for Obama, the Internet is both the “information superhighway”, and “spreads knowledge”, but, at the same time, he does not find “blogs to be reliable”. This is a curious juxtaposition: Nobel Prize Laureates write blogs. Actually all the information on the Internet is under the form of some sort of blog. Publications on the Internet, on what’s basically blogs, have replaced the entire scientific preprint system. Is science unreliable, and all one way, or then another? Is a “clean answer” something best avoided?

This brings the question of the coherence of the talking points. Is the Internet “superinformative” or is it “not reliable”?

***

Patrice Ayme
***

Now for two significant technicalities, respectfully addressed to our economically challenged president:

1) Nobody has suggested to “nationalize all the banks”, that would be crazy. Only insolvent banks should be taken over. Thousands of banks in the USA are fine and profitable, with good managers. The credit and insolvency problem comes from the few giant banks saddled with a conspiracy with hedge funds and private equity.

Nationalization is more like taking a shower, removing all the dirt (in this case derivatives and hedge funds). In other words, nationalization of a dirty bank provides with a clean answer. Now, of course, if one does like “a clean answer one way or another” to start with, there is little hope…

For example, the giant Belgian bank Fortis was nationalized by Belgium (Fall 2008). The giant French bank BNP, the largest bank in the Eurozone (around 200,000 employees), a private bank that made 4 billion dollars of profits in 2008, bought, and now owns 75% of Fortis (March 2009). When the republicans of Bush Senior and Reagan nationalized real estate banks with the RTC trick, they kept all and any banks nationalized from three to four months, before selling them. They did this for 747 banks. Most of the credit problem in the USA now would be solved by nationalizing 4 banks, but those banks are used to send taxpayer money to unnamed friends. So those banks cannot function according to their mission as institutions of civilization, simply because there are plutocrats, and they are hungry, and their friends feed them in their hour of hunger.

2) International banking regulations forbid to “leave the banks alone and they will be fine”. And so does USA law. So that was never an option. If Obama comes across someone advising him to do, he would be better off talking to his basketball buddies.

CATASTROPHIC PROBABILITY THEORY.

 

CATASTROPHIC RISK = [SCIENTIFIC PROBABILITY] + [PHILOSOPHICAL PROBABILITY].

***

Abstract: I propose to search for truth in a different way, which is more appropriate to potential catastrophes. Political application of this new method will be life saving, on a planetary scale. The new method, being intrinsically teleological, is closer in spirit to Lamarck than to Descartes. One adds the probability obtained by a refined scientific reasoning, to the probability computed by assuming that all which one can imagine could go wrong did (I call this the philosophical probability, as philosophy does not reason from the mediocre median, but from the exceptional case).

***

Overview: WHY THE RECENT ENORMOUS CATASTROPHES OF WESTERN CIVILIZATION, IN SPITE OF ALL THE SCIENCE?

I promote a new way of establishing certainty which should have tremendous impact on how decisions are taken, especially in politics. There is plenty of evidence that the Obama administration, far from following such a method, is taking decisions the old fashion way, with catastrophic consequences presently unfolding.

Humanity is at the crossroads between a radiant future, and a holocaust of six billion, after ruining the planet within a generation or two. The choice is now. It depends upon finding truth, and plenty of it. Probabilities are a big help to ascertain truth. But the usual method for computing probabilities is fatally flawed, and leads people astray by creating false certainties galore.

The probability computation of a rare event from a complicated theory should be added to a new term, the probability that the theory itself is wrong, multiplied by how probable it is to get the same rare event, should it be so. Running to this new term is how CERN physicists answered their critics about destroying the world with their accelerator. They did not trust their own entangled mathematical theories (GUT, QCD, and General Relativity).

Because a complex theory has a high probability to be false, the new factor should dominate when probabilities are low, the sort of probabilities characteristic of catastrophes. The new factor is conventionally ignored. We suggest to use inverted, catastrophic logic to evaluate it.

The conventional term is built with rigorous mathematics, it depends upon complicated data. It is organized like clockwork. But, like clockwork, it is good only if all its ingredients, empirical and logical, are 100% exact. A tall order. The logic breaks down if a piece is dead wood, instead of refined crystal.

Not only that, but the conventional term can be called the scientific term. Science is common sense articulated around elements of reality that independent probability analysis has established as true, certain, irrefutable. Thus this conventional first term is built only with elements of perceived reality and conventional logic that are well known, and can only lead to a conclusion that is well known.

But catastrophes are not well known before their time.

The new term is built with the philosophical method. One can call it the philosophical term. The philosophical method is common sense, articulated around potential elements of reality that destroy the preexisting paradigms. Those elements of potential reality may have been perceived, or guessed, but they have not been tested enough  to be considered certain. They could have been perceived just once. But these elements, should they turn out to be real, are game changers (an example below are dark comets; famous examples of  game changers in physics are the double slit experiment (Young), the electric current generated by moving magnet (Faraday), and the photoelectric effect (Hertz)). Of course game changers are why there are catastrophes, so the philosophical term is more appropriate to look out for potential disasters.

The philosophical term uses as ingredients what could go wrong, boosted with maximal imagination, and weighing more gravely the riskier outcomes and ominous warnings.

So one may abstract this new approach to risk evaluation with the following equation: risk of catastrophe = [scientific probability] + [philosophical probability].

***

***

CONVENTIONAL PROBABILITY COMPUTATIONS LEAD ASTRAY; THE EXAMPLE OF ASTEROIDS VERSUS DARK COMETS:

Conventional probabilities twist logic perversely. The tendency is to compute what can easily be computed, while ignoring the rest.

An example is given by studies of potential collisions of celestial bodies with our planet. To compute such a probability, scientists naturally look at SITUATIONS THEY CAN COMPUTE WITH. That means asteroids. Asteroids can be seen. Never mind if there is something worse lurking out there. OLD PROBABILITY THEORY MEANS OUT OF COMPUTATION, OUT OF MIND. Asteroids are space rocks on well established trajectories. The reason that they are well established, is that their former colleagues collided with the planets already. The survivors are well behaved, they follow intricate avoidance trajectories in resonance with the planets. Hence collisions with asteroids are rare. Accordingly, low probabilities are found.

Another reasonable approach to estimate collision probability seemed to be to look to the ground, and search for impacts, and estimate how many collisions there have been. The problem with that approach is that it also selects for the same space rocks, because only big rocks can reach the ground. The end result is that two probabilistic approaches come up with the same probability (roughly), giving a false sense of security. Both approaches are biased towards asteroids. One bias was computational (asteroid trajectories can be computed), and the other bias is observational (asteroids can be seen and their impacts can be observed).

The correct catastrophic question is not to ask how often a space rock would hit, but instead how often the earth is likely to be hit by something. So catastrophic logic asks: what could that something be? The philosophical method gives an immediate answer. PHILOSOPHY GUESSES GENERAL RULES FROM RARE EXAMPLES. (Whereas science makes laws from the systematic return of the same.)

In 1983, comet IRAS-Araki-Alcock passed within 300 times the diameter of the Earth. That was the closest known approach in 200 years by such a big object. It was detected only 2 weeks out, because it was so dark. Comet IAA had only 1 percent of its surface active. It was going at a relative speed of 44 kilometers per second, and its impact with Earth would have caused an explosion of 200 million Megatons of TNT. Yes, more than ten billion times Hiroshima. Most of civilization would have been taken out. Preceding statistics had underestimated such an occurrence by at least one hundred times.

Comet Borrelly, visited by NASA’s Deep Space 1 probe in 2001, was found to have extremely dark patches over much of its surface. The enormous explosion a century ago at Tugunska in Siberia, enough to kill 30 million people if it happened nowadays over a mega city, was probably a piece of comet (besides the fact that it exploded at 8,000 meters, leaving no debris, showing it was not very stony, it happened just the day when the Earth was crossing a well known meteoritic stream made of comet remnants).

There is some evidence of a double cometary impact off Indonesia and Norway during the Sixth century, more exactly in 536 CE, with nefarious worldwide consequences (frosts, darkness). A huge trailing fireball over North America 12,900 years ago, scorching half of the continent, may have blazed across the skies too (archeology finds a soot layer, and micro diamonds, continent wide, with massive changes all over).

So this is a case where finding the probability of whatever can be computed has been far from helping. Planners have years to consider any scary asteroid. So they have not been too worried about asteroids. But asteroids are not the problem.

A planetary defense system with warnings of only a few hours, should instead be set up to be ready to handle comets. A thermonuclear armed missile could certainly do away with a Tugunska style impactor, even with an hour’s warning (a 100 meters across cometary fragment would not be dangerous if blown to pieces). In any case, a serious theory of dark comets is necessary. Some scientists (Napier and Asher, 2009) are pointing out that a bit of (philosophical) thinking shows that comets become dark as they age. So many may be lurking out there. This is the correct approach: instead of computing asteroids to no end, thinking outside of the box.

***

THE GREATEST MISTAKES OF HUMANKIND HAVE BEEN PHILOSOPHICAL, NOT SCIENTIFIC:
The best example of a huge philosophical mistake is given by the Greco-Roman civilization. That civilization had decided to develop slavery instead of higher technology, condemning their civilization to no exit. (The Franks corrected that mistake, by outlawing slavery at the outset.)

Another philosophical mistake arose from the young British PM  hostility to the French revolution (which, after all, was just following in the footsteps of the earlier English revolutions, in which Louis XIV of France refused to partake, although the English king begged him to.) That unjustified anger brought 25 years of wars all over Europe, and many millions dead. (British Prime Minister Lloyd George recognized the Pitts for what they were, really the pits, 130 years after the facts.)

The USA has made colossal philosophical mistakes in the last 40 years (many of them reminiscent of the Greco-Romans, because they overemphasized the exploitation of man by man as the major engine of the economy, such as when Nixon decided to make health of Americans a profit center.)

USA president Obama has an armada of scientific advisers (or at least 4). All together they have pushed for a colossal (120 billion dollars says New Scientist) stimulus in science and technology. That is an excellent decision, very favorable to civilization. As long as it has legs (and is not just a jerk to the system).

But Obama has no philosophical adviser. This reflects the deeply erroneous belief that philosophy is so easy, any lawyer can do it.

In truth, it’s the other way around: precisely because it deals with certainties, it is science that is much easier than philosophy. Science looks like magic to the commons only because of massive deficiencies in the educational system.

But scientific progress gets really hard when it needs new philosophy to progress. ANY MAJOR SCIENTIFIC PROGRESS WAS FIRST OF ALL A PHILOSOPHICAL JUMP. There are no exception, “major philosophical jump” is nearly the definition of “major scientific revolution”. And this extends to mathematics: any ultra major mathematical advance was first of all a philosophical jump. (Those who screams too loud at this point may calm down if submitted to the intricacies of the foundations of Quantum Mechanics; in QM, not even light moves at the speed of light: see Feynman’s “QED”, page 89.)

Philosophy is much harder than science, because it is common sense applied to rare or heretofore undescribed events or patterns. It is the hard edge of science, far out. Newton knew this. So did Einstein. Lamarck was the discoverer of the theory of biological evolution, the discoverer of the immense age of the earth (from studying the evolution of clams), and the discoverer of the order of invertebrates, among other things. Although Lamarck was one of the world’s first biology research professor, and although he was very famous during the French revolution, as conservatism returned, he became the butt of jokes, died in misery, and his spirit ate crow for two centuries after that. Why? Because, as a scientist of civilizational class, he had stepped on the philosophical toes of conventional wisdom. And so did his science. Several celebrated British students of Lamarck (Wallace, Darwin) could not restore their teacher’s post mortem reputation. Lamarck kept on being the object of ridicule, until, on Darwin’s 200th birthday, epigenetics came back in force.

Studying philosophy and history or sociology is in full contradiction with the official philosophy of the USA, the fact Americans are supposed to “trust in” and “under” God. So philosophy and generally examining life is done much less, and the incapacity of conducting the most elementary logic reigns. When asked why he does not nationalize the banks, Obama and his entire government revert to the logic of the cave people, or as bin Laden would say: “it’s not our culture, it’s not traditional, we have more than five banks…” Silly juxtaposition, I know, but telling that it can be done. No pride of rationality, no glory in the human spirit: in God we trust, under God we are…

And sure enough, Obama has not reached philosophical clarity in Iraq and Afghanistan. Instead he pursues the exact same mistakes of his predecessor, with renewed military enthusiasm. Why? Because he has not evaluated the enormously high probabilities for the disastrous outcomes the USA is cruising towards, in both cases. How am I so sure? Well, because the catastrophic scenarios in both cases are all too likely and way too stable in their catastrophic natures.

If he wanted to go a good job of reflection, Obama would have to reason catastrophically, and backwards out of the imaginable pitfalls. But he may be unable do this anymore than he has been able to do it with his tiny little bank problem that he is ruining the world’s economy with.

To think that Iraq will not someday take its vengeance and stabs the USA is in the back for what it did, is the sort of naivety those who have never lived history are affected by.

So the USA is sinking in depression, while its army tries to ravage the Middle East. It’s like Roman history never happened. Shame. Remember Julian, Barack, and stop before knowing an ominous fate. Do not ask what God will do for you, imagine what catastrophe will do to your country. Please reason backwards from the worst possible outcome.
***

NO PROBABILITY IS AN ISLAND:
What we just saw is that planetary defense, “Spaceguard”, is oriented towards unlikely asteroids because asteroid theory is easier. Whereas the real danger is Dark Comets. This was pretty obvious ever since the Tugunska explosion. To be alarmed by this one has to use the philosophical method (because it was a one time event, just as comet IAA was a one time event).

Policy decisions and legislation depend on probabilities. Any probability of an event “E” is computed using a reasoning. the probability P depends upon the reasoning, R. P is justified only if the reasoning R is correct. So the real probability of E is not P, but the product of P with the probability p[R] that R is correct. So it’s [(P) (p[R])]. Now there is also a probability that the reasoning R is false and that the event E happens nevertheless. Call that Q. In the end the total probability of E is: P (p[R]) + Q (1- p[R]) = (P – Q) p[R] + Q.

Notice that the more complex the theory R, the higher is the probability p[R] that the reasoning R will be false, and so the probability coming out of such a reasoning R, if it very small, is irrelevant. Some critics have used this approach to claim that the CERN accelerator in Geneva is dangerous. The reasoning R, in the case of CERN, is QCD, plus dubious science such as the physics of black holes. There is no way that this unholy assemblage is all true. Conscious of this, CERN physicists changed tactics, and discarded the basic theory behind their accelerator to answer their critics.

If P is very small (like the probability of blowing up the world by turning on the CERN LHC accelerator), and Q is not, P becomes irrelevant. The probability of the event E is then roughly Q (1 – p[R]). Now a complicated theory like QCD (the theory behind CERN) gives us only a very low probability that R is right. So p[R} is roughly zero too. Everything gets dominated by a probability that has nothing to do with what mathematically oriented statisticians look at usually.

Perhaps intuitively guessing the preceding, instead of playing the game of going into the probably erroneous details of modern physics, CERN physicists argued that, even if the theory were false, the probability of an adverse outcome was insignificant, because the universe has collisions at these sorts of energies, and some million times more powerful, all the time (so the universe would make mini black holes and strange matter, all the time, if they could be made at these energies; since it does not, these energies are safe). This was the correct reasoning: not from a dubious theoretical ground up, but from heavenly evidence down.

***

IF ONE DOES NOT HAVE ALL THE GASES, ONE CANNOT COMPUTE GLOBAL HEATING:

OK, let’s focus minds with a particular case; the probability of a catastrophic outcome for greenhouse warming, turning it into global heating. It has been computed many times. Each time the results are worse, and there is a good reason for that.

What happens every time is that each greenhouse probability computation depends upon greenhouse gases. The most well known is CO2 (Carbon dioxide), the next one, a greater threat, is CH4 (Methane). Another powerful greenhouse gas is H2O (Water), as anybody who has spent a night in the desert will testify. The hotter it gets, the more H2O goes up, and the more CH4 comes out of permafrost, so the greenhouse effect augments non linearly (the more it augments, the faster it augments).

There are other greenhouse gases, found in minute quantities, but they are much more powerful as warming agents. Methane, over 100 years has 25 times the Warming Potential of CO2, and Nitrous Oxide, 298 times. Over ten years, the warming potential of methane is much higher. Incorporating those one gets 15% of the warming. But recently some gases were found that had the Warming Potential of 20,000 times CO2 (yes, twenty thousands times). This changes seriously the probability of massive heating. That is the type of situation where a probability computation fails because of missing ingredients. The reasoning R is not false intrinsically, but with not all the data in, it becomes so.

So what do I suggest? Well, start with what we know that could go wrong. That is exactly the most complete initial conditions to evolve logic from. One does not expect anything less from an airplane pilot. If she started with hoping for the best, and only considered what she can compute, instead of preparing for the worst, and the unexpected, she would not live very long. Nor would we.

***

THE TRAP OF COMPUTATION IN GREENHOUSE HEATING:

As I said above, Spaceguard has been looking at asteroids because asteroids can be computed. The same occurs with “Global Warming”. The IPCC (International Panel on Climate Change) did not incorporate  the possible melting of Greenland and Antarctica in its predictions. This is astounding, because this is the most dangerous proximal effect of global heating. Greenland is all white and sticks low in the blue Atlantic ocean, it does not require much brain power to decide it will melt. If it does, it’s 6 meters of water…

Why did the IPCC neglect this melt? Well, you guessed it: too hard to compute. So the IPCC ignores it outright, like Spaceguard ignored dark comets outright.

The correct catastrophic probability approach is to observe that total melting has happened before, and if it happen again, it would raise oceans by 72 meters. Thus it’s possible, and a great danger, so it should be viewed as an end one wants to avoid. Plus there is also the corroborating danger is that the oceanic level is rising 3 mm a year, faster than the IPCC projections.

***

WHEN IMAGINATION BEATS INSPECTION:

There can be logical flaws in the most precise reasoning. Mathematics is full of perfect reasonings that were found wanting later on. More exactly, by changing the logic R, much more was found later. It was not that R was really “false”. No, R was often found to be incomplete, to rest on unjustified, non explicit steps. (This is why it has been found hard to get computers to check mathematical proofs: they are not that logical, after all!) Overall, mathematical reasonings often worked not just from logic, but also from convention, and tradition.

Example. It was long thought there was no number that, multiplied by itself, would produce a negative number. It was a sort of reasoning by inspection: the probability of seeing such a number was zero, well, because no one had seen one before. BUT INSPECTION OF A BOX DOES NOT MEAN THERE IS NOTHING OUTSIDE OF THE BOX.

Indeed, an Italian surgeon-mathematician, Cardano, came around and solved some equations by assuming during the computation that there were numbers with negative squares. It turns out that there was just a psychological block: if one assumed such numbers with negative squares existed, the whole world was easier to interpret, and, ever since one has assumed that they exist, and these numbers allowed to visualize better electricity, electromagnetism and Quantum mechanics. Mathematicians now view these “complex numbers” as most natural, and physics cannot be done without.

The same happened with curved geometry. Although it is everywhere, and it preceded Euclidean geometry, Euclid did to it what it did to the zero (another Greek invention that had to emigrate to India to be treated well). Euclid had the reasoning bias: he admitted as a worthy object of study what he could present a lot of logic about, instead of making the philosophical jump to realize that he was after small logical fry, instead of really big game.

***

WHEN ERROR CAN BE FRUITFUL, BECAUSE SOMETHING IS RIGHT INSIDE:

False logics can lead to true results. An example is infinitesimal calculus (in its original Leibnitz version). As Berkeley pointed out, the logic made little sense. But certainly the results were true all over, and soon used in engineering. It would take three centuries, and a big advance in logics (model theory) to justify Leibnitz’ infinitesimals directly; Cauchy gave a different rigorous version of calculus, using limits, 150 years after Leibnitz’ initial invention.

An example of a falsehood bringing truth, from Physics: the establishment by Maxwell of the equations for electromagnetism used the hypothesis of the luminiferous ether. That was shown later not to exist. It came to be implicitly understood that the waves created the space, to some extent. Dirac systematized the madness, by predicting spin and antimatter just this way: he imposed the simplest wave equation on electrons, Maxwell-like, but Dirac did not care if he did not have a (non local) space for his equation.

***

TO BE SAFE, USE CATASTROPHIC LOGIC:

So what to deduce for policy making? Well, when trying to compute the probability of some catastrophe, one should start from the worst possible conclusion, and try to find out if there was a way to get, backwards, from there, to the present conditions. That is how the CERN physicists argued: there was no way to get to a catastrophe at CERN, because the universe is trying all the time, and fails to get there, namely to a catastrophe.

In climate research, the opposite is found; the planet Earth was often in its HOT MODE. So it certainly can get there. In that mode, dinosaurs and crocodilians lived in the polar regions. The tipping point out of the hot mode is the concentration of CO2 below which Antarctica freezes over (~ 425ppm CO2 equivalent). This is below a level of greenhouse gases we have already passed, on the way up. So we could have utter planetary destruction in 30 years, we are in mortal danger, and one should bring CO2 emissions to zero right away, because CO2 emissions is how we got there. Instead Obama is proposing to “capture carbon”, a wild goose chase where the mentally challenged nebulously runs around emitting gas, hoping for the best.

In the case of Afghanistan, or the Middle East and South Asia in general, the worst outcomes are absolutely terrifying: they involve nuclear war, and even nuclear world war. That’s bad. But what is worse is that it is easy to build scenarios to get from there to where we are, and conversely. Thus policy searching for better outcomes should be focused on poisoning these scenarios before they can unfold. Much fewer nukes worldwide is an obvious solution.

In economy, the advisers of Obama view as “improbable” that the economic conditions will get to 20% further down in housing prices, and more than 10% unemployment. They define those as “depression conditions”. Of course at the present rate of collapse, they will be there in three months, but they say no, because they say it would be improbable. It is true that it did not happen in the last 70 years, so making a theory from that duration, it can’t happen. (So, having decided it will not happen, they do nothing to prevent it, and one can safely predict it is going to be a disaster!)

Far from this circular logic, the catastrophic approach is to extend present trends, and realize that a deep depression is likely. Then, having realized the enormity of the disaster at hand, one has to go backwards, and see what could derail that scenario.

Well, the only thing that could derail catastrophe is basically what the advisers of Obama refuse to do: dump the rich, refuse to keep on sending them taxpayer money, and use the money of the People to give cheap housing, cheap health care, and jobs, jobs, jobs.

***

A NEW THEORY OF CERTAINTY, AS PROPOSED ABOVE, TO SAVE OUR LIVES:

The old fashion way of computing probabilities ignores the fact that any probability computation is in a logical universe, and that the probability that this logical universe represents all relevant ingredients for the situation at hand has itself to be evaluated.

One just needs a glance at the crashing world financial system to see what fatally flawed means. In modern times manmade disasters that had been viewed as very unlikely have been happening with increasing frequency. Examples are a few holocausts, two world wars and two great depressions (without counting the present one).

On a slightly larger time scale, there were important break downs of the Western moral code. The wars that happened around the French revolution were totally unnecessary, and killed millions, in France, and more, around Europe. After the initial hatred of the Old regime against the Rights of Man had caused an invasion of France, the blood kept flowing for 25 years because one “unlikely” event followed another. By contrast vast periods in history have been very calm (some are found in the Middle Ages!)

In North America, the American Revolution brought more slavery for Africans and holocaust for the Native Americans. That would have been viewed by the proponent of the Enlightenment, who wanted American independence, as another “unlikely” event. How likely was the American Civil War, the bloodiest civil war known? And how likely was it that Great Britain would imitate USA methods in South Africa as it forced the (white) Boers to surrender their republic?

Important advances were made in logic in the twentieth century. A basic trick was used throughout, GOING META. Going meta makes a theory of the theory, it manipulates it from the outside. The same basic trick can be carried over in the realm of computing probabilities. The disregard of the moral code by the Nazis or the USA (official reintroduction of torture) were unimaginable. They looked totally improbable before they occurred.

The usual approach to what is probable is dangerously misleading, because it WILL ALWAYS underestimate catastrophically a potential catastrophe (strategic, nuclear, financial, climatic, etc.). This new meta law of probability is pernicious: it says that, the worst the potential catastrophe, the rarer it will be, and the more the usual way of computing probability of said catastrophe is logically flawed.

So what to do I suggest to do when trying to find how probable a catastrophe is? Well, I propose to backtrack from the catastrophe itself: do not ask your theory how unlikely catastrophe is, ask catastrophe what it can do for your theory. As I showed, knowing dark comets exist, and knowing that so does the hot mode of Earth’s climate, radically augments the probability of an unhappy outcome.

***

Conclusion: The way truth theory is generally used is wrong. It ignores that any logical system carries its own truth inside, but that this truth has no value outside. Conventional probability computations of catastrophes are flawed, or, more exactly, meta-logically flawed. Yes, there is such a concept as “metalogical” and it led to the greatest advances in logic in 2,500 years. In metalogics, one applies logic to a logic from the outside. Any logic has countless metalogics surrounding it. Incompleteness theorems in logics say that there are a number of ways to build them up. To be logical is necessary, to be metalogical is prudent. Probability without metalogics is folly.

The philosophical probability weighs these metalogics according to the threats they represent. So it proceeds from the end (telos: end, goal, result). That’s why it is teleological. “Teleological” has not been philosophically very popular in recent centuries, because it smacks of God, intelligent design, or animals thinking about how they should evolve (the later being the oft made parody of Lamarckism).

But a moment’s thought reveals that all intelligence is teleological: the animal wants to save its life, so it rushes into the hole. It does not rushes into the hole first, and then wants to save its life. The flight in the hole is teleologically motivated: any Cretaceous critter fleeing for its life has not experienced yet catastrophic doom between the jaws of T Rex, five meters away. But it reasons BACKWARDS from a theory of catastrophe it has.

So, in the end, I am just suggesting to be a bit more systematic about something  the ancestors of rats understood 200 million years ago.

RISK OF CATASTROPHE = [SCIENTIFIC PROBABILITY] + [PHILOSOPHICAL PROBABILITY]. But the worst it can get, the more the term that dominates is the philosophical one.

***

Patrice Ayme.

http://patriceayme.com

https://patriceayme.wordpress.com

http://tyranosopher.blogspot.com

***

 

Addendum: More on Spaceguard.

Of course, ideally, any impact warning system should have a capacity for tracking and changing orbits of potentially harmful near-Earth asteroids and comets years ahead of impact. Unfortunately we don’t know how to do this, and years may not be available: cometary trajectories can be both hidden and chaotic (as they fall off the Oort cloud or graze giant planets).

The kinetic energy of the comet IAA was 44 squared by unit of mass, that is 2,000 (two thousand) per unit of mass times that of a speeding bullet. Hard to deflect: we could do little  with a comet within 2 weeks of impact, considering that its mass is of the order of a thousand billion tons.

But what happens if sometimes around 5:47 am on some month of June in the close future, as we cross the same comet debris stream again, astronomers discover that a Tunguska sized impactor is within two hours of hitting New York City? The Tunguska object was between 30 and 50 meters across, and exploded with about 15 Megatons of TNT equivalent (1,000 times Hiroshima), flattening 2,000 square kilometers of forest (an area greater than Washington DC).

Interestingly, we could do something about it, with existing technology.  Any explosion of a thermonuclear bomb in the vicinity of such an object, more than ten seconds before impact, should be mitigating (even with the EMP, as long as people close their eyes!).

***

Final word from T.S. Eliot:

“What we call the beginning is often the end
And to make an end is to make a beginning.
The end is where we start from.”

***

DESPERATELY FINDING FAULT WITH FRANCE

(The following is an expanded version of the original published in the New York Times, electronic edition, March 5, 2009. The original “DESPERATELY FINDING FAULT WITH FRANCE” can be found on http://tyranosopher.blogspot.com/. It is more compact.)

***

THE PLUTOCRACY OF THE USA MANIPULATES THE PEOPLE OF THE USA WITH LIES, BY BRANDISHING FRANCE AS AN OMINOUS FATE.

NATIONALISM STUNTS MINDS:
Nationalism is often the worst counsel a nation can have. Nationalism is not just about columns of armed men parading. The most noxious forms of nationalism twist the way minds work.  One sort of nationalism consists into not looking outside of the national box. Not comparing one’s nation to that of others, and to past civilizations, is unwise and disrespectful. The crisis engulfing the USA has been made possible by poor thinking. Its combination with strident nationalism is no coincidence (the peak of this was around 2003, but it could come back stronger as the economy sinks).

In an editorial in the New York Times, “One France Is Enough”, Roger Cohen opines that: “President Obama, in his restorative counterrevolution, must be careful to steer clear of his French temptation.” (March 5, 2009). Cohen explains that: “Nobody in their right mind would give up the manifold sensual, aesthetic and gastronomic pleasures offered by French savoir-vivre for the unrelenting battlefield of American ambition were it not for one thing: possibility.”
Cohen insists: “Americans, at least in their imaginations, have always lived at the new frontier; French frontiers have not shifted much in centuries.”

As a reminder, Roger Cohen was sitting thirty feet from Obama, during Obama’s inauguration. Cohen was also an ardent supporter of the invasion of Iraq, probably an example of shifting of the frontiers, American style. This sort of thinking is rampant in the USA, it is part of a relentless droning by the opinion makers. France is continually brandished as if she were an ominous fate, thus American policy should always go the other way. So what does it mean when the french solution is the best? That the USA will go for the worst?
***

OBAMA AT THIS POINT: AS FRENCH AS MARIE-ANTOINETTE?
To claim that Obama is in danger of turning the USA into France is in direct opposition with the observed facts.

If Obama wanted to do turn the USA into France he would have signed two executive orders on the day he became president:

1) Hedge Fund and Private Equity managers to be taxed at the maximal tax bracket, instead of the outrageously low maximal 15% they enjoy now.

2) Citigroup and Bank of America would have been nationalized, their management fired, and they would have been yanked from their holding companies and the derivatives and hedge funds. They would have been recapitalized, and ordered to extend credit as usual.

Obama did not do any such thing. I hoped he would, but he did not. Verily, he did quite the opposite. Actually Obama is clinging to the notion of privacy to the point of ruining the world economy. Baker, Greenspan and Graham, all right wing statesmen, have begged him to nationalize the four giant banks that are blocking the world economy. But Obama clings to his hedge funds managers like a little one to mummy.

What is happening is beyond belief: a vast class of people organized the uppermost parts of the financial and real estate industries of the USA as a racketeering system serving them. They “own” it in that sense. Obama, in total violation of the French spirit of knocking off exaggerated privilege by an upper class that has all the power, insists to keep on transferring to said upper and shadowy class the hard earned income of the People. It is neither egalitarian, nor just, nor rational, three deep characteristics of the French “Cartesian” character. It’s: “Let them eat Credit Default Swaps!”

The credit system of the USA is still frozen, and the world economy is in free fall. Obama is not advised by a Frenchman. Instead he is advised by Larry Summers, a famous misogynist, the greatest advocate, and protector of the Credit Default Swaps.

The Credit Default Swaps have destroyed the world financial system. Germans and French want to regulate them. Summers wanted the Credit Default Swaps free, so they were set free, and they destroyed the world. Summers did this in 1998, when he was Assistant Secretary of the Treasury. Bush just went along with the way Summers organized the economy and finance. Now Summers is back in person at the helm. It was not to fix his mistakes, but to persist into making more of the same.
****

DEMONIZING OTHER NATIONS:
To claim that there is “possibility” in the USA and much less in France is disjoint from the facts. It cultivates anti-French bias. Perhaps companies get created and destroyed in the USA, but so it is in France. Because the USA is bigger, and because of less social legislation, a company such as Wall Mart can grow faster than its French competitor, Carrefour (which is nearly as big, but which allows union membership).

When looking at the history of inventions, art and ideas, France arguably did much more than the USA, even in recent times. Accusations that are too off base, smack of racism. They are the last thing the USA needs right now. They provide a bigger serving of hubris, while taxing Obama of being French is a complete disjunction from reality. If anything, the USA is suffering from too many decades of following the path that France refused to take. In the present crisis, French methods offer the only hope. They are ineluctable. Bashing them is losing time by bashing the solutions.

Obama is so completely American, it’s not even funny. Obama uses several mental methods that thrive in the USA, but that Europeans know to lead to aggressive nationalism and war. Obama is affected by exaggerated claims of American unicity, a form of nationalism that has blinded the USA in recent decades.

Obama goes around saying that “only in the USA is my story possible”. That is literally true, but only in the sense that only in the USA there was pathological racism based on an obsession with skin color. Even the Greco-Romans would have been shocked. A little while ago, Obama, because of his brown skin, would have been a slave or a janitor. But he is president. It is not because suddenly the USA is out of its racist delirium, that the USA has invented antiracism. The Roman empire had Hispanic, Gallic, Kosovar, African, and Arab emperors. The empress of the Franks who outlawed slavery was English born and raised. Great Britain and France long ago already had Jews leading their governments and/or states (Disraeli, Mac Mahon, Blum). The present French president is the son of a foreigner.

Obama claimed many times that “the USA invented the Internet” (physicists at CERN in Geneva have a different idea). Obama also claimed that “the USA invented the automobile”. As someone who has long known him quipped: “that’s why it has a French name”.

Let’s stop for a moment here. There is an important point here. It has a French name, therefore, the USA invented it. The point is that Americans are trained not to think. They are trained to not exert any critical sense. Hence the claim that the USA is “the country of freedom”, as if there were no others. Never mind that the motto of 1954 talks only of “God” and “Trust”.

This is neo-American logic: I don’t think, therefore I am. Saddam killed his own people, as Bush loved to say, therefore I kill Iraqis too. Now Obama sends 17,000 soldiers to kill and get killed in Afghanistan, without a plan, he admits. But Bush wanted to send twice more, so Obama’s decision of sending half of what Bush wanted is “bipartisan”: half and half. American logic in wonderland, very neo-American.

In truth the first automobile was by Cugnot, a Frenchman, in 1769, as recognized by everybody, including the British Automobile Association. These first automobiles were steam powered. The internal combustion engine was invented by a Swiss around 1800, and ran on hydrogen (!). A whole slew of European inventors perfected it during the nineteenth century. The first car manufacturers in the world were French: Panhard & Levassor (1889) and Peugeot (1891). But lying about technology make the USA feel good about itself, it creates a sense of national unity. Example of an oft told lie: “the USA invented the transistor (1948)”. In truth Germans had invented the first transistors (using Germanium as semi conductor), 15 years earlier.
***

PRAGMATISM AND CONSERVATISM ARE ADVERSE TO VISION AND IMAGINATION:
In general the most fundamental science and technology has been invented in Europe, not in the USA. The USA has not produced thinkers of the caliber of Lamarck, Gauss, Hugo, Faraday, Maxwell, Riemann, Darwin, Nietzsche, Einstein, Poincare’, Planck, Boltzman, Hilbert, Bohr, Godel, De Broglie, Dirac, etc. And I am not listing all the French philosophers, nor the numerous less well known European mathematicians and thinkers that played a prominent role. (A lot of the work of Einstein on the Brownian motion, Relativity and the Photoelectric effect depended upon Dutch, British, German, Italian and French predecessors, or helpers not listed here; none of them, though, was American, although America had already a larger population than France.) None of the primary thinkers of the nineteenth century and the first half of the twentieth century is American born, and very few Americans are among the secondary thinkers (James and Gibbs come to mind). 

Civilizational class thinking does not blossom in the USA. Civilizational thinking grows out of an appreciation for vision, and what is grand. It grows out of the seduction of revolution. It does not grow from an obsession with peer pressure, money, jobs, and conforming in all ways to what the plutocracy demands.

When one looks at the present USA financial crisis, the greatest heist the world has ever known, one is struck by how far from France the USA has become. Long gone are the times when American revolutionaries would be taught the Enlightenment in Paris (although forced to free their slaves when in Paris, they went back to the USA to create the first official slave state in the West in more than a millennium).

The incapacity of “We The People of the USA” to stop the non sense, while patriotically sending ever more money to those who stole all the money, provokes one to change the meaning of the USA acronym from United States of America into “United Stupid of America”.

France was shaken in recent months by a few enormous warning strikes, putting the government on notice that it better improve the condition of the people soon, American crisis or no American crisis. After 44 days of total strike, the strikers that totally immobilized the big island of Guadeloupe got what they wanted; a boost of 200 Euros monthly to the lowest salaries. The Federal government promised to work hard to make life less expensive in the future, by breaking the predatory grasp of the local wealthy hereditary businessmen. In France the lowest hourly salary is already much higher than in the USA, and education and health care are free.  Ongoing strikes in the islands of Martinique and Reunion will have the same conclusion (because the French Federal government will force the local businessmen to bend). 
***

TOO BUSY JOKING:
But why did Obama not nationalize the banks, and why does he prefer to destroy the world economy instead? There again, Obama came up with that very American tendency of making fun at the expense of foreigners. Asked why he did not nationalize the banks, he replied: “Sweden had like five banks”, and he laughed. First, of course, it’s false, it’s a lie meant to create a diversion, sugar coated with a joke: “five banks, ha ha ha”. Foreigners living in the USA are often submitted to this sort of demeaning jokes. They happen when American racism is relaxing, and in need of a diversion. French culture is reduced to wine and cheese. Never mind that the Manhattan project, the construction of nuclear bombs to use against the Nazis, was started in France in January 1938. (It became the “Manhattan” project after the program’s principals fled England, lest it fell to the Nazis, as France just did.) 

In truth, Scandinavia had hundreds of banks, and Nordic politicians did not make stupid jokes at the expense of foreigners. Instead they looked around soberly, and went to work. They looked at what the conservative USA had just done with the Resolution Trust Corporation, under Reagan and Bush Senior, quickly nationalizing 747 banks. They had the solution, and they implemented it. Scandinavia was out of the crisis in two years.

The USA presently has four bank holding companies that are in huge trouble and, together, they make two-thirds of the USA banking market. Thus the USA has four banks, ha ha ha. Never make a joke you will not be the butt of. Sweden is not a plutocracy, the USA is. It is to please the people who have plotted with these four bank holding companies, that Summers is destroying the world economy. Many of the banks and insurance companies’ counterparts and creditors are the richest people in the world. Summers owns a mansion, but Secretary of the Treasury Paulson owns an island. Imagine the strikes in France if those gentlemen tried to rule there!
***

FRANCE AS THE GREAT SATAN:
The immensely catastrophic socioeconomic system that is devouring the USA needs no encouragement. The usual trick of the US plutocracy is to claim that France is a disaster for creativity, riches, employment, wealth, and, now, “possibility”!

After that has been established by repeating it enough on all the media of the USA, the servants of the plutocracy then claim that any socioeconomic progress in the USA smacks of France, thus is dangerous and unpatriotic. What is the truth?

In truth, France has mostly recovered from the three enormous wars against fascism that she underwent, on her own territory (1870-1945). She has now been reunited with the land to the east that had been ravaged by the same fascism. For half a millennium, France and Germany were part of the same polity, which dissolved because nobody thought that dissolution could have adverse consequences. Well, it did, and it is over. Europeans are reuniting, not by looking at their neighbors with hostility, and making demeaning jokes about them, but by learning from them. (For example, all European states are enthusiastic about how the extreme welfare state of Denmark has combined extreme free market with extremely low unemployment, and much larger states are trying to duplicate that; instead of joking malevolently that Denmark has only five banks. Which it does not.) 

France is richer per capita ($48,000 per capita, latest numbers, 2008), has better health care, better high technology in roughly all dimensions, has higher productivity per hour, better worker protection, three years of family leave (!) and much longer vacations than the USA. Any claim that French unemployment is higher is mathematically inconsistent with these facts (besides French citizens do not need miserable employment to get health care, and miserable employment, a form of slavery, is unlawful anyway).

What the USA has that France does not have, is the wealthiest class in power, having reduced the middle class to crumbs. To bash foreigners to justify the increasing backwardness of the USA is getting a bit old. The fact that Obama engages in this dark art will not be conducive to constructive problem solving, looking forward.
***

Patrice Ayme
https://patriceayme.wordpress.com/